'The Seen' Triumphs Over 'The Unseen' Again

from The New York Times:

"Gov. Andrew M. Cuomo on Monday signed a bill to ban vaping anywhere cigarettes are already prohibited, like workplaces, restaurants and bars ...

"New York has come down fiercely on e-cigs, even as their popularity grows: they now represent a $2.5-billion industry, according to the Centers for Disease Control and Prevention, which says that while the health consequences of the product are little understood, there are still reasons for concern, including nicotine addiction ...

"But proponents of devices like e-cigs and vaporizers  ... say they are a safer alternative to cigarettes and may help with smoking cessation. Studies so far have been limited and short term, and are not conclusive on either front."

In summary: 'The Seen' triumphs over 'The Unseen' again.

The Seen: Less plumes of vapor that may or may not be harmful.

The Unseen: Those who will die from smoking cigarettes because they lacked a major reason (getting a fix where smoking is prohibited) to switch to this much healthier alternative.

Drug Bans are Unconstitutional

"The Constitution does not give the federal government authority to regulate, much less ban, drugs.

"People who doubt this should ask themselves why it was necessary to amend the Constitution to allow the federal government to criminalize drinking alcohol but not necessary to amend the Constitution to criminalize drug use."

- Ron Paul, "Will the Trump Administration Overdose on Authoritarianism?"

Do Regulations Make Americans Poorer?

From Reason.com:

Is America's accumulating pile of regulations slowing down economic growth? According to a new study from the Mercatus Center at George Mason University, the answer is yes: Thanks to regulatory drag, the U.S. economy is $4 trillion smaller than it otherwise would have been ...

The Mercatus Center's new study refines the earlier work of two economists, John Dawson of Appalachian State University and John Seater of North Carolina State. In a 2013 Journal of Economic Growth article, Dawson and Seater constructed a regulatory burden index by tracking the growth in the number of pages in the Code of Federal Regulations since 1949. That number, they note, increased sixfold from 19,335 to 134,261 in 2005. (As of 2014, it had risen to 175,268.) The authors devised a pretty standard endogenous growth theory model and then inserted their regulatory burden index to calculate how federal regulations have affected economic growth.

Their astonishing conclusion: Annual output in 2005 was '28 percent of what it would have been had regulation remained at its 1949 level.' If not for the growth in the regulatory burden, gross domestic product would have been $53.9 trillion in 2011 instead of $15.1 trillion—a 2 percent annual reduction in economic growth cumulated over 56 years. Americans are significantly poorer due to federal regulations, without which 2011 U.S. per capita income would have been almost four times higher, at $168,000 instead of $48,000.

I have no idea if these numbers are accurate or if the study's conclusions are correct. Indeed, I see some potential flaws in the methodology I would want to investigate. However, this sort of thing needs to be calculated and considered.

It's easy to say regulations are necessary because without them, there would be much harm to citizens by greedy capitalists. (I agree.) But it's much harder to understand that regulations aren't cost-free. At some point -- who knows exactly where or when -- we are getting too much bad for too little good.

This is what we Libertarians call "the seen vs. the unseen." It's easy to see the smokestack that was made to stop smoking. It's not easy to see the town slowly descending into poverty.

The Free Market is the Harshest Regulator

From Ron Paul Liberty Report:

The free market is the harshest regulator on the planet. It shows no mercy to businesses that fail to provide consumers what they desire. Man-made government pretends to regulate, while lining the pockets of itself and its closest friends.

The free market doesn't care if consumers like Coca-Cola or Dom Perignon. It doesn't care if people like The Rock or Pavoratti. Whatever consumers want with great intensity, the free market will provide.

If asked "How do we prevent exploitation by the rich & powerful?" Most would say, "government regulation." But as the quote above points out:

1. The government is run by the rich & powerful
2. The free market has greater potential to prevent exploitation

Why Rationing Is Irrational

In the fall of 2012, my area of the country was hit with Hurricane Sandy, "the deadliest and most destructive hurricane of the 2012 Atlantic hurricane season, and the second-costliest hurricane in United States history," according to Wikipedia.

One result was a gas shortage, which predictably led to gas rationing to prevent "price gouging." Suddenly, we were all paying careful attention to our license plates since the rationing scheme in NJ had the last digit on a license plate determining which day you could purchase gas. An odd number meant you could buy on an odd day, and an even number meant you could buy on an even day.

