Leading the Revival of Individualism & Self Reliance

Why Society Starts To Crumble When We Ignore Economics In Favor Of Politics.

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At Center For Individualism, we like to say that Economics Is Life. The principles of individual economics can be applied to help us all make better decisions for ourselves and, as a result, a better society for all emerges. One of the principles of individual economics is that it is necessary for there to be inviolable private property rights in order for citizens to be free to decide how to use their property – how to trade it , how to exchange with others, how to collaborate in shared communities. How to be civil, in other words, without being hounded by others who want to press claims on one’s property or to steal it or to vitiate it in some way. The worst perpetrator of such improper claims is, of course, a redistributive government. The government’s existence is purely about who gets taxed (i.e. their property is stolen), who receives benefits (i.e. property redistributed from others), and who is subjected to violence in police and military actions (i.e. property gets destroyed).

We don’t often think about property rights in a disciplined manner. Occasionally, a situation arises where the chance to do so is offered, and a commentator comes along who can help shed the proper light. Here is Jeff Deist of Mises Institute with a timely observation on private property.
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Civility And Property Versus Politics

Calls for civility in politics are nothing new, and the incident involving White House spokesman Sarah Sanders at a restaurant has yielded plenty of smoke but little heat from both phony sides of this non-debate/non-issue.

I suppose we should be happy when property rights become part of the conversation. It’s healthy when our Left progressive friends develop a situational private property ethic. Of course property owners have the unfettered right to remove people or refuse service. And of course we should all be civil with those who don’t share our views. The day to day interactions that make any society at least tolerable, if not healthy, comport with customs and mutual-self interest, not positive laws.

But liberty requires property, and civility requires civil society. When politics and the state serve as the chief organizing principles in society, property rights and social cohesion necessarily suffer. Incivility is a feature, not a bug, of a highly political society. It is also a feature of an America where far too many things are decided by the federal government or its super-legislative Supreme Court.

What kind of healthy society devolves into cheering and jeering over judicial decisions, decisions swung by just a few judges voting one way or another? Should 320 million people have to worry so much about 5 or 7 Supreme Court justices?

It’s hard to argue for civility in winner-takes-all political scenarios. In fact it’s a recipe for hyperpartisanship, “othering,” and tribalism. It’s senseless to lament a loss of civility and then argue for overcoming our differences by voting harder and suing each other more.

Ludwig von Mises witnessed the collapse of the Habsburg civilization, the rise of Nazism in Austria and Germany, and two horrific European wars– a series of events far beyond mere incivility. His answer to actual barbarity was real liberalism, distilled in its purest form to one word: property. “If history could teach us anything, it would be that private property is inextricably linked with civilization,” Mises tells us in the aptly-titled Omnipotent Government.

But property is not part of the liberal program today; on the contrary, private ownership is under serious attack not only among rising “democratic socialists” like Alexandria Cortez and Bernie Sanders but also by protectionist and mercantilist forces in the Trump administration.

In fact only libertarians believe in full ownership–i.e. full control– of private property. This is hardly an edgy argument at this point; Murray Rothbard made it 50 years ago. But nobody in politics or media actually believes this or argues for it. In the context of real estate, full property rights would require no property taxes, no zoning, no permits or building codes, complete freedom to alienate or sell at will, and most of all full control over who enters and who is required to leave. This kind of private property is not available to cake bakers or quaint southern restaurateurs.

America slowly but surely lost her sense of robust private ownership, the soul of a free society. It happened through the tax and regulatory state, by overturning the Lochner case and jettisoning economic substantive due process, through absurd readings of the Commerce Clause, through the creation of wildly extra-constitutional administrative agencies, and through the creation of an inferior form of property called “public accommodations.”

By giving up property we gave up liberalism and civil society. By insisting on political control over vast areas of human affairs we gave up civility for force.

Remember, politics is zero sum. The restaurant owners view Sarah Sanders as a threat, as someone who is going to cause them harm if her (Trump’s) administration prevails. That the owners acted absurdly is not the issue, nor is the incoherent argument that Trump somehow is beyond the pale relative to past presidents. The scene at the Red Hen restaurant was the result of the owners’ not-unjustified perception that the US political system vanquishes people. To avoid being vanquished they must vanquish Trump, at least in their eyes.

Ideally, when asked to leave by the proprietors of the restaurant Ms. Sanders simply should have shrugged her shoulders and left quietly. Which is apparently what she did, although reportedly she was followed and harassed at a restaurant down the street. What’s unfortunate is not merely the twitter incivility that followed, or the nasty news articles clamoring about a brewing civil war, but rather our blindness in understanding where “democracy,” politics, and disrespect for private property lead.

This article originally posted at mises.org, June 27, 2018

How the Free Market Promoted Desegregation in the Era of Jim Crow

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Not all heroes wear capes, in fact, sometimes heroes wear shiny spandex underwear and don a signature white streak in their hair. Such was the case with professional wrestler “Sputnik” Monroe, who used civil disobedience and market incentives to desegregate wrestling in the Jim Crow South.

The Grand Tradition

Professional wrestling is deeply rooted in southern culture. Before televisions became a commodity that most Americans could afford, people had to find unplugged ways of keeping each other entertained.

For those whose economic situations did not permit weekends spent out at the theater or dining in upscale restaurants, local wrestling was the place to be. Every weekend, local auditoriums would transform into wrestling venues with big rings in the center and folding chairs placed around for spectators.

In the days of segregation, these seats were reserved for “white” audience members, while everyone else had to sit in the tiny upper balcony in a section nicknamed, “the crow’s nest.”

The Heel becomes the Hero

Before wrestling became the television sensation it is today, every region of the country had its own territory with its own cast of loud characters and dramatic storylines.

