Some Honesty

Ok, time for some honesty. In an earlier post I said that Roosevelt's New Deal did not reduce the unemployment of the Great Depression. I am now not entirely sure if that is true. I suppose it depends on what the New Deal was. The New Deal Coalition, dominated the Democratic party until 1968. Social Security, the Federal Deposit Insurance Corporation, Tennessee Valley Authority, United States Securities and Exchange Commission, National Labor Relations Board all still exist today (notoriously, so too do Fanny Mae and Freddie Mac, also creations of the New Deal to underwrite mortgages). The National Recovery Administration was, of course, found unconstitutional in 1935, but many of the labour law aspects of the administration were imposed under the Wagner act in the same year. The largest aspect of the New Deal, however, was the Works Progress Administration (renamed Works Projects Administration in 1939).

So what aroused my doubts about the earlier claims (other than comments by readers)? Well, in the article I listed the unemployment figures from 1931 to 1939. It was, however, pointed out to me that this was disengnuous of me, since Roosevelt's first term did not start in 1931, but in 1933 (until 1937). From 1933 to 1937 unemployment actually [i]fell[/i], from 24.9% to 14.3%. That is actually a fall of over ten percent.

What further aroused my doubt was this film from Reason.TV (making similar claims about the New Deal as I did, but favouring a monetarist solution):



My main concern with this film is that the graph shown in the film, (2:42 minutes in) shows that unemployment clearly did fall between 1932 and 1937, during Roosevelt's first term, and following the so called First New Deal. Of course, it also rose dramatically in 1937 (not necessarily during his entrance to the second term).

So, was I wrong, did the New Deal help? Perhaps not. The historian and social theorist Robert Higgs has shown that that investment did not recover as a result of the New Deal, and, indeed, may have been deterred by "Regime uncertainty." Like wise, real output didn't seem to recover. Per Capita GDP fell under Roosevelt, as did personal consumption expenditures.

But what about unemployment? That at least seems to have been improved by the New Deal, doesn't it? Well, a problem in claiming it was the New Deal that caused the reduction in unemployment between 1933 and 1937, especially that it was the Works Progress Administration, is that the WPA was not instituted until 1935, though it extended relief programs similar to the Reconstruction Finance Corporation started by Hoover in 1932. That means that by the time Roosevelt's WPA was started up, unemployment had already fallen from 24.9% to 20.1%, a fall of 4.8% without the help of the New Deal. After the WPA started up, of course, it fell further, to 14.3%. This is a faster fall in unemployment than that which preceeded the WPA, not not really that much faster. And then unemployment rose, again, even though the Works schemes stayed in place.

So, sure, unemployment fell during the New Deal. But it might have fallen without it, and it might also have been the case that the New Deal caused the unemployment that followed in Roosevelt's second term, under the 1937 Recession, since the monetary based increased over 100% during between 1933 and 1939. Other things also increased unemployment during that second term. Commenting on the book discussed in the Reason video above, Thomas DiLorenzo writes

FDR and his advisors mistakenly believed that the Depression was caused by low prices, therefore, high prices—enforced by threats of violence, coercion and intimidation by the state—would be the "solution." Moreover, it is hardly a secret that if less production takes place, fewer workers will be needed by employers and unemployment will subsequently be higher. Thus, the First New Deal could not possibly have been anything but a gigantic unemployment-producing scheme according to standard neoclassical economic theory.


FDR's tripling of taxes, his regulation of business, and his relentless anti-business propaganda also contributed to a worsening of the Great Depression, but his labor policies were probably the most harmful to the employment prospects of American workers. In this regard the most disappointing thing about the Cole-Ohanian article is that they do not even cite the pioneering work of Richard Vedder and Lowell Gallaway—Out of Work: Unemployment and Government in Twentieth Century America—first published in 1993.


Indeed, it is somewhat scandalous that they do not cite this well-known work while making essentially the same arguments that Vedder and Gallaway do. They recite many of the same facts about labor policy: The NIRA codes established minimum wages for less-skilled and higher-skilled workers alike; employers were told that they must bargain collectively with unions, which were given myriad legislated advantages in the bargaining process, all enforced by the newly-created National Labor Relations Board. All of these policies made labor more expensive. Consequently, as the economic law of demand informs us, the inevitable result had to be less employment.

Strike activity doubled from 14 million strike days in 1936 to 28 million a year later, and wages rose by about 15 percent in 1937 alone. The union/nonunion wage differential increased from 5 percent in 1933 to 23 percent by 1940. Newly-enacted Social Security payroll and unemployment insurance taxes made employment even more expensive. What all of this means is that during a period of weak or declining derived demand for labor, government policy pushed up the price of labor very significantly, causing employers to purchase less and less of it.

Vedder and Gallaway conducted an econometric evaluation of these labor cost-increasing policies and concluded that most of the abnormal unemployment of the 1930s would have been avoided were it not for these policies. They estimated that by 1940 the unemployment rate was eight percentage points higher than it would have been without the legislation-induced growth of unionism and government-mandated employment costs. They conclude that "The Great Depression was very significantly prolonged in both its duration and its magnitude by the impact of New Deal programs" (p. 141).

Cole and Ohanian reach the exact same conclusions, but express them in the somewhat convoluted language of the "top economic journals": "New Deal labor and industrial policies did not lift the economy out of the Depression . . . . Instead, the joint policies of increasing labor's bargaining power and linking collusion with paying high wages prevented a normal recovery by creating rents and an inefficient insider-outsider friction that raised wages significantly and restricted employment . . . . the abandonment of these policies coincided with the strong economic recovery of the 1940s."

This last conclusion—that the abandonment of FDR's policies "coincided" with the recovery of the 1940s is very well documented by another author who is also ignored by Cole and Ohanian, Robert Higgs. In "Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War" (Independent Review, Spring 1997), Higgs showed that it was the relative neutering of New Deal policies, along with a reduction (in absolute dollars) of the federal budget from $98.4 billion in 1945 to $33 billion in 1948, that brought forth the economic recovery. Private-sector production increased by almost one-third in 1946 alone, as private capital investment increased for the first time in eighteen years.

In short, it was capitalism that finally ended the Great Depression, not FDR's hair-brained cartel, wage-increasing, unionizing, and welfare state expanding policies.

The Argument from Implicit Consent

For my own personal benefit, since I will cover it in teaching in the next few years, here is why the argument from implicit consent fails to account for the legitimacy of a state. Refutation of this argument is important, since it is common for people to say things like, "well, you aren't forced to support the state, or pay this tax, or obey the draft, since you can avoid doing so simply by emigrating. If you choose to live in this country, you implicitly consent to support the state/pay that tax/be subject to the draft."

However, breaking the argument from implicit consent down premise by premise shows that it is logically flawed:

The conclusion of the argument is "therefore state is legitimate." The premises are, as follows,

1: The state has a legitimate claim to the territory it claims sovereignty over.
2: Continued residence within that territory indicates consent to the sovereignty of the state, and its laws.
3: If a state rests on consent it is legitimate.

and so the conclusion: therefore the state is legitimate.

The only trouble is, premise 1 assumes your conclusion, for if the state is not legitimate, it can have no legitimate claim to the territory it holds sovereignty over. So for premise 1 to be true, the conclusion of the argument would have to first be true. But that is what the argument is supposed to show.

If premise 1 is not true, though, then continued residence does not indicate consent.

Economic crisis

I am aware that I haven't actually blogged on the economic crisis. This, some may think is ironic, since I actually used this blog in July 2007 to predict the recession - a year before it happened!" I then followed this up by announcing the beginning of the crisis - the collapse of Northern Rock.

I suppose that the reason I haven't reported is, a) because so many others have, and b) because it has struck close to home. As I type this it is mid afternoon on my last day of work having been made redundant. My company, forced to cut costs in the present crisis, decided the rent of my shop is too high and has laid me off. I will be doing four hours of teaching a week, starting next week, but, that aside, I am unemployed.

On this crisis, my views echo those of Sean Gabb:

For many years, interest rates have been held below the sort of level needed to balance the supply of savings and the demand for loans. The result has been inflation. That many consumer prices have been falling is no argument against this proposition. Inflation is best seen not as price increases but as monetary expansion. There was a time when monetary expansion led fairly soon to price rises. Where at least Britain is concerned, though, most consumer goods are imported. So long as foreigners are willing to finance a growing current account deficit without devaluation, demand for imported consumer goods can expand rapidly and for years without any increase in prices.

The new money will therefore be used partly for investments in new production that may or may not be wise in the long term - and also to bid up the prices of property and of paper assets.

These bubbles never last. There comes a point where people lose faith in a currency, and where the upward spiral of asset prices is checked. The fall in the currency will push up consumer prices. Overvalued assets will fall in at least real terms. Many other investments will be shown to have been unwise. The immediate reasons for their bursting are less important than that they always will burst. This has now happened. There is no definite rule in these matters. But it seems that the length and intensity of the boom is roughly in proportion to the scale of the recession that follows.

The financial collapse we are now witnessing, therefore, should not be seen as some autonomous fall in aggregate demand that can be offset by increasing other variables in the national income income equation. It is instead part of the unavoidable correction to past experiments in demand management...

We should never have got ourselves into this mess. Failing that, the recession should have been allowed to hit last year. Since it was then deferred, it should be allowed to hit now. It will do nothing to moderate the inevitable recession. But there is a good case for cutting taxes and government spending now by at least a third, and then by five per cent a year every year for the next decade. And there is a case for returning to a fully convertible gold standard.

The thing that really annoys me, in light of this account of what has caused the recession, are the ridiculous "solutions" to the recession proposed. I mean, the first thing to notice is the term "solution": Recessions, as the above account shows, should best be called corrections. The creation of cheap credit lead to all sorts of investments that should not have happened, and would not have happened otherwise. Part of the process of recession is the liquidation of these investments that should not have occurred.

On top of this is the claim that banks are not lending to each other enough and that consumers are not spending enough. But as I said in the blog post where I predicted the recession, it was the existing saving and lending ratios that indicated the onset of the recession in the first place. before the recession the saving ratio was 2.1%, or, in other words, we were saving, on average, one pound for every £50 we recieved in take home pay. Meanwhile, the booming loan rates were such that household debt had trippled over 30 years to the equivalent of £55,000 for every household. The idea that banks are now not lending enough and consumers are not spending enough is basically the idea that we should go back to precisely what was occuring before the recessaion and caused it! As the Libertarian Alliance have announced,

Final responsibility for this crisis rests with the authorities. For at least ten years, the Bank of England - and the central banks in most other countries - has kept interest rates below the market equilibrium. The result has been an orgy of credit creation by the commercial banks. This led to an asset price bubble that has now burst.

This should never have been allowed to happen. Interest rates should have been allowed to settle at levels that equalised the supply of savings and the demand for loans.

Instead, of course, the Bank of England has reduced interest rates, and the media and politicians have publicly denounced banks that have not passed on these interest rate cuts. In fact, this has been done whilst we are told that the government should bail out banks to recapitalise them so they can start lending. Errrrr... how about this as a means of recapitalising them and giving them the means to start lending again: Encourage saving. How do we encourage saving? Certainly not by reducing interest rates. In other words, this crisis will be solved quicker if people save more.

Another ridiculous proposal is that the quantity of money in circulation should increase. Confusing falling prices with deflation, there have been calls for actual inflation, or for the government to increase the money supply, part of a process of "quantitive easing." It is ironic that one method of quantitive easing that got the most coverage, that of the central bank buying assets from banks in exchange for currency, was actually proposed by one of the Diretors of Barclays bank! In other words, the director of Barclays bank used "saving us from the recession" as an excuse for the Bank of England to buy huge amounts of "assets" from Barclays bank in exchange for currency! And the reason he proposed this is to reduce interbank loan interest rates... so, in other words, he can get cheap loans!

Does the money supply need increasing? Well, this is what the money supply looked like before the crisis:



So, like encouraging borrowing and lending rather than saving, qantative easing is, basically, doing what the government and BofE was already doing! Is there history of "quantative easing" working? It was tried in Japan during the recession of the 1990s and >didn't work there.

The new President of the United States of America, Barrack Obama, has joined calls for a "New New Deal," a "stimulation package," whereby the US government attempts to "stimulate" the economy by engaging in huge public spending sprees, funded either out of present taxes, or out of borrowing (later taxes), or by printing more money (funding it out of present taxes is impossible because the revenue is not there, funding it out of future taxes means reducing economic activity later, and funding it through increasing the money supply means stagflation and destroyed savings, so, no real stimulation). The belief is that this sort of "stimulation" worked after the last economic crisis as great as this one, the Great Depression. That stimulus, instituted under Roosevelt, package was called "The New Deal," hence the "New New Deal"!

Did it really work? No, not really. Public works schemes were introduced to try to end the massive unemployment that the 1929 crash had caused. This, of course, meant that jobs were created on these public works schemes, but jobs would be created if the government spent money hiring people to dig holes and then fill them in again all day. The question is whether this lead to increase economic activity in the actual real economy, in the private sector. What are the figures for unemployment during the years that Roosevelt "saved" America from the Great Depression? Well, here they are:

1931 15.9
1932 23.6
1933 24.9
1934 21.7
1935 20.1
1936 16.9
1937 14.3
1938 19.0
1939 17.2

Unemployment, as you can see, did clearly did not come down as a result of this stimulus package. Likewise, Real output (once one has taken account of inflation) was about as low in 1938 as if had been in 1932. UCLA economists Harold L. Cole and Lee E. Ohanian wrote, in the August 2004 Journal of Political Economy, arguably the top academic economics journal in the world, in an article entitled "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," that "Real gross domestic product per adult, which was 39 percent below trend at the trough of the Depression in 1933, remained 27 percent below trend in 1939" and "Similarly, private hours worked were 27 percent below trend in 1933 and remained 21 percent below trend in 1939." Thomas DiLorenzo writes,

This should be no surprise to anyone who has studied the reality of the Great Depression, for U.S. Census Bureau statistics show that the official unemployment rate was still 17.2 percent in 1939 despite seven years of "economic salvation" at the hands of the Roosevelt administration (the normal, pre-Depression unemployment rate was about 3 percent). Per capita GDP was lower in 1939 than in 1929 ($847 vs. $857), as were personal consumption expenditures ($67.6 billion vs. $78.9 billion), according to Census Bureau data. Net private investment was minus $3.1 billion from 1930–40.

This is what Obama wants to emulate!!!

The greatest, most quotable assessment of the various proposed "solutions" to the economic crisis comes from Perry de Havilland:

A large number of people, certainly the majority of the political looter class, think the best way to deal with the rapidly deepening economic crisis is via 'stimulus packages' with money plucked off the magic money tree... which is to say, by trying to re-inflate the credit bubble that actually caused the crisis. This is a bit like treating alcoholics by urging them to buy more whiskey.

So what is the solution to the economic crisis? Here, again, I echo the Libertarian Alliance:

The British Government is proposing to use £50 billion of the taxpayers' money to buy shares in illiquid banks and other institutions...

