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So you do believe this is broken window? Agreeing to the destruction is not the only criteria but is certainly the overriding criteria, especially if you believe in market forces. Certainly if you believe the market is best positioned to decide winning and losing technologies you believe the individual consumer is best positioned to decide what to destroy and what to keep. You say net economic growth would be higher, but net economic growth where? Most possibly in third world countries (also your source). The NYT is concerned about the environmental impact, but that is not the only issue with older cars going to third world countries; organized crime, less benefit to America than if they were scrapped here, and continued inefficient use of a strategic resource. Your point would have more merit if people were actually buying 15 MPG used cars in America. They aren't (at least not in America), so at worst the government is telling people to do what they're already doing. If government allowed the used car industry to sell CFC cars, it would actually be reversing market forces and encouraging sales of 15 MPG cars. As for "misappropriating" creative destruction I agree that it is mostly concerned with layoffs and company restructuring, but creative destruction also rebuttals your objection that there's less economic benefit to destruction. When personal computers displaced perfectly functional typewriters (and I'm sure there's many more examples like betamax, hddvd) all/many of those things went to landfills. These are all classic examples of creative destruction. By your logic all of these were broken window because they destroyed functional equipment. You are right that it's no longer creative destruction if the government picks winning or losing technologies, but it is not: it is providing incentive for what the market has already decided is a loser. I also remind you that broken window parable is unconcerned with whether the government or private sector breaks the window (boy breaking window is as much broken window as government dropping bombs), so if your overriding criteria in identifying broken window is whether government is involved you misunderstand broken window.
My friend, you should look around and see that nearly everyone depends on so-called handouts and subsidies: roads, hospitals, large public works projects, defense, education and so on are all the domain of government. The difference between a growing and a stagnant economy is a few percentage points of GDP. If the price to be paid is giving a few who do not earn their worth a few dollars so those who do earn their work have work to do, then it's a price worth paying. A boost in economic growth by half a percent may be "debatable" to you but it certainly is not to me. Regarding your original critique I repeat the point that intent is irrelevant, only fact. And the fact is even though the requirement might have been 4 MPG higher, average fuel economy of trade-ins was around 15 while buys was around 25. That's a tremendous increase in fuel economy, and is not about keeping nature beautiful or even clean air but rather efficiency and conservation of a strategic resource. If this "environmental impact" deters economic growth for you, you should read up on peak oil and its consequences: then you would understand that any and all actions which curb fuel consumption are acceptable even if it involves "evil" government handouts.
You think that description alone is sufficient to sow doubt? Ignoring the fact that you were responding to me and I mentioned broken window fallacy (if you didn't want your comment to be interpreted in the context of defending that false claim perhaps you shouldn't have mentioned destruction) simply describing something then saying it is self-evident that the program is bad through its description certainly is not sufficient. I might as well describe any economic program I don't like, then say it is self-evident it doesn't work. Creative destruction is a real economic concept whether you like it or not and it even belongs to the Austrian school not the Keynesian school. There's nothing wrong with broken window if it's really a broken window. For example, war and vandalism are broken windows because the owner has not agreed to the destruction of his property. In this case he agrees merely by participating in the program because he could certainly refuse to participate with no consequence as you point out because he has a working vehicle. You are verging on strawman by saying I don't like broken window when anyone can read up and see I don't like misapplication of broken window.
You mentioned "mandate" and "destruction" both as negatives. Concern over mandate is just another way of phrasing concern over coercion (for example libertarian fears of mandated healthcare) and concern over wanton destruction is just another way of phrasing broken window fallacy. The primary objection towards subsidy is moral hazard, followed by crowding out. You mentioned all these adjectives for a purpose, to describe what you see as a negative program. I addressed your concerns one by one pointing out this is not broken window fallacy, moral hazard is minimized due to the non-permanence of the program and force is minimal. You can't escape my rebuttals by pointing out you used different words for the same concepts. General consumer spending confidence could be most affected by a helicopter drop which will never happen due to political realities. So the pragmatic must settle for programs like this that increase confidence in specific sectors. Which by the way is quantified by sales. I will note that due to CFC JD Power says auto sales will rise over 1 million for the first time this year. We may not agree that this improves consumer spending confidence (surely there is a difference between "restore" and "improve") but the 1 million mark is important akin to keeping the DJIA over 10k.
Its intent is largely (thankfully) irrelevant. It ends now with 457,000 transactions which would have happened either later or never without the program. Complaining about the program not being perfect is one thing. If the idea is the program isn't perfect and it could be improved then I agree with you. But I do not think that's your idea since you A. bring up broken window fallacy B. bring up moral hazard C. bring up coersion. The economic facts (not philosophical facts such as fear of government intervention) are it was a fast program which resulted in real gains and most importantly (and often overlooked in stimulus programs) it is ending. So the "crowding out" theory doesn't even apply to cash for clunkers: it was money that was not in motion that moved due to a relatively small investment. Cash for clunkers should be the model for government intervention: speed, limited scope, limited duration.
