The Case for Voluntary Private Cooperation by Michael Munger

We don’t need nations, flags, and armies to make us prosperous.

When I tell Duke freshmen my version of the argument for liberty, they often scoff, “If this is right, how come I’ve never heard it before?” I try to be conciliatory. I offer the kids time to go text their parents. They need to sue those elite private high schools for failing to educate them in even the basics of how societies work, and why so many societies fail to work.

Okay, so that’s not all that conciliatory. And my answer plays to mixed reviews, at best.

But it’s the truth. How can it be that some of the world’s most educated young people have never heard the concise version of the argument for voluntary private cooperation? I want to present here the version I have found most useful. And by “useful” I mean profoundly unsettling to people who hear it for the first time.

“Markets” Are Not the Point

To start with, the argument for liberty is not an argument for “markets.” The market vs. State dichotomy was dreamed up by German sociologists in the nineteenth century. Don’t buy into that dichotomy; it’s a rhetorical straitjacket, and in any case it’s not our best argument.

The question is how best to achieve the myriad benefits of voluntary private cooperation, or VPC. Markets are part of that, a useful way of achieving prosperity, but a variety of other emergent social arrangements—more properly viewed under the rubric “society”—are also crucial for prosperity.

The first argument I usually hear, especially from people hearing about VPC for the first time, is this: “If markets are so great, why is most of the world poor?” The problem is that poverty is not what needs to be explained. Poverty is what happens when groups of people fail to cooperate, or are prevented from finding ways to cooperate. Cooperation is in our genes; the ability to be social is a big part of what makes us human. It takes actions by powerful actors such as states, or cruel accidents such as deep historical or ethnic animosities, to prevent people from cooperating. Everywhere you look, if people are prosperous it’s because they are cooperating, working together. If people are desperately poor, it’s because they are denied some of the means of cooperating, the institutions for reducing the transaction costs of decentralized VPC.

So forget about explaining poverty. We need to work on understanding prosperity.

There are two reason that VPC is the core of human prosperity and flourishing.

1. Exchange and cooperation: If each of us has an apple and a banana, and I like apple pie and you like banana crème pie, each of us can improve our lot by cooperating. I give you a banana, you give me an apple, and the world is a better place. And the world is better even if there is no change in the total size of our pies. The total amount of apples and bananas is the same, but each of us is happier.

But there is no reason to fetishize exchange. (That’s the “markets vs. social/state” dichotomy; don’t give away the farm here.) Nobel Prize-winner James Buchanan’s central insight was that cooperative arrangements among groups of people are just “politics as exchange.” Nonmarket forms of exchange, in which we cooperate to achieve ends that we all agree are mutually beneficial, may be even more important than market exchanges. Banding together for collective protection and taking full advantage of emergent institutions such as a language, property rights, and a currency are all powerful tools of VPC.

If we cooperate, we can use existing resources much better by redirecting those resources toward uses people value more. So even if we are only thinking of cooperation in a static sense, with a fixed pie, we are all better off if we cooperate. Cooperation is just a kind of sharing, so long as every cooperative arrangement is voluntary. The only way you and I agree with a new arrangement is if each of us is better off.

2. Comparative advantage/division of labor: Still, we don’t need to be satisfied with making better use of a static pie. Working together and becoming more dependent on each other, we can also make the pie bigger. There is no reason to expect that each of us is well-suited to produce the things we happen to like. And even if we are, we can produce more of it by working together.

Remember, I like apples and you like bananas. But I live on tropical land in a warm climate that makes producing apples difficult. You live in a much cooler place, where growing your favored bananas would be prohibitively expensive. We can specialize in whatever we are relatively best at. I grow bananas, you grow apples, and we trade. Specialization allows us to increase the variety and complexity of mutually beneficial outcomes.

Interestingly, this would be true even one of the parties is actually better at producing both apples and bananas; David Ricardo’s “comparative advantage” concept shows that both parties are better off if they specialize, even if it appears that the less productive person can’t possibly compete. The reason is that the opportunity costs of action are different; that’s all that is necessary for there to be potential benefits from cooperation.

But there is no reason to fetishize comparative advantage. In fact, true instances of deterministic comparative advantage are rare. The real power from specialization comes from division of labor, or the enormous economies of scale that come from synergy. Synergy can result from improvements in dexterity, tool design, and capital investment in a production process composed of many small steps in a production line, or from innovations, using the entrepreneurial imagination to see around corners. Synergy is not created by the sort of deterministic accidents of weather, soil quality, or physical features of the earth that economists obsess about. Producing wool and port depend on location; human ingenuity can create synergy anywhere that division of labor can be promoted. All the important dynamic gains from exchange are created by human action, by VPC.

The Street Porter and the Philosopher

Entrepreneurs are more likely to be visionaries than geographers or engineers. Argentina has a comparative advantage, probably an absolute advantage, in producing beef, because of its climate, soil conditions, and plentiful land in the pampas. But Argentina is poor. Singapore has next to nothing, and doesn’t produce much. But Singapore built both physical (port facilities, storage, housing) and economic (rule of law, property rights, a sophisticated financial system) institutions to promote cooperation. And Singapore is rich because those institutions help give rise to powerful synergies.

One could argue, of course, that Singapore has a comparative advantage in trade because of its location at the southern tip of the Malay Peninsula, connecting the Strait of Malacca with all of East Asia. But other nations not blessed with such location rents have used the same model. Portugal in the fifteenth century, Spain and Holland in the sixteenth, and England in the eighteenth century all built huge, prosperous societies by channeling the energies of citizens toward cooperation. None of these countries played well with others, perhaps, but internally they built synergies, so that for each their prosperity and importance in the world was multiplied far beyond what you would have expected just by looking at their populations, their climates, or their soil quality.

Humans build synergies by fostering VPC. Adam Smith’s example of the philosopher and the porter is sometimes quoted, but not well understood. The benefits to specialization need not be innate: The street porter might well have been a philosopher if he had had access to the tools that promote VPC. Education and social mobility mean that where one is born has little to do with where one ends up.

The plasticity of human abilities is at least matched by the malleability of social and economic institutions. Human societies need only be limited by what we can think of together. The development of specialization and the consequent increase in productive capacity is a socially constructed process, like Smith’s “philosopher”—the result of thousands of hours of study, practice, and learning. Smith’s porter didn’t fail to become a philosopher because of comparative advantage. The porter just failed (or was denied a chance, by social prejudice) to specialize.

To Be Useful, Cooperation Must Be Destructive

The flaw in division of labor is also its virtue. Division of labor and specialization create a setting where only a few people in society are remotely self-sufficient. Further, the size of the “market”—more accurately, the horizon of organized cooperative production—limits the gains from division of labor and specialization. If I hire dozens of people and automate my production of apple pie filling, I can produce more than you, your family, your village, or perhaps even your entire nation can consume. I have to look for new customers, expanding both the locus of dependency and the extent of improved welfare from increased opportunities to trade.

The same is true for the benefits of specialization. In a village of five people, the medical specialist might know first aid and have a kit composed of Band-Aids and compression bands for sprains. A city of five million will have surgeons who have invented new techniques for performing complex procedures on retinas, the brain, and exotic enhancements in appearance through plastic surgery. A village of 250 people may have a guy who can play the fiddle; a city of 250,000 has an orchestra. Division of labor, and specialization, is limited by the extent of the VPC.

The power of that statement, taken directly from Adam Smith, is the basis of the argument for VPC. People are assets, not liabilities. Larger populations, larger groups available to work together, and more extensive areas of peaceful cooperation allow greater specialization. Four people in a production line can make 10 times as much as two people; 10 people can make a thousand times more. Larger groups and increased cooperation create nearly limitless opportunities for specialization: not just making refrigerators, but making music, art, and other things that may be hard to define or predict.

VPC allows huge numbers of people who don’t know each other to begin to trust each other, to depend on each other. Emile Durkheim, the famed German social theorist, recognized this explicitly, and correctly noted that the market part of division of labor is the least important aspect of why we depend on it. He said, in his masterwork Division of Labour in Society, “the economic services that [division of labor] can render are insignificant compared with the moral effect that it produces, and its true function is to create between two or more people a feeling of solidarity.”

