Leading the Revival of Individualism & Self Reliance

Public Choice Economics Strips Away The Mythology From Politics And Government.

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Economists know a lot about incentives and individual motivation and how they impact decision-making. They’ve known it since the 18thCentury, ever since Adam Smith completed his Theory of Moral Sentiments and Inquiry Into The Nature And Causes Of The Wealth Of Nations. The term we have come to use for individual motivation is self-interest. This means that people seek betterment – they want to improve their circumstances, and to make their future better than their past. Individuals pursuing self-interest works out well for everyone because it turns out that we each do well when we make successful economic exchanges that serve others’ needs and offer others the greatest value. The better we each become at service, the more we earn, and the greater the productivity and the more betterment for everyone. Self-interest is the catalyst for the great self-organizing economic system of betterment. Even though the individual is, according to Smith, intending only his own gain, “he is, in this. ….led by an invisible hand to promote an end that was no part of his intention.”

“By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. “

“I have never known much good done by those who affected to trade for the public good.”

Recognizing Self-Interest In Politicians And Bureaucrats.

Since we have understood self-interest for more than two centuries, why was it that economists, deeply knowledgeable about individual motivation, had a blind spot about politicians and government? The perpetrators in those two lines of work claimed to be in the business of public service. They talk about the public interest. For a long time, economists, normally so rational and objective, swallowed this mythology hook, line and sinker. Perhaps it was wishful thinking.

Until the 1960’s, that is, when a theme emerged in economics that has acquired the name Public Choice Theory.  (One of the consistent attributes of economic theorists is that they prefer goofy opaque names for their fields of research.) What Public Choice Theory really means is politics and government stripped of their mythology.

The core tenet of Public Choice Theory is the recognition of self-interest in individuals in the field of politics and government. People are not different when they act as politicians, bureaucrats or even voters. Politicians seek election, bureaucrats seek to advance their own careers, voters vote their pocket book. The unit of analysis is individuals and their personal incentives. “The people”, “society” and “the public” are not real entities that make decisions. Individuals make decisions, based on the incentives facing them.

The Different Impact Of Self-Interest In Private Markets Compared To Politics And Government.

In private markets, incentives are based on the consequences of our own individual actions. We can calculate them, learn from feedback, and keep trying harder.

In politics, this is not the case. The election-seeking politician responds to a group that he or she believes will be the majority of voters. Kenneth Arrow, who was one of the leading Public Choice theorists, demonstrated mathematically that there is no mechanism of political choice that can truly represent the preferences of all voters or even a decent compromise. It’s called Arrow’s Impossibility Theorem. The result is the dictatorship of the majority.

The will of the majority voters will be imposed on the minority, irrespective of the minority’s preferences. Within the majority voting cohort, there is often a well-organized special interest group that is particularly good at applying political pressure through organizing and fundraising and political spending. So the election-seeking politician responds to them.

This group may run advertising and political messaging campaigns. Public Choice theory makes it clear that voting is irrational for the individual, since the possibility of making a difference in an election result is close to zero. Consequently, the incentives for the individual are stacked against spending time on information gathering – hence the phenomenon of the uninformed voter. The special interest group might run some crass and attention-getting ads that drive home a message like “my opponent is evil” at some level. This may be all the information the voter has.

Enter The Bureaucrats.

Once elected, the political representative is incented to delegate responsibility to government agencies and their bureaucrats. This saves the time and effort of studying issues and writing legislation. The agency bureaucrats secure their positions through civil service appointment, not elections, and their incentives are for more funding, more discretion, more control and more prestige among their agency peers. They, too, seek the support of special interest groups through discriminatory transfers of wealth from the broader citizenry. They give farmers subsidies in farm bills at the expense of the food-buying public. They give exporters tariff protection at the expense of domestic consumers. Public Choice Theory demonstrates that even Presidents and Supreme Court Justices are incented to maintain the “stability of the system”, which means not rocking the special interest boats.

No Point To Throwing The Bums Out.

This analysis also makes it clear that the policy outcomes will not change when different individuals are elected. The same voting mechanisms and the same bureaucratic response to special interest influence will prevail. There’s no point to throwing the bums out. Democracy itself is a sham.

Critics of free markets like to point to what they call “market failure”. Public Choice economists point out that “government failure” is the norm.

We’ve known this since Adam Smith’s time. Two centuries of folly have intervened.

 

Photo by Joakim Honkasalo on Unsplash

When Too Many Regulations Harm Health Care Consumers

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Caring Hearts Personal Home Services is an organization in Kansas which offers nursing care and physical therapy to Medicare patients who, for health reasons, are unable to leave their homes and are considered to be “homebound.” Though Caring Hearts has been a huge help to many in its community, the organization recently found itself at odds with the federal government.

Since the organization caters to Medicare patients, it is subject to oversight from the Centers for Medicare and Medicaid Services (CMS).  A recent audit by CMS led to claims that several of Caring Hearts’ patients did not meet the qualifications necessary to be labeled as “homebound.”

As a result, CMS was demanding repayment from Caring Hearts for all services that CMS deemed “unreasonable and unnecessary.” CMS asserted that Caring Hearts rendered $800,000 worth of services that did not meet the standards necessary in order to be covered by Medicare. However, as it turned out, CMS was unfamiliar with its own regulations.

