Red Tape Cutting

There are many things wrong with regulations—almost as an entire category:

·         The definition.

·         The negative economic effects.

·         The beyond the Constitution regulatory tyranny.

As I’ve mentioned before, our founders, when they used the word in the Constitution—i.e., “regulate Commerce,” and “well-regulated Militia”—they meant

to make regular—to make sure something can happen regularly, without blocks or interference. That’s what the founders meant by regulation interstate commerce.

But in today’s government, regulation means something else: governmental power to decide when, how, and whether something can happen. It’s arguable that all government regulation prevents, rather than provides, regularity of something happening.

What we need is for government—especially government regulations—to get out of the way, so that what we want to happen regularly, like commerce, can happen freely.

President Trump cuts red tape
in ceremony in December 2014

A Just the Facts article, “The Effects of Regulations on the Economy,” by James D. Agresti, shows how regulation has actually prevented what it claims to be trying to do:

For example, a 2015 working paper from the Harvard-Kennedy School of Government found that regulations are likely the main reason why community banks’ share of the U.S. banking market fell from more than 40% in 1994 to around 20% in 2015. This is because “larger banks are better suited to handle heightened regulatory burdens than are smaller banks, causing the average costs of community banks to be higher.” Likewise, a 2016 paper in the DePaul Business and Commercial Law Journal found that the 2010 Dodd-Frank “Wall Street Reform and Consumer Protection Act”:

could actually be enhancing the consolidation of the banking industry, in direct opposition to its principal purpose—eliminating “too big to fail” banks. While the industry has intentionally trended towards consolidation in the past, the current dramatic increase of consolidation of banking assets is likely an unintended consequence of increased regulation. This consequence comes from astronomical regulatory costs passed on to community banks, as well as increased capital requirements that diminish these banks’ competitiveness. Dodd-Frank has exacerbated this problem, and it will likely result in further increased consolidation of the banking industry.

What do we keep saying about the unintended consequences of government interference?

If the government wants to implement something beyond the proper role of government, not only will government fail to achieve the stated goals; it will likely do exactly opposite of the stated goal.

Why isn’t that obvious enough that people would stop wanting government to interfere?

It’s hard to get data on the negative effects of regulation on the economy. As Anne C. Steinemann, author of the textbook Microeconomics for Public Decisions, says, it’s pretty easy to create a cost-benefit analysis that will “produce a desired outcome,” and “it is practically impossible to predict all the future impacts” of a government program, “let alone their magnitudes and their probabilities of occurrence.”

An example provided by Agresti compares pro and con arguments. On the pro side, the Obama administration drafted a report in 2014: 

Estimating the costs and benefits of major federal regulations from 2003 to 2013. It concluded that the costs were somewhere between $57 billion and $84 billion, while the benefits were much greater at $217 billion to $863 billion.

Since we were in an elongated recession without the expected recovery through most of those years, that seems like it could be just a wild invention to say, “You think this is bad? Imagine how bad it would be if we hadn’t stepped in.” You can’t exactly “prove” an imaginary alternate universe.

Meanwhile, a 2013 paper in the Journal of Economic Growth found: 

The effects of federal regulations on the U.S. economy have been “negative and substantial.” They estimate that GDP would now be more than three times larger if federal “regulation had remained at its 1949 level.”

Which is right? Probably the one that coincides with the principles that lead to freedom, prosperity, and civilization. In other words, government regulation, which is rule by unelected bureaucratic fiat—or tyranny—is unable to lift an economy out of poverty and into prosperity. So if the pro-tyranny side is claiming their interference is creating all kinds of magical benefits, chances are they’re skewing the data for their purposes or simply outright lying.

Agresti suggests there are plenty of other indicators to lead to the conclusion that regulation is a negative on the economy:

A key driver of economic growth plummeted in the wake of two major regulatory expansions in modern U.S. history. This element is productivity, and as explained by former Federal Reserve Chair Janet Yellen (and various other economists with wide-ranging political views): “The most important factor determining living standards is productivity growth, defined as increases in how much can be produced in an hour of work.”

The Journal of Economic Growth study, mentioned above, uses historical data, of which there is an abundance, and finds

that regulations have “strong and robust negative effects” on economic growth, and these “results are qualitatively consistent with those obtained from studies using the various cross-country and panel data sets on regulation.”

Notably, regulations harm the economy by harming productivity. What we can see is that federal regulations spiked under President Carter (1977-1981) and Obama (2009-2017). “In the wake of both of these regulatory expansions, productivity growth crashed,” as you can see in the chart:

Chart from Just the Facts

So, while we don’t have absolute cause-effect proof, there is plenty of evidence for reasonable people to see the harm government regulation (which is, almost by definition, over-regulation) does to the economy.

What we ought to insist on is adherence to the Constitution; that would give us plenty of evidence that freedom from regulation is good for the economy. But we haven’t tried that experiment in a very long time. The Congress has mostly abdicated its legislative authority to the regulatory arms of the executive branch. And the courts have mostly bowed to the “experts” of those regulatory commissions.

However, there has been some recent progress from this administration: the FCC’s net-neutrality repeal, HHS healthcare reforms, EPA details, some Education Department deregulation. These are actual campaign promises President Trump made that he is keeping.

There are three ways to accomplish regulatory reforms:

·         Executive orders ending the executive orders of the previous administration (easiest to do, but also easiest to reverse by a future administration).

·         Legislation requiring change, and returning responsibility for lawmaking to Congress, and, in many cases, returning the judicial functions to the judiciary, instead of leaving all powers in the hands of regulators to determine law, prosecute, and punish.

·         Reform from within regulatory agencies, which depends on appointees to champion the goal of deregulation.

