Greecing the Skids

It is superfluous at this point to rehash the usual news bits about the Euro crisis. Suffice to say that states have consistently borrowed too much in order to fund their social welfare benefits, and now they are running up against the limits of such borrowing.

Yes, the immediate crisis was brought on by a fall in tax revenue, from the recent and continuing depression. However, we must ask how healthy a fiscal system is that fails whenever everything stops going right, all the time. Governments have grown accustomed to mortgaging their futures (or more to the point, someone else's futures) in order to pay for their present. Sadly, the future is now.

How will this play out? Smarter people than I are puzzling through the intricacies of how bad the car crash will get; but in general, we are about to return to the era of recurring sovereign defaults. Whether through an outright repudiation of their debts, or through monetary debasement of the Euro which would fund "grants" to the debtor countries, the problem children of Europe are going to escape their obligations for now, at the cost of driving up borrowing costs in the future.

An interesting question that I haven't seen addressed elsewhere is: how will the bond investors be compensated for their loss? It is one thing when you are a Latin American country borrowing from overseas banks; you can expropriate from them without pity and even with glee. But when your major lenders are German and French banks, and you have to live with these people even after you default, there needs to be something in it for them.

In earlier eras, when a profligate government had to periodically default on its debts, it would do so by borrowing from its own banks, who would face the certain prospect of losing their money every decade or so. In exchange, they were given lucrative monopolies over domestic lending and money creation. (An example of this can be seen in Mexico under Porfirio Diaz and thereafter.) The deal was worth it to the banking elites, for whom the periodic defaults became just another cost of doing business.

So what concessions will the big European banks extract from their governments? Or will the governments simply nationalize the banks, as many are itching to do? And if they do, what happens next?

Obama the Moderate Republican?

One of my father's coworkers recently said that he would vote for "the moderate Republican who is running unopposed for the Democratic nomination." It's certainly a clever line. And while most conservatives these days would be bemused at the thought that anyone could think President Obama a moderate Republican, given his interventionist domestic policy and disregard for the Constitution and so on, it occurred to me today that the characterization has some merit.

To understand how, we must remember that the Republican Party has not always been a party of small government. In previous years, people that would be derided as squishes or "RINOs" (Republicans in Name Only) were the conventional elite of the party. This was the faction of Nelson Rockefeller and the like.

In fact, the more I thought about it, the more President Obama reminds me of one moderate (really, progressive) Republican in particular, from times past: President Richard Nixon.

Now, I'm not talking about President Obama's apparent liking for enemies' lists, or his campaign's documented use of cheating and dirty tricks to defeat Hillary Clinton during the 2008 primaries (to say nothing of what his allies might do elsewhere), or any of the other sordid comparisons you might be tempted to make. I'm strictly talking about the policy programs of Presidents Obama and Nixon. Consider:

Both presidents came into office while America was embroiled in foreign wars started by presidents of the other party, having campaigned on a promise to end those wars. Both presidents discovered that to do so, they needed to ramp up the intensity of the conflict. (Though Obama seems content to cash out of Iraq and focus on Afghanistan; admittedly, he has two unwanted wars to handle.)

Both presidents favored deficit spending to stimulate the economy, coupled with interventionist policies designed to favor some domestic groups at the expense of others. For Obama, I mean the health care bill primarily, along with the nationalization of student loans and the repeated interventions into the home mortgage market, among others. Nixon, of course, imposed price and wage controls across much of the economy and severed the link between gold and the dollar, to escape the accumulating consequences of his own and President Johnson's massive deficits.

Both Nixon and Obama put in place major environmental policies; remember that Nixon instituted the Clean Air Act, which Obama's EPA has used to dramatic effect. Both, too, were committed to expanding the social-welfare state: Nixon pushed for and won passage of the Supplementary Security Income (SSI), an expansion of welfare, along with automatic Cost-Of-Living Adjustments to Social Security.

In many ways, the Republican Party then was just as Progressive as the Democrats were; Theodore Roosevelt was, after all, a Progressive Republican and one of the leaders of Progressivism of the time. It is only more recently that the Progressive platform of massive societal restructuring through the heavy hand of government, to create a New Man who would be a compliant member of mass society rather than an uncooperative individual, has been cast out of the Republican Party—by the rise of small-government conservatism on the one hand, and newly active religious blocs on the other.

So yes; in many ways President Obama would fit into the mold of a Progressive Republican from days of yore. The difference is that today is not a Progressive moment; and Obama is running against the tide of history in trying to make policy as if it were. We should see a clear demonstration of that in a few months.

How Partisan Opportunism is Eroding Civilian Control Over National Security

Recently, the Obama administration apparently cooperated with reporters working on a story about the Stuxnet virus inflicted on Iran, essentially confirming that the United States is now launching cyberattacks against other countries. The blowback from this has been immense, with even senior Senate Democrats attacking the leak as reckless and harmful to the interests of the United States. (Hat tip: Instapundit.)

This follows after an earlier episode in which the Obama team claimed credit for stopping the latest underwear-bomber plot in Yemen, antagonizing British intelligence and blowing the cover of at least one agent who had managed to infiltrate al-Qaida. In general, the Obama team seems to have utterly ignored the maxim about loose lips sinking ships.

The partisan implication of this have been well hashed over by other blogs. What I want to focus on is how such behavior by the civilian leadership will tend to encourage the military and intelligence services to simply stop telling the White House what they are doing.

At the beginning of President Obama's term I had lunch with someone who would know, who told me that the military was being very careful with what information they were giving the White House, until they could verify that he could be trusted. The reasoning is simple: if a politician is going to reveal all of your secrets for personal gain, then your duty to the civilian leadership may well be outweighed by your larger duty to the personnel you command, the objectives of your mission, and the greater interests of the United States as a whole. (Something like, "We had to deceive the village in order to save it.")

