There is a type of parasite known as “zombie” parasites. They alter the brain chemistry of their host and cause them to engage in behavior that they would normally never undertake. Naturally these behaviors benefit the parasite at the expense of the host. For example the Nematomorph hairworm targets grasshoppers and will compel them to dive directly into bodies of water – an apparent suicide. To someone unaware of the parasitical influence this behavior would be truly baffling. Humankind will also engage in similarly baffling behavior due to the influence of its parasite: the state. Likewise, to those unaware of the state’s infection of society, human behavior can be sometimes baffling. For example, just this week there was much moral outrage over the revelation that a Martin Shkreli (owner of Turing Pharmaceuticals) purchased the rights to manufacturer the drug pyrimethamine (brand name Daraprim) and promptly raised the price from $13.50 to $750 per pill. How can this be?! This is horrible; obviously this is an example of “market failure” that must be remedied by state intervention to ensure such greedy bastards can’t get away with such imprudent behavior. Oh, there is greed in play here, but it is not entirely of Shkreli’s doing, he has a good friend helping him out: the state. Acting like a zombie parasite injecting poison into its victim’s brain, the state distorts natural market incentives to such a degree that we are left with nothing but head-scratching outcomes such as this.

The first clue that the state is involved in this mess was the phrase “bought the rights” peppered throughout every new report on this matter. How does one buy the right to make something? Any reasonably competent organic chemist could look at the structure of that drug and figure out how to make it.* What is preventing someone from doing that and eschewing the need to buy the “rights” to make it? The state. Acting under the auspices of the patent office and the FDA the state creates an artificial monopoly barrier for the production of goods as well as their importation into this country. In essence the state acts as the hired goons of Company A that holds a patent or a licenses to produce Drug B. If anyone else tries to produce or import Drug B, those hired goons will take them down. Don’t believe me? Here are the facts: The FDA bans the importation of this drug (for example, a company in India currently makes it for 10¢ a pill) – so Shkreli is safe from that sort of competition. And because he has bought the “right” to make it in the US, that means no one else can make it unless they go through an onerous and expensive FDA approval process. And he didn’t just buy the rights for a song, no, he spent $55 million to acquire those “rights.” So from a strictly economic standpoint the price increase makes sense. The value of a capital acquisition is driven by the price its products can command on the market. Clearly under a monopoly situation (only made possible by the state) it can command a very high price indeed. Absent such monopoly rights, the recipe for the production of that drug would have had some value but certainly no where near $55 million worth.

When the pundits and critics blame the “free” market for this sort of ridiculous outcome I am left to ponder what an odd definition they must have for the word “free”. Does “free” mean to be influenced and controlled by an implicitly violent cartel of bureaucrats that restricts, regulates, licenses, subsidizes, and outlaws in favor of the few at the expense of the many? If so, then I’d like less freedom please. Like the unfortunate grasshopper most of society is willfully ignorant of the parasitical influence in our midst and so, like the grasshopper, we blindly leap into the abyss.

* please see this page for a discussion of the inevitable “but without IP no one will innovate” objection

Aborting Jobs

There is a problem with education in this country. It isn’t the usual suspects of cost, class size, teacher workloads, mediocre test scores, or Common Core. No, the problem goes much deeper and is reflective of a societal change in attitude concerning the purpose of education: learning. We have allowed ourselves to misapprehend the structure of the thing (education) for the thing itself (learning). When we think “education” we think nice and tidy classes, desks, lectures, tests – a regimen. We don’t think unplanned conversations, spontaneous readings, curiosity driven experimentation. Learning is the random walk of the ant who never knows what he’ll discover. Education is the regimented march of the military battalion. We have become so accustomed to the structure of the former that we fear anything that differs (homeschooling, un-schooling, etc). If we want worker bee drones to work in our factories then perhaps regimented education is the best approach. But if we want free minds to push the boundaries of human knowledge then it is learning, and not education, that we should encourage.

