I have to admit I am a baffled by the nut case sending ricin letters to the POTUS and other high ranking politicians. The letters stated,

“You will have to kill me and my family before you get my guns. Anyone wants to come to my house will get shot in the face. The right to bear arms is my constitutional God-given right and I will exercise that right till the day I die.”

Perhaps unbridled contradiction is a ‘tell’ for mentally ill people. In any case, to state the obvious, the U.S. Constitution was written for law-abiding citizens. The idea behind law is that it is not a smorgasbord that you can pick and choose from. You may not like all laws or agree with them but the Constitution does not mean anything if you are lawless. Lawless folks seem to really think that laws are optional depending on what suits them at the moment. Society makes prisons for such folks; probably because we do not know what to do with them. They are hopelessly narcissistic. It is crazy thinking to state that you believe in the 2^nd Amendment to the Constitution and are willing to murder to prove it. Even more, to state that the 2^nd Amendment is “God-given” as a way to justify murder is the same mentality that drives the common terrorist. This “God” is no different than the deranged mind that imagines it.

I think there is a deep feeling/conviction among many of us that living a lie is none other than living a contradiction. This is why when we become aware of our contradictions we have consciences and feel guilty. Guilt motivates us to change our behavior so that, eventually and ideally, we are at peace with ourselves. While many may never attain guilt-free life, we still hold to the ideal and labor under it our whole lives.

Apparently, some folks are not in the least hampered with such notions. They can spout off ‘God this and God that’, ‘Constitution this and Constitution that and in the name of their holy indignation murder anyone that disagrees. I find this kind of behavior no different than the ‘kind’ of a tornado. It is not human and can reap horrible unfettered violence at will with no pains of conscience. The odd thing is that this ‘human tornado’ can talk and look like a human. Perhaps such a phenomena fulfills the purely human notion we have of ‘monstrous’.

I think we should strive towards justice and critical thinking. Our Founding Fathers constitutionally put a judicial branch into government because they knew that people were quick to judge based on sensationalized facts. From a philosophical perspective there is quite an interesting dynamic between universal judgments as Kant recognized and particular cases which, all too often, are not obvious but dubious and uncertain, the macro and the micro, the one and the many. The existential dilemma is the in-between where we live and breathe and have our being. Post-modernism is replete with those that awaken the ancient Greek Skeptics¹ and Cynics² refrain from their Platonic and Aristotelian counterparts. The perennial themes that Leibniz first observed³ are replayed countless times by those that must act and react to the play of universal and particular as a singularity. Judgments are not optional as we must act and align our universals (or denials of them) in meaning-bestowing ways. Let’s take an example in the Austrian School of Economics.

The Austrian Economic School’s retreat into the micro-economic serves a macro-economic goal, a universal ideology that sustains itself vis-à-vis Menger’s causal realism⁴ and Rothbard’s chaos theory of economics⁵ which results in a spontaneous order of self-organization for Hayek⁶. Their criticism of neo-classic, macro-economic models deny these schools legitimacy based on their imagined universal orders that result in central planning. The Austrian model is based on an absolute freedom from idealized ‘economic theories’ and the assumption that entrepreneurship driven by free-market price competition in a spontaneous order, a bottom up, Darwinian styled, self organization that resists history and a priori narrative. Market equilibrium⁷ is denied as any long term market dynamic. Market predictability and manipulation are discredited as the outdated, neo-classic idealization in both neo-classic capitalism and Marxism. While it appears that this school would distance itself at times from post-modernism and some of post modernity’s initial affinity with certain liberal arts schools of Marxism, it shares a similar distrust of what Derrida calls “logocentrism” in deconstruction. It prefers localization to ‘universalization’. However, a certain purity of discord is attributed to entrepreneurial competition that may have a hard time explaining collusion.

Even if we take the bottom up approach to market dynamics there are dynamic differences between small-scale and large-scale entrepreneurship. Small-scale entrepreneurship is not performed in an absolute individualized vacuum but seeks market advantage not only by competition but also by partnership and strategic alliance which it largely does not yet have. Large-scale entrepreneurship already has forged those alliances and seeks to maintain the ones that further its economic goals and use its market leverage to create new economic alliances. If there is no market order that can stand over and above the market then the differences between partnership and alliance and price collusion and market monopoly could not be determined by market regulation. In effect, market ‘universalizations’, could spontaneously arise and ‘self-organize’ without restraint. Of course, the Austrian objection to this would be the ardent belief that market price competition and lassie faire capitalism as the most efficient allocation of market resources would prohibit this kind of market dynamic. For the Austrians however, this is not the case for government intervention where government tampering results in ‘malinvestment’ and over allocation of labor. Rothbard states,

The Fed essentially is a legalized monopoly counterfeiter. And the effect of the Fed increasing the money supply, or the Bank of England or any central bank, is almost the same as any counterfeiter.⁸

There is an apparent faith that no matter how large companies can be they would be exempt from market tampering which could only be rightfully applied to the government. It is a pre-determined absolution of free-market ‘self-organization’ and government imposed market order. The Austrian faith only works if this difference can be absolutely maintained. Here we have pin-pointed the absolute in Austrian economics. It is a faith that must think the market in terms of the individual and not the collective. Even if a large corporation were larger than the government, it would be unhindered and unfettered by its ‘private individualism’ banner which could not be claimed by the government. Could a large corporation manipulate the economy? Is that inconceivable? Could a large corporation not be the most efficient allocation of resources? Could the government make any positive contribution to market economy? Is the government always essentially defined as anti-free-market economy? How could one prove such a thing where it true especially if macro-economic measures are disqualified at the start? Paul Cantor states,

In short, the free market will always produce failures, but, unlike other economic systems, it has a built-in mechanism for correcting them. That is why the efforts of a multitude of uncoordinated market actors can produce a more rational result than any centrally planned economy can generate. Centrally planned economies inevitably produce system wide failures, whereas the free market tends toward merely local failures, which generally cancel each other out.⁹

Does this line of distinction really work? Are we to believe that we cannot correct failures in government? What is voting for if this is so? Why homogenize government? Don’t we have local governments as well? Cantor states that “the free market tends toward merely local failures”. I know the Austrians wholly blame the recession of 2008 on government intervention but isn’t the impunity of the free-market from any blame whatsoever a step away from realism and towards the ideal?

In Austrian economics, the metaphysic of the individual must be maintained over and against the collective as a way to purge the market of impurity but the individual never exists in some metaphysical, ontological, hermetic isolation. Groups and collectivities are formed by individuals that can counter and thwart other individuals, even other entrepreneurs, by its sheer size and this can happen in governments and private corporations. The Austrians talk a good game but their causal realism has just as many universal ideals built into it as their arch-nemesis neo-classic economics, just different universals. If causality is stretched to accommodate theories it can easily fall into the fallacy of false causality. The sign of this would be clear and artificial lines of demarcation that cannot or will not explain or justify itself. Further, any insistence that even the attempt to hold itself accountable to economic metrics rests on discounted macro-economic ideals is certainly a red flag for unfalsifiability; Popper’s notion of the difference between science and pseudoscience. History has shown universal truths, cultural myths, can be deceptively dangerous and insidious when they myopically distance themselves from any possible grounds for criticism.

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¹ See http://www.iep.utm.edu/skepanci/

² See http://www.iep.utm.edu/cynics/

³ See http://www.friesian.com/leibniz.htm

⁴ See http://mises.org/daily/6254/The-Odyssey-of-Sound-Economics

⁵ See http://mises.org/freemarket_detail.aspx?control=296

⁶ See http://mises.org/daily/4034/The-Poetics-of-Spontaneous-Order-Austrian-Economics-and-Literary-Criticism

⁷ See http://mises.org/freemarket_detail.aspx?control=296

⁸ See http://mises.org/pdf/het5_mises_and_austrian_economics_rothbard.pdf; page 16

⁹ See http://mises.org/daily/4034/The-Poetics-of-Spontaneous-Order-Austrian-Economics-and-Literary-Criticism; Section IV

Steven Miller, the Deputy Commissioner and Acting Commissioner of the IRS, is testifying before the Ways and Means Committee today regarding what the Republicans are terming “targeting of conservative groups” for the 501(c)(4), tax-exemption. Here are a couple things I learned. Steven Miller is not a politically appointed Commissioner. Apparently, the Commissioner is a politically appointed position. Miller was a Deputy Commissioner which means he is a civil servant. In other words, he worked up through the ranks. He is a career employee. The last real Commissioner, Douglas Shulman, was appointed by President Bush and served from March 24, 2008 until Nov, 9, 2012. He was the Commissioner during the alleged “targeting” incidents. The Commissioner before that was Mark Everson. He also appointed by President Bush and served from May 1, 2003 to May 28, 2007. It interesting to note that Shulman retired just three days after President Obama won re-election. However, he did serve during President Obama’s first term. I don’t know why he retired three days after President Obama won but might it be taken as a show of protest to Obama’s re-election or just a quick out to avoided getting fired or perhaps nothing to do with the election at all but I really doubt that a Bush appointee would be very happy with a Democrat winning the Presidency again. In any case, I have yet to hear how a Bush appointee would be “targeting” conservative groups. Do sane folks really think that Obama could pull off this kind of feat? This sounds like yet another case of the Republican Party eating their own in their feeding frenzy to take down Obama and win seats in 2014.

