Tracing consequences both seen and unseen.
Justin M. StoddardMore Bailouts for the Rich
Posted at 7:45 pm on October 20, 2011, by Justin M. Stoddard

The rich on Wall Street are demanding more bailouts:

The Demands Working Group of Occupy Wall Street unanimously endorsed and is circulating for discussion the following demand, which will be submitted to the General Assembly of OWS:

Jobs for ALL – A Massive Public Works and Public Service Program

We demand a massive public works and public service program with direct government employment at prevailing (union) wages, paid for by taxing the rich and corporations, by immediately ending all of America’s wars, and by ending all aid to authoritarian regimes to create 25 million new jobs to:

-Expand education: cut class sizes and provide free university for all;
-Expand healthcare and provide free healthcare for all (single payer system);
-Build housing, guarantee decent housing for all;
-Expand mass transit, provided for free;
-Rebuild the infrastructure—bridges, flood control, roads;
-Research and implement clean energy alternatives; and
-Clean up the environment.

Wait, you didn’t think I was talking about corporate bailouts, did you?

No, I’m talking about the rich people who make up the Working Group of Occupy Wall Street.

There is a very inconvenient and awkward question that is not being answered by the OWS crowd, as it pertains to wealth. Even making the assumption that the majority of those protesting are lower-middle class (a very liberal assumption, by anecdotal evidence), that would still mean that they are richer than 80 to 90 percent of the world’s population.

In fact, the poorest 5 percent of the United States is still richer than 68 percent of the world’s population. When compared to the poorest in India, China, or Afghanistan, the inequality is breathtakingly staggering. That college kid who is 60 grand in debt may as well be Bill Gates to a girl born in parts of rural China or Afghanistan.

Whenever this is brought up, you will inevitably hear this as a riposte:

“The problem is that attitude can be very easily used as an excuse for dismissing the complaints of literally anyone who is not the most oppressed, marginalised, and miserable people in the world.”

In other words, you cannot ignore what is bad here because things are worse elsewhere.

Well, that statement may well have merit, were it argued in another context. In this context, it is meaningless. Here’s why.

The above “demands” have everything to do with trying to bring the classes to a parity rather than fixing the economy. We are constantly barraged with the 99 percent vs. the 1 percent rhetoric. This, in itself is a lie. At worst, the people protesting on Wall Street are the 32 percent. More likely, they are the 20 percent and up.

If there were one shred of intellectual honesty in this movement, the above demands would be much, much different. They would be calling for taxing everyone in America at a much higher rate and redistributing that money to the poor in China and India. As the holders of 20 percent of the world’s wealth, they surely can afford it. After all, there are millions upon millions of people living in soul-crushing, abject poverty at this very moment. A vast number of them can never hope to make more than $1 per day, if that.

Instead, we get demands for free education and free housing for all (well, for all the rich people living in the United States, anyway — everyone else can go get stuffed). This is nothing more than the rich seeking taxpayer money for bailouts through the use of force.

Sound familiar?

I’m not being flippant, here. When it comes to entitlements, tariffs, trade barriers, immigration or where I purchase my goods, I’ve not yet heard a convincing argument for why I should regard a middle-class or working poor American in any higher regard than the absolute poor of other countries.

When I’m told that I should buy American in order to save American jobs, I wonder why a South Korean’s job is of any less importance. When I’m told that I must pay my fair share to help the deserving and undeserving (relatively) poor of this country, I wonder why the absolute poor from other countries shouldn’t get that money first.

But this is what it’s come to, now.

Rich college-age kids asking for taxpayer funded bailouts in order to relieve them of a debt (paid by the taxpayers) that they voluntarily took on with full knowledge that they would have to pay it back. Not only that, the vast majority of them have the means to pay off said debt through hard word and dedication.

Now, tell me again why I should care that a rich kid got a liberal arts degree that didn’t pan out, when tens of millions are living in absolute poverty around the world. Tell me again why rich kids with liberal arts degrees aren’t sacrificing their income, well-being, and happiness to redistribute their wealth to those more in need.