A wrestler’s compensation was directly tied to the popularity of the character they portrayed. If a wrestler wanted to make more money, they had to prove that their character could sell tickets and fill seats.

Traditionally, there are two types of wrestling characters: the hero and the heel. For every hero, there is a heel meant to stir up the crowd and boost the hero’s image.

Legendary heel, Sputnik Monroe, decided to make his character a hero to the black community, which in the heart of the segregated south was sure to rile up the audience.

Wrestlers take their character roles seriously. Since many lived in communities among their fans, wrestlers were required by their promoters to maintain their character personas at all times. So that is exactly what Monroe did.

After garnering a reputation for hanging around with the black community, an older lady, angered by his disregard for segregation, gave him the name “Sputnik.”

Meant to offend his honor and accuse him of having communist sympathies during the red scare, this nickname was intended to be an insult. But rather than getting upset, Monroe adopted the name as his wrestling moniker.

Civil Disobedience

Creating a stir in every town he passed through, “Sputnik Monroe” became a legend, drawing huge crowds wherever he went.

In these days, it was customary for wrestlers to drink with their fans after a match had ended. Since the majority of Monroe’s fans were black, segregation laws forbid him from fraternizing with his admirers, but he did it anyway.

For a six-month period, Monroe spent every night drinking with his fans in bars he wasn’t legally allowed to patronize. Every few weeks, Monroe was summoned to court and required to pay a fine for breaking Jim Crow Laws.

Holding true to his public image, Monroe made history by hiring black attorney Russell Sugarmon Jr. to defend him in court.

The more Monroe defied segregation laws, the bigger his crowds grew. Soon, it became routine to see thousands of people lined up outside Ellis Auditorium, each waiting for their chance to see Sputnik Monroe in person.

The promoters were not as thrilled about this situation as Monroe was. While they liked the idea of selling more tickets, there was one problem: Monroe’s fans were all black, there couldn’t possibly be enough room in the “crow’s nest” to accommodate the whole crowd. Initially, the promoters refused to accommodate Monroe’s fans, but Sputnik Monroe was not going to go down without a fight.

Money > Tradition

Monroe could not understand why these men would turn down an opportunity to earn extra money just to satisfy an outdated status quo. He took matters into his own hands and began bribing venue employees to let more of his black fans in the venue.

This eventually put the ushers in an awkward situation. As the “crow’s nest” ran out of space, the ushers had to choose between enforcing segregation laws or disappointing the great Sputnik Monroe by refusing to seat his fans.

Unable to turn down the opportunity to both impress Monroe and earn extra money, the ushers began seating black fans among the white audience members.

When the promoters realized what was happening, they demanded he stop his illegal behavior.

Understanding the value and worth he brought to his promoters, Monroe knew the show could not go on without him. He belligerently reminded his promoters of the crowds he was attracting and the money he was bringing in and refused to go on unless they agreed to let the black fans sit wherever they wanted.

Monroe recounted this situation by saying:

“There used to be a couple of thousand blacks outside wanting in, so I would tell management I’d be cutting out if they don’t let my black friends in. I had the power because I’m selling out the place, the first guy that ever did, and they sure wanted the revenue.”

While Sputnik Monroe always maintained that money was his main motivator behind his actions, he is single-handedly responsible for the desegregation of Ellis Auditorium, making it the first integrated public gathering place in the Jim Crow south.

The English Language Is the Product of Spontaneous Order

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No matter how many examples there are of spontaneous order emerging out of chaos, there are still those who cannot bring themselves to believe that such a system, or lack thereof, is possible. In previous essays, I have shown that spontaneous order is not only possible but that it is already happening all around us. And while previous articles touched on dancing, roads, and survival instincts in nature, this essay focuses on something we use every day: language.

The ability to form complex languages is what separates humans from all other living species.  And language, like markets, spontaneously derive from necessity, whether of a good or service or of communication. And just as humans are anxious to exchange money for desired goods and services, so are they eager to communicate with others to facilitate the exchange of ideas. But neither scenario requires any action from any central authority.

The English we speak today is different than the English used by our Founding Fathers. But these organic changes occurred in the absence of a central authority controlling and dictating the terms. And yet, considering all this, somehow we are still able to communicate with each other.

The English Language

The English language is unique. Younger than many others, there really is no “pure” English language. Instead, it borrows from a variety of different languages to form something completely new altogether. As American Enterprise Institute’s (AEI) Mark Perry points out, “If you speak English, you know words from at least a hundred different languages. That’s because English has borrowed words from languages everywhere, and continues to do so.”

But while this may seem like a chaotic way to form a language, human beings have managed to adjust adopt new words without the need for government mandates. And as a result, the English language is a free-flowing exchange of ideas.

Perry writes:

“Nobody is in charge! Human languages in general, and English in particular are perfect examples of “spontaneous order,” the spontaneous emergence of self-organization and order out of seeming chaos. And perhaps it’s because English has been the language most open to borrowing words from other languages that is has developed the most extensive and richest vocabulary.”

An Abundance of Choice

But the same cannot be said of other languages. Unlike America, which prides itself on the exchange of different cultural ideas, France is homogeneous by nature. The French government prefers to keep its culture rooted in French tradition, and language is no exception to this rule.

As Perry says:

“The opposite approach to allowing a language to develop according to spontaneous order, is  that of the French Academy, which actively tries to limit the French vocabulary and prevent the “anglicisation” of the French language.”

In fact, France is so controlling over its language, it even controls what you are allowed to name your children. Parents looking to bestow an untraditional name upon their children must first prove that the name has been previously established elsewhere. In many instances, this means having to use contemporary literature to justify “untraditional” names.

This type of central control serves only to limit the exchange of ideas within the country because spontaneous action cannot occur. It must first be sanctioned by the French government. And just like government regulation inhibits market innovation, so does it also inhibit individual freedom by restricting language.

