Towards Liberty

Over the last year I’ve become more and more persuaded by the likes of Nietzsche, Foucault, and the Post-Modernists that there is no ultimate truth. All presuppositions are fallible and subject to doubt. This affected my zeal for politics, and left me without a strong anchor for my political inclinations. My time adrift, though, is over.

No free society can be achieved because those who desire power will slowly undermine the logical presuppositions that liberty rests upon. Of course, tyranny too must rest on logical presuppositions. It is a battle of ideas and presuppositions between those who want power and those who want liberty. It is a battle that will never end, and I suspect will always ebb and flow.

In this battle, both sides are using the flawed techniques of social science and utilitarianism. Both suffer inescapably from the impossibility of calculation, and the perversion of status seeking agendas. Without spending countless hours of study and analysis, how can we resist the “science” of tyranny and thwart it with the “science” of liberty?

We don’t have to.

Then how can we help our fellow man avoid propaganda and the manipulation of self-serving reason? Without looking at the reasoning, we can merely look at the conclusions. Do the conclusions of their arguments gather more power into the hands of a small set of individuals? If so, then their argument is likely false and motivated by the “will to power”.

Recall, though, how I explained how an academic can be corrupted by secondhand status. That is, those with power reward the academic because his arguments give them power. The academic can maintain the pretense of disinterested research because he appears not to directly benefit from his conclusions. His mind has been bent to reinforce the status he has achieved. He will doggedly defend his “science”.

Am I immune to the desire for status? Not at all. I am, however, humble enough to realize that I will not be one of the select few who get to rule. My best alternative is to undermine the power lust of others. To avoid tyranny, I must pursue liberty, and not just for myself, but for everyone. The accumulation of power anywhere is a threat to me.

We must be skeptics. Our liberty depends on it.

On the Origins of Political Bias

I am not an anthropologist, but I’ve been mulling over some thoughts that came to me after watching a show on gorilla behavior. It has changed my thinking about society rather dramatically.

I have thought for a number of years that proper education and enlightenment would lead to the inevitable adoption of free market principles. If we are truly rational beings, how could society, over time, not accept what is true and beneficial. In chemistry, physics, and biology, we seem to be progressing all the time. However, I have now come to reject this concept as it applies to politics and propose that we are in never-ending oscillations between shades of freedom and tyranny.

Underlying many of our motivations, as is the case for gorillas, is the desire for status. It is not just a desire to be rich, but to be richer than our friends and neighbors. Wealth and status can be gained through virtuous means like hard work, through immoral ways such as theft and murder, but also through manipulation. The homeless man on the street is not stealing from passersby, he is merely manipulating people to give him money.

This manipulation is a constant force around us. A pretty girl will get a boy to do favors for her. A slick salesman will sell an item for far more than the going market rate. A politician will tell tear jerking stories to get votes. For those who seek power, but live in a civil society, manipulation is the most powerful tool at their disposal because violence is rarely tolerated.

At given points in time, societies around the world endeavor to pursue a new course. Much like England and it’s Magna Carta, and the U.S. with it’s Constitution, weak societies decide to try something different that improves on previous frameworks that don’t seem to be working anymore. If these new frameworks are truly better, the society will flourish and thrive. Clearly, America’s framework has worked spectacularly by growing a small group of colonies into a singular world power.

What works for societies are limits on individual power. There is no mistaking the strong correlation between free markets and high growth/high incomes around the world. Individual freedom to calculate one’s own actions leads to the best outcomes. However, this framework of individual freedom does not allow for the kind of power that certain individuals wish to wield. Manipulation is the pathway back to that power.

When one individual is able to successfully manipulate others to give them power, still others who desire power or status will adopt these techniques and employ it themselves. The manipulators, over time, must destroy the logic and tenets of the framework of individual freedom. Slowly, but surely, these manipulations begin to weave together a narrative that does reject freedom and offers some “more perfect” alternative. Successful manipulators use these narratives to get elected to office in a democracy.

Young and old, smart and dull, all start to fall sway to the romance and the Utopian possibilities promised in the narrative. A whole army of intellectuals will dutifully build a "science" around it, unknowing that they are greater victims of manipulation than the dullards they pity. The masses begin to reject old traditions and the fundamentals of individual liberty. The manipulators compete endlessly to perfect the power of the narrative and raise their status.

Finally, the day arrives when the old ways appear to fail (usually because it has been corrupted by a weaker narrative) and the new way is given a chance. It’s not that the narrative is invincible, but all that needs to happen is the appearance that it “works.” Under Mussolini, the crippling strikes by communist labor organizations ended and things “worked” much better. Under Hitler, the hyperinflation and sky-high unemployment of the Weimar Republic ended and things “worked” again. Under Hugo Chavez, oil prices soared and more than mitigated the horrible economic policies he has instituted.

The narrative that gave credence to government power does fail eventually because an oversized government is the downfall of a civilization. Communism failed. Monarchies failed. Jimmy Carter’s Statism failed. All led the pendulum to swing back to something different, and often times the manipulators got their just desserts.

Hopefully, our current leaders get stuck holding the bag when the music stops.

Toddler Economics

For years the Parent/Child relationship has been used as a metaphor for the role of government both pro and con. There is a an implicit assumption that the family is a microcosm of socialism. Even the very free market F.A. Hayek believed that we act altruistically or socialistically at the family level. This inspired me to think about my children and how I maintain order at home. I am beginning to see the virtue of running my household more like a free market.

I joined Economist Bryan Caplan’s virtual book club a few weeks ago as he analyzes Murray Rothbard’s “For a New Liberty”. I have also been influenced by my friend Brian Phillips who is an Objectivist a la Ayn Rand.

Both Rothbard and Rand believe that the path to a moral society is to establish clear property rights. I’m not certain about it being moral, but if it helps me achieve my ends, then I’ll use it.

Here are my applications to toddler economics, of which I have two:

The living areas of the house are clearly a case of “Tragedy of the Commons”. That is, no one really “owns” the space so we all abuse the space, especially my boys. Therefore, the common areas must become the property of Mom and Dad. We allow the use of these areas by our boys if they follow our rules.

To encourage them not to abuse the “common areas” we have established a rule of use for the living areas and different rules for their rooms (being their property). Possession and proximity are the rules of temporary ownership for property brought into the living areas. That is, if child A leaves a toy on the couch and is now playing in the kitchen, said toy can become the temporary property of child O on possession. Permanent ownership is still conferred on the child of original ownership. In their rooms, all toys (property) are under their complete and permanent ownership. That is, if child A leaves a toy on his own bed, child O cannot take even temporary possession without explicit permission or compensation from child A. Thus, an incentive is used to maintain toys outside of the living areas.

Another minor rule for individual rooms is the right to exclusion. Child O may prevent child A from entering his room. Child O has the right to exclude child A from taking temporary possession of any property owned by child O within child O’s room.

On the subject of noise. We are all owners of our own bodies, and thus also our ears. If Child A shouts/screams this is a violation of property rights. He has caused me pain without compensation or permission. Therefore, shouting is only allowed outside and within their rooms with the door closed. At night, shouting violates the rights of the other child who is trying to go to sleep. This again is a violation of property rights.

And finally, to running and throwing objects in the house. The objects within the living areas of the house are the possessions of Mom and Dad (mostly Mom). To subject our property to risk of destruction without permission or compensation is a violation of our property rights. Because there is an objective probability that our property may be broken, throwing balls and running in the house are forbidden.

Any other thoughts? It’s actually pretty cool how this is working out.

Silly Socialists, Capitalism Spreads the Wealth Around

It is often, and incorrectly, believed that capitalism inevitably leads to the accumulation of wealth in the grip of a handful at the great expense of the masses. Nothing could be further from the truth. It is capitalism that abuses the businessman by forcing him to share the fruits of his labor before he can enjoy them himself. The common man benefits from the talents, genius, and/or obsession of the rich capitalist. The rest of us should not envy, discourage, or hinder them, but cajole them to further abdicate leisure so that we can enjoy the benefits.

