John Rawls is a famous philosopher who argued for welfare capitalism as the ideal form of government through the use of his philosophical tool: the veil of ignorance. He contends that if we are behind a veil of ignorance and had absolutely no idea what our lot would be in life when we were setting up society, then we would set it up in such a way in which inequality would only be tolerated as long as it improves the lot of the worst off among us.
Far from being a call for welfare state capitalism, the Rawlsian veil of ignorance makes one of the most compelling cases for laissez faire capitalism possible. First of all, when one is behind the veil of ignorance, one would have absolutely no issue with increased wealth inequality as long as the poor are not worse off. This can be explained with another metaphor (a meta-metaphor, if you will). Imagine you are in a casino with two games. One game you flip a coin and if heads you make a dollar and if tails you make 10 dollars. In the other game, if you get heads you still make a dollar, but if you get tails, you make 100 dollars. There is no question that one would obviously rather play the game with the higher payout. There is an argument to be had for the first game, if in the second game the alternative to the 100 dollars was only 10 cents however, risk aversion aside, one is always willing to accept the game with the higher Bayesian payout.
Beyond the fact that those behind the veil of ignorance would rationally choose to accept a higher payout, the second and most damning attack on the Rawlsian welfare state is the existence of inter-temporal life. What I mean by this is that behind the veil of ignorance, one does not know where one would fall in time either. This means that decisions behind the veil of ignorance ought not increase the welfare of those who are alive now at the expense of those who will be alive in the future.
This has dire implications when looking at the effects of taxing capital. A Rawlsian who argues for a progressive income tax would have to grapple with considering what the other uses of that income might have been. For if people are better investors than the government, a tax on income will result in a decrease in the growth rate of the economy. A man with billions of dollars can invest more than a man with millions of dollars, and the main consideration about investment is that investment compounds. The marginal dollar invested today is worth an infinite amount of utility in the indefinite future in comparison to a dollar consumed today. Given that humanity will probably not last eternally, we could simply assume a very high value for the dollar invested. A truly Rawlsian state would have taxes minimized to the point where it maximizes the return on investment of the dollar.
This would in turn fall right in line with a flat minimal consumption tax, and a minimal state that encourages investment through a strict enforcement of property rights and proscriptions against fraud. Well what you know, Rawls was a libertarian after all!
Sunday, December 18, 2011
Friday, November 25, 2011
Endowed by Our Creator
On most issues I lean libertarian. I believe that the job of our government is to protect our liberties.
What I have trouble grappling with is how my non-theistic friends can justify their libertarianism. This country was founded on the belief that we are endowed by our Creator with certain inalienable rights, and on that basis we give our consent to the government to enforce these innate rights. On a non-theistic paradigm, there is no external grantor of inalienable rights. Judge Andrew Napolitano delineates both a secular as well as a theistic argument for the natural rights that rest at the heart of libertarianism :
I find his argument from theism to be compelling, but I cannot see the rationality behind his secular argument. He argues that:
What is needed in order to argue for self-ownership is a distinction between humans and other living things. Some attempt to make that distinction under atheism, and I will address that later, but let's look at some of the absurdities that arise when one believes in property rights and yet has no basis for a distinction between humans and other living beings.
We rob a cow of its self-ownership when we cut it into prime rib. We rob a bee of what its body produces when we take its honey. We rob a whale of the ideas that come out of it when we use the design of its fins for windmills without paying royalties. All of these absurdities make life impossible for a libertarian. In fact, even a raw food diet would literally rob plants of the fruits of their labor.
Some non-theistic libertarians recognize this reductio ad aburdum and resolve it by pointing out differences between humans and other living things. These quasi-escape hatches fall under three (non-exhaustive) categories: an appeal to reason, an appeal to the entity's respect for rights, and an appeal to voluntary trade.
An Appeal to Reason
One argument often used to escape the absurdity of a bushes property rights to its berries is that in order for a living being to have property rights, it must be able to reason. I am not sure how this distinction is enough to justify recognizing people's rights without recognizing the rights of other living things, but even if it is, such a justification is insufficient to justify property rights for all humans. A comatose man has no ability to reason, or at the very least, his ability to reason is as apparent as that of a plant. If one's rights are based on one's ability to reason, then a comatose man does not have property rights. That means that if you are a little short on cash, the ring on the finger of a comatose man who does not have a will is yours for the taking. Or better yet, if you are one of the man's children and want to speed up the execution of his will, smothering him would not be a violation of the man's right to life. Clearly, the ability to reason is not a necessary feature of having property rights.
An Appeal to an Entity's Respect for Rights
Another argument that is used to exit the rights of plants, is the claim that an entity is only entitled to rights, if it respects the rights of others. This argument has its basis in the justification for criminal prosecution which allows the state to take away the rights of a criminal provided that the criminal took away the rights of someone else. While I would agree that an entity's respect for the rights of others works as a method of determining when someone who has rights loses them, it is insufficient as a means of determining who has these rights to start with. There are plenty of entities that do not harm the rights of others and yet cannot have property rights themselves. When a plant homesteads the sun and produces sugar, it does no harm to me. Choosing to violate the right of a plant to accumulate "property" i.e. sugar by consuming it is simply an exercise in arbitrary "species-ism" since the plant does not infringe upon your own property rights. Under this theory, all farmers are as much slavers in this century as they were in the 18th century. So it seems that the ability to respect property rights brings up another dead end for the non-theist.