But France is not alone in this. In another article, Perry writes:

“Number of words in the English language:500,000 according to the number of words in the Oxford English Dictionary. There are supposedly another 500,000 uncataloged technical and scientific terms. By comparison, most estimates indicate that German has a vocabulary of about 185,000 words and French and Spanish have fewer than 100,000 words.”

With such an abundance of words, the English language allows us the opportunity to better communicate our thoughts and feelings with others. Along those same lines, allowing for more options in a free and spontaneous marketplace allows consumers more options to better suit their personalized needs. But like language, the only thing that stands in the way of consumers and seemingly unlimited options is government regulation.

How Old Logic And New Math Help Us Discover The Nature of Things.

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The nature of things is baffling and complex, and that poses two challenges. Deal with it with reason, or with emotion. An example of reason being applied to a complex problem is cancer research. A network of engineers, oncologists, scientists, patients, and data has been unleashed. Mammoth data silos of information are being shared and mined by new technological infrastructures and artificial intelligence. This will provide front-line doctors with the information they need to develop targeted, personalized therapies; ones that kill the cancer while minimizing damage to healthy tissues.

The Nature of Cancer

As a golfer carries fourteen clubs to customize each shot to the ball’s terrain, wind, distance, and hazards, a cancer medical team needs many tools to craft the most targeted therapy possible. They now include immunotherapy, proton therapy, and genomic sequencing. According to Dr. William Cance of the University of Arizona Cancer Center:

One of the challenges is to devise simple tests that will predict whether a person’s tumor will be sensitive to immunotherapy or resistant. Scientists are also paying attention to something called the tumor microenvironment, which is the area immediately around the tumor.

In these resistant tumors, “normal immune cells that live in this microenvironment act as a wall, preventing the immune system’s T-Cells from reaching the tumor.” The challenge of immunotherapy is to find a way to tear down this wall. Think of the malignant tumor, its protective wall of immune cells, and safely eradicating them as Secretary Clinton described last year: “Our body politic immune system has been impaired.”

With regard to sequencing the human genome, mathematics and artificial intelligence have proven themselves to be essential tools for decision support. Scientists have uncovered hundreds of thousands of “variants of uncertain significance” (VUS), and many are harmless. But which ones are harmful? According to Dr. Sean Tavtigian of the Huntsman Cancer Institute, they’ve developed new gene therapies with a “computational tool that comes up with a probability for the final result with astonishing accuracy.” The basis of this gene sequencing breakthrough was found in a centuries old formula: Bayes Theorem.

The Nature of Knowledge

According to economics consultant Peter L. Bernstein in his book Against the Gods, “A dissident minister named Thomas Bayes made a striking advance in statistics by demonstrating how to make better informed decisions by mathematically blending new information into old information.”  His mathematical achievements were not published until after his death in 1761. Bernstein continues:

Essays Towards Solving a Problem In The Doctrine of Chances, was a strikingly original piece of work that immortalized Bayes among statisticians, economists, and other social scientists. This paper laid the foundation for the modern method of statistical inference, the great issue first posed by Jacob Bernoulli.

“The Bayesian system of inference is too complex to recite here in detail” says Bernstein about his book, but in summary “there is no single answer under conditions of uncertainty.” Inferences about old information must must be revised as new information arrives. And regarding Bernoulli, just prior to his death in 1705 he had invented the “Law of Large Numbers and methods of statistical sampling that drive modern activities as varied as opinion polling, wine tasting, stock picking, and the testing of new drugs.”

And now their work has been blended with genetic sequencing data. Says Tavtigian, researchers can establish genetic predispositions for a disease, and “these efforts can add years to patients’ lives and improve their quality of life.” And with the growing volume of new data, there are new platforms for crowdsourcing such as patientslikeme.com, where people are able to share treatment options with each other and physicians.

The Nature of Science

In 1875 another amateur mathematician by the name of Francis Galton discovered regression to the mean, which is “the expectation that matters will return to normal.” Bernstein adds “Galton’s line of analysis led immediately to the concept of correlation, which is a measurement of how closely any two series vary relative to one another.” In the natural world it could be the relative size of parent and child, or rainfall and crops. In the social world it could be inflation and interest rates. These are conditional dependencies.

In a modern Bayesian biology network, conditional dependencies could represent the relationship between diseases and symptoms. Given symptoms, the network can be used to compute the probabilities of various diseases. And in the social science of micro-economics, these variables could be the relationship between future wealth and investment strategy. With given capital market assumptions, the Bayesian-like network could be used to compute the probability of various financial outcomes.

In both cases, Bayesian logic updates the probability of a hypothesis as more scientifically relevant evidence becomes available; and for the first time, making mathematics a viable tool for social sciences. This is necessary because people adapt as circumstances change.

The Nature of Things

As independent trials are critical to statistical reliability, so are the relationships between dependent variables to fully understand the nature of things. In 1952 Harry Markowitz expanded on Galton’s work and “touched off the intellectual movement that revolutionized business decisions around the world.” We call it the Efficient Market Hypothesis.

Throughout human existence, people have studied nature and its math to understand possibilities and manage risk. People have also studied ways to manipulate data for political power. The currency of the scientist, the economist, and the entrepreneur is reality. Their findings must be repeatable, and being wrong has consequences. The currency of the demagogue is emotion. Being wrong is of no consequence to them; their news cycles are saturated with stories about environmental and economic doom. As Weather Channel founder John Coleman has claimed, “scientists with environmental and political motives manipulated long term scientific data to create an illusion of rapid global warming.” Economist Murray Rothbard describes the fallacy of total utility as “absurd microeconomics textbook discussions of non-existent entities subject to mathematical manipulation.”