One of the cases in question involved an 85-year old who weighed more than 350 pounds and who was, more or less, confined to a wheelchair. Currently, CMS regulations specify “homebound” patients as those who have a “normal inability to leave home,” while “leaving home must require a considerable and taxing effort.” According to the CMS, this wheelchair-bound patient did not meet these qualifications.

However, in 2008, when the care was given to this patient, “homebound” was defined by CMS to mean any patient who had a “condition due to an illness or injury that restricts their ability to leave the place of residence except with the aid of: supportive devices such as crutches, canes, wheelchairs, or walkers.”

Clearly, given the circumstances surrounding the wheelchair-bound patient, the care provided by Caring Hearts in 2008 met all the necessary standards in place at the time. However, CMS was so out of touch with its own regulations, it was not aware of the rule change that took place between 2008 and the present day.

“What happens if we reach the point where even these legislating agencies don’t know what their own ‘law’ is?” Judge Neil Gorsuch asked after the Tenth U.S. Circuit Court of Appeals ruled unanimously in favor of Caring Hearts.

The court held that CMS “seems unable to keep pace with its own frenetic lawmaking,” and that, “an agency decision that loses track of its own controlling regulations and applies the wrong rules in order to penalize private citizens can never stand.”

CMS’ inability to keep track of its own rules is not something unique to their agency alone. In fact, with over 175,000 pages of federal regulations in place as of 2014, it has become impossible for anyone to keep track of all the federal rules currently in place.

When the ever-growing bureaucracy of the federal government prevents businesses from being able to help their consumers, especially when the commodity in question is health care, there is a real problem with our regulatory system. Luckily for Caring Hearts, this story had a happy ending. But many other businesses are not so lucky.

The “Netflix Effect” and the Wonders of Creative Destruction

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As a child, renting a movie was something I looked forward to every Friday night. After spending five long days trapped in a classroom, my siblings and I were rewarded for our time served with the gift of being able to select any movie our hearts desired. As children, we loved browsing each aisle thoroughly, making sure we considered all our options before committing to one selection. It would be another week until we were back, so we had to choose wisely.

But the excitement didn’t end there; once we reached the checkout counter we were also permitted to pick out one sugary treat to eat while we watched our selections. This was pure bliss for a child and I looked forward to this routine every single weekend.

Now, video rental stores are a relic of the past as modern technology has replaced the need consumers once had for these establishments. Streaming platforms of all varieties have given consumers the ability to browse thousands of movies without ever leaving the comfort of their couches. And with only a click of a button, you have pretty much any film or series you could ever want. So, even though my childhood memories of visits to Blockbuster Video are precious to me, I most certainly do not mourn the closing of these businesses. Instead, I celebrate the innovation that has made these stores obsolete.

Creative Destruction

Economist Joseph Schumpeter first coined the term “creative destruction“ in the 1940s and explained it as:

“The process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new structure. This process of creative destruction is the essential fact about capitalism.”

An excellent example of this phenomenon can be found when taking a closer look at why companies like Blockbuster and Hollywood Video no longer exist.

Our world is becoming increasingly more digital. And video media is hardly the only sphere impacted by this innovation. With the rare exception of vinyl enthusiasts who have created a steady demand for physical records, music is now mostly purchased and listened to on digital platforms like Spotify and iTunes. The same can be said for physical books as well. Many consumers prefer to read their content on e-readers. By switching to digital books, consumers can now carry hundreds of books around them at all times on a relatively small device. The new will always replace the old, and this is truly miraculous and absolutely something to be celebrated.

As new technology emerges, there is always less of a need, and thus less consumer demand, for older and outdated models. The carriage was replaced by the car, manual labor was replaced by industrial machinery, the typewriter was replaced by the computer, and Blockbuster Video was replaced by Netflix. The key thing to remember is that with each of these innovative changes, the consumer won by gaining access to better goods and services.

The Netflix Effect

Thomas Sowell once said:

“The very thing that makes a modern industrial society so efficient and so effective in raising living standards–the constant quest for newer and better ways of getting work done and more goods produced–makes it impossible to keep on having the workers doing the same jobs in the same way.”

And that is exactly what Netflix has done. In fact, the disruptive impact it has had on the market has even been dubbed, “The Netflix Effect” by economists. This is because, in addition to replacing the need for rental stores, Netflix has also changed the way we consume other forms of media as well.

As Mark Perry from AEI says:

“After challenging Blockbuster, which filed for bankruptcy in 2010 and was subsequently acquired by Dish Network at auction in 2011, Netflix (along with other online viewing platforms like Hulu, Amazon and Apple TV) is now challenging cable networks, traditional network TV channels, and pay-TV services.”

Many people, and especially millennials, are opting to use streaming platforms instead of purchasing cable television. And while in the earlier days of Netflix streaming this meant waiting until a season of a show had ended before being able to watch it on the site or having to wait until a movie had been out for awhile, now other companies are competing with live television.

Hulu, for example, now offers a live streaming service that is only further incentivizing consumers to ditch their cable providers. And to make things even more enticing, the prices for streaming platform subscriptions are far less than what consumers pay for cable packages.

But Netflix, along with Hulu and Amazon, are also changing the way media is produced. Since each of these platforms now offers a plethora of original content, they are now directly competing with major Hollywood production companies. And, even more interesting, have even encroached on these production companies’ turfs by resurrecting canceled projects. When Fox canceled the Mindy Project, for example, Hulu picked it up and carried the series for several additional seasons. Likewise, Netflix has become known for resurrecting older classics, like Full House.

