Author Archive for William Anderson

Damon Linker’s “terrible, horrible, no good, very bad idea”

Damon Linker, the writer who believes that the State is the Measure of All Things Great, has declared that the concept of what F.A. Hayek called the “spontaneous order,” is a “terrible, horrible, no good, very bad idea.” This is how Linker describes the concept:

Simply stated, the idea holds that when groups of individuals are left alone, without government oversight or regulation, they will spontaneously form a social and economic order that is superior in organization, efficiency, and the conveyance of information than an order arranged from the top down through centralized planning.

This view, declares Linker, is ” utter fiction. A fairy tale.”

So, what is the proof that Hayek and others were wrong?

President Obama got a lot of flack during his 2012 campaign for re-election for saying that wealthy business owners “didn’t build that” all by themselves, but his point was indisputable. The president mentioned the internet, roads and bridges, firefighting, and other public works that make it possible for the market economy to function and thrive. He could have said far more. How about the culture of general law-abidingness that we call the rule of law? The Federal Reserve’s regulation of the money supply? An independent judiciary for the settlement of civil disputes? Law enforcement at local, state, and federal levels that fights violent crime, fraud, corruption, monopolistic business practices, and a host of other behaviors that would otherwise scuttle the working of markets? And on and on and on.

Please understand that Linker does not elaborate on any of these points, just that he accepts his statements as pure and unvarnished truth and that they are self-evident. The only problem is that none of what he says is self-evident, and there is plenty of proof on the other side to show that these things he cites as being the true creator of social order are not what they say they are.

North Korea has all of the things Linker claims are the real source of prosperity, yet the country is dirt poor. For that matter, we can look at Venezuela, where the social order is falling apart. On the home front, I bet the citizens of Ferguson, Missouri, do not see the police as holding a society together, and anyone who has been involved in the American court systems on local and federal levels can attest to a corrupt and unjust system.


North Korea: A well-ordered society?

And the Fed being a source of stability? When the Fed has touched off speculative bubbles and has steered the U.S. economy into numerous boom-and-bust cycles? Or that the government “protects” markets? How does government do that? Instead, it promotes Crony Capitalism which undermines the free market system and steers resources away from higher-valued uses toward uses that promote the interests of the political classes.

Unfortunately, Linker does not stop with giving bad examples of government as the Source of Prosperity and Freedom. He then presents some examples of what supposedly were “spontaneous orders,” those being Iraq and Libya.

But there is one situation where it’s possible to see genuine spontaneity in action: when an established political order is overthrown. Now it just so happens that within the past decade or so the United States has, in effect, run two experiments — one in Iraq, the other in Libya — to test whether the theory of spontaneous order works out as the libertarian tradition would predict.

In both cases, spontaneity brought the opposite of order. It produced anarchy and civil war, mass death and human suffering.

How does one begin here? In both cases, the governments of these countries were overthrown by U.S. armed forces or groups supported and funded by the U.S. Government. Furthermore, after using violent means to kill indiscriminately, destroy property, and sever links of established communication and trade between individuals, no libertarian or anyone else with even a cursory knowledge of political economy, would not expect a happy, prosperous order to emerge from a vicious military invasion and subsequent occupation.

By claiming that the destruction of Iraq and Libya actually were done in the name of a Hayekian “spontaneous order,” Linker demonstrates his own ignorance of Hayek and of political economy in general. And by insisting that state control (the more the better, I suppose) is the real source of freedom and prosperity, then how does he explain North Korea? And should he and his statist followers claim that North Korea is irrelevant to the discussion, then I think we can add that Iraq and Libya would fall into that irrelevant category, too.

Government Greedheads

3446025121_072700607f_zProgressives — who religiously believe in the holiness and sanctity of the State — are forever lecturing the rest of us about capitalist “greed.” The capitalists, they tell us, have no compassion and no decency; they are interested only in money and will walk over anyone to get it.

This recent story from Beaver, Pennsylvania, tells us about a different kind of greedhead: the government agent. A widow had her house sold from under her in a tax sale for…$6.30 in unpaid interest for overdue property taxes. That’s right; the government had a widow unceremoniously booted from her house for a sum of money that would not even provide breakfast for a typical bureaucrat.

The government, of course, is blameless, or so its enforcers tell us. The woman was NOTIFIED BY MAIL. That means the government sent a letter to her, and that is all the government needs to steal the home of someone else: a letter. The Associated Press states:

BEAVER, Pa. — A widow was given ample notice before her $280,000 house was sold at a tax auction three years ago over $6.30 in unpaid interest, a Pennsylvania judge has ruled.

