Here’s a letter that I sent this morning to the Washington Post:
Re “Tens of thousands feared dead” (Jan. 14): The ultimate tragedy in Haiti isn’t the earthquake; it’s that country’s lack of economic freedom. The earthquake simply but catastrophically revealed the inhuman consequences of this fact.
Registering 7.0 on the Richter scale, the Haitian earthquake killed tens of thousands of people. But the quake that hit California’s Bay Area in 1989 was also of magnitude 7.0. It killed only 63 people.
This difference is due chiefly to Americans’ greater wealth. With one of the freest economies in the world, Americans build stronger homes and buildings, and have better health-care and better search and rescue equipment. In contrast, burdened by one of the world’s least-free economies, Haitians cannot afford to build sturdy structures. Nor can they afford the health-care and emergency equipment that we take for granted here in the U.S.
These stark facts should be a lesson for those who insist that human habitats are made more dangerous, and human lives put in greater peril, by freedom of commerce and industry.
Sincerely,
Donald J. Boudreaux
UPDATE: John Stossel posted my letter on his blog. Many of the commenters there laugh and point to California’s stricter building codes as a major reason why the 1989 Bay Area quake killed far fewer people than did this week’s Haiti quake. Quiz: why is the building-code argument mistaken?
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Haiti has no earthquake codes because Haiti is poor. Haiti is poor because of American Capitalism and Hegemony.
The story of Haiti is the story of democracy hating neoliberalism gone bad… as it always does. It's a story of the dark side of the market philosophy of profits at any cost and damn the externalities.
Quiz answer- Do the simple mind experiment of applying California mandates to the Haitian economy. They would accomplish nothing there because mere subsistence is beyond the economy's capacity. The California economy, built on a structure of the decisions of free people seeking their own enlightened self-interest is able to accept the additional burden of self-imposed standards of quality the conscripted (and largely wasted) economy of Haiti has no additional capacity to undertake.
So US capitalism makes Haiti poor HOW exactly?
I am ambivalent here. The codes probably offer some protection for people who are incompetent to protect themselves (a concept I generally abhor, but not in residential real estate). On the other hand, they constrain the possibly efficient use of land to house structures of a lower quality. And, getting back to the incompetent people who need to be protected, the codes create a false sense of confidence on their part.
I don't think the building code argument can be dismissed entirely.
True, experience in the construction trade has led to empirically safe construction that would continue to be demanded, and therefore supplied, even in the absence of a building code.
But, consider the difficulties. If there were no mandatory building codes, you would be paying someone to come to your building, tell you what you are doing wrong, and make you incur a greater cost to fix it. But, as you well know, when you make building inspections voluntary and increase their cost, people will consume less building inspections.
Finally, private “inspectors,” like financial rating agencies, have shown to be equally incompetent to the government who was doing the regulating of financial markets. True, they at least had an incentive to do so. Who will pay you to rate the safety of his investment instrument or building if you give him a bad grade?
Ultimately, no matter if the building code is promulgated and enforced privately or publicly, many of the same incentives and problems remain and cannot be attributed to “government” or “private industry,” but rather attributed to “humans,” who are guaranteed to be in both government or private industry.
There are ways, however, to build buildings reasonably well, and it is probably desirable to take steps to do so. Building well and safe costs more, at least in the short term, and probably requires a combination of involvement from private industry and government.
Don,
On your blog you write, ” No free markets, no hope for individualist self-determination, a world of constant regime uncertainty that provides no chance whatsoever to effectively plan for the future…”
The irony is that other more powerful capitalistic societies are tthe reason Haiti ( as with many other third world countries) been unable to establish a stable democracy and market economy.
Oops… that's addressed to Taylor
We have occupied their country, over-ridden their democratic elections, chosen their dictators, diverted their economic intentions and forced their markets to our will.
read some of the history;
http://www.youtube.com/watch?v=tsLU0sdiCOA&feat...
http://www.thenation.com/doc/20040419/wilentz
http://amywilentz.com/blog/about/
http://dir.salon.com/story/news/feature/2004/07...
