Fresh from his victory in last week’s Kentucky Republican senatorial primary, Rand Paul found himself caught in a whirlwind when MSNBC’s Rachel Maddow asked whether the 1964 Civil Rights Act properly outlawed racial segregation at privately owned lunch counters. Speaking circuitously if not evasively, Mr. Paul finally said:

“[O]ne of the things freedom requires is that we allow people to be boorish and uncivilized. But that doesn’t mean we approve of it.”

Larry and Sheldon had the pleasure of addressing 90 friends of freedom of all ages, from students to retired folks. Each gave two lectures during the day-long seminar. Larry spoke on “The History of Money and Inflation” and “The Importance of Character in a Free Society.” Sheldon spoke on “Education: Privatization vs. School Choice” and “Beware Health Care Reform.” Lively Q&A sessions followed each session. Between the lectures the participants divided into two discussions groups for extended exploration of the topics.

Freedom Seminars is a model that should be emulated throughout the country, since it is an ideal way to maintain interest in the freedom philosophy through face-to-face contact. It is also a perfect way for freedom advocates to introduce friends and family to free-market economics and individual liberty.

The seminars are put on each year entirely by dedicated volunteers. The program consists of two speakers from around the country giving two lectures each, along with discussion. A low admission fee, which includes a hot lunch, is charged attendees.

How did Freedom Seminars get started? According to David Hendersen, the origins can be traced back to Ridgway K. (Dick) Foley, a successful attorney, former FEE trustee, and Freeman author. For many years – and at his own expense — he invited speakers from FEE, the Institute for Humane Studies, and kindred organizations to present lectures to 12-35 people at a dinner meeting held in a nice hotel or the University Club.

David and Dick met at a FEE seminar in Agate Beach, Oregon, in June 1984, after which Dick invited David to a number of the evening lectures. Impressed by the gatherings, David offered to help with the costs, and they teamed up for a number of small programs in the late 1980s.

In September 1991 Hans Sennholz, then president of FEE, told his friend Dick Foley that he would be in Seattle in early November. Dick invited him to speak in Portland. Dick contacted David, and a one-day seminar was arranged for Hans, with Dick also agreeing to speak.

Since Laurie Hendersen had experience setting up fundraising events as a donor-relations staffer at Willamette University, she took on the management of the Sennholz program, with assistance from employees at David’s company, Columbia Food Machinery (founded in 1980). Dick and David divided the costs, and nearly 100 people attended.

The audience reaction was so enthusiastic that the organizers decided to hold a similar event a year later. Freedom Seminars were born, if not yet in name. A nominal sum ($25 per attendee) was charged, covering about a third of the cost. The organizers made it a point to have students attend.

Freedom Seminars incorporated as a 501(c)(3) nonprofit in 1995, and people who attended the events began donating generously. Longtime freedom advocates Ed Kelly, Jr., and Ervina Anderson joined president Dick Foley on the board of directors. (He still serves as president.) Ed handles the audio recording, while Ervina and her husband, Leo, handle book sales at the seminars. Volunteers guide the discussions. David and Laurie’s 15-year-old daughter, Kathleen, helps Laurie manage the events, with help from Columbia Food Machinery employees.

Over their nineteen years Freedom Seminars speakers have included, among others, Tom G. Palmer, Jeffrey Rogers Hummel, David R. Henderson., Donald Boudreaux, Greg Rehmke, James Bovard, David Friedman. Brian Doherty, Robert Higgs, Ralph Raico, Edward Stringham, Jacob Hornberger, Father Robert Sirico, Burton W. Folsom, Jr., Jane Shaw, Richard Stroup, Charlotte Twight, and Doug Bandow.

The lesson of Freedom Seminars? There’s no more powerful way to spread and deepen appreciation of the freedom philosophy than through regular events such as these. The educational value and camaraderie are vital to advancing freedom while creating a lasting community built around a dedication to the free society.

Maybe this would work in your city! Email Laurie and David at freedomsem@aol.com with questions about starting your own program.

(put a check mark next to any that apply):

____ I raised it in a conversation and hopefully turned on a light in at least one person’s mind

____ I defended it when it was challenged by error

____ I improved my own knowledge of the literature of liberty so as to become a better advocate

____ I wrote a letter-to-the-editor in liberty’s defense

____ I recommended a good article, book or film that advances values consistent with a free and civil society

____ I sent a personal check to an organization I know to be working for the advancement of liberty ideas

____ I resisted temptation to subvert liberty by accepting something from government that didn’t belong to me

____ I took action to clean up my own act so that I can be a solid exemplar of the virtues necessary for a free society to flourish

____ I checked out at least one textbook my son or daughter was assigned in school, explained to my offspring any fallacies I found, and complained to the school about any that were especially egregious

____ I told at least one of my representatives that if he or she ever voted for more government again, I would pull out all the stops to see him or her defeated in the next election

____ I told my college or university alma mater that if they didn’t start hiring faculty who know how to present and defend the case for free enterprise, they’ll never, ever get another dime from me

____ I did nothing at all for liberty today, except enjoy the fruits of it while leaving the battle for its restoration and preservation to others. I was essentially a liberty freeloader today.

