“Occupy Wall Street” rage misdirected

These people are very upset with a particular strip of roadway in Manhattan.

The protesters are ignorant, smelly hippies.  That about sums up my take.  If you want the longer version, here it is:

The protesters are literate, and some are even educated in some specialty, but they don’t seem to understand economics at all.  Some of them blame poverty and unemployment on “Wall Street”; others blame it on rich people.  Either way, they engage in pure fantasy.

First, Wall Street.  I assume they have no beef with the street itself.  Maybe they just call rich people or corporations “Wall Street,” or at least that’s what my understanding of markets leads me to infer.  They can’t be talking about the stock market–that is, they can’t be talking intelligently about the stock market.  If you know what the stock market actually is (not a true entity, but a loose network for the free and open exchange of securitized goods) and who participates in the stock market (hundreds of millions–if not billions–of individual disparate entities, among whom nearly everyone is included, and none of whom can exercise anything close to what could objectively called coercion over the market), and the effects of a stock market on an economy (a great increase in productivity, availability of capital, and gainful employment), then you have a hard time understanding what the hell it is these people are talking about when they express rage toward Wall Street. They don’t even seem to have a workable definition of what “Wall Street” is.

Because rage toward “Wall Street” is utter nonsense, I must assume they have a serious–albeit irrational–problem with corporations and/or high net worth or high income people.  They believe rich people and/or corporations are responsible for any extant hardship experienced by “the 99%.” But the rich, the corporations, the Apples, Disneys and Microsofts have exercised no force against us; on the contrary, we have engaged in voluntary exchange with them.  We have voted with our dollars to make their owners wealthier than we are.  The fact that they become so well-to-do that they escape the hardships of the rest of us is unfair, but it is not unjust.  They have not forced us to give them our money.  Any man who gives money to Apple does so because, marginally, he values Apple’s production more than his own–not because Apple has forced him to do so.  If the people must slay a dragon, there is a convenient and sensible target; it is an entity that forces us to give it money and it has a monopoly on force, but it is not headquartered on Wall Street.

That dragon is of course the federal government, and I can sympathize with these protesters only insofar as interest groups (including corporations) control the government to meet their own ends at our expense.  However, I see no real advantage in egregious (and probably unconstitutional) measures, such as depleting the wealth of interest groups, outlawing their association, or nationalizing corporations, which seem to be the sort of unjust solutions favored by today’s demonstrators.  I do not suggest a new all-powerful leader of the flock, but instead suggest each sheep be allowed his sovereignty.  I know such an individualistic position has never been and probably never will be popular–people like to be led, lest they wander.  My policy to keep interest groups from controlling government is by binding government down under the chains of the constitution (see Jefferson’s “Opinion on the Constitutionality of a National Bank”), which would make government a thing so small and insignificant–so limited in its powers of appropriation and bestowal–that no corporation would have any interest in controlling it, because it would be unprofitable to do so.

What happens if states run out of money?


People who warn about the insolvency of the U.S. government are wrong. A government that can legitimately print fiat currency can never really be insolvent, because more currency can always be printed to pay off debts and expenses. Because of their inability to print currency, U.S. states face real debt limitations. As California has discovered, a state can run out of money. Federal bailouts of insolvent U.S. states are politically unfeasible. To this point, they have been hidden under the veil of “stimulus” money, but economic stimulus packages will not be passed forever. There are, however, a couple of tools that are politically tolerable and produce the desired effect, but both of them have the undesirable side-effect of increasing federal expenses and the moral hazard of rewarding fiscal irresponsibility.

1. The federal government can buy state bonds. While this solves the immediate cash flow problem, it is even worse than a bailout in the long run. Racking up too much debt is the primary reason for state insolvency in the first place. Owing even more money only exacerbates the problem. This solution merely transfers the federal government’s fiat currency debt advantages to the insolvent states. The silver lining for states in this solution is that the Congress would have a fairly easy political sell if it wished to forgive state debt, and if it did so, states could use federal cash to pay their expenses and their debt. The bad news for the American people, of course, is that all of this would still mean more public debt at the federal level.

