“Which States Are Most Free?” at Cato

William Ruger and I will be participating in a discussion of our new study, Freedom in the 50 States 2011, at the Cato Institute on Wednesday June 8 at 4 PM. Michael Barone will be commenting, and John Samples will moderate. All Pileites in the DC area are of course very welcome, and the event will also be streamed online. Details here.

As soon as the study is released, more info will be available on Pileus.

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Do We Need a Commerce Department?

President Obama has just announced his nominee to be the next Secretary of the Commerce Department. In the WSJ‘s words: “President Barack Obama will nominate John Bryson, a senior adviser to the private-equity firm Kohlberg Kravis Roberts & Co., to be his next commerce secretary.” The Journal continues:

Mr. Bryson, one of 20 senior advisers to KKR, is the former chairman and chief executive of Edison International, a publicly traded power company and the parent of Southern California Edison and Edison Mission Group. He also co-founded the Natural Resources Defense Council, an environmental-advocacy group, and has been a member of the U.N. Secretary-General’s Advisory Group on Energy and Climate Change.

I had not heard of Mr. Bryson before this nomination. People who found “environmental-advocacy group[s]” make me a bit nervous—since such people are sometimes rather longer on the advocacy side than on the scientific side of policy—but I am sure he is an able and capable person.

My question instead is why he is needed at all. Why, in the twenty-first century, when we have a globally connected world with billions of trading partners making trillions (or more) non-centrally-coordinated decisions every day, do we have need for a person to oversee all of this? Does he believe that he will be able to make better decisions from atop his perch in Washington, DC about where people should allocate their scarce resources, which of the options they face are those of which they should avail themselves, which people, businesses, groups, companies, institutes, funds, and organizations should trade or associate with which, what they should trade, and on what terms they should associate, and so on, than the individuals and groups themselves would make?

According to the Journal, a White House official said: “The president is confident in Mr. Bryson’s ability to lead the department and promote job creation, economic growth, sustainable development and improved standards of living for all Americans by working in partnership with businesses, universities, communities and our nation’s workers.”

I confess I am rather skeptical that Mr. Bryson, however able he is, will contribute positively to any of those objectives. This is not an indictment of him personally; it is instead an indictment of the rather voluminously inflated estimation some seem to have of human beings’ ability to consciously design and coordinate large-scale human social institutions. Even if Mr. Bryson were literally the smartest person on the planet, his ability to “promote job creation, economic growth, sustainable development and improved standards of living for all Americans by working in partnership with businesses, universities, communities and our nation’s workers” would be orders of magnitude inferior to the ability to do those things of uncoordinated individuals and private parties acting in competitive markets.  

The Great Mind Fallacy, it would seem, strikes again.

I say cut not only this Secretary’s job, but the entire Commerce Department and its $8.8 billion budget. When we are more than $14 trillion in debt, it would have to have a rather astonishing rate of return on its investment to justify its continued existence. Given the systemic liabilities it faces, I am skeptical it meets that threshold.

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Eye for an Eye: Retribution or Restitution?

I recently came across this interesting, five-year-old interview with law professor William Ian Miller on “talionic” law in the Middle Ages, which specified literal “eye for an eye” justice. Talionic law developed in societies that lacked stable state institutions, like Iceland and early England. As such, it was embedded in strong extended-family institutions that used tit-for-tat strategies to keep order.

The traditional understanding of “eye for an eye” justice is that it is retributive, that is, that its motivating principle is punishment of the wrongdoer, pure and simple. Miller, however, makes a persuasive case that such systems are actually restitutory, that is, aimed at making the victim whole. In that sense they are much more humane than much contemporary criminal law, which ignores the victim and unproductively locks away criminals. An excerpt that makes the argument in a nutshell:

Your book argues that we often use the term “eye for an eye” to describe a harsh kind of justice from the past. But talionic societies could be said to put a higher value on human life and the human body than we do. They were much more committed to finding the exact worth of body parts and lives. So, let’s say you poke out my eye…

Then, instantly, my eye becomes yours. To get the value exactly right, we say an eye is worth an eye. You have a right to my eye. Now you can say to me, “I’m going to take your eye.” Then I’m going to say, “Hey, what would you be willing to accept instead?” It becomes an initial bargaining position.

If you want victims to be more highly valued and you want real, adequate compensation, this is how to do it. Now if I offer you what some lousy insurance company says your eye is worth — say, $100,000 — you’ll say, “No way! I would never have let you take my eye for that.” Instead, you can be sure I’ll put the same value on not losing my eye that you would have put on yours, and I will pay you that amount to keep my own eye. How about $5 million? Let’s start there. And we’ll bargain it out.

The book mentioned is this.

So how about it – should we return to the lex talionis?

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The USPS Nears Collapse: What to Do, What to Do?

Bloomberg BusinessWeek has a long story outlining the desperate financial situation that the United States Postal Service is facing. The USPS is currently approximately $15 billion in debt, and with revenues continuing to drop—and, as is becoming the all-too-familiar refrain with government agencies these days, costs of health care and retirement benefits for workers are rising rapidly. As the Bloomberg story reveals, the USPS has no real plan to deal with what even its advocates are calling its imminent insolvency.

Consider this passage from the story:

The USPS has historically placed the interests of its unions first. That hasn’t changed. In March it reached a four-and-a-half-year agreement with the 250,000-member American Postal Workers Union, which represents mail clerks, drivers, mechanics, and custodians. The pact extends the no-layoff provision and provides a 3.5 percent raise for APWU members over the period of the contract, along with seven upcapped cost-of-living increases. The union is happy. “Despite the fact that the postal service is on the edge of insolvency, the union and management have reached an agreement that is a ‘win-win’ proposition,” said APWU President Cliff Guffey on the union’s website.

Consider all of the pathologies contained in that passage—the destructive mindsets, the counter-productive incentives, the perverse priorities.

Those pathologies are brilliantly exhibited by the way the USPS is responding to changing technologies and changing realities of delivering correspondence. In Europe, of all places, postal services have been largely privatized. Sweden’s Posten, for example, closed and then privatized most of its remaining post offices, over complaints and doomsday predictions; yet the service is by most accounts better now than it has ever been. The same has happened in Germany, where the now privatized postal service competes with other postal delivery systems, including digital delivery systems, and turns a profit.

The USPS’s business plan? They hired someone to try to convince banks and other large companies not to use rising digital technologies but to continue using paper statements that must be mailed instead. No wonder they’re in such bad shape.

The solution seems obvious: privatize, and repeal federal laws and regulations that restrict competition. The patterns here follow a familiar path: public-sector services staffed by public-sector unions perform badly and get themselves into a terrible financial position; private and for-profit services perform much better, leading to better service and higher customer satisfaction; yet people do not want to try privatization.

Allowing private individuals, entrepreneurs, companies, and others seeking profits—in other words, free enterprise—compete to meet people’s desires and needs always seems scary. Yet it almost always works when allowed, and it almost always works better than what the government-provided services offer. Fear of the scary monsters in the unknown of the market—we don’t know who exactly will provide the good or service, how exactly it will be provided, which attempts will succeed and which will fail, and so on—continue to stop people from availing themselves, and others, of the enormous benefits of market competition.

Perhaps market competition and free enterprise would not work better in the provision of some goods or services than government provision. But surely the repeated success of the former and the repeated failure of the latter entails that the burden of proof has to be on those arguing for the latter over the former.

There are many places where this reasoning applies—I think it applies to government monopoly provision of public schooling, for example—but it also applies to the USPS. There are romantic attachments to the idea of a USPS, but at some point we need to put romantic attachments aside and look at reality. Cut the USPS loose. Let human ingenuity follow natural incentives to find better ways to satisfy our desires. No system is perfect, and no human attempts at anything will be without mistake or failure, yet there is every reason to be confident that ending the government monopoly on mail carriage would lead to improvements, exactly as free enterprise has our improved our lives in countless other ways.

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City and State Welcome Signs

Wouldn’t it be nice if city and state welcome signs were simply honest to goodness “welcomes” as opposed to subtle campaign signs for incumbents who get to advertise their name and associate it with a positive message?  Given that name recognition is an important commodity in elections, incumbents who plaster their names on welcome signs and every other manner of city and state property like buses get what amounts to a lot of “free”  – as in paid by someone else! – campaign advertising. 

Thus it was somewhat of a surprise to me when AP recently noted that Chicago Mayor Rahm Emanuel “said he sent a message out this week saying he didn’t want time wasted changing a bunch of signs and wasting taxpayers dollars.”  This comes on the heels of Mayor Daley putting more labels on city property than Benetton put on clothes!  One cheer to Emanuel – who has apparently put his name on only two welcome signs in Chicago (see the picture on the right for one example).  My guess is that the temptation Daley and so many other politicians succumb to will eventually get the best of Mayor Emanuel.

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Worst economic reporting of the week

I don’t expect much from mainstream journalists, but this quote from Fareed Zakaria at Time made me puke:

The good news is that the American economy is back to its pre-crisis size. The U.S. GDP is now about $13.5 trillion, a bit above what it was in 2007, before the financial crisis. The bad news is that we are producing the same amount of goods and services as in 2007 with 7 million fewer workers.

So making the same amount of stuff with fewer workers is “bad news?”  On what planet?  This quote is a perfect example of the media’s warped, feeble-minded economics that I commented on recently.  Producing more with less is progress,  not bad news.