But while cable providers and production companies aren’t doing much to innovate and compete with streaming platforms, Blockbuster deserves a nod for at least putting up one last fight before shutting its doors.

Blockbuster’s Last Stand

Before digital media became as popular as it is today, Netflix began as a mail DVD rental service. Still more modern than video rental stores, which still offered VHS well after DVDs became the norm, Netflix appealed to consumers who were too busy or didn’t want to have to leave their homes to rent a movie. For a monthly fee, you were given a certain amount of rentals per week. Selecting which films you wanted to see in order of importance, Netflix would go down the list and send you a few selections at a time. Once you returned those selections by placing them in the mailbox, you would be sent your next selections.

This was truly revolutionary for its time and even back in the early 2000s when Netflix started rising in popularity, rental stores knew they were in trouble. Hollywood Video kept their model the same, relying on their “hip” brand to save them. Blockbuster, on the other hand, put up a fight. 

Blockbuster saw the direction the market was taking and began offering a similar service, mailing DVDs to consumers in addition to having physical locations. This may have ultimately been what allowed the company to stay afloat for a few more years.

By 2010, the company that had acquired Hollywood Video in 2005 had filed for bankruptcy, signaling the final nail in the rental store’s coffin. Blockbuster would survive until 2013 when it finally decided to close its remaining stores.

Our world is ever-changing, but as the old way of doing things is replaced by the new, we should consider how lucky we are as consumers to be benefiting from creative destruction. And while kids today may not understand the wonders of visiting a video rental store, they will also never have to deal with the struggle of waiting for a video to rewind before having to return it to the store, and that is a worthwhile tradeoff. 

How Core Entrepreneurial Values Are Sacrificed To Appease Identity Groups.

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In the animal kingdom there are predators, prey, and scavengers. The predators are highly adapted and specialized; they have vision. Prey are also highly adapted, for survival. Both co-evolve under the laws of natural selection. The third category, scavengers, are opportunists. And there are interesting comparisons in the business world. Energy, vision, and specialization are key to attracting millions of new customers. Once critical mass is achieved, predator companies can leverage their new market strength into acquisitions. Other companies have a strategic plan that includes getting acquired. The liquidity event is their reward for successful opportunism. Prey are targets of hostile takeovers, or they are victims of extinction due to a failure to adapt. The ultimate scavengers are the regulators and their cronies. They act as legislator, judge, and tax collector. Awesome power concentrated in one entity.

The Animal Kingdom Meets The Magic Kingdom.

Category-of-one companies are the king of the jungle among predator businesses. Their creativity spawns disruptive new ways of doing things. They create markets that never existed, own first mover advantage, and have no peers. A notable example is Walt Disney. He started with a dream, assembled a network of investors, artists, and engineers to fulfill it, and changed the world. Disney’s enterprises have since enhanced millions of lives in wonderful ways, and the brand became a global entertainment powerhouse.

At his essence, Disney was an entrepreneur. He was an innovator who was empathetic to the desires of people. He wanted to do something meaningful, and he was willing to accept the rewards or the rebuke of the marketplace. Disney was guided by rigid principles and a long-term vision. His strategy was to sell an experience that celebrated the humanity of cultures from around the world. The successful execution of his ideas established Disney as the post-war icon for tolerance, individualism, and western civilization. He set the example for a new generation of entrepreneurs who value creativity, embrace risk-taking, and aspire to category-of-one impact.

The Postmodern Category Of One.

Today’s category-of-one brands are dominated by businesses creating amazing new technology. But unlike the animal kingdom, these businesses can quickly morph from a network of prolific entrepreneurs to a hierarchy of opportunists. As such, the largest big data firms have become cronies to the government protection racket. They have also rejected the entrepreneurial principles of individualism and free markets. The environment has changed. Rigid new company cultures devoted to the Marxist fallacies of identity groups now dominate. PayPal founder Peter Thiel observes:

It’s striking how what had always been a very liberal place has become almost a one-party state. When you have complete unanimity that tells you that political correctness may have gone a little bit too far.

Big data companies accept the market’s rewards, but in trying to avoid any market rebuke, they have turned themselves into scavengers. Their rationale is more about collection of data rather than provision of  service. To maintain their capability to collect data, they feel the need to navigate today’s social minefields, and their strategy is appeasement of identity groups.

The Sanction Of The Victim.

As communitarian philosopher Philip Devine tells us, these “identity groups are tribes organized for war”. Psychiatry professor Jordan Peterson explains:

The postmodernists built on the Marxist ideology. They started to play a sleight of hand, and instead of pitting the proletariat against the bourgeois, they pit the oppressed against the oppressor. That opened up the avenue to identifying any number of groups as oppressed and oppressor and to continue the same narrative.

This mindset intentionally ignores reality. Entrepreneurs contribute mightily to the peace and prosperity of everyone, but this role is never understood or celebrated. Funding non-profits is celebrated, and temporarily buys goodwill. But that is not enough, it never is. A business must also pay homage to the social reconstruction narrative sold as enlightened thinking.

The Art Of The Package Deal.

A company starts by establishing its virtue credentials; this is called “giving back.” Its corollary is “you didn’t build that.” Prosperous people do so because the tug of guilt, disguised as social affirmation, is that strong. And since the media-education complex has done such a good job of indoctrination, inclusion, diversity, and equity are treated as original and unique corporate values. Speech codes are next. In this environment, an established company, on the road to becoming a first choice brand, will make compromises.

