What you don’t know hurts more in politics than markets

There is an old expression that “what you don’t know won’t hurt you.” Unfortunately, it is not true. Further, when it comes to economic misunderstanding, it is far more likely to harm Americans in their political choices than their market choices.

thomas-sowellThomas Sowell, in Knowledge and Decisions, laid out why. In market competition:

Economic knowledge need not be articulated to the consumer, but is conveyed — summarized — in the prices and qualities of goods. The consumer may have no idea at all — or even a wrong idea — as to why one product cost less and serves his purpose better; all he needs is that end result itself. Someone must of course have the specific knowledge of how to achieve that result. What is crucial to economic competition is that better and more accurate knowledge on the part of the producer is a decisive competitive advantage, regardless of whether the consumer shares any part of the knowledge.

In political competition, however:

Political knowledge is conveyed by articulation, and its accurate transmission through political competition depends upon the preexisting stock of knowledge and understanding of the receiving citizen. … In political competition, accurate knowledge has no such decisive competitive advantage.

In other words, as long as consumers can choose which suppliers’ goods better satisfy their preferences and situations, misunderstanding the processes involved does not keep them from being well-served by market competition. In contrast, voters must understand how things will actually work to evaluate politicians’ promises.

In markets, “prices convey effective knowledge of inherent constraints.” In contrast, “ballots do not … there are no constraints on my voting for … options simultaneously desired [but] unrealizable from the outset.” To make it worse, “no small part of the political art consists in misstating options and in trying to give them the appearance of simultaneously satisfying competing claims when they cannot be satisfied in reality.” Consequently, “The competition among political groups does not therefore bring to bear more accurate knowledge, as in economic competition, but promotes exaggerated hopes and fears.”

Today, for those who believe freer trade harms people rather than creating mutual gains, promises of “cracking down” or imposing higher tariffs on foreign products appears attractive. For those who believe that they earn less because “the 1 percent” earn too much, rather than that market incomes reflect added value provided to others, punitive taxation appears attractive. For those who think various workplace amenities, such as paid leave, come out of employers’ pockets, rather than from workers’ compensation packages (once there has been time to adjust), mandating those benefits appears attractive. For those who think higher minimum wages will benefit “the poor” with few other effects, rather than helping some and hurting others, including those who lose their jobs, hours worked, on-the-job training, etc., as well as all consumers in higher prices, they appear attractive. But in each of these cases, and many others, appearances are deceiving the ill-informed.

Thomas Sowell recognized that “Perhaps the greatest achievement of market economies is in economizing on the amount of knowledge needed to produce a given economic result.” However, he also recognized “That is also their greatest political vulnerability,” which we are seeing acted out before our eyes. The public, benefitting from vast and varying market arrangements without understanding them, can be lured by siren songs of something for nothing, because they don’t see how it undermines those irreplaceable voluntary arrangements which do reliably serve them.

Gary M. Galles is a professor of economics at Pepperdine University, an adjunct scholar at the Ludwig von Mises Institute, a research associate of the Independent Institute, and a member of the FEE faculty network. His books include Apostle of Peace (2013), Faulty Premises, Faulty Policies (2014) and Lines of Liberty (2016).

Trumped-up trickle-down


trump-clinton-debateIn the post-debate spinning, few noted Hillary Clinton’s pride in coining “Trumped-up trickle-down” economics to accuse Donald Trump of policy malfeasance. However, it is important, because every time anyone has ever used the term “trickle-down” economics (or its rhetorical cousins, “tax cuts for the rich,” “voodoo economics,” etc.) it has been a trumped-up, intentional misrepresentation.

No supply-side economist ever promoted “trickle-down” economics. That was invented by big government opponents of market freedom, just as Marx named capitalism to make it appear harmful rather than to correctly describe it.

Trickle-down is a defamatory characterization used to misdirect attention away from how voluntary market arrangements benefit all. Its central false premise is that taxing high-income earners less, leaving them more take-home income, benefits them alone. That is abetted by the mistaken zero-sum view that more income for some must reduce others’ incomes.

