Quote of the Day: The Myth of Public Interest

The gist of it is that public servants, so called--politicians, bureaucrats, and their colleagues--tend to promote goals of their own even as they claim to be serving the public interest.  And this is not very difficult to grasp.  

The public is, after all, a vast number of citizens whose interests vary enormously so it is a pure myth that there is a public interest that can be served by public servants.  Given this plain fact, whose interest will public servants serve?  The interest they consider important. 

In the last analysis the so called public interest is really the private interests public officials like best.  Even the democratic process cannot sort out what the public interest is. (The best approximation is put forth by Thomas Jefferson in the Declaration of Independence where he identifies securing the protection of our basic rights as the purpose for which government is established, i.e., the public interest.)

Despite the hopelessness of pursuing and serving the public interest, politicians and their cheerleaders keep pretending that they have managed to overcome the hurdles facing them and assert that they are public servants instead of folks whose objectives are determined by lobbyists who represent innumerable, often conflicting, private and special interests.

That’s from professor Tibor Machan on the much overlooked Public Choice Theory on his blog.

Quote of the Day: Taxation Is Not Revenue Raising

Taxation isn’t revenue raising.  It is confiscation of people’s resources.  Revenue is what merchants or employees earn in voluntary trade.  To classify taxes as revenues is an obvious distortion.  It is akin to characterizing the loot from a bank robbery as earnings, profits or income…

Imposing taxes on people is no more asking them for funds than is a tax a form of revenue.  Both of these distortions have to be conscious since they both clearly serve to help to pretend that something voluntary is going on when that is the farthest thing from the truth.

This excerpt is from Philosophy Professor, Cato adjunct scholar and research fellow at the Hoover Institute of Stanford University Tibor R. Machan.

Quote of the Day: The Perils of Unlimited Democracy

Of course there is something very wrong with unlimited democracies. There is simply no justification for the majority of the population in a country imposing its will on everyone. The idea is completely misguided. Why on earth should a great number of people have the authority to force a small number to obey them? There is no argument anywhere in the history of political philosophy and theory that would make out the case for this? If it were a valid point, it would imply that a large number of thugs somehow have the right to subdue other people to serve them. The famous example of the lynch mob that hangs an accused person make the point without difficulty. Expanding the will of vicious people doesn’t make it virtuous. And even if what the larger group wants is actually virtuous, forcing it on others is still not justified since they would have to make the free choice to be virtuous. Human virtue must be a matter of free choice. Only in self-defense may force be applied to others!

The election process in so called democratic countries is anything but justified or moral. Even when it hides behind the term “we” as it tries to do in too many instances--just listen to politicians anywhere around the globe and notice how often they pretend to be speaking for and acting in behalf of everyone--the will of the majority simply has no moral authority, none! Anyone who can dodge it successfully is perfectly justified to do so!

This is from Philosophy Professor Tibor R. Machan at weblogbahamas.com

Olympics and the Egalitarian Bunk

Politicians and their mainstream sycophants frequently lectures, directly and indirectly (through media), the public about the supposed necessity of having a society based on ‘equality’ or egalitarianism.

Unfortunately they hardly practice what they preach.

Professor Tibor Machan exposes the egalitarian balderdash.

The Olympic Games come in very handy for those of us who find egalitarianism morally and politically intolerable. The Games show how little appeal there is to forcing everyone into the same mold, how much violence and coercion it would--and where attempted does--take to even toy with bringing about an egalitarian society.

The only place where equality has a decisive role in human social affairs is when it comes to protecting everyone’s basic rights. This is the way the Declaration of Independence finds room for equality. Once everyone’s basic rights are secure, from that point on no room exists for equalization in a just human community.

Sure, there can be special areas where equality can be of value, for example in the application of standards and rules, as shown in athletics. But even there equality will apply in highly diverse ways--one way in the classroom, another in the legal system, and yet another at a beauty contest. General equality belongs only in the protection of individual rights, period.

Elsewhere it is just as it’s illustrated by the Olympic Games, with variety and differences breaking out all over. As long as these are peacefully obtained, as long as ranking comes about without corruption, there is nothing objectionable about inequalities in human affairs. Furthermore, attempting to make things equal achieves the exact opposite since those doing the attempting will enjoy the worst kind of inequality, namely, power over their fellows as they try to manipulate everyone to be equal.

