A and B decide on what C is going to do for D [W.G. Sumner's famous formula]

When William Graham Sumner wrote the essay The Forgotten Man he outlined a now famous formula: A and B decide on what C is going to do for D. The underlying concept is that A wants to solve a perceived problem which D is supposedly suffering from. A recruits B who is of like mind. A and B then extract something from C to give to D. The Forgotten Man being C. (1)

Sumner defined the formula as follows:

“The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C's interests, are entirely overlooked. I call C the Forgotten Man”. (2)

How does Sumner define The Forgotten Man?

“….the Forgotten Man and any one who wants to truly understand the matter in question must go and search for the Forgotten Man. He will be found to be worthy, industrious, independent, and self-supporting. He is not, technically, "poor" or "weak"; he minds his own business, and makes no complaint. Consequently the philanthropists never think of him, and trample on him”. (3)

One needs to further consider A and B. Beyond A and B fancying themselves as philanthropic or humanitarians, they in practice act as third party decision makers. The “is going to do” or “made to do”, in the formula above, is the third party decision process.

What prompts A and B to think they have the presence, the knowledge, and the moral high ground to make third party decisions for others? Why must C, The Forgotten Man, need relied upon? If The Forgotten Man is self-sufficient, industrious and requires no assistance, then has not The Forgotten Man done his duty? If C, The Forgotten Man, owes some exogenous duty, would that duty not be the decision of The Forgotten Man?

The next question regarding A and B is why do they merely want to extract from C and give to D …rather than making D like C? One may want to consider that D is not like C, in the main, as D may not be industrious. That is, D likes being D. Moreover, A and B, being that A and B are in point of fact functioning as third party decision makers, may well be made up of two categories: “do-gooders” and those seeking power derived as the third party decision makers. In either case of do-gooders or power extractors, solving D’s perceived problem may well not be their aim. The do-gooder can’t feel “good” nor can the power extractor gain power, without the existence of D and the consequential “is going to do” or “made to do”, in the formula above.

The following are several observations by Sumner that might be enlightening regarding the above discussion:

…the characteristic of all social doctors is, that they fix their minds on some man or group of men whose case appeals to the sympathies and the imagination, and they plan remedies addressed to the particular trouble…

They [social doctors] are always under the dominion of the superstition of government, and, forgetting that a government produces nothing at all, they leave out of sight the first fact to be remembered in all social discussion—that the State cannot get a cent for any man without taking it from some other man, and this latter must be a man who has produced and saved it. This latter is the Forgotten Man.

Hence the real sufferer by that kind of benevolence which consists in an expenditure of capital to protect the good-for-nothing is the industrious laborer. The latter, however, is never thought of in this connection. It is assumed that he is provided for and out of the account.

For our present purpose it is most important to notice that if we lift any man up we must have a fulcrum, or point of reaction. In society that means that to lift one man up we push another down. The schemes for improving the condition of the working classes interfere in the competition of workmen with each other. The beneficiaries are selected by favoritism, and are apt to be those who have recommended themselves to the friends of humanity by language or conduct which does not betoken independence and energy. Those who suffer a corresponding depression by the interference are the independent and self-reliant, who once more are forgotten or passed over; and the friends of humanity once more appear, in their zeal to help somebody, to be trampling on those who are trying to help themselves.

The friends of humanity start out with certain benevolent feelings toward "the poor," "the weak," "the laborers," and others of whom they make pets. They generalize these classes, and render them impersonal, and so constitute the classes into social pets.  (4)

Notes:

(1) The Forgotten Man, and Other Essays ed. Albert Galloway Keller (New Haven, Yale University Press, 1918)

(2) William Graham Sumner, What Social Classes Owe to Each Other, 1883, chapter nine, On the Case of a Certain Man Who is Never Thought of, pages 75 -78

(3) and (4) Ibid

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.

Wisconsin and William Graham Sumner's "Forgotten Man": Revisting the Formula.

William Graham Sumner's Essay The Forgotten Man

William Graham Sumner was a famous nineteenth century economist and sociologist. (1) Sumner wrote the essay The Forgotten Man in 1883. The essay was widely read and widely quoted in the late 1800's. That is to say, the essay was quite famous. Even today the essay is widely read by economists and even managed to be the main title of Amity Shlaes recent book The Forgotten Man, A New History of the Great Depression. (2)

What Was the Essence of Sumner's Essay?

