There are principles we use in the Spherical Model to
identify whether something qualifies as leading toward freedom, prosperity, and
civilization, or in the other direction toward tyranny, poverty, and savagery.
Because of the prevalence of socialism in our time, I
thought it might be a good exercise about now, two months ahead of the mid-term
elections, to look at the principles. Since socialism claims to be just an
alternative economic system to capitalism (the word they prefer to
free-market), we’ll focus on the economic principles.
I’m taking from the list of principles here, where you can
find the list for the political and social spheres as well. And I’m taking from the list of question to ask candidates from here and here,
where you can find those lists for all three spheres.
We’ll go through the principles, and individually ask
whether socialism agrees.
Wednesday evening Glenn Beck did a special called “Capitalism: A Warning from the Dead.” I don’t know how long it will be available without a
subscription, but it’s worth seeing. Plenty of history and comparisons to our
day.
Glenn Beck, during "Capitalism: A Warning from the Dead" screenshot from here
Somewhere in there he reports on a recent poll:
In 2010, 68% of 18-29-year-olds had a "favorable"
view of capitalism. By 2016, that had dropped to 57%. Two years later, the
exact same poll indicated that only 45% viewed capitalism as
"favorable." This is a death spiral! Younger people are completely
abandoning capitalism because they don't really know what it is!
At the same time—the exact same decade in question—if you ask
millennials about the free market, "being your own boss," and
entrepreneurship, it has a 90%+ favorability rating.
So capitalism is at 45%, but free market entrepreneurship is
at 90%? This shows that no one knows what they're talking about. This proves
that no one knows what socialism is, what its goals represent, where it aims to
take us, and the difference between socialism and capitalism.
That’s puzzling. They disapprove of the very thing they
overwhelmingly approve of.
We need to define terms and do some teaching, which will
involve some questions that use the concepts without the words, to see if that
will get us better clarity on what people really want. It might turn out we
have more agreement when we do that.
Socialism
What my old dictionary says:
1.Any
of various theories or systems of the ownership and operation of the means of
production and distribution by society or the community rather than by private
individuals, with all members in society or the community sharing in the work
and the products.
2.a)
political movement for establishing such a system; b) the doctrines, methods,
etc. of the Socialist parties.
3.The stage of society, in Marxist
doctrine, coming between the capitalist stage and the communist stage, in which
private ownership of the means of production and distribution has been
eliminated.
What young people think it means:
To
be like Sweden or Denmark or places like that, where they get free healthcare,
free schooling, guaranteed jobs, and stuff like that.
What I think it means:
A
government interference with the free market. This can be a single socialist
policy, or a wide array of such policies in an attempt to replace the free
market with centralized economic control.
This means that I differ somewhat from many commentators who
rightly point out that Sweden and other “socialist” economies are not actually socialist economies. They
have certain segments of society, such as healthcare, that the government has
taken over—and for which they charge very high taxes. But, beyond these
specific segments, they still respect private property ownership. And they tend
to move away from government control, toward free market, when the capital they
were using for their projects becomes depleted. Some of these countries rate
equally on the Heritage Foundation Freedom Index as the United States.
Just to be clear, socialism
doesn’t have anything to do with being sociable. It claims to be “fair,” but it
ignores individual input, such as work, preparation, cleverness, risk of
personal assets, and instead looks mainly at equal outcomes regardless of
inputs. Most people wouldn’t find that fair.
It comes from Marxist ideology. As I’ve said before, is an attempt to replace capitalism, along
with the governmental systems that support capitalism. Instead of individuals
making individual market choices, central planners—elite power wielders—make
decisions, such as the price of goods, the choices of jobs, the products
produced.
And I’ll add that the Marxist experiment always ends badly.
If a country doesn’t do an about face and stop heading in the direction of more
government control, and instead returns control to the people, the result is
mass poverty, loss of freedom, and death. Take a look at the news from Venezuela this week.
Capitalism
What the dictionary says:
1.The
economic system in which all or most of the means of production and distribution,
as land, factories, railroad, etc. are privately owned and operated for profit,
originally under fully competitive conditions: It has been generally
characterized by a tendency toward concentration of wealth, and, in its later
phase, by the growth of great corporations, increased governmental control,
etc.
2.The
principles, methods, interests, power, influence, etc. of capitalists,
especially of those with large holdings.
Let’s add how the dictionary defines capitalist:
1.A
person who has capital; owner of wealth used in business.
2.An
upholder of capitalism.
3.Loosely, a wealthy person.
What young people think it means:
Greedy
corporations, in bed with corrupt politicians, taking advantage of the working
class. So, it’s evil.
Capital
is the accumulation of work above and beyond what is essential, followed by
careful use of it toward a good idea intended to result in even more surplus.