Let me explain how this is so…

Imagine an island with three inhabitants. Abram lives on the east coast and produces ice cream. He is industrious and driven to expand his wealth and production. Bob lives in the heart of the island, raises cattle, and produces steaks. Bob likes to play cowboy and has little interest in expanding production. Craig lives on the west coast as a vegetarian. He produces tofu burgers, and he too has little desire to expand output, and would rather do yoga.

In recent weeks, Abram produces 10 pints of ice cream every five days, but has grown to dislike the ice cream he produces. Bob produces 10 steaks and Craig produces 10 tofu burgers in the same 5 days. Abram trades with Bob 5 pints for 5 steaks. Abram trades Craig 5 pints for 5 tofu burgers. Bob likes to eat ice cream for lunch and a steak for dinner. Craig likes to eat a tofu burger for lunch and ice cream for dinner.

Now Abram wants to increase his wealth and has been focusing his thoughts on expanding production. Finally one day, the answer strikes him and he is able to increase his ice cream production to 14 pints of ice cream every five days.

Still not liking ice cream, Abram goes to Bob and asks to trade him 7 pints of ice cream for 7 steaks. Bob declines. He says, “I like having ice cream AND steak every day. So, I’ll just take my usual 5 thank you.” Abram goes to Craig and offers to trade him 7 pints of ice cream for 7 tofu burgers. Craig, too, declines. He says, “I like having ice cream AND burgers every day.”

Undaunted, Abram goes back to Bob and offers him a new deal. He says, “I will trade you 7 pints for just 6 steaks. Now you can have more food than you had before.” Bob now realizes that he can have ice cream for lunch, dinner, AND breakfast once every 5 days. Bob happily agrees to the trade. Abram makes the same offer to Craig and he accepts as well. Because Bob and Craig have a diminishing marginal utility of ice cream, Abram must lower the price of ice cream to match his new supply to the quantity demanded.

Abram now enjoys 6 steaks and 6 tofu burgers, so he is clearly better off, but it is a smaller increase in consumption than his increase in production. For Abram to increase his own consumption of the things he likes but does not produce, he must increase the consumption of his fellow islanders. Bob and Craig add nothing, but still enjoy the benefits. Capitalism, it seems, “spreads the wealth around”.

So, to all of those 70 hour week, no vacation, divorced three times, stress medication, corporate titans, I say “Keep up the good work”, my free lunch is depending on you.

Should we support Secession?

Always. Given two conditions.

Why is secession good? Because small states (governments) must trade and compete leading to more laissez faire governments.

A large state can harbor the belief that it is self-sufficient. By having an abundance of land, the random distribution of natural resources should dictate that it has large enough sources to sustain itself. A small state, is unlikely to be so fortunate. There are few places in the world with ample supplies of farm land, forests, iron, oil, and water all within a few thousand square miles. This puts pressure on that state to trade with other countries.

On a basic subsistence level, a large state is an unlikely victim of regional droughts or other natural calamities. Broad swaths of land allow it to hedge bad weather or pestilence with other areas not affected. A small state can easily fall to this sort of misfortune. If a small state does not trade, it faces great risks to its people. This again, puts pressure to trade.

As a state increases in wealth, the benefits of trade to a small country become ever more apparent as the gains from specialization are too great to ignore. In order to reap the full benefits of trade a society must drop tariffs and industrial subsidies. Protectionism, on the scale desired by some large countries, seems delusional for a small country.

Opening trade also exposes countries to the pressures of competition. If corporate taxes in your neighboring country are lower, you will lose business to them. If your regulatory environment is less complex, you will gain businesses. This will put pressure on these countries to seek lower taxes and less regulation.

Small nations lead to more competition that pressure governments to be smaller (as a percentage of the economy) and more business friendly. This is pressure, not certainty. Because I believe less government leads to more prosperity, more countries will be forced to compete regionally and internationally by shedding the economic and moral ill effects of socialism and protectionism.

The two caveats I mentioned for recognition are these:

1) The secession has to be by popular vote. I would not support some gangster creating a fiefdom by force.

2) The citizens have to be allowed to emigrate out of the state. Other countries may not allow them to immigrate, but that’s not the fault of their nation of origin. I would not support some cult or other totalitarian regime forming and trapping an unwilling minority.

Note - Because I have mentioned Somaliland before, I figured I would add that I now fully support Somaliland's international recognition. By all accounts that I can find, they now meet both of these conditions. I know that they have had democratic elections, but I'm not certain as to their emigration policies. Since my last blog post about Somaliland was linked by several Somaliland groups perhaps one of them can leave a comment about their country's emigration rules.

Democrats, and the Problem with Act Utilitarianism

Utilitarianism is probably the most commonly used moral philosophy in modern Western Society, but so often people will exclusively use the form of “Act” utilitarianism as opposed to “Rule” utilitarianism. Jeremy Bentham, the originator of utilitarianism, defines it in brief with his phrase, "the greatest happiness of the greatest number". When you hear a leftist implore this phrase, they are falling prey to the weakness of Act utilitarianism and embrace an ad hoc approach to running our country.

Wikipedia does a good job of explaining the difference between “Act” and “Rule” Utilitarianism.

“Act utilitarianism states that, when faced with a choice, we must first consider the likely consequences of potential actions and, from that, choose to do what we believe will generate most pleasure. The rule utilitarian, on the other hand, begins by looking at potential rules of action. To determine whether a rule should be followed, he looks at what would happen if it were constantly followed.”

I do not believe in the morality of utilitarianism, but it does accurately describe how people behave. I hold it as a matter observed fact that when presented with a choice, humans will try to calculate their self-interest (Act Utilitarianism) and/or rely on a pre-established rule (Rule Utilitarianism). Much of modern economics is based on this premise.

In our personal lives we run into situations where we must make, what many would call, a moral decision. Say, you have not started on a project that your boss is expecting you to finish and he/she has come by to ask about your progress. Should you lie or should you admit your progress and assure him/her that it will be finished on time?

The Act utilitarian would mull whether he thought he could get away with the lie. Because of our limited faculties, this is a difficult calculation. Might the boss immediately ask, “Can I see what you have so far?”, or will he naively believe you. We possess an arrogance that we can calculate these events with high accuracy. This is why policemen have an enormous advantage when questioning a suspect. They have the resources to check all the available facts, yet the suspect must rely on his memory to formulate an alibi without contradiction to reality.

The Rule utilitarian would have decided beforehand whether he would lie. Perhaps he would decide never to lie to anyone. By choosing this, he is knowingly giving up the opportunity to gain from lying, but assuring that he will not suffer the consequences of being caught. In making this choice, the rule utilitarian can rely on a broad history of his own experiences and the experiences of others. He is using a large amount of information, whereas the Act utilitarian is using a very limited information set.

Libertarians are labeled ideologues because we quickly reject ideas when we hear that which does not fit the rules that we have developed around our understanding of how the world works. This belittlement is akin to the thinking of teenagers and college students who chafe at parental suggestions of appropriate behavior. They arrogantly believe that they can enjoy the fruits of licentious behavior and avoid the fateful consequences. If the calculation of Act Utilitarianism is so difficult for an individual, how could one reasonably believe that the calculation of coercion over millions of individuals in aggregate would be anything but impossible?

Unfortunately, our leaders are drunk with this conceit. The tendency now is to eschew principles and toss aside careful deliberation, as the new President said at his inauguration, “the state of the economy calls for action, bold and swift.” Hundred billion dollar “fixes” come across the newswires every few days. Warnings of graft, unintended side effects, and futility are mocked as fears born of “worn-out dogmas.” The calculations one needs to perform Act utilitarianism through government planning number in the trillions of trillions, but haste cannot afford to be troubled with reality. We charge forth into battle, assured that mere courage will overcome the entrenched and daunting reality.

Wherefore Art Thou Liberty?

Over a number of months I have been mulling how liberty can be advanced. I believe that I have finally started to make headway, so I thought I would share some of my ideas.

