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No, You Can't Run a Government "Like a Business"

Mises Institute - Fri, 03/08/2018 - 12:45

For several decades a growing chorus of voices has been insisting that government can become more efficient and effective if it were “run like a business.”

For instance, former New York mayor Fiorello La Guardia in 1938 promised to “run [the government] as any honest man attempts to run his business,” while many of us remember 1992 presidential candidate Ross Perot injecting the “like a business” promise virtually every time he spoke.

More recently, many invested hope that Donald Trump’s business experience would enable him to govern more efficiently, while his senior advisor (and son-in-law) Jared Kushner declared “the government should be run like a great American company” and that “our hope is that we can achieve successes and efficiencies for our customers, who are the citizens.”

Such notions, however well worn, are completely misguided. Business and government are far too different, and the differences help reveal the dangers of state control growing into further reaches of society.

The most crucial and substantive difference between government and businesses in a competitive, market-based economy is that the government collects its revenue under threat of punishment, while businesses must earn their revenue through voluntary transactions with customers.

If consumers are not willing to pay a price for a good or service sufficient to exceed the costs of producing that product, the business will fail. Conversely, government doesn’t need to earn its revenue from people who value what they receive in return for more than what they pay. Force is their motivator, rather than the mutual benefit that exists in the voluntary business/consumer transaction.

Moreover, the management of a government bureaucracy differs greatly from that of a business. In his 1944 book Bureaucracy, Austrian economist Ludwig von Mises exposed the stark and unbridgeable differences between the two.

A business manager’s main goal, Mises pointed out, is to make profits. That means generating revenue that exceeds expenses. This is very clear, and can be concisely calculated. Because of this ease of calculation, each division in the business can measure whether it has a positive or negative effect on the company’s bottom line.

“The only directive that the general manager gives to the men whom he entrusts with the management of the various sections, departments, and branches is: make as much profit as possible,” Mises wrote.

As such, the general manager has no need to bother with the intricate details of each section’s management, and in turn can “assign to each section’s management a great deal of independence.”

The result is what matters most, and each department manager can exercise his discretion over how to achieve the best results.

Compare that, as Mises did, to the role of a provincial governor appointed by a king. To prevent the local deputy from enforcing his own arbitrary decisions and rules, Mises noted, “the king tries to limit the governor’s powers by issuing directives and instructions.”

The local governor’s free discretion is severely limited, replaced with a duty to comply with what can quickly develop into numerous complicated decrees and codes. “Their main concern is to comply with the rules and regulations, no matter whether they are reasonable or contrary to what was intended,” Mises described. “The first virtue of an administrator is to abide by the codes and decrees. He becomes a bureaucrat.”

Bureaucratic management, therefore, becomes first and foremost compliance with legislation — the rules and regulations passed down from above. Individual discretion and initiative is eliminated. Such a process enables a centralized authority to strengthen its grip over vast numbers of people.

While Mises used a medieval setting for his example, he emphasized that such characteristics defined modern administrative government as well.

Moreover, “success” in bureaucratic management is virtually impossible to define, because there is no economic calculation.

“In public administration there is no connection between revenue and expenditure. Public services are spending money only,” Mises observed.

Revenue to bureaucrats comes from taxes, taken thru coercion. There is no market price for “public” goods and services, resulting in no way to know which are most highly valued. Calculating value and trade-offs in a government bureaucracy becomes impossible in any economic sense.

In a business, however, customers voluntarily pay for the good or service being produced. The market price shows which goods and services are most highly valued by consumers. Because resources can be directed to where they are most urgently desired, waste can be minimized.

It is for these reasons, Mises argued, that it would be vain to seek reforms by electing or appointing businessmen as heads of government agencies. “The quality of being an entrepreneur is not inherent in the personality of the entrepreneur; it is inherent in the position which he occupies in the framework of market society,” he wrote. Once a businessman is appointed head of a government agency, he is no longer an entrepreneur, but a bureaucrat whose main objective becomes “compliance with rules and regulations.”

Calls for finding efficiencies in government by electing or appointing people to “run it like a business” are futile. Bureaucratic management necessarily involves rigid adherence to rules and statutes, while individual initiative and creativity are snuffed out. Centralized authority stifles more localized decision making and discretion. Meanwhile, the lack of economic calculation makes waste inevitable.

Citizens need to be vigilant in fighting against the expansion of government largess, in part because it places larger segments of society under bureaucratic management and results in wasteful use of scarce resources and more authoritarian rule.

Categories: Current Affairs

The student loan obligation that lives on after death

Adam Smith Institute - Fri, 03/08/2018 - 07:01

No, the British student loan system doesn't operate this way and we're not even sure that the American one should. However:

Deceased and still in debt: the student loans that don't get forgiven

Student loans not expunged upon death? Now there's a thing, eh? 

In 2005, Sean Bennett took out a student loan with Sallie Mae, in 2010 he graduated from college and in 2011, when Sean was 23 years old, he died in a car accident.

At first, Sallie Mae sent out a letter of condolence to Sean’s parents explaining that they had a policy of forgiving debt if the recipient dies before they have repaid (they could afford to forgive – in the first quarter of this year alone, Sallie Mae made $333m in interest repayments from student loans).

Their policy of debt forgiveness is available on their website but it’s also in a file which Sean’s parents have meticulously maintained. It contains Sean’s loan application, his death certificate and the letters they received from Sean’s lenders when they decided to chase the debt after all.

Sallie Mae did not, of course, "make" $333 million in interest payments. It received them. And also paid out substantial sums to the people who had lent it the money in the first place. But then The Guardian an accounting, economics or numbers.

However, let's think of the alternative system to student loans - taxpayer funding of both students and academe. We're really pretty sure that tax bills are not expunged at death, the estate must still settle them. In fact, it's worse than that, death itself is a taxable event, the government will, upon issuance of that death certificate, start asking for up to 40% or so of everything.

We cannot see why that's a better system than a student loan similarly living on after death. Especially since the complaint here is that dead people shouldn't have to pay.

Categories: Current Affairs

But Enough about Essential Forgiveness Oil

Blog & Mablog - Fri, 03/08/2018 - 02:00

“Paul doesn’t give us the content of the [old wives/1 Tim. 4:7] fables he had to deal with, but the word refers to a genus that has never lacked for content in any age” (Confessions of a Food Catholic, p. 171).

The post But Enough about Essential Forgiveness Oil appeared first on Blog & Mablog.

Categories: People I don't know

More Evidence that the US Constitution Does Not Mandate Federal Control of Immigration

Mises Institute - Fri, 03/08/2018 - 00:15

In recent years, Judge Andrew Napolitano has annoyed some anti-immigration activists by pointing out what the text of the US Constitution seemingly makes clear: "[T]he Constitution itself — from which all federal powers derive — does not delegate to the federal government power over immigration, only over naturalization."

Napolitano isn't the first one to point this out, though, and those who have been observing this debate for a long time, will remember that this has been a simmering debate among conservatives and libertarians for many years. Making the case that the text does support federal intervention in immigration is especially important to conservatives who support an "originalist" view of the Constitution. After all, if it really is the case that the original intent of the Constitution was not to empower the federal government to regulate immigration, then it would be impossible for these originalists to support ongoing federal immigration interventions without being accused of hypocrisy or inconsistency.

In response, originalists have suggested a number of theories, including the assertion that the Migration or Importation Clause grants this power. Ilya Somin has effectively dismantled this claim in his 2016 article on the topic.

Other far-less-sophisticated claims have been made as well, such as the claim that immigration is the equivalent of a military invasion, or that naturalization pretty much means the same thing as immigration. Rarely are these claims convincing to observers who are not already vehemently anti-immigration.

