Equality of Income: Richard Epstein of NYU School of Law on the subject of Income Distribution

Watch Does U.S. Economic Inequality Have a Good Side? on PBS. See more from PBS NewsHour.

HT Cafe Hayek blog

Class Warfare Politics: upon further review, poverty is the best policy

Each time class warfare politics raises its ugly head in regards to taxes, the rich are vilified and the vilification is used to argue for an increase tax on the so called “rich“. The argument put forth by politicos is the general and usual notional argument with concepts such as “fair”, “just”, “fair share” and so on. Purely political notional concepts that only have absolutely no meaning except in the context the politico presents e.g. fair is merely what you are doing and the other guy is not doing. That is to say, its an argument with no arguments. Vilification and notional concepts do not make for empirical underpinnings of any policy be it public or private.

Moreover, when the dust clouds of class warfare politics settle, everyone ends up paying more taxes. Stated alternatively, if one climbs on the magical bus of class warfare to tax the rich, at some point one has their very own class warfare bus ticket punched and ends up thrown under the bus of higher taxes. Odd huh?!?

Its not really that odd at all. You see, in a system of “some people” politicos want/need more money to spend. Why? The conduit of taxpayer dollars must increase at an increasing rate allowing the politico to use such funds for political constituency building exercises. Special interests and dependency constituencies [recipient class] are built with taxpayer money. The existing taxpayer-dollar-funded-constituencies, as well as any newly proposed constituency building targets, require vast amounts of taxpayer dollars flowing into the sphere of the politico. The flow must increase at an increasing rate in order for the politico to “grow their constituency”.


“Here it may suffice to observe that, on the theories of the social philosophers to whom I have referred, we should get a new maxim of judicious living: Poverty is the best policy. If you get wealth, you will have to support other people; if you do not get wealth, it will be the duty of other people to support you“. - W.G. Sumner (1)


Therefore, the politico promoted class warfare argument purposely plays James and Jane Goodfellow for saps. It sounds great as the politico weaves and frames the argument that you can have some other group of people pay for some crisis or problem. The politico is going to save you from the expense of solving a problem by merely making someone else pay for the problem.

The question one must ask oneself is: the centuries upon centuries of basically the exact same politico promoted class warfare argument has done exactly “what” to solve any and all problems? The politico wants you to judge them by their intentions and not their results. Exactly what results do we have presently? Do we have a tax problem or a spending problem? The politico wants the answer to be that we have a tax problem as they want more tax dollars to “grow their constituency”. The politico must direct the problem away from the spending side of the equation as decreases in spending means the collapse of existing political constituencies built and dependent on taxpayer dollars and disallows the acquisition of newly proposed constituency building targets.

“The good news is that, according to the Obama administration, the rich will pay for everything. The bad news is that, according to the Obama administration, you’re rich.” - P.J. O’Rourke

Notes:

(1) On a New Philosophy: That  Poverty is the Best Policy, William Graham Sumner, 1883

　

　

Saving the American Idea: Rejecting Fear, Envy and the Politics of Division - by Paul Ryan

Occupy: The 1883 Response.

The excerpts below are from the "forward" of the 1883 book by William Graham Sumner entitled What Social Classes Owe to Each Other. Take special note of the second paragraph below.


“Who are those who assume to put hard questions to other people and to demand a solution of them? How did they acquire the right to demand that others should solve their world-problems for them? Who are they who are held to consider and solve all questions, and how did they fall under this duty?

So far as I can find out what the classes are who are respectively endowed with the rights and duties of posing and solving social problems, they are as follows: Those who are bound to solve the problems are the rich, comfortable, prosperous, virtuous, respectable, educated, and healthy; those whose right it is to set the problems are those who have been less fortunate or less successful in the struggle for existence. The problem itself seems to be, How shall the latter be made as comfortable as the former? To solve this problem, and make us all equally well off, is assumed to be the duty of the former class; the penalty, if they fail of this, is to be bloodshed and destruction. If they cannot make everybody else as well off as themselves, they are to be brought down to the same misery as others“.


“The little group of public servants who, as I have said, constitute the State, when the State determines on anything, could not do much for themselves or anybody else by their own force. If they do anything, they must dispose of men, as in an army, or of capital, as in a treasury. But the army, or police, or posse comitatus, is more or less All-of-us, and the capital in the treasury is the product of the labor and saving of All-of-us. Therefore, when the State means power-to-do it means All-of-us, as brute force or as industrial force.

If anybody is to benefit from the action of the State it must be Some-of-us. If, then, the question is raised, What ought the State to do for labor, for trade, for manufactures, for the poor, for the learned professions? etc., etc. - that is, for a class or an interest - it is really the question, What ought All-of-us to do for Some-of-us? But Some-of-us are included in All-of-us, and, so far as they get the benefit of their own efforts, it is the same as if they worked for themselves, and they may be cancelled out of All-of-us. Then the question which remains is, What ought Some-of-us to do for Others-of-us? or, What do social classes owe to each other?

I now propose to try to find out whether there is any class in society which lies under the duty and burden of fighting the battles of life for any other class, or of solving social problems for the satisfaction of any other class; also, whether there is any class which has the right to formulate demands on "society" - that is, on other classes; also, whether there is anything but a fallacy and a superstition in the notion that "the State" owes anything to anybody except peace, order, and the guarantees of rights“.

William Graham Sumner’s famous essay “The Forgotten Man”

“I PROPOSE in this lecture to discuss one of the most subtile and widespread social fallacies. It consists in the impression made on the mind for the time being by a particular fact, or by the interests of a particular group of persons, to which attention is directed while other facts or the interests of other persons are entirely left out of account. I shall give a number of instances and illustrations of this in a moment, and I cannot expect you to understand what is meant from an abstract statement until these illustrations are before you, but just by way of a general illustration I will put one or two cases“. - William Graham Sumner, 1883 (1)

Above is the opening paragraph of William Graham Sumner’s famous essay “The Forgotten Man” written in 1883. And what did Sumner propose to discuss as a widespread social fallacy?

