Monday, July 29, 2013

Cafe Hayek: Public Choice Theorizing is Never Optional

            by DON BOUDREAUX

            Pete Boettke's recent post on the importance of public choice prompts this modest thought – one that I am vain enough to fancy supports Pete's point.  My thought is this: for a social scientist to assume away public-choice problems is not akin to a physicist studying the law of gravity assuming away, say, air friction.  It is, rather, more like a physician assuming away human mortality (or, indeed, like a physicist assuming away the law of gravity itself!).

            Choosing assumptions for scientific theories is always a matter of judgment.  Reasonable people can and do disagree over just what set of assumptions – for whatever is the particular purposes of the analysis at hand – are wise and enlightening and which are unwise and benighting.  But to assume away human nature as we know it –  or, worse, to assume that human nature as we know it operates only some of the time and not all of the time – strikes me as emphatically unwise and benighting.  The assumptions demanded by public-choice and (for lack here of a better term) Austrian analysis are nothing more than the recognition always that human beings (1) are self-interested; (2) generally respond predictably to incentives; and (3) have very limited cognitive capacities.

Any policy that can be imagined working well if these assumptions are dropped is simply not an appropriate policy to which real-world alternatives can be usefully compared.

Air can, in reality, be eliminated in the space through which a ball falls to earth.  Or perhaps more correctly, in reality some actual approach in the real world can be made to eliminating air friction.  The features of humanity mentioned above, however, cannot be eliminated.  And there's not the possibility even ofapproaching "in the limit" their elimination.

There is nothing beyond the banal about reality that we learn when we imagine a world populated by people who, when acting politically, are selfless and in possession of superhuman knowledge.  Again, such an imaginary world is not only impossible, it is unapproachable.  And so for any social scientist to describe how a policy might work if all or some of these features of humanity are assumed away is very much like a medical scientist assuming, say, that the human body is impervious to bullets shot from a gun or that each human heart is destined to beat for an eternity.  Such a "human" (so called) can, of course, be described.  And we would all marvel at his or her physical qualities.  Indeed, each of us real humans will correctly recognize the banal fact that the closer we approach to being physically like this imaginary indestructo, the longer we'll live.  But nothing that any medical scientist is likely to learn from assuming that humans are indestructible will prove useful in helping that scientist improve the actual practice of medicine.

In short, theories that describe what the world would look like in the absence of the realities emphasized by public-choice and Austrian scholars do not reveal to us ideals to which reality can be constructively compared.  Instead, such theories reveal only pure fantasies benighting intellectual curiosities as useful in making sense of social reality as are the ancient Greek' assumptions about the shenanigans of Zeus and other gods in making sense of physical reality.

Thursday, July 18, 2013

FEE: A Place of Learning for Reformers

            by WAYNE LEIGHTON

            Imagine you're the president, your state's governor, chair of the most powerful committee in Congress—or best friend and trusted advisor to one of these leaders.

            What would you reform? Would it be Social Security, healthcare, the legal system, or something else?

            Now here's a harder question: Exactly how would you do it?

            Thinking about how to make the world a better place—then doing something about it—is the role of the entrepreneur. A special type of entrepreneur deals in reform that expands liberty and economic opportunity. Like the entrepreneur in the market, this type of entrepreneur constantly looks for ways to innovate and add value for others. 

But the reform entrepreneur is confronted by potentially paralyzing questions: Which reform will bring the greatest benefit? Which will be most likely to endure? Is it better to reform what's already in place or build something from scratch? Is now the time to act? What are the competing ideas out there? What vested interests might oppose the reform? What's the best way to communicate the benefits to the public?

Learning how to answer these questions is the secret to successful reform—because everyone wants to change the world, but few know what to do when the opportunity arrives.

Not Just Another Conference
The Antigua Forum was launched to fill this knowledge gap. A project of Guatemala's Universidad Francisco Marroquin (UFM), the Antigua Forum serves as a "place of learning" for those who want to improve human well-being through market-liberal reform. It provides real answers to the practical, "how to" questions of reform.

Who attends?

Participants aren't simply those who want to make the world a better place—they're people who are actually doing something about it. Some are highly leveraged political reformers who work as legislators, government ministers, and trusted advisers. Others are "disruptors" who work outside traditional political institutions—a popular example is innovation at private schools whereas established interests focus on public schools. A few participants are experts on communications, strategy, and other tools of the successful reformer.

