Fixed Costs vs. Variable Costs

Post has changed locations. Click here to read this post.

Faith and the Free Market

I have faith, in things I can see and buy and deregulate. Capitalism is my religion.

- Jack Donaghy

The above quote is from the Emmy and Golden Globe Award-winning television series 30 Rock. The character, Jack Donaghy, is an extremely wealthy and powerful executive of the GE Corporation, and an avowed capitalist. The show portrays his free market beliefs as antithetical to faith and, even moreso, religion.  Here is part of a letter from Ayn Rand to Barry Goldwater, written in 1960:

The Communists claim that they are the champions of reason and science. If the Conservatives concede that claim and retreat into the realm of religion, it will be an act of intellectual abdication, the kind of intellectual surrender that the Communists’ irrational ideology could never have won on its own merits.

The conflict between Capitalism and Communism is a philosophical and moral conflict, which must be fought and won in men’s minds, in the realm of ideas; without that victory, no victory in the political realm is possible. But one cannot win men’s minds by telling them not to think; one cannot win an intellectual battle by renouncing the intellect; one cannot convince anybody by appealing to faith.

Capitalism is perishing by default. The historical cause of its destruction is the failure of its philosophical advocates to present a full, consistent case and to offer a moral justification for their stand. Yet reason is on the side of Capitalism; an irrefutable rational case can be, and must be, offered by its defenders. The philosophical default of the Conservatives will become final, if Capitalism—the one and only rational way of life—is reduced to the status of a mystic doctrine.

I am not suggesting that you should take a stand against religion. I am saying that Capitalism and religion are two separate issues, which should not be united into one “package deal” or one common cause. This does not mean that religious persons cannot crusade for Capitalism; but it does mean that nonreligious persons, like myself, cannot crusade for religion.

Granted, some of this letter is dated. Capitalism (a necessary component of freedom) is no longer at war with communism, per se. Individual rights now faces the much broader threat of collectivism. However, most of what Rand said still rings true today. The collectivists largely control academia, so they have been able to convince many that “progress” and “reason” are on their side. While conservatives (those mediocre champions of individual rights) frequently take up causes backed only by a subjective morality, or faith. For all the reasons stated in the letter above, this approach will lead to the victory of the collective over the individual.

It has been made clear by brilliant individuals (Milton Friedman, Ayn Rand, Adam Smith, F.A. Hayek) that free market capitalism is the political system that is consonant with man’s nature and the system that is supported by reason. But it is often asked whether or not a person of faith can also be a supporter of the free market. As both a Christian and an ardent proponent of capitalism, I believe that capitalism and faith are absolutely compatible. In fact, I would go so far as to say that free market capitalism is the only system compatible with the Christian religion. If one holds man to be created in the image of God, then it must follow that the individual is the highest object in the temporal realm. It is at this point that the atheist, agnostic, and deist alike come to the same conclusion: man is supreme on this earth. Any system of government must therefore be centered around man. As man’s nature is that of an individual and not as a collective, any system of government must be centered around the individual. As free market capitalism is the only political system built around individual rights, it is the only moral political system.

Let me be clear, I completely agree with Ayn Rand that capitalism can and should be argued by reason, not faith. However, many people of faith seem to believe that capitalism, because it requires at least a degree of selfishness, is incompatible with their religion. I would remind those readers that capitalism does not prohibit sacrifice in any way. The important point is that it does not enforce it. A collectivist society forces selflessness on its members, at which point sacrifice is no longer moral because it was not done by choice. Capitalism, on the other hand, leaves every individual free to pursue their own goals – allowing disparate beliefs to thrive without the violation of individual rights.

Side note: for anyone interested the American Enterprise Institute is holding an event on faith and capitalism called “Can Christians Be Capitalists?” on September 30th in Washington, D.C.