“These illustrations bring out only one side of my subject, and that only partially. It is when we come to the proposed measures of relief for the evils which have caught public attention that we reach the real subject which deserves our attention. As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X or, in the better case, what A, B and C shall do for X. As for A and B, who get a law to make themselves do for X what they are willing to do for him, we have nothing to say except that they might better have done it without any law, 'but what I want to do is to look up C. I want to show you what manner of man he is. I call him the Forgotten Man. Perhaps the appellation is not strictly correct. He is the man who never is thought of. He is the victim of the reformer, social speculator and philanthropist, and I hope to show you before I get through that he deserves your notice both for his character and for the many burdens which are laid upon him“.

　

“Whenever A and B put their heads together and decide what A, B and C must do for D, there is never any pressure on A and B. They consent to it and like it. There is rarely any pressure on D because he does not like it and contrives to evade it. The pressure all comes on C. Now, who is C? He is always the man who, if let alone, would make a reasonable use of his liberty without abusing it. He would not constitute any social problem at all and would not need any regulation. He is the Forgotten Man again, and as soon as he is brought from his obscurity you see that he is just that one amongst us who is what we all ought to be”.

　

A politico by the name of Franklin D. Roosevelt (FDR) used the phrase “the forgotten man” in many of his campaign/political speeches. Roosevelt used the phase in a diametrically opposite context/meaning. That is, Roosevelt co-op-ed the phrase and possibly, and possibly meaningfully, rewrote history regarding the phrase “the forgotten man“. Roosevelt basically switched the position of “the forgotten man” within Sumner’s formula. Roosevelt merely moved the forgotten man from C to D or X and elimiated C. (2) In other words, the formula was turned upside down to generate a different meaning by eliminating C from the formula, and now A and B are providing for “the forgotten man”.

However, the essay remains and for those who would enjoy some 1883 insight, insight that remains today, the link to the essay appears below.

Note: once you reach the link scroll down a bit and the essay appears below the fold.

http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=2396&chapter=226423&layout=html&Itemid=27




Notes:

(1) William Graham Sumner, The Forgotten Man and Other Essays.

(2) Amity Shlaes, The Forgotten Man, a New History of the Great Depression.

Statistics, Conclusions, and Evidence

"Anyone who looks through enough statistics will eventually find numbers that seem to confirm a given vision. Often, the same set of statistics contains other numbers that seem to confirm diametrically opposite conclusions. The same is true of anecdotal ‘facts.’ That is why evidence is different from mere data, whether numerical or verbal.

Scientific evidence, for example, comes from systematically determining–in advance–what particular empirical observations would be seen if one theory were correct, compared to what would be seen if an alternative theory were correct. Only after this careful and painstaking analysis has been completed can the search begin for facts that will differentiate between the competing theories. Seldom is this approach used by those who believe in the vision of the anointed. More typically, they look through statistics until they find some numbers that fit their preconceptions, and then cry, ‘Aha!’ Others with different views can, of course, do the same thing. But only those with the prevailing views are likely to be taken seriously when using such shaky reasoning". -Thomas Sowell (1)

Notes:

 (1)  The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy, Thomas Sowell, 1985, page 32

Duke Power Rate Hike? –Or- Rate Hike by Politicos through the Mechanism of Government?

 
Buried in Duke Energy's rate hike are two items: legal monopoly position of Duke Power and the coercive acts by politicos through the mechanism of government to cause Duke to purchase from uncompetitive, subsided energy sources.

Public utilities such as Duke Energy are legal monopolies caused by policies and legislation sponsored in part and promoted in full by the FDR administration. Power was produced privately in a robust competitive market before the policies of the FDR Administration.

Monopoly practices speak for themselves. However, it is worth pointing out that certain politicos do not oppose monopoly; they only oppose private monopoly and welcome public or state monopoly.

The other item to consider is yet another government intervention into the market for electrical power, namely the coercive power of politicos through the mechanism of government to mandate purchase of electrical power from uncompetitive, subsidized energy sources e.g. solar and wind power. Solar and wind power cost per kilowatt hour are far above [in some case four times] the cost to produce power by other means: coal, natural gas, and nuclear where available.

Moreover, a second cost exists for consumers: the cost of tax payer subsidies to solar and wind power companies.

Hence the consumer of electricity is suffering from the effects of monopoly delivery, artificially inflated prices, and is subsidizing the artificially inflated price to boot.

Maybe consumers and taxpayers would be better calling for competitive electrical generation in the private sector, where private companies are free to choose their electric power supply source, and to end taxpayer subsidies to uncompetitive companies.

H/T Triadwatch blog

Equality of Income: The New, Newer, Newest Crisis of self-congratulatory social policy.

A central element in the development of a collectivist sentiment in this century, at least in Western countries, has been the belief in equality of income as a social goal and a willingness to use the arm of the state to promote it. Two very different questions must be asked in evaluating the egalitarian sentiment and the egalitarian measures it has produced. The first is normative and ethical: what is the justification for state intervention to promote equality? The second is positive and scientific: what has been the effect of the measures actually taken? - Milton Friedman (1)

Friedman is asking an excellent question: what exact justification do politicos, through the mechanism of government, regard as empirical evidence for the promotion of equality of income. Friedman’s second question is: regardless of the justification, what is the effect/result of such political actions in the realm of equality of income?

Keeping the above two questions in mind, Friedman refers to “development of a collectivist sentiment” as a group promoting equality of income but left the details of the group unidentified. That is to say, the above two questions posed by Friedman are directly related to a group promoting such sentiment. Deferring to James Buchanan and public choice theory, we can, as a general rule, count out an organized “sentiment” emanating from a highly diffused voter and/or taxpayer. That is, James and Jane Goodfellow are not the group in question. Enter Thomas Sowell and “visions”. (2)

 The group promoting the equality of income argument was subsequently identified by Thomas Sowell. The Vision of the Anointed, A Conflict of Visions, and Intellectuals and Society identify ideological crusades [how society should be organized] of the twentieth century and continuing today. Sowell identifies  a group of self-appointed intellectuals, supported by media intelligentsia and the academic intelligentsia,  are promoted based upon the “moral exaltation of the anointed”. Moreover,, the general argument put forward by the anointed is notional and not empirical. Stated alternatively, particular “visions” are notional proposition, based on “the way things out to be”, argued through verbal virtuosity, and ending in the promoters of the vision merely painting the world in their own self-image. (3) (4) (5)

 One additional item that needs examined is the attempt to frame arguments by comparing the imperfect with the perfect. (6) That the anointed choose a social subject then compare the imperfection of the subject with the unreal world of perfections.  The difference between perfection and imperfection is then put forward as a problem. The now identified “problem” can only be solved through the achievement of their particular vision.

