LearnLiberty Videos

The Expulsion of the Acadians

braum.katz — Sat, 26 May 2012 15:30:32 +0000

The sad history of state-sponsored ethnic cleansing in North America begins with the story of the 18^th century expulsion of the Acadians by the British. Professor Amy Sturgis explains that the Acadians were peaceful French colonists who had prospered in Nova Scotia. In 1755, the British forcibly uprooted the Acadians from their land and scattered them across North America. In the upheaval, approximately 55 percent of the 18,000 Acadians lost their lives to drowning and disease, and many families were torn apart.

The tradition of state-sponsored theft, forced migration, and cultural destruction that started with the expulsion of the Acadians is a tragic part of American history. Over the course of their history, the Acadians had developed a culture based not on conflict and conquest, but on mutual respect, accommodation, and interaction among different peoples. It was a culture based on trade and not raid, and it stood in stark contrast to the destructive and exploitive British Empire.

How might U.S. history have been different if this first ethnic cleansing had never occurred? How might America be different today if the Acadians’ property and rights had been respected? Might the Acadian peaceful, non-coercive way of life have influenced the United States for the better?

Saving Endangered Species

tstrong — Fri, 18 May 2012 15:44:50 +0000

Have you ever had an idea that you thought was good, but turned out bad? It happens to everyone. Sometimes when we make a plan, we can’t predict what all the consequences will be. These unseen effects are known by economists as “unintended consequences.”

Don Boudreaux examines a major piece of legislation - the Endangered Species Act - and argues that we should judge it based on its results, not its intentions. The intention of the law is to preserve endangered species, a seemingly noble cause. As it turns out, the law severely restricts what property owners can do with land inhabited by endangered species. This in turn reduces the value of that land. As a result, the act gives landowners good reasons to quietly kill protected species they encounter on their land. This phenomenon is known as “shoot, shovel, and shut up.”

Giving landowners the incentive to kill animals clearly wasn’t the goal of the Endangered Species Act. It is an unintended, unforeseen consequence. Boudreaux encourages us to judge a policy not by its stated goals, but by its actual effects.

Transcript

Saving Endangered Species

When I teach Econ 101 I tell my students on the first day “intentions are not results.” The intentions behind the policy will not necessarily determine what the results of that policy are. Econ was taught a lot about unintended consequences and it is important to understand what we mean.

One example of the unintended consequence that is exactly the opposite of the intention comes from the endangered species act. The intention of that act is to enable endangered species to flourish. When consequence in many cases is to cause the endangered species to be killed off more quickly than otherwise, if you are a land owner and you find an endangered species on your property you know that the environmental protection agency will as a result of that finding impose restrictions on your land one consequence of those restrictions is it reduces the value of your land.

What you can do with it, the price you can sell it for. So what a lot land owners do when they find what they think to be endangered species on their property is they kill the species and they shut up about its – shovel and shut up. Kill the species shovel to bury and say nothing about it. Now clearly that is not the goal of the endangered species act.

The take home lesson from this is that you judge a policy not by its stated goals; it is easy to state good goals. You judge a policy by the incentives that the policy will likely give to the people that it affects whether or not you believe in big government, tiny government, or medium size governments. It is difficult in many cases to trace out how the incentives will have real world effects, but that difficulty does not excuse us from the task of pursuing it. We can’t just simply say, “Oh, the intentions of the policy makers are good therefore we can be assured that the results will be good.” That is cheating you just can’t do that. That is very bad public policy.

Schools of Thought in Classical Liberalism, Part 7: Conclusion: What's Your View?

tstrong — Wed, 09 May 2012 15:34:00 +0000

In his conclusion to the series “Schools of Thought in Classical Liberalism,” Dr. Nigel Ashford asks: What do you think the role of government should be? How do you decide what government should or shouldn’t do? What’s your philosophy?

What do you believe?

Anarchy: there is no role for government.
Minimal government, or minarchy: government should provide an army, police, and courts, but nothing else.
Social market economy: government has a responsibility for helping the poorest in society and providing a basic welfare state.
Non–classical liberal views: it’s the role of the government to promote a virtuous society (conservatism), to create equality (leftist), to own or control all aspects of the economy (socialism), or to control every aspect of life (totalitarianism, communism, and fascism).

Transcript

Schools of Thought in Classical Liberalism, Part 7: Conclusion: What's Your View?

So what’s your view about what the role of government should be? What’s your criteria for deciding what you think government should do? What’s your methodology? What’s your philosophy for making that broad goal?

Why do you think government should be limited? Do you think it should be limited because of the consequences of government action? Do you think it should be limited because government infringes on your natural rights or our natural rights?

And finally, what do you think the role of government should be? Do you think there’s no role for government? Are you an anarchist? Do you believe the role of government should be minimal—it should only provide the army, the police, and the courts but nothing else? Do you believe that there are certain public goods like defense, like dealing with externalities such as the environment? Do you believe that there’s a social-market economy, that there is a responsibility for dealing with the poorest within society? We need some sort of basic welfare state such as making sure every child can go to school?

Or do you believe in nonclassical liberal views about the role of the state? Is it the job of the state to promote a virtuous society, as some conservatives would argue? Do you think it’s the job of the state to create equality, as many people would argue on the left, having an egalitarian state?

Are you a socialist? Do you believe that the government should either own or, if not necessarily own, control all aspects of the economy? Or are you—I hope not—a totalitarian, a fascist, or a communist who believes that the government should control every aspect of life? So the question is, what’s your view about the role of government?

Learn More

Political Principles Quiz [Quiz]: Where do you stand on the questions addressed in this series? Take the Politopia Quiz to learn!

Classical Liberal Reading List [Text]: This series hasn’t even scratched the surface of the classical liberal tradition. There are literally hundreds upon hundreds of books, in multiple academic disciplines, about classical liberalism tradition. Kosmos has created a reading list to help you get started.

Questions:

1. How do you decide what the role of government should be?

2. Why should government be limited?

MP3

Schools of Thought in Classical Liberalism, Part 7 Conclusion Whats Your View.mp3

Schools of Thought in Classical Liberalism, Part 6: Anarcho-Capitalism

tstrong — Wed, 09 May 2012 15:17:25 +0000

What is an anarchist? Most people associate the word “anarchist” with the political left. However, there are anarchists who advocate for completely unrestricted capitalism, also known as anarcho-capitalistism. Two prominent anarcho-capitalists are Murray Rothbard and David Friedman, both of whom believed there should be no government. Dr. Nigel Ashford discusses the views of Rothbard and Friedman.

