Sunday, December 16, 2007

Libertarianism's Conundrum

Libertarianism finds its foundation in the support for individual liberty. The political philosophy holds that individuals are the absolute owners of their lives, and should be free to do whatever they wish with their person or property so long as they allow others the same liberties. Libertarianism has long been associated with democracy, as it is believed that democracy is the form of government which best upholds libertarian principles. This conclusion is misguided, however, in that it fails to acknowledge the basis of democratic rule: the will of the majority. Democracy will indeed never be able to satisfy true libertarianism.

First, a distinction must be made between a true democracy and a republic. In a true democracy, every decision of the state is decided upon by every member of the state. The actual carrying out of the decisions of the democracy may lie in elected representatives, but the decisions are the sole responsibility of the populace. Unanimity, of course, will not always exist in a society, so the principle of majority rule applies in democracy. A democracy will carry out the decisions of the majority, as that represents the views of the most people in society, and therefore is most just.

Democracy, following this assumption, operates fundamentally as a utilitarian body designed to maximize societal utility. An obvious problem results from such an assumption. If democracy exists solely to maximize utility for society, the only reason democracy should exist is if it actually does maximize utility. In order for democracy to maximize utility, however, the majority of a democracy’s populace must always make the best political decisions. Democracy assumes, to be brief, that the majority is always right. This we know not to be true. The majority is oftentimes misinformed, and frequently reaches conclusions that are invalid. Human nature is such that a charismatic statesman can easily sway one’s opinion, even if what the statesman is saying is not best for society. Also, the nuance decisions that governments must frequently make are oftentimes best made by experts; the majority’s uneducated opinion, in such cases, simply does not suffice.

Republicanism arose in order to address the inability of true democracy to achieve maximum societal utility. A republican form of government is one in which members of society elect representatives to make political decisions for them. Republicanism, therefore, cannot be said to be anything but a utilitarian form of government. Indeed its very purpose is to take away rights from individuals in order to best maximize societal utility.

The libertarian objection to democracy, however, does not lie in democracy’s ineffectiveness as a utilitarian body. The libertarian, in fact, has no regard for utility. Indeed, his only concern is that the individual rights and liberties of every member of society are upheld. He believes that one’s rights precede the state, and that if a state is to exist, it must concern itself solely with the task of upholding the rights of every member of society. A libertarian, in justifying democracy, would state that democracy is the only form of government (outside of anarchy, in which political rights do not need to exist) which upholds every member’s political rights. Democracy, however, is subject to the whims of the majority, of which the libertarian has no regard. In a true democracy, for example, the majority can decide to disallow wearing the color blue. In this situation, although every member of society’s political rights were upheld, one’s right to wear the color blue has been violated. Democracy therefore, while it allows for the political rights of every member of society to be upheld, will always, unless unanimity in political decisions is always achieved, violate the basic individual rights of the minority.

Winston Churchill’s defeatist epithet that “democracy is the worst form of government, except for all the other kinds” does not satisfy the libertarian. It does, however, raise an important question: if not democracy, then what? It is clear that democracy is inherently at odds with the principles of libertarianism, but must the libertarian adopt a utilitarian point of view and accept democracy as the form of government that, compared with other forms of government, best upholds its principles? In asking such questions, the libertarian makes a basic mistake: he assumes that political rights are more important than other basic rights.

It must first be acknowledged that libertarianism is not consistent with true anarchy, where no forms of cooperation exist and the individual lives in a Lockeian “state of war.” Libertarians believe in universal and equal rights, including the right to use force. The libertarian believes the individual may execute these rights provided the execution of one’s rights does not encroach on another individual’s rights. Murder is an interesting example. In anarchy, the would-be victim is forced to defend himself against the would-be murderer. Such a situation is consistent with libertarian principles, as the individual (being the sole owner of his life) who is being attacked has the ability to use force himself against his attacker. The attacker is violating libertarian ethos, but the individual being attacked assumes sole responsibility for his self defense, just as he assumes sole responsibility for his other rights. If, however, the attacker and attacked do not possess equal ability, anarchy is not able to satisfy libertarian principles of individual liberty. For not every individual possesses the same ability to defend himself. Anarchy, therefore, provides for the survival of the fittest, disregarding individual rights in the process.

Libertarians therefore adopt the concept of the state in order to protect their individual rights and liberties. As Locke describes in The Second Treatise of Civil Government, societal cooperation becomes necessary in order to protect individuals. Locke argues that individuals must necessarily sacrifice some of their rights in order to receive such protection. For example, one must relinquish his right to use force (to a police force, for example) in order to receive protection from others using force against them. Again we see utilitarianism used to justify a lack of individual rights.

When first considered, libertarianism can only reach its fullest potential in two forms of government: anarcho-capitalism and libertarian socialism. A state of anarcho-capitalism is one in which no authoritarian or coercive institutions exist and property rights reign supreme. An individual in an anarcho-capitalist state does not have to defend himself however, as he can pay a police force provided by the market to protect him. Libertarian socialism, on the other hand, does not recognize an individual’s right to property. Instead, libertarian socialists delegate property cooperatively, using non-bureaucratic, decentralized means of action such as trade unions, municipalities and workers’ councils to determine the proper allocation of society’s resources. Both forms of government reject the state as an unacceptable form of coercion that inherently undermines one’s natural rights. Both forms of government still, however, violate libertarian principles in notable ways.

