First of all – to whoever reads this, I could care less which way you decide to vote on these measures. I think that assumptions of ill intent by anyone on either side of Measures 66 and 67 are foolish, and distract people from carefully weighing the issues logically.
As anyone who knows me might have guessed – I’m not exactly enthralled with the two ballot measures, 66 and 67, which are currently facing Oregon’s voters. I have been trying to think them over for a while now, but I tend to think most clearly when I force myself to write my thoughts. Of course – before you read any further – you should read the actual bills yourself. Here is Measure 66, and here is Measure 67.
At this point, you have probably heard the talking point arguments from either side of the issue. Namely, that your choice is between hurting schools, teachers, and students (by voting against 66 and 67) or hurting corporations, jobs, and the rich (passing 66 and 67). Both arguments may be true, but I think there are some deeper concepts to consider.
“The most basic question is not what is best, but who shall decide what is best.”
-Thomas Sowell
In my opinion, all political and legislative ideas should be judged by two key factors.
- The vision they are built on
- Their practical seen and unseen results
In this post – I am going to discuss the vision behind Measure 66. It is important to understand that by ‘vision,’ I do not mean the stated goals or intent of the policies. In fact – whatever the stated goal of policy happens to be, is almost entirely irrelevant to whether or not it is a good policy which would achieve that goal. When I say ‘vision,’ I am referring to the actual fundamental assumptions about society, law, and justice that the policy is built on.
Measure 66
Measure 66 raises taxes on a certain group of people who earn above a specified amount of income. In my view, there are several problems with the vision behind this bill, primarily, the vision of Law. Firstly, this tax is progressive in nature, as it singles out a specific group of people to be taxed at a higher rate than another group. From the way I view law, I believe progressive taxes are unjust.
The Law (including tax law) is meant to be an instrument of justice. Here the definition of “just” is especially helpful:
“Equitable: fair to all parties as dictated by reason and conscience; “equitable treatment of all citizens.”
A just Law then is the application of force against the inequitable treatment of citizens, or the violation of individual natural rights, such as life, liberty, or in this case, property. Friederic Bastiat wrote far more eloquently about this concept in the 1800s (Please excuse the long quote):
What, then, is law? It is the collective organization of the individual right to lawful defense.
Each of us has a natural right — from God — to defend his person, his liberty, and his property. These are the three basic requirements of life, and the preservation of any one of them is completely dependent upon the preservation of the other two. For what are our faculties but the extension of our individuality? And what is property but an extension of our faculties? If every person has the right to defend even by force — his person, his liberty, and his property, then it follows that a group of men have the right to organize and support a common force to protect these rights constantly. Thus the principle of collective right — its reason for existing, its lawfulness — is based on individual right. And the common force that protects this collective right cannot logically have any other purpose or any other mission than that for which it acts as a substitute. Thus, since an individual cannot lawfully use force against the person, liberty, or property of another individual, then the common force — for the same reason — cannot lawfully be used to destroy the person, liberty, or property of individuals or groups.
Such a perversion of force would be, in both cases, contrary to our premise. Force has been given to us to defend our own individual rights. Who will dare to say that force has been given to us to destroy the equal rights of our brothers? Since no individual acting separately can lawfully use force to destroy the rights of others, does it not logically follow that the same principle also applies to the common force that is nothing more than the organized combination of the individual forces?
If this is true, then nothing can be more evident than this: The law is the organization of the natural right of lawful defense. It is the substitution of a common force for individual forces. And this common force is to do only what the individual forces have a natural and lawful right to do: to protect persons, liberties, and properties; to maintain the right of each, and to cause justice to reign over us all.
I can think of many rationalizations for a certain group of people to be forced to turn over a greater percentage of their earnings to the State, but not one which is just. Some people argue that the wealthy actually live on a different percentage of their income, than say, a poorer middle-class person, and are less affected by higher taxes. Whether or not this is factually accurate, it hardly justifies the majority deciding what percentage they actually need to live on, or what shall be taken.
“The smallest minority on earth is the individual. Those who deny individual rights cannot claim to be defenders of minorities.”
-Ayn Rand
Essentially, Measure 66 and all progressive taxes, agree that it is right for third parties (lawmakers or the majority of voters) to determine for other individuals (first parties) what constitutes ‘enough’ income to be taxed at a higher rate. Of course I believe in representative government, but only one which represents the whole equally as individuals, and not one group of citizens vs. another based on class criteria.
