Is Hayek still relevant today?

It took we a long time to write this response to Nathan's post on Hayek. Still, here it is. I want to start by saying that I appreciate Nathan's honest attempt to understand ideas of Hayek and his followers. Now we can have a substantive discussion of which part, if any of these ideas, have merit and applicable to the present economic, societal and political situation in US. Following traditions of the authors of old, I will arrange my discussion of Nathan's "Notes in the Margins" in the form of a dialogue. I will use actual quotes from the "Notes" to present the points he has made, and will compliment them with my replies and commentaries.

Nathan

Hayek, at first glance, comes across as much more moderate and reasonable than his current day disciples. Even his libertarian interpreter feels obliged to use words like "community" and "common interest" in describing his ideas.

Lev.

Dear Nathan, in the quoted text you imply that "community" and "common interest" to a libertarian are curse words to be avoided at all cost. You seem to believe that individualism lying at the cornerstone of libertarian world view is something incompatible with the sense of community and realization of significance of "common interest". This view trivializes basic libertarian notions as expressed for instance by Ayn Rand (cannot be responsible for all libertarians, quite possible that some of them view individualism in a similar trivial light). Individualism is not incompatible with sense of community, when the community is viewed as voluntary union of individuals, who come to assistance of each other because they realize intrinsic value of cooperation for each of them individually. The same goes for the idea of "common good", which is something voluntarily accepted by the members of the community as having high value for each individual, when realized through cooperation and common efforts. This understanding of common interest and community must be sharply contrasted with views of present days liberals, personified, for instance by Obama, for whom "community " and "common interest" is something which can only be realized through participation of some kind of central authority, most often, federal government. It is this understanding of "common interest" that Hayek would find incompatible with ideas of individual freedom.

This is nothing new, of course. The ideas that any distinction between Society and State must vanish have been discussed in Europe since the first decades of the last century. Here, for instance, a quote from Hayek's "Road to Serfdom", where he gives a sharp critique to views of once influential British political philosopher Prof. Carr, pointing out his connection to Nazism

Does Professor Carr, for example, realise, when he asserts that "we can no longer find much meaning in the distinction familiar to nineteenth-century thought between 'society' and 'state''', that this is precisely the doctrine of Professor Carl Schmitt, the leading Nazi theoretician of totalitarianism

I do not suggest, of course, that liberals consciously share doctrines of fascism. I rather suggest that liberals' views on relations between Society and State are intellectual relatives of totalitarianism.

Nathan.

Moreover, it turns out that Hayek had no problem with basic welfare state functions, thought the state had a legitimate role to play in establishing the "rules of the game" and even believed that citizens should be guaranteed a basic income. Ouch! That sounds like socialism!

Lev.

It is true that Hayek wrote about possibility for the State to provide some limited support to those members of society who for some reasons cannot earn their living. He thought that if society accumulated enough wealth, allocation of a small part of it to support the most unfortunate is allowable because the risk of distorting market forces through removing incentives to work is outweighed by limiting the risks of social unrest. The key words here are "limited" and "small number". I am afraid, however, that he overestimated ability of society to keep such assistance under control. What we have now in the form of welfare state has nothing to do with what Hayek had in mind. The level of benefits the State provides is so much above of what can be considered as limited temporary assistance that in many cases it does disincentives people from efforts to support themselves. And what Hayek allowed in terms of social support does not sound like "socialism" at all, and you Nathan know this very well, so, please, stop playing dumb.

Nathan

Hayek's ideas are the ideas of a bygone era. ..The entire edifice of his economic theory seems to be directed against Soviet style economic planning... How many governments still think that they can arbitrarily fix prices and plan all aspects of economic activity? ... its hard to see how Hayek's arguments against economic planning are applicable in the present day. There is after all, a world of difference between the Soviet planned economy and modern capitalism...

Lev.

Well, if one cannot rebut arguments, one call them trivial and/or obsolete. I wish it were true, but it is not. While Hayek was rallying against planned economy, he never understood it as narrowly as you, Nathan, suggest. His understanding of central planning was not limited by full-fledged Soviet style totalitarian planning, it was much broader. To explain his ideas let me give you a few contemporary examples of what Hayek would had considered as unacceptable elements of central planning, which happen right now under our very nose.

Example 1. Direct central planning.

Solyndra and other recent investment projects of Obama administration provide obvious examples of central planning in action. Indeed, all these projects grew out of the conscious actions of administration to substitute markets in developing specific products using centralized governmental resources. The result of these activities is well known. But even if Solyndra and others did not go bankrupt, and, indeed, managed to develop a successful business, it would not have mattered. It still would have been an example of central planning, when government, believing in its infinite wisdom, thinks that they know better than the market what consumers want. Hayek was screaming that this wisdom is an illusion, but who is listening?

Example 2. Planning via price fixing.

There are plenty of examples of price fixing by the State, which is just another way of central planning, when government, rather than market decides how much a particular product must cost. Market distortions caused by this type of planning usually have very negative consequences. Here is a few example of planning via price fixing: Rent control and other affordable housing programs, cost of health services, price of food (fixed via agricultural subsidies), minimal wage laws ( fixing the price of the labor).

Example 3. Here I collected examples of more subtle State interventions in economy, but which still are covered by Hayek's arguments against central planning. I can begin with the multitude of the licensing laws limiting access of people to particular professions. Governmental planners decided on the qualifications, which a person must have to legally practice certain professions. Most of these laws (I would say, all of them, but it will ire you too much) are not just unnecessary, but really harmful. For instance, according to the State laws neither you nor me are qualified to teach our respective subjects in high schools. Do you find it reasonable? I find it to be an example of central planning. Another example is the whole bunch of anti-discrimination laws, which require adherence to certain racial and gender quotes. I still have very fresh in my memory speeches by Soviet party bosses proudly reporting percentages of women, students, manual and agriculture laborers in their elected organs, institutes, etc. How is it different from us, calculating the percentage of women, or blacks, or Hispanics in Romney's or Obama's administrations, or any other organizations?

Thus, Hayek's concerns about central planning are very from being obsolete and have direct relation to our current political and economic practices.

Nathan.

To apply Hayek's thinking to the present day his followers need to show that his criticisms of the planned economy are applicable to any and all government intervention in the market. ... So how to separate legitimate government action from improper intervention? Hayek, according to author of the article, suggests a distinction between end-directed action, intended to create a specific outcome, and process-directed or procedural actions intended to establish the rules of the game, the framework within which spontaneous order can emerge. It seems to me, however, that this is really a distinction without a difference....

Lev

Well, Nathan, this is the point that I tried to explain several times in the past, unfortunately, without much success. Let me try again. Hayek's distinction between an end-directed regulation and procedural regulation is quite substantive and important.To develop procedure, by which a society does something, is obviously not the same, as to try to create a particular state of society according to some predefined vision. The fact that you choose one particular process over others making this process an end result in itself does not make this difference disappear. The chose process becomes the end result only in the meta-sense.

I will try to explain it in more details using the concept of the "veil of ignorance" introduced by John Rawls. (It does not mean that I share Rowls' views, I just use this idea as a explanatory vehicle.) This concept can be loosely interpreted as a statement that one can make objective judgments about issues involving interests of various groups of people, only by placing himself in the position of not knowing how this judgement will benefit him personally, or any other particular group of people he has a personal attachment to. This person must hide behind the "veil of ignorance" of his own interests in the issue under discussion. What Hayek says is that the regulations introduced by government cannot be based on consideration of which particular group will benefit from them, and who will be at disadvantage if the regulations are implemented. In other words, governmental rules must be developed from behind a "veil of ignorance" with respect to actual losers and beneficiaries of the regulations. These must be the rules of the road equally applying to everyone, but not necessarily producing equal results for everyone.

Why is it important, from Hayek's point of view? Hayek believed that government is not capable of knowing all consequences of its actions. Therefore, attempts to go beyond the simple rule of the road regulations, and design rules with the eye for affecting different groups of people in different ways will always have unintended consequences and will not reach desirable goals most of the time. In addition, they will most likely result in less productive use of limited resources, and make everybody's conditions worse. In a way, attempts to design a law for benefits of one particular group, is for Hayek just another example of central planning.

Now, looking at many past and recent laws, I think it is clear that our legislative practices are very far from the Hayek's standards. Just a very recent example. Romney proposed to cut rates for all tax brackets and close the loopholes in the tax code. This is the neutral "rule of the road" proposal. In response, democrats immediately employed class warfare rhetoric looking for losers and winners. However, contrary to what they claim, they do not know who the losers and winners will be. Nobody knows how new tax rates will change behavior of individuals and businesses, and it is quite conceivable that increased economic activity will result in increased wages and well being of those people who democrats are trying to scare. It might not happen this way, of course, because economic behavior depends on more factors, that the tax rates. Also, I am not claiming that Romney's proposal will do what is promised, I simply use it as an example of the difference between the two types of regulations, which I think illustrates that this difference, contrary to your, Nathan, assertion, is with much distinction.

Among multiple examples of failed end-directed legislations are all kind of laws concerning affirmative actions, which achieved very little, and actually hurt those whom they were designed to help, according to many studies. The so called war on poverty, which is another example of end-directed laws, is a complete failure by all accounts. One can come up with other examples, but I have to stop here or I will never finish this piece.

