The Mountain of Legal Injustice in the USA

TenThousandCommandmentsIn view of the thousands of laws in the USA for whose violation people are punished even though no identifiable person has been harmed by their actions, is it not wholly appropriate to say that those who are punished are in fact being punished for political crimes?

For example, persons entering or leaving the USA must file a declaration of the exact amount of cash and negotiable monetary instruments they are carrying if they have more than $10,000, notwithstanding that the money is their own. Here are the penalties for failure to file an accurate report as stated on FinCEN Form 105:

PENALTIES: Civil and criminal penalties, including under certain circumstances a
fine of not more than $500,000 and Imprisonment of not more than ten years, are
provided for failure to file a report, filing a report containing a material omission or
misstatement, or filing a false or fraudulent report. In addition, the currency or
monetary instrument may be subject to seizure and forfeiture. See 31 U.S.C.5321
and 31 CFR 1010.820; 31 U.S.C. 5322 and 31 CFR 1010.840; 31 U.S.C. 5317 and
31 CFR 1010.830, and U.S.C. 5332.

Think about this. For the “crime” of carrying, say, $20,000 of my own money into or out of the USA without accurately reporting it, the government may legally take the money, fine me $500,000, and put me in a steel cage for 10 years. Think about it. Are such reporting requirements in themselves not an outrageous invasion of one’s privacy and peaceful personal affairs? And are not the absurdly severe penalties for mere failure to make an accurate report the stuff of nightmares?

If you think about this law, which is but a single example among thousands that might be given, and you suppose that it is the kind of law that ought to be enforced in a free society, may God have mercy on your erring soul. The USA has become a legal nightmare of perfectly legal injustice, and aside from the lawyers, who thrive on this vast body of injustices, hardly anyone has an inkling of just how enormous and pervasive it really is.

Yet every day, millions of Americans are thinking, there ought to be a law . . . .

Health Spending Slows to a Less Alarming Pace

a_better_choice_1800x2700Last week’s second estimate of Gross Domestic Product for the second quarter confirms that growth in health spending took a welcome break. Unfortunately, it is not a clear break in the trend of health spending consuming an increasing share of our national income.

The second estimate revised the advanced estimate, and the update was positive news on the surface: Seasonally adjusted, annual GDP in the second quarter was almost $17,902 billion. This was an upward revision of one-third of one percent from the advanced estimate. Also, spending on health services was revised down a little, to $2,045 billion. The increase in health spending from the first quarter was $21 billion, only 8 percent of the $253 billion growth in GDP in the same period.

However, when we compare 2015 Q2 to 2014 Q2 annualized spending, health care is still consuming a slightly disproportionate share of GDP. Health spending grew $106 billion, comprising 17 percent of the $632 billion change in GDP. GDP only grew 3.66 percent, while health spending grew 5.47 percent.

Technical note: When I discuss health services in these quarterly GDP releases, I mean only health services. I do not include purchases of medical equipment, or facilities construction. While I include Medicare and Medicaid, I do not include Veterans Health Administration or other government benefits. So, these dollar figures undercount the amount of our economy consumed by the government-health complex.

(See: Measuring the Economy: A Primer on the GDP and the National Income and Product Accounts, Bureau of Economic Analysis, October 2014, pages 5-2 and 5-3; Micah B. Hartman, et al., “A Reconciliation of Health Care Expenditures in the National Health Expenditures Accounts and in Gross Domestic Product,” Research Spotlight, Survey of Current Business, September 2010, pages 42-52.)

The Government’s Tax on Peace of Mind

Schindlers_list_red_dressIn the USA, thousands of distinct actions that violate no one’s natural rights have been declared illegal. Often the law provides for draconian punishment of those who violate such unjust laws. Sometimes, especially in cases involving alleged violation of tax laws or drug laws, the government may seize an alleged violator’s assets, making it impossible for him to mount an effective defense, conduct a business, or even live a normal life. In this perverse legal environment, ordinary people know, unless they are especially dense and ignorant, that the law’s hammer may fall on them at any time, regardless of how scrupulously they have conducted themselves and their affairs.

In such circumstances, most people experience a certain amount of apprehension, and many live in stark fear that the government may at any time ruin their lives. So, just as the government diminishes people’s well-being by taking their money in the guise of taxes, fees, and fines, so it equally or perhaps even more greatly diminishes their well-being by generating a pervasive apprehension or fear in their minds. We can all recall accounts of how people languishing under Communist dictatorships lived in fear of the “midnight knock on the door.” But a political and legal regime need not be Communist to have a similar effect on people’s peace of mind.

