Red Scare: An Interview with Naomi Brockwell

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Naomi Brockwell, also known as Bitcoin Girl, is an actor, producer, journalist, and program officer at the Moving Picture Institute. She’s one among a number of rising personalities in the liberty community who are breaking the mold and setting a new tone. Brockwell is also an opera singer, Reason TV correspondent, policy associate at the NYC Bitcoin Center, and on the advisory council for the Mannkal Foundation for economic education.

We don’t have the space to list her talents and accomplishments. But we can say she is FEE seminar faculty and will be speaking again at Freedom Fest this year for the second year in a row. We got to sit down with Brockwell for a brief spell among her thousand projects.

The Freeman: Why does changing the world require artists?

Brockwell: If you want to change the world you have to change the underlying philosophy of a culture. You can try to educate people with facts and figures, but unless you understand how to connect to people, and unless you can reach out and speak to what’s important to them, all the data in the world won’t do you any good. People connect through storytelling. The emotionally compelling story of one individual can be more important for social change than all of the white papers stacked on top of each other. People don’t relate to facts, they relate to individuals and their stories, and it’s the role of the artist to tell these stories.

Artists throughout history have not only reflected what’s important in a culture, but they have helpeddefine it. Art changes the way people think, so if you want to change the world, then help artists redefine popular culture. Help artists expose people to new ideas, help them captivate the world with the issues that you believe are important. The fact is, films and stories will reach far more people than a white paper ever could, and this is why artists are so important. They have this immense power at their fingertips, and we need them to help us fight for positive change.

The Freeman: Who is Bitcoin Girl and what does she care about?

Brockwell: Bitcoin Girl is an educational platform that explores the cryptocurrency world and provides an alternative to the current trend in journalism of only printing doom-and-gloom as a way of getting a larger audience. There is massive demonization of cryptocurrency in the media, and it’s no wonder when you consider the vested interests that banks and governments have in destroying cryptocurrency. As a result, the only positive arguments that are honest about the benefits of cryptocurrency tend to be hidden away in esoteric subreddit threads, and are largely inaccessible to the average, unacquainted person. For this reason, the vast majority of people lap up what the mainstream media tells them, which is mainly negative and poorly informed.

Instead of being skeptical about this new protocol, people should be overwhelmingly excited about it and all of its possibilities we haven’t even begun to unlock. Bitcoin technology has the power to bring about incredible social change. It can lift people out of poverty. It can give people back freedom of speech. It can bring community together in a new peer-to-peer world—the full potential of which we’ve only seen a glimpse.

That is what Bitcoin Girl is: a more accessible way for people to learn about bitcoin, so that they are not forced to depend on a biased media for their information. It shows bitcoin in a refreshing way: as an exciting, powerful tool with the potential to create incredible positive change.

The Freeman: Self-awareness is vital to what you’re doing. What does it mean to cultivate one’s own brand?

Brockwell: I think the energy behind bitcoin is incredibly uplifting. I adore going to bitcoin conferences, because the atmosphere is one of creation and positivity. It is fun and inspiring: You’re surrounded by some of the smartest people in the world, and as Jeffrey Tucker astutely observes, they are all living 10 to 20 years in the future. And it’s like they’re in a giant playground. I hope that the Bitcoin Girl brand can harness the same sense of fun and lightheartedness. The one idea that I really want to reflect in this brand is that technology is not to be feared: It is value neutral. It’s really important that people don’t let fear of the unknown paralyze their willingness to explore something that has tremendous potential to benefit all mankind.

The Freeman: What would you say to rising personalities about the importance of projecting yourself in interesting ways?

Brockwell: Of course it’s always good to stand out, but I don’t believe that people will connect with what you’re saying simply because you stand out. Authenticity is supremely important, and you have to be completely passionate about what you are saying. That’s what will make you interesting. It’s not so much the image that you’re projecting that is important, but the principles you live by and the extent to which you are willing to fight for a cause that you believe in. If you want to be a respected personality, or just a respected person, then command respect.

The Freeman: In terms of movement-building, what do you think about the idea of tapping into different subcultures—like bitcoiners?

Brockwell: Bitcoiners value technological innovation, and they recognize innovation as the way of solving the world’s problems. They are also skeptical of the government’s role in this process, and see government interference in their developments and experimental startups as a hindrance rather than a help. They are also skeptical of the need for centralized banks, and are increasingly seeing the value in decentralized, peer-to-peer exchanges where the regulation is build into the technology rather than given to a third party. I think there are a lot of people in the freedom movement who would be really sympathetic to what these bitcoiners are doing if they only understood it better, and I hope to provide a bridge between these two groups.

The Freeman: Are you an optimist or a pessimist?

Brockwell: I’m an incredible optimist. I like the idea of technological determinism, that society organizes itself around its technology, that technology drives social structure and cultural values. If this is the case, then what we seem to be headed toward is a more peer-to-peer society. This is because of all of the peer-to-peer technologies that exist now as part of the Internet: 3-D printers, bitcoin, provably solvent transparencies in companies and banks, digital music sharing, digital movie distribution. This move away from top-down, centralized control and back to the individuals makes me very excited about the future.

The Freeman: In this editor’s opinion, most video that freedom-types put out is mediocre at best. There is a dearth of talent. Resources flow mostly to think tanks and established practices. Production values suffer. In many ways this is a chicken-egg problem, because funders don’t want to divert resources from familiar things until they see some evidence of good media. And yet we won’t see great media until we see more resources put into it. What are your thoughts on this dilemma?

Brockwell: I agree with half of what you say. There is certainly a lack of funding directed toward freedom-oriented films, and I believe that this is because people underestimate the importance of film in shaping our culture. Think tanks do a tremendous amount of good, but when we see think tanks, economists, and research analysts teaming up with filmmakers, that’s when you really start to see magic happen: reaching out to masses more people and moving public opinion. Take the Moving Picture Institute’s film The Cartelfor example: Chris Christie cited this incredible film by director Bob Bowden as being the number one reason why he decided to make education reform his top priority in New Jersey. Or another of the MPI’s films Battle For Brooklyn, an immensely powerful documentary about eminent domain, which was short-listed for an Oscar. Even Hollywood has been producing some great films for the freedom movement lately: Dallas Buyers Club and The Lego Movie are two of my favorites. There are certainly very high quality films being put out there, and this makes it even more necessary to support organizations like the Moving Picture Institute, so they can continue to support filmmakers and get the important messages of those films out there to even more people.

The Freeman: How did a young woman from Western Australia end up as a Reason.TV correspondent?

Brockwell: When you’re a freedom evangelist, passionate about journalism, with a degree in acting, and a long history of film production, it doesn’t take long before you discover and fall in love with institutions such as Reason. I’m honored to be a part of what they’re doing, and thrilled that they enjoy working with me, because Reason is just fantastic. In fact, working with Reason.TV on top of working full time for the Moving Picture Institute, and at the same time making feature films with Hilton Media Management, is pretty much a dream for me. I’m super excited that my first feature film with amazing director Georgia Hilton is coming out this year! It’s been a joy from start to finish working with her and the entire team, so keep an eye out for Subconscious, which will be released all over the world soon!

The Freeman: Who is your favorite economist—living or dead?

Brockwell: My favorite economist who is no longer living would be Murray Rothbard, who first ignited my passionate for economics and monetary policy. My favorite living economist would be Gene Epstein, who first introduced me to the ideas of Murray Rothbard!

Of course I adore Say, Bastiat, and Mises, too, and am always recommending their works to people. And as a communicator, Friedman did incredible work for the freedom movement, and I believe that a lot of people could learn a tremendous deal from him about how to debate ideas.

The Freeman: Thank you, Naomi Brockwell.

Report: Southern Leg of Keystone XL Has Been a Job Creator, Generated Economic Growth

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Critics like Tom Steyer’s Next Gen Climate operation wants you to believe that the Keystone XL pipeline will only create a few dozen jobs. However, after looking at the construction of the southern leg of the pipeline, the truth is far different.

A new report finds that construction of the 485-mile Gulf Coast Project, stretching from Cushing, Oklahoma to Nederland, Texas, created thousands of jobs and added billions to local economies.  The Gulf Coast pipeline is the portion of the proposed Keystone XL pipeline that was able to be built because it didn’t require a Presidential Permit.  It is helping improve the transportation of oil sands crude to Gulf Coast refiners – the same crude that Keystone XL will carry.

