Yesterday I participated in a seminar sponsored by the University of South Carolina Law Review on today’s financial crisis.
It was a high-quality affair; I learned much.
One participant, however, caused me to wince. This participant was a U.S. Representative from North Carolina, the Hon. Brad Miller. He began his remarks by pointing out that he was the only non-academic speaking at the seminar. Upon hearing this remark, I guessed correctly what he’d say next. It went something like this:
Unlike academics, I don’t see things with theories. I see things with my eyes. And I trust my eyes.
Ah yes, the practical man, unhampered by the blinders of theory, refusing to drink of the inebriating elixir of abstract thought. He looks at the world as it is, straight on, seeing plainly what the theories of woolly headed academics only cause to be misperceived and misconstrued.
Of course, when this particular practical man — this paragon of common sense and enemy of scholastic ceteris paribus-es — looks at the world, he sees plainly that greed and deregulation are the cause of today’s problems. (He also, by the way, determined that greed was the cause of the Great Depression by seeing that Franklin Roosevelt said that it was so. He quoted FDR.)
The implication of this instance of ignorant populism, of course, is that theories only confound sound thinking.
The setting was not one conducive to a debate on epistemology or methodology, so I kept my mouth shut — but had I opened it, I would have simply asked the Hon. Mr. Miller what he sees when he stands outside and looks at the relationship of the sun to the earth. Surely he sees the sun revolving around a perfectly still and stationary earth. He also sees a flat earth.
Were he consistent, he would proudly claim membership in Flat-Earth Society, and wear a lapel button proclaiming that Galileo was wrong.
My great teacher, Leland Yeager, quoted Norman Campbell’s wonderful smack-down of such ignornant criticisms of theorizing:
The plain man — I do not think that this is an overstatement — calls a “theory” anything he does not understand, especially if the conclusions it is used to support are distasteful to him…. It is only because he does not understand “theory” that the plain man is apt to compare it unfavorably with “practice,” by which he means what he can understand.
The practical man is apt to sneer at the theorist; but an examination of any of his most firmly-rooted prejudices would show at once that he himself is as much a theorist as the purest and most academic student; theory is a necessary instrument of thought in disentangling the amazingly complex relations of the external world. But while his theories are false because he never tests them properly, the theories of science are continually under constant test and only survive if they are true. It is the practical man and not the student of pure science who is guilty of relying on extravagant speculation, unchecked by comparison with solid fact.
The Hon. Mr. Miller’s remark that he can see, without the need of any theory, the causes of this crisis is more ridiculous than is Tina Fey’s intentionally comical remark, in her parody of Sarah Palin, that a governor who can “see Russia” from her house is well-equipped to carry out foreign policy.
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Mr. Miller was also one of the first to come out with the proposal that bankruptcy judges be allowed to rewrite mortgage agreements in favor of the borrower. Forget rule of law, and forget that many of those defaulting on mortgages falsified information on their loan application, the evil and greedy businesses deceived the innocent and frail borrowers.
"The Post American World", Fareed Zakaria,
pg 93-94:
"For a regime that is ostensibly Communist, Beijing is astonishingly frank in its acceptace of capitalism. I asked a Chinese official once what the best solution to rural poverty was. His answer: "we have to let markets work. They draw people off the land and into industry, out of farms and into cities. Historically that has been the only answer to rural poverty. We have to keep industrializing." When I have put the same question to Indian or Latin American officials, they launch into complicated explanations of the need for rural welfare, subsidies for poor farmers, and other such programs, all designed to slow down market forces and retard the historical – and often painful – process of market-driven industrialization."
Now, any honest observation of American policy towards markets since FDr causes one to confess that we could be included with the Indian and latin American officials in Mr. Zakaria's comments.
It is insane that America spent so much time leading and teaching the value of open trade and free markets in raising the living standards of everyone, and now that the world has learned it and is playing catch-up, American domestic idiots are shutting America down with oppressive ideas regulations, and laws.
I doubt that he would, but you could ask him.
The "Earth-centered" solar system proved inaccurate, although the "center" of the solar system is really an arbitrary construct. The Sun does go around the Earth, you know. The Earth also goes around the Sun.