So now that President Obama is getting desperate, in the face of an electoral defeat that seems more and more likely as time goes on, the national security establishment is going to be mighty tempted to cut the White House out of the loop altogether for anything important. In the short term I can't blame them; the danger is that for the long term, this kind of behavior could well lead to the defense establishment forming its own independent policy, free of civilian oversight. (More so than they already do, of course.)

This is why public-spirited politicians generally don't shoot their mouth off about national-security secrets. President Obama is doing real damage to the authority of the Presidency, and our elected government in general.

Being Paid to Borrow

On Friday, the 10-year Treasury yield ended up below 1.5%; shorter durations are even more ludicrous. At a time when inflation is something like 2% (and that's assuming you trust the official numbers, which I don't), what this means is that the Federal Government is essentially borrowing money for free, at worst—at best lenders are effectively paying real money to the Treasury for the privilege of letting it spend their assets.

I suppose that if ever there was a good time to run trillion-dollar deficits forever, this might be it. Of course, that all depends on whether the Treasury can roll all of its debt over into longer maturities before rates shoot back up…

Why are rates so low? John Mueller argues that interest rates are being driven down because of the Dollar's status as a reserve currency; something like $4 trillion is being held by other nations not to pay for our exports, but to stabilize their own currencies. This creates a serious problem, driving inflation and causing interest rates to decouple from fiscal and monetary policy. In short, politicians no longer suffer automatic consequences from borrowing loads of money.

Worse, if we were to stop borrowing so heavily, all it would do is to drive interest rates even lower as foreign buyers bid up the diminishing stock of Treasury bonds remaining. Eventually, the temptation of free money would grow intolerable to any responsible politician, and we'd start overspending again.

What can be done about this? Mueller suggests going back to gold as an international reserve. Short of that, I'm not sure how we solve the problem. Assuming that it is a problem to be solved.

Enlightened Regulation, or How Not To Do It

(Whew! Need to blow the dust off of this here blog. It's been a while, but I hope to get back into the swing of things. Onward!)

Lots of people have Employee Stock Option Purchase plans (ESOPs) through their employers. Have you ever wondered why companies provide them?

I happen to have just sat through a presentation for one of our client companies on putting an ESOP in place. The short version is that an ESOP plan is a way for the founders of a company to sell their shares to their employees over several years, and avoid paying taxes on the proceeds almost entirely.

"Why, those dastardly greedy capitalists!" you might exclaim. Well, not quite. If owners of a successful company simply sold their shares without sheltering the proceeds from taxation, they would lose around half to the government, state and federal. These owners consider that outcome a poor reward for their many years of sweat and toil, and would like a way around it.

And a battery of lawyers and other middlemen are happy to provide such a way.

One can find many similar cases where government regulations will create a perverse result, until specialist middlemen such as attorneys or financial services people or others find a way around the regulations. The net result is simply to raise transaction costs for everybody, and to penalize those people who try to do it the "normal" way. With enough government regulation, the "normal" way becomes the sucker bet. Those who find the loopholes (specially built into the law just for them!) are the real winners.

The presentation today reminded me of a story I heard about a year ago from a friend of mine, who is a lobbyist for the garment industry. I may be remembering the details wrong, so forgive me, but the story is that back in the 1950s or so, a number of children were burned when they were groping around near open flames at night and their pajamas caught fire. This created something of a scandal, so the government dutifully decreed that all children's pajamas had to be resistant to fire.

But how?

It turns out that while it was possible to use a tighter weave for the cloth, the new weave was prohibitively expensive (and continues to be so, in most cases). The industry found that there was only one good way to meet this requirement: by dousing the pajamas with flame-retardant chemicals. Alas, it turned out several decades later that the chemicals in question were toxic and caused cancer.

So a new chemical was found, and children's pajamas today continue to be doused with it. My friend mentioned one sad case where the maker of natural, organic pajamas had her stock confiscated for failing to use the appropriate chemicals.

Meanwhile, the world has changed. Open flame is no longer found in most households where children can get at them, particularly not in the middle of the night, thanks to the spread of electronics and electric kitchen appliances. So the original purpose of the regulation in question has vanished, leaving in its wake many young cancer patients.

And some clothing manufacturers have responded by producing new lines of "lounge wear," or some other euphemism, which is essentially children's pajamas under another name, and not subject to the regulations. To get away with this, the companies generally need some good lawyers on staff and connections with the regulators. So, all that the regulations have done is punish those who act straightforwardly, reward those who create new loopholes and their middlemen, and harm whole generations of children.

But why don't the garment companies simply lobby for the rule to be repealed? That would seem the sensible move, yes? I asked my friend this, and he told me that no company could dare be the first, because it would be pilloried as wanting children to burn to death to protect its profits. Thus, no action is taken.

Such stories of woe are shot through the vast regulatory morass of our government. Laws remain on the books long after they have ceased to help, and begun to hurt. Other laws have no chance of ever achieving their stated goal, and are merely yet another cudgel for the "in-crowd" to use against those not willing to keep lawyers on retainer. Yet the regulations continue. They can't be bargained with. They can't be reasoned with. They don't feel pity, or remorse, or fear. And they absolutely will not stop, ever, until... what?

What happens next?

The Self-Sustaining Society, Part II: Procedural Equality

In my last post, I argued that positional equality (i.e. equality of outcome) was unsuited to be a fundamental political principle for society. Unless positional equality is a secondary, subordinate principle to some other controlling principle, it provides no basis to choose between ends, leads to endless coercion, and goes against human nature in opposing the drive to better ourselves. Additionally, it provides no intrinsic basis to justify the authority of parents over children, or parents’ duties to them.

(Some, such as Locke, argue that children are under authority because their reason is not fully developed, and they cannot choose between ends themselves. The problems with this argument will have to wait for a further post, but for now note that reasoned choice plays no role in positional equality—indeed, is effectively discouraged, since nothing you do is permitted to improve your relative position.)

In this post, I will consider procedural equality.

