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Friday, July 31, 2009

"Cash for Clunkers" Can Not Benefit the Economy

What's the theory behind "cash for clunkers"? Of course, the same flawed economic logic that is behind every government debacle.

Allegedly, the government will steal $4,500 from taxpayers and give it to a person in exchange for their car, which is a piece of crap or "clunker".

After that transaction, the taxpayers will have $4,500 less to save or spend thus depriving a business somewhere of vitally needed investment capital or depriving another business from obtaining revenue from the purchase that will never take place.

Meanwhile, the person with the clunker will obtain $4,500 which they did not earn in order to buy a new car.

So, in summary, taxpayers who earned the money and businesses that are deprived of productive capital and revenue will transfer wealth to car makers, auto dealers, and the guy with a crappy car.

Can someone please explain how this will benefit the economy?

If it were logically possible for this idea to work - why wouldn't the government simply buy our garbage? Under this program, "Cash for Garbage", before you throw a wrapper or dirty diaper away, you could bring it to the Ministry of Cash, and they would exchange the garbage for cash.

I better be quiet - Obama might be reading...

Wednesday, July 29, 2009

The Modern Intellectual's Virtue of Complexity, Part I

After my post, Say Cheese, in which I discussed the effect of pragmatism on modern politicians, there were many great comments including the observation that in the physical sciences, "simplicity" is regarded as a value whereas in the social sciences, the term "simplistic" is used pejoratively and is taken to be synonymous with naivete. In other words, to the modern intellectual, "complexity" is a virtue, or as Galileo Blogs put it, in the social sciences, there appears to be "a worship of complexity." For example, he asks: "Why is it when I describe the absolute properties of water, everyone nods in agreement, but when I explain the absolutism of capitalism, people think I am naive, simplistic, dogmatic, or even cultish?"

This can clearly be seen in the context of the health care debate. The proposed bill is a 1,200 page monstrosity attempting to control and regulate virtually every aspect of the health care system. What if I were to argue that the problem is actually "simple" - if one were to think in principle ? Since health care is a service like any other, if a free market were restored, the health care market would flourish, costs would be reduced, quality would improve, and the result would be the most possible happiness for the most people as is always the case in a free market. I could make this argument with certainty, because the present health care market is but one instance of a more general problem in economics. The ability to think in principle allows one to apply this generalization to any of an infinite number of concretes. Of course, modern intellectuals would immediately accuse me of "oversimplifying" the problem. Surely, they would say, such a complex problem could not possibly be so simple. Surely, they would say, health care is not like repairing automobiles, mowing lawns, or painting a house. But, why?

The essential reason why social scientists regard complexity as a virtue is that they reject the human method of cognition, i.e, reason, whereas physical scientists regard simplicity as a virtue, because they tend to embrace reason.

Imagine that you see a metal looking box with four wheels rolling down a street. Then you see another metal looking box, but it is a different color. Then you see another one, but it is a slightly different shape because it is more round. Then you see one that has only two doors, whereas another has four doors. At some point, a human being can abstract the concept of "car" by retaining the essential distinguishing characteristic (a 4-wheeled vehicle propelled by an engine) and omitting the particular measurements like color, size, number of doors, etc. In a similar fashion, one can develop more complex concepts and abstractions. Note that such a process dramatically simplifies the problem, since all we have to do is retain the concept of car, which can be applied to an almost infinite number of concretes.

Thinking in principle is necessarily a process of simplification. Quoting Ayn Rand:

A concept is a mental integration of two or more units which are isolated by a process of abstraction and united by a specific definition. By organizing his perceptual material into concepts, and his concepts into wider and still wider concepts, man is able to grasp and retain, to identify and integrate an unlimited amount of knowledge, a knowledge extending beyond the immediate concretes of any given, immediate moment.

Again, quoting Ayn Rand:

A principle is “a fundamental, primary, or general truth, on which other truths depend.” Thus a principle is an abstraction which subsumes a great number of concretes.

Modern intellectuals, who reject reason as an absolute, are reduced to the level of an animal who sees the world of cars in terms of: "blue metal box", "black metal box with two doors", "rounder gray box with four doors and a big trunk", "squarer red box with two doors and a smaller engine", etc. To them, the field of human action appears as a random array of concretes with no possible unifying elements. Whereas the principled thinker grasps that a service on a free market is a generalization that can be understood in the context of the laws of supply and demand, the modern intellectual sees health care, vet care, barber, car repair, carpet cleaner, education, roads, cable TV, dog groomer, fast food, etc. as distinct concretes with no integrating attribute.

Rather than regarding the distinctive human faculty of reason as a virtue, which allows for the incredible integration of an infinite number of concretes into simpler concepts and principles, modern intellectuals regard the cognitive level of an animal to be a sign of maturity and sophistication.

This philosophy has profound implications for every intellectual discipline. I ran across an essay in The Spectator, by Paul Johnson, that discussed this issue. Related to the postmodern approach to history, Johnson notes:

"The same process has been taking place in the study of history. It is by its nature a simple subject. You begin by reading good secondary authorities, like Gibbon, Macaulay and Trevelyan, then proceed to the contemporary authorities, chroniclers like Bede, the Anglo-Saxon Chronicle, Matthew Paris and so on, then dig further, into the objective records, charters, exchequer pipe-rolls, court cases. You also use physical, as opposed to written, evidence: coins, archaeological findings, weapons etc. Postmodernism rejects this simple approach as falsification. It has been well summed up by Gertrude Himmelfarb: ‘Postmodernism is a denial of the fixity of the past, of the reality of the past apart from what the historian chooses to make of it, and thus of any objective truth about the past... Postmodernist history recognises no reality principle, only the pleasure principle — history at the pleasure of the historian.’ One of these complexity-makers, Keith Jenkins, who has edited The Postmodern History Reader (1997), insists: ‘We can never really know the past... the gap between the past and history... is such that no epistemological effort can bridge it.’ For an overview of the way in which underemployed academia has converted the positive simplicity of history into the destructive complexities of postmodernism, I recommend the essay by Ian Mortimer, ‘What isn’t History?’, in the issue of History for October 2008." [emphases mine]

Note that such an approach to history - an approach which emphasizes that one "can never really know the past", i.e., that one can never really know history - is a total dead end. Refusing to "know the past" reduces the historian to the level of a dog who does not "know the past" and thus, reacts with vigorous excitement each time his owner returns, as if the dog is thinking: "it happened again!!". Similarly, is it any surprise that modern academics appear to have learned nothing from the past as it relates to government intervention into the economy or appeasement in foreign policy. When modern economists refer to the recent crisis as "unprecedented", they literally mean it. To the post-modern historian, apparently, everything is literally unprecedented.

Although Johnson disputes this so-called "worship of complexity" on the part of modern intellectuals, he is led to an illogical conclusion - the advocacy of creationism. In fact, the author advocates a false alternative, and it is this false alternative which highlights the essential philosophical problem. Quoting Johnson:

What is simplicity? And is it desirable, on principle? A good question. My recent essay on the origins of the universe, arguing that the simple explanation, its creation by an omni-potent God, is more plausible than its sudden emergence as a result of infinitely complex (and disputed) events, angered some readers. They took the view that only the simple-minded see virtue in simplicity, and that a love of complexity is the mark of intellectual maturity.

