Tuesday, April 30, 2013
by DON BOUDREAUX
Over at Bleeding Heart Libertarians, Jason Brennan summarizes an analysis that he and Peter Jaworski will make in response to Michael Sandel's argument that (quoting Brennan�s interpretation of Sandel�s claim)
queuing distributes goods equally, while markets distribute according to ability and willingness to pay. Since people have unequal ability to pay, markets distribute goods unequally. They are in that way unfair compared to queuing.
Jason does a nice job exposing some of the many flaws in Sandel�s argument that queuing is more egalitarian than are markets. Here�s yet one additional problem with Sandel�s argument. (Jason and Jaworski might well make this additional argument in their larger work.)
As Jason suggests, queuing that is the result of money prices kept too low obliges people to pay more in the currency of time than they would have had to pay in the currency of time if money prices were closer to market-clearing levels. People spend more in the currency of time and less in the currency of money.
But it�s not the case that for every one-unit decrease in the money cost of acquiring the good that is in short supply there is only a one-unit � an equal-value � increase in the time cost of acquiring that good. The total amount spent, measured in value, in order to secure a chance of actually acquiring a unit of the good that is in short supply is greater than is the total amount spent if the money price were allowed to rise to its market-clearing (�equilibrium�) level.
Readers familiar with standard supply-and-demand analysis can picture an effective price ceiling that causes the quantity supplied not only to be less than the quantity demanded, but less than what the quantity supplied would be at the higher, market-clearing price. That is, the price ceiling makes the good (say, gasoline) less abundant than it would be otherwise. The marginal value of each unit of the now-lower quantity supplied of gasoline is, therefore, higher than it would be were gasoline�s price allowed to rise to its market-clearing height. Because the price-ceiling raises the marginal value of gasoline � yet does so in a way that prevents gasoline suppliers from profiting from this higher value � the value of the bundle of nonmony resources (e.g., time) spent by aspiring buyers to maximize their chances of actually acquiring some units of gasoline will rise until it is equal to the difference between the marginal value of the good and the capped money price. The total amount spent to buy each available unit of the good � the value of the bundle of nonmony resources plus the capped money price � will be higher than would be the total amount spent to buy each available unit of the good in the absence of a price cap.
If (as is plausible) the method used by buyers to compete amongst each other in order to acquire desired amounts of the artificially restricted supplies of gasoline is queuing, then the queues will lengthen until the amount of time spent in queues rises to its market-clearing height. That is, the (money-)price ceiling will cause the marginal value of time spent queuing for gasoline to be equal to the marginal value of gasoline � a value that is necessarily higher than it would be if the quantity supplied of gasoline were greater (that is, as high as it would be if there were no price ceiling in place).
The total (monetary and nonmonetary) per-unit cost of a gallon of gasoline will be higher if the money price of gasoline is capped than if it is not capped. In short, price controls raise � they do not lower � the cost of acquiring goods and services whose prices are controlled.
It might still be the case that people who are especially rich in time will be better able to afford such price-controlled goods and services than they would if the price controls were abolished. (Although, for other reasons, even this possibility isn�t all that high.) But make no mistake: price controls meant to lower the cost that consumers in general pay for goods and services do the opposite: such controls raise the cost.
Not convinced? Ask yourself the following question: What would be the cost of acquiring a gallon or a liter of gasoline if government capped the price of gasoline at, say, $0.01 per gallon (or liter)? Do you think that your cost of acquiring a gallon or a liter of gasoline would be lower than it is without any price ceiling? The same? Or higher?
Monday, April 29, 2013
Sunday, April 28, 2013
Saturday, April 27, 2013
by DOUG BANDOW
Uncle Sam is broke. After running up $5 trillion in deficits over the last four years, Washington is borrowing another $845 billion this year. And assuming Congress neither adds expensive new programs nor expands expensive old ones, the federal government will run up another $7 trillion in red ink over the next decade.
Government outlays must be cut. But when the sequester hit, reducing the $3.6 trillion budget by a paltry 2.3 percent, much of Washington reacted in shock and horror. The savagery, the inhumanity!
Of course, the standard response to most any proposed cut is the cry, �What about the poor?� Yet most of the federal budget has nothing to do with the poor. In fact, Congress favors middle-class and corporate welfare, plus a plethora of lesser special interests. Like the agriculture lobby.
It�s obvious why welfare exists, even though Uncle Sam does a bad job of helping the poor. But why subsidize farmers because they are farmers? We don�t have an engineers� support program. Or subsidies for writers. (How I wish.) There are no marketing orders for pharmacists. Or special loan programs for insurance salesmen.
Farmers have their very own Cabinet department. What accounts for the ability of people who otherwise appear to be rugged individualists to sup so handsomely at the public trough?
Farming remains hard work, but lots of Americans work hard. True, farming gets romanticized more than most other jobs. Some city folk have a sentimental view of a way of life they never have experienced. Imagine the hardy frontier family creating a new life and bounty in the wilderness! Of course, this scenario has nothing to do with rural life today. And even if it did, that would be no reason to tax away the earnings of some hardworking Americans to give to other hardworking Americans.
Nor do agriculture subsidies do much to save family farms, which capture most public attention. Despite ample government funding, small family farms are disappearing. Their number has dropped 70 percent since Uncle Sam went into the farm business during the Great Depression. Today agriculture is big business, made even bigger by federal intervention.
Another argument is that food production is essential and business is unpredictable. True, but Americans fed themselves before there was a Department of Agriculture. They fed themselves before there was a U.S. government. Even today two-thirds of American farm production, such as meat, fruit, and vegetables, is not subsidized. New Zealand got rid of all farm supports in 1984, and its farmers prospered.
