Thomas Sowell: Social Justice Philosophy Is a Blank Check for Government Power

Wednesday, March 14, 2018

Politics Social Justice Government Intervention Government Power Equality Equality of Opportunity Equality of Outcome

Forcing an equality of outcome for disadvantaged groups requires enormous outside interference.

by Brian Balfour

“In politics, the great non-sequitur of our time is that 1) things are not right and that 2) the government should make them right. Where right all too often means cosmic justice, trying to set things right means writing a blank check for a never-ending expansion of government power.”

This key passage from Thomas Sowell’s 1999 book, The Quest for Cosmic Justice, frames Sowell’s thoughtful analysis and rejection of arguments advanced by “social justice warriors,” or more briefly, SJWs.

Although written nearly 20 years ago, Sowell’s insights are especially relevant today, when you consider the heights of influence social justice activism has reached—especially on college campuses—in 2018.

For a blueprint to understand and refute today’s increasingly vocal SJWs, Sowell’s book proves to be an indispensable resource.

What Is “Social Justice”?

First, Sowell provides clarity to the concept of social justice, which he labels “cosmic justice.” Social justice seeks to “eliminate undeserved disadvantages” for selected groups. Sowell explains “undeserved disadvantages” by quoting Thomas Nagle, a professor of philosophy and law, as akin to an “unequal starting point” certain people have through no fault of their own.

For the social justice warrior, equality of treatment under the law is not a sufficient condition to achieve justice.

These conditions—be it race, gender, family income, etc.—are from mere chance of birth. Sowell prefers the term “cosmic” to represent a random factor—beyond anyone’s control—landing different groups in different conditions.

But given we can’t change the conditions we are born into, nor erase past injustices, the real concern boils down to what actions and policies are prescribed to mitigate these “unequal starting points” that people occupy.

For the social justice warrior, equality of treatment under the law is not a sufficient condition to achieve justice. Citing philosopher John Rawls’ A Theory of Justice, Sowell asserts that SJWs insist “having everyone play by the same rules or be judged by the same standards” is found to be lacking. True equality of opportunity, in their view, means “providing everyone with equal prospects of success from equal individual efforts,” and “putting segments of society in the position that they would have been in but for some undeserved misfortune.”

What Do Social Justice Warriors Want?

To make this a reality, processes need to be put in place, according to social justice theory, so that outcomes—such as income level, unemployment rates, leadership positions, etc.—are equalized regardless of one’s starting point or demographic trait. Any deviation from “equalized” outcomes is proof positive in the eyes of the social justice movement that some form of social injustice—be it racism, sexism, or capitalist greed—must be the culprit.

The quest for social justice “focuses on one segment of the population and disregards the interests of others.”

Sowell takes issue with such thinking. He believes it is the actions and policies in search of equal outcomes, along with their results, that need to be judged by an ethical evaluation of justice.

At this point, Sowell begins to expose the injustices involved in this process. “This conception of fairness requires that third parties must wield the power to control outcomes, over-riding rules, standards or the preferences of other people.”

Indeed, the quest for social justice “focuses on one segment of the population and disregards the interests of others who are not the immediate focus of discussion, but who nevertheless pay the price of the decisions made.” Such processes, it turns out, necessarily involve treating people unequally.

But at What Cost?

In classic Sowell style, he reminds readers that there are no perfect solutions, only trade-offs. Trade-offs involve costs as well as benefits.

“Costs of achieving justice matter…What, after all, is injustice but an arbitrary imposition of a cost—whether economic, psychic, or other—on an innocent person? And if correcting this injustice imposes another arbitrary cost on another innocent person, is that not also an injustice?”

These costs of attempting to advance social justice are not only borne by these innocent third parties, but also by society through changes in behavior of the supposed beneficiaries.

“Those given legal entitlements to various compensatory benefits have, for example, developed a sense of entitlement,” Sowell explains. Entitlement sows seeds of division among the givers and takers while blunting the recipients’ incentives to work. The productive are punished to serve the non-productive.

Promoting a vision of social injustices can also create a sense of helplessness among those labeled as “victims” of cosmic injustices. “Why study and discipline yourself in preparation for the adult world if the deck is completely stacked against you anyway?” Sowell asks rhetorically.

According to Sowell, aside from evaluating the costs involved, the key question in addressing the “unequal starting points” of different groups involves deciding between either political actions or voluntary individual cooperation.

With his typical precision, Sowell favors the latter.

“One of the crucial differences between political and non-political ways of dealing with undeserved misfortunes is that the non-political approaches do not acquire the fatal rigidities of law nor require either the vision or the reality of helplessness and dependency. Nor does it require the demonization of those who think otherwise or the polarization of society.”

A Misdiagnosis

Problems abound even with how SJWs diagnose current hot-button issues like income inequality and racism.

For example, Sowell contends most income statistics are crude aggregates. The implicit assumption that the mere existence of income disparities is evidence of racial discrimination is unsubstantiated. Simply examining the average age differences among different demographics can explain away a portion of the income inequality that SJWs proclaim exists due to discrimination. Adding factors like education level and personal career choices explains much of the rest.

The real issue, Sowell concludes, is not with income inequality itself, but with the processes put in motion in hopes of eliminating inequality.

“To allow any governmental authority to determine how much money individuals shall be permitted to receive from other individuals produces not only a distortion of the economic processes by undermining incentives for efficiency, it is more fundamentally a monumental concentration of political power which reduces everyone to the level of a client of politicians.”

Moreover, the culture of envy created by income inequality obsessions can harm the very groups SJWs purport to want to help. Attributing the “greater prosperity of others to ‘exploitation’ of people like themselves, to oppression, bias or unworthy motives such as greed, racisms and the like,” makes those people feel that self-improvement is “futile” and paints “the less fortunate into their own little corner, isolated from potential sources of greater prosperity.”

How Can You Be a Hero if No One Needs Saving?

Finally, Sowell holds no quarter regarding the motives of the self-anointed saviors of the downtrodden. As if anticipating by two decades the rampant “virtue signaling” consuming left-wing social media accounts, he writes,

“Like so much that is done in the quest for cosmic justice, it makes observers feel better about themselves—and provides no incentives for those observers to scrutinize the consequences of their actions on the ostensible beneficiaries.”

Social justice warriors too often value ego gratification over actual benefits. Sowell continues, pointing out that those invested in the social justice narrative create for themselves a “vested interest in the incapacity of other people,” while developing a “tendency to see people as helpless and not responsible for their own actions.”

All the better to gratify their own egos as self-styled “rescuers” of the purported helpless victims. Such attitudes, however, produce policies that fail to generate desirable results, while instilling a defeatist mindset among those being labeled victims, inducing them “to accept that image of themselves.”

“This is only one of the ways in which the vision of morally anointed visionaries’ ministers to the egos of the anointed, rather than the well-being of the ostensible beneficiaries of their efforts,” Sowell concludes.

The author finds that the corrective “solutions” for perceived social injustices involve costs that most often will outstrip any benefits, and invariably create real injustices at the hands of centralizing government power. Such insights explain why The Quest for Cosmic Justice is a valuable tool for understanding the social justice movement and how to confront its arguments.