Nathan

It seems to me that in their struggle against "redistribution" modern-day Hayekians are once again battling with Bolsheviks. Redistribution evokes the image of Leninist calls to "expropriate the expropriators, exploit the exploiters."... I believe, social programs are best envisioned in two ways neither of which involve outright redistribution of wealth. The first way to think of social programs is as a sort of insurance policy. I may not need unemployment benefits right now, since I am gainfully employed, but it is important to me to know that should I lose my job, I will receive support so that my family will not face total destitution. One could view food stamps, welfare, disability and social security in much the same way. I don't need these things now, but as a member of the middle class all that separates me from destitution is a few turns of bad luck. Should this happen I I will be very glad that there will be something there to cushion the fall and help me get back on my feet. This is no more a distribution of wealth than my car insurance which takes money from me (a safe driver, I'd like to think) and gives to people who drive like maniacs and get into accidents.

Lev

Dear Nathan, you keep pressing the line that Hayek was fighting only with full fledged totalitarian State, and, that his arguments do not apply to our contemporary world. I already have shown that Hayek' s arguments regarding planning were meant to be applied to a much broader set of political and economical circumstances that you would like to believe. Now I will do the same for the notion of redistribution of wealth.

Let me begin by stating the obvious: All social programs are re-distributive in nature. They can only exist if there is inequality in wealth and a mechanism of transferring resources from those who has more to those who has less. This is quite a trivial economic fact, which has nothing to do with images of Bolshevism. Hayakians do not fight with redistribution per se. More over, they accept that some degree of redistribution is unavoidable and justifiable even in the minimalist "dream" libertarian state. Robert Nozick quite convincingly demonstrated that maintaining law and order is a function of state, which is redistributive in nature because some people contribute to it more than others. However, since State does not allow people to take law in their own hands, it must compensate them for this restriction by extending its protection even to those who pay nothing for it.

Now let me comment about your attempt to present welfare programs as some kind of insurance policy. I believe that this interpretation is deeply flawed. Insurance is something that you buy with your own money to keep you solvent in the case of catastrophic unforeseen events. The key words here are "you buy" and "your own money". This is true that insurance policies redistribute money from those who has not experienced the insured event, to those who did, but this redistribution is voluntary, and everybody gets something, which they consider worthwhile from it. Peace of mind, for instance. Further, the premium you pay for insurance is inversely proportional to your risk factor. If social programs were anything like insurance, then those most likely to benefit from it (poor and uneducated) would have to pay more taxes than those with a much lesser risk to take advantage of them (wealthy and educated). This would mean a regressive tax system, while ours, of course, is the progressive one. Those who have almost zero probability to use welfare (the famous "one percenters") pay the largest premium. This makes no sense from the insurance point of view.

You may say that social programs are not individual insurance policies, but rather a collective insurance, which a society buys to defend itself against social upheaval, and those who stand to loose more, must pay more, thus the progressive tax scale. While this argument fixes the logical problem of the individual mandate argument, it is still flawed. In this case, the benefits are paid not to those who suffer as a result of the civil unrest after the insured event had happened, but is paid to the potential perpetrators of these event to prevent them from happening. In this situation, your insurance policy looks more like mafia protection racket.

The final comment in this segment is concerned with your argument that social programs give you peace of mind knowing that someone will be out there protecting you if your luck changes. While I agree that it is nice to have a piece of mind and feel protected, but have you thought through the moral content of this argument? You could try to live within your means, not to make debts, save for a rainy day, buy a number of insurance products to protect yourself and your family in the case of bad luck. Instead you prefer to rely on government to provide you with the protection. But the State does make money, manna does not fall in the State's treasury from the sky. Everything what government has, is taken from someone else. We can argue if it is OK to use coercive force of government to finance projects possessing certain common value, schools, for instance, or roads. But I think that to consciously expect that your bad decisions or even bad lack entitles you to receive resources taken by force from other people is morally quite questionable. Alas, but the concept of personal responsibility and self-reliance is becoming extinct in this country.

Nathan

People who don't want to pay taxes to support social programs do have an option--they can emigrate. Nothing is forcing them to stay in this country. I hear there's some great real estate in Mogadishu going cheap. "Oh, but you don't want to live in a country with no law and order, no infrastructure, no education, where corruption is out of control and dire poverty and misery confront you everywhere you turn?" Then, pay up! Paying for a social safety net is not coercive redistribution of wealth; it's the price of admission to a civilized society.

Lev

Dear Nathan, I had to re-read this passage several times before I realized what you have said. And I still could not believe that you, so smart, intelligent, and moderate, actually said it. What a disappointment! It looks like that you studied so much of Russian and Soviet history that it affected you thought process. This hit me very personally because this is exactly what I heard from Soviet party bosses and brain-washed proletariat: "You do not like our Soviet system, which provides you with everything, free health, education, housing? Then get out!" This is what they said to Rastropovich, Brodsky, Solgenitsin, Galitch, and multiple others, including me. I simply cannot believe you wrote it. I will assume that you do not really think it, and that it is the partisan rage that got the better of you.

Also, why did you choose Somali out of all places? do you think that this is the best representation of libertarian's "dream" state. Well, let me tell you something. Maintaining the law and order has always been considered as a main (for some people the only legitimate) function of the State in most of libertarian traditions, and definitely in Hayek' political philosophy. All of the economists working in Hayakian tradition emphasize importance of correctly organized governmental institutions maintaining law, order, sanctity of private property, of contracts, etc. No capitalist economy cannot work without government performing this basic functions, and liberals must be ashamed of bringing Somalia over and over again to scare people of libertarianism. To mention Somali while discussing libertarian's ideas of limited government is just intellectually dishonest way of arguing.

There is also another aspect of this argument. Did you really think through what will happen with this country if those who disagree with your version of civilized society will take you on your word and immigrate? They will not be going to Somali, of course, they will take their money and move to Cayman Islands or some other similar place. The one percent of US citizens pay more about 20 percent of all taxes in the country. What do you think will happen with the society if even a quarter of this one percent withdraw from the American economy? Well if you do nor have enough imagination, you can re-read Atlas shrugged.

Nathan

Getting back to my point on social justice, David Schmidtz, the author of the piece on Hayek, drawing, I believe, on the ideas of Robert Nozick, condemns social welfare program on the grounds that they are intended to create some kind of artificial "end state" based on an abstract notion of justice. Again, it seems to me the Hayekians are substituting Leninist visions of a communist utopia (along the lines of State and Revolution) for the actual functioning of the modern state. Social programs, as I understand them are designed not to equalize the end result of participation in the market but rather the initial conditions. It's about equal opportunities, not equal outcomes.

.

Lev

OK, let's talk about equal opportunities, a favorite liberal catch phrase. But what does it mean, exactly? Does it mean that everyone must enter the marketplace with the same level of education, skills, access to jobs? I think, it is obvious that this a completely Utopian goal unattainable in real world, and Shmidt is absolutely correct criticizing it for being based on an abstract concept of justice. People are born to different socio-economical situations, to families with different level of incomes, education, intellectual abilities, psychological compositions and predilections. This inequality is inherent to any society, and the more advanced the society is the greater the spread of this inequality. This is as much a fact as the law of gravity. One cannot eradicate this inequality unless one is ready to impose forceful totalitarian equalization by DECREASING the quality of education, health care, , etc. for everybody making everyone equally miserable. This is the argument, which Nosizk makes in his Anrchy, State, and Utopia. The suggestions that in the race for equal opportunities someone can seriously consider limiting opportunities for some kids is not a crazy right-wing fantasy. I actually heard on public radio comlains of liberal activists that well to do parents spend too much money and efforts on their kids. This is unfair, it was said, and must be forbidden. If they had their way, you would have been forbidden to take your daughter to piano classes, and to read smart books with her, and even to discuss with her topics outside of the list approved by the Board of Equal Opportunities. And why not? By doing all these things you create for her an unfair advantage as compared to children from East Orange, who do not have parents with doctorates. And these equalizers did succeed in equalizing our public school and university programs by dumbing them down, all in the name of equal opportunities. I think it is clear now, that the idea of equal opportunities either does have any real content, or, if taken seriously, put us dangerously close on the path toward totalitarianism.

The repudiation of the equal opportunity nonsense, does not mean that we, as a society, should not do something to give those who are at the bottom a boost, not to make their chances at success equal, but to improve them somewhat. However, presently, government has absolutely nothing to show for the billions of dollars spent on this type of programs. The most successful all-encompassing anti-poverty program run in Harlem has been developed by a private charitable organization with donations from wealthy Wall Street bankers. Attempts by the government to replicate this program elsewhere was a complete failure, first, because it is too expansive and government cannot afford it, and second, governmental bureaucrats are not capable of replacing passion and drive of a private individual for whom this program is the labor of his life. Most likely, such comprehensive approaches, while very beneficial for the small group of children lucky to be in the program, cannot be replicated, and cannot be foundation of the society-wide policy.

More promising are special type of early education programs tried in a number of states, which according to recent research, have very large impact with relatively modest expenses. The ironic thing is that these programs are quite Hayakian in style, as they do not aim to achieve some predetermined outcomes such as reading or math skills. They just put a child into a normal family-like environment and let him or her develop whatever abilities they naturally have. Normally, family would do that (and still doing for many children growing in "normal" families), but with destruction of families brought about by many years of misguided policies, the society must step in. These programs are not very expensive to run, and they save lots of money in the future. Not surprisingly many economists, including those of libertarian/Hayakian persuasion commented quite approvingly on these programs. But in order to have resources and implement these programs successfully, the government must stop wasting money and human resources on all the other crap they are doing unde the equal opportunity slogan now just to get votes.