Confidence in economics translates to spending now rather than later, consuming rather than hoarding. Of course if you don't believe in the existence of multiplier you will call this not true economic stimulus and any gains not true economic growth because "it would have been spent later anyway." I find such arguments ridiculous and a misunderstanding of how economies of scale works -- one dollar spent separately one million ways cannot accomplish a fraction of one man or one company spending one million dollars the former buying one million one dollar toys the latter perhaps a house -- an analogy which should be enough to convince even the most skeptical that multipliers exist, but some simply refuse because they think incentives are coercion.
The question that really matters is what will be the newest black swan. Is it going to be nanotechnology, the rise of Africa, or some other unforeseen event? The most probable black swan is healthcare. I support Obama not because I believe is is particularly well-versed in economics, but because the alternatives are far worse and also because I believe growth will be the (unintended) effect of Obama's policies. I see a population which will not get any younger, and a massive pent-up demand for healthcare of all types, preventative, alternative. Black swans are not the result of one mad scientist working in a basement. The conditions have to be ripe for such an event and the fast aging population combined with massive spending will grow the economy, not sink it. Of course when it happens revisionists will attempt to say Obama hindered the recovery like they said the New Deal hindered the recovery during the Great Depression. They will say so not with facts or numbers, but out of a philosophical opposition to deficit spending and a belief that government intervention is wrong in every case other than defensive wars. Libertarians don't understand that confidence is extremely important for growth. You can see this with their opposition to Cash for Clunkers. Confidence creates demand which creates growth. The best they can come up with is accusations of broken window fallacy or price controls and price tampering, when replacing a window that's already broken (low MPG cars) and giving business the opportunity to raise prices to cover operating costs during a recession is neither broken window nor price control but the complete opposite. Nevermind its not someone else breaking the window but the owner choosing to "break" the window (nobody is forcing consumers to trade in their cars), so it is a false analogy to parable of the broken window which is about a child breaking a shopkeep's window.
Yes both situations play havoc, but the real question is what plays more havoc. On the one hand deflation causes individuals to be more likely to hoard or save money. On the other inflation causes individuals to be more likely to spend or invest money. Anyone who doubts the former should visit Japan, and anyone the latter should hold on to a no-interest account for a decade. Unfortunately I seriously doubt that a sustained period of deflation would encourage consumers to save money. It would not solve what libertarians see as an overexcess of spending and credit. It certainly would encourage investors to hoard/save money if said investment did not exceed the rate of deflation. That's right, it's a price floor. Prices might be chaotic and unpredictable, but at least there is no additional price floor with inflation. And that is the real problem with deflation, an additional price floor as dangerous as overregulation or price controls. Can't forget microeconomics.
Well they accept it because they have to: better a job than no job. But I refuse to accept productivity isn't affected at all if you pay someone less. He might be at the same job but he'll do a worse job at it and that's really bad news if its across an entire economy. Not all goods are elastic, so giving someone a pay raise even if it is mostly inflation helps him pay not just trinkets like HDTVs or entertainment but necessities of life (if you assume that non-elastic goods are necessities). Someone said in a thread a couple months ago that this amounted to some kind of "delay" and stimulus spending was using this delay to hope for economic recovery akin to some kind of fraud. All I have to say to that is the "delay" if you want to call it that is intrinsic to economics when no one person can have the perfect information at the right time, so it is not fraud or counterfeiting or whatever you want to accuse it of but a realization of the fundamentals of economics. I imagine if human beings were all economic experts and could accurately and easily report how much money was in the market with full transparency a different system would work better. But we're not. The average employee or even a professional who has no knowledge of economics like a Dentist or Doctor cannot be expected to take a pay cut and calculate whether it matches deflation and is therefore no reprimand. Even economists can't agree what is deflation and what is inflation, and a system which expects the common man to have expert knowledge is a bottleneck at best. I have a stinking feeling those who love deflation just want the things they buy to be cheaper. At risk of sounding offensive given the number of libertarians roaming around the Internet I would say most of them don't even work (not necessarily a bad thing just means they're independently wealthy) or are on fixed incomes: try finding any blog or forum like Steve's which gives any credit at all to Keynesians and you'll see what I mean, and Steve isn't even a Keynesian. You can't even find anyone who admits to being a Keynesian on the Internet. The Keynesians are too busy working and getting raises so they don't particularly care enough to stump on the Internet because raises will match or exceed inflation, but the libertarians really, really want deflation so what they have doesn't lose value and they see the natural consequence of not working = losing purchasing power as some kind of tyranny or "wealth redistribution." Any system which wants maximum economic growth should favor the working (not to be confused with working class).