Galileo was wrong. The Copernican, heliocentric description of planetary motion, championed by Galileo, was always inferior to Ptolemy's Earth-centered description.
The real improvement came with Kepler's laws, based upon exhaustive observations by Tycho Brahe. Tycho rejected the Copernican system along with the Ptolemaic system, because neither were consistent with his observations. He developed a hybrid model.
Kepler later replaced Tycho's hybrid model with his wonderfully simple laws of motion.
Then Newton replaced Kepler's laws with his Gravity.
Then Einstein replaced Gravity with General Relativity, which isn't really a heliocentric theory at all. The Earth doesn't swing around the Sun like a ball on a string, as Newton imagined. It follows the contours of space immediately surrounding it, contours affected by the more massive Sun, according to Einstein.
Myth of the Flat Earth
The Flat Earth is a myth, because medieval scholars never believed the Earth to be flat.
Basically, the Flat Earth was invented later by people who didn't believe the Earth to be flat either.
The Flat Earth is actually a Straw Man falsely attributed to medieval scholars by their modern critics, just as you falsely attribute the idea to Miller.
You might like to expand the scope of your disdain: AIG officers party
What else would a bankruptcy judge do? Order the debtor into slavery, along with his children?
But I suppose bankruptcy judges shouldn't rewrite mortgage agreements. People with negative home equity should just default on their mortgages. The house secures the mortgage, and the creditor still has the house. That's the risk he chose to take when he wrote the mortgage. If a home mortgage reads otherwise, a judge should simply ignore it. Title to the creditor. Resident evicted. Debt erased. Case closed.
Bankruptcy is the rule of law. Do you think the socialists invented it or something?
If a creditor wants simply to believe everything a borrower says, that's his prerogative.
Bravo Mr. Boudreaux! You made my day!
Style over substance is more in vogue today than anytime in my memory (I'm approaching 50 at a gallop), and no where is substance ignored more than in the political arena.
Keep the faith!
My favorite sneering that I've encountered:
I explained the Monty Hall problem to some non-mathematicians and got the response "It's true on paper, but not in real life."
My theory is that demand for rents has reached an unprecedented level at the same time that prospects for growth are severely constrained by a relative scarcity of the ultimate resource. We haven't quite reached the resource constraint yet, but everyone knows, at some level, that we're almost there.
In other words, we're clamoring for entitlement to income streams that we haven't really created, because we invested much less than our parents in the ultimate resource. We ate our seed corn, and now we're in the fields searching for the corn we never planted, shocked that we can't find it and demanding that statesmen protect us from the frauds and ne're do wells hiding it from us.
So the peddlers of promissory notes are working overtime, and we're increasingly oblivious to the integrity of their promises, because we must take what we can find, and just can't find any better promises.
Do statesmen play a role in this rent seeking game? Of course, they do. Is Capitalism the solution to the problem? Of course not. The only solution to the problem lies in the past. We need to go back in time and have more children. Capitalists, by definition, are just the people holding the promissory notes. We are the capitalists, and we've over-promised to ourselves.
That's they're theory, isn't it?
That's their theory, isn't it?
I see the action Dr. Boudreaux is referencing frequently with a friend of mine. He is against free market reform, and we have other political differences. However, when I mention a study or data that supports my argument, his response is, generally, "You may have your numbers and your studies, but I know what is really going on." This has always confused me, but thank you for the references to other people writing on the subject.
I can't remember who said it, might have been Milton Friedman, but it went something like this. You can't make good public economic policy unless it comes from good economic theory. Amen.
Don linked this interview with Julian Simon a while back. He explains here what "the ultimate resource" is.
Simon doesn't say so explicitly, but you shouldn't imagine that he's only discussing academics. He certainly isn't. We're all continually innovating all the time in our specialized domains, right down to the particular problems I'm personally solving in my business this week.
If you believe that a few Bright Lights are the ultimate resource, you might imagine that we can triple the rate of productivity growth simply by tripling the number of academics, regardless of the growth of other factors, but I'm sure that Simon would disabuse you of this belief.
