(L85) Professors Caplan & Casey on Rationality & Representation

1.) Are voters informed? If not, why not? According to Professor Caplan, is the problem ignorance or irrationality?

It is generally known and a “wide consensus among social scientists” that voters, for the most part, are uninformed. Professor Bryan Caplan argues opposing the miracle of aggregation, stating that voters are making systematical errors, rather than random ones. He expanded on this by saying that the errors being committed are biased in a certain direction, and that they are not randomly distributed whatsoever. Caplan points the finger at irrationality of voters rather than ignorance, his reasoning for doing so being that “false beliefs are cheap”. False political beliefs carry no weight when it comes to actually effecting ones life (unlike a false medical or health belief, which would effect one almost immediately and directly); this being the case, people are more inclined not to care, or to be irrational.

2.) Professor Casey claims that the idea of political representation is an empty one. How does he defend this argument?

Professor Gerard Casey defends the idea that political representation is a fallacy by breaking down the basics of a political representative’s position. Summing it up wonderfully, Tom Woods states that the “agent is not responsible to the principal, who is not one, but many people; the vast bulk of whom the agent does not even know”. With the issue being that the agent (political representative) has multiple principals(clients/people), there is simply no way that each of the people can have their needs and wants met exactly and/or directly. Each of these people has different motivations, and (many have) irreconcilable interests.  In conclusion, a political representative stands for special interests, personal motivations and ultimately, representation of the very system they claim to represent people for; the government.

(L80) The New Deal & The Industrial Revolution

1.) Evaluate this claim: “The New Deal was a wise series of government actions that healed the problems afflicting the economy.”

The New Deal was a series of atrociously planned government actions that resulted in a famished, unemployed, and economically unsound people. The National Industrial Recovery Act for example allowed each industry to draft production codes for itself; this meant minimum wages, minimum prices, hours of production, specific production methods, etc. The claim backing this decision was that what businesses really needed was stability, rather than competition. The result of acting on this claim was basically stomping out smaller businesses on a major scale. Big businesses, having multiple locations and bountiful resources were in no competition with smaller businesses in the sense of service; however, the one area small businesses could compete in was prices. With new codes preventing small businesses from competing with prices, most perished by the hand government intervention. It was stated by UCLA professors Harold Cole and Lee Ohanian that “the abandonment of these policies coincided with the strong economic recovery of the 1940s”.
Another “wise” government action attached to The New Deal was the Agricultural Adjustment Act. This time, the government decided to stimulate the economy and raise food prices by destroying crops that had already been planted and grown. Acreage limitation was also implemented, and pigs were slaughtered needlessly to raise pork prices. This caused about 2 million tenant farmers and sharecroppers to become jobless, and to top it all off it was soon discovered after the fact that the United States was not producing enough food to sustain the population, even at a minimum subsidence level diet. What a way to heal the economy, way to go government intervention!

2.) How was the standard of living affected by the Industrial Revolution?

In short, the industrial revolution created numerous opportunities for workers that hadn’t previously existed. Before the industrial revolution, workers could have either made a profitable living through agriculture, or by gaining the tools necessary to enter into an independent trade. After the industrial revolution however, there was newly made space in the economy for a work force of people who were able to do neither of these things; factory work employed many people who would have otherwise suffered because they did not have the resources to meet the needs of the economy.

(L75) Domestic Politics, Economics, & African Government

1.) What kind of success did Africa have with governments that wielded great power over the different African economies?

In Zaire for example, ruler Mobutu Sese Seko (1965-1997) took a great negative toll on the society he ruled over. During his time in charge, there was a copper fueled economic boom; Mobutu took this opportunity to spend great sums of money constantly. He had eleven palaces erected, made his friends instant millionaires, and put up numerous monuments. Following this growth-spurt of power Mobutu launched the African “authenticity” program in which all Christian names were to be replaced with African ones. Christmas was also outlawed, as was dissent, and Mobutu had his own image displayed within the church. Westernized clothing was banned, and to top it all off, he cut national ties with Asians, Belgians and others.
After copper prices once again fell, there was severe economic downturn; Mobutu had to invite the Belgians back after having driven them out. High price inflation and great debt plagued Zaire. Public transportation systems failed and broke down without repair, and even hospitals were barren of the most basic medical supplies such as bandages and oxygen.
The result of anti-capitalistic government practices were devastating to say the least throughout various African economies.

2.) What are some of the major arguments advanced by the Public Choice school of economics?

