If I was an Onion writer for a day…

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My headline article would read something like the following: “Fidel Castro, mass murderer, usurper of the rule of law and the Laws of Nature, manipulator and oppressor of the poor, is mourned by thousands of Western progressive class warriors who ostensibly have devoted their lives and political actions to the needs of the poor.”

I suppose the challenge, however, is that the Onion is brilliant satire while my headline is in fact true –  witness Jill Stein’s Tweet that Castro was a “symbol for the struggle for social justice.” Admittedly, Stein is an absurd kook, but none other than the world’s favorite progressive Canadian Prime Minister, Justin Trudeau, delivered a ridiculous encomium, calling Castro “remarkable” and a “larger than life leader who served his people.” I would have rearranged that to read, “Castro was remarkablly durable in his ability to pervert justice and rule in maniacal tyranny over Cuba, a man who was larger than life for his crimes against humanity, and who served himself and his inner circle (as long as they could last in it) for as long as he lived…” but hey, that’s just me.

It is of the highest degree of mendacity to pretend that Castro was anything other than the monster that he was. It is also remarkable that the same people who place the CEO of Company X or the oil and gas lobbyist at the pinnacle of the “all that is most evil” pyramid, and who are deathly afraid that Trump is going to eviscerate and plunder America, can on the other hand reserve a soft spot in their heart and openly praise someone with literal blood on his hands. As Don Boudreaux at Cafe Hayek indicates, this is a special form of perverted ethics, and connects back to an earlier post I made about the modern “men without chests,” who fail the ancient humanitarian and spiritual test of being able to clearly differentiate good from evil.

Meantime, from his eighth level of the Inferno, Vladimir Lenin, recently joined by Fidel Castro, manages to smile from his backward turned head with the knowledge that useful idiots still exist in the West.

The Abolition of Man by C.S. Lewis – Modern Education and the Creation of “Men Without Chests”

I have written in previously in support of freedom of choice in our education models and in particular for support of the classical education model. I firmly believe that it is an inalienable right to be free to choose what manner or education is received, rather than the myopic and freedom of choice smothering one size fits all and centrally directed and dictated (and increasingly expensive with little return on investment) modern American education model we have blundered into. Recently, I found an ally of sorts in an unexpected corner – in the writings of C.S. Lewis. Many will recognize Lewis for \ his Chronicles of Narnia series or perhaps his more direct Christian books such as Mere Christianity and the Screwtape Letters, but oft neglected is his powerful and remarkably prescient book on primary education, The Abolition of Man.

In the Abolition of Man, Lewis takes aim at the then (1940s) education reformers and their zeal for removing the development of a foundation of objective values and replacing it with something in which the individual becomes much more critical and subjective. In a sense, this era witnessed the shift from attempts at educators to develop the moral and ethical character of a child to simply treating them as children to be loaded up with facts and to ostensibly create nothing more than rational and logical human beings who could conform to a certain desired standard way of thinking. With the hindsight of the year 2016, it is apparent to me that such reformers were successful in their aims with the modern education system as we know it. Of the reformers, Lewis has these rather harsh critiques:

They see the world around them swayed by emotional propaganda – they have learned from tradition that youth is sentimental – and they conclude that the best thing they can do is to fortify the young minds of young people against emotion. My own experience as a teacher tells an opposite tale. For every one pupil who needs to be guarded from a weak excess of sensibility there are three who need to be awakened from the slumber of cold vulgarity. The task of the modern educator is not to cut down jungles but to irrigate deserts. The right defence against false sentiments is to inculcate just sentiments. By starving the sensibility of our pupils we only make them easier prey to the propagandist when he comes. For famished nature will be avenged and a hard heart is no infallible protection against a soft head…. Their scepticism about values is on the surface: it is for use on other people’s values: about the values in their own set they are not nearly sceptical enough.

