Tuesday, August 30, 2016

Clinton Economist Favors Force Over Freedom

Few candidates spell out their policy proposals in as much detail as Hillary Clinton, but there’s still room to wonder about how a President Clinton would set her agenda for 2017 and beyond.

One clue comes in the naming of Heather Boushey to be chief economist of her transition team, giving Boushey an inside track for a major political appointment. She is currently the executive director and chief economist of the Washington Center for Equitable Growth, and recently published “Finding Time: The Economics of Work-Life Conflict.” That book is one good source for which ideas might rise in a Clinton administration.

The central insight is that American institutions do not support a proper balance between work and family life, and that the burdens fall disproportionately upon women. The proposed remedies are an extensive set of government interventions, including paid sick leave, paid parental leave, subsidized child care and better care for the elderly to relieve care burdens on grown children.

Do we trust the legal machinery of government to be making that decision anew over decades of social and economic change?

This is a thoughtful and intelligent book, but for my taste Boushey holds too much faith in mandated and centralized solutions.

It is striking, for instance, that private insurance companies offered prescription drug coverage long before Medicare did, and many business employers offered benefits for same-sex partners before the federal government did. When it comes to innovation, including benefits innovation, the federal government is often a laggard, due to the nature of bureaucracy, political checks and balances and the one-size-fits-all feature of most legislation. I am therefore reluctant to give government a much larger role in managing American family lifestyles.

Boushey portrays her policies as boosting rather than restricting freedom of choice, but usually trade-offs are involved. She does argue that recent state-level experiments show that mandatory paid sick leave doesn’t destroy jobs, but there is not yet a lot of hard evidence on the question. And what works in California may not be well-suited to Mississippi.

The Long-term Effects of Government Intervention

Most likely, there is a big difference between short-run and long-run effects. For instance, employers value the workers they have, and are reluctant to fire them when labor costs go up. A lot of “pro-worker” policies thus seem to be a kind of magical free lunch. Over time, however, as a generation of workers turns over and is replaced, mandatory benefits represent a real added cost, evaluated anew, and employers will respond accordingly. They will cut the paid dollar wage, cut other job benefits, require more hard work, automate more, or cut back on plans for growing the business. The downward-sloping demand curve is the best established empirical regularity in all of economics, and in this context that means some laborers -- maybe most laborers -- will pay a price for their new benefits, one way or another.

So let’s say America’s future means better sick leave and pregnancy leave for employed women, but a narrower choice of jobs, including lower pay, for those same women. Is that better? And do we trust the legal machinery of government to be making that decision anew over decades of social and economic change? Keep in mind that there is an alternative mechanism, which for all its imperfections is far more flexible: Let companies and workers make such decisions through employment bargains.

Unrealistic Optimism

Boushey doesn’t estimate or indicate the expense of her proposed mandatory benefits, although she does suggest on page 1 that the cost would be “very small.” She is developing a new kind of supply-side economics, this time on the left, but like her right-wing counterparts she is running the risk of excess optimism about how much her suggested improvements will boost productivity in the system.

Workers, at the margin, actually receive higher workplace benefits than they ideally would desire, relative to being paid more cash.

I usually suggest comparing any proposed program for amelioration to the simple alternative of sending people cash or leaving more cash in their hands, whether through tax cuts, tax credits or outright payments. With that cash in hand, individuals could try to create better arrangements for child care, elder care, and other problems of work-life balance. Some might work fewer hours or take lesser-paying but more flexible jobs, relying on their cash transfers to make up the difference. Others would spend the money on better neighborhoods, better health care or better schools, or in some cases the expenditures will be wasted.

Freedom vs Government-Mandated Benefits

Might that freedom be better than receiving a big package of government-mandated benefits? There is already a big distortion in the employment relationship that comes from taxing money wages at higher rates than workplace benefits. Workers, at the margin, actually receive higher workplace benefits than they ideally would desire, relative to being paid more cash. The way to remedy that misallocation is a lower net tax on the cash, not more benefits.

A more left-wing version of the cash transfer query would ask this: If workers can claim more resources from their bosses for free, through the exercise of legal bargaining power, why not focus policy changes on boosting minimum and mandated wages?

“Finding Time” doesn’t find time to address, much less resolve, such questions. The most plausible response to these criticisms is that individual Americans cannot be trusted to make good decisions for themselves, and I am afraid that is the view being swept under the carpet here.

A version of this article was published by The Mercatus Center.

Tyler Cowen
Tyler Cowen

Tyler Cowen is an American economist, academic, and writer. He occupies the Holbert C. Harris Chair of economics, as a professor at George Mason University, and is co-author, with Alex Tabborak, of the popular economics blog Marginal Revolution.

This article was originally published on FEE.org. Read the original article.

Friday, August 26, 2016

Is the Fear of Markets Rooted in Neurosis?

Neuroticism - the tendency to experience negative emotions like anger, fear, and sadness - is a pillar of the Five Factor Model of personality.  Human beings routinely attribute their emotions to external circumstances.  For proximate causes, they're often right.  The underlying reality, though, is that some people - the highly neurotic - naturally focus on negativity.  Which brings me to one of my pet theories: neurotic politics.  Quick version: When neurotics turn to politics, they find an infinite series of reasons to feel bad, which helps them stay one step ahead of the realization that their fundamental problem is inside their own heads and can be fixed by no one but themselves.  In light of my pet theory, I was struck by this passage in War and Peace:

"This is what they have done with Russia!  This is what they have done with me!" thought Rostopchin, an irrepressible rage welling up in his soul against the someone to whom what was happening might be attributed.  As often happens with hot-tempered men his wrath had taken possession of him while he was seeking as object for it.

There is decent evidence that anti-market people are more neurotic, but is there a broader literature on neurotic politics I should know about?

