Category: economics


Obama And the White House Reject Costly Ozone Regulations

September 2nd, 2011 — 3:09pm

But what about “the environment”? Economics are meaningless compared to Mother Earth, aren’t they? And anyway, there’s no connection between wealth and clean, healthy environments.

Well, the enviro-friendly White House seems to be rethinking that edict, as is usually the case whenever the rubber meets the road:

White House Rejects Controversial Ozone Regs

President Barack Obama on Friday asked the Environmental Protection Agency to withdraw a proposed regulation for ozone air quality standards, citing the nation’s wobbly economy.

President Obama, in a statement, said that by requesting withdrawal of the ozone regulations “I have continued to underscore the importance of reducing regulatory burdens and regulatory uncertainty, particularly as our economy continues to recover.”

A passenger enters a Kansas City Metro bus that warns of an Ozone Alert in Kansas City, Missouri, last month.

The EPA’s ozone rule has been among the more controversial regulations proposed by the environmental agency. Republicans and industry groups say the rule would be too costly to implement and lead to a slowdown in economic growth. Earlier this week, House Republicans said they would hold a vote this winter on a bill to prevent its implementation.

(Link)



1 comment » | economics, environmentalism

The Left-Winger’s Big, Big Problem

August 8th, 2011 — 2:12pm

It is the insurmountable flaw in all leftist philosophy, the insoluble contradiction, the problem that cannot be overcome: No matter what form that leftist philosophy takes — whether it be progressive, egalitarian, democratic-socialist, welfare-statist, communistic, or any other name those of this mindset wish to call it — in order to redistribute wealth, there must first be wealth to redistribute.

Somebody must produce, and the left-winger cannot exist without this person.

The welfare state cannot exist without the producers of welfare.

For exactly this reason, the left-winger is at the mercy of the very person he seeks to plunder. The left-winger relies on those he so often denigrates.

The state by definition cannot produce. It is (by definition) an agency of force. If you have any doubt about that, consider this:

The state cannot spend or redistribute a single cent unless it first either borrows, taxes, or prints.

As Janet Daley so felicitously phrased it in her recent London Telegraph article:

This was the heaven on earth for which liberal democracy had been striving: a system of wealth redistribution that was merciful but not Marxist, and a guarantee of lifelong economic and social security for everyone that did not involve totalitarian government. This was the ideal the European Union was designed to entrench. It was the dream of Blairism, which adopted it as a replacement for the state socialism of Old Labour. And it is the aspiration of President Obama and his liberal Democrats, who want the United States to become a European-style social democracy.

But the US has a very different historical experience from European countries, with their accretions of national remorse and class guilt: it has a far stronger and more resilient belief in the moral value of liberty and the dangers of state power. This is a political as much as an economic crisis, but not for the reasons that Mr Obama believes. The ruckus that nearly paralysed the US economy last week, and led to the loss of its AAA rating from Standard & Poor’s, arose from a confrontation over the most basic principles of American life.

Contrary to what the Obama Democrats claimed, the face-off in Congress did not mean that the nation’s politics were “dysfunctional”. The politics of the US were functioning precisely as the Founding Fathers intended: the legislature was acting as a check on the power of the executive.

The wealth that the left-winger wishes to “spread around,” as Barack Obama famously put it, must originate somewhere.

Where?

Only one place: production.

That in a nutshell is the awesome logic of Say’s Law.

Production, said Jean Baptiste Say, is everything.

He was correct.

Capitalism, as the very name implies, is the engine of capital production.

But what is capital?

Capital is the the amount of wealth owned by a person or a business. Capital is a form of property, and it can, if the owner of that capital chooses, be used to invest. I emphasize that word because investment is the backbone of production, which is the backbone of job creation.

Without wealth, humans are impoverished. Thus, for humans the production of wealth is survival.

Ultimately nothing more fundamental than labor is required for the production of wealth.

Production = life.

Money merely symbolizes wealth. Money is not wealth in and of itself but only a representative.

When money is debased, as it is when, for example, it’s printed without real wealth (i.e. production) backing it, it loses its value. In this way, government has the power to indirectly divest the value of the savings that people have spent their lives accumulating: by printing money that can’t be backed by real wealth, government thereby strips money of its worth. When too much money is printed, the money inflates, and a dollar is no longer worth a dollar.

The left-winger’s big, big problem, which the right-winger has to his detriment also accepted (albeit tacitly), is rooted in the misbegotten belief that if government doesn’t provide it, humans interacting freely will not get it done. That is the source of the insoluble flaw in all leftist thought, which in turn has a deeper source: the belief that human survival should be assured.



6 comments » | communism, economics, Liberals, Marxism

Steve Wynn — Wynn Resort CEO — Goes On Epic Anti-Obama Rant

July 18th, 2011 — 6:32pm

And he unloads with good reason.

Steve Wynn, by the way, is no consistent capitalist, as he himself as much as says when he announces his support for that dingy quack Harry Reid. And yet Steve Wynn is on the money here:

I believe in Las Vegas. I think its best days are ahead of it. But I’m afraid to do anything in the current political environment in the United States. You watch television and see what’s going on on this debt ceiling issue. And what I consider to be a total lack of leadership from the President and nothing’s going to get fixed until the President himself steps up and wrangles both parties in Congress. But everybody is so political, so focused on holding their job for the next year that the discussion in Washington is nauseating.

And I’m saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right. A President that seems, that keeps using that word redistribution. Well, my customers and the companies that provide the vitality for the hospitality and restaurant industry, in the United States of America, they are frightened of this administration.And it makes you slow down and not invest your money. Everybody complains about how much money is on the side in America.

You bet and until we change the tempo and the conversation from Washington, it’s not going to change. And those of us who have business opportunities and the capital to do it are going to sit in fear of the President. And a lot of people don’t want to say that. They’ll say, God, don’t be attacking Obama. Well, this is Obama’s deal and it’s Obama that’s responsible for this fear in America.

The guy keeps making speeches about redistribution and maybe we ought to do something to businesses that don’t invest, their holding too much money. We haven’t heard that kind of talk except from pure socialists. Everybody’s afraid of the government and there’s no need soft peddling it, it’s the truth. It is the truth. And that’s true of Democratic businessman and Republican businessman, and I am a Democratic businessman and I support Harry Reid. I support Democrats and Republicans. And I’m telling you that the business community in this company is frightened to death of the weird political philosophy of the President of the United States. And until he’s gone, everybody’s going to be sitting on their thumbs.