You're doing the fact picking, cherry picking thing lintond. If anything all that shows is the government stimulus was more successful in Japan than Austrians would have us believe. 1.5% - 2.0% growth is not misery but it is considered a lost decade in terms of economics, with 3.0% growth or far far higher double digits in Asian tigers being the norm, and those countries don't have deflation problems. You deny that deflation causes falling wages. That's a big load, akin to saying people do not always respond to incentives so tax cuts don't work. Since you don't seem to accept that a company can't continue to pay its workers the same amount of money if everything is cheaper, I don't know how else to convince you other than ask you provide example of a country with persistent deflation problems with tremendous economic growth. But again it violates common sense and human nature to think deflation has no effect or positive effect on economic growth when the human condition is to quit or grow less productive with less money. Put in other words, will you work harder if your boss gives you a pay cut? You wouldn't. Either answer how a company can pay its most productive workers more year after year if it charges less and less money for its products or concede deflation is a *disincentive* to work and a bottleneck on economic growth.
The world economic order runs on fiat money, specifically the American dollar. If fiat money caused deflation, we would've had stagnant growth in the entire world for decades. Correct deflation is a symptom, a symptom of cheap labor and an economy focused too heavily on export. That doesn't mean deflation is desirable any more than any other symptom of a disease -- if you have it, it is surely sign of a disease. Nobody wants to make less and less money on their paycheque. Nobody wants principal on their debts to stay the same at 0% interest. Everyone wants to make more and more money than their fathers and grandfathers. Inflation favors people who invest and spend their money rather than hoard it, because if they know they do nothing with it it will decrease in value. Just a little inflation being a desirable feature of money is human nature. If you dislike this argument, note that communism is a failure because it ignores human nature. Nobody will want a falling general price level because nobody wants to make less and less amounts of money regardless of whether that less amount of money can buy more. If you disbelieve that walk around asking anyone if they would like making less and less money: even try qualifying it if you want by saying the less amount of money they make will be able to buy more and you'll get some rude replies. Even if you disregard all those arguments as too qualitative and not quantitative enough (I don't know why -- Austrians love qualitative arguments) there's the fact it is impossible to know how much currency is moving and existing at a given time. So its either slight inflation or slight deflation, and I know what I prefer -- no Japan, no deflation.
For an example why deflation is fatal, take a look at Japan. Japan is often cited by anti-stimulus advocates as the reason to avoid big government spending, the reason infrastructure spending can't work and so on. But whatever your political stripe you cannot deny Japan has experienced a general fall in price level year after year after year. Those who say garbage, Japan's problems would be gone if the government didn't intervene, aren't looking at the fundamentals of Japan's economy. It is an export economy based on cheap consumer goods and surprise surprise with the rise of China right next door, Japan's economy collapsed once foreign markets realized they could get cheaper in other Asian countries. What is fact is a fall in the general price level in Japan. Whether or not you agree with the measures taken, quantitative easing, stimulus, etc., the fact of Japan is deflation. Here's how to tell if someone is biased: they have their own pet theories about how an economy works, say "government intervention is bad in all cases" or "quantative easing is evil" then search for examples like Japan to support their theories. What they should be doing is looking directly at the facts, saying "Japan has deflation of several percent a year for decades" then constructing theories from those facts, rather than fishing for facts to support their own preconceptions. Anyone who knows anything about business knows a maintained large scale price war in an industry is bad for the industry. Rather than churn out better products companies are forced to deceive consumers with ever cheaper and cheaper garbage, all the while cutting expansion and research dollars. Is it so hard to believe an economy wide price war is anti-growth? Saying fractional reserve banking is counterfeting is like saying anything but direct democracy is dictatorship. *Someone* has to print the money, and it can't be the politicians so why not a more or less independent body staffed by industry experts? At the same time full reserve banking is ridiculous: why should banks be expected to be mere storage bins which cannot loan large sums of money in fear of bank runs? Might as well say banks shouldn't exist at all. If you have a better solution I would like to hear it; the best I came up with was abolishing currency entirely and creating an economy entirely made up of IOUs so all tender was illegal and instead every single person in the world would be a bookkeeper. And for obvious reasons that scheme isn't workable, not to mention if it did work the economy would be absolutely stagnant, new startups finding it impossible to borrow money and old ones collapsing at the slightest strain.
Mike H., Very well. However, I would not call GM workers less fortunate, as they made wages far above market and should have saved during the "good years." You are making two separate arguments; one that rule of law must be supreme, and one that natural property rights cannot be violated in any case. It certainly is possible to take from those with and give to those without without violating the law or changing the rules midgame. However, that is not truly a topic for discussion on an economic blog, and I interpreted your comments in the context of inflation and deflation, spending and non-spending, fiat currency and commodity currency. Rule of law certainly is a topic for discussion on an economic blog because when law breaks down economics cannot work, but is a separate issue from whether the less fortunate deserve more or less, and certainly is a separate issue from natural property rights (which your original post implies by stating not just the government should be concerned about these rights which I interpreted as you referring to rights transcending law, natural rights.) I wanted to point out with the bankruptcy example that natural rights often conflict.
