morgan_polotan

In reading The Price of Everything, by Russell Roberts, I came across a passage explaining why prices aren’t needed within a family. He describes a situation in which a mother has two cookies to share among three children, and asks if the mother should auction off the cookies to the highest bidder. The notion is ridiculous to even the most ardent free-market economist, and the reason is because the mother has the knowledge to determine which of her children should receive the cookie. For example, maybe she knows that one kid had a candy bar for a snack that afternoon, so that kid can do without the cookie. Or one kid can offer to be nice and let his brother have one, or perhaps they give each kid 2/3 of a cookie. In a small town the case is often the same, and prices aren’t needed to allocate scarce resources in times of emergency. I quote, “In a small town, most citizens do the right thing either because they care about each other or because being selfish when there is a crisis has costs – people might shun you in the future. So when there’s an earthquake in a small town, the hardware store owner doesn’t raise the prices of the portable generators. And even if they sell out, someone who desperately needs one can probably find one to borrow. But in a big city, there isn’t as much love or knowledge to go around. Higher prices substitute for the lack of love [emphasis mine]. They encourage people to step aside and let strangers who are willing to pay the higher price, get the goods. And higher prices give business people an incentive to stock up on crucial items and bear the costs of inventory.” This distinction is really important. Many people have heard the childhood song, “Sharing Is Caring” and assume that sharing is best. As children, we are admonished by our parents to share our toys with others, because at an individual level, this makes us a pleasure to interact with. But you can’t just blindly apply the maxim “sharing is good” across all levels of society. We can share within a family because we have the knowledge and emotional bonds to make optimal decisions (although this doesn’t mean we always do). We also bear the costs of bad decisions. At a societal level, where we live and interact with hundreds, thousands and millions of people we don’t know, we can’t expect people to have the same love for strangers that they do for their closest of kin. And it is impossible for us to gain and use the knowledge of each individual’s situation when figuring how who gets the cookie. To remedy this lack of “love and knowledge” prices emerged, and do the work for us. Cross post

I am reading The Price of Everything: A Parable of Possibility and Prosperity, by Russell Roberts, and it got me thinking about shortages and what causes them. The book is a fictional novel that introduces basic concepts of economics to the layperson in an easy to understand manner. In the book, Ruth Leiber, an economics professor at Stanford, is describing the gas shortages that took place in the 1970′s. She describes a situation where OPEC cut back on production and the price of oil went up. To protect citizens from “price gouging”, the American government put a cap on how much gas stations could charge for gasoline. However this didn’t resolve the underlying scarcity of supply – all it did was increase demand due to the artificially lower price, and decrease supply because the price ceiling cut into the profit incentive of gas companies to find ways to supply more gas. This created shortages of gas, and consumers in the 70′s would often arrive at a gas station and see a sign that said, “Out of Gas. Come Back Tomorrow.” The professor said that the 70′s was the only period in her lifetime when you had to worry about whether the gas station actually had gas. Contrast this situation to today. Gas prices fluctuate, and we may get upset if prices are higher than what we deem to be “fair” (even though in most cases they are simply reflecting the relative scarcity of gas), but we never worry about whether the gas station actually has gas or not. We would think it ludicrous to arrive at a gas station and have the attendant tell us, “Sorry, we’re out of gas, but if you come by sometime within the next week, we should have some.” It would probably make the news and that company would get a ton of bad press. However shortages due to government manipulation of prices is still with us. Recently, it has come in the form of the attempt to limit “price gouging” after natural disasters. After Hurricane Katrina hit the U.S. and destroyed a bunch of gasoline refineries, a group of attorney generals imposed fines on gas stations that charged prices they deemed “excessive.” As a result, gas stations in New Orleans ran out of gas in the middle of the day and President Bush had to beg people to not buy gasoline unless they needed it. Higher prices would have achieved BUsh’s desired result of lower gasoline consumption in a more effective manner – people listen to their wallet much more than they do a man on TV (even if he happens to be the President…especially if he happens to be the President). The same thing happened when the flu vaccine was in short supply. The same group of attorney generals threatened fines for “gouging”, so prices stayed artificially low, and lines began to form. Supply could not meet demand, and people stood in lines for six, seven even eight hours. One elderly woman even fainted, banged her head on the pavement, and died. If flu vaccine producers were allowed to respond to the increased demand for the flu vaccine, there would be temporarily higher prices, but prices would eventually fall as competitors rushed into the vaccine market to make a profit. All with no shortages. The bottom line is that scarcity is real, and cannot be done away with just because the government wants it to disappear. So the only question should be: should we deal with scarcity by allowing the market to work, or should we let bureaucrats ration scarce resources outside of the market? Both history and common sense show that the market works far better. What implications does this have for other parts of our economy? Health care comes to mind. In countries with single-payer health care systems (i.e. the government is the sole provider of health care), the supply of medical services (e.g. doctors, medical equipment, hospitals, etc) are rationed out by government employees. Because this process is not as efficient