(Link)



3 comments » | Barack Obama, economics, socialism

Obama Versus Technology: ATM’s Responsible For Unemployment

June 22nd, 2011 — 1:11pm

It is, to say the least of it, a very horrifying thing indeed that someone in this position of power actually believes an economic canard of this caliber — a canard that’s been bunked a billion times, and which, in fact, is so easily debunked — and yet it’s even more horrifying to realize that so much of this country’s economic fate is in the hands of one whose economic knowledge is this puerile.

I, for one, was absolutely appalled when I saw the following:

Russell Roberts, professor of economics at George Mason University and a research fellow at Stanford’s Hoover Institution, recently rebutted and demolished Obama’s absurd notions, by pointing out the obvious:

The story goes that Milton Friedman was once taken to see a massive government project somewhere in Asia. Thousands of workers using shovels were building a canal. Friedman was puzzled. Why weren’t there any excavators or any mechanized earth-moving equipment? A government official explained that using shovels created more jobs. Friedman’s response: “Then why not use spoons instead of shovels?”

… Or look at eggs. Today, a couple of workers can manage an egg-laying operation of almost a million chickens laying 240,000,000 eggs a year. How can two people pick up those eggs or feed those chickens or keep them healthy with medication? They can’t. The hen house does the work—it’s really smart. The two workers keep an eye on a highly mechanized, computerized process that would have been unimaginable 50 years ago.

The savings from higher productivity don’t just go to the owners of the textile factory or the mega hen house who now have lower costs of doing business. Lower costs don’t always mean higher profits. Or not for long. Those lower costs lead to lower prices as businesses compete with each other to appeal to consumers.

… Despite losing millions of jobs to technology and to trade, even in a recession we have more total jobs than we did when the steel and auto and telephone and food industries had a lot more workers and a lot fewer machines.

Why do new jobs get created? When it gets cheaper to make food and clothing, there are more resources and people available to create new products that didn’t exist before. Fifty years ago, the computer industry was tiny. It was able to expand because we no longer had to have so many workers connecting telephone calls. So many job descriptions exist today that didn’t even exist 15 or 20 years ago. That’s only possible when technology makes workers more productive (boldface mine).

(Read the full article here.)

This, incidentally, is another manifestation of Bastiat’s economic law: “What is seen and what is not seen.”




11 comments » | Barack Obama, economics

Calling The Obama Bluff

September 7th, 2010 — 3:40am

Just recently, Barack Obama said, for the five or sixth hundredth time in the last year and a half: “The worst thing we could do is to go back to the very same policies that created this mess in the first place.”

He was referring of course to the profligate policies instituted under George W. Bush — about whom I’ve written here — and yet the question remains: why then has Barack Obama, from the beginning of his term, “gone back to the very same policies” instituted by his favorite scapegoat, without whom he’d be lost?

Unfortunately, I have no good answer for that question, but here’s something everyone, including Barack Obama, should know:

The President of the United States can’t create budget deficits or budget surpluses.

All spending bills, without exception, are born in the House of Representatives, and all taxes are voted into law by Congress.

Quoting Thomas Sowell:

Democrats controlled both houses of Congress before Barack Obama became president. The deficit he inherited was created by the Congressional Democrats, including Senator Barack Obama, who did absolutely nothing to oppose the runaway spending. He was one of the biggest of the big spenders.

The last time the federal government had a budget surplus, Bill Clinton was president, so it was called “the Clinton surplus.” But Republicans controlled the House of Representatives, where all spending bills originate, for the first time in 40 years. It was also the first budget surplus in more than a quarter of a century.

The only direct power that any president has that can affect deficits and surpluses is the power to veto spending bills. President Bush did not veto enough spending bills but Senator Obama and his fellow Democrats in control of Congress were the ones who passed the spending bills.

Today, with Barack Obama in the White House, allied with Harry Reid and Nancy Pelosi in charge in Congress, the national debt is a bigger share of the national output than it has been in more than half a century. And its share is projected to continue going up for years to come, becoming larger than national output in 2012.

Having created this scary situation, President Obama now says, “Don’t give in to fear. Let’s reach for hope.” The voters reached for hope when they elected Obama. The fear comes from what he has done since taking office.

“The worst thing we could do is to go back to the very same policies that created this mess in the first place,” he said recently. “In November, you’re going to have that choice.”

Another political fable is that the current economic downturn is due to not enough government regulation of the housing and financial markets. But it was precisely the government regulators, under pressure from politicians, who forced banks and other lending institutions to lower their standards for making mortgage loans.

These risky loans, and the defaults that followed, were what set off a chain reaction of massive financial losses that brought down the whole economy.

Was this due to George W. Bush and the Republicans? Only partly. Most of those who pushed the lowering of mortgage lending standards were Democrats– notably Congressman Barney Frank and Senator Christopher Dodd, though too many Republicans went along.

At the heart of these policies were Fannie Mae and Freddie Mac, who bought huge amounts of risky mortgages, passing the risk on from the banks that lent the money (and made the profits) to the taxpayers who were not even aware that they would end up paying in the end.

When President Bush said in 2004 that Fannie Mae and Freddie Mac should be reined in, 76 members of the House of Representatives issued a statement to the contrary. These included Barney Frank, Nancy Pelosi, Maxine Waters and Charles Rangel.

If we are going to talk about “the policies that created this mess in the first place,” let’s at least get the facts straight and the names right.

The current policies of the Obama administration are a continuation of the same reckless policies that brought on the current economic problems– all in the name of “change.” Fannie Mae and Freddie Mac are still sacred cows in Washington, even though they have already required the biggest bailouts of all.

Why? Because they allow politicians to direct vast sums of money where it will do politicians the most good, either personally or in terms of buying votes in the next election.

(Link)



5 comments » | Barack Obama, economics

Barack Obama Stands By His “Recovery Summer” Platitude

September 3rd, 2010 — 2:11pm

“I don’t,” said Barack Obama, when asked this morning if he regrets labeling the past three months of economic catastrophe a Recovery Summer.