And they come from all over the world. The first two annual gatherings took place in 2012 and 2013. Participants represented 29 countries from every region of the world, from Canada, China, and Chile, to Malaysia, Mexico, and Morocco. The United States, too.

What makes it work?

The Antigua Forum is unique, and uniquely productive. The secret is the mix of highly leveraged participants and a highly effective learning environment, where the focus is on how to achieve reform.

Familiar with the traditional conference? That's not the Antigua Forum. Reformers who want help from other smart people at the event must "pitch" for the opportunity to put together a small workgroup. Experts who have "been there and done that" share their knowledge where they think it can do the most good.

Sure, there are a few presentations, but they're a lot shorter than those at a traditional conference—no more than five minutes—and the emphasis is always on the practical. Most reformers could benefit from a tip or two on how to sell their brilliant idea. And everyone can learn from failure, even if no one wants to talk about it. At the Antigua Forum, reformers talk about it, so future failures can be few and far between.

The result is real learning, even unexpected learning. The most articulate reformer knows more than he or she realizes. Knowledge is tacit, and memory—even of key events in one's life—is incomplete. A candid dialogue among trusted colleagues can uncover questions and yield unanticipated lessons.

Remember the most productive conversation you ever had at a conference? It probably didn't happen when your would-be teacher was on a panel, or during the Q&A. More likely, your greatest learning happened in a 10-minute conversation during the coffee break. The Antigua Forum fosters such interactions. It's a conference of coffee breaks, deep discussions, and spontaneous spurts of genius—with everything focused on reform.

What comes of it?
The most thrilling conversation on reform is meaningless if it doesn't yield real results. The Antigua Forum helps reformers get results.

Discussions are channeled to develop actionable prototypes for reform. Participants with a project in hand are encouraged to analyze the reform challenge, evaluate solutions, pick the best approach, then come up with a plan to make it happen.

In addition, the Antigua Forum produces publications on reform, such as case studies and other practical tools. The first case study (2012) analyzes Guatemala's successful, market-based telecom reform of 1996. An upcoming study will look at sweeping reforms adopted in the Republic of Georgia in the last decade.

Over time, the Antigua Forum is building something more: a community of reformers who can turn to each other for advice and encouragement.

In just two years, Antigua Forum alumni have applied their learning to advance tangible reforms in their home countries. Participants from Honduras applied what they learned at the gathering to overcome obstacles to a startup cities project in their own country. Another participant took what he learned from the reformers in Honduras to change the constitution in the Republic of Georgia, which now allows for startup cities there.

This year, a group of reformers in Texas adopted the event's format to produce its most effective meeting yet. The learning continues, along with reforms that improve people's lives.

They're just getting started.

Read more:

Monday, July 15, 2013

An Excerpt from Murray Rothbard's review of Orwell's 1984

            "One significant method that the Party uses to remain in power is to contrive to keep its country always at war with some other country. The other countries are also run by similar parties, though each have different names. By the process of doublethink every loyal Party member believes that his part will ultimately conquer the world, yet also recognizes that all the countries tacitly engage in a war that never becomes too "hot." Thus, each Party has an excuse to starve and terrorize its subjects in the name of military necessity, while its ruler remains secure from any wartime disaster."

Thursday, July 11, 2013

FEE: Sticky Thoughts

            by JEFFREY TUCKER

            My car had languished at the airport parking lot for a full week. The blazing sun did its work on my rearview mirror, weakening the adhesive on the window. As I got into the driver�s seat, the mirror was hanging as if from the gallows. Now I had to drive without being able to see behind me�and on some tricky highways no less. There was no obvious fix, so off I drove with a number of blind spots.

            I stopped at the nearest gas station with full knowledge of what I needed to do. I bought a tiny tube of what�s commonly called �super glue��that super-sticky potion that does magic on everything from broken plates to metal pipes to falling-off car parts. It cost about $2. I put on a few drops, held it in place for 60 seconds, and, like magic, all things were right with the world. The mirror re-adhered and I drove off as if this potential visual calamity had never happened. 

            Then I got to thinking: What if that store hadn�t been there? My life would have been in danger. At the very least, I would have felt anxiety and probably endangered others. Thank goodness for the so-called convenience store. People have railed against them for years, because they tend to charge much higher prices for goods than the local grocery store�all to �exploit� people who are in a hurry or who need convenience. 

