Archives for category: Economics

Cultural diversity means conflict when the individuals and groups see themselves as competing for scarce resources in the Commons, and the access is a zero sum activity.

The meaning of said conflict is clear in the El Paso anti-immigrant shooting, in the group-righteous racism of intersectionalist hectoring, and . . . well, one could read about it in the pages of this book, Politics in Plural Societies, by Alvin Rabushka and Kenneth A. Shepsle, who begin their treatise listing ethnic conflict around the world.

“Outright killing frequently takes place,” is a typical topic sentence in the first chapter.

The key concept is that of “the plural society,” coined by J. S. Furnivall, who defined the concept as a mixed-group society “comprising two or more elements or social orders which live side by side, yet without mingling, in one political unit.”

Because of his training as an economist, Furnivall naturally focused on the economic aspects of the Dutch colony. Observing that each community possessed a distinct set of values incompatible with those of other cultural groups, he characterized the plural society as one lacking consensus or, in his terms, one without “common social demand.” To illustrate his point, Furnivall constructed the following example. The buying of cathedrals involves an expenditure of resources much like the purchase of groceries. In a homogeneous society, the purchase of a cathedral provides an indivisible “public good,” i.e., every citizen may benefit from its construction. In the plural society, however, the erection of a Chinese temple constitutes a “public bad” for Muslims; in a similar manner, Muslim mosques provide few or no benefits for Chinese. Therefore, in the plural society social demands often result in public expenditures with benefits for one community and opportunity costs for the others. The plural society thus isolates the demands of its separate communities, and fails to aggregate, in Furnivall’s terms, common social demand.
Furnivall points to the presence of separate ethnic demands as a basis for differentiating a plural society from its homogeneous counterpart.

Rabushka and Shepsle develop what is basically a familiar theory, a Classical Liberal Theory of Competing Interest Groups, the basic idea being that if you want diversity, you must have limited government — and if you want big government, you must possess or (more ominously, create) a monoculture.

And if you fail to create a monoculture, you will get violence.

There is a reason today’s “multiculturalists” are such hectoring, moralistic ideologues: they are trying, rather desperately, to create a monoculture, an ideological one. And that is why they tend to look upon their political opponents as “deplorables” — because they resist the multiculturalists’ creation of a utopian society based on left-moralism.

Drolly, “right-wing” nationalism and its relentless pushing of flag worship and patriotic rite amounts to much the same thing, if on a much more limited scale — after all, nation-building is what nationalists do, and its element of doctrinal monoculture (in America, anyway) is the major competitor to multiculturalism.

Furnivall’s major contribution lies in his observation that plural societies are qualitatively distinct from homogeneous ones, and that the different communities of the plural society can meet only in the marketplace. His insistence that outside force is required to maintain order implies that plural societies are inherently prone to violent conflict.

This should be familiar to anyone who has immersed themselves in the sociology of Spencer and Sumner, or of the less ideological conflict theorists. That it is not familiar to most folks today is largely the result of bad education all around.

twv

To members of a proud in-group, those in the out-group tend to look like Yahoos. Not Houyhnhnms.

The Quoran who asked the question, below, might not have been driving at what I took it to mean. The intention may actually have had something to do with economic systems, with “capitalism” as it has developed in “the West.” It never crossed my mind, as I wrote my answer, that it was not about the social science. But I should have guessed, for people often use “economics” as a description of some system.

Ayn Rand wrote of “the separation economics and State” while James Branch Cabell referred to “The Economics of Coth” (and others) when drolly recounting one of his better character’s decisions and rationales.

Cabell’s usage strikes me as more than merely forgivable, Rand’s does not. For one thing, when Cabell wrote, “economics” was still a fairly new term in an educated person’s lexicon. “Political economy” had served for over a century, and many economists wrote tomes in Cabell’s time calling the science “Social Economy.” For another, there is only one way to take Cabell’s construction, while Rand’s “economics” could mean either the science (it should not be subsidized) or “markets and the private property order.”

I write a lot comparing varying social systems of production, distribution and consumption on Quora. But here I stick to considerations of basic explanatory theory.

Why is western economics based on self-interest?

…adapted from an answer on Quora…

It isn’t.

Self-interest is a moral concept, and economists are supposed to be Wertfrei (value-free) social scientists — if on track of value.

You might say, “but economics is all about the results of people choosing according to their own values, thus all about choices dependent upon a kind of perceived or self-constructed interest.” And I reply, “well, OK, if you must — but it is just as much a science exploring other-interest, for these selves doing their choosing also value others, and their interests in others figure into their demand and supply curves just as much as does their self-regard.”

