Posts

Who Is Doing More for Affordable Education: Politicians or Innovators? by Bryan Jinks

With a current outstanding student loan debt of $1.3 trillion, debt-free education is poised to be a major issue leading up to the 2016 presidential election.

Presidential candidate Bernie Sanders has come forth with his plan for tuition-free higher education.

Senator Elizabeth Warren supports debt-free education, which goes even further by guaranteeing that students don’t take on debt to pay other expenses incurred while receiving an education.

Democratic Party front-runner Hillary Clinton is expected to propose a plan to reduce student loan debt at some point. And don’t forget President Obama’s proposal to provide two years of community college to all students tuition-free.

While all of these plans would certainly increase access to higher education, they would also be expensive. President Obama’s relatively modest community college plan would cost $60 billion over the next decade. What makes this an even worse idea is that all of that taxpayer money wouldn’t solve the most important problems currently facing higher education.

Shifting the costs completely to taxpayers doesn’t actually reduce the costs. It also doesn’t increase the quality of education in a system that has high drop-out rates and where a lot of graduates end up in low-paying jobs that don’t use their degree. Among first-time college students who enrolled in a community college in the fall of 2008, fewer than 40% earned a credential from either a two-year or four-year institution within six years.

Whatever the other social or spiritual benefits of attending college are, they don’t justify wasting that so much time and money without seeing much improvement in wages or job prospects.

Proponents of debt-free college argue that these programs are worth the cost because a more educated workforce will boost the economy. But these programs would push more marginal students into college without any regard for how prepared they are, how likely they are to graduate, or how interested they are in getting a degree. If even more of these students enter college, keeping the low completion rates from falling even further would be a challenge.

All of these plans would just make sure that everyone would have access to the mediocre product that higher education currently is. Just as the purpose of Obamacare was to make sure that every American had a health insurance card in their wallet, the purpose of debt-free education is to make sure that every American has a student ID card too — whether it means anything or not.

But there are changes coming in higher education that can actually solve some of these problems.

The Internet is making education much cheaper. While Open Online Courses have existed for more than a decade, there are a growing number of places to find educational materials online. Udemy is an online marketplace that allows anyone to create their own course and sell it or give it away. Saylor Academy and University of the People both have online models that offer college credit with free tuition and relatively low examination fees.

Udacity offers nanodegrees that can be completed in 6-12 months. The online curriculum is made in partnership with technology companies to give students exactly the skills that hiring managers are looking for. And there are many more businesses and non-profits offering new ways to learn that are cheaper, faster, and more able to keep up with the ever-changing economy than traditional universities.

All of these innovations are happening in response the rising costs and poor outcomes that have become typical of formal education. New educational models will keep developing that offer solutions that policy makers can’t provide.

Some of these options are free, some aren’t. Each has their own curriculum and some provide more tangible credentials than others. There isn’t one definitive answer as to how someone should go about receiving an education. But each of these innovations provides a small part of the answer to the current problems with higher education.

Change for the better is coming to higher education. Just don’t expect it to come from Washington.

Bryan Jinks

Bryan Jinks is a ?freelance writer based out of Cleveland, Ohio.

New York Orders Fast-Food Workers Replaced With Robots, Kiosks, Mobile Apps by Daniel Bier

Well, they didn’t quite put it that way — the New York Times‘ headline read “New York panel recommends $15 minimum wage for fast-food workers” — but it amounts to the same thing.

A panel appointed by Gov. Andrew M. Cuomo recommended on Wednesday that the minimum wage be raised for employees of fast ­food chain restaurants throughout the state to $15 an hour over the next few years. Wages would be raised faster in New York City than in the rest of the state to account for the higher cost of living there.

The panel’s recommendations, which are expected to be put into effect by an order of the state’s acting commissioner of labor, represent a major triumph for the advocates who have rallied burger­ flippers and fry cooks to demand pay that covers their basic needs.

They argued that taxpayers were subsidizing the workforces of some multinational corporations, like McDonald’s, that were not paying enough to keep their workers from relying on food stamps and other welfare benefits.

The $15 wage would represent a raise of more than 70 percent for workers earning the state’s current minimum wage of $8.75 an hour. Advocates for low­ wage workers said they believed the mandate would quickly spur raises for employees in other industries across the state, and a jubilant Mr. Cuomo predicted that other states would follow his lead.

In other news, I ordered my lunch yesterday on my computer and picked it up from Panera Bread without ever talking to a person. Last night, I picked up a couple groceries and paid through the self-checkout lane. This morning, I ordered a latte on my Starbucks app, and it was waiting for me when I walked into the store. I’m thinking of going to a burger joint later, where I’ll tap out my order on a kiosk.

Of course, it’s not fair to blame the minimum wage exclusively for the increasingly widespread automation of service jobs. Ordering kiosks and mobile apps are becoming more popular as the technology becomes better, cheaper, and more popular. That will probably happen no matter what the price of labor is.

But the fact that the cost of not using technology — that is, an employee — is about to cost 70% more will give the entire New York fast-food industry a great big shove away from labor and towards machines. And since chain restaurants don’t just operate in New York, the investment in automation will spill into stores everywhere.

Who wins from this?

Unions and more experienced workers, at least in the short-run. Labor unions’ entire purpose is to push up wages for their members, which makes them more expensive and less attractive compared to non-union workers.

But if unions — like, say, the Service Employees International Union — can make all workers more expensive, it makes union labor look relatively better by comparison. They won’t have to compete against cheaper labor anymore (which is to say, less-skilled workers won’t be allowed to compete by underbidding them).

Why arbitrarily single out “fast food” for the hike?

First, it makes the fight politically easier because the unions only have to defeat one industry lobby, instead of every business that uses unskilled labor. Second, the SEIU, in particular, represents a lot of food workers and has for years been pushing to unionize the big fast-food chains.

Who loses?

First, businesses, especially those operating on thin margins. They’ll be staring at a 70% increase in labor costs, already typically one of the biggest expenses for restaurants.

Less experienced workers — especially unskilled immigrants and young people starting out in the job market — will also lose. Businesses will try to offset some of higher cost of labor by cutting hours or jobs, delaying or cancelling expansions, replacing labor with capital where they can, and replacing less skilled with more skilled workers where they can’t.

They’ll also try to raise prices to cover costs, so consumers lose, too — especially those who eat fast-food more often, have tighter budgets, and have food as a bigger share of their budgets: i.e., low and lower-middle income families.

