A persistent situation has developed among the current political and economic climate that forebodes of large potential problems in the future.  This situation finds its source in a phenomenon that we refer to as “Evading the Obvious.”  The way this effect manifests itself is a stalwart refusal to recognize and adapt to the economic realities.  This issue is modestly problematic when constrained to people and absolutely catastrophic when employed by the political authorities.

The reason for this is because people are limited in the extent to which they can impact the overall marketplace.  However, political authorities can establish highly destructive rules and regulations that have the ability to cripple an otherwise vibrant economy.  Of the many pitfalls and problems that public officials can find themselves caught up in, there are three main principles that drive the most evasion of obvious economic truths.  These principles are that spending isn’t free, profits and losses are equally important, and that prices communicate knowledge.

Reality #1: Spending Isn’t Free

Against the backdrop of huge deficits in both the US and Euro-Zone, this truism cannot possibly be expressed poignantly enough.  Every time that any person, business, or government spends money, that money must come from somewhere.  In the cases of people or businesses, the spending frequently comes from either savings or credit.  In the case of governments, it can also come from ‘monetary expansion’ or simply printing new money.  In all cases, it is not free.

The world is a place where resources are limited.  These resources are often represented in terms of money, but there is no scheme that can ever be devised to create new resources out of nothing.  When savings are spent, those savings are not available for spending on anything else.  When money is borrowed, it must be paid back … with interest.  When new money is created, it devalues the money already in circulation.  Any time that money is spent, it represents a choice to bear a certain cost in exchange for a certain outcome.

Thus, the fundamental question for people, businesses, and governments is one of whether their money/resources are being spent in the most effective way possible.  It is certainly true that the notion of effectiveness is inherently subjective.  However, it is also true that when people are spending their own money, they do so much more effectively than people spending other people’s money.

When investors borrow to build a new factory, they do so because the rate of return from the factory is expected to exceed the cost of interest on the loan.  When people spend their savings, they do so because they value what they are buying greater than having a certain amount of money available to spend on something else.  When the government borrows or prints money to spend on “stimulus” projects, the net result is to either create or destroy value.  Projects more valuable than the alternative uses create value, and projects less valuable than the alternatives destroy value.

When one considers that political decisions are made by people who must be re-elected at regular intervals, and who are spending other people’s money, it is not difficult to see how large sums of money are spent on value destroying projects that benefit a particular political constituency.  If we seek economic growth, then net spending needs to be concentrated in areas that will generate more value than the (full) cost of the resources.  It is not possible to create affluence through borrowing to spend on value destroying projects.

Reality #2: Profits and Losses are Equally Important

Another key concept that seems to have been lost over the past five years is the importance of losses in a free market.  Profits exist to encourage innovation and risk-taking, but the risk of loss must be present to encourage prudence, and to weed-out under-performing entities so that the capital can be deployed more profitably elsewhere.  Problems emerge when the government seeks to insulate certain businesses from the impact of losses.  When profits are guaranteed, and losses are bailed out, the result is highly inefficient entities that funnel benefits to their insiders.

The reason for this is because in a competitive market, businesses who take excessive risk or have incompetent management will eventually go bankrupt.  In this scenario, the assets of the business will be sold off at a discount to other entities who behaved more responsibly.  The profit and loss system systematically channels resources from under-performing entities to those who are more effective and more prudent.

The problem that many people see in this process is the ‘creative destruction’ aspect of economic growth that pushes some companies out of business while new enterprises emerge and grow.  In response to this churn of business fortunes, many companies seek protection of their business, while people seek projection of their jobs.  Unfortunately, all of this creates a barrier against the systematic re-allocation of resources toward their most effective use.

Reality #3: Prices Communicate Knowledge

The third, and least well understood of the fundamental realities is that prices communicate knowledge.  When prices for a particular product or service are high, it signals to entrepreneurs that there is an opportunity for profit.  This opportunity attracts new competitors, and this competition often places downward pressure on the prices.  Similarly, when prices are pressed down low by weak demand relative to the amount of supply in the market, it is a signal to the marketplace that there are too many entities in competition with one another.

The problem that many government’s run into regarding prices is their attempts to manipulate prices for political reasons.  Almost every politician in the world will complain about the high price of health care.  However, very few ask why health care costs are so expensive.  Much of the reason comes from the fact that most people access health care through insurance plans where they do not personally bear the costs of care.  This means that they have no incentive to economize, and often consume much more care then they would if they were directly responsible for the costs.

