There are many contentious areas in science because groups are looking for universal truths that validate their preconceived beliefs. Peter Van Doren comes back to the show today to talk about the role of science in the policy world. We look to scientists to conduct research that may better inform our policy decisions, but at the same time we have to make sure the science is trustworthy.

How should we use scientific evidence to make decisions? What kind of environmental regulation should there be? How much politics go in to scientific evidence? What is the role of science in policymaking?

Further Reading:

Greenhouse Gas Emissions and the California Waiver, written by Peter Van Doren

EPA’s scientific advisers warn its regulatory rollbacks clash with established science, written by Juliet Eilperin

Trump proposes change to environmental rules to speed up highway projects, pipelines and more, written by Juliet Eilperin

Anti-vaxxers surge past rate allowed by herd immunity: Gallup, written by Tiana Lowe

History of the Clean Water Act, EPA

Related Content:

The Politics of Science, Free Thoughts Podcast

Science Doesn’t Need Public Funding, Free Thoughts Podcast

Capitalism Can Save the Environment, Free Thoughts Podcast

There is a paradox at the heart of Rush, the Canadian band whose all-world drummer and lyricist, and self-described “bleeding heart libertarian,” Neil Peart died of brain cancer on January 7^th:  for a band that wrote so many songs with themes of individualism and whose members are among the most talented individuals on their instruments in the history of rock, it’s nearly impossible to separate one member from the other in order to talk about any one of them as a distinct contributor. But death has a funny way of forcing separations upon us.

As a long-time, very serious fan, I’ve found it difficult to express what his shocking death means to me and to the music world. It’s even weirder because Neil wasn’t even my favorite band member, at least in the sense of the one I’d like to hang out with. A few hours with Neil would have been amazing sure, and a few hours with guitarist Alex Lifeson would be hilarious, but what I really want is a long lunch at Caplansky’s Deli with bassist-singer Geddy Lee. The reasons why aren’t important, other than to say I think we’d have more to talk about and more interests we share than I would with either of the other two. That said, Neil was always a giant figure in my life and his death has indeed hit me hard. I want to share some thoughts here that cover what I think was really important about Rush as a band and a cultural force, and why, for so many of us, they have been so central to who we were and who we are. And I hope I can do this by way of emphasizing Neil’s role in all of that in a way that shines a light on why his death has affected so many so hard.

Part of that devastating effect is that almost no one knew he was sick. Neil was incredibly private and often embarrassed by the way others treated his fame. He could not, as he wrote, “pretend a stranger was a long-awaited friend.” For him to have revealed his struggle of over three years, would have called attention to himself in ways that he would have found incredibly uncomfortable. I’m sure that if he were to read the various tributes and eulogies since the announcement, including this one, he’d be mortified. But if there was one thing that was true of Neil Peart and his fellow bandmates, they were going to do it their way. So here we are, in shock at the very unexpected death of a musical and lyrical giant.

I want to say a few things about Rush’s appeal and Neil’s legacy in particular, then talk about how their music influenced and changed lives. I think the key to understanding Rush’s legacy is that they were middle-brow, middle-class suburban rock. Growing up in the 70s and 80s, most rock fell into one of two categories. On one side was the high-brow, often ironic, artsier rock of people like David Bowie or Bob Dylan. On the other side was the lower-brow, working class, bluesier music of people like the Rolling Stones, Aerosmith, and AC/DC, among others. The high-brow stuff was more associated with the urban elite, and certainly the rock press, while the lower-brow stuff was clearly working class, though often beloved in a somewhat condescending way by the rock press, usually for its “authenticity.” Where did Rush, or progressive rock more generally, fit in this world?

The ethos of Rush was clearly middle-class suburbia, as was its fan base. Neil and his bandmates were extraordinarily earnest. There was never a touch of irony or a wink at the fans in their over 40 years together. And although they aspired to create art, it was never about pushing boundaries or shocking fans, but being, as they have said, the best version of Rush they could be. Neil was rarely completely satisfied with a live performance, and the band as a whole was constantly restless in its desire to be better than they were “last time,” whether live or in the studio. They genuinely believed that being very, very good at what you do would bring success, both artistic and material. They were neither hip nor ironic enough to sneer at that view of the world as naïve, nor did they believe that success and happiness were impossible, which might thereby justify the nihilism and destructive hedonism that beset so many of their peers. They were just three guys from the Toronto suburbs who wanted to make the best music they knew how. And they meant everything they said and did.

Rush’s middle-class, middle-brow rock unsurprisingly appealed to the very same kinds of people they were. When I look around at many of my fellow fans who I know well, one of the things we tend to share is a similar suburban upbringing in the 70s and 80s. This, I think, also explains why their fan base remains overwhelmingly white (well-known rap stars and the members of Living Colour duly noted as exceptions). What remains more of a puzzle is the relative lack of female fans. The puzzle here is that Neil’s lyrics are notable for the complete absence of the misogyny that affects so much rock and other popular music. If women are put off by the typical male rock star take on sex, love, and cars, they should have seen Rush as an escape from that. There are a few songs about sex, but even those are cerebral not genital. Neil wrote some “love songs” but rather than the usual pablum, they were rationalist love songs about how we fall in love and stay in love (“Ghost of a Chance” being the exemplar here.) Even their car song (“Red Barchetta”) isn’t really about a car, but about the car as a metaphor for freedom and individuality. Presumably, the aggressiveness of the music was not what many young women wanted to listen to. Although in the last decade of their careers, the number of women at live shows began to grow substantially, and not just Rush widows rolling their eyes after being dragged there by well-meaning but completely wacky husbands and boyfriends. (The famous scene in “I Love You, Man” captures this perfectly.)

All of that said, Neil and Rush took both their music and their lyrics seriously, and even if their earnestness sometimes spilled over into pretension, it was only because they were trying so hard to create something they cared about, and that they hoped their fans would care about. That earnestness was a real reflection of the middle class belief in upward mobility and the idea that hard work and excellence was the path to success. And that serious things mattered. It was okay to talk about philosophy and art and politics and history because they mattered. If nothing else, early Rush drove this teenager to the dictionary to learn a few new words (maelstrom?). It was a message, both in Neil’s lyrics and their music, that their fan base was primed to hear and to adopt as their own. For those of us who became fans at a young age, this message was central to so much of what we did and how we lived in the years that followed.

Rush believed in the possibility of human excellence. Each of them, especially Neil, is widely recognized as among the best on their instruments in the history of rock. So many of Neil’s lyrics are about regular people, both individuals and groups, who did extraordinary things, whether the simple acts depicted in “Nobody’s Hero,” or their tribute to the space shuttle (“Countdown”) or Neil’s direct depiction of genius in “Mission.” The message to listeners was clear: you too are capable of excellence and heroism. For suburbanites who were, in Neil’s words, “detached and subdivided in the mass production zone,” being told that you were capable of rising above the crowd was a much needed breath of fresh air.

Neil’s incredible drive to be the best at what he did was similarly inspirational. Early in his career, just watching him play with the energy of a Keith Moon, but with a level of control that reflected the thoughtfulness and complexity of his drum parts, was a thing to behold. As his sonic palette expanded through the 70s with the addition of a variety of percussion instruments, his ability to move among them and integrate them into both Rush’s music and his steadily lengthening solos became his signature. And as his power, speed, and control grew, his solos became feats of human excellence that would make me cackle with glee, thinking “how can a human being do that?” I’ve compared Neil’s drumming to great athletes like Barry Sanders in football or Pavel Datsyuk in hockey (pardon my Detroit bias), or to more everyday feats of excellence, like the work of a highly-skilled flat-top breakfast cook at my favorite diner. They all prompt that reaction of glee at humans pushing the boundaries of excellence. The most important part about this with respect to Neil is that it was never about competition with other drummers in a direct way. It wasn’t that he had to show the world he was better than Moon or Bonham or Copeland, or whomever. It was that he had to be the best Neil Peart he could be. He would accept no less of himself than that very exacting standard. And he was unafraid of feeling proud when he reached that standard, as he said often after playing “Tom Sawyer” live.

This point, for me, gets at the crux of what I think Neil and Rush has meant for so many of us who have been long-time fans. He, and they, have been role models for what it means to live a life of excellence, integrity, and seriousness of purpose, and they have demonstrated that doing so can bring one enormous success. You do not have to “sell your dreams for small desires” and being sucked in by “glittering prizes and endless compromises” will “shatter the illusion of integrity.” From as far back as the “2112” album in 1976 that put them on the map, they have never sold out their vision of making the music they wanted to make. In the face of record company pressure to be more “commercial” and deliver some singles, they made “2112” with its 20 minute suite based on Ayn Rand’s novella Anthem. I have elsewhere described that as the biggest “fuck you” in the history of rock, and when it turned out to be an unexpected huge success, Neil noted that record label executives never again tried to tell them what to do. At the pinnacle of their success in the early 80s, they could have continued to make the same music that sold millions, but that’s not who they were. Their restlessness, their interest in new music, and their desire to be the best Rush they could be, pushed them to move to a more keyboard-oriented sound through the 80s, costing them fans who were clearly just there for the band-du-jour. This was truly “progressive” rock. They found their way back to a harder sound in the 90s, and their final CD from 2012 (“Clockwork Angels”) is among their hardest rocking work ever (and among their best). They were fortunate to have a core fan base who was willing to take this ride with them and who seemed to be motivated by a deep curiosity about what they would do next. Speaking for myself, that describes me perfectly. Not every step was a good one (the “Roll the Bones” CD, for example), but we were there for the journey not the individual destinations.

Their unflinching integrity and commitment to excellence and progress as lyricists, songwriters, and musicians were, and still are, a role model for me personally. Alex once said that while they were never part of the “mainstream,” they were always there, walking along the shoreline. That metaphor seems just right, and has been one that probably applies to my own career as an Austrian school economist. One does not have to be part of the mainstream to have a successful career, and if one’s work is truly outside of that mainstream, little is to be gained by pretending to be something you’re not. It really is “just a question of your honesty.” Those very bourgeois values of honesty, integrity, and excellence are what matter for a career that will not only be successful, but that will allow you to look at yourself in the mirror and come to understand that, in the words of John Mellencamp: “an honest man’s pillow is his peace of mind.”

For young people trying to figure out how to walk their way through life, this is a message that will, I believe, always resonate with a substantial number of them. For all of the other reasons that Rush’s appeal has become multi-generational, as parents introduced their kids to the music that mattered to them, I think this one is central. Young people look around and see too many people who they perceive to have “sold out” or compromised their visions or just lived lives that they are unhappy with and wonder why adults would do that. Neil’s lyrics and Rush’s music offers them an alternative vision of what it means to have a life well-lived. You can achieve excellence. You can do it your way and succeed. You can be you, be successful, and be happy. Neil wrote about it in song after song, and Rush lived it despite the challenges they faced. That message is one that has perpetual appeal to youth and probably assures that Rush’s music will always have an audience.

I think this point also explains the much-discussed connection between Neil and Ayn Rand. For all of the ink spilled about this, it’s all more simple than many think. The real Rand influence on Neil was The Fountainhead and not Atlas Shrugged. In fact, all three members read and liked The Fountainhead. That book’s emphasis on artistic excellence and integrity and the values one brings to a career and to a life, and its ultimate vindication of those who pursue those values, explains much more about Neil’s lyrics, his excellence at his craft, and the band’s career path than anything else Rand ever wrote. Generation after generation keeps rediscovering Rand, and The Fountainhead is still taught in some high school American Literature courses (it’s where I read it first). The reasons for that parallel the reasons why Rush’s music will live on, similarly walking the shore of the mainstream: those are timeless, universal human values and ones that particularly appeal to youths who are trying to figure it all out. Very little of Rand’s influence on Neil was explicitly political. That influence shows up in the themes of excellence, integrity, and honesty, and the drive to be the best you that you can be.

In the end, I don’t think Neil was really much of a libertarian, nor are the bulk of his lyrics accurately described that way. The term that best describes them, as I have argued elsewhere, is “individualist.” That term encompasses the values discussed above and the broad political themes that do appear from time to time in his lyrics. One need not be a libertarian to appreciate Neil’s lyrics, as evidenced by my numerous leftist friends who are fans. But one does need, at some level I think, to believe that those values matter. Their music would be a hard listen otherwise.

I want to finish this on a more personal note. One vastly underappreciated aspect of Neil’s and Rush’s career is the way their music created intense meaning and incredible friendships for fans. Neil has said that his favorite compliment from fans was “thank you for the soundtrack to my life.” It’s the first thing I would have said to him. For almost 40 years now, their music has been there for me in the good times and the bad times. And for 35 of those years, their live shows were a place of escape, of transcendence, of deep friendships, and the sense that nothing could go wrong in the universe if this combination of musical transcendence and human friendship were possible. No matter what was happening in my life, the anticipation of another Rush show just made all of the bad stuff seem small and irrelevant. And for three hours, they just took me to another place in ways few things do. When they ended touring in 2015, it wasn’t a surprise, but the thought of life without those experiences was a hard pill to swallow. That Neil’s death has made that a certainty is part of why it’s hit so many of us so hard.

In addition to the live shows, Rush has given me a group of (mostly male) friends who, via the internet, have kept up our friendships for, in some cases, more than 20 years. We’ve been through all of the life stuff together, from marriages and divorces, to deaths of parents, to kids, to kids going off to college, and now, in our deep middle age, various health issues. At least four of us are dealing with cancer, and others have different serious medical issues. Rush brought us together, but the underlying shared values and experiences that attracted us to Rush have kept us together for two decades. It’s a unique male space that is a combination of incredible support and the humor of our 15 year old selves. That group has been the safest of safe spaces for its members for a very long time and I don’t know exactly what I would have done without them through a divorce and a cancer diagnosis. Don’t let anyone ever tell you that men can’t care for and support each other in our own unique and bizarre ways. As I recently said on Facebook, there’s a great Gender Studies thesis/dissertation to be written about Rush and masculinity. Among the very many gifts that Neil and Rush have given me, this one is up there on the list.

The loss of Neil Peart is more than the loss of a supremely talented musician and lyricist. Many of us have lost a mapmaker of adulthood without whom we wouldn’t be who we are today. It’s also the end of one of the most special stories in the history of rock. It’s the last chapter of the story of the uncool kids who triumphed over the cool ones on their own terms and, finally, became accepted as part of rock royalty with their 2013 induction into the Rock and Roll Hall of Fame. And while no one will ever again get to see in person the genius that was Neil Peart, or the musical spectacle that was all three of them playing together live, we have dozens of CDs of music, all kinds of official videos of their live performances, and several documentaries that will live on. The values and commitment to excellence that drove their careers have an appeal that will always find an audience among the young yearning for a guide to navigate the failings of their elders. It was true in 1976. It’s true in 2020. And it will be true in 2112 and beyond.

Rest in peace, Neil. And thanks for the soundtrack to my life.

Criminal law in the 18th century is best described as unpredictable, repressive, and punitive. Judges had immense discretion and could harshly prosecute people on the basis of flimsy evidence. Capital punishment was employed to punish a myriad of crimes, and nightmarish torture was often used to extract confessions. In England during the 18th-century, there were over 200 capital offences, most of them being property related crimes (theft, arson, trespassing). One of these 200 offenses was the cutting down of a cherry tree in an orchard. This changed when a previously obscure Italian philosopher named Cesare Beccaria published a short but evocative essay entitled On Crime and Punishment.

Beccaria’s Life

Beccaria was born on March 15th 1738 into an affluent,noble family. He was educated at a traditionalist Jesuit college at Parma in Northern Italy and, after graduating, he studied Law at the University of Pavia. After completing his studies, Beccaria returned home and fell in love with a woman called Teresa Di Blasco, the daughter of an army officer. Beccaria’s father forbade him from marrying her as he believed the marriage would sully Beccaria’s noble status. Beccaria protested angrily to his father, who eventually put him under what can only be described as house arrest to dissuade him from marrying Teresa. After three months elapsed, Beccaria married Teresa and became estranged from his parents. 

Beccaria seemed to be entirely uninterested in scholarly affairs. The traditional methods of education failed to inspire him. However, this changed quite dramatically when Beccaria began reading Montesquieu’s Persian Letters, which recounted the travels of two Persian noblemen travelling through France. Montesquieu’s satirical and sharply critical approach to political and religious institutions inspired Beccaria to delve further into philosophy. He then met two intellectually curious brothers, Pietro and Alessandro Verri, Pietro an economist and Alessandro a writer. Pietro was the leading figure of a short-lived but influential? group known as the Academy of Fists. The name was jokingly adopted by Pietro when he heard the group had garnered a reputation for having such heated debates that they were reputed to break into fistfights.  

The Academy was made up of Italian intellectuals who advocated for a variety of economic, legal and social reforms. They published their ideas in a periodical named Il Cafe, or “the Coffeehouse,” modelled after Joseph Addison and Richard Steele’s The Spectator. It was there that Beccaria published his first written work in 1762 on the monetary policy of Milan.

However, Beccaria found it hard to write. Pietro described Beccaria as a person with a great mind who was also lazy and easily discouraged. Pietro assigned Beccaria to write about criminal law. After some help from Alessandro, who had a wealth of experience of working with prisons, and some much-needed prodding from Pietro, Beccaria published On Crimes and Punishments at the tender age of twenty-six.

Where Does Law Come From?

A common idea in 18th-century thought was the concept of the state of nature, a time when there were people but no established authority to enforce rules. Many thinkers such as Thomas Hobbes, John Locke and Jean-Jacques Rousseau used the state of nature conceit to explain how we emerged from a primitive state into established civil society.

Thomas Hobbes believed that the state of nature was a miserable way to live. Without rules, there was pure anarchy in what he called the war against all. Eventually, the inhabitants of the state of nature, tired of lawlessness and war, surrendered their natural liberty to a sovereign endowed with unlimited powers. This sovereign would then use their power to enforce laws, bring about an end to the anarchy of the state of nature. By contrast, Beccaria wanted to stay away from theories of natural law and divine right to give a more secular account of how laws arise. To this end, the state of nature in Beccaria’s work serves not as a real event in human society but a thought experiment as to how laws would arise and function ideally.

Beccaria agreed with Hobbes’ assessment; humans left the state of nature due to the desire for security and peace. He writes that “Weary of living in a state of war, and of enjoying a freedom rendered useless by the uncertainty of its perpetuation men willingly sacrifice a part of this freedom in order to enjoy that which is left in security and tranquility.” However, unlike Hobbes Beccaria believed we did not give up all of our liberty to a sovereign. No one gives up their liberty for the benefit of another, but, as Beccaria writes, “ Every man thinks of himself as the centre of all the world’s affairs.” We only surrender the smallest portion of our liberty in order to preserve peace. 

Beccaria defines laws as “the conditions whereby free and independent men unite to form society.” From this definition Beccaria reached two conclusions. Firstly, the law must bind all equally, as the obligation to obey the law “reaches from the throne to the hovel” and is equally binding for “the greatest and most wretched of men.” Secondly, laws are only justified as long as they maximise the amount of individual liberty possible. Beccaria’s conclusions are deeply egalitarian and liberal as he believes no one should be above the law and that we ought to be allowed to pursue our rational interests as long as we do not interfere with or harm others.

Deterrence is Better than Punishment 

If a person commits a crime, how should we punish them? Beccaria believes that punishment functions mainly as a deterrence to dissuade future criminals from breaking the law. Retributive punishments which focus on the suffering of a criminal are a waste of time; as Beccaria asks “Can the wailings of a wretch undo what has been done and turn back the clock?” Instead, punishment serves “to prevent the offender from doing fresh harm and to deter others from doing likewise.”

Beccaria subscribed to Locke’s idea of empiricism, the idea that all of our knowledge comes through the senses alone. He believed that if punishments were speedy and certain then people would associate the crime with the sentence more clearly and avoid breaking the law. Therefore Beccaria argues that crimes “are more effectually prevented by the certainty, than the severity of the punishment.” Citing Montesquieu, Beccaria states “every punishment, which does not arise from absolute necessity… is tyrannical.” Punishment is first and foremost about stopping current criminals from causing harm and deterring future criminals. 

Beccaria believed that “it is better to prevent crimes, than to punish them,” but besides punishing criminals to deter others, how does Beccaria believe we can prevent crimes? Firstly, he believes that laws should be written in a manner which is understandable to the average person. Beccaria exclaims, “It is the greatest of evils if the laws be written in a language which is not understood by the people.” Laws should be clear, simple, and applied equally to all so there is no ambiguity or uncertainty. Lastly, Beccaria argued that “the surest but hardest way to prevent crime is to improve education.”

His Opposition to the Death Penalty

Beccaria was deeply opposed to the death penalty, a rarity for his time when most believed capital punishment was an acceptable response to many crimes. He was not the first to oppose the death penalty—he 12th-century Jewish philosopher Maimonides had opposed the death penalty because “it is better and more satisfactory to acquit a thousand guilty persons than to put a single innocent one to death”— but Beccaria was the first to provide a sustained critique of the death penalty.

Firstly, Beccaria opposes the death penalty on moral grounds. Laws are made legitimate by people’s consent; however, Beccaria believed no man would rationally sacrifice his right to life. He asks “Who has ever willingly given other men the authority to kill him?”  The minimum sacrifice of liberty people made to emerge from the state of nature did not include “the greatest good of all, life.” There are certain cases where the death penalty is acceptable when the state is in grave danger; however, for most cases detainment is the preferable option. Beccaria concludes that unless there are grave circumstances, the state has no right to put its citizens to death. He stresses further that “the death penalty is not a right, but war of a nation against a citizen.”

Secondly, he argues on practical grounds that the death penalty is not effective as a deterrent. Executions in Beccaria’s day were public affairs. Those who disagreed with Beccaria might well have asked whether the image of a man being beheaded or hung would stick in our minds and make us fear breaking the law? But Beccaria believes it will not as the execution-only lasts a moment. The passing spectacle of execution leaves no real impression in our minds. For the most part executions in the past were not solemn contemplative affairs, most thought of them as entertainment.

The death penalty has existed throughout history. The Athenian Lawgiver of the 7th century Draco made death the penalty for most offences. When asked why, he explained, “The lesser ones deserved it, and for the greater ones no heavier penalty could be found.” However, people still committed crimes despite the harshness of the punishment. The death penalty is ubiquitous throughout history, but as Beccaria points out “the ultimate punishment has never deterred men determined to harm society.” In fact, the times when the most draconian punishments are implemented is when crime is most common. He believes that by responding to savagery with state-sanctioned savagery, it harms the general humaneness of civil society “because of the example of savagery it gives to men.” Overall Beccaria believed that the state had little legitimacy in pursuing capital punishment and that, moral considerations aside, it wasn’t even a particularly useful policy.

Against Torture

Torture was a common practice in the 18th century. Beccaria believed that torture “is a standing monument to the law of ancient and savage times.” His opposition to torture is threefold. Firstly, torture undermines the rationality of the justice system. The use of torture replaces evidence with pain as the method of establishing the truth. Secondly, torturing someone to make them confess to the crime yet again undermines the justice system as “no man can be considered guilty before the judge has reached a verdict.” Thirdly, even if torture was only used on actual criminals, it is unnecessary and extreme, as stated by Beccaria, “Every act of authority between one man and another that does not derive from absolute necessity is tyrannical.” Torture is excessive and only serves to torment criminals, not to deter future offenders.

Gun Control in the 18th-Century 

Beccaria stresses the importance of deterring crime. Today, many proponents of gun control believe the laws they pass will deter criminals. Beccaria strongly disagrees. In a chapter entitled “False Ideas of Utility,” Beccaria makes many surprisingly modern-sounding arguments against laws restricting ownership and access to firearms. He believes that laws restricting firearms “only disarm those who are neither inclined nor determined to commit crimes.” If a person is going to murder someone, surely they will have no qualms illegally circumventing any regulatory laws, which Beccaria argues are “the most trifling and purely arbitrary regulations that can be broken with ease and impunity.” These laws are not only ineffective at deterring criminals, Beccaria notes that they also “place the assaulted at a disadvantage and the assailant at an advantage.” Furthermore, they “subject the innocent man to all the annoyances which the guilty deserve.” 

The Legacy of His Work 

Beccaria published On Crimes and Punishments anonymously as he was afraid that his radical views could get him into trouble with the authorities. In some ways, Beccaria was right to do so. His book was added to the Index of Forbidden Books by the Catholic Church in 1766 and was only removed nearly two hundred years later in 1962. Immanuel Kant, who believed that all murderers should be executed, called Beccaria’s arguments “sophistry.”  Long after his death, Beccaria was even called a socialist for his apparently utopian views.

There were many critics of Beccaria, but there were also many admirers. Convinced and inspired by Beccaria, Grand Duke Leopold of Tuscany and the Holy Roman Emperor Joseph II in Austria abolished the death penalty in 1786 and 1787. Empress Catherine the Great wished to abolish the death penalty and offered to hire Beccaria to reform the legal system of Russia; however, he preferred to stay in Milan. Beccaria, along with Montesquieu, inspired the 1791 penal code in France, which abolished the arbitrary crimes and trials of the pre-Revolutionary Ancien Regime. 

Today in America, Beccaria is by no means a household name; however, in the 18th-century he was wildly popular. When two scholars, Donald Lutz and Charles Hyneman, analyzed 15,000 sources written during the period of 1760-1805, they found that Beccaria was the seventh most quoted author, ranking alongside people such as John Locke, David Hume, and Montesquieu. Thomas Jefferson and Benjamin Franklin, who were both fans of Beccaria’s work, advocated for limiting the death penalty to treason and murder, while Benjamin Rush argued for incarceration as opposed to execution, all inspired by Beccaria. Thomas Jefferson even referenced him numerous times in draft legislation to reform Virginia’s penal laws.

The legal systems of Beccaria’s day were for the most part bound by custom and thus based upon personal discretion and hereditary rights. This resulted in laws being applied unequally as well as punishments that were often deeply disproportionate to the crime. Beccaria wished to modernise criminal law by making it a system of rational rules and principles, for which, his friends nicknamed him Newtocino, Little Newton. 

But Beccaria’s rationalism was not cold-hearted, he wished for a system which treated all people equally and fairly, regardless of their class or station in society. In that regard Beccaria was successful, his work having inspired many reformers throughout the Enlightenment. However, even today we have disturbing problems in our justice system. Most prosecutions never see juries, ending instead in plea bargaining. Many people are locked up for victimless crimes. The police disproportionately target minorities, applying the law harshly for some and leniently for others. In this regard, despite being over 250 years old, On Crimes and Punishments is still relevant to this day.

In a world where many feel that advertising has become increasingly information-free and somewhat crude (e.g., do we really need toilet paper commercials that talk about “breakthrough?”), mounting a defense of advertising is something of a challenge. But there are many good things about advertising, especially about the indispensable role it plays in the competitive market process. I want to focus on one of those by way of a story about Tide Dry Cleaners.

I recently discovered (note that word) that Procter & Gamble, the company that makes Tide laundry detergent, has opened up dry cleaners branded with Tide. They’ve been around for a few years, but P&G has recently started a major expansion into several new cities, including the Indianapolis area, where I live. In fact, one is opening just a couple of miles from my house.

This development is economically interesting for a number of reasons. One is that it’s a great example of how to take a well-known and well-liked brand and expand its reach through new initiatives. Once Tide was just a brand of laundry detergent. In the clean-up after Hurricane Katrina, P&G put a bunch of washers and dryers on tractor trailers and went around the Gulf Coast offering free laundry services to folks who could not use their own equipment or access a laundromat. This program was called “Loads of Hope” and was clearly branded with the Tide logo. This was incredibly successful and since Katrina, the Loads of Hope trucks have appeared at natural disasters all over the country.

The Tide Loads of Hope program showed P&G that the Tide brand could be deployed for all kinds of projects, and it was a natural to go from mobile laundry services to brick-and-mortar ones by creating the Tide Dry Cleaners franchise around 2010. What’s also interesting here is how P&G went from a seller of just the inputs into clean laundry to a provider of the services and machinery as well. It’s a great story about leveraging a brand and expanding the scope of the business. And from all reports, the Tide Dry Cleaners do a great job, and the expansion suggests they are profitable as well.

So what does this have to do with advertising? Let me tell you about how I discovered the existence of the new Tide Dry Cleaners here in Fishers.

Like many other suburbanites, I get lots of coupons in the mail every week. It’s worth a few minutes to flip quickly through those mailers and see if there’s ones for restaurants we frequent, for example. In doing so recently, I came across a large one for the new Tide Dry Cleaners offering 15% off your first purchase. I had no clue Tide Dry Cleaners even existed until that moment. It wasn’t that I didn’t know they had local outlets, because that question could be easily answered with a search. Instead, in the language of Austrian economics, I was beset by structural uncertainty – I didn’t know what I didn’t know. When you don’t know what you don’t know, you can’t go looking for it.

The ad for the new store alerted (note that word, too) me to the existence of something I otherwise would not have known. This is one of the key roles of advertising. It’s not that it provides information about the product or service in some objective sense, but that it can make us aware of opportunities of which we would otherwise be ignorant. This, among other reasons, is why advertising is not wasteful or unnecessary as many critics have alleged. It’s also a defense of what we might call “low-information” advertising. That coupon simply needed to have the large picture of the Tide Dry Cleaners store to serve its major purpose in alerting me to its existence.

Historically, economists have been skeptical about the value of advertising. In the most simple version, there is no reason for it to exist in the standard model of perfect competition. Among the assumptions of that model is that all goods have the same features and quality, that prices are given and cannot be changed, and that everyone has perfect relevant knowledge. In such world what purpose could advertising possibly serve? There’s no information about the product to talk about since all products are the same and everyone knows everything about them. There’s no way to offer a coupon because prices are given by “the market” and individual sellers have no power to change them. As long as economists accept the model of perfect competition as their standard of comparison, advertising will always seem wasteful.

If you flip this argument the other way, it implies that where advertising does exist in the real world, it would be due to deviation from the perfectly competitive model and therefore evidence of some degree of monopoly in the economy. For example, the model of so-called “monopolistic competition” relaxed the assumption of product homogeneity, allowing sellers to differentiate their products in various ways. Think of the different features on different models of smartphones. In this world, advertising at least makes some sense. Now producers have some control over price and might want to make information known about their product. That said, this was still seen as comparatively wasteful as pushing the economy toward perfect competition would enable society to take the resources spent on advertising and use it for other things.

The problem with both of these models was ably noted by the Austrian school economist Israel Kirzner in his path-breaking 1973 book Competition and Entrepreneurship. Both perfect competition and monopolistic competition are equilibrium models in which markets quickly settle in on one efficient (given the endowments and constraints) distribution of resources. One of the reasons for this is that both models make strong assumptions about knowledge such that there is no room for the sort of pure act of discovery that was involved in my realizing that Tide Dry Cleaners existed. Advertising might be able to provide information that actors could search for, knowing that the information is out there, but there can be no pure discovery in those models.

For Kirzner, the essence of the market process is the way in which entrepreneurs engage in such acts of pure discovery and thereby better coordinate the desires of consumers with the actions of producers. His classic example is the person walking down the street and noticing that apples are selling for $2 per pound on one side and $3 per pound on the other. Entrepreneurs are alert to these opportunities and will arbitrage that difference, paying more than $2 on the first side and selling at under $3 on the other. Notice how this improves both the sellers on the first side and the buyers on the second side. It brings the desires of both consumers and producers into closer coordination. In the limit, the competition that is inherent in entrepreneurship will drive the price of apples to the same price on both sides if all else is constant.

The moment of discovery where one realizes that there is this price differential, and that one can profit from it while also making the other parties better off, is the moment of entrepreneurship. At that moment, the person’s preexisting understanding of the economic world is shaken up and there is a whole new understanding of the means available to her to satisfy her various ends.

In a world where we are constantly facing the structural uncertainty of not knowing what we don’t know, entrepreneurship is central. And when we realize that consumers also don’t know what they don’t know, the role of advertising becomes clear. Entrepreneurs who want to sell their products have to make them known to consumers who might not have a clue they exist. Advertising is a way to help consumers discover things they didn’t know they didn’t know. Good consumers are good entrepreneurs in this way by being alert to opportunities for discovery, just as I was by looking through that coupon mailer. Alert entrepreneurs will create ads that play to the alertness of consumers to make them aware of their product or service and, one hopes, purchase it. In this way, advertising is central to the competitive market process, not just because it enhances sellers’ profits, but because it does so by also enhancing the surplus of consumers. They get products they want but didn’t know about, and that makes them better off.

This discovery function of advertising has little to do with its traditional informational content. Again, all I needed was the visual image of the Tide Dry Cleaners to make the point. The hardest part of opening a new business is getting consumers’ attention in a very crowded market, but it’s also the most important. It’s one reason why brand extension, such as putting the Tide brand on the dry cleaners, is such a common strategy. Consumers know and trust Tide, so not only is their attention grabbed, they are confronted with a brand they are comfortable with. Things like prices and hours and the science of their dry cleaning method aren’t necessary when the brand and image largely speak for themselves.

Looking at advertising this way helps us understand its value even when it isn’t traditionally “informative.” In an increasingly crowded market with so many products old and new, the economy of attention is key. Advertising allows others to pay the cost of enabling us to discover new opportunities for consumption. But we, as consumers, have to be entrepreneurial about such opportunities. Just as producers have to be alert to price differentials in order to capture pure profit, so to consumers have to be alert to new and improved products in order to capture additional consumer surplus. Advertising benefits alert consumers by spurring moments of discovery, leading consumers to react the way I did upon discovering Tide Dry Cleaners: “Who knew?!” Thanks to advertising, I now do.

Scientific research is the time-honored key to objective knowledge. In the past it was funded pluralistically, but today certain portions of the market for knowledge are dominated by a single buyer, namely the government. This is especially true in the research fields that impinge on the regulatory sphere, such as pollution and climate change.

What’s wrong with science today? What sciences can you trust? How are scientists incentivized? Are scientists just obsessed with getting published? How is science publicly funded?

Further Reading:

Scientocracy, written by Patrick J. Michaels and Terence Kealey

More Breakfast Science to Sink Your Teeth Into, written by Terence Kealey

More Proof That Breakfast Is a Dangerous Meal, written by Terence Kealey

Related Content:

Science Doesn’t Need Public Funding, Free Thoughts Podcast

Bias in Scientific Research, Free Thoughts Podcast

The Moral Arc of Science and Reason, Free Thoughts Podcast

Tell them however many times one might that he was far greater a political scientist, legislator, and constitutional statesman, Americans still will think of James Madison as President (if they think of him at all). If, however, his closest friend and ally, Thomas Jefferson, left “President of the United States” off the gravestone he designed for himself, Madison had far more reason to wish for his tenure in the White House to be forgotten. Although he departed Washington, D.C. in 1817 on a wave of enthusiastic support, Madison’s presidency must be classified as the grand flop of his otherwise momentous career.^[1]

The reasons begin with Madison himself. In a day and age when the ablest of despots ruled the greatest of nations, Madison was a kind of anti-Napoleon. Though Bonaparte’s diminutiveness is only mythical, James Madison was remarkably small. Besides that, Napoleon was known for his on-the-spot decision-making, most famously on the field at Austerlitz. Madison … not so much. Rather, he commonly buried himself in a library among books written in more than a handful of European languages, ancient and modern, before arriving at penetrating insights and powerful diagnoses. The most obvious example must be the year-long effort leading up to the Philadelphia Convention that one scholar referred to as “Jimmy Madison’s Research Project.”^[2] Once this type of work left Madison committed to conclusions, he remained so—sometimes even though conditions had changed markedly.

In The Federalist #70, Publius (Alexander Hamilton) justified the unitary Executive the Constitution would create by saying that it would combine “decision, activity, secrecy and dispatch” in greater measure than a plural one. By all accounts, Napoleon’s decision to sell Louisiana came as a complete surprise to everyone else, of a sudden. It was obviously the right move.

It was not the kind of move President Madison likely would have taken. He would have required extensive Cabinet consultations. Faced with a long-festering difficulty in relations with Great Britain, Secretary of State Madison devoted several months to another lengthy research project. In the end, he showed—to the satisfaction of twenty-first-century historians and political scientists—that Britain had no right during the Napoleonic Era to enforce the Rule of 1756, according to which it claimed authority to interdict neutral commerce that had not been allowed to the neutral country in peacetime.^[3] Ultimately, Britain’s Orders in Council of 1807 required any ship trading with virtually any part of Europe, from the eastern Baltic to the eastern Mediterranean, first to unload its cargo in a British port and pay a 25% duty. Napoleon responded with his Milan Decree, which ordered seizure of any ship that had complied with the British Orders.

Madison’s pamphlet was no match for Britain’s 900 warships. Nor was Britain disposed to change its policy at a time when economic coercion of the French Empire was effectively the only strategy available to it. Not only the paper blockade of virtually all of Europe, which is to say Napoleon’s empire and allied states, but impressment, the egregiously offensive British practice of stopping American merchant ships at sea to force British sailors into the Royal Navy, formed a cause of irritation between the Jefferson Administration and Britain.

Jefferson, Madison, and Gallatin could not—could not—take the obvious steps in response to difficulties with Britain at sea. Their entire program was against it. One might have thought that they would raise taxes to pay for a significant naval force to defend America’s coastal waters, besides fortifying the chief American ports, training a professional army officer corps significantly larger than the one West Point was producing, and raising sufficient soldiers for an army that could fend off incursions from Canada or the sea. One might have thought, in other words, that they would make their policies fit the circumstances.But they never did. Secretary Gallatin’s chief goals at Treasury—cutting navy spending and paying off the national debt—remained on the front burner for the Jefferson Administration. Not war, but the Embargo would be America’s response.

Madison had contemplated economic coercion of, for example, Britain since the early 1780s, and so his advice to Jefferson to take this step came as no surprise. The three Republican leaders were joined at the hip in this regard, as in all else. Jefferson and Madison had seen such policies coerce desirable responses from Britain in the days before the Revolution, and they were sure economic coercion would make the former mother country do what they wanted even now.

The results were entirely unlike what Madison, for one, expected. Britain did not accommodate the United States. Neither did France. The only people significantly affected by the Embargo were Americans. Up and down the Atlantic seaboard, and more as one went farther north, Americans resorted to smuggling—which proved quite lucrative. New Englanders traded with Canada. Britons laughed.

When Gallatin, in charge of enforcement, detailed to the president the types of new power he would need to make the Embargo effective , Jefferson forwarded the request to Congress. The Congress complied.

Partly as a result, Madison’s 1808 margin of victory in the Electoral College did not approach Jefferson’s from 1804. Jefferson essentially abandoned his office by fleeing to Monticello and refusing to make decisions in his administration’s closing months that would (as he put it) bind his successors in the coming years. In his presidency’s last days, the Senate rejected one diplomatic appointment unanimously and Congress (with Republicans still in control of both houses) repealed the Embargo. Formerly master of American politics, Jefferson left the presidency at its lowest ebb. Then, his chief lieutenant succeeded him.

Like John Adams before him and Martin Van Buren, Andrew Johnson, Harry Truman, and George H. W. Bush since, Madison was a pale substitute for his predecessor. Incongruously, he arrived at the Capitol to give his First Inaugural Address in a fancy carriage. Madison then read an  address that must have struck the large number of people in attendance who had heard, or at least read, Jefferson’s immortal speech on a similar occasion as utterly unlike it—the orchestra tuning up rather than in full voice. At that evening’s inaugural ball (an innovation from the First Lady), “Little Jemmy” was spotted standing in a corner with a small group, while Mrs. Madison made the rounds among all in attendance.

In those days of extremely few Federal Government employees even more than today, personnel were policy. Vice presidents did not count for much, which helps account for Republicans’ choices of George Clinton for Madison’s first term and Elbridge Gerry for his second. (These two former Antifederalists both died in office). If Madison had had his way, his rise from #2 (the State Department) to #1 would have been followed by Gallatin’s promotion from #3 ( the Treasury) to #2. Virginia Republican Senator Wilson Cary Nicholas told him, however, that in case Gallatin were nominated for secretary of state, he likely would be rejected by the Senate, and so Madison did not nominate him. Rather, he tabbed the brother of one of the U.S. senators who had organized opposition to Gallatin. Historians uniformly judge this fellow to have been not only less able than Gallatin (the brilliant immigrant whose finishing in Switzerland’s finest schools had prepared him to serve as Republicans’ answer to Alexander Hamilton, both in principles and in ability) but downright incompetent. By the time Secretary Robert Smith reached the end of his tenure at State, Madison was proofing all of his most important diplomatic letters to ensure that they accurately conveyed the messages the president (and Gallatin, Madison’s chief advisor) intended to convey. This was not the last time that preemptive surrender came back to bite President Madison.

What with abandonment of the Embargo, one might have thought that the president would take particular care in choosing his two military secretaries. But no. Rather, Madison selected for War a physician who had served in that capacity in the army during the Revolution and for Navy South Carolinian Paul Hamilton, whose progressively more debilitating, and ultimately embarrassing, dipsomania ultimately forced the highly resistant president to terminate him.^[4] Madison did not have a fully competent Cabinet until the final months of his two terms.

Congress and the administration went through a succession of feckless alternatives to the Embargo policy during Madison’s first term. One, the Non-Intercourse Act, barred American trade with France and England until such time as one of those great powers agreed to trade with America on such terms as America demanded. At that point, America would trade freely with the newly friendly power while continuing to forego trade with its enemy. When this gambit failed, Congress substituted Macon’s Bill No. 2, which opened trade with both countries until one of them recognized America’s rights as a neutral party to trade with both, at which point trade with the other would be cut off.

Upon learning of this, Napoleon had his foreign minister announce that France would indeed satisfy the American stipulations. But Napoleon set a trap for American shipping: in a day when transoceanic transport was exceedingly slow, the Madison government had no way of knowing that revocation of the edicts to which America objected did not account for Napoleon’s entire restrictive commercial system. The emperor had issued an edict of which the United States were unaware. By the time Madison learned that he had been snookered, scores of American ships had already traversed the Atlantic, only to be seized by French Imperial authorities and auctioned off on the other side. Napoleon had nothing but contempt for a country that remained essentially unarmed in the middle of the gigantic world war.

Madison understood the behavior of both Britain and France as essentially tyrannical. Both habit and geopolitical reality—that the Virginia Dynasty’s important goal of obtaining title to Spanish provinces neighboring the United States would require France’s cooperation, or at least acquiescence—made Republicans more willing to tolerate French depredations. (That Britain’s aggressive acts included impressment and French offenses did not made this distinction particularly easy to justify.) The administration expected Napoleon and his foreign minister, Charles-Maurice de Talleyrand-Périgord, ultimately to let America have its way, at least in regard to the Florida territory, because an American alliance would somehow benefit France. In the end, the emperor and his foreign minister never made the same calculation—Napoleon due to his own transient considerations, and Talleyrand because, as Henry Adams would have it, he was at heart a European conservative uninterested in aiding in the rise of the North American Republic at a great European monarchy’s expense.^[5]

The British found America’s position morally unacceptable, indeed infuriating. In his acid account of Madison’s presidency, Gary Wills analogizes the British attitude during the Napoleonic Wars to American opinion during the Cold War. Here the mother country was, holding out against the conqueror of all Europe in behalf of traditional European civilization, and the Americans were operatively siding with France.

In the year 1811, Madison reached the end of his rope. Seeing what likely would come and recognizing the utility of such an institution in time of war, he let Gallatin tell congressional allies that the president would be happy to see Alexander Hamilton’s Bank of the United States given a renewal of its original twenty-year charter. Backstage support did not suffice, however: the Senate’s Republican majority arranged a tie vote so that Vice President Clinton, once Hamilton’s chief home-state opponent, could cast the vote that killed the bank, which he gleefully did.

Later in the  year, the administration asked for authorization to raise a 10,000-man army. Republican senator William Branch Giles, who had been the chief organizer of the Madison for President effort in the Old Dominion in 1808,^[6] substituted a bill allowing the president to recruit 25,000 regulars and as many as 50,000 volunteers. One guess is that Giles intended by this measure to alarm potential opponents of a British war with the measure’s potential price tag. Giles by this point led a loose coalition of quasi-opposition Republicans (“the Invisibles”) in the Senate. Giles apparently had envisioned himself as a top Cabinet member, and failing to obtain that plum post, he turned to intermittently thwarting Madison’s initiatives. We should resist the impulse to think that because the party James Madison organized in 1792 controlled Congress during his presidency, the Madison Administration bore total—or sometimes even any—responsibility for measures the government adopted. Federalist strength had waned considerably, but opposition to substantial measures made itself felt on a regular basis.

Madison’s various appointments are a mixed bag. By 1811, Madison tired of having the incompetent, unfaithful brother of a Senate “Invisible” as his secretary of state and finally decided to heed Jefferson’s pleas to make up with James Monroe. Monroe was a once-close friend now on the outs with both Jefferson and Madison, but the president worked hard to repair the relationship and Monroe returned to the fold. That same year, Madison had an opportunity to replace two old Federalist Supreme Court justices. Here was the moment Republicans had yearned for. For one post, Madison chose a nonentity. For the other, he first nominated and the Senate confirmed an actual former Federalist, John Quincy Adams, who declined to serve. Madison next selected Joseph Story, an isolated Republican lawyer from coastal Massachusetts and still the youngest man ever appointed, whom Jefferson described to him as “unquestionably a tory.”^[7] [sic] If the goal of a Supreme Court appointment is to see the president’s constitutional philosophy reflected in the Supreme Court’s jurisprudence, Story may well qualify as the worst choice ever: he became John Marshall’s right-hand man in writing Hamiltonianism into constitutional law. Too, his glamorous post made his scholarly product as a Harvard law professor even more influential than it otherwise would have been.

Senator John Quincy Adams had judged Jefferson’s choice of John Armstrong for a European diplomatic post highly discreditable. Armstrong played a leading role in the shameful attempt of disgruntled officers at Newburgh, New York, to organize an effort by the Continental Army to intimidate the Continental Congress into paying them back wages at the Revolution’s end. Yet, his marriage to Robert R. Livingston’s sister greased the skids for him when it came time to divvy up appointed positions among key Republican Party constituencies. The Livingston faction was the leading faction in the pivotal state, New York, and so had to be rewarded. After spending most of a decade on the Old Continent, Armstrong found himself appointed in 1811 to head Madison’s War Department. Just as Senator Smith’s brother had proved a disastrous choice at State and the head of the Clinton faction in New York politics had made an unreliable vice president, so this top Livingston faction appointment would be crucial to the operation of the Madison Administration. It was not that Madison found any of these people particularly appropriate to their assigned tasks, but that internal Republican Party politics drove him to make these choices. Still, a more assertive personality might have opted to choose the best candidates, or even abler men, for at least some of these top posts. If Armstrong had tried his hand at fomenting mutiny during the Revolution, he would continue along his insubordinate path to devastating results as war secretary.

Many accounts of the message President Madison sent to Congress in June 1812 say that he asked Congress to declare war, some even that he declared war. Far from it. He considered decisions for war entirely for Congress to make. Therefore, he laid out in excruciating detail the offenses the British had committed against America since the Revolution, described the British policies that ensured such offenses would continue to proliferate, and concluded by saying that, “We behold, in fine, on the side of Great Britain a state of war against the United States; and on the side of the United States, a state of peace towards Great Britain.” Pointing to his constitutional principles, the president reasoned that, “Whether the United States shall continue passive under these progressive usurpations, and these accumulating wrongs; or, opposing force to force in defense of their national rights, shall commit a just cause into the hands of the Almighty disposer of events; avoiding all connections which might entangle it in the contests or views of other powers, and preserving a constant readiness to concur in an honorable re-establishment of peace and friendship, is a solemn question, which the Constitution wisely confides to the Legislative Department of the Government.”

In other words, even at what he regarded as a moment of urgent necessity, Madison could not muster an unforgettable phrase or a rallying cry, but instead offered his countrymen a persuasive but elliptical, high-fallutin’ climax to a lengthy war message. We have no reason to think that anyone heard Madison’s clarion call pierce the partisan darkness. If we want to pinpoint the time when Americans rallied behind President Madison, we will look for a long, long time. Congress declared war by the narrowest margins in history: 79-49 in the House and 19-13 in the Senate.^[8]

No one in Washington knew that only a few days after Madison’s War Message, the British prime minister withdrew the Orders in Council. Had news of this British initiative arrived in time, it would have prevented the War of 1812—probably permanently. Not for the last time, raw geographic distance played a pivotal role in deciding the course of Madison’s presidency. When at last Madison heard the news, he decided not to declare the war at an end—because he did not have any information about the shape of the British ministry’s response to Congress’s declaration.

Like Jefferson and Monroe, Madison approached the War of 1812 with the sanguine expectation that success would be “a mere matter of marching.”^[9] With Britain preoccupied in the titanic struggle unfolding in Europe, only meager British military assets would see service in North America in the coming months. America would be able to seize Canada and hold it as a bargaining chip. Britain would yield the policy concessions America demanded—recognition that neutral powers had a right to trade with whomever they wanted and abolition of the practice of impressment—in exchange for return of its North American imperial possessions.

The keystone of His Majesty’s North American possessions remained Montreal. Seize that, and the British would bargain. So the Americans believed.  Yet, the strategy the Madison Administration chose was woefully inadequate to the purpose. Instead of putting his forces under a unified command and allowing the theater commander to map out preliminary objectives the obtaining which would facilitate the ultimate, though quick, capture of the chief town in Canada, Madison and his subordinates selected three points of departure for American forces: near Detroit, near Buffalo, and in northernmost New York. Having launched across into Canada, the American forces were supposed somehow to head east and take Montreal.

The western portion of the campaign ended with an incompetent general, William Hull, unnecessarily offering a disastrous surrender. When he marched his men across the Detroit River into Canada in July 1812, prospects for seizing Fort Amherstburg seemed bright. Word of small British units’ movements to his rear spooked him, however, and he eventually decided not to attack the fort at all, but instead to cross back into Michigan. After intercepting anxious communications from Hull to the secretary of war and interviewing various men who told him of Hull’s forces’ low estimate of their commander, British Major General Isaac Brock besieged Hull’s forces at Detroit.

Hull seems to have been completely overcome by the crisis he faced, particularly after Brock warned him that the Indians attached to the British force would be beyond the general’s control in the event of an assault. “My God!” Hull wailed, “what shall I do with these women and children?” Fearful for his personal safety in the face of incoming artillery shells to the point of crouching at the sound of them, Hull on August 16, 1812 ran up a white flag—despite the fact that he had consulted none of his officers. He even surrendered portions of his overall force not stationed within the fort at the time.^[10]

Hull’s incompetence, though striking, was not an isolated problem for the United States Government. Rather, the war’s first campaign season saw manifestations of complete lack of preparedness, absolute ineptitude, and northern resistance to the war effort across the Canadian frontier. The central incursion, on the Niagara Peninsula, reached its climax with British capture of part of General Stephen Van Rensselaer’s army. The New York aristocrat had crossed into Canada, seeing that the battle had been won, only to find that that the balance of his militia forces would not follow him. A large portion of his troops, commanded by Winfield Scott, were captured, and the general asked to be replaced. The most easterly of the three, under Major General Henry “Granny” Dearborn, proved if anything more pathetic than the other two: units in the chief American formation ended up firing on each other while American militia units, standing on the Constitution, refused to leave American territory.^[11]

Due to the Federalist naval expenditures Jefferson and Gallatin had found so noxious in the 1790s, joined to superb naval architecture, the U.S. Navy scored a handful of isolated victories at sea in the war’s early months. Federalists loudly pointed out that if President Madison and his pals had had their way, there would have been no U.S. Navy to speak of. (Jeffersonian “gunboats,” cheap 15-foot boats boasting one gun each that Jefferson and Gallatin had thought fit substitutes for harbor fortification and seafaring ships, proved completely impotent when the time for war came.) Once overwhelming British Admiralty resources had been redeployed to new Western Atlantic stations, sheer numbers meant an end of naval victories too. American ships remained in port for the balance of the war.

The final year of the war, 1814, saw unforgettable developments. Most significantly, the U.S. Navy, which the Republicans’ policy had been to pare back virtually to nonexistence, cleared the Great Lakes of British ships. This American success resulted in establishment of the U.S.-Canadian border as the world’s longest essentially demilitarized frontier, which it remains today.

Elsewhere, the British at last decided that their various forays up and down Chesapeake Bay ought to lead to destruction of the American capital. Madison, rightly fearing this outcome, had told Secretary Armstrong to fortify the approaches to the town. Armstrong simply insisted that Washington did not contain any significant military assets, and thus would not be a British objective. Rather, they would attack Baltimore. After several months’ passage, Madison repeated his order. Armstrong again omitted to implement it, giving the same reason. Madison did not follow up.

At last, the British debarked a force of several thousand soldiers and marines, marched across Maryland, and met a more numerous American force outside Bladensburg, Maryland, today a site off the Washington Beltway. Madison, Monroe, and Armstrong all arrived at the field. Monroe, an authentic hero of the Revolution, set about helping the American commander to improve his troop dispositions. Armstrong did not. Madison upbraided Armstrong. At last, the Jeffersonian theory that militiamen would serve in place of a professional army would have its test.

Seeing those veterans of the Napoleonic Wars in their sharp red uniforms deploying into line of battle on the other side of the field, the American militia vindicated predictions made by Federalists of old: they fled. Even today, the battle outside D.C. is known as “the Bladensburg Races” in mockery of the American citizen-soldiers who disproved decades of Republican claims. To add insult to Republican injury, the only portion of the American army that behaved well that day was a small band of cadets from the Washington Navy Yard, who had manhandled a couple of big guns down the road to the battlefield. Their marksmanship made their armament far more effective than the Congreve rockets the British directed the Americans’ way.

So now Washington lay undefended. The outcome of several elements of Republican policy—regarding Cabinet appointments, military spending, peacetime preparations, etc.—would be an enemy army marching into town and burning down the Capitol (which then also housed the Library of Congress), the White House, the War Department, the State Department, and other government buildings. It took the intervention of the French minister to save the Patent Office: the British commander accepted his argument that patents were for the benefit of all mankind, not only the Americans.

The complete debunking of Republican ideology was not to have its logical political effect, however.

Well southwest of Washington, the war took a completely different turn. Major General Andrew Jackson, promoted to that rank by Armstrong without Madison’s involvement (to the president’s consternation), proved highly capable both against Indians and when faced with European forces. More or less a loose cannon because well beyond communication with Washington, he headed off a British incursion into the Deep South. When the Duke of Wellington’s brother-in-law, at the head of a force of veterans of the Iberian war against Napoleon’s subordinates, inexplicably opted to attack Jackson’s dug-in army head-on across an open field outside Louisiana’s metropole, Jackson’s men more than decimated his force and killed the general in the process. The Battle of New Orleans made Jackson the outstanding figure in American politics for decades to come. By the time he won it, the Treaty of Ghent had already been signed, and America had escaped with restoration of the status quo antebellum. Soon word of this most spectacular of American victories and word of the war’s end three weeks earlier spread across the country.

James Madison and his Republican Party proved superlatively lucky in the War of 1812. Besides military victories owing essentially nothing to their longstanding policies, the war also gave occasion for the political suicide of the opposition party. New England governors refused to send their militia units to participate in the campaigns, New England bankers refused to help Gallatin finance the war (thus leaving American taxpayers with a greater debt burden than they would otherwise have borne), and New England secessionists succeeded in pushing their more moderate neighbors into the Hartford Convention of 1814. There, official delegations from the three Southern New England states and scattered unofficial delegates from elsewhere in New England met behind closed doors to formulate demands of a Republican Washington Establishment entirely on the ropes. Surely more than one Calvinist must have seen the hand of God in the coincident arrival of the Treaty of Ghent, news of the Battle of New Orleans, and the messengers from Hartford—bearing the Convention’s official demands—in Washington, D.C. Amused by their transparently partisan demands, Madison is supposed to have laughed as he read them.^[12]

Talk about a near-run affair.

The Treaty of Ghent did nothing about impressment, the Orders in Council, or any other American grievance. Britain did return northernmost New England to the United States, which was more than the North American republic’s military effort had earned. For his part, Madison had a bit of a change of mind: America would need some kind of permanent military rather than reliance on militias, he publicly called for (and Congress chartered) a Second Bank of the United States, and the wartime tariffs established to help fund the war would not be repealed—lest American industries grown up under their protective cover collapse under the assault of free competition with European concerns. Madison explained his signature on the new Bank Bill by saying that the Constitution had now been liquidated in relation to Congress chartering banks—that is, that the precedent of the first Bank of the United States and of several Congresses’ and several presidents’ acceptance of its constitutionality must be understood to mean that such legislation had a constitutional basis. Whatever he said in the House in 1790 and the Virginia General Assembly in his Report of 1800.

Lest the people conclude Madison had simply caved in relation to all of his old positions, however, he gave them a parting gift. On his last day as president, Madison shocked his chief congressional supporters, Henry Clay and John C. Calhoun, by vetoing their Bonus Bill. In his Bonus Bill Veto Message, he explained that while he had indeed in two of his State of the Union Messages called on Congress to establish a national network of federal roads, he had also in one of them said that such legislation had to be preceded by a constitutional amendment. Since this bill had not been, Congress still had no authority to pass it. Veto. Score at least one for Madison, I suppose.

Calhoun told Madison he was shocked that the President had arrived at this conclusion. He thought the bill was Madison’s invention and would not have pushed it had he known he would impose this duty on Madison on his final day in office. In the old days, when Secretary of the Treasury Albert Gallatin lived on Capitol Hill among congressional leaders, communication between the Executive Branch Republicans and their Legislative Branch counterparts had left outnumbered Federalists feeling awfully bedraggled. This parting development underscored the distinction between Jefferson’s close communication with his allies and Madison’s counterproductive aloofness, both from them and from his top Executive Branch lieutenants.

Had James Madison been a political nonentity before becoming president, his eight years in the White House would not have left a good impression. Scholars generally regard him as one of the half-dozen men who rank right behind General George Washington among the American Revolution’s leadership cohort, but that is despite his presidency.

Madison gave no sign in his pre-presidential career that he would flourish in the chief magistracy, and he lived up to expectations. The program he took into office was one largely of his devising, and in the midst of a world war more threatening to America’s future than we tend to recall, it proved maladapted. Had the British wanted some significant portion of American territory—all of New England north of Boston—the American military establishment likely could not have done much to thwart them.

South of the Rio Bravo, there is an old saying: “Poor Mexico! So far from God, and so near the United States!” The events of the Madison years gave people the idea that if their country could prosper so despite such poor administration, the United States must have some kind of in with the Almighty.

This is the first of a three part series looking at the origins of Silicon Valley and how it became synonymous with technological innovation. The first pillar of Silicon Valley’s success is immigration. We bring on Alex Nowrasteh to discuss how immigration reform in the 1960s opened the door to a wave of skilled engineers and entrepreneurs from around the globe. Even today, a significant portion of tech startups are founded and staffed by foreign-born talent.

However, the recent turn towards immigration restrictionism is worsening the already problematic bottleneck on attracting global expertise to the US. Caleb Watney joins us to talk about how the flawed H-1B visa system is responsible both for worsening that shortage and for widening a competitive moat around the Big Tech companies that have the resources to navigate the visa morass.

What is the H-1B visa? Does our immigration system favor entrepreneurship? How many American college students are immigrants? What does our student visa system look like?

Further Reading:

Why Silicon Valley Wouldn’t Work Without Immigrants, written by Farhad Manjoo

Tech as We Know It Would Not Exist Without Immigrants, written by Tom Humberstone

Why We Need State‐​Based Immigration Visas, written by Alex Nowrasteh

Related Content:

You Are Now Free to Move About the Planet, Free Thoughts Podcast

Trump’s Immigration Crackdown, Free Thoughts Podcast

The Libertarian Argument for Open Borders, written by Grant Babcock

In the ongoing debates about inequality and the proposed wealth tax, there seem to be a number of misunderstandings of basic economic concepts. In particular, those favoring the wealth tax, and those who want billionaires to disappear, appear to believe that what it means to be “wealthy” is to have lots of physical money and that rich people leave their money lying around idle for them to luxuriate in like so many Scrooge McDucks. That idle money, the story goes, could be put to much better use by taxing it and then spending it on whatever project politicians might favor. This whole set of beliefs is false, and buying into it leads to bad public policy that will destroy the wealth-creating and wage-raising processes of the market economy.