Anarcho-capitalism relies on the market to uphold individual rights and liberties. The market, however, suffers from the same problem as democracy in upholding such a task. Just as democracy fails to satisfy the wants of the minority, so does the market for those not willing to pay the market price. If police protection in such a system costs $200 a month, and an individual in society is either not able or not willing to pay such an amount, he will be subject to the same problem addressed above, in which he must provide protection himself. In such a case, the individual’s inherent rights and liberties have been taken away (or at least limited) by the market mechanism.

The obvious critique of libertarian socialism is that it necessarily takes away one’s rights to property. If a libertarian considers the right to property an essential and fundamental individual liberty, the argument ends there: libertarian socialism is unjustified. The libertarian socialist, however, argues that the right to property is not only not an inherent individual right, but that property ownership necessarily leads to the violation of other individual rights. This is simple to understand: one individual owning a pencil, for example, violates another individual’s right to own that same pencil. Beyond property rights, libertarian socialism faces contradiction in that it cannot successfully allocate society’s resources without the use of some form of coercion. Libertarian socialism relies on either production or distribution (or both) of society’s resources to be conducted by an institution. Such an institution, according to libertarian socialists, must be governed democratically, but therein lies its fault: the rights of the majority will trump the rights of the minority, and libertarianism again fails.

Libertarianism can only truly exist in such a state in which possession rights (along with the absence of coercive institutions), but not property rights, exist. There is an important distinction between the two rights. Property rights, on the one hand, allow for an individual to possess an article of property that he did not himself produce. For example, when Bob pays James to produce an article of property, Bob claims possession of the article even though he himself did not produce it. Possession rights follow that one possesses only what he has himself produced. In such a system, one may trade the fruits of one’s labor for other items that he needs, so long as the transaction is cooperative.

Even so, however, libertarianism will nevertheless fail under such a system of possession rights. The production of an item as small as a toothpick requires the cooperation of many people, making it impossible to determine exactly what product should go to whom. Such a system will inevitably lead to a system of libertarian socialism, which, as is proved above, violates libertarian principles.

Alas, true libertarianism is impossible to realize.

Friday, October 05, 2007

Job Report In: Economy Looks Good

In today's New York Times:
The average hourly wage of rank-and-file workers — who make up about 80 percent of the work force — reached an all-time high of $17.57 last month, even after taking inflation into account. Two years ago, the hourly wage was $17.01, adjusted for inflation.
So much for globalization depressing the average American worker's wage. Cheap foreign goods are also a large reason why inflation remains low in the United States. If inflation was rampant in today's economic climate, the Fed would be forced to decide between raising rates and ensuring recession, or lowering rates and ensuring...recession.

Wednesday, October 03, 2007

School Reform - Choice Needed

In the past two days there have been two New York Times opinion pieces decrying the state of America’s public schools. Both articles prescribe measures that they believe will “cure” the American public school system of its ills. Not one mention was made in either article, however, of the one cure proven to be effective: choice.

The first article, titled “Our Schools Must do Better,” calls for a “wholesale transformation of the public school system.” Yet how does author Bob Herbert plan to go about achieving this? He calls for improved teacher quality and more alternative schools. Not much of a wholesale transformation. In fact, improving teacher quality has been on the agenda since the public schooling system in America was created. Alternative schools, notably charter schools, have been in abundance since the 1980s. What is needed is indeed wholesale transformation of the public school system, but Herbert comes up woefully short in his plan for ‘revolution.’

What must be introduced, wholesale and nation-wide, is choice in our nation’s schooling. This can be accomplished quite easily with what are called education vouchers. An education voucher is a certificate by which parents are given the ability to pay for the education of their children at a school of their choice, rather than the public school to which they were assigned. For example, a parent can use an education voucher to send their children to a private high school instead of a public high school, as long as the child is eligible for acceptance. Additionally, parents would be able to send their children to whichever public school they choose, as opposed to being forced to send their children to the school in whichever district they live in.

Such a system would open faulty public schools up to competition and scrutiny. If parents feel their children aren’t being properly educated at one school, they may easily transfer them to another. In this way, schools unable to educate children up to their parents’ standards will be forced to either improve the quality of their education, or shut down. Such a system is the only way to ensure improved quality of education – it relies on that great arbiter of quality – the market. If Toyota produces cars of poor quality consumers will go to the multitude of other car companies – eventually Toyota will go out of business. Similarly, a school is forced to produce high quality education, thus ensuring that America’s education system will be improved across the board. Education vouchers, in essence, localize accountability as opposed to relying on government standards. Those standards, prescribed by Congressmen with no exposure to the schools themselves, or knowledge of what is truly needed in education, are clearly failing.

Education vouchers have seen tremendous success wherever they have been implemented, most notably in Sweden and Ireland, yet they continue to face difficulty in their implementation in the United States. Milwaukee has established a highly successful voucher system, with 26% of Milwaukee children receiving vouchers, but the federal government has been reticent to adopt vouchers as a means to improve education. Why? Simply put, teachers lobbies, such as the American Federation of Teachers (AFT) and the National Education Association (NEA) have prevented vouchers from being implemented. Teachers fear vouchers for the same reason that they are so effective – they open education up to competition. Inadequate teachers will be forced to be replaced, so it is natural why teachers’ unions oppose such a measure. It is imperative, however, to establish education vouchers if one wants to improve the quality of education in the United States.