·

Adam J. White, writing for the Hoover Institution (in “Trumping the Administrative State”), says, ”2018 will mark the beginning of a steady wave of agency decisions that will immediately be appealed to federal courts.” The most high-profile of these

will be filed strategically before courts staffed disproportionately by sympathetic judges in Washington, D.C., or on the West Coast. This litigation may come to resemble the lawsuits challenging President Trump’s immigration and refugee orders: Judges will scrutinize agency actions much more aggressively than before. The traditional deference by judges to regulatory agencies’ decisions is unlikely to prevail, and courts will undoubtedly invoke statements by the president or by his appointees that they see as undermining the credibility that agencies usually are afforded. (This will be quite a turnabout after Democrats less than a year ago criticized President Trump’s appointee to the Supreme Court, Neil Gorsuch, for having questioned the amount of deference” that courts give agencies.)

Of the legislative option, he says this is “an opportunity Republicans may not enjoy again for a long time.” And he adds, if they fail to use it,

It would be disappointing and ironic: Congress’s inaction is itself one of the main causes of our modern administrative state. By failing to legislate on the issues of greatest national interest, Congress creates a policy vacuum that agencies fill unilaterally with regulations. Lawmakers further compound this problem by failing to reform the antiquated appropriations process that no longer ties Congress’s oversight of agencies to its constitutional “power of the purse.”

As for the third option, he makes these suggestions for the regulatory agencies:

They can unilaterally adopt reforms to promote transparency and accountability within their own houses. Perhaps the best example of this so far are the efforts at the Justice Department and Education Department to scale back their reliance on “guidance” documents, a broad category of agency pronouncements that regulate the public but that do not undergo even the minimal procedures for public accountability otherwise required of new regulations. If these two departments succeed in reforming their own practices, they could come to be seen by the public (and by judges and legislators) as the regulatory equivalent of “best practices,” raising the bar for what we expect of other agencies.

So, we’re at a time when we have at least some reason to be hopeful.

In his conclusion, White talks about the most lasting reforms of the Reagan era; they lasted because they became systemic. They became the expected practices over several administrations. Based on that, he says,

Years from now, we may find that some of the Trump administration’s most important regulatory reforms in 2018 were the ones that attracted the least attention. Executive orders and regulatory repeals announced to great fanfare are very important; even more important are reforms changing the culture of modern regulatory agencies, achieved through sustained effort within those agencies, to little fanfare and no ribbon-cutting.

In one of the announcements, President Trump cut a big red ribbon, to mean cutting the “red tape.” I hope his commitment to that is real. And I hope the results will become sustained changes that return us to the freedom that helps us thrive and prosper.

Disparate Impacts

There’s a new Uncommon Knowledge interview with Thomas Sowell, with the release of a new book—his fifth since turning 80. The book is called Discrimination and Disparities. I’m glad he keeps writing, even though he’s no longer doing a weekly column; it’s never enough.

Thomas Sowell, Uncommon Knowledge, May 3, 2018

Much of the discussion is about the term disparate impact, which Wikipedia defines this way: 

Disparate impact in United States labor law refers to practices in employment, housing, and other areas that adversely affect one group of people of a protected characteristic more than another, even though rules applied by employers or landlords are formally neutral.

It’s a controversial idea, because it’s ostensibly about fairness while being literally unfair. And it introduces into law the idea that a person with no intention of discrimination is held accountable as if there were mens rea (intent to commit a crime) based on outcomes that simply appear discriminatory.

Interviewer Peter Robinson starts the discussion with a quote from the book:

The disparate impact standard represents a major departure from American legal principles where the burden of proof is usually on those making the accusation.

Disparate impact is a tool used in cases of employment, housing, and credit, among others. And, for the sake of setting up the discussion Robinson asks,

the latest book by
Thomas Sowell
cover image from Amazon

But, Tom, what about the notion that we need a disparate impact test because discrimination, particularly racial discrimination, particularly against African Americans, is so deeply embedded in the fabric of this country that people discriminate all the time without even being aware of it?

And Thomas Sowell answers:

If you're going with that assumption, then you don't need the disparate impact theory. You just simply say what you've just said. To dress it up as the disparate impact theory, the disparate impact theory depends upon the truth of the assumptions.

What assumptions?

This implicit assumption that all of the groups are very similar in their capabilities, what they want to do and so forth. When you look at facts, you find disparate impacts everywhere.

For example, he looks at three groups of immigrants: Irish, Jewish, and Italian. Disparities depend on what you’re looking at:

If you look at things like politics, the Irish were so far more advanced politically than either the Italians or the Jews that for generations you had Irish politicians representing neighborhoods that were overwhelmingly Italian or Jewish.

Many disparities are natural. Like tornadoes.

You find 90% of all the tornadoes in the entire world occurring in one country, namely the United States. And only in a part of the United States. You don't hear about tornadoes in Maine or in the Pacific Northwest. So think how much land area there is in the world, and 90% of them right in this one little place.

If disparities are not an inherent evil, but simply part of nature, do we accomplish something good by adjusting to get rid of the disparities? Or do we accidentally cause some other problem?

Maybe we should start by questioning the assumptions. Are differences necessarily the result of bigotry? Or are some differences the result of personal choice and ability?

Sowell’s book refers to a 50-year study of 1500 people with IQs in the top 1%.

What I point out in the book is that the disparities within that narrow range, the top third, for example, had more than 10 times as many post-graduate degrees as the bottom third, among people who were all in the top 1%. So there were obviously many other things that had to come together. The other thing was that two people who failed to make the 140 IQ cutoff ended up getting Nobel Prizes in physics. There's nobody among these 1,500 that did, so obviously there have to be a lot of things coming together.

So intelligence is not the differentiating factor. What is? Family background.