So I don't expect the rate of productivity growth to increase in the next couple of decades, even if we do triple the number of academics. Productivity growth, for common consumption, might even decrease, because we'll be so focused on priorities other than growing output for common consumption, priorities like the health care of the oldest among us.
At best, I expect the rate of productivity growth to remain the same. In the simplest formulation, the growth of output (GDP growth) is the product of population growth (the population of workers) and productivity growth, so if the population doubles and we all produce twice as much, output grows by a factor of four.
In the first three decades of this century, the population of workers grows at one third the rate of the last three decades of the last century.
I see no reason whatever for the rate of productivity growth now to triple simply because we had few children in the past, so I expect U.S. GDP growth to fall substantially. I don't expect GDP to fall. I expect the rate of growth to fall.
The only solution to the problem lies in the past.
Of course that's no solution.
Looking forward, the people will learn the hard way that there's no solution to be found in faking reality either.
What our government has become is a reality faking regime. That's why so many are enamored of political power.
We can just get our political magicians to scribble some words on paper threatening to point guns at people and magically alter reality.
Nice post, overall, but I take issue with the following bit from Yeager/Campbell:
the theories of science are continually under constant test and only survive if they are true.
False theories can pass a large number of tests and survive for lengthy periods of time.
Nice to know all that about "flat earth" Martin, but I think the point still applies that if a person goes solely by his perceptual experience, the earth appears to be flat and the sun appears to do all the moving.
Hahaha. Besides the content and argument being put forth, I most enjoyed my laughter … very entertaining to say the least.
Thank you Don.
Brad Miller is my rep and now I have yet another reason to vote against him.
When I ran for congress in Maryland, I attended a candidates event sponsored by a community group. For the forum, they established a set of rules so all the candidates would have equal time to speak.
Mike Barnes, the incumbent, showed up (late), was immediately granted the stage, and just took over. He spoke for as long as he wanted (much longer than the allotted time) and left.
You misinterpret the intent of Representative Miller. His intent is to create legislation ordering judges to always favor the home buyer over the lender in foreclosure or bankruptcy cases. The judge could not decide a case on its merits. This would be yet another instance of Congress usurping judicial powers, similar to the creation of mandatory minimum prison sentences.
I don't know what Miller proposes, but it couldn't be much worse than McCain's call for Congress to sell another three hundred billion in entitlement to tax revenue to pay off parts of people's mortgages to protect other people who lent them too much money from foreclosure, while I'm pay my mortgage, which is obviously too small, and try to imagine saving in the future while my taxes skyrocket to pay for all of this stuff or my wages slide relative to prices as the Fed inflates further.
Like I said, hand the title back to the creditor, evict the resident and erase the debt. If the creditor wants to avoid this outcome by renegotiating the mortgage, that's fine too. That's the only solution to this "crisis" I favor.
And if the bank must declare bankruptcy and you bought an MBS from it, you lose too. Let's dump the FDIC while we're at it.
It depends what you call "theory"; I think that Don and I would agree that it is not the lemma-laden stuff one most often finds in JET. Dan Klein had an article about this in EJW entitled "The Paucity of Theory in the Journal of Economic Theory", and the work that a co-author and I had published in EJW (Entitled "The Market for Lemmas: . . . ") dovetails with Klein's.
The point is that what many economists call "theory" is not at all what maximus refers to when he allude to what Milton Friedman called "good theory."
Is there audio or video of this panel discussion?
Martin,
You have a good point about the coming demographic crunch. It is something I have argued to no avail with my two "progressive" co-workers which didn't have children (one being gay the other married but decided not to have children because "the planet is overpopulated", I think actually because he doesn't want to sacrifice to raise children which by the new customs of these day won't bother nor be legally obligated to care for him, just as the other (the gay) does financially speaking to his mother who has Alzheimer's and is on the taxpayers care even though she has two unmarried children with no child of their own, both professionals with decent income). Sorry for the detour but it illustrates the point.
Both want the rents and badly, both have never bother to invest productively whatever they have saved from not having children to live from when incapacitated. Both expect and vote for the State to take care of their needs.