With this essay, however, I want to largely ignore modern legal debates and instead approach the originalists' claim by looking at how nineteenth-century American policymakers themselves viewed the proper role of the federal government in restricting immigration.

At this point, you can probably already guess where I'm going with this: it turns out that if we look at immigration regulation and legislation in the first century of the United States, we find that federal involvement in regulating immigration was very rare, and that attempts to federalize the matter repeatedly failed in Congress, where federalization was often regarded as being of dubious Constitutionality.

During this period, it was the states that dominated in terms of regulation of immigrants, and state governments were considered to be well within their rights when it came to the regulation — and even deportation — of immigrants.

State and Local Regulation of Immigrants

It is not until the 1880s that we see the national government displace the states as the primary enforcer of immigration law. And even then, states continued to work in cooperation with the federal government. It was not until the twentieth century that the federal government began to insist that it had a monopoly on immigration law, and that the states were excluded from exercising their own powers in the matter.

In his lengthy article on "The Lost Century of American Immigration Law" in the Columbia Law Review, Gerald Neuman notes that state and local law had been used to restrict migration in the North American colonies — and later the United States.

The legal framework employed had its origins in English poor laws that restricted the movements of paupers, vagabonds, and other alleged undesirables. Neuman notes that after independence, local governments in many places retained control over settlement:

After 1794 [in Massachusetts], persons newly arriving in a town became settled inhabitants if they met certain statutory criteria, such as property ownership, or if they received express permission of the town government.

The idea was to prevent the permanent settlement of any persons who were likely to become reliant on local charity efforts, or who might be criminals.

These restrictions, in fact, were acknowledged and written into the Articles of Confederation in which Article IV states that states retained the powers to limit the movements of "paupers, vagabonds and fugitives from justice." Neuman further contends that "Although the Constitution omits this qualification from its Privileges and Immunities Clause, the courts continued to assume that paupers had no right to travel."

Historical experience in the states confirms that restrictions on free travel did not go away with the new Constitution, and indeed new restrictions on incoming migrants from outside the US were introduced.

In his study on state-level immigration laws, Expelling the Poor: Atlantic Seaboard States and the Nineteenth-Century Origins of American Immigration Policy, Hidetaka Hirota focuses especially on state laws in Massachusetts and New York where the matter of expelling and limiting new migrants was a matter of perennial concern:

To reduce Irish pauperism, New York and Massachusetts built upon colonial poor laws for regulating the local movement of the poor to check the landing into the state of destitute foreigners. In Massachusetts, an exceptionally strong anti-Catholic and anti-Irish tradition inspired the state legislature to go beyond merely setting entry regulations or excluding the unacceptable. Rather, Massachusetts developed laws for deporting foreign paupers already resident in the state back to Ireland or to Britain, Canada, or other American states. Between the 1830s and the early 1880s, at least 50,000 persons were removed from Massachusetts under this policy. State policies applied to all destitute foreigners, and German immigrants attracted their fair share of nativism. Those expelled from Massachusetts also included American paupers who originally came from other states. Yet it was Irish poverty that generated the principal momentum for the growth of state immigration policy.

Given the fact that Boston and New York were such popular destinations for the Irish during this period, these two states were the most active in instituting immigration controls. Other states engaged in some efforts, although as Hirota notes:

...Maryland and Louisiana had little interest in restricting European immigration throughout the nineteenth century, while Pennsylvania and California failed to establish sustainable systems of immigration regulation.

It was these laws that led to some of the earliest legal decisions in the US as to the role of the federal government in immigration law.

Early Supreme Court Cases

Early legal cases illustrated a reluctance on the part of the court to assert federal control of migrants.

In New York v Miln (1837) for example, the Court took up the matter of whether a state could require a docking ship to "to provide a list of passengers and to post security against the passengers from becoming public charges." The strategy of bonding was often used in which ship owners were forced to post a bond under which the state could be compensated in case the new migrants arriving in said ship turned out to be criminals or paupers dependent on the state.

The court sided with the state, concluding the state was entitled "to provide precautionary measures against the moral pestilence of paupers, vagabonds, and possible convicts, as it is to guard against the physical pestilence, which may arise from unsound and infectious articles imported."

However, regulation of immigrants was acceptable to the court so long as the regulation was "not a regulation of commerce, but of police." That is, the court ruled to overturn the state's ability to impose what were essentially taxes on shipping, while concluding that the state and local governments nevertheless retained to right to regulate the immigrants themselves. This included the right to refuse entry to new migrants perceived to be paupers, criminals, mentally ill, or carrying communicable diseases. As Hirota recounts, these "police powers" resulted in many deportations conducted by state officials.

Moreover, in the "Passenger Cases" of 1849, a fractious court again declined to limit state police powers in regulating immigrants. The majority "consensus" which consisted of several different concurring opinions, struck down state efforts to collect taxes and fees designed to fund state efforts at monitoring and controlling migrants. These taxes were ruled to be against the federal powers of regulating maritime law and international shipping. The court failed to establish overall federal supremacy on the matter of immigration, however, and Justice Levi Woodbury emphasized the point in his dissenting opinion:

[I]t is for the State where the power resides to decide on what is sufficient cause for it,whether municipal or economical, sickness or crime; as, for example, danger of pauperism, danger to health, danger to morals, danger to property, danger to public principles by revolutions and change of government, or danger to religion.

Similarly, according to Neuman, Justice "Peter Daniel invoked at length the Jeffersonian polemics against the Alien Act of 1798 to demonstrate that power over the entry of aliens was vested exclusively in the states."1

These cases came in the wake of more notorious episodes during the 1820s and 1830s in southern states in which some states prohibited free black sailors from coming ashore in port cities. Fearing the presence of free blacks would incite slave uprisings, some southern states — but most vigorously South Carolina — essentially adopted "quarantine" laws in which free black sailors were required to stay on their ships or be held in the local jail until they departed again out of port. Captains of British ships, which sometimes employed free blacks from British colonies, complained to federal authorities. Ultimately, however, the federal government was unwilling or unable to take steps that ended these policies.

Restricting State-to-State Migrants

The issue of race colored other restrictions on migration as well. Some states, both north and south, adopted laws designed to restrict the movement of free blacks from states to state. Michells Slack points out

the Oregon Constitution of 1857, although prohibiting slavery and involuntary servitude, 35 also prohibited the entry or presence of any "negro or mulatto" not already residing in the State at the time of its adoption. Moreover, most free black residents were required to register and prove both their free status and their right to residence within the state. In turn, such documentation was regularly demanded of free blacks under threat of expulsion.

The State of Illinois also imposed penalties for facilitating "entry by a mulatto."

In southern states, the situation was more focused on re-entry. Neuman writes:

In slave states, the mere visibility of black people living in freedom was regarded as a grave threat to the operation of the system of slavery. Moreover, slaveholders feared that free blacks would foment or facilitate escape, or conspire to bring about slave revolts.

Slave state legislation usually barred the entry of free blacks who were not already residents of the state. Penalties were often imposed on persons bringing in free blacks. Over time, some states extended these prohibitions to their own free black residents who sought to return after traveling outside the state, either to a disapproved location or to any destination at all. Slave states often required that emancipated slaves leave the state forever, on pain of reenslavement.

Although these laws were bound up with slavery and race, they nevertheless established both in the courts and in legislatures that states had the prerogative to prevent entry of certain persons into the states. Political realities, of course, meant there was mostly free movement between states.2

Congress Shows Little Interest in Regulating Immigrants

Meanwhile, Congress largely ignored the immigration issue beyond regulating naturalization, as mandated in the Constitution.

