Saturday, July 09, 2011

We Should Be Free Because We Are Equal: You can't be one without the other (?)

Steven Horwitz below points out that classical liberals -- precursors of libertarians -- did believe in equality. Conservatives, by contrast see equality as an unrealizable dream. Conservatives can see that there are a whole host of ways in which people differ and that those differences will result in many forms of inequality.

So this does expose the dire limits of a purely libertarian analysis of society. Liberty is vital but its presence or absence doesn't explain or predict everything. There are other influences at work in human affairs that influence how good our life experiences will be.

For those who still embrace a purely libertarian analysis of society, there is a sort of an "out". As noted below, classical liberals only asssumed equality for the purposes of their argument -- much as economists assume free markets for some analyses, even though real free markets are as rare as hen's teeth. So what is assumed is not that all men are equal but rather that all men need to be treated equally by the law. That seems to me to be the only sort of equality that libertarians could realistically embrace -- JR

At the core of classical-liberal arguments, especially in the nineteenth century, was what economists Sandra Peart and David Levy call “analytical egalitarianism.” Classical liberals, going back at least as far as John Locke, began their analysis of the social world by assuming that human beings were equal both in their moral standing (everyone’s preferences count equally) and in their capacity for making economic decisions. As Adam Smith phrased it, there was no difference between the street porter and the philosopher.

Peart and Levy contrast “analytical egalitarianism” with what they call “analytical hierarchicalism,” in which some people are thought to be different from others and therefore, in the view of those at the time, superior or inferior. Such differences might be attributed to any variety of inborn traits, from race to ethnicity to gender. By contrast, Adam Smith, John Stuart Mill, and other classical liberals believed that the observed differences among human beings were not due to inborn traits and capacities, but rather to factors such as incentives, luck, and history, as Peart and Levy put it. In the view of most early classical liberals, no inborn trait or capacity consigns some groups to inferiority while marking others for superiority. In understanding the social world, we must treat people as equal with respect to the things that matter for our theories and therefore for the policy conclusions that emerge from them.

Racial Equality

As Levy demonstrated in an earlier book, this mattered at a practical level in the nineteenth-century debates over racial equality. Classical liberals such as Mill supported racial equality because they believed race was irrelevant to people’s moral standing and capacity for choice. Classical economics assumed its models applied to all human beings, including the theorists themselves. They believed that free markets and a free society were desirable because all people were equal and capable of acting in the way their theories described, leading to the peaceful and prosperous world they promised. By contrast the Romantic critics of capitalism hated it for exactly those reasons: Their starting point was the assumption of hierarchy, specifically among the races, and they understood correctly that free markets would undermine that hierarchy, which is why they opposed it. This is also why the Romantics called economics the “dismal science” – they saw a future without hierarchy as dismal. (See David Levy’s Freeman article on the subject.)

If there really were morally relevant differences among human beings, or if some groups were unable to engage in reasonably rational decision-making, it would be easier to construct an argument that these humans should ruled by their superiors – and this is precisely the argument that a good number of critics of classical liberalism constructed. They wanted the State to treat some people differently from others because some groups were not equal to others in their capacity for free choice. Lest you think this went on only in the nineteenth century, these views manifested themselves again in the early twentieth century, as Progressive Era critics of capitalism used eugenic arguments to limit the economic rights of nonwhites and women.

Two Principles

The classical-liberal argument for freedom was premised on equality, both in people’s moral worth and in their capacity for free choice. In other words, the arguments for equality came first and the desirability of liberty followed from them. (See also Roderick Long’s “Liberty: The Other Equality.”) Classical liberalism’s critics denied that people should be free because they denied that people were equal. It was classical liberalism that defended the principles of both equality and freedom.

No doubt the concept of equality has been altered in the last 150 years. Too often it is used to mean “equalizing outcomes” by the hand of the State as opposed to treating people equally and accepting that unequal, but just and socially desirable, outcomes will result. Libertarians who rightly defend such inequalities of outcomes need to recognize that those are only possible in a world where the assumption of analytical egalitarianism operates and where the State treats all humans as having equal moral standing and equal capacity for free choice. Equality should not be a dirty word for libertarians since equality of liberty and equality before the law are in our intellectual DNA. Equality is one of our foundational concepts without which the argument for freedom would be that much weaker, if not nonexistent.



