My 2015 Commencement Address

All manner of people are giving commencement speeches to students graduating from colleges and universities these days. It is doubtful that any will be remembered because the prospects of students depend in large part on the economy into which they are entering, the majors they pursued, their individual ambitions, and capacity for hard work. Then, too, there’s dumb luck which often plays a role.

For those graduating this year, my profound sympathy because the economy could not be much worse short of being declared an official Depression. Out of a total of 330 million Americans, there are currently 93,194,000 Americans who are not in the workforce because they can’t find a job or have given up looking. Even in the field of manufacturing—not something you studied for—the number of jobs have declined by 7,231,000, some 37% since manufacturing peaked in the U.S. in 1979.

U.S. economic growth rate has slowed to 0.2%. In short, it is virtually non-existent. So, with your diploma in hand, unless you majored in the sciences, math or engineering, you are not likely to join the workforce any time soon. Those of you who majored in social work, theatre arts, elementary education, and something called parks and recreation, are going to be at the bottom of the salary scale for the rest of your life.

Of the previous graduates from 2008 to the present who voted for Barack Obama, just 14% have real jobs. You have had the vast misfortune of being born just in time to live through the worst presidency in the history of the nation. If, in fact, you even know the history of the nation.

You are at a further disadvantage because the curriculums of the government schools you attended have been so distorted that you have been led to believe that the Founding Fathers were all slave-owning, white elitists when in fact, many opposed slavery, the labor source of their era, and would have abolished it. However they knew they could not get the Constitution ratified by the southern states if they did. It’s called compromising for a greater goal, the finest and currently the oldest functioning Constitution on Earth.

Depending on your race and sex, you have already been taught to blame anything that goes wrong in your life on whether you are white, black or Hispanic, male or female. If you want to know what’s wrong, look in the mirror and ask yourself what you are doing wrong or not doing right—dressing, manners, behavior, addictions, et cetera.

If you have been raised to believe in God and have spiritual values, you are likely to be mocked, though not necessarily to your face. While still the majority faith in America, Christianity is under attack from many directions, not the least of whom are homosexuals that constitute less than 2% of the population. Their attack on traditional (and biological) male-female marriage that has been part of every civilization going back five thousand years and more will degrade society in many ways.

For many of you, graduation means years of paying off huge loans for the privilege of picking up a degree that, as noted—short of science, math and engineering—will not yield a lot of income. This will impact your lifestyle including possibly having to move back in with your parents. It may mean putting off marriage and a family of your own for a while and your loans will affect being able to secure a mortgage on a home, but everyone is having problems doing that these days.

So, if all this looks and sound bleak, it is because it is. A real commencement speech should tell you the truth but most of them do not. They are generally filled with inspiring talk about the future.

The future you are looking at along with everyone else is fraught with danger. That, however, can be said of every “future” that every American has faced since the nation was established. It took a shooting war with Great Britain just to have a nation and Americans have been engaged in wars large and small ever since.

The threat of Communism faced Americans after World War Two and generations previous to yours waited out and opposed the Soviet Union for nearly fifty years before it collapsed. Communism is still around however in China, nearby Cuba, Venezuela and other nations who suppress their people in the name of the utopian society they claim to have.

The more recent threat is the rise of Islamism, radical Islam as practiced and supported by a significant percentage of the world’s one billion-plus Muslims. It is a cult about Mohammed based on the total domination of the world. Divided between two sects, Sunnis and Shiites, when they are not killing each other, they are killing “infidels”, anyone who is not a Muslim.

It will fall to you and your fellow graduates to fix the nation’s problems and right now its biggest one is that the federal government is too large and we are collectively facing an $18 trillion debt that must be resolved because just paying interest on it makes doing anything else difficult at best.

All of the states are in debt as well as they struggle to pay the health benefits and pensions of civil service workers, active and retired. That often doesn’t leave much money for fixing potholes and other infrastructure needs.

Whatever problems you will encounter, keep in mind previous generations often encountered much worse, such as those in the 1930s during the Great Depression and in the 1940s who fought World War II, and those from the 1950s and 1970s who were called on to fight the Korean War and the war in Vietnam; more recently those who fought the war in Afghanistan and Iraq. Respect their sacrifices and their courage.

If you want to see the government grow even larger along with the debt, vote for Hillary Clinton. She’s still mentally and ideologically stuck in the 1990s, plus she has engaged in behavior that would get anyone else put in jail. You have a large choice among Republican candidates and eventually it will narrow to someone capable of tackling the future.

The best I can do is to wish you good luck. You’re going to need it.

© Alan Caruba, 2015

Reich Is Wrong on the Minimum Wage by DONALD BOUDREAUX

Watching Robert Reich’s new video in which he endorses raising the minimum wage by $7.75 per hour – to $15 per hour – is painful. It hurts to encounter such rapid-fire economic ignorance, even if the barrage lasts for only two minutes.

Perhaps the most remarkable flaw in this video is Reich’s manner of addressing the bedrock economic objection to the minimum wage – namely, that minimum wage prices some low-skilled workers out of jobs.

Ignoring supply-and-demand analysis (which depicts the correct common-sense understanding that the higher the minimum wage, the lower is the quantity of unskilled workers that firms can profitably employ), Reich asserts that a higher minimum wage enables workers to spend more money on consumer goods which, in turn, prompts employers to hire more workers.

Reich apparently believes that his ability to describe and draw such a “virtuous circle” of increased spending and hiring is reason enough to dismiss the concerns of “scare-mongers” (his term) who worry that raising the price of unskilled labor makes such labor less attractive to employers.

Ignore (as Reich does) that any additional amounts paid in total to workers mean lower profits for firms or higher prices paid by consumers – and, thus, less spending elsewhere in the economy by people other than the higher-paid workers.

Ignore (as Reich does) the extraordinarily low probability that workers who are paid a higher minimum wage will spend all of their additional earnings on goods and services produced by minimum-wage workers.

Ignore (as Reich does) the impossibility of making people richer simply by having them circulate amongst themselves a larger quantity of money.

(If Reich is correct that raising the minimum wage by $7.75 per hour will do nothing but enrich all low-wage workers to the tune of $7.75 per hour because workers will spend all of their additional earnings in ways that make it profitable for their employers to pay them an additional $7.75 per hour, then it can legitimately be asked: Why not raise the minimum wage to $150 per hour? If higher minimum wages are fully returned to employers in the form of higher spending by workers as Reich theorizes, then there is no obvious limit to the amount by which government can hike the minimum wage before risking an increase in unemployment.)

Focus instead on Reich’s apparent complete ignorance of the important concept of the elasticity of demand for labor.  This concept refers to the responsiveness of employers to changes in wage rates. It’s true that if employers’ demand for unskilled workers is “inelastic,” then a higher minimum wage would indeed put more money into the pockets of unskilled workers as a group. The increased pay of workers who keep their jobs more than offsets the lower pay of worker who lose their jobs. Workers as a group could then spend more in total.

But if employers’ demand for unskilled workers is “elastic,” then raising the minimum wage reduces, rather than increases, the amount of money in the pockets of unskilled workers as a group. When the demand for labor is elastic, the higher pay of those workers fortunate enough to keep their jobs is more than offset by the lower pay of workers who lose their jobs. So total spending by minimum-wage workers would likely fall, not rise.

By completely ignoring elasticity, Reich assumes his conclusion. That is, he simply assumes that raising the minimum wage raises the total pay of unskilled workers (and, thereby, raises the total spending of such workers).

Yet whether or not raising the minimum wage has this effect is among the core issues in the debate over the merits of minimum-wage legislation. Even if (contrary to fact) increased spending by unskilled workers were sufficient to bootstrap up the employment of such workers, raising the minimum wage might well reduce the total amount of money paid to unskilled workers and, thus, lower their spending.

So is employers’ demand for unskilled workers more likely to be elastic or inelastic? The answer depends on how much the minimum wage is raised. If it were raised by, say, only five percent, it might be inelastic, causing only a relatively few worker to lose their jobs and, thus, the total take-home pay of unskilled workers as a group to rise.

But Reich calls for an increase in the minimum wage of 107 percent! It’s impossible to believe that more than doubling the minimum wage would not cause a huge negative response by employers.

Such an assumption – if it described reality – would mean that unskilled workers are today so underpaid (relative to their productivity) that their employers are reaping gigantic windfall profits off of such workers.

But the fact that we see increasing automation of low-skilled tasks, as well as continuing high rates of unemployment of teenagers and other unskilled workers, is solid evidence that the typical low-wage worker is not such a bountiful source of profit for his or her employer.

Reich’s video is infected, from start to finish, with too many other errors to count.  I hope that other sensible people will take the time to expose them all.

Donald Boudreaux

Donald Boudreaux is a professor of economics at George Mason University, a former FEE president, and the author of Hypocrites and Half-Wits.

EDITORS NOTE: Here’s how Reich cherry-picked his data to claim that the minimum wage is “historically low” right now; here’s why Reich is wrong about wages “decoupling” from productivity; here’s why Reich is wrong about welfare “subsidizing” low-wage employers; here’s why Reich is wrong that Walmart raising wages proves that the minimum wage “works”; Reich is wrong (again) about who makes minimum wage; and here’s a collection of recent news about the damage minimum wage hikes have caused.

This post first appeared at Cato.org, while Cafe Hayek was down for repairs. 

Going Postal, Again: The USPS is in the red for the eighth straight year by DOUG BANDOW

The United States Postal Service (USPS) lost $5.5 billion last year. That is the eighth annual loss in a row and the third-highest ever. The only silver lining is that the loss was below the red-ink tsunami of $15.9 billion in 2012.

Why does the federal government deliver the mail? Why does it have a monopoly over delivering the mail?

Admittedly, the Postal Service is one of the few government programs with actual constitutional warrant. The Constitution authorizes Congress to establish post offices. And early American politicians rushed to take advantage of their opportunity, creating the Post Office Department in 1792.

Alas, one-time revolutionaries turned the system into a fount of federal patronage. Local postmasters became perhaps the president’s most important appointments, at one time accounting for three-quarters of all federal employees. The postmaster general actually was a member of the cabinet from 1829 to 1971.

With politics rather than service as the post office’s priority, Congress took the next step and approved the Private Express Statutes, which prevented anyone from competing with the government in delivering first-class mail. And Uncle Sam enforced his monopoly, fining would-be competitors, including celebrated libertarian author Lysander Spooner.

The feds continue to prosecute anyone with the temerity to compete with the USPS, even threatening the Cub Scouts for once offering to deliver Christmas cards.

Believing that Americans existed to serve the USPS left the system ill-equipped to adapt to changing circumstances. In 1971, Congress turned the Post Office Department into the semi-independent USPS. That removed its direct role in politics, but the USPS still is exempt from taxes and regulations, including local parking restrictions. Congress retained its control over postal policies and, of course, preserved the system’s delivery monopoly.