Editor's note: See also this passage from Liberalism by Ludwig von Mises:

"He who accepts life for what it is and never allows himself to be overwhelmed by it does not need to seek refuge for his crushed self-confidence in the solace of a "saving lie." If the longed-for success is not forthcoming, if the vicissitudes of fate destroy in the twinkling of an eye what had to be painstakingly built up by years of hard work, then he simply multiplies his exertions. He can look disaster in the eye without despairing.

The neurotic cannot endure life in its real form. It is too raw for him, too coarse, too common. To render it bearable he does not, like the healthy man, have the heart to "carry on in spite of everything." That would not be in keeping with his weakness. Instead, he takes refuge in a delusion. A delusion is, according to Freud, "itself something desired, a kind of consolation"; it is characterized by its "resistance to attack by logic and reality." It by no means suffices, therefore, to seek to talk the patient out of his delusion by conclusive demonstrations of its absurdity. In order to recuperate, the patient himself must overcome it. He must learn to understand why he does not want to face the truth and why he takes refuge in delusions. (...)

In the life of the neurotic the "saving lie" has a double function. It not only consoles him for past failure, but holds out the prospect of future success. In the case of social failure, which alone concerns us here, the consolation consists in the belief that one's inability to attain the lofty goals to which one has aspired is not to be ascribed to one's own inadequacy, but to the defectiveness of the social order. The malcontent expects from the overthrow of the latter the success that the existing system has withheld from him. Consequently, it is entirely futile to try to make clear to him that the utopia he dreams of is not feasible and that the only foundation possible for a society organized on the principle of the division of labor is private ownership of the means of production. The neurotic clings to his "saving lie," and when he must make the choice of renouncing either it or logic, he prefers to sacrifice logic. For life would be unbearable for him without the consolation that he finds in the idea of socialism. It tells him that not he himself, but the world, is at fault for having caused his failure; and this conviction raises his depressed self-confidence and liberates him from a tormenting feeling of inferiority."

See also Mises's The Anti-Capitalist Mentality.

Reprinted from EconLog.

Bryan Caplan
Bryan Caplan

Bryan Caplan is a professor of economics at George Mason University, research fellow at the Mercatus Center, adjunct scholar at the Cato Institute, and blogger for EconLog. He is a member of the FEE Faculty Network.

This article was originally published on FEE.org. Read the original article.

Wednesday, August 24, 2016

Russian Smugglers Renovate Road Neglected by Government

Who will build the roads if not the government? As it turns out, even criminals will, if they need to.

The public- and profit-minded entrepreneurs of the black market in Belarussia have taken it upon themselves to improve business by upgrading their transportation routes. Smugglers adopted a gravel road from Minsk to Moscow, raised the road, widened it, and added more turning points to increase access for their heavy goods trucks (fruit weighs a lot). The secret project was quickly rewarded with heightened traffic and an eventual government takeover, complete with customs.

If black market businesses can successfully build up a road under the table, imagine what "legitimate" entrepreneurs would build out in the open.

The Moscow Times has the full story:

"Smugglers have transformed the gravel track in the Smolensk region in order to help their heavy goods vehicles traveling on the route, said Alexander Laznenko from the Smolensk region border agency. The criminal groups have widened and raised the road and added additional turning points, he said. 

The road, which connects Moscow to the Belarussian capital of Minsk, is known to be used by smugglers wishing to avoid official customs posts and is now under official surveillance. 

A convoy of trucks was recently stopped on the road carrying 175 tons of sanctioned Polish fruit worth 13 million rubles ($200,000). The produce was subsequently destroyed, TASS reported.

Local border guards, customs and police officers have checked over 73,000 vehicles entering Russia from Belarus this year, Laznenko said, claiming that the number of heavy goods vehicles crossing the border from Belarus has increased dramatically in the last year, he said."

 

Eileen L. Wittig
Eileen L. Wittig

Eileen Wittig is the copyeditor for online content at the Foundation for Economic Education.

This article was originally published on FEE.org. Read the original article.

Friday, August 19, 2016

Venezuela's Road to Literal Serfdom

In his classic 1841 book on financial bubbles, Extraordinary Popular Delusions and the Madness of Crowds, Charles Mackay observed, “Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”

Mackay covered religious and political delusions, too. “We see one nation suddenly seized, from its highest to its lowest members, with a fierce desire of military glory; another as suddenly becoming crazed upon a religious scruple," he recounts, "and neither of them recovering its senses until it has shed rivers of blood and sowed a harvest of groans and tears, to be reaped by its posterity.”

Venezuela is sowing its harvest of “groans and tears." Due to the breakdown of civil society in the country, even war-plagued Syrians feel more safe in their homes than do Venezuelans. Venezuelans are so hungry that they cried at the sight of food in Columbia. Recently the hungry broke into a zoo to kill a horse for its meat. Literally, they have become serfs that may be required to work 60 days or more in agricultural fields.

Venezuela has the world's worst rate of economic growth, and the worst inflation rate. It has become like "a gangster state that doesn't know how to do anything other than sell drugs and steal money for itself." Socialism has virtually destroyed civilization in Venezuela making it seem like a "hurricane [has] swept things away."

When the history of this tragic period in Venezuela is written, the population will have plenty of “culprits” to blame. In blaming many will eschew their own responsibility. Some will blame Chavez; others will blame Maduro. Some will follow their beloved leaders and continue to blame the "elite" and the capitalists. The true believers will continue to insist there is no inherent flaw in socialism; they will simply say mistakes were made that will not be made again.

We are not the victims of the world we see. Our delusions, our beliefs have consequences. The fact that our delusions are often invisible to us does not make them any less powerful or any less consequential. Again, Mackay observed that a population subject to delusions “only recover their senses slowly, and one by one.”

The new idea of freedom “gave the socialists another word in common with the liberals and they exploited it to the full.