Statistician Adrian Smith sums up Bayesian statistics best when he says:

Any approach to scientific inference which seeks to legitimize an answer in response to complex uncertainty is, for me, a totalitarian parody of a would-be rational learning process.

The natural world is our universe of entities, all acting and interacting in accordance with their identities. Understanding those identities and their interactions is the job of curious and connected individuals. And they’re now connected with information and technology in decentralized networks. Bernoulli, Bayes, and Galton left behind an enormous gift, perhaps the Rosetta Stone of complex systems. Breakthroughs in cancer and economic science are just two of the latest beneficiaries.

When Occupational Licensing Is Used to Prohibit Private Acts of Charity

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There is something especially immoral about a government that punishes private individuals for giving back to their communities. Unfortunately, this cruel trend is becoming all too common, as one Tucson resident learned firsthand.

Stranger than Fiction

When local news spread about a cosmetology student being investigated for giving free haircuts to the homeless, many people expected to find some shocking twist revealed in the fine print. Surely, this student must have done something truly monstrous to warrant an official state investigation.

But instead of the story taking a Sweeney Todd-esque twist, it turned out that Juan Carlos Montesdeoca was just a generous cosmetology student trying to help the less fortunate in his community. His only real “crime” was not asking the government for permission beforehand.

A Noble Deed

Montesdeoca had extra time on his hands after his cosmetology school unexpectedly closed its doors a few months ago. Not wanting to lose the momentum he had built while in school, Montesdeoca decided to continue practicing his trade while also lending a hand to his fellow man.

For the homeless recipients of Montesdeoca’s generosity, this was the first haircut they had received in months. One woman even stressed that she had gone seven months without so much as a trim.

Every Sunday, Montesdeoca would visit his friends and offer to wash and cut their hair. This was especially significant to these individuals since even a simple shampooing was enough to help restore some of the dignity they had lost while living on the street.

After being chastised by passersby on a daily basis, many begin to feel disconnected from society. Having this human interaction was as good for morale as it was for their hair. Montesdeoca understood this plight all too well, as he too, had been homeless in the past.

Send in the Goons

Instead of applauding the efforts of Montesdeoca, who had also been experiencing rough times since the closure of his school, the state went out of its way to penalize him. Apparently, protecting the cosmetology industry is more important than promoting human kindness, at least in the eyes of the local government.

When the Arizona Cosmetology Board discovered that Montesdeoca was cutting hair without a license, they immediately put a stop to his “criminal” conduct.

Cosmetology is, unfortunately, just one of the many industries heavily burdened with protectionism in the form of occupational licensing.

True market competition terrifies established industries that have gotten too comfortable in their specialized fields and now refuse to innovate. The taxi industry’s constant campaign for stricter regulations on the ridesharing market is a perfect example of this.

Unwilling to participate in the market process, these trade cartels spend money pressuring local politicians into passing laws that protect their companies from actually having to compete. In other words: it’s cronyism at its finest.

Occupational licensing rigs the game against hardworking individuals, who, as a result, are the ones who end up paying the highest price.  

A Slap in the Face, Not on The Wrist

Since Montesdeoca has not completed his cosmetology training, he does not yet have a license to practice his trade. While he has not received any compensation in exchange for practicing cosmetology without a license, giving free haircuts to the homeless still somehow constitutes a violation of the state’s laws.

The board opened up an investigation into Montesdeoca’s “criminal” behavior and has also moved to proactively suspend his cosmetology license. When Montesdeoca finally does complete his training someday, it won’t matter since the board has already suspended a license he doesn’t yet have.

The board claims that its primary concern in this matter is the health and safety of the homeless community. Without a proper license, the board worries that Montesdeoca may not have practiced proper hygiene with his “clients.”

However, this claim seems unlikely, since no one in that particular governing body seemed too worried about any of the other unsanitary conditions so inherent to life on the street. Instead, they focused their attention on Montesdeoca, shutting down an act of charity in the name of cronyism.

After learning about the board’s insensitive response to Montesdeoca’s actions, Arizona Governor Doug Ducey released a strongly worded letter saying:

“Very unfortunate’ is an understatement. I find this outrageous, and I call on you to end your investigation, save Mr. Montesdeoca the inconvenience of having to travel to Phoenix to appear before your body, and waive any fees or penalties the cosmetology board is considering against him.”

Appalled that the board would threaten to ruin Montesdeoca’s career before it even begins, Governor Ducey was livid when he learned that the board was taking any action aside from applauding this young man for his charitable deeds.

Governor Ducey ended his letter to the board by reminding them that their duty is to serve the people of Arizona and not the cosmetology industry.

“Our job as public servants is to support Arizonans in their efforts to better their own lives—and certainly in their efforts to improve the lives of others.”

College Isn’t For Everyone: One Young Woman’s Story

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As individuals, it is important that we take the reins when it comes to forging our own paths in life. For a long time, conventional wisdom told us that without a college degree, our options in our adult lives would be severely limited. But as our modern world continues to change, so has the old way of doing things. Where once a degree may have ensured that graduates would transition immediately from the collegiate world to the professional world, this is no longer the case.

More and more, college graduates are realizing that their costly college degrees may not hold the value they were hoping for and counting on to help make their professional lives successful. Since everyone was convinced that college educations always ensured success, more young people began enrolling. With more people seeking access to college, the federal government joined the game and began increasing the amount of federal aid available for students.

But this was not the great solution that students were hoping for. Instead, this increase in access to college has inflated the value of degrees, but that is not the worst aspect of the situation. Since many young people have to take our large student loans in order to attend college, they graduate college already tied down with massive debt that they have no means of paying off without a job. And when you are competing against others in the job market, all of whom are equally qualified and hold the same degrees as you do, securing a position is not as simple as it sounds.

