On the heels of George McGovern’s defense of big business, we have Barney Frank extolling the virtues of a free market in the face of GOP reluctance to cut agricultural subsidies. (Via Instapundit -> Club for Growth).
Mr. Chairman, I am here to confess my reading incomprehension. I have listened to many of my conservative friends talk about the wonders of the free market, of the importance of letting the consumers make their best choices, of keeping government out of economic activity, of the virtues of free trade, but then I look at various agricultural programs like this one. Now, it violates every principle of free market economics known to man and two or three not yet discovered.
So I have been forced to conclude that in all of those great free market texts by Ludwig von Mises, Friedrich Hayek and all the others that there is a footnote that says, by the way, none of this applies to agriculture. Now, it may be written in high German, and that may be why I have not been able to discern it, but there is no greater contrast in America today than between the free enterprise rhetoric of so many conservatives and the statist, subsidized, inflationary, protectionist, anti-consumer agricultural policies, and this is one of them.
In particular, I have listened to people, and some of us have said let us protect workers and the environment in trade; let us not have unrestricted free trade; but let us have trade that respects worker rights and environmental rights. And we have been excoriated for our lack of concern for poor countries.
There is no greater obstacle, as it is now clear in the Doha round, to the completion of a comprehensive trade policy than the American agricultural policy, with one exception, European agricultural policy, which is much worse and just as phony.
Sugar is an example. This program is an interference with the legitimate efforts at economic self-help in many foreign nations.
Wow, is this Bizzaro World? Or has another blind squirrel found a nut?
[Open full post]In his book titled Sons of Providence, author Charles Rappleye tells the story of two brothers, John and Moses Brown, who figure prominently in early Rhode Island history. Both men were involved in many aspects of the early commercial and economic development of Rhode Island, but there was a sharp contrast between the two. John Brown engaged in and defended the slave trade throughout his life, while Moses Brown was a leader in the early abolitionist movement.
Mr. Rappleye is interesting both to read and to listen to (Marc and I recently attended a lecture he presented on his book sponsored by the Providence chapter of the NAACP and the Rhode Island Black Heritage Society) because of his impressive command of the different levels of the story he is telling. His work is fully aware that the story of the Brown brothers is important because it is a part of the long shadow that slavery casts on American history. But Rappleye is equally clear that John and Moses Brown are not mere prisoners of the events of their time; the individual decisions they make for personal, human reasons shape and drive the events of the period — events that include the American revolution and the formation of the American form of government.
Here are just a few of the interesting points that Mr. Rappleye presents…
- Not only was the slave trade very important to the economy of colonial Rhode Island, but there was also substantial slaveholding here. At one point in the mid-1700s, about 15% of Newport’s population was comprised of slaves.
- Moses Brown took up the abolitionist cause after the death of his wife Anna, believing that God had taken her as punishment for his sins, and that he had to work to eradicate slavery as his atonement.
- Moses Brown wrote the first Federal law banning slave trading. The first person convicted under the law was his brother John.
- John Brown was the original Robert Healey (not for reasons related to the slave trade) — he was elected to Congress even though he didn’t really believe in the Federal government. While in Congress, John bucked the common practice of the time of ignoring slavery in civic dicussions and offered the first public, affirmative defense of the slave trade.
After his presentation, Anchor Rising had the chance to ask a few questions to Charles Rappleye…
Anchor Rising: Can you tell us some more about how the story of Moses Brown and abolitionism combines two distinct strands; on the one hand, you have the philosophy of liberty growing out of the rationalistic enlightenment; on the other, you have Moses Brown converting to Quakerism and talking up abolition after a passionate religious experience following the death of his wife…
Charles Rappleye: The first three generations of Moses Brown’s five generations in Rhode Island were all Baptist preachers. His father James was a merchant and not a preacher. For Moses to convert from the Baptist faith was a big break with his family. As I describe in the book, as I see it in my mind, he was listening to his religious side, his religious core, whereas John and the other members of the family were kind of just going along.
I do talk, for more than my editor wanted me to, about how the Quakers were alone in talking about slavery and becoming abolitionists long before anybody else. Their tradition of abolitionism was about 50 years old. It was really reaching a crescendo just as this rhetoric of liberty and freedom started breaking out. Abolitionism went from a heretical fringe idea to the popular idea of the day, a popular movement that had the support of most people, certainly in the North, in a period of about three years, which is remarkable.
It was the Quaker influence connected with the revolution rhetoric, even though the Quakers were against the revolution because they were pacifists. But that idea of anti-slavery really caught on. Before I wrote the book, I hadn’t known that there was an early phase to the abolition movement, I thought it was more the William Lloyd Garrison kinds of activities going on in the 1820s, 30s and 40s.
It is kind of tragic. There was this moment where abolitionism was popular and slavery unpopular right around the time of the writing of the Constitution, but it was the economic interests, and not the popular sentiment, that prevailed at the conference that wrote that document.
AR: At that time, how radical was an idea like “everyone is equal”?
CR: That was an idea that was on the fringes, although some colonies were fairly democratic. Rhode Island was the most democratic. Some people considered it to be their big flaw. There was one guy who called it a “downright democracy”. He was one of the members of the commission that was assembled to hear the evidence of the burining of the Gaspee. In 1772, they’re still saying “it’s a downright democracy around here”.
Democracy was coming into vogue, but was certainly not universally accepted like it is now.