They err in trying to blend the principles of reason and entrepreneurship with the fallacies of tribalism and entitlement. This is not yin and yang – they are not the complementary forces. Its an insidious package deal. Besides, how does the adoption of an “enlightened” fallacy help achieve category-of-one status? It doesn’t, but heck, it buys off the cultural opportunists lest they become predators.

Singular Individualism.

Another wonderful innovator was Maria Montessori. She achieved international fame for her work on childhood development. Her movement featured teacher training academies and lectures that inspired Montessori societies throughout the world. At one time she had many government benefactors, but they were really more interested in exploiting public education for indoctrination, and were only trying buy her influence. But Montessori refused to conform to the demands of authoritarian regimes in fascist Italy and progressive America, so they became adversaries.

Montessori had discovered self-reliance and individual creativity as marvelous teaching aids. She would not compromise her values to unprincipled opportunists, and nor should we. In a society that champions individual liberty, creativity, and self-reliance, no one has to compromise. Instead, we should be grateful for the opportunity to be more than we are.

The Handmaid’s Tale Is a Collectivist Dystopia

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Ever since Donald Trump took office in January, the political Left has rediscovered their dread of state power.

The potential for tyranny is hardly a monopoly of Right-leaning politicians.

After the bombastic billionaire was elected to what is arguably the most powerful office in the world, many on the Left began warning of an imminent dystopian future. In fact, following Trump’s win in November, sales of George Orwell’s 1984 skyrocketed to unprecedented levels as comparisons between present-day America and Orwell’s fictional nation of Oceania have become commonplace rhetoric.

Suddenly, any story featuring authoritarian rule has become symbolic of the Trump regime and the rights we will certainly lose under his reign.

But the potential for tyranny is hardly a monopoly of Right-leaning politicians; it comes from all ideologies based on compulsory government. This means the Left is not immune to claims of authoritarian rule.

But now, a popular new series is adding to the Trump hysteria while neglecting to recognize that without government force, no such dystopian society would be able to exist.

A Handmaid’s Tale

Based on Margaret Atwood’s novel of the same name, Hulu’s new series The Handmaid’s Tale has become the latest sensation in a culture obsessed with watching a series and then discussing the show’s content on social media.

In the series, fertile women are forced to become birthing vessels for the state.

Set in the not-so-distant future, the series takes its viewers to an unrecognizable America. Like the masses in the story, the show’s audience is not entirely sure how the situation got so bad. Reflecting reality, viewers do, however, understand that whatever initial crisis led to this totalitarian takeover, the situation was worsened by perpetual war.

Somewhere along the line, America was plagued with infertility due to a toxic environment, leading to a population crisis. At the same time, a cult-like group of religious zealots have begun blaming modern “degenerate” culture for the problem and calling for a return to a more puritanical era.

As fertility continues to decline, this riotous collective begins to rise in influence in what was formerly known as Cambridge, Massachusetts. Continuing to blame society’s uninhibited and free loving culture for the inability to procreate, the radicals believe that in order to remedy the problem, women who are still deemed “able” to bear children must be forced into procreating for those at the very top of society.

After the United States government is ultimately overthrown, a new theocracy is born where the Bible is used to justify what is essentially rape of the worst kind. Not only are these selected handmaids expected to bear children for important and well-established men and their wives, they are also told that they should feel blessed to have been given the privilege to do so.

The premise of this new society is built on the biblical story of Rachel, Jacob, and Bilah. The story tells of Rachel’s desire to have children with her husband Jacob, only to find that she is unable to conceive. In desperation, Rachel asks Jacob to go into their servant Bilah’s room and conceive a child with her which will be raised as their very own.

In The Handmaid’s Tale, this allegory is put into practice and all fertile women are taken from their former lives and forced to become birthing vessels for the state.

Pop Culture Parallels

For those who fear that Trump is some sort of principled ideologue, and not just a power hungry lover of attention, they have made parallels between the show’s content and the culture of fear that is so prevalent now that the country has a new president.

Shortly after the series began airing, various articles were written, explaining how the show’s content reflects the reality we are now living with in the era of Trump. Even the book’s author has chimed into the discussion and given her thoughts on how the story relates to the new leader of the free world.

Since the plot focuses on women being oppressed in an outdated patriarchal hierarchy, the theme of the story resonated with the many on the Left, who fear that the Trump Administration will pass restrictive laws against women’s reproductive rights. Even though there has been little evidence to support this claim, the popularity of the recent women’s march proves just how real this perceived fear has become.

When Atwood originally wrote the book, she was residing in West Berlin surrounded by the Berlin Wall. Having traveled behind the Iron Curtain during this time, she was no stranger to the dangers of the Soviet police state and the heightened surveillance so prevalent in collectivist regimes.

Yet, even though the Soviets were more closely aligned with Left-leaning ideologies that, once again, focused on the collective and not the individual, somehow any oppressive regime is now a historical warning against Trump.

In her article written for the New York Times titled What “The Handmaid’s Tale” Means in the Age of Trump, Atwood herself even attempts to make parallels between the book’s premise and the election of Donald Trump.

“In the wake of the recent American election, fears and anxieties proliferate. Basic civil liberties are seen as endangered, along with many of the rights for women won over the past decades, and indeed the past centuries,” Atwood writes.