Hence we have identified the group promoting “sentiment” and this group’s justification is merely their particular notional vision with the vision further promoted as a vision of moral exaltation.

Next we need to examine equality of income in its action phase or “distribution of income”. Pundits, talking heads, media types, and the anointed themselves put forth a battery of statistics showing how distribution of income is incorrect. The problem with the statistics highlighted by those making the mal distribution of income argument is that they use “household statistics”. That is, the income producing components within a “household unit” have been declining for decades and decades (persona making up the household unit have been declining). Hence the number of people within a household has shrunk and hence the income produced by the household has shrunk as the income producing units within the shrinking household have declined). The correct measurement is per capita income which has risen. However, the per capita statistics do not support the anointed’s argument hence the anointed, academia, and media promote the statistic household income which is fallacious in this particular argument.

Closely related to the fallacious household income argument is the failure to account for taxes paid and benefits received [the actual transfer of income in action]. Stated alternatively, the income distribution statistic put forth as evidence are gross income statistics for higher end earners before taxes are extracted. Conversely, for lower income earners their incomes are shown before transfer payments are received such as: food stamps, aid for dependent children, Medicaid, unemployment benefits, housing subsidies, etc., etc. When taxes are extracted and subsequent benefits received are accounted for, the distribution of income statistics suddenly becomes much more equalized. However, just as pointed out above, the anointed, academia, and media promote the gross statistic before transfer which once again is fallacious in this particular argument.

One needs to pause for a moment and ask an important question: what is the exact empirical formula for the perfect distribution of income? Have you seen the formula? Problem is that no such formula exists. Hence is the current distribution the perfect formula? Was the distribution of income prior to 1880, 1905, or 1930 the correct distribution of income? Is mal-distribution of income the perfect formula? When no such formula exists a very common occurrence is the phenomena of “the middle”. That is, if one has no evidence that a perfect formula exists then one opts for the middle of two extremes. Stated alternatively, “equality of income” is really an argument of “middle of income” as the anointed have no formula to present and hence the middle must be the answer. That is, “equality of income” is not empirically based, its notional based and notionally presented.


“It is no less arbitrary and dogmatic to declare a priori that “the truth lies somewhere in between.” It may. It may not. On some highly specific issue, it may lie entirely on one side – and on another issue, with the other side. On still other issues, it may in fact lie in between.” Thomas Sowell, page 215, A Conflict of Visions.

A final point that needs examination before we proceed to Friedman’s question of “what has been the effect of the measures actually taken?” is that of the concepts of fair and just. “Fair” and “just” imply that something can in fact be determined as fair which makes it just. The problem arises that fair and just are basically political terms and not economic concepts. That is, fair and just have very little meaning other than the meaning one assigns in a particular situation. That fair and just are argument points of a political dimension, as subject A is fair and just if Z is undertaken, while subject B is fair and just if X is undertaken. That is, Z and X are merely political arguments to substantiate A and B. Stated alternatively, “fair” is merely what you are doing and the other person is not doing. That fair and just are merely notional argument points of a political type as the meaning assigned, is assigned, for persuasive reasons not empirical reasons.

Now we come to Friedman’s question of “what has been the effect of the measures actually taken?” According to the anointed and their vision the result is that the equality of income and its companion the distribution of income are in crisis. That is, in the last six months the anointed, academia, and media are promoting class warfare through the argument that equality of income and distribution of income are not fair and just. The problem is: the last eighty some years of policy, programs, and progressive taxation leading to transfer payment creating a supposed equality of income and just/fair distribution of income was their idea! The course of action over the last eighty years is their doing and now somehow one is supposed to forget the source of the action and merely concentrate on a manufactured “crisis”. How convenient!

The “convenience” of their argument has been identified by Thomas Sowell as the following formula: crisis, solution, results, response. A crisis is manufactured, a solution is proposed, the result is abysmal, and the response?

“THE RESPONSE: Those who attribute detrimental result Z to the policies instituted are dismissed as ‘simplistic’ for ignoring the ‘complexities’ involved, as ‘many factors’ went into determining the outcome. The burden of proof is put on the critics to demonstrate to a certainty that these policies alone were the only possible cause of the worsening that occurred. No burden of proof whatever is put on those who had so confidently, [but wrongly], predicted improvement. Indeed, it is often asserted that things would have been even worse, were it not for the wonderful programs that mitigated the inevitable damage from other factors. (7)

One must appreciate Sowell’s observation written in 1995 of “Indeed, it is often asserted that things would have been even worse, were it not for the wonderful programs that mitigated the inevitable damage from other factors”. Have you observed the above assertion regarding the many failed policies in the last three years? Further, if one were to point out the convenience element of the anointed, academia and media regarding their own policies being a part of their newest manufactured crisis, you will then be confronted with the non-empirical [argument with no argument] political talking point of “things would have been even worse”.

A final point, when mentioning Thomas Sowell’s book The Vision of the Anointed, that is merely an identifier as the complete title is: The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy. The complete title is very, very appropriate.

Notes:

 (1)    Capitalism and Freedom, Milton Friedman, 1962, reprinted as a fortieth anniversary edition, 2002, page 161.

(2)    James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy, 1958

(3)    (4) (5) Thomas Sowell, The Vision of the Anointed, A Conflict of Visions, and Intellectuals and Society

(6)    Capitalism and Freedom, Milton Friedman, 1962, reprinted as a fortieth anniversary edition, 2002

(7)    The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy, Thomas Sowell, 1985, pages 7 and 8

Living Standards and Economic Freedom

H/T: Cafe Hayek

Politicos Purposely Frame Arguments

'President Barack Obama and the Democratic Party have led increasingly successful efforts to pit Americans against one another through the politics of hate and envy. Attacking CEO salaries, the president -- last year during his Midwest tour -- said, "I do think at a certain point you've made enough money."

