health care has to be born by the individual and the local community.  The federal government cannot be involved in national health care. If society is forced to pay for an individuals health care then society must be able to limit the risky behavior of individuals to an unacceptable extent.  I remember, as many of you will, a saying from my parents that is almost always some variation of "as long as you live under my roof".  The reason this saying is used is because when someone else is bearing the risk and paying the price then they deserve a say in the decisions made.  There needs be a direct correlation in every instance between the choice and the cost.  In fact there needs to be a total static link between choices and the benefits or costs of those those choices.  That is just and fair!  For example it is unfair to expect one individual who eats salads for lunch and runs a mile a day to pay just as much to the general fund for health care as someone who smokes 2 packs of cigarettes a day while sitting on the couch eating McDonald's.  We can't control the health risks individuals take and if they do not bear the burden of their own health care it is not fair to the responsible folks who take care of themselves.  Do we need affordable health care? Yes, but define affordable.  Will health care be affordable if you eat fast food every day... become drastically over weight and develop diabetes?  probably not!  Should it be?  Probably not.  Not that I don't care for sick people but we have to address the real issue.  We are each responsible for our own choices and we need to make good choices or else we need to prepare for the consequences.  If you want to engage in risky behavior like smoking that is fine but you need to be aware of the risks and buy good insurance and if you are unwilling to pay the premium for that good insurance then you either have to risk the health problems and the financial problems that will come with it or quite the risky behavior.  Obviously with this I believe that we need to educate children on healthy behavior from a young age at home and in school, both privet and public.  Prevention needs to be a focus as well as healthy living but people also need the freedom to choose for themselves.  Knowledge is important to freedom and liberty because to use liberty responsibly you have to be informed in your decisions.  While that is not a real goal of government it is a concern which is under governmental jurisdiction and should therefore be encouraged.  Distribution of knowledge should be dealt with in privet sector when possible but if there is a market failure so that important data is not being found and delivered so that individuals can make good decision I believe that government can aid in giving people the option to become informed by making the information available.  This should be scarce and used as lightly as possible however.  The most important realm for this is in government operations, especially the justice system and actions of elected officials, and in the health arena where the decisions if made wrong impact life or livelihood.  


Simply people need to realize that they are responcible for their own choices and if they refuse that responcibility then they will lose the liberty to make those choices.  There is no third option it is either freedom or slavery and anything that pretends to be a comprimise is hidden or delayed bondage.  
 
 

Throughout history the single greatest problem with democracy has always been personal responsibility and morality.   Without personal responsibility and morality the masses will eventually realize the power they hold to benefit themselves at the cost of others.   Democracy, especially representative democracy, slips easily into cleptocracy.  It sits on a precipice with a slippery slope on one side.  Tyranny of the majority is a term associated with democracy in the past, with just cause.  Another great once said that democracy lasts only until the masses realize they can vote themselves largess from the public treasury; is this not true?  

                The United States experiment with democracy has lasted as long as it has because it was built around a culture, civilization and religion that supported individual rights, individual property, individual responsibility and individual morality.  This cultural norm set standards not codified in the law but adhered to by the masses and the elites alike.  The independence and self reliance allowed for government of the people and by the people to run relatively uncorrupted by privet interests. What happens if the majority of constituents loses the fundamental principles and instead develops an entitlement mindset?  When the many feel that the responsibility that their parents and grandparents welcomed as part of freedom is now the realm of government then we see the growth of government and codification and a decrease in personal morality and responsibility.   Democracy was not meant to function in such a world of excess and blame.  Democracy requires self government to function properly and cannot long survive when the people refuse to bind themselves to a moral code and solid work ethic.  

