Tuesday, May 31, 2011

Food Pyramid No More

"As of this coming Thursday, the food pyramid -- that symbol of healthy eating -- is going to go the way of the real pyramids and becoming a thing of the past. This week, the Obama administration will be unveiling a new graphic to tell American consumers what quantities of grains, fruits and vegetables, protein and dairy they should eat to maintain a healthy diet. The pyramid is to be replace by a plate, with four different-colored sections indicating how much of each food group the United States Department of Agriculture recommends and is a "crucial element of the administration's crusade against obesity" led by first lady Michelle Obama, as the New York Times says.

Half of the sections on the plate will be for fruits and vegetables. A smaller circle beside it will indicate a day's dairy allowance. This new logo, which cost about $2 million to develop and promote, is meant to educate Americans about new federal dietary guidelines released in January." - Kristina Chew, care2.com

The full article link appears below:


Update: 06/14/2011

We Paid $2 Million for This? - bighealthreport.com

Monday, May 30, 2011

Now a Forth State Wants an ObamaCare Waiver: Delaware

"Delaware Insurance Commissioner Karen Weldin Stewart is asking the federal government to temporarily suspend a new rule requiring insurance companies to spend more premium dollars on health care, rather than administrative costs."

"Delaware's request, which is currently under review at HHS, is not unique.

HHS has agreed to adjust the medical loss ratio rule in Maine, New Hampshire and Nevada, amidst similar threats of insurance companies abandoning the individual market." - delawareonline 05/25/2011

The entire article appears via link below: http://www.delawareonline.com/article/20110526/BUSINESS/105260325/Delaware-seeks-health-care-law-waiver

Thomas Sowell - A Conflict of Visions

Friday, May 27, 2011

Citizens Against Government Waste Names Sebelius Porker of the Month: ObamaCare Waiver for AARP

(Washington, D.C.) – Today, Citizens Against Government Waste (CAGW) named Secretary of Health and Human Services (HHS) Kathleen Sebelius its May Porker of the Month for the consistently murky process by which HHS grants or denies waivers from the Patient Protection and Affordable Care Act (PPACA). Sec. Sebelius received the dubious honor in the wake of preferential treatment HHS granted to the American Association of Retired Persons (AARP), which aggressively supported the new health-care law prior to its passage in 2010 but is seeking relief from the law now. AARP is just one of 1,372 unions, businesses, and insurers, covering 3.1 million Americans, that have received waivers from the PPACA’s onerous regulatory burdens.

Link to full story: http://www.cagw.org/newsroom/porker-of-the-month/

US Growth and Prosperity Trend Line: 17% below trend.

Tuesday, May 24, 2011

New York City Schools: calling in sick.

"Last week the United Federation of Teachers, the local teachers union, filed a lawsuit to stop the Bloomberg administration from closing 22 of the city's worst schools. It's the second time in as many years that the union has sued to protect the status quo.

On average, just 16% of the students who attend one of the elementary or secondary schools slated for closer are proficient in reading, and 19% are proficient in math, according to Education Department data. The citywide averages are 42% for reading and 53% for math. The average graduation rate of a high school in the lawsuit is 49%, versus a citywide average of 63%.

The statistics at some individual schools are even more shocking. Last year, 3% of students at the Academy for Collaborative Education in Harlem were performing at grade level in English, and 9% were performing at grade level in math. By what definition are these places even called "schools"?

Yet the UFT wants to keep these schools open to preserve jobs for their members. It's another example of teachers unions putting the interests of adults ahead of the needs of students. Moreover, the local NAACP is collaborating with the teachers unions in their efforts to consign poor kids to these failing schools. The civil rights organization has joined the union lawsuit against the city. Apparently, labor leaders have convinced black leaders that protecting union jobs is more important than providing the minorities who populate these dropout factories with a decent education." - Jason L. Riley, Wall Street Journal Political Diary, 05/24/2011

All the king's horses and all the king's men will merely put 19% back together again.

Politicos currently discussing taxation levels vs. spending levels, the discussion has to be viewed through the prism of reality not the theoretical.

