Behind the veneer of free-market governance is a deep expanse of government involvement in massive areas of the economy, such as the housing market and health care. People don’t make decisions on housing and health-care concerns every day, but when they do, they would benefit from the information that markets provide about whether they can afford a large house or whether a particular drug is worth the price. Government distortion of these key markets has scrambled these signals.
An annual congressional report, “Estimates of Federal Tax Expenditures,” gives insight into how Washington manipulates supply and demand in these sectors. Consider house prices. This year, Washington will pay homeowners $99 billion in forgone taxes to borrow money to purchase or refinance a house or to sell that house and reap the profit. Americans will buy or sell about $600 billion worth of houses this year. Government subsidy, then, represents nearly one-sixth of this market. The federal government also provides a guarantee for most mortgages, thanks to Fannie Mae and Freddie Mac, the two government-supported mortgage companies that benefited for decades from an implicit government guarantee before they got an explicit guarantee during the 2008 financial crisis.
These subsidies have fired the growth of the housing industry. Between 1975 and 1979, the U.S. Treasury paid out $102.6 billion in mortgage-interest breaks in today’s dollars. Between 2015 and 2019, the Treasury will pay out $419.8 billion in such tax favoritism — a more than fourfold rise, nearly ten times the population increase. The hike is particularly extraordinary, considering that in the late 1970s, the annual interest rate on a mortgage was 9 percent, twice what it is today. Taking today’s lower rates into account, Washington has increased the mortgage subsidy more than eightfold.
It’s no surprise that mortgage debt has soared, to $9.5 trillion, from $2.6 trillion in inflation-adjusted dollars in 1981. Back then, mortgage debt constituted 31 percent of our nation’s GDP. Today, it makes up nearly 53 percent. [Dierdre] McCloskey, who thinks that free markets are generally healthy, acknowledges that “there are examples of the price signal not coming through.” The mortgage-interest deduction is “a silly idea,” she says, yet “very hard to change.”
Indeed, government subsidy is a critical factor in whether families can afford to purchase a home, and what kind of home, how large, and in what zip code. The home-mortgage deduction, then, helps determine how people live — yet we barely notice. Few of us consider how the government shapes one of the biggest decisions we’ll ever make, or how the U.S. government’s presence in the housing market maintains the value of our homes.
Nicole Gelinas, “Fake Capitalism: It’s not free markets that have failed us but government distortion of them”, City Journal, 2016-11-06.
September 7, 2018
QotD: Government distortion of the housing market
September 6, 2018
QotD: Freedom of speech
A metaphor: we have freedom of speech not because all speech is good, but because the temptation to ban speech is so great that, unless given a blanket prohibition, it would slide into universal censorship of any unpopular opinion.
Scott Alexander, “You Are Still Crying Wolf”, Slate Star Codex, 2016-11-16.
September 5, 2018
QotD: Why did appeasing the Fascist dictators seem such a sensible policy?
It is a familiar student essay question, whether the revolution could have been averted, but for the world war and resultant loss of up to three million Russian lives. It seems more useful merely to suggest that, in the political and ideological climate of the early 20th century, the collectivist experiment was bound to be attempted somewhere, and Russia or China were obvious testbeds. The consequences for millions of Russian peasants, together with the ferocity of Soviet oppression, were successfully concealed from most western eyes for half a century. The 1789 French revolution killed only a few thousand aristocrats and transferred land to peasants, who thus became ardent upholders of property rights. The Russian version required liquidation of the entire governing class and transfer of land to collective ownership, an incomparably more radical proceeding. Douglas Smith’s 2012 book Former People gives a harrowing account of the fate of the Tsarist aristocracy.
In the West, the gullibility of the Webbs, Bernard Shaw and the rest of the ‘true believers’ was fed by a desperation to suppose the Soviet example viable. ‘Looking around us at our own hells,’ wrote the historian Philip Toynbee, who became a communist at Cambridge, ‘we had to invent an earthly paradise somewhere else’. As late as 1945, the leftist publisher Victor Gollancz brought posterity’s contempt upon himself by declining to publish Animal Farm, George Orwell’s great satire on Bolshevism.
For a counter-revolutionary contemporary perspective, it is impossible to understand the 1930s appeasement of the dictators without grasping the traumatic impact of events in Russia on the propertied classes everywhere. The Winter Palace was stormed only 16 years before Hitler came to power. For at least two decades, Europe’s ‘haves’ were far more frightened of Bolshevism than of fascism.
The ‘clubland hero’ novels of John Buchan and Sapper offer embarrassing glimpses of the British bourgeois view of Lenin’s people and their followers in the decades following the revolution. A belief took hold in polite circles that the bloodiest revolutionaries were not merely communists but also Jews, which meant they were doubly damned in St James’s clubs.