This phenomenon bears itself out over and over in nearly every corner of the economy.  Most of the people who are upset about prices fail to realize that the prices are communicating valuable information.  Instead, they accuse the business charging the prices of ‘greed’ when the business is really just a messenger of market realities.  High gasoline prices stem from a relative shortage of petroleum that drives up market prices.  These market prices are created by other people who are competing for the same petroleum.  The reason the prices rise is because exploration of petroleum has not kept pace with demand.  Thus, the problem is not one of rapacious oil companies, but regulations that constrain supply.  Nobody is able to maintain high prices for long when competing against somebody else who is willing to sell for less.

As we have seen, the phenomenon of “evading the obvious” has a distinctive impact on each individual’s personal, professional, and financial life.  The impact of these fallacious misunderstandings escalate as the scope of influence grows.  As each of us go throughout our own lives, we must stay aware of the fundamental realities so that we can learn to recognize opportunities and take intelligent action.  It is only through embracing the obvious and understanding the reality that we will be able to create a life of happiness and fulfillment for ourselves and the people we care about.

 

A curious aspect of the human condition is how we are much better at understanding scarcity than abundance.  Our minds naturally gravitate toward what we do not have, instead of noticing what we possess.  Some observers have astutely noticed that every abundance creates a new scarcity.

However, it is an interesting thought experiment to consider what our life would be like if the things that we currently consider to be the most scarce and expensive suddenly became abundant and cheap?  How would our perceptions of value and our priorities shift?  What things that we currently ignore would we begin to shift our attention toward?

The interesting twist is that this transition has already happened in the realm of information.  Before the advent of the internet, information was scarce, expensive, and difficult to acquire.  As the global online marketplace emerged, it created a situation where a literal wealth of information was available to all people in all places.  Suddenly there was a flattening of access to a valuable commodity that had previously been the exclusive property of some, but almost completely unavailable to others?  How has our life changed since we all gained access to the insights and information of the internet?  What new things have we been able to learn?  What new insights have we been able to uncover?  How has our life been enriched?

Of course, there will certainly be those who point out the abundance of low quality content that prevails on the internet.  These observations are completely correct, but are almost totally irrelevant.  The presence of great abundance almost always means that the abundant resource will be wasted in some manner or another.  Since many people grew up in a world of expensive information, it feels unnecessarily wasteful to have low quality information floating around the internet.  The thing that most people miss is how this apparent waste is the laboratory out of which we gain new ideas and insights.

Growth and development is not a linear process.  It is a jagged line that moves up and down, backward and forward.  In order for great new things to happen, there must be the appropriate conditions for the new innovations to emerge.  Abundance allows those conditions to occur without the necessity of being planned or funded by a central authority.  By extension, this means that more experimentation happens with new ideas, and more innovative breakthroughs are discovered.  Of course, this also means that many seemingly useless ideas will be advanced.  However, this apparent ‘waste’ is actually a critical part of innovation and advances.

What Does Abundance Mean To Me?

An important point for us to consider as individuals is the impact to our persona lives if the things that we found the most scarce such as money and time, suddenly became ubiquitously available?  What would you do with your life if you never needed to work in order to live?  What would your life be like if people lived to be 500 years old?  How would your priorities change if a scarcity of today turned into an abundance of tomorrow?  What things that you neglect today would you notice tomorrow?

The reason why this thought exercise is important is because it helps us to clarify what we truly consider to be important.  There are certainly some people who would allow themselves to become idle if they no longer needed to earn money to live, but there are many others who would endeavor to help others acquire the blessings that they have come to enjoy.  When we no longer have to spin our wheels just to get by, it allows us pause to search for meaning.

The clincher is that most people seek meaning at some point in their life, and many wait for far too long before taking the intellectual journey.  This is not to say that we should neglect the things that we need to do today such as earn an income or care for our families … only to say that we should also think of the things that we will pursue when scarcity turns into abundance.  In truth, it frequently comes to pass that the things we perceive as being scarce today will be less scarce in the future, and may possibly be available in great abundance.

Each of us should take a moment to think about the things that we would want to do, and the person that we would want to be if the constraints of our present life were removed.  The power of this thought process is that it underlines how there is very little stopping us from working toward that goal today.  We may not live in a world with no scarcity, but we also do no live in a world of total scarcity.  In this way, we literally have the ability to shape ourselves into the people that we want to be tomorrow … and we are able to start today.

 

What human motivation gets the most wonderful things done? It’s really a silly question, because the answer is so simple. It turns out that it’s human greed that gets the most wonderful things done. When I say greed, I am not talking about fraud, theft, dishonesty, lobbying for special privileges from government or other forms of despicable behavior. I’m talking about people trying to get as much as they can for themselves. Let’s look at it.