Yes a flat tax and removal of tax preferences, etc. is a most excellent idea. However, building a tax code over decades and decades based on special interests is extremely hard to reverse. The politico can't afford a major mistake or to alienate special interest political constituency. Hence the tinkering with the tax code will likely be marginal at best.

Even if the tax code was revised at the margin the special interests are not going away and they will be back knocking on the door.

Hauser's law states regardless of the mix of tax and tax preferences, tax will yield revenue just under 19% of GDP. (1) If one considered Hauser's Law as true, then just under 19% of GDP is the magic number.

All the king's horses and all the king's men will merely put 19% back together again.


(1) http://thelastembassy.blogspot.com/2011/02/obamas-proposed-budget-bad-meets.html

Sunday, May 22, 2011

U.S. manufacturing renaissance?

'Wages are increasing 11% per year in China and by 10% in India, which means that labor costs there are doubling every 7 or 8 years if those wage increases continue. Wages in the U.S. are rising by only 1.9% annually and at that rate it would take 37 years before wages would double here. At some point, the labor arbitrage advantages for China and India have to disappear. BCG predicts that “Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America." '         - Mark Perry from the blog Carpe Diem

The entire post can be read here:  http://mjperry.blogspot.com/2011/05/labor-arbitrage-is-disappearing-for.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FmmMP+%28CARPE+DIEM%29

Saturday, May 21, 2011

Armageddon's Armageddon

How many times can one claim pending Armageddon, nothing subsequently occurs, and yet claim pending Armageddon again? Once, twice, three times, even four times?

You see, Armageddon was pending with the bail out, the stimulus plan, ObamaCare, and the financial reform bill. These four horsemen of the apocalypse needed passed post haste or else "Armageddon"!

Now cometh the fifth horsemen of Armageddon. Wait a minute, there is only four horsemen of the apocalypse?!? Exactly. Four Armageddons that never occurred and now appears the fifth horsemen of the apocalypse. However, this time around the fifth horsemen is Armageddon's Armageddon.

Yes, the end of the ends.

'House Republicans are starting to rally behind a strategy on the debt ceiling called "cut, cap and balance." This is the condition for an agreement to raise the $14.3 trillion debt ceiling that was recently laid out by House Republican Whip Kevin McCarthy of California.

"What this means is we want an iron clad cut in spending over the next five years; an enforceable cap on outlays with automatic sequestration if the caps aren't met; and a balanced-budget requirement," said Mr. McCarthy.

The strategy is also being pushed by conservatives on the House Republican Study Committee. According to sources there, RSC Chairman Jim Jordan of Ohio will unveil a plan in the days to come that will require a balanced-budget agreement plus a cap on spending that brings federal outlays down to "around 18% of GDP after 10 years." Several RSC members are still smarting over the fact that the spending cuts in the 2010 continuing resolution were much smaller than promised, and this has only emboldened conservatives to take a harder line on the debt ceiling.

That could be bad news for the White House and Treasury Secretary Tim Geithner, who continues to talk about "Armageddon" if the debt bill is not passed. The scare tactic doesn't appear to be working. This week Mr. Geithner sent a letter to congressional leaders once again urging "timely action to increase the debt limit in order to protect the full faith and credit of the United States and avoid catastrophic economic consequences for citizens." Rep. Todd Akin of Missouri echoed the sentiment of a large majority of his House Republican colleagues when he responded, "We just can't fold like we did on the CR, because the real financial crisis happens if we don't solve this debt problem." ' (1)

Some say Washington D.C. is the end of the earth, while others say it is not the end of the earth but you can certainly see the end of the earth from Washington D.C.. Maybe. Or is it that folks in Washington D.C. fancy themselves as the beginning of all and the end of all.

Then again, maybe their only friend is the end.


(1) Political Diary, Wall Street Journal, 05/20/2011, Stephen Moore.

Certificates of performance

In Walter E. Williams 05/18/2011 column he mentions the concept of "certificates of performance". Its a rather interesting essay and here is an excerpt:

'Say I mow your lawn. For doing so, you pay me $20. I go to my grocer and demand, "Give me 2 pounds of steak and a six-pack of beer that my fellow man produced." In effect, the grocer asks, "Williams, you're asking your fellow man to serve you. Did you serve him?" I reply, "Yes." The grocer says, "Prove it."

