Marriage and the (Forgotten) Middle Class Welfare State by Daniel Bier

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Jason Kuznicki, in his wonderful post on marriage and the state, included this baffling chart of how the marriage penalty/bonus affects couples jointly filing tax returns:

Kuznicki points out that the penalty/bonus part is just an inevitable artifact of the progressive income tax system. The math just works out that way.

But, my friend Sean J. Rosenthal points out, the chart also shows Director’s Law: “Public expenditures are made for the primary benefit of the middle classes, and financed with taxes which are borne in considerable part by the poor and the rich.”

George Stigler, channeling the work of the great Chicago economist Aaron Director, coined the term in a 1970 article in the Journal of Law and Economics.

The logic of Director’s Law is:

Government has coercive power, which allows it to engage in acts (above all, the taking of resources) which could not be performed by voluntary agreement of the members of a society.

Any portion of the society which can secure control of the state’s machinery will employ the machinery to improve its own position.

Under a set of conditions… this dominant group will be the middle income classes.

Stigler went on to describe the Public Choice calculus for a wealthy modern democracy. In a society like ours, with our electoral institutions, the interests of the middle class will always have the biggest sway on public policy, since most people fall in the middle of the income distribution, rather than at bottom or the top.

Politicians will (and must) try to gratify the middle’s desires and shift the costs somewhere else — i.e., the rich and the poor and future generations, since they have relatively less influence on public policy. (Though this general rule is not to say that there aren’t also policies that primarily benefit the poor or the wealthy.)

This explains a lot of features of public policy that don’t fit with the normal “welfare is all about the poor” or “the rich run everything” paradigms.

For instance, Obamacare’s insurance scheme is basically all a big subsidy for older, relatively wealthier middle class people at the expensive of younger, poorer people. The other half of Obamacare, the Medicaid expansion, increases eligibility for Medicaid up to 400% of the poverty line — that safety net is catching some pretty middling fish at this point.

Medicare and Social Security, the marriage penalty/bonus distribution, college student loans, tax write-offs for mortgage payments and employer-sponsored health insurance, small business favoritism, and a host of other policies are essentially giveaways to the middle class, at the expense of the rich and poor.

Nonetheless, we should expect politicians to continue harping on the plight of the middle class, stroking voters’ fears and concerns about the “shrinking middle,” promising to “rebuild the middle class,” pass “tax cuts for the middle class,” save “Main Street,” and on, and on.

And who could ever be against helping middle class? Nobody. And that’s how we end up being content with a marriage policy that punishes poor (and rich) working couples, even while pundits bemoan the state of marriage.

Update #1: As with many later developments in economics, Frederic Bastiat anticipated Public Choice by more than a hundred years. In his Selected Essays on Political Economy, recently republished by FEE, he wrote,

When, under the pretext of fraternity, the legal code imposes mutual sacrifices on the citizens, human nature is not thereby abrogated. Everyone will then direct his efforts toward contributing little to, and taking much from, the common fund of sacrifices.

Now, is it the most unfortunate who gain in this struggle? Certainly not, but rather the most influential and calculating.

Update #2: I see that Director’s Law was first mentioned in the Freeman, before Stigler published on it in JLE, in John Chamberlain’s coverage of the 1969 Mont Pelerin Society meeting in Venezuela.


Daniel Bier

Daniel Bier is the editor of Anything Peaceful. He writes on issues relating to science, civil liberties, and economic freedom.

Europe Needs Regime Change in Greece: They Won’t Get It by Stephen Davies

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It seems the saga of negotiations between the Greek Government and its creditors has arrived at a denouement but almost certainly not a final conclusion, and we may expect this show to return to the stage at some point, probably in the near future. The reason for this is the real nature of the ultimate problem facing both parties, something of which the creditors are still unaware.

The negotiations over the last few months have been marked by a remarkable degree of acrimony. Most of the other eurozone governments have become increasingly (and publicly) exasperated with the Greeks, and the expressions of hostility towards the Greek government from members of national parliaments have grown ever more outspoken.

Some of the reasons for this are well known — above all, the lack of a true European demos: there simply is not the kind of solidarity or shared interest in Europe that one finds in, for example, the United States.

However, there is another reason for the acrimony that has not received much attention. The creditors misunderstand what it is they are asking the Greek government and society to do. This lack of understanding is why any deal made now is likely to prove a disappointment.

The impression given by media reports is that this is all about debt, specifically the debts run up by the Greek state before 2009. Certainly there is a problem, but it is one that is soluble and does not require the kind of fraught negotiations we have seen.

The difficulty is that the fiscal state of Greece before the first bailout in 2010, and the underlying state of the Greek economy, are symptoms of a much more serious underlying problem. This is one not of debt but of competitiveness.

Quite simply the Greek economy is not productive enough to support the levels of income and public spending that it now has, without significant capital inflows from outside Greece. Before 2008 these came in the form of private loans, since then by government bailouts (even if much of this has been recycled back to private creditors).

Greek firms and labour are simply not competitive with their counterparts elsewhere in Europe, above all in Germany. Being in the euro means that they cannot adopt the traditional way of regaining at least some competitiveness by devaluing their currency. Instead, they have to deflate internally, and the attempt to do this has devastated economic life in Greece.

This is all well known. It is the reason why the creditors are demanding that, in return for a third bailout, the Greek government introduce a series of reforms to public spending, the tax system, and the machinery of the Greek state, particularly it’s tax collecting apparatus. Successive Greek government have either refused to do this or promised to do it and then failed. This is why the rest of the eurozone is becoming ever more exasperated. It here however that the misunderstanding comes in to play.

What the creditors think they are asking for is a major shift in public policy. They recognise that the shift they are asking for is radical, and many also realise that what would be involved would be a shift in the general ideological basis of Greek politics, towards a more market liberal direction. However, they are actually, without realising it, asking for something much more fundamental and drastic.

One question that should be asked is why Greece got into a position that was so much worse than that of other “peripheral” economies. Also, why has the performance of the Greek economy been so much worse than that of other countries that have had bailouts and austerity, such as Spain, Portugal, and Ireland? The answer lies in the fundamental nature of the Greek state and the political economy of Greece.

Greek political culture is dominated by practices and institutions that certainly exist elsewhere in Europe but are not as dominant. The state has a narrow tax base, with powerful interests such as the Orthodox Church effectively exempt. The revenue collection apparatus is completely ineffective so that tax evasion is endemic at every level of income.

This means that simply raising or extending VAT for instance is not enough because so many transactions are off the books. At the same time, the Greek state provides generous pensions and other benefits, which it cannot fund.

The political system appears to be a modern democracy but is in fact a much older model. The key institution is clientelism, in which political actors give out rewards to their clients in the shape of handouts and sinecures in the very large public sector. This is done much more directly than with the kind of interest group politics that we find in most democratic countries, and it is central to the whole way that politics works.

The extent of patronage means that the Greek government (whoever they are) does not have a modern, Weberian, bureaucracy to call on. Instead, most of the people in the public service owe their positions to networks of patronage and these command their loyalty.

The economy is highly regulated in ways that entrench settled interests and inhibit innovation. In particular, a very wide range of occupations are subject to rules that make it very difficult for new entrants into those sectors. Because of the inefficiency and the existence of a plethora of rules that are irksome but ultimately unenforceable, corruption is endemic and widespread throughout Greek society.

This system cannot maintain anything like the standard of living to which most Greeks aspire and as such it means that, via membership of the euro, we have seen the development of an economy that depends upon inward transfers — to a much greater degree than is the case in countries such as Spain and Ireland.

Given all this, it becomes clear that what the creditors are asking for is much more than a shift in policy, no matter how sharp and dramatic. Policy shifts of that kind are part of the normal or regular political process that take place infrequently, but still regularly, in most polities. The shift brought about by Margaret Thatcher’s election in 1979 is an example.

What is needed in Greece, and what the creditors are asking for without realising it, is something more fundamental, a change in the very nature of the political system and in the entire nature of politics and government, rather than a change of policy within a system. This is a regime change in the original and correct use of that term.

The point of course is that changes of this kind are extremely difficult and only happen extremely rarely. Sometimes it requires a revolution, as in France; on other occasions, it takes place in the context of a fundamental crisis such as defeat in a major war. Very rarely it can happen when there is a near consensus in a society over what to do, as in Japan in the 1870s.

The current Greek government is almost certainly aware of this, but, apart from ideological objections to part of the list of reforms, they are quite simply unable, rather than unwilling, to do what is asked because a change in the political order is simply very, very hard.

So the creditors are likely to be disappointed and will then become even more enraged. Moreover, being in the euro makes any attempt at systemic change in Greece even more difficult than it would be already, because if removes a range of policy options that could alleviate some of the transition costs.

As most economists of all persuasions now think, the best option is a managed Greek exit from the euro. If this does not happen (as seems likely) then this farce is a production that will run for some time.


Stephen Davies

Stephen Davies is a program officer at the Institute for Humane Studies and the education director at the Institute for Economics Affairs in London.

7 Things the Left Should Apologize For

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While attending a gathering of conservatives a few years ago in Washington, D.C., I was confronted by a far Left group conducting an amateur “ambush interview.” They demanded I opine on the comments of a number of 2012 Republican U.S. Senate candidates whom they found objectionable, and it was clear that they were seeking some sort of apology.

The Left loves to demand apologies from conservatives for grievances both real and imagined and, sadly, sometimes we play along with this ridiculous game.

The Left loves to demand apologies from conservatives for grievances both real and imagined and, sadly, sometimes we play along with this ridiculous game. I frequently wonder why conservatives don’t pay back the favor and demand apologies from the Left.

At the macro level, the Left should apologize to America for their continued allegiance to European-style welfare statism. At the micro level, they should apologize for their ongoing use of hateful division politics.

These two guiding ideologies of the Left have caused immeasurable poverty, misery and grief. Their intent to divide us is leading to concertina-wire-reinforced borders among the individual race, gender, and religious silos that they have chosen for us.

With the continued focus on the 2016 presidential elections we should start demanding apologies from the Left. Here are seven things the Left is largely responsible for which I’m demanding apologies before Election Day.

The death of four American patriots in Benghazi and the disgusting lies told to the families of the deceased…

  1. Sanctuary cities and the murder of Kate Steinle, by an illegal immigrant deported, an unforgivable five times.
  2. The ruthless political targeting of conservatives by the IRS to silence conservatives and advance the Left’s political agenda.
  3. The Obama economic “recovery,” where a tragic 1 in 5 Americans are now on some form of government welfare and over 90 million Americans are not working.
  4. The continuing destruction of the economies and education infrastructures of America’s once great inner cities by liberal governance.
  5. The massive health insurance premium hikes, outrageously high deductibles, and doctor and hospital restrictions imposed on middle class Americans by the disastrous Obamacare legislation.
  6. The death of four American patriots in Benghazi and the disgusting lies told to the families of the deceased, and to concerned American citizens, by the Obama administration afterwards.
  7. And, most importantly, the continued shredding of our Constitutional Republic, and what little faith we had left in our government.