Capitalism is a system for using capital (accumulated surplus wealth) to invest
it in more wealth creation.
Capital
comes from surplus work. So, capital is a representation of surplus work that
is invested to find ways to produce more wealth. And wealth is defined simply
as the accumulated results of labor.
Capitalism, in this sense, is never evil. It is, simply, the free market allowed to work its
miracles at lifting people out of poverty.
However, what young people think it is, really is what we
could call “crony capitalism,” or more accurately just cronyism. And that is a
bad thing.
Cronyism has been around a long time—long enough to show up
as a definition for capitalism in my 1980 dictionary. Long enough to be represented
by the character Mouch in Ayn Rand’s Atlas Shrugged.
Back in 1980 economist Milton Friedman spoke at a graduation ceremony
at Brigham Young University (not mine, but I was there). He talked about the
dangerous influence of big businessmen. “They aren’t promoting free enterprise
when they ask for handouts and regulations and controls to avoid competition,”
he said. And he added,
The two greatest enemies of free society are intellectuals
and businessmen—for opposite reasons. Intellectuals want freedom for themselves
but no one else. Businessmen want free enterprise for everyone else, but
special consideration for themselves.
So, the millennials and I, we agree that cronyism is not a good thing. The
problem is, referring to this bad sort of business/government collusion as capitalism leads people to believe actual
capitalism—a synonym for free market economy—is bad. Still, that doesn’t exactly
explain why those who misunderstand these words would then think a great
solution is a whole lot more interference
by government.
Moving forward, maybe we can just use more accurate words,
like free-market and entrepreneurship. Or avoid the words they don’t understand
and just get on with the concepts using concrete examples.
With that in mind, let’s try these questions:
·When you earn money at work, who should decide
how you spend it? You, or a distant central controller?
·Who should decide how much you earn? You along
with your employer, or a distant central controller?
·Who should decide how you pay for your healthcare—whether
out-of-pocket, with a health savings account, or with help of insurance that
you’ve chosen for your needs—or a distant central controller?
·Who should decide whether you want to try a
particular medical method or therapy? You, or a distant central controller?
·Who should decide what kind of car is best for
you and your family? You, or a distant central controller?
·Who should decide whether you can use your skills
and efforts to start a business? You, or a distant central controller?
And then, let’s add these additional questions:
·Who should pay for your housing? You, or your
heavily taxed neighbor, who is coerced by government to pay it?
·Who should pay for your healthcare? You, or your
heavily taxed neighbor, who is coerced by government to pay it?
·Who should pay for your childcare? You, possibly
along with voluntary help from an employer, or your heavily taxed neighbor, who
is coerced by government to pay it?
·Who should pay for your advanced education? You,
or your heavily taxed neighbor, who is coerced by government to pay it?
·Who should pay charitable donations to those
unable to sustain themselves? You, along with your church or other
organizations in touch with those in need, or your heavily taxed neighbor, who
is coerced by government to pay it?
We could go on, but you get the idea. Socialism means
decisions normally made by free people are instead made by some distant
controller. And whenever you get something “free” or “low cost” because of
socialism, that means government is heavily taxing your neighbors—not just the
rich—to make those payments.
Government doesn’t “give” you “free” anything. Government
produces no wealth from which to draw those funds. Government is simply power.
And any government powerful enough to coerce you to pay for your neighbor’s
wants is powerful enough to take away your choices about what you produce, what
you earn from work, and how you spend those earnings.
And if they’re powerful enough to control your life, maybe
they’re powerful enough to take your life. At least that’s how it has turned
out every time it’s been tried.
Earlier today I was listening to the STA Money Hour on radio
(it comes on at noon weekdays on KPRC 950 AM), and one of the hosts mentioned he’d
had a conversation with his young adult son about socialism, what it means,
what’s being taught in schools and elsewhere, what the young man’s friends
thought. And the answer was kind of scary. There’s so little knowledge among
young people, who are being taught that socialism is about “fairness” and
“sharing the wealth” so that these young people get free education, free healthcare,
and other free “stuff.” So the host said it was his plan to post the video of
Milton Friedman on the Phil Donohue Show, from decades ago, that so clearly
explains the economics of it. I’ve shared that video before, but I’m including
it again at the end of today’s post.
Later today I heard Larry Elder mention on his show, that
there’s a recent poll showing that large numbers of young people in their 20s
and 30s favor socialism—this in the face of Venezuela. They don’t seem to make
the connection.
Last week economist Thomas Sowell was asked about the
growing approval of socialism in America; would we resist it? He said he hoped
so, but he wouldn’t bet on it.
Socialism, in red, overlaps with other -isms,
but they're all down into tyranny.