Conclusion

In conclusion, I am sorry to say that yours, dear Nathan, understanding of Hayek has been clouded by your political predispositions. I hope that I clarified some of the most confusing points for you. I wouldlike to help you with some other points such as relation between Hayekianism and Marxism, but I cannot afford spending any more time on this. May be next time.

What would I want Mitt Romney to tell us

Flying back home after visiting Vancouver and feeling frustrated with Romney's campaign, I started thinking about what I would like him to tell us. So , here it is, a fake speech I wrote for Romney, which, of course, expresses my own frustrations and idiosyncrasies with the situation in the country. I realize that nothing like this can ever be said in public by a politician, and when Romney made a minor remark about 47% which was not intended for mass public and became known only as a result of act of political espionage (I wonder why no one talks about this side of the scandal. If I remember correctly, Nixon was impeached for eavesdropping on his political opponents, and secretly typing Romney's speech at a private meeting is how different?), he was crucified. Well, this only emphasizes that everything what I wrote in my make-belief speech is relevant. So here it goes, let's pretend it is Romney speaking.

My fellow Americans, legal immigrants, and undocumented workers! This year presidential elections will present a watershed in the history of our country as well as in the history of the world. This November the people of United States of America will decide what kind of the country they want to live in. The country, in which they take personal moral responsibility for their own lives, lives of their children and their parents, or the country, in which they delegate this responsibility to governmental bureaucrats. The country of the later kind has been in the making for most of the last 100 years, with several interruptions, so all the structures are in place to complete its construction. President Obama and his supporters will achieve this goal and irreversibly change the very nature of American society shall he be re-elected in November. To fundamentally change America was what he set out to do four years ago, this is what he publicly promised to the forces who brought him to power. The vision offered by the president might appear attractive to many people. After all, who does not want to live in society, in which all the hungry are fed, all the sick are being cared for, all children are given excellent free education, everyone has all they need, the air is free from pollution, the climate does not change, and humans live in peace and harmony with all other living species on the Earth. But what is the price that we are willing to pay to achieve this Utopia?

The common wisdom of pundits and political class is that these elections are about economy and jobs. It is true that our economy struggles and our people suffer from lack of jobs. But I think that our society suffers from a more serious problem and that our economic stagnation is just one of its many consequences. What ills us the most is that the moral fabric of our society is strained to its limit and started showing gaps and holes. Just look around and you see moral degradation everywhere. It can be seen in small actions of individuals and extremely consequential steps of large businesses. Our students do not feel ashamed anymore to cheat on tests, but what is even worse is that some of our teachers find it morally permissible to cheat for their students. And even worse than that, we are not treating this occurence as shameful moral failure of teaching profession, but trying instead to find excuses for them and shift the blame to somebody else. Our bankers do not feel any moral restraints in squandering money of their clients while pretending to "serve" them. And what do we do? We bail them out. Our journalists find it acceptable to fabricate stories to advance their own carriers, and are ready to bend their principles to promote political agendas they are subscribed to. Corruption among our political class reached gigantic proportions. Our young women use their children as a tool to finance their leisure life style with handouts from the government, and instead of admonishing them, we find all kind of reasons why it is somebody else's fault. Our businessmen prefer to use their connections in the government to develop their businesses instead of relying on their brains and knowledge and hard work to offer better products to their customers. Moral erosion, unfortunately, reached all levels of our society, and those who benefit from it will fight till bitter end to keep their privileges.

It did not happen overnight. The forces tearing apart our society have been at work for a rather long time. This moral degradation is one of the unintended consequences of social policies imposed on us by multiple administrations over last century. Over this time period at least a part of our society got accustomed to the paternalistic view of the role of government. We statrted more and more to rely on government for rearing and educating our children, for providing medical services for us, for our retirement planning, for funding our businesses, for assistance in unfavorable business environment. We relinquished our moral responsibilities when we delegated to government to do what used to be our own duty. We stopped taking care of our elders because we entrusted government to do it for us. Equally, we became much less involved in lives of our children because government convinced us that we should trust our children to it. We even stopped taking care of ourselves because we became convinced that it is government's responsibility as well. We stopped looking for better ways to serve our clients and innovate in our businesses because we find it easier to bribe a politician and have him squash our competition for us, or give us a favorable loan, or bail us out, when we make stupid risky decisions. We do not worry about consequences of our decisions anymore because no matter what, the government will come and rescue us. All this is, first of all, the moral failures of us as people, which resulted from our willingness to neglect our own moral responsibilities.

Do you think that these words are too harsh for someone who hopes to get your votes in November. May be. But in these desperate times those who want to lead must have courage to tell people the truth as they see it. False praises to the greatness of our country and our people will only result in further irreparable decay and destruction. O, yes, our country used to be great, and it still can return to its glory, but we must wake up from the lethargy and see what is becoming of us. I believe that there are still enough people in this country who are seeing the truth, and that there are many others whose minds are open and flexible enough to recognize that the gods they were taught to worship are false gods. I believe that if all good and honest people, even those who might have been misled by decades of brainwashing and propaganda, come together, we shall be able to overcome those who are bent on destruction of this country in order to fulfill their utopian dreams and the thirst for power. I am ready to be the leader of this movement, and this is why I am running for the President. I am positive that there are still many honest, hard working people in this country, who take pride in their own achievements, who find it immoral to get ahead in life by cheating or by taking stuff from others using the power of government, those who do build their businesses, spend sleepless nights studying, inventing, serving in the military, teaching in schools and universities, planting crops, making discoveries, sending shuttles in space, exploring. These people, no matter what the color of their skin is or what their religious believes are, or if they are legally or illegally in this country, these people are mine constituents, and it is for their sake I am running for the President.

President Obama will tell you that I promote individualism and that this is not an American way. He will tell you that we, Americans, always take care of each other. Well, I am an individualist, in the sense that I believe in the power of an individual to make decisions about his or her life without government intervention. I believe that we, as individuals, are capable in most cases come to agreement with each other without "help" from government and freely trade our skills and fruits of our labor. I agree with the president that it is an American tradition to take care of your neighbor, but I disagree with his implicit suggestion that taking care of one's neighbor must involve government bueracracy. Obama and his supporters believe that our communities are not capable of helping those of us who are in need without government involvement. By doing so they are diminishing hundreds of years of charitable work done by many Americans. By giving our communities false hopes that government can help them, they are destroying charitable initiative of our citizens. For some reasons they believe that it is more moral to depend on government for help when you are in need than to accept help from your neighbors. Nothing can be more perverted than this. Government can help only by taking money from other people by force, and how can it be moral to accept funds attained through coercion? Neighbors, on the other hand, help because they feel moral obligation to do so voluntarily. There is no shame in accepting help given with open heart and willingly. Americans are generous people, and they are ready to help those who need help, and they will be happy to do it as soon as government gets out of the way. By restoring morality of our society we will be able to move forward as free succesfull people while providing social safety net to week and ill. To achieve this will be the main objective of my presidency.

Thoughts on Hayek:Notes in the Margins of an Encylopedia.

For the past few months, Lev Deych and I have been intermittently doing battle over Friedrich Hayek.  Lev is a ardent admirer of the Austrian economist whose ideas he finds relevant and applicable to our present day economic problems, while I am, to put it mildly, a skeptic.  First I took Lev to task on historical grounds arguing that the dire predictions Hayek makes in his "Road to Serfdom" simply haven't come to fruition.  Then I presented an article by the well-known historian Timothy Snyder who sees the current right-wing embrace of Hayek (along with Ayn Rand) as evidence of an ideological indoctrination akin to Marxism.   Lev, it's fair to say, found this more than a little bit objectionable and made the point that Snyder (and me by extension) were not dealing with the real Hayek at all, only with a kind of grotesque set of misconceptions with little relation to Hayek's true beliefs.  Perhaps to remedy this shortcoming, Lev posted on Facebook a link to a new article in the Stanford Encyclopedia of Philosophy that explains Hayek's ideas in a way that meets his approval.   The philosophical lingo made the article a bit tough going at times, but I think it did help me to better understand Hayek's theories.  What follows are some more or less random thoughts that occurred to me as I was reading the piece.

1)  This is a rather strange way to write an encyclopedia article.   Ordinarily I would expect an encyclopedia article to present a neutral overview of the subject's life and career along with a survey of major works and ideas.   This article in contrast is more of an interpretive essay that seeks to advanced a particular position--i.e. that Hayek's rejection of "social justice" was an integral and inevitable outcome of his core ideas.   I was also slightly taken aback by occasional off handed quips that made it quite clear the author was writing from the libertarian point of view.  I thought writers of encyclopedia articles weren't supposed to do that.  Where were the editors?

2)  Hayek, at first glance, comes across as much more moderate and reasonable than his current day disciples.  Even his libertarian interpreter feels obliged to use words like "community" and "common interest" in describing his ideas.  Moreover, it turns out that Hayek had no problem with basic welfare state functions, thought the state had a legitimate rule to play in establishing the "rules of the game" and even believed that citizens should be guaranteed a basic income.  Ouch!  That sounds like socialism!   Hayek's core theoretical teachings on spontaneous order, the limitations of economic knowledge and market price mechanisms also seem reasonable and uncontroversial.  So why all the fuss?  Most of the time Hayek seems to be charging through an open door.  There must be a reason for this...

3)  Hayek's ideas are the ideas of a bygone era.   Hayek died in 1992, the year after the fall of the Soviet Union, and if he felt some satisfaction, even vindication, in his final days at this turn of historical events, it was for good reason.  The entire edifice of his economic theory seems to be directed against Soviet style economic planning.  He spends a great deal of time, for example, talking about prices and why they must be set through the market.  He also makes a fairly compelling argument on he limitations of knowledge: since we can never know enough to predict how an economy will actually behave, it is a delusion to think that government can fully and unilaterally structure and manage all aspects of an economy.  Who would argue with these points in this day and age?  How many governments still think that they can arbitrarily fix prices and plan all aspects of economic activity?   But back in the 1930s, when Hayek came of age as an economist, these ideas were taken very seriously indeed.  Westerners were flocking to the Soviet Union on guided tours and coming back saying "I have seen the future, and it works!"  A theoretical case against the planned economy was an important contribution back then, and Hayek's points, its fair to say, were largely vindicated.  But those were very different times, and its hard to see how Hayek's arguments against economic planning are applicable in the present day.   There is after all, a world of difference between the Soviet planned economy and modern capitalism in which the state acts within the context of the market to regulate economic activity and facilitate growth.  So how can Hayek's ideas be made relevant to the present day?  Hayek's present day right wing admirers have made an attempt, and I'm not all that impressed with the results.

4)   To apply Hayek's thinking to the present day his followers need to show that his criticisms of the planned economy are applicable to any and all government intervention in the market.  This is problematic if for no other reason than the fact that Hayek himself openly endorsed a number of these interventions. (I have to admit, I'm still a little puzzled by this point.  My recollection of Road to Serfdom is that it was addressed mainly to economic planning, but the popular takeaway always seems to be presented as welfare state+government regulation=totalitarianism.  Is this really what Hayek meant?)  So how to separate legitimate government action from improper intervention?  Hayek, according to  author of the article, suggests a distinction between end-directed action, intended to create a specific outcome, and process-directed or procedural actions intended to establish the rules of the game, the framework within which spontaneous order can emerge.   It seems to me, however, that this is really a distinction without a difference.  When are actions ever not to some degree end-directed?  Even purely regulatory measures are promulgated with an end in mind--the existence of a regulatory system which is deemed to be more advantageous than other possible regulatory regimes, and will presumably be beneficial to society.  Hayek's supporters would probably respond by saying that actually they are only referring to a particular type of end-state involving redistribution of wealth--taking from the makers to give to the moochers to fulfill a vision of social justice.  But is that what social justice really means?  I have my doubts.

5)  It seems to me that in their struggle against "redistribution" modern-day Hayekians are once again battling with Bolsheviks.    Redistribution evokes the image of Leninist calls to "expropriate the expropiaters, exploit the exploiters."  I imagine the scene in Dr. Zhivago when the hero returns from the front to find his family's home filled with gruff and grimy workers.  "Yes, Comrades," Omar Sharif murmurs,  "it is only fair that you should have more and we should have less."   But is this really the way that modern day welfare state programs work?  I don't think so.   I believe, social programs are best envisioned in two ways neither of which involve outright redistribution of wealth.   The first way to think of social programs is as a sort of insurance policy.  I may not need unemployment benefits right now, since I am gainfully employed, but it is important to me to know that should I lose my job, I will receive support so that my family will not face total destitution.  One could view food stamps, welfare, disability and social security in much the same way.  I don't need these things now, but as a member of the middle class all that separates me from destitution is a few turns of bad luck.  Should this happen I'm very glad that there will be something there to cushion the fall and help me get back on my feet.  This is no more a distribution of wealth than my car insurance which takes money from me (a safe driver, I'd like to think) and gives to people who drive like maniacs and get into accidents.  But should one of those maniacs hit me, I'll be awfully glad I paid for the insurance.   "But wait!" the Hayekians say. "taxes are involuntary and therefore using tax revenues to pay for a social safety net is forced expropriation of wealth from the rich to be redistributed to the irresponsible moochers."  But is this really such a coercive set-up?  People who don't want to pay taxes to support social programs do have an option--they can emigrate.  Nothing is forcing them to stay in this country.  I hear there's some great real estate in Mogadishu going cheap.  "Oh, but you don't want to live in a country with no law and order, no infrastructure, no education, where corruption is out of control and dire poverty and misery confront you everywhere you turn?"   Then, pay up!   Paying for a social safety net is not coercive redistribution of wealth; it's the price of admission to a civilized society.

6)  Getting back to my point on social justice, David Schmidtz, the author of the piece on Hayek, drawing, I believe, on the ideas of Robert Nozick, condemns social welfare program on the grounds that they are intended to create some kind of artificial "end state" based on an abstract notion of justice.  Again, it seems to me the Hayekians are substituting Leninist visions of a communist utopia (along the lines of State and Revolution) for the actual functioning of the modern state.  Social programs, as I understand them are designed not to equalize the end result of participation in the market but rather the initial conditions.  To use the 'rules of the game' analogy that Hayek's followers seem to like, the idea is not to weigh the dice, making winners out of losers, but rather to allow as many people as possible to play in the first place.  This is why so many social programs are directed toward the needs of children and young people.  It's about equal opportunities, not equal outcomes.  Social justice does not mean taking from those with more and giving to those with less; it means insuring that the rules of the game apply evenly to everyone involved.  You would never have a baseball game in which one team comes in with state of the art bats and gloves and the other team plays with broom handles and oven mitts.  But when one sector of the population is expected to enter the economic fray of the market having grown up undernourished, undereducated, surrounded by crime and disease, it amounts to the same kind of unequal game.   Granted, it will never be possible to completely level the playing field, and even under the best of circumstances, not everyone will succeed.  But it is clearly in the best interest of society as large for as many people as possible to have the opportunity to participate in the market with a reasonable chance of success.   This is what is meant by social justice.

7)  To sum up, I see Hayek as an interesting and productive thinker whose ideas took shape in the context of the anti-communist struggles of the mid 20th century.  Applying Hayek's ideas to the present day requires certain interpretive leaps displacing Hayek's teachings from their original setting and placing them on new and much more shaky ground.  Present day Hayekians tend to envision a state pared down to almost nothing in which even the most basic public functions such as education, law and order and infrastructure are entrusted to the power of the market.   There is almost a kind of quasi-religious faith that in all cases, under all conditions, the market will find the optimal solution.   We don't really know why this is or how this works (Hayek taught that we could never really know) yet we believe that what the unfettered market produces will always be the best outcome in the best of all possible worlds.  In this regard, I do think that there is a utopian strain to Hayekian/libertarian thought that is comparable (though certain not identical) with orthodox Marxism.  Both claim to have uncovered the mechanism that governs all economic and social relations past, present and future and which, if allowed to function without interference will result in the emergence of an optimal state of existence.   The fact that this optimal state has never actually been achieved, does not deter the believers from seeking its realization in the future through a program of purposeful political action.  We've seen this before.  It did not turn out well....

Ron Paul, Israel and lost opportunities

Ron Paul's presidential campaign, while bringing an exciting visibility for libertarian ideas, is also an utter disappointment on several levels. A lot has been said recently about his affiliation with paleolibertarians and courting of the ultra right, and how this old decision of his and of his "handlers" at the von Moses Institute misrepresented and hurt the image of libertarians. However, for those willing to look past his "youthful" indiscretions, his campaign provided an interesting opportunity to talk about distinctions between conservative and libertarian positions on American place in the world. This is a large topic, and here I want to focus on only one issue: American relations with Israel. Apparently, I cannot agree with Paul's anti-Israel and pro-Palestinian position, but I think that his candidacy provided an opening for honest discussion of this issue. Unfortunately, this opportunity has not been seized by the pro-Israel camp, whose attitude was that it is so obviously wrong that there is nothing to talk about.

Unfortunately, for a large part of electorate it is not so obvious as Paul's surge in the polls demonstrate. Candidacy of Ron Paul brought to the surface uneasiness of American population about US foreign policy in general and US -Israel relations, in particular. He essentially gave political cover and the aura of respectability to views, which lurked for many years under the surface of public debate, expressed mostly by both right- and left-wing fringe elements. These views can be shortly summarized in the following statement: America has no true national interest in allying itself with Israel, and America (and the world) would have been better off if Israel somehow disappeared. Proponents of these views believe that USA supports Israel only because American politicians are controlled by all-powerful Jewish lobby empowered by Jewish money and Jewish press.

As repugnant these views can be for supporters of Israel, I believe that they must be openly discussed and refuted on strictly rational grounds by explaining to Americans why allying itself with Israel, USA, first of all, serves its own self-interest.