A few pressures exist on any society or nation that adopts a framework (like the United States has a Constitution) that provides for liberty. The political leanings of a society change over time as new ideas and new people, slowly change the original viewpoints. A free and successful society can flourish while striving upwards, but faces less pressure to maintain freedom’s zeal once at that inevitable zenith. Societies change because people change and their ideas change. No framework can prevent digression forever.

The first 120 years or so of American history revealed us capable of maintaining a great amount of liberty, but as the ideas of socialism and progressivism began to infect our thinking, the classical answers were losing their emotional punch. The progressive politics in the late 1890’s and early 1900’s began to spread and individual liberty began to decline. The Income Tax was made permanent, conscription grew, liquor was banned, and slowly, but surely, the government took a greater role in the economy. This role exploded under Herbert Hoover and then was cemented by Roosevelt. Today, the economic liberty that Americans once enjoyed would shock the sensibilities of those accustomed to governmental parenting, and inculcated with fairytales of apocalypse that liberty supposedly breeds.

On immigration, don’t get me wrong, I am all for it. How can I begrudge someone attracted to America’s peace and prosperity while living in grinding poverty? Many people, however, immigrate to countries with greater prosperity without fully comprehending the freedoms that lead to prosperity. I would wager a substantial sum that amongst most nationalities wanting to come to United States, few, if any, are propelled to find likeminded adherents to Hayek, Rand, or Rothbard.

Lastly, with success there is a tendency to embrace laziness and shortsightedness. California is a clear example of this. While they have had their share of economic calamities in the last 10 years they still don’t feel compelled to make the hard choices needed to avoid them in the future. There is an arrogance that wealth and popularity is endless, and government intervention in economic decision-making has no effect. Even with staggering budget deficits, horrendous unemployment, and a massive outflow of domestic emigration, they have refused to recognize the dull reality creeping in on them.

With failure, the incentives are the opposite. By the early 1980’s, Ireland’s status as a backwater was unquestioned. The impetus for change was thick in the air, and over the next 25 years they chose for themselves a staggering number of fruitful changes. The Irish sold off government owned enterprises, and slashed taxes, spending, and regulation. In barely a generation, the British hegemony was broken. With a surging economy, wealth and confidence soared, and for the first time in a thousand years Irish noses rose above those of its stodgy neighbor to the east.

The advance of freedom is mostly inevitable. A Darwinian process where individuals pursue their best interests rewards those freer societies with larger and smarter populations. I don’t think anyone can point to a time in the past where so many around the world enjoyed such freedom as now. It moves in fits and starts, and rises and falls in waves, but nonetheless, freedom is on the march, just not always where we hang out.

The academic arena is an important one and trying to defeat the ideas of would be authoritarians is noble, but not everyone can take part at that level. While new ideas almost exclusively come from the intelligentsia, they do get it wrong from time to time (think Communism, Fascism, Phrenology and Eugenics) and are often rejected by a recalcitrant public holding to tradition long enough to weather the edicts of excitable eggheads.

It is fun to best someone in a hard fought debate, but the battle of ideas should not come at the expense of failing to cultivate those most open to and in need of change. If we want to be at the front, moving liberty foward, we need to find the people and places where economic liberty stands in most glaring contrast to the failures of government. For all of us who support individual liberty, I recommend that we do a few things. Continue to sharpen our knowledge. Simplify our persuasion into short and easily understood methods. Keep our eyes and ears open for opportunities to enlighten the minds of our friends and neighbors.

Misunderstanding Self-Interest

Brad DeLong is the author of a popular economic blog called: Grasping Reality. If only his grip were a little tighter. He believes in pragmatism. That somehow the answer to economic problems is found in the middle. Surely, if Bob thinks that 1+1 = 2 and Bill thinks it's 3, that the true answer is around 2 1/2, eh? As dismissive of him as I am, he is more so in his attempt to disparage modern libertarianism.

His quote:

"...a truly self-interested butcher would not trade you his meat for your money but instead slaughter you and sell you as long pig."

This is ridiculous, but the basic premise is endemic to those who distrust free markets. They have a deep seeded distrust of other human beings.

His comment is also a fundamental misunderstanding of self-interest and human nature. It is apparently Mr. Delong’s belief that we are all psychopathic killers and cannibals, held back only by the force of law. Of course, his logic falls on its face, for if we are all psychopaths, how did law and order ever evolve? How did the human race ever come to be? How do animals survive at all without the intellect and advanced moral systems that we have?

Self-interest is more than just satiating our current desires and be damned the long-term consequences. This would imply that humans have no intellect and no capacity for reason. If I found myself on a desert island with only one companion, how would it serve me to cannibalize him? While I might be able to survive a few more days, it ignores the possibility of another arrangement: Specialization and Exchange.

Specialization and exchange allows us to use our diverse talents to maximize production. Were we both to try to survive on our own output, consumption and life spans would be lessened. Not killing him and coopearting allows the possibility of satiating more desires over a longer period. Clearly, this is the path that the vast majority of mankind, and even the animal world, has taken.

Now, reimagine Mr. Delong’s scenario as three men on an island, each having a gun. We land on the shore,Tom pulls out his gun, shoots Jim, and says, “Let’s eat!” Mr. Delong would ridiculously claim that he acted in his self interest. This ignores my incentive as the other island resident. If I acted in my own self-interest, I would immediately shoot Tom. How could I hope to survive the night if Tom has revealed his utter lack of willingness to negotiate an alternative production maximizing solution and his lack of hesitation at killing another human being? To maximize my lifespan, Tom has to go.

We all know this. If we tell a lie and are caught, we lose the trust of numerous people. If we steal and are caught, we lose the trust of even more. This is why with even minor offenses most of us keep these behaviors to a rarity, and some of us strive to never commit them. Any rational, self-interested person would kill Tom and kill Delong’s butcher, just like one would shoot a rabid dog. Revealing that one is capable of murder destroys the most fundamental form of trust in all human relationships: You don't kill me and I don't kill you.

It is even disconcerting to me that Brad Delong considers that murder could serve one’s self interest. Given that I do not consider self-defense as murder, I cannot conceive of a situation in which murder would serve my interest. If you can, I would wager that you are mistaken.

A Trillion Dollar Mistake

This is an essay I sent out to my e-mail list. Many of the thoughts have been included in previous posts here on this blog.

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In recent weeks the idea of a massive economic stimulus plan has been mentioned in the news. As the weeks have gone by, the size of this plan has grown tremendously. What started as a now paltry $160 Billion has now grown to an estimated $1 Trillion. This money is to be spent on a number of so-called investments in our nation’s infrastructure. Don’t be deceived. Remember those wild-eyed accusations of Socialism brought up during the campaign this fall? This is it.

During the Great Depression a British economist named John Maynard Keynes tried to come up with a theory to explain what had happened. Classical economics didn’t really have a good answer. Another economist named Ludwig von Mises, had discovered what I believe is the correct theory, but Keynes’ theories captured much more attention from politicians at the time. One of Keynes’ theories suggested that the government could unlock the fear and panic by having the government spend massive sums of money on numerous projects. It was believed that this new spending would “prime the pump” and get the economy rolling again. Unfortunately, this thinking has some fatal flaws.

First and foremost it ignores where the money comes from. In any economy, private investment is used to buy new machinery, build new buildings, and employ new workers. In Keynes’ economy this new government investment would do more of the same thing. So where does the government get the money? They must first borrow it from private investors. If government spending rises by $1 Trillion, the money must first be borrowed out of the pockets of people in the economy, thus private investment must drop by a similar $1 Trillion. So, instead of ABC Incorporated buying new machines, building new buildings, and employing new workers, the government is going to do this.

At first glance, one might think it’s worth the risk and for this strategy if it is just the government spending and buying the exact same amount of money as private companies. However, this is incorrect as well. Government spending is going to be less efficient and often times, simply wasted, when compared to private spending.

This truth is the fundamental failing of Socialism and Communism. An individual or company can quickly figure out society’s verdict on what they chose to invest. Did they make a profit or did they lose money? The government, on the other hand, does not have this feedback. Unless the waste is astoundingly obvious, the average citizen doesn’t complain enough to matter to politicians. Waste goes unnoticed.