Learning flourishes where the individual is not prohibited from following their passion and curiosity. Today an ever-growing plethora of rules and regulations smother the spark of curiosity that would otherwise ignite a passion for learning. This process has been slowly accelerating over the past few decades. I’ve seen this change in my own lifetime. My science fair project in high school utilized (expired) human blood as part of the experimental procedure. Today the hysteria over “blood born pathogens” would make such a project either impossible or a regulatory nightmare. Fear is what drives all these ridiculous restrictions. In recent days fear has once again struck, this time to new heights of stupidity. The recent arrest of Ahmed Mohamed at his school for making a homemade digital clock (that some mistook for a Hollywood-esque bomb) is symptomatic of this anti-learning pro-education-only-as-we-define-it mentality. After it became abundantly clear the device in question was not a “bomb” the entire matter should have been dropped perhaps only to be reflected upon years later as a humorous anecdote. But that is not what happened. Despite it being a mere clock, Ahmed was still handcuffed, arrested, and hauled off to jail. Although the charges were eventually dropped the school has still suspended him, for what it is unclear. Some have claimed this is evidence of an anti-Muslim attitude in this country, unfortunately I think it is indicative of something far worse: anti-intellectualism. Those that do things we don’t understand are scary and must be stopped. Time to start passing laws to restrict access to electronic parts – that will keep us safe.

This fear driven anti-intellectualism has already infected the natural sciences at the K-12 level. Some wonder why science is on the decline in this country, but when it comes to the venerable science fair a mountain of regulations scares off all but the most persistent or well-connected students interested in chemistry or biology. Both of my sons have gone through the science fair process and the message was loud and clear: unless you enjoy filling out forms and getting multiple approvals, choose a topic in an area other than biology or chemistry. Science in this country is dying a slow death of attrition. With each new generation there is yet another layer of regulation winnowing away those that pursue that path until one day I suspect one will need a law degree before they can even consider a science career.

I will offer up one more personal example. When my father was a teenager he actually made nitroglycerin. Why? He was fascinated by chemistry and wanted to see if he could do it (he discreetly detonated it in his backyard when done, much to the chagrin of my grandmother!) My point is that today if he could even manage to get his hands on the starting materials he’d be branded a domestic terrorist and thrown in jail. But because he was fortunate enough to live in a time when society was not so fearful and uptight, he took that passion for chemistry and turned it into a career that eventually gave rise to one of the few remaining US manufacturers with worldwide sales. People ask “where are all the jobs going?” – they aren’t going anywhere, they are being aborted before they ever even had a chance. Every rule and regulation or absurd response smothers a student’s curiosity and quenches the possibility of future companies and jobs. As with cancer, it is the damage we do not see that is far more insidious.

September 21 / 2015

Tiger by the Tail

With the ongoing debate about the “Iran Deal” and whether or not it is “good” or “bad” no one has thought to ask why should there be a “deal” at all. Think about it – wherefrom does the United States, or any other country, assert the right to dictate to other nations what they may or may not do within their own borders? Do you think our government or citizenry would stand for one second if say France, Brazil, and Argentina got together and told the US government it must immediately cease all production of nuclear weapons and dispose of those that it had? The idea is laughable and yet that is exactly what our government, in league with other countries, is dictating to the Iranian government. Now make no mistake, I’m no apologist for the Iranian government. All governments are so bad the only way to rank them is from least bad to worst. But, if we are to accept the narrative of the statists, namely that the people’s of each country have the right to elect their own government (and yes, Iran is a republic with elections) and be ruled by them without external influence, then certainly the hubris of demanding that the people of Iran beg for permission to behave as other countries is evidence of rank hypocrisy.

Nobody asks why are trying to prevent Iran from building a nuclear weapon. To answer that we must ask why do we think they would behave any differently than other bomb-holding nations. The simplistic answer is, “they hate us” or “they hate Israel”. But why? People don’t just start hating other people for no reason whatsoever. Some might say it is their religion that drives them to hate us. But if so, then it seems quite odd none of these feeling manifested themselves prior to 1953. What’s so special about that year? Well it is the year the UK and US governments orchestrated a coup of the democratically elected Prime Minster of Iran, Mosaddegh, and the installation of our puppet dictator the Shah. Perhaps living 25 years under the Shahs’ brutal regime tended to foster a bit of resentment among the populace. Perhaps US aid to our good friend Saddam Hussein and Iraq in its war against Iran in the 1980’s made them somewhat skeptical of the neutrality of the US. That’s not to say that if Iran did acquire a bomb and used it that it would be justified, but it would at least be understandable in the same sense we can understand why a battered wife, after enduring years of abuse, would buy a gun and kill her husband. As our fictional friend Commander William Adama once said, “Sooner or later, the day comes when you can’t hide from the things that you’ve done anymore.”