Since both the book and the series it inspired are narrated as if the main character, a handmaid named Offred, is recording her story in hopes that others will find it, Atwood attempts to draw comparisons between her story and other similar historical and literary instances by saying,

Robinson Crusoe keeps a journal. So did Samuel Pepys, in which he chronicled the Great Fire of London. So did many who lived during the Black Death, although their accounts often stop abruptly. So did Roméo Dallaire, who chronicled both the Rwandan genocide and the world’s indifference to it. So did Anne Frank, hidden in her secret annex.

This rhetoric seems par for the course, at least for the next four – possibly eight – years. But this is nothing new.

The same comparisons were used by the Tea Party during the early Obama Administration years, proof that neither side is immune to hypocrisy.

Squashing the Individual

For any tyrannical government coming to power, destroying any semblance of individuality is the first step to establishing authoritarian rule.

One would be hard-pressed to find any fictional dystopian setting where the individual is protected ahead of the collective. In fact, in many instances, a crisis is used to convince the masses that national security and personal security can only be obtained through the sacrifice of one’s own self.

The same is true in The Handmaid’s Tale, where the good of the state is put ahead of the individual. True, this new form of government may be centered around a false interpretation of the Bible and not a constitution, but at the end of the day, religious tyranny escalating to the point where rule of will is dictated by a select few is still state abuse.

The Right is just as guilty of political hyperbole as the Left.

Upon being kidnapped by the state, handmaids are stripped of their former identity and are forced to take on the name of the whichever commander they have been assigned. Ofglenn, for example, “belongs” to a commander named Glenn. By taking away each woman’s unique identity, they have taken away any semblance of the lives they had spent their lives building.

Each handmaid must also wear the same red, Puritan-style dress, making them easily identifiable if caught fleeing or found somewhere they ought not to be. Just as with their names, forcing them each to wear the same dress reinforces the idea that the collective is more important than the individual.

Oddly enough, the Left has historically been champions of collectivism, frequently claiming that individuals should be forced to give tax dollars to fund programs that favor the general public welfare. In other words, the group is more important than the individual.

Blame the State

To be sure, there has never been – and will most likely never be – an American president who has not tried, in some capacity, to strip citizens of their rights. After all, as the old saying goes, “absolute power corrupts absolutely.”

For example, many of those who are nervous about the current Administration were defensive of former president Barack Obama. This is the same President who was caught with a secret kill list and who continued the indefinite detention of American citizens. These acts were so blatantly oppressive it is hard to understand why the Left cannot see the hypocrisy.

As the old saying goes, “absolute power corrupts absolutely.”

Likewise, the Right has also neglected their principles when “their guy” makes these same mistakes. When this happens, the same rhetoric is used against the left and many on the Right have no issue compromising individuality for collective “safety.”

But the Right is just as guilty of this as the Left.

George W. Bush frequently put the collective ahead of the individual by placing us in a perpetual state of war and suspending Constitutional rights in the name of national security. Suddenly, any criticism of Bush and his post 9/11 policies were shouted down by those who favored safety over liberty.

Traces and warning signs of dystopian regimes will always be found so long as the state exists. While the Left may currently be attempting to monopolize the entire dystopian genre, the truth of the matter is that dystopias would not be possible if individuals, and not governments, called the shots.

Instead of arguing amongst each other and using hyperbole to further political agendas, the American people would be wise to realize that the mere existence of state power will always leave individuals open to an oppression that reeks of dystopia.

Seattle’s New “Employment Tax” Ignores Economic Logic

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Over the last several years, certain members of the Seattle City Council have embarked on a quest to make the city a socialist utopia. From raising the minimum wage to a whopping $15 an hour to instituting a ridiculous soda tax on consumers, Seattle loves to squeeze money from its residents and business owners in any way that it can.

On Monday, the City Council continued this pattern by voting to implement a new “employment tax” on large Seattle-based businesses. The city is justifying this tax on major job creators like Amazon, Microsoft, and Boeing by blaming them for Seattle’s increase in homelessness. By the city’s logic, these companies have set the bar too high when it comes to employee wages. This has subsequently led to an increase in housing prices, which the city believes is responsible for the rise in homelessness.

By instituting this new tax, the city hopes to be able to build 1,780 low-income apartments over five years with the revenue collected. And while this tax was surely created with the best of intentions, the logic behind it falls flat. Punishing companies for voluntarily paying their employees generous salaries is so absurd, it sounds like a proposal straight from the mind of a Randian villain. But it also seems particularly ironic coming from the very same city officials who championed using force to incrementally raise the minimum wage just a few years ago.

And while the city has yet to acknowledge the detrimental impact this minimum wage increase has already had, they are also ignoring the potential consequences of this new tax. But if the city is not careful in considering both the seen and the unseen repercussions of this new employment tax, they might soon find that all the job creators have had enough.

Private Sector Opposition

Amazon has been one of the first companies to voice its opposition to this new employee “head” tax. And it is no surprise why. The tax would require every Seattle-based company with revenue over $20 million to pay 14 cents for each hour worked by Seattle residents. This adds up to about $275 per employee each year, which means that these companies will end up paying an estimated $47 million a year for five years. This is an outrageous demand for companies that are doing more for job and wealth creation than all of Seattle’s big-government programs put together. In fact, Amazon alone is responsible for creating over 40,000 jobs.

Amazon spokesman Drew Herdener issued a statement saying:

“We are disappointed by today’s City Council decision to introduce a tax on jobs. While we have resumed construction planning for Block 18, we remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.”