We should want the people mad enough to demand no more bailouts.

FEE Timely Classic
“Bailing Out Statism” by Sheldon Richman

Why does government set prices?

FEE Timely Classic
“Rights Versus Entitlements” by Steven Yates

Agendas in conflict.

FEE Timely Classic
“Mandating Renewable Energy: It’s Not Easy Being Green” by Michael Heberling

We hear today that the Canadian dollar is almost at parity with the U.S. dollar. A few years ago the Canadian dollar was worth 75 cents USD, but today the U.S. government is  on a money-printing binge—and pretending to be shocked — shocked — when the its dollar plummets.

I am no prognosticator, and I don’t run any doomsday websites, but the long-range forecast looks bad. While most Americans believe this country is invulnerable to the deep shocks that have taken down lesser nations, some of us know that the government’s policies of the past 15 years have been ruinous. Furthermore, there is a country to our south that provides the unhappy roadmap to the destination to which the U.S. government’s policies are leading: Argentina.

Today Argentina is classified by the World Bank as a “secondary emerging market.” That might sound impressive next to Latin American failures like Cuba and Venezuela, but from where Argentina was just 70 years ago, its modern classification is a step backward.

In the first half of the twentieth century Argentina was one of the ten wealthiest nations in the world. That’s right, the world. This was a rich country, relatively speaking, and its future seemed bright. Unlike the European nations, it had not been burdened with wartime destruction; its economy benefitted from being at peace and by exporting agricultural products to nations at war.

Unfortunately, the same populist pressures that gave the United States its New Deal and promoted communism around the world undermined Argentina’s political economy.  The policies of the 1940s and 1950s, under Juan Peron and his wife, Evita, would prove permanently fatal for the country’s economic well-being. First and most important, militant labor unions tied to the Peronists forced up wages well beyond productivity. Not surprisingly, Argentina’s goods soon became uncompetitive on world markets.

Second, to deal with this newly acquired uncompetitive status, the Peronists passed one protectionist measure after another. Inflation soon followed, and the Argentine peso, which once rivaled the U.S. dollar, turned into play money. Yet the 50 percent inflation of the early 1950s was a pittance compared to what Argentina would experience over the next 30 years, as the country spiraled into hyperinflation by 1980.

Economic chaos led to political chaos, with the country witnessing a series of elections of Peronist presidents and subsequent coups to remove them from office as their policies exacerbated the continuing economic crises. Leftist guerrilla groups clashed with national forces in the infamous “dirty war” of the late 1970s and early 1980s that left thousands tortured and dead and still affects the nation’s politics.

Even today, Argentina is synonymous with political instability, high inflation, and an economy that always shows great potential but never meets expectations. Americans believe that such a thing cannot happen here, but it can. Argentina’s problems began with simple government interventions into the economy aimed at artificially propping up wages. From those first interventions came further interventions to deal with the problems caused by the previous actions, and so on. In the end, all that was left was inflation, chaos, political violence, and poverty.

The United States is facing perhaps its second-greatest economic crisis ever, and so far the government has taken page after page from Juan Peron’s playbook. As a result of this economic and political foolishness, the economy continues to shed jobs and hope.

There is a way out, but it is much different from what we have been doing. When one is in a deep hole, the first thing to do is stop digging. That means dispensing with the artificial means to prop up the economy when serious medicine is needed, medicine that will be painful but ultimately will lead to economic recovery. If we don’t go that route, I guarantee that the Argentines will not cry for us.

Anyone see that coming?

FEE Timely Classic
“The Financial Bailouts: ‘See the Needle and the Damage Done’” by Lawrence H. White

Yo, I gotta nice bridge here. Ya wanna buy a bridge?

FEE Timely Classic
“Obama’s Impossible Healthcare Reform Promises” by Sheldon Richman

How about free banking?

FEE Timely Classic
“Commercial Banking in a Free Society” by Steven Horwitz

Beware any close relationship between business and State.

FEE Timely Classic
“Economic Fascism” by Thomas J. DiLorenzo

Wasting time is apparently okay.

FEE Timely Classic
“Recycling Myths” by Lawrence W. Reed

Medical marijuana strengthens government power, but the federal crackdown was outrageous nonetheless.

FEE Timely Classic
“Benjamin Rush and ‘Medical Marijuana’” (pdf) by Thomas Szasz

Nothing has changed.

FEE Timely Classic
“A Crisis of Political Economy” by Chris Matthew Sciabarra

Never believe the government’s numbers.

FEE Timely Classic
“Mencken’s Wisdom” by Donald J. Boudreaux

Since Washington would control the insurance business in any case, the “public option” is window dressing.