AR: From your work, do you get a sense of whether the appeal of abolitionism was something that was universal, or something unique to the American experience, or something that grew out of European ideas?
CR: Abolitionism was an American product. At the same time, America, as time went on, became the largest slaveholding enterprise in the world. Abolitionism really did start here and caught on here. The Quakers were pushing it in England it at the same time as the ideas of the enlightenment were catching on there as well.
Britain passed their abolitionist legislation after the stuff that was written by Moses Brown and then they became the enforcers of the ban on the Slave trade. That was actually an issue in the War of 1812. The British insisted on the right to search on the high seas because they wanted to search cargoes of the American ships coming out from Africa to search for slaves. The Americans were saying you have no right to search us and no, we’re not in violation, whether they had slaves on them or not.
But the prohibition on Slave trading that Moses Brown wrote that passed the legislature in 1787 was the first prohibition on Slave trading anywhere in the world.
ADDITIONAL INFORMATION:
Marc gives his thoughts on Sons of Providence and Charles Rappleye’s discussion of it over at Spinning Clio.
[Open full post]This posting is Part V in a series of postings about economic thoughts.
This posting contains excerpts from the Introduction of Nobel Laureate Milton Friedman’s 1962 classic book, Capitalism & Freedom in which he begins a discussion about the relationship between economic freedom and political freedom:
…The free man will ask neither what his country can do for him nor what he can do for his country. He will ask rather “What can I and my compatriots do through government” to help us discharge our individual responsibilities, to achieve our several goals and purposes, and, above all, to protect our freedom? And he will accompany this question with another: How can we keep the government we create from becoming a Frankenstein that will destroy the very freedom we establish it to protect?…the greatest threat to freedom is the concentration of power. Government is necessary to preserve our freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power in political hands, it is also a threat to freedom…
How can we benefit from the promise of government while avoiding the threat to freedom? Two broad principles embodied in our Constitution give an answer…
First, the scope of government must be limited. Its major function must be to protect our freedom both from the enemies outside our gates and from our fellow-citizens: to preserve law and order, to enforce private contracts, to foster competitive markets…By relying primarily on voluntary co-operation and private enterprise, in both economic and other activities, we can insure that the private sector is a check on the powers of the governmental sector…
The second broad principle is that government power must be dispersed…If government is to exercise power, better in the county than in the state, better in the state than in Washington. If I do not like what my local community does…I can move to another local community, and though few may take this step, the mere possibility acts as a check…If I do not like what Washington imposes, I have few alternatives in this world of jealous nations…
…The power to do good is also the power to do harm; those who control the power today may not tomorrow; and, more important, what one man regards as good, another may regard as harm…
The preservation of freedom is the protective reason for limiting and decentralizing governmental power. But there is also a constructive reason. The great advances of civilization…have never come from centralized government…[Columbus, Newton, Leibnitz, Einstein, Bohr, Shakespeare, Milton, Pasternak, Whitney, McCormick, Edison, Ford, Nightingale, Schweitzer] achievements were the product of individual genius, of strongly held minority views, of a social climate permitting variety and diversity.
Government can never duplicate the variety and diversity of individual action…
This book’s…major theme is the role of competitive capitalism – the organization of the bulk of economic activity through private enterprise operating in a free market – as a system of economic freedom and a necessary condition for political freedom…
As it developed in the late eighteenth and early nineteenth centuries, the intellectual movement that went under the name of liberalism emphasized freedom as the ultimate goal and the individual as the ultimate entity in the society. It supported laissez faire at home as a means of reducing the role of the state in economic affairs and thereby enlarging the role of the individual; it supported free trade abroad as a means of linking the nations of the world together peacefully and democratically. In political matters, it supported the development of representative government and of parliamentary institutions, reduction in the arbitrary power of the state, and protection of the civil freedoms of individuals…
…especially after 1930 in the United States, the term liberalism came to be associated with a very different emphasis…The catchwords became welfare and equality rather than freedom. The nineteenth-century liberal regarded an extension of freedom as the most effective way to promote welfare and equality; the twentieth-century liberal regards welfare and equality as either prerequisites of or alternatives to freedom. In the name of welfare and equality, the twentieth-century liberal has come to favor…state intervention and paternalism…
…Jealous of liberty, and hence fearful of centralized power, whether in governmental or private hands, the nineteenth-century liberal favored political decentralization. Committed to action and confident of the beneficence of power as long as it is in the hands of a government ostensibly controlled by the electorate, the twentieth-century liberal favors centralized government. He will resolve any doubt about where power should be located in favor of the state instead of the city, of the federal government instead of the state, and of a world organization instead of a national government…
Part VI to follow…
For previous postings on Economic Thoughts, refer to:
Part I: What is Economics?
Part II: Myths About Markets
Part III: Why Policy Goals are Trumped by Incentives They Create & the Role of Knowledge in Economics
Part IV: The Abuse of Reason, Fallacies & Dangers of Centralized Planning, Prices & Knowledge, and Understanding Limitations
This posting is Part V in a series of postings about economic thoughts.