The truth is this: the logic of choice at the heart of subjective value and marginal utility and marginal rates of substitution and satisficing and all that is not egoistic . . . according to economists. And when they say that it is — as they sometimes do, in large part because they are not always good philosophers — they err.

The brilliant Jevonsian economist P. H. Wicksteed tried to make this clear when he argued that economists are not pushing a rationale of egoism when they develop their notion of a demand schedule or draw up indifference curves, nor negating altruism, either. What they apply, he argued, is a concept of non-tuism.

This is a coinage he offered to help explain what he regarded as the basic nature of trade: when a person economizes in his purchases and asks for the highest prices possible in his sales, he may do so for egoistic or altruistic reasons, but still works to maximize the interest of the transaction, either egoistic or altruistic, when he makes those trades. (Or when she makes her trades, for one of Wicksteed’s better examples was of a housewife deciding the basic economy of the household under her charge.) Non-tuistic interest is a worthwhile concept to try to understand: see Israel M. Kirzner’s The Economic Point of View: An Essay in the History of Economic Thought (1960), for a good treatment.

But even Wicksteed did not get it exactly right, for we do sometimes trade for others’ benefit, accepting a higher price for pencils from the blind man at the corner than at the Five and Dime.*

It helps to focus not on “interest” — which, as I assert above, has too moral a component — and not on “utility” — which is unduly abstract, and gets students confused. Concentrate, instead, on the specific uses to which a good may be put. Under the theory of Grenznutzen (border use) of the Austrian School economists (from which English-language economists got their term of art marginal utility), the various uses to which a fungible good may be put, and against which value is to be understood (as dependent upon the importance of the specific use the last unit of a good decided upon has to the economic actor), can be almost any mix of self-regarding and other-regarding purposes.

In my personal economy, my first gallon of clear water goes to drink, the second and third to food preparation, the fourth to cleaning myself, the fifth to my neighbor, the sixth to my dog, the seventh to washing the dog, the eighth to washing the house, the ninth to letting the neighbor’s cow to drink, and so forth.* All of these uses satisfy me, but several also satisfy others. Do you see how useless quibbling about whose interests are being served?

The economist does not usually inquire deeply about the egoism and altruism of the goals, or uses, that are the foci of the border use (Grenznutzen) that goes into explaining the formation of prices and the rates of exchange. Because such concerns are irrelevant to what economists are usually trying to explain.

Similarly, economists rarely fret about how a person forms the value scales which place the various uses to which goods are put into order. Not because they cannot be analyzed, but because they are mostly irrelevant to what economists do.

Who is concerned? Moralists, whose traditional and self-appointed job it is to get people to change their values.

But when moralists get worked up over whether choices on the market are “too egoistic” or “not altruistic enough,” they go too far if they also castigate all economic choice as selfish. And usually they descend into a very deep error.

The error was identified clearly by Austrian philosopher Alexius Meinong in his Ethische Bausteine (see Marie-Luise Schubert Kalsi, Alexius Meinong’s Elements of Ethics, 1996), where he explores the difference between subject and object, ego and alter. Of egoism and altruism, Meinong argued that, before any deep inquiry, one might think that “a value is egoistic if the subject is egoistic, altruistic if the alter is the subject. However, that this is not so can be seen in the fact that I myself have altruistic desires and valuations besides egoistic desires and valuations. Thus, no objection should be raised that there are altruistic and egoistic values for me. Then, the ego is subject of even altruistic values. But the altruistic nature of these values must be grounded on something other than the valu[ing] subject.”

The notion that economics is “based on self-interest” is actually a misguided philosophical complaint, and though I recommend Wicksteed and Kirzner and other economists to clear this up, it really is a philosophical error, and should be dealt with philosophically.


 * Yes, I am old. I like throwing around seemingly ancient examples.

N.B. In addition to the texts explicitly cited, above, one should consult


Reconsiderations

I have to confess to writing my Quora answers fairly hurriedly. It is obvious that some are better than others. This one was not great, rather poorly organized, with some sloppiness. The Meinong section should have been placed up a few paragraphs, and my problem with Wicksteed’s non-tuism is not adequately identified.

The issue lurking (as if Yog-Sothothery) behind the scenes, is this: in discussing market prices in terms of marginal utility we generally assume that the goods being traded are discrete and serve a specific set of needs, or wants. But sometimes we do trade “just to trade,” even though Adam Smith protested that he was unaware of much good being done in that vein. Human interaction is more complex than simple models can map, and, yes, the Austrian praxeological method of catallactic explanation is modeling, too. There is no way around models. There are just different sorts.

This complexity becomes clearer, amusingly enough, when you move away from mass markets and into murkier realms of barter markets, gift economies, plunder procedures, and straightforward cooperation in domestic and tribal contexts.