That's when I pull out the $20 I earned from serving my fellow man. We can think of that $20 as "certificates of performance." They stand as proof that I served my fellow man. It would be no different if I were an orthopedic doctor, with a large clientele, earning $500,000 per year by serving my fellow man. By the way, having mowed my fellow man's lawn or set his fractured fibula, what else do I owe him or anyone else? What's the case for being forced to give anything back? If one wishes to be charitable, that's an entirely different matter.

Contrast the morality of having to serve one's fellow man in order to have a claim on what he produces with congressional handouts. In effect, Congress says, "You don't have to serve your fellow man in order to have a claim on what he produces. We'll take what he produces and give it to you. Just vote for me." ' (1)


(1) Walter E. Williams, Understanding Liberals,

Friday, May 20, 2011

Appearances to the mind are of four kinds

According to the ancient phrygian  philosopher Epictetus, appearances to the mind are of four kinds:

(a) things either are what they appear to be,

(b) or they neither are, nor appear to be,

(c) or they are, and do not appear to be,

(d) or they are not, and yet appear to be.

Epictetus also added this: rightly to aim in all these cases is the wise man's task.

Tuesday, May 17, 2011

Greece: what happens when one attempts to privatize state owned enterprise

Its been long argued that when politicos through the mechanism of government legislate state ownership or state run enterprises, the removal of such a program is nearly impossible.

Why is state owned enterprise near impossible to remove? What if state ownership has to be removed?

The state ownership many times was a political constituency building exercise at its inception. That is, politicos bestowing benefits on a particular recipient group creates a voting block of dependent recipients. The recipients of the benefits in many cases become long term dependent on such bestowed benefits. In order to continue to receive such benefits the recipients vote for the politicos that support the particular state owned enterprise. Hence we have the complete political circle of the politico bestowing benefits on a particular class of recipients, the recipients grow dependent on the bestowed benefits, the recipients then vote for the politico bestowing benefits.

Meanwhile the bestowed benefits (in this case the state enterprise) must be administered by some government agency. The agency exists to bestow the benefits directed by the politico. The end of such benefits would theoretically mean the end of the agency. Hence agency employees also become a dependent class that support the politico that continues the programs the agency administers.

Further, vendors exist that supply the government agency with items to administer the state owned enterprise. These vendors have suppliers and so on. Further, the state owned enterprise have vendors and suppliers as well.

Hence we have an army of recipients, bureaucrats, and vendor/suppliers that are dependent on the state owned enterprise to continue. These dependent parties support the politicos that perpetuate the state owned enterprise.

What happens when you threaten to end such a program? Obviously great resistance is put forth by the dependent parties as well as the politicos that gain political support from the dependent parties. The politico stands to lose the political constituency base of the dependent parties and the dependent parties stand to lose benefits of one type or another.

What happens if the program must end? That is, there is absolutely no money remaining to fund the program? Greece is an excellent example of what happens when state owned enterprise must end. The resistance that occurs when you threaten to end such programs morphs into delay when you must end the program.

In an article appearing in Financial Times 05/13/2011 entitled Greece can privatize more, says IMF one sees a tail of delay. The article in this particular case focuses on state owned assets and state owned enterprises that need privatized. The article points out that privatization would gain confidence from exogenous parties that hold Greek debt as well as cut the debt. With only one-fifth of assets up for sale the delay to privatization is self evident.

'Antonis Samaras, leader of Greece's conservative opposition New Democracy party backed the privatization programme and on Thursday said the governing socialists were taking "too timid" an approach.

 "We need to act boldly to seek strategic partners who will invest in growth rather than simply selling equity stakes" said Mr. Samaras in a speech outlining his party's economic policy.

He urged immediate liberalisation of the energy sector, saying socialist-backed public sector unions were blocking the opening of the electricity market. "This is what international investors want to see," he said.' (1)


(1) Financial Times, 05/13/2011, Greece can privatize more, says IMF

Monday, May 16, 2011

Saturday, May 14, 2011

Firms have social responsibility? Firms spending someone else's money for social responsibility?

