The Rational Argumentator – Page 38 – A Journal for Western Man – Championing Reason, Rights, and Progress Since 2002

Free Trade Is the Path to Prosperity – Article by Georgi Vuldzhev

March 7, 2016 Georgi Vuldzhev Comments 0 Comment

Georgi Vuldzhev

******************************

The political circus of the 2016 presidential election has revived and reinvigorated popular belief in age-old protectionist fallacies. Currently Donald Trump and Bernie Sanders are both in favor of expanding protectionist trade policy, with both of them arguing that free trade “destroys” jobs and hurts domestic workers and producers by exposing them to foreign competition. Both candidates espouse an utterly misguided zero-sum view of economics, in which one side to an exchange wins only when the other side loses. Both men are, of course, completely wrong.

Free Trade Does Not Destroy Jobs

It is true that greater competition between domestic and foreign workers can lead to a decline in wage rates and possibly unemployment in some sectors of the economy. But this is only a short-term effect. Free competition between foreign and domestic producers also naturally leads to lower prices for the goods and services which can now be freely imported from abroad. So, while nominal wage rates are pushed down in some sectors, real wage rates rise overall for everyone in the economy because of the decline in prices.

Thanks to free trade consumers spend less money on certain goods and services and this allows them to spend more money on others, which leads to rising demand and thus profits in the sectors providing the latter, and consequently leads also to more investment by entrepreneurs. This higher rate of investment naturally leads to the creation of more jobs in these sectors and thus offsets any original rise in unemployment that might have occurred.

Alternatively, the consumers may choose to save the extra disposable income that was freed up by the decline in prices. This rise in the savings rate will lead to a decline in interest rates, which makes profitable certain long-term capital-intensive projects which were not profitable beforehand. Seizing the opportunity presented by this increase in savings, entrepreneurs will start borrowing and investing in those long-term capital intensive projects, which on its own already creates more jobs, but it also leads to a rise in demand for capital goods, which raises profits in the capital goods industries and consequently leads to more investment and job openings in those sectors.

Free Trade Is Win-Win

Free trade not only doesn’t “destroy” jobs, but it also promotes specialization between nations, which improves the efficiency and productivity of workers, and leads to a rise in living standards for all. Trade is not some kind of a zero-sum game in which if one side wins, the other has to lose.

When two countries such as the United States and China, for example, trade freely with one another, their citizens are incentivized to specialize in those lines of production in which they have a comparative advantage. Due to the difference in factors of production endowments it is best for different countries to specialize in producing those types of goods and services which they can produce most efficiently in comparative terms. A higher level of specialization, through the effect of economies of scale, makes production more cost-efficient.

By specializing in a certain line of production and then exchanging the goods and services produced for those that others are specialized in producing, the people of a given country can substantially raise their living standards because the gains in productivity are naturally followed by an increasing supply of goods and services and thus rising real incomes. This way free trade allows for the flourishing of what can be called an “international” division of labor. Just like a greater degree of division of labor can lead to big gains in productivity and thus real incomes on an intra-national (i.e., internal for a given country) level it can also do so on an international level.

Protectionism Makes You Poor

When international trade is restricted, for example, by protectionist legislation which places tariffs on certain imports, this process of specialization is hindered and thus the gains in productive efficiency are diminished. By artificially raising the price of imports, tariffs allow otherwise uncompetitive and inefficient domestic businesses to remain in operation. Consumers are forced to pay higher prices for the goods the importation of which is penalized by tariffs, and this effectively constitutes a redistribution of resources from the consumers to the domestic producers.

More importantly, protectionism hinders the process of specialization described in the previous section and thus prevents living standards from rising in the long-term, or worse — it can even lead to their decline. By propping up the profits of comparatively inefficient domestic producers and keeping in business, tariffs prevent the labor shift from those inefficient sectors, to more comparatively efficient ones. Consequently, because this prevents a higher degree of specialization from taking place, or even reverses it, the benefits that specialization leads to cannot be obtained. Productivity does not increase (or at least not to the same degree as it could) and thus real incomes do not rise.

Contrary to the popular political rhetoric nowadays, free trade does not “destroy jobs.” It can only lead to a shift of resources (labor, capital, and other factors) from one comparatively inefficient sector or group of sectors in the domestic economy to another more comparatively efficient one. This process of specialization in the comparatively advantageous lines of production not only does not destroy jobs, but it also enables big gains in efficiency and productivity to take place, which leads to a rise in real incomes. This is how, far from somehow hurting the domestic workers, free trade actually does the opposite — it makes them richer. It is, in fact, protectionism which makes us all poorer, workers included, by artificially propping up inefficient businesses, leading to a misallocation of resources and a decline in standards of living for us all.

Georgi Vuldzhev is a student and an intern at the Institute for Market Economics in Sofia, Bulgaria. He has written articles on economics and politics for the European Students for Liberty blog, where he is a regular contributor, and various Bulgarian publications. His main interests are Austrian economics and libertarian political theory.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

A Conversation with My Neighbor “Sam” – Article by Mark Brandly

March 7, 2016 Mark Brandly Comments 0 Comment

Mark Brandly

******************************

Lately, I’ve wondered how my neighbor, Sam, affords to buy so much stuff. He appears to have an unlimited budget. When I asked him about this, Sam asked, “Do you think I’m spending too much?”

“That depends,” I said, “How much money do you make?”

“I take home $100,000 a year.”

That surprised me. I would guess that he’s spending more than that. But I tried to be encouraging, “That sounds like plenty of income. With a little planning, you should be able to budget your spending and be financially stable.”

“But my finances are a mess,” Sam replied. “I spend more than I take home. Last year I had to borrow $12,000 just to cover my spending.”

“Well maybe things will be better this year,” I said, hoping that Sam’s spending issues was a one year problem.

“No,” Sam replied. “Actually, in the first three months of this year, I’ve already spent $19,000 more than I’ve made. It looks like my budget deficit this year will be much worse than it was last year.”

Now I was starting to worry. “Have you been borrowing money to cover your spending for a long time?”

“Oh yes. I have a lot of debt. Part of the problem is that I owe myself $150,000.”