Procedural equality encompasses such ideas as equal protection of law, the equal ability to speak freely, equal voting rights, and equal eligibility for government office, or benefiting from government goods. The most critical of these procedural protections are typically equal influence over government, and equality before the law. All people, when interacting with the institutions of government, are treated precisely the same as a function of their actual behavior, as opposed to social class, sex, religion, or any other intrinsic trait of the individual not related to their actions and choices.

We should pause here to note what procedural equality is not. It does not necessarily encompass political freedoms such as property rights; it would be consistent with the principle of procedural equality for all of us to live in a crushing tyranny, so long as that tyranny were applied to all equally. The principle of procedural freedom, meanwhile, will partly overlap with procedural equality, but based on a very different and stronger justification: you have fewer opportunities to treat people unequally when you may not infringe on their rights at all. Therefore, while much of the discussion to come will bear on procedural freedom, it does not necessarily follow that it can be directly applied.

Moreover, procedural equality does not preclude the application of a positive program imposed upon citizens, for example trying to cultivate a particular set of civic virtues or to encourage or discourage particular behaviors—so long as they are applied equally. (While a system based on positional equality could technically do the same, this creates an internal contradiction: all-encompassing positional equality is based on uncertainty over what the best life is. Advocating a positive program implies a judgment that some behaviors or character traits are better than others, which tends to undermine the argument for all-encompassing equality. And if you were to limit the scope of positional equality in response, you would again render positional equality subordinate to this new judgment or principle.)

And to be clear, we are not considering procedural equality as a means to prevent government corruption or oppression; this already treats procedural equality as a subordinate principle. Let us begin instead by considering procedural equality in itself, as a self-contained concept.

First let us explore the assumption above, that one can use different procedures on people based on their actions and only their actions. Procedural equality is premised on the existence of procedures, that is to say, a political institution that makes laws and carries them out. Civil and criminal law is based on the principle that you may treat people differently (i.e. punish them) if they should break the law. Recall from above that procedural equality is compatible with coercive government; therefore, in theory, any action can be criminalized, so long as the action does not affect the relative ability to exert political power and be treated equally by the state apparatus.

But penalizing personal attributes—sex, race, religion, and so on—is not an attempt to regulate behavior, but a direct attack on the political standing of the individual in question. A man cannot magically become a woman if he wishes to avoid sanction, nor a woman a man (neglecting modern surgical innovations). Rather, they must suffer harm that necessarily interferes with their ability to seek redress.

Yet here we pause. Is religion indeed a personal attribute, rather than a choice? What about a law against fat people; is someone fat by nature or by action? What about a law that discriminates between rich and poor; is wealth a personal attribute, or the product of certain actions?

What about personal attributes that lead to different behaviors? Men and women deal with different biological drives; perhaps the law should distinguish between them? Religions (assuming for the moment that they are indeed personal attributes) mandate different classes of behavior; should some be judged helpful and others harmful?

Many argue that our choices and our circumstances are so heavily interdependent that one cannot separate them from each other. Is a criminal to be punished because his poverty drives him to steal?

I shall not try to answer these questions; but that they exist at all poses problems for procedural equality. Perhaps that is why the trend in American jurisprudence has been to broaden its scope over time, attempting to uncritically absorb all of the problematic cases and avoid the issue. (When was the last time a government employee was fired for professing communism?)

The second problematic element was noted in the previous post: political power, and access to and treatment by institutions, do not exist in a vacuum. They are strongly influenced by disparities in wealth, education, group prejudices, or other otherwise-legal factors, to the point that (for example) no one believes that a welfare recipient has the same political control over government as a millionaire.

Therefore, goes this argument, to ensure true procedural equality, one is forced to seek positional equality or a functional approximation thereof for dimensions relevant to political interaction. This gets us back into the many logical tangles we saw in the last post (albeit mitigated somewhat because positional equality would here be subordinate to procedural equality, without necessarily extending beyond that).

One may scoff at such an argument, but consider education. One who cannot write well is unlikely to write his congressman for redress, nor is one who cannot read likely to exercise his vote effectively. A certain minimal level of education is necessary before one is able to use the procedural privileges which are in theory open to him. Therefore, one is forced to extend the principle of procedural equality into a vast new sphere of mandated policy. Other extensions suddenly do not seem so unreasonable.

(Here, the extended form of procedural equality could perhaps justify the education of a minor or major, even through coercion if you applied it equally; as Rousseau writes, “he shall be forced to be free.” The extended form does not distinguish between a minor and major beyond differences in ability, nor does it necessarily afford any special role to the parent in this regard.)

As a philosophical criterion, procedural equality ends up collapsing back into positional equality to a large degree as soon as it comes into contact with the real world. Even in the messier “practical” form it takes in our political system, it runs afoul of the blurred line between action and identity as discussed above. Therefore it is unsuited to be a primary principle for society, as was positional equality.

Once subordinated to other principles (such as, per Locke, the paramount place of property rights), procedural equality or variants thereof become a vital part of our political system, of course. The presumption of equal treatment is a powerful force in the continuing dynamism and legitimacy of our society. But again, it is only once subordinated to some other principle, and therefore limited in scope, that procedural equality can serve a purpose.

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The next post will discuss procedural freedom (in the sense of Robert Nozick).

The Self-Sustaining Society, Part I: Positional Equality

[I'm ba-aaack... —ed.]

A stereotype of the political controversies of our time envisions a conflict between those who favor freedom and those who favor equality. This formulation is imprecise: liberals and conservatives each claim to be motivated by both of these principles, applied in different ways. (In particular, the difference between “procedural equality” and “equality of outcome” is obscured by this stereotype; see below.) Some liberals assert a right to abortion in the name of freedom, while asserting the right to progressive taxation in the name of equality; some conservatives assert a right to unrestricted commerce in the name of freedom, while asserting the harm of abortion in the name of the equality or near-equality between child and mother.

This incoherence of principles is widespread throughout American political behavior. You will find very few ideologues entirely devoted to either freedom or equality. More often, you seem to find an arbitrary mixture of both. It is more accurate to say that most people’s tendency toward freedom or equality is, in fact, unconsciously or consciously determined by the prior application of other principles entirely: populism, or “national greatness,” or differing degrees of religious influence, or other such concepts. These people usually justify their positions by citing freedom or equality, not because these are their true sources, but because they are politically legitimate in modern American debate, while their true principles are not.

In this series of posts, I argue that this ideological confusion is a symptom of a deep deficiency in the modern understanding of both freedom and equality. Neither of these is appropriate, by itself or in combination with the other, to be the sole principle of a good society; and that we try to use them in this way is a contributing factor to our social fragility. Most people understand this instinctively, and are searching for something better, more complete. In the degenerate political movements that arise (such as populism or nativism), we can see people trying to find their way back, all unaware, to a political philosophy that was once a vital part of American thought—before it was taken from us by a mix of economic centralization, ideological shifts, and a change in the very meaning of rule by the people. America has lost the political vocabulary it once had to describe a better ideal: that of the self-governing citizen.

This ideal itself proved unable to resist the forces undermining it, I argue, because it did not include any rigorous treatment of the separate roles of the individual citizen, citizens in their private communities, and citizens acting through the apparatus of state power. So governments were able to absorb into themselves activities properly left to individuals or communities—and vice versa. Such a rigorous treatment is needed to correct this flaw, and to enable the ideal of self-government to survive in the face of the many ideologies seeking its destruction.

******

I will begin exploring the easier topic, equality.

The term “equality” can actually refer to either of two concepts: procedural equality (also called equality of opportunity) and positional equality (also called equality of outcome). Procedural equality addresses such things as equal justice under the law, or equal access to markets. Positional equality addresses topics such as disparities of wealth or political power. In this post, I focus on positional equality.

The naive argument for positional equality is that it is inherently wrong for two individuals to have disparities of happiness, and that efforts should be taken to raise the happiness of the less happy, even at the expense of the more happy. (In practical terms this often is applied to wealth, or access to education, and so forth. It is stated in perhaps its most stark form by John Rawls in A Theory of Justice, p. 102: “No one deserves his greater natural capacity nor merits a more favorable starting place in society.”)

Note a crucial aspect of this position: it is content-free. The principle of positional equality makes no claim about what makes people happy (except perhaps for money, which is viewed as a proxy for what really makes a person happy). By making people positionally equal, the proponent of this view can avoid the question entirely since, whatever it is that makes people happy, everyone will have the same quantity of it.

This aspect can be seen clearly when, every time a new social or material factor is determined to contribute directly to happiness, cries go up to share it equally (for example, medical care or housing).

That said, positional equality is a poor guide for making decisions in the real world, because it provides no intrinsic basis to trade off one consideration against another. If equality is the sole criterion, how does one handle a situation in which you must choose between two dimensions of equality? For example, equal access to health care requires a medical system with enough resources to provide such care. What if you could have such a system, but only by allowing more general disparities of wealth to provide the necessary tax revenues? The question cannot be answered purely within the framework of positional equality, for the reason noted above: positional equality makes no claim as to what makes people happy—and therefore, which of two conflicting goals should be chosen.

Another aspect in which positional equality is incomplete by itself is that it utterly fails to explain or justify parents’ responsibility for, and power over, their children. (By extension, it also fails to explain the prerogatives of education.) If children are equal to their parents, by what right can a parent constrain his child? Conversely, by what right can the child make a claim on the resources of the parent? Positional equality cannot answer, and thus is brought up short by one of the most primal elements of human existence.

(Parenthood and families will come up again as we consider other political principles, and will be dealt with at length in its own post sometime in the future.)

These points shows that the concept of positional equality is insufficient in itself to be the ultimate political basis of a society. Equality relies on the existence of prior and independent political or philosophical concepts, which can provide a basis to judge between ends, in order to be of use in a political society.

Positional equality has other, fatal flaws that throw into doubt its place in a society that claims to be good. First, it relies on relative judgments. Positional equality measures people’s standing solely in reference to each other. Absolute levels of wealth or health or education are unimportant, compared to the distribution of these things among the population. (This can be seen in economics, for example, in the Gini Coefficient of wealth.)

This relative focus causes an individual to compare his own attributes, or character, or achievements, not to an internal or societal ideal to be striven for, but (at least in part) to the attributes of his neighbor. This fosters complacency in the presence of mediocrity, and poisonous envy in the presence of achievement. It also guarantees that most people will be unhappy, because whenever there are inequalities in attributes, most people will be worse off than the fortunate few on top. In this sense, a dominant ethos of equality that causes people to focus their attention disproportionally on differences will lead directly to a decrease in general happiness, except in the presence of perfect equality.

But even pure equality would have the counterintuitive effect of lowering happiness, at least in the form of self-esteem. As Robert Nozick writes in Anarchy, State, and Utopia:

When everyone, or almost everyone, has some thing or attribute, it does not function as a basis for self-esteem. Self-esteem is based on differentiating characteristics; that’s why it’s self-esteem. And as sociologists of reference groups are fond of pointing out, who the others are changes [p. 243].

The most promising ways for a society to avoid widespread differences in self-esteem would be to have no common weighting of dimensions; instead it would have a diversity of different lists of dimensions and of weightings [with which to judge your own worth] [p. 245].

The focus on relative endowments also permits the champions of equality to advance policies that, on balance, reduce the aggregate wealth or happiness of a society, if they should also make the distribution of such things equal. This is true on a fundamental level, since the total wealth of society is irrelevant to the comparative calculations of positional equality.

Moreover, actually realizing a society built on positional equality (or any other predetermined distribution of wealth or anything else) by definition requires the continuous use of coercion, at all levels of society, to preserve the desired distribution of wealth. Nozick writes:

…no end-state principle or distributional patterned principle of justice can be continuously realized without continuous interference in people’s lives [p. 163].

For [such principles] do not give the right to choose what to do with what one has; they do not give the right to choose to pursue an end involving (intrinsically, or as a means) the enhancement of another’s position [p. 167].