While he is right that simplicity is a value, he conflates the concept of "simplicity" with the arbitrary. A "simple" explanation is one that explains a number of concretes in terms of provable causes, i.e., causes that can be demonstrated ostensibly. Johnson takes "simple" to mean some form of magic as in: "this must have happened due to simple magical factors that I can not prove". In so doing, he accepts the false alternative between religion and subjectivism, which I elaborated upon in a previous post:

To the modern philosopher (or left wing intellectual), everything is subjective, there are no black and whites, i.e. nothing can be proved. Such a doctrine results in the rejection of any objective standards and therefore gives rise to ethical relativism, multiculturalism, etc. This doctrine also gives rise to the false alternative between religion and subjectivism. In other words, if the world is unknowable and secular arguments unprovable, then a man who seeks certainty in any field has only one alternative - belief in the absence of evidence, i.e., faith or religion. Consequently, the modern philosopher equates a principled approach to ideas with religious faith and dismisses it as dogmatic or simplistic and smears its adherents as "fetishists" or "cultists". Therefore, to any group who takes reason, logic, and principles seriously, the writer is led to ask: "How can we take these people seriously?".

The alternative to the false alternative of subjectivism versus religion is a philosophy of reason, i.e., a philosophy that identifies, validates and employs the faculty which integrates percepts into concepts.

So, if complexity is a virtue in the social sciences, why is "simplicity" regarded as a virtue in the physical sciences? The physical sciences still employ the scientific method and, therefore, tend to value thinking in principle (although, physical scientists have also been suffering the effects of bad philosophy, e.g., see modern physics and climate science). As can be seen from the automobile example, logically, one who thinks in principle, or one who seeks more general truths to explain a wider range of concretes, regards ever more simplicity as a virtue rather than as a sign of naivete. In other words, "simplicity" is really just a synonym for "generality", and such a process of continual simplification is the essence of science and of knowledge as demonstrated by Newton's Theory of Gravitation, Maxwell's Laws, Darwin's Evolution, or the Atomic Theory. I submit the entire history of scientific progress as against the "achievements" of the social sciences as evidence of which approach is correct.

Since physical scientists deal with naturally caused phenomena, it is relatively more difficult for them to get away with theories that conflict with reality. For example, if one pushes a block and it moves, it is relatively easy to grasp the causal relationship. Since social scientists deal with human interactions, volition or free will is involved, and given a set of circumstances, human beings can choose to act in any number of ways. This makes generalizing about cause and effect more difficult and implies the need for a differing context than the physical sciences. For example, it appears that some social scientists today treat humans as if they were determined and others accept free will but take it to imply randomness or irrationality. This is a false alternative. Humans possess free will and are fallible, but they are not random either. Understanding human rationality also entails understanding that humans can err. This means we can make generalizations about human behavior, but we can not treat them as molecules or planets either.

I think this at least partially accounts for why the modern philosophical assault on reason has had less of an effect on the physical sciences than on the humanities. However, in any field, one who rejects the possibility of generalization will equate simplicity with naivete, whereas, one who upholds reason will properly regard "simplicity" as a badge of the highest honor.

In Part II, I will examine the philosophical causes and further implications of the anti-conceptual approach to the social sciences.

Monday, July 27, 2009

How Many People Are Actually "Uninsured"?

How many times have you heard the line about how "45 million Americans are uninsured..." as an argument supporting socialized medicine? Although, I believe the status quo is a form of socialized medicine and needs to be completely dismantled and replaced with a free market in medicine, the status quo is still a notch better than Obama's planned government nightmare. This article breaks down this "45 million" statistic and demonstrates that, in reality, only about 10 million Americans (out of a population of 300 million) are actually uninsured.

Sunday, July 26, 2009

Science, Not the Earth, Bears Scars of Human Destruction

Wasn’t there a time when astronauts were actually scientists? Don’t scientists rely on the scientific method?:

Scientific method refers to a body of techniques for investigating phenomena, acquiring new knowledge, or correcting and integrating previous knowledge. To be termed scientific, a method of inquiry must be based on gathering observable, empirical and measurable evidence subject to specific principles of reasoning. A scientific method consists of the collection of data through observation and experimentation, and the formulation and testing of hypotheses.
When I saw the headline, "Astronaut: Earth's Changed", it certainly caught my attention. Then I read the article and almost fell over when I read this passage related to statements made by Canadian astronaut, Bob Thirsk:

"It's a very thin veil of atmosphere around the Earth that keeps us alive," Thirsk said during an in-flight news conference. "Most of the time when I look out the window I'm in awe. But there are some effects of the human destruction of the Earth as well."

"This is probably just a perception, but I just have the feeling that the glaciers are melting, the snow capping the mountains is less than it was 12 years ago when I saw it last time," Thrisk said. "That saddens me a little bit."
Evidently, we are now at the point, where supposed scientists, can convey their "feelings" regarding a purely scientific question, and it gets reported, uncontroversially, as if it is newsworthy.

Anyone concerned with science and objectivity should be more than saddened "a little bit". They should be outraged.

Saturday, July 25, 2009

Stimulus Riddle, Can You Solve It?

In a comment after my post, Obama: Please Try This At Home, Taylor O. offers the following parable, which evidently is going around the internet. I provide my answer below, so if you want to think about it yourself, stop at the "spoiler alert" line before going on.

Taylor O. says:

I'm playing devil's advocate here so don't shoot the messenger; the stimulus e-mail going around goes as follows

"A Stimulus Story"

It is the month of June, on the shores of the Black Sea, it is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.

The Butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.

The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute that in these hard times, gave her services on credit.

The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything. At that moment, the rich tourist comes down after inspecting the rooms, andtakes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.

And that, ladies and gentlemen, is how the United States Government is doing business today.


None of these people were in debt. They all provided a value to one another. They could have used the IOU as money which they effectively did. In turn, each one provided a service or a good in exchange for the other's service and all debts were actually settled. To see this, consider the following:

The supplier worked to produce fuel and supplies. He traded these supplies to the pig grower who gave him an IOU.

But, the supplier used that IOU to pay the hooker. Now the pig grower "owes" the hooker.

The hooker used the IOU to pay the hotel. The pig grower now owes the hotel.

The hotel used the IOU to pay the butcher. The pig grower now owes the butcher.

The pig grower gives the butcher a ham, and all debts are settled.

The hotel proprietor didn't need to steal the 100 euros from the tourist and then give it back. Effectively, nothing happened with respect to the tourist.

With stimulus, the government seizes money from someone and gives it to someone else. Similarly, this is at best a zero sum game, albeit profoundly immoral. In practice, it is less than a zero sum game since the government will spend the money on things no one wants and will impair capital formation to the extent that the money would have been invested in something productive rather than consumed.

This parable has nothing to do with actual stimulus since each person freely and voluntarily exchanged a good or service. The evil was stealing the tourists money without his consent although he ultimately was paid back.

To actually equate the parable to stimulus, an additional plot should have been created where the town police seize the tourists 100 euros and spend it on a turtle tunnel (true story) or a box of dirt, and then never return the money to the tourist. The police (or Paul Krugman) then goes on Keith Olbermann and declares that he will be better off in the long run since the theft will "improve" the economy.