and responsive as a market where prices can change instantaneously, many people seeking health care end up waiting in long lines to get services. In a free market, the relative scarcity of medical services would be reflected by higher prices, not waiting lines. Why are higher prices better than lines? Prices allow each individual to weigh the value of that good relative to other goods as well as his local circumstances, and make a decision as to whether it is worth it to buy that good at that price. Let’s take the market for prescription drugs. If there was a decreased supply or increased demand for drugs, the potential for a shortage would appear. But as long as the market had free and functioning prices, no shortage would occur because the change in prices would cause behavior changes. Some people buy the same amount of prescription drugs even if the price increased, others would cut back on their use of prescription drugs, and still others would stop buying drugs and seek out natural alternatives. The important point is that given the inherent scarcity of the good (prescription drugs), the market provides the maximum opportunity for each individual’s preference to be met. With waiting lines, some people will benefit from the artificially reduced price, but only at the expense of others who will not be able to buy prescription drugs at all. And there is a good chance that some of those people who really need prescription drugs (heart attack victims, for example) would not be able to get drugs under a rationing process (perhaps they arrived late and waited at the back of the line) . And because it is impossible for the people doing the rationing (the government) to read people’s minds and make the best decision for everyone, lots of people will be royally screwed in the process. Cross post

Hosni Mubarak The guys trying to bring him down Sorry, but you don’t have a choice. Egypt has been all over the news for the past few days, as anti-Mubarak protesters take to the streets and duke it out with the dictator’s supporters. Most recent articles have focused on the government’s decision to kill the Internet or the attacks on journalists. While are both are tragic, few have addressed the fact that “President” Moubarak is a close ally of the American government, and is the 4th largest recipient of American foreign aid. Last year, Egypt received over $1.5 billion of taxpayer dollars. The only countries receiving more foreign aid are Afghanistan, Israel, and Pakistan. $1.3 billion of this aid is allocated for “peace and security”, or in other words, armaments. Mubarak’s brutal military regime has been characterized by political corruption, sham elections, censorship, imprisonment of political opponents without trials, oppression, torture, murder, kidnapping, socialism, state control of the media, an enriched oligarchy at the expense of the majority of poor Egyptians, the crushing of dissent, and a litany of human rights abuses. Is this the kind of entity you want to support? Every American citizen has a right to use their justly earned property as they see fit. The fact that the government confiscates the wealth of Americans and sends part of it overseas to protect a military dictatorship is unconscionable. If I had a choice, I would not send any money to Mubarak, and I’m guessing that a majority of Americans would share similar sentiments. I would rather support charitable organizations I trust, and in light of the recent events in Egypt, I would probably donate to disaster relief agencies that provide humanitarian aid to the people of Egypt. What right does the government have to deprive me of this choice, and force me to support a government I disagree with? Some may argue that the government needs to support foreign countries when it is in our national interest, and use this as a justification for our current foreign policy. I say let the American people decide. Don’t use our tax money for anything but strict self-defense against invasion. If foreign governments want support, let them send their ambassadors to convince American citizens who may give it voluntarily, rather than government officials who dole out other peoples’ (the taxpayers’) money. This philosophy of military isolationism and political non-interventionism is one first enshrined by our Founding Fathers. It was Thomas Jefferson who said, “I am for free commerce with all nations, political connection with none, and little or no diplomatic establishment” and, “We ask for peace and justice from all nations; and we will remain uprightly neutral in fact.” It would behoove us to heed his wisdom. It might serve us well. Cross post

*This is a guest post by Thomas Hochmann, of Objectivist Voice. Setting aside the very important issues of rights, free markets, and the like, there is an interesting consequence of government interference that often gets overlooked: government control inevitably seems to lead to people being just barely held in check by an ever-growing myriad of laws. This is increasingly true with health care, and specifically with Obamacare. Rather than have contract-based interactions between consumers and providers that can be handled in rational ways, and (when necessary) enforced by objective court systems, we have an environment where everyone is increasingly at everyone else’s throat. In “Obamacare Criminalizes Medicine,” Shikha Dalmia offers two examples. First, there’s the government versus its own citizens, especially those in low-income households: “When the government hands out subsidies, it will use a household’s income in the previous year as the basis for guessing what the household is qualified to get in the current year. But if the household’s income grows midyear, the subsidy recapture provision will require it to repay anywhere from $600 to $3,500… This will make it very hazardous for poor working families to get ahead. In the original law, the loss of subsidy with rising income already meant absurdly high effective marginal tax rates—the implicit tax on every additional dollar of income earned. How high? The Cato Institute’s Michael Cannon puts them at 229 percent for families of four who increase their earnings by an amount equal to 5 percent of the federal poverty level or $1,100. In other words, a family that added this amount to an income of $44,700 would actually see its total income fall by $1,419 due to the loss of subsidies.” This subsidy “recapture” mechanism will have