Of course the persistent existence of idle economic resources (unemployed workers and high holdings of cash by firms) is bad news.  But over the long haul continued improvements in technology swamp cyclical variation, which is why we (almost) all drive cars and talk on cell phones instead of driving horses and talking on party lines.

The structural adjustment needed to deploy more idle resources is a puzzle.  Shouldn’t government put the best minds together and try to figure out how to solve that puzzle?  Absolutely not!  The best thing the government can do is take less, spend less and dictate less.   The economy will adjust just fine on its own.

[OK, WordPress keeps jamming these last three paragraphs together even though I've tried to insert a break about 20 times.  What the heck is going on?  Some of these idle resources apparently need to be deployed at WordPress.]

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Frightening Sentences of the Day

From Peter Ubel in Free Market Madness: Why Human Nature Is at Odds with Economics—And Why It Matters (Harvard Business Press, 2009):

The government could, theoretically, change the finances of the food industry enough to halt the obesity epidemic. [...] Given that information alone may not suffice to encourage better eating habits, policy makers should consider yet another approach to combat obesity—an approach that structures people’s choices in ways that will lead them to make better choices, not through incentives or coercion, but through emotional or even unconscious psychological forces. (pp. 214, 217-18)

Ubel is a “physician and behavioral scientist” at the University of Michigan. He is apparently unaware of the manifest difficulties with which the word “theoretically” is fraught in the first sentence above; he is likewise apparently unaware of the frightening implications of a medical doctor and behavioral scientist proposing that the government use “emotional or even unconscious psychological forces” to manipulate its citizenry into making what he or it deems “better choices.”

Perhaps someone should remind Dr. Ubel that such things have been tried with a fair amount of vigor and dispatch during the twentieth century; perhaps he would like to inquire into the results?

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NY-26

While I’m displeased to see demagoguery of Medicare reform paying political dividends yet again, I await with glee the eventual collapse of the entire system due to voters’ unwillingness to countenance even small, timid reforms that would help save it.

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Are You a Sovereign Citizen?

"Free Born" John Lilburne

A student asked me whether I had heard of a loosely organized group of people calling themselves “Sovereign Citizens.” I had not. It turns out that 60 Minutes recently did a story on them (available here), in which they come off largely as deranged people looking for an excuse to engage in violence.

The 60 Minutes piece interviews one person, a roofer, sympathetic to the movement who seems somewhat more in touch with reality. Though still a bit unnerving, he does manage to suggest grounds for his position. What is interesting is that his grounds are close to principles John Locke articulated in his 1690 Second Treatise of Government. In describing the “State of Nature,” for example, Locke writes that it is:

A State also of Equality, wherein all the Power and Jurisdiction is reciprocal, no one having more than another: there being nothing more evident, than that Creatures of the same species and rank promiscuously born to all the same advantages of nature and the use of the same faculties, should also be equal one amongst another without Subordination or Subjection, unless the Lord and Master of them all, should by any manifest Declaration of his Will set one above another, and confer on him by an evident and clear appointment an undoubted Right to Dominion and Sovereignty. (chap. 2, sect. 4; Locke’s emphasis)

Locke argues in this chapter that the state of nature is also “a State of Perfect Freedom to order their Actions, and dispose of their Possessions, and Persons as they think fit, within the bounds of the Law of Nature, without asking leave, or depending on the Will of any other Man.”

Note that Locke claims that people have the freedom to dispose of their persons and possessions within the bounds of the law of nature, not within the bounds of human-made law. This is a deliberate and important part of his argument. These two features—”freedom” and “equality”—are aspects of human nature Locke argues people possess prior to and independent of any human or government action. They therefore become the bounds and limits of justifiable human, and thus government, action.

I think the proper way to understand the “equality” to which Locke refers here is as equal jurisdiction. That is, each of us, by nature (or by God’s will, but in any case antecedent to government), possesses rightful authority or jurisdiction over the same scope—namely, over ourselves. No one of us has any natural rightful jurisdiction over any other. This gives Locke a clear argument to oppose slavery, which he articulates in chapter 4 of the Second Treatise: Slavery is the illegitimate extension of one person’s jurisdiction over another.

It is important for Locke’s position that only God, not other human beings, can grant anyone “an undoubted Right to Dominion and Sovereignty.”

Locke did not invent this position. Indeed, both its form and substance had been articulated earlier in the century, during the time of the English Civil War, by a group of Englishmen known as the “Levellers.” That name is misleading now, because it can suggest, and has been taken to mean, that they were interested in equalizing, or “levelling,” people’s holdings, objecting to the great inequalities in wealth present in seventeenth-century England. But that was not their aim. (It was closer to the aim of another group with whom they are often, though incorrectly, associated, called the “Diggers.”*) Their aim was instead to ‘level’ people’s natural, God-given status. They argued that everyone was, regardless of rank or class, equally entitled to profess his own religion in his own way, and to order his life in accordance with his religious principles without correction or review from his alleged superiors. Before God, they argued, every man was equally free and thus equally accountable, and this equality preceded and therefore superseded any claimed authority by any human being or human institution.

But the Levellers too were drawing on a much older tradition, one that traces back at least to the 1215 Magna Carta and the 1320 Declaration of Arbroath. In the latter, Scottish nobles declared and asserted their sovereign right to determine for themselves who would rule them, denying the English king’s claimed jurisdiction over them on the grounds that they had not consented to his authority.

That is the background that informs Locke’s argument. It is also, therefore, via Locke, the background that informs some of the motivation behind the American Declaration of Independence and the American founding. Locke goes on to claim that our natural equality of freedom can even justify revolt, and he uses language that is eerily familiar:

Revolutions happen not upon every little mismanagement in publick affairs. Great mistakes in the ruling part, many wrong and inconvenieng Laws, and all the slips of humane frailty will be born by the People, without mutiny or murmur. But if a long train of Abuses, Prevarications, and Artifices, all tending the same way, make the design visible to the People, and they cannot but feel, what they lie under, and see, whither they are going; ’tis not to be wonder’d, that they should then rouze themselves, and endeavour to put the rule into such hands, which may secure to them the ends for which Government was at first erected. (chap. 19, sect. 225; Locke’s emphasis)

Where have I heard that before?

Whether any of the latter-day “Sovereign Citizens” base their positions on this tradition, or whether they use it only as cover for vicious and violent activity, I do not know. The tradition itself is, however, a venerable one, and it has given rise to some of the freest and most prosperous human societies on earth.

*For a wide selection of readings from the Levellers, as well as some discussion of the relevant historical context, see my edited collection, The Levellers: Walwyn, Overton, and Lilburne, 5 vols. (Thoemmes Continuum, 2003).

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A Deficit-Neutral Plan to Slash Unemployment

While the U.S. economy has been officially out of recession for a while and growing at a decent clip (1.8% at a seasonally adjusted annual rate in the first quarter of this year, 3.1% in the last quarter of 2010 – see chart), unemployment remains very unusually high, 9.0% in April 2011 (seasonally adjusted), compared to just 4.5% five years ago. The Economist wonders whether the U.S. has caught the European disease of “structural unemployment.” What can be done to get unemployment down fast?

Click “Continue Reading” to view the Sorens Deficit-Neutral Plan to Slash Unemployment (SDNPSU – catchy acronym, right? Try pronouncing it like “sudden Sue”):

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What is the carbon footprint of a U2 concert?

You know, just asking.  I started contemplating this as we were walking away from the Stadium and saw easily 100 semi trucks in the parking lot, with their diesel engines running of course.  And then there was all the travel involved in getting 40,000+ people to the stadium from all over the state, plus probably lots of air travel (I doubt Bono sailed from Dublin or walked across the plains like the pioneers to get to Utah), plus all the pollution used in constructing the special stage and equipment, plus a whole lot of electricity to power the event,  etc., etc., etc.

We were of course lectured on how wonderful the earth is and how democracy rocks and how we are all, like, totally ONE  (who knew?).

Great concert, BTW.

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The Last Days of Public School

My son on his day in public school:

We got to watch videos all day and no learning.

As you might guess, I was thrilled to hear this.  Perhaps he should testify in front of the legislature when teachers claim they are overworked and underpaid?  And I supposedly live in a district with excellent schools!  I know this is one data point, but still.  I really wish there was an affordable private school or Catholic school alternative where I live!  So, hey legislators, how about school choice and a voucher?

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Humble beginnings

Writing at NRO, Christian Schneider is annoyed at Tim Pawlenty’s playing up his humble beginnings.  He asks, “is it really relevant to anything?”  The answer is: absolutely!

Humble beginnings, in themselves, do not qualify oneself for office any more than going to a prep school disqualifies.  As Schneider correctly notes, it is what one will do in office that matters.  I also agree with Schneider that family background is not a reliable predictor of future political behavior.

But here is why it matters politically for Republicans.  Those of us who don’t belong to the country club set get annoyed that a philosophy of free markets and small government is often attacked as making the rich richer and the poor poorer.  Indeed, we see free market capitalism as—far and away!—the greatest anti-poverty, pro-human dignity system ever conceived by the mind of man.  Though many in the libertarian crowd like to pretend that there is little difference between Democrats and Republicans on this issue, the truth is that there are vast differences.  This is seen, for instance, in the fact that blue states are raising taxes to a much greater degree than red states (see Jason’s post on this).   Though some Democrats claim to be fiscally conservative (which usually means they want to reduce the deficit with tax increases), there is basically no such thing as a small government Democrat in America.