Thursday, September 20, 2007

The New York Times Needs an Economics Professor (or some common sense)

An op-ed in the New York Times today reads:
Companies compete. Countries, however, are not engaged in a zero-sum contest where one nation’s gain is another’s loss. Cutting corporate tax rates may or may not be a good idea, but we don’t need to make it a priority to preserve our competitiveness.

Ah, the hypocrisy of American liberals. They demand trade barriers in order to protect American jobs, yet the minute “tax cut” enters the dialogue they cry foul. Why? Is it not true that higher corporate taxes make companies less competitive, leading to the loss of jobs? Liberals cannot have it both ways, and they certainly cannot use contradictory economics to defend their arguments.

Tuesday, March 06, 2007

Citizenship for Sale

Citizenship and nationality are two distinct entities. While citizenship can be changed relatively easily, nationality is a birthright. One is Chinese, or Pakistani, or Jewish, but all three could themselves be French citizens. Citizenship is different in that it merely represents under which state’s jurisdiction an individual lies. To that regard, citizenship is a possession. One may reject his citizenship in favour of the citizenship of another nation. Is it then not so, in that case, that citizenship should be available for exchange? Indeed, if an individual wishes to sell his citizenship, why must he be prevented from doing so? In fact, there can be some very distinct advantages to allowing such exchanges to occur.

A transaction between parties benefits all parties, or else the transaction would not occur. When Bob buys a soda from the general store, the transaction benefits both Bob, who derives utility from the soda, and the general store owner, who gains income from Bob’s purchase. There is no potential transaction that is not associated with negative externalities that the government should coercively halt. To that end, the government has no right to infringe on the individual’s right to buy or sell his citizenship unless the transaction leads to the rights of another individual being infringed. And indeed, the transaction costs of buying and selling citizenship can be effectively screened, using the same processes that screen immigrants.

There are many reasons why an individual would wish to sell his citizenship. He might be mired in poverty, with no opportunity for success in his country of citizenship. He would be better off selling his citizenship for a lump sum and moving to another country, where with his newfound wealth he can create for himself a better life. Or he could be too greatly in opposition to a state’s government to be able to live in that state in peace. In both cases both the state and the individual benefit from the individual selling his citizenship and moving elsewhere. In the first situation, the state benefits by losing a despondent member of society and in the second situation, the state benefits by losing an antagonistic member of society. Coercing such individuals to leave would greatly infringe on their rights and thus cannot be condoned. But by presenting them the mechanism by which they may leave on their own terms, both the individual and the state benefit.

Furthermore, the state has much to gain from those who buy its citizenship. States now adopt immigration policies that favour those potential immigrants that can contribute to society. The buyers of citizenship would have a certain amount of wealth accrued that can help a country in two ways. First, that an individual is wealthy is in all likelihood an indication that he has skills that have allowed him to obtain such wealth. As such, his skills will be useful to the economy into which he is entering. And even if the buyer of citizenship did not accrue wealth due to his skilfulness, that he has wealth indicates that he will be able to obtain such skills and contribute thusly or, at the very least, participate in the economy as a consumer and tax payer.

There will be those that argue that opening citizenship to exchange opens likewise potential wrong-doers, such as terrorists, to easily buying citizenship so as to harm the nation. But if a nation would screen potential buyers of citizenship as vigorously as it does screen normal immigrants, that problem is eliminated. Of course, the threat remains, but no more so than it would if the exchange of citizenships were not allowed, and potential terrorists were forced to go through the usual means of immigration.

It will also be argued that a price cannot be put on citizenship. Why not? Selling one’s citizenship is not selling one’s identity, it is selling away the right to be governed and protected by a particular state. The government does not hold monopoly over such a right of a particular individual. Nor is it damaging the fabric of society. After all, if an individual is willing to sell his citizenship, he is in all likelihood not a willing member of society anyways.

If a state is permitted to disallow the exchange of citizenship it should also be permitted, as a matter of constancy, to disallow freedom of movement or, for that matter, freedom of any sort of exchange whatsoever. That would be unjust coercion and that is the fundamental reason why the exchange of citizenship should not and indeed cannot be forbidden.

Sunday, March 04, 2007

The Mal-Effects of Paternalism

The erosion of individual liberty lies in direct correlation with an increase in governmental involvement in every day life. In other words, government paternalism and the loss of freedom go hand in hand. Such paternalism is intended to cure societal ills, but what does it really do? Supporters of such practices must believe that the government is better suited to decide for individuals than the individuals themselves. The movement has widespread support (which is oftentimes contradictory) among America’s left yet what advocates of government paternalism fail to grasp is that government policies intended to help individuals by steering them towards the ‘correct’ decisions actually have the opposite effect.

New York City, in recent months, banned the use of trans-fatty acid (better known as trans-fat) in all restaurants in a move to curb obesity among its citizens. The thought was that the government knows better than the individual what the individual should and should not eat. Whether or not NYC’s ban of trans-fat actually contributes to reduce obesity in the city is irrelevant because what the ban symbolizes has far greater and more devastating effects. What the paternalistic government does is give the individual, as is inherent in human nature, an excuse to not shoulder the burden of responsibility himself.

