Elect This Man

If Ron Paul is not on the ballot in November, there's no reason to vote. I attended the Ron Paul Texas Straw Poll rally tonight, and he didn't disappoint.

Ron Paul talks in terms of principles. Unlike your typical politician, he doesn't give you a laundry list of government programs that he plans to implement. In fact, he spends more time talking about what government shouldn't be involved in. But when he does talk about the things government should do, he focuses on the principles of liberty and their application to those areas. It's a breath of fresh air, and if you haven't gotten to know Ron Paul yet, do yourself a favor and check out his websites (www.voteronpaul.com, ronpaul2008.com, etc.) and his speeches on YouTube (just search for "Ron Paul").

Protectionism

Check out the preamble to a new directive that was recently issued by Argentina’s Customs authority, AFIP: “Given the need to strengthen the means of control necessary to detect and investigate commercial fraud cases, especially those involving understated values for imported merchandise which cause grave damage to the national economy through the avoidance of import duty and other payments affecting federal revenues…”

Translation: “Whenever we in the government don’t get to steal as much as we want to, it harms our budget.”

Protectionism is nothing more than an unrelated third party interfering with the voluntary exchange of goods and services between two parties. If I have a quarter, and Joe has a pencil, we may decide to enter into an agreement in which I buy the pencil for a quarter. If we decide to do this, it is only because we both stand to gain from the exchange - otherwise we wouldn’t do it. If I buy the pencil, it’s only because I value the pencil more than I value the quarter. Conversely, if Joe sells me the pencil, it’s only because he values the quarter more than he values the pencil. As a result, we are both better off by having made the transaction.

But for some reason, people accept the idea that government bureaucrats can and should step between Joe and me and take a cut of the proceeds. Some guy from Washington says, “You can’t buy your pencil from Joe for a quarter. I want you to buy your pencil from Fred. If you still buy the pencil from Joe, you have to give me 5%.” It’s really no more complicated than that.

Naturally, the rhetoric surrounding protectionist arguments focuses on local industry and the plight of the domestic worker. Certainly protectionism artificially maintains workers in the industries that benefit from the policy, but it only does so at everyone else’s expense. Very few people are producers in the protected industry, but we are all consumers of goods and services. Protectionism increases the cost for the vast majority in order to benefit a small well-connected minority.

Protectionism flies in the face of the division of labor. We all benefit by obtaining goods and services from the most efficient producers, no matter where they happen to be located. That frees up money that we can use to consume other goods and services, and it is this increase that raises our standard of living. Protectionism also ensures that capital remains tied up in less efficient industries instead of being freed up to be used in more efficient areas that would further increase our standard of living.

When countries put up tariff barriers or other protectionist measures, they usually suggest that they are somehow punishing countries that don’t “trade fair.” This is nonsense. Protectionism always affects the domestic consumer by making goods more expensive. In addition, restrictions on imports are functionally restrictions on exports because consumers in the foreign country have fewer dollars to spend on our goods and services. So we pay more for the goods we want, and we sell fewer of the goods we produce.

Milton Friedman used the following example which helps to clarify the true nature of protectionism. In a time of war, the enemy will often attempt to blockade a country to prevent the importation of goods and services. Protectionism is merely an effort to do to yourself in peacetime what your enemy would do to you in a time of war.

Keep that in mind the next time you hear some politician calling for additional restrictions on imports.

Nonsense in the News

Brazil Brews New Law Against Exodus of Football Players

Brazilian president Luiz Inacio Lula da Silva reiterated recently his preoccupation about the exodus of football talents, saying that a new law is under discussion to brake this trend. In an interview published Sunday by the daily O Estado de Sao Paulo, Lula pointed out that the law prepared by football legend Pele, which allows players above 18 years old to choose clubs, should be revised.

"It's absurd. In Brazil, you could not find a player under 20 years, nor a player above 30 years ... because players under 20 years go to those great clubs in Europe and players above 30 years choose Japan as destination", said Lula. "Kaka is a good example. Sao Paulo sold him for just 8 million reals (4 million US dollars), but today he is worth 100 million reals (50 million US dollars). Ronaldinho was another case. He was sold at just 3 million reals (1.5 million US dollars). It's necessary that we watch over these cases," he added.

Since several months, Lula has been calling for a new law that will help detain players of good level in the Brazilian Championship and stop the exodus to foreign countries. Actually, about 800 football players leave Brazil for other championships, but just a few with a multi-million contracts.

• So how will this play out? I can just see it now,"Hey that was a hell of a game you played out there today! I'll need to confiscate your passport now." If passed, this will prove to be a great example on the unintended consequences of government intervention in the marketplace. It will only hurt the Brazilian national team over the long run, since the best players will have less reason to achieve the highest level of performance. In addition, they will no longer be engaged in competition at the highest level, which will ensure that the Brazilian team will over time become less and less of a soccer powerhouse. Most people in the US couldn’t care less, of course, but I can assure you this is a big deal in Brazil. I've been in Brazil when their team loses, and it's like a funeral all across the country. The Argentines should be happy, though.

Mexican Authorities Target Illegal Jukeboxes
Jukeboxes have become a new target for anti-piracy efforts in Mexico.On August 21, Mexican authorities executed raids on four outlets in Mexico City and seized 12 illegal jukeboxes containing 17,000 unauthorized music tracks.

The raids, executed with help from local IFPI offices, were the first official raids in Mexico as part of a regional strategy to promote the licensing of jukeboxes. IFPI estimates there are some 10,000 illegal digital jukeboxes in Mexico with unauthorized tracks. About 20 police units participated in the Aug. 20 raid, along with prosecutors from the attorney general's office.

• Good to know that the Mexican police force is finally being utilized to tackle the serious problems facing that country.

Saggy Pants Bans
Exposed boxer shorts and thongs would be illegal in any public place in Atlanta if the City Council approves a proposed amendment to the city's indecency laws.

The target is young men who wear their pants low off their hips to show off the two pairs of boxers they wear beneath their saggy pants, said Atlanta Councilman C.T. Martin, a college recruitment consultant who sponsored the ordinance. Saggy pants are an "epidemic" that are becoming a "major concern" in cities and states around the country, the ordinance reads. “Little children see it and want to adopt it, thinking it's the in thing," Martin said Wednesday. "I don't want young people thinking that half-dressing is the way to go. I want them to think about their future."