2. Big banks can cash state I.O.U.s. Small banks could try this too, but with risk of bankruptcy. When states run out of money, they must resort to writing I.O.U.s to their employees, creditors, and contractors. A large bank like Bank of America can cash these, and hold them to be paid later by the state, or by the federal government. Even if governments never pay the I.O.U.s, the large banks that hold them have little cause for concern. Between the goodwill they gain by cashing I.O.U.s, and the persistent doctrine of too-big-to-fail, it is inconceivable that such banks endangered by state I.O.U. exposure would not receive an “emergency” bailout.

Isabel Paterson’s God

God of the Machine

The following is a review of Isabel Paterson’s The God of the Machine, a 1943 book arguing for free market capitalism.  I wrote this for a college course called Modern Political Thought:

The year was 1943.  Hitler’s Germany was in the midst of all-out war with Stalin’s Russia and Franklin Roosevelt’s United States.  Isabel Paterson, a Canadian-American author, published The God of the Machine, which has become one of the more influential libertarian works of the twentieth century.  Paterson was a radical individualist.  Hitler and Stalin were avowed collectivists, and the well-known human suffering in Russia and Germany during their reigns was too great to be ignored.  Roosevelt’s New Deal represented by far the greatest economic intervention in American history.  The tendencies of world powers toward collectivism were Paterson’s main focuses, but societal attitudes also concerned her.  Many believed that the war economy was healthy, and some even believed that Germany and Russia had gotten it right, increasing their powers by collectivization.  John Maynard Keynes’ interventionism was emerging as the new textbook standard for economic theory.  Radical sloganeers were advancing such ideas as “property is theft” and “capitalism means war.”  Paterson addressed all of these developments.  Her book is an overview of the logic and history behind her answer to the great question that still stands before the political actor today: which interest should be the focus of our political attention, society’s or the individual’s?

If not for its analyses of ancient, modern, and contemporary histories, The God of the Machine may have been criticized as a knee-jerk reactionary critique of world leaders’ current collectivist policies; Friedrich Hayek’s The Road to Serfdom was widely brushed aside by the political establishment as reactionary.  While the Nobel Laureate’s criticism of Keynesian economic theory was much more influential, Paterson published hers earlier, and she conveys the same message, that government cannot spend an economy back to health.

The individualist political philosophy was first described by John Locke, and there are clear similarities between Locke’s philosophy and Paterson’s.  Obviously both are individualists.  Both believe that government exists to protect the natural rights of life, liberty and property, and that those rights are gifts to man from God.  With respect to property, there are differences between the two thinkers.  For Locke, ownership of objects in nature is initiated when people mix their labor with those objects.  Paterson, contrarily, claims that ownership exists because of the physical laws of space and time. She explains this in a matter-of-fact manner, stating “two bodies cannot occupy the same space at the same time” (180).  Elaborating upon this obvious statement, which at first sight appears irrelevant to the matter at hand, she points out that no one would farm if his land could be used–without restraint–by anyone who stumbled upon it, nor would any family build a dwelling, if every man were permitted to come in and go out of it as he pleased; the man farms and builds for his own private purposes (180).

David Hume’s legitimate criticism of social contract theory was precisely that it was a theory.  It was based on thought experimentation, and had no historical evidence.  Locke was a social contract theorist, and Paterson accepts his theory, but she is not a social contract theorist; she is a social contract historian.  She makes little reference to an imaginary social contract, as Locke did, because, unlike Locke, she can point to a historical social contract, the United States Constitution.

The modern liberal, socialist, utilitarian, and utopian thinkers came after John Locke.  The father of classical liberalism was long dead before any opportunity to rebuff their arguments presented itself.  In The God of the Machine, Paterson plucks Locke’s intellectual sword from the grave and carries it into battle against the likes of Keynes, Jeremy Bentham, John Stuart Mill, Karl Marx and Pierre-Joseph Proudhon.