There is a loss of well-being as a result of pecuniary taxes and other takings, and there is similar loss of well-being as a result of merely living in a society where “justice” is a joke and the authorities act arbitrarily and capriciously to a great extent. People in the USA today live in such a depraved legal environment. Their quality of life suffers even if the law’s hammer never actually falls on them. One never knows when he has been or might soon be placed in the government’s cross-hairs. So far as the logic of the situation is concerned, I can’t help but think of the concentration camp in the film Schindler’s List, whose commandant used the Jews confined there for target practice.

Obama Is Half Right about Katrina


The Salvation Army and other private responders were denied entry into New Orleans for days following Katrina.

Speaking in New Orleans on the tenth anniversary of Hurricane Katrina, President Obama declared:

What started out as a natural disaster became a man-made one—a failure of government to look out for its own citizens.

He then, typically, dissembled the argument, pointing to a mish-mash of “economic inequality ... a country that tolerated poverty.”

He should have stopped while he was ahead: Yes, Mr. President, the devastation of Hurricane Katrina was a failure of government—but it was the result of the active failure of government, not some vague, passive failure of omission.


Safe, Legal, and Rare, Part 2: Legal?

ChoiceForty years following Roe v. Wade, we have been taking a look at how reality accords with the promised outcome of the ruling that abortion would become “safe, legal, and rare.”

Last time, we looked at “Safe.” Today, let’s look at “Legal.”

First, definitions. Legal can mean either “according to the laws of man,” or “according with the natural, moral law.” As we all know, “the law” as written by man only rarely coincides with what we term the “natural, moral law”—that is, a strict adherence to inalienable rights. The standard example given of the two diverging badly is slavery, which was certainly “legal,” but also certainly an egregious violation of the natural, moral law. Examples of laws currently on the books that violate our inalienable rights are too numerous to list.

So let’s start with the question of whether abortion as practiced today is “legal” as in “according to the law.”

Virtually all arguments around abortion involve consideration of when life begins. The Roe v. Wade ruling attempted to balance a right to abortion against the protection of potential human life, by affirming the state’s right to regulate abortion in the third trimester. Subsequent medical advances and evidence that a fetus is human earlier than the third trimester resulted in the Supreme Court replacing the “third trimester” guideline with “viability” in its Planned Parenthood of Southeastern Pennsylvania v. Casey ruling. Ironically, the result in many states has been that the previous prohibition against third trimester abortion has been dropped, with “viability” left to interpretation by abortion providers.


Follow the Silk Road

9106979_SStretching some 4,000 miles, the “Silk Road” was a trade network connecting the continent of Asia. From around 200 B.C., the route, running from China to India, to the Mediterranean Sea, the horn of Africa, and beyond, is largely credited for opening up trade in much of the world, leading to the development and exchange of everything from spices and cloth, to religions and political philosophies.

In 2011, a new Silk Road sought to once again bridge the gap between buyers and sellers. Instead of exchanging cloth, however, this Silk Road was best known for allowing individuals to buy and sell illegal drugs.

Known as part of the “dark web,” the Silk Road website allowed users to anonymously buy and sell goods and services without government intrusion. Using the anonymizing software, TOR, the site effectively obscured the online identities of both buyers and sellers, meaning that even the authorities would be unable to identify Silk Road users. The site accepted no electronic forms of payment other than Bitcoin, meaning users could not be traced via their credit card information. By March 2013, the site had some 10,000 products available for purchase and oversaw more than $1.7 million in transactions a month. Approximately 70 percent of these sales were for illicit drugs.


In Memoriam: Nathan Rosenberg (1927-2015)

NathanRosenbergI have just received the sad news that Nathan Rosenberg has died. Nate was an outstanding economic historian, and in my early years in the profession I viewed him as the very model of the kind of economic historian I wanted to become. He reviewed many of my early papers before their publication, and when the publisher was looking for a reviewer of the manuscript that became my first book (published in 1971), I suggested Nate as the reviewer, and he did excellent work in advising me about revisions of my manuscript.