This posting contains excerpts from the Introduction of Nobel Laureate Milton Friedman’s 1962 classic book, Capitalism & Freedom in which he begins a discussion about the relationship between economic freedom and political freedom:
…The free man will ask neither what his country can do for him nor what he can do for his country. He will ask rather “What can I and my compatriots do through government” to help us discharge our individual responsibilities, to achieve our several goals and purposes, and, above all, to protect our freedom? And he will accompany this question with another: How can we keep the government we create from becoming a Frankenstein that will destroy the very freedom we establish it to protect?…the greatest threat to freedom is the concentration of power. Government is necessary to preserve our freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power in political hands, it is also a threat to freedom…
How can we benefit from the promise of government while avoiding the threat to freedom? Two broad principles embodied in our Constitution give an answer…
First, the scope of government must be limited. Its major function must be to protect our freedom both from the enemies outside our gates and from our fellow-citizens: to preserve law and order, to enforce private contracts, to foster competitive markets…By relying primarily on voluntary co-operation and private enterprise, in both economic and other activities, we can insure that the private sector is a check on the powers of the governmental sector…
The second broad principle is that government power must be dispersed…If government is to exercise power, better in the county than in the state, better in the state than in Washington. If I do not like what my local community does…I can move to another local community, and though few may take this step, the mere possibility acts as a check…If I do not like what Washington imposes, I have few alternatives in this world of jealous nations…
…The power to do good is also the power to do harm; those who control the power today may not tomorrow; and, more important, what one man regards as good, another may regard as harm…
The preservation of freedom is the protective reason for limiting and decentralizing governmental power. But there is also a constructive reason. The great advances of civilization…have never come from centralized government…[Columbus, Newton, Leibnitz, Einstein, Bohr, Shakespeare, Milton, Pasternak, Whitney, McCormick, Edison, Ford, Nightingale, Schweitzer] achievements were the product of individual genius, of strongly held minority views, of a social climate permitting variety and diversity.
Government can never duplicate the variety and diversity of individual action…
This book’s…major theme is the role of competitive capitalism – the organization of the bulk of economic activity through private enterprise operating in a free market – as a system of economic freedom and a necessary condition for political freedom…
As it developed in the late eighteenth and early nineteenth centuries, the intellectual movement that went under the name of liberalism emphasized freedom as the ultimate goal and the individual as the ultimate entity in the society. It supported laissez faire at home as a means of reducing the role of the state in economic affairs and thereby enlarging the role of the individual; it supported free trade abroad as a means of linking the nations of the world together peacefully and democratically. In political matters, it supported the development of representative government and of parliamentary institutions, reduction in the arbitrary power of the state, and protection of the civil freedoms of individuals…
…especially after 1930 in the United States, the term liberalism came to be associated with a very different emphasis…The catchwords became welfare and equality rather than freedom. The nineteenth-century liberal regarded an extension of freedom as the most effective way to promote welfare and equality; the twentieth-century liberal regards welfare and equality as either prerequisites of or alternatives to freedom. In the name of welfare and equality, the twentieth-century liberal has come to favor…state intervention and paternalism…
…Jealous of liberty, and hence fearful of centralized power, whether in governmental or private hands, the nineteenth-century liberal favored political decentralization. Committed to action and confident of the beneficence of power as long as it is in the hands of a government ostensibly controlled by the electorate, the twentieth-century liberal favors centralized government. He will resolve any doubt about where power should be located in favor of the state instead of the city, of the federal government instead of the state, and of a world organization instead of a national government…
Part VI to follow…
For previous postings on Economic Thoughts, refer to:
Part I: What is Economics?
Part II: Myths About Markets
Part III: Why Policy Goals are Trumped by Incentives They Create & the Role of Knowledge in Economics
Part IV: The Abuse of Reason, Fallacies & Dangers of Centralized Planning, Prices & Knowledge, and Understanding Limitations
I love this part of Marc’s post:
… Michaud also revealed that he was paid $80,000 by Beacon as a consultant and that he was unaware that he should have announced as such when he testified in front of the General Assembly as an expert witness earlier this year.
It brings to mind the movie version of The World According to Garp (I don’t remember whether the book has a corresponding scene): Garp is house hunting with his wife, and he insists on buying one that is hit by a plane right before their eyes, saying, “It’s been pre-disastered. We’re going to be safe here.”
In Rhode Island, it isn’t inconceivable that voters would feel safer with politicians who are “pre-ethical-lapsed.” They’ve already learned their lesson… right?
Recent days have been particularly active times in the illegal immigration debate. Since it is difficult to keep up with all that is going on, this is a sixth posting which will present excerpts from a range of news and opinion articles across the MSM and the blogging world.
There are more than a few problems with the Senate’s Hagel-Martinez illegal immigration bill.
First, the bill in the Senate is an amnesty bill in more ways than one: Not only are we offering amnesty to illegal immigrant lawbreakers but we are offering amnesty to corporate lawbreakers:
Senate bill protects employers of illegal aliens from penalties from Washington Times:
Among those who will be cleared of past crimes under the Senate’s proposed immigration-reform bill would be the businesses that have employed the estimated 10 million illegal aliens eligible for citizenship and that provided the very “magnet” that drew them here in the first place.
Buried in the more than 600 pages of legislation is a section titled “Employer Protections,” which states: “Employers of aliens applying for adjustment of status under this section shall not be subject to civil and criminal tax liability relating directly to the employment of such alien.”
Supporters of the legislation insist that such provisions do not amount to “amnesty.”
“The legislation we are considering today is not amnesty,” Senate Judiciary Committee Chairman Arlen Specter said last week. “That is a pejorative term, really a smear term used to denigrate the efforts at comprehensive immigration reform. This is not amnesty because amnesty means a pardon of those who have broken the law.”