Before that battle can be understood, however, it is necessary to explore Paterson’s social philosophy.  Paterson uses a metaphor extensively throughout the book, comparing society to an electrical circuit.  She perceives individual free will as the “dynamo” in society; in the metaphor, free association and exchange is the “electricity” of the circuit.  She argues that all progress comes from individual action.  Only individuals can think–groups cannot–and “in human affairs, all that endures is what men think” (18).  Paterson’s high potential energy circuit is closed and circulating maximum energy in a free enterprise system, when men are left to think and act however they wish.  It is static under a totalitarian system, when nearly every action must be commanded or permitted (78).  Government intervention into the market is represented by a “leak” in the otherwise complete high potential energy circuit.  A free enterprise society, then, will gain more and more prosperity and power, while a totalitarian society will tend to lose both.  The society in which government is most limited will be the most powerful society, in production and in war (61). Societies that are more powerful and prosperous become that way because they devise political systems that allow the greatest freedom of human action (13). Their circuits of energy are least broken.
Paterson borrows heavily from Herbert Spencer’s ideas.  She replaces Spencer’s “social organism” with her “high potential energy circuit,” and does so with favorable results.  Spencer laboriously pursues metaphors between government types and various biological organisms, flying over the heads of readers possessing even above average biological understanding.  Paterson clarifies Spencer’s message, by using a metaphor the average person can understand, a simple electrical circuit, and she simplifies his message by condensing it.

Paterson draws her “Society of Contract” and “Society of Status” from Spencer verbatim.  The society of contract recognizes the divinely given freedom and responsibility of each individual.  In the society of contract, “society consists of individuals in voluntary association.  The rights of any person are limited only by the equal rights of another person” (41). The society status, on the other hand, institutes privilege.  In Paterson’s mind, instituting a privileged status for anyone in society will lead to a class division between rulers and subjects.  She believes the society of status works against nature.  “The logic of status,” she says, “ignores physical fact.  The vital functions of a living creature do not wait upon permission; and unless a person is already able to act of his own motion, he cannot obey a command” (42).  Paterson says that her ideal societal relationships are best exemplified in what is called today’s middle class, which is not a class at all, but a classless society of contract (49).

Paterson bolsters her argument with the historical example of ancient Roman civilization.  She claims that Rome failed because it was a society of status, and the bureaucracy, the privileged class, became too big (and I am unqualified to argue this point with her).  Too much energy was diverted from production into the bureaucracy, so that almost no energy was making it all the way around the circuit.  When the productive class could no longer support the bureaucracy, the bureaucracy came down on the productive class and attempted a planned economy.  Prices were fixed and the currency was debased (39).  Roman civilization was torn apart.  Paterson writes, “Men who had formerly been productive escaped to the woods and mountains as outlaws, because they must starve if they went on working” (40).

Paterson says that the founding of the United States was the first and only time a society of contract was ever attempted.  The famous principle of the Declaration of Independence, that all men are endowed by their Creator with the inalienable right to life, had never previously been used as a basis of political structure (41).  The United States was an experiment in liberty.  Paterson points out that in the United States, for the first time, freedom was recognized as an indivisible whole; to speak of various “freedoms” was to revert to European terminology (68). The proof of the society of contract’s worth was the unprecedented power and prosperity of the United States.  Paterson derides European social philosophy as “mechanistic,” saying that it forgets that each individual naturally has freedom and responsibility, and it essentially reduces people to automatons.  She blames this on the arrogance of “academic planners” and the lust for power of self-described humanitarians. (145-147)

Paterson’s objection to “academic planners” returns us to the aforementioned intellectual battle between Paterson and thinkers like Keynes, Bentham, Mill, Marx, and Proudhon.   She says that John Stuart Mill, under the banner of liberty, in fact sacrificed it to society, saying that it was only justifiable insofar as it “served the collective good.” “Then,” writes Paterson, “if a plausible argument can be put forward that it does not–and such an argument will seem plausible because there is no collective good–obviously slavery must be right” (150).

Paterson views Bentham in much the same light, as another prominent philosopher who sold out liberty to the collective good.  Bentham is famous for attempting to devise a political system according to the principle of “the greatest good for the greatest number of people.”  Paterson says that this “is a vicious phrase; for there is no unit of good which by addition or multiplication can make up a sum of good to be divided by the number of persons.  Jeremy Bentham, having adopted the phrase, spent the rest of his life trying to extract some meaning from his own words.  He meandered into almost incredible imbecilities, without ever perceiving why they couldn’t mean anything” (90).