Rothbard favors anarcho-capitalism based upon his belief that it is always wrong to use force, except in self-defense. For Rothbard, the government is illegitimate because it relies on coercion. David Friedman, on the other hand, argues for anarcho-capitalism based on empirical evidence. Friedman believes that the market is always more efficient than the government.

Both believe there should be no state at all. Rothbard criticizes government for its use of force, while Friedman criticizes its inefficiency. Both argue that there are free-market alternatives to all government services. While many libertarians favor a minimal state, Rothbard and Friedman suggest that any state is likely to grow well beyond its intended role.

Transcript

Schools of Thought in Classical Liberalism, Part 6: Anarcho-Capitalism

So now we’re going to look at Murray Rothbard, David Friedman, and anarcho-capitalism. Murray Rothbard, famous for lots of things but particularly his book For a New Liberty. David Friedman, who’s Milton Friedman’s son, wrote a book called The Machinery of Freedom. As far as the first thing to say is that when people hear anarchism they tend to think of ideas as being on the left and in some sense collectivist. But there is a school of thought within classical liberal thought who are anarchists who base their ideas on capitalism. That’s what we’re going to have a look at.

Murray Rothbard, he defended his position, he based it on this idea of natural rights. In that sense, similar to Rand and Nozick and other believers in it. But he was also strongly influenced by Mises, and he developed what he called the noncoercive axiom, the noncoercive truth. It is always wrong to use force except in self-defense. It’s always wrong to use violence except if you’re protecting yourself against somebody who’s trying to use violence against yourself. He says that’s the principle we should use to establish what government should do.

David Friedman, from a different point of view, he very much follows the same methodology of his father: Chicago’s school of empirical analysis. He says, we answer this question by comparing what’s the relative efficiency of leaving things to the market and what’s the relative efficiency of leaving it to the government. Two very different sorts of methodologies, one clearly based on natural rights; one clearly based on consequences. Why do they think the government should be limited? In fact they go beyond that; they believe there should be no state at all.

Well that raises the question then, what is a state? The classic definition of a state comes from Max Weber, the German sociologist. A state is an institution which claims a monopoly of a legitimate use of force over a given territory. So within a society that a government covers, nobody else is allowed to use force. Only the government should be allowed to use force.

Rothbard criticized this because he said what governments do? They violate our rights. They obtain what they want through coercive means. If we don’t do what the government wants, they will throw us in prison. So for example, he says that taxation is theft. If somebody came along and took 25 percent, 40 percent of our income and said if you don’t give it to me I’m going to put you behind a jail, we would call that person a thief, a criminal. Rothbard says, why do we behave any differently when it’s the state that comes along and says it wants to take 25 percent and 50 percent of our income? It is the state is simply a criminal which is violating our rights.

David Friedman, taking this efficiency approach, he says the state is inevitably inefficient. All right, we carry out the empirical approach; we measure government efficiency versus market efficiency. He concludes the market is always more efficient than government. Whereas his father, Milton Friedman saw there was some circumstances where that wasn’t true, he argues empirically, it’s always true. Even things that most people assume that only the government can do, like defense or provision of roads, David Friedman argues, actually the market can provide these things most efficiently. This is what he argues in his book, The Machinery of Freedom.

So they conclude that the best society is one of anarchy, one without any government at all. So government is both illegitimate—it has no specific moral claim on us than any other single individual. And it’s also inefficient—it cannot provide more efficiently the goods and services that the market is able to provide. An alternative exists. We tend to forget, for example, that there are more people employed in the private security sector than employed by the police force. Most people are protected by private institutions not the police. We just tend to ignore that. We ignore the fact that many disputes between businesses don’t go to our state courts. In fact, many business disputes are settled in private arbitration courts because state courts are so slow; they’re so inefficient; they’re so unreliable. Many businesses will prefer to use private arbitration agencies to do this.

So they think that the other alternatives to the state provide these goods, and they also argue, all right, suppose we do believe in something like a minimal state. If you create a minimal state, it will never stay minimal. It will be unstable. And it will either have to go in one direction, which is the most likely: It will start as a minimal state and then it will grow and it will grow and it will grow and it will grow, or—this is what they favor—let’s go to anarchism of having no state whatsoever.

Learn More

Frequently Asked Questions [Text]: Anarchy seems very radical to many people. If you’re wondering how anarchy would work and you want to learn some common critiques, check out this thorough FAQ written by economist Bryan Caplan.

Friedman’s “The Machinery of Freedom” [free eBook]: For David Friedman, anarcho-capitalism isn’t just an abstract thought experiment. In his book “The Machinery of Freedom,” Friedman provides a blueprint for anarcho-capitalism, and outlines the benefits of anarchy.

Primer on Rothbard [Text]: If you are interested in a more detailed discussion of Rothbard’s anarcho-capitalism philosophy, check out this thorough primer by Edward W. Younkins.

Questions:

1. What is the non-coercive axiom?

2. What is a consequentalist defense of anarcho-capitalism?

3. How would defense be provided under anarcho-capitalism?

MP3

Schools of Thought in Classical Liberalism, Part 6 Anarcho-Capitalism.mp3

Schools of Thought in Classical Liberalism, Part 5: Natural Rights

tstrong — Wed, 09 May 2012 15:06:01 +0000

Some philosophers believe that all human beings have natural rights. America has a strong natural rights tradition, embodied in the Declaration of Independence’s claim that all men are endowed with “certain unalienable rights.” In part 5 of his series, Dr. Nigel Ashford explores the beliefs and philosophical methodology of philosophers Ayn Rand and Robert Nozick, both of whom believed that natural rights should dictate the proper role and size of government.

The philosophers agree that government often violates our natural rights. They also argue that capitalism is the only moral economic system, since it is based on voluntary action. So what should the proper role of government be? Rand and Nozick argue for a minimal state, that’s sole purpose is to protect our natural rights.

Transcript

Schools of Thought in Classical Liberalism, Part 5: Natural Rights

Now let’s look at Ayn Rand, Robert Nozick, and at natural rights. Ayn Rand is famous for being a novelist, but she wrote also lots of philosophy, probably best known for her book Atlas Shrugged. Robert Nozick was a Harvard philosopher who wrote a famous book called Anarchy, State, and Utopia. Both of them taking the so-called natural rights approach. So they believed that natural rights is the correct approach to deciding political questions. America has a strong tradition of natural rights going back to the American founding. They were strongly influenced by the ideas of John Locke, who believed these natural rights came from God. And we saw that expressed in the Declaration of Independence.