That “feeling of solidarity” is society—voluntary, uncoerced, natural human society. We don’t need nations, and we don’t need flags and armies to make us prosperous. All we need is voluntary private cooperation, and the feeling of solidarity and prosperous interdependence that comes from human creativity unleashed.


Michael Munger is the director of the philosophy, politics, and economics program at Duke University. He is a past president of the Public Choice Society.

EDITORS NOTE: The featured photo is courtesy of FEE and Shutterstock. The below quote by Walter E. Williams, American economist, commentator and academic, is worthy of note:


Pro-life bill overwhelmingly passes Florida House with bipartisan support

The Christian Family Coalition Florida (CFCF), Florida’s premiere human rights and social justice advocacy organization issued the following statement upon passage by the Florida House of one of its two legislative priorities:

“We are proud to announce that the Offenses Against the Unborn Bill, one of two CFCF legislative priorities for the 2014 session, was overwhelmingly approved by a bipartisan majority of the Florida House on Friday, April 11th.

It is historic to see an overwhelming majority of Democrats and Republicans, 64%, voted to adopt this common-sense legislation. During our 2014 Day at the Capitol, our CFCF citizen lobbyists identified thirteen (13) co-sponsors and supporters for the Offenses Against the Unborn Bill.

CFCF states, “We know these efforts contributed to passage of this much-needed legislation. We would like to thank Rep. Larry Ahern (R – District 66) for his courageous effort in sponsoring this legislation in the House.”

Click here to see vote:

About the Christian Family Coalition (CFC)

The Christian Family Coalition (CFC) is a widely acclaimed human rights and social justice advocacy organization serving Florida’s children and families for over 10 years. Through its daily community outreach, political education programs, and voter registration, CFC effectively mobilizes thousands of fair-minded voters across the state and actively works with municipal, county, state, and federal elected officials to advance common sense, family-friendly, non-discriminatory values and public policies. The CFC is highly respected for its sought-after, educational voter guides consulted by thousands of houses of worship and their voters all across Florida.

Let a Thousand Home Businesses Bloom by WENDY MCELROY

Time for regulators to take their boot off the neck of microbusiness.

Imagine you’re out of work. But you’ve got capital in your talents, your home, and your family and friends. You might try to start a microbusiness at home to earn a little extra income and make ends meet. That is, unless you live in certain U.S. states.

Making Dough at Home

A few years ago, Mark Stambler started a business in his California home that became a flashpoint in a legalization battle. That might sound like he had a few marijuana plants growing in the closet. Actually, he was making and selling bread. Yes, bread. He did it so well, in fact, that Stambler was featured in the May 31, 2011, issue of the Los Angeles Times.

The next day, Department of Public Health authorities shut him down. There was no customer complaint; Stambler was simply “not in compliance” with regulations.

Stambler decided to take food off the black market. He helped to draft the California Homemade Food Act, which went into effect in January 2013. According to a January Forbes headline, it created over a thousand local businesses.

The episode raises a host of questions. Should home businesses be regulated? Should they stay in the black market? It’s hard to say. But one impact of the Homemade Food Act is clear: When government loosens control of commerce, businesses and jobs get created. The Forbes articles explained, “In Los Angeles County, there are [now] almost 270 cottage food businesses. Statewide, over 1,200 homemade food businesses have been approved.”


California desperately needs employment. In January 2013, when the act came into effect, California’s official unemployment rate was 8.9 percent—2.3 percent higher than the national average of 6.6 percent reported by the Bureau of Labor Statistics. A separate Forbes article suggested that the national rate might have been as high as 23.0 percent.

Whatever the true figure is, people are looking to work. And yet, most states continue either to regulate home businesses out of existence or to make the requirements for entry so expensive as to be prohibitive. Consider Florida, where it is a criminal offense to cut hair without completing 1,200 hours of training at a barber college at a cost of $10,000 to $15,000. By contrast, Florida’s Emergency Medical Technicians “need only about a month of training before they can be licensed,” the Sun-Sentinel reported,

Why are state and local governments generally so hostile to small industry—especially home businesses? The answer lies in the definition of the businesses themselves.

Home industry consists of gainful work conducted in a dwelling. The specific businesses are so wide-ranging as to defy classification by product or service. They include businesses based on crafts, accounting, car repairs, writing or editing, foodstuffs, pet grooming, web design, hair styling, sewing, alternative medicine, day care, and carpentry. They usually address niche markets and often involve personal contact with customers to whom there is high incentive to provide satisfaction in order to secure repeat business. Home industry is integral to the American dream because it offers a path to prosperity through hard work, merit, and innovation.

A Path to Prosperity

Home industry is particularly important to the poor for at least four reasons. First, the business overhead is usually low. Second, it allows people to use their labor as equity to develop a business for which financial or capital equity is not available. Third, it does not require higher education. Fourth, people own the means of production, such as an equipped kitchen or a garage with tools. Home industry also has the advantage of not draining the public purse—that is, production does not draw on government subsidies or privileges, which benefits individuals as producers, taxpayers, and consumers.

But does it benefit governments? It is government’s nature to control; that is its raison d’etre. It is also in government’s nature to tax. Home industries are often black-market activities through which commerce flows without government skimming off resources. Thus control- and cash-hungry governments seek to ban home industries or to legalize them with both punitive and lucrative regulations. Lucrative regulations enrich the government by establishing an income stream. The benefit of punitive regulations is often more subtle. In many cases, the high bar set for entry into a marketplace is a form of protectionism for politically favored businesses.


Crony capitalism is defined as “an economy in which success in business depends on close relationships between business people and government officials.” The two general ways in which protected businesses succeed are through protectionism and privilege. The specific ways can include the selective granting of licenses and permits, subsidies, special tax breaks, zoning, and other State interventions.

Governments protect favored businesses by discouraging home industries that would otherwise compete in the marketplace. Civil liberties watchdog The Institute for Justice (IJ) describes its economic mission: “Arbitrary licensing and permitting laws foreclose many occupations that are ideally suited to people of modest means. The Institute for Justice challenges these laws to secure constitutional protection for the right to earn a living and to demonstrate the importance of entrepreneurship.”

dramatic example came in 2006 when IJ attacked “the Maryland Home Funeral Cartel.” Funeral homes are often family businesses in which the owners also maintain a residence. Clark Neily, a senior attorney with IJ, explained the situation then present in Maryland. The state “arbitrarily restricts who can own a funeral home. As a result, consumers pay more than they otherwise would, and opportunities for would-be entrepreneurs are blocked. Maryland’s law is a racket designed to protect the state’s funeral cartel from competition, and that’s not a valid use of government authority.”

Only licensed funeral directors and “politically favored corporations and individuals” could legally own a funeral home. The license required two years and thousands of dollars to secure. Neily continued, “But owning does not mean operating. Under Maryland law, a person is not allowed to own a funeral home even if he or she hires a licensed funeral director to oversee the funeral home’s day-to-day operations.” She likened this to saying you must be a pilot to own an airline. In October 2007, a federal judge struck down Maryland’s exclusionary law. Calling it unconstitutional, the judge added that the law was “the most blatantly anti-competitive state funeral regulation in the nation.”

Liberate the Poor

Austrian economist Murray Rothbard summed up the purpose of government intervention. “The intervention . . . was designed, not to curb big business monopoly for the sake of the public weal, but to create monopolies that big business . . . had not been able to establish amidst the competitive gales of the free market.”

Regulation of home industry is a source of revenue and social control for government, but it is also a means by which businesses with political clout cripple their competition. There is nothing new under the sun.

Government should remove itself from all business transactions. But it is particularly important to the unemployed and to the poor that government release its choke hold on home industries.


Contributing editor Wendy McElroy is an author and the editor of

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

The Truth About the BLM: The Bundy Ranch Dispute Explained

Federal Land Policy and Management Act of 1976 –… BLM Energy Page –…



BLM Whistleblower Rusty Hill Interview: Harry Reid, Bunkerville and real estate vultures at Bundy Ranch:



Related links to documents referred to by Rusty Hill in the video. Note: No records are available for on the Clark County government website prior to 1999.