It doesn't matter how much brain power you may have, if you're not raised in a home where people are thinking, where they're doing intellectual things, you're not in the same position as someone with the same IQ who's in a family that has that kind of background.

I talked about that in the last post. It’s not really about victimization, or a victimized underclass. It isn’t even much about innate ability. It’s about family.

Government interference—on the assumption that society is doing something evil, such as bigoted oppression—doesn’t get the positive results it claims to want, because it isn’t addressing the actual problem.

Dr. Sowell even gives examples of societies where there is actual racism, and government interferes by enforcing that racism, and yet people flout the law when it makes economic sense to do so. It happened in Apartheid South Africa. More black workers were hired than white, even in jobs where it was illegal to hire blacks. More blacks than whites lived in white-only neighborhoods.

Quoting the book, “Black incomes in 1900 were almost half again higher than they had been in 1867 to ’68.” So, in the American South, after the Civil War, where employers had agreed to suppress earnings for black workers and sharecroppers, black earnings had a higher rate of growth than the American economy overall.

The market is more powerful than racism, or any other bigotry.

Dr. Sowell explains this related to minimum wage laws:

If you have a minimum wage, and that's set above where it would be in a free market, then that means you're going to have more people applying because there's a higher wage, and there are going to be fewer people hired because of the higher wage. So you're going to have a chronic surplus of applicants.

Now, in a market where there's, say, a chronic surplus of qualified people of, say, 200, and there a hundred blacks, for example, who are qualified, then if the employer refused to hire all hundred black qualified people, he still has 200 others he can call on, and that's it. And it's cost him nothing. But if there's no minimum wage now, and there's no chronic surplus, every time he turns away a qualified black person, he has to have someone who's not black who's also qualified that he can hire….

[And he may not be able to find that person] at that price. Therefore, the price will have to go up, so it's costing him. And if he doesn't raise the price, he's going to have to keep his customers waiting because he doesn't have enough people to do the job.

In short, minimum wage laws are going to have an intensifying effect on existing racism, while free markets tend to lessen discriminatory hiring.

Another example of unintended consequences is housing in northern California, where home building is restricted in the name of saving the environment. The result, of course, is higher housing costs. And then officials ask, “What can we do to get more affordable housing?” The obvious answer is, build more houses. Instead, they appoint a committee to study the issue. Dr. Sowell quips,

It's like appointing a blue-ribbon committee to go out there and find out why the ground is wet after the rain. I think it's almost miraculous the way they can avoid the obvious.

So, what is the disparate impact of the higher housing costs resulting from government imposed home-building limitations? Blacks, among others who started out lower income, instead of moving up in the economy, get priced out—what Peter Robinson calls a sort of “soft version of Jim Crow.”

The progressive/liberal/tyrannists tend not to apply their disparate impact rules on their own “good intentions,” however. Because they want to keep feeling good about their intentions regardless of the harm they do.

Here’s another quote from the book:

The plain fact is that the black poverty rate declined from 87% in 1940 to 47% in 1960, prior to the expansion of the welfare state that began in the 1960s under the Johnson administration. There was a far more modest decline in the poverty rate among blacks after the war on poverty began.

He lists several more disproportionately negative effects for blacks. Quoting the book again:

In the United States, murder rates, rates of infection with venereal diseases, and rates of teenage pregnancies were among the social pathologies whose steep declines were suddenly reversed in the 1960s. Nowhere was rampant violence and other social pathology as common among low-income people in the first half of the 20th century, when they were more deprived, as in the second half, when the welfare state had made them better off in material terms.

Since we’ve been talking about sex education in schools recently, let’s look at that. Sex education was implemented in schools in response to disease and teenage pregnancy—both of which were going down on their own. By 1960 the rate of venereal disease was half what it was in 1950. Then they started teaching it in the schools, and rates rose dramatically, as did teenage pregnancy. And that hit blacks particularly hard.

In 1960 two-thirds of black children were being raised in families with both parents. By 1995, two-thirds were born out of wedlock. Today 85% of black children live in single-parent households. And that’s while, in some places, like New York City, more black babies are aborted than are born.

We know—the data is astoundingly clear on this—that children fare best in homes where they are raised by their two parents. The results of failure to these children is calamitous.

As Thomas Sowell puts it,

It’s not the legacy of slavery that destroys the African American family. It’s the legacy of the welfare state that destroys the African American family.

And, if you want to destroy or oppress a people, the simplest way is by destroying the family—the basic unit of civilization.

Did they do it on purpose? I’m not willing to go that far. But, if they had intended it, they couldn’t have done a more thorough job.

Dr. Sowell puts it this way:

For one thing, it [the welfare state] makes it unnecessary for fathers to support their offspring. And in fact, it makes it counterproductive in many cases. A very poor man who might be able to support his family realizes his family will be better off without him. But on the other hand, someone who's strictly irresponsible, either the man or the woman or both, now pays no price for being irresponsible. The taxpayers pay the price. And actually, the harm done to the taxpayers, which is serious, still is not comparable to the harm done to the families, especially the children.

Thomas Sowell is an economist; he’s about data. Let the data take you where it takes you, and then see what conclusions you need to draw. You don’t start with a premise and then dismiss data that doesn’t fit. Sometimes there’s an outlier, but sometimes it’s a clue that your original assumptions are wrong.

Disparate impacts—or simply differences—are not necessarily the result of a nefarious plot even so secretive that people don’t know they’re thinking it up. The simpler answer might be that there are a lot of factors—including personal choice—that go into various differences.

But allowing for freedom, and free markets, along with encouraging strong families—that gets us to better, more positive outcomes overall, than interference gets us, no matter how well intentioned.