This winter, Texas ranchers may have to fight the cold of night, perhaps blizzards, to run down, feed and care for stray cattle. They make the personal sacrifice of caring for their animals to ensure that New Yorkers can enjoy beef. Last summer, Idaho potato farmers toiled in blazing sun, in dust and dirt, and maybe being bitten by insects to ensure that New Yorkers had potatoes to go with their beef.

Here’s my question: Do you think that Texas ranchers and Idaho potato farmers make these personal sacrifices because they love or care about the well-being of New Yorkers? The fact is whether they like New Yorkers or not, they make sure that New Yorkers are supplied with beef and potatoes every day of the week. Why? It’s because ranchers and farmers want more for themselves. In a free market system, in order for one to get more for himself, he must serve his fellow man. This is precisely what Adam Smith, the father of economics, meant when he said in his classic “An Inquiry Into the Nature and Causes of the Wealth of Nations” (1776), “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” By the way, how much beef and potatoes do you think New Yorkers would enjoy if it all depended upon the politically correct notions of human love and kindness? Personally, I’d grieve for New Yorkers. Some have suggested that instead of greed, I use “enlightened self-interest.” That’s OK, but I prefer greed.

Free market capitalism is relatively new in human history.

Prior to the rise of capitalism, the way people amassed great wealth was by looting, plundering and enslaving their fellow man. Capitalism made it possible to become wealthy by serving one’s fellow man. Capitalists seek to discover what people want and then produce it as efficiently as possible. Free market capitalism is ruthless in its profit and loss discipline. This explains much of the hostility toward free market capitalism; some of it is held by businessmen. Smith recognized this hostility when he said, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” He was hinting at government-backed crony capitalism, which has come to characterize much of today’s businesses.

Free market capitalism has other enemies — mostly among the intellectual elite and political tyrants. These are people who believe that they have superior wisdom to the masses and that God has ordained them to forcibly impose that wisdom on the rest of us. Of course, they have what they consider to be good reasons for restricting liberty, but every tyrant who has ever lived has had what he considered good reason for restricting liberty. A tyrant’s agenda calls for the attenuation or the elimination of the market and what is implied by it — voluntary exchange. Tyrants do not trust that people acting voluntarily will do what the tyrant thinks they should do. They want to replace the market with economic planning and regulation.

The Wall Street occupiers and their media and political allies are not against the principle of crony capitalism, bailouts and government special privileges and intervention. They share the same hostility to free market capitalism and peaceable voluntary exchange as tyrants. What they really want is congressional permission to share in the booty from looting their fellow man.

Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

COPYRIGHT 2012 CREATORS.COM

Article source: Creators.com

 

In the midst of the current sluggish economy that has engulfed the government and business sectors in an avalanche of difficulty and uncertainty, there is a great temptation to ‘curse the darkness’ by casting blame.  It is certainly true that the current financial situation has plenty of blame to go around.  Typically, entities such as “Wall Street Greed” and “Irresponsible Government” are dogs that frequently get kicked.  However, there is a very large elephant that frequently seems to be overlooked.  That elephant is personal responsibility.

The reason why personal responsibility plays such an important role in the current economic situation is because it is impossible for a financial crisis to develop unless there are a LOT of people using credit to live beyond their means.  The crisis develops when the people who have been living on borrowed money can no longer make the payments.  Once the borrowers stop paying the creditors, there is suddenly a crisis.  (Note that the crisis is the proverbial ‘hangover after the party’ since it is necessarily preceded by people living high on borrowed money.)

This phenomenon highlights a curious and unflattering corner of the human condition.  Namely that people are more eager to “curse the darkness” and blame somebody else for their problems than seek a path of action that they can personally take to influence their personal situation.  This is not to say that all things are all our fault.  Quite to the contrary, there are many parties who have earned a considerable measure of blame.  However, the collective malfeasance of various players on the economic stage is not within our direct control.  Taking personal responsibility for our personal decisions is of paramount importance because our actions are the primary points of influence that we have control over in regard to our personal, professional, and financial well being.  The only way that our life will improve is if we take action. Past precedent has most clearly shown that the so-called guardians of our financial well being will look after their own interests before ours.

An unfortunate and disappointing part of the current economic situation is that the ‘solution’ being sought isn’t one of returning to responsible spending and lending practices . . . no, it is the exact antithesis of responsibility referred to affectionately as a ‘bailout.’  The extreme danger posed with the ‘bailout’ solution is that it simply subsidizes the irresponsibility that caused the problem in the first place.  My greatest fear with this ‘bailout’ mindset is that constantly rewarding irresponsibility can only lead to an increase in irresponsibility by more and more people until the problems eventually get so big that it is beyond of the ability of the government to bail out.

