Power & Market
With another Martin Luther King Day come and gone, we were reminded that the views of King are regarded as the model for the "civil rights movement."
Some of this is merited, of course. King stood up to governments that used state force, via Jim Crow laws to mandate segregation and violate property rights.
Unfortunately, not all of King's views on property and economic independence were equally enlightened.
For a start, King was no friend of markets. In 33 Question About American History You’re Not Supposed to Ask, Tom Woods uncovered a speech King gave to his staff revealing his disapproval:
You can’t talk about solving the economic problem of the Negro without talking about billions of dollars…. [W]e are treading in difficult waters, because it really means that we are saying that something is wrong… with capitalism. There must be a better distribution of wealth and maybe America must move toward a democratic socialism.
But King wasn’t working alone in the civil rights movement. While far less remembered and honored today, Malcolm X provided a far different and more radical view of how to achieve more independence and prosperity for historically disadvantaged groups.
Choosing Markets Over Forced Integration
Libertarian rapper Eric July produced an excellent video explaining Malcolm X’s philosophy when contrasted to MLK’s vision of forced integration. Malcolm X recognized the power of capitalism, and saw it as a means of advancing the community.
July highlights an interview with Eleanor Fischer in which Malcolm X called forced integration hypocritical and understood the flaws of its involuntary nature:
Well, any form of integration, forced integration, any effort to force integration upon whites is actually hypocritical. It is a form of hypocrisy involved. If a white man puts his arm around me voluntarily, that’s brotherhood. But if you hold a gun on him and make him embrace me and pretend to be friendly or brotherly toward me, then that’s not brotherhood, that’s hypocrisy. And what America is trying to do is pass laws to force whites to pretend that they want Negroes into their schools or in their places of employment. Well, this is hypocrisy, and this makes a worse relationship between black and white, rather than if this could be brought about on a voluntary basis.
He then expanded on the flaws of MLK’s forced integration strategy when the topic of the Montgomery Bus Boycott came up:
I don’t think having an opportunity to ride either at the front or the back or the middle of someone else’s bus does not dignify you. When you have your own bus, then you have dignity. When you have your own school, you have dignity. When you have own your own country, you have dignity. When you have something of your own, you have dignity.
But whenever you are begging for a chance to participate in that which belongs to someone else, or use that which belongs to someone else, on an equal basis with the owner, that’s not dignity, that’s ignorance.
Malcolm X also critiqued the sit-in strategies civil rights activists employed and insisted that blacks build their own economic institutions instead:
Instead of the negro leaders having the black man begging for a chance to dine in white restaurants, the negro leaders should be showing the black man to do something to strengthen his own economy, to give himself an independent economy, or to provide job opportunities for himself. Not begging for a cup of coffee in a white man’s restaurant.
In sum, Malcolm X was not interested in forced integration and focused his energies toward black economic self-sufficiency. It did not matter to him if blacks had to live separately from whites, as long as each community did not infringe on the rights of others.
He drew examples from the Japanese and Chinese communities in the U.S. to drive this point home:
When you are equal with another person, the problem of integration doesn’t even arise. It doesn’t come up. The Chinese in this country aren’t asking for integration. The Japanese aren’t asking for integration. The only minority in America that’s asking for integration is the so-called Negro, primarily because he is inferior, not inherently inferior, but he’s economically, socially, politically inferior. And this exists because he has never tried to stand on his own two feet and do something for himself. He has filled the role of a beggar.
For these reasons, among others, Murray Rothbard praised Malcolm X describing him as a “great black leader” and acknowledged that Malcolm X’s black nationalism was “a lot more libertarian than the compulsory integration pushed by King, the NAACP, and white liberals.”
It is now commonly recognized that the majority of the economics profession for about four decades held an erroneous view of the nature of the “socialist calculation debate.” In particular, the nature of the arguments put forward by Mises and Hayek were misconstrued.
