Saturday, December 10, 2011

The STRIP Act and Republican Window Dressing

According to The Hill,
"More than two dozen House Republicans introduced legislation on Thursday that would prevent the Transportation Security Agency (TSA) from calling airport screeners "officer" unless they have gone through federal law enforcement training or are otherwise eligible for federal law enforcement benefits.

Rep. Marsha Blackburn (R-Tenn.), the lead sponsor of the Stop TSA's Reach in Policy (STRIP) Act, said that TSA has essentially allowed its airport screeners to play dress-up by giving them metal badges and police-like uniforms in recent years. But she said many airport screeners have no 'officer' qualifications, and should have this title removed."

Needless to say, the backlash against the TSA was and is prompted by its invasive passenger screening methods, i.e., grouping and body imaging via x-ray machines, not by the insistence that its employees be designated as officers and dressed in "police-like" uniforms. I find the distinction between being fondled or irradiated by officers and being treated as such by non-officers to be lacking. So while House Republicans masquerade as tough lawmakers reigning in the excesses of the TSA (see H.R. 3608, aka the "STRIP Act" for the details), the latter goes about its business unadulterated.

Monday, September 5, 2011

Assessing Universal Suffrage

In his series on the various basic theories of ethics, Professor Massimo Pigliucci, while writing on egalitarianism, wrote the following:
"The first obvious question about egalitarianism is: equality of what? For instance, in most modern democratic societies it is uncontroversial that citizens have an equal right to vote, or an equal right to justice. I doubt anyone would reasonably disagree with that sort of egalitarianism, except for despots, many men in a large part of the world (wherever women don’t have equal legal rights), and incurable aristocrats."
In response, I wrote the following:
"Universal justice is hardly objectionable. I find universal suffrage to be much less unassailable. For example, Daniel Okrent in "Last Call: The Rise and Fall of Prohibition" argues that women's suffrage was a decisive, cooperating cause of the 18th Amendment prohibiting the distribution of alcohol. If this is true, it, in my mind, should have been weighed against the benefits of women's suffrage at the time. I should add that William Lecky in 'Liberty and Democracy' made the following claim: "Universal suffrage, which to-day excludes free trade from the United States, would certainly have prohibited the spinning-jenny and the power-loom.'"
In response to my response, Pigliucci wrote the following:

"[Y]ou can't be serious abut universal suffrage. Or maybe you are, unfortunately. That [Lecky's quote] sounds like nonsense to me. And at any rate, I agree with Rawls that civil rights come before economic advantages, so there..."

This hardly qualifies as a cogent objection. But given that Pigliucci has objected, I may conclude that he rejects my appeal to consequences. Here's why I find this troubling.

Assume that a religious or political minority within a nation has been disenfranchised for however long. Now assume that considerable political transformations have led to the establishment of universal suffrage whereby adult members of this minority will now retain the right to vote and participate in the electoral process. Furthermore, this minority has sinister political intentions (the establishment of religious laws prohibiting all kinds of activities and voluntary transactions among consenting adults) and is sufficiently large to influence the staffing of the legislature and the executive and, thereby, influence the content of enacted laws.

Given the above developments, would Pigliucci remain an advocate of universal suffrage? It would seem so, given his flippant rejoinder. Thus, a right to vote, according to this devotion to universal suffrage, should not be accompanied by a right to a competent electorate. Pigliucci regards himself as an exponent of reason and of skepticism. Why then would he spare the irrational voter?

The right to vote is but one element within an amalgam of political phenomena that go curiously unexamined. Why do we champion such a right to begin with if we're willing to tolerate the irresponsible exercising thereof?

Sunday, August 21, 2011

Saturday, July 23, 2011

GAO Audit Unearths $16 Trillion in Loans by the Fed

From the newsroom of Senator Bernie's Sanders' website:
"The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. 'As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,' said Sanders. 'This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else.'"
According to the,
"The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows..

Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
and many many more including banks in Belgium of all place

The GAO audit in its entirety can be viewed here.


Friday, July 22, 2011

Massimo Pigliucci on Libertarianism: A Response

Oddly enough, in a critique of Larry Summers, biologist and philosopher Massimo Pigliucci makes the following claim: "I simply do not buy the fundamentalist (yes, I’m using the term on purpose) libertarian idea that economics is all there is or that should count in pretty much all human transactions and social problems".

Simply put, Pigliucci errs if he labours under the impression that such an idea is a libertarian one. Libertarianism is a political philosophy, hence it contains a set of prescriptions concerning relations between human beings. Various kinds of libertarianism exist, but if one unifying proposition is a constituent of all of them its the notion that initiated physical force or the threat of initiated physical force should be minimized. Since the government is the most prolific initiator of physical force and threats of physical force, naturally it is the bete noire of libertarians.