When people, however rich or poor, get richer through voluntary arrangements, they do not hurt anyone except those suffering from envy. Each party is better off, as they see it, or they would not participate. But changes in the measured distribution of income distort that fact.

If I create a massively successful software program, my measured income will increase, but every buyer will also gain because they face better options than before. This holds true even if their imperfectly measured share of total income is lower because my income has risen.

Unfortunately, forcible redistribution proponents’ campaigns to punish higher income earners (given rhetorical cover as paying their “fair share,” which is always “more”) diverts debate from the central question — are others helped or hurt? Worsening the productive incentives of high-income people induces them to do less for others with their resources, harming them.

Of course, if a rich person or a rich politician gets richer by rigging the political process, that is objectionable. But it is not a market failure, requiring a government solution. It is a government failure, which undermines the benefits competitive markets provide for all, whose solution requires removing government from the theft-and-transfer business, not expanding its role in it.

Supply-siders have always focused on improving productive incentives, and trying to make those improvements as durable as possible. That is why they focus on permanently reducing tax rates and rolling back regulatory burdens where their burdens are most adverse, because that is where it improves productive incentives most. The immediate measured benefits in financial markets will, it is true, go to those who currently own the assets affected by those changes. But treating that as solely a “tax giveaway to the rich” ignores that what is primarily rewarded is using the resources at one’s disposal to do more of what others value, and spending less time and effort trying to minimize unjustifiable burdens.

Improved supply-side incentives will increase labor supply by increasing take-home wages. It will increase rewards for acquiring new skills, for added capital investments to increase worker productivity, for secondary workers to enter the labor force, for in-migration of productive people from less-friendly tax and regulatory climates (or reduced out-migration) and for productive risk-taking. They will also reduce incentives for tax evasion, for tax cheating, and for buying things people desire less because of the distortion of tax deductibility. Each of those changes will benefit Americans. Doing the opposite, which criticisms of “trickle-down” economics are the rationalization for, harms Americans.

There is no reason to add “Trumped-up” to “trickle-down economics.” Such assaults have always been trumped-up distortions, trying to get people to look at incomes others have earned, and envy them, forgetting that, in competitive markets, they were earned by making others better off. And the pretend solutions not only violate Cicero’s millennia-old definition of justice as “giving every man his due,” they harm the very people whose votes they are trying to buy with the imagery of soaking the rich.

Gary M. Galles is a professor of economics at Pepperdine University, an adjunct scholar at the Ludwig von Mises Institute, a research associate of the Independent Institute, and a member of the FEE faculty network. His books include Apostle of Peace (2013) Faulty Premises, Faulty Policies (2014) and Lines of Liberty (2016).

“Tim Kaine Most Liberal VP Nominee in Our Lifetime” – ACU ratings

The American Conservative Union has been conducting the Ratings of Congress for five decades.  Consequently, its archives have lifetime ratings for 18 Vice-presidential nominees for half a century.  Conservatives will be pleased to know that Mike Pence is the most conservative nominee the country has seen in 50 years (99% alignment with ACU).  Americans will be stunned, however, to learn that the single most Left Wing VP nominee in our lifetime is Tim Kaine, the only nominee with a perfect 0% lifetime rating.  That puts him to the left of Senator Barack Obama (10%), Senator Hillary Clinton (8%) and Senator Bernie Sanders (6%).  Out of 100 Senators and 435 House Members, that makes Tim Kaine the single most radical in ALL OF CONGRESS!

 Hillary Clinton has picked a wolf in sheep’s clothing who is fully committed to continuing Barack Obama’s fundamental transformation of America.  Please pass this on so Americans know the truth about Tim Kaine.  Below is the list of 18 VP nominees going back to Hubert Humphrey.  Kaine must NOT be elected.