So the question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no they do not - Milton Friedman

The above is an often quoted line by Milton Friedman. Few go further to determine what Friedman was meaning. Social Justice advocates use the quote to show the supposedly crassness of  the private enterprise system. That equality of outcome requires social responsibility/social justice.

Friedman stated: ' The discussions of the "social responsibili­ties of business" are notable for their analytical looseness and lack of rigor.' That observation may well come from Friedman studying F.A. Hayek. Hayek spent an entire decade studying "social justice". Hayek's conclusion was that social justice does not exist as its advocates never come forth with a definition [Friedman's: "... their analytical looseness and lack of rigor"]. (1)

Social justice comes from the concept "fair". That is, what is fair. Thomas Sowell has explained that "fair" is a concept that has little meaning except to the user of the term in a particular context. That is to say, "fair" is what you are doing and the other guy is not doing. (2) (3)

Further, firms are artificial entities. How can an artificial entity have a responsibility? Or as stated by Friedman: "Only people can have responsibilities. A corporation is an artificial person and in this sense may have artificial responsibilities, but "business" as a whole cannot be said to have responsibilities, even in this vague sense. The first step toward clarity in examining the doctrine of the social responsibility of business is to ask precisely what it implies for whom". Friedman makes a grand point which has been pointed out by Harold Demsetz on multiple occasions that firms are merely a collection of households. (4)

Going back to the quote above that began this essay, what did Milton Friedman mean? Likely much of the the answer can be found in the following 1970 essay by Friedman.

The Social Responsibility of Business is to Increase its Profits - by Milton Friedman

When I hear businessmen speak eloquently about the "social responsibilities of business in a free-enterprise system," I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free en­terprise when they declaim that business is not concerned "merely" with profit but also with promoting desirable "social" ends; that business has a "social conscience" and takes seriously its responsibilities for providing em­ployment, eliminating discrimination, avoid­ing pollution and whatever else may be the catchwords of the contemporary crop of re­formers. In fact they are–or would be if they or anyone else took them seriously–preach­ing pure and unadulterated socialism. Busi­nessmen who talk this way are unwitting pup­pets of the intellectual forces that have been undermining the basis of a free society these past decades.

The discussions of the "social responsibili­ties of business" are notable for their analytical looseness and lack of rigor. What does it mean to say that "business" has responsibilities? Only people can have responsibilities. A corporation is an artificial person and in this sense may have artificial responsibilities, but "business" as a whole cannot be said to have responsibilities, even in this vague sense. The first step toward clarity in examining the doctrine of the social responsibility of business is to ask precisely what it implies for whom.

Presumably, the individuals who are to be responsible are businessmen, which means in­dividual proprietors or corporate executives. Most of the discussion of social responsibility is directed at corporations, so in what follows I shall mostly neglect the individual proprietors and speak of corporate executives.

In a free-enterprise, private-property sys­tem, a corporate executive is an employee of the owners of the business. He has direct re­sponsibility to his employers. That responsi­bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con­forming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. Of course, in some cases his employers may have a different objective. A group of persons might establish a corporation for an eleemosynary purpose–for exam­ple, a hospital or a school. The manager of such a corporation will not have money profit as his objective but the rendering of certain services.

In either case, the key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them.

Needless to say, this does not mean that it is easy to judge how well he is performing his task. But at least the criterion of performance is straightforward, and the persons among whom a voluntary contractual arrangement exists are clearly defined.

Of course, the corporate executive is also a person in his own right. As a person, he may have many other responsibilities that he rec­ognizes or assumes voluntarily–to his family, his conscience, his feelings of charity, his church, his clubs, his city, his country. He may feel impelled by these responsibilities to de­vote part of his income to causes he regards as worthy, to refuse to work for particular corpo­rations, even to leave his job, for example, to join his country's armed forces. If we wish, we may refer to some of these responsibilities as "social responsibilities." But in these respects he is acting as a principal, not an agent; he is spending his own money or time or energy, not the money of his employers or the time or energy he has contracted to devote to their purposes. If these are "social responsibili­ties," they are the social responsibilities of in­dividuals, not of business.

