Month: October 2013

A Warm Welcome

Brandon Christensen Current Events , , ,

Ladies and germs, may I present to you our newest member here at the consortium: Audrey Redford!

Audrey is currently a second year Ph.D. student in the Department of Agricultural and Applied Economics at Texas Tech University. She also works as a Graduate Research Assistant for the Free Market Institute at Texas Tech University. Audrey graduated from James Madison University in 2012 with a B.B.A. in Economics with a concentration in Political Economy.  Her research interests include Austrian economics & political economy, particularly their applications to analysis of the War on Drugs in the United States. She hails from Richmond, Virginia.

Her debut post can be found here. I’m extremely excited about having Audrey on board.

Criminalizing Innovation

Fred Foldvary Economics, Liberty , ,

By Fred Foldvary

The U.S. government has attacked an entrepreneur and his new product, as another episode of the federal government’s war on enterprise. In this case, the entrepreneur CEO is Craig Zucker, the company was Maxfield & Oberton, and the product was Buckyballs.

Buckyballs were small magnetic spheres made of neodymium, a rare-earth element that is a powerful magnet. As they stick together, the balls can be assembled into shapes such as pyramids. They were named “Buckyballs” after Buckminster Fuller, an American architect, inventor of the geodesic dome, and futurist visionary. His friends called him “Bucky,” and the neodymium spheres were somewhat like Bucky’s domes.

The company imported the balls from China and started selling them in 2009. They became a popular office toy. But the Buckyballs were banned in July 2012 by the federal Consumer Product Safety Commission, which is now seeking to prosecute Zucker for having sold the balls.

In 2012 the Commission also sent letter to retailers warning of the risks to consumers of using Buckyballs and asking them to stop selling them. That was effective in stopping the sales. The Commission stated that the balls were a hazard for young children who swallowed them.

The company had developed the Buckyballs in collaboration with the Consumer Product Safety Commission, and after the action by the Commission, the firm provided it with a corrective-action plan. Buckyballs were sold with a warning against access by children, and they were not sold in toy stores. But the Commission pursued a lawsuit against the firm even before examining the corrective plan. As pointed out by the Wall Street Journal article (cited below) on that case, there are many potentially dangerous products being sold, such as cleaning chemicals, knives, and balloons. Buckyballs were intended and marketed for adults, and, according to the WSJ article, no deaths have been associated with the Buckyballs.

The Commission declared, as a justification for the ban, that Buckyballs have “low utility” and are unnecessary, despite purchases by 2.5 million adults who spent $30 each. The principle established by the Commission is that government determines which products are desirable, not consumers. Any product could be banned by the standards of the Commission.

The company then engaged in a publicity campaign regarding the actions by the Commission. In the end, the government was too powerful to resist, and the company was terminated in December 2012. However, in February 2013, the Commission charged Zucker as being personally liable for the costs of a recall costing $57 million if the Buckyballs are judged to be defective.

The federal government has by this action abolished limited personal liability under U.S. law for corporations as well as partnerships. From now on, the executives of a firm will be vulnerable for the liabilities of the firms. Any entrepreneur will now risk losing all that he owns if he engages in the production or distribution of any product. The effect of this government action is to strangle American entrepreneurship.

In the case of United States v. Park in 1975, the Supreme Court ruled that the CEO of a food company was criminally liable for a rodent infestation. This ruling was based on the federal Food and Drug Act. But another case, Meyer v. Holley in 2003 ruled that ordinary liability applies unless there is a clear Congressional intent to hold corporate officers personally liable. The relevant law in the Buckyballs case is Section 15 of the Consumer Product Safety Act, which regulates corporate persons, not individual persons.

The WSJ article says that since Zucker did not commit any criminal violation, the Commission’s continuing prosecution of Zucker “raises the question of retaliation for his public campaign against the commission.” If the Commission achieves its goal, personal-injury lawyers will take advantage of personal liability to go after CEOs and other company personae.

This action by Congress, the Courts, and the Commission has to be seen in the perspective of a broad war by government on private enterprise and consumer choice, using taxes, restrictions, mandates, and prosecutions, ultimately resulting in an economy that is nominally private but substantially controlled by governmental chiefs. The name for that system is “fascism.”

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Reference: Sohrab Ahmari, “What Happens When a Man Takes on the Feds,” Wall Street Journal, August 31-September 1, 2013, p. A11.

Breaking Bad Policy of Drug Prohibition (spoiler alert).

Audrey Redford Current Events, Economics, Law , , , , ,

I would argue that the only positive thing that has come out of the War on Drugs is awesome TV. From The Wire to Breaking Bad, illegal drug markets have brought us entertaining and groundbreaking television, but at what cost? As Breaking Bad has sadly come to an end, I would like to look at how things might have been different for Walter White and friends in a world without the drug prohibition. While I loved the adrenaline rush I experienced watching every episode, the violence and death highlighted in the show is indicative of a major problem.

Let’s assume for a moment that prior to the creation of the show, the U.S. government ended drug prohibition. Unlike what many paternalistic politicians would like you to think, the world would not descend into utter chaos or come to a grinding halt. How would this effect the show? Well, first and foremost, there would be no DEA (high five, hell yes)… thus Walter would have never gone on the ride-along that ultimately led him to a reunion with Jesse Pinkman. It is also likely that Walt would never consider drug manufacturing as a means to solving his money problem for cancer treatment. Why do I say this? The profit margin of the caliber in the show would not likely exist in a world outside of drug prohibition. In the illegal markets, the cost and risk associated with engaging in illegal activity and possibly getting caught serve as very costly barriers to entry. There are also sizable costs associated with self-regulation in illegal markets because the court system is not an available outlet for settling disputes. This drastically limits the number of producers willing to participate in the market.

