Short-sighted state governments rack up $1 Trillion in liabilities

Short-sighted state governments rack up $1 Trillion in liabilities


As if the national debt and federal entitlement liabilities weren’t enough. Now we get word that state governments have racked up more than a trillion dollars in unfunded healthcare benefits for state government workers. That’s trillion – with a ‘T’.

In a report released earlier this month, the American Legislative Exchange Council (ALEC) revealed the total, adding “That’s an average of $3,107 of unfunded OPEB liabilities for every resident of the United States.” 

The financial liabilities, labeled “Other post-employment benefits,” or OPEB for short, calculate the present value of health insurance coverage benefits promised to state government employees when they retire.

Virtually every state government promises fully- or partially- paid health insurance coverage to their employees in retirement.  

More than 40 percent of the benefit plans, according to the ALEC report, operate on a pay-as-you-go basis, meaning there has been no money set aside. And the states that do set aside some funds to help pay for the benefits typically don’t set aside much. Indeed, the ALEC report notes “The average funding ratio for state OPEB plans is 9.4%.”

States with the highest OPEB liabilities per capita are Alaska at $18,500 followed by New Jersey at $14,500 and Hawaii at $12,200.

The liability totals disclosed in the ALEC report differ from the “official” figures produced by most state governments, however. This is because ALEC uses a more realistic discount rate to calculate the present value of the liabilities. State governments are notorious for using impractical discount rates in order to make liabilities look less daunting.

This latest trillion-dollar revelation of yet more irresponsible government promises turning into taxpayer-crushing liabilities illustrates a key point made by Hans-Hermann Hoppe in his 2001 book “Democracy: The God That Failed.”

Because a politician’s top priority is getting re-elected, they have a high time preference. That is, they place a high priority on spending now with little regard for future consequences, because several years down the road they will no longer be in office and the mounting debt and liabilities will become someone else’s problem.

Referring to elected officials in a democracy as “temporary caretakers” of government assets and finances, Hoppe wrote that such caretakers are “not held liable for debts incurred during his tenure of office. Rather, his debts are considered ‘public,’ to be repaid by future (equally nonreliable) governments.”

There is no incentive for elected politicians in a democracy to concern themselves with the long-term value of the government’s financial condition. “A democratic ruler can use the government apparatus to his personal advantage, but he does not own it,” wrote Hoppe. Because there is no ownership, politicians are incentivized to use the resources temporarily at their disposal for their own personal gain, which often results in long-term financial pain.

Which brings us back to the OPEB liabilities faced by state governments. For decades, state politicians have promised generous retirement benefits to state employees to curry favor (and donations) from state employees, and to access the deep pockets of state government unions.

Such retiree health benefits for state government employees are far more generous than the private sector, where owners need to be more conscious of long-term financial implications.

According to this recently-released report by the Manhattan Institute, the growing OPEB liabilities have “also revealed the extent of the gulf between the public and the private sectors. Larger private-sector firms began to offer retiree health-care coverage in the 1940s, but new accounting rules issued in the 1980s drove most firms to halt the practice.”

The report continues, “The portion of large and midsize firms offering retiree health benefits fell from 45% in 1988 to 24% in 2017. Smaller companies were less likely to offer such benefits. Today, only 15% of private-sector workers have access to employer-provided retiree health benefits. In contrast, 70% of state and local workers are eligible for employer-provided retiree health benefits.”

Naturally, politicians who are merely temporary caretakers of money taken from citizens by force will be quite willing to exchange generous benefits for better odds of winning re-election. 

Leftists accuse capitalists of being greedy and self-interested. But the latest revelation of another trillion-dollar government liability underscores the greed and self-interest of the political class. Short-sighted desire to win the next election and maintain power is the driving force behind mounting government debt and liabilities. Not some altruistic desire to take care of others.

A free society based on private property would not only be morally preferable but would enjoy a far better preservation and accumulation of wealth. Private ownership incentivizes the increase of asset values, while democratic government incentivizes elected officials to use up resources in the short-term for personal gain at the expense of impoverishing future generations through crushing debt.  

Bradley Thomas is creator of the website Erasethestate.com and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.

Follow him on twitter: Bradley Thomas @erasestate

Is Anarcho-Capitalism A Contradiction?       

Is Anarcho-Capitalism A Contradiction?       

Is it possible for a stateless society to adequately protect property rights?

Any Rothbardian anarcho-capitalist has no doubt been confronted with the assertion that a state is necessary to enforce the property rights so vital to a market-based, capitalist system. 

Is this true?

Defining the State 

Before proceeding any further, its imperative to establish what we mean when describing “the state.”

In a brilliant 1974 lecture entitled “Society Without a State,” presented online here, Murray Rothbard laid out a concise definition:

“Let me say from the beginning that I define the state as that institution which possesses one or both (almost always both) of the following properties: (1) it acquires its income by the physical coercion known as “taxation”; and (2) it asserts and usually obtains a coerced monopoly of the provision of defense service (police and courts) over a given territorial area.”

Rothbard further refined his description in describing the state as an organization, that by its use of physical coercion, “has arrogated to itself a compulsory monopoly of defense services over its territorial jurisdiction.”

The State Is Coercion

With the definition of a state established, what is the proper role of the state? For those minarchists who believe a state is necessary, they insist the proper role of the state is to protect the rights of individuals. Namely, to protect people from physical harm or theft.

Such protection however, requires police, investigators, courts, prisons and judges. How are these services to be funded? Via taxation, they’ll concede. 

However, the aggression used by the state to collect taxes violates the very theft the state is supposedly established to protect against. Intellectual consistency leads us to conclude that the state cannot simultaneously protect us from theft while committing it. 

Even those who believe in free, competitive markets as being the most moral and efficient method of production and exchange for all other goods and services, will nevertheless maintain that the state must provide a system of law enforcement and courts to carry out the protection of rights – including property rights.

In his essay, Rothbard begs to differ. “But it is certainly conceptually possible for such services to be supplied by private, non-state institutions, and indeed such services have historically been supplied by other organizations than the state.”

He continues, “My contention is that all of these admittedly necessary services of protection can be satisfactorily and efficiently supplied by private persons and institutions on the free market.”

To be clear, Rothbard is not naïve in his thinking, acknowledging that “mankind is a mixture of good and evil.” There is no utopian vision of a stateless society in which bad actors and aggression magically become extinct. He persuasively makes the case however, that voluntary arrangements for security and criminal justice would not only be fairer and more efficient, but tend to minimizeboth the opportunity and the moral legitimacy of the evil and the criminal” with the removal of the state’s monopoly on violence and provision of defense services.

Markets in Security

Beginning with security, we already see a robust system of private security being enlisted by businesses and individuals to protect their property, in no small part because the current system of government policing is not up to the task. 

We can look to the city of Detroit, in which last year it was reported the city has seen massive increases in private security companies providing protection because local citizens and businesses have lost faith in the government to keep their persons and property safe.

For those who can’t afford to pay directly for security, Rothbard wrote, widespread and affordable protection services could “be supplied by insurance companies who will provide crime insurance to their clients.”

“In that case,” he continued, “insurance companies will pay off the victims of crime or the breaking of contracts or arbitration awards and then pursue the aggressors in court to recoup their losses. There is a natural market connection between insurance companies and defense service, since they need pay out less benefits in proportion as they are able to keep down the rate of crime.”

As Rothbard demonstrated, understanding how society could transition to exclusively private security should not be that intellectually challenging. 

Why Not Markets in Criminal Justice?

This leads us, however, to the somewhat more difficult case of how to replace the government court system. In his essay, Rothbard asserts that “any society, be it statist or anarchist, has to have some way of resolving disputes that will gain a majority consensus in society.”

When protection agencies catch a criminal who has committed, or is in the act of committing, aggression against another’s person or property, there must a system in which victims can recoup their losses and/or ensure the perpetrator receives appropriate punishment. For this, Rothbard argued, a system of private, voluntary arbitration courts will suffice. 

Indeed, Rothbard cites a 1970 book written by the Harvard and University of Virginia educated legal scholar William C. Wooldridge entitled “Uncle Sam, the Monopoly Man.”  Even in 1970, Wooldridge wrote that “Arbitration has grown to proportions that make the courts a secondary recourse in many areas and completely superfluous in others.”