Several cities have considered banning saggy pants but only one is known to have adopted a measure, Seagraves said. Delcambre, La., is the only city she knows of that passed such an ordinance. It carries a fine of up to $500 or six months in jail for exposing underwear in public, according to a description of it in Martin's proposed ordinance.

• I can just see the prisoners talking now: “What are you in for?”
  ”First-degree murder, aggravated assault. You?”
  "Baggy pants. SO YOU WANNA GET LOCO WITH ME, ESSE?”

Wasting Your Vote

I’m planning to attend the Ron Paul Texas Straw Poll rally this Friday. It should be interesting, to say the least. Ron Paul is the Republican “dark horse” candidate whose campaign has been roundly ignored by most media pundits because they’ve already decided he can’t possibly win. They may well be right. After all, Ron Paul is a principled Constitutionalist who favors such arcane policies as sound money and a non-interventionist foreign policy. Given the apparent desire for big government among most Americans and the neocon domination of the Republican party, Ron Paul’s free market, limited government proposals may indeed fall flat in the primaries.

I was discussing Dr. Paul’s candidacy with a friend of mine recently, and he stated that he didn’t want to “waste his vote by supporting someone who couldn’t win.” Now I understand that no one person’s vote actually makes a difference in a national election, but the sentiment struck me as odd nevertheless. What does it mean, exactly, to “waste one’s vote?”

It seems that voting for a candidate who does not represent your values is wasting your vote, regardless of whether that candidate will win or not. For example, the entire Democratic field is nothing but a gaggle of closet communists who think there’s no problem they can’t solve with more and more of your money. The Republicans are no better, of course. They’ve shown themselves to be the biggest of the big-spenders, and the neocon philosophy of making the world safe through warfare (first made popular by Democrat Woodrow Wilson) has taken firm root among all but one of them. With the exception of Dr. Ron Paul, the Republican slate consists of nothing but more eloquent versions of George W. Bush.

So that’s apparently what it boils down to - communists or warmongers. It’s your choice. But for the sake of argument, let’s say I think Mitt Romney really has the best shot against Hillary. Should I support him just because I really, really, really can’t stand Hillary Clinton? While Hillary talks about socialized medicine, Romney has actually implemented it. But I vote for him anyway. Maybe he wins. Whoopee for him. The real question is what have I won? Since none of the “likely” candidates represent anything remotely resembling my values, it’s pretty clear that I could only waste my vote by spending it on someone who didn’t deserve it.

Unless you’re a Chicago Democrat, you’ve only got one vote. Spend it on someone who’s earned it, or not at all.

Give Me Liberty (But You, Not So Much)

I asked a friend of mine to take a couple of political quizzes. He scored Neocon Republican on the first quiz, but Libertarian on the second. I told him that he was clearly a very confused individual. His response was, “Not really. I think that I should be free to do whatever I want, but I’m not sure about everyone else.” He was kidding, of course, but I think there’s a lot of truth in that joke.

I recently had an experience that made me think that my friend might be right after all. A co-worker mentioned that he was surprised to discover that Hong Kong was in China. He had always thought it was in Japan. After I wiped the tears of laughter out of my eyes, the following thought occurred to me - his vote counts just as much as mine.

Libertarians argue that individuals can make decisions for themselves far better than any government bureaucrat, but at times like this one has to wonder if that’s really true. Clearly, not all people are well-educated or engaged in the issues of the day. The more latitude people have, the more opportunity they will have to make bad choices. Working from this premise, it’s easy to think that some degree of paternalism is necessary to protect people from themselves.

The main problem with paternalism, though, is the moral one. Paternalism violates the right of self-ownership in an attempt to force “correct” behavior on everyone in a top-down manner. Through it, we get public education, socialized healthcare, smoking bans, fat taxes, seat belt laws, helmet laws, etc. One of the particularly insidious characteristics of paternalist policy is that it creates its own justification for ever-increasing paternalist controls. Since some people might not be able to get medical care, we have to create a socialist health care system. Once the government “has” to pay for the health care of its citizens, it can justify curtailing or prohibiting risky behaviors like riding motorcycles or eating red meat because now the costs of those activities are a burden on the taxpayer. Since everyone is required to pay for everyone else’s health care, what you choose to eat is now everyone else’s business.

A second problem with paternalism is that it assumes that there is a single, objective, “correct” choice for everyone. In reality, though, it’s impossible to define any objective that will be appropriate for everyone – even if it’s something as straightforward as living longer. Although most people probably do want to live longer, that is only part of the equation. The other part is identifying the trade-offs required to live longer and then weighing the subjective valuations of the available options. Only the individual himself can make that kind of judgment.

For example, if you told an oenophile that he could add two years to his life if he just gave up drinking wine, there is no reason to think that he would take that trade-off. He derives a great amount of satisfaction from drinking wine, and that satisfaction may very well be more important to him than an extra two years tacked onto the end of his life. Living well according to his own subjective measure may be more important than living longer.

In a free society there may well be individuals who make choices that are wrong, even by their own subjective standards, in the sense that their choices do not actually lead to the outcomes they themselves desired. Libertarians do not claim that people will always make good choices. We merely state that it is immoral for one person to decide what another may or may not do, provided he or she does not violate the rights of others.

The Illusion of the Competitive Monopoly

I've been discussing politics with a die-hard Republican friend of mine, and we've covered a wide range of topics, including public education and the Civil War. These may seem to be completely unrelated issues, but I was able to glean a common thread from our discussion of both.

On the issue of public schools, my allegedly small-government, pro-free market Republican friend was dead-set against privatizing the school system because he thinks the poor wouldn't be able to afford an education (see my previous blog entry, "Public Education"). Instead, he said the key to improving public schools was vouchers in order to give parents more choice.

On the Civil War, he stated that he believed in states' rights, but also felt the US was right in crushing the CSA for seceding. I may get into my take on the Civil War in greater detail at a later date, but I think it's at least reasonable to state that his views here are conflicted, to say the least.

The commonality between these two issues involves monopoly. Most people realize that a monopoly in the consumer arena is a bad thing. You obviously don't want one company controlling the provision of a certain good because the lack of competition will result in poor service, inefficiency, and high cost. But for some reason, everyone believes that a government monopoly will be immune from these deficiencies, and will be innovative, efficient, and responsive to the customer.

