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). ↩

Shownotes:

When left untreated, individuals with severe mental illness can occasionally end up in jail for minor charges. The system is cyclical, recidivism rates are high, and law enforcement acts not only as judge and jury, but also as caretaker. The mental health crisis in this country is severe, and government only exacerbates the problem.

Mentions:

Throughout this episode Tess Terrible talked with; Alisa Roth, Justin Volpe, Judge Leifman, Walter Thompson, Leah Reed, and Ayesha Delany-Brumsey.

Music by Cellophane Sam

There is much confusion over what the term socialism means. To Americans who lived during the Cold War, socialism invokes images of the Gulag in Soviet Union, the mass starvation due to Mao’s policies in China, or the rampant poverty and political oppression of Eastern Europe. Younger Americans, those born after 1989, seem to view socialism as a system aimed at alleviating social injustices. They want more government control of the economy and more wealth redistribution to address both historical and societal injustice. As such, they have uncoupled socialism from its history and redefined it as a more intense form of welfare capitalism (which has been around since at least the New Deal). As a result, we all seem to be talking past one another and thus incapable of understanding what we are actually debating.

Defining Capitalism

Words matter. Definitions matter. And most importantly, historical experience and context matters. If we want to change society, we must have some concept about what needs to be jettisoned, what needs to be reformed, and what is essential and must be kept. Without history such an endeavor is impossible. And yet the political conversation today is removed from that historical reality.

First, I think it is imperative that I explain what I mean by the term capitalism. Capitalism is a cultural and economic system that emerged in the late 18^th and early 19^th century in opposition to mercantilism, which was the dominant economic system of the time. Capitalism emphasized free trade, denounced protectionism, and depended on a set of liberal institutions – including the courts – to protect individuals’ rights to free speech, due process, and, perhaps most importantly, private property. Culturally, capitalism destabilized the hierarchical social structures of the 18^th century and replaced them with an egalitarianism that granted dignity to men and, eventually, women who engaged in market-based transactions. Market engagement began to lose its stigma. The goal of the entrepreneurially-minded would no longer be to become a landed aristocrat who could wash his hands of commerce; rather, commerce became dignified.^[1]

The incentive structures of western societies changed quite drastically. Entrepreneurship was directed toward new, more productive professions. Technological innovation emerged in response to the incentives created by the capitalist economic, social, and cultural system. Western Europe underwent rapid industrialization, experiencing both population and productivity booms that ultimately allowed urban workers to not only live but to also to thrive. However, as new cities, like Manchester in England, were created, the problems of industrialization also emerged: overcrowding, poor sanitation, and the loss of worker dignity as they moved from skilled artisanal labor to unskilled factory labor.^[2]

Marx’s Critique on Capitalism

During the Second Industrial Revolution a German philosopher, Karl Marx, wrote Das Kapital, which was both a theory of history and a critique of capitalism. Based on the flawed concept of the labor theory of value, Marx argued that the profits of capitalists were the product of exploiting the labor of workers. Marx argued that capitalism was only a temporary stage in history and that the bourgeoise “forged the weapons that [would] bring death to itself” and had “called into existence the men who are to wield those weapons — the modern working class — the proletarians.” Marx believed that the poor working conditions and wages in factories would propel the proletariat to rise up, overthrow the capitalists, and establish collective control of the means of production. Yet capitalism was a necessary step toward communism – which Marx believed was the ultimate mode of production for civilized society.^[3]

Contrary to Marx’s prediction, however, the bourgeoise reformed industrial life in response to worker agitation and labor market demand. Wages increased steadily throughout the 19^th century and working conditions improved. Unions were formed and, in time, offered a place at the negotiating table. Capitalism evolved and addressed many of the concerns of workers. And so the proletariat, far from demanding revolution, started ordering from the Sears catalogue, drinking Coca-Cola, and spending their half day off on Saturday attending professional sporting events, like soccer in the UK and baseball in the United States. They were too busy to have time for revolution.

Socialism in World War I through the Cold War

In 1914, Russia did not rank high on the list of places primed for a communist revolution. After all, it had little industry, which Marx had said was a precondition for a worker revolution. Indeed, compared to Germany, France, or Britain it was quite poor and the majority of its population were farmers. And yet after October 1917 it would be Russia that would become a hotbed of Bolshevik action. Lenin, recognizing that the Russian people were not ready for true communism, advocated for a vanguard of the proletariat that would instruct the workers in revolutionary politics and make them aware of their class consciousness.^[4]

In the wake of World War I, the Soviet Union became a pariah state that was shunned by the west. News of disconcerting happenings in the Soviet Union reached western presses, though some were unwilling to believe reports about the Holodomor, Stalin’s forced collectivization of farms in the Ukraine that killed about 3.5 million people.^[5] The existence of a vast system of Siberian prisons for political prisoners, the Gulag, did little to help western public opinion, though the perception of the Soviet Union did improve slightly during the Great Depression of the 1930s when some western intellectuals and politicians travelled to the country to see how it had avoided the worst of the economic downturn. Collectivized farming and worker-organized factories captured the imaginations of some Left intellectuals, but no comparable movement for such a system in the United States emerged.

The Soviets’ reputation took a further hit in 1939 when Stalin cut a deal with Hitler to divide Poland and other parts of Eastern Europe. This deal, known as the Molotov-Ribbentrop Pact, allowed both Germany and the Soviet Union to fulfill their expansionist desires without fighting one another. The West felt betrayed, but the reality was that Hitler couldn’t stand communists any more than he liked western liberals. In 1939 there were three different visions for modernity:

The first was a fascist modernity based on racialized theories in which the German and Anglo-Saxon races were superior and as such should dominate the world. Fascists believed that the economy should be subservient to the nation and so organized their economies from the top down. They allowed private property ownership although only to the extent that those owners embraced the nation’s vision for economic activity and expansion. All of society, including the economy, was to be directed toward the betterment of the German volk.^[6]

The second was the communist vision of a socialist economy directed by those elected from local and national workers councils (called ‘soviets’). The government – or in the idealized state, the workers – would own the means of production and would rationally dictate what should be produced and in what quantities. Individual economic and social needs were relegated to the determination of the collective.

The third vision for modernity was the western liberal capitalist vision marked by individual liberty and international markets. Here individualism was encouraged and private property was seen as essential to economic vitality. Furthermore, a price system based on market supply and demand – rather than a team of technocrats – dictated the type and quantity of goods that needed to be produced. In short, spontaneous order rather than State-imposed order would direct society’s economic activities.

Of course, we know that Hitler ultimately betrayed Stalin and that the United States, after Pearl Harbor, entered World War II. As a result, the United States and the Soviet Union found themselves allies during the war. It was clear very early on, however, that Franklin Delano Roosevelt and Stalin had very different conceptions of what the postwar world would look like. Stalin wanted an Eastern European buffer zone between the Soviet Union and Germany in which he could guarantee the election of pro-communist regimes. For its part, the United States would demand free elections in the liberated parts of Western Europe.^[7]

However, after Hitler was defeated, the US recognized the need for international institutions to encourage democratic development and stimulate international trade across the globe. The liberal project of globalization threatened Stalin’s global goals, so he and the other allies were unable to come to an agreement on the future of Germany. As a result, Germany was divided, with the East placed under Soviet supervision and the West under the supervision of the US, France, and Britain. Berlin, which was located in Eastern Germany, was likewise divided into an eastern socialist zone and a western capitalist zone.

The Cold War that ensued was a competition between conflicting worldviews: liberal democratic capitalism versus authoritarian socialism. The American and Soviet superpowers forced newly formed nations across Africa and Asia to pick sides and choose between the Americans or the Soviets. Due to the oppressive history of western European colonization, more than a few of these countries gravitated into the Soviet camp.

While the world was being divided, West Germany was becoming a problem for the Soviets. Under the leadership of Chancellor Konrad Adenauer and his ordoliberal Minister of Economics, Ludwig Erhard, West Germany experienced an “economic miracle” brought about by a stable currency, dramatic middle-class tax cuts (from a ~85% marginal rate to 18%), and heavy capital investment.^[8]

Many East Germans wanted to be part of that miracle and East German emigration to West Germany became a massive problem for the Soviets. From 1950 to 1953 alone, around 1 million people fled socialist East Germany to capitalist West Germany, prompting the authorities to create a barbed wire fence with checkpoints between the two countries. This effectively shut down emigration from east to west. However, East Germans quickly realized that there was a loophole to these restrictions, the city of Berlin.

The city became a magnet for East Germans who wanted to escape to the West. By 1961, 3.5 million people, or 20% of the population, had fled East Germany. Of those escaping after 1953, 90 percent left through Berlin. In response, the East German government built barriers to keep their own citizens from escaping. Initially, the divide was simply barbed wire, but in time the East Germans built a massive wall, dividing families and establishing a physical barrier between the impoverished east and the prosperous west.^[9] Even with the wall in place, however, enterprising East Germans would smuggle people into apartments overlooking West Germany. Journalists captured dramatic scenes of people jumping out of apartment windows and being caught by the West German fire department waiting with a safety net below. In response, the East Germans blocked up the windows so even this loophole couldn’t be exploited.^[10]

The Berlin Wall accomplished its purpose of keeping East Germans in East Germany and it deescalated tensions in the Cold War. However, it became the physical representation of the oppressiveness of governments in the Soviet-dominated Eastern bloc countries and an acknowledgement of socialism’s inability to compete with the capitalist west in terms of providing political freedom and economic prosperity to its citizens.

The fact that capitalism outperformed socialism isn’t really up for debate. Even looking at the admittedly dubious statistics from the Soviet government, GDP per capita in the United States was over three times what it was in the Soviet Union in the mid-1980s. When the Soviet Union collapsed in 1991, it was widely accepted that US diplomat George Kennan had been correct when he argued at the outset of the Cold War that, if contained, the Soviet Union would decay from the inside out, largely because of its inept command economy. It was also widely accepted after the dissolution of the Soviet Union that the contest between capitalism and socialism had been settled as well.

Liberalism Takes Hold

The 1980s and 1990s were an era of broad liberalization across the world. Trade barriers went down, cooperation between nations increased, and global poverty sharply declined.^[11] Some historians proclaimed it the end of history – liberalism as an ideology, they said, had won. In economics departments, classes like comparative economic systems, which had studied the differences between command economies and marked economies in a more or less neutral fashion, were stripped from the books. Liberal bourgeois capitalism had seemingly won. There was no other efficient way to organize society.^[12]

Nations across the world, including the Scandinavian countries and Great Britain, deregulated, lowered their tax rates, and decreased barriers to trade.^[13] But, as has often happened since the advent of liberalism, prosperity sowed the seeds of discontent. As Hans Rosling reminds us, while things are in many ways better than they have ever been, people often don’t recognize the tremendous progress that has been made. Instead, we focus on all the things that are wrong.^[14]

And so here we are. We live in the most prosperous time in human history and yet no one is very pleased with the current state of affairs. Older, blue-collar workers lament the loss of industrial jobs and young, woke, college-educated Americans denounce the evils of capitalism and its exploitation of marginalized peoples. As such, both groups have taken to denouncing capitalism in favor of protectionist nationalism on the right and democratic socialism on the left.

