… is from page 135 of the 1964 Harper Torchbooks edition of Karl Popper’s 1957 book, The Poverty of Historicism (original emphasis):
And in the social sciences it is even more obvious than in the natural sciences that we cannot see and observe our objects before we have thought about them. For most of the objects of social science, if not all of them, are abstract objects; they are theoretical constructions.
As every friend or relative becomes a potential informant, cooperation plummets and life degenerates into a day-to-day struggle to remain outside the reaches of the law. Professor Goffman offers a chilling portrait of tactics used to encourage relatives to turn in possible lawbreakers: For example, the police may tell mothers that if they don’t report their errant men, the authorities will yank their children, a threat that may be backed by a charge of harboring or aiding and abetting a fugitive. “Squealing” thus becomes more likely. A community becomes divided between those who are on the clean side of the law and those who are not. And trust breaks down in personal relationships.
Prohibitions on insider trading clearly benefit government agencies by providing a ready source of power and money. For the rest of us, these prohibitions are costly. Taxpayers pay the salaries of prosecutors like Preet Bharara—and for his wiretaps, investigations, lawsuits, etc. If people are convicted, even though they are nonviolent, they may spend time in jail and be unable to continue working, earning, and paying taxes. Many people, even if they are not true insiders, do not trade because they fear prosecution. That fear is a real cost, as it puts a damper on their portfolios and spills over into the larger stock market, where shares are not priced based on the best information. Consequently, the market operates below peak efficiency. Also, corporations must train and monitor their employees to avoid running afoul of insider-trading laws. There is also a cost to our privacy. All of these costs are substantial.
John Taylor remembers Gary Becker.
Richard Rahn explains that Pres. Obama should be more grateful for fracking.
Randy Holcombe asks: How valuable is a federal grant?
Roger Meiners reviews Cass Sunstein’s Simpler.
Inspired by my colleague Bryan Caplan, Marty Mazorra ponders protectionism.
Here’s an assessment, appearing in a popular national publication in the U.S., of Veterans’ Administration health care:
Our disabled veterans are being betrayed by the incompetency, bureaucracy, and callousness of the Veterans’ Administration, the agency set up … years ago to ensure the finest medical care for them.
The writer of these words goes on to document a plague of abominable medical treatments (and failures to give any medical treatment at all!) unleashed by the V.A.
“Hardly news,” you yawn. ”Accounts of V.A. failures have been flying around fast and furiously for the past few weeks!”
Well, ‘hardly news’ is a more accurate response than you probably realize. The above quotation is from an article by Albert Maisel published in Cosmopolitan in March 1945 and condensed in the April 1945 issue of The Reader’s Digest. (This issue of The Reader’s Digest is famous for featuring the condensation of F.A. Hayek’s 1944 volume, The Road to Serfdom.) (HT John Blundell)
Centralized government bureaucracies are now and always have been lousy at customer service. And they will always be lousy at this task, regardless of who is in charge today of the bureaucracy. The V.A.’s failure is not the fault of Barack Obama, Eric Shinseki, or of any other sentient creature. The V.A.’s failure is the result of its centralized, politicized nature.
Government can often successfully pull-off big projects with simple goals – goals that are easily defined and ranked. ’Build atomic bombs, brutally murder tens of thousands of innocent civilians with them, and then justify the genocide as necessary for the maintenance of civilization’ is an example of a task that government can perform well. (Governments truly excel at killing and maiming people. History knows no institution that comes close to matching government’s facility and ingenuity at performing this sanguinary task.) Likewise, ‘Spend oodles of other people’s money in order to land men on the moon and return them safely to earth’ is another task doable by government. But successfully providing nuanced customer service better than it can be supplied generally to the public by private-property-based markets – not so much. No way; no how.
… is from page 106 of Daniel Boorstin’s 1973 volume, The Americans: The Democratic Experience:
The department store, through its heavy newspaper advertising, contributed substantially to the success of these papers, and so helped keep them independent of subsidy by political parties. In this way the department store, like other large advertisers, indirectly contributed toward the political impartiality of American news reporting that would contrast sharply with the partisan-dominated press of France, Italy, and some other countries.
… is from page 5 of Bjorn Lomborg’s still-indispensable data-rich 2001 volume, The Skeptical Environmentalist:
The constant repetition of the Litany [that modern market activity is destroying the environment] and the often heard environmental exaggerations has serious consequences. It makes us scared and it makes us more likely to spend our resources and attention solving phantom problems while ignoring real and pressing (possibly non-environmental) issues. This is why it is important to know the real state of the world.
And as Lomborg documents in great and careful detail throughout this volume (as well as in follow-up research), the state of the world – the condition of the environment and the health and well-being of humans – continues to improve wherever private property rights are at least reasonably secure and markets are at least reasonably free.