Consider the circumstances surrounding the murder of Combo (Jesse’s friend that was shot by that young kid for selling on the wrong turf). There was an implicit contract that highlighted who could sell where, and at the urging of Jesse’s quest to build his empire, Combo started selling in neighborhoods that “belonged” to a rival drug gang. In illegal markets, how do you set an example that your turf cannot be taken? You resort to violence to make an example of what will happen to anyone who tries to disregard your jurisdiction. Furthermore, the legal recourse in a murder associated with other illegal activity is complicated. Jesse could not simply go to the police and explain that Combo’s death was a result of a drug turf dispute without implicating himself in a slue of crimes. However, if the drug prohibition component was absent from this equation, the rival gang would have not have used murder in order to solve the problem. For example, do you hear of a CVS owner shooting a new-to-the-area Walgreen’s owner for opening a new location? But even in the unlikely event that this happens, because there is not any illegal activity taking place outside of the act of murder, all parties involved can provide the necessary authorities (ideally private policing companies… but that is a blog post for a later time) the information needed to bring the murderers to justice without fear of being punished. This would allow Jesse to use the court system to punish the rival drug gang members rather attempting to murder them himself (and successfully killing them thanks to Walt’s fatherly instinct and his Pontiac Aztek).

Absent that extensive (but not exhaustive) list of costs brought on by the nature of illegal markets, many potential drug producers can move into enter the market. This forces the price of the goods sold to decrease, lessening the profits available to each drug producer. Thus, the sizable profit margin that led Walt down the road of methamphetamine production would not be as high in a world with legal production (at least on the scale of production consisting of Walt and Jesse in a trailer… However, if he started his own pharmaceutical company specializing in meth, that would be a different story… one that I hope to elaborate on soon, highlighting how ending the War on Drugs is only part of the battle).

Another situation that could have been avoided was the virtual enslavement of Walt and Jesse by Gus Fring. Once again, the hold that Gus had over Walt and Jesse (knowledge and proof of their involvement in countless felony-crimes) would be a non-issue outside of a prohibition state. The same could be said about the situation when Tuco initially refused to pay Jesse for his product. Breaking Bad is full of the issues associated with the limited ability for individuals to establish, execute, and enforce contracts. With substantially better defined property rights and access to a court system to settle disputes without fear of being punished, drug producers would not need to engage in violence to settle these disputes.

So where does this leave us? Well, it would leave us with a rather boring TV show where the most exhilarating dilemma is which daycare Skyler & Walt will choose for baby Holly. No more train heists, no more wheelchair bombs, and no more car trunk machine guns. Though I do love my fellow Richmonder’s directorial and writing brilliance (Vince Gilligan, you are the man), I would be willing to trade it any day for a freer state devoid of the devastating effects inflicted on all of our lives (directly or indirectly) by the War on Drugs.

Brandon’s Bad Numbers

Brandon Christensen Comments

Hi all,

I was alerted to the fact that I confused the miles/kilometers calculations in my latest post on India and macro institutions. It’s been updated accordingly.

Was I too Rash on Juries and Nullification?

henrymoore Comments, Law , , , , , , , ,

I made a certain statement (a status update, not a comment) on Facebook, and in retrospect maybe it would have been better to have made it more intelligible (okay, and less harsh as well). Now instead I must go through the statement line by line and clarify and defend it. I don’t know if it is good blogging etiquette or not to drag Facebook into it, but this started out as a clarification for the Facebook crowd and transformed into something to big to post there. We’ll see, I guess. Here is the statement I made:

Idiots (to speak kindly) who call others cowards for trying to get out of jury duty, thereby eliminating the less than 0.00001% chance that that person might have to actually “help their fellow man” are perhaps no less dull and collectivist-minded than the feverish nationalist buffoons who make similar statements about “serving” overseas. The purpose of today’s “defense” system is to murder innocents abroad. The purpose of today’s “justice” system is to incarcerate innocents at home. Any person who wants no part in this is not only not a coward, that person is a hero. Anyone who says otherwise should put their money where their big, loud mouths are. How brave and principled are you really, huh tough guy? Quit yer bitchin’ and show me! Get the hell off of Facebook and the comments sections of blogs and put your own life and livelihood on the line.

This all started when a Facebook friend (a very well-known person in certain circles, but I guess I won’t bring up his name) mentioned he had been “conscripted” for jury duty. This interested me at the time because it was just days after I had sent in my own paperwork for jury duty (this would be the second time, click here for my thoughts on the first). As is usually the case with this particular person’s statuses, the comments section was on fire. But the debate was at least a little more civil than the one that took place in the comments section of a blog post that someone linked to in this Facebook thread. It was an article by the estimable Douglas French of  Laissez-Faire Books and the Mises Institute recounting how he had gotten out of jury duty by telling the lawyers in the voir dire process, and later the judge, that, if made a juror, even if he thought the defendant guilty, he would not convict. That even if he was the only such person, he would hang the jury and nullify a bad law.

To my surprise he was accused in several comments of being a hypocrite and a coward because he chose not to perjure himself in order to get on the jury so that he might actually nullify, rather than do as he had done by merely telling off the judge and the attorneys. Sure, some of these commenters concocted clever ways whereby Mr. French could have (hindsight is 20/20) spoken ambiguously in order to get on the jury and then nullify without technically committing perjury but doing this would have required not only premeditation, but also that the person (in this case a humble economist) perfectly answer any objection brought up by the two (three, if you count the judge) cross-examining lawyers in the voir dire process. This would be like expecting the Oakland Raiders to beat the New York Yankees. In Yankee Stadium. Playing baseball. That’s nothing if not an “undue hardship.” Despite having this explained to them (on both the blog and on Facebook) there were those that persisted in their stupidity and their rudeness. Their argument at the end of it all amounted to, “so what, you’re still a coward.”

Now let me explain what I meant by my original statement, line by line:

Idiots (to speak kindly) who call others cowards for trying to get out of jury duty…

These specific people really are idiots in my estimation. Not because they think jury duty might be a good way to help your fellow man, but because they readily abuse others who don’t think it is all it’s cracked up to be, and because, even after the latter view point has been soundly defended, still won’t make room for the fact that other people might have more important obligations (or even trivial druthers) than being at some magistrate’s beck and call all week, pressured into agreeing with 11 other people on something that might be worth disagreeing on.

…thereby eliminating the less than 0.00001% chance that that person might have to actually “help their fellow man”…

I am referring here not to pronouncing a “not guilty” verdict on falsely or mistakenly accused innocents (which is why juries ever came about in the first place, I believe, and is a very admirable thing to do), but specifically to hanging a jury thereby nullifying bad law. In order to even get on a jury to do this you basically have to lie in voir dire, which is perjury. The 0.00001% may or may not be exaggerated, but you don’t exactly hear about jury nullification every day so I bet it’s not too far from the mark. If I had been talking about mere “not guilty” verdicts this would be way off. That number is probably more like 50%.