VP Nominee   ACU Rating

Mike Pence     99.0

Dick Cheney   90.8

Jack Kemp      88.8

Paul Ryan       88.6

Bob Dole         82.4

Dan Quayle     80.3

Gerald Ford     64.0

Lloyd Bentsen 40.5

Joe Lieberman 15.1

Al Gore           14.6

Eagleton          12.9

Joe Biden        12.4

John Edwards  12.2

Geraldine Ferraro 8.3

Edmund Muskie 6.4

Hubert Humphrey 5.0

Walter Mondale 3.7

Tim Kaine       0


Don’t bet the house against the law of demand

Unions22016’s edition of Labor Day followed a well-established tradition — unions claiming credit for every worker gain. Among their most common assertions, often incorporated in attributing negative wage trends to eroding union power, was that unions raise all workers’ wages. Unfortunately, unions retard rather than raise others’ real earning power.

Unions leverage special government-granted powers (e.g., unique exemption from antitrust laws) allowing current employees to prevent competition from others willing to do the same work for less, a form of collusion that, done by any business, would be legally prosecuted.

The higher union wages that result are then credited for raising all workers’ wages because they supposedly force up other employers’ wages to keep their workers from leaving for those better-paying alternatives. However, their claim cannot be true without violating the law of demand.

Higher wages from unions’ government-imposed monopoly power would push up others’ wages only if it increased the number of such high paying jobs. The reason is that employers need only outbid employees’ actual options to retain them. But by artificially forcing up the cost of hiring their workers, unions reduce rather than increase the number of such jobs offered by employers, reflecting the reduced output consumers will buy at the higher costs and prices that result. Instead of improving the alternatives available to non-union workers, they are worsened, as the displaced workers are forced into competition with others for non-union jobs.

Those displaced workers increase the labor supply for non-union employment. That pushes wages for all workers in those jobs down, not up. Consequently, union wage premiums do not benefit all workers, but come primarily from other workers’ pockets.

With only about 7 percent of America’s private sector workforce remaining unionized, union power therefore cuts the real incomes of 13 out of 14 workers. And since unions also hike government service costs directly, as well as through other cost-increasing policies (e.g., the Davis-Bacon Act and Project Labor Agreements) which big labor’s political clout has pushed through, all other workers are also harmed as taxpayers.

Unions have also used the same “big lie” technique of constantly repeating the opposite of the truth as fact in other areas. For example, aware that their monopoly power to exclude competing workers stops at the border, unions have long been the core backers of protectionism. They focus their attention on those getting special protection, then assert that their benefits will also spread throughout the economy to benefit others. But they ignore protectionism’s much larger harms — to all other workers who would have gained from expanded exports; to all other workers who, as consumers, have their access to lower cost and superior imports (and domestic production forced to compete with it) restricted; and to all other workers adversely affected by the reduction in real wealth and income produced by domestic protectionism and induced foreign protectionist responses.

Given that Labor Day has been considered the traditional start of “serious” presidential campaigning, it is an appropriate time to remember just how damaging unions’ “big lie” strategy is. Its illogical twist can derail accurate understanding of the harm unions impose on almost all Americans, offering a sobering reminder that “It ain’t ignorance that does the most damage; its knowing so derned much that ain’t so.” After all, when people know they are ignorant of important variables that bear on their decisions, they usually don’t bet the house on them, but when they think they know what is false to be true, they often lose the house. And a lot of American houses are on the line this November.

Gary M. Galles is a professor of economics at Pepperdine University, an adjunct scholar at the Ludwig von Mises Institute, a research associate of the Independent Institute, and a member of the FEE faculty network. His most books are Faulty Premises, Faulty Policies (2014) and Lines of Liberty (2016).

A Pattern for Revolt is better than a revolting pattern

2016 has already given Americans a truly unique presidential campaign, with more almost assuredly to come. Many have claimed to be revolted by it, for reasons ranging from obvious absence of decorum to apparent policy dementia. Sadly, though, attention soon leaves why we should be revolted, and what might hold out the promise of real improvement, to the latest political dirt and horse-race questions.

Pattern of RevoltA very instructive means to turn back toward such more impactful questions is easily available, however. It can be found in Leonard Read’s 1948 Pattern for Revolt. In striking contrast to what we are now witnessing, in which, except for occasional boilerplate obeisance to freedom, no one now proposes anything remotely near it, it offers examples of campaign statements that a true lover of liberty might offer, following Thoreau’s advice to “Let every man make known what kind of government would command his respect…[as] one step toward attaining it.”