Mr. Specter, Pennsylvania Republican, and others argue that the bill is not amnesty for illegal aliens because they will have to pay $2,000 in fines before they gain citizenship.
The law does not, however, provide for such fines against employers who have broken the law by hiring the illegals.
Sen. Robert C. Byrd, West Virginia Democrat, vehemently opposes “this effort to waive the rules for lawbreakers and to legalize the unlawful actions of undocumented workers and the businesses that illegally employ them.”
Amnesties, he said, “are the dark underbelly of our immigration process.”
“They tarnish the magnanimous promise enshrined on the base of the Statue of Liberty,” Mr. Byrd said last week on the Senate floor. “Amnesties undermine that great egalitarian and American principle that the law should apply equally and should apply fairly to everyone.”
While most of the focus thus far has been on the “amnesty” granted to illegal aliens, opponents only now are discovering the broad range of crimes that will be forgiven under the legislation.
Lawyers for the Senate Judiciary Committee have scoured the bill and come up with a list of 31 crimes relating to illegal immigration that would be wiped clean.
Under current law, simply entering the country illegally can result in a six-month prison stay and a $250,000 fine. Aiding in that crime carries a similar fine and a five-year prison sentence. Once ordered deported, an illegal racks up $500 per day of continued “illegal presence.”
In addition, there are the perjury and false statements associated with fraudulently filling out federal tax forms. Each instance carries up to a five-year prison sentence and a $250,000 fine. Then there is the wide array of crimes relating to forging false documents needed to obtain work. Punishments for those crimes range from civil fines to 25 years in prison.
Also, there are crimes relating to the misuse of Social Security numbers needed to obtain work. Those crimes can result in five years in prison and a $250,000 fine.
Businesses that have committed any alien-hiring crimes would be forgiven under the provisions of the bill, although the laws would remain on the books and, thus, future violations could be prosecuted.
In addition to absolving illegals for past misuse of Social Security numbers and documentation, the Senate last week voted to allow aliens to get Social Security benefits based on working in the United States illegally…
What a day in America, when conservatives find themselves agreeing with the porkmeister Senator Byrd!
On a more serious note, think about the implications of this crazy course we are going down: I am sure the content of this bill makes a number of law-abiding U.S. citizens wonder why they cannot get an amnesty from the Senate should they choose to consciously violate American laws in the future, like these illegal immigrants and corporations have done. After all, if the rule of law is to be selectively applied and people who violate laws can have penalties on their crimes waived retroactively, doesn’t that create an impulse where others will want our country to become consistently arbitrary in its application of its laws? The consequences of this are non-trivial, as noted here and here.
Second, the agency responsible for processing over 10 million illegal immigrants is not prepared:
Immigration bill’s timeline hit from Washington Times:
The director of U.S. Citizenship and Immigration Services, the agency that would administer a new guest-worker program and rule on applications from millions of illegal aliens, says the pending Senate bill doesn’t give his agency enough time to prepare for that giant task.
“Quite frankly, I don’t think that’s really practical. Ninety days to register 12 million people. Do the math,” Emilio T. Gonzalez, who took over as director early this year, told The Washington Times…
If Congress passes an immigration bill that includes a temporary-worker program, a path to citizenship for illegal aliens, or both, USCIS will be the agency that has to administer it.
Under the pending Senate bill, and under President Bush’s new vision, illegal aliens would be divided into long-time and short-time residents, with most of the long-time residents being conferred an eventual right of citizenship. But given the prevalence of fraudulent documents, the problem will be determining who is a long-time resident…
USCIS is part of the Department of Homeland Security and is one of the three agencies that used to make up the Immigration and Naturalization Service.
The other two — U.S. Customs and Border Patrol and Immigration and Customs Enforcement — are law-enforcement agencies…
But Mr. Gonzalez says he is making it clear to his employees that they are part of national security, too — and the last line of defense in preventing terrorists from gaining a permanent legal foothold in the country…
But he said his agency definitely will need time to write regulations and handle the flood of applicants, which could top 10 million. He said he would need at least two to three times as much time as the Senate has called for in its bill…
Otherwise, he said, they risk a repeat of 1986.
“We’re litigating cases today from 1986. And I think the reason we’re doing that — I’m not a lawyer, by the way — is, if you don’t take care of the details, that’s what’s going to bring you down,” he said…
Third, we are releasing illegal immigrants after their apprehension without knowing if they are associated with any potential terrorism risk factors:
Illegals released for lack of funding from the Washington Times:
More than one-third of the illegal aliens apprehended each year and found to be “removable” from the United States are released because of a lack of personnel, a shortage of beds and inadequate funding to hold them while determining their legal status, a report says.
The inability of U.S. Immigration and Customs Enforcement (ICE) to ensure their departure — including those who pose national-security or public-safety threats — exposes the country to “significant risks” from would-be terrorists and criminals, said a report by the Department of Homeland Security’s Office of Inspector General.
The report, released Thursday, said that of 774,112 illegal aliens apprehended during the past three years and ruled to be “removable,” 280,987 — or 36 percent — were released because of a lack of personnel, bed space and funding.
“This presents significant risks due to the inability of Customs and Border Protection (CBP) and ICE to verify the identity, country-of-origin, and terrorist or criminal affiliation of many of the aliens being released,” the report said.