The consequence of such teaching is not benign in Lewis’ estimation, rather, it leads to the creation of an adult who is not really a human at all. Lewis has these dire observations about what the new education model would produce:

The old dealt with its pupils as grown birds deal with young birds when they teach them to fly: the new deals with them more as the poultry-keeper deals with young birds – making them thus or thus for purposes of which the bird knows nothing. In a word, the old was a kind of propagation – men transmitting manhood to men: the new is merely propaganda…

…We were told it all long ago by Plato. As the king governs by his executive, so Reason in man must rule the appetites by means of the ‘spirited element.’ The head rules the belly through the chest – the seat, as Alanus tells us, of Magnanimity, of emotions organized by trained habit into stable sentiments. The Chest – Magnanimity – Sentiment- these are indispensable liaison officers between cerebral man and visceral man…

…It is not excess of thought but defect of fertile and generous emotion that marks them out. Their heads are no bigger than the ordinary: it is the atrophy of the chest beneath that makes them seem so. And all the time – such is the tragi-comedy of our situation – we continue to clamor for those very qualities we are rendering impossible. You can hardly open a periodical without coming across the statement that what our civilization needs is more ‘drive,’ or dynamism or self-sacrifice or ‘creativity.’ In a sort of ghastly simplicity we remove the organ and demand the function. We make men without chests and expect of them virtue and enterprise. We laugh at honour and are shocked to find traitors in our midst. We castrate and bid the geldings by fruitful.

[As an side, since Lewis invoked the great word Magnanimty – I am linking to a previous article on the subject of that very word, that also connects back to the broader themes and points I am attempting to make in this one.]

To be clear, what Lewis has in mind when he speaks of the “old” is a return to fortifying the character of a child through teaching of objective values. One might call this conecpt ‘Natural Law’ – basic, fundamental, or even first principle universal virtues that we should all aspire to and should commonly agree should be inculcated in our children. Lest I set off any alarm bells for my secular friends, I should indicate that of all the Lewis books, this is one that is the least explicitly Christian. In fact, the virtues and values he builds up in the narrative he collectively labels The Tao, borrowing heavily from an ancient Chinese term that seems to translate roughly into “The Way.” While there are many Christian principles that are consistent with the Tao, Lewis endeavors to build a comprehensive list of virtues that reach back to ancient Egypt, Babylon, Confucius China, Indian Hinduism as well as building on ancient philosophers such as Plato and Aristotle. Indeed, it is a very Aristotelian list of virtues and ethics that Lewis builds into his Tao, echoing much of what Aristotle includes in his Nicomachean Ethics.  Specifically, Aristotle indicated that, “The aim of education is to make the pupil like and dislike what he ought.” Years prior, Aristotle’s mentor Plato said much the same about education when he stated that, “The little human animal will not at first have the right responses. It must be trained to feel pleasure, liking, disgust, and hatred.”  In Plato’s Republic, he elaborates that the well-nurtured youth is one, “who would see most clearly whatever was amiss in ill-made works of man or ill-grown works of nature, and with a just distaste would blame and hate the ugly even from his earliest years and would give delighted praise to beauty, receiving it into his soul and being nourished by it, so that he becomes a man of gentle heart.All this before he is an age of reason; so that when Reason at length comes to him, then, bred as he has been, he will hold out his hands in welcome and recognize her because of the affinity he bears to her.”