Because the government has decided to involve itself in such paternalistic practices, such activity has come to be expected by the people. So when children become fat, for example, parents rush not to blame themselves for not feeding their children correctly, but rather blame the government for not preventing such obesity to occur. It is simply easier and less guilt-ridden for parents to do so. If the government did not involve itself in attempting to correct obesity, however, parents would recognize that it is their burden, and not the government’s, to take care of their children properly.

So while Americans get fatter, or do more drugs, or continue to utter racial epithets, supporters of government paternalism will advocate more and more government involvement in the decisions of individuals. Such will only exacerbate the problem. Less government involvement, although a seemingly riskier proposition to those who feel that society is held in balance by the government, would allow responsibility to be shifted back to the individual. And supporters of paternalism might be surprised at what they see. Without the government to act as the easy excuse, individuals would be responsible for themselves. After all, who else has the right to be responsible for them?

Friday, March 02, 2007

A Market in Babies?

A 23 year old Mexican woman is being detained for allegedly selling her 5-month old baby. Why? On the face of it, a market in children seems immoral, unethical and wholly irresponsible. But who is the state to impose its morality on the individual? And surely if parents do not wish to raise their children, and instead wish to sell them, they should be allowed to do so if we disregard morality. After all, parents frequently give their children up for adoption. Why is selling them any different? In fact, legalizing the sale of children by their parents might have some profound advantages.

First, in all likelihood the majority of parents who will sell their children if the practice is legalized will be poor. They need the extra income and certainly will be hard-pressed to feed another mouth. And, conversely, the most common purchaser of children will be rich. As a result, children who would have grown up in crime-ridden neighbourhoods, and attended substandard schools, would now be able to live a life of comfort, with the best opportunity to succeed. Not only does this help the economy and society as a whole, but the children themselves. Why stop such a practice?

Further, crime will be reduced. Children who are unwanted by their parents are far more likely to commit crime. Studies have linked a rising rate of abortion with a lower crime rate for this very reason. Parents who do not wish to have children, but have them anyways, are likely to be apathetic parents and not provide the best environment for their children. Additionally, children who grow up under the strains of poverty are far more likely to commit crime than those who grow up with luxury. By allowing poor parents to sell their unwanted children to rich parents, crime will be reduced, and the effects of poverty itself will be less hard-felt, as families will have fewer mouths to feed.

Besides, a market in children already exists. The problem is that it is entirely black market. Therefore, unscrupulous child-buyers often force children into sex-slavery, or use them in combat. Governments and international organizations have done their all to stop such horrific practices but to no avail. Introducing regulation and administration over the selling of children would add much legitimacy to the process, and allow parents the option to sell their children to buyers who are known to have the child’s best interests in mind. Without a legal market with which to regulate the sale of children, parents who are unable to afford their children often have to either abandon them or sell them to whichever buyer they can find. Surely something must be done to stop this practice. Obviously, if poverty is eliminated, so is child-selling to a large extent. But poverty hasn’t been eradicated in millennia. Instead, governments need to adopt practical solutions, and establishing a well-regulated market in children is just such a practical solution.

One may complain about the morality of condoning such activities to occur. Detractors of such policy may state that every human has the inalienable right to his or her own life and therefore cannot be sold by any party, even their own parents. We must acknowledge, however, the fact that until a certain age, children have minimal reasoning and survival capabilities and therefore are entirely dependent on their parents or guardians. They must, consequently, sacrifice some of their natural rights to their parents until such a time as they have the faculty to make decisions by themselves. The best solution, for that reason, is that parents have the right to sell their child only up until they reach a certain age, as determined by experts to be the age that the child gains proper decision-making ability and thus gains all natural rights granted to humans.

Friday, February 09, 2007

The Case for Open Borders

Immigration is accused of many evils. Immigrants supposedly steal ‘our’ jobs and leach off of social welfare programs. They are lazy and contentious, the ignorant proclaim, and they are here merely to cause trouble. How wrong they are. Immigration, if opened in the United States to all migrants, would benefit all Americans tremendously.

The most prominent argument against looser immigration is that immigrants steal Americans’ jobs by working longer and for less money. Even if this were really the case, being required to become more competitive in the job market is hardly the injustice anti-immigrationists espouse. The truth, however, reveals something vastly different. Immigrants in fact contribute to increasing employment among Americans as well as increasing wages that Americans earn. In recent years the United States has admitted a large number of immigrants, 9.1 million in the 1990s, along with an estimated 500,000 illegal immigrants each year, and unemployment has actually gone down.

How is such phenomenon possible? After all, if there are more immigrants working, must not that mean that less Americans are working? Such is the logic of many detractors of open immigration. Their fallacy, however, is that there is not a fixed number of jobs available; in a growing economy, the amount of available jobs is always increasing. Indeed, immigrants contribute to creating jobs. Immigrants work, often for low wages, increasing companies’ productivity and profits. This in turn allows companies to hire more workers. Additionally, many immigrants start their own businesses, creating capital and hiring workers themselves. One must only look at Silicon Valley, where many (perhaps the majority) firms were founded by foreign born. Google, for example, was co-founded by a Russian immigrant, Yahoo! by a Taiwanese immigrant and Sun Microsystems by an Indian immigrant. All three companies have thousands of employees.

