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Why Do We Believe These Pathological Liars? by B.K. Marcus

How do you feel when someone lies to you?

It probably depends on who is doing the lying. A stranger’s fabrications may not phase you, but dishonesty from a friend or lover can end the relationship. The more you feel the liar is supposed to be “on your side,” the more his or her deceptions feel like betrayal — unless, it turns out, the lies come from a politician you support.

When I shared a link on Facebook to Rick Shenkman’s article “Why Are Trump Voters Not Bothered by His Lies?” someone immediately replied by asking, “Why are Hillary voters not bothered by her lies?” Why, in other words, focus on only one mendacious candidate when lying to voters seems like a prerequisite for running for office?

Shenkman, who is the editor of HistoryNewsNetwork.org and the author ofPolitical Animals: How Our Stone-Age Brain Gets in the Way of Smart Politics, might respond with his claim that Trump “has told more lies than any other leading political figure probably ever has.” But his article is in fact about neither Trump’s astonishing number of fibs nor his supporters’ astonishing tolerance for them; it is about how widespread both such lying and such tolerance are across party lines and throughout the era of mass-media mass democracy.

Shenkman is writing for a left-leaning readership, thus his headline’s righteous indignation toward a right-wing candidate, but most of the examples he gives are of deliberately deceitful Democrats. He starts with candidate Kennedy’s campaign claim that the Soviets had more nuclear missiles than the United States:

He continued to insist that there was a missile gap to the Soviet’s advantage even after he was briefed by General Earl Wheeler that there wasn’t. After the election his secretary of defense, Robert McNamara, told the press on background that a study had found there was no missile gap, leading to blaring headlines the next morning.

JFK’s reaction? He ordered his press secretary, Pierre Salinger, to tell the media that there had been no study and that there was a gap. The truth was that JFK himself didn’t take his own rhetoric about the missile gap seriously. At cabinet meetings he cracked on numerous occasions, “Who ever believed in the missile gap” anyway?

Four years later, President Johnson “told the American people that the North Vietnamese were guilty of making repeated unprovoked attacks on [US] naval vessels in the Tonkin Gulf.” As with Kennedy, we know that Johnson was being dishonest, not mistaken. “Hell,” LBJ told an aide, “those dumb stupid sailors were just shooting at flying fish.”

Shenkman barely touches on Nixon’s perfidy in Watergate and never mentions Nixon aide John Ehrlichman’s 1994 interview, admitting that the war on drugs was not about crime or health but was rather a politically motivated attack on war protestors and American blacks. “Did we know we were lying about the drugs?” said the president’s former domestic affairs advisor. “Of course we did.”

And while he may have given Ms. Clinton a pass, Shenkman does mention the millions of supporters who refused to believe the allegations against her husband “until prosecutors revealed they possessed [Monica Lewinsky’s] infamous blue dress.”

No one should be shocked by the frequency of politicians’ duplicity, but it is frustrating when a candidate is caught in an undeniable falsehood and his or her supporters never waiver.  Our political culture expects politicians to perjure and prevaricate left and right, but that doesn’t make their deceptions defensible. So where is the outrage?

“Our brains are partisan,” Shenkman writes:

While we are quick to seize on the misstatements of other candidates, we give them a pass when it’s our own. When the social scientist Drew Westen put voters in an MRI machine he discovered that their brains quickly shut off the flow of information contrary to their beliefs about their favorite candidates. The neurons actively involved in the transmission of this information literally went inactive.

It’s not just the political candidates who are lying. So are the voters. “We lie,” Shenkman points out, “about our unwillingness to put up with lies.”

If politicians keep lying and voters keep shrugging it off, isn’t that an indictment of democracy? Aren’t voters supposed to act as a check on the people in power?

In theory, an election is supposed to be more than a popularity contest. Candidates are supposed to represent an approach to policy making, which is in turn supposed to reflect both facts and a theory of cause and effect. What we have instead is a formalized tribalism, us versus them, facts be damned.

Shenkman assures the reader that the liars don’t get away with it forever, but his evidence for that conclusion is questionable. Johnson and Nixon are remembered as liars by both Democrats and Republicans, but the reckoning for Gulf of Tonkin and Watergate are outliers in the steady stream of deception flowing out of DC and the state capitals. Meanwhile, Mssrs Kennedy and Clinton will be remembered more for deceiving their wives than the voters.

Westen’s research on cognitive dissonance and party politics is troubling, but well before there was any hard data on how voters process unwanted facts, the theory of rational ignorance told us why so many facts are so unwanted: to the individual voter, the cost of acquiring the relevant knowledge far outweighs the practical benefits of knowing the truth when casting a ballot.

In contrast, the benefits of supporting a candidate accrue, not from any actual effect on the electoral outcome, but largely from the signaling that it provides the voter: this is the sort of person I am, and these are the sorts of causes I support. Symbolic affiliation isn’t dependent on the truth of any particular facts, so why should we expect inconvenient falsehoods to change anyone’s political alignment?

As I wrote in “Too Dumb for Democracy?” (Freeman, spring 2015), “getting an issue like the minimum wage terribly wrong takes no work and has the immediate payoff of feeling like you’re on the side of the angels. It also solidifies your standing within your own ideological tribe. Bothering to understand supply and demand … offers no practical reward after you pull the lever in the election booth.”

The lies we care the least to uncover are precisely those for which the cost of caring outweighs the benefits of our vigilance. That describes almost anything we may ever be asked to vote on. But when knowing the truth directly matters to the decisions we make every day — the truth about our jobs, our homes, our families and loved ones — the relative benefits of knowing the truth are far greater, and we therefore penalize the liars in our lives. Cognitive dissonance may be a barrier to accepting hard truths, but even cognitive dissonance is price sensitive.

The more decisions we cede to the political process, the less we should expect anyone to protect our interests. Even we don’t bother to do it, because the rules of the game — majority rules — render our efforts ineffectual. Worse than that: we’re not even rewarded for knowing what policies really are or aren’t in our best interest.

The truth can win out, but it’s a lot less likely in an election.

B.K. MarcusB.K. Marcus

B.K. Marcus is editor of the Freeman.

Why the Holocaust Should Matter to You by Jeffrey Tucker

People tour the nation’s capital to be delighted by symbols of America’s greatness and history. They seek out monuments and museums that pay tribute to the nation state and its works. They want to think about the epic struggles of the past, and how mighty leaders confronted and vanquished enemies at home and abroad.

But what if there was a monument that took a different tack? Instead of celebrating power, it counseled against its abuses. Instead of celebrating the state and its works, it showed how these can become ruses to deceive and destroy. Instead of celebrating nationalist songs, symbols, and stories, it warned that these can be used as tools of division and oppression.

What if this museum was dedicated to memorializing one of history’s most ghastly experiments in imperial conquest, demographic expulsion, and eventual extermination, to help us understand it and never repeat it?

Such a museum does exist. It is the US Holocaust Museum. It is the Beltway’s most libertarian institution, a living rebuke to the worship of power as an end in itself.

I lived in Washington, DC, when the Holocaust Museum was being built, and I vaguely recall when it opened. I never went, though I had the opportunity; I remember having a feeling of dread about the prospect of visiting it. Many people must feel the same way. Surely we already know that mass murder by the state is evil and wrong. Do we really need to visit a museum on such a ghastly subject?

The answer is yes. This institution is a mighty tribute to human rights and human dignity. It provides an intellectual experience more moving and profound than any I can recall having. It takes politics and ideas out of the realm of theory and firmly plants them in real life, in our own history. It shows the consequences of bad ideas in the hands of evil men, and invites you to experience the step-by-step descent into hell in chronological stages.

The transformation the visitor feels is intellectual but also even physical: as you approach the halfway point you notice an increase in your heart rate and even a pit in your stomach.

Misconceptions

Let’s dispel a few myths that people who haven’t visited might have about the place.