Why are we so wrong about the world? Well, as a historian, I think the answer is obvious – we don’t know our history. The history I have just recounted to you has either been forgotten by large swaths of the population or it was never learned in the first place.

Young Americans support socialism at a much higher rate than older Americans, partly because they didn’t live through the Cold War. However, they likely wouldn’t acknowledge Soviet socialism as resembling what they call socialism. After all, democratic socialism is supposed to empower the marginalized, not crush them as Soviet socialism often did. At the same time, however, 96 percent of Americans support small businesses and have a positive view of entrepreneurship, both of which are bedrocks of a capitalist society.^[15] Furthermore, American consumers love the sharing economy and online shopping. Just try to take away UBER, Amazon’s two-day shipping, or Starbuck’s mobile ordering system and I will guarantee a riot.

To be honest, I must conclude that most people advocating for socialism today don’t really want socialism defined as government control of the means of production. They seem to want something different – social justice, a larger welfare state, redistributive justice, attention to systematic oppression, etc. The desire to fight injustice is laudable, but justice has not been historically achieved by societies that have socialist economies. Indeed, the history of the twentieth century seems to confirm Milton Friedman’s assertion that “a society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.” To be sure, there is still room for improvement, but the reality is that humankind has made tremendous progress over the past 200 years. It would be a shame to let the perfect become the enemy of the good. It would be a shame if Americans abandoned the free enterprise system, which remains the greatest vehicle yet invented for human flourishing.

Bryan Caplan and Zach Weinersmith join the show today to talk about their non-ficton graphic novel; Open Borders: The Science and Ethics of Immigration.

American policy-makers have long been locked in a heated battle over whether, how many, and what kind of immigrants to allow to live and work in the country. Those in favor of welcoming more immigrants often cite humanitarian reasons, while those in favor of more restrictive laws argue the need to protect native citizens.

Why is immigration a horrible injustice that no one seems to be talking about? Why do we frame immigration as charity? How do you change people’s minds on immigration?

Further Reading:

Open Borders: The Science and Ethics of Immigration, written by Bryan Caplan

The Case against Education: Why the Education System Is a Waste of Time and Money, written by Bryan Caplan

The Myth of the Rational Voter, written by Bryan Caplan

Look to Milton: Open borders and the welfare state, written by Robert Rector

Related Content:

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

The Truth About Immigration, Free Thoughts Podcast

Myths and Facts of Immigration Policy, written by Alex Nowrasteh

If a bear eats a burger in the woods and doesn’t realize it’s not from a cow, does it care? Until bears evolve the ability to communicate, I suppose we’ll never know. It’s an impossible question, but not as impossible as the Impossible Burger it just ate.

The future of meatless meat is here! So we asked the closest thing we have to a bear in the woods at Building Tomorrow, our producer Landry Ayres, to taste test two burgers, one an Impossible Burger and the other a traditional burger. Check out the episode to find out whether Landry guessed between them correctly, then stay for our interview with an Impossible Foods representative about the environmental benefits of this burger that is made from soy protein yet still ‘bleeds’ when you bite into it.

How do you define meat? Does Impossible Burgers taste like regular burgers? What is the environmental impact of the Impossible Burger? What is the key ingredient to the Impossible Burger? Is it possible to make the Impossible Burger at the same price as a regular burger? What is the difference between lab grown meat and the Impossible Burger?

Further Reading:

Impossible Foods

Impossible Burger: Here’s what’s really in it, written by Laura Reiley

Can a Burger Help Solve Climate Change?, written by Tad Friend

Related Content:

The FDA Ruins Everything You Eat, Free Thoughts Podcast

Popping Techno-Utopian Bubbles, Building Tomorrow

When Is a Market Failure Not a Market Failure?, written by Jon Murphy

François Poullain de la Barre is one of the most radical and forward-thinking figures in the history of philosophy. He is also one of the most obscure. 

Poullain was born in July 1647 and died on May 4th 1723. From 1673-1675, in a flurry of literary activity, he wrote, On the Equality of the Two Sexes, which argues that men and women’s intellectual abilities are equal and that the unequal treatment of women has disenfranchised them from contributing to society; On the Education of Ladies, which presents a group of intellectuals discussing the status of women; and On the Excellence of Men, where he satirically dissected arguments for male supremacy.

In these three works Poullain provides an unapologetic and iconoclastic argument for women’s full participation in society, that they be given the same rights and access to opportunities that were afforded to their male counterparts. This was already a radical thesis in the 17th century, but the implications of his philosophy went even further by affirming the egalitarian status of all people and questioning the nature of authority itself. 

His Life Story

We know very little about Poullain’s life, besides the few biographical details he left nestled within his writings. He was born into a wealthy family which enabled him to attain a traditional education in a scholastic curriculum. He graduated with a Master of Arts in 1663 and three years later he studied theology and was ordained as a Catholic priest. His traditional education left him feeling unfulfilled, and he would later explain that his education merely prepared him to speak in Latin about subjects he did not fully comprehend. Luckily, a friend of Poullain invited him to a Cartesian conference on physiology. This conference changed the course of Poullain’s intellectual pursuits by introducing him to Cartesianism, which would form the core of his philosophical method. 

Cartesianism

Cartesianism is a system of philosophy and science based upon the writings of René Descartes (1596-1650). Descartes believed that philosophers relied too heavily on the authority of previous thinkers. In particular, the theories of classical philosophers such as Aristotle were taught in universities throughout Europe. Descartes believed that the best way forward was to start the search for truth with a tabula rasa (latin for blank slate).

For Descartes, true knowledge must be above doubt. In this search for truth, only two sources could be trusted, namely intuition and deduction. By doubting everything, we can more clearly pursue philosophical truths. To illustrate why sensory experience cannot provide unshakable knowledge, Descartes creates a scenario. He asks the reader to imagine an evil demon which wholly tricks our senses. You may think you are reading a book, but the demon could be deceiving you, and in fact, you are not reading it at all.  The slimmest chance that this illusion-loving demon might exist throws into question our senses. Since we cannot once and for all prove that this demon does not exist, some doubt will always remain as to our senses’ ability to detect external influence.  

By applying such a radical sense of doubt, we are freed of preconceived opinions or prejudice. According to Descartes, this method provides us with a direct and straightforward path to immutable truth. This idea of leaving one’s personal experiences and biases at the door when it comes to philosophical investigation deeply impacted Poullain’s intellectual life.

Attitudes of the Time

It is jarring to see how much men in power feared and loathed independent women in previous eras. One of the most shocking examples of Poullain’s contemporaries is Alexis Troussets’ miserably misogynistic Alphabet of the Imperfection and Malice of Women. Trousset alphabetically ordered what he believes were “feminine vices”. In his preface, Trousset violently lashed out at women by calling them “the most imperfect creature in the universe, the scum of nature, the breeding ground of evils, the source of controversy, the laughing stock of the insane, the scourge of wisdom, the rebrand of hell, the instigator of vice, the cesspool of filth, a monster in nature, a necessary evil”. Troussets book was reprinted throughout the 17th century and even crossed the channel with an English translation, a sign of its widespread popularity.

The playwright Molière, a contemporary of Poullain, wrote two renowned plays named The Pretentious Ladies (1659) and The Learned Ladies (1672). Both of these plays berated educated women, and The Learned Ladies served as the catalyst for Poullain writing his treatises defending women’s abilities. 

Departing from the conventional wisdom of his time, Poullain instead argued that men and women are equals, and as equals, both ought to pursue any profession or position they without interference. Supporters of inequality argued for women’s subjection based on two claims: authority and nature. 

Authoritative Authors

Firstly, opponents of gender equality argued that all the greatest authorities believed in women’s natural inferiority. Who are we to question the authority of the ancients or even hallowed scripture? Selectively quoting from famous sources gave misogynist arguments more legitimacy. Church father Tertullian described women as “the devil’s gateway.” The influential medieval theologian Thomas Aquinas stated, “as regards the individual nature, woman is defective and misbegotten.” According to Aquinas, women’s subordination to man was for their own good. It is important to remember that Poullain studied theology at the Sorbonne, a university which enthusiastically adhered to the doctrines of Church Fathers including Tertullian and Aquinas. 

Poullain attacked tradition by applying Descartes’ skepticism. According to Poullain, authority is not a good argument for anything. Sound reasoning does not need to be tied to a famous figure or respected institution. Instead, Poullain believed that “almost all of us have enough reason and good sense to seek the truth.” 

Many skeptics also invoked scripture when arguing that women should be subordinated to men, but Poullain dismissed arguments based upon scripture. For Poullain, the Bible contains truths that human reason cannot not grasp without divine assistance. By contrast, the question of equality between the sexes is within reason’s grasp, “for whatever falls within the scope of reason should be known by reason.” Thus for Poullain it was unnecessary to invoke the bible to decide what was essentially a secular matter.

Poullain believed his contemporaries personified the past as “a venerable old man” who has great wisdom. However, Poullain argued that “the ancients were human just like us, and no less subject to error.” After all, even an esteemed thinker such as Aristotle believed that the earth was the centre of the universe, yet Copernicus had proven that this was not the case. Our ancestors are not endowed with superior reason or knowledge simply because they came before us. Poullain’s skepticism led him to state, “I recognize no authority here apart from the authority of reason and sound judgement.” No author was immune from Poullain’s critique, even his beloved Descartes, Poullain explains“But please take care that I do not claim here that Descartes is infallible, that everything that he proposes is true or unobjectionable, that one should follow him blindly and that others cannot discover anything as good as, or even better than, what he gave us.” 

Nature and Inequality

Secondly, misogynists argued that women were physically and mentally inferior by nature. Women did not engage in scholarly debate or theological discussions, nor did they command armies or hold political office. (The fact that women did not participate in these tasks not out of free will choice but because of social and legal barriers did not occur to them.). Many learned scholars used the fancy Latin phrase “ab esse ad posse valet consequentia,” meaning “from the fact that something exists, it follows that it is possible.” Because women didn’t hold political office, therefore they were incapable of holding office. While it sounds like a bizarre argument today, at the time it was taken as evidence that women were naturally inferior to men in both physical and intellectual ability. 

But Poullain showed that women’s inferiority was not in any way natural. He engaged in historical speculation about the first men and women. The first men, being physically stronger than women, became the warriors and protectors of society, while women were limited to tasks of child-rearing and homemaking. This social order, based upon male physical dominance, was preserved throughout the ages, leading to women’s exclusion from the newer arts of science, literature and politics which developed in tandem with civilization. 