…are perhaps no less dull and collectivist-minded than the feverish nationalist buffoons…

These jury-shamers I am talking about appear to be primarily libertarians, a group of people who seem to pride themselves on being bright and individualist-minded, so comparing them to those they despise the most (basically various shades of Neoconservatism, but in a pinch, Democrats who think Obama deserved his Nobel Peace Prize will do nicely) is the ultimate dig.

…who make similar statements about “serving” overseas.

The kinds of statements I am referring to in my comparison of jury-shamers to Neocons/Obama-Peacers are analogous to jury nullification, not analogous to “not guilty” verdicts. So maybe I’m talking about a person who admits in some cases that innocent people die even in the United States’ wars, but for the most part it’s just the bad guys. And then maybe, as if that didn’t make them look foolish enough, they make some statement to the effect of, “You can disobey immoral/unethical orders without being accused of insubordination, then court-martialed and punished.”

Note that these immoral/unjust orders might still somehow be lawful, or that even if they are unlawful, there is still pressure from command and your peers to carry them out. But let’s not be coy: just because something is done by the book does not mean it is right or correct or even excusable. Having rules of engagement may be better than having no rules, but they are no substitute for not invading and occupying in the first place.

The purpose of today’s “defense” system is to murder innocents abroad.

Collateral damage is murder, so even if these wars are motivated by good intentions, that’s what’s going on. However, I don’t think we should give the same exact Powers That Be that we accuse of being malevolent at home the benefit of the doubt by assuming that they are somehow benevolent abroad.

The purpose of today’s “justice” system is to incarcerate innocents at home.

This is somewhat different than saying that the “defense” system’s purpose is to murder innocents abroad. While there may be collateral damage of sorts, that is not what I am talking about. Here, I am talking about bad law. You may be “guilty” of breaking the law, so in that sense the purpose of the “justice” system is to incarcerate the “guilty”, and not as I said, the innocent. But this assumes that the laws in question are all good.

That is quite an assumption to make about the government of the supposed freest nation on earth that happens to have the highest incarceration rates in the world. The elephant in the room here is the Drug War. Most of us can agree that drugs are generally bad news, and that the violence associated with drugs is even worse news, but far too few seem to realize that this is just the natural result of prohibition. Surprise! It didn’t work with alcohol, which, according to some metrics, is FAR MORE DANGEROUS than certain hard drugs, but somehow these people thought it was going to work with pot and heroin? In a post-1960s world?! What were they smoking?

Any person who wants no part in this is not only not a coward, that person is a hero.

Freedom of conscience. That’s all this is. Would we want to live in a world where people are led to believe that exercising this right somehow makes them spineless (again, we can all agree on something, that just having your conscience tell you something doesn’t make that something right)? Well then, just open your eyes. Look out the window. Turn on the TV (the only channel immune to this might be the Weather Channel). People with an actual conscience or actual principles are laughing stocks. They are the ultimate fools in the eyes of the world. And for that, yes, even the ones I disagree with, they have my respect.

Anyone who says otherwise should put their money where their big, loud mouths are.

Here I’m only applying the same standards to the accusers that the accusers are applying to the accused. Judge not, that ye be not judged…Thou hypocrite, first cast out the beam out of thine own eye; and then shalt thou see clearly to cast out the mote out of thy brother’s eye…Therefore, all things whatsoever ye would that men should do to you, do ye even so to them…Physician, heal thyself…He that is without sin among you, let him first cast a stone.

How brave and principled are you really, huh tough guy? Quit yer bitchin’ and show me! Get the hell off of Facebook and the comments sections of blogs…

Well, it sounded good at the time. But as a wise guy once told me, “vulgarity is no substitute for wit.”

…and put your own life and livelihood on the line.

In the case of “defense” and the military, especially in time of war, your life is on the line. No one disputes that. In the case of jury duty, especially when you perjure yourself in order to nullify bad law, it could very well be your livelihood that is threatened. But even where there is no perjury or nullification going on, there is still a case to be made that your livelihood is in danger.

I understand it is the situation in probably most states that your employer cannot fire you (and may even be made to remunerate you in some way) for taking time off for jury duty. Were it not for this law (which places burdens on employers that arguably shouldn’t be there), there’s at least the possibility that you would not be retained/paid for this “time off”, especially if your employer was not particularly fond of the unjust and immoral incursions of the government into everyday life. And why shouldn’t your employer be able to look out for his own best interests, even if it means firing your sorry behind? Does he “owe” you your job, indefinitely, no matter what? If it wasn’t for our crummy system and you were to be fired or lose pay because of jury duty, would your instinct really be to blame your employer? Not the people who conscripted you for jury duty in the first place? Or not the people who made life so miserable for some so-called criminal that you felt it was your duty to aid that person by nullifying the bad law he was being tried for breaking?

Additionally, since jury duty, unlike the military (these days at least) is something the state compels people to do (ultimately backing up their threats with actual guns, prisons, and larceny), telling these loud mouth accusers to put their livelihood on the line needn’t mean they have to serve on a jury (something they cannot do unless called upon). It could very well mean instead that they go out and agitate through means of civil disobedience: resisting arrest, harassing magistrates and LEOs, and so forth. Don’t act so surprised by these seemingly bizarre suggestions; we are talking about libertarians here, after all. And civil disobedience, though not quite so much as actual violent acts (only justified in self-defense, need I remind you?), can very well land you in the slammer and/or ruin your reputation as a good cog in the machine. If that doesn’t threaten your livelihood, I don’t know what does.

Why is India so poor? A macro approach

Brandon Christensen Liberty , , , , , , , ,

India’s total area, in square kilometers, is 1,222,559 3,166,414.

The total area of France, Germany, the UK, Ireland, the Netherlands, Belgium, Luxembourg, Denmark, Sweden, Iceland, Norway, Finland, Switzerland, Austria, Italy, the Czech Republic and Slovakia (or “the West”), in square kilometers, is 1,223,543 3,106,585.