An Appeal to Voluntary Trade
The third argument rests upon the belief that an animal's ability to voluntarily trade justifies its own rights. This falls victim to the same weakness that first of the three arguments fell to. A coma would prevent someone from being able to voluntarily trade. Not only does appealing to voluntary trade underprotect the rights of people who cannot voluntarily trade, but it also does overprotect the rights of animals. Studies have shown that monkeys can voluntarily trade. One can also make a case that many symbiotic relationships are examples of voluntary trade among animals. On a more fundamental level, all cells within any multicellular organism engage in uncompelled trade with other cells. There is no case to be made for the ability to trade voluntarily being the basis of rights.
In short: I find disbelief in a deity to be incompatible with the core libertarian belief that people have rights and government is instituted to protect them.
What I have trouble grappling with is how my non-theistic friends can justify their libertarianism. This country was founded on the belief that we are endowed by our Creator with certain inalienable rights, and on that basis we give our consent to the government to enforce these innate rights. On a non-theistic paradigm, there is no external grantor of inalienable rights. Judge Andrew Napolitano delineates both a secular as well as a theistic argument for the natural rights that rest at the heart of libertarianism :
I find his argument from theism to be compelling, but I cannot see the rationality behind his secular argument. He argues that:
"I own my own body. I own what my body produces. I own the ideas that come out of it. I own what I produce with the sweat of my brow. I own the thoughts that I express. I own the property and wealth that I accumulate."On first blush this makes sense. If indeed I naturally own my body and its effects, then I can contend that on that grounds, government has a responsibility to protect me from abuses from others. Therein lies the implicit assumption that people do own their body and effects. A theistic libertarian believes that inalienable rights are granted by God. I contend that there is no extra-governmental basis for these rights on atheism.
What is needed in order to argue for self-ownership is a distinction between humans and other living things. Some attempt to make that distinction under atheism, and I will address that later, but let's look at some of the absurdities that arise when one believes in property rights and yet has no basis for a distinction between humans and other living beings.
We rob a cow of its self-ownership when we cut it into prime rib. We rob a bee of what its body produces when we take its honey. We rob a whale of the ideas that come out of it when we use the design of its fins for windmills without paying royalties. All of these absurdities make life impossible for a libertarian. In fact, even a raw food diet would literally rob plants of the fruits of their labor.
Some non-theistic libertarians recognize this reductio ad aburdum and resolve it by pointing out differences between humans and other living things. These quasi-escape hatches fall under three (non-exhaustive) categories: an appeal to reason, an appeal to the entity's respect for rights, and an appeal to voluntary trade.
An Appeal to Reason
One argument often used to escape the absurdity of a bushes property rights to its berries is that in order for a living being to have property rights, it must be able to reason. I am not sure how this distinction is enough to justify recognizing people's rights without recognizing the rights of other living things, but even if it is, such a justification is insufficient to justify property rights for all humans. A comatose man has no ability to reason, or at the very least, his ability to reason is as apparent as that of a plant. If one's rights are based on one's ability to reason, then a comatose man does not have property rights. That means that if you are a little short on cash, the ring on the finger of a comatose man who does not have a will is yours for the taking. Or better yet, if you are one of the man's children and want to speed up the execution of his will, smothering him would not be a violation of the man's right to life. Clearly, the ability to reason is not a necessary feature of having property rights.
An Appeal to an Entity's Respect for Rights
Another argument that is used to exit the rights of plants, is the claim that an entity is only entitled to rights, if it respects the rights of others. This argument has its basis in the justification for criminal prosecution which allows the state to take away the rights of a criminal provided that the criminal took away the rights of someone else. While I would agree that an entity's respect for the rights of others works as a method of determining when someone who has rights loses them, it is insufficient as a means of determining who has these rights to start with. There are plenty of entities that do not harm the rights of others and yet cannot have property rights themselves. When a plant homesteads the sun and produces sugar, it does no harm to me. Choosing to violate the right of a plant to accumulate "property" i.e. sugar by consuming it is simply an exercise in arbitrary "species-ism" since the plant does not infringe upon your own property rights. Under this theory, all farmers are as much slavers in this century as they were in the 18th century. So it seems that the ability to respect property rights brings up another dead end for the non-theist.
An Appeal to Voluntary Trade
The third argument rests upon the belief that an animal's ability to voluntarily trade justifies its own rights. This falls victim to the same weakness that first of the three arguments fell to. A coma would prevent someone from being able to voluntarily trade. Not only does appealing to voluntary trade underprotect the rights of people who cannot voluntarily trade, but it also does overprotect the rights of animals. Studies have shown that monkeys can voluntarily trade. One can also make a case that many symbiotic relationships are examples of voluntary trade among animals. On a more fundamental level, all cells within any multicellular organism engage in uncompelled trade with other cells. There is no case to be made for the ability to trade voluntarily being the basis of rights.
In short: I find disbelief in a deity to be incompatible with the core libertarian belief that people have rights and government is instituted to protect them.
Friday, November 18, 2011
100% of the 1%
Dear Occupiers,
I know that most of you have the best of intentions. You, like most Americans, want America to be the best it can be, but the policies you are advocating for are not practical solutions to the problems of the nation, but rather problems in and of themselves. Allow me to explain.
Many of you on the left are advocating for increasing the marginal income tax rate on millionaires to fix the budget shortfall. This policy is not being marketed in the moralistic terms that underlie it, but rather as a practical solution to solving the massive public debt on the shoulders of Uncle Sam. If indeed taxing the "1%" would solve the national debt, then I would take no issue with marketing the tax hike in practical terms, however a spike in taxes for millionaires would do no such thing.