Let's look at CEO salaries, but before doing so, let's look at other salary disparities between those at the bottom and those at the top. According to Forbes' Celebrity 100 list for 2010, Oprah Winfrey earned $290 million. Even if her makeup person or cameraman earned $100,000, she earned thousands of times more than that. Is that fair? Among other celebrities earning hundreds or thousands of times more than the people who work with them are Tyler Perry ($130 million), Jerry Bruckheimer ($113 million), Lady Gaga ($90 million) and Howard Stern ($76 million). According to Forbes, the top 10 celebrities, excluding athletes, earned an average salary of a little more than $100 million in 2010.

According to The Wall Street Journal Survey of CEO Compensation (November 2010), Gregory Maffei, CEO of Liberty Media, earned $87 million, Oracle's Lawrence Ellison ($68 million) and rounding out the top 10 CEOs was McKesson's John Hammergren, earning $24 million. It turns out that the top 10 CEOs have an average salary of $43 million, which pales in comparison with America's top 10 celebrities, who earn an average salary of $100 million.

When you recognize that celebrities earn salaries that are some multiples of CEO salaries, you have to ask: Why is it that rich CEOs are demonized and not celebrities? A clue might be found if you asked: Who's doing the demonizing? It turns out that the demonizing is led by politicians and leftists with the help of the news media, and like sheep, the public often goes along.' - Walter E. Williams

Link to the entire essay Pitting Us Against Each Other by Walter E.. Williams appears below:

http://townhall.com/columnists/walterewilliams/2011/10/19/pitting_us_against_each_other

ObamaCare C.L.A.S.S. Provision Removal and the Fog of Politico Math

Budget Shenanigans - Wall Street Journal Political Diary, 10/18/2011, Joe Rago

　

“Congressional Republicans spent yesterday debating their political strategy options now that the Obama Administration has euthanized the Affordable Care Act entitlement program known by the acronym CLASS. The next question is how much of the rest of the law, as a practical matter, they should try to take out too. But they did receive a gift from the Congressional Budget Office, which showed unusual common sense in ruling that formally repealing the Class spending program for long-term care would not increase the deficit.

Welcome to the wilderness of mirrors that is the budget process. During the health-care debate, CBO scored the CLASS entitlement as a fiscal benefit because of a Democratic gimmick: The program would have collected $81 billion more in premium taxes over the next 10 years than it would have spent on home health aides and the like -- even though this huge new liability would then have started draining the federal fisc in the following decade. Under these rules, getting rid of Class "costs" $81 billion, which Republicans would have to offset.

　

But then the white smoke rose up from CBO, and in an email to staffers it ruled that it would adjust its baseline to "assume that the program will not be implemented," since the Administration itself junked CLASS. "Beginning immediately, therefore, legislation to repeal the CLASS provisions in current law would be estimated as having no budgetary impact," the message continued. In other words, repealing what is now a vestigial program merely ensures that the CLASS program remains vestigial, while actually preventing future taxpayer dollars from being spent would have also erased the fake deficit reduction.

This kind of non-logic shows why the budget process is so in need of reform. But anyway, CBO's blessing makes it much easier for House Republicans in particular to do some practical good. The White House let it be known yesterday that it opposes a formal repeal of the CLASS program even as it says that the program would be a disaster. Perhaps that's because it may try to revive CLASS in the future, as the Hill newspaper reported it was telling its political allies.

More likely, the veto threat comes because the White House knows that a repeal bill would also be a vehicle for also repealing some of the health-care laws more unpopular and harmful elements that Democrats would find it difficult to oppose -- which is why Republicans should use this new lever to the maximum extent“.

Upon Further Review: the math of taxing the rich and the corporation equals the null set.

Does history repeat itself, or does history repeat itself due to purposeful intervention?

Consider history repeating itself

Say one lived during the Great Depression and made a list, a check list as it were, of policy, politics, antics, regulation, etc. that occurred during the Great Depression under the FDR Administration. The check list would be a "tree" in that each point would have sub-points e.g. how a series of policies failed to improve unemployment, how certain policies were merely class warfare related, union thuggery, regulation and over regulation, general government mysticism, etc.. One then took the points and sub points and turned each item into puzzle pieces that when put together said: Great Depression - FDR Administration. Around 1946 the puzzle pieces were placed in a box and stored away.

Around the inauguration of Obama and the ensuing Obama Administation  one went to the closest shelf and removed the dusty old box from 1946. Each time a policy, politic, antic, regulation, etc. that occurred similar to an item in the Great Depression, you removed the corresponding puzzle piece from the box. As time went by the puzzle pieces would begin fitting together and would begin to shape the word picture: Great Depression - FDR Administration.

As the puzzle began to fit together some puzzle pieces remained in the box: protectionism, subsequent stimulus plans, and socialist marches. However, in short order the puzzle is finished: Senate China bashing bill, Obama jobs bill, and "occupy".

There you are, history repeated itself!


Consider history repeating itself due to purposeful intervention


Yes, history does have a nasty habit of repeating itself. Not only repeating itself, repeating itself in almost verbatim fashion. However, history may very well repeat itself because certain institutions, politicos, pundits, talking heads, social groups, etc. have revised history in such a way that the history is cloaked and doesn't seem to be actually repeating itself.

James and Jane Goodfellow might have great difficulty standing back and reflecting on events and seeing the common thread through the fog of revisionism. Which then begs the question: are the supposed astute, supposed educated, and supposed informed leaders of the revisionist movement merely insidious time bandits who purposely revise to cover up and distort so future generations can not benefit from the knowledge that history repeats itself ?

Stated alternatively, does history repeat itself, or does history repeat itself due to purposeful intervention?

Keynesianism: economic arguments or political arguments?