Again, just as in security, the market has been providing arbitration services to supplement the government court system’s shortcomings. 

Critics may object Rothbard wrote, “that arbitration only works successfully because the (government) courts enforce the award of the arbitrator.” 

“Wooldridge points out however, that arbitration was unenforceable in the American courts before 1920, but that this did not prevent voluntary arbitration from being successful and expanding in the United States and in England,” he continued.

Moreover, as Rothbard highlighted, Wooldridge pointed out “the successful operations of merchant courts since the Middle Ages, those courts which successfully developed the entire body of the law merchant. None of those courts possessed the power of enforcement.”

“In other words, private arbitration is, and has been for generations, successfully settling disputes,” Rothbard concluded.

The market process, Rothbard added, would ensure the most trustworthy arbitrators would rise to the top. “As in other processes of the market, the arbitrators with the best record in settling disputes will come to gain an increasing amount of business, and those with poor records will no longer enjoy clients and will have to shift to another line of endeavor,” he wrote.  

But how would the system of courts in a free society be funded?

“Courts might either charge fees for their services, with the losers of cases obliged to pay court costs, or else they may subsist on monthly or yearly premiums by their clients, who may be either individuals or the police or insurance agencies,” Rothbard argued. Entrepreneurial ingenuity and technological advancements would also produce funding mechanisms yet to be imagined. 

Conclusion

Rothbard’s essay serves as an outstanding introduction to the provision of security, law and courts in a stateless society. The enforcement of private property rights, contrary to anarcho-capitalist skeptics and critics, can indeed be capably handled through voluntary market exchanges. No corrupting and coercive influence of the government is needed.

Bradley Thomas is creator of the website Erasethestate.com and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.

Follow him on twitter: Bradley Thomas @erasestate

What Robert Reich is hiding from millennials

What Robert Reich is hiding from millennials

Former Labor Secretary Robert Reich’s latest video presentation attempts to explain to millennials why they are so broke. Disappointingly, millennials will be left wanting, as Reich never delves deeper than surface-level observations and conceals some inconvenient facts that may lead viewers to a very different conclusion than Reich would like them to reach.

Produced by his organization called “Inequality Media” and published at Salon.com, Reich’s latest commentary is entitled “Four reasons why millennials don’t have any money.”

Declaring that millennials are “working hard, starting families and trying to build wealth,” Reich laments “(B)ut as a generation, they’re way behind” older generations.

Millennials, Reich continues, are “deeper in debt, only half as likely to own a home, and more likely to live in poverty than their parents.

“If we want to address their problems, we need to understand those problems,” he concludes.

Closer inspection of his four main points, however, reveals that Reich himself either doesn’t understand the source of these problems, or is intentionally obscuring them.

“Number one: Stagnant wages”

With no explanation offered, Reich begins by informing viewers that “Median wages grew by an average of 0.3% per year between 2007 and 2017, including the Great Recession – just as millennials were beginning their careers. Before that, between the mid-1980s and mid-1990s, wages grew at three times that rate.”

No doubt, entering the workforce during the Great Recession was a very perilous task. Such a daunting labor market put many a millennial behind schedule in terms of financial advancement.

But the economy has been in recovery mode for about a decade now, so why the continued slow income growth?

A significant factor can be found right in the theme Reich is examining: age. As noted in this 2018 MarketWatch article: “But it’s worth noting that the aging of America’s workforce is having a downward impact on pay.

The median weekly earnings of 55-to-64 year old’s is 28% higher than that of 25-to-34 year old’s. That’s logical — pay improves as a worker’s career advances.”

With more experienced, higher-paid workers aging out of the workforce, median wages are bound to be dragged down. “The San Francisco Fed studied this issue in depth in March 2016,” the MarketWatch article continued. The study found that as baby boomers retire “the fraction of exits occurring from above the median wage has gotten larger,” which naturally drags down the median. 

Moreover, as the economy recovered, more low-wage workers that lost their jobs during the recession began to re-enter the workforce, applying more downward pressure on median wages.

“Second: As wages have stagnated, the costs of essentials like housing and education have been going through the roof”

Here, Reich points out how millennials own fewer homes, and further points out that, adjusted for inflation, “the average college education in 2018 cost nearly three times what it did in 1978.”

Like his first point, Reich offers no potential explanations for this phenomenon. 

In higher education, as with healthcare, a system increasingly reliant on third-party payers for the expenses has been a major driver of exploding tuition costs. As summed up in this College Board articlewith third parties paying part or all of the bills (via government and private ‘scholarships,’ subsidized loans, and subsidies of institutions), schools can often raise fees without dire financial or academic consequences.”

In 2018-19, according to College Board, undergraduate and graduate students received a total of $246 billion in student aid in the form of grants, tax credits and loans.

Indeed, there’s been a stunning 416 percent rise in total federal, state and institutional student aid loans since 1989, adjusted for inflation. Pell Grants, the federal government’s largest college grant tuition assistance program nearly tripled in real terms during that time.

With billions in federal student aid, grants and below-market interest loans courtesy of the U.S. Department of Education artificially inflating demand for college, tuition prices were sure to explode. Why does Reich deprive millennial viewers of this vital information?

“Third: As a result of all of this, debt”  

Here Reich informs viewers that “the average graduate carries a whopping $28,000 in student loan debt,” and that as a generation, “millennials are more than one trillion dollars in the red.”

We already addressed a primary driver of rising tuition costs that Reich ignores. But here we can further note that the levels of student loan debt is so crushing because such a significant share of millennials are not earning enough to afford the debt payments. 

Young people are often drawn into college on the promise that a college degree is their only ticket to career success. 

But increasingly, it is not. As Ohio University economist Richard Vedder has written, “The Federal Reserve Bank of New York said that 41.4 percent of recent college graduates in December 2018 were ‘underemployed,’ doing jobs mostly held by those with lesser education.”

In other words, more than two-fifths of recent grads are in jobs that don’t require a college degree. As Vedder notes, this is because “(W)e actually have too many college graduates for the number of professional, managerial, and technical jobs available.”

With a glut of college graduates flooding the job market, there is little bargaining power for millennials entering the market, outside of those with degrees in highly technical areas. In too many cases, a college degree simply does not translate into earning power sufficient enough to pay off formidable student loans. 

And that glut can in no small part be attributed to the massive sums of money flowing from government programs, a fact Reich turns a blind eye to. 

“Fourth: Millennials are finding it harder than previous generations to save for the future” 

Harder, or less beneficial?

Historically-low interest rates for the past decade, which followed decades of a mostly low-interest environment, discourages savings. Why set money aside when there is virtually no financial gain to doing so?

For most of the millennial generation’s adult lives, the paltry interest on savings has been insufficient to keep up with inflation. 

Why won’t Reich mention the Federal Reserve’s role in keeping interest rates low, thus suppressing any returns to savings?

Reich further points out that employers are “replacing pensions with essentially ‘do-it-yourself’ savings plans; and that among Fortune 500 companies, “only 81 sponsored a pension plan in 2017, that’s down from 288 twenty years ago.”

Readers are just supposed to accept this as is, with no broader context.

What could be helpful to note is that perhaps corporate pension plans are being crowded out by rising healthcare costs. 

Research by the Peterson Center on Healthcare and Kaiser Family Foundation shows that large group employer coverage costs to employers more than doubled between 2003 and 2018.

This has escalated during a time of dramatically increasing government intervention into the healthcare market.

With so many more dollars going to paying employee health benefits, there’s little wonder that companies are cutting back on pension plans. 

Conclusion

Without further explanation for why millennials have no money, they will be more susceptible to accepting misguided policies claiming to ease them of their financial woes. 

Unsurprisingly, Reich lists several government interventionist policies to address the generational wealth gap, including “debt relief, accessible health insurance, paid family leave, affordable housing, and a more equitable tax code for renters.”

With the goal of selling government as the key to millennials’ financial security, it is hardly surprising that he would want to conceal vital facts about how government intervention is a primary cause of their financial struggles in the first place. 