As much as they might preach an ideology of free markets and small government, the GOP gets attacked as country club fat cats. The problem is that the GOP has the frustrating tendency to act like country club fat cats.  Take, for example, the party’s recent defense of massive oil company subsidies at a time when gas prices are sky high and the current unemployment rate is still unacceptable.  Elements within the party view any policy change that causes anyone to pay more taxes as a tax increase and has to be opposed on principle.  This is stupid.   The truth is that our tax code is full of “tax expenditures,” which are essentially government spending, often for corporate welfare, implemented through the tax code as a result of rent-seeking behavior, usually by country club fat cats.  Exxon Mobil’s first quarter profits were in the neighborhood of 25 gajillion dollars, yet the GOP tries to pass off subsidies to oil companies as small government.

But we will never get smaller government unless the GOP becomes better at packaging smaller government philosophy in terms that ordinary working American can see as something that benefits them in the long run.  Given the tremendous economic illiteracy in the nation, the active misinformation by the leftist media elites, and the fact that there actually are many country club fat cats in the GOP, this is a monumental task.  Certainly, the messenger matters.  I’m not endorsing Pawlenty and would happily endorse some prep school snot if I liked his/her policy agenda.  But, yes, beginnings do matter in politics.  A lot.

In short, a Republican who can say that he knows—really knows—what life is like for working Americans and who actively engages those Americans in the ideas of free markets and small government, will have a tremendous leg up in a general election campaign.  Republican voters, even that country club fat cats, should remember that.

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Privacy and the “Nothing to Hide” Trope

After reading this interesting excerpt from a new book on privacy by Daniel Solove, I’ve got to add one more tome to the pile (Nothing to Hide: The False Tradeoff Between Privacy and Security, Yale University Press).  Solove takes on the the “Nothing to Hide” argument made by those who want to increase surveillance and interfere with our privacy.  Here is a short bit, but I recommend the whole piece:

Commentators often attempt to refute the nothing-to-hide argument by pointing to things people want to hide. But the problem with the nothing-to-hide argument is the underlying assumption that privacy is about hiding bad things. By accepting this assumption, we concede far too much ground and invite an unproductive discussion about information that people would very likely want to hide. As the computer-security specialist Schneier aptly notes, the nothing-to-hide argument stems from a faulty “premise that privacy is about hiding a wrong.” Surveillance, for example, can inhibit such lawful activities as free speech, free association, and other First Amendment rights essential for democracy.

The deeper problem with the nothing-to-hide argument is that it myopically views privacy as a form of secrecy. In contrast, understanding privacy as a plurality of related issues demonstrates that the disclosure of bad things is just one among many difficulties caused by government security measures. To return to my discussion of literary metaphors, the problems are not just Orwellian but Kafkaesque. Government information-gathering programs are problematic even if no information that people want to hide is uncovered. In The Trial, the problem is not inhibited behavior but rather a suffocating powerlessness and vulnerability created by the court system’s use of personal data and its denial to the protagonist of any knowledge of or participation in the process. The harms are bureaucratic ones—indifference, error, abuse, frustration, and lack of transparency and accountability.

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Say It Ain’t So

Indiana Governor Mitch Daniels is apparently not running for President.  Even though I still think the smart money is on President Obama to win reelection, I would have liked to have seen Daniels run on a fiscal hawk platform combined with his truce on social issues.  The adult vs the Red Menace and its enablers.  

For the Republicans, this is looking a lot worse in terms of candidate quality than 1988 was for the Dems.  Is anyone on Team GOP all that excited about Pawlenty?  Willing to embrace Romney and his RomneyCare? (Plus it is hard to embrace someone so slick and slippery who seems so desperately in love with the idea of a President Romney). 

Philip Klein had this to say in the Washington Examiner: ”With Daniels out, one wonders if another big name might reconsider jumping into the ring.”  But are there any “big names” left who haven’t already taken their names out of the hat? 

Jeb Bush?  Rick Perry?

Jason and Sven – you might be onto something with Huntsman.  But can you really imagine President Obama losing to him?

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Sunday Morning Quotation – War Powers Resolution, Section 5b

Given what the United States has been doing in Libya for the last 60 days or so, here is a relevant part of the War Powers Resolution:

SEC. 5. (b) Within sixty calendar days after a report is submitted or is required to be submitted pursuant to section 4(a)(1), whichever is earlier, the President shall terminate any use of United States Armed Forces with respect to which such report was submitted (or required to be submitted), unless the Congress (1) has declared war or has enacted a specific authorization for such use of United States Armed Forces, (2) has extended by law such sixty-day period, or (3) is physically unable to meet as a result of an armed attack upon the United States. Such sixty-day period shall be extended for not more than an additional thirty days if the President determines and certifies to the Congress in writing that unavoidable military necessity respecting the safety of United States Armed Forces requires the continued use of such armed forces in the course of bringing about a prompt removal of such forces.

I actually think the War Powers Resolution is unnecessary given that Congress already has the power to declare war and the President is not allowed to fight wars (other than in extremis to defend the US against attack) without Congressional authorization in one form or another.  Therefore, the President is already in violation of his duty to uphold the law and the Constitution.  The WPR is probably also unconstitutional (but not for reasons that conservatives give).  Despite this, I was glad to see at least a few Senators and Congressmen/women trying to do something to defend Congressional powers.  As might be expected, Rand Paul was among those standing up for the law.  Here is CNN on Paul:

But Sen. Rand Paul told CNN congress should not let any president get away with launching military action without congressional approval, and that he and his colleagues may go to the Supreme Court and ask for a ruling on whether the president is in violation of the law.

“There is a law. It’s on the books, and in plain reading of the War Powers Act, he appears to be in violation of the War Powers Act,” said Paul.

Paul said they will also attempt to push “legislative remedies” on the Senate floor, but acknowledges that may be hard to accomplish since Democrats control the schedule.

“To me it’s the most important debate we’ll ever have up here. If we’re going to send someone, your son or my son to war, its important that it be done properly, and its important that if there are constitutional restraints, we obey them,” said Paul.

And here is a great short piece by legal scholar Bruce Ackerman that lays out why Obama’s war in Libya in unconstitutional and represents another step on the road to the imperial presidency – though one could argue that we’re already there!

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Huntsman: No-Label Libertarianism?

Mitch Daniels seems to be the potential Republican presidential candidate getting the most attention from libertarians if one excludes the forthrightly libertarian candidates Gary Johnson and Ron Paul. Our own Grover Cleveland has expressed his man-crush here, while Ilya Somin puts the case for Daniels here.

But I want to take a look at Jon Huntsman, widely viewed as a “moderate” Republican, but whose policy positions appear to stake out a position that may be more libertarian than Daniels’, even though he rejects any label other than pragmatism (see also Sven Wilson on Huntsman):

• Voucherizing Medicare
• Ending the Libya intervention
• Civil unions for gay couples
• Expanded immigration rights

Support for the stimulus is problematic, but in my view should not be a killer in the way that, say, support for an individual health-insurance mandate would be – or, for me, Daniels’ opposition to any legal status for gay families. Daniels might be more economically libertarian than Huntsman, but from all reports he’s a social conservative. And you’ve got to give a guy points for signing a proclamation declaring “Dream Theater Day” in Utah!

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How Important Was Benjamin Strong?

Megan McArdle asked recently whether the rape charges against IMF head Dominique Strauss-Kahn could have a negative impact on attempts to deal with the current economic crisis within the Eurozone.  In the process, she notes that an argument could be made that the absence of Benjamin Strong in the 1930′s contributed to the inability of authorities to prevent the Depression:

 

Having a power-vacuum at the major multi-lateral institution charged with assisting its resolution will make things much more difficult. There’s a plausible argument to be made that the untimely death of 1920s fed chief Benjamin Strong left a weakness at the center of the Federal Reserve that considerably frustrated both domestic and international attempts to cope with the monetary collapse of the early 1930s. Could this be a similar incident?

 

This argument echoes the views of economic greats Irving Fisher and Milton Friedman (in his classic with Anna Schwartz, A Monetary History of the United States)  For example, Fisher told Congress in 1935 that “Governor Strong had died and his policies died with him. . . . I have always believed, if he had lived we would have had a different situation (quoted in Wheelock 1992).  Likewise, Friedman and Schwartz claim that:

If Strong had still been alive and head of the New York Bank in the fall of 1930, he would likely have recognized the oncoming liquidity crisis for what it was, would have been prepared by experience and conviction to take strenuous and appropriate measures to head it off, and would have had the standing to carry the System with him (412-413).

But are individual actors really that important in this type of realm, especially macroeconomics?  And how important was Strong’s absence in this particular case?

Well, I’m not sure I’m all that qualified to answer either that meta question or the particular one.  However, it is important to note that Friedman ultimately concluded that individuals were not all that important in this area (indeed, he seems on the verge of walking back his argument about Strong in A Monetary History though he doesn’t go that far).  In his 1984 piece “Monetary Policy for the 1980′s,” Friedman argued that ”The experience of the past two decades has led me to alter my views in one respect only – about the importance of personalities.  They have on occasion made a great deal of difference, but additional experience and study has impressed me with the continuity of Fed policy, despite the wide differences in the personalities and backgrounds of the persons supposedly in charge.”  