Paterson calls Karl Marx a fool for thinking his utopian idea was an accurate prediction of the future (155).  She says Marx was a “parasitic pedant, shiftless and dishonest, he wanted to put in a claim on ‘society’ solely as a consumer” (96).  His theory of class war, she says, is “utter nonsense.”  Elaborating, she says, “it is physically impossible for ‘labor’ and ‘capital’ to engage in war on each other.  Capital is property; labor is men” (97).  She also criticizes Marx’s dialectical materialism, claiming that it “reduces verbal expression to literal nonsense” (96).  Paterson compares the phrase “dictatorship of the proletariat” to the phrase “roundness of a triangle” (96).

Keynes famously prescribed increasing government employment as a remedy for recessions.  Because recessions come with unemployment and slumping consumer demand, the theory goes that government can augment demand and employment by hiring more people, who will be consumers, multiplying demand.  In criticizing Keynes, Paterson employs reductio ad absurdum.  She brings up the example of paying a man to stand on the beach and throw pebbles into the ocean, arguing, “it would be just the same as if he were in a ‘government job,’ or on the dole; the producers have to supply his subsistence with no return, thus preventing the normal increase of jobs” (192).

Paterson says that Proudhon is responsible for “perhaps the most senseless phrase ever coined even by a collectivist” (179).  She is referring to Proudhon’s famous slogan, “property is theft.”  Clearly this statement is non-sensical, because theft presupposes property (179).  The slogan follows in the footsteps of Jean-Jacques Rousseau, who may well have agreed with its spirit, if not its words.  Both Rousseau and Proudhon saw property as an unnatural institution, and the source of inequality and unfairness.  Paterson contends otherwise, asserting that unfairness and inequality are unavoidable in any system, and that sacrificing property rights for the sake of fairness is foolish (200).  She explains, “The incidental hazard of a free society, which is that of nature, that some individuals may be temporarily unable to command a livelihood, is the permanent condition of every man living in a collective society.  In giving up freedom, the individual gets nothing in return, and gives up every chance or hope of ever getting anything” (200).

Paterson criticizes collectivists by analyzing their language and showing its errors.  She frequently uses “nonsense” as a descriptor of their rhetoric.  There is a tinge of hypocrisy in her critique, because she does not hold herself to the same exacting standards.  Proudhon’s “property is theft” is “senseless” to Paterson, but Paterson herself, in no uncertain terms, asserts that “profit is production,” which is evidently “senseless” to anyone with an understanding of economics (221).

Even accepting Paterson’s political principles and her criticisms of the collectivists, there remains a very important question: What is the alternative?  What political system does Paterson suggest?  Her ideal society is the “the private property, free enterprise society of contract,” but in The God of the Machine, the political apparatus responsible for protecting property and enforcing contracts is difficult to pin down.  The absence of a comprehensive, alternative political system may be the most prominent weakness of her argument.  Paterson thinks the very idea of political “leadership” is a threat to civilization, because every free man must lead his own affairs (80). She echoes classical liberals in saying that, ideally, government is a necessary evil.  Paterson explains, “since human beings will sometimes lie, shirk, break promises, fail to improve their faculties, act imprudently, seize by violence the goods of others, and even kill one another in anger or greed, government might be defined as the police organization” (69). Her ideal system seems to be liberty with a police man, a system that completes her high potential energy circuit for the machine of society, maximizing the creative use of human energy.  It requires equal protection of the laws, with privileged status for no “type” of person, be they impoverished, wealthy, numerous, or within government.  Paterson never even posits a method of determining who will make up the “police organization” that is government.

Some aspects of Paterson’s political system are clear.  She dislikes passports, or any other national identification (45).  She thinks “democracy inevitably lapses into tyranny” (16).  She favors a metal currency, saying the economist who advocates fiat money is “below the mental level of savages” because he has “forgotten how to apply number” (202).  She rejects compulsory public education as “the complete model of the totalitarian state” (258).  She also rejects licensing and regulation, which are impediments to free association (50).  However, Paterson’s political structure remains enigmatic.  As long as every individual is treated equally by the law, their natural rights are protected, and contracts are enforced, it does not concern her who governs, or how they are chosen.

Paterson, Isabel (1943). The God of the Machine. New Brunswick, NJ: Transaction Publishers. ISBN: 1560006668

Letter to the editor 03.29.10

members walk through protest

I sent the following letter concerning accusations of racism to the Daily Beacon, the University of Tennessee’s student newspaper, on March 29, but it was never printed:

Columnist Sam Smith is either a victim or, worse, a collaborator of propaganda. On March 20, the day before passage of the historic blunder misnamed the Patient Protection and Affordable Care Act, several male members of the Congressional Black Caucus sauntered through a large crowd of mostly white demonstrators outside the Capitol–that is to say, they pulled a publicity stunt.