Millennials: don’t just unquestioningly accept Reich’s recommendations. Do your homework and discover the underlying causes to this “generational wealth gap.” You just might find that the solution lies in less government, not more. 

Bradley Thomas is creator of the website Erasethestate.com and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.

Follow him on twitter: Bradley Thomas @erasestate

Two replies to shut down the “healthcare and housing are human rights” argument

Two replies to shut down the “healthcare and housing are human rights” argument

There is no shortage of politicians and other armchair philosophers insisting that things like healthcare and housing are “human rights.” Anyone watching the Democratic presidential debates, or having spent five minutes on social media, has no doubt heard this refrain countless times. The claim, of course, is a veiled way to promote greater government involvement in the provision of such goods. Opponents can then be tarred with wanting to deny people of their basic human rights if they dare speak a word in opposition to plans like Medicare for All or expanded housing subsidies.

The claim has natural appeal to many because housing and healthcare are such basic and vital needs for the well-being of our fellow citizens. This may indeed be a clever rhetorical trick to silence unprepared advocates of liberty. But there’s no need to be caught flat-footed when confronted with this argument. Below are two simple retorts that expose the fallacy of healthcare and housing being “human rights.”  

Conflating rights with goods – there is no right to the labor of others

Those presenting healthcare or housing as human rights are making a dire mistake: conflating rights with scarce economic goods. Goods and services like medical care and housing don’t just exist in a state of nature. They are produced using human labor combined with capital goods. This is where the popular meme “Nothing that requires the labor of others is a human right,” comes in handy.  In essence, declaring housing and healthcare to be rights implies that some have a right to the labor of others. Challenging progressives, “Democratic Socialists” and other advocates of these supposed rights to answer why they support the concept of some having a right to the labor of others will typically be answered with awkward silence. 

More specifically however, what supporters of the “right” to healthcare and housing envision is a government-funded system of hospitals, medical providers and “affordable housing” projects financed by taxes taken from workers against their consent. Instead of declaring a right of some to the labor of the service providers themselves, this system declares a right to a portion of the fruits of the labor of all (or most) productive workers in the form of taxation in order to finance such schemes. The mechanism may be different, but the concept remains the same. Taxation implies a right to the labor of workers by the State. That portion of your income earned from labor that is taken by taxes represents the State’s claim over your productive effort. For that amount of time, you are laboring for the rulers, not yourself.   

How much healthcare or housing does everyone have a “right” to?

If healthcare and housing are rights, how much do we have a right to? Mud huts, mansions, two-bedroom apartments? Around the clock medical concierge service, one doctor visit per year, unlimited surgeries? Because they are scarce goods, some form of rationing of healthcare and housing is required. Free markets use the price system to better allocate goods and services to their most highly valued uses.

A system of government provision however, empowers the ruling elite with determining the allocation of goods. If government says these are rights, then it follows government has the authority to determine how much medical care or housing you are entitled to. One can quickly surmise that when officials in Washington D.C. dictate to citizens how much housing or healthcare they are to be allotted, there is no denying that we have become but mere slaves – dependent on our masters for whatever housing or medical care crumbs they determine us to be worthy of. When someone else can determine how much you are entitled to, that means it’s not a right, but a privilege granted by the whims of your overlords.

Just imagine what a system of corruption this would create as those closest to the ruling elite would lobby for a greater share of their “rights” than the rest of the subjects. If you think today’s politicians are in the business of promising more generous benefits to certain segments of the population to buy more votes, just wait until highly-valuable goods like medical care and housing become “rights.” And how long before our rulers decide to wield their complete control over the distribution of housing and medical care as a weapon to punish political opponents?

Conclusion

The only legitimate right to healthcare or housing is to that which the providers are willing to supply in exchange for a price both willingly agree to. Market exchange based on private property is not only the most efficient means of allocating scarce goods like healthcare and housing, but the only moral means as well.

Those attempting to convince the populace that such scarce goods are actually “rights” are merely employing a rhetorical trick to conceal their true desires for further enslavement of the subjects. To paraphrase the old saying “If you think housing and healthcare are expensive now, just wait until they are rights.” The price we pay will be our freedom. 

Bradley Thomas is creator of the website Erasethestate.com and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.

Follow him on twitter: Bradley Thomas @erasestate

How Government is Preventing a North Carolina Doctor from Providing Low-Cost Care to Patients

How Government is Preventing a North Carolina Doctor from Providing Low-Cost Care to Patients

A North Carolina doctor suing the state to overturn a law preventing him from providing affordable MRI scans to patients recently won a small victory in court. In late November, a Wake County Superior Court judge ruled that Dr. Gajendra Singh’s challenge of North Carolina’s Certificate of Need (CON) laws could proceed. 

One of countless regulations imposed on America’s healthcare industry, CON laws serve as yet another reminder of just how far our nation is from having anything remotely resembling a “free market” in healthcare. 

In short, CON laws require medical care facilities and providers to get approval from a state commission to acquire certain medical equipment or otherwise expand the capacity of their facility.

In the case of Dr. Singh, a general surgeon in Winston-Salem, North Carolina, his case arises from his desire to purchase a new MRI machine for his practice.  Dr. Singh contends that doing so would “lower prices for patients by adding competition to the other provider of an MRI” in his area.

“We’re trying to make health care really affordable where a patient can come and not worry about it,” he said. “I’ve been on the other side of the fence where I didn’t have enough money. I grew up poor. I understand, and I feel how much it costs.”

Naturally, the biggest supporters of preserving North Carolina’s CON laws is the hospital lobby. CON laws protect them from new competition and as such enable incumbent providers to have near monopolies in their geographic area, providing the hospitals with much stronger bargaining power to negotiate higher reimbursement rates from insurers. The higher costs, of course, are passed on in the form of more expensive insurance premiums.

 According to news reports, the hospital lobby admits as much. One article wrote: “Cody Hand, Vice President of the North Carolina Healthcare Association, said he understands Singh’s issue but maintains that patients can’t afford to have medicine be a totally free-market environment.” 

The Institute for Justice (IJ), who is representing Dr. Singh in the case, provides more insight on the benefits Singh would like to bring to patients in his community. 

“In addition to X-rays, ultrasounds and other diagnostic imaging services,” they write, Singh’s practice also provides MRI scans. “On average, an MRI at a North Carolina hospital costs upwards of $2,000. At Forsyth (Singh’s practice), Dr. Singh charges $500 to $700. But keeping prices affordable is difficult. That’s because North Carolina’s outdated laws prevent Dr. Singh from owning an MRI scanner.”

Instead, Singh is required to rent an MRI scanner at a cost of thousands of dollars per day. North Carolina’s CON law is what is preventing him from purchasing an MRI scanner in order to offer much more affordable services.

As IJ points out, “Unfortunately, Dr. Singh cannot even start the costly and cumbersome permit process because a board dominated by regulators and industry insiders has determined his community is not in need of any additional MRI scanners.”

What’s perhaps even more absurd, even if the government board stacked with representatives of incumbent medical providers acknowledges a “need” for an additional MRI scanner in Singh’s community, state law allows competitors to challenge the granting of a permit for new medical equipment. State law “allows other providers, like the hospital down the street from Forsyth, to fight him at every step of the way. When all is said and done, obtaining a permit for an MRI scanner can cost upwards of $400,000,” according to IJ.

The original CON laws date back to the 1970s and were passed at the federal level. The stated purpose for CON laws was to control healthcare costs by limiting the amount of “unnecessary” health services and facilities invested in by hospitals and other providers. Presumably, government bureaucrats were in a better position to determine a community’s needs for medical devices and hospital beds than the providers themselves. 

The federal laws, however, did not live for long.

As the Mercatus Center at George Mason University writes, “In 1986—as evidence mounted that CON laws were failing to achieve their stated goals—Congress repealed the federal act, eliminating federal incentives for states to maintain their CON programs.”

Disappointingly, only 15 states have completely done away with their CON regulations. A majority still maintain some level of CON programs, and North Carolina has one of the most restrictive webs of CON laws in the nation. 