Demand an apology from the Left for this, America deserves it.

EDITORS NOTE: This column originally appeared in the Conservative Review. The featured image of former Secretary of State Hillary Clinton testifying before Congress on Benghazi is courtesy by Bill Clark Roll Call CQ | AP Photo.

Slate Writer: Freedom to Remove Eyebrow Hair Will Make Texas a “Dangerous” Place by Evan Bernick

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Texas Court rules that regulations have to make some kind of sense; chaos is imminent.

It’s a tremendous victory for individual rights and for the politically powerless. And progressives are terrified of it.

Over at Slate, Mark Joseph Stern warns that a Texas Supreme Court decision invalidating a requirement that commercial eyebrow threaders undergo 750 hours of training — 320 of which were admittedly unrelated to threading — will plunge Texas into a Dickensian nightmare, where judges will have free reign to strike down humane and necessary laws designed to protect workers.

Stern’s histrionics should not be taken seriously. The Texas Supreme Court did its job, insisting upon a rational, evidence-based explanation for restrictions on liberty that is protected by the Fourteenth Amendment as well as by the Texas Constitution.

As Justice Don Willett explains in an erudite and inspiring concurrence, “The Court’s view is simple, and simply stated: Laws that impinge your constitutionally protected right to earn an honest living must not be preposterous.”

Such judicial engagement is required to protect what liberal Justice William O. Douglas once referred to “the most precious liberty man possesses.”

Although eyebrow threading, a traditional South Asian practice, consists only in using cotton thread to remove eyebrow hair, Texas roped the threaders under the same licensing requirements that are applied to conventional cosmetologists who perform a wide variety of services such as waxing, makeup, and chemical peels.

The Texas Department of Licensing and Regulation issued $2,000 penalties to threaders across the state and ordered them to quit their jobs until they completed 750 hours of coursework (not a second of which is devoted to eyebrow threading) in private beauty schools, costing between $7,000 and $22,000, and pass two examinations (neither of which tests eyebrow threading).

In 2009, threaders Ashish Patel, Anverali Satani, Nazira Momin, Minaz Chamadia and Vijay Yogi challenged the requirements under the Due Course of Law Clause of the Texas Constitution. Like the Due Process of Law Clauses of the federal Constitution, Texas’ Due Course of Law Clause prohibits deprivations of liberty that do not serve any legitimate, public-spirited end of government.

The recent decision drew from the history of the state’s Due Course of Law Clause provision, which took its current form in 1875 — at a time when the Supreme Court was examining legislation under the Fourteenth Amendment’s Due Process of Law Clause for a “real or substantial” relationship to public health and safety. From this, the Texas Supreme Court determined that reviewing courts must “consider the whole record, including evidence offered by the parties” in evaluating laws, rather than taking the government’s professions of good intentions at face value.

It went on to evaluate the regulation at issue, emphasizing that, by the state’s own concession, “as many as 320 of the curriculum hours are not related to activities threaders actually perform.” Breaking this down, the Court explained that threaders are required to undergo “the equivalent of eight 40-hour weeks of training unrelated to health and safety as applied to threading.”

Combined with the fact that would-be threaders have to pay for the training and at the same time lose the opportunity to make money threading eyebrows, the court concluded that the regulations imposed an unconstitutionally oppressive burden.

As the court recognized, determining whether the government regulations are constitutionally legitimate, based on record evidence and their real-world effect, can never be a mechanical process. But it is essential to limited government.

Otherwise, there is nothing that would prevent the government from forcing threaders to take, say, 1,500, or 2,500 hours of training unrelated to threading, run marathons, or dig ditches before being certified. Judges would have to rubber-stamp such regulations and tell hardworking entrepreneurs to take it up with their local legislators.

Indeed, that is what happens all too often in cases in which the “rational basis test” is applied in federal courts. So deferential is this “test” in practice that, in the case that ended up before the Supreme Court in Obergefell v. Hodges, the same-sex marriage case, the Sixth Circuit Court of Appeals had held that the government may treat people differently for any plausible reason, even pure favoritism.

Remarkably, Stern seems comfortable with that outcome, and laments that the Texas Supreme Court vindicated the threaders’ rights. He advances two arguments against the decision, both of which are unconvincing; indeed, the second is so unconvincing that it is hard to believe that even Stern is convinced by it.

Stern first argues that the “liberty” protected by the Fourteenth Amendment’s Due Process of Law Clause (and Texas’ Due Course of Law Clause) is properly understood to encompass only a small handful of rights “relating to personal dignity and autonomy,” like “marriage and intimacy.”

This interpretation flies in the face of constitutional text, history, and the logic of the Supreme Court’s most recent decision on the subject.

The Due Process of Law Clause refers only to “liberty” — it does not distinguish between “personal” liberty and “economic” liberty, nor do most people neatly divide their lives between activities that are purely “personal” and those that are purely “economic.” (Which category would a dinner date fall under? Does it matter what happens later on?)

After the ratification of the Reconstruction Amendments, state courts and, later, the Supreme Court interpreted the Fourteenth Amendment to encompass a wide variety of actions that individuals can take without violating the rights of others.

Thus, in Meyer v. Nebraska (1923), the Supreme Court explained that liberty “denotes not merely freedom from bodily restraint, but also the right of the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience.”

The logic of the Court’s most recent “substantive due process” decision tracks this comprehensive understanding of liberty. In Obergefell v. Hodges, which Stern invokes, Justice Kennedy begins by stating that “[t]he Constitution promises liberty to all within its reach, a liberty that includes certain specific rights that allow persons, within a lawful realm, to define and express their identity.”

Few things are more central to defining and expressing our identity and, indeed, sustaining our very lives, than our work. As Professor Laurence Tribe has put it, “the determination of one’s vocation” is an “essential aspect of personhood.”

Stern next argues that even if Texas’s oppressive regulatory scheme “may be a problem” for eyebrow threaders, it is a purely “legislative problem” — not one with which the courts should be concerned. He submits that the threaders could easily solve this problem through the democratic process, “by petitioning the legislature to reduce their training hours.”

Stern is apparently unaware that most of the threaders involved in this case were non-citizen immigrants. Is Stern also unaware that American history is rife with examples of entrenched interests — that is, white males — using their political muscle to prevent newly freed blacks, women, and immigrant groups from entering into or effectively competing in the labor market?

In several key cases (including Lochner v. New York (1905), which Stern disparages), the Supreme Court struck down laws designed to keep immigrants (like the threaders in Texas) from competing against native-born whites.

Even today, although the Supreme Court has declared it is unconstitutional to require full citizenship and exclude legal permanent residents, some states still have licensing laws that restrict certain nongovernmental professions to citizens only. A growing body of Public Choice research documents the reality of special-interest lawmaking designed to benefit established firms at the expense of their competitors and the general public.

But of course, Stern knows that regulations passed in the name of public health and safety are sometimes pretextual and that those burdened by them are often in no position to persuade those responsible for them to “fix” them — indeed, he recently criticized the Fifth Circuit Court of Appeals for upholding regulations of abortion providers that are purportedly designed to protect public health and safety. So apparently some vocations are more equal than others, in Stern’s view.

Thanks to the Texas Supreme Court’s decision in the threading case, Texans are, as Justice Willett put it, “doubly blessed.” Two years ago, the Fifth Circuit Court of Appeals, which also has jurisdiction over federal courts in Texas, struck down a regulatory scheme targeting casket sales in Louisiana, rejecting the state’s “nonsensical explanations” for the scheme after finding them to be factually baseless.

Recently, a federal district court (in a case that Stern does not mention but presumably disapproves of), following the Fifth Circuit, struck down a law requiring African hairbraiders like Isis Brantley to spend thousands of hours taking useless classes and thousands of dollars on useless equipment before they would be permitted to teach hairbraiding at their own schools.

Thus, federal courts and state courts in Texas are committed to judicial engagement in economic liberty cases. In his concurrence, Justice Willett quotes Frederick Douglass, whose account of earning his first two dollars as a free man puts a human face on the right to earn a living that those who read it are unlikely to forget.

For all those whose emotions swell at Douglass’ recognition that “my hands were my own, and could earn more of the precious coin,” and value the freedom that he held so precious, this decision is nothing to be afraid of — it is a cause for celebration.

Cross-posted from HuffPo.


Evan Bernick

Evan is the Assistant Director of the Center for Judicial Engagement at the Institute for Justice, a libertarian public interest law firm.

Capitalist Theory Is Better Than Socialist Reality by Sandy Ikeda

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Tell someone on the left that crony capitalism is not the same as the free market and they’ll often respond that capitalism as it really exists is crony capitalism. They will say that there has never been an instance of capitalism in which government-sponsored or government-abetted cronyism didn’t play a substantial role — either through war, taxation, or slavery — in a market economy. As a result, the failings of crony capitalism — corruption, privilege, oppression, business cycles — are simply the failings of capitalism itself.

One correct response is to show that the less intervention there has been, the less corrupt, privileged, oppressive, and unstable the socioeconomic order also has been. Many would simply reiterate that, historically, laissez-faire capitalism has never existed, nor could it exist, without interventionism. They simply will not or cannot distinguish the free market from state capitalism, corporate capitalism, or other forms of the mixed economy.

Which is perhaps why some on the left have adopted the term “neoliberalism,” a perfectly good word that has come to represent an imbroglio of vaguely market-cum-corporativist views. They can’t imagine how markets could work without some form of state intervention holding it all together. And that’s probably because they reject what economist Peter Boettke calls “mainline economics,” or economics in the tradition of Adam Smith, Frédéric Bastiat, and Carl Menger, among others.

It’s frustrating, but there are two points I’d like to make. The first is that in our libertarian critiques of collectivism, we often make an argument that sounds similar to the one people on the left make. But, second, if libertarians are careful, they may be more justified in doing so.

What Is the Turnabout?

Most socialists today have abandoned their earlier claim that socialism generates greater material prosperity, but many on the left still insist that under a pure collectivist system, greater justice and equality would prevail. Socialism, in other words, is a far more humane socioeconomic order than capitalism.

How do libertarians respond to such a claim?

Sometimes we react with contempt or with disbelief that anyone could be so stupid or so evil or both as to argue such a thing. I hope no reader of theFreeman would react that way, although I’m afraid some do. Sometimes we react with slightly more civility by aiming our dismissive contempt not at the person but at the leftist ideas she holds. I will only say that we should take to heart what John Stuart Mill wrote in On Liberty about so-called bad ideas and opinions:

Every opinion which embodies somewhat of the portion of truth which the common opinion omits, ought to be considered precious, with whatever amount of error and confusion that truth may be blended.

