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.
 
According to a report I saw today if we increased to a 100% tax on the wealthy we couldn't cut through next year’s deficit.  We would have to tax at 100% everyone in the middleclass and above to cover the budget shortfall coming next year due to the new administrations spending projections.  This is ridiculous.  We can't sustain under the weight of spending that level of GDP.  That report suggested that everyone making $75k or above in annual income would have to pay in every cent to meet this new level of spending... this is outrageous.  We are passing along a debt to future generations which is criminal. 

 
The Cash for Clunkers Program struck me as very familiar when I first heard about it.  After a brief consideration I realized why it was so familiar and that reason was because I had heard a similar scenario in economics class a while back.  What was this similar scenario?  Well for those of you familiar with the “broken window fallacy” you may be keeping up with me by now but for those of you not familiar let me briefly hit the high points.

In essence the broken window theory states that assuming a very Keynesian type idea that it is possible to help the economy by forcing consumption of goods to artificially raise demand.  The idea continues the ideology very popular in government and takes it to a logical end.  The logical end is that since breaking a window creates jobs at the element level, the manufacture level and the installation level that a broken window is a benefit to the economy.  We go on to say that it would be a “good” idea to break all of the windows in a town during a downturn because demand would be stimulated and jobs created and therefore the economy would be strengthened.  Obviously, waste is never beneficial no matter how many jobs it might create.

So how does this remind me of the Broken Window Fallacy?  Let us walk through it.  The government is purchasing “clunkers” which are older but working vehicles and scrapping them.  The program destroys the vehicles and ensures that they are not used.  This is identical to the broken window theory.  Capitol is being destroyed and the tax payer is paying to replace the existing capitol.  How is it possible that the destruction of capitol can increase demand and therefore drive supply to strengthen the economy?  It can’t! The Theory of Economic Growth indicates that since economic growth is invariably tied to capital accumulation in fact these programs hurt the long run economic growth in the system.   I say that because due to the marginal propensity to save and the marginal propensity to consume only a portion of the “new” income created will result in savings and thus capital accumulation therefore paying  to destroy and replace existing capitol leads to a weaker capitol stock position after the dust settles leading to a slower long term economic growth picture then before such a program so why would the administration do it? 

I don’t know but if I had to speculate I would say that the auto industry and the support industries such as the steel industry and mining industry are union heavy industry and since the current congress and administration are democrats and are well to support union interest in exchange for union support my speculation is that this is a major encouragement to overlook the obvious bad economics.

6/10 of the top selling cars under this program are foreign made cars… that’s a huge leakage for a program of this sort not to mention the leakage from foreign components to domestic cars!  This is ludicrous waste and must be stopped.  This is simply unsustainable waste.
 

According to Rasmussen, "So much for the ongoing secrecy of the nation’s independent central banking system. A new Rasmussen Reports national telephone survey finds that 75% of Americans favor auditing the Federal Reserve and making the results available to the public.Just nine percent (9%) of adults think that’s a bad idea and oppose it. Fifteen percent (15%) aren’t sure.Over half the members of the House now support a bill giving the Government Accounting office, Congress’ investigative agency, the authorization to audit the books of the Federal Reserve Board."Read the full Story hereCan you believe that congress... the representative body in government elected directly by the people of the several states is stonewalling this audit when 75% of the people think it should occur.  9% say it shouldn't and our representatives are stone walling?  

 

The FED controls the banking system which just came a hair's width from crashing the strongest economy in the world and they want to keep the decisions of an independent group of bankers who created the mess off the books!?  They want to keep these decisions behind locked doors even after the crises they have created?!  This is outrageous behavior that must not be tolerated.  I am flabbergasted by the audacity of these congressman and senators who are standing in the way of such clearly reasonable and necessary transparency!  Don't forget to hound your "representatives" don't let them get away with this!  Hold them accountable! 

 
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.

7/20/2009

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 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.

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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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