So today I’m doing my little part of educating the world on
socialism, using what we know from the Spherical Model.
How do we know where socialism is on the sphere?
The same way you know about any government type or -ism: you
see how it answers the questions for reaching north on the political, economic,
and social spheres.
So let’s try it. We’ll try this one sphere at a time, but be
warned that the spheres interrelate.
Political Sphere
Question 1: Is socialism something that an individual
has the right to do, and therefore has a right to delegate to his/her
government?
Answer: Depending
on how we’re defining socialism, there’s some range here. Socialism could mean
that government takes over various sectors of the economy, or maybe the entire
means of production for a country. It’s a matter of degree, but socialism implies
that government has the right to take private property without due
compensation.
Socialism defines property “rights” as “whatever the
government allows you to control as if you own it,” but government is ultimately
the actual owner of whatever it decides to take ownership of.
But in real life—what we call natural law—we don’t have the
right to take someone else’s property, which essentially means taking the
fruits of labor from someone’s life, thus enslaving them; therefore we don’t
have the right to delegate that right to our government.
This means socialism doesn’t pass the freedom test on this
question. Socialism is southern hemisphere. The more power that government takes
that the people do not have the right to grant to government, the more
tyrannical the government.
Question 2: Does socialism infringe in any way on the rights
enumerated in the Bill of Rights?
Answer: Let’s
remind ourselves of those God-given rights—just the ones listed in the Bill of
Rights. (There are, of course, others.)
·Freedom of religion, speech, press, peaceable
assembly, petition government for redress of grievances.
·Right to bear arms.
·Right to security in our homes and papers, and
from illegal searches and seizures.
·Right to a fair and speedy trial, by jury.
·Freedom from excessive bail, excessive fines, or
cruel and unusual punishments.
The final two amendments of the original Bill of Rights add
that government is limited to the enumerated powers granted in the
Constitution, and that any rights not enumerated are retained by the States or
the individual people.
In theory, socialism wouldn’t have to infringe on all these
rights; it would only need to infringe on property rights. However, in
practice, in order to enforce the coercive taking of property, in all the
countries that have tried it, we’ve seen many more rights infringed. The right
to bear arms gets lost early on. So do free speech rights—and all the rest of
the First Amendment. The judicial system gets corrupted, and “fairness” becomes
whatever the government says it is, no matter how unjust.
So, socialism falls into the southern hemisphere on this
question.
Question 3: Is socialism within the proper role of
government, some aspect of protecting life, liberty and property? These
include national defense, protection from interstate crime, enabling (not
controlling) international and interstate commerce, standardized weights and
measures and currency, and the judiciary that guarantees the protective laws?
Answer: Socialism
isn’t about protecting life, liberty, or property. It purports to be about
fairness, and “protecting” people from poverty. But, as we know, whenever
government interferes in a way that is beyond the proper role of government,
there will be unintended consequences, which are usually the exact opposite of
the stated goal. So, if socialism intends to get people out of poverty, you can
expect the unintended consequences to include putting people into poverty.
That’s what we’ve seen happening in Venezuela. The richest nation in South America
fell into abject poverty in about a decade. In some countries the fall has
taken longer, 30 to 50 years. But it has happened every time. China, Soviet
Union, Cuba, North Korea, Cambodia. Everywhere it’s been tried. As it forces
the people into deprivations while taking away their ability to rebel, tyranny
reigns
.
screenshot from Stuart Varney report on Venezuela August 2018
Socialism is designed to fall into tyranny.
Economic Sphere
Question: Who decides what will be done with the
fruits of your labors?
Answer: There’s
only that single question for the Economic Sphere. Does the person who produced
something through his labors get to decide how the fruits of his labors are
used? Or should someone else decide? In socialism, it’s someone else.
Government. Probably a distant bureaucrat, who decides that, if someone
produces quite a lot—far more than the person needs for subsistence, so that the
producer accumulates wealth—then government should take a portion of that wealth and
distribute to someone who was not as successful at producing surplus fruits of
labor.
Socialism ignores how hard a person works, how valuable a
person’s work is to society, or how careful a person is to accumulate his wealth
rather than quickly spend it. Socialism is only concerned that the outcomes
should be equalized.
Socialism fails to take into account that, if a person doesn’t
get to keep the fruits of his labors, and the government promises to give
enough to everyone regardless of effort, socialism has taken away the incentive
to work. And the result, before long, is that those who would have produced
more will no longer bother to do so.
Socialism, therefore, not only takes what has been produced
from the producers, but it leads the producers to produce less in the future—which
means there’s less to take, to redistribute. That’s how poverty results.