Mike H., You say that property rights is a quintessentially American virtue. I would happen to agree, but I will point to another quintessentially American right; the right to a new start, the right for freedom. From the beginning America has been a land where you come for a fresh start and a new beginning. What would be justice in most other countries is one bad decision, one bad loan, one bad business venture ruining you for the rest of your life. Your wages could be garnished for life. Instead, a man in America can declare bankruptcy, lose everything and in most cases (other than child support and student loans) start fresh. He won't be able to get credit for seven years, but it is an American right to begin from nothing and work your way back up without the burden of a debt filled past. This obviously violates the natural rights of creditors. After all, after a person is back on his feet shouldn't he pay everything back that he owed in his "past life?" Here you must make a choice; what is more important, the right to be born again or property rights. So what say you Mike H., to the fact that inflation of 2-3% is a right and proper American approach to monetary policy? Debt is America's 21st Century slave whip, and I have no problems with a monetary policy which slowly destroys debt, just like I have no problem with a law which allows you to discard all your debt and start a new life. But mainly I want to make the point that property rights is not the pinnacle right of Americans, but liberty. And that means liberty from neverending debt along with liberty from taxes.
The red herring has been government interference. No, I am not making a value judgement on government interference, nor am I saying more government interference is better in all cases. What I'm saying is for years any politician who dared talk about growth was branded as a big government type who was willing to micromanage the economy. This is why Cheney had to speak of deficit and not growth directly, and even had to trot out Reagan to shield himself. It's taken an economic disaster for the word growth to be even mentioned because it's been maligned as a synonym of government interference. Now I have one question for anti-tax advocates; do you support a negative income tax? If lower taxes increases growth, then so-called handouts could also increase growth -- why does growth stop at zero? Of course moral hazard, but then the goal should be to prevent moral hazard rather than assume it always happens. Eventually libertarians have got to admit that they and conservatives are at odds; conservatives are pragmatists concerned with real results and real numbers who generally support some form of progressive taxation while libertarians are mainly concerned about abstract issues like personal liberty and less coersion and support no taxation. What else explains why they assume maximum growth at zero tax? Maximum growth could certainly be below zero for certain individuals, which would arouse anger and hatred in libertarians at "handouts" and "welfare" and having their "rights" violated. Obama's 250k class warfare attack is awful, but few understand McCain's attack on anybody receiving a refund cheque as a welfare bum is as bad if not far worse.
Well, it may be that Obama will never stop talking about taxing the "rich" and spreading the wealth but is uninterested in class warfare. Unless one believes that a flat tax is the maximum possible growth (or even more radically near no tax), one must discuss who should and who should not be taxed more. At least taxing the "rich" higher can be argued purely from a mathematics rather than a value judgment. The top percentile of earners have a quarter of the nation's income, and the gap expands even further if you look at the top ten percent. So unless you propose higher taxes for the middle class and poor, mathematically speaking the rich will have to pay more if tax recepits are to remain constant, given the gap is getting wider and wider. Of course the other solution is tax everyone less and drastically reduce government spending and hope the denominator (GDP) increases to maintain tax receipts. But firstly, government spending is not even remotely linked to tax receipts (a great evil I know) so reducing spending does not necessarily reduce the tax burden, and secondly increased growth is not guaranteed with an across the board tax cut. Targeted tax cuts seem to be the key, but who to target is the question government is wholly inadequate to decide. Steve is right that investing in people is the right step rather than investing in technologies, but Pell Grants, retraining programs, unemployment insurance and especially healthcare are not considered by modern day conservatives as economic stimulus or even worthy investment, but as a step towards "European Social Democracy." Libertarians especially are less concerned with economic growth than personal liberty and freedom from coersion, and they would reject paying for another person's education. They would certainly reject a second GI Bill. Unfortunately I believe Steve is right when he says my generation will pay dearly, because the word investment has become compromised by identity politics and overuse. Rockefeller Republicans are extinct, replaced by those who interpret the Constitution literally (as bad as those who interpret the Bible literally). Just imagine if Colin Powell was interested in politics and his reputation hadn't been trashed by the UN WMD presentation; it could be President Powell right now, unbeholden to the unions, who presumably supports much of the same policies as Obama but without any of the class warfare. And he understands entrepreneurs.
Do you believe in subsidy? By definition a government must pick winning or losing technology if it subsidises. Unless you believe in 100% results based reward and no government support up to that time, you already believe in government picking one technology over another because it will have to, to fund research. Results based only is fine if there's low barriers to entry but if it costs hundreds of billions or trillions to make a 50 MPG car and Detroit hasn't gotten around to it in 30 years, I have to wonder if direct intervention is necessary before we get hit hard by peak oil. You must also be aware that government subsidises many of America's largest businesses. Corporate welfare is not just a term used by liberals to slam tax breaks for business, but by libertarians to slam direct subsidy with the same mindset you detest: picking winners and losers. It may just be this administration's more transparent and honest rather than increasing intelligent design.