Bill Clinton’s Labor Secretary Robert Reich does not, however, agree:



Doug Powers speculates that the following photos help explain Barack Obama’s inexplicable label:

(Hat tip HotAirPundit)



1 comment » | Barack Obama, economics

Fisherman Gathered At Martha’s Vineyard Are Outraged Over Obama’s Job-Destroying Policies

August 27th, 2010 — 4:44am

From a Providence newspaper, local fishermen are infuriated over the Obama administration’s junk science catch limits: “All these politicians scream about is jobs, jobs, jobs. Why are they putting us out of business?”

Another local fishermen took out the following full-page ad in the Martha’s Vineyard Gazette:

EDGARTOWN, Massachusetts – Aug 24, 2010 – The Northeast Seafood Coalition has taken out a full page ad in today’s Vineyard Gazette. The ad is an open letter to President Obama from Russell Sherman, captain of the Fishing Vessel Lade Jane of Gloucester, Massachusetts. The text follows:

“MR. PRESIDENT, WE NEED YOUR HELP”

Dear President Obama,

My name is Russell Sherman, and I am a life-long fisherman. Like New England fisherman before me have done for 387 years, I take my vessel, the 72-foot F/V Lady Jane from the port of Gloucester, Massachusetts, into North Atlantic waters to bring back cod, haddock, flounder, and other groundfish for America’s table. I hope that while you’re in New England, you and your family are enjoying a few meals of our fresh catch – there’s none better tasting or healthier in the world.

Mr. President, my fellow fishermen and I need your leadership. We are small businessmen and women who want to continue the profession we love. We have worked hard over the past 16 years to rebuild groundfish stocks. Today, some stocks are fully rebuilt, and most others are expected to rebuild in three years, by 2014. According to federal forecasts, a fully rebuilt fishery will yield a sustainable catch nearly five times current landings.

At a time when we should be hopeful about the future of our businesses, we are desperate instead. We are being driven from our work and the fishery we have helped to rebuild. Ironically, what’s putting us out of work are the rules to rebuild the fishery. The most recent version of these rules – effective on May 1, 2010 – impose very low annual catch limits on stocks for the next three years, and at the same time institute a
“catch share” system.

Take my case. Under the 2010 rules, my permit allows an annual catch of only 60,000 lbs of groundfish. At an average price of $1.50 a pound, that’s an annual gross of $90,000, or about one-quarter of my business’ gross income last year. I simply cannot run my business and support my crew of four – each with a family – on only $90,000 a year.

My business is only one of hundreds facing extinction. While there will be a small handful of “winners” under these new rules, the vast majority of us will be losers. And when we “losers” are forced out, jobs will be lost, coastal communities gutted, and crucial commercial fishing infrastructure gone forever. Is this the way to rebuild our storied, centuries-old groundfish fishery?

I belong to an organization called the Northeast Seafood Coalition, a New England-wide organization of 255 small, entrepreneurial fishing businesses and allied support businesses that participates in the public process. The Coalition has tried to bring this matter to the attention of your Department of Commerce. We have tried to offer constructive solutions to the challenge of rebuilding fisheries without at the same time destroying them. But our efforts have fallen on deaf ears.

Mr. President, we desperately need your leadership. We ask that you please direct your Department of Commerce to listen to us and work with us. We know that we can meet this challenge by working together.

Sincerely yours,
Russell Sherman, Captain, F/V Lady Jane Port of Gloucester, Massachusetts

Here’s the video footage:





6 comments » | Barack Obama, Capitalism, economics

A Brief History of Economic Thought — By Jim Cox

August 26th, 2010 — 3:28am

Professor Jim Cox


Jim Cox is one of my favorite living economists. His slim but pregnant book — The Concise Guide To Economics — is a miniature masterpiece. The following comes from Chapter 37:

The Spanish Scholastics of 14th through 17th century Spain had produced a body of thought largely similar to our modern understanding of economics. The work of these scholars was largely lost to the English speaking world we’ve inherited. The French physiocrats carried the discipline forward in the 18th century with prominent economists of the time including A. R. J. Turgot and Richard Cantillon. A strategic error was made by these French advocates of laissez-faire as they attempted to change policy by influencing the King to embrace free markets, only to have the institution of monarchy itself delegitimized. Thus a guilt by association undermined the credibility of the laissez-faire theorists.

In 1776 Scotsman Adam Smith published The Wealth of Nations only to set the discipline back with his cost of production theory of value. (Smith did properly emphasize specialization and the division of labor in his analysis.) The correct subjective theory of value had been understood by both the Spanish Scholastics and the French laissez-faire school. Why Adam Smith chose the faulty cost of production theory over subjectivism is a mighty mystery as it is clear from Smith’s lecture notes that he had endorsed marginal utility analysis prior to the publication of his book. The marginal revolution of the 1870′s–with Carl Menger in Austria, William Stanley Jevons in England, and Leon Walras in Switzerland each writing independently and in differing languages–reestablished the correct marginal approach. As stated by Joseph Schumpeter in The History of Economic Thought:

It is not too much to say that analytic economics took a century to get where it could have got in twenty years after the publication of Turgot’s treatise had its content been properly understood and absorbed by an alert profession. p. 249

Unfortunately, the theory was perverted into a mathematized method with the rush to positivism in the 20th century.

The Austrian tradition of Menger was completed in the theories of Ludwig von Mises with the application of marginal utility analysis applied for the first time to money, which in turn led to the correct business cycle approach during the 1920′s. This approach was gaining headway in the English speaking world with F. A. Hayek’s appearance in England in the early 1930′s. But in the late 30′s the well-named Keynesian Revolution displaced the Austrian theories–not by refutation, but by neglect–taking economic theory to the bizarre point of splitting macro-theory from an underlying micro-emphasis; a point where it still is today.