Cass Sunstein: Regulatory Czar

Our new unelected, unconfirmed, unaccountable, and unconstitutional Regulatory Czar is Cass Sunstein, a law professor and longtime adviser to Barack Obama. In 1999 Sunstein co-authored an article entitled “Why We Should Celebrate Paying Taxes”. To call the article “appalling” is an understatement. It begins by, basically, crediting government with all of civilization’s progress.

“It’s our money, and we want to keep it!”

“Why should the IRS take our money, when the government wastes it and we want to spend it on ourselves!”

These are piercing sentiments, especially on April 15. But are they defensible? In what sense is the money in our pockets and bank accounts fully “ours”? Did we earn it by our own autonomous efforts? Could we have inherited it without the assistance of probate courts? Do we save it without support from bank regulators? Could we spend it (say, on the installment plan) if there were no public officials to coordinate the efforts and pool the resources of the community in which we live?

Do not get up tomorrow and drape your house in black! For tax day is not a day of national mourning. Without taxes there would be no liberty.

Without taxes there would be no property. Without taxes, few of us would have any assets worth defending.

Cass Sunstein is crediting government with creating wealth, implying that property rights emanate from government. I believe it’s self-evidently logical to equate “taxes” with “government” when reading Sunstein’s article. Government is not responsible for individual innovators and entrepreneurs. If these men of the mind did not put their faculties to use and create wealth, there would be nothing for the tax collectors to collect. As for the emanation of property rights; I’ve stated before my firm belief that they are a natural by-product of man’s right to his life.

There should be no question that man’s life is his and his alone. If we accept this basic premise, we see also that he has an inalienable right to his property. If, by his time (i.e. his life), he has produced property (this would also apply to maintaining property, such as land) he has the right to that property. When man works, he is, in effect, trading his time (a portion of his life) for whatever it is that he is producing. Because he had a right to his time/life, he has a right to whatever thing he traded it for.

As for Sunstein’s claim that government coordinators are necessary to effectively allocate resources – it’s barely worth responding to. The record of history is indisputable that (with the exception of certain non-rivalrous, non-excludable goods and services) the invisible hand of the free market (i.e. individuals acting in their own selfish interests) is far superior to any centrally-planned effort.

But perhaps I’ve jumped the gun. Cass Sunstein offers some examples of the validity of his ideas:

Indeed, property owners are more deeply “dependent” on government than food-stamp recipients. The man who purchases several news organizations owes more to legislative, adjudicative and administrative action than the woman who sleeps under one newspaper at a time.

While it is true that the property owner may be subject to more legislative, adjudicative, and administrative action than the homeless woman, he is hardly “dependent” on government. To the contrary, government is a roadblock in his path of fulfilling his potential as a human being. Government protects property rights because that is a more efficient system than each individual protecting his own property.

Even if we lived in a perfect world, there would still be some need for a government to protect against the possibility of looters attempting to attack the rights of human beings. Perhaps in Cass Sunstein’s perfect world, businessmen are extremely dependent on the government – or to put it more accurately: in Cass Sunstein’s perfect world, the individual is dependent on the collective. I, for one, would call this type of world a hell on earth (those unfortunate soul’s who lived in Soviet Russia under Joseph Stalin would likely agree with me). Some might say that I’m reading too much into Sunstein’s comments. Sadly, this is not so. Sunstein goes on to say:

This is all a truism, in a way. But it has yet to become a commonplace. Its implications are seldom thought through. Most importantly, the dependency of individual freedoms on collective contributions has not sufficiently penetrated the American debate over our basic rights and the proper limits of the state.

Unfortunately for Sunstein and his depraved philosophy, observable reality does not support his premises. There is no such thing as “collective contributions” because there is no such thing as a “collective” among mankind. Man exists as an individual. Any contributions come from an individual mind. This, to me, is self-evident. Spiritual notions about a “collective” aside, can any one name one invention, discovery, work of art, or idea that has come from a “collective” mind? No. Individuals may collaborate and work together, but they are merely using their individual faculties in concert – each specific action, idea, contribution comes from an individual mind. Individual freedoms depend on absolutely nothing. Individual rights are possessed by every human being as an inherent and inalienable quality that is an integral part of his or her nature.