Furthermore, I cannot think of a real justification for choosing $250,000, other than the assumption that this amount of money is high enough that a) the taxed party doesn’t need the money, or can ‘afford it’, and b) it won’t effect the majority of people voting to pass the Measure. The first reason subtly agrees that a progressive tax is unjust – but then attempts to rationalize it. And the second is nothing more than shrewd politicking.
The unfortunate consequences of Measure 66 passing or failing are real, and shouldn’t be minimized. If it passes – I believe that it will have an unseen negative effect on jobs (which are already in terrible shape) throughout the state. But there is no doubt – if it fails, it will certainly have a seen negative effect on teachers and schools. As with most government policy – we are left to vote on a loose-loose measure. If anything – this illustrates another simple truth about life:
“There are no solutions; there are only trade-offs.”
-Thomas Sowell
As I mentioned in the beginning – in no way could I judge anyone for voting one way or the other on this measure. The trade-offs of Measure 66 (as well as 67) are difficult to judge, but neither are without negative consequences. I can only state my own judgment and reasoning. Personally, I think 66 represents a deeply flawed vision of society and law. I am not arguing that people who vote for 66 are necessarily approving this vision. However, I believe that American society should be ‘progressing,’ or moving away from laws which divide citizens by class and set up one group against another. I think Bastiat again rightly illuminates this issue:
“But, unfortunately, law by no means confines itself to its proper functions. And when it has exceeded its proper functions, it has not done so merely in some inconsequential and debatable matters. The law has gone further than this; it has acted in direct opposition to its own purpose. The law has been used to destroy its own objective: It has been applied to annihilating the justice that it was supposed to maintain; to limiting and destroying rights which its real purpose was to respect. The law has placed the collective force at the disposal of the unscrupulous who wish, without risk, to exploit the person, liberty, and property of others. It has converted plunder into a right, in order to protect plunder. And it has converted lawful defense into a crime, in order to punish lawful defense.”
I realize that this opinion may seem grandiose and/or ideological. But I simply believe that the greater trade-off in the long-run is not just “education vs. jobs”, but a free people, and a system of just laws. And I think it is a serious problem that we have lawmakers who write policy of this nature.
WASHINGTON – A federal spending surge of more than $20 billion for roads and bridges in President Barack Obama’s first stimulus has had no effect on local unemployment rates, raising questions about his argument for billions more to address an “urgent need to accelerate job growth.”
An Associated Press analysis of stimulus spending found that it didn’t matter if a lot of money was spent on highways or none at all: Local unemployment rates rose and fell regardless. And the stimulus spending only barely helped the beleaguered construction industry, the analysis showed.
With the nation’s unemployment rate at 10 percent and expected to rise, Obama wants a second stimulus bill from Congress including billions of additional dollars for roads and bridges — projects the president says are “at the heart of our effort to accelerate job growth.”
Transportation Secretary Ray LaHood defended the administration’s recovery program Monday, writing on his blog that “DOT-administered stimulus spending is the only thing propping up the transportation construction industry.”
Road spending would total nearly $28 billion of the Jobs for Main Street Act, a $75 billion second stimulus to help lower the unemployment rate and improve the dismal job market for construction workers. The Senate is expected to consider the House-approved bill this month.
But AP’s analysis, which was reviewed by independent economists at five universities, showed the strategy of pumping transportation money into counties hasn’t affected local unemployment rates so far.
“There seems to me to be very little evidence that it’s making a difference,” said Todd Steen, an economics professor at Hope College in Michigan who reviewed the AP analysis.
And there’s concern about relying on transportation spending a second time.
“My bottom line is, I’d be skeptical about putting too much more money into a second stimulus until we’ve seen broader effects from the first stimulus,” said Aaron Jackson, a Bentley University economist who also reviewed AP’s analysis.
It’s familiar because I wrote the exact same thing…. except that was last November….and without an official study. And I’m not really boasting. I don’t have some special power of logic or ability to predict the future. All I did was apply a couple, rather simple logical mathematic and economic principals. The credit should really go to the wisdom gained from reading a couple dusty old papers on economics…
The problem here is that logic is not necessary to generate social policy, or political capital. Being seen to be ‘doing something’ to fix the economy, does not require logic and rationality, evidence from results, or much of anything at all. Simply doing something, and being seen: That’s politics. Thomas Sowell refers to this phenomenon as The Vision of the Anointed (the title of one of his excellent books, which I am reading). What mattered with the Stimulus was the Vision => not the results.
