Cummins on Ayn Rand's View of Human Nature

Dr. Denise Cummins wrote an article entitled This is what happens when you take Ayn Rand seriously, on which I commented extensively.  She has followed that article up with another in which she takes exception to one of my comments and generally finds fault with Ayn Rand for not embracing altruism.  Her second article is entitled What Ayn Rand got wrong about human nature.  She starts her article by saying that the complaints of Rand's followers "primarily objected to my assertion that Rand celebrated unbridled self-interest."

Her first quote and the only quote of such a "follower" was taken from one of my comments.  This is that quote:

Rand’s good people do care about others. They do not care to be forced to give away the fruits of their invested time to others, but they are delighted to trade what they produce to others and delighted to see those trades improve the lives of others.

To which her only direct comment is "Such objections are without merit." Oddly enough, she then quoted Ayn Rand

Man gains enormous values from dealing with other men; living in a human society is his proper way of life — but only on certain conditions. Man is not a lone wolf and he is not a social animal. He is a contractual animal. He has to plan his life long-range, make his own choices, and deal with other men by voluntary agreement (and he has to be able to rely on their observance of the agreements they entered). The choice is not self-sacrifice or domination.

showing that she also believed in goodwill towards others provided our associations and trades are of a voluntary nature.  She introduces this quote of Rand's by saying that she acknowledged that human beings are social animals who should "look beyond their own immediate self-interest in order to function."  Looking beyond "immediate self-interest" is consistent with Rand's general philosophy and with my comment that Cummins claimed had no merit.  Note the sleight of hand by Cummins in claiming that Rand believed in "unbridled self-interest" in the first paragraph of her article even as she now acknowledges that Rand looks beyond "immediate self-interest."  Actually, Rand and I believe that rational man pursues his rational self-interest, not an "unbridled self-interest."  An unbridled self-interest is an emotion-driven and short-range viewpoint of others and one's relations with them which is not bridled by rational assessment and long-range planning of one's life.

Cummins then claims:

Despite embracing sociality, Rand saw more evil than good in this kind of interdependence between people. As she wrote in “The Fountainhead,” “The choice is independence or dependence. All that which proceeds from man’s independent ego is good. All that which proceeds from man’s dependence upon men is evil.”

Note that in the quote she gives here, Rand is discussing man's independent ego.  She is not discussing an independence from the trade of values with others.  Rand is saying that one's ego should not be dependent upon what others think of you or that you should not let others tell you what to think or whether you have self-value.  The contradiction Cummins claims is not supported by this quote.

Cummins then claims that Ayn Rand somewhat embraces altruism:

Perhaps the key to understanding this contradiction lies in a journal entry in which she writes, “Selfishness does not mean only to do things for one’s self. One may do things, affecting others, for his own pleasure and benefit. This is not immoral, but the highest of morality.”

Seen in this light, altruistic acts are sanctioned insofar as they bring pleasure or other benefit to the giver, who has no moral obligation to offer help to those who are suffering.

 Ayn Rand defines altruism as the act of sacrificing one's own self-interest for the sake of the interest of others.  Cummins appears to believe that any act done for the sake of others is an act of altruism.  There are certainly many situations in which a rational man will act to enhance the interest of others without sacrificing his own interest and indeed by enhancing his own self-interest as well.  Cummins wants to provide legitimacy for altruism by claiming it subsumes both the sacrificial and the self-interested acts that help others.  For strong moral reasons, Ayn Rand wants to separate these very different actions with respect to relations and associations with others.  Cummins wants to muddle them together.

Cummins next takes exception to Rand's claims that socialism does not work.  Cummins says that socialism can lead to abuse and poverty, but it can also lead to wealth, health, and happiness superior to capitalism.  So, she proves this by stating that a certain Prosperity Index lists the United States as the 11th most "prosperous" nation after a number of nations she calls socialist nations.  The criteria for this ranking are not given by her link and that link does not link to the criteria either.  But in any case, one critical assumption in her "proof" is that the USA is an example of an unadulterated capitalist country.  In fact the Cato Institute 2015 Economic Freedom of the World report ranked the USA as only the 16th country in economic freedoms.  The Heritage Foundation Economic Freedom Index of 2016 lists the USA as #11 in economic freedom.  So, it should not be a surprising result of an index of prosperity to rank the USA #11.  According to the Cato Economic Freedom of the World report, New Zealand, Switzerland, Ireland and Canada are economically more free than the USA.  According to the Heritage Foundation Economic Freedom Index, New Zealand, Switzerland, Australia, Canada, and Ireland all have more economic freedom than does the USA.  Apparently, Cummins is unaware of the many socialist programs and economic controls that American governments have saddled our business sector with.

Oddly, Cummins claims that

while a given individual can benefit from cooperating, he or she can usually do better by reneging.  The end result is that altruists go extinct.  But Trivers showed that altruists can survive if one simple condition is satisfied: Those who fail to reciprocate must be punished through exclusion from subsequent cooperative ventures.

Once again, Cummins is implicitly claiming that one who cooperates and does their part is an altruist, while the rational self-interested person will renege.  But, she says the altruist can do well in cooperative transactions if the reneger is not allowed to enter into future cooperative ventures.  So, the long-range rational self-interest of a person is not to renege, which takes us right back to Ayn Rand's self-interest -- one of rational thought and long-range planning!  Cummins then tries to make a strong contrast between future exclusion and the enforcement of contracts.  The enforcement of contracts as advocated by Ayn Rand does help to prevent harm to the partner in a cooperative endeavor who will live up to the spirit of the endeavor.  The one who does not is subject to legal action to recover damages and also to future exclusion from cooperative endeavors.

Cummins claims that Rand's idea of enforceable contracts says Rand expects "government to play a role in maintaining fairness in market transactions."  She may be trying to claim this opens the door to a version of fairness as Cummins would see fairness, not as Rand would see it.  If this is not the case, I do not see why she has brought this up.

Not surprisingly, Cummins claims that laissez-faire capitalism failed in the 2008 financial crisis.  She fails entirely to recognize the many ways in which that crisis was caused by government policies and the many ways that government policies iced a recovery.

Cummins wraps her article up with the Elizabeth Warren quote that every individual has a collectivist debt, which may be extracted by force, because we gain from living in a society in which we exchange values, sometimes voluntarily, sometimes at the point of a gun.  Well, of course, we gain from living in a society in which we are allowed to choose our own values and act, often in cooperation with others, in the pursuit of our values.  That is central to Rand's philosophy.

Warren claims that we gain even from those goods or services delivered by the force of government that provide us some benefit, even if that benefit cost us far more in expense than is the value of the benefit.  We owe the collective for allowing us to use the roads, no matter how badly government builds and maintains roads.  We owe the collective for long-term unemployment insurance, no matter how irresponsible the beneficiary is for not getting another job or creating his own job.  This is Warren's inversion of cause and effect and hers a great way to reduce productive and creative work.  It is also most strange that she is only interested in laying forceful claim to the products of creative and productive work.  There is no compensation to the creative and productive person in the hours others have invested into their entertainments and pleasures of a non-creative and non-productive manner.  Warren is simply a bank-robber, who claims it is moral to be a thief.