FEE Timely Classic
“Obama’s Health-Insurance Cartel “ by Sheldon Richman

As we see in Moore’s new movie, Capitalism: A Love Story, Moore is offended by some truly offensive things: banks engaging in wild speculation without concern for the risk, taxpayer bailouts for banks and other businesses, cozy relations between Wall Street and Washington, politicians getting favors from companies that want benefits from government, and big institutions pushing less powerful individuals around. True, he’s offended by some inoffensive things as well, such as the cut in the 90 percent top income-tax rate nearly 30 years ago. But by and large, what he rails against should be railed against.

(Update: Moore gets the tax-rate story wrong, and I let it get by me. The 91 percent top marginal rate fell to 77 in 1964 and 70 in 1965; this was the Kennedy tax cut — I wonder why Moore didn’t say that Democrats John Kennedy and Lyndon Johnson were the rate cutters. Under Republican Ronald Reagan, whom Moore wishes to demonize for cutting taxes for the rich, the rate dropped to 50 and eventually to 28 percent. HT: Gary Chartier.)

Had he called his movie State Capitalism: A Love Story, I might be applauding (with some reservations). But he’s targeting the more ambiguous “capitalism,” which he uses interchangeably with “the free market.” He can be forgiven for this, however. Most people would say that the current U.S. economic system is capitalist. Moore has probably heard that all his life. He’d hear if he watched a Fox financial program. Would Ben Stein or Lawrence Kudlow disagree? Moore has also heard Republican politicians, George W. Bush, for example, praise the existing system, with all its deep government interventions, as capitalist. He did this even as he and Treasury Secretary Henry Paulson, former chief of Wall Street behemoth Goldman Sachs, stampeded Congress into passing the $700 billion TARP bailout last year. Moore takes such people at their word: The free market is capitalism, and capitalism is what we have today.

Can we blame him for thinking this way?

Yes, it’s sloppy thinking, and had he been more curious and read beyond the confines of “Progressive” literature, he could have gotten the straight story. But many knowledgeable advocates of the free market contribute to the confusion by exhibiting what Kevin Carson calls “vulgar libertarianism,” or what Roderick Long describes as “the tendency to treat the case for the free market as though it justified various unlovely features of actually existing corporatist society.” How often have you heard a free-market advocate condemn pro-business intervention in one breath, then defend existing dominant corporations in the next — as though they did not arise in the interventionist environment just condemned? Pro-market is not the same as pro-business. If some market advocates don’t understand that, why should Moore? Vulgar libertarianism is a disconnect that makes the free-market philosophy look like a corporate apologetic. It’s done incalculable damage to the cause of freedom, in part by alienating potential allies. Who knows, maybe even Michael Moore.

Aversion to Profit

This may go a long way in explaining Moore’s aversion to profit — at least other people’s. He associates profit with business, which he associates with (state) capitalism. So for him, profit per se is suspect. But he should see a problem here. Does he think he’s exploiting moviegoers when his production company ends up with a profit? Do the co-ops and worker-owned firms he loves exploit their customers when they sell their products for more than their money costs? When two people barter, are they mutually exploiting each other because each gets more value than he gives up? To consistently oppose profit, one would have to oppose all human action, since every action aims at a surplus of subjective benefit over subjective opportunity cost.

Cornered like this, Moore might say he’s only the against excessive profits that capitalist market power permits. But now we’re back where we started. To the extent that intervention hampers competition by erecting barriers to entry — which is the usual effect, intended or not — protected firms are free to charge higher prices and reap more profits than would have been the case in an open market. Corporate power and privilege derive from political power and can’t exist without it. In contrast to existing capitalism, the truly free market would have no legal barriers to competitive entry, assuring that prices and returns are economically justified and not the fruits of privilege. Strictly speaking, entrepreneurial profit in a true market gets competed away because the very process of capturing them reveals valuable information to others and invites imitation. It takes innovation and efficiency — that is, superior service to consumers — to create new profits. Only the State permits business to make profits by withholding benefits from consumers.

But Moore doesn’t know this. What he “knows” is that the choice is between the current corrupt system — and it is corrupt — and some vaguely defined scheme of control by benevolent politicians, which he calls socialism and democracy.

In his movie Moore expresses affection for socialism, but he’s not clear what he means. He never advocates collectivization of the means of production or the abolition of markets. Instead he suggests that socialism means workers having a say in how the companies they work for are run. But why assume that’s anti-free market? He praises worker-owned companies and notes that hundreds of them exist in the United States today. He might be surprised to learn that these things are entirely compatible with the free market. In fact, it’s a perfectly libertarian intuition to abhor being subject to the arbitrary whim of anyone — yes, even a private employer. If government regulatory and tax obstacles to new competition and self-employment did not exist, workers would have their maximum bargaining power and widest array of alternatives. I imagine we’d see more departures from the traditional firm. People used to get their “social insurance” from mutual aid societies. Maybe in a true free market, we’d see a bigger role for the employment counterpart to these public, yet not governmental, organizations.