Another option for producers is escape. Those who want to keep
more of what they’ve produced will leave a place where a government takes their
earnings. Even if government were to confiscate all their wealth, those
producers who escape would still have their human capital, which they would
take with them to produce more wealth in a less hostile environment. That’s one
reason socialist countries have historically prevented their people from leaving.
And you’re hearing complaints from New York's governor about the wealth
producers leaving, just when they had so many uses for the exorbitant taxes
they were charging.
Socialism doesn’t lift people out of poverty; it sinks
entire societies (except for a few ruling elite) into poverty.
Social Sphere
Question 1: Does socialism allow for and encourage the
flourishing of religion?
Answer: There’s an
essential reason for this question. Rights come, logically, from either a
greater than human source or a human-given source. If rights are God-given,
then a person is entitled to them simply by virtue of being human. No human can
rightfully deprive you of them. But if rights are not God-given, then there is
no guarantee the human giver will not take them away.
Say, as in so-called “Democratic Socialism,” a majority
votes that you should be deprived of your property simply because you have more
than the majority (or its appointed bureaucrat) deems that you need or qualify
for. You’re deprived of your property rights because you worked harder or
smarter than someone else. Put another way, the majority has enslaved you to
work for the majority’s benefit, rather than your own. The majority is a human tyrant.
And since the actions of a socialist government are
tyrannical—i.e., go against your God-given rights—coercion will be necessary to
do the enslaving, so you’ll lose additional rights.
But here is the crux
of the matter: socialism claims to be a way to alleviate the unfairness of unequal
outcomes, those terrible inequalities, or disparities. Without socialism, how
do you deal with the fact that some people are starving or homeless while
others enjoy mansions and private jets? Socialism claims to be moral and
charitable.
But is it? Is it charitable for you to go on your neighbor’s
property, steal the apples he has grown and was going to pick and sell at a
market, and instead take those apples and distribute them to some hungry people
down the road?
If your neighbor finds out and decides—voluntarily chooses—to
allow for this theft for the sake of the hungry people, that says something
about the charitable (and also merciful) feelings of your neighbor. But it says nothing about you
except that you disrespect your neighbor’s property. You didn’t give anything
of your own to feed the hungry. So you should stop smugly calling yourself charitable.
We can’t delegate our ability to give charity to government
to do for us, because we don’t have the power to give someone else’s property
charitably. We only have power to give our own property.
But isn’t that what we do when we pay our tax money to government
to distribute to the poor?
The simple answer is no. You give tax money to government to
carry out government responsibilities, of which charity is not one. When you
vote (or have your representatives vote) to take tax money for charitable
purposes, you’re giving your money and your neighbors’ to government
bureaucrats to make decisions about who deserves what, which opens up all kinds
of possibilities for favoritism and corruption.
If you donate your charity directly, not only is that
actual charitable giving, rather than coerced “giving,” there’s no portion of
it going to a government bureaucrat, so more money goes to the charitable cause.
If you give to an organization, you can do your research to know who they
serve, how they decide who’s deserving, and how much of your donation goes
directly to charitable purposes rather than overhead.
So there’s a free choice way to take care of the poor, and
socialism isn’t it.
But that real way does require a righteous people—a religious
people, most likely—who feel the personal obligation to help out their fellow human
beings.
Earlier today, the Heritage Foundation linked a piece well worth reading by
historian Lee Edwards, “What Americans Must Know about Socialism.” The piece ends with this:
This is the reality of socialism—a pseudo-religion grounded
in pseudo-science and enforced by political tyranny. This is the case against
socialism—a god that failed, a science that never was, a political system
headed for the ash heap of history
Socialism is a religious perspective, but it places
government in the role of God. And instead of seeing theft and coveting as
sins, it exalts them as basic principles.
Question 2: Does socialism promote the family as the
basic unit of civilization?
Answer: No. Socialism
tries to replace the family. It tries to be the source of rights, provider of
needs, educator and inculcator of ideology, controller of messages, controller
of behaviors. It assumes that people would not do what government calls “good,”
left to their own devices. So it steps in, where the family used to be, to
provide and teach its ways, and to coerce and punish any disagreement or disobedience.
And it punishes much more severely than a loving parent would. Violence against
dissent isn’t a mistake in how it has been implemented; it is an inherent practice.
Socialism is not intended to grow civilized adults, as a
family is intended to do; rather, it is intended to grow submissive minions to
allow the ruling elite unlimited power.
Ahead of a story on Venezuela posted on Facebook on March 8,
the Heritage Foundation summarizes
with this:
Socialism always promises progress, but it inevitably
delivers scarcity, corruption and decay.
Rather than empower the common man, socialists believe in
empowering bureaucracy. In their minds, bureaucrats will always make decisions
based on science and dispassionate reason—and make sure those decisions are
implemented and enforced efficiently.