Sunstein continues on in his ignorance and rejection of basic human dignity:

Unlike fees, levied on those who directly enjoy a service, taxes are levied on the community as a whole, regardless of who enjoys the benefits of the public services funded thereby. Most rights are funded by taxes, not by fees. This is why the overused distinction between “negative” and “positive” rights makes little sense. Rights to private property, freedom of speech, immunity from police abuse, contractual liberty, free exercise of religion–just as much as rights to Social Security, Medicare and food stamps–are taxpayer-funded and government-managed social services designed to improve collective and individual well-being.

For all rights–call them negative, call them positive–have that effect. There is no liberty without dependency. That is why we should celebrate tax day. As Oliver Wendell Holmes, the great Supreme Court justice, liked to say, taxes are “the price we pay for civilization.”

There is much in these statements that could be attacked – but every above blasphemy against the individual rests on two statements found in the preceding paragraphs. The first is the notion of “collective well-being”, and the second is the sentence “There is no liberty without dependency.”

What, exactly, does “collective well-being” mean? It could mean whatever allocation of resources is best for every individual member of society. The first problem with this view is that it is highly unlikely that, in a society of millions, one given scheme for allocating resources is optimal for every member. The second problem is that this would require (if we reject a free-market system as Sunstein clearly has) that some central body dictate the uses of every individual’s property. Not only is this abhorrent to anyone who values his freedom, history has shown time and time again that it leads to ruin.

The second possible meaning of “collective well-being” is even more grotesque than the first. This meaning holds that the “collective well-being” is the best allocation of resources for the majority of people – in other words, the greatest good for the greatest number. But if we practice this philosophy, if even one member of society is harmed for the sake of the rest, we have turned the slighted minority into sacrificial animals. If we hold down one to raise up another, we have, as Ayn Rand said, become a society of cannibals.

As for “no liberty without dependency”, this is just false. It is true that in a free market system, individuals depend on one another – but only when they have chosen to. The type of collectivization that Sunstein would like to see take place in America would force dependency on American citizens. For centuries, mankind operated in societies based on dependency. From the earliest human tribes, to ancient Egypt, to feudal Europe, to Soviet Russia: everyone who lived under these systems was dependent, but none were free. Not until the United States of America, where the individual was held to be sacred above all else on earth, was freedom truly understood and practiced (albeit to a limited extent at first, but still to a far greater extent than had previously been known).

Cass Sunstein’s ideals are antithetical to the ideals of the Founding Fathers. They should be abhorrent to all Americans, and his very presence in the White House should be viewed as an abomination to our country, and as a blasphemy against the sanctity of individual rights.

The ‘Trigger’ Option

In an effort to get the votes he needs by appeasing those in Congress concerned about Socialism, President Obama has introduced a “trigger option” into his health care plan. The Wall Street Journal explains:

The latest political gimmick is the notion of a “trigger” for the public option: A new government program for the middle class would only come on line if private insurance companies fail to meet certain benchmarks, such as lowering overall health spending or shrinking the number of the uninsured.

Liberals should love the idea because a trigger isn’t a substantive concession; it merely ensures that the public option will arrive eventually, instead of immediately. Democrats will goose the tests so that private insurers can’t possibly meet them, mainly by imposing new regulations and other costly burdens.

Keep in mind that every version of ObamaCare now under consideration essentially turns all private insurers into subsidiaries of Congress. All coverage will be strictly regulated down to the fine print, and politics will dictate the level of benefits as well as premiums, deductibles and copays. Under the House bill, a “health choices commissioner” will have the final say…

The larger reality is that private insurance won’t be less expensive until overall health-care costs go down. Democrats may be confused on this point because government, which paid nearly 47 cents of every medical dollar in 2007, simply sets lower prices when Congress feels like it. On average, doctors and hospitals are forced to accept 20% to 30% less for their services in Medicare. That’s another reason insurers wouldn’t meet a trigger’s thresholds, given that providers shift costs onto private under-65 patients to make up government shortfalls.