Think of this comparison in terms of regions: one region is India, the other is the West. Both regions are densely populated. Both regions have a number of languages and an even greater number of regional dialects. Yet one region is wealthy, and the other is poor.

One way to look at this phenomenon would be to glance at the macro institutional structures in place in these two regions. India is one country. The West is composed of 6 17 countries. That’s six seventeen centers of power, as opposed to one, within territorial spaces that are roughly equivalent in size.

If we think about these macro institutions and incorporate them into other institutional arguments that focus on the micro institutions, then India actually has a lot of hope. The West saw numerous wars before it finally came to the arrangements it now has (six seventeen independent centers of power and a free trade zone binding them together), so India has a great blueprint for improving its macro institutions.

On the downside, of course, is the fact that many factions won’t really care if India becomes freer and more prosperous, so long as they get theirs. Along with the standard public choice explanation, the path dependency argument also suggests that India has a tough road ahead.

Sometimes being a libertarian sucks.

Update: Dr Gibson was kind enough to point out that I had initially calculated India’s size in square miles rather than square kilometers. I have taken that into account and updated it accordingly. Conceptually, my argument actually grows in strength with the corrected size. 

Around the Web

Brandon Christensen Current Events, Links , , , , , , , , , , ,
  1. Ken White has the best post of the year (so far) on free speech
  2. Angelo Codevilla on the US’s god-awful intelligence apparatus
  3. Reclaiming fairness as a precept of commerce. Bart Wilson argues that we’ve been a-travelin’ down the wrong path.
  4. Contra Dr Delacroix‘s thoughtful argument, Jon Harrison thinks the GOP is terminally stupid
  5. Imagining a remapped Middle East: Robin Wright muses about how 5 countries could become 14 (and a map for context)
  6. A ‘comments’ thread on a libertarian blog in which a lone libertarian takes on some of the neo-reactionary elements that Andrew has been blogging about.

FATCA closes Americans’ Foreign Bank Accounts

Fred Foldvary Economics , , , ,

by Fred Foldvary

When the USA adopted the 16th Amendment to the Constitution a century ago, did the people understand that this would deprive Americans world-wide of foreign banking services? Americans thought that the income tax would just grab the money from the rich, but they did not understand that the income tax would tax everybody else more. All that is needed to equalize wealth without damage to the economy is to stop government subsidies, but this requires an economic sophistication that so far has eluded most people.

Inherently, an income tax yields an incentive to cheat, as the government depends on reporting. So the Internal Revenue Service has to monitor financial accounts to prevent tax evasion. Gradually, the IRS has extended its reach into accounts, first within the USA, and now into the foreign accounts held by American citizens.

No other country has imposed such costs and mandates on foreign accounts as the USA. So ironically the “land of the free” has the least economic freedom for its citizens abroad. The Foreign Account Tax Compliance Act (FATCA), enacted in 2010 requires foreign financial institutions to make reports on American accounts. Foreign financial institutions with American customers are required obtain a Global Intermediary Identification Number. FATCA requires foreign financial firms to identify their U.S. account holders, to disclose the account holders’ names, social security or other tax IDs, addresses, and the accounts’ balances, receipts, and withdrawals. For some accounts, the foreign bank is required to withhold some of the interest paid to the account, and send it straight to the IRS. This US law overrides the privacy laws of the foreign countries.

US law is thus legislating not only within US territory but throughout the whole world. If a financial firm does not comply, the IRS will tax 30 percent of its US-sourced income. The IRS is also busy laying out the legal infrastructure for enforcing this law with agreements with foreign governments for data sharing. Governments world-wide are signing on, because they too face the problem of tax evasion when they tax income that can hide.

FATCA does not just affect fat cats. Many foreign banks are now refusing to provide Americans with bank accounts and are closing the accounts of Americans, who are now also unable to obtain mortgages and insurance abroad. Americans are increasingly giving up their US citizenship in order to be able to work or retire abroad.

The US economy depends on international trade and global finance, with many Americans working abroad for US and foreign firms. Six million Americans live outside the territory of the USA. If Americans can no longer have foreign bank accounts, because the costs to the banks are too high, they will be so hampered that fewer Americans will be willing to live abroad, and this will hurt American enterprise.

Since the US government cannot directly impose laws on foreign lands, many foreign firms will sell their US affiliates and stop holding assets within the USA, thus putting themselves beyond the control of the US government. The overall cost to the US economy of FATCA may be much greater than the increase in tax revenue from reduced tax evasion. Also, those who seek to evade income taxes will find other ways. High taxes induce tax evasion, and enforcement drives evasion into other channels. How successful are US drug laws in stopping the smuggling in of drugs, and how successful have US immigration restrictions been at preventing illegal immigration?

Another consequence of greater reporting of American accounts is the increased risk of identity theft and theft of money from accounts. The greater the reporting, the greater the revelation of data that can be stolen.

It is no use seeking to repeal FATCA. The regulation of accounts, no matter how costly, follows from the income tax being, as Henry George put it, a tax on honesty. The taxation of wealth that can hide and flee requires strict and costly reporting and enforcement. The only effective remedy is to tax something that will not flee, hide, or shrink when taxed. A tax on land value cannot be evaded, and if that were the only tax, there would be no need to impose costs on finances.

Does the New York Times read NOL?

Brandon Christensen Liberty, Links , , , , , , , , , , ,

Parag Khanna definitely reads Notes On Liberty. From his latest op-ed in the New York Times:

Devolution is even happening in China. Cities have been given a long leash to develop innovative economic models, and Beijing depends on their growth. One of the most popular adages among China watchers today is: “The hills are high, and the emperor is far away.” Our maps show a world of about 200 countries, but the number of effective authorities is hundreds more. [check out “Federalism, Chinese Style” by Gabriella Montinola, Yingyi Qian, and Barry R. Weingast for a fascinating look at the ongoing devolutionary trends in China – BC]

The broader consequence of these phenomena is that we should think beyond clearly defined nations and “nation building” toward integrating a rapidly urbanizing world population directly into regional and international markets. That, rather than going through the mediating level of central governments, is the surest path to improving access to basic goods and services, reducing poverty, stimulating growth and raising the overall quality of life.

Connected societies are better off than isolated ones. As the incidence of international conflict diminishes, ever more countries are building roads, railways, pipelines, bridges and Internet cables across borders, forging networks of urban centers that depend on one another for trade, investment and job creation.