Venezuelans have not yet recovered their “senses.”  Caracas radio host Glen Martinez stubbornly insists that the “reforms” that Chavez instituted will never be reversed. “We are not the same people we were before 1999,” Martinez said. Many share Martinez's sentiments; daily the true believers still march and  promise to spill their blood in support of the government.   

There is no better book than Friedrich Hayek’s classic The Road to Serfdom to explain the popular delusions that helped to virtually eliminate the market economy and civil society in Venezuela. Writing during the depths of World War II, Hayek intended his book as a warning “to the socialists of all parties.” What happened in Venezuela can happen wherever a critical mass of the population begins to hold certain delusionary beliefs.

Popular Delusion 1: Freedom Means Freedom from Necessity

Hayek points out that freedom in Western countries traditionally meant “freedom from coercion, freedom from the arbitrary power of other men.”

Socialists point to a “new freedom” which is “freedom from necessity” which releases us “from the compulsion of the circumstances which inevitably limit the range of choice of all of us.”  

Hayek adds, “the demand for the new freedom was thus only another name for the old demand for an equal distribution of wealth.”

Believing that these two types of freedom can be combined is delusional. Hayek points out that the new idea of freedom “gave the socialists another word in common with the liberals and they exploited it to the full....Few people noticed [that the word freedom was being used differently] and still fewer asked themselves whether the two kinds of freedom promised really could be combined.”

Popular Delusion 2. Only Coercive Planning Can Coordinate Activity

Almost every individual and organization plans. Writes Hayek, there is no “dispute about whether we ought to employ foresight and systematic thinking and planning our common affairs.”  

Hayek thought that to plan or not to plan is not “the real question.” Instead, we should ask if “the holder of coercive power should confine himself in general to creating conditions under which the knowledge and initiative of individuals is given the best scope so that they can plan most successfully; or whether a rational utilization of our resources requires central direction and organization of all our activities according to some consciously constructed ‘blueprint.’”

Those who cherish such delusions may find themselves hungry.

The humanitarian disaster in Venezuela has been a long time in the making. In 2010, the hungry waited while "2,340 shipping containers with more than 120,000 tons of rotting food (estimated to feed 17 million people for one month)" sat at the government run port of Puerto Cabello.

Believing that the “coercive or arbitrary intervention of authority,” can coordinate and adjust our individual activities is delusional. With this delusion comes disbelief that a market economy can solve problems and advance society. Those who cherish such delusions may find themselves hungry.

Popular Delusion 3: Economic Choice is Not Necessary

Hayek enumerates the warning signs that a society is on the road to socialism. On the road to socialism, people blame “the system” for their troubles and “wish to be relieved of the bitter choice which hard facts often impose upon them.” They “are only too ready to believe that the choice is not really necessary, that it is imposed upon them merely by the particular economic system under which we live.”

Chavez was a master blamer; for many years, the population found their own hatreds nourished by his. Capitalism was a frequent target of Chavez’s lies: “[Capitalism is] an infernal machine that produces every minute an impressive amount of poor, 26 million poor in 10 years are 2.6 million per year of new poor, this is the road, well, the road to hell."

There is support for coercive planning, because individuals “feel confident that they will be able to instill into the directors of such a society their sense of the value of the particular objective.”

Like other tyrants, Chavez didn't neglect the old, reliable villain of the Jewish people. He railed, “The descendants of those who crucified Christ... have taken ownership of the riches of the world, a minority has taken ownership of the gold of the world, the silver, the minerals, water, the good lands, petrol, well, the riches, and they have concentrated the riches in a small number of hands.”

In blaming "the system," Hayek observes that even well-meaning people ask, “If it be necessary to achieve important ends," why shouldn't the system "be run by decent people for the good of the community as a whole?”

As Jeffrey Tucker has observed, “socialists are scarcity deniers.”  Socialists exploit the fact that, in Hayek’s words, “we all find it difficult to bear to see things left undone which everybody must admit are both desirable and possible." In societies turning to socialism, there is no appreciation of scarcity. There is no appreciation that “things cannot all be done at the same time, that anyone of them can be achieved only at the sacrifice of others.”

Thus, there is support for coercive planning, because individuals “feel confident that they will be able to instill into the directors of such a society their sense of the value of the particular objective.” In other words, there is the delusion that planners will follow their wishes and they will receive more of the goods that they want, sparing them from the necessity of making a choice. Why choose between spending your own savings on housing or education if you've been assured that you are entitled to both at society’s expense?The hard to give up delusion of socialists is that there are coercive plans that will benefit all.

It is delusional to assume that the role of an effective political leader is to control the uncontrollable. To believe that scarcity can be eliminated and hard choices averted is delusional.

Popular Delusion 4: There is a “Common Purpose”

It is essential to understand why there can be no such thing as the “common purpose.” All coercive plans will be win-lose, benefiting some and harming others. Hayek explains, “The welfare and happiness of millions cannot be measured on a single scale of less or more. The welfare of the people, like the happiness of a man, depends upon a great many things that can be provided in an infinite variety of combinations.”

The hard to give up delusion of socialists is that there are coercive plans that will benefit all. Venezuelans have seen the means of production nationalized in the name of the common good and with every intervention their standard of living fell further.

Since there is no majority to agree on a specific plan of action to promote a nonexistent “common good,” the worst get on top in a centrally planned economy.

Nothing can be done for its own sake in a totalitarian state. “Every activity must derive its justification from a conscious social purpose” determined by the totalitarian rulers. “There must be no spontaneous, unguided activity, because it might produce results which cannot be foreseen and for which the plan does not provide. It might produce something new, undreamt of in the philosophy of the planner.”