Let's say for a second that millionaires will not respond to incentives by taking their money to a more tax friendly country, or by decreasing the amount of money that they risk on venture capital firms because the payoff won't be big enough. Let's say, that you can somehow brainwash millionaires not to change their behavior in response to incentives. Now let's increase taxes on millionaires to 100%. I know of at least a couple of people who would get a rush of moral self-righteousness just from that last sentence. Now the IRS reports that millionaires reported a total income of $727 billion. That means that if we arrest all the millionaires, and force them to work at the same rate they were working at otherwise, while stopping them from consuming a penny of what they produce, then we get $727 billion. The federal government will spend about $3.6 trillion this year (a rate of $300 billion per month). That means that all the money you have taken from the enslaved millionaires will keep the government running for 2 months. Give yourself a pat on the back.
Clearly this is ridiculously unpractical and fails to take into account that the proverbial 1% can respond to incentives. One may even go far so far as to say that they would be more capable to relocate than others.
What is underlying a proposal to increase taxes on the 1% is not practical thought but rather irrational rage. The relatively minor sum of petty cash that the federal government could extract from millionaires will not solve the national debt, and would more likely harm the economy, by greatly shrinking VC funds and driving their investment outside of the nation and into more friendly tax environments. In a sense, taxing the "1%" is the equivalent of divesting from the future.
If you are interested in proposing serious solutions to the nation's economic financial problems, show the math, but if what you are proposing is driven by moral outrage, then come out and say it.
Your friend in the crusade against crony capitalism
John Wahba
I know that most of you have the best of intentions. You, like most Americans, want America to be the best it can be, but the policies you are advocating for are not practical solutions to the problems of the nation, but rather problems in and of themselves. Allow me to explain.
Many of you on the left are advocating for increasing the marginal income tax rate on millionaires to fix the budget shortfall. This policy is not being marketed in the moralistic terms that underlie it, but rather as a practical solution to solving the massive public debt on the shoulders of Uncle Sam. If indeed taxing the "1%" would solve the national debt, then I would take no issue with marketing the tax hike in practical terms, however a spike in taxes for millionaires would do no such thing.
Let's say for a second that millionaires will not respond to incentives by taking their money to a more tax friendly country, or by decreasing the amount of money that they risk on venture capital firms because the payoff won't be big enough. Let's say, that you can somehow brainwash millionaires not to change their behavior in response to incentives. Now let's increase taxes on millionaires to 100%. I know of at least a couple of people who would get a rush of moral self-righteousness just from that last sentence. Now the IRS reports that millionaires reported a total income of $727 billion. That means that if we arrest all the millionaires, and force them to work at the same rate they were working at otherwise, while stopping them from consuming a penny of what they produce, then we get $727 billion. The federal government will spend about $3.6 trillion this year (a rate of $300 billion per month). That means that all the money you have taken from the enslaved millionaires will keep the government running for 2 months. Give yourself a pat on the back.
Clearly this is ridiculously unpractical and fails to take into account that the proverbial 1% can respond to incentives. One may even go far so far as to say that they would be more capable to relocate than others.
What is underlying a proposal to increase taxes on the 1% is not practical thought but rather irrational rage. The relatively minor sum of petty cash that the federal government could extract from millionaires will not solve the national debt, and would more likely harm the economy, by greatly shrinking VC funds and driving their investment outside of the nation and into more friendly tax environments. In a sense, taxing the "1%" is the equivalent of divesting from the future.
If you are interested in proposing serious solutions to the nation's economic financial problems, show the math, but if what you are proposing is driven by moral outrage, then come out and say it.
Your friend in the crusade against crony capitalism
John Wahba
Tuesday, November 15, 2011
The Economic Doomsday Device
In the movie Dr. Strangelove or: How I Learned to Stop Worrying and Love the Bomb, the Soviets take mutual assured destruction to the logical extreme by creating a device, that would destroy the world if a nuclear device was ever detonated. The producer of the movie, obviously wanted to parody the notion of mutually assured destruction, but there are applications of this principle that could be applied to our financial institutions.
The principle long term problem with this nation's economy is that large financial institutions (hereafter sloppily referred to as banks) are operating with an implicit subsidy from the federal government. They know that if they bet with the system, the federal government will simply bail them out. The government cannot credibly threaten to let too-big-too-fail banks fail. Whatever law that the Senate or Congress pass, absent an amendment, could be easily reversed in the case of political expedience. The reason for this, is that the banks have a first mover advantage in this game of Chicken.
Here is a matrix that describes the potential payouts for the market given a collapse
As you can tell, the banks would clearly prefer to be in the right half of the matrix. They have the first mover advantage in this game, since they can take high risk and essentially force the government's hand in a bailout. If the government could somehow take the first mover advantage from the banks, and credibly threaten to let banks fail, then they would not take systemic risks in the first place. As mentioned earlier, no legislation can credibly threaten to let the banks fail, as it could be overturned by a scared Congress.
That's where my economic doomsday device comes in. The United States Federal government should create a derivative that pays out a sum of gold to the buyer of this derivative if the US Federal government bails out a financial institution. One would of course have to go through the trouble of delineating what constitutes a bail out, but once you have that, you could then turn around and sell these derivatives that payout gold from the US gold reserve in the event of a bailout. If the US government were to sell enough of these strange financial instruments, to the point where a bailout would essentially lead to bankruptcy of the federal government, then the government will have credibly threatened to let the banks fail, and will have taken away the first mover advantage from the banks. It may also need to be administered by a third party which would posses the gold reserve for the duration of the contract in order to avoid the legislature simply changing the terms of the contract unilaterally. Below is the revised matrix, given the economic doomsday device.