In fact, government�s role in agriculture almost always has been pernicious. Throughout history political authorities have stolen farmers� crops and imposed price controls on food. The twentieth-century communist experiments in collectivized agriculture led to mass starvation and death.
Nor are farmers the only businessmen vulnerable to changing markets. As columnist Robert Samuelson noted, �Technological upheaval and foreign competition have convulsed countless industries and their workers: autos, steel, entertainment, newspapers and many more.�
The last argument is that judicious state intervention can improve food production. It�s an inside joke by rural politicians determined to deliver ever more taxpayer loot to their constituents. Uncle Sam manages to simultaneously keep prices up, drive prices down, generate massive surpluses, and create terrible shortages. Washington pays dairy farmers to add milk cows and then to slaughter milk cows.
The result is not orderly markets. According to the Heritage Foundation, �Subsidies are intended to compensate farmers for low prices that result from an oversupply of crops, but granting larger subsidies to farmers who plant the most crops merely encourages them to plant yet more crops, driving prices even lower and leading to calls for larger subsidies. Furthermore, while paying some farmers to plant more crops, the Conservation Reserve Program pays other farmers to plant fewer crops.� Only an idiot�or a congressman�could design such a system.
The mishmash of bizarre programs and regulations�non-recourse loans, set-asides, deficiency payments, risk coverage, marketing orders, direct payments, price supports, disaster relief, and more�has but one objective: to transfer tens of billions of dollars annually to farmers.
Uncle Sam is playing reverse Robin Hood. A recent Heritage Foundation study noted that in 2009 farmers had a net worth of nearly a million dollars, twice the national average. Average farm household income in 2010 was more than $84,000, despite significantly lower living costs. In that year, farmers earned more while other American households earned less�$65,500�than in the year before.
Most federal subsidies are production-based, so they are designed to enrich the wealthiest farmers. The majority of agriculture payoffs go to farms with average annual revenue exceeding $200,000 and net worth around $2 million.
The Agriculture Department forecasts that farm income this year will be the highest in four decades. In March the New York Times reported that �farmers are receiving record prices for their land.� Despite last year�s drought, land prices have doubled in both Iowa and Nebraska since 2009. Yet farms fail at just one-sixth the rate of other enterprises.
The Republican Congress attempted to transform the system with the 1996 �Freedom to Farm Act,� but legislators quickly retreated, lavishing ever more money on farmers. There was a time when Americans might have felt rich enough to fritter away their earnings on people who were wealthier than average simply because they were farmers. But as Samuelson pointed out, �If we can�t eliminate the least valuable spending, then we will be condemned to perpetually large deficits, huge tax increases or indiscriminate cuts in many federal programs, the good as well as the bad.�
Farmers have grown comfortable on the federal dole. However, they would adapt if forced to operate in the marketplace like other businesses. My Cato Institute colleague Chris Edwards observed that �many industries have been radically reformed in recent decades with positive results, including the airline, trucking, telecommunications, and energy industries.� Ending farm subsidies similarly would leave �a stronger and more innovative industry.�
Washington is bankrupt. It�s time to eliminate farm welfare.
Friday, April 26, 2013
by BILL FREZZA
Flight delays are piling up around the country because air traffic controllers are being forced to take days off due to budget cuts.
Those automatic cuts came as a result of the so-called sequester, when Congress could not reach a deal to trim deficit spending.
To see Bill Frezza's interview on the topic, go here.
Thursday, April 25, 2013
Is the USA technically a warzone in the War on Terror? With the NDAA, how much strength does the Bill of Rights still have in protecting citizens? Considering The USA Patriot Act and Martial Law in Boston, how much privacy remains in America?
Tuesday, April 23, 2013
by DON BOUDREAUX
Here�s a letter to a reader who describes herself as a high-school teacher in Iowa:
Dear Ms. __________:
You object to my favorable mention, on my blog, of Richard Epstein's criticism of mandated paid sick leave. The crux of your objection is that Epstein �ignores the likelihood for businesses to pay for the expenses of [paid sick leave] from their profits.� You concede that businesses might respond as Epstein argues, but regard such a response as �not likely� because �businesses need workers.�
With respect, I believe that the possibility that you regard as a �likelihood� is a practical impossibility, if only because few firms consistently earn abnormally high rates of return. But there�s a deeper problem with your assumption that government can create benefits for workers merely by mandating that such benefits be supplied.
Suppose government were to mandate that workers receive the out-of-pocket costs of their paid-sick-leave packages not from their employers but from supermarkets. Every worker who takes sick leave would present a voucher to a supermarket. The voucher would be from his or her employer and would entitle that employee to receive from a supermarket a bundle of cash equal to the wages that the worker would have earned had he or she worked rather than taken time off.
Is it conceivable to you that supermarkets would simply absorb these higher mandated costs without taking countervailing actions � such as raising the prices charged for groceries and by limiting the number of people who shop in their stores? (Supermarkets, after all, need customers.) I assume that you agree with me that supermarkets would indeed react in ways that their customers find disagreeable. But, then, why are you a fan of mandated paid-sick-leave policies of the sort that Epstein criticizes?
I don�t claim that my supermarket hypothetical is fully analogous to the paid-sick-leave policies that you endorse. But my hypothetical is nevertheless relevant because it exposes as na� the assumption that government can arbitrarily impose higher costs on businesses without those businesses reacting in ways that shift much of the burden of the mandated higher costs from themselves onto others, such as consumers or workers.