The 1911 report from Congress's Dillingham Commission on immigration recounts that legislation addressing immigration during the mid-nineteenth century was minimalist, to say the least. The commission notes that most agitation for new immigration legislation stemmed from the Native American Party, also known as the "Know-Nothings." These efforts failed due to a lack of interest by federal lawmakers in regulating immigration, and also due to doubts about whether or not such efforts were even constitutional. A lengthy quotation from the Commission's report helps illustrate the Congress's inaction on the matter:

On January 2, 1855, Representative Wentworth, of Massachusetts, introduced a bill to prevent the introduction of foreign paupers, criminals, idiots, lunatics, and insane and blind persons, but it was laid on the table by a vote of 68 to 83...

February 17, 1855, Senator Jones, of Tennessee, evidently believing it useless to try to pass an act excluding undesirables, sought to have Congress agree to give the matter entirely over to the States, and presented the following resolution, which was quickly tabled:

Whereas the Constitution of the United States confers on Congress the power to establish a uniform rule of naturalization and is silent as to the exercises of any power over the subject of immigration; and Whereas it is declared in the Constitution that all power not delegated to the constitution nor prohibited to the states by it are reserved to the States respectively or to the people:

Therefore Resolved, that Congress has no power to pass any law regulating or controlling immigration into any of the States of Territories of the Union; but that the power to prescribe such rules and regulations touching this subject as may be deemed necessary to the safety and happiness of the people belongs to the States respectively or to the people, and that each State may determine for itself the evils resulting from the great influx of criminals and paupers and apply such remedy as their wisdom may suggest for their safety demand.

Again on March 4, 1856, Mr. Smith, of Alabama, introduced a bill to exclude foreign paupers and criminals. This bill required United States consuls to issue certificates to all persons intending to come to the United States, stating that they were not paupers, nor convicts, and that they were coming of their own accord and were not sent out of their own country by any society or authority whatsoever...

The law failed. Meanwhile, the Committee on Foreign Affairs issued a report on Congressional concerns about European nations dumping undesirables in the United States. But, the committee "seemed to doubt the power of Congress to regulate the matter, so almost all their recommendations were to the States..."

The lack of federal action on immigration matters led the Commission to conclude that it was until the 1860s that "the change of control of immigration from the various States to the National Government" began to take place.

The Federalization of Immigration Policy: the 1870s and After

As with so much else following the Civil War, what had been long accepted to be state policy began to be federalized, and in 1872, President Grant sent a message to Congress claiming that when it came to immigration, "I see no subject more national in its character..."

Hirota concurs with this assessment of latter-day federalization, noting that:

The federalization of immigration control was therefore a gradual process at best, and the actions of officials in the northeastern states set the conditions for the introduction of general deportation by the federal government in 1891.

The nationalization of immigration regulation technically reached completion in 1891. Responding to the inefficiency of state-federal joint administration at Castle Garden revealed in legislative investigations, Congress passed a new immigration act in March 1891. The act placed issues of immigration under the control of the federal superintendent of immigration in the Treasury Department and appointed federal commissioners of immigration at major ports, replacing state enforcers with federal employees. ... The 1891 law also expanded the excludable category to cover people with mental defects and insanity, paupers and people "likely to become a public charge," people with contagious diseases, people convicted of a felony of other crime involving "moral turpitude, polygamists, and assisted emigrants" — making all of them deportable.

The 1891 act came at the end of decade of growing federal action on immigration which included the Chinese Exclusion Act and more general legislation soon afterward. By the time this was taking place, however, many state governments, especially those in Massachusetts and New York were inviting more federal involvement in immigration control. Hirota continues:

Officials in both New York and Massachusetts fundamentally influenced the development of national immigration policy in the late nineteenth century by playing a central role in the making of the federal Immigration Act of 1882. Passed three months after the enactment of the federal Chinese Exclusion Act of 1882, which suspended the immigration of Chinese laborers, the Immigration Act was the first general legislation that applied to all foreigners at a national level and set the groundwork for subsequent federal immigration laws. ... Modeled on existing immigration policies in New York and Massachusets, these provisions came form a draft bill that the two states' officials created. In addition, the act left the enforcement of its provisions in the hands of the state officials.

Here we see that even in the 1880s, federal immigration laws continued to rely on local enforcement, and state and federal officials were seen as partners in regulation of migrants.

It would not be until the twentieth century that the federal government would begin to claim sole legal authority over matters of immigration.

That most of this legislative history is today forgotten would be an understatement. This led Neuman in 1993 to refer to a "myth of open borders" in which it has been long assumed, even by the very learned, that borders in the United States were essentially open with few to no attempts by governments at any level to control the flow of migrants either into the United States, or across state borders.

Michelle Slack notes that even among those who are aware of this legislative history, there have still been attempts to claim that no deportations of any consequence took place. As the work of Hirota has shown, this was not the case.

This is not to say that there were not also attempts to increase immigration to the US in numerous cases. As I have shown in the past, many frontier states adopted policies designed to attract migrants by offering an easy road to citizenship, and by adopting multiple "official" languages designed to accommodate a non-english-speaking population.3 Indeed, pro-immigrant sentiment mid-century was sufficient enough for President John Tyler to publicly declare in 1841: "We hold out to the people of other countries an invitation to come and settle among us as members of our rapidly growing family, and for the blessings which we offer them we require of them to look upon our country as their country and unite with us in the great task of preserving our institutions and thereby perpetuating our liberties."

It must be understood, though, that by "people of other countries," Tyler did not mean all those categories of paupers and other undesirables outlined in state statutes. He meant people other than the disabled, ill, impoverished, and criminally inclined. Indeed, while Emma Lazarus was penning her famous poem "The New Colossus" in 1883 — which claimed the US welcomed the world's "wretched refuse" — both the federal government and the states were at work enforcing legislation specifically designed to reject this alleged "refuse."

This effort to exclude undesirables, however, illustrates a fundamental difference between nineteenth-century immigration legislation and modern legislation. As Neuman observed "[n]either Congress nor the states attempted to impose quantitative limits on immigration" [emphasis in the original].

Legislation focused instead on refusing entry to those who were seen as likely to increase the government-assistance rolls or who might commit criminal acts. Creating arbitrary quotas for the total number of legal immigrants was a later innovation.

No Evidence of Early-American Federalization of Immigration Policy

None of the information in this essay, of course, has much to say in regards to those who employ non-originalist arguments in favor of federal control over immigration. Those who believe that the Constitution is a "living document," or that expansive federal powers are a good thing in most every circumstance, would not be stymied in their claims by the fact that nineteenth century Americans rejected federal primacy in the matter of immigration. For many non-originalists, immigration is just another case where the evolution of the federal courts is to be welcomed.

Considering the legislative history on the matter, though, it's difficult to see much to support originalist claims that immigration has always been the proper domain of the federal government, or that this position has long been accepted even by staunch defenders of constitutional federalism in the United States. To come to this conclusion, one must ignore repeated refusals by both Congress and the Federal Courts to assume control of the immigration situation during the first century of the United States.  Even less believable is the claim that immigration is exclusively a matter for the federal government, and that states are necessarily out of bounds when adopting immigration regulations in conflict with current federal law.

To be sure, the political realities of the nineteenth century don't "prove" that the original intent of the Constitution was to greatly limit federal involvement in immigration regulation. It could simply be that nearly everyone everyone was misinterpreting the text during most of the nineteenth century, and that now proponents of greater federal control have it right. Nevertheless, outside of the Federalists who supported the hated Alien and Sedition Acts, there's little evidence of policymakers from the "founding" generation calling for more federal control in the matter. This general neglect of the issue continued into the late nineteenth century. Contrary to some claims that immigration simply wasn't an issue in the nineteenth century, the existence of numerous state laws on the matter show that it was an important issue. And yet few sought federal control. One would think that if the Constitution were clear about federal control of immigration, this would not have been the case. 