  • The museum is not maudlin or manipulative. The narrative it takes you through is fact-based, focused on documentation (film and images), with a text that provides a careful chronology. One might even say it is a bit too dry, too merely factual. But the drama emerges from the contrast between the events and the calm narration.
  • It is not solely focused on the Jewish victims; indeed, all victims of the National Socialism are discussed, such as the Catholics in Poland. But the history of Jewish persecution is also given great depth and perspective. It is mind boggling to consider how a regime that used antisemitism to manipulate the public and gain power ended up dominating most of Europe and conducting an extermination campaign designed to wipe out an entire people.
  • The theme of the museum is not that the Holocaust was an inexplicable curse that mysteriously descended on one people at one time; rather the museum attempts to articulate and explain the actual reasons — the motives and ideology — behind the events, beginning with bad ideas that were only later realized in action when conditions made them possible.
  • The narrative does not attempt to convince the visitor that the Holocaust was plotted from the beginning of Nazi rule; in fact, you discover a very different story. The visitor sees how bad ideas (demographic central planning; scapegoating of minorities; the demonization of others) festered, leading to ever worsening results: boycotts of Jewish-owned business, racial pogroms, legal restrictions on property and religion, internments, ghettoization, concentration camps, killings, and finally a carefully constructed and industrialized machinery of mass death.
  • The museum does not isolate Germans as solely or uniformly guilty. Tribute is given to the German people, dissenters, and others who also fell victim to Hitler’s regime. As for moral culpability, it unequivocally belongs to the Nazis and their compliant supporters in Germany and throughout Europe. But the free world also bears responsibility for shutting its borders to refugees, trapping Jews in a prison state and, eventually, execution chamber.
  • The presentation is not rooted in sadness and despair; indeed, the museum tells of heroic efforts to save people from disaster and the resilience of the Jewish people in the face of annihilation. Even the existence of the museum is a tribute to hope because it conveys the conviction that we can learn from history and act in a way that never repeats this terrible past.

The Deeper Roots of the Holocaust

For the last six months, I’ve been steeped in studying and writing about the American experience with eugenics, the “policy science” of creating a master race. The more I’ve read, the more alarmed I’ve become that it was ever a thing, but it was all the rage in the Progressive Era. Eugenics was not a fringe movement; it was at the core of ruling-class politics, education, and culture. It was responsible for many of the early experiments in labor regulation. It was the driving force behind marriage licenses, minimum wages, restrictions on opportunities for women, and immigration quotas and controls.

The more I’ve looked into the subject, the more I’m convinced that it is not possible fully to understand the birth of the 20th century Leviathan without an awareness of eugenics. Eugenics was the original sin of the modern state that knows no limits to its power.

Once a regime decides that it must control human reproduction — to mold the population according to a central plan and divide human beings into those fit to thrive and those deserving extinction — you have the beginning of the end of freedom and civilization. The prophets of eugenics loathed the Jews, but also any peoples that they deemed dangerous to those they considered worthy of propagation. And the means they chose to realize their plans was top-down force.

So far in my reading on the subject, I’ve studied the origin of eugenics until the late 1920s, mostly in the US and the UK. And so, touring the Holocaust Museum was a revelation. It finally dawned on me: what happened in Germany was the extension and intensification of the same core ideas that were preached in the classrooms at Yale, Harvard, and Princeton decades earlier.

Eugenics didn’t go away. It just took on a more violent and vicious form in different political hands. Without meaningful checks on state power, people with eugenic ambitions can find themselves lording over a terror state. It was never realized in the United States, but it happened elsewhere. The stuffy academic conferences of the 1910s, the mutton-chopped faces of the respected professorial class, mutated in one generation to become the camps and commandants of the Nazi killing machine. The distance between eugenics and genocide, from Boston to Buchenwald, is not so great.

There are moments in the tour when this connection is made explicit, as when it is explained how, prior to the Nazis, the United States had set the record for forced sterilizations; how Hitler cited the US case for state planning of human reproduction; how the Nazis were obsessed with racial classification and used American texts on genetics and race as a starting point.

And think of this: when Progressive Era elites began to speak this way, to segment the population according to quality, and to urge policies to prevent “mongrelization,” there was no “slippery slope” to which opponents could point. This whole approach to managing the social order was unprecedented, and so a historical trajectory was pure conjecture. They could not say “Remember! Remember where this leads!”

Now we have exactly that history, and a moral obligation to point to it and learn from it.

What Can We Learn?

My primary takeaway from knitting this history together and observing its horrifying outcome is this: that any ideology, movement, or demagogue that dismisses universal human rights, that disparages the dignity of any person based on group characteristics, that attempts to segment the population into the fit and unfit, or in any way seeks to use the power of the state to put down some in order to uplift others, is courting outcomes that are dangerous to the whole of humanity. It might not happen immediately, but, over time, such rhetoric can lay the foundations for the machinery of death.

And there is also another, perhaps more important lesson: bad ideas have a social and political momentum all their own, regardless of anyone’s initial intentions. If you are not aware of that, you can be led down, step by step, to a very earthly hell.

At the same time, the reverse is also true: good ideas have a momentum that can lead to the flourishing of peace, prosperity, and universal human dignity. It is up to all of us. We must choose wisely, and never forget.

Jeffrey A. TuckerJeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE and CLO of the startup Liberty.me. Author of five books, and many thousands of articles, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. Email.

Does Democracy Lead to Socialism? by B.K. Marcus

Presidential candidate Bernie Sanders has brought “democratic socialism” out of the shadows of fringe ideologies and into the spotlight of mainstream American politics. Nevertheless, many find Sanders’s self-description perplexing. Is socialism seriously still in play? Didn’t the horrors of the 20th century finally bury that ideological monstrosity?

No, that’s communism you’re thinking of. To quote the Democratic Socialists of America (DSA),

Socialists have been among the harshest critics of authoritarian Communist states. Just because their bureaucratic elites called them “socialist” did not make it so; they also called their regimes “democratic.”

If the communists weren’t really socialists, then what the heck does socialism mean?

The basic definition of socialism, democratic or otherwise, is collective ownership of the means of production. The DSA website says, “We believe that the workers and consumers who are affected by economic institutions should own and control them.”

But the DSA keeps the emphasis on democracy:

Democratic socialists believe that both the economy and society should be run democratically — to meet public needs, not to make profits for a few. To achieve a more just society, many structures of our government and economy must be radically transformed through greater economic and social democracy so that ordinary Americans can participate in the many decisions that affect our lives.

Socialism, then, as the democratic socialists understand the term, is just the logical consequence of the democratic ideal:

Democracy and socialism go hand in hand. All over the world, wherever the idea of democracy has taken root, the vision ofsocialism has taken root as well.

On this point, at least, many in America’s free-market tradition would agree.

Anti-democratic Anti-socialists

Ludwig von Mises may have been the most radical classical liberal in 20th-century Europe, but when he came to the United States, Mises found himself at odds with American libertarians who felt that his liberalism didn’t go far enough.

Some of these disagreements would strike most of us as highly abstract, such as the question of whether or not the philosophy of freedom is based in natural law or utilitarianism. But at least one practical point of contention was the issue of majoritarian democracy. Mises had defended both capitalism and democracy in his book Liberalism. American libertarians such as R.C. Hoiles and Frank Chodorov shared Mises’s appreciation of the free market but were far less sanguine about majority rule. The harshest language came from Discovery of Freedom author Rose Wilder Lane:

As an American I am of course fundamentally opposed to democracy and to anyone advocating or defending democracy, which in theory and practice is the basis of socialism.

It is precisely democracy which is destroying the American political structure, American law, and the American economy, as Madison said it would, and as Macauley prophesied that it would do in fact in the 20th century. (Letter from Lane to Mises, July 5, 1947; quoted in Mises: The Last Knight of Liberalism)

Why would Lane argue that democracy is “the basis of socialism”?

Majority Fools

Voting turns out to be a particularly bad way to make economic decisions. Mancur Olson’s book The Logic of Collective Action wouldn’t appear for another 18 years, but some version of his thesis was probably already familiar to Lane and her radical allies. Olson argues that majority rule separates the benefits and the costs of decision-making.