The report said that although apprehensions have climbed by 19 percent since 2002, authorized personnel and funded bed-space levels have dropped by 3 percent and 6 percent, respectively. It said those “shortfalls encourage illegal immigration by increasing the likelihood that apprehended aliens will be released while their immigration status is adjudicated.”
A removable alien is one who has been found to have violated immigration law, pending an appeal, or committed a crime or poses a security risk…
Meanwhile, Senator Feinstein wants to expand the pool of illegal immigrants eligible for citizenship. The same article notes that “Last night in the Senate, Majority Leader Bill Frist filed a “cloture motion” to ensure a final vote on the immigration reform legislation before the end of this week. The Senate yesterday also rejected a proposal by Sen. Saxby Chambliss, Georgia Republican, aimed at removing an incentive for farmers to hire illegal aliens. The amendment would have equalized the wages paid to immigrants working on farms.”
And, it is not a surprise that “Since March, the average weekly number of driver’s license applications by immigrants and illegal aliens has nearly doubled in Maryland, where legal residency is not required of applicants.”
And why do we think this Senate bill will improve the failed status quo?
The Heritage Foundation has been quite active in the illegal immigration public policy debate; some of their major research papers are listed below:
Robert Rector on Senate Immigration Bill Would Allow 100 Million New Legal Immigrants over the Next Twenty Years
Robert Rector on Amnesty and Continued Low Skill Immigration Will Substantially Raise Welfare Costs and Poverty
Matthew Spalding on Making Citizens: The Case for Patriotic Assimilation
Tim Kane and Kirk Johnson on The Real Problem with Immigration… and the Real Solution
Kirk Johnson on The Senate Compromise on Immigration: A Path to Amnesty for Up to 10 Million
Kris Kobach on Courting Chaos: Senate Proposal Undermines Immigration Law
Kirk Johnson on The SAFE Visa: A Good Starting Point for a Truly Temporary Guest Worker Proposal
James Jay Carafano on Senate Immigration Plan Fails to Deliver Comprehensive Border Security
James Jay Carafano on Immigration Enforcement and Workplace Verification: Sensible Proposals for Congress
Another thoughtful policy piece is Newt Gingrich on Ending the Dishonesty: The Way Forward on Border Control and Patriotic Immigration.
Other recent commentaries include:
Mickey Kaus
Stanley Kurtz
Tom Bevan of Real Clear Politics
John Pohoretz
John Derbyshire
Michelle Malkin
Power Line
Power Line
Power Line
For previous posting information, refer to Parts I, II, III, IV and V.
This posting is Part IV in a series of postings about economic thoughts.
This posting contains excerpts from a January 2005 Reason magazine article, entitled Hayek for the 21st Century, which discusses biographer Bruce Caldwell’s thoughts on Nobel Laureate Friedrich Hayek’s ideas regarding: (i) the abuse of reason; (ii) fallacies and dangers of centralized planning; (iii) prices & knowledge; and, (iv) understanding limitations.
The Abuse of Reason
Bruce Caldwell: In the 1930s, Hayek was writing articles criticizing the economics of socialism…In Hayek’s Challenge, I mention [sociologist] Karl Mannheim in particular as a figure who argued that planning was the only way to avoid totalitarianism, but everyone was making a similar sort of argument. Hayek turned that on its head and said that extensive planning of the economy was in fact the road to serfdom, to less and less freedom.
He was engaging a widespread belief that socialism was not only more just but more efficient than capitalism, that it was the way to make the world work better. Not just economics should be planned. Science should be planned. Everything should be planned. There was an influential magazine around at the time called Science. Virtually every third or fourth week, they’d run an editorial that said we need to have scientists helping plan all sorts of things. Not just the war effort, but everything about the economy to make it work better. This is what everyone who was “intelligent” thought.
If you look at the early 1930s, there was this sense that the Soviet Union had a huge commitment to science and scientific progress…
His critique of the way “science” gets used in social settings. Science is a very powerful tool that has brought a lot of technological and material progress. But the mistaken notion that we can plan social structures and social realities and social institutions in the same way that we can accomplish goals like putting people in space is very, very seductive. That belief is something that never goes away. Hayek’s critique of that mind-set is part and parcel of The Road to Serfdom and many of his other writings. Road is part of a larger effort called “The Abuse of Reason Project,” which attacked what he eventually called “rationalist constructivism,” the idea that we are able to reconstruct or correct society along rational lines.
He argued that you can’t easily improve on what he called “spontaneous orders.” There are many situations in which an order has arisen by individuals following rules. They often can’t articulate why they follow the rules, some of them are moral rules, whatever, and this has lead to a certain amount of coordination of people’s activity. To the extent that it’s done, that it’s allowed, groups that have followed those rules tend to prosper. That’s what he defined as “a spontaneous order.”…Language, the market, money, and more reflect this.
To simply come in and say, “OK, this stuff all needs changing,” ignores that social evolution has taken place through time…
The way socialism was implemented in the 20th century is one of the pre-eminent examples of what goes wrong when you try to reconstruct society along more “rational” lines…
Fallacies & Dangers of Centralized Planning
Reason: Give us the stripped-down version of The Road to Serfdom.