Amazon also questioned the city’s own spending habits when Herdener mentioned that the city revenue growth “far outpaces the Seattle population increase over the same time period. The city does not have a revenue problem — it has a spending efficiency problem.”

But Amazon is not alone in their opposition to this tax. Starbucks, another Seattle-based company, also has some grave concerns over the city’s apparent spending problem. Public affairs chief John Kelley commented on the matter saying that the city “continues to spend without reforming and fail without accountability…”

A group of Seattle tech leaders also stand in opposition to the tax, but that has not done much to deter the city government.

While Mayor Jenny Durkan was initially opposed to the original employment tax proposal, which was asking for 26 cents per hour worked for each employee, she seemed more than satisfied with the version that passed this week. She stated:

“This legislation will help us address our homelessness crisis without jeopardizing critical jobs. Because this ordinance represents a true shared solution, and because it lifts up those who have been left behind while also ensuring accountability and transparency, I plan to sign this legislation into law.”

But making such a bold claim about the impact, or lack thereof, that this new policy will have on job growth completely ignores the consequences that are not immediately seen.

The Seen and the Unseen

All actions have consequences, and when those actions are meant to control the economy, the consequences can have far reaching implications. In his essay “What Is Seen and What Is Not Seen,” French economist Frédéric Bastiat explained that all government actions have consequences that are both immediately seen, and also consequences that are unseen.

He writes:

“In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

In the instance of the new Seattle employment tax, the “seen” is the revenue generated by the city through this new tax. But City Council members are so blinded by how this money can potentially decrease Seattle’s homeless problem that they fail to see how this tax may also have negative implications.

Unless you are the Federal Reserve, money is not simply printed out of thin air. And while the city government routinely ignores the economic realities that come with using other people’s money, the private sector understands that the money has to come from somewhere.

In order to pay for this new tax, which again taxes companies for each hour worked by employees, the obvious solution would be to lay off employees or cut back on employee hours, or both. Amazon is one of the largest employers in Seattle and forcing the company to lay off employees or trim the number of hours they can work will not serve to help the city’s homelessness problem. In fact, in many ways, it could be adding to it.

There is already a fear that automation will jeopardize human jobs. And while much of this fear is unfounded, by instituting a “head tax” on employers you are basically incentivizing them to move away from taxed labor and right into the arms of automation.  

Additionally, between the minimum wage increase and the new employment tax, there is also the possibility that these companies get completely fed up with Seattle and choose to leave the city altogether. Layoffs, reduced hours, and companies leaving are just a few of the “unseen” consequences of this new policy.

If only the Seattle City Council was wise enough to read Bastiat, they might be able to save themselves from a world of economic trouble. But the fact of the matter is, many politicians and legislators see only the immediate consequences, and completely ignore the “unseen.” However, economic realities can be ignored forever, anyone who doubts this fact need only look at the city of Detroit.

Cryptocurrency Does More for Teachers and Students Than Governments

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Recently, I wrote about how the cryptocurrency boom is making many young and idealistic investors exceedingly rich. And with this newfound wealth comes the opportunity to pursue passions projects. And this is exactly what one ICO is doing for public educators.

There is no doubt that in spite of the large amount of money being funneled into the department of education through taxation, many public schools fail to get the supplies and resources they are in need of. As is the nature of all government bureaucracies, taxpayer money is spent primarily on the salaries of high-ranking administrators and not on actual education costs. That is why many teachers have stopped relying on the government and have instead turned to crowdfunding sites to have their needs met.  

The “Largest Donation of Cryptocurrency”

Last week, the crypto-based payment network, Ripple, donated $29 million to the site DonorsChoose.org. DonorsChoose.org is a crowdfunding site that helps connect teachers with donors in order to meet their various classroom needs. To date, this donation on behalf of the ICO is the “largest donation of cryptocurrency” on record.

The donation itself was made in cryptocurrency, but the site will convert the donation into US dollars over the next few weeks Ripple’s token, XRP is currently only worth about $0.53, but when looking at its market cap, it is the third highest ranking cryptocurrency. XRP will be used to fulfill over 35,000 funding requests on the site. In a statement released to the press, Ripple stated:

“Approximately one million students are receiving books, school supplies, technology, field trips, and other resources vital for learning through DonorsChoose.org.”

But just how far can $29 million go towards fulfilling the teacher’s needs? Thanks to Ripple, every single teacher on the site was able to have their needs met. 

A Different Way

One of the true wonders of ICOs and blockchain is the fact that this technology is making decentralization easier than at any other time in history. This is largely because this technology is continuously showing us that private entities can solve problems that governments cannot. And in many cases, these problems were started by governments in the first place.

Whether it is stealing data from its citizens or failing to secure it against hackers, the government is horrible with our private information. But where the government is constantly trying to see what we are up to, the blockchain is making it easier to transfer data anonymously and without the fear of having it confiscated by the government. But the power of this technology does not end there.

Because so many early crypto adopters have made a fair amount of money, they are able to show us that the government need not be relied on for funding every program under the sun. for example, when Puerto Rico was devastated by the latest hurricane season, many called for government aid. But crypto investors stepped in with their own plan. The project, “Sol” was started by crypto investors and focuses around helping rebuild the Puerto Rican economy. Wealthy investors are now moving to the island with their newfound wealth and are creating new jobs for the locals while also helping the island become a major crypto hub.