Elections aren’t just a poll of everyone’s opinion; they are organized campaigns by different groups fighting for their interests. A voter doesn’t go into the booth having studied the controversy in question. He or she brings to the polls an impression of an issue based on how different organized groups have presented their cause during massive advocacy campaigns prior to Election Day. Every such campaign is a case of a special-interest minority trying to persuade a voting majority.

And it’s not a level playing field, to borrow one of the political left’s favorite metaphors. Olson explains how the incentive for group action decreases as the size of a group increases, meaning that bigger groups are less able to act in their common interest than smaller ones. Small groups can gain concentrated benefitswhile the rest of us face diffuse costs.

The textbook example is sugar tariffs (“or what amounts to the same thing in the form of quota restrictions against imports of sugar,” as former Freeman editor Paul Poirot put it). Why is Coke sweetened with corn syrup in the United States and with sugar everywhere else in the world? Because sugar is cheaper everywhere else, while the US government keeps sugar artificially expensive for Americans. The protections responsible are a huge benefit to a small group of domestic sugar producers (and, as it turns out, also to corn growers) and a burden on the rest of us.

Ignore the corn-syrup issue for a moment and pretend that Coke is still made with sugar. Let’s imagine that government price supports make each can of Coke, say, 5¢ more than it otherwise would be. That difference adds up, but at the moment you’re buying the can of soda, it’s an irritation, not a hardship. Even if you bother to figure out how much extra money you have to spend on sweet drinks each year, the figure probably won’t be enough to stir you to petition the legislature to repeal the sugar lobby’s protections. In fact, the loss isn’t even enough to prompt you to learn the cause of the higher price.

That’s what economists mean when they talk about diffuse costs. (And the Coke drinker’s very reasonable cluelessness about the cause of his lost nickel is what economists call “rational ignorance.” See “Too Dumb for Democracy?” Freeman, Spring 2015.)

On the other hand, the sugar producers will make billions from lobbying and campaigning to explain why their favorite barriers are good for the economy.

Take this example and multiply it by all the special interests seeking government favors. Even if you do understand what’s going on, even if you know how this hurts the economy and consumers and yourself, it’s not like there’s ever one plebiscite, a big thumbs-up or thumbs-down for free trade in sugar. Every issue is addressed separately, and every issue faces the same logic of collective action we see in the case of the sugar. (And as with the case of sugar, where the corn industry has its own interests in promoting higher sugar prices, many issues have multiple special-interest groups with their own reasons for supporting socially harmful policies.)

Now replace agribusiness in this example with teachers unions or the AARP or anyone else who benefits from a government program, even if that program hurts the rest of us.

The democratic system is rigged from the outset to favor ever more interference from ever-bigger government. From this perspective, Rose Wilder Lane doesn’t seem quite so polemical for equating democracy and socialism.

Democratic Socialists for Crony Capitalism

But is big government the same thing as socialism? The DSA denies it. They insist that they prefer local and decentralized socialism wherever possible. How long an elected socialist would keep his hands off the bludgeon of central power is a reasonable question, and a chilling one, as is the question of how long asocialist democracy would honor the civil liberties that the DSA claims to support.

But even if we reject the DSA’s claims as either naive or fraudulent, there is still a compelling reason to reject the equation of big government and socialism.

Government doesn’t grow to serve the poor or the proletariat. Democracy spawns special interests, and special-interest campaigns require deep pockets. None come deeper than the pockets of established business interests.

Real-world capitalists, despite the rhetoric of the socialists, rarely support capitalism — at least not in the sense of free trade and free markets. What they too often support is government protection and largess for themselves and their cronies, and if that means having to share some of the spoils with organized labor, or green energy, or the welfare industry, that’s not a problem. Corporate welfare flows left and right with equal ease.

“Democratic socialists,” according to the DSA, “do not want to create an all-powerful government bureaucracy. But we do not want big corporate bureaucracies to control our society either.”

If that’s true, then democratic socialists should aim to reduce both the size of government and the scope of democratic decisions. Unfortunately, they’re headed in the opposite direction — and trying to drag the rest of us with them.

B.K. MarcusB.K. Marcus

B.K. Marcus is editor of the Freeman.

Two-Thirds of Americans Believe Money Buys Elections by Daniel Bier

Everybody knows that money buys elections. That’s what opponents of theCitizens United decision have been ominously warning us for six years, and their message resonates. A CNN poll found that 67 percent of Americans think that “elections are generally for sale to the candidate who can raise the most money.”

The trouble is that there is very little evidence for this. Even though the candidate with the most money usually wins, the general rule is that moneychases winners rather than creates winners. People give to candidates they think are likely to win, and incumbents (who almost always win) and candidates in safe districts still raise money, even if they’re not challenged. On the flip side, donors and parties don’t waste support on long-shot races.

More importantly, money never guarantees any election. For instance, billionaire Meg Whitman spent $144 million of her own money on the California governor’s race; Jerry Brown spent just $36 million but crushed Whitman, 53 percent to 40 percent.

Mitt Romney, the GOP, and their PACs outspent Barack Obama and friends by over $120 million, and we know what came of that. Anthony Brown (D) outspent Larry Hogan (R) almost five to one in the 2014 Maryland governor’s race and lost, in a state that is two to one Democrat.

We can likely add Jeb Bush’s candidacy to this list. The Jeb! campaign and pro-Jeb groups have collectively raised $155 million. Only Hillary Clinton has raised more. According to the New York Times, he’s dominating “the money race” among Republicans.

But in the actual race, he got a dismal sixth place in Iowa, with 2.8 percent of the vote. Polls put Jeb fifth in New Hampshire and fifth nationally. Currently, Betfair places his odds of winning the nomination at 5.2 percent.

In fact, the whole Republican race shows that money can’t simply buy votes. Scott Walker raised $34 million in three months, spent all of it — and then dropped out, five months before Iowa. Meanwhile, Donald Trump has dominated news coverage and polls for months with only $19 million.

When you plot money vs. poll numbers, what jumps out is how little correlation there is:

… And money vs. Iowa caucus votes:

… And money vs. odds of winning the nomination:

Jeb and Jeb-PACs have spent $89.1 million so far and received 5,238 votes — over $17,000 per vote received. Trump has spent just $300 per vote.

This is not to say that money doesn’t matter — you can’t run a campaign without it, and campaign finance laws are designed to make it difficult for upstart challengers to become competitive. But after a certain amount (about $500,000 for a typical congressional race), there are rapidly diminishing returns, and dumping more money on a failing campaign will not save it.

There’s a lot of baseless fears about free speech, but the idea that the people with the most expensive microphone will always get their way is one of the easiest to disprove. More speech, more discussion, and more competition in the field of ideas is not what’s wrong with American politics — but they might be part of the solution to it.

Daniel Bier

Daniel Bier

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

Democracy Can’t Really Be Democratic by Ilya Somin

Recent debates over the meaning of “one person, one vote” and the lessons of ancient Greek democracy for the modern world highlight an important truth about democracy: it can’t be democratic all the way down.

Lincoln famously said that democracy is “government of the people, by the people, for the people.”

But before “the people” can govern anything, someone has to decide who counts as a member of the people, what powers they have, and what rules they will vote under. And that someone usually turns out to be a small group of elites.

Just as the world can’t be held up by “turtles all the way down,” so a political system can’t be democratic all the way down.

The Elitism at the Heart of Democracy

The ongoing litigation over the meaning of “one person, one vote” illustrates these points well.

Before the voters can decide anything at the polls, someone has to decide which voters will get how many representatives, and under what electoral rules. And that someone will turn out to be some combination of the Supreme Court and state legislators, depending on how tightly the Court chooses to restrict the discretion of the latter.

State legislators are democratically elected, of course, which means the voters will have some influence over their decisions. But in this instance, the legislators are determining the very rules under which they will stand for election in the first place, which gives them ability to constrain the electorate, as well as vice versa.

Ironically, the meaning of a principle that many people regard as a core element of American democracy is going to be decided by a relatively small elite.

Ancient Athens also exemplified the elitism underpinning democracy. While the Athenian citizen assembly had very broad powers over public policy, the right to vote in that assembly was narrowly circumscribed in ways that excluded the bulk of the population of the city.