According to Poullain’s theory of how women came to be subordinate to men, women were excluded based on differences in physical strength. Poullain argued that, in the modern world, “sheer physical strength should not be used to distinguish between human beings; otherwise brute animals would be superior to humans and, among men, those who are more robust would be superior.” He concluded that women’s current status was not natural in any sense of the word. Instead, it was the result of “chance, violence or custom.” The gendered hierarchy  of 17th century France was anything but natural; rather it was the product of generations of prohibitive practices and a lack of access to education and opportunity.

In reality, aside from a few bodily functions, Poullain concluded that women and men were essentially the same. Physicality is not what matters in the modern world; for Poullain, the brain is the most important part of the body. Men and women’s brains do not differ; he wrote that the “most minute anatomical study reveals no difference here between men and women; a woman’s brain is exactly the same as ours”. The conclusions are obvious: “the mind has no sex.” Both men and women have the same intellectual potential if only they were allowed to implement their abilities.

This idea is obvious to the modern mind. Of course men and women have similar minds, why was this fact so hard for people to grasp in 17th century France? Yet Poullain had an answer for us incredulous moderns: prejudice, what he dubbed “the greatest enemy of truth.” Descartes, Poullain’s intellectual inspiration, often commented on the difference between informed, reflective judgements and the snap-fire judgements we make spontaneously. Poullain defined prejudices as “judgements that are made about things without examining them.” 

The Role of Prejudice

Poullain believed that the tyranny of opinion was a crucial factor in women’s continued subjection. He thought that we have a tendency to believe “if some practice is well established, then we think that it must be right.” By seeing our current situation as the natural way, we enslave ourselves to the present state of affairs, regardless of its absurdity. The status quo makes it so that “we find it difficult to imagine that things could be right any other way, and it even seems that we could never change them however hard we try.” Because of how pervasive these prejudices against women are, women themselves come to accept them as true. Poullain argued that “because they are born in a state of dependency, they share the male point of view.” Due to the tyranny of opinion, women become slaves both in the external world and in their own internal minds.

The effects of prejudice are heightened when it benefits a particular party at the expense of another. Poullain believed that the status quo benefitted some groups at the expense of others, stating that “If one examines the foundations of all these various beliefs (about women), one finds that they are based only on self-interest or custom.” He believed that “everything men commented about women was to be considered suspect, because they are both judges and litigants.” This quote would later become the epigraph of famous feminist Simone De Beauvoir’s The Second Sex.

Broader Implications

Poullain’s egalitarian approach was not meant to be applied only to the sexes. He had even grander hopes for his philosophy. The reason he chose to discuss the status of women was because he believed it to be the most deeply ingrained prejudice of his day. If he could refute this prejudice, then the rest would follow suit. Poullain’s critique of authority could be applied not only to male supremacy, but to all unjustified power, including race and class. 

Prejudice affects not only women but all people. Poullain questioned,“why it is that the artisans, the farm-hands and the merchants who contribute the greatest part of the State’s expenses are held in less esteem than the nobles who do nothing.” Despite being essential to the wellbeing of society, Poullain observed that peasants are in fact treated as “the scum of society.” He pondered if peasants could be doctors if they had the chance. People may  not be equal in ability, however they are equal in potential. Poullain’s egalitarianism was based upon the proposition that all people had the potential to flourish. Everyone possesses reason, however not all people have the same opportunities. 

His Limited Influence

Despite his comprehensive philosophy, Poullain was not an influential figure in his lifetime or immediately after his death. His treatises did not elicit much excitement. Besides being anonymously quoted by later English feminist writers—including the author of the treatise Woman Not Inferior to Man, written under the psuedonoymn Sophia—Poullain was relegated to obscurity. 

Poullain was not a lone defender of equality. Writers such as Marie le Jars de Gournay had argued for women’s equality in Poullain’s time. However, none went as far as Poullain did in making a case for women’s full inclusion in all social, economic and political aspects of life.

But a diamond shines even if no one sees its brilliance. A testament to Poullain’s forward thinking is that his philosophy is still relevant and applicable today. His critiques of male supremacy should be applied to all areas of unjustified authority.

A person may become a refugee as a consequence of war, famine, or persecution based on political, personal, or religious identities. Today, 65 million refugees worldwide face some of the most dire circumstances imaginable.

Cellular and internet capabilities would give refugees access to a greater degree of freedom in their personal monetary decisions, which immensely improves their standard of living. This is to be expected, given the libertarian insight that choice is essential for progress and wealth accumulation.

An example of cellphones contributing to the improvement of refugees’ lives can be seen in the Nyarugusu refugee camp in Tanzania.

In the Nyarugusu camp, demand for phones, especially devices with internet access, is incredibly high. Social and emotional wellbeing is drastically improved with just basic phone services. Individuals with access to the internet through their phones show even greater improvements. Internet access facilitates educational and monetary opportunities. In camps like Nyarugus, electricity is hard to come by so the finding charging stations for these critical devices is difficult and expensive. Refugees even say they are willing to sacrifice food security and savings to benefit from the opportunities phones provide. 

Previously, where refugees would have had to wait for hours in long lines to use the single camp phone to place a call, social media provides a world of connection in seconds. It acts as a safety net when families are scattered across the world: Far-flung brothers and sisters see each other in seconds through FaceTime, and parents can see children separated abroad grow up. Refugees also report entertainment and information as significant psychological benefits of phone access. Music and movies can liven a gloomy day and allow for minor indulgences in often dreary camps. Online news provides updates from homes they may never see again. Refugees, like everyone else, are willing to pay for that comfort and closeness.

One of the most noteworthy impacts of refugee internet usage is online banking and money-lending. Sometimes the aid distributed at these camps is insufficient or does not match the refugees’ needs. In Tanzania, refugees use cell phones to ask relatives for money when necessary. Mobile payments through wireless capabilities such as Near Field Communication, popular in Africa, allow small and medium-sized businesses to flourish where they previously would not have existed. Refugees in other camps use applications to search the weather and market prices of their crops to ensure a profit.

The free movement of money, enhanced through informal enterprise, has become a mainstay of life in Nyarugusu. Internet and cellular access provide the framework which makes this possible. Phones allow for cash assistance to be directly deposited to those in need, instead of shuffled around through food vouchers and material goods. Organizations like the International Rescue Committee are switching to cash payments given the increasing demand for mobile deposit capability. By giving refugees cash instead of goods, we empower them to find the best way to invest their resources without paternalistic interference.

There are definitely inefficiencies in the current system of aid, which relies heavily on donations of items like bricks and blankets. These types of donations do little to alleviate the underlying problems facing refugees. Refugees do need material aid, but organizational inefficiencies cause them to be sent too much of one item and not enough of another. This can lead to frustrating impasses; for example, refugees might be sent the materials to build, but not be given the necessary tools. Humanitarian aid in the form of mobile network expansion avoids the pitfalls of a top-down approach by giving refugees the power of spontaneous order, business building, and freedom of choice in their own lives.

Mobile deposits are also quicker and less prone to manipulation than cash. Assistance can come in a matter of seconds with a money transfer, and refugees can keep track of those payments by staying in contact with their caseworkers. As well as being more convenient, they are also more secure—mobile deposits are harder to steal than cash. If we genuinely want to improve conditions for struggling refugees, we ought to extend network coverage to them. Rural refugees naturally face a larger barrier to accessing the internet than urban refugees, but that does not mean they should be left in the desert dust.

For mobile network operators, this a largely untapped market. Refugees want access to opportunity and will gladly pay for any services necessary. Expanded coverage would earn the operators more users, and improve the wellbeing of refugees. As refugees gain internet access, mobile network operators would be pressed to offer more choices. The variety of services provided to refugees would expand to meet the wants of this market, and increased competition from various operators would also drive the cost of access down—which currently stands as the most substantial barrier for many refugees.

Considering that billions of dollars in aid are given each year  by the UNHCR —over $1 billion of which is from the United States this past year, it is essential to know where that money is going. Instead of sending materials, we should be expanding network capabilities. The internet has given us an incredible boost of information and opportunity. Refugees should have this same chance.

Very few of us can imagine our lives without the ease and enjoyment that comes from internet access. Why deny the poorest among us the same benefits? Not only does internet access provide opportunities for employment and prosperity, it also allows for people scattered across the world to communicate with their families.

Catherine Wilson teaches us that there is more to Epicureanism than eating, drinking, and being merry. Epicureanism is not an excuse for having a good time, it stresses the importance of living a good life. Epicureans maintain a philosophy that promotes reason, respect for the natural world, and respect for fellow human beings.

What is Epicureanism? Who was Epicurus? How did Epicureans become utilitarians? Is Epicureanism just utilitarianism? Was Epicurus an atheist? What is the scope of Epicurean influence?

Further Reading:

How to be Epicurean, by Catherine Wilson

Using Epicurean Philosophy for Finding Happiness, written by Jodi Clarke

Epicureanism at the Origins of Modernity, written by Catherine Wilson

Related Content:

Buddhist Ethics Does Not Advocate State Action, written by Aaron Ross Powell

Stoicism, Encyclopedia of Libertarianism

Epicureanism, Encyclopedia of Libertarianism

In 2018, just under 3% of all federal sentences were the outcome of a jury trial. An overwhelming amount were the consequence of plea deal. Does the current system of deals and agreements make us safer?

Mentions:

Throughout this episode Landry Ayres talked with; Clark Neily, Kevin Ring, Molly Gill, and Lucian Dervan

Music by Cellophane Sam

Image Credit: https://fordlawokc.com/plea-bargains-explained/

The cigarette is the most lethal consumer product in history, but how has smoking changed in the last 30 years? Smoking is banned from many restaurants, bars, parks, and places of work. The moral panic has ensued around smoking and the fear is only increasing. But, what if there is a better way for smokers to have what they want without burdening them with regulations?

Why did the cigarette take over the tobacco world? Should there be places that people should go to enjoy smoking tobacco together? How did second hand smoke become a property rights issue? Why is smoking so stigmatized? What is thirdhand smoke? Does anyone want a safer cigarette?

Further Reading:

The Rediscovery of Tobacco: Smoking, Vaping, and the Creative Destruction of the Cigarette, written by Jacob Grier

King James I, A Counterblaste to Tobacco, 1604

Christopher Hitchens on Audio, Cato At Liberty

Christopher Hitchens May Be Dying Of Cancer, But He Has No Regrets About Smoking And Boozing, written by Joe Pompeo

Barbara Ehrenreich Doesn’t Have Time for Self-Care, Isaac Chotiner

Related Content:

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

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

The world is rapidly aging and, since people have fewer kids, that means we are facing an eldercare crisis. People will live longer, but have fewer family checking in on them, driving them to doctor’s appointments, and catching the early warning signs of serious illnesses. There is no perfect solution for that crisis, but new technology promises to take better care of us as we age. We have two interviews in today’s episode with startups that can passively track the health of elderly users to watch for Alzheimer’s, dementia, blood pressure, and heart attacks. These technologies can both save lives and improve the quality of life for many elderly people and, potentially, for the not so elderly as well, but that innovation will be delayed if the Food and Drug Administration fails to remove the regulatory barriers that inhibit medical device experimentation.