Wages are also increased by immigrants. A study by two Italian economists, Gianmarco Ottaviano and Giovanni Peri, found that a flow of immigrants that increases the total labour force by 10% increases the wages of US-born workers by 3-4 percentage points. This is because immigrants’ skills are not identical to those of Americans and thus the immigrants and Americans complement each other. Americans, for instance, are less likely to be willing to work menial jobs unless they are highly paid. Immigrants on the other hand are readily willing to work such jobs as even the lowest paying American jobs oftentimes pay leagues better than the next-best alternative in their native countries. That is, after all, why they immigrate. As such, immigrants work low-paying jobs, freeing Americans to pursue higher-paying occupations. A mother, for example, can hire a foreign-born nanny at a low cost and return to work as an investment banker. Such an effect both increases employment and wages. Furthermore, as stated above, immigrants’ willingness to work for less increases the productivity of firms and allows them to both hire and pay more.

It is worried further that immigrants come solely to benefit from the welfare state – that is, they come not to work but rather to claim unemployment benefits. Such, as well as being empirically proven false, is logically nonsensical. Immigrants to the United States are by and large extremely poor, and the process of immigrating itself is arduous. Oftentimes immigrants come to the United States to support a family in their native country. Why then, would they settle simply for the meagre benefits they would get from leaching off the welfare state when their potential returns from working are so much higher? Immigrating to the United States requires courage and enterprise; does one assume that these qualities in an immigrant will simply evaporate once he reaches the USA, where he will subsequently become slothful? Besides, the benefits immigrants can receive, since the passage of the Welfare Reform Act of 1997, are miniscule.

Detractors state further that immigrants place strains on society. They contribute to overcrowding of schools, crime and general unrest. To say such is simply xenophobic. Immigrants contribute to the vibrancy and modernity of America’s cities. What would New York be, for example, without its immigrants? And without ethnic restaurants Americans would surely be worse off. Immigrants provide culture and diversity to America, not strife and turbulence. The United States is, lest we forget, a nation of immigrants.

Instead of spending billions to patrol our borders, the government should open them and regulate immigration, not block it. Of course, potential terrorists and former criminals should be denied entry, but on the whole immigration should be allowed and even encouraged. Americans pine so feverishly for freer trade yet they fail to realize that freer immigration has even greater benefits. The World Bank estimates that if rich countries allowed their workforces to swell by 3 percent by letting in an extra 14 million workers from developing countries between 2001 and 2025 the world would be $356 billion a year better off. Immigration is met with hostility, but for entirely illogical reasons. It is time for America to open wide its borders.

Monday, February 05, 2007

Should Government Run The Lottery?

Currently 43 states in the United States run lotteries as a government operation. In Illinois and Texas, there is currently debate as to whether these state lotteries should be privatized. Privatization of the lottery would garner ostensible benefits – a large amount of cash, a more efficiently operated industry and less government involvement in an activity that could be run by the free-market. Yet if the revenue gained by state lotteries was used to fund beneficial government programs the privatization of the lottery would be counterproductive.

The Texas State Lottery, for example, reported sales of $3.77 billion in 2006; the cost of running the lottery was substantially lower. Such a large revenue stream, if put to the correct uses, would act as a deterrent of higher taxes and indeed could help both the programs it funds as well as the well-being of the individual. Participating in a lottery is a choice, compulsory taxation is not. So while a government-operated industry is to be avoided at all costs, a state-run lottery could in fact amount to be the exception that proves the rule.

In order for a state-run lottery to be beneficial certain criteria must be met. Primarily, it must be ensured that all revenue derived from the lottery not given out as prizes must be either used in positive government programs or given back to taxpayers in the form of tax rebates or permanent tax cuts. A lottery that funds school vouchers, or the expansion of a state’s Earned Income Tax Credit, would be entirely acceptable. And indeed, if lottery revenue is used to fund such beneficial government programs, less tax money is needed.

The problem, however, lies in the distribution of lottery generated revenue. Currently no state effectively uses lottery revenue; instead, state politicians use the revenue to fund pet-projects or destructive government policies. If such practices exist the state-run lottery is counterproductive in two ways: one, it is an industry that could be operated privately, but run by the state, and two, it funds destructive programs. It is, therefore, imperative that state-run lotteries be supported and continued only if they use their revenue effectively.

Unfortunately, such is in all likelihood never bound to occur, which is why privatization of the Texas and Illinois lotteries should, at the present time, be encouraged. If a state enacts lottery legislation that does, however, use the lottery’s revenue effectively, a state-run lottery should not be looked at in contempt and should, perhaps, be encouraged.

Sunday, February 04, 2007

Social Welfare: Incentives Matter

Social welfare programs championed by the liberal-minded inevitably employ compassion as their primary justification. Government should protect and assist those in need. To the extent that social welfare programs actually help the needy is, however, not the simple black-and-white result that liberals claim. It must be realized that in discussing the effects of social welfare programs, one must keep in mind not just the short-term benefits but also the potential long-term destructive effects. In short, incentives must be considered, because incentives matter.

The short-term effects of social welfare are indeed beneficial. The downtrodden receive assistance. The elderly who cannot provide for themselves receive the means by which to do so from the government. The unemployed receive unemployment insurance. One may not have a free lunch, however. The government is not, in carrying out its social welfare programs, simply giving away funds to the needy. The government is partaking in two destructive activities that hurt the needy more than they help.