And, at least in the first instance, the decision to exclude these people was not made democratically. Once the system was established, of course, the male citizens who had the right to vote were far from eager to extend the franchise to women, slaves, or the city’s large population of “metics” (resident non-citizens).

Committed democrats might say that such elitism can be avoided. Perhaps the rules of democracy can also be determined by a democratic process. The people themselves can decide the rules of the political game. For example, the US Constitution — which establishes the basic rules of the American political system — was ratified by conventions elected by popular vote.

But this solution simply pushes the problem one step back.

Before “the people” can decide the rules of the game, someone has to decide the rules under which that decision itself will be made (including the rules determining who qualifies as a member of the people).

In the case of the Constitution, while the people did indeed elect representatives to the ratifying conventions, it was a small elite at the Philadelphia convention that drafted the Constitution, decided that it would come into force if nine of the then-thirteen states ratified it, and chose to ignore the provision of the Articles of Confederation that required unanimous consent by all thirteen states before any amendments come into force.

Had the Philadelphia Convention followed its original mandate (which was merely to propose revisions to the Articles) or respected the unanimity rule, American political history might have turned out differently.

The point is not that the Founding Fathers were necessarily wrong to make decisions they did. It is that the decision-making process they followed was not — and could not have been — democratic all the way down.

Before a democratic process can even begin to function, some nondemocratic process has to make the rules. And those rules will have a major impact on the choices available to “the people” once they finally begin to have a say.

Why it Matters

Does it matter that democracy can’t be democratic all the way down?

The answer depends in large part on your reasons for valuing democracy in the first place. Even if its basic rules are the product of a small elite, democracy might still be superior to other political systems for a host of possible reasons.

If your support for democracy is premised on purely consequentialist grounds (e.g. — that democracy maximizes social welfare), you might not care much about how the democratic process got set up in the first place.

But the elitism at the heart of democracy does impact a number of common arguments for giving broad power to voters and elected officials.

One of the standard rationales for the idea that we have a duty to obey democratically enacted laws is that, thanks to the right to vote, we have consented to them. But we haven’t had a meaningful opportunity to consent to the rules under which the vote occurred in the first place. Many of those rules were established influential elites, in often centuries before any of today’s voters were even born.

In the 2016 election, those of us who can vote will get to decide whether the Democrats or the Republicans will control the presidency and Congress. But we won’t get to decide many of the rules under which that vote takes place, or whether the president and Congress should have so much power in the first place.

For these reasons, among others, voting does not entail any genuine consent to the policies enacted by the winners. This calls into question consent-based justifications for a duty to obey democratically enacted laws, and even consent-based justifications for the legitimacy of the entire apparatus of democratic government.

Another standard rationale for democracy is that it gives everyone (or at least all citizens eligible to vote) an equal voice. But that equality is severely limited if the most important rules of the system were actually set by a small elite, often before “the people” were even defined, much less allowed to decide anything.

Elite determination of the rules of the democratic game might also affect purely consequentialist rationales for democracy. While consequentialists may not care about the origins of the rules for their own sake, they might have good reason to worry that the elites who make the rules will skew them in their own favor.

There are many historical examples of such shenanigans. To take just one example, the elites who drafted the US Constitution included the notorious Three-Fifths Clause, which gave extra representation in Congress to slaveowners by enabling them to count slaves as part of the population base determining the number of representatives a state had (without, of course, giving the slaves any say in the selection of those representatives).

The inevitability of elite control over at least some phases of the decision-making process makes this sort of problem difficult to avoid.

Democracy’s inability to be fully democratic doesn’t do much to strengthen the case for dictatorship or oligarchy. After all, these systems are generally even more coercive and inegalitarian, as well as more prone to a range of other pathologies.

But the superiority of democracy over these rival systems should not blind us to its own significant weaknesses, or to the case for imposing tight limits on the scope of democratic government.

The elitism at the heart of democracy is far from the only factor we should take into account in evaluating political systems. But it is an important issue to keep in mind. At the very least, it should make us more skeptical of claims that some policy is wise or just because it represents the democratically enacted “will of the people.”

Ilya Somin
Ilya Somin

Ilya Somin is Professor of Law at George Mason University School of Law. He blogs at the Volokh Conspiracy.

EDITORS NOTE: This post first appeared at the Volokh Conspiracy.

Scandinavian Myths: High Taxes and Big Spending Are Popular by Nima Sanandaji

As I have explained in previous columns for CapX, there are a number of myths surrounding the Nordic countries that don’t stand up to scrutiny. These include the notion that long life span in Nordic nations arose as the public sector expanded, the idea that generous public programs alone explain low levels of Nordic poverty and the myth that Nordic countries are bumblebees that defy gravity by not being adversely affected by high taxes.

But surely the Nordic countries do show one leftist theory to be correct: that social democrat policies can be popular with the electorate.

Although the Social Democrats have recently lost much of their previous support, they did manage to dominate Nordic policies for long. Sweden was sometimes referred to as a one-party state, since the Social Democrats ruled it almost consecutively from 1932 till 2006 (interrupted by two short spells of centre-right rule during 1976-1982 and 1991-1994).

It is sometimes puzzling to the outsider why the Nordic public repeatedly have elected tax-raising governments to power. The obvious answer is ideological support for welfare state policies.

However, there is also another reason worth examining in greater detail: the general public has not been fully aware of the price tag, in terms of higher taxes, attached to expanding public sectors. Politicians have created a fiscal illusion which has resulted in higher levels of taxation that the population would otherwise have accepted as feasible had taxes been levied in a transparent way.

Before policies radicalised in the late 1960s, the tax levels in Nordic nations were around 30 percent  of GDP – quite typical of other developed nations. At the time, the tax burdens were quite visible. Most taxation occurred through direct taxes, which showed up on employees’ payslips.

Over time, an increasing share of taxation has been raised through indirect taxes. The latter are less visible to those paying them, since they are either levied before the wage is formally given to the employee or are included in the listed price of goods.

Finland is worth considering as an example. The country’s tax level was 30 percent of GDP in 1965. Indirect taxes in the form of VAT and mandatory social security contributions amounted to a quarter of total taxation. In 2013, the total tax take had increased to 44 percent of GDP, half of which was hidden taxes.

As shown below, Finnish governments have funded the expansion of the public sector by raising the hidden, but not the visible, tax burden. Denmark has followed a route wherein both hidden and visible taxes have been hiked.

Hidden and visible taxes in Finland (percentage of GDP)

Source: OECD tax database and own calculations.

Hidden and visible taxes in Denmark (percentage of GDP)

In Norway and Sweden, visible taxes are today lower than in the 1960s, although the true taxation is considerably higher. As can be seen below, it is clear that governments in both countries have followed a strategy based on replacing visible tax income with hidden tax incomes.

Thus, whilst the average worker has paid progressively more to the government, the payslips of the same worker have misleadingly shown a reduction in taxation.

Hidden and visible taxes in Norway (percentage of GDP)

Hidden and visible taxes in Sweden (percentage of GDP)

In other words, except in Denmark, the rise in taxation has occurred fully through an increase in hidden taxation.

This is in line with the predictions of fiscal illusion made by Italian economist Amilcare Puviani in 1903. Puviani explained that politicians would have incentives to hide the cost of government by levying indirect rather than direct taxes, so that the public would under-estimate the cost of policies.

The illusion can thus be created that an expanding state benefits individuals and families and yet costs less than it actually does. Nobel laureate James Buchanan and other researchers have expanded on the idea that it is easier for politicians to raise hidden, indirect taxes rather than visible ones.

Perhaps it comes as no surprise that those who believe in a higher tax rate in other parts of the world have followed a similar strategy as the Nordic nations. The American left-liberal think tank the Roosevelt Institute openly recommends “less-visible taxes that Americans are more likely to support.”

The Obamacare system launched in the US represents a form of indirect taxation – through an overly complex system – that is even more difficult to comprehend for the average taxpayer than in the Nordic systems.

I don’t doubt that less visible taxes in the US, the UK or other parts of the world would prove an easier route to raise the tax burden than visible taxes. This is indeed a lesson that the left can learn from the Nordics.