I’ve been making this same argument here at NOL for quite some time now, but Dan Drezner disagrees. He has three bones to pick with my argument (as augmented by Dr Khanna in the NYT):

  1. People were writing about devolution all the way back in 1995, so Khanna’s insights aren’t particularly new or exciting. This is true; if you’ll remember my recent post on federalism as an alternative to imperialism you’ll recall that Adam Smith was making the same argument as Khanna in 1776.
  2. Contra Khanna, states have always been in competition with other forms of governance (not government). Khanna needs hard empirical evidence to prove that the devolution he writes about is as prominent and fast-moving as he claims it is.
  3. Other academics, mostly economists, have been claiming precisely the opposite of what Khanna is arguing; namely that states have been increasing in size and scope over the past few decades. Drezner hesitantly errs on the side of the economists, who at least bring data to the table, but claims that there is probably a middle ground between Khanna and the economists.

As far as throwing out ideas to back up the devolutionist argument, it might be a good idea to look at the nation-state’s loss of monetary sovereignty to supranational (or quasi-national) organizations in the West. Or the separatist tendencies of regions within supranational organizations like the EU that threaten to break up nation-states. Or the fragility of African and Islamic states, as evidenced by the dictatorships and wars often found in these regions. Or the multilateral trade agreements that are becoming more and more inclusive, and more and more complicated. There are probably many more, and if you can think of any feel free to leave them in the ‘comments’ section.

With all of this said, Drezner has a point. The state has found a number of ways to counteract the various effects of globalization, and proving that the state is in decline is, for the moment, extremely hard to do. Yet Drezner’s point says nothing about Khanna’s overall argument, which is merely that devolution is a good thing and ought to be embraced by more progressively-inclined people.

The interesting question here is not the current situation of the state itself, but rather if a consensus can be forged, among thinking people, around the idea that political decentralization and economic integration leads to freer societies. Until a consensus built around this idea can be reached among intellectuals, I fear despotism will reign in most parts of the world at most times.

The Federal Shutdown, the Debt Ceiling and an Extremist’s Morning After

Jacques Delacroix Current Events, Politics , , , , , , , , ,

The fake government “shutdown” is already over. I hardly had time to enjoy it. I was just beginning to make a list of federal services that are “non-essential” according to the federal government itself. I was kind of hoping that the EPA, for example, would bite the dust. I does not seem fair.

The debt ceiling problem is also dealt with for the time being. It’s another expression of the same underlying problem that led to the “shutdown.” (See below.)

OK, after the crisis that just ended temporarily, it feels to conservatives like Great Britain in August 1944. The Luftwaffe rules the skies. Our few remaining pilots keep getting shot down. Our central city is bombed nightly. Everyone else who is civilized has already folded. Nightly, they are opening the Champagne in Berlin. We stand alone. It does not mean that we are wrong to stand.

Still, it also feels like the morning after. Time to look into it.

The so-called crisis is suspended for about four months. Nothing is solved. The Republicans collectively took a public opinion drubbing, it’s true. Speaking for myself, I will repeat what I said earlier: I am not attached to the Republican Party. I care only about limited government conservatism. Until now, the Republican Party was a not-so-bad vehicle for that view of the world. If it does not have the backbone to carry it further, so be it. Yes, I think that even if there is no other likely large vehicle in sight. I want to avoid pointless imaginings about my meaning by saying it clearly: What I fear most is not just another electoral defeat but a meaningless and useless electoral defeat such as the Republican Party suffered in the last presidentials. What hurts the most is the large number of nominal Republicans who just stayed home. Gov. Romney’s program was not the hill you want to die for. Gov. Romney was not the kind of commander who could induce you to die for that hill.

Here is the central conservative issue in a capsule. The phony government shutdown and the reappearing debt ceiling issue are parts of the same dark cloud:

A federal government that is deeply and routinely corrupt as well as shockingly incompetent keeps borrowing mindlessly to sustain the ordinary business of government.

It’s despotic; its’ a waste of resources; most of all, it’s immoral.

The mindless, nearly automatic borrowing is the worst part.

Myself, I think that I, my children and the federal government should only borrow under two circumstances:

  1. When the loan is to be applied directly to the acquisition of a tool that will contribute to greater earnings in the proximate future. I use the word “tool” liberally. Better freeways, for example, could easily qualify.
  2. When there is a strong presumption that we will earn more tomorrow . That’s with or without the condition in 1 above. This is separate. In the case of a country, for example demographic growth may by itself create such a presumption.

The present federal government’s borrowing fulfills neither condition. It’s borrowing to meet everyday expense. It’s as if I borrowed to buy bread for my lunch sandwich. There is also no reason so far to believe that the United States economy will grow a great deal tomorrow. (This could change the day after tomorrow if we had, for example, sudden access to new cheap energy. The Obama administration is doing its best to prevent precisely this from happening – Makes you think along dark lines, doesn ‘t it?)

Routine even legal, systemic federal government corruption: The widow of (wealthy) Senator Lautenberg received $174,000 from Congress because her husband took the trouble to die while in office. (WSJ 10/18/13, p. A12)

Federal Government incompetence: See the health insurance exchanges, in preparation for four years! Enough said! Note: I am not sure whether I am more afraid that its implementation will succeed or that it will continue to fail in exemplary fashion.

Mindless federal borrowing: It has become an integral part of the culture that the government must borrow to live. I said “integral part of the culture.” Below, an illustration I could not invent if I wanted to.

Larry Fink is the CEO of BlackRock, by some defensible measure, the largest investment firm in the world. Mr Fink said 10/16/13 or 10/17/13 (WSJ):

I have been in this business for 37 years. For 34 years I did not know there was such a thing as a debt ceiling.

Our point exactly! One of the highest placed business executives in the land takes government borrowing so much for granted that he does not know it’s subject to Congress-imposed limitations. He even sounds incensed when he learns the truth.

That’s what makes us conservatives, “extremists.”

Why do I care? I care because, unless there is another wave of fast economic growth lasting for several years, we are guaranteeing that our children and grand children will live in poverty. It’s wrong; it’s immoral.