But banning competition could not preserve the postal market. The number of pieces of mail peaked in 2001 and continues to fall despite a rising population. Mail pieces dropped from 213 billion in 2006 to 155 billion last year, and the number is expected to decline to 130 billion by 2020. The USPS’s last profitable year was 2006. Since then, losses have run between $2.8 billion and $15.9 billion. The Postal Service has maxed out its borrowing from Uncle Sam and missed four retiree program payments. With characteristic understatement, the Government Accountability Office observed, “Given its financial problems and outlook, USPS cannot support its current level of service and operations.”

The postal unions insist that nothing is wrong — at least, nothing that a federal bailout wouldn’t solve. They reserve particular ire for the requirement that the USPS prefund workers’ retirement. Had this rule not been in place, noted former postmaster general Patrick Donahoe, the Postal Service would have earned money last year.

But prefunding protects taxpayers. Washington’s unfunded (government) retirement liability is about $800 billion and growing every year. That no other agency is required to prefund is unfair to taxpayers, not the Postal Service, since every agency should have to set aside sufficient money to fulfill its financial promises. With the Postal Service earning too little to pay and with nothing left of its federal credit line, the USPS has defaulted four times over the last three years on its mandated contributions.

Even Donahoe acknowledged that prefunding is appropriate. He contacted me after I wrote about the issue a couple of years ago and disputed only the amount the USPS should set aside. He said he asked postal workers what they thought of an unfunded system in light of Detroit’s bankruptcy, when city coffers were empty.

The unions may simply assume that Congress would bail them out if need be. Legislators normally can be counted on to do the wrong thing, but with the unfunded liability for Social Security and Medicare around $100 trillion, there won’t be a lot of cash available when the big retirement bills come due. Tens of millions of elderly retirees have the edge in fighting with postal workers over a diminishing public pot. The postal workers shouldn’t bet their retirement on winning that political battle.

There’s no other obvious way for the USPS to become solvent. Over the last half-century, the postal authorities raised rates 50 percent faster than the rate of inflation. Pushing hikes even faster in the future would encourage more people to use alternatives. Squeezing postal consumers would work only for truly essential first-class delivery services, but what are they? Bills are paid online; digital magazines and greeting cards go instantly and inexpensively. Junk mail trumps online spam only in the ability to blanket every address in a neighborhood.

The USPS has reduced costs through facility closures and staff reductions despite strong opposition. Cuts in compensation, retirement benefits, and workforce levels and improvements in productivity also are obvious responses, but they must overcome union opposition. Proposals for reducing services abound: end Saturday delivery, cut delivery to just three or four days a week, close more post offices, stop door-to-door delivery (with neighborhood “cluster boxes”). All of these anger consumers, encouraging them to go elsewhere — including to Federal Express and UPS, which offer better options for packages. Irritated workers and customers also complain to Congress, creating political roadblocks for the USPS.

Odder ideas involve offering services that already are widely available, such as check cashing and photocopying. Perhaps the strangest, from the Greeting Card Association, is to transform post offices into “centers of continuous democracy” and offer “community bulletin boards, licenses, permit applications, [and] citizen polling/opinion gathering.” In other words: a bizarre mix of political activism and government regulation, with no obvious way to raise the billions annually needed to balance the books.

Instead of attempting to save an unnecessary political monopoly, Congress should look abroad, where numerous countries, some pushed by the European Union, have introduced competition and innovation into their postal markets. Even such unlikely states as Indonesia, Russia, and Sweden have pursued postal liberalization.

The Organisation for Economic Co-operation and Development, made up of wealthy industrialized states, including the United States, reported that such reforms have yielded “quality of service improvements, increases in profitability, increases in employment and real reductions in prices.” Only in the supposed laissez-faire paradise of America — where a union-led “Grand Alliance to Save Our Public Postal Service” just formed to ensure that whatever has been will forever be — do such ideas seem radical.

Even President Barack Obama appeared to get it. A few years back, he admitted, “It’s the post office that’s always having problems.” In contrast, “UPS and FedEx are doing just fine.” That suggests an obvious solution.

Better management and less politics would help. In fact, revenue was up a bit last year, much of it for package delivery, despite the bigger loss. But over the long term, the USPS cannot escape from a seeming death spiral of bigger losses, higher rates, poorer services, fewer customers, bigger losses, and so on.

Uncle Sam should get out of the postal business. Privatize the USPS and drop the federal first-class monopoly. No one can say for sure what would happen. But if history is a guide, innovative entrepreneurs would be more likely to find cost-effective solutions than will today’s mix of politicians and bureaucrats.

ABOUT DOUG BANDOW

Doug Bandow is a senior fellow at the Cato Institute and the author of a number of books on economics and politics. He writes regularly on military non-interventionism.

Seeing the Light on School Choice

The arguments against school choice in America are growing more desperate and outrageous as the special interest groups allied against the educational opportunities of America’s school children begin to lose their fight. In a remarkable development, a number of prominent Democrats are siding with Republicans on school choice and in the fight for the educational futures of millions of American children.

These special interest groups are experts at making us believe they’re in it for the kids but this message is far different from the one that takes place behind closed doors.

Think about it; where else do rational people argue against choice? We want to choose our doctors. We want to choose our childcare providers. We want to choose our home contractors. We want to choose the supermarket where we shop. We want to choose the restaurants where we eat. We want to choose which colleges we attend. We want to choose our lawyers, our accountants, our landscapers, our mechanics, our barbers, our butchers, and just about every other provider whose services or products we may want or need.

If choice is the obvious answer for nearly every other arena, then why is there such a controversy when it comes to educational options? The controversy stems from the fact that a number of special interest organizations make a living, and will continue to exist, only if the failed system in place continues to be forced down our throats. These special interest groups are experts at making us believe they’re in it for the kids but this message is far different from the one that takes place behind closed doors. If you have any doubts read the following quote from National Education Association lawyer, Bob Chanin, speaking in 2009 at the National Education Association’s (NEA) annual meeting:

Despite what some among us would like to believe it is not because of our creative ideas. It is not because of the merit of our positions. It is not because we care about children and it is not because we have a vision of a great public school for every child. NEA and its affiliates are effective advocates because we have power.

The NEA, and their sister organizations, are showing their unwillingness to get results, and to fight for a better educational future by their intransigence and their unwillingness to allow parents a choice, and a voice, in the process.

This quote is appalling. Speaking with educators in my family and those I came into contact with on my political campaigns, I bet most teachers would agree. The tragic irony of this quote is that the power Mr. Chanin speaks of is leveraged at the expense of both America’s school children AND its teachers. The NEA and its sister organizations, which have carelessly pursued a merciless, one-sided negotiation strategy, have ignored the alternatives for their members and are costing them both money and career flexibility.

South Korea, a country with a world-class education system, compensates its teachers at approximately two and a half times GDP per capita, while in the United States the ratio is roughly one to one. In addition, South Korean parents spend more on education for their children than parents in any other country (15% of Gross National Product) to attain academic excellence. To be clear, I am not making a case for or against more or less government or private spending on education in this specific piece. But, I am arguing that the education special interests are doing a disservice to their members and to the country by fighting for the failed status quo, and against school choice, under the misguided belief that the educators they represent will suffer financially. South Koreans are willing to spend such large sums on education and, in the process, improve the financial well being of their teachers, because they are getting results. The NEA, and their sister organizations, are showing their unwillingness to get results, and to fight for a better educational future by their intransigence and their unwillingness to allow parents a choice, and a voice, in the process.

Freedom, liberty and choice work because bureaucrats will never possess the information necessary about you and your children to make better decisions than you can make for yourselves. The value of a top tier education will only grow in a globalized future, where productivity enhancements will increasingly come from the arena of ideas, and less from the arena of physical labor.

This is a fight we can all get behind, regardless of our partisan leanings. Invest your time in the fight for school choice and educational freedom and tomorrow will pay us all back a handsome dividend.

EDITORS NOTE: This column originally appeared in the Conservative Review.

Does Florida want ‘Rubber Stamp’ School Boards?

Diverse views are needed on every board or committee, not one opinion to the exclusion of all others. Political discourse is healthy. One mindedness is dangerous and is called tyranny.

The Sarasota County School Board supports diversity, the exception being if one talks about diverse positions on school board matters. Recently this came to light when school board members went to Tallahassee to lobby the state legislature on matters of importance to students and parents. One of the issues of importance is vouchers for students provided by businesses.

Supporters of public charter schools, school voucher programs, equal funding for charter schools and home schooling are persona non grata to the Florida School Board Association, Florida Association of District School Superintendents, Florida’s teachers unions and Florida Democrats and some Republicans. Anyone who opposes the government public school monopoly is immediately classified as a “rival.” This is particularly true of school board members who support programs to give parents and students choices as to where they would like children to get an education.

Diversity and choice are one way streets to some elected officials and school bureaucrats. Going down the wrong road is considered blasphemy and creates discord. This discord must be stamped out at all cost.

Well there is a light of hope in the sunshine state from those who truly support diversity and choice in education. 

Zac Anderson and Shelby Webb from the Sarasota Herald-Tribune reported, “Sarasota County’s five School Board members used the school district’s spring break this week to lobby legislators and talk education policy in the state capital. But they weren’t all always working from the same playbook.” Question for Zac and Shelly: Since when are school board members required to work from any playbook? Aren’t school board members elected to represent the best interest’s of children and parents?

Anderson and Webb go on to report on “rival” school board organizations. The Florida School Board Association (FSBA) is presently suing the state of Florida to stop a voucher program to help students go to a school of their choice. The other organization is pro-choice and wants to stop the strangle hold of the FSBA on public education in general and school choice in particular.

Anderson and Webb wrote:

Another school board member from Escambia County, Jeff Bergosh, said he considers himself a “real threat to the status quo” and is intending to introduce a motion at his next board meeting asking the district not pay his portion of the $21,766 in dues owed to the Florida School Board Association.

“I’m tired of sending my money every year to an organization that’s working against school choice and suing the governor and Legislature,” Bergosh said.

Why would any school board member support using taxpayer money to fund an organization that does not have the best interests of students and parents in mind? 

Another issue raised by one school board member was “bias” in the current professional development opportunities offered to school board members. School board members, like students under Common Core, are being told what to think, not how to think, about public education.

sarasota school board logo with zuckerFor some school board members like Carolyn Zucker, president-elect of FSBA, it is all about the money, not the student. Zucker is worried about “…[Florida] House legislation that would allow certain businesses to solicit and collect contributions for the construction and maintenance of public education facilities. Zucker worries, “[I]t means the legislators will decrease capital funds going to districts and will instead rely on private contributions.”

Sheldon Richman in “Can the Free Market Provide Public Education?” writes:

The short answer, of course, is: yes, look around. Right now, private enterprise and nonprofit organizations provide all manner of education—from comprehensive schools with classes in the traditional academic subjects, to specialized schools that teach everything from the fine arts to the martial arts, from dancing to dieting, from scuba diving to scrutinizing one’s inner self.