In later years I kept in touch with Nate, though less frequently as the years went by and our career paths diverged. When David J. Theroux and I were creating The Independent Review in 1995, I asked Nate to serve on the journal’s board of advisers, and he did so from then on. Nate had many lovely stories to tell in addition to the scholarly information he shared with so many of us. I recall his telling me once about how as a boy he delivered the Yiddish newspaper, Morgen Freiheit, in New Jersey.

James Poterba has written the following notice of Nate’s passing.

I write with the sad news that Nathan Rosenberg, a pioneer in the study of the economics of technological change who also served as Stanford University’s representative on the NBER Board of Directors from 1980 until 2010, passed away on Monday at the age of 87.

Nate received his undergraduate degree from Rutgers, and his Ph.D. from the University of Wisconsin. He began his academic career at Indiana University, and served as a faculty member at the University of Pennsylvania, Purdue, Harvard, and the University of Wisconsin before moving to Stanford in 1974. Nate was the Fairleigh S. Dickinson, Jr. Professor of Public Policy, Emeritus, at Stanford, and an NBER board member emeritus, at the time of his death.

Nate’s research was primarily concerned with the economics of innovation, and he drew on historical as well as contemporary evidence to illuminate the economic forces that influence the rate of technical progress. His work had a powerful impact on both the micro-economic and macro-economic understanding of the role of innovation in economic growth, as well as on the recognition of the impact of institutions and policy in shaping the innovation process. His contributions were widely celebrated. When the Society of the History of Technology awarded him the Leonardo da Vinci Medal, the citation described him as having ‘almost single-handedly changed the way economists and economic historians think about technology and the nature of economic change.

We have lost a great scholar and friend; he will be deeply missed.

The Decline in R&D Efficiency in the Drug Industry

25149632_MPanel “a” in the graphic below shows that the number of new drugs approved by the U.S. Food and Drug Administration (FDA) per billion U.S. dollars spent on research and development (R&D) in the drug industry has halved about every nine years since 1950, in inflation-adjusted terms. This represents a decline in drug R&D efficiency of around 80-fold, which should concern everyone.



Aspirations and Policies

beyondpolitics_updated_nf_180x270Political rhetoric tends to obscure the difference between aspirations and policies. Aspirations are goals people would like to achieve, whereas policies are the means for achieving them. For example, the Obama administration has mandated automobile fuel efficiency standards that require a fleet average of 54.5 miles per gallon by 2025. This is an aspiration, not a policy.

An example of a policy would be a requirement that passenger cars have engines with displacements no greater than 1.6 liters, or an increase of $2 per gallon in federal motor fuel taxes to encourage conservation. Policies state what will actually be done to try to further a goal, perhaps in addition to stating of what the policies hope to accomplish.

You will notice, as campaign season is upon us, that political rhetoric is mostly about aspirations, and rarely about policies. Political candidates talk about problems with the status quo, and their aspirations for improving things. They talk about what they want to accomplish, but not what policies they favor for accomplishing their aspirations.

The reason is that everyone can agree the status quo is not ideal, so calls to improve the status quo receive widespread support. Hope and change. Just don’t be specific about what policies will drive that change. Lots of people will agree that things can be improved, but fewer people will agree that any specific policy will actually lead to improvement. So, politicians talk in terms of aspirations rather than policies.


Bernie Sanders and the Leaky Bucket of Income Redistribution

BernieSandersVermont Senator and presidential hopeful Bernie Sanders has pushed the American left to make income inequality a focal point of the 2016 elections. Echoing Thomas Piketty, the recently debunked economic pop star, Sanders has stated: “In America we now have more income and wealth inequality than any other major country on earth.” While not technically accurate, this rhetoric has inspired calls for redistributive tax policies.

Advocates for reducing income inequality may have the best of intentions or merely be indulging in political grandstanding. But if they wish to be taken seriously, they should first determine whether or not redistributive policies are truly effective at fixing the purported problem.

It’s commonly believed that taxation can combat inequality through progressive redistribution. Numerous studies, however, have shown that the economic and societal outcomes of income redistribution policies are inefficient. In other words, they destroy wealth in the process of transferring it.

Two of the most comprehensive empirical studies in this area are Public Spending in the 20th Century, by Vito Tanzi and Ludger Schuknecht, and Filip Palda’s paper “Fiscal Churning and Political Efficiency” (Kyklos 50:2, May 1997). Both studies use a metric called ‘churning’ that measures the degree to which taxes levied on citizens to support new social programs actually transfer capital right back to the original taxpayer.