Maybe, just maybe Keynes merely had an opinion regarding economics aka The General Theory. Maybe, just maybe Keynesianism is the opinion turned into a branch of politics. Maybe, just maybe the politician has become dependent upon Keynesianism and Keynesianism dependent upon politician. Maybe, just maybe Keynesianism is a perpetuated phenomena that empowers the politico and has nothing to do with economics.

Consider media reports describing Keynesian arguments. Are the reports more descriptive of economic arguments or are the reports describing a politician or political arguments?

The following may be enlightening:

(A) “Keynes was exceedingly effective in persuading a broad group—economists, policymakers, government officials, and interested citizens—of the two concepts implicit in his letter to Hayek: first, the public interest concept of government; second, the benevolent dictatorship concept that all will be well if only good men are in power. Clearly, Keynes’s agreement with “virtually the whole” of the Road to Serfdom did not extend to the chapter titled “Why the Worst Get on Top.”

Keynes believed that economists (and others) could best contribute to the improvement of society by investigating how to manipulate the levers actually or potentially under control of the political authorities so as to achieve desirable ends, and then persuading benevolent civil servants and elected officials to follow their advice. The role of voters is to elect persons with the right moral values to office and then let them run the country“. (1)

(B) "The fundamental principle of socialism is that its is appropriate to use force to organize society, to take from some and give to others. The government has nothing to give. The government is simply a mechanism which has the power to take from some to give to others. It is a way in which some people can spend other peoples' money for the benefit of a third party - and not so incidentally themselves". (2)

(C)  For policy, the central fact is that Keynesian policy recommendations have no sounder basis, in a scientific sense, than recommendations of non-Keynesian economists or, for that matter, non economists. (3)

Notes:
　

　

　
(1) Milton Friedman, Richmond Federal Reserve Economic Quarterly, volume 83/2 Spring 1997.

http://www.richmondfed.org/publications/research/economic_quarterly/1997/spring/pdf/friedman.pdf

(2) The Invisible Hand in Economics and Politics, Milton Friedman, Institute of Southeast Asian Studies, 1981, p11.

(3) After Keynesian Economics aka After the Phillips Curve: Persistence of High Inflation and High Unemployment, page 57, Lucas and Sargent.

Regarding Protectionism and Manufacturing Jobs‏

One item that seems to receive little press time regarding the arguments put forth that protectionism leads to more manufacturing jobs appearing [returning] to the U.S. is the overall decline in global manufacturing jobs. (1)

Making the assumption that protectionists got their wish for a menu of protectionist measures, and that somehow, someway this lead to more manufacturing jobs appearing/returning to the U.S., and assume somehow, someway everything else remained equal, you would be in fact be staring at the apex of manufacturing jobs as the new level of manufacturing jobs would immediately begin to decline. Why?  Because world wide manufacturing jobs are declining as more capital along with technology is replacing human capital. Then what, what then?

Taking this one step further, do you want to increase or attract a sector [manufacturing] who’s need for human capital is decreasing at an increasing rate? Have you in fact attracted a job reducing engine? (2)


Notes:

(1) Decline of Manufacturing" is Global Phenomenon, Dr. Mark Perry, http://mjperry.blogspot.com/2011/04/decline-of-manufacturing-is-global.html

(2) American Institute of Economic Research, http://www.aier.org/research/briefs/206-the-decline-of-manufacturing

Politicos Through the Mechanism of Government: Busting Bubbles and Benumbing Freezes

John B. Taylor in his book Getting Off Track makes the most excellent point that politicos through the mechanism of government created financial policy in regards to home ownership and the finance thereof [1978 - 2007] along with another branch of government [the Fed] creating a cheap money bubble [2002-2004] that set the table for the ensuing financial shenanigans. If one sets the table for shenanigans one should not be surprised that shenanigans actually do occur. -Or- if one sets the table for financial shenanigans then do not be surprised when financial shenanigans actually occur. (1)

Keeping the above observation in mind, what happens when politicos through the mechanism of government create a regulation machine that increases regulation at an increasing rate [1930 - present]. That the regulation increasing at an increasing rate, and in its regulatory summation, becomes a veritable mountain of regulation. That the mountain of regulation becomes a mountain chain of regulation [2008 - present]. Has another table been set for shenanigans?

If the financial crisis was a bubble created by politicos through the mechanism of government, which was merely a central planning scheme, then is regulation merely another central planning scheme, created by politicos through the mechanism of government, to create a “freeze”?

Moreover, if the fermentation of the effervescent bubble creating the financial crisis was approximately time period 1978 -2007, what about the benumb chill of the freeze of regulation with time period 1930 to present? If the financial crisis fermented for 30 years, does the benumbing effect of regulation over 80 years create a regulatory crisis of even greater magnitude than the financial crisis?

Finally, the 30 years of fermentation of the financial crisis was brought to the busting bubble stage by the cheap money effect of the Fed. Does the benumbing effect of mountains of regulation become a total freeze stage (the antithesis of the busting bubble) through a sudden and encompassing hyper-regulatory effect e.g. regulatory policies of 2008 to present embodied by Dodd-Frank, Consumer Protection Agency, EPA, Department of Energy, etc., etc..

In both instances, politicos through the mechanism of government have exercised central planning schemes known as financial policy and regulatory policy. One must consider such central planning schemes by politicos with the following insight:

This way lies charlatanism and worse. To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.

But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority. Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims. - F.A. Hayek, from the essay The Knowledge of Pretense (2)


Notes:

(1) John B. Taylor, Getting Off Track, pages 3 and 4.

(2) F.A. Hayek, 12/11/1974, Nobel Prize Lecture, http://www.nobelprize.org/nobel_prizes/economics/laureates/1974/hayek-lecture.html

Foreign Trade Subsidies: foreign and home economic rent seeker, foreign and home politico, and the foreign and home taxpayer/consumer

Foreign trade subsidies are vilified by politicos and their associated economic rent seekers [special interests] and result in protectionist measures such as the recent U.S. Senate China currency bill. Arguments over free trade vs. protectionism are many and varied. Without getting into the tall weeds of the free trade vs. protectionism debate, one might want to examine one very narrow topic which is the gain position of particular consumers/taxpayers due to foreign subsidies.