The report, prepared by Southern Methodist University’s Maguire Energy Institute for the Consumer Energy Alliance, found that in Oklahoma and Texas, the project resulted in

  • Over $5.7 billion in new economic activity.
  • Over 42,000 person years of new employment.
  • Over $217 million in additional state and local taxes.

The authors write:

[T]he Gulf Coast Project pipeline contributed substantially to the economic health of most of the counties along the alignment during the 2012-2014 construction period. In the years ahead, recurring expenditures for operations and maintenance of the pipeline will continue to support jobs while generating income and tax revenues for Oklahoma, Texas and the 24 affected counties.

Counties in Oklahoma where the pipeline was construction saw an average per capita income increase of 78%. Three counties—Seminole, Hughes, and Coal—saw over 90% increases. For counties in Texas, the average per capita income increase was 58%.

On a press call, Bud Weinstein, an economics professor at Southern Methodist University’s Cox School of Business and one of the reports’ authors noted that “most of these counties are comparatively low-income, rural counties.” Construction of the Gulf Coast Project has been a “tremendous economic tonic.” For instance, the report finds “pipeline activities averaged 31 percent of personal income” in Oklahoma.

During construction, TransCanada spent about $6 million per month directly in the local community. Here are some examples of local entrepreneurs taking advantage of the business opportunities the pipeline’s construction offered:

For instance, Clifford Bryant, a local entrepreneur in Prague, Oklahoma, reports that construction of the pipeline “doubled our city sales tax receipts.” Clifford bought a mobile RV and trailer park when he heard that TransCanada would be bringing a construction yard to town for its Gulf Coast Pipeline Project.  Previously, only 11 of the 57 spots in the park were occupied.  Once construction began, all 57 were occupied. Clifford notes that a full RV park contributes as much as $8,000 a month in electricity fees alone to the municipal utility.

In the Southeast Texas town of Kountze, Jeremy Kunk’s Ready Ice Company sold approximately 30,000 pounds of ice per week to pipeline construction sites in its area. The ice improved safety by keeping workers cool and hydrated.  Kunk expects that the economic boost supplied by pipeline projects will be long-lasting. “Pipeline construction such as TransCanada’s Gulf Coast Pipeline Project is going to feed our refineries more product and keep us hopping for the next five, 10 years at least.”

Joe Penland is another Texas business owner who benefited from TransCanada’s pipeline construction. Joe owns Quality Mat Company in Southeast Texas. His company partnered with TransCanada to make the Gulf Coast Project safer. With a patented concept, Penland fabricates more than 250,000 mats per year in his facility inside the Beaumont city limits.  He leased the mats to TransCanada during construction of the Gulf Coast Pipeline in Oklahoma and Texas.

Positive benefits would extend to more states if the northern leg of the pipeline, linking Alberta to Nebraska, were approved by the Obama administration. “Similar state and local economic benefits can be anticipated should the United States give the go-ahead for construction of the Keystone XL pipeline from Hardisty, Alberta to Steele City, Nebraska,” the authors write.

“I would expect similar impacts” to those found in Oklahoma and Texas if the northern leg of the Keystone XL pipeline is approved, Weinstein said on the press call.

Follow Sean Hackbarth on Twitter at @seanhackbarth and the U.S. Chamber at @uschamber.

EDITORS NOTE: The featured photo is of sections of pipe sit on the ground in Atoka, Oklahoma. Photographer: Daniel Acker/Bloomberg.

 

A Train Wreck You Can’t Look Away From: A government agency gets creative with arts funding by Bruce Edward Walker

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There’s a new patron in the arts world, one without a name as lofty as The American Arts Council or National Council on the Arts. In fact, it’s a one-word synonym for missed connections, interminable delays, stale candy bars, filthy restrooms, and stained seats. That’s right: Amtrak has decided it’s going to become a veritable Louvre.

Amtrak’s gameplan involves deftly blending individual donations and foundation grants with money from the National Endowment for the Arts and in-kind contributions of its own (tax-funded, for-profit) services.

True, trains are a significant part of the American culture, featuring prominently in ethnic folk songs, country music, and early rock; Buster Keaton, Western oaters, and Thin Man-franchise film classics; and even Ayn Rand’s Atlas Shrugged. However, the trains were one subject of the art created rather than the progenitor. In other words, Woody Guthrie, Junior Parker, and Hank Williams wrote songs and Jack Kerouac authored a novel (partially) about riding the rails or hearing the “high, lonesome sound” of the train whistle as both metaphorical and real. In each instance, the train provided some unbidden inspiration for enduring art rather than seducing artists with handouts.

Aggression (modified by opulent sensuality)

Today, though, Amtrak provides something a lot closer to commissions than inspiration. It even shelled out for a painter to blast neon paint on buildngs alongside the tracks. The Wall Street Journal reported last week that Amtrak, in tandem with the Southeastern Pennsylvania Transportation Authority, commissioned German artist Katharina Grosse to subject her “psychylustro” form of art to 34,000 daily riders exposed to seven sites along the Philadelphia-New Jersey railway corridor.

Art in America described Grosse’s artistic abilities thusly:

Unlike the Action Painters or Expressionists, with their convulsive brushwork and gestures, Grosse never comes into direct contact with the surfaces. Her physical if not psychological detachment seems related to Conceptual art. However, her technique involves a machismo stance, with aggression modified by a kind of opulent sensuality.

The project is expected to cost just under $300,000. Funding comes from a variety of sources, several of them public. Regardless of what one thinks of Grosse’s art, an unprofitable transportation company reliant on public dollars is in no position to patronize something as subjective as artwork.

Training artists and bureaucrats

As I’ve argued in the past, no government or even quasi-government agencies governed by those employed in the arts can predict whether commissioned pieces may or may not present anything of merit. Nor should public monies be spent on exercises appealing to only a few, arbitrated by committees composed of a narrow cross-section of contemporary aesthetics. And what of the artists who toil incessantly without government largesse?

“I can’t remember the last time public art turned out to be a good idea,” Larry Kaufmann told me. Kaufmann is president of The Liberty21 Institute, a new think tank dedicated to promoting a culture of liberty.

“Artists seem inevitably to go for shock value and transgression, and these qualities were already in ample supply the last time I visited an Amtrak station,” Kaufmann said. “I suppose it would be nice if they commissioned something that captured the glory of train travel in the past—but even that would be romantic nostalgia, not anything that captures the reality of today’s Amtrak.”

Kaufmann continued: “Fundamentally, I don’t understand why we’re spending federal funds we don’t have to beautify a transportation service that no one uses outside the Acela corridor. The arts budget would clearly be put to better use elsewhere.”

Even if Grosse’s effort is of merit, it won’t last long. The WSJ reports the installation has a shelf life of only three weeks, as the work involves coloring the outdoors. “After that, the piece will be subject to elements, both human and natural—from erosion to possible gentrification. Its lifespan may vary from a matter of weeks to several months or, potentially, years.”

Not included in the $300,000 price tag are the salaries of the Amtrak engineers who “are overseeing the action at every site during the artwork’s installation.” Further: “For the next six months, the Mural Arts Program and the City of Philadelphia’s Graffiti Abatement Team have pledged to maintain ‘psychylustro’ and protect it from defacement.”

“Fuel your sense of adventure!”

Writers can also get into the act with the Amtrak Residency. The program, according to the website,

Will allow for up to 24 writers to take long-distance trains to work on their projects. Each writer’s round-trip journey will include accommodations on board a sleeper car equipped with a bed, a desk and outlets. We hope this experience will inspire creativity and most importantly fuel your sense of adventure!

Oh, goodie. The New Republic’s Adam Kirsch writes:

As it happens, right around now is the time poets across America are wrestling with the unbelievably complicated online application process for NEA grants. By contrast, the ease and speed with which Amtrak decided to dispense its largesse feels positively humane. There is a certain PR benefit for the railroad company, of course—this is probably the first time in ages that Amtrak has made the news without the words “accident,” “delay,” or “cost overruns” in the headline. But there is also a sense that the people running the railroad actually responded to the idea that, somewhere in America, there are passengers for whom the idea of riding Amtrak is a dream, not a chore.

