Showing posts with label Thomas Sowell. Show all posts
Showing posts with label Thomas Sowell. Show all posts

Sunday, July 13, 2014

Seductive Blindness

Here's Walter Williams, John M. Olin Distinguished Professor of Economics at George Mason University, speaking at Villanova University in February 2012, on "The Legitimate Role of Government in a Free Society".


In his talk, Walter Williams emphasized that much government action is immoral, and would be considered criminal when practiced by private citizens.  For example, if you were to steal money from your neighbors in order to give to some charity, you would be charged with a crime, not celebrated because you were helping others with money you had stolen.  There's no practical difference between this example and government welfare -- the initiation of force doesn't magically become moral because a majority approves, and legalizes the immoral use of force via a political process.

Williams stated this in very clear terms in his talk -- here's a transcription of portions of the video --

http://www.youtube.com/watch?v=zT7dN4tNzvg
...
     The primary justification for the growth of government far beyond what the founders envisioned for us, is to promote fairness and justice.  Well that's a worthy goal, but at the same time we might ask: 'Well, what is fairness and justice?  What is the legitimate role of government in a free society?'
...
     Moral people cannot depend on legality alone to guide them.  That is because there are many things in this world that were and that are legal, but clearly immoral.  That is, slavery was legal.  Did that make it moral?  The Nazi persecution of the Jews, Stalinist purges, they were legal.  But did that make it moral?
    So the moral question that we're confronted with is: 'Is there a moral case for taking by force the property of one person and giving it to another to whom it does not belong?'  Now I have not come up with a moral case for that.
    What the government does, as I said earlier, you and I would get arrested for doing the same thing.  It's just the only difference between what the government does is when they take money they call it 'welfare' -- it's just a matter of legality.
    And so we have to ask ourselves the question: 'Should one person be forcibly used to serve the purposes of another?'  Is that moral?  'To forcibly use one person to serve the purposes of another?'  And I think it's immoral.
    Now before I go on, I think that if you find a fellow American in need, I think it is praiseworthy to help them out.  That is, it is laudable to help your fellow man out by reaching into your own pockets to help him out -- reaching into somebody else's pockets to help him out I think is worthy of condemnation, and it's despicable.
    Now, in a free society we want most, if not all, of our relationships to be voluntary, and we want to minimize involuntary exchange.
...
    I always like to say instead of voluntary exchange: I love seduction -- any kind of seduction.
...
   But what's the essence of seduction?  Seduction is when we proposition our fellow man in the following fashion: 'If you make me feel good, I'll make you feel good.'  Now let me give you some examples of that.  I walk into my grocer with $3 in my hand, and I proposition him, I say: 'If you make me feel good, and give me that gallon of milk, I'll make you feel good, and give you $3.'
    And if that exchange is transacted, he's better off, because he valued the $3 more than the milk, and I'm better off because I valued the milk more than the $3.  And we call that a positive sum game, where both parties are better off in their own estimation.
    Now I'm against rape.  What's the essence of rape, or involuntary exchange?  That occurs when we proposition our fellow man in the following fashion, we say to him: 'If you don't make me feel good, I'm going to make you feel bad.'  That's where I went into my grocer with a gun in my hand, and I say: 'If you don't make me feel good, and give me that gallon of milk, I'm going to make you feel bad, and blow your brains out.'  Clearly I benefit, but he loses.  And we call that a zero sum game.
    Now, by the way, you know a lot of people say: 'Williams you know, a lot of these things you complain about, represents that we are democracy, we're a majority, and a majority rules.'  Well, I tell them, I don't think gang rape is any better than individualized rape.  That is, just because you vote to rape somebody, doesn't make it right -- or a majority consensus does not establish morality.
    And by the way, the framers did not intend for us to be a democracy, did they?  No.  I mean, the word democracy is not found in any of our founding documents.  The framers of our nation had utter contempt for the idea of democracy, because they argued -- and you read the writings of James Madison and John Adams -- they said that democracy gives an aura of legitimacy to acts that otherwise would be deemed tyranny.
...
    Now, widespread private ownership and control of resources is consistent with seduction and the minimization of rape.  Widespread government ownership is consistent with rape maximization.  That is, the essence of our relationship with government is that, if we don't make them feel good, they're going to make us feel bad.
...