Firms as employers are no more likely than are firms as retailers to absorb without negative reactions higher mandated costs.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
Monday, April 22, 2013
Friday, April 19, 2013
by ANDREW HEATON
You may be alarmed to discover that sequestration affects not only sequestration leads to the involuntary fiscal liposuction of our federal budget, the National Endowment for the Arts (NEA) will tighten its belt by $7.3 million. That reduction will leave the NEA with an anemic $139.7 million to distribute grants among creative people like me who, apparently, are unable to persuade people to pay them for their services.
Public funding of the arts is contentious. You may recall that in the last presidential election Mitt Romney caught a lot of flak when he told Jim Lehrer that he intended to line up Big Bird and the rest of Sesame Street against a wall and have them summarily executed. Of course he didn't actually say that; he made the crazy claim that he himself liked PBS programs but didn't feel other people should be taxed to finance them.
This statement alarmed many folks who enjoy watching PBS but apparently do not want to pay for it themselves. If we privatized Sesame Street, wouldn�t all of the fuzzy educational puppets become homeless and live in garbage cans? (Oscar the Grouch has yet to recover from the Reagan administration.) And what about NPR? Will Melissa Block be on the chopping block?
Presumably there are enough NPR listeners (myself included) who would shekel out a fiver to keep the organization afloat. The idea�s worked before with other outlets, like the Weather Channel.
The NEA doesn�t bother with a model where people give their own money for things they actually enjoy. Instead, it gets a share of what the government takes from everyone else and forks it over to artists, dancers, opera singers, and writers who can�t sell any books. Usually it has about $150 million to dish out.
I�m a standup comedian. I�ve written novels for 10 years, and am only now getting something published (coming this summer). So I sympathize with other unknown creative geniuses eating cat food. We�re doing what we love�wasn�t the money supposed to follow? Why should we have to wait tables or convince rich people to marry us? Many artsy types fancy the notion that society has an obligation to support folks like me.
It�s an intriguing thought: I do not wish to wait tables, but I�m okay with taxing waiters to support my novel writing so that I don�t have to wait tables. Because said waiters, thus far, haven�t wanted to buy my books voluntarily.
No doubt the NEA funds some real gems. It also supports some more questionable uses of tax dollars. The most controversial, you may recall, is Piss Christ, a photograph by Andres Serrano depicting a crucifix plopped into a jar of his own urine. Not surprisingly, this objet d�art offended many Christians (even otherwise laid-back Episcopalians). They felt Andres Serrano ought to finance the exhibit himself, or at least through patrons, rather than through public coffers. Personally, I�m not so much offended by his iconoclasm as curious as to why pickling religious artifacts in pee should be a federally funded activity. (And if it is, shouldn�t the EPA handle it?)
A more elevated use of our money is awarding grants to opera companies or folk dancers. The problem the NEA must tackle is that only rich people like to go to operas, because operas are boring and rarely feature William Shatner or swimsuit models. Folk dancing, likewise, has a humbler consumer base as compared to Pixar movies and Cirque du Soleil. Limited patronage networks can only support a handful of companies, which can afford to hire only a handful of portly singers, spritely dancers, and so forth.
To solve the problem, we tax everyone to support forms of art most people do not actually want. This works out very well for rich people, because it means they do not have to pay as much to sit in a balcony while sleeping through a Wagner performance. It works out well for endowment recipients of all stripes, because they receive more goodies. Obtaining grants is always easier than appealing to people who like monster truck rallies.
You might enjoy folk art, or experimental photography, or musical theater. Hopefully you like standup comedy and science fiction novels as well, because someday I hope to earn a full-time living off of both.
Until I reach my goal of being professionally clever, I may well resort to jobs less grandiose than those envisioned in my high school graduation�s commencement speech. But don�t tax your waiter on my behalf. I really don�t want to subsidize my career choices at his expense.
Read more: http://www.fee.org/the_freeman/detail/professionally-clever-i-dont-want-your-waiters-money#ixzz2QvWD1msT
by DON BOUDREAUX
Here�s a letter to the Wall Street Journal:
Ralph Nader suggests that the only argument that minimum-wage opponents muster against that policy is that it harms small businesses (�America�s Miserly Minimum Wage Needs an Upgrade,� April 16). He�s wrong. Overwhelmingly, the chief argument against the minimum wage is that it reduces low-skilled workers� employment opportunities. Mr. Nader�s ignorance of the contours of this policy debate alone disqualifies him to comment on the matter.
But to support his case for raising the minimum wage by 47 percent Mr. Nader also serves up several doozies of economic illiteracy. None is doozier than his assertion that when government forces employers to pay higher wages, worker spending will rise by enough to make profitable the employment at the higher minimum wage of all low-skilled workers seeking jobs.
From where comes the money to pay the higher wages that low-skilled workers will then spend? Mr. Nader apparently assumes that it materializes out of thin air, for he doesn�t even mention the possibility that firms that are obliged to spend more on wages will spend less on inventory, factory expansion, and other activities.
If creating economic growth were as easy as Ralph Nader assumes it to be, then he should also support a �minimum clothing price.� Suppose government forced Wal-Mart, Target, and other retailers to raise the prices of all clothing items by 47 percent. On Mr. Nader�s reasoning, these firms would then have more money to spend. That spending would raise the demand for clothing sufficiently to make it profitable for firms to sell as much clothing as they like at those higher prices.
That Mr. Nader would likely � and rightly � oppose a �minimum clothing price� shows that he�s not thought seriously about his argument in support of a minimum wage.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
Looking to Ralph Nader for insights on economics is like looking to Kim Kardashian for insights on string theory.