One major argument advanced by the Public Choice school of economics is that individuals are self interested and motivated, regardless of whether or not they are government officials.
Another argument that Public Choice raises concludes that when one acts in the market, they receive the benefits or suffer the consequences. This is not the case for (voting or) government officials because they receive no feedback as they would in the free market system. Considering the fact that bureaucrats face no feedback, they face no consequences either.

3.) What are front-loading and political engineering?

Front-loading is a practice of political scheduling that shifts momentum towards a particular candidate before the general (final) election. In military terms however, it is simply an over-promising and underpricing (weasel) system to get what they want. To counteract front-loading, rather than rejecting an item that costs astounding amounts of money (which had originally been low-balled in the price pitch), political engineering is then utilized. Political engineering is when the cost of an item (or items) is spread out between as many districts as possible; this creates a domino effect and no one congressmen will (or can) pull the plug on it due to the fact that so many other districts back it.

(L70) Capitalism Vs. Communism: Karl Marx

What are some of Marx’s criticisms of capitalism? How might you respond to these criticisms?

One of Marx’s criticisms of capitalism was that it’s inferior to communism because it exploits wage labor in the sense that workers are only paid enough to survive, rather than being paid in accordance with the value that they create. I would respond to this by saying that in reality, a capitalistic economy is based off of voluntary contract between worker and employer. If the worker is good, and they have high value as an employee, then they will be paid according to that (with the value of their work decided between themselves and the employer). If a good worker is not being paid as they should be, then they have the option to take their services elsewhere and the employer has to make the decision between paying a worse worker the same amount, or keeping his good worker at a higher wage. This is the freedom of competition.
Another criticism of capitalism that Marx made was that the division of labor is wrong, and should be removed from the economy. My response to this is that, in all honesty, it makes no sense. I mean, would you rather have a hundred good workers who are each specialized in a certain field, or a hundred okay workers who can do a hundred different things alright? I certainly would rather have a great doctor do surgery on me than someone who is only a doctor in their down time!

(L65) Swedish Prosperity & Fascism

1.) The standard claim about Sweden is that it shows that society can prosper without such a free market and with extensive government intervention. Based on the lesson and on your reading, what would be a good response to this claim?

Sweden’s prosperity was originally birthed from a free market capitalistic economy, as well as avoiding war (as best they could). There is no historical evidence, even as late at the 1950s, of great welfare funding, and Sweden’s Austrian economics standpoint lasted between the 19th and even the early 20th century. The economic strength and prosperity that resulted from these practices was eventually funneled into a welfare state. Between 1970 and 1989 taxes were raised and hand-outs were increased; Sweden’s place as the 4th richest industrialized country dropped to the 14th by 1993. Just as capitalism had built their country strong, the turn away from it had began to make their country weak economically; since then however, economic freedom has increased (and surpasses that of the United States greatly).

2.) What were the primary values of fascism?

The primary values of fascism basically hold that the rights of the individual are far surpassed by the “good of the Nation”. In the words of Mussolini, “everything for the state, nothing outside the state, nothing above the state.” Beside putting the state on a pedestal and pushing for political centralization, fascism also highly encourages nationalism and the glorification of the military.

(L60) The Constitution, State Power & Nullification

1.) What is the idea of a “living Constitution”? In what way could it be argued that the American Revolution was a war against a “living Constitution”?

The idea of a “living, breathing Constitution” supports that the law of the Constitution must be interpreted (and changed by Judges) to suit current times. The American Revolution was a war against a “living Constitution” because the colonists were arguing that government action violating longstanding (unwritten) traditions was unconstitutional. Changing the Constitution to suit the times is a gross perversion of its original intent.

2.) What is nullification? Discuss one example from U.S. history in which the a state or group of states acted in the spirit of the Virginia and Kentucky Resolutions of 1798.

Nullification is the act of making a political action legally void, or cancelling it out. One example of nullification in U.S. history can be found through the years of 1808-1809, when Jefferson’s embargo was imposed by the federal government stating that American cargo ships could not travel to foreign ports. In January of 1809, Massachusetts declared this act unconstitutional. Following closely after in February, the governor of Connecticut ordered state officials to be uncompliant in regards to Jefferson’s embargo. Lastly, in March, Rhode Island declared that it’s (state) government would protect any and all of it’s people against this unconstitutional exercise of power by the federal government.

(L55) Compact Althusius & Nationalist Hobbes

1.) Describe the models of society laid out by Althusius and Hobbes.

The model of society laid out by Althusius was one consisting of many smaller authorities, each with its own rights that no other power could overturn or impede upon. The reasoning behind this being that if one authority (say, a state) became too oppressive, a person could easily move to another. The ability to leave the authority of a tyrannical state pressures all the states to remain un-oppressive.
The Hobbesian model of society, being quite opposite of Althusius’ model, stated that large states would be ruled over by one irresistible and centralized power; a government.

