Roads: The Little Stump Who Couldn’t

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Kristopher Morgan (Special Thanks to Jared Miller for Collaboration), June 15, 2017

For libertarians, roads are a fun mental exercise in examining market relationships and using them as a model to explain how a free society could provide a service that is provided by governments. But for those opposed to libertarianism, roads represent the Ace of Spades. Modern society is entirely dependent upon roads, and if we don’t build and maintain them, the entire economy would collapse. Since governments possess the sole authority to use taxation as a means to fund them, it seems self evident they are best left in government hands. But is that really true? In this article, I wish to open the reader’s mind to alternative possibilities to government funding as well as to put an end to the ‘toll road nightmare’ scenario associated with markets.

There are four basic types of roads: Residential, business, rural, and highway. I will give a brief summary on how each type of road can be provided in a market setting.

Residential roads are probably the most important in our daily lives since without them we cannot get to and from our own homes. In my opinion, the most common way residential roads would be provided is through Business to Business relationships. Land developers would simply make installing a road part of the overall investment when constructing a residential area. The cost of the roads could be included in the price of the houses. This gets us around using a different toll for each street as well as the possibility that a homeowner who has no money for the toll being unable to afford access to their own property. The quality of the road itself would play a role in the overall value of the houses located on them in the same way crime rates and other conditions do, making it part of the overall investment for the buyer as well. Of course there is always the risk a road will fail/collapse and damage utility lines, which is why insuring the road would be in the best interest of the developers. Insurance companies would demand the best possible construction specs before agreeing to accept the risk. The close relationship between utilities and roads also creates an incentive for utility companies themselves to maintain residential roads and include the costs in monthly statements. Since the price of the road would be included in the sale of the house, anyone not paying their share of the road would literally be in default of their mortgage and would be dealt with accordingly.

Business roads are perhaps the most intriguing to debate. I love the assumption that without (government provided) roads, we simply wouldn’t be able to visit the local grocery store. Because we all know that is precisely what entrepreneurs want to do; they want to start a business, spend all their savings on the building, inventory, hiring employees, and then make sure it is completely inaccessible! It’s interesting how hopelessly greedy we assume businessmen are, until we are left to conclude that their greed leads to a net positive. Business roads differ in many ways from residential roads, due to their purpose. The road would have to be higher quality due to the amount of traffic that would be on it. People would come not just from one neighborhood to visit the location, but many. To keep costs down, business chains, especially those which are not in direct competition with each other, would divide the costs of having a road that provides motorists access to each of their businesses. The easiest way to do this would be for all businesses involved to invest an equal amount into a road company to take care of the issue. The cost of the road would be included in the price of some of the products which are sold, and that makes sense from a social justice point of view, as those using the roads most would be the ones paying for them. Toll roads may be tried at first, but if American society has taught us anything, it’s that people like convenience. If toll roads were even tried in business districts, the first cluster of entrepreneurs to network and eliminate them would leave their competition far behind. The fact that the statist attempts to bring up the endless-toll-road scenario says that they understand this as well.

Rural roads are a bit more tricky since we are dealing with fewer people in low traffic areas. But if the traffic is light, the road may not have to be as high quality. For homes built by developers, we can assume there is already a road in place for access as we’ve already seen. But let’s suppose you and five other people decide you’re going to build your houses in a rural area, and you all decide to share the cost of a road by entering into a formal contract. On the surface this poses a serious problem, as any of you could simply choose not to pay, but as we dig a little deeper we see this problem can easily be handled through contract. Part of the agreement could include a penalty for a person refusing to pay their share of the road, for instance a boot on the tire until the payment is made. Enforcing contractual agreements is perfectly within the confines of a political theory based on individual freedom. Sure, someone could claim payments were missed by someone else and penalize them by accident, but we do have receipts and bank statements that can easily solve that problem. By that same token, legal action need not necessarily be taken just because someone fell on hard times and missed a few payments. A clause in the contract could account for such a scenario, but we must also not forget that we can be flexible and compassionate. The contract itself would give those who signed it the ability to take action against someone for not paying; however, that does not mean they have to. Indeed, it is often the case that showing an inability to adapt to special circumstances hurts one’s reputation. Nobody would enter into a contract with a person who was unable to understand a bout of depression after losing a loved one or bad economic conditions causing one to lose their job, etc.