Ayn Rand is associated with what she called objectivism. She believed that there was an objective reality and an objective morality, that we can discover reality and morality by the use of reason. We know that it is in the nature of man to want to live, to want to survive. In order for people to live, in order for people to survive, they have to have certain natural rights. They are necessary to exist. So we know that natural rights exist because they arise from man’s nature. This is called a teleological explanation, that is, natural rights exist for the goal or purpose of human beings.

Robert Nozick also believes in natural rights. He believes that it’s by pursuing rational self-interest you would not violate the natural rights of others. He assumes that rights exist. He examines what’s the consequences of that. It doesn’t depend on a particular view of human nature. So in this view, natural rights is a so-called deontological approach. Natural rights tell us the limits of what we should do. For example, thou shall not kill, clear moral principle that tells us that we should protect the rights of people, in this case, not to be killed. So both believing in natural rights but coming, explaining it by two different methodologies. They both agree that the problem with government is that it violates our natural rights. It is immoral to use force to obtain your goals.

Capitalism, they argue, is the only moral economic system. It is based on voluntary exchange; it’s not based on coercion. So the problem with government is that much of what government does is to undermine our natural rights. So what is the role of government? It’s a minimal state whose sole purpose is to protect our natural rights. Rand describes this as a minimal state, which places force under objective control. rObjectively, we can determine what the role of government should be. And Nozick says that there should be a minimal state against force, theft, fraud, and the enforcement of contracts is justified. Anything beyond that role is illegitimate because it violates people’s rights.

He talks about defending capitalist acts between consenting adults. As long as the people involved are agreeing voluntarily, they should be allowed to do whatever they want to do. So the result of this is that they believe in a minimal state solely designed to protect us. So the state should provide a military to defend us. It should provide a police to defend us against criminals. It should provide a court to avoid conflict between people. And that is it. There’s no justification for any form of government beyond that, such as a welfare state.

Learn More

Introduction to Nozick [Article]: Nozick’s Anarchy, State, and Utopia begins with the statement “Individuals have rights, and there are things no person may do to them (without violating their rights).” In this article, philosopher Mark Friedman explores Nozick’s philosophy, and traces the intellectual origins of natural rights theory.

Ayn Rand in her own words [Video]: Rand formulated her theory on the natural rights of man in her book “The Virtue of Selfishness.” Listen to a reading of that passage.

Ayn Rand on Rights [Text]: A collection of Ayn Rand’s thoughts and theories about natural rights.

Questions:

1. What are natural rights?

2. What is Objectivism?

3. What is Nozick's entitlement theory of justice?

MP3

Schools of Thought in Classical Liberalism, Part 5 Natural Rights.mp3

Schools of Thought in Classical Liberalism, Part 4: The Austrian School

tstrong — Wed, 09 May 2012 15:01:31 +0000

When people refer to the “Austrian School,” they are usually referring to the ideas of two prominent economists: Friedrich Hayek and Ludwig von Mises. Dr. Nigel Ashford highlights the similarities and differences of these two influential thinkers.

On the one hand, Hayek tends to recognize the limits of human knowledge and reason. He argues that much of the order in society – language, for example – comes from human action. These orders weren’t centrally planned or designed. For this reason, Hayek concludes the government lacks the knowledge or ability to centrally plan effectively.

Mises arrives at the same conclusions as Hayek, but comes about it differently. Mises believes we can identify certain truths through experience and reasoning. Using a priori deductive reasoning, he too concludes that government has limited knowledge.

Transcript

Schools of Thought in Classical Liberalism, Part 4: The Austrian School

Let’s look at Friedrich Hayek, Ludwig von Mises, and the Austrian school. Now they have lots of similarities between Hayek and Mises, but I want to identify what I see as the significant differences between these two thinkers. And the first place, you can see this difference, I think, is in their methodology. How do you decide what the role of government should be? Hayek tends to emphasize the limits of knowledge, that there are limits of reason and understanding what we should do. He’s much more willing to give deference to tradition, to how the rules that have evolved over a period of time. So for example, he’s much more interested in the whole question of a spontaneous order, how we come to work together without any central planner that tells how we should behave. He’s interested in the common law, how traditional law has developed over the ages.

So he’s cautious about self-evident proofs that, for example, the Founders of the United States Constitution examined. He thinks that many of the order that we do see in society were the result of human action but not of human design. So for example, the English language: no group or institution decided this is what the English language is meant to be; it’s something that has naturally evolved over time. But we recognize what those rules are and we can live with those sorts of rules.

Ludwig von Mises, another Austrian, had a totally different approach. He adopts what he calls or what’s called the a priori deductive reasoning. He believes that we can identify certain truths, what he calls axioms, that we can discover these axioms through our experience and through the use of reason. So in this view, economics is more like math than it is like physics that Chicago School often talk about. So let me give you some examples. He has many axioms. Let me give you a couple examples of these axioms that Mises identifies.

Firstly, he says that human action is purposeful. That is, what humans do is they seek to achieve certain goals. Actions are neither random nor are they predetermined. We can identify what people’s goals are, what it is they’re trying to achieve through their actions. A second axiom is that the individuals are the only actors. The technical term for this is methodological individualism. In so much political debate, we tend to say, “France does this.” Of course, it’s not that all the French people do this. What it is actually is a small number of ministers at the top of the French government decide to oppose American foreign policy. So who are the specific individuals who are actually carrying out this action?

Actions are only conducted by individuals; they’re not conducted by broad groups. Another example would be Muslims. We should say that some Muslims carried out terrorist acts but that we should not say that Muslims carried out terrorist acts. That implies that all Muslims did. So whenever we try and understand any particular choice, we should try and identify who are the actual individuals who are making these specific decisions.

And the third axiom is that value is in the eye of the beholder, the so-called subjective theory of value. That is, things do not have value in themselves but only that to which people attribute to it. So for example, I think rap is crap, but some people like rap. Some people think it’s a good thing. There’s no objective value to rap. So you often hear the criticism of economists that they know the price of everything and the value of nothing, but that assumes that we can know what the value is of something. But no, the value for the same thing is different for different people. So Mises argues that simply using our reason, we can identify these axioms or these truths. Now, Mises and Hayek tend to agree about why government should be limited: because government policymakers lack the knowledge, they can’t understand what the goals are of people. Because everybody has a variety of different goals, we can’t predict you want this, you want this, you want that. Goals are so diverse. And secondly, government can’t work out what is the best means for people to achieve these goals. It can’t plan that in advance. If we do X, the results will be Y.