Bob Murphy reviews Thomas Piketty’s Capital in the Twenty-First Century. Here’s Bob’s conclusion:
After all of the above, you might be tempted to excuse Piketty’s numerous, fatal errors because after all, his goal is to help poor people. Yet as I document elsewhere, the book is filled with shocking quotations making it perfectly clear that Piketty’s proposed taxes are not designed to raise revenue, but instead are designed to prevent people from creating large wealth and incomes in the first place.
I must admit, I learned a lot from reading Piketty’s book. Specifically, I learned how many self-styled progressives today are willing to sacrifice the standard of living of billions of poor people, in order to prevent a few people from becoming really rich.
Stephanie Rugolo explains that the economic well-being of the poor is improved by globalized free markets - globalized free markets that Piketty would burden with heavy taxes in order to reduce the economic well-being of the rich.
I look forward to Kevin Vallier’s forthcoming evaluation of Piketty’s normative arguments.
Phil Magness on Piketty: start here, then go here; now here and here; and now here; then here; and finally (for now) here. (HT Steve Horwitz)
Psychiatrist J.M Balter writes a long e-mail to me in response to my Barron’s review of Thomas Piketty’s Capital in the Twenty-First Century. Here’s the relevant passage (shared with Dr. Balter’s kind permission):
I’m concerned that if we as a society ignore what you [Boudreaux] ignore as an individual that our health will get worse over time. I can assure you that inequality gives rise to dangerous levels of stress in many people. I dare say most people…. [S]tress is responsible for a number of serious illnesses…. Income redistribution to my mind is justified mainly on public health grounds.
I’m no physician so I cannot – indeed, I do not – question Dr. Balter’s claim that excessive stress is unhealthy. Nor do I question here the proposition that greater inequality, all else held constant, leads to a greater incidence of excessive stress. But I do emphatically reject the notion that (1) the trend of market economies over time is to increase inequality in ways that promote greater stress, and (2) that government-orchestrated income redistribution will in any way that is relevant to this discussion about health reduce stress. The very opposite might occur.
As I suggest in my review, and as I’ve pointed out many times here at the Cafe (for example here), as well as in this essay, consumption equality is growing (regardless of what is or isn’t happening to monetary wealth and income equality). The differences in life-styles between the superrich and the poor in America, although very real, are shrinking over time. (I’ll mention also that the absolute standard of living of even the poor in America is rising – surely a positive force, ceteris paribus, for reducing stress.)
Also, even if my claims in the previous paragraph are wrong, it does not follow that even successful efforts by government to ‘redistribute’ wealth and incomes in ways that create greater (even perfect!) equality among all people in a country will have the positive health benefits that Dr. Balter supposes that they will have. Monetary incomes and wealth are not the only dimensions in which people compete with each other; nor is money the only determinant or measuring rod of status. If government somehow managed to reduce or eliminate money as a determinant and as a measuring rod of status, some other determinant and measuring rods would arise in its place. You’ll forgive me if, to drive this point home, I again reproduce here a letter of mine that appeared in an April 2008 issue of The New Yorker:
John Cassidy bolsters the hypothesis that people’s health is harmed by relative (rather than absolute) deprivation by citing evidence from the animal kingdom (“Relatively Deprived,” April 3). For example, “dominant rhesus monkeys have lower rates of atherosclerosis (hardening of the arteries) than monkeys further down the social hierarchy.”
Contrary to Cassidy’s suggestion, however, such findings do not support policies to redistribute income. After all, animals with social hierarchies have no monetary income. Because status among humans is determined not only by income but also by traits such as political power, athletic prowess, military heroics, intellectual success, and good looks, equalizing incomes will intensify the importance of these non-pecuniary traits as sources of status. And there’s no reason why persons with low status in these non-pecuniary categories will not suffer all the stress and envy now allegedly suffered by people with low incomes.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA
And another point (which I make here by asking a rhetorical question): Would you prefer to live in a society in which people compete for high status by earning lots of money through the creation, production, and sale of better mousetraps, or in a society in which people compete for high status by being indifferent to money but focused intently on conquering foreign territories or accumulating terrifying amounts of political power?
Here’s my Barron’s review of Thomas Piketty’s Capital in the Twenty-First Century. Some slices:
Piketty’s method of doing economics involves frequent grand proclamations about “social justice” and economic “evolutions,” but he offers no analyses of the dynamics of individual decision-making, often referred to as “microeconomics,” that should be central to the issues he raises.
The author hovers instead in the economy’s stratosphere, gazing down on the only phenomena visible from such a distant perch—big statistics such as population growth or the share of national income “claimed” by the very rich. Revealingly, Piketty writes of income and wealth as being claimed or “distributed,” never as being earned or produced. The resulting statistics are too aggregated—too big-picture—to reveal what is happening to individuals on the ground.