The article continues:

Beaver County Common Pleas Judge Gus Kwidis wrote that the county tax claim bureau complied with notification requirements in state law before the auction. She had previously owed other taxes, but at the time of the sale she owed just $235, including other interest and fees.

“There is no doubt that (she) had actual receipt of the notification of the tax upset sale on July 7, 2011, and Aug. 16, 2011,” the judge wrote. “

Let us put this into perspective. The woman’s late husband apparently handled all the financial affairs for the family and the widow was not very good at doing the government’s voluminous paperwork. Yes, one can argue that the woman was notified and that the law was followed to the letter, but maybe we should ask ourselves if the government should have the power to seize private property for trifling sums. Or maybe any sums.

My sense is that had this woman had political connections, none of this would have happened, even accounting for the $6.30. We finally have achieved what the Progressives always have wanted: a state of things in which political connections and political viability decide how everyone else should live. Long live Progressivism!!

Rifkin’s Folly

Jeremy Rifkin

Jeremy Rifkin

Jeremy Rifkin long has perfected the art of adding two and two and getting five. In the 1980s, he claimed that the Law of Entropy made it impossible to a free economy to exist, which meant that the State needed to plan and run things. (How the State would triumph over the Second Law of Thermodynamics is anyone’s guess, but Rifkin doesn’t need facts or even science, just wild conjecture.) He later declared that a new “hydrogen economy” was just around the corner – government just needed to engage in central planning and order hydrogen to be our new fuel of choice.

However, in an op-ed article in the New York Times, Rifkin does the impossible: he outdoes himself. Rifkin wants us to believe that the Law of Scarcity essentially has been repealed, and that the conditions this situation creates are unsettling. He writes:

We are beginning to witness a paradox at the heart of capitalism, one that has propelled it to greatness but is now threatening its future: The inherent dynamism of competitive markets is bringing costs so far down that many goods and services are becoming nearly free, abundant, and no longer subject to market forces. While economists have always welcomed a reduction in marginal cost, they never anticipated the possibility of a technological revolution that might bring those costs to near zero.

Understand something at the very beginning: to say that something is “no longer subject to market forces” is to say that the good in question is non-scarce, or free. That means that every (or nearly every) factor used in producing that good also is non-scarce, and that the full costs to the consumers using such goods also are zero. All I can say is that this contention is an absurdity.

It is true that the advent of low marginal costs has forced new ways of retailing, but economic progress always has done that. For example, a generation ago, Wal-Mart was able to seize huge chunks of market share because the company had developed a distribution and retail strategy that made is a much lower-cost producer than were the other retailers, including Sears, J.C. Penny, and K-Mart. That does not mean markets have disappeared or are no longer relevant; likewise, Wal-Mart now finds itself under pressure from other retailers as well as the Internet. Markets still prevail, but in different forms.

Before going further, I would say (gratuitously, of course) that this is the sort of idiocy and economic illiteracy that one expects from the Progressives that populate the NYT editorial page. This is the editorial page that has given us Paul Krugman and a gaggle of other economic illiterates, so we should not be surprised that Jeremy Rifkin equates low marginal costs of production with the end of Opportunity Cost.

While I realize that readers do recognize that Rifkin lacks economic literacy, nonetheless I am sure his article is a great conversation piece with the Progressive Set which truly seems to believe that every aspects of individual life can be organized and carried out through administrative bureaucracies. While Rifkin does not go so far as to endorse pure socialism, he is under the delusion that because (in his view) low marginal costs of production will mean very low profits, and “non-profit” sector can step in and provide goods because, well, non-profits don’t have to make a profit.

Some Austrian Economic Theory is in order here. Rifkin is making the same error made by the 19th Century British economists like David Ricardo and John Stuart Mill, who believed that in the long run, the value of a good came from its costs of production. No, the value of the factors, as Carl Menger pointed out in 1871, comes from the value of the final product, and the value of that product ultimately will come from the profitability that good brings to the entrepreneurs who created it.

In Rifkin’s mind, zero or near-zero marginal costs mean zero or near-zero costs of production, which would mean that goods are being made nearly for free. That is not exactly true. Marginal costs are costs per the next unit, which means that each new unit of a particular good is very cheap to make, which also says something about the volume of goods being created. (In Rivkin’s defense, he does mention the presence of high fixed costs that are necessary to bring about the production process in the first place, but then he fails to understand the implications of what he is saying.)