[ … ]

The free market—and I include here both for-profit and nonprofit organizations—would provide even more education than it does now but for the “unfair competition” from government. Since government has a resource that private organizations lack—the taxpayers—it’s able to offer its services for “free.” They’re not really free, of course; in the government context, “free” means that everyone pays whether he wants the service or not. Clearly, as long as government can tax its citizens and then provide educational services to them at a marginal price of zero, much private education will never come into being. How ironic that government vigilantly looks for predatory pricing in the private sector when it is the major offender.

Richaman concludes, “Thus it is not only the case that the free market can provide education. We may conclude further that only the free market should provide education.”

Now that is divergent thinking.

America is based upon an educated public. The public education monopoly is another matter all together.

Obama Amnesty Plan: Legalize Foreigners, “Take Over the Host,” Push “Citizens into the Shadows”

It was supposed to be a phone call for Obama administration ears only. But hear it the radio host did, she says. And what she heard should make your blood run cold — and perhaps your rage hot. Obama’s amnesty plan is to use illegal aliens as “seedlings,” said the federal officials. They will “navigate, not assimilate,” as they “take over the host,” create a “country within a country” and start “pushing the citizens into the shadows.”

Welcome to the “fundamental transformation” of America.

The above was alleged by WCBM radio co-host Sue Payne in an interview with talk giant Mark Levin last Thursday. Payne says that while at an immigration rally, she became privy to three conference calls in which 16 Obama administration officials — including Cecilia Muñoz, director of Obama’s White House Domestic Policy Council — discussed plans for what could only be called the final destruction of traditional America and the cementing of leftist hegemony. Muñoz, by the way, is perfectly suited to this task; she was once a senior vice president for the anti-American Hispanic lobbying organization the National Council of La Raza.

Oh, la raza means “the race” (I guess the whole “‘Hispanic’ is an ethnicity” thing doesn’t cut much ice with them).

Payne opened the interview by explaining that what Obama actually did on November 21 — the day he signed his supposed executive amnesty — was create the “Task Force on New Americans” (TFNA) for the purposes of implementing his legalization scheme. And it won’t be applied to just 5 million illegals, but “13 to 15 million to give protection [to] and move…on to citizenship,” reports Payne.

Payne then said that the illegals, labeled “seedlings,” would eventually “take over the host.” She continued, “And the immigrants will come out of the shadows, and what I got from the meetings was that they would be pushing the citizens into the shadows. They would be taking over the country; in fact, one of the members of the task force actually said that we would be developing a country within a country.

To this nefarious end, the goal of the TFNA is to create a “welcoming feeling” in illegal-seeded localities, which would be redesignated “receiving communities.” They’d subsequently be transformed (fundamentally, I suppose) into what are labeled “emerging immigrant communities” — or as some would say, México Norte.

The officials also said, reports Payne, that for the seedlings to “grow” they needed “fertile soil” (a.k.a. your tax money). The officials stated that the legalized aliens needed to be redesignated as “refugees” and be given cash, medical care, credit cards for purchasing documents and — since many illegals will be older — Social Security so they can “age successfully within their country within a country,” to quote Payne. As she then put it, it’s “as if we were funding our own destruction here.”

Some may point out that Payne has no smoking gun (that we know of) in the form of, let’s say, a recording of the calls. But Levin vetted her and found her credible, calling the scheme “stunning” and reflective of “Mao’s China.” I believe her as well, but it doesn’t even matter. She simply confirms what I’ve been warning of for years and years over and over again: The Left is importing their voters, engaging in demographic warfare and authoring the death of the republic.

Mind you, legal immigration itself is a sufficient vehicle for this. Ever since the Immigration Reform and Nationality Act of 1965, 85 percent of our immigrants have hailed from the Third World and Asia, thus growing leftist constituencies that vote for socialistic Democrats by approximately a four-to-one margin; in contrast and as Pat Buchanan pointed out, “[N]early 90 percent of all Republican votes in presidential elections are provided by Americans of European descent.” This, along with hatred and bigotry, is a major reason why Obama and his ilk want to destroy white America.

But liberals crave immediate gratification, and amnesty greatly accelerates this process. Legalize 15 million socialist voters clamoring for handouts, have them bring in relatives via chain migration — give them Social Security numbers which they can use to vote (as is Obama’s plan) — and tomorrow’s leftist dystopia is today. I predicted this in 2008, by the way, writing:

The coup de grace Obama will use against rightist opposition is mostly embodied in one word: amnesty. This, along with some other measures, will both grow the Hispanic voting block and ingratiate Obama to it. This will enable him to create a powerful coalition of blacks, young voters and Hispanics that, along with the older whites he will be able to retain, will constitute an insurmountable electoral force. And this is why amnesty has long been a dream of the Democrats. Even easier than brainwashing new voters (which the media and academia specialize in) is importing them.

Admittedly, I can be criticized since the above article is titled “How Obama Will Ensure His Victory in 2012.” But titles are hooks as much as anything else. And since I don’t have a crystal ball, just a not yet crystallized brain, I’d never claim to be able to perfectly predict timing. It also turned out that Obama and the 2009 to 2011Democrat House and Senate were preoccupied with instituting ObamaCare, and that the liberal legislators were perhaps too cowardly to face re-election having passed amnesty. Regardless, I have another prediction, one I hope you’ll take seriously:

The chances are slim to nil that Obama’s amnesty will be stopped legislatively.

Obama against John Boehner is the Beltway Brawler vs. the Beltway Bawler. Moreover, I suspect establishment Republicans — who just refused to defund Obama’s scheme — want executive amnesty. Why? Because the issue has been an albatross around their necks. And while they don’t have the guts or desire to really stand against Invasion USA, they also know voting for amnesty would mean electoral disaster. So, let Obama act unilaterally, huff and puff a bit with a wink and a nod while doing nothing of substance, and “Voila!” The issue is off the table with plausible deniability of complicity.

And the courts? They may uphold the recent injunction against Obamnesty, but there’s no saying Obama won’t ignore the courts (he assuredly understands that judicial review is a jurist invention). And, anyway, amnesty was always only a matter of time with today’s cultural trajectory. Yet this cloud does have a silver lining.

The Left was very successful boiling the frog slowly with the legal importation of socialist voters and the gradual transformation of our culture via entertainment, the media and academia. But liberals’ childish haste may have led to a tactical error. By going all in on executive orders and amnesty — by transitioning from evolutionary to revolutionary change and turning the burner up high — the Left risks rousing that frog from his pan. And how should it jump?

Obama said after the November Republican victory that it was his “profound preference and interest to see Congress act on a comprehensive immigration reform bill” (emphasis added), but otherwise he’ll work via executive orders. He also offered the GOP a deal: “You send me a bill that I can sign, and those executive actions go away.”

Translation: My preference is to follow the Constitution.

But my will be done — one way or the other.

How to respond? Question: what do you do when someone says “My preference is to follow the game’s rules, but if I can’t win that way, I’ll have to cheat”? You can:

  1. Continue losing; be a Charlie Brown sucker who keeps thinking that this time Lucy won’t pull the football away.
  2. Cheat right back (hard to do without judges in your pocket).
  3. Stop playing the game.

Now, conservatives, consummate ladies and gentlemen that they are, consistently choose option one. Far be it from them to violate the “law” even when it’s unconstitutional and therefore lawless. But I prefer option three.

This means nullification. Note that the Constitution is the contract Americans have with each other. And what happens when one party subject to a contract continually violates it in order to advantage itself, aided and abetted by corrupt judges?

The contract is rendered null and void.

Remember, cheaters don’t stop cheating until forced to. Governors and their legislatures need to man-up and tell the feds, “You like acting unilaterally and unconstitutionally? Two can play that game.” And this means not just ignoring Obama’s amnesty dictates, but nullifying a multitude of other things as well.

The other option is demographic and cultural genocide and the politics attending that. The Left knows this, too. Obama noted that growing “diversity hinders conservative priorities,” wrote the DC last month. Congressman Kurt Schrader (D-OR) said recently that amnesty “will decide who is in charge of this country for the next 20 or 30 years.” And an ex-advisor to former Prime Minister Tony Blair confessed in 2009 that the goal of the British Labour Party’s massive culture-rending immigration was to “rub the Right’s nose in diversity and render their arguments out of date.”

Do you get it yet?

Defy and Nullify.

The alternative is to walk legally and quietly into that good night, going out not with a bang but a whimper, muttering something about 2016, the Supreme Court and pixie dust.

Contact Selwyn Duke, follow him on Twitter or log on to SelwynDuke.com

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Star Trek’s “Infinite Diversity” and the Endless Frontier

Spock understood the importance of innovation for life and prosperity by RICHARD LORENC …

Last Friday, millions of Star Trek fans were saddened by the news that Leonard Nimoy, the actor who played the iconic character Spock on the series, had died at the age of 83 after a brief hospitalization.

I was among the multitude on social media who paid tribute to Nimoy by posting pictures, sayings, videos, and eulogies in remembrance of the man who brought “Live long and prosper” to the world.

The classic Vulcan farewell is not the only thoughtful gift from Nimoy and Spock. Another idea shared by the quintessential Vulcan was his people’s concept of “Infinite Diversity in Infinite Combinations,” or IDIC.

IDIC was the Vulcans’ subdued, yet profound, appreciation for diversity. They wore pendants representing IDIC and posted it like a religious icon in their homes, temples, and starships. It became the de facto symbol of the Vulcans and their intensely logical ways. It was as if they were saying, “Difference is essential to the universe, and we’ve seen far less than actually exists. We’ll never see the end of it – and that’s a good thing.”

That idea didn’t always sit well with space cowboys Kirk and McCoy, who wanted more concrete answers. But then humans are illogical. What else could Spock expect?

Like Star Trek generally, IDIC had a big impact on me. It’s an idea that still motivates and delights me when I think of the possibilities for humanity today, and particularly the opportunities for difference and diversity offered by markets.

If you view the market process as one of discovery – discovering new ways to combine old ideas, and imagining how to apply those ideas in service to others – you can see how it begins to reveal IDIC. With nothing holding back individuals’ creative energies, there’s no telling what orders and ideas might emerge, and there’s no end in sight to the frontiers of social and economic innovation.

The next time you walk a city street and gawk at the skyscrapers, or wander a supermarket and marvel at fresh strawberries in the winter, or gaze through a glowing box to see friends across the planet, take a moment to remember IDIC. Because of it, for the first time in history, our species truly can “live long and prosper.”

It’s fascinating – but it’s only logical.

ABOUT RICHARD LORENC

Richard N. Lorenc is the Chief Operating Officer of FEE.

Hiding the Unemployed: Disability and the Politics of Stats by WENDY MCELROY

Some statistics cannot be understood without setting them within a political framework because they reflect politics as much as or more than they do reality.

The unemployment rate is an example and a cautionary tale.

According to the Bureau of Labor Statistics (BLS), the official unemployment rate for last February fell to a four-year national low of 7.7 percent. While the White House cautiously congratulated itself, Republicans quickly pointed to what is often called the real unemployment rate; it stood at 14.3 percent.