            Well, exploit me, please. Grocery stores, similarly, charge higher prices than far-away farmer�s markets. It�s the consumer who determines what prices producers can charge, high or low. There is a simple solution if you don�t want to pay the premium: Don�t pay the premium. Just go somewhere else. Restricting existing opportunities accomplishes nothing for the social order. 

            Even more impressive, however, was that tiny bottle of glue that I bought. I can vaguely recall a time when you couldn�t buy super glue just about anywhere. When I was a kid, I never knew such a thing existed. Indeed, I remember when it first came to market. Maybe it was the 1980s. Looking into it further�which anyone can do with anything thanks to the market-produced resources on the Internet�the chemical name of this glue is cyanoacrylate.

Three years ago, the man who invented it received an award from President Barack Obama. His name is Harry Wesley Coover, Jr.. and he was awarded the National Medal of Technology and Innovation for his role as the lead scientist in an Eastman-Kodak lab in 1942, when most corporations were forced to produce for the war. Cyanoacrylate came about in the course of trying to find ways to improve on guns as part of a government contract�or so the short version of the story goes. 

There are a number of problems with the story, which on the face of it seems false, because this compound only became available to average consumers in the 1980s. It turns out that in 1942, neither Dr. Coover (who died in 2011) nor any of his lab assistants did anything with the substance. It was a lab thing�people with microscopes and test tubes who obey no other metric�and that�s where it ended. They totally dismissed the discovery on grounds that this stuff was surely useless because, after all, it absolutely stuck to everything. 

In other words, super glue was �discovered� by the government in the same way that the government built the Internet. It was able to combine the elements but then didn�t do anything socially useful with the results. The technology died on the vine, as it were, until it was brought to life again by market participants with an eye to improving lives. 

And while there�s nothing wrong with abstract knowledge or invention for its own sake, a much more telling problem to solve is how to make things useful and distributed throughout the human population. That requires entrepreneurs who are attentive to human needs, as well as the realities of scarcity, to make production and consumption economical�meaning not wasteful and compatible with people�s actual priorities.

Knowledge alone does not serve society. Knowledge put to use in a market setting�science turned into the �practical arts��is what serves the human population. Labs don�t provide those two crucial elements�entrepreneurial insight and marketing savvy�that turn ideas into socially relevant technologies. And getting ideas out of labs and into stores is no easy feat. It requires a competitive market order, unrelenting trial and error, a process of development over time, not to mention a price system that allows for cost accounting, among other institutions. 

Dr. Coover stumbled upon cyanoacrylate again years after it was initially discovered. This time, his mindset had changed: He was still working for Eastman-Kodak, but it was peacetime. Companies were profit-hungry and commerce was essential to the bottom line. Instead of working for preset government plans, he was working with a commercial motivation.

Clearly, then, this stuff had a commercial destination. The knowledge of a chemical compound that was previously too sticky to do anything useful became an actionable technology. To prove it, Dr. Coover went on a television game show called �I�ve Got a Secret� in 1958 to demonstrate his invention by bonding two pieces of metal and letting the bonding apparatus lift him up in the air. The audience was thrilled! 

Even so, it took many years before this glue was available on every street corner. In fact, it was not until the late 1970s when there was such a thing as �super glue� you could buy everywhere. 

My long research into patents suggested that this is the best place to look to discover why private markets slow down in distributing inventions. Sure enough, the lore is that Dr. Coover held the patents but never made a dime from them. The product didn�t become commercially successful until after the patents ran out. This little fact is typically reported as if it were some kind of injustice done to the scientist.

Actually, the causation likely runs the other way. So long as the patents were around�the first was issued in 1954�it could not achieve its fully commercial success because its marketing and distribution could not improve in a non-competitive environment. As the New York Times said in its obituary of Coover, �Kodak was never able to capitalize commercially on Dr. Coover�s discovery.�

Patents guarantee no success. In fact they often inhibit success precisely because people tend to believe that a patent generates some sort of human right to succeed. Just a quick glance at the patents surrounding cyanoacrylate shows results of 686,000�an astonishing thicket of monopoly central planning for a compound. From 1954 on, every iteration of it was repatented as much as possible (a high-point summary history is here). 