So they’re very skeptical about the government’s ability to identify what people’s goals are and to satisfactorily meet those goals. That’s why the Soviet Union collapsed. It wasn’t able—it suffered from the knowledge problem of knowing what people wanted, and it suffered from the knowledge problem of knowing how to achieve those goals. So it’s a consequentialist view. That consequences of government in their action is often bad or usually bad.

When it comes to the question about what is the role of the state though, Hayek and Mises again diverge. Hayek says the criteria for deciding what government should do is what he calls the rule of law, by which he means there are certain general principles that we should apply to any government action or any piece of legislation. Just like in the United States, the Supreme Court will often look at the law signed by Congress, passed by Congress, signed by the president. But the Supreme Court will sometimes say, “No, that’s illegitimate. We strike this down under the U.S. Constitution.” Well, Hayek argues that every society has these general principles that he calls the rule of law that we should apply to every government action. He has a long list of what these examples of the rule of law, just mention some of them. These are laws that should apply to everyone; there shouldn’t be particular exceptions. So for example, it’s very common for the U.S. Congress to pass a law which applies to everyone else except themselves.

So a classic example of that was the American’s for Disabilities Act. They passed a law saying that all buildings needed to adjust in a certain way to enable disabled access. But then, during the debate on the bill, they realized it would cost the U.S. Congress hundreds and hundreds of millions of dollars to adapt the Capitol Hill to meet those standards. So they excluded themselves from that bill. That’s an example of something where we’re not getting equality before for the law. They’re creating exemptions for themselves.

Another example would be earmarks, which is where they’re saying that government should spend the money with this particular company, in this particular way. He argues all those things should be considered illegitimate because they go against the rule of law. Another example would be that law should always be prospective. That is, they should be future-oriented; they shouldn’t punish something that happened in the past. So you may have done something in the past which was legal then, then they pass a law, it’s illegal. You should not be punished for something that occurs in the past. So that’s his criteria of any government action. Does it meet the rule of law? Does it meet these higher principles? And his conclusion is somewhat similar to Milton Friedman’s in terms of what government should do, although he comes from it, his approach to it is based on a different methodology.

He does believe, for example, that some form of limited welfare state can be justified by following the rule of law. Whereas Ludwig van Mises says following these axioms, it leads us to conclude that there should only be a minimal state. That is, the job of government is solely and exclusively to guarantee the protection of the life, health, liberty, and private property. There’s no role for the welfare state, only a minimal state. So here we have two Austrians broadly agreeing on many sorts of questions, but they have a different methodology. And they have a different conclusion about what the role of government should be.

Learn More

Austrian School of Economics [Article]: Peter Boettke, one of the foremost experts on Austrian economics, gives a concise overview of the 10 key propositions of Austrian economics.

Israel Kirzner on Austrian Economics [Video]: Kirzner, a student of Mises and an accomplished economist in his own right, provides an introduction to Austrian Economics

Ludwig von Mises and Friedrich August Hayek [Articles]: Short biographies of Ludwig von Mises and Friedrich Hayek, two of the most renowned and important thinkers of the Austrian School.

Hayek in his own words [Video]: Archival footage of Hayek explaining why socialism doesn’t work. This video is short, and is a great introduction to Hayek’s central arguments, theories, and methodology.

Hayek Primer [Essay]: Jim Powell tracks Hayek’s intellectual development and impact on economic thought, from his young days as a soldier in the Austrian army to his final years in Germany.

Mises Primer [free eBook]: In this short and free eBook, Eamonn Butler “provides a comprehensive yet accessible overview of Mises’ outstanding achievements.”

Questions:

1. What is the knowledge problem?

2. What is the socialist calculation debate?

3. What is the difference in methodology between Friedrich Hayek and Ludwig von Mises?

MP3

Schools of Thought in Classical Liberalism, Part 4 The Austrian School.mp3

Schools of Thought in Classical Liberalism, Part 3: Public Choice

tstrong — Wed, 09 May 2012 14:55:55 +0000

Schools of Thought in Classical Liberalism, Part 3: Public Choice

What is the proper role of government and how can it be limited? Dr. Nigel Ashford continues his series on classical liberalism with a discussion of public choice.

Public choice theory argues two points: 1.) that rational people would mutually agree upon limited government, also known as a “social contract” and 2.) that all people, including politicians are primarily motivated by their own self-interest. Public choice theorists believe that politicians have a vested interest in growing government well beyond the social contract.

So what should the role of government be? Public choice advocates typically argue that government should only protect individual rights, provide public goods, and address externalities like pollution. It is not the role of the government to provide for a welfare state, which goes beyond the social contract. How can we limit government? How does government grow so much beyond what the social contract dictates? Dr. Ashford uses real-life examples, such as agriculture subsidies, to give the public choice perspective on these questions.

Transcript

So let’s look at James Buchanan, Gordon Tullock, and the public choice school. James Buchanan, a Nobel Prize winner. Buchanan and Tullock wrote a lot of works together, probably the most famous one is The Limits of Liberty. Their approach to the question, how do we decide what the role of government, is they look for social contract. They say, supposing you’ve got rational individuals together and they had to decide what they would do, how would they set up a form of government, what would they universally agree? The American Constitution is an example of something like a social contract. They start with the questions what would happen if we had no state at all, there was no government? They believe it would be the Hobbesian state of nature after the ideas of the English philosopher Thomas Hobbes.

Hobbes said that life without a government is “nasty, brutish, and short,” and not as one student wrote, “nasty, British, and short.” Nasty, brutish, and short. It wouldn’t be very pleasant to live in such a society. So if we don’t have a government, there are three things we can do: we can produce things, we can steal other people’s things, or we can spend time protecting our own things. Suppose if we got together, it would be in the self-interest of everyone to create a body that would protect the things that we produce. Because we didn’t have to worry about things being stolen from us, we didn’t have to worry about protecting our own property, we can spend a lot more energy producing things. We would be wealthier; we could give some of that wealth to government, which would then prevent stealing. We wouldn’t need to spend so much resources into protecting ourselves; everyone in that society would be better. So it’s argued that rational individuals thinking about what sort of government they would want would agree on creating a government whose responsibility was to protect our life and property.