Well there's many variables that get in the way of entrepreneurs to start without even talking about Obama. For one, big box stores and strip malls. How is a drycleaner, restaurant and convenience store supposed to compete when Americans are getting more and more car-centric to the point when it's considered "unsafe" to walk and neighborhood patrol call the cops for "strangers" walking in their community? Another is quality of immigration. No longer are people allowed into the country for their willingness to sacrifice and work hard, but by abstract factors like formal education. If it were up to me I would give incredible leeway to immigration officers to pick who to let into the country at their discretion of who would make a good citizen. Of course that goes against the grain of central authority and zero-tolerance, but hey let's micromanage border officials like we micromanage everything these days. That's without bringing up demonization of immigration or anti-immigrant sentiments so I am not playing the race card here. Drycleaners, restaurants and convenience stores seem to have been replaced by Internet entrepreneurs with Google AdSense sites and eBay. It may be that even if Obama does not understand entrepreneurs, his actions unintentionally assist them such as removing job lock from healthcare: And Obama's Internet-centric administration is computer savvy and will never want to regulate the Internet (short of Clinton's abortive attempts to regulate violent video games). But the "lottery mentality" phenomenon is something that has been brewing for decades and is out of Obama's control as a social problem (although he does try by blaming absentee black fathers and slamming get rich quick schemes). No longer are entrepreneurs content with single digit returns over many decades, especially if it involves slaving at a store counter (besides being near impossible to compete with big box stores). Entreprenuers now want double digit returns, 20-30x of their initial investment, and they want it incredibly fast before they're 30. Even better if they "win the lottery" or do it with very little actual work -- they would rather pay someone else to do the work for them. Google AdSense is a good example: make money without even working, when you are sleeping even. The land of opportunity has been perverted to the land of lottery and I'm not sure if it can be reversed in anything less than a generation. There has to be a refocus on engineering, science, mathematics, generally the most rigorous and demanding majors, rather than human resources, journalism, accounting, marketing and management. Too many chiefs and not enough Indians. In your generation scientists, engineers and doctors were worshipped (atom bomb, NASA, vaccines) but nowadays nobody wants to become one because "they're treated like s***." You would roll your eyes at education these days if you could see it Steve; if you want to ensure your grandchildren have a healthy future as you say is your greatest goal make sure they major in something like computer science or nursing and you'll have done more for them than 1000 blog posts. If it must be that entreprenuers in the future will be technology experts, experts at arbitrage (which is not such a terrible thing according to Hayek) then they will be engineering majors not marketing airheads.
An interesting tidbit I thought I would like to share: "Economists call this phenomenon "job lock," and studies suggest that it keeps between 20 percent and 50 percent of workers from leaving their current jobs. Because health insurance is tied to employment in the United States, workers who leave their jobs can see health bills skyrocket if they strike out on their own or take a position with a company that offers fewer benefits. Workers who would like to retire early stay on, unable to qualify for the government's Medicare program until they turn 65. And those who have existing health problems may not be able to get coverage at all." 20-50% of people unable to leave their jobs? Sounds like an economic disaster in the making. That 20% could easily be the few percentage points growth that would make a difference between a recession and a boom. Some will discount this, but I tend to believe common sense arguments in economics -- that entrepreneurs will be unwilling to leave hundreds of thousands of dollars in group health insurance and group benefits -- than "moral hazard" arguments or "nanny state" accusations. If GM can't bribe workers to give up their health insurance with 140k, human nature may favor some form of common health insurance for maximum growth.