The BLS looks at six categories of different data, from U-1 to U-6, to analyze employment every month. U-3 includes people who have been unemployed but who have actively looked for work during the past month; this is the official unemployment rate used by the media. U-6 contains data excluded from U-3, including part-time workers and the unemployed who have unsuccessfully looked for a job in the last year; this is the real unemployment rate.

Those politicians who want to take credit for lower unemployment thrust U-3 figures forward. Those who wish to deny them credit prefer U-6.

But matters may even be worse.

Now there is fresh reason to believe that even the 14.3 percent rate may be a considerable understatement.

The Disabled and the Unemployment Rate

National Public Radio (NPR) recently published the results of a six-month investigation by reporter Chana Joffe-Walt: “Unfit for Work: The Startling Rise in Disability in America.” Joffe-Walt uncovered what she called a “disability-industrial complex,” which spends more on disability payouts than on welfare and food stamps combined.

About a year ago, the New York Post reported that “more than 10.5 million individuals” received disability each month, and the reserves would be exhausted in 2018. Now Joffe-Walt claims the federal government sends out approximately 14 million payments; Social Security’s disability fund is expected to run out of reserves by 2016.

On March 22, during an interview with “This American Life,” Joffe-Walt explained that “since the economy began its slow, slow recovery in late 2009, we’ve been averaging about 150,000 jobs created per month. In that same period every month, almost 250,000 people have been applying for disability.”

Why do disability figures skew the unemployment rate? In the NPR article, Joffe-Walt explains that “the vast majority of people on federal disability do not work. Yet because they are not technically part of the labor force, they are not counted among the unemployed.” They become the invisible unemployed.

What Explains the Rise in Disability Payouts?  

The precipitous rise in disability claims comes from the unintended consequences of political maneuvering.

“The End of Welfare As We Know It” was announced in 1996 when President Clinton signed a reform act intended to move people off welfare rolls and into jobs. Clinton “encouraged” the individual states to push for the transition by making them fund a much larger share of their welfare programs. To encourage the individual recipients, the reforms also capped the length of time a person was eligible for welfare.

The incentive worked on the states, but not in the manner intended.

Each person on welfare became a continuing cost for a state, but each person who moved onto disability saved the states money, because Social Security Disability Insurance is fully funded by the federal government.

In her NPR report, Joffe-Walt indicates how aggressively the states shifted welfare recipients onto disability. She writes, “PCG [Public Consulting Group] is a private company that states pay to comb their welfare rolls and move as many people as possible onto disability. The company has an office in eastern Washington State that’s basically a call center, full of headsetted women in cubicles who make calls all day long to potentially disabled Americans, trying to help them discover and document their disabilities.” A recent contract between PCG and the state of Missouri offered PCG $2,300 per person it shifts from welfare to disability.

The incentive for individuals to leave welfare also worked, but, again, not in the manner intended.

Disability is easier to qualify for than welfare, and it has no time limit. Moreover, those on disability qualify for Medicare and other benefits, and receive payments roughly equal to a minimum-wage job. According to Joffe-Walt, only 1 percent of those who go onto disability leave to rejoin the workforce.

Conclusion: What Is the Actual Unemployment Rate?

If neither the official (U-3) nor the real (U-6) unemployment rates can be trusted, then how can we ascertain a more reliable rate?

A huge step would be to acknowledge the invisible unemployed who are not part of the current BLS calculations. They include not merely the so-called “disabled,” but also those who have left the workforce for other reasons.

CNS News noted of the February 7.6 percent unemployment rate, “the number of Americans designated as ‘not in the labor force’ in February was 89,304,000, a record high . . . according to the Department of Labor.” The economic trend-monitoring site Investment Watchblog concluded that the actual American unemployment rate—one that includes all unemployed—is around 30 percent. The site reasoned, “89 million not in the labor force = 29%, give or take, assuming the US population is 310,000,000 + official unemployment 7.7%.”

It is not possible to render an entirely accurate unemployment picture. For example, the population figure of 310,000,000 used by Investment Watchblog almost certainly includes people under 16 who cannot legally work. Thus the unemployment rate may be higher. On the other hand, many “not in the labor force” could be retired or otherwise voluntarily unemployed. Not enough data are available.

It is possible, however, to reject the official unemployment rate. And it is necessary to cultivate a healthy skepticism of statistics produced by politics, as so many are.

ABOUT WENDY MCELROY

Contributing editor Wendy McElroy (wendy@wendymcelroy.com) is an author, editor of ifeminists.com, and Research Fellow at The Independent Institute (independent.org).

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

Dear Ultra-Rich Man: An ultra-middle-class man’s letter to Nick Hanauer by Max Borders

You probably don’t know me, but unlike you, I am one of the 99 percent, a proud and unapologetic advocate of free and open markets. I’m writing you because your letter to other rich guys has gone viral. Each time I saw it, I thought, “Somebody should respond to this guy.” I got tired of waiting. So I hope you’ll read this. I leave your prose in italics so I can address your major points in turn.

You probably don’t know me, but like you I am one of those .01%ers, a proud and unapologetic capitalist.

I admit I’m already suspicious. If you were a proud and unapologetic capitalist, I doubt you’d write the things you did. Now, maybe you’re an unapologetic investor, or even an entrepreneur. But to my mind, a capitalist is one who understands and advocates for a system of free and open markets—as opposed to other economic systems—such as State capitalism, crony capitalism, mercantilism, or Keynesian interventionism. If by capitalist, you mean, “guy who likes to make money in business,” then great. I just want to make sure we’re not talking past each other.

I have been rewarded obscenely for my success, with a life that the other 99.99 percent of Americans can’t even imagine. Multiple homes, my own plane, etc., etc.

Did you create something of value for people, or make it possible for people to get something of value in return? Did they willingly hand over what economist Walter Williams calls “certificates of performance”? Or did you take subsidies or lobby the government for competitive advantages? If the former, I certainly don’t begrudge you your airplane. If the latter, then you are a crony capitalist (crapitalist), or rent-seeker. There is a big difference.

I was so excited by the potential of the web that I told both Jeffs that I wanted to invest in whatever they launched, big time. It just happened that the second Jeff—Bezos—called me back first to take up my investment offer. So I helped underwrite his tiny start-up bookseller. The other Jeff started a web department store called Cybershop, but at a time when trust in Internet sales was still low, it was too early for his high-end online idea; people just weren’t yet ready to buy expensive goods without personally checking them out (unlike a basic commodity like books, which don’t vary in quality—Bezos’ great insight). Cybershop didn’t make it, just another dot-com bust. Amazon did somewhat better. Now I own a very large yacht.

What if the other Jeff had called first? You might be living next door to me. The point is not that you were successful, but rather that—at that time—the capital you gave to either Jeff could not be used for any other purpose. As it happens, Jeff Bezos was a good steward of your capital. He has created value for hundreds of millions of people, so both you and he have since been rewarded for being good stewards of capital. Without either of you, there would have been no Amazon (and thus no Amazon Prime, which lets me watch good TV cheaper than cable).

What sets me apart, I think, is a tolerance for risk and an intuition about what will happen in the future. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now? I see pitchforks.

We might quibble about the essence of entrepreneurship. You get it partially right, at least. But if you see pitchforks, it’s only because egalitarian ideologues are spreading bad economic ideas and fomenting the worst instincts in people: cruder emotions such as envy. Yet the poorest quintile of Americans is wealthier and healthier than two-thirds of the entire world. We should not be brandishing pitchforks at you. We should keep on sending you our certificates of performance—if, that is, you keep satisfying our wants and needs, and solving our problems.

At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country—the 99.99 percent—is lagging far behind.

Guess what? I, too, am thriving beyond the dreams of any plutocrats in history! Later, in this very letter, you admit that on the things that matter, there isn’t really much of a gap between us at all. You write, “I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men.” Looks to me like we’re pretty equal where it counts. Because when it comes to consumption power, we little guys also have it made, yachts notwithstanding. (You’re more likely to find me on a pontoon boat. That’s okay.) You leave those surpluses to be used as capital—hopefully by other able entrepreneurs.

The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent.

Accepting this statement on its face: So what? These statistical abstractions tell us nothing about how well people live today compared with the past. The more important questions are: Compared to 1980, is any one of us more likely to have greater access to the goods and services we need to live a decent life? Can plebs like me get mobile devices we couldn’t in 1980? Are we living longer than in 1980? Can we buy food, shelter, pants, TVs, transportation—on a website? Is total compensation (including non-wage benefits) more than it was in 1980? (Yes, yes, yes, yes, and yes.)

Now, might any of this have to do with entrepreneurs and investors directing capital to productive uses?

According to Michael Shermer, writing in Scientific American of all places, the American dream is not dead.

The top-fifth income earners in the U.S. increased their share of the national income from 43 percent in 1979 to 48 percent in 2010, and the top 1 percent increased their share of the pie from 8 percent in 1979 to 13 percent in 2010. But note what has not happened: the rest have not gotten poorer. They’ve gotten richer: the income of the other quintiles increased by 49, 37, 36 and 45 percent, respectively.

Not only that, but all quintiles have access to Netflix, Trader Joe’s, and mobile devices.

Now, there are desperately poor people out there. But worrying about what the desperately poor lack is very different from worrying about what the ultra-rich have. Surely guys like you can find creative solutions to helping the least advantaged without making them dependent on State largess, or without placing any more burdens on business.

Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.

This could be true, but not for the reasons you think. Again, there is a big difference between those who lobby politicians to transfer resources into their coffers through subsidies, regulations, and other political means and those who actually serve customers in order to make their lives better. The former should be called “crapitalists,” and there are way too many of them in the world. But crapitalism is a consequence of too much government power, power that ends up on auction. Such was the case in Rome, Paris, and Saint Petersburg. As long as poor people aren’t systematically excluded from entrepreneurial opportunities, the pitchforks will pitch hay.

(Note: Minimum wage laws can exclude poor people from opportunities.)

In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.

Sure there are counterexamples: Singapore. Hong Kong. Switzerland. These days the pitchforks are coming out in societies where the poor don’t have access to real property, collateral, and low-cost legal institutions that help them become upwardly mobile—places like Egypt, Brazil, and Turkey. (See the work of Hernando de Soto). The pitchforks come out not when there is inequality of outcomes, but when political power is being sold to the highest bidder, or put differently, where political powers pick winners and losers and where business and government collude unfairly to become a “monstrous hybrid.” Pitchforks come out when the welfare well runs dry, as in Greece.

Many of us think we’re special because “this is America.” We think we’re immune to the same forces that started the Arab Spring—or the French and Russian revolutions, for that matter. 

I agree. We are certainly not immune to populist uprisings. But this is no justification for wealth redistribution or minimum wage hikes, which are likely—revolution or no—to make those with the pitchforks worse off than they would otherwise have been. “People don’t like that other people have gotten rich” is not an argument for confiscating wealth.

The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren’t only cheap labor to be exploited; they were consumers, too. Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they’d be able to afford his Model Ts. What a great idea. My suggestion to you is: Let’s do it all over again. We’ve got to try something. These idiotic trickle-down policies are destroying my customer base. And yours too.