There are other responses to the claim that socialism is more just and humane than capitalism, but I would like to focus on the one that I’ve often used: socialism in practice has always and everywhere tended to lead, to the degree that it is consistently applied, not to freedom and material well-being, but to tyranny and want. In other words, while socialism in theory may be all good things to all good people, the more government has practiced collectivism and central planning to achieve its goals of justice and equality, the farther it has fallen short of those goals. (And if you think countries such as Sweden are the exception, you might read my March 2013 Freeman article, “The New Swedish Model.”)

How is that different from the left’s position that legal privilege, oppression, and other problems are part and parcel of capitalism in practice? Each side seems to be arguing that the historical failings we’ve witnessed in each system are necessary to that system and not exceptions — features, not bugs.

A Possible Resolution

Clearly, the die-hard socialist and the die-hard libertarian argue from different fundamental principles. While there are many varieties of socialism, all are suspicious to a fairly high degree of private property, prices, and profit as the central ordering forces of society. Libertarians, too, are diverse, but I believe we all share strongly opposite views to those on the left on private property, prices, and profit as necessary (and for some libertarians, mistakenly I believe, sufficient) for a civil and prosperous society.

Socialists and indeed interventionists of all stripes also seem confident that the intentions of government authorities (especially those who have been elected) are virtuous enough and their knowledge reliable and complete enough to succeed in promoting the general welfare. In this, I think, it boils down to the underlying economics.

As a rule, libertarians use mainline economic theory to reach their conclusions about socialism and the perverse dynamics of interventionism. (There are, of course, ethical and philosophical approaches, as well.) And while interventionists and perhaps even some collectivists may believe that mainline economic theory does an okay job of framing some questions and of finding some answers to those questions, they also believe that mainline economics is far too limited to address a significant proportion of economic issues.

But the problem with such a view is that there’s no principled way to say in what circumstances mainline economics has failed. Sure, no theory of the economic system, mainline or otherwise, gets it right in every instance. We then have to look to historical evidence to clarify when, under what circumstances, and to what extent mainline economics holds up. And the historical evidence is indeed on the side of the libertarian interpretation of what collectivism and various degrees of central planning are, and of what laissez-faire capitalism is.

Indeed, the historical evidence overwhelmingly shows that social mobility, innovation, prosperity, per capita income, and per capita wealth are all tightly and positively correlated with economic freedom. And contrariwise, to the extent that economic freedom is lacking, social and economic stagnation, want, and shrinking civil rights have followed. (See, for example, the most recent publication of FreetheWorld.com.)

Someone might retort that correlation is not causation, and they would be right if there wasn’t a causal theory linking economic freedom with all those great things. But libertarians do have such a theory, and it’s called mainline economics.

Those on the left, however, don’t have a coherent theory of the mixed economy. Indeed, no such theory exists. There are several theories of so-called “market failure,” but they do not together constitute a coherent theory. What does exist is a critique of the mixed economy that is based on the realization that the ordering principle of the free market and the ordering principle of collectivist central planning are logically incompatible. One is based on open-ended entrepreneurial competition, the other on some form of constraining central planning. Interventionist approaches that attempt to combine them aren’t really systems at all. They are literally incoherent, and what makes them incoherent is the absence of a consistent ordering principle.

(My contribution to this volume [PDF] delves into this topic more deeply.)

Instead, what you’re left with, given the cognitive limits of the human mind and the spontaneous complexity of real-world systems, is expediency. Each problem is addressed not on the basis of principle, but in ad hoc fashion according to the prevailing interests of the moment. In the case of capitalism, while opportunism and cronyism do constantly pull in the direction of expediency, the force resisting that pull is entrepreneurial competition. That’s because cutting corners opens opportunities for one’s rivals to do a better job.  Moreover, that competition operates more effectively to resist and absorb all forms of intervention, crony or otherwise, the less interventionist the system is.

So while the form of the critiques of the left and of libertarians may sound similar, they are vastly different in substance.


Sandy Ikeda

Sandy Ikeda is a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.

The Greek “OXI” (NO) vote is all over the news. But, what’s next? by LaRouchePAC

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Revive the Glass-Steagall Act — It’s time for our own United States to take the next historic steps to free the world of austerity.

If you don’t know what the Glass-Steagall act is, please take a moment and review the background of the law, and what it did.

Lyndon LaRouche’s call to action, below,  is our historic responsibility not only to other nations of the world, but to ourselves, so that we might give a future to the next generations.

LaRouche: To Save the Trans-Atlantic Region, Implement FDR’s Glass Steagall Act Now

July 6, (EIRNS) — Lyndon LaRouche today responded to Sunday’s landslide rejection by Greek voters of the Troika’s genocidal austerity program, by clearly spelling out how the United States can play a decisive role in solving the otherwise irreversible collapse of the entire British-run trans-Atlantic financial system. LaRouche called for the United States to immediately adopt a return to President Franklin Delano Roosevelt’s original Glass Steagall policy.

The United States, LaRouche declared, should set the example for Europe, by immediately reinstating FDR’s Glass Steagall.

“The U.S. should solve the problem of the European mess, starting with the mess in Britain, by a Glass Steagall reorganization, clearing out the oversized and useless debt. Cancel all the debt with no intrinsic value, by going back to President Franklin Roosevelt’s successful model.  Only by such a debt cancellation can there be any prospect of a longterm recovery, in real physical economic terms.”

In his weekly live broadcast dialogue with LPAC’s Policy Committee, on July 6, LaRouche elaborated on his call for immediate Glass-Steagall:

“What has happened, as a result of the Greek operations during yesterday and today, has created a situation in which… Europe, most nations in Europe, and also the United States, are implicitly bankrupt. This is number one.

“Now what I mean on number one, on the bankruptcy, is that Wall Street in particular, and everything that coordinates with Wall Street, is now actually worthless.  That will be shown in due course, that we hope we can get this thing under control. What this means, we have to go to a Glass-Steagall action.  The only way we can do this, is a Glass-Steagall action.  That means, in the trans-Atlantic region, I’m talking about right now the trans-Atlantic region:  The situation is that the United States in particular is in a collapse.  That is, Wall Street and the things which are associated with Wall Street, are now actually worthless, which means a great amount of what is called money, among the business community, especially the financial business community, is worthless, and it is going to be very difficult for Wall Street and President Obama, both, to try to cover things over in this matter.

“Now the other side of this situation is, that it is perfectly possible for us in the United States itself, and with cooperation with certain circles in Europe and elsewhere, we’re quite capable of solving the problem.  And the solution is obviously, Glass-Steagall, Franklin Roosevelt’s own Glass-Steagall.  That is essentially the key thing.

“And the only way that the United States and the people of the United States could possibly escape from a general breakdown of the financial system of the United States, is to go back to Glass-Steagall.  That would mean we would simply cancel most of everything that’s called Wall Street, or anything like it; just cancel it.  It’s rubbish.  It has no intrinsic value.

“And therefore we have to go back to Franklin Roosevelt’s policies in order to save the United States economy.  Now, it’s going to be a tough row to hoe, because we have very poor skills available in the U.S. population.  The productive power of labor, in the United States’ population, has collapsed to a great degree…

“We see that, when people say, ‘well, some people are poor, they’re not worth keeping.’ Well, that’s not the problem, that’s not the truth of the matter. What they’re trying to do is kill off people, as in the case of California.  What’s happening in California, is actually an intentional determination, to kill off as many people in California and adjoining areas as possible. That’s what the policy is; that’s plain talk, no beating around the Bush.  And the Governor of California is one of the leaders, who is leading toward a campaign for mass-slaughter of people in California and adjoining areas.  That’s the reality!

“However, if we go to Glass-Steagall, Franklin Roosevelt’s Glass-Steagall, with means which I’m fully aware of as feasible, we can prevent that.  But the key thing now that’s driving it, is the fact that the European economy is going into a spin, downward, and this includes the British system itself, and it means other areas.”

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Does “I, Pencil” Need a Pro-Government Update? by George C. Leef

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In a book I recently read, Complexity and the Art of Public Policy by David Colander and Roland Kupers, I was surprised to find a chapter entitled “I Pencil Revisited.” Yes, they meant Leonard Read’s famous essay showing how market prices and competition work to coordinate production in a way that no single person, however powerful or intelligent, possibly could.

The authors aren’t exactly hostile to Read’s message but say that it leaves out something important — the role of government.

They write,

For me to be produced, someone had to protect the property rights upon which the market is based, someone had to guarantee that the contracts between individuals would be enforced, and someone had to be on the lookout for lead, for the safety of machines, and similar problems, which if not addressed might well lead to a society to undermine the institutional structure that produced me.

And, again writing through the voice of a pencil, Colander and Kupers say,

The reason I, Pencil downplayed government’s role is that he was afraid its inclusion would lead some people to expand the role of government to solve the inevitable problems that come about in coordinating production.

I believe that they are mistaken on that. The reason why Leonard Read focused exclusively on the remarkable story of voluntary market cooperation and did not expand the piece to discuss the proper role of government was that he figured most people already had some understanding of the need to protect property, enforce contracts, and settle disputes.

What very few people had any comprehension of was the way individuals all across the globe are brought into cooperation by the market for pencils.

Going into the role of government in the essay would have been like Mozart adding a few extra movements to his Jupiter Symphony.

Here is why the authors make this argument. They don’t like what they call the “market fundamentalism” of Leonard Read, former FEE president Don Boudreaux, and others (like me) who argue that the people of any society will be the most productive, happiest, and best able to deal with the problems they see if the government is kept only to the functions of protecting the rights of life, liberty, and property.

Instead of laissez-faire, Colander and Kupers favor what they call “laissez-faire activism.”

In short, they want us to believe that there is an ideal middle ground between unsophisticated “market fundamentalism” and top-down government planning and control of the economy. The latter, they understand, is bad because such authority will squelch innovation and competition, but the former supposedly doesn’t do enough to allow people to realize their “collective goals.” Here is a crucial passage:

What simplistic or fundamentalist free market advocates sometimes miss is that a complex system works only if individuals self-regulate, by which we mean that they do not push their freedom too far, and that they make reasonable compromises about benefiting themselves and benefiting society.

Of course, the common law framework that thinkers in the Adam Smith, Frederic Bastiat, Leonard Read line advocated does put limits on individual action. Rights and the sphere of legitimate action are clearly established, and to the extent that people have collective goals, they are free to pursue them voluntarily. But Colander and Kupers think government can and should do just a bit more.