Thursday, April 18, 2013
Wednesday, April 17, 2013
by BILL FREZZA
Yes, it looks like a wedding announcement out of The Onion, but when it comes to making a killing off the never-ending �War on Poverty,� the marriage of convenience between the financial services industry and federal bureaucrats is no laughing matter.
The idea that government welfare programs could eliminate poverty, rather than temporarily alleviate its worst impacts during hard times, took root during Lyndon Johnson�s Great Society initiative. From modest beginnings, a panoply of federal welfare programs expanded and multiplied to the point where they now consume one-sixth of the federal budget�some $588 billion last year, according to the Congressional Budget Office.
This is a lot of spending�even by contemporary standards�and this figure doesn�t even include the current explosion in unemployment benefits, as these are considered social �insurance� payouts rather than welfare. Nor does it include Social Security or Medicare, our largest and most rapidly growing federal expenditures. To make matters worse, these programs, which were designed to keep the elderly out of poverty, are entitlements not yet subject to means testing, so payments go to rich, middle class, and poor alike.
With anti-poverty programs enjoying meteoric growth thanks to the economic policies of the current and previous administrations, we may someday look back fondly on the days when we �only� had to fork over half a trillion a year to support the longest and least successful �war� in American history, with no sign of stopping.
How many civil servants with good pay and benefits does it take to do all this poverty fighting? Try as I might to discover the answer I finally gave up, surprised that I couldn�t locate a definitive study enumerating the number of federal, state, and government-funded private employees whose livelihood depends on administering the ever expanding stream of tax dollars flowing to the poor. Is it any wonder that these entrenched bureaucrats have managed to slowly expand the definition of poverty to include a standard of living that would have been considered middle class back when the war on poverty started?
I didn�t do much better in trying to figure out what fraction of the money appropriated to be given away is consumed in administrative overhead. For most private philanthropic organizations, you can easily get that number by looking it up in Charity Navigator, but good luck uncovering it for most government programs. (If someone out there knows of a comprehensive study containing the administrative costs of all government means-tested programs please pass it on.)
What impact does this have on the economy? If you listen to Keynesian economists, giving away money is the easiest way to make an economy grow! That�s because when that money is spent on goods and services it fuels aggregate demand, which pumps up the Gross Domestic Product (GDP). Just like the cleanup from hurricane Sandy, expanding welfare programs creates economic vitality, never mind that both hurricanes and welfare drain money from other parts of the economy. So don�t even think about asking all those people who make a living giving away chunks of your paycheck to do something productive instead. Keynesians will warn you that such reckless austerity will drive us into a depression, just like firing all those government workers did in Greece.
It�s not just government employees who profit from this growing sector of our distorted economy. Today�s food related anti-poverty programs, such as food stamps and foreign food aid, were created during the Great Depression more to help American farmers than the poor. Today, agricultural interests are still among the biggest advocates for these programs, but other industries are learning that they too can make a buck by promoting America�s war on poverty.
It takes big business to process the distribution of so much �free� money, and that�s where the financial crony capitalists come in.
Consider the Supplemental Nutrition Assistance Program, otherwise known as food stamps. One in six Americans now use the Electronic Benefit Transfer (EBT) cards that replaced the old printed coupons to purchase everything from groceries to fast food. Three card processing contractors, J.P. Morgan, Affiliated Computer Services, and eFunds make money every time they swipe. With $85 billion in swipes last year, the numbers add up.
Details are hard to come by as they are not broken out in earnings reports, but a 2012 study from the Government Accountability Institute �Profits from Poverty� indicates that since 2004, 18 of the 24 states that contract with J.P. Morgan to provide welfare benefits have paid over half a billion dollars in fees. That may not sound like much relative to the size of some of these firms, but it provides a nice steady income for an industry happy to shower members of the House and Senate Agricultural Committees with annual campaign donations now exceeding $300,000 per year.
Yet it doesn�t seem like the poverty professional have much reason to worry. A record-shattering 50 million Americans now live below the poverty line, a number likely to grow as Obamanomics drives more people out of the work force and onto one assistance program or another. What could be better for the myriad civil servants and wing-tipped bankers who dole out benefits as ever more �clients� join the ranks of the poor and unemployed? While the Bible observes that the poor will always be with us (Matthew 26:11) it sure didn�t count on the millions more making a living off their misery.
For more from Bill Frezza, go to Menckenism.com.
Peter Schiff, broker, author and financial commentator, reflects on the historic drop in the price of gold, and where this financial chaos is headed. Read the article here.
"When the reign of 'king dollar' finally comes to a belated end, let's hope all the gold we allegedly have stored in Fort Knox is actually there. We're going to need every ounce of it." - Schiff
Tuesday, April 16, 2013
Monday, April 15, 2013
To stop the upheavel, the prison policy has been to force-feed inmates by strapping them down and inserting a feeding tube through their nostrils. In light of this peculiar situation it can be asked, should these prisoners of a war without geographic or temporal limit be given a trial, or at the least, charges?
Jan Helfeld is an independent journalist using peculiar tactics while interviewing government and media figures. Helfeld merely asks simple questions, and while most interviews start off smoothly, the Socratic Impretive slowly exposes the interviewee's lack of consistency.
For example: "Do you believe in government-forced redistribution of wealth?"
While most would say no, Helfeld goes on to ask about farm subsidies and foreign aid--forms of redistribution that people often find themselves in favor of, despite contradicting themselves by claiming a stance against redistribution. Congressman Gerald Connolly is interviewed below.
by CHARLES BAIRD
On December 11, 2012, Rick Snyder, governor of Michigan, signed a bill that made the state�home of the United Auto Workers (UAW)�the twenty-fourth right-to-work (RTW) state. A RTW law prohibits unions from forcing workers to pay union dues and fees as a condition of continued employment.