Brian Balfour

Brian Balfour is Executive Vice President for the Civitas Institute, a free-market advocacy organization in Raleigh, NC. He is the author of the high school economics iBook Economics in Action, creator of the Austrian Economics educational app, and has served as an adjunct economics instructor at Mount Olive University.

Republished with Permission – Source: FEE.org – Social Justice = Big Gov

The 2nd Amendment Really Is an Essential Safeguard against Crime and Tyranny

Wednesday, March 14, 2018

Policy Second Amendment Guns Gun Control Self-Defense Bear Arms Tyranny Bill of Rights U.S. Constitution

How many people might be saved if they had the means to protect themselves with a firearm?

by Richard M. Ebeling

For millions of Americans, the Second Amendment and its guarantee of the right of the individual to bear arms appears irrelevant and practically anachronistic. It seems a throwback to those earlier days of the Wild West, when many men, far from the law and order provided by the town sheriff and circuit judge, had to protect their families and land from cattle rustlers and outlaw bands. Such people are wrong.

If in our contemporary world, where the law fails to do its job of seeing that the guilty pay for their crimes, we take solace in the fantasy of extralegal solutions. We imagine that somewhere there is a Clint Eastwood on a metropolitan police force who uses some “magnum force” to see to it that the perpetrator of a crime doesn’t go unpunished. Or we want to think that there is a Charles Bronson occasionally roaming the streets of a large city at night fulfilling the “death wish” of the street criminal whom local law enforcement is not able to punish.

This popular conception of the legal system suffers from two fundamental flaws.

The crime once having been committed, it is some breakdown in the judicial system that prevents justice from being served. If only the law didn’t coddle the criminal or allow his defense attorney to use “loopholes” in the law, no criminal would ever escape his just deserts.

This popular conception of the legal system, law enforcement, and government, however, suffers from two fundamental flaws: first, it focuses on the legal process (and any supposed weaknesses in it) only after a crime has been committed; and second, it ignores completely the fact that it might be the government itself that is the potential perpetrator of crimes against the American citizenry.

The Tragedy of the Unarmed Victim

Locks, bars on windows, and alarm systems are all useful devices to prevent unwanted intruders from gaining entrance into our homes and places of work. But what happens if an innocent victim is confronted with an invader who succeeds in entering his home, for example, and the safety of his family and possessions is now threatened? What if the invader confronts these innocent occupants and threatens some form of violence, including life-threatening force? What are the victims to do?

Critics of the Second Amendment and private gun ownership never seem to have any reasonable answer. Silent prayer might be suggested, but if this were to be a formal recommendation by the government it might run the risk of violating the separation of church and state.

Even in an era promoting equality among the sexes, it nonetheless remains a fact that on average an adult man tends to be physically stronger than an adult woman, and most especially if there is more than one man confronting a single woman.

Several years ago, economist Morgan Reynolds wrote a book on the economics of crime. The following is from one of the criminal cases he discussed. It seems that four men broke into a house in Washington, D.C., looking for a man named “Slim.” When the occupant said that he didn’t know where Slim was, they decided to kill him instead. One of the defendants later testified,

I got a butcher knife out of the kitchen. We tied him up and led him to the bathroom. And we all stabbed him good. Then, as we started to leave, I heard somebody at the door. Lois [the dead man’s girlfriend] came in…. We took her back to the bathroom and showed her his body. She started to beg, ‘don’t kill me, I ain’t gonna tell nobody. Just don’t kill me.’ said we all could have sex with her if we wouldn’t kill her. After we finished with her, Jack Bumps told her, ‘I ain’t takin’ no chances. I’m gonna kill you anyway.’ He put a pillow over her head, and we stabbed her till she stopped wiggling. Then we set fire to the sheets in the bedroom and went out to buy us some liquor.”

Would either of these two victims have been saved if the man had had a gun easily reachable by him in the house or if the woman had had a gun in her purse? There is no way of knowing. What is for certain is that neither was any match for the four men who attacked and killed them with a butcher knife. Even Lois’s begging and submitting to sexual violation did not save her. How many people might be saved from physical harm, psychological trauma, or death if they had the means to protect themselves with a firearm?

Equally important, how many people might never have to be confronted with attack or murder if potential perpetrators were warded off from initiating violence because of the uncertainty that an intended victim might have the means to defend him- or herself from thieves, rapists, and murders? A gun can be a great equalizer for the weak and the defenseless, especially if an intended victim doesn’t have to waste precious seconds fumbling with the key to a mandatory trigger lock.

Tens of millions of people were murdered by governments in the twentieth century.

But what is an ordinary man to do when he finds that it is the government that is the perpetrator of violence and aggression against him and his fellow citizens? How do you resist the power of the state? Tens of millions of people were murdered by governments in the twentieth century. They were killed because of the language they spoke or the religion they practiced. Or because those in political control classified them as belonging to an “inferior race” or to a “social class” that marked them as an “enemy of the people.” Furthermore, the vast, vast majority of these tens of millions of victims were murdered while offering little or no resistance. Fear, terror, and a sense of complete powerlessness surely have been behind the ability of governments to treat their victims as unresisting lambs brought to the slaughter.

But part of the ability of government to commit these cruel and evil acts has been the inability of the victims to resist because they lacked arms for self-defense. However, when the intended victims have had even limited access to means of self-defense it has shocked governments and made them pay a price to continue with their brutal work.

The Power of Armed Resistance

Many have been surprised by the lack of resistance by the European Jews who were killed by the millions in the Nazi concentration and death camps during the Second World War. For the most part, with a seemingly peculiar fatalism, they calmly went to their deaths with bullets to the back of the head or in gas chambers. Yet when some of the people were able to gain access to weapons, they did resist, even when they knew the end was most likely be the same.

The following is from historian John Toland’s biography of “Adolf Hitler,” in reference to the resistance of the Jews in the Warsaw Ghetto in 1943:

Of the 380,000 Jews crowded into the Warsaw ghetto, all but 70,000 had been deported to the killing centers in an operation devoid of resistance. By this time, however, those left behind had come to the realization that deportation meant death. With this in mind, Jewish political parties within the ghetto finally resolved their differences and banded together to resist further shipments with force . . .

“At three in the morning of April 9, 1943, more than 2000 Waffen SS infantryman—accompanied by tanks, flame throwers and dynamite squads—invaded the ghetto, expecting an easy conquest, only to be met by determined fire from 1500 fighters armed with weapons smuggled into the ghetto over a long period: several light machine guns, hand grenades, a hundred or so rifles and carbines, several hundred pistols and revolvers, and Molotov cocktails. Himmler had expected the action to take three days but by nightfall his forces had to withdraw.

“The one-sided battle continued day after day to the bewilderment of the SS commander, General Jürgen Stroop, who could not understand why ‘this trash and subhumanity’ refused to abandon a hopeless cause. He reported that, although his men had initially captured ‘considerable numbers of Jews, who are cowards by nature,’ it was becoming more and more difficult. ‘Over and over again new battle groups consisting of twenty or thirty Jewish men, accompanied by a corresponding number of women, kindled new resistance.’ The women, he noted, had the disconcerting habit of suddenly hurling grenades they had hidden in their bloomers . . .