Politicians, not constrained by the need to make profits, also tend to invest in projects that sound really nice, but are really a waste of money. The vast majority of Obama’s green initiatives sound really nice, but individuals don’t invest freely in them because the projects simply don’t pay for themselves. They are feel good money pits.

The third, and most sinister problem with this enormous government spending plan is the inescapable influence of lobbyists. If you ever hated the kind of privilege that connections in Washington held today, just imagine the feeding frenzy over a trillion dollars of chum falling into the spending pool. Spending will be shaped by the people who can spin the best story and pull the right strings.

Governments do not have the ability to calculate good investments, nor do they face the proper consequences of bad investments. It was only 19 years ago that the world cheered as the Berlin Wall fell and the world knew, in one instance, that Socialism was such a catastrophic failure, yet now our next President believes that a little bit of Socialism is what our economy needs.

If it weren’t bad enough that the basic assumptions of this plan were wrong, there are still more problems unforeseen by Obama’s short-sighted advisors. What happens a few years down the road to the companies and people dependent on these massive government contracts? As the willfully naïve Paul Krugman, a recent Nobel Prize winner in economics and the main proponent of Keynesianism in the world today, wrote so eloquently at his blog, “I don’t really know the answer”. Well, Mr. Krugman, I do know the answer. They will either lose their jobs, go out of business, or lobby the government to keep spending money to keep them afloat. Getting rid of this wasteful spending will be like pulling teeth.

The massive burden will one day have to be paid back. The “stimulus” will not help the economy, more likely hurt it. We will pile up massive debt, which means higher taxes in the future. We will be stuck with the politically difficult task of cutting people off the government dole. This policy is dangerous and ill-conceived.

Fixing the American Economy

In the beginning, all men were created equal and endowed by our Creator with certain inalienable rights. Over the years, this equality has been perfected in difficult lurches through the duress of war and protest, but that first proposition of equality is yet still a radical notion. Even today, some 200 years later, those who believe themselves more equal than the rest of us still blithely deny our ownership of this most hard fought freedom. In contrast, our founding fathers, who were in general a group of men with significant wealth and power, chose not to abuse their position to abscond, but to abdicate these privileges and risk their very lives to give birth to freedom and justice. It was to them self-evident, that in the eyes of God and the eyes of the law all men must be equal.

In these days of economic fear, we have become dispossessed of this birthright. Our prosperity is no longer so determined by strength of will or content of character, but by the size and effectiveness of our public relations. Once proud business leaders wrap themselves in the flag and fall prostrate to grovel at the feet of our politicians. How can we not reward such talented beggary, a skill once selfishly monopolized by drunks and addicts, now so eloquently apprehended by the wealthy and powerful? The rest of us, the forgotten ones, are now obliged to ride at the back of the bus because we cannot spin sob stories quite so earnestly.

What of my brother, who struggles to make ends meet? What of my sister, who pinches pennies to pay for college? What of my parents, my aunts, my uncles, my cousins? What of my friends and neighbors? What of their jobs and their life savings? Currently, over 500,000 Americans file for unemployment weekly. Why did we not protect their jobs? The tales of terror from the auto industry claim that three million people will lose their jobs if they are allowed to collapse, yet every 6 weeks this number of job losses is wrought upon the rest of us. Does my family deserve less than others do, or should we quietly accept our new second-class standing?

Even more egregious than an auto bailout, is the so-called stimulus program designed by the incoming administration. Dazzled by economic alchemists, these grand planners suggest that we can spin debt into gold, and beseech us to ignore our better judgment. We are to lay our trust in a gaggle of political quacks to invest properly the estimated $1 Trillion borrowed, half the size of the entire Italian economy. Those of us who question this new leviathan are pat on the head and told to run along.

We cynics have coped with this new injustice by waffling between despair and detachment, resigned to complain from the sidelines and acquiesce to the high priests of the mystic calculus of economics. Yet these passive positions betray the very foundation of freedom and equality. It is individual action and the use of reason that gave birth to civilization and anointed humanity with the power to sustain our lives and procure for ourselves the destinies we each conceive.

What of my brother, should they help him? The very question is an insult to the strength he possesses. Implied in this is an assumption that they are more able to bear his burdens, and a confusion that struggle is needless pain. Up high in the ivory tower, he may appear to be a wobbly-kneed foal, mired in muck with his excessive burdens in tow. If they lowered themselves perhaps, they could better assess this situation. From such an altitude, one cannot see the sinews seethe beneath his chest, nor hot veins running jagged down his legs. One cannot hear his teeth grind the bit and whip taut the reins as his ferocious determination tears his cargo from the muddy clutches of the earth.

What kind of fearsome man is this? The common one. The standard model assumed by our founding fathers to populate every corner of the world. Where they see lambs in want of a shepherd, I see lions in want of wildebeests.

Bailouts and stimulus are a poison, convincing individuals not to act, but to wait for assistance. Prescriptions for our current ailments should affirm that all are individually capable of sustaining our recovery. No man’s job is more important than another’s. No man’s wealth is more important than another’s. The only stimulus we need is to free the faculties of individuals to rebuild our economic order one brick at a time. We are not in need of one great hero, but 300 million of them.

What is Capital?

I have thrown around the word capital quite often recently in my economic analysis. I have struggled to find a concise definition, so here’s my own. Capital is all accumulated resources not intended for consumption now or in the future.

The five bucks in your wallet that you plan to use at Burger King for lunch is not capital, but the five bucks you stuck in a jar last night to save up for that restaurant you want to open is capital. Capital is not necessarily money. Money is only a medium for exchange. Money only represents the goods that you plan to buy. Money for a hamburger is not capital, but money for the hamburger oven is. Any item you plan to use, but not consume is capital.

What is the Role of Capital?

Capital allows individuals to pursue increases in output and material comfort.

Imagine being on a deserted island. In the lagoon are fish and in the trees are coconuts, both you are able to harvest. However, there are also wild chickens on the islands. They are too fast to catch, but occasionally you run across their nests and take their eggs.

You realize one day that if you built a chicken coop. The chickens will stay close by because they would feel safe in the coop, and you can harvest the eggs more frequently. If there exists no spare time away from harvesting coconuts and fish, the coop can not be built. You must save food for the construction period. This savings is capital.

This capital allows you to pursue an increase in material comfort by tiding you over while you pursue this new idea. You can then build the chicken coop and your food intake will grow commensurately. This is how the economy grows. Less capital, less growth. More capital, more growth.

What is the Role of a Capital Market?

Capital markets link those with capital and those with ideas. It allows new ideas for increased production by those without sufficient savings to pursue those ends. It also allows those with capital to increase their wealth by finding a use for their capital.

Assume now, in the story above, that you have no savings and have no ability to save up fish and coconuts without starving. However, Susan is a much better fisherman that you and has some savings of dried fish. Susan is not very handy with building so she cannot build the coop for herself. If you present your plan to Susan and she believes that you can build the coop in the amount of time you estimate the two of you can make a deal. She gives you her capital, the dried fish, and both of you share the output of eggs. You are better off by expanding your diet with an easy bounty of eggs, and she is better off as well.

Why is Redistributing Wealth Bad?

To conceive of new ideas for production requires a focus in the pursuit of these ideas. Those without this focus are unlikely to conceive of new ideas. To develop a valuable skill set that allows for production above sustenance, like Susan, requires a focus on that task as well. The greater the focus, the greater the output, and the greater the accumulation of capital. By taking money away from those focused on increasing new skills and new ideas for production, and giving these resources to those focused on just consumption we reduce the amount of capital in the economy. With less capital, we achieve less growth and less material comfort.

Using our story, imagine a government requiring you and Susan to give the wood for your chicken coop over to John who uses it for firewood. John is able to enjoy a brief increase in material comfort, but all three are worse off in the end because there are now no eggs to eat.

Irrational Investors?

