Quote of the day – Mistrust the Government

Andrew Napolitano succinctly describes why it is imperative that we should mistrust the government and provides a nice list of the freedoms that we all yearn for:

Why We Should Mistrust the Government by Andrew P. Napolitano
The reason Obama likes government and the reason it is “a dangerous fire,” as George Washington warned, and the reason I have been warning against government tyranny in my public work is all the same: The government rejects the natural law because it is an obstacle to its control over us. The natural law is divinely embedded in our souls. It is manifested by the universal yearning for freedom and justice. It consists of areas of human behavior – thought, expression, religion, self-defense, travel, acquisition and use of property, privacy, for example – in which our behavior is subject only to the exercise of our free will and not the permission of our neighbors or regulation by the government. The natural law, properly understood, is a restraint on the government.

The full article is well worth reading: http://lewrockwell.com/napolitano/napolitano100.html

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Please State Government, may I have ice cream?

Wisconsin is in the midst of a recall process. Petitions have been circulated and are currently being examined to determine if the Republican Governor, Scott Walker, and several Republican state representatives will face a recall election. Today a private group, Verify the Recall, delivered recall signature eligibility reports to the Government Accountability Board (GAB). Those reports were generated from data in its on-line database built by private volunteers from the recall petitions. After accepting the reports, GAB spokesman Reid Magney did not hold out much hope that the GAB would pay much attention to the reports. I was not surprised by that news but in explaining their position Mr Magney said something rather remarkable: “Wisconsin law is permissive in that the law has to, you can’t just go do something just because the law doesn’t say you can’t do it. … People could bring things in but the law doesn’t say we are allowed to consider that. There is no provision set up for third parties to file challenges.” (My emphasis.) (Source: YouTube video uploaded by the MacIver Institute.)

I watched the video as I was eating a bowl of ice cream. Given what Mr Magney said, since, to my knowledge, the law does not explicitly give me permission to have a bowl of ice cream I must have been breaking the law as well as my diet. It is a sad state of affairs we have when our government officials believe that we can only do those things that the government specifically allows. And here I thought I lived in a free country.

Verify the Recall is a joint effort between the Wisconsin GrandSons of Liberty and We the People of the Republic, a Tea Party group.

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The Positive Side of Groupthink

When I think about the places I go for information, the people I seek out for conversation, the blogs I frequent, I realize that most of them are places where I find myself saying “yes, how true” much more often than “no, you got it wrong”. Hopefully now and then I find myself saying “interesting! I never thought of it that way!” “Good point, I’ll have to think about that some more.” I have been made to feel guilty, though, because I do not frequent places (whether physical or virtual) that conflict with my thoughts, positions and values more often than not. Pundits worry that I and others like me use the Internet only to seek support for my own narrow point of view and thus am closed to new thoughts. I am one of the thoughtless masses who get pushed further and further into isolated group think to the detriment of civil discourse and the advancement of knowledge and truth.

I never liked that argument but it still stung and made me worried, both about the advancement of my own knowledge and positions and about the hope for the future of the country. On February 27, 2012 Russ Roberts talked to David Weinberger on EconTalk about knowledge. EconTalk is one of the safe zones I frequent to hear thoughts that generally cause me to nod my head in agreement and frequently cause me to feel like I got new information. Thirty minutes into the talk Roberts and Weinberger turned to groupthink, also known as the echo chamber effect. Their short conversation on this topic so impressed me that I will quote from it at length below. The key point is that while it does seem appropriate to worry about the negative effects of conversations that only seem to happen in an echo chamber, we should not overstate that fear for conversations are more likely to be productive and lead to advancement in positions and knowledge when they happen between individuals who fundamentally agree on most issues but disagree about a fine point. If two debaters do not share fundamental agreement on many issues it seems unlikely that either will come away from the conversation having learned something valuable and having advanced toward a productive middle ground.