This extends so far as to prohibit the free giving of gifts; if (let us say) society were successfully ordered that property were distributed justly among individuals, according to some principle of equality or other criteria focused on the distribution itself—then if you give property to another, the act is unjust!

Whether or not it is better to give than to receive, proponents of patterned principles ignore giving altogether.… [T]heir theories are theories of recipient justice; they completely ignore any right a person might have to give something to someone [p. 168].

It should be clear by now that equality of position, in its strict and unrestrained form, is unsuited to be a fundamental political principle for a society. It gives deficient criteria for judgment between actions, cannot encompass such elemental parts of the human experience as parenthood, stimulates envy and the desire to bring low those more successful regardless of the cost to society as a whole, and cannot be carried out without an unrestrained tyranny that would extend into every aspect of life.

More limited justifications of positional equality seek to get around the preceding series of issues, to some degree. One argument states that some degree of positional equality is necessary to defend political equality (a subset of procedural equality, to be discussed in the next post) and government by the people: if too much power is concentrated in the hands of too few people, they will take effective control of government and make a mockery of our republic. Therefore, equality is necessary, but only along those dimensions important for political involvement, and only to the degree necessary to defend political equality from subversion. This is a pragmatic political program, motivated by a specific goal, and is furthermore less domineering than the requirement of full equality. Furthermore, the undermining of procedural equality necessitated by positional equality has a built-in limit, in that it must not itself threaten the political equality which is the point of the exercise.

A more cynical, limited version of this approach has it that society itself will not stand up to too great a level of inequality, and that if left unchecked inequality will inevitably lead to social upheaval and chaos. Therefore, as a defensive measure, the society must take steps to prevent such dangerous levels of inequality from arising or persisting. Here, too, the program of equality is restrained by the paramount importance of the well-being of society.

Both of these views are arguable, but are also worth keeping in mind. Yet notice that in each case, positional equality is no longer the sole criterion—instead, it has become a means, or a secondary and subordinate criterion, to achieve a prior goal. Indeed, only if used in this way can positional equality play a meaningful role in political society. That this conclusion is badly obscured in modern political discourse, and that positional equality in and of itself is sometimes appealed to as justification for some policy or other, has caused significant distortions in policy.

To cite a single example, at present the educational system labors under the belief that all students, in an ideal world, would go to college. (This simplistic belief neglects whether college is best for all people, or even tolerable; or whether society would benefit more from paying [or forcing the students to pay] the tremendous costs of universal college education, than from encouraging students to choose as they see fit.) But since students have unequal academic abilities, schools and colleges as a class have sought to broaden their student base by watering down the curriculum. Rather than encouraging the true achievers to excel, the program as a whole is weakened to accommodate those who will least benefit from it. Such is the effect of blindly applying the principle of positional equality.

(This treatment is painfully brief; the issues connected with education in a society will also be dealt with, at extreme length, in their own post.)

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The next post in this series will address procedural equality.

Quote of the Day

The mere fact that someone disagrees with one's judgement is insufficient grounds for opening one's mind. Most epistemologists forget that it is just as urgent a question to determine when we are justified in opening up our minds as it is to determine when we are justified in closing them.

—Isaac Levi, "Consensus as Shared Agreement and Outcome of Inquiry." Synthese 62, pg. 3

Externalities in Trade

At the blog of Harvard economist Greg Mankiw, he writes about a debate he participated in over whether one person should be allowed to sell his right to vote to another. Dr. Mankiw said no:

It is true that both parties in the transaction must be better off if they agreed to the deal. Nonetheless, the standard argument for unfettered voluntary exchange does not apply because there are externalities. That is, when one person sells his vote to another, that transaction may affect unrelated third parties through the electoral process.

However, there are serious flaws in this approach. His colleague Michael Sandow points out one obvious point that if a person were merely persuaded to change his vote, instead of being paid to do so, it would still have the same negative effects on the third party. So by Dr. Mankiw's explanation, we would be forced to prohibit political persuasion as well as outright vote-buying.

There is another, larger problem which gets to the heart of reasonable critiques of free trade in general. That is, many types of trade create negative externalities for others. To cite an obvious example, if I buy an automobile and gasoline, I affect the air quality for the people around me who do not necessarily benefit from my having an automobile. More crucially, perhaps, engaging in international trade has effects for the geopolitical situation. China's rise in power, which is causing a great deal of heartburn for national-security types in Washington, has been enabled directly by the world's trade. To base the legitimacy of a voluntary exchange on whether it creates negative externalities would be to undermine the free market in its entirety.

That being the case, can one argue for free trade in a case where it creates negative externalities? Free-market advocates would say that in a true free market, any negative externalities would be mitigated through voluntary exchange, leaving everyone or nearly everyone in a far superior position than if there had been no trade in the first place. And to be sure, it is hard to imagine any alternative to free trade that has not created far more misery than free trade would have. (For example, in our rush to get away from oil, we have poured vast amounts of money into ethanol-based fuels which have had the perverse effect of encouraging clear-cutting in Indonesia and elsewhere, and have driven up food prices for the world's poor.)

But the problem of negative externalities remains an issue. In the absence of an omniscient despot, the best course would probably be for budding entrepreneurs to seek out such externalities and devise ways to mitigate them for a profit, and thus remove the perceived need for coercion. But we cannot pretend that such externalities do not exist in the first place.

Quote of the Day

"Cowardice" and "self-respect" have largely disappeared from public discourse. In their place we are offered "self-esteem" as the bellwether of success and a proxy for dignity. "Self-respect" implies that one recognizes standards, and judges oneself worthy by the degree to which one lives up to them. "Self-esteem" simply means that one feels good about oneself. "Dignity" used to refer to the self-mastery and fortitude with which a person conducted himself in the face of life's vicissitudes and the boorish behavior of others. Now, judging by campus speech codes, dignity requires that we never encounter a discouraging word and that others be coerced into acting respectfully, evidently on the assumption that we are powerless to prevent our degradation if exposed to the demeaning behavior of others. These are signposts proclaiming the insubstantiality of our character, the hollowness of our souls.

