Archive for September, 2011

Column on Good Bye to Reason?

Good Bye Reason?

Tibor R. Machan

“Every one of us has our perceptions filtered by the thousands of stories and assumptions and rituals that constitute our culture. Every one of us has held beliefs that seemed self-evidently accurate but were actually contingent elements of the time and place that produced us. This is true not just of the people reading this article, but of every person, in every era, who has been capable of perceiving anything at all. You can stretch those perceptions, expose yourself to new worldviews, learn new things, but you’ll always be embedded in a cultural matrix….”

This passage comes from the managing editor of Reason Magazine, which I helped launch back in 1970 and which set out to be a corrective to our society’s widespread embrace of various versions of subjectivism and relativism. The passage exemplifies just such a viewpoint, whereby no one is capable of objectivity and everyone is caught in some set of preconceptions.

The aspiration at Reason had been to further the cause of using our reasoning powers so as to avoid being caught in the traps of prejudice, hasty generalization, bias, preconception, and the like, all of them foes of getting it right about the world. Indeed, some had argued even back then that prejudice is inevitable, we are all afflicted by it no matter how hard we try to rid ourselves of it. Racists were particularly fond of this line of thinking since it would have served them well had it been sound. Who can help but be prejudiced? No one, just as the passage above indicates.

Of course, there is that famous problem with such an outlook of being hoisted on its own petard. After all, if we are all “embedded in a cultural matrix” no matter how carefully we consider evidence, argument, facts, etc., then the passage itself would be no more than a declaration of the author’s own prejudice about, well, prejudice!

Of course, there is a great deal of prejudicial thinking afoot everywhere since human beings aren’t automatically careful in how they see the world. Many do permit their tastes, preferences, biases, wishes, and the like to dictate how they will understand the world, including–and some would argue, especially–themselves. That is supposedly one reason for getting a decent education, studying logic and scientific methods, and getting a clear head before undertaking difficult, challenging tasks. That is why those who care about the outcome of their investigations try hard to overcome powerful emotions that might intrude, including their hopes and agonies.

No one in his right mind can claim that it is easy to be objective, to overcome all the likely obstacles to thinking clearly. All those devices in the sciences, natural or social, by which one tries to secure a reliable, dependable picture of the world, are designed to stave off the evident enough threat of tainted judgments. And not all of us succeed, that is for sure.

However, some do, which is fortunate for us all since otherwise one couldn’t have any confidence in any of the work done in the fields that attempt to understand the world. The claim that it is all hopeless is, of course, an ancient one. It is advanced at various levels of sophistication. Perhaps the most impressive skeptical view comes to us from the 18th Century German philosopher, Immanuel Kant who didn’t so much hold that we are all biased, all the time, but that whether we are or are not isn’t something we can ascertain. We might be right but we will never be able to tell since in order to tell, we would need to overcome the kind of obstacles listed in the paragraph from Reason Magazine. And that is impossible.

Kant was mistaken, however, mainly because he held the odd view that the human mind instead of being an instrument for coming to know things is, in fact, a source of interference. That is like saying that the spoon we use to eat our soup is an obstacle to proper eating, not a means to it. Or that our eyes are not organs that enable us to see but ones that stand in the way of pure seeing.

The discussion will, no doubt, go on as long as there are people around to think of ways to make the case pro or con. However, I am sad that one effort to put in a solid, unyielding defense of our capacity to think objectively, namely Reason Magazine, now seems to be managed by someone who finds the effort futile.

Column on Infra-Structure Stimuli

Infra-structure Stimuli

Tibor R. Machan

One of my colleagues, who is in substantial agreement that the free market is best, argues that if one is going to have a stimulus–and given how politicians always need to do something, whatever it is, this is very likely in the face of crises such as the current one–it might as well be directed to improving (“investing” in) the country’s infra structure. If such stimulus were to be handed to the citizenry randomly, leaving it to their discretion where the system will be stimulated, there is too much of a risk that the more important and stable productive factors will not be what’s going to be given support. People may just take the money and blow it in Vegas or on something trivial and short lived.

Now it is never really fruitful, as I see it, to argue about what kind of investment is best. After all, wherever productivity is in force, people will be earning a buck or two and thus will spend these funds on various projects that need to be produced, i.e., by which economic activity and employment will be generated. But there is a prima facie plausibility to the claim that investing in largely permanent improvements of a country, such as its infra-structure, is better than risking the stimulation on productivity that creates temporary features such as entertainment or sports.