  • 1. Some originalists have claimed that the passage of the Alien and Sedition Acts proves that the federal government has Constitutional authority over immigration. The Jeffersonians, of course, disagreed vehemently. The loss of the Federalists to the Republicans in 1800 essentially destroyed the pro-federal, anti-immigration position for decades, during which time federal immigration control was associated with the overreach of the Federalist Party, and contrary to the more strict Constitutional views of the Jeffersonians.
  • 2. Although claiming to favor "states rights" slave masters demanded greater federal action on the matter of fugutive slaves. Significantly, when South Carolina seceded form the Union, it cited insufficient federal action on the matter of returning fugitive slaves to bondage.
  • 3. See: "In the 19th Century, Non-Citizens in the US Could Vote in 22 States and Territories" (
Categories: Current Affairs

Complaints dismissed against Christian ex-mayor accused of 'homophobia' and 'dishonesty'

Christian Concern - Fri, 03/08/2018 - 00:00
The local councillor who was forced to resign as Mayor of Ferryhill over social media posts has had formal complaints about his conduct dismissed.

The local councillor who was forced to resign as Mayor of Ferryhill over social media posts has had formal complaints about his conduct dismissed.

Mr Richard Smith's story was featured extensively in the news when he stepped down from his position after a number of activists, led by local drag queen 'Tess Tickle', campaigned for his removal over posts on his personal Facebook account.

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The Economic Theory of the Firm

Mises Institute - Thu, 02/08/2018 - 21:05

Originally Published September 20, 2011.

What is a firm? This may not seem like a question in lack of an answer. In the United States, as in most other countries, it is a registered, regulated entity acting legally as a person. But economically, the legal definition is irrelevant: the economic function of the "firm" is not its legal status — if it were, then the law rather than the organization would provide the market with that function.

So could there be firms without corporate law? The answer is obvious: firms exist and are an important part of modern markets today just as they existed and provided a vital function before the law defined and certified such organizations. Indeed, one can easily argue that corporate law is primarily about government taxation and regulation of the market — and defines the firm only as a means toward these ends.

Consequently, the economic question remains, and it necessarily includes the "where," "how," and "why" of the business firm. How can one economically define what a firm is? What, from an economic point of view, is a business firm? A deeper question is, what is the firm's function in the market — and why are certain transactions integrated in organizations? And further: how can we distinguish this phenomenon in the market so that it can easily be studied? The questions may seem foreign, but economics has not been able to find very good answers to them, neither historically nor in contemporary theory.

The economic question of the firm is old. Adam Smith discussed firms in The Wealth of Nations (1776) and established that they, in the sense of "manufactures," were more efficient in producing than individual, self-employed craftsmen and labor workers. (Cantillon, who wrote the world's first systematic economic treatise [1755], does not analyze the firm as much as he analyzes the entrepreneurial function.) Smith's explanation for the manufacture's efficiency is that it can utilize a different form of, or more intense, division of labor than can be coordinated through market exchange (or contracting). But he quickly moved on to discuss other economic issues instead of elaborating on this analysis (which, by the way, was heavily criticized by Rothbard).

Smith's view was however accepted by most classical economists and thus the firm was thought of in terms of its different kind of division of labor. Generations later, Karl Marx wrote in Das Kapital (1867) about the Smithian kind of manufactures and how they establish and exploit the more intense division of labor. Marx uses Smith's argument, but the discussion helps to clarify the view of the firm. Of course, he finds the manufacture and the division of labor highly problematic, since the individual worker is separated from the end product and therefore is "alienated" through work performed within the manufacture. Marx was obviously not very interested in the economic analysis — division of labor increases productivity and increases prosperity for all individuals involved as well as society as a whole — and so focuses solely on the problem he identifies.

A few decades later, the sociologist Emile Durkheim wrote a whole treatise on the division of labor (1892) and — characteristically difficult to read — defines its constitution and limitations. He also connects the division of labor to the structure of society and theorizes about its utilization and distinct types in towns and rural areas. The conclusion is that towns have greater density, which makes it easier to trade, because potential trading partners, as well as products to trade, are closer at hand.

Durkheim focuses on the limitations of the division of labor as it was famously defined by Smith in the phrase, "the division of labor is limited by the extent of the market." The market's "extent" is here identified as market density: the greater the density (closeness or ability to effectuate trade) the easier it is to divide work into smaller parts and thereby increase overall productivity through streamlining the carrying out of individual specialized tasks.

About the same time as Durkheim, Marshall authored his magnum opus, Principles of Economics (1890), which laid a foundation for neoclassical economics. Marshall also talked abstractly about how industries and market structure can be analyzed in terms of "representative firms," which are simplified representations (ideal types) of firms. Adopting this perspective (or the common interpretation thereof) allows for analytical precision, but at the same time does away with existing differences between real firms. The representative firm can easily be described in terms of a profit/output maximizing "production function," and this remains the neoclassical view of the firm to this day.

In direct contrast to the Marshallian analysis, E.A.G. Robinson analyzed the firm in terms of the division of labor in his book The Structure of Competitive Industry (1931). Robinson continued the Smithian analysis of firms as constituting a more intense division of labor, and attempted to identify the "optimal size" of firms in the market. He recognized that small firms tend to have a single general manager, while larger firms often employ an increased division of labor even within management. In this way, he wrote, firms can grow in terms of both scope and scale through internal divisions of labor.

But Robinson was too late; economics had already adopted Marshall's more formalistic analysis. Robinson's wife, Joan, received much more attention for her formal analysis of imperfect markets (1933).

Only years after Robinson's treatise on the firm's optimal size was published, a young Ronald Coase wrote an article espousing the formal analysis of economics while being inspired by Robinson's approach. Coase's article "The Nature of the Firm" (1937) introduced the concept of transaction costs (even though the term was not coined until much later) to explain why some production is organized in hierarchies (firms) while some is spontaneously coordinated through the price mechanism. Coase knew from economic theory that the price mechanism is efficient in resource allocation, which should mean that firms by definition must be suboptimal. So, he asked, why are so many transactions in the market organized within or between firms?

Coase answered his own question, stating that firms must aim to "reproduce" the price mechanism's efficient resource allocation. By directing labor workers, who are bound in open-ended employment contracts, rather than contracting with labor providers in the market, firms can avoid the costs of using the price mechanism. The way Coase sees it, the market is efficient in its resource allocation, but it is very costly to bring about this efficient allocation due to frictions such as search and marketing costs and negotiations over contract terms. These costs can be avoided by sidestepping workers' autonomy under "atomistic competition" and instead having them follow orders within islands of planning. (Coase quotes Robertson [1923] in saying that firms are "islands of conscious power.")

Nobody paid attention to his article, however, until Oliver Williamson rediscovered its core thesis some three decades later. At this time, economics had already adopted the production-function view of the firm — it was considered a "black box" that transforms inputs into outputs. In this sense, Coase and Williamson's emphasis on the firm's internal organization challenged the established analysis of economic organization.

Outside of economics, however, theoretical developments in management and organization theory are based on the Robinsonian (or Smithian) theory rather than that of Marshall and Coase. Robinson had great influence on Edith Penrose (one of Fritz Machlup's students), who wrote the still very influential book The Theory of the Growth of the Firm (1959) a couple of decades after Coase's award-winning article. This tradition has evolved almost exclusively within business schools and has lost much of its basis in economic theory; it therefore appears quite eclectic in terms of approach, analysis, and method.

The economic theory of the firm has not made much headway in the more than seven decades since Coase's article was published (and four decades since Williamson's rediscovery). Some discoveries have been made within the Coasean framework, but research primarily focuses on applications of Coasean reasoning as well as on (re)defining and measuring transaction costs.