 

This follows what a number of other economists have found regarding Strong’s particular impact.  As economist David Wheelock explains, Peter Temin, Gerald Epstein and Thomas Ferguson, and Karl Brunner and Allan Meltzer (among others) did not think Strong’s absence was that important (see page 13).

 

Therefore, it seems as if we probably should not get too worked up about the policy impact of the demise of DSK’s career at the IMF.  Bigger forces are at play and will ultimately constrain policymakers and shift policy in certain directions (even if individuals are able to steer within the bounds of that course).       

 

Note: one bit on individuals tweaked slightly.

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What Caused Recent Tax Increases at the State Level?

The recent recession cut deeply into state treasuries, forcing legislatures to raise taxes or cut spending or both to eliminate budget deficits. It is interesting to note which states opted for big tax hikes over big spending cuts. USNews Money blogger Rick Newman has compiled a list of the 10 states with the largest enacted and “proposed” tax increases per capita over the 2009-2011 years, based on figures from the Association of State Budget Officers.

Almost all the states on the list either had unified Democratic control for most of the period of analysis (New York, Delaware, Connecticut, Wisconsin, Washington, Oregon, Massachusetts, New Hampshire) or are ideologically liberal (Connecticut, California). Arizona is one of two exceptions; they had a particularly large real estate bust. Kansas I can’t explain – but they only show up because of “proposed” increases. I will go out on a limb and predict that most of those increases will never be enacted.

By the way, the two-thirds requirement for raising taxes in California, which effectively gives veto power to moderate Republicans, does not seem to have had the ill consequences attributed to it – California is #2 on the list.

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U.S. manufacturing continues to impress

Paul Krugman’s column today in the Times is full of the usual “everything bad is the fault of Republicans” drivel.  He is trying to claim that recent good news on manufacturing is the result of the Administration keeping the value of the dollar low in the face of GOP opposition.  So, a weak dollar leads to more exports.  Hardly newsworthy.

But consider this statement:  “In the 1990s, U.S. manufacturing _________ was more or less steady. After 2000, however, it entered a steep decline. The 2001 recession hit industry hard, while the bubble-fueled expansion of the decade’s middle years — an expansion marked by a huge rise in the trade deficit — left manufacturing behind.

Let’s look at a graph, and then I’ll explain the word I omitted.  Below is the industrial output for the US since 1986 (I’ve taken annual averages of the monthly data; see here for the original Federal Reserve data):

Official Federal Reserve data. 2011 data includes the first four months of the year. Industrial output is measured in real terms, with 2007 as the base year.

What the picture shows is that far from “holding steady,” industrial output exploded during the Clinton administration (I’m a little shocked that Krugman forgot to mention this), and do you notice the lack of a “steep decline” after 2001?  A dip, yes, but 2007 levels were still 8.3% higher than 2000 in real terms (nothing compared to the growth in the 1990s, but still hardly a decline),

So what is happening here?  Why in an article dedicated to manufacturing does Krugman’s description differ so markedly from the actual data?  The answer is found in the word I omitted from his quote.  He is talking about manufacturing employment, and I’m talking about output.

Trends in employment are interesting in their own right, but Krugmanites mischaracterize US economic performance by slipping in employment numbers when they should be talking about output.  My guess is that that the majority of Americans who pay any attention to economic news think that US manufacturing has undergone a dismal decline in recent decades.  In this piece, Krugman quotes a Russian engineer saying, “I never see Americans actually making anything.”  This misperception is caused by a continual onslaught of substituting employment numbers for output numbers.  We have lost manufacturing jobs, and we do import a lot of goods from abroad, but US manufacturing continues to hum along, even despite recessions.

There is another name for declining manufacturing employment.  It is called technological progress.  Technology makes workers more productive.  Simply, we can make more and more stuff with fewer and fewer people as time goes on.  This is what progress entails.   Not that long ago, almost all humans were involved in the agriculture business.   Now, only a tiny percentage (in the developed world) produce food, and even if we count all people involved in the production and sale of food, including restaurants, it is not that high.  Do we refer to this as a decline in the food industry?  Only poor, undeveloped countries have large agricultural sectors.

Structural shifts in the economy can have serious effects on people’s lives, especially those with either low human capital or capital that is highly specialized in sectors experiencing employment declines.  Those effects should not be trivialized, but let’s stop the incessant whining about the decline of US manufacturing.  Even given the Great Recession, our industrial output continues to impress (and imagine what it could be without the massive weight of productivity killing regulations imposed by the Feds and the States).

A strong manufacturing sector will continue in the future unless, of course, the government tries to “fix” it.

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Liberty: the example of circumcision

The Seattle Times, Slate, and other outlets have run interesting stories in the last couple of days discussing a new initiative that will appear on this November’s ballot in San Francisco–and hold onto your privates, gentlemen: It would ban circumcision for all minors (under age 18), rendering it a misdemeanor punishable by up to one year in jail or a $1,000 fine. It would contain no religious exemptions. While this is just a ballot initiative–not yet an approved ordinance–the mere threat of its enactment (and the fact that its supporters managed to get over 7,000 signatures) bothers my libertarian soul.

Media reports obsess about the First Amendment implications of such an ordinance, though honestly, since the Supreme Court’s decision in Employment Division v. Smith (1990), any state or local law of “general applicability” that burdens the free exercise of religion will be subject only to low-level rationality review (federal actions are subject to more rigorous review under the Religious Freedom Restoration Act). Since the supporters of the proposed circumcision ban claim that circumcision is a form of “genital mutilation” that is painful and unnecessary, it would seem to sail easily over the “rational basis” hurdle.

So frankly, I’m not all that interested in the First Amendment implications, though Smith is an intriguing case worthy of reconsideration. Instead, I’m struck by the lack of attention given to the individual liberty (substantive due process) implications of San Francisco’s proposed circumcision ban. I had thought it long settled that parents have a broad (though admittedly not limitless), presumptive liberty to raise their children as they see fit. Circumcision may indeed be painful to an infant, but is it any more so than piercing a little girl’s ears? Or tattooing your child? In either case, there is temporary pain and an extremely low risk of serious harm. In both cases, the procedure is undertaken to satisfy the parents’ own cultural or aesthetic preferences.

Supporters of the ban try to analogize circumcision to female genital mutilation, but I’m just not buying it. Female genital mutilation involves cutting out the clitoris, rendering the girl disfigured and permanently unable to have a normal, healthy sexual life. Circumcision obviously has no such long-term effects, as the 80 percent of U.S. men who’ve undergone the procedure can attest. Moreover, circumcision may actually have health benefits for some– it has been considered a way to lower the risk of AIDS in African communities ravaged by that disease.

On a broader level, I’m bothered by the fact that–particularly in an ultra-progressive city like San Francisco–there’s a decent degree of support for nanny-state restrictions on individual liberty, particularly when it relates (at least tangentially) to an individual’s choice of something so fundamental–”deeply rooted” in our history and tradition–as to what medical or aesthetic procedures to undergo. I know we are talking about minors here, but again–parents are presumptively allowed to make medical and aesthetic decisions for their children all the time. But then again, progressives are just as aggressive about nanny-state intrusions into individual liberty as conservatives, when it suits their agenda–witness progressive-supported bans on foie gras in California beginning in 2012 and the FDA’s recent decision to revoke approval of Avastin as a treatment for breast cancer.

Would love to hear others’ thoughts.

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Malcolm X – His Birthday, Resources, and His View of the Right to Bear Arms

Today might have been Malcolm X’s 86th birthday had he not been assassinated in New York City on February 21st, 1965.  It would have been interesting to see how his life and political views would have played out had it not been for those murderous thugs responsible for his death.

As I’ve written before, I’m quite interested in the life of Malcolm X, particularly how his views on the civil rights movement shifted over time.  Those of you who share that interest should probably examine Manning Marable’s new biography,  Malcolm X: A Life of Reinvention.  I’m not sure yet what to make of Marable’s interpretation of X.  It isn’t exactly Alex Haley’s account.  Moreover, the book has been quite controversial given that Marable discusses the possibility that Malcolm X engaged in homosexual behavior and that his marriage with Betty Shabazz was not exactly blissful.  Mr. X’s grandson just today was quoted in the New York Amsterdam News criticizing the book, Marable, and that author’s suggestions about Malcolm X’s personal life before and after his conversion to Islam.   

Those interested in Mr. X would probably also benefit from Columbia University’s excellent resource, The Malcolm X Project - especially if you, like me, want to sift through primary sources and not just secondary ones before coming to any conclusions.  The layout of the site is a bit non-intuitive, but it contains a remarkable array of resources on its subject – including hard to find news articles from sources like the Amsterdam News.       

