Thursday, December 25, 2014

Holiday Greetings

Merry Christmas to all my readers, and a belated happy Chanukah (I don't care what the current accepted transliteration is). Hope everyone is happy and healthy and otherwise well.

Since I don't have a political thought today, I thought I would turn to a little economic observation I made recently.

My son is prone to spend a fair part of his allowance, as well as most gifts he receives, on various "microtransactions" associated with various on-line games. At first, I thought this was a bit troubling, as he was basically throwing away money on very temporary benefits, but then I thought about it a bit more and realized it was no different than the massive number of quarters I poured into various video arcades in my youth, nor the many quarters wasted on pinball machines by the generation preceding mine. Or, for that matter, money spent renting skates or skis or pool tables or any other recreation. In the long run, most money spent on recreation seems wasted to those who don't enjoy the activity, but, for those who do, it seems an eminently sensible expenditure. And, I suppose, in the case of modern online spending, it is unfamiliar enough it must seem as strange to me as video arcades seemed to my parents.

Not that this means I am going to let him spend with abandon, but it does make me look at it a little differently. Which, i suppose does bring us back to one of my favorite political points, that value does depend entirely on one's perspective, that there is no "right" or "proper' way to value things, and trying to impose one will just make most people less happy. In short, I guess I reminded myself of the central lesson of the free market (and minimal government).

So I had a political point after all.

Again, enjoy your holidays. I will try to write more before the end of the year.

Tuesday, December 23, 2014

Downplaying FDR

It is a commonplace among many conservatives to blame FDR for many of this country's woes. And it is true, in terms of expansion of government scope, FDR is definitely one of the major players, along with LBJ and -- though many forget how much he expanded government scope -- Jimmy Carter. (See "Memories of Jimmy".) Nor does it help that FDR is so roundly praised by liberals, which helps to make him an obvious target, the same way liberals love to try to shoot down Reagan. So, I suppose it is not surprising that for many conservatives FDR would become historical enemy number one.

Yet, I would argue that, in many ways, this blame is misplaced. That is not to say that FDR did not expand government, he certainly did change quite a bit about the way the US government operates. However, I believe that, far from being an originator of any such changes, or even a major driving force, FDR was simply continuing a trend started long before him, and much of what he did would likely have happened whether or not he had held office. That, rather than looking to FDR to find the origins of our problems, we should look a little earlier in our history.

I know many will find these claims outlandish, but there is fairly good evidence to support them. For example, even before FDR was elected, Hoover was beginning to enact many of the same measures FDR would try out early in the depression. Granted, Hoover's versions were not quite of the same scope as FDR's would be, but Hoover was dealing with the earliest stages of the crisis. Recall, it was not until several years into the crisis that FDR began enacting his most sweeping changes.

Nor were the Republicans who preceded Hoover all that different from FDR. Many of the regulatory and centralization schemes, along with many of the monetary policies he would follow, had their roots in the supposedly conservative twenties, and even earlier in the presidencies of the "reform Republicans" such as Theodore Roosevelt. Granted, FDR took them to an extreme they had not previously reached, but that is true of any progression of ideas, the later policy makers always go farther than those who came before.

It is a point I have made many times already, but it is one that works especially well to explain what happened during the Roosevelt administration. While Roosevelt's changes may seem extreme and out of character, in most cases they are not very different than policies that preceded them, or, if they were, they were still nothing more than the logical conclusion of principles adopted by the Wilson administration, or even earlier.

Wilson is actually one of three least recognized creators of our modern world. Between his support for the league of nations, the creation of a federal income tax -- divorcing revenue from the states and removing any state control over federal spending -- and the birth of the Federal Reserve, the teens, which were largely dominated by Wilsonian ideas, were truly the birth of our modern era. Everything that came out of the depression or the Great Society is little more than a logical extension of the policies espoused by Wilson. And the few dangerous ideas that were not directly attributable to Wilson, such as the aggressive regulation of business, especially the use of antitrust legislation, was the outgrowth of his fellow reform politicians, such as Theodore Roosevelt.

But even that may be an unfair accusation, to blame Wilson, or the earlier Roosevelt, for the birth of our modern regulatory state, as none of that would have been possible were it not for the capture of the Democrats by the populist movement, making such policies respectable and giving them a home in one of the two major parties. And that would never have come about without the activities of William Jennings Bryant. He, more than anyone else, changed the face of our political system, essentially rewriting the two party system -- laissez-faire, states' rights Democrats and easy money, protectionist, somewhat centralizing Republicans/Whigs/Federalists -- that had existed in one form or another since 1789*.

Which brings me to my third, and final, caveat. Yes, Bryant may have set the stage which allowed Wilson and thus created the policies of FDR, but none would have been possible without a tendency toward greater centralization, concentrating power in the federal government and undermining federalist principles, and none of that would have happened but for Abraham Lincoln. From the simple act of using force to prevent the secession of supposedly free and independent states, one could extrapolate almost any extension of central power one would wish, and Lincoln did not shy away from doing so. Using the excuse of the necessities of war, Lincoln quietly undermined federalism more than any of his successors for the next four decades or more.

Which brings me to the peculiar conclusion that conservative Republicans should probably stop blaming FDR and instead start blaming the nominal founder of their party, for without Lincoln, I doubt FDR would ever have been able to do what he did.

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* I know conventional historians actually find two or more different party systems in that stretch of time, but in my view the two parties, by whatever name, seem to have pretty strong continuity, at least in terms of policy. I understand why historians see things differently, seeing major changes in the time of Jackson, or with the coming of the Republicans, but I really more continuity than change in the stretch from the beginning of the nation until the last decade of the nineteenth century.

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POSTSCRIPT

This is hardly the first time I have looked at this question, that being when things began to turn away from the largely libertarian/federalist vision of the founders and start moving toward our centralized, regulatory state. And, as with all of these "for want of a nail..." type essays, one can always take one more step back, adding yet another necessary predecessor. However, if you resist the temptation, and stop yourself when the actor becomes too remote from the event, or the action's consequences too indistinct, I suppose it can be a useful exercise, and give us some idea of how we came to be where we are, as well as what must be done to get us out of our present situation.

For those interested in my previous versions of this discussion, as well as related matters, I would recommend "A Timeline Part One", "A Timeline Part Two", "A Timeline Part Three", "The Best Historical Example", "Rethinking the Scopes Trial", "A Passing Thought", "The Political Spectrum", "Deceptive Spectra", "The Civil War", "Modern Marius and Sulla", "Ordered Liberty and Our Modern Mindset", "A New View of Liberalism", "Child Labor and the Industrial Revolution", "Child Labor" and "Mistaken Perceptions of the Industrial Age".

Monday, December 22, 2014

GMO Revisited - As Well as Hormones, Soy, Phytoestrogens, and a Host of Other Food Scares

I wrote a long time ago about the nonsensical nature of GMO scare mongering ("GMO? So What?", "A Misleading 'Right to Know'" , ""Better Safe Than Sorry" Usually Leaves Us Even More Sorry, And Much Less Safe"), however I continue to see the same nonsense being pushed, and pushed-- sadly -- by supposedly conservative groups as often as by the left. Just today I got a conspiracy laced email from a Townhall.com advertiser warning me about GMOs and hormones and the risks they pose. The name of the group sponsoring this "sky is falling" newsletter? The Laissez-Faire Research Group! Of all things, tyring to tie the free market to this conspiracy theory absurdity.

Well, let us go back again and look at a few truths and see what we can make of this nonsense.

OK. Let us first look at rBST. This is a hormone farmers use to extend the milk production of a cow. But, before I begin explaining this process, perhaps I should first establish some basics. Since most of us no longer have direct contact with farms, I should probably make a few things clear. Cows, like all animals, do not "just make milk", they produce it to feed their calves. Thus, a cow will only lactate a little before giving birth and for a period afterward. Thus, farmer must keep cows impregnated, resulting in a lot of cost for insemination, and a lot of unwanted offspring they sell off for relatively little profit. So, the longer a single pregnancy can provide milk, the better. In comes the artificial hormone. These wonders allow cows to lactate for longer, and in greater quantities, thus making milk less costly to produce.

But, why should we not be scared about them? Well, the simple fact is, if we should be scared about these hormone, we should be scared of all milk. After all, the reason they allow for prolonged milking is that they reproduce the situation which produces "natural" milk. So, if we are getting an "unhealthy" dose of these hormones, then we logically must be getting an unhealthy dose of cow estrogen from all milk. Not to mention that the amount of rBST is minute compared to the "natural" estrogens and other hormone in a cow that is lactating. So, if this is comething to be worried about, then we should probably be afraid of all milk. Yet these people who fear rBST love to tout "natural" milk. In short, they seem to choke on a gnat while swallowing a camel. But that is par for the course for food faddist scare mongers, as we shall see*.

Of course, they have lots of scare information about this product, how a large dose of rBST causes cancer in rats and so on. But, that overlooks two things. First, almost anything in sufficient quantity can produce growths in rats. One study took sterile dimes and implanted them under the skin, and sure enough growth arose that some studies would call cancer. So, does money cause cancer? Or is a massive dose of anything likely to produce harmful results? Second, we are not getting massive injections of this chemical from milk. At most we get a minute amount. As I said, the "natural" milk they love gives us very little estrogen, so why would an estrogen substitute suddenly be excreted in massive quantities? Nonsense.

And finally, it also overlooks the fact that we are neither mice nor rats. While such studies may be useful first steps, they are not a replacement for human studies.After all, saccharine was banned based on rodent studies and later it was learned the ability to produce cancer was limited to female rats because of a particular physiological situation**, in humans it was harmless. Similarly, dioxin is deadly to some rodents, harmless to others. So what does that tell us about humans? No, an animal study alone, especially one done with massive doses, is no substitute for epidemiological evidence, human studies, even a simple explanation of the mechanism by which it produces harm. None of these seem to be forthcoming, however.

Of course, many of those who promote food scares will tell you that if a massive dose produces harm in rats, then a minute dose will produce a small harm in you, so why not avoid it? But the truth is, biology does not work that way. Often things that are toxic at high doses are innocuous at smaller doses, or beneficial. Oxygen, for example, is essential at certain percentages, but when you raise the percentage of oxygen high enough, it actually becomes a toxin. So, should we ban oxygen? Similarly, vitamin C is a useful antioxidant at certain doses, but at very high and very low levels it actually becomes the opposite, a harmful oxidant. Nor are these unusual cases, almost every medicine is also a poison at some dose. What are antibiotics but poisons that kill bacteria while doing us only trivial harm? But at high enough doses, most antibiotics become dangerous, for that very reason.Even radiation, at certain low levels, has been shown in studies to actually produce beneficial results. So the fact that a large dose of something, injected regularly into a rat does harm is hardly reason to fear something at much smaller doses***. To offer but one example, do you refuse lima beans because they contain cyanide? If not, then I would not worry about much more minute trace amounts of synthetic hormone in milk.

Let us move along to another topic, one I already addressed, "genetically modified organisms". And, before proceeding, let me point out that, at this moment, there is one massive GMO in your home, and that is you! And one is writing to you as well. In fact, if you look out your window you will see nothing but GMOs. The whole world is full of GMOs. And that is because everything that lives has had its genes altered from its original state. It is called evolution. Or -- setting aside evolution for the moment -- allow me to point out that you are a clone of neither your mother nor father, and thus, in that way, you are genetically modified. However, you want to look at it, nothing on earth exists which has not undergone genetic modification.

Nor has it all been accidental. That sinister intentional modification of genes by scientists that has been much denounced was previously done by farmers and called selective breeding. Which is my point. There is no difference, except speed and efficiency, in the splicing of genes by scientists and the selective breeding of farmers. Both produce never before seen species with unknown properties. Yet, thanks to too many late night monster movies scare mongers can sell us on the idea scientists will try to produce a frost free strawberry and somehow accidentally produce a massive plague. (Or maybe a man eating super berry!)

The truth is, natural selection has produced far more dangerous GMOs than any lab. Every year many varieties of influenza are created in nature, yet the number of deadly organisms created in labs -- excluding those which intended to create such -- are... well zero. In short, there is nothing about genetic modification which makes it any different from selective breeding and natural mutation, except for a tremendous increase in speed and efficiency. In short, yet again a lot of hype over a technology which has proved incredibly beneficial and entirely harmless****.

I could go on, about the absurd fears over soy and phytoestrogens, about growth control hormones such as Alar, about pesticides and so on, but I think you see the patter here. So, rather than drive this into the ground, let me just say that, whenever you hear a tale of food somehow killing us, ask yourself if the claims make a bit of sense.

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* The email I got made much of the fact most European nations had banned rBST, but I would argue that is hardly a meaningful measure. Many European nations have strong green parties that would ban quite a few things we accept as safe and useful, and the EU bureaucracy, like all bureaucracy, tends to err on the side of excessive prohibition. ("Fear Driven Enterprises", "Gun Control, The FDA and Regulating the Law Abiding", "Consumer Protection", "Adaptability and Government") Thus, the fact that a given product is banned by this government or that tells us very little. The true measure is the actual provable risk of the product.

** Large quantities of suspended proteins in their urine precipitated solids from the saccharine which scored their bladders, increasing the probability of cancerous cell multiplication. In humans there is no similar mechanism. For that matter, there is no similar mechanism in male rats.

*** I would point out that almost every foodstuff, even the most healthy and "natural" contains some amount of chemicals "known to cause cancer", roast coffee has hundreds, yet they do no harm to us despite constant intake. And that is precisely because we ingest doses much smaller than the massive ones shown to be harmful, and thus suffer no damage, or even enjoy a benefit from them.

**** Reminds me actually of the hype over nuclear energy. Yet, excepting for incredibly rare natural disasters, and one very poorly designed Soviet reactor, there have been no nuclear disasters, and even then, the two largest disasters never developed into the much feared "China Syndrome" -- where supposedly even a mild problem would result in the core melting through the earth and causing a massive cataclysm -- haven't seen that yet, have we? In other words, even considering the two worst possible outcomes they were far short of even the most mild scenarios put forth by the nuclear scare crowd. (And, if we look at body counts, they both fall short of the number of deaths yearly due to generator incidents, boiler explosions, coal mining accidents, black lung and all the other fatalities we hear nothing about while producing electricity by "safe" conventional means.)

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POSTSCRIPT

The same article mentions two misleading "facts", which I shall address very briefly:

1. The US lifespan is shorter than some European nations: I dealt with this in "Lifespan" (and also "Poverty and Lifespan"), but the short version is: (1) urban crime definitely drags this down, and we are far more urbanized than many nations to which we are compared and (2) our "infant mortality" is high (and our other numbers dragged down) because we try to save ill and premature children others would write off as stillborn, and thus not count. So we have many more "infant deaths" because their "stillborns" are either live children, or infant deaths, on our books.

2. More people are dying of heart attacks, cancer and such. And, yes, this is true, but ignores the simple fact, you are going to die of SOMETHING. All the listed diseases are those of old age and opulence. Since we don't die of smallpox or animal attacks or workplace accidents, we die of cancer and heart disease. As I said, we have to die of something, and since we live a long time, we die of degenerative diseases of old age, so of course their incidence is rising. Would he be happier if we were dying of influenza or starvation?

POSTSCRIPT II

For those who enjoyed this assay, I also recommend "Transfats?", "Technophobes and Conservatives -- The Risk of Assumptions","In Defense of White Bread", "The High Cost of Not Wasting Food", "Salt, Transfats, DDT, Bad Science and Even Worse Law", "Organic Absurdities" as well as the classic essay "False Alarm".

Collective Ventures Versus Government

NOTE: This essay is my last attempt, at least for now, to make clear my thoughts on this subject. I realized that, in the past, I have often presented half of the argument, if that, and often simply assumed readers understood things I had not made explicit. In the hope of making my reasoning clear, I have presented here a much more thorough elaboration upon my reasoning about government and non-government activities. I apologize for the length, and at times the rather excessive detail, but as this is intended to be the last word, at least for the present, I want to be as clear as possible.

Ever since I began writing this blog, and its predecessor "Random Notes", back in 2007, there have been certain ideas I have held consistently. Such as my view of the proper functions of government1, or favoring federalism and a gradual evolution toward minimal government as opposed to the libertarian top-down imposition of freedom2, my views on money and monetary policy3, the importance of predictability4, and my belief that rights are inalienable, absolute and only deputized to the state5. There have been some other concepts which have only come to me as I wrote my blog, such as the importance of contract6, or the basic philosophies upon which all intervention rests7, the importance of society as such8 and the insignificance of the ethics of those operating in a free market in its function9. And there have been a few concepts which have evolved over time, such as the role of envy10, my views on wages and employment11, or the problems of pragmatism12. But in only one case can I think of a view I held at the beginning of my writing that I completely repudiated, and that is the belief that government can be used to provide group services outside of its essential functions.

To be honest, even when I first mentioned the possibility, I was quite hesitant about it, offering it only as a possibility, as a last ditch solution for problems which could not be otherwise resolved. Though I mentioned such topics as public health or disaster relief, my thoughts were far from today's routine reliance on the CDC and FEMA, and more akin to the ability to call in the national guard should everything else fail. In other words, even at my most tolerant of government involvement in matters beyond the protection of individual rights, I was quite restrictive in my views.

Over time, even that limited concession was abandoned, as I came to realize the problems involved with even that degree of government involvement. As I wrote many times over13, we have all become too comfortable with government involvement, seeing it as the "Swiss Army Knife" which can solve all problems, turning to the state to resolve any problem, seeing it as the first stop whenever we are troubled. To allow the government as even a last ditch is to turn away from private solutions, to set the stage for us to continue to be dependent on the state to solve all our problems, to feed into the culture that sees politicians rushing to solve every shortcoming of our lives, and voters rejecting any candidate who is not determined to "do something" whenever there is the slightest bump in the road14. And so, I could not in good conscience allow even for turning to the state as a last resort, it simply created far too many problems.

That was not the only objection, however. I may have originally abandoned my position because of the message it sent, but as I wrote more about making private those functions, such as roads and schools, which had been traditionally state run15, I came to realize there were a number of additional, concrete problems created by involving the state in matters outside of its role as protector of individual rights. Nor was there any need to risk any of those problems, as any function the state could perform could be as easily performed by a private assembly, for, excepting the power to use force, and to compel the payment of taxes, what difference is there between the state and a private gathering? None. And none of the problems in question needed either killing or confiscation for their resolution. And thus I came over time to completely abandon the idea that the state could play any part in these matters16, and decided they were best left entirely in private hands.

At this point I am sure many are asking themselves precisely what these actual harms might be that I have mentioned. And, since so much of my argument rests on these risks -- as setting a bad precedent seems such a weak argument to most17 -- I suppose this is the proper time for me to explain exactly why it is a problem to involve government in roles that many see as relatively harmless, or even beneficial.

Before going on, allow me to make something clear that I often think is overlooked in discussion of privatization. A private venture does not necessarily mean one run by a single owner, or a partnership or corporation. Nor does it necessarily mean one which is run for profit, or even turns a profit. A homeowner's association is a private venture, as are charities, churches and little league teams. A private venture means nothing more than that it is not part of the government, that's it. Thus, when I speak of privately owned roads, it could mean a given neighborhood manages those roads through a subscription, or an association mandated through covenants attached to local deeds. Far from being far fetched, as many imagine when hearing the argument for private roads, many communities have just such arrangements. I live in one right now. So, please keep that in mind, that the only requirement for a private solution is that it be independent of the state.

Which may lead some to ask "If everyone in town is electing a committee to manage the roads, and making mandatory contributions as specified by property covenants, then why not just let the state manage the roads? What is the difference?" A question which brings me back to my original topic, as such a system shows three very significant differences. (Though not all apply to roads.)

First, there is the simple question of funding. However it may be funded, a private venture is characterized by strict limits upon its spending. Whether funded by some form of revenues, by endowments, by loans or bonds, by mandatory subscriptions, by voluntary donations or any combination of these or other means, a private venture has a fixed amount of money to spend at a given moment. The amount may vary over time -- as do, for example, charitable contributions -- but at any given point in time, the funds are fixed and nothing will change that. On the other hand, while on paper the state has a similarly fixed budget, in truth the state has recourse to revenue streams the private venture does not. For example, the state can introduce a new tax, fee, or other involuntary source of income, to subsidize its activities. Or, if that is not politically viable, the state can also simply create new money, by means of monetizing debt, essentially issuing debt and then creating an equal amount of currency with which to buy it. In other words, the state is not confined at any given moment by the same constraints a non-governmental entity would have upon spending.

Why is this a problem? Most simply, it is a problem because it means there are, in essence, no constraints upon what the state can spend. Or, to be more precise, the constraints upon the state are based upon non-economic factors.

Allow me to explain that statement.

I suppose it was a bit of exaggeration to say the state has no limits on spending. Obviously the public has a limited patience for new taxes, or for the inflation brought about by printing currency18, while at the same time having an almost insatiable appetite for ostensibly "free" services provided by the state. Thus, the government does have to balance its spending between a variety of projects, and must limit its use of taxes and printing presses for those times when the public is willing to accept the consequences. However, where equivalent pressures in a private venture result in balancing spending based upon economic factors19, the government tends to balance such spending based upon political factors20, which very rarely correspond to economic considerations.

For example, a private venture will normally try to apply its funds where the greatest benefit will be obtained for the least cost. On the other hand, political ventures will often allocate money to those places where a given amount of spending will produce the most visible benefit, regardless of the cost or the existence of more beneficial, but less obvious, alternatives. As a result, political spending tends to be allocated remarkably inefficiently.

Of course, this rule is not the whole story. For example, many private charities end up engaging in similar showy spending, as such efforts may increase contributions, meaning that visible spending brings in enough revenue to make it worthwhile. But, look at that statement carefully. The spending may have been showy, but it is still based upon valid cost-benefit analysis. The money may be inefficiently used, but when balanced against increased income, there is a net benefit. That is still an economic thought process. On the other hand, political spending is completely divorced from concerns over money or efficiency, the only two concerns are to avoid any public scandal and, a distant second, to make a good impression on the voters and/or one's superiors.

And there is a second consideration in public spending that does not exist in private. For a public venture, every dollar spent is weighed, not just for the project, but against every alternative. A private school may need to justify its spending to the board, showing what benefit it brought and at what cost, but it does not then need to also justify why that money was not spent on highways, the military or art subsidies. Public spending, on the other hand, often does, which makes it even more likely money will be diverted from the most effective uses and into those which best match the public whims of the moment, the more visible the outcome the better.

To summarize, a private venture must live within its means, and is generally guided by cost-benefit analysis in spending. On the other hand, public ventures can often take recourse to taxes or inflation to make up overspending, and, when spending those funds, regularly ignore cost-benefit analysis to pursue those options which provide the best public exposure, regardless of true benefit.

But that is not the only problem when considering spending. The state also has an additional advantage denied to private firms. Should the state venture exist in an environment where there are private competitors, either direct (such as private schools competing with public schools) or indirect (such as voice over IP competing with state run phone services where such exist21), the state, because it is not concerned with turning a profit, or even balancing the books, can quite easily set prices low enough to effectively drive the competition out of business. Or when such is impossible, either -- as in the case of public schools -- where the public dislikes the state version enough to be willing to pay the premium for the competing service or --as in the case of UPS and Fed Ex --where the competitor offers something the state service cannot, the state can at least cause serious economic dislocation and reduce the market pool for the competitors. Thus, even in the best circumstances, state ventures, unlike private, can do serious , or perhaps, fatal harm to competitors.

And the situation grows worse when the state also regulates the field in question. Schools come to mind as a good example, as the state not only provides schooling itself, but it also legislates what is and is not acceptable in terms of primary and secondary education.  Obviously, in such a situation, it is quite easy for the state to take steps to drive any private competition from the market.  It may not even be intentional, it may simply amount to an effort by state ventures to "level the playing field", removing the inherent competitive advantages of private ventures, or maybe some measure undertaken for the "public good" such as introducing mandatory unionization. On the other hand, given the general inefficiency of state enterprises22 it would be unusual for them to hold their own against private enterprise, and thus it is quite probable that embarrassed managers, faced with bankruptcy and confronted by thriving private ventures, will try to introduce regulations favorable to their own firms, and harmful to the competition.

Restricting competition and monopolizing the market are not the only ills that can come from competition between public and private where regulation is concerned, there is one other problem, a less obvious problem, but one with much more damaging long term implications. To understand this issue, imagine for yourself what would happen if, say, Coca Cola were asked to define what is and is a not a cola, or if Quality Inn was asked to define what are acceptable and unacceptable practices for hotels. Whether intentional or not, is it not likely that the rules defined would tend to produce results quite similar to the product for which the regulator is known? In a similar way, when a state bureau both provides a service and regulates private providers -- such as, for example, education -- the rules established tend to make the state enterprises something of a model, thus reducing the range of choices available and forcing private ventures to mirror what the state considers best. Actually, not even what the state considers best, but rather what the state is able to realistically deliver in public ventures. In other words, the limitations on private ventures are not even based on the state's ideals, but on the historical, legal and economic accidents which define what public ventures can provide. In the long term, by eliminating many differences between public and private, this not only limits choices, but also makes the public consider the status quo the only possibility, eventually making it difficult or impossible for many innovative ideas to find any acceptance23.

But let us leave financial matters behind for a moment, and ask what other, non-monetary issues may arise when the government provides a service rather than a private venture.

One of the most obvious problems is that government ventures can exist in two forms. Either they can be driven by rigid rules, or they can be discretionary, essentially ruled by the arbitrary decisions of those in charge24. At least that is the ideal. In reality, very few government, especially in non-totalitarian states, would allow a discretionary enterprise, as it would grant immense control to whoever was entrusted with the decision making, as well as create the potential for horrible public relations fiascoes. (Which is why no one would likely accept such discretionary authority, despite the incredible power it would confer. See below about bureaucratic incentives.) Thus, in practice, all government enterprises are driven by rigid rules25.

In one way, rigid rules are a very good thing, as they provide utter stability, and as I have argued, stability is an essential element for planning, which is the foundation of economic and social progress. However, rigid rules are also a detriment in that they embody assumptions, assumptions about the values of the society as a whole, about who will and will not need various things, and so on. And thus, inevitably, rigid rules will produce results contrary to the intent of those who created the system26.

The only alternative is to enact an arbitrary system, allowing administrators at some level to make decisions based on their own decisions. The first, and greatest issue here is that, because the government does have, in some sense, effectively unlimited funds, it is very easy for such an administrator to go overboard and simply expand beyond any sensible limits. The other problem, because this is a governmental agency, is that were an administrator to do the opposite, and show restraint, anyone denied has an opportunity to sue, because without rigid rules to show justifying a decision, any decision can be characterized as racist, sexist or otherwise discriminatory. In other words, an arbitrary system will end up becoming an endless sinkhole of money, both because of excessive generosity and because of legal costs.

Private enterprise does not suffer from such problems. First, because it has a clear limit to the capital available, making it possible to determine precisely how much can and cannot be spent. Second, because the administrators must be accountable to those who are funding it. In for profit ventures, that would mean nothing more than cost accounting and the same profit management as for profit ventures anywhere. In nonprofit ventures, it is a bit more complicated, but in the end, there is still a market force driving them, and if they fail to satisfy, they will see their funds dry up and disappear27.

Private ventures also have one other feature government does not, even when those private ventures are compulsory, such as road building done by HOAs funded by covenants. The government, by its nature has multiple concerns, a given politician is hard to associate with a single action, or a specific decision. Especially since politicians are very adept at not tying their names to potentially unpopular decisions, most bureaucracies make decisions without reference to specific politicians, even if they were the driving force behind a choice.

On the other hand, a private HOA is accountable, and its scope is limited. What do you do if the government highway administration wastes money? Do you vote out all the politicians to show displeasure? Does that mean the bureaucrats who did the overspending will go? No, bureaucracy is insulated, and even if its actions inspire public wrath, odds are good the public will not vent that wrath upon seemingly disconnected politicians. On the other hand, single purpose private ventures are entirely accountable. Even when funding is compulsory through covenants or other means, the public still has voting control over those who control the funds, and can express it much more easily against them than against the omnipresent, dispersed and largely unaccountable government.

Private ventures often have the additional benefit of being of a relatively small scope. It is possible an entire state may establish covenants to fund roadways, but far more likely those funds would be for a neighborhood, maybe a town, at most a single city. Thus, if the managers behave in a way that is displeasing, it is far more easy to express unhappiness by moving away, refusing to pay funds to create a legal challenge, vote out the administrators or otherwise challenge the status quo. That is not often an option for a government covering a nation, a state, even something as small as a county. And with our tendency to centralize funding, to involve state and federal government in more and more local funding matters, it is becoming ever more difficult to vote with your feet to oppose a decision, as more and more such rules become nationwide28.

Another concern is the mindset I described in my several essays on bureaucracy, the "fear driven" mindset. As I explained several times, the incentive for government employees is not the same as either private enterprise or even politicians. Bureaucrats have no incentive higher than the imperative to avoid any trouble. Above all else, they seek to avoid controversy, upset, any sort of difficulty. And this applies regardless of their role. State enterprises seek above all else to maintain their invisibility.

I will admit, to a degree, some private enterprises, mostly among the nonprofit realm, have adopted a similar attitude, though by and large this has come because such enterprises are closely involved with government, receive government funding, and otherwise have taken on a quasi-governmental character. Well, that and the fact that our hyperactive tort system has brought the fear of lawsuits that once troubled government to the private realm. As more and more concepts which once applied only to the state, such as discrimination, to apply to private ventures, and as liability becomes ever more expansive, fear has become a driving force for some private ventures as well. But still, overall, private ventures do not display the same fearful perspective the state does, and thus will behave in much different ways.

I could go on, but I think I have made my case. There is more than just setting a bad precedent when we use the state to fulfill a function which should properly be private. And those consequence are far from trivial. Which is why I have, and will continue, to argue that the state should properly be limited to the protection of rights, with private initiative being left to deal with the remaining needs of society.

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1. See "My Vision of Government", "My Vision of Government Part II", "The Case for Small Government", "Minimal Reforms", "The Political Spectrum", "Deceptive Spectra", "A True Conservative Platform" and "The War of All Against All".

2. See "The Benefits of Federalism", "Why I Am Not a Libertarian", "Minimal Reforms" and "Reforms, Ideal and Real".

3. See "Monetary Issues Made Simple Part I", "Monetary Issues Made Simple Part II", "Bad Economics Part 7", "Bad Economics Part 8", "What Is Money? ", "What Is A Dollar?", "The Gold Question, Not "Why?" But "When?"", "Bad Economics Part 19","Fiscal Discipline", "Putting the Bull in Bull Market" and "Why Gold?".

4.  See "Predictability", "The Consequences of Bad Laws", "Traffic Lights, Predictability and Conservatism", "Inflation and Uncertainty" and "Juvenile Culture and Totalitarianism".

5. See "Negative and Positive Rights", "Symmetry and Asymmetry in Government", "Fictional 'Rights' Versus Real Rights", "A Right Is A Right", "Free Speech, Absolute Rights and the Absurdity of "Balancing Tests"", "Why Freedom Is Essential", "Misunderstanding Democracy", "Elective Government Versus Monarchy", "Elective Monarchy, Absolutism and Big Government" and "The War of All Against All".

6. See "In Praise of Contracts" and "Contracts and Freedom".

7. See "Liberalism, Its Origins and Consequences", "The Essence of Liberalism", "Liberalism, "Idealists" and Internal Contradictions", "Man's Nature and Government", "Appealing to Arrogance", "The Intellectual Elite", "The Citizen Dichotomy" , "Why We Need Adults", "All Life in a Day, or, How Our Mistaken View of History Distorts Our Understanding of Events", "Catastrophic Thinking, The Political, Economic and Social Impact of Seeing History in the Superlative", "Some Thoughts on the Media", "A Question" and "The Inherent Disappointment of Authoritarianism".

8. See "The State of Nature and Man's Rights" , "The Benefit of Society", "A Beast's Life", "Learning From Crows", "Knights and Bandits", "The All or Nothing Mistake" and "Of Ants and Men".

9. See "Competition", "Third Best Economy", "The Basics", "Bad Economics Part 18" and "Bad Economics Part 15".

10. See "Brief Discussion of Envy", "Envy Kills", "Envy Kills II", "Envy And Analogy" and "Brief Discussion of Envy".

11. See "Another Look At Exploitation", "Exploiting Workers?", "Fairness and the Free Market", "Capital Investment", "Exploited Labor", "The Cart Before the Horse, or, Some Thoughts on the Iron Law of Wages" and "Stupid Quote of the Day (January 3, 2012)", "Two Sided Processes and Claims of "Unfair" Outcomes" and "Employment A to Z".

12. See "The Lunacy of "Common Sense"", ""Seems About Right", Another Lesson in Common Sense and Its Futility", "A Look at Common Sense", "Res Ipsa Loquitur", "The Shortcomings of Pragmatism", "Pragmatism Revisited", "Pragmatism Revisited, Again", "The Plural of Anecdote is Not Data", "Rules of Grammar and Pragmatism", "The Problem of the Small Picture", "Keyhole Thinking", "Impractical Pragmatists", "In Defense of Zero Tolerance, or, An Examination of Law, Common Sense and Consistency", "No Dividing Line", "The Consequences of Bad Laws", "Questions of Law and Questions of Fact", "The Rarity of "Common Sense"" and "Common Sense,Philosopher Kings, Arbitrary Law and Dictatorship".

13. See "The Basics", "Non-Governmental Communal Solutions", "Volunteer Fireman, Barn Raisings and Government", "Government Versus Culture - A Forgotten Distinction", "Culture and Government", "Common Sense,Philosopher Kings, Arbitrary Law and Dictatorship", "The Case for Small Government", "Competition", "Minimal Reforms", "The Inverse of Empathy", "The War of All Against All" and "'...Then Who Would Do it?'".

14.  See "Doing Something", ""Doing Something" Revisited", "Doing Something Revisited, Again", "Don't Blame the Politicians", "What We Deserve", "The Written Law", "The Single Greatest Weakness", "The Life Coach Culture", "The Great 'What If?' - Advertising, Gullibility, Education, Capitalism and Socialism", "Hard Cases Make Bad Law", "Harming Society", "In Loco Parentis", "Government by Emotion", "Missionary Zeal and Human Discord", "Humility and Freedom" , "Bad Economics Part 11" and "Bad Economics Part 12".

15. See "Non-Governmental Communal Solutions", "The Dishonesty of Transportation Spending", "The Glory of Eisenhower?", "Reforming Education", "Never Ascribe To Evil, A Discussion of Education", "Why Vouchers are not the Answer" and "You Don't Drown in a Glass of Water - Vouchers Revisited".

16. Public health issues are the one area where things become ever so slightly muddied, because of the potential for an individual directly to cause harm or death to another. Of course, such matters can be treated to some degree under the criminal code, assuming the one causing harm acted either intentionally or with great recklessness. So there are some legitimate roles to play there. But, as a whole, public health issues, at least concerning infectious disease, are complicated enough to warrant their own essay, and so shall be deferred until later. Assume for the moment the present work excludes control of infectious disease from the functions under discussion.

17. I would argue that a bad precedent is actually much more damaging than we generally assume. As I have argued repeatedly (cf "Inescapable Logic"), once we accept a premise, it will eventually run to its logical conclusion. Thus, bad precedents do not just create a nebulous "unhealthy atmosphere", they provide the intellectual pattern which future events will follow, as well as the ammunition to be used in future arguments in favor of that pattern. Thus, bad precedents are far more harmful than most imagine.

18. See "Monetary Issues Made Simple Part I", "Monetary Issues Made Simple Part II", "Bad Economics Part 7", "Bad Economics Part 8", "What Is Money? ", "What Is A Dollar?" and "Inflation and Uncertainty".

19. See "Bad Economics Part 16".

20. See "Bureaucratic Management and Self-Policing", "The Inevitability of Bureaucratic Management in Government Enterprises", "Bureaucracy and Arbitrary Power", "Fear Driven Enterprises", "Killing the Railroads", "Bureaucratic Management", "The Bureaucratic Mind", "Bureaucracy Revisited", "The Wrong Solution to Bureaucracy", "Best Practices and Resistance to Change, Bureaucracy and the Free Market", "How the Government Corrupts Relationships", "In The Most Favorable Light", "With Good Intentions", "Grow or Die, The Inevitable Expansion of Everything", "The Right People, The Wrong People and "Just Plain Folks"", "Stupid Quote of the Day (January 3, 2012)" and "Liability Law and Cost-Benefit Analysis".

21. Or, to put it more plainly, either when competing directly, or competing with a substitute product.

22.  See "The Inevitability of Bureaucratic Management in Government Enterprises".

23. We see this not only in public schools, but to a lesser extent in many public policies, such as the belief that health insurance is best provided through employers ("Of Wheat and Doctors") or that social security type schemes are a necessary government function ("Social Security is Not Insurance"). Once something has become long established, with few or no alternatives, the public tends to forget there are alternatives, even ones that once functioned as well or better than the present system. (Cf "The Devil is in the Definitions (And Assumptions)", "High Cost of Medical Care", "The Absurdity of Mandatory Insurance", "Medical Reform, An Overview", "Preexisting Conditions", " Redefining Insurance... To Actually BE Insurance ","Misunderstanding Profits", "Government Efficiency", "Government Quackery", "Two Examples of "Inefficiency" in Capitalism", "A New Look at Intervention", "Cutting "Costs"", "Again?", "Misunderstanding the Market", "The Secret of Success, or, Why Government Fails", "How To Blame The Free Market", "How to Blame the Free Market, Part II", "It Takes But One Victory")

24. I am currently writing an essay about these two approaches to government authority, so I cannot go into too much detail here. For those who are curious, private for profit ventures work on a third principle, cost accounting. That is granting discretionary power, but using cost accounting to determine success or failure. With the state most, if not all, ventures are defined in such a way that profit is not a concern, or not the main concern, and thus cost accounting is not available to the state. And so it is left with the two choices mentioned. (See "The Inevitability of Bureaucratic Management in Government Enterprises", "Bureaucratic Management", "Inflexibility and Bureaucracy ", "Best Practices and Resistance to Change, Bureaucracy and the Free Market", "Bureaucracy and Arbitrary Power", "Bureaucratic Management and Self-Policing", "Fear Driven Enterprises", "Adaptability and Government" and "Redundancy as a Protective Measure".)

25. There are a minute number of exceptions, such as certain charter schools (another topic I intend to write about soon), but they are always exceptions, not the rule, with a limited scope and often limited lifespan, and even then are hemmed in by rules themselves, the freedom they enjoy is only within a well defined small region. And, in most cases, such ventures exist only in the most dire circumstances, when the system they are replacing is so obviously failing that the public demands a solution. The state very rarely grants discretionary power unless there is no alternative left.

26. One of the best examples of this is our welfare system. It has rigid rules so that we can basically know precisely who will and will not qualify, thus preventing excessive overspending by the overly compassionate, or underspending by hard hearted administrators. However, because of the rigid rules, many people who the majority would say need and deserve aid do not qualify, while many other manage to game the system, abiding by the strict letter of the rules and living on perpetual welfare.

27. This is tricky with things such as HOAs or collective contributions for public schooling, but private ventures, having a relatively limited scope, allow the dissatisfied to move away more readily, unlike government which tends to have a greater reach. But more of that later in this essay (and in others).

28. Some examples would be the 21 year old drinking age, seat belt and helmet laws, all enforced nationally through control of highway funding. I could list more, but the pattern should be obvious to anyone who has watched politics over the past few decades. More and more the federal government uses control of funding to make laws uniform across the nation. This is something no private venture could do. Private activities would be local, and even if one cannot easily opt out, one can still move to avoid unwelcome policies. (See "The Dishonesty of Transportation Spending" and "The Glory of Eisenhower?" .) For a discussion of choice, government uniformity and individual dissatisfaction see "An On Demand World", "The Right Way" , "The Threat of Perfection", "Utopianism and Disaster", "Patronage", "My Censorship is Your Discretion", "A Question for Artists of the Left" and "The Inverse of Empathy".

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POSTSCRIPT

As always, my views presented here are simply a description -- and justification -- of the ideal, not a blueprint for implementing a specific policy. I doubt very strongly that any politician of any stripe, no matter what the degree of support, could simply close all public schools or privatize all roads and utilities in one stroke. What I envision, should it ever happen, is a gradual evolution toward this position through a true federalist government, with power limited to the smallest local units possible. Under such a system, I could imagine a number of localities trying privatization of one or more government functions, and, as the benefits become clear, others following suit. It would likely be a long process, as the benefits of privatization -- or more precisely the harms of government involvement -- are small, slow and often hard to attribute to the proper cause. But I believe, over a long time, with a distributed and free government, people would eventually reach the same conclusions I have. Maybe not all, pockets of move activist government might remain where it was strongly desired by the voters, but I think for most people, they would eventually come to these conclusions.

POSTSCRIPT II

I realized as I wrote this that, in some ways, the arguments, by trying to deal with every possibility, often seem somewhat confused. Not to mention that each argument often applies only to a few cases, and certainly none of them can apply to every circumstance in which government exceeds its proper function. Thus, for example, someone thinking of, say, consumer protection laws, would find the parts on spending and competition absurd, while someone thinking of, say, the postal service or public roads would find other arguments nonsensical. I accepted such potential confusion as the alternative would be to write an essay several times as long, dealing with each category of activity independently, or perhaps write several essays, each dealing with a particular category of action. This seemed the less bothersome of the alternatives. So while I apologize for the seeming confusion in places, I think there was no acceptable alternative.

POSTSCRIPT III

I suppose I need to say a word about the discussion of spending as reading it again, I do seem to contradict myself. To be precise, government spending has aspects of both limited funds and unlimited funds. For example, as it is unconcerned with profit, and often has recourse to additional funds should it run out, the government venture acts as if it had unlimited money in the long run, lacking any concern for profit or cost efficiency/cost cutting. On the other hand, at a given moment a government venture does have a fixed amount of funding available, and thus tends to establish priorities, though, as I stated above, the way it prioritizes is completely alien to private ventures, and has little to do with efficiency. In other words, at any given time, the venture will be spending a fixed pool of fund in an inefficient manner, and, in general, as it spends those funds, it will find itself granted ever increasing amounts of funds in the future, as well as periodic emergency supplements, and thus it often acts as if it will never run out of money. If that still sounds somewhat confusing, it is because the incentives offered for government enterprises, at least since the birth of deficit financing and inflationary monetary policies, are confusing and contradictory, and go far beyond the well known principle that economizing and saving money means a reduced budget, while profligate spending means more money next year. (See "Monetary Issues Made Simple Part I", "Monetary Issues Made Simple Part II",  "Killing the Railroads", "Bureaucratic Management and Self-Policing" and  "Bureaucratic Management".)

POSTSCRIPT IV

For all my writing, I did overlook one other topic. I was so concerned with ventures for providing services, I forgot the oft raised question of controlling behavior. However, there is a simple solution to that oversight. On private property, the owner will have unlimited control over behavior (excluding, of course, criminal acts, which are illegal everywhere), and in those few areas where private control is not possible, control will be exercised by social pressures, as it has been throughout most of history, and is today in many contexts. For a better description, see "Bar Fights, Riots and Drug Markets - The Limits of Law", "The Written Law", "Culture and Government", "Government Versus Culture - A Forgotten Distinction", " Volunteer Fireman, Barn Raisings and Government", "Hard Cases Make Bad Laws", "Harming Society", "In Loco Parentis" and "Shameless".

Thursday, December 11, 2014

Incommunicado

My apologies to my readers for both the lack of posts and lack of replies to comments. I am afraid since Thanksgiving I have been both under the weather and swamped by tasks at work. As a result I have posted very little, and responded to very few comments. With a little luck, this should change before Christmas arrives, but at the moment I am still finding myself terribly pressed for time.

Please do check back though, as the moment I find some time I will be posting new essays and replying to whatever comments have been made in my absence.