Of course we gain by living in a society in which the knowledge gained by others and the produce of others can be freely traded and made available to us.  Most people who act in the private sector do leave a legacy of values behind them which make it easier for others to survive and flourish in the future.  This is a major benefit of a free society.  It is not a benefit if these benefits of a free society are undermined by the claim that the legacy of prior productive people allows a moral right to take by force whatever one wants in the future from that legacy beneficiary.  This claim does nothing but infest with rot the process of productive and creative thinking and the actions needed to turn those thoughts into actual goods and services.  We rightly admire those who have led productive and creative lives, but this does not make us slaves either to them or to others in society who may not be very productive and creative.  To claim that the legacy of other productive and creative people should be a justification for the use of force to steal the fruits of the time and effort that others invest in their productive and creative work is a sacrilege against that legacy and the good people who left it.

Freedom of Association and Anti-Gay Discrimination

As I have made it clear many times, I do not believe that homosexuality is in any way immoral.  Morality as it applies to homosexual acts is very similar to the application of morality to heterosexual acts in many important respects, though clearly it is differentiated by the absence of concern for the potential of responsibility for creating a baby.  I have supported gay domestic partnership contracts in their governmental form and noted that government really has no business addressing the spiritual aspects of marriage for anyone.  It should only grant domestic partnership contracts to consenting adults with no more concern for their sex or numbers than is appropriate for a business partnership contract. Adult individuals have the right to form the voluntary associations and contracts of their choice.

I have long been embarrassed by the stand of many Republicans for whom I have often voted on their stance on the issue of homosexual discrimination by government.  Government has absolutely no business discriminating against homosexuals or bisexuals or heterosexuals.  Government must support the rights of every individual to life, liberty, property, and the pursuit of their personal happiness.  This does not allow exceptions for homosexuals, bisexuals, or heterosexuals or many other characteristics individuals have or choices that they make.  Of course, for every Republican who embarrasses me in this regard, there are many more destructive and immoral choices made by almost every Democrat Socialist Party candidate.  Political candidates are never entirely rational and moral.

I argued for an end to the Clinton Defense of Marriage Act and for the end of Don't Ask, Don't Tell.  I contributed to the Log Cabin Republican effort in accomplishing these tasks and praised their work.  I contributed to the Marylanders for Marriage Equality group when it was trying to promote the ballot initiative to equalize same-sex marriages in Maryland.  That campaign was successful, with about half of all Maryland Republicans voting for it.  Unfortunately, these groups are now turning to attempts to make it unlawful for businesses in the private sector to discriminate against gay people.  On this matter, I part ways with these groups, for reasons of general principle and because their effort actually undermines their own right to freedom of association in a very fundamental and harmful way.

I find it an immoral act for a business to refuse service to someone because they are homosexual or because a gay couple may be married. I prefer not to do business with such a business and I applaud others who would not do so also.  In doing so, I am discriminating in accordance with my values.  This personal choice and expression of my own values and moral code is not one that I have the right to impose on others by the initiated use of force.  It changes nothing morally if I join a majority of voters and elect politicians who will use the force wielded by government to accomplish this same goal of imposing my values and my morality on others.  They too have a right to choose their own values and their own moral code.  The fact that I disapprove of the choices some people make does not give me the right to marshal the force of government to suppress their choices of values and actions made in accordance with their moral values.

Good government cannot be achieved or evaluated without a rational reference to principle.  Legitimate government has one and only one purpose.  That purpose is to secure and protect the equal, sovereign rights of the individual to life, liberty, property, the ownership of one's own body, mind, and labor, and to the pursuit of one's own happiness.  Government cannot do this if it does not allow individuals the implied freedom of conscience and the freedom of association.  The individual in possession of his own mind establishes the principles and values of his conscience and he acts in his life upon those principles and values in forming associations with others.  Good government imposes very little in the way of morality on its citizens.  It only requires that they respect the equal rights of others by not initiating the use of force against others and by not defrauding them.

So if a person forms his moral principles and values in accordance with a Bible verse of the Old Testament such as Leviticus 20:13

Leviticus 20:13 If a man also lie with mankind, as he lieth with a woman, both of them have committed an abomination: they shall surely be put to death; their blood [shall be] upon them.

without regard for the primitive, brutal nature of the times and the need of a small tribe to procreate madly in the interest of survival, it is not the role of good government to instruct this person on morality or to take actions against his discrimination in putting his moral beliefs into action, so long as his actions do not involve the initiated use of force or fraud.  Government should not require that the believer in Leviticus 20:13 not have an aversion for gay sex, though it must draw the line in not allowing the believer in this brutal dictum to kill or use other violence against those who have voluntary gay sex as adults.  In general, good government will no more prescribe morality than it will prescribe speech or dictate who one will marry or befriend.  Individuals have the freedom to choose their values and the moral principles by which they will live.  They enjoy freedom of conscience and freedom of association by choice.

These are freedoms are as critically essential to gay individuals as they are to heterosexual individuals.  Indeed, when the general principles of individual rights are not respected by government, it is various small minorities who usually suffer the most.  Historically, this has been clearly the case for homosexual and bisexual individuals.

Gay marriage is most often sold as a matter of equality, but that is a weak argument.  The response of some conservatives and other religious people is that everyone has the equal opportunity to marry someone of the opposite sex, so equality is maintained.  Of course, the freedom to enjoy one's own mind and body and to pursue one's own happiness may not be served by the equal opportunity to marry someone of the opposite sex.  In the context of rights, only the even-handed behavior of government is mandated.  Government must not differentiate the availability of equal domestic partnership contracts.  A person of religious belief or otherwise in the private sector, however, need not regard a domestic contract as the equivalent of a requirement of respect for that partnership that he might grant to other partnerships approved by his religion.  The private individual retains all rights to discrimination outside of governmental actions.

But the same-sex marriage advocates seemed rarely to worry about making a fundamental argument based on individual rights.  Too few of them have thought in general principles of the legitimate function of government and its very limited purpose.  Support for same-sex marriage has been based on a popularity contest riding the crest of a recent fad.  The broad and necessary right of a gay individual to choose his own values, who he wants to associate intimately with, who he wants as a domestic partner, and who else he will discriminate against for these purposes, is apparently unknown to him, with few exceptions.  Part of the problem is that most gay people do not think in terms of general good political principles because that would be inconsistent with the fact that most are too closely associated with the Democrat Socialist Party.  It is very difficult to find a valid and strong argument for freedom of conscience and freedom of association from the perspective of a collectivist!  Those arguments derive their strength from individualism and the clear and certain recognition that individuals are complex and highly differentiated.  Every individual has the right to life and the right to pursue his own happiness.  The nature of our lives, of our bodies and minds, and the paths to our happiness are rich in their variety.