It’s time that we stopped focusing on this murderous idea of “inequality” when we should be thinking instead of relative standards of living over time.

Maybe then we can focus on what’s wrong with our economy rather than just fight about which rich group of people get which bailouts.

[Cross-posted at Shrubbloggers.]

Filed under: Economic Theory, Government Spending, Labor, Politics, Taxes, Trade
Comments: 3 Comments

Eric D. DixonThe Keynesian Celebration of Destruction
Posted at 12:05 am on October 19, 2011, by Eric D. Dixon

Here’s a great cartoon from Completely Serious Comics published earlier this year, currently being passed around on Facebook by critics of Keynesian stimulus:

Marketing, by Completely Serious Comics

I doubt the cartoon’s creators were thinking about government stimulus of aggregate demand when they conceived this, so it has become a piece of appropriated satire. And, like pretty much all great satire, it doesn’t play completely fair with its target. Even so, it contains a substantial nugget of truth.

Readers of this blog who are familiar with the book from which it takes its name will be well-acquainted with the broken window fallacy, first created as a parable by Frédéric Bastiat and later appropriated by Henry Hazlitt, who applied it to a mid–20th century economy.

In a nutshell, the parable explains why destruction doesn’t make a society wealthier. It may stimulate short-run economic activity as people rush to replace and rebuild what they’ve lost, but always at the expense of overall prosperity.

Within the past few years, Bastiat’s and Hazlitt’s critical heirs have applied the fallacy again and again to modern Keynesians. Here’s a video that does exactly that to Paul Krugman’s application of Keynesian theory to the destruction wrought by terrorist attacks (featured on this blog last year):

One objection to this line of thought could be that the broken window parable doesn’t apply to general stimulus, because government spending absent a disaster isn’t the same thing as destruction, and so isn’t analogous with a broken window. One response to this objection would be that the broken window parable is part of a larger essay about the unseen effects of various types of economic action. People explaining the arguments in the larger essay, which does indeed include government spending, might reasonably refer to them by invoking the best-known portion of that essay, the parable of the broken window. Conjuring the whole of an essay by referring to one part would be a kind of allegorical synecdoche, if you will.

Another response would be that spending may not destroy useful physical objects, true enough, but it does divert resources from more productive to less productive uses. Although private-sector businesses can’t be sure what their most productive potential investment will be, the government is by nature even less informed and therefore less capable of investing wisely. Siphoning resources from the private sector to the public sector destroys wealth, even if it doesn’t destroy specific goods. An allegory of a destroyed object certainly applies to the reality of destroyed wealth.

Keynesian apologists, and even some non-Keynesians, have cried foul in still more nuanced ways, pointing out that advocates of government stimulus don’t per se want destruction, and may not even think it will bring increased wealth, but think instead that it will increase short-term economic activity, increasing employment and smoothing over economically troubled times.

There are indeed shades of meaning and intent here. Believing that destruction may benefit the economy in some structural way, thereby sustaining short-term damage for long-term gain, isn’t the same thing as thinking that any individual act of destruction will increase economic wealth. After all, as Joseph Schumpeter pointed out, entrepreneurs engage in short-term “creative” destruction all the time, writing off temporary losses as a necessary cost of pursuing their visions for long-term productive investment.

The evidence, however, shows that government spending intended to stimulate the economy and smooth out the business cycle instead exacerbates the business cycle, leading both to higher peaks and lower valleys.

As Russ Roberts pointed out at Cafe Hayek:

So the hurricane will put carpenters back to work. But it would be even better if there had been no hurricane and people had just given them a check. Charity is more productive than destroying stuff and paying people to get back to square one.

But the charity approach is what we’ve been doing for the last few years. It’s called unemployment insurance. I know, it’s supposed to be stimulative but there’s no sign that it is. Why would it be? It doesn’t solve the problem that there are too many carpenters.