“The Jews, he reported, remained in the burning buildings until the last possible moment before jumping from the upper stories to the street. ‘With their bones broken, they still tried to crawl across the street into buildings that had not yet been set on fire…. Despite the danger of being burned alive the Jews and bandits often preferred to return into the flames rather than risk being caught by us.’ … For exactly four weeks the little Jewish army had held off superior, well-armed forces until almost the last man was killed or wounded.”

In the end, the Germans had to commit thousands of military personnel and in fact destroy an entire part of Warsaw to bring the Jewish ghetto resistance to an end.

What if not only the Jewish population but the majority of all the “undesirable” individuals and groups in Germany and the occupied countries of Europe had been armed, with the Nazi government unable to know who had weapons, what types, and with what quantity of ammunition? It would be an interesting study in World War II history to compare private gun ownership in various parts of Europe and the degree and intensity of resistance by the local people to German occupation.

Revolts Against Tyranny

In the early years of the Bolshevik takeover in Russia, there were numerous revolts by the peasantry against Communist policies to collectivize the land or seize their crops as in-kind taxes. What made this resistance possible for many years was the fact that in the countryside the vast majority of the rural population owned and knew how to use hunting rifles and other weapons of various kinds.

Acquisition of firearms during the Second World War as part of the partisan movement against the German invasion of the Soviet Union enabled active, armed resistance by Lithuanian and Ukrainian nationalist guerrillas against Soviet reoccupation of their countries to continue in the forests of Lithuania and western Ukraine well into the early 1950s.

It is hard to imagine how the people of the 13 colonies could have ever obtained their independence from Great Britain at the end of the eighteenth century if the local population had not been “armed and dangerous.” It is worth recalling Patrick Henry’s words in arguing for resistance against British control before the king’s armed forces could disarm the colonists:

They tell us . . . that we are weak—unable to cope with so formidable an adversary. But when shall we be stronger? . . . Will it be when we are totally disarmed, and when a British guard shall be stationed in every house? … Three million people, armed in the holy cause of liberty . . . are invincible by any force which our enemy can send against us.”

The taking up of arms is a last resort, not a first, against the intrusions and oppressions of government. Once started, revolutions and rebellions can have consequences no one can foretell, and final outcomes are sometimes worse than the grievance against which resistance was first offered. However, there are times, “in the course of human events,” when men must risk the final measure to preserve or restore the liberty that government threatens or has taken away.

The likelihood that government will feel secure in undertaking infringements on the freedoms of Americans would be diminished if it knew that any systematic invasion of people’s life, liberty, and property might meet armed resistance by both the victim and those in the surrounding areas who came to his aid because of the concern that their own liberty might be the next to be violated.

Though it may seem harsh and insensitive, when I read the advocates of gun control pointing to incidents of private acts of violence against children, I think to myself:

How many more tens of thousands of children were killed around the world in the last century by governments? And how many of those children, victims of government-armed violence, might have been saved if their families and neighbors had possessed the right to bear arms against political aggressors? How many children have been saved because their families have had weapons for self-defense against private violators of life and property? And how many could have been saved from private aggressors if more families had owned guns?

Guns and American Liberty

The argument that virtually all other “civilized” countries should neither prohibit nor severely restrict the ownership and the use of firearms in general—and handguns intimidate Americans. America has been a free and prosperous land precisely because of the fact that as a nation we have chosen to follow political and economic avenues different from those followed by other countries around the world.

As a result, in many areas of life we have remained freer.

As a people, we have swum against the tide of collectivism, socialism, and welfare statism to a greater degree, for the most part, than have our western European cousins. As a result, in many areas of life, we have remained freer, especially in our market activities, than they. The fact that other peoples in other lands chose to follow foolish paths leading to disastrous outcomes does not mean that we should follow in their footsteps.

America was born in revolt against the ideas of the “old world”: the politics of monarchy, the economics of mercantilism, and the culture of hereditary class and caste. America heralded the politics of representative, constitutional government, the economics of the free market, and the culture of individualism under equality before the law. It made America great.

If in more recent times there has been an “American disease,” it has been our all-too-willing receptivity to the European virus of political paternalism, welfare redistribution, economic regulation and planning, and the passive acceptance of government control over social affairs.

We need not and indeed should not fall victim to one more of the European ailments: the disarming of the people under the dangerous notion that the private citizenry cannot be trusted and should not be allowed to have the means of self-defense against potential private and political aggressors in society. Let us stand apart once more and not fall prey to the false idea that somehow our European cousins are more enlightened or advanced than we on the matters of gun ownership and control. They are not.

Instead let us remember and stay loyal to the sentiment of James Madison, the father of the U.S. Constitution, who praised his fellow countrymen when he said, “Americans [have] the right and advantage of being armed—unlike citizens of other countries whose governments are afraid to trust the people with arms.”

Let us remain worthy of Madison’s confidence in the American people and defend the Second Amendment of the Constitution upon which part of that confidence was based.

Reprinted from the Heartland Institute.

Richard M. Ebeling

Richard M. Ebeling is BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel in Charleston, South Carolina. He was president of the Foundation for Economic Education (FEE) from 2003 to 2008.

 

Republished with Permission – Source: FEE.org – 2nd Amendment – Tyranny

 

5 Things Marx Wanted to Abolish (Besides Private Property)

One of the remarkable things about The Communist Manifesto is its honesty.

Karl Marx might not have been a very good guy, but he was refreshingly candid about the aims of Communism. This brazenness, one could argue, is baked into the Communist psyche.

“The Communists disdain to conceal their views and aims,” Marx declared in his famous manifesto. “They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a Communistic revolution.”

Like Hitler’s Mein Kampf, readers are presented with a pure, undiluted vision of the author’s ideology (dark as it may be).

Marx’s manifesto is famous for summing up his theory of Communism with a single sentence: “Abolition of private property.” But this was hardly the only thing the philosopher believed must be abolished from bourgeois society in the proletariat’s march to utopia. In his manifesto, Marx highlighted five additional ideas and institutions for eradication.

1. The Family

Marx admits that destroying the family is a thorny topic, even for revolutionaries. “Abolition of the family! Even the most radical flare up at this infamous proposal of the Communists,” he writes.

But he said opponents of this idea fail to understand a key fact about the family.

“On what foundation is the present family, the bourgeois family, based? On capital, on private gain. In its completely developed form, this family exists only among the bourgeoisie,” he writes.

Best of all, abolishing the family would be relatively easy once bourgeois property was abolished. “The bourgeois family will vanish as a matter of course when its complement vanishes, and both will vanish with the vanishing of capital.”

2. Individuality

Marx believed individuality was antithetical to the egalitarianism he envisioned. Therefore, the “individual” must “be swept out of the way, and made impossible.”

Individuality was a social construction of a capitalist society and was deeply intertwined with capital itself.

“In bourgeois society capital is independent and has individuality, while the living person is dependent and has no individuality,” he wrote. “And the abolition of this state of things is called by the bourgeois, abolition of individuality and freedom! And rightly so. The abolition of bourgeois individuality, bourgeois independence, and bourgeois freedom is undoubtedly aimed at.”

3. Eternal Truths

Marx did not appear to believe that any truth existed beyond class struggle.