Wait, didn’t you say you were “rewarded obscenely”? Looks to me like your customer base is doing just fine. Do you really want to use the “company town” as the model for the good society? Good luck with that. Now, if we’re being charitable in interpreting you, we might point to companies like Costco that pay more for labor. It works for them. If it works for you, then what’s stopping you? If any such model works so splendidly, people will replicate it.

Finally, don’t you think it’s a bit rich (no pun) to call “trickle-down” policies “idiotic” and then propose them in the same breath? What’s more “trickle-down,” after all, than the notion that raining free money from on high—whether via fiat wages or welfare checks—will “stimulate” a middle class to burgeon? If anything, it will stimulate them to do more of less. These tired Keynesian nostra only end up in perfectly good capital being misallocated. (Burning planks from a ship at sea might keep you warm for a night, but it won’t get your ship to port.)

It’s when I realized this that I decided I had to leave my insulated world of the super-rich and get involved in politics.

Why not help people with charity? Why not create better-faster-cheaper goods? Politics, at its root, is just some group compelling other people with the threat of violence to try to refashion the world as they see it in their minds. If that’s not inequality, I don’t know what is. But more importantly, you have already demonstrated that you can make the world a better place. It is better with Amazon than without. People are employed. I buy products and services from you that enrich my life. Thank you. Now, if you have more money than you can spend, why not build more businesses that solve more human problems? Why not engage in superphilanthropy instead of amateur economics?

I wanted to try to change the conversation with ideas—by advancing what my co-author, Eric Liu, and I call “middle-out” economics. It’s the long-overdue rebuttal to the trickle-down economics worldview that has become economic orthodoxy across party lines—and has so screwed the American middle class and our economy generally. Middle-out economics rejects the old misconception that an economy is a perfectly efficient, mechanistic system and embraces the much more accurate idea of an economy as a complex ecosystem made up of real people who are dependent on one another.

So far neither you nor Mr. Liu have demonstrated anything to suggest you understand the nature of the economy as an ecosystem. You seem to be selling the same old ideas that brought us mechanistic economics like “priming the pump” or “fixing” the economy with economic stimulus, fiscal transfers, and price controls—none of which takes into account effects on real flesh-and-blood people involved in that complex ecosystem, and instead reduces them to macroeconomic abstractions. (I’m bracing for more Keynesianism from you, Mr. Hanauer.)

Which is why the fundamental law of capitalism must be: If workers have more money, businesses have more customers. Which makes middle-class consumers, not rich businesspeople like us, the true job creators. Which means a thriving middle class is the source of American prosperity, not a consequence of it. The middle class creates us rich people, not the other way around.

Ah, more magical thinking from Keynes. First, it’s simply a myth that the American middle class is disappearing. And  Mr. Hanauer: You get things entirely wrong about the sources of prosperity. Most of the planet is poor, in fact, though it’s getting richer all the time.

The question we have to ask ourselves—inequality notwithstanding—is: Why did the rich countries get rich to start with? If we go by your logic, all we have to do to make sub-Saharan Africa rich is transfer massive amounts of wealth there until a “middle class” has enough money to go buy stuff. (Oh yeah, that didn’t work.) But the arrow of causation doesn’t run that way. Instead, wealth originates from people like the pillow makers in your family—perhaps starting small—operating within stable rules, creating goods and services that people value enough to trade their time and labor for it—that is, if they have nothing else to trade. Economies of scale and specialization kick in. Then, like a great coral reef, the economic ecosystem emerges through distributed processes of interdependency that flow from within simple rules (such as property, prices, and profit-or-loss).

Of course, time and labor are not enough to make society wealthier. If they were, then we really could dig ditches and fill them up again, as Keynes suggested, to become rich. Yes, entrepreneurs figure into a wider economic ecosystem that includes consumers. But Hong Kong did not become the richest rock on earth because of wealth transfers. It became rich because entrepreneurs and investors did not squander capital, but rather used it in wildly diverse ways to expand the base of capital goods so entrepreneurs could produce consumer goods and services—better, faster, and more cheaply. It started with little sweatshops and ended up with megacompanies. But this required savings, investment, ideas, innovation and entrepreneurship. Lather, rinse, repeat. You can try to shortcut this process with Keynesian manna. But rich guys have to get rich by creating wealth first.

So, without Henry Ford, no company town. Without a stable business environment, no Henry Ford. Yes, the open market is a virtuous ecosystem, but it is not improved by zero-sum (or negative sum) wealth transfers like you’re proposing. The ecosystem is seeded with ideas that make people more productive. More productivity creates surpluses that end up as investment in more capital goods or more consumption goods—all of which feeds better ideas that make people more productive and create further surpluses. Creative entrepreneurs, willing to take risks, get the ball rolling (not the other way around). They are the prime movers.

On June 19, 2013, Bloomberg published an article I wrote called “The Capitalist’s Case for a $15 Minimum Wage.” Forbes labeled it “Nick Hanauer’s near insane” proposal. 

Forbes was right. I’m sorry. But it is near insane. Price controls don’t work in the energy markets. Price controls don’t work in healthcare. Why would price controls work in labor markets? Your proposal amounts to nothing more than price controls. But prices are information signals wrapped in incentives. When you try to control prices, you’re distorting both the information and the incentives.

You go on to brag that your idea saw implementation in Seattle. I’m surprised a businessman of your caliber would do that. You see, we have to look at outcomes, not inputs. I know, you said you left business to go into “politics.” And politics is that bottomless well of aspirations in which people reward themselves for good intentions—that is, for getting things passed. But what are the effects of a policy?

Back in the business world, people have to live with the consequences of politics. And so far, the minimum wage in Seattle has already resulted in perverse effects. As businesses are forced to adapt—cutting back labor, hours, and substituting labor with technology—your policy hastens this process. You may think you’re making big companies pay their “fair share,” but you’re hurting small businesses: restaurateurs with slim margins, someone opening a little child care center, maybe a guy who runs a body shop. And more importantly, you’re depriving people of opportunities. When you raise the minimum wage by 25 percent, you are raising the costs of hiring a minority teenager by 25 percent. If the minimum wage makes it too costly to open another store, the business owner won’t open another store.

The thing about us business people is that we love our customers rich and our employees poor.

This doesn’t sound like a sentence written by a businessperson at all. Labor, like any other market phenomenon, has a market value. That may sound crass. But it’s true. If it weren’t true, we could set the minimum wage to $150 per hour. Now, it may be that some companies want to pay their work forces more than comparable wages in an area—perhaps in exchange for loyalty, or so that they’ll spend more at the company store. Maybe they attract better, more reliable workers. For some employers, it’s worth it: They value the labor that much based on their particular circumstances. In North Dakota, Walmart employees are being offered $17 per hour. Why? Labor supply and demand. For other companies, it might be a form of charity. But the truth is, we don’t know from one company to the next. One thing we do know, however, is that blanket policies don’t do a good job of determining which companies have which circumstances.

Every time the capitalists said exactly the same thing in the same way: We’re all going to go bankrupt. I’ll have to close. I’ll have to lay everyone off. It hasn’t happened. In fact, the data show that when workers are better treated, business gets better. The naysayers are just wrong.

The most comprehensive study of minimum wages is by Neumark and Wascher (and you can buy it on Amazon). These scholars have determined that the net effects of minimum wage laws over the years have been primarily deleterious. (And predictably so.) Treating an employee “better” may or may not have positive effects for a given business. But the thing about entrepreneurs is they are highly attuned to such opportunities. And if such opportunities are a win-win, they will pursue them. But the net effect of assuming you or anyone else knows what’s best for all companies has been shown to be negative in theory and in practice.

Most of you probably think that the $15 minimum wage in Seattle is an insane departure from rational policy that puts our economy at great risk. But in Seattle, our current minimum wage of $9.32 is already nearly 30 percent higher than the federal minimum wage. And has it ruined our economy yet? 

$9.32 versus $15.00? That’s a big difference. Normally politicians set minimum wages right around where they might otherwise be—say in a large, gentrified area like Seattle—and so the ill effects go away pretty quickly as companies adapt, if they need to at all. Politicians do this to create the illusion that they are making things better with policy, when actually they are getting out in front of a trend in order to take credit for it. But if entry-level wages are hovering around $9 in Seattle or San Francisco, they aren’t in Stockton (where the unemployment rate is 14 percent). Indeed, no one should believe for a second that a jump of more than 50 percent is going to be easy for companies to adapt to, and won’t require wrenching ill effects. Again, the labor pool and conditions are heterogeneous, so blanket policies are ill-advised. Remember, you said yourself the economy is like an ecosystem, not a machine. Wage rates can’t be set by a single rheostat.

The two cities in the nation with the highest rate of job growth by small businesses are San Francisco and Seattle. 

Raise it to $15 tomorrow and you’ll slam on the brakes. Or you’ll see lots of small businesses with fewer employees or just the owners.

Guess which cities have the highest minimum wage? San Francisco and Seattle. The fastest-growing big city in America? Seattle. 

My sources show my home city Austin is the fastest growing, despite a minimum wage of $7.25. Other major Texas cities—sucking in Californians by the day—have similar minimum wages. But let’s not facts get in the way of your hypothesis.

Fifteen dollars isn’t a risky untried policy for us. It’s doubling down on the strategy that’s already allowing our city to kick your city’s ass.

Did I mention I live in Austin, one of four Texas cities among the 10 fastest growing? How is this kicking our ass? While San Francisco’s unemployment rate may be low and its small start-ups doing okay for now, the rest of the state is a mess. You’ll have to look at other factors besides wage rates to see why.

It makes perfect sense if you think about it: If a worker earns $7.25 an hour, which is now the national minimum wage, what proportion of that person’s income do you think ends up in the cash registers of local small businesses? Hardly any.

It would make perfect sense if there weren’t so many counterexample cities that completely belie your claim—many here in Texas. But what’s  more, the United States already has an income support system called the Earned Income Tax Credit (EITC). That means rich people like you already subsidize wages for workers under a certain income threshold. So it’s not clear to me why shifting the burden directly onto individual businesses is going to create some sort of magic. If your argument is that there should be a bigger EITC, that’s a separate discussion.

Please, please stop insisting that if we pay low-wage workers more, unemployment will skyrocket and it will destroy the economy. 

A $15 per hour wage is not likely to destroy the economy. It will certainly destroy prospects for groups like African-American teens, whose unemployment rate currently hovers around 40 percent. Minimum wages don’t destroy the economy, they remove the bottom rungs of the income ladder for people who need to gain skills and experience to be upwardly mobile. And they often raise prices for consumers, including those making low wages.

The most insidious thing about trickle-down economics isn’t believing that if the rich get richer, it’s good for the economy. It’s believing that if the poor get richer, it’s bad for the economy.

It depends upon which straw man you’re beating up here, Mr. Hanauer, but neither of your “trickle down” claims is true. The rich getting richer is an effect, not a cause. The poor getting richer is an effect, not a cause. If all groups are becoming better off—as they have been (I refer you to the Shermer citation above) then the causes of those improvements across quintiles are good for the economy.