When there’s a downturn in the business cycle, there’s a structural problem with the economy — too many people in some occupations, not enough people in others. General stimulus provides no economic information about where people should go to find sustainable productive work, meeting real demands by providing the goods and services that people want rather than the trumped-up illusory demand prompted by government spending. You can’t build a healthy body on a string of sugar rushes, and you can’t build a healthy economy on a series of artificial top-down influxes of cash.

Stimulus only spurs some sectors of the economy by dampening others, whether present or future. The more that government officials tamper with the economic signals that let entrepreneurs know when they should invest and when they should steer clear, the more skittish investors become. Regime uncertainty entrenches malinvestment, and keeps the economy limping along.

So, Keynesians, please stop celebrating destruction as a cure for economic ills. If truly creative destruction needs to happen in order to move less productive resources into more productive uses, private-sector entrepreneurs have the decentralized knowledge necessary to determine which of their own resources need to be replaced or reshuffled. Government officials do not.

The only real cure for our lagging economy is for the government to quit breaking windows.

[Cross-posted at Shrubbloggers.]

Filed under: Economic Theory, Efficiency, Government Spending, Market Efficiency, Regulation, Spontaneous Order
Comments: 1 Comment

David M. BrownWhat if there were deficit thinking, thinking deficit, on a desert island?
Posted at 1:43 am on August 9, 2011, by David M. Brown

Let’s attempt the program of “economic stimulus” on a desert island. Five persons have survived the shipwreck. Joe is good at gathering berries and reeds, and dressing wounds; Al is good at fishing, hunting and basket-weaving; Bob is good at making huts and gourd-bowls; and Sam, who wants to spend all his time sharpening sticks, and who regards any other kind of employment as beneath him, cannot produce a tool of any usefulness.

Let more and more of the resources that would have been exchanged in life-fostering and productivity-fostering trade between Joe, Al and Bob be confiscated by a fifth person, the king (who happens to have the only gun, a Kalashnikov that he grabbed from the ship before it crashed; elsewise no one would listen to him). And let this confiscated wealth (after a suitably large finder’s fee for the king has been deducted) be given to Sam to subsidize his slow and pointless blunt-stick production, since it would allegedly be unacceptable for Sam to have to accept alms in accordance with the sympathies and judgments of his fellows. And let the king perpetually demand more and more “revenue” to distribute and perpetually bray that criticism of his taxing and spending policies by “economic terrorists” is undermining confidence in the island’s economy.

What are the effects of this confiscatory and redistributive process on the prospects for the islanders’ survival? Discuss.

[Cross-posted to Davidmbrowndotcom.]

Filed under: Culture, Economic Theory, Efficiency, Finance, Food Policy, Gains From Trade, Government Spending, Health Care, Labor, Law Enforcement, Local Government, Market Efficiency, Nanny State, Philosophy, Politics, Property Rights, Taxes, Trade, Unintended Consequences
Comments: None

John W. PayneNot Even Close
Posted at 1:25 am on June 21, 2011, by John W. Payne

Sometimes an article comes along that is so blindingly stupid and misinformed that the mind reels in a vain attempt to understand how such a thing could be published by any semi-reputable organization. In my personal experience, these articles often discuss the history of the libertarian movement or libertarian ideas. I’m certainly not contending that this is the only subject that attracts wildly inaccurate commentary like a picnic attracts ants, but it’s the one where I can spot these stories most easily.

Today’s entry is this deeply confused article on the supposedly baleful influence of philosopher Robert Nozick and his 1974 book Anarchy, State, and Utopia. The only proper response to a piece this nonsensical is something like this:

Nonetheless, I am going to attempt to correct some of author Stephen Metcalf’s more glaring errors.

First, the central conceit of the article–or at least the subtitle–is flat out wrong. Nozick did write that “The libertarian position I once propounded now seems to me seriously inadequate.” Metcalf assumes that this statement is a renunciation of libertarianism, but that’s not what Nozick meant, as Nozick himself explained in an interview shortly before his death:

What I was really saying in The Examined Life was that I was no longer as hardcore a libertarian as I had been before. But the rumors of my deviation (or apostasy!) from libertarianism were much exaggerated. I think this book makes clear the extent to which I still am within the general framework of libertarianism, especially the ethics chapter and its section on the “Core Principle of Ethics.”