But opting out of a traditional college education is not in any way a reflection of one’s own intellect, and one young woman, Raelee Nicholson, is living proof of this.

A Different Path

On paper, Raelee Nicholson would seem like the perfect candidate for a four-year college. Scoring in the 88th percentile on her college boards and receiving straight A’s in all of her honors courses, Nicholson is an excellent student. But as summer approaches and her years spent at her public high school in the south of Pittsburgh come to an end, Nicholson is not getting ready to start at a four-year university. In fact, she isn’t even planning on enrolling at a community college.

Instead, Nicholson has opted not to seek a traditional college education. After she wraps up her high school career, she plans to enroll in a two-year technical program that will allow her to work as a diesel mechanic once certified. Nicholson built her first car with her cousin when she was 14. It was this experience that triggered her desire to work with cars for a living. “We worked on it the entire summer and when we got it running it was the best feeling in the world,” she said. “I really like working with my hands,” Nicholson said.

And while many soon-to-be college students are blindly starting college without any solidified plans for the future, the adults in Nicholson’s life have not all be supportive of her decision.

Nicholson told the Wall Street Journal:

“My dentist told me to (work on cars) as a hobby, but she kept telling me with my potential I should really go to college.”

But this negative feedback did not end with her dentists. Nicholson has been approached by teachers and guidance counselors at her school, each telling her to rethink her decision to take an alternative path in her education. For the adults in her life, who are unfamiliar with realities now facing college-aged students, Nicholson’s decision is a slap in the face. After all, how could someone so smart and studious not want to attend a four-year university?

But this type of attitude helps no one, especially young students looking for guidance. Where Nicholson’s teachers and mentors see this as her not living up to her potential, it is their frame of mind that is limited not Nicholson’s future.

Becoming a diesel mechanic is nothing to scoff at. Where there is market demand there exists the opportunity to create value. Imagine the consumers, in need of a mechanic, who will have their wants met because of the services provided by Nicholson. Not to mention, a certification in this field does not mean that Nicholson will “only” reach the status of mechanic during her career.

Teachers and Administrators Just Don’t Understand

With this certification, she could potentially start her own business someday, creating even more value for more people. And by owning her own company, she would also become a creator of jobs, something the market is always in need of. With more jobs created, more people have the opportunity to create even more value. The adults in Nicholson’s life should not be so narrow-minded about her decision. Instead, they should embrace the ability of Nicholson to think outside of the box when it comes to her education.

The principal of the North Montco Technical Career Center, Dawn LeBlanc, commented on Nicholson’s situation:

“Parents come from a generation where everyone was pushed to go to college and the tech schools were for the bad kids.”

Not to mention, for those students who do choose college, 40-50 percent will never actually graduate. With two-year programs like the one Nicholson plans to participate in, completion rates are higher, allowing students to get the training they need and then get right into the workforce.

But Nicholson hasn’t let the criticism bother her. To those who question her decision, she reminds them that, “Diesel mechanics charge $80 an hour.”

These Are The Four Anti-Capitalist Characteristics Of Huge Corporations.

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AT&T has completed its acquisition of Time Warner, in a $81 billion M&A transaction. The deal creates a behemoth dealing in fundamental telecommunications and in both the creation and distribution of popular content. It is quite typical for us to be suspicious of the creation of new corporations of huge size, but why?

There is nothing inherently bad about scale. If scale is a necessary attribute for the efficient delivery of consumer value in telecommunications and content markets, we should welcome the financial engineering that makes efficiency possible.

Unfortunately, efficiency is not all that scale delivers, if it delivers it at all. There are four fundamental anti-capitalist and anti-liberty characteristics of huge corporations.

Drinking From The Government Money Firehose.

The money and credit that government creates in vast quantities does not enter every citizen’s pocket in equal amounts at the same time. It enters the financial system at the point where entities closest to government, with sufficient scale to absorb newly-created money in industrial quantities, have set up mechanisms to receive and process it. These are banks, Wall Street institutions, hedge funds and capital pools eager and willing to be the first recipients of the new money. Having obtained it in vast amounts at extremely low cost, they are eager to redeploy it quickly and profitably. One way is to buy stock and lend M&A funds to the largest corporations. The stock market in large company equities is funded by this huge pool of money, as are M&A deals of the size of the AT&T Time Warner merger. Smaller businesses can only access this money later in the cycle at much higher interest rates. By the time the money reaches consumers, it costs up to 24% on credit cards and more than that on small business working capital loans and consumer payday lending. Giant corporations have, and use, a major competitive advantage in preferred access to the government printing press.

Organizing For Authoritarian Management.

We often refer to these giant entities as organizations. An organization is a transmission device for authority, and specifically for an authority that has its own set of rules. Loyalty to an organization builds up a power hierarchy for the application of those rules. People who work in hierarchical organizations tend to be insulated from the workings of the free market; they deal only in the power politics of the organization they inhabit. A characteristic of those power politics is that there are non-market incentives to grow the size of the internal organization – for example, the number of people reporting to a departmental executive or the size of the departmental budget become sources of prestige. More and more resources are devoted to the administration of the internal organization,  and proportionately fewer to serving the customers and consumers on the outside, and to innovation and consumer value creation. The big company can become unresponsive and unaware of changes in market needs. In the worst cases, they can lose sight of their consumer mission altogether – as when United Airlines personnel dragged a passenger kicking and screaming off one of their planes so that they could use the seat to ferry an employee for organizational travel.

The Managerial Function Is Anti-Entrepreneurial.