One interesting aspect of Malcolm X’s thought worth noting on his birthday is his view of the individual right to bear arms (to which I was first alerted by historian David Beito).  Several pieces at the Malcolm X Project relate to his take on it.  For example, here, here, and here.  What you’ll find is that Malcolm X was a supporter of the individual right to self-defense and the individual right to bear arms.  As quoted in Marable’s biography, X argued that “It is lawful for anyone to own a rifle or a shotgun and it is everyone’s right to protect themselves from anyone who stands in their way to prevent them from obtaining what is rightfully theirs” (pg. 304).  At one point according to Marable, X even advocated that African-Americans start gun clubs to exercise that right.  Here is a speech in which Mr. X discusses the 2nd Amendment, around minute 3:00:

Here is what Malcolm X said about gun rights in his famous “The Ballot or the Bullet” speech:

Last but not least, I must say this concerning the great controversy over rifles and shotguns. The only thing that I’ve ever said is that in areas where the government has proven itself either unwilling or unable to defend the lives and the property of Negroes, it’s time for Negroes to defend themselves. Article number two of the constitutional amendments provides you and me the right to own a rifle or a shotgun. It is constitutionally legal to own a shotgun or a rifle. This doesn’t mean you’re going to get a rifle and form battalions and go out looking for white folks, although you’d be within your rights—I mean, you’d be justified; but that would be illegal and we don’t do anything illegal. If the white man doesn’t want the black man buying rifles and shotguns, then let the government do its job.

Here is one of my previous posts on Malcolm X on schools.

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Character and consent

The latest news on Dominique Strauss-Kahn is that he has been formally indicted by a grand jury and has made bail, though he is confined to 24-hour confinement in a Manhattan apartment, as opposed to the 11 by 13 jail cell at Rikers where he had been staying—and to which he will hopefully return one day.

Apparently DSK (seems he is famous enough in Paris to go by his initials, like JFK, who seems to have shared a fair amount in common with DSK), is going for the “it was consensual” defense, ala Kobe Bryant and other well-heeled rapists who think that sexual favors from the help are included in the price of a room.  This defense strains credibility, of course.  It is hard to imagine a 32-year-old single mom from West Africa, working as a maid to support her daughter, is going to be beguiled by this wrinkly, old French fart, jumping naked out of the bathroom to surprise her as as she was going about her job of cleaning his hotel room  (forgive me for putting that image in your head).

Conspiracy theorists are saying that this is an elaborate Sarkozy plot to undermine DSK’s shot at the French Presidency.  It is hard to imagine, first, that the French could actually pull off such a plot and, second, that they would choose a sex scandal.  I mean, wouldn’t they pick something really shocking to the French, like DSK eating a cheap shepherd’s pie at some London pub or something?  Illicit sexual conquest is a badge of honor for French politicians.

But this isn’t about sexual conquest; it is about violent sexual assault.  Whether the alleged sex was consensual is the key legal issue in the case, and the one that always makes cases like this difficult.   Proving a rape allegation should be difficult, since depriving an innocent man of his liberty for such a crime would be a worse injustice than the assault itself.  Given his money and connections (and the lack thereof of the victim in the case), I would give him even odds of beating this rap, guilty or not.

But consent isn’t the only ethical dimension of the case.   Even if he is innocent of rape, he is hardly innocent of serious moral lapses (of which he apparently has a long history).  The French like to separate their sex from their politics, but I don’t think any serious view of public ethics would argue for such a separation.  Even if there was consent, doesn’t his behavior reveal a lot about how he views women, the working class, those who are subordinate to himself in class and status and, well, humanity in general?  Can a man who is such a slave to his libido that he would engage in sex on a moment’s notice with a stranger he knows nothing about be someone who should have the public trust?  If he is willing to take such risks to his reputation in exchange for a cheap thrill, what else is he capable of?

People like to say that behavior in office should be the standard by which we judge public officials, not their private behavior.  Given that all people have weaknesses and vices, there is some merit to that argument.  On the other hand, to be a person of character and integrity is to be a person who is the same in public and private.  Indeed, that is pretty much the definition of integrity.  Maybe it is unrealistic to expect public officials to have high moral character, but it seems like we should at least avoid scum like DSK.

Ironically, the IMF, the organization headed by DSK until this week, is one that holds enormous power to affect the lives of millions of poor people.  People like the young women he so brutally assaulted, in fact.   Hopefully his arrest will remove this louse from doing any more damage for awhile.  Its too late for the women he has assaulted, unfortunately.

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The Koch Foundation and Florida State

Conversations among academics have been buzzing lately with talk of the Koch Foundation’s alleged interference in the Florida State Economics Department. The rumor was that the Koch Foundation was requiring veto rights over the hiring of new faculty from a $1.5 million grant to the department, which would indeed have seemed heavy-handed. According to James Piereson’s full-throated defense of the Koch Foundation, the foundation in fact collaborated with the department in putting together a list of 50 (later expanded) job candidates, from which two were ultimately hired. Vetting the applicant pool is apparently a common practice among grants-giving foundations and certainly does not have the sorts of potentially negative implications for faculty self-governance that the initial rumors suggested. Will the new facts put the controversy to rest? We’ll see.

More Pileus on the Kochs here.

Disclosure: Several of us here at Pileus have at one time or another received small grants from Koch-related outfits, including myself.

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Institutional Failure and the Tragedy of Climate Change

I am a Libertarian. I believe that market processes based on secure property rights and competitive ‘exit’ provide the best hope of discovering ‘solutions’ to the vast majority of socio-economic problems including environmental ones. Profit-driven capitalism and its desire to ‘make people pay’ for goods they were previously consuming ‘for free’ provides the key to solving most environmental dilemmas – it is the embodiment of the ‘polluter pays principle’. Seen through this lens, there are many environmental assets currently held under ‘open-access’ conditions or subject to government ownership and/or regulation that could and should be ‘privatised’ – whether at the level of individuals or companies, or as suggested by Elinor Ostrom at the level of cooperatives and mutual associations. These include land-based assets such as forests, minerals, and wildlife, which can be subject to various ‘fencing’ technologies; stationary resources such as oyster beds; and water-based assets such as rivers and inshore fisheries that are also relatively excludable with existing technology. Empirical studies of such assets under open access, government ownership and private ownership show that tradable property rights promote more sustainable management practices (for a summary of this evidence, see L. De Alessi, 2005). As exclusion technologies evolve this class of assets may be extended to include even such resources as offshore fisheries and some regional forms of pollution.

All this said, as a Libertarian I have no hesitation in recognising that anthropogenic climate change presents a potentially serious ‘market failure’. Even allowing scope for entrepreneurs to develop new techno-institutional devices Libertarians need to bite the bullet and recognise that ‘privatising the atmosphere’ is a fantasy. To make this admission, however, is not to suggest that there is any realistic non-libertarian solution to the problem. On the contrary, in order to reach this conclusion one would need to subscribe to at least three assumptions that are no less fantastic than the idea of privatising atmospheric resources. The first of these assumptions is the belief that government’s can be trusted to develop cost effective schemes to reduce emissions given their abysmal record at estimating accurately the costs of much more basic public infrastructure projects. The 1% of GDP estimated by the Stern Report to be the annual cost of reducing carbon dioxide emissions seems remarkably optimistic in view of the recommendation that cuts in emissions per unit of output need to reach the order of 80% by 2050. If Stern’s projected costs turn out to be as inaccurate as was the much simpler task for UK authorities of estimating the cost of the Scottish parliament building (and countless other similar schemes) – which came in more than 1000% above target – then the economic costs of climate change policies may turn out to be far greater than the costs of climate change itself.

The second assumption is that global policy makers have the knowledge to manage climatic patterns via adjustments to emissions and that they can in the face of diverse international incomes, preferences and attitudes to risk, agree on the parameters necessary to determine an appropriate rate of reductions. It seems highly unlikely that agreement will ever be reached on some sort of global cost v benefit analysis because depending on which particular climate simulation model proves accurate, significant parts of the globe may be net beneficiaries from climate change. Russia in particular would likely be a net beneficiary on some estimates owing to the improved agricultural productivity resulting from a warmer climate and fewer cold-related deaths during the winter months (Nordhaus and Boyer, 2000).

The final assumption is the belief that the type of global political institutions needed to develop climate change policies could enforce credible policies and be held accountable for their actions. While it is true that large scale environmental issues, of which CO2 induced climate change is the most important are unlikely to bring forth adequate solutions from individual nations ‘acting alone’ owing to free-rider problems and the difficulty of identifying individual ‘polluters’, these collective action problems will not be eradicated with the creation of global political structures. On the one hand, such structures would face massive monitoring costs in seeking to discover whether their own regulations are being enforced. In addition, they would need to commit to the enforcement of credible punishment procedures against transgressors. How exactly, a state like China or the United States might be ‘punished’ is left unanswered. Would such nations impose fines against themselves, and if not would other nations resort to protectionism with all its attendant costs or worse still (though less credibly) military action if they did not? And, finally there would be enormous principal v agent problems in holding to account the relevant global structures. The lack of accountability witnessed in existing trans-national bodies such as the European Union and the United Nations hardly fills one with confidence that global climate change institutions would not systematically abuse the enormous powers that would need to be at their disposal.

To summarise, I contend that there may be no effective institutional solution to the ‘mother of environmental dilemmas’. This is the tragedy of climate change.

References
De Alessi, L, (2005) Gains from Private Property: the empirical evidence, in Anderson, T, McChesney, F (eds.) Property Rights: Cooperation, Conflict and Law, Princeton: Princeton University Press.

Nordhaus, W., Boyer, J. (2000) Warming the World: Economic Models of Global Warming, Cambridge: MIT Press.

