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	<title>The Freeman &#124; Ideas On Liberty &#187; infrastructure spending</title>
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	<link>http://www.thefreemanonline.org</link>
	<description>Ideas on Liberty</description>
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		<title>Government the Job Killer</title>
		<link>http://www.thefreemanonline.org/columns/give-me-a-break/government-the-job-killer/</link>
		<comments>http://www.thefreemanonline.org/columns/give-me-a-break/government-the-job-killer/#comments</comments>
		<pubDate>Wed, 04 Jan 2012 16:00:13 +0000</pubDate>
		<dc:creator>John Stossel</dc:creator>
				<category><![CDATA[Give Me a Break!]]></category>
		<category><![CDATA[big government]]></category>
		<category><![CDATA[Crédit Mobilier]]></category>
		<category><![CDATA[infrastructure spending]]></category>
		<category><![CDATA[Obama]]></category>
		<category><![CDATA[regulations]]></category>
		<category><![CDATA[subsidies]]></category>
		<category><![CDATA[transcontinental railroad]]></category>

		<guid isPermaLink="false">http://www.thefreemanonline.org/?p=9358761</guid>
		<description><![CDATA[President Obama says government will have to build the nation out of the economic trough. “We’re the country that built the intercontinental railroad,” Obama says. “So how can we now sit back and let China build the best railroads?” I guess Obama doesn’t know that the transcontinental railroad was a Solyndra-like Big Government scandal. The [...]]]></description>
			<content:encoded><![CDATA[<p>President Obama says government will have to build the nation out of the economic trough.</p>
<p>“We’re the country that built the intercontinental railroad,” Obama says. “So how can we now sit back and let China build the best railroads?”</p>
<p>I guess Obama doesn’t know that the transcontinental railroad was a Solyndra-like Big Government scandal. The railroad didn’t make economic sense at the time, so the government subsidized construction and gave the companies huge quantities of the best land on the continent. As we should expect, without market discipline—profit and loss—contractors ripped off the taxpayers. After all, if you get paid by the amount of track you lay, you’ll lay more track than necessary.</p>
<p>Crédit Mobilier, the first rail construction company, made enormous profits by overcharging for its work. To keep the subsidies flowing it made big contributions to congressmen.</p>
<p>Where have we heard that recently?</p>
<p>The transcontinental railroad lost tons of money. The government never covered its costs, and most rail lines that used the tracks went bankrupt or continued to be subsidized by taxpayers. The Union Pacific and Northern Pacific—all those rail lines we learned about in history class—milked the taxpayer and then went broke.</p>
<p>One line worked. The Great Northern never went bankrupt. It was the railroad that got no subsidies.</p>
<p>We need infrastructure, but the beauty of leaving most of these things to the private sector—without subsidies, bailouts, and other privileges—is that they would have to be justified by the profit-and-loss test. In a truly free market, when private companies make bad choices, investors lose their own money. This tends to make them careful.</p>
<p>By contrast when government loses money, it just spends more and raises your taxes, or borrows more, or inflates. Building giant government projects is no way to create jobs. When government spends on infrastructure, it takes money away from projects that consumers might think are more important. When government isn’t killing jobs by sucking money out of the private sector, it kills jobs by smothering the private sector with regulation. I talked to Peter Schiff about all this. Schiff is a good authority because he was one of the few people to warn of the housing bust. Now he’s had a run-in with the federal government over job creation.</p>
<p>Schiff, who operates a brokerage firm with 150 employees, recently complained to Congress that “regulations are running up the cost of doing business, and a lot of companies never even get started because they can’t overcome that regulatory hurdle.”</p>
<p>Schiff claims he would have hired a thousand more people but for regulations.</p>
<p>“I had a huge plan to expand. I wanted to open up a lot of offices. I had some capital to do it. I had investors lined up. My business was doing really well. But unfortunately, because of the regulations in the securities industry, I was not able to hire.”</p>
<p>People don’t appreciate the number of regulations entrepreneurs face. Schiff pays ten people just to try to figure out if his company is obeying the rules.</p>
<p>“Even my brokers . . . find out that maybe 20 percent, 30 percent of their day is involved in compliance-related activity, activity that is inhibiting their productivity. . . . All around the country, people are complying with regulations instead of producing, instead of investing and growing the economy. They’re trying to survive the regulations,” he said.</p>
<p>This is no way to create jobs or wealth. Keynesian pundits and politicians can’t understand why businesses sit on cash rather than invest and hire unemployed workers. It’s really no mystery. Government is in the way.</p>
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		<title>Scientism and the Great Power Nexus</title>
		<link>http://www.thefreemanonline.org/featured/scientism-and-the-great-power-nexus/</link>
		<comments>http://www.thefreemanonline.org/featured/scientism-and-the-great-power-nexus/#comments</comments>