What would Moore think about a system in which no one could collude with politicians to legally plunder the rest of us for their own benefit and everyone was free to enter into any cooperative arrangements to produce and offer goods to others in voluntary exchange? Michael, that’s the free market!

FDR’s Second Bill of Rights

Of course, Moore naively looks to government to provide things. His movie laments that FDR died before he could see his Second Bill of Rights enacted. Roosevelt wanted government to guarantee everyone a good education, job, home, health care, and so on. Has Moore ever wondered where government would get the resources for this? He can’t really believe that somewhere there’s a massive pot of collective wealth waiting to be distributed. He must realize that the tax system would provide the money. But how can he not know that if government appears to penalize wealth creation with confiscation, less wealth will be created?

Moore is unaware that he commits the “Nirvana fallacy.” This is the erroneous idea that our choice is between the admittedly imperfect world we’re bound to live in if government leaves us alone and an imagined utopia in which benevolent and all-wise rulers oversee and regulate everything. Of course that is not the choice. Moore’s preferred system, whatever he calls it, would be run by individuals whose insight into the public interest would be no sharper and whose motives no purer than other people’s. However, since they would wield political power — which is the legal authority to compel obedience– they would be far more dangerous than anyone in a free market could ever be. He knows how corrupt politicians are. Why does he think different people would run things in his utopia? Does he really want them in charge of everyone’s job, education, health care, housing, pension, and the rest? It’s hard to understand why he isn’t uncomfortable with the idea of the people being tenants and employees of the State.

Whether he realizes it or not, Moore favors a system in which an elite necessarily would make critical decisions for the rest of us. He’d be incredulous to hear that, but if he ever comes to understand it, libertarians might end up with an unlikely ally.

Why is marriage even a concern of the State?

FEE Timely Classic
“The Politics of Freedom” by David Boaz

Are we children?

FEE Timely Classic
“Raw Milk and the Sour State” by William E. Pike

Her colleagues at Indiana University describe her as “humble and hardworking,” and another Nobel Prize winner, Vernon Smith, calls her a “remarkable scholar” with a passionate drive to understand human societies in all their variety. A former president of the Public Choice Society and the American Association of Political Science, Ostrom is also one of the most beloved teachers in academia. The Workshop in Political Theory and Policy Analysis at Indiana University that she co-directed with her husband, Vincent, is perhaps the ideal model for a research and graduate education center.

But what do we learn from her studies? I would argue that we learn at least three major points of style and substance. First, much of the last century of political and economic discourse has been dominated by a debate between advocates of perfect markets and perfect central planners. For one side, the demonstration of market failure was accompanied by an insistence that government would provide the necessary corrective. Ostrom was one of the core thinkers in the social sciences to say, “Hold on. Markets may fail, but government solutions also might not work.” One must always remember that Elinor and Vincent Ostrom are foundational contributors to the theory of Public Choice. But the Ostroms went further than simply demonstrating the possibility of government failure.

Smith versus Hobbes

This leads to the second point. In the history of political and economic thought the source of social order has been attributed either to the invisible hand of market coordination (Smith) or the heavy hand of state control (Hobbes). Perhaps one of the best ways to understand Elinor Ostrom’s work is to see it as working out a Hobbesian problem by way of a Smithian solution. That is perhaps a bit of a stretch but not by much. Her work on local public economies and common-pool resources focuses on actual “rules in use” (as opposed to the “rules in form”) that decentralized individuals and groups rely on to make decisions and to coordinate their behavior in order to overcome social dilemmas. Hers is an optimistic message about the power of self-governance to succeed even in difficult situations. As my colleague Alex Tabarrok put it, she sees how, through various voluntary associations, groups transform the common-pool resource situation from a “tragedy of the commons” to an “opportunity of the commons.”

Traditional economic theory argues that public goods cannot be provided through the market. Traditional Public Choice theory argues that government often fails to provide solutions. Ostrom shows that decentralized groups can develop various rule systems that enable social cooperation to emerge through voluntary association. A point that sometimes trips up readers is that Ostrom often focuses on situations where the technology of parceling property into private plots does not exist. In these situations she studies collective, but non-State decision-making over common-pool resources. While private-property solutions are not employed in such cases, the “rules in use” that do operate accomplish what private property would have accomplished. We find rules that limit access and that make individuals in the group accountable for their misuse of the resource. We also find enforcement of those rules. In short, the analyst must be willing to look at both the form and function of rules in a variety of social situations. There is a diversity of institutions at work in different societies that promote voluntary cooperation. As social scientists, we have to be able to understand them. There are rules that are in use, rules that are stated but not in use, rules that go by one name but that in practice do something else, and rules that tightly fit use, form, and function. Ostrom has insisted that social scientists must understand the rules that govern human behavior–both the way we interact with one another and the way we interact with nature. Some rules systems promote human betterment through the promotion of peaceful social cooperation and wealth creation; others thwart human progress by ensuring violence and poverty. It is actually that simple, and that profound.