Probably one of the better and simpler explanations is:

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… What I want to do is to look up C… I call him the Forgotten Man… 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. - Henry Hazlitt (3)


Here is an alternate explanation update for the 21st century:
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 – with the praise of Y – 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 C is forced to comply with the new law. All this is done while Y looks on with glee and proclaims that A and B are so good for helping poor X.
A is the politician
B is the humanitarian, special interest, do-gooder, reformer, social speculator, etc.
C is The Forgotten Man (i.e. you, me, us)
X is the downtrodden, the oppressed, the little guy, the misunderstood, etc.
Y is the Mainstream Media (4)

Better yet, read Sumner's essay for yourself [link below]:


http://oll.libertyfund.org/index.php?option=com_staticxt&staticfile=show.php%3Ftitle=1654&layout=html#chapter_108194


What About Sumner's Formula in a "both sides of the table" environment?


What is the "both sides of the table" phenomena?

(1) if bureaucrat Q is negotiating with collective bargaining public sector union U, exactly what motivation does bureaucrat Q have regarding negotiations? The problem goes back to Milton Friedman's fourth category of spending: other people (bureaucrat Q), spending other people's money (tax payers money), on other people (recipient class which in this case is a public sector union). Therefore the bureaucrat has no motivation because he/she is spending other people's money not his/her own money,

(2) public sector unions have found that they can collect dues through members and funnel dues into political action funds. They then fund the campaigns of politicos that promise them [public sector unions] more compensation. They not only fund certain politicos but actively encourage their union members to campaign for the politico. Once they get their particular candidate elected they have now secured a politico who over sees bureaucrat Q. (5)

Going back to Sumner's formula and identifying the participants we find: The Forgotten Man is you (C). The politico is (A). However, due to the "both sides of the table" phenomena which occurs in collective bargaining by public sector unions, (B) and (X) become the same. That is, the supposed disadvantaged group is also the social reformer. (6)

The formula has morphed! Sumner identified (B) and (X) as two separate entities. However, in public sector unionized collective bargaining environment, through the "both side of the table" phenomena, (B) and (X) become one in the same. This does not negate Sumner's proposition, rather it takes Sumner's proposition to another level.

Disassociation
Since (B) and (X) have become one in the same i.e. (BX), the political-economy is for (BX) to disassociate the sub components (B) and (X) or else (C) might catch on to their duel role as disadvantaged/social reformer [the original formula which was stacked against (C) in the first place, has now become a stacked deck of cards in which (C) always and forever becomes the consequential, quintessential, and constant loser].
Hence BX's strategy is to show (C) that it is merely a suffering group (X) and consequentially a disadvantaged group seeking relief.


Moving from the Formula to the Formula's Yield

As one can see from above, The Forgotten Man is being duped not once but twice. Not only is The Forgotten Man drawn into assisting the supposed disadvantaged group through politicos associating with social reformers, but the disadvantage group itself is the social reformer!

Summary

The Forgotten Man, the James and Jane Goodfellows of the world, are fed the argument that the disadvantaged group is in fact disadvantaged. That the wicked world has left this special group in need. Meanwhile, the supposed disadvantaged group functions as the social reformer. The social reformer in association with politicos vote to enhance the disadvantage group which in fact is the social reformer.

The recent actions and political-economy arguments surrounding the unrest in Wisconsin becomes the perfect example of the now morphed Forgotten Man formula. The unionized public sector employees march around the Wisconsin capital building with signs identifying themselves as the "disadvantaged", a special group that needs help. Arguments then come forth identifying the protest group as the "disadvantaged" while simultaneously and purposely leaving out of the debate/argument, that in point of fact, the same exact group is "the social reformer".
Moreover, examining Sumner's formula the exact same "disadvantaged" group is actually functioning in its duel role of social reformer. The social reformer/supposed disadvantaged group are one in the same. Purposely and methodically the social reformer/supposed disadvantaged group, through politicos, leave out their identity of simultaneously enhancing their supposed disadvantaged position.