		<pubDate>Wed, 30 Nov 2011 16:00:49 +0000</pubDate>
		<dc:creator>Max Borders</dc:creator>
				<category><![CDATA[Featured]]></category>
		<category><![CDATA[Arnold Kling]]></category>
		<category><![CDATA[Barack Obama]]></category>
		<category><![CDATA[CBO]]></category>
		<category><![CDATA[certainty]]></category>
		<category><![CDATA[congressional budget office]]></category>
		<category><![CDATA[economic forecasting]]></category>
		<category><![CDATA[economists]]></category>
		<category><![CDATA[Edward Lorenz]]></category>
		<category><![CDATA[Freeman Dyson]]></category>
		<category><![CDATA[heretics]]></category>
		<category><![CDATA[infrastructure spending]]></category>
		<category><![CDATA[jobs bill]]></category>
		<category><![CDATA[journalists]]></category>
		<category><![CDATA[macroeconomics]]></category>
		<category><![CDATA[Mark Zandi]]></category>
		<category><![CDATA[predictions]]></category>
		<category><![CDATA[Russ Roberts]]></category>
		<category><![CDATA[scientism]]></category>
		<category><![CDATA[skeptics]]></category>
		<category><![CDATA[William Byers]]></category>

		<guid isPermaLink="false">http://www.thefreemanonline.org/?p=9358113</guid>
		<description><![CDATA[President Obama wants to create jobs. His political life depends on it. So the President recently used the bully pulpit to propose a “jobs” bill that would include heavy spending on infrastructure. Journalists wanted to know what the bill would do. They turned to economists. These experts, armed with the most sophisticated methods available, gave [...]]]></description>
			<content:encoded><![CDATA[<p>President Obama wants to create jobs. His political life depends on it. So the President recently used the bully pulpit to propose a “jobs” bill that would include heavy spending on infrastructure. Journalists wanted to know what the bill would do. They turned to economists.</p>
<p>These experts, armed with the most sophisticated methods available, gave the journalists what they needed. In turn the journalists—armed with what they uncritically accepted as good information—returned with coffee to their keyboards and reported.</p>
<p>Witness:</p>
<blockquote><p>Mark Zandi, chief economist at Moody’s Analytics, is frequently the go-to guy for both parties when it comes to analysis of various jobs proposals. So, what did he think of President Obama’s speech last night? Here’s the report: “The plan would add 2 percentage points to GDP growth next year, add 1.9 million jobs, and cut the unemployment rate by a percentage point.” [Brad Plummer, “Ezra Klein’s Wonkblog,” <em>Washington Post</em>, September 9.]</p></blockquote>
<p>And who are the willing consumers of this information? People looking for reasons to be hopeful. People looking for certainty. Who can blame them? Times are tough.</p>
<p>But this sort of reporting is just scientism on display. I’m not alone in thinking this. Economist Russ Roberts, reacting to similar reporting in the <em>Financial Times</em>, <a href="http://tinyurl.com/5sq44ua">wrote at Cafe Hayek (September 13)</a>: “Really? That’s what they found? [The journalist] treats it like a discovery of fact. As in ‘[Alan] Blinder and Zandi weren’t sure of the distance between the earth and the sun but when they measured it, they found it was about 93,000,000 miles.’”</p>
<p>Roberts knows economists aren’t capable of auguring such things. Because when it comes to national-level prediction and forecast, economics has all the reliability of a Farmer’s Almanac. And that’s being charitable.</p>
<h2>Certainty for Sale</h2>
<p>Here’s the problem: People like Mark Zandi belong to a great power nexus that relies on scientism for its very existence. To repeat: People crave certainty. Politicians crave power. So the latter have to provide the former with at least the illusion of certainty to stay in office. But they can’t do it alone.</p>
<p>Economists—especially those who tend to get tapped by the media or by Washington elites—are the ones willing to strut around on the national stage showing their predictive plumage. Journalists, no experts themselves, report what they’re told. (And few try to spot the turkey behind all that peacocking.)</p>
<p>But as readers of this publication know, a nexus of politicians, economists, journalists, special interests, and a desperate lay public can hardly be virtuous. This industry enables peddlers of scientism to hock their wares in a world full of uncertainty. Indeed, a pseudo-certainty creates the circumstances under which great wishes can father great lies.</p>
<p>F. A. Hayek warned us about this, of course, when he said, “It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences—an attempt which in our field may lead to outright error. It is an approach which has come to be described as the “scientistic” attitude. . . .”</p>
<p>Since Hayek, a growing movement of great minds, across disciplines, warns us to clip our wax wings.</p>
<h2>Chaos Rules</h2>
<p>In 1961 Edward Lorenz discovered the “butterfly effect.” Ironically, when he figured out that tiny changes in initial conditions could mean seismic shifts in the rest of a system, he was studying weather and climate. I won’t discuss the irony here. Suffice it to say Lorenz is the one who taught us that complex systems—whether the climate, an ecosystem, or an economy—can also be chaotic systems. “I realized,” said Lorenz of his then-obscure finding, “that any physical system that behaved nonperiodically would be unpredictable.”</p>
<p>Although “chaotic” eludes strict definition, the term usually refers to a system that is sensitive to changes in initial conditions, shows order without regularity, and is immune to prediction and forecast.</p>