Pattern for Revolt has been described as “strong meat, probably too strong for stomachs that have long fed on government pap and can’t imagine how they can get along without it.” Yet while it would be panned by panderers who love power far better than liberty, it is well worth reading for anyone “who loves liberty better than power.”

The all-authoritarian state marches on…not only unhampered and unchecked, but aided and abetted by an ever-increasing number of gravy-trained citizens.

The people [have] no choice except between power-seeking personalities and groups, each offering a superior administration of government-as-master. Such a choice…is no choice at all.

Party leaders…are asking today “What must we say and do to win votes?”…a truly liberal party…would have been asking “How can we liberate the individual from the tyranny of the State?”

The mere changing of parties or personalities is not important. The transfer of power…is important only if the ascending party has principles which it is important to substitute for the principles of the party in power.

Not only will [an] office-seeker resort to expediency to attain office, but…A man who seeks and secures public office…will try to make it a bigger and more powerful office. Government should not be so expanded…Men in government, therefore, should be those who aim at making government as unnecessary as possible. Contraction, not expansion, should be the aim.

Freedom is an assertion of man’s God-given free will, a resurrection of man from deadening arbitrary authority…The principles which brought America to the greatest heights of freedom yet known on earth are easily forgotten…[but] what will our collectivistic opponents be able to do in extending their authority over the people if the people subscribe to the principle of liberty?

Our assignment is to cultivate an understanding of freedom—in ourselves and in others.

In every field where arbitrary authority is imposed we shall inquire how it may be removed and replaced by a reliance on the initiative and enterprise of individual citizens. We must give to the art of self-government its American renaissance… We need patriots who will stand against wrong even though they cannot see the time when right will triumph.

As liberals and individualists…we do not want to be led…we do not want to “lead” by force…The only way to guard freedom is to remove, to destroy, unwarranted restrictions and coercion.

There was [once] a general acceptance of the idea that governments should have only limited powers and functions…Today, however…Opponents of freedom… have pre-empted the language of freedom so extensively that we how attempt to speak on behalf of freedom now find it difficult to convey our meaning.

Our plunderstorm economy is a matter of common knowledge…The first reason is a deep-rooted conviction on the part of millions that they have, by reason of their existence on this earth, a right to share in the property of others. The idea that this is a wholly immoral notion has never occurred to most of them.

The result is this group-thirst for political plunder…there is no cure at all except to re-establish in the minds of people the normal boundaries of personal right. The present situation calls for an understanding of where personal rights end and infringement on the rights of others begins.

In the hope of plundering more from others than others succeed in plundering from us, we have voted away the inestimable benefits for which government and law were originally instituted.

We founded our government…on the premise that the individual citizen has certain inalienable rights and that government and law should protect those rights …While it is perfectly obvious that we should restore government and law to their proper functions, limit them as we originally intended they should be limited, it is equally obvious that this is not impossible until false ideas are removed…As long as people entertain these false ideas about rights and property, so long will they seek their fulfillment though government and the law…The choice is only one of going on with the filthy business or getting out of it entirely.

In a variety of ways this nation has legalized plunder…we seek prosperity by the fruitless process of picking each others’ pockets.

Coercion is my first objection…No man has ever lived who has been big enough or competent enough to apply it, justly and wisely, to any responsible adult person, arbitrarily…Tyranny is only arbitrary coercion carried to its logical consequence.

Using governmental coercion to protect your goods from a thief is proper. Using it to protect a thief in the taking of your goods is improper. It makes no difference whether the thief be a thug or a legally recognized pressure group, using the democratic process.

Given freedom of opportunity, protection from fraud, violence and predation and a dependence for our welfare on our own initiative, we can and will look out for ourselves better than will any other person or any government agency.

[Government’s] failure…was their guarantee to meet “human needs” and their inability to meet the ever-growing demands and impossible responsibilities to which they thus exposed themselves.

The real reasons for most of the…recent distress inhere in the suppressions of liberty, in the sabotaging, wittingly or unwittingly, of the free competitive economy, which alone produces general prosperity. Re-establishing a free economy is the only road to progress…Free enterprise can be re-established only by the repeal of those laws, rules and regulations which impede it. I stand for their destruction.