government agents chasing after low-income workers, forcing them to give back government money because these people had the gall to advance themselves and improve their income. Shikha predicts that with this threat looming overhead, recipients of these subsidies will feel pressured to fudge the numbers on tax returns or to work for cash under the table — thus creating whole new problems, and (I would expect) leading to further enforcement measures to reign in this government-encouraged “fraud.” Never mind that none of this would be necessary if we had a government that did not provide these wealth-redistributing, gunboat altruism programs in the first place. Second, Shikha points out extensions to the government’s already-existent “rat out your colleague” system for whistleblowers in the medical industry who report fraudulent Medicare claims. Doctors will be increasingly subject to searches by private “Recovery Audit” contractors who will be “authorized to go to doctors’ offices and rummage through patients’ records, matching them with billing claims to uncover illicit charges.” Actual intent to defraud the government will not have to be proven, and billing errors can be fined $50,000 each. Government versus low-wage citizens? Check. Doctors, nurses, and private mercenary contractors versus each other? Check. Giving doctors yet another massive financial risk to worry about? Check. This is not new to Obamacare, however. In a 1985 lecture titled, “Medicine: The Death of a Profession,” Leonard Peikoff highlighted the government intervention in place at that time. As he called it, the official “dropping of the noose” around doctors’ necks came with the introduction of DRGs, or “diagnosis-related groups.” With DRGs, the government would pay a fixed, arbitrary fee to a hospital based on whatever was diagnosed: “For example, for a Medicare patient in the Western mountain region who is admitted to a hospital with a heart attack and finally recovers enough to go home, the government now pays the hospital exactly $5,094 — no more and no less. And it pays this no matter what the hospital does for the patient… If the patient costs the hospital more than the government payment, the hospital loses money on him. If he costs less, the hospital makes a profit.” An obvious, immediate conflict of interest is introduced here. If a hospital receives the same payment regardless of how long a patient stays, how much or how little care he is actually provided, etc. then the hospital has an incentive: save as much money as possible, and get the patient out as quickly as possible. Peikoff outlines how this can easily pit doctors and administrators against each other: doctors (hopefully) trying to do right by their patients and provide the best care possible, and administrators (likely) trying to minimize costs and losses. It’s not hard to see how this also raises suspicion of doctors in the eyes of patients: is my doctor doing the best he can to treat me, or is he going to cave to the government-imposed bottom line? The government versus its own citizens; doctors and nurses versus each other; hospital administrators versus doctors (and by proxy, their patients); patients versus their doctors and their good intentions. Socialized medicine makes enemies out of everyone, and the webs of suspicion, distrust, fudged numbers, fraud, and “recapture” simply multiply with each new law that gets passed. It’s not bad enough that some people actually demand that doctors be servants to the creed of need (“I think it’s disgusting for doctors to make a profit,” one protester shouted on a TV broadcast I saw last year). With the creed of need enforced by government mandates, we end up with a system littered with servants and criminals on both sides of the equation. “There is nothing left but the coercive apparatus of the state to keep patients and doctors in line. This would be unimaginable where the customers receiving or contracting for services are actually the ones paying for it. If Whole Foods “overbilled” its shoppers, they would just go to Trader Joe’s. No one would think of summoning the police. If a mechanic submitted unjustified bills to All State Insurance for car repairs, All State would contract with someone else. There would be no need for an FBI stakeout.“ ~ Shikha Dalmia, “Obamacare Criminalizes Medicine“ Cross post

Last night I watched President Obama’s State of the Union Address. I agree with some things he said and disagree with others, and I want to comment on certain parts of his speech. *Obama’s words are in quotes and italics. “America still has the largest, most prosperous economy in the world. No workers are more productive than ours. No country has more successful companies, or grants more patents to inventors and entrepreneurs. We are home to the world’s best colleges and universities, where more students come to study than any other place on Earth.” I’m glad he pointed out some of the positive aspects of America’s economy. The steady growth in American productivity from 1947 has led to higher living standards, and is something to be celebrated. Rate of Worker Productivity Growth (BLS) America also still has the world’s largest economy, measured in nominal GDP. Ten Largest Economies In The World (IMF) America has also seen steady growth in the number of patents given. See this table by the U.S. Patent & Trademark Office. “What’s more, we are the first nation to be founded for the sake of an idea – the idea that each of us deserves the chance to shape our own destiny. That is why centuries of pioneers and immigrants have risked everything to come here.” I also applaud Obama’s confidence in celebrating the moral ideals of our Founding Fathers. America is a country based on freedom and natural rights. Immigrants continue to flock to our shores in the hopes that they will be able to escape oppression and make a better life for themselves. Many people shy away from discussing morality, but we must never forget the morals that created the United States. “Our free enterprise system is what drives innovation. But because it’s not always profitable for companies to invest in basic research, throughout history our government has provided cutting-edge scientists and inventors with the support that they need. That’s what planted the seeds for the Internet. That’s what helped make possible things like computer chips and GPS. Just think of all the good jobs – from manufacturing to retail – that have