As evidenced by our recent discussions, my friend apparently believes that it is possible to create a centralized Federal government monopoly - in education and law - and still expect it to behave as though it had competition. He believes we can create a government school system which crowds out private-sector competition, yet still deliver high-quality, affordable education that responds to the concerns of parents. He thinks we can create a centralized power structure in the Federal government, eliminate any checks on that power by the states, and still have a government that will limit itself to its Constitutional role and be responsive to the needs and wishes of hundreds of millions of people.

What is the reason for this particular blind spot when it comes to the government? A monopoly is a monopoly, regardless of who staffs it. The positive outcomes we desire from any organization (low prices, good service, etc.) result only from competition. Take away competition, and you remove the incentive and even the ability to deliver those positive outcomes.

Loving Leviathan

Our founding fathers created a government that was based on a Lockean, not a Hobbesian, foundation. To paraphrase Hobbes, we have absolute liberty in a state of nature, but life in such a state is “nasty, brutish, and short.” People therefore give up their liberty entirely in exchange for the protective services provided by government – but in so doing, the people become vassals of the state. In Hobbes’s philosophy the king was above the law because the will of the king was the law.

John Locke came along to refute this notion, and stated that men institute governments only to provide protective services that are necessary to allow us to secure our life, liberty, and property. In the Lockean bargain, we do not give up our liberty to an all-powerful monarch. We merely agree to submit to a neutral third party (government) in matters of dispute resolution. This is necessary to protect the rights of everyone equally. Should the government ever move beyond its original purpose of simply securing our rights, however, it becomes tyrannical. This is the core philosophical basis for limited government, and was a revolutionary leap forward in political thought. It was also the cornerstone of the Declaration of Independence and the Constitution.

Nevertheless, for decades now we’ve witnessed a clamor for a return to the state of Leviathan, embracing the Hobbesian philosophy of absolutism and abandoning the Enlightenment philosophy espoused by Locke. I’m not arguing that individual representatives themselves are above the law in the same way that an absolute monarch would be. However, I am hard pressed to identify any aspect of our lives that is not subject to some degree of government regulation or control. The problem is not just the level of government power, but the idea that many Americans are either ignorant of it, or worse, want even more of it.

Maybe I’m overstating or exaggerating the issue. After all, this is the land of free, right? Could be – let’s take a glance at the record. Here is a quick and by no means complete list, just off the top of my head:

• Food – mandates for nutritional information labels, farm subsidies, proposals for “fat taxes.”
• Clothing – import quotas on foreign textiles.
• Shelter – property taxes, rent controls, zoning regulations.
• Work – labor laws, minimum wage laws, withholding requirements, OSHA, Sarbannes-Oxley.
• Money – inflation, income taxes, sales taxes, central banking, Social Security.
• Family – compulsory school attendance laws, immunization requirements, car seat laws.
• Love and marriage – marriage licenses, federal definition of marriage.
• Entertainment – Congressional investigation of steroid use in baseball, rating video games, Janet Jackson fines.
• Communications – the USPS, domestic wiretapping, the FCC, McCain-Feingold.
• Travel – TSA restrictions and searches, seat belt laws, road construction, gas taxes, passport requirements.
• Health care – universal health insurance, Medicare, Medicaid, the AMA.
• The very air you breathe – smoking bans, carbon emissions caps, CAFÉ standards.

In the last 231 years, we’ve gone from fighting for freedom for this country to fighting against freedom in this country. Today, the term "capitalism" is a pejorative. Today, people actively clamor for additional restrictions on their freedoms. This is a problem that will lead us further down the road to socialism, poverty, and slavery. How did this happen?

Well, one factor could be the fact that the top 40% of all wage earners pay 99.1% of all Federal income tax. That means that 60% of the wage earners in this country pay virtually no Federal income tax. As a result, calls for tax cuts will fall on dear ears for the majority of wage earners, since they are now tax consumers utilizing goods and services that are paid for by the minority. Tax cuts could mean a decrease in those goods and services, and will therefore be resisted by ever-increasing margins.

Or maybe you think that the problem is simply that the “right people” aren’t in positions of power. Are you a liberal or conservative? Republican or Democrat? Do you live in a red state or a blue state? Do you realize that there is no functional difference? The Republicans and Democrats both accept the premise that there is no area of human activity which should be beyond government regulation or control. If you doubt that, just listen carefully to the presidential debates that are currently underway. Not a single candidate in either party, with the exception of Ron Paul, has said anything like, “That’s a state issue. The Federal government should have no role in that.” Even Republicans who still claim to be proponents of small government tacitly accept the idea that Washington should centrally plan health care, education, environmental concerns, energy use, and more. They have caved in to the modern liberal concept of positive rights, and now propose as much government intervention as any tax-and-spend Democrat. The arguments now simply boil down to quibbling over minutiae of regulatory priorities, and not over what the proper role of government should be.

As H.L. Mencken once wrote, "Democracy is the theory that the common people know what they want, and deserve to get it good and hard." Learn to love it.

Better Right Than Popular

As I mentioned in an earlier blog entry, libertarians are a strange mix of self-confidence and pessimism. Today I’m more pessimistic than ever. The Fort Worth City Council voted overwhelmingly, though not surprisingly, to ban smoking in private businesses throughout the city. There were two council members who did stand on principle to vote against the ban, including Carter Burdette, who noted that "We may find our new motto is, 'Welcome to Fort Worth, where the West begins and freedom ends’.” Kudos to Mr. Burdette.

I’ve been wondering why this particular issue has gotten me so worked up. I don’t smoke, and I don’t own a business. This should be a relatively small thing for me – and that, I think, is precisely why it bothers me so. It should be a small thing to show people that it’s wrong to use the coercive power of government to force your preferences on others. But the fact that people can’t or won’t see this in as simple a case as smoking bans doesn’t fill me with much hope for the future. It just tells me that most folks really do like to push other people around.

Most people focus solely on their own desired ends, and don’t give much thought to the means they use to achieve them. Of course, you always envision yourself as the one making the decisions about what ends will be sought in the first place. No consideration is given to the possibility that somewhere down the road, someone else might be calling the shots, and they may pursue goals that might not sit too well with you. Too bad. Once you’ve given government the green light to stomp all over everyone else’s rights, you don’t have a leg to stand on when it comes to defending your own. And government officials are only too happy to do the stomping. They do not believe that their job is to protect the rights of their constituents. They think their job is to enable whatever the majority or vocal minority wants, regardless of the legitimacy of those goals.