But, of course: Solipsism is the artist’s stock-in-trade, is it not? Or, at least it is at Amtrak and The New Republic. And, it seems, at The Paris Review, which published an essay from the program’s first free rider, Jessica Gross, featuring the following bout of navel-gazing:

I’ve always been a claustrophile, and I think that explains some of the appeal—the train is bounded, compartmentalized, and cozily small, like a carrel in a college library. Everything has its place. The towel goes on the ledge beneath the mirror; the sink goes into its hole in the wall; during the day, the bed, which slides down from overhead, slides up into a high pocket of space. There is comfort in the certainty of these arrangements. The journey is bounded, too: I know when it will end. Train time is found time. My main job is to be transported; any reading or writing is extracurricular. The looming pressure of expectation dissolves. And the movement of a train conjures the ultimate sense of protection—being a baby, rocked in a bassinet.

All in all, not bad, and, in fact, close to the woolgathering works I commissioned from authors as editor of several high-minded, small-circulation magazines back in the day. Keep in mind the magazines I edited relied on subscriptions and advertising revenue to stay afloat, and my small stable of writers and their expenses were paid from those proceeds rather than from government handouts. Remarkably, these magazines recognized a profit for their shareholders, to whom I was accountable.

Amtrak, seemingly, is accountable to no one.

So what will taxpayers get for their $300,000? For three weeks, a few Amtrak riders will soak in all the color, verve, and perplexity that comes with Grosse’s pink pigments on old fences and rail yard walls. Then it’ll all be washed away in an ocean of red ink.

ABOUT BRUCE EDWARD WALKER

Bruce Edward Walker writes on the arts and other topics from his home in Midland, Mich.

Finance for the People: Peer-to-peer finance is democratizing access to capital by Iain Murray

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Financial innovation: People like to talk a lot about it these days. But what is it? If you read the business press, it’s all about “high frequency trading” and “dark pools,” shadowy new entities few understand and even fewer know how to manipulate.

But never mind the scaremongering. The world—especially the United States—stands on the brink of a new era of democratization of finance, as technology expands access to capital to ever more of us. We could all be capitalists—if the regulators allow it.

Here’s an example. When I was between jobs a little over 10 years ago, I and a couple of like-minded souls had an idea for a new non-profit enterprise. The trouble is that the idea was so esoteric that it was exceedingly difficult to find seed funders (except for one who would match us a modest amount for funds we raised independently). A bank loan would have been difficult given our situations and our lack of track record.

Thankfully, we knew an excellent Web designer who agreed to provide us with a good-looking online portal to showcase our ideas and help us raise funds. The problem was that we needed to accept credit cards. It took us months to find a financial institution that would provide us with merchant account services. By that time, most of us had moved on and had no time to devote to the site. Things fell apart quickly, our little enterprise doomed by its inability to raise funds.

What a long way we’ve come. Today, you can get access to merchant services easily through services like Charge.com and payment capability through companies like Authorize.net. There are many payment processors like First Data that can handle the credit card processing.

Crowdfunding platforms allow people to run a creative idea up the flagpole and see who salutes. as it were, and they provide a great way of raising the funds to get a project off the ground. Many people are familiar with Kickstarter and Indiegogo, and there are platforms specializing in non-profit fundraising, like SimplyRaise.

Peer-to-peer (P2P) lending services like Lending Club match up people who need money with people who are prepared to lend it to them. No more meetings with a stern bank manager.

The best thing about these services is that you don’t need vast amounts of capital or a long track record to use them. The P2P platform CommonBond even enables students to pay off their student loans more easily than the official way of doing so (and thus provided a model that President Obama ignored in his recent action on student loans).

The trouble is that these innovations are now attracting the attention of regulators. The Department of Justice is targeting payment processors in a regulatory crackdown known as Operation Choke Point, on the supposed justification that they have been used by unscrupulous merchants to channel funds defrauded from victims. As a result, banks are dropping relationships with payment processors in order to avoid the extra expense that increased regulatory supervision brings. This will make payment processing more expensive, harder to obtain, or both.

Congress allowed the creation of equity crowd funding platforms that allow investing in a new venture when it passed the Jumpstart Our Business Startups (JOBS) Act in 2012. However, the Securities and Exchange Commission (SEC) has adopted a narrow interpretation of the act. Under the SEC’s interpretation, “accredited investors” can buy a piece of a company through crowd funding, but for the rest of us it’s going to be difficult. Worse, companies will find using this financing route difficult, given the likely reporting requirements.

This regulation seems strange considering that one can buy an entire company on eBay, but not a part of one through a portal.

So the biggest obstacle to the democratization of finance at the moment is the regulatory agencies trying to protect people from using their own money to help start a business.

Thankfully, innovators have a very good track record at staying a step ahead of the regulators. And while the regulators are playing catch-up, yet more financial innovation will come into play to change the world.

And how it’s changed! Perhaps I should get the band back together and fund that enterprise through one of these new innovative services.

Remember, Google was founded on maxed out credit cards.

ABOUT IAIN MURRAY

Iain Murray is vice president at the Competitive Enterprise Institute.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Virtual Worlds, Real Economics by Matthew McCaffrey

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Video games rot your brain and teach you econ.

Video games are playing an increasingly large role in pop culture. Whether you play or believe they are art, gaming will no doubt continue to be a major player in the entertainment industry. More importantly, libertarian ideas seem to be popping up everywhere in gaming. Criticism of government is on the rise, for example, and there is new emphasis on the importance of free thought and action.

To cite just two examples, Bioshock Infinite criticizes militarism and jingoism, while Assassin’s Creed 4: Black Flag is largely a celebration of pirate anarchy. Astute gamers may even notice that an animator forGears of War 3 put Mises’s motto, Tu ne cede malis (“Do not give in to evil but proceed ever more boldly against it”) in the game’s credits sequence.

This is all good news not only for libertarian ideas generally, but also for economic education. Gaming culture is a vibrant new arena of action where sound economic ideas have a real chance to take hold. There is already discussion about how in-game economies emerge and evolve—particularly how they deal with money and inflation. But games incorporate economics at even more basic levels. Indeed, gamers are already using the economic way of thinking without even knowing it. Games are all about basic economic concepts: scarcity, choice, trade-offs, opportunity cost, trade, and entrepreneurship. If we think of games like this, we see how their virtual realities imitate real-world economic decisions.

For instance, essentially all resources in the gaming world are scarce—that’s where the challenge comes from. If resources or experience points or time were unlimited, there wouldn’t be much of a game to play. But because gamers routinely face these kinds of scarcity, they are already familiar with the limitations they impose and have taken a first step toward economic understanding.

Scarcity means we have to make choices, and in this area games are pushing boundaries. Improved production values in the gaming industry have increased the immersive qualities of gameplay, to be sure. But it’s the economic simulations that make the experiences so real. Consider games like The Walking Dead, which takes scarcity to an extreme by using the zombie apocalypse as a backdrop. Instead of combat, The Walking Dead game centers on difficult economic decisions, like how to ration dwindling food supplies among survivors. Players become emotionally involved in the story by confronting scarcity and tough choices every step of the way.

Players’ decisions in turn imply trade-offs and opportunity costs. Anyone who has ever played a role-playing game (RPG) knows this territory well; choosing to allocate money or experience to a certain skillset means forgoing other skills. And it’s a short step from there to realizing that the true cost of skills is not the resources you spend to obtain them, but the alternative abilities you could have acquired.

Because players have different opportunity costs, not everyone is equally suited to all tasks: Enter the importance of specialization and social cooperation. Cooperation on a grand scale features in many massively multiplayer online RPGs such as World of Warcraft and EVE Online, where the most important quests can only be completed if a large number of diverse character types work together. Each member of the party specializes in enhancing the strengths or offsetting the weaknesses of the others, producing intricate networks of interdependence.

Trade is another vital form of social cooperation, and through the interactions of hundreds of thousands (if not millions) of players, MMORPGs rapidly develop complex systems of barter and monetary exchange. The teaching moment comes when players get to experience the benefits of the division of labor; even better, the benefits of specialization and trade are more obvious than in some ordinary market exchanges, where economic logic might seem too abstract.

Lastly, gaming showcases some of the best of the entrepreneurial spirit. Being a gamer is about crafting and controlling virtual worlds while at the same time learning to think creatively to overcome obstacles. Entrepreneurs do the same thing when they control productive resources in the constant drive to satisfy consumers. It’s not a surprise then that the gaming industry is growing and innovating in ways similar to Silicon Valley and other focal points of entrepreneurial energy; the two go hand in hand.