Scholars at Mercatus have come to the unsurprising conclusion that CON laws limit the supply of available medical care. In one study they find “that states with CON programs have about 99 fewer hospital beds per 100,000 people than states without these regulations.”

In Dr. Singh’s state of North Carolina, Mercatus estimates that if the state were to eliminate its CON laws, patients could have access to roughly 35,000 more MRI scans per year – a 5 percent increase. Moreover, the state would have 80 rural hospitals, compared to the 56 it has now, and 187 total hospitals compared to the current 132. The increased supply and competition would lead to financial relief for patients. According to the Mercatus research, eliminating CON laws in North Carolina would lower that state’s total healthcare spending per capita by more than $200 per year. 

The growing support for single-payer healthcare plans, such as Medicare for All, is driven in no small part by the belief that what plagues the U.S. healthcare industry is not enough government intervention. 

Certificate of Need laws, and the case of a North Carolina doctor that is forced to sue his own state government for permission to offer lower-priced medical services, serves as one of many examples that proves otherwise. 

Bradley Thomas is creator of the website Erasethestate.com and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.

Follow him on twitter: Bradley Thomas @erasestate

Three Underrated Arguments Debunking Marx’s Labor Theory Of Value

Three Underrated Arguments Debunking Marx’s Labor Theory Of Value

Though widely dispensed of in the field of economics, the notion of “wage slavery” is still commonly held among progressives and socialists of many stripes.

It is not uncommon, especially on social media, to run into people insisting that employers are “stealing” part of their labor because the wage they receive from their employer is less than the contribution of their labor to the final value (i.e. selling price) of the finished good.

Below is one such example that exemplifies the argument:

Profit to the employer, the argument goes, is akin to theft from the workers. Profit is “surplus value” created by the worker, but taken by the capitalist, they say.

To counter this argument, one must strike at its root: the labor theory of value. An underappreciated essay that provides a satisfying debunking of the labor theory was penned in 1884 by British philosopher and economist Philip Wicksteed, entitled “Das Kapital: a Criticism.”

Use value and exchange value

In Das Kapital, and other works, Marx wrestled with what he determined to be two different types of value of a good: use value and exchange value.

Marx described use value as the measure of needs-satisfaction of a good to its user; in other words, it’s usefulness. But as Marx evaluated the historic transition of economic systems from mostly production for use by the producer himself to widespread systems of production for exchange, he identified what he believed to be a second, and distinct, value of goods: exchange value.

Goods that were produced for the purpose of exchange Marx labeled as commodities.

Commodities being exchanged for each other, Marx reasoned, must have some inherent quality making them of ‘equal’ value. It is this supposed equal value that causes them to be traded for each other. In a barter economy, for example, if a pair of shoes is traded in exchange for three pounds of beef, the shoes must have an underlying value equal to the three pounds of beef, Marx argued.

Similarly, in a monetary economy, the common measure among different commodities manifests itself in their purchase price. If a dozen apples sells for the same price as a hat, for instance, Marx made the case that there is some common unit of measure inherent in both goods causing them to sell at the same price. Or if a new suit sold for the same price as, say, five shovels, then one shovel must be equivalent to one-fifth of a suit.

In short, Marx made the case that commodities that are exchanged are both not identical, meaning they have different physical properties and satisfy different needs, but also that “they are different manifestations or forms of a common something, (else they could not be equated against each other)” as Wicksteed wrote.

Wicksteed further summarized Marx’s description of exchange value: “In other words, things which are exchangeable must be dissimiliar in quality, but yet they must have some common measure, by reduction to which the equivalent portions of each will be seen to be identical in quantity.”

Largely because labor was the one common denominator in the production of all commodities, Marx identified labor as that common measure giving rise to the exchange value of commodities.

Wicksteed described Marx’s assumption as “setting aside all that gives the wares a value in use,” so that “there is nothing left in them but the single property of being products of labour.” Wicksteed concluded, “According to Marx, then, the (exchange) value of wares is determined by the amount of labour necessary on the average to produce them.”

Surplus value

With the establishment, according to Marx, of labor being the common measure of exchange value among commodities, we must proceed to Marx’s determination that profit represents “surplus value” stolen from the worker.

Marx argued that workers were forced to sell their labor power for less than the value of the commodities they produce with their labor.

In short, Wicksteed summed up Marx’s argument as a transaction in which the capitalist buys the inputs, including labor, at their value, and sells the finished good at its value, “yet more value comes out than goes in.”  In other words, the capitalist collects more revenue selling the commodity than he expends in its production.

And if value of the finished commodity is created by labor, as Marx insisted, then this “surplus value” represents the capitalist appropriating for themselves some of the value created by the workers’ labor.

But what if we could demonstrate that the common measure of exchange value among commodities is not labor? If the value of the finished commodity is determined by something other than labor, then comparing the revenue to the capitalist for the finished good to the amount paid in wages to labor would be rendered irrelevant. Marx’s entire theory would crumble like a house of cards.

Wicksteed is up to the task in his essay, using three key observations.

Value is Subjective

First, Wicksteed informs us that value is not measured by something inherent in each commodity, but rather in the subjective evaluations of the end user. “Now the ‘common something’ which all exchangeable things contain, is neither more nor less than abstract utility, i.e., power of satisfying human desires”, he wrote. “The exchanged articles differ from each other in the specific desires which they satisfy, they resemble each other in the degree of satisfaction which they confer.”

Commodities exchange for like value not because they contain the same amount of labor, but because the users value the ends they satisfy with similar intensity.

“If I am willing to give the same sum of money for a family Bible and for a dozen of brandy, it is because I have reduced the respective satisfactions their possession will afford me to a common measure, and have found them equivalent,” Wicksteed wrote.

Marginal Utility

A key insight of Austrian economics is the use of marginal analysis, and the concept of diminishing marginal utility. In other words, goods are evaluated by the needs-satisfaction of the next unit of that good, not by the value of all existing units of the good. In other words, the more of a good you already possess, the next unit of that good will satisfy a less important need.

For instance, if you have one gallon of water, you will use it to satisfy the most important use of water according to your priorities – drinking, for instance. If you acquire a second gallon of water, you will use that to satisfy your second highest priority for water usage, such as bathing. The third gallon of water will satisfy yet a less urgent use for water, and so on.

Obviously, the price you are willing to pay for a third gallon of water would be lower than the price you are willing to pay for that first gallon of water. You value it less not because of the amount of labor required to produce it, but because it has a lower needs-satisfaction, or utility, according to your priorities.

As Wisksteed explained, “Now in a community every member of which possessed two coats already, a further increment of coats would (ceteris paribus) satisfy a less urgent need, possess a less utility, and therefore have a lower exchange value than would be the case in a community each member of which possessed only one coat.”

In sum, the value of coats will have fallen, not because it takes less labor to produce them, but because the utility of the additional units satisfies less urgent needs.

Collectibles

Wicksteed closes his argument with an example of exchangeable items that the amount of labor is “powerless to affect.”

These items include “specimens of old china, pictures by deceased masters, and to a greater or less degrees the yield of all natural or articifial monopolies. The value of these things changes because their utility changes. And their utility changes…because of a change in the desires to which they minister,” Wicksteed declares.

“I cannot see how any analysis of the act of exchange, which reduces the ‘common something’ implied in that act to labour can possibly be applied to this class of phenomena,” he concludes.

Conclusion

As dismissive as many of us would like to be toward Marx’s labor theory of value, it still holds currency among today’s budding socialists. Wicksteed’s essay is a welcome and highly persuasive addition to the literature debunking Marx’s theory, and should not be overlooked. Once the labor theory of value is dispatched with, Marxism’s primary rallying cry for the “wage slaves” of the world is rendered impotent.

Reprinted from Erase The State.

Warning: Actual Costs of Government Programs Higher Than Advertised

Warning: Actual Costs of Government Programs Higher Than Advertised

As outrageous as the price tag promised to us for initiatives like Elizabeth Warren’s healthcare plan, Bernie’s ‘Medicare for All’ plan, or AOC’s ‘Green New Deal,’ history tells us the actual cost to taxpayers would be far higher.