As you said, we don't have enough resources to take care of the elderly (especially the gold plated care they think they are entitled to) and invest in raising productivity which is the only way we could overcome the demographic crunch because for many years we have being living beyond our means and not save and invest productively as much as we should and I think the reason for this behavior is no other than the Government "safety net" which many take for granted and reduces the incentives to save and invest.
As you said, we don't have enough resources to take care of the elderly
Hence the pressure for "universal" health care.
What easier way to usher the old folk off the planet than by having bureaucrats withhold treatment due to "budget constraints".
Exactly Sam, but that is not what they have in mind. I keep telling them they will end up with a monopolistic HMO with sovereign immunity that will ration them the health care by force but they live in a world of fantasy, totally irrational, no real concept of cost, opportunity costs, trade-offs, scarcity, et cetera. Not only on health care but most notably on anything regarding the environment. And this are people who think of themselves as very smart and sophisticated.
Martin:
There was a time when people really did believe the Earth is flat.
In the 19th century, this belief surfaced again as the ultimate conspiracy theory. See:
http://news.bbc.co.uk/1/hi/magazine/7540427.stm
BBC Article
People have believed that the Earth was flat, and some people will believe anything even today, but scholars have believed the Earth round for millenia. The popular myth is that detractors of Columbus expected him to sail off the edge of the Earth, for example. Hardly anyone believed so. This idea only appeared later in fictional accounts of the Columbus story.
Scientific American published an interesting article a decade or two ago arguing that the surface of the Earth is actually the interior of a sphere with the Universe inside of it. The author is a completely sane scientist. He describes how "law of physics" are different from this perspective. His point is that we can view the Universe this way if we want, because his "radical new theory" really only changes the systematic description of the standard model we already accept, like placing the center of the Solar system at the Earth instead of the Sun.
Why shouldn't we describe the Solar system with the Earth at the center? This description is not so much "wrong" in a scientific sense as it is more complex than necessary, in the sense of Occam's Razor.
More the point, Miller doesn't believe the Earth flat, and Don knows it. If Don wants to debunk Miller's specific assertion about the role of "greed" or "deregulation" in our "crisis", he should just do that. Of course, these terms are part and parcel of a popular theory of current events and aren't really observations of anything, but Don plays the same theoretical game himself.
We all play the same game, and we should never forget it, so I'm sympathetic to Miller's critique of "theorizing", not because I believe that Miller doesn't theorize but because theorizing is ubiquitous and we can can easily fool ourselves this way.
I'm not sorry at all. You understand my point exactly, except that we are still obliged to care for our parents. We only do it through these incredibly inequitable, statutory benefit programs rather than doing it directly.
Often, these programs are modeled on "capitalism". Social Security pensions are modeled this way, but of course the relationship between FICA taxes and benefits is only a statutory formula and has nothing to do with the purchase of real productive means and later yields of these means. On the contrary, our FICA taxes purchase consumption for people on their way to the grave who we never expect to produce again. The illusion could hardly be more misleading.
The idea that Social Security substitutes for "saving" and should be replaced with "saving" is so widespread that calls for reform focus almost entirely on this incredibly false presumption. The "conservative" Heritage Foundation discusses reform this way routinely. So does Cato and and Reason magazine. I love Reason, but we are indisputably part of the problem.
Bush started his talk of Social Security reform by promising reams of I-Bonds and TIPS (entitlements to tax revenue with an inflation adjustment), and Congressional proposals eventually ended up this way. Like that would solve the problem. It would only make the problem worse, of course.
A genuine "privatization" of Social Security pensions would involve children supporting aging parents who supported them, with life and disability insurance on the children to protect this support. Children might also pool their obligations to protect themselves against very long-lived parents.
People with fewer children would purchase more real means of production, other than children, for their rental value, but we wouldn't simply construct rents by selling Treasury securities and similar statutory entitlements.
Replacing Social Security with "investment" is like trying to replace mortgage payments with "investment". Why should the government "force" me to throw all this money away? Why shouldn't I expect my home builder to return to me the value I'm returning to him? Everyone should owe me, and I shouldn't owe anyone. That's my plan. Every man a king.