Thursday, July 23, 2009

Wishing for Non-A, The Sequel

If someone walked into a restaurant and demanded that the chef cook him a meal for free, he would be summarily dismissed. If someone walked into an auto repair shop and demanded that a car mechanic fix his car for free, he would be summarily dismissed. Perhaps even worse than demanding the service for free, imagine what would happen if you one were to walk to his neighbor's house and demand that the neighbor pay for his meal or his car repair. What if he told his neighbor, to his face, that he had a right to the meal and the car repair, and he threatened him with violence if he refused to fund his so-called "needs"? What would be the likely response?

If you think this is ridiculous, what is the difference between these scenarios and what proponents of government medicine are advocating? Do they not advocate the extortion of money from others to pay their medical bills? The only difference is that instead of directly threatening their neighbors with violence, if they do not comply, these people follow a more cowardly path. They advocate using the police power of the state to extort their victims.

Of course, such extortion, which entails the wholesale abrogation of rights - both the rights of the doctors and those who are forced to pay or comply with state regulations, relies on the justification provided by the moral theory of altruism. In other words, if someone is sick somewhere and in need, altruism holds that it is the height of moral virtue to sacrifice oneself for his benefit. This is precisely why proponents of socialized medicine, despite their advocacy of violence and force against doctors and taxpayers, are actually deemed to be "well intentioned". The idea that self-interest is evil and that sacrifice is moral results in the support of egalitarianism, which is the idea that individuals should receive equal outcomes regardless of their own character or effort. It is precisely this doctrine that Obama and his ilk seek to foist upon Americans.

Many on the right seem bewildered that Obama and his supporters would implement a plan that will only exacerbate the problems caused by government intervention in the first place - problems, known with certainty, to cause higher costs, waiting lines, bureaucratic nightmares, and the reduced quality of care. What they fail to realize is that Obama's goal is not the vitality, growth, and abundance that would result from a free market in medicine. That is because a free market in medicine, despite the fact that it would result in the best outcome for all and be consistent with individual rights, would result in unequal outcomes. Obama's goal is egalitarianism, i.e., he wants everyone to be equally miserable, and when he says he wants to do "what works", it should not be assumed that his criteria for "what works" is the same as a rational person's.


In a post from April 2007, I discussed the moral premises underlying socialized medicine. As I thought this post was apropos, I am reprinting it below after a few additions and some minor editing.

April, 2007

In a previous post, I discussed the health care crisis in moral and economic terms showing how egoism and freedom are the fundamental solution to the disaster caused by government intervention in medicine. In another post, I discussed the relationship of environmentalism, (today's primary pagan religion) to modern organized religion and compared them to the pagans and Christians of Ancient Rome. These issues are related in a fundamental way.

First, its important to reiterate the essential difference between free market medicine and socialized medicine which in principle is the essential issue underlying all economic debates between capitalism and socialism:

Those that support socialized medicine must logically support state sanctioned violence against doctors and patients.

This is absolutely true by virtue of the fact that the state must, by threat of physical force (jail, execution, etc.), compel one person to pay for another person's medical care and/or compel a doctor to work against his will. In essence, proponents of socialized medicine exhort the state to steal money on their behalf from others in order to pay their own bills. In addition, they demand that doctors live their life in service to their needs by either compelling their service through force and/or by not offering fair value in exchange for the doctor's services.

Under laissez-faire capitalism, physical force is banned from being initiated by individuals or the state except in retaliation against those who initiates its use. Doctors and patients choose to deal with each other on terms deemed to be mutually beneficial and either party is free not to participate, i.e., a doctor may choose not to trade his services to a patient, and a patient may choose not to see the doctor.

To further abstract, historically and logically what justifies the initiation of force against some for the unearned benefit of others (force which is necessitated by socialized medicine)? What ethical theory holds that self-sacrifice and self-abnegation is the "good" and that self-interest is evil? Of course, the answer is our old nemesis: altruism. In today's culture, it is the widespread acceptance of altruism as the good which justifies government intrusion into medicine, despite the fact that such intrusion causes only chaos and misery. Furthermore, it is the dominance of religion and the utter bankruptcy of modern secular philosophy which perpetuates acceptance of altruism without challenge.

It is the theory of altruism as the good that needs to be challenged at its root if the wonders of modern medical science and the miraculous work of the American medical profession are to be saved.

This issue is the essence of the debate - not minutia over insurance regulations or medicare premiums. There is no free lunch. There is no magic government program that will somehow make medical care and prescription medication fall from the trees. There is no way to circumvent reality. If one wants something from someone else, he must offer a value in exchange or ask the other party for charity. Capitalism is a system based on the recognition of individual rights including the right to own property, and protects the producer of a value from violence and extortion. In this way, capitalism is a system of justice.

Socialism, on the other hand, is a system of profound injustice. Under socialism, either doctors must be made to work against their will or others must be made to pay the doctor on behalf of someone else. If the government runs its own hospitals then it must acquire the hospital by expropriating it by force from a private owner or by compelling funding from the public to pay for its construction. Similarly, either pharmaceutical companies must function as government agencies or someone must pay them for someone else's prescription. Reality also dictates that the best and brightest will leave the field of medicine rather than become serfs akin to postal workers in a vast government bureaucracy. This well known "brain drain" to other fields will only compound the "crisis" by reducing the supply of medical professionals.

What do those that clamor for government medicine think is going to happen? Will they pass a law to compel reality into making medicine free and doctors happy to be slaves? At least those that do support socialized medicine must be forced to admit that this is their position and be made to morally defend the states' initiation of violence against doctors and patients. It is not a coincidence that over the last 100 years, socialism has only led only to violence, chaos, misery, and stagnation. It is not simply that it has been practiced by the wrong group of experts or somehow been corrupted. State violence is essential to socialism. How else does the state wrest control of private property or subsidize some at the expense of others?

In Capitalism: A Treatise On Economics (simply the best economics book ever), Dr. George Reisman eloquently, methodically and thoroughly shows how socialism leads to chaos and tyranny which I can only quote partially here (see www.capitalism.net for a pdf copy of the book or to order it):

"Socialism produces the same chaotic effects as price controls , because it destroys the same thing as price controls, namely, the one and only source of economic order and harmony in the world: private property rights and the profit motive...

""The essential fact to grasp about socialism, which explains why it is essentially identical to price controls , is that it is simply an act of destruction. Like price controls, it destroys private ownership and the profit motive, and that is essentially all it does. It has nothing to put in their place. Socialism in other words, is not actually an alternative economic system to private ownership of the means of production. It is merely a negation of the system based on private ownership..."

"The chaos of Socialism is equalled only by the tyranny of socialism. In abolishing economic freedom, socialism abolishes political freedom, In abolishing property rights, it abolishes civil rights. In a word, socialism means the establishment of a totalitarian dictatorship..."

"In every instance in which socialism has actually been enacted, as ,for example, in Nazi Germany, Soviet Russia, Communist China, Communist Cuba, and all the other communist- bloc countries, its totalitarianism has been manifest. It is only necessary to show why the violent, bloody means that have been employed to achieve socialism and the perpetual reign of terror that follows thereafter , are no accident, but are caused by the very nature of socialism; why in other words, socialism is a thoroughly evil end, necessitating evil means for its achievement, and necessarily producing the most evil consequences."
So, what is the relationship between environmentalism, Christianity, the fall of Ancient Rome, and the health care crisis?