come from those breakthroughs.” Here Obama argues that it is necessary for government to intervene in the free markets because companies can’t afford to invest in their own R&D. He uses government involvement in the Internet as a case study. Obama confuses correlation with causation. The government did in fact control Internet technology in the 1980′s, and only allowed universities and the military to use it. However it wasn’t until the 1990′s, when key resources were privatized and everyone was allowed access, that the Internet revolutionized industry and created all those jobs cited by Obama. If the Internet had never been privatized, the public would not have benefited from this technology. Tyler Cowen, a professor of economics at George Mason University, wrote a blog post refuting the notion that the government was responsible for inventing the Internet we have today. In Part 2 I will examine more of Obama’s claims made in the State of the Union Address. Do you agree or disagree? I welcome rational arguments in the comments. Cross post

Have you ever wondered why health care costs are rising faster than inflation? It’s not because doctors or insurance companies are “greedy”. It’s because the government is not allowing the free market to function. Health insurance, like any other insurance, is designed for major emergencies. You buy car insurance in case your’e in an accident, and you buy flood insurance in case your home is damaged in a flood. Similarly, you buy health insurance for major medical emergencies, like cancer, heart attacks, or serious injuries. Insurance of any kind is not designed to cover day to day, routine expenses. The model just doesn’t work. You don’t use car insurance to cover oil changes and trips to the gas station. If you did you would have to pay sky-high monthly premiums that wouldn’t make any financial sense. The reason health care is so expensive is because government requires routine medical procedures to be covered by health insurance. Insurance companies realize that they will lose money by paying for routine care, so they pass the cost on doctors. Doctors are forced to provide health care services for free and then chase down the insurance company for payment. This can take several months, and sometimes the insurance company decides not to pay at all. This system makes providing health care to patients with insurance a money-losing deal, so doctors will often over-charge patients without insurance to make up the difference. The result: exploding health care costs. A common argument made by supporters of universal health insurance coverage is that health care is essential to human life, and thus too important to be left to the free market. However, the fact that health care is so important is also the reason why it should be left to the market, free of government intervention. For example, food is even more essential to human life than health care, and the free market does a fine job of making food affordable and accessible for everyone. The market does such a good job that in first-world countries the biggest health problem we have is obesity, not famine. Consumers can buy everything from cheap fast food to expensive gourmet food. There are even soup kitchens and food drives for the homeless who can’t afford any food. Imagine if we had government mandated food insurance? Everyone would buy steaks, and the cost of food would skyrocket. To really lower costs and expand accessibility, the government should deregulate the health care industry and allow the free market to do its job. If the competitive forces of the market are allowed to work, health care costs will go down. We’ve already seen it happen in areas not covered by health insurance, such as LASIK. Every year costs come down and LASIK becomes more affordable for everyone. We don’t have to confine ourselves to the health care industry to see the cost-lowering effects of free markets. Take a look at cell phones and TV’s. When these products were first introduced, they were expensive and not everyone could afford them. Now, through the competitive forces of the free market, the average “poor” person in America has both. Why would it be any different for health care? If you agree with my arguments and would like to sign a petition to repeal ObamaCare, click here. I welcome rational arguments in the comments. Cross post

The Science of Success, by Charles G. Koch In the Science of Success, Koch Industries CEO Charles G. Koch takes the same principles that make societies free and prosperous and applies them to companies. He calls this process Market Based Management (MBM), and he used it to grow his company into the largest privately owned company in the world, with over $100 billion in revenues in 2009. Part-philosophy, part-economics, and part-management science, The Science of Success should be read by every executive of every company in the world. In it Koch discredits command-and-control corporate hierarchies, functional departments, and old-school compensation plans based on education and/or experience. Koch argues that in order to be successful, companies should be planned like free societies, where each individual is free to pursue his or her rational self-interest within certain mutually accepted rules of conduct. This revolutionary idea is applied through 5 Dimensions, which Koch describes in the book: Vision: Determining where and how the organization can create the greatest long-term value. Virtue and Talents: Helping ensure that people with the right values, skills and capabilities are hired, retained and developed. Knowledge Processes: Creating, acquiring, sharing and applying relevant knowledge, and measuring and tracking profitability. Decision Rights: Ensuring the right people are in the right roles with the right authorities to make decisions and holding them accountable. Incentives: Rewarding people according to the value they create for the organization. For this blog post I will describe how MBM handles the concepts of Decision Rights and Incentives differently from traditional companies. DECISION RIGHTS Koch correctly points out that the biggest problems in society have occurred in those areas thought to be best controlled in common: the atmosphere, bodies of water, air, streets, the body politic and human virtue. This is known as “tragedy of the commons”, because when there are no clearly defined property rights in a society, no one has an incentive to take care of