EconTalk  “Weinberger on Too Big to Know”. David Weinberger Hosted by Russ Roberts.  FEBRUARY 27, 2012 starting at 30:24. My emphasis.
Russ: Let’s turn now back to some of your arguments in the book. One of the things you talk about, I think very provocatively and insightfully is this sort of tension on the internet between hanging out with people who think just like you, which is comforting and feels good often, but dangerous, because it’s prone to groupthink or echo chamber effects, versus exposing yourself to other viewpoints and learning about things you don’t agree with, and maybe getting smarter. But less comfortable. Talk about how that’s going on on the internet.
Guest: Okay. This is actually one of my least favorite topics, because I’m so uncertain.
Russ: Well, we’ll make it short, then. I have plenty of other questions.
Guest: I think it’s a really important topic to bring up in any discussion of knowledge on the internet. Because the echo chamber argument is a powerful argument. It says that if you give people many different sources to listen to, they will naturally tend to listen to ones that they agree with. And there are bad consequences to that–namely you get further convinced of your own beliefs and in fact you get more extreme in your beliefs. There’s some evidence that’s what happens. And the internet is just that situation. And so there’s a great deal of agitation about the echo chamber. On the one hand, part of me doesn’t care about how severe the echo chamber effect is, whether it’s a lot or a little, because even if it’s a little, we still need to be doing everything we can to avoid closing ourselves off to alternative views. I’m a good liberal, not just politically but in terms of certain traditional liberal enlightenment sort of guy, so I think that openness to contrary ideas improves thought. Sorry, that’s what I think; and I’m old; and that thought itself isn’t very open to contrary opinion.
Russ: You’re pretty close-minded about openness.
Guest: I am, absolutely. So on the one hand, it doesn’t matter how severe it is; we still need to be doing everything we can as parents and as individuals and institutionally to avoid it. On the other hand, it seems to me there’s some wrong conclusions, or maybe there are assumptions within that model that we also need to be careful about. The echo chamber model seems to assume that the only good conversation is one with somebody with whom you disagree, and otherwise you are just in your comfort zone. I mean, the language around it is all negative. You are in your comfort zone, you are reconfirming, you are closing yourself down. So, a real conversation is you arguing with somebody with whom you disagree; and not just arguing, but being open to change. Because if you are not open to change then you incapable of learning and there is no point. And so the model should be: The Jew–I say this as a Jew, as my example–talking with a neo-Nazi, and the Jew says: Welcome my friend, let’s have some coffee–because we are in a coffee shop, that’s the setting for these conversations, these ideal conversations.
Russ: Or a salon. It’s the salon/coffee shop/faculty lounge–it’s where we romanticize intellectual discourse.
Guest: Yeah. In the Jurgen Habermas thing it’s the coffee shop. So, I’m going to put it in a coffee shop, if you don’t mind. So, would you like–it’s on me, we’ll get your Nazi latte; and lets talk and work down to our differences, and I am open to becoming a Nazi, my good friend, just as you are open to becoming a Jew. And that’s a real conversation. But that conversation not only never happens. It can’t happen. Because conversation needs a great deal of agreement. And so I worry that the echo chamber argument leads us to undervalue the extent to which we need similarity in order to have a simple conversation, or to have a culture at all. So, for you and me to talk, we have to share a language, we have to have a topic that we both think is interesting, a basic set of assumptions and values or else we can’t get anywhere. We have to have a set of conversational norms that are very particular and precise even if we don’t generally articulate them, that guide the conversation. We have to have so much in common simply to have a conversation. And furthermore the conversations that advance thought generally are not between the Jew and the Nazi, or between the creationist and the evolutionist, or whatever you want to pick. They are conversations among people who know a great deal about a topic, share huge amounts. I mean, they are 99.999% in agreement; but they are two economists who disagree about this particular issue. And the conversation that advances both of their thinking is the one that iterates on some tiny difference, something that they are getting all heated in their discussion but to an outsider who doesn’t know economics, it would look like they are arguing–you’d ridicule them, because they are arguing over something trivial. Echo chambers are an issue, but we should not undervalue the extent to which knowledge is based out of conversations with people with whom we fundamentally agree.
Russ: It’s a very deep insight. The reason I think it’s hard to think about is that word “echo chamber” or “groupthink.” Those are so horrifyingly negative as a way to describe it. But when we describe it as you describe it, we have to have these shared values, norms, it makes sense. And when you look at your own life–when I came here to George Mason U., I’m a pretty hard core free market, libertarian, classical liberal guy, I was worried we’d sit around all day when I got here and we’d talk about how bad the minimum wage is. That’s not what we talk about. It’s not very interesting and fortunately, it’s not what we do. And I’ve learned an enormous amount of economics from my colleagues here, even though we pretty much agree on most things. As you say, because of that agreement, we can go very deeply into aspects of things you don’t fully understand in a way you can’t with somebody who doesn’t share norms, basic values, etc. So, if you look at your own life and you ask yourself, who did you learn the most from, it is romantic–we do say often: I’ve got this great friend, we don’t agree on anything but we respect each other. And often you argue with those people. And if you are lucky they are polite and civilized. But I think the people you learn the most from are maybe the people you already pretty much agree with. That may be more an indictment of our dogmatic selves; but I think it’s a deep aspect of human nature.
Guest: Yes. And I don’t think it’s a dogmatic aspect. It’s how culture advances. It’s how knowledge advances. So, if you are trying to come up with–if you are in a lab and you are working on a vaccine, or whatever, and you are having your weekly meeting to have your people advance, it’s not helpful to have somebody there who says: Vaccines cause autism. You don’t want–that discussion may be important to have someone.
Russ: But not here. You need the groupthink; you need the echo chamber working. You do.
Guest: You do.
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The Morality of Profit

[Updated from May 21, 2011 post] Sheldon Richman in The Morality of Profit has a link to a video from the Atlas Foundation where Tom Palmer discusses the morality of profit. (Also available direct here.) On October 21, 2011 Tom Palmergave another talk on this topic at the John Locke Foundation. I have been puzzling over this topic for a long time and the Atlas Foundation video helps nicely frame some of the issues. I think there is more to be said but this will be a start. Some of his lines are worth quoting:

“Favored businesses profit from subsidies or from the government’s exclusion of competitors. … But there’s a crucial difference between profits gained by violating the property rights of others through theft, pollution, or special favors and subsidies on the one hand and profits that are earned voluntarily through exchange on the other. Whether an exchange is voluntary or involuntary makes all the difference. … Profits … channel self-interest into advancing the projects and interests of others as the best way to advance their own projects and interests.”

People throughout history seem to have a suspicion of profit. I wonder where that comes from? I wonder if entrepreneurs are different from the average man and different is suspicious. Entrepreneurs profit from their actions, therefore profit is suspicious. That seems a stretch when phrased that way but I wonder if we put it in an evolutionary context if there isn’t something there? I’ll continue thinking on that. Let me know if you have any ideas.

[Update November 28 and December 2, 2011] Walmart is often trotted out as an example of a firm creating negative consequences from its profit seeking. Mark Perry nominates them for a significant award: “What single organization in human history has made the greatest contribution to enriching and improving the lives of the poor, the middle class, the average citizen, the bottom of ‘the 99%,’ etc.?  I nominate Walmart.” Well said. Those seeking to reign in businesses often overlook the fact that the poor are helped more than most when competition leads to lower prices and improved efficiency. In a subsequent post, Perry discusses Walmart’s positive effect on neighborhoods, nearby businesses, and jobs. [HT Don Boudreaux at Cafe Hayek]

T. Norman Van Cott puts some numbers behind that point: “Scholars estimate that the presence of Wal-Mart in a community reduces food prices somewhere between 10% and 15%. That’s equivalent to shoppers receiving an additional 5.2 to 7.8 weeks of ‘free’ food shopping. That Wal-Mart’s customer base is skewed toward lower-income shoppers reinforces the beneficent consequences of its price effect.”

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Income Inequality

(Updated October 31, 2011) There has been an increasing amount of news lately, particularly surrounding the Occupy Wall Street movement, fussing that the gap between the rich and the poor is growing, bemoaning the declining lot of the poor and middle class, and condemning the rapaciousness of the very rich, grabbing all they can while the rest of us fight over scraps. Fortunately if one is inclined to look for solid studies examining the issue there are some thought-provoking studies that present a more comforting view of the progress of civilization over the past 50 years or so. Below I’ll link to some of the ones I have run across lately.

  • Russ Roberts interviewed Bruce Meyer October 3rd at EconTalk.org. Bruce makes the case pretty persuasively that after properly correcting for inflation the poor and middle class are doing better than commonly portrayed and the gap between the rich and poor is greatly overstated. He finds that the gap between the poor and the middle class has shrunk of late and the gap between the richest 10% and the poorest 10% has grown, but by a fairly small amount.
  • The Minneapolis Federal Reserve Bank ran an article in 2008 pointing to consumption data as support to the point that the middle class is doing quite well. (thanks to Don Boudreaux for pointing this out and quoting the article in his post on Cafe Hayek)
  • James Pethokouki discusses several studies on the topic in a blog post titled “5 reasons why income inequality is a myth — and Occupy Wall Street is wrong”.
  • Cafe Hayek post by Don Boudreaux on the purchasing power of an hour of labor over time.
  • Sheldon Richman at The Freeman Online makes the point that in an economy so tightly bound by regulations and laws, the rich have the upper hand in forming policy and will lobby for changes that enhance their wealth. However, expecting government to solve a problem it largely created is unrealistic. The best solution is not to ask for the government to redistribute wealth but for the government to back out of trying to micromanage the economy.
  • Ivan Pongracic in The Freeman Online exposes several fallacies contained in arguments that the current income distribution is a problem. He argues that some amount of variance in income is good for society as it reflects dynamism as people try new things. He also argues that static pictures of income disparity do not tell the whole story. People move from one income strata to another as they develop expertise. The richest people vary from year to year. Finally, he points out that the richest 10 percent paid 71 percent of total federal income tax in 2009.

Here are some links for the other side:

  • Associated Press article by Andrew Taylor picked up by the Wisconsin State Journal, the Arizona Republic and others on October 27, 2011 titled “Study: Rich are getting much richer” discussing material from a Congressional Budget Office study and the CBO Director’s blog.
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Minimum Wage, Minimum Rights

Minimum wage laws should be abolished. They are morally indefensible because they cause more harm than good. They are economic foolishness because they thwart the price signal that lets workers and employers arrive at the optimal price for labor.

First, minimum wage laws increase unemployment. As I argued in a post on unions, it is morally indefensible to favor a policy that increases unemployment in order to increase income to a group of people.

Second, minimum wage laws infringe on our freedom. They tell potential employees that they have no right to negotiate with an employer on the full range of benefits and duties that a job might require. When I negotiate with a potential employer while looking for a job, that is a matter between me and the employer. If I do not like the terms offered, I will go elsewhere. If the employer doesn’t like the skills I offer at the price I demand, they will say “no thanks”. What is broken there? Why do proponents of minimum wage laws think they have a right to interfere with my ability to negotiate conditions of my job? Why do they think they have the right to tell employers how much a particular job is worth to them?

Some argue that in some circumstances the employer comes to the negotiation with more power than the potential employee and thus has an unfair advantage. This argument inspires a desire to protect the potential employee from having to accept a bargain that produces an uneven split of benefits. One can probably imagine scenarios where this seems true for specific individuals. If the policy were designed to attempt to identify those specific circumstances some people face, then perhaps it would have some moral standing. But it does not. It applies to everyone, no matter what their circumstances. This policy says to me, if I were a low-skilled worker, you cannot have a job if your skills are not worth the minimum wage. Why would we want to send that message? Why not send the message, “Sure, you can have a job! Here are the things you can do with your skills and here is what they are worth.” Then people have concrete feedback on the value their skills bring in the market and they can make informed decisions about the pros and cons of working and going about improving their skills.

The minimum wage law is another example of implementing social policy through hidden taxes, here coming in the form of regulation. The federal government seems to love doing that. If we really believe people cannot live on under a certain income then we should find a straightforward way to help them that does not interfere with the market forces that keep our economy thriving and providing jobs.

October 4, 2011 postscript. Tim Nerenz just put out a nice post discussing the minimum wage (and a few other things).

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The Essence of Libertarianism

If I succeed with this post I will convince the reader that there are a narrow set of clear rules that should guide the debate over the appropriateness of any government activity. I claim that those rules are simple and uncontroversial for most Americans. They are rooted in the core of what it means to be human and are rules whose observance let our distant ancestors rise up from the level of common animals to improve their lot in life. Without the observance of these rules we would still be living in a world government by the rules of the jungle. Government activities that cannot be justified through these rules threaten to do more harm than good.

In defining these rules I borrowed heavily from a talk Roger Pilon presented at a Cato Institute event May 9, 2011. I quoted at length from Pilon’s talk in a posting on June 25, 2011. As I have freely extrapolated from Pilon’s points please do not blame him for any faults in my logic.

Three rules above all others govern the interactions among people:

Rule 1. We have a right to property. We have the right to keep the things we (legitimately) possess. This right also covers our own bodies – we have a right not to be assaulted, confined, or physically abused. I take it as an assumption that the reader will agree this is a right. I am sure there are those who would disagree with this (say those who believe that society’s right to possess things trumps the individual’s) but for my purposes today I am assuming that the vast majority of Americans agree with this right.

This right enables a key ingredient of the advance of society: the right to maintain possession of those things one has worked hard to obtain. The right to eat the tasty morsel you dug up rather than having it take from you by someone who had not put out that effort. The right to occupy the shelter you built against the weather. The right to feed your family with the wildebeest you just brought back to camp rather than seeing it taken from you by force and going hungry. Given the social structures we see in even the most basic societies (and their differences from animal behavior) it is hard to imagine how humans would have evolved beyond instinct-driven animals without constructing and agreeing upon this right.

Pilon says the rules I am describing here are “so simple you can understand them even on the playground” and describes Rule 1 as “Don’t take what belongs to somebody else.”

Rule 2. We have a right to enter into enforceable contracts with one another. In order to join in common society with one another and work together to advance our lot in life, we need contracts to document agreements and consequences for failure to abide by agreements. Contracts help us regulate interactions between people and thus provide the structure that allows us to specialize. Pilon describes the playground-simple version of Rule 2 as “keep your promises.”

As with Rule 1, contracts allow our civilization to advance and the key behavior they enable is specialization. Thus contracts and specialization go hand in hand. Specialization is perhaps one of the key features that has enabled humans to advance. You and I agree (create a contract) that I will hunt for game and you will gather fruits and vegetables and we will exchange some tonight so that our dinner may be more complete, nourishing, and appetizing. Or we agree (create a contract) that I will spend the week making arrowheads while you spend the week hunting. I share my arrowheads with you to make your hunting more efficient (for you are a great shot but a lousy arrowhead maker) and you share your meat with me to ensure you have better arrows (for I am a lousy shot but make great arrowheads). Together we eat better than if we both depended on our abilities alone where I would miss most of my shots even though I had great arrowheads for my distance vision is not so great and you would miss most of your shots for your inept arrowheads would send your arrows careening wildly across the landscape.

It may be that the this more than any other thing differentiates us from other animals – we establish contracts and trade with non-relatives and thus enable us all to live a better life than if we had not done so. (See, for example, my post on trade here.)

Rule 3. Government is the only institution that should be authorized to use force to enforce Rule 1 or Rule 2. Here I use a fairly broad definition of government – a group of individuals freely authorized by the population at hand and given specific authority to act in the name of the population.

Rule 1 leads to the conclusion that force should not be allowed as an option for anyone for any use of force is by its very nature an assault on some individual’s right to property. However, what do we do if someone breaks Rule 1 or Rule 2? Do we allow force to enforce those rules? Society functions best when we do not have to enforce most contracts by resorting to physical force but instead call upon social mores, peer pressure, churches, and other such aspects of the institutions we create to band together. These institutions create the feeling that we will be visited by significant negative consequences if we break contracts but those negative consequences typically fall short of physical violence. However, even with a well functioning society there will still be individuals who break the rules. We need to choose someone or some institution to enforce Rule 1 and Rule 2. If we have no institutions to enforce the rules, then we may face an unhealthy level of chaos and a sub-optimal level of individual effort as the costs to individuals of enforcing their own rights may make them more hesitant than would be optimal to invest in obtaining those things that need protection by Rule 1 or Rule 2. Thus it seems that we have strong support for Rule 3.

Enforcing contracts and providing a police power to protect the right to property seems to be supportable role for government, based on first principals.

Pilon describes Rule 3 slightly differently but I believe philosophically consistent with my approach and says Rule 3 means “if you fail in [Rule] one or two, give back what you have wrongly taken or wrongly withheld. That is the whole world of remedies and that is what we create government to do.”

Now if we agree that those are the three basic rules that ought to govern our affairs then whenever we discuss the rationale for government action we should ask how the proposed action is supported by these rules. If we cannot articulate a defense of a particular government activity by referring to these three rules then we have no recourse other than to conclude that the government activity under consideration is illegitimate. Even if we believe the end in mind is valuable, we must look elsewhere for some legitimate means for achieving that end than government action.

If we cannot defend a particular government action with these rules then it marks as illegitimate the use of government force to perform or enforce that action with money taken from the general population or when that action infringes on the rights of those who do not voluntarily surrender them.

Can we apply these rules?

These rules will only prove valuable if we can successfully apply them in considering a specific government program or activity. If they are too theoretical to provide useful guidance then they are of little use for my purpose here.

Presumably government action is only called for when there is some problem that needs fixing. If my thesis is correct we should be able to express that problem in terms of the three rules. If we cannot express the problem in those three rules then, I argue, there is no justification for government action to fix the problem. Please notice, however, that I am not arguing that the problem does not exist, rather I am arguing that government action is not the right solution to the problem.

I will attempt to apply these rules to a few government policies or actions. In order to try to avoid creating a straw man conveniently formulated to be easy to torch, I’ll look for someone else’s justification for the government policy then dissect the justification in light of the three rules.

As my first example, I will consider Federal funding for K-12 education and the rules that come attached to that funding. That will be the subject of my next post.

Links to related content

  1. A talk by Roger Pilon presented at a Cato Institute event May 9, 2011. I quoted at length from Pilon’s talk in a posting on June 25, 2011.
  2. See the quote by John Stuart Mill from 1859 in On Liberty on my favorite quotes page.
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Moral High Ground for Libertarians

I believe libertarians can make a strong claim for occupying the moral high ground on many issues. Opponents often argue against freedom by claiming that only the rich and powerful will benefit. Quite the opposite is true. I’m going to start a list of examples starting with:

  • An article by Jagdish Bhagwati who argues that free trade helps the poor. (HT Don Boudreaux)
  • I wrote a post on the morality of profit including a discussion of Sheldon Richman’s post on the same topic.
  • The Atlas Network has a whole project on the Morality of Free Enterprise.
  • The John Templeton Foundation has a conversation among several notable authors titled “Does the free market corrode moral character?”
  • Steven Horwitz in The Other Principle of Classical Liberalism argues that “classical-liberal principles require the State to treat all citizens as equal before the law.” If only we could get all of government adhering to that principal we would have a much more equitable and efficient system. Horwitz discusses the specific case of gay marriage and the lengthy commentary on his blog illustrate the issues and difficulties involved.
  • Tim Nerenz argues eloquently that “You can’t be for the poor and against the things that end poverty” and provides a lengthy list of examples of this common contradiction in public discourse.
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Roger Pilon Explains the Essence of Libertarianism

Roger Pilon of the Cato Institute presented at talk at a Cato event entitled “The Moral Implications of the Deficit, Debt and the Budget Battles” on June 9, 2011. His talk was part of a debate with Amatai Etzione that was inspired by Pilon’s article in the Wall Street Journal. Starting around 30 minutes in he outlines the core roles for government starting from first principals. This was the clearest exposition of the core beliefs of the libertarian cause that I have ever heard. He grounded the position in core fundamental rights and the basic rules that we can derive from those rights as we move from a state of nature into a civilized society. I searched for a copy of Pilon’s speech but did not find it, and so instead I will quote the key bits (from my point of view) below.

The theory of rights says you have two fundamental rights: property and contracts. Property as Locke put it is lives, liberties and estates. Property in your life. The property in the liberty you have. The property you have acquired in the world. Such that a right violation is the taking of something that belongs free and clear to another. … The second great right is through contract, whereby we associate with each other in various ways that will lead to the creation of civil society or civilization as we can think of it.

Now there are three basic rules which apply in this state of affairs before you turn to government. … They are so simple you can understand them even on the playground. Rule Number 1: Don’t take what belongs to somebody else. That is the whole world of property. Rule 2, keep your promises. That is the whole world of contract. And Rule 3, if you fail in one or two, give back what you have wrongly taken or wrongly withheld. That is the whole world of remedies and that is what we create government to do.

Now there is a 4th rule, but it is optional, it is voluntary, it is: Do some good as you work your way through life. Be a good Samaritan. But notice the good Samaritan is good only because he acts voluntarily, not through force of law. In other words, you are at perfect liberty to be a good Samaritan or not, … that is why it is an optional rule.

Those are the four basic rules you can derive from the theory of rights to sort out the vast array of human relationships no matter how complex they may subsequently be. When we come out of the state of nature into the state of society there are certain reasons we do that. As Locke put it there are inconveniences in the state of nature. We may disagree about what our rights are and our obligations are. We may disagree about what rights we have if they are violated. Indeed, Hobbes put it very poignantly, life in the state of nature is solitary, poor, nasty, brutish, and short.

When we come out of the state of nature for these prudential reasons it turns out that there are three basic powers of government that you can think of when you think of government analytically.

The first power is the police power. … that is the main power we yield up in the original position to government to exercise on our behalf. And we use it to secure our rights both with respect to our neighbors and with respect to foreigners who may threaten us from abroad. And it is also used to create public goods. But you have to understand the nature of public goods in a strict sense, those are goods that as the economist define them are entailed by non-rivalous consumption and non-excludability. Goods such as national defense or clean air. The idea is that a non-rivalous consumption of a good by one individual does not reduce the availability of that good for any another individual. Non-excludability – no one can effectively exclude another from using it.

The second great power is the eminent domain power, which is the power to take someone’s property provided you pay him just compensation and it is for a public use. This is much more difficult to justify. It is justified in our constitutional order, first of all because we agreed to it in the original position – the Fifth Amendment recognizes by implication the power of eminent domain. Secondly, it is a power that when exercised properly is pareto superior as economists would put it, at least one person is made better off, namely the public as is evidenced by its willingness to pay and nobody is made worse off. The individual from whom the property is taken provided he receives compensation that makes him indifferent to whether he keeps the property or takes the compensation. … Second great power, it is used to prevent the hold out in the state of nature, the person who simply will not relinquish his property and therefore can extract monopoly rents accordingly.

The third great power is the redistributive power, literally the power to take from A and give to B or the regulatory use of that power. … Regulatory power which is used to prohibit A from doing what he would otherwise have a right to do or require him to do what he would otherwise have a right not to do for the benefit of B. Unfortunately this third redistributative power is the one that defines most of what government does today. That means that most of what the federal, state, and local governments do today is illegitimate because there is no justification for this ultimate redistributative power.

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Price Controls: Yet another way some seek advantage over others through the government

I just read a great summary on The Freeman Online of the many problems with price controls. It was written in 1978 but is still quite relevant today. I highly recommend it.

Congress is currently debating reducing price supports on agriculture so refreshing our memory on the topic is important. It strikes me as ironic that when we talk about helping agriculture (and probably many other industries) we say “price supports” not “price controls” but the kinder sounding words should not mask the fact that under the hood it is about price control.

If as a society we think there is something to be gained by having more smaller farms and fewer big farms (see addendum at the end of this post), then we should be straightforward in our approach to achieving that end. Price controls are not a straightforward approach. They create all sorts of distortions and inequities in the market. I believe that there is nothing particularly unique about farms (other than, perhaps, their vulnerability to the vagaries of the weather) that indicates they cannot survive and thrive nicely in an open and free market, just like most other products made in this country. While I don’t follow this industry closely, I gather that we have a reasonably efficient and competitive insurance industry in some markets. Is there a reason farmers cannot buy insurance to hedge against bad weather? If not, then even being subject to the vagaries of the weather does not make the market farmers face meaningfully different from other open markets. I suspect we would be doing farmers a great favor if we drastically reduced the paperwork and burden of regulation that they face in return for eliminating price controls. Then they would be freed to make intelligent decisions about what to plant when and how to market it and to whom.

Addendum August 2, 2011
Today’s Wisconsin State Journal reports on a University of Wisconsin study that found that large dairy farms produce higher quality milk. Read UW’s press release here.

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