Its the non-disadvantaged acting the part of the disadvantaged and perpetually enhancing their very own position through their duel role as the social reformer. Its the formula, stupid!


Update: "Public Unions: The Rise of Arithmetic and How Taxpayers and the Little Guy Are Left Behind" - Mark Perry:
http://mjperry.blogspot.com/2011/03/rise-of-arithmetic-is-politically.html

Notes:
(1)http://www.encyclopedia.com/topic/William_Graham_Sumner.aspx

(2)http://www.amityshlaes.com/books.php

(3) Economics in One Lesson by Henry Hazlitt

(4)http://wstfrederick.blogspot.com/2009/09/sumners-explanation-of-forgotten-man.html

(5)(6)http://thelastembassy.blogspot.com/2011/02/wisconsin-is-coming-to-state-capital.html

ObamaCare: consequences, unintended consequences and hidden consequences

ObamaCare, the unread, un-debated , and poorly crafted legislation has immediately yielded consequences.

We need to examine the immediate consequences, immediate unintended consequences, and the continuation of consequences and unintended consequences. Once we examine the self evident consequences we can then seek hidden consequences.

What kind of consequences and unintended consequences have already occurred and what hidden consequences can one expect as time passes?

News stories will surely rage on as the consequences and unintended consequences continue to mount. Over time the unintended consequences will begin interacting with one another creating yet a new set of unintended consequences. Then all the unintended consequences will begin to cascade and create a seemingly insurmountable economic mess.

However, hidden consequences need examined as well.


Why are there going to be Unintended Economic Consequences?

The ObamaCare legislation fails a series of important economic axioms and fails a series of important insurance axioms. The major axioms violated by ObamaCare is that the plan is the world's most expensive and complicated solution that does not solve the problem. ObamaCare is a scheme to allocate scarce resources to competing ends through price fixing which merely causes non-price rationing (time/quality). (1) (2) Also, the risk management matrix of insurance being applied to low frequency/high severity risk is totally mismanaged. (3)

The correct solution would have yielded the simplest and least expensive solution that actually solves the problem. The correct solution would have allocated scarce resources to competing ends through a free market based on price as the only logical rationing agent. The correct solution would have applied insurance to its most efficient area which is low frequency and high severity risks.

It should be clear to all that violating economic and insurance axioms sets a stage for a train wreck. The violations listed above are a mere sampling of axioms broken. The list of economic and insurance errors within the legislation creates a laundry list. Violating sound economic and insurance principles yields unpleasant unintended consequences.

Put aside economic and insurance axioms for a moment and purely look at ObamaCare from a consumer purchase perspective: (a) the consumer has been warned for years to "read their insurance policy" before purchasing the policy, (b) understand your insurance before you purchase the insurance, (c) ask questions before you purchase insurance, (d) fit the insurance to your particular need for insurance. ObamaCare violates every basic consumer purchasing guideline.

What are the immediate Consequences and Unintended Consequences?

Mr. Obama hadn't put his pen down after signing the poorly crafted legislation into law when the consequences and unintended consequences began. Here is a short sampling:


(a) not all components of the plan where scored by the Congressional Budget Office (CBO) and hence any deficit savings referred to were immediately lost when additional components were added and a $260 billion dollar deficit increase appeared over the next 10 years. Hence an already widening deficit ending as national debt puts the U.S. in a more precarious financial situation, (4) (5) (6)


(b) the medicare physician fee schedule change aka "Doc Fix" was not added into the CBO calculation by design. Hence add another $371 billion to the deficit over the next 10 years. More debt to an already out of control deficit and consequently national debt, (7)


(c) authorizes the hiring of 16,000 additional IRS agents to enforce the rules yet no enforcement mechanism was written into the legislation. We then have 16,000 more public employees with no mechanism for enforcement, (8) (9) (10)


(d) AT&T, 3M, Deere & Co., Caterpillar Inc., AK Steel, Valero Energy and Verizon by law had to immediately restate earnings to reflect the present value of their long term health liabilities as well as the higher taxes. The total amount is estimated at $14 billion once all companies write down earnings. Companies had been incentivized through the tax code to provide benefits to retired employees. That tax incentive has been removed. Retired employees with health-care benefits and drug benefits provided by their x-employers will likely be cut loose by smaller employers and hence forced to purchase such coverage themselves. (11) (12) (13)