In its first year, Medicare cost $3 billion, and as reported by Reason Magazine, “The House Ways and Means Committee estimated that Medicare would cost only about $12 billion by 1990 (a figure that included an allowance for inflation).”

The actual price tag in 1990?

$107 billion, a full nine times the original projection.

Similarly, Medicaid – the jointly funded state-federal program – was sold to taxpayers and voters with what proved to be a wildly unrealistic price tag.

According to this Federalist article, “In 1965, the House Ways and Means Committee estimated that Medicaid … would cost $238 million in its first year. It actually cost more than $1 billion. By 1971, Medicaid spending had reached about $6.5 billion, blowing away all previous estimates.”

Naturally, the exploding costs of programs like Medicare and Medicaid mean that taxpayers are forced to cough up far more money than what they were promised at the time of passage.

As Reason noted, “In 1965, Medicare architects declared that the initial tax rate of 1 percent of income after 1967 would be sufficient to fund the program for 25 years.” This of course proved to be complete fantasy and by 1972 “the first of several increases in both the payroll tax rate and the wage base against which it was levied.”

It took all of five years for the initial promises to be shattered and for the federal leviathan to reach deeper into the pockets of taxpayers.

If voters knew what the actual burden would be for such government schemes, there’s little doubt public support for them would plummet.

Which leads us back to modern proposals from the likes of Warren and Sanders.

Warren, for instance, has been selling her healthcare plan on the basis that it would largely be funded by a “wealth tax” only impacting households with assets valued above $50 million.

Its easy to see the political appeal of such promises, few people oppose taxes that they won’t have to pay. Targeting a small minority of extremely wealthy people to fund a program providing benefits for a significant share of voters is a well-worn strategy.

But given the history of other massive government programs, are we to believe that only the ‘ultra-rich’ will end up paying for Warren’s or Sanders’ healthcare plans?

We saw how quickly Medicare and Medicaid costs exploded, prompting a heftier tax bill on working Americans.

Moreover, we can look to the modern income tax as more evidence. When the 16th Amendment was ratified in 1913, the initial federal income tax was targeted at the “top 1%” of earners at the time, with rates ranging from a paltry 1 percent to 6 percent.

A tax sold as only impacting “the rich” as a means to fund government expansion. Sound familiar?

We’ve seen what’s happened to the federal income tax ever since, so why should we believe that Warren’s “wealth tax” won’t have a similar fate of being not only increased, but expanded dramatically to include the middle class?

And dramatic cost overruns are not just found in grand, national government overhauls of entire industries. Local projects, like light rail lines, also consistently soak taxpayers for far bigger price tags than the one used to win support.

2015 analysis by Cato Institute analyst Randal O’Toole found “Rail transit projects typically cost about 40 to 50 percent more than projected, with some projects costing double the original projections and very few costing less than 20 percent more than the projections.”

For instance, a light rail line built in Charlotte, North Carolina roughly a decade ago exceeded projected costs by about 2-½ times initial estimates, costing local taxpayers an additional $300 million beyond what they were promised.

More recently, a light rail line in Maryland – slated for completion in 2023 – is already facing cost overruns exceeding $250 million.

The bottom line is this: never believe the cost estimates of government projects. Politicians will try to promise you that their massive schemes can be funded by modest taxes on “the rich,” but don’t fall for it.

In reality, massive cost overruns for government programs are the norm, whether they be national healthcare initiatives or local light rail programs.

It typically doesn’t take long before taxes on ‘the rich’ are revealed to be insufficient to fund the growing government leviathan, and you’ll soon find that those taxes on ‘the rich’ have expanded to take a bigger bite out of your paycheck.

Whenever you hear a politician has a plan, hold on to your wallet.

Reprinted from Erase The State.

The Superstition of State Authority

The Superstition of State Authority

Perhaps the greatest source of state power, Murray Rothbard once wrote, is “its legitimacy in the eyes of the majority of the public.” 

Thanks to centuries of propaganda, advanced in no small part in government schools over the past several generations, there exists in the minds of the American populace the dangerous belief that the government possesses a moral “authority” to rule over its citizens.

This belief has lead people, mostly agents of the state, to commit horrific violence against others. Indeed, as Larken Rose wrote in his 2012 book “The Most Dangerous Superstition”:  

“Flip through any history book and you will see that most of the injustice and destruction that has occurred throughout the world was not the result of people ‘breaking the law,’ but rather the result of people obeying and enforcing the ‘laws’ of various ‘governments.’ The evils that have been committed in spite of ‘authority’ are trivial compared to the evils that have been committed in the name of ‘authority.’”   

Moreover, as Rothbard noted, the belief in the legitimacy of the state has dulled the conscience of the masses to the immorality of government aggression. “(T)he depredations of the state are looked upon rather as benevolent services. Taxation is generally not seen as theft, nor war as mass murder, nor conscription as slavery,” he wrote.

 

Defining ‘Authority’

Before proceeding further, it is important to establish what is meant by authority in this context.

“‘Authority’ can be summed up as the right to rule,” wrote Rose. “It is the supposed moral right to forcibly control others.”

 When people believe in the “authority” of the state, according to Rose, it means they believe the state has “the right to control other people, which implies that those being controlled have a moral obligation to obey.”

Many individuals and groups have the ability to forcibly control others, such as violent street gangs or thugs, notes Rose. But people, especially the victims, rightly recognize that when gangs use force to extort, rob or otherwise control others, those acts are immoral and unjustified. 

The belief in government “authority,” however, makes people justify these same acts of aggression when the state carries them out. “What distinguishes a street gang from ‘government’ is how they are perceived by the people they control,” observed Rose. 

 

Just following orders

The “Nuremberg Defense” is a term popularized in the post-World War II military tribunals in which Nazi leaders being tried for war crimes by the Allies claimed innocence because they were “just following orders.”

The belief in the righteousness of orders coming from an “authority” leads otherwise decent people to commit acts their free conscience would never allow them to do. 

Imagine regular people flying across the globe to murder strangers that posed no threat to them or breaking into strangers’ houses to haul them off to a cage simply because they are in possession of an unapproved plant.

But such violent injustices occur on a mass scale every day by soldiers and police under the guise of “just following orders.” 

As Rose wrote, “the problem is not that evil people believe in ‘authority’; the problem is that basically good people believe in ‘authority,’ and as a result, end up advocating and even committing acts of aggression, injustice and oppression, even murder.”

It’s the irrational belief in a fantastical “authority” of government that enables people to override their conscience and commit atrocities against innocent people. 

Consent of the governed?

“The distinguishing feature of ‘government’ is that it is thought to have the moral right to give and enforce commands,” notes Rose.

But from where does this belief in the state having a moral right to rule others come?

Perhaps the most often used justification is that the people in society confer this authority by voting: the consent of the governed. In other words, society consents to whatever rules the ruling class enacts and however they choose to enforce them because the government is us. We voted for them, therefore they represent our wishes, goes the theory. 

But such justifications are nonsense. 

First, people cannot grant powers that they themselves don’t possess to another person, group or institution. Citizens have no moral right to forcibly take a portion of their neighbor’s income, or choke them for selling cigarettes on the street – how can we confer these rights to government?

Furthermore, as Rose points out, “the concept of ‘consent of the governed’ is a contradiction. If there is mutual consent, it is not ‘government’; if there is governing, there is no consent.” An institution cannot at the same time be coercive and voluntary.

Moreover, nobody can give their consent for something to be done to someone else. That’s not consent, that’s aggression. “It defies logic to say, ‘I give my consent for you to be robbed,’” Rose concluded. 

And let’s not forget the fact that the government does not “represent” the people in any meaningful way. A person’s true representative: would be subject to that person’s orders, can be dismissed at any time, and can’t act contrary to the wishes of that person. Government fails on all these counts. 

 

Guided by conscience, not orders

To be clear, a stateless society would not be some Utopia in which all aggression and violence has been eliminated. There would still be bad people who do bad things to others.

But a stateless society wouldn’t institutionalize aggression and violence like the state does, with a monopoly no less. People would no longer be under the delusion that aggression is justified when it’s done in the name of the state.