Popular Delusion 5: The Ends Justify the Means

Those who would coerce believe they know what is best for you. If a few eggs have to be broken, that’s a small price to pay for the socialist omelet.  Hayek warns that the idea of "the ends justify the means" leads to amoral totalitarianism: “There is literally nothing which the consistent collectivist must not be prepared to do if it serves ‘the good of the whole’ because ‘the good of the whole’ is to him the only criterion of what ought to be done.”

Since there is no majority to agree on a specific plan of action to promote a nonexistent “common good,” the worst get on top in a centrally planned economy.

The “worst” will take advantage of the fact that agreement can be more readily forged by focusing on a “negative program.” This negative program revolves around stirring up primitive hatred contrasting “us and “them.”  If Venezuelans were not susceptible to the stirring of delusional passions, Chavez and Maduro would’ve been unsuccessful in obtaining “the unreserved allegiance of huge masses.”

The “masses” that the “worst” seek to mobilize will include those who themselves are not grounded on principles. Hayek cautions that those having “imperfectly formed ideas are easily swayed;” their “passions and emotions are readily aroused.”

The End of the Road

“To make a totalitarian system function efficiently,” Hayek observed, “it is not enough that everybody should be forced to work for the same ends. It is essential that the people should come to regard them as their own ends.”  

The end game is a population that doesn’t realize it is on the road to literal serfdom. Hayek writes: “If the feeling of oppression in totalitarian countries is in general much less acute than most people in liberal countries imagine, this is because the totalitarian governments succeed to a high degree in making people think as they want them to.”

Venezuelans will have to recover from their delusions “one by one.”

This is why a totalitarian state seeks to eliminate private schools and socialize education.

In 2012 the Chavez government implemented "ResoluciĆ³n 058." “The resolution states that all decisions in every school — public or private — must involve parents, teachers, students, workers, and the community” in order to "construct a new model of socialist society." This model includes the belief that the State is the source of well-being.

Venezuelans will have to recover from their delusions “one by one.” A point in time will come that, due to their suffering, a critical mass of Venezuelans will no longer think as the government wants them to think. In the meantime, let us remember that Hayek wrote The Road to Serfdom to warn that the descent into socialism can happen anywhere. Let us have empathy for the suffering of the Venezuelans; and as Hayek would have hoped, let us also watch and learn.  

Barry Brownstein
Barry Brownstein

Barry Brownstein is professor emeritus of economics and leadership at the University of Baltimore. He is the author of The Inner-Work of Leadership. He blogs at BarryBrownstein.com, Giving up Control, and America’s Highest Purpose.

This article was originally published on FEE.org. Read the original article.

Wednesday, August 17, 2016

The IRS to Michael Phelps: "You Didn't Win That!"

You didn’t win that” might as well be the U.S. government’s official congratulatory platitude to American Olympians who succeed in Rio this summer.

This year, the IRS will impose a nearly 40% “victory” tax on athletes who take home gold, silver, and bronze medals for the United States.

American Olympians earn $25,000 for gold medals, $15,000 for silver, and $10,000 for bronze, paid for by the U.S. Olympic Committee. But according to the non-profit advocacy group Americans for Tax Reform, “a gold medalist from Team USA could end up facing a tax bill of $9,900 per gold medal, $5,940 per silver medal, and $3,960 per bronze medal.”

Though “these are the maximum possible tax amounts, and vary widely based on an individual’s tax circumstances and available deductions,” even the potential amounts of money owed are staggering.

His gold medals for that year alone — if taxed at up to $8,750, the 35% rate — may have earned the government $70,000.

Michael Phelps' Victory Tax

Michael Phelps, the famed cannabis-smoking swimmer — who, at 31, has conquered Olympic competitions in Rio, Athens, Beijing, and London — is arguably one of the most lucrative cash cows for the IRS. This year, he won five gold medals and one silver, making the total he could owe the government as high as $55,000.

Over the course of his Olympic career, he has won 23 gold medals, earning eight at the 2008 Beijing Olympics alone. At that time, the tax rate lingered at around 35%, making his payout to the IRS slightly smaller per medal than this year’s but still constituting a hefty tithe to the State. His gold medals for that year alone — if taxed at up to $8,750, the 35% rate — may have earned the government $70,000. Because Phelps’ net worth is $55 million, it’s likely he is required to pay the maximum amount.

Even the medals Olympians take home are subject to taxation, but because they are much less valuable than the cash prizes, they yield a smaller ‘profit’ for the IRS.

In 2012, Senator Marco Rubio introduced legislation to eliminate the tax on American Olympic athletes who win medals. “We can all agree that these Olympians who dedicate their lives to athletic excellence should not be punished when they achieve it,” he said at the time.

The bill was defeated.

However, amid ongoing indignation at the practice, a new version re-emerged this year. Sen. John Thune (R-S.D.) and Sen. Chuck Schumer (D-N.Y.) introduced a bill seeking to lessen the burden on Olympians. It has already passed in the Senate and is poised to gain approval when Congress reconvenes in September.

“It seems like a small thing, but when America’s Olympians and Paralympians bring home the gold, our nation should congratulate them – not send the IRS to claim a share of their medal,” said Ways and Means Committee Chair Kevin Brady (R-Texas) on Monday.

This argument reveals a desire to create an “even” playing field in a country where tax codes are convoluted and bureaucratic.

Leftists' Fair Share of Olympians' Earnings

But some argue the tax is fair and reasonable.

Proponents suggest most Olympians’ income brackets are not high enough for them to owe the maximum $9,900 on gold medals. In fact, many are already struggling financially, meaning they likely won’t owe the full potential amount. And as USA Today reports, “some or all of their massive training expenses would likely be deductible, whether they treat their sport as a business or a hobby.”

The Washington Post summarized the underlying reason leftists espouse for supporting the tax:

“That it’s unfair to the rest of America. By giving them a break on their winnings, the U.S. government is making a statement that Olympians’ successes are worth more than the rest of ours.”