Right. I have no problem at all with gays, but this is precisely the problem, and ideological "capitalism" contributes mightily to it. A burgeoning "childless rights" movement peddles the same arguments, and they're basically in the "libertarian" camp, but they're really free-riders.
I also favor education privatization on a model recognizing that chidren themselves pay for their own education later in life. We might scrap a lot of "education" if parents confronted the burdens they actually place on their children by enacting all of these "gifts" to children through taxpayer financed benefits. The problem is that their children grow into taxpayers.
Raising productivity isn't really a solution to the short-term problem. We have invested a lot in raising productivity, but these investments increase expected consumption. The demographic imbalance implies that at some point (and we're almost there), some people can't have the consumption that people a bit older had. These people will themselves will be very productive.
Either the baby busters consume less in retirement than their parents, or the busters impose heavy rents on the generation following them. Either way, a generation consumes less than the preceding generation. Productivity won't grow more rapidly simply because the buster generation ages.
The "baby busters" are the first generation after artificial birth control and life extension become ubiquitous. We call them "baby boomers", but this description is absurd.
The productive investments we didn't make are investments in child rearing. There is no substitute. Productivity enhancing technology is only a labor multiplier. We can't expect this multiplying factor now to increase to keep output growing at the same rate, so slowing workforce growth still implies slowing output growth. We've already seen the evidence in Europe and Japan. "Saving" without really investing, by raising children, only makes this problem worse. Essentially, we build more productive infrastructure than the next generation can fruitfully employ, like our glut of large houses in the U.S.
I belabor this point here, because nominal "libertarians" seem as oblivious to it as anyone else. In reality, "libertarians" often only revere one set of statutory benefit formulas over another, so they're really only more partisans vying for control of the state.
Don Boudreaux says “Ah yes, the practical man, unhampered by the blinders of theory, refusing to drink of the inebriating elixir of abstract thought. He looks at the world as it is, straight on, seeing plainly what the theories of woolly headed academics only cause to be misperceived and misconstrued.”
Many or probably even most of our academicians are equally refusing or have become equally unable to to drink of the inebriating elixir of abstract thought.
Alan Greenspan, is one of the current generation of bank regulators who gave in to the idea of the minimum bank capital requirements based on risk of default assessments and the empowerment of the credit rating agencies as the supreme risk assessors. He should have known that, sooner or later, this regulatory mishmash had to lead the world over a precipice of new and unknown systemic risks.
This week in the hearings before Congress on the financial crisis and the role of the regulators Greenspan explained that: “The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria. Had instead the models been fitted more appropriately to historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today, in my judgment.”
His explanation, that old “garbage-in garbage-out”, points to no intellectual edifice, at the most to an intellectual hut.
Why not let economists be like other professionals, let them be sued for malpractice when they are wrong?
They could get a little skin in the game!
The trial lawyers would be very busy right about now. Where to start?
Academic economists are much like sports reporters, experts with no grass stains.
"Why not let economists be like other professionals, let them be sued for malpractice when they are wrong?"
How about we target the media and mete out punishment to those individuals in the media that obfuscate information?
That's not what's happening. The other academics only deal in different abstractions.
People don't know what you think they should have known in retrospect. They only know their prospective theories. You're no different. For this reason, we must carefully distinguish our theories from what they purport to describe, and we must continually subject our theories to empirical tests.
So Greenspan believed that an "unregulated" market in default swaps could provide meaningful insurance against losses to creditors. I might not have believed it, but he did.
I believe instead that we buy as many promissory notes as apparently necessary to retire as our parents retired or otherwise to have our wishes fulfilled. We believe whatever we need to believe about the risks we're discounting. That we don't actually invest sufficiently to generate the real yields is irrelevant. We simply believe that we have or that someone else will suffer the consequences.
These theoretical beliefs create a market for promissory notes of dubious value, and the demand for these notes exists regardless of Barney Frank's meddling to benefit trailer trash (if you buy this theory of Frank). Frank is just another peddler of the notes. Avoiding Frank doesn't avoid the notes. It only avoids one peddler. The notes appear spontaneously to supply the demand for them.
The market correction in '87 occurred for different reasons. Similarities between that correction and this one are entirely superficial.
That's my theory. I invite you to debunk it, because I really have no idea how true it is.