Are there innovative ways to spot the early stages of Alzheimer’s? As the global population ages, how are we able to create technologies that will help us take care of the elderly?

Further Reading:

Hanamura Mirror Concierge

Researchers use AI to detect early signs of Alzheimer’s

Related Content:

Health Care without Health Insurance, Building Tomorrow Podcast

Wearable Tech: Health Care of the Future, Building Tomorrow Podcast

On Innovation: Don’t Ask for Permission, Building Tomorrow Podcast

On August 23, 1927, Ferdinando Nicola Sacco and Bartolomeo Vanzetti were executed by the state of Massachusetts for murder.

Within days, Frank Knight, at the time professor of economics at the University of Iowa, wrote a reflection on what Sacco and Vanzetti’s trial and execution meant for his understanding of the ethic of the state. His conclusion was:

Neither the methods of the state nor its fundamental aim can be ethical, in any ideal sense that distinguishes the ethical from the merely expedient. The method of the state is force and fraud, and if any organization that uses any more ethical methods is called a state the word is used in a sense antithetical to any meaning it has ever had (or ever will have, either). The aim of the state is not to do “right,” but simply, as it has always been, to keep the peace. (Knight 2011)

Three years later, after his move to the University of Chicago, Harvard University came calling to see if he would move to Massachusetts. According to an interview with his wife (Nordquist 2011, 6), Knight refused Harvard’s offer in large part because “he wouldn’t shake hands with the people that were involved in the Sacco-Vanzetti case.” (Harvard’s President Abbott Lawrence Lowell chaired the post-trial committee set up by the state’s governor that decided the trial had been fair and the two men were guilty beyond any reasonable doubt). Knight had been a frequent contributor to the Harvard economics department Quarterly Journal of Economics before 1927; he published only one book review in the QJE after 1927, and that may have been in the queue anyway, because it was published in 1928. Knight retired from Chicago in 1950, but was given a distinguished professorship in the Committee on Social Thought, which he had helped to found. Thus, Knight and F. A. Hayek were both in the Committee during the period from 1950 to 1962.

At Chicago, of course, Knight is best known as one of the early founders of Chicago economics, a school which was especially important in the middle of the 20th century when Milton Friedman was joined by George Stigler, T. W. Schultz, Ronald Coase, Harold Demsetz, Al Harberger, Gary Becker, and other market-oriented economists. Many of those Nobel-winning (or -worthy!) economists had their first introduction to the benefits of market organization in Knight’s price theory course. And they in turn handed the tradition down to the many students who emerged from Chicago as we moved into the “Age of Milton Friedman,” as Andrei Schliefer called the period from 1980 to 2010. That tradition supported the various free-market-oriented policies that helped create three decades of economic growth around that world—growth that halved, and then halved again, and then halved again, the percentage of the world’s population living in extreme poverty.

But despite being Knight’s protégés, Chicago economists often ran afoul of their mentor’s view of the world. From the 1940s on, Knight’s attention turned from economic theory and market organization to thinking about markets in their broader institutional context. There were no sacred cows for Knight. When he wrote an early essay on the ethics of the competitive order (Knight 1923), Knight concluded that competition was ethically indefensible except as a game. While his students were turning his economics into a toolkit for applied policy science, Knight was decrying the rise of “scientism” (it’s not clear whether he or Hayek used the term first) in economics. At the same time, he also decried the rise of “moralism”—the belief that we just had to get our ethical foundations right. When challenged on his rejection of natural law as the foundation for justice, he responded that natural law was the “last resting place of the bigot” (Knight 1949). And asked what Jesus’ Sermon on the Mount might say to us today, Knight responded that applying Jesus’ message to economic life in a market society would “wreck evil on the world.”

Knight was well-known for remarks of this kind, but he was also known as someone who trusted that economies organized through free markets would outperform other forms of economic organization. His little textbook, which was actually only four chapters excerpted from a longer manuscript, was aptly called The Economic Organization (Knight 2013). Reading the second chapter on “The Price System and the Economic Process,” one can understand how someone like Jim Buchanan could be won over by Knight from a soft socialism to an ardent appreciation for markets. Throughout his life, Knight argued first and foremost that an understanding of basic market principles was essential to all social and political discourse.

He also made two other arguments over and over again. (Knight often quoted Herbert Spencer: “only by varied iteration can alien conceptions be forced upon reluctant minds.”) First, uncertainty is a feature of the world we live in, not a bug. Knight’s background in German literature and philosophy meant he always saw the dark side. The belief that science can get us to certainty (scientism) is as flawed a belief as the belief that moral certainty is possible (moralism). But the fact that uncertainty plagues human existence does not mean that progress is impossible. It just means that there is no “one” answer. As he said in his American Economic Association Presidential address: the right principle is not to have no principles, but rather, to have lots of principles, and pull them out and see if they work.

In the absence of certainty from either science or morality, Knight argued, secondly, that discussion was essential. A favorite line of his in the latter part of his career was picked up and carried forward by Buchanan: “democracy is government by discussion.” Knight was less optimistic about “cheap talk” than Elinor Ostrom, but he believed democratic discussion accomplishes two tasks. The first is that it leads each of us to revisit our beliefs and values. In the process of discussion, adjustments are made both to what we think about the world, and to the values we hold. In some cases we are confronted by new knowledge or values that we have to accommodate; in other cases, we simply weight our existing knowledge and values differently after conversation with others.

The second thing discussion accomplishes is the coordination of people’s values and knowledge across a wider spectrum of options and configurations. In the first case, our beliefs and values change, and in the second, our actions change as we coordinate them with others. Nassem Taleb (2007), author of the very Knightian The Black Swan, argues that uncertainty requires us to have “skin in the game” in order to make profit. For Knight, discussion is the process of our putting “skin” in the political and social “game” of a democratic society. But, just as entrepreneurs always have to revisit their actions, so to do we as a democratic polity. Hence, nothing in democratic discussion is absolute; it is only, for here and now, a “relatively absolute absolute” (Buchanan 1989).

Knight’s answers were not always right. But he asked great questions. And, like most of us, he always welcomed a good debate; indeed, if not that, what else is liberty good for? That’s why anyone, including libertarians, should read him.

References

Buchanan, James M. 1989. “The Relatively Absolute Absolutes.” In Essays on the Political Economy, 32–46. Honolulu: University of Hawaii Press.

Knight, Frank H. 1923. “The Ethics of Competition.” Quarterly Journal of Economics 37 (4): 579–624.

———. 1949. “Natural Law: Last Refuge of the Bigot.” Ethics 59 (2): 127–35.

———. 2011. “The Ethics of the State.” Research in the History of Economic Thought and Methodology 29-B: 169–83.

———. 2013. The Economic Organization. New Brunswick, NJ: Transaction Publishers.

Nordquist, Gerald L. 2011. “A Conversation with Ethel Verry Knight.” Research in the History of Economic Thought and Methodology 29-B: 1–14.

Taleb, Nassim Nicholas. 2007. The Black Swan: The Impact of the Highly Improbable. New York: Random House.

Psychologist Stanley Milgram conducted a famous yet controversial experiment known as the Milgram experiment. In 1961, deeply perturbed by the willingness of ordinary people to comply with the Nazi regime and enthusiastically carry out heinous crimes, Milgram devised an experiment to investigate the willingness of people to obey an authority figure who commanded them to undertake tasks which conflicted with their own sense of morality. 

The experiment design was quite simple. Participants would be paid four dollars for an hour of their time, the equivalent of about thirty dollars today, adjusting for inflation. Two volunteers would be introduced to each other by an overseer who would explain the purpose of their tests. The volunteers were told that they were taking part in a study on memory and learning and that each should pick a role as either teacher or learner. 

The experiment could then begin in earnest. The learner was strapped to what looked like an electric chair while the teacher and overseer retired to a room where they could hear but not see the learner. The teacher was told to read aloud a word, followed by four possible answers. If the learner answered incorrectly, they were given a minor electric shock, which was administered by the teacher by simply pressing a button. With each successive incorrect answer, the voltage would increase until reaching 450-volts, enough to kill a person.

Eventually, successive shocks would cause the learner to be in immense pain and they would beg the teacher to stop. If the teacher at any time wished to stop the experiment, the overseer had been primed to given specific verbal cues, such as ‘please continue’, or ‘the experiment requires that you continue’, or ‘it is absolutely essential that you continue’ and ultimately, ‘you have no other choice, you must go on.’

Thankfully, this was all a carefully orchestrated ruse. The learner was always an actor who was in no real danger. 

Of the 40 participants in the original experiment, 26 administered what they thought to be a fatal 450-volt shock to the learner, even after being told that the learner had a heart condition. While there are many criticisms one could mount against the ethics and voyeuristic nature of Milgram’s experiment, no one can dispute that the results are disturbing.

How can regular people be so easily convinced to hurt and possibly kill another human being simply because a person in authority told them to do so? The answer possibly lies in the work of a 16th century writer Étienne De La Boétie, who had attempted to answer this question in his seminal book entitled, A Discourse on Voluntary Servitude. 

The Life of Étienne

In 1530 Étienne was born into an aristocratic family in Sarlat, a small town located in southwest France. At an early age, Étienne was orphaned and raised by his uncle. Despite these hardships, he trained as a lawyer at the University of Orleans and became good friends with the famous Michel de Montaigne, who later penned an essay about his  friendship with Étienne. Sadly, Étienne did not live a long life, dying at the age of 32. Étienne is an obscure figure today; most scholars know of his existence due to works about Montaigne. However, despite his obscurity Étienne is easily the most radical thinker of his century. A Discourse on Voluntary Servitude is a short yet scathing attack on the very nature of political authority.

The Nature of Liberty

Étienne believed that all human beings are equal, that we are all created in the same likeness “so that each of us may find himself reflected in another.” Even if there are inequalities in our abilities or talents this does not give one person the right to dominate another.  “If in distributing her gifts nature has favored some more than others with respect to body or spirit, she has nevertheless not planned to place us within this world as if it were a field of battle.” There is no excuse for the strong to dominate the weak, and violence against another is wholly unnatural since nature “has not endowed the stronger or the cleverer in order that they may act like armed brigands in a forest and attack the weaker.” Equality is the natural order of things while subordination is wholly perverse. For Étienne, “If we led our lives according to the ways intended by nature and the lessons taught by her, we should be intuitively obedient to our parents; later we should adopt reason as our guide and become slaves to nobody.” The only natural authority is parental authority, which ends once a child is capable of reasoning for themselves.

All living things wish to be free. A horse must be broken before it can be ridden without resistance. Étienne believes this urge for freedom is so immense that elephants will break their tusks off against rocks, deterring hunters by yielding their ivory rather than living in slavery. Every animal resists captivity, viciously even, except for one, humans. Étienne believes humans are the only animals in the world who will willingly subject themselves to slavery, misery, and torment despite their unique rational capacities. If all people are free and equal by their very nature, how could one ever justify holding sway over the other? Furthermore, Étienne suggests that if people were given a choice  “there can be no doubt that they would rather follow reason than serve another man.”   