As a thinking libertarian, I knew this scheme -- and rationing in general -- was a mistake. I knew "price gouging" was just a political/media term used to stir passions in defense of socialist policies. But when I went to make my case to my friend Bill, I got stuck.

It was easy to argue that a free market would shorten the crisis. Higher prices would create a big incentive for anyone with access to gasoline to invent new ways to meet demand. It would also create a more important disincentive to drive, which would help resolve the crisis faster.

It was equally easy to argue that rationing is indiscriminate. I invoked images of rich stock brokers in SUVs and their soccer-mom wives in mini-vans clogging up gas lanes ahead of doctors and nurses. Everyone just has to get somewhere "important" when gas is guaranteed to remain cheap.

What was harder to argue is the impact of high gas prices on the working class and the poor. Bill invoked images of only my spoiled rich stock brokers and soccer moms being able to afford gas. When I mentioned alternate ways to get to work, such as public transit and car pooling (which the government wants to encourage anyway for environmental reasons), he pointed out that the proper infrastructure for such methods does not exist in our suburbs. Driving is the only real option to get to work where we live. Gas, then, should be considered essential for survival, and it's the government's job to provide it at affordable prices during short-term emergencies, he argued. (We both agreed that, longer term, such policies were a bad idea. Bill is a capitalist after all.)

After further thought, my solution was that the government should turn certain gas stations into emergency refueling posts for these situations, just like there are emergency shelters for floods and tornadoes. This would allow the efficient free market to work -- gas prices could rise, creating proper incentives and disincentives -- but also allow ordinary people to get gas at affordable prices. People could choose to exchange time (waiting in long lines at the "free" government pumps) for money (short lines at the high-price pumps). This didn't solve the social justice/emotional aspects of the matter, but it solved the practical issues we were debating.

And yet ... I wasn't 100% satisfied with that resolution. I felt like I was missing something important, perhaps a better "slam dunk" argument against rationing. I searched the Internet, but I did not find what I was looking for, so I eventually gave up. Every time I saw an article about the topic, though, I read it eagerly in the hope that someone had thought of a better argument.

Recently, this led me to purchase an entire book just because a blog I read (Farnham Street) suggested it might have the answer I sought. I was not disappointed. The book is Economics Without Illusions: Debunking the Myths of Modern Capitalism by Joseph Heath. Right there in chapter seven is a critique of the "just price fallacy," which includes a thorough debunking of the gas rationing idea. Here are some excerpts that reveal what I had been missing.

Forget about gas prices and suburban commuters—look at the homeless, unable to afford shelter for the night; pensioners on fixed incomes, forced to eat cat food for dinner; single parents threatened by the cold, unable to pay their electricity bill. How can a decent society deny people these essential goods simply because “supply and demand” dictate that the price should be x instead of y? And how can it be right for companies to jack up prices at the first sign of scarcity, thereby imposing the greatest suffering upon those with the least ability to pay?

Good point, Mr. Heath. My fixation on the gas crisis caused me to overlook all of the other price inequities that exist all around us. Why is gas for our cars more important that electricity or proper nutrition? Is someone not being able to get to work (quickly) in the short term more important than freezing or malnutrition in the long term? It's the inconsistency of the seen versus the unseen to think socialism is necessary in the one case but not the other cases.

There are, however, two importantly different ways of looking at the problem. If some people cannot afford food and shelter, the problem could be that these things are too expensive, or it could be that some people don’t have enough money. Similarly, there are two ways of solving the problem: the first by changing the prices, the second by supplementing people’s income. Yet for some reason, people have a tendency to overlook the second option.

That's it! That's what I missed: the second option. Stop messing with prices since we capitalists know prices are the most efficient way to allocate scarce resources. Instead, supplement the income of those who can't afford the increased prices. For instance, give them government gas cards that expire when the crisis does. That's much more practical and efficient than designating and running emergency refueling posts.

Heath puts the cherry on top with a great quote from the socialist economist Abba Lerner. (Apparently there are "economically sophisticated socialists." Who knew?) Lerner concluded that "the solution of poverty lay not with the manipulation of prices but with the distribution of money income." Or as Heath puts it: "[T]he problem with the poor is not the prices they have to pay, but that they have too little money."

Sound too simple? Well, Heath invites us to do the math to show just how perverse rationing actually is. He uses the example of an electricity shortage in his native land of Canada, and the subsequent controlling of rates (rationing) the government instituted to address the problem.