The foundation of the social order of a free people is self-governance, not governmental authority and centralized power. Decentralized decision making that drills deep into the local social dilemmas real people face, that mobilizes incentives within a local rule structure, and that utilizes local knowledge is how the process of institutional development assures that self-governance is effective governance, enabling fallible human beings to reasonably manage scarce resources and the relationships among themselves.

Understanding Diverse Societies

The final point I want to stress concerning Ostrom’s research comes as a methodological message. Elinor’s work is humanistic and scientific. She is trying to understand human societies in all their variety. To do so she had to get up close and personal: from local government in California to irrigation systems in Nepal–and everything in between. Her field work in economics and political economy is guided by the logic of human choice. She describes her research program as “a behavioral approach to the rational choice theory of collective action.” If you take away the academic language, it translates into a research program that begins with human beings and their purposes and plans, and ends with their stumbling and groping to find voluntary solutions to difficult social dilemmas through norms, conventions, and rules.

Let me conclude by bringing this back to my title: Why should people who care about liberty rejoice in this choice for the prize? There is an ideological importance to the work of Elinor Ostrom. She has not stressed it in her work, but Vincent has ventured into the field of social philosophy. My favorite book of his is The Meaning of Democracy and the Vulnerabilities of Democracies (1997). In that work Vincent asks what are the preconditions for a self-governing citizenry. He answers that a self-governing society must be composed of citizens fully capable of embracing the “cares of thinking and the troubles of living.” Unfortunately, the machinations of democratic politics—with interest-group manipulation, logrolling, rent-seeking, and the vote motive—tend to undermine the capacity for self-governance among a people.

Nothing in this should be interpreted as deterministically pessimistic. The message is that hope is to be found not in the State but in the people. A society of free and responsible individuals who are able to form voluntary associations will solve the social dilemmas they confront through various means of self-governance.

Nobody has done more than Elinor Ostrom, both in her research and in her teaching/mentor capacity at the Workshop in Political Philosophy and Policy Analysis, to help us understand the self-governing rules and institutions that work to elicit cooperation in a wide variety of societies. And nobody has done more to alert us to the damage governments can do when they attempt to impose alien rules on local peoples from afar—especially when their own systems are already addressing social dilemmas in their own way. Elinor demands that we understand and respect institutional diversity in our world, to see the ingenuity and wisdom in local solutions and in the entrepreneurial creativity and resourcefulness of individuals throughout the developed and less-developed world. Transcending the older debates in social science and public policy, Elinor Ostrom’s work emphasizes the richness of the institutional environment and the creative solutions that arise when individuals are free to form associations and work within a network of informal rules that promote individual responsibility and collective accountability.

Supporters of FEE and readers of The Freeman are attracted to the vision of a society of free and responsible individuals. Elinor Ostrom’s research gives us a window into the diverse world of associations that do not fit neatly into the categories of “market” or “State” but nevertheless are essential to peaceful and prosperous social cooperation.

Today, the champion—the uncontested champion of Orwell’s “truth”—is Paul Krugman, the 2008 Nobel laureate, Princeton professor, and New York Times columnist. For those who read his twice-weekly column or glance at his blogs and commentary elsewhere, it is like reading the latest pronouncements from the “Ministry of Truth,” and, like in Oceania, it seems that the masses believe the nonsense.

Had I not read Krugman’s column, I never would have known that Jimmy Carter, who began the modern deregulation movement, was a right-wing Republican, or that the solution to almost all our economic ills is for the government to raise taxes, borrow, and print more money. However, his latest missive has managed even to outdo the Ministry of Truth itself. Big Brother would have been ecstatic.

There is not enough byte space in the universe to refute Krugman’s latest pronouncement completely, but a couple of the most glaring holes can be discussed here.

As most readers know, the U.S. Dollar has been falling fast against other currencies and members of OPEC are balking at continuing to price crude oil exclusively in dollars. Instead, they have suggested a “basket” of currencies, as they realize that our government’s policies are likely to turn the USD into something like the Zimbabwean Dollar.

Enter Professor Krugman, who writes:

The truth is that the falling dollar is good news. For one thing, it’s mainly the result of rising confidence: the dollar rose at the height of the financial crisis as panicked investors sought safe haven in America, and it’s falling again now that the fear is subsiding. And a lower dollar is good for U.S. exporters, helping us make the transition away from huge trade deficits to a more sustainable international position.

Not so fast.  The USD is falling because the rest of the world understands that the USA no longer is a “safe haven” and investors looking elsewhere. When super investors like Jim Rogers tell us to get out of this country altogether, people need to listen. Rogers does not have a Nobel to his credit, but he is no crackpot and he fully understands (unlike some American Ph.D.s) that the U.S. Government does not create wealth with the printing press.

While it is true that a falling dollar does make U.S. exports cheaper, the question is what can we export other than commodities. The government’s environmental policies alone continue to raise the cost of manufacturing and we are being forced by the political classes to divert productive resources into failed enterprises like General Motors and the zombie financial institutions on Wall Street.