Toggle Commented May 29, 2009 on Inflation Watch at The Skeptical Optimist
Ah, the "burden of proof" issue. What started this? You, saying that "most government spending" was illegitimate, then deciding you picked the wrong word perhaps changed to irresponsible. You create a clear distinction between individual and group, as if a group wasn't comprised of many individuals, then declare that an individual is incapable of deciding the destiny of other individuals. Besides the fact this is a rhetorical trick (a person voting for healthcare can surely vote for healthcare for himself and not others) it certainly does not solve the contradiction of you praising a man voting purely out of self-interest then declaring him wrong to do so because the "needs of the many" are not served. "Some else pays" -- so what? How does that prove a course of action is anti-growth, other than Randians declaring (incorrectly) that unearned income is automatically destructive? Has anyone ever asked you to consider the possibility certain types unearned income (not all) could be pro-growth? Possibly not, since it seems so "common sense" that a man should only receive what he's "earned" but common sense is often wrong. I already pointed out that "who deserves it" is a moral question that has no place in a discussion of economics. The healthier a nation is the more productive it is -- this is clear -- and health is a collective responsibility given diseases are spread communally. I believe in rule of law and stable government. I am very well aware of where I am; this is the same blog that said months ago that the bank bailout was necessary to prevent a total collapse of Western civilization (words were not minced; Steve posted a C-SPAN interview of a Senator saying that exact thing.) The only legitimacy a government has to rule is at the pleasure of the people. You ask me what school of thought or philosophy espouses this; do the names Hobbes, Locke and Rousseau mean anything to you? Perhaps you will now act shocked a if you have never heard of social contract (or pretend it is socialism as many Internet libertarians do) or perhaps you will now ask me where is the signed contract, as if a contract must be literal and physical rather than implied consent. I would rather not debate the validity of social contract as this is an economic blog not a political or philosophical blog, so the point I make is simple: *anarchy is the most anti-growth scenario imaginable*, and disregarding the will of the people continuously in favor of say, libertarian theorists, results in overthrown governments and revolutions. There is a *very* big difference in saying the electorate is competent enough to pick politicians who will pursue pro-growth policies (on the aggregate) and saying the electorate are experts in economics and could implement the minutiae of day-to-day policy decisions. I wish you would stop trying to represent my position as the electorate being economic experts rather than picking those they think can implement pro-growth policies -- there is a difference between being a leader and choosing a leader. From your source: "This was not conductive to the development of specialized education, but fostered an exceptionally high level of general literacy. Because general literacy was so widespread, intellectual monopoly was resented; priests, lawyers and physicians were regarded as the three great scourges of mankind." A modern economy, much different than an economy in the 18th Century, is highly specialized. Indeed, the greatest achievements of the 20th Century such as the Manhattan Project and Apollo Missions are extreme applications of specialization. Perhaps private education was better in the 18th Century when an educated man was a renaissance man, but your own source says that private education was not conductive to specialized knowledge. I stand by my original assertion that a mixed education system is superior to a purely private system -- this is not the 1700's where the sum of science could be learned in a single human lifetime. You also have *not* answered the blatant fact genius potential ignores family income. As for your "challenge" for me to "defend" that individuals on the aggregate vote for pro-growth policies, I respectfully must decline. I see no point in that exercise rather than more of your headaches -- what you and I consider anti-growth are no doubt diametrically opposed, as libertarians believe deficit spending is anti-growth and investment that doesn't yield tangible dollar returns in the short term are anti-growth.
Toggle Commented May 23, 2009 on Mis-remembering Jack Kemp at The Skeptical Optimist
You are correct, libertarian arguments do not rest on the assumption that all men are created equal. However, they certainly do use documents like the Declaration of Independence and the American Constitution as de facto proof of their views, so you'll forgive me if I say that. No, libertarian arguments rest on a far more easily attacked assumption that the _individual always knows what's best for himself_, give me liberty or give me death. That is false in some (perhaps many) cases, as you have strived so hard to "prove" these past few posts. I didn't think that's what you were trying to do, but apparently it is, and apparently you have not considered the contradiction you have generated. The problem is proving that the individual does not know what's best for himself is *fatal* to the libertarian argument. If it causes you "headaches" as you mention in the other thread I submit that is a good thing since likely you have only debated know-nothing leftists and/or partisans who are easy to respond to with canned answers but never an independent (who is not a libertarian but leans conservative on fiscal policy). Conservative, but not libertarian. But before you say yes at last he has admitted the common man is "stupid" know that I too believe that the individual knows what's best for himself, on the aggregate. But I am willing to consider the possibility if a large majority of Americans support an initiative, even a liberal one, it may generate the greatest GDP growth precisely because my axiom is the individual, or sufficiently large group of individuals, always knows best in terms of economics. In other words me admitting that there are many stupid people in America is only fatal in exceptional cases. Meanwhile if you continue to consider yourself a libertarian but say "the people do not know" when it concerns public education or healthcare reform, it is a violation of your core axiom that the individual knows best. You can handwaive intelligence all you want, but a group of people is merely a collection of individuals and if a sufficiently large majority of them want this or that, it is unfortunately fatal to the libertarian hypothesis if you reject their wants in favor of libertarian essayists. No I am not going to say 52 or 60 or 90 is enough -- it all depends on the circumstances, who will be bearing the brunt of the taxation (if any) and who will be receiving the services. 51-49 could conceivably enough if the 49 are out of state and are not forced to do anything. Besides the above contradiction, you have still not addressed the (lethal to your argument that pure private is *always* better) that public/private dual systems can increase competition. You mention "free" along with a non-free alternative without making a definitive statement, so I assume you say the individual will always pick the "free" choice. I submit this is insulting to the intelligence of the individual, not trusting him to pick the better product, and thinking him incapable of knowing no things are truly free. Rather a free system would simply be used by those who would not be otherwise able to afford *any* of that service (unless the government banned private delivery of that service). Now you will say what makes them deserve this or that service? Rather than discuss whether these people "deserve" this or that (bound to degenerate into what you think and what I think are natural rights) I would rather point out competition is increased, deadly to your axiom (which you have never explained) that a purely private system always generates more growth. Growth is the result of healthy competition, not morals like "this man deserves it because he worked for it" or "this man doesn't because he doesn't work for it" If we were at all concerned with "this man deserves this because he worked hard and not that man" we would take away property from those who do absolutely no work for it, perhaps even institute near 100% estate tax (perhaps money to be redistributed to everyone), but we do not because it inhibits growth. I am sure libertarians would not even consider a high estate tax despite their 'fruits of my labor' arguments. I certainly do not insult the American people by saying that people vote for whatever government will "give them free stuff" as many libertarians seem to do. By the way, Californians shot down Arnold's attempt to raise taxes to fund the bloated Californian bureaucracy. So in sum before we go any further (and I do not believe we will because I do not believe you will be able to answer this contradiction to any satisfaction) you need to explain how to reconcile your positions that the common man is too stupid to know "liberal policies" are bad for GDP growth with the position that the individual knows best. I solve this by saying it's entirely possible even liberal policies (however rare) could grow GDP more. You cannot, because you prefer a 100% private system under all circumstances.