In Étienne’s day, the majority of Europe was ruled by powerful monarchs and most of Étienne’s  contemporaries saw no problem with this state of affairs. Kings were divinely ordained to rule over their people. Contemporary political thinkers theorized that the difference between tyranny and kingship was that a king obeyed the laws and customs of the land while a tyrant ignored these norms.

Étienne disagreed, arguing that absolute power, even if not used, is fundamentally unjust. Its existence puts one at the complete mercy of another’s will. On absolute power Étienne writes “it is a great misfortune to be at the beck and call of one master, for it is impossible to be sure that he is going to be kind, since it is always in his power to be cruel whenever he pleases.” By rejecting the dichotomy between a tyrant and a king, Étienne was denouncing all forms of one-man rule. Whether they have risen to positions of power through elections, conquest, or inheritance, all kings are tyrants; there are no exceptions.

Étienne did not discuss how tyrants came to power nor parse their character. Instead, he wished to answer why people are willing to endure the hardships and humiliations that tyranny inflicts.  Étienne believed that people tacitly consented to their situation and so became voluntary slaves. How could anyone ever consent to such a situation, where one “single little man” held all of the power while the rest kowtowed to his will? Étienne believed there are three reasons that tyranny endures despite humanity’s inseparable traits of liberty and natural equality.

Custom

Étienne believes that men are “born and bred as serfs,” and because of this it never crosses their mind that they are meant to be free by nature. Étienne, in agreement with his good friend Montaigne, holds that nurture holds more sway over us than nature. Étienne explains, “It is true that it is man’s nature to be free and also such that he naturally takes the bent which nurture gives him.” Though it may be in our nature to be free, the force of habit dulls nature’s urges for freedom.  

Étienne compares people who find themselves in a state of involuntary servitude to children who are born in regions where there are months of darkness on end. Since they were born in the dark, they never long for the light. Étienne concludes that “anything comes to be natural to a man if he accustoms himself to it.” Akin to the child in the dark, since we have never experienced this natural and idyllic liberty, we do not long for it. The first generation under a tyrant might grumble and groan about their oppression. However, as Étienne explains, the second generation will reason that their “fathers lived in the same way; they will think they are obliged to suffer this evil.” Habit and custom are the first reason people accept their oppressed state. 

Being Bamboozled

The second method that tyrants use to solidify their rule is trickery. The Roman emperors held lavish games at the colosseum and distributed bread to the public. This led the people to believe  that without their rulers they would not have these wonderful displays or the bounty of food. In reality, Étienne explains they are merely being returned a small portion of the property stolen from them through taxation. 

Other tyrants attempt to convince people that they are something more than human, perhaps even divine. In Étienne’s day both the French and English monarchs claimed to have the divine power to heal the sick. Étienne mocks those who believe a king’s simple touch could cure diseases and explains that it is merely a trick to dupe the desperate.These tyrants attempt to bamboozle their subjects by borrowing a “splinter of divinity.” The modern parallel to this phenomenon is the cult of personality that 20th century dictators cultivated through mass propaganda, a prime example being Kim Il-sung the founding leader of North Korea, who in his life accumulated many grandiose titles such as Heavenly leader.

The Network of Patronage

Rulers’  ability to employ custom and the trickery to their advantage are potent methods of making people tacitly consent to their subjection. However, Étienne believes “the mainspring and secret principle of domination, the support and foundation of tyranny” was the benefits that state give to a select few. Every tyrant has a close cabal of cronies who carry out their bidding. For their subservient loyalty, they are handsomely rewarded. Each of these cronies then hires their own underlings to carry out their bidding, creating a complicated network of patronage. Eventually, through this web of relations “a hundred thousand, and even millions, cling to the tyrant by this cord to which they are tied.” For many entangled in this web of patronage, liberty would mean the end of their livelihoods. Therefore servitude becomes the more profitable and comfortable option. These entrenched soldiers, bureaucrats, and servants fiercely defend the status quo. 

Getting Rid of a Tyrant By Mass Civil Disobedience

The situation Étienne describes is a grim affair. He asks “has so, denatured man that he, the only creature really born to be free, lacks the memory of his original condition and the desire to return to it?” The forces of custom, trickery, and entrenched interests make it seem like reverting to Étienne’s ideal world of equals voluntarily cooperating would be a hopeless task.

Throughout the medieval and early modern period there had been a tradition of theorizing on the topic of tyrannicide, the ethical justification of killing a tyrant. French Protestant writers, due to religious persecution, had been theorizing doctrines of tyrannicide during Étienne’s lifetime. William Barclay later dubbed these thinkers as Monarchomachs, those who fight against monarchs.  

However, Étienne did not advocate for killing tyrants. If one tyrant was killed, another more ruthless might take their place. Étienne’s solution to tyranny is much more radical as it strikes at the root of power. Instead of fighting against the forces of the state, we should withdraw our consent in an act of unprecedented mass civil disobedience.

Étienne reasons that the state is upheld by our tacit consent and reflexive obedience. However, the state is not a magical and transcendent  force. In reality, it is composed of people just like us, people who have no right to demand our obedience. The state is wholly artificial and supported by our contributions. Thus Étienne explains that “if not one thing is yielded to them, if, without any violence they are simply not obeyed, they become naked and undone and as nothing, just as, when the root receives no nourishment, the branch withers and dies.” Étienne reasons that we would then see the truth of political power, that it is illegitimate, against nature, and wholly untenable. Étienne compares a tyrant to a colossus being supported by the people and says that once “you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled away, fall of his own weight and break in pieces.”

The Legacy of Étienne

Étienne’s work is especially unique for his day as it did not tackle any immediate political issue. Unlike contemporary Huguenots who were attempting to justify resistance against particular regimes, Étienne’s highly abstract and deductive methodology provided a powerful indictment of all central authority. 

Because Étienne did not focus on particular rulers and instead made a concerted effort to attack the very concept of political power, Étienne has found fans in a broad spectrum of ideologies including Anarchists, Marxists, and Libertarians. Leo Tolstoy liberally quoted sections of Étienne in The Law of Love and The Law of Violence, a work that was read by both Mahatma Gandhi and Martin Luther King. The political scientist Gene Sharp, who specializes in non-violent resistance and has been called the Machiavelli of non-violence, refers to Étienne’s work numerous times in his seminal work The Politics of Nonviolent Action.

Étienne’s main focus in the Discourse on Voluntary Servitude is not on the tyrants themselves, but those who serve beneath their reign. He explains that people reflexively and unwittingly obey political authority due to custom enforced over generations, the public works of the state, and, finally, the entrenched interests of those who benefit from the state’s dominance. The simple solution to dissolving state power is to revoke consent on a mass scale. Once the state has been exposed to be not a leviathan but a mouse, liberty will flourish as nature intended. Discourse is not only a scathing attack on all political authority but also a concise strategy on how to overthrow the state.  

Milgram’s experiment had many flaws, there is some evidence that he manipulated the results to get the conclusion he wanted. Contrary to Milgram’s experiments, there are glimmers of hope all over the world as people quietly disobey authority. Recently, over two hundred workers at a tech company quit their jobs after realizing their work was aiding Immigrations and Customs Enforcement. Two hundred people in a world of seven billion barely represents even a drop in the ocean. However, today, the world is more deeply interconnected than ever one example can be seen by millions in an instant. Small acts of resistance in isolation do not stop the leviathan, but they do show that it is possible to oppose the state.

According to Deirdre McCloskey the greatest challenges that humankind faces are tyranny and poverty. McCloskey is a firm believer that if we were to return to true liberal values it would be good for everyone. For examples of true liberal values she refers to philosophers Locke, Smith, Voltaire, and Wollstonecraft.

What is the connection between liberalism and democracy? How is liberalism non-coercive? What fights should libertarians prioritize? How can you be principled advocate for the poor? Who influenced Deirdre McCloskey?

Further Reading:

Why Liberalism Works: How True Liberal Values Produce a Freer, More Equal, Prosperous World for All, written by Deirdre McCloskey

The magic washing machine, Hans Rossling TED Talk

Bourgeois Dignity: A Revolution in Rhetoric, written by Deirdre McCloskey

Related Content:

The Bourgeois Era, Free Thoughts Podcast

Liberalism 1.0, Free Thoughts Podcast

A Review of Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World by Deirdre McCloskey, written by David S. D’Amato

Introduction

Externalities¹ are an economic bugaboo and often lead to calls for government intervention to correct these so-called “market failures.”  In my previous columns here, I discussed some of the issues with externalities, such as when they constitute a market failure and the role they play in public goods theory and practice.  However, those two columns, by themselves, are an incomplete treatment of the topic: there are two types of externalities, and the differences between them matter.

When a person’s behavior, or the behavior of two people entering into an economic exchange, has effects (either positive or negative) on a third party not privy to the original transaction, economists call those positive or negative effects “externalities.”  Indeed, I defined “externality” this way in my December 2018 column.  As such, economists will argue that, since the costs and benefits are not fully felt by the decision-makers, the social benefits/costs will deviate from the private benefits/costs and thus a market failure will occur.  This failure can then be a justification for government intervention. 

But this definition of “externality” describes necessary but not sufficient conditions for identifying a market failure.  As economists since Jacob Viner have discussed, there are two kinds of externalities: “technical externalities” and “pecuniary externalities.”  The former is what we typically think of when we discuss externalities: they are externalities that fall upon a third party that reduce their ability to produce with their given resources and thus potentially affect their profits as well.  The pollution that falls upon the grapes of a winery is a technical externality since, with the same inputs, the winemaker can produce less wine now.  Pecuniary externalities are when actions by trading members affect the profit, or pecuniary gains, of a third party but not their ability to produce.  When a Burger King opens up in town, cutting into the profits of McDonalds, that is a pecuniary externality on McDonalds.  It reduces McDonalds’ profits but not their ability to produce. Another example is if there is a technological innovation that affects workers’ wages in an industry, such as a large-scale adoption of self-checkout machines in the supermarket reducing the demand for (and thus wages of) cashiers.  There is again in this case a third-party effect that impacts the valuation of a group’s profit (labor’s wages) but not its ability to produce.

The distinction between pecuniary and technical externalities is crucial.  Technical externalities can be a form of market failure.  Pecuniary externalities are a sign of the market working.  A competitive market necessarily means that incoming firms are cutting into existing firms’ profits (or, alternatively, incoming buyers are cutting into existing buyers’ profits).  Superficially, these two externalities look the same in that they both affect profits.  But in their operation, they act very differently.  Furthermore, the distinction between the two help us understand why properly assigned property rights are key to market functioning. 