The country I live in, Czech Republic was occupied by the Soviet Union, had their dictators chosen, etc. It's a story of socialism gone bad . . . as it always does. It's a story of the dark side of State control at any cost and damn the realities.
Still, I think most Czechs would've preferred the evil American hegemony to the Soviets rolling in their tanks in '68.
So the question becomes: do we want people living in the lowest parts of New Orleans, an area susceptible to flooding?
I would hope most Czechs would choose to be left alone over hegemony or tanks. But profit first capitalist will seek their profits anyway they can including by-passing markets. That's why unbridled capitalism is ultimately a disaster.
The tanks that rolled into Prague in 1968 were a product of unbridled socialism. Yet Eastern Europe is managing to recover quite well. What is Haiti's excuse? I suppose they suffered much more under the terrible yoke of evil American capitalist hegemony than Eastern Europe did in the cold war?
All things our GOVERNMENT did to them.
Sarcasm or not. You're right here.
Seriously? How and why do you propose that “other more powerful capitalistic societies” are involved in keeping the Haitians impoverished? And, if that is the case, why are the inhabitants of the other country on the same island, the Dominican Republic, much less impoverished than those of Haiti? Are those “other more powerful capitalistic societies” less interested in keeping the Domincans impoverished?
Sorry, but your thesis doesn't fly. And, for the record, free market capitalism doesn't seek to impoverish people; rather, it is based on voluntary exchange for mutual benefit. The more free market “capitalistic” the society, the more prosperous.
Interesting question. Here's my quick thoughts:
1. In general, I'd say let people live on whatever property they legally own or rent, if that's what they want to do.
2. However, since we have allowed our governments to assume responsibility for the personal safety of its citizens, we should probably restrict housing development in locations which are doomed to fail.
3. Don't spend any more tax dollars draining lowlands that cannot be protected from flooding.
4. Stop spending tax dollars subsidizing flood insurance and thus encouraging development in areas which would not otherwise be developed.
So… What would happen if a 7.0 earthquake hit Miami? Miami doesn't have the same “earthquake-proof” building codes that the commenters presume California has. I suspect that a lot more than 63 people would die in that earthquake.
Of course, saying “If Haiti only had adopted (and enforced) California's building codes” is about equivalent to saying “If Haiti only had paved its streets with gold.” Earthquakes are rare in Haiti and, as a result, the country didn't spend much of the little it had to protect against them. If Haiti were hit by earthquakes every few years, I think the buildings probably would have been stronger. [Or wouldn't exist at all as the place never would have been settled.]
The occupation ended in 1934. All of the interventions that followed that were perpetrated by the US government. Again I ask, how is it that American capitalism makes Haiti poor?
Pish posh. Nothing to do with unions. It's all because San Francisco's city council, in its unbridled wisdom, realized that a cast-iron pipe is more stable in the event of earthquake. It adds structural support to the buildings and is a convenient hand-hold in the event of a major temblor. It may cost more, but you can't put a price on safety!
/sarcasm off
In the same year, 1964, the town of Valdez, Alaska suffered much damage from the Good Friday earthquake. They spent the next 3 years moving the town to more suitable ground.
Aren't you aware that free markets and capitalism are zero sum commodities? Haiti can't get any because we've used more than our fair share.
Sort of like how the brits raped and pillaged Hong Kong?
I get it! Cast-iron, which has a flexibility nowhere near as generous as glass, provides structural support! Agreed, you can't put a price on safety — but you can on politicians!
Although I wish it were so, your assertions don't withstand scrutiny. As a result of the 1933 Long Beach earthquake, 300 schools experienced
minor damage, 120 major damage, and 70 were destroyed entirely. In response, California passed the Field Act which required statewide seismic safety standards for schools. Since then only one room in one school built to Field Act specifications has been severely damaged by an earthquake. Field Act schools average less than 1% in damage relative to value, while non-Field act schools have average damage of up to 50% of valuation. See study here: http://web.mit.edu/murj/www/v10/v10-Features/v1...
I'm a very strong free market advocate, but this is one area where consumers require government oversight.
Hi Lad,
I'm a very strong free market advocate, but this is one area where consumers require government oversight.