One can discern several narrative lines of non-Jewish supporters of Israel. The one coming from evangelicals justifies support for the Jewish State by their faith in the coming of the prophet, which is hardly constitute the basis for rational discussion. Another is based of the notion that the enemy of my enemy is my friend, and is coming out of the people who do not believe in the possibility of peaceful co-existence with Islam. While this narrative is more rational, it's rationale is hardly sustainable politically and economically. Bush understood it as he went out of his ways to distinguish the war on terror from the war on Islam. However, in the absence of the global war with Islam, the justification for friendship with Israel based upon commonality of the enemy becomes significantly weaker.
Yet another narrative in favor of US-Israel alliance is based on the notion that Israel is the only democracy in the Middle East and for this reason alone deserve to be supported by US. This argument, which is not completely without merit, is based on the idea that only countries politically, economically, and ideologically compatible with the North-Atlantic type of societies do not present a threat to US and should be, therefore, be supported. While it is hard to argue that alliances between countries are forged on the ground of common interests, which often, while not always, arise from shared ideas about society and economy, it is not quite obvious how this argument applies to Israel. Indeed, let's us not to forget that Israel was created by socialists with the idea of creating a socialist state. Present day Israel is not of course a socialist paradise of centrally planned economy, but it is also very far from Anglo-Saxon economic model in its American reincarnation. I think that under different circumstances, Israel would have been a darling of left-wing liberals with its supers-strong labor unions, socialized medicine, and extensive social safety net. Why liberals choose to support Palestinians rather then Israel is a different story, which I partly discussed here.

Unfortunately, I am yet to find a satisfactory rational explanation of the US-Israel relationship based upon clearly formulated American interests. I do not fill competent enough in these issues to give here any positive version of such an explanation, but I fell that any attempts to justify US-Israel alliance based upon ideas of "moral obligations" or such are demeaning to Israel, and cannot be used as basis for foreign policy in any region, leave alone the one as controversial as Middle East. I am positive, however, that US does have crucial interest in maintaining friendship with Israel, and I call on those more knowledgeable in this problem to invest time and efforts into actually explaining it to American public.

Obamanomica or how to get rid of rich people

Latest Obama speech, which I did not have patience to listen in its entirety, but read enough exerts from to form an opinion, once again confirmed lack of intellectual honesty in his approach to problems facing this country. Or may be it is just the lack of understanding of these problems, and it is not clear, which is worse.

So, what are the main points of his speech? First is concerned with disproportion between growth of the incomes between very rich and the rest of us. Is it a valid point? It could have been, if instead of focusing on "income inequality", the President talked about "income stagnation" of the middle class. While the latter is a real economic and political problem, the former is a populist slogan smelling of the class warfare, no matter how many times he denies it. Indeed, the focus of Obama and cheering him progressives on the "inequality" betrays their thinking about economy as a zero sum game, which is the essence of Marxist thinking. Within this framework, the labor and capital are enemies in constant struggle for a fixed amount of resources, therefore, when one side wins, the other side looses. Luckily, the economy does not work this way as any serious economist would confirm. Capital and labor are dependent on each other and their rewards are supposed to grow in sync as they create wealth together. A physicist in me cannot resist to pointing out that there is no law of conservation of wealth; it can be created from productive energy and skills of people or destroyed by their incompetence and stupidity, both of which are much worse offenses than greed - the main enemy of populist charlatans and their cheerleaders.

There is a certain consistency in progressive's use of "comparative analysis" when discussing county's problems. They do not talk about poor quality of American education, they prefer to discuss "achievement gaps" between white and black, rich and poor, boys and girls, etc. The notion of the "income inequality" fits right here in this "comparative" narrative. The main problem with this approach is that it does not deal with real problems while wasting time, money, and public energy on unnecessary discussions of phantoms. The problems formulated in terms of "inequalities" or "gaps" have quite simple "solutions". One just needs to make wealthy poorer, strong students weaker, and the problem of inequalities goes away. In the area of education it is already happening, and Obama's latest speech signifies an attempt to apply the same template to economics. It reminds me of an old joke from Soviet times stating that the goal of Russian Revolution was to create a society, in which there are no rich people.

Joke or not, but the second point of Obama's speech, where he proposes a solution to the problem of inequality is quite consistent with the above mentioned goal of Russian Bolsheviks. Indeed, the main point of his proposal is to reform the tax code, such that rich will pay more. While it is not obvious how this proposal will increase income of the middle class, it clearly will make, if successful, rich people poorer. Thus, I think that I am entitled to believe that this is the main goal of the policy.

But let give the man a benefit of a doubt, and let assume that he does want to help the middle class out by increasing their income rather than by making them feel better because their rich neighbors suffer. The speech was, not surprisingly, devoid of any specifics about how taxing the rich will make middle class better off. While it is easy to imagine, how the redistribution of wealth can benefit poor (extension of welfare and medicaid programs), it is much less clear cut with respect to working middle class who live off the wages. To improve their situation these wages must be made to go up. The question how government can achieve this with extra money, collected from the rich. Government does not yet have a direct control of wages for those of 99% who works in private sector, and the idea that taxing the employers more will somehow induce them to pay better wages to their employees seems somewhat counter-intuitive. This leaves the government with only one option - create more and better paid public sector jobs. This proposition, however, raises lots of objections of philosophical ( Do we want to become a nation, where the State is the main employer?), political (Population of a country, in which most lucrative jobs come from the government cannot be free) and economical nature. I will not dwell on the first two objections, they are quite clear, so let me focus on the last one. Economically speaking, this simply would not work for several reasons. First, being deep in debt, government would not have the money even if it raised taxes on the rich by 100%. Second, let's assume for the sake of argument, that the money is not an issue for now. What can be the result of the government creating more and better paying jobs in public sector? If our economy were isolated from the rest of the word, it could, in principle, put pressure on private sector and force them to increase wages of their workers to remain competitive in the labor market. But we do not live in a closed system. The direct result of the employees run from private enterprises to governmental jobs will be shifting even more private jobs outside of the country. This process will be further exacerbated by the fact that increased taxation of investment income (the main portion of Obama's tax plan) will make domestic investment less attractive resulting in the flow of capital to other ,more attractive markets. This will create a vicious circle, with government having to keep stepping in to compensate for job losses in the private sector. It will end, though, pretty soon, with government going completely broke, and the entire system disintegrating. All rich people will flee the country with their money at the first sign of the troubles, and USA will finally become a country of only poor people, the dream of the progressives, I guess. No income inequality anymore, but is this what we all actually want?

One final note. Invoking T. Roosevelt ghost as a champion of progressive agenda is a bold political move, given a number of controversies surrounding his presidency. One that cut my attention in particular, is Roosevelt's fondness of eugenics (source - Wikipedia article on eugenics, where one will find Roosevelt in a fitting company of Keynes). Now we might find this attraction unbecoming, but at that time, where ideas of planned economy were on everybody's mind it was quine a natural sympathy. After all, if one can plan economy, why not to plan humans as well? Another popular idea of that era has also found its way to Obama's speech. It is not good, says he, than everybody plays by its own rules. Everybody will be better off if we all act together. This is, obviously, a poorly disguised attempt at promoting collectivism, from which it is just a small step to any kind of collective type of economy, be it socialism or fascism (not to confuse with Nazism). This part of his speech is wrong on so many levels, that it is even difficult to decide where to start. Interpreting individualistic philosophy as a game where "everyone is playing by its own rule" shows a gross misunderstanding of the nature of American individualism. It does not imply that there are no commonly accepted rules, it means people use their own individual judgements based upon their individual preferences to choose which moves to make in the game. And mantra of "we will be better off if we do it together" has never been anything more as a disguised attempt to force most productive part of society to work for the benefits of the less productive one. I hope that people will see right through this demagoguery.

Socialism and welfare state

A great deal of confusion going on in current political discussions. Such terms as socialism, welfare state, social safety net, free market, lassies fare capitalism are thrown around as monikers and used to frame users political positions but without actually giving them any real meaning. Most of political conversations these days are conducted not with real words but with their ghosts devoid of any stable meaning, which take any shape dependent on political preferences of their users. This phenomenon is not limited to just one ideological group as everyone, liberal and conservative alike throw around words and ideas in a very incongruent and confused manner.

In this post I want to focus on words socialism, welfare state and social safety net, which are often thought to be almost synonyms. Let me begin by stating that while socialist economics requires establishing the welfare state (population devoid of any rights to private ownership and free economic activity is at complete mercy of the State), the reversal of this statement is not true. Ironically, the first welfare state was conceived and realized by Bismarck in Germany to prevent spread of socialist ideas. The substantial social safety net developed in Nazi Germany played a huge role in ensuring popular support for Hitler. In neither of these cases existence of welfare state implied socialist type of economics. It should be noted, however, that Hitler's economics model was much closer to socialist ideals than current proponents of socialism are ready to admit. Hayek in his "Road to serfdom" gave very convincing arguments to support this point. In contemporary liberal political commentary successful socialism is often mentioned in relation to welfare states of protestant Europe such as Denmark, Netherlands, or Germany. For obvious reasons Greece, Spain or Portugal are talked about by modern proponents of socialism less frequently. At the same time, conservatives do not waste time pointing out to these states as examples of failure of socialism and by extension deny successes of the "Low Countries" and Germany in providing their citizens with free medicine and education.