Much work must have been done in the manner I indicate, here, but I have not seen that work, especially amongst the Austrians.

Austrians, whose basic approach I apply to social science, are like today’s leftists in one sense, at least: just as leftists endlessly and obsessively and yammer about racism for the obvious reason that the fight against racism is the only good thing they have ever accomplished, Austrian economists grind their brand of marginal utility theory because it was, indeed, the best thing they ever accomplished. Expanding it into other domains is harder work. So that work is generally not done.

That being said, Austrians are least apt among market-oriented economists to get caught up in puerile charges of “egoism.” The self-interest notion, too, is rarely botched by Austrians in a crude way, though I do not see many in the tradition to take a deep interest in the processes by which individual actors construct and revise their own understandings of their interests.

Finally, it is indeed unfortunate that we have to deal with two quite distinct concepts of “interest”: the moral concept, in which one aims to provide an objective standard for one’s subjective (personal) value scale, and the catallactic concept, which is associated with (if not defined as) the price of loaned funds.

twv

Remember President Barack Obama’s annoying “You didn’t build that”?

Today I watched President Donald Trump “explain” how awful trade deficits are. In that explanation he basically said to China, “You didn’t build that.”

The line should still be familiar. Obama had purloined it from the lips of Senator Elizabeth Warren. With this argumentative gambit, these two politicians revealed themselves for what they are, demagogues out to fan the flames of resentment and entitlement. In trying to give to government the credit for the entrepreneurial accomplishments of businessfolk, they were honing an agenda: de-legitimize the achievements of the successful the better to take their wealth away.

But while Obama gave to government the credit for business successes, Trump gave America the credit for China’s.

His logic?

Trump said previous presidents had allowed China to get away with trade policies that disfavored the U.S. to such an extent that no future deal could be 50/50; then, that a deal had been made, but China changed it, so he put up the wall of high tariffs.

Next, Trump boasted of the huge increase in government revenues from his taxes, er, tariffs.

And then the kicker: “We rebuilt China because they got so much money” under freer trade.

That is how Trump had America take the credit for Chinese growth.

And he was more than implying that there is something wrong with Americans helping Chinese grow in this manner.

Trump seems not to understand that when people trade (it is not, really, countries trading) both sides gain. The farmers who support Trump can imagine selling more agricultural product had President Xi’s own protectionist measures been lower, and it is on the basis of those lost opportunities that Trump makes his pitch to American farmers. But it is Chinese consumers who have the greater cause to complain for past Chinese protectionism, for had Xi allowed more trade, China would have grown even faster. Because of all the exchanges. 

Like in all trade, neither side to a trade is irrelevant. China could with just as much justification take credit for American progress in all that past trade.

Every instance of which was an advance for both sides.

The Chinese built what they built, with American help. And could’ve built more had their government gotten out of the way.

And right now, with Trump’s high tariffs in place, American consumers will have to pay more for what we buy from China.

And elsewhere.

Trump is apparently trying to get Xi to take down his protectionist barriers by putting up American barriers. And if Trump succeeds, we do indeed all win. If he fails, we all lose. Meanwhile, we are hurting as much as the Chinese.

And what Trump is saying encourages resentment and economic superstition. So, even if he wins, what we may end up with is more resentment and a greater reservoir of protectionist sentiment in the American electorate.

And that almost guarantees disaster.

twv

Why isn’t corporatism talked about as an alternative to capitalism and socialism?

…an answer on Quora by Ethan Lee:

‘Corporatism’ is not an alternative to capitalism, it is capitalism. Albeit not free market capitalism, it is capitalism none the less. Calling X corporatist is just a cop out to avoid admitting that is in fact capitalism.

Capitalism = Private ownership over the means of production

Socialism = Worker ownership over the means of production

Is that exactly right? Workers can own the means of production in capitalism. 

I own my small business. There do exist workers’ cooperatives. And laborers’ pensions often own stock in companies, though most often not majority stock in any one company, and not in their own — which, since they invest at their own discretion, suggests that workers, generally, do not want to own the means of production. Only a few exceptional people do.

And, interestingly, under several of the socialist societies that have existed — the most prominent one, anyway, that called itself socialist, explicitly — small business was not exactly tolerated, was it? And workers did not own their factories, etc., the State did. And, further, it was industrial workers that were focused on: agricultural workers were despised, expropriated, and killed en masse. For “workers” owning “the means of production” was not the point of socialism, historically. Not really. It was “everybody” owning the means of production through a central planning office, through the State. Which in practice just means tyranny.