“On the contrary,” Rose argued, “being a moral person requires taking on the personal responsibility of judging right from wrong and following one’s own conscience, the opposite of respecting and obeying ‘authority.’”

With the existence of the state and the belief in its “authority,” atrocities on a grand scale are deemed morally defensible by citizens who would rightly be appalled if those same acts were committed by a group not perceived to have a legitimate claim to rule over others.

In a free society, citizens would be freed of this superstition, and would never tolerate the kinds of injustices and violence that the state inflicts on a daily basis. As Rothbard wrote, a free society “minimizes both the opportunity and the moral legitimacy of the evil and the criminal.”

Importantly, if we strip the state of its legitimacy in the eyes of citizens, it will be revealed as a “channel for all manner of antisocial crime — theft, oppression, mass murder — on a massive scale,” according to Rothbard. 

From there, it is but a small step to recognize that “surely the abolition of such an engine of crime can do nothing but favor the good in man and discourage the bad,” Rothbard concluded.

 

Bradley Thomas is creator of the website Erasethestate.com, and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.

Follow him on twitter: Bradley Thomas @erasestate

 

The Two Biggest Reasons Why Government Welfare Makes the Poor Worse Off

The Two Biggest Reasons Why Government Welfare Makes the Poor Worse Off

Many non-libertarians will be sympathetic when presented with an argument making the case for the moral superiority of voluntary charity versus government welfare programs.

A mental hurdle they can’t overcome, however, is the concern that absent government programs, private charity wouldn’t be enough to provide adequate care for society’s most needy.

Indeed, this 2014 article in The Atlantic insisted that the voluntary system of charity in place before the state intervened “didn’t work in the first place,” and called a society based on private charity a “fantasy.”

“Only a vigorous public response,” the article concluded, “can ensure our safe passage into a prosperous future.”

But what if it turns out that the government welfare state is not only immoral, but makes poverty worse?

In his 1973 book “The Conquest of Poverty,” Henry Hazlitt wrote that the prevalent idea has become “that the solution to the problem of poverty consists in finding how to expropriate part of the income of those who have earned ‘more than they need’ in order to ‘distribute’ it to those who have not earned enough.”

On the contrary, Hazlitt notes, the “real solution to poverty” consists of “finding how to increase the employment and earning power of the poor.”

Considering Hazlitt’s observation, there are two main reasons why government welfare programs not only fail to reduce poverty, but make it worse.

Perverse Incentives Stunt Wealth Creation

Finding “causes” of poverty and attempting to address those causes gets things backwards. Poverty is man’s natural state.

As Austrian-school economist and Mises Institute Fellow Per Bylund so succinctly states at the top of his Twitter page, “What causes poverty? Nothing. It’s the original state, the default and starting point. The real question is, What causes prosperity?”

The only means to create wealth and prosperity is through increased per capita productivity, which results from investments in capital funded by real savings. Government welfare programs work against this process.

An old axiom in the public policy arena states: “the more you tax something, the less of it there will be; and the more you subsidize something, the more of it there will be.”

Paying people not to work will obviously create more people who don’t work. Welfare programs often confront recipients with a “welfare cliff”: that point at which if they take a job, or a higher-paying opportunity, they risk losing government benefits with a greater value than the additional labor income they would receive. Many make the understandable decision to opt for the benefits rather than work.

Fewer people working means a less productive economy, translating into less wealth creation.

Conversely, the taxes needed to fund the welfare programs disincentivizes productive activity. As Hazlitt wrote, higher taxes “discourage or confiscate the capital accumulation and investment that would have increased national productivity and real wages.”

Instead of increasing the economy’s productivity, “most of the funds are then dissipated by the government in current consumption expenditures. The long-run effect of such tax rates, of course, is to leave the working poor worse off than they otherwise would have been,” Hazlitt concluded.

In sum, welfare programs may mitigate the financial hardships and consequences of being poor, but they work against the wealth creation needed to actually lift people out of poverty. Moreover, a wealthier society has more resources for compassionate citizens to voluntarily donate to those in need.

Public Doles Inevitably Grow Out of Control, Requiring Money Printing – Harming the Poor

“Instances of government relief to the poor can be found from the earliest times. Though the records are vague in important particulars, we do know a good deal about what happened in ancient Rome. A study of that case may enable us to draw a few lessons for our own day,” wrote Hazlitt.

To combat famines and wild fluctuations in wheat prices, ancient Roman leader Gaius Gracchus enacted a program by which the government would distribute grain free or below cost to anyone who would be willing to stand in line once a month. As Hazlitt notes, “Perhaps 50,000 applied at first but the number kept increasing.”

By the time Julius Caesar assumed power a few decades later, the public wheat dole and climbed to roughly 320,000 people, according to Hazlitt.

Such escalations of welfare programs are the norm throughout history, which provides a crystal-clear lesson: “Mass relief, once granted, created a political pressure group that nobody dared to oppose. The long-run tendency of relief was to grow and grow,” Hazlitt wrote.

Fast forward to today’s massive welfare state that has exploded over the past few generations in terms of number of programs, expenditures and recipients for confirmation of Hazlitt’s thesis. A 2015 report from the U.S. Department of Labor estimated that more than one-fifth of Americans participate in at least one major means-tested welfare program per month.

Add in those who receive aide from the countless other smaller welfare programs, along with the army of government bureaucrats employed to administer these programs, and you have a sizeable and powerful voting bloc that no politician dares to cross.

A recent report by the Congressional Research Service estimated that the federal government spends in excess of $1 trillion annually on more than 80 federal means-tested welfare programs; a figure that doesn’t include spending on entitlement programs like Social Security and Medicare which total well over a trillion dollars a year combined.

With the federal government running trillion-dollar annual deficits, how are all these programs paid for?

One way is for the Fed to create trillions of dollars out of thin air.

And new money creation by the Fed disproportionately makes the poor worse off. When the Fed creates new fiat money out of thin air, it isn’t distributed evenly throughout the economy. The wealthy investor class reaps most of the benefits. 

Meanwhile, the poor, who lack the bargaining power to raise their wages to keep pace with inflation, and otherwise rely on relatively fixed incomes, suffer the most through the erosion of their purchasing power.

The inevitable proliferation of the very programs ostensibly designed to reduce poverty end up making the poor worse off.

Conclusion

Statists of all stripes insist that government welfare programs are a sign of compassion and an essential tool to reduce poverty.

But actual poverty reduction can only be achieved through wealth creation. If one is truly concerned about raising the living standards of society’s poorest, examine how wealth is created.

Government welfare programs are not only immoral because they involve the initiation of force against peaceful people to fund them, but they also end up hurting the very people its proponents claim to want to help.

Bradley Thomas is creator of the website Erasethestate.com, and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.

Follow him on twitter: Bradley Thomas @erasestate

Why Facts and Data Are Less Persuasive Than Moral Appeals

Why Facts and Data Are Less Persuasive Than Moral Appeals

When’s the last time you heard somebody say: “that statistical table really changed my view of how society should be organized”?

Probably never.

That’s because facts don’t persuade, but emotions do.

People’s views are shaped by their moral intuitions first, reasoning and data come afterwards as a means to support their initial gut instincts about a topic.

This is why its so imperative for libertarians to always lead with moral appeals when attempting to persuade others of the illegitimacy of the state.

According to the social scientist Jonathan Haidt in his 2013 book “The Righteous Mind,” in the human mind, morality is the elephant and reason is just the rider.

In other words, a person’s moral intuitions will determine their opinion regarding political issues, and the “reasoning” part of the brain is just along for the ride.

While no libertarian, Haidt describes himself as a left-leaning centrist, we certainly have much to gain from Haidt’s writing. In his recently-released book “The New Right,” Michael Malice describes Haidt as “one of the most important political thinkers on earth today.”

Gut Instincts Trump Reason

Haidt opens his book with the story of a family who sees their pet dog get killed by a car after it ran loose into the street. After a brief mourning, the family gathers up their deceased pet, brings it inside, and decides to cook it and eat it.

Haidt challenges the reader with this question: did the family do anything morally wrong?

Assuming the meat was properly prepared, it posed no health threat upon consumption, and because it was already dead, the dog faced no additional suffering.