But the question remains if this is a good route to venture on. Shouldn’t politicians strive for systems where people are aware of how much they are paying for the government?


Nima Sanandaji

Dr. Nima Sanandaji is a research fellow at CPS, and the author of Scandinavian Unexceptionalism available from the Institute of Economic Affairs.

EDITORS NOTE: This article was originally published at CapX.

How Economic Control Threatens Political Liberty, Free Speech and the Rule of Law by Jon Guze

John Cochrane (aka “The Grumpy Economist”) has posted a long meditation entitled “Rule of Law and the Regulatory State,” in which he makes a very important point:

The United States’ regulatory bureaucracy has vast power. Regulators can ruin your life, and your business, very quickly, and you have very little recourse. That this power is damaging the economy is a commonplace complaint. Less recognized, but perhaps even more important, the burgeoning regulatory state poses a new threat to our political freedom.

What banker dares to speak out against the Fed, or trader against the SEC? What hospital or health insurer dares to speak out against HHS or Obamacare? What business needing environmental approval for a project dares to speak out against the EPA? What drug company dares to challenge the FDA?

Our problems are not just national. What real estate developer needing zoning approval dares to speak out against the local zoning board?

Readers who doubt that this is an urgent problem should read the whole thing, which includes numerous chilling descriptions of regulatory abuse, but here I want to focus on an issue he raises in passing: how best to refer to this urgent problem?

Cochrane says he hasn’t found “a really good word to describe this emerging threat of large discretionary regulation, used as tool of political control.” He considers “socialism,” “regulatory capture,” and “cronyism,” but he rejects all three. Regarding the last two, he notes:

We’re headed for an economic system in which many industries have a handful of large, cartelized businesses — think 6 big banks, 5 big health insurance companies, 4 big energy companies, and so on.

Sure, they are protected from competition. But the price of protection is that the businesses support the regulator and administration politically, and does their bidding. If the government wants them to hire, or build [a] factory in unprofitable place, they do it.

The benefit of cooperation is a good living and a quiet life. The cost of stepping out of line is personal and business ruin, meted out frequently. That’s neither capture nor cronyism.

The fact is, we’ve seen this system of political economy before — most notably in Mussolini’s Italy and in Hitler’s Germany — and there’s a commonly used term for it. It’s fascism. Maybe Cochrane thinks that term is too emotionally charged. However, I’d have thought a bit of emotional charge was warranted. As Cochrane says:

The power of the regulatory state…lacks many of the checks and balances that give us some “rule of law” in the legal system. …

The clear danger we face is the use of regulation for political control. Each industry gets carved up into a few compliant oligopolies. And the threat of severe penalties, with little of the standard rule-of-law recourse, keeps people and businesses in line and supporting the political organization or party that controls the agencies. …

A return to economic growth depends on reforming the regulatory state. But… preservation of our political freedom depends on it even more.

Read the rest here.

This post first appeared at the John Locke Foundation.

EDITORS NOTE: See Steve Horwitz’s “Why the Candidates Keep Giving Us Reasons to Use the “F” Word“; Jeff Tucker’s “Trumpism: The Ideology“; and Jason Kuznicki’s “The Banality of Donald Trump.”

Jon Guze

The Man Who Sowed the Seeds of Puerto Rico’s Collapse by Lawrence W. Reed

Is there anything more tragically monotonous than a failing welfare state? From ancient Rome to modern Greece, the story is one of the most repetitive in history. It goes like this:

People increasingly decide they’d rather vote for a living than work for one. An academic and intellectual class, dependent on subsidies and anxious to command the economy, advises the people that this is a really good thing. Politicians cater to them with high-sounding rhetoric (“We’ll take care of you”) and low-balling promises (“We can afford it. It won’t cost much. We’ll just take it from the rich”).

Responsibility, self-reliance, and enterprise give way to an entitlement mentality. Power concentrates and corruption ensues. Taxes and debt rise. The government debases the money. Crisis leads to more government, which leads to more crisis. What was always bankrupt morally finally goes bankrupt economically. Goodbye economy, liberty, and often even civilization itself. The barbarians take over. What else is new?

Now it’s Puerto Rico’s turn.

The Commonwealth of Puerto Rico is a US territory in the northeastern Caribbean. Its governor, Alejandro García Padilla, startled the world back in June when he announced that the island cannot pay back its $72 billion public debt.

“The debt is not payable,” García Padilla said. “There is no other option. I would love to have an easier option. This is not politics; this is math.”

He called the situation a “death spiral.” Suddenly, millions of Americans were learning what a basket case the Puerto Rican economy has become. It is indeed a crisis but one that was, to an embarrassing extent, made right here in America.

It was foisted on Puerto Ricans by one lousy New Dealer in particular. His name was Rexford Guy Tugwell.

More on the egghead Tugwell in a moment, but let me bring everybody up to date on just how bad things are down there. Be sure to read to the end because there’s a silver lining in this very dark cloud.

Puerto Rico has been in a funk for a good while. Its stubbornly high, double-digit unemployment rate is more than twice that of the United States. In fact, it hasn’t been below 9.7 percent in 40 years.

The island’s debt is higher on a per capita basis than that of any US state and four times that of Detroit, which went bankrupt two years ago. Businesses are collapsing. People are fleeing (200,000 have left since 2005). Almost half of the island’s 3.7 million residents earn incomes under the US federal poverty line. Nearly 40 percent of all households get food stamps. Until recently, the retirement age for government school teachers was as low as 47, prompting underfunded pension fund crisis so endemic to welfare states. (The retirement age has lately been raised to at least 55 for current teachers, and 62 for new teachers.)

As Tyler Durden explains at ZeroHedge.com, policies imposed from Washington must shoulder a big part of the blame for this mess: the wizards on the Potomac encouraged debt and deficit spending, priced hundreds of thousands of Puerto Ricans out of entry-level jobs with a punishing minimum wage, taxed and regulated commerce and investment to a crawl, and showered the island with debilitating welfare. The place would be a showcase of government-induced prosperity except for one sticking point: government.

All of this has been decades in the making, which brings me to the character named Tugwell. I’ve long had a distaste for this pompous meddler. The more I learn about his role as Puerto Rico’s appointed governor (1941–1946), the more I’m ashamed that a US president was dumb enough to put him in charge of anything.

I first heard of Tugwell as an undergraduate economics major at Grove City College in the early 1970s. Fascinated by what my econ prof, Dr. Hans Sennholz, had said in class about America’s 22nd and 24th president, Grover Cleveland, I checked out a biography of him. It carried the imaginative title, GroverCleveland, and included a revealing subtitle, A Biography of the President Whose Uncompromising Honesty and Integrity Failed America in a Time of Crisis.

The author was Rexford Guy Tugwell, widely regarded as the most influential ideologue of economic planning during Roosevelt’s New Deal. The Cleveland terms were largely wasted opportunities, according to Tugwell, because Cleveland would not turn the economy into his personal plaything. If only he had trashed his honesty and integrity, Cleveland could have been the scientist and the rest of us the lab rats.

Tugwell was the Jonathan Gruber of his day. (Recall the smug academic who admitted that deception was employed to fool stupid Americans into supporting Obamacare.) He went straight from academia as a student (the Wharton School at U-Penn, then Columbia) to academia as a professor (University of Washington, American University in Paris, and Columbia University). His intellectual mentors were socialists like Upton Sinclair and Edward Bellamy. Woodrow Wilson’s wartime administration gave him his first real glimpse of the glorious fun of central planning, and he loved it even when it flopped.

In 1932, President-elect Franklin Roosevelt invited Professor Tugwell to join the first White House “brain trust.” These were the whiz kids — the social scientists and experimenters of the administration. Blessed with power and attention, they were ready to “transform” America and “plan” our way out of the Great Depression.

H.L. Mencken was less charitable in his description. He called them “an astonishing rabble of impudent nobodies,” “a gang of half-educated pedagogues, starry-eyed uplifters and other such sorry wizards.” Along with FDR, they “planned” the Depression into the longest slump in American history.