I guess I should have bet some money on it. Actually, I guess we all did. Almost $1 Trillion, in fact…
As far as The Vision of the Anointed is concerned, here are some quotes, for those interested in the concept:
“One of the most important questions about any proposed course of actions is whether we know how to do it. Policy A may be better than policy B, but that does not matter if we simply do not know how to do Policy A. Perhaps it would be better to rehabilitate criminals, rather than punish them, if we knew how to do it. Rewarding merit might be better than rewarding resultsif we knew how to do it. But one of the crucial differences between those with the tragic vision and those with the vision of the anointed is in what they respectively assume that we know how to do. Those with the vision of the anointed are seldom deterred by any question as to whether anyone has the knowledge required to do what they are attempting.” — P. 109
“In the tragic vision, individual sufferings and social evils are inherent in the innate deficiencies of all human beings, whether these deficiencies are in knowledge, wisdom, morality, or courage. Moreover, the available resources are always inadequate to fulfill all the desires of all the people. Thus there are no “solutions” in the tragic vision, but only trade-offs that still leave many unfulfilled and much unhappiness in the world.” — P. 113
“The presumed irrationality of the public is a pattern running through many, if not most or all, of the great crusades of the anointed in the twentieth century–regardless of the subject matter of the crusade or the field in which it arises. Whether the issue has been ‘overpopulation,’ Keynesian economics, criminal justice, or natural resource exhaustion, a key assumption has been that the public is so irrational that the superior wisdom of the anointed must be imposed, in order to avert disaster. The anointed do not simply happen to have a disdain for the public. Such disdain is an integral part of their vision, for the central feature of that vision is preemption of the decisions of others.” — P. 123-124
“In their zeal for particular kinds of decisions to be made, those with the vision of the anointed seldom consider the nature of the process by which decisions are made. Often what they propose amounts to third-party decision making by people who pay no cost for being wrong–surely one of the least promising ways of reaching decisions satisfactory to those who must live with the consequences.” — P. 129
“The vision of the anointed is one in which ills as poverty, irresponsible sex, and crime derive primarily from ’society,’ rather than from individual choices and behavior. To believe in personal responsibility would be to destroy the whole special role of the anointed, whose vision casts them in the role of rescuers of people treated unfairly by ’society’.” — P. 203
“A California farmer can always show the television audience the abundant crop he has been able to grow because of federal water projects. But no one can videotape the crops that would have been grown elsewhere, at less cost to the economy, if there were no federal subsidies to encourage the use of water delivered at great cost into the California desert instead of water delivered free from the clouds elsewhere.” — P. 257
“In the anointed we find a whole class of supposedly ‘thinking people’ who do remarkably little thinking about substance and a great deal of verbal expression. In order that this relatively small group of people can believe themselves wiser and nobler than the common herd, we have adopted policies which impose heavy costs on millions of other human beings, not only in taxes, but also in lost jobs, social disintegration, and a loss of personal safety. Seldom have so few cost so much to so many.” — P. 260
“There are no solutions; there are only trade-offs.” — P. 142
“To those with the vision of the anointed, the question is: What will remove particular negative features in the existing situation to create a solution? Those with the tragic vision ask: What must be sacrificed to achieve this particular improvement?” — P. 135
In case you were wondering – I hold to the tragic vision. How about yourself?
No matter the situation, there will always be That Which is Seen and That Which is Unseen. Great article from the Mises Institute:
Conserving conserves nothing
December 22, 2009 5:21 PM by Jim Fedako (Archive)
Maybe it was the holiday spirit. Or maybe it was the impatient line of holiday shoppers anxiously waiting for me to finish paying the cashier. Regardless, I let an economic fallacy slide without comment.
As the cashier was totaling my bill, she asked if she could pack some of my goods in the plastic bag I was holding; a plastic bag that previously held an item I had returned upon entering the store.
“Certainly,” I replied.
She then noted with a smile, “Great. I’ll reduce your bill by a quarter. You are saving the environment, you know.”
I’m certain my sweater could feel the hair on my neck rise. “Saving the environment?” I thought. But before I could respond, and begin a lesson in economics, the holiday spirit, or the line of holiday shoppers growing and waiting, kept me quiet.
In a slower time of the year, I would have noted that I would soon spend the quarter she left in my wallet on an after-dinner mint at a local restaurant. You know what I’m talking about; one of those small, foil-wrapped chocolate mints conveniently placed at the cash register.