<p>In his still-vibrant <em>Chaos</em> (1989), James Gleick tells Lorenz’s story—including the latter’s discoveries and the implications of chaos. “Forecasts of economic growth or unemployment were put forward with an implied precision of two or three decimal places,” writes Gleick. “Governments and financial institutions paid for such predictions and acted on them, perhaps out of necessity or for want of anything better. . . . But few realized how fragile was the very process of modeling flows on computers, even when the data [were] recognizably trustworthy and the laws were purely physical, as in weather forecasting.”</p>
<p>Little has changed.</p>
<h2>Aggregates, Agents, and Ants</h2>
<p>I think the failure of macroeconomics can be boiled down to this: Macroeconomics deals primarily with aggregates, or macro-level trends. But to be truly accurate the macro level would have to be explained in terms of the micro—that is, individual agent behavior. Micro behaviors give rise to macro trends. Another way of putting this is that macro trends are dependent on micro behaviors. The trouble is, individual agents interact with—and react to—one another in diverse, complicated ways.</p>
<p>Similarly, it’s impossible to predict exactly what an ant colony will do when confronted with two picnics at equal distances from the colony. In that famous experiment we might be able to predict a single ant’s behavior if we have lots of local information about its pheromone secretion algorithms and such. But relative to each food source it would be impossible to predict the behavior of the colony as a whole. Such is life at the edge of chaos.</p>
<h2>A Blind Spot</h2>
<p>Now of course we have processors that can crunch tons of data. We have a new breed of mathematical wizards in the tradition of Paul Samuelson who can write whole tracts with as many equations as words. And we have whole new constituencies of politicians, pundits, and people ready to believe. So are we finally living in a time when macroeconomics can tell us what we need to know about unemployment in a year—as Newtonian mechanics tells us when Halley’s Comet will arrive?</p>
<p>Alas no, says mathematician William Byers. In his excellent <em>The Blind Spot</em>, Byers makes an audacious argument for humility in the sciences—both hard and human: “Human beings have a basic need for certainty. Yet since things are ultimately uncertain, we satisfy this need by creating artificial islands of certainty. We create models of reality and then insist that the models are reality. It is not that science, mathematics, and statistics do not provide useful information about the real world. The problem lies in making excessive claims for the validity of these methods and models and believing them to be absolutely certain.”</p>
<p>Interestingly, Byers also picks up on the idea of selling certainty. Whether he’s talking about the complicated financial instruments that obscured the problems leading to the financial meltdown, or the schematics for all the Keynesian fixes that followed, models are the conduits of pseudo-certainty. “The more complex the package and the more arcane the mathematics, the better,” says Byers. “What was being sold was the faith that the complex, human, world of economics and finance could be made over in the image of science, could be made objective and predictable.”</p>
<p>Byers goes on to explain that there is a kind of quantification bias at work. That is, if you can describe things in mathematics, you are in some sense speaking the language of nature. But limning the world in numbers has its limits—especially since so many of the important aspects of science are subjective. And so many aspects of nature are, well, uncertain. Numbers, argues Byers, are our attempt to create the illusion of objectivity—where objectivity is thought to be the very stuff of certainty. But “science does great damage when it turns into ideology, when it begins to worship certainty.”</p>
<h2>The (Other) Freeman</h2>
<p>Eminent physicist Freeman Dyson is no libertarian. But his call for humility in science (“<a href="http://tinyurl.com/yozuja">Heretical Thoughts about Science and Society</a>,”) extends to economics, too:</p>
<blockquote><p>The politicians and the public expect science to provide answers to the problems. Scientific experts are paid and encouraged to provide answers. The public does not have much use for a scientist who says, “Sorry, but we don’t know.” The public prefers to listen to scientists who give confident answers to questions and make confident predictions of what will happen as a result of human activities. So it happens that the experts who talk publicly about politically contentious questions tend to speak more clearly than they think. They make confident predictions about the future, and end up believing their own predictions. Their predictions become dogmas which they do not question. The public is led to believe that the fashionable scientific dogmas are true, and it may sometimes happen that they are wrong. That is why heretics who question the dogmas are needed.</p></blockquote>
<p>So if Dyson is right about the need for heretics, are those skeptical of macroeconomics heretics or “market fundamentalists”?</p>
<p>People who understand markets know they can’t do everything under the sun. Yes, markets can and do work wonders. But most truly liberal thinkers start with a particular kind of skepticism:</p>
<ul>
<li>Knowledge is dispersed, not centralized. Planning or tweaking by central authorities is a fool’s errand and results in perverse effects. (Skepticism of grand designs.)</li>