The idea that gaming conventions are reflections of economic principles is just one example of the many opportunities for economic teaching presented by the mass appeal of gaming. We’re bound to see more as the industry continues to thrive, so let’s be ready to show gamers that the experience they crave is not just good fun, but good economics.

ABOUT MATTHEW MCCAFFREY

Matthew McCaffrey teaches economics as a postdoctoral fellow in the Department of Liberal Studies at the University of Illinois at Springfield, and is editor of Libertarian Papers.

CLICHES OF PROGRESSIVISM #9 – Human Rights Are More Important Than Property Rights by Paul L. Poirot

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(Editor’s Note: This essay was first published in 1962. Paul L. Poirot was a long-time member of the staff of the Foundation for Economic Education and editor of its journal, The Freeman, from 1956 to 1987.)

The Foundation for Economic Education (FEE) is proud to partner with Young America’s Foundation (YAF) to produce “Clichés of Progressivism,” a series of insightful commentaries covering topics of free enterprise, income inequality, and limited government.

Our society is inundated with half-truths and misconceptions about the economy in general and free enterprise in particular. The “Clichés of Progressivism” series is meant to equip students with the arguments necessary to inform debate and correct the record where bias and errors abound.

The antecedents to this collection are two classic FEE publications that YAF helped distribute in the past: Clichés of Politics, published in 1994, and the more influential Clichés of Socialism, which made its first appearance in 1962. Indeed, this new collection will contain a number of essays from those two earlier works, updated for the present day where necessary. Other entries first appeared in some version in FEE’s journal, The Freeman. Still others are brand new, never having appeared in print anywhere. They will be published weekly on the websites of both YAF and FEE: www.yaf.org and www.FEE.org until the series runs its course. A book will then be released in 2015 featuring the best of the essays, and will be widely distributed in schools and on college campuses.

See the index of the published chapters here.

#9 – Human Rights Are More Important Than Property Rights

It is not the right of property which is protected, but the right to property. Property, per se, has no rights; but the individual—the man—has three great rights, equally sacred from arbitrary interference: the right to his life, the right to his liberty, the right to his property…. The three rights are so bound together as to be essentially one right. To give a man his life but deny him his liberty, is to take from him all that makes his life worth living. To give him his liberty but take from him the property which is the fruit and badge of his liberty, is to still leave him a slave. 

—U.S. Supreme Court Justice George Sutherland

Tricky phrases with favorable meanings and emotional appeal are being used today to imply a distinction between property rights and human rights.

By implication, there are two sets of rights—one belonging to human beings and the other to property. Since human beings are more important, it is natural for the unwary to react in favor of human rights.

Actually, there is no such distinction between property rights and human rights. The term property has no significance except as it applies to something owned by someone. Property itself has neither rights nor value, except as human interests are involved. There are no rights but human rights, and what are spoken of as property rights are only the human rights of individuals to property.

What are the property rights thus disparaged by being set apart from human rights? They are among the most ancient and basic of human rights, and among the most essential to freedom and progress. They are the privileges of private ownership which give meaning to the right to the product of one’s labor—privileges which men have always regarded instinctively as belonging to them almost as intimately and inseparably as their own bodies. Unless people can feel secure in their ability to retain the fruits of their labor, there is little incentive to save and expand the fund of capital—the tools and equipment for production and for better living.

The Bill of Rights in the United States Constitution recognizes no distinction between property rights and other human rights. The ban against unreasonable search and seizure covers “persons, houses, papers, and effects,” without discrimination. No person may, without due process of law, be deprived of “life, liberty or property”; all are equally inviolable. The right to trial by jury is assured in criminal and civil cases alike. Excessive bail, excessive fines, and cruel and unusual punishments are grouped in a single prohibition. The Founding Fathers realized that a man or woman without property rights—without the right to the product of his own labor—is not a free man.

These constitutional rights all have two characteristics in common. First, they apply equally to all persons. Second, they are, without exception, guarantees of freedom or immunity from governmental interference. They are not assertions of claims against others, individually or collectively. They merely say, in effect, that there are certain human liberties, including some pertaining to property, which are essential to free citizens and upon which the State shall not infringe.

Now what about the so-called human rights that are represented as superior to property rights? What about the “right” to a job, the “right” to a standard of living, the “right” to a minimum wage or a maximum work week, the right to a “fair” price, the “right to bargain collectively, the “right” to security against the adversities and hazards of life, such as old age and disability?

The framers of the Constitution would have been astonished to hear these things spoken of as rights. They are not immunities from governmental compulsion; on the contrary, they are demands for new forms of governmental compulsion. They are not claims to the product of one’s own labor; they are, in some if not in most cases, claims to the products of other people’s labor.

These “human rights” are indeed different from property rights, for they rest on a denial of the basic concept of property rights. They are not freedoms or immunities assured to all persons alike. They are special privileges conferred upon some persons at the expense of others. The real distinction is not between property rights and human rights, but between equality of protection from governmental compulsion on the one hand and demands for the exercise of such compulsion for the benefit of favored groups on the other.

Paul L. Poirot
Freeman Editor, 1956–1987

Summary

  • You own yourself and you own those material things you’ve created or traded for freely with others. These are rights to property—property in yourself and in your possessions—and they cannot be separated from human rights.
  • America’s founders made no distinction between human rights and property rights for good reason: There aren’t any. They are one and the same.
  • Your right to what’s yours is very different from a claim on the person or property of others.
  • For further information, read these articles:

“Human Rights Are Property Rights” by Murray Rothbard: http://tinyurl.com/k7q28wj

“The Primacy of Property Rights and the American Founding” by David Upham: http://tinyurl.com/k8ymp24

“The Property Basis of Rights” by Clarence B. Carson: http://tinyurl.com/knha534

“Freedom or Free-for-All?” by Lawrence W. Reed: http://tinyurl.com/ks94kt4

ABOUT PAUL L. POIROT

Paul L. Poirot was a long-time member of the staff of the Foundation for Economic Education and editor of its journal, The Freeman, from 1956 to 1987.

EDITORS NOTE: The featured photo is courtesy of FEE and Shutterstock.

An Increased Minimum Wage Equals Greater Unemployment

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It’s June, a month famed for marriages, but it is likely to be remembered for the high rate of teen unemployment which has been soaring for a long time. By February, the national unemployment rate for youth, age 16 to 19, had reached 20.7%. By November 2013 it was three times higher than the national average of 6.6% according to the Bureau of Labor Statistics.

Teens are rivaled by the number of American men in their prime working years, a record 1-in-8,who are not in the labor force. These men, age 25-54, represent 61.1 million who are either not working or no longer looking for work. The Weekly Standard reported that “This is an all-time high dating back to when records were first kept in 1955.”

The non-partisan Congressional Budget Office released a report in February that said the wage hike to $10.10 could result in a net loss of about a half a million workers at the same time in increased wages for 16.5 million others.

So, naturally, President Obama in his State of the Union speech, called on Congress to raise the national minimum wage from $7.25 to $10.10 an hour. Soon after, he signed an Executive Order to raise the minimum wage for individuals working on new federal service contracts. That means that taxpayers will pay more for those services as the cost gets passed along. Does he have the power to impose the increase? Probably not.

Meanwhile in California where countless businesses are fleeing thanks to the insanity of its liberal legislature and Governor, as May ended its senate approved a measure that would lift the state pay floor to $13.00 an hour by 2017. If it becomes law, Californians will be interacting with machines for everything from banking to filling their gas tank to having a fast-food meal. Even more insane, Seattle has become home to the highest minimum wage in the nation, $15.00 an hour!

Minimum wage laws have been around a long time. Their original goal was to raise the income of the working poor, but the fact that there is still talk of raising them suggests they don’t work as intended. Letting the job market determine wages holds a greater promise of increased wages because businesses have to remain competitive and that means paying a wage that attracts skilled and even unskilled workers.

As Thomas E. Hall, the author of “Aftermath: The Unintended Consequences of Public Policies” (Cato Institute, $24.95, due in August) notes, “The living wage concept moved to the forefront during the Industrial Revolution, along with calls to end practices such as child labor and conditions poor working women faced. Massachusetts passed the nation’s first minimum wage law in 1912.