My reuse of a plastic bag at the store allowed me to purchase a conglomeration of chocolate, sugar, fat, and foil. So, in the end, was the environment really “saved?”
Were my actions the same as those envisioned by the cashier? Did she really mean for me to consume different resources – something other than plastic? Is that really the end sought by those in the environmentalist movement?
Conserving conserves nothing is an outrageous claim, but it is true nonetheless. Oh, sure, by reducing my consumption, I am conserving certain scarce resources – that is the seen. However, as Hazlett and Bastiat showed years ago, the seen never tells the whole story. And, many times, the story it does tell is simply not true.
To get to the truth of my claim, we have to scratch beyond the surface. So, let us begin our Hazlettian and Bastiatian journey from the seen toward the unseen, and a better understanding of the economics of conservation.
First, we must define conservation. [1] As commonly used today, conservation refers to actions that reduce the use of certain resources for the purpose of protecting the environment. So, in this view, I conserve when, for the sake of protecting the environment, I travel by bicycle instead of by car. It then follows that I am not conserving when I choose to ride my bike as a benefit in itself. For my actions to be considered conserving, I have to be acting with the environment in mind. Or so the current definition goes.
I can reduce my consumption of a certain resource in order to satisfy a number of ends. For example: I can reduce out of a belief that, by doing so, I am protecting the environment; I can reduce due to a change in my valuation or preferences; I can reduce in order to save for future use; or, I can reduce as a result of government interventions.
In all cases, the result is the same: nothing is conserved. [2]
Let’s analyze the result of my supposed conservation effort at the store? As noted above, if I simply redirect my quarter to another purchase, I am not conserving the environment, so to speak. While it is true that I am reducing my use of certain resources, it is also true that my new purchase results in the increased use of other resources. The unseen negates the seen.
What if I had flipped the quarter into the trash can on the way out of the store? Or dropped it in a piggybank at home? In either case, the market would have read my action as a change in preference for money over other goods. The value of money would change ever so slightly and the resources that I left unused would be purchased by some other consumer or producer. My abstention would result in their consumption – and nothing would have been conserved (or, more correctly, some resources might be conserved, but at the expense of others).
What if government had taxed that quarter away? Well, the same applies as above. Government could have spent its ill-gotten gain on monuments to itself, using scarce resources in the process. Or it could have destroyed the quarter, and the value of money would have changed in the market. Again, nothing would be conserved.
So there is nothing about the reuse of the plastic bag and the reward of a quarter which causes a reduction in the use of scarce resources — in the aggregate, of course. And this holds every time I reduce my consumption of some good. I either consume some other good or change my preference for money. But nothing gets conserved.
Are there other ways to reduce consumption of a scarce resource? Absolutely. If folks in the environmentalist movement want to conserve (say) oil, they can purchase oil fields with all of those quarters returned at the checkout line. And they can leave the oil in the ground for as long as they own the land.
Certainly, by doing so, they will conserve oil. Nevertheless, they must also recognize that oil left in the ground will likely be offset by an increased use of other resources, with nothing being conserved in the end.
You may think, “That’s a sad tale. If there is no way to conserve, then we have no future.”
Such an argument is pure question begging. What makes conservation – as currently defined – a necessary means to a future? And what is that future, anyway?
There is hope. A truly free market would efficiently and effectively utilize scarce resources – conserve – through time. A free market and requisite property rights are the solution. They are our only hope, our only means to a brighter future.
I suggest that environmentalists redirect their efforts from so-called conservation to efforts that strengthen property rights and build freer markets. By doing so, they will be able to rest more easily knowing that the market will conserve resources efficiently and effectively. And then their means will be the same as our means, all leading to an end desired by most of us: a better world for ourselves and our children.
Note:
1. I am only looking at conservation as used by environmentalists – the three R’s of recycle, reduce, and reuse. I am not considering conservation as defined by conservationists — protecting certain plants, species, and habitats. Of course, strong property rights can protect those as well.
2. It is true that under full-blown socialism, with vast numbers of starving men, women and children lying down in the fields awaiting a quick dust to dust ending, fewer resources would be used – conservation would occur. However, with the exception of all but a few of the most-ardent environmentalists, no one desires such a dystopian world.
My appeal to the environmental movement is the same: Promote things that are true and actually make economic sense, not collectivism. That is all I ask.
A PETITION From the Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps, Snuffers, and Extinguishers, and from Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.