Low marginal costs do not mean goods are free. Indeed, profitability of the firms making these goods depends upon the volume created and sold, and it also means that these firms are making huge capital investments (which hardly are free) in order to produce at high volume levels. The labor used in this process, too, is scarce and not free, and so on.

Yes, the retail mechanism for many of these new goods has changed drastically. For example, the VHS tape gave way to the DVD, and both were retailed through firms like Blockbuster. However, Blockbuster’s business plan then gave way to that of Netflix and so on. The key to success was profitability and Netflix was able to arrange its business plan to be profitable (at least for a while).

Interestingly, Rifkin gives an example of crony capitalism as proof of the new zero-cost world. He writes:

Although the fixed costs of solar and wind technology are somewhat pricey, the cost of capturing each unit of energy beyond that is low. This phenomenon has even penetrated the manufacturing sector. Thousands of hobbyists are already making their own products using 3-D printers, open-source software and recycled plastic as feedstock, at near zero marginal cost.

While it is true that the marginal costs of producing electricity via windmills are very low, nonetheless these wind farm monstrosities can be profitable only if each kilowatt of electricity produced is priced substantially higher than electricity produced via conventional means such as through burning of coal, oil, or natural gas. That is why wind farms essentially are tax credit farms; in order to stay in operation, these farms must receive massive government favors not available to other electricity producers. To put it another way, wind power might be “zero marginal cost” but it is still is high-cost electricity, which means that if the government continues to force consumers to purchase this high-priced power, they will be poorer, not wealthier. Likewise, someone must manufacture the 3-D printers and also produce the materials people use to make the copies, and that means investment, planning, and, yes, the use of scarce factors of production. These things do not just appear from nowhere.

Rifkin leaves out another important cog of the entire production mechanism: the entrepreneur. Indeed, it seems that he believes the entrepreneur can be replaced by non-profit corporations and the “sharing community.” This is someone who believes that production just happens on its own, and the institutional arrangements really don’t matter. But they do matter, and they matter greatly. Modern production methods, as magnificent as they are, do not eliminate the Law of Scarcity no matter what the NYT might tell us on its editorial page.

The Austrians as Trotsky or Goldstein

lossy-page1-457px-SABOTAGE_CAN_OUTWEIGH_PRODUCTION_-_NARA_-_515321.tifLets hear it for the Austrian School. Yes, after much soul searching and research the Washington Post’s resident Marxist E.J. Dionne has discovered why things are not getting done in Washington the way he would like. Yes, it is the Austrian School of Economics. Yes, we Austrians are wrecking the country and keeping economic recovery from occurring because we tend to be skeptical about unleashing the power of the state.

Like Stalin, who declared that every failure of the U.S.S.R. (and the failures were legion) was due to sabotage by Leon Trotsky, or Big Brother, who claimed that Emmanuel Goldstein was the lurking saboteur of Oceania, Dionne wants us to imagine that F.A. Hayek and Ludwig von Mises are behind Barack Obama’s failure to restore prosperity and full employment. Yes, if Hayek had not written The Road to Serfdom and had Mises not written Human Action, our economy would be humming.

While I realize Dionne’s column was written a month ago, it still is relevant in that it demonstrates the utter intellectual bankruptcy of the Statist Classes that now rule this country. The Austrian, you see, somehow control the entire economic apparatus, or at least are influencing so many people that the government is unable to “fix” the economy. Despite the fact that only a few people in Congress actually have read anything in Austrian Economics, and despite the fact that no Austrians are employed in key positions in Congress and at the Federal Reserve, somehow the ghosts of Hayek and Mises overshadow all of Washington.

To quote George Leef, “If only it were so.”

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Yes, Paul Krugman is an Underconsumptionist

SOne way to make a Keynesian bristle is to tell him that Keynesian theory at its core is little more than the discredited belief of “underconsumption.” Now, the standard “underconsumption” theory is built upon the premise that unless an economy can “buy back” the products that are created, the economy will drift into crisis as inventories pile up, layoffs occur, and the economy implodes into a perverse equilibrium — and stays there unless government intervenes to save the economy.

The problem, according to “underconsumptionists” is that people save too much (called “hoarding”) and that they are unwilling or unable to spend enough to purchase goods at prices that will permit the owners of factors of production to be paid their opportunity costs. Thus, the imbalance begins and then metastasizes unless government steps in with more spending and/or easy money.

For all of the supposed sophistication of the Keynesian theory, at heart it is nothing more than “underconsumption.” Certainly the so-called Keynesian cures for depressions are right in line with “underconsumption” theory even if they have sophisticated names like Monetary Policy or Fiscal Policy.