Democrats awash in ‘green’ energy deals on public land
Why does federal government own 84% of Nevada and what can Ried do to give it back?
Oregon Clear Cutting
BLM Misuse and Abuse of Wildlife Funds
Abuses of Wild Horses
A Tactical Retreat

EDITORS NOTE: NO LEGAL ADVICE is intended in any way by the content of this video. Consult your local laws and local licensed attorney for any legal matters.

Rotten to the Common Core

The term “Common Core” might not be familiar to many of you.  If you have children, plan on having children, have grandchildren, hope to have grandchildren or just care about the future of the country, you need to pay attention.  Common Core is the latest of the federal government takeovers, this one targeting education.

Over the past few years we’ve seen what happens when the government takes over an industry, with thousands of pages of new rules, regulations and bureaucracies.  With health care, we were told we needed to pass it before we could see what was in it.  We were told it would expand services and lower costs for everyone.  The truth of the matter is quite the opposite.

Now, the federal government is promising better test scores through higher standards and a more comprehensively-planned curriculum for your child.  Those behind Common Core can make these claims because the curriculum has been thoroughly tested….nowhere.  This is correct; those pushing the implementation of Common Core nationwide have never tested this new curriculum, at least not outside the minds of well-heeled lobbyists pushing for Common Core on behalf of those positioned to make lots of money from it.  In fact, they were getting States to sign on to Common Core before the standards and curriculum was even written.  Have our elected officials learned nothing from the debacle that the Affordable Care Act has become?

Do we not owe it to our children to fully understand what is in and behind Common Core first, before adopting it?  Shouldn’t this new curriculum be fully vetted before subjecting a generation of children to it?  More importantly, why are we abdicating the responsibility of educating our children to the Federal Government, when we already have education departments at the State level, and locally-elected School Boards?  Education is not and never should be one-size-fits-all.  Education is most effective when there is involvement by the parents in their local schools.  Accepting Common Core is tantamount to accepting education without any kind of representation on behalf of parents, teachers, and your local community.

Ask any teacher passionate about their profession, and they will tell you that no curriculum can take the place of one individual inspiring another.  Most teachers will also tell you that after reviewing the Common Core curriculum and required material, they have serious concerns with it.  They see it as too restrictive, as micro-managing their classroom.  Teachers will be turned into facilitators, lessening their ability to reach the underachiever and inspire the overachiever.

This is not a partisan issue, as those trumpeting Common Core would like the general public to believe. You can easily dismiss the notion that there are only a few small groups of Tea Partiers, or the extreme right wing of the Republican Party that are against Common Core, then you read that the entire Board of the New York State United Teachers (NYSUT)  has withdrawn its support for Common Core.  “We’ll have to be the first to say it’s failed,” said Richard Iannuzzi, president of the NYSUT, an organization of 600,000 teachers, retired teachers and school professionals.  Trust that the NYSUT will never be confused with the Tea Party.

This is not an isolated incident.  This is happening all over the country, as teachers and parents join forces against this issue.  State after State are opting-out of Common Core, and I believe Florida should follow suit.  We hear about setting our own standards and taking out the data mining of our students that is currently a part of Common Core.  If we do this, then why bother staying in Common Core at all? Once Common Core is fully-implemented, I believe that Federal Law will trump State Law and we will be mandated to comply with all of the law, as well as cover all the unfunded mandates that come with it. As always with the Federal Government, if you take their dime, they get to control your dollar.

It’s time to act to protect our children, because their future is our future.  It’s time to listen to the People, and not the lobbyists and special interests.  It is time for the State of Florida to opt-out of Common Core.

Rubio: On Tax Day 2014

U.S. Senator Marco Rubio (R-FL) on Tax Day 2014 notes, “Tax reform is critical. And it’s not just critical to take the hassle out of our lives. It’s critical for the economic future of our country. Our economy is stagnant. It’s not growing fast enough. It’s not creating enough jobs. And by the way, about 40% of the jobs that it is creating pays $16 an hour or less.”

Is reform of the tax code needed or a scraping of the entire income tax? Many are calling for either a flat tax or FairTax system.

To mark Tax Day 2014, Rubio sent out the below video addressing constituent concerns about the broken tax code system. Rubio points to the tax codes stifling effect on the economy as proof of the need for tax reform:


In the video, Rubio outlines various disconcerting facts about the increasingly complicated tax code and the unnecessary burdens it places on taxpayers:

  1. It takes 13 hours for the average taxpayer to file their taxes, including record keeping, planning, as well as filling out forms.
  2. Last year, Americans spent 6.1 billion hours and $168 billion complying with all their tax filing requirements.
  3. The tax code, rules and regulations now totals more than 73,000 pages, as opposed to 400 pages when it was created in 1913.
  4. Americans will pay $3 trillion in federal taxes and $1.5 trillion in state and local taxes this year.
  5. Americans must work 111 days this year to pay their federal, state and local taxes.


“One of the things holding back our economy is a broken tax code. We have a tax code, for example, that punishes companies for investing their profits back into their businesses, to hire more people, to give their workers raises, to expand their operations. We have a tax code that actually encourages our employers to take their business overseas. Those are some of the things we have to fix as well. So I agree with you wholeheartedly, and that’s why I hope this November we’ll have new leadership here in Washington that will move on this important item.”

RELATED STORY: Obama has Proposed 442 Tax Hikes Since Taking Office

It May Not Be Ready but EPA Chief Defends Carbon Capture Technology Anyway

West Virginia MetroNews reports that at a Senate committee hearing, EPA Administrator Gina McCarthy, was forced to defend the viability of the carbon capture and sequestration technology, the key component of proposed greenhouse gas rules for new electric power plants:

“Carbon capture and sequestration (CCS) is not commercially viable,” [North Dakota U.S. Senator John] Hoeven said. “So how are we going to build any new coal plants even with the latest technology and CCS with your latest proposed rules?”

McCarthy said told Hoeven the EPA believes CCS is “technically feasible.”

But the Republican senator shot back: “I did not say technically feasible. I said commercially viable.”

McCarthy answered that “technically feasible” is the standard under the law.

However, the Clean Air Act states that technology mandated has to be “adequately demonstrated,” and EPA must consider its costs. These are hard standards for CCS to meet when no commercial power plants are using it, and its first commercial application in Mississippi is undergoing cost overruns. Experts and former administration officials understand that CCS is years away from being viable and will mean added electricity costs. Southern Company, which is building the Kemper power plant, says it “should not be used in developing a national standard for greenhouse gases.”

Back to McCarthy’s testimony. According to a Politico Pro report, at the committee hearing, she said, “We think [CCS] is the future, and we think facilities are investing in it now.”

CCS might be the future, but we live in the here-and-now where EPA regulations are pushing reliable, coal-fired power plants offline and pushed a coal producer into bankruptcy:

James River Coal Co., a mine operator in Logan and Mingo Counties, has filed for Chapter 11 bankruptcy protection as part of its effort to turn around its business.

The Richmond, Va.-based company says it faces challenges from the weak economy, environmental regulations and competition as electrical-generating utilities switch from coal to natural gas.

RELATED STORY: Democrats awash in ‘green’ energy deals on public land

EDITORS NOTE:  Features photos of EPA Administrator Gina McCarthy. Photographer: F. Carter Smith/Bloomberg.

The Positive Nature of Risk: Removing or Shifting Risk by Government Fiat Is Not a Panacea by CHRISTOPHER MAYER

There would be no risk if the future were known and all of one’s plans played out exactly as expected. Because of pervasive uncertainty, a variety of risks permeates all human endeavors.

It is a common human desire to want to feel secure, to want to avoid as much risk as possible and live a comfortable, protected life. But different people deal with risk in different ways. Not all people are risk-avoiders.

For example, artists take risks with each work. In his Lectures on Shakespeare, W.H. Auden draws a distinction between a minor writer and a major one. This distinction hinges on the writer’s appetite for risk-taking and his ability to break new ground. A minor writer (Auden used the example of the poet A.E. Housman) is one who finds his niche and sticks to it. “The minor writer never risks failure,” Auden states. On the other hand, the major writer, like Shakespeare, pushes himself to discover new problems and try new things. In a word, the major writer takes risks. According to Auden, “Shakespeare is always prepared to risk failure. Troilus and Cressida, Measure for Measure, and All’s Well that Ends Well don’t quite come off, whereas almost every poem of Housman does.” Yet Shakespeare risked enough so that his successes have earned him almost universal acclaim as a great writer.