One of the functions of the internal bureaucracy at large corporations is management. This term refers to activities aimed at efficiently extracting economic returns from the resources created and assembled by original entrepreneurs. The company founders and original entrepreneurs were the ones who identified a problem in the marketplace that consumers wanted solved, and who either created new resources or re-assembled existing resources, or some combination of both to solve that problem. Henry Ford created a new resource in the affordable automobile, and recombined existing resources of steel and rubber and leather in new ways to implement it. Since then, managers in the automobile industry have done some minor further recombination, but the idea of the internal combustion engine, 4 wheels, seats and a steering wheel has not been innovated out of existence. The job of managers is to consistently extract financial returns from the original innovation. This is a process-based activity, with a focus on accounting, procurement, design, manufacturing efficiencies marketing and sales. It aims at stability and predictability. Innovation and creativity are anathema to management teams because they lead to unpredictability and uncertainty. So they’d prefer not to innovate.

Perceptively, Ludwig von Mises pointed out that the capitalist system is not a managerial system, it is an entrepreneurial system. The emergence of a managerial class was aimed at eliminating the influence of owners and shareholders. The managerial function is entirely different from the entrepreneurial function. Most of what managers do has no cash value in the marketplace. Much of the industry that has grown up around managerial processes, “strategy”, consulting and business school studies is just an accumulation of additional managerial costs and expanded managerial staffing. It’s not particularly profit-oriented. It’s a luxury that original entrepreneurs like Henry Ford would probably eschew.

Merging Corporate And Government Bureaucracies.

The final insult to consumers from the large corporations is the merger of corporate bureaucracies and government bureaucracies in shared activities designed to extend the power of both. Government bureaucracies design forms that require filling and regulatory demands that require an informational response. Corporate bureaucracies love this, because it gives them something to do and justifies their existence. They get to hire more bureaucrats to fill in the forms and more data engineers to provide the information flow to the government, and more supervisors and managers to oversee the activity. Large corporations are happy to hire and add bureaucratic staff in this field of compliance with government regulation, because their large size makes it relatively easier for them to do so, and their market power enables them to pass on the costs to their customers and consumers. Smaller firms in the same industry are highly disadvantaged under these circumstances. They can’t afford the compliance costs because they have less customer revenue across which to amortize. They either exit compliance-heavy businesses or decline to invest in more profitable operations.

In effect, the government is offloading the cost of its internal bureaucracy and regulation to the corporate sector, and the bigger companies are happily embracing the deal because it gives them a crony relation with the government, a more entrenched bureaucracy, and an unfair advantage versus smaller and potentially more nimble competitors.

Justified Suspicion.

Should we be suspicious of large corporations on principle? Yes. They gulp from the government money spigot, they crony up to regulation to gain competitive insulation, and they grow bureaucratic and managerial staff at the expense of innovation and entrepreneurship.

What Puerto Rico Can Teach Us about Minimum Wage Laws

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Puerto Rico has been put through the ringer lately. But one of the most economically devastating aspects of its economy came about because of minimum wage laws enacted by the United States.

After the 2007 Fair Minimum Wage Act passed, each of the fifty states was required to raise the minimum wage from $5.15 an hour in 2006, to $7.25 by 2009. Few Americans realize that this legislation was also applied to the U.S. territories of Puerto Rico, American Samoa, and the Northern Mariana Islands, who were also forced to raise wages.

Unemployment in Puerto Rico surged and its GDP per capita declined by almost 7 percent. 

When the minimum wage is increased, the private sector is responsible for finding the means to actually pay for these increases. Though many companies will be forced to raise prices in order to continue operating within their profit margins, some might be left with no choice but to lay off employees or dramatically cut employee hours.

Since minimum wage pay is typically associated with entry-level workers, if employers are forced to let these employees go, they will lack the skills necessary to quickly rebound in the job market. As a result, the unemployment rate begins to rise.

When minimum wage requirements are made at the city or state level, the losses experienced from high unemployment rates are offset in the local economy, since many who are unable to find work often relocate to an area where the minimum wage isn’t as restrictive.

However, for those living in U.S. territories, relocation is not as easy as it is for residents in the continental states. Without the flexibility to relocate, the economic catastrophe that resulted from the 2007 minimum wage increase was felt on a grander scale.

According to the National Review,

The impact on the economies of American Samoa and the Northern Mariana Islands was devastating. In American Samoa, by 2009, after only three of the ten scheduled minimum-wage increases, overall employment dropped 30 percent — 58 percent in the critically important tuna-canning industry. Real per capita GDP in American Samoa fell nearly 10 percent from 2006 levels. In the Northern Mariana Islands, by the end of 2009, employment was down by 35 percent, and real per capita GDP off by 23 percent.

As the situation grew desperate, the governor of American Samoa testified before the U.S. Congress explaining that the new minimum wage policy created, “the real possibility that American Samoa could be left substantially without a private-sector economic base except for some limited visitor industry and fisheries activities.” He continued, “American Samoa’s economic base would then essentially be based solely on federal-government expenditures in the territory.”

Puerto Rico met a similar fate after the new minimum wage rate went into effect. The increase resulted in a minimum wage that was greater than 75 percent of the Puerto Rican median wage. In fact, the situation grew so dire, unemployment in Puerto Rico surged and its GDP per capita declined by almost 7 percent between 2007 and 2013. As a result, many young and able-bodied Puerto Ricans left for the U.S. mainland, creating an imbalance as the old and less motivated were forced to stay behind.

Additionally, foreign investors were turned off from hiring Puerto Ricans, since residents of Jamaica and the Bahamas would only cost half as much to employ.

By raising the minimum wage to as much as $15 an hour, states like California and New York are not just setting an American record for highest minimum wage; they are setting a global record as well. Even France, where socialism thrives, has a minimum wage equivalent to only $10.90 an hour.