Apparently, regulators didn't require bankers to maintain adequate capital reserves, because they believed a false theory of credit insurance, and I'm not the least bit convinced that the problem is limited to mortgage backed securities.
Where is the historical evidence that free bankers have ever refrained from selling promissory notes of dubious value? The biggest difference I expect between the status quo and the freer system I prefer is that buyers of these notes will lose more money, so I object to facile claims by nominal "libertarians" that we can all retire like our parents if only we'll repeal Social Security and buy more promissory notes.
I also hear "libertarians" telling me that we'll all take vacations to the moon in no time if only we'll shut down NASA and withdraw from the Moon Treaty. I'm happy to shut NASA down but not for this incredible reason. These guys are con men as much as any socialist.
Basically, promissory notes of dubious value at this time are entertaining. We enjoy the illusion that we'll retire as our parents did, and we'll pay for this illusion until reality dispels it. Reality is intervening now.
The FICA tax surplus peaked this year. We've just crossed from an era in which the supply of available rent grew faster than the demand to an era in which demand grows faster than supply.
In a free market, the price of rents would naturally rise, i.e. natural rents would fall, real yields on real investments would fall. This fall has occurred in fact. Long term Treasury rates fell. Dividend payout ratios fell (before the recent share price correction). Discounted yields on mortgage backed securities have obviously fallen.
But capitalists don't like falling yields, so they're telling their lackeys in the state to create more nominally "riskless" rents, but these rents aren't riskless to me, only to the richer capitalists, including "middle class" pensioners who are older than I am.
This will be my last post in this forum for some time to come. Based upon the economic collapse, I think that libertarism has been discredited. I know that many of you will disagree with me, but I wish you well.
I suspect the reluctance to regulate default swaps was part of a deal (explicit or implicit) to encourage lenders (by allowing "profits") to keep making sub-prime loans.
David, I hope you'll keep your ears open, because Hayekian liberalism is worth learning and certainly has not been discredited. Real market economics is still very useful, and the tragedy now is that we'll swing from the fascistic pseudo-liberty of the neocons to socialists who don't even pretend to understand the merits of market organization.
Martin Brock said “People don't know what you think they should have known in retrospect. They only know their prospective theories. You're no different”
No. And this is not I told you so. This is something I sincerely believe the regulators should have know.
In a letter to the Editor of the Financial Times published May 11, 2003 I said “Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic errors, about to be propagated at modern speeds".
In May 2003, as one of the 24 executive directors of the World Bank, probably only because of that, I was invited to make some comments during a workshop arranged by the World Bank for bank regulators on assessing, managing and supervising financial risk. I told the regulators, "I simply cannot understand how a world that preaches the value of the invisible hand of millions of market agents can then go out and delegate so much regulatory power to a limited number of human and very fallible credit rating agencies. This sure must be setting us up for the mother of all systemic errors."
Martin Brock says “ … minimum bank capital requirements … Apparently, regulators didn't require bankers to maintain adequate capital reserves, because they believed a false theory of credit insurance, and I'm not the least bit convinced that the problem is limited to mortgage backed securities.”
No, the minimum capital requirements brough on by the Basel Accord and of which the US is a signatory calculates the capital required for each bank based on the credit ratings of their loans and investments.
Based upon the economic collapse, I think that libertarism has been discredited.
More based upon the pronunciations of the political punditry wishing to point fingers away from themselves and toward the handiest and least powerful of their intellectual enemies.
The most libertarian of U.S. representatives, Ron Paul, warned of this collapse and he based his diagnosis on Austrian economic theory of which Hayek was a proponent.
Maybe they did know but acted in their own interests, which didn't align with the interests of bank shareholders and other interests. I don't know, but I do know that regulators know much less than they "should" know.
Apparently, everyone didn't know, but I would have agreed with you.
Your credentials definitely top mine. It's nice to know that someone "up there" knew … or believed he knew.
I suppose that's how regulators arranged not to require banks to maintain adequate capital reserves, in retrospect of course. In prospect, I suppose they thought they were requiring adequate capital, but I'm only giving them the benefit of the doubt. They have guns, you know.