The first destructive activity undertaken by the government in funding social welfare programs is taxation. Taxation is inherently destructive – it takes money away from individuals and families. Social welfare programs undertake a Robin Hoodian objective – redistribute the nation’s wealth so as to best benefit society as a whole. The idea is that a dollar in Bill Gates’ pocket is worth less to him than would be a dollar in a poor person’s. Therefore, the government should tax Gates and give the money to the individual who values the money more.

Such logic is rife with fallacy. First, one must assume that the reason Gates has more money than the rest of us is due to his superior ability to make that money. Therefore, taking money from Gates and giving to someone of lesser-ability destroys Gates’ incentives to make more of that money. If his incentives to make money do not exist, he will cease to do so, thus destroying all the potential wealth that Gates has proven to be able to accrue. Gates’ money without taxation contributes by itself to the welfare of the needy. His money provides jobs, higher wages, cheaper products, better technology and countless more benefits to society. Furthermore, because Gates values one dollar less than anyone else, he must earn ever-more dollars each year in order to satisfy his present needs. Thus, his incentives to innovate and satisfy consumer demands are ever-increasing. This is the very way in which capitalism produces wealth; and wealth produces overall well-being.

In such a way, one (although I do not make it) may make a case for regressive taxation. If the burden of tax is placed more heavily on the poor, the poor have more of an incentive to lift themselves out of poverty, and the rich have more of an incentive to continue creating wealth. Of course, regressive taxation also limits the opportunities of the downtrodden and thus is contradictory with regard to its aims. Nevertheless, giving incentives to the poor to create wealth themselves rather than allowing them to simply collect it from the government is necessary.

Therein lies the problem with social welfare. Giving the poor benefits eliminates their incentive to create those benefits themselves. Why work when the government can provide for you instead? Especially destructive is unemployment insurance. Why search for employment when the government will pay you anyways? Such social-welfare programs foster a feeling of complacency and eliminate the incentive to work. And thus the long-term effects of social welfare rear their ugly head. In the short-term, the unemployed individual receives benefits and is better off. In the long run, however, his lack of employment hurts society as a whole. Leeching off the government is a burden bore by the taxpayer, who now has less money in his pocket to spend. The money the taxpayer would have spent would have been reinvested, providing more jobs and opportunity for other individuals. Thus, the leach is not only hurting his own prospects by not amassing as much wealth as he potentially can, he is hurting the taxpayer, and consequently, he is hurting individuals who do want work.

The government cannot support such activity. It is destructive, irresponsible and unjust. One individual cannot be punished for the fault of another. The burden of fault must be carried by the one responsible. That is not to say that the government should not assist the needy. Certainly, they need the government’s support. But supporting them through social welfare programs is not productive. Instead, government should pursue programs that allow the needy to benefit while also providing incentive for them to help themselves. Programs such as the Earned Income Tax Credit (EITC) or school vouchers keep in tact incentives for the needy to better their economic status themselves, while also providing them with assistance. It is that which should be government’s objective, not appealing to the illogical compassion of social welfare.

Tuesday, January 30, 2007

The Case Against Public Schooling in America

Education is a right every citizen of the United States must have. Not only does universal education benefit the individual, it benefits society as a whole. It is therefore imperative to ensure all Americans access to a comprehensive education, without exceptions. Simply having an education, however, is not enough – especially for a country with as high standards as the United States. All Americans should and must receive the best education possible, regardless of their socioeconomic status or ethnicity.

Unfortunately, the public schooling system present in the United States does not work. The national graduation rate from public high schools in America was 72% in 1991. In 2002, the graduation rate was 71%. What is more grievous – that almost 30% of public high school students nationwide did not graduate in 2002, or that the graduation rate is worse than that 10 years ago- is debateable, but both points reflect gravely the failure of the American schooling system.

Furthermore, the United States federal government will spend 90 billion dollars on education in 2007. And that is just the federal government. In California, government spending on K-12 education amounts to one third of all government expenditures. In total, the United States spends over 500 billion dollars annually on public education. Such an overbearing burden on the taxpayer to fund a program that does not produce desirable results is unjustifiable and in dire need of reform. Relying on the government to institute effective changes is irresponsible, however. The government has proven itself incapable of educating America’s youth.

Instead of using the taxpayer’s money to provide schooling, the government should leave the task to the mechanism that best produces efficient institutions: the free market. Private schools in the United States already fare far better than do their government-run counterparts; the problem lies in their exorbitant costs. It is then government’s duty to assist those not able to afford private schooling.

A voucher system, whereby families unable to pay for their children’s educations would receive funding from the government to do so, is a far more efficient way to educate the populace. Opening education to the free-market, and thus eliminating the educational monopoly the government has at present, would result in both better and cheaper schools.

Such a system would greatly reduce the amount of money the government spends on education while at the same time improving the education standards in the United States. Of course, great practical difficulties exist in implementing such a drastic change. The process would have to be gradual, as currently not nearly enough private schools exist to accommodate all American students. Additionally, teachers unions would have to be assuaged, as they would surely be enraged over the potential turnover that such a change would entail. And finally, vast amounts of public school facilities would have to be auctioned off in a manner that does not create monopoly, as privatization often does.

Nevertheless, such problems must be overcome if America is to have a system of education befitting of the country’s might and importance. Central planning has been proven not to work in governance, and as the American public schooling system has shown, it does not work in education either. The free-market solution to education would cure, if correctly and gradually implemented, all the problems that public schooling presents.