But what about the Austrian School? The answer is that we sadly do not have a theory of the firm. Mises did not theorize much on firm organizing, and Rothbard finds it sufficient to briefly discuss the natural limit to firm size due to the calculation problem in Man, Economy, and State (1962). More recently, we have seen several attempts to draft an Austrian theory of the firm, but they generally remain drafts rather than developed theories. Frederic Sautet has attempted to formulate a theory of the firm based on Kirzner's entrepreneur in An Entrepreneurial Theory of the Firm (2000), but does not make a thoroughly convincing case, and Peter Lewin has developed a Lachmann-inspired capital-based view of the firm. Similarly, Peter G. Klein has made some progress in integrating the transaction-cost approach with Austrian capital theory and Misesian entrepreneurship (see his The Capitalist and the Entrepreneur [2010] and the forthcoming Organizing Entrepreneurial Judgment: A New Approach to the Firm [2011]).

While these approaches are predominantly Austrian in both flavor and substance, they all tend to disregard the traditional, "older" view of the firm as a different type of division of labor; instead, they focus more narrowly on several distinctly Austrian insights. Furthermore, the firm tends to be analytically separated from the overall market process due to the emphasis put on its internal organization and boundaries. But should the firm be analyzed as a creature distinct from the market — or is it an integral part of the market's process and its evolution toward more extensive or intense division of labor and greatly increased prosperity?

Mises put great emphasis in Human Action and elsewhere on the value and effects of the division of labor, both as a productive force in (and necessary condition for) the market process and as a prerequisite for civilization. I choose to see the firm in light of this fundamental Misesian view of the market and society; it is not only a vehicle for profit-seeking entrepreneurs to establish novel structures of production; it also plays an indispensable role in the evolution of the market process and the unfolding of future divisions of labor and, hence, in civilization. The firm is the means through which entrepreneurs establish new and more intense divisions of labor, which, when profitable, set in motion an entrepreneur-driven competitive discovery process that is uncompromising in thrusting the market toward more efficient utilization of scarce resources.

There is good reason to put the firm at center stage, rather than making it a marginally important phenomenon in the market. Indeed, I attempt in an article for the Quarterly Journal of Austrian Economics to show that the firm not only provides a function in the market place but could be an essential part of the wealth-creating market process as well as an essential part of civilized society. The firm is much more than a legal entity — it is a cornerstone of the market and instrumental to entrepreneurial profits.

Categories: Current Affairs

Growing the Cloudflare Apps Ecosystem

CloudFlare - Thu, 02/08/2018 - 18:26
Growing the Cloudflare Apps Ecosystem

Starting today we are announcing the availability of two key pilot programs:

Why now? Over the course of past few months we've seen accelerating interest in Workers, and we frequently field the question on what we are doing to combine our growing ecosystem around Workers, and our unique deliverability capability, Cloudflare Apps. To meet this need, we have introduced two programs, Apps with Workers and Workers Service Providers. Let’s dig into the details:

First, we are announcing the upcoming availability of Cloudflare Apps, powered by embeddable Workers. This will allow any developer to build, deploy and in the near future package Workers to distribute to third parties, all using the Cloudflare Apps platform. It will be, in effect, the world's first serverless Apps platform.

Today, it's easy develop Workers using with our UI or API. The ability to App-ify Workers opens up a whole new promise to those who prefer to deal in clicks and not code. For our Apps developers, Apps with Workers allows for more complex Apps offerings running on Cloudflare, and for our customers the next generation in Apps. So, while we are actively putting the finishing touches on this capability we are opening up this pilot program for select developers. We have a limited early access to program. To apply, click here for more details.

Growing the Cloudflare Apps Ecosystem

Second, we are announcing the upcoming availability Cloudflare Worker Service providers. While many Cloudflare customers write Cloudflare Workers for themselves, many customers want to focus on their core business and bring in the development expertise when they need it. The goal is simple: make it easy for our customers to connect to an ecosystem of developers and Apps, and to grow a vibrant marketplace around customers and partners. Moving forward, in addition to Apps, we will support the ability to post Solutions and Services backed by curated set of consultants, experts and System Integrators, all adding a new richness to the Cloudflare ecosystem. We are excited to hear from our community so drop us a line.

Growing the Cloudflare Apps Ecosystem

Categories: Technology

"Sweatshops" Are like Lifeboats for the Poor — Don't Sink Them

Mises Institute - Thu, 02/08/2018 - 17:55

Being on a lifeboat does not sound like a pleasant experience. You’re hungry, baking under a hot sun, surrounded by sharks and endless miles of ocean, and the extent of your living space is maybe ten square feet. Being stuck on a lifeboat is not an ideal way to enjoy the ocean.

So given that being stuck on a lifeboat sucks so much, wouldn’t it be best if we just got rid of lifeboats? This is the logic of people who advocate shutting down sweatshops.

Working in a sweatshop is something I would like to avoid. Long, laborious hours in a hot factory for meager pay is not my top career choice. At the risk of making sweeping generalizations, nobody enjoys working in a sweatshop.

So why do people continue to do so?

If you look at the countries in which sweatshops exist, you don’t see a free market. You see the heavy hand of government intervening in the economy. These governments constrain trade, impede industry, and inhibit economic growth.

So the answer to why people continue to work in such deplorable conditions is pretty simple: they don’t have any other options.

Typical progressive compassion diagnoses a situation such as this, identifying the deplorable conditions of the sweatshop worker, and decides that the best thing one can do for them, when looking at all their available options, and then to remove the one they actually chose to do. From their moral pedestals, these activists proclaim that the children of these poor countries (countries implementing many of the very policies these activists lobby for) deserve an education, all while promoting regulations that serve to displace children into street thievery and prostitution.

This is what happened when Bangladesh passed their Child Labor Deterrence Bill in 1994. 50,000 Bangladeshi children lost their jobs, and the humanitarians broke open the champagne while these children took to even more dangerous work such as stone crushing and prostitution

Abolishing sweatshops is not the remedy to the dismal conditions of the citizens of poor countries. Removing the government from the economy would be, but even short of that, any reduction of trade regulations, taxation, and socialization will help foster an environment in which sweatshops are done away with naturally, through market competition and capital accumulation.

If you want people to have more access to education, food, and healthcare — among other first world amenities — then the best thing you can do for them is to support policies that allow for capital accumulation. Socialists hate this concept, but reality persists even in the face of Marxist bromides. An increase in capital means an increase in production, and an increase in production must precede an increase in consumption. You cannot have your cake and eat it too, and you certainly cannot eat your cake before you have it.

Abolishing sweatshops outright while continuing socialist policies does the opposite of increasing production. It essentially amounts to removing the lifeboat from the person stranded at sea.

Capitalists don’t deny that sweatshops are bad, at least relatively speaking. A modern white collar job is preferable to a sweatshop job. The capitalist simply acknowledges the reality that this kind of economy has to develop over time and, most importantly, under the right conditions: free market conditions.

Sweatshops are not the problem; they are a symptom of the problem. If you want to treat the true illness, instead of advocating the removal of sweatshops, focus on removing the government from the economy.

Categories: Current Affairs

The Real Cost of Medicare for All is in Lives, Not Dollars

Mises Institute - Thu, 02/08/2018 - 17:55

A recently released study by the Mercatus Center has placed renewed focus on the fiscal costs of Medicare for All. The study finds that the proposal — increasingly popular with the Democratic Party — would “add approximately $32.6 trillion to federal budget commitments during the first 10 years of its implementation (2022–2031).” The authors of the study also specify that this is a conservative estimate, assuming that “the legislation achieves its sponsors’ goals of dramatically reducing payments to health providers, in addition to substantially reducing drug prices and administrative costs.”

Though this study suggests that Federal tax dollars would have to more than double in order to afford this new entitlement, advocates like Bernie Sanders are claiming this study vindicates their position. Why?