Simple arithmetic clearly demonstrates that the extent of government financial obligations will soon exceed its financial resources by an impossibly large margin.  This will lead to a situation where many people receive far less than they have been promised for their benefits, pensions, salaries, and many other varieties of services.  This will compel many of them to “curse the darkness” as well, saying that the problem comes from taxes not being high enough on the “rich” or from unfair foreign competition, and from a variety of other sources.  In order to endure this ensuing storm of financial darkness, it is completely necessary that we take action now so that the financial well being of our families are safeguarded.

Ultimately, there is only one way to permanently restore stability.  That is to retreat from blaming other people for the financial problems that we the people have created.  Put another way . . . instead of cursing the darkness, try lighting a candle.

 

Ever wonder why so many children of entrepreneurs become entrepreneurs themselves?

One reason is that our genes influence the decision to start a business. I don’t mean that figuratively; I mean it scientifically. With colleagues at Kings College in London and the University of Cyprus, I have been investigating how genes affect entrepreneurship for more than five years. Through studies of twins, and more recently, through molecular genetics laboratory research, we have found that genes influence whether people start businesses, are self-employed, or have owned their own companies. Our research shows that the same genetic factors influence the tendency both to see business opportunities and to start companies, as well as how much money self-employed people earn.

At this point you may be wondering how researchers could determine that there’s a genetic component to entrepreneurship. It’s actually pretty straightforward.

With twins, it’s a matter of comparing the choices of the two siblings. Identical twins share the same genetic composition, while fraternal twins have half in common. If pairs of identical twins make more similar choices, such as starting a business, than pairs of fraternal twins, then genetics must affect the choices, as long as a few scientific assumptions hold. In the molecular genetics research, we examine the different versions of genes people have and see if entrepreneurs are statistically more likely to have one version over another.

There are probably many ways genes influence whether or not we become entrepreneurs, but in the twins research, we have found initial evidence that one route clearly is through our personalities. The same genes that affect whether we are extroverted, open to experience, disagreeable and sensation seeking also influence our decision to start our own business. Furthermore, the same genes that influence the tendency to be open to experience also affect the tendency to identify new business opportunities.

Before you start worrying that this research will usher in the world portrayed in the science- fiction thriller Gattaca, we are a long, long way from any practical application of these findings. That will come only after many years of replicating the findings.

Moreover, there’s no single gene or even set of genes for entrepreneurship. Our genes influence broader categories of behavior, such as whether we do things that involve a great deal or small amount of novelty. While entrepreneurship might involve pursuing novelty, so do many other human activities.

Further complicating the issue, hundreds of genes probably influence whether or not we become entrepreneurs. Thus far in the molecular genetics research, we’ve found initial evidence for just one of them–a version of a gene for a receptor for the brain chemical dopamine.

Geneticists have speculated that sensation-seeking people have versions of dopamine receptor genes that require more stimulating experiences in order to produce a given amount of dopamine in the brain. To get the higher level of stimulation, those people are more likely to engage in sensation seeking activities, including starting businesses.

While your genes influence whether or not you become an entrepreneur, experience matters, too. Genes don’t determine anything you do; they merely influence what you do in the same way your life experiences do. Just as receiving a financial windfall increases your odds of starting a business, so too does having a particular genetic makeup. But just as some people without a penny to their name start companies, so too can people without the genetic make-up associated with entrepreneurship.

While the research so far is limited, it does mean that when you describe someone as a born entrepreneur, you really are onto something.

Article source: Entrepreneur.com

 

It used to be common for people to urge us to learn “the lessons of history.” But history gets much less attention these days and, if there are any lessons that we are offered, they are more likely to be the lessons from current polls or the lessons of political correctness.

Even among those who still invoke the lessons of history, some read those lessons very differently from others.

Talk show host Michael Medved, for example, apparently thinks the Republicans need a centrist presidential candidate in 2012. He said, “Most political battles are won by seizing the center.” Moreover, he added: “Anyone who believes otherwise ignores the electoral experience of the last 50 years.”

But just when did Ronald Reagan, with his two landslide election victories, “seize the center”? For that matter, when did Franklin D. Roosevelt, with a record four consecutive presidential election victories, “seize the center”?

There have been a long string of Republican presidential candidates who seized the center — and lost elections. Thomas E. Dewey, for example, seized the center against Harry Truman in 1948. Even though Truman was so unpopular at the outset that the “New Republic” magazine urged him not to run, and polls consistently had Dewey ahead, Truman clearly stood for something — and for months he battled for what he stood for.