One of their ideas is that government should adopt policies that will “nudge” people to do what they “really want to do,” but can’t sufficiently discipline themselves to do. They extol the book Nudge by Cass Sunstein and Richard Thaler, which purports to show how government can “encourage” people to act in preferable ways, without dictating behavior to them.

But why can’t we rely entirely on voluntary efforts by concerned individuals and organizations to do that encouraging? Churches, for example, have been encouraging people to behave better for millennia; Alcoholics Anonymous has been helping people recover from alcohol abuse since 1935; parents have been “nudging” children to make wiser decisions since time immemorial. Why look to government policy?

Sometimes, the reason why people seem to need “nudging” is that current government policy encourages undesirable behavior. Few Americans save much these days, for instance. But instead of trying to “nudge” them to save more, why not change the tax laws that discourage thrift? Going back towards “laissez-faire fundamentalism” would solve or ameliorate many of our problems.

Moreover, Colander and Kupers ignore the great and, I maintain, insuperable problem of keeping government interference within bounds. If the state has the authority to “nudge” people, what keeps politicians from ratcheting up the power if it doesn’t work? Nudging turns into pushing, then shoving. Interest groups will importune politicians with arguments for policies they favor, crafting them as merely helping “the people” to realize the social goals they “really” favor.

They way democratic politics tends to be captured by interest groups is the big message of Public Choice theory, but Colander and Kupers never think to explain how they’d prevent their “laissez-faire activism” from turning into plain old activism.

After reading Complexity and the Art of Public Policy, I fail to see how government can improve upon capitalism combined with the host of voluntary organizations that spring up in a free society. I, Pencil does not need to be revisited.

George C. Leef

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.

Amazon Liberates Readers: The Digital Era Creates Gardens without Gardeners by Stewart Dompe

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Science fiction author Ursula K. Le Guin thinks Amazon represents everything that’s wrong with capitalism:

If you want to sell cheap and fast, as Amazon does, you have to sell big. Books written to be best sellers can be written fast, sold cheap, dumped fast: the perfect commodity for growth capitalism.

The readability of many best sellers is much like the edibility of junk food. Agribusiness and the food packagers sell us sweetened fat to live on, so we come to think that’s what food is. Amazon uses the BS Machine to sell us sweetened fat to live on, so we begin to think that’s what literature is.

She blames the online retailer for perpetuating a system that encourages authors to produce “sweetened fat” instead of the literature that nourishes the soul. She attacks the marketing of best seller lists (“BS lists”), and it would not be a mistake to infer that she believes these lists are comprised of an entirely different sort of “BS.” She writes:

Best Seller lists are generated by obscure processes, which I consider (perhaps wrongly) to consist largely of smoke, mirrors, hokum, and the profit motive. How truly the lists of Best Sellers reflect popularity is questionable.

If the literary world is a garden, then Amazon would be a gardener whose liberal use of fertilizer, Le Guin contends, has encouraged the growth of weeds. But her anger is misplaced. There is no gardener — and the garden is more beautiful than ever.

Spontaneous Order in the Book World

Amazon is a consequence, not the cause, of the digital revolution. More books are being published every year because it is now easier to become an author. Traditional publishers printed 316,480 new titles in 2010. That’s 100,000 more than they published in 2002, but this figure is dwarfed by the 2.7 million “nontraditional” titles that were published in 2010. The importance of publishing houses, bookstores, and critics has eroded because authors can now bypass these middlemen and sell ebooks directly to the public. All it takes is a website and some social-media savvy.

amazon quoteSome will argue that with this large increase in quantity, the weeds will start to outnumber the roses. The problem with this argument is that it misunderstands the market segmentation that is occurring. Simply put, what is a weed to one is a rose to another. Publishers need to sell a minimum number of books to recover the substantial fixed costs of printing. These financial pressures mean that even a well-written manuscript would be rejected if it were judged to appeal to too small an audience. As the cost of publishing has fallen, manuscripts that were previously rejected are now being published, and authors can now target smaller audiences. It is therefore unsurprising if readers find that most books conflict with their aesthetic preferences — they are not the intended audience.

Abraham Lincoln, Vampire Hunter will never sit on my parents’ nightstand. That is neither a tragedy nor unexpected, but to the people who love historical horror fiction, the world is a better place with that book in it. More writers can now pursue their dreams of becoming authors. The garden is growing larger and more diverse.

What Hath Marketing Wrought?

Le Guin is concerned about the influence of marketing in creating best seller lists. But even with a much larger budget than what book publishers have, Hollywood seems incapable of ensuring against $100 million bombs like Tomorrowland. Producers may broadly know what “the people” want, but that knowledge offers little guidance in ensuring a commercial success.

If you had told me a few years ago that one of the most popular book series in America, the Twilight saga, would be about a love triangle between a mopey teenage girl, a werewolf, and a centuries-old pedophile, I would have laughed in your face. Another best seller, Fifty Shades of Grey, started as Twilight fan fiction. In what smoke-filled room was it decided to sell erotica at Walmart?

Best sellers are an interesting phenomenon, because book consumption — once an intimate connection between reader and writer — has transformed into a widely shared social experience. These shared experiences create bonds between strangers. Art is a bridge that connects otherwise lonely islands of experience. When Mark Zuckerberg announced his book club, he was inviting countless strangers to join him in thinking and talking about the world.

Producing a best seller is harder than it looks. What sells or doesn’t sell — and what becomes the next breakout hit — is never the outcome of design. Writers and publishers experiment. Readers respond. Social media allows the cycle to accelerate, and sometimes the results can seem bewildering.

In this new era, more people are dedicating their lives to creating art. It is hard to find fault with either those pursuing their dreams or those paying them to do so. There are more books than we can read in a lifetime. If there is anything to regret, it is our pitifully short lives, not the literary bounty before us.

Le Guin is a brilliant novelist, but she fundamentally misunderstands the nature of the 21st-century market. The challenge now facing all readers is not to criticize the abundance of choices but to develop better filters for finding the literature that appeals to their interests. Luckily, Amazon has some recommendations you may be interested in viewing.

Stewart Dompe

Stewart Dompe is an instructor of economics at Johnson & Wales University. He has published articles in Econ Journal Watch and is a contributor to Homer Economicus: Using The Simpsons to Teach Economics.

The Ex-Im Bank Is Dead — But Watch Out for Corporate Welfare Zombies by Daniel J. Ikenson

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At midnight, the gears of crony capitalism ground to a halt at 811 Vermont Avenue, NW, Washington, D.C.

After 81 years of funneling taxpayer dollars to favored companies, projects, and geopolitical outcomes under the guise of advancing some vague conception of the “U.S. economic interest,” the Export-Import Bank of the United States will end its financing operations at midnight tonight.

No more subsidies to Fortune 100 businesses. No more siphoning revenues from unwitting U.S. firms and industries. No more loan guarantees to wealthy, autocratic foreign governments. No more crowding out of private lending. No more taxpayer exposure to a Fannie Mae-like fiasco. No more bribery and corruption scandals. No more collaboration and lending to China’s Export-Import Bank – you know, the entity whose support for Chinese companies is alleged to threaten U.S. exporters and jobs, and is the most frequently cited imperative for reauthorizing Ex-Im.

No more of any of this… for now.

Champions of small government and market capitalism should savor this rare victory. It was won with solid arguments, including over 20 years of analyses from Cato Institute scholars including Ian Vasquez, Aaron Lukas, Steve Slivinsky, Chris Edwards, Doug Bandow, Sallie James, and – perhaps most comprehensively and tirelessly – Veronique de Rugy.

It was won because of columnist/scholar Tim Carney’s persistence in focusing the public’s attention on the corruption bred of corporate welfare and because of the analytical contributions of Heritage’s Diane Katz, the Competitive Enterprise Institute’s Ryan Young, and others who continued to make compelling arguments for shuttering the Bank, despite steep odds against that outcome.

It was won because certain libertarian groups and conservative activists made the issue a priority, recognizing that corporate welfare is as great a threat to liberty as is the Welfare State, and that reining it in should be a priority because success there would lend greater credibility to the effort to rein in the Welfare State.

It was won against great odds, including vast political expenditures and arm-twisting by U.S. business interests on Capitol Hill, a mainstream media that is reflexively unsympathetic to any cause associated with “Tea Party Types,” and a general aversion among establishment organizations to any challenges to the status-quo.

Radical and reckless, excessive and extreme, ideological and idiotic have been the characterizations assigned by media, politicians, and Boeing lobbyists in their attempts to discredit legitimate efforts to purge “crony” and make “market” the new brand of capitalism.

And it was won because House Financial Services Committee Chairman Jeb Hensarling and Senate Banking Committee Chairman Richard Shelby, knowing the case against Ex-Im reauthorization was more substantive than the New York Times would allow, made good gatekeepers by putting the onus on Ex-Im proponents to answer the critics – a task at which they failed.

So, at midnight, the Export-Import Bank ceased in its capacity to issue new financing. That is something to cheer. It may also be short-lived.

Proponents of the Bank have been regrouping and strategizing to move legislation to reauthorize the Bank at the soonest possible chance. In fact the White House is hosting a conference call for the purpose of advancing that outcome. Here’s the text of the email:

Dear Friend,

Please join us for a conference call on Tuesday, June 30th, at 2:35 PM with President Barack Obama, Senior Advisor to the President, Valerie Jarrett, and Director of the National Economic Council, Jeff Zients, to discuss the importance of reauthorizing the Export-Import Bank of the United States.

The Export-Import Bank is a critical tool to help U.S. businesses and workers succeed in global markets and grow their exports – it supports high-quality jobs, is a vital tool for small businesses, and doesn’t cost taxpayers a penny. Its reauthorization is vital to U.S. competitiveness and leveling the playing field for American small business owners and workers. …

This call is off the record and is not for press purposes nor amplification on social media.

Thank you,

The White House Business Council

The battle may be over but the war continues. Given the sway that conservatives have had on this issue, it will be interesting to see whether and how Speaker Boehner tries to circumvent Hensarling’s committee to get a reauthorization bill to the floor. Majority Leader McConnell believes there’s enough support in the Senate for reauthorization, but most of the Republican presidential hopefuls have expressed opposition to reauthorization.

It seems to me that if Ex-Im reauthorization resurfaces in the weeks and months ahead, it will be an issue that provides Republicans with yet another opportunity to demonstrate commitment to limited government, free market principles. Maybe this time they’ll see the value in reclaiming that brand.


Daniel Ikenson

Dan Ikenson is director of Cato’s Herbert A. Stiefel Center for Trade Policy Studies, where he coordinates and conducts research on all manners of international trade and investment policy.

EDITORS NOTE: A version of this post first appeared at Cato.org.