Conceivably insurers could make their products more affordable by cracking down on treatments and refusing payment more often, much as HMOs held down spending in the 1990s. But both patients and doctors hated this “managed care”—and in any case, Democrats would find a new rationale for the public option in the inevitable voter outcry about private “rationing.”

ObamaCare doesn’t bother with incentives, instead merely increasing government command and control of private insurance while making it more expensive in the process. That’s why a trigger will inevitably lead to the public option, and also why ObamaCare will make all of our current health problems worse.

ObamaCare doesn’t bother with incentives, and Obama himself doesn’t bother with individuals. President Obama and his administration are idealogues. They have a collectivist vision for America, and harm done to American citizens is an irrelevant factor. Ayn Rand probably best sums up the difference between collectivist and individualist approaches to policy:

Economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman’s tool is values; the bureaucrat’s tool is fear.

There is no choice to be found in or reward to be gained from President Obama’s polices – only submission to the will of the collective.

Control Freaks

An excerpt from Jonah Goldberg‘s latest column on health care nationalization:

But here’s the kicker: The more life expectancy improves, the more we will spend on health care. Despite his professed outrage over charges of “death panels” and whatnot, Obama admits this. In an interview with the New York Times last spring, he acknowledged that oldsters are a “huge driver of cost.” The “chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health-care bill out here,” Obama explained. Which is why he advocated an advisory panel of experts to offer “guidance” on end-of-life care and costs. But don’t you dare call it a “death panel.”

Now, I don’t think Soylent Green-style solutions are coming down the pike. (Government cheese is people!) But every nationalized health-care system to one degree or another rations care based on the quality of life and number of “life years” a procedure will yield. That’s perfectly reasonable. If you put me in charge of everyone’s health care, I would do that, too. That’s a really good argument for not giving me — or anyone else — that power.

When it comes to civil liberties, liberals are often distrustful of government power. But, for reasons that baffle me, they are quite comfortable with Uncle Sam getting into the business of deciding, or providing “guidance” on, which lives are more valuable than others. A government charged with extending life expectancy must meddle not just with our health care, but with what we eat, how we drive, how we live. A government determined to cut costs must meddle not just with how we live, but how we die.

Make no mistake, President Obama, his Cabinet, and many of the Democrats (and, surely, a few Republicans) in Congress are not pushing for nationalization of the banking, health care, and automotive industries (to name a few) in a mere effort to amass power. Our current government’s agenda is about more than power, it is about control. This fight is between the individual and the collective. Fighting against President’s Obama’s health care “reform” is not merely a fight against policy, it is a fight for the right of every individual to live his own life as he sees fit.

A Bastion of Hope

Anyone who visits this blog on a regular basis has a sense for how much we respect the Wall Street Journal, particularly, the opinion pages. To explain why, here is the “About Us” from the op-ed home page:

We speak for free markets and free people, the principles, if you will, marked in the watershed year of 1776 by Thomas Jefferson’s Declaration of Independence and Adam Smith’s “Wealth of Nations.” So over the past century and into the next, the Journal stands for free trade and sound money; against confiscatory taxation and the ukases of kings and other collectivists; and for individual autonomy against dictators, bullies and even the tempers of momentary majorities.

What more can a reader ask for in a newspaper?

Freedom of Conscience

Most Americans will, at least, pay lip service to the Freedom of Religion. It is the first right guaranteed in the Bill of Rights and very few Americans would openly oppose it. But many U.S. citizens either do not apply it consistently to their political beliefs or they construe it far too narrowly. The first case is easy to find examples for – the most glaring being conservatives with their opposition to gay marriage and their use of religion-based pro-life arguments. The second type of inconsistency (construing freedom of religion too narrowly) is, in my opinion, not as recognized but just as fatal.

Terms such as “freedom of religion” and “separation of church and state” are somewhat outdated. They come from a time when religion and morality were seen to be inseparable. The terms we should be using – to more accurately describe the application of individual rights to the moral, philosophical, and spiritual aspects of our lives – are “freedom of conscience” and “separation of morality and state”. For the former, I must thank Eric Rassbach, who recently went to court to defend his client’s right to sacrifice goats. He also penned an excellent WSJ op-ed on the topic.

Some people just give me a funny look and say nothing. Others say, “Goat sacrifice?,” laugh nervously, and look for the nearest exit. Only the most forthright ask me directly: Why in the world would I go to court to defend my client José Merced’s religious practice of killing goats in his home in the Dallas suburbs? I then explain, often to dubious ears, that Mr. Merced is a priest of the Santería religion and must sacrifice goats in order to ordain new priests. Without goat sacrifice, his religion would die out. Sometimes my questioners nod in agreement, sometimes they don’t.

The simple fact is that freedom of religion doesn’t mean much if it protects only those beliefs that the government, or the general populace, decides it likes. It is first and foremost unpopular beliefs that need the protections afforded by the First Amendment and international human rights treaties like the Universal Declaration of Human Rights.

No student of history could disagree. A constant in world history has been the marriage of despotism and the suppression of conscience. Pharaoh forbade the Jews to worship God in their own way. Socrates was executed for supposedly not believing in Athens’ gods. The Romans called Christians “atheists” and threw them to the lions for failing to worship Caesar. Heretics of one sort or the other–including agnostics and atheists–were executed during Europe’s religious wars. Hitler killed Jews as well as ministers like Dietrich Bonhoeffer who rejected his crimes against humanity. Stalin persecuted Jews, Orthodox Christians, Muslims, and many others. Mao closed almost every house of worship in China.

From the very beginning, the United States has taken freedom of conscience far more seriously than many other countries, making it the first principle in our Bill of Rights, coming before even freedom of speech. But the United States has had its fair share of government suppression of religion, from the hanging of Quaker ministers in Puritan Massachusetts, to the anti-Catholic laws of the 19th Century. And many modern Americans–from both the right and the left–would choose a coerced moral conformity over the individual conscience. Religious freedom will remain at risk, even in the United States, for as long as one group of people is tempted to employ state power to suppress another group’s peaceful attempts to act on conscience [emphasis mine] .

Which brings us back to Mr. Merced. Last week the federal Court of Appeals in New Orleans put itself on the side of freedom of conscience, ruling for Mr. Merced and telling the city he lives in–Euless, Texas–to let him start sacrificing goats again. The Court did not decide whether Mr. Merced’s beliefs were right or wrong, orthodox or unorthodox. It simply held that as long as he is not endangering public health or safety, the government had to leave those beliefs up to him and his gods.

It is a small victory for religious freedom in this country, not just for Mr. Merced, but for everyone who believes the human conscience is a precious gift to be protected. Of course, Christians, Jews, Muslims, or others may want to convince Mr. Merced that his beliefs are in error, and the same religious liberty will protect their right to try to persuade him. That’s the point: Persuasion, not state coercion, is the way all of us should engage our fellow citizens as they seek to obey the “still small voice” of conscience.

So ask not why I defend goat sacrifice. Ask me how you can too.

The most important point made by Mr. Rassbach is that we must broadly define the First Amendment. Many in this country (liberals, in particular) believe in the absurd concept of the “common good”. I won’t attempt to argue against it here, for the purposes of this post we’ll assume that it is, in fact, moral for society to pursue the “common good”.  Does this then give the government (or a majority of citizens) to enforce this morality of the “common good” on a minority? Absolutely not. Just as Christians or Muslims cannot, in accordance with the natural rights of man, coerce their fellow man to follow their religious dictates (even if the Christians or Muslims comprise a majority), society cannot coerce individuals to sacrifice themselves for the collective. Freedom is a black/white issue. There is no area of gray. True, some oppressive governments are more severe in attacking freedom than others, but that is only a difference in degree, not principle. A benevolent dictator is still a dictator. And a violation of an individual’s rights for the sake of the “common good” is still a violation of that individual’s rights.

