The Independent Institute


You’re Stupid, So We Are Going to Take Away Your Freedom

ball and chain_MLIn a country based on the principle of liberty, should we really contemplate depriving people of freedom because they sometimes don’t make choices experts think are best for them? My title really understates the liberty-depriving philosophy of the nanny state. More accurately, it is: Some people make what we think are bad choices, so we are going to deprive everyone of liberty.

I’m thinking about this after reading Harvard Professor John Y. Campbell’s article in the May 2016 issue of the American Economic Review titled “Restoring Rational Choice: The Challenge of Rational Consumer Regulation.” Campbell reviews several bad financial decisions consumers tend to make, such as not refinancing their mortgages when it is financially beneficial to do so, and ultimately concludes, “The complexity of twenty-first century financial arrangements poses a daunting challenge to households managing their financial affairs” so “household financial mistakes create a new rationale for intervention in the economy.” People make financial decisions that Professor Campbell thinks are mistakes, so he wants government to intervene.

Peter Boettke’s Splendid Essays on Learning and Teaching Economics

living_economics_180x270I have just finished reading Living Economics: Yesterday, Today, and Tomorrow, a wonderful collection of essays by Peter Boettke. (It was published in 2012, but I move slowly these days.) The essays were written over a span of some twenty years or so, most of them in the first decade of the present century or soon thereafter. Several have a co-author or two; the co-authors include Christopher Coyne, Peter Leeson, David Prychitko, Steven Horwitz, and Frederic Sautet. I read the book from cover to cover and enjoyed it from start to finish.

Broadly speaking, the essays deal with how to teach—and learn—economics, but Pete and his co-authors approach this overarching topic in a variety of ways and usually in a substantive rather than merely hortatory manner. It will be a rare graduate student—or even a practicing professional economist—who cannot learn a great deal from the book. Pete writes clearly and well and has a deep knowledge of the history of economics. His excitement for teaching and learning shines forth on nearly every page. He has a true intellectual’s outlook, which means that he is constantly looking at anyone’s writing with the question in mind, What can I learn from this exposition? He has great willingness to set aside, at least for the moment, opportunities to criticize a scholar’s work, focusing instead on the work’s positive, worthwhile aspects.

Pete has excellent judgment about what is right and wrong with the economics profession today. And he exudes confidence that young economists can go forth successfully to practice and teach what he calls mainline economics—the basic elements of economic understanding that extend from Aquinas, the School of Salamanca, and Adam Smith to Menger, Mises, Hayek, Buchanan, and the New Institutional School. Although Pete is a great champion of Austrian economics, his vision is much broader than that of the typical Austrian, which in my view is a good thing.

So, my advice is that you buy the book, read it, learn from it, keep it handy for future reference, and take its solid advice to heart. You’ll know more and better economics if you do.

Is a Dystopian World Closer Than We Think? Thoughts from Hiroshima

The A-Bomb Dome at the Hiroshima Peace Memorial Park

The A-Bomb Dome at the Hiroshima Peace Memorial Park

Bestselling dystopian young-adult (YA) literature has inspired some of the biggest films of recent years. Many of these books, including The Hunger Games, the Divergent series, and the more modestly performing Fifth Wave, have been set in the aftermath of global war, geo-political events that bring human societies to near annihilation. While these stories are fictional, the reality of the setting is not as far fetched as many readers might think. A recent trip the Hiroshima Peace Memorial Park was a sobering reminder of how close these dystopian futures might actually be in the wake of modern warfare.

Few of these YA authors, whether it’s the authoritarian hegemony of the Capital District in The Hunger Games or the class-based hierarchies embedded in the faction system governing Chicago in Divergent, seem to acknowledge how events leading to their dystopian worlds are remarkably easy to recreate in the real world and how dangerously close we have come to doing this. A simple look at the after effects of the atomic bombs dropped on Hiroshima and Nagasaki are perhaps our best examples. My visit to the Hiroshima Peace Memorial Park perhaps did more than any of my reading or self-education on the effects of war to translate fears and worries about nuclear war into a understanding of its horrific reality.