Contemplate the following:

(1) consider groups which are made up of the foreign and home economic rent seekers, foreign and home politicos, and the foreign and home taxpayers/consumers,

(2) foreign subsidies mean the foreign taxpayer/consumer is bearing a cost of a foreign economic rent seeker, a foreign politico, or a combination of a foreign economic renter seeker and foreign politico,

(3) the home taxpayer/consumer [diffused unrepresented group] , which is constantly under attack by the well organized home economic rent seekers and the home rent seeker’s relationship with the home politico, is in a unique position,

(4) the first component of the unique position is that the home tax payer is not being called upon to fund a home renter seeker/politico scheme,

(4a) the next component of the unique position also allows the home taxpayer/consumer to enjoy a gain in the form of the foreign subsidy in that foreign goods are artificially reduced in price equivalent to the foreign taxpayer/consumer bearing a cost of a foreign economic rent seeker, a foreign politico, or a combination of a foreign economic renter seeker and foreign politico.

Therefore, home consumer C buys product Y. Product Y is purchased at price P minus the foreign taxpayer/consumer subsidy. The home consumer is receiving price relief via a foreign taxpayer. The foreign taxpayer is coerced into subsidizing home consumer C’s purchases of product Y by a foreign economic rent seeker, a foreign politico, or a combination of a foreign economic renter seeker and foreign politico.

This unique gain position of the home taxpayer/consumer spawns a unique argument. The unique argument is one in which home politicos and home interested rent seeker frame the home taxpayer/consumer in a non-gain position. Stated alternatively, the home rent seeker and home politico purposely create a false argument that the home taxpayer/consumer is in a loss position. The unique gain position of the home consumer C buying product Y at price P minus the foreign taxpayer/consumer subsidy is framed as a loss not a gain. That is, rational consumer C should irrationally reject lower prices produced by foreign taxpayers/consumers.

Why in the world should rational consumer C irrationally reject lower prices produced by foreign taxpayers/consumers? The home taxpayer/consumer is urged to erase his gain and act irrationally as an exogenous party wants to capture the gain. Politicos and their associated rent seekers want consumer C to transfer the gain, through differing methods, to home rent seekers and their associated home politico.

That is, the taxpayer/consumer gain, in fact, becomes yet another target of the rent seeker and politico. The gain is merely viewed as an additional revenue source for the rent seeker/politico. That by fashioning a false argument the gain can be extracted from the taxpayer/consumer.

An excellent essay one might want to examine is Do Subsidies Justify Retaliatory Protectionism, Donald Boudreaux, department of economics, George Mason University, Link appears below:

http://cafehayek.com/site/wp-content/uploads/2011/10/I-attach.pdf

Government planned regulation and over regulation as a job creator? Huh?

‘ "I think the answer is no," Ellison said when asked if he believes regulations kill jobs. "And here is why: When we talked about increasing fuel efficiency standards, the industry responded, and they need engineers and designers and manufacturers, and they need actually more people to help respond to the new requirement."

"I believe if the government says, look, we have got to reduce our carbon footprint, you will kick into gear a whole number of people that know how to do that or have ideas about that, and that will be a job engine. I understand what you mean, because if anything adds a cost to a business, you could assume that that will diminish that business's ability to hire. But I don't think that's actually right. I think what businesses want is customers and what -- if they are selling product, if they have a product to sell they will do well even if they have some new regulations to meet," the Congressman said.’ (1)

For a moment examine Rep. Ellison’s economics. “I understand what you mean, because if anything adds a cost to a business, you could assume that that will diminish that business's ability to hire. But I don't think that's actually right“. OK, and an increased cost is not a factor of production due to what? “I think what businesses want is customers and what -- if they are selling product, if they have a product to sell they will do well even if they have some new regulations to meet". Hence cost is a non-factor in production and firms merely need to “want customers” and product is sold regardless of cost.

That’s it, is it? Amazing economic breakthrough!

Therefore we need to throw out the following economic axions:  regulation is a form of tax, regulation is generally a limitation on private property rights, capital and human capital migrate to the environment of lowest tax and lowest regulation, overtime most capital and most human capital migrates to the environment of lowest tax and lowest regulation.

Here is a another gem from Rep. Ellison and regards to his breakthrough work in the field of economics: “When we talked about increasing fuel efficiency standards, the industry responded, and they need engineers and designers and manufacturers, and they need actually more people to help respond to the new requirement”. Hence additional resources are required [“…need engineers and designers and manufacturers…”]. Apparently those resources appear magically and have no effect on other recourses with alternative uses within a macro economy. According to Ellison we merely throw out the current economic axiom that we live in a world of scarcity, there is never enough of anything to satisfy all those who want it, hence a rationing agent must be introduced which is price in a free market economy. That the allocation of scarce resources with alternative uses is merely a fallacy. You merely regulate allocation!

Tax comes in many forms including regulation. Regulation besides acting as a tax is also a form of central planning. Maybe Rep. Ellison should consider the following:

(1) A tax levied on corporate profit reduces the care and effort owners put into its operation, since part of the return that would have been received by owners will go to the state. Defacto, private owners of the corporation are saddled with a shirking partner, the state, which takes part of the revenue and provides none of the effort to improve the firm’s return. Consequently the greater is the corporate tax rate, the greater the incentive for corporate owners and management to pursue the “quiet life”. - Harold Demsetz, From Economic Man to Economic System, page 158.

(2) This way lies charlatanism and worse. To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.

But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority. Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims. - F.A. Hayek, from the essay The Pretense of Knowledge.

(3) Economists are often asked to predict what the economy is going to do. But economic predictions require predicting what politicians are going to do-- and nothing is more unpredictable.

The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. - Thomas Sowell

H/T: Our Dinner Table blog

(1) http://www.realclearpolitics.com/video/2011/10/09/dem_congressman_keith_ellison_regulations_create_jobs.html

Chuck Woolery - Let's Tax The Amish

Waiting on Slovakia

The seventeen countries making up the Euro area [aka Euro zone] are waiting on additional political maneuvering and possible additional voting by the Slovakian parliament in regards to "expand the powers of the EFSF bailout fund” after Tuesday’s “no” vote. (1) (2)

Many pundits have discussed the topic of seventeen sovereign nations, merely connected by a common currency, having to vote unanimously regarding many governing topics and the inherent problems thereof regarding governing by committee.