That turned out to be enough to beat Dewey, who simply stood in the center.

It is very doubtful that most of the people who voted for Harry Truman agreed with him on all the things he stood for. But they knew he stood for something, and they agreed with enough of it to put him back in the White House.

It is equally doubtful that most of the people who voted for Ronald Reagan in his two landslide victories agreed with all his positions. But they agreed with enough of them to put him in the White House to replace Jimmy Carter, who stood in the center, even if it was only a center of confusion.

President Gerald Ford, after narrowly beating off a rare challenge by Ronald Reagan to a sitting president of his own party, seized the center in the general election — and lost to an initially almost totally unknown governor from Georgia.

President George H.W.

Bush, after initially winning election by coming across as another Ronald Reagan, with his “Read my lips, no new taxes” speech, turned “kinder and gentler” — to everyone except the taxpayers — once he was in office. In other ways as well, he seized the center. And lost to another unknown governor.

More recently, we have seen two more Republican candidates who seized the center — Senators Bob Dole in 1996 and John McCain in 2008 — go down to defeat, McCain at the hands of a man that most people had never even heard of, just three years earlier.

Michael Medved, however, reads history differently.

To him, Barry Goldwater got clobbered in the 1964 elections because of his strong conservatism. But did his opponent, Lyndon Johnson, seize the center? Johnson was at least as far to the left as Goldwater was to the right. And Goldwater scared the daylights out of people with the way he expressed himself, especially on foreign policy, where he came across as reckless.

On a personal note, I wrote a two-line verse that year, titled “The Goldwater Administration:”

Fifteen minutes of laissez-faire,

While the Russian missiles are in the air.

Senator Goldwater was not crazy enough to start a nuclear war. But the way he talked sometimes made it seem as if he were. Ronald Reagan would later be elected and re-elected taking positions essentially the same as those on which Barry Goldwater lost big time. Reagan was simply a lot better at articulating his beliefs.

Michael Medved uses the 2010 defeat of Tea Party candidates for the Senate, in three states where Democrats were vulnerable, as another argument against those who do not court the center. But these were candidates whose political ineptness was the problem, not conservatism.

Candidates should certainly reach out to a broad electorate. But the question is whether they reach out by promoting their own principles to others or by trying to be all things to all people.

To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate Web page at www.creators.com. Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com.

COPYRIGHT 2011 CREATORS.COM

Article source: Creators.com

 

The “Occupy Wall Street” protests of recent months has placed a lot of attention on income inequality and the reviled top 1% of earners.  The protestors loudly proclaim themselves to be a part of the 99%, and profess all sorts of beliefs about what should be done to remedy this perceived injustice.  Predictably, the desired remedies take the form of government financed subsidies.  As the protests have persisted, they have become notable for the disgusting state of protest areas, the deplorable behavior of some protestors, and the lack of a coherent message.  This has attracted all of the usual pro-socialist protesters to the movement, and steadily pushed it further away from the mainstream on its way to the fringe.

How About the “United States” 1%?

To the extent that there is a message from “Occupy Wall Street” that message seems to be that the top 1% are too affluent relative to the rest of the population.  The idea of income and wealth disparities have garnered quite a bit of media attention over the past few months, so it is reasonable to make a deeper examination of what the top 1% really means.  Fortunately, one of the economists from the World Bank named Branko Milanovic has done a considerable amount of research on the subject of inequality.

So how much do you have to earn to be in the top 1% of US earners?

Answer: $380,ooo per year

Many people are likely to reply that $380,000 is a lot of money and that a lot of the people earning those high incomes got them because of inside connections with the government to rig the game so that they have an unfair advantage.  However, there is an important distinctions that need to be made.  Not everybody in the top 1% got there through graft and corruption.  Many are owners of productive businesses, innovators, creators, entertainers, and people who generate otherwise valuable products and services.  If graft and corruption are the problem, it would make much more sense to protest against graft and corruption instead of protesting against the fact that some people have succeeded in generating high levels of income.

As far as having an unfair advantage is concerned, there is certainly credit to the argument that certain people have advantages that other people do not enjoy.  In Milanovic’s work, he calculated that 60% of global income disparity is explained by where a person is born.  To many people it is painfully obvious that some folks have more advantages than others, and that this is fundamentally unfair.  Because of this, some believe that the government should take resources away from those that produce the most so that they can be re-distributed to those who have not had as many advantages and produce very little.

How about the “Global” 1%?