Not being one to mince words, I will not start now. Ever once in awhile we see things written on the Cafe (usually from muirduck or one of his sycophants) that are just so devoid of any intelligence that it is difficult to comprehend any one being so stupid. The following is just that:
"This will be my last post in this forum for some time to come. Based upon the economic collapse, I think that libertarism has been discredited. I know that many of you will disagree with me, but I wish you well.
Posted by: David P. Graf | Oct 26, 2008 11:44:39 AM"
We all know this guy has been reading and off and on participating for at least a year or more, yet he has learned zero and understands even less about the real world he sees in the paper and on TV.
Yeah, David, I suggest you check out a real successful system called Socialism, it has made hundreds of millions just so wealthy and happy that it will shock you.
It is impossible to think that David could exist in this world and think Libertarian ideas have been discredited because of a socialist government collapse.
Stupidity beyond belief!
"Ah yes, the practical man, unhampered by the blinders of theory, refusing to drink of the inebriating elixir of abstract thought."
Ah, yes, the snide dismissal of the academic theorist.
Don, where exactly do you make your money? Are you out there running for office and rubbing elbows with the great unwashed? Or are you one of those armchair policy makers, safely distant from the mob?
I'll tell you what – I'll give you each and any theory you want and bow to your expertise. Just do me one small favor – tell me where the boundary of your particular expertise lies.
I like experts, but I object to an elitist extension of their status even an mark, a yen, a buck or a pound beyond their area of actual training.
I'm guessing you don't mind and possibly believe only 'experts' should run the world. Presumably politicians who actually engage, however imperfectly, in office don't qualify. Who would? (Isn't this the basis of a good socialist government?)
And I don't say that from any fondness for the political herd.
Larry, are you new around here?
Most of us don't want anyone "running" the world.
Quote from Martin Brock: "We need to go back in time and have more children."
Talk about the ultimate in centralized planning. This may indeed be a solution to the demographics problem, but you might as well proclaim that we need to become photosynthetic.
There's a reason why people are having fewer children today than in the past, expecially in "western" countries. It's because it takes a lot of resourses to raise a child to continue living at the same living standard as today's parents. Raising children to be doctors, lawyers, and engineers (or even X-ray technicians and auto mechanics), takes a long time and a lot of resources (not just money, but time and personal effort). Doing this for more than two or three children is simply beyond the means or capability (or desire) of most people.
This is unlikely to change.
Sam, if 'most of us' don't want anyone to run the world, then what's the point of a sneer? I don't have any particular love for politicians. They've not done a great job. But, I don't believe (so far) that any profession has the inside track or special insight into how things 'really' work or what 'ought' to be done. I'd be quite happy if all the experts kept their ideas safely tucked away and quit imposing them on the rest of us. They won't, of course. Human nature is such that they can't help it.
The trend is not limited to "western" countries. After decades of a one child policy, China's population is aging incredibly fast.
That's true. We talk a lot about increased life expectancy and the increased duration of retirement, but the duration of childhood has also increased, as more children finish high school and go on to higher education. We must add this trend to the other two significant demographic trends of the 20th century, increased life expectancy and falling birthrate. Talk of a stable "dependency ratio" often ignores this trend.
Not really. The burden seems beyond most people, because we've destroyed the link between parental investment and the yield of this investment. Lots of things are beyond common people when statesmen recognize no obligation to return common people's investments but sell rents on the capital they create.
This is unlikely to change …
In the not so distant past, parents expected direct support from their parents in old age. My father and his brothers supported my grandmother after my grandfather suffered a stroke. They both supported my grandmother and kept my grandfather alive in a vegetative state in a nursing home for years.
This custom is well within my own memory. The nursing home was a mile from my home. We visited my grandfather weekly, and we visited my grandmother as often. My father and his brothers received no state benefits for this purpose. My grandmother received something from the Social Security system, but my father and his four brothers undoubtedly paid far more in FICA taxes, because my grandmother never earned wages.