Highways may be the one form of toll road that could survive in a market setting. This is not the same as the endless-toll-road scenario, as the motorist continues on the same road for a matter of hours before paying a toll. The advantage to privatizing highways is if there is a way to get rid of toll roads through other superior business models, people would be free to take on the project. It sounds far fetched to think about having a road that goes across the entire country not funded by tolls or taxation, but what about after we consider all the people who have an incentive for such a product? The tourist industry has an incentive for highways that are toll-free, as tourist sites are spread all over The United States. The US in particular has ocean-front property to the South, West, and East, all of which can be utilized to meet demands for vacation and retirement spots. It is also conceivable that roads connecting tourist locations with other roads across the country could be paid for with revenue made from cottage rentals and other goods provided by the industry. Anyone importing goods from sea that need transported to locations across the country would like to see it done without the use of tolls and could also include the maintenance costs of similar roads in the prices of the goods they sell, or even network with those in the tourist industry and share roads.

The Statist may point out that no matter what, we are all going to pay for the roads, so why bother changing it from government’s use of taxation to market relationships? Well, for starters, it also involves the possibility of democide; “the murder of any person or people by their government, including genocide, politicide and mass murder.” If you refuse to pay your taxes, eventually you will deal with a policeman, and if you disobey and resist a policeman as you would anyone else knocking on your door and shaking you down for money, the escalation of force could get you killed. Unfortunately, most people in society will blame you with phrases like “well, they should have obeyed the law,” or “everyone has to pay taxes,” and that will be the end of it. I can’t imagine that is how we really want to fund anything, or what we honestly think when we demand government pay for some other good.

Secondly, in power relationships, you simply don’t get win/win outcomes. Everywhere the government throws money, whether it’s healthcare, education, or banks (bailouts), we see bubble after bubble and prices inflated and services that are not meeting demand. Corporations benefit very well from receiving taxpayer dollars, at the expense of those who pay. The only situations in which win/win relationships are actually achieved occur when all parties involved are free to choose the conditions in which they will enter the agreement. Statists who, to their credit, are informed about roads and all of the other maintenance costs and variables that affect them, are more than willing to point out the costs involved. While such a person understands roads as they exist today, they don’t understand prices and how they reflect economic relationships. We should not act shocked at the conclusion that an entire industry can inflate the prices of its goods when its business model includes receiving tax dollars. When entrepreneurs have to convince us to buy their products rather than resort to receiving tax dollars, and there is a market based on private property and competition, prices tend to fall. We cannot pretend that the prices we see now are the exact same we would see with a free market. The first rule of making a sale is the consumer has to be able to afford your product.

Third, innovation in roads and daily transportation are massively hindered by the current system. Who’s to say we wouldn’t have developed something better by now if we hadn’t been forced to build our lives and our society around government-mandated infrastructure? In an age where new technology and production methods have revolutionized almost everything, why has road construction and maintenance stayed in the figurative “dark ages?” One of the externalities of suppressing markets in a sector of the economy is the loss of any creative energy that would have naturally flowed into it had it not been for government intervention.

Sorry statists, but we can clearly see that the issue of roads is not the Ace of Spades you thought it was. Everyone in society working together towards a common end through consensual agreements is, and always will be, far superior than a few groups of bureaucrats using law to deliver goods. Understanding this is what makes libertarians more collectivist than any other group in society. The intelligence and foresight of a handful of bureaucrats cannot possibly out-perform the collective intelligence of everyone in society. That is why stumping a libertarian on the issue of roads will never stump our overall position. The basis of our economic theory is founded on the fact that one person, or a small group, cannot possibly possess the knowledge it takes to run an entire economy. To illustrate the point, I will leave the reader with a list of everyone who has an incentive to make sure roads are built and maintained.

Homeowners

Car companies

Food deliverers

Schools

Churches

Gas Stations

Convenience Stores

Video sellers

Hardware Stores

Furniture stores

Fast Food restaurants

Factories

Golf Courses

Pawn shops

Banks

Booksellers

Electronics stores

Sports Teams

News Stations

Hollywood

Charities

Advertising agencies

Anyone who might ever need to go to a hospital

Night clubs

Arcades

Pool halls

Community pools

Anyone who doesn’t want to walk or ride a bike to work

Utility businesses

What really could we as a society accomplish if our creative energies were released to explore new solutions to problems which affect us all? It’s time to think outside of the box!

