Why Freakonomics was great

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

--Henry Hazlitt

I got the book "Freakonomics" shortly after it came out. It was my first dose of "pop science" reading and I enjoyed the book very much. What I didn't realize until a few years later, after recently reading some newer pop science economics, was why Freakonomics was, and still is, the best of the lot.

Hazlitt ("Economics In One Lesson") condemned Keynesian economists for failing to properly connect economic policies with future consequences. The Keynesians counter: 'in the long run, we're all dead'. Now it is just expected of the Grand Poobahs of economics that they have the intelligence and resolve to fix any problem that comes along, and we generally see any care of the past or the future thrown out the window. Bernanke tells us not to worry about inflation tomorrow, because tomorrow is tomorrow and we only need to worry about today. Go shopping! They'll take care of it when it becomes an issue.

I specifically recall two studies in the book that led me to write this blog (admittedly, I did not read it recently or even scan through it--I'm going on memory alone here). First, Dr. Levitt attempted to find out what happened to crime rates, which led him back in time to an unexpected causation: legalization of abortion. And later he sought to find an answer to the nature-nurture question and parenting methods.Both of these studies called for looks into the past and a search for long-term relationships between causation and consequence. Unfortunately, applying rational principles to 'freakonomics' is insightful, applying those same principles to real economics is obscure, arcane, anachronistic, out of the question.....

Celebs fall for the false dichotomy

In relation to my previous post about language and manipulating ideas, I'm going to address the recent video put out by Will Ferrell and some guest celebrities.

The video (from Funny Or Die) is a satirical public service ad, in which a bunch of celebrities remind us, sarcastically, to look out for the insurance companies who stand to lose huge profits and the execs who stand to lose their large bonuses and private jets. And of course, they talk about how private insurers will refuse coverage based on contractual terms.

The obvious thing that jumped out at me from this ad was that these celebs have fallen hook, line and sinker for a false choice dichotomy--a decision between only two options. The message in the video is to promote Obama's health care reform by bashing the existing system and playing up one or two points on the reform plan. But this is an oversimplification that goes beyond oversimplification. If I were thinking of oversimplifying the health care question I could come up with no less than four options: free market, lightly regulated, highly regulated (current US system) or fully socialized. In terms of this oversimplification, the celebs in the video are actually not even for reform at all; they want to take a highly regulated system and keep it highly regulated according to the Obama plan, with some minor policy changes within the system.

I could respect these people a lot more if they did a video about the problems with the current system and then actually asked people to think of many alternatives that might help and to debate the merits of each. Dumbing the debate down into Shitty Current System vs. Reform is a false choice and of course, if such a debate is allowed to be narrowed in such a way, reform is always the most seductive option. But reform should not be synonymous with more control, more government and less freedom, particularly without an honest debate.

P.S. Will Ferrell isn't funny and hasn't been for at least 1o years....

Corporate bashing

One of the things that frustrates me with a large group of people associated with libertarianism is the corporate personhood concept.

Corporate personhood is the concept that a corporation is a distinct legal person. Corporate personhood came into being a long time ago by fiat, and now corporations demand that the rights afforded human beings by the constitution be guaranteed to them as well.

Obviously, there is a problem with this notion--corporations are not people, and only people have true rights. So why am I on the side of the corporations on this argument? And why is it such a frustrating debate?

When I say I'm on the side of the corporations, I may be exaggerating. I do not believe that a corporation is a person, nor that the law should treat it as such. And I would like to see common law rediscovered and fiat law like this thrown out. However, a corporation is a collection of people, all with full and equal rights. Generally when people argue against personhood, they are not only advocating for the corporation to be treated as an asset of a group of free people, they are instead suggesting that a corporation is subservient to the "common good".

Recently, The Colbert Report had a feature on corporate personhood where Stephen Colbert predictably railed against the notion that a corporation should be able to spend money on political campaigns or that a corporation has the right to free speech at all. This is the common type of thought associated with the anti-personhood movement.

But when you make the case that those who own and operate a corporation cannot speak freely insofar as they are part of the corporation, it is an abridgment of individual liberty against those people. While a corporation has no true rights, all the rights of speech, privacy and everything else of the ownership is legitimately extended to the corprorate asset, just as my righs are properly extended to my property.

Instead of focusing on ways the state can deny people rights, we ought to be looking at how to eliminate any privileges extended to them by the state. Corporations follow different tax and investment regulations and ownership enjoys the security of limited liability. Limited liability is one of the greatest moral hazards imaginable, providing no accountability to ownership for the misdeeds of its business' operations. This is analogous to holding a dog responsible for attacking a child, instead of its owner.

We should scrap silly notions like corporate personhood along with all the silly regulations and benefits doled out by the state, and embolden our position on individual rights and their extension to property.

What is capitalism?