The seventeen sovereign counties voting phenomena regarding governing topics might be an understatement when one considers the volumes of political parties making up each of the seventeen counties. For example Slovakia has twenty one political parties of which nine currently have representation in the Slovakian parliament. (3)

Please take a look at the map above as well as the link below. You will find a historical map of the Slovakian region depicted in 1250 A.D. Take note of the many, many small countries, territories, duchies, kingdoms, etc. that populated the area. Note further that many still exist to this day (861 years later). -Or- do they all exist to this day?

Do they all exist to this day? Maybe? How could they still exist? The historical Slovakian map is merely one example of how many small countries, territories, duchies, kingdoms, etc. make up each of today‘s seventeen sovereign counties making up the Euro area.

Further, countries in Euro area have many, many political parties. Are the many, many political parties a reflection of the historical makeup of many small countries, territories, duchies, kingdoms, etc. that now make up today‘s seventeen sovereign counties making up the Euro area?

Hence is the Euro zone suffering from government by a committee of seventeen or government by a committee of hundreds?

http://www.slovakia.org/sk-location5.htm

Notes:

(1) Eurozone bailout fund faces key Slovakian vote, BBC,
http://www.bbc.co.uk/news/business-15251441

(2) Slovakia ‘no’ vote endangers rescue effort, ninemsn.com,
http://finance.ninemsn.com.au/newsbusiness/aap/8358801/slovak-parliament-debates-eurozone-rescue

(3) http://en.wikipedia.org/wiki/List_of_political_parties_in_Slovakia

“Occupy”: For, Against, Not Sure, and the opportunity to act the part

The phenomena of “occupy” is by no means new. The generally considered positions (especially for survey/polling) regarding an issue such as "occupy" are: for, against, not sure. However, the phenomena "occupy" allows a grand opportunity to point out a fourth type of  position.

A fourth position emerges many times regarding an issue, and the fourth position doesn’t receive much attention. The “occupy” phenomena is allowing for clear identification of the fourth position: above a position-position.

The above a position-position avoids any root central issues, adds absolutely no insight, and is merely the self indulgent opportunity to act the part of the highly educated tutor of issues. It is a one episode play with a self centered plot. The self appointed actor in this one act play purposely takes on character attributes of the highly astute instructor of issues.

In the final analysis the above a position-position is merely a one act self centered play with its central theme being please-see-me as educated and astute.

Take note how many times you can identify the above a position-position .

Wall Street Occupation, Marching on Particular Homes of Particular Business Leaders, 1930’s “Unionization”, and “Occupy”

An item worthy of note in regards to the phenomena surrounding “occupy” is the unionization movements in the U.S. during the 1930’s.

[Paraphrasing] The majority of unionization that came about in the 1930’s did not come about due to labor actually voting for or against unionization. The majority of unionization came about by coercion by unions [including occupying the physical firm]. The majority of “unionization” in the 1930’s, was in fact, the firm merely accepting a particular union which exercised coercive means of varying nefarious nature. Hence the firm accepted the union as the representative of the current workers, not by vote, but by coercive means exogenous to open voting by labor. - FDR’s Folly, How Roosevelt and His New Deal Prolonged the Great Depression, Jim Powell, pages 187 - 206.

Successful Protesting Brought to You By Corporations

H/T Carpe Diem blog

http://mjperry.blogspot.com/2011/10/down-with-evil-corporations.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FmmMP+%28CARPE+DIEM%29

High persistent unemployment: a statistical outlier or an indicator?

An item heard over and over from pundits, talking-heads, and media types, regarding firms in association with job creation, is expectations [uncertainty]. And yes, there is a difference between general uncertainty which is with us all the time and extreme uncertainty which is with us now.

Another item, which you hear less of, is the persistent below trend number in GDP and the associated “snap back” after recession [in trend] for several quarters settling back to trend. The snap back which is associated with job creation (in most instances).

Consider for a moment the persistent below trend GDP number and lack of snap back eventually settling to trend. GDP has remained well below historical trend since the second quarter on 2007. (1) Therefore, GDP has remained well below trend for four years and one quarter. The recession according to economic indicators ended June 2009. (2) (3)

The “snap back” is really Milton Friedman’s “Plucking Model”. Basically, when an economy goes into recession, based on historical economic cycle statistics, the GDP trend acts like the plucking of the string of a guitar [hence Plucking Model]. That is, when the economy recedes, like pushing a guitar string, it snaps back [like a guitar string] and trends above historical GDP trend for several quarters before returning to trend [a still guitar string]. (4) (5) Generally speaking, the “snap back” would have occurred and continued surrounding the June 2009 date.

Consider the “snap back” aka Plucking Model in conjunction with expectations [uncertainty and extreme uncertainty]. Pundits currently depict the persistent below trend GDP and persistent poor economic expectation (uncertainty and extreme uncertainty) as outlier phenomena. Yes, statistically speaking you could make the outlier argument given historical economic cycle statistics.

-Or- is the statistical phenomena not an outlier but an indicator of summation. Does GDP trend fall and remain below trend and snap back becomes eliminated due to the summation of factors?

At some unknown but certain point does the historical summation of a political tax code, the funding of a politically promised social welfare state, continuing and historical class warfare rhetoric, mountains of regulation associated with a nanny state, crony capitalism, failure to foster private capital formation, etc. (lending itself to a summation-effect regarding expectations), finally create such a bottle neck that the current phenomena is not an outlier, rather an indicator of the summation?

