Leading the Revival of Individualism & Self Reliance

The Tools For Defending Ourselves In The Surveillance Economy Are Beginning To Emerge, Albeit Slowly.

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“Go, go gadgets” has long been the attitude in my house. Perhaps yours, too: A smartphone made it easier to stay in touch. A smart TV streamed a zillion more shows. A smart speaker let you talk to a smart thermostat without getting out of bed. That’s progress, right?

Now I’ve got a new attitude: It’s not just what I can get out of technology – I want to know what the technology gets out of me.

For the past year, I’ve been on the trail of the secret life of our data. What happens when you put your iPhone to sleep at night? Does Amazon’s Alexa eavesdrop on your family? Who gets to know where you drive – and where you swipe your credit card?

Trying to get straight answers has been, literally, a full-time job. I’ve digested the legal word salad of privacy policies, interrogated a hundred companies and even hacked into a car dashboard to grab my data back. There are lots of stories about online threats, but it feels different watching your personal information streaming out of devices you take for granted. This year I learned there is no such thing as “incognito.” Just stepping out for an errand, I discovered, lets my car record where I shop, what I listen to and even how much I weigh.

Learning how everyday things spy on us made me, at times, feel paranoid. Mostly, my privacy project left me angry. Our cultural reference points – Big Brother and tinfoil hats – don’t quite capture the sickness of an era when we gleefully carry surveillance machines in our pockets and install them in our homes.

With each discovery, I’ve looked for ways to change my own relationship with technology. I’ve stopped installing new smart-home devices that let corporations or police log what’s happening at my house. I switched web browsers and credit cards. When possible, I use a pseudonym or a throwaway email address.

Still, I’m going to level with you. After a year of wrestling my data from corporate America, I hardly feel in control. Being paranoid isn’t enough to save us in the age of surveillance.

But no, privacy isn’t dead. A path to reclaiming it – fuzzy and almost too late – is starting to emerge. We just have to be angry enough to demand it.

Data is power

While we’re busy living increasingly online lives, it’s hard to know what’s at stake in our data.

Most of the headlines focus on leaks and the unintended consequences of data collection, like hackers stealing credit card numbers. You hear about creepy but vague violations, like when Apple and Amazon hired people to review recordings taken from their voice assistants. In a world where so many others are collecting our personal data, it’s legitimate to worry whether they’re doing enough to protect it.

But there’s a more fundamental problem: Why is so much of our information being collected in the first place?

When I began my privacy project, I learned something about the now-ubiquitous Alexa I hadn’t quite understood when I first brought home an Echo speaker. Every time Amazon’s artificial intelligence activates, it keeps a recording. Amazon had four years of my family’s conversations.

There’s more: Amazon also keeps reports on appliances you connect to Alexa – in my smart home, every flip of a light switch or adjustment on the thermostat. Last week, Amazon reported that Alexa users received “millions” of doorbell and motion announcements during the 2019 holiday season, “from carolers to delivery drivers and holiday guests.” Surveilling that many homes is a thing the company brags about. (Amazon CEO Jeff Bezos owns The Washington Post, but I review all technology with the same critical eye.)

Amazon isn’t building its dossier on you just to be creepy. It wants your voice and your data to train its AI, the technology it hopes will rule our future economy.

While we’ve been wondering at the new capabilities of connected apps and devices, many of them have been quietly turning our private experiences into their raw materials. These companies act like the data belongs to them, rather than us. Largely unhindered by law, a hidden economy of data brokers gobbles every data morsel it can. Author Shoshana Zuboff gave this data grab a sharp name that I hope sticks: “surveillance capitalism.”

There are lots of ways your data can, and will, be used against you. Governments frequently compel companies to hand over what they know. Tracking your credit card lets retailers know how much you’re willing to pay. Tracking what you watch on TV lets politicians micro-target your fears. Tracking your web surfing lets marketers glimpse your desires – to get you to buy things you may not really need.

These corporations understand that data is a form of power. It’s time to take ours back.

The arms race

Opting out is more easily said than done.

I tried putting my Alexa speaker on mute, but that defeated the purpose of having a voice-operated assistant in my house. Turning it back on, Amazon would let me delete its recordings of my voice and smart-home activity – but only after the fact, and if I remembered.

Around every corner in my connected life lay one of these traps. Data-collecting companies, especially when they’re trotted in front of lawmakers, like to say they give us “control.” But often it’s a false choice between forgoing some new capability vs. letting them mine your life. That’s not how technology has to work.

In my privacy project, I found that every swipe or tap of a credit card lets as many as a half-dozen kinds of companies grab information about what, where and how much we spend. Since I can’t live without a credit card, I switched most of my purchases to the new Apple Card, which restricts its bank, Goldman Sachs, from selling customer data.

That’s good, but Apple didn’t do anything to stop data collection by the Mastercard network its card runs on, or by retailers and point-of-sale system operators. Sometimes companies say they protect our privacy, but I find they often use a narrow definition of privacy. Same for your smartphone: Apple brags, “What happens on your iPhone stays on your iPhone,” but doesn’t stop app makers from sending your personal information to third-party tracking companies.

Facebook, Google and lots of other data-collecting companies offer privacy control panels that hardly anybody ever uses. I don’t blame anyone for keeping away: I’ve tried adjusting the terrible default settings for Google, Facebook and Amazon, but the companies keep changing the controls and the types of information they collect. Using a virtual private network, or VPN, doesn’t do much to stop them from grabbing data from a device you use while logged in to one of their services.

The arms race is exhausting. After I discovered how much Google’s Chrome let tracking cookies ride shotgun while I browsed the web, I switched to Mozilla’s Firefox, which has default cookie-tracking protection. But even it struggles to defeat a newer, more pernicious form of tracking called fingerprinting, already used on a third of the most-popular sites.

The truth is, most of us don’t have the time or expertise to defend ourselves from the smartest minds in Silicon Valley, many of whom say they want to improve the world but hooked their own financial success onto grabbing as much data as possible.

Data co-pilots

We won’t regain our privacy if we leave it up to individuals. If we’re going to survive the age of surveillance, we’re going to need help.

That starts with laws. Privacy isn’t just an individual right. It’s a public good that, when done right, keeps everyone safe, whether they’re paying attention or not. This ought to be obvious: Our data shouldn’t have a secret life.

America doesn’t have a broad privacy law, like Europe’s General Data Protection Regulation, or GDPR. But after years of U.S. lawmakers just talking about data, we’re starting to see some action. So far, that has come mostly in the form of regulatory fines. We should demand laws that not only require companies to come clean about what they’re taking but also place some limits on it.

Starting in January, California will bring us closer to a general data law with its new California Consumer Privacy Act, or CCPA. It treats our data like we own it, and gives California residents new powers to demand that companies show us what they’ve collected and who they share it with. It might force some (but not all) of the companies I investigated in my privacy project to open up.