Any kind of objective analysis must point out, first of all, that neither Denmark, nor Germany have socialist economies. Denmark, for instance, have been rated by Heritage Foundation as a country with most favorable for free markets economic system for several years in a row. Serious economic growth in Germany had began only after Germans significantly liberalized their labor laws. Let me clarify it for particularly stubborn liberals: liberalization of labor laws (making it easier for businesses to fire workers and freeing wages from dictate of the Unions), i.e. freeing labor market from regulations, means more capitalism and less government intervention in economy. Thus, in both examples of Denmark and Germany economic growth is directly caused by more and not less capitalism.

As a side note I would like to point out that discussions about socialism versus capitalism is often framed in terms of Keynesian versus Austrian school economic paradigms, which is undoubtedly wrong. Keynesianism may be an example of economists' equivalent of the delusion of grandeur, when economists believe that they can actually manage economy, but it is not equivalent to socialism.

Returning to the main point of the post, I hope it has become clear by now that presence of well developed social safety net with free medicine and education is not neccessarily imcompatible with free markets economy. This statement, of course, should be qualified because social safety net does create disincentives for productive particpation in the markets, and deflect resources form their most effective use. However, it is wrong to think about people as "pure homo economicus". No society can be built using economic efficiency as an only criterion. Political consideration, which sometimes require redistribution of resources to ensure political stability of the system, also play an important role. Thus, the main question is how much of safety net is too much? The answer to this question cannot be given by economists alone, as it depends on a great deal of local factors such as cultural traditions, the etnic homogeneity of population, the size of economy, economic inspirations of the populace etc. In short, in a democratic society, the extent of the safety net is determined by local social compact, and its success depends on ability of the citizens to resist the calls of the "sirens" of dependent life. It have been working for Dutch and Danes, and I happy for them, but combination of the welfare state with different cultural traditions of Italy and Greece resulted in a complete disaster. The selective use of European experience to promote liberal political agenda is a clear cut example of intellectually dishonest behavior of our progressive "intellectuals". However, when conservatives refuse to address successes of such countries as Denmark talking only about politically more convenient Greece and Portugal, they demonstrate shallowness of their political thinking.

Conservatives and undoing of America

I started writing this right after the debt ceiling debacle, so the beginning of this post is somewhat outdated. Still I decided to keep everything as it was written. Enjoy (or not).

So, the historic stand-off around the debt ceiling is
over and the sides started tending to the wounded and burying their dead, all while asking a traditional question:"whose fault is that?" Predictably, neither side of the political spectrum is satisfied with the results, while reaction of the liberal wing of the democratic party shows that they have much more corpses to bury than the conservatives. Their attitude toward the deal ranges from complete disgust to attempts to dismiss it as "smoke and mirrors". One ought to enjoy the
irony as one realizes that a big chunk of a recent article in New Yorker
written by a very liberal John Cassidy can be easily attributed to Michele
Bauchman. Anyway, no matter what democrats or more radical elements of the Tea Party say, the conservatives did score a victory if not in terms of actual budget cuts but in terms of redefining the national discourse.

At the same time, this debate has once again highlighted significant weaknesses in conservative movement, which are being happily exploited by liberals all over. In addition to being portrayed as angry, racist, undereducated, if not outright stupid, rednecks, the Tea Party adherents are routinely described as ruthless carrying about nothing terrorists. No matter how baseless all these accusations are, a sober observer must recognize that conservatives did supply enough ammunition to liberals to use against them. I myself, being a student of classical liberalism of Haeyk's
type have a long list of grievances against contemporary conservative political
movement. Apparently, I am not alone in my dissatisfaction as according to a
recent article in Politico, "conservative intelligencia" is not happy with any of potential republican candidates.

So, let me lay down a few issues, which I believe are hurting anti-liberal anti-socialist political movement in this country.

Let me begin with the issue of religion. Americans are religious people, but it does not necessarily mean that the majority of them are ready to embrace the idea that a particular brand of Christianity is essential to American success as a nation. To me the idea of defining USA as a "Christian nation" seems to be not just ounterproductive politically, but more importantly, false intellectually. Religions in general emphasize collectivist approach to life, and are, therefore much closer to
socialist ideas than to individualistic capitalist worldview, which used to be
the cornerstone of American psyche, and which Tea Party conservatives apparently want to restore. Still, there is no doubt that religion played an important role in development of American society, and this creates an impression of a direct link between Christian believes of American settlers and success of American capitalism. This link, however, is illusory. The unique nature of American religious experience stems from its protestant roots. Protestantism with its ideas of personal God and detachment from central papal authority is the least collectivist of all religions, and is, therefore, most conducive to capitalism. Protestantism, therefore, can be considered an important factor in American success only in the sense, that it did not stay in the way of capitalism as, for instance, Catholicism would have. Thus, I see no reasons, ideological or political, why the movement to restore creative force of capitalist enterprise in US should drive away people whose relationship with
God is much more complicated than that prescribed by the standards of
conservative evangelism. Also using adherence for a particular set of religious
views significantly decreases the pool of potential anti-socialist candidates
this country is so much needed.

Another big disappointment is a significant anti-academic and more general anti-intellectual bias of the conservative movement. I understand and share conservative's displeasure with usurpation by liberals of intellectual discourse on nation's campuses and in Academia in general. Way too often what is being passed for intellectualism has very little in common with genuine intellectually honest discussion. It is indeed intolerable that liberal art education has become in many instances an instrument of ideologically driven indoctrination and brain washing. Just a few weeks ago, I listened on NPR an interview with an author of the book on race. The woman was extremely upset with biologists whose work on human genome project indicated that there exist genetically identifiable differences between races. Because this finding contradicted her ideological convictions that the idea of race was invented by whites in order to suppress the rest of the world, she declared genetics to be in service of pharmaceutical corporations. This was really painful to hear since it resembled too much of Soviet's rhetoric of late fortieth of the last century. For those who do not know - at that time Soviet genetics was destroyed for being "a Servant of capitalists" with many geneticists imprisoned or killed. Unfortunately, this is not just a single example of one misguided person. It reflects the trend in social "sciences” to subjugate academic discourse to ideologically predetermined positions.

This, however, does not mean that conservative politicians must reject the very idea of academic discourse and alienate people in Academia who can be their natural allies. Plenty of faculty, especially in natural sciences and economics, support ideas of free market capitalism but are being driven away from conservative politics because of it real or perceived anti-intellectualism mixed with religiosity. This is not to say that conservative politicians and commentators are somehow intellectually inferior to their liberal counterparts. They are definitely not. But after listening to different conservative talks show hosts including celebrated and brilliant Rush
Limbaugh, I got an uneasy impression that they do not trust intellectual abilities of their listeners and dumb down their programs to cater to the level of intellectually lazy.

This lack of intellectual rigor is responsible for conservatives routinely losing the propaganda game to the liberals even on purely economic front, where conservatives are supposed to be at home. For instance, liberals are talking about Keynesian economics as though it is as established as the law of gravity. Anyone rejecting this notion is being branded as a lunatic. They make it look like the entire economics profession agrees about Keynes and his orthodoxy. This is not so, but I am yet to see a serious substantial discussion by conservative politicians and commentators of why Keynesian prescriptions rarely work in real life. I am sure that there are plenty of conservative bloggers and websites doing this, but the main stream conservative media and conservative political events definetely avoid getting involved in serious discussions of this topic. The same is true with regard to discussions of the role of government, social safety net, regulations: virtually
all aspects of public discourse. It seems that conservatives still live in the glory days of the end of the cold war, when socialism as idea seemed to be buried under the remnants of Soviet Union and Warsaw Pact. They failed to realize that socialist ideals are very attractive for the public, and that these days socialism is associated not with horrors of Gulag but with free medicine and education of Denmark and Netherlands. Refusal to recognize achievements of European countries in creating social safety net for their public opens conservatives to charges of being deological dogmatists not able to reconcile their views with real world. More importantly, it prevents them from defending conservative economic views by providing detailed analysis of the European situation. It is not sufficient now to just label something as socialist or “big government” to have it dismissed as unacceptable. It is also not sufficient to simply point out to the Europe debt problems and dismiss the entire European experience as failed experiment. They actually have to do the hard work of explaining why they think that Hayek’s approach to economics is better than the one advocated by Keynesians. This is not an easy task as they have to overcome people’s tendency to get addicted to governmental handouts and act against what they may perceive as their self-interest. Liberal in this situation has a much easier task as it is not that difficult to convince people that it is a good thing to take money from those who have them and give it to them. And it is much more difficult to explain why such a policy would be disastrous first of all for those whom it is intended to help. However, if the leaders of conservative movements would not start doing it immediately, they will participate in undoing of this country. It might happen that Ayn Rand was correct once again, when she said that conservatives and not liberals would eventually destroy America.

Carnival on the Wall Street

I decided to present my response to Nathan's thoughts on the meaning of OWS protests as a separate post. Due to time restrains I would not be able to offer as well written exposition as those of Nathan's and Vladimir Davidenko's, thus I will limit myself to expressing a few poorly connected thoughts.

Let me begin my iterating once again that Vladimir's description of OWP (see link in Nathan's post to his piece written in Russian) as a carnival is amusingly exact. Indeed, masked people with painted faces and bodies demonstrating behavior, which would not normally be considered socially acceptable, ritualization of the process (drums, human "microphone", all have standard characteristics of purely ritualistic actions), and finally the activity, in which process is everything and goal is nothing.