The same can be said of musicians. Great jazz artists like Charlie Parker and Miles Davis pushed their art in new and different directions, taking risks when they had no assurance they would succeed. Their experimental play earned them places in the pantheon of jazz immortals.

Gamblers are other examples of people who willingly take risks. In fact, gamblers who frequent the gaming tables create risks in playing various games. Sometimes they are lucky. The tale of Charles Wells is a case in point. In 1891 Wells gained fame by “breaking the bank” at Monte Carlo three times in one year. One evening he played the wheel and left his chips on the number 5, with the odds 36 to 1. The number five came up five times in a row. He walked out with the equivalent of over one million dollars. He was written up in the newspapers and even had a song about him (“The man who broke the bank at Monte Carlo”). Ironically, Wells would die broke.

In any event, whatever happens to the artist or to the gambler happens to him alone (and perhaps his backers, should he have any). In other words, if Shakespeare wrote a clinker, Ben Jonson didn’t have to come out of pocket to support him. In a similar way, the gambler who loses his shirt has no claim against sober individuals who choose not to gamble. Conversely, Shakespeare’s fame is his alone and the gambler’s winnings are his too.

However sensible this arrangement seems, it often does not prevail in the modern world where collectivist thinking is rampant. In real life successful people indirectly support those who are unsuccessful. In some cases successful people do this voluntarily by contributing their time and money to charity. But more often, successful people support others whether they want to or not, since their pockets are regularly picked by government officials of every stripe. The government encourages the illusion of a mighty shield that will protect people from their own imprudence and misfortune rather than let them take care of themselves, which would require them to save, to plan, and to be prudent.

The existence of a forced safety net, or a support system not voluntarily funded, warps the normal incentives and changes people’s behavior, in perverse ways.

Banking and Risk

Look at the banking world. If a bank makes a series of poor decisions that lead to failure, the FDIC stands ready to make good on any losses depositors should suffer. Here we have two problems. The first is that the banker is not held accountable for his losses. And the second is that the depositor is relieved of the responsibility for where he puts his money. All he has to know is whether his bank is FDIC-insured.

This would be like giving your money to Charles Wells knowing that the house will reimburse him for any losses he suffers and that he will in turn reimburse you. Do you think that this would change Wells’s behavior? Do you think that he might take some risks that he otherwise might not take? And what if Shakespeare knew that no matter how bad any particular play was, he would get reimbursed for any losses incurred? It is common sense to acknowledge that risk influences behavior.

In more formal terms, a moral hazard is created when the adverse consequences of risk-taking are transferred to a third party and the transfer benefits the risk-taker and harms the third party. Insurance is often cited as a common example of risk transfer. However, most insurance is created in the marketplace and is priced, like all goods and services in the market, by the interplay of buyers and sellers. In other words, insurance is not persistently mispriced. The fact that the FDIC determines the price of insurance necessarily means that it will likely be higher or lower than the market price. Risk will always be too cheap or too dear. Occasionally, perhaps, the FDIC hits the market price. Then the question becomes, why not let the market run this insurance program?

Then again, deposit insurance is really not insurance at all. Just because the government calls it insurance doesn’t mean it is. No other industries have insurance like it. When Amazon or General Motors or Dell takes a loss, no one reimburses the company for it. Entrepreneurial risk is inherently uninsurable. Insurance protects against certain kinds of risks, but it doesn’t underwrite failure.

Behavioral Boundaries

If the theory of moral hazard is correct, then risk—the possibility of loss, the element of chance—serves a useful purpose in changing behavior. Risk can keep people within certain behavioral boundaries.

Few would dare cross a busy street without at least looking to see if any cars were coming. The risk of being hit and its attendant consequences are simply too great. People modify their behavior to deal with these risks. They mitigate them, in this case, by looking both ways before crossing the street. Further, a pedestrian may choose to cross only when the light is in his favor. These are some of the ways people deal with risks of crossing a busy street. The risk of being hit forces them to think before they act.

In banking, the theory of moral hazard is no different. Benjamin Esty of the Harvard Business School conducted a valuable study on the impact of contingent liability on commercial bank risk-taking.* Esty looked at the banking world prior to deposit insurance. From the passage of the National Banking Act of 1863 until 1933 regulators imposed double liability—a form of contingent liability—on national bank shareholders. Esty explains: “Under this system, shareholders were doubly liable in that they could lose both the market value of their shares and, through assessment, an amount equal to the par value of equity to cover creditor obligations including deposits and other debts.” Most banks at the time had a par value of $100 per share. So, as a shareholder, if your bank went belly up you would lose the market value of your stock and you could be assessed another $100 per share to cover depositor and other losses. Do you think that this would change your behavior as an owner of a bank?

The states passed their own versions of contingent liability as well. Some had single liability. California had triple liability. And regulators were effective at collecting assessments. During the years 1865 through 1934, the comptroller of the currency collected 51 percent of the assessments. The fact that these assessments were creditable is shown in the behavior of the banks and their risk-taking activities. As Esty notes, from 1865 to 1933 voluntary bank liquidations accounted for over 70 percent of all bank closures. The states had similar experiences with state-chartered banks.

In an FDIC world there is no incentive for banks to close or liquidate as soon as trouble arises. And since bank shareholders have limited liability, their appetite for risk is greatly enhanced. Banks of the nineteenth century were fortress-like compared to their late twentieth-century counterparts. They had reserves of gold and silver, and by law their reserves had to cover 25 percent of deposits. Some banks, like National City, carried reserves to cover 60 percent of deposits.

This is not to recommend that contingent liability is the way to enforce bank soundness, but rather to illustrate how the risk of loss changes behavior and forces prudence in a way that FDIC insurance lacks.

Other Interventions

Deposit insurance is only one commonly known way that governments try to collectivize and minimize risk. They have numerous other programs and guarantees that seemingly lower risk. Another example is the Small Business Administration (SBA), which provides banks with a partial guarantee of loans made to certain favored classes. If a minority-owned business, financed under an SBA loan, fails, the SBA stands in to absorb a portion of that debt. This encourages the banks to take risks that they otherwise would not take.

Removing or shifting risk by government fiat is not a panacea. Genuine risk serves a useful purpose. Forcing the shifting of risk to third parties, in essence creating moral hazard, leads to the perverse outcome that the risk one hoped to avoid is actually recreated in the form of the false promises made by the welfare state.

*“The Impact of Contingent Liability on Commercial Bank Risk Taking,” Journal of Financial Economics, February 1998, pp. 189–218.


Christopher Mayer is a commercial loan officer and freelance writer.

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

The Fifteen Charts Obama Doesn’t Want You to See

Amy Payne from The Foundry writes, “Talking about Obamacare’s effects is one thing; seeing hard data is another. Heritage’s newly updated Obamacare in Pictures has 15 charts that show the law’s effects on Americans—from canceled insurance policies to new taxes, Medicare cuts, reduced choice for plans, and more.”

Higher Ed: Bubble, Toil and Trouble by SANDY IKEDA

Interest rates have been in the news again so for this week’s column I thought I’d do a little back-of-the-envelope economic analysis.

What Does this Sound Like to You?

The government artificially lowers interest rates for borrowers who want to invest in a particular sector of the economy. Other things equal, that will increase the demand for assets in that sector as borrowers are misled into believing they will be worth more in the future than they actually will be. The current price of those assets will climb as will the quantity supplied (i.e., the demand curve slides up the supply curve). Borrowers will then clamor to keep borrowing rates low (or even lower) so they can afford to complete their investments, although that would also attract new borrowers. So pressure on demand continues and investment costs soar as asset prices and output keep rising.

Now, because government has kept interest rates artificially low—below the rate that would accurately reflect the actual supply and demand in the loan market—there is too much investment in those assets in relation to the actual demand for it. That means when investors try to sell their assets they will find no market for them. At that point the bubble bursts, bringing complementary sectors down with it.