I am discussing these fundamental issues of individual freedom pertaining to gay individuals now because of the recent hullabaloo over the Arizona state Senate Bill 1062 which allowed business owners to make association choices based on their religious beliefs.  Now my objection to that bill is that it is defective in limiting the freedom of conscience to that subset of conscience deriving from religious beliefs.  This is a common error in American law.  In reality, the individual has a broad freedom of conscience and it is wrong for government to limit that freedom to only its religious expressions.  I do not believe that when one owns a business, one gives up one's basic freedoms.  If that were so, then every business owner in exercising his right to earn a living and to own property for the purpose of doing so, would be losing other fundamental and necessary rights.  Our rights are broadly owned by each of us and we are rightly and properly deprived of them only when we initiate the use of force against others.

If a businessman is deprived of the right to discriminate against others for some choices or actions they take, can he long expect that he will be allowed to fire an employee who does not perform his job well.  Will he soon be forced to buy goods and services for his business from inept suppliers because a supplier might be a brother-in-law of the governor or represent an industry that makes large campaign contributions?  Must he sell items or services to some people preferred by the government at lower cost than to others?  Will he be allowed to fire an employee or not do business with a supplier who lies to him?  Businessmen have every bit as much need to discriminate among people based on their values as those who are not businessmen. An employee of a business has the right to judge his employer and if he finds him wanting, he is free to leave employment.  The consumer is free to discriminate against a businessman and not buy the goods and services he offers for sale, unless the service falls under ObamaCare, if you go along with one important aberrant claim on how limited our rights are.  In reality, our individual rights are not narrow, as American law tends to mistakenly take them to be, but they are broad, generous, and rich.

Legitimate and good government recognizes this fact.  The presumption of good government is that the freedom of the individual is sovereign and inalienable.  Only extremely rational reasons, agreed upon by most everyone, can be used to limit individual rights.  It does not impose the moral preferences bare majorities or a favored faction on others.  It must allow the individual the freedom to use his own mind and to act upon his own view of reality with only the most necessary limitation that we all have the equal right to do that.  None of us has the right to initiate the use of force to limit the choices and actions of others and we do not gain that right by manipulating a government to do this for us.  The presumption of individual freedom must be very strong in the healthy, individualist society.

Does the gay person refused service by a business suffer a measure of harm?  Yes he does.  He is done an injustice.  But, if the government forces a business owner whose moral beliefs dictate that he should not serve the gay person to serve him, then the business owner has also suffered a harm.  There is no way violating the rights of one person to prevent a harm or an injustice to another can be worked to prevent harm and injustice.  That course of action simply guarantees more harm and more injustice.  We have to expect in life that some people are going to make moral choices others of us will not like.  We cannot treat someone as a slave to be ordered about just because we believe they have done an injustice and that their morality is not as good as ours is.  No, in a free society one simply seeks out other adults who are willing to associate with us.  This is so for much the same fundamental reason that we do not force someone to associate with us for the purposes of sex.  Voluntary consent is critical in a free society.

While the modern Progressive Elitist does not believe freedom of speech and of the press is a broad right anymore and often wishes to limit them based on harm or hurt feelings, these rights are very broad.  It has served us well to enjoy a broad right to speak and write our minds.  It has served our society well to allow people to choose their own values, formulate or adopt their own moral ideas, and to manage their own lives.  While freedom of conscience and freedom of association are not always given the broad protections they should be given, for the most part in the non-business private sector they are tolerated by our government.  They should be equally tolerated in the business sector.  Indeed, they should be given a very committed and strong protection in all of the private sector in America.  If they are, gay individuals will prosper and flourish more certainly than if they are not.

Hope

Strange that so few people understand that hope is contingent upon having the freedom to make your own value choices and make their achievement your personal dream.  Without the dream, there is no hope.  Without the value choice, there is no dream.

Understanding this simple fact makes Obama's idea of big government dictated values a hope-killer.  Hope becomes an illusion, an empty promise, a delusion of the masses when the special interests that control government replace personal value choices by each of us with their enforced value choices.  The way his administration is playing out is making this "hope" phantasm all too apparent.

The Falsely Framed Moral Evaluation of Capitalism

The Washington Post ran a long article on page 1 of its Outlook section on Sunday, 17 March 2013 entitled Is Capitalism Moral?  It was written by Steven Pearlstein, a Post columnist.  He claims that much of the reason for the stalemate in Washington is because the Republicans and Democrats have not really faced up to the question of whether Capitalism is moral or not.  He says that

The grand experiment with communism has been thoroughly discredited, a billion people have been lifted from poverty through free-market competition, and even European socialists have given up on state ownership and the nanny state.  Here at home, large swaths of the economy have been deregulated, and tax rates have been cut.  A good portion of what is left of government has been outsourced, while even education is moving toward school choice.  In embracing welfare reform, Americans have acknowledged that numerous programs meant to lift up the poor instead trapped them in permanent dependency and poverty.

This introduction to the Pearlstein article seems to bow to the power of Capitalism to do good, though it is always jarring to read that deregulation characterizes our government's efforts when about 80,000 pages of new regulations are added each year and the EPA is carrying out the Obama threat to kill the coal industry and coal-fired electric plants and to give us skyrocketing European gasoline prices.  The outsourced government continues to grow its many tentacles and keeps developing new tentacles such as those that sprout from the recent and still developing ObamaCare and Dodd-Frank "Too Big to Fail" acts.

Pearlstein notes that books by Arthur Brooks, of the American Enterprise Institute, and John Allison, of the Cato Institute, make a moral case for "even-freer-market capitalism than we have now."  The books he is referring obliquely to are:

Arthur C. Brooks, The Road to Freedom: How to Win the Fight for Free Enterprise, Basic Books, 2012.

John A. Allison, The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy's Only Hope, McGraw Hill, 2012.

Pearlstein characterizes their argument for capitalism as

As they see it, regulation is an infringement of individual liberty, while income redistribution, in the form of a progressive tax-and-transfer system, is nothing more than thievery committed against the most talented and productive by those who are not.  Regulation and redistribution, they contend, also undermine the vital incentives that drive capitalism, which throughout history has been the best system for freeing large masses of human beings from lives of misery and poverty.  What could be more moral, they ask, than that?

 Pearlstein even credits John Locke, Adam Smith, and Ludwig von Mises for their moral defenses of capitalism, before noting that the novels and writings of Ayn Rand really caused the idea of the morality of Capitalism to catch hold among "right-leaning intellectuals and politicians."

The remainder of this article mostly examines whether Capitalism is moral from Pearlstein's and frankly that of most people's perspective.  That perspective is implicit in the question he asks at the end of the article in his very last sentence:

If our moral obligation is to provide everyone with a reasonable shot at economic success, within a market system that, by its nature, thrives on unequal outcomes, then we ought to ask not just whether government is doing too much or too little, but whether it is doing the right things.