Not much longer ago, children were literally "property" of their parents, just as wives were property of their husbands and vice versa. We don't talk about husbands being property of their wives, but it was certainly just as true. This custom is very apparent in the traditional Anglican wedding ceremony, in which each takes the other "to have and to hold", the legal language of property. The gender symmetry in this ceremony is not a modern, PC fashion. It goes back to the foundations of the ceremony, along with dowry and similar customs. Of course, in English custom, the dowry pays parents for the husband, not the wife. The husband is obviously the property here.
We should return to the custom and grant parents a property right in their children, as opposed to granting this property to an "elderly" collective as we do now in the Social Security system. It's not like we aren't property of "the elderly" already. We clearly are. We don't earn our Social Security benefits by paying FICA taxes in any economically meaningful sense of "earning". We're simply obliged to support the elderly, and the next generation is also obliged to support us.
Any relationship between FICA taxes paid and benefits received is only a statutory formula. This formula isn't equitable at all, regardless of any progressive benefit formula. Essentially, the system requires the children of relatively poor parents (most children) to support relatively rich elderly people, who never did a thing for them, more generously than the children support their own parents. Most children have relatively poor parents, because poorer parents have more children.
In a more equitable system, children might owe supportive parents ten percent of income from age 22 foward, recognizing the reality of extended childhood. This obligation, plus some disability and life insurance, would replace the OASI portion of the FICA tax. Of course, parents would be free to return this income to their children, as they may return Social Security benefits to their children paying FICA taxes now, assuming that they have children paying FICA taxes. This reciprocal obligation, child support for parental support, is genuine investment and yield, unlike buying entitlement to tax revenue and other rents.
Some Social Security beneficiaries have no children, and some have more children than others. That's precisely the looming problem with the system, of course, but it's not really a problem, because childless people don't support children and thus are well able to purchase real means of production, as opposed to entitlements to tax revenue, to provide them income in old age. More generally, people with fewer children are well able to purchase more real means of production other than children while people with more children expect more of the yield of the real capital they purchase (their children).
This page shows how this system works with very conservative assumptions and has none of the demographic weakness of Social Security. The system works regardless of changing demographics, and it makes no incredible assumptions about limitless rents.
There is no shortage of real capital. It's just that the real investors aren't entitled to the yields, because rents are so high. Rent collectors capture the yields regardless of any investment.
Quote from Martin Brock: We should return to the custom and grant parents a property right in their children, as opposed to granting this property to an "elderly" collective as we do now in the Social Security system. It's not like we aren't property of "the elderly" already."
So your solution to collective slavery through taxes is direct slavery through heredity. Either way it's still more centralized planning of economics (and culture), all controlled by the government.
But, I don't believe (so far) that any profession has the inside track or special insight into how things 'really' work or what 'ought' to be done. I'd be quite happy if all the experts kept their ideas safely tucked away and quit imposing them on the rest of us. They won't, of course. Human nature is such that they can't help it.
Exactly.
But you said I'm guessing you don't mind and possibly believe only 'experts' should run the world.
Few here at this forum don't believe anyone has the expertise to "run the world", that, aside from a relatively few rules that apply universally (prohibitions on aggression and fraud to obtain value) the world is pretty much self running.
A exchange of like for like in a mutually supportive relationship is not slavery, even if this sloganeering suits your political ends.
If you want to return to the state of nature, you can do that. Move to the Australian outback or something. If you want to buy rents on my children from central planners, I'll go on objecting. If you want to abandon parents who supported you in their old age, I don't really think you should be so free, even if you march around with your comrades crying "liberty".
Quote from Martin Brock: "If you want to buy rents on my children from central planners, I'll go on objecting. If you want to abandon parents who supported you in their old age, I don't really think you should be so free, even if you march around with your comrades crying "liberty"."
I don't have any political ends, other than to be left out of other's political ends. I have no desire to buy rents on anybody's children, including my own.
I do support my parents in their old age, but certainly not because of your or anybody elses idea of obligation or duty to them. I do it because I want to. I don't see how doing it for some other reason, especially one enforced by law, has any virtue and is any different than slavery. And I don't see how professing that all parents should have perpetual property rights over their children has any semblance to liberty.
I'm thankful that I am still "so free" as to have such liberty, and will continue to stand against those who are so sure that I shouldn't have it.
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