Libertarians typically employ economics to attempt to demonstrate the alleged prudence of minimizing government coercion. They argue the discipline of economics proves that maximizing social welfare requires the circumscription of government power. Economics is but one method they use to attempt to prove the wisdom of their creed of "non-aggression". The pervasiveness of economic deliberation and reasoning among libertarians stems from the fact that it enables them to identify and understand the mal-effects of government intervention. Libertarians do not treat economics as the be all and end all of intellectual life. It would be inappropriate to employ economics at the expense of other approaches. But if an issue involves the use by humans of scarce means to achieve ends, then economics has got something to say about it.

Thursday, July 14, 2011

Whither Military Keynesianism?

From The Hill:
"A top defense and aerospace industry trade organization is pressing House Speaker John Boehner (R-Ohio) to resist deep Pentagon budget cuts as officials grapple with the nation’s troubled finances.

In a letter to Boehner, Aerospace Industries Association (AIA) President Marion Blakey argues substantial Defense budgets cuts would spawn new job losses and further damage the already injured economy.

Capitol Hill and defense industry sources tell The Hill that negotiators have discussed national security spending cuts as large as $700 billion over a decade; that is almost twice as much as the $400 billion in security cuts by 2023 that President Obama has called for.

'Deeply cutting defense during these tough economic times could make our nation’s fiscal and broader economic situation even worse,' Blakey wrote. 'Major cuts to defense would create further layoffs and great uncertainty for them and their families and undercut economic gains.'"

Blakey conjures up an interesting argument: give my constituents more money or run the risk of blighting the economy. Now given all the ridicule with which to bespatter Ms. Blakey, who is an example par excellence of the category of human being who lobbies on behalf of the industry that he or she has previously been in charge of regulating, epitomizing the worst elements of the infamous Washington "revolving door", I nevertheless won't discount her last-ditch argument merely because she has a financial stake in the acceptance of her conclusion. To do so would be to commit the vested interest fallacy. Her economic allegations are more than enough cannon fodder.

The premise from which Blakey's proceeds should be a familiar one. It is a conclusion of military Keynesianism, a variant of Keynesianism which holds, among other things, that increasing military spending can contribute to economic growth and that increasing such spending is advisable during or in anticipation of recessions as part of a policy of increasing aggregate demand to hedge against recessions.

It should be no surprise that military Keynesianism commits the same errors as standard Keynesianism.

First off, it underappreciates the opportunity cost of government spending. As a reminder, opportunity cost, as I employ it, refers to the value of the next-most-preferred alternative use of a set of resources.

Suppose a $100 billion military budget is sufficient to protect the nation from foreign aggression. Fine. Military Keynesians, at least under certain conditions, would have the government expand this budget by an unspecified amount, say another $100 billion, on the grounds that doing so will increase economic growth. Well, since $100 billion is scarce (money is a scarce resource), $100 billion spent by the government means $100 billion denied to the private sector, where it could have been used for consumption and investment. This is known as the crowding-out effect.

Moreover, we have every reason to expect, in advance, that the opportunity cost of allowing the government to spend $100 billion is greater than the opportunity cost of allowing the private sector to spend $100 billion because of incentives. Within the private sector, the prospect of profits or losses incentivizes prudent consumption and investment habits. No such similar prospect exists within the "public sector", where the survival of a firm is not necessarily contingent upon performance in satisfying demand and where the assurance of revenue (e.g., taxation) erodes the incentive for wise decision-making.

Th crowding-out effect occurs as well if the spending is made possible by debt financing. Hence, if the government borrows money in order to expand the military and subsidize the defense industry, the borrowing represents in increase in the demand for credit which raises interest rates. Rising interest rates mean more expensive credit for private sector economic agents, thus crowding them out of the credit market.

The cyclical prescriptions of military Keynesianism are derived from the notions that recessions are caused by a lack of aggregate demand and that recessions are to be avoided. The former is misleading and the latter is false altogether. Recessions begin, in the words of economist Jesus Huerta de Soto, after "the pace of credit expansion unbacked by real saving stops accelerating". Central banks incite faux economic expansions by increasing the supply of credit in the absence of an increase in the supply of savings, i.e., monetary inflation. This causes interest rates to fall, which in turn causes the quantity of credit demanded by firms to rise. As firms acquire more credit, they begin to spend more money, principally to acquire additional factors of production, capital goods in particular, with which to produce more goods for customers. This process bids up both capital goods and consumer goods (price inflation, in other words), as the additional money introduced into the economy is spent and as factors are withdrawn from lower order stages of production (consumer goods) to higher order stages of production (capital goods).