I watched some of the hearings to try to understand how Steven Miller might be approaching this issue. First, he believes he told the truth, when he previously testified to the same committee, even though Republicans were basically calling him a liar today. He stated that the issue he was dealing with at that time and what he thought the previous hearing was about was processing specific applications for 501(c)(4) status of some conservative groups not any internal lists the IRS used to direct claims to specialized agents. He stated he was not aware of any specialized agents that were given orders to deny 501(c)(4) status to tea party groups. Apparently, he was aware of organizational methods the IRS used to direct applications to special agents. Apparently, this is common procedure. Imagine if you were a boss and you had to come up with ways to organize 70,000 501(c)(4) applications with only 200 agents that could handle this type of thing. These are the numbers that Seven Miller cited today. The first thing you would do if you had a database is try to sort the applications electronically by key words. You might have one agent that specialized in tea party or conservative group applications because they would gain knowledge and experience in that particular area that they could use on new applications. You would also have some applications that would go through without further investigations and some that would get flagged for further, personalized attention. You would be looking for scams and frauds that the IRS regularly deals with. Based on previous experience you might have developed some buzz words on the application that would cause the computer to flag it to a specialized agent. So why would it take 2 or 3 years sometimes to process an application? Well, 70,000 divided by 200 is 350 applications on average that one person must approve or deny. It is not so hard to imagine that common data processing techniques that I have described would have to be used. However, let’s take a step back.

If you were an employee and you were told that your job was to approve or deny 350 applications on average for tax-exempt status, would it cross your mind that your employer was severely understaffed? Would your boss also have an inkling about this? Could it be that your boss may have taken this understaffing issue to his boss and received the answer that we do not have enough money to hire more people? In the case of the IRS, it is feasible that Congressional appropriations would be the limiting factor. What if you were Secretary of State and were responsible for multiple embassies around the world? What if, again, you were denied funds for maintaining adequate security for all the embassies? Personally, I think the only appropriate thing to do would be to close down the embassies until and if Congress decided to make the funds available to adequately protect them. I also think the IRS should refuse to process more applications for 501(c)(4) status than they can realistically handle. If political bureaucrats would refuse to do the impossible without appropriate funding of their agencies we would have a lot of squeaky wheels out there that would need oiling. Then, the American people would have to decide if they want to keep cutting government spending or have a functioning government. This is where the battle needs to take place. Unfortunately, when department heads keep saying we will do more with less they are enabling the demise of the government while preserving their careers and not making waves. I believe we need more intestinal fortitude to force these issues to a head. When filibustering was allowed to happen in the silence of Senate backrooms, the squeaky wheels went away while the government was coming off the rails. We need folks in these positions to take public stands, wear out their welcome, and allow the electorate to make their decisions about whether or not they want these politicians to stay in office. At what level of pain will the electorate cry uncle? We need to find out. The French have a word particularly biting to moderates (or blue dogs) in politics that allow untenable situations to continue and thrive in government – bourgeoisie. I do not think there is any big bad political wolf behind the IRS issue only government that has over-reached their funding level and kept their mouths shut.

Additionally, the numbers that were cited in the meeting today of denied claims and approved claims seemed to fall fairly evenly between conservative and liberal groups. Conveniently, this side of the story has not been told. Also, these kinds of incidents occurred during the Bush administration with the NAACP and other left leaning groups. One comment was made today that these issues have been going on for a long time and that the real culprit is badly legislated laws concerning C4s. The law really is a mess. It has been chipped away so much that we should either give C4 status to any applicant OR have very strict and well defined rules about who can quality. Bad laws and bad court decisions create these kinds of situations…I am reminded of Citizens United. Again, when we try to please everyone for everything we only do a disservice to everyone and everything. We need more chutzpah from our elected leaders and willingness to take the heat for better or worse for them personally. Personally, I think it is inevitable that the American people will have to decide when the pain stops and what kind of people they send to Congress…BUT first, they have to feel the pain enough and in large enough numbers to throw the bums out and get a Congress that can do something besides show their ass all the time. Anti-government hate will not solve the problem; only a proactive electorate. Patriots do not hate their government. I think that is the domain of terrorists and thugs.

Underneath all the cloak and dagger of politics, there are real issues that all too often get covered over by the latest political drama. The maddening thing about all this is that nothing seems to get resolved. It just appears that every action gets a reaction. Perhaps the laws of physics are perpetually reaffirmed but this type of dynamic which generates heat and entropy in the system. Perhaps the manifestation of heat is chaos and knee jerk reactions that end up hating the government and becoming paranoid about the evil genius that is the ghost in the machine of absolute power. Fox news has made a lot of money propagating this tragic drama. Unfortunately, the electorate has demonstrated more of a propensity for loving the manufactured lie than digging into the pesky details, the anomalies that call for thought and wisdom. What is it that calls for resolution and solutions? The answer that political chaos calls for is not eternal, emotional vigilantism or otherworldly cynicism for this world but principles that address justice. We all come to this calling with historical deficiencies and biases that easily derail and confuse us. In any case, this is the situation the Founding Fathers faced even with their advantage over us as the most highly, liberally educated scholars of their day. However, we are, as they were, constrained to try to answer the questions of our day, to heed an inner necessity for a yet to be determined justice. Cynicism is always snapping at our heels and tempts us to yield to hate, fear and apathy. Apathy is most seductive and can take many forms. Apathy absolves us from responsibility from ‘my’ call for resolution, for solution, for justice. Apathy is the lassie faire of the rabble; let the market decide, not me. However, capitalism is not about passivity but production and action from the individual. It is unfortunate that a long history of economic reductionism has lost the connection to personal responsibility to heed the call for justice as what is most noble in human production. Our understanding of what it means to ‘be’ has taken on a certain stubborn, habitual embedded-ness to a metaphysic of materiality and its antithesis, spirituality. Body and soul, accident and substance, no-thing and thing, mortal and divine have split us into fragments, historical pieces of our call to ‘be’, to do justice in spite of our overwhelming injustices. The face of every child, every victim of suffering continually calls for remembrance and reawakens us to our personal and absolute responsibility for justice, response and answer. Let’s take a few concrete, current examples of how this gets worked out in our politics.

The far right can concoct conspiracies and vile governmental demons in a vacuum but now oxygen has been heaped on their delusions in the form of the phantasmal IRS scandal, the Benghazi attack and the Associated Press surveillance. Let’s refresh our convenient short term memories and see if a need for an unanswered question arises.

After 911 many folks had a burning desire for vengeance that fueled a political fire for two wars, Guantanamo and the Patriot Act. The cost of the wars and effect on the national debt, the torture of “war combatants” and the invasion of personal liberties on U.S. citizens was only met with crickets chirping. Only a few voices were raised in unpublicized hearings and court cases to counter the onslaught of public aggression. The government was not evil back then but the arm of the almighty fighting the just war. The vile liberal laws (which really were not enacted by liberals) that prohibited CIA assassinations and much covert activity were readily dispensed with in the name of hanging the perpetrators high. The onslaught of drones was welcomed by the chirping crickets. The call for justice was silenced by the call for revenge at any price. The CIA could listen in on any calls they wanted including U.S citizens; businesses were not exempt either. The tax exempt status of immensely funded political machines was given carte blanch for any “social service” group including neo-Nazis and the KKK…remember Citizens United, the Wisconsin Right to Life decision, tax exempt status and corporations right to free speech?¹ Not a chirp was heard from conservatives when all this was working for them. Did many of us really think through the loss of revenue from these tax exempt groups and whether tax exempt was being unfairly endowed on puppet groups opening the flood gates to political circus and “targeted groups” for any organization that did not get tax-exempt status? Who will be the next targeted “social service” group…Serial Killers of America? Isn’t more money in politics rust to any iron left in our politicians?

Now, in the aftermath of impending danger we are left with some nagging questions. Can segments of our society be interned in various ways as slaves in the early U.S., the Japanese in World War 2, the Islamic community now, and the latest, conservatives in the Tea Party? Apart from a comedic grand conspiracy of President Obama, how do we justify bias and favoritism in our own calling and personal responsibility for an answer? We did so in the Bush administration while garbing ourselves in the clothes of the Divine. Now, our holiness is not so pure and we are left with nagging questions. Yes, it always easier to devise a devil like President Obama to squelch our conscience but the truth is that we are our own worst, diabolical conspirator. We setup, welcomed and allowed the conditions for these injustices while the crickets were chirping.

