Support for Decentralized and Limited Government from the 18th Century Scottish Enlightenment

In the wake of my second-highest viewed post of all time, which covered the topic of decentralization of government (please don’t ask for actual viewing values; allow a man writing an obscure blog his small relative victories), I was pleased to get philosophical support from one of the greatest writers on the topic of government and political science of all time – David Hume. Most people who have enjoyed, or endured, depending on one’s perspective, an Economics 101 course are well familiar with one lion of the Scottish Enlightenment, Adam Smith. Smith gave credence in his Wealth of Nations to a philosophy of full-throated support of the individual liberties of merchants practicing their crafts and generating profits unencumbered by the meddling state that was a novel philosophy and code of ethics for the times. Smith forcefully advocated that betterments in society occurred in imperceptible and novel ways through people seeking profits, guided by the “invisible hand” of the pricing mechanism, which effectively coordinated their ideas and actions in ways that no government planner could match. Never mind that both modern day proponents and detractors of Smith both seem to believe that Adam Smith was some form of Machiavellian profit maximizer and utilitarian, thereby completely missing his comprehensive views of bourgeois ethics that he espoused in his perhaps even more compelling and powerful book, The Theory of Moral Sentiments, in which Smith speaks of the “impartial spectator” within us which guides and regulates our behavior such that it is socially acceptable and in most cases benevolent. The impartial spectator of Smith is driven by a mysterious combination of divine nature and the nurture that occurs as people (or the vast majority of people comprising society) interact with each other and seek approbation and praise of others. Scorn is something most of us do our best to avoid. In other words, while profit-seeking is a virtue of prudence, the vast majority of people operate in their daily lives with other self-regulating and self-controlling virtues that balance the prudence of profit-seeking. All of this social self-regulation is performed through emergent order without the need of heavy-handed law and government.

I digress, so back to the topic of David Hume. Hume was a Scottish Enlightenment contemporary and great friend of Adam Smith, and it is through his remarkable Selected Essays as compiled by Oxford World Classics that I find support for decentralized government under a different and additional rubric than I articulated in my original musings on the subject. Specifically, in his essay on Of The Rise and Progress of the Arts and Sciences, in which Hume generally makes the case that people living in free governments are much more likely to contribute to the progress of arts and sciences than those living in autocracy, Hume makes compelling arguments for divided and decentralized government. The first point Hume articulates is this:

A large government is accustomed by degrees to tyranny, because each act of violence is at first performed upon a part, which being distant from a majority, is not taken notice of, nor excites any violent ferment. Besides, a large government, though the whole be discontented, may, by a little art, be kept in obedience; while each part, ignorant of the resolutions of the rest, is afraid to begin any commotion or insurrection: not to mention that there is a superstitious reverence for princes, which mankind naturally contracts when they do not often see the sovereign, and when many of them become not acquainted with him so as to perceive his weaknesses. And as large states can afford a great expense in order to support the pomp of majesty, this is a kind of fascination on men, and naturally contributes to the enslaving of them.
In a small government any act of oppression is immediately known throughout the whole; the murmurs and discontents proceeding from it are easily communicated; and the indignation arises the higher, because the subjects are not to apprehend, in such states, that the distance is very wide between them on their sovereign. ‘No man,’ said the prince of Conde, ‘is a hero to his Valet de Chambre.
In other words, a large central government presiding over a wide swath of people and with large amounts of power can more readily get away with persecuting minorities, be they ethnic minorities or minorities in dissenting thoughts and views. Additionally, the further removed from proximity to a ruler or ruling elite, the more prone people are to superstitious reverence and obsequious behavior towards them. I loved the quote related to no man being a prince to his valet, since such close proximity as to that of a valet makes us all aware of any human’s noxious flaws and weaknesses. I would gently point out that Americans are no strangers to this superstitious reverence for powerful leaders – witness the rise of the bumptious Trump riding a wave of American voters seeking brash authority. Witness also the esteem, admiration, and honor we typically reserve for presidencies such as the two Roosevelts, who consistently abused executive power and authority. Contrast that to practitioners of great executive power restraint, such as Calvin Coolidge and William Howard Taft, who receive no such comparative historical encomiums.
Hume proceeds in the essay with the following observations:
But the divisions into small states are favorable to learning, by stopping the progress of authority as well as that of power…To balance a large state or society, whether monarchical or republican, on general laws, is a work of so great difficulty, that no human genius, however comprehensive, is able by the mere dint of reason and reflection, to effect it. The judgments of many must unite this work: experience must guide their labour: time must bring it to perfection: and the feeling of inconveniences must correct the mistakes, which they inevitably fall into, in their first trials and experiments. Hence appears the impossibility that the undertaking should be begun and carried on in an monarchy; since such a form of government, ere civilized, knows no other secret or policy, than that of entrusting unlimited powers to every governor or magistrate, and subdividing the people into so many classes and orders of slavery. From such a situation, no improvement can ever be expected in the sciences, in the liberal arts, in laws, and scarcely in the manual arts and manufactures. The same barbarism and ignorance, with which the government commences, is propagated to all posterity, and can never come to a period by the efforts or ingenuity of such unhappy slaves.