I wondered if Sam misspoke, “Wait, wait, wait, you owe yourself $150,000? Why do you think that you’re in debt to yourself?”

“Well you see, over the years I promised myself that I was going to use my paychecks to pay for a fund for my children’s education, but instead of spending $150,000 on colleges, I spent the money on other expenses. So I figure that I owe myself this money so that I can pay for my children’s college tuitions.”

Obviously Sam doesn’t understand the definition of the word “debt.”

I tried to be polite in my response: “That doesn’t make any sense. It’s true that you’ve made some horrible decisions regarding your spending, but it’s ridiculous to claim that you owe yourself money. A debt occurs when one person owes another person money. Just because you changed your mind about how to spend your paychecks doesn’t mean that you’ve borrowed money from yourself.

“So the first thing you need to do is to think clearly about the amount of debt you have. You don’t owe yourself any money. Now, forgetting about this ridiculous notion of self-debt, how much do you owe?”

“Alright, I think I see your point. Let’s just talk about the rest of my debt. I owe various banks about $420,000. This debt is more than four times my take-home income.”

Sam often lies about his income and spending issues, but he always understates his budget problem. If he’s lying now, then I can be sure that the problem is even greater than he says. I wanted more information.

“That a pretty high debt to income ratio. But that might be somewhat manageable, although unwise, if you’ve borrowed that money at low interest rates.”

“I have some good news and some bad news,” Sam said. “Interest rates are low. In fact, in the last fourteen years, my debt has more than quadrupled, but my interest payments have increased less than 50 percent. That’s because interest rates have collapsed during that time. Isn’t that good news?”

“I suppose, but do you know that interest rates are going to increase over the next several years?”

“Yes, that’s the bad news. In the past year, I only paid $7,000 of interest, but within ten years my debt will increase over 50 percent, and possibly much more, and with higher interest rates I expect to be paying at least four to five times that much in interest annually.”

“That’s a huge problem. So to be able to make your loan payments, I assume that you’ve taken out some long-term loans.”

“No, no, no. In order to take advantage of the low interest rates, most of my borrowing is short term. I rollover my loans quickly. In the past year my principal payments on these loans totaled $207,000.”

“Let me get this straight. Your loan payments, including principal and interest, are well over twice your take home pay?”

“Yes, I take home a little over $8,000 per month and my loan payments are over $17,000 per month. But it’s no problem. In the past year I borrowed $223,000 to cover everything.”

Shocked, I said “How can you say borrowing more than twice your income is not a problem?”

“I simply borrow all the money I need to make all of my loan payments. I never pay any of the loans down. I’ve been doing this for years, ever since I started spending more than I make.”

“Okay. Most of your borrowing goes to cover your increasingly large principal and interest payments. And as interest rates rise, interest payments will become a bigger percentage of your spending. When that happens, your total debt will increase faster than your income. What is your plan, say in the next ten years, to correct this situation?”

“Well I don’t have a plan for correcting anything, because I don’t see how I can cut my spending.”

“What if the banks stop loaning you money to make your payments on your loans? What happens then?”

“I guess I’m assuming that won’t happen.”

Sam’s Budget Situation in Real Numbers
If one of our neighbors budgeted in this manner, we would obviously conclude that the guy is crazy. No such plan could work. Eventually lenders would refuse to fund Sam’s spending.

However, Sam’s situation looks a lot like the federal government budget plan. Take a look at some recent federal budget information and some Congressional Budget Office projections:

In FY (fiscal year) 2015, the feds had a budget deficit, counting only debt held by the public, of $339 billion, which is about 10 percent of their tax revenues of $3,248 billion. The deficit has been declining the last few years, but that is now changing.
In fact, in the first three months of FY 2016, according to the Treasury Department, federal debt held by the public increased $548 billion. Admittedly, some of this debt was due to the fact that the feds were cooking the books in FY 2015 when they hit the debt ceiling limit. Nonetheless, the first quarter 2016 deficit is already 60 percent larger than the overall 2015 deficit.
The federal government claims to owe itself over $5 trillion (they call it intragovernmental debt here). This $5 trillion represents tax revenues that were earmarked for specific spending programs, such as Social Security, but were spent on other programs. Since the feds collected taxes to pay for Social Security, but spent the money on something else, they conclude that they owe it to themselves to collect those tax revenues again. That’s the essence of intragovernmental debt. We should not count this as debt. Give the Treasury Department credit for ignoring this type of “debt” in their Daily Treasury Statements and in their end of the year debt reports.
As of September 30, 2015, the feds had $13.1 trillion of debt owed to the public. FY 2015 tax revenues totaled $3.248 trillion. So just like Sam the government has a 4-to-1 debt-to-tax-revenue ratio.
In the past fourteen years, from September 30, 2001 (the start of George Bush’s first budget) to September 30, 2015 (the end of Barack Obama’s sixth budget), debt owed to the public increased from $3,339.3 billion to $13,123.8 billion. That’s an increase of 293 percent.
According to the Daily Treasury Statements, in the past fourteen years, interest on treasury securities increased from $162.5 billion in fiscal year 2001 to $233.1 billion in fiscal year 2015. That’s a 44 percent increase during the same period when federal debt owed to the public almost quadrupled.
In FY 2015, again according to the Daily Treasury Statements, the feds borrowed $7,251.4 billion (see the Public Debt Cash Issues for September 30, 2015), an average of almost $20 billion per day. They spent $6,740.3 billion of this borrowing rolling over their debt. So, Federal principal and interest payments are more than double federal tax revenues.
According to the Congressional Budget Office’s baseline projections, debt held by the public in 2025 should exceed $21 trillion and during that time interest rates are expected to increase. Interest rates have been kept artificially low for years. If interest rates return to a more normal level, say to the rates they were paying when George Bush took office fifteen years ago, then interest payments in 2025 will exceed $1.2 trillion. That’s over a 400 percent increase compared to the FY 2015 interest payments. I should note here that the baseline budget projections are optimistic. We should expect the debt situation in 2025 to be significantly worse than these projections.

The federal government’s debt has exploded under the Bush and Obama administrations. Low interest payments due to the low interest rates have masked their budget problems. As interest rates and the spending gap on entitlement programs such as Social Security both increase, the budget problem will compound.