Given this, it is clear to me that libertarianism is strictly for those who would rather be right than popular. Libertarianism is the only political philosophy in which the means matter just as much as the ends. In the case of the smoking ban, I myself prefer non-smoking facilities. I don’t want to go to a smoky bar or restaurant. But I understand that my only legitimate recourse is to avoid places where smoking is allowed, and to vote with my dollars. I do not have a right to frequent any particular business – I am allowed to enter the business owner’s property if he or she wants me to, and I have to abide by the rules that they set. I certainly do not have the right to impose my personal preferences on business owners through the force of government prohibitions that threaten them with fines or even seizure.

Even though I have chosen not to smoke, I will defend to the death the right of others to make their own choices. I understand that in order to protect my own rights, I have to be willing to defend everyone else's rights as well, even if they use them in a way that I disagree with.

Now just try to convince one of the health Nazis from the American Cancer Society of that. They don’t care about your finely nuanced arguments for freedom. It's not enough for them simply to persuade people not to smoke - they have to make smoking a criminal act simply because they've decided it's not good for you. They don’t want you to smoke, and they don’t care if they have to take away the livelihood of the small business owner to make sure you don’t.

They won’t come out and state their position in this way, of course. They will stick to statistics about the dangers of secondhand smoke (none of which I dispute, by the way). But this is a straw man argument. No one is forced to expose themselves to secondhand smoke, even if they work in a business that allows smoking. They have chosen to work there, and they are free to leave whenever they want. Likewise, customers are not forced to frequent those businesses. They are free to select other places that have rules that are more in line with their own personal preferences.

There is no “right to clean air.” You cannot have a right to something that must be provided by someone else. Workers have the right sell their labor to businesses according to mutually agreed terms, whatever they may be. If the business owner allows smoking, the worker weighs that risk for himself and makes his decision accordingly. Likewise, customers have the right to vote with their dollars. The marketplace will naturally guide the business owner to make the choice that best serves his customer base. In fact, given the overwhelming opposition to smoking in general, I believe that most places would choose to prohibit smoking voluntarily. After all, there is certainly no “right to smoke” either, and I am not suggesting that there is. I only object to the use of government force to impose one option on everyone. It is an illegitimate use of force against those who have not initiated force on others, and it is a further erosion of the liberties of smokers and non-smokers alike.

The Broken Window

The idea that the government can take taxpayer money and then use it to “create” anything (wealth, jobs, hydrogen cars, etc.) is an example of the fallacy of the broken window. This comes from an economic essay written by Frederic Bastiat titled What Is Seen and What Is Not Seen. Here’s the Cliffs Notes version (you can get the entire essay at Liberty Fund:

A kid throws a rock through the window of a bakery. All the townspeople gather around and shake their heads, wondering what has gone wrong with today’s youth, the appalling lack of respect for private property, yada yada yada. Then someone says, “Yes, but there is a silver lining here. The baker now has to replace the window, which will provide the glazier with work that he wouldn’t otherwise have.” And everyone starts to nod in agreement, thinking about all the new business that has been "created."

The problem is that they’re only looking at one part of the equation – the money that will now be spent on a new window. What they don’t see is the opportunity cost of what the baker would have done with that money had he been able to spend it as he wanted to. Let’s say he was going to take the money he had and buy a new suit with it. Had the window not been broken, his total wealth would have increased by one new suit – he would have wound up with a new suit and his original window. Now all he’s got is the window that was replaced, and no new suit. If you take the baker as society, and the total amount of goods and services consumed as wealth, then you see that society as a whole is less wealthy than it would have been otherwise.

The same holds true with government spending. The government cannot create any wealth through its spending. It merely redirects money that would have otherwise been spent in myriad ways by the taxpayers themselves. There’s no question that government can take our money and do something with it. If Caesar wants a coliseum, a coliseum will be built. People can walk by the site and see construction workers busy at work. They say to themselves, “Oh, look – so many people hard at it! It’s a good thing the government has decided to invest in this project, because it’s created so many jobs that wouldn’t otherwise exist.”

What they’re missing is that the very fact that the Coliseum had to be built by government decree is an indication that building it was a misallocation of resources. Had the taxpayers actually wanted a coliseum, then no government coercion would have been necessary – they would have simply banded together, created a business plan, and raised the funds via voluntary means from people who were looking for a profit opportunity.

Government spending may create demand for a certain good, but it takes away demand from all of the other uses that the taxpayers would have created themselves had they been able to keep their money. And the taxpayers’ spending and investing would have allocated resources in more efficient ways, because the free market is based on the collective knowledge of millions or even billions of people. The government, on the other hand, consists of just a handful of bureaucrats whose combined knowledge of the optimal allocation of resources cannot possibly match that of the market as a whole. Wealth is created in voluntary free market transactions because each party exchanges something of lesser value for something of greater value. Governments just move money from one group to another, which must result in sub-optimal outcomes.

Public Education

We’re told that education is “too important” to be left to the market or that people have “a right to” education. In fact, we believe in our public school system so much that we’re willing to take your house away if you don’t go along with the program. Because we care about the children.

Ridiculous. My kids are still too young to attend school. Nevertheless, I pay over three thousand dollars in property taxes every year to fund public schools (not to mention all those lottery tickets I buy). My neighbors also pay property taxes to fund public schools, and they have no children at all. Area businesses also fund public schools through property taxes. The same scenario is played out in every state in the Union, yet American public schools consistently rank below almost all other industrialized countries.

The poor results delivered by the public school system are completely predictable, of course. Schools receive their funding regardless of the results they achieve. Not happy with the public schools? Too bad, you’re going to pay anyway.

In no way, shape, or form would we put up with this performance from a private company operating in the free market. If I pay for service that is not provided to my satisfaction, I’m free to take my business elsewhere. Not so with public schools. If I don’t like what’s being taught, the results achieved, or any other aspect of the current school system, I’m stuck with it. Even if I have the resources needed to send my children to private schools, I am still forced to pay for the public system.

As a thought experiment, let’s apply the public school model to something like grocery stores. Imagine a grocery store financed by property taxes. You could go into the grocery store five days a week, and pick up a pre-defined basket of goods once a day with no out-of-pocket expense. You are free to shop at a for-profit grocery store if you like, but no matter which store you choose, you will be assessed property taxes to cover the expense of the public grocery store.