However, it is obvious that £50 billion will not be enough to restore stability. There are trillions of pounds of imaginary money on the markets. The fundamental problem is that no one really believes in this money today, and it just disappears whenever people stop looking at it. No government on earth can painlessly clean up the mess left by the bursting of the credit bubble.

Governments can stand back and let weak institutions fail. This will bring on the worst financial collapse since 1931, and be followed by a nasty recession. Or they can spray vast amounts of our tax money into the financial markets, which might briefly delay the worst financial collapse since 1931 and a nasty recession to follow.

Do nothing. People are aghast at the suggestion that the government should do nothing - or less (cut spending and taxes). Something, they say, has to be done. Industries cannot be allowed to collapse and fail, the people working in them cast out on the street. However, this ignores the fundamental position of the do-nothing advocates: The stimulus will fail, bailouts cannot be enough, slashing interest rates and increasing the money supply will simply restore the scenario that lead to the crisis in the first place. At best, they will postpone a massive economic crash and a recession to follow, but they will not prevent it. The industries will still crash, their workers thrown out on the street, but, on top of this, taxpayers will be burdened with billions, trillions of pounds or dollars in debt. At worse, the economic collapse will bre greater, the recession harsher (Historical parallels: There was a crash in the US in 1921. After that, fallimng prices were held up by strengthened tariffs, falling wages by tightened immigration controls, and the Fed held interest artificially low, leading to the creation of cheap credit and excessive lending, falling saving. The result? At the end of the 1920s the stock markets crashed worse than they ever have since, and the Great Depression was ushered in).

Great Quote

I haven't kept any quotes of the day, week, month, or whatever, but this is a good quote, from somebody joining the general lambasting of Mark Chapman's latest terrible piece for Reason:

Isn't it odd how the "greater good" is always the greater good of someone else?

Aside from the fact that "somebody" would have been better than "someone," very insightful! And the author calls him- or herself Smartass Sob.

SCHOOLS OF THOUGHT

Reproduced from my old blog

SCHOOLS OF THOUGHT

It seems that there is much rowing about university fees at present. Interestingly, someone I know well once said to me that the government's whole justification for top up fees is ridiculous. The argument we hear from government ministers is that top up fees are the fairer way to fund higher education than general taxation is, because general taxation would force poor people to pay for education their children is not recieving, and which generally goes to benefit the non-poor. My associate said that this must be wrong because such an argument would justify privatising the entire education industry.

Quite! Yes, well libertarians have been using that argument for decades for precisely that purpose. Yes, it does justify privatising the education industry, and most other parts of the so-called public sector. What is interesting, though, is why should the fact that the logic of the argument justifies policies that my associate (and the Labour party) don't want to accept make that logic false? It doesn't make the argument any less true at all. If funding higher education through general taxation forces poor families to pay for the education of non-poor children, without delivering any benefits to the non-university going (or even non-existent) kids of poor households, then such an arrangement is hardly fair. Pointing out that other state services are unfair on precisely the same grounds is not good reason to suddenly start thinking that it is fair after all!

Anarchist communist author, Colin Ward, made precisely the same argument in his classic Anarchy in Action

Today, as the educational budgets of both rich and poor nations get more and more gigantic, we would add a further criticism of the role of the state as educator throughout the world: the affront to the idea of social justice. An immense effort by well intentioned reformers has gone into the attempt to manipulate the education system to provide equality of opportunity, but this has simply resulted in a theoretical and illusory equal start in a competition to become more and more unequal. The greater the sums of money that are poured into the education industries of the world, the smaller the benefit to the people at the bottom of the educational, occupational and social hierarchy. The universal education system turns out to be yet another way in which the poor subsidise the rich. Everett Reimer, for instance, remarking that schools an almost perfectly regressive form of taxation, notes that the children of the poorest one-tenth of the population in the United States cost the public in schooling $2,500 each over a lifetime, while the children of the richest one-tenth cost about $35,000. "assuming that one-third of this is private expenditure, the richest one-tenth still gets ten times as much as the poorest one tenth." In his suppressed UNESCO report of 1970 Michael Huberman reached the same conclusion for the majority of countries in the world. IN Britain, ignoring completely the university aspect, we spend twice as much on the secondary school life of a grammar-school sixth former as on a secondary modern school-leaver, while, if we do include university expenditure, we spend as much on an undergraduate in one year as on a normal schoolchild throughout his life. "While the highest social group benefit seventeen times as much as the lowest group from the expenditure on our universities, they only contribute five times as much revenue." We must thus conclude that one significant role of the state education system is to perpetuate social and economic injustice.

There are, of course, arguments against this view point. One of them is that the rich pay more in taxes, so whilst they get more in public funds spent on taxes, they also pay into them, more. This is possible, but not massively likely. The the non-poor do not pay enormously more tax than the poor do, since income tax cannot collect that much and indirect taxes fall very much on the poor.

Another argument against it that is popular in government circles is that education benefits the whole of society. This is a popular argument in favour of public funding of schooling. It may been seen as an argument against the idea that public funding of schooling is a regressive taxation on the grounds that those that hold this position believe that there are enormous external benefits of education that do not solely go to the consumer, but go to eveyone. Hence, even if the non-poor do get more education than the poor, the poor may benefit.

This argument says that society as a whole benefits from generations of well educated school leavers, most obviously because of the increased productivity they can bring. Of course, the only reason, economically speaking, as to why this might be a case for state intervention (and a very weak one at that) is if this external benefit is so great that it encourages people to free-ride it and so not bear any of the costs. In this case, a person, seeing how much he benefits if everybody else goes to school, realises that he benefits substantially, even if he doesn't go to school himself, and so has no incentive to go. The result of people thinking like this, though, is that nobody goes to school, and so that generation of well educated school children does not appear and neither do any of its benefits. Classic prisoners' dilemma game.

The trouble is that this theory is a crock! Is it really plausible to suggest that I might be much better off not going to school than going, so long as everybody else goes? Is the cost of my paying for my own education? or anybody else doing so voluntarily for me) really more than the additional benefit I would reach if I didn't sit on my butt waiting for the benefits of that generation of well-educated kids to come roling round to me? Of course not. So, no free-rider problem, no lack of demand for education due to major positive externalities, and so no reason to assume that the market would undersupply schooling. David Friedman has one of the best on-line articles regarding education that I have seen. He discusses this very same "a-good-education-system-benefits-society-as-a-whole-and-not-just-student-or-pupils" argument:

It is said that since education increases human productivity, by educating my child I increase the wealth of the whole society, making all of us better off. One obvious problem with this argument is that, if correct, it applies to a lot of things other than education. Physical capital also increases productivity; does it follow that all investments ought to be subsidized? Better transportation allows workers to spend more time working and less time commuting; should we subsidize the production of cars? The argument suggests that everything worth doing ought to be subsidized-leaving us with the puzzle of what we are to tax in order to raise the money for the subsidies.

What is wrong with this argument is that it misses is the way in which the price system already allocates "social benefits" to those who produce them. Building a factory may increase the wealth of my society-but most (in the limit of perfect competition, all) of the increase goes to the investors whose capital paid for the factory. If I use a car instead of a bus to commute, the savings in time is added either to my leisure or my income. If education makes me a more productive worker, my income will be higher as a result. That is why top law schools are able to sell schooling to willing customers at a price of about twenty thousand dollars a year.

Schooling-like a new car-produces non-market benefits as well. But these too go mostly to the student, enabled by education to appreciate more of the riches of the culture he lives in. There may be effects on other people as well, but they are typically small compared to the benefits to the student, and their sign is not always clear. When my child becomes an expert in Shakespeare and quantum mechanics one result may be to enlighten and entertain her friends, but another may be to make them feel stupid. In just the same way, the beauty of my new car may produce the pleasures of aesthetic appreciation or the pains of envy in those who watch me drive it down the street. To base the design of our institutions for schooling on the uncertain effect on such third parties rather than the direct effect on the schooled makes no more sense than to base the design of cars on their value to everyone except the owner.

Murray Rothbard has written,

While in a free private school market most children would undoubtedly attend schools near their homes, the present system compels a monopoly of one school per district, and thereby coerces uniformity throughout each area. Children who, for whatever reason, would prefer to attend a school in another district are prohibited from doing so. The result is enforced geographic homogeneity, and it also means that the character of each school is completely dependent on its residential neighborhood. It is then inevita­ble that public schools, instead of being totally uniform, will be uniform within each district, and the composition of pupils, the financing of each school, and the quality of education will come to depend upon the values, the wealth, and the tax base, of each geographical area. The fact that wealthy school districts will have costlier and higher-quality teaching, higher teaching salaries, and better working conditions than the poorer districts, then becomes inevitable. Teachers will regard the better schools as the superior teaching posts, and the better teachers will gravitate to the better school districts, while the poorer ones must remain in the lower-income areas. Hence, the operation of district public schools inevi­tably results in the negation of the very egalitarian goal which is sup­posed to be a major aim of the public school system in the first place.

Moreover, if the residential areas are racially segregated, as they often tend to be, the result of a compulsory geographical monopoly is the compulsory racial segregation of the public schools. Those parents who prefer integrated schooling have to come up against the geographical monopoly system...

The geographical nature of the public school system has also led to a coerced pattern of residential segregation, in income and consequently in race, throughout the country and particularly in the suburbs. As everyone knows, the United States since World War II has seen an expansion of population, not in the inner central cities, but in the sur­rounding suburban areas. As new and younger families have moved to the suburbs, by far the largest and growing burden of local budgets has been to pay for the public schools, which have to accommodate a young population with a relatively high proportion of children per cap­ita. These schools invariably have been financed from growing property taxation, which largely falls on the suburban residences. This means that the wealthier the suburban family, and the more expensive its home, the greater will be its tax contribution for the local school. Hence, as the burden of school taxes increases steadily, the suburbanites try desperately to encourage an inflow of wealthy residents and expensive homes, and to discourage an inflow of poorer citizens. There is, in short, a break-even point of the price of a house beyond which a new family in a new house will more than pay for its children's education in its property taxes. Families in homes below that cost level will not pay enough in property taxes to finance their children's education and hence will throw a greater tax burden on the existing population of the suburb. Realizing this, suburbs have generally adopted rigorous zoning laws which pro­hibit the erection of housing below a minimum cost level—and thereby freeze out any inflow of poorer citizens. Since the proportion of Negro poor is far greater than white poor, this effectively also bars Negroes from joining the move to the suburbs. And since in recent years there has been an increasing shift of jobs and industry from the central city to the suburbs as well, the result is an increasing pressure of unemploy­ment on the Negroes—a pressure which is bound to intensify as the job shift accelerates. The abolition of the public schools, and therefore of the school burden–property tax linkage, would go a long way toward removing zoning restrictions and ending the suburb as an upper middle-class-white preserve.

Rothbard was writing in the context of the US, but his arguments apply equally well. The UK has similar monopolistic "school district" arrangements, in that secondary schools give priority to those people that live within their catchment areas, and only if there are spaces left do they give them to people that live outside these areas. So again, there is good reason to believe that state interference in education benefits the non-poor at the expense of the poor.

Spending more on education means spending less on other things. People who say that enough is not being spent on education therefore imply that too much is being spent on other things, and that spending on jobs and investment in the areas of the economy producing those other things should be cut. OK, socialists sometimes say, "sure, cut the money spent on bombs and war in Iraq," but this money came at the expense of other things too. Less had to be spent employing people in other industries, and less had to be spent investing in other industries, so that either the arms or the education industry could be funded. I am happy with this - it is inevitable that resources cannot be used to produce every good, but will be allocated to some areas of the economy and away from others. However, the question, at least for a utilitarian, is surely "are resources being used in the most valuable way - are we allocating resources to where they are most valued, and away from where they are valued the least?" This is a question that the defendent of increased state funding for education needs to answer. Is the increased funding to education worth all the lost goods, lower incomes, lost wages, and decreased investment elsewhere? And how do you know.

The definitely not libertarian (he was a student of Marxist GA Cohen) philosopher Jonathon Wolff, in his An Introduction to Political Philosophy, writes

Suppose that a certain good - garlic, say - costs a certain price: 50 pence per bulb. Then a respected scientist publishes a report indicating that consuming a bulb of garlic a day wards off cancer and heart disease. Accordingly, demand for garlic soars. Garlic retailers sell out rapidly, and prices spiral. Huge profits are made in the garlic industry.

The prospect of such profits will prompt new producers to enter the garlic market. Supply begins to rise, and as it does the price falls again, until a new equilibrium is established. Eventually demand equals supply at a price where garlic producers achieve the same profit levels as are available elsewhere in the economy.

This banal example of economic life shows the remarkable powers of markets. First, the price system is a way of transmitting information. The fact that the price of a good rises indicates that the good is in short supply; if the price falls then it is oversupplied. Second, the profit motive gives people a reason to respond to that information. If prices rise in a sector because of increasing demand, this normally means that larger than average profits are to be made, and so0 new producers rush in. If prices fall, because of falling demand, generally profits will fall, and so some firms will leave the industry. IN both cases the equilibrium will eventually be established, where the rate of profit for the industry is roughly equivalent to the average rate of profit for the economy as a whole.

These are the key features of the market: it signals information, and it gives people an incentive to respond to that iunformation by changing production patterns. Nor should we forget the importance of competition in driving down prices, and driving up quality. In combination these factors lead to the consequence that, broadly, in markets people (with money) get what they want from other people.

Many theorists accept that the market can distribute goods to individuals in a way in which no planned economy could match. If I want a certain good and if I have the money I can go and buy it. I can express my preferences in my purchasing behaviour, and others try to make as much profit as they can by responding to them. In the planned economy there are two problems. How will the planner know what I want? It might be common knowledge that people like ice cream, and need socks, but how can the planner know that I prefer vanilla ice cream to chocolate, or plain socks to patterned ones? And why should the planner take the trouble to make sure I get what I want? Real planned economies have been plagued by chronic shortages of some goods, such as winter tights, over-production of others such as low-grade vodka, and a depressing lack of quality and variety in those goods that are available. In order to run an economy as efficiently as the free market, the planner needs a level of omniscience, omnipotence, and benevolence rarely attributed to mere human beings.

If the demand for schooling in a free market rises, then profits to be made from supplying this increased demand also rise. These increased profits attract new suppliers, these suppliers will need labour, land and capital, but since their demand for such would increase, incomes to be made from working in the education industry, or investing in it will rise, attracting new people into it. Obviously, these new increases will come from elsewhere in the economy, but since people would be buying more education, they would be buying less of other things, this causing a drop in demand for those other things, and so fewer profits and less incentive to provide them. The fact that they choose to do this proves that they value increased schooling more than they value other uses of their money, which means that the resources being allocated to education and away from elsewhere are being allocated to where they are most valued and away from where they are less valued. Without the price mechanism, the state has no means of knowing whether its investment in education is more valuable than the resources and jobs and investments it is destroying elsewhere, or less.

Wolff said that their were exceptions to the general superiority of free markets, in the case of market failures. Examples he gave were of positive externalities. I don't agree that such cases justify, either on utilitarian grounds or on grounds of justice, state interference, but that is irrelevent, since we have already seen, with the quote from David Friedman, that these examples of market failure do not apply in the case of education, which is almost a pure private good, with no free-rider problem.