In other words, a centralized government taking on too much power is reduced to trying by sheer exertion of a “Tyranny of Experts” to borrow the William Easterly phrase, of trying to plan for and rule a great diversity of people. As Hume implies, it is an impossible task that starves us of all natural freedoms and the ingenuity that we would have exhibited without the heavy hand of a meddling government, and it makes us “unhappy slaves.” Or as Hume’s good friend Adam Smith might say, it also torches our invisible hand and extinguishes the impartial spectator within. Lest anyone think that I am speaking of some distant and ancient European monarchy, I am looking at you America and your Centers for Medicare and Medicaid Services, your Health and Human Services, your Obamacare, and your Dodd-Frank.

 

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Exhibit A: Industrial policy that protects the few at the expense of the many – Carrier keeps jobs in Indiana but on the backs of taxpayers and consumers

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I just received an article from the Wall Street Journal that indicated that Carrier has agreed to keep roughly 1,000 jobs in a manufacturing plant rather than shift the employment to Mexico. Rather than celebrate this as a great example of private and public partnership and the deal-making style of Trump that successfully and benevolently puts Americans first, I am going to put a different, and perhaps unpopular, spin on this and call it what I believe it to truly be – arbitrary manipulation and industrial policy developed by government for the benefit of the few at the expense of the many.

Of course, the “saving” of 1,000 jobs is a positive thing on the surface, and it will no doubt lead to declarations of success and subsequently votes for the protectionist politicians who promoted it well into the future. Less visible will be the unintended consequences and foregone opportunities of non-government intervention. I will start with the obvious and work my way to the more philosophical, but just as important, reasons to decry, rather than to celebrate, such government interventions:

  • The 1,000 jobs were kept and promoted at a hefty price tag per worker. At a $7,000,000 tax incentive agreement, this works out to $7,000 per job “saved.” This means the rest of Indiana taxpayers are subsidizing this arbitrary policy. No doubt, you will find many lower-paid workers subsidizing their higher-paid brethren. I am sure the Indiana taxpayer could think of a million different things they could do with that $7,000 to help their own careers and families. This is the unintended consequences that are diffused and don’t get highlighted in the media that happens with industrial policy. This is also what happens when rent-seeking corporations get the ear of government officials who control too many of the levers of economic policy. They get to decide how to use our tax dollars and declare it a successful investment with little accountability or visibility to what ends those dollars could have gone to had they left them in our pockets.
  • The inability to shift labor to take advantage of wage rate/productivity imbalances leaves costs higher for American consumers in the long-run. Once again, this is government meddling in support of one small class of citizens at the expense of the many.
  • Preventing Mexico from taking advantage of their comparative advantages in their specific mixture of labor force participation, wages, and productivity will continue to put pressure on their citizens but not allowing them to grow economically, which further puts pressure on its citizens to immigrate. Being able to take advantage of cross-border trade is mutually beneficial and is not the zero-sum game that protectionists such as Trump believe it to be. The great irony is that plugging one “problem” of imbalanced trade only exacerbates another one of immigration- or at least in the sense that self-described American Economic Nationalists believe trade and immigration to be problems.
  • Sustaining or creating new abusive and arbitrary government power to take tax dollars from citizens in support of the few establishes/continues a dangerous precedence. What well-connected company or connected political body will take their turn next in using their connections to politicians to extract resources from the rest of us under the auspices of “America first?” Do we really trust the government to pick and choose these winners wisely and with all of our freedom, liberty, and economic interests in mind? I hope to someday make this a rhetorical question.
  • I keep coming back to this point from previous posts – but what right does the government have to tell me as a consumer where I can and can’t buy goods? By implication – browbeating, cajoling, and incenting them to stay (using my money) in America through taxpayer funds is ultimately an act to usurp my rights to buy goods from the provider who can make the highest quality good at the lowest cost and in the end is little more than theft of my resources to support their own arbitrary decisions.