I am a spokesman for the philosophy of government which is an American heritage… Nowhere else have men so successfully escaped from arbitrary authority…This American philosophy of government is premised on our countrymen being free men. This is what our birth as human beings gives us a right to be; that is what we ought to be; it is the object to which our Constitution commits us—all of us.

I do not desire to reorganize the lives of other people under the pretext of doing them good…It is now time to turn your hopes from this place on the Potomac as a source of livelihood. It is the most unproductive spot in these United States…May your federal government no longer be condemned for what it plunders from some. And may it never have applause because of the loot it bestows on others.

In a day-and–night contrast with our modern political cacophony of promises to violate moral principles and other people’s property on an indescribable scale, Leonard Read recognized that “Nothing is in our nation’s capital except that which is taken from individuals.” His Pattern for Revolt, though written long ago, offers both a bracing reminder of what has been lost and motivation to reclaim it. It merits attention from anyone who, “If given the opportunity…would revolt against all of those political devices and ideas incidental to government in the role of master.”

Gary M. Galles is a professor of economics at Pepperdine University and research fellow with the Independent Institute. His books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).

Mainstream Misdirection in SCOTUS Search


Photo courtesy Envios, flickr

Photo courtesy Envios, flickr

Antonin Scalia’s death has begun a new Supreme Court battle. And much of it will be expressed in terms of whether nominees are “mainstream” or not.

Senator Charles Schumer already demonstrated this pattern. In 2007, he said any Bush nominee “must prove … that they are in the mainstream rather than we have to prove that they are not,” but has now doubled down in the opposite direction, saying, “many of the mainstream Republicans, when the president nominates a mainstream nominee, will not want to follow Mitch McConnell over the cliff.”

Why so much mainstream rhetoric? To be in it sounds good; to be out of it sounds bad. But it rests on a distorting analogy.

The analogy equates mainstream to “normal,” or majority, views. They are then further equated to “correct” views. But while majorities choose representatives, our Constitution was far from majority rule (“mob rule,” to many founders). It put many choices off-limits to political determination, and subjected others to very stringent standards. In short, it defended liberty against government encroachment. This is especially critical in evaluating justices, whose primary role is preserving the Constitution against majority abuses.

The analogy presumes a speaker’s mainstream evaluation is accurate. But where the mainstream is and how far from its supposed center is acceptable are indefinable.

The core issue is not, then, about being in the current mainstream, but where that mainstream should be. Advocating respecting the Constitution as written, as Scalia was famous for, focused on that.

That is, the mainstream may be in the wrong place. It has clearly changed in our country, but only because some were out of the previous mainstream. Men being created equal, with inalienable rights against government abuse, is far from the once mainstream belief in the divine right of kings. And our Bill of Rights freedoms to speak, write and worship as we choose, and to have our property protected from government predation, were not always mainstream.

Federalist 78, America’s most famous statement of the judiciary’s role, reveals that the political mainstream has indeed jumped its constitutionally enumerated banks, arguing for re-routing it toward its original course: “A limited Constitution…can be preserved in practice no other way than through…courts of justice, whose duty it must be to declare all acts contrary to the manifest tenor of the Constitution void. Without this, all the reservations of particular rights or privileges would amount to nothing.”  Further, “whenever a particular statute contravenes the Constitution, it will be the duty of the judicial tribunals to adhere to the latter…to guard the Constitution and the rights of individuals.”

If the mainstream has moved from its original American course, only those now out of it can shift it back. For example, the now-common view that using government to rob Peter to pay Paul is acceptable means anyone acting to undo such policies would be outside today’s mainstream, though not that of our founders. As Jefferson said, “The majority, oppressing an individual, is guilty of a crime, abuses its strength, and…breaks up the foundations of society.”

In fact, “out of the mainstream” nominees are the only ones who might resist further expanding government encroachment or even reclaim eviscerated freedoms once taken for granted. In contrast, those recently advocated as mainstream have enabled “new and improved” encroachments.