Since firms in the free market are under pressure from competition, they have every incentive to make sure they deliver the greatest benefits to their customers, utilising the least amount of resources. This inbuilt mechanism protecting against wasteage means that education providers in a free market have every incentive to keep their costs as low as they can. A nationalised education system has no such features, since it doesn't have to compete for its revenue to cover its costs, nor actually work to please those that use it, in order to obtain this revenue. Local Education Authorities's tend to absorb any additional funds for schools, and workers in the industry present powerful special interest groups.

And just as Mars prefers to price its chocolates as close to cost as it can and get lots of customers, rather than price them extraordinarily highly and hope that rich people with extreme sweet teeth will cover the company's entire costs, firms in the education industry will tend to price their services within reach of as many people as possible. After all, the car industry doesn't only provide gold plated cars for billionaires.

Of course, many people will talk about the nineteenth century, and people not getting any education before it was compulsory and tax funded. However, firstly, in the early nineteenth century, newspaper sales were very high, conservative were worried about radical literature falling into the hands of the poor (so they imposed the stamp duty, and taxed paper), and so literacy was actually quite high and widespread.

Secondly, one of the most important and prolific writers on the histroy of education before and after compulsion and public funding, EG West, wrote,

Contrary to popular belief, the supply of schooling in Britain between 1800 and 1840 was relatively substantial prior to any government intervention, although it depended almost completely on private funds. At this time, moreover, the largest contributors to education revenue were working parents and the second largest was the Church. Of course, there was less education per child than today, just as there was less of everything else, because the national income was so much smaller. I have calculated, nevertheless, that the percentage of the net national income spent on day-schooling of children of all ages in England in 1833 was approximately 1 percent. By 1920, when schooling had become “free” and compulsory by special statute, the proportion had fallen to 0.7 percent.

As West says, there wasn't universal education, because the national income was too small to provide this. However, his writing seems to suggest that as productivity increased through out the nineteenth century, so consumption of education increased.

This matches contemporary views. According to UNESCO, in developing countries in 1926, 75% of the population were illiterate. In 1948 this had fallen to 52%, and by 1970 it had fallen to 20%. Between 1965 and 1998, the average income of the world's citizen almost doubled, from $2,497, to $4,839. However, this didn't come about through the richest nations multiplying their incomes. During the same period, the the average income in the richest one-fifth of the world's population increased from $8,315 to $$14,623, which is by almost 75%. The average income in the poorest one-fifth, though, more than doubled, from $551 to $1,137. So consumption of education increases as prosperity increases, and so it increases as productivity increases.

So, state education redsitributes money from the poor to the non-poor, misallocates funds, can't plan the provision of the good, relative to other goods, or relative to altranative forms of the good properly without a price mechanism to relveal demand. It is aburden on poor families, and on everybody else, and we would be better off without it.

AN ELECTED GOVERNMENT, UNDER MAJORITY RULE?

The accountability of our government versus, say, various private bodies, is often taken for granted. Regulation of the economy, for instance, it is presumed, means making "unaccountable" companies (i.e. firms that respond to changes in supply and demand!) beholden to "accountable" public bodies.

Well, with this in mind, I will reproduce a forum post I made today, because I like it. It was in response to somebody who said that under democracy a large proportion of the public give their assent to the laws of that society. My response was this:

Which planet is this on? Since 1997 there has been an average of one new law passed every day. I'm sure you don't even know what most of them are, let alone have given your assent to them.

Take all the people employed by the state: Thats 520,000 civil sevants added to the armed forces, police, school teachers, and local government employees, plus 300 odd quangos, the total number of people employed by the state is in excess of six million, more than a tenth of the population. There are 650 MPs. So saying the government is elected is a bit of a stretch - actually it is only one thousandth of one percent of the government that is elected.

You might say that by "government" you mean, as the media often means, the ruling party. However, in reality the ruling party is that which gets the most votes, but the prime minister is the leader of that party, and he is not elected by anybody other than some of the party members eligible to vote for him. The prime minister then selects a cabinet - it is not elected.

New laws are debated by both houses, and have to pass three readings by the houses. Of course, one of those houses is the house of lords, full of unelected people. Then it has to be signed by the queen - also unelected.

And this is ignoring other details: In the last few years we have had unelected prime ministers: John Major, Gordon Brown. On top of that, during an election, government carries on as normal, because that is seen to by the civil service, who are unelected. Judges are unelected, military officers, customs officials, treasury bureaucrats, civil servants, and local cheif directors, all unelected, and yet they all do work administering and enforcing the law.

So the reality is that far from government being elected, only a tiny percentage is. The actual governing is done by thousands of other people who never had to submit to an election, never had to persuade voters that they are worthy of the positions they hold. It is these people who decide how to do what parliament decrees, and so weild enormour power - they are the executive branch of government, and are largely unelected. So most of the actual power holders in our government are unelected.

Beyond this, you have the reality of elections, which is far from being majority rule. Tony Blair's win in 2001 is called a landslide win. Labour got 10.7 million votes in that election. That means that the majority of those who voted, 15 million people, including eight million Conservatives, voted against Labour. 30% more people voted against Labour than voted for them.

On top of this, there are 45 million registered voters in the UK. If, in 2001, 10.7 million voted Labour, and 15 million voted for somebody else, then 25.7 million out of 45 million registered voters voted. In other words, less than 60% of the electorate voted. So, even bigger than the majority of 15 million who voted against Labour, is the 18 million eligible voters who couldn't be persuaded that anybody in the election was worth voting for.

So, we have a government which is called elected when in reality less than a thousandth of a percent of all the people working in it are elected, and real power is excercised by those who aren't. We also have a government called "majority rule" under which a landslide victory is claimed from election by a party that does not recieve the majority of votes, but actually gets 10.7 million votes for it compared to 33 million against it. If we had majority rule, then the 33 million who chose against Labour would get their way.

Of course, 2001 is not the only example. Thatcher won a famous victory in 1983 after the Falklands War. That was another result that was called a landslide win. In that election no less than 162 of her MPs won a majority of the votes cast in their constituencies. That means that over 40% of her MPs came from constitutencies where most people who cast a vote did so for somebody else. Labour fared even worse, though, in that election: 68% of Labour MPs failed to win a majority. But all these people went to Westminster, claiming to have been elected by their constituents, rewarded themselves fat salaries and expense accounts from the public purse, and called themselves "Honourable"!

Once elected, of course, MPs are free to switch parties without the approval of their constituents. You could vote a Labour MP into office and suddenly find yourself "represented" by a Tory!

But we can go further. Although MPs are supposed to represent their constiuents (how they represent people that preferred somebody else did the job, I don't know!), they are not actually obliged to vote in parliament. Only 40 MPs, out of 650, are required for a quorum. This means that even on some big, headline grabbing laws (i.e., the tiny minority that you may have actually heard of), hundreds of MPs may not actually turn up to vote.

And since we are talking about laws, lets go back to those unelected civil servants. After all, it is they, not the MPs, that draft the laws. A final polish is added by a committee containing only a handful of MPs, and then parliament is asked to vote. The few MPs that turn up to vote on it may well not have even read the law, which can contain pages and pages of detail, have been presented to them at an antisocial hour, and in legalese language few could understand. Usually the law is passed at a nod.

The above is a summary from a book, of course. The person hearing these facts announced afterwards, "But if the government authority is supposed to be based on the will of the people, on the will of the majority at least, and if what you say is true, then the British government has no real authority at all."

Owining Silver Veins

Recently I had a heated discussion with two close relatives touching on third world poverty. It was suggested that the wealth in the third world is being taken to the first world and enriching people there rather than in the poor countries (forgetting, of course, that incomes of the world's poorest quintile have been rising faster than those of the richest). As an example, it was pointed out that in Bolivia a new, massive vein of silver had been discovered, but the silver belongs to an American company, so they would be profitting from it, not the Bolivians. My relatives in question supported the proposition, instead, that Eva Morales, the president of Bolivia, nationalise the mine, so that its profits can be put to public use. I, on the other hand, felt that natural resources should belong to whoever first finds them and uses them, by mixing their labour with, or working them, regardless of what country the individual or organisation that finds them comes from, or what country they are found in.

I could discern two positions from my relatives' arguments. The first was that mineral, as was pointed out to me explicitly, in fact, mineral deposites belong to the person under who's property they are found, and this was "quite legal, proper and fair." The second position was that those displaced by the silver mine should be compensated. I supose the first position may follow from the second, or be a motive for supporting it.

It is, of course, legal practice that people own the mineral rights under their property. I forget the name of the legal doctrine, but the theory is that people's property extends in a gradually diminishing cone (to make space for other property) to the Earth's core. Of course, the same theory is that their property extends in a gradually incresing cone outwards and upwards from the earth. The result, of course, is that, if this theory of property should be the one we adopt, it would be incredibly hard to arrange flightplans without committing trespass: Every flyover would be a tort. Presumably this consequence would be ridiculous.

The idea that people displaced by the mine should be compensated may motivate sentiments to cling to this odd legal doctrine, but it employs a fallacy: Sure, I shouldn't damage your house, or your farm, or whatever, on the surface, but it doesn't follow that you should therefore own whatever is under your property, or over it. If property rights, at least in part, to protect our uses of things, then so long as my mining under your property doesn't damage your property, then what claim do you have against me? Or, in other words, if it is the case that people are being forced off their land so this US corporation can mine silver, then this should not occur, and is a gross injustice... but it doesn't follow from that that the silver should be nationalised, or given to people who own property over it, or that it should not belong to an American company able to mine it without damaging the property of those over it or without forcibly depriving them of it.

In any case, neither of these arguments seems to justify nationalisation. Nationalisation would be making the silver the property of the entire nation. Of course, that would really mean that the people who got to decide over it, and decide who benefits from it the most, would be the ruling class and their lackeys. Unless all votes by the entire country regarding it and income earned from it were passed by unanimous vote, it wouldn't really be the entire nation enjoying it, but only some of the nation. Morales and his co-workers would be the only ones with power to decide what is done with it, and they would benefit those with the most political pull, because that is how government works.

Regardless of this, though, lets just think of nationalisation in the abstract - it belongs to the nation. Why? Why is "the nation's" claim any better than anybody elses. Remember, the arguments were that a) it is established legal practice that mineral rights belong to those under who's property they are, and that b) people will be displaced by the mine, losing their homes, etc. But both of these arguments, if they have any weight at all, which I have disputed, suggest that the silver should belong to those who have property in the top soil over it, not to the entire nation. Why should the fact that demolishing my house to make way for a silver mine makes me homeless imply that everybody else in the country, and nobody else, has as much right to that silver, and the income it generates, as I do? Or why should the fact that the silver is under my land, and established law extends property conically to the earth's core, mean that it belongs to everybody else in the country, and nobody else, as much as it belongs to me? Neither of these positions justify's the silver being seized by the state.

I suppose it could be suggested that, if the established legal practice is that property extends conically to the centre of the earth, and the silver was found under Bolivia, then the silver belongs to Bolivia, and so everybody in it. But, then, "Bolivia" is an arbitrary designation in itself. Why does the border of Bolivia stop where it does rather than extend, say, fifty mile further out, or fifty miles further in? A person is a Bolivian simply due to being accidentally born one side of a line that could have been drawn anywhere and has probably only been drawn where it is because that has been the point where strength of arms, the might of war, has only been sufficient to maintain it. The silver is as much under South America as it is under Bolivia, or as much under America as it is South America, etc, etc. It is certainly far more under the property of the people displaced from the mine that it is under a part of Bolivia possibly hundreds of miles away.

The sentiment seems to be that Bolivians are being made worse off by somebody other than their state owning this silver. Ignoring the possibility that land was seized to make way for the mine, which is not what I am defending anyway, Bolivians may well not be made worse off. The reason? They didn't even know the silver was there, and were not making use of it. Somebody else profitting from something I knew nothing of and wasn't trying to use does not worsen me. They may not be bettering themselves, that is true, but that is not the same as being worsened. Of course, it will be said, "fine, then it should be nationalised, not because the US company is making Bolivians worse off, but because, by nationalising it, Bolivians will be made better off." Sure. But are the Bolivians the worst off people in the world? Maybe not. In which case, maybe the Bolivian silver should be nationalised by, say, Etheopia? Why better the position of Bolivians rather than some other group?

In the end, it is deeply odd to say that some Bolivian who did nothing to get the silver, nothing to, in effect, create it (since, at least for all intents and purposes, until its discovery, it may as well not have existed), nothing to make it useful to people, and who's life is not worsened, though it may not be improved, by somebody else taking the silver has a better claim to it than those who did these and was using the silver first.

Roderick Long on Noam Chomsky

Roderick Long has an excellent short article on Noam Chomsky's claim to be an anarchist over at The Art of The Possible (Nigel, if you are reading, Long's article may be worth reproducing?). The article has sparked an even more interesting discussion that makes me feel nostalgic for discussion forums where I don't have to spend my time arguing that all jews aren't collectively guilty for anything that goes wrong in the world.

Professor Long's view is that Chomsky is about as anarchist as Karl Marx was, with his blathering about the eventual withering away of the state. Of course, Marx and his followers wanted to massively build up the state to incredibly totalitarian proportions first, run by shrewd and Machiavellian characters. So, make government bigger, then abolish it. The trouble is that Chomsky is the same. He may say that "In the long term, I think the centralized political power ought to be eliminated and dissolved and turned down ultimately to the local level, finally, with federalism and associations and so on." But he follows it with "right now, I’d like to strengthen the federal government." In other words, like Marx, bigger government now, abolish it later - and not just Marx: Cold Warrior interventionists like William F Buckley also advocated "temporary suspension of liberties" or the Constitution until the threat of communism was over. Reduce government later, grow it now. As Roderick Long says, "anarchy, but not yet."

In the discussion a defender of Long accidentally leant a defender of Chomsky a weapon, saying

Realize that smarter libertarians (and Dr. Long is certainly that) fully realize that if we, all of the sudden right now, with people having the beliefs that they have now, adopted anarchism, things might get a little … dicey.

The defender of Chomsky quite rightly responded by quoting Long: "Anarchy, but not yet."

But there is a fundamental difference that makes the Chomsky defender's position fallacious: Chomsky is not just saying "anarchism, but not yet." He is saying "much further from anarchism now." Long may recognise that anarchism can arrive only gradually, as the result of changes in the ideological hegemony, institutional changes, and the creation of alternative institutions, occurs, but that the process should start now. Chomsky is saying the opposite.

A chap calling himself TGGP has an excellent post well worth quoting:

When the government is locking up 1% of the population waging the war on drugs, bombing and shooting people in Iraq and will shoot or arrest you if you refuse to pay it tribute, it’s just obvious that the real problem is BIll Gates and Warren Buffet! All that nasty stuff the government is doing is their fault anyway, and once capitalism is abolished the state will wither away. Isn’t that what happened in all those communist countries?