One of the outcomes of the Great Depression, 1929 to 1941, was the inclusion of a minimum wage as part of the New Deal’s National Industrial Recovery Act. Suffice to say, the NIRA, which actually encouraged businesses to collude together to set prices, failed to promote economic recovery. It was very unpopular and in 1935 the Supreme Court declared it unconstitutional.

Because liberals never learn anything from experience, the NIRA was resurrected later in the 1938 Fair Labor Standards Act that raised the minimum wage to 40 cents in 1945. “The United States has had a federal minimum wage ever since.”

Politicians and even some demented economists like the minimum wage. Every time it is raised, it appears to the general public that working people benefit. The problem is that the wage increases also include increases in unemployment as businesses try to contain costs in order to remain competitive and make a profit.

As Hall, a professor of economics at Miami University in Oxford, Ohio, notes, “The minimum wage’s first significant impact on national labor market conditions occurred in 1956, when the hourly rate was raised from 75 cents to $1.00.” The increase had its “greatest impact on teenagers because they possess the fewest marketable skills among the working-age population. Also, teens often do, or have in the past, worked at jobs easily replaceable with machinery or by conducting business in a different manner.”

The minimum wage rate, nonetheless, has continued to increase since the 1950s and, “By the early 1990s, these changes had caused to minimum wage to apply to over 90 percent of the U.S. workforce.”

Here’s the fundamental lesson about the minimum wage that continues to be ignored. “President Ronald Reagan, who occupied the White House from 1981 to 1989, did not support further increases because he believed that raising the minimum wage would discourage employment growth…during that decade, the U.S. economy created 18 million new jobs.”

As Hall succinctly points out “Remember that the minimum wage is just a government-imposed price-fixing scheme that creates winners and losers.”

Teens that stayed in school and will either be facing a summer vacation or graduating are particularly disadvantaged by a minimum wage law.

“The effects of high unemployment among this demographic group,” says Hall, “should not be discounted. One reason is that the lack of employment opportunities for young people deprives them of valuable work experience in the form of learning the responsibility of showing up for a job on time, learning to follow directions and complete tasks, learning to work with others…these skills can prove to be beneficial later in life.”

It is likely that the minimum wage is also a factor in why many men in the 25-54 age cohort are not working either. This is hardly the time to be increasing the rate unless you want to see the rate of unemployment increase for all ages and both sexes.

By contrast, in addition to the energy sector, the sector that builds machines to replace human workers is likely to do very well over the coming years.

© Alan Caruba, 2014

RELATED ARTICLE: Consumers Hit With Surcharge to Cover City’s $15 Minimum Wage

Why is the U.S. Government in the Mortgage Loan Business?

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It is often truly astonishing to me the harm done by the way the federal government was expanded well beyond its constitutional limits during the 1930’s New Deal era. One dramatic example is the government’s role in the housing mortgage loan marketplace.

I recently read a commentary by Steve Stanck, a research fellow at The Heartland Institute, a free market think tank, whose title was “Don’t Replace Fannie and Freddie; End Them.” He began by pointing out that “For every 100 mortgages being sold in the United States these days, at least 94% of them have government backing.”

Fannie is shorthand for the Federal National Mortgage Association and Freddie is short for the Federal Home Loan Mortgage Corporation. Both are referred to as “government sponsored enterprises” and Stanck points out that “The housing market was nearly ruined several years ago, and the government’s involvement is a big reason” because, before the 2008 financial crisis, both “were bundling mortgages into mortgage-backed securities and selling them to investors”, primarily banks.

ForeclosureStill largely unknown to the public, the financial crisis was triggered on September 15, 2008 when the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S. amounting to $550 billion dollars in the matter of an hour or two. This was revealed in a 2008 congressional closed door session and later reported by Rep. Paul Kanjorski of Pennsylvania. Had the Federal Reserve not closed down the accounts by 2 PM that day, the entire economy would have collapsed, followed by the world economy a day later.

To this day, the identity of those who initiated the withdrawal has not been revealed, but the banks that were heavily invested in Fannie and Freddie’s bundled mortgage-backed securities were most at risk. Those securities were regarded as a safe investment precisely because both are, as noted, “government-sponsored enterprises”, implying that they were backed by the government—taxpayers.

When the housing bubble burst in 2008, the federal government put Fannie and Freddie into conservator ship “and handed them $188 billion to stay afloat. The actions of both entities had artificially lowered mortgage interest rates in order to increase home buying and required lenders—banks—to loan money to riskier borrowers.

As Brian M. Carney noted in a July 26, 2010 Wall Street Journal editorial opinion, “The official version of the housing boom and bust, and subsequent panic and recession, tells us that greedy bankers took unacceptable risks, assumed too much leverage, made irresponsible loans, and left the government to clean up the mess. The causes of the crisis, in this version, include banker bonuses, deregulation ideology and predatory lending. Most of this is nonsense.”

Carney noted that “There’s simply no room in this story for two giant government-sponsored enterprises that distorted the housing and credit markets…” Those would be Fannie Mae and Freddie Mac.

Stanck notes that there is a bill in Congress to “wind down Fannie and Freddie. This is good. But they want to replace those organizations with private mortgage bond issuers who would each have government guarantees back by a new entity called the Federal Mortgage Insurance Corporation. This is bad.”

It is bad for the same reason that Fannie and Freddie are bad. The government needs to get out of the mortgage loan business. The bill barely squeaked through the Senate Banking Committee on May 15 with minimal support.

The new entity that the bill would create would charge fees to the private mortgage bond issuers—“fees that would be based on how many people in ‘underserved’ demographic groups receive mortgages” leading to “more of the subprime lending that played such a big role in the most recent housing mortgage collapse.” It is nothing more than Fannie Mae and Freddie Mac with a new name.

Stanck sensibly says “Let borrowers and lenders strike their own deals without government meddling. In that way, mortgage interest rates would better reflect true risk, there’d be almost no way for legislators to inject corruption and cronyism into the system, and taxpayers would not be at risk of shelling out more hundreds of billions of dollars.”

You may read or hear that Fannie Mae and Freddie Mac are returning to solvency, able to turn a profit in the first quarter of 2014 and this is true. Those profits are going straight into the U.S. Treasury to resolve their debt incurred when they were bailed out. When they pay it back, they should, as Stanck says, be ended, not replaced.

So long as they exist, another housing boom and bust, and another financial collapse will repeat what occurred in 2008.

© Alan Caruba, 2014

A Lot of Economics in One Lesson by Sandy Ikeda

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Economics in One Lesson (PDF) is by far Henry Hazlitt’s most famous book. Like many, I’ve read some of this other works, including Failure of the New Economics, Man versus the Welfare State, and The Foundations of Morality. But whether he intended it or not, EIOL is Hazlitt’s masterpiece.

It’s there that he addresses and elaborates on Frédéric Bastiat’s broken-window fallacy, which claims that destruction can be a gateway to wealth. Bastiat and Hazlitt simply point out that, in fact, destruction destroys wealth, and any perceived benefits of destruction are limited only to what is easily seen. It’s a simple lesson, though perhaps deceptively so.

Indeed, if you’re not careful, you might misstate the title as “Economics in One Easy Lesson.” Anyone who’s read the book wouldn’t make that mistake. While the lesson is simple, fully grasping and applying it is not. Even some Nobel Prize-winning economists don’t get it.

But perhaps because of his book’s welcoming title and popular reputation, Hazlitt, while familiar among libertarians and conservatives, has been underrated as an economist and intellectual. (And if you’re philosophically inclined, I would recommend that you tackle his closely argued and enlightening The Foundations of Morality.)

This summer I have the privilege of lecturing at two of the many seminars that the Foundation for Economic Education offers to select college and high school students, and to prepare for them I reread Hazlitt’s classic. Once again, I was impressed by the level of economic analysis it contains, especially in the chapters titled “Saving the X Industry” and “Minimum Wage Laws” for their rigor as well as the sensitivity to and concern for the human condition that they embody.

I’d like to focus on two things that stood out to me on this latest reading.

Learning the full lesson

Hazlitt states the lesson early on:

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

So in saving a declining domestic industry with subsidies or protective tariffs, what you don’t see are the more-efficient businesses and new products that won’t now serve customers, the workers and capital that won’t now be efficiently employed in those businesses, and the lower prices that won’t now be charged, all because the lowered efficiency and the higher taxes or monetary expansion needed to pay for those subsidies make them impossible. We need to look beyond those directly affected and past the short term.