Jim Cox is an Associate Professor of Economics and Political Science at the Gwinnett Campus of Georgia Perimeter College in Lawrenceville, Georgia and has taught the principles of Economics courses since 1979. Great Ideas for Teaching Economics includes nine of his submissions. As a Fellow of the Institute for Humane Studies his commentaries were published in The Cleveland Plain Dealer, The Wichita Journal, The Orange County Register, The San Diego Business Journal, and The Justice Times as well as other newspapers. His articles have also been published in The Atlanta Journal and Constitution, The Margin Magazine, Creative Loafing, The LP News, The Georgia Libertarian, The Gwinnett Daily News, The Atlanta Business Chronicle, The Gwinnett Post, The Gwinnett Citizen, The Gwinnett Business Journal and APC News. Cox has been a member of the Academic Board of Advisors for the Georgia Public Policy Foundation, and is currently on the Board of Scholars of the Virginia Institute for Public Policy.

(Link)

6 comments » | economics

The Multiplier Theory

June 24th, 2010 — 1:43pm


In the Concise Guide To Economics, author and economist Jim Cox correctly explains that the Multiplier is one of the major components of Keynesian policy.

For those who still don’t know it, Keynesian economics — named after John Maynard Keynes — are the economics that Barack Obama, as well as George W. Bush (et al), espouse in full.

The following explanation of the Multiplier Theory, though exceptionally clear and cogent, gets a bit technical, but please read through it. It is short, and it is also crucial that everyone understands the degree to which economic illiteracy grips the political leaders who have power over us.

The multiplier effect can be defined as the greater resulting income generated from an initial increase in spending. (For example, an increase in spending of $100 will generate a total increase in income received of $500 as the initial income is respent by each succeeding recipient–these figures are based on an assumption that each income receiver spends 80% of his additional income and saves 20%, the formula being Multiplier = 1 / % Change in Saving.)

Fundamentally, the multiplier is theory run amok, as Henry Hazlitt has explained in The Failure of the New Economics:

If a community’s income, by definition, is equal to what it consumes plus what it invests, and if that community spends nine-tenths of its income on consumption and invests one-tenth, then its income must be ten times as great as its investment. If it spends nineteen-twentieths on consumption and invests one-twentieth, then its income must be twenty times as great as its investment….And so ad infinitum. These things are true simply because they are different ways of saying the same thing. The ordinary man in the street would understand this. But suppose you have a subtle man, trained in mathematics. He will then see that, given the fraction of the community’s income that goes into investment, the income itself can mathematically be called a “function” of that fraction. If investment is one-tenth of income, income will be ten times investment, etc. Then, by some wild leap, this “functional” and purely formal or terminological relationship is confused with a causal relationship. Next the causal relationship is stood on its head and the amazing conclusion emerges that the greater the proportion of income spent, and the smaller the fraction that represents investment, the more this investment must “multiply” itself to create the total income! p. 139

A bizarre but necessary implication of this theory is that a community which spends 100% of its income (and thus saves 0%) will have an infinite increase in its income–sure beats working!

A further reductio ad absurdum is provided by Hazlitt:

Let Y equal the income of the whole community. Let R equal your (the reader’s) income. Let V equal the income of everybody else. Then we find that V is a completely stable function of Y; whereas your income is the active, volatile, uncertain element in social income. Let us say the income arrived at is:

V = .99999 Y

Then, Y = .99999 Y + R

.00001 Y = R

Y = 100,000 R

Thus we see that your own personal multiplier is far more powerful than the investment multiplier, it is only necessary for the government to print a certain number of dollars and give them to you. Your spending will prime the pump for an increase in the national income 100,000 times as great as the amount of your spending itself. pp. 150 -151

The multiplier is based on a faulty theory of causation and is therefore in actuality nonexistent. Keynesians today will often admit to this but cling to their multiplier by citing the fact that it has a regional effect. Without them saying so explicitly, what this means is that if income is taken from citizens of Georgia and spent in Massachusetts it will benefit the Massachusetts economy(!).

The multiplier is an elaborate attempt to obfuscate the issues to excuse government spending. It and Keynesian theory are nothing more than an elaborate version of any monetary crank’s call for inflation; Keynes managed to dredge up the fallacies of the 17th century’s mercantilist views only to relabel them as the “new economics”!

(Link)

7 comments » | economics

The Green Jobs Racket Exposed (Again)

April 8th, 2010 — 8:16pm

Here’s an economic axiom which we’ve discussed here before, but which in this day and age is always worth repeating:

If something is economically tenable, it never ever needs to be subsidized.

The latest concretization of this fact comes from none other than the state-run Associated Press:

After a year of crippling delays, President Barack Obama’s $5 billion program to install weather-tight windows and doors has retrofitted a fraction of homes and created far fewer construction jobs than expected.

In Indiana, state-trained workers flubbed insulation jobs. In Alaska, Wyoming and the District of Columbia, the program has yet to produce a single job or retrofit one home. And in California, a state with nearly 37 million residents, the program at last count had created 84 jobs…

…”This is the beginning of the next industrial revolution with the explosion of clean energy investments,” said assistant U.S. Energy Secretary Cathy Zoi. “These are good jobs that are here to stay.”

But after a year, the stimulus program has retrofitted 30,250 homes — about 5 percent of the overall goal — and fallen well short of the 87,000 jobs that the department planned, according to the latest available figures.

As the Obama administration promotes a second home energy-savings program — a $6 billion rebate plan — some experts are asking whether that will pay off for homeowners or for the planet.

(Link)

For more on the inherently toxic nature of environmentalism, please read this.



4 comments » | economics, energy, environmentalism

Myths About Markets

March 31st, 2010 — 7:21pm

There are approximately twenty million myths about markets and market capitalism, one of the most common being this:

Markets don’t work well (or are inefficient) when there are negative or positive “externalities.”

Here’s how Tom Palmer, philosopher and economist, bunks that canard:

The mere existence of an externality is no argument for having the state take over some activity or displace private choices. Fashionable clothes and good grooming generate plenty of positive externalities, as others admire those who are well clothed or groomed, but that’s no reason to turn choice of or provision of clothing and grooming over to the state. Gardening, architecture, and many other activities generate positive externalities on others, but people undertake to beautify their gardens and their building just the same. In all those cases, the benefits to the producers alone — including the approbations of those on whom the positive externalities are showered — are sufficient to induce them to produce the goods. In other cases, such as the provision of television and radio broadcasts, the public good is “tied” to the provision of other goods, such as advertising for firms….