Enter Paul Krugman. Although he has said before that he does not subscribe to “underconsumption” theories, nonetheless his prescription for more economic growth — that government impose much steeper graduated tax rates than currently exist in the USA — fits exactly into the “underconsumption” mold. Furthermore, he argues that “equality of outcomes” is superior, economically speaking, than “equality of opportunity,” writing:

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The New York Times and the ‘Stimulus’: Keynesian Anti-Logic

5826333455_688152b3ef_bAmerican political culture always seems to be “celebrating” the anniversary of something, be it JFK’s assassination (we just passed the 50th anniversary of that sad event) or the signing of some (mostly bad) legislation. The latest political activity to be enshrined with an anniversary is the so-called Stimulus, the $800 billion monstrosity passed five years ago ostensibly to “put America back to work.”

Not surprisingly, the New York Times has editorialized that any criticism of the spending bill — at least any criticism which says “too much” was spent — is a Republican “myth and falsehood.” Not only was the “Stimulus” a legitimate piece of legislation, sniffed the NYT, but it also:

…prevented a second recession that could have turned into a depression. It created or saved an average of 1.6 million jobs a year for four years. (There are the jobs, Mr. Boehner.) It raised the nation’s economic output by 2 to 3 percent from 2009 to 2011. It prevented a significant increase in poverty — without it, 5.3 million additional people would have become poor in 2010.

Like all examples of the Broken Window Fallacy, the spirited defense of this spending bill is based upon “accounting” methods that count the people hired through “Stimulus” spending as “new jobs” but fail to note how others might have lost their own means of employment. Now, this was a bill that, among other things, had workers rolling sod into the grass median of I-68 (which is near my home) in an area where runoff from tons of salt thrown onto roads by state highway crews (our area receives a lot of snowfall). Not surprisingly, within a year, all of the new grass was dead.

I liken the “Stimulus” to throwing a bit of lighter fluid onto a pile of soaking wet wood. The flames pop up for a few seconds, but then disappear as the effects from the fluid go away. (No, repeated douses of “Stimulus” fluid do not ultimately gain traction and then lead to a miraculous economic recovery.)

If Beltway political culture permits any criticism of the Holy Stimulus, it is this: “The Stimulus wasn’t big enough.” Intones the NYT: “The stimulus could have done more good had it been bigger and more carefully constructed.”

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The TSA Is a Fraud? We’re Shocked, SHOCKED!

So the TSA finally has been officially outed by one of its former employees. Yes, the agency is a joke, and everyone working there knows it. The TSA has not prevented any terrorist attacks, nor are TSA agents “on the front lines of fighting terrorism” no matter what rhetoric we hear from Washington and members of Congress, as well as from the sycophants working for President Obama.

No, Rape-a-Scan was little more than a radiation-spewing device aimed at making the public believe that the TSA was Johnny-on-the-Spot when everyone from the executives at the company (officially called Rapiscan, but we know better than to dignify this outfit) to the TSA drone who was stuffing his hand into someone’s crotch in the name of “national security.”

To put it another way, the TSA has been little more than a government PR scam and it is hilarious to watch the same “Progressive” people who mock business advertising as “propaganda” line up to defend this idiotic agency. As I wrote shortly after 9/11, the government’s show of force (and the TSA is exactly that) actually makes us less safe. I also wrote the following about a year later:

In this new atmosphere, one can expect a number of things. First, searches will be slower and more cumbersome, since the fewer people who actually get through, the lower the probability that a plane can be hijacked. Empty seats on flights will not matter to federal employees whose paychecks will come courtesy of the taxpayers.

Second, it is quite likely that screeners and other government security personnel will be more rude toward passengers than they are at present. While some of us have suffered through some brutal searches, I fear the worst is to come. Again, airline employees, while they can be disagreeable, do have at least some incentive to treat their customers with some decency. Federal employees will have none.

When my family and I went through security lines, there was some grumbling, although I could tell that many of the screeners at least were trying to be as fair and helpful as possible, given the difficult situation all of us found ourselves. However, I suspect that when the government takes over all security, anyone who makes even the slightest complaint quickly will be banned from their flight. Look for airport workers to become more surly and less helpful, as their government status will give them power to harass people.

No doubt, we can look forward to congressional hearings when airline passengers will tell of airport horror stories perpetrated by federal security workers. Sympathetic members of congress will listen attentively, just as they listened when citizens told of being harassed by Internal Revenue Service agents. Those same members will excoriate whoever is head of the security agency, just as they did the IRS administration, then give the agency even more power to harass people.

I think it is safe to say that the TSA has met all of my expectations, and then some.