During his talk, Walter Williams repeatedly emphasized the moral aspect of being free from coercion, and the immorality of forcibly using another person to serve your purposes, and yet the first question from the audience was to question the morality of freedom, as if Williams didn't discuss it --

  " ... the very foundation of liberty rests in a central idea.  It has to do with interests, it involves self-interest, if you will, but that self-interest is always defined with a moral foundation.

[supposedly the questioner is quoting James Madison here] "Interest doesn't have any bearing, unless you qualify interest with every necessary moral ingredient."

... and that moral ingredient has to do with the idea of recognize other human beings as human beings and treating them as such, so there's a real positive moral component I think that's the basis of liberty in America, and I'm wondering if you would speak to that ..."


Well, what could Walter Williams say in response, other than repeat some of the things that he had just finished saying?  Given that Williams focused on the morality of freedom in his talk, he might have asked in response: "What do you think I've been talking about?"

This question is especially fascinating in a perverse way, since the "moral ingredient of recognizing other human beings as human beings and treating them as such", to quote the audience member again, was precisely what Williams was emphasizing in his talk as missing from government action.

To quote Williams again: "Widespread government ownership is consistent with rape maximization.  That is, the essence of our relationship with government is that, if we don't make them feel good, they're going to make us feel bad."

It was also fascinating that when Williams pointed out the long standing moral tradition that goes against common government actions that are viewed as perfectly acceptable today, the same audience member stated agreement.

Here's how Williams made the point --

For Christians among us, we should recognize that when God gave Moses the commandment 'Thou shalt not steal', I'm pretty sure he did not mean that thou shalt not steal, unless you got a majority vote in Congress.  And that's what we're doing -- we're taking by force what belongs to one person, and I don't consider that moral, at all.


You can hear the audience member who asked the original question respond: "I actually agree with you on that."

But then what motivated the original question?  If you agree that it's immoral to take by force, what 'moral ingredient' is missing from a defense of liberty that relies on that point?

There's a very interesting phenomenon on display here.  The first question from the audience member wasn't for some clarification or specific application from Williams of the principles he was describing -- she asked that he readdress the main point of his talk.  Her question implied a concern for the moral justification of liberty, but Williams repeatedly stressed the moral justification for liberty in his talk, so the act of posing the question treated that moral justification as unimportant and even meaningless.  Clearly, using one person to serve the purposes of another, as Williams put it, didn't resonate with her as a critical issue in defining liberty.

And so the audience member helps prove a point Williams makes earlier (at 00:16:00) --

For the last half century, free enterprise, and what it implies, has been under unrelenting attack in our country.  Americans from all walks of life, whether they realize it or not, have demonstrated a deep and abiding contempt for personal liberty, private property rights, and economic freedom.


In his talk, Williams used the term 'seduction' to describe individuals attempting to entice others to trade with them in a voluntary exchange in a free market, and there's also a seduction expressed in the attitude that so many share regarding freedom.

Whether it's open hostility for freedom, or the more subtle contempt expressed by the audience member in the question quoted above, there's an obvious seductive power on display in the desire of many individuals to initiate force as an expression of their own morality -- as if their desire alone gives them a special moral standing and importance, regardless of the violation of individual rights required by the expression of that desire, and the obvious destructive consequences that often follow.

See Thomas Sowell's book 'The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy', for a detailed treatment of the phenomenon of visions on social policy being completely disconnected from reality.

Listening to the audience member pose her question quoted above, reminds me of this quote from the first page, of the first chapter, of 'The Vision of the Anointed', 'The Flattering Unction' --

In earlier eras as well, many individuals foresaw the self-destruction of their own civilizations, from the days of the Roman Empire to the eras of the Spanish, Ottoman, and other empires.  Yet that alone was not enough to change the course that was leading to ruin.  Today, despite free speech and the mass media, the prevailing social vision is dangerously close to sealing itself off from any discordant feedback from reality.