Sadly, it doesn’t get any better from there. Metcalf quotes Keynes as highly critical of Friedrich Hayek’s The Road to Serfdom, claiming that Keynes scribbled in the margins of his copy, “An extraordinary example of how, starting with a mistake, a remorseless logician can end up in Bedlam.” Again, Keynes did write that and about Hayek no less, but the line appeared in his review of the dense economic tome Prices and Production. Liberal economist Brad Delong first blogged this error and goes on to note that Keynes was actually quite found of The Road to Serfdom, calling it ” a grand book….Morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement.”

Even more importantly, Metcalf drastically overstates Nozick’s importance:

I like to think that when Nozick published Anarchy, the levee broke, the polite Fabian consensus collapsed, and hence, in rapid succession: Hayek won the Nobel Prize in economics in 1974, followed by Milton Friedman in ’75, the same year Thatcher became Leader of the Opposition, followed by the California and Massachusetts tax revolts, culminating in the election of Reagan, and … well, where it stops, nobody knows.

Metcalf may like to think that, but that doesn’t make it true. Don’t get me wrong–Nozick was one of the intellectual giants of libertarianism and made the philosophy a somewhat respectable position among academic philosophers. That’s a very insular group, however, and Metcalf presents no evidence that it was Nozick’s popularity that propelled Hayek and Friedman to their Nobel Prizes. Probably because that evidence doesn’t exist.

A more plausible explanation for the Sveriges Riksbank’s recognition of Hayek and Friedman is that the Keynesian consensus was collapsing in the mid-1970s, and Hayek and Friedman offered alternative theories. The combination of slow economic growth and high inflation known as stagflation is essentially impossible under classic Keynesian models, but both the British and American economies seemed cursed with it in the 1970s. Contrary to Metcalf’s nostalgia, the 1970s were a terrible decade economically, and Keynesian economics proved inadequate to address the problems we faced. I don’t deny that Nozick was a powerful advocate for libertarianism, but the economic crisis did more to shift people’s views on economic policy in a more market oriented direction than any single thinker.

Furthermore, although Nozick played an important role in the history of libertarian ideas, I believe he has been less influential than any of the other big names, by which I mean Milton Friedman, Friedrich Hayek, Ludwig von Mises, Ayn Rand, and Murray Rothbard. I’ve been active in libertarian circles for nearly a decade now. I work for a free market think tank. I probably know around 1,000 libertarians personally. Yet I have not heard even a single person credit Robert Nozick for making them a libertarian. I’ve heard all the others–more times than I can count–but Nozick comes up only occasionally as an influence and never as the decisive one. I readily concede that this is not a scientific measure of Nozick’s influence among libertarians, but this is not a huge movement, and after working within it for this long, I think I have a pretty good sense of who the big influences are…or at least a better sense than Stephen Metcalf.

All this might be forgivable if Metcalf’s assault on Nozick’s famous Wilt Chamberlain thought experiment–which occupies a huge chunk of the article–was accurate and interesting. Unfortunately, Metcalf only engages with a strawman version of Nozick’s argument. Metcalf seems to think that Nozick intended for the Wilt Chamberlain example to be some kind of allegory for the economy as a whole. Instead, Nozick was simply showing why a specific pattern of wealth distribution is impossible to maintain without constant government intervention. As Auburn University philosopher Roderick Long explained in a 2002 article commemorating Nozick’s life and work:

ASU‘s most famous argument–the “Wilt Chamberlain example”–is also its most misunderstood. Criticizing “patterned” theories of justice–that is, those that regard the distribution of resources in society as just only if it fits some preconceived pattern (say, equality)–Nozick asked us to imagine a society that in fact realizes the desired pattern. He pointed out that if people are free to transfer their resources as they wish, the society will quickly deviate from the established pattern, as some individuals, like basketball star Wilt Chamberlain, become wealthy as a result of the voluntary decisions of other members of society who are willing to purchase the exercise of their talents.