Maybe we ought to switch it around: hold government accountable for negative impacts of their interference, and put a stop to it. And stop holding individuals and businesses accountable for discrimination that was never intended, thought, or practiced.

Disparate impacts, then, are really just a narrow, limited view, of one portion of a larger picture that, if you could see the whole picture, would become nothing worth acting on.

How do you know whether a particular policy is one of those, or something really worth acting on? Try applying this Spherical Model axiom about unintended consequences:

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.

Diverting Production

I’m finding Henry Hazlitt’s Economics in One Lesson rich in application for our day. Here’s the beginning of Chapter VI, “Credit Diverts Production”:

Government “encouragement” to business is sometimes as much to be feared as government hostility. This supposed encouragement often takes the form of a direct grant of government credit or a guarantee of private loans.

Hazlitt spends most of this chapter talking about loans to farmers. But we can extrapolate this example to similar good-intentions-with-bad-outcomes that government proposes. I’m thinking about home loans to people whose incomes didn’t qualify, which led to the housing bubble of nearly a decade ago. And it probably applies to government school loans, or any other scheme to make college available (and supposedly affordable, or maybe even free) to everyone. And of course the Affordable Care Act and any other interference in the health care industry.

The overarching principle is that government only gets money from taxpayers, and then government uses money as if they have a right to it, but no responsibility for wasting it.

As I’ve said here before,

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.

So, here is a good chunk of chapter VI, with Hazlitt explaining what happens:

At first glance the case for this type of loan may seem a strong one. Here is a poor family, it will be said, with no means of livelihood. It is cruel and wasteful to put them on relief. Buy a farm for them; set them up in business; make productive and self-respective citizens of them; let them add to the total national product and pay the loan off out of what they produce. Or here is a farmer struggling along with primitive methods of production because he has not the capital to buy himself a tractor. Lend him the money for one; let him increase productivity; he can repay the loan out of the proceeds of his increased crops. In that way you not only enrich him and put him of his fee; you enrich the whole community by that much added output. And the loan, concludes the argument costs the government and the taxpayers less than nothing, because it is “self-liquidating.”

Now as a matter of fact that is what happens every day under the institution of private credit. If a man wishes to buy a farm, had has, let us say, only half or a third as much money as the farm costs, a neighbor or a savings bank will lend him the rest in the form of a mortgage on the farm. If he wishes to buy a tractor, the tractor company itself, or a finance company, will allow him to buy it for one-third of the purchase price with the rest to be paid off in installments out of earnings that the tractor itself will help to provide.

But there is a decisive difference between the loans supplied by private lenders and the loans supplied by a government agency. Each private lender risks his own fund. (A banker, it is true, risks the fund of others that have been entrusted to him; but if money is lost he must either make good out of his own funds or be forced out of business.) When people risk their own funds they are usually careful in their investigations to determine the adequacy of the assets pledged and the business acumen and honesty of the borrower.

If the government operated by the same strict standards, there would be no good argument for its entering the field at all. Why do precisely what private agencies already do? But the government almost invariably operates by different standards. The whole argument for its entering the lending business, in fact, is that it will make loans to people who could not get them from private lenders. This is only another way of saying that the government lenders will take risks with other people’s money (the taxpayers’) that private lenders will not take with their own money. Sometimes, in fact apologists will freely acknowledge that the percentage of losses will be higher on these government loans than on private loans. But they contend that this will be more than offset by the added production brought into existence by the borrowers who pay back, and even by most of the borrowers who do not pay back.

This argument will seem plausible only as long as we concentrate our attention on the particular borrowers whom the government supplies with funds, and overlook the people whom its plan deprives of funds. For what is really being lent is not money, which is merely the medium of exchange, but capital…. What is really being lent, say, is the farm or the tractor itself. Now the number of farms in existence is limited, and so is the production of tractors (assuming, especially, that an economic surplus of tractors is not produced simply at the expense of other things). The farm or tractor that is lent to A cannot be lent to B. The real question is, therefore, whether A or B shall get the farm.

This brings us to the respective merits of A and B, and what each contributes, or is capable of contributing, to production. A, let us say, is the man who would get the farm if the government did not intervene. The local banker or his neighbors know him and know his record. They want to find employment for their funds. They know that he is a good farmer and an honest man who keeps his word. They consider him a good risk. He has already, perhaps, through industry, frugality and foresight, accumulated enough cash to pay a fourth of the price of the farm. They lend him the other three-fourths; and he gets the farm.

There is a strange idea abroad, held by all monetary cranks, that credit is something a banker gives to a man. Credit on the contrary, is something a man already has. He has it, perhaps, because he already has marketable assets of a greater cash value than the loan for which he is asking. Or he has it because his character and past record have earned it. He brings it into the bank with him. That is why the banker makes him the loan. The banker is not giving something for nothing. He feels assured of repayment….

Now it is to A, let us say, who has credit that the banker would make his loan. But the government goes into the lending business in a charitable frame of mind because, as we say, it is worried about B. B cannot get a mortgage or other loans from private lenders because he does not have credit with them. He has no savings; he has no impressive record as a good farmer; he is perhaps at the moment on relief. Why not, say the advocates of government credit, make him a useful and productive member of society by lending hi enough for a farm and a mule or tractor ad setting him up in business?

Perhaps in an individual case it may work out all right. But it is obvious that in general the people selected by these government standards will be poorer risks than the people selected by private standards. More money will be lost by loans to them. There will be a much higher percentage of failures among them. They will be less efficient. More resources will be wasted by them. Yet the recipients of government credit will get their farms and tractors at the expense of those who otherwise would have been the recipients of private credit. Because B has a farm, A will be deprived of a farm. A may be squeezed out either because interest rates have gone up as a result of the government operations, or because farm prices have been forced up as a result of them, or because there is no other farm to be had in his neighborhood. In any case, the net result of government credit has not been to increase the amount of wealth produced by the community but to reduce it, because the available real capital (consisting of actual farms, tractors, etc.) has been placed in the hands of the less efficient borrowers rather than in the hands of the more efficient and trustworthy.[i]

There’s so much in this example: the broken glass theory, the story of Davy Crockett[ii] learning that government shouldn’t be in the business of charity. Hazlitt explains why government shouldn’t be in the business of economic interference at all. There will always be those pesky negative consequences.