Depute – to appoint, entrust
Desultory – loose, rambling
The principle long term problem with this nation's economy is that large financial institutions (hereafter sloppily referred to as banks) are operating with an implicit subsidy from the federal government. They know that if they bet with the system, the federal government will simply bail them out. The government cannot credibly threaten to let too-big-too-fail banks fail. Whatever law that the Senate or Congress pass, absent an amendment, could be easily reversed in the case of political expedience. The reason for this, is that the banks have a first mover advantage in this game of Chicken.
Here is a matrix that describes the potential payouts for the market given a collapse
Banks take high risk
|
||
That's where my economic doomsday device comes in. The United States Federal government should create a derivative that pays out a sum of gold to the buyer of this derivative if the US Federal government bails out a financial institution. One would of course have to go through the trouble of delineating what constitutes a bail out, but once you have that, you could then turn around and sell these derivatives that payout gold from the US gold reserve in the event of a bailout. If the US government were to sell enough of these strange financial instruments, to the point where a bailout would essentially lead to bankruptcy of the federal government, then the government will have credibly threatened to let the banks fail, and will have taken away the first mover advantage from the banks. It may also need to be administered by a third party which would posses the gold reserve for the duration of the contract in order to avoid the legislature simply changing the terms of the contract unilaterally. Below is the revised matrix, given the economic doomsday device.
Banks take high risk
| ||
Depute – to appoint, entrust
Desultory – loose, rambling
Thursday, November 10, 2011
Letter from Bizzarro America
So I went into my room one day, and I found on my desk an envelope that seemed out of place. I opened it and here is what it said:
scintillate-Emit flashes of light; sparkle.
ovis - Latin for sheep.
Greetings John,
We here in Bizzaro America have managed to create a wormhole to America. Perhaps I should explain myself. During the 2008 presidential elections, a group of scientists, realizing the inevitability of an Obama presidency wanted to know if the election of McCain would change America in any substantial way. So they created an alternate America apart from America. I don't want to get technical as to how they pulled it off, but I simply want to relay some of the policies that President McCain instituted.
McCain, being the slightly off-color conservative that he is, went forward with the auto and bank bailouts. He also upheld the timetable set by Bush in Iraq, while keeping a residual military force to protect the embassy. The president also used drones to take out Al-Awlaki, an American citizen without trial. He also took out Osama Bin Laden, but that mission didn't receive much coverage. I wonder if they found any actionable intelligence in the compound that Osama was in. Palestine made a bid for statehood, but McCain sided with Israel, making him unpopular among other world leaders. It seems as though really, McCain's presidency was a simple continuation of the Bush policies with a few exceptions. Obama's campaign message was right. There was no real substantive difference between the two presidential administration.
I am certain that Obama was a radical departure from Bush in international and domestic affairs. I am willing to bet that he passed expansive health care reform over the objections of the unions and without the individual mandate he derided during the campaign. Sometimes I wish I was in your world. Go ahead and write a letter to me detailing the differences between between the Obama presidency and the McCain presidency I described and place it in this envelope before tomorrow.
Best of Luck,
Bizzaro JohnI sent back a blank sheet of paper...
scintillate-Emit flashes of light; sparkle.
ovis - Latin for sheep.
Thursday, November 3, 2011
Buying power
I asked the following question on my Facebook:
Ignoble – mean, base
Ignominious – shameful, degrading
"To all my Occupy-friendly friends, would you rather have less buying power and less income inequality, or more buying power and more income inequality?"It was meant to be a rhetorical question that might moderate some of the anti-income inequality sentiments ravaging my news feed. After all, if we all had the buying power of billionaires, who would care about income inequality? What was meant to be a rhetorical question was responded to by a stubborn egalitarian who said he would prefer less buying power and less income inequality. I was floored. I needed to double check that he knew what he was saying so I reasked the question in a different way:
You would rather be able to afford fewer goods and services as long as more people would be able to afford fewer goods and services?When he responded yes, I half believed that he was trolling me. Such a belief if actually held would prefer Soviet Russia over the US. I fear that the fact that people live in their academic bubble (the respondent was a student) precludes them from seriously considering the implications of what they are saying. I seriously hope that the respondent was not serious, for if he was, either he will be in for a rude awakening when he begins working, or America is about to meet the most idealistically self-destructive generation it has ever had.
Ignoble – mean, base
Ignominious – shameful, degrading
Monday, October 24, 2011
Student Loan Derivatives
What this nation needs is financial innovation in the realm of student loans. Milton Friedman described a simple contract whereby students would receive tuition aid from an investment fund in exchange for a portion of their salary over the immediately following 10 years. In a sense, a fund would be taking a risk in investing in people the same way it does when looking for an entrepreneur to invest in.
If implemented, such a system of human capital contracts will revolutionize education and provide information to students. Percentage of income collected could be based upon a combination of degree attained, major chosen, and expected performance in the job market. For instance, a driven student who is deciding between going into gender studies or engineering will be instantly hit with the expected earnings of each degree simply by looking at the percentage of income that they would have to give up in each case. People who are not as driven will find that they would be required to pay a higher percentage of their income and may consider doing something more socially productive such as a trade school.