And I note that the socialists I know personally, and the ones I see on TV, do not seem much interested in workers as such, or the means of production as such. They are concerned with consumers, making sure that everyone can consume about the same amount of goods: equal access to healthcare, equal access to housing, equal access to iPhones, complete financial security for all, etc. Which suggests, once again, that “workers” is the reddest of red herrings. Socialism always comes back to a form of consumerism. State-supported and -enabled consumerism.

What “corporatism” means is not always clear, either. We have a lot of publicly* traded stockholders’ corporations in these United States, and they sure look like market institutions, and not a few are even basically operating within something like a free market. But many — though, once again, certainly not all — of the most successful are dependent for their success on government contracts (some of the biggest corporations are those within the ambit of the military-industrial complex) and, when the biggest fail (most recently in the financial sector) they are bailed out, at taxpayer expense. Further they are regulated in such a way that “just so happens” to protect established businesses from upstart competitors. This system is certainly not laissez faire, as stated in the answer, above. But its capitalist nature, while being there, is certainly open to some interrogation. What it looks like to me might best be called “producerism.” A form of it. Producerist arguments were dominant in 19th century support for protective tariffs, and they now dominate the government practice of regulation and bailouts.

Which should indicate my approach to free-market capitalism: it is consumerist-producerist . . . both. We produce to consumer, sure, but no consumer and no producer should really be given special favors. “Workers” and “business” do not compete so much as cooperate, and foisting a class narrative on their relations is a bad idea. They are just two special interests, and our rule of law should serve the general interest, not any specifically identified class or group. Neither consumer-oriented socialism nor worker-oriented socialism make sense, and corporatisms that focus on bolstering up specific industries for the sake of stability are not much better.

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* Note that we call publicly traded stock companies “private” — our nomenclature sure must confuse the young.

Gustave de Molinari

The economist must not confound interest with selfishness, still less with the satisfaction of such needs as are purely material. It signifies rather the sum of the requirements of human nature, material as well as moral. A man does not impose upon himself the sufferings which are inseparable from effort, nor abstain from enjoying the fruits of his toil, for the sole purpose of satisfying selfish wants, whether present or future. Altruistic intention is a frequent and often the more powerful factor in determining labours or abstentions. Altruism includes the love of family and the race, of truth and justice; and its scope is only limited by that of the moral sentiment. Under its spur men have died for each other, a cause, even a cherished idea. There is no real warrant for the opposition between interest and duty, a contradiction that has been too often reiterated. Duty is no more than the obligation to act in conformity with justice, the criterion of which is the general and permanent interest of the species. The sense of justice — in other words the moral sense — naturally predisposes us to conform action to duty. This sense is, no doubt, distributed most unequally. Certain individuals find that obedience to its dictates yields a joy which outweighs any pain, and such men pursue duty at all costs and in face of every obstacle; others are less conscious of the stimulus. A sense of obligation is often disobeyed, but every lapse is followed by that feeling of pain which is called remorse. Finally, there are many persons whose moral sense, the sense of justice, is quite rudimentary; they commit every kind of injustice or immorality to satisfy their passions or vices, and are a menace to society and the race. Mere self-defence compels society to supplement such enfeebled sense of the obligations. It therefore imposes penalties, regulating their incidence in such a way that the amount of pleasure obtained by comitting an injustice is more than neutralised by the punishment which follows.

Society’s first duty is, therefore, to foster the sense of justice — the moral sense. And it is equally imperative to define the distinction between just and unjust, moral and immoral, since the hurt or benefit of society and the species is bound up with the opposition between these two ideas. The interests of the individual and the species are, in their regard, identical.

Gustave de Molinari

The Society of To-morrow: A Forecast of Its Political and Economic Organisation (1904)

from the Preface, third footnote (to the passage in the title on this page)

To believe that “deficits don’t matter” and “public debt is no problem” requires one to believe that government, and government alone, has solved the problem of scarcity.

Furthermore, governments have mastered this magic by doing the one thing that politicians most like doing: bestowing benefits on some constituents without immediately raising taxes on others.

Suspicious. Stretches the credulity, if you ask me. I have never been shown the mechanism how this could possibly work.

Most defenses of deficit spending are Keynesian, and Keynesian fiscal prescriptions only make sense on their own terms when counter-cyclical, that is, when deficit spending is parlayed in bad times to be offset by budget surpluses used to pay off debt in good times. But that no longer ever happens. If it ever did.

Politicians just get too few rewards from paying down debt.

So, as near as I can make out, the modern State’s “solving” of the “problem of scarcity” is not a solution at all, but is, instead, a con job. It depends wholly upon misdirection. As is so often the case, we come back to Bastiat’s “the seen and the unseen.”

The populace? Blind to it. But politicians and their pet economists? They squeak and take their politic soundings for mastery of flight.

Batty.

Cultic behavior is not limited to marginal groups.