Toggle Commented May 22, 2009 on Mis-remembering Jack Kemp at The Skeptical Optimist
Don't forget telecom wiretapping, stem cell research, gay rights and immediate withdrawal from Iraq. In fact since his base is the anti-war pro-union pro-civil rights movement if I had voted for Obama based on what he promised I would feel pretty betrayed by now. Check out "The Hundred Days that Didn't" in the Vatican's newspaper. As usual the devil is in the details and from the article linked Canadians are having little trouble with Federal contracts due to the "does not violate existing trade agreements." Rather it's state and local governments playing protectionism. City Hall in small towns is a powder keg of xenophobia anyway. Yes, the article says "federal officials" wrote the guidelines for municipal and local governments, but from the comments of mayors they wholeheartedly agree. The guidelines just gives them an excuse. Of course the Feds could have forced local and State governments to go for the lowest bidder and take foreign contracts, but then there's the whole thorny issue of State's rights and central planning. Mayors are egotistical, self-conceited types who will absolutely refuse money from higher levels of governemnt if it comes with too many strings. With all his political capital Obama could've done a lot more if he truly believed in protectionism. This is either subterfuge to fool moderates (and Obama conserving political capital for say, healthcare), or far more likely overzealous bureaucrats, administrators and mayors seeing a chance to finally fight foreign "invasion."
Very long and many points so I'll try and keep it brief: 1. "Literacy" rate exploded in that time period due to the rise of the serialized novel, entertainment, made possible by the industrial revolution's printing press, not through any triumph of private education (which existed for thousands of years before that). I will ignore for brevity that this is not literacy and accept your definition. All this means is without public education, people would be reading at a level well enough to enjoy novels, entertainment. But given the tremendous selection of visual entertainment available today and how every child prefers television and even more advanced interactive media like video games, literacy would be abysmal. I have thousands of years of precedent (not just America but other cultures) while you have a hundred year window where the economy was undergoing a vast technological shift. 2. Biology is the strongest argument in favor of public education. You are looking for those with the genetic mutation to be a future Einstein or Hawking, and this ignores ability to pay. That is why you spend millions, billions just to find the one diamond in the rough with scholarships, free education and so on. Libertarians like to believe all men are born equal but they are truly not. 3. The reason for the efficiency of private systems is competition. I submit that the majority of libertarian arguments with respect to private/public dual systems are poorly thought out precisely for the fact that another choice increases competition. The "crowding out" theory is just another way of saying the economy is finite and private business is competing for the same amount of dollars that funds public uses, but economics is not a zero sum game. If it is at all possible for a government dollar to have a multiplier greater than 1 (and according to economists it can) then crowding out is a weak theory (see Steve's post a few weeks back on interest rates). For true crowding out the government must ban the same service being delivered by the private sector as they do in Canada with healthcare. 4. So the new rage is to declare Reagan and Bush non-conservative, to avoid taking responsibility for their "failures." I understand this as a political tactic but not during debate. Conservatism at its core is keeping tried and tested paths, and unfortunately for libertarians the past hundred years of tremendous growth and technological innovation have coincided what they call massive "inflation" and steady debt/GDP ratio (contingent on circumstances: I would argue global war on terror is the greatest threat since WWII). Correlation is not causation but conservatism is surely stay the course. Why not continue encouraging growth to deal with debt that rather than radical libertarian proposals such as mint a single coin with the worth of the entire US debt (yes, that is on the Internet what abysmal economic knowledge) or to default on everything and start from "square one"? 5. You can use as many children and/or truck drivers as you wish to prove the superiority of your position but on a dime this can be turned against you by an academic liberal who is the most educated (and can name every country on the map and all their capitals) hence the contradiction. I believe in the will of the people except in cases of violating law and/or natural rights. Deficit spending does neither, because the individual consumer is certainly not being asked to pay for the spending (debt rollover). Taxation is violation of natural rights, but all that counters is liberal spending which increase taxes, not liberal spending which increases deficit.