In fact, the only time in history that the minimum wage was increased at economic levels comparable to that of New York and California was in 2007, when the U.S. territories implemented the Fair Minimum Wage Act. As we all know how that situation ended, we can only hope that in the future, governments can learn from history and avoid causing economic catastrophes.

Independent Minds Discover The Flexible Fabric of Reality.

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“When I’m playful I use the meridians of longitude and parallels of latitude for a seine, drag the Atlantic Ocean for whales.” These words are from Mark Twain’s 1883 memoir Life on the Mississippi, and at that time – a whimsical daydream. But according to author Dava Sobel in her book Longitude, “Anyone alive in the 18th century would have known that the longitude problem was the thorniest scientific dilemma of the day – and had been for centuries.”

For all of mankind’s seafaring history, cartography and navigation involved a baffling and complex system – an orbiting and rotating planet. It was a global challenge for the most complex of systems, the neurons and synapses of the human mind.

The Space-Time Continuum

The imaginary fabric of Twain’s net was first presented graphically by the Greco-Roman mathematician and astronomer Ptolemy in 150 AD. And determining latitude was relative child’s play, the laws of nature had revealed the equator as the zero-degree parallel. Yet as Sobel describes, “the zero-degree meridian of longitude shifts like the sands of time.” Ptolemy could put it wherever he liked, and he did, and in the following centuries it became a purely political decision.

It was mathematician and astronomer Galileo, whose land based method using Jupiter’s moons, finally gained acceptance in 1650. As Sobel writes “Renowned astronomers approached the longitude challenge by appealing to the clockwork universe. Palatial observatories were founded in Paris, London, and Berlin for the express purpose of determining longitude by the heavens.” But it was another observation of Galileo’s that changed the course of mankind, despite the political and scientific elites.

While a young medical student sitting in church, Galileo observed the motion of a swinging lamp. He timed its arcs with his own pulse, and discovered that its rate of speed was a function of the length its chain. According to Galileo’s protégé Vincenzo Viviani, “Galileo always intended to put this remarkable observation to work in a pendulum clock, but he never got around to building one.”

What he did, according to Sobel in her book Galileo’s Daughter, while a professor at Pisa in 1589, “he measured the swinging of pendulums; and he rolled bronze balls down inclined planes to derive the rate of acceleration in free fall.” This was a breakthrough discovery. As Galileo was stitching together the flexible fabric of space and time, he was also scratching the surface of the anti-Copernican Edict of 1616. For his efforts he was awarded a conviction by the Holy Offices of the Inquisition in 1633.

The World Wide Web

A century before the Copernican Edict there lived another renegade. His countrymen referred to him as a traitor, but today Lisbon proclaims: He is ours! In middle age this maverick renounced his native land. He then received a commission from King Carlos I of Spain to venture west. His Anglicized name is Ferdinand Magellan, and according to historian William Manchester in his book A World Lit Only by Fire, “he couldn’t even be certain of what he was looking for until he found it, and the fact that he had no clear view of his target makes the fact that he hit it squarely all the more remarkable.”

Like his contemporaries during the Age of Explorers, he was almost always lost. According to Magellan’s scribe Pigafetta, “The captain spends many hours studying the problem of the longitude but the pilots content themselves with the knowledge of the latitude.” A singularity among 16th century men, he rewarded those who performed well and was respected for his supreme competence.

According to Manchester, he was “meticulous, fiercely ambitious, stubborn, driven, secretive, and iron-willed. Magellan possessed an inner vision he shared with no one. He was a man of boundless curiosity, and found reality equally enthralling.” His sense of mission was adventure, but his political sponsors had a different sense of mission – property. He used them to eventually stitch together the world wide web, our flexible fabric of meridians and parallels that cover mountain tops and oceans floors.

Connecting the Dots

Ptolemy defined the problem of longitude, and in 1519 Magellan studied it as if his life depended on it, and it did. Galileo’s celestial solution was useless to navigators, but his idea of pendulums as time pieces was lightning in a bottle. The dilemma, “one that stumped the wisest minds of the world for the better part of human history,” instead led to “accurate determinations of the weight of the earth, the distance to the stars, and the speed of light.” As Sobel continues in Longitude, “what Newton had feared as impossible,” required not a celestial clock, but a mechanical one.

In 1714 the British Parliament passed the Longitude Act. It established prize money for a reliable and repeatable solution, and was worth millions of dollars in today’s money. It was finally awarded to a man “with no formal education or apprenticeship to any watchmaker, he nevertheless constructed a series of virtually friction-free clocks that required no lubrication or cleaning, made from materials impervious to rust.”

In 1773, John Harrison finally collected his prize, despite “decades of political intrigue, the backbiting of academic elites, and scientific revolution.” Sobel concludes Longitude saying “With his marine clocks, John Harrison tested the waters of space-time. He succeeded against all odds, in using the fourth dimension to link points on the three dimensional globe. He wrested the world’s whereabouts from the stars, and locked the secret in a pocket watch.”

The Flexible Fabric of Reality

Ptolemy, Magellan, Galileo, and Harrison shared qualities that make them shining hubs among the countless nodes of the creative human network. Among them are curiosity, reason, vision, ambition, and will. In that order. Hierarchies are only in the way. The rotation of the earth is a concrete. The dark matter of gravity is a concrete. They are everywhere. They are complex systems to be understood and appreciated. The flexible fabric of reality discovered by these renegades belongs to all of us. And like them, the flexible fabric of human action is everywhere, and it is called spontaneous order. It is the incomprehensible network of human activity we call economics.

It’s nodes are countless scientists, entrepreneurs, investors, inventors, artists, and consumers; all engaged in life affirming activity, trading value for value. And they stand ready to defend the only concrete it requires, economic freedom. As economic scientist Ludwig von Mises has discovered, “In a system where there is no market, where the government directs everything, all freedoms are illusory, even if they are made in to laws, and written up in constitutions.”

