Quote of the Day: GDP Fetish

"GDP fetish"—the belief that increases in GDP are good whether or not they represent increased production of things that people actually value. If the government spends $100 billion digging holes and then filling them back up, then GDP can rise by $100 billion or more even if the $100 billion is totally wasted.

This is from Professor, Econlog blogger, and research fellow at Stanford University’s Hoover Institution David R. Henderson in a book review of former Federal Reserve of vice chairman Alan Binder’s “After the Music Stopped” at the Wall Street Journal (hat tip Mises Blog).

The fetish for GDP is really a statistical illusion

Quote of the Day: The Bottom One Percent

We hear a lot about the top 1%. We don't hear a lot about the bottom 1%. There are about 313 million people in America today. 1% of 313 million is 3,130,000. In our prisons today are 2,200,000 people. So the people in prison are 2/3 of one percent. And their wages are typically about 23 cents an hour. They are, essentially, the bottom 1%.

Many of them are there for violent crimes, theft, fraud, and other such things. But hundreds of thousands of them are there for buying, selling, or producing illegal drugs. The drug war has put them there. And we taxpayers are paying $30,000 a year and more to keep them there.

So let me get this straight: high-income people are paying lots of taxes so that the government can put poor people in prison and keep them poor or put non-poor people in prison and make them poor.

We hear the occupy people advocate taxing the top 1% more. I've got a better idea: let's tax the top 1% less--they're already paying a disproportionately high share of taxes--and let a few hundred thousand of the bottom one percent out of prison and out of their grinding poverty in prison.

That’s from Professor David Henderson.

Why Property Rights is NOT a Public Policy Problem

I know most people are on a vacation this Passover week or the culmination of the Lenten Season. But for as long as the computer is within my handle, I’d continue to keep sharing ideas of liberty.

Happy Easter in advance.

Below is a superb essay by Professor David Henderson on how private property resolves our societal problems.

Should restaurants allow smoking or not? Should schools teach evolution or intelligent design or both? Should insurance companies cover contraception? Should I be able to take off my shoes in your living room?

You might think that that last question doesn't belong with the first three. After all, the first three questions are momentous ones about "public policy." The last one is only about the rules you have for my behavior in your living room—a "private-policy" question. And your answer to that question will depend on how you want to use your property.

But think about what you just read: Your answer to whether I should be able to remove my shoes in your living room depends on how youwant to use your property. What is implicit here, but obvious to all, is that the choice is yours. I have no say in the matter. That doesn't mean you won't take account of my thoughts and feelings. You will. Let's assume that you find it distasteful for me to take off my shoes, but that you like my company. Let's further assume that telling me that I can't get comfortable by taking off my shoes will mean that I won't want to visit you. Then you will trade off your distaste at having me shoeless with the pleasure you take from my company. If one outweighs the other, in your subjective estimation, then you'll choose accordingly.

Notice how property rights solve the problem. It's your living room and so you get to choose. How your living room gets used is not a public-policy problem.

Read the rest here

As a final point, the capital markets, which includes stock markets, are rooted on property rights. Take away property rights, capital and stock markets ceases to exist.

Quote of the Day: War Equals Presidential Greatness

Our data analysis suggests that wars in which a large percentage of the U.S. population is killed will, all other things equal, cause historians to judge as great a president on whose watch those wars occurred. Certainly, this was the perception of presidents Theodore Roosevelt and John F. Kennedy. It was probably also the perception of other presidents.

This conclusion is troubling. Most presidents, after all, probably want to be thought of as great. When they spend resources on war, they are spending almost entirely other peoples money and lives. They get little credit for avoiding war. Martin Van Buren, for example, effectively avoided a war on the northern border of the United States. How many people know that today?
Indeed, how many people have even heard of Martin Van Buren?

Woodrow Wilson, by contrast, inserted the United States into World War I. That was a war that the United States could easily have avoided. Moreover, had the U.S. government avoided World War I, the treaty that ended the war would not likely have been so lopsided. The Versailles Treaty`s punitive terms on Germany, as Keynes predicted in 1919, helped set the stage for WorldWar II.

So it is reasonable to think that had the United States not entered World War I, there might not have been a World War II. Yet, despite his major blunder and more likely, because of his major blunder, which caused over 100,000 Americans to die in World War I, Wilson is often thought of as a great president.

The danger is that modern presidents understand these incentives. Those who want peace should take historians` ratings of presidents seriously. Beyond that, we should stop celebrating, and try to persuade historians to stop celebrating, presidents who made unnecessary wars. One way to do so is to remember the unseen: the war that didn`t happen, the war that was avoided, and the peace and prosperity that resulted. If we applied this standard, then presidents Martin van Buren, John Tyler, Warren G. Harding, and Calvin Coolidge, to name four, would get a substantially higher rating than they are usually given.

That’s from a paper by Professors David Henderson and Zachary Gochenour.

Seeing greatness in war or destruction is an example of the public’s misconceived glorification of the state, which has mostly been a product of indoctrination and political propaganda.

War, according to writer Randolph Bourne, is the health of the state.

Wars are the ramifications of societies that worship the state, where the gullible public are misled to exalt the illusions of the supposed virtues of nationalism by ignoring the destructive real effects of such political actions.

Wars will always be a recourse or an option of any society that depends on political redistribution of resources.

Differentiating Phony Rights from Real Rights

In a letter to a newspaper, Professor David Henderson refutes what the mainstream and leftists call as “rights”

A real right is, say, my right not to be murdered. The only responsibility that imposes on you and others is not to murder me. In other words, it's a responsibility not to do something. The "right" to good housing, though, is a phony right because it implies that someone else has a positive duty to provide it. And let's not hide behind government. The only way government can provide things is by forcibly taking from others.

Except for the preservation of the natural rights to life, liberty, and property, I’d be very leery of anyone claiming for (positive) “rights” (which are disguised grants to state power) as such would extrapolate to more taxes, restriction of civil liberties and inflation.