—Jeffery Snyder, "A Nation of Cowards", The Public Interest, Fall 1993.

Quote of the Day

[Information Technology’s] revolutionary significance is not merely in that it is a brand new technology itself, but more in that it is a kind of bonding agent which can lightly penetrate the layers of barriers between technologies and link various technologies which appear to be totally unrelated. Through its bonding, not only is it possible to derive numerous new technologies which are neither one thing nor the other while they also represent this and that, and furthermore it also provides a kind of brand new approach to the relationship between man and technology. Only from the perspective of mankind can mankind clearly perceive the essence of technology as a tool, and only then can he avoid becoming a slave to technology—to the tool—during the process of resolving the difficult problems he faces in his existence.

—Qiao Liang and Wang Xiangsui, Unrestricted Warfare, 1999. (PDF here.)

Quote of the Day

It is not generally realized that education can never be more than indoctrination with theories and ideas already developed. Education, whatever benefits it may confer, is transmissive of traditional doctrines and valuations; it is by necessity conservative. It produces imitation and routine, not improvement and progress. Innovators and creative geniuses cannot be reared in schools. They are precisely the men who defy what the school has taught them.

—Ludwig von Mises, Human Action pg. 314

[Note: "conservative" is here used not in the political sense, but in the sense of preserving an existing status quo. If one looks at the public schools today, one typically finds an entrenched class of educators and administrators who fight tooth and nail to impose and maintain a particular educational ideology, which has not shown great success in producing capable students yet is defended regardless.]

Quote of the Day

Every one who has had the misfortune to talk with people in the heart or on the edge of mental disorder, knows that their most sinister quality is a horrible clarity of detail; a connecting of one thing with another in a map more elaborate than a maze. If you argue with a madman, it is extremely probable that you will get the worst of it; for in many ways his mind moves all the quicker for not being delayed by the things that go with good judgment. He is not hampered by a sense of humour or by charity, or by the dumb certainties of experience. He is the more logical for losing certain sane affections. Indeed, the common phrase for insanity is in this respect a misleading one. The madman is not the man who has lost his reason. The madman is the man who has lost everything except his reason.

The madman's explanation of a thing is always complete, and often in a purely rational sense satisfactory. Or, to speak more strictly, the insane explanation, if not conclusive, is at least unanswerable; this may be observed specially in the two or three commonest kinds of madness. If a man says (for instance) that men have a conspiracy against him, you cannot dispute it except by saying that all the men deny that they are conspirators; which is exactly what conspirators would do. His explanation covers the facts as much as yours. Or if a man says that he is the rightful King of England, it is no complete answer to say that the existing authorities call him mad; for if he were King of England that might be the wisest thing for the existing authorities to do. Or if a man says that he is Jesus Christ, it is no answer to tell him that the world denies his divinity; for the world denied Christ's.

Nevertheless he is wrong.

—G.K. Chesterton (hat tip: Sydney Carton, commenting at Ace of Spades. Also notice the YouTube video that got the whole discussion started.)

(Is everyone else getting as bored with this QotD thing as me?

Sheesh, you work a real job for a change, and your brain just shuts off. On the bright side, next year I go back to school for my PhD…)

Quote of the Day

The relative, diminishing hardships of everyday existence, together with more extensive academic instruction, has laid a foundation of knowledge for most people that is less tested by experience and affirmed more by internal feelings and passions. More people may be better educated these days, but they are also more insulated and more naive.

—Richard Reay, letter to the Wall Street Journal, published 6 August 2003.

Quote of the Day

Everyone prefers to believe rather than to judge. One never judges but always believes regarding the things which are vital. Error transmitted from hand to hand always turns us to and fro and throws us down headlong, and we perish through following examples taken from others. We shall be cured if we were but to secede from the crowd. As it is, however, the people, the defender of its own evil, stands firm against reason.

—Seneca, cited by Leo Strauss in his Thoughts on Machiavelli, pg. 126

(My apologies for not posting recently. This page was flagged as a possible spam-blog by Blogger, and I was prevented from posting for over a week until the issue was resolved. But, I'm back now…)

A Step Towards Decentralized Logistics

Longtime readers of this blog may remember that I am interested in the concept of a decentralized, flexible military that follows the model proposed by Arquilla and Ronfeldt in their work, Swarming and the Future of Conflict. Briefly put, they propose that the current hierarchical structure of the military be replaced with one where troops are organized in autonomous units of about 200 men, which would then coordinate their actions laterally with each other. In this way, they would gain flexibility and speed, compared to the present system in which information must be passed up a long hierarchy, and then orders are passed back down. Often this process can take days, during which time the information becomes stale. Col. Thomas Hammes reiterates the problems with the military's current structure in his book, The Sling and the Stone, and also advocates a more flexible, decentralized military.

There are several practical problems that must be solved before a decentralized national military is possible (completely aside from the furious opposition to such a system from the entrenched military bureaucracy). One of the largest problems is developing a system of logistics that can complement autonomous action by many small units.

The category of "logistics" encompasses several related but distinct problems. First is making the process of peacetime procurement decentralized. Second is ensuring replenishment and resupply to autonomous units during a deployment, especially during a combat situation. Third is managing the demands of autonomous units on scarce shared resources, such as close air support or satellite overwatch. (Not being a soldier, I cannot say whether there are additional problems within the broad logistical heading.)

I would like to propose a solution to the first problem, peacetime procurement. Under the present system, procurement is largely accomplished on the national level: the Pentagon requests funding for specific needs from Congress, which is sometimes granted, and then signs gigantic procurement contracts with various suppliers. The Pentagon then distributes the equipment internally to the troops who are slated to receive it. Troops have very little say in the equipment they are issued, and in many cases are actually forbidden from buying equipment on their own. The ongoing saga of Dragon Skin body armor is a case in point; confirmed to be better quality than the Army's Interceptor vests, it has nevertheless not yet been approved for military procurement. Soldiers have even been ordered not to buy it on their own.