(e) your freedom to choose different health care plans has been extremely curtailed and mandated coverage elements must be included in your plan regardless of your needs. The most ridiculous being that single men and women who can't have children must still have pediatric services included in their plan and pay the premium to fund the benefit. Further, the reduction in available deductibles, the mandated inclusion of preventative benefits and the many mandated coverages will force insurance cost to rise significantly, (14)


(f) an additional 2.3% tax is imposed on medical device makers and an annual tax of 2.3 billion will be applied to drug makers. When you increase the tax on something you get less of that item. Medical devices that could save your life or a drug that could save your life will now be curtailed,
(15) (16)

(g) the mandate of requiring everyone to buy health insurance was immediately challenged by a series of state attorney generals as unconstitutional. (17) The U.S. Constitution has no clause requiring a citizen to buy any particular product. Will you be required to by a vehicle from GMC next?


Will there be more Unintended Consequences?

ObamaCare's 3000 pages are basically an outline. The legislation authorizes over 100 new government departments that will then write the rules and regulations. That is to say, ObamaCare is an attempt to centrally plan a once free market through rules and regulations. Planned economies always fail as they attempt to plan what were once millions of daily individual decisions made in each individuals self interest. Each individual made decisions based on the least expensive simplest solution that actually solved their individual problem.


The mountain of rules and regulations that are about to appear will attempt to duplicate the workings of a free market. The "control" of the individual and his/her individual decisions that existed with in a free market is now replaced with "control" being mandated and assumed by a central authority aka government. The attempted central planning is no different than the former Soviet Unions attempts to centrally plan. That somehow the central government has "special knowledge" that you and other individuals do not possess and hence this special knowledge replaces the individuals self interest based decisions. Centrally planned economies result in vast shortages in many areas while creating mass surpluses in other areas.

Hidden Consequences

Hidden consequences are those economic undercurrents, those economic trends and economic phenomena acting in the background.

There lurks plenty of hidden economic consequences. However for this discussion think of these three factors acting in the economic shadows:

(1) over 100 new federal government departments created to handle a command and control market for health-care and health insurance,

(2) 16,000 new IRS agents to enforce government mandates,

(3) the unionization of the personnel in (1) and (2) above.


Consider this economic phenomena: the tax increases added to medical device manufacturers and drug makes will be passed onto consumers. Its an economic fact that input costs, and tax is an input cost, is always reflected in the final price of the producer. Hence the consumer of a product or service ultimately pays any tax placed on the producer.

Now consider this economic phenomena as described by William Graham Sumner is his 1883 essay The Forgotten Man:


"Sometimes people go on to notice the effects of trades-unionism on the employers, but although employers are constantly vexed by it, it is seen that they soon count it into the risks of their business and settle down to it philosophically. Sometimes people go further then and see that, if the employer adds the trades union and strike risk to the other risks, he submits to it because he has passed it along upon the public and that the public wealth is diminished by trades-unionism, which is undoubtedly the case. " (18)

What Sumner is explaining is an economic phenomena in the private sector. Unionization of the public sector had not occurred in 1883. However, just like taxes being assessed to a producer and ultimately transferred to the consumer, the cost of unionized labor is transferred from the producer to the consumer.

Now think about the difference between the private sector producer negotiating with unionized labor and the public sector negotiating with unionized labor. What incentive exists for the private sector producer to negotiate with unions vs. the incentive that exists for the public sector to negotiate with unions? That is, do the incentives differ between private and public entities when negotiating with unions?

William Graham Sumner and Milton Friedman


If we take Sumner's theory that the cost of unions to the producer is consequently a cost passed onto the consumer, then the cost of unions in the public sector is passed onto the tax payer. Then is there a difference in the magnitude of the "transfer of cost" of union labor in the private and public sectors?