The Rape of Nanking and the U.S. Atomic Bombings of Hiroshima and Nagasaki

Boom_MLQuestion: In what way do the atrocities committed by soldiers of the Imperial Japanese Army in China in 1937-38, especially those included under the rubric of “the Rape of Nanking,” justify the U.S. government’s atomic bombings of Hiroshima and Nagasaki in 1945?

Answer: In no way whatsoever.

Question: Why then do so many of the Americans who defend the atomic bombings bring up the Rape of Nanking as part of their argument?

Hypothesis: They do so because their thinking is completely collectivistic. They think: “The Japanese committed atrocities in Nanking; therefore it is only just that the Japanese suffered the retribution of having atomic bombs exploded over Hiroshima and Nagasaki.”

Comment: This argumentation, by making “the Japanese” the alleged moral agent that committed a wrongful act and therefore deserved to be punished for it, lumps every Japanese person, regardless of actual individual culpability, into a moral category that is nothing but a meaningless abstraction divorced from a recognition of which specific individuals committed wrongs and therefore might justly have been punished for those wrongs. An attempt to justify killing, wounding, and destroying the homes of, in particular, scores of thousands of babies, children, women, old people, and others who had nothing to do with the crimes committed in Nanking—nor any responsibility for the war in general—substitutes tribal savagery for defensible moral thinking.

Obamacare Silver Plan Premiums to Rise 16% on Average in 2017

Doctor Ben Franklin_MLCaroline F. Pearson of the Avalere consulting firm has surveyed states which have already published 2017 Obamacare exchange premiums. Among eight states and the District of Columbia, the average requested rate hike is 16 percent for popular Silver plans:

Specifically, average proposed rate increases across all silver plans in the nine states examined range from 44 percent in Vermont to 5 percent in Washington. In 2016, 68 percent of exchange enrollees selected silver plans.

According to the data, in most states, proposed premiums for lower cost silver plans increased less dramatically or even went down for 2017, compared to higher-cost plans on the same tier. Lower-cost silver plans tend to be most popular with consumers, making this portion of the market more competitive as plans seek to attract enrollees.

The devil is in the details: The lowest premium Silver plan is going up seven percent, and the second lowest 8 percent, which means most Silver plans are going up more than 16 percent.

This widening of premium dispersion is not what we would expect in a functioning market. Instead, we would expect prices to converge towards the lower premiums. The dispersion is explained by Obamacare’s poorly designed subsidies, which make the second-lowest cost Silver plan the “sweet spot” for insurers, because that is where subsidies are maximized. Insurers that want to shed market share, because they have lost money, increase the difference between their offering and the second-lowest cost Silver plan.

Premiums in other “metal” tiers (Bronze, Gold, and Platinum) are likely to increase at even faster rates, because insurers want to drive beneficiaries into the second-lowest cost Silver plan, where taxpayers pick up the biggest share of the tab.

Avalere’s analysis corroborates my recent finding, that insurers are increasingly skilled at getting taxpayers to pay a greater share of beneficiaries’ Obamacare premiums.

* * *

For the pivotal alternative to Obamacare, please see Independent Institute’s book, A Better Choice: Healthcare Solutions for America, by John C. Goodman.

Historical Understanding versus Moral Appraisal

ethics_MLTo understand history, we must, as it were, enter into the minds of people in the past—a task that we can never accomplish except in a very incomplete way. We must try to understand how they viewed the choices they made, what various actions and categories of action meant to them. By looking at their world through their eyes, understanding their motives, incentives, and constraints as they understood them, we may construct a warranted historical interpretation of why they acted as they did.

But the use of such Verstehende Soziologie, as Max Weber called it, must never be confused with exculpating the sins that people committed in the past merely because generally prevailing standards were different then. Slavery was always and everywhere morally wrong, regardless of how widely accepted it was. Mass murder of innocents was always wrong, even if the American whites considered the plains Indians to be subhuman or the Nazis considered Jews and Slavs to be vermin or the Truman administration regarded the people of Hiroshima and Nagasaki as expendable in its exercise of “statecraft.”