The problems with the procurement process have been dramatized in the last week by Daniel Henniger's WSJ column on the deployment of the Snake Eater fingerprinting system. Soldiers, private contractors, a nonprofit, and a blogger cooperated outside of official channels to produce a device in a single month, that the military had failed to create in over three years.

Meanwhile, the centralized procurement process is incredibly opaque, and renowned for its wastefulness and episodes of corruption. In part this is due to its sheer size; even while audits routinely point out examples of waste or fraud, the system is simply too big to reform easily.

There is a way to dramatically improve the peacetime procurement process, and render it more transparent and flexible at the same time, by decentralizing it. The trick is to do so without losing the real economies of scale that can be achieved with large purchases.

My inspiration for this is the concept of a "group-buy," in which a seller and many buyers coordinate the purchase of a single type of good, allowing the seller to offer each buyer a lower price than he could offer on an individual basis. (There are many, many group-buys being organized over the internet at any given time; here is an academic paper on modeling the group-buy process.)

Assume the existence of battalion-sized autonomous units of the type discussed by Arquilla and Ronfeldt, although this is not strictly necessary. Rather than Congress allocating funds to the Pentagon, which would then purchase and distribute equipment, I propose that each battalion have its own allocation of funding, set according to the type of unit. (A tank battalion is more expensive to run than an infantry battalion, for example.) The unit could then spend the money on any purchases it felt were necessary, from any supplier, civilian or defense-related. Most equipment would still need to be standardized, but the timing of purchases could be according to the unit's needs.

Defense suppliers would offer group-buy windows in which units would subscribe; if fifty battalions were to purchase body armor at the same time, the unit cost would be less than if a single unit were to make a purchase. But participation would be on an as-needed basis, not as dictated by Pentagon bureaucrats.

The Pentagon would still have an independent budget, for example to conduct R&D. But if there is a development project out of favor with the brass, yet eagerly anticipated by military units, they could decide to fund the project with a portion of their logistical budgets. If an entire division of troops were to chip in for a development project, it could proceed even in the face of bureaucratic or Congressional skepticism.

This system could have many benefits. First, it is much easier to audit a single battalion and enforce accountability than it is for the entire Pentagon. This would reduce corruption. Second, unit would be unlikely to buy equipment that is shown to be substandard. For example, a distributed procurement system would have adopted the Dragon Skin vest by now instead of the Interceptor. Third, units could rapidly adjust to changing mission requirements and purchase the necessary gear.

Another benefit is that incentives could be built into the money allocations. A bonus could be paid out if the unit has a high percentage of soldiers with excellent marksmanship skills, or who have completed Ranger training, or who have college degrees, or who learn critical languages. Not only would this encourage the units to continually improve themselves, it would allocate more resources to those units who are demonstrably more valuable.

I have not yet considered how such a system could work in battle conditions, where free-flowing resupply is often critical. But this is a good first step to revamping the military procurement system.

Opportunities in Doing One Thing Well

The angst continues to build over the ballooning cost of medical care in the United States. Thanks to a toxic combination of perverse legal incentives, crippling legal restrictions, and inefficient use of medical resources, health care costs have been consistently growing 2% faster than inflation for decades. (It is noteworthy that both health care and education—the other sector where prices have been rising, not falling, as time goes by—are heavily influenced by government interventions.) Aside from the inherent problems caused by rising costs, the health care issue has generated calls for the government to expand its intervention yet again.

Before we embark down that dreary road, trodden by the soles of so many others whose present misery we are apparently so keen to share, it is worth noting circumstances where medical care has gotten much cheaper and has improved in quality.

In C. K. Prahalad's book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, he lays out steps necessary for companies to effectively build a market among those who earn less than $2 a day. One of these is that companies must find "quantum jumps in price performance," reducing prices for a product not by half but by 30-100 times! He cites several examples; one of these is an Indian medical services company called Aravind Eye Care.

Aravind Eye Care specializes in a single procedure: cataract operations with inter-ocular lens. This surgery typically costs $2500 to $3000 in the United States or Europe. But Aravind charges between $50 and $300 depending on complications—when it charges at all; 40% of its patients receive their surgeries free. Yet their average cost per patient is less than $25, allowing them to make a healthy profit.

How can they get the cost of a $3000 procedure down so low? To do it, the founder of Aravind, Dr. Venkataswamy, standardized every step of the process and strove for consistency and efficiency. Their hospital facilities are designed specifically for eye care, and located in central areas, including the main hospital in Madurai; patients are screened in their villages and then transported in via an efficient system of buses. Each doctor is supported by two teams of technicians who have been trained only to do eye care; in this way, a doctor can go through 50 surgeries per day. Because they are so carefully trained and because every aspect of the procedure is systematized, "Aravind boasts of an outcome rate that is among the best in the world."

Nothing about this system is fundamentally shocking—or it should not be, at any rate. The inspiration for it was McDonald's, which can take a group of low-skilled employees and turn out hamburgers and french fries of uniform quality for very little cost, simply because the process has been so deeply understood and optimized.

Hospitals, on the other hand, have traditionally tried to do everything. For good reason; in most of human history, people could hardly have had the luxury of specializing, not when there might be a single hospital within days of travel. Even when specialists arose, they were turned to when the traditional medical system came up short. Specialists in the United States are premium assets, and command premium prices because of it. The very idea that a specialist should be cheaper than a traditional hospital is a non-sequitor.

Yet now that travel is so easy and cheap, the reasons underpinning this system have largely vanished. Indeed, Aravind has an agreement with the British National Health Service: Britons needing eye surgery can fly to India, be put up in a hotel for a few days, go to Aravind, and fly back, all for much less money than it would take to have the surgery done domestically.

It seems to me that this sort of deep specialization should be possible for more procedures than eye surgeries. For example, one of the most common surgeries is performed on the knee, especially for those 85 and older. One imagines that this surgery will only become more common as the population ages. As it stands now, that surgery is very expensive; but what if someone were to analyze each step of the procedure, develop a streamlined process, and reduce the cost to, say, 10% of the current level? What if this procedure were carried out in a bare handful of facilities—perhaps five in the United States, placed so that you need travel only an hour by plane to get to them? And what if by having so few facilities, you could extract every efficiency and improvement possible to make the process easier, safer, and cheaper?

