A follow up to Ruthi's post

Ruthi raised quite a few topics in her most recent post. I'm not going to add thoughts to all of them, but I will focus on a few subjects I felt were particularly key.

I'm sure we've all heard "you're an idealist" before. It's a classic example of a statement absent an argument. Simply saying that a point of view is idealistic is, of course, not enough. One must explain why this is the case. For that, one needs a theory. I'll return to this shortly.

Now, it's worth pointing out that Ruthi's fellow passenger seemed to be an idealist of sorts himself. These days in particular, we hear a very pressing call for more regulation, a desire that the government "do something." But governments can't just do something. They have to do something specific. And 95% of the time, that's when the conversation will get very fuzzy. It's taken as an article of faith by most Americans that the government can and should make things better. But press the issue a bit, and the conversation falls apart. What exactly should the government be doing? Why will this make it better? What will be the effects on incentives faced by other parties, in the short term and the long term? How much influence will special interests play in the decision making process? These questions are rarely asked, much less answered.

I find it somewhat disturbing that it is so commonly taken for granted that government intervention is equal to improvement. "Markets can fail," we are told. Indubitably. There is nothing easier to do than show how something involving human beings is imperfect. But governments can also fail. A perfect government could certainly perform more efficiently than the actual market. And a perfect market would perform better than the actual government. What's missing so often from the conversation is a comparison of actual verses actual.

Joseph Stiglitz had the following to say:

The fact that markets with imperfect information do not work perfectly provides a rationale for potential government actions. The older theory said that no government, no matter how well organized, could do better than markets. If that was true, then we had little need to inquire into the nature of government. The modern theory says that government might improve on matters, but to ascertain whether or not this is the case requires a closer examination of how governments actually behave, or might behave under various rules.

The opening sentence of that paragraph put me on red alert on my first reading. But by the last sentence, Stiglitz sounds much more reasonable. Unfortunately, I don't think he's ever lived up in his other writings to carry out an "examination of how governments actually behave."

A pattern commonly found among the political left is a tendency to assume the reason their plans don't work out well is because the wrong people are in charge. And there seems to be eternal optimism that if only the right leaders were at the helm, a plethora of problems could be solved. But disappointment often frustrates their desires. Stiglitz has had nothing but harsh words for the Obama administration. The prime movers of President Obama's economic policy are described by Stiglitz as "either in the pocket of the banks or they’re incompetent." He complains bitterly about the administration talking counterproductive measures, covering politically connected interests, and generally holding "a strategy trying to recreate that bubble...That’s not likely to provide a long-run solution. It’s a solution that says let’s kick the can down the road a little bit."

My only question for Stilitz and his fellow travelers is why they would expect anything else. Thomas Sowell constantly points out that politician's incentives don't go past the next election, so a strategy which only kicks the can down the road is exactly what one should expect. And the idea that those making policy would be in the pockets of the banks shouldn't surprise anyone. Milton Friedman said that "one of the reasons I am in favor of less government is because when you have more government, industrialists take it over, and the two form a coalition against the ordinary worker and the ordinary consumer." None of this should be a surprise to anyone familiar with Public Choice economics.

This is where I make my return to the need for theory. An old cliche about socialism is that "it's good in theory, but it doesn't work in practice." I think that this cliche misses a very important point. If an idea fails to work in practice, then there is no way it can be described as good in theory. Rather, the fact that it fails in practice shows that the theory itself is bad. Similarly, the ideas of Stiglitz and those of like mind fail to work in practice because they are based on a bad theory. Their theory tells us that, at least some of the time, government should be able to bring about substantial improvement. But in practice, the government always does more of the same, to their continuing and bitter disappointment. It never seems to register to them that, like the scorpion of fable, government does these things because this is it's nature. Why the failure of their ideas in practice never seem to give them doubt is a subject for another time.

All of this seems extremely tangential, but it brings me back to another point Ruthi raised. She asks, "Am I really an idealist because I think that entities such as the US government can change for the better? Have there not been such changes in the past to suggest this possibility? And even if I am an idealist, couldn't enough idealists working towards a similar goal achieve better results than are currently being achieved?"

I'll take these in reverse order.

