Sunday, July 31, 2005

Remembering the Founder of Pediatric Ophthalmology

I was born with a fairly rare genetic condition affecting my eyes, requiring corrective surgery to prevent irreversible vision loss. Fortunately for me, Dr. Marshall M. Parks had found an unfilled niche in the field of pediatric ophthalmology and specialized in the surgical procedure I needed. Dr. Parks performed my surgery when I was six months old, allowing me to have 20/20 vision with a minimal loss of depth perception. I was his most successful case.

Sadly, Dr. Parks passed away a few days ago, on July 27, 2005. His contributions to pediatric ophthalmology were phenomenal, through research, managing his own practice and training many other ophthalmologists. His work made many lives better, including mine, and his contribution to pediatric ophthalmology as a teacher and writer will continue to help many born with various eye conditions. For this I am ever grateful.

Saturday, July 30, 2005

Giving in a Capitalist System

There are six intangible legal rights of property ownership, often referred to as the "bundle of legal rights." As an owner of property, you have the right to:
  1. Possess the property
  2. Control the property, without violating the rights of others
  3. Enjoy the property, again without violating the rights of others
  4. Exclude others from any right to your property
  5. Encumber, or lessen, one's rights of ownership
  6. Dispose of the property, through sale, inheritance, or giving it away

As the owner of property, you have the right to give your property away. You don't have the right to give someone else's property away, but you have every right to give yours to help someone less fortunate than yourself, to assist in finding cures to a disease, to aid in recovery from natural disasters, etc.

From a moral perspective, it is not noble to vote to give someone else's property away; but it is honorable to give one's own property, not out of obligation, but out of choice. Capitalism does not force one to care for another human being, but it allows one to have the right to, and to choose to whom he wishes to bestow his gifts.

Friday, July 29, 2005

Principles of Justice and Utility

There is a significant difference between stating that an outcome results from a given action; therefore the given action is just, and stating that a given action is just and noting that the resulting outcome is positive or stating that a given action is unjust and noting that the resulting outcome is negative. To determine the morality or fairness of an action requires us to first examine the action itself. We do not start by finding out whether ultimately a good outcome arose from the initial action, and then proclaiming, "the outcome was good, therefore the initial action was good."

The end does not justify the means; the end is justified by the means.

It is also meaningless to judge the end result in isolation. First, one must judge the means or action that caused the final outcome. If those are just, the end result is necessarily just, regardless of whether one believes the end result to be positive or negative.

Using the end to justify the means relies on a set of false assumptions. You have to assume that you can objectively measure total utility. Utility is subjective and each individual's perception of utility is different. For example: you may believe that security is important but rights are of less importance. You place a high value on security and a low value on rights. I, on the other hand, place a higher value on rights than I do security (I firmly believe that security necessarily results from rights, but that is irrelevant to this example). If we were to ignore justice and focus solely on utility, whose perception would we use? Any attempt to measure total utility would be arbitrary. When we make generalizations such as, "capitalism makes people better off," we are measuring central tendency, but not discounting the possibility that some people may consider themselves better off in a socialist system. The problem with socialism is not just that people are generally poorer, but that it violates the principle of individual rights.

The argument for capitalism does not rest on arbitrary measures of utility, but on the principles of fairness and justice. Any positive or negative results are necessarily just because a system of voluntary exchange free of coercion is just.

Nota Bene

The limit on comments is 3000 characters; after that it cuts off the rest of your comment. By clicking "preview comment" before publishing, you can avoid having your message truncated.

A few suggestions: Try limiting your comments to the topics presented in the post, although I realize this may be difficult as they have wide implications. Avoid ad hominem attacks and focus on the arguments at hand as much as possible. Finally, proofread your comment before you click "publish" - poor grammar and spelling only hinder the communication of your ideas.

On that note, thank you all for the comments and contributions. Keep up the great discussions!

Thursday, July 28, 2005

A Victory for Free-er Trade

In the news today, CAFTA (Central American Free Trade Agreement) passed by a narrow margin of 217-215. It's a step in the right direction, but I'm reluctant to say this is truly a victory for free trade, particularly when I read, "To allay lawmakers' concerns about the U.S. sugar and textile industries, the administration also won over several Republicans by pledging protection from Central American imports." Protection? From imports that might compete with U.S. companies if we had genuinely free trade?

After reading the numerous restrictions that compose this "Free Trade Agreement," Russell Roberts at Cafe Hayek thinks maybe a more appropriate name is CAMTA, for Central American Managed Trade Agreement.

It's sad to see another set of restrictions on trade passed off as "free trade." Protectionism and free trade don't mix.

What Is Freedom?

An underlying, or sometimes not so underlying, theme behind my posts is that people should be free. Liberty should not be compromised. I focus on economic freedom because, as I illustrated in a previous post (see Theory of Rights), without property rights there are no rights.

But what do I mean when I use the terms freedom or liberty?

First, you must understand what these words should not be taken to mean. By freedom, I do not mean freedom from having to make choices on your own. I do not mean freedom from consequences of your decisions. I do not mean freedom from the demands of nature. I do not mean freedom from your unfortunate circumstances. I do not mean freedom from responsibility.