Like a parent who abused their children when they were young and helpless, there comes a day when those children grow up ready to strike back. This deal is an attempt to forestall that inevitable day of reckoning a bit longer. We have been propagandized to fear that day will be marked with a mushroom cloud. But the ruling class knows that won’t happen, they are far more concerned that if Iran acquires nuclear capability then their power and influence will be reduced and they will have no choice but to treat Iran as an equal (or at least no longer meddle with them). North Korea has a far more evil government than Iran and yet we hear nothing in regards to “regime change”. It couldn’t be because North Korea has a nuclear weapon could it? Just as a gun on the hip commanded respect in the old west, so today does a nuke in ones arsenal grant one the right to be left alone. The idea that Iran would nuke Israel is laughable. Israel has its own nukes and would instantly respond in kind. But even more so, the geography of it makes no sense. It would be like New Jersey nuking Long Island and expecting Delaware, Rhode Island and Connecticut to not get upset by having a nuke dropped in their backyard.

Iran is like a mistreated tiger that we have firmly grasped by the tail. We know if we let go we may very well get bit, or worse. But that cannot go on forever. Someday we must let go. Perhaps if we do so voluntarily by lifting all sanctions and extending a hand of respect and friendship we can show we are serious about making amends for the past misdeeds of our government. That will not only pave the path toward real peace but will disarm the arguments of those in the Iranian government who, like our own chicken hawk Neocons, are saber rattling, using our bellicose behavior as proof of their need to strike against us. Remember, the Japanese didn’t just wake up one day and decide to bomb Pearl Harbor; the US had a years long Naval blockade – economic sanctions – on Japan. Actions have consequences. Some say to have peace you must prepare for war, but sometimes preparing for war sends the signal that there can be no peace.

September 15 / 2015

Living Under the Mirage of Law

Respect for “the law” held by liberals and conservatives alike is entirely a consequence of their own personal stance on its validity. For example, the Supreme Court found in Citizens United that free speech protection does indeed extend to corporations, but since that didn’t sit to well with liberals (who are eager to selectively muzzle corporations they disagree with) they applaud any attempt to undermine that decision. The second amendment guarantees a right to individual gun ownership, but again liberals will hardly shed a tear when local officials defy that right with onerous restrictions. Likewise, Roe v. Wade and Obamacare are settled constitutional law (according to the Supreme Court) and yet conservatives will do whatever they can to subvert the spirit and intent of these laws. With conservatives the cognitive dissonance of unconditionally supporting cops (even when throwing grenades into a baby’s crib) but opposing taxes creates unexpected results. Last year Eric Garner chose to ignore New York’s laws regarding selling untaxed cigarettes and paid the ultimate price for his impertinent obstinacy in not bending to the will of the state (death by cop). And what did the putatively tax-averse conservative do? Rather than commending his act of tax-rebellion, they hid behind a wall of cowardice in proclaiming, “well, the law is the law and it must be followed.” I guess they’re only opposed to onerous taxes that affect them.

Religious conservatives are now all too happy to do a full 180 on the principal of “follow the law” and heap accolades upon someone who defies the law – because they happen to agree with her. Kim Davis, clerk of the court for Rowan County Kentucky, is being held up as a noble heroine for her staunch refusal to issue marriage licenses to gay couples. There aren’t many things one can be sure of in life but of this I am most certain: had the court ruled the other way and we now had a clerk issuing marriage licenses to gay couples in defiance of that decision, conservatives would be quite vocal on the sanctity of the “rule of law” and that officials have a solemn duty to carry out the law despite their own personal misgivings.

At one time the Fugitive Slave Act, Jim Crow, and Japanese internment were law but I dare say you’d be hard pressed to find anyone today who would view people that ignored those laws as being guilty of anything other than heroism. So where does this leave us? If sometimes it really is ok to ignore the law and sometimes it (supposedly) isn’t, then perhaps the problem is not with a societal lack of unwavering respect for “the law” but rather with the laws themselves. This lack of solidarity over what constitutes valid law is merely a reflection of the fact that society is composed of individuals who don’t all agree on everything. That is ok. I have some shocking news: it is possible for people to live together and not be forced to live the exact same way.

Laws of nature cannot be broken; laws of man can. By labeling the latter with the same appellation as the former, society deludes itself into believing the two are equivalent in their capacity to govern human behavior. Man’s laws are that fiction that implies human behavior can be constrained by mere ink. And if ink alone doesn’t work then we now have our excuse to “enforce” its edicts by any means necessary. Law is not protection from aggression but rather an excuse to engage in it – “look, he broke the law, go get him!” Laws against murder, rape, or theft are not what potentially protect us from such acts, rather feedback does. That is to say, contained within the act itself is the basic natural right to reciprocally respond to it (the right of self-defense). The real and certain potential for instantaneous reciprocity is the actual deterrent that keeps criminals at bay, not mere laws.