Indeed, it has become increasingly clear in recent years that the social controls we associate with cults are the prime drivers (with interesting differences) of almost all center-dominant cultural organizations, institutions and movements.

Most people adopt center-dominant beliefs not because of the beliefs’ truth-values, but for pragmatic reasons and for signalling. Think of it as “innocence by association.”

We should expect nothing else.

And it is for this reason that whole cultures can lurch into extremely perverse directions, whether they be Aztec mass sacrifice, communist political centralism, or even dietetic “science” and eating habits.

My favorite modern example is usually deficit spending by governments and debt accumulation — often excused by half-adopted, half-assessed Keynesianism while being driven by very different but very obvious Public Choice factors.

twv

I asked a question about Menippean satire and the works of Jack Vance, in a Facebook discussion group, and in the conversation that followed I encountered this:

What is remarkable about this passage from a fellow Vancian is how easy it would be to satirize, in Menippean fashion.

But instead of doing so, I will just explain: the truth of the matter is almost precisely the opposite of the notions for which my interlocutor expresses certainty.

“We” do not destroy the environment to enrich the “1 percent.” This “1 percent” works mightily to fulfil our desires, and in the course of the process some damage is done to the “environment.” Trendy progressives — by which I mean “trendy anti-progress doomsayers” — never seem to understand how the world works. They seem to think that if the 1 percent goes about enriching themselves, we allow them to do that because we are suckers. Not quite. We allow them to invest, and to build businesses, so that those businesses can increase the quality of our lives. The dreaded Greenhouse gases do not come, primarily, from the recreational activities of the very rich. They come from all of our driving in automobiles, heating our domiciles, and eating meat. Sure, many people get rich providing us with cars and fuel, electricity and natural gas, and raising beef animals that fart up methane. It is because we engage in consumption that production is developed, and some people — serving vast hordes of consumers — get very rich.

Capitalism is mass production for the masses.

It is a defect of leftist thought that what leftists object to is the great successes of the most productive, not the real drivers of the market system, consumers.

I find it hysterical coming from folks who readily parrot Keynesian doctrine, since Keynesians fixate almost wholly on consumer spending as the driver of market activity. I think the actual implementation of capital is way more complicated than Keynesians think, but nevertheless I more than acknowledge the consumer sovereignty idea embedded (perhaps precariously) within Keynesian dogma.

But leftists and environmentalists and other responsibility-evaders must always shift blame for unfortunate social patterns away from themselves and onto the dreaded Rich.

I guess this allows them to justify their lust to tear away at other people. And because they do not see the integral role of entrepreneurs in markets, or recognize the symbiotic relationship of all market participants, including between “classes,” they eagerly attack one sector, in vulgar fashion, while inflicting harm more generally.

Then, of course, they blame the rich for not being more productive.

This general attitude is what I think of as a satirizable — and is satirized in some of the character types to be found in many of Vance’s best work, such as Wyst and Emphyrio.

It is not just the attitude that is bothersome, however. Also latent in my interlocutor’s sort of complaint is lack of recognition of a fairly basic truth: it is only the comparatively rich societies that find ways to make industry cleaner. America and Europe developed strategies for cleaning up industrial excess only after a level of wealth was reached, far in advance of what big polluters in India and China now possess.

This may be a sad truth, but it is a truth regardless.

Environmentalists so rarely recognize it.

And yet they often do so tacitly, by focusing their ire on First World polluters more than in China and Africa, for instance.

Pure comedy gold.

twv

IMG_4603


What would happen if the world stopped using money?

As Answered on Quora

Billions of people would die.

Without a medium of exchange and unit of account, coördination of capital would become utterly incoherent, and the established interdependence of the modern age would vanish.

Most people would become useless to others, unrewardable.

And violence would reign supreme, as there would be a scramble to capture existing resources. Economists would utter the words “consumption of capital” before they were placed against the wall and shot en masse.

Mass starvation, rioting, tyranny, and death would follow, and quickly. Progress would not merely halt, regress would set in. We would go back to a stone age. A few technological utopias may survive, but the cost would be extraordinary.

For billions and billions of people would die miserable, horrifying deaths.

And the population would reduce itself to something like twice the population of bears.

In the meantime, certain infrastructure elements, like nuclear power plants, might very well fail and poison the planet . . . that is, if the malign individuals who capture the nuclear arsenal do not usher in nuclear winter, first.

I try to read the MoveOn emails I receive several times a week. Yes, I try. But they are very trying.

Just this morning I got an email from “Bernie Sanders” . . . which began “Hi Timothy — I just wanted to make sure you saw my message from the other day.”

Must be important.

So what does “Bernie Sanders” say?