When posing this question in social experiments, Haidt notes, the near universal response is that the family was wrong to do what they did. But when asked to explain why, subjects struggle to come up with an answer.

Their judgement was based on an initial, gut, emotional response. They attempted to fill in reasoning afterward to support what their initial gut instinct prompted them to believe.

A similar phenomenon takes hold when discussing political issues like justice, rights, liberty and equality.

People will tend to bind themselves together onto political “teams” that share the same moral narratives, according to Haidt. And importantly, these narratives are formed not by a dispassionate analysis of facts, by one’s moral intuition – or initial gut instinct about something.

Using reason and data will come later in an attempt to justify the initial moral judgement.

The Roots of Moral Judgements

There are several categories, or modules, that organize moral judgement and therefore form the basis for people’s moral intuition, according to Haidt.

The most relevant is likely the “care/harm” module. This entails a concern for harm being committed to others, which is triggered by suffering not your own.

From a young age, Haidt argues, children recognize that rules that prevent harm are moral rules. Children construct moral understanding on the bedrock moral truth that harm is wrong.

Another important moral category is “fairness/cheating.” People will feel anger and contempt when we feel someone is trying to cheat us, or if the “rules of the game” are unfair.

Similar to that category is the “liberty/fairness” module, which involves a sense of moral aversion toward an aggressor attempting to dominate – or oppress – others.

Other moral modules include loyalty, which triggers negative gut reactions when someone is perceived to betray their loyalty to the group; and authority, which includes a strong respect for authority figures that is triggered by perceived acts of disobedience.

Which Categories Most Motivate the “Left” vs. “Right”?

For progressives on the left, according to Haidt, the care/harm moral module is easily the most influential category. As he wrote, “For the left, the most sacred value is caring for victims of oppression. Anyone who blames such victims for their own problems or who displays or merely excuses prejudice against a sacralized victim group can expect a violent tribal response.”

Think of angry twitter mobs that attack anytime someone is viewed to have slighted a person from a “marginalized” group.

Moreover, the left is on high alert attempting “to spot victims of existing social arrangements,” according to Haidt. The moral modules of progressives motivate their desire to change laws, traditions and institutions to solve social problems.

For the left, Haidt argued, oppression of victims and powerless groups occurs through exploitation by traditional hierarchies like the “patriarchy” and capitalism. Progressives will look to government to “defend” the weak (victim groups) against oppression by the strong (white males, capitalists, corporations) as a means of enacting justice.

Conversely, according to Haidt, conservatives endorse all of the moral modules pretty evenly, without heavily favoring one in particular. Observation, however, suggests that – at least in rhetoric – they rely strongly on the liberty/fairness category, in which perceived restraints on the liberty of individuals evokes strong negative gut reactions.

This module, as Haidt points out, is in tension with the authority category, in which conservatives tend to view any subversion of their favored authority figures to be illegitimate rebellion against the social order. Police and military obviously come to mind. Other triggers for conservatives, according to Haidt, include “acts seen to subvert the traditions, institutions or values that are perceived to provide stability.”

When understanding the different moral modules motivating progressives and conservatives, the origin of the chasm between their political beliefs becomes more clear.

In sum, according to Haidt, the left views fairness through the lens of equality of outcomes, while conservatives view fairness according to proportionality, i.e. you keep what you earn.

One thing both sides have in common, however, is a hatred of oppression, Haidt deduced. But they differ in the sources of oppression. As mentioned above, progressives view oppression as coming from those propped up by traditional social arrangements such as the patriarchy and capitalism, while conservatives tend to blame the controlling behavior of the government.

Interestingly, Haidt points out that “rich and poor are split between the left and right.” He highlights how tech billionaires typically lean left, while wealthy industrialists tend to the right. Meanwhile the rural poor are more conservative and the urban poor more progressive. Income is not a good predictor of political views, Haidt found. Perhaps this explains the noticeable trend toward emphasizing identity politics rather than economic status as a means to attract voters.

In the Art of Political Persuasion, “Feelings” Beat Facts Every Time

To change minds, Haidt advises, you need to try to nudge the elephant. Appealing to the reason of the rider will be fruitless.

To be persuasive, it is critical to understand the moral intuition that motivates a person and appeal to them on an emotional level. Always lead with the moral argument. Aligning your argument with the moral intuitions held by those listening will vastly increase the chances they will be willing to hear you out.

For instance, libertarians can appeal to left-leaning people by first showing empathy for marginalized groups and following up by demonstrating how the state is actually the biggest source of oppression for these victim groups.

Emphasizing liberty will typically draw a sympathetic ear from most conservatives, however their instinctual attraction to the importance of authority to maintain order in society is a tough nut to crack. An appeal to the moral superiority of voluntary hierarchical structures as opposed to the ones forcibly imposed by the state may be persuasive, in part because it allows the conservative to avoid the notion of subverting authority, which they find offensive.

Regardless of whom we are trying to persuade, libertarians need to present the case that a free, stateless society is consistent with the moral foundations that motivate that person.

Conclusion

When it comes to the art of political persuasion, Jonathan Haidt so capably proves, always lead with a moral appeal.

It is those gut feelings, the moral intuitions people have when confronted with an issue, that are the dominant factor dividing people up into different political factions.

Presenting more facts and data will simply fall on deaf ears to someone whose moral intuition is opposed to the case you are presenting. As Haidt wrote, “People get ensnared in a moral matrix. To convince someone that they’re wrong you must approach them from within that matrix.”

To understand opposing viewpoints, follow the elephant, think about the moral foundations and try to figure out which one or two are carrying the most weight in a particular issue.

Libertarians have the most ethically consistent case for our vision of a free society. The analysis that Haidt provides can make us far more persuasive. Let’s not ignore it.


Bradley Thomas is creator of the website Erasethestate.com, and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.

Follow him on twitter: Bradley Thomas @erasestate

If I Wanted to Increase Income and Wealth Inequality…

If I Wanted to Increase Income and Wealth Inequality…

If I wanted to increase income and wealth inequality, I could start by looking at San Francisco as a model of what to do.

Strict property zoning restrictions combined with high taxes make it unaffordable for the non-rich to live there. As reported by the Stanford Daily in 2018, San Francisco imposes a “rigid collection of ultra-restrictive zoning laws,” which, according to the Daily, have played an “indisputable and well-documented” role in the city’s housing crisis.

The median price of a home in 2018 was an astonishing $952,400, while San Fran ranks as the second most expensive city in the U.S. to live.  Bay area residents and workers face an additional local 1.5% income tax tacked on to federal income and the high California state income taxes. Moreover, San Francisco residents face a bevy of local taxes, including one of California’s steepest property tax rates.

Courtesy of central bank money printing, the area is flush with venture capital for startups (more on the Fed in a moment), enabling wannabe tech entrepreneurs to afford the steep housing prices and heavy tax burden. Meanwhile, the middle class vanishes, having left for more affordable locales.

And living on the streets that the hotshot venture capitalists pass by on their way to their swanky headquarters is a growing homeless population. San Francisco is home to a reported 10,000 homeless people, a growing problem exacerbated by a lack of affordable housing and a bizarre concern by rich progressives that more homeless shelters would be an “environmental concern.” 

Millionaires and the homeless, with few left in between. Extreme inequality achieved.

If I wanted to increase income and wealth inequality, I would make a central bank with a monopoly on the money supply my top priority. As Austrian school investor Jesse Colombo writes at his site explainingcapitalism.org, “the Fed and the ‘paper’ dollar are the main reasons for America’s growing economic inequality.”

Why is this so?

“In simple terms,” Colombo explains, “inflation benefits the rich while hurting the middle class and poor due to the way each group’s finances are structured.”

In short, the rich receive a significant share of their income from investments, while the middle class primarily relies on their income from labor, and the poor a combination of labor income and government welfare payments.

When the Fed creates new fiat money out of thin air, it isn’t distributed evenly throughout the economy. Instead, it is inserted at specific points, typically via credit to business investors. As the Fed inflates a bubble, speculation with the new money also increases – which inflates the stock market, benefitting the investor class.