On the other hand, trusting the free market, while concentrating our efforts on being better, more compassionate individuals, might just work out those perceived issues.

---

[i] Henry Hazlitt, Economics in One Lesson, 50^th Anniversary Edition, Laissez Faire Books, © 1996, pp. 27-31.

[ii] I the retell this story on the Spherical Model website, in the Economic section, under the heading “Free-Enterprise Zone.” [   http://sphericalmodel.com/theeconomicworld.html   ] I first heard this Davy Crockett story from Nina Hendee, who tells Texas history stories to school groups at the family restaurant Taste of Texas. I later found the full story: “Not Yours to Give,” originally published in The Life of Colonel David Crockett, by Edward Sylvester Ellis, republished at http://juntosociety.com, © 2002 The Junto Society.

Voting and Econ Lesson

One of the best pieces I’ve read recently is Mike Rowe, theDirty Jobs guy’s response to someone who encouraged him to use his platform to encourage voting—to Get Out the Vote.

Mike Rowe
image from here

I wrote a piece about whether to GOTV just before the 2012 election, which seems even more necessary this year. I’m in agreement with Mike Rowe. Here is part of his response:

Thanks for the kind words. I appreciate it. I also share your concern for our country, and agree wholeheartedly that every vote counts. However, I’m afraid I can’t encourage millions of people whom I’ve never met to just run out and cast a ballot, simply because they have the right to vote. That would be like encouraging everyone to buy an AR-15, simply because they have the right to bear arms. I would need to know a few things about them before offering that kind of encouragement. For instance, do they know how to care for a weapon? Can they afford the cost of the weapon? Do they have a history of violence? Are they mentally stable? In short, are they responsible citizens?

And he continues:

Voting is a right, not a duty, and not a moral obligation. Like all rights, the right to vote comes with some responsibilities, but let’s face it—the bar is not set very high. If you believe aliens from another planet walk among us, you are welcome at the polls. If you believe the world is flat, and the moon landing was completely staged, you are invited to cast a ballot. Astrologists, racists, ghost-hunters, sexists, and people who rely upon a Magic 8 Ball to determine their daily wardrobe are all allowed to participate. In fact, and to your point, they’re encouraged.

The undeniable reality is this: our right to vote does not require any understanding of current events, or any awareness of how our government works. So, when a celebrity reminds the country that “everybody’s vote counts,” they are absolutely correct. But when they tell us that “everybody in the country should get out there and vote,” regardless of what they think or believe, I gotta wonder what they’re smoking.

What we need are better voters, so we don’t get the intolerable choices we got stuck with this election. He suggests:

I can’t personally encourage everyone in the country to run out and vote. I wouldn’t do it, even if I thought it would benefit my personal choice. Because the truth is, the country doesn’t need voters who have to be cajoled, enticed, or persuaded to cast a ballot. We need voters who wish to participate in the process. So if you really want me to say something political, how about this—read more.

Spend a few hours every week studying American history, human nature, and economic theory. Start with Economics in One Lesson. Then try Keynes. Then Hayek. Then Marx. Then Hegel. Develop a worldview that you can articulate as well as defend. Test your theory with people who disagree with you. Debate. Argue. Adjust your philosophy as necessary. Then, when the next election comes around, cast a vote for the candidate whose worldview seems most in line with your own.

He continues with a couple of paragraphs about the right and responsibility of informed voting. And then he concludes with this:

In the meantime, dig into Economics in One Lesson, by Henry Hazlitt. It sounds like a snooze but it really is a page turner, and you can download it for free.

So, thank you, Mike Rowe, for using your celebrity to share wisdom, yet again.

That’s two mentions, in one short piece of Economics in One Lesson, which I happened to start ^th anniversary edition from 1996. The original was written in 1946. It’s amazing that words written 70 years ago seem so current today.

reading a couple of days earlier. I’m only a few chapters into it yet, but he’s right that it is quite readable, and under 200 pages. It has been on my list of stuff to read for several years—and actually on my shelf, waiting to be read for a few months. I have a used paperback, 50

There’s a premise the book makes early on, explaining why so many economic efforts go awry. This is from page 1:

In addition to these endless pleadings of self-interest, there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.

In this lies the whole difference between good economics and bad. The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.

Here at the Spherical Model we have a similar saying about unintended consequences:

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.

I’m sure I’ll want to refer to Hazlitt’s book more as I read to the end, but I think this is going to be a main theme. And I want to quickly apply it to one example: Obamacare, or the inaptly named Affordable Care Act.

When the Supreme Court was hearing oral arguments about whether the government had the power to compel citizens to buy a product or service, there was discussion about how healthy young people were getting away with lower costs, or going without insurance, which was unfair to older or chronically ill people. The only way to lower their costs was to bring in a lot of healthy people who would not need the coverage, to even out the risks, and the costs. There was an assumption that the government ought to have the power to even out life’s unfairness.

But, just as Hazlitt suggests, the group that needed lower cost insurance because they would make more use of it is only one group. If you focus only on the goal of solving their issue, you might end up doing harm to other—maybe every other—groups in society.