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Journalists and Basic Economics

One of the most frustrating things about reading the newspaper is that journalists frequently display a nearly absolute ignorance of basic economics.  For example, I remember reading a news story back around the time of Hurricane Andrew discussing how that natural disaster had a silver lining: it would be good for the economy!  Yes, that was Bastiat rolling in his grave (which he must do a lot of given the ubiquity of the broken windows fallacy).  

Since sports ”journalists” are probably the least erudite of the bunch, you basically have to turn off all knowledge of statistics (especially knowledge of the myth of the hot hand), logic, and economics when you read the sports page or risk missing all of the pleasure of the activity.  The key is to remember that reading the sports page is a consumption good not an educational activity!  But it is particularly frustrating to hear sports scribes say stuff like how you have to play a high-dollar athlete so that you can get something for the money.  Hello, sunk costs and opportunity cost?!  If past behavior is an accurate guide to future behavior, I’m pretty sure we’ll be hearing these arguments a lot among baseball journalists as Derek Jeter and Jorge Posada continue to circle the drain.    

Whether it is for reading (or writing) the first page or the sports page, there are probably few things worth doing in college more than taking a basic economics class or two — and that comes from a political scientist!*

Anyway, here is a journalist who understands economics:

*If I had my way, universities such as mine would design a PPE major (philosophy, politics, and economics) since such a degree provides a nice balance of economic theory and concepts, philosophical tools and theories, as well as knowledge of the political institutions and constraints that impact how we live, work, and play.

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Quotation of the Day – On Presidential News Conferences

Sid Davis (former NBC Washington bureau chief) on Presidential news conferences:

If you watch an Obama news conference, and watched a Bush news conference previous to that, where correspondents sit in their seats with their hands folded on their laps, [it's] as if they are in the room with a monarch and they have to wait to be recognized by the president.

I would bet things are worse now with Obama in the White House since most of the press are sympathetic towards him and his policy goals.  People mock Fox for cheerleading for Republicans but many studies of media bias show that news reporters and most news outlets are biased in a liberal direction (though admittedly this is a controversial issue among scholars).  For example, UCLA political scientist Tim Groseclose and Jeffrey Milyo of the University of Missouri argue in the Quarterly Journal of Economics that ”all of the news outlets we examine, except Fox News’ Special Report and the Washington Times, received scores to the left of the average member of Congress. Consistent with claims made by conservative critics, CBS Evening News and the New York Times received scores far to the left of center.”

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Summer Reading Suggestions

Many a Republican legislator would argue that now that classes are over and my grading is done, I don’t have to work again until September.  Although the “summers off” description might be true for some professors, it isn’t for most profs I know.  Myself, I’ll be revising syllabi, trying to get a couple of scholarly articles out the door, doing talks and interviews on past research, and catching up on scholarship published in my field.  I’ll also be trying to read some other things that have lingered on my shelf during the past year.  

If you are looking for a few things to read this summer, here are my recommendations (some that I’ve read over the last year, some that I’m going to read this summer based on reviews and recommendations from others):

1.   Damon Linker.  The Religious Test: Why We Must Question the Beliefs of Our Leaders

2.   James C. Scott.  Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed.

3.   James C. Scott.  The Art of Not Being Governed: An Anarchist History of Upland Southeast Asia.

4.   Karen Valby.  Welcome to Utopia: Notes from a Small Town.

5.   Manning Marable.  Malcolm X: A Life of Reinvention.

6.    Bruce Ramsey.  Unsanctioned Voice – Garet Garrett, Journalist of the Old Right.

7.   Tracy Kidder.  House.

8.   Witold Rybczynski.  Home: A Short History of an Idea.

9.   C. Bradley Thompson.  Neoconservatism: An Obituary for an Idea.

10.  Herbert Spencer.  The Man Versus the State.

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Whistling Past the Grave Yard

There has been lots of good news recently regarding America’s fiscal state of affairs. The life spans of Medicare and Social Security have been adjusted down (and this ignores the fact that the trust funds are not stores of wealth. Under current conditions, the only option is to borrow funds to cover the transfers from the trust funds to their intended use). And then there is the debt ceiling.

One immediate response is: Problem, what problem? The rates on Treasuries are low suggesting that the markets are not taking the risk of default seriously. I am not certain how to interpret the low rates on Treasuries. Does this suggest that the markets believe (1) that we will find a workable solution before Armageddon;  (2) that members of Congress are so craven that ultimately they will blink and raise the debt ceiling after a few symbolic concessions; or (3) none of this really matters because, after all, the USA does not have to play be the same rules as Greece, Ireland, Portugal et al?

Regardless of how one interprets the Treasuries, is there any reason to believe that Democrats or Republicans are committed to finding a path to fiscal stability when all are intent on maximizing short-term political returns?

As a generalization, Republicans continue with the illusion that reductions in discretionary spending, reforms to means-tested programs, and cuts in foreign aid will do the job. New revenues are unnecessary and, in fact, additional tax reductions might stimulate new growth. Democrats nurture the illusion that eliminating the Bush tax cuts and ending Bush’s two wars will do the trick. And since every Democratic spending program is, by definition, an investment in America’s future, children, competitiveness (you name it), they are hesitant to propose any significant cuts in expenditures.

Both sides agree on the need to address “waste, fraud, and abuse,” of course. But those terms are defined so narrowly as to be completely irrelevant.

Voters, it appears, are quite happy to embrace tax cuts for the rich and an expansion of politically popular entitlement programs. But as recent polls reveal, even so called Tea Party supporters overwhelmingly reject any cuts in Medicare, Medicaid, and Social Security.

There are some voices of sanity.  Even if you don’t buy all of Paul Ryan’s plan (I certainly do not), he is making the case for politically unpopular cuts. The recent editorial Alan Simpson, Erskine Bowles, Pete Domenici, and Alice Rivlin shows that it is possible to get bipartisan recognition of the magnitude of the problem and the difficult sacrifices that will be needed. Of course, Ryan is an anomaly and the Bowles-Simpson-CEA crowd is populated by people who have no reason to fear the phalanx of angry voters who focus intently on maintaining or expanding existing benefits without increasing levels of taxation.

My fear: short of an apocalyptic collapse, elected officials will continue to do what elected officials do. They will appeal to constituents’ myopic demands and whistle past the grave yard, fearing that to do otherwise would ensure their name would end up on a political gravestone.

If you are interested in some thought provoking posts on the debt ceiling from the past few days, I recommend the posts by Tyler Cowan and MeganMcArdle.

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For all sad words of tongue or pen, the saddest are these “it might have been.”

It is official: the Donald will not be running for the presidency.

“I maintain the strong conviction that if I were to run, I would be able to win the primary and ultimately, the general election,” Trump said in a statement.

Although the Donald likely overestimated the inevitability of his ascension to POTUS, you must admit that he would have livened up what appears to be a rather lackluster set of GOP candidates. Let us hope that the “Girl with Far Away Eyes” (aka Michele Bachmann) remains in the contest.

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Interposition: Part Six: The Virginia and Kentucky Resolves

Both Jefferson and Madison were keenly aware that a direct assault upon the Alien and Sedition Acts would likely bring on them the same charges of seditious libel as had been leveled against Congressman Cabell of Albemarle. Wholly aside such risk, the personal views of both men were already well established. Madison had resisted from the floor of the House everything from the bank bill forward, as had Jefferson in various capacities from within the Washington administration and later on from Monticello. In fact Jefferson had been supporting challenges to seditious libel through various jury petitions in Virginia. 

What became apparent first to Jefferson and then to Madison was the need for a fundamental statement by the peoples of the states or their representatives. Such an act would stand the best chance of awakening Americans to the dangers of the particular constitutional constructions being proffered by the Federalists as well as to the specific abuses in the offending acts. Consequently, both men worked in secret to coordinate the involvement of certain state legislatures in late 1798.

In pursuing this course of action, both men were relying directly on the idea of the hue and cry, the idea noted in Hamilton’s 84^th essay. Both produced draft resolutions, Jefferson for Kentucky and Madison for Virginia, that made good on the claim that the states would be “so many sentinels over the persons employed in every department of the national administration.” To that end, both resolutions, as passed by their respective legislatures, Kentucky on November 10 and Virginia on December 21, were purely declaratory in nature.

It is true that in the first case, Kentucky’s language was stronger. The Alien and Sedition Acts were declared to be “void and of no effect,” “void and of no force,” and “utterly void and of no force,” but no interdiction was declared. The state was not going to obstruct federal agents. It was not going to arrest or in any way intercept national authorities. Indeed, it merely instructed its “senators and representatives in Congress” to “procure, at the next session of Congress, a repeal of the aforesaid  unconstitutional and obnoxious acts.”

Jefferson’s original draft announced that “a nullification of the act is the rightful remedy,” but even here, he merely noted that Kentucky was “from motives of regard and respect for its co-States,” communicating with them on the subject in hopes of coordinating a response. The final version approved by the legislature, preserved this communicatory function, but worked through the offices of the governor, rather than a committee of correspondence, which was Jefferson’s original idea. From this, it was hoped, the states would “concur in declaring these acts void and of no force, and will each unite with this commonwealth, in requesting their repeal at the next session of Congress.”  

Virginia’s version was not far off the mark in tone, but where Kentucky used “void and of no force,”Virginia declared that “the aforesaid acts are unconstitutional.” Publius had already observed that unconstitutional was synonymous with void and of no force. The real difference between the two statements is not found here.