Transparency means that vigilant citizens – and pushy journalists – can hold companies accountable through public debate about what sorts of data collection are acceptable. Transparency is also good for business: It helps consumers trust what’s happening behind the digital curtains.

But better seeing our data gets us only so far. My inbox is already flooded with updated privacy policies and data disclosures from companies rushing to comply with the CCPA. Managing all the data I generate is more than even I can handle.

When we’re sick, we go to a doctor. To keep our computers safe, we install anti-virus software. We rely on professionals to help out with lots of complex aspects of modern life: Why not have professionals help with data, too? Call them your privacy co-pilot.

A fledgling privacy service called Jumbo shows what’s possible. From your phone, it logs into Google, Facebook, Amazon and others and spruces up your privacy on your behalf. In clear language and colorful illustrations, it explains the real choices we have and makes recommendations like you’d get from a really clued-in friend. It’s my favorite app of the year.

The first time I used Jumbo, I was shocked that it identified a half-dozen privacy settings for Facebook and Google that even I had missed. Now the app goes in on a regular basis and deletes my Alexa recordings, Google data and Twitter posts, reducing the data trail I leave behind me.

Right now Jumbo is tiny and faces an uphill battle when it adds a paid version in the coming months. But the privacy co-pilot market is burgeoning with new ideas, joining the likes of password managers and security-focused WiFi routers. California’s new law smartly carves out protection for third parties to manage our data for us. Now we need clear professional rules for how these companies represent us and prove their trustworthiness.

I don’t know exactly how this will evolve. But we’re more likely to win when there are laws that stop data collection from being a secret – and when we have companies fighting to protect our privacy, not just exploit it.

Cognitive Bias: Why Being Smart Is No Protection Against Dumb Ideas.

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In September, California passed a bill regulating the gig economy. The worker status bill, which goes into effect on January 1, 2020, redefines “employee” to include freelancers. Progressives hailed the new law as providing needed worker protections.

After the law passed, Veena Dubal, a law professor at the University of California, Hastings, and prominent supporter of the bill tweeted, “I have tears in my eyes and goosebumps on my limbs.”

In 2020, it is the gig workers who are crying.

Vox Media announced “it would end contracts with hundreds of freelance writers and editors in California.” Vox is the same media company that hailed the passage of the bill as “a victory for workers everywhere.”

One of Vox’s fired employees, Rebecca Lawson, tweeted: “California, you’re breaking my heart (and taking my money),” adding:

I am heartbroken that the state I love so much has forced a company I love working for to cut formal ties with people who are doing amazing work — and who are able to help themselves and their families with the extra income that a passion project or side hustle can sometimes provide.

Another freelance writer, Andi Loveall, tweeted:

Just lost my ability to earn a living because of California Assembly Bill No. 5. My freelance brokerage company says they have to let California authors go. Almost a decade of hard work gone in an instant. I can’t stop crying.

The consequences for freelancers were hardly unanticipated. The law of unintended consequences prevailed: “actions of people—and especially of government—always have effects that are unanticipated or unintended.”

Dubal and other supporters of the worker status bill could have read hundreds of articles—including here and here—that predicted the dire outcomes for freelancers. As Elizabeth Nolan Brown writing in Reason pointed out:

Mainstream politicians and pundits love to cite “unintended consequences” when their preferred policies cause harm in the exact ways libertarians said they would. It’s a brilliant way to get credit for trying to Do! Something! about a problem while absolving one’s side of any blame for the negative consequences of that action.

I doubt if Dubal, who is regarded as an expert on the gig economy and technology, will acknowledge the consequences of her mistake.

It’s all too easy to dismiss Dubal as stupid; chances are, she is intelligent.

Keith Stanovich, emeritus professor of applied psychology at the University of Toronto, writes,

We have an implicit [but wrong] assumption that intelligence and rationality go together—or else why would we be so surprised when smart people do foolish things?

Stanovich, coined the term dysrationalia “meaning the inability to think and behave rationally despite having adequate intelligence.”

In his book, The Intelligence Trap, David Robson explores “why smart people,” such as Dubal, “make dumb mistakes.”

Robson reports on research conducted by professors Norbert Schwarz and Eryn Newman, who study how our emotions influence our decision-making.

Consider this question: “How many animals of each kind did Moses take on the Ark?”

Since it was Noah, not Moses, who built an ark, the answer is zero. Robson writes, “Yet even when assessing highly intelligent students at a top university, Schwarz has found that just 12 percent of people register that fact.”

According to Schwarz’s and Newman’s work,

truthiness comes from two particular feelings: familiarity (whether we feel that we have heard something like it before) and fluency (how easy a statement is to process).

Robson explains further:

The problem is that the [ark] question’s phrasing fits into our basic conceptual understanding of the Bible, meaning we are distracted by the red herring—the quantity of animals—rather than focusing on the name of the person involved. “It’s some old guy who had something to do with the Bible, so the whole gist is OK,” Schwarz told me. The question turns us into a cognitive miser, in other words—and even the smart university students in Schwarz’s study didn’t notice the fallacy.

Try this thought experiment. Imagine you are a politician, professor, or a concerned citizen interested in workers’ rights. You have a pre-established cognitive bias that government is the best protector of workers. Thus, a statement such as California’s Worker Status bill is needed to protect the rights of freelancers would likely meet with your approval. Given your cognitive biases, the statement has “familiarity” and “fluency.” You’ve cheered a thousand times before for statements that begin with: This bill is needed because… Such statements are easily cognitively processed.

If you need “intellectual” firepower for your bias, Dubal and other experts are ready to assist. In her essay, “Regulating the Gig Economy is Good for Workers and Democracy,” Dubal presents elaborate arguments:

Poverty is not a suspect classification under our Constitution, but it is an affront to life and dignity and to democracy more broadly. With the evisceration of the U.S. welfare state and the judiciary’s deference to political outcomes in the area of “economics and social welfare,” employment is the primary legal and political means to address economic inequality. In turn, employment is—for better or for worse—key to our democracy. It provides access to the tools for basic sustenance in modern America: the minimum wage, health insurance, safety net protections, and even the right to organize and collectively bargain. Our capacity to participate in life and partake in politics, depends, in no small part, on our employee status. In the words of political theorist Judith Shklar, “We are citizens if we ‘earn.’” To this observation, I might add that we are citizens if we earn enough.

If you are a true believer like Dubal—concerned about an “alarming trend” of “the use of app-based technology to proliferate work outside the regulatory framework of ‘employment’”—perhaps like Dubal you shed tears of joy that politicians passed a bill you believed would save democracy and solve the problem of inequality. Huzzah! If heaven is reached by having good intentions, surely your ticket has been punched.

Reading carefully, though, we see that the interests of the gig workers were buried under Dubal’s many other concerns. Perhaps gig workers such as Rebecca Lawson and Andi Loveall mean nothing to those who want to expand the role of government. Perhaps Dubal told herself she was helping the gig workers, while her ideology sought to expand the role of the government at the expense of gig workers.