Monday, January 15, 2007

The Travesty of the Electoral College

The Electoral College, a set of electors empowered to elect the President of the United States, is an institution outlined in the Constitution. Its purpose is to uphold democracy in presidential elections, primarily by empowering less populous states. In effect, however, it has curtailed America’s democratic capabilities, and undermined the legitimacy of presidential elections.

The founding fathers feared mobocracy. They were of the opinion that a simple majority would not effectively uphold democratic standards in the United States. They thought that such a system would inevitably lead to factions galvanizing partisan politics that had no relevance to the real issues affecting America. To combat such from occurring, the founding fathers instituted the Electoral College, a system whereby states were apportioned votes determinant on population, and electors from each of the states decided who to support in presidential elections. It was, and still is, deemed common practice for the electors of each state to choose the candidate that has garnered the most votes in the states through popular election. The system was designed to ensure that all states, even those of insignificant populations, were able to influence the presidential election. Indeed, under the current Electoral College system present, small states do have reasonable power in influencing elections. The benefit of this, however, is undermined by the undemocratic characteristics that the Electoral College procures.

The most profound of these characteristics is the exclusion of an influential third party in American politics. Such a failing inhibits democracy in the United States. The two dominant parties, the Grand Old Party and the Democratic Party, have a monopoly on national elections, forcing voters to choose between candidates whose views might not be in accordance with their own. The presence of a third or fourth party that has national repute would, while holding the two major parties accountable, allow Americans to choose between a wider range of candidates, allowing issues to be decided on not as a result of partisanship, but of discussion. Since 1857 there has been no American president who did not belong to either of the two major parties, a glaring example of the deficiencies presented by the Electoral College.

The Electoral College eliminates the presence of a powerful third party by the presence of the institution itself, as opposed to a parliamentary system of election. All states, excluding Nebraska and Maine, assign votes to candidates on an all-or-nothing basis. This means that if a candidate wins, for example, 51% of the vote in a state, he earns all of the state’s electoral votes, regardless of the votes of the other 49%. Such disenfranchisement of vast swathes of voters eliminates any chance of a third party candidate winning the presidency. The most glaring example in recent history occurred in the 1992 presidential elections. Ross Perot, member of the Reform Party, won almost 20% of the vote nationwide. Yet he did not win a single state in the Electoral College. If third parties do not have hope of winning national elections, they cannot garner support enough to effectively advocate their views. The Electoral College disallows views from being presented in American politics, and ensures the continuation of the inefficient two-party system. Madison advocated the presence of multiple factions in order to best preserve democracy. Unfortunately, the Electoral College compromises that.

The disenfranchisement that results from the Electoral College also undermines democracy in the United States. Huge amounts of voters are denied representation due to the winner-take-all system. Accordingly, voter participation is affected, as voters assume their votes do not matter and thus do not participate. For example, the Electoral College discourages voter participation by Democratic voters in Republican dominated Texas. As such, the views of Americans are not appropriately communicated. Additionally, it is possible under an Electoral College system for the winner of the presidential election to not have received the most votes in an election. The 2000 election, between Governor George W. Bush and Vice-President Al Gore, illustrated the failings of the Electoral College. Al Gore won the majority of the votes, yet due to the Electoral College system, Bush won the presidency. It is in the interests of democracy for the most widely supported candidate to win the presidential election. For a candidate who won the majority of the votes to lose the election is a travesty. Yet the supposedly democracy-protecting system that is the Electoral College allows such to take place.

Supporters of the Electoral College claim that the institution ensures that candidates campaign in the “boon-docks.” This, supporters say, ensures that the views of all Americans are heard and have some semblance of influence. One cannot make this claim, however, considering the absence of an influential third party. To say that due to the Electoral College system the views of all Americans are taken into account assumes that the views of all Americans are in accordance with one of the two major political parties. Such a view, illustrated by the 1992 election, is fallacious. And indeed, that the occurrence of “faithless electors” additionally compromises the view that the system ensures all Americans of a say. Faithless electors are those that cast their state’s Electoral College votes in their own interests, as opposed to the interests of the majority of the state’s voters. On 20 occasions electors have cast an electoral vote for a candidate other than the candidate they have pledged to elect. The presidential election of the United States cannot be considered democratic if it is dependent on the whims of states’ electors.

Reform of the Electoral College system is desperately needed. The best solution is to scrap the institution entirely, allowing popular vote to determine the presidency. Such a system would encourage voter participation, allow for an influential third party, and ensure that the election process is entirely democratic. Such reform, however, is hard to come by. Indeed, it is near impossible to do away with the Electoral College. A reform of the system would require a constitutional amendment. To pass such an amendment is a daunting task, especially considering that it would need the support of the smaller states that the Electoral College helps most. Additionally, the Republican and Democratic parties will be reticent to embrace measures of reform as the Electoral College ensures that their power will not be challenged.

Regardless of the difficulties inherent in reforming the dated and ineffective system, reform is imperative. Democracy is compromised in America as a result of the Electoral College system, which means that millions of Americans are not being effectively and appropriately represented in national government. The failure of the Electoral College is apparent and only elimination of the entire system will save American democracy from the partisanship and exclusiveness that exists so prevalently today.