Now imagine if such a fundamental change in the status quo were achieved in nearly all of the most expensive procedures in medicine. Would we still have a looming problem with the cost of health care? I doubt it.

Can it be done? If they could do it in India, they can do it here. What is needed is a doctor or group of doctors with entrepreneurial drive and vision to take the first step. Perhaps Dr. Venkataswamy can give a seminar to get the process started.

Quote of the Day

The various modes of worship, which prevailed in the Roman world, were all considered by the people as equally true; by the philosopher, as equally false; and by the magistrate, as equally useful.

--Edward Gibbon, The Decline and Fall of the Roman Empire

Quote of the Day

Government is the only enterprise in the world which expands in size when its failures increase.

—Judge Janice Rodgers Brown, speaking at the University of Chicago on 20 April 2000.

The Failure of the Diplomatic Mentality

Revolutions rarely compromise; compromises are made only to further the strategic design. Negotiation, then, is undertaken for the dual purpose of gaining time to buttress a position (military, political, social, economic) and to wear down, frustrate and harass the opponent. Few, if any, essential concessions are to be expected from the revolutionary side, whose only aim is to create conditions that will preserve the unity of the strategic line and guarantee the development of a "victorious situation."

—Mao Tse-Tung Samuel Griffith, in his inroduction to Mao Tse-Tung's On Guerrilla Warfare, cited in Col. Thomas X. Hammes, The Sling and the Stone.

European-style diplomacy (which is largely the model for American diplomacy) is premised on two sides coming to a mutually tolerable agreement, involving gains and concessions, in order to avoid a larger conflict. Such an agreement is then expected to constrain the behavor of both sides going forward. A necessary precondition for such a system is that both sides must be operating in good faith; each side believes that it has achieved the most beneficial likely outcome, and therefore has an interest in protecting the stability of the agreement.

What has been overlooked is that a diplomatic agreement only has value when there are significant incentives for all parties to keep it. In Europe, the incentives had become implicit and overwhelming (i.e., breaking agreements would lead to economic consequences in an interdependent system, and sometimes war). Therefore it became possible for diplomats to neglect actively thinking about the consequences of bad faith, and to begin to ascribe an intrinsic, quasi-mystical power to the diplomatic agreement itself. That an agreement is signed (goes the unexamined, subconscious premise) guarantees that it will be followed.

The naiveté of such a premise comes to the fore when we must deal with a class of people who treat negotiations not as a way to avoid conflict, but as another tool in that conflict. The long history of diplomacy surrounding the Israeli-Palestinian war is an example of excellence: the Palestine Liberation Organization ostensibly agreed to end warfare against Israel and Jews around the world, but in practice this amounted to little more than mouthing empty platitudes of peace and toleration at black-tie functions. In exchange for this wrenching concession, the new Palestinian Authority was given administrative control over several million people, billions of dollars in international aid, large stores of weapons along with the training to use them—and most important of all, international legitimacy that served as a powerful shield against Israeli action. The PLO proceeded to use these gifts to mount a second Intifada, as well as turning a blind eye to the efforts of other terrorist groups such as Hamas and Jihad Islami.

The same class of behavior is on display with Iran. Iran's stated goal is the development of nuclear capability. In non-diplomatic settings, the Iranian government has openly alluded to its aim of a nuclear bomb. In pursuit of this goal, Iran has broken nearly a dozen separate agreements that the European powers painstakingly negotiated over a period of several years. These agreements have been very useful to Iran, even as they were being flouted: they often came with financial inducements, they served to keep the Western powers divided and bickering among themselves over the proper course to take—and most importantly, they bought time, lots of time.

To the serious observer whose brains have not been addled by the diplomatic fantasies so adored by most Western governments, it becomes obvious early on when an oppposing party is negotiating in bad faith. The most important early warning is when the aggressive party achieves tangible gains through negotiation, in exchange for concessions that are entirely symbolic or else of minimal importance. This pattern has been confirmed in the farcical negotiations between Israel and the PLO, between Columbia and FARC, between Pakistan and the Taliban forces of Waziristan, and (at the risk of invoking Godwin's Law) the Munich 1938 agreement with Hitler.

So then why do the assorted diplomats of the world continue to make the same errors over and over again? I have argued before that a major flaw in the structure of our government is that diplomats have a single responsibility (i.e. diplomacy) and the military has a single responsibility (i.e. warfighting) that is not called upon until the diplomats throw in the towel. We need to take an integrated view towards interactions with other governments, so that out actions are not divided into discrete categories but fall along the same continuum.

I am not necessarily advocating open war with Iran. There are easier ways to accomplish our goals. For one thing, there are indications that the Mossad has begun assassinating key Iranian scientists in their nuclear program. I find these reports entirely believable, given that Israel assassinated several ex-Nazi scientists working on Egypt's ballistic missile program in the early 1960's. And it is far more difficult to replace a scientist than it is to replace physical infrastructure. Given that, and given the recent isolation of Iran by America and our allies, it is entirely possible that the Khomeinist government of Iran could fall before they achieve nuclear capability. (There is still the issue of their continuing support for terror operations in Israel, Iraq, Saudi Arabia and elsewhere.)

But the larger point is that we need to look at our diplomatic activities with a jaundiced eye. Why on Earth should we engage in negotiations with a power operating in bad faith, if the only party that will benefit is our adversary?

*******************

UPDATE 4:31 PM: With impeccable timing, Wretchard has posted a news item from the Phillipines about a delegation of negotiators sent to talk to the Moro National Liberation Front, a supposed "peace partner," who were promptly taken hostage by a supposed "breakaway faction." Perhaps in the same sense that Black September was a "breakaway faction" of Fatah, i.e. an organizational fiction meant to provide plausible deniability.