The federal government’s plan is to borrow all of the money they need to pay all of their principal and interest payments and to also pay for the budget deficits in their spending programs. The question we should ask is: what’s going to happen when the world’s lenders refuse to bankroll DC’s spending schemes?

Mark Brandly is a professor of economics at Ferris State University and an adjunct scholar of the Ludwig von Mises Institute.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

Do We Need To ‘Rebuild The Military’? – Article by Ron Paul

March 7, 2016 Ron Paul Comments 0 Comment

Ron Paul

******************************

The Republican presidential debates have become so heated and filled with insults, it almost seems we are watching a pro wrestling match. There is no civility, and I wonder whether the candidates are about to come to blows. But despite what appears to be total disagreement among them, there is one area where they all agree. They all promise that if elected they will “rebuild the military.”

What does “rebuild the military” mean? Has the budget been gutted? Have the useless weapons programs like the F-35 finally been shut down? No, the United States still spends more on its military than the next 14 countries combined. And the official military budget is only part of the story. The total spending on the US empire is well over one trillion dollars per year. Under the Obama Administration the military budget is still 41 percent more than it was in 2001, and seven percent higher than at the peak of the Cold War.

Russia, which the neocons claim is the greatest threat to the United States, spends about one-tenth what we do on its military. China, the other “greatest threat,” has a military budget less than 25 percent of ours.

Last week the Pentagon announced it is sending a small naval force of US warships to the South China Sea because, as Commander of the US Pacific Command Adm. Harry Harris told the House Armed Services Committee, China is militarizing the area. Yes, China is supposedly militarizing the area around China, so the US is justified in sending its own military to the area. Is that a wise use of the US military?

The US military maintains over 900 bases in 130 countries. It is actively involved in at least seven wars right now, including in Iraq, Syria, Pakistan, and elsewhere. US Special Forces are deployed in 134 countries across the globe. Does that sound like a military that has been gutted?

I do not agree with the presidential candidates, but I do agree that the military needs to be rebuilt. I would rebuild it in a very different way, however. I would not rebuild it according to the demands of the military-industrial complex, which cares far more about getting rich than about protecting our country. I would not rebuild the military so that it can overthrow more foreign governments who refuse to do the bidding of Washington’s neocons. I would not rebuild the military so that it can better protect our wealthy allies in Europe, NATO, Japan, and South Korea. I would not rebuild the military so that it can better occupy countries overseas and help create conditions for blowback here at home.

No. The best way to really “rebuild” the US military would be to stop abusing the military in the first place. The purpose of the US military is to defend the United States. It is not to make the world safe for oil pipelines, or corrupt Gulf monarchies, or NATO, or Israel. Unlike the neocons who are so eager to send our troops to war, I have actually served in the US military. I understand that to keep our military strong we must constrain our foreign policy. We must adopt a policy of non-intervention and a strong defense of this country. The neocons will weaken our country and our military by promoting more war. We need to “rebuild” the military by restoring as its mission the defense of the United States, not of Washington’s overseas empire.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

Thanks to Court Ruling, Student Literally Can’t Attend School Because He’s Black – Article by Carey Wedler

March 5, 2016 Carey Wedler Comments 1 comment

Carey Wedler

******************************

St. Louis, MO — An African-American third-grader in St. Louis, Missouri will be unable to continue attending his charter school due to a decades-old federal court decision intended to fight segregation. Edmund Lee, a high-performing student at Gateway Science Academy, will be forced to leave the school he has attended since kindergarten because he and his mother, La’Shieka White, are moving away from the district where the school is located. Though policy guidelines, pursuant to the court decision, allow students to stay if they move, a provision specifically states he cannot — because he is black.

“When I read the guidelines I was in shock,” White said. “I was crying.”

Though media outlets, including Salon, have reported this anachronistic decision to be a result of state law, the policy is actually a result of a U.S. Court of Appeals ruling from 1980 in response to a 1972 lawsuit challenging segregation. In 1983, a desegregation settlement agreement was reached that included “the transfer of black city students into primarily white suburban districts and white suburban students into magnet schools in the city,” explains the Voluntary Interdistrict Choice Corporation, the organization tasked with overseeing the implementation of the 1983 settlement. Until 1999, VICC stood for the Voluntary Interdistrict Coordinating Council, but in 1999, it became a non-profit corporation and the name was changed.

Kurt Fuchs, an employee with the Missouri Department of Elementary and Secondary Education (MDESE), told Anti-Media that Edmund will be able to finish his current semester at Gateway Science Academy, but noted he will have to relocate to a new school next year. He explained that the 1983 settlement agreement was reached when St. Louis’ demographic was predominantly black, and the court decision sought to implement what could be called reverse discrimination.

Sarah Potter, a communications coordinator for the MDESE, explained the settlement initiated transfers intended to equalize race distribution in schools. She said when the agreement was drafted, the region had predominantly white suburbs and predominantly black cities, a demographic the settlement sought to change.

Though the agreement was intended to undo segregation, more than 30 years later it has become a justification for it. Edmund’s mother expressed a broad view of the issues with the court-mandated policy.

“I don’t want it to be just about an African-American boy,” she said. “I want it to be about all children.”

Staff at the charter school are also dismayed at the way the decades-old policy is now perpetuating the very discrimination it was intended to prevent.

“If this helps us start a conversation about maybe some things that could be different with the law, then that is as good thing,” said Assistant Principal Janet Moak.

Tiffany Luis, Edmund’s third grade teacher, said, “To not see his face in the halls next year would be extremely sad.”

David Glaser, VICC’s chief executive officer, told Anti-Media they are unable to challenge the policy.

“I understand why people would like to do [something] different, but there isn’t anything I can do — or that anyone can do — because we are all under the constraints of the decision, and it’s our job to follow the law,” he said. He suggested it is unlikely an exception will be made for Edmund because the court’s decision — and the subsequent 1983 desegregation agreement — are legally binding federal court mandates. “It’s not like we can unilaterally change it,” he said.