Notes:

(1)    Deep freeze, The Economist, 08/18/2011, http://www.economist.com/blogs/dailychart/2011/08/gdp-recovery-recession?page=2

(2)    The Recession Has (Officially) Ended, NYT, http://economix.blogs.nytimes.com/2010/09/20/the-recession-has-officially-ended/

(3)    Recession officially ended in June 2009, CNN Money, http://money.cnn.com/2010/09/20/news/economy/recession_over/index.htm

(4)    Milton Friedman’s ‘Pluck’ Gives Hope to Jobless, Bloomberg, 04/06/2009, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aeHgUQWKHL3Y

(5)    In-Depth Look - Snap Back In The Economy – Bloomberg, http://www.youtube.com/watch?v=wH4rnKuNCRw

Obama’s proposed Tax Increase aka “Jobs Bill”: political science vs. public choice theory

Obama’s shallow debate points/talking points regarding his “Jobs Bill” and its funding through additional taxes find their basis in the political science concepts of “society” [actually existing rather than merely an abstract idea] and the greater good of politics [the altruistic supposed end game of politics according to political science]. Leaving the realm of political science and entering the realm of public choice theory, Obama's tax proposal and consequential rhetoric is really based on the concept that an individual will support more public goods when not confronted with a cost [the cost borne by others aka millionaire tax].

The economist does, normally, attribute precise meaning to the terms "more" and "less." Moreover, if a similar model of rational behaviour is extended to the collective-choice process, we are able to derive propositions about individual behaviour that are parallel to those contained in economic theory. If the hypotheses are valid, the representative individual should, when confronted with relevant alternatives, choose more "public goods" when the "price" of these is lowered, other relevant things remaining the same. In more familiar terms, this states that on the average the individual will vote for "more" collective activity when the taxes he must pay are reduced, other things being equal. On the contrary, if the tax rate is increased, the individual will, if allowed to choose, select a lower level of collective activity. In a parallel way, income-demand propositions can be derived. If the income of the individual goes up and his tax bill does not, he will tend to choose to have more "public goods."  - James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy, 1958

Miller Time: when you have the time, we have more government for you!

“Rep. Brad Miller introduced the Freedom and Mobility in Banking Act on Tuesday. It's a bill that would make the Consumer Financial Protection Bureau create a comparison list of banks and their fees.” (1)

Apparently the economic concept of the rational consumer no longer exists. The original "more is better" economic man has disappeared! Furthermore, the first rational item to go regarding economic man was rational comparison in the area of picking and choosing banking institutions. Go figure!

-Or edited slightly-

Rep. Brad Miller introduced the Further Government Intervention and Reduction of Freedom Banking Act on Tuesday. It's a bill that would make a very expensive government bureaucracy expand and create a government-directed comparison list of banks and their fees.

Apparently political populism still exists. The original "government mysticism" of political populism has not disappeared! Furthermore, the first populism item to continue is government mysticism in the area of picking and choosing banking institutions. Go figure!

How in the world did economic man 1.0, economic man 2.0, all the way up to economic man 2011.0 rationally go about choosing banking institutions without the help of politicos through the mechanism of government? Lucky for economic man his rational comparison abilities/skills can not be supplanted by the Brad Miller's ability to be in direct contact with omniscience and omni-presence delivering vast and perfect knowledge through the mechanism of government.

The nine most terrifying words in the English language are, 'I'm from the government and I'm here to help.' – Ronald Reagan

The eight most populist words in the English language are, “I’m Brad Miller, and I’m here to help”.

Notes:

(1)    Myfox8.com, 10/04/2011

http://www.myfox8.com/news/wghp-triad-congressman-proposes-easier-bank-switches-fee-comparison-list-20111004,0,444025.story?track=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wghp-localnews+%28WGHP+-+News%29

Obama Administration Jobs Bill: which came first the quack or the duck?

“Among the colossal fallacies that keep our economy mired in unemployment, few loom as large as the notion that "creating" jobs leads to growth and prosperity, rather than the other way around. In fact, when jobs are treated as ends rather than means, the perverse effect of pursuing policies designed to artificially inflate employment figures only serves to make things worse.

This conflation of cause and effect lies at the heart of entire schools of economics - a science made more dismal by the fact that whenever policy prescriptions fail to deliver their promised benefits, the proposed remedy is to increase the dosage. How many times would you go back to the same doctor if the medicine he prescribed kept making you sicker?

Yet after watching untold hundreds of billions of dollars in federal stimulus spending evaporate into the ether, here we are at the cusp of a recessionary double dip listening to the president berate us for a lack of willingness to tax, borrow, and spend even more to "create" jobs. Hey, if he walks like a quack and talks like a quack, might 51 percent of the voters eventually figure out that he is a quack?” - Putting the Jobs Cart Before the Growth Horse, Bill Frezza, Real Clear Markets, 09/19/2011

Link to entire article appears below:

http://www.realclearmarkets.com/articles/2011/09/19/putting_the_jobs_cart_before_the_growth_horse_99264.html

Private Capital Formation and The Great Recession

Within a private enterprise system, private capital formation is a major driver of long term well paying private sector jobs. During the Great Depression private capital formation was anemic. Currently, during the Great Recession, private capital formation is anemic.

Private capital formation during the 1930’s was lifeless due to rising taxes, the specter of even more taxes [which did in fact occur], government deficit spending causing a crowding out effect of private investment,  the vilification of the investor class, and over regulation.

History repeats itself? Same song just a different beat?

'With the jobless rate stubbornly stuck above 9 percent for the last 28 months, the United States is experiencing a “jobless recovery” that is much worse than those following the 1990-91 and 2001 recessions. What’s the main reason that job creation has stalled and prevented a full economic recovery? The ongoing economic weakness and lack of job creation can be traced directly to a lack of private business investment, and the critical “investment-employment-economic growth” connection has been getting some attention lately.

For example, Robert Higgs wrote recently that “The economy remains moribund not because consumption spending has failed to recover and not because government spending has failed to increase, but because the true driver of economic growth—private investment—remains deeply depressed.” In a recent New York Times editorial, Greg Mankiw emphasized that “The subpar recovery has coincided with a historically weak investment recovery.” ' - Dr. Mark Perry, The ‘Jobless Recovery’ Is Really an ‘Investment-less Recovery’, Journal of the American Enterprise Institute, 10/03/2011

Link to the entire article appears below:

http://blog.american.com/2011/10/the-jobless-recovery-is-really-an-investment-less-recovery/