The UAW and other unions reacted with predictable wrath and violence, even going so far as to tear down a large Americans for Prosperity tent with several pro-RTW people in it. Not to be outdone, state representative Douglas Geiss, a reliable union crony, threatened that blood would be spilled in reaction to the new law.
Earlier that year neighboring Indiana had become the twenty-third RTW state. People in the old Rust Belt, it seems, are beginning to renounce their long-time allegiances to coercive unionism. Unions and their apologists are desperate to quash the emerging consensus that unionism is legitimate if and only if it is voluntary. Only voluntary unionism is consistent with workers� freedom of association.
One of the arguments used by union apologists in their reaction to the Michigan story is the observation that Milton Friedman, whom they call conservative but who was actually a classical liberal, was opposed to RTW laws. Thus, they argue, conservatives who support RTW are hypocrites.
Here is how Martin Fridson put it in Forbes magazine on December 14:
The NLRA imposes forced association on workers through �exclusive representation,� which is more appropriately called monopoly bargaining privileges for unions. Once a union is certified (by the National Labor Relations Board) as an exclusive bargaining agent for employees in a firm, all such employees must accept such representation whether they, as individuals, want it or not. Individuals are even forbidden to represent themselves.
Friedman is clear that such monopoly should not be permitted. In his view, getting rid of the monopoly is better than relying on RTW laws to ameliorate the malign consequences of the monopoly. I agree. Repealing the NLRA would eliminate the labor monopoly in question. Under those circumstances RTW laws would be illicit.
However, in my view, if we cannot get rid of the monopoly, RTW laws are an acceptable means by which some modicum of workers� freedom of association can be protected. I don�t know whether Friedman would agree with this point.
All union apologists use the free-rider problem as justification for forcing workers they represent to pay union dues and fees as a condition of continued employment. They argue that inasmuch as unions, under the NLRA, must bargain for all workers, not just their voluntary members, all workers will benefit. Any dissenting worker who didn�t pay the union for those benefits would get them for free. He would be a free-rider. He wouldn�t pay his �fair share.�
This hoary argument is wrong for at least four reasons.
- Most of the time, if the union represented only its voluntary members no one except union members would get union-generated benefits. The only exception would be union-bargained improvements in the job environment such as improved safety. Exclusive representation creates the possibility of free riding. If unions want to get rid of free riders, they should advocate repeal of exclusive representation.
- The free-rider idea is based on the assumption that a dissenting worker gets a net positive gain from union representation. However, this gain is never demonstrable. Costs and benefits are subjective. Suppose a union bargains for and gets increased safety on the job. Say a dissenting worker values that increased safety by the same amount he values $100, but he values the forced association with the union by the same amount he values losing $300. On the dissenting worker�s value scale there is a net loss of $200. If he is forced to pay dues, he would be a forced rider.
- This forced-rider argument applies to all the alleged benefits of being represented by a union. Moreover, even in wages, salaries, and pensions there is no evidence that a union-represented worker is better off than a union-free one. Private sector unions are now admitting that the terms they can get are severely constrained by competitive market (even global) competition.
- Consider market dynamics. For example, a union-impaired employer is more likely to lose market share than a union-free one. Over time, union rules reduce productivity growth and even reduce the level of productivity. If union-impaired employers shrink relative to union-free ones, employees of the former have less job security than employees of the latter. In this case, union representation hurts workers. Forcing them to pay for the hurt is like forcing victims of assault to reward the perpetrators.
If more and more states adopt RTW laws, the union movement will become so anemic that perhaps even its crony politicians might summon the courage to repeal the NLRA.
No, I am not an incurable optimist. I just like to dream.
Saturday, April 13, 2013
by DON BOUDREAUX
Here�s a letter to the New York Post:
In �The art of Free Markets� (April 11), you rightly applaud Leonard Lauder�s gift of cubist art to the Met. But such philanthropy is not the chief means by which free markets promote the arts.
Free markets greatly expand the availability of the leisure that is necessary for both the creation and enjoyment of art. Perhaps even more importantly, though, as my colleague Tyler Cowen documents in his book In Praise of Commercial Culture, free markets also create a diverse range of high-quality, affordable media on which art is fashioned and through which it is shared widely with the public.
For example, it�s only because of market-generated recording studios and consumer electronics that nearly every denizen of capitalist economies today can listen � whenever, wherever, and how ever often he or she pleases (and in high-quality stereo) � to some of history�s finest performances of Handel�s oratorios, Beethoven�s symphonies, Verdi�s operas, and Gershwin�s musicals. Think about it: without these free-market wonders, only a minuscule number of human beings � and no one born after the mid-1950s! � would ever have heard music performed by The Beatles.
Art � its production, promulgation, and preservation � owes vastly more to free markets than most people, including most artists, realize.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
Friday, April 12, 2013
Despite the fact that many have weak credit, The Obama Administration is implying that our banking system leaves too many people behind in the housing market.
As if a Federal Housing Administration--which the Founding Fathers would be perplexed by--isn't enough of an impediment on the free market, we are now flirting with the same functions that led to the disastrous housing bubble just a few years ago. Interests Rates are already as low as they can feasibly go, and so we must wonder, if the President intends on making money even cheaper, are we risking another housing bubble?
Centralized planning for housing has a poor history--pun intended. Perhaps its time to quit this experiment of manipulating of prices.
For Washington Post's article on the matter, click here.