But the lesson doesn’t say to discount the short-term and particular effects, either. Libertarians too often make the mistake of looking only at the long-run effects of a change on the general welfare, discounting or ignoring altogether the short-run effects on particular people. (It’s a mistake that Hazlitt claims the classical economists made, and I think he had David Ricardo in mind):

It is true, of course, that the opposite error is possible. In considering a policy we ought not to concentrate only on its long-run results to the community as a whole.

In the debate on raising the minimum wage, although it will cause fewer to be employed than otherwise and shrink the potential benefits of those who remain employed, some desperate people may be helped a great deal. Those who argued for bailing out General Motors point to the people who’ve developed specialized skills over many years who would really take a hit were the company to fail. When we respond that the bailout will reward inefficiency and mean fewer good jobs and products in the future, we shouldn’t overlook those who, through no fault of their own, will suffer because of competition and innovation. Thus, Hazlitt counsels:

It is altogether proper—it is, in fact, essential to a full understanding of the problem—that the plight of these groups be recognized, that they be dealt with sympathetically, and that we try to see whether some of the gains from this specialized progress cannot be used to help the victims find a productive role elsewhere.

I note that Hazlitt does not name any government agency or private charity here. I think he was being careful. The point is that he felt that these folks are indeed victims of the market process, and that those who benefit from that process should help them somehow. One can trace such sentiments in the classical liberal tradition back to Adam Smith and his concern for the most vulnerable in society.

Public Choice in reverse

Another passage that struck me also relates to the impact of innovation on people’s lives. Hazlitt writes:

Now it is often not the diffused gain of the increased supply or new discovery that most forcibly strikes even the disinterested observer, but the concentrated loss.

He uses the example of advances in coffee production and shoe manufacturing that over time will create greater benefit for far more people than are harmed by them.

The fact that there is more and cheaper coffee for everyone is lost sight of; what is seen is merely that some coffee growers cannot make a living at the lower price. The increased output of shoes at lower cost by the new machine is forgotten; what is seen is a group of men and women thrown out of work.

One of the more important lessons of Public Choice economics is that political institutions induce people to choose an inefficient policy when the rules of the game allow them to concentrate benefits and disperse costs.

For example, planting trees along the road at a total cost of $100,000 at taxpayer expense might make economic sense if the total benefit from the trees exceeds $100,000. But if the total benefit is only $10,000, it wouldn’t make economic sense. Suppose though that there are 100,000 taxpayers but only 10 beneficiaries of the trees. The tax cost per person is $1 while the per-person benefit is $1,000. In such a case the beneficiaries may be willing to fight much harder than their tax-paying “benefactors,” which makes political sense.

If the rules of the game allow interest groups to disperse costs and concentrate benefits—the opposite of Hazlitt’s observations on the effects of innovation—the result over time will be inefficiency, corruption, and worse.

It occurred to me that here is another way of expressing the contrast between the logic of politics versus the logic of the market process. Namely, in interventionist politics it makes sense to concentrate benefits and disperse costs, while in a flourishing economy, competition sometimes concentrates negative consequences and disperses benefits. And it’s this unfortunate but often unavoidable feature of competition that gives rise to demands for government intervention, and to thinking in terms of the broken-window fallacy. If you pay attention you’ll see many such connections in his work.

That goes especially for economists who wish to explain complex ideas to a popular audience. Reading Hazlitt we would see how a master marries analytical subtlety with clarity and wit, something rare in what today passes for “economics for the intelligent layman.” But Henry Hazlitt’s scholarship would reward anyone who devotes to it the close study that it deserves.

Thank you, FEE, for giving me the occasion to read him again.

ABOUT SANDY IKEDA

Sandy Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism. He will be speaking at the FEE summer seminars “People Aren’t Pawns” and “Are Markets Just?“

Capital One forms “Unilateral Partnership” with People’s Cube

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This week Capital One has established a new unilateral partnership with the People’s Cube, with the purpose of creating catchy and spectacular advertising materials. The first rule in such a unilateral partnership is that one partner doesn’t let the other partner know anything about it. The second rule is that the other partner doesn’t get any of the proceeds from the resulting revenues.

In practical terms that means that Capital One produces their ads based on the People’s Cube material, and we at the People’s Cube find out about it on Facebook from an alert reader who sends us a link.

The first ad resulting from our exciting new partnership with Capital One features a gloriously red People’s Cube on a rough wooden surface, under the caption, “It just got easy.”

We can only guess what the next Capital One ad will be, but we expect our members to post their suggestions in what may become a very productive and successful unilateral partnership with Capital One.

On our part, laborers at various People’s Cube departments have already enthusiastically signed different kinds of improvised one-sided contracts with Capital One, many of them in triplicate and notarized in red pencil, stating that they don’t want to hear anything about Capital One using their work, demanding that they never be contacted by Capital One representatives, nor receive any compensation for their selfless toil for the Common Good™ in the field of visual agitation and propaganda.

We have scheduled a spontaneous celebration of this historic development at 21:00 behind the tractor barn. Many a rationing coupon is expected to be redeemed tonight to ensure an uninterrupted flow of beet vodka, stale bread, and pickled beet products. And by all means, bring your own beets!

This looks like the beginning of a beautiful unilateral friendship.

Capital_One_Cube_Boxcar_Ad

Capital_One_Hammer_Logo

Capital_One_Soup_KItchen

Capital_One_rubik_hands

RELATED ARTICLE: Unsecured Yet Easy Credit Cards to Qualify For

Everything I Know About Economics I Learned from Tinder by Joseph S. Diedrich

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The Huffington Post calls it “the Twitter of dating.” It’s Tinder, an 18-month-old mobile app now available in two dozen languages. Millions of men and women, mostly millennials, have flocked to the Tinderverse. It’s exhilarating, enticing, and occasionally disturbing.

To begin, you download the app and log in via Facebook. Tinder hijacks essential data—name, age, photos, mutual friends, and likes—from Zuck’s house and builds you an editable profile. Then you go window shopping—not for shoes, but for other users in your area. Swipe right if you like what you see and left if you don’t. When two people swipe right for each other, they’re “matched,” and a chat conversation opens.

You may have already known all that, perhaps from personal experience. What you probably didn’t know is that Tinder is also an economics textbook. Besides getting you laid, the app teaches you the fundamentals of the “youngest of all sciences.”

Human action

For Ludwig von Mises, economics starts with a foundational understanding of human action. He defines human action as “purposeful behavior” precipitated by perceived “uneasiness” and “the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness.”

That’s precisely why I downloaded Tinder. Some of my needs, wants, and desires were not being met. I was not perfectly content. By engaging in the purposeful act of using the app, I expected that I would come closer to contentment. Whether or not that happened is none of your business.

Subjective value

The cornerstone of Austrian economic thought (to which Mises adhered) is the subjective theory of value. When Mises writes, echoing his forebear Carl Menger, “value is not intrinsic, it is not in things,” he underscores the basic premise of Tinder. The choice is mine to make to swipe right. While the app can find people for me based on my location and input parameters (age, gender, etc.), it cannot (and could never) quantify or calculate my valuation of the beauty of another.

My valuations neither impede nor enhance another man’s abilities to make his own subjective valuations. Nobody can be declared “objectively attractive” prior to or because of a swipe. I doubt, for instance, that many people swipe right for anarchy tattoos, but I do. Indiscriminately.

Law of returns

Originally articulated in 1815 by the classical economist David Ricardo, the law of diminishing marginal returns states that “as more and more resources are combined in production with a fixed resource—for example, as more labor and machinery are used on a fixed amount of land—the additions to output will diminish.”

More generally, the per-unit (marginal) benefit gained from something diminishes with every further addition of that thing.

When I first started Tindering, I vetted every individual with a critical eye. I swiped deliberately and meticulously. After awhile, however, each additional profile seemed less and less significant. I began to scrutinize with less intensity. My thumbs got faster. Likewise, I remember my first Tinder match vividly: It increased my match total from zero to one. But now, a new match raises the proverbial boat nary an inch on my Tinder sea.