There is an ingenious passage from Atlas Shrugged (by Ayn Rand, 1957, p. 960-961) which ties these issues together by abstracting and reducing these arguments to philosophic essentials:

“What is the nature of that superior world to which they sacrifice the world that exists? The mystics of spirit curse matter, the mystics of muscle curse profit. The first wish men to profit by renouncing the earth, the second wish men to inherit the earth by renouncing all profit. Their non-material, non-profit worlds are realms where rivers run with milk and coffee, where wine spurts from rocks at their command, where pastry drops on them from clouds at the price of opening their mouth. On this material, profit-chasing earth, an enormous investment of virtue –of intelligence, integrity, energy, skill-is required to construct a railroad to carry them the distance of one mile; in their non-material, non-profit world, they travel from planet to planet at the cost of a wish. If an honest person asks them: ‘How?’ They answer with righteous scorn that a ‘how’ is the concept of vulgar realists; the concept of superior spirits is ‘Somehow.’ On this earth, restricted by matter and profit, rewards are achieved by thought; in a world set free of such restrictions, rewards are achieved by wishing.

“And that is the whole of their shabby secret. The secret of all their esoteric philosophies, of all their dialectics and super-senses, of their evasive eyes and snarling words, the secret for which they destroy civilization, language, industries, and lives, the secret for which they pierce their own eyes and eardrums, grind out their senses, blank out their minds, the purpose for which they dissolve the absolutes of reason, logic, matter, existence, reality – is to erect upon that plastic fog a singly holy absolute: their Wish.

“The restriction they seek to escape is the law of identity. The freedom they seek is freedom from the fact that an A will remain an A, no matter what their tears or tantrums -that a river will not bring them milk no matter what their hunger - that water will not run uphill, no matter what comforts they could gain if it did, and if they want to lift it to the roof of a skyscraper, they must do it by a process of thought and labor, in which the nature of an inch of pipe line counts, but their feelings do not - that their feelings are
impotent to alter the course of a single speck of dust in space or the nature of any action they have committed.
When I read that passage for the first time, I recognized that it was a profound statement but did not entirely understand it. The notion that all of the evil in the world was at root a desire for the world to be not what it is (or in her words that A be Non-A) is an idea so profound that it is hard to believe. Could all of the evil throughout history done by man from war to slavery to torture to every imaginable oppression of every kind really come down simply to “their wish” for things to not be as they are?

It took me years to fully appreciate and integrate the meaning of this idea and to learn why it is true. Yet, here is another example. Those that seek socialized medicine wish that reality was not what it is. They wish that medical care could be free. They wish that every time they are hurt they simply show up to a magic building with gadgets and medicines that arrived there somehow and someone cures them simply because they want it. They wish that somehow, if enough smart politicians get together with only the desire to form a "consensus" (as Obama might say) they could craft a program that this time will "work." How? Somehow.

The relationship of this issue to religion must by now be obvious both epistemologically and ethically. The men wishing "to profit by renouncing the earth" or "mystics of spirit" are the religionists demanding sacrifice of our lives to god. The men wishing "to inherit the earth by renouncing all profit" ("mystics of muscle") are both the pagan environmentalists demanding that we stop producing as a sacrifice for the earth and their socialist colleagues demanding "universal" health coverage which involves the sacrifice of the doctors or their neighbors to those allegedly in need.

In a previous post, I asked if there was a rational solution to the false alternative offered by the "Mystics of Spirit" and the "Mystics of Muscle". The answer to this false alternative is a philosophy of reason, individualism, and freedom.

And, to those dreaming of heaven, a kingdom of God in the afterlife, water turning to wine, life without reason, production without freedom, production without utilization of the earth's resources, Gardens of Eden (at the perfect temperature), medicine without science, medicine without doctors who wish to be paid, pharmaceutical companies that don't work for profit, insurance companies that pay out more than they take in...keep wishing.

Coulter: "Thanks, Government!"

Fun piece from Ann Coulter. Not much new but really well written:
All the problems with the American health care system come from government intervention, so naturally the Democrats' idea for fixing it is more government intervention. This is like trying to sober up by having another drink.

The reason seeing a doctor is already more like going to the DMV, and less like going to the Apple "Genius Bar," is that the government decided health care was too important to be left to the free market. Yes -- the same free market that has produced such a cornucopia of inexpensive goods and services that, today, even poor people have cell phones and flat-screen TVs.

As a result, it's easier to get your computer fixed than your health. Thanks, government!...
And this:
Isn't food important? Why not "universal food coverage"? If politicians and employers had guaranteed us "free" food 50 years ago, today Democrats would be wailing about the "food crisis" in America, and you'd be on the phone with your food care provider arguing about whether or not a Reuben sandwich with fries was covered under your plan.
She undercuts her thesis by even casually advocating health stamps for the very poor but a fun read.

Wednesday, July 22, 2009

How to Stop Socialized Medicine Without Doing Anything

I greatly enjoyed the essay in The Objective Standard titled Moral Health Care vs. Universal Health Care by Lin Zinser and Dr. Paul Hsieh (see their excellent website FIRM which stands for Freedom and Individual Rights in Medicine). This piece details the history of government intervention in health care and clearly shows how it is government, not the free market, which is to blame for the state of health care today. If you truly want to understand the causes of the problem, read this essay. (In 2007, back when I was the only one who read my blog besides my mom, I blogged about the economic and moral issues underlying socialized medicine here and here. In the first link, I go into some detail on the economic causes of the health care crisis. In the second link, I philosophically relate environmentalism, religion, and socialized medicine.)

In particular, their essay details how the government provides incentives to business to purchase health care benefits on behalf of their employees rather than pay them cash wages. Because health care benefits, mainly in the form of comprehensive insurance policies, are tax deductible to the employee and the employer, while wages are taxable to the employee and employer, employers and employees prefer to be paid in benefits rather than cash. Employees, rather than purchasing a catastrophic policy in a similar fashion to how car insurance is purchased, instead are given comprehensive policies that greatly and artificially increase the demand for service. This artificial increase in demand results in exploding prices, pressure on payments from insurance companies, followed by more government demands for more comprehensive coverage, higher costs, repeat ad infinitum. Such distortions, along with government mandates and restrictions on the insurance companies, have resulted in a form of de facto socialized medicine.

One could see this point very simply by imagining that employers suddenly begin providing "car care" benefits. Such policies would effectively give employees a blank check on car maintenance. Rather than fixing their car when it was necessary, car owners would flood auto repair shops with every possible problem from small dings and scratches to more serious problems. Naturally, auto repair shops would begin increasing prices as well as offer more elaborate services as long as they could deem them to be "necessary" and as long as the government forced the insurance companies to provide the coverage. The government might even mandate that car owners be covered for "pre-existing conditions" which would radically drive up costs as owners of broken down cars or cars that were advancing in miles figured out how to game the system. As the government mandated that more problems be covered, prices would increase further. I don't think I have to extend the analogy further...