Both Externalities Found in Public Policy

As I discussed in my previous article, “When is a Market Failure Not a Market Failure?,” the public policy implications of a technical externality are fairly straightforward: if a technical externality exists, and if the costs of implementing a policy such as a tax or regulation are sufficiently low, then a government body can step in and correct the externality.  This will bring the market toward a “social optimum” and eliminate the market failure.  For pecuniary externalities, on the other hand, the best policy prescription is to do nothing out of the ordinary.  Pecuniary externalities are a sign of the market working as intended: competition is driving down prices and forcing firms to look for better ways to satisfy buyers. 

Economists tend to ignore pecuniary externalities in their welfare analysis since, in the model, pecuniary externalities show up as a transfer of welfare from existing firms to incoming firms and consumers.  Net welfare at worst doesn’t change and at best increases.  But these are externalities, and as such the existing firms do face real effects to “their” profits.  If the firms have a property right to the value their profits, in theory, the “winners” can compensate the “losers:” if there are zero transaction costs, then existing firms can negotiate with the incoming firms and buyers to offset their pecuniary losses.  If the firms are not assigned property rights to the value of their profits, then the same outcome occurs: new firms enter the market and buyers are better served.

But, in a world like ours where transaction costs exist, the assignment of property rights matters.  If firms are assigned property rights to the value of their profits, and the transaction costs of negotiation are high, then the current firms could block incoming firms on property rights grounds and maintain their monopoly power.  Consumers in the market are served less well since the market process fails to operate. 

Here in the United States, firms are generally not given property rights to the value of their profits.  They have property rights to profits they have earned, but not property rights to future profits not yet earned.  In other words, just because Firm X earns $5 million in profits this year does not mean they have the right to earn $5 million in profits next year.  If Firm X earns $5 million this year and next year earns only $2 million because Firm Y enters the market, Firm X may (rightfully) believe they are “harmed” by Firm Y’s entry since their profits went from $5 million to $2 million. 

Since Firm X, in their view, is “harmed” by Firm Y’s entry, they have some incentive to try and influence public policy.  What’s more, since Firm X can claim that their loss of profit is due to actions beyond their control, they could make an externality argument; they could try to claim a market failure or an unjust takings.  Indeed, this argument has been used recently to justify banning Uber in Chicago.  In Illinois Transportation Trade Association et al. v. City of Chicago, the taxi cartel of Chicago sued the city for allowing Uber and other ridesharing services to operate without a license.  This, they claimed, constituted a 5^th Amendment takings of their property.²  They claimed that, by allowing Uber and other firms to operate, the City of Chicago was taking away the value of their licenses (their private property) and distributing it to other firms (for public use).  In his decision for the 7^th District Federal Court of Appeals, Judge Richard Posner struck down the taxi firms’ argument by pointing out they have no property right to future profits or the value of their licenses. 

If Firm X were to take the route of attempting to influence public policy because of Firm Y’s entry, this is where assignment of property rights becomes crucial.  If the judge were to agree with Firm X that they have the right to a value of their profits, then the government essentially rewards uncompetitive behavior.  Firms can object to competition on pecuniary externality grounds and, despite arguments to the contrary, prevent the market process from working properly.  Buyers will be poorly served, and existing firms will become entrenched. 

If the judge were to disagree with Firm X and state that they do not have a property right to future profits, then the market mechanism will succeed.  New firms could enter, reduce the profits of current firms, and better serve buyers.  Such a property rights regime would encourage, rather than discourage, competitive behavior among firms.

Although technical and pecuniary externalities bear superficial similarities to each other, they can have polar opposite policy implications.  In a market setting, the optimal level of influence a market transaction has on other people is not zero; in some cases (such as competition) the level of “harm” is actually positive!

Property Right Assignments and Pecuniary Externalities

Above, I discussed how assigning property rights based upon pecuniary externalities can lead to consumers being poorly served.  But improper property-rights assignments can have wider implications as well.

Assigning property rights based on pecuniary externalities can have an effect not just upon competition with incoming firms, but among existing firms as well.  If the firms have a right to a given value of profits, it will discourage innovation among the existing firms.  Since any new invention will, all else held equal, increase the profits of one firm at the expense of the other firms, they could be sued and enjoined (or in other ways discouraged) from innovation, as it would violate the pecuniary property rights of the other firms. 

Furthermore, pecuniary property rights can have far reaching consequences throughout the economy.  Competition comes in many forms, not just direct competition between firms in the same industry.  Substitutes abound for goods and the longer prices are relatively high, the more consumers will look for substitutes.  These substitutes may be obvious (such as substituting water for milk as a beverage if the price of milk remains relatively high) or less obvious (substituting phonebooks for firewood if the price of firewood remains relatively high).  If a firm has a pecuniary property right, it could seek to prevent these substitutes from becoming viable.

The common thread here is that resources are diverted from economically valuable uses (that is, serving the consumer), toward efforts of protecting profits, all under the guise of legitimacy given the property rights assignment.  These resources are not going toward “growing the economic pie” but trying to secure shares of it.  And they represent a self-feeding mechanism with no clear delineation for assigning rights: why does Firm X have a right to a certain level of profit but not competing Firm Y?  Every pecuniary property right must come at someone else’s expense and resources will be spent constantly clarifying these inherently unclear property right assignments. Pecuniary property rights turn the positive-sum game of the market process into a zero-sum or negative-sum game of rent-seeking and rent-protection. In short, assignment of property rights is not just important to encourage trade by clarifying who owns what and what is being exchanged, but such assignment is also important for preventing wasteful rent-seeking behavior.

Conclusion

Unfortunately, arguments for pecuniary property rights are pervasive throughout any society; tariffs, income re-distribution, “living wage,” occupational licensing, and student loan forgiveness are all examples of policy prescriptions arising from pecuniary externalities.  Understanding how these externalities differ from technical externalities and how they can harmfully influence policy is crucial for effective policy reform and economic analysis. 

Although public choice and economic analysis can help frame the conversation about property rights, and they can help us see various consequences of differing regimes, no amount of economic analysis can tell us what property rights should be assigned.  For that, we need moral philosophy; we need an idea of just property rights.  What constitutes just property rights?  How are they to be assigned?  These are important questions, but they are questions for another time.

Summary:

American viewers love dystopias that are just eerie enough. In Gilead, a totalitarian theocratic state, reproduction rates are plummeting and women at-large are having trouble conceiving children. The answer to this problem is to institute child-bearing slavery. Elizabeth Nolan Brown, Marianne March, Tess Terrible, and Natalie Dowzicky unpack this controversial and timely television show.

Transcript:

Summary:

On the show today is Peter Suderman and Paul Matzko with our hosts, Natalie Dowzicky & Landry Ayres. Throughout this episode they discuss five distinct Black Mirror episodes and what is or is not scary about the dystopian-thriller. One common theme is that the creators of Black Mirror seem to assume the worst will happen, when many of the technologies introduced in this world could have positive effects as well. 

Transcript:

Prior to November 2018, felons in Florida were barred from the voting booth for life. That meant that about 10% of the voting age population in the state was disenfranchised for having a felony conviction. When someone owes a debt to society, how should we determine when it’s paid in full?

Mentions:

Throughout this episode Natalie Dowzicky talked with; Julie Ebenstein, Neil Volz, Lance Wissinger, and Ashley Thomas

Image Credit: New York Post

Music by Cellophane Sam

The “Long Peace” Thesis

Having considered the modern nation-state as a unique subject of historical and political inquiry, we turn to the widely popular notion that we are right now living amidst a “Long Peace,” characterized by falling rates of war and violence more generally. Among the intellectuals notably associated with this thesis is the Harvard cognitive psychologist Steven Pinker, who argues that wars between the world’s great powers have steadily declined, and that even the nightmarish violence and genocide of the last century was, population sizes properly weighed, a move in the right direction. We have described the emergence of the modern state as a process “of centralization, concentration, and absorption,” in which other sources of power in society were consolidated, the state eliminating rivals. This process, a violent one, is among the historical facts generally ignored or downplayed by the Long Peace thesis. As Reinhart Kössler notes, “the pacified environment provided by the modern state (at least, according to its own pretensions), rests on a history not only of violent disarmament of competitors and elimination contests, but also of the equally violent process of disciplining people.” Or as Peter Kropotkin observes of England under Henry VIII, the state forcibly expropriated and supplanted the network of voluntary associations and guilds that had grown up over the course of centuries, robbing them in broad daylight “without bothering with formalities or procedure.” Such episodes, largely forgotten in any case, are not deemed violence or coercion by the contemporary defender of the modern state, who tells us that it ushered in a new age of peace. The acknowledgment or retelling of such crimes doesn’t fit a narrative that sees the birth of the Westphalian nation-state as a propitious event for human liberty and prosperity. To understand the problems with the Long Peace argument thus requires a close reassessment of the bureaucratic state: though today regarded as the benign vehicle of qualified, scientific expertise, this new form of total government creates the preconditions for the worst, most thoughtless exterminations of human beings in the world’s history.

The principle of bureaucracy, Kropotkin says, “destroys everything,” because through it is enforced a suffocating pattern of uniformization, the determined elimination of foci of social power outside of the state and the active preclusion of their reemergence—as well as the erasure of the popular memory of these cooperative alternatives to state power. This accession of unrivaled, anomymous power (and the anonymity of the bureaucratic state is important in this discussion) brings along with it a system of incentives creating a fertile ground for the germination and growth of the mass-murder state. Mary McCarthy has a famous quote on bureaucracy: “Bureaucracy, the rule of no one, has become the modern form of despotism.” The modern nation-state’s characteristic bureaucratic form seems to have made possible the mechanized mass slaughters it has carried out since its appearance. For if no one rules, then no one really kills—that is to say, no one must take responsibility for killing, the murder of millions becoming an exercise in bureaucratic anonymity and detachment, everyone mechanistically following orders, no one choosing.