Basically, Pearlstein and most people believe that Capitalism is moral only if it is fair.  The bulk of the article is devoted to his belief that it is not really fair and loaded with implications that it must be controlled by government to see to it that it is as fair as possible.

One problem with judging the morality of Capitalism on the basis of whether it is fair or not is that even a toddler soon has a concept of fairness which need not have firm roots at all in a deep moral understanding.  It is extraordinarily common for the child to complain that it is not fair that her older brother always wins when they play Monopoly.  It is common that the younger sibling claims it is unfair that the older sibling can stay out to midnight on a Friday night with his friends or maybe even until 3 AM.  For many people, that concept of fairness evolves very little as they become adults.

The Founding Fathers and the Framers of the Constitution understood that what government should do was not governed by fairness.  They understood that the legitimate role of government was, as stated in the Declaration of Independence, the protection of our equal, inalienable individual rights to life, liberty, and the pursuit of happiness.  The role of government was simply to see that we were not forced by government or by others to give up making our own choices of values and prevented from taking action to try to acquire and keep our values, so long as we did not initiate the use of force against others.  Government had no role in deciding what values we should seek and no role in the distribution of those values among the people.

Those, who like Pearlstein, claim that the central government role is to ensure fairness in the distribution of values among the people must push government to decide what values really matter and how they will be distributed.  Commonly, they then think almost entirely in terms of income and worldly goods as the values of importance and those to be redistributed.  To concede that government has such a fairness role, is to concede that the Nanny State is proper.  It is to concede that the less developed person is right to constantly challenge the more developed person, or at least that those who have fewer worldly goods are right to challenge the government to redistribute those goods more in their favor or even totally unto equality in the distribution.

Of course a more developed concept of fairness might recognize that someone who chooses to watch NBC and CBS every evening for hours rather than working 12 or 14 hours in a day does not have a moral claim on the earnings or wealth of a person who did make the choice to work the longer hours.  After all, the TV watcher does not trade his relaxation and laughter in front of the TV in any meaningful way for the proceeds of the many additional hours worked by someone making a very different value choice.  Yet, most Americans exercise their limited sense of fairness to think that the TV watcher deserves to have a significant part, maybe even more than half, of what the hard worker made in his additional hours of work.

To a large degree, most people think fairness is about equality.  Yet, people are too complex and too highly differentiated for them to be equal.  They may have equal rights, but that is about the only way in which people are equal.  The Founding Fathers understood this, but they feared democracy largely because they understood that most people are governed too much by a desire for a simple-minded fairness, which drove them to desire equality and the redistribution of money and goods.  Yet, it cannot be fair to deprive the person who has acquired income and goods without the use of force of what he has acquired.  No system based on a forced redistribution can be fair.  Why set out in the name of fairness to redistribute income and goods when this necessarily means that one is unfairly doing harm to many and that fairness cannot be achieved?  Even Pearlstein allows that it is hard to know when to stop the process of redistribution.

The morality of Capitalism has the same basis as the morality of the entire private sector, only some of whose activities are devoted to the values of income and worldly goods.  There is no role for government in choosing who my friends will be and how many hours I am to spend with each of them for our mutual enjoyment.  The government that tried to redistribute my friendship time and effort would clearly be recognized as a tyranny.  There is no role for government in determining how fair it is that a woman of good character may or may not be loved by the man she wants to love her.  There is no role for government in deciding who we may choose for our domestic partner or partners, though that issue is still hotly debated with respect to same-sex marriage.  Many of the greatest values in each of our lives are properly seen by most of us as beyond the sphere of government rules for distribution.

Yet, for some childish and foolish reason, most adults do think that government has a role in re-distributing income and wealth.  I believe this is in large part because they ignore the fact that this is really a theft of the time an individual put into acquiring that income and wealth, including the time he may have spent preparing himself for earning it, as in his studies, his thinking about markets over many years, and his careful attention to details in his work.  Many seem to think that they have not subjected someone to slavery just because they are taking by force only half of every added dollar he earns rather than all of it.  In fact, a paper by Peter Diamond (MIT) and Emmanuel Saez (UC Berkeley) is making its rounds among the Progressive Elitists now that claims that the correct marginal tax on high income people is 73%.  I frankly cannot understand how they so deceive themselves that taking half or 73% of every additional hour worked from someone is not the moral equivalent of slavery.

Most slave owners in the Antebellum South allowed their slaves to spend a few hours working in their own gardens to grow some of their own food.  Did this mean that they were really not slaves because the slaveholder did not have them in his cotton or rice fields 100% of the time?  The Progressive Elitist might argue that they only make slaves of those who choose to be very productive in the marketplace, so if you participate in the market you are choosing to be a slave.  Of course they fear to be that honest, but they do say that if you make a lot of money you are choosing to pay the progressive taxes.

Yet, the person who spends time on other values, such as watching TV, going fishing, running, or spending time with friends or family is not taxed in any way.  That is not fair.  If it is right to progressively tax the person who chooses to spend time making money, then it is unfair to give the person who could have made money, but did not, a tax deduction for the money he failed to make.  Fairness demands that he be taxed for the value of his time that he spent in a different choice of values.  Yet, government knows that people will not stand for it to discourage other values such as time with family with a tax, so it acts in a manifestly unfair way on those who spend productive time making money through voluntary trades with others.  It does this even though it is generally recognized, even by Pearlstein, that such economic activity has done wonders in improving the standard of living for almost everyone, even the inveterate TV watcher.

Pearlstein's characterization of the market as much more free than it is provides him with some of his arguments that free markets do not work so well.  He also treats the arguments of people like Allison  unfairly.  For instance, he says

The conservative case against regulation, for example, is premised on the proposition that everything that has gone wrong with the markets is the government's fault.

 Well no, free market advocates realize that many businesses will fail in a perfectly free market and that there will be a business cycle in a free market with recessions from time to time.  They just object to the fact that government action in the market has the consequence of causing more business failures, more frequent and deeper recessions, and in the present case a recession that seems to have no foreseeable end.

Pearlstein claims that free market advocates say that

Because pursuit of self-interest is the essential ingredient in a market system, it somehow follows that individuals and firms are free to act as greedily and selfishly as they can within the law, absolved from any moral obligations.

I do not think there are many who believe they are "absolved from any moral obligations" in their actions.  Pearlstein in particular seems to imply that Allison holds this view.  I have not read his book, but the way Pearlstein describes Allison's viewpoint leaves quite a large leap to the conclusion that Pearlstein seems to impose on Allison's viewpoint.  I surely do not believe that a businessman is only morally obliged to obey the law and that he is morally allowed to otherwise act immorally.  Indeed, that is a clearly immoral viewpoint, which an advocate of Capitalism on moral grounds is most unlikely to make.  But Allison correctly notes that when government uses a heavy hand in making moral decisions in the marketplace, the many laws that claim to define moral actions and value choices in the marketplace will naturally become a substitute morality for many people.  If Pearlstein wants everyone in the market to act morally, then he should remove the government from the market as much as possible so that people will understand that they must act morally in the market, rather than just obeying the laws.  Government morality acts as bad money does to drive good money out of the market.