Now think for a moment about what sort of sums are involved. About half of the typical electricity bill represents transmission cost, which would be unaffected by an increase in rates. Thus even a 30% increase in prices would raise the average poor family’s bill by only $100 a year, assuming no change in behavior. Since a “quintile” in Canada constitutes about 2.5 million households, the practice of keeping electricity prices low is therefore delivering a benefit worth just under $250 million to this low-income group.

Yet in order to achieve this relatively small subsidy to low-income households, the government is giving everyone in the society cheap electricity. It’s difficult to imagine a more catastrophically inefficient social policy. Not only does it lead to widespread over-consumption, with disastrous environmental consequences, but the whole policy is extremely regressive with respect to income. 

Of course, poor people spend a greater percentage of their income on electricity, but even then the differences are not as great as one might think. The middle-income quintile spends an average of $1,117 per year (2.4% of income), while the upper quintile spends $1,522 per year (1.1% of income). This means that the $250 million annual gift being bestowed upon the poor is coupled with a $408 million gift to the middle class and a $556 million gift to the richest 20% of the population. Needless to say, a welfare program that required giving $2 to a rich person for every $1 directed to a poor person would hardly be regarded as progressive (emphasis mine).

That's exactly the sort of slam dunk I needed! It turns out that in both scenarios (price "gouging" and price fixing), those rich stock brokers and soccer moms will benefit unfairly. Beyond what is most efficient as a method of resolving the crisis (e.g. a free market with government gas cards), the best solution would also address the social justice aspect of the situation. That's what's really driving the public outrage, media coverage and political pandering when prices spike. But Heath has shown rationing is not that solution. It just benefits the rich in a less obvious way. Whether you're a capitalist or a socialist, rationing is irrational.

Oh, and here's a parting shot:

In 2005, households in the lower-income quintile of the population in Canada spent an average of $663 per year, or 3% of their income, on electricity. They also spent an average of $344 per year on cable or satellite television services, and an additional $165 on home entertainment expenses such as audio and video equipment, DVD players, camcorders, and video rental. This doesn’t mean that they’re living the high life, but it does mean that there is some discretionary use of electricity going on, even in poorer households.

I argued this point during the Sandy crisis, too, having observed how the incredible luxuries of America life (e.g. cable TV) have somehow become necessities of life in our way of thinking. But I had to admit that argument had no chance of persuading anyone. I'm not a politician for a reason.

Why I No Longer Vote

I used to care about voting. My son was born on Election Day in 2008, and I actually left the hospital to vote against Candidate Obama. Why? Well, I never fully thought it through.

I did think about the impact of my vote, of course. Many thinking people do. Most I know joke about how in their state (New York or New Jersey), their vote is irrelevant. My best friend likes to joke he is voting to cancel out his mother-in-law's vote. (They are diametrically opposed when it comes to politics). But I didn't think past the joke until I watched an amusing PBS video featuring Gordon Tullock. This is the video that changed me:

So why did I vote for so long? I remember the editor-in-chief at my first job used to badger us about voting. She was a liberal and I was a conservative then, so it was fun for me to listen to her advice and then vote for the guy she hated. And there, in those last two sentences, are the main reasons I voted: feeling good and not feeling bad. It was emotional, and largely subconscious. I voted out of guilt because I didn't want to be the kind of deadbeat my editor derided. I voted for pleasure because it felt righteous to support my side and take a stand against the other side. (Even if their guy won, I could say snarky things like, "He's not my president.") Sometimes it also felt good to be part of a great democratic process that others would literally die to have in their miserable countries. Etc.

After I converted to libertarianism, though, voting became much less attractive. (As P.J. O'Rourke put it: "Don't vote: It just encourages the bastards.") I realized the above is all brainwashing, that I'd fallen victim to skillful mind manipulators. After that, all I was left with was the weak guilt my editor had tried to instill in me. It dissipated quickly.

Now I call people out on this issue. I ask them why they vote, and I make them give me a thoughtful answer. Some have enough self-awareness to immediately identify emotional reasons. Good for them: It took me longer to get there. Most, though, cite all the usual strident nonsense. They say thing like, "Well, if you're not part of the solution, you're part of the problem." (Groan. Eye roll. End of conversation.) Or, "What if everyone followed your example?" (I tell them that I wish I were so influential). Lately, someone even tried a thought experiment where it was 2000, I lived in Palm Beach County, Florida, and the Bush v. Gore thing came down to my group's hanging chads.