 

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The McDonald’s Standard: A Guide for Determining The Legitimate Role of Government

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Kristopher Morgan, May 23, 2017

We all have things we would like to see humanity do, whether we want to feed the poor, move towards clean energy, protect endangered species, scientific research, or setting floors on wages.  We all like to believe that passing a law is akin to waving some magic wand that simply makes things better. We get ourselves into trouble when we consider the reality of the situation;  there is no wand.  When we realize passing and enforcing new laws means making criminals out of more and more people, we have to choose responsibly.

Coming to a balanced belief system as to what the proper place of government in society takes an immense amount of study into the social sciences, history, political economy, ethics, philosophy, etc.  This can be extremely time-consuming… fortunately there are shortcuts to answering most questions pertaining to the proper role of government.  I call one of them the ‘McDonald’s Standard.’  The method is very simple: Clarify what action the government is taking and ask yourself “how would I feel if McDonald’s were doing this?”  Here are a few examples to demonstrate how it works.

  1. Taxation.  On one hand, we are threatened with fines and jail time if we do not pay taxes.  On the other hand, those taxes pay for services such as roads.  Let’s imagine that McDonald’s decided to use the same business model.  McDonald’s decides to provide every resident within a 1mi radius with a Big Mac.  McDonald’s then decides that they will collect money from all residents, and those who decline simply get locked in a room on McDonald’s property.  Is food not a vital service?
  2. Welfare programs.  On one hand, they are paid for through taxation, on the other hand poor people benefit from them.  So, let’s imagine McDonald’s decides that they’re going to send their employees in a neighborhood, armed with tasers, guns, and clubs, and they collect money from some residents to give to others (while keeping about 80% for themselves!).  What would we think about McDonald’s?
  3. War.  On one hand, evil do-ers really should be taken out of power.  On the other hand, innocent people die in government wars.  So, let’s imagine a McDonald’s employee tracks a criminal into a Burger King bathroom, right after taking from the BK cashier’s drawer.  The McDonald’s employee then proceeds to blow up the entire Burger King restaurant to get this criminal.  Does this person get to claim all the other people inside the Burger King were simply collateral damage?

Now I know someone out there is going to say something along the lines of: “of course we don’t expect McDonald’s to take on the same role as the government ya dope!  McDonald’s doesn’t have a Constitution, and we don’t elect politicians to operate McDonald’s like we do the government.  We don’t expect these things from them because they’re not the government!”

This line of reason is exactly why I am writing this article.  What we are actually talking about is government legitimacy, so let’s examine the reasons people believe government has it.

1. The government represents the people through voting.  Their job is to carry out the will of the people they represent.

  • False.  All governments operate via law and enforcement thereof.  So what that means is the first thing politicians assume is that they do not have your consent.  If they had your consent, there would be no need to use law enforcement measures.  Also, the idea that some bureaucrat you have never met before can accurately take your conscience and values into account when making decisions… come on…

2. The government is an entity on its own charged with the task of running society.

  • False.  The government is a collection of human beings.  Society is not a machine that needs an operator, but rather a collection of people.  If no human being has the moral right to use force against another, then the government can’t possibly have it.  Morality for McDonald’s doesn’t change if they change their name to McGovernment!

3. The government derived its power to use force from the consent of the people.

  • False.  If nobody has the power to use force against others to begin with, nobody could have possibly given that power to the government.  Giving one’s consent to others to use force against themself is a contradiction in terms.

This list could grow exponentially, but I hope the point is clear.  Governments are nothing more than groups of people, same as any other, whether it’s a business, a family, a charity, a community watch group, etc.  It doesn’t have to be McDonald’s necessarily, but before you support anything any government does, ask yourself “what if someone else in society were doing the same thing? How would that make me feel?”  Because let’s face it:  most of us spent our formative years pledging allegiance to the flag and learning politically correct/tainted history.  By projecting government actions onto parties we feel neutral about, we can overcome these biases.