To the Honourable Members of the Chamber of Deputies.
Gentlemen:
You are on the right track. You reject abstract theories and little regard for abundance and low prices. You concern yourselves mainly with the fate of the producer. You wish to free him from foreign competition, that is, to reserve the domestic market for domestic industry.
We come to offer you a wonderful opportunity for your — what shall we call it? Your theory? No, nothing is more deceptive than theory. Your doctrine? Your system? Your principle? But you dislike doctrines, you have a horror of systems, as for principles, you deny that there are any in political economy; therefore we shall call it your practice — your practice without theory and without principle.
We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us [1].
We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights, and blinds — in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat.
Be good enough, honourable deputies, to take our request seriously, and do not reject it without at least hearing the reasons that we have to advance in its support.
First, if you shut off as much as possible all access to natural light, and thereby create a need for artificial light, what industry in France will not ultimately be encouraged?
If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth.
If France consumes more oil, we shall see an expansion in the cultivation of the poppy, the olive, and rapeseed. These rich yet soil-exhausting plants will come at just the right time to enable us to put to profitable use the increased fertility that the breeding of cattle will impart to the land.
Our moors will be covered with resinous trees. Numerous swarms of bees will gather from our mountains the perfumed treasures that today waste their fragrance, like the flowers from which they emanate. Thus, there is not one branch of agriculture that would not undergo a great expansion.
The same holds true of shipping. Thousands of vessels will engage in whaling, and in a short time we shall have a fleet capable of upholding the honour of France and of gratifying the patriotic aspirations of the undersigned petitioners, chandlers, etc.
But what shall we say of the specialities of Parisian manufacture? Henceforth you will behold gilding, bronze, and crystal in candlesticks, in lamps, in chandeliers, in candelabra sparkling in spacious emporia compared with which those of today are but stalls.
There is no needy resin-collector on the heights of his sand dunes, no poor miner in the depths of his black pit, who will not receive higher wages and enjoy increased prosperity.
It needs but a little reflection, gentlemen, to be convinced that there is perhaps not one Frenchman, from the wealthy stockholder of the Anzin Company to the humblest vendor of matches, whose condition would not be improved by the success of our petition.
We anticipate your objections, gentlemen; but there is not a single one of them that you have not picked up from the musty old books of the advocates of free trade. We defy you to utter a word against us that will not instantly rebound against yourselves and the principle behind all your policy.
Will you tell us that, though we may gain by this protection, France will not gain at all, because the consumer will bear the expense?
We have our answer ready:
You no longer have the right to invoke the interests of the consumer. You have sacrificed him whenever you have found his interests opposed to those of the producer. You have done so in order to encourage industry and to increase employment. For the same reason you ought to do so this time too.
Indeed, you yourselves have anticipated this objection. When told that the consumer has a stake in the free entry of iron, coal, sesame, wheat, and textiles, “Yes,” you reply, “but the producer has a stake in their exclusion.” Very well, surely if consumers have a stake in the admission of natural light, producers have a stake in its interdiction.
“But,” you may still say, “the producer and the consumer are one and the same person. If the manufacturer profits by protection, he will make the farmer prosperous. Contrariwise, if agriculture is prosperous, it will open markets for manufactured goods.” Very well, If you grant us a monopoly over the production of lighting during the day, first of all we shall buy large amounts of tallow, charcoal, oil, resin, wax, alcohol, silver, iron, bronze, and crystal, to supply our industry; and, moreover, we and our numerous suppliers, having become rich, will consume a great deal and spread prosperity into all areas of domestic industry.
Will you say that the light of the sun is a gratuitous gift of Nature, and that to reject such gifts would be to reject wealth itself under the pretext of encouraging the means of acquiring it?
But if you take this position, you strike a mortal blow at your own policy; remember that up to now you have always excluded foreign goods because and in proportion as they approximate gratuitous gifts. You have only half as good a reason for complying with the demands of other monopolists as you have for granting our petition, which is in complete accord with your established policy; and to reject our demands precisely because they are better founded than anyone else’s would be tantamount to accepting the equation: + x + = -; in other words, it would be to heap absurdity upon absurdity.
Labour and Nature collaborate in varying proportions, depending upon the country and the climate, in the production of a commodity. The part that Nature contributes is always free of charge; it is the part contributed by human labour that constitutes value and is paid for.