Today, I wanted to talk about something a little more philosophical. In the world of economics there seems to be quite the debate over people behaving rationally versus irrationally. We are told repeatedly these past few weeks that investors are behaving irrationally. That we humans are digressing into the primitive parts of our brains and basing decisions on emotion and not on reason. This is where I disagree. I do not think that irrational behavior is even possible.

First, let’s define rational and irrational behavior. If, like some seem to think, that rational behavior is based on facts and irrational behavior is not based on facts, then this makes it difficult for me to conceive of an irrational thought. Do investors panic for no reason at all? Is it merely a phenomenon where many people randomly panic and start to sell everything? Not likely. As has been the case in recent weeks, dark clouds have been slowly growing for months. People were acting on facts.

Now the retort will be that people oversold in the market, and that they were selling stocks whose true value is more than current prices. More simply, that people are acting on a limited number of facts, but not on the full truth. If the definition of rational behavior requires omniscience, this creates an impossible hurdle and no thought can be considered rational.

As an example, imagine that you are in the middle of a crowded theater and a teenage boy yells “Fire!” Should you race to the rear exit, or stay in your seat assuming the kid is just pulling a prank? I would say that either choice is rational depending on what you know. Is it irrational to flee a burning building? Is it irrational to ignore some teenager yelling “Fire!” when you can’t see it or smell anything? Neither is irrational given the information that you have at the time. If in reality there was an unlit exit at the side of the theater that no one else could see, this would not make the other thoughts irrational.

Many people invest without much knowledge of finance or economics. They generally stick to a few rules about their choices. Their brokers tell them to “buy and hold” and not to try to time the market. These are nice rules, but in 1929 in the U.S. and 1989 in Japan these were horrible strategies. It took 23 years for the DJIA to recover its losses and the Nikkei is less than a quarter of its 1989 high (was 38957 is ~9600).

What naïve investors often do is look at trends (i.e. they extrapolate). Extrapolation is a very important and rational approach to life, but it is a very inaccurate way to judge stock prices. If floodwaters are rising, extrapolation tells you to get the heck out of there. We don’t call people irrational because they didn’t know that a 5 inch rain event in their watershed would leave them 3 or 4 feet above the flood waters. When time is of the essence we have to rely on less information. This is rational and pragmatic.

In the long run, those who base their decisions on more precise techniques and more complete sets of information are going to make fewer mistakes, but all decisions are based on limited information and imprecise techniques. The difference between rational and irrational investing in the common lexicon is arbitrary. I conclude that irrational investing does not exist.

In essence, we have economists on the left trying to help protect those who are “irrational”. What they truly are doing is rewarding ignorance by taxing the prepared.

Another Depression? Not Yet

The belief that we are headed for another depression is being tossed around, so I wanted to help clear up some questions about the current state and direction of the economy. Let me put a few fears aside, but then bring up a few that you may not be aware.

How do Depressions Happen?

First, Depressions don’t just happen. They are not a random and inevitable byproduct of a free market. In fact, the opposite is true. As I have written before, the free market is simply a system where individuals, not government, make personal financial decisions that are often extremely complex, based on what makes the best sense to them. When the government interferes, they are telling individuals that they are wrong and that a few people are smart enough to make decisions for society as a whole. Because each human life is so complex, a small group of government planners will make so many errors that the more they try to fix the economy the more havoc they will cause.

A Quick History Lesson

In 1929, the stock market plunged in widespread panic. This was not unique, as it has happened many times before and afterwards throughout the years. In 1987, the stock market dropped even more precipitously than in 1929 and the economy kept on humming for several more years. In fact, the market recovered so dramatically that the Dow Jones Industrial Average actually recorded a gain for the year.

What actually happened was a collision of new socialist ideas and the hubris of Presidents Herbert Hoover and Franklin Roosevelt. In 2001, we saw the stock market drop and the economy slow after the attacks on September 11th. Within days, the Federal Reserve lowered interest rates to help the economy get back on its feet. After the crash in 1929, the Federal Reserve decided to stop following the rules of the Gold Standard and increased interest rates. The Fed poured cold water on an already cooling economy.

Herbert Hoover knew what always followed a financial panic in America: companies would slash their worker’s wages so that they could stay in business. Hoover, in his infinite wisdom, decided that this was bad and convinced thousands of companies not to lower wages exchanging union promises to not strike. Lo and behold, hundreds of companies started to go out of business because they couldn’t afford the promises. The mistakes by President Hoover continued as he and his cabinet tried to “fix” the economy.

As the economic malaise dragged on the American people soured on Capitalism. Roosevelt easily won election in 1932. Unfortunately, instead of seeing Hoover as fool hardy, he saw Hoover’s error as not going nearly far enough. Roosevelt’s government attempted one fruitless attempt after another. Not until Pearl Harbor did President Roosevelt’s experiments end and the country’s focus moved to the war. Afterwards, President Truman was not nearly as interested in market interference as Roosevelt, and America’s economy quickly rebounded.

Are Our Leaders Repeating History?

Ben Bernanke, the current President of the Federal Reserve had this to say to the famously free market Milton Friedman on his 90th birthday on the role of the Federal Reserve in starting the Great Depression:

“You're right, we did it. We're very sorry. But thanks to you, we won't do it again.”

Is he right that they will not do it again? I believe so. I am not a fan of the Federal Reserve or much of what they do, but I do think that they will likely avoid the horrible mistakes that occurred during the Great Depression. Mr. Bernanke is renowned as an expert on the Great Depression and his admissions on the numerous mistakes that the government made encourages me to believe that we will not make the same mistakes.

As a number of other economic writers have recently noted in various articles, there is also no brewing intellectual movement endorsing the socialist ideas rampant amongst the intelligentsia during the late 1920’s. This too gives me comfort that history will not repeat itself.

However, what happened in a few short years after the onset of the Depression that gives me concern today was that millions of Americans, who had more faith in the free market than understanding, lose the faith in tough economic times. Unfortunately, in our own time, we have seen a significant bump in support for solutions that ignore free choices and responsibility by individuals.

Many of our leaders exhibited the same vices of Hoover and Roosevelt when it came to the recent $700 billion bailout, but not all. While President Bush admitted that the bailout went against his free market instincts, few in the Democratic Party, nor their candidate Senator Obama, took pause at such a gargantuan interference. Their concern was not whether the government should interfere in the market, only the distribution of the benefits.

It is not repeating old mistakes that concern me so much, as it is committing new ones. There are many people in power with a friendly disposition towards market interference. Unemployment is heading upwards and inflation continues to be a problem. Will recent decisions make these situations worse? Will Americans lose just enough faith in the free market to vote people into power whose first instinct is to interfere in the market and expose us to the risk of a much deeper recession? Will our leaders, guided by fear, succumb to ill-conceived economic ideas? I hope not.

Another Depression? Not yet.

The Freedom Game

The plan I have detailed over the last few days may not sound revolutionary, but there is a method to my madness. If we are going to have a free market, we must trust that the government isn’t going to change the rules to benefit others over ourselves. In review, the three points are: Ban Earmarks, Enact a Flat Tax, Transfer the Corporate Tax to the Income Tax.

In economics, there is a branch of research called Game Theory. The classic example of this is the Prisoner’s Dilemma.


Looking at the table above, we have two prisoners who committed a felony, let us say armed robbery, but neither has been convicted yet, merely arrested. Both prisoners are put into separate interrogation rooms. If they both stayed silent, they could both serve 6 months in jail because the evidence is not a slam-dunk. However, the cops start to lean on them and tell them that their accomplice is starting to talk. If Prisoner B rats he goes free, and Prisoner A gets 10 years. The same is true if Prisoner A rats. If your “friend” is willing to rob a bank, how likely is it that he would not lie to stay out of prison? Both prisoners panic, and both rat on each other. Both go to prison for 5 years. This happens quite often in the real world and has been a police interrogation technique for a very long time.