Money Will Be Digital — But Will It Be Free? by Andreas M. Antonopoulos

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Bitcoin offers a glimpse into the future of money — a purely digital form of money that is individual, private, global, and free (free as in speech, not as in beer). Bitcoin is often compared with the existing banking system, juxtaposing its futuristic capabilities with the slow, antiquated, and cumbersome world of wire transfers, checks, “banking hours,” and restrictions.

But the future will not be a choice between “old money” and cryptocurrency. Instead, it will be a choice between two competing visions of digital money: one based on freedom and choice, the other based on control and surveillance, a dystopian totalitarian system of control from which no one can escape.

We are now at the crossroads, and we must choose the future of currency wisely.

Cash, checks, and other forms of tangible money have been gradually disappearing for decades. We are now rapidly moving toward a cashless society where all money is purely digital. In the past, cash payments were expected and preferred; credit transactions were suspect. But as we turned into a debt-based society, cash became the oddity. The inscription “for all debts public and private” no longer rings as true. Today, if you try to buy a car with cash, you’ll be treated with extreme suspicion. Large amounts of cash are now associated with criminal activity and the definition of “large” is getting smaller each day. This is how we arrive at a cashless society: by making cash itself suspect, then criminal.

The transition from cash to digital money is not just a change in form. It is a transition from transactions that are private, person-to-person, and decentralized to transactions that are monitored, intermediated, and under centralized control. In the last two decades, digital payments have become a powerful surveillance tool. Citizens who are concerned about their government monitoring their telephone calls are simultaneously oblivious to the fact that every transaction they make with a plastic card or an online payment network can be scrutinized without suspicion of a crime, without warrants or any form of judicial oversight. Most national governments, under the guise of counterterrorism laws, have empowered their law enforcement and intelligence agencies with unfettered access to financial data. It shouldn’t surprise you to learn that these powers are used far more broadly every day, increasingly removed from the originally stated intent.

What a strange world we now live in. Total surveillance of every citizen’s transactions, without any basis or suspicion, is not just normal but presented as a virtue, a form of patriotism. Using cash or wishing to retain your financial privacy is inherently suspect, a radical position, soon to be a crime.

A future where all payments are trackable is terrifying, but a world with centralized control over transactions would be even worse. Digital currency with centralized control means the eradication of property as a right. Instead, your money exists only as a database entry where the balance is controlled entirely by a third party.

By managing the payment networks, a government has effective control over all participants, including banks, corporations, and individuals. Already, banks are extorted into adopting global financial blacklists for fear of being disconnected from networks like the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and Automated Clearing House (ACH). This web of control is expanding and is used more and more frequently as a weapon of geopolitics.

The future of digital central currencies will make this control entirely individualized and easy to target. Attended the “wrong” protest? Your bank balance is now zero. Bought a suspicious book? Expect a visit from the police. Annoyed someone in power? They can trawl through your transactions until they find something juicy enough to leak.

Your movements can be tracked, your friends identified, your political affiliations analyzed and cross-correlated to your reading habits. No part of your life is private when every form of money is digital and every transaction can be tracked, blocked, seized, and deleted. Your life savings are yours only as long as you don’t offend someone in power. When money is centrally controlled, ownership of anything is a privilege the government can revoke. Property is not an inalienable right, but an advantage afforded to the those who acquiesce to the system. Combining surveillance of communications with complete control over money will result in tyranny the likes of which the world has never known.

Totalitarian surveillance of money is toxic to democratic institutions, and the power of surveillance erodes the social contract and corrupts those in power. There cannot be self-determination, freedom of expression, freedom of association, or freedom of conscience in a society where every penny you spend is monitored and controlled.

Even if you believe that your government is benevolent and will only use these extreme powers against “terrorists,” you will always live one election away from losing your freedoms. Even the supposedly benevolent governments in liberal democracies are already using their power over money to harass journalists and political opponents, while allowing their friendly bankers to finance tyrants, warlords, and militias across the world.

Bitcoin offers a fundamentally different future for currency. Bitcoin is digital cash; its transactions are person-to-person, private, and decentralized. It combines the best features of cash with the convenience, speed, and flexibility of a digital medium.

Bitcoin enables an alternative future of personal freedom and privacy that revokes the surveillance-state developments of the last few decades and reintroduces financial emancipation through the power of mathematics and cryptography. Through its decentralized global network, Bitcoin provides no central point to control, no position of power to enable censorship, no ability to seize or freeze funds through a third party without due process, no control over funds without access to keys.

Lacking a center of control, bitcoin resists centralization. Lacking concentration of power, it resists totalitarian domination. Lacking identifiers, bitcoin promotes privacy and makes total surveillance impossible. Disregarding political borders as network-irrelevant, it eschews nationalism and geopolitical games. Dispersing power, it empowers individuals.

Bitcoin is a protocol of free commerce, just as the Internet’s transmission control protocol/Internet protocol, or TCP/IP, is a protocol of free speech. Bitcoin’s design can be replicated to create myriad forms of decentralized money, all superior to the dystopian future we are otherwise headed for.

We can live in a world where money operates like any other medium on the Internet, free from control or interference. In a decentralized digital future, money will be controlled by individuals, banking will be an “app,” and governments will be as powerless to stop the flow of money as today they are powerless to stop the flow of truth.

In this future, money will be a tool of freedom from tyranny, an escape hatch from corrupt banks, a haven from hyperinflation. Four to six billion people without access to international financial services will be able to leapfrog the banking system and connect to the world economy directly. Individuals will not have to choose between directly controlling their own money and participating in a global financial network. They will enjoy global peer-to-peer finance, where trusted third parties and endless lines of bankers and intermediaries are things of the past.

While the future of currency is undoubtedly digital, it can take two radically different forms. We can live in a financial panopticon, a straitjacket of surveillance and tyranny. Or we can live in an open society where our privacy is protected by cryptography, not subject to the whim of every petty bureaucrat — where our digital money is global, borderless, anonymous, and controlled by the individual. The choice between financial freedom and financial tyranny is a choice between fundamental freedom and tyranny. Choose financial freedom: choose freedom.


Andreas M. Antonopoulos

Andreas M. Antonopoulos is a technologist and serial entrepreneur who advises companies on the use of technology and decentralized digital currencies such as bitcoin.

How to Outsource Your Compassion to the Government by Robert P. Murphy

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I saw the mom and her two little kids camped out in the shopping center parking lot. She held a sign asking for help to feed them. I bought some oranges and bananas for them.

Imagine if someone from the government had swooped in to explain that my bag of fruit was hardly sufficient to feed the struggling family. What if the government then passed a law saying that if anybody decided to donate food (or cash) to people begging on the street or in a parking lot, the contribution had to be worth at least $15? Anybody caught giving, say, a $1 bill or a small bag of fruit would be fined heavily. Does that sound like “pro-homeless” legislation?

Try a different example: there are civic and church groups who will pick a weekend to go to a specific elderly widow’s house and help her put on a fresh coat of paint, clean up the yard, restock the pantry, and so on. Such one-off bursts of assistance obviously can’t fill the void for someone without an extended family or a generous pension. Shouldn’t the government pass legislation insisting that if you are going to donate time and goods to an elderly widow, you must do so in a way that allows her to live comfortably? Isn’t that a great “pro-widow” method for raising the living standards of the target demographic?

Or consider families who adopt children from war-torn regions. These actions, though seemingly noble, are clearly a drop in the bucket, with hundreds of thousands of orphans left behind. What if the government passed a law saying that US families were only allowed to adopt foreign children if they did so at least 15 kids at a time? Would activists agree that such a “pro-adoption” measure would increase the number of adoptions and be an unmitigated boon for foreign orphans?

Currently there are people who volunteer to teach adults how to read. But adult illiteracy is still a vexing problem in certain communities, so clearly these volunteer efforts have been inadequate to overcome the challenge. The obvious, pro-literacy way to fix things is to pass a law saying volunteers must give at least 15 hours of tutoring per week. If they are caught only teaching adults how to read for, say, 14 hours, then the volunteers will be heavily fined.

I’ll offer one final example. There are millions of people in the United States who do not have very marketable skills. There are a few thousand people who are willing to give them jobs. Wouldn’t it be a great benefit to these unskilled workers to pass a law saying that if you want to hire any of them, then you must pay at least $15 per hour of their labor? (If you get caught only paying, say, $14 per hour, then you get heavily fined.) What could possibly be a downside to such “pro-labor” legislation?

At this point, you surely recognize that I am being facetious. I am highlighting the absurdity of minimum wage legislation as an alleged “pro-labor” device. First and most obvious, by raising the hurdle to giving a job to unskilled workers, minimum wage legislation might perversely reduce employment among the very groups the government is supposedly helping.

This textbook claim about the danger of minimum wage laws is repeated by free-market economists so often that people have been lulled into complacency, especially in light of econometric studies that seem to show that minimum wage hikes do not have disastrous effects on employment. Yet, there is a strong prima facie case against the minimum wage in the analogous examples. Would advocates for the homeless, widows, adult illiterates, and other disadvantaged groups be so confident in the other hypothetical legislation I described above?

I designed my hypothetical examples to underscore another perversity in minimum wage legislation — and, more generally, all mandates placed on employers: it attacks the benefactors of the unskilled. Consider: there are millions of people who have trouble earning a living. Isn’t it perverse to burden those specific people who are doing the most to alleviate the problem? This is analogous to singling out volunteers doing at least something to battle adult illiteracy, making them bear the brunt of further efforts on this score, while allowing the rest of society to continue doing nothing to mitigate the problem.

To be sure, as both an Austrian economist and a libertarian, I consider it neither appropriate nor ethical for state officials to interfere with property rights in order to help unskilled workers. But if the government is going to “do something,” then it is particularly perverse to lay down the burden exclusively on the people who are already giving some money to unskilled workers. A more sensible approach would, say, give government subsidies to workers who were earning a bona fide paycheck in the market, or (better yet) would give targeted tax breaks to the unskilled workers that the government wanted to assist. Incidentally, this type of reasoning is why many economists — even progressives — are pushing the earned income tax credit as a much more efficient way to help poor workers than minimum wage mandates.

The minimum wage is a perverse tool with which to (allegedly) help unskilled workers. At best, it helps some unskilled workers while drastically hurting others — by making it impossible for them to find work at all. Beyond that, minimum wage legislation perversely places the entire (direct) burden of helping such workers on their employers, the one (tiny) group of people who are actually helping them solve the problem. The rest of society, which has done nothing whatsoever to help the unskilled workers have a higher standard of living, can pat themselves on the back for voting for certain politicians while continuing to do nothing whatsoever to help those who want to work.


Robert P. Murphy

Robert P. Murphy is senior economist with the Institute for Energy Research. He is author of Choice: Cooperation, Enterprise, and Human Action (Independent Institute, 2015).