The net effect this will be less employment, less production, and less consumption. The economy and especially less-advantaged people will be worse off for it.

Miscellaneous arguments:

  • CEO pay: The Times awkwardly shoehorns in the fact that McDonald’s chief executive made $7.5 million last year, presumably trying to suggest that he’s the reason its other 420,000 employees are paid so little. In case you’re wondering, redistributing his salary comes out to 5 cents per employee per day. And then McDonald’s has no CEO. Hurray?
  • Corporate Subsidy: The Times also uncritically repeats the incoherent claim that taxpayers are somehow “subsidizing” these “multinational corporations” because they don’t pay “enough to keep their workers from relying on food stamps and other welfare benefits.” This makes no sense at all.
  • No Big Deal: The economists who claim that raising the minimum wage won’t hurt employment that much always couch it with the caveat that the increase be “small” or “moderate.” By no stretch of the imagination is hiking the wage floor to $15 “moderate.” In New York, it’s a 70% increase; in states with the federal minimum of $7.25, it’s 107% increase.

Antony Davies has charted the relationship between the minimum wage as a share of the average wage and the unemployment rates for different workers over time.

There’s no connection between the minimum wage and unemployment for the college-educated, but for those with high school or less, there’s a strong positive correlation:

Notice that the chart axis stops at 45% of the average hourly wage: in more than three decades, the minimum wage has never gone higher. Today, according to BLS data, a $15 minimum wage would be 60% of the average hourly wage — the highest relative minimum wage ever. We are literally going into uncharted territory.

Daniel Bier

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

The Politics of Nostalgia: Why Does the Left Want to Take Us Backwards? by Steven Horwitz

One of the more curious developments in the last couple of years has been left-wing nostalgia for the economy of the 1950s.

Don’t political progressives usually portray themselves as being on “the right side of history” — representing, as the term suggests, the march of “progress”?

Not when it comes to the economy.

Paul Krugman has written a number of columns over the last decade about how much better things were in the middle of the 20th century. More recently, we have presidential candidate Hillary Clinton making a major economic policy statement in which she longs for a time like the 1950s when workers had the structure of the corporate world and unions through which to lobby and negotiate for pay and benefits, rather than the so-called “gig” economy of so many modern freelance employees, such as Uber drivers. “This on-demand or so-called gig economy is creating exciting opportunities and unleashing innovation,” Clinton said, “but it’s also raising hard questions about workplace protection and what a good job will look like in the future.”

To protect Americans from the uncertain future, Clinton promised she would “crack down on bosses that exploit employees by misclassifying them as contractors or even steal their wages.”

In an economy where technology has enabled people to have a great deal more flexibility with their workdays and independence with their work choices, it’s now the “progressives” who are complaining about the economic organizations that have been agents of more efficient resource use, expanded choice for workers, and cheaper goods for consumers.

In short, the progressives are complaining about what would otherwise be called progress.

And let’s not let the conservatives off the hook here either, as they demonstrate their own nostalgia for an economy of the past, with cheers for Donald Trump’s anti-immigrant and anti-trade tirades and for his general love of dirigiste policies. Immigration and trade have also expanded the range of work available, lifted millions out of poverty through better-paying jobs in the United States, and enriched the rest of us through more affordable goods and services.

What’s particularly amusing about both sides, but especially the progressives, is how wrong they are about life for the average American being better back in the 1950s, including how much more secure they were. In a terrific paper for the Cato Institute, Brink Lindsey effectively demolished Krugman’s nostalgia with some actual data about the economy of the 1950s. He pointed out that the increase in income inequality since then noted by so many progressives is largely overstated, and that the economy they are nostalgic for is one that restricted competition in a variety of ways, mostly to the benefit of the politically influential. Limits on immigration and trade, in particular, prevented the 1950s economy from achieving the reductions in cost and increase in variety that we associate with our economy today.

Does anyone really want to go back to the stagnant, conformist, more poverty-stricken world of the 1950s?

It is more than a little ironic that modern progressives are nostalgic for the very economy that GOP front-runner Donald Trump would appear to want to create.

As I argued in a recent paper, when we look at the cost of living in terms of the work hours required to purchase basic household items, most goods and services are far cheaper today than in the 1950s. The equivalents of those items today are also of higher quality: think about the typical household TV or refrigerator in 1955 versus 2015. These substantial decreases in cost have had another effect. They have made these goods increasingly accessible to the poorest of Americans. American households below the poverty line are far more likely to have a whole variety of items in their homes than did poor families in the 1950s. In fact, they are more likely to have those things in their houses than was a middle-class American family in the 1970s.

When you also consider the number of goods that weren’t even available in the 1970s or 1950s, from technology like computers and smartphones, to innovative medicines and medical procedures, to various forms of entertainment, to a whole number of inventions that have made us safer, healthier, and longer-lived, it’s difficult to argue that things were better “back then.”

The effect of all of this change driven by increased competition is that our world is one in which the middle class and poor are better off, and the gap between poor and rich as measured by what they consume has narrowed substantially. Does anyone really want to go back to the stagnant, conformist, more poverty-stricken world of the 1950s?

Politicians do. And here’s one reason why: back then, it was easier to influence and control people’s economic lives. Progressives with a desire to shape their ideal economy aren’t happy with the world of freelancers, Uber, and independent contractors.

The economy of the 1950s and 1970s had organizational focal points where politicians could exercise leverage and thereby influence the lives of large numbers of citizens.

I’m thinking here of the auto companies in the 1950s, the oil companies in the 1970s, and any number of industries where large firms were created by restrictions on domestic and foreign competition, which were easy points of contact for politicians with a desire to control, and which had corporate leaders who were happy to reap the benefits of corporatism.

In a world of Uber, Airbnb, and all the rest, there are no central points of leverage. Facebook produces no content, Uber owns no cars, Alibaba owns no inventory. More important: Uber has no employees, only contractors. If you are Clinton or Trump, or even Krugman, there’s nowhere to go to exercise your power or to drum up support from workers in one place. There’s nothing to grab hold of. There are just people trading peacefully with each other, enriching everyone in the process.

The real irony, once again, is that what this decentralized economy has produced is more freedom and more flexibility for more workers. The same progressives who railed against the conformism of the 1950s a decade later are now nostalgic for what their predecessors rejected and are rejecting exactly the “do your own thing” ethos their 1960s heroes fought for.