Caldwell: Let’s say you agree that the definition of socialism is the ownership of the means of production by the state. That means the state is making decisions about production…
Hayek’s point is that when people are not under war conditions, they have many different values. So the question then becomes, if you have socialism, who makes the decision of what gets produced? If people have different values, they are going to disagree with the planners. The planners end up being frustrated because they are unable to decide what to produce and gain full consensus. So they completely take over the production process. Hayek argues that you can’t make that neat separation between economics and politics that implicitly fills in the claims of the socialists.
…I think his argument was shown to be absolutely correct. States that went to full socialization of production also placed considerable restrictions on personal liberty and decision making. You don’t get the kind of choice that you get under a more liberal system.
Prices & Knowledge
Reason: Beyond his critique of wide-scale social planning, what would you say are Hayek’s other major contributions to 20th century thought?
Caldwell: Another very important one has to do with the role of prices in coordinating social action where knowledge is dispersed.
…The model that was then used to describe how an economic system works assumed that all agents had full knowledge and that [an efficient distribution of goods and services] gets obtained [through various transactions]. Some of the socialists argued that the differences between socialism and capitalism, or the market system, were really about what set of people [made the transactions]. Under socialism, you had planners; under capitalism, you had individuals.
Reason: And the socialists argued that their planners could coordinate the production and distribution of goods and services with less trial and error, more quickly, more efficiently?
Caldwell: That’s right, because they would be centrally gathering information. The socialists argued that individual entrepreneurs are just looking over their own markets whereas the planners are taking everything into account.
Hayek said, “Well, wait a second, this does not make sense. Markets do a lot of stuff, but this model does not shed light on what markets do.” He zeroed in on the critical assumption of full or perfect information. He said that in the real world, we have millions of individuals who have little bits of knowledge. No one has full knowledge, and yet we see a great deal of social coordination. As Frederic Bastiat said, “Paris gets fed.” No one intentionally plans on feeding Paris, but millions upon millions of people get up every morning and get what they want for breakfast. How does that happen? Hayek’s answer is that a market system ends up coordinating individual activity. Millions of people are out there pursuing their own interests, but the net result is a coordination of economic activities. And prices are the things that contain people’s knowledge.
Mainstream economists have picked up on this and talk about prices as containing information. Modern information theory certainly nods to Hayek as a precursor. He argued that pricing contains knowledge of specific time and place and the man on the spot. Prices contain knowledge that is tacit, that can’t really be expressed by individuals. Individuals make actions in markets, and that’s what causes prices to be what they are. People are acting in markets. They are not always explicitly saying why they are acting, but they are acting on their knowledge of local situation, the past, and more…
Understanding Limitations
Reason: What do you think Hayek’s legacy in the 21st century will be?
Caldwell: To the extent that the ideas in papers like “The Theory of Complex Phenomena” get developed, that could be a big part of his legacy. He didn’t get very far in developing the concept, but it’s the basis for his claims that what we can know in the social sciences is ultimately very limited. It holds that pattern predictions are the best that we can often do when it comes to society. He suggested that it’s better to provide explanations of the principle by which something works than to make precise predictions of how people will act.
Reason: So he taught us that the starting point of our plans has to be a recognition of the necessary limits of our understanding, that the grand old Enlightenment dream of total knowledge has to be replaced with one that is limited and provisional.
Caldwell: That is a Hayekian theme. One of the things that I take away from Hayek is you can’t really prove any of this stuff in a traditional way. What you can do is develop a way of thinking and all sorts of different evidence that ultimately convinces you that this is an appropriate way of looking at this particular type of social phenomenon. I think this is part and parcel of Hayek’s method. It’s certainly what I took from him in my book.
Understanding the limits of what we can do is an important legacy. And so is understanding that in trying to do too much, we often end up making situations much worse.
Part V to follow…
For previous postings on Economic Thoughts, refer to:
Part I: What is Economics?
Part II: Myths About Markets
Part III: Why Policy Goals are Trumped by Incentives They Create & the Role of Knowledge in Economics
Jim Haldeman is a candidate for State Representative in Rhode Island’s 35th district (South Kingstown). Though this will be his first campaign for elected office, it is certainly not his first experience with politics and government…
During a seven month period from March — September 2005, [Lt. Col. Haldeman] acted as principle representative of the U.S led coalition in Fallujah, where his primary role was to build relations with the people and to establish a new government in Fallujah and surrounding areas. His contributions stand out in several areas. As quoted by Kael Weston, Department of State Representative…
Lt. Col Haldeman’s contributions in Fallujah warrant special recognition. His role stands out even in a setting where so many others have contributed so much to overarching U.S. objectives. Lt. Col Haldeman’s performance and commitment helped ensure that incoming Marines are well-positioned to build on the groundwork that he and his CMOC team have laid. He represents the best traditions and high standards of the U.S. Marine Corps.
Continuing his answer to Anchor Rising’s question about running for office, Mr. Haldeman discussed the dangerous trends that are shaping the future of Rhode Island…
Right now, the kids who are graduating from college are not coming here. They’re not staying here. They’re going to Massachusetts and New Hampshire and Connecticut. And as I make my rounds and talk to the older generation, they tell me they’re leaving too. They stayed for only one reason — because their kids were here. But now that the younger generation can’t find a job, the parents and the grandparents are deciding to leave Rhode Island because they can’t take the tax burden.But there is more to leading — especially leading youth — than economics. Jim Haldeman discussed a special concern of his in this vein…
Rhode Island is stuck with a younger generation not staying, an older generation that’s leaving, and a middle income tax base being forced to take care of all of the problems in Rhode Island. Changing this is going to take someone willing to go the General Assembly and talk about these things instead of talking about lemons and oranges at the package store.