Someone responded,

Or maybe, TGGP, the real problem is Blackwater; and the Carlyle Group; and Lockheed-Martin; and Kellogg, Brown, and Root; and Halliburton….

To which the obvious response was "Well let’s see Avram… who is their employer? Oh yes, the US gov’t. So again, the problem would be the government and its corporate vassals."

To quote, out of context, a guy that massively grew the government deficit whilst stealing libertarian rhetoric, President Reagan in his first inaugural speech, "Government is not the solution to our problem. Government is the problem."

Who isn't insured in America?

Watching Hillary Clinton's speech to the Democratic convention on the Parliamentary Channel, I noticed how popular "universal healthcare" is to Democrats. I personally think that the Democrats are likely to win the next presidential election, and hence suspect that some sort of (even more) government led healthcare in US is coming soon.

The language is infuriating. After all "universal health care" - who wouldn't want that? Thats like saying "we want good things." How could anybody oppose that? Who wouldn't want everybody to have access to health care?

Of course, there is "universal food" in the US, but these people seem to think providing health care the same way food is provided won't achieve that. There is universal clothing in the US, but these people don't think that providing health care the same way clothing is provided will achieve that. For some reason advocating "universal healthcare" means imposing some huge government program, nationalised hospitals, funded from general taxation, free at the point of consumption (alternatives are some sort of forced saving, but since the US already has that, through medicare and medicaid, I'm not sure what the difference would be). Due to connection of the idea of "universal healthcare" with advocacy for such a huge government program, opposition to such a program is translated into the public mind as opposition to univeral healthcare, opposition to everybody getting healthcare, as though the absence of some corrolary government program for food in the US means that not everybody in the US gets food.

People outside the US even think that health care is provided on a free market in the US, not one where monopolies of privilege are granted to specific insurers; where employers are penalised if they don't buy insurance for their staff; where staff are penalised if they don't accept it; where insurers are forced to provide insurance to certain people; and to insure them for various treatments whether the insured want that coverage or not; where a massive government bureacracy has let millions die whilst holding medicines off the market, imposing regulatory standards that may or may not be necessary, but mean that only the dominant medicine providers can afford to supply medicines; and where dominant healthcare providers are sheltered against competition when the competitors come from the other side of an arbitrary line called a "border"; and where everybody is taxed to pay into a pool of funds, on the state and national level, from which healthcare costs will be paid for anybody deemed suitable by bureaucrats.

And this point should be emphasised along with the fact that healthcare systems that the Democrats seek to emulate do not achieve universal healthcare, and cannot. We in the UK regularly get news reports about people in some areas being told some form of treatment is not available in their local hospital, that they have to go to another, or that the NHS won't provide it at all because it is "too expensive" (how much gets spent on the NHS a year? Has anybody ever capped NHS spending?) So the huge government programs don't achieve "universal health care" either.

So why the pressure for "universal health care" in the US? Because people like Hillary Clinton bandy around this figure that "45 million people" in the US have no health insurance. In Clinton's speech last night, it was 47, actually. Of course, if people ran around saying "two hundred and sixty million people in the US have health insurance" one gets a quite different response, though that would be saying the same thing!

But where does this figure of 45 million come from? This is an interesting documentary that actually says that number is false, the number of uninsured in the US is actually far lower, 8 million:



The transcript, including sources for claims, is here.

Returning to the point that universal healthcare has not been a achieved by vast government programs, here are two other, shorter films, buy the same film maker:





Lest people think that I am claiming the status quo in the US is a good thing, I'll post another film: A while ago I made this post about Cuba that mentioned a film by libertarian major network anchorman John Stossel. Well, here is his documentary on the failings of the US system and what may be done to improve it:

Minimum Wages and Monopoly Prices

An interesting possible line of argument not explored often enough is that the minimum wage law is actually a monopolistic privilege, effectively enforcing cartelisation of the labour supply.

Think of it like this: A cartel is classically thought of as occurring when different competitors in an industry, or supply a particular type of good or service, get together to agree not to undercut each other. They threaten to withold supply of goods unless buyers agree to pay a higher price, or they just reduce the supply anyway, so that supply falls relative to demand, and prices increases.

Well, what examples do we have of this? People like to alledge that supermarkets do this, that railways did it in the nineteenth century, and other such examples. However, surely the most common occurence of a cartel, or collusion in order to withhold supply in order to raise prices is one that people just don't like to point out. Maybe because they are supposed to be nice, benevolent things. The most common attempts at forming cartels are unions.

Think about it: Unions are when suppliers of labour get together so that they can threaten to strike unless they get a better wage. Ultimately the idea of "collective bargainning" with union negotiated wages rests on this power of striking, that is the threat to withhold supply unless the price rises. This is classical, typical cartel behaviour.

Now, libertarians believe that people have a right to form unions. Unions may well occur in free markets - which is not to say that they can effect general wage levels, because they will not be able to charge monopoly prices. The reason why people should be free to form unions, is because if one person has a right to withhold his labour, by virtue of owning himself and hence his labour, if follows that a large number of people have the same rights. On utilitarian grounds, though, people sometimes fear the power of unions "in restraint of trade." I think they are wrong to do so, because cartels are inherently unstable in a free market economy.

Why is this the case? For at least two reasons. Firstly, the most obvious, if you were a businessman and you, with reasonable certainty, knew that your competitors were going to keep their prices high, or raise them, though costs, say, were falling, what would you do? Cut your prices, of course, and take business from your competitors. A cartel agreement provides this certainty, by definition: It is when a bunch of your competitors, and you, get together and announce to each other that you will fix prices. However, you don't know if anybody else will also stick to this agreement, so perhaps it is not so certain. So, suppose you don't know whether your competitors will keep their prices high? Again, you will reduce yours, so that you don't lose business to them in case they cut prices too.

So, either you can be certain they will stick to the cartel agreement, in which case you don't. Or you can't be certain they will stick to it, in which case you don't. Either way it simply is not rational for you to abide by the cartel agreement.

Secondly, though, the new, higher price will attract new suppliers to compete with the established suppliers in that industry. The cartel would then be forced to compete with these new suppliers, and could only do that by reducing prices.

However, moving away from a free-market, a cartel can be made more stable if these instabilities are removed. What the cartel needs is a means to ensure that members will abide by the agreement to keep prices high - that means a method to enforce the cartel agreement. But what is also needed is a way to stop new competitors selling at less than the cartel price.

Unions have accomplished both these things. Cartel agreements are strengthened by unions threatening to withhold benefits or legal support or protection, etc, for members that cross picket lines. They also support legislation preventing employers from hiring "scabs," or even to force workers in a particular workplace to join a particular union. In fact, many unions workers are also professional workers, meaning that workers in that industry must be licensed, and the licensing authorities are usually staffed by members of that industry, probably unionised.

However, one of the most effective ways of enforcing the cartel agreement is for the government to simply enforce the cartel price, and make it illegal for members of the cartel to sell at less than the monopoly price. This is precisely what the minimum wage does.

Milton and Rose Friedman wrote, in Free to Choose, that

These laws are defended as a way to help-low income people. In fact, they hurt low-income people. The source of pressure for them is demonstrated by the people who testify before Congress in favour of a higher minimum wage. They are not representatives of the poor people. They are mostly representatives of organized labour, of the AFL-CIO and other labour organisations. No member of their unions works for a wage anywhere close for the legal minimum. Despite all the rhetoric about helping the poor, they favour an ever higher minimum wage as a way to protect the members of their unions from competition.

The minimum wage is a means of ripping off employers by enforcing a cartel agreement.

TRIMMING THE WEEDS

Home secretary, Jacqui Smith, decided, yesterday, that cannabis should be reclassified from a class C to a class B drug.

Smith justified her decision by highlighting the strength of "skunk" strains of herbal cannabis now widely available.

Last week, Gordon Brown warned of the "more lethal quality" of much of the cannabis now available, described it as a gateway drug, and said that the reclassification was needed to "send a message to young people that it was unacceptable".

The home secretary told the Commons today: "Reclassification reflects the fact that skunk, a much stronger type of the drug, now dominates the cannabis market."

She said it accounted for 81% of cannabis available on the streets compared to just 30% in 2002.

The average age of first use is 13 years old and young people may binge on skunk in the same way as alcohol, trying to achieve the maximum effect

This story comes hot on the heels of another, however, that smoking marijuana might help prevent cancer. This does not come from someone with a great history of supporting cannabis use, but from UCLA medical school professor Donald Tashkin, who

was the lead investigator on studies dating back to the 1970s that identified the components in marijuana smoke that are toxic. It was Tashkin et al who published photomicrographs showing that marijuana smoke damages cells lining the upper airways. It was the Tashkin lab reporting that benzpyrene -a component of tobacco smoke that plays a role in most lung cancers- is especially prevalent in marijuana smoke. It was Tashkin's data documenting that marijuana smokers are more likely than non-smokers to cough, wheeze, and produce sputum.

Nevertheless,

Tashkin's team interviewed 1,212 cancer patients from the Los Angeles County Cancer Surveillance program, matched for age, gender, and neighborhood with 1,040 cancer-free controls. Marijuana use was measured in "joint years" (number of years smoked times number of joints per day). It turned out that increased marijuana use did not result in higher rates of lung and pharyngeal cancer (whereas tobacco smokers were at greater risk the more they smoked). Tobacco smokers who also smoked marijuana were at slightly lower risk of getting lung cancer than tobacco-only smokers.

And

As to the highly promising implication of his own study -that something in marijuana stops damaged cells from becoming malignant- Tashkin noted that an anti-proliferative effect of THC has been observed in cell-culture systems and animal models of brain, breast, prostate, and lung cancer. THC has been shown to promote known apoptosis (damaged cells die instead of reproducing) and to counter angiogenesis (the process by which blood vessels are formed -a requirement of tumor growth). Other antioxidants in cannabis may also be involved in countering malignancy, said Tashkin.

So, it is nice to know that our own Home Secretary may well be putting us more at risk of cancer than we need otherwise be! So why the fear of "skunk" that has lead to the reclassification? There have been claims that it can be linked to schizophrenia amongst regular users. If use has been increasing amongst our nation's youth, and this link with mental illness is real, then this may indeed be a problem. However, returning to the Guardian article,

The ACMD chair, Professor Sir Michael Rawlins, refused to criticise the home secretary, saying that the ACMD's recommendations were based entirely on harmfulness - but that the government had the right to consider other factors.

He said: "We don't take into account 'the message', we don't take into account policing priorities; we are obliged by law only to take into account the harmfulness.

"The government may want to take into account other matters. That's their right; they are the government. We are only an advisory committee and from time to time governments, for their own reasons, may wish to ignore the advice."

...

His council heard evidence that the potency of homegrown herbal cannabis tended to be two and a half times that of imported resin. But they said users now often moderated their intake.

They were also told that the incidence of new schizophrenia cases reported to GPs had gone down, not up, between 1998 and 2005, indicating a weak link between increased potency and use in the past two decades and mental health problems.

Since cannabis was downgraded in 2004 the proportion of young people using it has fallen each year from 25.3% in 2003-04 to 20.9% now. Among those aged 16 to 59, the proportion over the same period has fallen from 10.8% to 8.2%, according to the British Crime Survey.

Libertarians believe that people should be free to do as they choose with their own person and property as they want. That means free to put it at risk if they think doing so is worth the benefits. Here we have two opinions - and it is common in serious medical matters for patients to seek a second opinion. But in this case, as in so many others, the government has decided to try to prevent people from following the second opinion and is trying to force you to accept its preferred opinion. It has decided that it, and not you, should be the one that decides when or when not it may be worth putting your body at risk. It is, thereby seizing control of your body. And yet so many people seem to find this fact so less nauseating than I.

How sad.

Walter Block on Free Market Environmentalism

Part 1


Part 2


Part 3


Part 4


Part 5


Also of relevance:

On the Ivory Trade



Related fragmemts from discussion:

From Samizdata's group blog

Daniel Hannan, writing on his Telegraph blog, gives a good example of how the free market is more environmentally-friendly than state ownership:

Kenya banned the killing of elephants in 1979, effectively nationalising its herd. At around the same time, Rhodesia (as it still was) made elephants the property of those whose land they were on. The result? Thirty years on, Kenyan elephants have been all but wiped out, while Zimbabwe’s are as numerous as ever.

People say that the market promotes selfishness, but it turns out that it is when things are owned collectively that greed thrives.

From Matt Ridley's

The Origins of Virtue

Leviathan [political authority] creates tragedies of the commons where none were before. Consider the case of wildlife in Africa. All across the continent countries nationalised their game during colonial regimes and after independence in the 1960s and 1970, arguing that it was the only way to prevent ‘poachers’ wiping out this commonly held resource. The result was that peasants now faced competition and damage from government owned elephants and buffalo, and had no longer any incentive to look after the animals as a source of either meat or revenue. ‘The African farmer’s enmity towards elephants is as visceral as Western mawkishness is passionate,’ said the head of the Kenya Wildlife Service. The decline of African elephants, rhinos and other animals is a tragedy of the commons created by nationalisation. This is proved by the fact that it has been spectacularly reversed wherever title to wildlife has been re-privatised to communities, such as the Campfire programme of Zimbabwe in which sport hunters bid to buy rights to kill game from committees of villagers. The villagers rapidly change their attitudes to the now-valuable game animals on their land. The acreage of private land devoted to wildlife has increased from 17,000 to 30,000 square kilometres since Zimbabwe granted title over wildlife to landowners.

Some private game and nature reserves in South Africa.

In the course of discussion of Walter Block's videos, and the examples of private nature reserves in South Africa someone mentioned, "30% of elephants no longer have tusks and thanks to this no body wants to hunt them." I thought that this was interesting: Maybe long tusks is genetic, and so, if long tusked elephants are shot, preventing them from breeding and reproducing, thus breeding out long tusks. Whatever, someone else replied,

A similar phenomon was observed in Pennsylvania some years back. Pennsylvania has a very large deer population and deer hunting is very popular - upwards of a million licenses used to be issued annually. But the hunters went for "trophy" bucks with huge antler racks. Such bucks apparently have become much less common than they used to be, suggesting a reduction in the gene pool of the "large rack" genes.

I asked, "Hmmmm, if the licenses were issued by a private company, I wonder what would have been different?" And my friend responded,

I never thought of that, but I guess they could issue a special, more costly, license which would be required to shoot a deer with more that a prescribed number of "points". This would be perfectly feasible because as it is the season is divided into a 12-day "buck season" (Sundays being excluded) and a two day "doe" season. There is a minimum antler requirement in the buck season and a complimentary maximal antler requirment in the "doe" season - i.e. the criterion is not the gender of the deer. About as many deer are normally taken in the doe season as in the buck season.

But, it would be quite possible to manage hunting so that the "trophy" deer were better preserved. Usual arguments might suggest that private interests would be more desirous than government interests of such preservation.

I did point point out,

There would still be a problem of over hunting the deer, though, and that results from the fact that whilst a company could sell fewer licenses, if anybody could go into business selling licenses, the benefits would be undermined. That is why exclusive control of the land is required. Say, nobody is allowed to hunt deer in that area without a license issued by company X.