By freedom, I mean the ability to do as one chooses as long as he is not forcefully violating the rights of another. This preclusion from initiation of force and violating others' rights is not a limitation on freedom, but a logical precondition to having freedom oneself. By freedom, I mean the freedom from initiation of force, freedom from coercion, freedom from any violation of rights.

Freedom does not mean having everything you need handed to you; it is having what is rightfully yours not forcefully taken away. It does not mean having every choice made available to you; it is having the choices available to you not forcefully taken away.

Wednesday, July 27, 2005

"None of Your Business" -- Literally

Suppose I spend a few hours making a necklace and Ms. Smith decides she wants to buy it. I agree to sell it to her for $20 and she agrees to pay me $20. Both Ms. Smith and I are happy with the transaction. Wouldn't it be ridiculous for someone else to block this voluntary exchange or force either of us to change our agreed upon price? Maybe you happen to think that Ms. Smith should have paid me $25 for the necklace. Or maybe you think the necklace was really only worth $15. So what? It is, quite literally, none of your business.

It is irrelevant whether you personally agree with the price that the two parties believe is fair. You are not a party to the contract -- where do you obtain the ability or the right to decide its terms?

*Editor's note: In case it wasn't apparent to the reader, the above is an analogy. It illustrates a principle in the most basic terms. Apply it to any voluntary exchange in which an unaffected third party, say for example - the government, is able to determine the terms of the contract, even though both parties are fully satisfied with the transaction and no individual's rights are violated.

Tuesday, July 26, 2005

Let's Start Caring About Those Workers

I don't know how many times I have heard people say "there's no such thing as a free lunch" -- yet again and again people seem to think that they can legislatively force lunches to be free. I can't blame them for their hope, but the naïveté in light of history is inexcusable.

I remember very clearly as a child asking, "Why don't we just print more money and give it to poor people so that everyone is rich?" This is a question only children should ask. Adults should know why people can't just make wealth from nothing. Adults should know that if you can't produce at least what you're paid, you're not going to keep your job. Adults should know the difference between a job and charity. No amount of minimum wage legislation or costly mandatory benefit programs make better workers and workers better off -- it just puts companies out of business and unskilled workers out of jobs. (And if we could force companies to hire underproductive workers and pay them more than what they generate, the companies are underpaying their productive employees in order to take a loss on the underproductive ones).

People seem to believe that it is the economists who do not care about the plight of the workers. Yet, if you examine what is actually best for all workers, you find that economists are often their only advocates. Politicians love to say that they are helping those minimum wage earners when they raise it by another dollar, but the workers are the ones most harmed by such legislation.

Minimum wage laws don't just regulate those "evil corporations that exploit the labor of poor workers," they regulate the worker's legal ability to bargain for a job. Let's say I have no skills yet and I'd like a job so I can make myself more marketable in the future (and earn more money later). I go to the local convenience store and say, "I'd like a job." Minimum wage is $5.15/hour, but since I have no experience, I can't do $5.15/hour worth of work -- I can only generate $3.15/hour. I might as well go to the manager and ask him for $2.00/hour to do nothing. There's no way that I am going to get the job given that scenario, but the experience is really important to me so I tell the manager, "I know I'm not that skilled yet, so I'll take $3.15/hour instead, just so I can gain the experience." The manager legally cannot hire me. I legally am not allowed to sell my labor for that cheap, even though that's what it's worth.[1] Instead, I remain unemployed and do not gain the valuable experience that will help me land a better job in the future.

So for all of those who put forth the argument, "It's impossible to live on only minimum wage," tell me this: Is it any easier to live on no income at all?[2] It's nice to come up with scenarios in which everyone is well off, but what about the costs? Let's not try to "help" the workers at their own expense.

I'll take a free market over a free lunch any day.

[1] Minimum wage laws are the most common example of a price floor, or minimum price at which a product (in this case, labor) can legally sell. The price floor is set above equilibrium, or higher than the market clearing price (how much the good would sell for without the restriction). The effect of a price floor is inevitably a surplus of the item being sold. In the case of minimum wage laws, this 'surplus' is of labor and it is measured in terms of unemployment.
[2] Another myth that exists is that the majority or even a significant percentage of minimum wage earners are supporting themselves and/or a family. To the contrary, those who earn minimum wage are typically young people who have obtained their first job and are supported financially by their parents. The above example accounts for almost all of minimum wage earners. They are not generally "living off minimum wage."

Monday, July 25, 2005

Maybe They Just Generally Hate Us

According to this news story, the Pope "did not see an anti-Christian motive in the recent wave of terrorist attacks blamed on Islamic extremists, attributing them instead to 'a much more general intention,'" saying in response to a question regarding whether Islam was a religion of peace, "I wouldn't want to label [it] ... Certainly there are elements that favor peace. It also has other elements."

Now, I am not sure what "general intention" causes people to hijack airplanes, bomb subways and buses, and kill themselves in the process. Methinks it is not unreasonable to suggest there is a more "specific intention" -- which leads me to the question: does everyone sound like a politician these days?

The Standard For How Much You "Deserve"

What standard determines whether I can charge $5.15/hour, or $500.15/hour for my work?