Monday, January 08, 2007

Beyond the Coffee: The Ethics of Starbucks

Starbucks drinkers seem to prefer their latt├ęs with a double-shot of social justice. Fairtrade branded coffee has been a wildly successful seller at the global coffee giant, indicating the consumer’s desire to feel morally vindicated in overpaying for a cup of coffee. The Fairtrade label supposedly ensures that coffee farmers are not exploited by banana republics, and that the environment is preserved in the process. Unfortunately, such signalling is unreliable and in some cases, downright faulty.

The Fairtrade standards dictate that coffee traders must secure farmers a premium over the market price for their beans, meaning, essentially that Fairtrade coffee growers must be paid more for their product than what it is worth. In return, the growers must ensure that their workers are paid decent wages, and have the opportunity to unionize. In addition, growers must adhere to certain environmental standards.

An investigation, however, into whether these standards were being upheld by the Fairtrade coffee growers that supply Starbucks found unfortunate results. It was found by the Financial Times that coffee pickers working for a Fairtrade certified coffee plantation were paid under the national minimum wage. These workers labored in squalor, and were paid just $3 a day. The farm itself breached environmental regulations, as 20 acres of coffee were being grown on a national park designated area. The standards that Starbucks were obligated to uphold by labeling the coffee as Fairtrade were, essentially, thrown out the window.

Even if Fairtrade standards were upheld, critics argue, Fairtrade certification is not the most effective method of ameliorating the financial situations of poverty-ridden coffee growers and workers. Cynically speaking, Starbucks supports Fairtrade simply because of the great profits garnered from coffee advertised as ethical. Instead, CAFE (Coffee and Farmer Equity,) which aims to help coffee farmers through a mixture of technical support and microfinance loans, helps coffee farmers far more than simply paying them a higher price for their coffee.

What matters most to the coffee magnate, the largest buyer of Fairtrade coffee beans in North America, is not the well-being of the farmers they purportedly help. Look in a Starbucks chain, and what you will find is brochure upon brochure detailing to what extent Starbucks has helped poor coffee growers the world over. Yet look also at the cup of Fairtrade coffee, priced at £5, and think of Peruvian coffee pickers laboring 10 hours a day for just $3. And let Starbucks know that their double-shot of social justice seems a bit weak.

Tuesday, January 02, 2007

"Moving to Opportunity Program" a Failure

In 1994 the federal government initiated a social experiment, designed to examine the effects of different neighbourhoods on poverty. Jon E. Hilsenrath of the Wall Street Journal explains the program: “Beginning in 1994, the federal government offered a lottery for housing vouchers to families in five major cities. Families were randomly assigned to different groups. One group received vouchers to be used specifically to subsidize rents in neighborhoods where poverty was low. About 860 families eventually moved. Another group, of 1,440 families, wasn't offered vouchers and, initially at least, stayed in high-poverty neighborhoods. Researchers have since tracked and compared the fortunes of the two groups.”

The experiment, however, did not work as expected. The federal government assumed that moving poor families to affluent neighborhoods would lead them out of poverty. The empirical evidence demonstrates that the program failed: earnings of the families who moved to low-poverty areas were just 3% higher than those that stayed in poverty-afflicted locales. Furthermore, depression, crime, and school participation were found to be significantly worse among those who were moved to low-poverty neighborhoods. The reasons for such results are understandable: the new inhabitants most likely felt isolated, or harassed by police, and were unable to adjust.

The success (or in this program’s case, the lack thereof) of the program, however, is ultimately insignificant. The equity of such a program must be considered and it is clear upon examination that subsidizing the housing of low-income individuals and families compromises the competitive capitalistic society present in America. It, in effect, destroys the very incentives that drive the society that has made America the wealthiest nation in the history of mankind.

Americans are not divided by a class system, as is present in a nation such as the United Kingdom. Instead, Americans, if they are divided at all, are partitioned into different socioeconomic groups. The famed “American Dream” explains such a phenomenon: it is every Americans desire to make themselves better off financially. This “American Dream” mentality is what drives American capitalism. More even than Americans’ great propensity towards consumerism, it is the American’s desire to become more wealthy that has made America’s economy so successful. This desire towards wealth leads Americans to educate themselves, work hard, and invest. Indeed, the proof is in the proverbial pudding: the American education system is among the best in the world, America’s workers are among the most productive, and America is the world leader in global investment.

Why compromise such a system? Giving housing vouchers to the poor, so that they may live in housing complexes inhabited by middle and upper class residents clearly gives unfair advantages to those that have yet to earn them. Government must instead target, and subsequently improve, institutions that allow the poor to become wealthier. For example, the government operates educational institutions, many of which are in dire need of improvement. Instead of attempting to bandage the problem by bettering the lives of a select few poor individuals and families (and using taxpayers’ money in doing so,) the government should concentrate on bettering institutions that directly lead to less poverty. It has been shown statistically that better education, less crime, and more job opportunities lead to less poverty, less crime, and better overall well-being.

Therefore, a different voucher system should be instituted: school vouchers. Instead of using middle class families’ tax-money to give housing that they themselves could not afford to poverty-stricken families, education vouchers should be given to all families on a per-need basis, allowing children who meet the educational requirements of the schools to attend educational facilities more conducive to their progression out of poverty and into the productive workforce.

A government that meddles, especially one that meddles with the tax-money of the individuals it purportedly serves, is one that will inevitably not be successful in achieving its social objectives. It has been proven that the best solution is to allow the market mechanism to drive the economy forward, with the government providing a light helping hand to those in need, complementing the free-market rather than compromising it.