Tugwell loved to set up and run what came to be known as “boondoggles.” He was an architect of the Agricultural Adjustment Act and later director of its Agricultural Adjustment Administration (AAA), which taxed agricultural processors and used the revenue to destroy crops and cattle to raise prices. It was declared unconstitutional by the Supreme Court and ridiculously destructive by clear thinkers.

From its inception in 1935, he directed the Resettlement Administration (RA), which relocated the rural unemployed to new, planned communities in suburbs. Urban authority Jane Jacobs, in her classic The Death and Life of Great American Cities, showed that his program simply displaced people and ruined neighborhoods. The RA was also thrown out as unconstitutional. True to the statist stereotype, Tugwell learned nothing from either experience. “Planning” was his religion and he was going to be its high priest, come hell or high water.

In 1936, Tugwell left Washington and two years later showed up as the first director of the New York City Planning Commission. He tried retroactively to enforce nonconforming land uses with almost no legal or public support. He proved too much an ideologue even for the polarizing Robert Moses, who killed Tugwell’s 50-year, pie-in-the-sky master plan for public housing.

Now let’s get back to Puerto Rico.

By 1941, Rexford Guy Tugwell had behind him a 20-year career of pontificating for big government and managing expensive government flops. Somehow that gave Franklin Roosevelt the idea of naming him governor of Puerto Rico. What Tugwell did for the mainland, he could now do for an island. Maybe this central planning stuff works better if you work small, right?

Nope.

So for five years, Professor Tugwell became Governor Tugwell. One of the first things he did was to create, with the legislature’s approval, the Puerto Rico Planning, Urbanization, and Zoning Board in 1942. If only he had done what John Copperthwaite did later in Hong Kong or what Ludwig Erhard did in postwar Germany or what inspired free marketers have done in freeing their cities, Puerto Rico might today be a beacon of liberty and prosperity. But Tugwell wanted to plan, plan, plan.

Pedro Serra is president of a new organization in Puerto Rico, the Alliance for the Protection of Liberties. He is a businessman from San Juan whose interest in free-market economics led him to work with the 2012 Ron Paul campaign. Looking back on the Tugwell period, he observes,

When President Roosevelt appointed Rexford G. Tugwell governor of Puerto Rico, it was in keeping with the same economic attitude that characterized the New Deal — that the government can solve an economy’s woes. Our government has since taken as an axiom that economic stagnation results from too little government, not too much. If this were the case, then today’s Puerto Rico should be paradise on earth. Instead our economy is depressed, our people jobless, and our government bankrupt.

Climate would seem to have blessed Puerto Rico for agricultural pursuits. Tugwell’s infinite wisdom suggested it should opt for industry instead, so he directed public policy against farming and toward manufacturing. He lobbied for all the aid and welfare from the mainland he could get. He set the tone for decades of a top-down welfare state. Joe Milligan, a colleague of Serra’s, is originally from Rochester, Michigan, and now brings his passion for free markets to San Juan, Puerto Rico, as the director of development for the Alliance for the Protection of Liberties. Here is how Milligan sums it up:

Governor Tugwell’s legacy is alive and apparent on the island. His tenure in office was characterized by central planning, government growth, and expansion of the welfare state. He stamped out the thriving sugar cane and coffee industries in favor of manufacturing. The result is that now we have neither. Today in Puerto Rico our government is the island’s largest employer and half of all residents require government financial assistance to subsist. In this sense Governor Tugwell truly left his mark.

Indeed, for many years after Governor Tugwell left Puerto Rico for academia back in the United States (where failure is celebrated as long as you worship the state and have good intentions), other New Dealers sojourned to the island to offer more of the same.

One of them was Hugh Barton, who had directed the US State Department’s Office of Strategic Services until he was fired for his knowledge of the communist affiliations of some of his top staff. Barton set up shop with the Puerto Rico Planning Board and the Office of Economic Research. If you had a college degree and a penchant for planning the economy of other people, you could get a government job in Puerto Rico in the 1950s and ’60s. Except for a brief retrenchment under one-term Governor Luis Fortuño, Puerto Rico has been run for decades as Tugwell first envisioned it, exacerbated by Washington’s poor policies to boot.

As I promised early in this article, there’s some good news in this bleak course of events. Puerto Rico now has a nascent libertarian movement and an organization devoted to spreading ideas of liberty as an antidote to the Tugwell legacy — the Alianza para la Protección de Libertades (Alliance for the Protection of Liberties) that Pedro Serra and Joe Milligan have launched.

The Alliance seeks to improve the lives of Puerto Ricans by building a new consensus around this proposition: a free society — not a centrally planned, politicized one — is a more prosperous and tolerant society. It works to build public support for smaller government and advise policy makers in choosing the proven path toward prosperity. The Alliance’s programs include developing a college campus lecture circuit, starting a YouTube channel specific to Puerto Rico’s issues, and disseminating compelling literature to legislators.

Never let a crisis go to waste, as the saying goes. Puerto Rico represents a unique opportunity to undo a painful, statist history. I hope readers will want to help.

To support the efforts of the Alliance, email Pedro Serra, the director, at pedro@protecciondelibertades.org.

“The curious task of economics,” Austrian economist F.A. Hayek taught us, “is to demonstrate to men how little they really know about what they imagine they can design.”

Rexford Guy Tugwell never understood that. With the help of the Alliance for the Protection of Liberties, Puerto Ricans may yet embrace Hayek’s wisdom and thereby shake the curse of Tugwell.


Lawrence W. Reed

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s.

Hillary Clinton’s Ideological Vortex of Power and Planning by Jeffrey A. Tucker

Just trust her. Truly, just trust her: to know precisely how much energy we ought to use, where it should come from, how it should be generated, how we should get from here to there, and the effects that her plan will have on the global — the global! — climate, not just in the near term but decades or a century from now.

If you do this, you will have embraced “science,” “reality,” “truth,” and “innovation,” and, also, “our children.” If you don’t go along, you not only reject all those good things; you are probably also a “denier,” the catch-all epithet for anyone doubtful that the brilliance of Hillary Clinton and her czars know better than the rest of humanity how to manage their energy needs into the future.

Hillary’s campaign seems designed to prove that F.A. Hayek was a prophet.

That brilliant economist spent 50 years explaining, in book after book, that the greatest danger humanity faced, now and always, was a presumption on the part of intellectuals, politicians, and bureaucrats that they know better than the emergent and evolving wisdom of social forces.

This presumption might seem like science but it is really pretense. Civilization arises from, is protected by, and advances through the dispersed knowledge of billions of individual decision makers and the institutions that arise from them.

Hayek called the issue he was investigating the knowledge problem. Society needs to know how to use scarce resources, how to navigate a world of uncertainty, how to form rules that turn struggle into peace. It is a problem solved through freedom alone. No ruler, no scientist, no intellectual can substitute for the evolving process of decentralized decision making and trial and error.

The message is bad news for people like Hillary, who is supposed to embody the ideology called “liberalism” in America. Yet it is anything but liberal. It seems to know only one way forward: more top-down control. That’s a tough sell in times when everything good so obviously comes from anything but government, and, meanwhile, governments are responsible for every failing sector from health to education to foreign wars.

But here’s the problem. People like Hillary Clinton are stuck in an ideological vortex with no way out. Government planning is their thing, and they refuse to recognize its failures. So they press on and on, even to the point of preposterous implausibility, such as the claim that government can know everything that is necessary to know in order to plan the entire energy sector with the aim of managing the climate of the world.

Economist Donald Boudreaux puts matters this way: “why should someone who cannot ensure the proper use of a single private server be trusted with the colossal power necessary to design and to oversee the remaking of a trillion-plus dollar sector of the U.S. economy (a sector, by the way, in which this person has zero experience)?”

With this presumption comes the inevitable hypocrisy.

After unveiling her plan to ration energy use and plaster the country with solar panels, Ms. Clinton boarded a private jet that uses more fuel in one flight hour than I use in a year. “The aircraft, a Dassault model Falcon 900B, burns 347 gallons of fuel per hour,” wrote the muckraker who did a public service in exposing this. “The Trump-esque transportation costs $5,850 per hour to rent, according to the website of Executive Fliteways, the company that owns it.”