Being smart is no protection against foolish ideas. We can expect to hear more elaborate arguments from smart people, justifying the worker status bill mistake. As Robson observes:

Intelligent and educated people are less likely to learn from their mistakes, for instance, or take advice from others. And when they do err, they are better able to build elaborate arguments to justify their reasoning, meaning that they become more and more dogmatic in their views.

In other words, dysrationalia needs to be defended. When we think we are smart, Robson explains, we “rationalize and perpetuate our mistakes, without recognizing the flaws in our own thinking.” The result is “building ‘logic-tight compartments’ around our beliefs without considering all the available evidence.”

Robson offers an antidote to dysrationalia:

Besides cognitive reflection, other important characteristics that can protect us from the intelligence trap include intellectual humility, actively open-minded thinking, curiosity, refined emotional awareness, and a growth mind-set. Together, they keep our minds on track and prevent our thinking from veering off a proverbial cliff.

Dysrationalia is not limited to progressives, nor is it limited to politics. We ignore the intelligence trap at our own peril.

In his 1710 essay, “Political Lying,” Jonathan Swift wrote,

Falsehood flies and the truth comes limping after it, so that when men come to be undeceived, it is too late; the jest is over, and the tale hath had its effect.

Swift gives as an example “a physician, who hath found out an infallible medicine, after the patient is dead.”

California’s gig economy is suffering from the consequences of dysrationalia. The “medicine” in this case is a repeal of a law that is already putting many out of work. No elaborate arguments are needed. Before the gig economy in California is dead, what is needed is a large dose of humility to admit a mistake.

Barry Brownstein is professor emeritus of economics and leadership at the University of Baltimore. He is the author of The Inner-Work of Leadership. This article first appeared at fee.org.

Corporatism Is An Economic And Social Scourge. Entrepreneurs Are Our Defense.

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We hear a lot of talk about breaking up “Big Tech” – companies like Alphabet, Amazon, and Facebook. This thinking stems from a kneejerk leftism that equates corporate scale with consumer disutility. Yet the size of corporations, in and of itself, is not damaging to consumers, and can often deliver efficiency benefits and lower prices.

Corporations become big because they serve the needs of consumers and customers well. It’s what they do after they become big that causes economic problems. It’s the attitude and behavior of big corporations that constitute the problem, not their size per se. Let’s apply the term corporatism to these attitudes and behaviors. Here’s a partial list.

They seek to tell us what our values should be, when it’s none of their business.

Sustainability. Climate Activism. Diversity. Gender identity issues. The progressive activists who run many of our big companies want to tell us to make a social justice statement when we buy their products and services. They use social justice as a marketing tool to impose their cultural values.

This is, effectively, anti-capitalism. Free market capitalism results in social benefits when individual entrepreneurs and firms produce quality goods and services that consumers prefer. The values those consumers embrace are no business of big tech or any other big companies.

They have created and are in the process of enforcing the surveillance economy.

While new technologies have huge potential for consumer betterment, big corporations have chosen to focus on customer data collection for the purposes of targeted advertising. It’s a horrible misdirection of effort, and it’s tremendously unproductive. The outcome has been a surveillance society. Consumers are uncertain about when and how their behavioral data are being collected, to whom it is being sold, and for what purpose it is being used. Consumers are increasingly paranoid about corporate surveillance. Companies are supposedly in the business of generating value experiences for consumers: facilitating the feeling that their lives are improving. The opposite is now the case: consumers are increasingly feeling vulnerable and exploited.

They treat customers as ATM’s.

Big companies’ consumer goals have shifted from satisfaction to loyalty. Satisfaction is an emotional measure: it seeks to understand how consumers feel, recognizing that consumer value is an experienced benefit. Consumer loyalty is simply financial math: how many times do consumers buy, repeat purchase, and subscribe. How can they be locked-in? Satisfaction is presumed if so-called loyal behavior is observed. Exotic pricing schemes, always aimed at ratcheting up the cash flow from individual consumers, become more and more complex and more and more opaque in the extraction of cash from the consumer ATM. In effect, the big companies dictate to consumers how much they must spend to qualify for the company’s approval of their behavior.

They actively undermine the US economy and the security of their own employees.

Big multi-national companies are the drivers of the phenomenon known as globalization, which can be interpreted as a redistribution of America’s wealth to other countries. Multi-national companies have no vested interest in America’s wealth, only in their own. One direct effect of globalization has been the reduction in US employee compensation (see chart from World Bank). On other words, the multi-nationals have traded away American employee compensation, security and benefits like healthcare, in favor of lower cost employees in other countries. The so-called global supply chain is simply an arbitrage to disfavor American workers.

Big corporations distort America’s financial markets.

Big corporations pursue stock buybacks more than hiring and capital investment. Corporate demand for stock relative to investor demand is high. Buybacks were the single largest source of US equity demand each year from 2011 to 2019, averaging $50 billion annually. In comparison, average annual demand from households, mutual funds, pension funds, and foreign investors was less than $10 billion each. Capital spending as a % of cash flow from operations for the US S&P 500 ex financials averaged 69% from 1990-2002, but only 46% from 2003-2019.

As they get bigger, corporations draw closer to government.

Free market capitalism is the citizens’ defense against the encroachment of government. Government produces nothing; it exists by extracting from the economy the value generated by others. Free market firms counteract this ever more voracious extraction by continually generating even more value, increasing productivity and economic growth faster than government can dissipate it.

But once they get big, many corporations redirect their resources from value generation to government integration. They build up their lobbying capacity, they seek government as a customer for their surveillance technology, they write protectionist laws, either directly or through lobbying and consulting, and they fund elections. They cease to be the people’s defense against government and become part of the problem.

The alternative is entrepreneurship.

Governments despise entrepreneurs since they are not a significant source of tax revenues, and because they are the sworn enemies of the status quo that the government is dedicated to preserving, strengthening and concretizing via bureaucracy and regulation. Entrepreneurs are engaged in purposive economic activity for others: their total effort is focused on customer betterment and new ways to generate value. They have no time or money for lobbying, they’re not ready for stock buybacks, and they’re interested in meeting customers’ needs through innovation. They embrace competition as a spur to continuous improvement. They don’t seek to leverage their scale.

Entrepreneurs refuse to accept the nightmare of corporate employment, preferring the fulfillment that comes from being a free market producer. The more we can cultivate a spirit of entrepreneurship, the better chance we have of surviving the current wave of corporatism.

 

There’s No Such Thing As The People Or The Will Of The People.

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Among the most important advances in the social sciences of the 20th century is Kenneth Arrow’s Impossibility Theorem. The full explanation of this theorem first appeared in Arrow’s 1951 book, Social Choice and Individual Values. As explanations go, this one is especially beautiful in its rigor, yet highly technical and inaccessible to the general public. But it can be summarized well-enough: Arrow proved that a collection of people has no “will” in the way that we understand each individual person to have a will.