Indeed, what is good for the economy—and human well-being—is when people get richer due to becoming more productive, solving more problems, and satisfying more wants and needs. The value of a worker’s effort is determined according to the subjective valuations of individual entrepreneurs in unique circumstances. You can’t possibly know these circumstances, Mr. Hanauer, because you are not treating the economy like a complex ecosystem. How do I know? Because you say…

In order for us to have an economy that works for everyone, we should compel all retailers to pay living wages—not just ask politely.

But again, a “living wage” is a numerical abstraction—detached from any real economic ecosystem. If we were to view the economy as an ecosystem, we would have to reckon with its complexity and heterogeneity. Price controls treat the economy as a static thing that can be jump-started by edicts from a central committee.

[Instead of buying stuff…] I sock my extra money away in savings, where it doesn’t do the country much good. 

What makes you think your savings don’t do the country much good? If it’s gaining interest at all, then it most certainly is doing the country good. You seem to be laboring under the mistaken notion that consumption drives production. But consider for a moment that Lord Keynes was wrong. When you save, somebody is going to use that money for something (unless the Fed has other ideas). Now, if you’re just letting it sit in a zero-interest account, or you’re bathing in dollars, I would encourage you to diversify and/or use your savvy to create more wealth for both yourself and the country. If you’re a true capitalist, you know more interest/income is a signal that you’re doing something right—that you’re making the world a better place, even if you’re just leaving your money in the bank.

Bottom line: If you don’t agree, you can always give it away. One wonders why you haven’t.

So forget all that rhetoric about how America is great because of people like you and me and Steve Jobs. You know the truth even if you won’t admit it: If any of us had been born in Somalia or the Congo, all we’d be is some guy standing barefoot next to a dirt road selling fruit. It’s not that Somalia and Congo don’t have good entrepreneurs. It’s just that the best ones are selling their wares off crates by the side of the road because that’s all their customers can afford.

If this were true, Hong Kong would be a backwater, poor as it was 100 years ago. As Nobel Laureate Douglass North said in his prize speech:

The organizations that come into existence will reflect the opportunities provided by the institutional matrix. That is, if the institutional framework rewards piracy then piratical organizations will come into existence; and if the institutional framework rewards productive activities then organizations—firms—will come into existence to engage in productive activities.

And entrepreneurs start firms. In the Congo, piratical organization is rewarded by the institutional matrix. It’s been a corrupt dictatorship for years, so people who take bribes and join the army get the rewards. Make no mistake: Changes to Congo’s institutional matrix—along with the entrepreneurial culture—will give rise to dramatic changes in living standards, as they did in Hong Kong. There are 75 million potential customers in the Congo.

So why not talk about a different kind of New Deal for the American people, one that could appeal to the right as well as left—to libertarians as well as liberals? 

Edge of my seat.

If people are getting $15 an hour or more, they don’t need food stamps. They don’t need rent assistance. They don’t need you and me to pay for their medical care. 

Raising the minimum wage is effectively no different than raising the corporate tax for welfare benefits for assistance, except that one has greater potential to harm businesses. In both cases, people are getting something for nothing.

If the consumer middle class is back, buying and shopping, then it stands to reason you won’t need as large a welfare state. 

How’s that? If fewer poor people are being hired—a la Neumark and Wascher—more poor people will require assistance.

And at the same time, revenues from payroll and sales taxes would rise, reducing the deficit.

If all these positive effects were to come about, how does this address the so-called “problem” of inequality? If you’re correct that all this crazy consumption is going sustainably to push up company revenues (which I doubt), aren’t guys like you still going to get richer under your theory?

There are three main problems with any proposal to raise the minimum wage in lieu of welfare:

First, there are better, more pragmatic proposals out there for a minimum income, including the negative income tax (i.e., expanding the EITC and getting rid of welfare). Charles Murray’s In Our Hands is a good start, though his numbers might need updating. That proposal reduces the direct burden on companies compared with your proposal, because it redistributes after profits rather than before. Minimum wage laws are indifferent to whether a firm is profitable, which makes them dangerous by degree.

Second, any policy that simply transfers wealth can have incentive effects that discourage upward mobility. That being said, I will grant that your proposal would help people avoid “welfare traps” if there were no negative effects on employment. But if your government-set wage rates are pricing people out of the labor market, there will be just as many unemployed workers, if not more.

Third, any such grand compromise ideas about minimum income—as much as we might like to think about them—are very likely not to be implemented. How do you plan to combat the welfare-industrial complex? There are armies of vested interests in the welfare bureaucracy. They will be extremely difficult to send packing.

Capitalism, when well-managed, is the greatest social technology ever invented to create prosperity in human societies. But capitalism left unchecked tends toward concentration and collapse. 

I think you might be confused about what capitalism is. If by capitalism, you mean crapitalism, then you’re right. It’s not sustainable. And only checking the State’s power to assist cronies will we rein in the excesses of crapitalism. If by capitalism, you mean free and open markets, then you are simply mistaken. In competitive environments, it’s very difficult for firms to hold on to market dominance for very long. Firms have to consistently deliver on quality and price. Almost all monopolies and cartels are created and shored up by corporate-State collusion. And corporate-State collusion almost always starts with the State trying to “manage” capitalists. Regulation is inherently anticompetitive.

Now there will be resource concentrations in a free and open market, as with any natural system, but they too are difficult to maintain over time. In other words, there is incredible churn at the top—because only the best stewards of capital can stay there.

My family, the Hanauers, started in Germany selling feathers and pillows. They got chased out of Germany by Hitler and ended up in Seattle owning another pillow company. Three generations later, I benefited from that. Then I got as lucky as a person could possibly get in the Internet age by having a buddy in Seattle named Bezos. 

You may feel guilty about this. After all, your forebears were real value creators. Maybe you inherited a fortune and got lucky knowing Jeff Bezos. Maybe you really aren’t that good at predicting the future, identifying trends, etc.—just lucky. Maybe Bezos just called you first and you simply rode the wave. Still, we shouldn’t begrudge you your fortune, any more than we should pity a guy who loses at the tables.

Things get tight for me and my family. We’re trying to figure out how to fix the fender on my car (my fault) and renovate the old house we just bought. But at least we’ve got a car to fix. We’ve got a house to fix up. We eat nutritious food. My son has a Kindle Fire. And my wife and kid are about the best family a guy could have. We don’t have much, but we have enough to make Louis XVI positively green.

Yeah, you might be lucky, Mr. Hanauer. But so am I.

Max Borders is author of Superwealth: Why we should stop worrying about the gap between rich and poor, which you can buy for your Kindle at Amazon.

ABOUT MAX BORDERS

Max Borders is the editor of The Freeman and director of content for FEE. He is also co-founder of the event experience Voice & Exit and author of Superwealth: Why we should stop worrying about the gap between rich and poor.

The Pursuit of Profit Is Pro-Social by Matthew McCaffrey

A value-creating business is “social” whether it pursues an explicit social agenda or not.

You can’t throw a rock these days without hitting someone who’s talking about entrepreneurship and why we need to encourage more of it. In the public and private sectors — especially in higher education — innovation, enterprise, and entrepreneurship are buzzwords like never before.

A big beneficiary of this trend is the field of social enterprise. Unlike ordinary businesses, the conventional explanation goes, social enterprises use their commercial activities to promote a broader aim of human well-being rather than simple profit maximization. An example is Jamie Oliver using the restaurant business to provide culinary training to disadvantaged youth or sell food that encourages healthier living, even if doing so hurts the bottom line. Because of these kinds of expansive goals, social enterprises tend to be looked on favorably by business students, governments, and the media.

But while social enterprises certainly do create value, emphasizing “social” goals over profits can be misleading because it implies that traditional profit-seeking entrepreneurship fails to produce wide-ranging benefits for large numbers of people. Thinking of social enterprise as distinct from conventional business helps obscure the vital truth that profit seeking is not only compatible with increases in human welfare, it is probably the most powerful force for producing them ever devised.

In fact, that’s the beauty of free-market enterprise: it’s social whether it pursues an explicit social agenda or not. Critics of government intervention often point out that good intentions don’t equate to good policies. Likewise, the absence of good intentions doesn’t equate to bad policy, and lacking a specific social goal doesn’t make entrepreneurs antisocial. Think of Adam Smith’s observation about the butcher, brewer, and baker, which reveals that commerce is social because it’s mutually beneficial, not because entrepreneurs necessarily have a larger agenda.

When a company like Uber charges a price for its services, it’s being social in the sense that it’s creating value for consumers, not just for itself. And the market is simply an elaborate network of voluntary exchanges in which buyers and sellers constantly make each other better off — which is why they do business to start with.

Free enterprise is therefore social enterprise, but the reverse is true as well: enterprise is social if and to the extent that it’s free. We are truly social when we choose our relationships and refrain from choosing our neighbors’. In a free market, the term “social enterprise” is redundant because it’s in the marketplace that human beings express some of their most fundamental social instincts. Buying and selling teach us about peaceful interaction for mutual gain — and reveal to us just how profoundly our well-being depends on our commitment to benefiting others.

However, if we choose coercion over peaceful cooperation, we abandon hope of a working social order. Any social enterprise worthy of the name is therefore hostile to economic intervention, because every intervention is a step away from social cohesion and toward conflict.

Unsurprisingly, the corporate state is the primary cause of antisocial tendencies in real-world enterprises. Take, for example, intellectual-property law. What could be more antisocial than prohibiting people from sharing ideas and using them to improve the welfare of others? Yet many who promote enterprise take it for granted that “protecting” ideas is an essential part of entrepreneurship.

This attitude hints at a broader institutional problem: the sort of enterprise supported by public rhetoric is rarely the kind of healthy economic activity that would be produced in a free economy. Instead, public support for enterprise tends to mean support for a few privileged ventures at the expense of others. Sadly, it’s common for governments the world over to emphasize the need for more entrepreneurship while simultaneously promoting policies that distort, penalize, or even outlaw it. That’s why it’s more important than ever to be wary of the different meanings attached to words like “social” and “enterprise” and how these useful terms come to be associated with harmful economic ideas.

If economics tells us anything, it’s that we can’t effectively promote enterprise without first abandoning the networks of privilege and regulation that undermine entrepreneurship and divert human talent into destructive practices. A vital step toward that goal is seriously considering the rhetoric we use to describe the market. Language radically alters perceptions of commerce and can make the difference between thinking of enterprise as zero-sum profit seeking or as the key to the countless benefits of peaceful exchange.

ABOUT MATTHEW MCCAFFREY

Matthew McCaffrey is assistant professor of enterprise at the University of Manchester and editor of Libertarian Papers.

 

How About Those Dream Machines?