Alas, Krugman does not stop there. No, he claims that what our economy “desperately” needs is—get this—more “easy credit.” That is right; the very thing that gave us massive malinvestments and brought the U.S. economy to near-ruin is what we “desperately” need. As I have written elsewhere, this is like claiming that the best way to deal with alcohol addiction is to imbibe even more.

For all the talk that the government’s policies of bailouts, printing money, and borrowing at record rates have “prevented” a second Great Depression, the truth is that all the government has done is to give the illusion of recovery while setting us up for an even worse Day of Reckoning. By keeping the zombie entities afloat, the government continues to force even more malinvestments at a time when liquidation is the order of the day.

The Keynesian propositions of printing money and borrowing might be popular to the political and intellectual “elites” of this country, but they are utterly destructive in the real world. Unfortunately, we are being fed Orwellian “truths” at a time when what we need to hear is the unadulterated truth.

An inkling that minimum-wage laws have bad consequences.

FEE Timely Classic
“The Minimum Wage: Good Intentions, Bad Results” by Roger Koopman

Do the senators think we have too many devices?

FEE Timely Classic
“The Power to Tax Is the Power to Destroy” by Clarence B. Carson

A sign of things to come?

FEE Timely Classic
“The Future of the Dollar” by Henry Hazlitt

Neat: Proof of their success is that things could be worse.

FEE Timely Classic
“A Microeconomist’s Protest” by Mario Rizzo

Good diagnosis, bad medicine.

FEE Timely Classic
“What Hunger Insurance Could Teach Us About Health Insurance” by Joseph Bast

Rule by an elite.

FEE Timely Classic
“Regulation Red Herring” by Sheldon Richman

“Reality is negotiable.”

FEE Timely Classic
“Political Accounting” by James Bovard

Did we need more reason not to cripple the economy by raising energy prices through intervention?

FEE Timely Classic
“Unprecedented Global Warming?” by Michael Heberling

Easy answers are often wrong.

FEE Timely Classic
“Dos and Don’ts of Tort Reform” by Robert A. Levy

In his op-ed column Monday, Brooks imagines how Bentham and Hume would each approach global warming and health care. Bentham, he says, would display a policy wonk’s command of the nuts and bolts and come up with detailed government programs for imposing solutions to the problems.

“Mr. Hume, I’m afraid, wouldn’t be so impressive,” Brooks writes. He imagines that Hume — whining, head in hands, or weeping while in the fetal position — would confess his ignorance about solving the problems and then would propose just enough government intervention, such as a carbon tax and health-insurance exchanges, to “set off a decentralized cascade of reform, instead of putting all the responsibility on us here.”

Brooks then gets to his point:

This country is about to have a big debate on the role of government. The polarizers on cable TV think it’s going to be a debate between socialism and free-market purism. But it’s really going to be a debate about how to promote innovation.

The people on Mr. Bentham’s side believe that government can get actively involved in organizing innovation….

The people on Mr. Hume’s side believe government should actively tilt the playing field to promote social goods and set off decentralized networks of reform, but they don’t think government knows enough to intimately organize dynamic innovation.

Brooks predicts that Bentham will win because he serves the lobbyists interests.

Leaving aside Brooks’s defamation of Hume as a pathetic, sniveling character — David Hume? — we can take issue with his picture of Hume on a couple of other counts. I am no Hume expert (and I disagree with him on many issues), but I know enough to point out some important things Brooks missed in his effort to be cute.

Note that Brooks presents the debate over the role of government in fairly narrow terms. It’s between a government that actively organizes innovation and a government that actively sets social goals then arranges the carrots and sticks in order to induce people to achieve those goals.

In either case, government is the active party. Hume would not be comfortable with either team.

Stability of Possession

For one thing, Hume thought that society depends on, more than anything else, secure property. But how secure can property be if politicians of limited knowledge and perspective (not the impliedly lofty government) have the power to set goals for the rest of us and to impose incentives and penalties in the service of those goals?

Let there be no mistake about where Hume stood on the matter of property. In A Treatise of Human Nature (Book III, 1740) he writes of “the three fundamental laws of nature, that of the stability of possession, of its transference by consent, and of the performance of promises” and adds:

’Tis on the strict observance of those three laws, that the peace and security of human society entirely depend; nor is there any possibility of establishing a good correspondence among men, where these are neglected. Society is absolutely necessary for the well-being of men; and these are as necessary to the support of society.

“Stability of possession” is a favorite phase of Hume’s. Indeed, he emphasized that property should be respected even when in particular cases we do not like the outcome:

Property must be stable, and must be fix’d by general rules. Tho’ in one instance the public be a sufferer, this momentary ill is amply compensated by the steady prosecution of the rule, and by the peace and order, which it establishes in society. And even every individual person must find himself a gainer, on ballancing the account; since, without justice, society must immediately dissolve, and every one must fall into that savage and solitary condition, which is infinitely worse than the worse situation that can possibly be suppos’d in society.