Stated more fully, Arrow proved that it’s impossible to devise any method of discovering the preferences of two or more persons and then aggregating these preferences into a single set of preferences of the sort that is possessed by each individual person.

One welcome implication today of Arrow’s Theorem is that it reaffirms our understanding that a monarch or dictator who boasts of embodying or carrying out “the will of the people” of the country is either lying or delusional. An implication far less welcome today – although one no less indisputable – is that the results of even the fairest and most-inclusive democratic decision-making procedure are not the will of the people. Indeed, these results are not even the will of the voters. Because two or more people do not share a single mind, no group of people has wants, hopes, and fears in the same way that each individual experiences these attitudes and desires.

Arrow’s proof does not discredit majority-rule democracy as an acceptable – indeed, perhaps as the best available – method for making collective decisions. If, say, the government is charged with supplying national defense, some variety of inclusive democratic decision-making is arguably the best practical means of choosing the size of the annual defense budget. Not only does each and every adult in the political community have the opportunity to register his or her preference, this procedure also ensures against the selection of options that are wildly unpopular.

All good. But the chosen outcome should not be accorded a status that it doesn’t deserve: the chosen outcome is not the will of the people. It’s simply the outcome of the collective-decision-making procedure.

“The People” Is No Person

Another way to put Arrow’s point is to say that it is a gross error to anthropomorphize a group of people, even when that group makes collective decisions according to democratic norms.

Perhaps the single best way to see why such anthropomorphization is an error is to consider what Arrow identified for each individual decision-maker as being the “irrelevance of independent alternatives.” The language here is confusingly technical, but the idea is not – as revealed by this example that I steal from a lecture given a few years ago by my colleague Alex Tabarrok.

Suppose that you have a hankering for a scoop of ice cream. To satisfy this hankering, you stroll into a diner and ask the waiter what flavors of ice cream are available. The waiter replies, “We have vanilla and chocolate.” You weigh these two options for a moment and then tell the waiter, “Please give me a scoop of vanilla.” But just as the waiter is about to serve the vanilla to you, he says, “Oh, I almost forgot. We also have strawberry ice cream.”

How would you, a rational individual, respond upon learning of this additional alternative? You might respond by saying, “Wonderful! I love strawberry! Give me a scoop of strawberry instead.” If you respond in this way, no one would think you odd.

But suppose that you instead respond by telling the waiter, “Oh, now that I know that strawberry is also an option, please change my order from vanilla to chocolate.” If you respond in this way, everyone would think you to be crazy-odd. Normal – “rational” – individuals don’t react in such a manner. An individual who prefers vanilla to chocolate does not come to prefer chocolate to vanilla upon learning of the availability of strawberry.

Yet in political elections such ‘preference shifting’ is neither unusual nor an indication of irrational or otherwise inexplicable behavior on the part of anyone.

For example, it’s quite possible that Ross Perot’s 1992 candidacy for the U.S. presidency – by taking more popular votes from Pres. George H.W. Bush than from Gov. Bill Clinton – swung the election from Bush to Clinton. If the American people were a creature with a will – if the American people were a giant sentient being – it’s as if this creature walked into a polling place in November 1992 and asked “What presidential options do you have?” Upon being told “Bush and Clinton,” this American People creature replied, “Give me a Bush!” But then upon learning that there is available also a Perot, the creature changed its mind and said, “Oh, well in that case, give me a Clinton!”

No rational being behaves in such a way.

There’s disagreement over Perot’s effect on the outcome of the ’92 election. But whether or not he did or didn’t swing that election to Clinton is here not the point. The point is that in fact such electoral outcomes in reality are often quite likely and not considered to be odd or inexplicable. Yet because no individual acts in such a way, electoral outcomes are not properly to be reckoned as the choices of a rational creature with a will – as a rational creature called “the people.”

It’s fair to suspect that I’m making too big a deal about not calling the outcome of any election “the will of the people.” But I insist. To talk of a “will of the people” is to imply the existence of a creature who is greater than each of the individuals who comprise ‘the people’ – a creature to which each individual’s will and well-being are subservient. It’s the tiniest of steps from a belief in such a creature to the conviction that no individual is an end in himself or herself but is, instead, merely a means to serve this creature. And from this false belief in such a higher-order creature, all manner of tyranny has ensued.

Humanity owes thanks to Kenneth Arrow for proving the non-existence of such a creature as the will of “the people.”

Donald J. Boudreaux is a senior fellow with the American Institute for Economic Research. This article first appeared at AIER.org

Seven Hundred Forty Five Years of Poetic Justice Warriors in Review – A Brief Look at 2019

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On November 1, 2018 we introduced the concept of the Poetic Justice Warrior. It is an abstract idea that honors certain individuals whose choices and actions are guided by rationally chosen principles. One week later we inducted our first member into the Poetic Justice Warrior Society, the 18th century classical economist Jean-Baptiste Say, the man who wrote the textbook for the prosperity of the 19th century and beyond.

On February 20, 2019, we released the Poetic Justice Warrior Society Manifesto, identified the foundational principles of its members, and proposed behaviors that lead to life-enhancing achievements that benefit everyone. Because the Manifesto features twelve behaviors and philosophical principles, twelve individuals have been selected who are exponents for the value system that drives their heightened sense of reality. As you read this celebration of life with the benefit of unprecedented personal liberty, please find happiness in your pursuit of freely chosen values during this new year.

Choices and Actions

Behavior can be motivated by attraction to a positive or avoidance of a negative. Focusing on positive values requires effort, and is the first big step to rational action. Left alone, it evolves into the economic way of peaceful human progress. Avoidance of disvalues is a different motivational system. It is rooted in fear, can be destructive, and possibly threaten our values. Left unchecked, it devolves into the political way of authoritarian control.

The primary behavior for human survival is Reason. It is the power to think, the process of logic, and the formation of rational principles. As such, we lead with Henry Hazlitt as our greatest advocate for volitional human thought. Hazlitt not only bestowed mass audiences with the positive values of the economic way through his iconic Economics in One Lesson, he educated us about the disvalues of the political way with humor, not fear.

The primary behavior for human happiness is Purpose. It is productive work that integrates reason and other personal values. Whether we create value as inventors, firemen, scholars, diplomats, scientists, librarians, real estate developers or journalists, producers are the cornerstone of civilization. The titan among the Enlightenment’s giants, Benjamin Franklin, was all of these.

The primary behavior for human flourishing is Pride, and it must be earned. It is confidence in our ability to achieve our values, the spiritual reward for doing so, and its outward behavior is independence. We own our lives, are responsible for our judgments, and our exemplar is the extraordinary teacher Marva Collins.

I do what I do very selfishly. I wanted to create citizens in my own school whom I would want as my friends, whom I would want as my doctors, because they are precise. They take pride in what they do.