If an orange from Lisbon sells for half the price of an orange from Paris, it is because the natural heat of the sun, which is, of course, free of charge, does for the former what the latter owes to artificial heating, which necessarily has to be paid for in the market.
Thus, when an orange reaches us from Portugal, one can say that it is given to us half free of charge, or, in other words, at half price as compared with those from Paris.
Now, it is precisely on the basis of its being semigratuitous (pardon the word) that you maintain it should be barred. You ask: “How can French labour withstand the competition of foreign labour when the former has to do all the work, whereas the latter has to do only half, the sun taking care of the rest?” But if the fact that a product is half free of charge leads you to exclude it from competition, how can its being totally free of charge induce you to admit it into competition? Either you are not consistent, or you should, after excluding what is half free of charge as harmful to our domestic industry, exclude what is totally gratuitous with all the more reason and with twice the zeal.
To take another example: When a product — coal, iron, wheat, or textiles — comes to us from abroad, and when we can acquire it for less labour than if we produced it ourselves, the difference is a gratuitous gift that is conferred up on us. The size of this gift is proportionate to the extent of this difference. It is a quarter, a half, or three-quarters of the value of the product if the foreigner asks of us only three-quarters, one-half, or one-quarter as high a price. It is as complete as it can be when the donor, like the sun in providing us with light, asks nothing from us. The question, and we pose it formally, is whether what you desire for France is the benefit of consumption free of charge or the alleged advantages of onerous production. Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat, and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long!
Frédéric Bastiat (1801-1850), Sophismes économiques, 1845Notes:
[1] A reference to Britain’s reputation as a foggy island.
Could have been written yesterday.
This is a thoughtful critique of the private vs. public control of our air traffic control system. However, it raises some important issues which deserve more attention.
Whenever someone trots out the ‘Profits vs. People‘ line, it is important to recognize this as nothing more than an economically illiterate straw-man. We live in a society of free people, not of slaves. Therefore, there is no such thing as People versus Profit, rather – they go hand in hand.
In a free society, Profit in not something which necessarily requires the sacrifice of People (as the video above puts it: ‘People before profits’). In fact, Profit is not possible without People – whether workers or consumers. Nor is Profit simply “making money,” though it is almost exclusively discussed this way. (Note that money is nothing more than a representation of value, and a means of easily trading it. Without money – trading would be nearly impossible. I would have to barter hours of web development directly for flight control service, or mexican food, or Wii games, or my mortgage payment, etc.) People trade things they value and produce, (usually represented by money), for things they value more or are incapable of producing. This creates a ‘profit’ for both traders. The one offering the service – turns a profit on the service provide, the other gains a profit from the service rendered. There is no ‘versus’.
Likewise, the animosity toward the ‘profit motive’ is also illogical. This phrase is often used as a pejorative describing an enterprise making money. But what of the consumer’s ‘profit motive‘ to obtain the service for the cheapest cost? Both parties are negotiating a trade of value. Why is only one seen as profiting, and is thus demonized? As a service provider or producer in a free market – it runs counter to the ‘profit motive’ to do something that is destructive to your customers or the public image of your company. Because a private entity does not have the ability to use force (in contrast with the government, which IS force), it is inherently imperative to, not only, earn your trust and support – but provide something of greater value, than whatever thing of value (money) you would trade for it. If a certain product or service is not of greater value – or if the provider is known to harm its customers, you are free to trade for something else that isn’t harmful and is a better deal. Essentially – you are free to choose to pursue a better trade – one in which you gain a bigger (here comes that ‘evil’ word again…) profit with regard to what you offer to trade. The profit motive is hardly more than the desire to not get screwed over when making a trade.
Consider these thoughts the next time someone attempts to decry Profits, the profit motive, or pushes the false idea that Profits and People are enemies fighting for opposing teams.
One Crucial Distinction About Capitalism
Above I am arguing for capitalism. It is essential to point out that private entities who do use governmental force to compel consumers to trade for their service are not practicing capitalism. Capitalism is free trade, hence -laissez faire. The power to determine and negotiate value and fairness is on the individual traders. Forced trade is a feature of socialism, communism, and/or fascism. With forced trade, the government (force) is used to increase a private entities influence or bargaining power. For example: Let’s say General Electric is lobbying congress (which they are) for all sorts of things (as is their constitutional right). Among those things is likely a push to pass legislation against incandescent light bulbs in the interest of climate change. Congress then may outlaw these bulbs, and you will be obligated to purchase the new curly florescent bulbs. Obviously, G.E. will profit greatly from this new legislation, even if you buy your new bulbs elsewhere, because the new law will necessarily create an increase in demand. The point is that G.E. will have bargained with the politicians to borrow the government’s monopolistic force to influence the market and raise the value of florescent light bulbs. This is anti-capitalism.