The role of advertising

Economists have sparred over the role and value of advertising. Prominent figures such as John Kenneth Galbraith believed that advertising is a scourge on society. Firms use advertising to create artificial demand for their own products, thereby distracting the gullible public and siphoning wealth from more productive uses. Galbraith’s contemporary F. A. Hayek saw it differently:

It is because each individual producer thinks that the consumers can be persuaded to like his products that he endeavors to influence them. But though this effort is part of the influences which shape consumers’ taste, no producer can in any real sense ‘determine’ them.

Information shared by Tinder “producers” is more or less advertising. For that, I am grateful. It helps me make decisions as a “consumer.” As Mises says, “The consumer is not omniscient.” Oh, you like gin? Please, tell me more. Your profile picture includes multiple cats? Swipe left. I much prefer the market of Tinder to blind-date socialism and arranged-marriage communism.

Assurance contract

An assurance contract is a mechanism through which one party agrees to provide a collective good if and only if other parties first provide resources that reach a threshold when aggregated. The idea first appeared in The Review of Economic Studies in 1989. Authors Mark Bagnoli and Barton L. Lipman explain: “Agents voluntarily contribute any non-negative amount of the private good they choose and the social decision is to provide the public good if contributions are sufficient to pay for it.”

When I swipe right on Tinder, I pledge my contact information (my Tinder “address,” if you will). The app takes note of my pledge and holds it in escrow. Upon reaching a threshold (viz., two reciprocal right swipes), Tinder provides the threshold good (a chat conversation). Neither my match nor I are obligated to actually chat, however. The contract only assured us that the feature would be made available, not that it had to be used.

On the whole, Tinder is a vast marketplace of individuals making choices. That’s the economy in a nutshell. Use the app to shop around, find a date, or fall in love . . . with economics.

ABOUT JOSEPH S. DIEDRICH

Joseph S. Diedrich is a Young Voices Advocate and a law student at the University of Wisconsin. He also works with multiple Internet startups, including Liberty.me.

Study: Canadian Oil Sands Aren’t Increasing U.S. Carbon Emissions

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A mining truck carries oil sands in Fort McMurray, Alberta, Canada. Photographer: Jimmy Jeong/Bloomberg.

Keystone XL opponents say they’re fighting the project because they fear the carbon emissions that would be produced by developing Canada’s oil sands, but a new report undercuts that argument by finding that the oil sands development has resulted in only a fractional increase in them.

Bill McKibben, head of 350.org and the main face behind the anti-pipeline campaign declared in 2011 that Canada’s oil sands are “the earth’s second-largest pool of carbon, and hence the second-largest potential source of global warming gases after the oil fields of Saudi Arabia.”

However, a report by IHS finds that increased development of Canadian oil sands have not had an impact on U.S. carbon emissions. Canada’s National Post reports:

The report, based in part on a focus group meeting held last October in Washington, D.C., with Alberta’s Department of Energy and major oil sands producers, found that between 2005 and 2012, the carbon intensity of the average crude oil consumed in the U.S. “did not materially change,” decreasing by about 0.6%.

That is despite a 75% increase in U.S. imports of oil sands and other Canadian heavy crudes over the same period — to about 2.1 million barrels a day from 1.2 million barrels.

At the same time, U.S. imports of Mexican and Venezuelan heavy crude fell, while production of U.S. tight oil from North Dakota’s Bakken and the Eagle Ford shale in Texas climbed to 1.8 million barrels a day, up from virtually zero in 2005. That helped displace imports of similar crudes from Africa and elsewhere with relatively higher carbon footprints, the report says. U.S. imports from Nigeria fell 64% over the period, it said.

“A lot has changed since 2005,” said Kevin Birn, a director of IHS Energy and leader of the consultancy’s oil sands dialogue in Calgary.

“We’ve had heavy crudes push out heavy crudes that happen to be within the same GHG intensity range, and the same thing’s happened on the light oil side.”

Since we’re on the topic of the Keystone XL pipeline and greenhouse gas emissions, I’ll remind you that the State Department’s economic analysis of the pipeline found that alternative methods of moving oil sands crude—no serious observer thinks they won’t be developed–would result in higher greenhouse gas emissions than from the Keystone XL pipeline.

Remember these facts the next time pipeline protesters get arrested in the name of reducing carbon emissions.

A Slogan Worth Your Bumper? by Lawrence W. Reed

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Statism can be summed up and slapped on the back of a car. Can the freedom philosophy?

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups. — Henry Hazlitt, Economics in One Lesson

Statists—those who prefer force-based political action over spontaneous, peaceful, and voluntary initiatives—excel at distilling their views into slogans. It’s shallow stuff, but their pithy expressions have nonetheless taken a toll on individual liberty and free markets.

“I’m for people, not for profits!” is a case in point. Never mind the fact that an economy without profit is an economy that’s headed nowhere (and taking its people with it). If you suggest that one must choose between people and profit—that you can have one only at the expense of the other—it’s not hard to fathom which one the uninformed will pick.

A student leader in the Czech Republic recently asked me, “Can you think of a few words that so effectively summarize the case for liberty that they will draw people to our side?” His name is Jan Škapa and his question revealed an understandable frustration. On a mere bumper sticker, statists glibly express fallacies that require far more time, space, and patience to rebut than it ever took to cook them up in the first place.

I’m no fan of slogans. By their very nature and brevity, they can oversimplify. But is there one, rooted in truth not deception, that would advance liberty and put its opponents on the defensive?

Long Run, All People

I submit there may be many strong candidates for such a slogan, but the moment Škapa raised the question, my nominee was this one: “Long Run, All People.” The more I’ve thought about it since, the more I like it. Škapa informed me that since he started using it at exhibits and in promotions for his organization, Students for Liberty, “the reception has been very positive—people generally agree right up front and are interested in learning more.” You can see reference to it on the group’s Web site under “Why Liberty?” (in Czech, “Proc Svoboda?”).

(Please note: In my view, the moral argument for liberty still trumps all others, including this rather utilitarian one. Liberty is a birthright of all individuals. You forfeit it in whole or in part only when you initiate force against another. But in the battle for liberty, we need many arrows in our quiver. Choose the one you think may best hit the mark depending on the circumstances.)

Statism in all its various forms reduces to this: It’s a short-sighted scheme that benefits some at the expense of others. Its time horizon is usually no further ahead than the next election or, at best, maybe one generation. It profits those who wield power and those who receive more advantages from the state than they pay for, but statism in practice is not aimed at improving the lot of all people in the long run. It’s a short-term theory of redistribution and consumption, not a long-term theory of wealth creation. A more cynical but not inaccurate way to look at it is this: It’s just glorified vote-buying with other people’s money.

Statists like to “stimulate” the economy today by giving money to some (often the politically well-connected) and strapping future generations with debt and inflation to pay for it. They also claim to want to help old people (via Social Security and Medicare) or young people (via student loans). They do it, however, with programs that shift power and responsibility—but not the expense—away from individuals and families and to politicians. Their programs resemble Ponzi schemes that must inevitably go bust, even as they feed bureaucracies and breed debt and dependency for many along the way.

Paved with Good Intentions

Writing in the November 13, 2013, edition of The New York Times (p. A-19), John Harwood noted how the assistance programs created by the nanny state naturally mushroomed:

Congress enacted Social Security in 1935 to provide benefits to retired workers. In 1939, benefits were extended to their dependents and survivors. Later the program grew to provide disability coverage, cover self-employed farmers and raise benefit levels.

President Lyndon B. Johnson’s Great Society created Medicare and Medicaid in the 1960s to provide health coverage for the elderly and the poor. They followed the same pattern.

In 1972, Congress extended Medicare eligibility to those under 65 on disability and with end-stage renal disease. In 2003, Congress passed President George W. Bush’s plan to offer coverage under Medicare for prescription drugs.

Lawmakers initially linked Medicaid coverage to those receiving welfare benefits, but over time expanded eligibility to other “poverty-related groups” such as pregnant women. In 1997, President Bill Clinton signed into law the Children’s Health Insurance Program, which now covers eight million children whose families’ incomes are too high to qualify for Medicaid.

All of these expensive, bureaucratic, and ultimately unsustainable programs sounded wonderful to many when they were enacted. Rarely were they judged on what they likely would yield down the road for us all. Supporters embraced them mostly because of what they would do for some in the near term. None of the advocates ever said, “In the not-too-distant future, these programs will grow like topsy and saddle the nation with trillions in debt, thereby jeopardizing those who depend upon them and the nation as a whole as well.”