As just one example, when Kodak held the chemical as a proprietary product, it was called Eastman 910�not so catchy. I can�t say for sure, but it probably wasn�t packaged well, either. After 1980, when a frustrated Kodak company sold the product to National Starch, marketing and distribution improved to the point that I could find it in any convenient store. Now anyone can make the stuff and sell it, and dozens if not hundreds of companies are involved. They compete not on the basic glue but on the packaging, which turns out to be rather important with this glue, which dries out in minutes. 

There is another use to cyanoacrylate that we know well today. It fixes cuts and scrapes better than Band-Aids. Once you have used it for cuts, you wonder why you ever used anything else. It turns out that the government did use this on wounded soldiers in the Vietnam War and it was mighty successful. (One shudders to think how much good it might have done during World War II, but government was too busy looking for things to make guns, not repair wounds). 

The FDA didn�t give the go-ahead for regular consumer use until the 1990s, because the government feared that the stuff was somehow toxic. A few companies threw some antibiotics into the mix and the approval finally came through, which is why we have liquid bandages today. 

Given all of this, it�s no wonder that the product took so many decades to go from invention to market viability. It was the competitive market that finally gave the product life, but first it had to struggle through an incredible array of barriers, from disincentives to monopoly grants to regulatory restrictions. What might have helped people at daily life since the 1940s took a half a century. Part of that time passage is inherent in the market process, but much of the rest of it was due to intervention. 

It was not science as such that made the difference. It was science given flight by market forces. At each stage of its development, the market was there, encouraging, prodding, guiding, and leading to the light, despite all odds.

In the end, I�m the beneficiary. It all comes down to my $2 purchase, made on the fly, involving totally unexpected circumstances. I did not get in a wreck, and my rearview mirror is still holding solid. 

Of course, people will still complain about the prices at convenience stores and a lack of government funding for research and development, and suggest that we need some form of control to hold back the wiles of the competitive market order. Yet, this case illustrates that the �wiles� are not the problem; the problem is the artificial barriers.

Read more:

Wednesday, July 10, 2013

Best and Worst States for Business

(You'll notice the impact of economic freedom on business success)


We're proud to announce...

            ...the launch of's Youtube channel, a state-of-the-art resource for 21st Century teachers!  Please take the time to subscribe, and be sure to use the resource for learning liberty!

Tuesday, July 9, 2013

Menckenism: Can Post-Constitutional America Recover Its Freedom And Prosperity?

            by BILL FREZZA

            It is by now undeniable that our Constitution is being unwound at an accelerating rate. With the wave of a blog post, the President of the United States suspends the due process checks and balances prescribed by the Constitution, refusing to enforce laws he finds politically inconvenient, while enacting other laws by executive decree to energize his political base.

            Revelations that the Fourth Amendment has been rendered moot by massive internal spying operations are met with the facile explanation that administrations led by both parties have carried out such violations for a long time. Few people know the real extent of the spying, as it is a state secret.

            Is it any wonder that other countries scoff at American entreaties to adopt liberal democracy? How can we expect others to respect and emulate the America Way when we think so little of our own system that we carelessly discard the rule of law whenever it�s expedient?

            And it�s not just because our politicians have become mendacious and disingenuous�though many surely have�but because they have lost control of their own enterprise. Our laws, quite simply, have become too numerous, unwieldy, and riddled with contradictions. Many are flatly incomprehensible even to the legislators who are supposed to read and understand them before they foist them on the American people�often exempting themselves to avoid the unintended consequences.

            What brought us to this point? Our failing public education system? The erosion of non-governmental social institutions? A media-induced national stupor? How about all of the above?

            We publicly celebrate the birth of a nation uniquely founded on individual liberty and limited government, yet we keep returning professional politicians to office that not only mock these ideals but portray them as dangerous lunacy, characterizing advocates as potential terrorists.

            We demand an ever expanding array of entitlements that we expect someone else to pay for, distributed by a corrupt and bankrupt bureaucracy we openly hold in contempt.

            We�ve become so easily distracted by �culture war� sideshows that we�ve forgotten how to hold elected officials to minimal standards of competence.

            We have descended into such an abject state of ungovernable dysfunction that the best we can do when a floundering president starts ruling by decree is stand back and gawk.

            Will there be no consequences?

            Of course there will be. Just as an unaccountable professor with a printing press can go on creating an illusion of economic recovery only for so long before the world�s monetary system collapses, the President and Congress can only carry on enacting unintelligible, unworkable laws before their Frankenstein monster-like statutes begin to fall apart under their own weight.