 

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The Why of Libertarianism

Kristopher Morgan, May 22, 2017

My journey to libertarianism didn’t start until I graduated high school, spent 4 years in the Army, and was on the final year of my BS in Criminal Justice.  When the economy crashed in 2007, I found myself in awe and searching for answers.  It started me on a journey of self-education that focused heavily in areas of political science, philosophy, and economics.  It is a journey that has helped to define who I am and what my values in life really are.  I would not trade any of it for the world; however, what I find most interesting about libertarians is we are very much the same in these respects.

What makes this article necessary is how libertarians are portrayed by the media.  Here are a few article titles to demonstrate:

Libertarians: Rich White Males of the Republican Party

Libertarianism is for white men: the ugly truth about the right’s favorite movement.

Libertarians: The Great White Hope   

Rather than go through every article I can find and refute every false claim about libertarianism, I have decided simply to lay out the basics of what we think.  

Libertarians, in my experience, take two approaches to politics.  The first approach is the economic approach.  This is why so many libertarians offer entrepreneurship as a replacement for government provided services when questioned.  Austrian economics provides the key to understanding basic economics and how economic growth occurs.  An entrepreneur recognizes demand for a product and obtains capital either through savings or investors and implements a business plan to provide the said service.  All very simple, and an accurate way of understanding economics.  When governments interfere with this process, they distort real demand, make certain products no-longer feasible due to taxation and regulations, making less desirable substitutes available in lieu; a fancy way of saying they make society as a whole poorer.  Since governments operate through the power of law, classes of winners and losers are always created, whereas free exchanges benefit all parties involved.

The second approach to politics is a firm belief in justice.  Libertarians recognize that all human beings possess the same basic characteristics: self-ownership, consciousness, and the need for property to survive.  This need to own property in order to survive gives all of us the right to self-defense.  Without property we can’t meet our basic needs for food, water, or shelter; a species without the ability to defend their property is an endangered species, as others throughout the animal kingdom will swoop in and deprive them of their food.  Hence it follows that the individual has the right to repel any encroachments, from the animal kingdom or from other people, on the rights to their property.  The libertarian, knowing they have the right to self-defense, also recognizes that if they themself attempt to encroach on another’s property, that person also has the right to defend from their attack.  This creates a principle that libertarians live by: The Non-Aggression principle.  This approach to politics is not much concerned with what will provide the strongest economic or social outcome; it is simply a matter of whether or not someone’s property rights were violated.

What both classes have in common; what separates libertarianism from all other ideologies, is the refutation of delusion and respect for truth.  Libertarians do not pretend, for example, that our material problems will be solved if we simply pass a new law.  Passing a law does nothing to add to the amount of goods and services available to us all; only production can do that, and only production of things people demand (not government directed production such as ‘digging holes and filling them back up’).  The justice-oriented libertarian does not pretend that passing a law and sending policemen to enforce said law with guns and other weapons and endless backup is what defines justice.  Justice; natural rights, whatever you want to call it, is everyone’s birthright.

It is my sincere hope that the reader considers what has NOT been said here at least as much as what has been said.  Libertarianism does not mean we cannot have a commune… It does not mean we cannot have charities… It does not mean we believe in state capitalism (that really does benefit the rich)…  There is room for anything and everything in a libertarian society.  What concerns libertarians is the means, not the ends.  As long as coercive means are not being used, libertarians will not oppose it, even if they don’t necessarily agree.  We don’t ask “Who is going to benefit from this?” or “How will this benefit rich white people?”  We ask: Is one party using force against another?

 

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Your Questions Answered: Why Can’t Intervention Fix Capitalism’s Flaws?

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Jared Miller May 22, 2017

One of the worst side effects of this conversation is that most often interventionist policies create exactly the conditions which they claim to prevent. One of the other worst is that people begin to assume, at least to some degree, that legal and moral are interchangeable terms. I’ve been studying on my own for several years now, and so far I haven’t seen many examples of capitalism causing more problems than interventionism/crony corporatism.

Of course, interventionism and cronyism do often go by more appealing names, but they are still the same thing. There is a trend in recent years to refer to anything “good” a government does as Socialism. But socialism is not simply the act of paying for services with tax money, nor is it bringing about some broad moral reformation through government intervention. It is something much more specific. Socialism is when the government owns all means of production. There are plenty of examples of government activity that are not socialist in nature. Military and rule of law aren’t socialist. Taxes for national defense and public safety aren’t socialist. Prevention of fraud and exploitation, and even certain kinds of environmental protection, aren’t socialist.