I have watched several videos of the incident, and I have a few questions that Smith may not have asked himself. Why did this group of black men choose to walk through the excited crowd? Almost every other representative traveled to the Capitol that day through the underground tunnel connected to their offices, and almost every other day these men do so as well. Why did all of these black men walk to the Capitol together? Why were two of the members recording the event with mobile devices? Why, after watching all of these videos, did I never once hear the N-word? It was mostly shouts of “kill the bill.” No one in the media, or even on a layperson’s hand-held recorder, has been able to produce any evidence that a racial invective was ever uttered, much less shouted, by the demonstrators that day. Fortunately, it appears the Black Caucus’ attempt to instigate a racial incident failed. The “Tea-Party” contingent was not so racist as had been hoped.

The publicity stunt, however, worked wonders. Just hours later, every evening news program reported that the demonstrators shouted the N-word at the men repeatedly. The intended message is clear: citizens opposed to Obamacare are ignorant, unreasonable racists that should be ignored. Despite the fact that this message is based on lies and propaganda, Smith affirms it.

Then, after forcing Republicans to accept this propaganda as reality, Smith challenges GOP leadership to denounce the fabricated bad behavior of its base, apparently unaware that House Minority Leader John Boehner has already issued a public condemnation. Smith also asks, “How long will we continue to watch the GOP behave this way and accept it as part of our political dialogue?” The answer: until we stop believing the perpetual myths of propagandists like the Congressional Black Caucus.

The myth of excessive wealth

I sent the following letter concerning wealth to the Daily Beacon, the University of Tennessee’s student newspaper, on February 15, but it was never printed:

Sam Smith’s February 15 column was illogical and economically ignorant. He begins by declaring that the federal government spends too much. His only solution to this problem: increase taxes on the wealthy. Low taxation does not water the root of our growing federal deficit–excessive spending is its true life-source. Over the past twenty years, federal spending has tripled. Because no level of taxation can keep up with this exuberant trend, the only realistic solution is to stop the government’s spending spree.

Smith then points his wayward cannon at the “excessively” wealthy, blasting the likes of Lane Kiffin, an easy target in this media market. It is a contradiction in terms to speak of “excessive wealth”; there is no such thing. An individual who gains wealth through productivity or capital investment, regardless of selfishness, benefits everyone else in the process, by meeting the demands of consumers. Moreover, the initial investment of wealthy consumers eventually allows even the poor to enjoy life’s luxuries. If there were no one “excessively” wealthy enough to buy the first television sets, the first computers, or the first cellular phones, then inventors would have toiled fruitlessly, and no reinvestment into their innovations would have taken place. Without the “excessively” wealthy purchasing high-dollar goods, we would not know many of the technologies we enjoy cheaply today.

Smith echoes many of my professors, who complain that the football coach earns too much money. This is in truth a lament over the rights of individuals to consume freely; it assumes that people who choose to watch football are somehow guilty of injustice. To the professor of this mindset, I offer a promise: When you attract 100,000 people to pay $50 a head to sit through one of your lectures, the University of Tennessee will kindly add a zero or two to the amount on your paycheck.

Assassinating suspects undermines justice

My following letter about assassinating terrorists appeared in the Daily Beacon, the University of Tennessee’s student newspaper, on March 5, 2010:

In light of the publication of a secret Israeli assassination in Dubai, Treston Wheat committed his Feb. 25 waste of ink to glorifying assassination, which he deems necessary to the fight against terrorism. Even if this were true, assassinations are illegal under domestic and international law, so he condones lawbreaking. While ignoring all moral and legal questions, Wheat boldly assumes that assassination can stop terrorism. It cannot, and one could argue that the assassination of suspected terrorists increases the strength and legitimacy of the terrorists’ cause, while undermining our claim on liberty and justice.