However, this argument reveals a desire to create an “even” playing field in a country where tax codes are convoluted and bureaucratic. Rather than questioning the fundamental problems with a government that forcibly takes money from its citizens to fund an increasingly corrupt, violent, and perpetually failed political system, liberals cited by the Post contend Olympians should fall in line and pay their fair share.

Olympians and the American Brand

But there is another problem with the notion that Olympians should pay any portion of their prize money to the IRS. During the Rio games, American athletes won their 1,000th gold medal since the inception of the summer games in 1896.

While this number might trigger the emergence of dollar signs in the eyes of IRS agents and “fairness”-obsessed liberals, it fails to consider the extraordinary degree of free advertising the United States earns from the prowess of athletes competing in its name.

The United States is one of the only countries that refuses to fund their athletes and still has the audacity to demand a cut of their prizes.

Let’s face it: the United States reputation in the world is less than favorable. Between the government’s habit of waging pre-emptive war, bullying other nations into submission, and exporting weapons of mass violence to corrupt regimes, the American government has given the world little reason to respect the stars and stripes.

But Olympic athletes do the government the favor of restoring some semblance of positivity, dignity, and sportsmanship to the country’s much-maligned global image. Their athletic success translates into national honor and pride and reminds the world Americans are more than just gluttonous, ignorant warmongers. This valuable service should render their debts to the government paid in full.

Further, most countries subsidize their Olympic athletes and do not tax their winnings. In contrast, the United States is one of the only countries that refuses to fund their athletes and still has the audacity to demand a cut of their prizes.

Adding insult to injury, as Yahoo News reported, “with inflation, the bonuses have actually dropped in value by $5,429.91 in the past 10 years.”

Reprinted from TheAntiMedia.org under a Creative Commons license.

Carey Wedler
Carey Wedler

Carey Wedler is a video blogger and Senior Editor for Anti-Media.

This article was originally published on FEE.org. Read the original article.

Tuesday, August 16, 2016

The Intellectual Conceit of IQ Ideology

The cultural fascination with the idea of an “intelligence quotient” or IQ seems to be experiencing a resurgence. Relentless testing is a feature of schooling and school admissions, and tests are used for a variety of occupational screenings. The practice reflects an intuition we all have: some bulbs are brighter than others. Surely there is nothing wrong with knowing, measuring, and acting on that information, however difficult it might be to assess.

Where matters become elusive is in codifying those skills, reducing them all to a single quantitative number, aggregating them based on other demographic traits, assessing the variability of the results, comparing the results across large population groups, determining the variety of causal factors – genetic, environmental, sheer personal determination – that make up what we call intelligence, and cobbling together a plan for what to do with the results.

The search for some measurable standard of intelligence has a deep history that is bound up with the emergence of the planned society, eugenics, and the 20th century leviathan state.

Here we have a much more complex problem, as complex as the human mind itself. The amatuer commentator might read a book on the topic and hope to come away with a sense that within this literature we find the key to the rise and fall of whole civilizations. The would-be central planner salivates at the prospect! But the more you read, the less certain you become, and the more in awe of the unknowns, the surprises, and the way the real world continues to defy the predictions of the scientific elite.

The IQ as a Central Planning Tool

And then there are the social and political implications of the efforts. What’s not usually understood is that the search for some measurable standard of intelligence – and implicitly human value itself – has a deep history that is bound up with the emergence of the planned society, eugenics, and the 20th century leviathan state.

That’s hardly surprising. The notion of a scientific elite classifying people based on aptitude, assigning an efficient role for everyone, appeals to the conceit of intellectuals. While the curiosity about human biodiversity seems innocent, the birth of an ideology rooted in quantitative measurement of mental aptitude, backed by a scientistic planning ambition, obviously trends anti-liberal.

The story of IQ begins at the end of the Franco-Prussian war when France’s civic institutions were remodelled to never lose another war. The prevailing theory was that France lacked the technical skills necessary for modern warfare. Citizens needed training and that meant education reform. Schooling would raise up a citizen army and therefore must be forced. From 1879 to 1886, legislation imposed compulsory schooling on the entire population.

The first American enthusiast for Binet’s work was Henry H. Goddard, a leading champion of eugenics and a champion of the planning state.

With all kids now forced into non-religious schools, it was time to impose a rational method on steering the conscripts into socially and politically optimal paths. In 1904, just as fascination with the idea of scientific socialism had gained fashion, the French Ministry of Education contacted the psychologist Alfred Binet (1857-1911) to come up with some assessment test. He came up with a series of questions from easiest to hardest, and ranked the kids based on their performance of the tests.

The result was the Binet-Simon scale. From Binet’s point of view, the only purpose was to identify which kids needed special focus and attention so that they would not be left behind. But the idea of quantity, ranking, and assessing cognitive performance caught on in the United States, where eugenics was a prevailing intellectual fashion. It was driving public policy in labor regulations, immigration, forced sterilizations, marriage licenses, welfare policy, business regulation, and segregation strategies.

The first American enthusiast for Binet’s work was Henry H. Goddard, a leading champion of eugenics and a champion of the planning state. In 1908, Goddard translated Binet’s work and popularized it among the intellectual classes. He turned what might have been a humanitarian push to provide remedial help to students into a weapon of war against the weak.

What did Goddard believe could be done with his insights?

He summarized his political outlook as follows:

“Democracy, then, means that the people rule by selecting the wisest, most intelligent, and most human to tell them what to do to be happy. Thus Democracy is a method for arriving at a truly benevolent aristocracy. Such a consummation will be reached when the most intelligent learn to apply their intelligence…. High intelligence must so work for the welfare of the masses as to command their respect and affection.”

Goddard’s views were those of his generation, and they were the theorists of the totalitarian state.