If there is a time for a person to choose to pay for health care out of pocket, it might be when that person is young and healthy. Such a person might still want catastrophic coverage, or might want to risk not having it. But if this young person is at the beginning of a career, and making only $15 an hour, he is probably not going to appreciate being forced to pay $1000 a month for coverage he doesn’t want or need, just because some older (and probably wealthier) person wants his coverage subsidized.

And, of course, as it turned out, you don’t get to keep your doctor; you don’t get to keep your coverage; and costs have skyrocketed—even for the group government was targeting to help in that SCOTUS conversation. (Michelle Malkin offer her personal experience in this piece.)

How did we get here? By electing leaders who get the attention of various factions by promising them things—and by voters who fall for it.

So, I’m with Mike Rowe: go vote, if you know what you’re doing. If you don’t know what you’re doing, stay away from the polls. If you want to get ready for future elections, read. Start with Hazlitt’s Economics in One Lesson.

Review of the Proper Role of Government

This is a public service message for several presidential candidates, their supporters, and anyone else who may have forgotten (or never learned) the answer to this question: What is the proper role of government?

Choose the best answer. The proper role of government is: 

A: to redistribute wealth, provide jobs, and control wages.

B: to protect the environment, end racism, and enforce agreement with prevailing opinions.

C: to offer security, education, and health care. 

D: to protect life, liberty, and property.

Clue: the answer is in the Declaration of Independence.

WE hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness—That to secure these Rights, Governments are instituted among Men, deriving their just Powers from the Consent of the Governed.

What does “Pursuit of Happiness” mean? because that’s the single difference from answer D. It means “property,” but more; it includes choosing how to pursue wealth—what job or profession you will choose—and it includes other pursuits that may or may not lead to gaining property, but are ways you choose to spend your life. Property is, after all, the things you accumulate by living your life in a way that exceeds subsistence. So “property” is shorthand for “how you live your life and pursue happiness,” but since “pursuit of happiness” is less concrete, for our purposes we can refer to property and be close enough.

If we turn to the Preamble of the Constitution, we can see how life, liberty, and property are applied:

 We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

Protecting life, liberty, and property, then, require some security things, like common defense from external forces, peace among the states (domestic Tranquility), and a justice system for lawbreakers and settling disputes, plus “general Welfare” good practices like standardized weights and measures, and maintaining the value of money, and arguably interstate roads and bridges.

All of these things are designed to “secure the Blessings of Liberty.”

There are some more specifics within the body of the Constitution—enumerated powers. That doesn’t mean just numbered (although they are), but named, or specified. Nothing is enumerated there that isn’t designed to protect life, liberty, and property. And then comes the Bill of Rights, which spell out things that government absolutely can’t do, just in case someone comes along in a generation beyond the founders that doesn’t understand the “self-evident” truths.

There’s another truth about the role of government: 

Whenever government goes beyond its proper role, there will be unintended negative consequences—and they are likely to be exactly opposite of the stated purpose of the government action. 

For example:

·        Government interference intended to alleviate poverty increases poverty, and keeps individuals in poverty who would otherwise have worked their way out of it.

·        Government interference intended to provide jobs limits job creation, and likely increases unemployment, underemployment, and/or people giving up and leaving the workforce.

·        Government interference intended to provide minimum “living wages” limits job opportunities for the lowest qualified workers, leaving them with no wage, rather than a living wage, and leaving them without experience-building work to increase their wage-earning abilities for later.

·        Government interference intended to protect the environment damages the environment while also damaging free market solutions that would have otherwise improved the environment.

·        Government interference intended to end racism increases looking at race rather than looking at character among citizens.

·        Government interference intended to provide education ensures an inferior education than can be achieved through free market innovations, private schools, and homeschools.

·        Government interference intended to lower the cost of high education has raised the costs of higher education and student loans, making it more difficult for more worthy students to get the education they need and want and are willing to work for.

·        Government interference intended to lower healthcare costs and healthcare insurance rates raises the cost of healthcare and insurance, making paying for basic health services less affordable for more people, and prevents free market innovations and philanthropy that could solve the problems.

It’s a pattern. You can count on it. Civilized free people in a free market are unstoppable when it comes to innovation, wealth creation, and strength. And they keep thriving as long as the people live civilized lives, and as long as the citizens are diligent in limiting government.

This can be true not only in the United States, but anywhere in the world where the rules are followed:

Freedom comes from government limited to only protecting life, liberty, and property. Prosperity comes from free market, which rewards hard work and innovation. Civilization comes from living lives that value God, life, family, and truth.

Defining Freedom

This past week or so, law blogger Eugene Volokh wrote two pieces about the word freedom, and how we use that word, and its synonyms, differently: Freedom and Hypocrisy, on December 28, and “We All Declare for Liberty.”

The point of Volokh’s first piece is that calling each other hypocrites when we are really just using different definitions is polarizing rather than helpful. And that is worth considering. He followed up with a reminder of a similar discussion by Lincoln in 1864:

Volokh shared this image in his piece,
from the Library of Congress

The world has never had a good definition of liberty, and the American people, just now, are much in need of one. We all declare for liberty; but in using the same word we do not all mean the same thing.

With some the word liberty may mean for each man to do as he pleases with himself, and the product of his labor; while with others the same word may mean for some men to do as they please with other men, and the product of other men’s labor. Here are two, not only different, but incompatible things, called by the same name—liberty. And it follows that each of the things is, by the respective parties, called by two different and incompatible names—liberty and tyranny.

The shepherd drives the wolf from the sheep’s throat, for which the sheep thanks the shepherd as a liberator, while the wolf denounces him for the same act as the destroyer of liberty, especially as the sheep was a black one. Plainly the sheep and the wolf are not agreed upon a definition of the word liberty; and precisely the same difference prevails today among us human creatures, even in the North, and all professing to love liberty. Hence we behold the processes by which thousands are daily passing from under the yoke of bondage, hailed by some as the advance of liberty, and bewailed by others as the destruction of all liberty.— Abraham Lincoln, in his Address at a Sanitary Fair, Baltimore, Apr. 18, 1864

One thing about truth is that it is timeless. Lincoln’s words could have just been spoken.