What does it mean to say that the corpo­rate executive has a "social responsibility" in his capacity as businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers. For example, that he is to refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of the corporation. Or that he is to make expendi­tures on reducing pollution beyond the amount that is in the best interests of the cor­poration or that is required by law in order to contribute to the social objective of improving the environment. Or that, at the expense of corporate profits, he is to hire "hardcore" un­employed instead of better qualified available workmen to contribute to the social objective of reducing poverty.

In each of these cases, the corporate exec­utive would be spending someone else's money for a general social interest. Insofar as his actions in accord with his "social responsi­bility" reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers' money. Insofar as his actions lower the wages of some employees, he is spending their money.

The stockholders or the customers or the employees could separately spend their own money on the particular action if they wished to do so. The executive is exercising a distinct "social responsibility," rather than serving as an agent of the stockholders or the customers or the employees, only if he spends the money in a different way than they would have spent it.

But if he does this, he is in effect imposing taxes, on the one hand, and deciding how the tax proceeds shall be spent, on the other.

This process raises political questions on two levels: principle and consequences. On the level of political principle, the imposition of taxes and the expenditure of tax proceeds are gov­ernmental functions. We have established elab­orate constitutional, parliamentary and judicial provisions to control these functions, to assure that taxes are imposed so far as possible in ac­cordance with the preferences and desires of the public–after all, "taxation without repre­sentation" was one of the battle cries of the American Revolution. We have a system of checks and balances to separate the legisla­tive function of imposing taxes and enacting expenditures from the executive function of collecting taxes and administering expendi­ture programs and from the judicial function of mediating disputes and interpreting the law.

Here the businessman–self-selected or appointed directly or indirectly by stockhold­ers–is to be simultaneously legislator, execu­tive and, jurist. He is to decide whom to tax by how much and for what purpose, and he is to spend the proceeds–all this guided only by general exhortations from on high to restrain inflation, improve the environment, fight poverty and so on and on.

The whole justification for permitting the corporate executive to be selected by the stockholders is that the executive is an agent serving the interests of his principal. This jus­tification disappears when the corporate ex­ecutive imposes taxes and spends the pro­ceeds for "social" purposes. He becomes in effect a public employee, a civil servant, even though he remains in name an employee of a private enterprise. On grounds of political principle, it is intolerable that such civil ser­vants–insofar as their actions in the name of social responsibility are real and not just win­dow-dressing–should be selected as they are now. If they are to be civil servants, then they must be elected through a political process. If they are to impose taxes and make expendi­tures to foster "social" objectives, then politi­cal machinery must be set up to make the as­sessment of taxes and to determine through a political process the objectives to be served.

This is the basic reason why the doctrine of "social responsibility" involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce re­sources to alternative uses.

On the grounds of consequences, can the corporate executive in fact discharge his al­leged "social responsibilities?" On the other hand, suppose he could get away with spending the stockholders' or customers' or employees' money. How is he to know how to spend it? He is told that he must contribute to fighting inflation. How is he to know what ac­tion of his will contribute to that end? He is presumably an expert in running his company–in producing a product or selling it or financing it. But nothing about his selection makes him an expert on inflation. Will his hold­ing down the price of his product reduce infla­tionary pressure? Or, by leaving more spending power in the hands of his customers, simply divert it elsewhere? Or, by forcing him to produce less because of the lower price, will it simply contribute to shortages? Even if he could an­swer these questions, how much cost is he justi­fied in imposing on his stockholders, customers and employees for this social purpose? What is his appropriate share and what is the appropri­ate share of others?

And, whether he wants to or not, can he get away with spending his stockholders', cus­tomers' or employees' money? Will not the stockholders fire him? (Either the present ones or those who take over when his actions in the name of social responsibility have re­duced the corporation's profits and the price of its stock.) His customers and his employees can desert him for other producers and em­ployers less scrupulous in exercising their so­cial responsibilities.