The “gig” economy works for people who want options and who want flexible hours so they can pursue a calling the rest of the day. Or perhaps they want to spend a few hours a week driving an Uber because Obamacare caused their employers to cut their hours at their other job.

Whatever the reason, this economy offers the freedom and flexibility for workers, and the benefits for consumers, that represent the progress progressives should love. That progressives (and conservatives) with power are fighting against it tells you that they are much more concerned with power than with progress.

Nostalgia is a dangerous basis for making policy, whether left or right.


Steven Horwitz

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Microfoundations and Macroeconomics: An Austrian Perspective, now in paperback.

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.

The Hidden Costs of Tenure by Jonathon Anomaly

Conversations I’ve had with non-academics about university employment practices usually evoke surprise and skepticism. Most people have a hard time understanding the point of a system that makes it so difficult to dismiss faculty members who are not especially good at their job.

The recent motion in Wisconsin to remove state laws that protect teacher tenure has re-ignited the debate over providing special protections to teachers—protections that don’t apply to journalists, gardeners, or bloggers who are occasionally fired for expressing unpopular views.

In some ways, regulations that determine how university professors are hired and fired in the United States are analogous to the restrictive labor laws in Spain and Greece. By raising the cost of firing bad workers, they increase the relative cost of hiring good ones.

The consequence is persistent unemployment and low productivity in Greece and Spain. The consequences of our tenure system are the proliferation of poor teaching and arcane research in university departments that are immunized from market forces.

Those who pursue a career as a university professor are mostly incentivized to produce specialized work aimed at impressing people who may end up on their promotion committee rather than a wider audience.

In the sciences, this may be a good thing, since one’s peers are likely doing narrow but important work that uncovers the basic structure of the universe. But in the humanities and social sciences, it often leads to the pursuit of bizarre research that is inscrutable to outsiders and of little value even to scholars in related fields.

Another hidden effect of the tenure system is that it often sifts out the very people it is supposed to protect: those with unusual or unpopular ideas. The original justification for tenure was to protect teachers and scholars who hold unpopular views by making it difficult to fire them. But when tenure is the main game in town, the stakes associated with hiring a new faculty member are high, making departments risk-averse. Thus, in order to be considered for tenure-track jobs, candidates have strong reasons to conceal unpopular political beliefs and to pursue relatively conservative lines of research.

By “conservative” I do not mean politically conservative. Quite the opposite.

If most people in a department where you’ve applied are progressives, it is not likely that your allegiance to any non-progressive views will help your cause. Tenured faculty members who make those decisions are often unwilling to take a chance on somebody with eccentric or politically unpopular views, since when a tenure-track position is filled, the candidate who fills it will probably be a colleague for life.

This is not only unfair; it is contrary to the mission of most universities. Research by Professor Jonathan Haidt suggests that political bias negatively impacts the quality of research by stifling open debate. But it’s one of the unintended results of tenure.

Tenure can, of course, protect people with unpopular views. Consider Edward Wilson and Arthur Jensen, eminent scholars at Harvard and Berkeley who have argued, among other things, that different groups of human beings exhibit average differences in genetically-mediated characteristics, including general intelligence and impulse control. Tenure protected their careers, although it didn’t protect them from death threats and intimidation.

On the other hand, it is likely that many more controversial scholars will never be hired in the first place because those on the hiring committee are hostile to their ideas.

Tenure also makes it much harder to terminate faculty members. It was never supposed to be a guarantee that one will never be fired. According to the American Association of University Professors, tenure can be revoked if members of a department can demonstrate that a colleague exhibits incompetence, or engages in academic fraud or seriously immoral behavior.

But even when these things can be shown, it is often easier for faculty and administration to ignore the problem than to mount a costly battle to fire a colleague.

This is one reason many tenure-track jobs are being replaced with adjunct positions, which is a temporary fix for a deeper problem. In the long run, it is likely that the quality of student education and faculty research would increase under a system that offered faculty a greater diversity of contracts, reflecting a faculty member’s ongoing accomplishments, experience, and contributions to the university.

In effect, tenure is a barrier to entry in the academic job market that makes it difficult to replace poorly performing faculty with better alternatives. We should applaud rather than protest the recent decision of the Wisconsin legislature to force the University of Wisconsin to experiment with new ways of conducting the business of hiring and firing faculty.

This post first appeared at the John William Pope Center. 

Jonathan Anomaly

Should We Fear the Era of Driverless Cars or Embrace the Coming Age of Autopilot? by Will Tippens

Driving kills more than 30,000 Americans every year. Wrecks cause billions of dollars in damages. The average commuter spends nearly 40 hours a year stuck in traffic and almost five years just driving in general.

But there is light at the end of the traffic-jammed tunnel: the driverless car. Thanks to millions of dollars in driverless technology investment by tech giants like Google and Tesla, the era of road rage, drunk driving, and wasted hours behind the wheel could be left in a cloud of dust within the next two decades.

Despite the immense potential of self-driving vehicles, commentators are already dourly warning that such automation will produce undesirable effects. As political blogger Scott Santens warns,

Driverless vehicles are coming, and they are coming fast…. As close as 2025 — that is in a mere 10 years — our advancing state of technology will begin disrupting our economy in ways we can’t even yet imagine. Human labor is increasingly unnecessary and even economically unviable compared to machine labor.

The problem, Santens says, is that there are “over 10 million American workers and their families whose incomes depend entirely or at least partially on the incomes of truck drivers.” These professional drivers will face unemployment within the next two decades due to self-driving vehicles.

Does this argument sound familiar?

These same objections have sprung up at every major stage of technological innovation since the Industrial Revolution, from the textile-working Luddites destroying looming machines in the 1810s to taxi drivers in 2015 smashing Uber cars.

Many assume that any initial job loss accompanying new technology harms the economy and further impoverishes the most vulnerable, whether fast food workers or truck drivers. It’s true that losing a job can be an individual hardship, but are these same pundits ready to denounce the creation of the light bulb as an economic scourge because it put the candle makers out of business?

Just as blacksmithing dwindled with the decline of the horse-drawn buggy, economic demand for certain jobs waxes and wanes. Jobs arise and continue to exist for the sole reason of satisfying consumer demands, and the consumer’s demands are continuously evolving. Once gas heating devices became available, most people decided that indoor fires were dirtier, costlier, and less effective at heating and cooking, so they switched. While the change temporarily disadvantaged those in the chimney-sweeping business, the added value of the gas stove vastly improved the quality of life for everyone, chimney sweeps included.