More commonly, however, it is the existence of NEGATIVE externalities that leads people to question the efficacy or justice of market mechanisms. Pollution is the most commonly cited example. If a producer can produce products profitably because he or she imposes the costs of production on others who have not consented to be a part of the production process, say, by throwing huge amounts of smoke into the air or chemicals into a river, he will probably do so. Those who breathe the air or drink the toxic water will bear the costs of producing the product, while the producer will get the benefits from the sale of the product. The problem in such cases, however, is not that markets have failed, but that they are absent. Markets rest on private property and cannot function when property rights are not defined or enforced. Cases of pollution are precisely cases not of market failure but of government failure to define and defend the property rights of others, such as those who breathe polluted air, or drink polluted water (source).

Under true laissez-faire capitalism, in other words, which is the only system that fully protects property and person — thereby forbidding the instigation of force in any form — you are not allowed to poison anyone.

In a socialistic, protectionist society, such as the one we now live in, no such rule of law exists because property is not regarded as private but communal.

The proof is ultimately in the water.



16 comments » | Capitalism, economics, environmentalism, Water

Political Theory: Theory of Government

March 17th, 2010 — 6:57am

Political theory is the theory of government. It is a sub-branch of ethics, and economics, in turn, is a sub-branch of politics.

Ethics — the science of human action — precedes politics because politics is the science of human action in societies, and societies are composed only of individuals. For this reason, the individual has hierarchical primacy.

Capitalism, socialism, communism, anarchy — these are all a species of the genus ethics, as is any specific political theory.

Governments, properly defined, are the body politic that have the power to make and implement the laws of the land, and humans are the only species who possess them. But what ultimately gives rise to these political bodies, and do we really need them at all? If so, why?

Some 40,000 years ago, when Homo sapiens sapiens first emerged, we existed exclusively in bands and small tribes.

A band is the smallest of societies, consisting of five to seventy-five people, all of whom are related either by birth or marriage.

Tribes, the next size up, consist of hundreds of people, not all of whom are related, although everyone is known by everyone else.

It is for this reason that conflicts in band and tribal life are resolved without the need of government. Indeed, it’s a well-established fact among anthropologists that governments do not exist in societies of this size.

As Jared Diamond appositely explains it in his otherwise overrated Guns, Germs, and Steel:

“Those ties of relationships binding all tribal members make police, laws, and other conflict-resolving institutions of larger societies unnecessary, since any two villagers getting into an argument will share kin, who apply pressure on them to keep it from becoming violent.”

Homo sapiens lived for approximately 40,000 years in just such non-governmental societies.

Around 5,500 BC, however, chiefdoms arose.

Chiefdoms are one size up from tribes but still smaller than nations.

These societies have populations that number in the thousands or even tens of thousands, whereas nations consist of fifty thousand people or more.

It is at the stage of chiefdoms that the necessity of government begins; for when populations increase to this size, the potential for conflict and disorder increases proportionally.

And here we get a glimpse of government’s primary function: to protect against conflict.

As long as the potential for conflict exists among humans, the need for protection and adjudication exists as well.

“With the rise of chiefdoms around 7,500 years ago, people had to learn, for the first time in history, how to encounter strangers regularly without attempting to kill them…. Part of the solution to that problem was for one person, the chief, to exercise a monopoly on the right to use force” (Ibid, p. 273).

The legal use of force is the defining characteristic of government.

It is also the fundamental difference between governmental action and private action.

In the words of Auberon Herbert, speaking over 100 years ago:

Nobody has the moral right to seek his own advantage by force. That is the one unalterable, inviolable condition of a true society. Whether we are many, or whether we are few, we must learn only to use the weapons of reason, discussion, and persuasion…. As long as men are willing to make use of force for their own ends, or to make use of fraud, which is only force in disguise, wearing a mask, and evading our consent, just as force with violence openly disregards it – so long we must use force to restrain force. That is the one and only one right employment of force … force in the defense of the plain simple rights of property, public or private, in a world, of all the rights of self-ownership – force used defensively against force used aggressively” (Auberon Herbert, The Principles of Voluntaryism, 1897).

Among individuals, the initiation of force is illegal, whether the force is directly used, as in rape, or indirectly used, as in extortion (a crucial distinction, incidentally, which Mr. Herbert notes in his fraud-is-force-in-disguise example above).

People can only infringe upon the rights of other people by means of (direct or indirect) force.

In this sense, government is an institution whose function is to protect the individual against the initiation of force.

In the words of Thomas Jefferson: “The legitimate functions of government extend to such acts only as are injurious to others” (Notes on the State of Virginia).

Around the same time that Thomas Jefferson was writing those words, another articulate fellow by the name of Wilhelm von Humboldt independently came to an almost identical conclusion:

Any State interference in private affairs, where there is no reference to violence done to individual rights, should be absolutely condemned…. To provide for the security of its citizens, the state must prohibit or restrict such actions, relating directly to the agents only, as imply in their consequences the infringement of others’ rights, or encroach on their freedom of property without their consent or against their will…. Beyond this every limitation of personal freedom lies outside the limits of state action (Wilhelm von Humboldt, The Limits of State Action, 1791).

What professor Jared Diamond incorrectly refers to as government’s “right to use force” (governments do not, strictly speaking, possess rights but only permissions) is a sentiment that has been stated more succinctly many times by Enlightenment thinkers, such as the best theoreticians among our Constitutional framers; but it was perhaps expressed most eloquently by the fiery political philosopher Isabel Paterson:

Government is solely an instrument or mechanism of appropriation, prohibition, compulsion, and extinction; in the nature of things it can be nothing else, and can operate to no other end…. Seen in this light, government is so horrific – and its actual operations in the past have been so horrible at times – that there is some excuse for a failure to realize its necessity (Isabel Paterson, The God of the Machine, 1943).

If, however, government only becomes necessary when societies reach the size of chiefdoms or beyond, what precipitated this sudden population leap, when for 40,000 years — by far the majority of our short history — human growth had remained relatively static?

Why, in other words, do we not still exist in bands and tribes, without the need of government?

The answer, it turns out, is food.

“We have seen that large or dense populations arise only under conditions of food production.… All states nourish their citizens by means of food production” (Jared Diamond, Guns, Germs, and Steel).

When survival is made easier, populations increase. When populations increase, societies become more complex. When food production increases, mankind increases, societies become increasingly complex, and governments become necessary to maintain order. So it is with increased food production that the science of economics is born.