Perhaps you may argue that you get to vote about the new legislation (usually you don’t, but for the sake of the argument…) – but your decision is either upheld or overruled by the majority of other voters. This is a far cry from actually freely choosing – “I will trade some value, in exchange for something you value more”.
This difference is crucial and must be distinguished, as it is commonplace to blame laissez faire capitalism (free trade) for the faults which are actually aspects of socialism (government sponsored forced trade). Ayn Rand further lays out this distinction in the video below:
Part of me laughs, and part of me cringes whenever I see these signs….because they are absolute rubbish. This sign is based on the assumption that we the public are either too lazy, or just too ignorant to think beyond what we immediatly see.
Whenever we are presented with this concept: that the government can “put people to work,” the question must be asked, “How?”When a non-state entity creates a job, it does so either by taking out a loan on the investment bet that the job created will produce enough value to repay or exceed the loan taken, or by reinvesting its own existing capital with a similar goal.
The State “creates jobs” or “puts people back to work” either with existing tax revenues, or by taking on debt to be funded through future tax revenues. I used quotes above because anyone with a grasp of elementary mathematics would realize that this is neither “creating jobs” nor “putting people back to work.” It is nothing more than shifting work around. Ask yourself, what would the tax revenues taken by the state to ‘put Oregon back to work’ have been used for otherwise? What of the things the tax-payers would have invested their money in, had it not been taxed away? The answer is: jobs. Perhaps the tax-payer was planning on buying some new shoes (a shoe salesman’s paycheck), going out for an extra nice dinner (a restaurant worker’s wages and tip), a kitchen remodel project (construction material producers, contractors, cabinet makers, plumbers, etc) planning to add to their payroll at work to hire a new employee, or even donating money to their favorite charity. But these things will never be seen because some politician had the nice, though deceptive and false idea that they had the ability to “put Oregonians back to work.”It is important at this point to understand that money is nothing more than a representation of labor, or work. We choose to work and earn money because money allows us to trade the value of something we are good at (in my case, web developement), for something we value that we aren’t good at, or couldn’t possibly create on our own (e.g. a ticket to football game. I neither play football, nor do I have the knowlege or ability to coach a team, let alone build a football stadium. Heck, I even suck at Madden…).
The point is that the sign above is clearly hogwash. It is based on the flawed notion that governments create things. To accept this idea, is to throw out the economic concept of opportunity cost. Government is force. The government is the only entity that we allow the power to involuntarily take our money and re-appropriate it. In this case – it is the opportunity for the tax dollars to have been spent elsewhere – that the government is forgoing so they can be assigned to this road project. If the sign was actually honest it would read: Taking a portion of your work, and directing it to someone or something else. Or perhaps simply, Making Oregonians pay for this road project.But telling the truth doesn’t matter to politicians because when there is a problem (such as a down economy) they must be seen as doing something to fix the problem. The perception that they are doing something to ‘put Oregon back to work’ is far more important politically than the actual truth, that they just moved work to a project that the voters will see. What the voters won’t see is all of the jobs that were sacrificed to make that particular road project possible.
It is important for me to mention that here, I am not necessarily arguing against road or other government projects. I am however calling out the hack politicians who think that tax-payers are dumb enough to fall for the ludicrous idea that government can create jobs by simply spending them into existence. From here, you can draw your own conclusion on whether the ’stimulus’ bill will actually stimulate anything, other than some politician’s delusion of grandure.
Oh, and here’s the real irony of ironies: This sign is on a road leading up to the city Amtrak station. Amtrak is in business today, and its employees have jobs, only because they are subsidized with money taken from tax-payers. I suppose a sign for that could have read: Putting Amtrak back to work – which of course actually means, Forcing you to pay for Amtrak, rather than whatever else you valued more.
“In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause – it is seen. The others unfold in succession – they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference – the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favourable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, – at the risk of a small present evil.”