"Don't you see that the whole aim of Newspeak is to narrow the range of thought?... Has it ever occurred to your, Winston, that by the year 2050, at the very latest, not a single human being will be alive who could understand such a conversation as we are having now?... The whole climate of thought will be different. In fact, there will be no thought, as we understand it now. Orthodoxy means not thinking—not needing to think. Orthodoxy is unconsciousness."

--George Orwell, "Nineteen Eighty-Four"

As a libertarian, I need never fear a shortage of frustration. The government is assured to do something I will disapprove of tomorrow. The newspapers are sure to publish all sorts of asinine commentary that ignores the logic of Austrian [free market] economics and the ethics of libertarianism. But I generally don't mind being part of the minority. What is terribly frustrating however, is the great difficulty that I have even attempting to communicate ideas with non-libertarians.

Many years before even knowing what a libertarian was, I read George Orwell's Nineteen Eighty-Four and became fascinated with the ideas expressed in the story. Most compelling was his attention to the language 'newspeak', that ideas could be suppressed by manipulating the language with which they are expressed. Now I fully appreciate newspeak, not as a literary term but as a reality.

What is capitalism? The term has taken on a full load, used to define any economic order from a pure free market to one on the brink of socialism. And we all lose as a result. As the analysts attempt to unravel the current economic crisis, the need for articulate language is paramount. A free-marketer like myself can scarcely use the term 'capitalism' in any assessment of the economy without likening myself (in the eyes of others) to Conservatives, Republicans and other groups of people who are not only terrible advocates of the free market, but in fact the most dangerous enemies of my 'capitalism'.

Eight years of George Bush calling himself "a free market guy', a fiscal conservative and a capitalist is a problem for those like me--coincidentally, a free market guy, a fiscal conservative and a capitalist, though i practically never found myself agreeing with Bush's economic policies. Conservatives pay lip service to capitalism, while they adopt corporatist policies that enrage the socialist crowds. This is a perfect dichotomy: capitalism vs. socialism, where capitalism is a system that serves the special interests and enrages the socialists, and where socialism is a system that serves the special interests and enrages capitalists. Beautiful! This was one of the many prescient points made by FA Hayek in Road to Serfdom, that government can control the people by representing an opposition to one unfavourable option in order to garner support for some policy that serves its own interests. A left-right political dichotomy serves to bolster this tactic. Once one policy has bilked the people for long enough, support will turn against it and the opposition ideology can be adopted in the same manner.

The moral of the story is, I suppose, that next time you see someone complain about capitalism, pay a little attention to which capitalism they are railing against and don't let that sour you to other capitalisms, such as my free market brand which certainly cannot be blamed for the current crisis given the fact that it was not being practiced. And while you're at it, be on guard for other politically-charged words that maybe don't mean anything, or at least any one thing, anymore.

After seeing District 9

One thing I've been thinking about lately is something I read through some links I followed from Michael Shermer's site (if I remember correctly). A skeptic of so-called "UFOlogy" made a case for why we may never witness alien life come to our planet, that I found very interesting to ponder. He pointed out the amazing technology required to travel through space and interact with life in other planets--other galaxies even--and made the case that if the technology of their space programs could be so advanced, they must also have incredibly advanced consumer and household electronics as well. And if they have such technologies, wouldn't they be zombified the way we humans are by our television sets and broadband internet access? Interesting hypothesis.

Some problems I found with this theory:

• Human laziness is a result of our evolution, an evolution that presumably took a different path than our alien counterparts, and therefore would suggest they might not share our foibles
• Prosperity, such as leisure and consumer electronics, are the result of liberty and self-driven entrepreneurship. We see with humans that when a totalitarian regime comes to power, the people cease to have leisure time, toys and the opportunity to be entrepreneurial, instead becoming means to their masters' ends. We take it for granted that alien visitors, because of their evolved intelligence, would therefore be interested in what we consider to be higher pursuits than war, power and conquest, but it seems to me that the most likely alien civilization to reach us would be that of beings subjected to the whims of a self-indulgent authoritarian.
• If the opposite is true, than the advances in technology must then be brought about not by force, but rather by entrepreneurial activity. This means a relatively free market--at least as free as modern western society. If this is the case, I think that there is a vast overstatement of the ignorance of our modern society. We still have enough freedom that people are driven away from their TV sets and computer screens, even if a large segment of the population cannot resist. These would be the individuals that would bring about technological advances and be adventurous enough to travel to Earth.

I've probably overlooked many theoretical concepts here and certainly excluded many theories both in favour and in opposition to the thinker whose idea I am addressing here. But I just wanted to get a stream-of-thought thinking exercise off my chest, not solve the riddle of interstellar relations.