Expanding the divide between the Constitution and current interpretation increasingly threatens our founders’ mainstream belief in liberty and the Constitution they designed to defend it. Consequently, advocates for the modern mainstream are opposing the mainstream that made America great. That is why Antonin Scalia fought vigorously for our founders’ understanding. It is also why Americans don’t need more justices from the modern mainstream, but more from its original channel.

Gary M. Galles is a Research Fellow at the Independent Institute and a Professor of Economics at Pepperdine University. His books include Lines of Liberty (2015), Faulty Premises, Faulty Policies (2014) and Apostle of Peace (2013).

They Do Not Own Us As Property

Lysander-SpoonerIn recent years, Americans have been burdened with historic expansions in government control, with a proliferation of fees, regulations, czars and bureaucracies, along with profligate spending that guarantees higher future taxes. Such dictates violate Americans’ inalienable self-ownership.

That is why Lysander Spooner, born January 19, deserves renewed attention. Spooner laid out why our natural right of self-ownership, combined with its implied right to enter voluntary arrangements, made government coercion of peaceful people illegitimate. Since we are rapidly accelerating away from that moral standard, we need to rediscover Spooner’s vision. In particular, his 1870 No Treason illuminates our current situation:

That men may rightfully be compelled to submit to, and support, a government that they do not want … [is] self-evidently false … a man, thus subjected to a government that he does not want, is a slave. And there is no difference, in principle … between political and chattel slavery. [Each] denies a man’s ownership of himself and the products of his labor; and asserts that other men may own him, and dispose of him and his property, for their uses, and at their pleasure.

A man’s natural rights are his own … any infringement of them is equally a crime … whether committed by one man, calling himself a robber or by millions, calling themselves a government.

To say that majorities, as such, have a right to rule minorities, is equivalent to saying that minorities have, and ought to have, no rights, except such as majorities please to allow them.

The principle that the majority have a right to rule the minority, practically resolves all government into a mere contest between two bodies of men, as to which of them shall be masters, and which of them slaves.

How does [a man] become subjected to the control of men like himself, who, by nature, had no authority over him … as if their wills and their interests were the only standards of his duties and his rights … force, or fraud, or both.

A man finds himself environed by a government that … forces him to pay money, render service, and forego the exercise of many of his natural rights, under peril of weighty punishments.

Governments … [are] tyrannies to that portion of the people … compelled to support them against their will.

Getting the actual consent of only so many as may be necessary to keep the rest in subjection by force…is a mere conspiracy of the strong against the weak … a presumption that the weaker party consent to be slaves.

Government, like a highwayman, says to a man: “Your money, or your life.” [But] The highwayman … does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit.

No government … can reasonably be trusted for a moment, or reasonably be supposed to have honest purposes in view, any longer than it depends wholly upon voluntary support.

If [Congress] own us as property, they are our masters, and their will is our law. If they do not own us as property, they are not our masters, and their will, as such, is of no authority over us.

On what ground can those who pretend to administer [The Constitution] claim the right to seize men’s property, to restrain them of their natural liberty of action, industry, and trade … at their pleasure or discretion?

A tacit understanding between A, B, and C, that they will, by ballot, depute D as their agent, to deprive me of my property, liberty, or life, cannot at all authorize D to do so. He is none the less a robber.

In an era where what remains of our self-ownership is threatened with further evisceration, rediscovering Spooner’s vision, which Murray Rothbard called “a great bulwark against the State’s eternal invasion of rights,” is crucial. Coerced obedience cannot be derived from our natural rights or our Constitution. The individual, rather than the ever-more-powerful State, must be re-established as the basis of our society.

Gary M. Galles  is a professor of cconomics at Pepperdine University.

Government Hypocrisy: “Save More”

Photo courtesy of kenteegardin, flickr

Photo courtesy of kenteegardin, flickr

American government is so ubiquitous it even offers advice about New Year’s resolutions. However, its guidance to citizens mainly illustrates ideas government violates. Consider one example from the About USA.gov site: “Save more.”

That is not a very controversial resolution for an uncertain world. But the massive and still growing government debt and its far larger unfunded liabilities makes it the largest violator of its own resolution. Talk about “do as I say, not as I do.” Further, the main reason people save too little is that government does so much that discourages saving and investment, making the Hippocratic oath –“First, do no harm” — a better means to increase savings.