Finally, freedom and liberty requires a tradeoff of uncertainty in outcomes that don’t always redound to every individual, but is the only way with which we can grow economically (and in turn emotionally and spiritually) in the long run. The fundamental question then becomes do we want to bequeath to our future generations and children an open and dynamic society where people are free to create the exciting and enriching occupations of the future, or do we want to confine them to the known quantities of the past and present?  We shouldn’t demand equality in outcomes, but rather demand the equality of opportunity combined with blind justice – good arbitration when conflicts arise over contracts between free people. Otherwise, we should keep government at a safe arm’s length that is akin to a good and impartial referee who knows a foul when it sees it and has a consistent redress for those fouls irrespective of the player that committed them. Instead, what we have these days is a referee who changes the rules in the middle of a game to the advantage of his favorite and most well-connected players. On this note of equality of opportunity and why it is extremely important, I land with a powerful excerpt from Deirdre McCloskey’s remarkable book, Bourgeois Equality, of which I have written more at length about in a separate post, but for today’s topic pull out this specific section:

The ideas of equality [in the English and Scottish Enlightenment period] led to other social and political movements not uniformly adorable. Hannah Arendt remarked in 1951 that ‘equality of condition…is among the greatest and most uncertain ventures of modern mankind.’ Alexis de Tocqueville had said much the same a century earlier. And Scottish equality has a harsh, even tragic side. It entails equal reward for equal merit in a marketplace in which others, by freedom of contract, can also compete. As John Stuart Mill put it in On Liberty, ‘Society admits no right, either legal or moral, in the disappointed competitors to immunity from this kind of suffering; and feels called on to interfere only when means of success have been employed which it is contrary to the general interest to permit – namely, fraud or treachery, or force.’ Yet in the real world, unhappily, if the poor are to be raised up, there is no magic alternative to such competition. An ill-advised and undercapitalized pet store, into which the owner pours his soul, goes under. In the same neighborhood a little independent office for immediate health care opens half a block from a branch of the largest hospital chain in Chicago, and seems doomed to fail the test of voluntary trade. Although the testing of business ideas in voluntary trade is obviously necessary for betterment of the economy (as it is too by non-monetary tests for betterment in art and sport and science and scholarship), such failures are deeply sad if you have the slightest sympathy for human projects, or for humans. But at least the pet store, the clinic, the Edsel, Woolworth’s, Polaroid, and Pan American Airlines face the same democratic test by trade: Do customers keep coming forward voluntarily? Does real income rise?

We could all by state compulsion backed by the monopoly of violence remain in the same jobs as our ancestors, perpetually “protected,” though at $3 a day. Or, with taxes taken by additional state compulsion, we could subsidize new activities without regard to a test by voluntary trade, “creating jobs” as the anti-economic rhetoric has it. Aside even from their immediate effect of making national income lower than it could have been, perpetually, such ever-popular plans – never mind the objectionable character of the violent compulsion they require – seldom work in the long run for the welfare of the poor, or the rest of us. In view of the way a government of imperfect people actually behaves in practice, job “protection” and job “creation” often fail to achieve their gentle, generous purposes. The protections and the creations get diverted to favorites. Laws requiring minority or female businesses to be hired, for example, tend to yield phony businesses run in fact by male whites. In a society run by male whites or inherited lords or clan members or Communist Party officials, or even by voters not restricted by inconvenient voting times and picture IDs, the unequal and involuntary rewards generated by sidestepping the test of trade are seized by the privileged. The privileged are good at that.

 

 

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.

 

What freedom entails: facing the good and the bad consequences of our decisions

For men and women to be free from paternalistic domination from others and free to make our own choices necessarily means that we are in turn subjected to the vicissitudes and the consequences, for better or for worse, of those decisions. It is a fundamental concept that for us to remain free, we must not in turn be “protected” by government from the downside risk of flawed choices or bad luck. It was in fact this form of “protection” that for centuries kept peasants under the feudal domination of their class superiors – the knights, earls, and dukes under which they served and whom they paid exorbitant rents to. Predictably, famine only ever struck the peasants when harvests failed, while nobles and priests always maintained a relatively bountiful diet. Ostensibly, this was the price to be paid for protection by the lords of the castle and his soldiers and mercenaries. The reality was that for most peasants throughout the ages, the only real danger to their lives was in fact the deprivations of the lords supposedly protecting them.