As of Thursday afternoon, a petition seeking to allow Edmund to continue his studies at Gateway has garnered over 35,000 signatures. In spite of public outcry, however, it appears that for now, the anti-segregation policy will continue to enforce discrimination.

Glaser noted that even the state legislature can’t do anything because the state of Missouri signed the agreement when it was crafted.

As Tiffany Luis said, “The family is saying they want to stay. I don’t understand why they can’t.”

Carey Wedler joined Anti-Media as an independent journalist in September of 2014. Her topics of interest include the police and warfare states, the Drug War, the relevance of history to current problems and solutions, and positive developments that drive humanity forward. She currently resides in Los Angeles, California, where she was born and raised.

This article (Thanks to Court Ruling, Student Literally Can’t Attend School Because He’s Black) is free and open source. You have permission to republish this article under a Creative Commons license with attribution to Carey Wedler and theAntiMedia.org. Anti-Media Radio airs weeknights at 11 pm Eastern/8 pm Pacific.

First They Came For the iPhones… – Article by Ron Paul

March 3, 2016 Ron Paul Comments 0 Comment

Ron Paul

******************************

The FBI tells us that its demand for a back door into the iPhone is all about fighting terrorism, and that it is essential to break in just this one time to find out more about the San Bernardino attack last December. But the truth is they had long sought a way to break Apple’s iPhone encryption and, like 9/11 and the PATRIOT Act, a mass murder provided just the pretext needed. After all, they say, if we are going to be protected from terrorism we have to give up a little of our privacy and liberty. Never mind that government spying on us has not prevented one terrorist attack.

Apple has so far stood up to a federal government’s demand that it force its employees to write a computer program to break into its own product. No doubt Apple CEO Tim Cook understands the damage it would do to his company for the world to know that the US government has a key to supposedly secure iPhones. But the principles at stake are even higher. We have a fundamental right to privacy. We have a fundamental right to go about our daily life without the threat of government surveillance of our activities. We are not East Germany.

Let’s not forget that this new, more secure iPhone was developed partly in response to Ed Snowden’s revelations that the federal government was illegally spying on us. The federal government was caught breaking the law but instead of ending its illegal spying is demanding that private companies make it easier for it to continue.

Last week we also learned that Congress is planning to join the fight against Apple – and us. Members are rushing to set up yet another federal commission to study how our privacy can be violated for false promises of security. Of course they won’t put it that way, but we can be sure that will be the result. Some in Congress are seeking to pass legislation regulating how companies can or cannot encrypt their products. This will suppress the development of new technology and will have a chilling effect on our right to be protected from an intrusive federal government. Any legislation Congress writes limiting encryption will likely be unconstitutional, but unfortunately Congress seldom heeds the Constitution anyway.

When FBI Director James Comey demanded a back door into the San Bernardino shooter’s iPhone, he promised that it was only for this one, extraordinary situation. “The San Bernardino litigation isn’t about trying to set a precedent or send any kind of message,” he said in a statement last week. Testifying before Congress just days later, however, he quickly changed course, telling the Members of the House Intelligence Committee that the court order and Apple’s appeals, “will be instructive for other courts.” Does anyone really believe this will not be considered a precedent-setting case? Does anyone really believe the federal government will not use this technology again and again, with lower and lower thresholds?

According to press reports, Manhattan district attorney Cyrus Vance, Jr., has 175 iPhones with passcodes that the City of New York wants to access. We can be sure that is only the beginning.

We should support Apple’s refusal to bow to the FBI’s dangerous demands, and we should join forces to defend of our precious liberties without compromise. If the people lead, the leaders will follow.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

Trump and Sanders Are Both Conservatives – Article by Steven Horwitz

March 2, 2016 Steven Horwitz Comments 0 Comment

Steven Horwitz

******************************

Shared Visions of Fear, Force, and Collectivism

Those of us who reject the conventional left-right political spectrum often see things that those working within it cannot. For example, in “Why the Candidates Keep Giving Us Reasons to Use the ‘F’ Word” (Freeman, Winter 2015), I argue that Donald Trump and Bernie Sanders, seen by many as occupying opposite ends of the ideological spectrum, both embrace the thinking of economic nationalism, if not fascism.

They also share a different political tradition. It may seem to contradict their shared fascist pedigree, but Trump and Sanders are both, in a meaningful sense, conservatives.

Trump, of course, has been lambasted by many self-described conservatives precisely because they believe he is not a conservative. And Sanders, the self-described “democratic socialist,” hardly fits our usual conception of a conservative. What exactly am I arguing, then?

They are both conservatives from the perspective of classical liberalism. More specifically, they are conservatives in the sense that F.A. Hayek used the term in 1960 when he wrote the postscript to The Constitution of Liberty titled “Why I Am Not a Conservative.” There he said of conservatives,

They typically lack the courage to welcome the same undesigned change from which new tools of human endeavors will emerge.… This fear of trusting uncontrolled social forces is closely related to two other characteristics of conservatism: its fondness for authority and its lack of understanding of economic forces.… The conservative does not object to coercion or arbitrary power so long as it is used for what he regards as the right purposes. He believes that if government is in the hands of decent men, it ought not to be too much restricted by rigid rules.

That description would seem to apply to both Trump and Sanders. They share a fear of uncontrolled and undesigned change, especially in the economy. This is most obvious in Trump’s bluster about how America never “wins” and his desire to raise tariffs on Chinese imports and close the flow of immigrants, especially from Mexico. Economic globalization is a terrific example of uncontrolled change, and using foreign workers and producers as scapegoats for that change — especially when those changes have largely benefited most Americans — is a good example of this fear of the uncontrolled.

Those policies also show the much-discussed economic ignorance of Trump and his supporters, as shutting off trade and migration would impoverish the very people Trump claims to care about — those who are, in fact, supporting him. International trade and the free migration of labor drive down costs and leave US consumers with more money in their pockets with which to buy new and different goods. They also improve living standards for our trade partners, but Trump and his followers wrongly perceive their gains as necessitating American losses.