Notice how rarely it is mentioned that the US military, with hundreds of bases in over a hundred countries, is the worst single polluter on the planet. If we really believe in human-caused climate change, this might be a good place to start cutting back. But no, there’s not a word about this in any of Hillary’s plans. Government gets to do what it must do. The rest of us are supposed to pay the price, bicycling to work and powering our homes with sunshine and windmills.

When I first read about her energy plan, my response was: Why would any self-interested politician make the need for reduced living standards a centerpiece of her campaign? After all, her speech was made in a setting piled high with bicycles (oddly reminiscent of Mao’s China), while demanding a precise path forward for energy and everything that uses it (oddly reminiscent of Lenin’s first speech after he took control of Russian economic life).

As it turns out, people aren’t that interested. Sure, most people tell pollsters that they favor renewable energy to stop climate change. You have to say that or else risk being denounced as a denier. On the other hand, it seems like very few people really care enough to forgo the benefits of modern life, which is probably what will save civilization itself from plans like hers. Note that days after release, her pompous video only had only 54K views — pathetic given her celebrity and how much money her campaign is spending, but encouraging that nobody seems to put much stock in her plan for our future.

It’s extraordinary how quickly one branch of the political class has leapt from the delicate and ever-changing science of climate monitoring to the absolute certainty that extreme and extremely specific application of government force is the way to deal with it. Writes Max Borders: “The sacralization of climate is being used as a great loophole in the rule of law, an apology for bad science (and even worse economics), and an excuse to do anything and everything to have and keep power.”

The last point is critical. Everything done in the name of public policy in our lifetimes has become a handful of dust, yielding little more than unpayable debts and unworkable programs, and leaving in its wake an apparatus of compulsion and control that robs society of its inherent genius.

What to do? Give up? That’s not an option for these people. Instead, they find a new frontier for their schemes, a new rationale to sustain a failed model of social and economic organization.

I can think of no better words of rebuke but the closing of Hayek’s Nobel speech in 1974:

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible.

He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.

There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try, “dizzy with success”, to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will.

The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society — a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.

Yes, it surely ought to.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World. Follow on Twitter and Like on Facebook.

Hypocrisy in the Democracy

After six years in office, I am amazed that Black folks continue to blindly follow the machinations of president Obama and his administration.  In less than eight years, Obama has radically changed the fabric of America more than all the other 43 previous presidents combined.

America is totally unrecognizable from the way it was eight years ago.

Eight years ago, Blacks had more net worth than they do today; more Blacks were in university eight years ago; more Blacks had jobs eight years ago; Blacks owned more homes eight years ago than they do today.

But Blacks did get the confederate flag taken down all across the country.

Homosexual marriage is now the law of the land.  Children are told they are no longer bound by the gender they were assigned at birth; but rather they can self-identify and choose from moment to moment how they want to be viewed.

George W. Bush did more for the Continent of Africa than the sum of all previous U.S. presidents only to have Obama reverse many of the programs Bush put in place.

But, did I mention that the confederate flag is no longer flying in South Carolina?

By every single metric, Blacks are far worse off now than we have been over the past fifty years.  Even the former head of the NAACP, Ben Jealous, had to admit that Blacks are worse off under Obama than they were under Bush.

But did I mention that “Black lives matter?”

Obama’s foreign policies have weakened us as a nation.  No one respects us internationally.  Putin of Russia and Assad of Syria are current examples of foreign leaders who have no respect for America and Obama.  They dared Obama to stop their brutality towards their own citizens or their annexation of sovereign countries.

After six years of Obama, no one can define what it means to be American anymore.  You have a significant part of the population who cannot even speak English; some are even citizens.  How is that possible?

But “Black lives matter.”

Language is the DNA of a country.  Without a unifying language, you have no country.  States like California and Virginia print government documents in multiple languages because of those in the country who don’t speak English.  That is pure insanity.

Oh, but did I tell you “Black lives matter?”  Not all lives, just Black lives.

Black on Black crime is at epidemic levels in cities like Baltimore and Chicago and we are focusing on flags and slogans that mean absolutely nothing.

If Black lives really matter, why are we putting so much energy and time on superfluous issues?  What policies has this president promoted to prove that Black lives matter?  What policies have the members of the Congressional Black Caucus (CBC) passed to prove that Black lives matter?

Not one member of the CBC has proposed any solutions to the pathologies of Baltimore or Chicago; but yet they spent a whole two weeks fighting over the confederate flag flying in South Carolina.

So, what’s going to happen when groups start demanding the removal of statues of Dr. Martin Luther King, Jr. because he was deemed too controversial?  Blacks will scream bloody murder.

You just can’t say remove everything related to the confederacy from government property because “we don’t like it;” but yet defend your right to put people that you respect on the same government property.

King’s legacy is just as important as the legacy of the confederacy—they both are part of our history and the whole story must be told no matter how painful.

America may never recover from the disastrous effects of the Obama presidency.  He is not only the first “gay” president (according to Newsweek); but he is also the first president of the world because he has totally subjugated our sovereignty to that of international organizations and other countries via trade agreements.

So, as opposed to devoting time and attention to things that don’t matter, just maybe all the civil rights groups should focus on promoting a better environment for entrepreneurs to flourish; provide more school choice and vouchers for low income parents; and restore a values based curriculum in our public schools as opposed to teaching about homosexuality.

We have too many serious issues to deal with in America and within the Black community.  Time out for the sophomoric games and time to focus on the tangible solutions to the problems facing us; but I am not optimistic.

I guess it really is true that weak people take strong positions on weak issues.

Paul Krugman Is Even Wrong about What Paul Krugman Thought by Steve H. Hanke

Paul Krugman, “Killing the European Project”, NY Times, July 12, 2015:

The European project — a project I have always praised and supported — has just been dealt a terrible, perhaps fatal blow. And whatever you think of Syriza, or Greece, it wasn’t the Greeks who did it.

Paul Krugman has always praised and supported the European project? Really? Here’s Prof. Krugman in his own words on the centerpiece of the European project, the euro:

  • Paul Krugman, “The Euro: Beware Of What You Wish For”, Fortune, December 1998: “But EMU wasn’t designed to make everyone happy. It was designed to keep Germany happy — to provide the kind of stern anti-inflationary discipline that everyone knew Germany had always wanted and would always want in future.So what if the Germans have changed their mind, and realized that they — along with all the other major governments — are more worried about deflation than inflation, that they would very much like the central bankers to print some more money? Sorry, too late: the system is already on autopilot, and no course changes are permitted.”
  • Paul Krugman, “Can Europe Be Saved?”, NY Times, January 12, 2011: “The tragedy of the Euromess is that the creation of the euro was supposed to be the finest moment in a grand and noble undertaking: the generations-long effort to bring peace, democracy and shared prosperity to a once and frequently war-torn continent.But the architects of the euro, caught up in their project’s sweep and romance, chose to ignore the mundane difficulties a shared currency would predictably encounter — to ignore warnings, which were issued right from the beginning, that Europe lacked the institutions needed to make a common currency workable. Instead, they engaged in magical thinking, acting as if the nobility of their mission transcended such concerns.”
  •  Paul Krugman, “Greece Over The Brink”, NY Times, June 29, 2015: “It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency…”
  • Paul Krugman, “Europe’s Many Economic Disasters”, NY Times, July 3, 2015: “What all of these economies have in common, however, is that by joining the eurozone they put themselves into an economic straitjacket.Finland had a very severe economic crisis at the end of the 1980s — much worse, at the beginning, than what it’s going through now. But it was able to engineer a fairly quick recovery in large part by sharply devaluing its currency, making its exports more competitive. This time, unfortunately, it had no currency to devalue. And the same goes for Europe’s other trouble spots. Does this mean that creating the euro was a mistake? Well, yes.”

When reading Prof. Krugman’s works, it’s prudent to fact check. Prof. Krugman has always been in the Eurosceptic camp. Indeed, the essence of many of his pronouncements can be found in declarations from a wide range of Eurosceptic parties.