Alas, for centuries and the better part of human history, this system kept a stable class of hereditary beneficiaries in control of a never growing and largely agrarian-based economic pie. People lived consistently on the modern equivalent of $3 a day and under a Malthusian system in which population growth led to a decrease in individual agrarian and artisanal wages, wages which only rose again the next time a plague wiped out swaths of the population and the supply of labor.  On that note, this never growing economic pie also led to no real advancements in science and medicine, and those frequent plagues (thought for centuries to arise out of miasmas in the sky that needed to be avoided by clustering indoors and blood that needed to be let out of the body – an ignorantly fatal combination) killed noble and peasant alike. In the words of Thomas Hobbes, life for the vast majority of our ancestors’ histories was lived in “continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.” Shakespeare poetically wrote of death as, “the arbitrator of despairs, just death, kind umpire of men’s miseries…” Let me pause for a moment and express my extreme gratitude to have been born into the relative bounty and ease of modern-day American life. Whatever our problems, they pale in comparison to the way humanity lived for thousands of years; well into the 1800s most people lived in these Hobbesian conditions. Many millions of people on earth still reside in dark removes of similar medieval conditions in places such as Somalia and Afghanistan.

Deirdre McCloskey, in her remarkable book, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, makes the above points eloquently and with her unique ability to draw upon an impressive panoply of analogies, anecdotes, and historic intellectual luminaries’ thoughts and writings to buttress her points. I highly recommend the book and credit it with much of my facts (i.e. the $3 a day factoid, Malthus’ theories). In direct contrast to the idea that we as individuals need protection and on the topic of the reality and essential connection between freedom and potential loss, she observes:

“The ideas of equality led to other social and political movements not uniformly adorable. Hannah Arendt remarked in 1951 that ‘equality of condition…is among the greatest and most uncertain ventures of modern mankind.’ Alexis de Tocqueville had said much the same a century earlier. And Scottish equality has a harsh, even tragic side. It entails equal reward for equal merit in a marketplace in which others, by freedom of contract, can also compete. As John Stuart Mill put it in On Liberty, ‘Society admits no right, either legal or moral, in the disappointed competitors to immunity from this kind of suffering; and feels called on to interfere only when means of success have been employed which it is contrary to the general interest to permit – namely, fraud or treachery, or force.’ Yet in the real world, unhappily, if the poor are to be raised up, there is no magic alternative to such competition. An ill-advised and undercapitalized pet store, into which the owner pours his soul, goes under. In the same neighborhood a little independent office for immediate health care opens half a block from a branch of the largest hospital chain in Chicago, and seems doomed to fail the test of voluntary trade. Although the testing of business ideas in voluntary trade is obviously necessary for betterment of the economy (as it is too by non-monetary tests for betterment in art and sport and science and scholarship), such failures are deeply sad if you have the slightest sympathy for human projects, or for humans. But at least the pet store, the clinic, the Edsel, Woolworth’s, Polaroid, and Pan American Airlines face the same democratic test by trade: Do customers keep coming forward voluntarily? Does real income rise?
We could all by state compulsion backed by the monopoly of violence remain in the same jobs as our ancestors, perpetually “protected,” though at $3 a day. Or, with taxes taken by additional state compulsion, we could subsidize new activities without regard to a test by voluntary trade, “creating jobs” as the anti-economic rhetoric has it. Aside even from their immediate effect of making national income lower than it could have been, perpetually, such ever-popular plans – never mind the objectionable character of the violent compulsion they require – seldom work in the long run for the welfare of the poor, or the rest of us. In view of the way a government of imperfect people actually behaves in practice, job “protection” and job “creation” often fail to achieve their gentle, generous purposes. The protections and the creations get diverted to favorites. Laws requiring minority or female businesses to be hired, for example, tend to yield phony businesses run in fact by male whites. In a society run by male whites or inherited lords or clan members or Communist Party officials, or even by voters not restricted by inconvenient voting times and picture IDs, the unequal and involuntary rewards generated by sidestepping the test of trade are seized by the privileged. The privileged are good at that.”