Why should government be limited? Well, they say that when we try and understand what goes on in economics, we assume that people are motivated by their own self-interest. That they are, to use economist language, utility maximizers. The public choice school people say people behave exactly the same way in the political realm as they do in the economic realm. They’re the same human beings. What their self-interest may be may not be the same. In economics, we tend to look for income and wealth to identify people’s self-interest. Self-interest in the political realm may be somewhat different. So, for example, if you’re a politician, your self-interest is getting elected, getting reelected, being in public office. How do you do that? Well you do that by promising goodies to particular groups. Vote for me; I will protect your Social Security. Vote for me; I will reduce your student loans. Vote for me; I will support your farms. So it’s in the vested self-interest of politicians to promise goodies to particular groups within society.

Bureaucrats, which I think is an underresearched area in terms of explaining what happens to government, it’s in the interest of bureaucrats to have a bigger government. The more government there is, the more income they probably have, the more power they have, the bigger their offices there are. It’s better for bureaucrats to have a bigger government than a smaller government. And for most interest groups, the way they look to government is, how can we manipulate government to work to our benefit? They are, again to use an economic term, rent-seekers. How do we get the rules written in such a way that prevents it more difficult, for example, to a competitor to enter into the market and compete with us? So it makes it more difficult to import goods from abroad. So the problem for the public choice school is that most political actors have a vested interest in growing government well beyond what people agree on in the social contract. So that’s why they think government needs to be limited, to prevent it going well beyond what the proper role of government should be.

So what should be the role of government in that context? It’s often described as the public goods state, that the state and the public choice has two responsibilities. The protective state: it should protect individual rights, especially our property. And it should be a productive state: it needs to provide the public goods, deal with the sorts of externalities that we’ve talked about before. It is not the responsibility—public choice argues—to have any form of welfare state; that goes well beyond the social contract. So a lot of public choice is interested in the question how do we limit the role of government? For example, should we amend the U.S. Constitution to ensure that there would be a balanced budget?

So why does government grow far beyond that which people would reasonably agree under the social contract? For example, why does the federal government in the United States do so many more things than the limited and enumerated powers that was established in the U.S. Constitution? The public choice school explains this by the concept of concentrated benefits and disbursed cost. That is, the benefits of a government program concentrate in the hands of a relatively small number of people while the costs of those programs are spread much among the larger group of people. Let’s take agricultural policy for example. Agricultural subsidies, agricultural tariffs that make it difficult to import food from outside the United States.

Only about 3 percent of the population in the United States is engaged in agriculture. And 97 percent, we’re not. But when it comes to deciding agricultural policy, these 3 percent, they really, really care about it. It would determine who they vote for. It would determine who they campaign for. It would determine who they will give money for.

They will throw cow manure over politicians who don’t support these agriculture subsidies and tariffs. How about the rest of us? The 97 percent of us? Well, we all lose by this. We lose because we pay higher taxes to subsidize this. We lose because of the tariffs, that means we pay more for the food we buy in the supermarkets. So you would think, in a democracy, here is a policy, it is in the interest of 3 percent and against the interest of 97 percent. Obviously you would think in a democracy a policy would fail, and every attempt to do away with these agriculture supports have failed. How do we explain that? Well, those who really care about it, they really care about it. They’re active on the issue.

The rest of us, the population who loses by it, for us, we don’t even think about agricultural policy. But even if we did think about it, for each one of us, it’s only a couple of dollars a week. We’re not going to get politically active on that issue. So when it comes to debating agricultural policy, it’s the small 3 percent that determine what those policies should be. According to public choice, this is true of most government laws and programs. It is driven by the small number of people, concentrated beneficiaries of that policy, and almost no influence from those who pay the costs—consumers and tax payers. That’s public choice.

Learn More

Ben Powell on Public Choice [Audio]: Professor Ben Powell gives a clear and thorough overview of public choice theory at a FEE seminar in 2009.

Public Choice [Article]: “Electing better people will not, by itself, lead to much better government,” writes William Shughart. Read Shughart’s concise discussion of public choice theory, and what it means for politics in the real world.

James Buchanan [Audio]: James Buchanan grew up poor in rural Tennessee, and would later go on to become a Noble Prize winner. Listen to the founder of Public Choice theory discuss his life and ideas.

Bootleggers and Baptists [Article]: Bootleggers and Baptists don’t agree on much, but they join forces to make sure that selling alcohol is banned on Sundays. Public choice theory seeks to explain why politics makes for such strange bedfellows.

Questions:

1. What is rent seeking?

2. What are concentrated benefits and dispersed costs?

3. What is the case for a balanced budget amendment to the US Constitution?

MP3

Schools of Thought in Classical Liberalism, Part 3 Public Choice.mp3

Schools of Thought in Classical Liberalism, Part 2: Milton Friedman and the Chicago School

tstrong — Wed, 09 May 2012 14:49:04 +0000

Dr. Nigel Ashford discusses the ideas of Milton Friedman, a Nobel Laureate and economist. Friedman is widely considered the founder of the Chicago School, an intellectual tradition that basis its theories on empirical and measurable evidence and theories.

According to the Chicago School, in order to assess the merits of a law, you must measure the results of that law. Laws may be well-intended, but the Chicago School demands that we measure the consequences of laws, and not just intentions.

The Chicago School admits that markets do fail sometimes. But, they also believe that governments fail as well. They contend that government failure is almost always greater than market failure. That’s why the Chicago School believes the government should be significantly limited.

What does the Chicago School say about the proper role of government? According to Friedman’s thinking, which you can find in his popular books Capitalism and Freedom and Free to Choose, the government should have four realms of responsibility:

Military and police
Administration of justice
Public goods (like defense) and negative externalities (like pollution)
Protection of children and mentally handicapped

Transcript

Part 2: Milton Friedman and the Chicago School

Now I want to look at Milton Friedman and the Chicago school. Milton Friedman, of course, the famous former president of the American Economic Association, Nobel Prize winner, wrote best-selling books, Capitalism and Freedom and Free to Choose, the latter of which was turned into a popular television series. They approach the question by using an empirical methodology. That is, for them it’s about testing the power of theories.

So they approach it by presenting a hypothesis: we predict that X will result in Y. So for example, if you increase the minimum wage, the result of that will be that lower-skilled workers will find it more difficult to find employment. And you can test that with empirical evidence. Why do they think government should be limited? It’s because they believe that there is such a thing as market failure—markets sometimes fail—but there’s also such a thing as government failure, that governments often fail. And they say if you compare those two things, usually government failure is much greater than market failure.