At root, economics is indeed the science of production and exchange.

Money, in the form of currency, is nothing more, or less, than a symbol of production — an invaluable one, to be sure, since money simplifies so drastically the process of exchange.

It also creates the possibility to store and save over long time periods and makes usury possible, which in turn creates more wealth. This is a crux because it illustrates the deep connection between politics and economics.

Thus, increased food production equals increased population equals increased production equals more people equals more societal complexity, and so on, reciprocally.

This is the process whereby societies develop the need for government.

This is why the fact of government is inescapable.

Whatever a society’s original size, smaller ones only make that initial leap to larger by producing more food.

(If they don’t make it, they are absorbed either by the actual use of force or by its mere threat, by the societies that do produce more food. For this reason, bands and tribes have become all but obsolete today, with a few Amazonian and New Guinean exceptions, most of which are also being swiftly amalgamated.)

Thereafter, in order for that society to flourish, it must now continue to produce food, but it must also efficiently manage its size increase, with all that ensuing complexity. Countless societies have foundered at this stage, as they still do today (see, for example, present day Yugoslavia, or Turkey, or Russia).

Advancements in irrigation, the domestication of animals, the introduction of fertilizers and pesticides, these things begin to make societies complex, because they increase food production. But with this added complexity come new challenges:

To thrive, these societies must sort out and solve a host of additional problems, ranging from mass uprisings, to increasing economic developments, to internecine warfare, to the threat of governmental takeovers, to crime and punishment, to many, many other things as well.

In the final analysis, then, we can say that governments are unique to humans because humans are the only conceptual species. We produce our food, we build our homes, we create our medicine, we extract our energy, and we deal with one another not as animals, by brute force, but as men, by agreement.

Trade is the natural drive of the conceptual mind.

So that at this point, our world without government would collapse into chaos — until, that is, the strongest faction seized control, forcefully, you can be sure, and then laid down its own version of order (see present day Somalia).

Who would stop them?

Other warring factions?

In the end, however necessary government may be, never forget this:

“In its best state, government is but a necessary evil; in its worst state an intolerable one” (Thomas Paine, Common Sense).

Government, in short, is inherently dangerous because it holds exclusive power over the people.

The task, then, is not necessarily to do away with government altogether but rather to limit government in the extreme: to build a government which protects its citizens without, at the same time, creating oppression of any kind, including taxation to the point of plunder under that mythical guise of a “right” to redistribute your money – which is the symbol of your work.



15 comments » | economics, Moral philosophy, Philosophy, Political philosophy

McDonald’s And The Clam Shell

March 11th, 2010 — 8:40am

Speaking of clams without shells, it was in the late 1980′s that McDonald’s was bullied by burgeoning environmental groups (who were concerned about “how many trees it takes to make paper” ) into switching from paper packaging to Styrofoam containers. These containers are what McDonald’s soon came to call (apparently without irony) “clam shells.”

Clam shells were not McDonald’s first choice. But Styrofoam is an exceptionally good insulator and so McDonald’s acquiesced to this environmental strong-arming.

Shortly thereafter, near the end of the 1980′s, environmentalists came along again and attacked McDonald’s use of polystyrene (the technical name for Styrofoam), because in order to make polystyrene, chlorofluorocarbons (CFC’s) are required, which chlorofluorocarbons purportedly poke holes in the ozone. So out of the goodness of their hearts, the suppliers of McDonald’s clam shell stopped using CFC’s in their manufacturing process.

This wasn’t good enough, however. The clam shell came under fire again, this time for other things:

It doesn’t “biodegrade” in landfills, environmental groups said — though, in fact, next to nothing, no matter how “organic,” biodegrades in landfills, because biodegrading requires oxygen, which compressed trash does not have.

Another reason they gave: plastic and polystyrene “take up a great deal of space.” (Untrue.)

Yet throughout this whole fiasco, McDonald’s was completely compliant.

They even embarked upon the suggested polystyrene recycling program.

Pressed, however, by the Environmental Defense Fund, McDonald’s, in the autumn of 1990, abandoned the clam shell altogether and supplanted it with a so-called quilt-wrap, which is paper coated in a thin layer of plastic.

So it was back to paper after all, back where it began.

McDonald’s received public acclaim for this change (this was before it had become quite so vogue to anathematize corporations) and the story even made the cover of The New York Times (November 2, 1990).

It soon transpired, as you would perhaps suspect, that, according to environmentalists, the quilt-wrap was “too difficult to recycle,” whereas polystyrene was not. Also, polystyrene accounted for only four percent of all McDonald’s solid waste in the past, which was much less than with the quilt-wrap.

So McDonald’s was yet again asked to switch.

And so it goes….

You may read all about this ongoing saga in Doctor William Rathje’s excellent book Rubbish! The Archeology of Garbage, — a must see for anyone wanting to understand the true nature of rubbish, as opposed to the trash-heaps of environmental propaganda that surrounds the subject. And you may listen to an excerpt of Dr. Rathje’s book here.

13 comments » | economics, environmentalism

Legalizing Drugs

February 28th, 2010 — 9:41am

Everyone believes in freedom — until everyone finds out what freedom actually means. Then almost no one believes in it.

Freedom means you are left alone; you are neither helped nor hindered. And that’s all it means.

Rightwing politicos and leftwing politicos don’t usually agree on specifics, but they do often agree on principle: namely, that government’s proper sphere of authority does extend beyond protection against the initiation of force.

Humans, say today’s politicians, both right and left, aren’t capable of flourishing without the aid of bureaucrats; so these bureaucrats must help us live our lives for us.

Nowhere is this (unquestioned) conviction made clearer than in the issue of drugs.

Drugs, like prostitution, provide us with a good example of how the rightwing and the left are not fundamentally opposed but merely disagree on superficialities, insofar as both sides agree that not all drugs should be legal.

This notion is so ingrained into the mind’s of Americans that to question its legitimacy at all is considered lunatic-fringe thinking.

True, there are representatives on both sides of the political spectrum who support legalizing marijuana and perhaps a few other drugs. But start talking about legalizing all drugs on principle, or mention doing away with drinking-age laws on principle, and all liquor laws on principle, or speak of legalizing gambling and prostitution in all states and cities — and then you really begin to sort out the men from the boys.