Short Run, Some People

This is the essence of the statists’ welfare state: Rob Peter to pay Paul. Always promise more, and send a lot of the bills to generations yet unborn. Après moi, le déluge. And they have the nerve to sell it by claiming they are the compassionate ones. If their rhetoric matched their handiwork, their motto would be “Short Run, Some People.”

“Long Run, All People” should be a battle cry of those who embrace liberty. It seizes the moral high ground because it’s farsighted and inclusive—and it’s accurate, too. It challenges others to be thorough in their thinking, to consider the whole picture and not just the corners of it that capture their ephemeral attentions. Isn’t that what responsible adults are supposed to do? Today is the tomorrow that yesterday’s shortsighted statists didn’t bother to think about. The victims of their handiwork number in the millions, though the statists never saw them coming.

Half a century ago, W. Allen Wallis addressed this issue in this very magazine in his insightful article, “The Public Versus the Private Sector.” I urge you to give it a look. It’s “dated” only in a few examples and in a word choice here and there, which only underscores the timelessness of the core message.

I wish I could get a T-shirt and bumper sticker that say in large print, “Long Run, All People” and in small print, “Shrink Big Government.” Wouldn’t they spark some interesting conversations?

How might “Long Run, All People” be deployed with good effect in today’s context? I could produce some hypothetical examples, but I’d prefer to stimulate YOUR thoughts. So let me invite you, the reader, to put the comment section below to good use. Where, when, and how do you think this line of reasoning could change some minds in the right direction? Or is my case here overstated? All comments, suggestions, and examples welcome.

20130918_larryreedauthorABOUT LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

EDITORS NOTE: The features image is courtesy of FEE and Shutterstock.

Former CIA Officer — Its the National Debt Stupid! Beware of the Bail-in!

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“It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.” – Thomas Jefferson, 3rd U.S. President

berntsen_gary

Gary Berntsen

Decorated former Central Intelligence Agency (CIA) career officer who served in the Directorate of Operations between October 1982 and June 2005, Gary Berntsen was in Sarasota, Florida to talk about the greatest threat to the national security of the United States of America. Speaking at an event hosted by the Concerned Veterans for America, Berntsen said that the greatest national security threat to the U.S. is not the Russian incursion into Ukraine, the Chinese expansion into SE Asia, the threats from Middle Eastern terrorists, its the growing national debt.

Berntsen went on to say that the debt bubble is about to burst. It is when, not if, ordinary Americans will feel the impact of a weakened dollar and the failure of Congress to deal with the national debt and spending.

Berntsen quoted a number of recent books warning about the coming fiscal crisis, including The Death of Money: The Coming Collapse of the International Monetary System by James Rickards. Berntsen said that after reading Rickards book he understood how vulnerable Americans are to two fiscal bubbles – the dollar bubble and national debt bubble. Berntsen said that the pins that will burst these bubbles are: inflation and China stopping to buy U.S. Treasury Bonds.

Berntsen raised the specter of a new financial global paradigm called the “bail-in“. The Financial Times defines “bail-in” as, “[A] desire to make bondholders – who after all helped lend the money that allowed banks to lend imprudently – share the burden in future by making them forfeit part of their investment to “bail in” a bank before taxpayers are called up on to bail it out. In theory, this will force them to be more careful with their investments and protect the taxpayer from a re-run of the recent crisis.”

Berntsen noted that the bail-in paradigm was used in Cypress. In his article Bail-in vs. Bailout, David Kotok writes:

In the aftermath of the bungled Cyprus affair, we are now observing a major transition underway with regard to bank-deposit safety.

In the Eurozone and in Europe generally, the sacredness of an insured deposit was bludgeoned by the finance ministers in their botched attempt to impose a cost on insured deposits in Cyprus. The finance ministers were taken to task decisively by their political constituents. Imagine: it was the parliament of Cyprus that stood between the insured depositors in Eurozone banks and the outrageous attempt to breech the sacred promise that insurance entails.

One has to be thankful for the democratic political process that elects parliaments, even in Cyprus.

Now we are seeing a different form of attack on depositors. We are transitioning from a system of bank bailouts to “bail-ins.”

Read more.

Berntsen said that Alan Greenspan in his book The Map and the Territory: Risk, Human Nature and the Future of Forecasting alluded to the new paradigm of the bail-in. The bail-in is available to President Obama and Congress as it was included in H.R. 4173: Dodd-Frank Wall Street Reform and Consumer Protection Act. The Financial Times in the definition of bail-in uses the Example of Dodd-Frank stating, “The US has already put in place bail-in-like powers as part of the Dodd-Frank financial reform act passed last year [2010]. The law includes a resolution scheme that gives regulators the ability to impose losses on bondholders while ensuring the critical parts of the bank can keep running. Employees would be paid, the lights would stay on and derivatives contracts would not have to be instantly unwound, one of the areas that caused market confusion when Lehman Brothers collapsed in September 2008.” [Emphasis added]

The danger is clear and present. The media is not covering this existential threat. Rather the news outlets are more interested in any issue other than the one most important to Main Street America.

Time will tell and time is running short according to Berntsen.

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Maybe You Can Get Blood from a Stone by Lawrence W. Reed

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How a beautiful old hill in Britain is bleeding one man dry.

With these words two centuries ago, the poet Samuel Taylor Coleridge immortalized a beloved mountain in Britain’s stunningly beautiful Lake District:

On stern Blencathra’s perilous height
The winds are tyrannous and strong;
And flashing forth unsteady light
From stern Blencathra’s skiey height,
As loud the torrents throng!

The famed and prolific fellwalker (hill climber) and guide book author Alfred Wainwright (1907–1991) wrote more about Blencathra than any other hill or mountain in the country. Untold hundreds of thousands of hillwalkers have left their footprints on its trails. The goat herds of a dozen graziers eat of its grass every day. It’s quiet, panoramic, idyllic—and private.

Now the peak is in the news again, as I learned during a visit to Britain earlier this month. Blencathra is up for sale.

For 400 years, the nearly 3,000-foot Blencathra has belonged to the same family, the Lowthers. Ownership includes an ancient manorial title, the Lordship of the Manor of Threlkeld, and the man who holds it now is Hugh Lowther, Lord Lonsdale. Since his father died eight years ago, Lord Lonsdale has been saddled with a massive inheritance tax bill he can’t pay without selling the mountain. The British government wants £9 million—equivalent to more than $15 million.

A worldwide study by accountants UHY Hacker Young showed that Ireland and Britain (in that order) have the highest death duties of any of the world’s major economies—more than three times higher than the global average. Australia, Israel, and New Zealand are among the more enlightened developed countries that have scrapped the tax on death altogether. Even the average continental European tax on a large estate is less than half what it is in Britain.

“Big inheritance tax bills,” UHY Hacker Young’s Ladislav Hornan told The Telegraph, “can reduce the incentive to keep creating wealth in order to pass it on to your family. They can also deprive the next generation of capital that traditionally has been key to funding the establishment of new businesses. As more and more UK families are caught in the inheritance tax trap, pressure for major reform is growing.”

Prime Minister David Cameron promises to raise the threshold of estate value at which the high death rates kick in—hardly revolutionary and certainly a step that doesn’t challenge the inherent injustices of the inheritance tax: It taxes a second time what was already taxed heavily once (as income); it assaults the right of a property owner to bequeath his already-taxed wealth to his family; it makes it difficult if not impossible to pass on land that generates little income because its owners seek to preserve its pristine nature; and it siphons money from productive people to politicians to squander and buy votes.) See “Grave Robbers: The Moral Case Against the Death Tax” by Edward J. McCaffery (1999).

Lowther is asking 1.75 million pounds for Blencathra but at that price, any buyer will have to pay over 300,000 pounds more (half a million dollars) in VAT, or value-added tax. There’s no such thing as a free lunch or a cheap mountain in the British welfare state.

“Nobody climbs mountains for scientific reasons,” said Sir Edmund Hillary, who scaled the summit of Mt. Everest in Nepal. “Science is used to raise money for the expeditions, but you really climb for the hell of it.” Sometimes I think that’s the best explanation for why governments tax inheritances—just for the hell of it.

20130918_larryreedauthorABOUT LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.