Rules (laws) are acceptable if one has affirmatively consented to them (and consent does not mean merely being born within invisible walls), but without consent mere ink can not convey the right to aggress against others because they choose not to follow particular rules concerning taxation, social behavior, or other non-aggressive behavior.

There is nothing mistaken in thinking this law or that law is unjust and should be ignored; all non-property rights violation laws are but mere opinion enforced with guns. The real crime here is engaging in the hypocrisy of believing we must live under a rule of law while simultaneously ignoring the laws you don’t like. Don’t be a hypocrite; admit that forcing others to live according to your beliefs is dishonorable and in that moment you will have earned the right to live unmolested by the beliefs of others. If you espouse aggression against others, then don’t come crying when others aggress against you.

September 09 / 2015

Paddling in Circles

One of the more frustrating “Trumpisms” is his idea that in order for American to “win,” US exports must exceed US imports. He sees the entire country as just one big corporation whose sole purpose is to make a “profit” by exporting more than it imports (that is, sells goods at a greater value than what it paid for them). This simplistic viewpoint is deeply flawed. It presumes trade is a zero-sum game where one side always “wins” and the other side “loses” in the exchange. Indeed this mindset would mean every time we buy groceries the store has “won” and we have “lost.” Trade is always a win-win game; both parties have gained more than they gave up, otherwise they would not have made the exchange.

Viewing trade at a macro-level is myopic at best (as it ignores the underlying individual decisions being made by billions of people) but in order to make a point we will proceed with that fiction. That point is this: a trade surplus or deficit can never exist. Although that may sound shocking at first it really shouldn’t when you consider the nature of any trade. If I buy a candy bar, I hand the clerk a few dollars. Does the store now have a trade surplus with respect to me? Do I have a trade deficit with respect to the store? Of course not. The store traded away a candy bar and traded in money. I did the exact reverse. So when we consider China and US trade we see that China sends us a whole host of goods and we send them green paper rectangles. Now, ignoring the fact that Federal Reserve is constantly swelling the money supply for its friends on Wall Street, we’ll assume that the supply of US currency is constant. Given that assumption we must ask: how did we acquire those pieces of paper to give to China? We got them by producing goods and services for someone else. So if we send $x to China for $x worth of goods A that means we had to first produce $x worth of goods B. China didn’t want goods B, they wanted the money. That is the nature of indirect exchange and is why money is an emergent property of trade (it solves the double coincident of wants problem).

Ok, but some will say that’s all fine and good, but the problem we have is that the total export of goods to all countries is less than total imports of goods from all countries. So even though the US may have a trade surplus with respect to US dollars, we have a deficit with respect to goods. That is true. But it doesn’t it matter, or rather it shouldn’t matter. The only reason this is viewed as a problem is because of the artificial attempts to solve it actually make the problem worse. In order to explain the problem we must once again assume that the quantity of money is constant. In that case, as more goods come into the US and more money flows out of the US there will be fewer and fewer dollars remaining in the US. This is called deflation (a contract of the quantity of money). This is natural and does not cause depressions or any other nonsense like that (no matter what your 4th grade teacher told you). Under deflation money is in high demand (because there isn’t a lot of it), which means the money price of goods decline (in order to get that scarce money, people will trade more and more goods for it – hence prices fall). So if prices of goods made in the US fall, what do you think that would do in terms of making American goods more competitive to overseas buyers with fistfuls of dollars? That’s right, they’ll start buying all those cheap US goods which will naturally swing the trade pendulum the other way, with more goods leaving the US than coming in and likewise more money coming in than leaving.

That this does not occur presently is a testament to how much the Federal Reserve and US monetary policy has distorted these natural incentives. The Federal Reserve short circuits this natural feedback system and inflates the money supply. This very temporarily makes US goods cheaper overseas (buy devaluing the exchange rate of the US dollar relative to other currencies that are inflating less rapidly), but (a) it doesn’t last long because other countries quickly adjust their inflation to counterbalance the effect and (b) it has the deleterious side effect of making US goods MORE expensive for US buyers (that’s what inflation does, it increases the money price of goods). So, under the natural system of deflation ALL prices fall which benefits both domestic and international trade. However under the artificial Fed induced inflation system we have domestic prices rise while relative prices for international buyers fall for a short period but then quickly also rise resulting in market disruptions and distortions. Using money creation to solve trade problems is like rowing a boat with one paddle forward and the other paddle backwards.