These “three fundamental laws of nature” were not the conscious inventions of some Benthamite social engineer, but rather elements of an undesigned social order that produces benefits for the general population. Indeed, Hume along with Adam Smith, was a leading philosopher of the Scottish Enlightenment.  Its defining characteristic was the historic liberal appreciation that society was not constructed consciously but rather emerged spontaneously from the peaceful pursuit of self-interest and the social cooperation it generates. “[T]he rule concerning the stability of possession,” he wrote, “… arises gradually, and acquires force by a slow progression, and by our repeated experience of the inconveniences of transgressing it.”

He goes on to draw a parallel that will be familiar to students of Menger, Mises, and Hayek: “In like manner are languages gradually established by human conventions without any promise. In like manner do gold and silver become the common measures of exchange….”

Thus law, language, and money are institutions that are, in the words of Hume’s friend Adam Ferguson, “the result of human action, but not the execution of any human design.“

Public Good as Byproduct

Hume emphasized that, as spontaneously emergent institutions, the laws of justice and property were not intended to promote the good of the public, having grown out of “self-love,” but they nevertheless do so. This process is what Adam Smith would liken to an “invisible hand.” In fact, Hume wrote, the public good wouldn’t have been achieved had it been aimed at directly and consciously. He writes,

[I]f men had been endow’d with such a strong regard for public good, they wou’d never have restrain’d themselves by these rules; so that the laws of justice arise from natural principles in a manner still more oblique and artificial. ’Tis self-love which is their real origin; and as the self-love of one person is naturally contrary to that of another, these several interested passions are oblig’d to adjust themselves after such a manner as to concur in some system of conduct and behaviour. This system, therefore, comprehending the interest of each individual, is of course advantageous to the public; tho’ it be not intended for that purpose by the inventors.

Is belief in spontaneous social order and stable property consistent with the two forms of rationalistic discretionary government Brooks gives us? I think not.

One final word from Hume in light of today’s fiscal affairs: “The source of degeneracy, which may be remarked in free governments, consists in the practice of contracting debt, and mortgaging the public revenues, by which taxes may, in time, become altogether intolerable…” (Of Civil Liberty).

Somehow the free market will get blamed.

FEE Timely Classic
“Nationalization of the Mortgage Market” by Robert P. Murphy

And risk squelching the “recovery”?

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“Inflation in One Page” by Henry Hazlitt

If you believe that they’ll cut costs as promised and that higher taxes will mean increased revenues.

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“The Growth of Government in the United States” by Robert Higgs

No special pleading here.

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“Creating Jobs vs. Creating Wealth” by Dwight R. Lee

They just can’t keep hands off.

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“Can the Feds Save the Housing Market?” by Robert P. Murphy

More “creative” tinkering when it’s retrenchment that is needed.

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“Human Ignorance and Social Engineering” by Wendy McElroy

Prettifying the prisons hardly constitutes “change.”

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“What About Immigration?” by Julian L. Simon

Why isn’t that word offensive to more people?

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“No More Czars, Please” by Lawrence W. Reed

Yes, the Federal Reserve and the Obama administration have pulled us “back from the brink” — the title of a new paper by Christina Romer, who leads the Council of Economic Advisers. She argues convincingly that expansionary policy saved us from a possible replay of the Great Depression.

But while not having another depression is a good thing, all indications are that unless the government does much more than is currently planned to help the economy recover, the job market — a market in which there are currently six times as many people seeking work as there are jobs on offer — will remain terrible for years to come.

As if on cue, the Times editorialized two days later:

If successful, ambitious goals like health care reform and energy legislation may generate jobs, but officials have not persuasively linked them to job growth. Congress and the administration also have not done enough to directly create jobs. That could be done with more stimulus to spur job creation, or a large federal jobs program, or tax credits for hiring, or all three.

The truth is elsewhere. First and most important, the economy continues to shed jobs more than two years into the recession because government has increased the burdens private firms and individuals must bear. From tax increases to a gaggle of new rules and regulations to the bailouts, government has done nearly everything it should not be doing if it wants a real recovery to take place.

Second, it is clear that the politicians in Washington are just getting started. From the appointment of numerous “czars” over different sectors of the economy to the “ambitious” plans for remaking medical care and imposing huge new environmental burdens, it is clear that President Obama and Congress believe that the economic downturn is an excuse for an upturn of State control of our lives.

If there is any “recovery,” it is a false recovery, one based not on any tangible economic progress but rather on financial trickery and printing money. Our “recovery” is a fraud perpetrated by Washington and its Amen Chorus in elite higher education and the mainstream media.

For the U.S. economy to have a real recovery, the economy first must shed the huge number of malinvestments that piled up like garbage on New York streets during the last unsustainable boom. Unfortunately, as the economy dumps these failed investments, that means people who were employed in those areas also lose their jobs, which simply is unacceptable to the political classes.