That principle is the principle that it is not within the proper sphere of government to be involved in these aspects of human lives.

If we each possess the right to our own life and only our own life — and we do — then using drugs is obviously the right of each individual. The fact that it has become unquestionable to the majority that we do not possess the right to use drugs is we choose is a sad testament to the power of custom.

It is a sad testament to how people get so used to thinking about something in one way that changing minds becomes absolutely out of the question.

Yet if you believe in freedom, you not only should but must believe in the legalization of all drugs. If you do not, then you do not believe in freedom, and you must choose: freedom or statism.

This point can be made on principle alone, and it is a foolproof argument, the first and strongest line of defense. But it will not satisfy those who believe the proper scope of government does extend into telling us how we may and may not live.

It is frequently argued, for example, by the religious contingent, that if you legalize drugs, the usage of drugs will increase.

“Common sense and common experience tell us this,” says lawyer and radio talk-show host Dan Caplis, incessantly.

Next, we’re offered as evidence that the number of drinkers did increase after prohibition — a statement which is, at best, misleading, and here’s why:

Prior to prohibition, when drinking was still legal, the number of drinkers in this country was on a significant downward trend. For a decade leading up to prohibition, fewer and fewer people were drinking.

This fact is clear and not in dispute. But when, in 1920, the moralizers and busybodies got their way and legislated that the rest of the country must live as they deemed appropriate, and prohibition was then made into law, drinking still continued its downward trend. This went on for about three years.

It is very important to reiterate that the downward trend in drinking began long before drinking had been made illegal.

In the middle of prohibition — when drinking was still illegal — the number of drinkers began gradually to rise.

It continued to do so throughout the rest of prohibition, so that when, in December of 1933, prohibition was finally repealed, that upward trend continued for about a decade. But it was only the continuation of a trend that had already begun while drinking was illegal. This is a critical fact, but one you’ll never hear mention of when you hear people talking about “the number of drinkers increasing after prohibition.”

The next time someone says that “repealing prohibition increased the number of drinkers in this country,” be clear what that means: it means the number of drinkers was already increasing throughout the latter two-thirds of prohibition, and that the upward trend plateaued and then declined a decade after drinking was legalized anew.

Ask yourself also these questions: if, as the religious propound, making substances illegal prevents their usage, how is it that the number of drinkers began rising when alcohol was still illegal?

How is it that in Holland, where many drugs are legal and even subsidized(!), how is it that usage has decreased?

What does this tell us about “common sense and common experience”?

How is it that in Switzerland, marijuana usage has decreased even though it’s been made legal? And Spain?

There are those, of course, who argue that if drugs are legal, crime will increase. This is the biggest canard of them all.

Rest assured, if crime is your concern, illegalization should be what you want done away with.

There exists right now a multi-trillion-dollar underworld built up around illegal drugs, which legalizing would instantaneously crush, and which, as it stands, no amount of law, legislation, or litigation can come close to stopping. Why? The law of supply and demand is unstoppable: if there is a demand for something, supply will meet it, no matter what. All the conservative legislation imaginable cannot negate this fact. One might just as well try legislating against the tide.

When cigarettes and alcohol became so staggeringly taxed, do you know what happened? A gigantic blackmarket swept into the country. That meant more crime. People were smuggling in alcohol and cigarettes because these things could be sold for much cheaper on the blackmarket. They still are to this day.

Decriminalizing brings less crime.

For those who believe that if drugs are legalized, your kids are then more likely to use drugs, I urge you to remember that children have brains. Human beings have brains. We can learn, and we can be educated. We can be taught why not to use drugs. If you doubt the effectiveness of this, observe that cigarettes were legal for any age group until fairly recently, and the number of young smokers was sharply decreasing, and had been since the dangers of smoking were made known. Now that’s it’s illegal, teen smoking is on the rise again, and criminalizing doesn’t help.

Ask any honest school kid if he or she would have trouble getting drugs. Every honest school kid will tell you no. This despite the fact that drugs are illegal.

The inescapable law of supply and demand is why: if there’s a demand, supply will meet it. And no government bureaucracy and no middle-class morality can successfully fight it.

Making something illegal won’t decrease the supply of anything. It will only increase the underworld that provides the supply. This is a economic axiom.

Here’s another:

The only way to decrease supply is to curb demand.

The only way to curb demand is to inform, to educate, to decriminalize.

Each person must choose if he or she wants to use drugs or not, and whether those drugs are legal or illegal has little to do with the choice. There are many things that are legal and that every person has instant access to, but not everyone chooses to partake of. Why so?

The so-called war on drugs is a monumental waste of resources and money; it will continue to be so until the end of time. When something is made illegal, it develops a mystique. It entices. When something is legal, it becomes commonplace and mundane. It becomes no big deal. It is demystified.

Take, for instance, a person who’s grown up in an ultra-sheltered society and compare him or her to a person who’s grown up in the inner-city. Now drop them both off in downtown New York where there’s legal XXX shops on every street corner. Whom do you think will be more curious? And for whom do you think this will be more of a novelty?

And finally, for all the tax-happy liberals out there, think about this: if you legalize drugs, you can tax the living hell out of them. You can then use that tax money to educate with all your half-assed liberal programs, which benefit the “common good.” What more motivation do you need?

It is often said:

“Legalizing pot might be okay, but legalizing cocaine and methadrine, no way. I’ve known wealthy, white-collar, healthy, normal, successful businesspeople who’ve gotten so caught up in amphetamines that they’ve never been able to get off. They died. Suicide. OD. They’ve ruined their lives and the lives of their families. No way you should make these drugs legal.”

This is a repackaged version of the legalizing-creates-more-usage argument. It’s the same argument that drugs shouldn’t be legal because look at all the children born severely retarded and deformed because the mothers used crack throughout the pregnancy.

The first thing we must obviously note here is that all this happened (and still happens) even though drugs are illegal. Observe that making them illegal did not prevent these things from happening. Now ask yourself why.

Remember also that cigarettes and alcohol have ruined more lives and more families by far than every amphetamine combined. Should we therefore make alcohol and cigarettes illegal? And if not, why not? If it’s within the proper jurisdiction of government to run our lives, why shouldn’t we illegalize them?