“The ruling ideas of each age have ever been the ideas of its ruling class,” he argued. “When the ancient world was in its last throes, the ancient religions were overcome by Christianity. When Christian ideas succumbed in the 18th century to rationalist ideas, feudal society fought its death battle with the then revolutionary bourgeoisie.”

He recognized how radical this idea would sound to his readers, particularly since Communism does not seek to modify truth, but to overthrow it. But he argued these people were missing the larger picture.

“‘Undoubtedly,’ it will be said, ‘religious, moral, philosophical, and juridical ideas have been modified in the course of historical development. But religion, morality, philosophy, political science, and law, constantly survived this change.

There are, besides, eternal truths, such as Freedom, Justice, etc., that are common to all states of society. But Communism abolishes eternal truths, it abolishes all religion, and all morality, instead of constituting them on a new basis; it therefore acts in contradiction to all past historical experience.’

What does this accusation reduce itself to? The history of all past society has consisted in the development of class antagonisms, antagonisms that assumed different forms at different epochs.”

4. Nations

Communists, Marx said, are reproached for seeking to abolish countries. These people fail to understand the nature of the proletariat, he wrote.

“The working men have no country. We cannot take from them what they have not got. Since the proletariat must first of all acquire political supremacy, must rise to be the leading class of the nation, must constitute itself the nation, it is so far, itself national, though not in the bourgeois sense of the word.”

Furthermore, largely because of capitalism, he saw hostilities between people of different backgrounds receding. As the proletariat grew in power, there soon would be no need for nations, he wrote.

“National differences and antagonism between peoples are daily more and more vanishing, owing to the development of the bourgeoisie, to freedom of commerce, to the world market, to uniformity in the mode of production and in the conditions of life corresponding thereto.”

5. The Past

Marx saw tradition as a tool of the bourgeoisie. Adherence to the past served as a mere distraction in proletariat’s quest for emancipation and supremacy.

“In bourgeois society,” Marx wrote, “the past dominates the present; in Communist society, the present dominates the past.”

Reprinted from Intellectual Takeout

Jon Miltimore

Jonathan Miltimore is a senior editor at Intellectual Takeout.

This article was originally published on FEE.org. Read the original article.

An Anniversary of Evil: 100 Years of Communism, 100 Million Deaths

October 30, 2017 by Dan Mitchell

Just in case you didn’t realize, we’re “celebrating” an anniversary.

In 1917, at this time of year, the Bolshevik revolution was occurring in Russia. It resulted in the creation of the Soviet Union, followed in subsequent decades by enslavement of Eastern Europe and communist takeovers in a few other unfortunate nations.

This is a very evil and tragic anniversary, a milestone that merits sad reflection because communism is an evil ideology, and communist governments have butchered about 100 million people.

I’ve written about the horrors that communism has imposed on the people of Cambodia, Cuba, and North Korea, but let’s zoom out and look at this evil ideology from a macro perspective.

My view is that communism is “a disgusting system…that leads to starvation and suffering” and “produces Nazi-level horrors of brutality.”

But others have better summaries of this coercive and totalitarian ideology.

We’ll start with A. Barton Hinkle’s column in Reason.

…the Bolsheviks…seized power from the provisional government that had been installed in the final days of Russia’s Romanov dynasty. The revolution ushered in what would become a century of ghastly sadism. …it is hard even now to grasp the sheer scale of agony imposed by the brutal ideology of collectivism. …In 1997, a French publisher published “The Black Book of communism,” which tried to place a definitive figure on the number of people who died by communism’s hand: 65 million in China, 20 million in the Soviet Union, 2 million in Cambodia, 2 million in North Korea, and so on—more than 90 million lives, all told. …depravity was woven into the sinews of communism by its very nature. The history of the movement is a history of sadistic “struggle sessions” during the Cultural Revolution, of gulags and psychiatric wards in Russia, of the torture and murder of teachers, doctors, and other intellectuals in Cambodia, and on and on.

Here’s some of what Professor Ilya Somin wrote for the Washington Post.

May Day. Since 2007, I have defended the idea of using this date as an international Victims of Communism Day. …Our comparative neglect of communist crimes has serious costs. Victims of Communism Day can serve the dual purpose of appropriately commemorating the millions of victims, and diminishing the likelihood that such atrocities will recur. Just as Holocaust Memorial Day and other similar events help sensitize us to the dangers of racism, anti-Semitism, and radical nationalism, so Victims of Communism Day can increase awareness of the dangers of left-wing forms of totalitarianism, and government control of the economy and civil society.

In an article for National Review, John O’Sullivan explains the tyrannical failure of communism.

Those evil deeds…include the forced famine in Ukraine that murdered millions in a particularly horrible fashion; starting the Second World War jointly with Hitler by agreeing in the Nazi–Soviet Pact to invade Poland and the Baltic states; the Gulag in which millions more perished; and much more. …The Communist experiment failed above all because it was Communist. …Economically, the Soviet Union was a massive failure 70 years later to the point where Gorbachev complained to the Politburo that it exported less annually than Singapore. …it is a fantasy that the USSR compensated for these failures by making greater social gains than liberal capitalism: Doctors had to be bribed; patients had to take bandages and medicines into hospital with them; homelessness in Moscow was reduced by an internal passport system that kept people out of the city; and so on.

We’re just scratching the surface.

As an economist, I focus on the material failure of communism and I’ve tried to make that very clear with comparisons of living standards over time in Cuba and Hong Kong as well as in North Korea and South Korea.

But the evil of communism goes well beyond poverty and deprivation. It also is an ideology of mass murder.

Which is why this tweet from the Russian government is morally offensive.

Nazi Germany started #WWII and killed 27 millions Soviet people. USSR ended #WWII and saved the world from the Brown Plague#blackribbonday pic.twitter.com/Xb8D6QrgYK

— MFA Russia 🇷🇺 (@mfa_russia) August 23, 2017

Yes, the Soviet Union helped defeat the National Socialists of Germany, but keep in mind that Stalin helped trigger the war by inking a secret agreement with Hitler to divide up Poland.

Moreover, the Soviet Union had its own version of the holocaust.

I don’t know who put together this video, but it captures the staggering human cost of communism.

Meanwhile, Dennis Prager lists 6 reasons why communism isn’t hated the same way Nazism is hated.

The only thing I can add to these videos is that there has never been a benign communist regime.

Indeed, political repression and brutality seems to be the key difference between liberal socialism and Marxist socialism.

Let’s close with this chart from Mark Perry at the American Enterprise Institute.

All forms of totalitarianism are bad, oftentimes resulting in mass murder. As Dennis Prager noted in his video, both communism and Nazism are horrid ideologies. Yet for some bizarre reason, some so-called intellectuals still defend the former.

Reposted from International Liberty  

For historic reference information see the website Democide: Murder by Government

Are Tax Cuts Dangerous?

October 28, 2017 by Dan Mitchell

I’ve responded to all sorts of arguments against lower taxes.

• Tax cuts are “unfair” because rich people will benefit.
• Tax cuts are wrong because revenue should be going up, not down.
• Tax cuts are pointless because the economy won’t grow faster.
• Tax cuts are misguided because there will be more red ink.
• Tax cuts are risky because vital services would be unfunded.