Revisionism took off in the mid 1980s with the work of Peter Murrell (e.g., here) and Don Lavoie (e.g., here). From a mainstream perspective, Murrell argued that the Austrians had developed sophisticated insights in property rights economics and the agency problem and had applied these insights to the problem of socialist calculation. Lavoie highlighted the distintive Austrian knowledge argument in the calculation debate, in particular emphasizing Hayek’s contribution. A bit later, Salerno and others emphasized the distinctiveness of Mises’ contribution. Thus, whereas Mises stressed the need for a distributed process of entrepreneurial judgment in the context of a private ownership economy characterized by uncertainty, Hayek put more of an emphasis on the impossibility under socialism of harnessing and processing massive amounts of knowledge, particularly under dynamic conditions.
Between the 2nd Wold War and these works, there are four decades in which the dominant opinion held that the Austrians had been thoroughly defeated by the formal demonstration, particularly in Oskar Lange’s work, of the possibility of combining socialism and efficient allocation. A pertinent question is whether there were (non-Austrian) dissenters from this dominant view. To those well steeped in libertarian social theory, names such as Trygve Hoff and G. Warren Nutter come to mind. But apart from these, it would appear that it is not until the mid 1980s that the distinctiveness of the Austrian arguments in the calculation debate concerning knowledge becomes recognized.
However, an early contribution, unknown to most economists, that fully recognized the distinctiveness of the Austrian arguments, is the 1958 book Organizations by James G. March and Herbert A Simon, a book that many would regard as the seminal contribution to organizational theory and a milestone in the evolution of organizational theory (I have heard organization theory scholars remark that all org theory in the last five decades is just variations over March & Simon themes).
The discussion of the socialist calculation debate takes place in the final chapter, “Planning and Innovation in Organizations,” the main purpose of which is to “… contrast the concept of rationality that has been employed in economics and statistics with a theory of rationality that takes account of the limits on the power, speed, and capacity of human cognitive faculties” (1958: 172) — in other words, bounded rationality.
This theme is taken through a number of variations, one of which is the theory of planning, understood as both “national planning and intrafirm planning” (p. 200). March and Simon (1958: 201) argue that even if motivational problems can be solved, there are still planning (coordination) problems remaining. They note, echoing Hayek (1945), that if one person or group of persons possessed “… all the relevant information connecting possible courses of action with the utilities resulting therefrom, he or they could discover which course of action was best for the organization” (p. 201). An alternative is to make use of the price mechanism, for example, through the Barone/Lange idea of consistent marginal cost pricing throughout the organization. March and Simon note a number of difficulties with this proposal, such as the requirement that externalities be absent. More seriously, perhaps, they note that it is not clear how to make a choice between the alternatives of central planning and pricing, since modern welfare economics, including the Lange/Barone proposal, does not give any positive reason for preferring the one to the other.
This is where the Austrian arguments in the socialist calculation debate enter the scene. These are placed under the heading “The principle of bounded rationality” (p. 203), and, accordingly, March and Simon note that the “… argument of von Mises and Hayek (we will use the latter’s version) depends crucially on the limits of information available to humans and their abilities to use information in their computations.” In other words, Hayek argues that “given realistic limits on human planning capacity” (italics removed) a decentralized system will work better than a centralized one.
Thus, March and Simon present a sympathetic reading of the Austrian — mainly Hayekian — positions in the socialist calculation debate. In the context of Organizations, March and Simon also criticize the “Robbinsian” characterization of decision-making in mainstream economics (to use Kirzner’s terms) – that is, the given’ness of means and ends — and they stress that the understanding of behavior should be broadened to include the process of discovering choice alternatives. These two observations are related, for it is arguably exactly because March and Simon are critical of the conceptualization of behavior in mainstream theory that they are so appreciative of the Austrian positions in the calculation debate.
[Reprinted from Organization and Markets.]
Media Accuses Rand Paul of Hypocrisy for Visiting Canadian Hospital: Turns Out It's a Private Hospital
Kentucky Senator Rand Paul recently announced he was receiving hernia surgery as a result of being blindsided in an attack from his neighbor. While a senator undergoing common surgery is of questionable newsworthiness, one may expect that the reminder that the Senator is still suffering from the 2017 incident as cause for sympathy. Instead, major media outlets decided to try to use the news as an example of hypocrisy on the part of Paul due to the fact he is receiving treatment at a Canadian hospital.