            Let us rejoice that Obamacare�s failure is arriving years ahead of schedule. Designed to implode after vitiating the private health insurance market and creating tens of millions of new dependents, its premature self-destruction is a blessing in disguise. Rather than greasing the slippery slope to single-payer nationalized healthcare�the preferred outcome for Obamacare�s designers�the midterm elections may open up the potential to junk the whole enterprise and start over.

            We may never stuff the genie back in the bottle and re-impose those limits on the federal government listed under the strictly enumerated powers of the constitution. But there is still time to save ourselves from falling into a permanent state of legislative dysfunction. Recovering the freedom that once made us great will require reclaiming the inalienable rights and shouldering the personal responsibilities we have slowly been surrendering in return for promised security and false prosperity.

            The only reason why this planet can support 7 billion souls is that most are being fed, clothed, and housed by vast engines of commerce developed by market-centric economies fueled by free enterprise, sustained by the rule of law, and rescued from both fascist and communist tyranny by the might and the example of the United States. If we abandon that which made us great and collapse under an orgy of self-inflicted mismanagement, it is just a matter of time before everyone else goes down with us.

            All of humanity is watching, for if a nation comprised of the world�s most determined immigrants, raised in a melting pot unencumbered by Old World hatreds, and blessed with the most brilliant Constitution ever conceived cannot figure out how to effectively govern itself, who can?

Thomas Sowell on Black Misrepresentation


Monday, July 8, 2013

Free Lunch?


Cafe Hayek: Unjust Exploitation is Everywhere

            by DON BOUDREAUX

            Your website reports on a class-action lawsuit filed against MSNBC and Saturday Night Live seeking at least $5 million in back pay for work done by unpaid interns (�Unpaid Interns Are Suing MSNBC and SNL,� July 3).

            The plaintiffs' lawyers at Outten & Golden, LLP, pushing this case should set their sights higher.  If interns are unjustly exploited by receiving no pay beyond the learning and connections that they gain while interning, then the same is true in spades for college students.  Not only are most college students not paid to put in the hard work required for them to learn, to forge personal connections, and to earn good and credential-rich grades while in school, they must actually pay colleges for these experiences and benefits!  According to the legal-ethical theory fueling this lawsuit, then, colleges clearly exploit young people in a manner far worse than do firms and other organizations that merely don�t pay cash to their interns.

            Because simply not being paid to put in the time necessary to gain valuable skills, knowledge, and professional connections is unjust exploitation � and, hence, because being obliged to pay to put in the time necessary to gain these advantages is a far worse injustice � the lawyers at Outten & Golden, LLP, should begin to remedy this social ill by filing a class-action lawsuit against Harvard University.  How many are the poor students who�ve been exploited since 1636 by that oldest � and among the priciest � of American colleges?  And how tragic is their lot?!

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

Cafe Hayek: July 8 Quotation of the Day

            by DON BOUDREAUX from page 117 of the 1991 Robert Schalkenbach Foundation edition of Henry George�s 1886 volume, Protection or Free Trade:

To have all the ships that left each country sunk before they could reach any other country would, upon protectionist principles, be the quickest means of enriching the whole world, since all countries could then enjoy the maximum of exports with the minimum of imports.

Friday, July 5, 2013

FEE: The Great Power Auction

            by THE FREEMAN

            Leonard Read reminded us that state power is like a clenched fist. There�s not much you can do with a fist, except destroy. And yet many of us are still living in the illusion that if we could just get the right people into power, we could use the fist to change the world for the better. 

            People we like consistently disappoint us when given access to power. Is it any wonder? They�re just people. But without realizing it, a lot of us attribute abilities and virtues to these people that suggest they are somehow superhuman.

            True believers depend on the myth of the virtuous leader. The idea is that the true believers and a small circle of rulers can embody the �will of the people,� so their judgments are fit substitutes for the preferences, desires, and knowledge of everyone on the ground. It�s rarely so explicit. But look through the speeches of the last few U.S. presidents and you�ll find them claiming powers that don�t even exist in comic books. 

            But those who would found entirely new societies, cultures, even ways of being can never acquire quite enough power to remake the people over whom they rule. So they work tirelessly to consolidate and expand their power. The consequences in such cases become direr day by day: pervasive surveillance, re-education camps, down the road to serfdom and perhaps into the Gulag. Of course, corruption�lying, cheating, and system-gaming�is always along for the ride. 