As price inflation rises, monetary authorities typically reduce the supply of credit in order to halt it, which causes a rise in interest rates. This sparks the recession. Interest rates rise (even past pre-credit expansion levels due to increases by lenders as a hedge against price inflation and the increase in demand for credit by firms in anticipation of even higher future interest rates), credit becomes scarce, firms operating with higher order production stages get priced out of the credit market and become credit starved, leaving them with incomplete investment undertakings staffed with labour, land, and capital goods that must be "liquidated" or sold so as to cut losses and avoid insolvency. This process of liquidation is called a recession.

Recessions however are to be treated as visits to the dentist - painful but necessary - not as painful and unnecessary events. The liquidation process must occur because too many investment projects are incomplete and too costly to continue (due to rising interest rates). In addition, the high prices of goods, especially capital goods, is an effect of a dis-coordinating decision by the monetary authorities to expand the supply of credit without an equal expansion of savings, hence those prices must be allowed to fall so as to allow for the proper coordination of economic agents. Military Keynesianism, therefore, is powerless to correct the mal-adjustments produced by such credit expansion, for the solution is an economic contraction, not additional spending.

I draw attention to this issue because more than enough Republicans in Congress, despite their apparently shallow demands to cut spending, have demonstrated their unwillingness to cut the budget of the Defense Department. They claim to oppose Keynesianism, but will they show clemency towards this version of Keynesianism because of the military element? I won't hold my breath, as was once said.

Saturday, July 2, 2011

Nicholas Kristoff's Fantasy

In a piece in the New York Times, Nicholas Kristoff attempts to discredit Republicans by arguing that the epitome of what they supposedly desire - "a low tax, laissez-faire Eden" equipped with a limited government - can be found, of all places, in Pakistan. Let this be a reason to question Mr. Kristoff's expertise on foreign political economy.

Kristoff's "critique" is aimed at Republicans, and while I won't take this opportunity to defend them I will nevertheless venture to expose the errors in his argument. According to Kristoff, "[Pakistan] has among the lowest tax burdens of any major country: fewer than 2 percent of the people pay any taxes. Government is limited, so that burdensome regulations never kill jobs."

Its true that, according to the Heritage Foundation's
2011 Index of Economic Freedom, Pakistan's fiscal freedom is greater than the world average fiscal freedom, but Kristoff cannot conclude much from this premise. Hong Kong and Singapore far exceed Pakistan in terms of fiscal freedom and the standard of living in both nations is world class. Hence, it can hardly be argued, as Kristoff does, that "'starving the beast' of government, cutting taxes, regulations and social services...are steps toward Pakistan", i.e., sufficient, when combined, to plunge a nation into destitution and underdevelopment, since Hong Kong and Singapore, developed as they are, lead the world in the absence of those government controls and are neither like Pakistan nor in danger of becoming like Pakistan. The 2011 Index says it all. Furthermore, advocates of reducing government interference into the economy do not argue that tax cuts are a sufficient cause of economic development.

Kristoff's claim that the government of Pakistan is "limited" is as asinine. Again, according to the Index, Pakistan is designated as "mostly unfree" with a score of 55.1 out of 100 and a rank of 123th freest nation out of 179 nations. Read the report for yourself. For example, investment freedom in Pakistan is abysmal. According to the Index,
"Deterrents to investment include security threats, political instability, civil unrest, corruption, poor infrastructure, weak contract enforcement, inconsistent and arbitrary regulation, and a lack of coordination between the federal and regional governments. Payments, transfers, and capital transactions may be subject to approval, quantitative limits, and other restrictions. Foreign investors may acquire real property."
Financial freedom is as non-existent, as the Index states that,
"The government has a majority stake in the largest commercial bank and controls several specialized banks. Restrictions limiting the number of foreign bank branches have been removed, but the central bank must approve all new openings. Foreign investors are now allowed to hold up to 100 percent of the equity share of insurance companies."
Monetary freedom is severely obstructed. Again, according to the Index,
"The government controls pharmaceutical and fuel prices, subsidizes agriculture, and influences prices through state-owned enterprises and utilities, including electricity and water. Ten points were deducted from Pakistan’s monetary freedom score to account for measures that distort domestic prices."
Protection of property rights is atrocious and corruption is "pervasive" with the Index stating that "Pakistan’s judiciary, separate by law from the executive, remains hampered by poor security for judges and witnesses, sentencing delays, a huge backlog of cases, and corruption." According to the 2010 International Property Rights Index, Pakistan ranks 113 out of 129 (see page 117) nations examined in terms of the quality of protection for property rights, which puts it below nations like Iran and Serbia. According to the Corruption Perceptions Index of 2010, Pakistan ranks 143rd out of 178 nations examined, putting it behind countries like Zimbabwe, Syria, and Ukraine. If Pakistan was truly a capitalist paradise, then the above non-freedoms and non-respect for private property rights would not exist there.