Thursday, April 11, 2013
by KEVIN CZARZASTY
Faith in our leaders
is dwindling. As families and governments drown deeper in debt, our never-ending spending spree persists. Worse, we continue entangling alliances, our
welfare state is neither well nor fair, and our currency is currently
crumbling. All of this is reason to
believe that something terrible is coming to America. However, despite the grim conditions, I am
optimistic for three reasons.
First and foremost,
Americans are smart. Etched into our
culture are common sense, innovation and problem-solving. Friedrich von Hayek wrote of Spontaneous
Order, the tendency for societies to organically solve issues not because of
central planning, but by individuals sorting things out on their own. Americans are well-equipped to handle hardships, and moreover, the internet�s gift of easily
accessible information suggests that not only is the potential for
an American revival possible, but already in the works. America is the fertile land for freedom, and
Americans are the ideal people to grow and harvest freedom.
Secondly, I am
optimistic because government is not slightly mismanaging�they are blatantly
incompetent in centrally planning our affairs.
If they were only partially failing, perhaps they�d be able to get away
with it, but this is fortunately not the case.
Most of the current leaders behave so farcically, the problem of control is finally
out in the open. In short, part of my
optimism is born out of a pinch of pessimism.
The third reason I�m
hopeful is that, while failing leaders have on their side poor economic
understanding and tyrannical tendencies, we have the United States
Constitution. Every day, I am filled
with a deep satisfaction because not only is liberty both moral and practical,
but it is the legal law of the land. I am
humbled by the historical breakthrough that is our founding documents, and I�m
confident that if we repetitively preach Life, Liberty, and Property as
prescribed by our founders, we will one day, no matter what, win.
Victory, however, is
not yet ours, and as you read this, a targeted assault on the blessings of
freedom is being waged. While
legislative battles continue, the central war is in the field of
information. The real fight is forged
with the weapons of media and education.
The Free to Choose Network hopes an uprising emerges that not only shows the people understand liberty, but also displays the we are able to share, teach and spread freedom throughout the land.
by ZACHARY CACERES
Carl Sagan devoted his career to bridging science and spirituality. He was searching for �a God that would be worthy of the revelations of science,� according to Ann Druyan. Economist F. A. Hayek spent his life arguing and uncovering that we live in a world rich with order created by human action, but not by deliberate human design. Hayek taught us reverence for spontaneous order.
As scientists begin to unlock the principles that order complex systems like ecosystems and economies, they are revealing the power of spontaneous order. But might they also be rediscovering the sacred?
How Science Buried the Sacred
The twentieth century was not kind to a sacred view of the universe. As great scientists searched deeper into physics, they did not find God�they found particles. Some searched for divine creation as the source of our lives, but found the trial-and-error of evolution instead. We looked inside our brains for signs of an eternal soul but found an elaborate, wet computer.
In a world where everything can be reduced to physics, the argument goes, there�s not much room for the sacred. Particles don�t have morals or a transcendent purpose, and since we�re ultimately just elaborate jumbles of particles, neither do we.
This view, scientific reductionism, traces as far back as the Ancient Greeks. But as science advanced in the nineteenth and twentieth centuries, the extreme practical effectiveness of reductionism only further entrenched a worldview without the sacred. Mathematician Pierre-Simon Laplace wrote, �Life�s most important questions are, for the most part, nothing but probability problems.� Modern scientists set off in search of fundamental laws that could govern everything.
Everything, believe reductionists�from dinosaurs to the War of 1812�can be reduced to its constituent parts. Physics grew magnificently on this idea. Even as scientists like Niels Bohr pioneered quantum mechanics, which argued that the universe operated through probabilities rather than rigid, deterministic laws, reductionism remained mostly unscathed.
�The more we know of the cosmos, the more meaningless it appears,� wrote Nobel Laureate physicist Steven Weinberg in his 1994 book Dreams of a Final Theory.
Weinberg argued that to understand �big� phenomena we always peer downward: we travel from large objects like societies to groups, to individual people, to organs, to cells, to chemistry, to physics. Finally we might arrive at a set of ultimate laws that explain everything�Weinberg�s dream of a �final theory.� Causality points upward, from parts to the whole. Everything thus reduces.
Theoretical biologist Stuart Kauffman, in the vanguard of complexity sciences at the Santa Fe Institute, disagrees. In his book Reinventing the Sacred, Kauffman argues that we can find a new sense of the spiritual in the behavior of complex systems like the biosphere and the economy. These systems, Kauffman argues, cannot be reduced. Their complexity is beyond Weinberg�s final theory.
If this is true, the natural world that we discovered with modern science�perhaps without a Creator God but full of purposeless particles�need not leave us stranded in a world without meaning. The �ceaseless creativity� of complex systems, writes Kauffman, �is so stunning, so overwhelming, so worthy of awe, gratitude, and respect, that it is God enough for many of us. God, a fully natural God, is the very creativity in the universe.�
The emergent complexity of the world, sprouting as it does from law-like forces, is sacred for Kauffman. The economy is no different. It is order without design.
More Is Different
In a 1972 article titled �More Is Different,� Nobel Laureate physicist Philip Anderson argued against reductionism in physics. If we think of causality as an arrow, it does not just point upward from particles, thought Anderson. As the size and complexity of something increases, �entirely new properties appear� that cannot �be understood in terms of a simple extrapolation of the properties of a few particles.� Things are not just the sum of their parts. More is different.
Robert Laughlin, another Nobel Laureate, agrees. He argues it makes no sense to speak of the temperature of a single gas particle, for example�only of a collection of them. Similarly, a single iron atom is not �rigid��only the whole iron bar is. Yes, a rigid iron bar is composed of individual particles, but rigidity can only emerge from the whole entity. Though these collective properties are emergent, few would deny that they are real.