Apart from that, there is a proposal for private management of deer hunting.

TERRORISM, COLLATERAL DAMAGE, AND DOUBLE EFFECTS

There is a classic and obvious way of defending the loss of innocent life in acts of war as morally justifiable that draws on the utilitarian or consequentialist tradition. This is, broadly, that "the ends justify the means." In practice, this means that the innocent people are "expendable," in order to achieve a weightier goal, for instance, to take a simple example, the saving of even more lives. The phrase "collateral damage" is used to refer to such innocent casualties, and it lends itself perfectly to this idea: Collateral is what we put up for risk in order to achieve some higher end.

Let's take, as a paradigmatical example, for instance, the idea collateral damage in war is justified so long as the loss of innocent life is outweighed by the lives that would be saved as a result of the military action. So, for example, if fify people will die in a bombing raid on village where a chemical weapon laboratory is based, but the chemical weapons there would be used to kill thousands if the raid were not to go ahead, then the attack, on this consequentialist line of argument, would be justified.

However, what may be problematic in accepting such an argument is that defenders of such casualties in war may well not also be able to reject terrorism as a legitimate means. After all, a terrorist might equally say that a terrorist attack in which fifty people are killed is justified if it fosters public pressure and influence on government to get it to reject a policy that would kill thousands. So, just as with the village example, the terrorist could say, "yes, fifty people were killed, but thousands were saved, so it is justified." The argument is precisely the same: So long as the benefits (in numbers of human lives saved) outweigh the costs (the number of human lives lost), the action is justified. Indeed, terrorists could likewise refer to the lost lives as "collateral damage" in a war. I have no idea if they really do, but terrorist characters did in an Arnold Schwarzenegger film. In this film the terrorist leader tells Arnie that his family, killed in a bombing, were collateral damage no different from when the US goes to war.

Another common argument is used to justify "collateral damage," and I think it may be a merit of this argument that it avoids what may be, for consequentialists, the problem of avoiding justifying the use of terrorism. This is the doctrine of double effect, an ethical theory developed by the scholastics and, most importantly, Catholic theologian Thomas Aquinas. I am not intending, here, to either justify the doctrine of double effect, or to justify the loss of innocent life as collateral damage. All I intend to do here is show how the doctrine of double effect helps highlight normatively significant differences between loss of life as collateral damage and as terrorism.

Terrorism, for the purpose here, is defined as ideologically motivated violence, or threats of violence, against otherwise innocent or unrelated people (hence different from assasination) for the purpose of generating terror, which, in turn, is for the purpose of generating pressure to effect public policy (either to change from a given status quo, or to reverse a course of change. Terrorism is, then, a means to a means to an end - the initial act, say a bombing, is a means to generating widespread fear or terror, which in turn is a means to changing policy or social habits.

The doctrine of double effects says that a harmful affect of an action is justified, under four conditions:

1) The nature of the act is itself morally good, or at least neutral.

2) The bad effect is not intended, though it may be foreseen.

3) The good effect of the action outweighs the bad effect.

4) The good effect does not go through the bad effect.

So, lets take two cases:

A: The airforce makes a bombing raid on a chemical weapons lab that is certainly known to be located in the centre of the village. The airforce knows that innocent people will be killed in the raid, but also knows that the chemical weapons will be used by the government of that village's country to gas a thousand innocent people. Fifty innocent civilians die in the otherwise successful raid.

B: A terrorist cell bombs the village hall of a village where there is a chemical weapons laboratory. It does this to generate fear amongst the populace of a country that they could become victims in similar events unless the terrorist demands are met. These demands are that the government closes down a chemical weapons laboratory producing a weapon that would a kill thousand people. Fifty people die in the terrorist bombing and the government shuts down the factory.

In both these cases the consequentialist seems to say that the action was justified, whether it is the airforce bombing raid, or the terrorist attack. However, the doctrine of double effect allows us to point out significant and morally relevant differences between A and B.

The most obvious difference that leaps out is regarding conditions 2) and 4): The bad effects, though, foreseen are not intended in A, but are in B, and the good consequences in both cases (getting rid of the chemical weapons factory and so saving a thousand lives) does not go through the bad effect (killing the fifty innocents) in A, but does in B. The air force foresaw the innocent deaths, but did not intend those deaths. Their intention was not to kill the innocents, but to get rid of the factory. They would have gone through with their bombing even had their been no innocents there. On the other hand, the terrorists intended to kill the innocent people. Had there been no innocents there, they would not have bombed where they did.

Likewise, the the good consequences of the air force's raid was not achieved by achieving the bad consequences. The air force did not get rid of the factory by killing the innocents, whilst that was precisely how terrorists accomplished it.

So, to reiterate, I am not intending to either defend collateral damage or to defend the doctrine of double effect as a tool. What I intended, and what I think I have done, is to show that the killing of innocents as collateral damage is not the same as killing innocent people in terrorist acts. Terrorism and collateral damage are different in normatively significant ways.

TAXATION IS VOLUNTARY; REPETITION MAKE IT SO

In interview Democratic Senator, Harry Reid, tries to argue that taxation in the US is not "forceably taking money from some people to give it to others," because the tax system in the US is "not forceable" but is "voluntary."

Check it out.

Now, one commentator there, Kevin T. Keith, responds that Reid is actually correct, saying

Reid is making a perfectly standard - and correct - point about our mechanism for collecting taxes. The US system is "voluntary" in the sense that it is up to the individual to declare their own tax liability and make sure it has been paid by paying any extra taxes owed if their paycheck withholding is not sufficient. As he points out, perfectly correctly, in many other countries the individual has no role in the payment of their own taxes - the government deducts the money without asking them what they owe or what exemptions they may be entitled to. Even with paycheck withholding, in the US the individual must make the effort to reconcile their own taxes at the end of the year.

The standard term used in tax policy discussions for such a system is "voluntary". That's the term Reid used. Of course the system is not optional - and Reid says so explicitly. But it is different from other systems, and there is a standard term used to express that difference, and that was the term he used. (And that term is surely no more euphemistic that Mr. Flourescent Necktie's harping on the word "forced", which US taxation is not.)

You don't have to like the terminology that knowledgeable people use, but you make yourself look like a fool by proving that you don't know what it means.

OK, lets concede this argument. I am not a US tax lawyer, so I won't dispute the terms. However, Kevin Keith is still wrong to say, as he later did,

Complaining that he was wrong because it is not "voluntary" in the colloquial sense, when he was using the term correctly, in this context, in the strict sense, is just buffoonery. You don't have to like the tax system, but it's idiotic to criticize knowledgeable people who discuss it knowledgeably, using the terminology used by experts in the field. There is no "evidence to the contrary" regarding the voluntary nature of US tax policy - the US system is voluntary, as that term is used by people who are trying to discuss tax policy alternatives rationally and not playing silly word games.

He is wrong to say this because Reid is clearly attempting to conflate the two senses of voluntary. He is plainly trying to say that taxation is voluntary in the "colloquial" sense because it is voluntary in the technical sense of people declaring their own income taxes rather than having the taxman deduct it at source.

The fact is that there are threats involves in the tax system. Perhaps not everybody pays in response to a threat. I could give a robber money because I like his face, regardless of the fact that if I don't he would shoot me. However, it is still the case that the government will do nasty things to you, things you presumably prefer less than keeping your money, and things that would be illegal for others to do, if you do not give it your money, and that it intends that its doing these things, or promising to do them, will create an incentive for your to accede to its demands to turn your money over.

Now, perhaps people do "voluntary" accede to threats - they choose to do what the threatener wants because they prefer that alternative to others. But that is plainly not really what people mean when they say that something is "voluntary." In fact, under that terminology, there could be no such thing as forced labour: Saying that people are free to choose not to pay taxes, but will face civil or criminal consequences if they don't, is much like saying that slaves were free not to work, but would face consequences such as floggings if they did.

Taxation is not voluntary.

Classic Post: The Marxian Theory of Exploitation

Reproduced from my old Blog:
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Many socialists have regaled against the market economy as inherently exploitative. One of the most well known examples and influential examples of this is in the writings of Karl Marx. This theory was developed most completely in his massive three volume economics treatise Capital, but is neatly summarised here by Arthur P. Mendel:

“The entire argument in Capital rests on the labor theory of value. As was the case with virtually all the parts that Marx fused into his system, this concept was borrowed from earlier writers, in this case from the ‘classical’ economists such as Adam Smith and, especially, David Ricardo. It is primarily a price theory, according to which ‘commodities’ should exchange on the basis of the ‘socially necessary’ labor time devoted to their production. In other words, the amount of time a laborer works to produce a particular item determines its "exchange value": two products of equal labor value would thus be exchanged for one another.

“Having incorporated the labor theory of value, Marx derived from it a second step in his demonstration: the theory of ‘surplus’ labor value. According to this theory, the worker does not receive in wages an amount equal to tile value of the goods he produces. We must keep in mind that the influence of tile "pessimistic economists" still prevailed, as did the conditions promoting their pessimism. Drawing their conclusions from their own observations and from official government reports on working-class conditions in England during the industrial revolution, economists like Malthus and Ricardo argued that an "iron law of wages" existed that would keep wages down to a minimum necessary to meet the workers' basic needs. Marx accepted this and drew the conclusions he desired: on the one hand, the labor theory of value argued that labor created all the value of the goods sold by the capitalist; on the other hand, an ‘iron law of wages’ kept the laborer's income down to a subsistence minimum consequently, it must follow that the workers were not receiving the full value of their labor, that there was a ‘surplus’ kept by the capitalist owner of the means of production.”

Our first response to this argument is to look at the “Iron Law of Wages.” This theory is clearly false, for numerous reasons. The theory is, basically, that if wages rise for a time above enough to pay for mere subsistence then population will increase, resulting in increased competition for jobs amongst workers, resulting in lower wages. If, on the other hand, wages are lower than subsistence, fewer children are born, malnutrition kills off a certain percentage of the population, so competition for wages falls, and wages rise. Thus, it is argued, wages will always tend to a mere subsistence level.

However, Malthus, Ricardo, and Marx held the theory of the Iron Law of Wages in the nineteenth century, but in that century wages doubled, population increased over two and a half times. Rising real wages after 1850 did not lead to a rise in the birth rate, but the exact opposite – the birth rate fell from 35 per thousand in 1850 to 28.7 per thousand in 1900. (See JL Hanson, A Textbook of Economics, pp 311). So empirical evidence doesn’t back up the Malthusian argument. Secondly, the Iron Law of Wages only approaches the question of what determines the price of labour from the perspective of supply and not demand (and then only crudely, for it doesn’t recognise that the worker is buying a wage at the same time as selling their time, and thus take in the relative value they place on their uses of it). For instance, it is likely that a rise in population will result in a rise in demand for labour, so if population were to rise as a result of higher wages (as the Iron Law says it would), there is not necessarily a reason to expect a fall in wages as a result, because of an increase in demand for labour. This is, in fact, why an increased population as a result of free immigration or an absence of state control of reproduction will actually be likely to increase wages in the long term – increased population means more mouths to feed, means more demand for workers to feed them, means higher wages. Indeed, the Iron Law of Wages doesn’t even take account of how productive a worker is – surely an employer would offer more to a skilled and dedicated worker than a talentless lay about, because the former will get more work done than the latter? If so, then, at least to that degree, wages will reflect productivity.

Thirdly, the phrase “subsistence level” is so ambiguous as to be almost useless. Cave men subsisted on a lot less than the average UK worker – or even the least paid UK worker – so why haven’t UK wages fallen to the level needed to provide subsistence to a cave man. Workers in today’s Britain live a lifestyle many would have thought luxurious by the standards of one hundred years ago.

So the “Iron Law of Wages” fails to hold any water. Given this, Marx’s presumption that wages will always tend to be less than the true value of the labour spent producing becomes untenable, and, if this is the case, his claim that capitalism is exploitative looks shaky too.

However, we may go further – having disposed of the theory about what determines how much value a capitalist gives a worker, lets turn to the theory about how much value a worker gives the capitalist. This theory, as stated above, is “…primarily a price theory, according to which ‘commodities’ should exchange on the basis of the ‘socially necessary’ labor time devoted to their production. In other words, the amount of time a laborer works to produce a particular item determines its ‘exchange value’: two products of equal labor value would thus be exchanged for one another.” In short, the exchange rate, or price, of one hour of socially necessary labour time, in a free market economy, would be another hour of socially necessary labour time – an hour of work from a farmer will buy an hour of work from the builder. Hence the belief, also iterated above, that “labor created all the value of the goods sold by the capitalist.”

However, it is obvious that labour doesn’t create all the value of the goods (remember that the argument isn’t that only labour creates goods, but that only labour creates the value of those goods, or, in other words, only labour gives those goods value). Surely if a group of identical workers spent an identical amount of time building an identical house next to a land fill site or a sewage works as they did building one next to a site of great natural beauty, the latter would fetch a higher price than the former. Isn’t this obvious? If so, then it must also be obvious that the exchange value, the price, of each house is not solely determined by the labour put into producing it, but by the geographical position too – and by the attractiveness of that position to those who would live in the house. Hence it is the utility, the preference satisfaction derived from owning that house, which determines its price.

An old complaint against the traditional labour theory of value (as stated by Adam Smith and David Ricardo) was that it implied that useless labour would fetch an equal price as useful labour. For example, an hour’s worth of delicate and life saving brain surgery would buy an hours worth of digging holes and filling them in again. Or, more crudely, that if I spent the same amount of time making a shit sandwich as I did making a cheese sandwich, consumers would happily spend as much on each of them! This is obviously not the case, so the price of a good cannot be determined by the amount of time spent working on it.

However, this was not Marx’s claim. As Robert Nozick points out, “Marxist theory does not hold that the value of an object is proportional to the number of simple undifferentiated labour hours that went into its production; rather, the theory holds that the value of an object is proportional to the number of simple undifferentiated socially necessary labour hours that went into its production.” This claim is backed by reference to page 46 of Marx’s Capital. The point is that Marx qualifies the traditional labour theory of value by also requiring that labour hours be socially necessary, and this, he believes, saves him from the above argument.

Marx writes that “Nothing can have value without being an object of utility. If a thing is useless so is the labour embodied in it; the labour does not count as labour, and therefore creates no value.” (Capital pp48) However, even accepting the condition that an object has to be of some utility, there still remain some problems. For instance, what if a worker works for 893 hours on something that is of only very slight utility. This satisfies the condition that it must be of some utility, so should we now believe that here on in only the time spent making it matters, that only the amount of labour matters, so that, now that it is of some utility it will buy a 893 products that are of incredible utility but only took an hour to make. Nope, because, as Marx says “…the labour spent on them (commodities) counts effectively only insofar as it is spent in a form that is useful to others.” (Capital pp97-98) In other words, the 893 hours of labour are only valuable insofar as they are of utility to those that consume them, as is the hour of the other goods mentioned, which implies that the value of a good depends on its degree of utility to its consumer, that the labour embodied in it is only as valuable as it is of utility to its consumer. Marx even claims that “Whether that labour is useful for others, and its product consequently capable of satisfying the wants of others, can be proved only by the act of exchange.” In other words, the only way to tell if a commodity is valuable or not, or even if it has value, is by observing the action of the market process – the act of exchange. This is a hell of a concession! But what becomes clear is that, by tacking on the qualifying condition that labour need be socially necessary in order to have value, Marx has in fact ended up with something much different from a labour theory of value. He has claimed, in effect, that the value of a product is determined insofar as it is useful in satisfying the preferences of the consumer and not by the amount of labour time spent producing it at all!