For those folks, I recommend reading this 2004 Steven Landsburg article from Slate. Sub-headline: "It makes more sense to play the lottery." Well put, Mr. Landsburg. (I'll explain why I don't play the lottery another day.)

Before We Debate: Government Action

Want to debate about whether the government should take action in a certain circumstance? First, we have to agree about a few things ...

Imagine we're discussing a court case that's in the news, and a debate arises. There is no sense continuing the debate if I believe a person is innocent until proven guilty and you believe a person is guilty until proven innocent. We'd have to start with a shared understanding about the "burden of proof" -- is it on the prosecution or the defense? -- else my arguments would seem insufficient to you and vice-versa. Agreed?

In the same way, we must agree about 'burden of proof' in the case of the individual vs. the collective before we can have a productive debate about government action. I believe that the rights of the individual take precedence over the will of the collective. Therefore, I believe the burden of proof is on the collective to show any abridgment of individual rights is necessary before it can act. Conversely, an individual does not need to show that exercising his or her individual rights is necessary. He or she is presumed free to act. Do you agree with this in principle?

If yes, what standard shall we establish for the collective to meet its burden? One option is majority rule. The problem is that this creates an immediate contradiction. It essentially says that the rights of the individual take precedence over the will of the collective unless the will of the collective is to override the rights of the individual. Majority rule can also lead to oppression and worse. It led to Jim Crow laws, for instance, and is ultimately responsible for the Holocaust.

Another option, the one libertarians prefer, is the idea of "involuntary exchange." When the freedom of one individual interferes with the freedom of another individual to a sufficient degree, the collective has met its burden and can act. The debate, then, should center on this question of sufficiency.

For instance, if we were debating Jim Crow laws we might ask, Does the right of a black person to choose his or her seat on a bus sufficiently interfere with the rights of other people on that bus? If the answer is no, the collective has failed to meet its burden of proof and does not have the justification to act.

An equally important follow-up to the original question is: Should the collective act? This question entertains the often-overlooked truth that action, even that done with the best of intentions, can result in worse outcomes than inaction. Not all change is for the better, and sometimes less is also more.

For instance, an original thinker named Hans Monderman discovered something counter-intuitive about traffic engineering that later came to be called "shared space." Monderman was interested in pedestrian safety at busy intersections. Most people would assume the best way to tackle this problem was with more regulation and road signs. Clearly, the collective has the justification to act in this way: Getting hit by someone else's car is the worst kind of involuntary exchange. But Monderman wondered what would happen if the collective chose inaction. What if less -- or even no -- regulation or road signs was the answer? It turns out that it just might be.

Moderman's design approach minimized "demarcations between vehicle traffic and pedestrians, often by removing features such as kerbs, road surface markings, traffic signs, and regulations," according to Wikipedia. He discovered that "traffic efficiency and safety improved when the street and surrounding public space was redesigned to encourage each person to negotiate their movement directly with others."

Applying these insights to our debate, then, we should begin by asking:

1. Can the collective act in this particular case? (Is there a sufficient level of involuntary exchange to justify action?)

2. Should the collective act in this particular case? (How do we know that action won't have worse consequences than action?)

A Thought Experiment on Taxes

Raising taxes is not an effective means of achieving desired social outcomes. Here's a thought experiment that will demonstrate why ...

Imagine that every year, you have to take the taxes you owe to the tax office and pay them in person. In fact, you have to bring them in the form of gold coins. The amount of coins you have to bring is based on a percentage of your income, like it is now. When you arrive, you're given a cup for your coins and sent into a room with an IRS agent and a giant scale.

On the left side of the scale are three jars labeled "War," "Debt" and "Handouts." That's the side of bad government spending.

On the right side of the scale are three additional jars. These are labeled "Education," "Aid" and "Infrastructure." That's the side of good government spending.

QUESTIONS

It has a been a good year, and you have 100 gold coins to distribute. How would you distribute them?

Let me guess: The right side would hit the table with a clunk.

No such luck, though. You don't get to distribute to the coins as you see fit. Rewind. You have 100 gold coins to distribute. The IRS agent hands you instructions for how to distribute your coins based on how Congress has voted your taxes should be distributed. By law, you are required to follow the instructions on that piece of paper.

Now how are your 100 coins distributed?

Result: The left side would hit the table with a clunk.

Would it matter if, because of an increase in your taxes, you had a cup of 200 gold coins?