The same concerns are echoed in Sanders’s criticisms of free trade and in his claim that immigration is undermining good jobs for the native-born. Trump’s rhetoric might be more about how the US needs to “beat” the Chinese, and Sanders might focus more on the effects on working class Americans, especially union workers, but both fear the uncontrolled change of globalized markets, seeing commerce as a zero-sum game. (See “Why Trump and Sanders See Losers Everywhere,” FEE.org, January 20, 2016.)

For Sanders, fear of change also bubbles up in his criticisms of Uber — even though he uses the service all the time. Part of Hayek’s description was the fear of change producing “new tools of human endeavor.” The new economy emerging from the reduction of transaction costs will continue to threaten labor unions and the old economic understanding of employment and the firm. Sanders’s view of the economy is very much a conservative one as he tries to save the institutions of an economy that no longer exists because it no longer best serves human wants.

In addition, both Trump and Sanders are more than willing to use coercion and arbitrary power to attempt to resist that change. These similarities manifest in different ways, as Trump sees himself as the CEO of America, bossing people and moving resources around as if it were one of his own (frequently bankrupt) companies. CEOs are not bound by constitutional constraints and are used to issuing orders to all who they oversee. This is clearly Trump’s perspective, and many of his followers apparently see him as Hayek’s “decent man” who should not be too constrained by rules.

The same is true of Sanders, though he and his supporters would deny it. One need only consider his more extreme taxation proposals as well as the trillions in new spending he would authorize to see that he will also not be bound by constraints and will happily use coercion to achieve his ends. This is also clear in his policies on trade and immigration, which, like Trump’s, would require a large and intrusive bureaucracy to enforce. As we already know from current immigration restrictions, such bureaucracies are nothing if not arbitrary and coercive. Both Trump and Sanders believe that with the right people in charge, there’s no need for rule-based constraints on political power.

Hayek also said of conservatives that they are characterized by a

hostility to internationalism and [a] proneness to a strident nationalism.… [It is] this nationalistic bias which frequently provides the bridge from conservatism to collectivism: to think in terms of “our” industry or resource is only a short step away from demanding that these national assets be directed in the national interest.

As noted, Sanders and Trump share exactly this hostility and proneness. And despite being seen as political opposites, their distinct views converge in the idea that resources are “ours” as a nation and that it is the president’s job (and the state’s more generally) to direct them in the national interest. For Trump, that interest is “making America great again” and making sure we “beat” the Chinese. For Sanders, that interest is the attempt to protect “the working class” against the predation of two different enemies: the 1 percent and foreign firms and workers, all of whom are destroying our industries and human resources.

All of this fear of uncontrolled change and economic nationalism is in sharp contrast with the position of what Hayek calls “liberalism” or what we might call “classical liberalism” or “libertarianism.” In that same essay, Hayek said of classical liberalism, “The liberal position is based on courage and confidence, on a preparedness to let change run its course even if we cannot predict where it will lead.”

This is why classical liberalism rejects the idea that the path toward progress entails electing the right people (the “decent men”) and the cult of personality that frequently accompanies that idea, as we’ve seen with Trump and Sanders. Classical liberalism understands how, under the right rules and institutions, progress for all is the unintended outcome of allowing each to pursue their own values and ends with an equal respect for others to do the same, regardless of which side of an artificial political boundary they reside on.

If we want to live in peace, prosperity, and cooperation, we need to recognize that progress is a product of unpredictable, uncontrolled, and uncontrollable change.

Trump and Sanders can stand on their porches telling us to get off their lawn, but we’re going to do it in an Uber imported from Asia and driven by a nonunionized immigrant, because we classical liberals welcome the change they fear.

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions. He is a member of the FEE Faculty Network.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

Happy Future Day! – Article by Edward Hudgins

March 2, 2016 Edward Hudgins Comments 0 Comment

Edward Hudgins

******************************

Stand up for optimism about the future today!

Transhumanism Australia, a non-profit that promotes education in science and technology, has marked March 1 as “Future Day.” It wants this day celebrated worldwide as a time “to consider the future of humanity.” If all of us made a habit of celebrating our potential, it could transform a global culture mired in pessimism and malaise. It would help build an optimistic world that is confident about what humans can accomplish if we put our minds and imaginations to it.

The Future is Bright

The information and communications technology that helps define and shape our world was, 40 years ago, a vision of the future brought into present reality by visionaries like Steve Jobs and Bill Gates. The exponential growth of the power of semiconductors allowed entrepreneurs to create one new industry and cutting-edge good product and service after another.

Today, we are at exponential takeoff points in biotech, nanotech, and artificial intelligence. For example, the cost of sequencing a human genome was $100 million in 2001, $10 million in 2007, but it costs only a few thousand dollars today. Steve Jobs created the first Apple computers in his garage. Biohackers similarly housed could transform our lives in the future in ways that still seem to most folks like science fiction; indeed, the prospect of “curing death” is no longer a delusion of madmen but the well-funded research projects in the laboratories of the present.

For a prosperous present and promising future a society needs physical infrastructure—roads, power, communications. It needs a legal infrastructure—laws and political structures that protect the liberty of individuals so they can act freely and flourish in civil society. And it requires moral infrastructure, a culture that promotes the values of reason and individual productive achievement.

Future “Future Days”

We should congratulate our brothers “Down Under” for conceiving of Future Day. They have celebrated it in Sydney with a conference on the science that will produce a bright tomorrow. We in America and folks around the world should build on this idea. Today it’s a neat idea: next year, we could start a powerful tradition, a global Future or Human Achievement Day, promoting the bright future that could be.

Were such a day marked in every school and every media outlet, it could to raise achiever consciousness. It could celebrate achievement in the culture—who invented everything that makes up our world today, and how? It could promote achievement as a central value in the life of each individual, whether the individual is nurturing a child to maturity or a business to profitability, writing a song, poem, business plan or dissertation, laying the bricks to a building or designing it, or arranging for its financing.

Such a day would help create the moral infrastructure necessary for a prosperous, fantastic, non-fiction future, a world as it can be and should be, a world created by humans for humans—or even transhumans!

Dr. Edward Hudgins directs advocacy and is a senior scholar for The Atlas Society, the center for Objectivism in Washington, D.C.

Copyright The Atlas Society. For more information, please visit www.atlassociety.org.

