Friday, December 24, 2010

One Swallow

Tibor R. Machan

Those who have paid a bit of attention to my writings on public policy probably know that I have always been an opponent of preemptive petty tyrannies of government regulations, the sort that force people to follow certain standards of professional conduct, including manufacture, regardless of whether or not they have deserved to be coerced.

In the criminal law such prior restraint is seriously frowned upon but in administrative law it is not, mainly because of two legal notions. These are the police power--a feudal relic if there ever was one--and the arguably distorted provision of the U.S. Constitution, Article 1, Section 8, the interstate commerce clause.

The former made sense only when the monarch had been thought to be in charge of us all, when government ruled the lives of all the subjects as if they were children, invalids or inferiors. The latter appeared at first to mean only that Congress is authorized to regularize commerce among the several states so that these states do not behave as economically warring or protectionist political bodies. No duties may be imposed between New York and Pennsylvania (etc.) was the idea, no tariffs, nada.

OK, now instead of tossing this police power feudal notion and being faithful to the rational meaning of the interstate commerce clause, both developed as weapons in the arsenals of government planners and interventionists despite the classical liberal revolution. This despite the fact that neither legal measure has a leg to stand on in the court of justice.

But perhaps practically they are unexceptionable, no? Why would that be? Because, just as now and then a bit of violence among people can be useful, so can government intervention or regulation bear some valuable fruit.

Consider what Elizabeth Kolbert wrote some time ago for the New Yorker Web site concerning President Obama’s choice for energy secretary, Steven Chu, and his enthusiastic defense of government intervention:

“In the mid-1970s, California--the state Chu lived in--set about establishing the country’s first refrigerator-efficiency standards. Refrigerator manufacturers, of course, fought them. The standards couldn’t be met, they said, at anything like a price consumers could afford. California imposed the standards anyway, and then what happened, as Chu observed, is that ‘the manufacturers had to assign the job to the engineers, instead of to the lobbyists.’ The following decade, standards were imposed for refrigerators nationwide. Since then, the size of the average American refrigerator has increased by more than 10 percent, while the price, in inflation-adjusted dollars, has been cut in half. Meanwhile, energy use has dropped by two-thirds.”

Let’s give Chu credit for at least making the effort to defend government regulation--post bureaucrats treat it as their God given authority. But I am also tempted to mention here how Benito Mussolini was able to make the trains run on time back in the days he ruled Italy as a fascist dictator. Thus it is important here to recall a wise saying by the ancient Greek philosopher Aristotle, namely, that “One swallow does not make a summer, nor does one day; and so too one day, or a short time, does not make a man blessed and happy” (NE I.1098a18). And again, true enough, now and then smacking someone who is acting hysterically could calm him down, yet it would be folly to adopt smacking people around as a general policy by which to help them cope.

Or again, a bit more technically, the imposition of the refrigeration manufacturing standards in California is used by Mr. Chu as an explanation of both the increase in the efficiency of refrigerators nationwide and the cut in half of their price since the imposition was made. But there is a famous fallacy of informal logic that’s in evidence in Mr. Chu’s reasoning, namely, post hoc, ergo propter hoc (after this, therefore on account of this). No one could tell at the time the California government imposed these standards that only by doing so will the desired efficiency and price drop be produced. Indeed, in many cases in which government intrudes by establishing, by law, standards like this the market has already begun to do it, albeit peacefully, without the use of coercive force and the heavy cost of bureaucracy (like ho cigarette smoking began to subside way before government waged its war on smokers).

I am convinced that government regulation is an improper way to run people’s lives, even if now and then it may appear or even prove to be a bit helpful. Would be good thing of Mr Chu & Co. would agree with this.

Monday, December 20, 2010

Krugman’s Trashy Debating Style

Tibor R. Machan

Looks like critics of the free market are at their whit’s end. At least one of the most prominent of them clearly appears to be.

Princeton economics professor and columnist for The New York Times Paul Krugman has always been discourteous to those with whom he disagrees but his latest exhibition of his way of going about debating issues takes the cake. It used to be that he would call everyone who finds even the slightest merit in free market economic theory a “market fundamentalist,” suggesting thereby that such folks are, like all fundamentalists, mindless in their convictions and merely blindly follow some sacred text or book of instructions. Besides wishing to score points for his statist economic politics by smearing the ideas and methods of his intellectual adversaries, he also regularly distorts the scholarly lay of the land by claiming that America is in the grip of such fundamentalism. This basically meant that throughout the academic landscape departments of economics are filled by people who hold and teach views similar to those held by the late Milton Friedman, F. A. Hayek and Ludwig von Mises (among others).

While these thinkers did consider the free market superior to its statist alternatives--ones that give a decisive role to government intervention in the lives and activities of market agents--they did not, of course, hold identical views. Nonetheless, Krugman lumps them all as fundamentalists. Moreover, he rarely takes on living supporters of the free market, such as James Buchanan or Gary Becker, not to mention such current members of the Austrian School as NYU’s Israel Kirzner. Might we suppose that he doesn’t wish to engage anyone in a dialogue about economic policy but merely discredit them once they could not respond? (Just after Milton Friedman died, he and his frequent co-author Robin Wells penned an extensive and it turns out demonstrably inaccurate essay on Friedman for The New York Review of Books.) Also, despite Krugman’s allegation, there is plainly no dominance of free market thinking in American universities. Mainstream economists are mostly followers of such notables as Paul Samuelson and, of course, John Maynard Keynes, with quite a few who are influenced by the political economics of welfare statism. At the universities where I have taught throughout the last 40 plus years, economists may have been respectful toward free market theorists but were by no means fully in line with their views. So even in this elementary matter, Krugman has it wrong.

But the claim that the country is in the grips of market fundamentalism is also mistaken if it’s meant to apply to official public policies bearing on economic matters. Just for starters, the financial market place has been heavily regulated for over a hundred years--consistent free market theorists usually don’t favor a central bank such as the country’s Federal Reserve Bank (even though, somewhat paradoxically, Alan Greenspan had been such a consistent free market thinker before he was selected to head up the Fed). Furthermore, the plethora of government regulation of various elements of the economy, including virtually all professions (apart from the clergy, journalism, and writers of all stripes who are protected against such regulation by the First Amendment of the U. S. Constitution), is decisive evidence that free market thinking does not dominate public policy in America.

Yet, despite all this, here is a Nobel Laureate and professor from a most prestigious academic institution and columnist for a most distinguished newspaper who keeps trying to distort reality. Why? But I will not speculate, again. Who knows what Krugman’s agenda is.

One thing does clearly stand out in his approach to making a case for more and more government involvement in the economy. This is that he relies extensively on name calling, on besmirching those with whom he disagrees. In a recent column he went so far as to dismiss all those who hold views opposed to his as zombies! Yes, zombies. That means that people, some very distinguished scholars, who are convinced that a public policy of laissez-faire when it comes to a country’s economic affairs is best are all mindless. They do not merely think mistakenly but cannot think at all.

When a critic of a position needs to resort to this kind of technique with which to attract readers of his missives to his own outlook, it suggests that the intellectual merits of that position are truly hopeless. And that is precisely so. Statism in economics has for a long time been proven and shown to be utterly unsupportable, be this the Draconian sort one found in Soviet Russia and finds in North Korea or the less drastic kind that has just produced the worldwide financial meltdown, namely the more or less interventionist welfare state.