And why, if that is government’s legitimate jurisdiction, draw the line at amphetamines, alcohol, and cigarettes? Why not let government run everything we consume — be it bacon, beer, or brats?

When gin made it into mainstream London, should it have been illegalized because it created such staggering addiction rates and ruined so many thousands of families?

We often hear: since alcohol can be and often is used in moderation, it should therefore be legal, whereas drugs cannot be used in moderation, and so should be illegal.

Leaving aside the questionable verity of such statements, since when did moderation become the standard for legalization versus illegalizing? That means, then, among other things, that for all those who can’t use alcohol or tobacco in moderation — for all, in other words, who are addicted (roughly half of all drinkers and more than ninety-five percent of all tobacco users) — these substances should be illegal? But for the rest, fine?

Freedom means you are left alone. It means you are neither helped nor hindered.

In this country, as in any just country, government’s proper role is not to be proscriptive or preventative.

In the words of Frederic Bastiat (1801 – 1850):

The nature of law is to maintain justice. There is in all of us a strong disposition to believe that anything lawful is also legitimate. This belief is so widespread that many persons have erroneously held that things are ‘just’ because the law makes them so (Frederic Bastiat, The Law).


13 comments » | Capitalism, economics, ethics, Individual rights, Political philosophy

How The American Healthcare Crisis Began

February 16th, 2010 — 9:36am

Staff of Asclepius, symbol of healing

What is now termed modern medicine actually began in the early 1920s when science — in particular, germ theory — culminated to a point that sickness and disease were at last being treated reliably. It was then that doctors and hospitals got much better at the business of saving lives. This more highly developed service and expertise raised the value of their work, and they charged accordingly for their increased skill and labor.

And that, really, is when the situation started: for when lives can be saved and health can be gained because of developments in technology, everyone suddenly believes that it’s his or her right to have that thing. We see the same principle at work in, for example, the platitude “No one should go hungry when Americans are throwing away food.”

The error in both cases is the fraudulent notion that survival should be assured. This notion neglects the singular fact that abundance and technology are produced — and produced, moreover, by individuals.

No one has the right to the life and labor (i.e. production) of any individual, including the life and labor of doctors.

An easy way to demonstrate this truth is by asking the following: where was that right before these goods and services were produced or invented?

Fact: American medicine is already 50 percent socialized; there is a clear and incontrovertible correlation between rising healthcare costs and the socialization of medicine in this country. More government intervention will only compound the problem.

In the 1920s, when advancing healthcare became more expensive (though still very reasonable), the administrator of Baylor Hospital in Dallas, one Dr. Justin Ford Kimball, created a system called Blue Cross. The Blues (so-called) were nonprofit health insurers. They served local organizations like the Rebeccas and the Elks Club, and — please pay attention — they kept their premiums low in exchange for tax breaks.

Tax breaks are one of the main components to our current healthcare crisis. They’re what initially created the problem.

Blue Cross, you see, was successful because of these tax breaks. Up until then, commercial insurers had always regarded medicine as a mediocre market, and therefore commercial insurers didn’t deal too much in medicine. But when commercial insurers saw that the Blues were making money, it convinced them to enter the medical field. This was not a problem, at first — until the 1940s, when private insurers increased their efforts to get around wartime wage controls, thus:

During World War II, Franklin Delano Roosevelt’s price-and-wage people, who didn’t generally permit wage increases or price increases (regardless of market forces) sanctioned a form of tax discrimination: specifically, they allowed employers to pay for employee medical insurance with pretax dollars.

This quickly became one of the few ways employers could attract new and better employees, since FDR had actually mandated that employers were no longer permitted to pay out higher wages. (How this ridiculous idea came about is another story, for another time.)

To this day, those who get employer-financed healthcare are purchasing their healthcare coverage with pretax dollars. On the other hand, those who buy their own healthcare are purchasing it with after-tax dollars.

As far as the employer was (initially) concerned, this wasn’t any different from additional labor costs — which is to say, medical insurance was not, from the employers perspective, any different from a rise in wages, and yet FDR’s price-and-wage control people did not at all see it as a wage increase. They therefore allowed it, which may seem surprising in light of FDR’s desire to control the entire economy.

Likewise, the IRS bureaucrats under FDR did not regard this maneuver as a wage increase, and for this reason they didn’t slap a tax on it. Neither did the employees see it as a real raise in wages — a fact that is singular to how this whole horrible precedent was set — because these costs are what economists call hidden costs.

The upshot: people didn’t and very often still don’t know that it is, after all, their own money paying for this prepaid medical coverage, and that medical coverage isn’t free.

In fact, health insurance today isn’t even really health insurance. It’s more properly called prepaid healthcare. But — and this is an absolute crux — it gives the appearance of being free or substantially free to the user, and it therefore substantially increases the demand for it and therefore its cost. Of course, the root of this whole problem is the misbegotten notion that healthcare is not a good and service to be traded on the open market, but a right.

Let us remember what insurance actually is:

Insurance, properly defined, is what you purchase in order to avoid financial ruin in the case of a rare emergency.

Under the dangerous system FDR created, employees came to regard their healthcare coverage as a kind of blessed phenomena which came without cause or consequence. Quickly, this phenomena was absorbed into the working culture and as quickly was taken for granted: employees got used to receiving free goods, which goods, however, were not actually free. Employees just could not see that they were paying for them, and paying for them, furthermore, with pretax dollars.

A family in the bottom fifth of the income distribution pays about $450 more in taxes than insured families at the same income level. For families in the top fifth of the income distribution, the tax penalty is $1,780. On average, uninsured families pay about $1,018 more in federal taxes each year because they do not have employer-provided insurance. Collectively, the uninsured pay about $17.1 billion in extra taxes each year because they do not receive the same tax break as insured people with similar income. If state and local taxes are included, the extra taxes paid by the uninsured exceed $19 billion per year (“Are the uninsured freeloaders?” National Center for Policy Analysis, Brief Analysis No. 120).

Among other things, this illustrates again why entitlements are such a deadly precedent: once they’re entrenched, it’s virtually impossible to retrogress. Why? Because people acclimate to entitlements and in no time cannot imagine life without them.



11 comments » | economics, Healthcare

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