If the Shoe Fits

If you think this describes the housing market from 2001 to 2006, you’d be right. Just substitute housing/houses for asset/assets and “financial sector” for “complementary sectors” in the above narrative and you would get an accurate (though incomplete) summary of the recent housing boom and bust. (For an excellent discussion of this episode, see Peter Boettke and Steven Horwitz’s essay.)

But you could substitute “higher education” into the story as well.

As an author of the Economix blog over at The New York Times reports, data from the Bureau of Labor Statistics show that “college tuition and fees today are 559 percent of their cost in 1985. In other words, they have nearly sextupled (while consumer prices have roughly doubled).” There’s a nice diagram in the post illustrating this. Tuition has been far outpacing price increases over time for consumer items, medical care, and gasoline.

Author Catherine Rampell argues, however, that “the main cause of tuition growth has been huge state funding cuts.” As an employee of a state university I can confirm that these cutbacks have indeed been taking place over the past couple of decades. The author offers some evidence to support her claim, but if you look closely, the dramatic rise in tuition still seems to outstrip the relative fall in state subsidies.

More importantly, if what she argues is true, why is it that college enrollment over the same period has been rising?

In basic economic terms, she is arguing that because the colleges are bearing more of the actual costs, the supply curve for college education has been shifting upward and to the left—causing tuition to rise and enrollment to fall. But the evidence points to a rightward shifting demand curve (like the narrative I sketched at the outset), which accounts for both the higher tuition and higher enrollment.

According to the National Center for Education Statistics,

Enrollment in degree-granting institutions increased by 11 percent between 1990 and 2000. Between 2000 and 2010, enrollment increased 37 percent, from 15.3 million to 21.0 million.

Between 2000 and 2010, the number of 18- to 24-year-olds increased from 27.3 million to 30.7 million, an increase of 12 percent, and the percentage of 18- to 24-year-olds enrolled in college rose from 35 percent in 2000 to 41 percent in 2010.

The Stafford loan program, which subsidizes student loans, began in 1988.

If Rampell is right, then shouldn’t enrollment be falling? Instead it is rising disproportionately. Just as the housing bust left tracts of houses unused, a higher-education bust would create a small army of unemployed young people.

An Act of Independence?

But just as overbuilt housing can be used for some lower-valued purpose than it was intended for, investment in education—which is sometimes more accurately described as “spending on a credential”—often goes “underemployed.”  So growing underemployment of college grads is something we should keep an eye out for.

According to The Huffington Post, “half of recent grads are working jobs that don’t require a degree, according to research from the Center for College Affordability and Productivity, released in January.”

The same article notes, “In 2000, before the economy fell into a recession, the share of recent college graduates who were either jobless or underemployed hit an 11 year low of 41 percent, according to the Associated Press.”

Now, as an article from The Washington Post makes clear, that’s not necessarily a bad thing: Some jobs don’t require a specific degree. Also, it’s unrealistic in a dynamic economy to expect the major you choose when you’re 20 to match what your comparative advantage will be later in life.

Still, it’s probably true that many young people who would otherwise get the training they need for productive jobs from trade schools and community colleges are applying to and getting into four-year colleges, as the lower rates tend to offer a higher subsidy to the latter. (Example: The savings from a lower rate on a $50,000 liberal arts college loan is greater than the savings on a $10,000 loan for community college.)

This week Congress takes a holiday to celebrate Independence Day. One of the things they’re leaving undone is negotiating a measure to keep the rates on Stafford loans from rising from 3.4 percent to 6.8 percent. Given the very real possibility of a bubble in higher education, that may actually be a blessing.

The first step to avoiding a huge bust, though some kind of correction seems to be inevitable, would be to let the Stafford-loan rates rise to reflect the realities of the loan market. That could mean a significant break in the vicious boom-bust cycle in higher education.  The question is, does Congress have the will to do nothing?


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

Louisiana: Foreign Operated Charter School State Legislation Introduced

Kenilworth Science and Technology School(1)

Gulen Science Academy Baton Rouge, Louisiana

Turkey’s Sunni Muslim Brotherhood Islamist leader, Premier Erdogan, this June could become the country’s first elected Executive President modeled on the US and France. It would give him enormous powers furthering his goal of creating a neo-Ottoman Caliphate.  Erdogan’s former ally, Sufi Sheik Muhammed Fethullah Gülen launched a major split in December 2013, after Erdogan banned non-state run preparatory school. This was, aimed squarely at the Gulen academies, a major source of the multi-billion dollar Gulen Movement (GM) global empire. The GM supplies Turkish nonimmigrant foreign workers to more than 1,000 private preparatory schools in over 100 countries, including more than 135 Charter schools in 20 states here in the US.

The expat Sheik Gulen, a resident alien, occupies a fortified compound in the Poconos Mountains of Eastern Pennsylvania. In retaliation, GM followers in Turkey’s public prosecutors and judiciary launched a series of investigations against Erdogan.  The investigations revealed extensive family involvement with funneling funds via Saudi global terrorist financier for Al Qaeda –backed militias in Syria, bribery payments on major construction projects, illicit gold for gas trades with Iran and muzzling free speech with shutdown of Twitter and You Tube.  Recent municipal election victories in Turkey in late March have paved the way for changes in the country’s basic Constitutional law enabling Erdogan to seek the new form of Presidency. That could have his AK party extend its power a decade beyond the current 11 year tenure of the Islamist party in Ankara’s parliament.

What we have in Turkey today is a contest between two Islamists. Erdogan, seeking to convert the country into a Caliphate with a one time election to an executive Presidency, versus, Gulen “the world’s most dangerous Islamist” slowly perfects the same goal.

The GM connection here in the US is of interest, because of the controversy over the movement’s control of dozens of Math and Science academies operating with US taxpayer funding as charter schools. According to one source there are more than 135 Gulen charter schools with an enrollment of 45,000 students in over 20 states in the US. The staffs of these US charter schools are manned by Turkish Gulenists who enter the US under the H-1B visa program. There have been expose’s on the US Gulen science academies in Texas and elsewhere published by the New York Times. The Gulen  Harmony Schools in Texas received  $30 million in  grants  from the US Department of Education “Race to the Top” program.

We posted on an FBI raid of a Gulen science academy in Louisiana. Because of the problems with the Gulen charter schools, many states have either passed or are considering legislation that would control the proportion of H-1B Visa staff employed at Gulen-sponsored charter schools. The Gulen movement charter school program has been supported by the Gates and Walton Family Foundations.  The Walton Family Foundation contributed more than $1 million for Gulen schools in California, alone. Former President Bill Clinton has gone on record supporting the GM interfaith dialogue and educational development program in 2008. GM members were alleged to have contributed to Hillary Clinton’s failed Presidential Campaign in 2008.

Gulen’s immigration status came into question in the same year, 2008, in actions brought by the US Department of Homeland Security. Note what the Investigative Project on Terrorism (IPT) reported:

In 2008, negative U.S. Department of Homeland Security and U.S. Citizenship and Immigration Service decisions threatened to deny Gulen’s application for permanent residency. A federal court reversed the rulings after receiving 29 letters on Gulen’s behalf. One of those letters came from [Prof. John] Esposito [of Georgetown University]… after his Prince Alwaleed Bin Talal Center for Muslim-Christian Understanding received donations from the [GM] and sponsored a conference in [Gulen’s] honor.

We noted in a December 2013  Iconoclast post a report by Christopher Holton on the FBI investigations into Gulen  Louisiana charter schools and the efforts by a Texas-based GM charity to stop legislation controlling the influx of Turkish adherents under the H-1B visa program:

The story broke in Baton Rouge media that the Kenilworth Science & Technology School had been raided by the FBI.

The FBI indicated that the raid, which evidently was conducted to gather material evidence in the form of documents and computers, was not a matter of public safety. As a result, it probably was not related to a report earlier this year that a teacher at the school was accused of having inappropriate pictures of children on his cell phone.

Had those charges stuck, that would have been the second scandal of a sexual nature involving a Gulenist school in Louisiana. Abramson Science & Technology Charter School in New Orleans was shut down back in 2011 in the wake of a scandal that started as an investigation into sexual activity involving students at the school and evolved into a possible public bribery investigation. Abramson operated under the same charter organization that Kenilworth operates under: Pelican Educational Foundation.