The Victories of the 19th Century

According to its author, the purpose of the Declaration of Independence was “to be an expression of the American mind.” The thinker in search of Evidence, the one who derived purpose for human life on earth was the late 17th century philosopher John Locke. His radical ideas triggered The Great Upheaval – the failed “enlightened despotism” in Russia, the failed French Revolution, and the successful “revolution of the mind” in America in the late 18th century.

If man be lord of his own person and possessions, equal to the greatest, subject to nobody, why will he part with his freedom? Why will he give up this empire, and subject himself to the dominion and control of any other power?

Ultimately, the stunning individualist, socio-economic, and artistic victories of the 19th century can be attributed to Enlightenment radicalism. It starts with the first rock star and software pioneer who set the stage for Romanticism in 19th century art, Ludwig van Beethoven. Supremely independent, he was able to integrate his sense of the human condition, both heavenly and terrestrially inspired, into magnificent compositions that inspire human flourishing.

Frederic Bastiat was a life-long champion of Say’s Law of Markets. During a career as a politician and economic journalist, Bastiat became famous for his pamphlet titled The Law. In it he describes the positive values of Capitalism, and directly confronted the disvalues of socialism and political overreach with satire and sarcasm.

Frederick Douglass is the uniquely American self-made man who combined the 19th century’s victories of individualism, capitalism, and romanticism in his own pursuit of happiness, and he fought vigorously for the same opportunity for all African-Americans everywhere. He refused special treatment for anyone, only equal Justice under objective law. As he declared at the 1893 Chicago World’s Fair,

There is no Negro problem. The problem is whether the American people have honesty enough, loyalty enough, honor enough, patriotism enough, to live up to their own Constitution.

Philosophy, Who Needs It?

The academic discipline whose ideas are most needed in everyday life is the one whose concepts are the most abstract. It exists as perceptions, concepts, logic, propositions and principles. It is philosophy, and everyone acquires their personal philosophy randomly or willfully. The latter requires effort and is rare. For ease of understanding, it helps to divide philosophy into categories, give examples, and highlight people who have worked successfully to change our world in profound ways.

It makes sense to start with Theories of Knowledge. Today we know it as the scientific method of observation and precision. Historically it began in ancient 5th century BC Greece. The catalyst for Aristotle’s reason to be resurrected and coalesced into Christendom was St. Thomas Aquinas. His application of inductive reasoning, and completion of Summa Theologica in 1274, were the primordial soup of modern Western Civilization.

Metaphysics has to do with the nature of reality, matter as the primary of existence, and the application of human intellect to solve their mysteries. We focus on inventors who have engaged the physical world, transformed nature, and created immense value. The invention that became the neural connection between Aquinas, the Late Middle Ages, and the Great Upheaval was the printing press created by Johannes Gutenberg.

Aesthetics is not so much a branch of philosophy as it is the integration of abstract principles into a philosophical theme. Great romantic art is the representation of some of the artist’s highest values. The literature of Victor Hugo is a marvelous expose of Hugo’s sense of life. His range includes the heights of virtue and the depths of cruelty. Reading Hugo educates students about something exceedingly rare in today’s culture – human souls with gravity.

Ethics is the branch of philosophy that governs our relationship with each other. As World War I wiped out the 19th century ethical achievements of individualism and limited government, collectivist ethics gave rise to 20th century totalitarian regimes in Russia, Germany, and China. The resulting mass atrocities, such as the Soviet Great Terror, were emotionally and convincingly described by poet Anna Akhmatova.

Politics is our relationship with society. Although economics is a distinct discipline, it is frequently mixed with politics because economic freedom requires political freedom. They are inextricably combined over the issue of property rights. Our greatest exponent for the primacy of property rights, and the economic way over the political way is Austrian economist Ludwig von Mises.

His epic Human Action is “the most scientific defense of human freedom ever published. Mises’s book is the best defense of capitalism ever written.” Today is the first day of our “Roaring 20s.” May this Poetic Justice Warrior Manifesto inspire readers to find new resolve for challenging personal values, develop principles for human action that will achieve them, and roar!

 

She Dropped the Bombshell of Spread Spectrum Technology for Wireless Communication – Hedwig Kiesler

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In 1937, Poetic Justice Warrior Hedwig Kiesler escaped a four year marriage to man she describes as “the absolute monarch in his marriage. I was like a doll. I was like a thing, some object which had to be guarded—and imprisoned—having no mind, no life of its own.” She was 18 years old when she got married to the 33 year old. Not only did she flee her husband and his ties to Hitler’s socialists in Germany and Mussolini’s fascists in Italy, Kiesler was abandoning her native Vienna for the relative safety of London. This was the year before Hitler arrived in Austria.

The Applied Scientist

While Kiesler may have thought her mind imprisoned, it remained very active. As a young girl she had taken long walks with her father, an Austrian banker, and became enthralled with the mechanical ways of the world. As a young lady, she accompanied her husband to business conferences hosted by scientists and military technology specialists. It was during these events, aided by her gifted mathematical mind, that Kiesler first learned that radio controlled torpedoes were becoming a ruinous naval weapon, but their accuracy was unreliable. To make matters worse, the signals were easily jammed by enemy transmitters.

With the outbreak of World War II, and now living and working in America, Kiesler became passionate about contributing to the American war effort and defending her native Austria. By this time, allied torpedoes were being blown up by Nazi U-Boat Wolfpacks. With an assist from her mother Trude, (Hedwig’s father Emil had died in 1935), Kiesler came up with the idea for frequency hopping. The idea was for American torpedoes to rapidly change frequencies in order to evade Nazi identification. However, this created a significant challenge, one that required a highly inventive mind – how to synchronize the remote control transmitter with the torpedo’s guidance system. As poetic justice would have it, Kiesler attended a dinner party and shared her idea with another inventive mind. One that had experience with a crude, mechanical prototype – the player piano.

During time off from her day job, Kiesler formed a partnership with this struggling music composer, George Antheil, who had also been a government munitions inspector himself. After several months of development, they sent their idea for a synchronized electronic transmitting system to The National Inventors Council; the clearinghouse for inventions with possible national defense capabilities. Encouraged by its director, Kiesler and Antheil continued to develop their technology with the help of an electrical engineer, and in June 1941 they applied for a US Patent. Their invention was officially named “Secret Communication System.” In August 1942, Markey and Antheil (Markey was her second married name) were granted patent #US397412A for “encryption being effected by mechanical apparatus, e.g. rotating cams, switches, key tape punchers” that would be deployed using high altitude aircraft. The number of frequencies to be synchronized were eighty-eight, the number of keys on a piano.