And then, there is the growing phoniness of the public discourse including discourse by the mainstream privately owned press.

During the two days following the cessation of the pretend-government “shutdown,” the main media are eager to pretend that the multitudes feel great relief. They talk as if the average folks out there had experienced tremendous suffering because federal non-essentials were furloughed. I, for one, feel no relief at all. I don’t know anyone who does. (Agree, it’s an unsystematic sample but it’s a sample.) This is all the media’s deliberate exaggeration or a misplaced identification with federal public servants. It’s becoming more and more obvious that such public servants are overpaid and that they enjoy too many unearned privileges. (State public servants also, in some states, such as mine, California.) I don’t identify. It pisses me off. The more I know, the more pissed off I am.

They, the mainstream media, echo dumbly the noises coming from the administration about the alleged “costs” of the “shutdown” to the national economy. No one takes the trouble to do a net calculus, even to raise the issue of a net calculus. Isn’t it true that for each day certain federal bureaucracies are unable to do their job, some of the main producers in the nation are better able to produce? Again, the EPA comes to mind. And the IRS, of course. And a number of federal agencies whose names I don’t even know.

Besides, it’s an empty formula, a truism that (theoretical) wealth that fails to be produced usually is not regained, as the administration says gravely.

N. S. ! That’s what happens with Columbus Day and with Presidents’ Day, for example. (When only public servants and bank employees don’t work. When nearly the whole private sector keeps on producing wealth.) Why not cancel both holidays if non-production is a cause for worry? Why not make federal public servants come to work on both days if the president is worried? He only need issue an executive order. Bet you, he won’t even mention the possibility. And why do I have to state the obvious? Why aren’t the media doing their job? Have they been hypnotized? And, I almost forgot: if the president loses sleep over the missed production of federal employees, he could imitate the French in reverse and institute the federal forty-four hours work week. Would anyone notice?

Something else does not add up in the media’s discourse. For days, during the so-called “shutdown,” both administration officials and supposedly independent pundits threatened us with a world economic abyss because of number of non-essential federal employees were prevented from going to work. (I am not making this up; I am not exaggerating that we were told this ad nauseum; go back to those recent days, you will be amazed.) Yet, the day he current agreement is announced, the day we jumped form the edge of the supposed abyss, the markets reacted limply. The Dow Jones Industrial gained a lackluster 175 points that day. Now, that’s nice; it’s a gain for sure. However it’s no more of a gain than happens, for example, when the international price of the oil barrel comes down by ten dollars. The next day, the Dow Jones was flat. Trouble over; no big deal after all. Forget what we said yesterday. Forget the alarm. We were just kidding!

The Republican cave-in saves us from falling into the Grand Canyon and the market gives us a small hot dogs party by way of celebration! Does it make sense?

President Obama’s deftness never ceases to amaze me. No mistake seems to stick to him. On the day of the agreement, he declared that the new debt ceiling is not really debt. No one in the mainstream press questioned this absurd statement. Let me repeat, by the way, that I don’t think he is lying. He really does not know better. Academia is overflowing with his type of intelligent ignorance.

Perhaps, I am not grasping what’s going on, culturally. Perhaps, the reservoir of white American guilt concerning the long atrocity that was slavery, concerning racial segregation and discrimination also, is far from exhausted. Perhaps, the president can write checks on this for a long time to come. Or maybe, as Rush Limbaugh suggested, he struck a giant chord with the millions by giving them a chance to see themselves as victims. If you are a victim, almost any grotesque behavior is permissible. Soon only my wife, our grown children and I will be the only non-victims left in America. It will be a lonely existence. And, I wonder how long we will be able to support the victims because two of us are long retired (thus mirroring American demographics to come).

At one point one of Mr Obama’s servants referred gravely to the global reputational damage the shutdown has caused to the United States. (I don’t remember exactly who or when but I heard it with my own ears.) The “red line” in Syria about using chemical weapons does not in any way affect the credibility of the US, I suppose. The hundreds of civilians who died from chemical weapons died and all is forgiven. In the words of Pres. Obama’s former Secretary of State, “What difference does it make now?”

The day after the agreement the president gave another speech in which he advised those who don’t like something to just win elections in order to be able to change the something. I don’t think it was mistake. It was Freudian slip. President Obama does not believe that tea party Senators and Representatives who oppose him so tenaciously were just as elected as he was. It sounds familiar to me because I know history rather well and French history very well. The weakling tyrant, Louis-Napoleon, the Emperor Napoleon the Third (there was no Second) was initially elected. His supporters really thought that if you were elected by a sizable majority, you were morally allowed to do anything. They thought that was democracy. (There is a very nice readable piece by my old buddy Karl Marx on this topic for your reading pleasure where and when it rains: The Eighteenth Brumaire of Louis Napoleon, Abstract of Chapter I.)

Thus do we drift fast toward a one-party state. I warned about this a long time ago, before Mr Obama was even elected. (See also on this blog: “Fascism Explained“)

The unspeakable Senate Democratic leader Harry Reid said after the agreement was reached: “This is a time for reconciliation.” I don’t think so. I hope not.

Про политику народных волнений в России

Evgenii Grigorev Current Events , ,

С недавних пор в России стала очень популярна новая форма диалога с властью, которая получила название “народный сход”. В последнее время подобные акции случаются все чаще и чаще и носят все более спонтанный характер. Как правило, это несанкционированные митинги, которые зачастую переростают в погромы и столкновения с полицией. Буквально несколько дней назад в Москве прошел такой народный сход на волне резонансного убийства одного из местных жителей мигрантом с Кавказа.

Не буду рассказывать про толерантность, терпимость к незаконной миграции и засилью приезжих с Кавказа. Местное население устало, правительство считает, что “все нормально”. Другое дело, что градус эмоционального накала уже настолько высок, что достаточно малейшей вспышки, чтобы произошел взрыв. Район, в котором произошло убийство, славится своей овощной базой, которая по мнению местных жителей является центром этнической преступности. Не сложно догадаться, во что вылился народный сход: погром овощной базы, перевернутые автомобили, столкновения с полицией, 400 арестованных и так далее и тому подобное.