Well, he pushes what he (or his copywriter) call “the progressive agenda,” which is dead set against the “corporate giveaway” in the new tax reform bill. Here is how he begins:

Throughout my political career, I have asked us all to imagine what our nation’s future could be: a country with a minimum wage that is a living wage; with students graduating college without crushing debt that stifles their ability to pursue their dreams; where health care is recognized as a right for every man, woman, and child; and where we lead other nations in the fight against climate change.

I have asked us to believe that we could level the playing field and create a vibrant democracy where the billionaire class would no longer be able to buy and sell our candidates and elections.

I will always believe in that vision of America — even as I watch Republicans try to pass a tax scam that is literally the opposite agenda of what you and I have championed over the years.

A tax scam. I wonder: does it increase taxes on the poor and the proverbial “middle class”? I doubt it, but I honestly do not know. The only “fact” about the tax bill given is that it decreases taxes on the wealthy.

I assume by that he means decreases tax rates on the wealthy. There is a difference between rate and revenue. The difference should affect the way we talk about taxes. Somehow, it almost never does.

Bernie, if you could help me on this, please explain. Comments are open below.

Lacking many specifics from this pitch letter (and, after all, that is what most MoveOn emails are, pleas for funds — the only other regular pitch being calls for action, usually to complain to my congressperson), I wander back up to the top. Bernie Sanders imagines an America with “a minimum wage that is a living wage”; with college students not starting their remunerative careers buried in debt; “health care” treated “as a right” for all; and the country leading the world “in the fight against climate change.” Each point is worth thinking about. But I am going to avoid the “climate change” issue entirely, focusing, instead, on the climate-of-opinion change regarding matters nearer at hand.*

The Ass Ceiling

Minimum wage laws were one of the two big issues regarding economic policy that turned me away, forever, from Bernie’s brand of politics. The first time I heard someone assert that minimum wage laws hurt some low-skilled workers while helping competing workers with higher perceived skills, I got really interested in economics. As a science. I wanted to see how this could be the case, if it could at all.

I learned two things right away: one must move beyond slogans and look at what laws are at base, and then what their effects are beyond the policy’s immediate targets.

At base, minimum wage laws proscribe hiring people at a rate lower than set by the “minimum.” A minimum wage regulation does not require businesses to hire anybody at that rate. Such regulations prohibit businesses from hiring anybody below that rate. So, by their very nature, minimum wage laws are employment-limiting laws.

That puts the burden of proof on the proponent of the “minimum wage” to explain how it could increase the ranks of the employed, or, at the very least, not decrease those ranks. If employment decreases — either immediately or in the future — then minimum wage laws are not boons to the poor, lifting poor workers out of poverty. Instead, they would constitute mere redistribution-of-wealth schemes: in effect taking from some poor and giving to others, making them less poor.

The import of this idea has yet to hit at least half of the population.

The working out of the wider and long-term effects of wage-rate floors (as economists tend to characterize the regulation) gets complicated. It comes down to productivity — the marginal product, actually — and interesting scientific study can work out the complexities. There are debates to be had.† But what is interesting about political discussion, particularly from Bernie Sanders and his cadres, is that such discussion is never forthcoming. The usual defenses of minimum wage regulations that I hear point to the bizarre Card and Krueger studies, and not as economic explanations, but as excuses, as authority to dismiss economic reasoning entirely — with no more intellectual integrity than nyah-nyah taunting. “My study is better than your study”!

The popular use of these contrarian studies (and yes, most studies of minimum wage law effects disconfirm the stated utility of the regulations) is not to advance knowledge, much less explore how any particular study is constructed, but because it gives an excuse to hold to a policy endorsed for non-scientific reasons.

imageI know this because I felt their pull. The love of “minimum wage” regulations is part of a belief in the efficacy not merely of government but of activists who propound simple nostrums. It is a very religious commitment, and when I looked into the issue, nearly four decades ago, and studied my own psychology as well as economic theory, I concluded that my motives in promoting the wage floor were not pristine.

As always in such issues, it comes back to the Seen and Not Seen. What we “see” is a minimum wage law, and people employed above the prohibited low rates. We do not — and cannot — see the people that would have been employed had such regulations not existed. The counter-factual world is closed to us. And yet the reality of our experience is entirely encompassed precisely by such counter-factuals, since, when we choose either a job or a policy (or a career or a spouse or a philosophy) we are forecasting two or more possible worlds of effects that would result from a choice one way or the other, and those forecasts are not illusions, but guesses as to possible realities that, after the choice is made and the action (or policy) instantiated, only one of which becomes factual, actual.

By sticking to the Seen effects of minimum wage regulations, the enforced floor’s proponents allow themselves a smug sense of “sticking to the facts” while denying a basic part of reality. Meanwhile, they become acolytes to a particular religious view of life, wherein the State is savior and activism is ritual and prayer.