It seems as though the modern (not classical) liberal mindset is that your salary can somehow be determined on an absolute standard based on how much education you have received, the unpleasantness of your work, the overall need for people in your line of work, and most importantly, your need for income. How many times have you heard the argument, "We need teachers and police officers! We should pay them more since they are so important!" or, "These poor workers are making barely over minimum wage and can't afford nice clothes like you can. We should raise minimum wage and make those evil corporations pay them more money!" To need and to deserve are two different things.

The problem here is that I am not the only seller of labor, and there are plenty of other people willing to work for less money than I might be willing to -- regardless of how much education I have received, how unpleasant my job might be, or how much income I need in order to lead the lifestyle I want. In order to compete with those people, I have to lower the price I charge for my labor from what I'd like to have to what I can reasonably obtain. It's not unreasonable for companies to shop around and find the best deals on labor, just as it's not unreasonable for you to shop around to find the best deals on new shoes. The standard for how much those shoes should sell is the same standard as for how much your labor will sell: the market -- the amount you pay for a close substitute should be approximately the same; if you charge much more, your shoes or your labor simply won't sell.

Sunday, July 24, 2005

Stunting Leviathan's Growth

How will people be able to check government power as it gradually increases? One way is to make sure that government does not grow at a fast pace. Rational ignorance[1] is an ever growing problem because there are simply too many laws, sponsored by too many politicians, written in too much legalese over hundreds of pages, and being passed too quickly. It is impossible for any one person to be familiar with and understand these laws. Even the politicians who pass these laws don’t even read them or know what they say! Yet, these same laws are imposed and enforced on people who cannot possibly know that they exist, let alone what they entail.

My recommendation is this: only one law may be introduced and passed every two weeks. A bill should not take up more than one full page in the Sunday paper, so that everyone may read it and understand it in its entirety. This prevents political leaders from engaging in rational ignorance themselves and signing a bill just because its name sounds innocuous. This prevents other politicians from burying additional clauses into the bill to direct money towards their constituents.

The two weeks is somewhat arbitrary, but the reasoning behind it is simple. In two weeks the average citizen has time to review the law, to consider its fairness, costs and benefits, and the two weeks also allows enough time for individuals to write to their representatives and for the representatives to read the opinions of their constituents. Additionally, this limits government to passing a maximum of twenty six laws per year, a much easier number of laws for people to remember and a much slower pace for potential government expansion. Because there is a limit to the number of laws that may be introduced, only the ones that are most important and most popular will be introduced. Politicians will be under greater scrutiny because it will be less costly for people to be informed about the decisions their elected officials make.

[1] Rational ignorance: One may engage in what is termed 'rational ignorance' when it is more costly to know something than to remain ignorant of it. For example, I may decide that it is not worth it for me to know the names of every celebrity in Hollywood (I have better things to do with my time); therefore, with regards to names of celebrities, I am said to be rationally ignorant. The cost for me to learn every celebrity's name far outweighs any benefit I may obtain from that knowledge.

Removing the Bias Towards Government

Suppose you decide to sue Big Corporation, Inc. Who should decide the outcome of the suit? High ranking employees of Big Corporation, Inc., or a jury of your peers?

This is one of the inherent problems in any suit against the government. Go to court and who decides the case? A judge -- employed by the institution against which you have filed suit. Naturally, one would expect that judges would be biased in favor of their employer -- the government whom you are suing, rather than you -- an individual with whom they have never had contact and likely will never have any contact with again. You may have a legitimate case; you may have proof that a mistake made by government officials resulted in direct monetary damages. But if we look at case after case, it seems as though the bias is always in favor of government, and rarely are government officials held liable for their actions, even when their errors results in measurable losses.

Here's the dilemma:

Lifetime appointments for Supreme Court Justices may mitigate this tendency to some extent. While they are employed by the government, they do not face the threat of being fired and should generally be able to make decisions free from external influences or politics. If they rule in favor of citizen # 350,426 rather than in favor of the government, they won't be handed pink slips the next day.

But at the same time, they do not worry about the same external influences which a jury of your peers might. The consequences of their rulings in all likelihood will never affect them. So if the ruling of the court is in favor of the government, and against citizen # 350,426 of 250 million, what difference does it make to them if he had a decent case? Will they lose sleep at night thinking they may have made an unfair ruling, but knowing that their own jobs are secure for the rest of their lives? Probably not.

How do we remove this bias towards government?

Here are some ideas, albeit none are perfect:
  • Suits against the government should be decided by an impartial jury -- not by judges in a State or U.S. Supreme Court.
  • Supreme Court Justices should be appointed and should be free from the threat of being 'fired' -- however, they should not be appointed for life. Instead, they should be appointed for staggered ten year terms, so that no one president is able to make multiple Supreme Court appointments. The ten year term aids in providing stability of rulings, and the staggered terms help in preventing perpetually fixed rulings or long term biases. Additionally, they will have the security of making just rulings without any repercussions resulting from the popularity or lack of popularity of their rulings for those ten years, but should their rulings have adverse effects on the rights of the people, they will have to face those effects as a regular citizen after they leave the Court and are employed elsewhere.

What else could we do to remove this bias towards government and shift it towards a dedication to individual rights?

Friday, July 22, 2005

Sharing Is Not One of the 3 'R's

What comes before reading, 'riting, and 'rithmetic? Sharing.