So, let’s say we get rid of those unjust, liberal laws that were supposed to protect us against terrorism according to President Bush and Dick Cheney. Let’s go back to NOT being able to spy on Americans, intern enemy combatants, water-board terrorists, propagate our clones and keep national security secrets from the American public to protect top secret sources. Let’s give every group that wants it tax exempt status. Let’s cut the national debt indiscriminately. When another terrorist attack gets our attention, unemployment goes back to depression levels, everyone’s pet government handout including Social Security and Medicare gets slashed or eliminated, when we can no longer justify our hypocrisies, we can go back to the silence of crickets chirping and start the whole insane cycle all over again OR we might try to think proactively.

We may actually have to suffer a little pain to be true to ourselves and our highly praised, Founding Father’s ideals. We may have to stop looking for easy, purely reactive indulgences and heed the call for justice even when it hurts us. We may actually have to live our ideals instead of revering them. If we, the electorate, reward mindless political thrills we will create a political machine in our own image. This will not be the image envisioned by the Founding Fathers but a hideous underside that will mock truth and justice. We need to ask ourselves and settle the issue, are we ok with perceived “war time” invasions of privacy? What are the limits we should not cross in the name of national security? What are conditions for mass expenditures and waging wars? What groups do we sanction and what groups do we oppress…gays, Arabs, conservatives, KKK, neo-Nazi, etc. or do we give carte blanch to everyone? Wisdom and measure is required to think through these issues. Government institutions are also required to ensure that we enact our collective wisdoms. The rabble of the market has no indebtedness to enduring wisdom only self satiation. There is no given goodness to the market only the perpetuation of the war of all against all. If we are to overcome our injustices we will have to become capitalists of a sort that are personally responsible for justice, which cannot abdicate our debt to the market but only continually answer to ourselves. We will have to rediscover what human being is, our being and our indebtedness to the other cannot be suffocated by the evil genius we hate or fear, the Great Satan that opposes God, the not-my-problem cop out of apathy. We must decide, act and live resolutely with the consequences of our desire for justice or shrink back into living oblivion. I hope to explore the depths of these questions more in my upcoming philosophy series.

 

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¹ See http://mixermuse.com/blog/2012/08/08/formalism-when-a-lie-becomes-truth-really/

See http://benjaminstudebaker.com/2013/05/13/the-irs-tea-party-muddle/

Logic, logos in classic Greek, has a kind of intrinsic compulsion; the notion of identity. Aristotle spent much of his discussion in the Metaphysics¹ on the principle of non-contradiction (PNC). He thought that any claim of knowledge was essentially bound to PNC. Therefore, knowledge itself is not absolutely relative to personal belief. It must continually prove itself in the foundry that separates iron from slag, the true from the false. Truth is never complete but existentially contingent upon contradiction and error. However, “It is impossible to hold (suppose) the same thing to be and not to be (Metaph IV 3 1005b24 cf.1005b29–30).” If I make a claim that x is universally true then I also make the corollary claim that all particular cases of x will demonstrate the universality of the claim. Therefore, for example, if I suggest that large government leads to more corruption and am faced with significant examples of large government and less corruption, I must either modify my original universal premise to account for this discrepancy OR give up the claim IF the PNC is given essentially and intrinsically in the identity of universality². This is not a matter of civility or incivility, opinion or fact, relativity, etc., it must necessarily always come along with any claim of knowledge. Of course, I agree with Jeff that civility is very important especially in light of the fact that PNC is existentially contingent and no one can lay claim to having arrived finally, teleologically (telos-completion, wholeness and logos), at universal truth. We are all paupers in the face of the richness of PNC. Yet, non-contradiction does remain in a non-relative assumption, always already implied every time we make a universal claim. We can only deny this in bad faith.

Bad faith is a claim to knowledge that violates PNC while maintaining PCN. As Aristotle stated, something cannot be and not be. A cannot be both A AND NOT A in any sense without violating PNC. If identity is taken as a singularity, an ontological (ontos, being, isness) unity then, it cannot be itself and not itself. This would be nonsense. Yet PNC is not the whole story. I will deal with that in my upcoming philosophy series. However, for now, I would like to take particular example in which the question of PNC is a concern. Bad faith is what Aristotle would have referred to as a logical fallacy. Aristotle cited formal fallacies in the form of logical syllogism. One form of a necessarily, tautologically, true syllogism is:

All humans are mortal.

All Greeks are human

∴ All Greeks are mortal.

The middle term, human, establishes an identity between the major term, mortal, and the minor term Greeks and, on the basis of this identity, truthfully concludes that the major term and the minor term are identical in the universal sense of Greeks and mortality. They are bought together under the rubric of the same (mortality applies to all Greeks). This is necessarily so or tautologically true. If I maintain that,

All large governments are over regulated

All over regulation (necessarily leads) to corruption

∴ All large governments are corrupt

 

the existential fallacy here would be demonstrated by use of the terms “all” and any particular case that could be cited in which the conclusion is false. The way to fix this argument would be to make a contingent claim by replacing “all” with “some”. However, to maintain a universal generalization it must include existence as a necessary component of the “universal”. Another way to avoid contradiction would be to qualify what “large” is such that we are not referring to a linear relationship of ever larger governments and corruption but some critical mass wherein the stated universal relationship to corruption applies. Additionally, to simultaneously cite data that both proves and contradicts the conclusion, the universality of the claim, is a bad faith argument. Perhaps another way to avoid this would be to question the validity of the existential data but that cannot be laid hold of if one maintains the veracity of the data in some cases and not in other cases (using the same criteria for establishing the data as “true”).

There is another particular form of a bad faith argument that I really want to address, more as an imposing question, than a proven case. In order to do this I will put it in its most radical form. If I maintain that public debt is not a stimulus and economic stabilizer over the long run but a recipe for endless boom and bust WITH a correlation of the magnitude of public debt to the magnitude of the boom and the bust then we have a recent existential example that should at least pose a valid question. How is it that Europe and the European Central Bank (ECB) which has followed a policy of public frugality and reduction of public debt has seen higher unemployment and social upheaval while the US which has pursued a more Keynesian route, using the Federal Reserve to stimulate the economy with more public debt in the form of public bonds, has seen a lower unemployment rate and economic recovery?

It seems to me that one way to address this by the Austrians would be to appeal to an order of magnitude in which the correlation occurs that is not linearly related as in the previous example (magnitude of public debt to bust). Historical examples would be more pertinent in this tact. Another fallacious way to address the issue is to perpetually push off the final proof of this to the future. In other words, the BIG bust will come and that will prove our case. If a small bust would occur, even for a very large public debt, then the claim to correlation with magnitude of public debt and magnitude of bust could not be claimed as “universal” but perhaps only contingent. A non-correlation to magnitude of public debt to economic calamity is tantamount to saying nothing about public debt. There will always be larger and smaller economic busts at some point in the future unless one is a utopist. In order to draw a conclusion it must have a universal quality that is shown in the micro-economic, existential case. In fact, all historical existential cases must prove the case and not defer the case to an ever looming future.

I know the Great Depression has been the subject of much revisionism but the policies of FDR and the World War did greatly increase public debt and there was a recovery that followed this expenditure. It was not public austerity that was the catalyst for the recovery. Austerity prolonged the Great Depression and created unemployment and soup lines. Economic stimulus appears to have been a necessary and historically accompanying factor that changed impoverishment to recovery. Please note that I am not recommending throwing tax payer dollars indiscriminately at an economic crisis but selectively using the advantages of public resources to create jobs and build infrastructure as a historically proven stimulus when the private sector is imploding economically. I am aware of how the Austrians process the lessons of the Great Depression but am not convinced by their arguments yet. It appears to me to be a bit of revisionist history but I would not argue that all history may be essentially revisionist as Marx and Nietzsche noted.

Aren’t we seeing the same thing today with real world examples of Europe and the US? Here we have two different economic philosophies in concurrent existential laboratories and the apparent winning philosophy seems to be on the side of the Keynesians. I know we can make the claim that the big bust is coming and scare the bejesus out of everyone as they prep for the apocalypse but that may only be a futile exercise of an overactive amygdala³ and not a claim to universal knowledge. If existential import is minimized, denied or put off indefinitely, the claim can only remain as hypothetical and not a claim of knowledge.

In any case, it does appear to me that this subject has gotten bogged down in the endless ‘circle of hermeneutic’ discussions where evidence remains in the eye of the beholder and not in the logical claims that either hold up to their universality OR become a continent claim that may or may not be the case. It is the “faith” part of Austrian economics that appears to get cloaked in endless interpretation and apocalyptic vision that is a disservice to the logical truth claims against macroeconomic, brute historical results. It is as if we are all Alice in the rabbit hole trying to decipher if what we see is a big or small Armageddon while holding a tea party to debate the intimacies of our upcoming oblivion. If we separate and isolate the logic of the claims to see if they are contradictory in themselves we may get further than endlessly “re-stating” the claims to obfuscate and diminish the universality the Austrian school is trying to lay hold of in economic theory. As such, I would love it if someone could provide a relatively simple argument that does not appeal to the true, complicated, scholarly arguments that take years to understand and merely highlight the logical principles of the Austrian school that cannot be diminished without losing its integrant veracity to itself. I am not asking for over-simplification, only logical arguments that do not get lost to further “clarifications”.