Simply put, No, you are not. It's offensive to people who are to see you try to pass yourself off as one.
The study you link to and its findings are fascinating– for calculating socialists, I suppose.
Meanwhile, here in reality (where the free market-types reside), we'd be interested to know how you and the other calculating socialists figured out that the increased spending on seismic safety via regulation is a net economic benefit compared to the alternative uses of the resources expended on satisfying this regulation, as they would've been determined by the free market.
Care to enlighten us on how you came up with that calculation? (Hint: you can not employ objective value theory in providing your answer)
muirgeo,
You have confused your terms. By free markets, I mean, the absence of violence in exchange. Any “powerful capitalistic societies” who would impose their will and their exchange patterns on other countries, like Haiti, through violence, do not satisfy my definition of the term “free market”.
Thanks for your confused thoughts. Enjoy your evening.
SheetWise,
Are you playing games? What use does wealth serve if one doesn't have access to it? One may as well not be “wealthy” at all.
I'll assume I agree with you and you are confused and attempting to talk past me due to this confusion. Thanks for your confused thoughts.
SheetWise,
I assume now you're being facetious in an attempt at humor. If so, you've succeeded and I enjoyed your wit. If not, you are wrong, and thank you for your confused thoughts.
Kevin, I'm not sure that building codes offer that much protection. You still get an awful lot of shoddily constructed residential buildings.
I've been to a set of four townhouses that were so poorly constructed that nothing is square. The door to the garage locks but can be pushed open because the door separated from the frame when the houses settled. Half the doors don't latch at all and the prefab frame wasn't brought together properly, so there's a crack going all the way up. Needless to say, it's growing. The electric is so poorly done that some of the light switches and sockets stopped working entirely. This development was built in 2004 and it was given a CO.
Scarier still, a couple of years ago a couple bought a brand new house. Fortunately, they were forced to move to Europe for several months soon after. I say fortunately because the plumber installed something incorrectly and the ceiling on the second story (where the bedrooms are) became saturated with water and simply collapsed one night. The water saturation wasn't all that visible to the untrained eye, so the family wouldn't have had any warning.
a couple of years ago, a family bought a plot of land and hired a builder to build them their dream home. The builder built it. The house passed inspection. Once they moved in, the house started falling apart – literally. It was developing monstrous cracks. They discovered the builder had dug the foundation too deep and backfilled without going to the trouble of tamping down the backfilled soil. The house was effectively built on sand. After several suggestions by other builders (including lifting the house and redoing the foundation), they discovered it would just be cheaper to tear it down and start over. Unfortunate, since it was a $5MM house.
This IS a tough crowd
You're right. I have no cost/benefit calculations to support my position, but neither do you. While it's true that more stringent building codes increase construction and regulatory compliance costs, it's also true that more stringent codes save lives, reduce replacement costs and reduce inspection costs each time a building is transferred.
Even Friedman, Hayek and Smith acknowledge that free markets are not perfect and that government intervention is sometimes beneficial. In this instance the market has a flaw because information regarding construction materials and techniques isn't available to consumers after a structure is built. Further, structural flaws may not appear until decades after construction.
Like the monopoly problem and free rider problem, it's consistent with free market principles to use government to address problems arising from market flaws.
Hi LAD,
Sorry to see you are still confused on this. Allow me to try to help.
You're right. I have no cost/benefit calculations to support my position, but neither do you
For someone who admits they have no cost-benefit calculation to refer to, it's odd how committed you are to your belief you are right.
The nice thing about my position is– I don't need a cost-benefit analysis. Why? Because I am not advocating the use of force (regulation) to impose my viewpoint on others. If I am wrong, people are still free to do what they like. If you are wrong, people suffer a double insult: once for losing out on utility they may have gained had they been free to do otherwise, and twice for having to suffer under your delusion that your righteousness is worth imposing on them at the point of a gun.