With Virginia’s Resolve, no appeal is made to instruct Congressional representatives, but simply a request that each state take “the necessary and proper measure…for co-operating with this State in maintaining unimpaired the authorities, rights, and liberties reserved to the states respectively or to the people.” Usually counted as far more measured in response, here Madison leaves open the possibility of direct interference through coordinated state actions. Even more peculiar is his use of the phrase found specifically in the Constitution, “necessary and proper.”

In the fourth article of the Virginia Resolve, Madison expounded on his particular grievance against the Bank of the United States:  the abuse of the necessary and proper clause. He does not specifically quote the words, but his reference would have been unmistakable to anyone at the time. Thus he lamented the spirit which seeks “to enlarge its powers by forced constructions,” revealing “a design to expound certain general phrases…so as to destroy the meaning and effect of the particular enumerations….”  Why use the necessary and proper clause to concludeVirginia’s resolution?

Without using words like “void” or “of no force,” words that one might expect to signal the announcement of a more radical intercession, the Virginia resolve, in point of fact is ominously more radical for what it did not explicitly say. Madison’s choice of words conveyed a sense of urgency that hint at more extreme action: “the States, who are the parties thereto, have the right, and are duty bound, to interpose for arresting the progress of the evil, and for maintaining within their respective limits, the authorities, rights, and liberties appertaining to them.”

“Arresting evil” and “maintaining rights” are words that do not wait. But aside from communicating the illegality of the offending acts to her sister states,Virginia’s resolve falls silent as to any specific measure or response. Madison simply ended with a call for the “necessary and proper measure.” A startling use of words indeed! It was a slap in the face of Federalists, casting back at them the very clause which they had rendered ambiguous by their own “forced” constructions of the Constitution!

Thus among the earliest acts of interposition was the “hue and cry.”

In his January 1799 statement to explain Virginia’s 1798 resolution, Madison directly noted the duty of “the state legislature to watchfulness.” It was the act of Hamilton’s sentinels fulfilling the role that Publius had set out for them, and it was done in defense of constitutional limits, “to preserve unimpaired the line of partition.” Interestingly, he specifically cited Virginia’s statement of ratification to support this understanding, and then went on to contend for the need of interposition on the part of the states, quite explicitly revising his thoughts since the 39^th essay.

Rather than resting all authority for resolving disputes on the national court, Madison drew from his understanding of the people of the states the idea of the Constitution as a national compact, arguing now that the Supreme Court possessed final authority only over the operations of the general government, “but not in relation to the rights of the parties of the constitutional compact, from which the judicial as well as the other departments [executive and legislative] hold their delegated trust.” If the judiciary “may exercise or sanction dangerous powers,” then the states as parties to the compact “must themselves decide in the last resort, such question as may be of sufficient magnitude to require their interposition.”  

In its follow-up statement of 1799,Kentucky moved the issue a bit further down the road,  observing that a “nullification” would be the “rightful remedy,” but ended only with “its solemn PROTEST.”

In these various statements, the resolves of Virginia and Kentucky made good on the intentions of the state ratifying conventions and set a firmer precedent for future action, though at the time, many of the states responded negatively to their presentations. New York, for example, had fallen into the hands of the Federalists shortly after the ratification of the Constitution and in the wake of anti-French sentiment.  But the populations were still very much closely divided, and in the election of 1800, Jefferson and the Republicans were largely victorious outside of the New England states. The influence of the resolves in this outcome is a matter of some debate, but they likely helped to embolden the republican press which had its influence on the elections. In that respect, they were not in vain.

More importantly, the arguments which the resolutions kept alive, had their influence in later very critical debates picked up, not so much by the Jeffersonians or their heirs, but by the New England Federalists, who soon began to resent the actions of the republicans in the nation’s Capital, especially as they related to growing tensions with England and the interference with trade…

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Not free to move about the country

A few weeks ago I took my family from Tucson down to Tombstone. That’s a drive of a little over an hour (and well worth it, if you’re into kitschy Old West stuff, or just interested in the history of the American West). On the way back we ran into a permanent ICE (Immigration and Customs Enforcement) checkpoint. This was one fairly insignificant data point in how immigration is being managed (or, better, mismanaged) in America at this point, and the experience indicated problems at two levels.

First, I was initially appalled to see drivers of the cars queued up ahead of my handing papers through their windows to the ICE officer to check. I thought: “No way am I submitting papers to travel on a state highway in this country.” (The road crosses no state boundaries, let alone the border to Mexico. It runs roughly away from that border, which is about 40 miles south of Tombstone.) When we pulled up, however, the ICE officer didn’t ask for papers. He made some attempt at humor. I was not amused: I don’t think people with guns checking American citizens as they travel peacefully are amusing at all.

As we drove on (in my typical lead-foot style), it became apparent what had gone on. The cars queued up ahead of me were driven by people who looked as though they could have been illegal immigrants. We are lucky enough not to have that thought of us, so we were spared the indignity of having to prove that we were within the law; these people were not. And now, with the charged atmosphere on immigration here in Arizona, that probably is an experience they have fairly frequently.

That is a significant problem. Here are people who (if the ICE officer was doing his job properly) were conducting themselves perfectly lawfully and peacefully within the state of Arizona. But they have to prove their legality whenever (apparently) ICE decides they must. That is appalling. Of course the appalling nature of this situation will surprise nobody who has to put up with it routinely. But it was the first time I encountered it in this bald form.

That seems to me a serious problem for a nation that styles itself as “conceived in Liberty, and dedicated to the proposition that all men are created equal.” But, it seems to me, it is the lesser problem on display here. For the fact is that ICE exercises jurisdiction over the right to travel over not just those who might be illegal immigrants, but anybody traveling that road. Though they did not stop me, nor ask for papers, it is clear that they take themselves to have the prerogative to do so. In other words, not just those who might have immigrated illegally, but every person who wishes to travel that road, does so only with the permission of ICE.  The liberty to move about peacefully and lawfully is gone for all of us, not just immigrants, legal or otherwise.

How did that happen?  At one level, it’s obvious enough: people fed up with the problems they attribute to illegal immigrants provided the political muscle to implement policies like these. More worrying is that the cost to the liberty of everybody was never appreciated going in, and no doubt is rarely appreciated now. It is another of those tradeoffs of liberty for (perceived) security that Franklin warned us about. The more accustomed to such tradeoffs we get, the better his judgment fits what we have become.

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Gingrich 2012

Is there anyone not related to or currently married to Newt Gingrich who thinks his candidacy is a good idea or something America needs?  Well, I’m sure there are some Republicans and lots of Democrats who do.   

But sorry, Newt was so 1994.  Admittedly, Gingrich burned bright as an insurgent member of the minority leadership and then Speaker in Congress.  His (and others’)Contract with America was good politics and good policy (though the consequences are arguable).  However, he fell fast and hard – and I have a difficult time thinking he’ll catch on as the future of the Republican Party.  I think Newt would probably be better off focusing on his interests in dinosaurs and space travel and leave 2012 to Daniels, Johnson, Paul, and others.

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Learning the Wrong Lesson

Paul Krugman had a piece in the NYTimes yesterday entitled “The Unwisdom of Elites.”

Krugman objects to the claim that the fiscal problems that beset the US and many European nations can be attributed to the public: “The idea is that we got into this mess because voters wanted something for nothing, and weak-minded politicians catered to the electorate’s foolishness. So this seems like a good time to point out that this blame-the-public view isn’t just self-serving, it’s dead wrong.”

Unsurprisingly, Krugman blames the current situation on elites and, to be more precise, Republican elites. The three causes of our current fiscal problems include: George W. Bush’s tax cuts (promoted “in the service of his party’s ideology, not in response to a groundswell of popular demand”), George W. Bush’s war in Iraq (“something he and his advisers wanted to do, not because Americans were clamoring for war against a regime that had nothing to do with 9/11”), and the economic collapse that was a product of “a runaway financial sector, empowered by reckless deregulation. And who was responsible for that deregulation? Powerful people in Washington with close ties to the financial industry, that’s who”).

Krugman is intent on getting the story right for a simple reason: “by making up stories about our current predicament that absolve the people who put us here there, we cut off any chance to learn from the crisis. We need to place the blame where it belongs, to chasten our policy elites.”

I largely agree with Krugman on the tax cuts and the war. As for the financial collapse, however, we get a melodramatic portrayal that obscures the details of what was essentially a tragedy. There were some black hats in Congress who were providing benefits to the financial, real estate and construction industries in exchange for donations. There were ideologues who never saw a regulation worth retaining. There were some well-intentioned policymakers who hoped to leverage credit markets as tools of social engineering. There were speculators who wanted to take full advantage of relaxed underwriting standards. And yes, there were millions of Americans who wanted to purchase houses they could not afford who had little skin in the game. Favorable tax treatment (the Taxpayer Relief Act of 1997), low interest rates from the Fed, and Congress/HUD pressure on Freddie and Fannie to flood the market with liquidity all fueled the housing market. Deregulation was most certainly part of the problem.

As with so many policy problems, a complete account requires a consideration of elites, transfer-seeking interests, institutions, and the great unwashed masses. Even if economists are known for their simplifying assumptions, to focus on elites alone is to create a cartoonish account. As Krugman recognizes: “by making up stories about our current predicament …we cut off any chance to learn from the crisis.”