During the course of the investigation into Abramson, Pelican’s ties to the Gulenist movement were revealed.

[ . . . ]

State Representative Cameron Henry in the 2013 legislative session … filed a bill that would have limited the number of employees hired by Louisiana state-funded charter schools who were in the country on H-1B visas. Henry’s legislation would have gotten right to the heart of the matter – with a very reasonable restriction that no more than 3.5 percent of the school’s employees be H-1B visa recipients (or 1 in 29), and that the people or groups submitting requests to start charter schools be American citizens.

Unfortunately, Henry’s bill hit hard where it hurt for some powerful, politically connected people in Louisiana. It seems that the number one donor to the Louisiana Republican Party in 2012 was none other than a Gulenist organization out of Texas. Kemal Oksuz, president of the Turquoise Council, a Texas-based group closely related to the Gulenist movement and the Harmony charter schools in that state, donated $83,000 to the state GOP, making him its largest donor during 2012.

Fast forward to the current 2014 legislative session in Baton Rouge and the re-introduction of restrictive legislation aimed at employment of nonimmigrant Turkish workers in Louisiana charter schools.

HB 1243 was introduced by Reps.  Hodges and Pope, in the Louisiana legislature in late March 2014. The bill’s purposes are to establish conditions for “approval of certain charter school proposals and provides relative to prohibitions on the employment of nonimmigrant foreign workers in charter schools, with exceptions.”  The bill denies” approval of charter school applications if  staff  positions  with  nonimmigrant  foreign  workers  unless the  charter  school  plans  to  take  affirmative  action  to  recruit,  select,  employ,  and  train nonimmigrant  foreign  workers  regardless  of race, color, religion, sex, national ancestry,  or  national  origin.”   The legislation defines a non immigrant foreign worker as ” as an individual  who  has  a  visa  pursuant  to  certain provisions  of  the  federal Immigration and Nationality Act of 1965’. Further it states that “non-immigrant foreign worker” shall not mean a teacher who spends more than half of his time providing instruction in or teaching a foreign language.”

Similar legislation was introduced in the 2014 Mississippi legislature.  HB510 contains similar bars against employment of nonimmigrant foreign workers.  Section 37-28-47 1. (b) of the, Mississippi Code of 1972, would be amended as follows:

 A charter school may not staff positions for teachers, administrators, ancillary support personnel or other employees by utilizing or otherwise relying on non-immigrant foreign worker visa programs.  However, a charter school may submit a request to the authorizer for an exception allowing the employment of a non-immigrant foreign worker before the worker is employed.  The authorizer may grant permission for the employment of the non-immigrant foreign worker only if the charter school makes a satisfactory showing of efforts to recruit lawful permanent residents of the United States to fill the position and a lack of qualified applicants to fill the position.

In May  2011, we were asked to prepare a presentation to brief the Tennessee House Speaker about the GM charter schools investigations at that time and the purported abuses of the H-1B visa program for nonimmigrant foreign workers, see here.  In May 2012, Tennessee Governor Bill Haslam allowed the law restricting the employment of nonimmigrant foreign workers for Charter schools approved by the state despite his misgiving and those of the State’s attorney general in an October 2012 opinion indicated  that the provisions might be unlawful under the equal protection provisions of the US Fourteenth Amendment.   A  Knoxville News .com report on the 2012 Tennessee legislation noted its provisions vis vis foreign interests, including funding as well as restriction on employment of nonimmigrant foreign workers:

The governor announced on May 2, 2012, that the bill restricting foreign interests in charter schools would go into law without his signature.

Under the act, which takes effect July 1, 2012, a chartering authority may not approve an application if a school plans to rely on “non-immigrant foreign worker H-1B or J1 visa programs in excess of 3.5 percent of the total number of positions,”  if operators of the proposed school have been affiliated with other schools that have been “subjects of investigation by any government agencies for questionable use of non-immigrant foreign worker visa programs,” or if  the school is controlled by foreign nationals. Certain provisions of the law do not apply if the chartering authority is a local education agency and the agency itself uses foreign worker visa programs to fill more than 3.5 percent of its staff.

The law also states that charter school applications and renewals shall disclose all sources of private funds and all funds from foreign sources.

The emergence of restrictive employment of non-immigrant foreign workers will take a long time to be adopted by Louisiana and Mississippi, notwithstanding the relatively quick adoption in Tennessee.  Given the battles in Turkey between the AK party of Premier Erdogan and former ally Sheik Gulen there will doubtless be intense pressure to place GM Turkish adherents through its global private academy and charter school network.

There is a further compounding factor that should be considered. The attractiveness of investment in private run charter schools to so-called entrepreneurial immigrants under the EB-5 Visa system. In exchange for a $500,000 private investment, the investor receives an immediate green card.  Note this Reuters article, “The new US visa rush: Build a charter school, get a green card”:

Wealthy individuals from as far away as China, Nigeria, Russia and Australia are spending tens of millions of dollars to build classrooms, libraries, basketball courts and science labs for American charter schools.

In Buffalo, New York, foreign funds paid for the Health Sciences Charter School to renovate a 19th-century orphanage into modern classrooms and computer labs. In Florence, Arizona, overseas investment is expected to finance a sixth campus for the booming chain of American Leadership Academy charter schools.

And in Florida, state business development officials say foreign investment in charter schools is poised to triple next year, to $90 million.

The reason? Under a federal program known as EB-5, wealthy foreigners can in effect buy U.S. immigration visas for themselves and their families by investing at least $500,000 in certain development projects.

The GM has latched on to a good thing in the Charter School system here in the US. It provides a platform for indoctrinating American children in its form of Turkish Islamism supplying employment for GM adherents. The EB-5 system would bolster investment in Charter Schools not only by the GM but also by the Muslim Brotherhood perfecting its form of Da’wah to Somali émigré children. That occurred in Minneapolis with the Muslim American Society control of the Tarek Ibn Zayed Academy subjected to a suit by the Minnesota branch of the ACLU in violation of the establishment clause of the First Amendment.  Let’s see if these bills can make it through the Louisiana and Mississippi legislatures in the waning days of the 2014 sessions. Those legislative bills  and the Tennessee law are a work in process that other states with GM charter school problems might consider investigating as remedies.

EDITORS NOTE: This column originally appeared on The New English Review.

Arne Duncan Plays the Common Core Distancing Game

On April 2, 2014, Louisiana has witnessed the lame demonstration of “Common Core distancing” from the governor (Bobby Jindal) who signed the state onto “the standards” (CCSS) in 2009– before they were written.

In 2010, US Secretary of Education Arne Duncan accepted Louisiana’s CCSS MOU (memorandum of understanding) despite the majority of Louisiana school districts rejecting the idea.

Like Jindal, Duncan has begun playing the CCSS Distancing Game. He first did so when when Indiana appeared to be the first state to drop CCSS, in March 2014.

On March 15, 2014, Duncan publicly stated that “states are free to completely discard Common Core.”

This is the same Duncan who told newspaper editors in June 2013 how to favorably report on CCSS.

This is the same Duncan who insulted “White suburban mothers” and blamed them for CCSS resistance in November 2013, then offered no apology.

Now, on April 8, 2014, Duncan has told the House Appropriations Subcommittee that he “just likes high standards”:

“I’m just a big proponent of high standards. Whether they’re common or not is secondary,” he told members of the House appropriations subcommittee that works on health, education, and other related issues. [Emphasis added.]

And at this point, Duncan falls back on the “or other common standards” clause included in the Race to the Top (RTTT) application. You see, the House Appropriations Committee questioned Duncan on the apparent requirement that states agree to CCSS in order to compete for RTTT money.

Duncan states that “zero” federal grant money is contingent upon CCSS since states could have chosen to form their own “common standards.”

Duncan is drawing on a clause in the 2010 Blueprint for Elementary and Secondary Education Act (ESEA) reauthorization:

States may either choose to upgrade their existing standards, working with their 4-year public university system to certify that mastery of the standards ensures that a student will not need to take remedial coursework upon admission to a postsecondary institution in the system, or work with other states to create state-developed common standards that build toward college- and career-readiness. 

