Saturday, December 06, 2008

The Economist’s Individual

Tibor R. Machan

You may recall that about a month ago Alan Greenspan said, in his testimony on the Hill, that he had been mistaken to think that the self-interest of those working in financial institutions will serve their clients’ interest and, thus, avoid anything like the meltdown we have experienced recently. As he put it on Wednesday, October 22nd, "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms."

Greenspan was in fact referencing on two basic tenets of modern economic science, namely, that (a) everyone acts selfishly all of the time (even when one seems to be benevolent) and that (c) if people are not interfered with as they pursue their self-interest, this will turn out best for all.

Here is how the late Milton Friedman put the first point: . . . every individual serves his own private interest . . . . The great Saints of history have served their 'private interest' just as the most money grubbing miser has served his interest. The private interest is whatever it is that drives an individual.” (The Line We Dare Not Cross," Encounter, 11/76:11) Adam Smith laid out the second tenet back in 1776. He argued that when one is guided by one’s own self-interest, this is going to promote the greater good "of the society more effectively than when he really intends to promote it which was no part of his intention."

Why such confidence in self-interest? Because it really means something very vague and can apply to all kinds of actions, just as Friedman suggests. For economists self-interest is whatever one chooses, whatever one freely selects as one’s goal, even if it is what would ordinarily be considered self-destructive, such as suicide, or altruistic, such as helping the poor in Africa (as Bill Gates has been doing with his foundation recently)! My writing these lines, your reading them, indeed everything we do of our own initiative is self-interested conduct.

In common sense terms, whenever one does what one chooses to do, one necessarily advances one’s own agenda, no one else’s. Even if one is being thoroughly helpful to others, this still is true--after all, one is acting as one thinks best and that must be, the theory has it, something that serves one’s own interest. To put it another way, the idea that we are all acting from self-interest means merely that we are all doing, when not being coerced by others, what we ourselves want to do. There is nothing more to the idea, as the economist uses it. (After all, another widely embraced thesis of economics is that what is best, what is right, is all subjective, so there is no right versus wrong, good versus bad other than how one sees things.)

So when Greenspan recanted the theory that “the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms” what he was saying, in common sense terms, is that the expectation, the one advanced by Adam Smith, is sometimes mistaken, namely, that all these people in all these organizations will always act to everyone’s benefit.

Of course Smith’s thesis is by no means a wild and crazy one. Even if we do not assume that people, when they act freely, follow their own lights and so will always also benefit others, the opposite by no means follows. That is the view that, for us all, to do what is best overall we must be guided by government regulators, by the likes of, say, Representative Henry Waxman, the man whose questioning elicited Greenspan’s comments and a most fervent advocate of government intervention in the economy. This latter theory, the one that places great confidence in government regulation, is not made true just because the first theory, that the self-interested or free conduct of everyone always promotes overall welfare, is false.

Quite apart from the two tenets of modern economic theory, there are independent reasons to be very weary of government regulation and good reason to favor deregulation. Here, too, we can invoke a famous quote but not from an economist but a political theorist, Lord Acton. He is the one who observed, and quite truthfully, that "Power tends to corrupt, and absolute power corrupts absolutely.” This means that government agents are routinely corrupted by the power they hold. They aren’t always but they are nevertheless tending in that direction and the greater their power over others, the more they do so.

It is this thesis that the likes of Henry Waxman need to absorb but are very likely to resist to the day they die.

Friday, December 05, 2008

Nader Should Rejoice

Tibor R. Machan

Ever since I became aware of American politics, way back in the 19060s, I kept hearing from Ralph Nader, the so called consumer advocate--who appointed him that I don’t know--that corporations are our major problem in this country. In particular, Nader had ranted and raved about how powerful corporations are, how invincible they have become, and how this hurts us all.

Well, it looks like some of the biggest corporations aren’t actually that invincible and, to tell the whole truth, they have never been. Over the many years of corporate commerce in America alone, hundreds have gone belly up--most notably Montgomery Ward sticks out in my memory! Even Sears and Roebuck was near demise, and K-Mart is nearly always on the brink.