There were no auto mechanics before the automobile and no web designers before the Internet. It is impossible to predict all the new employment opportunities a technology will create beforehand. Countless jobs exist today that were unthinkable in 1995 — and 20 years from now, people will be employed in ways we cannot yet begin to imagine, with the driverless car as a key catalyst.

The historical perspective doesn’t assuage the naysayers. If some jobs can go extinct, couldn’t all jobs go extinct?

Yes, every job we now know could someday disappear — but so what? Specific jobs may come and go, but that doesn’t mean we will ever see a day when labor is no longer demanded.

Economist David Ricardo demonstrated in 1817 that each person has a comparative advantage due to different opportunity costs. Each person is useful, and no matter how unskilled he or she may be, there will always be something that each person has a special advantage in producing. When this diversity of ability and interest is coupled with the infinite creativity of freely acting individuals, new opportunities will always arise, no matter how far technology advances.

Neither jobs nor labor are ends in themselves — they are mere means to the goal of wealth production. This does not mean that every person is concerned only with getting rich, but as Henry Hazlitt wrote in Economics in One Lesson, real wealth consists in what is produced and consumed: the food we eat, the clothes we wear, the houses we live in. It is railways and roads and motor cars; ships and planes and factories; schools and churches and theaters; pianos, paintings and hooks.

In other words, wealth is the ability to fulfill subjective human desires, whether that means having fresh fruit at your local grocery or being able to easily get from point A to point B. Labor is simply a means to these ends. Technology, in turn, allows labor to become far more efficient, resulting in more wealth diffused throughout society.

Everyone knows that using a bulldozer to dig a ditch in an hour is preferable to having a whole team of workers spend all day digging it by hand. The “surplus” workers are now available to do something else in which they can produce more highly valued goods and services.  Over time, in an increasingly specialized economy, productivity rises and individuals are able to better serve one another through mutually beneficial exchanges in the market. This ongoing process of capital accumulation is the key to all meaningful prosperity and the reason all of humanity has seen an unprecedented rise in wealth, living standards, leisure, and health in the past two centuries.

Technology is always uncertain going forward. Aldous Huxley warned in 1927 that jukeboxes would put live artists out of business. Time magazine predicted the computer would wreak economic chaos in the 1960s.

Today, on the cusp of one of the biggest innovations since the Internet, there is, predictably, similar opposition. But those who wring their hands at the prospect of the driverless car fail to see that its greatest potential lies not in reducing pollution and road deaths, nor in lowering fuel costs and insurance rates, but rather in its ability to liberate billions of hours of human potential that truckers, taxi drivers, and commuters now devote to focusing on the road.

No one can know exactly what the future will look like, but we know where we have been, and we know the principles of human flourishing that have guided us here.

If society is a car, trade is the engine — and technology is the gas. It drives itself. Enjoy the ride.

Will Tippens

Will Tippens is a recent law school graduate living in Memphis.

RELATED ARTICLES:

The Roads of the Future Are Made of Plastic

Apple co-founder: Robots to own people as their pets – English Pravda.RU

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Stephen Davies

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Cross-posted from HuffPo.


Evan Bernick

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

Gays Need the Freedom to Discriminate by Jeffrey A. Tucker

Gaining the right to be married is a win for liberty because it removes a barrier to free association. But how easily a movement for more freedom turns to the cause of taking away other freedoms!

Following the Supreme Court decision mandating legal same-sex marriage nationwide, the New York Times tells us that, “gay rights leaders have turned their sights to what they see as the next big battle: obtaining federal, state and local legal protections in employment, housing, commerce and other arenas.”

In other words, the state will erect new barriers to freedom of choice in place of the old ones that just came down!

To make the case against such laws, it ought to be enough to refer to the freedom to associate and the freedom to use your property as you see fit. These are fundamental principles of liberalism. A free society permits anything peaceful, and that includes the right to disassociate. Alas, such arguments seem dead on arrival today.

So let us dig a bit deeper to understand why anti-discrimination laws are not in the best interests of gay men and women, or anyone else. Preserving the ability to discriminate permits the market system to provide crucial information feedback to a community seeking to use its buying power to reward its friends and noncoercively, nonviolently punish those who do not share its values.

Ever more, consumers are making choices based on core values. Does this institution protect the environment, treat its workers fairly, support the right political causes? In order to make those choices — which is to say, in order to discriminate — consumers need information.

In the case of gay rights, consumers need to know who supports inclusion and who supports exclusion. Shutting down that information flow through anti-discrimination law robs people of crucial data to make intelligent buying decisions. Moreover, such laws remove the competitive pressure of businesses to prove (and improve) their commitment to community values, because all businesses are ostensibly bound by them.

A market that permits discrimination, even of the invidious sort, allows money and therefore success and profits to be directed toward those who think broadly, while denying money and profitability to those who do not. In this way, a free market nudges society toward ever more tolerant and inclusive attitudes. Money speaks far more persuasively than laws.

Notice that these proposed laws only pertain to the producer and not the consumer. But discrimination is a two-edged sword. The right can be exercised by those who do not like some groups, and it can be exercised by those groups against those who do not like them.

Both are necessary and serve an important social function. They represent peaceful ways of providing social and economic rewards to those who put aside biases in favor of inclusive decision making.

If I’m Catholic and want to support pro-Catholic businesses, I also need to know what businesses don’t like Catholics. If I’m Muslim and only want my dollars supporting my faith, I need to know who won’t serve Muslims (or who will put my dollars to bad use). If a law that prohibits business from refusing to serve or hire people based on religion, how am I supposed to know which businesses deserve my support?

It’s the same with many gay people. They don’t want to trade with companies that discriminate. To act out those values requires some knowledge of business behavior and, in turn, the freedom to discriminate. There is no gain for anyone by passing a universal law mandating only one way of doing business. Mandates drain the virtue out of good behavior and permit bad motivations to hide under the cover of law.

Here is an example from a recent experience. I was using AirBnB to find a place to stay for a friend. He needed a place for a full week, so $1,000 was at stake. The first potential provider I contacted hesitated and began to ask a series of questions that revolved around my friend’s country of origin, ethnicity, and religion. The rental owner was perfectly in his rights to do this. It is his home, and he faces no obligation to open it to all comers.