<li>Centralized power tends to corrupt people. Coalitions of interests, bureaucrats, and moralists form to transfer resources from the masses or from competitors to the pockets of coalition members. (Skepticism of power wielded for the “public good.”)</li>
<li>Value is not objective but rather subjective. This not only makes market exchanges possible, but makes it difficult for any central authority to claim it is operating in the name of a universal good. (Skepticism of claims to objective value. [See my “<a href="http://tinyurl.com/3kgpvj9">The Relentless Subjectivity of Value</a>.”])</li>
</ul>
<p>I could go on. Suffice it to say that to be a classical liberal is to be a heretic. And for heretics skepticism is a prime virtue. Yes, we tend to admire the market process. But unlike those who prostrate themselves before the golden calf of Aggregate Demand or Government as God, we are skeptics first and foremost.</p>
<h2>Soothsayers and Charlatans</h2>
<p>When it comes to heresy in economics Arnold Kling comes to mind. Writing in <em>The American</em>, <a href="http://tinyurl.com/3pzrnyq">he says</a>: “I think that if the press were aware of the intellectual history and lack of scientific standing of the models, it would cease rounding up these usual suspects. Macroeconometrics stands discredited among mainstream academic economists. Applying macroeconometric models to questions of fiscal policy is the equivalent of using pre-Copernican astronomy to launch a satellite or using bleeding to treat an infection.”</p>
<p>Kling says economists should be more honest about their limitations. He thinks the Congressional Budget Office, with all its scoring, can do little to predict the effects of various policy scenarios, such as taxing and spending: “The CBO adds value to policymakers by ‘scoring’ the impact of policies on the budget. However, the ‘scoring’ of policies in terms of GDP growth or jobs saved is of no value. The CBO should simply refuse to do it, and the consulting firms that purport to provide such estimates should be regarded as the charlatans they are.”</p>
<h2>An Uncertain Constituency</h2>
<p>Though the methods used by these macroeconomists are no more reliable than “soothsaying or entrail-reading,” they belong to that great nexus of power, which creates incentives for folks to “step right up” for more of the same elixir.</p>
<p>Sadly there is no competing power nexus. And yet people are growing increasingly suspicious of these nostra. Just as Americans have grown weary of intervention in foreign affairs, they’re growing weary of intervention in the economy, too. Call it what you like—stimulus bills, jobs plans, back-to-work schemes, or whatever—fiscal interventionism is not producing the desired effect. And people are getting wise to it. In the old days they ran the charlatans out of town.</p>
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		<title>More Government Action Needed for Job Recovery?</title>
		<link>http://www.thefreemanonline.org/columns/it-just-aint-so/more-government-action-needed-for-job-recovery/</link>
		<comments>http://www.thefreemanonline.org/columns/it-just-aint-so/more-government-action-needed-for-job-recovery/#comments</comments>
		<pubDate>Wed, 26 Oct 2011 15:00:04 +0000</pubDate>
		<dc:creator>Tyler Watts</dc:creator>
				<category><![CDATA[It Just Ain't So]]></category>
		<category><![CDATA[boom-bust cycle]]></category>
		<category><![CDATA[economic stimulus]]></category>
		<category><![CDATA[federal borrowing]]></category>
		<category><![CDATA[federal deficit]]></category>
		<category><![CDATA[Federal Reserve intervention]]></category>
		<category><![CDATA[federal spending]]></category>
		<category><![CDATA[government debt crisis]]></category>
		<category><![CDATA[government spending]]></category>
		<category><![CDATA[infrastructure spending]]></category>
		<category><![CDATA[job creation]]></category>
		<category><![CDATA[Keynesianism]]></category>
		<category><![CDATA[Paul Krugman]]></category>
		<category><![CDATA[recession]]></category>

		<guid isPermaLink="false">http://www.thefreemanonline.org/?p=9357595</guid>
		<description><![CDATA[Would it come as a shock to hear one of the best-known apologists for government intervention in the economy admitting that it hasn’t worked (so far)? This is exactly what Nobel Prize-winning economist and uber-Keynesian Paul Krugman does in a New York Times column, stating, “[W]e are not now and have never been on the [...]]]></description>
			<content:encoded><![CDATA[<p>Would it come as a shock to hear one of the best-known apologists for government intervention in the economy admitting that it hasn’t worked (so far)? This is exactly <a href="http://www.tinyurl.com/3jnruye">what Nobel Prize-winning economist and uber-Keynesian Paul Krugman does</a> in a <em>New York Times</em> column, stating, “[W]e are not now and have never been on the road to recovery” (“The Wrong Worries,” August 4).</p>
<p>That’s right: Despite record federal spending and unprecedented Federal Reserve intervention, the economy remains depressed. Beyond stating the obvious about the nonrecovery Krugman frets about the long-term implications of the stubbornly sour labor market. He also notes that consumers are “still burdened by the debt that they ran up during the housing bubble,” which, to my Hayek-schooled mind, sounds an awful lot like the drawn-out bust phase of a credit-fueled business cycle.</p>