But in our day it is the three huge, politically protected American automakers that are verging on going kaput. They ought to have a long time ago but the federal government has protected them from foreign--and even potential domestic--competition. Vis-a-vis the foreign companies they did this mostly by way of tariffs and various irrational requirements imposed on them. As to potential domestic rivals, just check out the movie Tucker to get an accessible picture of how the Big Three behave when their dominance is threatened in the market place!

I was teaching for a year or so in Switzerland in the early 1980s and at one point ran across a very nice Saab at a used car dealer in Lugano and inquired about buying it and bringing it back to the USA with me. I was quickly apprised of the fact that this would be an extraordinarily difficult thing to do because the US government requires all cars brought into the country to meet a bunch of standards that successfully manage to remove competition from the market place and leave the Big Three relatively protected. And it worked for a while, at least until the Big Three stopped having the clout in Washington that it used to.

By the way, automakers are by no means the only ones who play so dirty. Big agricultural firms are notorious for managing to get protection erected against foreigners--indeed, this is a real embarrassment to the American government which keeps giving lip service to free trade for everyone else but some of its own special interest groups. Even television networks had such protection against potential competitors until cable finally broke their oligopoly. For a long time if you wanted to start a new TV station, you had to go to Washington and prove to the Federal Communications Commission that you would not take any viewers away from existing stations, most of which were owned--directly or indirectly--by the three Big Networks. Can you imagine this? You were disallowed from going into business if some existing firm producing what you planned to produce could show that you might lure some of its customers away? How would this work with restaurants, movie theaters, grocery stores? What would competition amount to?

Now that finally some reality has descended upon the Big Three automakers--aside from some troubles not related to their lingering dominance--I want to see Ralph Nader appearing all over the tube hailing the fact. Finally his wish is coming true--big corporations are going bust, just he has wanted them to do for decades.

But suddenly I sense a deafening silence from Mr. Nader. I guess he has realized that big corporations are actually not just a few fat cat executives--who are easy to demonize--but thousands of people who work in various capacities that result in the production of the cars made by the Big Three. And to wish for the demise of the Big Three isn’t merely to wish ill on the suits in Detroit but also on all the workers who have benefitted from protectionism, from many years of keeping foreign competitors away or making it very tough for them to enter the domestic market.

What is needed is a completely depoliticized economy, one in which, like referees at a game, government does nothing but make sure that everyone plays by the rules--respects private property rights, the integrity of contracts, etc. But instead what governments at all levels tend to do is both play referee and enter the game, bet on the teams, console the looser, heal the injured, sell players their uniforms, you name it!

And they say our current economic mess is the result of free market fundamentalism. What a crock!

Monday, December 01, 2008

Another Restraint of Trade

Tibor R. Machan

When I was teaching at Auburn University some publishing firms decided to lobby the Alabama government--some division of it supposedly concerned about ethics. They were asking that a ban be imposed on professors selling books they receive from publishers as unsolicited examination copies. And the government was on the verge of complying!

I learned of this and immediately contacted this ethics commission in Montgomery and went to testify about how such a ban amounts to restraint of free trade, something no government ought to encourage, let alone perpetrate. Governments are supposed to protect our liberties and not to violate them, and such a ban would clearly be a violation. When you receive gifts from others at their initiative, there can be no legally enforceable strings attached. (I won’t even return something I am sent unsolicited when asked to do so! I don’t work for these people!)

There is absolutely nothing wrong with publishers and authors making a living off their books but when they decide to promote their wares by giving out free copies, they must live with the consequences. One such consequence is that they will give away or sell these books to willing buyers. Sometimes this comes to no more than giving a copy to a student or a colleague. At other times vendors may come around and offer a few bucks to take the examination copies away from one’s home or office library, to purge them to make room for new books.

The idea that once one has received these unsolicited books one must accommodate the publishers by keeping them for oneself or by returning them is morally odious. If you get something you didn’t ask for, you are completely free to give it away or sell it to willing recipients. This is no different from one receiving a gift of a book of which one already has a copy and then selling or giving away the extra copy. Or indeed from selling one’s used furniture or car!