Such knowledge points the way toward an effective, albeit partial, solution. The government should stop providing incentives or forcing employers to purchase health insurance on behalf of their employees. If individuals were not provided these policies, they would purchase catastrophic policies and pay for routine services in the same way that individuals pay for an oil change out of their pocket but retain collision insurance policies if something major occurs. Of course, this is not all. There are myriad ways in which government policies distort and destroy the private market for health care and health insurance which this essay details.

Note that, rather than rationalizing the marketplace for health care by removing artificial demand created by the government and restoring economic freedom to the health care market, Obama's "plan" actually will exacerbate the problem by forcing everyone to purchase comprehensive insurance policies or by providing policies through a government sponsored program. Such an approach is equivalent to throwing gasoline on a fire (an approach which I discussed in more philosophical detail in
this past post.)

Given the political reality that the government seems intent on intervening in the health care market even more dramatically by, for example, offering "competing" public insurance plans or mandating that individuals purchase some form of coverage, I propose an even simpler way to fight socialized medicine without doing anything: doctors should simply refuse to contract with insurance companies or the government. In other words, doctors should do nothing until they get paid their asking price.

Some doctors are already doing this by
going "private", i.e., by setting up practices, often known as concierge practices, that do not accept insurance or medicare. In other cases, some major medical groups are dropping insurance carriers. The doctors are the last line of defense against socialized medicine. They could stop it tomorrow, if they chose to do so. I applaud efforts being made by groups, such as FIRM, that attempt to educate policy makers on the causes of the crisis, and I further advocate that we attempt to focus on educating the doctors, who could put an end to this nonsense very quickly if they were to shrug.

Thursday, July 16, 2009

Obama: Please Try This at Home

If you want to understand why “stimulus” programs do not work in the sense of generating economic growth, try the following experiment at home or at your place of business.

Go up to someone and hand them $20 and tell them that by giving them this money, you intend to “stimulate” the local economy. Observe what happens. The recipient now has $20 to spend or do whatever. However, note that you have $20 less to spend. Therefore, there will be no net affect on the local economy. All that has happened is that the recipient has twenty of your dollars to spend on something he wants, and you have $20 less to spend on something you want.

What if you were to borrow the money to give to the person? Would that make a difference? Try it. Borrow $20 from someone you know, and then give it to the recipient again. Observe what happens. He now has $20 to spend again, but the lender has $20 less to spend. And, you now owe the lender the money, so you have to find a way to come up with the $20. Therefore, there will be no net affect on the local economy, but you are in debt.

What if you found a printing press so that you could counterfeit paper money? Would that make a difference? Try it (or not since it is illegal unless you work for the Federal Reserve). Print twenty fresh paper dollars off of your machine and hand them to the recipient. He now has $20 to spend and you don’t owe anyone anything! Hurray! You have found a way to stimulate the economy. Proceed immediately to Sweden to get your Nobel Prize.

But, wait. Since you have created artificial demand, that is, you have created demand in the form of paper dollars without any corresponding production of anything, the net effect of the recipient’s spending will be to increase the price of everything on which he spends money. Although the recipient initially received $20 worth of goods, subsequent purchases made by others in the local economy will have to be made at the higher price. Therefore, all that happens is that the person who was first to spend the $20 benefited at the expense of all those who must pay higher prices now.

With respect to the latter case, you might say that the spending of $20 could not affect the price of anything. Maybe not, but if you created 1 trillion dollars, it certainly would.

So, there you have it. Taxing some so that others can spend it will not "stimulate" the economy. Deficit spending through borrowing will not stimulate the economy. Printing money to buy government bonds so that the government can deficit spend will not stimulate the economy.

I might add that just as taxing, borrowing, and creating paper money does not lead to production, innovation, and economic prosperity, neither does wishing, praying, hoping, crying, marching, picketing, legislating, voting, chastising, or threatening. To see this, try it at home.

Sunday, July 12, 2009

Rational Animal Spirits

In a previous post, Politics for Dummies, I said:
If you are trying to eliminate the effects of a particular problem, do you think it would ever help to understand the causes that give rise to the effects? For example, if a building were on fire, do you think it would help that the firemen in charge understood what tends to fuel a fire and what tends to extinguish it? If they did not understand the causes, wouldn't they be as likely to throw a ham sandwich on the fire as to pour water upon it? ...Obviously, if one does not understand the causes, the solution may actually be worse than the problem itself. At best, the supposed solution can only mitigate or eliminate effects through random chance.
To see this point in reality, consider two different takes on the present financial crisis.

One which I enjoyed immensely was
John Alllison's lecture on the financial crisis. According to Titanic Deck Chairs, when the lecture was given at a Chicago conference, it resulted in "the entire room of hundreds of high-powered financial people [giving] a rousing standing ovation...while the members of the Fed sat motionless." Allison's thirty-eight years of experience in the banking business including serving as the current CEO of BB&T gives him unique, detailed knowledge of the causes of the financial crisis. His detailed analysis of the Federal Reserves manipulation of interest rates, government policies that forced banks to lend to sub prime customers, and the government apparatus enacted to encourage underwriting such as Fannie and Freddie lays the blame for the crisis squarely on government policies and "misregulation" of the banking industry which, contrary to popular belief, is the most heavily regulated industry in America.

Since I already understood the role of the Fed and the GSE's in causing the crisis, what I found even more interesting were the not so obvious ways in which government policy caused the crisis. For example, Allison details how regulators became obsessed with mathematical models of risk in the 1990's. Such models are inherently flawed as they are based on simple statistical assumptions that can not account for real world risks which are non-normal and virtually impossible to model. Based on these models, which had been fitted to a benign environment, banks were forced to lower loan loss reserve assumptions which encouraged leverage and risk taking. (There is a deeper factor related to this observation concerning the philosophy of "empiricism" which I will discuss in another post.)

Another interesting detail was related to FASB accounting rules enforced by the government which force so-called "fair value accounting" standards on banks. Since a bank must mark its portfolio to actual real time bids rather than the economic value of the portfolio, liquidity for these securities dried up as banks feared that even though they would get a good deal, the accounting standard would force them into bankruptcy. To understand this, imagine the government made you value your home at the price you would get if you absolutely had to sell it tomorrow. Would that price make sense on a balance sheet?

Allison derives the correct conclusion: that it is the government, not the market, that is to blame. What's interesting is that many other bankers and economists who have access to the same observations as Allison have not drawn this conclusion. Why was Allison able to derive the appropriate conclusion from these facts?

One needs to be able to think in principle in order to abstract a generalization from facts. Such a process entails the integration of these facts with all other known facts in a non-contradictory fashion. Allison's integration of economics, politics, ethics, epistemology and metaphysics allowed him to know without even understanding the details of his own profession, that government intervention in the economy would lead to disaster. Given his breadth of knowledge in his own field, he could readily take the observed facts and show how they support his position that it is government and not markets that are to blame.

This example demonstrates that understanding "economics" is not enough to draw the proper generalization. The evidence for this is overwhelming. Brilliant businessmen, scientists, economists, etc. have access to the same facts of reality but only a few draw the proper conclusion.