If the original pattern is to be maintained at all costs, then the government must “continually interfere to stop people from transferring resources as they wish”; hence no patterned theory of justice can be implemented without “continuous interference in people’s lives” (p. 163). Nozick thus rejected patterned theories in favor of a “historical” theory, according to which a given distribution of resources, regardless of what pattern it fits, is legitimate so long as it arose through a process involving no violations of anybody’s rights.

Metcalf’s abuse of the facts are by no means limited to those detailed here, but going through all of them would require an article far longer than his original. In fact, if Slate removed everything that is incorrect or misleading in the article, they’d soon be left with nothing but prepositions. For that reason, I believe Slate’s editors should retract this piece. Not because I disagree with many of Metcalf’s philosophical principles, although that does appear to be the case, but because even with heavy editing and correction, this article is so fallacious that it detracts from public discourse.

Filed under: Philosophy, Property Rights
Comments: 13 Comments

Sarah BrodskyDo Markets Need Fairness?
Posted at 5:11 pm on June 19, 2011, by Sarah Brodsky

I was surprised by this post on Common Sense Concept, a blog published by the American Enterprise Institute. Although the author has written in support of private charity, in this post he argues that fairness in terms of material outcomes is not desirable. He supports this argument with quotations from various Christian texts and concludes by saying, “Let us be content with managing our own affairs”.

I won’t address the religious justification for this position, but I’d like to point out that the author is overlooking several ways in which fairness matters for the free market. First, unfair outcomes such as poverty and economic immobility can be an indication that the market is not working so well as it should. This may be caused by government intervention or incompetence, as when centralized education policies trap poor children in schools that don’t prepare them to enter the workforce. Or it may be a sign of untapped opportunities, like the lack of access to banking services by residents of the central Amazon. Whether the solution is the curtailment of government power or entrepreneurial innovation, we should heed these instances of unfairness so that we can make the market better.

Second, economic conditions change and the people who are privileged today could be needy tomorrow. We’ve all heard stories of people who lost their life savings in the latest recession; even in calmer economic times, giant corporations and once-profitable-looking investments can vanish as technology evolves. The existence of a safety net, possibly based on private charity, could give people the confidence to start new ventures and to take the risks necessary for innovation, knowing that their basic needs will be met if they fail. Charities should also ensure that the poorest people can survive without resorting to theft and crime, which can cripple a market system. The post’s author might counter that we should give charity without regard to fairness, but I don’t see how that’s possible. Do you give charity to the first wealthy person who walks by your door? Of course not. You look for the people who need charity the most–in short, the people in the least fair situations.

Finally, I’d like to remind the author that we don’t have a free market with perfect efficiency. While based on the econ textbooks, one might think that demand for innovations will lead to an increase in the number and quality of innovators, in real life that doesn’t always happen. If the person who could have cured cancer or revolutionized communications was born into unfair circumstances, he might not obtain the necessary human capital investments through no fault of his own. That’s not just a tragedy for him. It makes the rest of us poorer too because we don’t get to benefit from his potential contribution to the economy. So while we shouldn’t count on government to smooth every inequity, we should give serious thought to fairness if we want a successful market.

Filed under: Efficiency, Market Efficiency
Comments: 2 Comments

Justin M. StoddardThe Language of Markets
Posted at 4:29 pm on April 14, 2011, by Justin M. Stoddard

Diane Ravitch of NYU talks with EconTalk host Russ Roberts about the ideas in her new book, The Death and Life of the Great American School System: How Testing and Choice Are Undermining Education.

Click here for the podcast and the supplementary information.

Here’s the money quote from the very end of the discussion:

I think the problem with what I would call a market language rather than a market process is that, too often, government policy takes the language of markets, which is fundamentally about incentives, which is what this is about, and then tries to graft them into institutional arrangements where there’s no market process. There’s bureaucracy or government mandates, and the incentives are supposed to then be tailored and tweaked so that it looks like…acts like a market, because it has these incentives. And, the problem is without the full range of effects, it doesn’t work at all.