Oh yeah, and after seeing District 9 and enjoying the movie, I did have some problems with it....Namely, that these creatures created cybernetic-style technology for their weapons and spacecraft, and they had the remote transmission system that the little alien used to get the ship moving over district 9, not to mention the technology of the actual transportation and weaponry themselves. And yet, they were communicating with regular speech--regular given their biology, that is. If they have the technology to mutate the main character into an alien, and the technology to fix him, as the alien insisted he could, along with the cybernetic biologically-integrated technology, why weren't they all fitted with nano-communication devices and cybernetic telekinesis and cool shit like that? I was just recently watching an episode of NOVAscienceNOW that was discussing how close we are to recreating eardrums and other body parts and the prospects of nanotech and cybernetics giving us technological telekinetic abilities in a future not-too-distant.

But I guess I will just take the positives from the movie, be glad I saw it and watch NOVA for the futuristic technology....

Reporting health care hoaxes to the White House

There was a fury amongst conservative and libertarian groups recently when the White House put together a campaign to have Americans send in information about health care reform that didn't jive with their views.

There is a lot of disinformation about health insurance reform out there, spanning from control of personal finances to end of life care. These rumors often travel just below the surface via chain emails or through casual conversation. Since we can’t keep track of all of them here at the White House, we’re asking for your help. If you get an email or see something on the web about health insurance reform that seems fishy, send it to flag@whitehouse.gov.

First, I should state me annoyance with those of my fellow libertarians that blew this whole thing out of proportion (I was less annoyed with the conservatives, because their nonsense does not reflect back on me). Implications were made by many individuals that the government was getting people to tattle on their neighbours, family and friends, drawing comparisons to Orwellian policies. While I cannot guarantee that the government was not proceeding toward such a program, there was certainly no proof or logic to suggest that it was. The White House has a tough task of selling the people on its plan, and certainly would want to keep on top of all the arguments against it, so as to rebut them and persuade people to accept the initiative.

But we mustn't overlook the very fact that there is too much disinformation to keep track of. (I actually believe a lot of it is not disinformation, but in fact valuable information for the people, but that is a moot point, at least in this post.) Why are there so many points of contention being raised by the various people in opposition? Why does the White House need to concern itself with every chain letter and blog post? Why can't the people tell real information from disinformation?

The answer to these questions and more: the draft of the proposed bill posted by the Senate Health, Education, Labour and Pension Committee is a 615-page PDF! (summary) This excludes all the other pages that are adopted into the bill from other acts, where amendments and revisions are made. Compare this to Ron Paul's "Audit the Fed" Bill, HR 1207 which is less than a page and for which the amendments to existing law apply to only one paragraph of the US Code. That is a bill you can read.

The government knows the health care bill is unreadable! It knows that ordinary citizens cannot tell truth from fact because they wouldn't even know where to start. And it knows that the people are dissatisfied with the current system. All it needs to do is offer an alternative, and put forth some arguments against opposing points. These arguments needn't be rational or honest, because the people will not be reading the bill, and the media will validate their existing viewpoints according to the viewership, not challenge them. All they need to do is keep together a coalition of the majority--that is, those who are dissatisfied with the current system--who will cheer for reform. As Hayek wrote in Road to Serfdom, "It seems to be almost a law of human nature that it is easier for people to agree on a negative program...than on any positive task."

While I'm glad that the White House has ended its appeal for so-called tattling, it doesn't address the real issue of unintelligible legislation. The real solution here is to have bills that people can read.

Or better yet, the government could just get out of the way and let the free market operate.

Compassion and law

The term "compassion" is thrown around a lot in politics, and proves to be one of the most asinine arguments I am faced with. We are a compassionate society, someone will argue, and must therefore do this, this and this.....(Of course, when they say we, they really mean the government.) What these people do not understand is that government is not compassion, it is force.

You exercise compassion when you give from your own pocket to charity, when you give your own time to someone in need of assistance and when you compel others to do the same. The law eliminates the option of compassion. If you are happy to give money to help some group of needy people, but the government taxes your money and distributes money to that same group, you have not exercised compassion. More importantly, all those people who wished to give different amounts of money or to help different causes (and even those who didn't wish to help anyone at all) have been harmed by the law that compels them to share in your so-called philanthropy.

What is forgotten is that your compassion for one group necessarily means you cannot show compassion to another group. Those who decide to not pay their taxes because the government does not use the money as they wish will be threatened with the loss of property, jail and even death. Just as you wouldn't see it as compassionate to demand charitable donations at gunpoint, it is not compassionate to position the government apparatus against anyone to achieve your ends.

And due to widespread economic ignorance, people also fail to understand how not giving is a laudable use of money. When someone hoards money, they take themselves out of the consumer pool for certain goods and services, which drives costs down, making things more affordable for those in the market. If the money is saved, it drives up supply of available credit, which drives down the interest rate, making credit more affordable for those at the bottom who may rely on it to get through a tough time. By investing, the money is turned into productive capacity that can create jobs. This is a far more pleasing method, at least in my view, to create jobs than to institute government bureaucracies to rob the wealth of the people and then distribute it politically. And finally if the money is spent, that results in someone else saving, hoarding or investing, precipitating a cycle that promotes affordable goods and services and job growth. Bureaucracy robs from the productive wealth of society and hurts everyone.