As published in USA Today:
Kentucky Sen. Rand Paul, one of the fiercest political critics of socialized medicine, will travel to Canada later this month to get hernia surgery....
He is scheduled to have the outpatient operation at the Shouldice Hernia Hospital in Thornhill, Ontario during the week of Jan. 21, according to documents from Paul's civil lawsuit against Boucher filed in Warren Circuit Court....
Paul, a Republican, often argues for private market solutions to American's health care woes.
In Canada, medical care is publicly funded and universally provided through the country's Provincial Ministry of Health, and everyone receives the same level of care.
Paul has called universal health care and nationalized options "slavery."
Of course, if the author had decided to do a two second internet search for “Shouldice Hernia Hospital,” they would have found that it is one of few private hospitals that were grandfathered in prior to the government’s takeover of Canadian healthcare.
Of course, the same media outlets that jumped to cry "hypocrisy" at Senator Paul are also guilty of ignoring the very real consequences of Canada’s socialist healthcare system. For example, patients dying due to a lack of access to basic medical supplies such as hospital beds.
For more on the disaster of Canada's socialized healthcare system, check out this series by (Canadian author) Lee Friday:
Dr. Mark Thornton joined Glenn Beck for an interview on how Austrian economists have predicted every major crisis of the last century.
The Skyscraper Curse is available now as a hardback, paperback, e-book, and audiobook at the Mises Store.
The book and audiobook are also available for free in the Mises Library.
Momentum in Congress is Building to Decriminalize Marijuana, but Bipartisan Leadership Stands in the Way
Momentum is strongly behind the United States government ending its war on marijuana. From states legalizing medical and recreational marijuana to the increasing majority support among Americans for full marijuana legalization, countrywide legalization is more and more seeming inevitable. Indeed, I would not be surprised to see the US government legalize marijuana within the next four years. But why not this year or even this week? What is delaying congressional action to legalize? A major barrier appears to be resistance by congressional leadership.
Similar to how House leadership last week acted, through the House Rules Committee, to prevent a House floor debate and vote on legislation seeking to end the US military’s involvement in the war on Yemen, the Rules Committee has for years repeatedly blocked any amendments seeking to liberalize US marijuana law from reaching the House floor. And having such a provision included in a bill before the bill reaches the House or Senate floor is just about unheard of, though the passage in both bodies of the farm bill last week containing legalization of farming hemp (cannabis with a very low THC percentage) is a promising sign that Congress may approve more war on marijuana roll backs soon.
Another promising sign could be Democrats taking over the leadership in the House next month. Democratic voters and Democratic House members have overall been more supportive of ending the war on marijuana than their respective Republican counterparts have been. That suggests that roll-back bills and amendments will fare much better under Democratic leadership than they have under Republican leadership. In line with this expectation, incoming House Rules Committee Chairman Jim McGovern (D-MA) has declared that, unlike his Republican predecessor, he will not block marijuana amendments from reaching the House floor for debate and votes. But, a note of caution is in order. Top overall Democratic leaders in the House have been less than enthusiastic about supporting war on marijuana roll back efforts. Also, there can be a failure of the House and Senate to agree on war on marijuana roll-back or elimination legislation if the Democratic-majority House approves only legislation that includes provisions, such as welfare program expansions coupled with race-based preferences, that could prevent the legislation from advancing in the Republican-majority Senate.
Rep. Thomas Massie (R-KY) asserted in an interview this month that legislation leaving marijuana law up to the states would pass in the House if leadership would just allow a House floor vote on it.