Pearlstein repeats the liberal argument that economic success often is due to dumb luck.  Some have the good fortune to be born with the right genes and the right parents, to grow up in a good community, to be better educated, to be better mentored, and to be at the right place at the right time.   They argue that the market should reward virtue, not dumb luck.

Well OK, we like to see virtue rewarded.  But, in a system in which market success means that everyone involved in a voluntary transaction has entered into it because he believes he is better off for having participated in it, how is anyone hurt if someone in the transaction was lucky?  Everyone still benefited.  We all want the freedom to be lucky, do we not?  We may be lucky in a business transaction one day also.  Or, maybe we were lucky enough to meet the love of our lives 40 years ago.  Apparently liberals believe that luck should be re-distributed also.  So, why is it only luck in financial terms to be redistributed?  Did I not realize a greater value in having the luck to meet Anna than someone else has had who is unhappily married for the third time?  As in the marketplace, virtues and luck both play roles in our love lives.  Luck is not something to be redistributed and rationed among us.  Our luck and misfortunes are generally properly beyond the reach of government.  Yes, we may well choose to recognize that some people have suffered more misfortune in life than others in our private charity work or contributions, but this is not a proper function of government.  Rightly, there is no grant of power for the purpose in the Constitution.

Pearlstein continues to argue against the perceived fairness of the marketplace.  He says that 20 years ago wage and salary earners reliably captured about 75% of the national income, with the rest going to capital providers.  More recently, labor has only received about 67%.  I expect there are reasons for such a shift that make sense.  One is that there is a decrease in union labor in the private sector.  Another is that there is an increase in the importance of knowledge and professionalism and both are more and more often tied to capital and the founders of businesses.  Still another is that complex law and regulation has insulated very large companies from upcoming competition.  Another is the huge influxes of taxpayer money to companies such as Goldman Sachs, CitiBank, Bank of America, GE, GM, Lockheed Martin, Solyndra, and A123 Systems in recent years.  Corporate welfare seems to be a staple of Progressive Elitist government even as it pretends it is not.

Pearlstein claims that 50 years ago, the typical corporate executive earned less than 50 times the pay of the average front-line worker.  He says the ratio is now 350 to 1.  He implicitly believes this is a statement that morality is defied here.  I expect he is comparing the few large corporations of 50 years ago in a much smaller US economy with today's corporations acting in a much larger US economy and in a much larger world economy.  If he chose to compare the mid-sized companies and large small businesses today with similar sized businesses by income of 50 years ago, the ratios would be much more similar.  That is, compare the ratio in a $100 million income company today with a $100 million income company of 50 years ago and the ratio will be much less dissimilar.  Neither 200 years ago, 100, 50, or last year did most companies even have a 50 to 1 ratio.  That ratio is a phenomena of size.

Pearlstein laments the fact that inequality of income in the market threatens to overwhelm the ability of a progressive tax-and-transfer system to keep up with it.  So yes, Pearlstein simply assumes that income equality is a requirement of a moral economic system, despite the fact that almost no one advocates equality in other aspects of our private lives.  His, and that of most Progressive Elitists, is a very childish moral code.  It is manifestly biased in the application of equality and it absolutely refuses to recognize that individuals are highly complex and differentiated.  It refuses to recognize that as a result, we make very different value choices and bring very different abilities to bear on acquiring the values we choose.  It just assumes that using force to redistribute income and wealth is good.  It just assumes that largely enslaving those who make good money in the voluntary and mutually beneficial marketplace is justified as for the greater good.  It also assumes that it is right and proper to redistribute luck, but only luck operating in the market.  What an absolutely weird, yet common, idea of morality this is!

A society with a very limited government whose only function is to protect our equal, sovereign individual rights to life, liberty, property, the ownership of one's own body, mind, and labor, and the pursuit of personal happiness is the only society in which people are free to be moral.  They are then free to be moral in the entire private sector of their activities, including that subset of economic activities in the market.  Capitalism is moral for the same reason that other human action dedicated to the free choice of values and the freedom to pursue them is moral.  Capitalism is moral because it allows these choices of value by each individual in the marketplace.  It is moral as an exercise in our individual right to freedom of association to cooperate with others as we choose for financial reward, just as in other aspects of our lives we are free to associate with others as friends and lovers and family.  Our labor belongs to each of us by right and we trade it with others in some cases for monetary gain and in other cases as part of a family to instruct a child or to do the dishes and laundry.  Government has no moral obligation to equalize any of the rewards that we get from exercising our freedom of association or the use of our time.  Indeed, if it tries to do so, it has violated our individual rights and done an evil deed.

Socialized Medicine and a Doctor's Moral Obligation

A friend asked this question:

One of the arguments I have heard from proponents of socialized medicine is that it is immoral to stand by while someone dies, and therefore society is obligated to help when someone is facing a life threatening illness but can't afford the treatment. Although there is much to refute in this type of statement, I am wondering about the more difficult refutation. As a personal decision of each doctor, is it rational to make the decision to deny treatment based upon the fact of a patient's inability to pay?

The moral argument against socialized medicine, or ObamaCare in particular, is based on our equal, sovereign individual rights. It is not dependent upon whether a particular doctor decides that he must act to save a life independent of remuneration or not. It is an important moral principle that he is free to either be benevolent or not be benevolent. Now, I do believe benevolence is an important virtue, but benevolence is virtuous in the context that the person helped has value to the doctor.  Benevolence is not about self-sacrifice, since that would hardly be benevolent to oneself. 

If the person has an entitlement mentality, then the doctor generally has no rational reason to help that person without remuneration. It is perfectly moral for him to walk away. In the context of a society of largely productive and benevolent people, a doctor may be rationally inclined to provide help to those who cannot afford to pay for their care, especially if they have become ill or hurt through no great fault of their own. But, even that depends on context, such as the expense the doctor will have in helping him and whether his helping the unfortunate person means that he is not able to help someone else who can pay. He is not obliged to save the poor man, while letting the financially prepared man die! If he gives too much of his time to helping the poor, he may not be able to generate enough income to buy the medical equipment that will enable him to save many lives in the future or he may simply go out of business. The doctor must make difficult moral decisions based on a very complex context. Some may appear to make a greater effort in benevolent acts than others, but still may not be saving the most lives possible.

Rational men are going to balance these difficult decisions differently and we should be careful in our appraisals of their morality.  A doctor may be willing to give his services free in a given case, but he may be unable to convince a nurse and other assistants to give their time free.  Or the hospital may be unwilling to make an operating room available.  Now the proponent of socialized medicine will want to use force to make all of these needed experts and facilities available, but this is a violation of everyone's rights and cannot be tolerated in a civilized society.