Lewis provides ample examples of what is included in the Tao – Natural Law elements such as honor, courage, good faith, justice, being free from cruelty and calumny, charity, and many others. The list of objective values that we could be teaching in schools could be distilled to seven virtues or as expansive as four-hundred. Our ample history and thousands of pages published on the subject from some of the world’s greatest philosphers and theologians provides us plenty of rich and viable options to choose from. I am personally partial to a recent innovation and list from Deirdre McCloskey’s book Bourgeois Equality in which she arrives at seven core values – a snapshot at which I have taken liberty of including in the (rather amateurish) picture below. Perhaps the broader point is that our public education systems aren’t teaching any of these. If there is any “value” being taught, it is the maniacal pursuit of of tolerance under a veneer of moral relativism. I believe this to be a travesty of the highest order, and I find it morally repugnant and offensive that we are under the shackles of being forced to pay tax dollars and forced to send our children to a school teaching such methods (and neglecting all others) by simple virtue of the arbitrarily drawn school districts we live in. We scramble to live in the right neighborhoods and pay dearly for housing  and property taxes to buy into certain school districts while ignoring that there truly is little difference in the education that is received out of them. There may be better “outcomes” due to clustering into wealthy neighborhoods, but ask yourselves, is there truly any differnece in what is learned? Does your chid truly develop any better character than the child forced into the “poor” school down the street? Isn’t it an injustice that the child born into poverty has no choice but to go to their locally zoned school? The connection back to my opening paragraph is that I believe school choice and reform is an idea ripe for harvest. I only hope to convince my fellow citizens of this fact one day, so that we can benefit our children, our families, communities, states, and nation.

Seven Principle Virtues.jpg

 

 

No, pumping up demand through government intervention is not “basic macroeconomics.” In the long run, only great ideas in a free market create economic growth.

In a recent social media debate, I found myself engaged in a discussion about whether government regulation and intervention can create economic growth and jobs. Readers here won’t be surprised at which side I am on generally with this topic . My opposite interlocutor ended his closing argument with something to the effect of, “government can help to increase the velocity of money (and therefore GDP). Just basic macro.”

“Just basic macro” is how progressive economists and those in never-ending faith in big government view the “expert” technocratic interventions in the market. The basic concept is one in which during market downturns, there can be a multiplier effect that ripples throughout the economy when government spends money. Thus, a $1 spend out of government (read taxpayer) coffers can magically create $3 out in the broader economy, and at least in theory results in economic growth and a positive return to the taxpayer for their “investment” which happens to have been forced upon them via the government’s monopoly on violence (if this statement seems dramatic to you, try not paying your taxes one year and see what happens). A true win-win! However, while this concept may be “just basic macro” to John Maynard Keynes, Paul Samuelson, and Paul Krugman, to the Austrian school economists and those of us toiling away on Main Street, we can grasp a sense of what the elitists in Ivory Towers can’t. To put an economic term to it, these “prime the pump to multiply” government interventionists inevitably always fail to account for opportunity costs. In layman’s terms, opportunity costs are defined as the next best alternative that was not pursued because of decisions to use scarce resources to pursue some other objective end. Very often, the opportunity cost can be larger than the objective end that was ultimately pursued. To use a simple analogy, think of an investor with $1,000 in 2006 who chose to invest in Microsoft rather than Apple. While the Microsoft investment may very well have been positive, it paled in comparison to the return on the investment in Apple. In this scenario, the cost of a foregone opportunity exceeded the option that was actually pursued.

On this topic, I am gaining some great insights as I am slowly and deliberately making my way through Deirdre McCloskey’s incredible book Bourgeois Equality, which is the final installment of a trilogy in which McCloskey sets out to prove a remarkable thesis that can be broadly summarized as follows: the global outlook and economic growth changed dramatically for the better when some geographic regions’ ethics changed substantially in the direction of valuing and dignifying the bourgeois class of traders, merchants, bankers, businessmen, etc. The slow and deliberate pace is due to my desire to fully absorb all of the insights and jot down and highlight the key sections to commit to memory, so to the extent that this post is one-part book review, please don’t let my pace suggest lack of interest in the book or that it is  a difficult and laborious read, because I assure you wholeheartedly that this is far from the case. The thesis is essentially that all of the conventional notions of what caused rapid economic development since the 1800s, such as sound government institutions, development of the rule of law, property rights, the Industrial Revolution, and so on, are all sideshows, byproducts, and/or elements that had long existed in a world in which for most of history, life was nasty, brutish, and short, and which most of humanity lived on a mere equivalent of $3 a day. McCloskey powerfully asserts, backed by an unparalleled mountain of facts and her own research, along with quotes from the global history of economics, sociology, philosophy, and literature, that it truly was the ethics and growth of the bourgeois engaging in open competition, resulting in what she calls “trade-tested betterments” that catapulted us to over 1,000% economic growth (from the $3 a day base) in developed parts of the world. Trade-tested betterments is a term coined uniquely by McCloskey, and is just one of many examples of the creative and brilliant mind of the author. One might mistakenly call what McCloskey calls trade-tested betterment “innovation,” but McCloskey stresses the importance of innovators being forced to face competition and global trade to truly push remarkable and rapid innovation to fuel economic growth. In essence, innovation at its best occurs when we don’t allow trade restrictions and competition, both forces that are inevitably rife when a government intervenes in the market.