The North American International Auto Show, also known as The Detroit Auto Show is quite an impressive display of automotive dream machines.  Upon entering this year’s motorcar display for the recent press week, it was immediately obvious that America’s Ford motor company is not only gearing up to compete with, but even to surpass some automotive competitors.  As one ventures into the sizeable Ford exhibit, a collection of mustangs both new and vintage will both please the eye and bring about thoughts of summer drives in one of those iconic beauties. Almost all car enthusiasts will truly want to hit the road in the Shelby Mustang GT 350R.

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For a larger view click on the image. Photo by Ron Edwards.

You will also not want to leave the presence of the 2017 Ford GT Coupe.  I stood there gawking at that future classic for over ten minutes before acquiring information about it from the experts waiting to answer our litany of questions.  For starters, the 2017 Ford GT is a superb combination of old and new.  As one spokesman stated, “Its wide gauge cluster with center mounted tachometer, red starter button, metal shift nob, large toggle switches and carbon fiber seats reflect upon its earlier heritage.  Also, the Ford GT is adorned with a console made of magnesium and a unique pattern of interior lighting. Which is coupled with almost every element of high style and superior quality gadgets that combine to make this American standout very competitive on the global stage.  With a lightening fast 0 to 60 mph in 3.5 seconds, it is doubtful that the Ford GT Coupe will ever get left behind at any road race venue.”

Upon venturing over to the Buick display, I was immediately focused upon the very beautiful Avenir flagship concept vehicle. It is a very long and almost sensuous motorcar with what one expert dubbed to be “a look that combines the styling of everything, ranging from the 1954 Wildcat to the third generation Buick Riviera.”  Although I am usually not very partial to very large coupes or sedans, I must say that the Buick Avenir is a visually stunning motorcar.  Last year Buick sold 1.17 million units worldwide with over 920,000 in China alone.  Some have asked if the Avenir will be produced exclusively for the Chinese market? Buick officials said no. But such large production vehicles are hot sellers in China, not the United States of America.  By the way, the Buick Avenir will not appear in American showrooms anytime soon.

The 2015 debut of the Buick Casada convertible was met with tepid enthusiasm. The pleasant looking car is powered by a 1.6 liter 200 horse power engine that will definitely get you where you want to go with ease.

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Ron Edwards at the Detroit Auto Show. Photo by Ron Edwards.

Because of lower petrol prices and a drifting away from thus status quo in auto body style offerings, fun cars like the Corvette Z06 which propel from point A to point B via a 650 horse power engine that goes from 0 to 60 MPH in 3.3 seconds. It is truly a thing of beauty.  Product specialist Ann Marie informed me that “the Corvette is more than competitive with comparable motor cars from around the world.”  It now comes with a removable roof and if you like you can start ordering a convertible version that will became available in early spring.

Not only have the lowest fuel prices since President George W. Bush was president sparked a greater interest in high performance vehicles, but the already popular big trucks could benefit from an even greater groundswell of consumer interest.  Speaking of big trucks, the massive aluminum body Ford F-150 captured the North American truck of the year, beating out the Chevrolet Colorado and the Lincoln MKC cross over.  However, my favorite truck is the Hyundai Santa Cruz concept.  Auto expert Andrew Story described it best by stating “that the Hyundai Santa Cruz is an attractive, forward thinking compact crossover pickup truck.”

Another Detroit Auto Show eye candy vehicle is the 2015 Infinity Q 60 concept coupe that closely resembles an upcoming production vehicle. One auto week writer said it best, by describing the Q 60 concept is a strong statement from Infinity designers and that exhilaration is real.”  The Q 60 will begin rolling off the assembly line next year. It will replace the rather tired Infinity G Series Coupe.  To sum it up. The 2015 Detroit Auto Show is a fun experience and a sign of many good things to come from American and international auto producers.

On a related topic, a small number of Automotive company representatives who wished to remain unidentified, expressed concern over the government’s desire to increase gasoline taxes.  It is a shame that during the slowest economic economic recovery in United States History, that those elected to represent us are chomping at the bit to eliminate a small break from high fuel prices with higher gas taxes. It seems as if “We the People” will have to enforce the concept of “governing according to Constitutional guidelines and our benefit.”

United Teachers of Dade Political Misadventures and Contractual Follies

Fed and EW

Fed Ingram (left) and Enid Weisman.

United Teachers of Dade: Do as We Say, Not as We Do!

The picture, Fed Ingram’s “cuddle and huddle” with Enid Weisman, M-DCPS Chief Human Capital Officer and Mayor of Aventura, sums it all up as to where the loyalties of Fed Ingram and United Teachers of Dade (UTD) seem to lie: with M-DCPS, not the members.

As I was always told by UTD leadership concerning my exposure of misdeeds by M-DCPS, be mindful of “the integrity of the school district.” UTD seems more mindful of their integrity and not that of the dues paying membership given questionable expenditures of dues money and the recent disgraceful contract ratification.

For the potential detrimental impact of the new contract in terms of salaries, check out the reasonable analysis that a member produced along with a study that concluded that teacher pay in South Florida is among the worst in the U.S.

Teachers were given a 1% stipend that was less than 1% and a supposedly 2% raise that was less than 2%, it seems to make sense.

On top of this, UTD spent $250,000 on losing candidates during the 2014 elections and has launched a lawsuit against the Mayor of Miami-Dade County that seems to lack merit while politically promoting Fed Ingram and Karla Hernandez-Mats at the expense of the membership.

Additionally, UTD is estimated to have spent an estimated of over $300,000 and counting in the ongoing lawsuit brought forth by Geno Perez concerning electoral fraud in the 2010 UTD elections.

Besides Fed and Karla, UTD attorney Mark Richards seems to be the big winner.

As quoted in a Miami Herald article, “This is a scandal that’s falling on the backs of fourth graders,” said Mark Richard, an attorney representing UTD.

How quickly he, and UTD leadership, forgot about, and was silent on, Adobegate at Miami Norland Senior High School, a cheating scandal that netted the faculty almost $250,000- a scandal on the backs of high school students during the 2011-12 school year.

They did not speak out on their member’s behalf whatsoever.

As other county entities request and allocate money for the Value Appeal Board, it is not the mayor’s fault that the VAB is underfunded and understaffed.

Mike Hernández, Mayor Gimenez’s communications director, said the County Commission doesn’t deserve the blame. He said the clerk of courts and property appraiser request funding for the appeal board, and that the county hasn’t denied any funding requests in recent years.

“It’s unfortunate that a life-long educator like the president of the United Teachers of Dade doesn’t understand civics,” Hernández said.

 It’s not like Mr. Ingram does not understand, he does I am sure, but the larger aim was to assist his campaign to lead the Florida Education Association and to put Ms. Hernandez-Mats in charge of UTD as Mr. Beightol explains.

 UTD blames the county mayor and the lack of property tax dollars for the contract that resulted. Their reasoning seems disingenuous as the Miami-Dade County School Board sets the millage rates and has reduced them over the past years without UTD objection.

 Beckons the questions, why was UTD silent then and why not sue the School Board instead?

 Moreover, why isn’t the School Board of Miami-Dade County suing those responsible? Why is the UTD membership footing the bill?

 It appears the Republican-led School Board did not want to sue the Republican-led County Commission, so the school district administration put UTD up to doing their dirty work and UTD happily obliged.

 As UTD does not directly receive property tax dollars, the suit may be dismissed as the union lacks standing.

Interestingly enough, Ms. Hernandez-Mats is listed as a plaintiff as a teacher with children in the school system. She is coded as a teacher, but in reality she is a teacher on special assignment (TSA) and not in the classroom whatsoever as she works out of the UTD building- hence giving credence to politically propping her up as Mr. Beightol asserts.

Should M-DCPS and/or UTD be successful, do not count on the teachers to receive these funds as some other excuse will necessitate the funding being needed elsewhere- lack of funding from the Legislature, health care costs, etc.

Therefore, a few (school district administrators, UTD leadership, and Mark Richards) will benefit on the backs of the many (UTD membership) with the many footing the bill.

Former UTD Executive Board member and retired teacher Ira Paul, who had to leave the union to sue UTD along with M-DCPS, says, “I am not anti-union, I am anti-UTD because they are not doing what they are supposed to be doing.”

It is a sentiment shared by many as evidenced by a decline in membership and what I am hearing from members about lack of representation and questionable contracts.

Police and firefighter unions have high membership whereas UTD has a membership of less than 50% of the bargaining unit, especially less than 50% of M-DCPS teachers are union members.

Then again, police and firefighter unions negotiate better contracts and gain better benefits for their members and represent them extraordinarily well as evidenced by recent controversies.

The Candlemaker’s Petition by Frederic Bastiat

We candelmakers are suffer­ing from the unfair competi­tion of a foreign rival. This for­eign manufacturer of light has such an advantage over us that he floods our domestic markets with his product. And he offers it at a fantastically low price. The moment this foreigner appears in our country, all our customers de­sert us and turn to him. As a re­sult, an entire domestic industry is rendered completely stagnant. And even more, since the lighting industry has countless ramifica­tions with other native industries, they, too, are injured. This foreign manufacturer who competes against us without mercy is none other than the sun itself!

Here is our petition: Please pass a law ordering the closing of all windows, skylights, shutters, cur­tains, and blinds — that is, all openings, holes, and cracks through which the light of the sun is able to enter houses. This free sunlight is hurting the business of us deserving manufacturers of candles. Since we have always served our country well, gratitude demands that our country ought not to abandon us now to this un­equal competition.

We hope that you gentlemen will not regard our petition as mere satire, or refuse it without at least hearing our reasons in support of it.

First, if you make it as difficult as possible for the people to have access to natural light, and thus create an increased demand for artificial light, will not all domestic manufacturers be stimulated thereby?

For example, if more tallow is consumed, naturally there must be more cattle and sheep. As a result, there will also be more meat, wool, and hides. There will even be more manure, which is the basis of agri­culture.

Next, if more oil is consumed for lighting, we shall have extensive olive groves and rape fields.

Also, our wastelands will be covered with pines and other res­inous trees and plants. As a re­sult of this, there will be numerous swarms of bees to increase the production of honey. In fact, all branches of agriculture will show an increased development.

The same applies to the shipping industry. The increased demand for whale oil will then require thousands of ships for whale fish­ing. In a short time, this will re­sult in a navy capable of upholding the honor of our country and grat­ifying the patriotic sentiments of the candlemakers and other per­sons in related industries.

The manufacturers of lighting fixtures — candlesticks, lamps, candelabra, chandeliers, crystals, bronzes, and so on — will be espe­cially stimulated. The resulting warehouses and display rooms will make our present-day shops look poor indeed.

The resin collectors on the heights along the seacoast, as well as the coal miners in the depths of the earth, will rejoice at their higher wages and increased pros­perity. In fact, gentlemen, the con­dition of every citizen of our country — from the wealthiest owner of coal mines to the poorest seller of matches — will be improved by the success of our pe­tition.

Translated and slightly condensed by Dean Russell from Selected Works of Frederic Bastiat, Volume 1. Paris: Guill­aumin, 1863. pp. 58-59.