Убийцу-то поймали в конечном итоге. Но самое интересное не в этом. После народных волнений началась массовая проверка приезжих и незаконных мигрантов, несколько полицейских чиновников лишились своих мест…

Неужели власти надо каждый раз давать пинок под зад, чтобы она поняла: у населения кончается терпение. Как осел – пока не повесишь морковь перед носом, он никуда не пойдет. В данном случае роль морковки выполняют народные сходы. Это грустно.

Around the Web

Brandon Christensen Current Events, Links
  1. Generation Libre: a French libertarian website (why don’t you have Google’s Chrome yet?)
  2. eigentümlich frie: a German magazine modeled after Reason
  3. Contrepoints: a French magazine modeled after Reason!
  4. Consortium of Defense Analysts: a new blog with lots of great maps
  5. The Umlaut: an American blog with a German-sounding name

In case you are wondering, many non-American libertarians refer to themselves as ‘liberals’ rather than libertarians because once upon a time, American libertarians were actually liberals. The American Left stole (surprise, surprise) the term ‘liberal’ and began to use it as their own. In response, Americans dedicated to individual freedom became libertarians. Hayek talks about the peculiarity of the term ‘liberal’ in the American context in his book the Constitution of Liberty.

Update: I had to edit the hell out of this post, mostly for grammar.

Which is bigger Ponzi scheme?

Rick Weber Politics , , , , , , ,

A comment on my recent post made me realize that I’ve been wrong about Social Security this whole time. It isn’t quite a giant Ponzi scheme, but if we’re being flexible with our definition of Ponzi scheme it may still be the biggest.

Many people are happy to pay into Social Security thinking they’ll get a reasonable return on their “investment”. To the extent that that’s true, and that return is financed by other people paying in (rather than on actual investments) it’s a Ponzi scheme. But others don’t pay in voluntarily. To the extent that that’s true, it’s like theft but with the robber systematically dropping some of the money. Quasi-Ponzi scheme might be a better term. Social Security paid out $615B in 2008. Let’s guess $650B for 2012. If that was all happy money, it’s one big Ponzi scheme.

But the U.S. government has another project that more closely resembles a Ponzi scheme: Treasury bonds. Here people voluntarily fork over money for a return that is financed in part by later “investors” buying Treasury bonds. Of a $3.5T budget with a $1T deficit, 6% went to paying interest last year (that’s $223B). So 29% of the budget was deficit, and we might conclude that approximately $65B of interest (0.29*$223B) is “Ponzi-financed”.

So now the question is how much of Social Security is “happy money”? Anything more than 10% makes it the bigger Ponzi-scheme. But even if Social Security is heavily financed with “happy money” it is still taken at gun point while purchasers of bonds are there voluntarily. If the government were looking to save $223B and only Social Security benefits and interest payments were on the table, the more ethical choice is to default (if not repudiate). As I recall, I’m ripping off this point from Jeff Hummel.

What the Hell is a “RINO” Anyway???

Wood Liberty, Politics , , , , , ,

I have serious problems understanding the definition of the term ‘RINO’. The term is supposed to mean a Moderate Republican, i.e. a Republican that shares views with a Democrat. However, the term is used by so many contradictory parties that it lacks real meaning. Many people hold up President Reagan as the hard definition of a true conservative, with his quote of “the soul of conservatism is libertarianism”.

In the 2012 election, the four Republican candidates each represented a key demographic of the current Republican base. There was Mitt Romney, a Mormon westerner who had become merged with the moderate eastern Money Trust Rockefeller establishment. There was Rick Santorum, a right-wing Catholic obsessed with social issues and ready to wage a Christian jihad. There was Newt Gingrich, a Baptist-turned-Catholic career politicians who’d passed centrist legislation throughout the Clinton administration. And of course, Ron Paul, a libertarian carrying the youth vote, ironically carrying views of a politician born in the 1890s, who would have been a member of the bipartisan anti-Roosevelt Old Right coalition.

The idea of a RINO came into existence around the campaign of Barry Goldwater, an Arizona Senator, who won the 1964 nomination instead of Nelson A. Rockefeller, the grandchild shared by John D. Rockefeller of Standard Oil and Senator Nelson Aldrich, who pitched the original idea for the Federal Reserve. Even though he won the nomination, Goldwater was written off as an “extremist” by many, and Rockefeller was considered a “moderate”. But what does this really mean?

As America was still very homogenous in 1964, most regions had a strong local culture. At the time, the Republican base was comprised of Midwestern Lutherans, Western Mormons, wealthy New England Episcopalians, and transient career military families. At the time, most Southern Baptists and Catholics were still largely Democrats. Goldwater winning Southern states in 1964 did not permanently secure the Solid South as red states, despite the widely toted myth. (Third party Wallace of 1968 and Democrat Carter of 1976 prove this.) As a general phenomenon, the lower-middle-class flyover demographics were known as the extremists, while the upper-middle-class city and suburban folk were known as the moderates.

Despite being categorized as a “right-wing extremist” in 1964, Goldwater still had little in common with the heartland evangelicals of today. Goldwater had no connection to fundamentalist Christianity like Governors Perry or Palin. One side of his family was Jewish, and the other side was Yankee Episcopalians, and Goldwater was an Episcopalian his whole life. Goldwater supported no legislation in regards to gay marriage, drugs, or abortion. Goldwater is directly quoted as saying, “Mark my words, if and when these preachers get control of the Republican party, and sure they’re trying to do so, there’s going to be a terrible damn problem. Frankly these people frighten me”.

Everything Barry Goldwater predicted about the Christian fundamentalist hijack eventually came true. Now the term RINO has a whole new meaning than when two socially liberal Episcopalians were vying for the nomination in 1964. Many Republicans referred to John McCain (a career military man with no regional ties) and Mitt Romney (a flip-flopper from the far left state of Massachusetts) as RINOs or moderates. But when Obama ran against them in 2008 and 2012, his campaign spent countless efforts painting the two candidates as right-wing extremists

Since 2008, the mainstream liberal media outlets have generally painted all Republican candidates in the same stereotype: old, uncool, racist, sexist, cranky, corny, money-hoarding, miserly Mr. Scrooges, obstructing Obama’s hip-and-groovy “CHANGE”. It mattered little how moderate McCain’s and Romney’s records were, the media rhetoric implied that anyone running against Obama had a closeted agenda with the same motivations as the Thurmond, Wallace, or Duke campaigns. Vice President Biden shouted out to an audience during a debate with Paul Ryan, “Romney is gonna put you all back in chains”. The MSM saw no problem with this.