On the other hand, I found the questions annoying, even offensive. I decided that I didn’t want to do business with this person. I made a few more clicks, cancelled that query, and found another place within a few minutes. The new renter was overjoyed to take in my friend.

I was delighted for two reasons. First, my friend was going to stay at a home that truly wanted him there, and that’s important. Force is never a good basis for commercial relationships. Second, I was able to deny $1K to a man who was, at best, a risk averse and narrow thinker or, at worst, an outright bigot.

Declining to do business with him was my little protest, and it felt good. I wouldn’t want my friend staying with someone who didn’t really want him there, and I was happy not to see resources going toward someone whose values I distrusted.

In this transaction, I was able to provide a reward to the inclusive and broad-minded home owner. It really worked out too: the winning rental property turned out to be perfect for my friend.

This was only possible because the right to discriminate is protected in such transactions (for now). I like to think that the man who asked too many questions felt a bit of remorse after the fact (he lost a lot of money), and even perhaps is right now undergoing a reconsideration of his exclusionary attitudes. Through my own buyer decisions I was actually able to make a contribution toward improving cultural values.

What if anti-discrimination laws had pertained? The man would not have been allowed to ask about national origin, religion, and ethnicity. Presuming he kept his room on the open market, he would have been required under law to accept my bid, regardless of his own values.

As a result, my money would have gone to someone who didn’t have a high regard for my friend, my friend would have been denied crucial information about what he was getting into, and I would not be able to reward people for values I hold dear.

This is precisely why gay rights leaders should be for, not against, the right to discriminate. If you are seeking to create a more tolerant society, you need information that only a free society can provide.

You need to know who is ready to serve and hire gay men and women, so they can be rewarded for their liberality. You also need to know who is unwilling to hire and serve so that the loss part of profit-and-loss can be directed against ill-liberality. Potential employees and customers need to know how they are likely to be treated by a business. Potential new producers need to know about business opportunities in under-served niche markets.

If everyone is forced to serve and hire gays, society is denied important knowledge about who does and does not support enlightened thinking on this topic.

Consider the prototypical case of the baker who doesn’t want to make a wedding cake for a same-sex couple. He is within his rights. His loss of a potential customer base is his own loss. It is also the right of the couple to refuse to give this baker business. The money he would have otherwise made can be redirected towards a baker who is willing to do this. It is equally true that some people would rather trade with a baker who is against gay marriage, and they are within their rights as well.

Every act of discrimination, provided it is open and legal, provides a business opportunity to someone else.

How does all this work itself out in the long run? Commerce tends toward rewarding inclusion, broadness, and liberality. Tribal loyalties, ethnic and religious bigotries, and irrational prejudices are bad for business. The merchant class has been conventionally distrusted by tribalist leaders — from the ancient to the modern world — precisely because merchantcraft tends to break down barriers between groups.

We can see this in American history following the end of slavery. Blacks and whites were ever more integrated through commercial exchange, especially with the advance of transportation technology and rising incomes. This is why the racists turned increasingly toward the state to forbid it. Zoning laws, minimum wage regulation, mandatory segregation, and occupational licensing were all strategies used to keep the races separate even as the market was working toward integration.

The overwhelming tendency of markets is to bring people together, break down prejudices, and persuade people of the benefits of cooperation regardless of class, race, religion, sex/gender, or other arbitrary distinctions. The same is obviously and especially true of sexual orientation. It is the market that rewards people who put aside their biases and seek gains through trade.

This is why states devoted to racialist and hateful policies always resort to violence in control of the marketplace. Ludwig von Mises, himself Jewish and very much the victim of discrimination his entire life, explained that this was the basis for Nazi economic policy. The market was the target of the Nazis because market forces know no race, religion, or nationality.

“Many decades of intensive anti-Semitic propaganda,” Mises  wrote in 1944, “did not succeed in preventing German ‘Aryans’ from buying in shops owned by Jews, from consulting Jewish doctors and lawyers, and from reading books by Jewish authors.” So the racists turned to the totalitarian state — closing and confiscating Jewish business, turning out Jewish academics, and burning Jewish books — in order to severe the social and economic ties between races in Germany.

The biggest enemy of marginal and discriminated-against populations is and has always been the state. The best hope for promoting universal rights and a culture of tolerance is the market economy. The market is the greatest weapon ever devised against bigotry — but, in order to work properly, the market needs to signaling systems rooted in individuals’ freedom of choice to act on their values.

And, to be sure, the market can also provide an outlet for people who desire to push back for a different set of values, perhaps rooted in traditional religious concerns. Hobby Lobby, Chick-Fil-A, In-and-Out Burger, among many others, openly push their religious mission alongside their business, and their customer base is drawn to them for this reason. This is also a good thing. It is far better for these struggles to take place in the market (where choice rules) rather than through politics (where force does).

Trying to game that market by taking away consumer and producer choice harms everyone. Anti-discrimination laws will provide more choices at the expense of more informed choices. Such laws force bigotry underground, shut down opportunities to provide special rewards for tolerance, and disable the social learning process that leads to an ever more inclusive society.

New laws do not fast-track fairness and justice; they take away opportunities to make the world a better place one step at a time.


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.

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

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

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

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

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

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

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

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

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

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

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

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


Robert P. Murphy

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

SCOTUS Says You Can Be Sued for Unintentional Discrimination by Walter Olson

Stop calling it fair housing law. If it was ever a matter of fairness, it isn’t now.

Under today’s 5-4 Supreme Court holding in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, you can be held liable for housing discrimination whether or not you or anyone in your organization intended to discriminate.

Instead — to quote Justice Anthony Kennedy, who joined with the Court’s four liberals in a 5-4 majority — you might have been influenced by “unconscious prejudice” or “stereotyping” when you lent money or rented apartments or carried on appraisal or brokerage or planning functions.

What you did had “disparate impact” on some race or other legally protected group, and now you’re caught up in potentially ruinous litigation in which it’s up to you to show that you had a good reason for what you did and could not have arranged your actions in some other way that had less disparate impact.

The decision is quite broad in its implications. For example, in employment discrimination law, where disparate impact has long been legally established, it is increasingly legally dangerous to ask job applicants about criminal records, or carry out criminal background checks on them before a job offer, for fear of disparate impact.