This is where the conversation gets really interesting.  With global affluence being even more heavily skewed than the United States, it is reasonable to extend the analysis out to the whole world.  Assuming that one fundamentally believes in equality, then it should stand to reason that the top 1% of the world’s largest economy is too narrow of a sample.  What happens when we look at the whole world as our sample?  How does that change the dynamics of the discussion?

So how much do you have to earn to be in the top 1% of global earners?

Answer: $34,000 per year

Thus, it turns out that most of the people who profess to be in the (United States) bottom 99% are actually in the (Global) top 1%.  Ironically, the very people who are protesting against domestic inequality have themselves benefit greatly from global inequality.  If the philosophy of re-distribution is suitable for inequality within a country, it should stand to reason that it is suitable for a global scale?

Of course, this is where the self-centered hypocrisy of many protestors comes to bear.  The overwhelming majority of people protesting against domestic inequality have absolutely no interest in making intense personal sacrifices to remedy global inequality.  By expanding the scope of the debate, it becomes much more clear what is truly motivating the discussion.  The protestors have no interest in equality … otherwise they would be advocating for ‘global’ equality, which would require that they make sacrifices.  They are using equality as a shill to advocate for extracting resources from high producers.

The Fixed Pie Fallacy

The principal issue underlying the context of these conversations is a fundamental fallacy that believes the world’s resources are a fixed pie, and that this pie is divided up into “haves” and “have not’s” by some autocratic power structure.  When viewed through this fallacious lens, the answer seems to be one of simply re-distributing the pie.  However, all of the things that are consumed must first be produced.  Typically, the people who enjoy the most wealth and income are the ones who produce the most.  So it stands to reason that when the rewards of being productive are reduced or eliminated, there will be less production.

Unfortunately, government policies and financial markets have created a situation where many of the most highly compensated people engage in activities that produce very little in terms of real output.  Exploiting subsidies, regulatory protection, and market arbitrage can produce high incomes, but does relatively little to increase overall output.  It makes complete sense that these avenues of resource extraction without commensurate real production should be sought out and eliminated.  The free market is about rewarding real production and innovation.  The phrase “crony capitalism” is an oxymoron … capitalism is about competition.  the only way cronies can be rewarded is when a political authority is impeding the competitive market.

This is where the ‘real’ solution to the global inequality can be found.  Namely that emphasis should not be placed on how to extract more resources from those who are productive, but that emphasis should shift toward finding ways to help those at the bottom become more productive themselves.  Put another way, it is much better to focus on growing the whole pie instead of focusing on who has the biggest piece of the existing pie.

Envy Economics

Unfortunately, encouraging real productivity isn’t high on the priority list for most politicians.  The reason is because promoting free markets doesn’t deliver many votes.  There’s much more political mileage to be gained from higher taxes, more government subsidies, and higher regulations than the opposite.  The economic pie grows the most when tax rates are low, exemptions are low, regulations are light, and government intervention is modest.  However, high tax rates mean that you can lobby for campaign contributions from businesses and individuals who want deductions and exemptions.

Empirical studies have shown that the net tax rate paid barely changes over time, regardless of what marginal rate is published.  When rates are high, politicians can sell exemptions for campaign contributions.  This results in very little net tax revenue but a vast increase in net political contributions.  Light regulation promotes growth, but lobbying groups always prefer more regulation that benefits their contributors.  Most workers would be better off with a robust job market than government subsidies, but it’s much easier to take credit for subsidies than for a job market.

In the end, economic well-being on both the national and global scale must come from productivity.  The only sustainable way to increase the affluence of the people at the bottom is to help them become more productive.  Put another way, it is much more beneficial to help the people at the bottom climb up than it is to target the people at the top and bring them down.

 

Now that Newt Gingrich has become the latest in a series of Republican front-runners, he is getting the kinds of scrutiny and attacks that have done in other front-runners.

One of the issues that have aroused concern among conservative Republicans is that of amnesty for illegal immigrants, especially after Gingrich said that it would not be “humane” to deport someone who has been living and working here for years.

Let’s go back to square one. The purpose of American immigration laws and policies is not to be either humane or inhumane to illegal immigrants. The purpose of immigration laws and policies is to serve the national interest of this country.

There is no inherent right to come live in the United States, in disregard of whether the American people want you here. Nor does the passage of time confer any such right retroactively.

The usually sober and thoughtful Wall Street Journal, on issues other than immigration, outdoes Newt Gingrich’s claim that it would not be “humane” to deport illegal immigrants who have been living here a long time. A Wall Street Journal editorial says that it would be “psychotic” to do so.