My grandfather was a physician in the Great Depression. He was a surgeon who operated in the Mayo Clinic and all of the hospitals of Minneapolis and St. Paul. He did a very unusual number of operations on people who could not pay for them. But, people were different back then. A farmer might not have any money, but he would give Harry Christianson a chicken, which to the farmer was his fortune. Then very likely for 20 years after, when he could, he would stop by grandpa's home and leave a bag of potatoes or a bushel of corn. This was very welcome when rationing was going on in WWII for instance. Harry and his wife Bess always had free food and there was so much that Bess and her daughter Betty organized ways to get it into the hands of those in need in the city. One man decided he would paint grandpa's house in payment for an operation, but while he was painting the upper part of the exterior, union thugs knocked him off the ladder and shattered his leg. The man was not a union painter. He was just a farmer who wanted to pay a debt he believed he had. Harry and Bess put him up in one of their rooms until he was healed. The union later burned down their home because they did this.

So this is another important issue of context. There is value in helping people who put value on the help they receive. There is value in helping people who fundamentally believe that one should trade values for value.

There is little value in helping the ungrateful, however. Any deserving person, any person whose welfare one has reason to care about, will recognize the value they have received and will not presume that they have the rights of a master, while the doctor who worked so hard to develop his healing skills and knowledge is treated as his slave.  A doctor or any other service provider has the right to choose his own values and to pursue his own happiness in terms of his values.

The need of a poor person does not deprive him of this equal individual right to pursue his happiness.  Every man, whether poor or rich, whether a professional or a low-skilled worker, has this magnificent right to pursue his happiness.  No one has the right to dictate the values or the moral code which will define what his happiness will be.  All that can be required of another is that they are not allowed to initiate the use of force as a means to pursue their happiness.

This is very adequate for each of us when we exercise our freedoms and act within the private sector of our society.  In the private sector we have a wealth of potential opportunities to cooperate with others whose values are sufficiently similar to ours or in some way complementary so that each of us can pursue our goals defined by our individually chosen values.  When our values are not approved of by others, they are free to choose not to associate with us.  This is the realm of the voluntary and is relished by those who want rich choices and who abhor being forced to bend to the will of others.

In contrast to this natural realm of freedom, we have the realm of the government.  The principal property of government is its monopoly on the use of force in a society.  Because a wise society seeks to minimize the use of force and seeks to maximize individual freedom of choice and association with others, such a society has a minimal government.  Such a limited and legitimate government uses force only for the purpose of protecting the equal, sovereign rights of the individual to life, liberty, and the pursuit of happiness.

When government attempts to do more, it must necessarily do violence to the rights of the individual as it imposes values and moral codes upon the People.  With this loss of freedom to choose one's values, one loses many of the freedoms to use one's own mind.  One loses the choice of one's own goals.  With the loss of one's own goals, one loses all hope.  It is no accident that unfree societies become depressed societies with large increases in drug use, excessive alcohol use, and increased numbers of suicides.  Big governments do much harm to individuals and are notable in the brutally of their violence against their people should any insist on exercising their sovereign rights.  We see the party of biggest government verging close to a desire to let loose the hounds of hell upon the Tea Party people for just this reason.  Over and over they have tried to label the Tea Party people who simply want to preserve some of their individual rights as terrorists and subversives.  This makes the brutal nature of unlimited government all the more clear in our time.

The Individual Capacity for Joy and Pleasure

A recurring theme for me is the importance, the complexity, and the individuality of the individual human being.  One of the more important ways individuals differentiate themselves from one another is in their capacity to experience joy and pleasure.  This capacity is different because we differ in many ways from one another.  Among these ways are:

• Babies in their first days differ in their interest in the world.
• Babies in their first days also respond emotionally to those things in the world in which they have taken an interest in different ways.  Our brains react differently to the chemicals produced in varying quantities as we experience pleasures, pain, fear, or anticipation.
• The capacities of our senses differ.  Differences in our nervous system are very great.
• Our intelligences are inherently different in many ways, with complex variations in how good it is in various modes of operation.
• We develop our rational abilities further in many different ways.
• Our emotional response to gaining understanding, solving problems, and other analytical thinking processes differs greatly.  Our minds are our greatest pleasure center.
• To pursue our happiness, we must first successfully identify our values so that we can direct our actions rationally.
• We apply our rational abilities to understanding, controlling, and reacting to our emotions in very different ways.  Some see their emotions as uncontrollable threats, others as in-control guides and pleasure enhancers.
• To understand and control our emotions, we must be willing to take the risks of exploring our pleasures and developing them.  We must work to automate them in controlled ways so we can trust, rather than fear, them.  As we become able to trust them, our pleasure increases.
• We differ greatly in the degree to which we allow the ideas of others to assist or harm our capacity for joy and pleasure.  Some people feel guilty for experiencing pleasure, since they think pleasure is reserved for heaven.  Others feel egalitarian guilt if they have more pleasure than others do.  Others experience greater joy due to the richness added to their lives by the ideas of others.
• Our capacity for joy and pleasure is increased when we find others with whom we can trade and share mutually held values, joys, and pleasures.
• Suitable others for such pleasure trading and sharing are usually matches in intelligence, rationality, creativity, shared values, and have similar capacities for joy and pleasure.  When one is an exceptionally good person, our suitable partners are the people one must love.
• One of the most important capacities for pleasure is through the experience of sex and sexual attraction.  We again differ greatly in our capability to experience pleasure in sex due to the role of the mind, our nervous systems, the differences of our sex organs and tissues, the quality of our partners, our willingness to explore and develop our enjoyment of sex, and our ability to deny the many guilts and taboos created by societies and others to cripple mankind's ability to enjoy sex.

Many people experience a limited capacity for joy and pleasure because they have not thought about these many factors which affect that capacity.  The rational man manages his life so that he is likely to experience great joy and pleasure as a constant in his life.  The effort of living is hardly worth it if it is not to be rewarded with a great measure of joy and pleasure.  Indeed, they are the very fuel for that effort.  Do not shortchange your effort in understanding how to enhance your capacity for joy and pleasure.  It takes a never-ceasing effort to refill your tank to keep the engine of life performing, especially if you want to achieve top performance.

Embedding Government Deeply into Your Private Life

Obamacare will embed the government deeply into our private lives.

The HR 3200 Health Care bill which appears to be the core plan under discussion in the Democrat Congress will cover Marriage and Family therapy and Mental Health Services. It will also provide Nurse Home Visit Services to improve maternal and child health and pregnancy outcomes and to increase birth intervals between pregnancies. The Nurse Home Visit Service will evaluate economic self-sufficiency, employment advancement, and child readiness for school. The government will also require "qualified" health insurance plans to cover State Family Planning Services. The government will also implement a Home Visitation Program for families with young children or expecting a child. This program will enter your home and tell you how to be a "good" parent and how to raise your child.