Revenge of the Frequency Jammers

According to Antheil’s sales pitch “Our fundamental two mechanisms can be made so small that they can be fitted inside of dollar watches!” Today we know them as spread spectrum technology and smart watches. Yet predictable of government elites, his appeal to the US military brass was stymied. Not only were young female inventors and entertainers not taken seriously, the idea of strapping a piano to the back of a torpedo was taking up too much space between the bureaucrat’s ears. Instead, according to fee.org contributing editor B. K. Marcus “the U.S. Navy did three things: they rejected the idea, acquired the patent to it anyway, and kept the technology secret for almost 40 years.” He then asks,

What if the federal government hadn’t cartelized the communications industry? What if the industry itself hadn’t sought government protection from innovation? What if competition had been allowed to thrive in the tech industry of the mid-twentieth century?

Kiesler’s short-lived gig as a high-tech inventor for the American government had one fatal flaw. She trusted the American government and their command and control culture of centralized authority. Kiesler and Antheil, quite naturally at the time, had faith in their government’s fight for individual rights and free markets against the forces of socialism and fascism that were brutalizing Europe. Their patent expired unused in 1959, the year of Antheil’s death. As libertarian author Jeffrey Tucker explains, “Knowledge alone does not serve society. Knowledge put to use in a market setting—science turned into the ‘practical arts’—is what serves the human population.”

Beginning with the Carter administration in the late 1970s, and accelerating during the Reagan years, the National Security Agency declassified scores of patents, including spread spectrum technology, to the dissatisfaction of technology industry cronies. According to then FCC Chairman Michael Marcus,

Regulations prevented rapid innovation and prevented both new entrants and technological surprise from the few competitors. It was a cozy oligarchy for the major manufacturers, but it denied the public the benefits of rapid introduction of new technologies.

Kiesler’s Secret Communication System also allowed multiple signals to share the same spectrum without interference, now known as CDMA (Code Division Multiple Access) and TDMA (Time Division Multiple Access). Thanks to deregulation and the invention of the microchip, it is now fundamental to cell phones, Wi-Fi, Bluetooth, and the new sharing economy of companies like Uber, Airbnb, and thousands of new media outlets. These life-enhancing efficiencies naturally lead to immense wealth creation and its looters – new government regulation. Thanks now to California’s Assembly Bill 5, dozens of politicians and bureaucrats of the Luddite persuasion will force thousands of value-creating freelancers out of their chosen Gig Economy livelihoods. The majority of them are women, and all of them victims of the politically connected.

Wonder Woman

Just as Nikola Tesla‘s innovative, yet naïve, genius went largely unrewarded and unrecognized for years after his death, Kiesler and Antheil never earned anything from their patent, even though she learned twenty years later it was being used by the US Navy in the blockade of Cuba. However, aviation pioneer Howard Hughes had become aware of Kiesler’s inventive prowess and gave her access to his engineers. By studying the aerodynamics of the fastest birds, she made recommendations to Hughes for more efficient airframe designs.

Still, one of her biggest regrets was that her intelligence was largely unnoticed, “Any girl can be glamorous. All you have to do is stand still and look stupid.” Well, maybe not just any girl. According to Liberty magazine writer Howard Sharpe, after an interview he had with Kiesler that was published in 1938:

Hedy has incredible personal sophistication. She knows the peculiarly European art of being womanly; she knows what attracts men, and forces herself to be these things. She has magnetism with warmth, something that Dietrich nor Garbo managed to achieve.

About attractive men Kiesler says “I have never seen a wrestling match or prize fight, and I don’t want to. When I find out a man is interested in these sports, I drop him.” Historian Richard Rhodes adds, “Of all the European émigrés who escaped Nazi Germany, she was one of the few who succeeded in moving to another culture. She really was a resourceful human being, I think because of her father’s strong influence on her as a child.”

If you are reading this on a wireless device connected to the internet, think of Hedy Lamarr.

 

 

A Newly Independent Britain Should Follow The Singapore Model To Become Rich.

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Imperial nostalgia leads Europeans to adopt the prejudice that the prosperity of a civilization depends on its ability to transform itself into a vast empire. Hence the anxious atmosphere that reigns over the United Kingdom, which has been trying for too many months to implement the exit from the European bloc decided in the referendum of June 23, 2016. Is the cult of political gigantism justified?

The history of Singapore proves the opposite.

At the end of the Second World War, Singapore was cornered as the British regained control of the island after losing it to the Japanese. Political circumstances led the British state to grant Singapore broad autonomy in 1958. The Popular Action Party (PAP) campaigned, however, to complete Singapore’s independence from the United Kingdom by joining Malaysia, reputed to be closer culturally. In 1959, the PAP won the election.

But the PAP’s victory panicked the business community. Its political elites were suspected of being too close to the socialists. Lee Kwan Yew’s rhetoric did not help matters, as it was imbued with anticapitalism. Singapore suffered a capital flight to Malaysia. This leak paradoxically reinforced the idea that a merger of the two countries would be in the interest of the former. After much political and social unrest, Singapore officially became a member of Malaysia on September 16, 1963.

However, the merger would not last long. Ethnic conflicts and politico-ideological differences (especially in terms of foreign trade) revealed a certain political incompatibility. Malaysia opted for the expulsion of Singapore, which took place on August 9, 1965.

Figures 1 and 2 allow us to grasp the demographic and economic situation of Singapore and to compare it with that Malaysia and the former British colonial metropole a year after independence was formalized.

Figure 1: Demography of Singapore, Malaysia, and the United Kingdom in 1966

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Figure 2: GDP per Capita of Singapore, Malaysia, and the United Kingdom in 1966

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At the time, few commentators bet on Singapore’s success. Imperial passions led to opposition to the idea that a city like Singapore could prosper in a globalized world. After all, it is a small territory devoid of natural resources. But fifty years later, the verdict is clear: not only has Singapore widened its wealth gap with Malaysia, but its GDP per capita has become twice that of the United Kingdom. It seems that demographic weight, the size of a country, and the presence of “natural resources” are not decisive factors for prosperity.

Figure 3: Demography of Singapore, Malaysia, and the United Kingdom in 2016

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Figure 4: GDP per Capita of Singapore, Malaysia, and the United Kingdom in 2016

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The Singaporean success is easily explained. The city has bet on fiscal attractiveness to attract foreign capital. Its influence is not limited to its immediate vicinity.

In 1972, Jean Abshire tells us, the United States was the source of 46% of foreign investment. But Singapore’s commercial policy, based on a free port, has contributed to making the city an essential place for world trade. Today Singapore is said to be one of the most liberal foreign-trade regimes thanks to this unilateral openness.

Can the Singaporean model be applied to the British case? Technically, nothing prohibits it. The detractors of this model are mainly on the political field. Unilateral free trade is said to face public-opinion and protectionist pressures from multiple interest groups, we are told. The argument is strange. We admit the effectiveness of a policy, but we give up implementing it because of electoral considerations. Another simple argument could be made against this defeatism: it may be up to experts and commentators to persuade public opinion that opening up trade is desirable.