Leo Kadanoff showed that important ideas in fluid mechanics can be derived from strange, mathematical �toy worlds� following simple laws. (Imagine beads on a lattice.) If these ideas so fundamental to our understanding of the universe can �run� on multiple platforms�one being the world of quantum mechanics, the other a toy world�how can we say that physics logically reduces to the one and not the other?
Rather, there appear to be laws of organization that are not reducible, but govern the behavior of overall systems. We can find them in many places where complexity reigns, including within our own bodies.
Meet Your Heart
Consider your heart. What�s its function? Well, hearts pump blood. But they also race when you�re nervous and make thumping sounds. So the function of the heart is only one of many features of the heart.
Darwin and most other scientists would agree the heart evolved over time. But Kauffman asks us to imagine that we could deduce the human heart from particle physics. We would discover all of its properties: its redness, its shape, thumping sounds, and the blood pumping. But our understanding of the heart would still be incomplete. We would have no way to know which of these properties is the heart�s function. All the heart�s features are equally deduced from physics, but the evolutionary fitness of the heart requires us to think at a higher level of description. The heart came to be because of its role in a higher-order process�biological evolution, not just physics.
To understand the function of the heart, we must look to the entire lifecycle and environment of the organism with the heart. In Kauffman�s terms, we must look for the laws that govern the higher-order system (biology), even though the system ultimately depends on lower-order physics.
But it�s not just our understanding that operates at this higher level. The existence of hearts, as systems, has changed the course of evolution and modified the biosphere. The heart�the whole�has caused a ripple of changes in everything around it, including in its component parts, such as molecules and proteins. Yes, the heart and �emergent wholes� (like organs in general) are dependent on their components. But they also create new constraints and feedbacks for their component parts because of their special (holistic) forms. In other words, the evolved form and function of the heart is what gives it its force in the world. And that form and function is emergent.
Hearts, Holes, and Wholes
To Kauffman, this is a glaring hole in the reductionist worldview. Suddenly Weinberg�s arrow, which seemed to point upward from the particles to the organ, now points downward and outward too. It�s actually more like a circle: the component parts cause and constrain the whole, and the form of the whole causes and constrains the component parts. It�s no longer just evolution, but co-evolution. Emergent wholes have causal powers all their own: The parts depend on the whole just as the whole depends on its parts.
�Of course,� writes Kauffman, �the heart is made of particles and not some mystical stuff . . . But the heart works by virtue of its evolved structure and the organization of its process� (emphasis in original). It�s greater than the sum of its parts. And it participates in the creation of something even greater (for example creatures with brains large and complex enough to think about their places in the universe).
For Kauffman, the whole of the heart is an expression of the biological creativity of the universe. Lower layers of complexity give rise to newer wholes. A new layer of complexity such as the human heart allows for even higher layers of complexity to emerge. Without hearts, no animals. Without animals, no humans. Without humans, no economy, no law, and no culture. Creation begets still more creation. Each emergent whole creates new spaces for emergence. And these new spaces create still newer spaces for even more complex arrangements to arise. In this principle of complexity, Kauffman spies something sacred.
From Hearts to Economies
How far does this principle reach? To Kauffman, legal systems and markets are like ecosystems, and firms or organizations are like organisms within them. Like the heart or the biosphere, they self-organize over time and are assembled from smaller pieces. Economies too emerge.
To understand how humans create new forms of order using technology and resources, Kauffman asks us to imagine a simple box of Lego blocks. Can we state all the functions and ways we can arrange and combine the box of Legos? No, because new combinations of Legos create the possibility of still-newer combinations.
We could build a Lego crane to haul Legos to our new building site for a Lego house. We could then put the house on Lego wheels and make an RV. Or build a Lego crane to lift smaller Lego cranes to the Lego RV repair shop.
There is no way to define the possible functions of a box of Legos, since the function largely depends on the context and what has already been created. With each change, new combinations and possibilities appear that can disrupt previous functions. New forms become the pieces for still newer combinations and forms.
The economy works this way too. Think of all the possible uses of a simple screwdriver: open a can of paint, defend oneself in an assault, use as a paperweight, open coconuts on a desert island, and so on. These uses explode exponentially as you include any new object that could be recombined with a screwdriver (like an electric motor to make a drill). And, of course, the new form�s properties would depend, in some sense, upon the environment in which it�s used. For example, it would not be a drill in 1800, because electric motors co-evolved with the advent of electrical grids. Electrical grids created the possibility of the electric drill.
In markets, humans search through these endless networks of possibility, combining and recombining resources and technologies with never-ending freshness in ever-changing contexts. (This is similar to what science writer Matt Ridley calls �ideas having sex.�)
�How can we possibly pre-state all possible uses [for an object] in all possible environments,� asks Kauffman, when �these novel functionalities are invented by the human mind� in the process of creation?
Markets: A Sacred Force
The human economy is massively more complex than a box of Legos. The �econosphere,� as Kauffman calls it, roils with novelty and creativity, just like the biosphere. Markets are the collective expression of our creative work, and they are more than the sum of individuals that compose it. We do not fully understand them, and we cannot predict them. We never will, because things will always suddenly appear and change the course of their evolution. But in their creativity, Kauffman believes we can rediscover the sacred. To sacralize, after all, is to venerate the sources of creativity that are beyond any one mere human�s own powers of creation. For many in the past this was an all-powerful Creator God. For Kauffman, it is the natural creativity of the universe.
To say markets exhibit something sacred is not �market fundamentalism.� Many times, markets are just as fragile as ecosystems, and certainly can be just as messy and inefficient. But this is what gives them their beauty. Evolution, co-evolution, and emergence push us toward novelty.