Volokh’s pieces got me thinking, because I use freedom (and liberty, as a synonym) as one of the three main things we’re trying to restore and retain in the Spherical Model—freedom, prosperity, and civilization. So I thought it might be worth defining the way I use the term, plus maybe some related terms. I’m combining my favorite 30-year-old Webster’s dictionary with my own words.

Freedom: absence of hindrance, restraint, confinement, repression. In the political sense, it is ownership of one’s own life and the production of wealth and property that results from one’s use of life and effort. A government should protect the freedoms of life, liberty, and property; it does not grant these things, but protects them from infringement. A government that takes life, liberty, or property unjustly—when the person has not unlawfully infringed on those rights of another person—that is a tyrannical government, which is the opposite of freedom.

Political freedom means living in a society in which our God-given rights are protected rather than infringed. These would include freedoms of belief and expression, such as freedom of religion and freedom of the press, as well as freedoms of property and security, such as freedom from illegal searches and seizures and the right to bear arms.

Liberty: synonym of freedom. It is ownership of one’s own life, to pursue as one chooses, and to enjoy the fruits of one’s efforts. No person or government or other entity owns a person or controls how the person pursues happiness.

Libertine: originally from Roman society, a libertine meant a freed slave, but in our day it is a person who leads an unrestrained, sexually immoral life.

License: implies violating the usual rules, laws, or practices—taking some privilege not generally allowed because of its possible harm to other individuals or the entire society. Some licenses are legal—such as a driver’s license. A person becomes free to drive with the license, or permission, after proving ability or qualification.

Licentious: disregarding accepted rules and standards, morally unrestrained, lascivious.

I don’t use freedom to refer to doing whatever one wants without suffering the consequences; that is licentiousness. That is what a libertine does, rather than a lover of liberty.

When I use freedom, it is in relation to the God-given rights—those things we are born with, granted by God, not by some government or other entity. I do not include things that are nice to have, but not naturally given, such as freedom from want, or entitlement to have food, clothing, shelter, education, and other things that must be provided to a child by someone else, preferably parents, until the child becomes capable of self-providing those things.

If someone is entitled to those things, then someone else is required—enslaved—to provide them. If the parents provide these things, that is part of the agreement taken on when the couple choose to conceive a child to bring into the world; they choose to provide, so they are not enslaved. But the neighbor down the street didn’t bring that child into the world and isn’t required to use up his life in providing that child’s comfort.

What happens when parents cannot, or do not, provide? Shouldn’t the larger society step in and provide those things? In a civilized society, yes, people voluntarily provide for the needy, when they can. That is charity, or philanthropy. When government forces the confiscation and redistribution, even to those needy that we would sympathetically choose to help, that government is not being charitable, but tyrannical.

The Political Sphere

When government uses force to “do good” that is not government’s limited role of protecting life, liberty, and property, there will be unintended consequences, usually exactly the opposite of the stated “good.”

In the summary to the political sphere section of the Spherical Model, “The Political World Is Round,” I ask several questions to determine whether a considered policy will lead toward freedom or toward tyranny. One of these is to make use of the Bill of Rights:

Does the policy infringe in any way on the rights enumerated in the Bill of Rights? Does the policy infringe on the free exercise of religion or try to establish a particular sect as a state religion? Is political speech hindered? Does the policy infringe on the right of citizens to bear arms? Does the policy constitute an illegal search or seizure? Does the policy deprive a person of life, liberty, or property when the person has not committed a crime for which that deprivation is the just sentence? Does the policy try to claim for government a power that was not specifically granted in the Constitution? etc. If the policy infringes on the God-given rights, then government cannot take that power without usurping power from the people.

We get the most freedom, prosperity, and civilization when we live the principles in all three spheres simultaneously. We limit government to protecting our God-given rights of life, liberty, and property. We exchange the results of our labor freely, within a free market economy that includes voluntary charity. We grow civilization when a critical mass of us worship God, who gave us our rights, and we value family, life, property, and truth—values you might recognize from the Ten Commandments.

Wealth, Poverty, and Politics

Economist Thomas Sowell has yet another book out: Wealth, Poverty, and Politics. He did an interview on Uncommon Knowledge, which came out this week. I’ve only just become aware of the book, so I haven’t read it yet, but the interview had some themes worth mentioning.

Here at the Spherical Model, we notice the interrelationships of things political, economic, and social. Thomas Sowell does that as well. Then entire interview (and so I’m assuming the entire book) covers a great deal more than what I’ll look at today. But a middle segment of the discussion takes on a couple of issues we can just lift out and benefit from.

First is his assertion about diversity—that it does no inherent good. I’ve long believed that. I remember the first time Mr. Spherical Model came home and discussed diversity training at work. They had been taught that they benefited from diversity. And I said, “You mean you learn how to get along despite diversity?” No, they were supposed to see that they got additional viewpoints from ethnic diversity.

That struck me as pointless. There are types of diversity that can help benefit the whole: variations in thinking style, attention to detail, energy for leadership, different talents. You get a diverse team, and you all benefit from each other. But skin color and ethnic background don’t provide you with that addition. In international business you do benefit from someone on your team familiar with the culture you’re doing business with. But a basic classroom in America doesn’t benefit educationally from having students with different amounts of melanin in their skin. It's not relevant to learning.

Thomas Sowell grew up poor and Black in Harlem, New York. So he can safely say things others may not be able to without backlash. Or he’s immune to the backlash.