Consider the vast power of principles. Rather than analyzing the minutia of every conceivable intervention into the economy - schools, roads, medicine, energy, cosmetology, etc. one simply needs to grasp that, in principle, government intervention must lead to disaster. Yet, modern intellectuals, react to the consequences of these programs with surprise and bewilderment each time they fail. Like a non-conceptual dog, who jumps for joy each time his master comes home, modern intellectuals are unable to abstract the common denominator.

To further grasp how the lack of principles affects the world on a daily basis consider these statements made by famous academic economists in this
Bloomberg article:

The worst recession in half a century may be prolonged because consumers see few signs job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.

“The fundamental problem, as Franklin Delano Roosevelt said in 1933, is fear,” Shiller, a Yale University professor, said yesterday on Bloomberg Radio’s “Surveillance.” The Great Depression was deepened by a “sense of lost confidence or animal spirits that was a self-fulfilling prophecy. The worry is that we will have the same kind of issue arising again,” he said.

While it is certainly true that "fear" will result in a loss of confidence or "animal spirits" and decrease risk taking and severely restrict economic growth the real question is why are people scared. What is the cause of the fear? Shiller seems to be suggesting that this "fear" is a disembodied, ethereal entity which in and of itself can cause a downward economic spiral.

Of course, fear is not a primary. Presently, it is caused by uncertainty in government policy as it relates to taxation, health care, energy, and the banking system to name a few. The federal government has embarked on trillion dollar spending programs that siphon productive capital from private markets, increase the rate of taxation, and threaten the specter of hyperinflation. The House just passed a 1200 page "climate change bill" that threatens to completely upend the lifeblood of American commerce: the energy markets by increasing costs, dramatically increasing regulation and making the source of supplies uncertain. They are now threatening to further government intervention into health care, which is the source of tremendous cost and anxiety for American businesses and individuals.

The idea that the economy is governed by mysterious forces that we can not understand or control appears to be the essential guiding theory of modern economists - an observation I blogged about here. In that post, I discussed Fed Chairman Bernanke's arbitrary claim that the economy would likely get better by the end of the year.

...Fed Chairman Bernanke can claim he thinks the recession will be over by year end, as if in the midst of trillions of dollars of debt, government nationalization of the banking system, regulations that make the productive into criminals, strangling environmental policies, confiscatory tax rates on virtually every aspect of existence, suddenly it will just all be “over”.

In this post in which I debunked Obama's claim that things must get worse before they get better I said:

In other words, they appear to be making this claim on the premise that it is a metaphysical absolute that things must get worse before they get better. It's almost as if they believe there is a mystical force shadowing the nations' economy which necessitates recession and malaise and which can not be understood or resisted.

Shiller and Roubini are men who have spent their entire lives devoted to the economics profession at the highest levels. They certainly have access to the same facts as Allison, yet what is their argument: we have nothing to fear but fear itself...? Well, besides fear, they do have another explanation:

Both Shiller and Roubini said a lack of regulation allowed banks to take unmanageable risks, leading to the government’s takeover of American International Group Inc. and the collapse of Lehman Brothers Holdings Inc.

This is a complete evasion of reality and/or utter intellectual negligence. As Allison pointed out, banks are the most regulated industry in the country and it was government policy that encouraged and even demanded that banks take these risks. What could lead to such a ridiculous claim? I think at root it has to do with Platonism. I believe that such academics believe that Platonic Philosopher Kings able to access true reality (such as themselves), are always in a better position to know what to do as opposed to mere businessmen who are tainted by the base, selfish pursuit of material wealth.

Why does Bernanke predict a recovery and Obama claim things will get worse? In the past, they observe that, statistically, recovery takes place after X amount of time. They never ask why the economy recovered in the past or seek to examine the causes of those busts and what factors led to recovery. Shouldn't they be asking themselves what are the causes of the current crisis and are these government policies making it better or worse? Quoting the article:

Home prices in 10 major U.S. metropolitan areas fell 0.7 percent in April, the least since June 2008, according to a S&P/Case-Shiller home-price index, the latest sign that the worst of the housing slump may be passing. Sales of existing homes increased in April and May, while new construction rose in May from a record low.

“A slowing in the rate of decline is good news, and it suggests that it will continue to slow in coming months,” Shiller said.

He sees the numbers and extrapolates a trend. Send him the Nobel Prize.

Now, perhaps, these academics do understand that "affordable housing" programs that provide incentives for excessive leverage and loans to people that can not afford them are a bad thing. But, they might conclude that such programs are "noble" since they are based on altruism so they reject the claim that such programs be prohibited. Sure, they might understand that inflation acts as an insidious tax and violate the liberty of individuals, but so what, if the program is "well-intentioned"? Or, they may reject the idea of principles and causality altogether and base their theories on empirical studies that demonstrate a statistical relationship between psychological studies of fear and GDP.

If these academics embrace this type of non-conceptual approach to knowledge, they are at the level of animals that regard each experience as an entirely new phenomena. At best, they can grasp at relationships that appear to be related (like fear and recession), although they would not even think to trace cause and effect. So, if these non-principled, non-conceptual economists are called in to "analyze" the crisis, what is likely to be their recommendation? Could they grasp that only a removal of the causes of the crisis will indeed result in true recovery? Will they advocate economic freedom, repeal of regulations, abolition of the Federal Reserve, and a return to hard money?

The U.S. needs another stimulus package because President Barack Obama’s initial $787 billion plan hasn’t been implemented fast enough, according to Shiller. Roubini, an economics professor at New York University, said more spending is necessary to avoid stagnation like Japan’s in the 1990s.

So there you have it - they advocate the causes of the crisis to solve the crisis. Of course, this is worse than throwing a ham sandwich on a fire. Their "solution" is equivalent to throwing gasoline.

Tuesday, July 7, 2009

Gore vs. Churchill

Apparently, Al Gore has invoked the memory of Churchill as a means to garner support for "fighting climate change" (which he no longer calls "global warming" since the climate is no longer warming - a fact I blogged about here). To label Gore's invocation morally repugnant and nauseatingly offensive is a profound understatement. Invoking the spirit of the great man who steadfastly led Great Britain and most of the free world in a horrifyingly bloody struggle against arguably the most formidable evil in world history is an act of monumental evasion and vicious absurdity. To invoke a world war, fought by free people to secure their liberty from the march of totalitarian oppression, as a means to gather support for his global fascist central planning fantasies, is the height of irony.

Sunday, July 5, 2009

The Tea Party Movement Has Just Begun

I am very happy to report that I was able to give my speech (posted here) to about 1000 people. I would like to thank Wendy Caswell and her group http://www.louisvilleteaparty.org/ for holding the event which was a tremendous success. My colleague, George, and I hosted a table and were able to pass out well over 100 Ayn Rand samplers which were sent to us by the Ayn Rand Institute who connected us with the event organizers. We also formed a mailing list with the goal of forming a local Objectivist group.

The Tea Party movement is an eclectic mixture of individuals and organizations. Although there are certainly differences in philosophy and priority, what unites this movement is outrage over the rapid erosion of individual freedom amid the extraordinary growth of government and a desire to reassert the Founding Father's philosophy of a government constitutionally limited to securing the right to life, liberty and the pursuit of happiness. The challenge will be to harness this outrage and channel it into a coherent and rational program.