                Business, politics, religion these are things which cannot be viewed in a bubble.  Economics is not simply the study of how people make business transactions but in essence how they live their lives.  You cannot subscribe to beliefs of freedom and simultaneously acquiesce your risks and responsibility away to another.  You cannot enslave yourself for the comfort of living without responsibility and then not work and serve that master without freedom.  Physics will not be mocked and every action will have its reaction.   If you can separate your life and rationalize your behavior then you will never have to accept any responsibility.  If each aspect of life is its own sphere then there can be no black and white, no absolutes.  When man is free to do as he wishes without constraint; when morality is not binding and there is no higher standard then there is not code of laws and no enforcement agency that can maintain the rights of all.  Man naturally infringes on the rights of others unless he reveres their rights as essential for his own.  Respect for the rights of all as intertwined with your own is the glue of democracy that allows it to solidify and maintain itself as a viable government.  When men become complacent and no longer respect the value of their own rights and are willing to give them away for comfort or safety and when men fail to realize that their rights are only as sure as the rights of the weakest citizen in their society then they have lost the necessary knowledge and understand for democracy and it will not long survive.  Democracy is a delicate phenomenon and cannot endure the loss of structure which comes from an understanding of the fundamental principles and premises which allow it to operate.  To erode individual responsibility and morality is to undercut the very pillars on which our way of life stands.  To separate morality and religion; to separate our higher laws from our secular lives is to destroy a foundation of responsibility and control which cannot be synthesized and cannot be duplicated.  A free society cannot stand when its citizens do not understand the duties of free men.

 
07/20/2009
 
 
 

 Throughout the history of economic thought there has been a debate between socialistic theories and capitalistic or market based theories.   This debate has consumed huge amounts of resources and altered the areas of study in many cases to fit the points of contention in the debate.  I would like to look at the development of our understanding of market structures relative to the socialistic alternatives for information solutions.  From my study to date I do not see a clear cut socialistic proposal which would remedy the loss of the market as an informational data base type structure.  As unfair or inappropriate as markets may seem to the separate schools of socialist thought it appears to me that without such a structure there can be no control of relative utility. Without such control on relative utility then there cannot be the prediction of a net gain since the inherent inefficiencies created by the loss of such information would create a scenario where any gains are necessarily a fluke.   While the capitalists are trying to understand how markets work and what we can learn from them it appears that socialists simply refuse to consider them on moral grounds.  I can’t separate this method of thinking from a doctor refusing to believe that someone is dead simply because on moral grounds death is not the best alternative.  

                Looking at markets there are certain pieces of information which are derived by producers and consumers and even signals to those on the sidelines.  These signals among other things include signals showing the aggregate utility of certain production as well as the relative difference in separate uses of the same resources.  Markets allow and encourage producers to use the resources in their control to produce those things which have the greatest utility to the public relative to the basket of potential products using the same or similar resources.  This efficiency of utility output from inputs is the driving force behind the benefits of capitalism.  I would like to address the ability of a socialist thought structure to address the alterations and inefficiency in utility data if such markets no longer existed.  I would like to study the various alternatives posed by the separate schools of socialism and communism and determine if any of these schools have meet the scientific burden necessary to make the claims they have made.  I suspect that I will find that when socialists and communists talk about fairness, equity and equality they fail to look at the likely mean or median welfare of the very people they attempt to help.  It is my hypothesis that these pseudo-scientists enjoying talking about a flaw in the present system and then directly leap to the assumption that it is not optimal because it is flawed. The problem is a system is only not optimal if there is a better system available or in the alternative a method to correct the inefficiencies of the present system.  It is my expectation that instead of looking to reform the current system or prove the existence of alternatives the separate schools of socialists simply jump to theoretical and normative alternatives without dealing with all of the necessary proofs of increased performance to justify their claims of increased welfare, equity, equality or anything else they “predict” would accompany their wholesale restructuring of a way of life.  They fail to consider liberty and other rights based reproductions as well as the most important things to us economists; utility. 