the thing they use. In an attempt to replicate the positive effect of property rights in a company setting, MBM uses the idea of decision rights. Decision rights should reflect an employee’s demonstrated competitive advantage, meaning he or she can perform an activity more effectively at a lower opportunity cost than others. The key point is that this authority is based on the degree to which an employee has demonstrated a competitive advantage in that area, NOT arbitrary factors like experience, education, seniority or being chummy with the boss. For example, an employee who has demonstrated a superior ability in accounting would have significant authority to approve financial statements. However this would not automatically grant him a similar authority to hire and fire junior accountants. Contrast this with the situation in many corporations, where technical excellence can get you promoted to a management position in which you are responsible for leading a team of people, despite demonstrating absolutely no management ability. INCENTIVES Abraham Maslow stated that the central problem of management is, “how to set up social conditions in any organization so that the goals of the individual merge with the goals of the organization.” That means that every employee in MBM is considered an entrepreneur, and is paid a portion of the value they create for the company. That means no cost-of-living adjustments, no automatic promotions or bonuses due to seniority, and no golden parachute severance packages if you run the company into the ground (I’m looking at you Wall Street). Compensation in an MBM company is based on the long-term, real value you add to the company. If you take unnecessary risks that lose money for the company, your compensation will be decreased accordingly. On the other hand, if you are the leader of a project that is financially successful in the long-term, your compensation will be increased accordingly. Compensation isn’t set in stone, so employees cannot rest on their laurels but must continually strive to add value. Also, MBM strives to tailor incentives for each employee. What any individual employee values is highly subjective and includes both financial and non-financial components. Just as in a free society, some citizens may value a high salary, some may value time freedom, and some may value a remote working agreement. The variations are endless. In MBM, compensation packages, where feasible, are tailored to the individual and may be different for different employees. Some employees may be awarded with company stock, increased vacation time, or the ability to bring their kids to work. It all depends on the unique situation surrounding the employee. Those are only two of the vast number of differences between a traditional company and an MBM company. To get the rest, you’ll have to read the book. Cross post

Clint Townsend Today I want to share part of a term paper, written by my friend Clint Townsend, for his Peace Studies class. It is a bit longer than my usual blog posts, but it is a great read, and I encourage you to share your thoughts and opinions in the comments section. — Throughout all of human history, no political document other than that of America’s Declaration of Independence better articulated the notion of universal human rights. In it, it states that “all men are created equal, that they are endowed…with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” The concept of rights remains relatively new. Throughout all of history, humankind accepted his status as a subject of the king or monarch. Today little debate surrounds questions of negative rights, namely the right to be free from arbitrary force, fraud or injury, although many states continue to violate these principles. More argument, however, surrounds questions of the role of the state in providing a minimum standard of living. Some claim that basic access to healthcare, education, and work constitute humans rights. In order to adequately address this claim, we must first define what rights are. In a nutshell, a human right is an entitlement, merely by virtue of being human, that can not be denied without just cause. The American tradition, under Lockean influence, has held that an individual has rights to life, liberty and property and the government serves the purpose of protecting these rights. Some scholars today, however, claim that there is no axiomatic truth regarding rights and that rights are simply relative to a given culture. Of course, our very own culture, with slavery and the denial of rights to women, has practiced this belief, rejecting the dictum that “all men are created equal.” In this essay I will argue that in purely philosophic terms negative rights constitute human rights and that conferring positive rights, such as right to healthcare and education, must necessarily infringe upon the rights of others. Additionally, my contention will be that all states should recognize human rights to life, liberty and property, thus imposing international standards and expectations of foreign states to uphold universal rights. While I believe that each state should reserve sovereignty, this does not imply a belief in relative rights; all persons have natural rights independent of and preceding the state. I will argue against the concept of economic and social rights on the basis of an incompatibility between negative and positive rights. For the opposite reason, I will argue in favor of civil and political rights. The American founders used the term “unalienable” to describe the nature of human rights. By it, they meant that rights were inherent upon human nature and that no government could either grant nor arbitrarily withhold those rights. The modern American conception of human rights has been influenced by the Lockean concept that rights precede and supersede the power of government. Regarding the origins of humans rights, some have claimed that rights are a gift of God, while others claim that rights are a gift of society or a social contract. However, both views miss the point that the source of rights is man’s nature. Ayn Rand explained that “rights are conditions of existence required by man’s nature for his proper survival.” Accepting such a view of the origins of rights, the question then becomes what are rights and which ones are necessary for man to live in accord with his nature. “A right”, as Rand explains, “is a moral principle defining and sanctioning