If we want to “fix” trade we need to examine the current incentives created by the distortions into the market introduced by Fed monetary policy. Only then will we see we need to do less, not more, to “fix” the situation.

Anchors Away!

Donald Trump has finally brought up a legitimate point in the ongoing debate over illegal immigration (as opposed to his usual economically illiterate xenophobic racially-tinged fear mongering). The courts have long used the 14th Amendment as a justification for birthright citizenship, that is, the notion that one instantaneously acquires US citizenship merely by being birthed within US territory. This interpretation has created the phenomenon known as “anchor babies”, that is, the children of immigrant women (legal or otherwise) who enter the US merely to give birth. By virtue of the citizenship status of the newly birthed, the entire extended family may to varying degrees be granted residency status. Unconditional birthright citizenship (‘Jus soli’, right of the soil) is a peculiarity of the New World. It is almost exclusively found in the Americas. Everywhere else it is unknown or exists only with many conditions. The rest of the world follows a system of ‘jus sanguinis’ (right of the blood) which means that citizenship flows from the citizenship status of the parents. On its face this does seem to be the more practical approach. Would you want your child saddled with the citizenship of some foreign land you just happened to be travelling through at the time of her birth? Indeed that has happened to a number of “accidental Americans” who have never lived in the US but are labeled as tax cheats by the IRS because of an accident of birth location.  Birthright citizenship seems to be primarily a legal artifact found among those former New World countries that sought to rapidly increase populations. In the US the amendment merely codified what was already common law practice at the time while also unambiguously establishing citizenship for former slaves.

Contrary to popular opinion, birthright citizenship in the US is not entirely unconditional. The condition it hinges on is normally ignored as its meaning in modern parlance is somewhat opaque to those without a legal or history background. The amendment states, “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and The States wherein they reside.” The key clause here is “and subject to the jurisdiction thereof.” So citizenship requires not only that you be born within US territory but that you also be subject to the jurisdiction of the US government at that time. You could only be subject to such jurisdiction if your parents (your legal guardians) were subject to such jurisdiction. At first glance it would seem that applies to anyone in the US, citizen or not. After all, anyone who kills someone or rob them, is “subject” to US laws against it, right? Well yes that is true, but the key word our modern ears need is the one that was obvious and thus unspoken for those in the 19th century. The latent word is “complete” as in “the complete jurisdiction thereof”. “Complete jurisdiction” is redundantly the same thing as “jurisdiction” because both stand in contrast to “partial jurisdiction”. Partial jurisdiction means one is subject to laws against murder, theft, etc., but likewise are not subject to laws related to the obligations of citizens. A foreigner (or more legally precise, an alien) is a citizen of another state and thus by virtue of that foreign allegiance cannot be subject to the complete jurisdiction of the US. (e.g. an alien is not required to serve on a jury, may not vote, may not be drafted, etc).

So, in short this means the proper interpretation of the “citizenship” clause of the 14th amendment is that if both parents are already citizens of another state (owe allegiance to another state, thus not subject to the complete jurisdiction of the US) then one does not acquire US citizenship at birth. If the parents are stateless (or one is orphaned) then one could acquire US citizenship. The proof that this is the proper interpretation is found both in practice and via first hand accounts on the drafting of this amendment. In practice, American Indians, who were not subject to the complete jurisdiction of the US but who were nevertheless born in US territory, were not made citizens after this amendment was passed. Indeed it was not until 1924 that the Indian Citizenship Act made them US citizens. If the 14th amendment were interpreted the way it is today then no such law should have been necessary. Clearly there has been a change in interpretation. But don’t take my word for it, let’s hear what the author of the citizenship clause, Senator Jacob M. Howard (MI) had to say on it in 1866: “This amendment which I have offered is simply declaratory of what I regard as the law of the land already, that every person born within the limits of the United States, and subject to their jurisdiction, is by virtue of natural law and national law a citizen of the United States. This will not, of course, include persons born in the United States who are foreigners, aliens, who belong to the families of ambassadors or foreign ministers accredited to the Government of the United States, but will include every other class of persons.”

August 24 / 2015
Author Greg Morin
Comments No Comments

Murphy vs. Block: May Libertarians Accept Government Money?

Tom Woods recently had a debate between Bob Murphy and Walter Block on whether or not libertarians should accept government money (through employment, services rendered, or welfare). You can listen here.