                If socialism has scientific justification and can truly answer the question regarding information dissemination without natural signals is correct then it warrants development and consideration however, if it does not meet this standard, as I suspect, then it is nothing but a drain on the field.  Quite simply this study of the validity of the debate itself would clarify the validity of the vast expenditures of time energy and money on this debate that has raged for decades.  If there is no alternative then pointing out the inefficiencies of an existing system without proposal for correction is simply a waste.  We must ask the right questions but to do that we must start with the proper premises.  Does socialism warrant the honor of a debate if not then what is the scientific reason and if so what is the possible benefit of such conversation. 

 
 


      The American Revolution and the resulting American experiment were unique because it was the creation of a state based on ideals.  The United States did not and for the most part still does not command loyalty because of birth, heritage, nationality, ethnicity or the other ties of nationalism but because of the ideas upon which it is founded.  The American Revolution, at least as I have been taught, was driven by principles of equality and inalienable rights of man as given by God.  The founders believed that all humans where created equal with God given rights to “life, liberty and property” as they so eloquently stated.  This is the basis of both this nation, the greatest nation on earth, and our free market economy, the greatest economy on earth.  

                Life, liberty and property have been considered sacred in American politics.  At the time of the revolution taxation without representation, quartering of solders without adequate compensation or permission and other unfair confiscations of property and infringement on liberty created battle cries for which men were willing to lay down their lives.  This is a nation based upon the principle that government is not absolute.  These men believed that there are natural limits which should be enforced upon government's authority which were established by God at the foundation of time; hard wired into every man woman and child.  This desire, this hard wired longing, for freedom creates the foundation upon which our society, constitution, and economy are built.  There are few people in America today who will disagree with such statements.  The American public has always believed in independent, individual freedom and has been willing to pay a high premium for it.  

                Property rights are not just an abstract idea for discussion.  Property is not just ownership of goods and land; it is a way of life.  We plan our lives and make our decisions based on the assumption that what we earn will be ours; we reap what we sow.  We base our economic model on the idea of free markets and the free exchange of goods and ideas. This is possible because of the ownership interest which acts as Adam Smith’s invisible hand guiding markets.  Pareto superior moves whereby there is a net benefit with no one losing are not only possible but the most likely outcome in our market because of that ownership interest.  The ownership of property delineates authority, independence and power but the real importance of individual ownership rights in our society is responsibility.  Responsibility and the rule of law are the keys of civilized society.  Furthermore, responsibility is the driving force behind efficient economies.  Bureaucrats will never be as efficient as a privet business owner because their interests are not always in perfect alignment with the proper allocation of goods.  On the contrary these interests never deviate in a privet ownership market.  The interest of the owner is always to bring their goods to their highest and best use or in the alternative sells them to someone who will.  This is the foundation of free markets and in its absence we descend into either a Hobsian jungle or attempt, as many have without success, some kind of planned economy.  These are our options as I see them: 1.) the rule of law which protects each man in his Life Liberty and Property 2.) The “Natural” state whereby men take what they can and power and cunning are the only real things of value (a Hobsian Jungle) or 3.) Centrally Planned state whereby the government owns and distributes all goods effectively eliminating any direct consequences to decisions.  In my opinion there is no other alternative.  

                Eminent domain has long been an exception to the rule in property rights which leaves some protection for the “public interest” or in many cases prevents extortion by one or two individuals able to prevent a large project when the public as a whole is the end benefactor.  This discussion is relavent today because all of this social spending can be viewed in the same right, at least in my mind, and subject to the same rules as Eminent Domain.  To me taking money for the "public welfare" is no differen than any other property and so this subject is a good classical example to look at as a real representative idea that might be easier to discuess... I especially think that liberals would better follow the argument in an eminent domain conversation because it detaches some of the automatic responces and emotional connection associated with "helping people".  Eminent domain was designed to prevent single individuals from preventing a major project such as the development of a military base or highway by refusing to be reasonable in the sale of their property for such public uses.  The limitations on it use have historically been strictly confined to projects which few question as truly in the public interest and till recently always ended with the property being purchased and converted to a pubic property with the only benefactors being the citizenry at large.  