Kristoff attempts to reassure us when he claims that,
"I spend a fair amount of time reporting in developing countries, from Congo to Colombia. They’re typically characterized by minimal taxes, high levels of inequality, free-wheeling businesses and high military expenditures. Any of that ring a bell?"
Again, Kristoff is implying that the alleged laissez-faire conditions in countries like Congo and Colombia are contributing factors to the poverty and neglect within this countries. Predictably, neither country is characterized by laissez-faire conditions, particularly Congo which ranks 168th on the Index of Economic Freedom. A variable or variables cannot be blamed for having produced a certain effect if said variable(s) do not exist to begin with; a thing must exist before it can cause an effect. Hence, one wonders from where Kristoff receives his information.

A "laissez-faire Eden" is a place where the exercise of property rights is not stifled by government interference, corruption, or violence. Why Kristoff labours under the impression that Pakistan is such is beyond me.


As a side note, I'm now settled in in my new residence in Alaska, so the long absences are a thing of the past for now.

Monday, May 16, 2011

Tax Breaks Are Not Subsidies

While discussing a proposal to discontinue tax breaks for oil companies, Senator Chuck Schumer thought it was imperative to make the following comment: "Let me get this straight, Republicans plan to dismantle Medicare while refusing to end this tax subsidies [sic] for big oil companies?"

I cannot reiterate this enough: tax breaks are not subsidies. A tax is "a sum of money demanded by a government for its support or for specific facilities or services, levied upon incomes, property, sales, etc." A subsidy is "a direct pecuniary aid furnished by a government to a private industrial undertaking, a charity organization, or the like."

Consider this: taxes are a necessary condition for the existence of subsidies. Under current politico-economic conditions, if a government distributes subsidies, then it levies taxes. Hence, if a government does not levy taxes (100% tax breaks), then it cannot distribute subsidies. Subsidies are government expenditures. All government expenditures come from taxation. Therefore, all subsidies come from taxation.

Half the battle with government intervention is lost when political authorities manage to influence the lexicon. A tax is a seizure of property one has acquired via production and voluntary exchange. A subsidy is a piece of property seized and then granted to a party that did not acquire it via production and voluntary exchange. It's essential that we distinguish the two.

Saturday, April 30, 2011

A Note on My Posts

I'm currently located at Ft. Leonard Wood, Missouri for the moment, so I have no internet access other than my phone service. Hence, I can post essays (via my Evo) but I cannot edit the font or recall my list of labels. I'm moving to Alaska in one month where internet access will be available again. Until then, I'll write posts with my phone.

On the Criminalization of Inflation Reporting in Argentina

According to the Economist, INDEC, the statistics agency of the Argentinian government, "began doctoring its consumer-price index in 2007" costing "holders of the country's inflation-linked bonds at least $2.3 billion last year." Naturally, private statisticians and economists have offered their own estimates of price inflation. According to the Economist, "They reckon that inflation is now running at about 25%. That is far above the 10% reported by INDEC...but less than the 30% wage increases public employees have received in recent years."

Unsurprisingly, the Economist reports that "Guillermo Moreno, the thuggish commerce secretary, is moving to stamp out the unofficial, but widely trusted, price indices. To do so he has dusted off a decree, penalising misleading advertising, approved by a military dictatorship in 1983. In February he sent letters to 12 economists and consultants ordering them to reveal their methodology, on the grounds that erroneous figures could mislead consumers."

Ah yes, the repression of information distribution, a cynical, time honored tactic of governments far and wide. To begin with, we have every reason to believe that the figures produced by INDEC are erroneous, deliberately so. Given its loose monetary policy and the inevitable price inflation it yields, the Argentinian government has an incentive to disinform the public. At the very least, a government must command a modicum of respect from its citizens as this is a necessary condition for its continued existence. As price inflation rises as monetary authorities expand the supply of loanble funds, this respect decreases, and rightly so. Hence, the technocrats in Buenos Aires think they can maintain this necessary condition for their prolonged employment by fooling the public into thinking that price inflation isn't nearly as bad as they ought to think it is and harassing those who offer accurate estimations. It's a rather crude form of malfesance but certainly not beyond even the esteemed monetary authorities of the U.S. government who discontinued publishing M3, a monetary aggregate considered by many to have been the best measure of the money supply and, therefore, of inflationary activity.