“No one honestly believes the government should or will mount a nationwide manhunt to deport millions of people,” according to the Wall Street Journal.

What we have today is virtually the opposite of that. Cities that openly proclaim themselves “sanctuaries” for illegal immigrants put their own policemen under strict orders not to report illegal immigrants to the federal authorities, with the result that illegal immigrants who have committed crime after crime are free to stay here and commit more crimes, including murder.

You don’t have to launch a “manhunt” when a known criminal is also a known illegal alien. What many local policies have done has been to virtually put illegal aliens in a witness protection program.

The more doctrinaire libertarians see the benefits of free international trade in goods, and extend the same reasoning to free international movement of people.

But goods do not bring a culture with them. Nor do they give birth to other goods to perpetuate that culture.

Why do people want to come to America in the first place? Because America offers them something that their native countries do not. This country has a culture which has produced a higher standard of living and a freer life than in many other countries.

When you import people, you import cultures, including cultures that have been far less successful in providing decent lives and decent livelihoods. The American people have a right to decide for themselves whether they want unlimited imports of cultures from other countries.

At one time, immigrants came to America to become Americans. Today, the apostles of multiculturalism and grievance-mongering have done their best to keep foreigners foreign and, if possible, feeling aggrieved. Our own schools and colleges teach grievances.

European countries have learned the hard way how massive imports of a foreign culture can undermine your own culture, polarize your population and create internal dangers that are irreversible. Victor Davis Hanson’s chilling and insightful book “Mexifornia” shows similar patterns in California.

Moreover, in an age of terrorism, everyone who comes across the border from Mexico is not Mexican. It is the height of irresponsibility to leave that border open and the people who cross it a protected group. Punishing employers who hire illegals is punishing an accessory to an illegal act more harshly than the one who committed the illegal act in the first place.

As for Newt Gingrich, his position on immigration is just one of the items in the “baggage” he has to overcome. But what the voters have to overcome is an insistence on a perfect candidate. Ronald Reagan, after all, supported an immigrant amnesty bill, but that did not prevent him from being a great president otherwise.

A Republican Congress would be unlikely to make that mistake again, even if a Republican president wanted to. The big question for 2012 is whether Republicans will win Congress and/or the White House. If Democrats win Congress and the White House in 2012, amnesty is virtually certain, along with other disasters.

To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate Web page at www.creators.com. Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com.

COPYRIGHT 2011 CREATORS.COM

Article source: Creators.com

 

During the Thanksgiving season, many people reflect on all of the things in their life that they are thankful for.  This is a time when people are especially mindful of all the blessings that we enjoy in our lives.  For those of us who are fortunate enough to live in the developed world, there are great material blessings that are available in abundance.  Of course, the vast abundance available in the contemporary world has resulted in a crisis of sorts … a crisis of abundance.

This crisis results from the fact that vast abundance renders us blind to the blessings of our life when they are placed in contrast against those who have been fortunate enough to amass more wealth than us.  In this situation, we lose sight of all that we have by focusing on all that we don’t have.  In the midst of this abundance crisis, we lose track of something else.  This important factor is that many of the most important things in life are not material in nature and cannot be measured.

In this way, we can become blind not only to our material blessings, but the virtues in life that cannot be measured.  Things such as family, friends, cherished relationships, and treasured experiences are all highly important factors of a full and happy life.  The unfortunate reality is that an abundance crisis can invade many facets of our life, causing the things that we do not have to blot out the many blessings that we are fortunate enough to enjoy.  The critical skill for us to master is that of appreciating the blessings we have, while avoiding the temptation to resent the good fortunes of others.

What About the World’s Problems?

This philosophy of gratitude causes some people to wonder whether they should ignore all of the world’s problems while they are being thankful for their life’s blessings?  To this sentiment, one must ask whether our worrying about the world’s problems brings them any close to being solved?  This is not intended to be an excuse for us to disengage from the world, but as an exhortation to elevate ourselves from worrying about the world’s problems to actually doing something that helps.

The reciprocal expression of thankful gratitude is a genuine desire to take actions that are within our power to help those less fortunate than ourselves.  In this way, an abundance crisis can be turned into an abundant opportunity. This abundant opportunity plays out in our daily lives as we have the chance to do things both large and small that help others.

Another frequent response to this philosophy is an objection concerning the civic responsibility of voting.  Specifically that paying keen attention to the news events of the day is necessary to be an informed citizen.  Furthermore, many would argue that their voting activity is the method by which they express their desire to help those less fortunate.  However, we must ask ourselves whether an opaque vote really represents our best efforts to help other people, or if it represents a shield behind which we hide as a means of convincing ourselves that we do not need to take any more action?