Max Hastings, “The centenary of the Russian revolution should be mourned, not celebrated”, The Spectator, 2016-12-10.
September 4, 2018
QotD: Law and morality
In the first place, it would efface from everybody’s conscience the distinction between justice and injustice. No society can exist unless the laws are respected to a certain degree, but the safest way to make them respected is to make them respectable. When law and morality are in contradiction to each other, the citizen finds himself in the cruel alternative of either losing his moral sense, or of losing his respect for the law — two evils of equal magnitude, between which it would be difficult to choose.
Frédéric Bastiat, The Law, 1850.
September 3, 2018
QotD: “Market failure”
It is not too much of an exaggeration to say that markets are considered to fail if and whenever they fail at achieving some ideal, while governments are considered to succeed if and whenever they succeed at achieving anything other than utter chaos and calamity.
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-11-04.
September 2, 2018
QotD: Coyote’s first rule of government authority
Never support any government power you would not want your ideological enemy wielding.
Warren Meyer, “Regulatory Deception”, Coyote Blog, 2014-11-12.
September 1, 2018
August 31, 2018
QotD: Victim mentality
Does feeling like a victim make one behave more or less selfishly? Imagine that an individual feels wronged by an everyday event: An executive sees a colleague receive a promotion that she feels she deserved instead; an academic finds out that he is once more assigned to a tedious committee, whereas his colleagues seem miraculously spared; an author is about to send off a manuscript when a computer glitch erases weeks’ worth of work, and she is penalized for missing her deadline.
As these individuals contemplate their unfortunate lot, how motivated would they be to help others? One could imagine that individuals who have received the short end of the stick would be especially motivated to help others, to redress other wrongs, or to make themselves feel better with the warm glow that comes from doing good. In this article, we make the opposite prediction: We propose instead that feeling wronged gives people a sense of entitlement to obtain positive outcomes — and to avoid negative ones — that frees them from the usual requirements of social life. Whereas individuals typically contend with a strong norm of benevolence that encourages helping and curbs egoism, we propose that wronged individuals, because of their heightened sense of entitlement, feel relieved from this communal obligation and therefore exhibit more selfish intentions and behavior.
[…]
Our research has shown that people who have just been wronged or reminded of a time when they were wronged feel entitled to positive outcomes, leading them to behave selfishly. They no longer feel obligated to suffer for others and therefore pass up opportunities to be helpful. By contributing to our general understanding of the determinants of selfishness, this research points toward one possible impediment to people’s engagement in charitable behavior. Future research in this vein thus has the potential to identify novel methods to encourage altruism in people who feel wronged, thereby stemming the cycle of suffering-to-selfishness suggested by our research.
Emily M. Zitek, et. al., “Victim Entitlement to Behave Selfishly”, Journal of Personality and Social Psychology, 2010-02.
August 30, 2018
QotD: Beliefs
In religion and politics people’s beliefs and convictions are in almost every case gotten at second-hand, and without examination, from authorities who have not themselves examined the questions at issue but have taken them at second-hand from other non-examiners, whose opinions about them were not worth a brass farthing.
Mark Twain, Autobiography of Mark Twain, 1906.
August 29, 2018
August 28, 2018
August 27, 2018
QotD: The trouble with term limits
I used to be a big supporter of term limits, but I think the evidence at this point is that they actually empowered lobbyists and activist groups, both because politicians going back to the “real world” needed somewhere to work after they left office, and because the politicians were too naive to recognize when they were being taken for a ride by a special interest. The longer I stay in Washington, the more skeptical I am of any silver bullet …
Megan McArdle, commenting on Facebook, 2016-11-11.
August 26, 2018
QotD: Epicurus and the gods
… [Ludwig von] Mises ridicules the naïve anthropomorphism that consists in applying human characteristics to deities defined as perfect and omnipotent. How could such a being be understood to be planning and acting, or be angry, jealous, and open to bribing, as he is shown in many religious traditions? As he writes in Human Action again, “An acting being is discontented and therefore not almighty. If he were contented, he would not act, and if he were almighty, he would have long since radically removed his discontent.”
In an article on the implications of human action published on Mises.org two years ago, Gene Callahan discusses this and asserts that Mises’ insight into the relationship of praxeology to any possible supreme being is quite original, at least as far as he knows. Well, in fact, this insight is straight out of Epicureanism. Epicurus declared that since Gods were perfect and completely contented, they could not be involved in any way in human affairs. It was silly to be afraid of them, and useless to try to propitiate them. For this of course, he was suspected of being an atheist, and this is a major reason why he has been so vilified by Christian writers for centuries.