Natural law propounds a concept of justice applicable to human beings as such. It applies to any moral judgment of human actions. Differing dominant ideologies and changes in the prevailing social and economic conventions and institutions do not alter it. To reduce moral judgments to nothing but a consideration of what was viewed as proper or improper in another time and place is to embrace a form of moral relativism that, in fact, obliterates moral appraisal as such and substitutes the all-purpose excuse that “that’s just how it was then and there,” which, however accurate it may be in a factual sense, is merely descriptive and wholly divorced from genuine moral judgment.

Remembering Arthur Seldon, Champion of Capitalism

39235749_MLMay 29 marks the centennial of Arthur Seldon’s 1916 birth. Called “one of the most influential economists of the late twentieth century,” for over three decades he was editorial director of the London-based Institute of Economic Affairs, which The Economist said, “brought to the lay reader the ideas of all the leading free-market economists and thinkers of the day.”

Seldon edited 350 papers, monographs, and pamphlets, and penned 28 books and monographs and more than 200 essays and articles, generating a seven-volume set of collected works.

In such a vast body of work, one cannot easily winnow out the best of Arthur Seldon’s words. Therefore, consider some of the wisdom in just one of his books—Capitalism (1990), winner of the Fisher Arts Literary Prize:

Don’t Be Fooled by Misleading Rhetoric on Medicare Payment Reform

14742678_MLA few weeks ago, Medicare proposed a pilot program to test a new way to pay doctors who inject drugs. Cancer is the big kahuna, cost-wise, when it comes to injected drugs. Medicare payment policy leads to certain industry practices to profit from the status quo. When the status quo is threatened, the “preservatives” immediately form a defensive coalition to stop the change.

The campaign to roll back the reform has become irresponsible and misleading. I do not endorse the reform, but neither do I oppose it. Currently, physicians who inject drugs are paid by Medicare a margin of 6 percent on top of a reported price called the Average Sales Price (ASP). The concern is that the oncologists make more margin off an expensive drug than a less-expensive drug.

Drug makers know this very well. People who sell injection drugs to physicians sometimes refer to their sales technique as “selling the spread.” Physicians, especially oncologists, sometimes say they cannot earn a living off the fees Medicare pays them, so they need to earn the “spread,” too.

An 1883 Memo to Bernie, Hillary, and Donald on How to Help Ordinary People: Leave Them Alone!

William Graham Sumner

William Graham Sumner

In 1883, William Graham Sumner wrote a series of essays for Harper’s Weekly, which paid him $50 apiece. The excerpted essay below on “The Forgotten Man” is as relevant today as in 1883—even more so. Politicians continue to pile more burdens on ordinary people in the name of this or that professed well-intentioned cause, but it’s the ordinary working man and woman who pays the taxes, suffers under government regulatory and redistribution schemes, and would do much better if government simply secured “true liberty” and otherwise left them alone. Bernie, Hillary, and Donald would be wise to follow Mr. Sumner’s advice:

I call him the Forgotten Man. Perhaps the appellation is not strictly correct. He is the man who never is thought of. He is the victim of the reformer, social speculator, and philanthropist, and I hope to show you before I get through that he deserves your notice both for his character and for the many burdens which are laid upon him....

In the definition the word “people” was used for a class or section of the population. It is now asserted that if that section rules, there can be no paternal, that is, undue, government. That doctrine, however, is the very opposite of liberty and contains the most vicious error possible in politics. The truth is that cupidity, selfishness, envy, malice, lust, vindictiveness, are constant vices of human nature. They are not confined to classes or to nations or particular ages of the world. They present themselves in the palace, in the parliament, in the academy, in the church, in the workshop, and in the hovel. They appear in autocracies, theocracies, aristocracies, democracies, and ochlocracies all alike. They change their masks somewhat from age to age and from one form of society to another. All history is only one long story to this effect: men have struggled for power over their fellow-men in order that they might win the joys of earth at the expense of others and might shift the burdens of life from their own shoulders upon those of others. It is true that, until this time, the proletariat, the mass of mankind, have rarely had the power and they have not made such a record as kings and nobles and priests have made of the abuses they would perpetrate against their fellow-men when they could and dared. But what folly it is to think that vice and passion are limited by classes, that liberty consists only in taking power away from nobles and priests and giving it to artisans and peasants and that these latter will never abuse it! They will abuse it just as all others have done unless they are put under checks and guarantees, and there can be no civil liberty anywhere unless rights are guaranteed against all abuses, as well from proletarians as from generals, aristocrats, and ecclesiastics....