Is it unthinkable that this stuff could happen here? Revelations about the NSA and IRS, just in the past months, make it all seem a lot less farfetched. The more extreme, twentieth-century examples serve as a reminder of why State power is the biggest threat we face. 

And people always need motivation. With each successive election, the process of auctioning off bits of power repeats itself. Curtailing power�and returning as much of it as possible to each of us to conduct our lives and build our social networks as we see fit�doesn�t seem to be on the table anymore. Instead, it�s just one set of factions competing with another to see who can force everyone else to underwrite their favored cronies or participate in their social experiments.

If you look, really look, you�ll find a perverse state of affairs. And our national power auction raises serious questions about this rather hoary idea that power can be wielded for good, at least in the long term. The stories of what it winds up doing to people cut across party lines and dog every ideologue who jockeys for a place at the trough. 

The only guaranteed outcome comes from giving up and accepting this as simply the immutable nature of the world. It may be necessary to keep examples of how power actually does corrupt in the front of our minds. But we can choose whether these litanies of abuse become the excuses for giving in or fuel for further innovation and resistance. 

It�s very easy to be swept up in support of the latest expansion of the State�because it purports to help the poor, or save the environment, or end terrorism, or keep people who aren�t like us from coming here. Revisiting the topic of abuse of power can keep us from losing our skepticism of the State. It can wake us up like smelling salts; this stuff always stinks, at any rate. 

Once awake, we can fix our sights again on the enormous task of breaking up power. But how?

There's clearly a problem when power and money connect. The liberal progressive answer is to take money out of politics. This view is naive and illiberal, since political expression costs money. On the other hand, conservatives talk a big game about limiting power but, in practice, accept it�which winds up looking hypocritical. Each "side" finds special interests they can tolerate to help them hold on to power. "Left" and "right" act like a cartel and power grows. 

The classical liberal/libertarian solution is to decentralize power, leaving less to auction off. That leaves more power vested in people to pursue their private lives, building a civil society robust enough to prevent any one group from dominating everyone else. That might seem quaint, but we think it's hard to improve on the wisdom of James Madison:

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. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions.

This policy of supplying, by opposite and rival interests, the defect of better motives, might be traced through the whole system of human affairs, private as well as public. We see it particularly displayed in all the subordinate distributions of power, where the constant aim is to divide and arrange the several offices in such a manner that each may be a check on the other�that the private interest of every individual may be a sentinel over the public rights. These inventions of prudence cannot be less requisite in the distribution of the supreme powers of the State.

Madison knew that history was already littered with the detritus of civilizations that failed to decentralize power and went through that corruptive process that has its own predictable pattern. 

What comes first, the power or the money? Who can say? But the greatest insight of the American Founding was that power corrupts. Madison warned us that the seraphim had long ago departed this world and that cherubim grow up fast when confronted with the auction. 

And that�s why our belief, tentative but hopeful, is that there is a way forward in decentralization. Only this decentralization may not be a consequence of any Madisonian statecraft. It may very well be a result of social technologies forged by innovators with a desire to upend the status quo�perhaps readers of this very publication who are ready to change the world.

Read more:

Milton Friedman, George Shultz, President Nixon


Advice to Egyptians from FTCN

Here is a segment of Created Equal with Arabic speakover.

We hope Egypt will move forward towards equality of opportunity

rather than equality of condition.


Wednesday, July 3, 2013

Egypt: Largest Political Event in History?

IRS Lois Lerner update

            Lois Lerner has agreed to testify before congress under the condition that she receive immunity. However, this is a bizarre request, as she issued a statement before congress, then pleaded the 5th Amendment denying cross-examination.  The IRS Scandal seems to have lost traction--in light of the many other scandals occuring.  Is this an opportunity for the Oversight Committee to revive talks about a sincere injustice, or is this more tricky in nature on Lois Lerner's behalf?

Gary Becker on the aim of his work


Tuesday, July 2, 2013

Did Ayn Rand and Murray Rothbard take liberty down a bad path?

            by KEVIN CZARZASTY

Hultberg, author of The
Golden Mean
, suggests that in response to exploding government in the
1930's, some libertarians became too extreme.  In turn, Anarchy-leaning
Libertarians dividing the freedom movement into one part radical, one part
conservative.  From there, Hultberg argues, Liberty had a tiny chance at
prevailing, because its proponents were fighting against themselves rather than
exponentially growing government.

battle, I believe, illustrates the genius of Milton Friedman.  Freedom
fighters often run into the following problem: To be principled or to be practical?
 All too often, this is seen as a black and white issue, but as Milton
Friedman showed, the grey area is where the most progress can be made.  It
is in the spectrum between principles and practicality that we can begin to
reunite the cohesive freedom-thinkers that split apart in the early 20th

Below is a short explanation by Hultberg...