We would like to think that loyalty would win out, but the consequences are just too big most of the time. When this game is repeated over and over again, the game changes, it is called a Repeated Game. Very creative right? Because the prisoners know that they are going to have to trust each other many times, they stick by their friend and don’t rat out as easily.

How does this relate to Capitalism?

While I wish that everyone could be an economist, I know this is not possible. Most who support the free market simply trust that they are being treated fairly and that people in society are receiving only the fruits of their ideas, investments, or labor. Let me reiterate an economic definition that I used on my blog a few days ago: Rent Seeking. According to Wikipedia, “In economics, rent seeking occurs when an individual, organization or firm seeks to make money by manipulating the economic and/or legal environment rather than by trade and production of wealth.” More specifically, this includes tax breaks, special contracts, welfare checks, and other special treatments.

When one group receives these kinds of rents, a.k.a. Free Money, we lose trust that we are being treated equally and envy leads other groups to seek their own rents. The best solution is to take away their rents, as I have proposed, but unfortunately, our system has made it much easier to seek rents then to remove them. It has become a game like the prisoner’s dilemma. Here is a new illustration depicting this problem.

As long as rent seeking is easy, people will seek rents. As long as rents are given, we will not trust each other and we will seek our own rents. As we seek more rents, the economy will not work as well, there will be fewer jobs, and we will slowly lose our personal freedom. Getting rid of Earmarks, setting up a transparent Flat Tax, and eliminating the Corporate Tax will make rent seeking much more difficult.

Reports of Capitalism’s Demise Are Greatly Exaggerated

It has been suggested that neo-liberalism has failed because of current economic problems. It may have a black eye because of bad choices by the political party that claims it, but the Left has yet to prove that their policies at the time would have worked better or were less expensive. Let's walk back in time and remember how things were.

In 1998, I was walking on the campus of my Alma Mater, Texas A&M, where there is a tower called the Richardson Petroleum Engineering Building. In the front is a bronze statue of a roughneck working the drill floor of a rig. As I walked by, I thought to myself, “What kind of moron majors in petroleum engineering?”

At the time, oil was $11 a barrel. Besides the brief period during the first Gulf War the price had been declining since 1981. My family had lived through the oil bust in Houston during which my father was laid off several times. I knew a number of people who had to quit their oil careers and switch to something else. Houston in the ‘80s was the Detroit of today. The oil industry was dieing and the city was desperate to tout rare exceptions like Compaq Computers from the embarrassing dependence on oil companies. In the late ‘90s, oil majors were hemorrhaging losses while the rest of the country soared with the booming tech industry. Oil was still needed, but Big Oil was dead.

Back then economics professors showed how real prices for almost every commodity inevitably declined. Virtually every new power plant in the United States was going to natural gas. Hybrids and fuel cells were right around the corner. People were going to move back into the city and were going to use mass transit. Everything pointed down for the future of the oil industry.

For housing too, there were few warning signs of our recent problems. Before 2006, there had been no nationwide home price decline since the early deflationary years of the Great Depression. Since the mortgage industry came to dominate home buying, no nationwide decline had ever occurred. So, when mortgage securities, tranches, and other derivatives were created no one ever thought about the possibility of prices plunging and foreclosures exploding. We had a real estate boom during the 1970’s, but at the end, there was no bust, so why would this time be any different?

Today those on the Left are claiming victory because the free market and its proponents have failed to perform with omniscient clairvoyance, beseeching us to pitch the whole philosophy. They are taking their turns playing Monday morning quarterback with economic history to nail Republican leaders back to Ronald Reagan as responsible for today’s crises by not foreseeing the inevitability of today’s problems. The nakedness of their argument is exposed when you look at the realties a decade ago. Big Oil was ailing and mortgage backed securities were doing fine.

It would be helpful to know exactly what policies were promoted by Democrats before 2006 that would have avoided the housing crisis? Did anyone support legislation to alter the way financial service companies value mortgage backed securities? Legislation is slow and cumbersome and cannot be written to prevent a risk before the market is even aware that a problem exists. By the time errors and abuses were well known it was already too late. The only legislative prescription would have been a Luddite resistance against new financial instruments.

Similar complaints have been raised about the free market approach to the energy policy approximated by Republicans. Ten years ago, no one knew exactly when supply constraints would be a problem. Yes indeed, politicians could have gone against public sentiment and the evidence of downward trending oil prices to pass some unpopular measures and force more conservation and research on alternative fuels. However, to substantially change consumption patterns the policies would have had to have been draconian. Blithe claims that government funded alternative fuel research would have quickly found these mythic new carbon friendly energy resources are mostly wishful thinking. If we can’t produce them in high quantity at $148 oil, the research grants would have to be astronomical to be successful. Today’s higher prices are encouraging the very behaviors they would have legislated. Their policies were unpopular, unnecessary and would not have been any less painful than high gas prices.

Using the sophist argument that Republican principles are Free Market principles glosses over the broad evidence that the market is the best mechanism ever conceived to discover information and allocate resources. The correlation between free markets and high living standards is proved over and over again around the world. While free market skeptics like to cherry pick historical evidence they have still not proved that a few people can plan an economy better than individuals.

As for the morons at Texas A&M choosing to become Petroleum Engineers; they are averaging first year salaries of $78,000 a year with a bachelor’s degree. Fortunately, I was not allowed to plan their futures.

Is Libertarianism a Failure?

I recently ran across this commentary by Charles Wheelan, the author of Naked Economics. Entitled “Confessions of a Maturing Libertarian”, Dr. Wheelan makes a mistake that far too many economists and laymen make when it comes to the point of libertarianism and belief in the free market. From his article:

I've discovered just one problem with my elegant libertarian philosophy after spending two decades in public policy: It's terribly impractical for actually governing society. My whole quibble with libertarians can be boiled down to one banal question: What's the libertarian point of view on stoplights?

I like stoplights. More to the point, they're a simple and tangible example of how government can make us better off: They enable complete strangers to interact more safely and efficiently. Given a choice between the freedom to speed through an intersection at any time and the coercive red light, I'll tolerate the red light.

That's kind of silly, so consider a more significant example, like counterterrorism. In a world of libertarians, who finds Osama bin Laden?

Far too many libertarians believe that the market is omniscient, and too many anti-libertarian skeptics belittle it for not being so. Both sides are wrong.

By omniscient, I am speaking of the assumption by many libertarians that if only the government was eliminated all problems would go away. They embrace the power that the free market has in solving problems with religious fervor. It’s not that this viewpoint is far from the truth, but when proselytizing to a skeptical world it’s a little like quoting the Bible to Richard Dawkins. Saying “let the free market figure it out” falls on the deaf ears of non-believers.

The problem with these puritanical libertarians, and Dr. Wheelan’s understanding, is that the free market doesn’t have all the answers. The concept of the tragedy of the commons was first noted in 1833. The solution is to set up private property rights. This was fine in England where plots of land were small and stone was readily available to build fences. In the American West this was not so easy. It can be rather costly and time consuming to fence a 50,000 acre ranch. It wasn’t until the invention of cheap barbed wire that this was a viable option. Yes, the market found a solution, but the problem was apparent long before the solution came along.

In recent decades pollution has become one of the more befuddling externalities. A number of economic mechanisms have been created to reduce the negative affects it has on those uninvolved in its production. The most recent being cap and trade. The market has failed to produce a solution that eliminates the problem. A debate can be had as to the magnitude of loss that pollution produces, but I am aware of very few market solutions for it. Should we wait and let the market figure out a marketable use for soot and other pollutants? I don’t want to bet my health on it in the meantime.

Mr. Wheelan’s mistake, as with many others, is that their conversation ends here. I hold libertarianism as an ethic to strive towards in my economic analysis. Simply because there is no free market solution right now does not mean that there isn’t going to be one down the road. The market doesn’t have all the answers right now, but it is the best mechanism we have to find the answers that avoid coercion. Profit focuses our attention to solve complex problems.

I will never concede that the free market fails. It is only the limited knowledge of humanity that prevents it from finding the answer, not the failure of the mechanisms it creates. I see examples of free rider problems in the private sector all the time, from the unkempt refrigerator in the break room to community LAN space. Market “failures” are examples of bounded human knowledge not a blight on libertarianism.