It’s an elitist, intellectually arrogant belief, and it’s
dangerous.
We had family filling the house for Thanksgiving, and that
meant time for some conversation about economics with son Economic Sphere. I
was wondering about the economics degree of the new, apparently clueless,
socialist congresswoman from New York, Alexandria Ocasio-Cortez. Her degree is
in economics, and it was my understanding that most notable economics
departments had changed in the past few of decades toward free market, and
away from Keynesianism. But she seems economically unaware (if I am being
kind).
I got this explanation—not recorded, so any errors are mine
and not my son’s. Anyway, Economic Sphere said that there are two types of
economics programs: those focused on macroeconomics, and those focused on
microeconomics. The macroeconomics ones use Keynesian models—despite their
being wrong nigh unto 100% of the time. If the model says there will be a
particular outcome, they act as though that is the outcome, even after it
isn’t, even though sensible people can show why it would never be the outcome.
The ones focused on microeconomics go with free market
economic principles. For some reason, they’re more aligned with what actually
happens. They’re less willing to interfere, to try to wield power over the
economy to get a particular outcome, such as by enforcing pricing, but will
instead let the market set prices.
I asked another question, about the difference between the
Chicago school (way of thinking) and the Austrian school, since both are free
market.
What I got was some basic review. So I thought it might be useful to define a few terms today, and the reasons we prefer what we do--i.e., freedom instead of government interference. While Economic Sphere tends to be a walking encyclopedia, and his answers filter through my explanations below, I've also turned to Wikipedia fairly liberally.
Keynesian Economics
Keynesians,
according to my old Webster, “hold that full employment and a stable economy
depend on the continued governmental stimulation of spending and investment
through adjustment of interest rates and tax rates, deficit financing, etc.” In
other words, a healthy economy requires government intervention.
Keynesian economists generally argue that, as aggregate
demand is volatile and unstable, a market economy will often experience
inefficient macroeconomic outcomes in the form of economic recessions (when
demand is low) and inflation (when demand is high). These can be mitigated by
economic policy responses, in particular, monetary policy actions by the
central bank and fiscal policy actions by the government, which can help
stabilize output over the business cycle. Keynesian economists generally
advocate a managed market economy – predominantly private sector, but with an
active role for government intervention during recessions and depressions.
One of the first lesson I was taught in a basic econ class, by
a free-market economist, was that intervention lags. Legislators—or other
officials—look at the current situation, decide it isn’t what they’d like it to
be, so they set in motion a policy to change it, that takes about six months,
by which time the original situation has changed, and most likely the
intervention causes new problems.
Supposedly, the Federal Reserve is there to mitigate and
smooth out the damage of cyclical market recessions. What we had before that was
occasional volatility. What we’ve had since is occasional volatility plus more
regular cyclical recessions. Are the problems all caused by the interventions?
We don’t know. And you can’t prove a negative; we don’t have a parallel
universe to compare to. But we do know it didn’t do what it set out to do.
Macroeconomics
(from the Greek prefix makro- meaning "large" + economics) is a
branch of economics dealing with the performance, structure, behavior, and
decision-making of an economy as a whole. This includes regional, national, and
global economies.
Macroeconomists study aggregated indicators such as GDP,
unemployment rates, national income, price indices, and the interrelations
among the different sectors of the economy to better understand how the whole
economy functions. They also develop models that explain the relationship
between such factors as national income, output, consumption, unemployment,
inflation, savings, investment, international trade, and international finance.
While macroeconomics is a broad field of study, there are two
areas of research that are emblematic of the discipline: the attempt to
understand the causes and consequences of short-run fluctuations in national
income (the business cycle), and the attempt to understand the determinants of
long-run economic growth (increases in national income).
So, macroeconomic models—such as those developed by Keynes—are
used by governments to develop policies. But, like I said, interference doesn’t
work the way their models say they will. Our Spherical Model saying fits here again:
Whenever government attempts something beyond the proper role
of government (protection of life, liberty, and property), it causes unintended
consequences—usually exactly opposite to the stated goals of the interference.
Microeconomics
By comparison, here’s the smaller story of microeconomics,
also according to Wikipedia:
Microeconomics (from Greek prefix mikro- meaning
"small" + economics) is a branch of economics that studies the
behavior of individuals and firms in making decisions regarding the allocation
of scarce resources and the interactions among these individuals and firms.
One goal of microeconomics is to analyze the market
mechanisms that establish relative prices among goods and services and allocate
limited resources among alternative uses. Microeconomics shows conditions under
which free markets lead to desirable allocations. It also analyzes market
failure, where markets fail to produce efficient results.