But we can approach this from a different direction. Imagine that things are being produced as efficiently as they can be, but that too many of them are produced to sell at a certain price. The price at which the market clears is lower than the apparent labour values of the products; a greater number of efficient hours went into producing them than people were willing to pay for. Does this show that the number of average hours spent making an item of sufficient utility doesn’t determine its value? Marx’s answer to this question is to say that if such overproduction occurs that the market won’t clear at a certain price, then the labour devoted to making an object was inefficiently used – less of the thing should have been made – even though the labour itself was efficient. Thus, not all those efficient labour hours constituted socially necessary labour time. The product does not have less value than the number of socially necessary labour hours expended on it, because there were simply fewer socially necessary labour hours expended on it than meets the eye.

“Suppose that every piece of linen in the market contains no more labour than is socially necessary. In spite of this, all the pieces taken as a whole may have had superfluous labour-time spent on them. If the market cannot stomach the whole quantity at the normal price of 2 shillings a yard, this proves too great a portion of the total labour of the community has been expended in the form of weaving. The effect is the same as if each weaver had expended more labour-time upon his particular product than is socially necessary.”

(Marx, Capital, p 120)

Robert Nozick neatly sums up the consequences of this view: “Thus Marx holds that this labour isn’t all socially necessary. What is socially necessary, and how much of it is, will be determined by what happens on the market!! There is no longer any labour theory of value; the central notion of socially necessary labour time is itself defined in terms of the processes and exchange ratios of a competitive market.” So on one hand Marx concocts a theory about prices that actually tells us that prices are not determined by labour, and then on the other he tells us that workers are exploited because all the value of the product they create is determined by labour! This is simply intellectual dishonesty!

The classic labour theory of value is clearly wrong because it cannot explain why a shit sandwich won’t buy a cheese sandwich when they both take the same amount of time to make. In fact, the labour theory of value is not even useful in economics because it cannot explain what goes on in an economy. For instance, I can buy cola in one-litre-bottles, and I can also buy it in two-litre-bottles. However, the price of a two-litre-bottle is not twice that of the one-litre-bottle even though it holds twice the contents. Why is that? Modern economics, abandoning anything approaching a labour theory of value, can answer this, but the labour theory of value cannot.

In terms of modern economics, it is easy to explain: It is less important to me that I get a second litre of cola than it is that I get a first. Once I have one litre, I care less about getting the second; the marginal utility of a second litre is lower than the first. Thus, if the company wanted to sell me a second litre, they have to make it cost me less than the first, because it is less important to me than the first. This is why the two litres of cola in a two-litre bottle will not be the same price as the two litres in two one-litre bottles.

But the amount of labour time spent producing the second litre was exactly the same as that spent producing the first litre. Therefore the labour theory of value cannot explain why two-litre bottles of cola are cheaper than two one-litre bottles. Marx’s changes to the labour theory of value lead us further and further away from an account of exploitation, because he would have to say that the labour embodied in the second litre in the two-litre bottle was less “socially necessary” than that of the first, but can only do so on the grounds that the market for cola wouldn’t clear if it was twice the price, which moves us into a position of saying “price of a good on the market tells us how much of the labour was socially necessary,” and into one that says “the price of a good on the market is determined by the amount of socially necessary labour time spent producing it.”

However, we can reject the Marxist theory of exploitation without even rejecting the labour theory of value. David Gauthier sums up the Marxist argument:

“Marxism offers a direct challenge to our account of the Market which, if sustained, would refute the claim that market interaction is impartial. For the Marxist insists that private ownership of the means of production, a fundamental presupposition of the market, is necessarily exploitative. The argument is simple. Under private ownership, nothing can prevent the emergence of a situation in which some individuals (capitalists) own the means that others (workers) need if they are to engage in productive activity. These others are then compelled to sell their labour power to the owners of the material means that production requires. This sale is exploitative. For the essential and distinctive characteristic of labour is that it produces more than the cost of its own production; labour thus reproduces itself and in addition produces what in Marxist thought is called surplus value. Now labour power is bought and sold, as any other commodity, at a price sufficient to cover its cost of production. Hence the buyer of labour necessarily receives the surplus value, since he pays the worker a wage equal to the cost of producing the labour power sold, and receives a price equal to the value of what that labour power produces. The market systematically favours the buyer of labour power over the seller; hence its operation is in principle partial to the capitalist.”

Gauthier begins studying this position from the claim that the market price of what labour produces is greater than the cost of its own production. Imagine that the price of labour power was equal to the cost of producing it. It is obvious that under these conditions there would be a demand for more labour, because buyers (capitalist employers) profit from the difference between the price they pay for labour power and what they receive in exchange for its product, which, under these conditions, would be nothing (because price equals cost). This demand for more labour power would continue until the marginal product of an additional unit of labour power is equal to the marginal cost of producing that additional unit. However, at this point the price of labour – the wage paid – is equal to the price that is received for its product. There can be no surplus value when the supply of labour is brought into equilibrium with the demand for it. “The worker receives a wage equal to the marginal difference her labour power adds to the total product” – workers are paid according to their marginal productivity.

Marxists attempt to escape from this conclusion by denying that supply and demand come into equilibrium. The claim is that the buyer of labour power is able to keep its price, the wage, below the price he receives for its product, because the supply of labour will always exceed demand for it because of what Engels called “The reserve army of the unemployed.” However, we have just seen that if the wage is below the price received for the product of labour, then there will be an effective demand for more labour – demand will be greater than supply. So the Marxist is trapped in a contradiction: The buyer of labour power is able to derive surplus value from labour – to pay the worker less than he receives for the product of labour – only if labour exceeds demand. But if there is a surplus to extract then this creates amongst capitalists a demand for labour in excess of the existing supply. As Gauthier says,

“Or, to put it another way, if the supply of labour exceeds the demand for it, this can only be because the cost of producing labour exceeds the price that can be received for it’s product. So there can only be surplus value if supply exceeds demand if supply exceeds demand there can be no surplus value.”

So, if, as Marxists suppose, labour power is a commodity, then the operation of a competitive market must bring the supply of labour into equilibrium with the demand for it. Thus, at equilibrium, there can’t be any surplus value for the buyer of labour power to extract, and so there can be no exploitation of the seller of labour power – the worker. Thus, in a competitive market, there can be no exploitation of workers, at least in the Marxist sense.

Kevin Carson's New Book

Kevin Carson's long awaited new book on anarchist organisation theory is almost with us. Sean Gabb has already commended it as "a devastating attack on big business from a libertarian point of view. I cannot recommend them too highly."

A LIBERTARIAN MANIFESTO?

The Libertarian Party of the United Kingdom is set to have its first official meeting some time in March. Regular readers will know that I have supported the idea of a UKLP, though the contest I wrote my support for was won by an article opposing the suggestion. Ah well, Neil Lock doesn't have to get involved!

However, with both my post and the first meeting in mind, here is either a manifesto or a set of policy suggestions.

Economic policy

1: Seek to cut the size of government realtive to GDP by 25%.

2: End compulsory regulation. This idea is kind of lifted from a thought experiment in Charles Murray's What it Means to be Libertarian. In this thought experiment regulation is no longer compulsory. People don't have to submit their goods, their businesses, their manufacturing processes, etc, etc, to governments for inspection and approval. They don't have to prove to the government that they are conforming to statutory standards, etc. If they want to, then they can. If they don't want to, then they have to stamp or market their goods "government unregulated," or put up signs in clear view "government unregulated" in their stores, etc.

3: Abolish the income tax and replace it with a flat tax.

4: Abolish the welfare state, except for support for the physically disabled (eg, paraplegics, people with extreme MS, etc.). Replace it with a negative income tax, on Friedman's line.

5: Abolish the minimum wage that is causing such disemployment amongst our youth.

6: Declare unilateral free trade, and start reducing tariffs and quotas with an aim to their being zero in five year's time.

7: Have an enquiry on the extent of corporate welfare, and end all instances, no subsidies, grants, etc.

Foreign Policy

8: Withdraw from the EU (because 6 would be a waste of time without doing so!

9: Freeze military spending.

10: Start withdrawing troops from Iraq, Afghanistan, and reduce troop numbers over seas.

Domestic policy

11: End the War on Drugs, decriminalising drug use, possession, manufacture and sale.

12: Decriminalise prostitution, pimping, and brothels.

13: Decriminalise sadomasochism.

14: Bring to an end blasphemy laws and laws against "incitement of religious hatred" and racial counterparts.

15: Implement the principle of subsidiarity, returning powers to local councils that have been taken by central governments over the last few decades. The simple reason is that it is easier to vote with one's feat against local governments than it is against national governments. Whilst it is still a burden for people to move house if they don't like the way their Council is run, it is less of a burden than emigrating from the entire country is, and so the ability to vote with one's feat is a more effective check on local government power than on national government power.

16: Full tax credits for people using private alternatives to government services, such as private health care and insurance, private schooling or homeschooling, private policing, rubbish collecting, or use of arbitration rather than courts in civil disputes, and for community based schemes providing alternatives or supplements to government services. "Privatisation" usually ends up meaning the government setting up a firm, or firms, then selling it off, even though it shouldn't really own it in the first place, and then regulating the entire new industry, often with disasterous effects, and with a "free enterprise" rhetoric that allows the inevitable failure to smear free markets ever more. A better alternative is to allow markets to evolve from below by simply avoiding forcing those willing to use private alternatives to pay twice for their service. Whilst a scheme of "voluntary taxation would be better," simply refunding the part of people's taxes that would be spent on this service, in a tax credit, is pretty close to doing this, and avoids the problems associated with voucher schemes.

Is Charity Enough

Discussing libertarianism inevitably involves answering the question "what about the poor"? And then, when libertarians suggest that those that want to help the poor can do so through private charity, the discussion inevitably ends with a doubt that charity would be enough. The answer is, of course, "enough for what?" It certainly isn't the be all and end all. Firstly, it is plain that the poor in the more capitalist tend to be much better off than the poor in the less capitalist countries. The claim that libertarians want to defend the interests of the rich only and don't care about the poor, when shown in this light is utterly falacious: Capitalism, where it has been allowed to work, has been better for the poor than socialism has, both in terms of actual wealth, ensuring that even if the poor get a smaller slice of the pie, it is a much bigger pie they get a slice of, and in terms of equality: The division between the rich and poor is less in more capitalist countries than, say, between racking members of the Comintern compared to the poorest person in the USSR. Libertarianism would also mean an end to corporate welfare, redistribution to the rich, and the provision of monopolistic privilege by the state. And, lastly, libertarianism would also mean the freeing of the creative energies of people themselves to come up with theri own solutions to problems and hazards, including the risk of poverty and the inability to provide for oneself. That means the development of mutual aid and insurance arrangements.

So, libertarians do not simply rely on private charity. However, what can be said in defense of charity and in answer to this question, would it be enough? Well, the question itself is odd. The supposition is that people don't want to help the poor, or those in need, or those incapable of helping themselves. But if that is the case, then why would they ever vote for a government to force them to do so? As David Friedman wrote,

Suppose that one hundred years ago someone tried to persuade me that democratic institutions could be used to transfer money from the bulk of the population to the poor. I could have made the following reply: 'The poor, whom you wish to help, are many times outnumbered by the rest of the population, from whom you intend to take the money to help them. If the non-poor are not generous enough to give money to the poor voluntarily through private charity, what makes you think they will be such fools as to vote to force themselves to give it?'

So, if the vast majority of people are too selfish to help those in need, then it plainly follows that no democratic institutions would result in the transfer of money from the majority to the poor. People wouldn't be likely to vote for such a government. But people do vote for such governments. Of course, one must not neglect various facts, such as the fact that the state employs between about a fifth and a quarter of the entire workforce of the UK (the NHS is, I hear, the biggest employer in Europe), and so that inevitably means that a huge part of the electorate will be made up of people who's continued income depends on voting in support of various government activities and policies. It also means that some of the most powerful pressure groups on government policy will be public sector, as opposed to private sector, unions. Given this, support for an extensive welfare state is likely to come, in large part, from those actually employed by that welfare state, not necessarily from those it serves, or from those exclusively interested in using it to help people. Beyond this, the welfare state also helps people who are not poor, not needy. The NHS is there fore all who want to use it, rich or poor (in theory, at least). Likewise for schooling, and so many other things. Some of those non-poor who support the welfare state may well do so because it helps them, not because they care for the needy who cannot help themselves, then.

However, in the end, surely a large reason that people vote for welfare statist policies is because they support and favour the use of democratic institutions to help the poor and the needy and those who cannot help themselves. Libertarians say, then, that if people want to help the poor, then they don't need governments to force them to do it, and if they don't want to help the poor, then it is odd to think that they will support governments to force them to do it.

Of course, the response to that is that the defenders of the welfare state are voting to force the unwilling to help, as well as themselves. However, surely the number of unwilling people isn't that big. I find it totally incredible that they would comprise any significant part of the electorate. In fact, I would use the unpopularity of libertarianism as evidence that it is not. Hardly anybody likes libertarianism, and the principle reason that they dislike libertarianism, it seems to me, is because libertarians say that there is a big problem in forcing people to contribute to looking after the poor, and the reason that most people reject such a position is because most people have a fear that, without such force, the poor would not be looked after. It should, therefore, follow that most people care for the poor considerably, and would, then, continue to give money to help them were they not forced to.

So, to build an answer to the question, we can accept that, given the popularity of the welfare state even amongst those that are not net beneficiaries of it, support enough to maintain its existence, it is reasonable to assume that most people would continue giving large portions of their income to help those in need. Lets assume that a third of them would, or that total voluntary donations would amount to a third of the amount that government provides now.

Beyond this we have the question of how many now in receipt of welfare are actually people that those who support the welfare state for altruistic reasons actually want to help. By this I mean, how many of these people are actually capable of providing for themselves. Mary Ruwart wrote,

During the 1980s, I rented to welfare recipients. Ninety percent of my tenants were able-bodied women with children who simply chose welfare instead of work. Indeed, one woman who tried to give me friendly advice suggested that I stop fixing up the apartments at night and give up my day job. "Have some kids and get on welfare so that you can enjoy your life," she counseled me. Although I did not take her advice, many young women did. Low-income teens often told me that they became pregnant in order to receive welfare checks and establish their own residences. The more children they had, the bigger their welfare stipend.

In 1992, New Jersey eliminated part of the monthly increase that women received for new children. Even though stopping this stipend only decreased the welfare package 4%, births to welfare mothers went down by 10%. Clearly, many women were getting pregnant as a means of self-support. No wonder that one in eight children now receive some form of government "aid."