Given the complete disconnect between the audience member's question and the points Williams made in his speech, the audience member also did a good job of demonstrating the description Sowell gives in the quote above of a 'social vision dangerously close to sealing itself off from any discordant feedback from reality.'

And consider this telling statement from the audience member: '... there's a real positive moral component that's the basis of liberty in America'.

But liberty does not have a moral component -- liberty is the moral component of a civilized moral society that recognizes the right of individuals to be free from coercion.

Attempting to add a so-called moral component to the expression of the fundamental moral principle that individuals have the right to be free from coercion, can only mean one thing: reducing the freedom of some, and violating the moral principle.

Liberty is a state of being, and just like any other virtuous state, it can't be morally perfected -- refusing to initiate force is moral perfection in a social context.  Anything short of that perfection, can't properly be called liberty.

Now, many people will make the silly comment here that we infringe on the liberty of criminals to prevent crime, for example, and so no reasonable person expects liberty to be unconstrained.

But this is absurd -- criminals function as parasites, and survive by initiating force, and so depriving them of liberty is done in retaliation to protect the liberty of others -- not to constrain liberty.  All coercive criminal activity is a violation of liberty, and justifies retaliation.  The only proper constraint on the liberty of one individual, is the liberty of others.

During his talk, Williams repeatedly made the statement that it is immoral to forcibly use one person to serve the purposes of another -- of course, since it's a violation of their liberty.  It's contradictory to argue otherwise, since such force requires a subordination of one person to another, and a completely inconsistent definition of individual rights.

George Orwell's satirical tale against Stalin, 'Animal Farm', comes to mind here.  See 'Chapter X' --

ALL ANIMALS ARE EQUAL
BUT SOME ANIMALS ARE MORE EQUAL THAN OTHERS 


Williams, among others, foresees the self-destruction of his own civilization, and has been giving a warning for many years, but who is even capable of listening, never mind acting on the warning, when so many are so seduced by blindly maintaining a pretense, that their particular initiation of force is moral, as long as they HOPE it will be helpful?


Here are some other highlights from Williams's speech --
  • Article 1, Section 8 of the U.S. Constitution enumerates the powers the founders gave to government.
  • The claim that the Constitution is a 'living document' makes it meaningless, since if the Constitution doesn't fix specific rules, government can't be limited by it.
  • The private property and free enterprise that the framers envisioned are mere skeletons of their past.
  • Taxes represent claims on private property.
  • Taxation and spending show government gaining ground and liberty yielding.
  • In 1902, expenditures at all levels of government (federal, state, and local) totaled $1.7 billion, and the average taxpayer that year paid $60 in federal, state, and local taxes.
  • From 1787 until 1920, federal expenditures were only 3% of GDP, except during wartime.
  • Today, federal expenditures alone are close  to $4 trillion, or 30% of GDP.  State and local governments spend close to $3 trillion.
  • The average taxpayer today (2012) pays $10,000 per year in federal, state, and local taxes.
  • This shows that as time goes by we own less and less of ourselves and the fruits of our labor.
  • Capitalism is defined as a system wherein individuals are free to pursue their own interests, so long as they don't violate the private property rights of others.
  • Much of the original intent of the U.S. Constitution as seen in the document itself, and the Federalist Papers that debated the Constitution, was to bring about a climate in which peaceable voluntary exchange could occur.
  • The legitimate functions of government in a free society are national defense, police, the adjudication of disputes (courts), and the provision of certain public goods (as an economist would define them).
  • In order for these legitimate and constitutionally mandated functions to be carried out, each citizen is obliged to pay his share of the federal government's expenses.
  • For the last half century, free enterprise, and what it implies, has been under unrelenting attack in our country.  Americans from all walks of life, whether they realize it or not, have demonstrated a deep and abiding contempt for personal liberty, private property rights, and economic freedom.

