Tuesday, December 20, 2016

My letter to the NY Times re: Free Basic Income Is Not a Solution to Unemployment

Re: Free Money for the Jobless

Dear Sirs:
Your article about Finland's experiment in providing a free basic income to the unemployed fails to address the main question--what exactly is the cause of unemployment and what is the best way to eliminate it? The cause of unemployment is a change in the market, which, if not caused by government itself, is a natural occurrence in a dynamic economy. The great Austrian economist Joseph Schumpeter coined the phrase "creative destruction" to describe the process whereby an advancing, wealth generating economy is constantly shedding old production methods for better ones, causing malinvestment of capital and temporary unemployment of labor. Government programs such as unemployment insurance hinder the necessary and beneficial process of capital and labor adapting to the new market environment. Not only do they cause disincentives to adaptation, they must be funded out of the wealth generating sector of the economy. Finland's experiment in going beyond unemployment payments and providing a basic income is simply the welfare state bureaucracy trying to justify its own existence after the failure of its previous programs. There is no solution to unemployment other than that provided by the market itself.

Sunday, December 4, 2016

The Chimera of Mandating Health and Safety Standards


Federal regulation of health and safety is based upon several illogical premises. Unfortunately these premises are never discussed. Instead we are bombarded with scare stories that business intends to make its profits with no consideration to the health of the public or the safety of its workers.


Illogical premise number one: There is an absolute criteria for health and safety that can be discovered.


 Wrong! There is only a continuum of healthier and safer practices. For example, we accept some level of pollution and some level of worker risk. Some level of pollution escapes from factories, commercial establishments, and even homes. Likewise, there are many occupations that are obviously dangerous, such as lumberjack and commercial fisherman. Furthermore, even occupations that no one would consider to be dangerous contain some level of risk. My wife broke her foot a few years ago when she slipped on a well waxed hallway at work.


Illogical premise number two: The federal government should be responsible for conducting research into determining the extent of risks to health and worker safety.


Wrong! All research should be conducted by private means, because such research itself comes at a cost to society. Wealthier societies can afford more research than poorer ones. Yet the federal government will command resources to conduct health and safety research that the free market would direct to a higher use. Nothing should be exempt from the market test. Therefore, all research should be conducted at private expense.


Illogical premise number three: The federal government should be responsible for setting health and safety standards based upon either public or private research.


Wrong! Any standards should be set by the most local community affected. For example, pollution standards may be different in Gary, Indiana than Hollywood, California. The former is a major industrial city, and the latter is a wealthy bedroom community. Hollywood's residents may very well set more stringent standards than Gary residents, because there is little factory-type pollution or worker risk there. Therefore, stringent standards would not affect production or jobs. Jurisdictions may even be a city block or two long and not encompass an entire city. Residents of Gary, Indiana may set more stringent noise level standards in residential neighborhoods than directly across the street from a factory. Of course, there may be natural gradations to noise level, with homes in noisier neighborhoods selling cheaper than homes in quieter neighborhoods.


Illogical premise number four: The federal government should fine and/or shut down businesses that violate its standards.


Wrong! Violations of health and safety are torts--i.e., harms--or a taking--i.e., violation of the benefits of property rights--that can be adjudicated only in a court of law based upon the standards of the local community. Standards need not be the same for every community. Any financial remedy should go entirely to the plaintiffs and not to a federal government agency. Otherwise, the federal government agency becomes a legitimate shakedown/extortion racket, funding itself through its own fines imposed for so-called violations of its own standards. (Regrettably, this is the situation today!)



Standards for health and safety are legitimate concerns. Violations are torts (harms) and/or takings (of property rights). There is no one standard that can be discovered, only a continuum of standards that may be different in different places, according to community desires. All standards impose costs that involve tradeoffs with other needs. In other words, a costly new standard may be accepted in some richer venues and rejected in poorer ones. Imposing one strict standard impoverishes the latter while perhaps having little or no effect on the former. Therefore, health and safety standards should be adopted by the smallest constituency possible.