While the view of the OWS protests as a carnival-like action is quite deep and insightful, the protest has also a different side to it. I would describe this other side as a raucous high school party that completely got out of hand in the absence of any meaningful adult supervision. Some adults neglected to pay attention to this party for way too long, while other adults played the role of the cheerleaders and encouraged this raucousness. As a result, the kids imagined that they actually have something smart to say, something that only they can see or have audacity to express. They started "making history". In reality, from what I have seen and heard, none of them have ever done anything productive in their lives, and I doubt that they are capable of it. This carnival will be over once adults wake up from lethargy and tell the kids that sleepover is over and everybody has to go home.

Anyone with unbiased attitude and some brains would see how ridiculous everything that is happening at this party is starting with their incoherent list of complaints and ending with their General Assembly meetings, which are the focal point of the whole action. Presumably, according to the interviews I heard, the process, by which this organ works, is the main goal of everything. They advocate for participatory rather than representative democracy, in which everything is decided by consensus.It invokes direct associations with socialist anarchism, as it was pointed out by one professor of economics at a reasonably respected University who worked for 40 (!) years developing economic model based on this idea. Should I spend more time on this, or it is clear that socialist anarchism can survive only in the make-believe world of stoned high school kids or their older reincarnations?

All this would be amusing if it were not so damaging to the country. The country has got some serious problems which require serious adult discussion. Attention paid to OWS folk actually distracts from this discussion substituting it with some childish games. Those politicians, who give credence to their "grievances" and call them legitimate and deserving serious consideration, are consciously engaged in dangerous populism to frame the discussion of the country's problems in terms most acceptable to them politically. This simply delays finding real solutions making situation much worse. All this agitation against banks, corporations and their CEOs does not offer any constructive solutions unless, of course, you think that destroying corporations as a form of business organization, imposing regulations on compensation structure of private businesses, and massive wealth redistribution via forceful expropriation, is the solution. As far as I know these are the only ideas consistent with the views exposed by majority of protesters.

And on the top of all this, the folk at this protest are simply disgusting, at least the most of them, and I despise them. They descended on my City, which I love, uninvited, as foreign occupiers, and desecrated it with their filth, and litter. They do not understand New York, they do not understand this country, they do not represent anyone whom I know, including you, Nathan. You, unlike them, studied and worked all your life and paid your bills, and did not ask anyone to forgive your debts.

What to make of Occupy Wall Street?

Everyone is talking about the Occupy Wall Street protests and what they mean for American politics and culture, so it seemed to make sense that Lev and I should do the same.   Last week, at the invitation of my colleague Maxim Matusevich, I published a short piece on the Russian site "Balt-Info" with my impressions of the protests as of the end of September.  Here's the link.  And for anyone who doesn't read Russian, my original English text, which, I should note, is rather different from the Russian version, follows below.  But Lev suggested that some balance would be appropriate here and offered the following text by the blogger Vladimir Davidenko to provide a conservative counterpoint. 

Oct. 3, 2011

Not long ago, I found myself rather unexpectedly amidst the “occupiers” of Wall Street. My reasons for being there had nothing to do with politics, although their protests against the greed and impunity of the titans of American business arouse in me no small degree of sympathy.   But no, it was music that drew me to Zuccotti Park on a warm late September afternoon. 

That morning rumors starting to crop up on the internet that the group Radiohead, well known for their anti-corporate views as well as their innovative compositions, would be making a surprise appearance at the demonstration.   My daughter is a big fan of Radiohead, and I like their music too.  Our attempts to procure tickets for a rare concert appearance a few days earlier ended in disappointment.  So when we went to the protester’s web site and found a notice confirming that Radiohead would appear we had the same reaction – Let’s go!   We rushed down to the train station just in time to catch the commuter train into the city and were on our way. 

Less than an hour later, we were wandering around the encampment.   The park turned out to be fairly small—about half the size of a football field.  A huge orange metal sculpture stood at one end, trees poked out of holes in the brick pavement in the middle and at the other end a set of steps led to the street just around the corner from “ground zero” where the twin towers one stood.   One could imagine how in ordinary times employees of Wall Street banks and investment funds might come out here on their lunch breaks or relax in the park at the end of a long day.   But now the park was filled with a motley assemblage of young people—probably about a thousand—accompanied by the thunder of drums echoing off the walls of the surrounding skyscrapers.   It was clear right away that a concert was out of the question—there was no stage, no sound system, not even electricity—it seems we were victims of a hoax.   On the other hand we had the opportunity to observe this rather colorful scene.

For someone of my generation with faded childhood memories of the 1960s and 70s, the appearance of the protestors immediately evoked familiar associations—long haired youths, unwashed, bruised and beaten, shirtless, with beads and tattoos; girls in long skirts with pierced noses and multicolored hair; earnest, sincere faces—the usual style of American nonconformist youth.   One second glance, though, other types emerged from the crowd—veterans in camouflage, well dressed men in ties, elderly ladies.  Who were these people and what were they doing here?

Judging by the content of their signs, which were displayed in abundance around the perimeter of the park, the protesters themselves didn’t seem to know what exactly they were protesting.   The slogans ranged from the strident (Eat the Rich!) to the naïve (I love everyone. Let’s figure this all out together!) to the downright bizarre (I am a goat.  Ignore me.  Go  Shopping).   When the first reports of the protests appeared it was easy to dismiss them as a bunch of latter day hippies and muddle headed leftists trying to get attention.   But over the past week or so, to the surprise of the participants themselves, the movement has caught fire.  Every day more articles and reports appear in the news and more people make their way, as I did, down to Zuccotti Park to see what all the excitement is about.
  
In part the success of the protesters may be due to pure persistence—if you stay in one place long enough and make enough noise (they make plenty!) someone is sure to notice.   On the other hand, the protesters had one of the best publicity agents anyone could possibly ask for—the New York City Police Department.   For the most part, the police have exercised restraint in their dealings with the occupiers. In part they have no choice.  The Park which the demonstrators have occupied is technically private property.  The owner was given permission to build a skyscraper next door on the condition that he create the park and keep it open to the public 24 hour a day.  Without permission of the owner, the police do not have the authority to clear the premises.   So the police stand around the edge making sure traffic isn’t blocked, but leave the park to the young people. 

There have been a few occasions, however, when the protesters have left the refuge of the park and the police have abandoned their restraint, inflicting excessive force, and applying questionable tactics including mass arrests.  Invariably videos showing police misconduct surface right away and go viral on the internet arousing a wave of sympathy and support.   After two or three such events, the protests had become national news and inspired analogous protests in cities throughout the country. 
But all police brutality in the world could not have helped the Wall Street protesters gain support if their message had not resonated with a set of widely held, if not always clearly articulated, beliefs about contemporary American life. 

Three points in particular come to mind.  The first is that something has gone terribly awry with our financial sector.   Instead of providing necessary services and investment opportunities for ordinary Americans, Wall Street has become a crazy game of smoke and mirrors conjuring unimaginable wealth out of thin air through arcane and opaque instruments with names like credit default swaps and collateralized debt obligations.  

Of course, such games could not continue forever.  Eventually the whole thing came tumbling down in the crash of 2008, and giving rise to a second widely held belief--Wall Street walked away from the mess it made leaving ordinary Americans to suffer the consequences.  All throughout America people are losing their jobs, losing their homes, struggling to stay afloat under mountains of debt.  Meanwhile the great banks and investment firms have received generous government bail-outs and are back to making record profits at the expense of the very people who are suffering the most.    Huge banks are deemed “too big to fail” and given help at the tax payer’s expense while ordinary people are abandoned to their fate.   

As if this wasn’t enough, Wall Street is clamoring for Congress to remove the few regulations that still remain in place.  Hence a third key idea— American political life is controlled by large corporations and ordinary people no longer have a say.   Corporations spend millions of dollars on powerful lobbyists and campaign contributions without which no politician can even hope to be elected.   Naturally, after the elections, the corporations collect the political returns on their investment and although the politicians come and go, nothing really changes.  

In part this perception reflects the disillusionment that many people feel with Barack Obama who came into office promising change only to pack his cabinet with Wall Street insiders and give the banks everything they could ask for and more.   The banks, far from being grateful, responded by financing the Tea Party, setting the stage for the decisive victory of the extremist wing of the Republican party in the last congressional elections.    As a result, the activists feel that if any change is to occur it must come from outside the framework of the traditional political system.    This may be one reason for the lack of specific demands or goals on the part of the protesters.   Unlike the Tea Party, to whom they are often compared, the protesters show little interest in supporting political candidates, organizing referendums and otherwise participating in the give and take of American politics.   This may come later.  But for now they have already made a more profound contribution.  By drawing attention to the abuses of Wall Street and its impact on ordinary people, the protesters have given voice to a deep frustration felt throughout the country and opened a new framework for discussion and action.  No one knows how long the protesters will remain encamped in Zuccotti Park, but their message has already left its mark. 

Leftists in academia redux

A while back we had an interesting discussion about the apparent preponderance of leftist views within American academia.  We suggested a variety of possible explanations but they all seemed to fall short for lack of concrete evidence.  I'm not particularly interested in returning to this debate, but when I saw this article in the Times--The Left-Leaning Tower--I thought it might be interesting to post as a sort of follow up. 