Yet, as already suggested above, since no one can tell what those who obtain resources from infra-structure stimuli will spend them on, this appearance is misleading. Moreover, why would investing in family entertainment or vacations or even a trip to the Vegas tables amount to frivolous spending? Those who earn their income in these lines of work may very well spend what they earn very productively, even more productively than members of road crews.

Furthermore, all that infra-structure investment can go mighty wrong–when old style roads and rails are refurbished only to be made obsolete by yet unforeseen future innovation. Who knows for sure that renovating the roads with stimulus funds according to current technological possibilities will be of benefit once something else takes the place of the roads or when later on much better ways of improving them is discovered?

There is no substitute for the planning done in the market place or at the local level where those doing the planing have at least a reasonable chance of knowing what is likely to be needed and when. The saying “all politics is local” should be supplemented with “all economics is local.” By that insight the best thing to do is not to extort funds from citizens and move them through the bureaucracy–where much of those funds is lost–but to leave them with the citizenry who have a reasonably good idea what needs to be done with it. And a hug side benefit of this is that those citizens have a better grasp on budgetary constraints than do politicians and bureaucrats who routinely forget about the source of the funds they spend and are subject to the dynamics of public choice, self-dealing and similar malfeasance that afflicts the public sector’s administrators.

For my money trying to figure out what is the best way to spend stimulus funds is akin to trying to figure out how best to spend loot gotten in a bank heist. There is simply no way to calculate such a thing. Stolen or extorted funds cannot be correctly, properly or rationally allocated. Recall, also, that when major infra-structure projects, such as highway systems or dams are built, not long after it priorities can change, such as when environmental concerns had develop and these huge projects turned out to become threats to endangered species or the wilds that some want desperately to preserve. But once the huge projects are there, it is very tough to change course–the damage may well have been done forever.

So appearances to the contrary notwithstanding, the idea of these infra-structure stimuli turns out to be flawed, even apart from the issue of how dare these people meddle in our lives all the time, taking our resources for purposes we haven’t consented to.

Column on Liberty versus Stimulus

Liberty versus Stimulus

Tibor R. Machan

Despite all the bad blood and heated rhetoric–name calling, besmirching, hyperbole and other polemics–involved in our current political-economic controversies, there really is a substantive point of considerable difference at issue. Put bluntly, the Obama team is convinced that unless people get a push from the state, or some kind of prompters, they will not move; whereas many in the Tea Party and their allies believe that people will move on their own once they are free to do so.

Free market champions tend, in the main, to believe that what is needed for economic growth–including the ensuing surge in productivity, sales, investments and employment–is for the government to stop butting into people’s economic lives. Once that happens, the bulk of libertarians and free marketeers think, there will be plenty of action, generated by the people who will then be free to exercise their initiative. Freedom of enterprise is the main issue for these folks. They aren’t mean, they do not lack compassion, they just have greater confidence in human beings picking themselves up by their own bootstraps then in others beating them into action, stimulating them to move out, etc. As to those who need help, this too is best left to private initiative than to state action which is fraught with corruption.

In the most general way the Keynesians who are advising and cheering on President Obama consider this free enterprise doctrine primitive, something for which the philosophical and scientific basis has been thoroughly discredited. The grandfather of the American system, John Locke, often spoke as if people did have free will–basically they are all free and independent, he held. Similarly Adam Smith believed that a regime of liberty will unleash the kind of energy that gets people to seek to prosper–that is the gist of the invisible hand idea. Governments may need to help with keeping the peace since there will always be some miscreants who want to cheat their way to prosperity on the backs of their fellows but in the main those are exceptions, The bulk of the population in a society can get on with the job of earning a living, of creativity and productivity, without government meddling and prodding and waiving around all sorts of artificial inducements for people to get to work.

That has been, roughly, the outlook of modern free market political economists, although that’s not to say that all of its champions have been in full agreement about the basic ideas. Free will, for example, isn’t what all champions of economic and political liberty accept but even those who do not hold to the idea that there is some kind of inner drive–some call it self-interest, some the profit motive, some the instinct for survival–that will be unleashed in a free system.

In contrast, the sort of view of human nature found in Keynes and among his followers comes to the idea that to get moving from their natural and preferred state of rest, people have to be pushed or stimulated. Only if policies that exhibit these features are implemented will there be economic activity. (Even the free market champions embrace some of this when they claim, as a lot of them do, that what gets people to work is “demand.” The famous supply and demand idea suggests this, although there are free marketeers who are what used to be called supply-siders, which is to say that they believe the way the economy gets going is with people thinking up stuff to produce and taking it to market which will then generate purchases, etc. So the issue isn’t neatly describable.)