Political modernity, incarnated in the nation-state, seems, then, to admit the fundamental libertarian truth that no one could attain the right to rule. But instead of treating this as a good reason to subject the state to a searching analysis, it accepts social contract theory’s counterfactual and concludes that we are the authors of our own oppression. As the great liberal Benjamin Constant wrote, the social contract theory articulated by Rousseau is “the most terrible auxiliary of all kinds of despotism,” for it operates to remove all constraints on political power. There can, after all, be no limits on political power in principle if that power only an expression of the citizen’s own will.¹

And indeed the twentieth century was an experiment in limitless political power. The internal logic of the modern nation-state reaches its conclusion in authoritarian political systems like Italian Fascism, German National Socialism, and Chinese and Soviet communism. As I’ve discussed previously, defenders of the modern state have attempted, against the weight of available evidence, to read such brutal, murderous regimes out of the modernist project, to distinguish them as deviations from or deliberate reactions against the dominant trend. Detlev Peukert argued compellingly that in fact German National Socialism “pushed the utopian belief in all-embracing ‘scientific’ final solutions of social problems to the ultimate logical extreme,” stamping out genuine social ties in favor of a bleak coherence derived from “bureaucratic procedures.” An examination of the familial connection between Progressivism and National Socialism reveals that the “logic of segregation and exclusion” was always there, latent in the very Progressive ideas that had been the foundation of the Weimar welfare state.² Making matters even more ridiculous, the horrors of the twentieth century transpired during a period in which the nation-state was supposedly in decline, in which the growth of international organizations (both business corporations and treaty organizations like the League of Nations and, later, the United Nations) grew in power. Premised on the idea that there is a rationally discoverable natural law preceding positive law, international law does, at least in principle, posit a challenge to the sovereignty and authority of the state. But as historian Quentin Skinner has observed, reports of the death of the state have been greatly exaggerated, as states have arguably become “more aggressive of late, patrolling their borders with increasing attention and maintaining an unparalleled level of surveillance over their own citizens.” Skinner further notes that states intervene decisively in the economy (to rescue failing banks, for example), print money, tax and imprison their citizens, and “legislate with an unparalleled degree of complexity.”³

The Devastation of Modern War

Still, notwithstanding the unique power of the modern state and the bloody history of the twentieth century, is it possible that Pinker and others trumpeting the “Long Peace” are right? Will Wilkinson of the Niskanen Center recently assured me that “advent of the Westphalian nation state brings in its wake plummeting death rates from war.” This seems, however, to be far from the truth—indeed, the empirical record shows us that just the opposite is true. In the roughly four centuries since the Westphalian treaties were signed,[4] the world has played host to a series of bloodbaths that would have been inconceivable before the modern era and its unique political institution, the state (on which more below). But during the relevant period, the number of human beings on the planet skyrocketed, from little more than half a billion in 1648 to nearly 8 billion today. The Long Peace theorists argue that “even if wars have become deadlier in absolute terms,” those deaths account for a smaller percentage of the population.

This seems a strange way to think about the destructiveness of war, for we don’t ordinarily believe that the value of one person’s life is reduced by the mere fact that there are more people currently alive on earth. The inexpressible value of any given individual has not been diminished as the global population continues to climb. Human persons are not fungible cogs that can be readily substituted for one another, void of unique characteristics. This kind of statistical analysis reduces the human person to a commodity, a mere chattel. It is, at this juncture, important to point out that this relative vs. absolute debate is a philosophical one, a question that by definition cannot be decided on the basis of the raw data alone (even assuming that the data themselves were perfectly validated and not subject to any meaningful disagreement). The philosophical question precedes, and must precede, the data-analytical question, as any interpretation of the data will assume certain philosophical priors. While proponents of the Long Peace thesis see it as obviously true that we should use the relative standard, this is not at all obvious, and there are compelling reasons that favor the absolute standard when we’re talking about something like the lives of individual human beings. We can’t mitigate the loss of one life with the substitution of another, i.e., by gesturing at the existence of additional other persons. The loss is fundamentally immitigable, because each individual is irreducibly unique. If your empirical approach is telling you, roughly immediately following the bloodiest century ever, that there’s been a “Long Peace,” then that approach is broken at a fundamental level. That this is not immediately obvious reveals much about the normative philosophy that today’s intellectuals use to frame their definition of empirical rigor. Mao’s communist government alone was responsible for approximately 70 million peacetime deaths. Pinker, and his defenders like Wilkinson, apparently mean us to believe that such a staggering, almost unimaginable, death toll is reconcilable with a general downward trend in violence because, well, China has lots of people.⁵

Setting the matter aside, war-related deaths actually increased in absolute terms more than they should have given population growth alone, with exponentially more such deaths in “modern organized societies” than in primitive nomadic societies. Further still, as we shall see, the twentieth century saw a uniquely high death toll, even if we (1) employ the relative/per capita standard preferred, I think implausibly, by the supporters of the Long Peace thesis, and (2) include only deaths in conflicts (see Max Roser’s graph “Global deaths in conflict since 1400”). To reckon that the world has grown more peaceful in the centuries after the Peace of Westphalia, we must define “peace” in a way that can accommodate the liquidation of millions in what is in fact an extremely short period.

Indeed, some estimates of World War II casualties are as high as 120 million, with World War I as high as 65 million. Political scientist Rudolph Rummel, who coined the term “democide,” observes that even looking solely at the number of conflict-related deaths as a share of global population (as opposed to the absolute standard of total conflict-related deaths), the twentieth century comes out on top as compared with the four centuries immediately preceding it; he notes, too, that the conflict-related values do not “take into account the massive democides accounting for about 170 million deaths,” which largely occurred in “peacetime”—for example, the mass murders perpetrated by the Soviets and the Chinese Communists. Rummel later remarked that “this total could even reach near 341,000,000 killed.” Democidal governments have “murdered 6 times more people than died in combat in all the foreign and internal wars of the [twentieth] century.”

There are still other problems: Steven Beard argues that even if we forecast using the data from the more peaceful period following World War II, it is still not at all clear “that that this recent peaceful period represents a long-term decline in interstate war.” Beard goes on to explain that the changes we observe in the data “appear to be either temporary or random variation around a flat base probability.” The idea that we’re living in a uniquely peaceful time is simply not grounded in what we know. We should expect the waxing and waning of war deaths, and thus we don’t yet have sufficient reason to believe the current apparently-peaceful moment is sui generis. Ohio State political scientist Bear Braumoeller agrees that Pinker’s identification of a trend is premature, noting that his research found no “downward trend in the incidence or deadliness of warfare. If anything, the opposite is true.” Braumoeller says that the “escalatory propensity of war is the scariest thing [he] found” in his research, finding a fairly good chance that the world could, within the relatively near term, see a war that kills 70 million. He further points out that war follows what is called a power-law distribution, meaning that while there may be many small wars, random chance can turn one into a catastrophically deadly event—an event “unbelievably huge even by the standards of other unbelievably huge things” (emphasis added). Braumoeller’s work suggests that it would be “frighteningly easy” for humankind to walk a path that is even more violent than ever.

What, then, explains this absurd claim that the Westphalian state has ushered in a new era of peace? Simple myopia provides perhaps the best explanation: that very recent history has been particularly peaceful seems to have left some neoliberal optimists with the misimpression that this as yet short-lived peace represents a sea change. It has simply become too easy for people today—particularly those living in the rich West—to forget both the history of the modern state’s emergence and the horrors it has left in its wake. Exemplifying this myopic, overly sanguine view, Steven Pinker cites a falling rate of deaths in war over the last 25 years in support of his claim that there’s been a “long-term historical trend” of declining violence. Pinker and other such committed Pollyannas have either forgotten the horrors of the last century or are completely immune to evidence. As anthropologist Dean Falk remarked in 2017, even the decades that have passed since the end of World War II represent “a proverbial drop in the bucket compared with the five [million] to seven million years humans and our ancestors have been around.” It is furthermore important to point out that the character of war has changed in the years since World War II, with wars between the great powers being replaced by proxy wars and civil conflicts, the frequency of which have increased.

It must be granted that the Long Peace argument is certainly not without appeal, as another attempt to claim that we have arrived at the end of history. Alas, this is just too easy a story. The modern state was born of and designed for warfare, and it has delivered on the promise of its roots. As Charles Tilly notes, “Preparation for war has been the great state-building activity,” this process continuing largely without interruption for the last 500 years. Christopher W. Morris writes similarly, “The nature and scale of modern wars are made possible by the modern state, and what the future threatens may be worse than what we have already experienced.” Let us hope that Morris is wrong and that a Long Peace does in fact await us. I’m afraid I do not share Pinker’s optimism.

Those with some knowledge of ancient history might assume that the Cato Institute derives its name from the notoriously staunch ancient Roman Cato the Younger. But it does not; instead, it is a reference to Cato’s Letters, a collection of 138 essays written in England during the 18th century. 

On November 5th 1720, John Trenchard and Thomas Gordon published a letter titled Reasons to prove that we are in no Danger of losing Gibraltar, with both men writing under the pseudonym Cato. At first, their work focused on contemporary events such as the South Sea bubble, which exposed rampant corruption in the government. However, these essays quickly evolved from polemics on current events to more fundamental investigations into the nature of liberty and power. Over the next three years, the two men would publish 138 letters on a wide range of topics. They discussed the blessings of liberty, how to prevent tyranny, freedom of speech, the separation of church and state, and the right to resist tyrannical governments.

Cato’s Letters were an instant hit and became extremely popular in both England and the American colonies. Five decades later, the views encapsulated in Cato’s Letters gave American revolutionaries the intellectual ammunition needed to justify their revolt against their British oppressors.

Trenchard and Gordon’s lives

John Trenchard was born into a prominent family in 1662. He attended Trinity College Dublin (as it so happens, my own alma mater). Trenchard lived a very comfortable life; his uncle and parents left him a considerable amount of property through inheritance and he married into an even more affluent family. 

Thomas Gordon is a more obscure figure. Little is known about his life before he started writing, though was born sometime around 1691 in Scotland. Textual evidence suggests he might have attended college to study law, but this is hard to confirm. Gordon began his career writing lighthearted essays, which he compiled in 1720 into a collection entitled the Humorist, jokingly dedicated to “the Man in the Moon.” 

The Pair Meet

Gordon and Trenchard first came into contact due to the Bangorian controversy. Benjamin Hoadley, the Bishop of Bangor, denied the divine right of kings and argued in favour of freedom of conscience. Many criticised Hoadley for questioning the authority of the church and arguing that people should be free to make up their own minds on religious matters. Gordon, writing in favour of Hoadley, defended religious toleration and attacked the church’s influence on the state.

Gordon’s enthusiasm caught the eye of Trenchard, and the pair met in 1719 in London. The duo wrote a weekly pamphlet entitled The Independent Whig. This publication lasted for a year and mainly focused upon religious issues such as toleration and the separation of church and state. After writing a total of 53 essays for the Independent Whig, Gordon and Trenchard began writing for The London Journal, for which they decided to cover a broader variety of topics. 

Why the Name “Cato”?

They wrote under the pseudonym Cato, which referred to Cato the Younger, a Roman statesman from the 1st century BC who had defied the tyrant Julius Caesar. Throughout his life, Cato had been an honest, wise, and prudent statesman as well as a Stoic; he had defended traditional Roman liberties and viciously attacked corruption in the government. By the 18th-century Cato was associated with a love of liberty and a hatred of tyranny. During the fall of the Roman Republic, Cato sided with the senate against Julius Caesar. When civil war broke out, Caesar eventually overcame his foes and became the de facto Roman head of state, which brought the republic to an end. Cato committed suicide rather than accepting a pardon from Caesar, an act that was immortalized by future generations of republicans. In the 18th-century British playwright Joseph Addison wrote a play titled, Cato, A Tragedy, which became hugely popular in both Britain and the American colonies.  