One huge illustration is Social Security. People have been led to substitute its “contributions” and retirement benefits for funds they would have saved to finance their “golden years.” Its promises also dramatically exceed what funds will be available, making people anticipate richer retirements than they will actually have, reducing savings more. Those who save enough to provide well for retirement also face income taxes on most of their Social Security benefits as well.

Social Security exacerbates the adverse effects of budget deficits, which divert funds that would have added investment into government spending.

Taxes on capital reduce the after-tax return on saving and investment, also reducing saving. These include property taxes that, while relatively small percentages of the capital value, represent sizable fractions of annual income generated. Then state and federal (and sometimes local) corporate taxes take further bites from after-tax returns. The implicit “tax” imposed by regulatory burdens must also be borne before earnings can reach investors.

Personal income taxes at up to three levels of government reduce saving further. Investment income left after other taxes is taxed again if paid out as dividends.  Earnings from saving and investment can also trigger additional tax burdens by triggering phase-outs of income tax deductions and exemptions.

If investment earnings are retained and reinvested, increasing asset values, they are taxed as capital gains. And even increases in asset values from inflation are taxed as real increases in wealth.

Medicare, whose unfunded liabilities are far greater than Social Security’s, reduces incentives to save for future medical costs. Current earners, forced to cover three quarters of the cost, are left with less to save. Medicaid coverage of nursing home costs only after other assets are virtually exhausted undermines another savings motive.

Unemployment benefits, along with food stamps and other poverty programs, also reduce the need for a nest egg, “just in case.” And as illustrated by so many disasters and crises, government steps in to assist those who “need” it, reducing the incentives for financial self-responsibility.

Estate taxes also reduce successful savers’ ability to pass on assets as bequests, eroding another savings motive. And monetary policy that has long kept interest rates near zero have undermined incentives to save as well.

Together, these government policies punish savings heavily, resulting in large numbers without appreciable savings. But fixing that saving problem doesn’t require government to tell us to resolve to save more. It doesn’t require ever more government intervention to “solve” a problem its existing interventions have created. It only requires a government resolution to stop aggressively undermining incentives to save as it does now.

Gary M. Galles is a research fellow with the Independent Institute in Oakland, and a professor of economics at Pepperdine University. His books include Lines of Liberty (2015), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).

Electric Cars – The Promise and the Reality    


By Abe Ostrovsky with contribution from Peter Whealton

I leased an electric car nine months ago. A 2014 BMW I3 rex. The BMW advertising was clear. Eighty-seven miles per full charge plus 48 miles of additional range from the range extender, a built-in gas driven generator that recharges the battery while driving. The gas tank serving the generator is 1.5 gallons. The extender is meant for the occasional short additional miles to reach a charging station when a destination turns out to be just beyond the electric range or mishaps on the road mandate a detour.

My discussions with the sales person reinforced the claimed range and I was further reassured as I read that since BMW did not expect the range extender to be used regularly, it would automatically come on and cycle for 5 or 6 minutes every 2 months to keep it lubricated and ready.

The battery charger that is included with the car is classified as a level 1 and takes 20 hours for a full charge. BMW sells a level 2 charger (an extra $980 accessory which requires wall mounting to a 220 Volt, 30 Amp source – it cost me $250 to provide this power in my garage). This charger will charge a depleted battery in 3+ hours. The logical operating radius for the car is therefore 43.5 miles one way assuming there is no time to recharge the battery at the destination.

In my case, 43 miles was sufficient to reach most addresses in Los Altos Hills and San Jose was reachable depleting the battery one way. This covered most of my needs so I leased the car, bought a level 2 charger and had an electrician install it in my garage.

Soon I learned that the car was capable of delivering the 87 mile range only when driven carefully (no quick acceleration and no extensive brake usage) on flat streets (no San Francisco hills) in a mode that deactivated many features (no AC or heat or seat heaters) at a maximum speed of 56 miles per hour (no expressway driving). The actual range being driven normally (I am told I am an aggressive driver) on San Francisco hills and Bay Area expressways is around 50 miles, just a few miles more than half  the advertised range.