<p>Rather than concluding that deficit spending and printing money are the wrong cures for what ails us, Krugman complains that government is not doing enough. Citing the tea-party Republicans’ “deficit obsession,” Krugman complains that government has been “pulling back [rather than] supporting the economy in its time of need.” He also cites lassitude at the Fed, claiming it’s been “intimidated by the Ron Paul types” into overreacting against potential inflation. Krugman argues the federal government should be doing much more, and its top priority should be creating jobs, not reducing the deficit.</p>
<p>While Krugman avoids the specifics of what such grandiose federal jobs programs would entail, he’s on the record supporting massive New Deal-style public-works spending, which would employ “armies of government workers.” Krugman also favors more monetary stimulus by the Fed to boost spending throughout the economy. In brief Krugman is saying we have not yet begun to fight the Keynesian battle of stimulus on either the monetary or fiscal fronts.</p>
<p>Let’s review the figures. Since September 2008 the Fed has more than tripled its balance sheet, printing roughly $2 trillion in new bank reserves, monetizing around $900 billion of U.S. government debt, and lending over $3 trillion to U.S. and foreign banks. As for federal spending—the real growth engine, in Krugman’s mind—it increased by 40 percent (29 percent in real terms) from 2007 to 2011 to a record $3.8 trillion, with half that increase coming in the recession year 2009 alone. “Stimulus” spending by itself has amounted to $666 billion so far, and federal bailouts have racked up at least $150 billion in taxpayer costs. Since 2007 gross public debt has increased from 64 to 103 percent of GDP.</p>
<p>And Krugman’s argument again? Government is not printing and spending enough. This fetish for unlimited spending juxtaposes strangely against a backdrop of perhaps the most fiscally profligate decade of American history, but I’ll give Krugman credit for boldness. However, the figures themselves, shocking as they are, mask the real question: Can more government spending actually encourage productive employment that promotes overall economic welfare?</p>
<p>Stimulus enthusiasts like Krugman are sure it can. And their first big task for the new labor armies is to go forth and fix America’s broken infrastructure. Haven’t you heard? America’s roads, bridges, sewers, airports, and more are in total disrepair—so says the infrastructure lobby. But these folks—an assortment of large construction, manufacturing, and transport companies, and their unions—have been carping about infrastructure being underfunded for the last 30 years. No surprise here: like any special-interest group, they want a continued and enlarged flow of federal funding. Hence my Public Choice nerves twitch at every mention of “crumbling infrastructure.”</p>
<p>But let’s concede that they’re right: that our infrastructure is in a sad state and more federal spending would be a wise investment. Using the infrastructure lobby’s figure of 18,000 new jobs for every $1 billion in government spending, doubling federal infrastructure spending would reduce the unemployment rate to 8.3 percent. And this ignores the matter of timing, as infrastructure projects require years of planning and regulatory hurdle-jumping before they’re “shovel-ready.” Nonetheless, even the most unrealistically generous assumptions about infrastructure spending indicate that if you want to get the economy back to full employment, it’s going to take a lot more than just public works.</p>
<p>But stepping back from labor army fantasies, there’s something absurd about using infrastructure “investment” as a jobs program. To the extent that federal funding of infrastructure is economically advisable, “good government” would require minimum expenditure (read: minimum employment), lest said public works turn into a black hole of rent-seeking—public spending to enrich private interests.</p>
<p>Infrastructure spending is not immune to the institutional inefficiencies that beset all government programs. But questioning the value and efficiency of public works is only half the matter. Call me a conservative stick in the mud, but the little question of how the government is going to pay for all this largess strikes me as relevant these days.</p>
<p>Krugman of course sees no problem here. He is on record favoring larger deficits, seeing historically low interest rates as a go-ahead for even more federal borrowing. Oddly enough, others in the economy, such as Standard &amp; Poor’s, see a quite large problem with continuing government debt growth. It’s called insolvency: If you have too much debt and you can never pay it off, bad consequences ensue. (I wonder if Krugman would advise a family with $325,000 in credit card debt on an income of $50,000 a year to go ahead and open up a new credit card account simply because it came with a 0 percent teaser rate?) While Krugman, with his stale brand of vulgar Keynesianism, appears increasingly oblivious to it, other recent events have revealed in stark fashion what our real economic problem is—excessive government debt, a direct consequence of excessive government spending.</p>
<p>The fixation on ever-bigger government stimulus programs to “fix the economy” reveals the basic fallacy with Krugman and the Keynesians. They view “the economy” and “the government” as distinct entities—as if poor little Johnny Economy would be just fine if only rich, stingy old Uncle Sam would open up his wallet and give Johnny a job! The reality is that the economy is us—the government exists within the U.S. economy, not apart from it. To “support” the economy the government must take resources from the very same economy. This can only confer a net increase in productive activity if government bureaucrats and politicians a) are truly benevolent, suppressing their representation of private interests in favor of “the general welfare” and b) know better than individual entrepreneurs throughout the country how to wisely invest scarce resources.</p>