Grexit? A flesh wound compared to Frexit (exit of France from EU)

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The Telegraph reports this morning that Greek economic minister Varoufakis now threatens to sue in a higher court if the EU attempts to force Greece to leave the EU (our thanks to G. in the UK for this tip).

The article quotes French President François Hollande as follows:

“What is at stake is whether or not Greeks want to stay in the eurozone or want to take the risk of leaving,” said French president Francois Hollande.

Now you would think from this bold statement that Hollande heads up a country that pays its bills to the EU on time, wouldn’t you? After all, financial pundits are all saying that if Greece leaves the EU, Spain, Portugal and perhaps even Italy could be next. No one mentions France.

However, there’s a colossal French debt that no one wants to talk about, except some brave journalists like Francis Journot at the site Agora, who shows that France is actually the elephant in the EU room.

My translation of the opening paragraph of this extraordinary article follows:

The French State’s public debt has reached 6 trillion euros, equivalent to 5 years of tax receipts and nearly 300% of GDP. The process of extravagant financial operations [tentative rendition of cavalerie financière, see below] on the public debt that are available to the government since the banking law of Jan 3, 1973 exposes France more than ever to the volatility of the financial markets and to a default. More-confidential commitments, off the balance sheet and allowed by the State, for payment of retirement pensions of government employees and the like, could also prove impossible to meet in the long run. An exit from the EU could eventually be the only way out of a fraudulent system that is threatening to blow up. [my highlighting] [original text below]

This debt has been constantly fed by new loans to ensure reimbursement of the elderly and their interests, as well as new deficits. The amounts kicked down the road in this way are far greater than those payable by the Greeks. But the off-the-books debt is no less than the debt shown on the books. The author makes it clear, citing authorities, that this debt could never be paid without major growth through new investment in industry. Some of the debt is owed to the IMF and hence, represents US exposure.

One rendition of the term I rendered as “extravagant financial operations” is “Ponzi scheme” and that is just a more direct way of saying the same thing.

Now, if a Grexit is a threat to the integrity of the EU, a Frexit would spell certain doom to the already-shaky entity, and the entire globe is exposed.

Original text:

La dette publique de l’État français atteint 6 000 milliards d’euros, équivaut à plus de vingt années de recettes fiscales et près de 300% du PIB. Le processus de cavalerie financière de la dette publique auquel les gouvernements ont recours depuis la loi bancaire du 3 janvier 1973, expose plus que jamais la France à la volatilité des marchés financiers et au défaut de paiement. Des engagements plus confidentiels, hors-bilan et portés par l’État, pour le paiement des pensions de retraites des fonctionnaires ou assimilés, pourraient également s’avérer, à terme, impossibles à honorer. Une sortie de l’UE pourrait s’imposer comme l’unique voie de sortie d’un système de cavalerie qui menace d’exploser.   

End quote

Cavalerie financière is a fraudulent financial practice based on the discrepancies between the amounts and periods for recording income and outflows to mask a failure between resources and debt owed. Other possible renditions include “can kicking” and “Ponzi scheme.”

RELATED ARTICLE: The euro is a straitjacket for Greece

U.S. Congress Passes “Landmark” Anti-BDS Amendment

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What some consider as a “landmark” anti-BDS Amendment to the Fast Track Trade Promotion Authority legislation passed the Senate on Wednesday afternoon, June 24, 2015. Having passed both the House and Senate the legislation now goes to President Obama for his signature. That’s good news for Israel, bad news for J Street and Peace Now who opposed the anti-BDS Amendment. Clearly, the President’s overriding objective was completion of negotiations of a Trans Pacific Partnership Agreement which gives the U.S. leverage in competition with China and encourages job creation and business in the U.S. J Street and Peace Now have been allies of the Administration promoting a Palestinian State that would divide Israel’s capital of Jerusalem. Those groups also support the looming P5+1 Iran nuclear agreement with a current deadline of next Tuesday, June 30th.

Among the principal sponsors of the anti-BDS Amendment were:  Sen. Ben Cardin (D-MD) and Sen. Rob Portman (R-OH) and members of the House  bi-partisan Congressional Israel Allies Caucus, Representative Peter Roskam (R-IL) and Representative Juan Vargas (D-CA).  The anti-BDS measure passed by Congress has garnered praise from mainstream American and international Jewish Groups:  AIPAC, American Jewish Committee, American Jewish Congress and the World Jewish Congress.

As noted in a Times of Israel report:

The anti-BDS provisions in the trade authorization were directed toward free trade talks between the US and the European Union. The provisions require US negotiators to make rejection of BDS a principal trade objective in Transatlantic Trade and Investment Partnership negotiations with the European Union. These guidelines, sponsors hope, will discourage European governments from participating in BDS activities by leveraging the incentive of free trade with the US.

Rep. Roskam issued a statement saying:

Today, for the first time in nearly four decades, Congress sent legislation to the President’s desk to combat efforts to isolate and delegitimize the State of Israel. The recent wave of boycotts originating in Europe, including French telecom company Orange’s decision last week to sever ties with Israel, demands a robust response from the United States. This is that response. The bipartisan TPA provisions I authored are simple: if you want free trade with the United States, you can’t boycott Israel.

After today, discouraging economic warfare against Israel will be central to our free trade negotiations with the European Union. Congress will not be complicit in the marginalization of our ally Israel by watching these attacks from the sidelines. Instead, we have decided to fight back against the BDS movement and ensure the continued strength of the US-Israel relationship.

President Ronald Lauder of the WJC added:

The Senate today took a strong stand against the growing vilification of Israel. American values such as freedom and openness have triumphed over the blatant hypocrisy and bias of the anti-Israel campaigners. This vote marks a major defeat for BDS.

J Street and Peace Now opposed the anti-BDS legislation on the grounds that “the amendment plays into the hands of BDS activists’ claims by conflating boycott of Israel and boycott of products of settlements.”

The author of the Algemeiner article  on why  J Street and other groups opposed the anti-BDS amendment commented:

The impression one gets is that J-Street wants to maintain its ties to radical anti-Israel BDS groups like Jewish Voice for Peace but still wants to pretend to be pro-Israel.

Pro-Israel? Yeah, right.

The passage of the anti-BDS amendment should encourage the Israel Allies Foundation Jerusalem Call that worked with South Carolina State Rep. Alan Clemmons developing a state level model anti-BDS statue signed into law on June 4, 2015 by Governor Nikki Haley. In our 1330am WEBY interview with Dr. Daniel Williams, National Director of the IAF Jerusalem Call  he noted that the South Carolina model is being filed in 17 states, among them Ohio and potentially here in Florida.   J Street is the subject of a viewing of the Americans for Peace and Tolerance documentary, J Street Challenge, Saturday evening, June 27, 2015 at Brit Ahm Synagogue in Pensacola. A panel discussion will follow that includes Florida State Rep. Mike Hill, Mike Bates of WEBY’s “Your Turn”, Rabbi Eric Tokajer of Brit Ahm and this writer.  On Tuesday evening June 30, 2015, Rep. Hill and Guy Rodgers, Director of Operations for the IAF Jerusalem Call will be the principal speakers about support for Israel and the work of the group at Pensacola First Assembly of God Church.

EDITORS NOTE: This column originally appeared in the New English Review.

The Industrial Manifesto

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In the wake of two recessions following two fleeting, largely service-sector bubbles—the dot-com bubble and the housing/financial bubble—America’s intellectual and political leaders are championing the need for industrial progress.

The ubiquitous Thomas L. Friedman takes on the subject of industrial progress in his latest book, That Used to Be Us, coauthored by political scientist Michael Mandelbaum. The book begins by describing a China full of fast trains, stupendous buildings, and an aura of dynamism—and contrasting it to an America in which repairing a subway is a multi-year project. Such images resonate with readers and voters, who wonder with frustration why so much industrial innovation, production, and job-creation is happening overseas rather than in America.

In President Obama’s recent address on jobs, he angrily complained about the state of American industry:

Our highways are clogged with traffic. Our skies are the most congested in the world. It’s an outrage.

Building a world-class transportation system is part of what made us an economic superpower. And now we’re going to sit back and watch China build newer airports and faster railroads?

Obama is right about this much; the state of American industry is an outrage. America has enormous, incalculable, untapped potential to make industrial progress—to radically increase our standard of living through far greater productivity in energy production, in manufacturing, in construction, in mining, in transportation. Unfortunately, the statist philosophy of Obama, Friedman, et al leads them to speciously attribute the problem to lack of government—despite the unprecedented expansion of government over the last 50 years. They propose still more increases in government spending and controls, as if some magic manipulation is going to spark the next industrial revolution.

At the same time, they ignore the most blatant impediment to industrial progress—an impediment caused by policies they support. This impediment is an open secret readily discoverable by asking American industrialists what is holding them back.

When I do this, I hear one theme repeated over and over: it is ruinously difficult to start new industrial projects because of our anti-industrial, “green” policies.

Consider the plight of the modern industrialist. Whether he wishes to construct a new apartment complex, open a coal mine, site a nuclear power plant, build a new factory, drill for oil, he cannot count on clear, objective laws to protect his right to develop. Instead, he must deal with open-ended environmental laws and near-omnipotent regulatory agencies that can forbid any project that is regarded as insufficiently “green.”

The industrialist is virtually guaranteed to face a labyrinth of opposition by environmental bureaucrats, controls, lawsuits, NIMBYs, and activist groups. Every step of the labyrinth costs time and money, and there is no guarantee a project will emerge alive; vital industrial projects can and have been shut down to preserve the likes of kangaroo rats and two-toed sloths.

Given this industrial climate, it is a wonder that any industrial development occurs in this country. Ask any leader of an industrial project how much opposition he faces in refining the fuel we use to drive, in fracking for the gas that heats our homes, in building the coal or nuclear plants that keep the power on, and you will marvel at the inhuman endurance our industrialists possess—an endurance we can’t, and shouldn’t have to, count on.

The “green” labyrinth goes far beyond traditional environmentalist targets such as coal and oil. The DC Metro subway system that Friedman and Mandelbaum complain about has been enmeshed in controversy for years over adding a new “Purple Line” to its system, with rabid opposition. Any proposed new road in California, the home of some of the country’s worst traffic, faces an uphill, if not impossible, battle.

Even allegedly “green” solar and wind projects frequently face environmentalist opposition. Environmentalist Robert F. Kennedy Jr. is the biggest opponent of Cape Wind, a windmill project off the coast of Nantucket. Environmentalists were the first to object to a giant solar project in the middle of the Mojave Desert in California.