Is it still safe to ask such questions of prospective tenants in your apartment building? Better ask your lawyer.

The case hinged on statutory interpretation, and as Justice Alito’s dissent makes clear, King v. Burwell wasn’t the only case decided today in which a majority mangled the clear meaning of a law’s text to get the result it wanted.

As Justice Ginsburg was frank enough to note at oral argument, “”If we’re going to be realistic about it…in 1968, when the Fair Housing Act passed, nobody knew anything about disparate impact.”

On the contrary, the law’s text specified that it was banning decisions taken “because of” race, and to find a loophole the majority was obliged to fall back on an incidental clause banning the making “unavailable” of a “dwelling,” which we are meant to believe snuck in a huge new area of liability.

As the majority stresses, many appeals courts did go along with a liberal interpretation. But the Executive Branch did not — in 1988 it took the position before the Court that the law did not permit disparate impact claims — while Congress hedged the issue in later enactments so as to keep all sides on board a compromise.

Despite ridiculous claims (like that in a Vox headline) that the Court today “saved” the Fair Housing Act or that a contrary decision would have “gutted” it, the great majority of litigation under the Act has been on disparate-treatment complaints (which, as Alito notes, can already use disparate impact as evidence of pretext.)

But the Obama administration, as I’ve documented elsewhere, has launched a huge effort to turn disparate-impact law into an engine of revolutionary changes in local government and housing practice, introducing, for example, such concepts as a local government obligation to pursue subsidized federal housing grants and to enact laws forcing private landlords to accept Section 8 tenants.

As the four dissenters make clear, a compliance and litigation nightmare now looms for many in real estate, finance, and local government as they try to dodge liability.

“No matter what [Texas] decides” in the case at hand on locating low-income housing, for example, one or another group “will be able to bring a disparate-impact case” based either on the theory that projects should be put in poorer areas (which enables building more of them) or in affluent areas (which will benefit some future residents).

If you have time to read only one bit of today’s opinion, read Justice Clarence Thomas’s separate dissent. Thomas brilliantly recounts the EEOC’s successful subversion of its own founding statute, culminating in the Court’s profoundly mistaken opinion in Griggs v. Duke Power, the employment case that founded disparate impact theory.

“We should drop the pretense that Griggs’ interpretation of Title VII was legitimate,” he writes. It’s a tour de force — and already being denounced vehemently on the Left.

This post first appeared at Cato.org.


Walter Olson

Walter Olson is a senior fellow at the Cato Institute’s Center for Constitutional Studies.

Blurred Lines: The Humanitarian Threat to Free Speech by Aaron Tao

“Think of liberalism … as a collection of ideas or principles which go to make up an attitude or ‘habit of mind.’” – Arthur A. Ekirch

In Democracy in America, Alexis de Tocqueville was keen to observe that “once the Americans have taken up an idea, whether it be well or ill founded, nothing is more difficult than to eradicate it from their minds.”

Reflecting upon my experience as a first-generation immigrant who grew up in the United States, I concur with Tocqueville; this inherent feature of the culture and character of the American people holds true even today.

In America, there are no sacred cows, no one is above criticism, and no one has the final say on any issue. It is worth emphasizing that today, the United States stands virtually alone in the international community in upholding near-absolute freedom of personal expression, largely thanks to the constitutional protections provided by the First Amendment.

But without certain internalized values and principles, the legal bulwark of the First Amendment is nothing more than a parchment barrier.

As cliché as it may sound, it is important to recognize that our cherished freedom to think, speak, write, and express ourselves should not be taken for granted. Defending the principle of free speech is a perennial conflict that has to be fought in the court of public opinion here and abroad.

Unfortunately, a number of recent developments have greatly alarmed civil libertarians and may very well carry long-term negative repercussions for the United States as a free and open society.

In his new book, Freedom from Speech, Greg Lukianoff, the president of the Foundation for Individual Rights in Education (FIRE) and tireless free speech advocate, highlights a troubling cultural phenomenon: the blurring of physical safety with psychological and ideological comfort.

It is a disturbing trend that is not limited to the United States:

People all over the globe are coming to expect emotional and intellectual comfort as though it were a right. This is precisely what you would expect when you train a generation to believe that they have a right not to be offended. Eventually, they stop demanding freedom of speech and start demanding freedom from speech.

On the other side of Atlantic, Great Britain is undergoing what one writer describes as a “slow death of free speech.” The land of Milton is now home to luminaries who wish to reinstate Crown licensing of the press (not seen since 1695!).

Meanwhile, ordinary people face jail time for callous tweeting. In British universities, student-driven campaigns have successfully shut down debates and banned pop songs, newspapers, and even philosophy clubs.

While the United States is fortunate enough to have the First Amendment [to] prevent outright government regulation of the press, cultural attitudes play a greater role in maintaining a healthy civil society.

Lukianoff reserves special criticism for American higher education for “neglecting to teach the intellectual habits that promote debate and discussion, tolerance for views we hate, epistemic humility, and genuine pluralism.”

Within academia, “trigger warnings” and “safe places” are proliferating. In a truly Bizarro twist, it has now come to the point that faculty members are defending individual rights and due process and decrying mob rule, while their students run off in the opposite direction.

We now hear on a regular basis of campus outrages involving a controversial speaker or perceived injustice, and the “offended” parties responding with a frenzied social media crusade or a real-world attempt to shame, bully, browbeat, censor, or otherwise punish the offender.

A small sampling from this season include attempts to ban screenings of American Sniper at the University of Michigan and the University of Maryland, resolutions to create a Stasi-like “microaggression” reporting system at Ithaca College, and the controversy involving AEI scholar Christina Hoff Sommers speaking at Oberlin College.

These incidents are just the tip of the iceberg.

With the endless stream of manufactured outrages, perhaps it is fitting that George Mason University law professor David Bernstein would raise the question, “Where and when did this ‘makes me feel unsafe’ thing start?”

My personal hypothesis: When postmodernism found itself a new home on Tumblr, spread across the left-wing blogosphere, became reinforced by mobs and echo-chambers, and spilled into the real world.