My take on this question takes a bit from both of their arguments as I think they both make good points, however I think Murphy edged Block out just a bit in this debate. Walter’s reductio absurdum don’t really work (roads, currency, etc) because with those things we have no choice It’s like arguing the slave gives his imprimatur of approval to the slaveowner because the slave accepts food, clothing, and shelter from the slaveowner. He doesn’t, he has no choice in the matter (technically there is a choice in the sense that yes one can choose to die, but that’s not a practical nor principled choice).

I think what it comes down to is choice. If one has no choice in the matter then it is acceptable to use such government monopolized service. However, when there is a choice then one can debate principle vs outcome and neither is really “wrong”. Walter makes a good point in that if one can undermine the core mission of the state by working for it/with it then that can be a net gain for liberty (Ron Paul being the most notable example). But Bob also makes a good point in that if everyone withheld their services from the state, it would cease to exist. Of course getting 100% of people to simultaneously withdraw their consent is never going to happen so in the real world we have to make decisions about whether our actions on balance harm or help more people. Now yes, that utilitarian principle is one you can drive a bus through and use it to justify anything practically. But I’m saying we are only concerned with applying that principle in the very narrow question of “should a libertarian participate in state actions voluntarily?”. One can choose to be entirely pacifist when it comes to the state and simply accept all its abuses and never try to get anything back, there is nothing wrong with that. But there is also nothing wrong with defending oneself from the transgressions of the state – proportionate reciprocal responses to aggression being permissible are a cornerstone of libertarian philosophy.

Simply taking money from the state for the sake of doing so such that it has less serves no purpose whether they give it to you for performing a service or you steal it directly. The state is a thief and will simply thieve some more to get back whatever it wants. Thus your taking indirectly harms others via the state as your proxy. So I disagree with Walter on this one. There is no amount you can take that will weaken it, they will always just take more. However, to the extent the state has taken from you, then you are fully in your rights to take an equal amount back (or to be very principled about it, an amount that equals the difference between what the state took and what you believe you would otherwise have paid a free market entity performing the same functions as the state.) So if one can get tax credits, government aid, grants, etc that offset the excess amount robbed from one in taxes, that is ok. If one exceeds what they had stolen from them, then that would be wrong and one must stop.

So in a practical example, Bob should feel fine about accepting payment to give a lecture at a state school if his remuneration never exceeds what he paid in taxes (or should have paid for services received). But Bob should not set up a lecture business that accepts billions of dollars from the state to give lectures. That zero boundary between net tax payer vs tax receiver demarcates one’s transition from capitalist to crony-capitalist.

So in summary, here is the decision tree:

  1. Do I have a choice? If “no”, then it is permissible to use such service, since after all, you have no choice.
  2. If you have a choice then is the amount you are getting less than the excess amount robbed from you in taxes for a given time frame? If yes, then go right ahead, nothing wrong with taking from the thief that took from you
  3. If the amount exceeds the amount robbed from you in taxes then here is where it gets speculative and subjective: on balance are you advancing the cause of liberty by receiving more than you lose in taxes? If yes then this is ok, but… this is a very difficult thing to determine, be cautious. If no, then you should not engage in such activity if you want to remain principled and not open yourself up to the charge of being a hypocrite.
August 20 / 2015

You can lead a horse to a carousel, but you can’t make him eat a free lunch

A persistent myth in this country is that even though the government may do things we do not approve of, We the People ultimately have control of the reigns. We elect representatives, senators, and a President and it is they that decide how this country is run. So the theory is that if we don’t like what they do we can “vote the bums” out. That Congress’ approval rating is perennially in the low teens and yet incumbents are re-elected at a rate exceeding 80% speaks volumes about how successful that strategy has been. However, the dirty little secret is that most government functions originate not from elected officials but rather faceless bureaucrats who write, approve, and enforce what is known as “administrative law.” This process proceeds quietly in the dark underbelly of Washington, completely immune from “outsider” (that is, “the peoples”) influence. Like the static animals and chariots of a carousel, the unchanging bureaucracy provides support to our elected officials, who come and go like so many children believing they are driving when in fact they are merely passengers.

Case in point: The Department of Labor. Last month President Obama announced that the Department of Labor would be implementing a doubling of the white-collar salary threshold for overtime exception to $50,440. Although there is a request for comments period from the public, ultimately none of that really matters. The DOL committee voting on the change is in no way bound by those comments. President Obama knows that getting a minimum wage increase through Congress is likely to fail. However he can unilaterally ramrod a change to the overtime rules with little oversight if he employs the autonomous rule making authority of the DOL. Such changes do not require a new law or public debate. Only a handful of bureaucrats need to simply decide “ok, let’s just change this” and that’s it.