Little Suzie has a brand new toy and Little Maggie comes along and decides she wants to play with it too. Suzie protests. You know what comes next, "Suzie, why don't you share with Maggie?" "How about you take turns?" "Suzie, be nice to the other children." -- as though Maggie had any right to Suzie's toy in the first place.

If Suzie values Maggie's friendship and gets enjoyment from allowing her to play with her new toys, Suzie will choose to share with Maggie. But if she chooses not to, has she committed a grave sin? If the toy is Suzie's property, she has exclusive rights to it. Why should she be required to give up those exclusive rights against her will?

Should one of a child's first lessons be that she must relinquish her property to other children merely because of their envy?

Instead of teaching sharing, maybe we should teach property rights and negotiation. Suzie, if you don't want to share, you don't have to. It's your toy. Maggie, if you'd like to play with Suzie's toy, you can try offering her one of yours to play with in exchange, but remember, Suzie has no obligation to accept your offer. If it's worth it to you, you can try to make her a better offer, and if not you can walk away. Sharing will not be a part of my children's curriculum.

"Stealth Justices" and "Non-Activists"

Little information exists on Supreme Court nominee John Roberts . Labeled a "non-activist" judge by those who seek his appointment, conservatives have looked for hints that Roberts may side with them on issues such as abortion: Roberts' wife belonged to Feminists for Life (a pro-life group) and Roberts himself is Catholic. These mean nothing as to Roberts' own opinions, and nothing as to how he will decide cases.

David Souter, the "stealth justice," was another nominee whose values were uncertain. Even a year after his appointment to the Supreme Court, little was known about the principles on which his decisions would rest. Even now, do we know what guides his decisions? From his concurrence in the Kelo v. New London case, it apparently is not a commitment to individual rights to property and clear definitions of "the public good."

When we try to figure out what a nominee might think about one issue or another, we're looking at red herrings and forgetting to look for the basic principles on which all the other issues rest. A Supreme Court Justice must be committed to the principle of individual rights. The Justice's priority must be to uphold the Constitution, not to reinterpret it. All other decisions follow from that commitment. What I want is a nominee with a reputation for not sacrificing individual rights on the altar of the ever increasing "public good."

I may ultimately agree with all of John Roberts' decisions -- but who knows? I could draw straws and happen to obtain a favorable outcome, but my decision would not have been made correctly.

No more mysterious "stealth justices" or "non-activists" -- give me a Justice with a proven commitment to individual rights.

Thursday, July 21, 2005

Changing Incentives

The question, "Can we change the system of incentives so that it is compatible with a truly limited government?" is one that people have struggled with for centuries. The U.S. Constitution was written to establish a self-limiting government deriving its power from the people, but like any document formed by humans even with the utmost care, it is not perfect.

If I am found to have violated your rights, I go to jail. What is a politician's incentive to uphold the Constitution? Will he face jail sentences, fines, anything? No, instead of punishment, they receive more votes! It's easy to blame special interests, politicians and voters for shirking their stated responsibilities and acting in their own self interest. Look at some of the solutions proposed thus far:
  • Abolish Special Interests: impossible - there are always people willing to give up someone else's rights when it benefits them; as long as it is profitable for special interests to pay politicians for favorable legislation, they will continue to do so. They'll find ways around that law.
  • Campaign Finance Reform: you can lobby all you want, politicians can grant you special favors, but you are not free to contribute your money as you see fit. Might a law such as this be a violation of free speech? Might it also violate your property rights -- the right to give away or dispose of your property as you wish? Not to mention the ways around that one: "how about instead of paying the politician now, we just offer him a high paying job at the end of his term?"
  • Better Candidates: of course! We need politicians who don't listen to lobbyists, who don't like having power, and who don't want money. Two problems: (1) those people, assuming their existence, rarely enter politics, and (2) if they did, would they succeed? The system of incentives is not in their favor.
  • Better Voters: to vote for whom?

Notice that all of these solutions ignore the system of incentives as it currently exists. Politicians and special interests rely on one thing: the ability of government to transfer your property or require you to spend more to obtain the same product (via subsidies, tariffs, protection of monopolies/cartels, and other regulations that you never even know exist). Take away this ability and what do you have? Special interests have no reason to lobby for legislation they can't obtain. They'd be wasting their money. Think for a moment about how much money is funneled through lobbying efforts for merely the chance of obtaining a bit of legislation in the special interest's favor. What does this tell you? It tells me two things: the payoff of the legislation is potentially very high, and the likelihood of its existence is also high. If it was truly a gamble where the odds were not stacked in their favor, those special interests would take their money to Vegas. The only way to prevent special interests from influencing politicians is to reduce the odds of obtaining favorable legislation or reduce the potential payoff. Reduce them by eliminating government's power to violate your rights for someone else's benefit. Make consequences for politicians who violate your rights, just as consequences exist if you violate another's rights.

Next: Implementation - what we might do differently.

To be continued ...

Wednesday, July 20, 2005

Economists & Costs

A real economist recognizes a cost when he sees it -- and he knows that costs aren't always measured in dollars (or euros, or yen, or lira or yuan).

