Wednesday, April 21, 2010

The Latest Example of EU Decadence--Calling "Taking a Vacation" a Human Right

This story is both amusing and troubling. Calling "taking a vacation" a human right that the EU should subsidize for poor people is laughable. But it is also troubling that grown men and women, who have the power to force it upon their constituents, take it seriously. The last line of the Times (London) report illustrates the fallacious "stimulus" impact of government spending that is pure Keynesian nonsense.

"The idea is based on a project in Spain in which holidays in the winter off-season are subsidised by the government for European residents aged 55 and over. Spain calculated that for every €1 it spent in subsidies, €1.6 was gained for its resorts."

What the Spaniards spend at vacation resorts they cannot spend elsewhere. Every Euro a vacation resort enjoys comes at the cost of reduced revenue elsewhere in the economy. If Spaniards spend their own money at vacation resorts, that is their private preference and privelege. But when they spend tax dollars at vacation resorts, the economy is poorer by the amount of the extra spending, which must be confiscated from the people by the government in one form or another. This is a classic case of Frederic Bastiat's "That which is seen and that which is unseen" phenomenon. Perhaps more importantly it diminishes the perceived importance of real human rights as worth little more than the right to take a vacation at some else's expense.

Monday, April 19, 2010

My Letter to the NY Times re: The Greek Financial Crisis

Sent: Fri 4/16/10 4:28 PM
To: NY Times (

Re: Debt Worries Shift to Portugal, Spurred by Rising Bond Rates, by Landon Thomas, Jr.

Dear Sirs:
This may be the understatement of the Greek crisis so far--

"The aid package agreed on last weekend--aimed at calming fears of a Greek default--has not yet had its desired effect."

As if "desired effect" has any meaning in the reality of financial markets. Serious economists have questioned the rationale for believing that a Greek bailout would solve anything, since the Greek government and, especially, the Greek people seem bent on self-destruction through the self-delusion that they can spend more than they earn...forever...and someone else MUST bail them out. Greece is the EU's no-good kid brother living in your basement and mooching off you, throwing a temper tantrum when you mention the four-letter word "WORK". Now his buddies are crashing at your place, raiding the fridge and demanding more beer. The EU's solution is the equivalence of you telling your wife to get a second job to make ends meet. Divorce is in the air.

Patrick Barron
Adjunct Instructor in Austrian Economics
University of Iowa
Iowa City, IA

My Letter to the Wall Street Journal re: EU Responds to Volcano Disaster

Sent: Mon 4/19/10 8:43 AM
To: Wall Street Journal (

Re: EU Politicians Step In As Volcanic Ash Losses Mount

Dear Sirs:
There is nothing that the EU can do to stop or ameliorate the economic damage from the volcanic eruption in Iceland. All it can do is socialize the cost. In contrast, the EU should reduce all manner of regulations that prevent the market economy from responding in a rational way to this disaster. But it is more likely that the EU will take measures that will make it more difficult for people to respond positively in the millions of ways that no one can direct, because it will see this disaster as a means to increase its own regulatory power.

Patrick Barron
Adjunct Instructor in Austrian Economics
University of Iowa
Iowa City, Iowa

Friday, April 16, 2010

My Tax Day Tea Party Speech in Iowa City re: National Healthcare

It will come as no surprise to this group that national health care cannot work. It cannot work because it violates economic law…and no, Mr. President, these are not laws that you can rescind. They are immutable laws of human action. You may ignore these economic laws, but these economic laws will not ignore you.

Like any socialist enterprise, National healthcare will bring excessive cost, shortages, and degraded quality of service. In short, it will fail to achieve all of its vaunted goals.

Since it makes healthcare a so-called free entitlement, demand will soar. It cannot do otherwise. This increased demand will swamp our healthcare providers—the hard working doctors, nurses, medical technicians, plus all the support services that accompany modern medicine. Some may believe that, yes, this may be so, but supply will catch up. Sadly they are mistaken.

The supply of all things related to healthcare actually will shrink, due to the other great evil—price controls. The law promises to hold down costs the old-fashioned way, by setting government-mandated maximum prices. So demand will increase while supply will decrease, creating all manner of shortages in the delivery of healthcare services.

This supply shortage will be exacerbated by the rising costs of healthcare. The elimination of private healthcare will remove the profit-and-loss incentive that is necessary for controlling costs of all kinds. The healthcare system will suffer from the same high costs as the Postal System and Amtrak. Without private owners with their own capital at risk, government bureaucrats will have little incentive to hold down costs.

Of course, a shortage of anything that cannot be relieved by price adjustments will mean that healthcare will be rationed. How? Perhaps it will be rationed by bureaucrats, as it is in every other country with a national healthcare system. Or it might be rationed by those who can wait the longest, which means that many will suffer and some will die before they receive proper care. This is the situation with our neighbor to the north. There is a reason that Canadians come to America for healthcare services and few Americans go to Canada, or Britain, or France, or Germany…

But it gets worse. Shortages, price controls, and rationing are just the near term problems. A long-term problem will be the diminished level of care and the end of medical innovations. How many here would like to return to the quality of care of 1950? Well, get sick in England and you will find out what decades of national healthcare can do to a once fine medical system. We have become accustomed to medical breakthroughs, new medical devices, and improved procedures. But with the medical system strapped for funds simply to keep things at their current level, much less will be spend on new and, initially at least, expensive care.

One last, but by no means final, problem is that of economic calculation. The healthcare system will not know how to treat patients most efficiently. And efficiency is just as important as is quality, because an efficient system will bring better quality care to more people. But price controls and government rationing will destroy all economic cues from the price system that are necessary to keep ANY service alive.