 The implicit conclusion is that while there are unfortunate consequences of freedom and a free market, the alternative is worse. The plea, as McCloskey states in her book’s foreword, is this:  “Perhaps you yourself still believe in nationalism or socialism or proliferating regulation. And perhaps you are in the grip of pessimism about growth or consumerism or the environment or inequality. Please, for the good of the wretched of the earth, reconsider.”

Limiting health insurance plan choice is harmful to consumers

A significant component of the Affordable Care Act is the forced standardization of health care coverage through prescribed components that must be carried by insurance plans. Ultimately, this approach has been tremendously disruptive and has moved millions of people off of the plans that in the previous market paradigm they were happy to buy. I refuse to call it a free market since it really has not been that for decades. This disruption is the impetus behind much of the lampooning of Obama’s language, which later proved to be an astoundingly incorrect bit of marketing and hype, that if you had a plan that you liked you could keep it.

Standardization of plans ostensibly removes buyer searching costs for complicated products. Such as approach would only make economic sense if the searching costs were higher than the benefits obtained from the selected product. The challenge is that this sets a remarkably paternalistic precedent – if we dupes in America can’t be trusted to buy health coverage that suits our needs, perhaps we can’t be trusted to buy financial instruments or real estate either. It also has the perverse effect of cutting off product innovation that caters to individuals and unique segments of the healthcare market. Something to consider and question: can government possibly keep up with the changing demands of consumers as well as the unpredictable emergent order that drives market-betterment ideas and innovations? Even if government might be approximately right on the first iteration of defining product standards, it would be impossible for them to keep up with the pace that a free market comprised of consenting adults engaging in commerce could drive. Furthermore, a significant philosophical challenge is that such an approach mandated by government significantly violates an essential freedom of consumers to choose for themselves what is best for them. Finally and perhaps most perniciously, such an approach allows government to enact their own views of desirable social policy through diktat. The Supreme Court case of Burwell vs. Hobby Lobby  is an example in which a private employer was forced to provide contraceptives against their own religious beliefs. Whether one believes Hobby Lobby is outside of the societal norms in their stance on contraceptives is quite beside the point. The point is really whether we believe government should be powerful enough to be able to force anyone in society to choose which product to purchase and what it should contain. This is the first-order principle freedom-loving citizens should be concerned with.

In the book The Future of Healthcare Reform in the United States, Richard Epstein, of the NYU School of Law, pens the following compelling narrative on the challenges with the elitist assumptions of government needing to protect consumers through standardized plans:

Any decision such as that made in healthcare markets – to require given firms to offer a particular type of contract with predetermined coverage – does not facilitate competition but thwarts it by restricting the dimensions over which innovative firms can compete. To be sure, it is unlikely that either midsize firms or ordinary consumers can canvass the entire market. But they can make a series of initial cuts to focus on the market segment they care about most. At this point, one of the key drivers of good competition is the ability to offer a particular configuration of goods and services that make sense to some segment of the overall market. The standardization of service packages thus prevents innovation along certain key dimensions, which hardly improves the overall competitive market. Put otherwise, product differentiation is the great and beneficent spoiler because it allows rapid and discontinuous changes in the market such as the rise and fall of BlackBerry and the now possible decline of Apple in the face of potential disruptive technological developments from a host of competitors. In my view, these large gains dominate any negative effects. Indeed the constant use of product differentiation, both large and small, in market after market, suggests healthcare regulators engage in a dangerous gambit by limiting product choice to a few set choices in order to reduce the buyer’s costs of search. People can truncate searches using sensible strategies. They do not have similar ways to expand market options.

Imagine if government decided that our smartphone choices were overwhelming to consumers and determined that we should all have certain features based upon some government committee’s determination of a rightful specific set of requirements. I suspect the product so described by the committee in the duly published 500 page document would prescribe usage of something resembling the BlackBerry more so than the iPhone. And despite Hillary Clinton’s fondness for this device, we obviously would be immediately worse off as consumers. Further imagine that the government decided that we could no longer buy the phones at Apple stores or Best Buy, but purchasing of these devices had to occur at government licensed locations. Behold the entirety of the healthcare market: a market in which there is an inherent paternalistic assumption that consumers are too ignorant and overwhelmed to make their own choices. The government committee decisions on what we can buy and where we can receive our products described in the smartphone analogy is precisely the kind of marketplace we have allowed our government to create in healthcare. Perhaps it is time to step back and ask ourselves why and whether we are getting good outcomes out of this approach.