Luckily, not all progressives have sacrificed the basic principles of liberalism to the altar of radical identity politics and political correctness. One liberal student at NYU courageously pointed out the grave dangers posed by the ideology embraced by many of his peers:

This particular brand of millennial social justice advocacy is destructive to academia, intellectual honesty, and true critical thinking and open mindedness. We see it already having a profound impact on the way universities act and how they approach curriculum. …

The version of millennial social justice advocacy that I have spoken about — one that uses Identity Politics to balkanize groups of people, engenders hatred between groups, willingly lies to push agendas, manipulates language to provide immunity from criticism, and that publicly shames anyone who remotely speaks some sort of dissent from the overarching narrative of the orthodoxy — is not admirable.

It is deplorable. It appeals to the basest of human instincts: fear and hatred. It is not an enlightened or educated position to take. History will not look kindly on this Orwellian, authoritarian perversion of social justice that has taken social media and millennials by storm over the past few years.

I, too, am convinced that these activists, with their MO of hysterical crusades, are one of today’s biggest threats to free speech, open inquiry, and genuine tolerance, at least on college campuses. The illiberal climate fostered by these their ideologues seems to be spreading throughout academia and is continuing to dominate the headlines.

As of this writing, Northwestern professor (and self-described feminist) Laura Kipnis is undergoing a Kafkaesque Title IX inquisition for writing a column in the Chronicle of Higher Education and making comments on Twitter that offended a number of students. The aggrieved mobilized in full force to have her punished under the federal sex discrimination law.

These groups and their tactics represent what Jonathan Rauch would describe as the “humanitarian” challenge to free speech. In his must-read book, Kindly Inquisitors: The New Attacks on Free Thought, Rauch identified how these “humanitarians” sought to prevent “offense” to “oppressed and historically marginalized” peoples. In the name of “compassion,” words became conflated with physical action.

As speech codes spread and the definition of “harassment” (reading a book in public, for instance) became broader within the bureaucracy of academia, an “offendedness sweepstakes” was cultivated and turned into the norm.

Rauch’s book was published in 1993, but his diagnosis and arguments still apply today, if not more, in the age of social media when the “offendedness sweepstakes” are amplified to new levels.

Nowadays, PC grievance mongers can organize much more effectively and more often than not, get rewarded for their efforts. The future of a free society looks very bleak should these types become a dominant force on the political landscape. I can’t help but shiver at the prospect of seeing the chronically-offended eggshells of my generation becoming tomorrow’s legislators and judges. The chilling effects are already being felt.

Even as numerous challenges emerge from all corners, free speech has unparalleled potential for human liberation in the Digital Age. The eternal battle is still that of liberty versus power, and the individual versus the collective. I remain confident that truth can still prevail in the marketplace of ideas. It is for this reason we should treasure and defend the principles, practices, and institutions that make it possible.

Last month marked the birthday of the brilliant F.A. Hayek, the gentleman-scholar who made landmark contributions to fields of economics, philosophypolitical science, and law, and established his name as the twentieth century’s most eminent defender of classical liberalism in the face of the collectivist zeitgeist.

For all his accomplishments, Hayek practiced and urged epistemological humility (a position that should be natural to any defender of free speech) in his Nobel lecture. Looking back on his life’s work, Hayek was highly skeptical of the nebulous concept of “social justice” and its totalitarian implications. He even went as far as to devote an entire volume of his magnum opus, Law, Legislation, and Liberty, to completely demolish The Mirage of Social Justice.

Hayek concluded:

What we have to deal with in the case of “social justice” is simply a quasireligious superstition of the kind which we should respectfully leave in peace so long as it merely makes those happy who hold it, but which we must fight when it becomes the pretext of coercing other men [emphasis added].

And the prevailing belief in “social justice” is at present probably the gravest threat to most other values of a free civilization.

Hayek did not predict that “social justice” would be first used to silence dissent before moving on to its long-term agenda, but it would not have surprised him. Weak ideas always grasp for the censor in the face of sustained criticism — and feeble ideas made strong by politics are the most dangerous of all.

Humanitarians with guillotines can be found from the French Revolution to present day. Modern day defenders of individual liberty would do well to heed Hayek’s warning and resist the Siren song of “social justice,” the rallying cry of collectivists who cannot realize their vision without coercion.


Aaron Tao

Aaron Tao is the Marketing Coordinator and Assistant Editor of The Beacon at the Independent Institute.

California Government Puts Uber on Blocks by Jeffrey A. Tucker

The California Labor Commission, with its expansive power to categorize and codify what it is that workers do, has dealt a terrible blow to Uber, the disruptive ride-sharing service. In one administrative edict, it has managed to do what hundreds of local governments haven’t.

Every rapacious municipal taxi monopoly in the state has to be celebrating today. It also provides a model for how these companies will be treated at the federal level. This could be a crushing blow. It’s not only the fate of Uber that is at stake. The entire peer-to-peer economy could be damaged by these administrative edicts.

The change in how the income of Uber drivers is treated by the law seems innocuous. Instead of being regarded as “independent contractors,” they are now to be regarded as “employees.”

Why does it matter? You find out only way down in the New York Times story on the issue. This “could change Uber’s cost structure, requiring it to offer health insurance and other benefits, as well as paying salaries.”

That’s just the start of it. Suddenly, Uber drivers will be subject to a huge range of federal tax laws that involve withholding, maximum working hours, and the entire labor code at all levels as it affects the market for employees. Oh, and Obamacare.

This is a devastating turn for the company and those who drive for it.

Just ask the drivers:

Indeed, there seems to be no justification for calling Uber drivers employees. I can recall being picked up at airport once. Uber was not allowed to serve that airport. I asked the man if he worked for Uber. He said he used to but not anymore.

“When did you quit?”

“Just now,” he said. Wink, wink. He was driving for himself on my trip.

“When do you think you will work for Uber again?”

“After I drop you off.”

That’s exactly the kind of independence that Uber drivers value. They don’t have to answer any particular call that comes in. They set their own hours. They drive their own cars. When an airport bans Uber, they simply redefine themselves.

They can do this because they are their own boss; Uber only cuts them off if they don’t answer a call on their mobile apps for 180 days. But it is precisely that rule that led the commission to call them “employees.”

That’s a pretty thin basis on which to call someone an employee. And it’s also solid proof that the point of this decision is not to clarify some labor designation but rather to shore up the old monopolies that want to continue to rip off consumers with high prices and poor service. No surprise, government here is using its power to serve the ruling class and established interests.

This is exactly the problem with government regulations that purport to define and codify every job. Such regulations tend to restrict the types and speed of innovation that can occur in enterprises.