2.) What are the compact and nationalist theories of the Union?

The compact theory, as known as the “compact fact”, goes hand in hand with Althusius’ model of society. It holds that a union, which is a collection of states, was created by and from the states; meaning that the states were the original unit. The nationalist theory, corresponding with the Hobbesian model of society, states that the union is a single whole, and that it was the original unit. This theory holds that states exist only as parts of the union.

(L50) Fiat Money & Government Interference

1.) What problems do price ceilings cause, and what are the benefits of letting prices adjust without government interference?

Price ceilings lower the quantity of products available to consumers, and raise the demand all at the same time. This causes shortages. Allowing prices to adjust themselves would allow producers to accurately interpret economic signals and meet the needs of consumers in a highly efficient fashion.

2.) Name and explain three disadvantages that have been identified with fiat money.

One disadvantage that has been identified with fiat money is the fact that when the government (really The Federal Reserve) increases the paper money supply, prices rise to a level that they would not have naturally reached without intervention. Another disadvantage to fiat money is that it increases the power of the government. Because they can create new money from thin air and there is no limit to how many paper bills they can print, they have, in a general sense, unlimited resources. Adding onto this, when new money is created there is a distortion in the distribution of money throughout the economy, because whoever receives the new money first is spending it at the prices of the old money. (When new money makes its way through the economy, prices rise; however those who are the first to receive the money have not yet experienced this rise in prices, and are therefore favored in this process.) The losers of this process are those who get the new money at the end of the process, or by the time it has already taken it’s toll on the economy.

(L45) The Welfare State

1.) What is the primary problem facing a policymaker who is trying to design a program to benefit people in unfortunate circumstances?

The biggest issue in creating a welfare-benefits program is the fact that it needs to be created in such a way that it is good enough to help people, but not so good that people never give up the help to support themselves (without welfare). This entails creating a target group; however people just outside of the guidelines of this target group are more likely to worsen their own situations, to place themselves within the guidelines in order to receive assistance. This means greater numbers of people are taking out, and less are paying in. Welfare benefits also create incentive for people within the guidelines (say, unemployed people) to stay within the guidelines, because rather than bettering their situations through work, they are handed a better situation. Even for those who originally have intentions of using welfare just to get them back on their feet again become comfortable in the situation they have been gifted. Overall, the rules of the program have encouraged those within the guidelines to stay there, and those outside of the guidelines, to get between them.

2.) In practice, what have been some of the outcomes — intended or unintended — of anti-poverty programs?

Throughout the growth of the welfare state, many disturbing side effects have been revealed. The largest of these realities being the fact that the welfare state does not actually decrease poverty! From 1967 to 1994, welfare spending quadrupled; poverty levels however, remained the same. It has also been discovered that poor people without government assistance are two and a half times more likely to escape poverty than those who are on welfare. It’s effects on family life have been absolutely devastating as well, and it has been linked to extremely high divorce rates. Children who come from families receiving government assistance typically have an IQ 20% lower than the average child coming from a non-welfare funded family. Welfare also has proven to impair young men’s earning abilities, cause behavioral and emotional issues in children three times greater than that of those without government assistance, and double the chances of a criminal future. Tax payer’s hard earned money is being drained into a system promoting broken families and lives of despair, all the while being framed as the greater good; is this something that you really want to be supporting?

(L40) Government Intervention in The United States

1.) Explain the basics of the Austrian theory of the business cycle. What is the difference, in terms of consequences, between lower interest rates that result from the saving choices of individuals, and lower interest rates that are achieved artificially, by a government-established central bank?

The Austrian theory of the business cycle basically dictates that in a free market, there is communication between the consumer and the producer which is translated through interest rates. As long as interest rates are not interfered with, they will read correctly to producers and allow them to meet the needs of their consumers reliably. However, when interest rates are interfered with and pushed down artificially by the central bank, there is no longer clear communication between producers and consumers. This lack of economic coordination creates conflict, and makes society poorer because labor and physical resources have been misallocated. The results of government intervention and false interest rates are recession and depression plagued upon the people.

2.) What are some of the pitfalls of industrial policy?

Industrial policy is what it is called when the government favors certain industries through subsidies, cheap loans, and other specific assistances. One of the biggest downfalls of industrial policy is the fact that it diminishes incentive within the favored business firms to be entrepreneurial. Another large issue with industrial policy is that it eliminates competition to a certain degree, and makes it more difficult for newer firms to compete against pre-established, government supported firms.