Microeconomics stands in contrast to macroeconomics, which
involves "the sum total of economic activity, dealing with the issues of
growth, inflation, and unemployment and with national policies relating to
these issues". Microeconomics also deals with the effects of economic
policies (such as changing taxation levels) on the aforementioned aspects of
the economy.
In short, microeconomics is what a business would do to
figure out how to price a product, and whether to produce the product, based on
the price. How well businesses do in predicting price, and allocating limited
resources, determines the health of the overall economy. Government
interference makes that decision-making process more challenging, adding in tax
burdens and other punishments or incentives that distort the actual value of a
product.
Free-Market Economics
I looked up both free enterprise and free market in the
dictionary.
Free enterprise is
“the economic doctrine or practice of permitting private industry to operate
under freely competitive conditions with a minimum of governmental control.”
Free market is “any
market where buying and selling can be carried on without restrictions as to
price, etc.”
So these terms relate mainly to microeconomics. But they are
affected by macroeconomic policies, which alter money supply, pricing, taxes,
and allocation of resources, distorting information that normally leads to
sound pricing and/or production decisions.
I also asked Economic Sphere what is the difference between the
Chicago school of economics (i.e., a school of thought, or a set of ideas
adhered to by various people—not a physical school) and Austrian, or Mises economics,
because they’re both free market. Economic Sphere said the Austrian school of
economics is theoretical. It’s about principles and ideas related to the free
market. The Chicago school of economics is about policy: how to implement
policies as close to the free market as we can get in an imperfect political
world.
So, the Austrians tend to be libertarians? I guessed. And he
said that was right. Here’s a bit more on those terms.
Austrian School of
Economics
I usually hear about the Austrians through the Ludwig von
Mises Institute. The originals showed up in Vienna in the late 1800s to early
1900s, although they are all over the world today.
Among the theoretical contributions of the early years of the
Austrian School are the subjective theory of value, marginalism in price theory
and the formulation of the economic calculation problem, each of which has
become an accepted part of mainstream economics.
Since the mid-20th century, mainstream economists have been
critical of the modern day Austrian School and consider its rejection of
mathematical modelling, econometrics and macroeconomic analysis to be outside
mainstream economics, or "heterodox." Although the Austrian School
has been considered heterodox since the late 1930s, it attracted renewed
interest in the 1970s after Friedrich Hayek shared the 1974 Nobel Memorial
Prize in Economic Sciences and following the 2008 global financial crisis.
I’m assuming that “mainstream economists” from mid-century on
refers to Keynesians in this context. Interference was all the rage from about
1910 onward. Keynes and Friedrich Hayek were contemporaries, and Hayek does a
good job of refuting the pro-controlled economists with real life. The
controllers love their models, and they can’t be bothered with things like
real-life evidence and facts.
If Hayek hasn’t been on your reading list, his Road to Serfdom is a must read. Hayek
qualifies as an Austrian, but he is also of the Chicago school, because of his
influence there. Here’s how Wikipedia describes his contribution:
Friedrich Hayek
(1899–1992) Hayek made contact with many at the University of Chicago in
the 1940s, with Hayek's The Road to
Serfdom playing a seminal role in transforming how Milton Friedman and
others understood how society works. Hayek conducted a number of influential
faculty seminars while at the U. of Chicago, and a number of academics worked
on research projects sympathetic to some of Hayek's own, such as Aaron
Director, who was active in the Chicago School in helping to fund and establish
what became the "Law and Society" program in the University of
Chicago Law School. Hayek, Frank Knight, Friedman and George Stigler worked
together in forming the Mont Pèlerin Society, an international forum for
libertarian economists. Hayek and Friedman cooperated in support of the
Intercollegiate Society of Individualists, later renamed the Intercollegiate
Studies Institute, an American student organisation devoted to libertarian
ideas.
Chicago School of
Economics
This school of thought got its name because of the work of a
number of neoclassical economists on the faculty at the University of Chicago,
producing twelve Nobel laureates in economics.
They rejected Keynesianism, and looked at a variety of other
ideas for macroeconomics—that is, policy ideas. They’re a little harder to pin
down, but in general are trying to apply free market principles to national
policy. Bruce Kaufman, in The Elgar Companion to the Chicago School of Economics (2010) says they are characterized by:
A deep commitment to rigorous scholarship and open academic
debate, an uncompromising belief in the usefulness and insight of neoclassical
price theory, and a normative position that favors and promotes economic
liberalism and free markets (p. 133).
The great economist Thomas Sowell studied at the University
of Chicago for his PhD—and remained a Marxist throughout. It was later, when
real life woke him, that he transformed into a free-market economist.