Sunday, June 22, 2014

Pretending the Rules of Arithmetic Don't Work (or The Perfect Issue for a Demagogue)

The widespread support for minimum wage laws is an interesting phenomenon, especially given the simple nature of the economics of this issue.

Almost everyone has heard of the 'Law of Demand', and anyone who has taken an introductory class in economics is taught this law: other things being equal, the quantity demanded of something is inversely related to its price.

But more than that, we all experience it directly, since it expresses an external constraint on human behavior, that everyone is unable to buy more of something as its price rises.

Here is the classic graph that shows the basic relationship between supply and demand.  The demand curve slopes down from left to right, indicating the inverse relationship between demand and price — everyone demands less as price rises.  The supply curve slopes up from left to right, indicating the direct relationship between supply and price — rising prices cause more of something to be produced, since the increasing price increases the reward for producing that something.


But why do we know the Law of Demand is true, and that the demand curve above must slope down to the right, indicating that price and quantity demanded are inversely related?  It certainly is not because some academics believe it (many do not — at least not consistently).  It is because it is impossible for it not to be true.

Why? Because the Law of Demand is restating an obvious fact of simple arithmetic, that when you perform a division, the result (or quotient) must get smaller as the divisor (or denominator) gets larger.  Even school age children learn fairly early that when you take larger pieces of something, there will not be as many pieces to go around.

In determining how much you can buy of anything, you divide the amount of money you have available to spend (what you have produced), by the unit price of whatever you would like to buy, like this:
                My Money / Unit Price = Quantity I Can Afford.

So when prices rise, the effect is to divide the money available for spending (the available production) into smaller quantities.  For example, it is pretty obvious that if your favorite hamburger cost $10, and you have $100 available from your pay each month to spend on hamburgers (after all other expenses), that the maximum quantity you can demand of those hamburgers is $100/$10 = 10 hamburgers.  If the price of those hamburgers doubles to $20, but your income does not change, then you can only buy $100/$20 = 5 hamburgers.

Obviously, there is nothing new here.  But it is important to point out that nothing is altered about this basic relationship by the complications of the modern day economy.  In essence, simple division explains why the Law of Demand must be true and universal, since if it were not, it would mean that the behavior of division must be inconsistent, behaving differently in different cases.

And note that quantities of money have nothing to do with it — using money as the measure of cost and productivity is just a convenience that everyone is familiar with.  Money, in this sense, is just a tool of exchange, and represents the value of labor (the value of your productivity).  If you were stranded on a deserted island, and you had to climb coconut trees to gather coconuts to survive, your daily demand for coconuts would be computed like this:
       Daily Working Hours / Average Hours to Get a Coconut = Daily Quantity of Coconuts.

And so if one day you jumped down from a tree while gathering coconuts, and you badly sprained your ankle on the landing, and the injury doubled the average amount of time it took you to gather a coconut, your demand for coconuts would be cut in half, just as it was for hamburgers in the previous example above, since in both cases the cost to you has doubled — nothing necessarily changed about the good you were trying to acquire, but your ability to produce it, or produce enough to trade for it, has decreased.

When viewed in this way, it is immediately obvious why demand is inversely related to price.  To say that the demand curve is flat, or that it sloped up to the right, would be to say that the quantity you could produce, was in now way affected by how long it took you to produce it — i.e. that you could acquire more of something, as the cost to you was increasing.

This is obviously impossible.

So, do you have to do a study to show that raising the minimum wage will reduce employment to the degree that individuals were earning less than the higher wage amount?

No, of course not, since if the minimum wage were raised above market rates, while there was no corresponding increase in the available capital to purchase labor, and unemployment did not increase, it would mean that the behavior of simple arithmetic changed, that the law of demand stopped working, and that employers could purchase just as much labor, as the cost was increasing.