What is so remarkable about the “green” opposition to industrial projects is that Americans, who supposedly want industrial progress, are so accepting of it. Based on the “green” movement’s actions, one might expect its goals and policies to be viewed with suspicion if not derision.

Instead, the idea of “going green” has never been more popular, with practically every businessman, schoolteacher, and politician trying to prove his “green” chops, in his personal life or at the ballot box. And thus, countless industrial projects continue to be deferred and destroyed.

If we are to make industrial progress, we need to seriously question the idea of “going green,” and its role in our government.

The “Green” Ideal

What does “green” really mean? It is most commonly associated with a lack of pollution and other environmental health hazards, but this is both far too narrow and highly misleading. Consider the range of actions that fall under the banner of “green.” As industrialists experience, it is considered “green” to object to crucial industrial projects, from power plants to dams to apartment complexes, on the grounds that some plant or animal will be impacted—plants and animals that take precedence over the human animals who need or want the projects.

It is considered “green” to oppose not only fossil fuel plants (which produce 86% of the world’s energy), but hydroelectric plants and nuclear plants—which all told means 98% of the world’s energy production. It is considered “green” to turn off the heat or air-conditioning, even at the price of personal discomfort.

It is considered “green” to do less of anything industrial—from driving to flying to using a washing machine to using disposable diapers to consuming pretty much any modern product (there is now an attack on iPhones for being insufficiently “green” given the various materials that must be mined to make them).

Often the same activity will be characterized as both “green” and non-“green”—just ask the proponents and opponents of any given solar farm. The proponents will say that the installation is “green” because it doesn’t use fossil fuels (except, they evade, to mine, fabricate, transport and assemble it), it isn’t mining the earth’s precious “natural resources” (except, they evade, for enormous amounts of steel, concrete, and various rare and toxic elements), etc. The opponents will point to the fact that solar farms, because they use a diffuse, intermittent energy source, take up an enormous “footprint” on nature, that they require prominent, long-distance transmission lines to take to their customers, that they require large-“footprint” backup systems to store energy or fossil fuel plants to serve as backups, etc.

Clearly, “going green” is not primarily about human health—indeed, in its opposition to just about anything industrial, it threatens the industrial foundations of modern health and sanitation. The essence of “going green,” the common denominator in all its various iterations, is the belief that humans should minimize their impact on nature.

“Green” leaders and followers may disagree on how to implement this ideal, and they certainly do not follow it consistently, but nevertheless it is uncontroversial that minimizing impact is the ideal.

But if we take ideas seriously, then the “green” ideal should be more than controversial. It should be jettisoned, as it is squarely opposed to the requirements of human life, including the requirements of a healthy human environment.

The Industrial Ideal

Human beings survive by transforming nature to meet our needs. The higher our level of survival, the more we must transform nature. In other words, we survive to the extent we depart from the “green” ideal.

Nature does not provide us with the wealth or the environment we need to live long, healthy, happy lives; hence the historical life expectancy of 30. To live and thrive, we must create wealth and create a livable environment.  And every new  act of creation, from building a fire to building an air-conditioned home to building the Internet, requires additional impacting—transforming—nature.

The fundamental reason for today’s incredibly high standard of living is that thanks to industrialization—the pervasive use of man-made power to fuel industrial machines—human beings can do hundreds of times more work to transform nature than we could even 200 years ago. But if our ancestors had followed “green” strictures, industrialization would have never got off the ground.

When the early oil industry turned night into day by making cheap illumination available to millions, they did it by drilling thousands of deep holes in rural Pennsylvania, extracting the black gold beneath, refining it into various useful substances, burning kerosene to create light, and dealing with whatever waste products emerged. J. J. Hill’s Great Northern Railway, a private transcontinental railroad that revolutionized American transportation and commerce, required men to mine iron ore from the ground, to combine it with carbon to make steel, to mine and use coal to power the steel furnace, to pour the mixture into molds, to use the molds to make railroad tracks, to lay the railroad tracks across patches of wilderness, to displace various plants and animals that stood in the way, and many more changes to the status quo.

Fast forwarding to today, the Chinese airports and buildings that many marvel at also transform nature on a massive scale—from the magnitude of the physical structures themselves to the coal plants, gas plants, factories, mining operations, oil rigs, oil refineries, and heavy machinery that went into building them, not to mention the industrial transportation system that keeps them maintained and stocked with supplies.

Industrial progress is not “green.” “Going industrial” requires a commitment to impacting nature as much as necessary to make it more hospitable to human life. And it is no accident that in generations past, Americans viewed industrial progress, not industrial abstention, as an ideal to strive for. Earlier generations took pride in transforming nature—in being a people that “tamed a continent,” that built new factories, that paved new roads, that drilled new wells, that mined the earth for resources. Whole towns would celebrate when a new bridge was built, when a factory was erected. They would proudly drive their automobiles, fly in planes, support new railroads, build new roads—without a shred of guilt over the fate of the two-toed sloth.

What about “green” support for “green energy” and a “green economy”? Is this not just a new, superior form of industry? Far from it. Any talk of green industry is ultimately contradictory, which is why such industries never materialize on a significant scale. All energy production requires an enormous amount of industrial development, both in its production and in its consumption.

Thus, environmentalists frequently oppose every power source, including solar and wind, for their various impacts. (They complain that solar and wind farms have the largest land “footprint” of any form of energy generation, which is true.) Similarly, for all the talk of “green construction,” “green building,” and “green jobs,” any activity with a major industrial presence will draw “green” opposition—as the valuable website www.projectnoproject.comaptly details.

The more consistent anti-industrialists are explicit about their goal, including its ultimate implication: de-development and depopulation. Stanford environmentalist celebrity Paul Ehrlich, who likens population growth to a “cancer,” “A massive campaign must be launched to de-develop the United States. De-development means bringing our economic system into line with the realities of ecology and the world resource situation.” Billionaire Ted Turner, a “mainstream” figure, says: “A total [world] population of 250-300 million people, a 95% decline from present levels, would be ideal.”

The true nature of “green” emerged particularly clearly in a debate over nuclear fusion in the late 1980s. Some uninformed news reports announced that fusion—which, if it worked, would be the cheapest, cleanest, most plentiful source of energy every created—was on its way to commercial reality. Many expected environmentalists to embrace this development. They condemned it.

“It’s the worst thing that could happen to our planet,” said leading environmentalist Jeremy Rifkin. Ehrlich memorably said that allowing human beings to use fusion was “like giving a machine gun to an idiot child.” Environmentalist icon Amory Lovins stresses he would oppose any fusion-like energy breakthrough: “Complex technology of any sort is an assault on human dignity. It would be little short of disastrous for us to discover a source of clean, cheap, abundant energy, because of what we might do with it.”

Do not make the mistake of writing off these anti-industrialists as “extremists” who don’t reflect on “moderate” greens. While the “extremists” are more consistent than the “moderates,” they share the same ideal—the anti-impact ideal that destroys industrial progress to whatever extent it is practiced.

But what about the “environmental impact” of industrial development? Isn’t the “green” movement providing a salutary influence us by helping us combat that problem? Again, no.

The idea of “environmental impact” is what philosopher Ayn Rand called an “intellectual package-deal.” Such a concept dishonestly packages together two very different things—the impact of development on the human environment and the impact of development on the non-human environment. Industrial development will certainly often harm various non-human environments—but it is a godsend to the human environment. By lumping together concern with the non-human environment (e.g., displacing some caribou to get billions of barrels of the lifeblood of civilization) and the human environment (e.g., air quality), anti-industrialists are able to dupe Americans into thinking that sacrificing to caribou somehow benefits them.

Historically, industrial progress brought with it a radical improvement of the human environment. Indeed, industrial progress essentially is the improvement of the human environment. The reason we develop is to make our surroundings better so that our lives are better, cleaner, healthier safer—in the face of a natural environment that is often hostile to human life.

Contrary to “green” mythology, man’s natural environment is neither clean nor safe. In a non- industrialized, “natural” state, men face all sorts of health dangers in the air and water, from the choking smoke of an open fire made using plant matter (a cause of over a million deaths a year to this day) to the feces-infested local brook that he must share with farm animals. Industrial development gives men the technology and tools to make their environment healthier—from sanitation systems to sturdier buildings to less onerous job conditions to comfortable furniture to having healthy, fresh food at one’s disposal year round, to the wealth and ability to preserve and travel to the most beautiful parts of nature. And so long as we embrace policies that protect property rights, including air and water rights, we protect industrial development and protect individuals from pollution.

As for the “sustainability” of industrial progress, an accusation that dates back to Marx, this fails to recognize the fact (elaborated on by Julian Simon and Ayn Rand) that man has an unlimited capacity to rearrange nature’s endless stockpile of raw materials into useful resources—which is why the more resources we use, the more resources we have.

Human life requires changing nature on a massive scale. Any cause that holds minimal impact as an ideal is anti-human and an enemy of the human environment.

Today’s anti-industrial movement is not new in this respect. Throughout history, there have been major, anti-industrial groups or movements. The basic premise they have in common is that it is arrogant and wrong for man to transform nature as he sees fit. Man, they believe, should not tame nature but exist in some sort of mystical “harmony” with it (how he is supposed to cope with nature’s dangers and a life expectancy of 30 is rarely specified). Perhaps the iconic anti-industrialist was the 18th Century’s Jean-Jacques Rousseau, who worshiped nature untouched by man and regarded the transformation of nature in his time (let alone the then-unimaginable transformation that is our modern world) as evil.

But the modern-day followers of Rousseau know they cannot succeed by being directly anti-industrial. So they create a false association between themselves and environmental progress, and a false opposition between industrial progress and environmental progress.

Part of this false conceptualization has been achieved by using an old socialist trick to obscure the massive environmental improvement that industrial capitalism brought. The trick is to criticize something by comparison to a nonexistent and impossible utopia.

Socialists used this technique to criticize capitalism for causing poverty, even though capitalism inherited poverty–and cured it. Yet Marxists would attack capitalism’s incredible contribution to human life, including to the life of laborers, by comparing that contribution, not to its predecessors and not to any known alternatives, but to a fictional socialist utopia whose advertised results contradicted everything known (even then) about socialism’s destructive nature.

Environmentalists have done the equivalent to industrial progress. Instead of comparing the human environment pre-industrial and post-industrial, they compared the post-industrial environment to a non-existent pollution-free utopia achieved by man living in “harmony” with nature. They did this in spite of conclusive historical evidence that living in “harmony” with nature means living very briefly. Historically, to the extent humans didn’t mine, didn’t burn fuels, didn’t develop, and were unwilling or unable to control or displace other species where necessary, they died early and often. The modern standard of living is an unprecedented, singular achievement that continues only so long as men are free to command nature on a large scale.