                A strange twist has crept onto the books through the Kelo case however.  In Kelo the U.S. Supreme court has allowed property rights to be striped under eminent domain for privet use.  This is the confiscation of property by the government to give this property to a third party as oppose to the historic precedence of conversion to a public good.  The saying “Democracy can only exist until the voters discover that they can vote themselves largesse from the public treasury” if twisted slightly seems to apply here.  The American government seems to be saying that men can, through political connections and donations, conduct their business in any way they choose even if that includes the confiscation of privet property.  A system of “to the victors go the spoils” is the only logical outcome here.  Can a democracy founded on free market principles survive such precedence?  I am afraid that it will not.  We cannot freely give up principles which our founders fought and died; for which our grandparents fought and died for.  We cannot freely hand off this right to fair treatment under the rule of law lightly.  This single ruling moves us dangerously close to the edge of a cliff which leads to a cleptocracy.  If low and middle level elected officials can choose who should be allowed property with such sweeping power as eminent domain allowing them to redistribute that property then we have crossed a line which opens a Pandora’s Box.  This is the equivalent of a VERY poorly designed centralized distribution scheme, or decentralized as the case here may be.  Let us look to the principles of free markets and then to the principle tenants of tyrannical governments or communal type systems of planned economies like communism and socialism and see where this falls on the spectrum.

                Planned economies which are generally socialistic, communistic or totalitarian in nature, work on the basic premise that central planners, the government and bureaucracy, know how to better allocate resources than the individual.  Generally the premise is that individual ownership leads to power going to bad greedy people but communal ownership takes away the motivation to be bad or greedy since everyone is truly equal.  The problem with this, of course, is it also takes away motivation to do anything productive because you will always be on par with the lowest and the best simultaneously regardless of your efforts or decisions.  Now, let us take into consideration the premise of free markets which is: Given the construct of laws which establishes clear ownership and protects that interest, individuals will attempt to use their resources in a way that most benefits them.  We then take it a step farther to say that when everyone is trying to makes things as good for themselves as possible we, accidentally, through the “invisible hand” make things better for everyone.  The reason for this is because in free markets we are rewarded based on our utility to others.  Therefore our prosperity is directly related to the value placed on our work by others or society which take out really all biases and inequalities aside from the quality of the product or service you offer offered.  IT is really ingenious.  Now let us consider this new ruling on eminent domain.  Kelo allowed a city politician to remove property from the owner and give it to another individual for development because he, the politician, thought that the second individual would produce more tax revenue from the use of the land.  Since the tax revenues are directly related to the productivity of the land we must consider several things.  If we assume the required tenants for a free market economy it is not possible for the second owner to be more productive unless the second owner would have purchased the property from the true owner regardless of the intervention.  This means that unless we throw out our basic tenants of free market economies we cannot justify this action as being for the public good because the public good would have been best served by those with the most knowledge utilizing that knowledge in industry in a way to maximize its utility.  Short of some market failure which was not cited here, if the second individual was confident that he could turn a much better profit from the use of the land than the original owner it should have been easy to come to an agreement with the initial owner to purchase the land since it would have been of more value to the second person than the first.  If the second was not convinced then on a free market system he would not have bid a high enough price to acquire the land and the first person would have assumed essentially the same risk as the second by developing the land himself and attempting to make a profit.  There is, in a free market, no room for a fiat development program that can possibly, at least in theory, consistently produce better results in terms of productivity than would have existed natural in the absence of that decree.  It therefore follows that under the law this nation no longer accepts the tenant that free markets function properly and more importantly must reject the tenant that free individuals acting rationally will create a prosperous society.  Essentially, Pareto must be wrong for the court to be able to justify this decision as in the public interest.  If the city politician is better able to predict profitability of an asset than those who wish to develop the asset which they are familiar with, then the free market cannot function. Yet given this clash this is our present economy and our present law.  I believe they stand in stark contrast and are absolutely irreconcilable.   I draw a strict comparison to the ideas portrayed here and the ideas I hear floated about health care, especially when it comes to the intellectual property issues with prescription drugs.  It seems as though many are, in practice not lip service, losing respect for other people’s property rights. Our Revolution was primarily lead by elites who had the most to lose.  I believe this was the case because they came to the realization that if they do not protect the rights of the lowest and weakest then the rights of the strongest are relative only to his relative power and thus no rights at all. To protect their own rights the most powerful must protect the rights of the weakest. Power is relative and ones power can never be solidified; there is always someone or some group that can surpass you and therefore you must uphold the ideas, the principles of freedom for even the weakest as a means to secure your own freedom regardless of the power pendulum.  I fear Americans are forgetting this important tenant of freedom and it has manifested itself in our law here in this case on eminent domain.