When we talk about the cost to obtain something, we don't simply mean "how much money do I give for that item?" We include everything that is required to obtain that item as its cost. Costs may also differ for individuals, even for the same item at the same monetary price. Perhaps I consider my time more valuable than you consider yours - in terms of time, my cost is higher. In analyzing whether this is a cost that we should bear, we ask "how much effort am I willing to put into obtaining said item, how much risk am I willing to take, how much time am I willing to spend or how long am I willing to wait?" In short, we ask if the payoff (or total benefit) is higher than the total cost. A real economist knows that cost is more than just money. Cost is anything that we give up, be it money, time, security, or other things that we could be doing.

When I wait in line at the grocery store, that's a cost to me in addition to the price I pay for my groceries. I'd be willing to pay more in dollars for the groceries if I didn't have to wait in line.

When I decide not to buy health insurance, that's a cost to me in terms of the risk or lack of security I face by not owning insurance. When I choose not to purchase insurance, it means that the dollar amount of the insurance policy exceeds the value that I place on not having to worry about my health.

The same is true for payoffs -- when I refer to profits and payoffs, I could mean money, but not necessarily. When considering a job, do you only look at the salary? Or do you look at how much free time the job allows you, whether you like the people with whom you will work, whether you enjoy the job itself, whether your office has a window, etc? Payoffs can be in the form of psychological benefits, good relationships, leisure, security, or anything that you value.

Don't make the common mistake of thinking solely in dollar terms. Costs & payoffs are more than just money given up & money gained.

What 2nd Amendment?

I could spend an entire post on the Constitutional argument for your right to keep and bear arms. I could throw in quote after quote from our founders detailing that when they said the right of the people, that's what they meant -- who ensures the right of government in their Bill of Rights? I could show that their objective, according to Patrick Henry, was "that every man be armed." But why waste precious time? Do away with the 2nd amendment completely and the compelling argument against gun control still holds.

Gun control is not a tool for reducing crime, much as advocates claim it to be. Its effect is quite the opposite. (I'll save the empirical evidence for a later post, for now this is just basic economics). Let's say we enact a gun control law that requires waiting periods, licensing, mandatory trigger locks, and high taxes on firearm purchases. We have just made it more costly for an individual to buy a gun. What should we expect to happen to the quantity of firearms demanded? It drops overall. But in limiting ourselves to the overall drop in quantity demanded, we ignore the responses of two important groups: the law-abiding citizen and the criminal.

1) I'm a law-abiding citizen. The cost of owning a gun goes up. The only reason, ignoring target practice and hunting, that I own a gun is for self defense. I don't know that I will ever need a gun. So, my cost-benefit analysis goes something like this: the risk of me being attacked is fairly low, but the cost of purchasing this firearm is very high ... I'll take my chances.

2) I'm a criminal. The cost of owning a gun goes up. I now know that fewer people will own guns, and therefore the likelihood of my criminal activity being met with resistance is much lower. My cost-benefit analysis: My risk has gone down, my expected payoff to crime has gone up ... a gun is a pretty good investment right now, I'll take it!

Daniel Polsby, Professor of Law and acting Dean of George Mason Law School, terms this phenomenon the "futility theorem" in his article, The False Promise of Gun Control. While for the law abiding citizen there is less of an incentive to purchase a gun when the cost is increased, there is a corresponding higher incentive for a criminal to purchase a gun. For the criminal, the cost of the weapon has increased, but the payoff for criminal activity has also increased because his victim is less likely to be armed. From simple economics, it is clear that when the expected return exceeds the cost by a larger amount, one should expect a rise in the activity that yields the expected return. Polsby concludes, and I agree, “This is what makes the case for the right to bear arms, not the Second Amendment. It is foolish to let anything ride on hopes for effective gun control. As long as crime pays as well as it does, we will have plenty of it, and honest folk must choose between being victims and defending themselves,” The False Promise of Gun Control. Atlantic Monthly, March 1994.

So go ahead, abolish the Second Amendment. The case against gun control still stands.

Tuesday, July 19, 2005

Incentives, incentives ...

In my previous post regarding the incentives for politicians to behave in a manner which benefits the few at the expense of the many (concentrated benefits & diffuse costs -- a politician's goal is to maximize votes after all!), note that I am neither advocating the abolition of special interests nor politicians -- although I may be persuaded of the latter.

Special interests, regardless of our opinion of them, cannot be eliminated. Nor should we try to eliminate them. For more thoughts on special interests, consult Federalist Paper #10. As James Madison so eloquently stated, "By a faction [special interest], I understand a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community. There are two methods of curing the mischiefs of faction: the one, by removing its causes; the other, by controlling its effects. There are again two methods of removing the causes of faction: the one, by destroying the liberty which is essential to its existence; the other, by giving to every citizen the same opinions, the same passions, and the same interests. It could never be more truly said than of the first remedy, that it was worse than the disease. Liberty is to faction what air is to fire, an aliment without which it instantly expires. But it could not be less folly to abolish liberty, which is essential to political life, because it nourishes faction, than it would be to wish the annihilation of air, which is essential to animal life, because it imparts to fire its destructive agency ... The inference to which we are brought is, that the causes of faction cannot be removed, and that relief is only to be sought in the means of controlling its effects."