a man’s freedom of action in a social context.” I believe that there is only one fundamental right to which all other rights are derived from: a man’s right to self-ownership. Man owns his life which means the right to engage in self-sustaining and self-generating action. The concept of rights pertains only to freedom of action, and freedom from physical compulsion, coercion and interference by other men. His rights impose no obligations on anyone else except of a negative kind: to abstain from violating his own rights. As previously noted, self-ownership acts as the source for all other rights. We can broadly categorize self-ownership as a property right since one’s body is one’s property. Without property rights, no other rights are possible. For example, if a man has a right to speech, but can not legally own a typewriter, how then does he manifest such a right? Additionally, how does a man sustain his life without the right to the product of his effort? Therefore, all rights, including life, liberty and property, are simply rights to action, never the right to an object, but simply to the action and the consequences of producing or earning that object. As I have noted, all men are entitled to the same rights, those of life, liberty and property, solely by virtue of being human. No government has the right to deprive a man of his natural rights without due process of law. Therefore, in the question surrounding whether or not a country is free to determine its own laws and customs I argue in favor of sovereign, self-government, however I reject the notion that governments have the right to deprive their citizens of their natural rights on the basis of different cultural norms and practices. While Donnelly views “human rights as prima facie universal, but recognizes that culture [acts] as a limited source of exceptions and principles of interpretation”, I hold the view that no exceptions to one’s natural rights is acceptable. The assumption is often made that supporters of radical universal human rights would support international responses to violations of the principle of universalism. I do not hold, however, that outside regimes, whether the UN or other international organizations, have the moral authority to intervene in the affairs of another nation. The lack of defense against the violation of universal human rights does not indicate the absence of rights, rather it merely means that human rights have been violated. For example, freedom of assembly in China is extremely restricted, which is in fact a violation of the rights of individuals to meet together peacefully, however a response in the form of violence, whether through direct military action or economic sanctions, only perpetuates further rights violations. That China refuses to recognize its citizens rights does not mean that those rights do not exist as relativists would claim in certain circumstances. Therefore, I conclude that while Donnelly is correct that countries should be free to “communal autonomy and self-determination” I disregard his argument that different cultures can determine the interpretations of these rights. Donnelly explains my position when he asks “If human rights are based in human nature…, and human nature is universal, then how can human rights be relative in any fundamental way?” Lastly, I want to address the notion of economic and social rights. To the extent that property rights exist, only free trade and property rights can be included amongst economic and social rights. If rights are to impose to obligations on other men, then economic and social rights that claim man has a right to a certain standard of living, employment, healthcare, education, etc. can not exist without necessarily imposing on other men to provide these things for them through taxes. The right to life does not mean that others must provide an individual with the necessities of life. Likewise, the right to property does not mean that others must provide him with a home. Political rights versus economic rights is an either-or situation. One must necessarily destroy the other. All in all, I have explained the origin of man’s rights, specifically that rights are inherent within man’s nature and that he must have them in order to act rationally. Human rights are strictly negative. They confer no obligation on that of another other than a purely negative one; no man has the right to restrict the peaceful action of another. I further argued that no state has the right to violate the rights of man by interpreting his rights in the context of a given culture. This view does not imply my support for international action against states who violate the rights of their subjects. Ultimately, I side with the universalist approach to human rights, claiming that rights are absolute, they are clearly defined, and no state has the right to modify rights based on cultural differences. Lastly, I defended only political and civil rights and denied the existence of economic and social rights as they required the state to take action, which necessarily infringes upon the rights of other individuals. Cross post

The Statue of Liberty Yesterday I listened to a webinar titled, How to Get An Internship In Liberty, sponsored by the E-Leadership Initiative at Students for Liberty. The webinar featured Isaac M. Morehouse, the Educational Programs Director at The Institute of Humane Studies. He is an energetic and passionate presenter, and I learned a lot from him. His presentation made me realize that there are so many ways to get involved in the liberty movement that it can be confusing trying to sort through it all. In this post I will highlight a few opportunities I’m familiar with that can serve as a good place to get started. At the end of January, 2011 I will begin work as an intern with the Charles G. Koch Charitable Foundation. The opportunity to work with the Foundation was made available through the Koch Internship Program, which runs every year in the spring, summer and fall. The KIP enables you to work at several non-profit partner organizations in the DC area or at the Foundation itself. Your work at the non-profit organization of your choice will be supplemented with weekly training in the principles of Market-Based Management, the revolutionary management philosophy that takes the principles that make free countries prosperous and applies them to companies. This philosophy was developed by Charles G. Koch and has been