Absolutely enough idealists working towards a similar goal can indeed change things for the better. The American Revolution is a good example of that. But, it also raises an uncomfortable realization. Out of the American Revolution, we had small government with limited power, and a straightforward Constitution without the creative interpretation we find these days. Plus, the Tenth Amendment seemed to still exist. But even with that start, we have been slowly moving away from that, in bits and pieces, with the occasional Great Leap Forward. This is an inherent tendency of government; it can shake off its Constitutional shackles in ways that would confound Houdini. We can push the tide back, but lovers of freedom, I fear, are doomed to recreate the life of Sisyphus, forever pushing the boulder up the mountain.

A brief flight into the mind of an American

My name is Ruthi, and I hail from the great state of Minnesota, USA. For the last three years I have been studying International Banking and Finance as well as Political Science at Franklin College in Lugano, Switzerland. The following is just a chip from a whole cookie of ideas on liberty.

It fascinates me to no end to see how quickly people come to the defense of the U.S. government in solving their problems; yet are also inclined to believe, when shown that their thoughts on government may be void of any logical structure, that no change can happen for the better in our political system.

I was recently on a plane, heading from Greensboro to Detroit, when I met a man who had immigrated to the United States from Iran, and was now finishing his last two years of training to become a pediatric neurologist. Normally I do not talk to people on planes, but this particular gentleman seemed so eager to talk I figured he must have something interesting to say.

After many a pleasantry regarding what we each do and why, I decided to make the conversation something of an educational experience. I asked him his thoughts on the new health care bill, and more specifically its effect on doctors. His view on the matter was that, on his end, there was very little that would change, and that the large pharmaceutical companies and insurance companies were still going to be the ones in power over the market. He was also of the impression that doctors really have no say or influence on the subject; so I asked him about his thoughts on the AMA- whether he thought it was helpful for doctors or not- he seem to dislike the organization, although refusing to say it outright. The real problem for doctors was a legal one. "Tort reform" he said was the major problem solver.

I asked him if he thought any of the problems with healthcare on the whole could be solved and fixed. He said no. Impossible. It's too much of a mess, nothing can be done.

Short break for reading, then the beverage cart arrived.

"How do you feel about the whole BP disaster?" he asked. Over the last month this question seems to be the new source of heated small-talk debate. Every person who has asked me this question seems to believe that it is blasphemous to say anything other than a general agreeing statement about the evil nature of BP (and oil companies in general for that matter) and the government's need to do something about the problem. This conversation was no exception. My reply was something to the effect of 'BP is taking responsibility for the situation to the extent that they have the incentive to do so, and their incentive is stronger than any other entity who has been suggested as a substitute.' Needless to say, the support of BP and its actions does not go over well with the majority of people who bring the subject into a conversation, and this instance was no exception.

My new acquaintance followed the school of thought favorable to mass public media- that the government should not only intervene in the situation, but that it is Obama's duty to both solve this problem today, and create the regulations to keep it from happening again tomorrow.

On this first point he held the belief that the situation should be taken over by the coastguard and the navy immediately- they could do a much better job at solving the problem, and should therefore be appointed to the task- or, if nothing else, the cost guard and the navy should serve as onlookers and regulators of BP's progress on cleanup. My difficulty in understanding this assertion has to do with the knowledge-base of the coastguard and navy, and so I inquired about the expertise of the aforementioned entities in off-shore drilling and mass oil cleanup. Unfortunately, but not surprisingly, I received no answer.*

I tend to believe that BP has the largest vested interest in solving the problem of oil cleanup and prevention since it is in fact BP that will eventually have to pay the costs of repercussions- extending beyond general decline in sales and overall competitiveness to the realms of compensation for the losses of individuals and any lawsuits that may ensue.** As the entity with the greatest vested interest in solving the overall problem it can reasonably be assumed that BP has the greatest incentives for creating a solution as well. Would it not also be realistic to presume that BP also has the best access to (if they are not already present) specialists in this particular area of knowledge? Given their incentives for solving the problem it follows that they are the most likely candidate for hiring the best specialists at the most competitive price. In contrast, the American tax payer, who most likely has only a small fraction of vested interest in solving the problem, will not be willing to put forth the resources required for paying the highest price to the best specialists. Why is this important? Well, the specialists will most likely go to the highest bidder, and if they can utilize their knowledge and abilities elsewhere at a higher wage they will do so. This is one of the reasons (amongst many) that the cost guard and the navy will not have the necessary means to solve the gulf problem. This assertion was taken with a fair amount of acceptance, although some skepticism remained within my seating partner.