It reminds me of the California energy market, when they tried to use incentives to allocate energy, but they didn’t have a market. It was a government created market. And, it seems we’re are doing that in education, that the main beneficiaries are the people who, as we talked about earlier, who fund the…who create the circular add-ons, the consulting, the training, all the bells and whistles. They don’t get to the students. And, yet, it has the language of markets, so people like me are going to be lured into thinking, ‘well, they’re incentives, so it’s just like a market.’ But, it’s not. And, there’s no fundamental process that allows those market improvements to take place.

[Cross-posted at Shrubbloggers.]

Filed under: Education
Comments: 1 Comment

Justin M. StoddardBurn This Post
Posted at 7:20 pm on April 4, 2011, by Justin M. Stoddard

William Roper: So, now you give the Devil the benefit of law!
Sir Thomas More: Yes! What would you do? Cut a great road through the law to get after the Devil?
William Roper: Yes, I’d cut down every law in England to do that!
Sir Thomas More: Oh? And when the last law was down, and the Devil turned ’round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man’s laws, not God’s! And if you cut them down, and you’re just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I’d give the Devil benefit of law, for my own safety’s sake!

—A Man for All Seasons by Robert Bolt

In 1919, Oliver Wendell Holmes proclaimed that you cannot “shout fire in a crowded theater.” The ignorant, the credulous and the cynical have been misusing that phrase ever since. The argument usually follows a well defined euphemistic process:

Person X says something offensive or inflammatory. Person Y denounces not person X but rather his speech by saying, “there is no such thing as free speech. You can’t shout fire in a crowded theater.” Implied is that speech is already restricted, so there’s no problem in restricting it further for whatever the reason du jour.

I’ve heard this argument from both sides of the political spectrum.

Here’s the thing. Justice Holmes was using the ‘fire in a theater’ analogy to refer to speech that had no “conceivable useful purpose,” or was “extremely or inherently dangerous.” In this case, the speech in question were fliers handed out in Yiddish opposing the draft for Mr. Wilson’s war. (In case you missed it, Mr. Wilson is the great “Progressive” president that oversaw a government apparatus of which Josesph McCarthy could only dream, longingly.)

Is this perfectly clear? Justice Holmes, with the full weight of the judicial branch behind him, with enthusiastic support from the executive branch, ruled that any verbal or written opposition to war was of no purpose and was extremely dangerous, essentially nullifying any First Amendment rights on the issue. Many hundreds of people languished in prison for long periods of time for the “crime” of “shouting fire in a crowded theater,” and this is inevitably the problem with arguments from authority or arguments from tradition. They almost always lead back to Yiddish-speaking pacifists. Please remember this the next time one of your friends feels the need to use this canard in any future discussions about speech.

I am going to be unequivocal in what I say next. There will be no genuflection. There will be no apologies. I ask for no quarter and welcome all challengers on the subject.

I will stand up for and next to mentally ill, idiotic, book-burning pastors with all the ignorant religiosity and disgustingly offensive things they stand for before I’ll give one nod of acknowledgment to the likes of Senators Harry Reid and Lindsey Graham (Democrat and Republican, respectively) and their pusillanimous simpering; anytime, anywhere.

When Harry Reid says, “We’ll take a look at this of course … as to whether we need hearings or not, I don’t know,” I say, “It’s none of your business. It’s none of the government’s business.” Not only should Harry Reid be fundamentally embarrassed for uttering such a statement, his constituency should be incredibly alarmed.

When Lindsey Graham says, “I wish we could find a way to hold people accountable. Free speech is a great idea, but we’re at war,” my response is to ask, “when are we NOT at war?” I will also go on to say that in all of human history, nothing thoughtful or nuanced has ever been uttered after the phrase, “Free speech is a great idea, but. …”

Any bien pensant has more than a few choice words for the likes of Pastor Terry Jones and his ilk. He has expressed his First Amendment rights, as is his birthright, and we fight him in kind, with … wait for it … free speech. That’s how it works. We want people like Terry Jones and his maniacal followers in the light of day. We dare not use the force of government to censor him, for fear of driving him underground to fester, to lend him credence. That’s how it works in an enlightened, secular, civil society. When offended, we do not go around beheading people. We do not rend our clothes and beat our breasts. There are no overwrought gesticulations. We go to the public square, without hindrance of or succor from the government, and we fight it out.