By adopting Cato as their nom de plume, Trenchard and Gordon had adopted a widely recognized symbol of political dissent. It was also an appeal to public fascination with Greco-Roman antiquity that had been sparked by archeological discoveries in the preceding decades. Throughout Cato’s Letters, Trenchard and Gordon liberally quoted various classical works, showing their affinity for the ancients.But the purpose of the work was not merely to show Trenchard and Gordon’s erudition. They expressed a coherent political philosophy; indeed, the liberal views of “Cato” formed the ideological bedrock of the radical Whigs in England and would later influence the American Revolutionaries.

[From this point on I will refer to Trenchard and Gordon as Cato and as a single person for simplicity’s sake.] 

Where Does the State Come From?

The origins and ends of the state are foundational questions in political philosophy. For example, Aristotle conceptualized humans as political animals who need politics and cannot live without it, therefore for a person to fully flourish they must engage with politics. Therefore the end of the state is to promote the moral development of its citizens. English Republicans inherited a tradition of civic republicanism from writers such as Aristotle. This tradition stressed the importance of civic virtue and political participation as essential elements in creating a free republic.

This contrasted with contemporary conservatives, who believed that the authority of the state was based upon Divine right. God chose monarchs and thus we have a duty to obey their commands as representatives of God on earth. Robert Filmer’s book De Patriarcha encapsulated these conservative arguments in favour of a God-given monarchy.

For Cato, the state is not instituted to promote the moral flourishing of people. Instead, he argues that the end of the state is “temporal Felicity” or, in less fancy terms, human happiness which consists of comfort and security rather than moral or philosophical virtue. The state is not a tool for educating people on how to live; rather it is best kept as a guardian of our rights which allow us to pursue the lives we personally wish to lead while not harming or being harmed by others.

Nor is government divinely ordained; instead, it is a wholly human creation. Cato explains that “men are naturally equal, and none ever rose above the rest but by force or consent: No man was ever born above all the rest, nor below them all.” Since all men are equal, no one man has natural authority over the other. Legitimate government must then be founded on consent. Cato believed if there was to be a monarch, it ought to be a constitutional monarch. He was dismissive of theories justifying an unlimited use of arbitrary power.

For Cato, all people are born free with an inalienable right to liberty. Cato defines liberty comprehensively as “the power which every man has over his own actions, and his right to enjoy the fruit of his labour, art, industry, as far as by it he hurts not the society, or any members of it, by taking from any member, or by hindering him from enjoying what he himself enjoys.” A century before John Stuart Mill, Cato had argued in favour of what libertarians today call the harm principle, which is the idea that actions should only be limited if they harm others.

Human Nature

Cato wrote in the tradition of John Locke, who had argued thirty years before that government exists to protect life, liberty and property. Everyone has an inalienable right to liberty, but that doesn’t mean that people will not interfere and come into conflict with each other. Humanity is not naturally benevolent, kind, or altruistic. According to Cato “Every man loves himself better than he loves his whole species.” Because of this, people will have no qualms in taking advantage of others through theft, fraud or force. Even worse, “men will never think they have enough, whilst they can take more” because by nature they are greedy, acquisitive and self-centred. As Cato pessimistically explains, “Whilst men are men, ambition, avarice, and vanity, and other passions, will govern their actions…they will be ever usurping, or attempting to usurp, upon the liberty and fortunes of one another.”

A Solution to Human Nature

Unlike many of his contemporaries, Cato did not ascribe these vices solely to the men of his day. Instead, he was saying that all of humanity is the same. The essence of human nature is a passion for self-love and because this passion cannot be quelled, “men will be men, in spite of all the lectures of philosophy, virtue, and religion.” Despite this pessimistic picture of human nature, Cato believes that human nature’s depravity is useful.

Because we are selfish by our nature, if we consent to any law that limits our actions,  we expect others also to be bound by its dictates. Cato states that “it is the common interest of all, who unite together in the same society, to establish such rules and maxims for their mutual preservation, that no man can oppress or injure another, without suffering by it himself.” Our mutual fear of one another forms the basis of law, which is defined by Cato as nothing more than “checks upon the unruly and partial appetites of men.” From our desire to hold onto what is ours and our fear of others, we mutually bind ourselves to laws which keep us from infringing upon others.

Those In Power

But binding law introduces a new problem, the power of the state. If Cato is correct, is the state not just an artifice made of flawed people? Given that people are rapacious, greedy and vain, how can we trust those in power not to be the same? Cato affirms that those in power are not a different species to those who are not.  For Cato “all men would be tyrants,and do what they please.” Those in power are equally likely (if not more so) as the common person to dupe, steal, and commit violence upon those they rule over.

If power is not checked, arbitrary tyranny reigns supreme. Living under liberty is living by the rule of law that is mutually applied to all. Tyranny, on the other hand, is the unequal and ad-hoc application of laws; it is arbitrary, biased, and unfair. It is unlimited liberty for some and subordination for the rest. For Cato, tyranny is slavery, which is living “at the mere mercy of another.” Life under slavery is “a continual state of uncertainty and wretchedness, often an apprehension of violence, often the lingering dread of a violent death.” Free people must avoid slavery at all costs.

Preserving Liberty

Consistent in his realistic attitude of human nature, Cato states, “We must not judge of men by what they ought to do, but by what they will do.” Instead of expecting representatives to be virtuous, he argues we should implement institutions to safeguard fragile liberty, namely constitutional restraints, the separation of powers, and free speech. 

Constitutional Restraints

Firstly, Cato argues for constitutional restraints on state power. No matter how virtuous a person might be, power corrupts. Cato refers to lawless or unlimited power as monstrous. Human nature cannot possibly wield unlimited power with restraint,“the mind of man, which is weak and limited, ought never to be trusted with a power that is boundless.” Therefore we must put constitutional restraints on power. Cato explains that “considering what sort of a creature man is, it is scarce possible to put him under too many restraints, when he is possessed of great power.”  

Separation of Powers

Secondly, constitutional restraint means the separation of powers. By dividing power between those within the government, who possess different interests and incentives, we stop power from becoming concentrated. As Cato explains, a regime designed with separation of powers creates paranoia among state representatives, who then limit each other’s power. Cato notes that “their emulation, envy, fear, or interest, always made them spies and checks upon one another.” The separation of powers decentralizes and divides power, stopping any one person or group from completely dominating the rest.

Free Speech

Thirdly, for Cato the ability to freely criticize one’s government is “inseparable from publick liberty.” Freedom of speech is so essential that he refers to it as “the great bulwark of liberty.” Being able to criticize those in power helps rally communities to protest against encroachments upon liberty. Cato believes that if one was an aspiring tyrant, the most important first authoritarian step would be to subdue freedom of speech, silencing any dissent or opposition and creating the illusion of harmony. 

Selfish Patriotism

But what if all of these methods of checking power do not work, what then? Cato believed that the people would rise up to resist the encroachment of illegitimate power. But how could this be the case as Cato states himself that “I think it impossible for any man to act upon any other motive than his own self-interest.” How could anyone expect patriotic and virtuous civic resistance if people are so selfish?

It is because Cato believes that the selfishness inherent in human nature was a crucial element for preserving liberty.  

Government exists to defend people’s rights and property. Therefore it is quite simple to differentiate a good from a bad government. As Cato says, “Every Ploughman knows a good Government from a bad one, from the Effects of it; he knows whether the Fruits of his Labour be his own, and whether he enjoy them in Peace and Security.” The people are to be trusted in their judgements given that what they are deciding upon is a matter for common sense.

Because it is simple to tell when the government is acting poorly, Cato believes people will rise and defend their rights when they are violated. He does not believe they will do this out of an abstracted vision of patriotism, but, instead, out of their own self interest. In the context of the people, he explains that “the Security of their Persons and Property is their highest Aim.” When people’s rights are violated, Cato believes they would “make Virtue of their present anger” and protest and hound officials out of office.  If he had heard JFK’s famous aphorism “ask not what your country can do for you — ask what you can do for your country” he would have scoffed. Cato did not rely upon virtue to preserve liberty but upon realistic self-interest. 

When all Else Fails, Resist Tyranny

According to Cato,“no government ought to take away men’s natural rights, the business and design of government itself being to defend them.” But what if the government deprives people of their natural rights, despite all institutional safeguards and the protests of self-interested citizens? In this final case, Cato advocates for resisting tyranny; the people must decide, according to their own consciences, whether or not the tyrannical actions justifies revolt. Since government is legitimated by the trust of the people, it can also be dissolved when it loses that trust. According to Cato we all have a natural right to oppose tyrannical government and to defend our liberty.

However, Cato was not an anarchist; he believed that we need a government in order to preserve our natural rights. However, a government means power and according to Cato “power is like fire; it warms, scorches, or destroys, according as it is watched, provoked, or increased.” The dilemma that Cato wished to solve was how liberty could coexist with power. Liberty cannot exist without power, but as we have seen throughout history, power can exist without liberty.

The Legacy of Cato’s Letters

The publication of Cato’s Letters ended after the British government convinced the London Journal to discontinue the troublesome series. In their own day, Cato’s Letters attracted both a great deal of praise and criticism. But however famous Cato’s Letters were in Britain, they became an even larger hit in the American colonies, where Gordon and Trenchard became household names. Historians such as Caroline Robbins, Bernard Bailyn, and Robert Shalhope have commented upon the frequency of Cato’s Letters appearing both in libraries and private collections throughout the colonies. Some historians have argued he was as influential as John Locke on the revolutionary generation.

Cato’s writings appealed greatly to the colonists, including several future founding fathers, especially the letters on freedom of religion, free speech, and resisting tyranny. A young Benjamin Franklin, writing under the pseudonym Silence Dogood, liberally quoted Cato’s Letters on free speech. William Livingston, before he became the governor of New Jersey, founded a journal named the Independent Reflector, a reference to Trenchard and Gordon’s Independent Whig. When Josiah Quincy II, a Sons of Liberty member and good friend of John Adams, died, he left his son his collection of books which he believed contained “the spirit of liberty”; among them was Cato’s Letters. John Adams himself said that the writings of Trenchard and Gordon had become “fashionable reading” by 1770.  

Sadly, Cato’s Letters are rarely read outside of academic circles. Yet the letters are passionate, insightful, and still deeply relevant. Cato’s observations on the selfishness of human nature and how it can be fruitfully channeled are timeless and will appeal to anyone who disdains the high minded yet empty rhetoric of contemporary politicians. Thankfully, Cato’s Letters can all be read online for free on the Liberty Fund’s project the Online Library of Liberty.

Cato’s Letters was as much a work of political philosophy as it was of political science. Political philosophers such as John Locke set out a framework for natural rights and government by consent. Cato contributed to this tradition by delving into the practicality of how to maintain liberty in a world where the scales are tipped in favour of tyranny. By taking the approach of assuming the worst of people, Cato aimed to create a rational framework for governance.

It should now be clear why the Cato Institute was named after Gordon and Trenchard’s work. The themes that run throughout Cato’s Letters—inalienable rights, harnessing self-interest, and preserving liberty through limited government—are core libertarian affirmations three centuries later. Unfortunately, Cato’s observations about state power and corruption remain all too relevant to the modern reader.