Why would someone choosing to conceive children as meal tickets and live on welfare? By the mid-90s, a person would have to earn $5.50 to $17.50 per hour (depending upon your state) to get more after-tax benefits than they'd receive on welfare! Of course, choosing welfare instead of work didn't give a person job experience or regular raises, so choosing poverty as a teen was generally a life sentence.

When Ohio required capable welfare recipients to work, 40% of them decided that they didn't need help after all. Oregon tried to place its able-bodied welfare population in jobs by offering employers a subsidy to take them. Once welfare recipients found that they were going to have to work for someone, 80% went out and found an unsubsidized job. Clearly, a great deal of the welfare population simply chooses not to work when tax dollars, usually in excess of what they would initially earn, are readily available. Giving money to those who could work results in less money for those who can't.

In 1987, Wisconsin began requiring people on aid to seek or train for work. By 1997, Wisconsin had 55% fewer families on welfare than it did in 1987, while the rest of the nation experienced an average increase of 16%. In other words, Wisconsin's work program cut welfare by 71%!

Of course, this is from America. People may say that the UK is different, that our welfare state is more discriminating and better safe guarded against abuse and fraud. I'm not sure what possible grounds they could argue such a ridiculous thing on - so far as I can tell, welfare fraud is widespread. Such a thing has formed the basis of James Bartholomew's work on the welfare state, and I would direct them there. Mary Ruwart's claim was that "Giving money to those who could work results in less money for those who can't." People may think that money about benefit fraud and welfare mothers is only for the selfish and greedy minded, but this is a real reason to oppose such a thing: Less welfare fraud means more for those who actually need it. Private charity is more discriminating than government. Its funds more limited. If people don't think that a particular charity is helping, and helping more than anybody else can, then they will stop donating. This means that charities are under a competitive pressure to be successful, and it means that if funds are being wasted on those that don't need them rather than those that do, then a charity is wasting the funds of its donors - funds that they can simply stop donating if they discover such a thing, unlike those that fund the welfare state. Mary Ruwart writes,

In 1987, Wisconsin began requiring people on aid to seek or train for work. By 1997, Wisconsin had 55% fewer families on welfare than it did in 1987, while the rest of the nation experienced an average increase of 16%. In other words, Wisconsin's work program cut welfare by 71% !

Let's assume that Wisconsin's experience was atypical and that nationwide, only 50%, rather than 71%, of the people on welfare are capable of supporting themselves. Private charities would be likely to weed out such people. Thus, if we simply gave the equivalent of the welfare budget to churches and other private charities for distribution, twice as much help would go to the truly needy--virtually overnight!

Make a conservative guess that half of the people actually on welfare or claiming some sort of benefit are actually capable of supporting themselves, and that private charity would cut off all support for such people. Now add in our previous position that, absent government compulsion, people would voluntarily donate funds equal to half the current money that the government provides for the poor. That would mean that the actual needy, instead of those who are able to support themselves, would recieve just as much without a welfare state.

However, we needn't stop there, since we have the effectiveness of government versus charity itself to bring in. James Rolph Edwards has an excellent paper on this in the Journal of Libertarian Studies. He reminds us that "Some fraction of each dollar taxed will always be absorbed in wages and salaries of the administrative bureaucracy, costs of purchasing, powering, maintaining and replacing equipment, buildings, etc., and other overhead costs. Only the remainder will actually be received by the target population in the form of cash or in kind payments. Many advocates of compulsory income redistribution have tended to ignore this inconvenient fact altogether in their writings, however. Indeed, most of the public discussion proceeds with an implicit assumption of costless, dollar-for-dollar income transfers." Given this, it is very worth considering where the overheads will be higher, how much money gets absorbed in costs - in state welfare, or in private charity. Edwards writes,

Of course it is also true of private charities dependent on voluntary donations that they have costs absorbing part of their revenue, but there is a huge difference in the efficiency with which they operate relative to government. Contrary to Okun, public income redistribution agencies are estimated to absorb about two-thirds of each dollar budgeted to them in overhead costs, and in some cases as much as three-quarters of each dollar. Using government data, Robert L. Woodson (1989, p. 63) calculated that, on average, 70 cents of each dollar budgeted for government assistance goes not to the poor, but to the members of the welfare bureaucracy and others serving the poor. Michael Tanner (1996, p. 136 n. 18) cites regional studies supporting this 70/30 split.

In contrast, administrative and other operating costs in private charities absorb, on average, only one-third or less of each dollar donated, leaving the other two-thirds (or more) to be delivered to recipients. Charity Navigator www.charitynavigator.org), the newest of several private sector organizations that rate charities by various criteria and supply that information to the public on their web sites, found that, as of 2004, 70 percent of charities they rated spent at least 75 percent of their budgets on the programs and services they exist to provide, and 90 percent spent at least 65 percent. The median administrative expense among all charities in their sample was only 10.3 percent.

Edwards suggest that actually this two-thirds figure is conservative: Charity Navigator only records charities that are tax exempt 501 (c)(3) organisations required to provide informational tax returns. That excludes religious organisations. Such organisations often use donated labour, and so can exclude labour from their total costs. Why this difference in costs?

The basic reason for this large differential in costs between private and public agencies is not difficult to see. Depending largely on voluntary contributions, most private agencies are under strong pressures to operate efficiently and keep costs low. Benevolent citizens naturally wish a large fraction of their donations to reach the needy, and many will not keep donating to an agency that does not accomplish that. Donors can select among private nonprofit charities, and competition between charities for donations tends to insure efficiency. Public aid agencies, in contrast, are budgeted their funds by Congress, which obtains them through compulsory taxation. These agencies are not under competitive pressures to keep costs down that are remotely equivalent to those of private charities. Indeed, their incentives may be much the opposite, as Niskanen (1994) has argued. Yet another factor promoting efficiency of private charities is that those operating at levels of inefficiency comparable to the average government agency are often prosecuted—by the government (which never applies the same standards or threat to its own agencies)—for fraud. Pressure on private charities to avoid such prosecution, and the bad publicity and loss of public trust resulting, is strong.

Where does this leave our argument now? Mary Ruwart again provides the answer: "Of course, public welfare gives over 2/3 of every tax dollar we give them to overhead (e.g., salaries of the bureaucrats who administer the program). Private charities, however, give 2/3 of every dollar to those who need help. By switching to private distribution, we'd cut overhead in half. In other words, we'd double the dollars available to the needy once again."

So, we have the fact that so many people who are not themselves net beneficiaries or employees of the welfare state continue to vote for or support welfare statist policies itself indicates a good chance that huge numbers of people would continue to donate money were the compulsion removed. On a conservative estimate I said that a third of the present government expenditure could be raised through voluntary donations.

I then established a conservative suggestion that half of the total revenue spent by the government on welfare is collected by those that can support themselves, and would be denied support by private charities. That means doubling the remaining funds for anybody left. That gives us two thirds or the present expenditures.

Lastly we have the superior efficiency of charity over government, averaging twice as efficient. So we can double our two thirds of government expenditure. The result is that leaving support for the needy could well leave us with 33% more support, in financial terms, for the actual needy than is presently provided by the state.

Is charity enough? It is more than enough

OH. MY. GOD! This guy is a hero!

Ezra Levant is a publisher in Alberta, Canada. He aroused fury by republishing the Danish cartoons that mocked Mohammad, portaying the alledged prophet and his followers as terrorists. For this crime Levant has been dragged into a court. Not a real court, of course. Nope, he has been dragged in front of something calling itself the "Alberta Human Rights Commission." Here is his description of the commission:

The commission was meant as a low-level, quasi-judicial body to arbitrate squabbles about housing, employment and other matters, where a complainant felt that their race or sex was the reason they were discriminated against. The commission was meant to deal with deeds, not words or ideas. Now the commission, which is funded by a secular government, from the pockets of taxpayers of all backgrounds, is taking it upon itself to be an enforcer of the views of radical Islam. So much for the separation of mosque and state.

I have read the past few years’ worth of decisions from this commission, and it is clear that it has become a dump for the junk that gets rejected from the real legal system. I read one case where a male hair salon student complained that he was called a “loser” by the girls in the class. The commission actually had a hearing about this. Another case was a kitchen manager with Hepatitis-C, who complained that it was against her rights to be fired. The commission actually agreed with her, and forced the restaurant to pay her $4,900. In other words, the commission is a joke – it’s the Alberta equivalent of a U.S. television pseudo-court like Judge Judy – except that Judge Judy actually was a judge, whereas none of the commission’s panellists are judges, and some aren’t even lawyers. And, unlike the commission, Judge Judy believes in freedom of speech.

I am not here passing judgement on the content of the Danish Cartoons and the rest of Levant's publications. What excites me is the passionate defense of freedom of speech and the propper respect for the limits on a limited government.

Opening Statement

Levant is given a chance for an opening statement in his interrogation by the Human Rights Commission, and uses the opportunity to point out the irony that a government organisation calling itself a "Human Rights Commission" funded by taxpayers under a secular government, should be having a hearing to decide whether or not a Canadian should get to speak freely.



What was Your Intent

The commissioner asks Levant what his intent was in republishing the Danish cartoons. Levant responds by asking why the commissioner would want to know that. He gets her to admit that any answer is irrelevent in law - in law, it doesn't matter what his intent was. So, despite having given reasonable reasons for publishing the article in other interviews, when interviewed by the government, when asked by the government what the reason he exercised his right of free speech, he heartily accepts that it was to offend precisely the people that were offended in precisely the manner he offended them... AND TO DO SO IS HIS RIGHT! There is an exellent line where Levant points out that someone had accused him of offending the prophet Mohammad. Levant's response: "and he's dead, by the way, so I don't think I've offended him much".



The Real Violence in Edmonton

The judge claims that the republishing of the Danish cartoons contributes to an atmosphere of hatred for Moslems, and so puts them at risk of violence. Levant Makes the excellent and quite correct response that what actually creates hatred for Islam and Moslems is fundamentalist nuts fire bombing people's synagogues in liberal countries, launching nuisance suits against magazines critical of Islam and Moslems, and using government kangeroo courts to try their publishers. The Moslem showing of outrage in response to the cartoons contributed more to an atmosphere of hatred for Moslems than the cartoons themselves did.



I Don't Answer to The Government

Again, Levant decries the Kangeroo Court he is being interrogated in. He suggests that it is quite proper for him to be judged in civil society, for society to punish him through ostracism for his views, for advertisers and doners to stop funding his magazine, etc. But the government has neither the legal nor the moral authority to censor him and it is outrageous for it to attempt to do so.



You're Entitled to Your Opinions

This bit is hilarious. I'm not sure what the context is, but after Ezra makes some point that McGovern clearly disagrees with McGovern retorts "well, your'e entitled to your opinions"!!! DUH! Why is he being interrogated by a "Human Rights Commission" as a response for publishing images and views offensive to some people if he is entitled to his opinions, then? He replies, "I wish that were the fact," since Levant is plainly only entitled to the opinions that the Human Rights Commission will let him hold.



Levant's website is here

The really real Sicko

In his new "documentary," Sicko, Michael Moore criticises US healthcare, which he is quite right to do, since it is a ridiculously flawed system. However, he controversially compares it with "socialised" healthcare systems in the UK, France, Canada, and... Cuba. Yes, Cuba. This is interesting, because, early in the film Moore shows his audience a chart from the World Health Organisation ranking countries by the effectiveness of their health care. He does this to show how bad the US ranks, way down at 37. He doesn't comment on the fact, and hopes his audience has missed it when he holds the chart up, that Cuba ranks 39, worse than the US!

In Sicko Moore rounds up a group of 9/11 heroes, police, firefights and the such, and takes them to "the only place in the USA where healthcare is free": Guantanamo Bay. Unfortunately the military won't let them in, so they go to Cuba instead. The results... well, you can see them in the video from John Stossel below. The short Stossel video is a trailer for a show I will post at some other date.

Stossel Takes on Michael Moore about Cuba healthcare myth:



And here is, first, an interview from YouTube introducing some videos from hospitals in Cuba, and then the videos themselves:

Videos taken by doctor Darsi Ferrer and smuggled out of Cuba by therealcuba.com's webmaster show the real health care regular Cubans receive. Very different from the flagship hospital for the Elite, paying foreigners and special interest useful idiots where Michael Moore went for his Sicko propaganda movie. This is only the beginning, there is plenty more this came from and a lot of the raw videos are already here in this youtube profile. These are the hospitals from the other side of the apartheid for regular Cubans that Sicko wouldn't show

Miguel Enriquez Hospital for regular Cubans

This is the outside of the Miguel Enriquez Hospital, in Havana. Notice the garments hanging from windows; broken windows; near the end there is a view of the inside staircases and you can see that the exterior panel glasses are missing. Some pieces of wood have been placed on the floor against these windows to prevent people from falling. See another video titled: Elevators / Garbage containers in Hospitals for Cubans

Elevators / Garbage containers in Hospitals for Cubans.

This video was taken at the Miguel Henriquez Hospital in Havana. Only one of the elevators is functioning. The panel glasses at the end of the hall by the elevators are missing and now they have placed some pieces of wood on the floor and against the window to prevent someone from falling down. For more videos visit www.therealcuba.com

Dead Patient in Hospital for regular Cubans

This video was filmed in August of 2007 inside the 10 de Octubre Hospital (formerly known as "La Dependiente") in Havana, Cuba. This is a hospital for regular Cubans, very different from those hospitals for foreigners and tourists where regular Cubans are not allowed. In the video, a relative of another patient is told by a nurse to watch when the patient on the next bed stops breathing, because that would be a signal that he was dead. If you watch closely, 24 seconds into the video, you'll see a fly landing on top of the dead patient's pajamas

Patients in Hospital for Cubans part 2

More videos showing patient's rooms at the 10 d... (more)
More videos showing patient's rooms at the 10 de Octubre and Miguel enriquez hospitals in Havana. Notice how some of the beds have bed sheets that are not the typical white sheets used in most hospitals. This is because many patients have to bring their own bed sheets, pillows and towels.

Room at a Hospital for Cubans

This room at the Miguel Enriquez Hospital (Formerly known as Benefica) happened to be empty at the time and it was possible to take a more detailed video. Notice the filthy conditions of the patient bathroom; the mattresses; pieces of plastic and rags covering the broken windows.

I don't care about consumers of books

Must be true. After all...

"Providing healthcare shouldn't be about making a profit; it should be about caring for people."

I help provide books to readers for a profit. So presumably I don't care for readers of books. Or...

Can you say "false dichotomy?"

More On Guns

In response to my last post on guns Matt Wardman made an interesting response:

It seems to me that you have the wrong end of the statistical stick, and your argument is specious.

The original proposition you question:

However the connection between liberal gun laws and a high gun crime rate is very questionable.

The final conclusion you draw:

There is, therefore, little evidence from the US supporting a correlation between high rates of gun ownership and high murder rates.