And, all the while they go about promoting one of their favored nostrums, they ignore the reality: wage floors are worse than the proverbial “glass ceilings” of feminist lore. The floor is raised, hiking the productivity requirements of workers, placing those unable to perform at the set level below the floor, looking up at the . . . feet and asses of those who remain employed. The People Under the Floor have been condemned by the regulation, with no more hope for them other than subsidy.

Oh, sure, they could get more skills, and that is indeed one thing progressives have always insisted upon: that people who want to work go to progressive-run schools where productivity is allegedly taught (it isn’t, for the most part) and the bills are paid from taxpayers. Indeed, unable to work because prohibited from doing so, the likelihood of skill acquisition is diminished for the low-skilled, since actual work is the single most important source for acquiring skills. And, indeed, most of those trapped under the floor are there in no small part because our society’s prescribed basic training ground, the public school, has proved to be ineffective (for a variety of reasons). No wonder, then, that The People Under the Floor turn to black markets and government handouts. That is pretty much all that is left them.

That is what Bernie Sanders and his kind have left them.

I shudder when I think about the People Under the Floor. And I try (often not successfully) not to be angered at the progressives most intent on policies that keep them there.

The takeaway that is so rarely taken, is this: the wage floor is an ass ceiling for the forcibly unemployed.

But Wouldn’t It Be Nice?

The interesting thing about progressivism is its relentless moralism. The subject line of Bernie’s email is “Stop this immoral disaster.” Calling something “immoral” often excuses one from thinking about it in any practical way. Bernie was talking about the tax issue, but his lack of any specifics is just indicative of this sort of mindset.

When I call something “immoral” or “evil,” that means that I have stopped careful consideration of it, too. Them’s fighting words, words of action.

One just hopes that there is some thought upon which that judgment of immorality can be based.

In his earnest (if under-thought) wishes for a debt-free beginning to careers (Bernie himself was a slacker, and then entered Congress in a great binge of living off the system) and for automatic, care-free medical assistance for all, Bernie seems driven by a utopian vision, an Edenic myth, backed only by

  1. activism and
  2. subsidy from the rich

IMG_4679Indeed, this email sums up his whole approach. It is an appeal to activists to support more activism that would (the scheme runs) lead to government action that would take from the rich and give to the not-rich. So no wonder, in all this, it is important to mention the awful spectacle of billionaires “buying and selling” — no talk of renting, interestingly enough — “our candidates and elections.” The big money game in politics is there, of course, because big money is what it is all about. Bernie S. and his fellow B.S.ers demand that “the rich” subsidize them more. Which is about money. Lots of it. The mere presence of the B.S. agenda ensures that those whom B.S.ers wish to plunder will lobby government to keep a bit more of what they have.

This is simply the nature of politics. When it is not about offense, it is about defense. And the more hits in offense a group takes, the more the group will spend in defense.

And by complaining about the rich defending themselves, the B.S.ers are trying to stack the game in their favor. Not only do they think it would be “nice” if other people paid for their college educations and their health care, they think it would be especially nice if those people who pay do not have a say in the “deal.”

How convenient.

Yet they are the ones always talking about “greed”!

This whole approach that they push seems a huge grab from a few to give to the many.

Quite a scheme they got, there.

None of This Is New

Nothing I have written here should strike anyone as in any way novel — except perhaps for a few quips and phrasings. After all, this is a very old debate. As soon as “socialism” became a word on the lips of reformers and revolutionaries, these debates became ubiquitous.

When I was young, the people who pushed the B.S. line were often called “liberals,” but with the rise of Reaganite conservatism, the l-word because a term of opprobrium. The word “progressive” became more popular. When I was younger, I read The Progressive magazine. I have been following this sort of thing all my adult life. But not close enough, apparently, for that magazine still exists. I have not seen it in years.

IMG_4680Indeed, I dropped the rag about the time I helped found Liberty magazine, which was published from Port Townsend until the death of its publisher in 2005. The third issue of Liberty appeared about 30 years ago exactly; the first had hit the mails in July (I think it was) of 1987. Liberty was a libertarian zine, and I had considered myself some sort of a libertarian for less than a decade at the time of its founding. But I had read a great deal of literature in both the individualist and collectivist movements. I had made an informed choice.

Perhaps I was destined to become a libertarian, for my individualism was built into the warp and woof of my psyche. Thinking in terms of groups seemed nuts to me. Indeed, I had interpreted my anti-racism and anti-sexism so big in the decades of my youth as anti-groupthink ethical philosophies. The error of sexism was to judge a person primarily in sex role terms, “by his or her sex” not his or her personhood. What an affront to civility, it seemed to me. And racism? Even less justifiable, for while the differences between men and women, boys and girls, were quite obvious and pronounced on the biological level, and even in psychological terms, the differences among the races were not that large, and from one person to another in any racial category could easily stretch the whole of human diversity.