-That Which is Seen, and That Which is Not Seen -Frédéric Bastiat, 1850
I've posted these videos before – and I see no reason not to again. My thanks to all who have labored for the cause of liberty. I think that this commercial could apply to all the armed forces:
20 years after the destruction of the Berlin Wall – Remembering the Victims of Communism
“Liberty, according to my metaphysics, is an intellectual quality, an attribute that belongs not to fate nor chance. Neither possesses it, neither is capable of it. There is nothing moral or immoral in the idea of it. The definition of it is a self-determining power in an intellectual agent. It implies thought and choice and power; it can elect between objects, indifferent in point of morality, neither morally good nor morally evil.”-John Adams
Liberty…Everything that communistic collectivism is not.
“And does not experience prove this? Look at the entire world. Which countries contain the most peaceful, the most moral, and the happiest people? Those people are found in the countries where the law least interferes with private affairs; where government is least felt; where the individual has the greatest scope, and free opinion the greatest influence; where administrative powers are fewest and simplest; where taxes are lightest and most nearly equal, and popular discontent the least excited and the least justifiable; where individuals and groups most actively assume their responsibilities, and, consequently, where the morals of admittedly imperfect human beings are constantly improving; where trade, assemblies, and associations are the least restricted; where labor, capital, and populations suffer the fewest forced displacements; where mankind most nearly follows its own natural inclinations; where the inventions of men are most nearly in harmony with the laws of God; in short, the happiest, most moral, and most peaceful people are those who most nearly follow this principle: Although mankind is not perfect, still, all hope rests upon the free and voluntary actions of persons within the limits of right; law or force is to be used for nothing except the administration of universal justice.”-Frédéric Bastiat, The Law
If you want my quick advice: This is an important book, and you should read it. You will probably be better off reading it yourself, and drawing your own conclusions – than reading my evaluation of it, since there is no possible way I can adequately address the many ideas covered.
Jobs, food, clothing, recreation(!), homes, medical care, education, etc., do not grow in nature. These are man-made values—goods and services produced by men. Who is to provide them?
If some men are entitled by right to the products of the work of others, it means that those others are deprived of rights and condemned to slave labor.
Any alleged “right” of one man, which necessitates the violation of the rights of another, is not and cannot be a right.
No man can have a right to impose an unchosen obligation, an unrewarded duty or an involuntary servitude on another man. There can be no such thing as “the right to enslave.”
A right does not include the material implementation of that right by other men; it includes only the freedom to earn that implementation by one’s own effort. . . .
The right to property means that a man has the right to take the economic actions necessary to earn property, to use it and to dispose of it; it does not mean that others must provide him with property.
Today’s Wall Street Journal profiles the world’s largest wind farm. One local politician, Greg Wortham, hailed the Roscoe, TX farm as a model for the rest of the country, citing all the jobs it’s brought:
… 20% of Nolan County’s jobs are related to the wind-development rush here — as many as those in oil and gas…
Oops. It turns out most of those jobs were temporary.
… At the peak of its building, the Roscoe wind project employed 600 people, said Patrick Woodson, chief development officer for E.On Climate & Renewables. Now the project employs about 10 permanent staffers … 60 contractors … .
The article fails to mention one thing: The farm was built with $121,903,306 in subsidies.
So did this project actually create new jobs? No. This is another example of Frederic Bastiat’s broken window fallacy. Applauding the jobs that result from the subsidy ignores the fact that, had the money not been taxed away and given to the wind farm, it would have been spent elsewhere. All the subsidy did was steal money from other activities to give to a politically-favored business. That makes for good headlines and allows bureaucrats to feel good about themselves. But it doesn’t create jobs – green or otherwise.
If “green” jobs make sense, the market will create them. Viable businesses don’t need a multi-million handout to get started. Private entrepreneurs will invest their own money to profit from investments that really work.
If green energy is good idea, it’ll just happen.
If it’s a good idea.
Stossel nails this one. The Broken Window Fallacy may be the most prevalent thinking error in modern day politics and economics. And it may also be the oldest. Read Bastiat! He wrote about it this in the 1800s when the French politicians were promoting the same ludicrous notion that you can “create jobs” by simply removing wealth from one place, and placing it someplace else. Anyone with a basic grasp of mathematics should be able to see that you are simply shifting wealth around – not creating wealth – something which actually creates jobs.
Bastiat’s writings are easy reading, free, and as certainly as relevant today as there were in the 1800s. Read them all at Bastiat.org.
“No legal plunder: This is the principle of justice, peace, order, stability, harmony, and logic. Until the day of my death, I shall proclaim this principle with all the force of my lungs (which alas! is all too inadequate).”
-Frédéric Bastiat, The Law