What's more, I don't need a cost-benefit analysis because I have economic logic on my side! Economic logic tells us that all exchanges which are voluntary are wealth-enhancing, while all exchanges which are involuntary (occurred via the initiation of force or threat thereof, aka govt regulations) are wealth-destroying. We know this because people will only make exchanges that they see as enhancing their wealth… if one or both parties sees that they stand to lose from an exchange, the exchange won't occur! This necessarily means that anytime the government forces an exchange (via regulation, for instance), the total utility resulting from the exchange is necessarily less than what would've occurred voluntarily (either no exchange, or a different exchange)!
While it's true that more stringent building codes increase construction and regulatory compliance costs, it's also true that more stringent codes save lives, reduce replacement costs and reduce inspection costs each time a building is transferred.
Because you are talking about involuntary exchanges, and because you have no ability to calculate competing alternative uses of resources, you can't even make this claim! That's what's so humorous about it. For every life (presumably) saved with your favored building codes, how many are lost because, say, resources that would've gone into hospital investment have been squandered on making buildings earthquake safe that may never have toppled over in the first place?
Answer: you don't know! You're just making a guess, and once again, you're advocating that your guess is so superior to other market participants it should be forced at gunpoint.
LAD, socialism doesn't work. It doesn't work in shoe production, food production or building safety production. There is no “special market failure” for your pet project, building safety, that lets you get around this. You can't calculate. Stop telling people you can, at gunpoint.
Even Friedman, Hayek and Smith acknowledge that free markets are not perfect and that government intervention is sometimes beneficial.
Friedman believed in centrally planning an economy by manipulating interest rates and money supply. Hayek believed that markets couldn't provide security and law and that therefore government must supply them (ignoring the non sequitur involved in that, let it be noted that Hayek admitted that, were he younger, he might be more willing to adopt the radicalism of anarchism, but as an older gentleman he did not have that flexibility of thought). Smith believed in the labor theory of value… that “cost” was determined by how much labor it took to produce something.
What does this prove, LAD? It proves NOTHING besides the fact that even great minds can be in error. If Newton, the man who “discovered” gravity, denounced it as a physical law… would that cancel the law of gravity? No. And similarly, great economists admitting market failure doesn't cancel the laws of economics. Your appeals to authority are unimpressive. Try logic.
In this instance the market has a flaw because information regarding construction materials and techniques isn't available to consumers after a structure is built. Further, structural flaws may not appear until decades after construction.
By your own logic, building codes can only, AT BEST, prevent future calamities from being repetitions of past ones… they can not predicatively prevent future crises that have not happened once before.
Aside from that, however, you still have not proven why anyone should be forced to adhere to building codes. Where is your calculation? You imagine a world where greedy/ignorant builders might take advantage of less-enabled economic participants do to information asymmetry and let them live and work in buildings they know to be unsafe… what happens to your most charitable and well-intended policy when it is the economically less-enabled participant who is trying to build for himself a building that is not up to code, but you won't let him because he can't afford to meet the regulatory standards for safety? What do you tell this man when he says “I'll trade future risk to my safety for the present convenience of enjoying this structure I'd like to build”? You are going to tell him, “No, and if you try I will imprison or kill you, if necessary…. FOR YOUR OWN GOOD, SIR! For your own good, of course!”
Save the altruism for the gullible, LAD. I don't buy it. You're a tyrant, well-intentioned or not. Let this man build his structure and let anyone who dare enter it at their own risk and let no man like you try to come in and dictate to anybody anything “for their own good” but rather let men such as yourself not think of themselves as so goodly that they have a role to play in minding other people's business, than their own! Somehow, LAD, you are able to mind your business, but others are not rich or smart or powerful enough to do the same? Quite snobbish, my friend.
Like the monopoly problem and free rider problem, it's consistent with free market principles to use government to address problems arising from market flaws.
It absolutely is not. All of these supposed market failures have been treated, extensively, by true free marketeers (that is, people who do NOT resort to the use of governmental force anytime things don't go as they'd like them to). You are debasing the term “free market” when you use it in concert with the advocacy of violent solutions to social/economic problems, which is the OPPOSITE of free market principles, not its kindred spirit.
LAD… markets will do what they please, and sometimes what they please is not what you please. You're just going to have to get used to that… stop trying to boss everyone around.