So, the national medical records to be kept on each of us will include our complete financial information, all information about any marriage or family issues from therapy sessions including all accusations of insufficient love that many a teenager can imagine, all discussions relating to any mental health issue ever faced, all the observations of our home and family life made by the Nurse Home Visit Service and the Home Visitation Service, and anything discussed with the State Family Planning Services.

It seems clear that the intention is that the Nurse Home Visit Service and the State Family Planning Service will be providing information on birth control and abortions. Now, I am not opposed to birth control in the least and I definitely believe it to be within a woman's right to decide to have an abortion. But, there are many Americans who oppose both and it is wrong to set up a system which forces them to subsidize such activities, which is exactly what the inclusion of these activities will do. This is a violation of freedom of conscience and of freedom of religion.

The Nanny state has long wanted to be involved in every personal decision that every American makes, especially if that American is not a graduate of one of America's finest universities. Those who did graduate from the finest universities are the elite and it is their job to help the poor uneducated, bewildered, redneck Americans live their personal lives more wisely. Of course, these elites do not really know you and they do not know much about your life experience, your family, your friends, and your actual knowledge and values, but this will never stop them from the presumptuous belief that they can manage your life better than you can. They also cannot fix their own car problems, solder their own pipes, drive a nail straight, or even identify a soybean plant, let alone grow one. This will give them no pause. So just think about how much more deeply they can reach into your life and how much easier it will be for them to micromanage your life when they have all of these records at their disposal. Why, it is the dream of the elitists come true.

If you think you are walking on eggshells now as a parent raising your children, just imagine how much worse things will be when the elitists can point at each and every financial misstep, any marital problem, any teenage child's fit of imagined insufficient love and attention, any comment that you did not feel ready to raise children or did not want children at some time of your life, or any bout of depression you may have once suffered through. While I do not know that it was mentioned in the bill, it seems almost inevitable that such information is also likely to be shared with the public schools to which your children are going as well.

Frankly, there is nothing in the history of governments generally and nothing in the history of the U.S. government in particular, that gives me any confidence that such a huge role in our lives can be handled by the government with even the most minimal competency. Many people do not live their lives without serious errors, but at least most people are paying some attention to their lives most of the time. The government, even with all of these records on us, is going to swoop down on us from time to time and impose judgments on each of us, despite the fact that most of the time, they are not paying any attention to our lives. We can also be sure that government will not share our values, so we will be judged by such values as the government bureaucrat exercising the judgment may have, not by our values. Once government starts making judgments of our lives, it will find ways to impose its values on us by forcing us to live our lives in accordance with its values.

This is not the way for an American to live. This will impede our exercise of our right to life, liberty, and the pursuit of happiness for sure.

Egalitarianism vs. Flourishing

One of the great differences between socialism and capitalism is based on the relative values that the socialist and the capitalist put on egalitarianism and flourishing. The socialist is greatly offended by differences in income and wealth among people. He would rather have a system in which the lower quintile in income of workers had, say, $15,000 income per year and the upper quintile had $25,000 per year income, than one in which the lower quintile of workers had an income of $25,000 per year and the upper quintile of workers had an income of $80,000 per year. In his preferred system the upper quintile makes only $10,000 per year more income and it is only two-thirds greater. In the latter case, the difference in income is $55,000 per year and the the upper quintile is making 3.2 times as much per year. The capitalist is very happy with this case with the greater divergence of income. Why?

The result of the capitalist system proposed here has an upper quintile making 3.2 times as much as they would make in the socialists preferred system. This group is certainly better off. The lower income quintile in the capitalist system is making 1.67 times as much as in the socialist system. Of course, the capitalist system has not rewarded the lower quintile as richly as it did the upper quintile, but it sure did make them 1.67 times better off than did the socialist system.

Yet, many, many people prefer the above socialist system outcome to the capitalist system outcome. Why? One can only see this as the result of an overweening envy and/or an equally overweening guilt at being successful in generating income. Both seem to apply in various combinations to socialists. But these same socialists almost always pretend to actually care about whether the lower quintile will flourish in their system. It is some very twisted notion of caring in which you would condemn the poorest quintile to only 60% of the income they might readily have in the capitalist system. Rather than see the lowest quintile in income actually have more means to buy homes or rent decent apartments, have a car of their own, eat well, be able to reasonably entertain themselves, educate themselves, and wear decent clothes, the socialist wishes to indulge his feelings of envy and guilt. Rather than respect the wealthier quintile for its ability to produce goods and services in high demand by others, they choose to hate them. When they are of that highest group, it is often guilt which motivates them to despise the capitalist system and to hate themselves.

The capitalist proponent seeks the means to allow each individual to maximize his own interest without the use of force, but only by means of arranging free trades for values of mutual interest to the trading parties. This allows each individual to decide for himself what he wants and how he wants to go about attaining it. In this system, it has been shown that men are quite effective in acquiring the values they have chosen. In the socialist system, a huge fraction of the people must be thwarted in their pursuit of their values, so that the differences in the degree to which men achieve those values are minimized. This is a very achievable goal, but it always comes with a very high price tag.

The capitalist system does not just allow some people to maximize the amount of money they make. It allows them and it encourages them to maximize their use of energy and their use of their minds. It allows men to be creative and to offer others the products of their creativity. When Henry Ford built the inexpensive Model T, he not only made himself rich, but he made cars that very many people could afford available to them. He was also able to pay his factory workers unheard of high wages. Who was hurt by the great wealth that Ford acquired? Neither the new car owners nor his factory workers were hurt in the least. In fact, they clearly benefited greatly.

With many desirable products being produced by men becoming wealthy in the process, the population has a rich choice of goods to buy. They buy those that they think will make their lives better and richer. The employees who make the various products also have many choices as to where they will work, for whom they will work, and what kind of work they will do. They can go to the factory with the best pay, which will tend to be the one with the greatest need for workers or the one which can put them to the most productive use. They may wish to stay in a given area of the country where they have family and the more factories there to choose from, the better off they are likely to be in choosing work they like or in negotiating for pay. When the socialist is allowed to put roadblocks in the way of the entrepreneur who is becoming wealthy, they hurt everyone. They hurt those who use or would use the products and services of the in-demand entrepreneur and they hurt the employees of the entrepreneur. They also hurt the stockholders and investors, which even in today's mixed economy is more than half of all workers.

All of this is inescapable and it is also a very obvious truth. Yet, in the name of envy and guilt, many people turn a blind eye to this knowledge. Envy and guilt create blindness and it is most debilitating. It is grotesque when this denial of reality and rejection of the good for almost everyone becomes the justification for the brutal use of force to keep men from making voluntary trades in their mutual interest.

Obama Attacks Selfishness Again and Again

This guy is really committed to attacking people for being selfish. He attacks them if they use their own mind and work long, hard hours to create income and wealth by providing goods and services that other people want and voluntarily trade for. Frankly, to do so is to attack the mind and body of every individual human being. He believes it is perfectly righteous to threaten each of us with brutal force to deprive us of the value of the hours of our lives and to dictate to us what our values will be, or else, he will soon be able to send hordes of government-hired goons to forcefully take our property and take our income. All in the name of his supposition that if we do not allow this to happen, we are the damned selfish.