 

Three simple rules to live by

Do not take what does not belong to you.

Keep your promises.

If you fail to abide by the first two, then you must make just compensation for what you took or what you failed to deliver.

Try to do some good in life.

Within two separate Free Thoughts podcasts on the topic of the philosophical underpinnings of the U.S. Constitution, Dr. Roger Pilon does as remarkable and scholarly of a job as anyone I have ever heard on the topic. He discusses in great depth the intellectual traditions embodied in the Constitution as well as how that has evolved from its originalist and natural law construct over time to something much more expansive and interpretative that has moved significantly away from the original guiding principles of a federal government that is a necessary evil that should be deliberately kept small. It was so small in fact, that in the move from Philadelphia to the new White House in Washington D.C. in 1800, all of the federal government files could be transferred in just 12 boxes. Imagine that! The most salient moment for me is when Dr. Pilon distills all of the Constitution and the philosophy behind it into four simple rules for us to live by, which are quoted above.

The first rule is the concept of property rights and rights to be free from physical harm and is embodied most visibly in the opening words to the Declaration of Independence. The second rule is the concept of rights of contract and enforceability of contracts that are freely entered into by citizens. The third rule is based upon the concept of remedies and justice and is essential in upholding the first two as general principles, allowing us to retain trust in the good of fellow man and of just redress if they happen not to be good. The fourth rule is something that Dr. Pilon indicates is entirely optional. If we are to retain our essential freedom and a true good and virtuous nature, we can’t be compelled to do good. However, a preponderance of people doing good seems to be the most secure way in which to uphold a free society and thus ensuring that government does not grow in scope inexorably. As Benjamin Franklin indicated – we have a Republic, if we can keep it. It increasingly seems to be appropriate, given how large and arbitrary our federal government has become, to say that we had a Republic, and we have the blueprint for how to get it back, if we want it bad enough.

 

Trump versus Clinton – a diabolical choice

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I am reminded of this Far Side cartoon every time I think of the Trump versus Clinton election circus we are doomed to endure for the next few months, followed by 4 years of whatever we get on the back-end of it.

On principle, I believe that voting for the Presidency should never have become, nor is it currently, a binary choice between lacklustre candidates put forward by two parties. I say this only to make the point that the Far Side cartoon, while humorous and somewhat appropriate, isn’t entirely accurate given that we can freely vote for other options or choose not to vote at all. Much of my actual lament today is that the office is as powerful as it currently is in the first place. If the executive office was relegated to its proper constitutional role, this would be far less consequential of an exercise.  It is the legislature, through reasoned and deliberative process, that was established with the preponderance of governmental powers and placed in the pre-eminent Article I of the U.S. Constitution. This was a wise decision by the founders, who intended to promote the durability of individual liberty through due process of deliberative and participatory government, as I indicate in another post. This legislative responsibility has been eroded greatly through various executive branch usurpations (i.e the vast proliferation of unaccountable executive agencies) as well as a judiciary that has strayed beyond its boundaries of interpreting law as devised in the Constitution and through laws promulgated through the legislature to a modern-day role in actively creating their own laws out of the judge’s’ own political and personal preferences.

All that being said, my ideological principles don’t matter much when the reality is that one of these individuals will become President of the United States, a fact that I can only find comic relief in the Monty Python scene in which the “Constitutionalist” peasant indicates to King Arthur, “well, I didn’t vote for you…”  I picture myself in the next four years as an increasing malcontent who mutters throughout the day, “well, I didn’t vote for you…” every time a poor decision is made or every time something else surfaces that demonstrates their unsavory characters. Actually, upon re-watching the entire scene, I think there is a good deal one could use out of the clip as a parody of modern American government.

And while I don’t agree with the enthusiasm in which the author takes in not ever voting, as I still believe that it is an important right to cherish, there is much in a recent commentary in which he quotes David Boaz posted on the Cafe Hayek blog  that I think is spot on. I quote the main points that I agree with below:

I’ve heard libertarians say, “We know how bad Hillary is, so the mysterious Trump is a better bet.”  But we do know much about Trump.  He’s been clear and consistent on a few issues: banning and deporting Mexicans, building a wall around America, banning Muslims, and taking a sledgehammer to the world’s most important trading relationship (between the United States and China).  He’s indifferent to federal spending and against entitlement reform.  He thinks he doesn’t need advisers or policies or principles.  He has no earthly idea what he thinks about taxes, abortion, minimum wages, debt, health care, or most other issues.  Most disturbingly, he shows disdain for Congress and the Constitution.