 
 
 
Posters 07/13/2009
 
 
 

In Economics there is a basic understanding that money is only a medium of exchange.  Money really doesn't anything by itself it is representative of other things.  Money represents productivity and it represents the value of what is produced to society.

Progressive income taxes cause people who make more money to pay a higher percent of that money in taxes.  This sounds good to many people... tax the rich for the benefit of the poor... it's very Robin Hood.  But what are the long run impacts of such policies?  Do they benefit the poor? Do they help or hurt the disparity of income distributions?

I believe that progressive income taxes may be making the income gap wider!  I think that over time the policy is widening the spread between high income earners and low income earners.  I know this sounds counter intuitive but give me time to explain.

People make decisions based on the cost and benefit of those decisions.  High income earners are generally people with a high degree of skill... Doctors, Lawyers, Business/finance gurus, Engineers, Scientists, inventors... generally people with lots of investment in their career.  These people often spend years in college living like monks and come out owing thousands or hundreds of thousands in student loans... WHY?

They do this because they think it will be worth it.  They want high incomes and they are willing to sacrifice years of their youth for a job that pays well when they get older.  Now... Why do these jobs pay so well?  They pay well because there is such a high cost to gain the skills necessary to do them... not anyone can go in and do open heart surgery.  Basic supply and demand keeps the wages for these kind of jobs high to pay these people back for their investment of time and money to gain the skills needed to perform these high value jobs for us.

Now what happens when we increase taxes on these folks?  Well one thing I have learned from my research into economics is this: Government tries very hard to control who pays taxes but they in reality they almost always fail!  Government can control who writes the check but not who pays.  ultimately who pays taxes is determined by many factors but mostly the elasticity of supply and demand.  As we look at high skill high wage jobs it is clear that these people will get their higher relative wages regardless of taxes because society needs them and they are hard to replace.

So we see that the costs of these services will continue to rise to cover these high taxes so that these individuals can recoup their costs and still afford to pay these high taxes.  These means me and you as consumers are the ones actually paying the taxes because those costs feed through to us.  But there is a bigger issue. Psychology

What happens when college students see that if they make good money they will be taxed back into poverty?  What if people considering going to medical school see that the marginal tax rates keep climbing and they may end up not making that much money relative to the sacrifice to get the necessary training?  Well at the margin, econ speak for people who are on the verge trying to decide, trying to determine if its worth it ... they are less likely to choose to go into those fields becuase of the risk that they won't make enough to cover their investment... they are giving up years of their youth and taking on huge debt... for what?  to make 10grand a year more than a highway worker?  Many won't take that risk... especially those on the margin..

 So what happens in the long run?  Well if people aren't sure if they can recoup their costs to get these high skill levels we don't get as many high skilled employees because the sight of high taxes scares them off.  So... Supply is decreased... there are not fewer brain surgeons than there would have been but demand hasn't fallen... so what happens?  Those surgeons now have pricing power.  They now raise their rates not only to make up for the excess taxes but because their is more demand for their services then they can provide and they have to choose who to help.  