And yet now the B.S. folks talk relentlessly of groups, of group identity, of one’s personal identity in terms of groups, and of victim groups and groups to be victimized (I mean, “oppressor” groups to be brought down and made “to pay”). Collectivism is alive and well. I have no sympathy for it any more. The whole “thinking in group terms” groupthink strikes me as pure madness.

And why “madness”? Why not use a nicer term? Well, madness is a word we usually use to describe the passionate people who are in some important way unhinged from reality.

The reality I see is that, right now, there are two federal governments: the constitutional government funded by income taxes, corporate taxes, other taxes, tariffs and “fees”; and the extra-constitutional government (consisting of Social Security and Medicare and Medicaid, mainly) funded by FICA and SECA and similar taxes. Interestingly, the unconstitutional government (which I designate as unconstitutional simply because, uh, none of its functions are listed in the Constitution) is basically run on a rough parity, mimic-insurance-contracts “public utility” basis, and what one gets out of the system does indeed depend on what one puts into it. The constitutional part is paid for mostly by the wealthy.

The nature of this tax situation is indeed quite amazing. The B.S.ers often yammer about “making the rich pay their fair share,” but the constitutional government is paid for almost entirely by the rich. This video explains this pretty well:

So when Bernie writes me to warn that current moves by the Republicans are designed to benefit the rich at the expense of “working families,” I am a bit skeptical:

And I’m going on the road again because we have to defeat this bill, too — a tax bill that will slash taxes for the rich, raise taxes on working families, and lay the groundwork for a massive attack on the most vulnerable people in our country.

This bill is an immoral disaster. If it passes, 13 million fewer Americans will be insured, and health care premiums will surge for tens of millions more. Further, the Republican budget cuts Medicaid by $1 trillion over 10 years and Medicare by over $400 billion. In order to give huge tax breaks to billionaires and large corporations, the Republican budget also makes enormous cuts to education, nutrition, affordable housing, and transportation — and will crush college students and college graduates struggling with debt.

In short: This budget will do incalculable harm to tens of millions of working families, women, kids, the sick, the elderly, and the poor. We have to fight this budget and stop it. That’s why I’m hitting the road with MoveOn, and why I’m asking you to support the work that we’re doing.

Then he asks for $3.

Thanks, but no thanks. I will spend $3 on a Coke. Or two. Or three.

Bernie makes no mention of how “rickety” is the current unconstitutional government sector, the Social Security/Medicare/Medicaid division. That is where most of his complaints about cuts are. But if it be unstable, financially unsound, we (if there is a “we” at all here . . . I know I have no power of choice in the matter) have basically two things to do: cut services and/or raise revenues. A normal person would probably suggest doing both, though one could see problems associated with doing either. The consequences of doing nothing? Almost unthinkable, for most people.

The fact that Bernie makes no mention of the problem, just focuses, instead, on the problem he sees with one solution, strikes me as irresponsible. If you want to know why there is such a strong divide, these day, look not merely the rhetoric on both sides, but on what they do not say. Bernie is mum about the secular disorder of the federal government, in which he serves as a prominent leader.

And his solution — make the rich pay more, not less — is even less responsible. He wishes to bail out the unconstitutional system that he himself helped strain (by voting for more benefits in the past) from the constitutional half of government, which already is paid for mainly by the very people he wants to soak further in his bailout.

I just shake my head.

I realize, this rambling blog entry is of little value. I am not really writing to convince anyone of any particular thing. Do I have any hope of convincing the progressives? No. They live in their reality, and its irreality they hope to impose on the rest of us. Meanwhile, we watch the Republicans speak only in half truths, and attempt only half-responsible reforms. I am just venting between jobs. (I have a video project to get to.)

I have never been less hopeful about the political future of the United States than I am right now. And I ascribe most of this to the unwillingness of partisans to deal with reality. Two sides and the middle are caught in a game where not seeing the whole is the most obvious feature.

It looks like the worst sort of game: not win-win; not win-lose; but lose-lose.

twv

 



* The willingness of people to become convinced of governments’ ability to manage the planetary climate while our federal government cannot even balance a budget is so astounding to me that I am, right now, at a loss for words. On that goofy subject.

† One of my readers made an astounding caveat to an earlier expression of mine about the marginal productivity theory of wages, which depended upon what seemed to me like a bizarre misreading of equilibrium theory, and a complete elision of knowledge problems —  but I confess, many of these are beyond my ken.)

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