A few libertarians have said that war is the greatest threat to life and liberty, and Trump is less hawkish than Clinton and most of the other Republican candidates.  True, he has criticized the Iraq war and nation building and even read a speech proclaiming that “unlike other candidates for the presidency, war and aggression will not be my first instinct.”  But he has also promised to “bomb the s– out of” ISIS and “take out their families.”  And his ignorance, anger, and impulsiveness about trade and immigration would surely make for rocky international relations.

 

 

In defense of liberty and deliberative self-government

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A Republic madam, if you can keep it

– Benjamin Franklin

Have we not already seen enough of the fallacy and extravagance of those idle theories which have amused us with promises of an exemption from the imperfections, weaknesses, and evils incident to society in every shape? Is it not time to awake from the deceitful dream of a golden age and to adopt as a practical maxim for the direction of our political conduct that we, as well as the other inhabitants of the globe, are yet remote from the happy empire of perfect wisdom and perfect virtue?

Where is the standard of perfection to be found? Who will undertake to unite the discordant opinions of a whole community, in the same judgment of it; and to prevail upon one conceited projector to renounce his infallible criterion for the fallible criterion of his more conceited neighbor?

I never expect to see a perfect work from imperfect man. The result of the deliberations of all collective bodies must necessarily be a compound, as well of the errors and prejudices, as of the good sense and wisdom, of the individuals of whom they are composed… [A] common bond of amity and union, must as necessarily be a compromise of as many dissimilar interests and inclinations. How can perfection spring from such materials?

– Alexander Hamilton, Federalist Paper Number 6

The defining ideals of the American Republic, as expressed in the Federalist Papers through the pseudonym Publius, which was comprised of Alexander Hamilton, John Jay, and James Madison, was fundamentally an unprecedented quest to demonstrate the power and durability of a self-governing Republic built on a Constitution that above all valued deliberative process and based upon a moral foundation and virtuous society. These ideals were in marked contrast to other contemporary democratic philosophies then taking shape, notably in France, which favored the immediate supremacy and wisdom of the collective man through elections and plebiscite-based majority rule. In contrast, the American experiment was intimately crafted to be by design incrementalist and deliberative through the separation of powers and checks and balances inherent in the Constitution, as well as the diffusion of various powers across federal and state governments. This uniquely designed separation and diffusion is why Benjamin Franklin, during the closing days of the Constitutional Convention of 1787, gave the response in the first quote above to the question asked by a woman out in the street, “Doctor, what will it be, a monarchy or a republic?”

This methodical and deliberative process was above all meant to protect the rights of the governed and uphold individual liberties. If anything unified the Founding Fathers as a guiding principle, it was a fear and skepticism of immediate majority rule and mob mentality, a risk of democracy that French philosopher and political scientist Alexis de Tocqueville would later coin as “the tyranny of the majority.” This ideology is markedly different that the origins of progressive ideology based on humanist rationalism and an idealistic belief that majority rule and decisions should reign supreme and democracy in action should be rapid and responsive, all in the efficient pursuit of achieving egalitarian equality.  It is this vain quest for individual equality in outcomes, this naive notion of human Utopia, and the endless government usurpation of individual rights that stem from it, that the Founding Fathers were greatly fearful of and undergird both the Hamilton and Franklin quotes above. Greater elaboration on these political and philosophical points are wonderfully discussed in a recent Imaginative Conservative article from which I was inspired to lift the Hamilton quote. One quick point to make is that the Founding Fathers preferred deliberation over even elections themselves. The author of the article contends that incessant focus on elections and score settling between sides leads to a breakdown in unity and social cohesion in ways that discussion and deliberation do not. I believe we have completely lost sight of the art of deliberation and consensus in American politics of today. We are constantly myopically focused on what election cycle we happen to be in and the scores that we are trying to settle and tearing down those who stand in our way. Meantime, government power and tramping of rights of the individual continue to grow apace.