This facet of "social responsibility" doc­trine is brought into sharp relief when the doctrine is used to justify wage restraint by trade unions. The conflict of interest is naked and clear when union officials are asked to subordinate the interest of their members to some more general purpose. If the union offi­cials try to enforce wage restraint, the consequence is likely to be wildcat strikes, rank­-and-file revolts and the emergence of strong competitors for their jobs. We thus have the ironic phenomenon that union leaders–at least in the U.S.–have objected to Govern­ment interference with the market far more consistently and courageously than have business leaders.

The difficulty of exercising "social responsibility" illustrates, of course, the great virtue of private competitive enterprise–it forces people to be responsible for their own actions and makes it difficult for them to "exploit" other people for either selfish or unselfish purposes. They can do good–but only at their own expense.

Many a reader who has followed the argu­ment this far may be tempted to remonstrate that it is all well and good to speak of Government's having the responsibility to im­pose taxes and determine expenditures for such "social" purposes as controlling pollu­tion or training the hard-core unemployed, but that the problems are too urgent to wait on the slow course of political processes, that the exercise of social responsibility by busi­nessmen is a quicker and surer way to solve pressing current problems.

Aside from the question of fact–I share Adam Smith's skepticism about the benefits that can be expected from "those who affected to trade for the public good"–this argument must be rejected on grounds of principle. What it amounts to is an assertion that those who favor the taxes and expenditures in question have failed to persuade a majority of their fellow citizens to be of like mind and that they are seeking to attain by undemocratic procedures what they cannot attain by democratic proce­dures. In a free society, it is hard for "evil" people to do "evil," especially since one man's good is another's evil.

I have, for simplicity, concentrated on the special case of the corporate executive, ex­cept only for the brief digression on trade unions. But precisely the same argument ap­plies to the newer phenomenon of calling upon stockholders to require corporations to exercise social responsibility (the recent G.M crusade for example). In most of these cases, what is in effect involved is some stockholders trying to get other stockholders (or customers or employees) to contribute against their will to "social" causes favored by the activists. In­sofar as they succeed, they are again imposing taxes and spending the proceeds.

The situation of the individual proprietor is somewhat different. If he acts to reduce the returns of his enterprise in order to exercise his "social responsibility," he is spending his own money, not someone else's. If he wishes to spend his money on such purposes, that is his right, and I cannot see that there is any ob­jection to his doing so. In the process, he, too, may impose costs on employees and cus­tomers. However, because he is far less likely than a large corporation or union to have mo­nopolistic power, any such side effects will tend to be minor.

Of course, in practice the doctrine of social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions.

To illustrate, it may well be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabotage or have other worthwhile effects. Or it may be that, given the laws about the deductibility of corporate charitable contributions, the stockholders can contribute more to chari­ties they favor by having the corporation make the gift than by doing it themselves, since they can in that way contribute an amount that would otherwise have been paid as corporate taxes.

In each of these–and many similar–cases, there is a strong temptation to rationalize these actions as an exercise of "social responsibility." In the present climate of opinion, with its wide spread aversion to "capitalism," "profits," the "soulless corporation" and so on, this is one way for a corporation to generate goodwill as a by-product of expenditures that are entirely justified in its own self-interest.

It would be inconsistent of me to call on corporate executives to refrain from this hyp­ocritical window-dressing because it harms the foundations of a free society. That would be to call on them to exercise a "social re­sponsibility"! If our institutions, and the atti­tudes of the public make it in their self-inter­est to cloak their actions in this way, I cannot summon much indignation to denounce them. At the same time, I can express admiration for those individual proprietors or owners of closely held corporations or stockholders of more broadly held corporations who disdain such tactics as approaching fraud.

Whether blameworthy or not, the use of the cloak of social responsibility, and the nonsense spoken in its name by influential and presti­gious businessmen, does clearly harm the foun­dations of a free society. I have been impressed time and again by the schizophrenic character of many businessmen. They are capable of being extremely farsighted and clearheaded in matters that are internal to their businesses. They are incredibly shortsighted and muddle­headed in matters that are outside their businesses but affect the possible survival of busi­ness in general. This shortsightedness is strikingly exemplified in the calls from many businessmen for wage and price guidelines or controls or income policies. There is nothing that could do more in a brief period to destroy a market system and replace it by a centrally con­trolled system than effective governmental con­trol of prices and wages.