It needs to be said. Clichéd euphemisms do not need protection. They are banal and lazy, but rarely offensive. We fight these battles at the desolate outer fringes of respectability. We do this because we understand that to censor speech is to set up a chair in the anteroom of all our minds, inviting any petty bureaucrat to have a seat. Whom do you trust to take on such a role? Senator Harry Reid? Senator Lindsey Graham? Who among your friends would you appoint the gatekeeper to your thoughts?

Burn a book? I would stand on the side of any person who burned every beloved word of William Faulkner if it demonstrated how serious I am about free speech. I say that with no small amount of emotion. Just the thought of it makes me tear up.

I do not wish to have the devil turn on me and, in turn, have no protection, all the laws of the land laid low.

Shame on those who think otherwise, whatever their political ideology.

[Cross-posted at Shrubbloggers.]

Filed under: Freedom of Expression, Politics, Religious Freedom, Rhetoric
Comments: 2 Comments

Eric D. DixonGovernment Is a Broker in Pillage
Posted at 4:20 pm on March 5, 2011, by Eric D. Dixon

H.L. Mencken summed up public choice theory in 1936:

The state—or, to make the matter more concrete, the government—consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office. Their principal device to that end is to search out groups who pant and pine for something they can’t get, and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time it is made good by looting A to satisfy B. In other words, government is a broker in pillage, and every election is a sort of advance auction sale of stolen goods.

[Cross-posted at Shrubbloggers.]

Filed under: Economic Theory, Politics, Public Choice
Comments: 1 Comment

John W. PayneTough Luck for (Un)elected Officials, The Beast Ya See Got Fifty Eyes
Posted at 1:44 am on February 5, 2011, by John W. Payne

I used to follow foreign policy with a passion that bordered on obsession. I’ve always been a news junkie, but, like many Americans, my focus shifted to foreign affairs after 9/11. But after about five or six years, I started drifting away from it somewhat, I think mainly because it just got too damn depressing. However, the wave of protests that has erupted in the Arab world over the past two months has not only rekindled my interest in the region but also given me some hope that its political problems are not completely intractable.

Perhaps the most heartening aspect of all this is that it seems to be a legitimate groundswell of popular opposition to all the repressive regimes from Yemen to Algeria. The most obvious historical parallel is to the Arab Revolt against the Ottoman Turks during World War I in 1916, but that was primarily composed of Bedouins from the Arab peninsula–not a truly pan-Arab phenomenon. To find a similar string of uprisings across many nations, you would have to go back to the Revolutions of 1848 that swept almost all of Europe and spread the idea of national self-determination far and wide. Like the protests we see today, those revolutions were all driven by local problems and concerns, but participants frequently drew inspiration and solidarity from the knowledge that similar events were unfolding in neighboring countries.

Of course, bottom-up political change does not square with accepted faith of partisan hacks–both Democratic and Republican–that Washington is the prime mover in all earthly (and, in all likelihood, cosmic) affairs. It has been amusing to watch people absurdly attribute the millions of people gathered in Tahrir Square to Obama’s speech at Cairo University in 2009. Even more outlandish is the view endorsed by a few neoconservatives that recent events have somehow vindicated George Bush’s foreign policy of implementing democracy at the end of a bayonet. Left unsaid is that part of Bush’s (and Obama’s) foreign policy was propping up dictators like Egypt’s Hosni Mubarak with billions of dollars in foreign aid. Moreover, I hate to break it to them, but the rest of the world does not revolve around the United States (and the United States does not revolve around Washington D.C.), and you can’t centrally plan and export a revolution. The protesters have a variety of reasons for their actions, but a speech by an American president and an eight-year-old war hundreds of miles away are probably way down the list.