As a Jew and a staunch advocate of freedom, due process and the rule of law, I am often disappointed by the Israeli government’s tactics and policies. I am equally disappointed by self-proclaimed followers of Christ like Wheat, who defend government policies that are immoral, expedient, unnecessary and antagonistic to everything Jesus taught. The philosophical innovation of Judaism was the recognition of human freedom; to this, Christianity added the common brotherhood of all men. These Western religious tenets, freedom and brotherhood, have been abandoned by the current Israeli coalition and its supporters. Do I support Israel? Yes, but only an Israel that recognizes all its inhabitants as free and equal under the law, and one need not look far into Israel’s laws to discover that it does not. I hold every other nation to the same standard.

The United States itself participates in secret assassinations more often than we know. The targets of these assassinations are suspects. They are innocent until proven guilty. They are the accused, and in a free and just society, the accused have rights. Our CIA is not all bad, but it is often involved in a lot of mischief offensive to our idea of justice. Recently, ABC News released agency recordings of a small plane being shot down over Peru, with the aid of our CIA. The plane was suspected of smuggling drugs, but was actually carrying an American missionary family, all of whom were killed by the machine gun fire of Peruvian fighter jets. These deaths are a consequence of the notion that it is okay to murder suspects without the benefit of a trial, or even evidence presented against them. Even if the plane had been carrying drugs and smugglers, since when is capital punishment, executed in secrecy without trial, the proper punishment for this crime? Or any other crime, for that matter? This practice destroys 800 years of our legal traditions dating back to the Magna Carta. Now we are told by the CIA that it considers itself obliged to assassinate American citizens, on secret evidence, in order to protect us from threats. The power given to the U.S. president by our passive acceptance of this practice is definitively totalitarian. It is a real threat to essential human liberties.

Terrorism works, and the more brutal the physical force opposing it, the more quickly it strengthens and spreads. The true “War on Terror” is a battle of ideas and politics, because terrorists are inspired by ideas and political grievances. I prefer destroying the dark tree of terrorism at its root — not picking off one prickly leaf at a time, as several grow back in its place. To do this, we must ask ourselves what the root cause of terrorism is and address that cause. If we have not properly answered that question, and the answer to it is well-publicized by its perpetrators, we cannot begin to address the terrorist threat.

Wheat’s disapproval of the recent Mossad assassination stems from its sloppiness, not its intent. The trouble with the Israeli government’s policy of murdering suspected criminals, Wheat has so amorally asserted, is that the crime was eventually caught on film. The real trouble is that assassination is murder with impunity. It is always unjust. If a person is evil enough to “deserve” assassination, certainly that person is evil enough to stand trial for his crimes.

Alex Winston

Senior in political science

Letter to the editor of the Daily Beacon, 02.05.10

My following letter appeared in the Daily Beacon, the University of Tennessee’s student newspaper, on February 5th:

Sam Smith’s Feb. 1 column was written with the journalistic integrity of a White House spokesperson.

Of President Obama’s unprecedented social reforms, he says that “it’s clear the policies being proposed would greatly benefit the American people.” This clarity is imaginary. The real lack of clarity in legislation today is a government failure, not to mention a broken campaign promise. If asked what exactly is being proposed in Washington, Smith would not know. Nor would anyone else. I suspect that general benefits to the people never require 2,000 pages of statutory language. While the reforms being proposed by Obama’s administration may arguably benefit some, it is a mistake to say that they would benefit the people in general. A law enforced always injures someone.

Smith also called Supreme Court Justice Samuel Alito an “idiot” for mouthing the words “not true” and then challenged Alito to explain this. Just in case Judge Alito forgets to read Smith’s column, I will explain for him. Obama said that because of the Citizens United decision, American elections could be “bankrolled by foreign entities.” This is, as Alito correctly mouthed, not true. The opinion contains language specifically preventing this from happening. Obama was lying. If Alito had any chutzpah (which Smith incorrectly spelled hootspa), he would have channeled Joe Wilson and yelled, “NOT TRUE!”

Smith opines that the Republicans are “no longer a ‘serious’ opposition party,” with no serious ideas and no serious leaders. Republican leadership is serious to the extent that it is truly Republican—it is not. Serious Republican ideas do exist, even though the party’s official leadership does not acknowledge them. That human existence involves some degree of suffering that cannot be legislated away is an idea as serious as it is true, but it makes the political tinkerers in Washington seem irrelevant, so they selfishly refuse to give credence to it.

Alex Winston

Senior in political science