What does this mean for us poor folks?  Well it means that over a few generations we end up with a supply and demand elasticity that forces all of the higher tax burden to shift through to us... we pay it in the form of higher medical and legal and tuition bills.  Just check inflation in those fields and see if it proves me right... So we pay the higher tax not the those making the big bucks... they make the big bucks because they are providing a service that is hard to provide!  Otherwise competition would force the price lower... but wait their is more... now because we scared off people from the field with the threat of higher taxes limiting profitability we pay an even higher premium because the supply has been cut and with it competition. 

So Progressive taxes feed through to consumers and are not paid by the high skill workers who write the check but even worse the consumer pays a premium because the bad tax policy has manipulated the marker to make it less efficient by scaring people away from the investment needed to enter the market.  Its terrible!  

If we tax everyone the same we remove the disincentives that alter behavior and we will have more people trying to do these jobs forcing the price down.  Its cheaper on everyone but it especially helps bring down the disparity in income over a few generations.

 
 

A wealthy man, ie: a man of high net worth has a greater need for defense than does a man of low net worth because he has more to lose and a greater likelihood of loosing it.  Therefore it is the wealthy man who should pay a higher tax for his part of the national defense, the legal system and the keeping of law and order.  Since the wealthy man has a high net worth he should pay for this through a type of property tax since it is this persons assets which are in need of defense.  By this logic a flat tax (everyone paying the same percent but different amounts) makes most sense. 

The profitable man, ie: the man who has a high income, profits from a very high productivity which historically is dependent, either directly or indirectly on infrastructure and a fair legal system and relatively free trade.  Therefore the man with a high income should pay a greater share of infrastructure spending, judicial spending and customs costs of government in the form of income tax.
(While I think taxing labor is obscene please bear with me for the point to follow).


It is the hard working man and his employer who stands to benefit from unemployment or disability should he lose his ability to work and therefore it should be from his labor or the employers profits that this insurance is purchased for him and it should be left to him the circumstances under which it should be paid.  This lends itself best to a privet system where by the employee is required to insure for these things to meet a minimum such as with auto insurance in most states but it should be to the employee the terms of these agreements. 

It is the lazy person who profits the most from social welfare programs and so using this logic it seems only fair that it is this non-productive person who should pay for these programs through a lower standard of living and if necessary hunger.  

Does any man escape the tax collector?  I say he should not each must pay equally for his own choices.  No power on earth or in heaven should break this most basic rule that for every action there is reaction and for every choice a consequence.  If you choose productivity and wealth your consequence is a tax to support the system and if it be laziness and unproductiveness then the tax is discomfort in this life.  Let no governments of men or angels upset this institution and take from the productive man the fruit of his labors that the unproductive may eat without labor for if everyman may eat off of the table of another without a cause then what point is there in setting your own table with pride?  

There is none for if my actions have no consequence the moral hazard is established and I will do that which most pleases me at the moment without regard for others or the future and will be as the grasshopper in the children’s tale rather than the ant. If I know and am aware of the impending winter and that there is no store from which I can partake I will make haste and prepare for the impending necessity and there will be enough for myself and those for whom I prepare but if there is no property right and if there is no right sacred that what I produce is mine it matters not how full my stores may be for there will be always more grasshoppers than the ants can feed and both will starve and freeze in but one winter and will not see another. 

 
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    Ludwig von Mises: 'Used to the conditions of a capitalistic environment, the average American takes it for granted that every year business makes something new and better accessible to him. Looking backward upon the years of his own life, he realizes that many implements that were totally unknown in the days of his youth and many others which at that time could be enjoyed only by a small minority are now standard equipment of almost every household. He is fully confident that this trend will prevail also in the future. He simply calls it the American way of life and does not give serious thought to the question of what made this continuous improvement in the supply of material goods possible.' - Economic Freedom and Interventionism
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