used to grow his company, Koch Industries, into the largest private company in the world, as ranked by Forbes Magazine. I am excited to learn more about MBM, and if you are a business major (like I was) I suggest you take a look at this program. I also want to thank Thom Russell, Danika Ciano, Alanna Ream, and Marty Kwedar for making the interview process a pleasurable one. I will be attending the 2011 International Students for Liberty Conference this February 18 – 20 at George Washington University in DC. Fox Business anchor John Stossel and executive vice-president of the Cato Institute David Boaz are the keynote speakers. The conference will feature activism training taught by student leaders of liberty, networking and social events, and guest speakers like George Mason University economics professor Tyler Cowen. Student tickets are $45 and non-student tickets are $70. Hurry because prices will increase in February. Reduced-cost housing and scholarships are also available. I will also be attending the 2011 Conservative Political Action Conference, which is traditionally a conservative conference (as you can tell by the name), but should feature a high proportion of liberty lovers this year. Rep. Ron Paul and his son, Senator-Elect Rand Paul will both be speaking, and there will be a straw poll to vote for 2012 Republican Presidential candidates. I’ve been told that if Ron Paul receives enough support in this straw poll, he will strongly consider running. Student tickets are $35 and non-student tickets are $75, and there are student scholarships available. I have applied to three Summer Seminars put on by the Institute for Humane Studies: Exploring Liberty (June 11-17, George Mason University), Morality, Capitalism, and Freedom (July 23-29, Wake Forest University), and Liberty & Leviathan: Policy from the Libertarian Perspective (May 28-June 3, Wake Forest University). Which one I attend will depend on whether I get accepted or not and my work schedule. The best part about these seminars is that they are FREE, so if you can get to the locations you won’t have to pay tuition or housing. They have many other seminars available, so if you’re interested in learning about liberty I highly recommend you check them out. I also applied to the 2011 Summer Conference: Ayn Rand’s Atlas Shrugged and The Moral Foundations of Capitalism, put on by the Clemson Institute for the Study of Capitalism. This conference is for both undergraduate and graduate students, as well as recent graduates and will be taking place from May 26th – May 30th at Clemson University in South Carolina. I’m especially excited for this conference because it focuses specifically on the study and analysis of Atlas Shrugged. There are full scholarships for students that cover tuition, housing, and travel expenses of up to $500, so I encourage you to apply before the March 1, 2011 deadline. Finally, I recommend looking into the Charles G. Koch Summer Fellow Program and the Journalism Internship Program at the Institute for Humane Studies. Both are well known, paid and seem like excellent programs for students or recent graduates to get involved in the field of liberty. There are many other opportunities to defend liberty, but the programs listed above are the ones that I’m most familiar with. I hope this post was informative, and if liberty is your thing, take action! Have more questions about these programs? I welcome your comments below. Cross post

Purpose: Explore the costs, benefits, and alternatives of a federally mandated minimum wage. Definition: A minimum wage is the lowest hourly, daily, or monthly wage employers may legally pay to employees or workers. Equivalently, it is the lowest wage at which workers may sell their labor. History The minimum wage was first enacted in New Zealand in 1894 as a means to control proliferation of sweat shops in manufacturing industries that employed large numbers of women and young workers. Today there is minimum wage legislation in more than 90% of all countries. Despite this high adoption rate, there is still much debate as to whether minimum wage law is effective in helping the poor lift themselves out of poverty. Does It Work? Up until the mid-1990′s, it was widely accepted by economists that an artificial increase in the minimum wage would simultaneously decrease employment. This can be illustrated by the economic theory of supply and demand, found in any Economics 101 textbook. One textbook states: “If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces, the quantity of unskilled workers employed will fall. The minimum wage will price the services of the least productive (and therefore lowest-wage) workers out of the market. … The direct results of minimum wage legislation are clearly mixed. Some workers, most likely those whose previous wages were closest to the minimum, will enjoy higher wages. Others, particularly those with the lowest pre-legislation wage rates, will be unable to find work. They will be pushed into the ranks of the unemployed or out of the labor force.” This is illustrated by the following diagram: Economists such as George Stigler and Thomas Sowell both support this assertion that the minimum wage law creates unemployment. Both Stigler and Sowell go even further to say that the harmful effects of the minimum wage law fall disproportionately on low-skilled workers who are forced out of the labor market. Better skilled workers whose market wage is at or near the minimum wage benefit, while workers who cannot demand the federally mandated minimum cannot find work. Supporters of the minimum wage assert that this supposed inverse relationship between the minimum wage and employment exists in a market with “perfect competition”. In the real world, they claim, the labor market suffers from imperfect competition and that a monopsony develops where there are few buyers (employers) and many sellers (employees). This imbalance of power can cause employees to be paid less than their market value. They cite asymmetric information and imperfect mobility in the labor market as factors that cause this monopsony. In other words, the employee may have less information on the wages, benefits and availability of other jobs (asymmetric information), and it is proportionally more expensive for the individual employee to transition to a new job than it is for an employer to hire a new worker (imperfect mobility). What Do The Studies Say? Actual empirical