Rather than complain about this eclecticism or divergences in philosophy, Objectivists should see this as an opportunity to reach like minded individuals who may not fully appreciate the role of fundamental philosophy or the need for a rational, secular defense of freedom and capitalism. As I have argued before, our battle is with the right not the left. We are not going to persuade Barney Frank or Noam Chomsky that we are right. Their minds are wrecked. We can convince people already sympathetic to the American ideals of individualism and limited government.

This movement needs leadership. Many sense something is drastically wrong but do not have the intellectual ammunition to win this battle. Without properly understanding the rational, moral case for capitalism this movement will fail for the same reason the American right has been failing for generations. When the right can proudly and unapologetically assert the right to our lives and property we will win.

The Tea Party movement has just begun. There are legions of Ayn Rand admirers who have had generations to digest her revolutionary philosophy. Objectivism has a presence in academia. We have prominent Objectivists appearing on national television and in the national media on almost a daily basis. Let's provide the leadership and the intellectual ammunition that the right so desperately needs.

Friday, July 3, 2009

Tea Party Speech: July 4, 2009, "My America"

I hope to give this speech tomorrow if afforded the chance. Please use any or all of it if you find it helpful. It is about 5 minutes. (update: I will be speaking at the Louisville Tea Party).


Today, we are engaged in a battle - a battle between opposing visions of America's future. The challenge of the Tea Party movement is to define that vision and to give it life.

In many ways, this battle has been raging since the founding of our nation. Recently, however, this battle has reached a profound and critical moment as we witness a spectacle - the spectacle of the first actively anti-American president in our nation's history. (editors note: HT to TIA via The New Clarion)

America was founded upon the spirit of individualism - the idea that each individual is independent, the owner of his life, free to pursue his own happiness. In stark contrast to the Founders spirit of individualism, Obama stands for collectivism, the idea that one's life belongs to the state and that morality consists of sacrifice and duty.

Throughout our history, Americans have always stood for limited, self-government, whose purpose is to secure the right to pursue your life and happiness. Obama stands for the long arm of a faceless command and control bureaucracy which attempts to manage and control every detail of your life.

Americans admire success and believe in reaping the profits derived from hard work. Obama denigrates the productive and seeks to tax and redistribute your earnings to anyone who has not earned it.

Americans are unapologetic for our success which has come at a steep price - the blood of patriots spilled here and around the world for over 200 hundred years - and the sweat and tears of the productive: the scientists, the businessmen, the tradesmen, and the laborers who followed their dreams, built this country and in improving their own lives created the highest standard of living in world history.

While Americans celebrate their achievements and the birth of our nation, Obama travels the world apologizing for America. The President of the nation which fought a bloody Revolution to overthrow the tyranny of monarchy - bows to Kings. He dignifies evil by extending olive branches to tyrants and kowtowing to our enemies. He hesitates to criticize the terrorist theocrats of Iran when they butcher their own people in the streets but vehemently decries the Honduran people's exile of an outlaw supported by the likes of Chavez and Castro.

My vision of America or My America means something very specific to me. My America is represented by George Washington, Patrick Henry, James Madison, John Adams, and Thomas Jefferson.

Obama's America also means something very specific. Obama's America is represented by Barney Frank, Nancy Pelosi, and Harry Reid.

Our Founding Fathers were influenced by men such as John Locke, Voltaire, and Montesquieu.

Obama sympathizes with Pastor Wright, William Ayers and the God of the American Left: Karl Marx.

My Americans are the creators and the producers: the Founding Fathers, Thomas Edison, the Wright Brothers; My Americans are Fred Astaire, and Walt Disney, Mark Twain and Henry Ford; My Americans are Sherman, Patton, and MacArthur; My Americans are Bill Gates and Steve Jobs; My Americans are John Galt and Ayn Rand.

Obama's Americans are anti-American destroyers: Michael Moore, Rahm Emanuel, Robert Reich, Saul Alinsky, Paul Krugman, FDR, the Clintons, Ted Kennedy, and Jimmy Carter (and the thousands of Marxist university professors funded by your tax dollars and their allies in the mainstream media.)

My Americans have literally given us light, mass production, aviation, bridges, the movies, music, television, the personal computer, and life saving medicines; some led great armies in heroic battles against tyranny and evil or glorified their work in literature and art.

Obama's Americans have given us the Internal Revenue Service, government run schools, section 8 housing projects, the Federal Reserve to print paper dollars out of thin air and destroy the purchasing power of money, Fannie Mae and Freddie Mac who underwrote loans to people who could not afford them, trillion dollar bailouts of politically connected banks and automobile companies, and trillions of dollars of pork barrel fiascos.

My Americans produced wealth, defended freedom, and invented something from nothing.

Obama's Americans gorge on the productive through the income tax, medicare tax, social security tax, state tax, city tax, county tax, sales tax, property tax, school tax, capital gains tax, corporate income tax, alternative minimum tax, gas tax, gift tax, estate tax, the generation skipping transfer tax, excise tax, VAT tax, marriage tax, luxury tax, recreational vehicle tax, road usage tax, telephone federal excise tax, vehicle tax, workers compensation tax, federal unemployment tax, state unemployment tax, to name a few.

My Americans have given us freedom, production, prosperity, and aesthetic beauty.

Obama's Americans have given us stifling regulations, confiscatory taxation, inflation induced boom-bust cycles, and a veritable mountain of debt to support a Leviathan federal government that never shrinks but only grows.

My America stands for the life affirming benevolence and productivity that follows from free minds and free markets. Obama's America stands for the stagnation, misery, and tyranny of government coercion, central planning, and socialism.

Which America do you want?

To change America, you must realize that My America is no longer the mainstream. Obama's America is the mainstream. Obama, Barney Frank, and Nancy Pelosi's vision, that freedom is the problem and government coercion is the solution, is preached in virtually every university classroom, on every television network, and in every newspaper in this country. In the wake of every government caused crisis from housing, to health care, to education, to traffic jams on public highways, always "the free market" is blamed and always, their solution is "more government intervention, more controls, and more taxes."

We must wage a moral and intellectual battle to rediscover the American spirit and the morality implied by the Declaration of Independence; we must recapture the spirit of individualism, self-reliance, and limited government. We must fight, not just against Obama's vision, but for our own vision.

In the words of Ayn Rand:

"The world crisis of today is a moral crisis--and nothing less than a moral revolution can resolve it: a moral revolution to sanction and complete the political achievement of the American revolution. . . . [You] must fight for capitalism, not as a 'practical' issue, not as an economic issue, but, with the most righteous pride, as a moral issue. That is what capitalism deserves, and nothing less will save it."

We must boldly and proudly assert our rights to life, liberty, property and the pursuit of happiness. We must fight to make My America, our America.

Thursday, July 2, 2009

Helen Thomas Questions Obama's AgitProp?!

In a previous post, I discussed the Obama administration’s deliberate attempts to control the media through what I described as an unofficial Soviet style Department of Agitation and Propaganda. Such efforts at tightly manipulating the media are the hallmark of dictators as “state run media” in Iran, North Korea, Cuba, Venezuela, etc. so clearly demonstrate. In that post, I discussed an internal media network that has apparently been created within the White House to report on events inside the White House separate from the traditional White House press corps. I also discussed a recently staged “town hall” meeting in which guests were invited by the White House and questions were submitted and approved by White House controllers yet carried on as if it were an extemporaneous exchange between Obama and the public.