That is, this same relationship holds:
        Money Available to Purchase Labor / Unit Cost of Labor = Quantity of Labor Purchased

Since the unit cost of labor is the divisor, increasing it in isolation must reduce the quantity of labor that can be employed. Even if employment went up after a minimum wage increase — which is still possible, depending on how far the new minimum is below prevailing wages — if there are any individuals who are not worth the new minimum, employment must still be less than it would have been without the minimum wage increase, since a minimum wage makes it uneconomical to hire those with skills that are worth less.  Increasing the cost of labor can only cause a decrease in employment, since the increase reduces the amount of labor that can be purchased.

Even if you believe that businesses can exploit individuals, and pay them far less than their labor is worth, raising the minimum does nothing to change that situation.  The obvious implication of this view is that businesses can simply charge their customers far more than it costs to produce something.  If this were true, raising the cost of labor would not eliminate that power — this belief implies that businesses can easily pass cost increases onto customers, since by assumption, they were charging well over their costs to begin with.  And so this means workers will just spend more on rising prices as a result of the wage increase, leaving them no better off — everyone will just be spending more, whether or not their income went up.

This is what is so comical about comments about how little prices would have to go up to support an increase in the minimum wage.  Here is a blog post regarding Senator Elizabeth Warren's (D-MA) comments on this issue back in March, 2013, that is titled as if Warren 'dismantled a right wing talking point' that is obviously false —

http://boldprogressives.org/2013/03/watch-elizabeth-warren-bat-down-right-wing-talking-points-about-the-minimum-wage/
http://archive.is/ARCPK
WARREN: During my Senate campaign, I ate a number 11 at McDonald’s many, many times a week. I know the price on that. $7.19. According to the data on the analysis of what would happen if we raised the minimum wage to $10.10 over three years, the price increase on that item would be about four cents. So instead of being $7.19 it would be $7.23. Are you telling me that’s unsustainable?


Again, if prices have to rise to compensate for the increase, will not workers making minimum wage be in exactly the same position as they were before the increase?  This is just inflation, that does nothing to improve anyone's living standard.

The minimum wage is such a useful issue for demagogues, because it plays into popular public biases.  Regardless of knowing how difficult it is to start a business, and regardless of knowing how many businesses fail, people still act as if there is no competition for labor, and that businesses can pay workers as little as they want.

Even many economists support minimum wage laws.  Here is a letter signed by over 600 economists in support of an increase to the Federal Minimum Wage --
   http://www.epi.org/minimum-wage-statement/
   https://archive.is/VDDtV

Here is an excellent article by Walter Williams, John M. Olin Distinguished Professor of Economics at George Mason University, where he points out the absurdity of supporting minimum wage laws as a way to fight poverty, since we could eliminate poverty everywhere, if this worked.  But he goes on to make the rarely heard point that minimum wage laws are discriminatory, and hurt minorities the most.  He gives the example of the openly racist South African Building Worker's Union, and its support for minimum wage laws for blacks, as a way to price them out of the labor market --
  http://www.fee.org/files/docLib/0703williams.pdf

Here is a recording of Walter Williams and Thomas Sowell discussing these issues with minimum wage laws —
   https://www.youtube.com/watch?v=b4Ubp7U9Dq4

Here is another excellent article by Walter Williams on this issue.  His comparison of the law of demand with the law of gravity really highlights the absurdity of the disagreement among economists on this issue, since the law of demand is just as fundamental to the science of economics, as the law of gravity is to physics —
  http://walterewilliams.com/minimum-wage,-maximum-folly/

The disagreement among economists on the effects of minimum wage laws, would be like physicists being divided on the effects of gravity.

But since it is easier to support a popular bias, than explain why that bias is false, minimum wage laws will likely continue to get widespread support, despite that such laws only harm people.

Here is Elizabeth Warren again, pretending she is fighting for the underdog by supporting an increase in the minimum wage --
   http://archive.is/Ks5f3
   http://abcnews.go.com/Business/17-million-reasons-raise-minimum-wage/story?id=23054905
   http://archive.is/p7PgP

As they say, with friends like these ...