Finally, Singapore’s history shows that anticapitalist hostilities are by no means insurmountable. Singapore’s adherence to a liberal business model is not so much the result of a cultural revolution as an instinctive realization that a small island cannot afford the luxury of self-sufficiency. For the British to succeed outside of the European Union, they will have to be both humble and daring.

Ferghane Azihari is a freelance journalist and policy analyst based in Paris. This article was originally published in French by Institut de Recherches Économiques et Fiscales, and republished at mises.org

 

The 2% Inflation That Central Banks Target Is Simply A Wealth Redistribution Scam.

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The world over people are told that central banks pursue “price stability” by making sure that consumer goods prices do not rise by more than 2 percent per annum. This is, of course, a big sham. If the prices of goods rise over time, it does not take that much to understand that prices do not remain stable. And if the prices of goods increase over time, it necessarily means that the purchasing power of the money unit declines.

As money loses its purchasing power, income and wealth are stealthily redistributed. Some individuals and groups of people are enriched at the expense of others. Savers and workers are swindled out of their deserved income and retirement benefits, while those who own goods that rise in value or who borrow money typically reap a windfall profit. Clearly, the banking industry is a major beneficiary of monetary debasement.

“Inflation” Is a Rise in the Quantity of Money

Central banks are the very source of the phenomenon that all prices of goods tend to rise over time. They hold the money production monopoly and increase — in close cooperation with commercial banks — the outstanding quantity of money through credit expansion, an increase in the supply of credit that is not backed by real savings. It goes without saying that it is rather profitable to be active in the money-production business.

The increase in the quantity of money results, and necessarily so, in higher prices compared to a situation in which the quantity of money has not been increased. This is no arbitrary assertion but stems from logical reasoning: a rise in people’s money holding lowers the marginal utility of the additional money unit, meaning that the marginal utility of other goods that can be exchanged against money rises.

Consider the case in which the quantity of money in the hands of market agents rises. People will then exchange money balances (which have, from the viewpoint of the money holder, lost in marginal utility) against other vendible items (which have gone up in marginal utility). As people exchange money units against other goods, money prices go up (compared to a situation in which the quantity of money has not been increased).

The Mainstream Explanation and Its Problems

Of course, in real life additional factors (such as, for instance, demand changes, market introduction of new products, etc.) interfere with the link between the increase in the quantity of money and the rising prices of goods. This, however, by no means refutes the economic insight that a rise in the quantity of money in the economy leads to goods prices that will be higher than if the quantity of money not been increased.

The increase in the quantity of money is what deserves to be called inflation; rising prices are just a possible symptom of an increase in the quantity of money. However, mainstream economists typically define inflation as rising consumer goods prices. This, however, is problematic for at least two reasons. First, by equating inflation with rising prices, the real reason for higher prices, namely the rise in the quantity of money, is obscured.

This, in turn, gives rise to arbitrary explanations of why goods prices may go up: sheikhs who force up oil prices, unions that cause wages to rise, an overall buoyant economy that creates shortages in production factors, and so forth. All these pseudo-explanations deflect from the real culprit — the central bank, in cooperation with commercial banks, which issues new money, so that people no longer understand who, in fact, harms them.

Asset Price Inflation

Second, changes in consumer goods prices do not tell us the entire story, for they do not take into account asset prices such as, for instance, stock prices, housing prices, and land prices. However, the newly injected money can be expected to not only push up consumer goods prices, but also drive up asset prices. And like rising consumer prices, rising asset prices diminish the purchasing power of money.

In other words: asset price inflation destroys the purchasing power of money in the same way that price inflation of consumer goods does. Take, for instance, stock market prices. If prices rise from, say, $100 to $200, the purchasing power of the money unit would drop by 50 percent. The owner of the stock becomes richer, while the holder of dollars become poorer. In fact, this is precisely what has been happening in the last decades.

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For illustrative purposes, let us take a look at the chart above. It shows the development of the US quantity of money, nominal GDP, and stock prices from 1996 to autumn 2019. In the period under review, the US nominal GDP increased by 4.3 percent per annum on average. The quantity of money rose by 6.1 percent, while stock prices expanded by 8.1 percent. To the attentive observer, these numbers contain an important message.

The increase in the money supply does not only raise prices of consumer goods, but also tends to raise all prices. For instance, in the period under review, on average, the real GDP in the US rose around 1.9 percent per year while prices of goods and services that are included in US GDP went up by 2.4 percent. The remaining “excess money” obviously pushed up stock prices and other asset prices such as for instance, housing prices.

Don’t Put Your Trust in Today’s (Fiat) Money

The lessons to learn are these: always think of inflation as a rise in the quantity of money. Be aware that central banks and commercial banks provide a kind of money that does not keep its purchasing power — that most people suffer losses when holding it for the purpose of storing wealth. Better not to put your trust in today’s money and keep your transaction balances as small as possible. Don’t be taken in by the inflation sham.

The insights outlined above should encourage all of us to join the call for better, sound money — money that lives up to the highest economic and ethical standards. This can be achieved by simply creating a free market in money, where people are free to choose the kind of money they would like to use, and where entrepreneurial spirits are free to make their fellow people sound-money offers.

A free market in money — which would be tantamount to putting an end to central banks’ money production monopolies — is actually easy to establish. Just strip the official currency of its privileged “legal tender” status and remove all capital gain and sales taxes on all media that stand an excellent chance to compete for becoming currency — most notably gold and silver but potentially also crypto units.

A free market in money will work wonders. Many of the evils that haunt our world today — be they chronic price inflation, financial and economic crises, boom-and-bust cycles, and even over-funded governments and aggressive wars, would be greatly reduced. One of the biggest challenges of our time is to reform our money. The solution is to open up the market in money.

Dr. Thorsten Polleit is Chief Economist of Degussa and Honorary Professor at the University of Bayreuth. This article appeared at mises.org.

What Young People Want From Politicians Are Proposals To Drive The Private Economy, Not Schemes For More Government Spending.

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By this point, many readers have struggled to help children or grandchildren assemble impossible puzzles or intricate Lego contraptions. In this spirit, we invite you to puzzle through the pieces of Nancy Pelosi’s impeachment project. Our list includes clues to the final picture.

Dec. 5: Speaker Pelosi announces the Democrats will draft articles of impeachment against Donald Trump.

Seven days later, Prime Minister Boris Johnson defeats Jeremy Corbyn in the U.K. general elections. It is the Conservative Party’s greatest margin of victory since Margaret Thatcher’s third win, in 1987, and Labour’s biggest defeat since 1935.

Dec. 12-15: Mr. Trump’s approval ratings begin to rise.

Dec. 18: The House votes to impeach Mr. Trump, with no Republican support.

The next day, seven Democratic presidential candidates debate in Los Angeles. Virtually all approve the impeachment, denounce wealth and offer agendas of increased public spending.

The day after that, the British Parliament votes overwhelmingly to support Mr. Johnson’s intent to pull out of the European Union.

I think we have enough pieces to see the shape of things to come.

After Mr. Johnson walloped Mr. Corbyn, some Democrats and American progressives asserted that the U.K. result had little relevance to the U.S. They said it was Mr. Corbyn’s personal failure, not a repudiation of Labour’s agenda. Which sounds similar to the notion that the Democrats’ loss in 2016 was Hillary Clinton’s fault, not theirs.

Still, the British result got me wondering about the point of Mrs. Pelosi approving the construction of a Potemkin impeachment—a grand facade to hide the reality of weakness inside her party.

Socialism is in the air these days, at least in the U.S., and the U.K. has long experience with socialism. The stark fact of the British election is that thousands of longtime Labour voters turned away from the party despite Mr. Corbyn’s promise of large-scale public spending.

Mr. Johnson’s victory may have been mainly about Brexit, but the result exposes what looks to be a tipping point for left-leaning liberalism in the U.S.: The Democratic Party has a big problem with the vision thing. It’s possible that government today, which is to say government that is everywhere all the time, has become a big bore to the voting public.

Like Britain, the U.S. has lived for most of the past century with high levels of public spending for an infinity of public programs. The population should be content and the left should be happy. They aren’t.

The average voter listens to an Elizabeth Warren or Bernie Sanders promise vastly expanded public spending—and shrugs. The top Democratic vote-getter is Joe Biden, a party war horse in harness for 50 years.

The “average” Democratic voters supporting Mr. Biden are black, Hispanic or white baby boomers. What remains beyond these more-traditional Democrats are the party’s millennial utopians. They sound angry, but the truth is, they’re bored.

Instead of the political vibrancy of the 1960s, young progressives see their world in the grip of political stasis. They weren’t around for the hard work of building the Great Society, brick by brick, amendment by legislative amendment, the way their elders did, such as—just to pick a name— Rep. John Dingell.

No wonder Mrs. Pelosi was agog at the aggression from Reps. Alexandria Ocasio-Cortez, Ilhan Omar and the rest of the progressive “Squad.” They act as if none of this hard work ever happened and barely acknowledge its legacy exists.

Older leftists and liberals revere the alphabet soup of assistance programs and rotely support all of it. The New New Left treats all this pre-existing government as virtually an abstraction.

Note how Mayor Pete Buttigieg, 37, routinely waves off the achievements of Sen. Amy Klobuchar’s generation: “If you’re my age or younger . . .” The pedestrian dailiness of “government” has become a liability for traditional Democrats, despite all they’ve done. Dismissing U.S. history in general, progressive activists and gentry liberals want their own Great Society program. (For a reality check on the original version, read Amity Shlaes’s “Great Society: A New History.”)

But the left has a problem: The liberal legacy—extraordinarily big government (this year’s spending bill is more than 2,000 pages)—has sucked all the revenue out of the system. Elizabeth Warren’s multiple “plans” financed by beating taxes out of billionaires—like Jeremy Corbyn’s 21st century nationalizations—are the reductio ad absurdum.

She’s hardly alone. One listens in vain to the Democratic presidential debaters, including Mr. Biden and Ms. Klobuchar, for proposals to drive growth in the private economy. Instead, they all promise to keep shoveling more coal into the spending furnace.

The promise of more public spending is no longer an animating political philosophy for most people. It’s just there, a dull humming noise. Britain proved that. America, while it watches the Pelosi impeachment revels, may follow.

This article first appeared at wsj.com.

A Walmart In The Neighborhood Does More For Affordable Food Distribution Than Food Baskets From Charity.

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Among economists’ insights over the last almost 250 years, one of the keenest is that one can do good while doing well. The idea traces to Adam Smith. It means capitalists’/entrepreneurs’ pursuit of profit can have favorable consequences for the community at large—and not just for capitalists and entrepreneurs. It applies equally to landowners and workers pursuing their own interests.

The following are two of Smith’s statements of the “doing good while doing well” proposition. The first is from The Wealth of Nations and the latter from Smith’s 1759 Theory of Moral Sentiments.

“It is not from the benevolence of the Butcher, the Brewer or the Baker that we expect our dinner, but from their regard to their own interest.”

“Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

One frequently hears about capitalists/entrepreneurs making substantial gifts either before or after their deaths to colleges/universities and other non-profit organizations. Many say it is an opportunity for them to “give back,” which suggests, at least to me, that the wealth making the gifts possible was obtained in less than noble ways. Regardless, the benefits the community at large reaps from these gifts are not what the doing good while doing well proposition is about.

The doing good while doing well proposition does not describe government officials’ actions.

Rather, the proposition refers to the process by which the capitalists/entrepreneurs earn their wealth. It’s not what they do with their accrued wealth. It’s the benefit the community realizes as this wealth is accrued. To paraphrase Smith, people enjoy the benefits of meat, beer, and bread as a result of their respective producers’ efforts to earn a profit. What these producers do with their wealth is a different question.

It should also be noted that the doing good while doing well proposition does not describe government officials’ actions. For these officials, making personal monetary profits from their jobs is illegal. The result when government officials pursue their own interests, given this illegality, is the topic of the public choice economics. The results do not parallel those of Adam Smith.

The coming of Thanksgiving and Christmas each year brings with it churches and benevolent groups organizing distributions of food baskets. I have participated in these efforts, though probably with less enthusiasm than others.

Americans are surrounded 24/7 by a process (Smith’s invisible hand) that is wealth-producing for all, thereby making these charitable acts possible.

Always in the back of my mind was the doing good while doing well proposition. That is, how do the effects of the proposition compare with the distributions by churches and benevolent groups? To repeat a previous cautioning, how does the process by which capitalists/entrepreneurs pursue profit affect the community at large?

My mind went to the case of Wal-Mart. No one would deny that Wal-Mart is a profit-pursuing entity. At the same time, there is credible evidence that Wal-Mart’s presence in a community reduces food prices between 10 and 15 percent. Put on an annual basis, this is equivalent to food shoppers receiving 5.2 to 7.8 weeks of additional food shopping per year. It follows that Wal-Mart spreads far more holiday food cheer than churches and public service groups do.

Food basket distributions presumably trace to noble intentions, while pursuit of profit is widely held to be ignoble. Noble trumps ignoble. That’s why the doing good while doing well proposition has always been a tough sell for economists. For many, good things only happen when people intend to do good things.

None of the above is meant to trivialize church food baskets during the Thanksgiving and Christmas holidays. Nor is it meant to disparage those making end-of-life or after-life contributions to colleges/universities or not-for-profit institutions. These acts of charity have long played a vital role in American life. Moreover, they are voluntary, and I would be the last to put them down.

Instead, my purpose is to point out that Americans are surrounded 24/7 by a process (Smith’s invisible hand) that is wealth-producing for all, thereby making these charitable acts possible.

T. Norman Van Cott, is a professor of economics at Ball State. This article first appeared at FEE.org

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