What would the shopping experience at this public grocery store be like? What would be the motivation for that public store to innovate? What would the selection of products be like? Absent competition and the profit motive, it would be like shopping at the Department of Motor Vehicles.

And what would the effect of this subsidized grocery store be on the for-profit stores in the area? Government investment in any sector causes a crowding out effect. Since people would already be paying for the public grocery store anyway, it would be very difficult for most of them to “pay again” for the food at the private grocery store, even if they might like to. As a result, the actual demand for those private stores would be dampened. In economic terms, “demand” means more than just desire for a certain product. It is the desire coupled with the ability to purchase. For example, I might desire an Aston Martin, but economically speaking I don’t demand it since I have no way to pay for it (yet).

The same holds true of education. I desire to send my children to private schools, but given my property tax burden, I can’t be said to “demand” private education since I don’t have the funds needed to pay both property taxes and private school tuition.

Of course, most people will say that education is not like groceries, and that the free market can’t handle its production and distribution. Ultimately, this argument implies that the law of supply and demand applies to certain items but not to others, which is akin to saying that the laws of physics apply to some kinds of rocks, but not others.

“But what about the poor?” they cry. “Poor people can’t afford private schools, so they wouldn’t be able to get an education!” Yet public schools hurt the poor the most, even though the cost is “free.” Financing schools through taxes ensures that the poorest among us are the least able to attend good schools, since the quality of local schools is tied directly to the property values in the area. People living in wealthier areas have greater control and influence over their public schools because they have a greater ability to overcome the crowding-out effect by “voting with their feet.” If the rich are unsatisfied, they have the means to move to districts that are more responsive to their concerns and desires, or place their children in the few existing private schools.

There are a number of myths underlying the idea that the poor wouldn’t be able to afford private schooling in a free-market system, including:

1. That what the government spends per pupil per year reflects the true cost of education. This ignores the fact that all government programs are inherently inefficient and wasteful as a direct result of not having any competition. The free market, on the other hand, is incentivized to drive down costs in order to meet demand profitably.
   

2. That all private schooling would be uniform. Today’s high-priced private schools are generally what people picture when discussing free-market alternatives, but the private sector would provide an array of educational products, from no-frills budget education to high-end luxury education.
   

3. That if the government doesn’t provide education, then no education will be provided at all (at least for the poorest families). But if this were true, then surely the government should be responsible for the distribution of even more necessary goods, such as food, shelter, and clothing (it worked so well in the Soviet Union, after all). To assume that the free market will not supply a clear demand is to ignore all economic reasoning.
   

4. That there would be no private charities, corporate scholarships, and other voluntary programs to further defray costs for the poorest families. After all, the very fact that education for the poor is the first objection out of anyone’s mouth should be proof enough that people demand this service, even though they don’t necessarily consume it themselves.

Ultimately, though, the best argument against the current “gun-run” education system is the moral one. I have no right to force my neighbors to pay for my children's education. I certainly have no right to threaten to take their house away from them if they don’t pony up. I have a right to contract for educational services on a voluntary basis, but socializing the costs of public education across the entire population is a violation of everyone’s property rights. It is a violation of self-ownership to demand that someone else pay for a service that I wish to consume. It imposes a contractual obligation on every member of society without their consent.

Ironically, some of the most vehement objections I’ve heard against privatizing education have come from so-called conservatives, who allegedly believe in the free market and distrust government interference. The same people who are violently opposed to socialized medicine are nevertheless rabidly in favor of socialized education. How they manage to rationalize this contradiction is a mystery to me. There is no functional difference between the two. If you concede the core philosophical issue of positive rights in the area of public education, you cannot rationally object to other government programs that further expand the scope of taxpayer-funded goods and services.

Projection

I wonder how much of the resistance to freedom is due to projection. Some conversations I’ve had lately lead me to believe that people extrapolate the shortcomings of existing statist solutions to the private sector, and see nothing but heartache in any attempt to unleash capitalism as a means to solve problems. It usually goes something like this:

• “If we don’t ban smoking, then there will be no place for me to go. All bars, clubs, restaurants, and stores will allow smoking.”
• “You can’t get rid of public schools, because the poor won’t be able to get an education. Private school is too expensive.”

The objections, of course, are complete nonsense. Functionally, what they contend is that there will be a demand for a certain good or service, yet no one will enter the market to fulfill that demand. “No thanks, I’ve got plenty of money. No need to tap an underserved market.” Ironically, the people who believe this are often the same ones who fear and lament the “greed” of capitalism.

But this hostility toward free enterprise solutions begs the question, “Why?” I think it has something to do with projection. When hearing free-market alternatives to government action for the first time, many people project the nature, incentives, and failures of government onto the private sector. This quickly leads to incorrect conclusions and fear of change.

Government by its very nature provides a one-size-fits-all, “take it or leave it” solution - or more accurately, a “take it or else” solution. Government policy makers are incentivized by the majority (where the votes are) or by the special interest minority (where the dollars are). As a result, minority interests are either ignored entirely (e.g., smoking bans) or overrule the majority (e.g., farm subsidies).

This incentive structure is completely alien to the free market, which offers something for everyone. Capitalist actors are obviously incentivized by money, but this is the very thing that motivates the market to cater not only to the majority, but also to the minority. With capitalism, the wishes of one group need not be sacrificed in order to fulfill the wishes of the other.

We can see this very clearly in any shopping experience. For example, a large number of people like hot dogs, and a relatively small number of people like tofu, but both are readily available. You can buy one or the other, or even both at the same time. We work under this paradigm every single day. Nevertheless, people object to free market solutions because they do not think conceptually. They assume that certain goods and services are somehow “different” than hot dogs and tofu. They are so habituated to the status quo of the statist model that they project it onto the private sector, where it has no relevance whatsoever. If we were to take the free market solution as our starting point instead and then project that onto the statist paradigm, the failures of government programs would become glaringly obvious.

Maybe They Should Change the Name

For a magazine that calls itself The Economist, the writers know shockingly little about economics. This from the August 10, 2007 online edition of The Economist Intelligence Unit ViewsWire:

Bolivia’s Blues

…Eighteen months after Bolivia’s government announced plans to put the hydrocarbons industry under majority state control, concerns are growing over a lack of new investment. The government has repeatedly warned international oil companies with hydrocarbons concessions that their contracts will be rescinded and their operations seized if they do not collectively commit to invest at least US$3bn in exploration and production over the next three years. If they fail to meet this target, Bolivia’s plans to expand its gas sector will be in jeopardy.