The Chicago name I know best is Milton Friedman, who was at
the University of Chicago for some thirty years. According to Wikipedia, again:
Milton Friedman
(1912–2006) stands as one of the most influential economists of the late
twentieth century. A student of Frank Knight, he was awarded the Nobel Prize in
Economics in 1976 for, among other things, A
Monetary History of the United States (1963). Friedman argued that the
Great Depression had been caused by the Federal Reserve's policies through the
1920s, and worsened in the 1930s. Friedman argued that laissez-faire government
policy is more desirable than government intervention in the economy.
One of the critics of the Chicago school, economist and three-term Democrat senator Paul Douglas, complained that, “The
opinions of my colleagues would have confined government to the
eighteenth-century functions of justice, police, and arms.”
That doesn’t seem like a valid criticism to me; it seems
like something to appreciate—limiting government to its proper role. What a
concept!
We could summarize today’s economics lesson with this
Friedman quote:
One of the great mistakes is to judge policies and programs
by their intentions rather than their results.— Milton Friedman Interview with
Richard Heffner on The Open Mind (7
December 1975)
There’s more going on this fall than the presidential
election. Some of it is closer to home, and with more immediate effect on our
families. Here in Texas it’s time to gear up for the upcoming bi-annual legislative
session, from mid-January to early June. Some bills start getting preliminary
bill numbers in a month or so. If we can get the attention of our legislators
early, we may be able to persuade them to work on the legislation we’re
interested in.
I’m working on a list. One of the main big issues is
education. This week I happened upon a couple of inputs to my thinking. One is
a video called “It’s Time for School Choice in Texas.” It’s only about 8
minutes, so worth watching in full. But here are some of the details.
Texas spends an average of $12,761 per student, for 4.8
million students. Education makes up 52.7% of the state’s general budget. After you
watch the video, we’ll talk about it some more.
Data may not mean much without some context. So I did some
research. The Cato Institute has come up with a different way of
looking at the numbers. Instead of an annual cost per student, they look at the
total cost of educating a student K-12, and use inflation-adjusted dollars.
This chart takes us only through 2012. Nationally, and
also in Texas, there has been some slowdown, and even decrease, in the annual cost per student during 2010-2015. Nevertheless, total cost per student
over time has grown exponentially, while results have remained flat.
In economic terms, when the cost for a service has grown
exponentially and offers no additional value, we don't purchase that service. Because we have a choice in how to spend our money.
But in government-run education, we do not have a choice. So
we are forced to make the purchase regardless of the bad service.
The video talks about several ways of moving toward school
choice, summarized as,
Let the money follow the students. And let students and
families decide how best to educate their kids.
Whatever we do, choice needs to lead away from publicly
funded education. Because wherever government goes beyond its proper role,
there will be unintended negative consequences, usually exactly the opposite of
the stated goal.
So, if government says the goal is to educate the populace,
and particularly to offer education as a way out of permanent poverty, you can
expect that government education will be less effective at educating the
populace than the other options, and will particularly fail those in poverty.
That means—if you care about the education of your children
and the rest of the children in society, you should be against government
education.
That is a radical idea today. But a century ago it was still
a mainstream thought. Go back 150 years or so, and the idea of government
taking over education was crazy radical.
If we need an educated populace—people who are as
well-educated as the founding fathers—we need people who avoid the
institutionalized indoctrination factories that have been foisted upon us.
Especially in this day when so many other educational avenues are available.
Another resource I came across this week was a free ebook by
Tom Woods, Education without the State.
He’s a Libertarian, so there are areas
where I will disagree with him, but education is not one of them. The first few
chapters of the book (the part I’ve read so far) are transcriptions of
interviews he has done with people working on educational choice.
Woods begins by pointing out that education is one of the
stiffest stumbling blocks against Libertarianism. As Woods says in his
introduction, “Public schooling is as close to the official religion of the
United States as any institution is ever likely to be. And if you are reading
this eBook, you are likely a heretic.”
So, yes, I recognize that I am a heretic. Since I
homeschooled my kids for a decade, I already knew that.
About funding, Woods and Sheldon Richman, author of Separating School and State, discuss the
usual arguments about budgets:
WOODS: Just about everyone agrees that there are problems
with the government-run schools, and the kids aren’t learning what they should
be learning, but then come the excuses: this is because the schools have been
deprived of funds, and we don’t have the right priorities, and we favor
basketball players over scholars. If only we could change this, we could get
our act together. Why would you think the solution would instead involve
getting rid of the whole system, root and branch?
RICHMAN: Well, the idea that they haven’t spent enough money
is laughable. They’ve been spending amazing amounts of money year after year
for twenty or so years, in increasing amounts. They haven’t shown any results.
There’s no improvement.
The other thing is that the worst districts in the country
have the highest per-capita spending. In Detroit, or Chicago, inner-city
schools, Washington, D.C., they are spending $10,000 or more per student, and
they have worse results even than other public school districts, government
school districts, that spend less per capita. There is no correlation between
the amount of money spent and the performance of the children. So that is not
the problem.[i]
One of the larger arguments is about educating the poor.