Never mind that the federal government would still be controlling state standards by ultimately deciding if the evidence offered is “good enough” for state receipt of federal money.

The author of the April 8, 2014, EdWeek article, Michele McNeil, isn’t convinced of Duncan’s “zero” response:

But when it comes to competitive grants, the answer is more complicated than “zero.”The administration’s original $4 billion Race to the Top program awarded 40 points to states for developing and adopting common standards. All 12 of those winners have adopted the standards, and have not backed off. What’s more, a separate, $360 million Race to the Top contest to fund common tests was based on the premise that states needed help developing such assessments based on the common standards. But technically, aligning to the common core wasn’t required (you just probably weren’t going to win without it).

Duncan’s testimony, which didn’t contain such nuances, illustrates the fine line the department continues to walk between supporting states as they implement the common core, and not giving critics ammunition to cry “federal overreach.” [Emphasis added.]

Duncan (and Obama) will be crossing that “fine line” should they make CCSS a definitive component of the FY2015 ESEA reauthorization blueprint, a direction that the Cato Institute believes the Obama administration plans to follow.

Proponents of CCSS are fond of saying that “federal overreach” is an unsubstantiated complaint.

Not so, according to ESEA Subpart Two,Section 9527(c)(1):


(1) IN GENERAL- Notwithstanding any other provision of Federal law, no State shall be required to have academic content or student academic achievement standards approved or certified by the Federal Government, in order to receive assistance under this Act. [Emphasis added.]

However, given the Obama/Duncan love of education privatization, I don’t think the ultimate goal is federal control of American “common,” public education.

I think the ultimate Obama/Duncan goal is for-profit education company control of American education– but no longer public.

For-profit control of American education can only lead to the end game of not educating all American children– just the “common” ones who might be exploited for profit.

The children of privilege– Obama’s children and Duncan’s children– will be exempt from “common” privatization betrayal.

Is Lying About Climate Change Okay?

Those of us who have chronicled the global warming hoax, now called “climate change”, know that it is based on decades of lies about carbon dioxide and other “greenhouse gas” with predictions that the Earth will heat up and cause massive problems unless those emissions are drastically reduced by not using coal, oil and natural gas.

Two American think tanks, The Heartland Institute and the Committee for a Constructive Tomorrow (CFACT) have been among those exposing those lies for years. The lies have been generated and led by the UN Intergovernmental Panel on Climate Change (IPCC).

“Despite the panel’s insistence that the Earth is getting hotter, five different datasets show that there have been no observable warming for 17 and a half years even as carbon dioxide levels have risen 12%,” notes Christopher Monckton, a science advisor to Britain’s former Prime Minister Thatcher. “The discrepancy between prediction and observation continues to grow.”

Recently, two Chinese assistant professors of economics, Fuhai Hong and Xiaojian Zhao, were published in the American Journal of Agricultural Economics. Their paper, “Information Manipulation and Climate Agreements”, openly advocated lying about global warming/climate change in order to get nations to sign on to the International Environmental Agreement.

“It appears that news media and some pro-environmental organizations,” they noted, “have the tendency to accentuate or even exaggerate the damage caused by climate change. This article provides a rationale for this tendency.”

Craig Rucker, CFACT’s Executive Director, responded to the Chinese authors saying “They’re shameless.” Theirs and others ends-justify-the-means tactics reflects the attitudes and actions of environmental organizations and serves as a warning to never accept anything they say on any aspect of this huge hoax.

CFACT’s President and co-founder, David Rothbard, noted that “Global warming skeptics have long charged that alarmists are over-hyping the dangers of climate change.” How long? Back in 1989, the late Stanford University professor, Stephen Schneider, said, “So we have to offer up scary scenarios, make simplified, dramatic statements, and make little mention of any doubts we might have. This ‘double ethical bind’ which we frequently find ourselves in cannot be solved by any formula. Each of us has to decide what the right balance between being effective and being honest.”

There is no “right balance” between telling lies and telling the truth when it comes to science or any other aspect of our lives. Suffice to say that thousands of scientists who participated in the IPCC reports over the years supported the lies, but many have since left and some have openly denounced the reports.

As the latest IPCC summary of its report has garnered the usual verbatim media coverage of its outlandish predictions, The Heartland Institute has released its own 1,062 page report from the “Nongovernmental International Panel on Climate Change (NIPCC) called “Climate Change Reconsidered II: Biological Impacts. An 18-page summary is available at

Among its findings:

  • Atmospheric carbon dioxide is not a pollutant.
  • There is little or no risk of increasing food insecurity due to global warming or rising atmospheric CO2 levels.
  • Rising temperatures and atmospheric CO2 levels do not pose a significant threat to aquatic life.
  • A modest warming of the planet will result in a net reduction of human mortality from temperature-related events.

Based on hundreds of peer-reviewed studies, the NIPCC report is free of the lies that are found in the IPCC report whose studies have been, at best, dubious, and at worst, deliberately deceptive.

In light of the natural cooling cycle the Earth has been in that is good news and it will be even better news when the planet emerges from the cycle that reflects the lower levels of radiation from the Sun.

On March 31, CNS News reported that “The United Nation’s Intergovernmental Panel on Climate Change’s latest report estimates it will cost developed nations an additional $100 billion each year to help poorer nations adapt to the devastating effects of ‘unequivocal’ global warming, including food shortages, infrastructure breakdown, and civil violence. But that figure was deleted from the report’s executive summary after industrial nations, including the United States, objected to the high price tag.”

The price tag reveals the IPCC’s real agenda, the transfer of funds from industrial nations to those less developed. It’s about the money and always has been. It’s not global warming the planet needs to survive, it is the costly lies about it.

© Alan Caruba, 2014

The EPA’s Taking of Nevada 1-2-3

The Freedoms guaranteed individuals by the US Constitution continues to be eroded by the Obama administration.  When the Bureau of Land Management (BLM) took possession of millions of dollars in private property and cattle herds in violation of the provisions of the Bill of Rights and the Tenth Amendment, the Federal Government violated Nevada’s State Sovereignty, Nevada’s State Law and the Clark County Sheriff’s Law Enforcement authority.  The Environmental Protection Agency pushed for the confiscation of the land and confiscation of the ranch owner’s herd of 908 cattle, in order to protect the food source for the desert tortoise; yet there has always been plenty of food available to feed the grazing cattle and the desert tortoise for 144 years.

VIDEO: Protesters at the Bundy Ranch in Bunkerville, Nevada take on the Feds and stand their ground. Bundy Ranch Protesters were tasered by federal agents and attacked by K9’s. WARNING STRONG LANGUAGE:

4-540x335The Bureau of Land Management, in support of the Environmental Protection Agency, imposed fines of $1 million on a rancher for allowing his cattle to graze on the open range, which is public land. The family owned ranch has had cattle grazing rights on the public land which is the open range, since 1870, for a period of 144 years.  Although the US Government’s action was opposed by the Governor of Nevada and the County Sheriff in whose jurisdiction the land grab occurred, 200 heavily armed federal agents ignored the State and County’s opposition and moved in on the rancher.

While the federal agents were taking possession of the ranch owner’s herd of 908 cattle, they were threatening the rancher’s family members, in order to prevent them from taking photos of the land and cattle grab (his son was arrested for taking photos). The federal agents also arrested the rancher and one of the federal agents ground the rancher’s head into the dirt with his boot on the rancher’s head.

2-e1396998819209Over the last 5 years, the Obama administration has had a great deal of experience oppressing American citizens, in the US Armed Forces, who did not have the freedom to object; the above action against the rancher seems to be a shift in the oppression of freedoms from military personnel to civilians. In the US Armed Forces, Chaplain’s Freedom of Speech in the pulpit has been curbed, Religious Freedom of military personnel who oppose homosexuality on religious grounds is restricted, refusal of the resident of the Oval Office to send a rescue force to save the lives of 4 Americans murdered in Benghazi has resulted in a loss in faith by military personnel of their leaders, the failure of the resident of the Oval Office to protect 14,000 straight military males from sexual assaults by new gay members entering the military has been covered up, and forcing new and dangerous Rules of Engagement (ROE) on military personnel in combat has resulted in an increase casualty rate of 358%.