<p>Since the days of Hume and Smith, economists have rightfully heaped skepticism on such assumptions. Politicians and bureaucrats are neither angelic nor omniscient; simply increasing their ability to print and spend is not a formula for prosperity. The fact that the United States is currently suffering the lingering effects of a complex recession and government debt crisis does not change these lessons, but confirms them. To adapt a phrase from a president who understood this (even if he couldn’t quite enact it): In our present crisis government spending is not the solution to the problem; government spending is the problem.</p>
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		<title>Growing Government Ensures “National Greatness”?</title>
		<link>http://www.thefreemanonline.org/columns/it-just-aint-so/growing-government-ensures-%e2%80%9cnational-greatness%e2%80%9d/</link>
		<comments>http://www.thefreemanonline.org/columns/it-just-aint-so/growing-government-ensures-%e2%80%9cnational-greatness%e2%80%9d/#comments</comments>
		<pubDate>Wed, 21 Sep 2011 15:00:55 +0000</pubDate>
		<dc:creator>Arthur E. Foulkes</dc:creator>
				<category><![CDATA[It Just Ain't So]]></category>
		<category><![CDATA[Albert Jay Nock]]></category>
		<category><![CDATA[Chris Edwards]]></category>
		<category><![CDATA[education]]></category>
		<category><![CDATA[expansionist government]]></category>
		<category><![CDATA[Fred Hiatt]]></category>
		<category><![CDATA[free-rider problem]]></category>
		<category><![CDATA[government schools]]></category>
		<category><![CDATA[government spending]]></category>
		<category><![CDATA[government-funded research]]></category>
		<category><![CDATA[Greece]]></category>
		<category><![CDATA[infrastructure spending]]></category>
		<category><![CDATA[investment]]></category>
		<category><![CDATA[James Tooley]]></category>
		<category><![CDATA[Peter Van Doren]]></category>
		<category><![CDATA[private research]]></category>
		<category><![CDATA[private schools]]></category>
		<category><![CDATA[public goods]]></category>
		<category><![CDATA[public schools]]></category>
		<category><![CDATA[scientific research]]></category>
		<category><![CDATA[Terence Kealy]]></category>

		<guid isPermaLink="false">http://www.thefreemanonline.org/?p=9356991</guid>
		<description><![CDATA[There is widespread belief among politicians, public officials, and pundits that if government doesn’t give us the seeds, nothing will grow. A friend of mine served on our city’s legislative council for eight years. During that time he often heard—in defense of tax-funded business incentives—“If we don’t do something, nothing will happen.” The same belief [...]]]></description>
			<content:encoded><![CDATA[<p>There is widespread belief among politicians, public officials, and pundits that if government doesn’t give us the seeds, nothing will grow.</p>
<p>A friend of mine served on our city’s legislative council for eight years. During that time he often heard—in defense of tax-funded business incentives—“If we don’t do something, nothing will happen.” The same belief holds sway at the national level. Many of our most educated people believe that unless government provides direction and pays the fare, the national train will stop or even slide backward.</p>
<p>That view undergirds<a href="http://www.tinyurl.com/3wpjbsb"> a June op-ed piece </a>by <em>Washington Post</em> opinion page editor Fred Hiatt. Discussing U.S. fiscal policy, Hiatt wrote: The “doctrinaire Republican insistence on ever-shrinking government would sap the country’s ability to invest in the research, education [and] infrastructure . . . that a great power needs” (“What’s Happened to America’s Leadership Role?” June 26).</p>
<p>In other words, without government spending, there will be a serious lack of critical investment. So serious, in fact, that America would cease to be a “great power” and force for good around the globe.</p>
<p>Is that so?</p>
<p>In the first place, if massive government spending were required for a nation to emerge as a “great power,” one wonders how America became the wealthiest nation on earth in the late 1800s, after a century of having a small and sharply limited national government.</p>
<p>That aside, let’s look at Hiatt’s assertions one at a time.</p>
<p>First, he apparently embraces the argument that scientific research is a “public good”—something anyone can enjoy whether he helped pay for it or not. This is the so-called free-rider problem. If basic research is a public good, the standard argument goes, government must pay for it.</p>
<p>But Professor Terence Kealey, an author, lecturer, and clinical biochemist at the University of Buckingham in the United Kingdom, has shown that scientific research is not a public good. Indeed, he has found that the most profitable companies do fund pure science, often quite generously and with important wealth-creating results. That’s a sign they don’t fear free riders.</p>
<p>Writing for the Cato Institute in 1997 Kealey pointed to research showing that while the benefits of pure science are often “captured” by rival firms, those firms still must employ excellent (and highly paid) scientists to take advantage of new developments. In other words, there is no free ride in R&amp;D.</p>