 

What we really have is not socialism, or even capitalism. What we currently have is crony corporatism; a system whereby businesses are able to lobby government for special treatment. This leads to a lack of competition since it keeps new businesses from entering the market. Competition keeps profit margins thinner, often boosts wages (contrary to popular belief), and diminishes the wealth gap while also increasing income mobility (the ability to increase your income over time). Any policy that prevents or hinders competition damages the lower and middle classes. These policies make the very thing they supposedly claim to be trying to prevent into an absolute certainty.

“But depressions!!”
Our depression was caused by a glut of cheap credit, which made it a common practice to borrow money in order to invest it. That cheap credit was caused by intervention; specifically the federal reserve manipulating interest rates. After the recession began, the fed also started shrinking the money supply, further exacerbating the already delicate situation. Even if they had done everything right, just the existence of the Fed caused some damaging distortions. Before the fed, large banks would intervene on behalf of the smaller banks in order to limit the effects of financial panics and protect their own bottom line. After the fed, the large banks no longer saw this as their responsibility. As a result, more small banks failed, causing a snowball effect that eventually harmed the large banks too. Similar causes can be found for our more recent recessions as well. The dot com bubble and the housing market bubble were both at the very least amplified to disastrous proportions by bad monetary policy and interventionist legislation. Without them, that particular market may have hit hard times, but they would not have become national, systemic failures.

 

“But child labor!”
Child labor was already by and large a thing of the past when the legislation outlawing it was passed. Don’t get me wrong, if regulation actually had the power to end that kind of thing, then that’s exactly what it should be doing. But in places where child labor happens, it’s because the entire economy is underdeveloped. It’s not a choice between work and school, it’s a choice between work and prostitution, or worse. Kids don’t work because corporations are greedy. Kids work because avoiding homelessness and starvation is more important than education. No law will change that. It just eliminates their only legal means of helping their families survive. And it’s the same with the rest of the labor market. But don’t take my word for it:

 

Video: “THE UNBELIEVABLE TRUTH ABOUT SWEAT SHOPS.”

https://m.youtube.com/watch?v=O2sW2wt3nLU
(Note: this video isn’t supposed to give the full argument, it’s just an introduction to the topic by someone who has spent most of his career studying this specific subject)

“But Monopolies!”

There are very few, if any, examples of big businesses having that kind of power without getting it from the government. The natural business cycle is such that virtually never does a business accumulate monopolistic power without appealing to organized force to eliminate the competition. Instead, legislators are either manipulated or outright bribed into passing legislation that favors one business over another. Often it is with the best of intentions. Even safety and environmental regulations are often pushed by the industries they are being levied against. Usually, there is some moral or humanitarian motive attached to these new restrictions as a means of gaining support, feeding off of the idea of government as a moral force in order to manipulate the masses into voting against themselves in favor of corporate interest. But here’s the trick: the big guys usually already follow those guidelines, and the startup business has no hope of implementing that kind of infrastructure before they even start production. The manufacturing world is overrun with precisely this style of protectionism. Incidentally this is also one invisible factor that leads to more production overseas, and less domestically. Of course, not all regulation comes from corporate interest or emotional manipulation, but the result is the same nonetheless. We may argue about what level of market distortion we are comfortable with in order to promote the wellbeing of the worker, but we cannot ignore its existence. That is how monopolies happen, and it’s how they stay monopolies.

 

Video: “IDENTIFYING A MONOPOLY: IT’S MORE THAN JUST MARKET SHARE.”

https://www.policyed.org/intellections/identifying-monopoly-its-more-just-market-share/video
(Once again, just a brief introduction to the topic.)

When we say markets are self regulating, we don’t mean that abuse cannot happen. What we mean is that in a free market those who do abuse people are not protected from the consequences of that abuse. As long as there is a law or regulation, there will be someone with deep pockets and great lawyers looking for ways to exploit it or modify it to their advantage. There will always be a politician to bribe who can find ways to prevent a corporation’s competition from ever existing. Without organized force to hide behind, having piles of cash can’t make people buy your product, or use your service. It can’t prevent someone else from starting their own business to do it better.

By putting the economy in the hands of government, we are not preventing people from being exploited. We are ensuring it. That is why communist and socialist countries always develop a wealthy ruling class, and the rest of their citizens suffer. We don’t have to debate that fact. It is what has historically happened every single time.