The shockingly sad part about all of this is not so much that a handful of people get to substitute their personal opinion of acceptable work conditions for the opinions of 120 million employees and employers but rather that they actually think this change will, in the words of Obama “help promote higher take-home pay… and shore up the middle class.” You can lead a horse to water, but you can’t make him drink. These people seem to labor under the fairy tale that employers are just sitting on a big pile of cash that they selfishly refuse to share with their employees. So to rectify this we need the government to step in and force them to share. Employee wages are a business transaction just like any other. Each transaction is negotiated between both parties to a level that is acceptable, otherwise were it not acceptable there would be no exchange. If these transaction costs are externally forced upward then employers will respond just as anyone else would, cut back in other areas to compensate.

There is no free lunch. Newly overtime-eligible employees will find their base hourly rate decreased so that at the end of the year they still have made the same dollar figure. Employers will also cut back on discretionary bonuses and benefits or simply cut back on hours so that there is no overtime. This will force such employees to become more efficient with their time and those that can’t will find themselves demoted or unemployed. Another way employers may respond is to reduce the number of managerial positions, which ultimately makes it harder for people to climb the corporate ladder into solidly middle class wage territory.

Another aspect often overlooked by the ivory tower elite is that many employees do not want to be classified as overtime eligible. A job requiring clocking in and out is viewed by employees as a job that is “not important.” Somebody with a college degree making $45k a year feels demeaned if they are told they must now clock in and out like some pimply-faced fry cook. Being on salary is a point of pride for these employees who feel they have worked quite hard to earn that status. That the government is now condescendingly informing them that this is for their own protection reflects the magnitude by which those in government are out of touch with the real world. As with all government interventions, conditions are made worse, not better. Employees either lose benefits and bonuses, get demoted, or end up making the exact same as before but not without first being made to feel less important due to their new status as “just” hourly.

Job! 2016

With the 2016 Presidential election season in full swing it seems nearly every candidate (from far right Trump to far left Sanders) is falling all over themselves to do “something” about illegal immigration. Problem is, the top three economic reasons cited in favor of “closing the border” are utterly fallacious despite their unquestioning acceptance by the media and voters alike.


Fallacy#1: Immigrants force wages down making Americans poorer.

Reality: Wages have two parts: a money part (the number) and a real part (the buying power). The money wage is arbitrary and irrelevant because all that matters is the real wage – how much that arbitrary amount will buy. Lower money wages (like lower prices) reflect a concomitant increase in production and should be welcomed. Yes, the money wage is lower, but there is more “stuff” available to buy at lower prices than before, thus real wages increase. Where would you rather live, in a town with a population of ten or one thousand? How much more must everyone work to produce everything needed in the town of ten vs the town of one thousand? Many hands make light work – on this principal alone we should be welcoming more, not fewer, immigrants into this country.


Fallacy#2: Immigrants steal jobs.

Reality: This fallacy is rooted in the mistaken notion that “jobs” are a form of fixed resource welfare. It views jobs like soup at a soup kitchen; there’s only so much to go around (see Fallacy#3 below). This view sees jobs as a completely one-sided affair when in fact it is of course a mutual exchange; you can’t be “stealing” if you are giving something in return. So jobs “given” to immigrants are not welfare – they produce something in exchange. Ah, but you say a job “given” to an immigrant was thus “stolen” from an American. This rests upon the assumption that there is some ideal level of workers and we must not exceed that. Well if that is true than how can we have this totally unregulated system of childbearing in this country? There is no control over how many children are born and who ultimately enter the work force only to “steal” jobs from other Americans. Should we restrict births in order to ensure just the right amount of jobs in this country? Shall we soon face the specter of the “illegally birthed”?

It is not possible to “steal” a job because one cannot own their job. The term “stealing” is a red herring that misdirects us into thinking a crime of sorts has been committed when in fact the real issue is one of competition. Competition lowers prices or increases quality. Normally we welcome that…when we are the buyer of a good. But when we are the seller, well then the story changes doesn’t it? Immigration control is simply another flavor of protectionism intended to limit competition. It is no different than tariffs or other import restrictions. The seen benefits accrue to the sectors of the economy so protected (whether that be agriculture, steel, or labor) while the unseen harms inflicted upon the consumer paying higher amounts are ignored.