But I’ve never had to deal with the argument that lower taxes are “dangerous.”

Yet that’s what Ruth Marcus of the Washington Post would like readers to believe. Here’s some of what she wrote today.

…tax cuts — not to mention tax cuts of the magnitude Trump and fellow Republicans contemplate — are worse than unwarranted. They are dangerous.

Dangerous?!?

Before clicking on the headline, my mind raced to imagine what she had in mind. Was she going to argue that lower taxes somehow might cause the nutjob in North Korea to launch a nuke? Was her argument that a tax cut would unleash the Ebola virus in the United States?

Well, you can put your mind at ease. The world isn’t coming to an end. It turns out that Ms. Marcus is simply making a rather hysterical version of the argument that tax cuts are bad because they result in more red ink.

They would add trillions to the national debt at a point when it is already dangerously large as a share of the economy. …the national debt is 77 percent of the economy, the highest since the end of World War II. It is on track to exceed the entire gross domestic product by 2033. That is even without a $1.5 trillion tax cut, the amount envisioned in the just-passed budget resolutions. …the nonpartisan Tax Policy Center found that increased growth would be counteracted within a few years by the drag of higher deficits; overall, the plan would increase deficits by $2.4 trillion during the first decade. …As an economic matter, they are simply reckless.

I’m actually semi-sympathetic to her argument. It isn’t prudent in the long run to reduce revenues and allow a continuing expansion in the burden of government spending. She would be right to hit Republicans for wanting to do the fun part of cutting taxes while ducking the politically difficult task of restraining spending.

That is a recipe for becoming another Greece. Not today. Not next year. Or even 10 years from now. The United States probably has the ability to stumble along for decades without doing anything to reform entitlements (the programs that are causing our long-term fiscal problems).

But I can’t resist making two points.

First, where was Ms. Marcus when Bush was pushing the TARP bailout through Congress? Where was she when Obama was advocating for his faux stimulus? Or the Obamacare boondoggle?

These pieces of legislation were hardly examples of fiscal rectitude, yet a search of her writings does not produce examples of her warning about the “dangerous” implications of more red ink.

Her selective concern about deficits makes me think that what she really wants is bigger government. So if the deficit is increasing because of new spending, that’s fine. But if red ink is increasing because of tax cuts, that’s “dangerous.”

If nothing else, Marcus may deserve membership in the left-wing hypocrisy club.

Second, if Ms. Marcus genuinely cares about deficits, then I’ll forgive her for her past hypocrisy and instead simply ask her to look at the Congressional Budget Office’s most recent long-run fiscal forecast.

She will see that more than 100 percent of America’s future fiscal crisis is due to expected increases in the burden of entitlement spending.

You may be wondering how something can cause more than 100 percent of a problem. Well, if you look closely at that long-run forecast (or previous forecasts), you will discover that tax revenues automatically are expected to increase. Not just in nominal terms. Not just after adjusting for inflation. Tax revenues will climb as a share of overall economic output. By about two percentage points over the next 30 years.

By the way, that built-in tax increase is bigger than the Trump/GOP tax cut, which will only reduce taxes over the next 10 years by $1.5 trillion out of an expected haul of $43 trillion.

Oh, by the way, I’ll add a third point. Advocates of higher taxes should be required to explain why more revenue for Washington will somehow lead to better results than what happened when such policies were adopted in Europe.

In other words, some of us don’t want to “feed the beast.”

Reposted from International Liberty

Free Enterprise, Creative Destruction, and Consumer Power

October 29, 2017 by Dan Mitchell

I fully agree with my leftist friends who say that corporations want to extract every penny they can from consumers. I also (mostly) agree with them when they say corporations are soulless entities that don’t care about people.

But after they’re done venting, I then try to educate them by pointing out that the only way corporations can separate consumers their money is by vigorously competing to provide desirable goods and services at attractive prices.

Moreover, their “soulless” pursuit of those profits (as explained by Walter Williams) will lead them to be efficient and innovative, which boosts overall economic output.

Moreover, in a competitive market, it’s not consumers vs. corporations, it’s corporations vs. corporations with consumers automatically winning.

Mark Perry of the American Enterprise Institute makes a very valuable point about what happens in a free economy.

Comparing the 1955 Fortune 500 companies to the 2017 Fortune 500, there are only 59 companies that appear in both lists (see companies in the graphic above). In other words, fewer than 12% of the Fortune 500 companies included in 1955 were still on the list 62 years later in 2017, and more than 88% of the companies from 1955 have either gone bankrupt, merged with (or were acquired by) another firm, or they still exist but have fallen from the top Fortune 500 companies (ranked by total revenues).

It’s not just the Fortune 500.

…corporations in the S&P 500 Index in 1965 stayed in the index for an average of 33 years. By 1990, average tenure in the S&P 500 had narrowed to 20 years and is now forecast to shrink to 14 years by 2026. At the current churn rate, about half of today’s S&P 500 firms will be replaced over the next 10 years.

Here’s Mark’s list of companies that have stayed at the top of the Fortune 500 over the past 62 years.

Mark then offers an economic lesson from this data.

The fact that nearly 9 of every 10 Fortune 500 companies in 1955 are gone, merged, or contracted demonstrates that there’s been a lot of market disruption, churning, and Schumpeterian creative destruction over the last six decades. It’s reasonable to assume that when the Fortune 500 list is released 60 years from now in 2077, almost all of today’s Fortune 500 companies will no longer exist as currently configured, having been replaced by new companies in new, emerging industries, and for that we should be extremely thankful. The constant turnover in the Fortune 500 is a positive sign of the dynamism and innovation that characterizes a vibrant consumer-oriented market economy.

He also emphasizes that consumers are the real beneficiaries of this competitive process.

…the creative destruction that results in the constant churning of Fortune 500 (and S&P 500) companies over time is that the process of market disruption is being driven by the endless pursuit of sales and profits that can only come from serving customers with low prices, high-quality products and services, and great customer service. If we think of a company’s annual sales revenues as the number of “dollar votes” it gets every year from providing goods and services to consumers… As consumers, we should appreciate the fact that we are the ultimate beneficiaries of the Schumpeterian creative destruction that drives the dynamism of the market economy and results in a constant churning of the firms who are ultimately fighting to attract as many of our dollar votes as possible.

Incidentally, Mark did this same exercise in 2014 and 2015 and ascertained that there were 61 companies still remaining on the list.

So creative destruction apparently has claimed two more victims.

Or, to be more accurate, the needs and desires of consumers have produced more churning, leading to greater material abundance for America.

I’ll close with two points.

• First, my argument is in favor of free enterprise, not big business. That’s because large companies can be soulless profit maximizers, even if it means using the coercive power of government to impose cronyist policies that generate unearned profits. Just think about how the big health insurance companies and big pharmaceutical companies endorsed Obamacare in hopes of generating government-guaranteed income. Or think about companies like GE that have long-standing “expertise” in manipulating the political process. Or big agribusiness interests fleecing taxpayers and consumers with farm subsidies. And Goldman Sachs and other Wall Street firms supporting Dodd-Frank in hopes of getting oligopolistic profits. Or Exxon-Mobil ripping off taxpayers and getting special advantages thanks to the Export-Import Bank. I could continue, but you get the point.
• Second, the churning that Mark Perry describes is a good example of why antitrust laws are misguided in theory (and I would argue that they are misguided in practice since incumbent companies often use such laws to thwart upstart competitors).