The perils of centrism

The Republican party says it’s for lower taxes. It isn’t. It passed the largest federal budget in history, and even after it controlled the White House and both houses of Congress, it failed to make a dent in the federal tax burden.

The Republican party says it’s for limited government. It isn’t. Not only has it failed to reduce the already ridiculous size and power of government, it has drastically increased it.

The Republic party says it’s for individual liberties. It isn’t. It created the biggest federal bureaucracy in history, and gave it all sorts of new powers to spy on, detain, silence, and otherwise harass Americans.



The Cost Of Government Regulation

“You, there: stop complaining and start hiring!” That is essentially the Obama administration’s message to businesses. This is an administration that seems to believe that $1 million spent on pollution control will create more than 1.5 net jobs. Who comes up with such numbers?

One would be Cass Sunstein, head of the White House Office of Information and Regulatory Affairs (OIRA), who recently wrote in the Washington Post that there is no “tsunami” of regulations to worry about, no matter what the Chamber of Commerce says. All is fine and dandy because OMB says regulations cost no more than $62 billion annually.

Sunstein, who is in charge of keeping tabs on the costs of government regulations, also recently saw it fit to undermine his colleagues at the Small Business Administration, telling a Senate hearing that SBA’s oft-cited report finding of $1.7 trillion in regulatory costs is an “urban legend.”

He may be a lot smarter than the rest of us and have more legal citations than anyone else in the Milky Way, but if Sunstein seriously contends that regulations aren’t costly or shouldn’t be fretted over — or that only “net benefits” matter — we have a real problem.

Sunstein cites a progressive advocacy group’s critique of the SBA, titled “Setting the Record Straight,” which doesn’t attempt to find out what regulatory costs are, but just highlights the “conservativeness” of those who seek disclosure and accountability and to critique their efforts.

Sunstein also cites a Congressional Research Service report actually entitled “Analysis of an Estimate of the Total Costs of Federal Regulations,” which, rather than finally tabulating regulatory costs after all these years, simply shrugs and talk about how complex it all is and demeans the SBA effort.

In my view, the SBA report’s authors, Nicole and Mark Crain, concede a lot to potential critics, and such reports can and do benefit from genuine critique. The authors bend over backward to stress that they are not assessing benefits, given that the SBA’s legislative mandate is to address small-business impacts.

The country’s wealth creators need a real review of regulations, not comforting words from federal officials. Out of over 3,500 rules finalized in 2010, OIRA reviewed 66 — and of those only did benefit calculations for 20.

A simple perusal of the Federal Register shows over 430 rules costing over $65 billion so far this year alone, let alone the entire Crain universe of rules, which stops at 2008. As the Crains note, regulatory costs are often “indirect,” compared with direct taxation.

Significantly, they also note that the “totality” of rules under $99 million are not reviewed by OIRA. That is important because “major” rules — those estimated to cost $100 million or more — comprise likely less than 10% of the regulatory pipeline at any given time. Thus, a rule that is not considered “major” could still impose significant costs in real-world terms.

The Crains also note that they do not include in their assessment the indirect or ripple effects of regulatory mandates. They also do not directly review many categories of rules—including import restrictions, antitrust regulations, product safety and telecom—and rules issued by “independent agencies.” And no one has yet accounted for the impending regulatory tsunami (yes, I said it) that will be unleashed by the Dodd-Frank and Patient Protection and Affordable Care Act (Obamacare). Sarbanes-Oxley alone costs $1.4 trillion in lost market value.

In short, the Crains’ estimate of regulatory costs, while more accurate than Sunstein’s, may well prove to be on the low end. My own casual survey of literature on regulations, not using Crain or OMB numbers, already adds up to $1 trillion — and that doesn’t count the new health care law and the 3,500 pages of Dodd-Frank financial rules (with more on the way).

Agencies think within their squares and have conflicts of interest in assessing their own benefits. Regulators can ignore the opportunity costs and moral hazard they create. Even now they are in the process of distorting entire industry structures via limiting access to energy, antitrust regulatory abuse and “net neutrality” rules in telecommunications and government “stimulus” with regulatory strings attached.

This “official” attack on the SBA by the very administration under which the report appears is inconsistent with Obama’s Executive Order on “Improving Regulation and Regulatory Review,” his Wall Street Journal op-ed, and with the reality that we know very little about the regulatory state’s impacts. The real urban legend at hand is the idea that the Obama administration is working diligently to streamline federal regulation.