<p>Furthermore, government-funded research pales in comparison to private research in terms of commercially useful industrial technology, which is what makes us richer. Government-funded research, meanwhile, is largely unproductive. Kealey also noted that in countries with low tax burdens, companies use their own funds to pay for basic science. But in countries with high tax burdens, companies seek government grants, meaning “pure science” becomes purely political.</p>
<p>Kealey concluded: “Scientists may love government money and politicians may love the power its expenditure confers upon them, but society is impoverished by the transaction.”</p>
<h2>“Education” and Government</h2>
<p>Hiatt also believes quality education requires government funding. But this is mistaken as well.</p>
<p>In the first place, public schools have never been about “education” per se. They were created, and continue, to be institutions designed to “mold” children into “good citizens.” They are not selling a good or service on the open market. They are peddling a State-endorsed frame of reference.</p>
<p>Recently in my home state of Indiana, government school teachers had a public confrontation with the governor, Mitch Daniels, over tax-funded charter schools and a tax-funded voucher system. The lockstep protest among teachers (at least those speaking for their fellow teachers at the statehouse) hardly showed any real independence of thought. It did show, however, that education policy has fully entered the realm of interest-group politics.</p>
<p>The idea that only government can provide schooling is demolished by the work of James Tooley, a professor of education policy at the University of Newcastle. He found that in the poorest slums of Africa, private schools are operating successfully, providing real education at affordable prices or without charge for the poorest kids. (See Tooley’s May 2006 <em>Freeman</em> article, “<a title="How Private Schools Are Good for the Poor" href="http://www.thefreemanonline.org/featured/backing-the-wrong-horse-how-private-schools-are-good-for-the-poor/" target="_blank">Backing the Wrong Horse: How Private Schools Are Good for the Poor</a>.”)</p>
<p>Unfortunately, the United Nations entered this picture and pushed a system of universal “free” (tax-funded) schools in those same areas. This cost some private schools enrollment, at least until many parents found the government schools lacking and returned their children to the private schools. As in America, Tooley also found private schools in Africa educate children far below the cost of government schools.</p>
<h2>Infrastructure</h2>
<p>Finally, Hiatt also names infrastructure spending as an area in need of more, not less, government funding. Yet as Peter Van Doren and Chris Edwards of the Cato Institute pointed out in 2008, countries on every continent have been busy selling off inefficient State-owned assets, including airports, seaports, and even highways, to private concerns. Greece, now on the brink of bankruptcy, may provide the best example of a state that followed the road of more and more government spending on what might otherwise be private infrastructure. The result has been exceptional waste, inefficiency, and a populist and trade union stranglehold on the nation. As Greek economist John Sfakianakis wrote recently in the <em>Financial Times,</em> “The Greek political landscape is ingrained with vested interests, endemic kleptocracy and bribery. Since the days of Andreas Papendreou, an economist and father of the current prime minister, our politics has been predicated on the expansion of the public sector, patronage and borrowing.”</p>
<p>In his classic book, <em>Our Enemy, the State</em>, Albert Jay Nock wrote in 1935: Whatever “the state has accomplished outside its own field has been done poorly and expensively. . . . No complaint is more common, and none better founded, than the complaint against officialism’s inefficiency and extravagance.”</p>
<p>Many people believe only a large and growing State can ensure America’s greatness. But they misunderstand greatness. A growing government sector necessarily weakens civil society, where individuals make (and pay for) their own choices and market forces guide the use of capital to its most productive uses.</p>
<p>Far from being the key to national greatness, an ever-expanding government sector will only push more economic decisions into the political realm. It will also undermine the commitment to the individual freedom and personal responsibility that made America unique, prosperous, and great in the first place.</p>
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		<title>Who Killed the Constitution? The Fate of American Liberty from World War I to George W. Bush</title>
		<link>http://www.thefreemanonline.org/book-reviews/who-killed-the-constitution-the-fate-of-american-liberty-from-world-war-i-to-george-w-bush/</link>
		<comments>http://www.thefreemanonline.org/book-reviews/who-killed-the-constitution-the-fate-of-american-liberty-from-world-war-i-to-george-w-bush/#comments</comments>
		<pubDate>Wed, 17 Jun 2009 21:29:41 +0000</pubDate>
		<dc:creator>Jacob H. Huebert</dc:creator>
				<category><![CDATA[Book Reviews]]></category>
		<category><![CDATA[abuse of power]]></category>
		<category><![CDATA[Brown v. Board of Education]]></category>
		<category><![CDATA[commerce clause]]></category>
		<category><![CDATA[FDR]]></category>
		<category><![CDATA[george bush]]></category>
		<category><![CDATA[infrastructure spending]]></category>
		<category><![CDATA[John Yoo]]></category>
		<category><![CDATA[Lysander Spooner]]></category>
		<category><![CDATA[pork-barrel spending]]></category>