All of which explains why I want separation of business and state.

The bottom line is that an unfettered market produces the best results for the vast majority of people. Yes, people are greedy, but that leads to good outcomes in a capitalist environment.

But we get awful results if cronyism is the dominant system, and that seems to be the direction we’re heading in America.

P.S. Even when corporations try to exploit people in the third world, the pursuit of profits actually results in better lives for the less fortunate.

Reposted from International Liberty

Should the Government Control for Luck?

Some people have natural advantages like inherited wealth and raw talent. But should the government involve itself in squashing those advantages?

by  Christopher Freiman

Luck egalitarianism is, roughly, the view that inequalities in life prospects resulting from luck are unjust. (There’s a lot to nitpick about that characterization, but it’s a start.) If Amy has better job opportunities than Bob because she happened to have parents who could afford to send her to a fancy private school, that’s unfair.

But It’s Not Fair!

You might even think it’s unfair that Rob Gronkowski makes so much more money than, say, me simply because he was gifted with 6’6” height and fast-twitch muscle fibers that enable him to run a 4.68 40 yard dash. Even if we both work equally hard at our crafts, Gronk will earn more than me because his natural talents are more marketable than mine. But it’s not like Gronk earned those talents; he just got lucky and won the genetic lottery. So it’s wrong for him to make so much more money than I do.

Suppose, for argument’s sake, this account of distributive justice is correct. What institutional conclusions follow? Luck egalitarians suggest that the income disparities between people like me and Gronk show that free markets are unjust. It’s the job of the state to correct for these kinds of market-generated inequalities via regulation and redistribution.

As I detail in my book, luck egalitarians (and fellow travelers who might not apply the label to themselves) are nearly unanimous in their rejection of free-market regimes. Here’s a small sample:

• “Laissez-faire capitalism (the system of natural liberty) secures only formal equality and rejects both the fair value of the equal political liberties and fair equality of opportunity.” (John Rawls)
• “Market allocations must be corrected in order to bring some people closer to the share of resources they would have had but for these various differences of initial advantage, luck, and inherent capacity.” (Ronald Dworkin)
• “Desert as a principle of justice, then, rather than justifying the distributional consequences of free market choices, requires precisely the elimination, or at least the minimization, of the differential brute luck that characterizes the free market […]. The adoption of desert as a principle of justice seems to result in a much more demanding requirement, as far as its implications for the regulation of the market are concerned, than a commitment to voluntariness as a legitimating condition for the imposition of obligations, even when this is suitably revised so as to square up with a defensible account of voluntariness and force.” (Serena Olsaretti)

I could go on, but you get the point: the market generates luck-based inequalities and the state reduces them.

But Is It Better?

One problem with this argument is that you don’t clinch the luck egalitarian case against free markets by simply showing that they create luck-based inequalities. What you need to do is show that the alternative is better. To use an old analogy of mine, showing that Steph Curry misses over half of his three-point shot attempts doesn’t justify benching Steph Curry. To justifiably bench Steph Curry, you’d need to show that his replacement would do better. Similarly, luck egalitarians need to show that a highly regulated market with extensive redistribution will have less luck-based inequality than a libertarian regime.

Here’s a reason for doubting that claim: those who benefit from inherited wealth, elite education, and natural talent in the market also benefit from those factors in politics. Put very roughly, political power will concentrate in the hands of the rich—the very people the political power was created to regulate and restrain. Thus, we might naturally expect such power to be used to increase rather than decrease the advantages of the rich.

Interestingly, this is Rawls’s own view. He says that a

“reason for controlling economic and social inequalities is to prevent one part of society from dominating the rest. When those two kinds of inequalities are large, they tend to support political inequality. As Mill said, the bases of political power are (educated) intelligence, property, and the power of combination, by which he meant the power to cooperate in pursuing one’s political interests. This power allows a few, in virtue of their control over the machinery of state, to enact a system of law and property that ensures their dominant position in the economy as a whole.”

By Rawls’s own lights, the rich will use their “(educated) intelligence, property, and the power of combination” to acquire political power and “enact a system of law and property that ensures their dominant position in the economy as a whole.” But now we can see a problem for Rawls’s view. The people that Rawls wants the state to control (those with property, education, and so on) are the same people that Rawls thinks control the state itself. So how can the state control the rich if the rich control the state? Shouldn’t we instead expect state intervention into the economy to favor the rich? Indeed, this is exactly what we see in many cases: subsidies, licensing, trade restrictions, housing regulations, and so on tend to benefit the rich at the expense of the poor.

Of course, we cannot definitively establish a conclusion about the effects of regulation and redistribution on luck-based inequalities by doing a priori institutional analysis. But at a minimum, luck egalitarians shouldn’t rule out libertarianism as a viable institutional option at the level of philosophical theory. Perhaps libertarianism and luck egalitarianism are compatible after all.

Reprinted from Bleeding Heart Libertarians

Christopher Freiman

Christopher Freiman is an associate Professor at William and Mary. He is a graduate of Duke University (B.A. in Philosophy) and the University of Arizona  (M.A., Ph.D. in Philosophy).

Republished with Permission – Original article may be found at FEE.org

If American Healthcare Kills, European Healthcare Kills More

The justification for moving to a socialized healthcare system like those in Europe is preventable deaths, but the numbers don’t bear that out.

by  Mahdi Barakat

The moral argument for universal healthcare is simple: more people receiving medical care means fewer preventable deaths. If universal healthcare, such as single-payer, leads to less death, then it is obviously the superior moral choice. Politicians like Bernie Sanders will go a step further and claim that Republican legislation, in fact, kills people by reducing government-sponsored coverage.

Yet, what if there were evidence to suggest that more people would die under a universal healthcare scheme than under the current US system? What if, by the left’s standards, the American healthcare system is less of a killer than the average European one?

Consider the best estimates of how many people die in the US due to a lack of healthcare. The question is hotly contested, and approximations range from 0 to 45,000 people per year. The latter figure is obviously what most progressives prefer to cite, and although there’s much to doubt about this number, let’s for the sake of argument accept that approximately 45,000 fewer people would die in the US every year if all Americans had decent health insurance.

Now flip the question: How many people die in other countries due to deficiencies in their healthcare systems? And how many people would die in the US if we had treatment outcomes similar to those in other countries?

Socialized Healthcare Has Clear Life-Costs

A study by the Fraser Institute titled The Effect of Wait Times on Mortality in Canada estimated that “increases in wait times for medically necessary care in Canada between 1993 and 2009 may have resulted in between 25,456 and 63,090 (with a middle value of 44,273) additional deaths among females.” Adjusting for the difference in populations (the US has about 9 times as many people), that middle value inflates to an estimated 400,000 additional deaths among females over a 16 year period. This translates to an estimated 25,000 additional female deaths each year if the American system were to suffer from increased mortality similar to that experienced in Canada due to increases in wait times. A system that disproportionately harms women? How progressive.

By the “US healthcare kills” logic, any tax increase that stalls productivity is tantamount to killing.