What’s more, “society must be so organized that these people of limited intelligence shall not be given, or allowed to hold, positions that require more intelligence than they possess. And in the positions that they can fill, they must be treated in accordance with their level of intelligence. A society organized on this basis would be a perfect society.”

Toward this end, he broke down the human population into normative categories, the underperforming of whom he labelled imbeciles, morons, and idiots – designations that survive to this day. He proposed a new form of social order in which an elite of intellectuals assigns tasks and life stations based on test results.

Illiberal at its Core

Yes, it sounds just like Hunger Games, Divergent, or any number of other dystopian nightmares because that is exactly what he imagined could be achieved with IQ studies. Having now read many dozens of books, articles, and contemporary accounts of this whole generation of thinkers, none of this comes as a surprise. Goddard’s views were those of his generation, and they were the theorists of the totalitarian state – the “Progressives” in the United States, the post-Bismarckian planners of imperial Germany, the scientific socialists of Russia, and, later, the ghoulish exterminationists of Nazi Germany. It’s all of a piece.

Continuing the tradition was Lewis Terman of Stanford who in 1916 proposed a revision to the now-traditional Binet test, and became an open and aggressive advocate of segregation, sterilization, immigration controls, birthing licenses, and a planned society generally.

The eugenics movement, and its new tool of intelligence testing, hoped to replace freedom and dignity with totalitarian technocracy.

White supremacy was a given among this generation, and he embraced it openly: “There is no possibility at present of convincing society that [Mexicans, Indians, and Negros] should not be allowed to reproduce, although from a eugenic point of view they constitute a grave problem because of their unusually prolific breeding.” In that spirit, he joined the Human Betterment Foundation, which played the crucial role in California’s sterilization program that had such a profound influence on the race policies of Hitler’s Germany.

Intelligence tests became essential for a nation at war, with eugenicists advising the US Army about the fitness of soldiers: the dumbest at the front and the smartest in safe positions of leadership. And they advised immigration authorities: who could become an American and who couldn’t. Eugenics was the goal and intelligence testing became a crucial part of the scientific veneer.

Thomas Leonard summarizes the bloody history:

"Dubious though the tests and testing methods were, the millions of persons subjected to crude intelligence tests demonstrated one result unambiguously. American social scientists had convinced government authorities to fund and compel human subjects for an unprecedented measurement enterprise, carried out to identify and cull inferiors, all in the name of improving the efficiency of the nation’s public schools, immigration entry stations, institutions for the handicapped, and military."

That only begins to scratch the surface of the far-reaching hopes of the IQ-eugenics movement. So close is the relationship between the theory and policy ambition that they are really inseparable.

There seems to be nothing particularly threatening about wanting to assess an individual’s aptitude. And yet IQ testing was created and used as a social planning tool for use in compulsory education and war preparation, and mutated into a full-scale ideology that had no regard for human rights, the liberal theory of the social order, or freedom more generally. The eugenics movement, and its new tool of intelligence testing, hoped to replace freedom and dignity with totalitarian technocracy.

What is it about this ideology that contradicts the idea of a free society? Where is it that IQ ideology goes wrong?

There are three general issues:

First, consumers have odd tastes that have little to do with intelligence, scientifically defined. Abstract Intelligence is not necessarily the thing rewarded by the market, and that matters. In a free society, the value of a resource is not objective; value is conferred on services by the choices we make, whatever they may be.

We all face resource constraints, time above all else. This is why we cooperate through trade with other people, even those with less absolute ability than we personally possess.

If you hang out at Nascar races, high intelligence is not the first trait that stands out. Same with monster truck rallies. I might be wrong of course. Maybe if I administered tests to all the participants and consumers, I would be stunned at the disportionate intelligence compared to the general population. The same goes for for a Britney Spears concert, an NFL game, or the buyers of grocery-store romance novels. Maybe in these groups, you find higher intelligence than you find at the university chess club. I do seriously doubt it, however.

But the real question is: why does it matter? Does it matter whether Michael Phelps is smart or that he is the best swimmer in history? Swimming is what he valued for. It’s the same way with Beyonce’s singing and dancing or Matt Damon’s acting. Or think of your favorite local restaurant: it actually doesn’t matter whether the cook is smart or dumb.

The unpredictability of consumer markets defy intelligence distributions. Market processes are not about rewarding intelligence; they are about rewarding talent, insight, and service to others.

Market processes are not about rewarding intelligence; they are about rewarding talent, insight, and service to others.In fact, this is precisely why so many intellectuals have despised markets through the centuries. To them, it seems wrong that a professor of physics should make less than a pop star, that a number-crunching bureaucrat would live in a small house and a movie star own five mansions, and so on. Here is the source of more than a century of resentment against capitalism.

We all face resource constraints, time above all else. This is why we cooperate through trade with other people, even those with less absolute ability than we personally possess.

How markets value what they value will always remain unpredictable. What’s crucial is that the common man is in charge of the system, and not planners. And that’s the crux of the issue: who should decide what constitutes human value, who is worthy of being treated with dignity, who should be in charge of how labor resources are going to be used in society? Will we embrace freedom or rule by a wise elite?

Second, the law of association makes everyone valuable. A core belief of the IQ ideology is that smart people, as measured by tests, are more valuable to the social order than dumber people. But economics has made a different discovery. It turns out that through the division of labor, or what Ludwig von Mises called the “law of association,” everyone can be valuable to everyone else, regardless of aptitude.

The intelligence necessary for the building of a great society does not reside in the minds of particular individuals.

Michael Phelps might have the cognitive capacity to be the greatest nuclear physicist, computer programmer, or chess player in the world – but it is in his personal interest to focus on his comparative advantage, even if he has an absolute advantage over every person in the world.