As Matt Bruenig at Jacobin explains, if you compare the projected price tag of Medicare for All against projected total healthcare spending in the United States, you see a net decrease of around $2 trillion over the decade.

Of course, in promoting this conclusion, Sanders and his allies out the true aims of their proposal: the outright nationalization of the US healthcare system.

While Sanders and others usually try to avoid being honest with this aim, others on the left are more transparent. This is why the description of “Medicare for All” is fundamentally dishonest. With Medicare, not only do you have an increasing number of Americans opting for the privately managed Medicare Advantage programs, but you always have the option of seeking treatment outside of the Medicare program. This would not be true in the future envisioned by Bernie Sanders and his supporters.

Without this flexibility beyond government programs, we would see the same outcomes that have plagued countries like Canada and the UK: higher mortality rates and increased rationing of medical services. At the end of the day, the focus on comparing the dollar costs of Medicare for All to the current medical system (made unnecessarily expensive by government) overlooks the reality that we are not comparing equal goods. Government-controlled healthcare will lead to more Americans dying from disease than they do today.

After all, this is precisely what we have seen in the American healthcare system that comes the closest to resembling socialized care: the VA. Once promoted by economists like Paul Krugman as a great model for the rest of the healthcare, the VA has been bogged by inefficiency and scandal. Veterans neglected by this government-managed system have resorted to lighting themselves on fire outside of clinics in a desperate attempt to highlight the absolute failures of the system.

Further still, the complete bureaucratization of healthcare has perverse effects on practice beyond the obvious examples such as wait times and supply restrictions. As Dr. Michel Accad has explained, the reliance of medical coding — required for doctors to receive government payments — necessarily moves the focus of healthcare away from the patients and toward paperwork.

In 1992, with the passage of the Medicare Fee Schedule, use of this coding system became mandatory. From then on, clinical care would be spoken in the lingua franca of CPTICD, and E/M codes, and the term “documentation” would take on a bitter significance for doctors.

But translating the what, how, and why of local medicine into cryptic ciphers for remote bureaucrats does not make the business of health care any more intelligible to the central planner, regardless of whether the codes are transmitted by an archaic fax machine or digitized and made immediately accessible by means of mandatory electronic health records systems.

Codes and data, of course, are not knowledge. Hayek’s shipper engaging in tramp trade can make a judgment about the significance of empty spots on a boat because the context associated with that information elicits meaning based on which he acts.

In contrast, a CPT code 99204-21 (new patient visit, E/M coding level 4, prolonged service) associated with ICD-9 code 786.50 (chest pain, unspecified) hardly conveys any real knowledge and cannot possibly be a basis on which relevant decisions can be made or value established. These codes cannot help determine the needed supply of doctors, nor that of drugs and other material necessities. The only tangible effect of the coding scheme, then, is simply to require a massive influx of administrators charged with “interpreting” and acting upon its obscure data signals.

So at the end of the day, while there is value in discussing some of the potential fiscal costs of socialized medicine in America, it is important to not overlook that we are not even talking about the same services. For all the many issues that exist today with American healthcare — all the direct result of government — at least there is freedom to explore options outside of the Federal bureaucracy.

By their own admission, this is precisely what the advocates of Medicare for All want to eliminate.

Categories: Current Affairs

The Content Cluster Muster (08.02.18)

Blog & Mablog - Thu, 02/08/2018 - 17:00

Graphing the Dominion Mandate

A 1.9 billion-acre jigsaw puzzle of cities, farms, forests and pastures: Here’s how America uses its land

— TicToc by Bloomberg (@tictoc) July 31, 2018

A Nudge for Parents to Read

That’s Why all the Californians Are Moving

Moms . . . Sign Up

Retweet for a chance at FREE registration for @lizziejank‘s new webinar! Winners will be announced Friday 8/3! #MotherhoodCallToArms

For groups of 10+ contact for special rates!

— Canon Press (@canonpress) July 30, 2018

A Good Reminder that Idols Are Always Well-Intentioned

Logos Online Is a Real Option:

A big reason students love Logos Online School is  . . . the teachers. So find out more about the excellent, affordable online education offered at Logos Online School by visiting our website today.

The post The Content Cluster Muster (08.02.18) appeared first on Blog & Mablog.

Categories: People I don't know

LVE Manager for cPanel updated

CloudLinux - Thu, 02/08/2018 - 16:42

A new updated LVE Manager 4.0-19.8 for cPanel is now available for download from our production repository.

Note: this update affects cPanel users only.



  • WEB-1092: fixed LVE Manager error when trying to determine the system locale on cPanel. This fix eliminates a software error when entering into LVE Manager plugin on cPanel WHM.

To update run:

yum update lvemanager
Categories: Technology

Beta: Alt-Node.js updated

CloudLinux - Thu, 02/08/2018 - 16:25

New updated Alt-Node.js10 packages are now available for download from our updates-testing repository.



  • updated package to version 10.8.0. Please find the full changelog here.

Update command:

yum groupupdate alt-nodejs10 --enablerepo=cloudlinux-updates-testing
Categories: Technology

Beta: CloudLinux 7 and CloudLinux 6 Hybrid kernel updated

CloudLinux - Thu, 02/08/2018 - 15:53

CloudLinux 7 and CloudLinux 6 Hybrid kernel version 3.10.0-714.10.2.lve1.5.19.1 is now available for download from our updates-testing repository.


  • Fix for CVE-2018-8781: the udl_fb_mmap function in drivers/gpu/drm/udl/udl_fb.c at the Linux kernel version 3.4 and up, including 4.15 has an integer-overflow vulnerability allowing local users with access to the udldrmfb driver to obtain full read and write permissions on kernel physical pages, resulting in a code execution in kernel space;
  • Fix for the CVE-2018-10675: the do_get_mempolicy function in mm/mempolicy.c in the Linux kernel before 4.12.9 allows local users to cause a denial of service or possibly have unspecified another impact via crafted system calls;
  • CLKRN-287: fixed a CPU soft lockup during the path lookup;
  • CLKRN-272: fixed kernel crashes in ia32 emulation layer;
  • KMODLVE-193: fixed the kernel crash due to invalid end of an array calculation;
  • KMODLVE-194: fixed a crapsh in lvp removal;
  • KMODLVE-172: fixed a use case with the lvectl apply ("Can`t setup lve").

To install a new kernel, please use the following command:

CloudLinux 7:

yum install kernel-3.10.0-714.10.2.lve1.5.19.1.el7 --enablerepo=cloudlinux-updates-testing

CloudLinux 6 Hybrid:

yum install kernel-3.10.0-714.10.2.lve1.5.19.1.el6h --enablerepo=cloudlinux-hybrid-testing
Categories: Technology

Manufacturing's Death Has Been Exaggerated

Mises Institute - Thu, 02/08/2018 - 14:55

The US manufacturing sector has had a rich history, one that has lifted millions of Americans into the middle-class, making the Land of the Free the most envied nation in the world. You clock in your eight to 10 hours a day, bring your lunch pail, and complete an honest day’s work, giving you a paycheck to purchase that new radio set to listen to Suspense, a modest two-bedroom home, and enough cash left over to buy your child the latest Cowboys and Indians toy set. The American Dream blossomed thanks in part to manufacturing.

Today, when you think of US manufacturing, it is rare to conjure up images of a thriving middle-class. Instead, you see in your mind ghost towns, shuttered factories, and thousands left jobless. The cherry on top are the headlines that say the company is sending jobs overseas, citing higher labor costs, ballooning energy prices, and a non-competitive tax environment.

For years, politicians have paid lip service to stimulating US manufacturing, making nauseating campaign stops in Ohio in an election year to nab a photo-op driving a Ford or operating a forklift. That said, there have been two political candidates who seemed to have really been genuine about their concerns: Ross Perot and President Donald Trump.