McCloskey’s Chapter 16 in her book is titled, Most Government Institutions Make Us Poorer. This chapter resonates with the point of my blog post today and ties back to the debate in which it was declared that government intervention grows the economy and creates jobs as “Just Basic Macro.” McCloskey begins the Chapter with a quote from 19th Century French Economist Frédéric Bastiat that is apropos:

“The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen….Whence it follows that the bad economist pursues a present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.”

Again – the bad economist ignores opportunity costs, moral hazards, and tramples on the rights of citizens with their arbitrary wealth redistribution schemes.

But what if government technocrats could prove themselves truly capable of beating the next best alternatives? Here is what McCloskey has to say about that:

“The fact suggests that the projects of betterment enacted by governments, compared with voluntary deals made among consenting adults free of force or fraud, will fail, as they regularly have, because they are directed not at general betterment but at enriching special interests at the expense of generality, or merely spending mindlessly what money the government can appropriate under the threat of violence. The modern social-democratic habit of regarding the government as a wise and honest distributor of public goods ignores the unseen, the contents of Swiss bank accounts and the misdirected expenditures in aid of the prime minister’s second cousin, which practices govern most of the world. It supposes that every government is like Denmark’s, New Zealand’s, or Finland’s (which together govern 2 percent of the world) when most are instead like Russia’s, China’s, or India’s (39 percent). In James Madison’s words in 1787, ‘If angels were to govern men, neither external not internal controls on government would be necessary.’ Angles are rare, if unseen.”

McCloskey closes the chapter with a sweeping declaration comparing government intervention and regulation with a free market:

“The relevant comparison is not of some unattainable utopia of perfect trade-tested betterment with actual, imperfect government regulation. It is the comparison of the actual record of liberated trade, and the betterment it has brought to the powerless of the world, with the actual record of populism, fascism, socialism, and thick regulation bettering a few favored groups of the poor, every Party official, and most of the owners of the bigger enterprises able to corrupt the government, all at the expense of the rest.”

Once again, the ignored opportunity costs, the actual historical record of how bad governments are at market interventions (either through regulation or prime the pump spending), and the abuse of power and moral hazards it creates, means we as citizens should be extremely skeptical of these interventions.

Taking a quote from one my my favorite blogs, Cafe Hayekfurther illustrates the point of how Keynesians fail to capture the true essence of economics when they reduce everything to their formulas and theories.

Quotation of the day is from page 40 of Arnold Kling’s excellent new book, published this year, Specialization and Trade: A Re-introduction to Economics (link added):

[Paul] Samuelson and his successors taught that the economic machine had a gas pedal that could be used to avoid economic slowdowns.  That device was “aggregate demand,” which could be increased by the government’s printing money, running a budget deficit, or both. In this economic subfield, known as macroeconomics, the concept of specialization is forgotten entirely.  Instead, economists employ an interpretive framework in which every worker performs the same job, toiling in one big factory that produces a homogeneous output.  Macroeconomics replaces specialization with that GDP factory.