Markets are merely one expression of the ceaseless creativity of the universe, as particles become atoms, atoms become molecules, molecules become organisms, organisms become simple life, simple life becomes thoughtful humans, and humans become societies and economies.
It�s not clean. But participating in markets�building the novel together�extends the creativity of the universe ever upward. Every new idea, every entrepreneurial dare, every revolution, every corporate merger, every new film or poem, every missile strike: Each act of creation or destruction molds the possibilities for our future in an endless flux. Each level of complexity, from molecule to multinational, buzzes with creative evolution. New forms bloom and flower, and they irreparably alter the future of the universe. Like the heart, each level is composed of its lower parts, but transcends them in constraining and co-creating future evolution.
We, too, can become vessels of the universe�s creativity by participating in the extended social order of human civilization.
�If we reinvent the sacred to mean the wonder of the creativity in the universe, biosphere, human history, and culture, are we not inevitably invited to honor all of life and the planet that sustains it?� asks Kauffman. Compelled, certainly not. �Is� still does not imply �ought.� But we are invited.
�The wholly liberating creativity in the universe we share and partially cocreate can invite you,� he writes, �for that creativity is a vast freedom we have not known, since Newton, that we shared with the cosmos, the biosphere, and human life.�
If we recognize the creativity of the universe, do we have an ironclad ethical system? No. Do we find absolute, inviolable moral truth in spontaneous order? No. But we can rediscover a sense of wonder at the universe and a deep connectedness with all things. We can find our role as expressions of the universe�s creativity and as co-creators of our shared future. All humans are equally vessels, and so we are all responsible for the world we create.
Hayek showed how, together, we create our social world. The full effects of our combined actions cannot be understood in their totality. But our creation grows from the fundamental creativity in the biosphere, and the universe as a whole. We are thus surrounded by ordered complexity beyond comprehension. This may be sacredness enough.
For more, go to fee.org.
Wednesday, April 10, 2013
by BILL FREZZA
A debate is raging among free market advocates regarding the proper posture to take with respect to Too Big to Fail (TBTF) banks. This has become an increasingly important issue as the financial sector has grown to take up an unprecedented share of our economy.
While cleaving to tried-and-true libertarian defenses of finance as vital to the economy, some of us fear that the machinations of the crony capitalists running the TBTF banks�in cahoots with their allies in the Treasury Department and the Federal Reserve�will result in not only another global financial collapse, but a populist anti-capitalist backlash that could destroy what�s left of our free enterprise system.
But before we can tackle this problem, we must figure out what is really going on. In all public policy debates, perceptions matter, and public perceptions are often driven by the leading narratives that gain cultural acceptance. Let�s look at what these are.
To read the rest of Bill Frezza's column click here.
Tuesday, April 9, 2013
Monday, April 8, 2013
stroke has taken the life of former British Prime Minister Margaret Thatcher, and FTCN honors her...
At the age of 87, Thatcher leaves behind a legacy of conservative
leadership, and as the only woman to become British PM, she serves as an icon
for breaking barriers. Known for strong convictions pertaining to
freedom, she will be missed, and the Free to Choose Network sends our
condolences to her family.
If anyone needs reminding of Thatcher's greatness, look no further than
this quote: "We want a society where people are free to make
choices, to make mistakes, to be generous and compassionate. This is what we
mean by a moral society; not a society where the state is responsible for
everything, and no one is responsible for the state." - Margaret Thatcher
Here, Thatcher dissects the Socialist argument for prosperity by means
of force and centralization. Not only was her ideals in tune with a free
society, but Margaret Thatcher had the wit and presentation to--much like
Milton Friedman--explain complex phenomena in the most digestible manner.
by Don Boudreaux
If you are a modern �Progressive� and cannot abide the notion of conservatives, Christian or otherwise, having a say in who you sleep with and who you may marry, when and why you may get an abortion, what sorts of scientific research and artistic projects should be funded, what school curricula should and shouldn�t include, or when and why Uncle Sam goes on world-policing ventures, then why do you wish to expand the scope of government authority? Doing so in a society with a wide franchise, such as the U.S., inevitably invites those rubes to intrude their antediluvian superstitions and dogmas onto you and onto all that you hold dear and sacred.
If you are a modern conservative, Christian or otherwise, and cannot abide the notion of �Progressives� having a say in how you school your children, what your tax rates are, what size Big Gulps you may buy, or whether or not you may fill in ditches and water puddles on your land, then why do you tolerate � indeed, frequently applaud � activities such as government�s �war on drugs,� Uncle Sam�s interventionist foreign policies, strict immigration restrictions, and tariffs on imports? Doing so � by creating a large and discretionary state � only encourages those obnoxious know-it-alls to use government against you and against all that you hold dear and sacred.
Here�s why I ask the above questions: every time I�m in a supermarket check-out lane and catch the headlines of the reading materials on sale there � soap-opera digests, magazines featuring Oprah and other entertainment celebrities, and the like � I literally get a bit of a queazy feeling in the pit of my stomach. It somewhat sickens me that people care who Jennifer Anniston is dating, what Oprah is eating, or why male hunk du jour just ditched female sex-goddess du jour for some other equally vacuous if va-va-va-voom!-inducing babe. I don�t wish to prevent anyone from reading about or caring deeply about these matters about which I truly couldn�t care less. But it scares me that people who read that nonsense � because they care about that nonsense - have a say in how mylife is conducted. I resent the fact that such people, if only through the ballot box, have influence how government orders me about.
The more expansive is the scope of government authority, the more my life is subject to commands issued in part under the influence of people who read Us magazine.