So, the crux of the debate is between those who expect economic growth to come from personal initiative that is usually thwarted by governments and those who believe some super agency needs to spur us all into action–via thousands of regulations and the planning of the economy in ways the state agents think important but the economic actors do not have in mind.

Thus the stimulus that Mr. Obama & Co. advocate comes with state generated public works that are supposed to beef up the infrastructure, create demand for what they think would be important to produce, etc. The free market people, in contrast, leave the economic growth to the multitude of interactions among free economic agents who aren’t told to do this or that, to build roads or bridges or paint or write or whatever (which is what planners usually count on for getting economic activity going). No, the free market champions leave it to the people and their creative and productive initiative to generate economic activity, with results that aren’t predictable and that cannot be planned out by politicians and bureaucrats.

So, the bottom line is that the big dispute is indeed a substantive one, between those who have confidence in freedom and those who trust manipulation–out right force or substantial nudging.

Couple of fine lines from George Orwell:

“The real division is not between conservatives and revolutionaries, but between authoritarians and libertarians.” (“A Life in Letters,” quoted in The New York Review of Books, 10/29/11, p. 101)

“What sickens me about left-wing people, especially the intellectuals, is their utter ignorance of the way things actually happen.” A Life in Letters

Column on SS: Ponzi Scheme Isn’t the Problem

SS: Ponzi Scheme Isn’t the Problem

Tibor R. Machan

Everyone by now knows what a Ponzi Scheme amounts to. We all became familiar with it when Bernie Madoff was caught using it to amass a fortune at the expense of clients who were unaware that his plan to put away money for them amounted to such a scheme.

The issue in the case of Madoff wasn’t actually so much the scheme but the lack of full disclosure about it. Ponzi schemes are legion around the world and people knowingly take part in them. Most insurance companies use them, collecting funds from new clients and paying old ones in part from the new cash. Retirement systems make use of the scheme as well. Those who have paid in are often getting the funds the new clients pay now. So with the social security system.

But the social security system would be no problem if it were voluntary and those who are part of it knew from the start the risks involved. Fractional reserve banking is like that too: when people deposit their money in banks the money isn’t all left in vaults until they withdraw it but much of it is used to give loans and make investments. And clients of the bank know this but figure the bankers are skilled at what they are doing and will not use the funds recklessly, irresponsibly. But they do not expect all costumers to suddenly withdraw their funds; the banks could handle that. But since it is common knowledge, nothing is amiss in such arrangements.

So that’s not what’s wrong with the social security system. The problem is that once you work, you are forced to be part of them system (with only some exceptions, such as when the state you work in has its own similar scheme in play). This, just like the income tax, is a form of extortion. Just like what happens when organized criminals force merchants to cough up money for them or they will burn down the business! Sending working people to jail or imposing immense fines on them unless they pay their taxes, social security or otherwise, is just like that. One has no choice if one wants to make a living: “Pay the government or have no job!”

When Republican candidate Rick Perry called the social security system a Ponzi scheme, a bunch of his critics, even fellow Republicans, expressed shock. Their ire, however, is misplaced. But the Republicans have no more leverage with pointing out that social security is mandatory than would the Democrats. Republicans and Democrats–indeed all political parties other than the Libertarians–favor extorting funds from the citizenry, only for different purposes. So what they argue about isn’t really all that important. Ponzi schemes are everywhere. What is much more problematic is when everywhere some people force others to carry on in certain ways, take part in various schemes, whether they chose to or not.

If there is a feature of the modern world that is basically different from ancient systems is that it is less enamored by outright force–slavery, serfdom, torture, etc. Such things are these days more widely seen as uncivilized, barbaric. And if a political system or public policy embodies coercive force that some use on others, it is now more suspect than it used to be in olden days. Not everywhere, of course, and not even in so called Western democracies. After all, democracies can contain a great deal of coercion and do everywhere you look. Still, the coercion in democracies is less brutal than in systems with top down dictatorial rulers such as the ones in the Middle East.

What needs to be discussed about social security in not the Ponzi scheme element but that is forcibly imposed on all working people in the country, never mind whether they want it or not. It would be quite enlightening if this aspect of social security were debated. That would bring up a central feature of most governments, namely, their coercive nature. That is what the American Founders and Framers were concerned about and while they didn’t reject all coercive policies –e.g., slavery, taxation–they were very hesitant about them.