Who could have imagined that foreign investment might dry up after the Bolivian government stole – oops, “nationalized” – the hydrocarbon companies’ assets? Not the writers at The Economist, apparently.

The rest of the article goes on to describe how the hydrocarbon revenue shortfalls have the Bolivian government concerned. Truly heartbreaking stuff. What strikes me about this article is the completely uncritical way in which they present the government’s position. Not a single eyebrow raised at the core issue of nationalization. Other than a passing reference to “judicial uncertainty,” there’s not a hint that stealing property and extorting private companies may make doing business in Bolivia less desirable.

This is precisely the kind of economically illiterate journalism that I was referring to in the “Ideas Matter” entry. Inherently faulty ideas are constantly presented in an uncritical manner, and any discussion of policy begins from an erroneous starting point.

The Fort Worth Smoking Ban

Fort Worth is determined to follow other cities' examples in how to limit freedom. A near-total smoking ban will be enacted here shortly. Here is a copy of an admittedly quixotic letter I sent to my city councilman:

"I have heard that the Fort Worth City Council is expected to pass the near-total smoking ban proposed by Ms. Kamm and her organization, the American Cancer Society. The ACS is a good organization, and I attribute the fact that I do not smoke in large part to their educational efforts. When I was a very young child, the American Cancer Society ran a series of public service announcements with the tag line, 'Don’t smoke. It’s a matter of life and breath.'

That campaign made such an impression on me that when I was about four or five years old, I actually knocked a lit cigarette out of my grandfather’s mouth and into his lap while we were driving down the highway at sixty miles an hour. He nearly ran off the road and killed us both right then (which I guess would have been two more deaths attributed to smoking), but fortunately I survived to become a non-smoker, and for that I thank Ms. Kamm’s organization.

But with regard to Fort Worth’s proposed smoking ban, I guess I’m a little confused. The website states that the goal of the ban is to eliminate smoking in all public places. That sounds good to me. But I’ve also heard that the ban affects places like bars and restaurants, which as we all know are not public places at all, but rather private property.

Now, since I neither smoke nor own a business, maybe I’m missing something here, but I don’t understand how a group of people, no matter how well-intentioned or well-financed they may be, can take it upon themselves to dictate what others may or may not allow on their property. I understand how I as a property owner have the right to decide what I will or will not allow on my own property, but what gives me the right to tell you what you will or will not allow in your home or business? That seems to violate the very principle of ownership itself. After all, what does it mean to “own” a piece of property if you cannot decide for yourself how you will utilize it?

And although I agree that smoking is dangerous to one’s health and the health of those who are exposed to it, I don’t see how we can legitimately prevent people from taking that risk if they choose to do so voluntarily. If I choose to go to work in a smoking facility, what gives you the right to tell me that I can’t? Do I not own my own body? Am I not responsible for my own actions? After all, no one is forcing me to work in any particular establishment, whether it be smoking or non.

I read that Mayor Moncrief referred to this as a quality of life issue. It seems more like a civil liberties issue to me. Elected officials serve in a government that supposedly exists to protect citizens’ rights. Notice that I said “protect rights” and not “protect from harm.” You are not elected to be our parents. You are not elected to think for us. You are not elected to dictate what risks we may choose to accept. You are elected to help protect the property rights of all citizens, and not merely to grant the unprincipled wishes of even the majority. Because when it comes to property rights and self-ownership, numbers don’t matter - just because 51% of the voters wish to violate the rights of the other 49% doesn’t make it legitimate. Might does not make right.

Any councilperson who supports this ban is abdicating his or her responsibility to protect the rights of the citizens of Fort Worth, and is choosing to violate those rights instead. You need to reject this proposal."

Hey, No Fair! (A Discussion of Rights)

Libertarians love to discuss rights. This is often a rather heated debate, with some questioning whether rights even exist in the first place. I would suggest that rights do indeed exist, but that they exist as a framework for defining the proper interactions between individuals, rather than as an inherent characteristic of individuals.

Man is a social animal, but not a hive animal. We depend on a series of complex interactions for our survival, but we are not pre-programmed with instincts defining how those interactions must take place. Given this, it becomes necessary to define the proper sphere of individual action. This sphere is what we refer to as individual rights.

There are many different concepts of rights, which usually boil down to some form of positive rights (e.g., the right to education or universal health care) versus negative rights (the right to be free from aggression against one’s person). Whenever two or more people come into contact with each other, some concept of rights will come into play, perhaps even multiple concepts at once. Our task as libertarians is to show why our concept of negative liberty is superior. It is superior because it is universalizable – it applies equally to all people, in all places, at all times.

Positive rights cannot be universal, because they impose obligations on some individuals to provide goods and services to other individuals. Person A must provide healthcare to Person B, but Person B isn’t obligated to do the same for Person A. Positive rights create inherently unequal relationships between people.

So do rights exist? Yes, but only as a means to describe just action. They don’t exist as an independent characteristic of a person, in the same way as, say, a spleen or a kidney does. However, that doesn’t mean that the framework is invalid. Mathematics doesn’t exist in nature, either. It is nothing but a mental construct, but it still serves to describe how things work in nature. Rights work in the same way – as a concept that defines how individuals within a society may legitimately interact.

And just because rights can be violated doesn’t mean that rights don’t exist. That would be like saying that law doesn’t exist because some people break occasionally break laws. Rights violations are only identifiable as such because we have a concept of rights in the first place. If there were no such things as rights, there would be no way to identify improper actions, much less mount a defense against them.

The Lockean term “natural rights” is also a source of great contention. The English utilitarian philosopher Jeremy Bentham sneered that the concept of natural rights was “nonsense on stilts.” However, I’m not so sure rights aren’t natural, or at least very close to it. Just watch kids on a playground. If you’ve ever heard a three-year old complain, “Hey, no fair!” you’ve heard a rudimentary expression of a recognized rights violation. This basic concept of ownership (rights) seems pretty intrinsic to human beings, and manifests itself at a very young age.

So, are rights a defining characteristic of man? No. Man is not a bi-pedal mammal with eyes in front of his head and a well-defined theory of rights. However, some concept of rights will always come into play whenever two or more individuals interact, as a simple result of the fact that man lives in a world of scarcity. If I were alone on a desert island, I would have no need for a concept of rights. As soon as another person washes up on shore, however, he and I will have to define some basic rules of the game, or rights, so that we may co-exist.