Without government schools, wouldn’t poor kids be stuck in poverty? Richman
addresses that:
Government produces many obstacles to individual
self-advancement economically. And one of the biggest obstacles is its schools.
If you look at the inner-city schools, they are just sabotaging generation
after generation. If you set out to ruin generations of kids, you could not
design a better system than the one we have. So that’s one reason alone that
parents don’t seem to have enough money to educate their kids.[ii]
The next chapter hits that idea even harder. Woods
interviews Pauline Dixon, who has been doing research into private schools for
the poor. She has been to very poor, slum areas, in Africa, China, and India,
places identified by UNESCO or the World Bank as very poor. And they found
low-cost private schools in all of these areas. Here’s part of their
discussion:
WOODS: I think what surprised me the most about your talk was
the very existence of the low-cost private schools that you were finding in
these various places. That runs contrary to the expectations of many people. It
runs contrary to the expectations of certain economic models that hold
education to be a public good, which will therefore be underfunded on the
market. So what’s going on here? Tell us something about the types of schools
that you encountered and how it’s possible that they were, from the West’s
point of view, anyway, more or less under the radar all this time.
DIXON: Exactly right. The main reason parents are voting with
their feet away from the state sector is that the state sector is failing them.
These parents don’t read World Bank reports. They don’t wait around for
governments to actually do something for them, because their governments aren’t
going to do something for them. So these parents have to do something for
themselves. And what happened in India, for example, was that entrepreneurs
within certain areas were finding that government schools were teaching only in
Hindi or the local language, and that’s not what parents wanted. Parents wanted
schools that were what’s called English Medium. That means that their children
were going to read and write in English. So local entrepreneurs, because these
schools grow organically within the communities themselves, started off what we
call low-cost private schools in order to satisfy parental demand.
What happened, for example in India, is that parents started
moving away from the government schools. What you tend to think is that a
government school would be provided free, but there are always these hidden
costs. Parents still have to buy a uniform. They have to buy books. There’s
transport to schools and so on. And the local private schools weren’t actually
that much more costly for the parent than sending your child to a government
school. A low-cost private school costs maybe $4, $5, $6 per month per child,
which is about six percent of a worker’s daily wage. So in India, for example,
what we found was that these low-cost private schools have sprung up because
parents wanted English Medium. That’s the main thing. But also because the
government schools were failing.[iii]
In the next chapter Woods interviews James Tooley, author of
The Beautiful Tree, about these
unlikely private schools. Tooley says,
I’ve been recently in Liberia, south Sudan, and Sierra Leone,
and the same phenomenon exists. You talk to people in government or NGOs,
non-government organizations, or middle-class people, and even they don’t know
about it. So it is extraordinary. The poor are doing something for themselves
all over the world, and yet somehow people refuse to accept that they are doing
it.[iv]
What I would like to assert is that parents have the role of
seeing to the care and education of their own children. When they love their
children, they sense this responsibility and act on it. I know I did. Whatever
the cost in time and effort, within the limits of our financial means, I would
do it. I’m middle class and not on the verge of starvation, but I did have to
stand up against some pretty strong social forces to do what I knew was better
for my children.
That is what good parents do, regardless of their
circumstances.
In the video above, there’s this quote from economist Milton
Friedman:
As long as the schools are governmental, as long as they are
financed and administered by public entities, they are a source of political
power.
Friedman was actually one of the first proponents of the
voucher system, an attempt to move choice from government to parents. School
lobbies fight it tooth vouchers tooth and nail. As a homeschooling parent, while
I wasn’t against the voucher movement, I was very wary of anything that might
give government control over what I was doing in my private school with my
kids. Woods and Richman have a discussion about that, worth reading.[v]
I think Richman may be right that it isn’t even a step in the right direction.
But the concept of school choice is the right direction,
however we accomplish it. The above video suggests a list, some of which I
could argue for:
·Education Savings Accounts
·Scholarship Tax Credits
·Expand Charter Schools
·Better Parent Trigger Laws
·Home-Rule School Districts
·School Finance Reform
I’m particularly interested in Education Savings Accounts, and I’ll be bringing this idea to
legislators this session. I’m uncertain of the details on several of the other
suggestions. For now, I’m favoring ESAs, because there’s so much in control of
the parents, and such a wide array of options. But ESAs have to be implemented
without government interference into content/indoctrination.
If we succeed in returning people to recognizing education
as a family responsibility, instead of a government “service,” we can also return
to the idea of using charitable donations from businesses and individuals to
offer support to the poor, so that every student willing to learn gets to learn.