Those Who Forget The Past…

There’s no joy in saying “we told you so.” Not when millions of Americans are beset by plummeting home prices, stagnant income levels, deteriorating job opportunities and rising consumer prices. And let’s not forget the trillions of dollars in debt that America’s politicians have saddled taxpayers with in an unsuccessful effort to alleviate these economic ills.

Free market advocates repeatedly warned political leaders of both parties regarding these inevitable “bailout byproducts,” but they didn’t listen. Instead, they rushed to reward their favored banks and bureaucracies for years of gross fiscal negligence — leaving taxpayers stuck with a scarcely-fathomable tab.

The only silver lining to this Keynesian tsunami? That the failure of the largest, costliest and least effective government economic intervention in human history could be the impetus for an urgently needed course correction — and a long-overdue debunking of one of the greatest myths in American history.

According to Barack Obama and the New Keynesians, years of unrestrained and unregulated “corporate greed” pushed America to the precipice of a second Great Depression. That’s when government rode to the “rescue” with more than $13 trillion worth of new spending, lending, loan guarantees and money-printing.

It’s a familiar narrative — one evoking all too common misconceptions about the policies responsible for the depth, duration and the eventual demise of previous economic downturns. Like its predecessors, however, this narrative ignores a flood of politically-correct, government-mandated lending that helped artificially inflate the nation’s housing bubble. It also ignores a steady increase in deficit spending in the years leading up to the recent recession.

This isn’t a past tense situation, either — the interventionist spigot is still flowing. Washington is currently staring down its fourth consecutive budget deficit of more than $1 trillion, while the Federal Reserve is just now winding down its latest $600 billion installment of “quantitative easing.”

Even Wall Street — which soaked up more than its fair share of the borrowed largesse — is finally saying enough is enough. “They’ve done more than enough already,” one investment analyst recently said. “Any further stimulus only increases the long-term risk of inflation, which we already view as high.”

Indeed. Now if we could just wind the clock back three years — and $13 trillion. In 2008, Keynesian economist Gauti Eggertsson published a paper in the American Economic Review which presented a theoretical basis for the Bush-Obama doctrine of “over-stimulation.” Eggertsson’s fundamental premise was that the interventionist policies of Franklin Roosevelt’s administration lifted the nation out of the Great Depression — ostensibly in contrast to the policies of Herbert Hoover.

Obviously, it’s not hard to find fault with Hoover’s disastrous response to the stock market crash of 1929 (especially the Smoot-Hawley Tariff Act of 1930 and the Revenue Act of 1932). But those were interventionist excesses — and Hoover’s contemporaries knew all too well that he was hardly the laissez-faire scapegoat he’s made out to be in government textbooks. “That man has offered me unsolicited advice for six years, all of it bad,” Hoover’s predecessor Calvin Coolidge once said.

As Commerce Secretary to President Warren G. Harding, Hoover also recommended a massive federal response to the post-World War I depression. Fortunately Harding chose to ignore Hoover’s advice, and his hands-off handling of the 1920-21 depression is widely credited with ending that downturn in short order — just as Harding and Coolidge’s tax cuts paved the way for robust economic growth in the years that followed.

“The secret to the quick recovery was that the government generally stood aside and let the market recover by itself,” a 2005 report by The Cato Institute’s Chris Edwards noted. “Wages and prices adjusted, resources shifted to new areas of growth, profits recovered, business optimism returned, and investment rose.”

Even Keynesians, such as economist Robert J. Gordon, are forced to acknowledge that this economic recovery commenced in short order “despite the absence of a stimulative government policy. “Government policy to moderate the depression and speed recovery was minimal,” says Gordon. “The Federal Reserve authorities were largely passive.”

Obviously the virtues of “minimal” and “passive” government approach were not shared by Hoover and Roosevelt. Nor was the spectacular failure of Hoover and Roosevelt’s Keynesian approach heeded by Bush and Obama.

As a result of Hoover and Roosevelt’s mismanagement, the U.S. unemployment rate remained above 14 percent for ten years from 1931-1940. While it’s everyone’s hope that current elevated levels of unemployment won’t drag down our economy for such an extended time frame, the disastrous Bush-Obama response to the recent recession — and the looming specter of Obama’s socialized medicine law — don’t offer much cause for optimism.

“Told you so” — but let’s hope for the sake of our economy (and the taxpayers who support it) that our leaders have learned their lesson this time. We really can’t afford any more “stimulus.”



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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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