"When it first began in the early 1940s, the freedom movement in America was not split between libertarians and conservatives. It was one coalition unified in rebellion against FDR's welfare state. By 1970, however, the movement had become tragically bifurcated. Ayn Rand and Murray Rothbard took libertarians off into anarchy, while the Burkean philosopher Russell Kirk drove conservatives into the complacency of welfare-statism. This split has created two incomplete visions (contemporary libertarianism and conservatism) that are, in their singularity, incapable of effectively challenging the authoritarian mega-state."

FEE: The Division of Labor

            by SARAH SKWIRE

Jacob and Wilhelm Grimm. "The Mouse, the Bird, and the Sausage," in Children's and Household Tales (aka Grimm's Fairy Tales), 1812. (adapted here)

Once upon a time a mouse, a bird, and a sausage formed a partnership. They kept house together, and for a long time they lived in peace and prosperity, acquiring many possessions. The bird's task was to fly into the forest every day to fetch wood. The mouse carried water, made the fire, and set the table. The sausage did the cooking.

The folk and fairy tales collected by the brothers Grimm are not widely considered to be significant demonstrations of the economic way of thinking. After all, aside from the static (and mostly symbolic) wealth of kings and queens, money in these tales tends to show up in comic or magical contexts—like an enchanted girl who drops gold from her mouth when she speaks, a purse that always contains one gold coin no matter how often you spend it, the goose who lays golden eggs, or the Italian tale about a donkey who provides gold from — elsewhere. Even these magically provided types of money do not function like money. No one ever spends the goose's golden eggs or the money dropped from the enchanted girl's mouth. The magic purse and the donkey are in the story, in most versions of the tales, in order to be stolen and to allow a villain to take the place of the hero or heroine until everything ends happily ever after.

When we remember that the economic way of thinking is not only about monetary exchange, but about all kinds of exchange and choices, these tales look a bit different. "The Mouse, the Bird, and the Sausage" is a perfect example.

The three companions begin this brief tale in an equitable and beautifully functioning partnership. Each member of the trio has a job, executes it well, and benefits from his own work and the work of his compatriots. Everything is going perfectly, and they live, as the Grimms tell us, "in peace and prosperity."

That is, until the bird starts to squawk.

Discontented with his lot, and describing his voluntary exchange of labor as (depending on one's translation) "servitude" or "slavery," the bird insists that the current arrangement is unfair and that they must all switch jobs. He assigns new tasks, and the sausage is sent to gather wood, the mouse to do the cooking, and the bird to tend the water, fire, and house.

In other words, the bird attempts to construct "fairness" from the top down by ignoring the advantages that have revealed themselves over time as the trio has settled into their familiar tasks and evolved a functioning and prosperous example of social cooperation under the division of labor. He forces the trio to desert the idea of comparative advantage as laid out by David Ricardo's On the Principles of Political Economy and Taxation (1817) and in chapter 8 of Mises's Human Action. Comparative advantage is the idea that everyone has something they do at lowest opportunity cost to themselves. That is the thing they should do if they wish to benefit themselves and others the most through exchange.

The sausage is probably the clearest example of comparative advantage in the tale. The bird and the mouse may well be able to exchange their tasks (though I suspect the bird's sharp eyesight, flight capability, and experience in gathering twigs for nests make him the best wood gatherer of the three), but the sausage cooks every night for a very specific reason. "When mealtime approached, she would slither through the porridge or the vegetables, and thus everything was greased and salted and ready to eat." Seasoning dinner with one's own flesh is a very low opportunity cost for a sausage (even a sentient one), but very high opportunity cost for a bird or a mouse—especially given that they can keep house or gather wood better than a sausage, no matter how sentient.

The tragic consequences of denying the truths of comparative advantage rapidly become clear in the tale. The sausage, sent off to gather wood, is eaten by a dog. The mouse attempts to season the boiling pot of vegetables with her body, but is instantly scalded to death. And the bird, angry and panicked, begins to throw the wood around the house. It falls into the hearth, and the house catches fire. When the bird runs to draw water from the well to quench the flames, the bucket falls into the well. He falls in with it, and he drowns.