The interventionists are half right though… free markets don’t make people more moral, and they don’t keep rich people from being assholes. But neither does government. It just gives them hired guns (law is force imposed at the point of a gun), and the power and authority to use them. Only with the backing of the law also comes the assumption that their actions are somehow right or just simply because they are executed through the mechanism of the law.

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Wasted Paper

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“End the lies! Give responsibility back to the people. The government was not founded to regulate life… only to represent the minorities across this nation on an international scale and to secure freedom for all with limitations to none.”

Donnie Davis, Feb 10, 2017

The American dollar is worth nothing, more or less, when compared to the silver certificates of yesteryear. Our currency is inflated, to this we can all agree, yes?

Ok, so our currency is inflated exponentially over time, during which, we have seen more and more government control of our markets. Since the birth of “controlled monopolization” as I like to call it, or government assured markets, our jobs have been shipped overseas, “minimum wage” has fallen way below where it needs to be (matter of opinion), the price of goods skyrocketed, stock markets crashed, too big to exist corporations falter and fail then are bailed out by our government who now owns them more or less, corrupt bankers give loans, and crashed marketplaces for profit, etc etc etc….. all while under the strict eye of big brother government.

We have seen that more regulations bring about cronyism, the controlled monopolies I was speaking about earlier. This is where lobbyist and politicians band together to not give business licenses to new businesses because it will threaten the profit margins of the already established monopoly that is secured through “law”. Not ending there, we have lobbyist. People that are paid to “persuade” politicians to vote in corporate interest by any means possible, the literal definition of corruption. Yet it’s legalized and nobody’s doing anything about it. We [libertarians] are one of the only parties who have this as a main issue of concern. Moving on, we have the mis-informed public, who have never seen what a free market actually is, that has to suffer the checks and balances of social justice. Meaning that if a corporation is immoral in its business practices that it will suffer profit loss. The common idea that monopolies will be rampant and take over the nation are a fallacy. Child labor is a fallacy. People need to stand up and take responsibility for their society. Personal responsibility goes a long way in libertarian ideas. If someone is willing to shorthand themselves, good for them. Hopefully they will learn that through pride in oneself that they can demand their employer to raise their wage to an acceptable level or find a new occupation. It is literally that easy.

If you wouldn’t send your kids to go work in sweatshops, take a wage that is not worth the job, or support monopolization…. why do you think anyone else will? Probably because they have been lied to their entire lives to believe that this is the best that it can ever be.

 

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Money vs Wealth

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Eliyahu Neiman-Jan 23, 2017

Do the wealthy accumulate their riches at the expense of the poor? Some believe that wealth inequality means that the poor must be losing out – because, after all, there is only so much money to go around. However, this is not exactly true. To see why, it is important to understand the difference between money and wealth.

Consider a case focusing on only two people: a tool manufacturer and a contractor. Say that the manufacturer pays the contractor $100,000 to build a production facility. Over the course of a year, the contractor buys $100,000 in tools from the manufacturer. Having paid off his initial investment, the manufacturer now pays $100,000 to the contractor to expand his facility.

How much money has changed hands? Apparently, only $100,000 – three times. But how much wealth has been created? The tool manufacturer has produced $100,000 worth of tools for the contractor. The contractor has built $200,000 worth of construction for the manufacturer. Our two-person economy now contains $400,000 in wealth. It is richer by $300,000. In fact, that would be its GDP if it were a country.

How is it possible that only $100,000 of money has created $300,000 of wealth? The secret is that money is not actually worth anything – other than as a means of exchange. Money represents a collective IOU that can be collected from anyone at all. This allows anyone to use their skill set to create wealth on behalf of anyone else,  requiring nothing in return but an anonymous IOU. Those who find ways to create wealth for consumers accumulate money, which they can exchange for other forms of wealth. This is the reward that the free market delivers for serving consumers. If Bill Gates and Warren Buffet have more money than anyone else, it is because they have created real wealth for consumers, and used their initial profits to create more wealth for consumers to purchase.

Two government activities are particularly harmful to this process:

1. High taxes. By confiscating the IOUs, government becomes the new recipient of the wealth owed in exchange for creative activity. This reduces the reward for wealth creation. (Equivalently, it diminishes the purchasing power of consumers). If government then spends this money on activities which don’t create wealth (i.e. goods or services that don’t improve people’s lives), then it has wasted resources, making them unavailable for real wealth creation.