The app economy and peer-to-peer network are huge growth areas precisely because they have so far manage to evade being codified and controlled and shoe-horned into the old stultifying rules.

If everyone earning a piecemeal stream of income is called an employee — and regulated by relevant tax, workplace, and labor laws — many of these companies immediately become unviable.

There will be no more on-demand hair stylists, plumbers, tennis coaches, and piano teachers. The fate of a vast number of companies is at stake. The future is at stake.

For now, Uber is saying that this decision pertains to this one employee only. I hope that this claim is sustainable. If it is not, the regulators will use this decision to inflict a terrible blow on the brightest and fastest growing sector of American economic life.


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.

“Paid Family Leave” Is a Great Way to Hurt Women by Robert P. Murphy

In an article in the New Republic, Lauren Sandler argues that it’s about time the United States join the ranks of all other industrialized nations and provide legally guaranteed paid leave for pregnancy or illness.

Her arguments are similar to ones employed in the minimum wage debate. Opponents say that making particular workers more expensive will lead employers (on aggregate) to hire fewer of them. Supporters reject this tack as fearmongering, going so far as to claim such measures will boost profitability, and that only callous disregard for the disadvantaged can explain the opposition.

If paid leave (or higher pay for unskilled workers) helps workers and employers, then why do progressives need government power to force these great ideas on everyone?

The United States already has unpaid family leave, with the Family and Medical Leave Act (FMLA) signed into law by President Clinton in 1993. This legislation “entitles eligible employees … to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave.” Specifically, the FMLA grants covered employees 12 workweeks of such protection in a 12-month period, to deal with a pregnancy, personal sickness, or the care of an immediate family member. (There is a provision for 26 workweeks if the injured family member is in the military.)

But “workers’ rights” advocates want to move beyond the FMLA, in winning legally guaranteed paid leave for such absences. Currently, California, New Jersey, and Rhode Island have such policies.

The basic libertarian argument against such legislation is simple enough: no worker has a right to any particular job, just as no employer has the right to compel a person to work for him or her. In a genuine market economy based on private property and consensual relations, employers and workers are legally treated as responsible adults to work out mutually beneficial arrangements. If it’s important to many women workers that they won’t forfeit their jobs in the event of a pregnancy, then in a free and wealthy society, many firms will provide such clauses in the employment contract in order to attract qualified applicants.

For example, if a 23-year-old woman with a fresh MBA is applying to several firms for a career in the financial sector, but she has a serious boyfriend and thinks they might one day start a family, then — other things equal — she is going to highly value a clause in the employment contract that guarantees she won’t lose her job if she takes off time to have a baby. Since female employment in the traditional workforce is now so prevalent, we can expect many employers to have such provisions in in their employment contracts in order to attract qualified applicants. Women don’t have a right to such clauses, just as male hedge-fund VPs don’t have a right to year-end bonuses, but it’s standard for employment contracts to have such features.

Leaving aside philosophical and ethical considerations, let’s consider basic economics and the consequences of pregnancy- and illness-leave legislation. It is undeniable that providing even unpaid, let alone paid, leave is a constraint on employers. Other things equal, an employer does not want an employee to suddenly not show up for work for months at a time, and then expect to come back as if nothing had happened. The employer has to scramble to deal with the absence in the meantime, and furthermore doesn’t want to pour too much training into a temporary employee because the original one is legally guaranteed her (or his) old job. If the employer also has to pay out thousands of dollars to an employee who is not showing up for work, it is obviously an extra burden.

As always with such topics, the easiest way to see the trade-off is to exaggerate the proposed measure. Suppose instead of merely guaranteeing a few months of paid maternity leave, instead the state enforced a rule that said, “Any female employee who becomes pregnant can take off up to 15 years, earning half of her salary, in order to deliver and homeschool the new child.” If that were the rule, then young female employees would be ticking time bombs, and potential employers would come up with all sorts of tricks to deny hiring them or to pay them very low salaries compared to their ostensible on-the-job productivity.

Now, just because guaranteed leave, whether paid or unpaid, is an expensive constraint for employers, that doesn’t mean such policies (in moderation) are necessarily bad business practices, so long as they are adopted voluntarily. To repeat, it is entirely possible that in a genuinely free market economy, many employers would voluntarily provide such policies in order to attract the most productive workers. After all, employers allow their employees to take bathroom breaks, eat lunch, and go on vacation, even though the employees aren’t generating revenue for the firm when doing so.

However, if the state must force employers to enact such policies, then we can be pretty sure they don’t make economic sense for the firms in question. In her article, Sandler addresses this fear by writing, in reference to New Jersey’s paid leave legislation,

After then-Governor Jon Corzine signed the bill, Chris Christie promised to overturn it during his campaign against Corzine. But Christie never followed through. The reason why is quite plain: As with California, most everyone loves paid leave. A recent study from the CEPR found that businesses, many of which strenuously opposed the policy, now believe paid leave has improved productivity and employee retention, decreasing turnover costs. (emphasis added)

Well, that’s fantastic! Rather than engaging in divisive political battles, why doesn’t Sandler simply email that CEPR (Center for Economic and Policy Research) study to every employer in the 47 states that currently lack paid leave legislation? Once they see that they are flushing money down the toilet right now with high turnover costs, they will join the ranks of the truly civilized nations and offer paid leave.

The quotation from Sandler is quite telling. Certain arguments for progressive legislation rely on “externalities,” where the profit-and-loss incentives facing individual consumers or firms do not yield the “socially optimal” behavior. On this issue of family leave, the progressive argument is much weaker. Sandler and other supporters must maintain that they know better than the owners of thousands of firms how to structure their employment contracts in order to boost productivity and employee retention. What are the chances of that?

In reality, given our current level of wealth and the configuration of our labor force, it makes sense for some firms to have generous “family leave” clauses for some employees, but it is not necessarily a sensible approach in all cases. The way a free society deals with such nuanced situations is to allow employers and employees to reach mutually beneficial agreements. If the state mandates an approach that makes employment more generous to women in certain dimensions — since they are the prime beneficiaries of pregnancy leave, even if men can ostensibly use it, too — then we can expect employers to reduce the attractiveness of employment contracts offered to women in other dimensions. There is no such thing as a free lunch. Mandating paid leave will reduce hiring opportunities and base pay, especially for women. If this trade-off is something the vast majority of employees want, then that’s the outcome a free labor market would have provided without a state mandate.


Robert P. Murphy

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