No, Mr. Trump, Victims of Eminent Domain Do Not “Get a Fortune” – Article by George C. Leef

February 26, 2016 George C. Leef Comments 0 Comment

George C. Leef

******************************

Trump’s huge mistake about eminent domain

During the debate among Republican presidential candidates last month, Jeb Bush hammered Donald Trump on his abuse of eminent domain. But Trump apparently sees nothing wrong in having government officials force people to sell their property.

Trump replied,

Eminent domain is an absolute necessity for a country, for our country. Without it, you wouldn’t have roads, you wouldn’t have hospitals, you wouldn’t have anything. You would have schools, you wouldn’t have bridges.

And what a lot of people don’t know because they were all saying, oh, you’re going to take their property. When somebody — when eminent domain is used on somebody’s property, that person gets a fortune. They at least get fair market value, and if they’re smart, they’ll get two or three times the value of their property.

This last assertion led George Mason law professor Ilya Somin (an expert on eminent domain) to quip at the Volokh Conspiracy, “If eminent domain really were a good way to make a fortune, the Donald Trumps of the world would be lobbying the government to condemn their property. But that rarely, if ever, happens.”

Put aside Trump’s hyperbole about the supposed impossibility of schools, hospitals, and bridges without eminent domain. What I want to focus on is his claim that eminent domain is not objectionable because people who have their property taken make out just fine financially.

That claim is simply indefensible. The truth is that people who lose their property to eminent domain proceedings are almost never made whole.

Legal scholars have for many years been writing about the injustice that usually befalls people who have to settle for what the government deems “just compensation” under the Fifth Amendment. I wouldn’t expect Mr. Trump to know about that because he is too busy making deals. But the kind of deals businessmen usually make involve two parties who can say “no,” unless and until they think the deal will improve their positions.

With eminent domain takings, however, the property owner can’t say “no,” and usually must settle for much less than he or she would have bargained for in a voluntary setting.

Professor Gideon Kanner has written extensively about the problem of inadequate compensation for people who’ve been forced to sell under eminent domain. In his article “[Un]Equal Justice under Law: The Invidiously Disparate Treatment of American Property Owners in Taking Cases,” he writes:

The true standard of compensation is not indemnity, but rather fair market value so artfully defined as to exclude factors that sellers and buyers in voluntary transactions would consider, and that the government need only pay for what it acquires, not for what the owner has lost.

Those losses include business goodwill, relocation expenses, and the emotional damage of having to leave a community where one may have strong ties. In the government’s calculus, people are expected to suffer such losses as part of the price of living in America.

As the Supreme Court stated in the 1949 takings case Kimball Laundry v. U.S., “Loss to the owner of non-transferable values … is properly treated as part of the burden of common citizenship.” That “tough luck, property owner” mindset still prevails.

Knowing that they hold the high cards (and ultimately the guns) when they deal with property owners, government officials take full advantage. As Kanner observes, “Condemning agencies regularly reap unjustified windfalls from the fact that the majority of their offers (including the many low-ball ones) are accepted without litigation or even involvement by a private appraiser or lawyer.”

Therefore, eminent domain causes many property owners to suffer uncompensated losses.

Far from “getting a fortune” or “two or three times” the market value of their property, most owners are left substantially worse off for their unwanted encounter with condemning government agencies. Few if any of them shrug off the losses as their part of the “burden of common citizenship.”

Although the eminent domain issue came up during a debate among presidential candidates, there is hardly anything that the president can do to rectify the problem of under-compensation for property owners. He (or she) cannot issue an executive order mandating that property owners be made whole.

If there is to be a solution, it must come from the judiciary.

Judges, and especially the justices of the Supreme Court, will have to stop ruling that merely because an individual is paid an amount deemed “fair market value,” the Fifth Amendment’s requirement of “just compensation” has been satisfied.

It would also help property owners if the Supreme Court would overturn Kelo v. New London and establish that property can only be taken for actual “public use,” as the Fifth Amendment requires, and not for private use that local politicians think might have some “public benefit.”

Since we are going to have confirmation hearings for a new member of the Court eventually, it would be important to find out precisely what the nominee thinks “just compensation” and “public use” actually mean.

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.

Homeschooled Weirdoes and the Culture of Conformity – Article by B.K. Marcus

February 24, 2016 B.K. Marcus Comments 1 comment

B.K. Marcus

******************************

“Not seeming weird” carries its own cost

Remember that weird kid in school? I don’t mean the really scary one. I mean the borderline oddball. The one you had to talk to a bit to spot the weirdness. The boy who never knew what TV show everyone was talking about. The girl who, when you asked her what her favorite music group was, answered some long name that ended in “quartet.” The kid who thought you meant soccer when you said football.

How did you treat that kid? (Or were you that kid?)

In “Homeschooling, Socialization, and the New Groupthink,” I suggested that the most useful definition of socialization is “ensuring that a child becomes sociable, that he or she develops the intelligence and social reflexes that promote peaceful and pleasurable interactions.” I also suggested that some of homeschooling’s critics might mean something more sinister: indoctrination into a particular vision of society.

But after reading my article, third-grade schoolteacher Heather Lakemacher, commenting on Facebook, pointed out yet a different meaning of socialization: not seeming weird.

This is the real reason, she said, “why this stereotype of the poorly socialized homeschooler exists.” Whereas I had only addressed adult perceptions of homeschooled children, the true culprit, she said, is other kids:

Many of us who were educated in a traditional school have vivid memories of meeting other kids our age who were homeschooled and thinking, “Oh my god! This kid is so WEIRD!” It’s entirely possible that the child in question grew up to be a happy, well-adjusted, productive member of society. …

However, I think the stereotype exists because of the power of those childhood interactions with a peer who just didn’t behave in the way we were expecting them to behave. That’s not an argument against homeschooling, but data will always have a hard time dispelling emotionally charged memories.

She’s right. Odd kids can make a lasting impression.

Grownups regularly note how polite my homeschooled son is, or how he’ll talk to them at all when so many other kids clam up and fail to make eye contact. Adults find his lack of awkwardness with them charming. But what do schooled kids see?

