Below is a comment received from reader Ictator61 on the recent post from Reason on Milton Friedman. I have added my comments in blue. Towards the end, a series of [...]
Friedman
In the short span of a century and a half, the US went from a government famously described by Abraham Lincoln as “of the people, by the people, for the people” to one “of the Elites, by the Elites, for the Elites.”
Albert J. Nock
Albert J. Nock referenced Lincoln’s phrase as “probably the most effective single stroke of propaganda ever made in behalf of republican State prestige.” Perhaps, but when Lincoln said it our country had at least some resemblance to Lincoln’s description.
This country, founded on personal liberty, freedom and limited government, has morphed into a massive Social Welfare State rivaling the paragons of Socialism in Europe. The concept of government serving the people no longer applies. The people now serve their government and its cronies.
The Founding Fathers would not recognize what has transpired in this country. Their creation and ideals have been savagely distorted if not destroyed forever. In its place stands the detested evil that results from increasingly unbridled power. The image of Leviathan ruthlessly ruling over its citizens is faintly visible. Each violation of The Constitution and The Rule of Law only strengthens the growing monster.
Two Views of Government
Two diametrically opposed views of government played a role in our metamorphosis:
- Government as Passive, Unbiased Referee
- Government as Active Player
1. Government as Passive, Unbiased Referee
The concept of government as an honest broker used to be acceptable to many (although probably not the Founding Fathers). Fifty or sixty years ago this view was reflected in statements like: “If you can’t trust your government, who can you trust?” Today, few make such statements outside of comedy club routines.
Even the libertarian Milton Friedman believed, for a time, that government could be an unbiased referee. When asked late in life about his biggest mistake, he replied that some early policy recommendations he made were based on this erroneous assumption.
If government was honest and unbiased, it would be reasonable to grant it a larger role than if it were not. However, even this unrealistic assumption cannot justify the excessive government of today.
2. Government as Active Player
James Buchanan
Public Choice Theorists, like Nobel Laureate James Buchanan and Gordon Tullock, provided an alternative view of government that was consistent with that of the Founders. They saw government as just another institution in the sense that it is populated by self-interested individuals. As such, it would be an active player in the economy and society to the extent possible.
So long as these individuals could benefit from outcomes, government could not be an honest broker. In their view, those who “serve” are no different from the “greedy” businessman who politicians regularly condemn.
This view of human nature drove the Founders to develop The Constitution, The Bill of Rights and the separation of powers in an attempt to contain misbehavior by government. Public Choice theory is merely a modern intellectual affirmation of what our educated Founders knew two and one-half centuries ago.
Government is necessarily run by self-interested individuals until we discover a way to breed and elect angels. Friedrich Hayek, among others, argued that a biased process attracts and enables the “worst” to succeed in government. (See “The Road to Serfdom” for his reasoning).
Passive and unbiased government is not impossible, merely highly improbable. Noble phrases like “public service” are should be seen as modern day examples of what Nock saw as self-serving propaganda.
What Does This Mean?
Public Choice theorists deal with the difficulties of providing the proper incentives and disincentives to prevent self interest from exploiting positions in government. Charles R. Anderson recently used a taxonomy Continue reading »
A short clip that the Occupy Wall Street (and elsewhere) Protesters should watch. Or perhaps not. Their positions have nothing to do with rationality or logic. Even Phil Donahue seems incapable of understanding.
Solar energy may or may not be a solution to the energy problem eventually. It clearly is not economic today. It is nothing more than payoffs to political cronies, photo-ops for politicians and the last gasp of Obama’s central planning ideology. In short, it is a waste of money.
Solyndra has blown up, costing taxpayers over $500 million. It also raises serious questions of government corruption. Likely more damaging to taxpayers and the Administration are subsequent solar investments. Even if they all worked as projected (including Solyndra) they would have created only 283 permanent jobs. According to Bruce McQuain those jobs would have cost $23 million each:
A failed Solyndra and 9 companies the private sector won’t invest in which may create 283 jobs. May. Government estimates about programs it supports have never been known to be overly optimistic, have they?
$23 million a pop for 283 jobs that may or may not materialize.
Solyndra is only the first failure. There is no way that solar energy can compete with existing energy sources. Taxpayers are subsidizing failure for environmental zealots and politicians seeking votes.
Unfortunately, most of the failures will occur past the next election. Recall that Solyndra was doing “just fine” until bankruptcy was rather suddenly made public. Future costs associated with solar failures will make Solyndra look like small change, both monetarily and likely ethically.
As I write this, the following breaking news appears regarding another green energy boondoggle: ‘Green jobs’ farm in Colorado sheds jobs after receiving $200M in stimulus funds.
It is probably too much to hope for prosecutions in corrupt Washington for this cronyism and stupidity. The best that can be achieved is a cessation of this blatant political favoritism and waste of taxpayer money.