Such a system would be a far better alternative to the status quo. As it currently stands, a student loan is federally guaranteed and non-dischargable in the case of bankruptcy. By removing federal subsidies from student loans, students will become more productive, more likely to graduate promptly and more knowledgeable about the costs and benefits of each major. It would also save students from the crushing debt that they face when they graduate.
propitiate- to conciliate; to appease
pulchritudinous- beautiful
If implemented, such a system of human capital contracts will revolutionize education and provide information to students. Percentage of income collected could be based upon a combination of degree attained, major chosen, and expected performance in the job market. For instance, a driven student who is deciding between going into gender studies or engineering will be instantly hit with the expected earnings of each degree simply by looking at the percentage of income that they would have to give up in each case. People who are not as driven will find that they would be required to pay a higher percentage of their income and may consider doing something more socially productive such as a trade school.
Such a system would be a far better alternative to the status quo. As it currently stands, a student loan is federally guaranteed and non-dischargable in the case of bankruptcy. By removing federal subsidies from student loans, students will become more productive, more likely to graduate promptly and more knowledgeable about the costs and benefits of each major. It would also save students from the crushing debt that they face when they graduate.
propitiate- to conciliate; to appease
pulchritudinous- beautiful
Wednesday, October 19, 2011
The Political Panacea
Every once in a while, the political class find an allegedly urgent problem that needs "fixing". K-12 education has been plagued by the parasite of reform, each time planning to fix the education system for the better. The glaring failure of all of this is that while spending per pupil adjusted for inflation has more than tripled, test scores in the United States have remained stagnant. The problem is not that education needs more money, but rather that every effort up until this point to reform education has increased cost and done nothing to address the needs of studnets.
What we need to do is align school administrators with a profit motive, rather than an effort to maximize federal grants. While a beautiful new gym complex may leave a lasting legacy for a principal, improvements to student performance have nothing to recommend them. By switching to a voucher system, the goals of the parents will be aligned with the goals of administrators and the performance of students will improve. If they don't improve, then the schools will fail, and others will rise in their place.
Treacly- too sweet; over sentimental
Vacillated- wavered; hesitated
What we need to do is align school administrators with a profit motive, rather than an effort to maximize federal grants. While a beautiful new gym complex may leave a lasting legacy for a principal, improvements to student performance have nothing to recommend them. By switching to a voucher system, the goals of the parents will be aligned with the goals of administrators and the performance of students will improve. If they don't improve, then the schools will fail, and others will rise in their place.
Treacly- too sweet; over sentimental
Vacillated- wavered; hesitated
Thursday, October 13, 2011
Fixing unemployment
I was talking to a former teacher of mine about the issue of unemployment. I agree with unemployment is theory, but I cannot disagree more the the current implementation of it. As it currently stands, Congress on a day to day basis offers an extension to unemployment benefits. This creates a perverse incentive.
One of my teacher's friends is currently unemployed. Prior to his unemployment he worked for a salary upwards of $200k. Now that the market has collapsed, whenever he seeks a job, the best salary he can find is in the low $100k range. If he remains unemployed, he will continue to earn unemployment benefits and reject job offers for a relatively lower salary.
My proposal is simple. Unemployment insurance should be a single payout large enough to help someone through a tough time. The size of this payout is not important, but what is important is that a monthly payout system encourages people to reject a lower salary even if the market is telling them that the lower salary is all that their labor is worth. By coming to the realization that people respond to incentives, congress will take the unprecedented step towards understanding the economy that they ignorantly regulate.
Apiary – place where bees are kept
Dictum – positive statement
One of my teacher's friends is currently unemployed. Prior to his unemployment he worked for a salary upwards of $200k. Now that the market has collapsed, whenever he seeks a job, the best salary he can find is in the low $100k range. If he remains unemployed, he will continue to earn unemployment benefits and reject job offers for a relatively lower salary.
My proposal is simple. Unemployment insurance should be a single payout large enough to help someone through a tough time. The size of this payout is not important, but what is important is that a monthly payout system encourages people to reject a lower salary even if the market is telling them that the lower salary is all that their labor is worth. By coming to the realization that people respond to incentives, congress will take the unprecedented step towards understanding the economy that they ignorantly regulate.
Apiary – place where bees are kept
Dictum – positive statement
Wednesday, October 12, 2011
The Value of a Human Life
I am a pretty religious man, but often there are issues on which I disagree with my fellow thinking religious compatriots. One of them is the value of a human life. It is taken as almost axiomatic among the religious community that a human life is priceless. I wholeheartedly agree with the notion that a human life is incredibly valuable, however I cannot bring myself to the conclusion that the value of a human life is infinite while at the same time operating as a moral being in this world.
Whenever a design of a vehicle is under consideration, an increase in safety features is weighed against the cost of the car itself. There is no question that every car on the market can improve its safety, if only marginally, by adding in one more feature. While one could throw price out the window and focus on making an indestructible car that would survive a drop off of the empire state building, such a car would be ludicrously expensive. As a matter of public policy, the state could mandate that all cars be able to protect their passenger from a head-on collision with a tank at 100 mph, and I guarantee that traffic fatalities would fall dramatically. The state could also set a national speed limit at 20 mph, and once again traffic fatalities would fall dramatically. The point is, that the cost of each and every one of these laws would be incredibly high, but they would unquestionably save lives. One typically considers balancing the cost of a 20 mph speed limit when comparing it to the amount of lives it would save implies that cost benefit is necessary.