First, let’s recall what we mean by “wealth.” At the most basic level, wealth is our net worth, or our assets minus our liabilities. If we think about material and financial wealth, our wealth is everything from our cars, houses, clothes, bank accounts, and other financial assets minus all our debts. What is also important is that our assets can include anything we subjectively value. So one could count one’s health, for example, as part of one’s wealth, most broadly construed.

What matters for the public policy debate is that wealth is far more than just “cash.” When we say Jeff Bezos has $108.9 billion in wealth, we are most emphatically not saying that he has over $100 billion in cash lying in a room in one of his houses. What we are saying that if we add up the value of all the things he owns, from his $65 million jet to his 57 million shares of Amazon, and deduct anything he owes, the net value is around $108.9 billion. The vast majority of his wealth is not in any form that we would recognize as cash or money, but in assets like the plane and his stock shares.

Even the word “cash” has an ambiguity about it that matters a great deal. Cash can mean anything from physical dollar bills (or “currency”) to checking account dollars to other very liquid assets (i.e., assets easily convertible to currency or checking account dollars). When people talk about wealth and cash, they are not even precise about what they mean by “cash.” That matters, because if one is imagining taxing wealthy people, they will have to pay that tax out of one of those liquid assets. Those supporting such a tax seem to believe that the rich really do have a big pile of cash that they can use for that purpose.

For example, a 6% wealth tax such as Senator Warren’s would mean over $6 billion per year for Bezos. “It’s just 6 cents on a dollar,” we’re told, but how exactly is he going to pay this? Someone with his level of wealth will likely have only a very small percentage of that wealth in a very liquid form. Some estimates are that Bezos probably has “cash” in the $5 million to $15 million range. He’s going to bounce a check big time paying $6 billion every year. Paying that tax would mean having to sell off his other assets, which may not be feasible in short order, aside from the fact that he would be likely to start hiding those assets in ways that would avoid the tax. Again, when you tax wealth, you are not just taking 6 cents on a dollar from that imagined room full of cash, but forcing wealthy people to sell off their assets to pay it, and that will lead to a variety of tax avoidance behavior with pernicious consequences for economic progress. Those assets, of course, are also producing wealth in their contributions to output and in enhancing the productivity of labor. Forcing the rich to sell them off to pay a wealth tax means withdrawing those assets from the private sector, and that means job losses and wage reductions as productive capital is forcibly transferred from the market to the state.

That leads to the second important misunderstanding with respect to rich people and “cash.” All of the wealth that rich folks have in the form of financial instruments, from checking accounts to bonds to stock to other more complex options (though not physical currency) are not just sitting around “idle” providing no benefits. All of those instruments supply loanable funds (savings) to the financial system. Whatever Bezos has in his various checking accounts, for example, doesn’t just sit in a vault in the bank. The bank lends those funds out to borrowers who use them to invest in new projects that create capital goods and jobs for the general public. To the extent firms now have more productive capital goods, the wages of their existing workers will rise as well. Nearly all of the funds that rich people put into banks and other financial intermediaries make their way into the hands of people putting that money to work in the service of economic progress.

That is why banks are called “financial intermediaries” – they serve as intermediaries between people with money to lend and people who wish to borrow. In doing so, they reduce the transaction costs and risk of lending, as well as paying lenders more interest, encouraging much more lending that would happen otherwise. They also reduce the transaction costs of borrowing and lower rates on loans compared to a world of direct finance, making people more likely and able to borrow. This process of capital goods formation is central to economic progress and growth in wages and wealth of the general public. The vast majority of the “cash” of the rich is the fuel that powers economies across the world.

Note that this does not apply to paper currency in the form of Federal Reserve Notes. Bank account dollars are a loan you give the bank that it then lends out to others. Paper currency is not a loan to a bank. It is produced by the monopoly known as the Federal Reserve System, and the various promises of the Fed and the federal government are all that back it up. We accept them because we know others will, but holding US paper dollars provides no loanable funds. Depositing them in your checking account does. All of that said, the wealthy generally hold very little of their assets, including just a tiny percentage of their financial assets, in the form of currency. It pays no interest and, like the rest of us, they can use debit cards and other instruments for everyday payments.

Not only are the rich not sitting around on piles of “cash” as a general rule, almost all of the financial assets they do have are in the form of loans to various financial intermediaries, and those loans (their assets) serve to finance a great deal of productive economic activity. The savings/lending of the rich are central to economic growth and material progress for all of us. Financing the creation of new capital is what generates new jobs and increases wages on existing ones. This is what the financial assets of the rich do every single day, whether in the form of bank accounts, bonds, or more complex instruments. The same is true of their ownership of stock or physical capital, all of which drive the process of job creation, higher wages, and innovative and cheaper consumer goods. Rich people’s wealth is not idle – it actively enriches all of us.

A wealth tax that imagines that governments are just taking away a very small percentage of the rich’s idle cash misunderstands both the nature of the wealth held by the rich and the important role played by financial assets in powering market economies. Such a tax will transfer wealth from the positive-sum, wealth-enhancing capital creation process of the private sector (especially as the rich engage in tax avoidance behavior), to the negative-sum, wealth-destroying transfer and spending processes of the federal government. A wealth tax is a certain path to impoverishing not just the rich, but the rest of us for whom economic progress depends crucially on the ways in which the rich actively put their wealth to use to finance new and existing businesses.

Summary: 

Alan Moore’s 1986 Watchmen was a condemnation of all forms of authority, mocking the concept of a benevolent superhuman, and portraying masked vigilantes as emotionally unstable. And Damien Lindelof took this story for HBO and refreshed it for a 2019 audience where the origin story is the Tulsa, Oklahoma Race Riots of 1921.

How is HBO’s Watchmen not a typical superhero story? Why is the classic superhero archetype an orphan?

The political left seems to think that wealth inequality undermines democracy. There are many reasons why this fear is incorrect. The political views of the wealthy are not homogeneous, and on many issues, they track the views of the rest of the population. Many political leaders consider wealth inequality to be a major economic and social problem. Ryan Bourne and Chris Edwards join the show to talk about their new study that tackles this issue from multiple fronts.

How do we measure inequality? Has wealth inequality gotten drastically worse in the last decade? What is a wealth tax? What is cronyism?

Further Reading:

Exploring Wealth Inequality, written by Chris Edwards and Ryan Bourne

A Wealth Tax Is a Tax on Business, written by Chris Edwards

Top Wealth Is Business Assets, written by Chris Edwards

The Forbes 400: The Definitive Ranking Of The Wealthiest Americans, edited by Luisa Kroll & Kerry A. Dolan

Downsizing the Federal Government

Survey of Consumer Finances

Related Content:

Wealth Tax Advocates Muddle Stocks and Flows, written by Steven Horwitz

Taxation: How the Government Funds Itself, Free Thoughts Podcast

Are Taxes a Democratic Alternative to Charity?, written by David S. D’Amato

This episode is a re-release of Episode 3 from Season One of the Pursuit.

Government, big or small, really does impact people’s lives. And more than that, it sets the tone about what people believe they can do about their own lives. And when government makes people feel as though it’s untrustworthy or the individual is unempowered, in democracy, that’s bad. In our system, it really needs to be a system of laws and not just of people exerting power.

Image Credit: Institute for Justice

Jacob Sullum goes beyond the debate on legalization or the proper way to win the “war on drugs,” to the heart of a social and individual defense of using drugs. He believes that the conventional understanding of addiction, portrayed as a kind of chemical slavery in which the user’s values and wishes do not matter, is also fundamentally misleading.

How does someone defend heroin use? Is alcohol more addictive than opioids? What are the expectations that surround marijuana use? What can and can’t make drug use dangerous? Does marijuana actually make people violent? What is the benefit of legalizing some illegal drugs?

Further Reading:

Saying Yes: In Defense of Drug Use, written by Jacob Sullum

Tell Your Children: The Truth About Marijuana, Mental Illness, and Violence, written by Alex Berenson

For Your Own Good: The Anti-Smoking Crusade and the Tyranny of Public Health, written by Jacob Sullum

Related Content:

Is the DEA Trippin’? (with Rick Doblin), Free Thoughts Podcast

Chasing the Scream: The First and Last Days of the War on Drugs, Free Thoughts Podcast

How Drug Prohibition Caused the Opioid Crisis, Free Thoughts Podcast

As the cultural economy (music, movies, television, and books) digitized around the turn of the 21st century, many critics worried about severe negative consequences, including declining creative output because of piracy and decreased aesthetic quality. Joel Waldfogel joins Paul and Aaron to discuss why those fears were wrong. Digitization has actually stimulated a renaissance in the cultural economy as both the number and perceived aesthetic quality of film, television, and books have soared. It has been a triumph of technological innovation enabling an expansion of the marketplace for the ultimate benefit of producers and consumers.

Are we overproducing movies because of digitization? Are we consuming culture too fast? Is piracy a customer service problem? Does the business model of Spotify prevent piracy of music? Why did music take such a huge hit from piracy when TV and movies took a much smaller hit in comparison? Do we want ownership of products or the ability to have access to stream of service? Why are people unbundling their cable services? Should we get rid of all copyright?

Further Reading:

Digital Renaissance: What Data and Economics Tell Us about the Future of Popular Culture, written by Joel Waldfogel

How Does Spotify Make Money?, written by Rameez M. Sydeek

Music Piracy Remains a Problem in the Spotify Era, written by Anne Steele

Related Content:

In the Economy of the Future, You Won’t Own Your Kitchen, written by Pamela J. Hobart

Intellectual Privilege, Free Thoughts Podcast

Is Netflix Ruining Culture?, written by Pamela J. Hobart reviewing Joel Waldfogel’s book Digital Renaissance

Much ink has been spilled over the past few years on the subject of “the deep state”—what it is, who operates it, where it is located, whether it is secretly working in the background to oust Donald Trump from the White House. It has therefore become important to undertake a more serious treatment of the deep state, one that avoids the pitfalls of the partisan fracas. To attempt a definition, the deep state is that portion of the federal administrative bureaucracy that is unaccountable, secretive and opaque, relatively permanent, and armed with extremely dangerous powers, regularly abused (though we might observe here that such powers themselves are abuses per se).

Of particular importance here are the military, intelligence, and national security components of this apparatus, not only because their activities are the most dangerous and most offensive to the rule of law, but because they are the most secretive and unresponsive to electoral politics. Nominally and formally a part of the executive branch, this bureaucracy is a de facto fourth branch, nowhere contemplated by the Constitution, isolated from any notion of popular sovereignty. It is unaccountable in that it acts with impunity and without meaningful oversight from the people’s representatives in Congress or from the President. There is no one to check it or rein it in. Almost all of its actions are kept secret, privileged and classified as implicating sensitive national security concerns; the deep state is thus completely lacking in transparency, always pointing to the safety and security of American citizens to justify its secrets. Related to its secrecy is its mendacity, its reliance on a systematic program of lies and disinformation designed to hide its actions from the public and the democratic branches of government. So commonplace are the lies of the intelligence and national security establishment that American journalists on the whole no longer even feign surprise or outrage when intelligence bigwigs like James Clapper and Michael Hayden (to give just two prominent examples) brazenly lie to our elected representatives; they are handsomely rewarded for their “service,” uniformly belauded by the Right People with the Right Opinions. This is dangerous to a free society, more dangerous than Trump’s ridiculous brand of Know Nothingism.

The deep state is also characterized by its relative permanence, its personnel remaining in their positions regardless of who occupies the White House. Indeed, the “deep” in “deep state” denotes, perhaps, elements that are abiding or enduring, unchanged by the country’s two and four-year electoral substitutions, a group of permanent power centers underneath, if you will, politics. Finally, it is defined by the kind of absolute power it wields, the power of life and death, its very real license to kill—and to do so outside of the judicial process, beyond the reach of the law (domestic or international) and elected officials. It kills, tortures, imprisons, spies, and conspires in the overthrow of foreign governments all without any requirement that it answer to anyone. We must ask how a supposed liberal democracy reconcile itself to such power.

It is interesting to witness elite Beltway centrists grapple with the deep state as an object of commentary, to see them vacillate between two irreconcilable positions: (A) the deep state does not exist, but is only a ridiculous, though still dangerous, right-wing conspiracy theory concocted by Trump apologists to damage faith in government institutions and legitimate civil service; and (B) something like the deep state certainly exists, but is worthy of praise and admiration as the locus of the knowledge, expertise, and superior judgment of qualified professionals who have nobly chosen to serve their country rather than making lots of money in the private sector. The defenders of this extra-democratic infrastructure, found in the so-called “reasonable center,” appear to be willfully ignorant of its dark history. Last year, in a piece titled “God bless the ‘deep state,’” Washington Post columnist Eugene Robinson gushed, “the deep state stands between us and the abyss.” In order to sincerely believe this, one would have to know virtually nothing about the record of criminality associated with the intelligence agencies and the FBI. Still, however horrifying is the notion “God bless the deep state,” it at least has its transparent embrace of authoritarianism to recommend it; it is, for that reason alone, to be preferred to either the proud ignorance or outright dishonesty of the view that the deep state (whatever we choose to call it—on which more below) simply does not exist. Those among the Beltway literati who acknowledge that it does believe that this kind of power is good and proper insofar as it is exercised by the Right People, by people like them, urbane professionals who hold the Right Opinions, attend the right charity events, and hold the appropriate level of scorn for Donald Trump. To distrust “our expert civil servants” is, for progressives, evidence of a lack of sophistication, a crude populism or anti-elitism that unthinkingly resents achievement and expertise. This sycophantic, near-absolute deference to and respect for the intelligence and national security elite may be the single worst thing to come out of the Trump years, worse even than any of the administration’s own actions.

It is striking that the most knowledgeable and articulate critics of this system of government have no interest in “the Trump circus,” as William M. Arkin called it. Arkin and his like have been focused on a deeper and more serious threat, “the increasing power of the national security community” and “the creeping fascism of homeland security,” subjects in which the news media seem to have no interest whatsoever, particularly since the election of Donald Trump. Upon his election, or perhaps as his campaign became more viable, the character of the conversation around the deep state changed; it took on the appearance of a shallow partisan talking point and a nutty conspiracy theory rather a subject of serious scholarly and journalistic inquiry, which is what it had been for years before Trump entered the political fray.

In his book National Security and Double Government, international law scholar Michael J. Glennon identifies a “Trumanite network” responsible more than anything else for the transfer of power from the Constitution’s three branches of government “to unelected bureaucrats who run the national security apparatus.” He argues that we have moved in the direction of an “autocracy” with less and less democratic accountability. “The watchdogs are asleep at the switch,” he says, speaking of Congress. Congress didn’t know torture black sites existed, for example, among many other crimes and abuses to which they were blind. John Kerry, at the time Secretary of State, remarked that many of the government’s surveillance programs have been “on automatic pilot,” with no one in the civilian government able to stop or control them. And as President Obama said, “The CIA gets what it wants.” It could’ve been said no less accurately of any of the other national security agencies. It must be noted that Glennon takes care to distinguish this Trumanite network from the deep state, pointing out that there was never a conscious or deliberate decision to adopt this system—that the United States rather drifted into it. He contends that to refer to the system of double government he describes in his book as entailing the deep state only confuses matters. For Glennon, the definition of the deep state requires a kind of shadowy conspiracy to commandeer or overthrow legitimate democratic government, a “silent coup, in which a group of nefarious plotters has taken over the government of the United States.” And that, he says, is not how double government has emerged in America. Yet we might take issue with Glennon’s definition of the deep state, for arguably the system of double government, as outlined by Glennon, is just what most commentators who have used the term (whether or not they see it as a danger) have meant by “deep state”; that is, the accepted definition does not seem to require the kind of secret, premeditated plot that Glennon uses to distinguish his term, double government, from the idea of the deep state. Indeed, as Jacob Silverman observes, notwithstanding Glennon’s studious avoidance of the term, “his book National Security and Double Government is essentially a taxonomy of the same [that is, of the deep state].” Further, in his book American Coup, William M. Arkin argues that in fact the American Coup is complete, having created “a dual system” in which “an unelected elite…cares for secret law.”

In a talk earlier this year, Glennon considered the disturbing change that has taken place since the beginning of the Donald Trump era in American politics, amazed that the deep state is now regarded as worthy of praise:

They go directly to the people and suggest, “Hey, we’re the good guys now. You should be supporting us.” So that people like Bill Kristol tweet, “Rather the Deep State than the Trump State.” And you see over and over again: a lot of people who hate Donald Trump embrace the national security bureaucracy on the theory that the enemy of our enemy is our friend. They don’t remember what the Church Committee reported in the 1970s; they don’t remember that the CIA spied on American citizens; they don’t remember that the FBI infiltrated student groups of anti-war protestors, civil rights activists; they don’t remember that the FBI, J. Edgar Hoover, tried to, through blackmail, urge Martin Luther King to commit suicide just before he accepted the Nobel Peace Prize; they don’t remember that the NSA assembled a watch list of American critics of the Pentagon and the intelligence community. … They’ve forgotten all of this.

It is the deep state that spies on millions of Americans, elected officials, and foreign dignitaries. (As the heroic whistleblowing of Edward Snowden and others has revealed, the National Security Agency has conducted warrantless, unconstitutional spying on millions of American citizens.) It is the deep state that imprisons and tortures without judicial process. It is the deep state that manages the U.S. government’s infamous kill list—or, in Doublespeak, “Disposition Matrix”—on which are listed the names of people who could be murdered by drone at any moment, for any or no reason. Even American citizens who haven’t even been charged with a crime might end up killed by a drone. Glenn Greenwald writes similarly, “Empowering the very entities that have produced the most shameful atrocities and systemic deceit over the last six decades is desperation of the worst kind.”

Given legal doctrines like the state secrets privilege, we likely only know about a tiny fraction of the deep state’s crimes; under that privilege, if the government claims that the continuation of a legal case in court may compromise national security interests, the evidence in the case is excluded. Astute observers will notice that such a powerful privilege functions effectively to preclude all legal challenges to the government’s actions. For as long as the government avers that important national security interests could be compromised, a case, which involves the presentation of evidence, is ruled out, rendered impossible. The government thus sits in final judgment of the constitutionality and legality of its own actions, even in—especially in—cases with allegations of the most egregious violations, for example, claims of torture. This kind of power should offend anyone, Democrat or Republican, liberal or conservative, even somewhat interested in safeguarding the rule of law, protecting democracy and the constitutional separation of powers, and promoting government transparency and accountability in general. Powers like the state secrets privilege aren’t partisan issues, and they’re not conspiracy theories cooked up to legitimize the current president, casting him as the target of some shadowy group of intelligence operatives. Indeed, what the state secrets privilege, the NSA spying story, and the U.S. government’s general history of disregarding due process and of engaging in illegal wars and war crimes all tend to show is that positing elaborate conspiracy theories and secret plots is not at all necessary—that is, even when Americans are aware that the U.S. government is violating the rights of citizens and ignoring the Constitution’s most important provisions, they seem to be powerless to change this system, or else simply lack the political will to change it.

Harry Truman, not usually one for second thoughts, remarked to Merle Miller that the establishment of the CIA had been a mistake, that the Agency “got out of hand.” It was “practically the equal of the Pentagon,” and “one Pentagon is one too many.” “[T]hose fellows in the CIA don’t just report on wars and the like, they go out and make their own, and there’s nobody to keep track of what they’re up to… . [I]t’s become a government all of its own and all secret. They don’t have to account to anybody.” These are the words of a former president, the man most responsible for the creation of the CIA—not some radical libertarian, anarchist, or anti-war activist, not a Trump supporter looking to cast suspicion on supposedly innocent, public-spirited civil servants. Arguments about the deep state are not at all new to this moment in American political life; they’ve been around for decades, even if the terminology has changed. To pretend otherwise marks one as historically illiterate, or hopelessly partisan, or both. The bizarre and inexplicable admiration for the deep state among American progressives leaves one with the distinct impression that they do not in fact object to Trump’s reflexive authoritarianism, for their politics and their favorite institutions are themselves authoritarian and undemocratic. They object, more likely, to his branding, his open embrace of bigotry, xenophobia, and white-trash populism, his untutored, uninterested approach to important public policy questions, his clear misogyny and history of sexual harassment and assault, all of which—it goes without saying—is repulsive and detestable. But while the Trump administration will soon be a memory, the unaccountable, undemocratic, and indeed criminal institutions that make up the deep state aren’t going anywhere. Americans of all political persuasions would do well to take note.

Christopher Preble and John Glaser talk about how Donald Trump’s rise in the Republican primaries and eventually to the presidency represented an astonishing break with the foreign policy consensus that had prevailed from Harry Truman to Barack Obama. And they detail this more extensively in their book, Fuel to the Fire: How Trump Made America’s Broken Foreign Policy Even Worse, which is a comprehensive explanation of how Trump’s “America First” mentality was more a campaign slogan than a coherent vision of American grand strategy and foreign policy.

How did Donald Trump change the messaging on foreign policy? Does the public support an adventurous foreign policy? What does the military think of Trump’s rhetoric? Does President Trump have a foreign policy doctrine? Is Trump obsessed with status and prestige? How is Donald Trump erratic?

Further Reading:

Fuel to the Fire: How Trump Made America’s Broken Foreign Policy Even Worse (and How We Can Recover), written by Christopher A. Preble, John Glaser, and A. Trevor Thrall

Trump Clears Three Service Members in War Crimes Cases, written by Dave Philipps

Special Providence: American Foreign Policy and How It Changed the World, written by Walter Russell Mead

The Jacksonian Revolt, written by Walter Russell Mead

Related Content:

Peace, War, and Liberty: Understanding U.S. Foreign Policy, written by Christopher Preble

Three Arguments Against War, written by Jason Kuznicki

Understanding U.S. Foreign Policy, Free Thoughts Podcast

Free Thoughts/Power Problem Crossover: Are Libertarians Isolationists?, Free Thoughts Podcast

In casual conversation we often use the words “price” and “cost” interchangeably.  What’s the difference and why does it matter?

Suppose you have $5, which is just enough to buy either a hamburger or a salad for lunch, and that today these are your top two choices.  The price of either meal is amount of a particular good that you pay in exchange for it (in this case the amount of money, but it could be any other economic good). Here, the price of the hamburger or the salad is $5.  Let’s say then you buy the hamburger instead of the salad.  In that case the cost to you of consuming the hamburger is value of the salad you would have chosen had you not bought the hamburger.  Economists refer to this as “opportunity cost.”

Furthermore, let’s say that you would have been willing and able to pay as much as $7 for the hamburger.  Since the price is $5, the value you attach to the difference (i.e. $2) is the gain from that exchange. (You could also call this net gain “profit.”)

As I’ve explained elsewhere, it’s important to distinguish among the different, legitimate meanings of the word cost.  So far, I’ve given one:  The cost to the buyer of consuming the hamburger, which would include not only the value of the foregone salad but also the value of the time it takes to eat the hamburger.  (We call them “fast foods” because they take less time to serve and less time to eat.)  There’s another meaning of cost:  The cost to the seller of selling the hamburger.

It’s also worth keeping in mind that, other things equal, costs for a business rise when competing demands for its inputs increase.  In this case, suppose hamburger sellers expect their customers will demand more hamburgers than usual in the future and in response they increase their demand for ground beef and demand for labor.  Other things equal, if the increase in demand for beef and labor is great enough, and if the supply of those inputs is even a little price-insensitive, then the cost of beef and labor to the seller will rise.  In this way an expected increase in the demand for hamburgers may itself be ultimately responsible for a rise in the seller’s costs.

When the cost of selling the hamburger rises, how does that affect price of the hamburger?

Let’s start simple.  If the seller’s cost of labor rises, other things equal, she will not now be able to cover all of her costs and sell as much as she did before at a price of $5 per hamburger.  If nothing on the demand side changes, the price of a hamburger will rise and buyers will buy fewer hamburgers.  It works in reverse if the seller’s cost fall:  Lower price, more hamburgers bought and sold.

So using demand and supply analysis, we can state the relationship as follows:  Cost influences price through changes in supply.  This means that while cost and price are related to each other, they are not the same thing and that their connection is indirect.

Now let’s posit that in the hamburger market, on average, buyers are more sensitive to price changes than sellers.  When cost rises and as a result the supply curve shifts upward (i.e. the quantity sellers are able and willing to see at any price decreases), the price of the hamburger will rise, but not as much as it would rise if it were the sellers who were more sensitive to price changes than the buyers.  That’s because, being more sensitive to price changes than sellers, buyers will reduce their purchases of hamburgers by a lot in order to avoid paying higher prices.  In fact, if buyers were hyper-sensitive to any price-change at all, then even the slightest uptick in price would mean they won’t buy any hamburgers; a jump in cost won’t raise the price of a hamburger at all.  And that means sellers won’t be able to “pass along” any of the increase in their costs by charging more.  Whether she can “pass along” a lot, a little, or none of the cost increase to the buyer depends, again, on how sensitive to price changes buyers are relative to the price-sensitivity of sellers. Cost and price are not the same thing and their connection needn’t be close.  To reiterate:  Cost influences price via changes in supply.

And this goes for all kinds of costs, including taxes.  For example, other things equal, if the U.S. government imposes a tax on imported steel (a.k.a. a steel tariff) and if buyers in America are more price-sensitive than sellers in the country exporting to the U.S., then sellers in the exporting country will pay more of the tariff because buyers in America will have shifted most of the burden by buying a lot less steel.  But, if the buyers in America are less price-sensitive than the exporting sellers, buyers in America will pay a greater share of the tax because they will not reduce their purchases by very much.  How much of the tariff people in America or in the foreign country pay thus depends on their relative price sensitivities: if the American government levies a tariff on steel imports, buyers in America may end up paying for none, some, or all of it.  In general, just because the law says that one party actually pays the tax, that doesn’t mean that they will bear the full burden of the cost of that tax.

There’s only one circumstance when cost is persistently equal to price.  That’s when some buyers are just barely willing and able to pay the market price because that price just barely covers their opportunity cost, and some sellers are just barely willing and able to accept that price because it just barely covers their selling cost.  There is no net gain or profit for these “marginal” buyers and sellers.  In technical terms we would say that price equals marginal cost.  This theoretically occurs when competition among sellers drives the price down, and competition among buyers drives the price up, to the price where the quantity of hamburgers demanded is just equal to the quantity of hamburgers supplied.  (Economists call this a “competitive equilibrium.”)  But, of course, cost and price being equal does not mean they are the same thing.  They are not.

Finally, what if a seller gives away hamburgers as a promotion?  Here the hamburgers are not free in the sense that anyone’s costs have disappeared.  There are still the opportunity costs to the seller and the buyer.  That’s why economists, when they’re careful, will not say in this instance that the hamburgers are “free” but that they are “zero-price.”  Admittedly, that may sound a bit odd, but it’s precise.  And in many cases it’s a price worth paying!

Shownotes:

Over the course of the early 20th century, a series of amendments and court cases slowly expanded the FDA’s purview. But advocates of the “Right to Try” are motivating the FDA to act more efficiently and compassionately.

Mentions:

Landry Ayres spoke with Laura McLinn, Jessica Flanigan, and Christina Sandefur.

Special thanks to Tom Oszman from TCMediaNow for providing us with video footage from October 1988’s Seize Control of the FDA protest.

Image Credit: ABC News, President Trump signing “Right to Try” legislation. 

Transcript:

The Color of Law, written by Richard Rothstein, has been described as the “powerful and disturbing history” of how American governments deliberately imposed racial segregation on metropolitan areas nationwide. He helps us understand twentieth-century urban history. A history that provides insight as to why our cities are still facing residential issues today.

When the government created segregated housing systems, did they think it would persist much through the 20th century? What obstacles did blacks face in the Jim Crow era when they were buying a house?

Related Content:

The Color of Law, written by Richard Rothstein

The Road Not Taken, written by Stephen Menendian and Richard Rothstein

From Ferguson to Baltimore, written by Richard Rothstein

Further Reading:

Black History and Liberty, written by Jonathan Blanks

Looking Back to Look Forward: Blacks, Liberty, and the State, written by Jonathan Blanks

Why Aren’t There More Black Libertarians?, Free Thoughts Podcast

Most Americans, including working class Americans, could retire millionaires…if we fixed Social Security. Instead, we are facing a financial crisis when Social Security runs out of money in the mid-2030s and are forced to decided between massive tax increases or major benefit cuts. There is a country that’s a peak into our possible future if we start making smarter choices. Australia enacted major reforms to their retirement system in the 1990s that are just starting to bear fruit. Their superannuation system, though flawed in some ways, shows just how much better a market-based system of individual accounts would be for retirees.

What is the Social Security Trust Fund? When is Social Security suppose to run out? When did we attempt to fix our Social Security problem? What is superannuation?

Further Reading:

Millennials and Super: The Case for Voluntary Superannuation, written by Simon Cowan

Social Security Is Running Dry, And There’s Only One Politically Viable Option To Save It, written by Patrick W. Watson

Fixing Social Security, Commentary from Michael Tanner

Related Content:

Social Security vs. Private Retirement, Antony Davies

Bringing Wealth to the Poor (with Michael Tanner), Free Thoughts Podcast

America’s Middle Class Gets More Welfare Than the Poor, written by Michael Tanner

Many libertarians admire the Enlightenment as the time when early liberals laid down the intellectual foundations on which were built our flourishing modern world. At times, this can lead some libertarians to believe that a system which emphasizes free enterprise, constitutional government, and personal liberty can only be achieved through what is often dubbed ‘western values.’ However, the truth is more complex. The concepts of personal and political freedom were not unique to Enlightenment Europe. People from different parts of the globe, a variety of religions, and across many eras have theorized about the value of freedom and how to best preserve its benefits. 

One thinker belonging to this long list of non-western practitioners is the Chinese philosopher Huang Zongxi. He argued for a constitutional model of government designed to benefit all people, not just the ruling class, and which stressed the importance of respecting private property rights. 

Huang’s Life

Huang was born in 1610 in Zhejing province in China. His father Huang Zunsu was a high ranking official of the Ming Dynasty. Thanks to his father’s high ranking position, Huang was able to study history and philosophy extensively. He was introduced to the scholar Liu Tsung-chou, under whom he studied for a number of years. Zunsu’s works show that he was well versed in philosophical matters and did not wholly subscribe to any particular school dogmatically. Instead, he drew from different traditions as he saw fit.

Huang’s father, Zunsu, had opposed the unchecked authority of eunuchs at the Chinese royal court. Indeed, Zunsu died after being imprisoned by his political opponents in 1626. Huang boldly protested the death of his father, at the capital city of the Ming Dynasty, he then returned home to dedicate himself to his studies.

By 1644 the ascendant Manchu Qing dynasty had taken control of the former Ming territories. Huang spent many years as part of a guerilla resistance against the Manchu Qing dynasty which he regarded as foreign invaders. Eventually, Huang abandoned the fight against the Qing dynasty, although he refused to cooperate or take any government positions that he was later offered. Instead, Huang dedicated the rest of his life to studying history, politics, and philosophy. During his retirement from public life, Huang produced arguably his finest work in 1663, Waiting for the Dawn: A Plan for the Prince, an extensive criticism of the Ming regime and a comprehensive set of proposed reforms.

The First Rulers

Huang believed that before there was any government, people tended to their affairs with no acknowledgement of the common good. This was not an idealized state of nature, but nor was it complete anarchy. According to Huang, looking after one’s own interests is entirely natural, and he deemed selflessness to be a rare and fickle virtue.

For Huang, the primary issue which plagued the Ming regime was the excessive greed of those in power. To rule is to take into account the interests of  others and to selflessly pursue what other people wish for; that, however, is difficult given that  “to love ease and dislike strenuous labour has always been the natural inclination of man.” The first people who ruled did so with extreme reluctance knowing how difficult it would be to rule in the common interest of all. Some even tried to quit but were forced to continue. The first rulers understood that to rule correctly was an immense effort that was, for the most part, a thankless job. 

However, as time passed, new rulers decided that since they did so much for their people, it was perfectly justifiable to rule for their own benefit. They began to use the state to benefit themselves, and because of their selfishness, these rulers made their subjects miserable and downtrodden. Therefore, according to Huang, “He who does the greatest harm in the world is none other than the prince.” The solution to this miserable state of affairs is for princes to rule justly with true laws.

What is Law?

Huang states that there has not been true law since the end of the Three Dynasties over a thousand years previously. Since then, all rulers had cared about was preserving their dynasty, they had refused to look to the common good of the people. Huang referred to the laws established after the three dynasties as “dynastic law.” But he did not believe that dynastic law could be called true law as it was narrowly based upon the interests of the rulers, that “what they called ‘Law’ represented laws for the sake of one family.” For any law to be true law it must conform to the dictates of “all under heaven” (or what can be broadly termed the will of the people). Huang writes that “in ancient times all under heaven were considered the master and the prince was the tenant.” The state existed to serve the people, not vice versa. True laws, for Huang, must not favour any particular group over another. Instead, laws must conform to a higher standard of justice which had been originally embodied by the sage kings of the past. Laws are not just, simply because a ruler has established them. If law does not conform to a higher standard of justice, it can hardly be called true law.

Governance by Laws

Huang believes that first and foremost we need laws before we need leaders. By contrast, earlier philosophers such as Xunzi in the third century BC had written: “There is only governance by men, not governance by law.” To which Huang replied, “Only if there is governance by law can there be governance by men.” However, law alone is not enough; Huang had seen how knowledgeable men like his father were ousted from government positions due to entrenched and unchecked power. We cannot count on virtuous rulers alone to guide us and to preserve true law. Thus Huang believes that we need institutions to put checks on power and to stop any individual dominating all others.

Huang had no time for the idea of divine rule, and he questioned those whom he called “petty scholars” who insisted that the duty of the subject to his prince is utterly inescapable.”The sage kings of the past deserve praise and respect but the princes of today deserve little if any praise,” Huang argues, further asking, “Could it be that Heaven and Earth, in their all-encompassing care, favor one man and one family among the millions of men and myriads of families?” While Huang did not wish to abolish the emperorship entirely, he strove to desacralize the state.  The state is neither quasi-divine nor should it command the total obedience of its people. As we have already seen, the relationship for Huang between sovereign and citizen is actually inverted; the people are the masters, and the state is the tenant.

Reinstating the Prime Minister

In theory, the Ming dynasty was ruled by an emperor and supported by a court which was composed of ministers and civil service members. The reality was a departure from this ideal. Emperors resented and resisted any check upon their power. To cement their position, emperors tended to promote only those civil servants who were wholly servile, especially eunuchs, who had long been a crucial part of the Chinese government. They tended to the emperors household and his personal needs, which gave them immense influence as they were naturally intimate with the emperor and increasingly infringed upon the administration of civil affairs.

To this end, Huang argues that the previously abolished office of prime minister should be reinstated. While one man should act as prime minister, he would have multiple vice premiers, all of whom are scholars with whom he would consult. Huang had three critical reasons for arguing for the reinstatement of the premiership: 

Firstly, no matter how wise or hardworking, no one man can rule alone. While Princes may have been created initially to rule, “All under Heaven could not be governed by one man alone.” To remedy this, the prime minister aids the prince. Secondly, the emperor is decided by hereditary succession. Huang states that in ancient times “succession passed, not from father to son, but from one worthy man to another.” A person being handed a position based upon their lineage is no guarantee that they will rule justly. While Huang does not specify precisely how the prime minister will be chosen, he believes that the role will act as a buffer in case the emperor is not a competent ruler given that the Prime Minister’s power will be equal to that of the emperor. Thirdly, by reviving the position of the prime minister, the government affirms the principle that no man should hold supreme power and that instead, power should be divided and shared in order to serve the people best. 

Huang’s reforms aim not only to make government more effective but, by putting qualified people in power, it also serves to check the power of the emperor who, without constraints, would have little stopping him from becoming tyrannical. Thus Huang’s approach can be described as constitutional in its fundamental nature. Constitutionalism, as a broad idea, is a set of rules, principles, and norms which define the limits of government authority to avoid arbitrary despotism.

Huang and Private Property

For Huang, it was essential that the government did not encroach upon property rights. According to Huang, during ancient times there was no private property. The sage kings distributed land through what was known as the well-field system. Huang explains that during this time “land was granted by the king to the people. Therefore, such land can be called the king’s land.”

However, after the sage kings subsequent rulers no longer distributed land to the people. Instead, people acquired land through sale and purchase. By the second century, private property had been established. Because the land was purchased by the people and not granted by a king, Huang concluded that “the land is the people’s land and not the king’s land.” For Huang “all land is either official or private.” The difference between the two is that official land is owned by the state and cannot be bought or sold, while private land can be traded and belongs to individuals.

Huang argues that that private property ought to be protected since people have a moral right to keep what they own. However, Huang does not stop there. He also argues that property rights set limits on government power. By protecting property, it underpinned the principle that emperors should not view “the world as an enormous estate to be handed on down to his descendants, for their perpetual pleasure and well-being.” Instead, emperors should respect the rights of their subjects and refrain from appropriating property.

Against Redistribution

Not all rulers in history were selfishly trying to expropriate property. Many genuinely wished to redistribute wealth in order to help the poor. To achieve this, some believed in limiting or equalizing the distribution of property. Huang replied to this proposition saying that “doing even one act that is not right” should not be allowed. People have a right to their property and this should not be violated even in the event that the motivation is to help those in need. Huang wonders why “should one needlessly make a big thing out of causing the well-to-do to suffer?” He proposes instead that the state should redistribute official property, which had been established for the emperor’s family and allies, and should be given to the poor. For Huang, it was perfectly natural to pursue one’s own self-interest and to accumulate property. He supported individuals autonomously pursuing their own interests. 

Similarities Between Huang & John Locke

Huang’s political thought bears a striking resemblance to the influential English philosopher John Locke’s Second Treatise on Government. Locke has been referred to as the Father of Liberalism, his political thought centred on his arguments for natural rights, government by consent of the people and his theory of private property has been massively influential on classical liberalism.

As we have already seen, Huang was sceptical of the claims of divinity that emperors had made throughout history. Much later, Locke would argue against divine monarchy by saying that even if God had given the right to rule to someone, such as Adam from the bible, there would be no way of determining who are his rightful descendants. Thus Locke concluded, “that in the races of mankind and families of the world, there remains not to one above another the least pretence to be the eldest house, and to have the right of inheritance.” 

Huang believed true law serves the common good and does not favor any particular group. Similarly, Locke argued that the principle of “let the welfare of the people be the ultimate law” is such a fundamental rule that “he, who sincerely follows it, cannot dangerously err.” Both Huang and Locke based the legitimacy of the law upon how it served the interests of the governed not the rulers.

Huang wished to see the position of the prime minister reinstated to check the power of the emperor. Locke proposed that government ought to be composed of legislative, executive, and federative powers. This separation of powers allowed not only for a more effective government but also one which would not quickly descend into tyranny.

Finally, Huang and Locke both argued that the government ought to protect the institution of private property. Locke, like Huang, believed that property was once commonly owned but that when people mixed their labour with the land they appropriated what belonged to nature and made it their own. While Huang’s theory of how land becomes privately owned is not exceptionally robust, it is clear that, akin to Locke, he believed that people have a moral right to hold onto what is rightfully theirs.

Despite living on opposite ends of the world, Huang and Locke came to very similar conclusions on the proper ends of the state. Possibly it is because both had fathers who fought against incumbent regimes and both men lived through civil conflicts which resulted in regime changes. Huang Xongxi is an excellent example of how quite different philosophical traditions have arrived at broadly classical liberal ideas without being part of the same so-called ‘western tradition’ or ‘western values.’ 

There is much to admire in the Western tradition of philosophy, but this does not mean we cannot praise and synthesize other traditions. Thinkers like Huang remind us that all cultures, religions, and peoples have traditions which advocate for the freedom of the individual.

Patrick G. Eddington’s tenure at the CIA spanned the transition from the Cold War to the new era of American interventionism in the Persian Gulf and the Balkans. In his book, Long Strange Journey: An Intelligence Memoir, he tackles a whole slew of questions; Why was President George H.W. Bush so surprised that Saddam Hussein invaded Kuwait? Did America’s intelligence community fail to warn him of the threat, or did he ignore their predictions of an invasion? Why did the CIA and the Pentagon deny so vehemently for so long that sick Desert Storm veterans were exposed to Iraq’s chemical agents?

Should we be weary of surveillance technology that our foreign intelligence uses overseas? What if that technology was used domestically? What is it like to work with America’s intelligence community? What was Gulf War syndrome? How do you become a whistleblower?

Further Reading:

Long Strange Journey: An Intelligence Memoir, written by Patrick Eddington

The Uncounted Enemy: A Vietnam Deception

Crisis of Conscience: Whistleblowing in an Age of Fraud, written by Tom Muller

Related Content:

The CIA Listens to Free Thoughts, Free Thoughts Episode

The Inhumanity of Torture, Free Thoughts Episode

Deconstructing the Surveillance State, Free Thoughts Episode

One of the first lessons we try to get across in introductory economics, especially macroeconomics, is the difference between “stocks” and “flows.” Understanding this difference and making sure one compares stocks to stocks and flows to flows, never letting the streams cross so to speak, is crucial to good analysis. Unfortunately, recent debates over proposed wealth taxes and other related issues have been marred by confusion about this point, allowing participants to advance arguments for greater government intervention based either in ignorance or deliberate obfuscation.

The general difference between stocks and flows is captured by the difference between a volume or weight and a rate. Imagine a bathtub full of water. We can ascertain the volume of water in the tub, and that would be a “stock.” But we can also imagine how quickly the tub drains or fills expressed as a rate of the quantity of water over some measure of time. That (literally) is a flow, as the filling or draining represents a change in the volume of water in the tub at some rate. In general, flows are expressed as rates of change, while stocks are not.

So, in the business world, firms normally report both income statements and balance sheets: Income statements are a description of flow variables, as they show the changes in the firm’s revenues and expenses over a specific period of time, such as a month, quarter, or year. The balance sheet, by contrast, takes a snapshot of the firm’s assets and liabilities at a specific point in time. Those are all stock variables, as there is no “rate” at which they are changing, unlike the income statement. Profit and loss are flow variables; net worth is a stock variable. Notice also that, like the bathtub, what changes the stock variables are the cumulative effects of the flow variables. Firms that make profits over a given period of time will see their net worth rise as depicted on the balance sheet.

Similarly, we can talk about the difference between wealth and income in a broader economic context. If we want to talk about a household’s wealth, we are adding up a snapshot of its assets and liabilities at specific point in time and trying to find out what its net worth is. All of the bank accounts, investments, and personal possessions including houses, cars, and the like, go on one side, while borrowing and other liabilities go on the other. Wealth is assets minus liabilities.

Income is the flow in and out of wealth. If I make $65,000 per year as a high school teacher, that’s income and that’s a flow variable, as the “per year” indicates. It’s an addition to my wealth, of course, but it’s not the same thing as my wealth. I need to know my expenses and liabilities to determine how my wealth will be affected in total.

Income and wealth are often confused when we talk about people being “rich.” There are two possible ways to parse that claim: the person’s income is high, or the person is very wealthy. Those need not both be true at the same time.

For example, imagine a retiree couple who owns their house and cars free and clear and have no children at home or in college. They might also have accumulated bank balances that they are running down to pay for their consumption. They may well be quite wealthy, but their annual income could be pretty low. High wealth, low income.

Imagine the reverse, such as a young person who has a job with a very high income, but spends nearly all of it on things like dinners out and travel, and who rents rather than owns housing. Whatever one thinks of those choices, they do not accumulate wealth. Such a person’s balance sheet would record few assets, in contrast to that of our retired couple. High income, low wealth.

Both of our examples are people we might consider “rich” in some sense of the term. However, the difference between their situations matters for how we understand their respective behaviors and for how different policies might affect them.

Not understanding, or purposefully ignoring, the distinction between wealth and income is becoming something of a bad habit for critics of the market. One example from a few years ago is the “Wealth Inequality in America” video, which—among its many flaws—moves back and forth between the emphasis on wealth in the title and examples in the video that are about income. The example that starts at about 1:40 shows annual salaries, not wealth. At the 5:00 mark, the narration moves between wealth (ownership) and income without even noticing it. The later discussion of CEO versus worker wages is about income, not wealth. When such a video has 22 million views, we should perhaps not be surprised that the larger public is easily confused about the distinction between wealth and income.

We also see this confusion in the recent debates over the wealth taxes proposed by some of the Democratic candidates for president, especially Bernie Sanders and Elizabeth Warren.