So what are the concrete issues that make or break the difference between the RINOs and a non RINO? Is it the military, war, and foreign policy? Is it economics? Is it Christian social issues? (a dead horse, as far as I’m concerned) Are the rants espoused by Limbaugh, Hannity, and other Fox News anchors the policies that anyone who runs as a Republican are “supposed” to have? Fox anchor Ann Coulter referred to libertarians as “pussies”, and implied that supporting drug legalization was RINO/moderate, by mashing  different ideologies from left and right. Everyone has different definitions of RINO.

So this brings up the question: Was Ron Paul a “RINO”? Fox News certainly said so in the 2012 election. Were Ronald Reagan and Barry Goldwater “RINOs”? Many Democrats who hate the Tea Party would say so today. Although one must acknowledge Ron Paul’s ultraconservative personal views, one should realize he would give power back to the fifty state governments, with the intention that each American demographic can carve out a haven. There is no point pretending that Ron Paul is a hip guy with young libertarian social ideas: his views have changed little since he was a medical student in the 1950s.

Despite this, Ron Paul had the potential to represent a purge of many issues that the left hates about the Republicans; policies relating to drugs, gays, abortion, corporate bailouts, but most importantly, the wars in the Middle East. This was only exacerbated by Rick Santorum’s extremist Christian authoritarian rants, and his comment that he wanted to “fight against libertarian influence in the Republican party”. Despite the Obama administration’s continued drone warfare allover the Middle East, the Obama 2012 campaign repeated the same 2008 rhetoric that this was Bush’s personal, Republican, corporate, Islamophobic war. Simultaneously, the other three Republicans called Ron Paul an isolationist coward for his foreign policy. Ron Paul could have been the perfect moderate with ideas compromising from both sides, and yet they trashed and defamed him every possible chance.

Unfortunately, it is the Tea Party, and not moderate Republicans or Democrats, who have been blamed for the government shutdown. Personally, I think the Republicans handling the shutdown is a poorly planned reactionary idea. This kind of political activism only works if the libertarian-leaning Republicans were to shut down the government about the wars in the Middle-East, or the incarcerations of non-violent drug offenders. Otherwise, the MSM will just paint them as quintessential obstructionist right-wing cranks, as they have done so far.

McCain’s machine of moderate Republicans have marched in lockstep behind Obamacare, in an attempt to make Ted Cruz and other libertarian-leaning Republicans look like the “extremists”, Obama-haters, and Confederate secessionists. Despite the fact that libertarians are supposed to share a good bit ground with progressives, Democrats and moderates are together pointing to libertarianism “the far right fringe”. Moderate Republicans need to keep in mind that when is all over, the liberal media outlets will put all Republicans, moderate and conservative, in the same category as tongue-speaking, back-alley-abortion-causing, end-of-times, Limbaugh-hypnotized, warmongering, theocratic neo-confederates no matter what.

If liberal Democrats prefer moderate ‘Rockefeller Republicans’, or big government Republicans, let them have each other. If they think the enemy is small town, small business people, let them feel that way. Democrats can have Republicans like the Bushes, an old New England Money Trust family, long term ally of the Rockefellers, with CIA connections and investments in the baby Standard Oil corporations. After all, when corporate exploitation, global imperialism, and war profiteering makes millions, they can cash in and use the money to look humanitarian later in life. Just don’t dress him up like a Texas good ol’ boy, and then blame flyover folk for him.

Not Reagan, Goldwater, Taft, Coolidge, Eisenhower, or possibly even Bush, Sr. would ever have done what George W. Bush did in Iraq and Afghanistan, or what Nixon did in Vietnam. (both cited for the claim: “Republicans are warmongers”) Meanwhile, Democrats Wilson, Truman, and Johnson started long wars based on the idealistic grounds of “spreading democracy”. It is the imperialist Republican war machine and CIA added to the liberal Democrat dream of international government that make a poisonous combination together.

Maybe a RINO is what we want. If RINO means secular Republican; with no evangelical Christian dogma influencing government policy, then RINO is good. If RINO means Republican who embraces science and new technology, then RINO is good. If RINO means anti-war Republican, who wants to cut military spending, then RINO is good. If RINO means socially liberal Republican, then RINO is good. If RINO does not recite unoriginal reactionary propaganda from Fox News, then RINO is good. If RINO is opposed to neo-conservative foreign policy, then RINO is good. Maybe RINO is what we need after all.

barry-goldwater-on-preachers

Balanced Budget Amendment Slated to be Rejected by Tomorrow

Rick Weber Economics, Liberty , , , ,

So Tomorrow’s the big day. The U.S. government is slated to hit the debt ceiling, and with it will be faced with the prospect of actually having a balanced budget. I think the situation is nicely summed up in the opening sentence to an article from Cato: “America faces two very serious budget problems: Democrats, and Republicans.” Of course behind those problems are voters who vote for their congressman to steal and object to others’ doing the same.

This root problem is interesting and I’d like to take a minute to speculate about it. It looks like long term economic growth in the U.S. will slow down. The pace of government expansion can only continue so long before growth slows to a crawl and we hit some equilibrium. What happens then? I think there will be two changes in patterns of entrepreneurship.

The first change is a general decline in growth-oriented entrepreneurship. As the returns to private investment fall, young innovative entrepreneurs will focus on improving their (non-taxable) lifestyle rather than getting rich. Better to run a cool boutique shop and spend lots of time loafing around than work your ass off to pay taxes. Even more likely, students trained in navigating public schools and subsidized colleges will find themselves more at home in bureaucracy than industry. C students will get productive jobs and A students will shuffle papers.

The second change is an exodus of entrepreneurs. The U.S. isn’t the only game in town. The ambitious few who decide they want to make it big (and whose entrepreneurial spirit hasn’t been ground down by life in a culture that isn’t any longer interested in such ambition) will go elsewhere. And places like the Cayman Islands will get freer and flourish as they attract these entrepreneurs.

The U.S. as a country will gradually fade from prominence, the world will be less free overall, but some places will do well and will perhaps foster long run shifts.