My own personal observation and grievance is that the one deliberative and long-term focused institution that we had at the outset of the American Republic, the U.S. Senate, which was originally populated by individuals appointed by state legislatures, became much more captive to short-term whims of the majority when the 17th Amendment created direct election to the Senate. In other words, the indirect election method to the Senate enumerated in Constitution by the great sagacity of our Founding Fathers was replaced with direct election by the population. This in essence made the Senate really nothing more than a smaller extension of the House of Representatives. I believe the model in which there was both a relatively insulated deliberative body coupled with a directly elected body more responsive to the population served America quite well. Unfortunately, I don’t think repealing the 17th Amendment is going to become a rallying cry anytime soon.

School choice in America – what are we waiting for?

This podcast on school choice, in which Jason Bedrick is interviewed on the landscape and philosophical rationale in support of school choice, is highly informative and I highly recommend the full listen. Some highlights that I found insightful are as follows:

  • University of Arkansas School Choice Demonstration Project has several studies demonstrating the positive impact school choice has, including a meta-analysis (a study of studies) that showcases the beneficial impact of school choice and school reform at statistical levels of significance. The volume of positive results rolling in from a growing number of localities and states where there are pockets of school choice is becoming harder to refute and ignore. It is time for individuals to start looking at their own localities and asking why their own school choices are so restrictive.
  • While school vouchers are the funding option that is most discussed in policy circles, they are not the only or even perhaps the best option available to school reform advocates. Education savings accounts and tax credits are alternatives that present compelling economic benefits as well as possessing legal characteristics that allow for circumventing the Blaine laws that exist in many states. On the former, vouchers have one economics limitation in that their actual dollar value is recognized and known across the education system and thus can be gamed by school providers as a price floor, which can spur cost inflation and undermine the desired impact of providing better education options to disadvantaged communities as they get priced out of the market. Contrast this with savings accounts that can accumulate and can be spent in a more flexible manner across a wider range of education activities, which present economic forces that mitigate inflation. The Blaine laws that exist in many states was originally a muddle-headed approach in the late 1800s to prevent Catholic schools from receiving federal dollars. Nowadays the laws are now widely used to prevent any religious school from receiving government funds. My own aside to this is that we should always be extremely cautious when promoting government power at the expense of someone else’s individual liberties, even if we firmly believe it is in our own personal and parochial interests. Indeed, the Blaine laws were fomented by Protestant Christians concerned with immigrants from Catholic-dominant lands, such as Ireland and Italy, setting up their own Catholic schools and not assimilating into American culture. Ill-founded xenophobic concerns unfortunately often lead to using government power to coerce our fellow man and trample on their rights. Nowadays, it is these same largely Protestant Christians fighting Blaine laws in the hopes of clawing back their tax dollars to use on the private Christian schools of their own choosing. The fact that our Protestant forebearers created this anachronism is a cruel irony.
  • One common attack against one form of school choice reform, public charter schools, is that in some cases they have not outperformed their traditional public school peers in the same area. Mr. Bedrick indicates that if one goes beyond that surface level point-in-time comparison one quickly realizes that in most cases, the fact that there was competition forced the public school to increase their performance; in essence the mere fact of school choice and competition created a rising tide that lifted all boats. Furthermore, qualitative surveys and interviews with parents in these districts point to much higher satisfaction amongst parents on the responsiveness and customer service aspects of the pre-existing public schools. In short, options and competition made everyone better off and forced the previous public school monopoly to be far more responsive to their customers.
  • There is a common fear that school diversity will wind up breaking the common societal bonds that we idealistically believe we benefit from as communities out of common public schools. Mr. Bedrick points out that private school students actually achieve higher scores on civics and in their support for other views and pluralism than their public school peers.

What prevents greater school choice and diversity? What keeps us captive to the school of the zip code we happen to live in? One commonly maligned enemy are the teachers unions. While they certainly seem to be a roadblock, I sincerely believe that the real enemy is our own individual and collective inertia. Public schools are the status quo and represent how it has been done for generations, so why should we change? I would submit to you as parents, grandparents, and students, that the world could be a great amount brighter if we have school choice and schools innovating and diversifying their curriculum. Picture all of our collective laments on how the public schools fail to deliver on the arts, liberal arts, STEM, trades, or how they are prone to centralized dictates such as common core. Imagine how that might change if we could take our highly creative child to the new school started in our area that focuses highly on the arts, or if we could take our burgeoning engineer to the school focused on STEM.  These innovative and diverse models would blossom and grow if only they were allowed to.  Aside from all of that, it would seem to me that freedom of choice of where to spend your dollars and where to send your kids to school, while also allowing the poor and children captive to failing school to escape them, is the right thing to promote as a policy in of itself.