Diane Flynn Keith, a veteran homeschooling mom and author of the book Carschooling, writes that homeschooled kids are, in fact, “not well-socialized in the traditional school sense.”

I hate to be the one to break it to you, but there’s nothing “normal” about our kids. Your homeschooled child is odd compared to the schooled population because they have not experienced ongoing school-based socialization and standardization. …

They haven’t been indoctrinated in the same way. They have not been steeped in the popular consumer culture to the degree that most schooled kids have been. They are not adult-phobic and peer-dependent. (“Yes, My Grown Homeschooled Children Are Odd — And Yours Will Be Too!“)

And most of the time, homeschooling parents love that about our kids — and about homeschooling in general. We don’t want them to be standard. Whether we admit it or not, we tend to think they’re better than the standard. But it’s true that our socially flexible and resilient children can be puzzling to their traditionally schooled peers, and vice versa.

So why does the assessment of weirdness flow only in one direction? Why don’t homeschooled kids think the mainstream schoolchildren are weird?

One answer is that our kids know the mainstream experience through television, movies, and books. They may not always track the finer distinctions between Degrassi High and Hogwarts, but they certainly know a lot more about schools and schooling than mainstream kids know about education outside a classroom.

But I think that even without the pop-cultural lens on the schooling experience, homeschooled kids are just less likely to see anyone as weird. It’s just not a part of their semantic reflexes. Instead they think, “I don’t get him,” or “I’m not into the same stuff she is.”

As a result, homeschooled kids aren’t just more tolerant of diversity; they’re probably also more diverse. And that’s a lot of what gets labeled weird by those who are better assimilated into the mainstream culture.

What’s probably obvious to anyone familiar with homeschooling is that it’s good for the emotional health of kids who don’t easily fit in. What is less obvious is the damage that a culture of conformity does not just to the oddballs in that culture but also to the kids who conform with ease — and to the liberty of the larger society.

For over half a century, studies have shown that the need for social acceptance not only changes our behavior but can even make us perceive the world differently — and incorrectly.

In the early 1950s, psychologist Solomon Asch conducted a series of experiments on the dangers of group influence. When presented with simple problems that 95 percent of individuals could answer correctly when free of group influence, 75 percent of Asch’s test subjects would get the answer wrong when it meant concurring with the group.

In 2005, neuroscientist Gregory Berns conducted an updated version of Asch’s experiments, complete with brain scans to determine if the wrong answers were a conscious acquiescence to social pressure or if, instead, test subjects believed that their group-influenced wrong answers were in fact correct. Not only did the subjects report that they thought their wrong answers were right; the brain scans seemed to confirm it: they showed greater activity in the problem-solving regions of the brain than in those areas associated with conscious decision-making. And the nonconformists who went against the group and gave correct answers showed heightened activity in the part of the brain associated with fear and anxiety.

Commenting on the implications of these experiments, author Susan Cain writes,

Many of our most important civic institutions, from elections to jury trials to the very idea of majority rule, depend on dissenting voices. But when the group is literally capable of changing our perceptions, and when to stand alone is to activate primitive, powerful, and unconscious feelings of rejection, then the health of these institutions seems far more vulnerable than we think. (Quiet: The Power of Introverts in a World That Can’t Stop Talking)

Groupthink, in other words, is dangerous to a free society. And we don’t always realize when we’re not thinking for ourselves.

This kind of cognitive conformity, however, isn’t fixed or universal. Not only does it vary, for example, between East and West; it has also declined in the West since the 1950s, according to a 1996 review of 133 Asch-type studies from 17 countries. That review assessed the cultures in which the studies took place to see if their results “related cross-culturally to individualism [versus] collectivism.” Unsurprisingly, test subjects were least susceptible to the reality-distorting effects of the group in the more individualistic national cultures.

We should expect the same to be true of more and less individualistic subcultures. I bet homeschoolers, for example, are less likely to show the Asch effect. I suspect the same thing of the oddballs at school.

That doesn’t mean everyone should homeschool, or that only weirdoes can be independent thinkers, but it does suggest that the more a culture values independence and diversity, the less vulnerable it will be to the distortions of conformity. And if socialization means helping kids fit in more easily with the culture of their peers, then parents of homeschoolers and schooled kids alike may want to reconsider the value of socializing our children.

B.K. Marcus is editor of The Freeman.

How Networks Topple Scientific Dogmas – Article by Max Borders

February 24, 2016 Max Borders Comments 0 Comment

Max Borders

******************************

The Peer-to-Peer Republic of Science

Science is undergoing a wrenching evolutionary change.

In fact, most of what we consider to be carried out in the name of science is dubious at best, flat wrong at worst. It appears we’re putting too much faith in science — particularly the kind of science that relies on reproducibility.

In a University of Virginia meta-study, half of 100 psychology study results could not be reproduced.

Experts making social science prognostications turned out to be mostly wrong, according to political science writer Philip Tetlock’s decades-long review of expert forecasts.

But there is perhaps no more egregious example of bad expert advice than in the area of health and nutrition. As I wrote last year for Voice & Exit:

For most of our lives, we’ve been taught some variation on the food pyramid. The advice? Eat mostly breads and cereals, then fruits and vegetables, and very little fat and protein. Do so and you’ll be thinner and healthier. Animal fat and butter were considered unhealthy. Certain carbohydrate-rich foods were good for you as long as they were whole grain. Most of us anchored our understanding about food to that idea.

“Measures used to lower the plasma lipids in patients with hyperlipidemia will lead to reductions in new events of coronary heart disease,” said the National Institutes of Health (NIH) in 1971. (“How Networks Bring Down Experts (The Paleo Example),” March 12, 2015)

The so-called “lipid theory” had the support of the US surgeon general. Doctors everywhere fell in line behind the advice. Saturated fats like butter and bacon became public enemy number one. People flocked to the supermarket to buy up “heart healthy” margarines. And yet, Americans were getting fatter.

But early in the 21st century something interesting happened: people began to go against the grain (no pun) and they started talking about their small experiments eating saturated fat. By 2010, the lipid hypothesis — not to mention the USDA food pyramid — was dead. Forty years of nutrition orthodoxy had been upended. Now the experts are joining the chorus from the rear.