 

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^{1 See link: http://plato.stanford.edu/entries/aristotle-noncontradiction/}

^{2 See link: http://critical-thinker.net/?p=1929#comments}

^{3 See link: http://critical-thinker.net/?p=1074}

 

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Congratulations President Obama!

In spite of all the dust kicked up by the Republicans in this presidential campaign, there is an enduring shine on our future. In spite of the Citizens United decision and all the billionaires wasted billion+ dollars, albeit a fiscal stimulus from the private sector , the regular folk have stood the test, weathered the BS, separated the wheat from the chaff and preserved the union for the many and not the few. Those whose ideologies protect a shrinking populace from a growing populace cannot survive in this democracy. There are other countries more suited to that pursuit but our citizens have once again affirmed “by the people, for the people and of the people”. Oh yes, it is messy but our optimism, over time, keeps our eyes toward the future and not embroiled in the past. If we will not or cannot change to meet the challenges of the future we will rot in the ‘good ‘ol days’. The economic, free market, purists may prefer their utopist ideals to international and domestic realities but they will continue to get marginalized if they keep telling us to wait for the private market to decide in the face of decades of no decision for health care, elderly, poor, crime, education, disease and fairness. If we had waited for the market’s decision on these matters we would not be a democracy but a plutocracy as every other country in history has repeatedly proven when they embarked on that path. The comes a time when the PEOPLE have to decide. The people have decided that the market is not the panacea for all social ills AND made the decision not to wait for the market’s purported solution. Of course, the elitists will continue to claim that unicorns really do exist and we should wait for them but reality seems to get the attention of the common folk more. Perhaps those that ‘know’ would benefit from a little Socratic ignorance and pay less attention to their sophistic, capitalistic ‘tenure track’ interests.

In addition to the Republican message getting out of touch with changing demographics, they would also do well to not try to “fool all the people all the time”. The strategists obviously thought that given the right amount of money they could position Mitt has a far right winger during the primary and a moderate Republican in the general election. As elitists typically do, they believed that they were smarter than the masses (the 47%) and that people would forget the primaries, forget the lost decade of 2000, and sheepishly follow the correctly pitched party line. What they proved is that people have a better memory than they give them credit for AND trust has to do with ideological consistency. Sophistry does have some short term benefits at times as every liar knows but over time the Sophist acquires a reputation as a liar that cannot be trusted. When the Sophist loses credibility and trust is damaged, the tried and true propagandist tactic of truth as repetition is much harder sell. The Romney strategy of ‘tell them what they want to hear’ duplicity made Romney himself look like a phantasm, not real, and common folk want real people that can perform in real situations in the real world. This is the reason that President Obama won the election. President Obama has an even hand, says what he means, and won the trust of enough of the electorate to stay in office.

While Fox news is in the business of re-creating a ‘brand new world’ the real facts have a pesky way of staying relevant. Fox and friends wanted the American people to believe that the economy was horrible and all of it was due to President Obama but the facts kept popping back up. Fox labels the tendency of facts to keep popping up as the ‘liberal media’. They want to believe that the ‘facts’ they created are not subject to question or debate. Fox has to continually pump up the congregation with a better sermon. This is the problem with creating automatons…they need constant feeding. They cannot feed themselves, fish for themselves, so they need fresh meat daily. It is a Fox News handout of sorts at least as long as they can keep the church large enough to pay their bills. The Heritage Foundation, American Enterprise Institute, and the Cato Institute have a monotone approach in their analysis that makes them overtly partisan and thereby, not credible. Yes, there are liberal think tanks that would like to mimic this behavior but it does not work as well with their natural constituencies. Liberals are plural, more heterogeneous in ethnicity, ideology, self-identity. Homogeneity does not work so well for them. What does work for them is critical thinking, error detection, a sense of facts that I may not like or agree with but still retain the status of ‘truth’. With regard to liberals, they are much more like herding cats than cattle. This is where the conservative ‘think tanks’ go wrong in their assessments. Some folks that are more fear bound and determined, more amygdala dominated, are easier to coral. Folks that are more concerned with responding appropriately to real situations are more engaged in error correcting, anterior cingulate cortex dominated. They need to first believe that there are facts ‘out there’ that is other than what I want or need or like. These folks do not want convenient truths but real truths. Fear paralyzes and creates fantasies in its chronic form. Fear was really only meant in an evolutionary sense to get us to run when a tiger approaches us. It was never meant to create illusions of ever approaching tigers to get us to listen to its council as to how to keep from getting eaten. As such, chronic fear is dysfunctional, delusional and non-adaptive. Eventually, as Joseph McCarthy discovered, the myth of impending doom becomes more of a personal problem that a social ill. This is what Fox, conservative ‘think tanks’ and Republicans risk if they push their methodology too far. Credibility is not faked. Credibility is acquired by having beliefs that are researched from non-partisan, good sources and being open to change if the facts warrant it. This is how folks that are not prone to fear paralysis want to respond to new challenges. Insulting these folks may make the fear mongers feel better about themselves but will not get them into national office when social change is called for to effectively address pressing issues.

For those that believe the end of the world is upon us, I know a lot of folks are going through Fox News withdrawal now and waking up to smell the coffee that many of us think the economy is improving and the future is bright not dark and dismal. The next four years will be even better for the economy and the Democrats. If the Republicans continue to deny the numbers economically and demographically they will find it harder and harder to win national elections. Obstruction, whining and negativity may feel good and make Fox lots of money but becoming part of the solution will keep you in national office. I know many of the doom and gloom prognosticators will only dig in harder but I hope, this time -PLEASE, remember your dire predictions and in four years when we still have a great country with a strong economy…do us all a favor and reflect please!

I think it will be very interesting to see how the Republicans digest this failure. It seems that demographics will absolutely not allow them to dig in deeper and keep on keeping on. Part of their party will absolutely insist that this is the only course. Another part of their party will want to win future national elections and are smart enough to understand why the status quo will not get them there. Change has been thrust upon the conservative base that they cannot ignore any longer. I believe we need authentic conservatives that understand the need to be cautious and preserve what has worked in the past. However, I think the current conservative movement has abandoned the real world that changes and may require ‘adaptations’ to the old ‘tried and true’ methods to continue to be relevant. The balance must be struck with results not ‘ought to be’s, ‘should be’s, denials, anger, insults or utopist idealism. I am not so sure that all of the Republican Party is ready or willing to make these changes and therefore, a great divorce is imminent. When the Dixiecrats were unwilling to make the changes Democrats where demanding they abandoned the Party and joined the Republican Party. If the hard core of the Republican base cannot live with the required practicalities of survival in the national arena they will not join the Democrats but create their own identity to the right of the base that can adapt. I think they would rather die in their ‘rightness’ than live in the requirements of the real world…but I am open to being wrong…we will have to see.

I know that I have been critical at times with the Obama administration with regard to not moving fast enough on issues especially the wars. However, I do want to thank President Obama for all that he has done. The Republican Party wants to say that President Obama was an ineffective leader AND that he was an effective leader in corrupting the nation, the economy and the masses of folks that want handouts. He obviously was an effective leader as they acknowledge at times…they just, in true Sophist fashion, call his effectiveness ineffective. Thanks to Rachel Maddow for compiling this data, I want to end with the accomplishments of the past four years of the Obama administration:

Democratic Government Accomplishments:

Fair Pay Act

New rules on credit card companies

New regulations on tobacco

Federal hate crimes bill

Children’s Health Insurance Protection bill

College student loans by the Department of Education

Serve America Act

Cash for Clunkers

Economic Recovery Package (single largest tax cut in history)

Affordable Care Act

Financial Reform Bill

First Hispanic Supreme Court justice

Cut US and Russia nuclear arms

911 Health Bill

Gays in military (DADT)

Out of Iraq

Getting us out of Afghanistan

No new wars

Killing Osama Bin Laden

Overthrow a dictator in Libya

Most severe sanctions ever on any country against Iran

Marriage equality for same sex couples

Stop deportation of immigrant kids

Stock market doubled

Historic job growth following the Bush recession.

Saving auto industry

 

PS…

Republican Government Accomplishments:

NO!

 

What the Data Shows

The chart below shows the Great Depression and all the recessions since.

The lines show the drop in GDP during the upheaval and the period of the recession.

The colored dots show the unemployment rate for each event and the peak unemployment date.

Each event shows who the president was and his party at the start and end of the event.

10 events started with a Republican president in office.

4 events started with Democratic president in office.

7 events ended with a Republican president in office.

7 events ended with Democratic president in office.

The “Early 1990s recession” took 15 months from recession end (George H.W. Bush) to peak unemployment.

The “Early 2000s recession” took 19 months from recession end (George W. Bush) to peak unemployment.

All other recession ends to peak unemployments took 4 months or less including the one with President Obama.

Conclusions

President Obama has been blamed for a slow recovery.

If the standard is who is president when the recession ends to peak unemployment then President Obama took 4 months and both Bush Sr. and Bush Jr. took 15 and 19 months respectively.

15 and 19 months to hit peak unemployment from recession end is highly unprecedented from the Great Depression onwards.

Most recessions started when a Republican was in office.

The “Late-2000s recession” started under Bush Jr.

The political rhetoric that the RNC has repeatedly made about President Obama’s handling of the recession is, historically speaking, a lie.

As a Republican, Romney’s track record and economic ideology would be no different than his predecessors.

Please vote according to facts and not lies if you are a responsible voter.

This is the data (the spreadsheet .xls can be downloaded here):

Data Sources:

National Bureau of Economic Research

Wikipedia

Bureau of Labor Statistics

Bureau of Labor Statistics

Here is an interesting chart of the top 51 overall donors to the current political campaign.

The web site is here.

You can download my spreadsheet with the charts here (.xls).

This chart is the sum total of direct campaign contributions and superpac contributions.

The total Democratic contributions for the top 101 donors is $187,590,262.

The total Republican contributions for the top 101 donors is $326,833,735.

Here is the top 20 donors by industry.

I was wondering why I did not see more Koch brothers so I did a search of Kochs that were donors and surprisingly almost all of them were Republican contributors. I am sure there is no relation – right?

With regard to Jeff’s post here.

The data source is here.

Jeff quotes Mandani’s blog claim:

The World Bank’s Investment Climate Department (CIC) has reviewed the recent literature on the relationship between restrictive regulation, corruption and business environment reforms, finding that corruption is positively correlated with restrictive regulation.

Jeff disagrees with Mandani. Here is Jeff’s hypothesis

Correlation does not imply causation. When two events A and B are correlated, one of the following is true:

1. A caused B

2. B caused A

3. Some third factor C caused both A and B

4. A and B happening together are just a coincidence.

The correlation appears significant enough that #4 is unlikely.

It also seems unlikely that the length of time it takes to start a business would cause corruption. Correct me if I’m wrong here.

That leaves either #1 or #3.

I hereby hypothesize that #3 is the culprit, and further that factor C is the power brokering-rich environment resulting from a too-large government.

Jeff thinks that the other factor is “too-large government” which results in a “power brokering-rich environment”. I suppose this means that if the government is too large, corporations will use the government to create regulation to benefit themselves and therefore, result in corruption. I take it that Jeff’s solution would mean a small government which would, in theory, keep large corporations from getting corrupt regulations that benefit themselves. Additionally, in true Austrian School economics fashion, if the government is small the free-market will work more efficient over time and, I assume the conclusion would be, result in less corruption in the system (and certainly in less booms and busts according to Austrian economics). If this is the case, the problem with the purity of the Austrian utopian dream is that this data does not back up that claim. To the contrary, this data counters that claim.

Here is my hypothesis:

Jeff is right with regard to #3 being the culprit. However, Jeff is wrong about the specific other factor (C).

First, I have graphed all the data that the World Bank has accumulated based on their 2011 data, the latest data they provide. You can download their data with my added graphed sheets here. They have 5 benchmarks that they measure for 215 countries:

Political Stability, Government Effectiveness, Regulatory Quality, Control of Corruption, Voice and Accountability

Each of the benchmarks are defined above the graphs and the definitions can be found here.

Each benchmark spans the approximate range from -2.5 to +2.5. Estimates range from approximately -2.5 (weak) to 2.5 (strong).

Each graph shows the data sorted by one benchmark, one column only, from lowest value to highest value. The other benchmarks on the graph falls where they may. We will call the sorted column benchmark the dependent variable as it is the outcome we are comparing to our non-sorted benchmarks, the independent variables. The sorted benchmark for each graph is shown as the thickest line on each graph. Linear trend lines are displayed for each of the other, non-sorted, benchmarks for each graph. This methodology will show the relationship of the other independent variable benchmarks, to the dependent variable, the sorted benchmark, to determine which of the independent variable benchmarks might have a causal relationship to the sorted, dependent variable benchmark. We will also look for any relationships we can see of the benchmarks to each other. Also, we should try to see if Jeff’s hypothesis concerning “too-large government” shows a pattern in any of the dependent variables tested.

What the data shows:

If each of the benchmarks are sorted from low to high, the other non-sorted benchmarks trend lines linearly follow the sorted benchmark upwards. This would indicate that each of the benchmarks play a role in improving the results of the others or, put another way, there is no necessary cause and effect relation established by this data to only one or only some of the independent variable benchmarks to the dependent variable benchmark. All of the independent variable benchmarks appear to effect the dependent variable benchmark causally. For example, less corruption results when improvements are made in political stability, government effectiveness, and voice and accountability and not just regulatory quality. The “Control of Corruption” graph shows that the “Regulatory Quality”, independent variable is not a factor of regulation
per se but of political stability, government effectiveness, regulatory quality, control of corruption, voice and accountability. In fact, there is nothing in the data about ‘regulation’ as too much or too little regulation but ‘regulation quality’. Additionally, this data does not add credence to the Austrian School’s claim that the free market is able to regulate itself (if that is indeed the claim of the purist fundamentalists). Neither does this data show any singular correlation to the “restrictiveness” of regulations (“regulation quality”) to corruption. If it did, some (perhaps one could argue some but not all of the benchmarks are overlapping to “regulation quality”) or all of the other benchmark trend lines would not have a positive slope. For example, if political stability is decreased, it seems to indicate that corruption goes up as well. There does not appear to be a singular benchmark that is independent from the others with regard to government corruption (“Control of Corruption”).

Additionally, if you look at the countries that are doing better (closer to 2.5) you will see no correlation between big and small countries or governments. This would seem to indicate the Jeff’s hypothesis is wrong with regard to the absolute or relative size of the government. Since all the countries will not fit on the horizontal axis without making the graph too big I will list where the United States rank is for each benchmark (N/As are not included) and the countries that are ahead of us (closer to 2.5):

Political Stability 136 out of 213

CYPRUS, MONGOLIA, CHILE, ITALY, ESTONIA, MACAO SAR, CHINA, COSTA RICA, FRANCE, OMAN, LITHUANIA, PUERTO RICO, MARTINIQUE, PORTUGAL, CAPE VERDE, HUNGARY, GUAM, SLOVENIA, SAMOA, GERMANY, BHUTAN, AUSTRALIA, ST. LUCIA, ST. VINCENT AND THE GRENADINES, MAURITIUS, BELGIUM, NAMIBIA, TAIWAN, CHINA, URUGUAY, UNITED ARAB EMIRATES, HONG KONG SAR, CHINA, SLOVAK REPUBLIC, TONGA, JAPAN, SEYCHELLES, AMERICAN SAMOA, ANTIGUA AND BARBUDA, VIRGIN ISLANDS (U.S.), MALTA, BERMUDA, IRELAND, MONACO, NAURU, PALAU, SAN MARINO, BOTSWANA, CANADA, POLAND, ST. KITTS AND NEVIS, DENMARK, CZECH REPUBLIC, BAHAMAS, THE, BRUNEI DARUSSALAM, NETHERLANDS, VANUATU, AUSTRIA, SINGAPORE, QATAR, ICELAND, DOMINICA, MICRONESIA, FED. STS., SWEDEN, SWITZERLAND, BARBADOS, NETHERLANDS ANTILLES (FORMER), ARUBA, LUXEMBOURG, ANDORRA, KIRIBATI, TUVALU, NORWAY, NEW ZEALAND, FINLAND, CAYMAN ISLANDS, JERSEY, CHANNEL ISLANDS, LIECHTENSTEIN, ANGUILLA, GREENLAND

Government Effectiveness 188 out of 212

IRELAND, JERSEY, CHANNEL ISLANDS, BARBADOS, ANDORRA, ANGUILLA, CYPRUS, GERMANY, UNITED KINGDOM, ICELAND, AUSTRIA, BELGIUM, HONG KONG SAR, CHINA, LUXEMBOURG, AUSTRALIA, LIECHTENSTEIN, NORWAY, NETHERLANDS, CANADA, SWITZERLAND, NEW ZEALAND, SWEDEN, SINGAPORE, DENMARK, FINLAND

Regulatory Quality 195 out of 212

LIECHTENSTEIN, GERMANY, CHILE, ANDORRA, UNITED KINGDOM, SWITZERLAND, IRELAND, CANADA, FINLAND, AUSTRALIA, SINGAPORE, SWEDEN, NETHERLANDS, LUXEMBOURG, HONG KONG SAR, CHINA, NEW ZEALAND, DENMARK

Control of Corruption 182 out of 212

URUGUAY, ANTIGUA AND BARBUDA, BERMUDA, ANGUILLA, ANDORRA, CAYMAN ISLANDS, BAHAMAS, THE, AUSTRIA, IRELAND, JAPAN, FRANCE, UNITED KINGDOM, CHILE, BELGIUM, GERMANY, BARBADOS, LIECHTENSTEIN, HONG KONG SAR, CHINA, ICELAND, CANADA, SWITZERLAND, SINGAPORE, AUSTRALIA, NORWAY, NETHERLANDS, LUXEMBOURG, FINLAND, SWEDEN, NEW ZEALAND, DENMARK

Voice and Accountability 184 out of 214

ST. VINCENT AND THE GRENADINES, MARSHALL ISLANDS, SAN MARINO, ST. KITTS AND NEVIS, PALAU, FRANCE, BARBADOS, ST. LUCIA, JERSEY, CHANNEL ISLANDS, GREENLAND, ARUBA, RÉUNION, UNITED KINGDOM, GERMANY, IRELAND, ANDORRA, BELGIUM, AUSTRIA, CANADA, AUSTRALIA, ICELAND, NETHERLANDS, NEW ZEALAND, FINLAND, LIECHTENSTEIN, LUXEMBOURG, SWEDEN, DENMARK, NORWAY, SWITZERLAND

A few of my comments:

There are multiple reasons for corruption and it is way too simplistic to blame it on ‘regulation’ (in regard to more or less) alone. It may be fair to suggest that ‘bad’ or ineffective regulation could be one factor in increasing corruption but the data does not independently verify this to be the only factor. We should look at how the World Bank defines corruption:

Control of corruption captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests.