During the 1992 presidential election, the billionaire Independent candidate warned the nation about a “giant sucking sound going south.” In 2016, then-candidate Trump promised to restore manufacturing jobs following “a rapid deindustrialization that has evaporated entire communities.”

This may seem like a realistic account of what’s happening today. However, rumors of manufacturing’s death are greatly exaggerated. The US sector is alive and well, and it’s contributing immensely to national and global economies.

So, is it just fake news or a misreading of the data?

US Manufacturing is Thriving

The Federal Reserve recently published several manufacturing statistics from June, and they beat market forecasts and rose from the previous month:

  • Factory output jumped 0.8%.
  • Total industrial production advanced 0.6%.
  • Capacity utilization increased to 78%.

Yes, there have been some hiccups along the way, but this has been the norm for years.

While it is true that factory jobs have fallen by approximately seven million since 1979, manufacturing output has climbed more than one-fifth since 2006. In fact, US manufacturing production, which totals $2.18 trillion, is equal to that of France, the UK, Italy, Germany, South Korea, and India combined ($2.19 trillion).

In the first quarter of 2018, the nation’s manufacturing output hit a record high of roughly $2 trillion.

Now, you will likely thank President Trump’s tariffs for this development, since he is targeting the very nations that ostensibly stole American jobs. However, domestic manufacturing didn’t suddenly become a force to be reckoned with; it’s been doing well for a long time thanks to technological advancements, not because of a Republican or Democrat administration.

We are witnessing record levels of output with the same or fewer number of factory workers. Automation has complemented the backbreaking labor, allowing the US to produce more at a lower cost. For example, it used to take 10 man-hours to create one ton of steel, but this has cratered to just 90 man-minutes in the last couple of years.

And most US workers are no longer confined to sweatshops, creating t-shirts and snow globes. They are developing everything from aerospace technology to business systems to financial services. Isn’t this a whole lot better than snow globe economics à la Senator Bernie Sanders (I-VT)?

Making Manufacturing Great Again

These are all befuddling findings because we routinely hear about how the nation is only consuming, not producing. Even the most eminent libertarians, the champions of free markets and free trade, espouse the falsehood that America isn’t making anything more. This is simply not true.

Some industries ebb and flow. Some industries perish. You only need to look at the energy sector to fathom how markets operate: It was five years ago when oil prices crashed, sending tens of thousands to the unemployment line. Today, a barrel of oil has topped $70, sending tens of thousands back to work. This will inevitably occur again.

There are a couple of realities to face: Automation will play a greater role in factories and every sector goes through the best of times and the worst of times. Logging jobs are tumbling, but the domestic industry is excelling because of monster equipment. Coal is dying because natural gas is taking its place. The horse-and-carriage niche faced its demise a century ago because of the automobile.

US manufacturing is so immense that output levels are the same as several nations combined. Sure, there may no longer be surly men wearing overalls and smoking Camel cigarettes all day long, but it remains the envy of the world, and it will stay that way for many years to come.

Originally published by Liberty Nation.

Categories: Current Affairs

Nine arguments against basic income debunked

Adam Smith Institute - Thu, 02/08/2018 - 14:50

1. Such a system removes the incentive to work

One of the most popular arguments against basic income is that providing everyone with enough money to live off could reduce the incentive to work, leading to a drop in productivity, higher unemployment and a subsequent slowdown in growth. Current benefit systems often fail to ‘make work pay’, with sharp cut-offs leading to additional earnings being cancelled out by the withdrawal of benefit payments. If a system like the NIT was carried out correctly, there would be no such disincentives - the more income earned, the more income kept. We see in the US pilots of basic income in the 1970s that overall hours worked fell slightly, with the most significant reduction in work coming from single mothers. Most often the drop in hours worked was due to people allowing themselves more time to find new, more suitable jobs, rather than them simply working less.

Despite the ability to get by on no work at all, the individuals who would be most likely to ‘slack off’ are those whose productivity is low in the first place, perhaps due to lack of motivation or aptness to the role they are in. The absence of these workers from the labour market could actually boost productivity as they could be replaced by new capital - their roles could be automated. These individuals could then have the opportunity to learn new skills and become productive in other industries where they are better suited (see point 2). More people could find a role that motivates them, and as the US pilots suggest, few appear to drop out of the labour force solely due to the UBI received. Additionally, many of those who could benefit the most from basic income would be those who often face difficulties in full-time work (i.e people involved in childcare, domestic duties, those who are disabled). In this case it makes it easier for these people to manage as they are now receiving their own income and aren’t reliant on another’s, assuming that the basic income is paid out on an individual rather than household level.

2. People are more likely to find work meaningless when it is no longer their main source of income

Won’t those who choose to stay in employment find little value in their work if they don’t need the money they earn? This argument holds little reason itself; many people relish work itself and hold a sense of pride and identity in what they do. With the current welfare system millions are stuck in ‘unfulfilling’ jobs, often because they cannot afford to take time off and obtain the skills needed to switch industries. Basic income could allow those who feel this way to be free to pursue the positions they are really interested in, rather than having to take anything to keep afloat. People could have the liberty to learn skills that would allow for an expansion into more creative, or simply more enjoyable and fulfilling roles. Greater bargaining power for workers could mean businesses having to replace mundane, but essential, jobs requiring little skill with automated capital or AI – otherwise market distortion would occur due to labour being more expensive than capital.

3. Such a scheme would be too costly to be feasible

Perhaps the most popular criticism of basic income is its apparent cost. The money needed to give an entire population enough to live off of has to come from somewhere. What could make such a system affordable – potentially even revenue neutral – is a withdrawal rate in the case of Negative Income Tax (or clawing back money through taxation in the case of a UBI). As people earn more, the amount they receive through the NIT decreases on a tapered rate until they reach a certain income where they are no longer eligible for the NIT. It is entirely possible to set the withdrawal rate and the baseline at a level where sustenance is possible and the cost of introducing the scheme is not prohibitive to implement - a revenue neutral UBI could provide those over 25 with over £70 a week.

Additional savings from basic income could be made through the reduction in the number of DWP employees as much of the bureaucracy that is attached to the current welfare system might no longer be required.  

4. Giving everyone money would lead to excessive inflation

A common misconception is that as an entire population now has enough money to live off, more money will be injected into the economy leading to higher levels of inflation. This is not the case. Firstly, the money supply isn’t changing due to the nature of the funding behind the NIT (see point 3). Demand-pull inflation would not occur because we’d have to be close to full capacity to experience high inflation in this scenario; more likely is that we’d experience a healthy level of inflation and growth. In fact AD itself might not shift out as you’d expect. And if inflation were to occur, we would expect to have seen it already with the current welfare system providing substantial payments through Universal Credit.

When the UK employed QE after the 2008 recession it didn’t cause excessive inflation, though we’d injected huge amounts of money into the economy. This is because the banks who received this extra cash didn’t actually push it straight into the economy - they held onto it. Similarly, those who receive extra income may choose to hold onto it rather than spend it immediately.

5. A basic income would worsen poverty and inequality

Some say, like Ian Goldin of the Financial Times, that by replacing specific benefits with a single grant, those who are dependent on multiple benefits won’t have enough income to cover basic needs, and those who don’t need the additional income will get it anyway. But those receiving the income would have the freedom to spend it on whatever they want, covering previous benefits they received and more. And basic income trials suggest that people tend to spend such money on necessities like food and shelter, rather using it to fuel addiction or ‘wasting’ it in some other manner. A GiveDirectly trial, in which entire villages in Kenya were sent direct cash transfers, resulted in individuals being able to literally build a roof over their heads, as well as start businesses and invest in livestock.