Adam Smith reminds us that —the greatest improvement in the productive power of labour, the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labour.— But Ricardo and Mises remind us further that labor cannot just be divided up any old way. When we do that—when we ignore the concept of comparative advantage and the way it allows each of us to contribute most effectively—we end up like the bird, the mouse, and the sausage. And they did not live happily ever after.

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Official Snowden Statement

One week ago I left Hong Kong after it became clear that my freedom and safety were under threat for revealing the truth. My continued liberty has been owed to the efforts of friends new and old, family, and others who I have never met and probably never will. I trusted them with my life and they returned that trust with a faith in me for which I will always be thankful.

On Thursday, President Obama declared before the world that he would not permit any diplomatic "wheeling and dealing" over my case. Yet now it is being reported that after promising not to do so, the President ordered his Vice President to pressure the leaders of nations from which I have requested protection to deny my asylum petitions.

This kind of deception from a world leader is not justice, and neither is the extralegal penalty of exile. These are the old, bad tools of political aggression. Their purpose is to frighten, not me, but those who would come after me.

For decades the United States of America has been one of the strongest defenders of the human right to seek asylum. Sadly, this right, laid out and voted for by the U.S. in Article 14 of the Universal Declaration of Human Rights, is now being rejected by the current government of my country. The Obama administration has now adopted the strategy of using citizenship as a weapon. Although I am convicted of nothing, it has unilaterally revoked my passport, leaving me a stateless person. Without any judicial order, the administration now seeks to stop me exercising a basic right. A right that belongs to everybody. The right to seek asylum.

In the end the Obama administration is not afraid of whistleblowers like me, Bradley Manning or Thomas Drake. We are stateless, imprisoned, or powerless. No, the Obama administration is afraid of you. It is afraid of an informed, angry public demanding the constitutional government it was promised � and it should be.

I am unbowed in my convictions and impressed at the efforts taken by so many.

Edward Joseph Snowden

Monday, July 1, 2013

Snowden seeking Asylum in Russia

            The ball is now in Putin's court, as Edward Snowden's passport has been cancelled by the US government, and he remains in the Moscow Airport. While Ecuador has shied away from their innitial suggestion that they may take him, Russia has tried to remain neutral but may not have that luxury much longer. The entire debacle is turning into a mess, with some French politicians pushing for Paris to take him in, and with Germany declaring that the NSA revelations have greatly damanged US-German relations.  The catch: Snowden is still leaking information every few days.

Douglass on Effort


Cafe Hayek: Maximum Misunderstanding of the Minimum Wage

            by DON BOUDREAUX

Here's a letter to the Los Angeles Times:

Michael Hiltzik's "Debate over minimum wage reignites decades-old arguments" (June 29) is flawed by several half truths and leaps of illogic.  Here are two examples.

First, no credible minimum-wage skeptic contends that raising that wage "would have a disastrous effect on the economy."  That wage (fortunately!) is set so low that it affects only a small fraction of American workers.  And those relatively few affected workers, being unskilled, are in many cases easily replaced with machines.  Both the smallness of the portion of the workforce affected and the easy mechanization of tasks performed by unskilled workers ensures that minimum-wage legislation isn't disastrous for the economy.  Such legislation, however, is often disastrous for those flesh-and-blood workers who, because of the minimum wage, lose their jobs or are obliged to toil at worse jobs.

Second, Mr. Hiltzik confuses publicly trumpeted motives for actual effects — a confusion revealed by his claim that "in addressing its citizens" economic dignity, the America of the Thirties was smarter and more humane than the America of today.—  The average annual unemployment rate for the 1930s was, on the most F.D.R.-friendly measure, 14.1 percent.  (Other measures put it at 18.2 percent.)  That rate was never lower than its 1930 level of 8.7 percent, while on F.D.R.'s watch during the 1930s it never fell below 9.1 percent.*

Anyone who considers these statistics along with the reality that the Fair Labor Standards Act of 1938 was, in fact, an attempt by politically powerful northeastern textile producers to crush competition posed by low-wage  and often black" textile workers in the south can be forgiven for dismissing Mr. Hiltzik's uncritical praise of the New Dealers— intelligence and humanity.

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

* See, for example, Table 1 in this 1993 JEP article by Robert Margo.