The Problem Goes Deeper

But the problem doesn’t just affect the soft sciences, according to science writer Ron Bailey:

The Stanford statistician John Ioannidis sounded the alarm about our science crisis 10 years ago. “Most published research findings are false,” Ioannidis boldly declared in a seminal 2005 PLOS Medicine article. What’s worse, he found that in most fields of research, including biomedicine, genetics, and epidemiology, the research community has been terrible at weeding out the shoddy work largely due to perfunctory peer review and a paucity of attempts at experimental replication.

Richard Horton of the Lancet writes, “The case against science is straightforward: much of the scientific literature, perhaps half, may simply be untrue.” And according Julia Belluz and Steven Hoffman, writing in Vox,

Another review found that researchers at Amgen were unable to reproduce 89 percent of landmark cancer research findings for potential drug targets. (The problem even inspired a satirical publication called the Journal of Irreproducible Results.)

Contrast the progress of science in these areas with that of applied sciences such as computer science and engineering, where more market feedback mechanisms are in place. It’s the difference between Moore’s Law and Murphy’s Law.

So what’s happening?

Science’s Evolution

Three major catalysts are responsible for the current upheaval in the sciences. First, a few intrepid experts have started looking around to see whether studies in their respective fields are holding up. Second, competition among scientists to grab headlines is becoming more intense. Third, informal networks of checkers — “amateurs” — have started questioning expert opinion and talking to each other. And the real action is in this third catalyst, creating as it does a kind of evolutionary fitness landscape for scientific claims.

In other words, for the first time, the cost of checking science is going down as the price of being wrong is going up.

Now, let’s be clear. Experts don’t like having their expertise checked and rechecked, because their dogmas get called into question. When dogmas are challenged, fame, funding, and cushy jobs are at stake. Most will fight tooth and nail to stay on the gravy train, which can translate into coming under the sway of certain biases. It could mean they’re more likely to cherry-pick their data, exaggerate their results, or ignore counterexamples. Far more rarely, it can mean they’re motivated to engage in outright fraud.

Method and Madness

Not all of the fault for scientific error lies with scientists, per se. Some of it lies with methodologies and assumptions most of us have taken for granted for years. Social and research scientists have far too much faith in data aggregation, a process that can drop the important circumstances of time and place. Many researchers make inappropriate inferences and predictions based on a narrow band of observed data points that are plucked from wider phenomena in a complex system. And, of course, scientists are notoriously good at getting statistics to paint a picture that looks like their pet theories.

Some sciences even have their own holy scriptures, like psychology’s Diagnostic and Statistical Manual. These guidelines, when married with government funding, lobbyist influence, or insurance payouts, can protect incomes but corrupt practice.

But perhaps the most significant methodological problem with science is overreliance on the peer-review process. Peer review can perpetuate groupthink, the cartelization of knowledge, and the compounding of biases.

The Problem with Expert Opinion

The problem with expert opinion is that it is often cloistered and restrictive. When science starts to seem like a walled system built around a small group of elites (many of whom are only sharing ideas with each other) — hubris can take hold. No amount of training or smarts can keep up with an expansive network of people who have a bigger stake in finding the truth than in shoring up the walls of a guild or cartel.

It’s true that to some degree, we have to rely on experts and scientists. It’s a perfectly natural part of specialization and division of labor that some people will know more about some things than you, and that you are likely to need their help at some point. (I try to stay away from accounting, and I am probably not very good at brain surgery, either.) But that doesn’t mean that we shouldn’t question authority, even when the authority knows more about their field than we do.

The Power of Networks

But when you get an army of networked people — sometimes amateurs — thinking, talking, tinkering, and toying with ideas — you can hasten a proverbial paradigm shift. And this is exactly what we are seeing.

It’s becoming harder for experts to count on the vagaries and denseness of their disciplines to keep their power. But it’s in cross-disciplinary pollination of the network that so many different good ideas can sprout and be tested.

The best thing that can happen to science is that it opens itself up to everyone, even people who are not credentialed experts. Then, let the checkers start to talk to each other. Leaders, influencers, and force-multipliers will emerge. You might think of them as communications hubs or bigger nodes in a network. Some will be cranks and hacks. But the best will emerge, and the cranks will be worked out of the system in time.

The network might include a million amateurs willing to give a pair of eyes or a different perspective. Most in this army of experimenters get results and share their experiences with others in the network. What follows is a wisdom-of-crowds phenomenon. Millions of people not only share results, but challenge the orthodoxy.

How Networks Contribute to the Republic of Science

In his legendary 1962 essay, “The Republic of Science,” scientist and philosopher Michael Polanyi wrote the following passage. It beautifully illustrates the problems of science and of society, and it explains how they will be solved in the peer-to-peer age:

Imagine that we are given the pieces of a very large jigsaw puzzle, and suppose that for some reason it is important that our giant puzzle be put together in the shortest possible time. We would naturally try to speed this up by engaging a number of helpers; the question is in what manner these could be best employed.

Polanyi says you could progress through multiple parallel-but-individual processes. But the way to cooperate more effectively

is to let them work on putting the puzzle together in sight of the others so that every time a piece of it is fitted in by one helper, all the others will immediately watch out for the next step that becomes possible in consequence. Under this system, each helper will act on his own initiative, by responding to the latest achievements of the others, and the completion of their joint task will be greatly accelerated. We have here in a nutshell the way in which a series of independent initiatives are organized to a joint achievement by mutually adjusting themselves at every successive stage to the situation created by all the others who are acting likewise.

Just imagine if Polanyi had lived to see the Internet.

This is the Republic of Science. This is how smart people with different interests and skill sets can help put together life’s great puzzles.

In the Republic of Science, there is certainly room for experts. But they are hubs among nodes. And in this network, leadership is earned not by sitting atop an institutional hierarchy with the plumage of a postdoc, but by contributing, experimenting, communicating, and learning with the rest of a larger hive mind. This is science in the peer-to-peer age.

Max Borders is Director of Idea Accounts and Creative Development for Emergent Order. He was previously the editor of the Freeman and director of content for FEE. He is also cofounder of the event experience Voice & Exit.