The shortsightedness is also exemplified in speeches by businessmen on social respon­sibility. This may gain them kudos in the short run. But it helps to strengthen the already too prevalent view that the pursuit of profits is wicked and immoral and must be curbed and controlled by external forces. Once this view is adopted, the external forces that curb the market will not be the social consciences, however highly developed, of the pontificating executives; it will be the iron fist of Government bureaucrats. Here, as with price and wage controls, businessmen seem to me to reveal a suicidal impulse.

The political principle that underlies the market mechanism is unanimity. In an ideal free market resting on private property, no individual can coerce any other, all coopera­tion is voluntary, all parties to such coopera­tion benefit or they need not participate. There are no values, no "social" responsibilities in any sense other than the shared values and responsibilities of individuals. Society is a collection of individuals and of the various groups they voluntarily form.

The political principle that underlies the political mechanism is conformity. The indi­vidual must serve a more general social inter­est–whether that be determined by a church or a dictator or a majority. The individual may have a vote and say in what is to be done, but if he is overruled, he must conform. It is appropriate for some to require others to contribute to a general social purpose whether they wish to or not.

Unfortunately, unanimity is not always feasi­ble. There are some respects in which conformity appears unavoidable, so I do not see how one can avoid the use of the political mecha­nism altogether.

But the doctrine of "social responsibility" taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a "fundamentally subversive doctrine" in a free society, and have said that in such a society, "there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." (5)


(1) Hayek, his contribution to the political and economic thought of our time, Eamonn Butler.

(2) Intellectuals and Society, Thomas Sowell.

(3) A Conflict of Visions, Thomas Sowell.

(4) From Economic Man to Economic System, Harold Demsetz.

(5) The New York Times Magazine, September 13, 1970

Tuesday, May 10, 2011


" If the progress of socialistic legislation be arrested, the check will be due, not so much to the influence of any thinker as to some patent fact which shall command public attention; such, for instance, as that increase in the weight of taxation which is apparently the usual, if not the invariable, concomitant of a socialist policy". - A.V.Dicey (1)

(1) Lectures on the Relation between Law and Public Opinion, (1914 ed.), p 302.

Monday, May 2, 2011

US Public Schools (K-12) and the Power Purveyor

The threat to public schools arises from their defects, not their accomplishments. - Milton Friedman

The US education system (K-12) is a collectivist based firm delivering their product through monopoly. In other words, it is the worst of all worlds as the collectivist based firm always suffers from shirk, enrichment of the central planners (bureaucracy), and output is abysmal.....and this abysmal output is your only selection as the consumer (monopoly delivery system).

Its worth one's attention and hence worth pointing out that collectivist based firms arise in part from the notion of: the consumer being "exploited". That is a political notion. However, in economic theory a collectivist based firm delivering its output through monopoly is the exact conditions for maximum exploitation of the consumer. Why? There is no choice. Orwellian huh?

An interesting question arises of: why does one want to be on the Board of Education given the above conditions? Stated alternatively, why would one want to be a power purveyor over a collectivist based firm delivering product through monopoly which creates the condition for maximum consumer exploitation?

Four basic choices exist: (a) they [candidates] are in fact collectivists, (b) they are free market oriented yet think they can create barking cats, (c) they are free market based oriented and want to replace the collective with a free market system, or (d) they have no clue that they are running for office to become a purveyor over a collectivist based firm delivering product through monopoly.

Choice four, have no clue that they are running for office to be a purveyor over a collectivist based firm delivering product through monopoly, is worth noting. F.A. Hayek made the argument that "socialism is what you get used to". That is, after a socialist program is introduced, and when several generations go by, the socialistic program becomes second nature or "the way its always been". One might say the socialistic program becomes institutionalized. There is no doubt that some Board of Education members come directly from this perspective. That is, they don't even bother examining what type/kind of system they oversee, its merely a system that has always been. Yet they have elected to become a candidate for, and elected to, the most insidious of all models regarding consumer exploitation.