studies on the effectiveness of minimum wage laws have been inconclusive. Gramlich (1976) argued that most of the benefit from minimum wage laws went to higher income families, and that low-income teenagers were made worse off. Brown et. al. (1983) also found that there was a 1-3% decrease in employment every 10% increase in the minimum wage. However, Card and Kreuger studied the 1992 New Jersey minimum wage increase from $4.25 to $5.05 (an 18.8% increase) by gathering survey data from employers and concluded that in fact employment increased after this period. A subsequent meta-analysis by Neumark and Wascher contradicted the Card & Kreuger conclusion by analyzing 300 studies of minimum wage law from over 50 countries, primarily from the 1990s onward. They found that: 1) studies strongly point to a reduction in employment opportunities for low-skilled workers 2) there is some evidence that minimum wage is harmful to poverty stricken families, and virtually no evidence that it helps impoverished families 3) minimum wage lowers adult wages of young workers who encounter it, by reducing their ultimate level of education Basically, we’re not sure if the minimum wage law is doing more harm than good. What Are The Alternatives? Economist such as Friedrich Hayek and Milton Friedman have supported the idea that instead of a minimum wage there should be a “basic income” given at periodic times to all of a country’s citizens that would be sufficient to cover life’s necessities. They claim this would be more effective than a minimum wage law because it doesn’t impose any costs on employers. Refundable tax credits are another version of this idea. Unlike the basic income, it does require that a household earn income, but it allows poorer households to reduce their tax liability to below zero, resulting in a tax payment from the government. Ronald Reagan championed these tax credits, and in 2007 the Congressional Budget Office stated that refundable tax credits delivered more monetary benefit to the poor at a lower cost to society. Basic income and refundable tax credits are both based on a government-backed, compulsory transfer of wealth from the rich to the poor, from the producers to the consumers. I believe that the government use of force should be confined to protecting individual rights. I believe there is a better alternative that rejects the use of force as a means of wealth distribution, and is instead based on voluntary organization and negotiation between the employer and employee. It is called collective bargaining. Germany, Sweden, Norway, Switzerland, Sweden, and Denmark all use collective bargaining to determine wages and have no federally mandated minimum wage law. The resulting wages negotiated between employers and unions are almost always higher than what the federal government would mandate (the collectively bargained minimum wage in Denmark amounts to $16/hour). In addition, the government would not have to impose legislation that would create costs for employers and result in economic inefficiencies. I can draw upon my personal experience as an actor in the entertainment industry as evidence of the benefits unions can have for their members. Many unions exist in Hollywood, including the Screen Actors Guild (SAG), the Directors Guild of America (DGA) and the Writers Guild of America (WGA). As an example of the benefits collective bargaining can bestow upon the labor force, let us look at the differences in pay between union and non-union movie extras, covered by SAG. SAG movie extras are paid $144 for 8 hours plus overtime, whereas non-union movie extras are paid only $64 for 8 hours plus overtime. SAG members also enjoy better overtime wages and can qualify for benefits like pension plans, health insurance and unemployment insurance once they reach a certain annual income. The collective bargaining power of SAG smooths out the market inefficiencies of asymmetric information and imperfect mobility, resulting in wages closer to their market value; without the costs associated with government meddling in the labor market. In collective bargaining, both parties maintain their freedom to choose. Employees can choose to join the union or not, and employers can choose to hire union workers or not.There is a definite cost-benefit analysis to be made for either decision, and it is my belief that analysis should be left up to the parties involved, not the federal government. Conclusion In conclusion, I have examined the history of the minimum wage law, as well as arguments for and against its effectiveness. I have considered the alternatives to the minimum wage, including the basic income and refundable tax credits. I have proposed that collective bargaining is an alternative that maintains an individuals freedom to choose, and avoids the use of force by the government. Cross post

Khan Academy is a website that hosts multiple educational YouTube video lectures on topics as varied as mathematics, history, economics, language, science and finance. It is hosted by Salman Khan, a former Wall Street trader who now operates the website full time as a 501© non-profit, thanks to generous donations from organizations like the Bill and Melinda Gates Foundation. Khan Academy is revolutionizing education. I love this website. Khan’s uses of pictures, diagrams and video during his lectures (you never actually see him, just hear him) makes the course material much easier to remember. I posit that watching all the videos on his website (there are over 1,800 of them as of November 25, 2010) would make you more educated than the average college graduate. And the best part? It’s ALL FREE. This is how the free market is supposed to work. This is how the free market WILL work if not to heavily regulated by the government. Entrepreneurs (whether in the for-profit, non-profit, or social business sector) see an unmet need and they come up with an innovative way to meet it. Could you imagine if the federal government intervened for “the public welfare” to shut down Khan Academy because it didn’t conform to the regulatory standards of other educational institutions? It would be a huge disservice to us all. There is a huge unmet need for high quality and affordable education online, especially with traditional higher education costs outpacing inflation. Organizations like the University of Phoenix and Academic Earth are rising to meet this need; now you can add Khan Academy to that list. Cross post