Corporatism = Corruption

Their definition is probably the definition of corporatism (see my related essay on corporatism). By definition, corporatism is corruption. In this case, corporatism and corruption is effectively a tautology. However, the definition does not prove the case, the data does.

Corporatism does not necessarily lead to corruption if you believe the Supreme Court of the United States

This data cannot be contrived to make the claim that regulatory quality alone leads to corruption (or its effective tautological definition in this case – corporatism). It is possible to think that “corporations are people too” and they may actually have the best interest of their communities in addition to the best interest of their bottom line (as the ‘clean coal’ campaign would have us believe¹).

Regulation as defined by ‘restricting effectiveness’ does not have to be done by the government and many times is not done by the government

If the free market is to decide there will be large corporations and small businesses. Large corporations can effectively ‘regulate’ the market with or without the government as I have made the case elsewhere. The contention of the Austrians is that this type of private ‘free market regulation’ can be overcome by competition. This may or may not be the case. I would think some of the other benchmarks cited here like “Voice and Accountability” might have an impact on this but this is not demonstrated by the data. Additionally, very large multi-national corporations can effectively evade many regulations and taxes of any particular government by locating their operations in more ‘regulatory or tax friendly’ countries and thus create competitive advantages that would be difficult to overcome in the ‘real’ world.

What this data does not show

This data does not show how regulation may actually reduce corruption (i.e., vis-à-vis conflict of interest banking regulations, bribery, loan sharking and theft laws, abolishing slavery, outlawing child labor, ruining the environment, aircraft maintenance, lead based toys, etc.). If, by definition, public regulation is corrosive and the private market cannot be corrosive to market economies, we may have Austrian ideological purity but restraint of corruption is another issue altogether.

With these points in mind, I personally would conclude that corporatism may lead to corruption but that is not substantiated by this data, by the Supreme Court, by the Republican Party, by public policy alone (without ‘free market’, self-regulation also restricting effectiveness). It is also not apparent by this data that corruption may actually be restricted by public policy.

There are countries² with much smaller and larger governments that are doing better than the United States regarding the benchmarks relative to their size and government spending versus GDP. If you will notice on the “Control of corruption” benchmark there are countries doing better than us like the “government controlled” health care countries of Canada, United Kingdom and France, the “Euro-Socialists”, and even the king of government bureaucracies, communist China (Hong Kong). I believe China is doing better on all the benchmarks except “Voice and Accountability” than the United States in addition to many of the “Euro-Socialists” and the government controlled health care countries. In my opinion, this disproves Jeff’s hypothesis that corruption (as defined by corporatism) is caused by the size of government vis-à-vis public policy regulation.

What we should all learn:

If an ideology makes short shrift of data in order to validate itself, the ideology functions like a religious dogma not like a falsifiable scientific claim. To the degree that we help each other become more rational (I include myself most of all) is to the same degree that we will have a real and positive effect on our community and help each other become better critical thinkers.

——————————————————————-

What is “governance” according to the World Bank?³

Governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them.

World Bank Data Graphed

Political Stability – Political stability and absence of violence measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically-motivated violence and terrorism.

Government Effectiveness – Government effectiveness captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies.

Regulatory Quality – Regulatory quality captures perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development.

Rule of Law – Rule of law captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence.

Control of Corruption – Control of corruption captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests.

Voice and Accountability – Voice and accountability captures perceptions of the extent to which a country’s citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media.

_________________

¹ From the Republican Party Platform adopted in the 2012 convention (Link pdf):

 

A Failed National Security Strategy

The current Administration’s most recent National

Security Strategy reflects the extreme elements

in its liberal domestic coalition.

…

Finally, the strategy subordinates our national

security interests to environmental, energy, and

international health issues, and elevates “climate

change” to the level of a “severe threat” equivalent to

foreign aggression. The word “climate,” in fact, appears

in the current President’s strategy more often

than Al Qaeda, nuclear proliferation, radical Islam,

or weapons of mass destruction.

One word – SANDY

² This is a list of all the countries used to compile the data (Link):

AFGHANISTAN , ALBANIA , ALGERIA , AMERICAN SAMOA , ANDORRA , ANGOLA , ANGUILLA , ANTIGUA AND BARBUDA , ARGENTINA , ARMENIA , ARUBA , AUSTRALIA , AUSTRIA , AZERBAIJAN , BAHAMAS, THE , BAHRAIN , BANGLADESH , BARBADOS , BELARUS , BELGIUM , BELIZE , BENIN , BERMUDA , BHUTAN , BOLIVIA , BOSNIA AND HERZEGOVINA , BOTSWANA , BRAZIL , BRUNEI DARUSSALAM , BULGARIA , BURKINA FASO , BURUNDI , CAMBODIA , CAMEROON , CANADA , CAPE VERDE , CAYMAN ISLANDS , CENTRAL AFRICAN REPUBLIC , CHAD , CHILE , CHINA , COLOMBIA , COMOROS , CONGO, DEM. REP. , CONGO, REP. , COOK ISLANDS , COSTA RICA , CÔTE D’IVOIRE , CROATIA , CUBA , CYPRUS , CZECH REPUBLIC , DENMARK , DJIBOUTI , DOMINICA , DOMINICAN REPUBLIC , ECUADOR , EGYPT, ARAB REP. , EL SALVADOR , EQUATORIAL GUINEA , ERITREA , ESTONIA , ETHIOPIA , FIJI , FINLAND , FRANCE , FRENCH GUIANA , GABON , GAMBIA, THE , GEORGIA , GERMANY , GHANA , GREECE , GREENLAND , GRENADA , GUAM , GUATEMALA , GUINEA , GUINEA-BISSAU , GUYANA , HAITI , HONDURAS , HONG KONG SAR, CHINA , HUNGARY , ICELAND , INDIA , INDONESIA , IRAN, ISLAMIC REP. , IRAQ , IRELAND , ISRAEL , ITALY , JAMAICA , JAPAN , JERSEY, CHANNEL ISLANDS , JORDAN , KAZAKHSTAN , KENYA , KIRIBATI , KOREA, DEM. REP. , KOREA, REP. , KOSOVO , KUWAIT , KYRGYZ REPUBLIC , LAO PDR , LATVIA , LEBANON , LESOTHO , LIBERIA , LIBYA , LIECHTENSTEIN , LITHUANIA , LUXEMBOURG , MACAO SAR, CHINA , MACEDONIA, FYR , MADAGASCAR , MALAWI , MALAYSIA , MALDIVES , MALI , MALTA , MARSHALL ISLANDS , MARTINIQUE , MAURITANIA , MAURITIUS , MEXICO , MICRONESIA, FED. STS. , MOLDOVA , MONACO , MONGOLIA , MONTENEGRO , MOROCCO , MOZAMBIQUE , MYANMAR , NAMIBIA , NAURU , NEPAL , NETHERLANDS , NETHERLANDS ANTILLES (FORMER) , NEW CALEDONIA , NEW ZEALAND , NICARAGUA , NIGER , NIGERIA , NIUE , NORWAY , OMAN , PAKISTAN , PALAU , PANAMA , PAPUA NEW GUINEA , PARAGUAY , PERU , PHILIPPINES , POLAND , PORTUGAL , PUERTO RICO , QATAR , RÉUNION , ROMANIA , RUSSIAN FEDERATION , RWANDA , SAMOA , SAN MARINO , SÃO TOMÉ AND PRINCIPE , SAUDI ARABIA , SENEGAL , SERBIA , SEYCHELLES , SIERRA LEONE , SINGAPORE , SLOVAK REPUBLIC , SLOVENIA , SOLOMON ISLANDS , SOMALIA , SOUTH AFRICA , SOUTH SUDAN , SPAIN , SRI LANKA , ST. KITTS AND NEVIS , ST. LUCIA , ST. VINCENT AND THE GRENADINES , SUDAN , SURINAME , SWAZILAND , SWEDEN , SWITZERLAND , SYRIAN ARAB REPUBLIC , TAIWAN, CHINA , TAJIKISTAN , TANZANIA , THAILAND , TIMOR-LESTE , TOGO , TONGA , TRINIDAD AND TOBAGO , TUNISIA , TURKEY , TURKMENISTAN , TUVALU , UGANDA , UKRAINE , UNITED ARAB EMIRATES , UNITED KINGDOM , UNITED STATES , URUGUAY , UZBEKISTAN , VANUATU, VENEZUELA, RB , VIETNAM , VIRGIN ISLANDS (U.S.) , WEST BANK AND GAZA , YEMEN, REP. , ZAMBIA , ZIMBABWE

³ See Link

With regard to Jeff’s post here.