By contrast, private institutions have an incentive to offer accurate information on the price level, as the financial integrity of their clients and their reputation as reliable distributors of data are contingent upon their performance. This is yet another example of a function assigned to the government that is better performed by the private sector.

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Saturday, April 23, 2011

Essays, Articles, Blog Posts, Podcasts, and Videos

~According to the New York Times, "For the last three years, Gallup has called 1,000 randomly selected American adults each day and asked them about indicators of their quality of life. Responses are converted to the Gallup-Healthways Well-Being Index. Here are the 2010 results, sorted by Congressional districts."

~Ben O'Neill eviscerates the intellectual edifice upon which dictator Evo Morales attempts to
"[grant] the Earth a series of specific rights that include rights to life, water and clear air; the right to repair livelihoods affected by human activities, and the right to be free from pollution." O'Neill also has an older essay on the problems of "positive rights" as well.

~Morgan Alexander Brown shames Terry Eagleton in his review of Terry's latest Marxist apologetics.

~Wendy McElroy discusses restrictions upon the freedom to cross the border into the U.S.

~ExxonMobil, via the Minerals Management Service and the Department of the Interior, provides an illustration of the extent to which offshore drilling for oil and natural gas is prohibited by the federal government.

~According to Taking Points Memo (TPM), "In a McClatchy-Marist poll released this week, 70% of registered voters who identify with the Tea Party opposed making cuts to either Medicare or Medicaid -- the government-run health programs for the elderly and the poor -- to help reduce the nation's deficit. Meanwhile, only 28% of tea partiers said they'd be willing to cut spending on those two programs.

Tuesday, April 19, 2011

Assessing the "Pro-life" Argument from Human Similarity

A common argument among "pro-life" conservatives against abortion rights involves a deduction of the claim that a fetus deserves freedom from fatal coercion, i.e., freedom from being killed, from prior claims asserting that a fetus is a human being and that a human being deserves freedom from fatal coercion. When asked to demonstrate that a fetus is a human being, many conservatives appeal to a claim that identifies the human characteristics of a fetus and a corollary claim asserting that these human characteristics make it a human being. Below is a formalized version of the argument:

1.) A fetus is a human being
2.) A human being is something that deserves freedom from fatal coercion
3.) Therefore, a fetus is something that deserves freedom from fatal coercion

4.) To prove that a fetus is a human being, pro-lifers often emphasize facts about the development of the fetus, particularly the formation of those physiological characteristics present within human beings who have been born already. It is said of the fetus that as it develops, its humanity is expressed ever more vividly. Different sets of characteristics are provided by different pro-lifers and pro-life organizations, but the very brief list offered by below is typical:

-The heart starts beating between 18 and 25 days.
-Electrical brainwaves have been recorded at 43 days on an EEG.
-The brain and all body systems are present by 8 weeks and functioning a month later.
-At 8 weeks, the baby will wake and sleep, make a fist, suck his thumb, and get hiccups.
-At the end of 9 weeks, the baby has his own unique finger prints.
-At 11-12 weeks, the baby is sensitive to heat, touch, light and noise. All body systems are working. He weighs about 28g and is 6-7.5 cm long.
-(Often an emphasis on the human DNA of the fetus is offered as well, though omitted this detail)

5.) The subsequent premise asserts that anything possessing the characteristics shown within the former premise is a human being
3.) Therefore, a fetus is a human being

One of the propositions I dispute within the above argument is premise #5. I have yet in my participation within the abortion debate to see a demonstration of premise #5. How does the formation of certain human characteristics qualify a fetus as a human being?

But nevertheless, we have a conflict of "interests". If the mother aborts, the fetus dies. If the mother is prohibited by the state from aborting, she is disenfranchised. To whom should legal protection be greater?

It seems to me that women ought to possess the legal right to abort. Consider the following.

On one side, we have the mother. She is a physiologically independent, human entity and she is capable of being rational, i.e., she can make inferences. On the other side, we have the fetus. It is physiologically dependent wholly upon its mother and it most certainly is not capable of rationality. Because of her ability to conduct herself rationally, the mother is capable of being a productive member of society, participating in the division of labour and making positive-sum exchanges with others. By contrast, it will be years, perhaps decades until the fetus develops into a productive, contributing member of society precisely because it is not equipped with a rational cognition. Shall we sacrifice the rational and productive (or those who are currently capable of being so) to the non-rational and the non-productive? I would rather not.

What I would like however from pro-lifers is:

1.) A proof of premise #5
2.) An elaboration on what is it about human beings that make them worthy of freedom from fatal coercion (or a proof of premise #2, in other words)