I am going to be a big advocate for youth physical education. I’ve played sports all my life. If you affect children’s health, there will be less stress on healthcare.Finally, Mr. Haldeman gave his view of the big-picture…
We have to break the cycle and get people to be healthy and stay healthy. I don’t know exactly how I’m going to do it. There are a lot of issues, but we need to get kids away from the computers and TV for part of the day and get them to be physically active. We need to educate the youth and break that chain of inactivity. I will find a way to be a big proponent on this.
My opponents can go hobnob with the all the big unions and the NEAs, and that’s fine, but the only special interest group I want to work with is called the taxpayers.
There’s a big transition taking place here in Rhode Island and I just happen to be fortunate enough to be able to ride the wave. Things are happening. Things are changing. You see it in the front pages. People want to really become educated and want to know answers and why what has happened to our state has happened. There’s going to be quite a few people hit-up in the General Assembly and asked, why is this happening?
Jim Haldeman had contemplated runnng for State Senate in Rhode Island’s 37th district, but recently decided to run for Representative in the 35th. His official campaign website will be updated soon to reflect this. In the 35th district, his opponent will be John Patrick Shanley. [Open full post]
Conventional wisdom holds that voters don’t pay much attention to city council endorsements. Here is an endorsement worth paying attention to: Jim Haldeman, candidate for State Representative in Rhode Island’s 35th district (South Kingstown), has received expressions of support from the city council and the mayor of Fallujah — as in Fallujah, Iraq.
Here’s a short snippet of Jim Haldeman’s biography(*) that explains why he is in a position to receive an unofficial but heartfelt endorsement from Iraq…
Jim volunteered for military duty in Iraq in 2005. He performed with distinction as the Civil-Military Operations Center (CMOC) Commander in Fallujah, Iraq. This position is amongst the most important and sensitive in Al-Anbar Province. During a seven month period from March — September 2005, he acted as principle representative of the U.S. led coalition in Fallujah, where his primary role was to build relations and establish the new government in Fallujah and surrounding areas…
I had the opportunity to put the following question to Mr. Haldeman: When it comes to working with government, you’ve done the toughest job in the toughest place in the world to do it. Why step into what, by comparison, is the Keystone Cops world of Rhode Island politics?
Mr. Haldeman began his answer by talking about his experience in Fallujah…
Going over to Fallujah was a rewarding experience for me.Next, he talked about a local concern that is part of the motivation for his run…
I’ve done nothing more rewarding than go into a city of 250,000 who had been dealing with forty years of dictatorship and tyranny and change the lives of real people and develop a government by working with the people and building sincere and true friendships. That’s what I was supposed to do there, establish the human element of relations with as many of the Iraqi people as I could.
The other stuff got done. We had the Army Corps of engineers and all those kinds of people, but mine was a face-to-face mission, doin’ a lot of man-hugs and building human, personal relationships. I think I accomplished that.
I think politics is a philosophy of personal relationships. It’s how you deal with people. That’s my issue. I’m really fed up with Rhode Island politics, and that’s why I’m getting into it. That’s why I went to Fallujah. I wanted to find out what was really happening over in Iraq, and I found out. I can make a change here, just like I did there.
I think about the LaPlante Memorial Center. It is a center for the mentally handicapped. It deals with the whole gamut of mental retardation, from 6 month-old children to a group old enough to work. There are 130 clients there. 30 of them are in our community, working every day. They’re at Belmonts, at Shaws, at McDonalds.Mr. Haldeman then explained how the state legislature is failing the clients of the LaPlante Center and Rhode Islanders in general…
You first walk into LaPlante and it breaks your heart; it tears at your soul to see them. But then you quickly realize the genuine dignity and pride that they have when they talk about working. The self-reliance and true dignity that these clients show when they talk about themselves is great. It is really inspiring to see that.
Now, LaPlante’s clients have every right to feel sorry for themselves. They are the people who should be using the government as their safety net. They don’t have to go out and work and yet they do. But as I was touring the facility, the manager of the place told me they’re on the chopping block to lose state funds. This just one case of the full-circle economic debacle that is hurting Rhode Island.
Here you have the people who are running the General Assembly, who are supposedly the advocates of taking care of the truly needy, 85% from one party. Are they talking about healthcare reform? Are they talking about pension reform? Are they talking about welfare reform? Are they talking about tax-reform?More to come…
On healthcare and pension reform, the legislature is not talking about simple economic reforms like increasing accountability and ownership. As a union member myself, I think union members deserve more options in their health care and pension benefits. A “one size fits all” approach does not serve the union member or the taxpayer well.
And instead of creating incentives for the most vulnerable of the working class to move down the rungs of the ladder and go on welfare, we should be providing incentives that help people move upward. But when you are a state that is allowing itself to be nearly last in business friendliness, it’s not going to happen. There’s no reason Rhode Island should be fourth in income tax, or sixth in tax-burden. We’re 48th in business friendliness, absolute last in establishing jobs and absolute last is moving people off of welfare and into jobs. Rhode Island keeps people up to 39 months on welfare.