Meanwhile, the fiat money creation creates price inflation that permeates over time throughout the economy. Some of the more highly skilled in the middle class may receive salary increases to keep up with the inflation, while many of the lower-skilled middle class will struggle to keep up with rising prices.

Meanwhile, the poor, who lack the bargaining power to raise their wages to keep pace with inflation, and otherwise rely on relatively fixed incomes, suffer the most through the erosion of their purchasing power. “The poor typically have no investments or savings to speak of and generally rent their housing. The poor are hurt most by inflation in rents, food, transportation, entertainment, and healthcare,” Colombo wrote.

To see just how acute the rise in asset value for the investor class has been, the chart below illustrates how massive fiat money printing has helped the S&P 500 to rise by over 2,550% since the early-1980s.

Making matters worse, the low interest rates facilitated by the Fed’s money printing encourage the average person to venture into the stock market seeking returns, because merely parking it in savings fails to keep up with inflation. Unsophisticated investors will often find themselves losing significant shares of their savings when stock market bubbles burst, while more savvy investors are better positioned to avoid more significant losses.

If I wanted to increase income and wealth inequality, I would support government professional licensing schemes. Professional licensing requires would-be professionals to pay the government a fee, complete a mandated course, or jump through other state-imposed hoops in order to practice their profession.

Often touted as “public safety” measures, to ensure professionals are appropriately credentialed so as to not cause harm by shoddy work, professional licensing in practice is a barrier to entry to protect incumbent professionals from new competitors.

Perhaps the most powerful professional licensing cartel in the U.S. is the American Medical Association. As reported by The American Conservative, “The American Medical Association (AMA) artificially limits the number of doctors, which drives up salaries for doctors and reduces the availability of care.”

For more than a hundred years, the AMA has been successfully lobbying governments to enact laws that would restrict the number of new doctors in the country. AMA activities have included dramatically decreasing the number of medical schools across the U.S. and turning the process of becoming a doctor into a monumental feat that “requires navigating a maze of accrediting, licensing, and examining bodies.”

The result of such restrictions is a worsening doctor shortage, that is “bad for patients and the country” but “definitely good for doctors’ pay.”

Like the AMA, other professional licensing boards effectively restrict the supply of professionals, enabling the incumbent professionals to command higher pay, while blocking the less fortunate from even entering their chosen profession at all.

If I wanted to increase income and wealth inequality, I would support the government welfare state. In contrast to claims that welfare programs are designed to help the poor and close the income gap thru income redistribution, the actual results are quite different. Welfare programs create perverse incentives for the poor, often serving as poverty traps rather than tools to escape poverty.

Because they are means tested, welfare recipients are often confronted with a situation in which earning more labor income will result in losing government benefits far more valuable than the income gain. This is especially true for households with children receiving Medicaid and subsidized day care – benefits that would cost tens of thousands of dollars if paid out of pocket.

Faced with this dilemma, many make the financially rational choice of turning down work, additional hours at work or avoiding higher-paying jobs because it would make them worse off on net. But making this choice stymies any hopes of career advancement, keeping people trapped in poverty.

Moreover, the welfare state has facilitated a dramatic rise in single-parent homes.  Nationally, since LBJ’s Great Society ratcheted up government welfare programs in the mid-1960s, the rate of unmarried births has tripled.  Naturally, there is a high correlation between number of household earners and household income. For instance, economist Mark Perry analyzed 2016 U.S. Census Bureau data and found that 63 percent of households in the lowest income quintile nationally had no income earners, and had an average of just 0.43 earners per household. Conversely, households in the top quintile featured an average of 2.04 earners.

Finally, if I wanted to increase wealth and income inequality, I would support a highly interventionist government – which typically taxes, regulates and restricts economic actions in a manner to favor entrenched interests over the little guy – as well as favor an increasing minimum wage which locks low-skilled workers out of the labor force, keeping their income at zero.

Free market capitalism typically gets the blame for rising wealth and income inequality, but in reality, it is the opposite. Statist and interventionist policies, in particular Federal Reserve fiat money creation, are the cause.

Of course, in a market-based economy wealth and income inequality will exist, but not at the levels we see today. As Colombo concluded, Instituting free market capitalism and sound money is actually the only solution to America’s growing economic inequality.”


Bradley Thomas is creator of the website Erasethestate.com, and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.

Follow him on twitter: Bradley Thomas @erasestate

The Myth of the “Fair Share” of Taxes

The Myth of the “Fair Share” of Taxes

There is seldom a shortage of politicians and pundits calling for more people to pay their “fair share” of taxes. But how is one to determine what everybody’s fair share should be?

The blunt answer is that there is no non-arbitrary way to determine a “fair” amount of taxes, because unlike market exchange, taxes are not voluntary.

Many justify taxes as “the price we pay for a civilized society.” Leaving the internal contradictions of that statement aside, we can evaluate what makes for a fair price in the market and arrive at the conclusion that there is no such thing as a fair share of taxes.

For centuries, ethicists and economists grappled with the concept of a “fair price” for a good or service. Despite their best efforts throughout the centuries to establish the notion of goods having a universal, objective value that should determine its price, subjective value theorists won the day.

The seeds of the subjective theory of value were planted as far back as ancient Greece, with the philosopher Xenophon’s important insights into what makes an item valuable.  Xenophon suggested there is no inherent value in items but rather the value of an object is derived from the “utility” – or pleasure – the user gets from it. He used the example of a flute to illustrate:

“…the same thing are wealth (valuable) and not wealth (not valuable), according as one understands or does not understand how to use them. A flute, for example, is wealth to one who is competent to play it, but to an incompetent person it is no better than useless stones.”

Clearly, there can be no objective value in objects when the same object can be valued far greater or less by different individuals.

With no objective value inherent in goods, what basis can we use to determine what the “fair price” for a good should be?

As Murray Rothbard wrote in his 1970 book Power and Market: Government and the Economy, even the most objective of ethicists arrived at the conclusion that “the only possible objective criterion for the just price is the market price” mutually and voluntarily agreed to by buyer and seller.

Indeed, we can find St. Thomas Aquinas of the late Spanish Scholastics arrive at this conclusion in the second part of his 13th century work, Summa Theologiae

As summed up in this March 2019 Public Discourse article, “For Thomas, then, the market price is the just price if the buyer and seller are honest and not trying to take advantage of each other.”

With the theory of what makes for a fair, or just, price settled, Rothbard questioned “If the search for the just price has virtually ended in the pages of economic works, why does the quest for a ‘just tax’ continue with unabated vigor? Why do economists, severely scientific in their volumes, suddenly become ad hoc ethicists when the question of taxation is raised?”

Later in his work, Rothbard provided an answer of sorts to his own question: “The ‘just price’ was abandoned in favor of the market price. Can the ‘just tax’ be abandoned in favor of the market tax? Clearly not, for on the market there is no taxation, and therefore no tax can be established that will duplicate market patterns.”

In short, when it comes to taxes, voluntary agreement is removed. Government imposes its arbitrarily chosen tax rates by threat of force. Because mutual consent is removed from the transaction, there can be no such thing as a “fair share” of taxes.

But shouldn’t the rich pay more in taxes, because they can afford to?

The ‘ability to pay’ rationale fails on several counts. Asking higher-income people to pay more in taxes fails to take into consideration each person’s accumulated wealth. Surely, a person earning $50,000 per year’s ability to pay taxes is far less compared to a person earning the same income but with a million more dollars in accumulated savings.

Moreover, a pay stub tells us nothing about the financial obligations of each individual. One may have major medical bills or ongoing expenses for caring for an elderly parent, while another may have no such obligations. Even at the same income level, these two have a vastly different “ability to pay.”

And let’s not forget that progressive taxation serves as a de facto penalty for more highly productive activities, which serves to disincentivize such activity. The resulting economic stagnation will harm the poor and low-skilled people the most.

The notion of “tax fairness” is crude political demagoguing with no moral foundation. It is simply a cloak for power-hungry rulers to conceal their desire to arbitrarily determine what portion of their justly-earned property citizens shall be allowed to keep.


Bradley Thomas is creator of the website Erasethestate.com, and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.

Follow him on twitter: Bradley Thomas @erasestate

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