The right to private property implies all this. Something that you own you have the right to sell. And when someone sends you something that you have not asked for, you become its owner, free and clear. This is so even if inside the item you have been given there is a note urging you to return it--no one is authorized to impose obligations on us to which we have not agreed, though of course you are also free to grant the request.

Well, lo and behold one of the book buyers who visits us occasionally at Chapman University told me recently that in Arizona a bunch of publishers are attempting to get the government to ban trade in unsolicited examination copies. Déjà vu! I told the merchant who informed me of all this that I would be glad to help out, send an affidavit or even travel to Phoenix to testify against the corrupt merchants who want to both eat their cake and have it: They want to send around promotional gifts to encourage the sale of their books but then want to avoid living with one likely result of this promotional strategy, namely the sale by the recipients of the books they gave away.

Well, one doesn’t get to do this in a free country. Once you have given something to someone else, without prior conditions agreed upon, the recipient has every right to do with it anything peaceful, as he or she pleases, even burn it in a fireplace. (It might be a dumb idea to do this, although when I consider how cluttered my office and home libraries are because I am so reluctant to toss many books I’ve read or never will read, it may not be such a bad idea.)

An interesting lesson to be learned from this evidently minor case of businesses trying to get politicians to protect them from competition is that by no means are people in business above such behavior. Free markets are OK as far as those in business are concerned but the first group to embark on restricting it are often the very people in business. As Adam Smith observed back in 1776, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices."

Free market champions are often and very unjustly charged with favoring people in business as against, say, wage laborers or other professionals. From the start this has been a distortion of their attitudes, including that of contemporary libertarian champions of free markets.
Objectivity and Consensus

Tibor R, Machan

The radical skeptic regarding gaining knowledge about the world will tend to trust the empirical sciences above other means of investigation. Several issues arise, though, Scientist do not all deploy identical methods across the sciences. Botany and physiology study differently as do astrophysics and subatomic physics. That’s because the method of study needs to be fitted to the object of study. This is one reason that subatomic physicists, find it difficult to reconcile their work with astrophysicists--Stanford University’s Leonard Susskind versus Cambridge University’s Stephen Hawking.

Because the human form of consciousness a quite complex, its study, too, will involve comparably subtle tools and approaches. And, of course, the tools of study, instruments of measurement, medication, etc., will vary from field to field.

The diversity of rational approaches is evident also in how readily scholar argue. Even among ordinary folks there is less argument about, say, where the line divides a road, one side going there, another here. Other than for those whose faculties are impaired, disputation in these simple regions are rare.

Consider, for illustrative purposes, that the same people who drove to work on some express highway at 75 mph and had no trouble agreeing on where the curbs, lines, and signs stood and what they meant will enter their work and begin to argue about various issues related to their subject matters, often bearing on the making of public policy,

Is reality suffering from innate instability, as some physicists have been claiming, so measurements are in principle and practice not possible to undertake and agree about? Are the instruments badly designed? Are the students themselves impeded by differences in the way their faculties operate? Or are the individuals themselves exercising their cognitive capacities differentially--plainly put, are some slower than others, more distracted, less attentive, etc.?

Or perhaps when tasks turn out to be surrounded with many contingencies, lots of variables, and are undertaken by scholars with varied capacities, willingness, interests, and influences on their thinking--including that neglected influence of their own varied levels of attentiveness and focus--disagreements multiply. At that point it becomes tempting to ascribe responsibility to the way the world itself works, not to human shortcomings, to alleged innate irrationalities about the world, much vagueness or many ambiguities. This is suggested by those who take some epistemological challenges passed to human knowledge at the subatomic level and generalize or extrapolate it to all cases of our knowing the world.

Take, for example, that the future president’s economists drive to their offices in considerable harmony, with no intransigencies plaguing their trip but once they sit down at the round table and begin to discuss the country’s economic wows, varied opinion become routine. Why? Is it because the world is so messy that no rhyme or reason can be attained from studying it? Or is it that such coordinated study requires enormous unity of purpose and similarity of approach, otherwise the results will be mixed and that can lead skeptics to declare the effort hopeless.