Toggle Commented May 15, 2009 on Mis-remembering Jack Kemp at The Skeptical Optimist
So ttar, you are concerned with efficiency. Very well. 1. Private sector more efficient 2. Public sector more efficient 3. Private sector more efficient but will not invest. You seem to believe that 1 is always true (and with rare exceptions like roads 3). It's not for a vast majority of investments. For example, imagine if preschool, primary, secondary and college were all 100% private. What kind of corporation will wait 20 years for a *possible* return on investment? Words and language have existed for thousands of years but only upon advent of public education has the majority of the populace been literate. Government is clearly more efficient in delivering education. So people support a mixed system for education and with it all the Obama liberal policies like increasing Pell Grants etc. Maximum resource efficiency is not always the primary goal. For example the most efficient use of resources would be to let those who are at the end of their lives, who produce nothing and have little future potential to produce anything *die*. I suggest by default pure capitalism favors this conclusion (and why shouldn't it: those who do not work get nothing under pure capitalism). Now if you want to take the position that all old people who aren't working should die, that's your perogative, but many are willing to sacrifice economic growth for healthcare so their grandfathers and grandmothers live longer. Hence they support a mixed system for healthcare. That truck driver seems to understand something you do not. That 10 people with 10 dollars can do far less than 1 person (or organization) with 100 dollars -- economy of scale. Angel investors receive x20 - x30 times the investment back, so it's entirely possible for a far more conservative investor to receive single digit multipliers back, sacrificing return for less risk. The truck driver also understands money in the present is worth more than money in the future -- I'm not talking just about inflation, but the ability to invest money here, now, is worth more than the same amount later. Social security is not a ponzi scheme and neither are pension plans: they assume perpetuity because surprise, they assume humans will continually be born and the same trends will continue. The mistake they often make is not taking into account changing demographics. No problem, cut benefits later or increase immigration. It is quite a contradictory position to say truck drivers, salt of the earth types with the most experience (generally anti-regulation, anti-tax types) are too stupid to vote for those who will implement good policy (they are *not* the ones pointing at this or that business to take money away from but voting for those who they think know how big difference) but at the same time rail on the liberal elite who generally have the most formal academic education as similarly incompetent. So who's left? Perhaps you would rather libertarians, who get the majority of their economic education from neither experience nor study but the Internet, have the strongest say. I would not. Hopefully the libertarians do not hijack the GOP, or there will be no conservative option left in America: the other day a libertarian said to me "if only conservatives would stop listening to Bush and *Reagan*" I had to supress my urge to utter many four letter expletives.
Toggle Commented May 14, 2009 on Mis-remembering Jack Kemp at The Skeptical Optimist
There's nothing wrong with questioning the legitimacy of government decisions but when you start with the premise that all government spending is illegitimate then must be proven you disregard the meaning of representative democracy. As long as there's no violation of natural rights all an advocate of public healthcare (or any other liberal policy) needs to do is point to the overwhelming majority of Americans desiring healthcare reform, social security, and so on. Meanwhile libertarians keep acting as if natural rights are being violated without bothering to make a coherent counter-argument: no wonder they are the fringe of the fringe, stuck on the Internet with a single champion in Congress. Nobody except libertarians are convinced that deficits and spending are violations of natural rights like habeus corpus, right to bear arms, freedom of the press and so on (and I am not convinced either.) I bothered to look up the accusation that "transfer payments make up 60% of the American budget" made by someone in another thread and it is simply false. Social security is called a transfer payment technically because it's unearned income, but take away the bull and it's a pay-as-you-go system which does not have to draw on general tax revenue. Maybe it will in 2017, but maybe it won't even exist by then and that's then not now. Seems as if every single benefit from scholarships to medical care for children to any service provided under the sun is a transfer payment. Might as well call defense a transfer payment since the wealthy could hire private armies and communal defense is a service too. I hate definition drift: a true transfer payment is redistribution of *income* from one party to another, welfare, money. Government taking money then providing services for all is not a transfer payment: that does not make government seizure of money legitimate but does expose a glaring fault in those who believe most government spending is illegitimate. Meanwhile there is a very simple rebuttal someone from the left (not one I would make) can say to libertarians who say transfer payments violate natural rights: they can point to Nordic or socialist countries and say *everyone* qualifies for certain services so income and wealth is not being redistributed at all. I'm sure that would reduce the majority of libertarian, natural rights arguments to shreds because they simply haven't bothered examining their own argument. In sum perhaps libertarians should assume government spending is legitimate then go on to prove it is illegitimate with hard numbers as Steve is planning to do with Obama's stimulus if it doesn't work, rather than hark about how the burden of proof is on the liberals/conservatives/whoever to prove their spending programs are legitimate when they won the election.
Toggle Commented May 13, 2009 on Mis-remembering Jack Kemp at The Skeptical Optimist