There are many, many more problems with national healthcare…I have not even mentioned the impact on business profits and worker employment…but here’s a hint…it will all go South.

All in all, national healthcare will throw America’s premier healthcare system into chaos…racked by corruption and incomprehensible government rules. It will go the way of all other national healthcare systems—it will become more expensive, access will diminish (even for the poor, who are served very well right now), and quality will diminish. This process will NOT stop, either. It is not as if our healthcare system will deteriorate to some new, lower plateau. It will deteriorate until, like government schools in our inner cities, even the poor will be afraid to utilize it. And, wasn’t it to aid the poor that is supposed to be the rationale for all this nonsense?

Real healthcare reform would eliminate current regulations on our healthcare system. Healthcare is a scare resource that must be integrated into the market to serve the peoples’ needs as expressed by their private expenditure of money. This is the process that has brought us unprecedented prosperity AND great healthcare. Now we are throwing it all away to pursue the discredited socialist dream of state control of what Lenin called “the commanding heights” of the economy. It worked so well for poor Russia that our own socialists just have to try it here in America. This law must be rescinded!

Wednesday, April 7, 2010

Why America Seems to Slide Inevitably Toward Socialism

A friend wrote to me recently expressing his concern that the US electorate is choosing socialism. That certainly seems to be the case. Republican President George W. Bush socialized prescription drugs for seniors, and now Democratic President Barack Obama has socialized the entire healthcare system. There are other examples, such as the government taking an equity position in General Motors, once the world’s largest private enterprise, and major banks. Since there is little real doubt that Barack Obama and his Democratic Party won the last election fairly and squarely, there is some justification to the claim that we are getting what we wanted—socialism. At least that is the conclusion that one must draw when our fairly elected representatives vote to enact these social programs.

But I don't think the US is consciously choosing socialism per se, even though we are sliding toward socialism one step at a time, with the electorate ratifying each and every step. Furthermore, I doubt that many of our representatives who voted for the healthcare bill, the bailouts, and all the rest would agree that it is fair to call them socialists. They are simply giving Americans what they think we want. If they did otherwise, they would be voted out of office.

The slide toward socialism in America is not a conscious act. Rather it is the inevitable consequence of abandoning the fetters placed upon the federal government by the Constitution. Nowhere in the Constitution will you find authorization for funding ninety percent of the federal government’s current operations or regulating America’s private businesses.

The Self-reliant Become Victims

Rather, the electorate understands that to refrain from lobbying for a government handout of some kind is to become a victim...the government robs you and returns nothing to you or it handicaps you in dealing cooperatively with others. Therefore, the electorate wants "middle class" entitlements similar to the ones the government has granted to the poor, the unions, and big business for decades...with no appreciable beneficial result, by the way.

Economists call this phenomenon a “Tragedy of the Commons”, where all scramble to grab as much of the commonly owned resources as they can before others grab them. Eventually these commonly owned resources are plundered to extinction; thus the name, “Tragedy of the Commons”.

The underlying fact of modern American life is that more and more resources are considered to be “commonly held” or at least subject to confiscation and/or regulation by the government for the benefit of government’s constituencies. It is clear that if you desire to live a life of personal responsibility, asking nothing of anyone, you will become the victim of all the rest—you will contribute more and more to the “common” and get nothing in return.

The Tyranny of State-Sponsored Altuism

Extending welfare benefits to a larger portion of society seems to be unstoppable. There is a very good reason for this. Welfare benefits are couched in the highest altruistic terms; for example, healthcare benefits are extended to the “uninsured”, whom we are told will suffer and die without them. We have heard this refrain before; it got us public housing, food stamps, and aid to families with dependent children.

To oppose the extension of these benefits is to incur the scorn of polite society as one who is callous, greedy, smugly comfortable, selfish, etc., and these are the polite terms! It is a brave person who can stand opposed to this scorn for very long. The temptation is to agree in principle but disagree as to the extent of welfare’s reach. One can easily see that this is no obstacle at all, for once any welfare program gains a foothold it is impossible to prevent its spread to the next tier of potential beneficiaries and then the next and then the next, ad infinitum.

Ayn Rand characterized taxpayer-supported welfare as the tyranny of altruism, for it places one at the state-enforced mercy of any and all who claim to be less well off. One no longer may labor for oneself, one’s family, or one’s chosen friends, but for the never-ending and growing ranks of one’s fellow men. The state lays claim as the moral arbiter of public altruism, and since there are legions of potential voters as recipients of all its largess, there is an inherent propensity for the state, acting in its own best interest, to grant more and more public welfare. Since the constitutional restraints have been removed that would have prevented raids on the public treasury, there is no limit to what the state may confiscate and redistribute. Nor is there any rational reason why more and more potential recipients should not lobby to get their share of the public pie. We now have the perfect storm brewing to drown the ship of state in a sea of red ink and the blood of warring “needy” constituents. The poor taxpayer finds that the state may lay a legal claim, backed by moral superiority, to unlimited amounts upon his time and wealth.

The welfare state has come to represent the ultimate form of despotism, because to oppose its greedy hands is to be labeled as a societal enemy of the worst kind. Being an enemy of a conquering power rests more easily upon the shoulders of a man than being an enemy of one’s own countrymen. That is why public altruism is the worst form of tyranny—it is a tyranny that one opposes at the risk of becoming an outlaw within one’s own country, with few friends or supporters. There is no solace borne of the confidence that one has earned the admiration of others that would serve to sustain one in his heroic defiance against this tyranny. Thusly, the American electorate, like electorates everywhere else, slides toward socialism from a combination of self-interest and fear of public condemnation.