Had the Bush and Obama administrations left the economy alone, those malinvestments would have been shed quickly and the economy now would be moving toward a real recovery that could be sustained over time, employing new people in those sectors. Alas, the political classes believe that “inactivity” is anathema, so Bush and Obama engineered hundreds of billions of dollars of “bailouts,” which have served to prop up whole sectors of failing enterprises.

What does that mean, economically speaking? It means that instead of being directed into those sectors that could have grown without aid from the government, resources are being shoveled into the economic equivalents of bottomless pits. Americans are forced to prop up domestic automakers that are bankrupt, keep zombie financial institutions going on life-supports, engage in energy policies that literally destroy wealth and produce less energy, and to be taxed even more so government can destroy the part of the medical sector it has not already ruined.

In other words, Americans in productive entities are being forced to give up a large chunk of their own wealth o prop up firms and institutions that might be bankrupt but also are politically connected. While the New York Times and its elite economists in tow might claim the government needs to continue this course with another “stimulus,” commonsense economics is telling us that this is a policy that benefits the political classes and their allies and no one else.

Does the “safety net” prolong unemployment?

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“Benefit Mandates Cause Unemployment” by Hans F. Sennholz

Markets preceded government, so why would government be needed to create markets?

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“The Market and Political Freedom” by John Marangos

Out of control.

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“Regulation by Reputation on the Net” by Aaron Steelman

In an earlier comment on the fracturing of the U.S. Climate Action Partnership (USCAP), an industry-environmentalist coalition pushing for cap-and-trade carbon emission controls, Environmental Defense Fund president Fred Krupp repeated a commonly held misconception about government regulation when he said:  “It’s very unusual for big corporations to raise their hands and say, ‘We want to be regulated for something that we’re not regulated for now.”  Exelon, PG&E and PNW apparently make his point.

But as a matter of fact, industry support of regulation is not rare at all; indeed, it is the norm.  And in the United States it is as American as apple pie.

A somewhat casual investigation of business history reveals that it was the U.S. Chamber of Commerce, with the special assistance of General Electric president Gerard Swope, that supported passage of President Roosevelt’s 1933 National Industrial Recovery Act.  The Act, with its Blue Eagle codes affecting 2.3 million employers, attempted to place all American industry in a price-fixing cartel.  But while the Chamber and many large firms supported FDR’s cartel, many firms, including Ford Motor Company, did not.

Going back further, we are reminded by Howard Marvel, writing in the 1977 Journal of Law of Economics, that it was the owners of the newly built water-powered textile plants that supported the English Factory Acts (1802 and on), not the owners of older mills that used far more labor per unit of output.  The legislation limited child labor and hours and conditions of work, which raised the costs of labor-intensive producers.  The industrialists who joined with other crusaders to support the legislation are remembered as philanthropists.

In 1907 it was the electric utility industry led by Samuel Insull that lobbied for state regulation in the hopes of escaping a less predictable and intractable municipal control.  And it was in 1910 that American Telephone and Telegraph Company chairman Theodore Vail successfully called for federal regulation of long-distance telephone just when the Bell patents were expiring and new competition was, as he put it, “skimming the cream” from the market.  Even Magna Carta (line 35) specifies a standard width for all cloth sold in the kingdom — all in the name of consumer protection, scholars tell us.  The standard happened to be the width of looms operated by the London weavers.  The less fortunate Bristol weavers had to break and modify their looms to compete.

A focus on environmental regulation reveals a host of Bootleggers and Baptists who have coalesced, sometimes quietly, to support output restrictions.  In hearings before passage of the 1972 federal Water Pollution Control Act, industrialists located along the Ohio River argued for the law. They faced pollution controls imposed by the Ohio River Sanitation Commission and wanted a national level playing field.  Only federal regulation would solve their problem, and they supported it.  It was the coal interests in Ohio and West Virginia, along with environmentalists, that lobbied for the 1990 Clean Air Act amendments requiring scrubbers on newly built and modified coal-fired electric utilities.  As Bruce Ackerman and William Hassler famously noted in their 1981 book, Clean Coal/Dirty Air, the scrubber requirements eliminated the clean-burn advantage of western coal and kept the higher sulfur eastern coal producers happily operating.

Yes, industry support of legislation that imposes restrictions on output is commonplace, but one begins to understand this more fully after careful scrutiny of the lobbying process.  It is seldom the case that every firm in an industry supports restrictions.  When John Deere petitioned EPA (Environmental Protection Agency) to increase the stringency of the air-emission standard on small gasoline engines, it was because Deere had a patent on cleaner engines. When the Chicago meat packers lobbied Congress to pass the 1906 Meat Inspection Act, it was because of markets lost to consumer fear over Upton Sinclair’s The Jungle and Argentine beef producers who were invading the U.S. market with lower priced food.

And when nuclear-power producers Exelon, PC&E, PNM, and others lobby for a federal statute that would impose high costs on coal-fired competitors, there should be no question why.

Illogic 101: economic growth through higher energy prices.

FEE Timely Classic
“Climate Change: What if They’re Right?” by Max Borders