Chart of the Day: Regime Uncertainty

Concludes the editor of the Wall Street Journal

The evidence is overwhelming that the Obama regulatory surge is one reason the current economic recovery has been so lackluster by historical standards. Rather than nurture an economy trying to rebuild confidence after a financial heart attack, the Administration pushed through its now-famous blitz of liberal policies on health care, financial services, energy, housing, education and student loans, telecom, labor relations, transportation and probably some other industries we've forgotten. Anyone who thinks this has only minimal impact on business has never been in business.

Regime Uncertainty as defined by economist Robert Higgs

To narrow the concept of business confidence, I adopt the interpretation that businesspeople may be more or less “uncertain about the regime,” by which I mean, distressed that investors’ private property rights in their capital and the income it yields will be attenuated further by government action.

Such attenuations can arise from many sources, ranging from simple tax-rate increases to the imposition of new kinds of taxes to outright confiscation of private property. Many intermediate threats can arise from various sorts of regulation, for instance, of securities markets, labor markets, and product markets. In any event, the security of private property rights rests not so much on the letter of the law as on the character of the government that enforces,or threatens, presumptive rights.

(hat tip John Cochran Mises Blog)

Quote of the Day: Welfare State and Personality Based Politics

As the ranks of those dependent on the welfare state continue to grow, the need for the rulers to pay attention to the ruled population diminishes. The masters know full well that the sheep will not bolt the enclosure in which the shepherds are making it possible for them to survive. Every person who becomes dependent on the state simultaneously becomes one less person who might act in some way to oppose the existing regime. Thus have modern governments gone greatly beyond the bread and circuses with which the Roman Caesars purchased the common people’s allegiance. In these circumstances, it is hardly surprising that the only changes that occur in the makeup of the ruling elite resemble a shuffling of the occupants in the first-class cabins of a luxury liner. Never mind that this liner is the economic and moral equivalent of the Titanic and that its ultimate fate is no more propitious than was that of the “unsinkable” ship that went to the bottom a century ago.

From Professor Robert Higgs.

Oh, this very much applies to the Philippine political setting. Think Pork Barrel politics and the 250 political dynasties. And that's why the search for the elusive efficacious leader who is supposed to deliver us from hardship will always be just that: a constant source of frustration. People don't realize that the much sought after miracle of effectiveness and justice from the nanny patriarch state will always be a mirage.

Quote of the Day: Fervent Love of Individual Liberty

In receiving of the Alexis de Tocqueville Award, I excerpt Professor Robert Higgs' speech, (italics original)

For society as a whole, I wish nothing more fervently than I wish that it should be as free as possible. For me, freedom is not simply the highest-ranked value with regard to public affairs; it stands on a level by itself, far above all the others.

I espouse individual liberty in this “extreme” fashion for two reasons, which in my mind complement one another. The first is that freedom is the optimal condition for each individual’s engagement in society. To be driven, bullied, abused, disregarded, treated with contempt and dishonor―these are bad things in themselves, not only for me, but for every human being. We ought to recoil from them, regardless of whether the perpetrator is a local cop or the government in Washington. Yet all too many of us become accustomed to such official cruelties and take them in stride without much conscious thought that they are wrongs and ought to be stopped, regardless of their source.

Individual liberty, however, is also an instrument for the creation of many of the conditions, goods, and services that constitute material abundance and relieve many of the anxieties and pains that once accompanied social life for almost everyone. Virtually everyone favors economic development, especially inasmuch as it reduces or eliminates extreme poverty. Individual liberty is a necessary condition for sustained economic progress. The specific conditions of a free society―private property rights, secure contracts, a reliable rule of law―are prerequisites for the ongoing creation of wealth in the long run. At this late date, after we have witnessed the personal horrors and economic disasters brought about by socialist central planning, it should not be necessary to go on preaching the gospel of private property and the market economy, yet we all know that many people still do not understand these essential matters and often act politically to thwart the operation of a genuinely free society.

Congratulations for a very much well deserved honor, Professor Higgs.

Regime Uncertainty: Assault on Private Property Rights

Professor Robert Higgs explains, (bold emphasis mine)

it has to do with widespread inability to form confident expectations about future private property rights in all of their dimensions. Private property rights specify the property owner’s rights to decide how property will be used, to accrue income from its uses, and to transfer these rights to others in various voluntary arrangements. Because the content of private property rights is complex, threats to such rights can arise from many different sources, including actions by legislators, administrators, prosecutors, judges, juries, and others (e.g., sit-down strikers, mobs).

Because of the great variety of ways in which government officials can threaten private property rights, the security of such rights turns not only on law “on the books,” but also to an important degree on the character of the government officials who administer and enforce the law. An important reason why regime uncertainty arose in the latter half of the 1930s, for example, had to do with the character of the advisers who had the greatest access to President Franklin Roosevelt at that time—people such as Tom Corcoran, Ben Cohen, William O. Douglas, Felix Frankfurter, and others of their ilk. These people were known to hate businessmen and the private enterprise system; they believed in strict, pervasive regulation of the market system by—who would have guessed?—people such as themselves. So, as bad as the National Labor Relations Board was on paper, it was immensely worse (for employers) in practice. And so forth, across the full range of new regulatory powers created by New Deal legislation. In a similar way, the apparatchiki who run the federal regulatory leviathan today can only inspire apprehension on the part of investors and business executives. President Obama’s cadre of crony capitalists, which he drags out to show that “business is being fully considered,” in no way diminishes these worries.

Thus, regime uncertainty is a multifaceted and somewhat nuanced concept. Many economists don’t like it because it cannot be measured and compiled along with other standard macro variables in a convenient data base.

Read the rest here

Every time governments intervene in the marketplace someone’s property rights gets affected. The unintended consequence is risk aversion from heightened atmosphere of uncertainty.

Quote of the Day: Killing is Never Great

Great one from Dr. Robert Higgs,

But mere killing is never great, and those who carry out the killings are not great, either. No matter how much one may believe that people must sometimes commit homicide in defense of themselves and the defenseless, the killing itself is always to be deeply regretted. To take delight in killings, as so many Americans seem to have done in the past day or so, marks a person as a savage at heart. Human beings have the capacity to be better than savages.