My Rebellion

Over the last few months, my wife and I have decided that we are going to home school our children. We are doing this for some of the same reasons that others are doing it, but our focus is different.

In the end, my children will annihilate most of their public school counterparts both socially and academically. This is not necessarily our goal, but it is simply stating the way it will be. In addition to the path that they choose, they will be extraordinarily well learned on the virtues of freedom both externally, through the study of history and free market economics, and internally, through philosophies that lead to freedom from sin.

Why Are Public Schools Inherently Inferior?

We believe that public schooling, run by a government monopoly, has proved to be so endemically miserable because the system inherently cannot escape failure.

Reason 1) A public school system is a large public bureaucracy and suffers from a principal-agent problem (no pun intended). School managers cannot actively observe the behavior of individual teachers. The teacher’s prerogatives, as virtuous as they may seem, are not going to align perfectly with the prerogatives of management and parents. Thus, states and districts create curriculum and measurement that applies to all teachers in an attempt to curtail inferior or aberrant teaching.

The curriculum binds teachers to present information to students that will not match the interests or passions of every child. The more uniform the curriculum and the more diverse the population of students, the less likely that any individual child will be engaged to learn. The curriculum will approximate the values of the dominant political class in the region creating the curriculum. It will serve only the students who most embrace those values. Students who differ from the ideal will receive an inferior education. Many students will receive instruction that is impertinent and impersonal. Thus, the public school monopoly fails many students.

Any measurement of success used by schools will inherently distort the behavior of managers and teachers to maximize the methods that lead to measured success. Much as we have seen through by the No Child Left Behind act, which is amongst many failed measurement techniques, teachers focus on certain subjects at the expense of others. Measurements based on minimum standards will lead educators to focus on improving those students below the minimum standards at the expense of those who are already above them. The bad incentives brought by measurement yield an incomplete education to every student.

Reason 2) A public school system groups children with varying levels of expectations. These expectations reveal themselves in the behaviors of students. These behaviors model inconsistent values. Modeling of these behaviors (peer pressure) will push all students towards mediocrity. This mediocrity dulls the genius of the most academically focused students, and slows the progress of human ingenuity overall. An educational system that leads to mediocrity leads to a society of mediocrity.

Reason 3) A public school system, because of the separation of church and state and other requirements of pluralism cannot offer purpose in education. A public school system can only offer bland and inoffensive materials in political, economic, religious, and literature. It is a system that squelches minority opinions. The lack of purpose leads to the oft repeated tautologies “It just is”, “You’ll need to know this in the real world”, and “It will get you ready for next year” in response to students who question the importance of pieces of curriculum. Older children learn less because they do not see a purpose to what they are learning. They see less purpose because a public school system is limited from imbuing purpose to maintain political harmony. They see less purpose because the bland purposes that public school systems are allowed to imbue are highly unlikely to match the values of many students.

Why is Home Schooling Inherently Superior?

Reason 1) Home Schooling can teach with purpose. The direction that home schooling education takes can be guided by the purpose the child finds most appealing. In early years the child will need direction and a purpose imposed on them, but as they discover their talents and interests they can be supported in those endeavors without the choking limitations of public schools.

Reason 2) Home Schooling greatly reduces the predatory behavior of social competition. A home school student will not waste his or her faculties worrying about their clothes, hair, skin, makeup, car, or other measure of status during their education. They are free to dedicate their faculties to things that will actually matter in adulthood. In my home, they will not be exposed to the peer pressure of low expectations, or inculcated with the “virtues” of anti-social behavior.

Reason 3) Home Schooling is less restricted by the pragmatic realities of a larger public school. A home school environment is not bound by bells, bus rides, bathroom breaks, calendars, report card cycles, or curriculum. It is not bound to a classroom, a couple field trips to local museums, and a simple playground. Home School students can make use of the wasted time of a public school with more learning or more playing. Home School is not bound by geography and can take children to experience what their public school counterparts will only read about.

Reason 4) Home Schooling does not suffer from a principal-agent problem because the principal and the agent are the same person.

Aren’t you limiting your children by only offering a Christian viewpoint?

No, because we won’t only be offering a Christian viewpoint. No, because you do not understand that sin is a burden, and that the optimal life is found by throwing off its shackles. No, because my children will not be so dulled by a mediocre educational system that they will not have the brainpower to question their own beliefs.

New Individualism and the Locus of Control

A few weeks ago, I talked about my “New Individualism”. While I like to use free market rhetoric by talking about personal freedom and individual action, there is actually more than just sentiment to back it up. Quite a few psychologists believe the concepts that I have used to build my Individualism.

Let me introduce a term, if you don’t already know it. Locus of Control. People either have an internal locus of control, an external locus of control, or a combination of the two.

Having an internal locus of control means that you believe that you are in control of your life and you assume that your decisions determine most of the events, good and bad, that occur in your life. Having an external locus of control means that you believe that luck and chance determine the events of your life and your actions have little to do with what happens to you.

For example, someone with an internal locus of control would believe that if they prepared really well for an interview that they would likely get the job. Someone with an external locus of control would believe that if the interviewer happens to like them or they caught the manager at a good time only then will they get the job.

I took an on-line survey here to determine whether I had an internal locus of control. Not surprisingly, I scored as having a high level of internal control. This part of my personality explains why I abhor the idea of the government “helping” me. I tend to feel that if life threw me to the wolves I would come back with a dog-sled team.

In place of real research, I trolled through Wikipedia and read some of the source materials for Locus of Control and another related topic Self-Efficacy. Having an internal locus is not just a personality type. Those who have an internal locus also tend to have these personal characteristics:

1. More likely to work for achievements, to tolerate delays in rewards and to plan for long-term goals
2. Increased ability to delay gratification
3. Better able to resist coercion
4. Less prone to depression

Externals are more likely to be:

1. Less willing to take risks, to work on self-improvement and to better themselves through remedial work than internals
2. More stressed and prone to clinical depression

These two sets of beliefs explain much about the political dynamics in our times. Offshoots of Socialism, which infect the Democratic party, tend to rely on external locii of control to justify their actions. It’s Wall Street Conspiracies and Big Oil who are out to steal from the helpless little guy. It’s “Life’s Lottery” that lets job losses and health care catastrophes randomly strike good honest people that justify massively inefficient social insurance and welfare programs.

It’s not that the most disciplined of savers is never effected by events outside of their control, but the negative effects are greatly diminished by someone who has practiced the daily discipline of saving money and being a hard-working employee or owner.

As I have said before, striving for a society “that recognizes personal action, not as a burden, but the narrow gate to personal freedom.” It is not cold hearted and calloused it is kind and compassionate. Individual action brings safety. Individual action brings security. Individual action brings personal empowerment. These things cannot be achieved outside of ourselves.

Creating a society where we are protected, not by our own character and ingenuity, but by whims of those in power leaves us worse off. When looking at the symptoms of an external locus of control, is it any wonder why so many Americans are on psychiatric medication? Is it any wonder why we can’t delay gratification and have a zero savings rate? Is it any wonder why so many are up to their eyeballs in debt? Is it any wonder that we cannot seem to lose weight? Just look at the systems of having an external locus of control. Look at the symptoms of a society that believes we have to make everything equal because the differences between people are not the result of choices, but of mere chance. Look at the philosophies that imply that taking control of one’s own destiny is unnecessary because a few people at the top will take care of us all. Look past the brashness and bravado into the private hell of millions of Americans waiting and waiting and waiting for their lucky break.

True love and true compassion do not let people wallow in doubt and self pity. True love asks them to stand up one more time. True love pushes them to walk one more mile. True love leads them across one more river; over one more mountain. True love pokes and prods until the unflinching fury of human potential brakes free of the shackles of inaction. True love brings freedom.

One final quote from a man named Teilhard de Chardin:

“It is our duty as human beings to proceed as though the limits of our capabilities do not exist”

As always, tell me what you think.