Martin Masse, “The Epicurean roots of some classical liberal and Misesian concepts“, speaking at the Austrian Scholars Conference, Auburn Alabama, 2005-03-18.
August 25, 2018
QotD: India’s caste system
… Gandhi, born the son of the Prime Minister of a tiny Indian principality and received as an attorney at the bar of the Middle Temple in London, [began] his climb to greatness as a member of the small Indian community in, precisely, South Africa. Natal, then a separate colony, wanted to limit Indian immigration and, as part of the government program, ordered Indians to carry identity papers (an action not without similarities to measures under consideration in the U.S. today to control illegal immigration). The film’s lengthy opening sequences are devoted to Gandhi’s leadership in the fight against Indians carrying their identity papers (burning their registration cards), with for good measure Gandhi being expelled from the first-class section of a railway train, and Gandhi being asked by whites to step off the sidewalk. This inspired young Indian leader calls, in the film, for interracial harmony, for people to “live together.”
Now the time is 1893, and Gandhi is a “caste” Hindu, and from one of the higher castes. Although, later, he was to call for improving the lot of India’s Untouchables [Dalits], he was not to have any serious misgivings about the fundamentals of the caste system for about another thirty years, and even then his doubts, to my way of thinking, were rather minor. In the India in which Gandhi grew up, and had only recently left, some castes could enter the courtyards of certain Hindu temples, while others could not. Some castes were forbidden to use the village well. Others were compelled to live outside the village, still others to leave the road at the approach of a person of higher caste and perpetually to call out, giving warning, so that no one would be polluted by their proximity. The endless intricacies of Hindu caste by-laws varied somewhat region by region, but in Madras, where most South African Indians were from, while a Nayar could pollute a man of higher caste only by touching him, Kammalans polluted at a distance of 24 feet, toddy drawers at 36 feet, Pulayans and Cherumans at 48 feet, and beef-eating Paraiyans at 64 feet. All castes and the thousands of sub-castes were forbidden, needless to say, to marry, eat, or engage in social activity with any but members of their own group. In Gandhi’s native Gujarat a caste Hindu who had been polluted by touch had to perform extensive ritual ablutions or purify himself by drinking a holy beverage composed of milk, whey, and (what else?) cow dung.
Low-caste Hindus, in short, suffered humiliations in their native India compared to which the carrying of identity cards in South Africa was almost trivial. In fact, Gandhi, to his credit, was to campaign strenuously in his later life for the reduction of caste barriers in India — a campaign almost invisible in the movie, of course, conveyed in only two glancing references, leaving the audience with the officially sponsored if historically astonishing notion that racism was introduced into India by the British. To present the Gandhi of 1893, a conventional caste Hindu, fresh from caste-ridden India where a Paraiyan could pollute at 64 feet, as the champion of interracial equalitariansim is one of the most brazen hypocrisies I have ever encountered in a serious movie.
Richard Grenier, “The Gandhi Nobody Knows”, Commentary, 1983-03-01.
August 24, 2018
QotD: Kafkatrapping
One very notable pathology is a form of argument that, reduced to essence, runs like this: “Your refusal to acknowledge that you are guilty of {sin,racism,sexism, homophobia,oppression…} confirms that you are guilty of {sin,racism,sexism, homophobia,oppression…}.” I’ve been presented with enough instances of this recently that I’ve decided that it needs a name. I call this general style of argument “kafkatrapping”, and the above the Model A kafkatrap. In this essay, I will show that the kafkatrap is a form of argument that is so fallacious and manipulative that those subjected to it are entitled to reject it based entirely on the form of the argument, without reference to whatever particular sin or thoughtcrime is being alleged. I will also attempt to show that kafkatrapping is so self-destructive to the causes that employ it that change activists should root it out of their own speech and thoughts.
My reference, of course, is to Franz Kafka’s The Trial, in which the protagonist Josef K. is accused of crimes the nature of which are never actually specified, and enmeshed in a process designed to degrade, humiliate, and destroy him whether or not he has in fact committed any crime at all. The only way out of the trap is for him to acquiesce in his own destruction; indeed, forcing him to that point of acquiescence and the collapse of his will to live as a free human being seems to be the only point of the process, if it has one at all.
This is almost exactly the way the kafkatrap operates in religious and political argument. Real crimes – actual transgressions against flesh-and-blood individuals – are generally not specified. The aim of the kafkatrap is to produce a kind of free-floating guilt in the subject, a conviction of sinfulness that can be manipulated by the operator to make the subject say and do things that are convenient to the operator’s personal, political, or religious goals. Ideally, the subject will then internalize these demands, and then become complicit in the kafkatrapping of others.
Eric S. Raymond, “Kafkatrapping”, Armed and Dangerous, 2010-07-18.