Well, I am selfish and proud that I am worthy of living a fine life. I am competent and fully able to manage my own life, while directing the thought and action needed to identify my values and to achieve them. I am proudly selfish and have a sovereign right to live for my values, not Obama's values and not for some amorphous goo of the values of those who voted for him. We have a choice: to be selfish or to be slaves.

Depression Lunacy

There is a great deal of talk in the media, broadcast and print, that we are heading into a depression, or at least a significant recession. We had a one-month drop in manufacturing followed by a rise the next month and we had a brief leap in unemployment, which has since leveled out. Housing starts are certainly down and energy and food costs are certainly up. Despite all of this, the economy has not been knocked to the ground. It seems determined to chug on. Many companies just announced first quarter earnings which beat expectations. Consequently, stocks went up last week. But, the Gloom and Doomers have great staying power, especially with a Presidential election coming up. So, let's see what economist Alan Reynolds has to say about the state of the economy.

On 11 April, before most companies announced their first quarter earnings, Reynolds had an article appear in the New York Post. He notes that the gloomy economic news is of a credit crisis or a financial crisis. He points out that since WWII, no U.S. financial crisis has become an economic disaster. The S&L crisis of 1986-1995 was the worst financial crisis since WWII, but the economy grew by an average 2.9% a year in that time. There was a recession in that time lasting 8 months and beginning with the invasion of Kuwait by Iraq when oil prices jumped 113%. By then, the S&L problems were healing.

So, what is going on now? The LA Times asked on 20 March if another Great Depression was just over the horizon. On 6 April, the NY Times claimed that the "focal point for the stock market's difficulties" is that "banks have been reluctant to lend money to one another, or to anyone else." Reynolds points out that this is nonsense since the six-month London Interbank Offered Rate (LIBOR) would not have fallen from 5.3% to 2.6% in the last year if this were so. Bank loans to "anyone else" have increased by 8% according to Federal Reserve Board data since last August. As a further anecdotal measure, numerous companies are calling me daily eager to loan my laboratory money to buy equipment!

So, where is the difficulty? Reynolds says, "It is in selling or valuing exotic securities." The IMF, the Washington Post reports, says the crisis will cost nearly $1 trillion. Well, that estimate was for the entire world, not the U.S. This is the accounting loss of 4.1% on all sorts of loans and securities. The IMF estimates losses of $115 billion on mortgages alone. But, these accounting losses are in many cases only temporary. In many cases the future cash flow produced by the mortgages will be much higher than implied by the accounting loss declared. Standard and Poors says these write-down losses may be as much as $285 million. Well, in comparison, the S&L losses were 3% of GDP, which would be $450 billion now! Reynolds notes that many of these potential losses will be to foreign banks now, rather than U.S. banks or S&Ls as they were in the S&L crisis.

The villain socialist Paul Krugman (remember the guy of a few posts ago who did not like BB&T giving money to universities to teach Ayn Rand's philosophy) told Fortune that we should expect $6 or 7 trillion in capital losses in housing. Reynolds notes that the Federal Reserve estimated the value of household real estate was $22.5 trillion in the 4th quarter of 2007. A 30% fall in house prices would generate a $6.8 trillion loss! A 30% decrease in value across the nation is unlikely. Furthermore, Reynolds points out that this household real estate is not just single family homes, but it is actually all commercial, farm, and rental property as well owned by households and nonprofit institutions!

Further, the often quoted S&P Case-Shiller index of house prices only covers single-family homes in 20 metropolitan areas. The extra-expensive LA, San Francisco, and San Diego areas are weighted heavily at more than 25% of the total loss of 10.7% for home values in this index. Data for the whole country show that single-family homes lost 3% in the year ending in January. Between the 4th quarters of 2006 and 2007, home values rose an average of 3.8% in 29 states not appearing in the S&P Case-Shiller index. Two states not included in the S&P index actually did see home values decrease, but it is clear that the home value losses are largely localized to metropolitan areas heavily overweighted in the S&P index.

Others have claimed similarities to the 2000-2002 tech-stock collapse. But, Reynolds notes that in 1999 to 2000, oil prices also nearly tripled and in late 2000, the Fed increased the fed-funds rate to 6.5% with industrial production falling. Then came 9/11. So, there were more shocks to the economy than just the tech-stock collapse.

Actually, the S&L and tech-stock crises were quite mild recessions. They were brought on by worse economic conditions than we have now, so it is insane to be drawing analogies to the Great Depression. It is a common practice for socialists and some contrarians to tend to exaggerate the problems of the U.S. market. The socialists do it to create an excuse to have more government controls put in place and to hit higher income taxpayers with higher taxes. The contrarians often do it because they underestimate the resilience and resourcefulness of American producers and investors. Others do it because a frightened public will pay more money for investment advice. The media does it because frightened people watch and read the news more. As a result, you have to carefully seek out those who know what they are talking about, like Alan Reynolds.

Krugman Criticizes Teaching of Ayn Rand

Paul Krugman referred to an article about BB&T Bank giving grants to colleges if they would offer the study of Ayn Rand's novel Atlas Shrugged in college classes in his New York Times column Conscience of a Liberal. I made this comment:

Ayn Rand's work and Atlas Shrugged in particular offer students a very different approach to thinking about ethical and political ideas from those they are otherwise exposed to in most universities. I have found the usual collection of favored ethical and political ideas at universities to be simple-minded, weak-kneed, uninspiring, shackling group-think, and laden with childish envy of those who have more material goods. Ayn Rand offers a viewpoint that recognizes the complexity and uniqueness of the individual, enables the individual to claim the right to live his life and pursue his happiness, allows him the self-worth that in turn allows one to perceive and value the worth of others, and encourages everyone to make the most of their rational faculty to pursue productive and creative work and thought. This is a very good philosophy for living life.

The negative comments above have frequently indicated a clear misconception of her ideas, where enough information was given to make such a judgment. Read her works and think hard about what she has to say and some will be able to understand her philosophy. It tends to appeal much more to reality-oriented people than to academics whose theories are so readily disassociated from the real world. This is why it is more popular with businessmen and engineers as a group than with the academics. They cannot afford the luxury of ignoring reality. Ask yourself if the Marxism and socialism generally so popular among academics has proven successful in the real world. Ask yourselves if self-loathing, racial group-think, the rejection of almost all ethical values, class warfare, and the denigration of the values expressed in the Declaration of Independence and in the Constitution are representative of a healthy world view. When Capitalism and limited government are rejected, what are they replaced with? They are replaced with government wielded force. Individuality is given little accommodation and our individual goals and values are given up to the lowest common denominator goals and values of the democratic majority, so long as that will last.

Materials physicist and small business owner,

Charles R. Anderson, Ph.D.