Hey Pal, No Soliciting

Every night when we turn on the news there are threats and evil forces surrounding us. It is Wall Street and the mortgage crisis, immigrants taking our jobs, and the disappearing middle class. It’s hard not to believe the hype. It’s hard not to believe that we are all victims of our circumstances, and that the world is hopelessly out of control and that Armageddon will come soon.

When we start to hear these hysterics, we need to employ a little skepticism. When the Wizard of Oz is spewing fire and the green vein on his forehead pulses with anger, we need to look around and see if Toto has exposed a little man behind a curtain. Fear is a tool of manipulation. The peddlers of fear usually want something from you. They want you to tune in at 10, buy their product, or vote for their candidate. We should greet these peddlers with the same skepticism that we greet car salesmen.

It is not that all horror stories are false. If the news tells me that there is a Hurricane in the Gulf of Mexico, I need to watch because my life and family depend on knowing what to do. The critical test is listening to what they want you to do about it. Do they want something from you? Do they want your money, your personal freedom, your rapt attention during commercial breaks?

The more afraid we are, the more power we cede to those who want to be in charge. We feel powerless and hopeless and that only someone stronger can save us all. Beware the stench of manipulation.

Many economists now believe we are either in or about to be in a recession. Recessions are not fun, but the media blows it way out of proportion. According to the news, I should start growing my own crops and livestock to survive the coming dark ages. Many people may lose their jobs, but in reality that will only be 1 or 2% of the working population and it will be temporary. Most people’s income will continue to rise, but maybe a little slower.

Yielding to fear and handing over money and freedom to massive government “fixes” is not the answer we need. What we need to do now is what we need to do every day. We need to work hard at our jobs and set money aside for a rainy day. In Atlas Shrugged, Ayn Rand wrote of her character Henry Rearden, “He had never known fear, because against any disaster he had held the omnipotent cure of being able to act.” It is individual action that we need not collective panic.

If we do not act, we become slaves to luck. We become objects manipulated by those in power. When it comes to life’s troubles we sometimes exhort personal responsibility, but we misunderstand it. American Heritage Dictionary defines responsibility as a duty, an obligation, or a burden. When we choose to act, the only burden is the effort of throwing off the shackles of dependence. Action brings freedom, safety, and security.

A leader or politician cannot bring us freedom. Freedom begins in our hearts and minds, and flows upward to curtail the ambitions of those who wish to use us for their gain. However, action turns to force when it moves outside of ourselves and to the coercion of others. Do not be fooled, forcing others to act is not the same as them choosing to act.

While we sympathize with their plight, the poor and the downtrodden are not victims of circumstances they are slaves to inaction. Whether it is addiction and sloth or fear and hopelessness, they have ceded their personal freedom and borne themselves into bondage. Their emancipation cannot be delivered, they must choose to take it up. We best help when we live the answers that they seek.

It is not mere personal responsibility that we need, but a new individualism. We need an individualism that recognizes personal action, not as a burden, but the narrow gate to personal freedom. We need an individualism that sneers at fear and hopelessness. An individualism repulsed by the brimstone breath of fear mongers. We do not need “enlightened” leaders to save us; we only need to act with daily discipline and contempt for coercion.

We need the audacity of Winston Churchill under the specter of the Nazi blitzkrieg. As the Third Reich roared across Europe like a tsunami, he stoked the fires of defiance in England with his call to action and rejection of fear.

“We shall defend our island, whatever the cost may be, we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender”

Recessions, crises and corruption come and go. They will always happen, and they will always end. There will always be those who try to manipulate us into believing that we are powerless over our own lives, and that we need only to hand over our personal freedom so that they can protect us. But, the new individualist knows that safety and security can only be found in the daily discipline of human action. Declare your independence. Turn off the TV, put your wallet away, and vote for the other guy. Become a new individualist.

As always, tell me what you think.

I am a Liberal

What is a liberal? If you read various dictionaries it implies being open to new ideas. Politically, it is a derogatory term. We think of it as meaning someone who believes in socialist policies and tries to undermine Judeo-Christian values. Many economists like to call themselves “Classical Liberals”, because liberal used to mean someone who embraced the free market. The word was later stolen by socialists and the meaning changed.

Ironically, in France, left wing parties deride President Sarkozy as a “liberal”. Sarkozy has been pushing for free market reforms, cracking down on crime, and limits to immigration. This is not exactly the American idea of a liberal, but it does imply someone who is pushing new ideas.

I recently saw an interview with Hillary Clinton saying that she likes to call herself a Progressive, discarding Liberal because it has taken on such an ugly connotation. Well, Sen. Clinton, one woman’s trash is another man’s treasure. I consider myself a “Classical Liberal”, so maybe it’s time to drop the “Classical” part of my label and take the true meaning of the word back.

My friends, I am a Liberal.

If a conservative is someone who wants things to stay the same how can I honestly call myself a conservative when I have proposed so many radical changes in this newsletter? Let’s compare what I support against our so-called “Liberal” political party.

Democrats want to take us to universal health care. A new idea? Universal Health started in Germany in the late 1800’s. Health Savings Accounts were invented by John Goodman in the late 1900’s. They want us to keep doing health care the way it has always been done. I want to rip it out by the roots and start over with Health Savings Accounts. They are the conservatives, I am the liberal.

Democrats want to maintain the same failed education system that has been sliding downhill for 50 years. I want charter schools, vouchers, and home schooling. I want to free the underprivileged and undereducated from the shackles of a system that continues to fail them and keeps them in poverty. They want us to do education the way it has always been done. I am the liberal.

Democrats don’t want to touch social security. I want Swedish-style private accounts, and I want my future benefits to be cut to avoid the fiscal disaster coming down the road. They have buried their heads in the sand and they want us to do things the way they have always been done. I am the liberal.

Democrats scream bloody murder at any proposal to change any of our failed poverty programs. I have proposed Milton Friedman’s reverse income tax to help wean the poor off of government handouts. They want to do things the way they have always been done. I am the liberal.

Democrats promised to clean up earmarks, but got virtually nothing accomplished. I want to ban earmarks. They are doing things the way they have always been done. I am the liberal.

Democrats want us to plan nearly every inch of every building in our cities. This isn’t new, rulers have been indiscriminately bulldozing and rebuilding parts of cities for centuries. I want people, in a free market, to decide what to do with their property to keep home prices down so that every person can hope to achieve the American dream. They want to boss you around the way it has always been done. I am the liberal.

Democrats’ only idea for our tax system in the last 75 years has been to raise them every chance possible. I support a flat tax that eliminates the millions of tax breaks given out to special interest groups. I have supported moving the corporate tax burden onto high income earners so that our businesses don’t waste billions dodging taxes and they can crush their foreign competitors with the tax advantage. They, on the other hand, want to do things the way they have always been done. I am the liberal.

Democrats fight free trade with same arguments the Mercantilists used in 16th century. I support free trade anywhere, anytime, and any place. It increases wealth in the United States and it will bring income to the most desperately poor countries on earth. There is a veritable consensus amongst economists that both countries always win with free trade. Democrats are chained to their union donors and want to do things the way they used to be done hundreds of years ago. I am the liberal.

The word of the year seems to be “Change”. Boldly leading us towards the status quo is not change. Fixing your gaze on the ideas of the past is not change. I want to do what has not been done. I want to do things that have not been tried. I am the liberal, not them.

We have been unjustifiably labeled “conservatives” as if we were the ones holding back progress. We have worn the scarlet C for too long. How long do the policies of the “liberal” party have to fail before we call them old ideas. The intellectual Amish of the Democratic party are not liberal at all. To paraphrase a quote from economist Robert Murphy,

“If [they] ignored advances in other scientific fields as much as they do in economics, we'd see weathermen advising readers to offer sacrifices to the rain gods.”

In the great time span of human history, freedom of the individual and small government are still radically new ideas. They are liberal ideas. I believe in these liberal ideas because I AM A LIBERAL.

Are you a liberal?

As always, tell me what you think.