Though inequality is not something to be concerned about, the actual level of inequality might actually decrease with UBI as there would be a baseline standard of living, narrowing the gap between the rich and poor. Billionaires don’t ‘get a little more’ out of the system because with both a NIT and a UBI, and those with greater income pay it back via withdrawals or taxation. A basic income would be even better for many in poverty than the National Minimum Wage; those whose skills demand less in wages than the NMW may usually go unemployed, but with basic income in place these less-skilled workers could still receive a small wage (and supplemented by their basic income).

6. There are political implications - excessively high levels of UBI/NIT would be promised by politicians to garner support

There could be the issue of opposing political parties promising higher and higher levels of basic income in order to accumulate greater levels of political support. For basic income to work it should optimally be at a revenue neutral level – otherwise it could become unaffordable or force the government to borrow to fund it. A solution to this might be to have a third party administer the level of basic income (we see something like this in the Low Pay Commision advising the government on the National Minimum Wage). Removing politics from the payments means evidence based increases or decreases in the level, rather than rhetoric driving the debate.

7. Increased costs from higher levels of welfare tourism

There are concerns that countries providing a basic income for all open themselves to being  ‘swamped’ by an inflow of immigrants into the country looking for a stable income. The argument goes that the country would then end up increasing the amount spent on such a programme, and so decreasing its affordability.

What this argument doesn’t take into account is the additional revenue provided by immigrants in terms of productivity and growth. Studies have shown that UK immigrants should not be generalised as sucking the cash out of the welfare system, and most immigrant groups are actually less likely to claim benefits than natives. Many forms of basic income such as CBI are only paid out to citizens of the country, so migrants would have to wait several years after moving before they could claim basic income, weakening any incentive to emigrate solely because of the programme.

8. Basic income makes people more reliant on the state

This argument suggests that by spending more on welfare, individuals become more reliant on said welfare and this dependency could be detrimental when trying to cut down on spending in this sector. However, by introducing a UBI scheme you are letting people spend money on what is their personal priority rather than tying them to a state-funded welfare programme or busybody groups that decides what people need for them.

By taking a less interventionist approach, governments are allowing individuals to become consumers: they are now contributing to market forces. With benefits and more specific programmes, the government could actually be creating surpluses and shortages in various industries by distorting demand and supply.

9. Introducing basic income could create a ‘slippery slope’

Some argue that the laissez-faire approach basic income provides to welfare could open the gate to more reforms of a similar nature, for example increases privatisation, or cuts to other schemes. programmes. While more free-market policies may not necessarily be a problem, worries about this are unfounded: basic income is an idea that has garnered support from the left, right and everywhere in between. As the Citizen’s Basic Income Trust puts it: ‘[CBI] is not the possession of any political ideology.’ The introduction of basic income would not make ‘right-wing’ policies more viable anymore than it would do for the left.

Emma Weber is a research intern at the Adam Smith Institute.  

Categories: Current Affairs

Memorialize the Sabbath

Peter Leithart - Thu, 02/08/2018 - 12:00
The Fourth Word begins with: “Memorialize the day of ceasing to sanctify it.” I’m using the verb “memorialize” or “commemorate” rather than “remember.” It’s not a command to “call to mind.” Of course, Israel isn’t to forget. But it wouldn’t be enough for Israel to call the Sabbath to mind without actually practicing the Sabbath. […]
Categories: People I don't know

Southeast PHP Conference

PHP - Thu, 02/08/2018 - 11:45
Categories: Technology

Pastors need rest too

The Good Book Company - Thu, 02/08/2018 - 10:48

“Do not sacrifice your family on the altar of ministry.”

Those were the words of a seasoned pastor I listened to, sitting in my first ministry training course. I was newly married, preparing to step into the world of overseas missions, determined to do what he said.

Fast forward 15 years. I’m on my fourth church plant. It’s Thursday night — family movie night. But while my kids are watching the movie I’m sneaking emails and texts like a teenager hiding from his parents. This was supposed to be a time of rest… of pulling away from work to recuperate, reconnect with God, and re-establish our love for each other within our family. But there I was, with every text, offering up a little sacrifice to my work at the expense of my family.

Church planting can be exhausting. Starting anything is hard. It takes all of your effort, and then a whole helping of God’s grace to establish a gospel outpost in a hard place. But the God who called you there didn’t call you to work without ceasing. He gave you the work and invites you to rest. So, here are a few rest tips from a rest failure like me, learning how to lay down my work so I can take up some Sabbath habits.

Do not sacrifice your family on the altar of ministry

Put the Phone Away

It sounds so simple, but it’s so hard. These little devices we carry to help us end up enslaving us. Work hard, pastor. But when it’s time to rest, put your phone down. Your kids see you. Your wife sees you. When you’re with them, down show them downcast eyes and a forehead titled toward a screen. Show them your face. To rest well, put the phone down.

Give Yourself Permission to Stop Thinking About the Church

The larger our church gets the more complex and various our problems become. I assume you want your church to grow, right? Then just know that’s what you’re signing up for: a larger set of more complex problems. If that’s the case, how can we ever expect to stop? Simple: God has commanded it, so you must allow yourself to.

The God who called you here didn’t call you to work without ceasing

Plan Your Sabbath

I have to put my day of rest in my calendar, with alerts. I must prepare for it by getting the necessary work done beforehand. In other words, stopping means planning. I know that the church “needs” you, and you’re super important to a lot of people. But if you’d like to continue being useful to your flock you’d better make a plan to be useless from time to time. If you have an assistant, ask them to help you. Do whatever you have to do, but get it in the calendar.

Say “No.”

Everyone likes to feel needed. So, when we pastors are asked to give advice, meet for coffee, or squeeze in one more appointment, we say yes. Pastor, you have to learn to use the word “no.” Saying no to the wrong things (even good things) is the first step to saying yes to God’s right things. If someone you pastor can’t handle a no from you to protect your ability to obey God’s instructions to stop, they probably weren’t going to stick around long anyway. Say no to say yes… it’s worth it.

Fifteen years later, I’m trying hard to not sacrifice my family on the altar of ministry. One way I wish to do that is by practising the art of rest.

Pastor, work hard, but rest well.

Find faith to hit pause in a world that never stops with Adam Mabry's book The Art of Rest. Buy it here

Categories: Christian Resources

PHP 7.3.0.beta1 Released

PHP - Thu, 02/08/2018 - 10:44
Categories: Technology

How can they charge these prices? Because people will pay them

Adam Smith Institute - Thu, 02/08/2018 - 07:01

Some questions in newspaper advice columns are easy enough to answer. "No, ee's not worf it" being a useful one that applies to many. This is equally simple:

How can Viagogo get away with charging such big fees?

Because they can - some people will pay them. Enough people will pay them to make the tactic viable that is.

At which point a slightly deeper dive into the explanation. People will charge absolutely as much as they can for anything. We can ascribe this to capitalism if we desire - that lust for profit - but it's more a feature of being human. We'd all like to get more coming to us for what we've got to send the other way. So, therefore, people do charge as much as they possibly can.

The solution to this is market competition. It is true that there's some limited number of anything. Most especially tickets to an event. Price is not the only but it's the most efficient manner of sorting through who really, really, wants a ticket and who would prefer to be doing something else given what they'll have to give up to gain one.

OK. But how is that margin, mark up, that the intermediary able to charge limited? By the fact that they don't have a monopoly. Sure, they've an effective monopoly over that specific pair of tickers but not over all those to that event. Thus the competition of others also willing to sell their tickets brings down the margin that can be charged for any specific pair.

Or as we've been known to put it, it's market competition that reduces the gouging that human nature makes us all prey to. Which is why we have market competition of course.

Categories: Current Affairs


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