This brought the conversation to the second point asserted by my 'single-serving friend,' the point that Obama really needs to insert the proper regulations to make another one of these catastrophes impossible. This may come as a shock to you, the reader, but I thought this proposal was also ridiculous. My first question concerned what sort of regulation should be put in place. The reply to which was a suggestion that no particular regulations should be imposed, but rather a committee of sorts should be created to monitor any offshore drilling, and create regulations as necessary. These people must be held accountable for their actions.

As a reply, I inquired as to the success of similar organizations that are currently serving the purpose he advocates. For instance, I asked him, how well does the FDA perform its role of ensuring overall public health? The first retort was that it was the best feasible system we (the United States) could employ, but after a few minutes of chatting on this subject he conceded that the costs associated with the FDA (which he suggested)- such as restricting products that would ultimately have a net benefit to the public, taking an extraordinarily long time to give the go-ahead on a drug which ultimately results in hindering the prevention of a death, and the taxes to pay for the whole system- actually outweigh the benefits. He also granted that there are indeed private organizations which do a much better job of ensuring what the FDA was originally intended for. Given the comparison, he agreed that maybe having some sort of committee or governmental organization was not the best solution.

"But you are an idealist." 'Things like this sound pretty in theory, but they could never be achieved in the real world.' "You're young," he said "full of optimism that you can change the world and its problems, give it time and experience, you'll see."

What baffles me is the immediate transition from 'the government can and must solve my problems,' to 'the system is entrenched; nothing can be done.' Am I really an idealist because I think that entities such as the US government can change for the better? Have there not been such changes in the past to suggest this possibility? And even if I am an idealist, couldn't enough idealists working towards a similar goal achieve better results than are currently being achieved?

Flight lands; "If you're ever in Detroit, give me a ring."

*It should be noted of course that my acquaintance was not an expert on the subject, I mentioned previously that he was pediatric neurologist, and I in no way mean to portray him as such. Rather, I view him as a demonstrative voice of the masses to show what rhetoric is being used by the various medias, and how it is being re-asserted by the average citizen.

**This assertion only holds true under the assumption that BP's stakeholders believe that the company can survive the disaster, lest they would actually have a disincentive to spend more resources on solving the problem. However this assumption is a reasonable one due to the fact that if investors believed that BP's future cash flows were zero (meaning BP had gone bankrupt) they would in fact value the bonds and stocks as such.

Stuff I hate...

Ok so I guess I'll be the first person to post on this bad boy. hmmmmm what to write about? ooo I'll talk about all the things I hate because it's fun to bitch about stuff.

I hate people who say "I feel that..." when they're talking about what they think. Don't be retarded. If you're talking about your feelings, say "I feel like..." When you're talking about what you think, say "I think that..." Don't be an idiot.

I hate when someone is asked to give a comparison about two people (like giving a ruling on who won a debate) and they start off by saying something like, "I just wanna say that you both did so well." Dude, forget the high school cheerleader crap; you're gonna ripping one of them. Be straight up with them and just be honest. And stop being a pussy by hiding behind some bullshit phrase. If you really think that one person did better than the other, there's no reason to say that "they both did so well." No they didn't! If they really both did "so well", then they'd be equal and you wouldn't be able to say which one was better. Make a decision without turning into a stinky vagina.

I hate people who refuse to concede a point in an argument even when they know they're wrong. Shut up, swallow your pride, and just say these words..."Ya know what? you're right. I'll give you that one."

I hate it when people lose an argument, realize it, and then resort to petty name calling and ad hominem attacks. I finished kindergarten when I was 6, I'm shocked that you didn't finish that one yet.

I hate liberals (politically left people). Usually because they're guilty of the above 4 faux pas. (is the plural form of faux pas written as "fauxes pas" or is it just "faux pas"? someone who speaks french help me out here.)

I don't have much to say in terms of libertarian thoughts or ideals really. Although I guess I can mention the fact that I have the freedom to say what I hate. There ya go. The aforementioned random crap is now relevant to the overall intention of this blog. BOOM!