The data source is here.

Jeff quotes Mandani’s blog claim:

The World Bank’s Investment Climate Department (CIC) has reviewed the recent literature on the relationship between restrictive regulation, corruption and business environment reforms, finding that corruption is positively correlated with restrictive regulation.

Jeff disagrees with Mandani. Here is Jeff’s hypothesis

Correlation does not imply causation. When two events A and B are correlated, one of the following is true:

1. A caused B

2. B caused A

3. Some third factor C caused both A and B

4. A and B happening together are just a coincidence.

The correlation appears significant enough that #4 is unlikely.

It also seems unlikely that the length of time it takes to start a business would cause corruption. Correct me if I’m wrong here.

That leaves either #1 or #3.

I hereby hypothesize that #3 is the culprit, and further that factor C is the power brokering-rich environment resulting from a too-large government.

Jeff thinks that the other factor is “too-large government” which results in a “power brokering-rich environment”. I suppose this means that if the government is too large, corporations will use the government to create regulation to benefit themselves and therefore, result in corruption. I take it that Jeff’s solution would mean a small government which would, in theory, keep large corporations from getting corrupt regulations that benefit themselves. Additionally, in true Austrian School economics fashion, if the government is small the free-market will work more efficient over time and, I assume the conclusion would be, result in less corruption in the system (and certainly in less booms and busts according to Austrian economics). If this is the case, the problem with the purity of the Austrian utopian dream is that this data does not back up that claim. To the contrary, this data counters that claim.

Here is my hypothesis:

Jeff is right with regard to #3 being the culprit. However, Jeff is wrong about the specific other factor (C).

First, I have graphed all the data that the World Bank has accumulated based on their 2011 data, the latest data they provide. You can download their data with my added graphed sheets here. They have 5 benchmarks that they measure for 215 countries:

Political Stability, Government Effectiveness, Regulatory Quality, Control of Corruption, Voice and Accountability

Each of the benchmarks are defined above the graphs and the definitions can be found here.

Each benchmark spans the approximate range from -2.5 to +2.5. Estimates range from approximately -2.5 (weak) to 2.5 (strong).

Each graph shows the data sorted by one benchmark, one column only, from lowest value to highest value. The other benchmarks on the graph falls where they may. We will call the sorted column benchmark the dependent variable as it is the outcome we are comparing to our non-sorted benchmarks, the independent variables. The sorted benchmark for each graph is shown as the thickest line on each graph. Linear trend lines are displayed for each of the other, non-sorted, benchmarks for each graph. This methodology will show the relationship of the other independent variable benchmarks, to the dependent variable, the sorted benchmark, to determine which of the independent variable benchmarks might have a causal relationship to the sorted, dependent variable benchmark. We will also look for any relationships we can see of the benchmarks to each other. Also, we should try to see if Jeff’s hypothesis concerning “too-large government” shows a pattern in any of the dependent variables tested.

What the data shows:

If each of the benchmarks are sorted from low to high, the other non-sorted benchmarks trend lines linearly follow the sorted benchmark upwards. This would indicate that each of the benchmarks play a role in improving the results of the others or, put another way, there is no necessary cause and effect relation established by this data to only one or only some of the independent variable benchmarks to the dependent variable benchmark. All of the independent variable benchmarks appear to effect the dependent variable benchmark causally. For example, less corruption results when improvements are made in political stability, government effectiveness, and voice and accountability and not just regulatory quality. The “Control of Corruption” graph shows that the “Regulatory Quality”, independent variable is not a factor of regulationper se but of political stability, government effectiveness, regulatory quality, control of corruption, voice and accountability. In fact, there is nothing in the data about ‘regulation’ as too much or too little regulation but ‘regulation quality’. Additionally, this data does not add credence to the Austrian School’s claim that the free market is able to regulate itself (if that is indeed the claim of the purist fundamentalists). Neither does this data show any singular correlation to the “restrictiveness” of regulations (“regulation quality”) to corruption. If it did, some (perhaps one could argue some but not all of the benchmarks are overlapping to “regulation quality”) or all of the other benchmark trend lines would not have a positive slope. For example, if political stability is decreased, it seems to indicate that corruption goes up as well. There does not appear to be a singular benchmark that is independent from the others with regard to government corruption (“Control of Corruption”).

Additionally, if you look at the countries that are doing better (closer to 2.5) you will see no correlation between big and small countries or governments. This would seem to indicate the Jeff’s hypothesis is wrong with regard to the absolute or relative size of the government. Since all the countries will not fit on the horizontal axis without making the graph too big I will list where the United States rank is for each benchmark (N/As are not included) and the countries that are ahead of us (closer to 2.5):

Political Stability 136 out of 213

CYPRUS, MONGOLIA, CHILE, ITALY, ESTONIA, MACAO SAR, CHINA, COSTA RICA, FRANCE, OMAN, LITHUANIA, PUERTO RICO, MARTINIQUE, PORTUGAL, CAPE VERDE, HUNGARY, GUAM, SLOVENIA, SAMOA, GERMANY, BHUTAN, AUSTRALIA, ST. LUCIA, ST. VINCENT AND THE GRENADINES, MAURITIUS, BELGIUM, NAMIBIA, TAIWAN, CHINA, URUGUAY, UNITED ARAB EMIRATES, HONG KONG SAR, CHINA, SLOVAK REPUBLIC, TONGA, JAPAN, SEYCHELLES, AMERICAN SAMOA, ANTIGUA AND BARBUDA, VIRGIN ISLANDS (U.S.), MALTA, BERMUDA, IRELAND, MONACO, NAURU, PALAU, SAN MARINO, BOTSWANA, CANADA, POLAND, ST. KITTS AND NEVIS, DENMARK, CZECH REPUBLIC, BAHAMAS, THE, BRUNEI DARUSSALAM, NETHERLANDS, VANUATU, AUSTRIA, SINGAPORE, QATAR, ICELAND, DOMINICA, MICRONESIA, FED. STS., SWEDEN, SWITZERLAND, BARBADOS, NETHERLANDS ANTILLES (FORMER), ARUBA, LUXEMBOURG, ANDORRA, KIRIBATI, TUVALU, NORWAY, NEW ZEALAND, FINLAND, CAYMAN ISLANDS, JERSEY, CHANNEL ISLANDS, LIECHTENSTEIN, ANGUILLA, GREENLAND

Government Effectiveness 188 out of 212

IRELAND, JERSEY, CHANNEL ISLANDS, BARBADOS, ANDORRA, ANGUILLA, CYPRUS, GERMANY, UNITED KINGDOM, ICELAND, AUSTRIA, BELGIUM, HONG KONG SAR, CHINA, LUXEMBOURG, AUSTRALIA, LIECHTENSTEIN, NORWAY, NETHERLANDS, CANADA, SWITZERLAND, NEW ZEALAND, SWEDEN, SINGAPORE, DENMARK, FINLAND

Regulatory Quality 195 out of 212

LIECHTENSTEIN, GERMANY, CHILE, ANDORRA, UNITED KINGDOM, SWITZERLAND, IRELAND, CANADA, FINLAND, AUSTRALIA, SINGAPORE, SWEDEN, NETHERLANDS, LUXEMBOURG, HONG KONG SAR, CHINA, NEW ZEALAND, DENMARK

Control of Corruption 182 out of 212

URUGUAY, ANTIGUA AND BARBUDA, BERMUDA, ANGUILLA, ANDORRA, CAYMAN ISLANDS, BAHAMAS, THE, AUSTRIA, IRELAND, JAPAN, FRANCE, UNITED KINGDOM, CHILE, BELGIUM, GERMANY, BARBADOS, LIECHTENSTEIN, HONG KONG SAR, CHINA, ICELAND, CANADA, SWITZERLAND, SINGAPORE, AUSTRALIA, NORWAY, NETHERLANDS, LUXEMBOURG, FINLAND, SWEDEN, NEW ZEALAND, DENMARK

Voice and Accountability 184 out of 214

ST. VINCENT AND THE GRENADINES, MARSHALL ISLANDS, SAN MARINO, ST. KITTS AND NEVIS, PALAU, FRANCE, BARBADOS, ST. LUCIA, JERSEY, CHANNEL ISLANDS, GREENLAND, ARUBA, RÉUNION, UNITED KINGDOM, GERMANY, IRELAND, ANDORRA, BELGIUM, AUSTRIA, CANADA, AUSTRALIA, ICELAND, NETHERLANDS, NEW ZEALAND, FINLAND, LIECHTENSTEIN, LUXEMBOURG, SWEDEN, DENMARK, NORWAY, SWITZERLAND

A few of my comments:

There are multiple reasons for corruption and it is way too simplistic to blame it on ‘regulation’ (in regard to more or less) alone. It may be fair to suggest that ‘bad’ or ineffective regulation could be one factor in increasing corruption but the data does not independently verify this to be the only factor. We should look at how the World Bank defines corruption:

Control of corruption captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests.