One of the academics making the case for Senator Warren’s wealth tax is Berkeley economist Gabriel Zucman. In a recent tweet, he attempted to respond to those who claim the rich do plenty through their charitable donations. The data he used to make the opposite case were that the total wealth of the Forbes 400 summed to about $4.5 trillion while the annual giving of the top 400 earners was about $10 billion. He then concludes that the rich are giving only 0.4% of their wealth, which is no different than a “tiny wealth tax.” There are a number of problems with his argument, not the least of which is that the Forbes 400 and the “top 400” income earners are not the sample people, and the question of whether the government or charitable foundations will use those funds more effectively and efficiently. But those problems aside, the confusion between stocks (wealth) and flows (annual income and charitable giving) undermines his case.

Annual charitable giving is a flow based on annual income. Accumulated wealth is a stock, and one that changes—presumably in a positive direction—from year to year. If you want to get a sense of how much the rich are giving to charity, you need to do apples-to-apples comparisons here. Either calculate how much of a specific year’s income was given to charity (or an average of that over a period of time), or find a way to add up the cumulative amount of charitable giving over a multi-year period of time and divide that by their wealth. Doing the latter is very rough and will likely understate the percentage of wealth donated because their wealth today is presumably greater than what it was in the past. If you could get donation and wealth data and, roughly, take the sum of their donations over the average of their wealth, you’d be closer to the truth than looking at one year’s donations divided by accumulated wealth. But trying to compare an annual flow to a long-term stock generates nonsense.

The problem with Zucman’s tweet is that the 0.4% number will stick with people, but given the analysis above, it’s meaningless. If the point is to get an accurate accounting of how much the rich give to charity, Zucman fails—his method produces a number that is deceptively small. Either of the correct ways of doing such a calculation would give a more honest result. The way to work with data is not to find the variables that will produce the result you want, but to use economic theory to decide what things to measure and then get the appropriate data. It seems that the defenders of the wealth tax and related policies are often more concerned with the rhetorical value of their result than whether it makes sense in terms of the economic way of thinking.

The confusion of stocks and flows is not the only such basic error that the defenders of the wealth tax have made in their attempts to defend it. Another major one is an unwillingness to confront seriously the literature on what economists call “tax incidence.” The key insight there is that the party who writes the check for a tax is not necessarily the party who bears the burden of its cost. Retailers write checks for the sales tax they accumulate, but the burden of that tax does not fall completely on them; some is passed on to purchasers. This is true of the wealth tax, and it’s also true of corporate taxation of the sort Senator Warren is proposing to fund her health care program.

Things like stocks versus flows and the theory of tax incidence are, or should be, part of any introduction to economics and the economic way of thinking. It’s understandable when commenters on Twitter are unaware of these issues, but when Berkeley economists and front runners for the presidency (and their advisors) overlook or intentionally ignore them in the name of scoring political points, it’s less forgivable. A wealth tax would eat away at the capital so necessary for economic growth and a better life for our children and grandchildren. So, as the wealth tax and similar policies gain favor, it becomes that much more important to revisit the core principles of economics and use them to generate rigorous critical assessments of those policies.

Summary:

Is It’s a Wonderful Life actually a story about giving up on your dreams? How is A Christmas Carol a larger narrative about corporate welfare and charity? Most importantly, is Jingle All the Way the best Arnold Schwarzenegger movie? We answer all of these questions and more! If you have always wanted to hear a Libertarian rendition of the 12 Days of Christmas, you won’t be disappointed. 

Transcript:

When most Americans think of welfare, they think of programs designed to assist the poor, programs such as Temporary Assistance for Needy Families (TANF), food stamps (SNAP, the Supplemental Nutrition Assistance Program), or housing subsidies. Indeed, there are more than 100 federal anti-poverty programs. More than 70 of those provide benefits (cash or in-kind) directly to individuals, while the rest provide assistance to low-income communities. The federal government spends more than $857 billion per year on these programs, while state and local governments kick in an additional $300 billion.¹

Yet, programs for the poor are only a tiny portion of the U.S. welfare state. In fact, the Congressional Budget Office estimates that more than 60 percent of American households receive more in government benefits than they pay in taxes. To get an idea of just how big the American welfare state has become, consider that those transfer payments from the federal government are equal to 34 percent of all wages and taxes in the U.S.²

And it is not just a question of raw dollars. Increasingly, the welfare state is the main thing the federal government does: In the years before the Great Depression, transfer payments made up less than 10 percent of federal expenditures. In 1965, at the start of Lyndon Johnson’s Great Society, that percentage had roughly doubled to 19.7 percent. By 2010, it had doubled again, reaching 41.8 percent. Today, it tops around 62 percent.

The largest transfer programs are the middle-class entitlements, Social Security and Medicare. In addition, a large portion of the third biggest entitlement program, Medicaid, actually goes to the middle-class elderly and disabled individuals, not the poor. Those three programs alone now make up more than half of all federal spending.

Yes, Social Security and Medicare are Parts of the Welfare State

Of course, many recipients of Social Security and Medicare will object to calling them “welfare” (or even “entitlements”). They would point out, correctly, that they have paid taxes that they were told were intended to finance those programs. In fact, some 2/3rds of Americans pay more in Social Security and Medicare payroll taxes than they do in federal income taxes. But this fundamentally misunderstands how those programs are funded, both as a matter of law and practice.

First, the Supreme Court has ruled, in both Nestor v Flemming³ and Helvering v Davis,⁴ that there is no relationship between taxes paid into Social Security (and by extension Medicare) and the benefits received from those programs. Payroll taxes may be designated FICA (Federal Insurance Contribution Act) taxes and referred to as Social Security taxes, but the court makes it plain that they are “paid into the Treasury like any other internal revenue generally and are not earmarked in any way.”⁵

As the Court held, there is no “legal, contractual, or property right” to Social Security benefits based on having paid Social Security taxes.  As a result, Congress is free to change, reduce, or even take away Social Security benefits at any time.

Second, we need to understand that, in practice, when an individual pays Social Security taxes, none of those taxes are set aside for that individual’s benefits.  Rather, they are used to pay benefits to those who are currently retired.  Social Security is merely a transfer payment from workers to retirees.  In that sense, it operates exactly the same as any other transfer or welfare program.

Third, while this will not necessarily be true for future generations, current retirees can expect to receive more in benefits than they paid in taxes. Many individuals will receive more than taxes paid plus a reasonable amount of interest on those taxes.

Medicare operates in much the same way. There is no contractual right to benefits, which can be and are changed frequently.  And it operates as a transfer payment from workers to retirees/recipients. Indeed, with Medicare, the welfare aspects of the program are even more apparent since roughly 43 percent of the program’s financing comes directly from general revenues without the illusion of a dedicated payroll tax.

Finally, Medicaid is commonly thought of as a program for the poor. However, a substantial portion of its benefits go to middle-class families, notably to long-term care benefits for nursing homes.  Moreover, none of this includes a host of other social welfare programs from unemployment insurance to workers’ compensation to educational subsidies that primarily benefit the middle-class (or in many cases the wealthy).  This is not to say that all such programs are bad or should be quickly eliminated, but it does mean that discussions of the size, cost, and lack of sustainability of the modern welfare state should take a larger view.

Massive Red Ink

A justifiable alarm has been raised about America’s $22 trillion national debt. Yet, that debt represents only a small fraction of this country’s real indebtedness.  The unfunded obligations of middle-class entitlements like Social Security and Medicare dwarf the “official” debt.

In 2020 the cost of social security is expected to exceed income for the first time since 1982.  From that point on, the deficits simply grow larger forever.

Of course, in theory, Social Security can continue to draw from its Trust Fund until 2030 after that the fund will be exhausted. However, the Trust Fund is simply an accounting measure, not an actual accumulation of assets that can be used to pay benefits.  As the Clinton administration once explained it:

These [Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures—but only in a bookkeeping sense. …They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large Trust Fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits.⁶

This is not a matter of the government having “looted” or “stolen” Social Security Funds, but rather the structural inability of the government to save money. Excess government funds must go somewhere, and there are good reasons why we don’t want the federal government directly investing that money in markets, which would effectively give the government control over the economy.  Rather, that money is used to purchase special-issue treasury bonds.  Once a bond is purchased, the money used to purchase it becomes General Revenue of the government and is spent on all those things—good and bad—the government spends money on.  Social Security simply holds a promise that someday the government will repay those bonds, which total some $2.9 trillion today. And, while the government has never defaulted on such an obligation and is unlikely to in the future, the money to repay those bonds must eventually come from somewhere—meaning from you and me in the form of higher taxes.

Overall, according to the Social Security system’s trustees, the program faces a future shortfall of more than $43 trillion⁷ (measured in discounted present value over an infinite horizon—that is, if the government put away $43 trillion today and earned 3 percent interest on those funds, it would have enough money so that, combined with payroll taxes, it could pay all future benefits). Unfortunately, however, the federal government doesn’t have an extra $43 trillion. As a result, there is simply no way that Social Security can pay future benefits without a massive tax increase.

In fact, from 1999 until March of 2011, a benefit estimate was mailed to workers annually. During the Bush administration, the Personal Benefits Statement (PEBS) contained a disclaimer that:

Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2040, the payroll taxes collected will be enough to pay only about 74 percent of scheduled benefits.”⁸

Estimating Medicare’s future unfunded liabilities is much harder. Not only do we have to consider changing demographic trends and the aging of society as with Social Security, but also expected future changes in health care costs. Still, to see the unsustainability of Medicare, consider two facts.

First, a typical two-earner middle-income couple, both earning an average wage of roughly $55,000 a year, will pay slightly more than $140,000 in Medicare taxes and premiums over their lifetimes. That’s a substantial amount. But that same couple can expect to receive more than $422,000 in Medicare benefits during their lives. That’s a model of unsustainability.⁹

Or look at it another way. In 1975, 24.8 million Medicare recipients were receiving an average of $1,985 each year in benefits. By 2015, the number of Medicare recipients had more than doubled to 55.4 million, while the average annual cost of benefits per person had risen six-fold to $12,559. And, by 2025, there will 73.3 million beneficiaries, each receiving an average of $19,405 in benefits. One needn’t be clairvoyant to follow that trend to disaster.¹⁰

The best guesses suggest that the total unfunded liabilities of Medicare (in discounted present value terms) may well exceed $56 trillion over the infinite horizon.¹¹ That makes Medicare an even bigger fiscal nightmare than Social Security.

Finally, portions of Medicaid should also be included in the litany of middle-class entitlements which are adding to our rising tide of red ink. That is because, although around 77 percent of Medicaid enrollees fit the traditional profile of poor welfare recipients (such as mothers, and children), fully 2/3rds of the program’s expenditures go to the elderly and disabled for long-term care (i.e. nursing homes). Many if not most of those individuals were middle-income workers or retirees who have spent down or otherwise sheltered their assets in pursuit of the government assuming the cost of their care. Indeed, an entire industry of elder law exists to help seniors to shelter or transfer their assets in order to qualify for Medicaid.

Crowding Out Private Options

Even if middle-class welfare programs were affordable, we should be concerned with the degree to which they crowd out better private alternatives.

For example, numerous studies have demonstrated that workers could have achieved higher retirement benefits if they had been allowed to invest even a portion of their payroll taxes in private capital markets. For example, workers retiring today can expect a return on their contributions of about 2.2 percent.  Younger workers can expect an even lower rate of return.  In fact, many younger workers will not even receive back what they pay into the system, let alone any return on investment.   Their returns could be negative.¹² In contrast, the return on private capital in this country over the past century has been around 6.09 percent.¹³ That is over a period that includes the Great Depression, the 2008 market crash and the recession, which followed numerous other economic downturns, World War II, and other economic disruptions.

Yet, payroll taxes are so high that they make it difficult if not impossible for low—and middle-income workers to save privately.  Consider a minimum wage worker, who is paying 12.4 percent of their modest income in Social Security taxes.  Unlike the wealthy, they have little opportunity to save or invest privately.  What little discretionary income they might have had is being forced into a Social Security system that provides below-market returns.  Social Security, therefore, perpetuates inequality.

Moreover, as Martin Feldstein pointed out, even workers who might be able to save and invest could be dissuaded from doing so out of the mistaken belief that Social Security is doing that investment for them.  But because, as noted above, there is no saving or investment through Social Security, net national savings is lower than it would otherwise be, reducing capital investment, wages, national income, and economic growth.¹⁴

Medicare too squeezes out private options that might provide better insurance options and access for the elderly.  In fact, if a senior opts out of Medicare Part A, they lose all Social Security benefits.¹⁵ Seniors can choose not to participate in Medicare Part B but may be penalized if they choose to sign up later.   In addition, physicians are limited in their ability to accept cash-payment in lieu of Medicare reimbursement for covered services.  All of this limits seniors’ choices and is one reason that there is not a more robust insurance market for seniors.

And, of course, Medicaid has all but devastated the market for private long-term care insurance.

A Matter of Perspective

When looking at the costs and consequences of the modern welfare state, it is easy to punch down and criticize welfare programs for the poor.  And, as I have detailed elsewhere, there is ample reason to criticize those programs. However, it is impossible to reduce or reform the modern welfare state without addressing the programs that primarily benefit the middle class.    

1. Michael Tanner, “The American Welfare State: How We Spend Nearly $1 Trillion a Year Fighting Poverty—And Fail,” Cato Institute, April 2012. Numbers have been updated for 2019 by Luke Shaefer, Kate Naranjo, and David Harris in Poverty Solutions at University of Michigan’s report, “Spending on Government Anti-Poverty Efforts: Healthcare Expenditures Vastly Outstrip Income Transfers.” ↩
2. Bureau of Economic Analysis, “National Income and Product Account Tables,” Table 2.1. ↩
3. Flemming v. Nestor, 363 U.S. 603 (1960) ↩
4. Helvering v. Davis, 301 U.S. 619 (1937) ↩
5. Ibid. ↩
6. Executive Office of the President, Budget of the United States Government, Fiscal Year 2000: Analytical Perspectives (Washington: Government Printing Office, 1999), p.337. ↩
7. The 2019 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (Washington: Government Printing Office, April 2019), Table VI.F1. ↩
8. This warning was discontinued when the Social Security Administration stopped mailing paper copies of the benefit statement, and it is not included in the online calculator. While the SSA website includes discussions of the program’s financial problems elsewhere on the website, someone looking for what his or her benefits will be would not be told that Social Security cannot pay the listed benefit. ↩
9. C. Eugene Steuerle and Caleb Quakenbush, “Social Security and Medicare Lifetime Benefits and Taxes,” Urban Institute, September 2015. ↩
10. 2016 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (Washington: Government Printing Office, June 2016). ↩
11. C. Conover, “Two Inescapable Reasons America’s Entitlements Crisis Is Way Worse Than Advertised”, Forbes, January 31st. ↩
12. Thomas F. Siems, “Reengineering Social Security for the New Economy,” Cato Institute Project on Social Security Privatization, SSP no.22, January 23, 2001. ↩
13.  Michael Tanner “Still a Better Deal: Private Investment vs. Social Security,” Cato Institute Policy Analysis no. 692, February 13, 2012. ↩
14. Martin Feldstein, “Privatizing Social Security: The $10 Trillion Opportunity,” Cato Institute Project on Social Security Privatization, SSP no. 7, January 31, 1997.  ↩
15. Hall v. Sebelius, 667 F.3d 1293 (D.C. Cir. 2012). ↩