Those who value human life on any grounds cannot value it infinitely for if they do, they cannot operate in a world where costs and benefits must be considered. Even the act of stepping out of the house increases one's risk of being killed in a mugging gone wrong. Every action has costs and benefits and pretending that the loss of a human life is infinite would require one to live in a hamster ball and only eating completely sterilized food for the rest of one's life.
abnegation- denial of comfort to oneself
assiduous- hard-working, diligent
Whenever a design of a vehicle is under consideration, an increase in safety features is weighed against the cost of the car itself. There is no question that every car on the market can improve its safety, if only marginally, by adding in one more feature. While one could throw price out the window and focus on making an indestructible car that would survive a drop off of the empire state building, such a car would be ludicrously expensive. As a matter of public policy, the state could mandate that all cars be able to protect their passenger from a head-on collision with a tank at 100 mph, and I guarantee that traffic fatalities would fall dramatically. The state could also set a national speed limit at 20 mph, and once again traffic fatalities would fall dramatically. The point is, that the cost of each and every one of these laws would be incredibly high, but they would unquestionably save lives. One typically considers balancing the cost of a 20 mph speed limit when comparing it to the amount of lives it would save implies that cost benefit is necessary.
Those who value human life on any grounds cannot value it infinitely for if they do, they cannot operate in a world where costs and benefits must be considered. Even the act of stepping out of the house increases one's risk of being killed in a mugging gone wrong. Every action has costs and benefits and pretending that the loss of a human life is infinite would require one to live in a hamster ball and only eating completely sterilized food for the rest of one's life.
abnegation- denial of comfort to oneself
assiduous- hard-working, diligent
Saturday, October 1, 2011
Thou Shalt not Tax
Evangelical conservatives are often criticized for being hypocritical whenever they oppose increasing taxes on the wealthy. Pundits are often quick to point out that many of these evangelicals are lower-middle class would not benefit from a more progressive tax system, and that they are probably being brainwashed by some conservative overlord. There is a perfectly rational explanation for this conundrum.
This wouldn't be the first time I reference PJ O'Rourke, but I believe that he made a very interesting observation about the tenth commandment.
This commandment defines the conservative psyche. Conservatives are not opposed to giving. They are opposed to stealing. Jesus' call to charity involved giving your cloak and tunic, not in giving other people's cloak and tunic.
eschew- Deliberately avoid using; abstain from
This wouldn't be the first time I reference PJ O'Rourke, but I believe that he made a very interesting observation about the tenth commandment.
“You shall not covet your neighbor's house; you shall not covet your neighbor's wife, nor his male servant, nor his female servant, nor his ox, nor his donkey, nor anything that is your neighbor's.”
This commandment defines the conservative psyche. Conservatives are not opposed to giving. They are opposed to stealing. Jesus' call to charity involved giving your cloak and tunic, not in giving other people's cloak and tunic.
Its fair to then ask whether or not the evangelical right lives up to the call to charity. A somewhat dated study done by a researcher at Syracuse University explored that very question. He found that while Liberals on average made 6% more than conservatives, conservatives donated 30% more to charity.
The fact is, the definition of a charitable society depends on which side of the political spectrum you are on. The right define a charitable society as one where individuals voluntarily give up large sums of money to help the less fortunate. The left define a charitable society as one where people are coerced into giving large sums of money to Uncle Sam who then arbitrarily distributes the money to the less fortunate in the way they see fit. This difference in definition explains why conservatives don't see themselves as greedy and liberals don't see themselves as thieves.
eschew- Deliberately avoid using; abstain from
plenary- Complete in all respects; unlimited or full
Thursday, September 29, 2011
Societal Debt
The following is a response to a picture going around on the internet:
Yeah, I saw the picture, but I find that it has several nearly insurmountable shortcomings as an argument for the increasing the marginal tax rate on the rich.
First off, it is not at all clear that the premise necessarily implies the conclusion. In other words, the fact that society contributed to the making of you does not necessarily entitle society to the sweat of your brow. I would be remiss to not point out the works of a philosopher on this matter of justice: http://www.econlib.org/library/Columns/Jasaydog.html
My second major objection is that it is not at all clear that the recommended course of action follows from the conclusion of the argument. Even if I were to grant that because the rich benefit disproportionately they should pay more, the only taxation method that this argument rules out is a per person flat tax. If there was a simple 17% flat tax on income or consumption, the rich would still pay a disproportionate amount of taxes relative to their percentage of the population. The argument pushed by Elizabeth Warren, and others of the same ilk, does little to philosophically recommend that the rich should pay a higher percentage of their income relative to the poor. Putting that aside, what we have already is a highly progressive income tax, in which the top 50% pay for almost all government operations, and the top 10% pay more than 70% of the taxes that go to the IRS.
Even if I do grant the conclusion that the rich ought to pay more, it has absolutely no practical application in the real world. Why should I believe that a flat percentage tax is any more unjust than a progressive tax? Why should I believe that the current progressive tax is less just than a more progressive tax? This argument does nothing to answer either of these questions.
Finally, there's the matter of consistency. If this is indeed the premise that we operate under, then the government ought to tax business leaders proportionally to the resources they use. That means that in order to remain philosophically consistent, we ought to tax businesses that hire graduates from public high schools and colleges at a higher rate than those that hire private school graduates. We should also tax businesses that sell products and services to public school graduates at a higher rate than those that sell to private school school graduates. Such a policy would be literally absurd, but falls well in line with the line of reasoning. If a business leader should pay higher taxes because he uses more of "society's resources," then it is only fair that a business leader who uses less of society's resources be taxed at a lower rate.