There will always be groups of people who are willing to take the rights of others to benefit themselves. Do we want a government that is able to assist them in so doing?

Think about this some more ... remember from my earlier post, it's not the "employee handbook" that makes a difference in terms of observed behavior, it's the incentives. If special interests give their money to politicians who have no power to make laws which give those interests protected monopoly power, tariff protection, subsidies and other handouts, they've wasted their time and money -- and you, Mr. Taxpayer, get to keep yours.

This is a pretty involved topic and there are no easy answers in terms of implementation. But Capital Freedom has a few more ideas on how to accomplish this and preserve liberty.

to be continued ...

Incentives for Bad Behavior ...

When a child steals a toy from another child, does the parent reward the child who stole by giving it more toys? Of course not. The child would only continue stealing toys from the other children in hopes of getting more and more for himself.

Yet this is the way the system of incentives works in government. The politicians are much like the child in the above example: they steal (via taxation or regulation) from the average guy who doesn't contribute much to their campaign and transfer that wealth (via subsidies or the natural result of regulations in their contributor's favor) to those who make large donations. We criticize politicians for "caving in to the special interests" and forget that it is the system of incentives created over time that have enabled politicians behave in such a manner. We forget that we have demanded that politicians spend other people's money for our benefit, and given them our vote in return. When we continue to reward bad behavior, can we honestly expect it to cease?

We ask, Why doesn't the government stick to doing its job? The easy answer is that it is profitable for those in charge of running it to exceed the scope of their job. Let's say you are my employee and the employee handbook says "No working past 5:00," yet, when you do, the accountant pays you an extra $1,000/hour. Which speaks louder: the instruction to not work past 5:00, or the bonus you get for doing just that?

The Constitution is that employee handbook. It is the list of restrictions on what government may and may not do. But the special interests are those 'accountants' who pay our employees to do more than their stated responsibilities. Is it a wonder that the government's "employee handbook" is disregarded in favor of bigger government?

Next question: Can we change the system of incentives so that it is compatible with a truly limited government?

Sunday, July 17, 2005

Always Evil?

Government is evil when it is not sufficiently restrained. The framers of the U.S. Constitution knew of government's tendency to gain more power and become a threat to the people. They harbored no utopian illusions that government is a paternal figure with only our best interests at heart. “Government is not reason. It is not eloquence. It is force. Like fire, it can be a dangerous servant or a fearful master,” said George Washington. Like fire, it must be kept under control before it consumes everything.

As James Madison stated, “If men were angels no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself." -- James Madison, The Federalist Papers, Paper #51. Why do we need government? Unrestrained governments have a tendency to steal away the rights of the people, but so do unrestrained men. Governing forces always exist, even in anarchy, but the only legitimate ones are those which exist by the consent of the people. Now, I am not referring to the Hobbesian idea that we must give up all of our rights for some amount of security which the government may afford us. Rather, we recognize that individually it may be difficult to secure our rights against those who may form alliances against us. To protect those rights (life, liberty and property), we created our own alliance, known as government, to enforce our contracts and settle civil disputes, protect us from foreign threats, and convict and punish criminals. Government's job is not to supply goods or services -- it is not to protect us from ourselves -- it is not to make us good people -- it is not to make us tolerant -- it is not to make us smart -- it is not to make us healthy -- it is not to make us rich -- yet, in remaining limited and providing only the environment in which we may thrive and produce all of these things ourselves, we become all of the above.

The next question is then, Why doesn't government stick to doing its job?

To be continued .........

Saturday, July 16, 2005

Theory of Rights

Rights are never in conflict. That's right - NEVER.

The U.S. Constitution was based on Locke's theory of rights as inherent in man, granted by God and not by government. We understand that "rights" granted by government are merely temporary privileges which the government may give and take away as it pleases. (As such, we have no "right" to drive, but it is correctly referred to as a privilege which government chooses to grant or not to grant to individuals, and may suspend or revoke.) Nothing which must be licensed can be a right. Nothing given by government is a right. "I have a right to nothing which another has a right to take away." --Thomas Jefferson to Uriah Forrest, 1787. ME 6:388, Papers 12:477

Rights cannot exist in the absence of property. I do not have the right to walk into your home uninvited and preach the merits of capitalism to you, because you have the right to tell me to leave. Why? Because it is your property. I can, however, speak freely in my own home, produce newspapers and sell them to others, and use my computer to post my thoughts online. Likewise, you are able to use the resources you have earned to obtain newspapers, religious books, and other sources of information. Freedom of speech, freedom of religion, and freedom of the press follows from the right to property.

If I do not own my life and am not allowed to earn and keep the property I need to preserve it, I do not have a right to life. The right to life follows from the right to property.

Without the right to property, I have no right to pursue my own interests because I am incapable of keeping the salary I have earned and using it to obtain other things that I value. If the government or any other group of individuals is able to take my salary that I spent a year of my life working for, they have enslaved me for a year because I was unable to keep the product of my labor for that period of time. The right to liberty follows from the right to property.