Let’s look at interventional outcomes. According to the CDC, stroke is the cause of more than 130,000 deaths annually in the United States. However, the US has significantly lower rates of 30-day stroke-induced mortality than every other OECD country, aside from Japan and Korea. OECD data suggest that the age- and sex-adjusted mortality rates within Europe would translate to tens of thousands of additional deaths in the US.If America had the 30-day stroke-mortality rate of the UK, for example, we could expect about an additional 38,000 deaths a year. For Canada, that number would be around 43,500. And this only accounts for mortality within a month of having a stroke, which in turn accounts for only 10% of stroke-related deaths.

This is further reflected in overall stroke-mortality statistics: for every 1,000 strokes that occur annually in the US, approximately 170 stroke-related deaths occur. The latter number is 250 and 280 for the UK and Canada respectively. Considering that approximately 795,000 strokes occur each year in the US, the discrepancy in stroke-related mortality is humongous. But don’t expect NPR to run a sob story about a Canadian stroke victim who would’ve survived in an American hospital.

Similarly, cancer-survival rates are considerably higher in the US than in other countries. Check out this data cited by the CDC, which comes from the authoritative CONCORD study on international cancer-survival rates. The US dominates every other country in survival rates for the most deadly forms of cancer.

If we weight the CDC-quoted survival rates for different forms of cancer in accordance with their contribution to overall cancer mortality, we find that, with the UK’s survival rates, there would be about 72,000 additional deaths annually in the United States. There would similarly be about 21,000, 23,000, and 31,000 additional deaths per year with Canadian, French, and German survival rates.

Lives are indeed saved by the many types of superior medical outcomes that are often unique to the US. This is not to mention the innumerable lives saved each year around the world due to medical innovations that are made possible through vibrant US markets. By the “US healthcare kills” logic, any tax increase that stalls productivity, and thus stalls the rate of innovation, is tantamount to killing – which is obviously an absurd conclusion.

The Healthcare Debate Has Been Misframed by Demagogues

I’ll be the first to admit: our medical system is far from optimal. Among other things, soaring healthcare costs certainly need to be controlled, and insuring against medical calamity ought to be much more affordable. But the policy demands advanced by Sanders and his ilk are completely ignorant of the massive deficiencies that are characteristic of universal healthcare systems. They’ll sing songs all day about the 45,000 lives taken every year by greedy insurance executives and their cronies on Capitol Hill, yet remain completely ignorant of the fact that the European systems they fetishize are less humane by their own standards.

If we’re going to call Paul Ryan a killer for curtailing Medicaid spending, then we logically have to apply that epithet to all politicians who advocate for European systems – you know, the systems with outcomes that would result in tens of thousands of additional deaths in the US every year. Paul Ryan may indeed qualify for the Manslaughter Olympics, but Bernie Sanders is poised to smash the world record.

Mahdi Barakat

Mahdi is a first-generation American from Salt Lake City, Utah. As a strong advocate for small government and liberal principles, he dedicates his time to researching and writing about public policy and culture. He holds a master’s degree in engineering from University College London and has worked as a consultant in the medical device industry.

Republished with Permission – Original article may be found at FEE.org

What We’ve Learned About Economics in the Last 100, 150, and 200 Years

2017 marks important anniversaries in the world of economic theory.

by  D.W. MacKenzie

The year 2017 is a milestone in both economic history and the history of economics. The Marx-inspired Red October coupe d’état took place in Russia one century ago. The 1st volume of Marx’s Capital, a Critique of Political Economy was published 150 years ago. David Ricardo’s Principles of Political Economy and Taxation was published 200 years ago.

Ricardo’s Law of Comparative Advantage is an application of what economists now term Opportunity Cost.

Death Blow to MercantilismThe bicentennial of Ricardo’s book is worth commemorating because this book finished a crucial debate over the merits of international trade. 18th Century Mercantilists believed that a nation could become wealthier through trade surpluses- by having exports greater than imports. Taxes on foreign goods create a surplus of exports over imports. 18th Century Economists David Hume and Adam Smith each demonstrated flaws in the economic nationalism advocated by Mercantilists. Hume demonstrated that trade surpluses just cause an inflow of money, gold back then, which makes exports more expensive. Smith proved that free trade can make all nations wealthier by allowing each nation to specialize in areas of absolute productivity advantage.

Smith and Hume dealt severe blows to Mercantilism, but Ricardo ended the debate between Mercantilists and Economists. Ricardo proved that free trade will make everyone wealthier by allowing each nation to specialize in areas of comparative productivity advantage. Ricardo pointed the way to both modern economic theory and prosperity. Ricardo’s Law of Comparative Advantage is an application of what economists now term Opportunity Cost. People who choose between goods according to the cost of not having some other real good maximize expected real wealth. The emergence of global trade in the modern world has raised productivity by allowing people to choose the most advantageous options, not just domestically.

The progress achieved from Ricardo’s insight has been limited by two factors. First, Mercantilism remains popular. Second, a third set of ideas emerged to challenge Ricardo. Smith and Ricardo both erred by thinking that the price of a good ultimately depends on labor content. Ricardo pointed the way out of this intellectual error (Opportunity Cost), but Karl Marx took a different path. Marx argued that since all value comes from labor, all profits come from exploiting labor. Marx’s initial critique of Smith-Ricardo political economy was published in 1867, with two additional volumes published posthumously. Marx argued that workers would overthrow capitalists to end misery brought on by capitalists paying them mere subsistence wages.

Problems with Marxism

Problems with Marxism were ascertained during a half-century of debate.  In 1917 the leader of the Bolshevik faction of Marxists, Vladimir Lenin, admitted that the notion of capitalists exploiting workers in each in their own nations was wrong. Why did Lenin concede this point? Because it was obvious that wages and living conditions for workers in the most advanced industrial nations were rising.

Yet somehow Marxism is resurgent and popular in academia.

Since wages in capitalist nations were obviously moving away from, not towards, subsistence levels, Marxists sought some new basis for justifying their belief in capitalist exploitation. Perhaps imperialist powers, like Belgium, France, and England, exploited workers in colonies. Is this theory plausible? No decent person could excuse abuses by the English, French, and especially Belgians, in their colonies.Can Lenin’s revised Marxism explain capitalist development in the United States, Germany, or Sweden? Germany and the US accumulated capital for decades without colonies.  How could the initial phases of German and American industrialization be the result of “surplus value” extracted from future colonies?  Furthermore, Germany and the US acquired relatively small colonies, very small compared to ongoing industrialization in these nations. The U.S. acquired its’ colonies from the 1898 Spanish-American war. Why didn’t Spain develop more substantially while it had colonies?

Do the examples of France and the U.K. actually fit with Lenin’s imperialism theory? No. Industrial development in France and the U.K. began while these nations were just beginning to acquire colonies, and continued even after these colonies were lost around a half-century ago.

Experience over the past 200 years has also shown that Ricardo was right about Mercantilism, yet this repudiated theory remains popular today. Experience over the past 150 years has shown fatal flaws in both Marx’s original and Lenin’s revised version of Marxism, and the theoretical defects of Labor Value theory were completely exposed by Carl Menger in 1871.