LAD,
Post-script: I will not be responding further as I've thoroughly refuted your arguments and, if you continue to ponder this matter further you can easily find answers on your own at a site like Mises.org, or even this blog (perhaps you don't read it that much).
So, let this be notice to you that if I do not respond further, it's not because you've left me speechless with your wonderful reply, but rather that I've moved my attention to other things and I no longer have the time or the interest to straighten you out on this. I hope that, if you demand further satisfaction, some other passerby will be kind enough to deliver it to you post-haste!
En garde!
Good evening, and thank you again for your confused thoughts!
Oh, and if I ever see you on the streets and you try to argue with me about your right to force me to do what you want in the name of market failure… I'll punch ya in the nose! It's the only thing violent types like you seem to respond to! You've been warned!
“By free markets, I mean, the absence of violence in exchange. Any 'powerful capitalistic societies' who would impose their will and their exchange patterns on other countries, like Haiti, through violence, do not satisfy my definition of the term 'free market'.”
I get it. They're already free, and others want to enslave them.
If an alternative form of government is offered by others, and anyone objects — that is an imposition of the others will. That will be perceived as “violence” — and is not free.
Explain to me how alternative ideas can be incorporated into this countries economy — ideas that have their will — that will not be characterized as an imposition by the sucklings you speak for?
It seems you are the one intent on denying my rights. More particularly, you are denying my right to contract with others for our mutual benefit. It's true that the government can enforce its will through force, but only with the consent of the governed. Would you deny me the right to enjoy a poker game because it involved the taking of money from others, or is it important to acknowledge the broader context that the players have voluntarily agreed to be bound by certain rules? Likewise, you cannot narrowly focus on the use of police power by the state without acknowledging the broader context of our constitutional democracy.
I suppose you could argue that only the unanimous approval of a state's constitution is truly moral and, to some extent, I could acknowledge the moral clarity of that position. Unfortunately that view is moral in only the most narrow sense because of the great human suffering that would certainly emerge. You see, due to the free rider problem, your freedom will be short lived as the sporadic voluntary contributions to your military fail to materialize.
Sorry, but your thesis doesn't fly. Absolutely true! But, look at the author.
Dave,
The closest Yasafi ever comes to being right is when he starts with, “I could be wrong”. But, even that statement from our Dear Ducktor is incorrect. The correct way for Yasafi to start a statement is, “Of course I'm wrong, but I'm going to butt in anyway…”
Prague,
First off, welcome to the Cafe.
Second, if you're new here, you just met our Dear Ducktor. Muirgeo's full name is Cardinal Yasafi Torquemuirduck of the Church of AGW. Most times, we use just one of his names.
Now, you must understand that (in Yasafi's eyes) Soviet domination of Czechoslovakia wasn't near as bad as it would have been if your homeland had been under US influence. You see, the Soviets understood better than possibly any other government in history, that only government can know how much liberty a man needs in order to be free. This is Yasafi's only principal. All human activity should be scrutinized by government, and only be allowed after government has determined that you're not getting too much liberty.
One other thing in Czechoslovakia's favor: The USSR didn't have Republicans.
I welcome your enjoyment of confusion, as I often experience it myself.
OTOH — De Soto was instrumental in clearing up much of that confusion. I could suggest sixty or seventy books you should read beforehand, but he adds a touch of common sense. De Soto often reminds me of Smith.
LAD & Taylor: I hope you're both willing to respond to a third party.
I thought (but could be swayed) that government worked effectively with the free market only as an umpire of sorts; to level the playing field. Let's say two builders put up similar buildings, and one complies with codes, and the other doesn't. The first gets a CO, and the other doesn't until complying with codes at additional expense.
(Allow me to put off the issue of bribed umpires for this, and grant that the citizens have had ample part in the codes' creation.)
The free market appears to be served, and government appears to have a relevant, limited role.
Is that what we all want?
stormywebber,
I am happy to respond to third parties. What I am not happy to do is to continue arguing with belligerent egotists who can not concede a point without hurting their own self-esteem and so instead choose to devolve into logically incoherent accusations that one person's desire to NOT do something is in actuality a positive, aggressive act against their ability to exercise a right, the right in this case being a right to violate other people's rights. I don't have time for fools of that caliber.