To my great surprise, this event was the subject of a dustup between Chip Reid of CBS News, Helen Thomas, and White House spokesman Robert Gibbs as the reporters grilled Gibbs on the “pre-selected” nature of this town hall meeting. Helen Thomas went as far to say that this was “shocking” and something she had never seen before. Gibbs’ snarky obfuscation and haughty attempts at humor were appalling. I am sure that Gibbs, accustomed to getting the kid glove treatment from the White House press corps, was taken aback that anyone in the MSM would dare question the Dear Leader. After all, the ends justifies the mean – do they not?

As an aside, this Breitbart show, “The B-Cast”, discusses this incident and runs a clip from the town hall in which Obama hugs a sobbing uninsured cancer patient – an image which made national headlines.

Wednesday, July 1, 2009

Looking at Obama's "Green Jobs" through a Broken Window

If I were to urge you to grasp one principle of economics, a principle that would help you throughout your life dissect and refute virtually every government scheme to take your money in the name of the "public good", it would be the Broken Window Fallacy. This parable was created by Frederic Bastiat in 1850 and popularized by Henry Hazlitt who used it to refute dozens of economic fallacies in his famous book Economics in One Lesson. Despite over 150 years of knowledge and experience, this fallacy permeates every facet of politics today and is committed routinely by politicians and Nobel Prize winning economists alike.

I gave detailed descriptions of this principle in two past posts here and here so I will not go into full detail. Briefly, the principle is that one must focus on both the direct consequences of an action AND consequences that would have occurred in the absence of the action. In certain contexts, it could be called the law of unintended consequences. Another way to put it: in order to understand the consequences of government action, do not just look at what it does directly, but also imagine what could have happened and what did not happen as a result of government action.

For example, in the parable, when a brick is thrown through a shopkeepers window, observers are led to believe that the broken window is "good" for the economy since it increases the revenue of the glass maker. Such a view might lead someone to think that destruction is good for the economy and even to conclude that wars are actually a benefit. Perhaps someone should routinely burn the entire town to the ground to "help" the economy. Sound familiar? What is not seen by these observers, is the action that would have taken place if the shopkeeper had not had to pay for the broken window. He would have had more money to spend elsewhere on the movies, new furniture, or perhaps to expand his own business. In this instance, although the glass maker benefited, the broken window is at best a zero sum game as far as the economy is concerned since the movie theater, furniture maker, or anywhere the shopkeeper would have spent the money has lost potential revenue. (In actuality, I would argue that the broken window is less than a zero sum game - it is highly destructive to the economy to the extent that it subdues capital investment which subdues innovation and productivity.)

Once one fully grasps this principle by applying it to numerous instances as Hazlitt does, it becomes clear how futile and destructive are government policies implemented on the basis of this fallacy.

One of the most obvious applications of this principle is to the idea of "make work" jobs which are jobs "created" by the government for the purpose of employing individuals. For example, say the government announces a plan to employ 10,000 individuals digging ditches. For the 10,000 people who get this job, it clearly is a benefit. After all, they are now working and making wages which they can use to support themselves. However, is such a plan "good" for the economy?

First, where did the government get the money to pay these workers? It obtained the money through taxation which means the wages paid to the 10,000 workers is money no longer available to those who paid the taxes. These taxpayers now have less money to spend on other things like food, computers, or automobiles. Again, it is at best a zero sum game and in actuality worse since the government generally spends the money on activities that no one wants or needs.

How could anyone think that robbing money from some people and giving it to others could result in a "better" economy? If that's true, why don't we legalize theft by, for example, the Mafia. Then, when the economy needs a jolt, the government can urge the Mafia to shake people down for their money in order to spend it. Won't that be good for the economy? How is the logic any different?

If such a notion seems absurd - it is, yet, this is the exact reasoning behind the "stimulus" package unveiled by Congress earlier this year. It is exactly the reasoning behind the argument being offered that the cap and trade energy bill, despite the fact that it will increase energy costs, is actually good for the economy since it will "create" so-called "green jobs".

In this case, the stimulus bill and the climate bill are supposed to actually create jobs since the government will spend money in various areas. In fact, in this Yahoo article, seven "lucrative" new jobs from the Obama stimulus plan are highlighted. What are they? Among others include "solar panel installer", "cost estimator" to estimate costs of spending the stimulus money, and "physical therapist" since so many people are unemployed and apparently will need physical therapy (I'm not making this stuff up...). This means that individuals rather than being motivated to enter productive professions like medical research or computer science will instead be encouraged to install solar panels and to monitor the expenditure of loot that is robbed from taxpayers.

Let's ask another important question: is the government literally magic? Can it simply spend other people's money and, voila, create prosperity? Apparently, the government is magic since Nobel Prize winning economists like Paul Krugman endorse the government's plan to spend other people's money and in fact call for even more spending. Obama claims that the climate bill will create "millions of new jobs" which, of course, relies on the Broken Window Fallacy.

What creates real wealth? Making more with less effort or productivity is what leads to real gains in prosperity. "Jobs" in the sense of "people doing things" is not necessarily good for the economy nor does it necessarily lead to increasing prosperity. In other words, "activity" should not be confused with "productivity". When people make more with less effort, it frees up time so that people can work and produce in other areas. Hundreds of years ago, virtually everyone spent their time simply producing food and subsisting from day to day. More efficient agriculture due to new technology allowed the same amount of food to be produced by less people and freed people up to work on things like inventing electricity, the locomotive, and medicine. Robbing some people and giving it to others to spend does not benefit the economy in terms of creating real wealth and prosperity. Such a plan only redistributes wealth to some for the unearned benefit of others.

In April 2009, Dr. George Reisman posted Green Jobs in which he facetiously discusses how Obama's stimulus plan is capable of creating an infinite number of "jobs":

Indeed, advancing the goals of environmentalism is capable of creating a virtually limitless number of jobs. Big-rig trucks and their “polluting” emissions might be done away with by replacing them with human porters who would carry freight on their backs. Ocean-going ships and their emissions might be done away with by replacing their “dirty engines” with the clean labor of banks of oarsmen. (Sails would be a substitute too, but they are no match for oarsmen when it comes to the number of workers needed.) Automobiles and their emissions might be replaced by sedan chairs and teams of litter bearers.
Later, he discusses a brilliant idea that could literally "employ" millions:

And finally, think of all of the jobs that a program of environmental “stewardship” might make available. Thus each patch of desert, each rock formation, each clump of grass, and each tree stump, might have assigned to it one or more “stewards” whose job would be to watch over it, protect it, and “preserve it for future generations.” To carry out this valuable work, there could be a whole corps of “stewards.” They could be dressed in special uniforms displaying various ranks and medals, all gained in “service to the environment” and the defense of nature and its resources against the humans.

Indeed, once we put our minds to it, nothing is easier than to think of things that would require the performance of virtually unlimited labor in order to accomplish virtually zero result. Such is the nature of all job-creation programs. Such is the nature of environmentalism. Such is thought to be the path to economic recovery by most of today’s intellectual establishment.

When you understand the Broken Window Fallacy, programs offered to "stimulate" the economy and "create" jobs seem laughable. It's too bad it's not funny anymore.