Just as elsewhere in most of nature, in human affairs, too, inequality is the norm. But since human beings are free to establish various rules in their societies, they have the option, which they ought to exercise, to preclude all coercion from human interactions. Beyond that, it is futile to try to exclude inequalities in human affairs.

It is not inequality that needs to be abolished but coercive force. With that achieved, at least substantially, let diversity and difference be the norm. As that old saying goes, “Vive la difference.” Any serious examination of the prospects of an egalitarians polity should reveal just how insidious the idea is. Just consider requiring that all outcomes of the Olympic Games be equal!

The simple point is that Olympics is all about the inequality of human affairs. The fact that governments promote Olympics has been an implicit recognition of such diversity.

Yet in reality, the politics of egalitarianism represents nothing more than convenient excuses to implement social policies of redistribution or interventionism and the rule of philosopher kings.

Quote of the Day: Libertarian Values

Libertarians do hold that the right to individual liberty across the board is the prime political value but by no means the prime value. Politics for libertarians can be thoroughly derivative, meant mainly to secure the possibility for a full moral or ethical life. Why be free? Mainly to be able to choose right from wrong, that’s why…

The only thing libertarianism has to say about one’s moral convictions is that they may not include coercing anyone else to do anything. Coercion is using unprovoked force on people, ones who haven’t violated the rights of others. If you believe it is your moral duty or responsibility to rob Peter so as to help out Paul, that will not fly. It is like holding that one has the moral duty to rape or kidnap someone. Some may--and sadly some do--claim that this is what they ought to do but they are confused or vicious. Only vis-a-vis children or invalids could one have such moral duties or responsibilities, never toward intact adults.

Despite what we could call the thinness of libertarian politics--the opposite end of the thickness of any kind of totalitarian regime--it does not follow that libertarians hold “that only freedom matters.” That’s what matters politically but as far as how human beings should conduct themselves in their lives, a plethora of moral requirements will be on the agenda for everyone. Fathers, mothers, friends, colleagues, sports partners, farmers, engineers, doctors, and all others who occupy some such role in life have a list of virtues they ought to practice. Hence even college courses in medical, business, engineering and legal ethics, for example.

On top of it there is just the ethics for living one’s human life, ethics addressed by numerous philosophies and religions and nearly all libertarians embrace one or another of these in their personal, nonpolitical lives.

[italics mine]

That’s from Professor Tibor R. Machan who defends against stereotyped misrepresentations or on spurious (begging the questions) claims that for Libertarianism “only freedom matters” to the "exclusion of all other values".

Quote of the Day: Government Infrastructure Spending

From Professor Tibor R Machan

There is no substitute for the planning done in the market place or at the local level where those doing the planning have at least a reasonable chance of knowing what is likely to be needed and when. The saying “all politics is local” should be supplemented with “all economics is local.” By that insight the best thing to do is not to extort funds from citizens and move them through the bureaucracy--where much of those funds is lost--but to leave them with the citizenry who have a reasonably good idea what needs to be done with it. And a huge side benefit of this is that those citizens have a better grasp on budgetary constraints than do politicians and bureaucrats who routinely forget about the source of the funds they spend and are subject to the dynamics of public choice, self-dealing and similar malfeasance that afflicts the public sector’s administrators.

For my money trying to figure out what is the best way to spend stimulus funds is akin to trying to figure out how best to spend loot gotten in a bank heist. There is simply no way to calculate such a thing. Stolen or extorted funds cannot be correctly, properly or rationally allocated. Recall, also, that when major infra-structure projects, such as highway systems or dams are built, not long after it priorities can change, such as when environmental concerns had develop and these huge projects turned out to become threats to endangered species or the wilds that some want desperately to preserve. But once the huge projects are there, it is very tough to change course--the damage may well have been done forever.

US Dollar, Gold and Democracy

I find it odd or self-contradictory for a high profile investment expert[1] to claim that Eurozone bondholders should accept losses while declaring US muni bonds as a “buy”. In short, bearish Euro bullish USD. I view this more as an endowment bias where people place a higher value on objects they own than objects that they do not[2] (That’s because the expert is domiciled in the US).