What is particularly interesting is that even if one accepts Krugman’s account, one may none the less conclude that he has lost the substance by grasping at the shadow. If this is a story regarding the “unwisdom” of the elite the lesson would seem to be to reduce the capacity of the elite to provide transfers, engage in nation-building, and leverage markets to generate campaign donations or pursue some idyllic vision of the “ownership society.”

Despite the hints of populism in this piece, I am assuming that the message is not an indictment of the elite per se, but of the elite that do not embrace one’s favored ideological agenda. Social engineering remains the best response. Just make sure you vest the authority in a wise elite.

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Hayek versus Habermas: Round 3

In this final round of the H versus H contest I want to question the claim that communication in markets is ‘distorted’ by ‘money power’. According to this Habermasian refrain not only do markets embody and reproduce inequalities they also corrupt the democratic process by allowing those with deeper pockets to buy support and to entrench established positions. If democracy is to fulfil the ideal of ‘un-coerced discourse’ where decisions are based on the ‘power of the better argument’ rather than on the political clout that money can buy then a fundamental redistribution of wealth is required in order to launch a process of democratic renewal.

There are several aspects of this argument that need to be dealt with. First is the failure to recognise that far from ‘distorting’ social communication some inequalities (though not all) may actually aid the process of communication. As Hayek noted in The Constitution of Liberty, ‘if the results of individual liberty did not demonstrate that some manners of living were more successful than others then much of the case for it would vanish’ (p.85). In markets, for example, it is precisely the unequal discovery of profit opportunities by more alert actors that facilitates the spread of the most successful production and consumption models via a process of imitative learning. Habermasians themselves seem to acknowledge the inevitability of unequal influence by suggesting that those who give better arguments should exercise greater influence over the allocation of resources. If inequalities resulting from the exercise of the ‘better argument’ are acceptable, however, then it is not clear why inequalities which result from persuading others to purchase goods are not. Indeed, as noted in my first post there is a strong case that markets may be more egalitarian than deliberative democratic processes precisely because they do not rely exclusively on formal argumentation. Procedures that privilege the use of explicit reasoning systematically exclude those who are less able to engage in articulate persuasion but who may still possess valuable knowledge embodied in the exercise of entrepreneurship or a practical skill.

Inequalities in markets may, of course, be ‘reproduced’ owing to the ‘inheritance effect’ where people invest in the wealthy or those with an established reputation simply because they have wealth or reputation rather than backing a newcomer who may have the better ideas. Deliberative democratic procedures are, however, also prone to a variant of this ‘inheritance effect’. Those who have exercised the ‘power of the better argument’ in the past will inevitably come into the deliberative process with a greater stock of social status in the same way that those with a track record of prescient entrepreneurship enter markets with greater buying power. Moreover, because democratic procedures tend to encourage a ‘group centred’ rather than an individualised form of representation, people may ‘inherit’ a hearing for their views by mere virtue of their attachment to those groups whose representatives have won out in earlier rounds of public debate. Spokespersons for business associations, trades unions or environmental groups may be invited to participate in a public forum primarily because previous representatives of these groups have offered persuasive arguments. In principle, there seems little difference between such cases and those where a person inherits greater buying power in a market because a family member was a successful entrepreneur.

Now, it might be argued that the capacity to maintain such ‘undeserved’ influence in a democratic forum depends on the ability of today’s representatives to continue offering good arguments. Yet, the same logic may be applied in the case of inherited wealth. In a competitive market the capacity of the wealthy to maintain their standing will depend on whether they invest their assets in ways which enhance consumer welfare. Habermasians argue for wealth redistribution prior to the process of public debate on grounds that private ‘money power’ exercised via campaign contributions and political advertising enables the wealthy to manipulate the process in order to entrench established positions. In this they will find no argument from Hayekians. The response to the financial crisis confirms only too well that bail-outs justified in the name of ‘saving capitalism’ were actually designed to save key elements of the ruling financial elite. The capacity of the wealthy to maintain their position in ways which diminish consumer welfare is not, however, an intrinsic element of a market economy but results from the capture of an interventionist state apparatus that shelters the wealthy from the ‘creative destruction’ characteristic of unfettered markets. If we want as Hayek puts it to ‘save capitalism from the capitalists’ then we should not seek to expand ‘democratic control’ over markets but to limit the scope of state intervention whether conducted democratically or otherwise. Of course, this ideal may be dismissed as a libertarian fantasy. I submit, however, that it is a more worthy, realistic and attainable ideal than the fantasy of a perfectly egalitarian process of public deliberation.

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National Journal on the FSP and NH Primary

I was recently interviewed for a National Journal story, which has just come out, on how the Free State Project may influence the 2012 presidential primary. Pileus also gets a link!

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Facebook and the End of the World

AEI is sponsoring a debate tomorrow on whether Facebook is destroying human relationships. The debate boasts a formidable lineup: Roger Scruton, Adam Keiper, and Tyler Cowen.

It occurred to me recently that one unintended negative consequence of Facebook is the potential destruction of, not friendships, but acquaintanceships.

I have many friendly acquaintances who are my Facebook Friends but with whom I am not close enough in real life to be friends. These are people I may see from time to time—at academic conferences, say—and know well enough to have a friendly “how have you been?”-type chat. Many of these acquaintances have different, sometimes very different, political or religious worldviews from mine, but because we see each other infrequently enough, that doesn’t matter: We have plenty to chat about in those irregular brief encounters that we can avoid altogether any sticky issues or hot topics.

But that’s not the case on Facebook. There I am the recipient of their regular updates, which sometimes attack or mock people with views like mine in not-very-friendly terms, and certainly not in terms, I am sure, they would have used with me in person. Let’s face it: We sometimes have not-so-charitable thoughts about people who differ from us politically, religiously, or in other ways that matter to us. That is okay. And sometimes we confess some of those thoughts to a close circle of friends we know are sympathetic to our own view. Within reason, that is okay too.

But we also have to maintain at least friendly and civil associations with these same people who we might secretly, occasionally, even only fleetingly wish to attack or mock. And so we keep those thoughts largely to ourselves. That allows us to get along with all sorts of people, to have civil if not close relationships with people holding many kinds of views, and thus to get on with the business of social life peacably. Just think how destructive of human relationships it would be if people always knew what we sometimes think to ourselves about them.

Well, that is precisely what Facebook can do. We put our more personal thoughts in our updates, and everyone sees them—including those among our friendly acquaintances who are sympathetic to, or are part of, the group we’re targeting.

Here’s an example. One of my Facebook Friends recently linked an article with his own comment that if you did not accept what the article argued, you must belong either to “Team Evil or Team Very, Very Stupid.” Funny, I know. But then again, not so funny to someone who is not yet persuaded. Another Facebook Friend spoke recently of the “Bullshit Brigade,” which included people for whom I have a great deal of respect and whose work I think that Friend does not fully appreciate. Less remarkable examples are all the times people post things asking how anyone with half a brain can possibly think x, or suggesting that the people who disagree must be come combination of stupid, naive, or evil.

I think that these posts, while not utterly destructive in isolation, nevertheless slowly poison relationships. If the only regular things you hear from one of your Facebook Friends is his mocking of people who hold views like yours, it is hard not to be affected by that—and to be thinking about the contempt he has for people like you the next time you see him face-to-face. Whereas before you two might have been able to enjoy a long-term, perfectly friendly and civil acquaintanceship, now you might harbor a low-level anger or resentment toward him.

Now, is Facebook to blame for this? Or are people themselves to blame for posting what they do? It is the latter, of course, but Facebook has certainly made it easier.

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Socialism in One State

Vermont has passed a law authorizing a single-payer, government-run health insurance system. Apparently the plan fails to grasp the fiscal nettle and thus may never come to fruition. Nevertheless, I hope they go forward with it. I don’t think it will work – to the contrary, the experiment should serve as an object lesson to the rest of the country. But we are only going to get a ceasefire on health insurance at the federal level if PPACA can be repealed and the left comes to realize that they can try out their cockamamie schemes at the state level, so why not let those crazy libertarians do the same?

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Monday Morning Distractions

For those of us tenured/tenure-track professors who are cursing our jobs as the grading stacks up, a reality check on how good we have it via William Deresiewicz at the Nation.

Pew has an online poll that might help identify your specific political tribe. Some of the options are a bit odd, but it is worth a minute or two.

Speaking of odd polls, the Smithsonian wants your opinion on who had the best facial hair in the Civil War (General Alpheus Williams is quite impressive).

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Bailouts and the Optimal Size of States

Risk-pooling in an era of frequent financial crisis is not as good an argument against Scottish independence as Tyler Cowen thinks it is. First off, bailing out is a policy choice to which there are alternatives. Second, financial governance matters. Who had a worse financial crisis in 2008: the United States (population 300 million) or Canada (population 35 million)? Which set of countries suffered more in the 1997 East Asian financial crisis: South Korea, Thailand, and Indonesia or Singapore, Hong Kong, and Taiwan?

Finally, the European Central Bank and leading European Union member states have shown that they are more than willing to pool risk with weaker members. The SNP favors joining the Eurozone in the event of Scottish independence. Even if the optimal size of nations has gone up with the increased risk of financial crisis, that does not mean that Scotland falls below the optimal size.

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