Other than those three crippling points, I find the reasoning to be flawless.
anachronism n. - person or artifact appearing after its own time or out of chronological order
tyro n. - beginner; person lacking experience in a specific endeavor.
Yeah, I saw the picture, but I find that it has several nearly insurmountable shortcomings as an argument for the increasing the marginal tax rate on the rich.
First off, it is not at all clear that the premise necessarily implies the conclusion. In other words, the fact that society contributed to the making of you does not necessarily entitle society to the sweat of your brow. I would be remiss to not point out the works of a philosopher on this matter of justice: http://www.econlib.org/library/Columns/Jasaydog.html
"There is a minor and a major point to recognise. The minor point is that the "framework" is not a person, natural or legal, to whom a debt can be owed, "institutions" do not act, "society" has no mind, no will, and makes no contributions. Only persons do these things. Imputing responsibility and credit for accumulated wealth, current production and well-being to entities that have no mind and no will is nonsense. It is a variant of the notorious fallacy of composition.
Once this is understood, we can move on to the major point. All contributions of others to the building of your house have been paid for at each link in the chain of production. All current contributions to its maintenance and security are likewise being paid for. Value has been and is being given for value received, even though the "value" is not always money and goods, but may sometimes be affection, loyalty or the discharge of duty. In the exchange relation, a giver is also a recipient, and of course vice versa."In other words, the fact that others worked to make you who you are does not entitle them to what you produce unless they have gone uncompensated for their work.
In the broad scheme of things, all this is part of the universal system of exchanges. Some of these exchanges may be involuntary. Such is the case where redistribution, a coercive act, is taking place. We then lose the trace, the precise measure and the assured reciprocity of contributions to wealth and income, but this circumstance can hardly serve to justify the very redistribution that has caused it. However, where exchanges are voluntary, tracing and measuring become, in a strong sense, otiose and irrelevant. For in a voluntary exchange, once each side has delivered and received the agreed contribution, the parties are quits. Seeking to credit and debit them for putative outstanding claims is double counting.
My second major objection is that it is not at all clear that the recommended course of action follows from the conclusion of the argument. Even if I were to grant that because the rich benefit disproportionately they should pay more, the only taxation method that this argument rules out is a per person flat tax. If there was a simple 17% flat tax on income or consumption, the rich would still pay a disproportionate amount of taxes relative to their percentage of the population. The argument pushed by Elizabeth Warren, and others of the same ilk, does little to philosophically recommend that the rich should pay a higher percentage of their income relative to the poor. Putting that aside, what we have already is a highly progressive income tax, in which the top 50% pay for almost all government operations, and the top 10% pay more than 70% of the taxes that go to the IRS.
Even if I do grant the conclusion that the rich ought to pay more, it has absolutely no practical application in the real world. Why should I believe that a flat percentage tax is any more unjust than a progressive tax? Why should I believe that the current progressive tax is less just than a more progressive tax? This argument does nothing to answer either of these questions.
Finally, there's the matter of consistency. If this is indeed the premise that we operate under, then the government ought to tax business leaders proportionally to the resources they use. That means that in order to remain philosophically consistent, we ought to tax businesses that hire graduates from public high schools and colleges at a higher rate than those that hire private school graduates. We should also tax businesses that sell products and services to public school graduates at a higher rate than those that sell to private school school graduates. Such a policy would be literally absurd, but falls well in line with the line of reasoning. If a business leader should pay higher taxes because he uses more of "society's resources," then it is only fair that a business leader who uses less of society's resources be taxed at a lower rate.
Other than those three crippling points, I find the reasoning to be flawless.
anachronism n. - person or artifact appearing after its own time or out of chronological order
tyro n. - beginner; person lacking experience in a specific endeavor.
Wednesday, September 14, 2011
An Unteachable Moment
A cursory examination of the facts will lead to the undeniable conclusion that universities have perverse incentives. Before analyzing universities, one needs to first look at the basic economics of subsidies. Every economist and their grandmother will tell you that when you subsidize a good or service, its price increases. This is as a direct result of people being willing to pay more for a good or service. A quick look at tuition prices will find that every year since 1958 tuition has trounced inflation. More is afoot in the war on parent pocketbooks than inflation. There is clearly an underlying force that keeps pushing tuition upwards.
Government policy on making tuition more affordable could not be more counter productive. Before Uncle Sam pulls out his pocketbook and lays some dough on the table for a student's education, he turns to the parents and finds out precisely how much they can "afford" to pay. Anything above the affordability marker, Uncle Sam is willing subsidize either directly in the form of grants, or indirectly in the form of loans. This has grave implications for a university administrator looking to maximize the number of students applying to a given university. One way to increase applicants is to decrease tuition pricing. In a sane world, where markets operate free from government subsidy, that is precisely what the administrator would do. We do not occupy this sane world.
Because of the subsidies offered to universities that scale up and down with tuition, universities have every reason to keep costs up in order to attract stampedes of students. These costs include using tuition money to build attractive new facilities such as stadiums, dorms and *ahem* student unions that would encourage would-be students to apply to the university. The cost is then unloaded upon the students. In a university like San Jose State, where most students receive financial aid, this means that demand becomes inelastic and administrators are forced into non-monetary competition like the airline industry pre-deregulation.