Early environmentalists cursed the coal fumes of newly industrial cities, evading the wood fumes, dung fumes, and starvation coal had replaced–and the work-hours it saved and years of life it added to human life. They cursed smog, evading that it replaced rampant airborne disease from horse-drawn society. And when increased production of coal and oil and natural gas produced the energy and technology to develop ways to radically reduce their pollution, environmentalists took credit–as if laws against pollution weren’t essential to capitalism, the system where protection of all forms of property is sacrosanct.

Development, industrial progress, and capitalism promote a human environment. The anti-industrial “green” movement opposes it. This is a truth that Americans desperately need to understand. At present, the philosophical confusion caused by anti-industrialists causes Americans who are genuinely concerned about their health and well-being to embrace the ideas and policies of those who want to sacrifice that health and well-being to the non-human. We are taught to denigrate fossil fuels, which have doubled the human life expectancy, and to strive for a mythical “green energy” economy, powered by fuel sources that have failed for decades. We are not taught that industrialization has enabled man to be orders of magnitude less vulnerable to climate, but that a degree rise in temperature over 150 years portends catastrophe. With proposals on the table such as 80% cuts in CO2 emissions, “green” confusion could mean economic suicide.

Such is the power of moral idealism and philosophical corruption. The ideal—and the corruption—need to be replaced.

Industrial Progress: A New Cultural Ideal for America

The only solution to a false ideal put forward by philosophical corruption is a true ideal put forward with philosophical clarity.

We need to embrace, unambiguously, the never-ending project that is the industrial revolution: the transformation of nature on a massive scale, with the unlimited potential to produce more energy, create more wealth, create more productivity, increase leisure time, transport things more quickly, conduct more complex scientific experiments, build sturdier, more comfortable places to live. We can travel farther and faster. We can live longer and better.

For the same reasons, we need to embrace, unambiguously, the harmony of industrial progress and the human environment. Industrial progress should be celebrated in classrooms, on YouTube, on t-shirts. Americans should think of fracking with the same excitement they feel for iPhones.

It is a moral embarrassment that in today’s world, where billions die for lack of energy, where Americans still have so much untapped potential, that what passes for idealism is driving a battery-powered car or sorting through one’s trash to make sure everything is in its “proper” bin. What does it say about our cultural self-esteem when we believe it is wrong to do something as necessary as generate trash—which simply amounts to taking some matter from the earth, making profitable use of it, and putting its waste product in a safe place?

For too long, Americans have taken industrial progress for granted, and carelessly embraced “going green” as an ideal–expecting that the unprecedented standard of living we had would automatically continue, even though we permitted environmentalists to oppose new energy production and new development at every turn. Today, we are paying the price, with an economy whose productive fundamentals are less and less sound.

So long as the anti-industrialists have the moral high ground, they can inspire support for their suicidal “green economy,” and inspire guilt to gain power and thwart the opposition. Way too much of free-market criticism of environmentalism bends over backwards to declare itself “green” and mouth environmentalist terminology such as “protect the environment”—as if the kangaroo rat environment and the human environment are interchangeably valuable.

Thus, we must clearly identify and steadfastly reject any trace of the “green” ideal: to sacrifice the human environment to the non-human environment. And any trace of “green” must be removed from politics. The one and only industrial policy that is needed is the proper definition and protection of property rights for individuals and companies. Human ingenuity directed toward the improvement of human life, will do the rest.

In the past, Americans’ unprecedented industrial freedom and growth depended on a certain industrial philosophy. With industrial progress as our ideal, and with policies that fully respect property rights and fully allow free markets, the brilliantly talented individuals of this great country can lead us to the next industrial renaissance and an ever-improving environment.

Don’t “go green.” Go industrial.

Driverless Money by George Selgin

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Last week I was contemplating a post having to do with driverless cars when, wouldn’t you know it, I received word that the Bank of England had just started a new blog called Bank Underground, and the first substantive post on it had to do with — you guessed it — driverless cars.

As it turned out, I needn’t have worried that Bank Underground had stolen my fire. The post, you see, was written by some employees in the Bank of England’s General Insurance Supervision Division, whose concern was that driverless cars might be bad news for the insurance industry.

The problem, as the Bank of England’s experts see it, is that cars like the ones that Google plans to introduce in 2020 are much better drivers than we humans happen to be — so much better, according to research cited in the post, that “the entire basis of motor insurance, which mainly exists because people crash, could … be upended.”

Driverless cars, therefore, threaten to “wipe out traditional motor insurance.”

It is, of course, a great relief to know that the Bank of England’s experts are keeping a sharp eye out for such threats to the insurance industry. (I suppose they must be working as we speak on some plan for addressing the dire possibility — let us hope it never comes to this — that cancer and other diseases will eventually be eradicated.)

But my own interest in driverless cars is rather different. So far as I’m concerned, the advent of such cars should have us all wondering, not about the future of the insurance industry, but about the future of…the Bank of England, or rather of it and all other central banks.

If driverless cars can upend “the entire basis of motor insurance,” then surely, I should think, an automatic or “driverless” monetary system ought to be capable of upending “the entire basis of monetary policy,” as such policy is presently conducted.

And that, so far as I’m concerned, would be a jolly good thing.

Am I drifting into science fiction? Let’s put matters in perspective. Although experiments involving driverless or “autonomous” cars have been going on for decades, until as recently as one decade ago, the suggestion that such cars would soon be, not only safe enough to replace conventional ones, but far safer, would have struck many people as fantastic.

Consider for a moment the vast array of contingencies such a vehicle must be capable of taking into account in order to avoid accidents and get passengers to some desired destination. Besides having to determine correct routes, follow their many twists and turns, obey traffic signals, and parallel park, they have to be capable of evading all sorts of unpredictable hazards, including other errant vehicles, not to mention jaywalkers and such.

The relevant variables are, in fact, innumerable. Yet using a combination of devices tech wizards have managed to overcome almost every hurdle, and will soon have overcome the few that remain.

All of this would be impressive enough even if human beings were excellent drivers. In fact, they are often very poor drivers indeed, which means that driverless cars are capable, not only of being just as good, but of being far better —  90 percent better, to be precise, since that’s the percentage of all car accidents attributable to human error.

Human beings are bad drivers for all sorts of reasons. They have to perform other tasks that take their mind off the road; their vision is sometimes impaired; they misjudge their own driving capabilities or the workings of their machines; some are sometimes inclined to show off, while others are dangerously timid. Occasionally, instead of relying on their wits, they drive “under the influence.”

Central bankers, being human, suffer from similar human foibles. They are distracted by the back-seat ululations of commercial bankers, exporters, finance ministers, and union leaders, among others. Their vision is at the same time both cloudy and subject to myopia.

Finally, few if any are able to escape altogether the disorienting influence of politics. The history of central banking is, by and large, a history of accidents, if not of tragic accidents, stemming from these and other sorts of human error.

It should not be so difficult, then, to imagine that a “driverless” monetary system might spare humanity such accidents, by guiding monetary policy more responsibly than human beings are capable of doing.

How complicated a challenge is this? Is it really more complicated than that involved in, say, driving from San Francisco to New York? Central bankers themselves like to think so, of course — just as most of us still like to believe that we are better drivers than any computer.

But let’s be reasonable. At bottom central bankers, in their monetary policy deliberations, have to make a decision concerning one thing, and one thing only: should they acquire or sell assets, and how many, or should they do neither?

Unlike a car, which has numerous controls — a steering wheel, signal lights, brakes, and an accelerator — a central bank has basically one, consisting of the instrument with which it adjusts the rate at which assets flow into or out of its balance sheet. Pretty simple.

And the flow itself? Here, to be sure, things get more complicated. What “target” should the central bank have in mind in determining the flow? Should it consist of a single variable, like the inflation rate, or of two or more variables, like inflation and unemployment? But the apparent complexity is, in my humble opinion, a result of confusion on monetary economists’ part, rather than of any genuine trade-offs central bankers face.

As Scott Sumner has been indefatigably arguing for some years now (and as I myself have long maintained), sound monetary policy isn’t a matter of having either a constant rate of inflation or any particular level of either employment or real output. It’s a matter of securing a stable flow of spending, or Nominal GNP, while leaving it to the marketplace to determine how that flow breaks down into separate real output and inflation-rate components.

Scott would have NGDP grow at an annual rate of 4-5 percent; I would be more comfortable with a rate of 2-3 percent. But this number is far less important to the achievement of macroeconomic stability than a commitment to keeping the rate — whatever it happens to be — stable and, therefore, predictable.

So: one goal, and one control. That’s much simpler than driving from San Francisco to New York. Heck, it’s simpler than managing the twists and turns of San Franscisco’s Lombard Street.

And the technology? In principle, one could program a computer to manage the necessary asset purchases or sales. That idea itself is an old one, Milton Friedman having contemplated it almost forty years ago, when computers were still relatively rare.

What Friedman could not have imagined then was a protocol like the one that controls the supply of bitcoins, which has the distinct advantage of being, not only automatic, but tamper-proof: once set going, no-one can easily alter it. The advantage of a bitcoin-style driverless monetary system is that it is, not only capable of steering itself, but incapable of being hijacked.

The bitcoin protocol itself allows the stock of bitcoins to grow at a predetermined and ever-diminishing rate, so that the stock of bitcoins will cease to grow as it approaches a limit of 21 million coins.

But all sorts of protocols may be possible, including ones that would adjust a currency’s supply growth according to its velocity — that is, the rate at which the currency is being spent — so as to maintain a steady flow of spending, à la Sumner. The growth rate could even be made to depend on market-based indicators of the likely future value of NGDP.

This isn’t to say that there aren’t any challenges yet to be overcome in designing a reliable “driverless money.” For one thing, the monetary system as a whole has to be functioning properly: just as a driverless car won’t work if the steering linkage is broken, a driverless monetary system won’t work if it’s so badly tuned that banks end up just sitting on any fresh reserves that come their way.

My point is rather that there’s no good reason for supposing that such challenges are any more insuperable than those against which the designers of driverless cars have prevailed. If driverless car technology has managed to take on San Francisco’s Lombard Street, I see no reason why driverless money technology couldn’t eventually tackle London’s.

What’s more, there is every reason to believe that driverless money would, if given a chance, prove to be far more beneficial to mankind than driverless cars ever will.

For although bad drivers cause plenty of accidents, none has yet managed to wreck an entire economy, as reckless central bankers have sometimes done. If driverless monetary systems merely served to avoid the worst macroeconomic pileups, that alone would be reason enough to favor them.

But they can surely do much better than that. Who knows: perhaps the day will come when, thanks to improvements in driverless monetary technology, central bankers will find themselves with nothing better to do than worry about the future of the hedge fund industry.

Cross-posted from Alt-M.org and Cato.org.

George Selgin