The magnitude of the transfer of cost of union labor in the private and public sectors is related to Milton Friedman's four categories of spending. In other words, incentive exists in the private sector to negotiate for the best price for union labor. In the public sector there is less incentive to negotiate for the best price therefore causing a greater transfer of cost. The less the incentive to negotiate with union demands surely affects the magnitude of the transfer cost of union labor. Why is there less incentive in the public sector?

The incentive level between private and public sector negotiations with union labor costs lies within Milton Friedman's four ways that money is spent:

The first and most common way in the private sector is people spending their own money on themselves. In this case, the buyer is interested in both quality (the best product or service that he can afford) and value (getting it at the best price) because he is both the producer of the wealth being spent and the consumer of the good or service being procured.

The second way is when people spend their own money on others (such as gifts). Here they are still concerned about value (it's their money), but less concerned about service quality as they are not the consumer.

The third way is spending other people's money on yourself. Think of the rich man's girlfriend who buys herself the nicest dresses in the store on his credit card without even looking at the tag. She wants quality, but value is irrelevant since she sacrifices nothing.

The fourth way is when people spend other people's money on other people. In this case, the buyer has no rational interest in either value or quality. Government always and necessarily spends money in this fourth way. This guarantees inefficient public spending because the spenders have no vested interest in efficiently allocating those funds.

Public sector money falls in the fourth way of spending. Bureaucrats spend your tax money when negotiating with federal workers that are almost all unionized. In other words, other people are spending other people's money on other people. Since no rational interest exists in either value or quality, we find that the union employees within government have negotiated large salary, benefit, and pension packages.

Hence Sumner and Friedman are correct. Much of their correctness lies in the fact that today public sector employees total compensation far exceeds that of private sector employees. (20)That is, over time the fourth category of spending has benefited public sector unions and the enormous cost has been passed onto the consumer which is the tax payer.

Therefore we have a hidden economic phenomena at work within ObamaCare. Those public sector employees charged with overseeing the centrally planned program known as ObamaCare will create a dynamic, continuous, shadow cost driver. The unions representing these public sector employees will push as hard as ever for compensation enhancements. The compensation enhancements will be approved just as they have in the past due in part to Friedman's fourth category of spending. And as Sumner explained those compensation enhancements will be passed onto the consumer (taxpayer).




(1)http://www.washingtonpost.com/wp-dyn/content/article/2010/03/14/AR2010031401389.html

(2)http://online.wsj.com/article/SB10001424052702304871704575159940357375132.html

(3)http://thelastembassy.blogspot.com/2010/03/socialized-medicine-scheme-trickle-up.html

(4)http://www.gop.com/index.php/comms/comments/obamacare_quick_facts/

(5) http://www.investors.com/NewsAndAnalysis/Article.aspx?id=527363

(6)http://article.nationalreview.com/429092/an-off-budget-office/thomas-sowell

(7) http://www.gop.com/index.php/comms/comments/obamacare_quick_facts/

(8) http://thehill.com/blogs/on-the-money/domestic-taxes/87697-republicans-assail-irs-provision-in-health-care-bill-

(9)http://www.newsmax.com/InsideCover/Obamacare-Democrats-healthcare-IRS/2010/03/18/id/353209

(10)http://online.wsj.com/article/SB10001424052702304370304575152181030785348.html

(11) http://online.wsj.com/article/SB10001424052748704100604575146002445136066.html

(12)http://www.smartmoney.com/investing/economy/congress-hates-capitalism-it-seems/

(13) http://online.wsj.com/article/SB10001424052748704100604575145981713658608.html

(14) http://www.investors.com/NewsAndAnalysis/Article.aspx?id=528137

(15) http://www.smartmoney.com/investing/economy/healthcare-change-will-leave-you-with-less-change/

(16)http://farrmiller.com/blog/?p=323

(17)http://www.ameripac.org/original-articles/states-wage-constitutional-obamacare-legal-war/

(18) http://oll.libertyfund.org/index.php?option=com_staticxt&staticfile=show.php%3Ftitle=1654&layout=html#chapter_108194

(19)http://newsgroups.derkeiler.com/Archive/Soc/soc.history.medieval/2006-05/msg00040.html

(20)http://mjperry.blogspot.com/2010/03/two-americas-public-vs-private-sector.html