This starts at about fifteen minutes into the conversation. The interviewer is Peter Robinson:

PR: In Wealth, Poverty, and Politics you describe three very selective—they’re public high schools in New York, but they’re very selective. You have to test to get into them. They’re Stuyvesant High—your Stuyvesant High—Bronx Science, and Brooklyn Tech. Quote:

“The triumph of egalitarian principle and demographic ‘diversity’ in the rest of New York’s education system has not resulted in an increase in the number or proportion of Black or Hispanic students passing the admissions tests to get into Stuyvesant, Bronx Science and Brooklyn Tech. On the contrary, the numbers and proportions of Black and Hispanic students have declined substantially over the years at all three institutions.”

So, telegram to Mayor DeBlasio: As diversity becomes championed in the city of New York over the last forty years, fifty years, diversity actually diminishes at these very selective high schools. Why?

TS: Well, diversity really doesn’t do anything for you. There are many cultural…

PR: Doesn’t do anything for you as a society?

TS: As a society, or the people in whose interest you’re promoting diversity. In other words, when Black and Hispanic kids go to schools other than those three, they get a load of diversity. It doesn’t do them any good. For example, as of about 2012 or 2014—I forget the exact one—the percentage of Blacks at Stuyvesant High School was one tenth of what it was 33 years earlier. There’d been a major retrogression. So while they’re being taught, filling their heads full of diversity, the Asian students are learning math and science. Plus, the schools are also…  Another point against diversity is that in years past, those schools were so heavily Jewish that Stuyvesant was referred to once as a free prep school for Jews. Well, they weren’t diverse, but it was very successful.

And now, Asian Americans outnumber whites by more than two-to-one in all three of those schools. It’s still not diverse. But they’re turning out people who do marvelous things. And that’s what they’re there for—to benefit society, not to present this tableau that will please a handful of people.

If only we would deal with the content of character, rather than color of skin. I think someone said that once.

The next portion of the conversation looked further into that word retrogression. Things haven’t progressed under progressives; they have gone backward. Why?

PR: Political factors—this is the last of the large factors you discuss in Wealth, Poverty, and Politics. Quote: “Black Americans, a group often identified as beneficiaries of the welfare state in America, made considerable economic progress in the twentieth century.”

Thomas Sowell: screen shot from
Uncommon Knowledge interview

Fine. Of course. “But much, if not most…”  This is the thing with you: the dependent clause is where the sting is. “But much if not most of it was prior to the massive expansion of the American welfare state.”

That is so counter—I want to say counter-intuitive, because we hear so much about African-American progress and civil rights and the establishment of the welfare state, that it really has become kind of an American intuition. Explain yourself, Dr. Sowell.

TS: Well, as of 1940 87% of Black households were in poverty. Over the next 20 years that declined to 47%. This is all prior to the civil rights laws, prior to the social welfare policies of the Johnson administration. Over the next 20 years it fell an additional 18 points. But that was just the same trend continuing—at a reduced rate.

Affirmative action is even worse, because, as I remember—I’m trying to think now, the numbers—I think it was something like, the poverty rate was something like 30% among Black households before affirmative action. And a decade after affirmative action it was 29%. This is not the same as the 40% decline that occurred before there were any civil rights laws and before there was any social welfare state.

PR: So, what happened between 1940 and 1960 was the post-world war economic boom.

TS: It was that, but it was also the massive migration of Blacks out of the South.

PR: So they’re getting better education and jobs?

TS: That’s right.

PR: OK. Now, you mention cultural and social retrogressions. Again I’m quoting you: “Arguably the most consequential of these was the decline in two-parent families.”

Explain that one—among African-Americans, we’re still talking about.

TS: Yes. You know, when they talk about things like this, they talk about the legacy of slavery.

PR: Right.

 TS: And I argue, empirically it’s not that; it’s the legacy of the welfare state. Because, as of 1960, which is almost a hundred years after slavery ended, the majority of Black kids were being raised in two-parent households. But within one generation after the welfare state, that had dropped down to a minority. So the majority of Black kids today are raised in one-parent households. When you think about it, I mean, centuries of slavery, generations of Jim Crow did not destroy the Black family. But one generation of the welfare state did.

PR: The Moynihan report, what was it, a call for national action—“The Negro Family: A Call for National Action,” was 1965—fifty years ago. And his principle point of alarm—and again, now I’m trying to recall the statistics—but I believe the out-of-wedlock birthrate among African-Americans in 1965 was 25%.

TS: Something like that, yes.

PR: And he was so alarmed that he wrote this report. And today it’s over 70%. And, by the way, the rate among whites is one third at this stage.

TS: Yes.

PR: So, how does the family breakdown fit into an economic understanding? Is the social breakdown of the American family something that we have to understand aside from the tools of economics? It just doesn’t fit into the supply and demand curve?

TS: This occurred at a time when the black income was rising. And so, we’re saying that previous generations of Blacks with lower incomes and more racial barriers—the family stuck together under those conditions. And under the new conditioned, which were advertised to make for great progress, in fact created great retrogressions. And I think many people who were gung ho for the idea that this was going to be progress simply cannot bring themselves to look at the evidence and say, “My God! We made things worse.” (ending 22:39 or 43:06 minutes)

There are two Spherical Model principles illustrated here:

·         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.

·         Civilization requires strong families. Anything that decays the strong family—in which married mothers and fathers together raise their children in love and security—leads to increased less civilization, prosperity, and freedom.

Freedom, prosperity, and civilization are closely interrelated. The way to get the positives we want require living the principles in all three spheres at the same time. But the starting place is the social sphere. Family is the basic unit of civilization. One strong family is its own civilization. Yet another strong family, and another, builds to thriving communities.