Violations of others' rights cannot be a result of inaction. I cannot passively take someone's property or life or liberty. From this principle, it follows that rights are not entitlements. I have no "right" which presents an obligation to another. I do not have the "right" to healthcare. I have the right to earn property which I can use to pay for my own healthcare. You are not "violating my rights" by not paying for my healthcare. However, if I were unable to afford healthcare and you had the obligation to pay for mine, that would violate your right to property. I do not have the "right" to a job because you do not have the obligation to hire me. I do have the right to freely exchange goods and services for money or other property in a free, uncoerced exchange. That is, there is no such thing as a "positive right," or a right to something that requires action by another. If one person's "right" violates that of another, rights are not absolute and are no longer rights. The right to property is a negative right -- when I say I have the right to property, it means that I have the right to earn, keep, use, sell, give away, or dispose of property that I own; no one has the right to restrict it or take it from me. To have both negative rights and positive "rights" is like saying "I have the right to be left alone" and "You have the right to bother me." Simultaneously, they cannot exist.

Friday, July 15, 2005

On Public Education

"The aim of public education is not to spread enlightenment at all, it is simply to reduce as many individuals as possible to the same safe level, to breed and train a standardized citizenry, to put down dissent and originality." -- H L. Mencken

"Should the government be permitted to remove children forcibly from their homes, with or without the parents' consent, and subject the children to educational training and procedures of which the parents may or may not approve? Should citizens have their wealth expropriated to support an educational system which they may or may not sanction and to pay for the education of children who are not their own? To anyone who understands and is consistently committed to the principle of individual rights, the answer is clearly: No." -- Ayn Rand, Capitalism: The Unknown Ideal, p. 89

If I am for freedom of thought, I am against state monopoly on education.

"In order to make possible to every capable and industrious [citizen] the attainment of higher education and thus the achievement of a post of leadership, the government must provide an all-around enlargement of our entire system of public education … We demand the education at government expense of gifted children of poor parents." -- excerpted from the Nazi Party Platform, adopted in Munich, February 24, 1920

Jobs & Free Trade

In An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith criticized governments for outlawing the use of labor-saving technology, granting monopoly privileges and subsidies to certain industries, and aiding in the creation of cartels. Adam Smith believed, as economists do almost unanimously today, that competition and choice lead to prosperity, but protectionist measures inevitably lead to misallocation of resources and poverty. To understand this, we must first understand the basic question: why do we buy things from other people?

We could make everything ourselves, right? Isn’t being self-sufficient a good thing? As a matter of fact, being self-sufficient is a good thing, that is, until you consider what you have to give up to be self-sufficient. Suppose you earn $20 per hour at your current job, and you typically spend thirty minutes buying your groceries each week ($10 in time) and the groceries cost $30. The total cost of your trip to the grocery store, excluding any minor transactions costs such as gasoline expenses, is $40 – equivalent to two hours of your time. Suppose you are also entirely capable of growing your own food. Let’s say you can purchase a few plants for $15 and spend approximately two hours maintaining your garden and harvesting your food each week. The total cost associated with growing your own food in this case is $15 for the plants plus $40 for the two hours per week, or $55. Is it worth the loss of $15 per week to be “self-sufficient?” No. In fact, you are spending more money or more time to accomplish the same outcome as you had when you purchased your groceries at the grocery store. In being “self-sufficient” you are making yourself poorer.

Now, let’s change our suppositions in the previous example. Let’s say that you earn only $6 per hour, and all other variables are the same. Your cost of groceries is $30 plus the half hour of your time, which is equivalent in this case to $3. The cost associated with growing your own food are $15 for the plants, plus two hours of your time each week, or $12. For you to buy your groceries, it would cost $33. For you to grow your own food would cost $27. Because your time is less valuable, it is cheaper for you to grow your own food. It follows that the only time that one should be self-sufficient is when one’s current specialty does not pay highly and/or when the cost of purchasing a good exceeds the cost of making it oneself. A poor society is self-sufficient. A wealthy society, by its very nature, produces that in which it specializes and purchases all else. To do otherwise would be more costly.

Undoubtedly you agree in practice as well; if it is cheaper for you to buy something, you do not make it yourself without the added feeling of accomplishment to account for the difference in cost. However, we are not only dealing with the issue of making goods ourselves versus purchasing them from others. In fact, we recognize that on an individual level, people should not be truly self-sufficient, but should capitalize on their own unique skills. Why is this different for countries?

No supporter of protectionist policy in the United States would argue that you should make everything yourself rather than purchase it from other people in the United States. Who is to say that other people in the U.S. are our ‘friends’? Is a foreign stranger sufficiently different from a stranger in our own country?

There are companies that I simply do not buy from because I disagree with the political or social objectives that they support. Certainly it is the freedom of all individuals to choose from whom they purchase or whom they do not. However, we make these choices in the absence of tariffs or quotas. When I refuse to buy an equivalent, lower-priced item because I disagree with the political agenda of the manufacturer, I am saying that the difference in price is not sufficient enough to warrant the negative externality (supporting their political agenda indirectly) that I bear. I am the only person qualified to make this decision for myself and I bear the cost of this decision. On the other hand, if I were to make a law that would impose a tax on Bad Political Agenda, Inc., while not imposing a similar tax on Good Political Agenda, Inc., I would make it more costly for EVERYONE to buy from Bad Political Agenda, Inc.