I don't know what a “CO” is but looking at your example, we'd be wise to keep in mind that the umpire is also the rulemaker. It'd be like playing baseball and having an ump who had the ability to move the diamond around constantly while simultaneously ruling on balls, strikes, runs, etc.
The free market, properly understood, pays heed to the “free” part– this means the absence of the initiation of the use of force. In other words, the free market is just a term we give to the sum total of all voluntary exchanges people make in society. Outside of the free market is the criminal, involuntary exchange market, which has two elements– the private criminal (individual or private mafia/organized private crime) and government (similar to the mafia, but has an official, “legitimate” right to behave as a mafia does, without risk of punishment, for it is the punisher).
The free market is served anytime consenting adults are allowed to make their voluntary exchanges. This would include instances in which consenting adults would like to work together to build a structure that someone in the involuntary, criminal world deems to be “unsafe and not up to code.”
The best a government can ever do from the standpoint of justice, is enforce natural law (no individual may initiate the use of force against another– this means no assault, no murder, no theft and no fraud… and no more specific variants of these general arch-crimes). But even then, simply by existing, a government is in violation of the very natural law it might seek to serve, because it relies on taxation (theft) to fund itself.
Building codes certainly have nothing to do with enforcing natural law– they're about manipulating probability and risk. This is for private individuals to calculate and mitigate against according to methods of their own, voluntary choosing– it's not a task for government to dictate and arbitrate and ultimately enforce.
You ask “is that what we all want?” but your premise is flawed– justice is not democratic, and neither is truth. “We” don't decide how the laws of nature (physics, chemistry, etc., even economy!) function via majoritarian consensus. “We” don't do anything unless “we” agree to it on an individual, voluntary basis, and even then “we” aren't off scot-free unless what we're attempting to do has nothing to do with violating an individual's right to be left alone if they're not harming anyone.
Ultimately, government is violence. Appeals to government to settle non-criminal issues (that is, issues not relating to the initiation of the use of force– assault, murder, theft, fraud) are appeals to violence as a solution. In other words, to advocate the use of government to settle building safety standards, for instance, you must first believe that violence is the best answer to the question at hand.
(You also imply people have the “right” to a safe structure, whatever that may be. You ignore that there is no way to successfully guarantee against ALL calamities that might face the structure — one can't eliminate risk entirely no matter how much one legislates about it — you select an arbitrary subset of calamities/risk you wish to mitigate against, and then you threaten the owner with violence if they don't construct in compliance with your wishes. In reality, nobody has a “right” to a safe structure, just as nobody has a “right” to any structure in the first place! That way be commie-logic!)
But Americans weren't colonized by the imperialist Frenchs…Were they?
I agree that a proper role for government is to adopt building codes and grant Certificates of Occupancy before a building can be occupied, but not because the government has a role as umpire. The only reason I think it appropriate is because the information required to confirm the safety of building techniques and materials is hidden from subsequent buyers by drywall and can only be confirmed during the building process. Without a third party safety review process insurance and transaction costs would be higher and safety would be reduced.
Ordinarily, government doesn't have a role in protecting consumers from bad products because consumers can gather information prior to a purchase or sue manufacturers for defective products in the event of harm. Home building is an exception because the relevant information is hidden from view and building flaws might not be discovered for decades, thus making a lawsuit impractical.
I agree that a proper role for government is to adopt building codes and grant Certificates of Occupancy before a building can be occupied, but not because the government has a role as umpire. The only reason I think it appropriate is because the information required to confirm the safety of building techniques and materials is hidden from subsequent buyers by drywall and can only be confirmed during the building process. Without a third party safety review process insurance and transaction costs would be higher and safety would be reduced.
Ordinarily, government doesn't have a role in protecting consumers from bad products because consumers can gather information prior to a purchase or sue manufacturers for defective products in the event of harm. Home building is an exception because the relevant information is hidden from view and building flaws might not be discovered for decades, thus making a lawsuit impractical.
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