The oppressive actions by the Obama administration over the last 5 years, toward personnel in the US Armed Forces, is negatively affecting “Combat Effectiveness” and/or has been in violation of the US Constitution; those restrictions of freedom in the military personnel, seems to be migrating toward civilians in the US as well, and if nothing is done to oppose the action in Nevada by the Obama administration, the restrictions of freedoms of American citizens, guaranteed by the Bill of Rights will continue to increase.

IMG_3144-e1396998660335The Obama administration has been employing government agencies to apply pressure on Obama’s political opponents, and those government agencies have been restricting the freedoms of Americans citizens in the Republic. Examples of how the Obama administration has been employing government agencies to oppress Obama’s opponents are as follows: the IRS scandal prevented hundreds of conservatives organization from participating in the 2012 Presidential election, the Fast & Furious gun running scandal executed by DOJ was designed to restrict gun rights guaranteed by the Second Amendment, the Socialist Obamacare Law was passed to take control of one-sixth of the US economy and replace The Free Enterprise System with a Socialist system.

Cancellation of the stockholders ownership of General Motors that they paid for, and giving control of General Motors to unions was unlawful. Directing the NSA to gather information on organizations and individuals that are opposed to the Obama administration has been opposed by conservative organizations, Obama’s refusal to enforce Federal Immigration Laws designed to protect American citizens from dangerous Illegal Criminal Immigrant resulted in Obama freeing 68,000 Illegal Criminal Immigrants into the general public, and the current assault on the rancher in Nevada by the BLM is in violation of Nevada State Laws, the Tenth Amendment and The Bill of Rights; if the BLM and the Environmental protection agency is allowed to get away with the illegal confiscation of personal property, more of those actions in violation of the US Constitution will be perpetrated by the Obama administration.

Will the Republican leadership in the House take action to protect the individual Freedoms of American citizens guaranteed by the US Constitution—they have the power of the purse to put pressure on all government agencies?


Last Man Standing: 20 Year Conflict Between Rancher and Bureau of Land Management Comes Down to Armed Feds Surrounding His Ranch
200 Armed Federal Agents Surround Farm…
‘Range War’…
Cattle Seized…
Governor Calls Roundup ‘Intimidation’…
Blasts ‘First Amendment Area’…

Senator: ‘Overreaching’…
Family: ‘Wake up America…they are taking everything from us’…

Climate Consensus: Do Little for Now by DANIEL SUTTER

The 2007 report of the Intergovernmental Panel on Climate Change (IPCC) projects that continued emission of greenhouse gasses (GHG) will raise the earth’s temperature by 1.8°C (3.2°F) and sea level by one foot by 2100. Projected climate changes, if they come to pass, will have a number of effects on society, though not all of those effects will be negative.

Although debate over the IPCC’s projections continues, less attention has been focused on the ultimately more important result: Cost-benefit analysis (CBA) implies we should do very little to prevent climate change. Instead, we should create wealth. Expanding the productive capacity of the economy will compensate future generations better than reductions in GHG will. A richer world in 2100, after all, will be able to afford to do things like relocating people affected by rising sea levels and constructing new port facilities and seawalls.

report by the liberal Global Development and Environment Institute at Tufts University observes, “Economists frequently . . . calculate the optimal policy response [to climate change]. This calculation often leads to the conclusion that relatively little should be done for now.”

Cost-Benefit Analysis

Businesses operate under the discipline of profit and loss based on market prices. Profit signals that an action generates benefits for the economy. Government does not face the discipline of profit and loss, but CBA, performed honestly, offers guidance about whether government actions benefit society.

Measures to reduce GHG emissions today typically fail a cost-benefit test due to the discounting of benefits. Discounting refers to applying a real interest rate to future values. Two arguments support discounting in CBA. The first is impatience, or what economists call time preference: $100 is worth more today than it is one year from now, even without inflation. The second is the return on savings and investment, or the opportunity cost of capital. Money spent now to reduce GHG could be saved and invested instead. The interest rate equates impatience and the return on investment on the margin, as investors must be compensated for delaying consumption.


The mathematics of discounting makes values more than about 50 years in the future worth little today. The federal government makes cost-benefit calculations using 3 percent and 7 percent annual real (or adjusted for inflation) interest rates, approximating the historical risk-free interest rate and the annual real return on stocks. The present value of $1 million 100 years from now is $52,000 at a 3 percent discount rate, and $1,150 at a 7 percent discount rate. To see how this affects climate change economics, suppose that spending $100 billion annually—starting right now—we could prevent $1 trillion in annual damage, beginning in 100 years. The ratio of $10 in benefits to every $1 in costs appears favorable, but this fails a benefit-cost test at either a 7 percent or 3 percent real discount rate.

Some observers respond to this math by arguing against discounting in climate change economics. Time preference is a questionable argument in intergenerational settings because future beneficiaries will not have to wait 100 years to realize climate benefits. But the opportunity cost argument remains. The Stern Commission in the U.K. applied an implausibly low discount rate to its calculations. Others imagine current benefits from GHG reductions rendering discounting irrelevant. For example, the Environmental Protection Agency (EPA) included private benefits in a CBA of higher fuel economy standards to reduce GHG emissions, arguing that making people purchase higher-mileage cars than they prefer makes car buyers better off. Creating benefits today effectively makes reducing GHG a free lunch.

Wealthier is Healthier

Resources put into reducing GHG can’t be invested elsewhere, so the opportunity cost of GHG reduction amounts to the returns that could have been expected, based on historical rates. Maintaining opportunities to invest and create wealth for future generations requires the institutions of a market economy, or a high level of economic freedom, as the Fraser Institute’s Economic Freedom of the World: 2012 Annual Report demonstrates. Bequeathing a higher standard of living to future generations also requires preserving economic freedom. Discounting mathematics ultimately tells us that economic freedom addresses climate change more effectively than energy central planning through carbon taxes or cap-and-trade.

Compensating the “victims” of climate change with extra wealth does have a potential limit. Extra resources provide inadequate compensation if climate change dramatically alters the world. Money will not typically fully compensate for a catastrophic injury; a quadriplegic is unlikely to enjoy the same level of utility or satisfaction after his injury, even if his medical bills and care needs are paid. Wealth accumulation would not adequately compensate future generations if climate change produced a world like those depicted in Waterworld and The Day After Tomorrow. Future generations would not be adequately compensated if climate change destroyed the economy’s ability to produce goods and services. Fortunately Waterworld is the stuff of Hollywood fiction; the largest of the upper range of sea level rise in any 2007 IPCC climate scenario is about 2 feet. That will have serious consequences, but it will hardly flood the entire world. It can be offset by wealth accumulation.

A Hundred-Year Plan?

Property rights and prices lead basically self-interested people to worry about the future. For example, property rights and markets for existing homes provide owners with incentives to keep their houses livable long after they plan to own them. And yet the mathematics of discounting implies that events too far in the future should not affect decisions much today. Growth, progress, and creative destruction limit the horizon for detailed planning in a market economy. Imagine a business in 1900 trying to plan its operations in 2000. The plan could not have included automobiles, planes, television and radio, satellites, computers, and many other conveniences of modern life.

Now let’s project ahead and consider planning for climate change. A number of fundamental innovations could substantially reduce if not eliminate the threat from climate change, such as effective, low-cost carbon sequestration or effective weather modification to smooth out precipitation patterns. And the development of a radical new clean energy source like nuclear fusion could render remaining stocks of fossil fuels uneconomic at any price.


A dynamic market economy will feature too much creative destruction to allow detailed planning for the distant future. Nothing is sure in a market economy 10 years from now, much less 100 years, and discounting in cost-benefit analysis simply reflects this reality. The economic future becomes more predictable when government controls economic activity, but then stagnation results. Discounting in climate change economics tells us to create wealth to protect future generations. Economic freedom and the institutions of the market economy, not central planning of energy use, are the prudent policy approaches to a changing climate.


Daniel Sutter is the Charles Koch Professor of Economics at the Johnson Center for Political Economy at Troy University.

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