The good jars would get more, but the bad jars would get a lot more.
Result: The left side would still hit the table with a clunk.

Would it matter if, because of a decrease in taxes, you have a cup of only 50 coins?

The good jars would get less, but the bad jars would also get less.
Result: The left side would still hit the table with a clunk.

But two positives would also result: a) the money spent on things like war and handouts would be reduced, b) you'd get to keep more of your money to spend as you saw fit.

Would it matter if you were a billionaire and had to bring a Brinks truck loaded with cups of coins with you to the tax office?

The good jars would get fuller, but the bad jars would be overflowing. The left side would still hit the table with a very loud clunk.

Would it matter if you were a billionaire but only had to pay 100 coins because of special tax breaks for billionaires?

Not in terms of tipping the scale. But the two positives above would apply in an amplified way.

Reality Check: Do billionaires bring Brinks trucks or cups with same amount of coins as ordinary people?

Do you have any doubt this scale metaphor reflects the reality of the situation? If so, why? If not ...

What's the best solution to this problem?

Not Why. Why Not?

In the recent debate over gun control, a question has emerged that goes something like this: "Why does anyone need an assault rifle?"

It's a tough question for people who are pro-gun to answer. "Because of the Second Amendment" doesn't quite do it because then the conversation devolves into talk of muskets and Founder intent. There is obviously no rational argument for using assault rifles to hunt, or to protect one's home. And talk of civil unrest or government abuse just makes you sound like a militia nut.

The anti-gun people would seem to have the upper hand ... but only if we accept the question. Thinking Americans shouldn't. The question isn't "why" -- it's "why not?"

Here's what I mean: The premise of our country is that individuals have a right to be free. Some freedoms need to be restricted for the common good, of course, but the burden is always on those who want to do the restricting.  THEY have to make the case. Not the other way around.

Other countries -- authoritarian regimes, for example -- start from the opposite premise. Individuals have no rights except those expressly granted by the divine ruler or the divine collective. But not here. People forget this when they ask, or fall for, questions like the above.

The correct question for Americans to debate would be, "Does the government have a compelling case to restrict the freedom to own assault rifles?" Who decides, of course, is clearly spelled out in this case -- in the amendment process of the Constitution. This is where the Second Amendment argument can be made. The fact is, the freedom to bear arms was considered so important, it is one of only a few freedoms expressly mentioned in our Constitution.  This means the burden is squarely on the anti-gun people when they want to limit this right. They have to convince enough legislators to amend the Constitution.

People will argue that point, of course. Common sense restrictions and all that. But those arguments don't usually stand up to rigorous analysis because there is nothing "common sense" about the limitations proposed. Pistol grip styles and magazine capacities are just two recent examples.  As if a magazine with 7 rounds instead of 10 rounds would have prevented the slayings that sparked this debate.

The absurdity is further illustrated when you switch out the constitutional right. Suppose, for example, politicians were suggesting similar restrictions to the First Amendment. You can assemble, but you can't use a megaphone with too much volume. You can assemble, but you can't have more than X people because high-volume crowds have a greater tendency to riot. You can print a newspaper, but you are limited to a certain number of pages or issues. And so on.

At the very least, it seems inconsistent to enforce the First Amendment to the point of allowing the most disgusting forms of pornography to be published and the most religiously offensive "art" to be displayed, but allow the Second Amendment to be narrowed down to the controlling of the kind of butt stock a rifle owner can use (true story).

Another way of looking at the problem with the question atop this post is to zero in on the word "need." "Why does anyone NEED an assault rifle?" OK, you got me. No one really needs an assault rifle. But so what? Let me give you a short list of other things people don't NEED:

• Tobacco in any form
• Alcohol in any form
• Junk food of any kind
• Most trucks, SUVs and fast cars

I purposefully avoided zero-harm items like giant flat-screen TVs because it's too easy to attack those examples with arguments like, "Flat screens don't kill people!" Tobacco, alcohol, junk food and vehicles do kill people. But this is missing the point.

We are talking about needs, and as Americans we have rights that transcend needs. In other words, we don't have to need something to be free to have it. That's the beauty of our country. We have the right to pursue happiness, which usually has nothing to do with needs. It's usually about wants. And if I want to own and shoot an assault rifle, why shouldn't I?

Why not? That's the question the anti-gun people need to answer. And they need to make a very persuasive case. The burden is on them.