In the article, the author reviews the work of several scholars who have actually studied this phenomenon in some detail.   Unfortunately, the results are still rather inconclusive.  One the one hand are the findings of a sociologist who identifies himself as a democrat and claims to have found that discrimination is not a factor in the low number of conservatives in academia.  On the other hand are a few conservative/libertarian scholars who argue that discrimination may be taking place in more subtle ways at later stages in academic careers--in short if you're a conservative don't get your hope up for tenure.  

So basically this supposedly neutral review of empirical studies boils down to yet another he said/she said media sleight of hand using "balance" as a pretext to shore up an untenable position.  It turns out that the "liberal" study is based on an extensive investigation of actual behavior in the real world, whereas the conservative counterpart employs much more flimsy evidence--a much smaller survey of attitudes based on hypothetical scenarios.  But in reviewing the conservative critique, the author succeeds in voicing several quite insidious stereotypes that feed right into the anti-intellectualism so prevalent in American culture.  Two particularly stood out--first that being a professor is a cushy job with four months of summer vacation, and secondly that there is some kind of multicultural and feminist veto over hiring and tenure decisions.    Ultimately what gets lost in all of this is the real reason why people go into academia--love of research, teaching and of the life of the mind.  More often then not when it comes down to what academics actually study, the crude distinction between liberals and conservatives that dominates our media landscape becomes almost irrelevant. 

Liberals and Ideology of failure. Take II

Previous thread with the same title got too cluttered, thus we decided to streamline the discussion and move to a new thread. So, here it is. Enjoy.

Recently, I ran across a blog by some fringe uber-liberal blogger mourning the death of Bin-Laden as a misguided hero willing to sacrifice his life for the sake of "oppressed". Her words turned my mind to the question that puzzled me for a long time. Why is contemporary liberalism simultaneously anti-American (more generally anti-Western in the sense of Western cultural values) and anti-Israel in nature? What is that psychological trait which turns people born in USA and Europe to hate values on which their native civilization was founded? What is it that makes liberal Jews, to whom Israel did nothing bad personally, to hate it that much?

Obviously, liberals are against capitalism, and this explains their hatred for such things as individualism, private property, economic freedom, limited government. Capitalism was invented in the West, and US is perceived as the country embodying it the most, thus the anti-West and anti-US sentiments of the liberals are quite natural. What is more puzzling is why they always go hand in hand with loathing for Israel, which is a country with long-lasting socialist traditions.

In an attempt to find the answer to this question, let me begin by noting that liberalism is based on the idea, originating from Marxists class struggle theory, according to which people belong to one of two categories: they are either oppressors or the oppressed. The latter deserve sympathy and should be defended, while the former must be anathematized and, when possible, destroyed. Practical application of this idea depends, of course, on how one determines who the oppressor is, and who is being oppressed. This is where liberals very successfully play their favorite linguistic game redefining words and giving them new meanings. For me oppression is associated with Stalin's GULAG or with Hitler's gas chambers, but this is not what liberals mean by “oppression” these days. Nothing helps to understand the actual meaning of the words than looking at their usage.

The main favorite oppressor these days is, of course, Israel. Never mind that nobody heard about concentration camps build by Israel for Palestinians or about mass extermination of the latter by the former. (And, yes, I do know about certain incidents perpetuated by Jewish groups in 1948, which, while definitely, regrettable, were committed in the midst of the war and never became official policies of the State of Israel). In modern Israel, Arab citizens have the same civil rights as Jews including their own representation in the Knesset. Living conditions of even those Palestinians, who do sit in Israeli prisons for such insignificant things as blowing up Israeli civilians, are often better than that of their “free” compatriots. There has been a press report recently about two Palestinians refusing to leave the prison so that they could complete their education. So much for being oppressed! But it all does not matter because liberals learned very well Lenin’s dictum: “A lie told often enough becomes the truth”. Their demonization of Israel has been so persistent that now everybody is convinced that Jews are the most evil people in the Middle East, and “the pain in the asses” as one famous movie director put it recently.

When liberals do not blast Israelis, they like to talk about global guilt of the West before underdeveloped countries in Africa or Latin America or the same Middle East. Before WW 2, the Western countries "oppressed" the rest of the world directly by colonizing them. What does it matter that those “oppressors” built infrastructure, provided education and medical services to those whom they oppressed? So what that after "liberation" most of this infrastructure, medical and educational institutions fell in disarray, and the newly free nations, especially in Africa succeeded mostly in killing each other? While after the war Europe engaged in restoring their cities and developing their economies, Africa self-destructed. Instead of accepting responsibility for their people, African leaders helped by Western liberals, succeeded mostly in the blame game and stealing whatever resources the West had sent to their countries. The West is being blamed for everything including AIDS epidemics. The idea that one has to use condoms during sex turned out to be much less appealing than suggestions that the Western countries created HIV virus in order to get rid of Africans and to appropriate their resources. And it does not matter how many financial and human resources western countries wasted in Africa, it is never enough. If Africans are miserable, it is because of West's colonial, neocolonial or postcolonial policies.

The faces of oppressors and oppressed back home in the "Land of opportunities" are also well known. The most obvious oppressors are of course the "fat cats” from the Wall street, greedy bankers, and the biggest and the scariest one – the Corporation. Vilification of corporations in liberal media became so beyond any reason that it appears that Corporations are some evil monsters from outer space rather than just one of many ways to organize ownership and governance of a business. Liberals seem to forget that corporations provide hundred thousands of people with jobs and manufacture those things, which liberals do not feel any shame to use in their daily lives.

In addition to large oppressors, there are smaller oppressors, which judging by Obama’s tax proposal, are everyone making more than $250 K per year. They may be not as evil and powerful as Big Oil or Big Farma or Koch brothers are, but they still oppress “less fortunate”, just by the virtue of possessing their “fortune”. One should admire Left’s linguistic abilities in inventing names designed to conceal the actual nature of phenomena they discuss. Term “less fortunate” is supposed to convey the idea that being poor has nothing to do with people making their personal choices, but it just a matter of good or bad fortune. Here are a few examples of those who are encouraged to think about themselves as oppressed. Students at my university feel so oppressed that a week before the finals, instead of studying, went to demonstrate and demand that more money were taken from those who has them and given to them. Another example: welfare mothers, a whole bunch of the “Precious”, who do not have the will and skills or even a desire to hold a job, but dream big about how they magically appear on a brightly lit stage, in a glamorous dress, and are admired by everyone. Also oppressed are the drug dealers and the drug users. The former sell drugs because they are not provided with other economic opportunities and the latter use them for exactly the same reasons. In general, oppressed are those who have “needs” they cannot fulfill and demand that other people were forced to provide for them.

Now, let us see if there is anything in common between these disparate examples of “oppression”. There might be more than one unifying motif here, but the one, which seems almost obvious to me, is that in all these cases oppressors are those cultures, countries, individuals who succeed, and the oppressed are those who fail. Indeed, Israel built a functioning state with a powerful army, modern economics, developed infrastructure, medicine, world-class education, and the level of life unseen in this part of the woods. Palestinians, at the same time, completely failed in developing their territories in spite of streams of money sent their way. This observation also helps me to understand why liberal Jews hate Israel so much that actually covertly want its passing to oblivion. They are psychologically frustrated. They would like to be able to be both good Jews and good liberals, which is not possible while Israel exists as a successful state. If Israel were no more and all the Jews (those who would survive) were scattered again all over the world and persecuted, they could be immediately moved to the category of oppressed. At this point, the liberal American Jews would find themselves in a very comfortable position - once again, they could be good liberals and good Jews saving their fellow compatriots and bringing them back under socialistic banners.

The same idea explains the general animosity of liberals toward principal Western values and their embrace of multiculturalism, which is just a code word for diluting western ideals of individualism, rationality, objectivity with cultural values from other much less successful traditions. The only consequence of this dilution can be diminishing role of those values that brought people from all other the world to the West to enjoy its achievements. The result is not difficult to predict: no more achievements.

One can argue that in the world of limited economic resources, the successful people and countries enjoying the fruits of their success consume too many resources leaving too little for those who are less successful, and therefore they become oppressors immediately once they claim their rights on the fruits of their labor. This argument, however, suffers from two fallacies. First, is the presumption that amount of wealth available for distribution is a conserving quantity so that if one has more than the other necessarily has less. Or if put in terms of the game theory, that economic activity is always a zero sum game. This is, of course, not so. Successful people create something, which would not have existed without them, and this defines their success. In very general terms, they create wealth, and by creating wealth, they increase resources available for everyone, including those who are “less fortunate”. Hayek in his “Road to slavery” gives a perfect example of this phenomenon. The labor of a minimally skilled worker by itself is not worth much. When, however, he becomes a part of a bigger enterprise, a factory, created by a successful individual with vision and talent, the worth of his labor increases by orders of magnitude. The second fallacy consists in the assumption that expropriating wealth created by successful people to achieve its more equitable distribution would have no influence on its overall amount. Ayn Rand showed that this is not so very clearly in her Atlas Shrugged, where she demonstrated with almost mathematical precision what happens to a society, which begins such redistribution.

OK, it is time to wrap it up, as I myself am not able to finish reading this post. To conclude: the liberals hate capitalism because they are ashamed of being successful. They believe that success of some is unfair for the others. It might be so, but to punish people and countries just because they succeeded while others failed is not just more unfair – it makes things worse for everyone, including those whom liberals are purported to defend.