I had a discussion recently with some out of town guests who believed that free trade would harm the U.S. because of "lost jobs" to workers in foreign countries who were willing and legally able to work for less pay. While I agreed that minimum wage laws stifle the ability of the U.S. to compete in exporting certain manufactured goods, not permitting free trade would only cause further misallocation of resources. We might keep some jobs, but to do so would be at the cost of other jobs at which we would excel. I also made the point that "losing jobs" is not necessarily a bad thing - losing the end result of a job is the bad thing. Jobs are costs, not end results. We work not for the sake of having a job, but for the sake of having a salary! If our goal is to maximize the number of hours we spend working, then by all means, outlaw free trade -- in fact, we should just outlaw trade in general so that everyone is always employed! But if our goal is to maximize wealth, we must realize that free trade and specialization is key. When we find more efficient ways of doing business, our productivity remains the same, but the cost (i.e. the number of hours worked or the number of employees needed) is less. Free trade is a mechanism that allows us to receive the same (or superior) product with less work because it is comparable to finding a more efficient outcome.

Planned Genocide?

If you are ever in the D.C. area, I would highly recommend touring the Holocaust Museum. In doing so, ask yourself this question: how did Hitler rise to power? Although the museum is by no means a complete historical analysis, the attentive visitor will note the bad public policies in existence in the German government prior to Hitler. It was the combination of incentives and public policies that grant unnecessary power to government officials that enabled him to carry out his agenda. However, the most striking thing to me was the cunningness that Hitler used to make his agenda appear benign. In many ways, I was struck by the resemblance that Hitler bears to many of the modern liberals in the United States: he was an anti-smoking crusader and a champion of animal rights. Undeniably, Hitler appealed to many sides. The museum had displays regarding Hitler’s censorship and book-burning of noted authors as psychologist Sigmund Freud and Birth Control League founder Margaret Sanger. Ironically, Margaret Sanger supported much of Hitler’s agenda, knowingly or unknowingly. In her own publication, A Plan for Peace, she indicated that Congress should “set up a special department for the study of population problems and appoint a Parliament of Population, the directors representing the various branches of science: this body to direct and control the population through birth rates and immigration.”[1] The tasks that she believed the Parliament of Population should accomplish include application of “a stern and rigid policy of sterilization and segregation to that grade of population whose progeny is tainted, or whose inheritance is such that objectionable traits may be transmitted to offspring,” and “take an inventory of the secondary group such as illiterates, paupers, unemployables, criminals, prostitutes, dope-fiends; classify them in special departments under government medical protection, and segregate them on farms and open spaces.” Somehow the government should decide who is fit to reproduce and, in Sanger’s utopia, can segregate people on farms, just as Hitler segregated the Jews in concentration camps. In fact, the Convention on the Prevention and Punishment of the Crime of Genocide defines genocide as any act that includes “imposing measures intended to prevent births within the group.”[2] Yet many still laud Margaret Sanger as a hero, a champion of women’s rights. The Birth Control League, now known as Planned Parenthood, is an institution that has maintained its status in today’s world as an institution dedicated to freedom of choice, despite its beginnings in segregation and forced sterilization.
[1] Sanger, Margaret. A Plan for Peace, Birth Control Review (April 1932, pp. 107-108).
[2] U.N.T.S. (United Nations Treaty Series), No. 1021, vol. 78 (1951), p. 277.

Thursday, July 14, 2005

No Dichotomy Between Economic & Social Freedom

Have you ever heard someone say, "we need to protect social freedom before we worry about economic freedom," as though they are two entirely different freedoms that one can separate? Often, those same people mistakenly believe that economic freedom is what we give up to have more social freedom, and believe that economic freedom is only important to the very rich. This blog will illustrate, example by example, why economic freedom -- the right to property -- extends to also grant the right to life and liberty, that without one, the others are meaningless. Without economic freedom, 'social freedom' could not exist.

No better recent example exists than in the case of Kelo v. New London which incensed both conservatives and liberals alike. And rightly so -- the city of New London, Connecticut used its power of eminent domain to compel residents to move out of their homes so that New London Development Corporation could bulldoze their houses and build research facilities for Pfizer. The reason? Pfizer and others who will own the land that Susette Kelo and others called home will bring more tax dollars to the town of New London. The government, backed by the Supreme Court of the United States, decided that it was legal and constitutional to steal the property of one person and give it to someone else who will bring more tax revenue.

In an example of the implications of such a decision, refer to the movement to take Justice Souter's property by eminent domain to build Lost Liberty Hotel.

Economic freedom is driven by principle. It is fueled by the right to life, liberty and property and any lawful extension thereof. To reject economic freedom is to reject the rights to life, liberty and property and all social freedom stemming from those fundamental rights.

Now, I wonder, am I generating enough tax dollars for Uncle Sam so he will let me keep my own house?


Hello all,

I am Capital Freedom, someone you may have forgotten about while you were caught up in complaining about the price you paid for that cup of coffee which by some magic known as uncoerced economic interaction ended up in your hands. Quite disgusted with how I was being treated by politicians and Supreme Court Justices, I decided the best course of action was to tell you why you need me, even though you often ignore that I exist.

~ C. Freedom