 

Without Government, Who Will Build the Roads? Domino’s Pizza, Apparently

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Yesterday, Domino’s Pizza announced that rather than wait for government action, the company would take it upon itself to fix potholes as part of its “Paving for Pizza” campaign.

A lot can happen in the time it takes for your pizza to leave its store of origin and arrive at your door. Sitting helplessly in the front seat, one encounter with a pothole may mean your delicious cheesy pie is delivered in ruins.

We’ve all had the unfortunate experience of opening that square cardboard box after the delivery guy has left, only to find that the cheese and toppings have slid off in what appears to be an act of foul play. Overcome with hanger, you call the pizza store and demand that a new one be sent over. But realistically, between traffic and bake time, you are not going to get that pizza for at least another hour. The struggle is all too real.

This problem is apparently so widespread for Domino’s, they recently launched a pizza insurance program that would allow consumers to insure their pizza in case something happens to it during the delivery. While this was a clever idea, especially to those of us who subscribe to a “private insurance for everything” philosophy, it still didn’t save any pizzas. Insured or not, Domino’s still has to make another pizza if one is ruined.

So how do you, to the best of your ability, prevent pizzas from being destroyed on the road? You attack the root of the problem and fix the roads themselves. And that is exactly what Domino’s plans to do.

While the new program officially launched yesterday, “Paving for Pizza” has already fixed over 50 potholes in California, Texas, and Delaware. The campaign promises to give local municipalities the money needed to fix their crumbling infrastructure should they be selected by the company. Those wanting to cash in on this opportunity need only go online to Domino’s website and nominate their own neighborhood roads for consideration.

Commenting on this unconventional initiative, creative director at CP + B, Kelly McCormick, said:

We know that the carryout experience includes everything from ordering, to getting the pizza home in perfect condition. This forced us to think broader about carryout and meant that we had to consider the drive or walk home, on the pothole-ridden roads and icy sidewalks that we don’t own and can’t control ourselves. So, we decided to go where no other pizza company would go.

And where they’re going, they will most certainly need roads.

Who Will Build the Roads?

Since the dawn of time, libertarians have been routinely bombarded with one infamous question: Without government, who will build the roads? For those hostile towards the freedom philosophy, this question seems like a real “gotcha” weapon. There is no possible way the free market could handle a “public good” as important as roads, thus proving the entire libertarian philosophy to be untenable. Of course, Domino’s is now proving this assertion to be false.

Yet, the “roads” question has taken on a life of its own within the liberty sphere, dominating meme culture and becoming a source of constant frustration for those committed to free-market principles. So tightly woven is this question into the modern freedom movement, historian Tom Woods once said:

“Who will build the roads?” is the question that belongs at the top of every libertarian drinking game. If we didn’t have forced labor, the argument runs, there would be no roads. There’d be a Sears store over there, and your house over here, and everyone involved would just be standing there scratching their heads.

But what our skeptical friends may not fully understand is that where there are roads there is commerce. And in the absence of roads, how could Sears feasibly draw customers into its store? Or, put differently, without properly functioning roads, how could Domino’s deliver your pizza safely to your door?

All Roads Lead to Commerce

Roads have historically been viewed as a public good, which is defined as a product or service that is provided to citizens exclusively by governments, ensuring use is accessible to all. This has led many to believe that the government is the only entity capable of road management. And even though toll roads and other forms of private thoroughfares exist as living examples, there are many who cling to the government’s monopoly on roads. But there are multiple problems with this viewpoint.

For starters, there is absolutely no proof that the government is well suited to care for the roads. In fact, there is far more evidence in support of the opposite. Government roads are either always in need of repair or heavily congested because some bureaucrat sitting in a desk ordered roadwork to be done during rush hour.

Additionally, the government has no real incentive to care for the roads in the first place.

In the market, private entities hoping to succeed know they must respond to consumer demand, lest they go out of business. A roofing company, for example, would not survive in the marketplace if it promised and then failed to respond promptly to emergency situations time and again. Yet, government roads are constantly in a state of disrepair, and it sometimes takes years before a service request is completed.

Of course, the government doesn’t get fired when it fails to respond to a road issue in a timely manner. Since the state operates by force, consumer satisfaction plays no role in its existence.

The private sector, on the other hand, has a vested interest in properly maintaining local roads as quickly as possible, as Domino’s is now proving.

The decision to launch Paving for Pizza was born out of an unmet demand in the marketplace. The government was failing to meet the needs of drivers on the road, which in turn was inhibiting Domino’s ability to live up to its promise of offering quality products to its consumers.

The Paving for Pizza campaign actually works in Domino’s best interest. Already, the company is having to spend money to replace the pizzas that are being destroyed en route to their final destinations. Additionally, having to remake a ruined pizza means that a Domino’s employee has to shift his or her focus away from another customer’s order. Replacing one pizza ends up costing the company both precious time and money.

But by choosing to invest money into fixing the roads in its many delivery areas, Domino’s is not only attacking the root of the problem, they are also scoring major points with consumers and local communities. Not only does the consumer have a better chance at receiving a beautifully intact pizza, but the entire community also benefits from the improved infrastructure. This, in turn, will result in new Domino’s customers who are drawn to the company as result of the improved roads. Everyone wins in this situation.

But the implications of this are far-reaching. Roads clearly play a vital role in the way Domino’s conducts business. But Domino’s is just one company. Since many establishments rely on roads to bring their customers to them, there is an enormous potential for private companies to lead the way in infrastructure innovation if they follow Domino’s lead.

At the very least, libertarians can now rest easy knowing that the next time we are accosted with the infamous question about roads, we can look to Domino’s as a beacon of free-market innovation of a public good.

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