This post first appeared at Cato.org.


Steve H. Hanke

Steve H. Hanke is a Professor of Applied Economics and Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore.

Martin O’Malley Got $147,000 in Speaking Fees from a Company He Gave Lucrative Government Contracts by David Boaz

Martin O’Malley, the former governor of Maryland and Democratic presidential candidate, is no Bill and Hillary Clinton, who have made more than $100 million from speeches, much of it from companies and governments who just might like to have a friend in the White House or the State Department.

But consider these paragraphs deep in a Washington Post story about O’Malley’s financial disclosure form:

While O’Malley commanded far smaller fees than the former secretary of state – and gave only a handful of speeches – he also seemed to benefit from government and political connections forged during his time in public service.

Among his most lucrative speeches was a $50,000 appearance at a conference in Baltimore sponsored by Center Maryland, an organization whose leaders include a former O’Malley communications director, the finance director of his presidential campaign and the director of a super PAC formed to support O’Malley’s presidential bid.

O’Malley also lists $147,812 for a series of speeches to Environmental Systems Research Institute, a company that makes mapping software that O’Malley heavily employed as governor as part of an initiative to use data and technology to guide policy decisions.

I scratch your back, you scratch mine. That’s the sort of insider dealing that sends voters fleeing to such unlikely candidates as Donald Trump and Bernie Sanders.

These sorts of lucrative “public service” arrangements are nothing new in Maryland (or elsewhere). In The Libertarian Mind, I retell the story of how Gov. Parris Glendening and his aides scammed the state pension system and hired one another’s relatives.

In some countries, governors still get suitcases full of cash. Speaking fees are much more modern.

This post first appeared at Cato.org.


David Boaz

David Boaz is executive vice president of the Cato Institute. He is the editor of The Libertarian Reader, editor of The Cato Handbook for Policymakers, and author of The Politics of Freedom.

Could Hillary Really “Restore” the Middle Class? by Donald J. Boudreaux

Eduardo Porter opens his column today by asking “Could President Hillary Clinton restore the American middle class?” (“Sizing Up Hillary Clinton’s Plans to Help the Middle Class”).

Mr. Porter illegitimately presents as an established fact a proposition that is anything but. It’s true that between 1967 and 2009 the percent of American families with annual incomes between $25,000 and $75,000 (in 2009 dollars) fell from 62 to 39 – a fact that, standing alone, might be interpreted as evidence that the middle class is disappearing.

Yet this fact does not stand alone, for it’s also true that the percent of families with annual incomes lower than $25,000 also fell (from 22 to 18) while the percent of families with annual incomes of $75,000 and higher rose significantly – from 16 to 43.*

So given these Census Bureau data – which are strong evidence that America’s middle class, if disappearing, is doing so by moving into the upper classes – to ask if President Hillary Clinton could restore the American middle class is to ask if she will make the bulk of today’s prosperous families poorer rather than richer.

This post first appeared at CafeHayek.

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.

Bernie Sanders Thinks the Middle Class Is Deteriorating: He’s Wrong! by Corey Iacono

Sen. Bernie Sanders is a democratic socialist running for President of the United States, and his passionate populist message has won him many admirers on the left. His willingness to push for radical progressive policies (such as top income tax rates of 90 percent), which mainstream Democrats are too moderate to embrace, is steadily eroding Hillary Clinton’s dominance of the Democratic primary field.

There are several “facts” upon which Sanders has built his campaign. Probably the most important is the claim that the American middle class has been declining for quite some time. According to Sanders’s website:

The long-term deterioration of the middle class, accelerated by the Wall Street crash of 2008, has not been pretty…

Since 1999, the median middle-class family has seen its income go down by almost $5,000 after adjusting for inflation, now earning less than it did 25 years ago.

The situation is clearly dire, and the right man for the momentous job of saving the middle class is Sen. Sanders. Well, at least that’s [the] message his campaign seeks to convey.

But what if the middle class isn’t becoming worse off over time? What if the American middle class is actually doing as well as ever? Would Sanders’s supporters be as likely to endorse his more radical ideas if they weren’t convinced that the middle was becoming poorer over time — and that only progressive policies could reverse this trend?

It’s worth taking the time to examine Sanders’s claim that the middle class is worse off now than in the past. He doesn’t cite a source for his statistic, but it seems to rely on looking at the median household income over time and adjusting for inflation using the Consumer Price Index (CPI).

This is a problematic methodology because it does not control for the well-known fact that the median household has itself grown smaller over time. Even if median income stayed the same over time, a decline in the number of people in the median household over time would lead to an increase in income per household member.

Additionally, Sanders’s statistic looks at income before taxes and transfers. Transfer payments and tax credits (like the Earned Income Tax Credit) make up a significant portion of income for many lower-income families. Not controlling for these factors understates their true economic well-being.

The figures cited by Sanders also fail to take into account the fact that a larger proportion of worker compensation comes in the form of non-cash benefits (such as health insurance) now than in the past.

According to research published by the National Tax Journal, “Broadening the income definition to post-tax, post-transfer, size-adjusted household cash income, middle class Americans are found to have made substantial gains,” amounting to a 37 percent increase in income over the 1979-2007 period.

Similarly, in 2014, the Congressional Budget Office found that adjusting for changing household size and looking at income after taxes and transfers, households in all income quintiles are much better off than they were a few decades ago.

The incomes of households in the three middle income quintiles grew 40 percent between 1979 and 2011. Somewhat surprisingly, given the histrionics about the state of America’s poor, income in households in the lowest quintile was 48 percent higher in 2011 than it was in 1979.

Research from the Federal Reserve Bank of Minneapolis comes to even more optimistic conclusions.

The Consumer Price Index is widely understood to overstate inflation — among other reasons, by failing to accurately account for improvements in quality and consumer substitutions for newer or cheaper goods — which is why the Federal Open Market Committee uses an alternative measurement for inflation, the Personal Consumption Expenditures (PCE) price index, which includes more comprehensive coverage of goods and services than the CPI.

If the CPI does, in fact, overstate the extent to which prices rise over time, then it also consequently understates the growth in real, inflation-adjusted incomes over time.

Indexing median household income (post taxes and transfers) to inflation using the PCE, rather than the CPI, and adjusting for the long-run decline in household size shows that median incomes have “increased by roughly 44 percent to 62 percent from 1976 to 2006.”

Moreover, the focus on statistical categories ignores what is happening at the level of individuals and households, which may move up or down the income ladder, through different income quintiles. And studies have consistently shown that this income mobility has not changed in decades.

While the rate of growth for some income categories in recent years has been sluggish, the claim that middle incomes are declining precipitously is false. Based on these findings, it seems appropriate to conclude that Sanders’ claim that there exists a “long-term deterioration of the middle class” is patently untrue.

Learn more about wage “stagnation” from former FEE president Don Boudreaux:

Corey Iacono

Corey Iacono is a student at the University of Rhode Island majoring in pharmaceutical science and minoring in economics.

What Greek “Austerity”? by Steve H. Hanke

greek president

Greek Prime Minister Alexis Tsipras

It’s hard to find anything written or spoken about Greece that doesn’t contain a great deal of hand-wringing about the alleged austerity — brutal fiscal austerity — that the Greek government has been forced to endure at the hands of the so-called troika (the European Central Bank, the European Commission, and the International Monetary Fund).

This is Alice in Wonderland economics. It supports my 95% rule: 95% of what you read about economics and finance is either wrong or irrelevant.

The following chart contains the facts courtesy of Eurostat.

Social security spending as a percentage of GDP in Greece is clearly bloated relative to the average European Union country — even more so if you only consider the 16 countries that joined the EU after the Maastricht Treaty was signed in 1993.*

To bring the government in Athens into line with Europe, a serious diet would be necessary — much more serious than anything prescribed by the troika.

* Ed. note: The treaty created the EU and the euro and also obligated EU members to keep “sound fiscal policies, with debt limited to 60% of GDP and annual deficits no greater than 3% of GDP.” Ha!

Steve H. Hanke

Steve H. Hanke is a Professor of Applied Economics and Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore.