Thursday, March 31, 2016

The Trump Plan

I have been reading some conservative criticism of Donald Trump recently and, without fail, any such criticism elicits at least one comment which reads as follows (almost every one is identical, so no point in linking to any specific instance):

President Trump has a great Agenda:
•Lower/simplify taxes, and eliminate the IRS asap
•Stop IL-LEGAL immigration, anchor-babies, and AMNESTY
•Replace ObamaCare with market-driven TrumpCare
•Balance the federal budget in 4 years
•Down-size the bloated, corrupt US government and USPS
•Re-negotiate all international-trade agreements
•Expand the US Supreme Court from 9 to 15 Justices
•Remove Ryan and McConnell from leadership of Congress
•Impose TERM-LIMITS on Congress and US Supreme Court
•De-fund PBS and the Dept. of Education and Common Core
•Make English the official language of the USA
•Audit the Federal Reserve banking system
•Thorough investigation of 9-11 and BenGhazi 
https://www.donaldjtrump.com/positions
Now, if you are of a relatively uncritical turn of mind, and accept certain populist ideas -- and maybe a few Truther ones given that last item -- this may sound good to you, but give it even a moment's thought, and there are quite a few problems with this platform, even ignoring the fact that the man promoting it was until recently a die hard Democrat and supporter of his now rival, Mrs. Clinton.

I must apologize to the original author, but I will not follow his erratic use of capitals and hyphens.

1. Lower/simplify taxes and eliminate the IRS

Given his efforts to pander to every imaginable group, I am surprised Trump has not come out for the FairTax as Huckabee did when he needed to shore up his campaign, but this is probably the next best thing, as promises to "eliminate the IRS" always attract a certain type of angry voter. Don't get me wrong, I am no fan of the IRS or the current tax system, but until we return to the original Constitutional scheme of direct state funding, there is simply no way we will eliminate the IRS. Oh, maybe "the IRS" will go away, but it will go away the way "The Department of Immigration" went away by becoming ICE. Maybe "the IRS" will be no more, but we will have a Bureau of Taxation or a Department of Revenue or something, which will, in the end, be just another IRS. Even the FairTaxers would have needed one, to figure who got prebates, to make sure states complied and make policy decisions about what was and was not taxable, despite their claims. So, as long as the federal government retains the power of taxation, any promise to "end the IRS" is just sophistry. A lot of hot air.

2. Illegal immigration et al.

Well, quite a bit here. First, no wall will stop illegal immigration. Oceans could not keep Asian, European and African immigrants away, how are a dozen feet of concrete going to do something thousands of miles of water can't? And will there be no entry or exit points? What is to stop a day worker from never going back? Or someone from forging a visa or day worker permit? Sorry, but the wall is smoke and mirrors, something that, again, sounds nice, but will do little and cost a lot.

On top of that, ending "anchor babies" is not exactly within the power of the president is it? Since it comes from the interpretation given the 14th Amendment, it would require a new amendment, or a drastic change in how the Supreme Court reads the existing one. And, even were that the case, I seem to recall citizenship being a congressional, not presidential power. So exactly what is he promising? To rule by decree? Isn't that why his supporters hate Obama? Sorry, makes no sense to me.

3. Trump-Care

So, nominal conservatives are supporting a federally mandated health insurance scheme if it is "market driven"? Sorry, no sale here. Eliminate Obamacare. Eliminate Medicare and Medicaid as well. Return healthcare to the market. Do not institute a nominally "market driven" plan, which will end up being nothing but another government boondoggle. The plans before Obamacare were nominally market driven, and they were fiasco as well. ("The Madness of Our Health Insurance Scheme") If you want "market driven" why not just let the market do it? Why do we need a government plan to let the free market work? And if "TrumpCare" is as successful as "Trump Steaks", "Trump University" and everything else with his imprimatur, I am thinking maybe I should stock up on medicine now, as sure won't be much of it in the future.

4. Balance the Budget

Well, again, is that not a Congressional issue? I recall the Constitution saying quite a lot about Congress drawing up a budget. And if he thinks he can face a stand off against Congress, he better check his history. Americans love a balanced budget, right up until someone tries to institute one, then the opposition and press all them obstructionists, the public hates them, and it all falls apart. Trump thinks he can do better? He can't face down Megyn Kelly. Sorry, no sale.

In any event, our system is designed to never have a balanced budget. With federal debt being used to back our currency, if we ever did balance the budget, our monetary system would collapse as soon as the last notes were retired. Since we no longer accept gold or silver as valid tender, government debt is the only possible means of backing Federal Reserve notes. As such, we must have debt, or else we cannot have money. I know, it sounds stupid. Why, it IS stupid, but that's the system. Don't blame me, blame Nixon, FDR and Wilson. (And Bryan too, for good measure.) (See "Monetary Issues Made Simple Part I", "Monetary Issues Made Simple Part II", "Inflation and Uncertainty", "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", "Why Gold?", "A Timeline Part One", "A Timeline Part Two", "A Timeline Part Three".)

5. Downsize the Government and Postal Service

I have no objection to this, but again, Trump is going to have a tough time with it. Again, people love to say they want the government smaller, until the local base closes, or their nearest post office, or they lose their government job. It is the same reason everyone hates incumbents, but votes in their own incumbents time and again. Everyone else's incumbent is bad, just not ours. Similarly, every government job is wasteful except the ones that are convenient for you. And this NIMBY attitude makes it unlikely the government will shrink anytime soon. And certainly not under someone riding a populist wave like Trump. It is why populists typically run left rather than right, at least in terms of government power and size. It is easier to promise patronage jobs and deliver than really carry through on downsizing. Trump has the misfortune to be playing the Huey Long part in the wrong party and so he has to promise some things he will never, ever deliver.

6. Renegotiate trade agreements

Again, THIS is a conservative? Should we not try to simply create open trade agreements? I thought the idea of the government as controller of trade was a liberal dream, not a conservative one? Oh, I know there are nominal conservatives who are anti-trade. Paleocons have a lot of silly, non-conservative ideas (or rather ideas fitting well with 19th century conservatism -- See "The Political Spectrum") But to hear a supposed conservative gushing over getting government to make better deals for our businesses is just too mercantilist for me to see him as a conservative.

Also, should the government really be in the business of picking winners and losers? Should they be negotiating trade to favor this company or that? This industry or that? Again, I hate to repeat myself, but should not the goal be to simply remove trade barriers with foreign nations and then let commerce flow without the involvement of government? I thought mercantilism went out with powdered wigs and walking sticks.

6. Supreme Court Packing

I find it hard to believe conservatives are supporting an idea last floated by FDR. And then only because he could not break the resolve of the existing justices. First, while this may give whatever party does it a temporary advantage, you have to realize, no matter how many justices there are, the random timing of retirements and deaths mean that eventually we will be back to the same division we have now. Second, since it will give a tremendous advantage to the party of the president, I cannot see it ever happening unless one party had a super majority, and, if that were the case, then it would be rather unnecessary. In short, not going to happen. You could only do it if you had so much power you wouldn't need it. And, even if somehow, some fluke made it possible, say 30 sick Democrat senators or something, the opposition would still do everything they could to tie up hearings on the new justices, just to ensure some equal representation. So, this is a pipe dream, at best, and an oddly FDR-inspired move for a supposed conservative.

7. Congressional Leadership

Again, I did not know this was part of the president's job. I thought Congress chose their leaders. The more I read these points the more obvious it becomes Trump slept through Civics in high school. Even if it were the president's job, this just shows how trivial and petty are his concerns, and those of his supporters. They waste a platform item on striking a blow against "the establishment". Come now, can't you think of something a bit more important?

8.  Term Limits

Another Civics gaffe here. How can you impose term limits on the Supreme Court? They aren't elected and serve for life (assuming good behavior). Even a single term limit would be life long, so that seems a bit of another show of Mr Trump's Constitutional ignorance.

Concerning congress, I have never been a fan of term limits. (See "Why Term Limits Will Fail (And Should)", "The Problem of Professional Politicians, or, The Impossibility of a True "Ousider" Candidate", "Critique of a Congressional Reform") As I always argue, they may have saved us from the 3rd and 4th terms of FDR, but they gave us Bush instead of Reagan as well. And that is the problem with term limits, they keep us from keeping good people as often as they force out bad. And, in the end, should not the choice of representative be the will of the people? If we really WANT term limits it is easy, don't vote them back in. In other words, term limits mean either you do not trust yourself or you don't trust other people, and neither is a good foundation for laws. It is akin to either hiding your cigarettes to force yourself to quit smoking, or banning all cigarettes because you want to quit. One is silly and the other obnoxious.

Not to mention that, the less experience law makers have, the more authority will come to rest on staffers and career bureaucrats, neither of which is a desirable outcome. No, the solution is not term limits, but less government. Term limits is a silly supposed panacea we should all ignore.

9. Defund PBS, Dept of Ed, etc

I have no real objections to these, but, again, they seem kind of small potatoes for a position statement. They sound like catering to very narrow, specific groups. Much as I dislike patronage (eg "Patronage", "Patronage Versus Choice", "Free Market and Federalist Confusion"), and find government involvement in issues not related to police, courts or armies troubling, these are hardly tops of my list among things to eliminate. In any case, this is, again, a Congressional matter. If congress funds them, and legislation mandates them, he is going to have a hard time doing much about it. Again, do those who hate Obama's "rule by decree" think Trump should do the same?


10. Make English the official language

I have no objection to having a single national language used for all official acts and laws. Then again, that is the de facto situation in the US at present. I am afraid those who think this means they will never have to hear "Press 1 for Spanish" again are deluded. An official language means nothing more than the language in which government is conducted, and that is English right now. Making it a law would change absolutely nothing. And, despite their beliefs, it would not eliminate the use of translators in government offices, phone menus in Spanish or government brochures being printed in other languages. So, I am sure it appeals to the same people as his immigration position, but in effect it would do absolutely nothing.

11. Audit the Federal Reserve

I am not sure exactly what this means. I mean, the Federal Reserve creates money out of thin air. We are no longer on a metallic standard, so what are they auditing? The amount of currency created? The number of federal bonds held? And what will that do? Sorry, but with our current fiat currency system, the amount of money created is a purely arbitrary number. And if experts cannot agree on how much money there should be, or even what to count as money and what to count as some other sort of asset, how is this going to accomplish anything more than waste a massive amount of money?

12. Investigate 9/11 and Ben Ghazi

This is a strange combination. Ben Ghazi has been a rallying cry for conservatives who hate Clinton, 9/11 for nutty Truthers, most of whom hate Bush. I suppose a few rabid anti-government types might be in both camps, but in general this seems a very odd mix of promises.

Ignoring how odd it is and pressing on, I hate to tell everyone who is excited about this, but we ALREADY had investigations into both. And, even if we do it again, what will happen if the new findings are not to the liking of those screaming for new inquiries? Will they demand another? I a sorry, and will probably upset some conservatives, but the available evidence does not prove any malfeasance about Ben Ghazi. A lot of mistakes,  a fair amount of after the fact CYA, but nothing like what some imagine. Maybe some things were done wrong, maybe some errors were made, bad decisions, but proving culpable, criminal intent just is not possible. And 9/11 has even less evidence of anything other than what everyone sane knows. 19 men from various countries in the middle east, at the prompting of al Qaida, flew planes into the WTC and Pentagon. That is all. So, other than garnering a few fringe votes, what would promising investigations gain?

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Of course, all of this is probably a waste of time. Those who hate Trump don't need to be told what a twit he is, and those who love him don't seem to respond to evidence, even when Trump himself clearly changes position or acts like a demented child. So, I am not sure why I bothered except that I simply cannot let a piece of nonsense as absurd as this pass without some comment.


Saturday, March 26, 2016

Understanding and Evil

Many on the right have a fondness for speaking of the left's love for "preferred minorities", or even accuse the left of actively favoring various groups, promoting, for example, Islamic interests over Christian ones. In most cases, the right paints this as a sort of covert scheme, some effort to undermine traditional values, or some similar agenda. I believe, while there is some truth to the allegations of the right -- though not as much as they think -- that the real motive, at least in the majority of cases, is much less sinister. In fact, it is almost understandable, though the consequences are every bit as harmful as many allege.

First, let us agree there is a definite double standard when it comes to the handling of some groups. When, say, a Christian group blows up an abortion clinic, it is portrayed, rightly, as nothing but a hateful, criminal act. On the other hand, when Moslem's rioted because of cartoons about Mohammed, some responded with "it is a bad response, but...", and a few did not even bother with that first bit. Nor are those isolated incidents. Time and again, when certain groups -- religious, racial, or other -- act in ways that would be denounced were they anyone else, the left will either qualify their criticism, or even avoid criticism entirely and call for "understanding" because of whatever provocation they allege motivated the acts. And, because the left's world view tends to inform the media,popular culture, and so on, this narrative becomes the accepted view, the conventional wisdom.

So far, I am in agreement, I believe, with most conservative critics, my problem comes in the motives. You see, I do not believe most on the left, especially among the rank and file, have any agenda in this behavior, it all comes from simple, almost understandable, motives.

My belief is, many on the left, rightly or wrongly, believe there is a strong history of bigotry in this nation*, and they believe they not only have to distance themselves form it, but do what they can to remedy it. And that is generally what motivates them. They imagine most who hear of rioting Moslems are imagining it is just another sign of Islamic barbarism, and so they feel the need to point out the motivation, to explain why it happened, to show that Moslems are not mindless brutes. And it is the same with others, with various minorities of all sorts.

Now, I am not saying this is the agenda of every liberal. As with environmentalism**, and many other movements, there is often a disconnect between the rank and file, the "man in the street", and the policy makers and politicos. Some may take a sincere grassroots movement and twist it to enact some other agenda. Some may even create a popular movement to promote a second, hidden agenda. But, for the most part, I believe the bulk of those promoting a movement are sincere, they are acting for the reasons they say. Oh, maybe a few are hangers on, mouthing a line to appear good tot heir friends, to pick up girls or boys, to get in with teachers or professors or bosses, or what have you. That is true of everything from church attendance to choices in music or movies, and certainly applies to politics as well. But if we ignore the people there just to be seen -- and those at the very top -- the rest are generally acting for the reasons they claim.

In short, I think most who seem to have a double standard are not promoting any culture war, are not trying to covertly undermine western civilization, but really are just doing their best to promote understanding and tolerance as they see those concepts.

However, there are two problems with this world view.

The first is that it is terribly insulting to the groups it supposedly embraces. When a person criticizes Christians and Jews and other westerners for doing something, but simply shrugs when Moslems do it, it does not show understanding for Islam, but rather a patronizing attitude toward its practitioners. When one does this, it implicitly says "we really can't expect better of Moslems, can we? But you, Christians, we expect better of you." It is akin tot he way teachers and parents hold older children to higher standards than younger siblings. And to treat fully grown Moslems as if they were younger brothers is insulting, and does not show understanding, but rather a patronizing attitude. The same is true of liberals who claim to show understanding to young black criminals by excusing their crimes, by saying they cannot help themselves, while white children can, is not being understanding, it is being insulting***.

The greater problem is that such efforts at understanding often end up excusing real evil. Does it help those being slaughtered by ISIS to hear that it is the result of Bush interfering in the Middle East? Does it make those dying in religious civil wars in various states to know that westerners who could help don't because they have adopted an enlightened view of historical religious conflicts?

Think of it this way, would the world be better had we "understood" how Hitler's rise was assisted by the Versailles Treaty which provided a pretext for nationalist complaints and stayed out of the Second World War?

No. The fact that we recognized the Nazis as a force for evil and worried about their motives, about the forces that made their rise possible afterward, that made the world a better place. Similarly, trying to understand those who do evil, rather than first recognizing the evil, is a recipe for inaction, and certain to do more rather than less harm.

And that, in the end, is why I say understanding, at least as understood by the modern left, is harmful. It insults those it supposedly helps, and makes the rest of worse off by excusing evils large and small.

On the other hand, I do recognize why so many adopt such views, and why this particular element of liberal thought is so widespread. And it is a hard position to argue against, given that it is easy to portray arguments against this sort of "understanding" as arguments for racist, chauvinism and intolerance. Which is why I think we need to point out, as often as we can, both how potentially harmful such beliefs are, and, even more, how insulting such understanding is to those it supposedly benefits.

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* In a way, I can almost sympathize, as there certainly are those who make it easy to believe this. I cringe whenever I see some comment on a conservative site ranting about towel-heads or sand-ni**ers. I grant they are a minority -- and not all Republicans, as many blue collar Democrats have the same beliefs -- they definitely can give an impression that Americans are very different than everyday experience leads me to believe. And, imagining someone who lives in the "liberal bubble" of the Northeast, or academia encountering such comments, it is easy to see how they could imagine it represents a majority belief in "flyover country" and elsewhere, even if that is far from the truth. Sadly, as we have seen with the Trump movement, a vocal minority can often come to appear as a majority. (Cf "The "Liberal Bubble" Becomes Universal")

** See "The Lie of Environmentalism".

** See "Eurocentrism? Racism? Liberal Traits All", It Is All In How You Say It", "The Costs of Understanding", "The Important Lesson of Racism", "The Racism of the Left", "Mainstreaming Hate", "Tyranny Without Tyrants", "Three Versions of Evil and the Confusion They Cause", "Misguided, Deceptive or Evil?".

Tuesday, March 22, 2016

Brief Thought on Government Subsidies

I recently read some essays debating the best way to provide "universal" low cost internet. As it is a very government oriented group, most answers centered on government involvement, and even the goal -- "universal" access -- showed a government-oriented bias, as the free market never ensures universal anything. However, listening to the debate something struck me.

One argument offered (after a lot of nonsense about monopolization*) was that in rural areas, the market simply would not support access. Even if the free market were efficient and cost-effective in populous areas, in rural areas, users would need to rely on high cost satellite for fast internet service. Thus, the argument is made, it falls upon the government to subsidize such access to give rural people access to cheap, fast internet.

My response is a bit different. In rural areas it is also probably difficult to get good sushi, see a live opera, find a taxi or a decent museum. So, should the government subsidize all of those as well? Or should we accept that certain areas impose certain conditions, and living in rural areas means you will not have access to some services? So why is it the duty of government to ensure rural people have cheap internet? For that matter, why is it a goal of civil society -- to which our tax monies must be dedicated -- to ensure universal access to the internet?

I honestly think the best solution is to let the market prevail. Some areas may see higher prices, or less service -- at least until costs of setup fall due to technological changes -- but that is life. Why must we try to ensure that no choice anyone makes has any negative consequences, so you can live in the country with all the conveniences of urban life? Or so every nation has exactly the same amenities? I thought the left loved diversity? Why do they seek to homogenize everything? And do it at the expense of taxpayers?

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* The argument is the usual, that "big" (See "Fear of the 'Big'") providers will come in and undercut the "little guys", then jack up prices. I have explained why this does not work repeatedly, but for those who have not read them, see "The Little Guy Can't Compete", "Saving Us From Lower Prices", "The Basics", "Competition", "The Gadarene Swine Fallacy", "A Passing Thought on Cell Phones", "Denying Reality", "Two Sided Processes and Claims of "Unfair" Outcomes", "The Difference Between Public and Private, Or, The Real Monopolies and Cartels" , "The Problem of Antitrust", "Consumer Protection, Cartels and the Failure of Regulation" and "Imperfect Competition, Abstraction and Anti-Trust".


A Stupid, and Incorrect, Observation

I have seen a claim a few times that is quite misleading. In several essays on how industrialization has changed us, or changed our perceptions, people repeatedly make the claim that "before such and such a date [usually in the early 19th century, sometimes late 18th] clocks did not have minute hands". From this observations -- correct as far as it goes -- they draw all sorts of erroneous meaning and imagine that, prior to the demands of "demon industry" we were happy saying "oh, it is round about six" and did not even conceive of minutes, which is quite wrong.

Do you doubt me? Then look at ancient texts, look at Roman writing, old alchemists, anything, and, guess what? They mention MINUTES! Or at least fractions of hours in the earliest cases, but in later times minutes do appear, even before the minute hand makes its appearance. Adam Smith and James Watt did not invent the smaller divisions of time, nor did people of the past not know they existed. Granted, in some contexts they did not matter, but that is true now. In some cases in the past, as today, it was enough to know it is "a little after noon" or "sometime in the morning". But when people needed to know things to a more fine tuned degree, they were perfectly capable of doing so.

So, what about the minute hand?

Well, think about it. Until mechanical clocks became common, the most ubiquitous timepiece was the sundial. It operates by throwing shadows. How will you put a minute hand on it? But that does not mean there are not small tick marks between the hours. You may not be able to tell 11:22 from 11:23 on it, but you can definitely tell time in units smaller than an hour.

Then we have the "hour glass", which, as its name suggests, was often designed to mark the passage of an hour, but also existed in larger and smaller units. And while they did not explicitly mark off the quarter hour, half hour and so on, it was pretty easy to estimate from an hour glass what part of the hour had passed or remained.

The next most popular non-mechanical timekeeper was the candle. These were sold in a lot of sizes, each made to burn down by set increments, allowing you to see the passage of time by seeing which marks had been consumed. As I said, they came in a number of sizes, the one covering an entire day or night being most common, but smaller and larger candles existed, allowing the telling of time in a more fine-grained manner.

And then we come to the early mechanical clocks. While it may not be surprising, it seems to be overlooked that the clock face is itself inspired by the sundial, and thus early clocks normally had one hand to tell hour and minute. It was not that they did not tell minutes, just that it was more familiar, and mechanically more practical to use a single hand for both. As technology improved (including advances in metal working, spring manufacture and so on) it became possible to tell time more minutely, and eventually a minute hand was added for added precision.

But this says nothing about how we perceived time, or that the industrial revolution changed how time was measured. I will grant, the prevalence of precise minute-hand clocks probably was speeded by the needs of railroads, but they existed before rail. And the second hand, it was not instituted because of some industrial need, but simply because it became technically possible. Thus undercutting the thesis of this argument.

Let us look at it this way, kitchen timers all have minutes but not hours, does that mean bakers cannot conceive of hours? That the demands of baking remove hours from their consciousness? No.

And this argument is equally silly. It is a combination of Marxist dogma that the means of production determine everything, and the theory that the past is an alien land, which allows us to believe the most absurd things about our ancestors. I will grant, the past was unlike the present, and people may have held beliefs we cannot conceive today, but they also were humans, with the same drives and logic as we have, and thus, given an understanding of their motives, were perfectly understandable.

All of which is round about way of saying this a load of bunk.

POSTSCRIPT

I am sure some of you will notice I agree earlier times did not precisely define 1/60 of an hour and argue I am mistaken, that ancients did not see time as we did. But that is wrong. Granted, due to technical limitations, they could not so finely subdivide the hour, and so had no term in the earliest eras for the modern minute, but that does not mean they had no concept of time more fine grained than an hour, nor that the industrial revolution invented the minute. People have always divided time, and units smaller than hours were always recognized, it just varied how small a unit they could usefully measure. It was not the industrial revolution but technical developments that made small measures possible. And thus, while I suppose, by making better springs and gears available, the industrial revolution played a part in the current subdivision of time, it certainly did not bring them into existence. The concept existed earlier, we just could not practically measure them.

UPDATE (2016/04/02): Having read through this  a few times, I keep thinking I could have said this better. So, I think I will give it another try. The many essays I read obsessed with missing minute hands, seemed to take from that observation the idea that before the 18th or 19th century, people not only did not specifically measure minutes, but only thought of time in large, hour-sized blocks. And that is nonsense. The modern minute may not have existed, or at least been measured accurately, but there definitely was an understanding of subdivisions smaller than an hour. Time was not seem in some bucolic, "an hour's good enough" haze prior to Willoughby, the Stephensons or Isambard Kingdom Brunel, nor was the concept of "minute" completely unknown prior to the minute hand.  After all, does it make sense for a largely decimal-dominated era to decide to use a 12 and 60 based system for divisions? No, subdividing circle predates the industrial revolution by quite some time, and the concept of a 60th division of an hour can be found as early as Roger Bacon, though it may be even earlier, his is but the first known reference. So my point is, quite simply, that imagining that the invention of rail and minute hands somehow magically changed how we see time is utter nonsense, and, as I said above, an embodiment of the Marxist silliness that the "means of production" control how we think, instead of the other way round.

Should probably have just written that short form in the first place.

Monday, March 21, 2016

Social Security is STILL Not Insurance -- And You Did Not "Pay Your Fair Share"

I have written about this before, but I can't resist commenting again, especially as I ran across the following comment on Townhall.com:
I get sick and tired of people like you that list Social Security and Medicare are entitlements. I worked and paid into those for over 45 years. The money isn't there because Congress diverted my money to pay for other things. I paid for this with my hard work. Big difference with actual entitlements. Take your entitlement claim and put it where the sun don't shine, and stick it there sideways.
Obviously, this is hardly an unusual opinion. Time and again, I have heard people spout similarly outraged opinions when they hear Social Security (or Medicare) as entitlements, or hear them described as welfare. Yet, whether or not it is a popular opinion, and whether or not it offends, the truth is, Social Security and Medicare are welfare every bit as much as any other program. The fact that you have to have paid in to receive makes it slightly different, but the truth is, it is in no way "insurance" and unless you die pretty young you are not simply taking out what you put in.

As I wrote in "Social Security is Not Insurance" (and "Misleading Terminology" and "A Timeline Part Three"), Social Security... well... is not insurance. It was sold as insurance, and structured to vaguely look like insurance, but, just as with modern medical insurance*, it is not real insurance, any more than the Earned Income Tax Credit is in any way related to tax refunds**. 

To start with, insurance requires that an event be unpredictable. If you know something will happen, then insurance does not work. If something is certain, you and the insurer both know precisely what the present value is***.  Thus, since we all know we retire at 62, or 65 or 67, and will get a payout equal to X if our contribution is Y, there is no uncertainty, and thus this is not insurance.

Nor is it an annuity. An annuity requires that the pay-in equal the net present value of the payout. Or, adjusts the payout to equal the value of the pay-in. Social security makes a nod in this direction by adjusting the payments to reflect contribution, but there is no economic relationship between the two. They are related by nothing but an arbitrary schedule of payments, there is no relationship to interest rates, rates of return or anything else. And they can be adjusted by statute after the fact, making it clear it is nothing but a government payout with a sliding scale of payments.

Nor is it any sort of investment. The money is not invested, it earns no interest. And you have no ownership in it. By law, the state could stop paying tomorrow. Or could pay you ten times as much. That means it is nothing but a government payment, or an entitlement. Your payment may be tied to what you paid in, but that does not make it an investment, annuity or insurance. And since most people get out VASTLY more than they ever paid in, it should be clear that describing it as welfare is not too far off the mark.

I know, people don't want to hear it, as they feel responsible when taking Social Security, since they "paid in" and would rankle at accepting welfare, but the truth is, the way Social Security is designed, it really is nothing but a welfare payment. Don't get angry at me, get angry at FDR and his successors. They were the ones who decided to make all retired people accept welfare. That we were too stupid to save for our retirement and had to be told what to do by our betters in government. 

I had nothing to do with it, I am simply pointing out the truth.


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** The EITC is nothing but disguised welfare. After all, if it were a "refund" then you would not be able to get more back than you paid in taxes all year long. Thus, though it is disguised as a refund, or "credit" and uses the tax system as a means of disguising its nature, it is little more than welfare, plain and simple.

*** If you know an event will happen on a given date and require a payment of a set amount, you can sue interest rates to calculate the amount you would need to invest to earn that return. Thus, there is no benefit paying for insurance as it would cost more than buying a bond or CD of the proper amount. And an insurer has no interest in you, as if he charges only as much as a CD or bond, he would be able to make no profit at all. Thus, without uncertainty insurance simply cannot exist.

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POSTSCRIPT

I did not mention it, but the same applies to "Unemployment Insurance" and similar schemes, though in those cases the government take pains to make sure payouts are usually far lower than what is paid in. Still, the amount of payout bears no logical relationship to pay-in except that mandated by a government table of figures.

Sunday, March 20, 2016

Free Market and Federalist Confusion

I have made it pretty clear that I believe in minimal, local government, and believe economics should be left in private hands1. And the reason for both is pretty much the same. Both federalism and free market rely upon keeping government intervention to a minimum, while ensuring what intervention is found necessary is applied at as local a level as possible, so as to allow for alternate solutions -- or none at all -- in other locales. It is not a unique position, though I am surprised to find how few absolutely consistent believers there are in both2.

However, when I discuss these topics, or when I listen to critics attack them, I am struck by the way that both critics and proponents often share common mistakes concerning how these policies work, or what their benefits would be.

First, let us look at the free market.

The most common, and most mistaken, belief is that the free market produces optimal outcomes3.  There is no system which produces ideal outcomes, which is why comparing a system to perfection will always produce a long list of "flaws". What the free market does, and what other systems fail to do, is produce the best possible outcomes. Now, these outcomes are not perfect. Nor are they achieved instantly. The free market can take time to correct poor allocations, it can take time to adjust to new situations, and, in some cases, it may be slower in responding than alternative systems. However, over the long run, taking everything into account, the free market produces the best outcomes among those produced by all systems. It is not perfect, but then again, nothing is. But to pretend it is somehow a machine for producing optimal solutions is to hold it to an impossible standard, and to make easy criticisms that it is "failing" when it simply is not perfect.

Which leads into my second, related, mistake. This is the belief that the free market will always resolve a specific problem better than the alternatives. In truth, if we narrow our vision to address only specific issues, sometimes another answer may resolve that specific problem better. For example, if your worry is that medical insurance is not widely available, socialized medicine does solve that more rapidly than the free market. However, in so doing, it creates a host of other problems, such as shortages and poor allocation of resources. But for a single, specific problem sometimes other systems resolve them more rapidly, but at a great overall cost. Only the free market produces solutions which, over time, maximize the possible satisfaction. They are not ideal, as I said above, but are the best possible solutions.

Then there are errors on the other end of the spectrum, both those who give too much credit to the free market, but too little. These are the nominal conservatives who accept the free market, but would impose some "common sense"4 regulations5, or would "rein in" speculators6, or "curb the abuses" of "big oil"7 or cap CEO salaries8, or limit free trade, maybe enforce "fair trade"9. In other words, the populist and protectionist wing of the Republicans, along with a handful of others who, though not going so far, still believe the market needs regulation.

The problem with all of these positions is they overlook one of the greatest strengths of the free market. Unlike those imaginary benefits, these interventions are trying to resolve assumed problems the market itself does fix, and fix without the need for intervention, at least so long as government behaves consistently10, respects contracts11 and enforces property rights12.

All of the objections above rest upon the belief that the free market is akin to interventionist governement, that is, that its function depends upon "good people" being in charge13. The reason many conservatives want to impose an SEC, or salary regulations or  rescission periods and the like14, is that they believe, left without oversight, the free market will gradually be taken over by the greedy and unscrupulous who will exploit and abuse the rest of us, and thus regulation is needed to prevent abuses when the "wrong people" come to power.

But this misses the main point of the free market. The mechanism of the market is such that -- provided the government protects minimal individual rights -- the basest of our drives inspire us to the greatest efforts to benefit others. To put it more simply, if you are greedy, the only way to obtain the wealth you want is to satisfy the wants of others. Likewise, in the realm of employment15, the free market ensures those seeking to obtain the most wealth will, of necessity, pay their workers the most equitable wages, as well as watch out for their safety and so on16. Similarly, companies will want to provide safe and worthwhile products, f only because their reputations are assets of considerable value17.

Some may object and say the free market did not ensure this in the past, but I would disagree18. In some cases, especially during the formative years of American industry, there was anything but a free market. Our railroads, for example, were cases of the most egregious government patronage, coupled, in some places, with local efforts to "shake down" owners of rail, shipping and other transport firms19. In these cases, it is absurd to speak of the failure of the free market, as no free market existed.

I will grant, by and large, in many industries, parts of the 19th century were close to a free market. Granted, banking, shipping and other fields remained excessively regulated, but many industries were mostly free of government. So, why were there so many problems? Why were wages low? Why was safety so poor? Why were shoddy or dangerous products produced?

The answer is, that, for the time, given the consumers and the capital available, that was what the market wanted. I said the market tends toward the greatest satisfaction, but that does not mean ideal. If you live in a time much less careful about safety, with uniformly low wages, it makes sense to produce cheap, flimsy and less safe goods, as that is what consumers can afford. It would have made no sense to produce expensive, durable goods, as the market was too small. It is only now, with increasing wealth, that the vast majority of us can worry about product durability and safety.

Wages were a similar issue. Wages may have been low in factories, but ere perfectly in line with wages paid unskilled or low skilled farm hands, liverymen, longshoremen and so on. We forget when we complain of low wages, or child labor, that even lower wages predominated outside of the industrial cities, and children had worked in all but the wealthiest families since the dawn of time. (Many still work today on farms and the like.) The industrial revolution and free market were not responsible for low wages or child labor. They eventually resolved both, it just took time and societal changes to make it happen.

However, in the present era, we seem determined to eliminate any problems, even potential problems, as soon as they are recognized, without allowing time for the system to work itself out. Rather than allow for the market to adjust, using laws only to prevent actual frauds and theft, we tend to jump on the bandwagon the moment there is an outcry, and regulate blindly, often making things worse, rather than better.

Let us look, for example, at banking. Early on in the colonies, there was a tendency for unscrupulous souls to abuse the difficulties in redeeming bank notes to create small scale inflation, issuing far more bank notes than reserves could support, depending upon isolated locations and the general difficulties of travel to prevent them from being redeemed20. However, because that was an era when the state was generally reluctant to jump in and regulate, the market had time to adjust. At first it was a number of ad hoc solutions, such as out of state holders of notes pooling their bank notes and hiring agents to redeem the lot for gold. But, over time, more formal solutions arose. Regions developed clearing house banks, which required specie from all regional banks, and which could then both redeem notes, and handle interbank transfers. In time, membership in such clearing houses became seen as the sign of legitimacy and banks unwilling to participate saw their notes either refused or traded at a significant discount, which meant, eventually, being driven from business, as they found themselves unable to pay sufficient interest to keep depositors.

The modern era is quite different. Though to blame it solely on politicians is dishonest. No doubt there are activist politicians with an agenda, but most politicians subordinate personal views to political expediency, and with good reason. You see, the realm of politics is very much like competition for survival as envisaged in the more ruthless of social Darwinist theories. Those politicians succeed who give the people what they want. I grant, some very smooth politicians might convince the voters that their own agenda fits in with the public's demands, but that does not eliminate the fact that the public demand for something has to be there int he first place. Thus it is with our current environment. Yes, some politicians may use public demands to "do something"21 in order to enact their own agenda, but the public still must first demand they act. And that is what makes our era quite different from many in the past. In the past, I will grant, the public may have from time to time insisted on government action, but in other era has the public met every problem, even the slightest inconvenience, with such demands. The public may have wanted the state to put down riots or deal with floods and earthquakes, but only in our era do people go to the government when they can't get a refund for a defective toaster22.

Which is why so often we hear calls for government oversight and regulation, and claims from even nominal conservative that the market cannot run itself, it needs regulation. The problem with such claims is, in general, the examples they choose are not examples of where the market was allowed to work and failed, but rather examples where the first few baby steps of a new market proved far from perfect and the government immediately stepped in and took over. Or, in a few cases, anachronistic argument from eras that are alien enough that we believe claims that make little sense.

Let us look at three of these. First, the stock market, an all time favorite for those seeking government oversight. Second, the pharmaceutical industry. Third, the FDA and the regulation of foodstuffs in particular.

The stock market is a good example of the government jumping in before allowing the market to work out its own issues. Admittedly, stock sales had existed for quite some time before the birth of federal regulation, but largely in a very small scale way, and, even then, the market was fairly swiftly bound by any number of state laws. Thus, there never was much of a chance for the market to self correct, or for it to begin to develop free market mechanisms to ensure a fairly smooth operation. Instead, we were saddled early on with heavy handed regulation. Which makes the claims for the need for government regulation even more peculiar, as all the many stock frauds and swindles, all the crimes we ascribe to the stock market, were committed while regulation was strong. Thus, we can see that regulation does not stop such abuses.And yet, time and again, we hear unless it is regulated the stock market will be filled with corruption, while other industries free of such regulation operate with much less crime and deceit23.

The favorite example for the need to regulate the pharmaceutical industry -- and at one time the poster case for tort reform24 -- was the use of ethylene glycol as a solvent for sulfa drugs, resulting in a number of poisonings. However, while offered up as proof of the need for government regulation, it is a actually a bad example. First, because the market was not free at that time, the FDA had already come into existence and drug manufacture was already partly cartelized as a result. In a free market, such an error would doubtless be, if not the death knell, then certainly a massive setback, for the company making such a mistake. But by that time, there was no longer a free market in drugs, and so the harm was blunted and Massengill continued to function and profit. Thus, the outcry was not against a rogue company in a "wild west" market, but a cartel member in a regulated market. And, of course, the solution was not to ask whether cartelization through regulation worked, but to argue the laws were insufficient and to pile on more regulation. As with the stock market, the assumption seems to be oddly one sided. If there is a problem in a free market, the answer is regulation. But if there is a problem in a market already regulated, the answer is that the current regulations are insufficient. In short, regulation is a one way door, there is never a situation which would call for less regulation, only more.

Now let us look at the FDA itself. Of course, as we all were taught in high school, the FDA was created largely in response to outcry brought about by muck raking journalists and writers such as Upton Sinclair. Now, before we go on, let me see a show of hands of those who think "The Jungle" is in any way accurate... If you raised your hand, slap yourself in the forehead. Does anyone, anywhere think this depicts real human behavior? It is akin to the other 19th century novels which depicted equally bizarre behavior in distant lands. So long as he presented it as "in the slums" and "in the factories" which were as alien to his middle class audience as China was, he could claim anything, and did. And yet, on such a foundation there arose a public outcry for largely unneeded regulation.

States had traditionally regulated foodstuffs to some degree, though even that was largely unnecessary. And, yes, corruption did exist. However, no one explained how moving regulation from the states to the federal government would solve that particular problem. Especially since regulators and inspectors largely came from the same pool of people as once supplied the -- ostensibly easily corrupted -- state officials. But the era was one of centralization and belief that "federal" meant trustworthy, and thus the FDA was born.

But why?

Granted, food safety of the turn of the twentieth century was not what we would prefer it to be today, but that ignores a number of factors, including gross anachronism. The early twentieth century was a different time, much less wealthy, and much closer to our agrarian roots than today. People had fewer issues with eating what later would be called offal. Organ meat, scraps and bits were acceptable if the price was right. Likewise, some foods we would consider too old were considered perfectly fine for human consumption at the time25. So it is completely unfair to look at the past and imagine we can apply today's standards. And yet, by and large, the market worked, even without state regulation. People took some care in selecting food, as did sellers. And should a provider prove to have supplied something tainted, for the most part people avoided his goods. As with any other good, people used trial and error and voted with their dollar to get what they wanted. No need for the state to become involved.

Obviously, these are but brief looks at much more complex concepts, but I would argue that, despite the claims of many, the free market can safely be relied upon to protect itself. If it not perfect, it does not produce ideal outcomes -- no system does -- but as far as ensuring the consumers get what they want, the free market is inferior to no system. Given a stable, consistent government, with protection against force, theft and fraud, the free market produces the best possible outcome in the most cases possible. It may not be perfect, it may actually be outperformed in some specific situations by some alternate system, but overall it is superior, and that is the best argument I can imagine. While it may fall down, it also self-corrects over time, and, taking the results as a whole, it produces the best outcomes of any system conceived. And all that by being the most minimal system possible.

Then again, perhaps that last bit explains a lot. After all, the free market is nothing more than allowing people to go about their business, provided they respect the rights of others. It is the baseline of all trade. Any system has to be some regulation piled on top of the free market. And so, when we say the free market produces superior outcomes to any alternative, all we are really saying is that regulations tend to produce inferior results, that telling people to do other than what they want tends to make everyone less happy and efficient. In short, freedom produces the best possible solutions. Not perfect, not without problems and flaws, but better than the alternatives.

Is that really so surprising?

As this essay seems to have run a lot longer than I thought, I think I shall let it end here, with our discussion of the free market, and move the discussion of federalism, and the many mistaken beliefs about it, into a second essay.

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1. See "The Benefits of Federalism", "Conservatism, Incremental Change and Federalism", "Power and Disorder", "Redundancy as a Protective Measure", "Adaptability and Government", "Inflexibility and Bureaucracy", "Why Freedom is Essential", "The Free Market Solution", "How To Blame The Free Market", "In Praise of Contracts", "Contracts and Freedom", "Symmetry and Asymmetry in Government" and "Negative and Positive Rights".

2. Technically, as I discuss in "Reforms, Ideal and Real", I do not support an enforced free market, or even enforced minimal government -- say for example, a universal decriminalization of drugs. As I am consistent in my federalist beliefs, I would want to see the localities to have the ability to enact laws in as wide or narrow a manner as they wish. However, I believe it would be best were they to keep these laws as narrow as possible, to use as little power as they can, and, also, over time, I believe the minimalist ideas would win out over the alternatives. But I will be discussing some of these topics later in the essay.

3. This seems to be more common among critics than supporters, though supporters often seem to imply it without stating it explicitly. (Though some do go that far as well.)

4. See "Common Sense, Guns and Regulations" , "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", "On Extremists, Moderates and Polarization", "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'", "Common Sense,Philosopher Kings, Arbitrary Law and Dictatorship" and "The Problem with Common Sense Solutions".

5. See "Et Tu, Town Hall?", "In Praise of Contracts", "Contracts and Freedom", "The Case for Small Government", "Competition", "The Basics", "Greed Versus Evil" and "Denying Reality".

6. See "Another Shakedown", "Absurdities on Oil", "Authoritarian Oil Talk", "Fighting the Wrong Fight", "Fighting the Wrong Fight, Part II", "Greed and the Price of Oil", "Obscene Oil Profits?", "Oil Company "Profits"", ""True" Prices", "Those Darn Speculators" and "In Defense of Speculators".

7. See "Imperfect Competition, Abstraction and Anti-Trust", "The Difference Between Public and Private, Or, The Real Monopolies and Cartels", "The Problem of Antitrust", "Consumer Protection, Cartels and the Failure of Regulation", "Put Your Money Where Your Mouth Is, Or The Logical Implications of Price Gouging Laws", "Price Gouging", "'True' Prices" and "Technology and 'Natural Monopolies'" regarding price "gouging" in general, and  "Greed and the Price of Oil", "Obscene Oil Profits?" and "Oil Company "Profits"" concerning oil in particular. Also, see "Confirming My Argument on Peak Oil", "A Brief Thought on "Peak Oil"", "I Am Going to Say Something that Doesn't Make Sense", "The Consumption Curve", "Peak Oil Re-Run", "A Brief Comment on Oil", "Why I Doubt Peak Oil Predictions", "Rejecting "Peak Oil"", "Why Peak Oil is Laughable", "A Thought on Oil Reserves", "Greed and the Price of Oil" and "Bad Economics Part 1".

8. See "A Little More On CEO Salaries", "Why Do They Earn So Much For Playing a Game?", "Moral For Me, But Not For Thee", "Greed", "Greed Part 2", "Symmetry and Greed", "Perverting Self Interest" and "Government by Emotion".

9. See "Beware Populist Deception", "Protectionism Right and Left", "Jobs, Jobs, Jobs, and More Jobs", "Fear of Trade", "Free Trade, Employment, Outsourcing, and Protectionism", "Another Look at Exploitation", "Computer Games, Immigration and Protectionism", "Cheap Lighters, Overseas Dumping and Monopolies", "Post Hoc, Ergo Propter Hoc", "Unfair Advantage and Foreign Trade", "The Problem of Established Perspectives", "Two Sided Processes and Claims of "Unfair" Outcomes" and "Fear of the 'Big'". Also, on the topic of the term "fair" see "The Most Misleading Word", "Luxury and Necessity", "Res Ipsa Loquitur", "A Question of Fairness", "Protean Terminology", "One More Meaningless Word and Its Consequences", "Confucius, Aedes Aegypti, Pluto, Sub-Species, Conservatives and Republicans", "Misunderstanding Arbitrary Definitions", "Weasel Words and Hollow Words", "Semantic Games", "Misleading Terminology", "Smoking Versus Sex -- Want and Need Take Two", "Can We Ban the Word 'Scarce'?", "Government by Emotion" and "Selfishness as Reason - 'Wants', 'Needs', 'Fairness' and Other Guises for Arbitrary Decisions".

10. See  "Predictability", "The Consequences of Bad Laws", "Traffic Lights, Predictability and Conservatism", "Inflation and Uncertainty", "In Praise of Contracts", "Contracts and Freedom" and "Juvenile Culture and Totalitarianism".

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

12. See "The State of Nature and Man's Rights".

13. See  "The Right People, The Wrong People and "Just Plain Folks"", "The Wrong People", "A New Look at Intervention", "Perverting Self Interest", "Racketeering Through Legislation", "Power and Disorder" and "Transparency, Corruption and Reform".

14.  See "The Gadarene Swine Fallacy".

15. See "Employment A to Z", "More Thoughts on Wage Disparities", "Capitalism and Its Consequences", "Competition", "Another Look At Exploitation", "Fairness and the Free Market", "Exploited Labor", "Capital Investment", "Exploiting Workers?", "Two Sided Processes and Claims of 'Unfair' Outcomes", "How Wages Work".

16. See "Who Is Safer?", "Worker Safety" and "Oven Mitts and Safety Regulation".

17. See  "For Your Own Good", "Business Licensing and Regulation", "Inspections, Regulations and Bans", "Why "Hope for the Best, Plan for the Worst" is Bad Policy", "GMO Revisited - As Well as Hormones, Soy, Phytoestrogens, and a Host of Other Food Scares", "Gun Control, The FDA and Regulating the Law Abiding", ""Better Safe Than Sorry" Usually Leaves Us Even More Sorry, And Much Less Safe", "The Problems With "Safe and Effective""and "The Problem With Regulation".

18. See "A Timeline Part One", "A Timeline Part Two", "A Timeline Part Three", "Mistaken Perceptions of the Industrial Age", "Child Labor and the Industrial Revolution", "A Passing Thought", "Rethinking the Scopes Trial".

19. See "Killing the Railroads". On patronage in general see "Patronage", "Patronage Versus Choice", "The Road to Violence","My Censorship Is Your Discretion", "The Other 99%", "Subsidies and Censorship", "The Secret of Success, or, Why Government Fails", "A Question for Artists of the Left", "Power and Disorder", "Chaotic Government", "Government Funding and the Creation of Strife", "Missionary Zeal and Human Discord", "How the Government Corrupts Relationships" and "The War of All Against All".

20. A few states even helped such "wild cat" banks by passing laws making redemption by out of state note holders more difficult. But that is another issue.

21. See "Doing Something", ""Doing Something" Revisited", "Doing Something Revisited, Again", "With Good Intentions", "In The Most Favorable Light", "Grow or Die, The Inevitable Expansion of Everything", "The Right People, The Wrong People and "Just Plain Folks"", "Madmen, Tyrants and Big Government", "What We Deserve", "The Written Law" , "Don't Blame the Politicians", "The Single Greatest Weakness", "The Difficulty of Principle", "Damn the Torpedoes!", "The Problem of Professional Politicians, or, The Impossibility of a True 'Ousider' Candidate".

22. OK, perhaps a bad example, as arguably this could be fraud which is a legitimate government interest. My point is, even the most trivial issue, say "false advertising" or worries that billboards make children buy too many sugary foods, bring about calls for massive government response, and that is pretty much unprecedented in our history. In most of history in general, for that matter.

23. Before anyone mention 1929 and its sequels in recent times, those are neither the fault of the market or regulation. Most modern stock market crashes are the outcome of excessive banking regulation and government inflationary policies. A few were exacerbated by other policies, such as the government fondness for encouraging subprime lending, but by and large they are monetary, not regulatory, phenomena.

24. The topic of liability and torts is too elaborate to discuss here and deserves a post all its own.

25. Strangely, this is coming full circle, as eco-types complain about us throwing away "perfectly good food", and advocate for selling wilted and bruised and somewhat off foodstuffs to "save the planet". In short, what would once have landed you in jail, or at least made consumers suspect your produce is now being lauded as socially responsible. Odd how things come back sometimes.

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POSTSCRIPT

I found a quote in an earlier essay ("Competition") which seems quite fitting for this essay:
The free market does not automatically produce the best outcome, what it does, and does well, is ruthlessly remove failed attempts, while inspiring countless more. It is not so much the invisible hand pushing us in the right direction, it is the lure of wealth driving a slew of new attempts to get rich coupled with the "invisible scythe" brutally removing all those that fail. Those few survivors are what push us toward improved efficiency.
It does quite effectively describe what is best about the free market, as well as pointing out how many who praise the free market overlook its most important -- if most ruthless -- element, the willingness to allow firms to fail.


Sunday, March 13, 2016

Theories of Management

I have often griped privately about various theories of management, especially such excessive models as the CMM (especially popular among government contractors), but I have not written much about them as they seem to have little political application. However, one aspect of this topic recently struck me as rather characteristic of our age, and so I decided to have a brief say.

Now, there is lots to complain about in these theories, especially those related to software development. For example, the obsession with making things predictable and repeatable. This sounds fine, and, if you are doing something routine, it may even be worthwhile. But often this theory is applied to creative work, development of entirely novel products, and in that case it seems misguided. Is it really important to do "the same thing the same way" when you are treading novel ground? How? When doing something new, it seems you want to do something different, not routine, and thus these models seem more of a hindrance than benefit.

Another issue is the tremendous amount of excess effort expended on management. Under the CCM, for example, a small shop would probably spend three or four times as many hours in meetings as actually working. Which is probably why it is most popular among bloated, overstaffed government departments and government contractors.

But the one things that truly strikes me as important in understanding these theories, and their shortcomings, is the claim I often heard that they were trying to eliminate "reliance on heroic efforts, or heroic employees." In other words, they were under the illusion a job could be divorced from the quality of the worker. And, int he end, that is a delusional position. It may be a bad idea to rely upon the efforts of one super-efficient person, but then again, if you have one, why not use him tot he fullest? But, beyond that, there is simply no system that can make a bad employee good. It may be possible to make good employees, bad -- I argue many of these systems encourage just that -- but no system can eliminate the need for quality employees, or make a task independent of the skill of the workers.

And that is why I say these theories are in some way characteristic of our era. It is bizarre for an age which revels in "individual expression", but our era does so love to denigrate individual skill. I discussed this before in "The Era of the Cocky Know It All" and "The Tragedy of the Creative Commons", but for all our encouragement of individuals to feel self-important we simultaneously believe no one is real worth more than anyone else. And these theories seem to rest on that same idea. Add to that their absurdly positivist idea that with enough system you can ignore individual ability and make regular and predictable even creative work, even the development of novel products, and you end up with the ludicrous embodiment of all our era's shortcomings.

Tuesday, March 8, 2016

Against the Neo-Luddites and Anti-Automation Rhetoric

A few months ago, I ran into an essay on LinkedIn about how automation is going to destroy the job market. Of course, this is nothing new, along with claims that foreign trade is going to impoverish us, that China is going to buy us out (an update of the 1980s fear Japan would do the same), and that increased worldwide consumption of oil will destroy the economy, it is one of the more popular economic doomsday myths. In this case, however, I was happily surprised to find a fellow skeptic, and so wrote the following in support of his argument:
I have to agree with you. After all, in a way this is nothing but an update of Luddite nonsense. "The water driven mills will starve the workers!" yet the industrial revolution brought riches, not poverty. Then electrical automation would drive away all jobs, then computers, now robots. It seems every innovation is going to destroy the need for labor and yet, we never seem to see this in reality. Perhaps it is time to take such doom-saying Cassandras with a tremendous grain of salt.
Of course, nothing terribly surprising in my response either. I have been saying the same thing here since 2007. But, having read this again a few days ago, I realized how many people believe this claim (and some related nonsense, such as the fear of outsourcing), and decided it may be worth my time to write a short essay debunking this claim.

I suppose the first point to make is the one on which I based my comment, that this same fear seems to have been repeated since at least the introduction of water driven machinery, if not earlier, and has never once proven correct. Time after time, the claim was made some new labor saving device would eliminate the need for workers and leave the proletariat dying in the streets, and yet time after time, the world continued with everyone working away just as before1. Despite endless fears about machinery taking the place of workers, somehow those workers always found a new job, or someone found a new job for which they needed workers. And, either way, the economy continued without any sudden mass unemployment.

An interesting parallel can be found in labor saving devices marketed to housewives from the turn of the century onward. Each would give her endless free time. From mechanical wringers, to iceboxes, to clothes washers and drier, to garbage disposals and so on, each was said to free time for her to spend on herself. Yet, oddly, housewives in the early sixties had little more free time than housewives in the teens, as they or their husbands and children, found new demands to take up all that free time.

And that is what happened with automation. Workers who were no longer needed to work as fullers (one of the first use besides grinding grain to which industrial water drive mills were put) were employed in some other capacity, as cutters of cloth, or tailors, or in some other industry entirely, maybe transporting or selling goods, or mining, whatever could be imagined.

The simple fact is, there are unlimited human wants2, and there are even more ways in which each of those wants could possibly be filled, but there is a limit to the amount of labor. And that limit defines the extent of our economy. Some would argue limited natural resources are also a factor, but that is not quite accurate. Almost anything has substitutes, or has an alternate process for producing it that uses other resources. What prevents us from using those approaches is (1) that a cheaper alternative exists and (2) the required labor is costly enough to make it unprofitable. Thus, even scarce resources are only scarce because of labor. Labor is the sole limiting factor on production.

Given that, we allocate labor3 to those functions where it provides the greatest returns. But, if one of those functions suddenly required half the labor it once did, that would not mean unemployed workers, but, instead, that another, somewhat less profitable function could now be fulfilled.

Let us look at this in a slightly different way. Suppose you are on a deserted island, and each day you can work only so many hours. You gather food, gather water, make clothing, build or repair shelter, make tools and so on. Now, suppose, one day, a box of tools falls out of the sky. Would you lament that you lost the chance to make them yourself? Of course not! Would you sit idle for the hour or two you normally used to make tools? No! You would take the extra time you had and do something you previously lacked the time to do. In other words, you would become more wealthy, not less. And that is the same with automation. When labor is freed from one task, someone else finds a use for it, and overall wealth is increased.

For example, the transition from hauling things on our backs, to using carts freed up labor, as one man can drive a cart hauling the load it took a dozen men on foot. Similarly, a train can haul many carts of goods using only a fraction of the manpower carts would require. So, when we went from manual hauling to carts, and from carts to trains, did we impoverish ourselves? Did humanity suddenly find a fraction of its population with nothing to do? No! Those men found other work, and added to the net wealth of the world.

But some would argue that current automation, with robotics and similar technologies is different, and will produce different outcomes.

It would be laughable if so many did not take it seriously. Just use your senses. When we went from the largely man and animal driven economy of the year 1000,  to the early wind and water driven machines of the 13th through 16th centuries, to the coal and steam driven machines of the 18th and nineteenth centuries, and then the petroleum and electric and nuclear powered economy of today, did we become poorer? Or did we increase the population of the earth many times over, while simultaneously giving to even the poorest of developed nations things kings of the past would envy? If that is true, then why would suddenly one type of machine break with this pattern? Why would robotics be different than internal combustion engines or steam engines or water wheels?

Before someone puts forth some silly strawman argument, let me say, yes, there will be individual problems. Some people will find a transition to a new job difficult. But, then again, that is true with all economic changes. When a corner grocery closes, some workers have trouble finding jobs for a time, does that mean we should never close a store? In the past, buggy makers probably lamented the coming of the auto, as did blacksmiths an horse breeders and whip makers and wheelwrights and so on. Yet they adjusted. A few may have suffered for a time. But, does that mean we should never have allowed the change to happen? Would it be better to freeze the economy in the present state so that no one ever suffers a hardship? Even if we could freeze technology, I doubt it would work to prevent hardships, as bankruptcies and buyouts and expansions and changes in fashions would still take place, and some would lose jobs while others gained them. Life is dynamic, unless you mandate an absolutely lack of change, hardships for some are unavoidable4.

Nor is this only an argument against the neo-Luddites who would argue against new technology. The same is true also of job "loss" to overseas firms. If a product is made elsewhere, it is because it is cheaper to produce there. But that does not mean suddenly there will be  a mass of unemployed workers. Instead, it means consumers have more money left over, and there are free workers to produce other things. In short, it means the economy will expand, not collapse. If a product can be made cheaper, whether overseas or at home, that is a net gain, not a loss. And it is silly to think it is not longer so simply because it involves the goods crossing a border5.

Of course, all of this depends upon a free economy to work precisely as described, but even with a somewhat regulated economy, things will still come out much closer to these results than to the worries of the Luddites. It would take a very extensive and rigid regulatory economy for automation to produce lasting unemployment, and we are nowhere near that. And, in any case, if our economy were that highly regulated, then unemployment would be the least of our worries.

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1. It was not until the government granted pseudo-political powers to unions, instituted welfare and unemployment insurance schemes, mandated minimum wage, undermined the banking system with unconvertible currency and engaged in chronic inflation that there emerged the phenomenon of people who neither worked nor were supported by their families. This was unknown throughout most of history, and really only arises in the mid to late 19th century and onward. Obviously, as industrialization had started much earlier, and there is no correlation between this unemployment and the degree of automation, this is not a phenomenon of industrial development, but rather a consequence of government economic and social policies.

2. This is literally true, as not only are there all conceivable wants that exist today, but there are wants of which we are not aware. Fifty years ago, no one wanted a cell phone or computer. A century before that no one wanted a car. As new products and services arise, new wants are created. Thus, the total possible wants is truly unlimited.

3. When I say this, I mean the market, through competitive bidding for labor, does the allocation. It is simply easier to use this shorthand rather than spell it out with more precision.

4. But change is not only about hardships. Without change, there would also be no improvement, and many who could benefit from a change would never receive that benefit. Of course, that is an invisible loss, while the store owner driven out of his shop is visible, so the Luddite position often gains more sympathy, even if the potential harm from never changing is far greater and harms far more people. (If you doubt this, ask what would have happened had we banned pacemakers, or pharmaceuticals in the name of stopping the negative consequences of change.)

5. Some will argue against foreign countries subsidizing their goods, but in truth, that amounts to little more than transferring domestic tax monies to foreign consumers, which seems to benefit those consumers, not the country giving the subsidy. So long as the market is free to enter, subsidies cannot create a lasting monopoly, and so end up being self destructive and nothing else. (Just look at Japan after the 1980s, it certainly makes one question why we worried about their subsidized economy.)