		<category><![CDATA[Roosevelt]]></category>
		<category><![CDATA[truman]]></category>
		<category><![CDATA[u.s. constitution]]></category>

		<guid isPermaLink="false">http://www.thefreemanonline.org/?p=9770</guid>
		<description><![CDATA[There have now been many conservative and libertarian books covering the demise of American liberty under the U.S. Constitution, so if you don’t think you need to read another one, I understand. Still, if that’s what you think, you’re wrong. The latest entry in the genre, Thomas Woods and Kevin Gutzman’s Who Killed the Constitution?, [...]]]></description>
			<content:encoded><![CDATA[<p>There have now been many conservative and libertarian books covering the demise of American liberty under the U.S. Constitution, so if you don’t think you need to read another one, I understand.</p>
<p>Still, if that’s what you think, you’re wrong.</p>
<p>The latest entry in the genre, Thomas Woods and Kevin Gutzman’s Who Killed the Constitution?, is something different. It’s well worth your while.</p>
<p>Unlike some other writers, Woods and Gutzman don’t just place the blame for our present situation on a handful of bad Supreme Court decisions. Instead, they show how, in the twentieth century, all three branches of the federal government have spun out of control, completely abandoning any pretense that the Constitution constrains them at all.</p>
<p>Woods and Gutzman demonstrate how the executive branch claims virtually unlimited power. President George W. Bush damaged the constitutional fabric significantly, and the authors demolish the dubious constitutional scholarship of Bush’s court intellectual, law professor John Yoo. They point out, too, that presidents never have trouble finding “scholars” like Yoo to rationalize their power grabs.</p>
<p>But the authors also show that Bush did not do much of anything new. All presidents since at least Harry Truman have assumed they could make war without a declaration from Congress. In fact, most presidents since Theodore Roosevelt have assumed, as he did, that they can do anything they want in the absence of a specific constitutional restriction on their power. (Gene Healy’s recent book, <a href="http://www.amazon.com/Cult-Presidency-Americas-Dangerous-Executive/dp/1933995157">The Cult of the Presidency</a>, reviewed in the <a href="http://www.thefreemanonline.org/book-reviews/cult-presidency-executive-power/">March <em>Freeman</em></a>, offers much additional detail on this subject.)</p>
<h2>A Litany of Abuses</h2>
<p>One chapter in particular illustrates this by exposing one of the worst, but most overlooked, government crimes in U.S. history: Franklin Roosevelt’s confiscation of everyone’s gold. This discussion also gives the authors an opportunity to offer an important bit of economic education as they explain why gold was used as money in the first place.</p>
<p>You might expect the chapter titled “Roads to Nowhere” to offer a familiar list of pork-barrel projects funded by Congress. Instead, the authors show that the federal government shouldn’t be funding roads at all, no matter where those roads go. Early presidents assumed they would need a constitutional amendment to fund “infrastructure” projects. Unfortunately, today they just assume it’s within their power and that assumption goes unchallenged.</p>
<p>Other chapters explore topics such as the Commerce Clause, which the courts have used to justify almost anything Congress does; the military draft, which violates the Constitution’s prohibition of slavery; presidential “signing statements” (written pronouncements by a president on signing a bill, often with the intent to modify the statute and especially to nullify its application to the executive branch), and President Truman’s attempt to nationalize the steel industry.</p>
<p>Two of the boldest chapters deal with what the authors call the “third rail of American jurisprudence”—Brown v. Board of Education and its aftermath. The authors show how Brown had no basis in the Constitution—and that the Supreme Court justices behind the decision knew it. Yes, the book’s authors actually say it: the Fourteenth Amendment’s text does not actually prohibit school segregation.</p>
<p>Even if that’s so, why attack this sacred cow when most everyone today opposes segregation anyway? Because if the Supreme Court can so utterly disregard the Constitution and the very idea of law in this decision to reach its own policymaking goals, then there really is no Constitution to speak of anymore. And that’s the point. As they say in their introduction, “the Constitution is dead.”</p>
<h2>Beyond Redemption</h2>
<p>Refreshingly, they don’t argue that the Constitution might be revived by electing the right people or bringing the right lawsuits. Indeed, they even suggest that our sorry result might have been inevitable—not only with this particular Constitution, but with any written constitution. After all, what do you expect will happen when you let federal officials determine the limits of the federal government’s power? That’s true regardless of who’s in office, or what they might say before being elected. Woods and Gutzman write: “People in power exercise all the power they can get, even after they have howled in the wilderness against legislating judges, imperial presidents, and the death of states’ rights.”</p>
<p>The authors also quote Lysander Spooner, who put the problem best when he wrote in the nineteenth century that the Constitution “has either authorized such a government as we have had, or has been powerless to prevent it. In either case, it is unfit to exist.”</p>
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