Quote of the Day

“Freedom (i.e. individual liberty) and democracy (i.e. unlimited majority rule over the individual) are entirely different and incompatible things, the second being an enemy of the first.”

~ Yaron Brook

Conservative Contradictions

Peter Berkowitz writing in the Hoover Institution’s Policy Review:

Both the quest for purity and the quest for unity [among conservatives] are misguided. This is because modern conservatism in general and certainly American conservatism in particular is a paradoxical orientation. The central paradox pervades the writing of Edmund Burke. Rightly recognized as having informally and unofficially but powerfully launched modern conservatism in 1790 with his Reflections on the Revolution in France, Burke cherished two fundamental goods, liberty and tradition, that do not obviously cohere and sometimes obviously conflict. Constitutional government in America intensifies the paradox. Insofar as American conservatism involves the conservation of the Declaration of Independence and the Constitution—and how could it not?—it puts a revolutionary doctrine and a founding document, forged by men in the heat of the political moment and constructed with numerous painful compromises, at the heart of the conservative mission.

I think this phenomenon is, in large part, a symptom of the problem that many conservatives – though claiming to advocate individual liberty – have not rejected certain collectivist principles. Many still argue for free market capitalism on practical grounds (i.e. it produces the greatest good for the greatest number of people). Conservatives must return to a principled stance in defense of the individual rights, for the sake of the individual (no practical arguments for the “common good” needed). Only when conservatives once again stand on principle, can the various factions of the conservative movement be reconciled and their policy conflicts resolved.

Temporal Savior? No Such Thing

In troubled times, a nation often turns to a strong leader with vision and answers to society’s problems. This usually has disastrous results. History overflows with examples: Joseph Stalin, Mao Tse Tung, Adolf Hitler, Benito Mussolini, Gamal Abdel Nasser, Mahmoud Ahmadinejad, Franklin Delano Roosevelt – all offered their nation a way out and some portrayed themselves as temporal messiahs.

Before I continue, let me make clear that I do not equate Franklin Roosevelt with Adolf Hitler (or any other dictator mentioned). What all of these figures have in common is their solutions to societal problems hinged on force and their belief that the collective good was to be pursued at the expense of the individual. To be sure, all of these leaders had (or, at least, claimed) altruistic motivations for their actions. Joseph Stalin was moving society towards a utopia, Adolf Hitler was eliminating the “inferior” in order to create a stronger human race, Mahmoud Ahmadinejad claims to be doing God’s will, and Franklin Roosevelt was merely acting on behalf of the common good. But there is a fatal (literal and figurative) flaw in the thinking of each of these leaders. They, as many people do today, assumed that such a thing as the “collective” or “common” good exists.

Man does not exist as a collective, there is nothing common among mankind’s members. Man is an individual being – not a member of a beehive. What is good for most is not good for all. And if even one individual is sacrificed for the “common good” it is destructive to the entire society. If a society does not hold every individual life as an irreplaceable value, as an end and not a mean, then that society is, at best, the equivalent of an ant colony and, at worst, the equivalent of a tribe of cannibals. How can one man value himself (i.e. possess self-esteem) while he has attempted to morally justify the sacrifice of his neighbor?

This generation of Americans has ignored history and turned to a new temporal messiah: President Barack Obama. He is using government (i.e. force) to solve all of America’s problems. Our government is currently in a rapid process of devaluing the individual and establishing the “collective” as the end goal. Never in history has this approach produced prosperity, it defies the law of causality and the basic principles of economics. The news is full of protests and angry groups of citizens rising up against the rapid growth of government, but many of these are surely the same citizens who long ago accepted collectivist principles. Until we once again learn to regard the individual as the end and not the mean, we will not know liberty.