The defects of Mercantilism and Marxism are hardly trivial. Red October created a wave of Marxist states, which perpetrated atrocities that dwarfed the abuses of French and Belgian colonials. Yet somehow Marxism is resurgent and popular in academia. Mercantilists stood in the way of the unprecedented economic progress achieved through globalization, yet Mercantilism is resurgent and popular in the White House. One century ago this year the rise of Bolshevism rose to threaten modern progress. Bolshevism drove many others into the extreme nationalist movements of Mussolini and Hitler. Now, a century later, the twin threats of Fascism and Marxism appear resurgent. What can we learn from the resurgence of Nationalism and Marxism? Those who have failed to learn the correct economic lessons of modern history may doom all of us to repeat its worst aspects.

D.W. MacKenzie

D. W. MacKenzie is an assistant professor of economics at Dickinson College.

Republished with Permission – Original article may be found at FEE.org

In One Image, Everything You Need to Know about Health Insurance, Community Rating, and Pre-Existing Conditions

July 1, 2017 by Dan Mitchell

When discussing government involvement in the health sector, I usually focus on the budgetary implications. Which makes sense since I’m a fiscal wonk and programs such as Medicare, Medicaid, and Obamacare are diverting ever-larger amounts of money from the economy’s productive sector.

I also look at the tax side of the fiscal equation and complain about how the healthcare exclusion mucks up the tax code.

Though it’s important to understand that government involvement doesn’t just cause fiscal damage. All these programs and policies contribute to the “third-party payer” problem, which exists when people make purchases with other people’s money. Such a system is a recipe for inefficiency and rising prices since consumers generally don’t care about cost and providers have no incentive to be efficient. And since government figures show that nearly 90 percent of health care expenditures are financed by someone other than the consumer, this is a major problem. One that I’ve written about many, many times.

But there’s another economic problem caused by government – price controls on insurance – that is very important. Indeed, the fights over “community rating” and “pre-existing conditions are actually fights about whether politicians or competition should determine prices.

Simply stated, politicians want insurance companies to ignore risk when selling insurance. They want artificially low premiums for old people, so they restrict differences in premiums based on age (i.e., a community rating mandate), even though older people are statistically far more likely to incur health-related expenses. They also want artificially low premiums for sick people, so the crowd in Washington requires that they pay the same or similar premiums as healthy people (i.e., a pre-existing conditions mandate), even though they are statistically far more likely to incur health-related expenses.

Set aside that the entire purpose of insurance is to guard against risk. Instead, let’s focus on what happens when these types of price controls are imposed. For all intents and purposes, insurance companies are in a position where they have to over-charge young and healthy people in order to subsidize the premiums of old and sick people. That’s sounds great if you’re old and sick, but young and healthy people respond by choosing not to purchase insurance. And as fewer and fewer young and healthy people are in the system, that forces premiums ever higher. This is what is meant by a “death spiral.”

The pro-intervention crowd has a supposed solution to this problem. Just impose a mandate that requires the young and healthy people to buy insurance. Which is part of Obamacare, so there is a method to that bit of madness. But since the penalties are not sufficiently punitive (and also because the government simply isn’t very competent), the system hasn’t worked. And to make matters worse, Obamacare exacerbated the third-party payer problem, thus leading to higher costs, which ultimately leads to higher premiums, which further discourages people from buying health insurance.

So how do we solve this problem?

One of my colleagues at the Cato Institute, Michael Cannon, is a leading expert on these issues. And he’s also a leading pessimist. Here’s some of what he wrote a week ago as part of a column on the Senate bill to modify Obamacare.

ObamaCare’s “community rating” price controls are causing premiums to rise, coverage to get worse for the sick and insurance markets to collapse across the country. The Senate bill would modify those government price controls somewhat, allowing insurers to charge 64-year-olds five times what they charge 18-year-olds (as opposed to three times, under current law). But these price controls would continue to make a mess of markets and cause insurers to flee.

But he wasn’t enamored with the House proposal, either. Here are some excerpts from his analysis earlier this year of that proposal.

The House leadership bill retains the very ObamaCare regulations that are threatening to destroy health insurance markets and leave millions with no coverage at all. ObamaCare’s community-rating price controls literally penalize insurers who offer quality coverage to patients with expensive conditions, creating a race to the bottom in insurance quality. Even worse, they have sparked a death spiral that has caused insurers to flee ObamaCare’s Exchanges nationwide… The leadership bill would modify ObamaCare’s community-rating price controls by expanding the age-rating bands (from 3:1 to 5:1) and allowing insurers to charge enrollees who wait until they are sick to purchase coverage an extra 30 percent (but only for one year). It is because the House leadership would retain the community-rating price controls that they also end up retaining many other features of the law.

Though existing law also is terrible, largely because of Obamacare. Here are passages from Michael’s column in the Hill.

ObamaCare’s core provisions are the “community rating” price controls and other regulations that (supposedly) end discrimination against patients with preexisting conditions. How badly do these government price controls fail at that task? Community rating is the reason former president Bill Clinton called ObamaCare “the craziest thing in the world” where Americans “wind up with their premiums doubled and their coverage cut in half.” Community rating is why women age 55 to 64 have seen the highest premium increases under ObamaCare. It is the principal reason ObamaCare has caused overall premiums to double in just four years. …Why? Because community rating forces insurance companies to cover the sick below cost, which simply isn’t sustainable. The only solution ObamaCare supporters offer is to keep throwing more money at the problem — which also isn’t sustainable.

Anyone who wants to really understand this issue should read all of Michael’s work on health care issues.

But if you don’t have the time or energy for that, here’s an image that I found on Reddit‘s libertarian page. Using not-so-subtle sarcasm, it tells you everything you need to know about why price controls ultimately will kill health insurance.

P.S. None of this suggests we should feel sorry for health insurance companies. They got in bed with the previous administration and endorsed Obamacare, presumably because they figured a mandate (especially with all the subsidies) would create captive customers. Now that it’s clear that the mandate isn’t working very well and that increased Medicaid dependency accounts for almost all of the additional “insurance coverage,” they’re left with an increasingly dysfunctional system. As far as I’m concerned, they deserve to lose money. And I definitely don’t want them to get bailout money.

P.P.S. Republicans aren’t doing a very good job of unwinding the Obamacare price controls, but they deserve a bit of credit for being bolder about trying to undo the fiscal damage.

Addendum: A comment from Seb reminds me that I was so fixated on criticizing price controls that I never bothered to explain how to deal with people who have pre-existing conditions and therefore cannot get health insurance. I’m guessing the answer is “high-risk pools” where the focus of policy is directly subsidizing the relatively small slice of the population that has a problem (as opposed to price controls and other interventions that distort the market for everyone). But the main goal, from my perspective, is to have states handle the issue rather than Washington. A federalist approach, after all, is more likely to give us the innovation, diversity, and competition that produces the best approaches. States may discover, after all, that insurance doesn’t make sense and choose to directly subsidize the provision of health care for affected people. In the long run, part of the solution is to get rid of the health care exclusion in the internal revenue code as part of fundamental tax reform. If that happened, it’s less likely that health insurance would be tied to employment (and losing a job is one of the main ways people wind up without insurance).

Reposted from International Liberty