Many people who have traditionally seen the government as the only medium through which public programs can be funded are now seeing that there is another way. But cryptocurrency is showing us that we do not need the government in order to have financial needs of educational facilities met. 

Don’t Drain The Swamp, Eliminate The Swamp.

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Seldom do we find the media, the ultimate cronies, stepping out of their well-worn track of defending more and more government. Therefore, it is a great pleasure to encounter this article from the Las Vegas Review-Journal.

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President Donald Trump has repeatedly promised to “drain the swamp.” Looks like his personal lawyer, Michael Cohen, never got the message.

News broke last week that companies paid Mr. Cohen millions of dollarsfor counsel on a host of issues he has little known expertise on. AT&T gave him $600,000 as it sought the government’s OK to take over Time Warner. A drug company, Novartis AG, paid him $1.2 million for health care advice. Columbus Nova handed over $500,000 for assistance on real estate.

Either Mr. Cohen is a 21st-century Renaissance man with expertise on a wide variety of complex subjects, or he knew Mr. Trump.

That’s easy. This is a classic case of influence peddling, not part of a Russian plot to influence the election. Likewise, attempts to tie this to the hush money Mr. Cohen paid Stormy Daniels look extremely far-fetched.

The buying and selling of influence happens — albeit usually with a more respectable veneer — every day in Washington, D.C. It’s why former elected officials so often remain in D.C. Lobbying their former colleagues is a lucrative business. Knowing the right people, like Mr. Cohen did, can make you rich. That’s not illegal, but it is the type of swampy behavior that Mr. Trump pledged to eliminate.

But the fundamental problem isn’t Mr. Cohen, although his antics belie Mr. Trump’s claim that he hires only the best people. Rather, the problem is that the federal government has too much power. These companies thought it made good business sense to shower a Trump associate with cash. Why? Because the benefits they could have reaped were worth far more than the money they spent.

Companies don’t engage in lobbying because it’s fun. They do it to either push laws that hurt their competitors or to protect themselves from laws that would do them harm — or both. That’s the very definition of crony capitalism, and while it can make the winners rich, it’s a losing game for the average citizen.

Reduce the power of the federal government to pick winners and losers in the economy, and Michael Cohen doesn’t get rich just for knowing Mr. Trump. If you want to stop lobbyists, give them less to lobby for. Confine the federal government within its constitutional boundaries and the issue of lobbying and money in politics becomes much less acute. In fact, the progressive dream of eliminating money from politics is directly at odds with the big-government progressive agenda.

The problem with the “swamp” isn’t primarily the character of the people involved, but that the swamp exists in the first place. Reduce the size and scope of government, and the lobbyists and the companies that employ them will have fewer reasons to occupy those expensive digs on K Street in the first place.

Is The Pope Totalitarian? He Certainly Prefers Central Control Over Free Markets.

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Do you handle money? Better be careful. It’s the “dung of the devil”, according to the Pope, as reported in the Wall Street Journal. This somewhat emotional feeling about, and imprecise understanding of, finance and markets leads him down a path of condemnation of capitalism. His disgust is captured in a document recently released by Vatican offices and personally approved by the Pope.

The Pope’s solution to the problems identified in the document include totalitarian central control at the global level, and the banning of any innovative financial instruments of which the Pope does not approve. Some examples:

Elimination Of Markets.

The Pope is no fan of F. A. Hayek. Markets, he declares, are not capable of governing themselves. Lack of governance, according to the Pope, gives free rein to fraud and other negative effects including environmental damage. The love of money leads to global warming, apparently, as well as a lot of additional excesses that he finds distasteful. He has an answer.

Global Central Control.

Even nation states are insufficiently controlling for the Pope’s preferences. “The supranational dimension of the economic system makes it easy to bypass the regulations established by individual countries”, according to the Vatican document. The perfectly logical answer, in that case, is global control. In earlier declarations, the Vatican has expressed its favor for a “global public authority” and a “central world bank” to regulate the international financial system. This time, their wording is:

“The current globalization of the financial system requires a stable, clear and effective coordination among various national regulatory authorities.”

Since the Vatican is a globally centralized organization that seeks to control how individuals think and behave in religious and social matters, it is natural that they should assert the same principles for free market exchanges between individuals and firms. To misquote Henry II, “Who will rid us of these meddlesome priests?”

Don’t Try To Reduce Your Tax Rate.

One of his reasons for preferring global control to nation-state level control is because the nation states are free to compete among themselves to offer more hospitable tax regimes to interested consumers. He condemns “offshore tax havens” as places to recycle dirty money associated with the mafia and war booties. Your thought you were just seeking alternatives to the egregious levels of extraction you face in your home country. But no, you just became a member of a murderous criminal organization. Better take confession.

Product-level Micromanagement.

The Pope is not satisfied with globally centralized control at the level of rules and regulations. He has his own point of view about specific financial products that have been invented by creative innovators in financial markets and adopted by customers because they meet identifiable needs and solve specific problems.

He dislikes debt securitization, saying that the risky nature of such products makes them a “ticking time bomb ready sooner or later to explode.” Clearly, he has not asked himself the first question in the entrepreneur’s handbook: “What do I know?”

He also expresses disdain for credit default swaps. He characterizes them as “gambling on the failure of others, which is unacceptable from an ethical point of view…a kind of economic cannibalism.” It is to be wondered how he feels about insurance, which is not only betting on the failure of others, but of oneself to keep one’s automobile out of the ditch and one’s life out of terminal accidents.