We all face resource constraints, time above all else. This is why we cooperate through trade with other people, even those with less absolute ability than we personally possess. The result is more valuable than we could ever create on our own. You know this if you hire your lawn to be mowed, your house cleaned, or go to restaurants. Every social order consists of an infinitely complex web of relationships that defy categorization by crude scientific tests. Through the division of labor how freedom finds a way for everyone to become valuable to everyone else.

A third criticism of this literature is more profound. It observes that the intelligence necessary for the building of a great society does not reside in the minds of particular individuals. The highest intelligence of the social order resides in the processes and institutions of society itself. It doesn’t exist in total in any single mind and it doesn’t emerge consciously from the plans of any group.

Hayek explains in The Counterrevolution of Science:

"Though our civilization is the result of a cumulation of individual knowledge, it is not by the explicit or conscious combination of all this knowledge in any individual brain, but by its embodiment in symbols which we use without understanding them, in habits and institutions, tools and concepts, that man in society is constantly able to profit from a body of knowledge neither he nor any other man completely possesses. Many of the greatest things man has achieved are not the result of consciously directed thought, and still less the product of a deliberately co-ordinated effort of many individuals, but of a process in which the individual plays a part which he can never fully understand. They are greater than any individual precisely because they result from the combination of knowledge more extensive than a single mind can master."

And there we see most plainly the difference between the IQ ideology and the theory of the free society. The IQ ideology tempts us to believe in the same fallacies that drove socialism: the conceit that a small elite, if given enough resources and power, can plan society better than the seemingly random associations, creations, and trades of individuals. Freedom, on the other hand, locates the brilliance of the social order not in the minds of a few, but in the process of social evolution itself and all the surprises and delights that entails.

Jeffrey A. Tucker
Jeffrey A. Tucker

Jeffrey Tucker is Director of Content for the Foundation for Economic Education and CLO of the startup Liberty.me. Author of five books, and many thousands of articles, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. Email

This article was originally published on FEE.org. Read the original article.

Friday, August 12, 2016

Socialists are Scarcity Deniers

Amnesty International has finally had enough of the goings-on in Venezuela. With a population starving, the government issued a forced-labor edict. Amnesty said: “Trying to tackle Venezuela's severe food shortages by forcing people to work the fields is like trying to fix a broken leg with a band aid.”

Maybe you notice a pattern here. Wherever socialism is tried, people suffer.

Actually it’s more like fixing a broken leg with a bullet to the head.

Forced labor is indeed a human-rights abuse. Maybe you notice a pattern here. Wherever socialism is tried, people suffer. Each case is different because no tyrannical regime behaves exactly like any other. But the root of the problem is the refusal to allow people to own, accumulate, trade, and associate.

Surely that is the core of the problem in Venezuela.

Here We Go Again

No, say the socialists. “The problems plaguing the Venezuelan economy are not due to some inherent fault in socialism.”

Socialism seems to be the most persistent non-falsifiable ideology on planet earth. The socialists are like people who swear that gravity doesn’t exist and keep hopping around on two feet, expecting to rise into the clouds at any moment. It never happens, but the faith that there is no gravity remains unshaken.

What, in any case, is socialism? No matter how one describes it, no matter how many failed cases you point to, no matter how often all its central ideas are refuted, the socialist refuses responsibility.

So let’s just take at least someone’s word for it. The Socialist Party of Britain gives this shorthand description of what socialism is: “free access to all goods and services.”

Interesting idea. I think I’ll take a Bentley, a vacation to Europe, a custom-made suit, and a lifetime of haircuts. For free. Thank you very much.

Fundamental Misunderstanding

This claim seems to confirm everything I’ve ever suspected about socialism. It’s rooted in a very simple error, one so fundamental that it denies a fundamental feature of the world. It denies the existence and the persistence of scarcity itself. That is to say, it denies that producing and allocating is even a problem. If you deny that, it’s hardly surprising that you have no regard for economics as a discipline of the social sciences.

So long as there is a contest for control over something, it is a scarce good.

To be sure, economists use the term “scarcity” in a particular way. It does not mean a shortage, though the possibility of shortages are a feature of scarcity. But a good or service can still be scarce even if it exists in abundance.

So, for example, just because the stores overflow with groceries, or because Internet startups are begging you to download applications, it doesn’t mean that we live in a post-scarcity age. There is no such thing as post-scarcity in this life.

So long as there is a contest for control over something, it is a scarce good. Let’s say you are sharing a pizza with friends. Every time you take a slice, another appears in its place. The pizza is magically reproducing itself. At some point, once having noticed this phenomenon, your behavior begins to change. There is no more rivalry over slices. Your control over a slice does not forbid another’s control. In this case, pizza has indeed become non-scarce.

Scarcity is baked into the nature of a good. If you can imagine people in some sort of argument about who gets to control or consume it, it is scarce. And fighting over “intellectual property” doesn’t count, because what that really involves is fighting over whether someone can use their scarce resources (computer drives, guitar strings, etc) to reproduce patterns (software, songs, etc). More on this below.

Even copious goods can be scarce. Think of an Easter egg hunt with 100,000 eggs on a lawn. The kids will still run and struggle to collect them. They still have the features of scarcity.

Things can be allocated by arbitrary decision backed by force, or they can be allocated through agreement, trading, and gifting.

No Collective Ownership of Scarce Goods

Here’s the key point. So long as anything is scarce, there cannot be free, unlimited, collective access to it. Whatever it is will be over-utilized, depleted, and finally vanish following the final fight for the last scrap – sort of like what is happening in Venezuela today.

That is to say, you can’t have socialism in a scarce good or service. Instead, it has to be allocated. Things can be allocated by arbitrary decision backed by force, or they can be allocated through agreement, trading, and gifting. The forceful way is what socialism has always become. This is for a reason: socialism does not deal with reality.