You have refuted a different proposition from the one you claim to countering. You have switched from "gun murder rates" to "overall murder rates" at some point. No one asserted that there was a correlation between liberal gun laws and high OVERALL crime rates.

Looking at your stats, and using the rates for GUN crime - not overall crime - as these are the ones you set out to address, your argument proves the original assertion you set out to question.

I actually suspect Matt's criticisms are on target: The stats I used did switch from gun crime and gun murder rates to murder in general. However, I suspect his conclusion is false. The stats I was able to find from a quick google search suggested that the percentage of murders that are committed with a gun is lower in heavily armed states than in states where the populace is less well armed.

The percentage of the population who own guns in the least heavily armed states are Hawaii 8.7%, New Jersey 12.3%, Massachusetts 12.6%, Rhode Island 12.8%.

The percentage of murders by gun in Hawaii is 43.5 %. In New Jersey it is 61 %. In Massachusets its 47.4%. In Rhode Island its 63.4%.

The four most heavily armed states the ones where the perecentage of population owning guns is highest, is Wyoming, at 59.7%, Alaska, at 57.8%, Montana 57.7%, South Dakota 56.6%.

The percentage of murders committed with a gun in Wyoming is 40%. In Alaska it is 52.9%, in Montana it is 50%, in South Dakota its 33%.

The average rate of gun ownership in four least heavily armed states is 11.6% The average murder rate in the four least heavily armed states is 3.025 people in 100,000. The average percent of the murders that is committed by gun in these least heavily armed states is 53.825%

The average rate of gun ownership in the most heavily armed states is 57.95%. The average murder rate in the most heavily armed states is 3.325 people in 100,000. The average percentage of these murders that is committed by gun is 43.975%.

So you are only very slightly more likely to be murdered in one of the states where gun ownership is most widespread than you are in one of the states where it is least widespread, but you are much less likely to be killed with a gun in states where gun ownership is most widespread than you are in states where gun ownership is least widespread.

Moreover, the figures I have used have been percentage of homicides committed by gun, not percentage of murders. Homicides can include lawful killings. This would make the actual percentage of murders committed by guns even lower. On top of this, I only had figures on gun-caused homicides for the states, not districts. I have no doubt that stats for DC would tip things even further in favour of gun ownership.

Source, in addition to my article source.

As cream for the pudding, here's this story, with the accompanying video:



A guy with a gun caught career burglar in his house. Being armed, he was able to detain the criminal until the police arrived. had he not been armed, the criminals could have got away... or worse. What is the lesson?

Drew Carey Solving LA's Traffic Problems

DELETED SCENES: WHAT WOULD YOU PAY TO ESCAPE GRIDLOCK?



DELETED SCENES: EXPRESS LANES VS. CAR POOL LANES



URBAN LEGEND - GRIDLOCK & ASPHALT



RELATED: ROBERT POOLE ON FUNDING NEW ROADS

State Capitalism and Burma

Amongst opponents of free market economies, some of the most under handed are those who pretend to be the exemplars of capitalist economies: The large corporations. When people speak of laissez faire, it is usual that opponents will point to the actions of various large corporations to "prove" that laissez faire cannot work. Likewise, "vulgar libertarians" that should know better correctly use economic theory against their critics to refute claims that the free market wouldn't work, but then seem to be persuaded by their critics that "actual existing capitalism" is laissez faire.

The reality is, of course, very different: Both the "vulgar libertarians" and the "vulgar authoritarians" are incorrect - the status quo is not libertarian, is not free market, and is not capitalst. Some countries more closely approximate free markets than others, and do so in some respects and not others, but none does so very much, and many does so barely at all.

It is often in third world countries that both the vulgar authoritarianism and vulgar libertarianism come into play. Socialists point out the plight of workers in sweatshops as "proof" that markets can't help workers, and laissez faire only grants employers the power to exploit workers, and that, instead, international effort is justified to force governments to intervene in economies to enforce minimum working standards and wages. Vulgar libertarians then respond that, in a free market workers earn according to their marginal productivity, and so attempts to raise their incomes above the price the market will pay will result in pricing them out of the market, into even worse black market conditions, or starvation... therefore the low wages experienced in the thirld world are justified, and a necessary stage in the development of the industrialised countries.

The trouble with the libertarian response is that, whilst correct in many places, it is not universally true, and it is untrue precisely because the libertarian response assumes that the socialist critic is correct and that what is happening in the world is the result of free markets. Often, however, it is definitely not. And the vulgar authoritarian is wrong to assume that corporations favour laissez faire when the reality is that they all to often favour state intervention when it serves their purposes.

The most pertinent example in today's news is Burma. Burma, or Myanmar, has been in the news recently where mass protests have been shaking the streets of the capital Rangoon.

About 20,000 protesters led by Buddhist monks and nuns on Sunday mounted the largest anti-government protest in Myanmar since a failed 1988 democratic uprising, shouting support for detained pro-democracy leader Aung San Suu Kyi.

At one point a small crowd of about 400 -- about half of them monks -- split off from the main demonstration and tried unsuccessfully to approach the home where Suu Kyi is under house arrest. The monks carried a large yellow banner that read: "Love and kindness must win over everything.

The support of the monks was key in the protests.

In our country the monks are the highest moral authority. When the monks take the leading role, the people will follow," said Soe Aung, a spokesman for the National Council of the Union of Burma, a coalition of opposition groups based in neighboring Thailand.

So what does this have to do with state capitalism? The answer is here: "The protests began on Aug. 19 as a movement against economic hardship, after the government sharply raised fuel prices, increasing the overall cost of living."

So, again, "what has this got to do with state capitalism"? Why aren't these just more socialists calling for state intervention to provide for people when the market fails? Because it is the rising fuel prices that was the trigger for the protests, and it is in the fuel prices that the hand of the corporate state is most evident:

Fueling the military junta that has ruled for decades are Burma's natural-gas reserves, controlled by the Burmese regime in partnership with the U.S. multinational oil giant Chevron, the French oil company Total and a Thai oil firm. Offshore natural-gas facilities deliver their extracted gas to Thailand through Burma's Yadana pipeline. The pipeline was built with slave labor, forced into servitude by the Burmese military.

The original pipeline partner, Unocal, was sued by EarthRights International for the use of slave labor. As soon as the suit was settled out of court, Chevron bought Unocal.

Chevron's role in propping up the brutal regime in Burma is clear. According to Marco Simons, U.S. legal director at EarthRights International: "Sanctions haven't worked because gas is the lifeline of the regime. Before Yadana went online, Burma's regime was facing severe shortages of currency. It's really Yadana and gas projects that kept the military regime afloat to buy arms and ammunition and pay its soldiers."

The U.S. government has had sanctions in place against Burma since 1997. A loophole exists, though, for companies grandfathered in. Unocal's exemption from the Burmese sanctions has been passed on to its new owner, Chevron.

Rice served on the Chevron board of directors for a decade. She even had a Chevron oil tanker named after her. While she served on the board, Chevron was sued for involvement in the killing of non-violent protesters in the Niger Delta region of Nigeria. As in Burma, Nigerians suffer political repression and pollution where oil and gas are extracted, and live in dire poverty. The protests in Burma were actually triggered by a government-imposed increase in fuel prices.

In addition to oil and fuel, however. 16 percent of all of Burma's exports go to the US. Most of these are apparel, clothing etc. exports of which greatly increased during the 1990s, growing 272 percent since 1995. 80 percent of all exported apparel from Burma goes to the US, bought by companies such as Adidas, Kohl’s, Warner Bros., Bugle Boy, Jordache, and Nautica, a consortium of low-cost-clothing providers.

Note, however, in the above quote, the mention of forced labour. This reminded me of an interesting article in Journal of Libertarian Studies a while ago. Ellennita Meutze Hellmer restated the typical free market economic argument against critics of sweatshop labour, against those that demand that companies improve working conditions and wages in poorer parts of the world (an excellent summary of the argument, in fact, well worth reading). However, she then says

Given these points, many observers —especially libertarians— tend to view the actions of such student organizations as USAS as actions arising from an ignorance of basic economics (e.g., Block 2000). However, it is not necessarily correct to entirely dismiss the sense of injustice felt by these groups. Although these organizations may be misguided in only attacking the wages paid by corporations, the claims of injustice are not always fictitious, not by a long shot. In some countries, such as Burma/Myanmar, workers are forced by the state to work in miserable manufacturing jobs for powerful multinational corporations (The Economist 2000; Amnesty International 2004).

Hence it is wrong for both vulgar authoritarians to point to the plight of Burma's sweatshop workers as proof that laissez faire free's employers to exploit workers, and it is wrong for vulgar libertarians to try to use free market economic theory to defend the low incomes and poor working conditions of those workers. As Hellmer went on,

a number of other grassroots organizations, including the Free Burma Coalition, Global Exchange, and the Campaign for Labor Rights, have campaigned in the past to use the force of the state to end the importation of apparel made in Burma. Generally, reasons for concern cited are the usual anti-sweatshop rhetoric, most notably contempt for corporate profits. For example, a study by the National Labor Committee (NLC) concerning the source of NBA hooded sweatshirts manufactured in Burma reports that garment workers’ wages are as low as 7 cents per hour, and that the workers in Burma are paid just 4 cents for each NBA hooded sweatshirt they
sew; their wages add up to less than one-tenth of 1 percent of the NBA’s $60 retail price for the garment.

Sadly, however, the NLC and most other organizations miss the linchpin in an attack on the Burmese system of manufacturing. Mentioned (very briefly) in this report is the fact that merely questioning factory conditions can result in imprisonment. This last fact is reasonably well-documented but tragically far from the ony individual
liberties violation that is a way of life in Burma. However, it is brushed over by an organization that claims to care for international labor rights. The truth is that the military regime of Burma abducts its own citizens and forces them to work in factories owned by multinational corporations. Often, the laborers are political dissidents or petty thieves, but the criminality requirement is a mere formality.
Many innocent people, as well, are forced to work in the factories as well, bringing the number of slaves to a total of 800,000 (The Economist 2000). These forced laborers toil all day in dangerous and disease-ridden conditions under the gaze of armed guards. Often, they are chained together for months at a time. Those who refuse to work are beaten; thousands are raped or killed (Amnesty International 2004). The U.S. and the international community have imposed sanctions on Burma, but the regime and the state-dominated economy continue to thrive.

In this case, it is clear that many of the economic objections made by free-market defenders do not apply. The condition of slavery prevents many of the workers from pursuing better jobs, even when manufacturers move to the country to take advantage of the cheap labor. According to capitalist theory, the high profits made by corporations that manufacture their clothes in less-economically developed nations attract more entrepreneurs who want to further increase their profits, and these new entrants into the Burmese manufacturing market then have to bid up wages in order to entice workers to work for them. However, this logic only applies when workers are free to choose which jobs to work and receive the benefit of their productivity in the form of wages, which is not always the case in Burma. Here, the government is often paid by the multinational firms in order to utilize the labor of the prisoners. In such a situation the bidding up of the price of labor does not affect the incentives of the prisoner-workers. Rather, correct economic reasoning suggests that the politicians would respond to the increased demand for their cheap workers by raising the price that they (the government) charge for the labor. The upward movement in prices in turn provides the ruling classes with an incentive to enslave even more workers, ceteris paribus. As long as this upward movement in the price of labor allows corporations to maximize profit, they will continue to locate manufacturing in this nation, and this will lead, in a truly vicious circle, to still more enslavement of the population and little increase in
the standard of living for the impoverished worker.

In the light of this, government responses to the protests can be seen to be benefiting the corporate allies of the Burmese state. And those responses have been harsh:

In the pre-dawn hours Wednesday, military vehicles were patrolling the streets using loudspeakers to blast the warning: "We have photographs. We are going to make arrests!"

Shari Villarosa, the acting U.S. ambassador in Burma, told The Associated Press that military police were pulling people from their homes in the middle of the night and citizens of Burma's largest city were terrified.

"From what we understand, military police ... are travelling around the city in the middle of the night, going into homes and picking up people," she said.

CTV's Paul Workman, reporting from neighbouring Thailand since journalists are now banned from entering the country, said several young monks had made the escape across the border, telling horrific stories of the violent crackdown.

"They witnessed of course people being beaten up and arrested and had come across the border for safety, although they say they do want to go back," Workman told CTV Newsnet.

"But they had certainly come because they wanted to get out of Burma for at least a period of time and were being given some refuge in that part of Thailand."

and

A SENIOR Burmese intelligence official claims thousands of protesters are dead and the bodies of hundreds of executed monks have been dumped in the jungle.

After defecting from the military junta and fleeing to the Thai border, Hla Win told a reporter from London's Daily Mail: "Many more people have been killed in recent days than you've heard about. The bodies can be counted in several thousand."

The horrific details emerged as Burma's top general continued to snub the UN's peace envoy, who is in Rangoon on a mission to convey the world's outrage to the junta.

With protests quashed and many monasteries empty, fears are growing for those who have disappeared into Burma's grim jails.

Observers say many detainees have been taken to the city's notorious Insein prison, the Government Technological Institute, the police battalion number seven compound, the Kyaikkasan racetrack and possibly elsewhere...

A Swedish diplomat told the Daily Mail of more reports that monks had been tortured and killed in large numbers.

"We were informed from one of the largest embassies in Burma that 40 monks in the Insein prison were beaten to death today and subsequently burned," the diplomat said.

At least there will be more cheap slaves for multinational corporations then!

The proper libertarian position on this sort of thing is plain, and it is not the vulgar libertarian apologetics for the exploitation of the Burmese. As Brad Spangler has put it:

What you might not be aware of is that oil companies Chevron and Total are business partners with the Burmese state. These enterprises are complicit in propping up a tyrannical regime. Agorists recognize that, like most of the corporate dominated “white market” economy, the source of their wealth is not really production and exchange but subsidies, sweetheart deals and generally cozy relationships with the bandit gangs more commonly referred to as “governments”...

Chevron and Total are complicit in the atrocities in Burma via their relationship with the Burmese government. This constitutes an active disregard for the rights of the Burmese, rather than the merely apathetic passive disregard of the average person who feels to overwhelmed with the challenges of day to day life to pay attention to such things and is not directly involved in the first place. Chevron and Total, by means of their business partnership with the Burmese government ARE involved.

It is my opinion that this active disregard rises to a level sufficient to nullify corporate property claims, at the very least until such time as Chevron and Total sever all ties with the Burmese government.

Brad concludes from this that "If I were on a jury, as a matter of moral conscience I could not vote to convict anyone of a property crime involving purported property of Chevron or Total — from petty shoplifting through multi-billion dollar embezzlement and including destruction of property where no egregious risk to others was created by the destructive act." I'm personally not certain that this would be appropriate: The petty theif and shoplifter stealing from Chevron or Total is not a victim of them. Rather, I suggest it would be much more appropriate for the workers, the slaves that the Burmese state forced, in exchange for bribes, to work for these companies and others, to rise up and seize those companies for themselves. They built them, after all.

In the meantime, we might be able to use our purchasing power, or, rather, non-purchasing power to punish those companies supporting the Burmese military Junta with a boycott.