Rhode Island now stands first in the country in having the most costly welfare system. This shows the General Assembly’s deficit in understanding basic economics. By not moving forward with welfare reform, the legislature, and not the Governor, is threatening the truly needy in Rhode Island. Governor Carcieri has shown great vision in trying to steer this state toward greater prosperity. The Governor understands that good job creation will build wealth in Rhode Island. This state’s real problem is that the legislature has created a hostile environment for potential job growth.
It’s a silly operation, it’s nonsensical, and it needs to be stopped right now, or we are doomed. We have got to change those statistics.
(*) Note: Jim Haldeman had contemplated runnng for State Senate in Rhode Island’s 37th district, but recently decided to run for Representative in the 35th. His official campaign website will be updated soon to reflect this. In the 35th district, his opponent will be John Patrick Shanley. [Open full post]
This posting is Part III in a series of postings about economic thoughts.
The excerpts in this posting are taken from Chapter 24, entitled Parting Thoughts, in Thomas Sowell’s book Basic Economics: A Citizens Guide to the Economy and discuss: (i) why policy goals are trumped by incentives they create; and, (ii) the role of knowledge in economics.
Why Policy Goals are Trumped by Incentives They Create
Many economic fallacies depend upon not thinking beyond the initial consequences of particular policies…
One of the recurring themes in our consideration of various policies and institutions…has been the distinction between the goals of these policies and institutions versus the incentives they create…
What must be asked about any goal is: What specific things are going to be done in the name of that goals? What does the particular legislation or policy reward and what does it punish? What constraints does it impose? Looking to the future, what are the likely consequences of such incentives and constraints? Looking back at the past, what have been the consequences of similar incentives and constraints in other times and places?…
The Role of Knowledge in Economics
In addition to the role of incentives and constraints, one of our other central themes has been the role of knowledge. In free market economies, we have seen giant multi-billion dollar corporations fall from their pinnacles…because their knowledge of changing circumstances, and the implication of those changes, lagged behind that of upstart rivals…The public benefitted from that, by getting what it wanted at lower prices…
In centrally planned economies, we have seen the planners overwhelmed by the task of trying to set literally millions of prices and keep changing those prices in response to innumerable and often unforeseeable changes in circumstances. It was not remarkable that they failed so often. What was remarkable was that anyone had expected them to succeed, given the vast amount of knowledge that would have had to be marshalled and mastered in one place by one set of people…
Given the decisive advantages of knowledge and insight in a market economy…we can see why market economies have outperformed other economies that depend on ideas originating within a narrow elite of birth or ideology. While market economies are often thought of as money economies, they are still more so knowledge economies, for money can always be found to back new insights, technologies and organizational methods that work…Capital is always available under capitalism, but knowledge and insight are rare and precious under any system.
Knowledge can be bought and sold in a free market, like anything else…
Knowledge should not be narrowly conceived as the kind of information in which intellectuals and academics specialize…
In reality, there is much that the intelligentsia do not know that is vital knowledge in the functioning of an economy. It may be easy to disdain the kinds of highly specific knowledge and implications which are often economically decisive by asking, for example: How much knowledge does it take to fry a hamburger? Yet McDonald’s did not become a multi-billion-dollar corporation…for no reason – not with so many rivals trying desperately and unsuccessfully to do the same…
…In all these cases, it was the knowledge that was built up over the years – the human capital – which ultimately attracted the financial capital to make ideas become reality. The other side of this is that, in countries where the mobilization of financial resources is made difficult by deficiencies in property rights laws, those at the bottom have fewer ways of getting the capital needed to back their entrepreneurial endeavors. More important, the whole society loses the benefits it could gain…
Success is only part of the story of a free market economy. Failure is at least as important a part, though few want to talk about it and none want to experience it…Economics is not about “win-win” options, but about often painful choices in the allocation of scarce resources which have alternative uses. Success and failure are not isolated good fortunes and misfortunes, but inseparable parts of the same process.
All economies…are essentially ways of cooperating in the production and distribution of goods and services, whether this is done efficiently or inefficiently, voluntarily or involuntarily. Naturally, individuals and groups want their own particular contributions to the process to be better rewarded, but their complaints or struggles over this are a sideshow to the main event of complementary efforts which produce the output on which all depend. Yet invidious comparisons and internecine struggles are the stuff of social melodrama, which in turn is the lifeblood of the media and politics, as well as for portions of the intelligentsia.
By portraying cooperative activities as if they were zero-sum contests…those with the power to impose their misconceptions on others through words or laws can create a negative-sum contest, in which all are worse off…
Those with a zero-sum vision who have seen property rights as mere special privileges for the affluent and the rich have helped erode or destroy such rights, or have made them practically inaccessible to the poor in Third World countries, thereby depriving the poor of one of the mechanisms by which people from backgrounds like theirs have risen to prosperity in other times and places.
However useful economics may be for understanding many issues, it is not as emotionally satisfying as more personal and melodramatic depictions of these issues often found in the media and in politics. Dry empirical questions are seldom as exciting as political crusades or moral pronouncements. But they are questions that must be asked, if we are truly interested in the well-being of others, rather than in excitement or a sense of moral superiority for ourselves. Perhaps the most important distinction is between what sounds good and what works. The former may be sufficient for purposes of politics or moral preening, but not for the economic advancement of people in general or the poor in particular…
Part IV to follow…
For previous postings on Economic Thoughts, refer to:
Part I: What is Economics?
Part II: Myths About Markets