It is plain enough that the Forgotten Man and the Forgotten Woman are the very life and substance of society. They are the ones who ought to be first and always remembered. They are always forgotten by sentimentalists, philanthropists, reformers, enthusiasts, and every description of speculator in sociology, political economy, or political science. If a student of any of these sciences ever comes to understand the position of the Forgotten Man and to appreciate his true value, you will find such student an uncompromising advocate of the strictest scientific thinking on all social topics, and a cold and hard-hearted skeptic towards all artificial schemes of social amelioration. If it is desired to bring about social improvements, bring us a scheme for relieving the Forgotten Man of some of his burdens. He is our productive force which we are wasting. Let us stop wasting his force. Then we shall have a clean and simple gain for the whole society. The Forgotten Man is weighted down with the cost and burden of the schemes for making everybody happy, with the cost of public beneficence, with the support of all the loafers, with the loss of all the economic quackery, with the cost of all the jobs. Let us remember him a little while. Let us take some of the burdens off him. Let us turn our pity on him instead of on the good-for-nothing. It will be only justice to him, and society will greatly gain by it. Why should we not also have the satisfaction of thinking and caring for a little while about the clean, honest, industrious, independent, self-supporting men and women who have not inherited much to make life luxurious for them, but who are doing what they can to get on in the world without begging from anybody, especially since all they want is to be let alone, with good friendship and honest respect. Certainly the philanthropists and sentimentalists have kept our attention for a long time on the nasty, shiftless, criminal, whining, crawling, and good-for-nothing people, as if they alone deserved our attention....

What the Forgotten Man really wants is true liberty. Most of his wrongs and woes come from the fact that there are yet mixed together in our institutions the old mediaeval theories of protection and personal dependence and the modern theories of independence and individual liberty. The consequence is that the people who are clever enough to get into positions of control, measure their own rights by the paternal theory and their own duties by the theory of independent liberty. It follows that the Forgotten Man, who is hard at work at home, has to pay both ways. His rights are measured by the theory of liberty, that is, he has only such as he can conquer. His duties are measured by the paternal theory, that is, he must discharge all which are laid upon him, as is always the fortune of parents. People talk about the paternal theory of government as if it were a very simple thing. Analyze it, however, and you see that in every paternal relation there must be two parties, a parent and a child, and when you speak metaphorically, it makes all the difference in the world who is parent and who is child. Now, since we, the people, are the state, whenever there is any work to be done or expense to be paid, and since the petted classes and the criminals and the jobbers cost and do not pay, it is they who are in the position of the child, and it is the Forgotten Man who is the parent. What the Forgotten Man needs, therefore, is that we come to a clearer understanding of liberty and to a more complete realization of it. Every step which we win in liberty will set the Forgotten Man free from some of his burdens and allow him to use his powers for himself and for the commonwealth.

Venezuela’s Problem Isn’t Oil—It’s Government

2908654_MLOn Sunday night, my husband and I sat down to watch comedian John Oliver’s show “Last Week Tonight.” The news satire program is a guilty pleasure for the both of us. As the host, Oliver often brings humor to many otherwise (rightfully) dreadful topics.

Although I usually enjoy the show, that’s not always the case. In particular, when Mr. Oliver discusses anything related to economics, I often want to rip my hair out. This past Sunday’s show was no exception. In his opening segment, Oliver discussed Venezuela. In particular, he addressed the nation’s economic woes.

We begin tonight in Venezuela—AKA: North South America. They have been in the throes of an economic crisis, and recently, things have escalated sharply. Twelve says of violent clashes—that is a terrible situation—and even worse Christmas carol. So, what is wrong with Venezuela? Well, the short answer is everything. The low price of oil, which accounts for 96 percent of Venezuela’s exports, has triggered an economic collapse, causing massive inflation and shortages of food and medicine. And their current president, Nícolas Maduro, is not handling it at all well. He recently suggested punishing business owners who’ve ceased operations by jailing them and seizing their factories.