Is there a solution to this problem? Therein lies the beauty of punditry. I don't need to give you a solution. A gadfly cannot be seriously asked to propose a solution to the horses ailments. The gadfly's job is to aggravate the horses ailments till it can ignore them no longer. Nonetheless, here is my modest proposal to fix the system. Stop subsidizing education and watch prices fall. Given the political impossibility of my proposal, I will return to my conservative hermitage until next week.
chimerical- imaginary, impossible
choleric- easily angered, short-tempered
Government policy on making tuition more affordable could not be more counter productive. Before Uncle Sam pulls out his pocketbook and lays some dough on the table for a student's education, he turns to the parents and finds out precisely how much they can "afford" to pay. Anything above the affordability marker, Uncle Sam is willing subsidize either directly in the form of grants, or indirectly in the form of loans. This has grave implications for a university administrator looking to maximize the number of students applying to a given university. One way to increase applicants is to decrease tuition pricing. In a sane world, where markets operate free from government subsidy, that is precisely what the administrator would do. We do not occupy this sane world.
Because of the subsidies offered to universities that scale up and down with tuition, universities have every reason to keep costs up in order to attract stampedes of students. These costs include using tuition money to build attractive new facilities such as stadiums, dorms and *ahem* student unions that would encourage would-be students to apply to the university. The cost is then unloaded upon the students. In a university like San Jose State, where most students receive financial aid, this means that demand becomes inelastic and administrators are forced into non-monetary competition like the airline industry pre-deregulation.
Is there a solution to this problem? Therein lies the beauty of punditry. I don't need to give you a solution. A gadfly cannot be seriously asked to propose a solution to the horses ailments. The gadfly's job is to aggravate the horses ailments till it can ignore them no longer. Nonetheless, here is my modest proposal to fix the system. Stop subsidizing education and watch prices fall. Given the political impossibility of my proposal, I will return to my conservative hermitage until next week.
chimerical- imaginary, impossible
choleric- easily angered, short-tempered
Wednesday, September 7, 2011
Laugher's Curve
Economic theories are often utterly ridiculous. One claim that seems particularly implausible to me is that of the Keynesian belief in stimulus spending . In short, stimulus spending is the belief that when the economy has slowed, and unemployment is high, the government has an imperative to remedy the situation by increasing spending on anything that will get people to work. John Maynard Keynes half-jokingly proposed that hiring someone to dig a hole and fill it back up would have a stimulative effect on the economy.
One skeptical satirist named P.J. O'Rourke came up with the perfect Keynsian solution. The premise is simple, legalize the shooting of convenience store clerks. First, jobs would increase in the high paying domestic manufacturing sector of guns and ammunition. Furthermore, Additional security guards, emergency medical technicians and undertakers would be hired to care for the convenience store clerks. Finally unskilled job seekers would have opportunities due to the incapacitation of those currently in the workforce. Talk about a Keynsian multiplier. By using this system of logical reasoning politicians are able to justify nearly everything in terms of stimulus. On the 8th of September 2011, President Obama is scheduled to give a big speech concerning jobs. How many times will he use the very same tenuous Keynsian logic that P.J. O'Rourke jokingly put forth before giving up?
Apoplexy – sudden loss of consciousness
Bucolic – rustic
One skeptical satirist named P.J. O'Rourke came up with the perfect Keynsian solution. The premise is simple, legalize the shooting of convenience store clerks. First, jobs would increase in the high paying domestic manufacturing sector of guns and ammunition. Furthermore, Additional security guards, emergency medical technicians and undertakers would be hired to care for the convenience store clerks. Finally unskilled job seekers would have opportunities due to the incapacitation of those currently in the workforce. Talk about a Keynsian multiplier. By using this system of logical reasoning politicians are able to justify nearly everything in terms of stimulus. On the 8th of September 2011, President Obama is scheduled to give a big speech concerning jobs. How many times will he use the very same tenuous Keynsian logic that P.J. O'Rourke jokingly put forth before giving up?
Apoplexy – sudden loss of consciousness
Bucolic – rustic
Wednesday, August 31, 2011
In the Land of the Blind, the Man with One Eye is Nowhere to be Found
Not only that, but any blind man with sufficient charm can convince everyone else that he has one eye. Allow me to explain. The modern nanny state is built on the premise that human beings are myopic, and that because of this myopia, government ought to step in and correct for the irrationality of the citizenry. What the presupposition of the nanny state fails to take into account is the irrationality of the bureaucracy itself.
CS Lewis strongly made this point when he wrote,
The stench of elitism surrounds many of the policies of the modern nanny state. Whether its requiring people to buy health insurance that they do not desire, or levying taxes on "sins", the thought process is the same. As a democracy, the United States must resist the urge to control the lives of the citizenry. It is fundamentally anti-american to suggest that a government official knows what is the right rate of consumption of a given good or service.
mendacious- untruthful
torpid- Mentally or physically inactive
CS Lewis strongly made this point when he wrote,
"I am a democrat [proponent of democracy] because I believe in the Fall of Man. I think most people are democrats for the opposite reason. A great deal of democratic enthusiasm descends from the ideas of people like Rousseau, who believed in democracy because they thought mankind so wise and good that every one deserved a share in the government. The real reason for democracy is just the reverse. Mankind is so fallen that no man can be trusted with unchecked power over his fellows. Aristotle said that some people were only fit to be slaves. I do not contradict him. But I reject slavery because I see no men fit to be masters. "
The stench of elitism surrounds many of the policies of the modern nanny state. Whether its requiring people to buy health insurance that they do not desire, or levying taxes on "sins", the thought process is the same. As a democracy, the United States must resist the urge to control the lives of the citizenry. It is fundamentally anti-american to suggest that a government official knows what is the right rate of consumption of a given good or service.
mendacious- untruthful
torpid- Mentally or physically inactive
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