So whereas what happens in so much public debate, they identify, politicians identify a market failure and therefore assume that a perfect government can come in and solve that problem. Whereas the Chicago school says, that’s not right. What we need to do is to compare imperfect markets, with all the imperfections the Chicago school recognizes, with imperfect government, with all of the problems that government have. And they say, normally when you do these two things, government failure is so much greater than market failure.

So what there is is a gap between the intentions of policymakers and the actual results and consequences of what they advocate. Sometimes, for example, policies lead to the opposite to that of which was intended. Perverse incentives. For example, the idea of rent control is to provide more opportunities for poorer people to provide housing. But by reducing the price of rental property, what you actually do is reduce the supply of rental property. It actually makes it more difficult for poor people to find housing. It has the opposite effect to what’s intended.

Then there are many other government policies, which might actually achieve their goals, the positive, intended consequences of polices, but it ignores the negative, unintended consequences of those policies. So for example, raising the minimum wage, there are some people who benefit from that; they get a higher income because of it. But it ignores the negative, unintended consequences. That is, larger numbers of people can’t get jobs at all. And so we need to compare both the positive consequences, which were intended, and the negative, unintended consequences.

And the Chicago school argues that normally the negative, unintended consequences are greater than the positive, intended ones. But it’s an empirical question; we have to examine what the evidence say. And why is there this gap between intentions and consequences? They argue it’s because policymakers’ failure to take into account the importance of self-interest in explaining peoples’ behavior. They ignore human nature.

What should be the role of government according to the Chicago school? Well, Milton Friedman identifies four main areas of government responsibility. First of all, to protect us from our enemies, both internal and external enemies. We need a military to provide us with defense against our foreign enemies; we need a police force that the government provides to protect from our internal enemies, such as criminals.

Secondly, government should provide the administration of justice in order to achieve peaceful reconciliation of conflict. Inevitably, if you live in a society with other people, we will come into conflict with each other. We will disagree about certain things; that’s a contract, what the meaning of a contract is.

One possible way of resolving any sort of conflict is, easy, we could beat up with the other person. Presumably, though, we don’t want to live in a society where every time there is a disagreement, we try and have a physical fight with the other person. So we want some neutral arbiter that we can go to that is not connected with either side, and they will be an arbiter and say, yes, this is what the contract means; this means you were right and the other person is wrong. So it’s the job of the government to provide these courts that we can go to.

The third area that Friedman argues is that there are some things, not many, but there are some things that the marketplace, through voluntary exchange, cannot provide satisfactorily. They take two different forms. First of all are what economists call public goods. This is not the same thing as necessarily being good for the public; public goods for economists have a very particular meaning.

Public goods have two characteristics. First of all, you can’t exclude people from the benefits of this program. And the second thing is they’re nonrival. The fact that I consume more of it does not mean that you have less of the product. Best probably illustrated by an example: the classic example of a public good is defense. I’m not yet an American citizen, but I live on American soil. Suppose that I didn’t want to pay my taxes towards defense. I would prefer to be defended by Her Majesty the Queen and therefore I’m not going to pay my taxes for defense.

The problem with that is I do live on American soil. That means the American military are going to defend me whether I want it or not. I can’t be excluded from American defense. But it’s nonrival. The fact that I am protected means, the protection of me doesn’t mean any less protection for anyone else. So that’s a classic case for a public good. I could say, well I don’t want to pay for it, but I will still benefit from it. But it doesn’t mean any less for anyone else. So if you left it, just not going to work in the voluntary system; people would simply not contribute to public goods. So it’s an argument you have to have the government that provides the public goods.

The second main area that Chicago school will talk about are negative externalities. That is, when people interact with each other, it may have consequences for third parties. The classic case of that is pollution. I may be producing a good, but I produce pollution, which then affects the people who live in the neighborhood. So it’s argued, Chicago school says we need some way of controlling these negative externalities, such as pollution. More controversially, Freedman argues that the poor are a negative externality. That is that we don’t want to live in a society where we walk down the streets where there are people begging and starving on the streets. So he argues it’s a negative externality to live in a world where there are lots of poor people, and therefore he justifies, as dealing with a negative externality, some form of social safety net.

And the fourth area he says that government needs to act is to protect the irresponsible, those that we assume are not capable of looking after themselves. Classic case of that of course are children; we assume they’re not in a position to make decisions for themselves. Normally we can allow parents to make their decisions, but we have to keep an eye. Not all adults treat children properly. And then we assume that there are some people who are mentally incapable of making decisions on their behalf; the government has to make sure that their interests are protected.

So Friedman is very clear, these are the four areas that government should be active in or necessary to carry out. They’re important, but they’re still significantly limited. This approach is often called the Social Market Approach. Friedman believes that what governments, governments have these responsibilities, but as far as possible, they should use market mechanisms to achieve these ends. So for example, it is a responsibility of government to make sure every child is educated, but that does not mean that government has to provide the schools. Government, for example, could give vouchers or some form of school choice, private schools, but parents can chose whichever school they want to go to. So government has a social responsibility; it doesn’t necessarily have to directly provide what those social responsibilities are.

Learn More

Free to Choose [Video]: In the 1980s and 1990s, PBS broadcasted a television series featuring the ideas of Milton Friedman and the Chicago School. In the 15 part series spanning two decades, Friedman looks at the success of capitalism in human history. Friedman engages in debates and discussions with thinkers from across the intellectual spectrum.

The Chicago School [Video]: This short clip from the PBS documentary The Commanding Heights introduces the chief figures of the Chicago School, and the intellectual battles they fought.

Milton Friedman and the Chicago School of Economics [Article]: The Chicago School thinkers were not idle academics; they rigorously and systematically challenged widely accepted Keynesian economic theories. In this article, Richard Ebeling puts the Chicago School and Milton Friedman in historical context.

Milton Friedman [Article]: A biography of Milton Friedman highlighting his academic achievements.

Questions:

1. What is the law of unintended consequences?

2. What is a "public good"?

3. What is the case for school vouchers?

MP3

Schools of Thought in Classical Liberalism, Part 2 Milton Friedman and the Chicago School.mp3

Schools of Thought in Classical Liberalism, Part 1: Introduction

tstrong — Wed, 09 May 2012 14:42:28 +0000

What is “classical liberalism?” Many people say they’re a classical liberal – or “libertarian” – but that means different things to different people. Libertarians agree that the government should be limited, but disagree why.