If there is anything that shows that human beings are free agents, not determined to act as they do, their ubiquitous disagreements certainly suggest it. The varied beliefs people hold about God, free will, democracy, child raising and zillions of other topics shows that they need to be very much in self-control, very focused, very skilled so as to reach similar conclusions. And they need to keep in mind the philosophical issue, the one that emerges out of the study of metaphysics, that at bottom the world is and can be nothing else but internally consistent. This is implicitly acknowledge by most scholars and scientists when they do not rest until they come up with a theory that excludes contradictions. Just as at a criminal trial, if a witness makes a contradictory claim that claim is discredited, the same is true in science and everywhere else where we want to know about the world.

Sunday, November 30, 2008

Public Editor Ideology

Tibor R. Machan

I need to be especially careful in using that term, “ideology,” since I have been a frequent critic of others’ use of it. In casual talk it means “simplistic viewpoint.” But when used in a more serious discussion, “ideology” means “phony and psychologically devious viewpoint.”

That is to say, an ideology is a position someone holds not because it was reached through research and reasoning but because it serves an agenda or merely buttresses how one feels about something. In the hands of Karl Marx, for example, the term was used to discredit the views of his opponents. If they invented those views so as to serve some class or personal (especially economic) interest, well then they didn’t deserve to be taken seriously.

Today the term is deployed a lot by pundits and commentators who want to dismiss ideas of which they disapprove but do not wish to defend their dismissal of those ideas. Just calling in an ideology, or labeling someone an ideologue, serves to demean the position of those who hold it. Scientists, when they do science, would be the farthest thing from ideologues and science from ideology. That’s because it is still widely believed among intellectuals that observation is the sole basis for rational judgment and that all science is based on observtion.

This was, if I may be somewhat ironic, the ideology--or, put more respectfully, the philosophical stance--of a great many educated people at the early and middle part of the 20th century. That famous motto of the state of Missouri, “Show me,” pretty much said it all--if you can’t, well there is nothing to what you are claiming.

This outlook fell on hard times when it was noticed that advocating it had itself no observational foundation. The idea that observations ought to back up all our claims to know things turned out not to be subject to observational support! It was an article of faith, at least by the terms of the very people who proposed it.

But this didn’t kill the position as it ought to have. To this day many people embrace the supposedly hardheaded doctrine of empiricism, namely, that only knowledge based on sensory evidence counts, nothing else. And with this idea came another very seriously wrong and harmful one, namely, that no value judgments could be rationally defended, none could amount to knowledge.

The public editor of The New York Times appears to be among those who still cling to the discredited idea that nothing counts for knowledge that includes value judgments. In a recent piece in which he tries hard to distinguish between writing news or analysis and writing editorials or opinion pieces, he approvingly quotes Bill Keller, the executive editor of The Times, saying that “Op-Ed columnists have ‘greater license to write from an ideological viewpoint and be prescriptive’,” than do news writers and analysts.

So, apparently, Mr. Keller and public editor Clark Hoyt believe that prescriptive commentary need not bother much with providing support and evidence because these are produced “from an ideological viewpoint.” This is what used to be labeled “being biased” and, therefore, containing mere attitudes or feelings. That is what the early positivists argued about all non-scientific claims, including those in ethics, politics, aesthetics, and religion.

Now it is sad to find the public and executive editors of The New York Times pretty much dismissing all the material on the editorial and Op Ed pages as being written from an “ideological viewpoint.” All of it is “prescriptive,” meaning, as they implicitly do, that such writing fails to be well grounded, could not aspire to being true, cannot be subjected to critical scrutiny.

When one dismisses--editorials, opinion pieces, etc.--as prescriptive or ideological, one is of course dismissing one’s own opinions as no more than that. And if so, then why bother taking it seriously, why even read it?

In fact, ideological viewpoints are every bit as subject to critical scrutiny as are scientific positions, only not by the same criteria. Some (few) ideologies are sound, others are not. That is also the case with prescriptive statements, the stuff of morality and politics.

There is no sharp division between discourse about values and about facts--values are just different kind of facts, facts about how we ought to act, something vital to human life and not to be relegated to the class of unfounded, emotional utterances.