Corporatism = Corruption

Their definition is probably the definition of corporatism (see my related essay on corporatism). By definition, corporatism is corruption. In this case, corporatism and corruption is effectively a tautology. However, the definition does not prove the case, the data does.

Corporatism does not necessarily lead to corruption if you believe the Supreme Court of the United States

This data cannot be contrived to make the claim that regulatory quality alone leads to corruption (or its effective tautological definition in this case – corporatism). It is possible to think that “corporations are people too” and they may actually have the best interest of their communities in addition to the best interest of their bottom line (as the ‘clean coal’ campaign would have us believe¹).

Regulation as defined by ‘restricting effectiveness’ does not have to be done by the government and many times is not done by the government

If the free market is to decide there will be large corporations and small businesses. Large corporations can effectively ‘regulate’ the market with or without the government as I have made the case elsewhere. The contention of the Austrians is that this type of private ‘free market regulation’ can be overcome by competition. This may or may not be the case. I would think some of the other benchmarks cited here like “Voice and Accountability” might have an impact on this but this is not demonstrated by the data. Additionally, very large multi-national corporations can effectively evade many regulations and taxes of any particular government by locating their operations in more ‘regulatory or tax friendly’ countries and thus create competitive advantages that would be difficult to overcome in the ‘real’ world.

What this data does not show

This data does not show how regulation may actually reduce corruption (i.e., vis-à-vis conflict of interest banking regulations, bribery, loan sharking and theft laws, abolishing slavery, outlawing child labor, ruining the environment, aircraft maintenance, lead based toys, etc.). If, by definition, public regulation is corrosive and the private market cannot be corrosive to market economies, we may have Austrian ideological purity but restraint of corruption is another issue altogether.

With these points in mind, I personally would conclude that corporatism may lead to corruption but that is not substantiated by this data, by the Supreme Court, by the Republican Party, by public policy alone (without ‘free market’, self-regulation also restricting effectiveness). It is also not apparent by this data that corruption may actually be restricted by public policy.

There are countries² with much smaller and larger governments that are doing better than the United States regarding the benchmarks relative to their size and government spending versus GDP. If you will notice on the “Control of corruption” benchmark there are countries doing better than us like the “government controlled” health care countries of Canada, United Kingdom and France, the “Euro-Socialists”, and even the king of government bureaucracies, communist China (Hong Kong). I believe China is doing better on all the benchmarks except “Voice and Accountability” than the United States in addition to many of the “Euro-Socialists” and the government controlled health care countries. In my opinion, this disproves Jeff’s hypothesis that corruption (as defined by corporatism) is caused by the size of government vis-à-vis public policy regulation.

What we should all learn:

If an ideology makes short shrift of data in order to validate itself, the ideology functions like a religious dogma not like a falsifiable scientific claim. To the degree that we help each other become more rational (I include myself most of all) is to the same degree that we will have a real and positive effect on our community and help each other become better critical thinkers.

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What is “governance” according to the World Bank?³

Governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them.

World Bank Data Graphed

Political Stability – Political stability and absence of violence measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically-motivated violence and terrorism.

Government Effectiveness – Government effectiveness captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies.

Regulatory Quality – Regulatory quality captures perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development.

Rule of Law – Rule of law captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence.

Control of Corruption – Control of corruption captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests.

Voice and Accountability – Voice and accountability captures perceptions of the extent to which a country’s citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media.

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¹ From the Republican Party Platform adopted in the 2012 convention (Link pdf):

 

A Failed National Security Strategy

The current Administration’s most recent National

Security Strategy reflects the extreme elements

in its liberal domestic coalition.

…

Finally, the strategy subordinates our national

security interests to environmental, energy, and

international health issues, and elevates “climate

change” to the level of a “severe threat” equivalent to

foreign aggression. The word “climate,” in fact, appears

in the current President’s strategy more often

than Al Qaeda, nuclear proliferation, radical Islam,

or weapons of mass destruction.

One word – SANDY

² This is a list of all the countries used to compile the data (Link):

AFGHANISTAN , ALBANIA , ALGERIA , AMERICAN SAMOA , ANDORRA , ANGOLA , ANGUILLA , ANTIGUA AND BARBUDA , ARGENTINA , ARMENIA , ARUBA , AUSTRALIA , AUSTRIA , AZERBAIJAN , BAHAMAS, THE , BAHRAIN , BANGLADESH , BARBADOS , BELARUS , BELGIUM , BELIZE , BENIN , BERMUDA , BHUTAN , BOLIVIA , BOSNIA AND HERZEGOVINA , BOTSWANA , BRAZIL , BRUNEI DARUSSALAM , BULGARIA , BURKINA FASO , BURUNDI , CAMBODIA , CAMEROON , CANADA , CAPE VERDE , CAYMAN ISLANDS , CENTRAL AFRICAN REPUBLIC , CHAD , CHILE , CHINA , COLOMBIA , COMOROS , CONGO, DEM. REP. , CONGO, REP. , COOK ISLANDS , COSTA RICA , CÔTE D’IVOIRE , CROATIA , CUBA , CYPRUS , CZECH REPUBLIC , DENMARK , DJIBOUTI , DOMINICA , DOMINICAN REPUBLIC , ECUADOR , EGYPT, ARAB REP. , EL SALVADOR , EQUATORIAL GUINEA , ERITREA , ESTONIA , ETHIOPIA , FIJI , FINLAND , FRANCE , FRENCH GUIANA , GABON , GAMBIA, THE , GEORGIA , GERMANY , GHANA , GREECE , GREENLAND , GRENADA , GUAM , GUATEMALA , GUINEA , GUINEA-BISSAU , GUYANA , HAITI , HONDURAS , HONG KONG SAR, CHINA , HUNGARY , ICELAND , INDIA , INDONESIA , IRAN, ISLAMIC REP. , IRAQ , IRELAND , ISRAEL , ITALY , JAMAICA , JAPAN , JERSEY, CHANNEL ISLANDS , JORDAN , KAZAKHSTAN , KENYA , KIRIBATI , KOREA, DEM. REP. , KOREA, REP. , KOSOVO , KUWAIT , KYRGYZ REPUBLIC , LAO PDR , LATVIA , LEBANON , LESOTHO , LIBERIA , LIBYA , LIECHTENSTEIN , LITHUANIA , LUXEMBOURG , MACAO SAR, CHINA , MACEDONIA, FYR , MADAGASCAR , MALAWI , MALAYSIA , MALDIVES , MALI , MALTA , MARSHALL ISLANDS , MARTINIQUE , MAURITANIA , MAURITIUS , MEXICO , MICRONESIA, FED. STS. , MOLDOVA , MONACO , MONGOLIA , MONTENEGRO , MOROCCO , MOZAMBIQUE , MYANMAR , NAMIBIA , NAURU , NEPAL , NETHERLANDS , NETHERLANDS ANTILLES (FORMER) , NEW CALEDONIA , NEW ZEALAND , NICARAGUA , NIGER , NIGERIA , NIUE , NORWAY , OMAN , PAKISTAN , PALAU , PANAMA , PAPUA NEW GUINEA , PARAGUAY , PERU , PHILIPPINES , POLAND , PORTUGAL , PUERTO RICO , QATAR , RÉUNION , ROMANIA , RUSSIAN FEDERATION , RWANDA , SAMOA , SAN MARINO , SÃO TOMÉ AND PRINCIPE , SAUDI ARABIA , SENEGAL , SERBIA , SEYCHELLES , SIERRA LEONE , SINGAPORE , SLOVAK REPUBLIC , SLOVENIA , SOLOMON ISLANDS , SOMALIA , SOUTH AFRICA , SOUTH SUDAN , SPAIN , SRI LANKA , ST. KITTS AND NEVIS , ST. LUCIA , ST. VINCENT AND THE GRENADINES , SUDAN , SURINAME , SWAZILAND , SWEDEN , SWITZERLAND , SYRIAN ARAB REPUBLIC , TAIWAN, CHINA , TAJIKISTAN , TANZANIA , THAILAND , TIMOR-LESTE , TOGO , TONGA , TRINIDAD AND TOBAGO , TUNISIA , TURKEY , TURKMENISTAN , TUVALU , UGANDA , UKRAINE , UNITED ARAB EMIRATES , UNITED KINGDOM , UNITED STATES , URUGUAY , UZBEKISTAN , VANUATU, VENEZUELA, RB , VIETNAM , VIRGIN ISLANDS (U.S.) , WEST BANK AND GAZA , YEMEN, REP. , ZAMBIA , ZIMBABWE

³ See Link