In this seven part video series, Dr. Nigel Ashford explores five different schools of thought within the Classical Liberal tradition:

The Chicago School
Public Choice
The Austrian School
Natural Rights
Anarcho-Capitalism

Dr. Ashford takes a close look at the fundamental beliefs of these five schools of thought, exploring how they are similar, and how they are different.

Throughout the series, Dr. Ashford challenges you to think critically and humbly about your own beliefs. What do you believe? What do you think the role of the government should be, and why? What is your philosophy about government? Are you a classical liberal, or something else? Dr. Ashford hopes you will approach these questions with humility, and draw your own conclusions.

Transcript

Schools of Thought in Classical Liberalism, Part 1: Introduction

So what I want to look at today is: What is the proper role of government? What should governments do, and what should they not do? Classical liberals all agree that government should be limited, but they disagree about how they get to that conclusion. And it’s those differences that I really want to look at today.

My goal is not to advocate one or other of these positions—I certainly have a view on those questions—but I want to approach it with some degree of intellectual humility. As I always say, I know some of the things I believe in are wrong; I just don’t know which ones. So how do I discover what of my ideas are wrong? I can only doing that by articulating, presenting them as clearly as possible and listening to peoples’ disagreements—where they think I’m wrong on those issues—and I get that little bit closer to the truth. And that’s what I want to encourage you to do today, is to look at these different ideas, think about these different ideas, and come to you own conclusions about which of these you agree with and which of these ideas that you disagree with.

And I want to approach it by looking at three different questions that anyone concerned about the role of government should care about. So the first question is: How do we decide what the role of government should be? What is the methodology or the philosophy that will determine how we decide this question? Secondly, why should government be limited? Unless you’re a totalitarian, that is someone who believes that government should control every aspect of your life, then you believe that government should be limited. The question then becomes, why do you think it should be limited? Should it be limited because of the consequences of government actions, or should it be limited because people have natural rights, which government should not interfere with? And then the third question is: What is the legitimate role of government? What should governments do, and what should government not do?

I’m going to ask those three questions with reference to five different schools of thought. All classical liberal, all believe that liberty is the most important political value, but disagree on these three fundamental questions.

Learn More

What is Classical Liberalism? [Video]: For a concise overview of what the term “classical liberal” means, check out Dr. Ashford’s video “What is Classical Liberalism”

Definition of Classical Liberalism [Text]: A one-page definition of “classical liberalism” as defined by Richard Hudelson in Modern Political Philosophy.

The Libertarian Reader, edited by David Boaz [Book]: A compilation of classical liberal writings ranging from Lao Tzu to Ayn Rand, from Frederick Douglass to Milton Friedman.

Libertarianism: A Primer, by David Boaz [Book]: In this book, “David Boaz presents the essential guidebook to the libertarian perspective, detailing its roots, central tenets, solutions to contemporary policy dilemmas, and future in American politics.”

Questions:

1. What are the main principles of classical liberalism? Is there one more important than the others?

2. What is the difference between classical liberalism and what is described as liberalism in the United States?

3. Is there a difference between classical liberalism and libertarianism?

MP3

Schools of Thought in Classical Liberalism, Part 1 Introduction.mp3

Are Corporations People?

tstrong — Mon, 07 May 2012 15:29:42 +0000

Are corporations people, or are they something else? Corporations are made up of people – including employees, shareholders, and executives. So, are corporations distinct from the people that comprise them? Economics professor Steven Horwitz addresses this question.

Today, many people say we should raise the corporate income tax as a way to tax the rich, or the so-called “1%”. But according to Professor Horwitz, taxes on corporations don’t just tax rich executives, but also average workers and consumers.

So who ends up paying when corporate taxes are raised?

Workers pay in the form of lower wages
Consumers pay in the form of higher prices
Americans saving for retirement pay in the form of lower stock prices and a less valuable retirement portfolio

Professor Horwitz shows that a tax on corporations is not the equivalent of a tax on the wealthy; instead individual people will pay these taxes, regardless of wealth. Working people bear the costs of the corporate income tax.

Transcript

Are Corporations People?

Are corporations people? This question is actually two different questions. One question is, are corporation’s legally people? The second question, however, is are corporations economically distinct from the people that comprise them? And it’s that question that I want to address. And that question’s particularly important today, when a lot of people are saying we should be raising corporate income taxes as a way to tax the rich and to help address our deficit and debt problems. Well, as it turns out, if we tax corporations we’re not just taxing the rich. We’re taxing everybody. Taxing corporations means taxing all of the people who comprise corporations.

Whenever we do social scientific analysis we always are talking about the choices of individuals. We frequently say things like Walmart lowered its prices today or the government bought more military equipment today. But when we say those things, we really don’t mean Walmart as a whole or the government as a whole. Those institutions can’t act. What’s really happening is that individuals within those institutions—executives or managers at Walmart, bureaucrats within the government—have made a decision to lower prices or to buy more equipment. Abstract entities like Walmart or the government don’t choose; only people choose. And that’s no less true when we talk about corporations and the corporate income tax.

There’s over 50 years of economic research on who bears the burden of taxation. Consider, for example, the gasoline tax. It’s true that gas stations and oil companies write the actual check to the government, but who bears the burden of that taxation? One group of people is you and I as consumers of gasoline. You and I pay that tax in the form of higher prices at the pump as the owners pass along some of that tax to us. Employer payroll taxes work the same way. It’s the employer that writes the check to the government, but part of that tax is paid by workers in the form of wages that are lower than they would otherwise be.

The same is true of the corporate income tax. The biggest burden of that tax falls upon workers, who see lower wages. In addition, you and I bear the burden of higher corporate income taxes as corporations raise the prices of their products to help pay that tax. And finally, higher corporate income taxes tend to reduce stock prices; as a result the value of people’s retirement funds fall as well. So yes, corporations are indeed comprised of people in the sense that it is individuals who ultimately bear the burden of increased corporate taxation. There is an ongoing debate about who bears that burden and how much. But anyone who thinks that taxing corporations means taxing the rich is fooling themselves. It’s us, actual people, who bear the burden of corporate taxation, not the abstract entity called the corporation. And that’s true whether or not corporations are legally people.

MP3

Are Corporations People.mp3

Social Security vs. Private Retirement

tstrong — Wed, 02 May 2012 14:33:28 +0000

A large part of your Social Security taxes goes towards a forced savings plan intended to provide Americans with money for retirement. Economics professor Antony Davies looks at the Social Security system, and discusses alternatives that may provide Americans with more retirement money and more financial security.