What doesn’t have the feature of scarcity? Think of any good or service over which there is no contest to control and consume. You can consume it and so can everyone else, unto infinity. The last word is key. For a good to be non-scarce, there can be no limits to its reproducibility.

Does air qualify? Not always, as you know if you have ever been stuck between floors on a crowded elevator. What about water? No, there is a reason why the bottled water market is so huge. These are like all things in the physical word: subject to limits and hence must be allocated.

On the other hand, let’s say you hear a catchy song like “Happy”; you can take the tune, sing it all day, and share it with your friends. Doing this takes nothing away from the original. In the same way, you can stare at an image, remember it, and reproduce it. And so it is with the ideas in this article. You can take them. I can’t stop you unless I attack or threaten your scarce body, or someone else (like the government) does so on my behalf. The idea portion of all these goods is non-scarce, so they do not need to be priced or owned.

How is it that you still end up paying for downloading books and purchasing music? The reason isn’t entirely due to copyright; it’s also because what you are paying for is not a good as such but a scarce service: all that is associated with accessing servers. Here is the scarce, and hence priced, service.

Socialism is indeed the problem. It truly makes no sense.

All this aside, socialists often don’t seem to get the very first point: there is no imagined heaven on earth of unlimited plenty. All we can do is struggle to make more of everything available to as many people as possible, and encourage trading to take advantage of the division of labor. This is called a market, and it is based on the notion of private ownership in all scarce things (including capital goods) – the very thing that socialists want to end.

Then they look at Venezuela and think: my goodness, something seems to be going wrong! Whatever it is, it can’t be socialism!

But you know what? Socialism is indeed the problem. It truly makes no sense.

Jeffrey A. Tucker
Jeffrey A. Tucker

Jeffrey Tucker is Director of Content for the Foundation for Economic Education and CLO of the startup Liberty.me. Author of five books, and many thousands of articles, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. Email

This article was originally published on FEE.org. Read the original article.

Thursday, August 11, 2016

Suicide Squad Review - Spoiler Free



I'm going to keep this review free of spoilers and get right to the point.

I'm really sorry to have to say this. I know that expectations for this film were high.

But, don't see this movie... and truly... you should give up on the DC Cinematic Universe altogether, at this point.

I have.

I'm not sure how Suicide Squad was released as if it were a "completed" movie. It's an absolute mess from the jump.

It seems, at first blush, as if WB is attempting to distinguish themselves from Marvel in terms of style and tone. But, then we get an 80s pop-song every five minutes, in a ham-fisted attempt to mimick the stylistic element that Guardians of the Galaxy employed so effortlessly.

Warner Brothers' executives seem to keep making bad decision after bad decision. These are many and varied, but they essentially all stem from the same core-mistake. This mistake is the root of all the other problems arising in these films; they hire directors who have a directorial voice, and then they (the studio execs) do everything in their power to stifle said voice, once the final product is submitted. Watching Suicide Squad, it is obvious that the movie was chopped-up, re-edited and re-shot over and over again, due to studio notes, and that the end product is a jumbled mess of a film that completely fails to deliver on its trailer-promises. You can see that the director had very different ideas for this movie from what ended up on screen. If the studio wanted a director who would just follow orders and check their notes off a list, then they should have hired a Brett Ratner. Why hire somebody like David Ayer, (that is, someone with vision and style,) if you're not going to let any of that make it to the final cut?

This isn't the first time, either. In my Batman v Superman review, I pointed out a lot of continuity errors and strange, unexplained alterations to well-established characters. Well,... if you watch the extended edition of the film, nearly all of those concerns are explained. They're explained succinctly in short little scenes or lines of dialog that were, inexplicably cut from the final film. But, to make room for what? The theatrical release was loaded from beginning to end with pieces that could have been lost to make room for these much needed expository parts. It makes no sense what they chose to keep and what they chose to cut, and those decisions left the movie feeling jumbled and disjointed.

When it comes to these illogical cuts, however... if Batman v Superman is missing a few fingers and toes, Suicide Squad is the multiple amputee who's basically just a half-torso with its head hanging on by a thin flap of skin.

This is the third film in the DCCU, and the third disappointing outing for the fledgling continuity.

Here's my prediction of what's going to happen...

With each release, they will continue to contradict their own decisions, as the balls they show in the hiring and casting process seem to mysteriously fall off when it comes time to edit these films together. As these deeply flawed products are released, one after another, the greater product (the DCCU) will only grow more and more conceptually convoluted as the mistakes stack-up and compound upon each other. Eventually, the spine of the greater story arc will snap under the pressure.

Watch for an announcement from Warner Brothers in 2018, (2019 at the latest,) of a full-reboot of the entire continuity.

WB has hired James Wan (writer/director of Saw, The Conjuring, Insidious) to helm Aquaman. He's said that he's going for a more horror-oriented take on the character that will play up the scary elements of the deep-sea. Sounds great, right? Well, if Man of Steel, Batman v Superman and now Suicide Squad have taught us anything, it's that his vision will likely be shot in the head, execution style during the editing process, due to the studio suddenly deciding to hammer his visionary-cut into a yes-man-cut via heavily-noted re-shoots and re-edits before it is released.

Prior to that, we've got the utterly tone-deaf non-actress Gal Gadot as Wonder-Woman. I don't think I'm going to bother reviewing it unless it somehow manages to be great.

For me, the DCCU is a dead-issue until the inevitable reboot. So, I won't be giving it any more time here, unless a miracle happens. Not going to hold my breath.

Again, I'm sorry this review is so negative. I don't like being this cynical about it. I really don't, but it's hard not to be when Warner Brothers keeps botching-up what should, by rights be Marvel Studios's worthy and challenging competition. It's tough, because as great as the Marvel movies are, and will likely continue to be,... I can't not realize that they'd be even greater if WB were offering some real competition.

But, yeah... don't waste your money on Suicide Squad.

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