The following Chip Bok cartoon captures the utter ineptness and duplicity of this Administration and the solar energy boondoggle:
Mr. Bok’s cartoon reflects how Keynesian economics once (still?) believed that digging holes and then re-filling them stimulated the economy. Using that logic, solar energy could be looked at not as an energy solution but a Keynesian stimulus. This rationalization as much sense as the other nonsense that passes for Keynesian economics. Two of my favorites:
- Nancy Pelosi and other Democrats stated that extending unemployment benefits was economic stimulus
- Milton Friedman in China, viewing hundreds of workers with shovels digging a ditch, asked the State Official why the near-by steam shovels were not used. The answer was because hand shovels enabled the creation of more jobs. Friedman inquired: “Why not use spoons?”
Solar energy and Keynesian economics are aspects of the Alice in Wonderland world that government attempts to pass off as reality.
There was no joy in Mudville Jackson Hole this year. The central bankers of the world have mucked things up so badly that not even their fancy words and Wizard of Oz pronouncements were enough to penetrate the gloom.
The US economy and Ben Bernanke’s optimism have deteriorated from the prior year. Fed policies have not worked, and there is increasing recognition they are the wrong tool for the job. Economic results, body language and confidence among world leaders has noticeably deteriorated.
Econophile provides an analysis of the Jackson Hole dog and pony show. He describes the outcome:
We are witnessing the failure of contemporary economics on a grand scale. These policies are being played out on the worldwide stage much to the same result. Europe is experiencing a culmination of years of failed policies.
What concerns me greatly is the next step. It doesn’t look likely that the Fed will embrace Austrian theory economics.
Instead they will try the same things again. ZIRP has been continued to 2013. Perhaps the Fed will reduce interest on excess reserves, or not pay interest at all, in order to encourage banks to lend. Perhaps it will pursue “Operation New Twist” and roll its portfolio over into even longer term maturities. Perhaps it will reduce bank reserve requirements temporarily (assuming it could get by Dodd-Frank and Basel III).
Then there is QE3, more monetary stimulus through direct injections of cash into the financial markets.
Despite Mr. Bernanke’s promise to the late Milton Friedman, it (Depression) is happening again. Bernanke is out of tools, resources and apparently hope. That he was using the wrong policies is the cause of his dispirit, although he still does not recognize that. For Ben, the situation and its timing could not be worse:
What this means is that during the presidential election cycle, politically sensitive economic indicators such as unemployment will remain negative. This will result in a lot of pressure on the Fed and Dr. Bernanke to “do something.” Like all former Fed Chairmen, it will be hard for Dr. Bernanke to resist these calls from politicians. He will earn his moniker as “Helicopter Ben” and unleash more quantitative easing, a dangerous and regressive policy. Like most drugs it becomes less effective over time. It will further destroy real capital and delay recovery.
I concur completely with the above paragraph, although would add one more important consideration to the list. Even if economic conditions were improving, this paragraph would still be true. The US will be unable to fund its deficits without the Fed printing money. Until spending is reduced, QE is with us regardless of the state of the economy.
 Never Trust an Economist Who Associates With GovernmentThe battle for supremacy in economic theory continues. Monetarists, Keynesians and Austrians all claim their systems are the proper ones. The argument is worth having, but not in the fashion [...] |
 Reason’s Tribute to Milton FriedmanReason.tv: Happy 99th Birthday, Milton Friedman! A Tribute to the Late, Great Economist by Reason TV Popout There’s no way to appreciate fully the contributions of Nobel Prize-winning economist Milton Friedman [...] |
 Sell the Silverware and the Mink CoatLet’s get serious about downsizing government. How about doing what families in desperate shape do? They raise cash by selling off assets. The Federal government is not your average poor [...] |
|
 The Problems With SchoolsMilton Friedman discusses the problems of education in this video made more than thirty years ago. Free To Choose (1980) Vol. 6 – What’s Wrong With Our Schools from Free [...] |
 Competing Visions of GovernmentIn the simplest of terms, C. Edmund Wright presents the two competing views of government at work today in America. It’s about the entire notion of the role of government [...] |
 Chicago vs. Austrian EconomicsFor free-market layman economists, the differences between the Chicago School and the Austrian School are often blurred. Both often come to the same policy conclusions, but from very different perspectives. [...] |
 Updating “Free To Choose”Milton Friedman’s TV series “Free to Choose” aired on PBS circa 1980. It probably did more good than any book or video before or since bringing free market principles to [...] |
Commentary on Milton Friedman and An Invite for Responses
Wisdom: Friedman on Fed
Milton Friedman on Limited Government
47% of Households Pay No Income Tax
Keynes is The One
Bernanke's Pickle
Recent Comments