Indeed, it’s not too much to say that macroeconomics in the Samuelsonian-Keynesian mode abstracts away from most of what is essential in economics.  Market processes and entrepreneurial searches for profit; specialization; the complementarity of different capital goods with each other and with labor; the role of relative prices; the reality and importance of institutions; the reality and importance of the fact that politicians are relatively uninformed and self-interested agents. These important aspects of economic and social reality are either ignored or treated haphazardly in too much of what is called “macroeconomics.”

In short – “Just Basic Macro” is shorthand for legerdemain to justify government abuse, power, and expropriation of citizen wealth that in aggregate would have created higher economic growth (especially in the long run) than all the government experts in the world pumping out formulas could ever achieve.

Trump’s first 100 Days

I could write my own treatise on Trump’s first 100 days, or I could just link to one that already says exactly what I think written by an eminent University of Chicago trained economist and Hoover Institute fellow named  John Cochrane instead.

For today, I choose the latter option. The only addition I would make is that he should look no further than Cochrane when appointing a Chair of the Council of Economic Advisors.

http://johnhcochrane.blogspot.com/2016/11/no-100-days-please.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed:+TheGrumpyEconomist+(The+Grumpy+Economist)&m=1

In praise of decentralized government

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I have lived everywhere from a tiny Texas Panhandle farm community, a turkey farm in the rural Ozarks of Missouri, a college town (Gig ’em!), the West Texas border town of El Paso, all the way to the great northeastern communities of Hanover, NH and Boston (a slight difference in size between them),  Kansas City after a brief tour in Orlando, and recently back down to the West Texas city of Lubbock. I have witnessed and lived with many different communities that ranged quite starkly in their habits, ethics, socioeconomics, religion, and political compositions.This has given me a tremendous sense of appreciation for the diversity our great land possesses and the different strengths, weaknesses, and decision tradeoffs that each unique community dealt with, and how they responded to their own local needs. As a result of these peregrinations, it is a marvel to me that we don’t force governments to allow more of our substantial decisions on taxation, education, health, and welfare to the lowest possible level that reflects the unique natures of these far-flung communities. This post, then, is an attempt at defending the idea of taking back more control from our central government and in the spirit of federalism that this nation was founded upon, devolving more of it to the communities in which we live and therefore can more directly influence.  Whereas most of my topics on this blog focus on limiting government in the aggregate, this post is directed at the virtues of decentralizing the government and reducing it to the lowest possible polity possible. With this concept of fostering greater use of decentralized tax and spend policies I hope to someday appeal to my progressive friends under the guise of more freely allowing you to build communities on the model that suits you and to craft them in direct competition to your more conservative cousins. If you hate that democracy and the federal government can result in a Donald Trump ruling over the spoils and levers of government, then by all means, join hands to limit the power of central government and remain free to build progressive communities of your own making. Make San Francisco even better than you believe it to be, since you will send less money to the centralized coffers and can retain it in your own backyard. Obviously, for my part, I would like to believe that being unyoked from the decisions that progressives have taken centralized government since the FDR era that in turn limited and decentralized government communities would thrive and grow into my idealistic vision for communities – vibrant, dynamic, innovative, growing, and combining virtue and charity with competent and accountable local government, which is able to bring more decision making into its remit on account of what the central government has given up. Even poorer communities could make decisions that are more efficient and optimized for their needs, lifting them up faster than any central planner could ever do.

The cataclysmic and visceral reactions to last night’s election got me to thinking about why the Presidential and other federal elections matter so much to us as a people. The simplest of ways to reduce the problem logically is that the stakes are extremely high given how much the two dominant parties and their core adherents are fighting over the spoils of big government. The desires and end goals are quite different, but too often the centralizing mechanisms and controls over the levers of government are the same. Recognizing that there is tremendous power and centralized decision making in everything from military base posture, entitlements, health, energy, education, environment, and many more, it is little wonder that the controlling levers are so bitterly contested. If we want to get out of this cycle of high stakes gambles, we will necessarily have to devolve more of these fought over powers to lower levels of government. Tying this back to my list of locations that I have lived in, this devolution has the great benefit of allowing each of these municipalities to focus on the tax and spend and regulation policies that make sense given its populations and all its attendant mixture of demographics, ethics and philosophical beliefs. Lubbock,TX may need greater focus on their water access to aid cotton farmers while Granby, MO may need greater focus on Farm to Market road to support turkey transport trucks. Pulling back money blindly sent to state and federal programs allows them greater flexibility to focus on their unique needs. Getting more specific, the deliberate decentralization of government has many benefits that I find completely intuitive:

  • Local government is more responsive and accountable directly to its constituents.
  • Centralized government is able to obfuscate and hide what they spend money on and its impact – complexity and unaccountability is the enemy of good governance and the friend of easy corruption and pet projects that favor the connected
  • Individual communities making a wide diversity of tax and spend decisions promotes tremendous competition, which is good for us individuals as “consumers” of places to live and work
  • Individual communities making a wide diversity of tax and spend decisions promotes tremendous experimentation, giving us real-world learning labs of what policies actually work versus those that fail. Contrast that with central government decisions in which if the decision is a terrible one, as they often are (see the second bullet point and then connect the logical dots to Obamacare for a great example), then we all go down in a sinking ship due to the central government’s large ability to own the “monopoly of violence” which does not allow us to opt out of their decisions. Furthermore, such sinking ships oddly have very few people with which we can directly point to as accountable for the decisions and the failures
  • Decentralized government is much more consistent with liberty and freedom and mobility. In a world in which power and decisions are increasingly centralized, we are all subjected to the same standards (witness Common Core as an example). In decentralized models and with the competition promoted therein, if we don’t like the tax and spend policies of one community, then we can move on to the next that may have a mixture of these that we personally favor.
  • Greater individual liberties as a result of decentralized government allows us to pursue more meaningful charitable work in which we see the direct and tangible impacts in our own communities, and this is of incalculable personal, spiritual, and community value. One of the most fundamental frameworks of economics is to always keep in mind the opportunity costs. An opportunity cost is the foregone opportunity that could not be pursued due to a decision. In a simple example, the fact that Dr. Jones has to send 20% of her income to the federal government to have it spent by much less accountable bureaucrats means that that same 20% was not able to be taxed by her local community, county, or state – lower levels of government who are in a progression more accountable to her tax dollar. Taking this all the way to its opportunity cost extension, it means Dr. Jones also can’t directly spend that 20% in her local business, church, or community and can’t devote that portion to the charity of her choosing, where she could have uniquely observed a direct impact that connects the community to her and her to the community, all the while boosting her spirits.

I suspect all of this seems quite straightforward but still leaves us needing specific examples to debate the points. I think some natural areas, to name but just a few in my limited time, that are ripe for debate for decentralization are education, criminal justice, health systems, health payment (i.e. Medicaid block grants), commerce, agricultural policy, and determining the role of private charity versus local municipality tax and spend decisions. Each of these topics could use its own further paragraph about the key differences in philosophy, strategies, and expected outcomes when comparing centralized versus decentralized models, but that will be a topic for another day.

 

The central government planners behave as conflicted madmen, creating a muddle of healthcare

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The federal government created the “Affordable” Care Act, which by this point is a laughable misnomer in the face of never ending premium increases, alongside the creation of payment and delivery reform structures such as Accountable Care Organizations, knowing full well that it would drive health system consolidation. In fact, one might argue this consolidation was a specific goal of the reforms in the government planners belief that newly minted behemoths would drive cost down due to scale and drive care quality up through better coordination across the system continuum up. Meantime, the same federal government is also fighting against that urge to consolidate through the Federal Trade Commission, as this Modern Healthcare Article indicates.

If we were to view a man trying to push the walk button at a busy intersection with his right hand while his left hand tugged it back, we would think him a madman. Well, this is our own government intervention into the healthcare “market” at its finest.