These revolutions are spontaneous orders–like markets or civil society–which governments do not respond to well, both because they frequently demonstrate how unnecessary the government is and they lack formal hierarchies. Most people believe that without government, society immediately turns into pandemonium, but despite the fact that the Egyptian government has been effectively shut down, the Egyptian people themselves are coming together to provide the services they need. In this video, Egyptians volunteer to clean up the streets, deliver medical care, and distribute free food to demonstrators. The New York Times also ran a superb article on Monday describing how regular Egyptians are keeping their society functioning even in the midst of great turmoil:

Out of these humble beginnings, the Popular Committee for the Protection of Properties and Organization of Traffic was born. “What we tried to do first was protect the electricity, water, gas — even the state-owned ones,” Mr. Mardini said, his voice a hoarse whisper after starting on the street at 8 in the morning on Sunday and finishing at 6:30 a.m. Monday, with a two-hour nap before hitting the road again. His stubble is gaining on his soul patch, and if he does not shave soon he will have a full beard.

Compared with the chaos in Cairo, Alexandria has seemed relatively orderly, though only relatively. In some neighborhoods the only building that has been destroyed is the police station, though there has been looting in others. The streets are filled with volunteers.

“We want to show the world that we can take care of our country, and we are doing it without the government or police,” said Khalid Toufik, 40, a dentist. He said that he also took shifts in his neighborhood watch, along with students and workers. “It doesn’t matter if one is a Muslim or a Christian,” he said, “we all have the same goal.”


The civic enterprise is now divided into four branches: traffic, cleanup, protection and emergency response.

Though others refer to him as the head of the committee, Mr. Mardini said: “We don’t have a leader. This is our country, and we all have to protect it.”

And being leaderless is is actually one of the revolution’s great strengths. If there was a leader or small group of leaders, Mubarak could attempt to co-opt them with money or positions of power. In fact, this is precisely what he is attempting to do with the army by appointing General Omar Suleiman to the vice presidency. A government can deal with another hierarchical institution, but an amorphous blob consisting of millions of pissed off people is utterly confounding.

There is only one thing Mubarak or any other government can do to retain power in such a situation, and it is best explained by an Egyptian quoted in that Times article:

“I am glad, that they [the citizen volunteers] are all on the streets to protect us from robbers,” said Hannan Selbi, 21, a student. “We are sure that it’s in the interest of the government to create chaos.”

Mubarak’s government has been exposed as malevolent and unnecessary, so he has little choice but to create the problem he purports to solve. Many Egyptians are reporting that when caught, looters frequently turn out to be plainclothes police officers loyal to Mubarak. When it comes down to it, there is really only one tool in government’s toolbox: a big fucking club, and Mubarak is using it to spread fear and instigate violence, which he hopes will make people submit to his rule once more.

The revolts in Egypt and elsewhere could still go terribly, terribly wrong. Mubarak could weather the storm and rule the country until his death. Or a radical Muslim faction could take power and institute a theocracy. Or a new government could start another war with Israel. Although I’m guardedly hopeful, I know that these things usually end in tears. That said, what these protests have already shown Egypt, the Middle East, and the whole world is that people do not need a strongman; they do not need a government. Society is an organic process, and it gets along pretty well without leaders. The lesson is there, but whether enough people will listen remains to be seen.

Headline reference here.

Filed under: Foreign Policy, Spontaneous Order
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Wirkman VirkkalaAgainst the Simple Scenario of Rescue
Posted at 6:03 pm on January 30, 2011, by Wirkman Virkkala

Social causation cannot be simply drawn on a line, so public policy cannot be conceived in a one-dimensional fashion. See a goal? Find a means. Stick to it.


It doesn’t work, because each cause has more than one effect, and the selected effect, the end, is not all that must be considered.

You will often hear conservatives complain about progressives’ lack of understanding in this department, how those on the left too often have a one-dimensional view (more…)

Filed under: Unintended Consequences
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Henry Hazlitt"[T]he whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."
Henry Hazlitt, Economics in One Lesson






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