Given this simple fact of human nature, rights must exist. The only question is the form they will take. Will we have a divine right of kings, where a single person is elevated above all others? We will have positive rights, where the less productive can plunder the more productive at will? Or will we have a concept of negative rights, where all people are treated as equals, and can pursue whatever goals they wish, as long as they do not infringe on the rights of others to do the same?

The choice seems pretty simple.

Energy Independence

I recently had a conversation with a co-worker about the issue of gas prices. He was furious at Exxon for having the audacity to spend money on advertising when they were making profits “hand over fist.” My response was that in a free market, profits merely indicate that a company is providing consumers with what they want in an efficient manner. He, however, wants government to “do something,” echoing the calls by some for a windfall tax on oil company profits, or some other unspecified government action. And there are plenty of politicians who would love to do just that – tax the companies that are providing a vital good to the consumer and thus ensure that those companies provide less of it. This is the same recipe for disaster that was tried in the 1970s. The last thing we need is the government deciding what profits are “appropriate” in any given industry.

The current reality is that even at today’s prices, oil and gasoline are still the most cost effective fuels. America is not addicted to oil – it’s addicted to making rational economic decisions. As prices continue to rise, three things will happen – a) new players will enter the market and increase supply in order to get in on the profits, b) existing players will increase supplies to take advantage of higher market prices, and c) consumers will look to reduce their demand via substitutes and/or conservation. Costs will go down as a natural result of market forces.

Nevertheless, politicians are anxious to use the recent increase in gas prices as a talking point in the debates. I’ve lost count of the number of times a presidential candidate has called for a national policy designed to make us “energy independent.” This is an idea that clearly has broad bipartisan support, and further evidence of the fact that both Republicans and Democrats wholeheartedly agree on the need for top-down, Soviet-style central planning. There are no philosophical differences between the parties, just quibbling over the details of how best to apply big-government policies. No one stops to ask whether this is an appropriate role for the government. These days, the only justification needed for state involvement in any issue is for some people to be concerned about it.

So let’s explore the concept of energy independence for a moment. The idea is that by producing enough oil within the territory of the United States, we can achieve the following goals:

1) Lower the price of gasoline

2) Reduce our dependence on foreign oil

It is my contention that these are two mutually exclusive goals. Pursuing a national policy of energy independence runs counter to basic economic theory, and will increase the price of gas, not reduce it.

The essence of the energy independence argument is that we should be self-sufficient with regard to energy production. I’m here to tell you that self-sufficiency is actually a very bad idea. In fact, all material progress that mankind has ever enjoyed has been due to dependency, and not self-sufficiency. If you doubt this, just take a minute and think of how long you’d last if you were reduced to a subsistence lifestyle in which you had to grow your own food, weave your own clothes, and build your own house. This was the reality for people all over the world for millennia, and crushing poverty was the result.

The division of labor enabled people to specialize in those things that they did best. If you had a green thumb but were a lousy hunter, you could focus on growing crops and then barter with a skilled hunter for meat. That’s how people slowly improved their standard of living – by following the concept of comparative advantage, which states that we’re better off focusing on the things we do best and then trading for the things that other people produce more efficiently.

In the case of oil production, the reality is that the United States doesn’t do it very well relative to various other countries. I would suggest that one reason for this is the tremendous regulatory barriers we’ve erected in this country to inhibit refining capacity and other energy sources. These regulatory barriers should be eliminated, of course, but as long as they do exist, we are far better off buying our oil on the open market, rather than trying to supply it ourselves.

Take the Brazilian market, for example. The Brazilians are very proud of the fact that they do not import any oil, but are able to supply their needs with domestic sources. However, they still pay over $4 per gallon of gasoline. Why? Because Brazil is not very efficient at oil production. Their domestic sources are in deep-ocean shelves, which are expensive to extract. As a result, they pay more for their domestically-produced oil and gas than we do buying from OPEC. This is what happens when you pursue a concerted policy of self-sufficiency and deny yourself the benefits of division of labor.

Although I believe that there are tremendous opportunities for the development of new energy sources by the private sector, I am against any government attempts manage energy consumption in this country. If the government has to subsidize something, you know it’s a loser by the very fact that it’s being subsidized. After all, if it’s such a great idea, the market will pursue it naturally. So even tough I’m tapped out every time I tank up, the last thing I want is “help” from the government in the form of windfall taxes on oil companies, new taxpayer-funded gadgets, or other forms of market interference. The only real, tangible help the government can provide is cutting taxes and reducing the regulatory obstacles that prevent the market from increasing the supply of energy to meet the demand.

Another popular rationalization for energy independence is national security. The idea is we have to somehow “stabilize” the Middle East to ensure that the oil wells keep pumping. This has been used as an excuse to involve ourselves in the domestic politics of that region, and has made the United States a hated enemy instead of a valued customer. Our national security is threatened by this type of interventionism, not enhanced by it.

Energy independence is necessary only as long as you maintain an interventionist foreign policy. A policy of non-interference leaves us free to buy our energy securely at the lowest possible cost from the most efficient producers, no matter where they might live. It also ensures that there is no motivation for a supplier to “cut us off” for economically irrational reasons stemming from political conflicts. In the free market, the incentive is always to keep your customers happy, so that the income they provide continues to flow to you. The profit motive provides the most reliable form of national security, not economically backward policies imposed by Washington that threaten peaceful commercial relationships between oil producers and oil consumers.

Ideas Matter

So what’s the point of getting all worked up over things like smoking bans, the American buffalo, and Morgan Spurlock? Taken one by one, these seem to be pretty insignificant stories. The reason for taking these things seriously is that ideas matter. Eroding freedoms, government controls, and violations of property rights harm people in very real ways.

The reality is that most people do not think critically or delve deeply into the rationale underlying various issues. They merely take the “expert” opinion as a given, and form their political ideas from there. Most of the time we do not hear ideas directly from the horse’s mouth – and we certainly don’t come up with them ourselves. Instead, they come to us in filtered form through the so-called “intellectuals” in the media or the universities. Hayek referred to these people as “second-hand dealers in ideas” in his article, The Intellectuals and Socialism:

“In all democratic countries, in the United States even more than elsewhere, a strong belief prevails that the influence of the intellectuals on politics is negligible. This is no doubt true of the power of intellectuals to make their peculiar opinions of the moment influence decisions, of the extent to which they can sway the popular vote on questions on which they differ from the current views of the masses. Yet over somewhat longer periods they have probably never exercised so great an influence as they do today in those countries. This power they wield by shaping public opinion.”