2. Overregulation. If a small business owner cannot afford to spend the time and energy, or to purchase the additional equipment, required by government regulations, they may not have enough remaining resources to create wealth at a price that consumers are willing to pay. Overregulation can shut down the means of wealth production entirely.

In short, money is just an IOU, or stand-in for real wealth. Anyone, rich or poor, who can sell their services to a consumer has not only earned a share of their own wealth – they have contributed more wealth to the whole economy. Taxing the creation of wealth harms everyone; this is because everyone benefits from being able to purchase the goods and services that wealth creators produce. Policies that benefit poor people most are those that encourage and enable them to create valuable goods and services. When more people are able to create and contribute to the economy, we all become richer.

 

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UNIVERSAL BASIC INCOME

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Melissa Davis – Contributing Editor – 11/17/16

The discussion on Universal Basic Income (UBI) is becoming more prevalent across the globe. Countries including Canada, the Netherlands, as well as the Dutch city of Utrecht are developing pilot programs to test its effectiveness. FinlandIndia, and France are considering UBI as an option to streamline government welfare programs. Though there are still many unknown variables, an incremental approach may prove to be a viable solution to resolving the disastrous mess that is our welfare system here in the United States.

According to an article posted by FiveThirtyEight: What Would Happen If We Just Gave People Money?  The “U.S. government spends nearly $1 trillion across dozens of separate programs at the state and federal level…This all requires enormous administrative oversight on the part of the government, and it requires the ability to navigate multiple agencies on the part of recipients.” “In the U.S., we’re left with a patchwork benefits system, an indecipherable alphabet soup of programs: SNAP, TANF, CHIP, Section 8, EITC, WIC, SSDI.” “The problems with this system go beyond its complicated structure. Because eligibility for most social assistance is based on income (or is “means-tested”), recipients lose their benefits as they earn more income — this is often labeled the “welfare trap” or “poverty trap.”

We are all aware of the “poverty trap” where recipients on such programs cannot earn income in addition to the assistance they receive from the government, discouraging work even if one is capable in slight capacity. This leads to either hiding extra income through “under the table” cash payments or non-efforts by the recipient to seek extra income elsewhere. With UBI, these limitations would not be relevant. Therefore, if one chose to seek extra income, to better their life through education, and so on, they would not be penalized by losing the safety net their families rely on for basic living expenses.

Switzerland rejected the idea of UBI earlier this year citing fears that “disconnecting the link between work done and money earned would have been bad for society.” However, so far, studies have shown the opposite to be the case. One Study led by Johannes Haushofer (Princeton) and Jeremy Shapiro (Princeton) “documented large, positive, and sustainable impacts across a wide range of outcomes including assets, earnings (from sources other than our transfers), food security, mental health, and domestic violence, after on average four months. The study found no evidence of impacts on alcohol or tobacco use, crime, or inflation.”  Another U.K. based program, the Universal Credit Pathfinder Evaluation, cited by Cato Institute claims that “recipients of the cash payment were more likely to look for work and believed that the program offered a “better reward for small amounts of work“.

In an interview with CNBC Elon Musk of Tesla Motors says “there is a pretty good chance we end up with a universal basic income, or something like that, due to automation. He based his assessment on the prospect of increased automation in society. Given that his companies use robots and automation extensively in their products and that he has started a non-profit to explore judicious uses for artificial intelligence, Musk should know a thing or two about such matters.”

Silicon Valley agrees, “If technology eliminates jobs or jobs continue to become less secure, an increasing number of people will be unable to make ends meet with earnings from employment. UBI becomes a consolation prize for those whose lives are disrupted. Benefits still accrue to the designers and owners of the technologies, but now with less guilt and pushback about the collateral damage.”

While factors still need to be considered, including the counter argument from a libertarian perspective that it would be a form of socialism, perpetuating the “slave to the system” mentality, a slippery slope to communism; the overall concept of providing a universal basic income implementation gets complicated. How would it be distributed fairly across states with varying costs of living?

While It would eliminate the current complex government welfare system which has proven to be a dramatic failure, it would provide opportunity to those who wish to better themselves sans penalty for their efforts.

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