Our abundance opportunity should not be stifled by a civic vote in which we are a single anonymous player among many other people in the extended marketplace.  Each of us should avert the abundance crisis by living a life of gratitude that expresses itself in actions that help other people improve their personal, professional, and financial lives.  Ultimately, we each have a choice to make with each passing day.  We can decide to do things that will help, or decide to do nothing.  The decisions we make shape the taxonomy of our future.  As each day goes by, make sure that the decisions you make are in concert with the future that you wish to create.

 

There ain’t no such thing as a free lunch. Everything demanded by the Occupy Wall Streeters — whether “free” health care, a “world-class education” or a “guaranteed living-wage income regardless of employment” status — costs money.

When a CEO makes a lot of money in the private sector, it is because his company — rightly or wrongly — values that CEO’s services at that price. To say it is “not right” that a CEO makes (fill in the blank) times more than the janitor is to say it is not right for the marketplace to set wages. If the marketplace ought not set wages, then who or what should?

Most people work for the private sector, which cannot exist without profit.

Is the OWS objection to bank bailouts on the grounds that government should not protect businesses from the consequences of their actions? Or is the objection that bailouts should be for everybody?

We already have a huge welfare state, with entitlements — Social Security, Medicare and Medicaid — the biggest expenditure of the federal budget. Europe’s welfare state is larger, with a slightly smaller “gap” between the rich and the poor. Yet its citizens also take to the street to denounce inequality. Puzzling, isn’t it?

No one can legally ask about the immigration status of a public school student, so Americans and non-Americans, including illegal aliens, receive a K-12 public education at taxpayers’ expense.

Per-pupil spending for public education increased 49 percent from 1985 to 2005. Community colleges are cheap, and many states guarantee a junior college graduate admission to a public four-year college.

The physical advantage that men possess over women is an increasingly small advantage — given the decline of labor-intensive jobs and the technology that makes it easier for machines to do hard, dangerous, repetitive work.

There are more tenants than landlords, which thus exemplifies the stupidity of “rent-control” laws. Rent-control laws disproportionately benefit the non-poor because the elite pull strings, work the system and are better connected than the poor. All of this matters when items of scarcity (in this case, apartments) are dispensed by government dictates rather than through prices.

Government possesses no money of its own. It raises money by taxing, by borrowing or by printing.

The bigger the government, the smaller the private sector.

Individuals can spend their money more wisely, efficiently and more humanely than can government.

People value and spend their money more wisely when they acquire it by their own efforts — also known as work. There are real-world, direct consequences on you for squandering your own money, as opposed to when government squanders the money of its people.

Government employees enjoy job security unknown in the private sector and are often paid more than their private-sector counterparts. Greed?

People spend their money more humanely because they won’t waste as much of it. Consider that to deal with “the poor,” the federal government has a vast array of agencies, programs and policies. But only about 30 cents of each dollar designated for the poor actually gets in the hands of the recipient. Contrast this with the United Way, Salvation Army and other private charities where 90 cents of each dollar donated gets to a beneficiary.

Americans agree that some people — whether faultless or irresponsible — need assistance, if only occasionally. The only issue is how they will be helped.

Americans are the most generous people of any industrial nation. We give more of our time and money than do the Germans, British and Japanese. Note that those states have a bigger public sector than we do. Maybe they feel they gave at the office.

The U.S. Constitution isn’t just any ordinary document. It is the contract between the government and its people, the ones who empower government and who — once upon a time — expected the Constitution to restrain government, not empower it.

Government’s involvement in housing caused the meltdown — not greedy Wall Street bankers. The same Occupy mindset caused the Community Reinvestment Act of 1977, placed on human growth hormones by President Clinton, who pushed banks into lending to poor credit risks and allowed Wall Street to play with taxpayers’ money.

There is no bad guy. It’s not the Koch brothers, Grover Norquist or the Maltese Falcon. There is no evil entity, snorting steam from his nose, standing in an office full of Nazi memorabilia, staring out the window with the cityscape view, laughing: “Ha! Ha! Ha! Pretty soon, all this will be mine. Mine, I say!”

Life has never been so good, with so many choices, with so many more conveniences, so much less danger of dying from disease, with so many choices for entertainment and affordable travel.

When you rob Peter to pay Paul, you can always count on the support of Paul. But at some point Peter begins to feel taken advantage of.

Larry Elder is a best-selling author and radio talk-show host. To find out more about Larry Elder, or become an “Elderado,” visit www.LarryElder.com. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

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Article source: Creators.com