Similarly, Sen. Cory Gardner (R-CO) declared in a new Bloomberg interviewthat he believes a majority of Senators would vote in support of the US government deferring to states’ marijuana legalization and war on marijuana roll-back laws. This week, Gardner sought to test this proposition by bypassing the blocking of such marijuana bills from reaching the Senate floor. He offered an amendment on the Senate floor proposing a major roll back of this type in the US government’s war on marijuana, but, that amendment also was blocked.
Why are Senators not being allowed to have Senate floor votes on rolling back or ending the US war on marijuana? As in the House, the reason is leadership.
Hopefully, House and Senate leadership will take a new approach to marijuana in January when both a new year and a new Congress begin. There is no reason to have to wait two to four years, or even longer, for the terminating of the US war on marijuana — along that war’s creation of more bad effects. Senate and House leadership, including Senate Majority Leader Mitch McConnell (R-KY) and expected next House Speaker Nancy Pelosi (D-CA), can help make 2019 the year of ending marijuana prohibition. Accomplishing this goal would likely not require leadership members to do much leading. Instead, it could just require that they get out of the way.
Originally published by the Ron Paul Institute
Mark Thornton recently joined CJ of the Dangerous History podcast to discuss his new book The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century, and his recent article on the government's role in Florida's recent red tide crisis.
Recently Mark Thornton joined the Tom Woods Show to discuss his new book The Skyscraper Curse, and How Austrian Economists Predicted Every Major Economic Crisis of the Last Century.
Okay, so I’ve been looking at the Mercatus numbers.
First, Think Progress IS wrong in their representation. (Think Progress makes the very simple error of acting like an ADDITION to cost is the WHOLE cost.)
HOWEVER, my initial impression was also wrong. My error was a bit more complicated – I assumed constancy in some things that weren’t constant in the Mercatus estimates, and ended up misrepresenting the results, TOO.
So, let’s try to get it right, and we’ll just focus on one year.
Before we hop in, we need to figure out what we’re talking about. We’re going to look at National Health Expenditures (page 5 is my reference here). What this is: Personal Health Care Expenses + Government Administrative Cost + Net Cost of Insurance (Basically, private administrative costs, I would guess) + Government Public Health Activities
Mercatus starts by looking at personal health care expenses in 2022. They suggest these are projected, under our current system, as being $3.859 trillion. (Note: this includes both public and private systems.) With Medicare 4 All, there would be a big jump in healthcare utilization – amounting to $435 billion. This comes from the currently uninsured being covered and from Medicare covering things that some private insurance doesn’t, and from people using more medical care because they are no longer responsible for copays or coinsurance (so, on the margin, they go to the doctor more often – though I suspect this effect is small). BUT, providers would receive less because of M4A’s pay structure. That would cut $384 billion from provider payments, and $61 billion from prescription drug costs. Net effect: personal health care spending FALLS by $10 billion in 2021.
The other change is that total administrative cost is expected to fall by about $83 billion. Basically, we’re eliminating private health insurance costs, but Medicare’s administration would have to eat that up – but with some economies of scale, there would be a net savings on the administrative side.
So, total effect: $93 billion in National Health Expenditure savings. The other years in the estimate project savings of up to $300 billion in NHE by 2031.
Now, Mercatus’s point is that, EVEN WITH this savings, the government would be spending an additional $2.535 trillion that year – since it is absorbing the private insurance industry’s costs. They want to know where the money is coming from, since doubling income taxes on both individuals and corporations wouldn’t be enough to bring in that money.
On the one hand, progressives can reasonably point out that we’re already spending this money, it’s just a matter of redirecting it. And there’s a point in that. This $2.535 trillion is not new to the ECONOMY, it’s just new to the GOVERNMENT BUDGET. Okay.
But, would progressives then suggest that we should just have the government absorb the health insurance premiums currently paid by employees, employers, and individuals? I suspect not. That would mean that each person’s premium would vary not based on income, but on their current employer. This would be an administrative nightmare, I suspect. So, while the money is there, there is still the practical question of how best to collect it in a way that isn’t politically disastrous.
Another big point: Blahous is very clear that he’s being generous in his estimates of savings because he wants to estimate the MINIMUM amount of additional tax revenue that would be required.