Kickstarting It Old School: Crowdfunding may seem new, but it has a long history by Iain Murray

If you’ve been to crowdfunding sites like Kickstarter and Indiegogo, you might think that they are new phenomena, made possible only by the wonder of the Internet. That’s true in part, but crowdfunding actually has a long and proud tradition dating back well before the web was a twinkle in Tim Berners-Lee’s eye.

As my colleague John Berlau details in his new paper, “Declaration of Crowdfunding Independence: Finance of the People, by the People, and for the People,” entrepreneurs and inventors had a long track record in the early part of the last century in seeking funds directly from large groups of interested supporters. Henry Ford, for example, sought funding for his first car from friends, colleagues, and even his lawyer, whose investment of $5,000 in 1903 turned into $12.5 million by 1919.

Indeed, mass solicitations for funding were common among colonial-era entrepreneurs seeking to develop ideas into new ventures. Ben Franklin created a fire department and insurance company using the model in 1752. The insurance giant MetLife was founded by solicitation of policyholders in the 1860s. Railroads — the high-tech start-ups of the early 19th century — routinely raised money from citizens who could expect to use the service.

As the example of Henry Ford’s lawyer shows us, there was a crucial difference between earlier crowdfunding campaigns and today’s web-based equivalents: those who put up money got an investment share in the company rather than simple perks such as T-shirts or downloadable movies.

What happened? To put it simply, the Progressive Era happened. Beginning in the late 1910s, states began to pass laws restricting investment solicitations, based on the idea that people were being lured into turning over their savings for promises of pie in the sky. Progressive reformers wanted to protect vulnerable investors from losing their shirts; some even declared such investment sinful.

As is so often the case, these “Baptists” were accompanied by bootleggers in the form of local banks, who feared they were losing savings accounts to these investments. As Berlau points out, for example,

Kansas Bank Commissioner J.N. Dolley, who pushed through that state legislature the nation’s first “blue sky” law, was a former bank executive who worried openly about deposits being withdrawn for stock offerings. He complained, “The banks hear of such cases because usually the victim draws money out of a bank to buy his wildcat mining shares or his stock in a lunar oil company, or whatever it may be.”

Eventually, the federal government got into the act. It created the Securities and Exchange Commission (SEC) in 1934, which imposed more and more restrictions on how companies could raise money.

SEC rules prevented entrepreneurs from soliciting investment from the public and eventually created the class of the approved “accredited investor,” which turned general investment into a rich man’s pastime. And the reason there are so few peer-to-peer lending operations like Prosper or Lending Club is because the SEC requires that every loan made on peer-to-peer websites submit a separate prospectus or securities filing.

These restrictions on investment, dating from early in the 20th century, are a perfect example of what Competitive Enterprise Institute founder Fred Smith calls the Progressive Era’s derailment of classical liberal evolution.

The good news is the tide can be turned back. And the development of new technologies like peer-to-peer lending and crowdfunding platforms represents the first steps in restoring American finance’s innovative spirit.

Debt and equity crowdfunding afford much greater potential for boosting companies, jobs, and the economy than the current versions of fundraising. Debt-based crowdfunding offers a specific rate of return, while the equity version offers an ownership stake similar to a share of stock and a claim on future profits.

These forms of funding allow a firm to expand quickly. According to a study by Crowdfund Capital Advisers, “While pledge or donation crowdfunding lead[s] to an increase of 24 percent in revenues, equity-based crowdfunding resulted in a quarterly increase of 351 percent[,] not including funds raised via the equity round.” In addition, “87 percent of firms either had [hired] or intended to hire new employees as a direct result of having raised equity or debt financing via crowdfunding.”

Thankfully, some in Washington have noticed these possibilities. The Jumpstart our Business Startups (JOBS) Act, which became law in 2012, has allowed limited investment crowdfunding. The SEC, however, has dragged its feet in issuing regulations pertaining to the liberalization and has taken a more restrictive view than seems to have been Congress’s intent.

The new Congress could go further. It could create a new, high upper limit for crowdfunding offerings and other exemptions from securities laws at $10 million, up from $1 million. The Startup Capital Modernization Act of 2014 (HR 4565), which contains just such a measure, has already been passed out of committee in the House. Congress could also significantly decrease, or abolish, the qualifications necessary to be an “accredited investor.”

The United Kingdom abolished its version of the accredited investor rule in the mid-1980s. That allowed ordinary people to share in the success of the Thatcher-era privatizations, which involved crowdfunding solicitations such as the “Tell Sid” campaign.

If equity crowdfunding worked for Henry Ford, it can work for people today.

ABOUT IAIN MURRAY

Iain Murray is vice president at the Competitive Enterprise Institute.

5 Priceless Tips I Gave My Uber Driver

Big ideas most people don’t understand about the economy. by Richard Lorenc:

I was in an Uber car the other day, returning from a conference. I love Uber and used it for years in Chicago before returning to my hometown, Atlanta. There are a lot of amusing exposés out there contending that the majority of Uber drivers hate their jobs and feel enslaved by corporate overlords.

Virtually every driver I encounter tells me they love working with Uber; an off-duty Uber driver once overheard me saying something about the company over lunch, and he volunteered enthusiastically that he loves his job. There was no driver rating at stake in that exchange.

I’ve had interesting discussions in Uber cars. One driver told me he had walked a young woman into the ER minutes before picking me up (he thought she had overdosed). Another driver explained how he had escaped New Orleans just hours before Katrina hit, only to return to complete destruction. And there have been quite a few who’ve told me they drive to earn money to build other businesses. Uber drivers are by definition entrepreneurs. And many see driving as a stepping-stone to something bigger.

Occasionally, Uber drivers will volunteer economic views as they relate to their business. My driver the other day — his name was Chris —  even identified himself as a “free-market guy” while talking about Uber.

Naturally, this got my attention, but I decided not to spill the beans until he asked what my colleague and I do. I explained that we work for an organization called the Foundation for Economic Education, which teaches young people about the free market.

Chris is a big guy, and on hearing my words, he shook the car with laughter as we drove on the interstate.

Then he asked for tips.

“Stock tips?” I asked.

“No, big ideas that most people don’t get about the economy.”

I gave him those tips. I thought I would share them with you, too.

Big idea 1: Trade is win-win.

My colleagues and I teach our students that trade is win-win by saying, “Trade is made of win.”

I asked Chris to imagine being a customer at Starbucks. He wants a venti café au lait so much that he’s willing to part with $5 to get it. For the customer, the coffee is worth more than the money; why else would he surrender his cash at the register? The opposite is true for the seller: $5 is worth more than the coffee. The buyer and seller exchange property rights, and each says, “thank you.” (This is sometimes called the “double-thank-you phenomenon.”) The transaction makes them both better off — they have created value for each other through trade.

Big idea 2: Entrepreneurs create value.

Entrepreneurs create massively greater value for society generally than they create in profits for themselves.

An estimated 98 percent of the innovators profits generated by nonfarm businesses in the United States between 1948 and 2001 were never captured directly by the individual innovators or firms. Innovators profits — or “Schumpeterian profits” —vary by industry. Apple did not fully capture the Schumpeterian profits generated by the debut of the iPhone, for example. Instead, the iPhone created entirely new business categories and lowered the consumer price of supercomputers that fit into your pocket. But Apple captured enough of its innovators profits that it has an incentive to continue to innovate — and potential competitors had an incentive to enter the market. Competition lowers prices, benefitting consumers.

Big idea 3: Everything has a cost.

This idea is the lynchpin of what we call economic thinking: that is, the application of economic concepts to help explain why people and groups make the choices they do.

Normally, we introduce this concept by calling it an opportunity cost. If all of us understood clearly how the choices we make today necessarily limit the choices available to us tomorrow, we would solve 95 percent of the problems caused by economic illiteracy.

At FEE’s seminars, many students are deciding whether to go to college. Not only is there a direct cost to college, but there is also the opportunity cost of spending time cloistered in academia when you could be launching the next Facebook. In many cases, college is worth the cost, but not in every instance.

We take pains at FEE to practice what we preach. We’ve gotten away from advertising that our seminars are free to attend and offer free accommodations and meals. Instead, we say they are offered at “no charge.”

After all, TANSTAAFS — there ain’t no such thing as a free seminar. You have to sit and take it for three whole days. And that carries a cost.

Big idea 4: Emergent order rules.

The world we live in is the product of countless interactions among individuals, not the result of some master plan. Even if there is a plan, the traditions, mores, and informal institutions that guide behavior dominate. F.A. Hayek named this phenomenon spontaneous order, but I prefer contemporary economist Russ Roberts’s term emergent order. The concept goes back to Scotland, to Adam Ferguson, and later to Adam Smith’s invisible hand metaphor.

The invisible hand, by the way, is probably one of the most misunderstood concepts in economics. It’s as if those who mock it as some sort of supernatural occurrence have never heard of a metaphor, which depicts how individuals working in their own interest also create value for others.

The idea boils down to this: The world we live in is the product of human action, not human design.

Big idea 5: Markets are moral.

Finally, we have what is perhaps the most important tip of all when talking to young people: commerce makes us better people.

It civilizes us. It permits us opportunities to practice politeness with strangers. FEE’s founder, Leonard Read, captured this concept in his famous essay “I, Pencil,” and Milton Friedman popularized it in the Free to Choose TV series.

The market is a process of ever-growing interconnectedness. As the market grows, our individual opportunities for specialization grow with it, and we each become wealthier through our access to goods and services we could never fathom creating ourselves. By creating value for others, we tend to become less concerned with the nationalities or races or religions or sexual orientations of those who bring to market the goods we depend on. A deal is a deal, and the more we become acclimated to making deals with those who are different from us, the closer we grow as human beings.

This last concept is vital, because students today are looking for ways to explain the world and their places in it through dimensions beyond material efficiency. Certainly, the coordination of market activities through the information conveyed by prices is superior to the commissar’s desk-bound decision-making, but advocates of economic freedom must first listen to the concerns of those undiscovered libertarians who are fundamentally idealistic and decent people, and whose only hang-up with the free market is that it sometimes appears irrational.

Why, for instance, would GM, a hallmark of American ingenuity and industry, be more valuable if it were closed? Why can’t the government just give spoons to all of the unemployed so they can stay busy constructing roads? Why shouldn’t fast food workers make $15 per hour? Why can’t everyone have inexpensive health care?

Appealing to personal values is the gateway to economic thinking that helps to explain our complex world.

Uber redux

The Uber phenomenon represents something important happening now in the human consciousness, and millennials (people born between 1980 and 2000, roughly) may be noticing it the most.

Individuals are now free to exchange goods and services with each other around the world. They are able to take innovations such as the concept of ride sharing and the proliferation of apps to use otherwise unproductive capital — their cars — to serve others.

This is great news for our world as millennials begin to assume positions of influence and leadership and are now beginning to see a real choice between the philosophy of control versus the philosophy of freedom.

This article is excerpted from a speech the author made to The Discussion Club, a Bastiat Society affiliate, in St. Louis, Missouri.

ABOUT RICHARD LORENC

Richard Lorenc is the director of programs at FEE.