Just so there is no misunderstanding, I think the I3 is a great city car. It is well featured, easy to drive, has nice pep, handles well, parks easily and transports 4 comfortably. As a city car in San Francisco, a city that is approximately 7 miles by 7 miles, it is terrific. But if normal usage requires more than 25 miles one way, the battery system is inadequate.

My investigations into battery technology indicate that advances in battery density (the amount of stored electricity available per pound of battery) is rapidly increasing. Chevrolet has recently announced the Chevy Bolt, a compact expected to deliver 200 miles of range on a fully charged battery which should be available by end of 2016. I expect that battery technology advances will allow a doubling of range for same size and weight batteries by 2017. At that point the lower price electrics will have sufficient battery power to compete with gasoline powered cars at competitive pricing.

Until then, I will continue to rent Zip cars when going further than the short rides to San Carlos airport, Walnut Creek or Lucas Valley.

Where is the further conversation?

“Check your privilege” has become a mainstay of social justice rhetoric. Assumed privilege is also a presumption behind microaggression accusations now seeming to sprout by the second. Those employing the terms frequently describe them as reminders to be empathetic and sensitive, elevating social relations. But they are often little more than assertions that others are members of an oppressor class, fundamentally mistaken in their views and responsible for a cornucopia of complaints.

The “kinder, gentler” version offers a sometimes-useful reminder that you might be including some inappropriate assumptions in your understanding, because something that may be sensible for you, given your characteristics and circumstances — i.e., your privilege — may not be sensible for others, leading to insufficient consideration of others and therefore erroneous evaluations.

Max Borders has described the latter meaning (or demeaning) as:

Your rights and opinions are invalid and you have no real complaints or suffering because you belong to X group. Or … you are obligated to pay because people who look like you in some ways did bad things at some point.

In other words, others need not listen to, much less respect, your arguments. Further, your inherent “wrongness” sacrifices your rights and property to satisfy those claiming to be oppressed, an aggression justified as undoing your alleged privilege or responding to your microaggression.

How are we to judge between such dramatically opposed interpretations?

The key is that, where confusion reigns, better evaluation requires clearer, more accurate understanding. That demands a real, ongoing conversation. So ask what would be entailed if “check your privilege” or its microaggression progeny was intended to advance such a conversation.

When such terms are used to preemptively cut off communication by stopping those who disagree from being heard or taken seriously, neither clarity nor empathy will be improved. So they must not end discussions; they must facilitate more complete conversations.

By themselves, the terms say you are wrong in your understanding and views, and too self-absorbed to notice. However, they leave how and why unspecified, beyond somehow relating to membership in an allegedly privileged group defined by accusers. Progress toward better understanding requires several additional steps.

Such progress would require specifying precisely what faulty premises, assumptions or arguments a person holds to, as well as why they are inappropriate for the issues considered. The appropriate premises to replace them would then need articulation.
How the “new and improved” premises would alter one’s conclusions would need to be demonstrated, followed by considering the appropriate remedies based on the alternative analysis. It would have to explain how proposed remedies were not merely “more for me” gambits, connected to the rationales offered only by self-interest. It would have to justify any special privileges to be created now for those claiming victimhood status, including any coercive impositions on members of supposedly dominant or victimizer classes who had nothing to do with the “sins of their fathers.”

When “check your privilege” and microaggression claims communicate that we should think carefully about others’ circumstances, which may be far different than ours, and be empathetic, it can be a useful reminder in advancing mutual understanding. But it can bear good fruit only as the beginning of a far deeper discussion.

In contrast, when they are used to peremptorily declare victory in social justice disputes, they assert special privileges for speakers to define themselves as morally superior and disqualify those who disagree from any consideration, without any coherent argument. And when that social demonization is leveraged into coercive imposition of “solutions” at the expense of those they decide must make it up to them, it undermines social cooperation, by undermining the rights upon which it is built, without advancing understanding or empathy.

Gary Galles is a professor of economics at Pepperdine University and a research fellow at the Independent Institute. His books include Lines of Liberty (2015), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).