Instead of actually looking at the behavior behind his statistics, the author serves up ad hoc and ultimately unpersuasive theories about the “behavior” of his big statistics themselves, including such hulking impersonal aggregates as the return to capital and the ratio of national wealth to national income. He imagines that such aggregates interact in robotic fashion through a logic of their own, unmoved by individual human initiative, creativity, or choice.
….
Every semester, I ask my freshman students how wealthy they would be if they each were worth financially as much as Bill Gates but were stranded with all those stocks, bonds, property titles, and bundles of cash alone on a desert island. They immediately see that what matters is not the amount of money they have but, rather, what that money can buy. No principle of economics is more essential than the realization that, ultimately, wealth isn’t money or financial assets but, rather, ready access to real goods and services.
Piketty seems barely aware of this reality, focusing on differences in people’s monetary portfolios. He therefore ignores the all-important supply side: what people—rich, middle class, and poor—can buy with their money. Yet, to the extent that inequalities are at all relevant, the only ones that really matter are inequalities in access to real goods and services for consumption. Bill Gates’ living quarters are larger and more elegant than mine and, I dare say, yours. But even the poorest people in market economies have seen their ability to consume skyrocket over time. And the poorer they once were, the greater has been the enhancement of their ability to consume.
*****
I should have, in the first passage quoted above, said that Piketty offers few analyses of the dynamics of individual decision-making; he does have some such analyses. But Piketty’s very few ventures into microeconomics are nearly all, in my opinion, flawed and ad hoc. I’ll recount these flaws in upcoming comments on Piketty’s volume.
… is from pages 233-234 of Brink Lindsey’s important 2002 book, Against the Dead Hand:
Much of what goes on in the name of social cohesion, though, goes beyond the malprovision of public benefits and extends to intervention in the commercial sphere. The purpose of social safety nets, properly conceived, is to help people cope with the disruptions and dislocations that economic change sometimes brings. The interventionist policies in question, on he other hand, seek instead to prevent change from happening. Such policies are the utter perversion of social assistance: Rather than helping the few who fall behind to share in the general bounty, they sacrifice the future of the bounty itself. Consequently, they produce, not cohesion, but division and conflict.
There are two distinct aspects to the meaning of the word “law” when used today to refer to rules for governing how people choose to act. One aspect is rooted in the presumed source of law; the other aspect is rooted in the presumed function of law. Most people mistakenly take for granted that both aspects must be present for a rule to be law.
The first aspect is that the rule be promulgated and enforced by – or at least enforced by – the state. The second aspect is that the rule be meant to modify, through the use of incentives, the way people act. (The incentives are understood usually to be negative ones, such as “If you kill an innocent person you will pay with your life by being executed.” Such incentives can, of course, be imagined to be positive ones, such as “If you never kill an innocent person during your life the government will give $25,000 to your heirs upon your death.”)
I believe that the first aspect of the popular meaning of the word “law” is distorted and, hence, should be abandoned. Just because the state claims for itself the exclusive power to create law, and just because it monopolizes (usually through the use of force) the power to enforce some of the most important rules of conduct (such as those against murder), and just because we are accustomed to calling the rules promulgated by the state “law,” does not mean that law necessarily is that set of rules, and only that set of rules, handed down by and enforced by the state.
Historical examples abound both of
(1) rules that the state duly promulgates and presumably intends to enforce but which are disobeyed so widely that these edicts cannot be legitimately said to be “law” that governs behavior (for example, 55mph speed-limits on U.S. Interstate highways), and
(2) rules that people obey that are neither created by nor enforced by the state (for example, the first-come, first-served rules for queuing, and, more formally, the lex mercatoria).
I believe that the functional aspect of law is the relevant one. I therefore argue that the term “law” correctly refers to all sets of rules that modify humans’ choices of actions, regardless of whether or not the state promulgated the rules, codified the rules, actively enforces the rules, or even recognizes the legitimacy of the rules. If the rules generally affect human behavior, the rules are law. (These rules might also be recognized to be morals and norms – but they are also law.) Whether or not the state is involved is irrelevant. Also irrelevant is the severity of the punishment for violations of the law. Laws whose violations are less costly to society naturally should be enforced with less-severe penalties. Punish cold-blooded murders severely; punish people who violate the laws of grammar much more lightly (say, with only a snarky critical whisper).
As regular readers of this blog know, I go even further and call law only those rules that evolve decentrally from on-going human interactions. The state might later codify and – or or – take over some or all of the responsibility for enforcing such rules. Rules designed by the state – rules that do not emerge spontaneously from on-going human interactions – are properly called “legislation.”
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