No Limit To The Scope Of The Control Community.

The word “catholic” means universal. That is the targeted span of the central control community, in which we can include not only the Catholic Church, but also the World Bank, IMF, United Nations, EU and many, many more institutions that recognize no bounds. They share thinking with global communism and all the totalitarian themes in history.

Exponential Growth In Entrepreneurship #3: The New Building Blocks Of Augmentation.

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What can an individual accomplish in a system as vast as the US economy or the global economy? Don’t we need systems and institutions and scale to accomplish anything these days? Isn’t the individual a cog in the machine?

The clear answer is no, and the no is becoming more emphatic. A new infrastructure of individualism is emerging to augment the capability of one person to impact the world. Here are some of the elements of the infrastructure.

Clouds Of General Rules.

F.A. Hayek put forward the proposition that creative and productive systems work best when there is a shared set of general rules that are known to everyone and apply to everyone, and the freedom for individuals to try their hardest to succeed within the framework of those rules. Today, cloud computing and cloud services are digitizing Hayek’s system. Think of 3D printing, for example. There are recipes and general rules for printing in the cloud. Anyone with a 3D printer and an internet connection can utilize the general rules, make a local adjustment based on their individual creativity, and produce a unique artifact, or a series of differentiated ones.

A paralegal can access the cases and precedents stored for everyone in the cloud, and apply their own knowledge and creativity to ranking the top cases for the support of the specific defense or prosecution they wish to make. A researcher can access analytical tools and algorithms in the cloud to apply to their own data set in order to arrive at a singular insight. We can think of 3D printing recipes, data storage and analytical tools as augmentation of our individual knowledge. Knowledge and tools will be broadly available; the whole world will be contributing to this cloud cache of rules; our individual creativity will make the difference in how we utilize them.

Miniaturized Rule Translators.

To help us translate the general rules and knowledge in the cloud into our own creative applications, there will be a host of innovative machines, IoT sensors and processors, miniature factories and farms, batteries and chips and devices. These machines will process the cloud knowledge and data, and allow for local adjustment and additions and combinations. This is the ultimate empowerment for individuals. Think of solar panels translating the rules of energy generation to turn your house into a power plant. Think of the batteries you can now buy to store that energy and further enhance your self-sufficiency. Think of the driverless cars that will translate the rules of the road, and the data-experience of trillions of journeys by hundreds of millions of people, into safe commutes. Think of the video cameras and local software you use to record personalized content that is sent into the cloud as data for rendering. Individuals are empowered to act locally, and utilize the knowledge of the world in the cloud and on networks.

Cognitive Assistants.

Beyond just the translation of rules, we are at the beginning of the era of the low cost, high performance AI-powered cognitive assistant. These software + hardware helpers will bring us not only knowledge, but intelligence. A medical cognitive assistant can work beside individual EMS personnel in an ambulance to scan the brain of a stroke victim and inform the doctor at the hospital of the kind of blockage (compared with a database of past stroke victims) and the specific type of thrombectomy that should be performed. Cognitive Systems Institute lists computer and information research scientists, human factors engineers, sociologists, mathematicians, statisticians and engineers among the professions that can already be augmented by cognitive assistants, with many to follow.

While waiting for our cognitive assistant to arrive, we can already utilize the vast amount of cognitive assistance built in to the Google search bar, Google Maps and other readily downloadable apps that are already providing individual access to artificial intelligence and machine learning. The quality of the questions we ask will determine the utility of the results we get.

Step Across The Threshold Of Universal Access.

It is reasonable to think and act on the basis that no access is denied to us. Access to people, knowledge, tools, learning, insight, technology is fully available. Now, that may not be completely the case, but things are certainly moving in that direction. Historically, preferred access was one of the ways that the few made life difficult for the many. Today, with the use of the appropriate tools, there are few access barriers we can’t navigate around.

Global exchange platforms grant us access to markets all over the world. We can connect to buyers and to vendors. We can trade currencies. We can assemble supply chains from our desktops. We can contract fulfillment services to deliver goods from across the world to our own doorstep or one in our neighborhood. We can access research papers, API’s, software, algorithms, and books. We can reach out to people, and do so in the context of LinkedIn or academia.edu or match.com. If we can’t make an immediate connection, we can identify someone who knows someone who knows someone and take a roundabout route.

Any single individual can reasonably expect to access any other individual, any piece of knowledge, any tool, or any sub-system.

Reconfigurable Organizations.

With all of this augmentation, what limitations remain? One of the traditional answers is that the individual entrepreneur can not tap the power of organization – the hierarchical firm or corporation can harness the power of organization in ways that individuals and small group can not. That limitation is now also removed in the world of individual augmentation. New organizational forms are emerging for individuals and groups to assemble teams and resources on a project-specific basis. You can recruit the individuals you need on the team, with the most specific skill sets and experiences, and assemble the resources to support them, co-ordinating virtually and digitally. You can assemble the team in a WeWork office or on zoom or some other form of collaborative software, run team communications and digital asset sharing on Slack, and manage the process on software like Appian or one of many other alternatives. You can bring on new contributors when needed, and those that have finished their specific task can leave and go on to the next one. The new organization is configurable and reconfigurable at will, and in response to specific project steps and tasks.

Unlimited Potential.

None of this comes without effort. It’s hard work to compete as an individual practitioner. But, increasingly, the technologies of individual augmentation are pushing the boundaries of what one entrepreneur can accomplish.

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