It may true that state of the US muni bonds should be seen at the local level, but this should apply to the Eurozone too. In other words, prospective haircuts should apply to any nations/state where the cost to maintain debt levels can’t be economically sustained and where the policy of bailouts ceases to be part of the picture.

The cost to maintain debt levels can also be read as the willingness to pay, as Dr. Antony P. Mueller rightly commented[3],

``With debt it is as much the willingness to pay as it is the ability to pay. One could even say that the willingness to pay precedes de ability to pay.”

In addition, there is the tendency to ignore the role played by central banks. In as much as the US Federal Reserve can print money to conduct bailouts, so as with the Europeans through the ECB. So who prints more money will likewise impact on the relative economics of debt.

While it may be true that interest rates would impact the Eurozone more than the US (see figure 2), interest rate dynamics can swiftly change depending on either rate of change of inflation at the national level or on the public’s fluid perception of credit quality conditions.

Interest Payments as share of GDP[4]

Besides, both the US dollar and the Euro are fiat based money that are structurally flawed, as it is being shown today with a gamut of bailout policies left and right, targeted at rescuing the banking system and welfare nations/states in distress.

Thus, like all paper money subject to currency debasement and currency wars or competitive devaluation, that would make both like a race to the bottom.

So it’s a matter of which country (US or the Euro) would make more policy errors.

So even while I may be bullish the Euro over the US over the short-term, I wouldn’t recommend positioning on either one of them over the opportunity costs of holding other assets.

Why the USD or the Euro when there are others to choose from?

And many investors seem to share my view and vote with their money. According to analyst Doug Noland[5]

``The past year saw another $500 billion flee the U.S. money fund complex in search of higher yields. Tens of billions flooded into perceived low-risk bond and muni funds, while tens of billions more headed overseas. Meanwhile, money flowed into the hedge fund community, where assets and leverage are said to now approach pre-crisis levels. All of this amplifies systemic risk.”

So while it may hold the US dollar may rally, mostly as a result of a weakened Euro, I think this could be temporary.

Yet even as the USD should rally, we shouldn’t expect the same pattern of asset behaviour to occur as with the 2008 paradigm as some other experts seem to suggest.

It’s not true that a strong USD automatically translates to weakness in all other assets.

In 2005 the US dollar rallied alongside commodities and global equity markets. Thus, reference points can give divergent views and the view that a strong USD means automatic weakness in all others means anchoring to the 2008 post Lehman bankruptcy episode.

For me, it will always be a question of how authorities are likely to respond to any unfolding problems than simply projecting past or present conditions into the future.

For now, the auto response mechanism or path dependency by policymakers has been to engage in bailouts. Thus, in sustaining these policies means we should position for boom bust cycles, or at worst, insure ourselves from the prospects of a crack-up boom phenomenon (flight to commodities) since money is never neutral.

In a similar vein, it would seem to be impractical to be bearish on gold or precious metals for the same reasons.

And in growing recognition of these reckless monetary policies, in the US, lawmakers of some 10 states have reintroduced bills to recognize gold and silver as money[6].

Thus, it would misguided to suggest that democracy can’t be compatible with gold.

As Professor Tibor Machan points out[7]:

In a just society it is liberty that is primary – the entire point of law is to secure liberty for everyone, to make sure that the rights of individuals to their lives, liberty and pursuit of happiness is protected from any human agent bent on violating them. Democracy is but a byproduct of liberty

Thus if gold should represent liberty then democracy, as a byproduct of liberty, should blend well with gold as money.

And this may be zeitgeist of the current trend of gold prices

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[1] Moneynews.com Pimco’s El-Erian: European Bond Investors Must Accept Losses, January 14, 2011

[2] Wikipedia.org, Endowment Effect

[3] Mueller, Antony P. Portuguese Bond Sale, cashandcurrencies.blogspot.com, January 12, 2011

[4] Mitchell J. Daniel Which Nation Will Be the Next European Debt Domino…or Will It Be the United States?, Cato.org, January 11, 2011

[5] Noland Doug Issues 2011 Credit Bubble Bulletin, PrudentBear.com, January 14, 2011

[6] TPMDC At Least 10 States Have Introduced Gold Coins-As-Currency Bills, January 5, 2011

[7] Machan Tibor R. Reexamining Democracy, January 4, 2011