Fallacy#3: There are only so many jobs so more immigrants means fewer for everyone else.

Reality: Jobs are unlimited. They are unlimited because humanity will never quench its desire to alter the world. We create our own jobs when we perform work for our own benefit. Others can create jobs for us if they are allowed to save that which they do not consume (profit) and use it to entice others to perform work on their behalf. Since the creation of jobs by others is a direct function of the amount of money they have saved and the amount of money saved is a direct function of profit, then it follows that decreased profit (through higher taxes or costs) will necessarily reduce the quantity of jobs at a given money wage. If one could pay any wage that both parties agreed upon there would be no limit on the quantity of jobs available. Jobs could be doubled overnight if everyone paid one-half the prevailing wage.

Now you may be aghast in horror at the thought of making one-half what you do now. And therein lies the problem. We have becomes so fixated on the money wage we ignore the reality staring us in the face, which is that with twice the number of people employed, output would increase far beyond two-fold (owing to the synergy of combined resources). Honestly, would you really care if you made one-half the money wage you do today if it bought five-times as many goods than your current wage does?


The blind spot that infects every conversation about immigration vis-à-vis jobs is this central fact: we are all buyers and sellers in the economy. You cannot simultaneously protect yourself as a seller without harming yourself as a buyer. Decreasing money wages, when driven by the competition originating from increased production, are reflective of a necessary growth in real wages.

August 11 / 2015

Paddling Upstream

“We kept losing our men, they kept escaping from the factory life from a pesthole–till we had nothing left except the men of need, but none of the men of ability.” Atlas Shrugged, Chapter 10


This quote from Ayn Rand’s “Atlas Shrugged” highlights the ultimate outcome of a “to each according to his need, from each according to his ability” pay scale at the fictional Twentieth Century Motor Works. That this novel has been so eerily prescient on so many topics is a testament not so much to Ms. Rand’s prose but rather to her ability to recognize cyclical patterns that emerge in society due to those that succumb to ideas driven by emotion rather than reason. One of the most common fallacies is to conflate the value of one’s humanity (which is equal for all) with the value placed on what one produces. It is an easy error to make; after all it certainly seems “fair” that if two people work equally long and equally “hard” they deserve equal remuneration. Even though this fallacy (the labor theory of value) is easily overturned by considering the case of a mud-pie baker in comparison to an apple pie baker, it continues to infect the minds of all too many. When our leaders are infected with this nostrum, their position of power permits them to spread the damage far and wide. Governmental implementations of this idea include the minimum wage coupled with welfare. Such policies with one hand make it illegal for those with low experience or skills to work while with the other hand pays those same people to not work, crushing their spirit and the motivation to improve themselves.

Private implementation of this idea is more rare, but it does happen. The most recent and well-publicized example is that of Gravity Payments located in Seattle. The company’s CEO, Dan Price, apparently took a page from Atlas Shrugged and announced they would implement a new $70,000 minimum salary pay scale (that’s a $33.65 minimum wage).

Those on the left predictably rejoiced at this news – here was someone finally doing privately what they have been insisting for so long government must force everyone to do. Irrespective of who implements such a plan (public or private) it is doomed to failure on psychological grounds. The first signs of that failure harkens back to the Atlas Shrugged quote above – “we kept losing our men.” Early on two of Gravity Payment’s key employees quit citing the inequity of a pay scale they saw as rewarding the least productive at the expense of the more productive. Like a talent sieve there is nothing to retain or attract the more productive employee when it is need, and not effort, that is rewarded. Likewise, like an anti-talent magnet only those with the lowest drive and skillset will be attracted, for where else could they have any hope of earning such a high wage?

The irony here is that Mr. Price started his company in order to provide the lowest cost alternative in the payment processing industry. He saw others charging too much and he knew he could do the same for less (that is, be more efficient and hence more productive). Now he claims he will not raise prices in order to support this new wage scale (he’s already lost some customers over this fear). But, it seems, if he is going to be consistent it would be perfectly acceptable to raise prices and lay a guilt trip on his customers if they were reluctant to pay the higher rates. After all, his company “needs” the money to pay his employees who “need” their high wages.

Wages, like everything else, are a function of supply and demand. Demand is a function of the subjective valuations humans place on things. Supply is a function of the uneven distribution of varying talents. We can no more expect uniformity in wages than we can expect solidarity in opinion or an equal distribution of talents. One can paddle up stream only for so long; eventually nature will overpower our feeble attempts to counter to it.

August 03 / 2015
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