This is why it is important to develop a solid understanding of certain key areas that affect our lives, such as political theory and economics. A solid theoretical and philosophical foundation can help us avoid being swept away by range of the moment issues.

As an example, take the way in which inflation is usually reported by the media. Typically, a journalist for a financial magazine will report something along the lines of, “Despite the Venezuelan government’s price controls, inflation continues to soar.” Most people will read this and accept it uncritically. But anyone with a basic understanding of economics will instantly reject this as nonsense because, as Milton Friedman put it, “inflation is always and everywhere a monetary phenomenon.” That is, inflation is caused by the government increasing the money supply. It does not occur naturally, and it is not tamed by the government slapping price controls on consumer goods.

These are small examples, of course, but when taken as a whole they add up to shape the dominant opinions and ideas within a society. If the ideas that are communicated every day through countless sources are inherently faulty, then people will naturally follow counterproductive or even dangerous courses of action. The 20th century should have provided ample evidence of this simple fact. People espousing bad ideas can lead mankind to very bad places.

Contrast the 19th century to the 20th. Enlightenment ideas of rationality really began to take hold by the late 19th century. Capitalism was an outcome of this new intellectual awakening, replacing the mercantilism and feudalism that had preceded it. Slavery was abolished throughout the western world for the first time in recorded history. England followed a predominately laissez-faire economic system and as a result Europe was at peace for one hundred years – a feat never before accomplished in the history of that continent. And the standard of living for all classes rose more in a century than it had in the previous two millennia.

Not satisfied with these successes, however, German philosophers began to espouse central planning as a way to out-produce capitalism and replace the seeming anarchy of the free market with “rational” order. It is not surprising that central planning should be popular among governments, since it requires a growing, active state apparatus to implement the necessary plans and controls. This leads to greater influence, power, and money within the bureaucracy.

These ideas, of course, found their most fertile ground in Germany and Russia. World War I broke out soon after, ending the peace that Europe had enjoyed over the previous century, and putting an end to the laissez-faire capitalism that both required and reinforced that peace. In a very real sense, socialism was responsible for ushering in the bloodiest century the world has ever known.

This same ideology took hold in the “free world” as well. A penchant for central planning and a desire to spread American democracy to the world led Woodrow Wilson to abandon the traditional American foreign policy of noninterventionism and plunge the US into what had been the purely European conflict of World War I. The punishing Versailles treaty set the stage for the rise of Adolf Hitler and another world-wide conflagration twenty years later.

It is important to note that the totalitarian governments that arose in Nazi Germany, Fascist Italy, and the Soviet Union were in no way opposites. They were different strains of the same socialist ideas, and they caused the deaths of tens of millions of citizens who suffered under those regimes, to say nothing of the millions who died in the battles and concentration camps.

In the US, FDR continued to push for greater centralization and government power. Whether he was self-consciously socialist or merely an unprincipled idiot is a question for another day. But his disastrous New Deal economic policies were modeled explicitly on Mussolini’s fascist system, and they prolonged the Great Depression until well after the end of World War II. Roosevelt often spoke admiringly of his good friend “Uncle Joe” Stalin – a man who murdered far more people than even Hitler. Many of FDR’s programs are still with us today.

How much more prosperous would we be today if we had stuck to the Founders’ principles of free markets, limited government, and peace? How many lives would have been spared? How many new ideas would have come into being without stifling government regulations to quash them? How much safer would we Americans be today had we not taken on the mantle of world policeman?

Ideas matter.

Buffalo Hunted to Near-Extinction Due to Lack of Government Regulation?

American Buffalo Slaughter Fueled by International Trade
New paper argues European demand for bison leather was the culprit for near-extinction on the Great Plains

While the 19th century is surely one of the most inspirational periods in American history, it also bears witness to a less flattering record with regard to the environment: most significantly, the slaughter of the plains bison, or buffalo. In a working paper for the National Bureau of Economic Research, University of Calgary environmental economist M. Scott Taylor argues that the story of the buffalo slaughter on the Great Plains is not, at bottom, an American one. Instead, Taylor argues that the slaughter of some 30 million bison over the course of a decade was initiated by a tanning innovation created in Europe, and maintained by a robust European demand for buffalo hides for use as industrial leather. Taylor used international trade records and first-person accounts of the hunt to show that that the widespread slaughter of bison between 1870 and 1880 was the result of a market for industrial leather that was virtually unregulated by the U.S. government as the country emerged from the Civil War.

Is this all it takes to be considered an economist these days? This guy's argument is that a valuable economic resource was almost obliterated because the Fish and Wildlife Commission wasn't around to stop it? Has the tragedy of the commons been completely eliminated from economic textbooks?

Certainly, the discovery of new processes and products can lead to increased demand for the inputs to those products. Ceteris paribus, this increased demand will tend to drive up prices. But it does not follow that increased value leads to the destruction of the resource in a free market. Quite the opposite, in fact.

If you own a valuable resource, the incentive is to maintain that resource, not destroy it. As Walter Block explained, this is why ranchers do not typically take out an Uzi and start machine-gunning their entire herd of cattle. It is only when there is no ownership of a resource that there exist incentives to take as much as you can before someone else does, which is what happened with the buffalo. No one in the west owned the buffalo, so the only rational thing to do was take as many hides as you could as quickly as you could.

The same thing happens in the timber industry. The unsustainable logging that we hear so much about only occurs when the timber companies don't own the forest. This usually happens in the western United States, where timberland is owned by the government and leased to timber companies for a finite period of time. Under these circumstances, there is no incentive for the company to invest in maintaining the resource.

Contrast this with the timberland east of the Mississippi river, which is primarily private land owned by logging companies. They have the economic incentive to harvest trees in a sustainable manner. Clear-cutting makes no sense in this situation.

This is one of the primary benefits of capitalism - it aligns incentives with proper actions far better than any government central plan. If you doubt the veracity of the tragedy of the commons, ask yourself why the cow has never been threatened with extinction, while the buffalo were cut down to less than 100.

I can't believe someone paid this guy...with taxpayer money, no less!