To evaluate the merits of Social Security, Professor Davies examines how much average Americans will earn in social security benefits relative to how much they will contribute. As it turns out, social security is a very poor option: the average worker will earn an annual return of only 1.2% percent on his social security taxes.

Imagine, however, if workers weren’t required to pay into social security. If a worker took the money that would have gone to social security taxes and invested it in the stock market himself, he could expect to earn a lot more; upwards of $500,000 dollars more.

Accord to Davies, phasing out Social Security would enable government to honor its obligations to current retirees, shut down a program that costs half a trillion dollars each year, and allow Americans to transition to a system that would provide more safety and a better return on investment.

Transcript

Social Security vs. Private Retirement

Your Social Security taxes pay for insurance in case you’re disabled and insurance for your survivors in case you die. The largest part of your Social Security taxes go to a forced savings plan that provides income when you retire. It is reasonable that we ask what sort of return one can expect from this forced savings plan.

To answer this, let’s look at what the average American worker pays into and receives from Social Security. We’ll filter out inflation, so the figures you will see are all in today’s dollars. To be conservative, let’s assume that our average worker doesn’t start working full time until age 22.

Economists generally agree that employers pass on their halves of Social Security tax to workers in the form of lower wages. This means that our worker pays 12.4 percent of his wages in Social Security taxes, but only 63 percent of those taxes go to paying for retirement benefits. So the total amount of Social Security tax the worker can expect to pay toward his retirement is just over $216,000 in today’s dollars.

Our average worker can expect to pay that amount from age 22 to age 66. According to the Social Security Administration, our worker can expect to receive retirement benefits of almost $25,000 per year in today’s dollars, starting at age 67. The average 22-year-old can expect to live to age 78, so he can expect to receive just under $300,000 in retirement benefits.

Now, to evaluate Social Security as a retirement plan, we combine the worker’s expected Social Security tax payments and his expected Social Security retirement benefits. Our average worker pays $216,000 toward retirement, receives almost $300,000 in retirement benefits. That’s the equivalent of an annual real return of 1.2 percent on his Social Security taxes.

In other words, the Social Security taxes that went toward the worker’s retirement earned him an interest rate that is about 1 percent better than inflation. How does this rate compare to other interest rates? Over the past 50 years, stocks in the S&P 500 have generated a return that is 5.1 percent higher than inflation. If our worker were able to invest his Social Security taxes in a private account then invest it in stocks, he could expect to collect over $950,000 in retirement, or more than three times the return that Social Security provides.

The counter argument is that stocks are risky and that the whole point of Social Security is to provide guaranteed retirement benefits. This is in fact false. The only thing that is “guaranteed” is that the Social Security Administration will invest the taxes it collects in government-issued Treasury bills. There is no guarantee that Social Security will give you the money back. At any time, Congress can change the rules and reduce your Social Security benefits.

If a person truly wants safety, one can use a private retirement account to obtain an investment that is safer than Social Security: Treasury bills. By investing privately in Treasury bills, the retiree gets the same safety of government-issued securities that Social Security claims to provide but without the risk of the Congress changing the rules and reducing Social Security benefits.

Historically, one-year Treasury bills have paid an average of 1.7 percent more than inflation. If our worker were able to invest his Social Security taxes in a private account that invested in one-year Treasury bills, he could to expect to collect more than $345,000 in retirement, or about 17 percent more than Social Security provides.

Today, Social Security retirement benefits cost the federal government about half a trillion dollars a year. And under current law the program is projected to be insolvent within 25 years. If the government started a 20 or 30 year phase out of Social Security today, the government could honor its obligations to current retirees, shut down a program that cost half a trillion dollars a year, and allow Americans to transition to private accounts that would yield more safety and better returns than Social Security provides.

MP3

Social Security vs. Private Retirement.mp3

Does Government Have a Revenue or Spending Problem?

tstrong — Wed, 25 Apr 2012 15:18:54 +0000

People say the government has a debt problem. But what causes federal government debt? Deficits cause debt. Every time government spending is greater than the amount government collects in tax revenue, the government runs a deficit, which increases the debt. In this video, economics professor Antony Davies traces the root cause of government debt to find out if the problem is too much spending or too little government tax revenue.

Davies examines the data to determine whether the government debt problem is really a revenue problem. It turns out that federal tax revenue today is significantly greater than it was in the 1950s. Even adjusted for inflation and population growth, the federal government collects three times more tax revenue per person than it did 50 years ago. So if revenue isn’t a problem, why are we still in debt?

Ultimately, the data suggest that the debt problem is really a spending problem: No matter how robustly our tax revenue grows, government finds a way to spend everything it collects and more. Professor Davies concludes that the root cause of the government debt is spending, not a lack of tax revenue.

Transcript

Does Government Have a Revenue or Spending Problem?

People say that the government has a debt problem. But debt is an effect. The cause is deficits. Every time the government runs a deficit, the debt increases. If the debt is like the outstanding balance on the government’s credit card, the deficit is the extra amount the government charges on its card each year. Debt is caused by deficits, but deficits are caused by the difference between tax revenue and spending. So perhaps the debt problem is really a revenue problem.

How much tax revenue has the government collected over time?

Federal tax revenue today is more than 20 times what it was in the 1950s. But that’s not a fair comparison. Prices are a lot higher than they were in the 1950s, so let’s adjust tax revenues to account for inflation. Adjusted for inflation, tax revenue is more than five times what it was in the 1950s. But that’s not a fair comparison either. There are a lot more people in the United States than there were in the 1950s, so let’s adjust tax revenues to account for population growth. Adjusted for inflation and population growth, tax revenue today is three times what it was in the 1950s.

This suggests that the government does not have a revenue problem. If the debt is caused by deficits and deficits are caused by revenue and spending, and if the government does not have a revenue problem, then that means that the debt problem is really a spending problem.

Since 1954, the average price level has risen 700 percent. How does that compare with government spending? Over the same period, the per-person cost of government has risen 3,000 percent. To put that in perspective, the government recently attempted to take over the health care industry in an attempt to rein in the rising cost of health care. But since 1954, the average cost of health care has risen only 2,000 percent. This suggests that we would have been better off to ask physicians to reform government than to ask politicians to reform health care.

The lesson here is that we don’t have a government debt problem or even a budget deficit problem. We have a spending problem. This means more tax revenue won’t solve it. In fact, it will make it worse, because no matter how robustly our tax revenues grow, government always finds a way to spend everything it collects plus more.

MP3

Does Government Have a Revenue or Spending Problem.mp3