Wednesday, March 30, 2011

American Constitutionalism

Good morning, Alaska.

As a constitutional political economist, rather than a historian, I will focus this week's comments on chapter 12 and American constitutionalism. For the excellent blog post questions on the origins of rule of law in Ancient Rome (chapter 11), I refer you to Scott Gordon's superb overview book on the history of constitutionalism, _Controlling the State: Constitutionalism from Ancient Athens to Today_. Chapter Three, on the Roman Republic, will do a much better job of addressing your questions than I can. Basically, Gordon argues (as Hayek does implicitly) that there have been many manifestations of liberty over the years – all of them incomplete and evanescent, but all of them influential for modern forms, from the British 17th century to the American 18th century (and what next???).

Chapter 12 is, as you might imagine, one of my favorites.

First, I like the way it sheds light on the tension between spontaneous order and planning – a question that is central to Hayekian thought, and which many, many blog posts have raised. After giving lectures on spontaneous order, I have often faced speakers who jump on me with an excited "gotcha!" question, which invariably goes something like this: "So… you've argued about the importance of spontaneous order. But the American constitution was clearly written, and thus designed. What do you make of that?" Well, chapter 12 addresses that. On p. 177, Hayek emphasizes that the American colonists originally appealed to their rights as Englishmen, rooted in the English common law tradition; when English institutions proved insufficient to safeguard rights and liberties, the Americans sought a different solution, which culminated in the constitution of 1787. So, yes, the American constitution of 1787 was a crafted document, designed by the framers, and the result of negotiations and other public choice considerations. But it was also profoundly respectful of existing traditions – sovereign/constituting states, local traditions of self-governance, English/colonial common law, etc. So the US constitution of 1787 was not an attempt to rewrite institutions ex nihilo (like the French revolution). Rather, it almost seems like the US founders had read Hayek's advice from earlier in the book: "In all our endeavor at improvement we must always work inside this given whole [of tradition, civilization, organic growth], aim at piecemeal, rather than total construction, and use at each stage the historical material at hand and improve details step by step rather than attempt to redesign the whole." (70, footnote omitted). In sum (back to language from chapter 10, p. 161), the American founders recognized, with Hayek, that "the task of the lawgiver is not to set up a particular order but merely to create conditions in which an orderly arrangement can establish and ever renew itself."

For those who are interested, I wrote my dissertation on Argentina's constitutional choice. I argue that Argentina's founders mistakenly tried to impose the American constitution on Argentina, even though the cultural soil wasn't fertile, because Argentina lacked a tradition of rule of law and local self-governance… so the constitution failed, leading to military dictatorships and economic chaos. For an abridged version, see

Second, Hayek returns to an earlier theme (chapter 7) of the tensions between democracy and constitutionalism. The idea of constitutionalism is not to thwart democratic expression completely – that would, after all, be tyranny – but to temper it, and not allow majorities (or powerful minorities that can capture the political process) to violate the rights of everybody else. Hayek thus emphasizes (p. 180) that a constitution is not an absolute limitation on the popular will, but merely a "subordination of immediate objectives to long-term ones," to cool down passions and help guide us towards our goals. (Incidentally, economists will refer to this as dynamic inconsistency. Who is the real you? The you who sets the alarm clock an hour early to go running before classes? Or the you who hits the snooze button for an hour? A constitution can act as a "pre-commitment device," which forces us to move towards our long-term goals, such as peace, harmony, limited government, respect for rights, etc., even if we are temporarily drunk on power and enjoy a majority… a bit like placing the alarm clock on the other side of the room or posting a bond. In this similar vein, Ludwig von Mises was once asked about implementing his ideas, and what he would do, specifically, if he were dictator of the world. Without missing a beat, Mises replied: "I would abdicate.") Back to Hayek, the constitution allows for two things: (1) restrictions on a temporary majority (for obvious reasons); but also (2) acceptance of temporary majorities by everybody else, who can be secure that that majority is guided by general principle, and restricted by the constitution. In countries that lack a tradition of constitutionalism, there will be chaos and tyranny, as each democratic majority tries to squeeze what it can out of its tenure in office, because it knows the opposition will do the same.

I particularly like the phrasing of a constitution as "an appeal to the people drunk to the people sober" (p. 180). A constitution is like turning over the carkeys to the host before you start drinking from the punchbowl of political power.

Third, Hayek emphasizes the need for a twofold approach to constitutionalism: (1) a paper reminder (hence the importance of written constitutionalism, even if parchment cannot stop a column of tanks); and (2) the appropriate machinery (p. 182) of checks and balances – in the words of Federalist 51, "ambition must be made to counteract ambition." So I wonder… yes, on the one hand, it would be nice to get rid of the executive branch; on the other hand, getting read of the executive simply means more power in the hands of the legislature, and fewer checks on it. Instead, I'd like to see an executive that… executes laws, rather than writing them (by executive order or regulation).

There's also some interesting material on the 9th amendment and constitutional erosion, but I think I'll leave my comments at that for this week.

Sunday, March 27, 2011

Executive Branch... Who needs them!

I found my subconscious meandering on a path of its own while reading this weeks reading, at one point it was strolling along a path of revolution, wondering if the abolishment of the Executive Branch of the U.S. would be for the greater good, really what does the President and His Posse do anyways... Think about it...

While my mind was strolling in a secret service free utopia calculating the tax $$$ that could be saved by not having to pay for an executive branch and Air Force One, not to mention how nice it would be not having to deal with the insanity of a Presidential campaign every four years (campaigning doesn't really ever stop now thanks to fox), and how the senate pro temp and speaker of the house could have keys to nukes and all would be well my subconscious stopped upon the line, " No government, at the time appearing in the world, nor is perhaps to be found in the records of any history which subsisted without the mixture of some arbitrary authority.... whether human society could ever arrive at the state of of perfection as to support itself with no other control , than the general and rigid maims of law and equity." (172)

I wonder if that state of perfection has arrived in the last 200+ years. Perhaps all the insanity at play in the world is not because people are crazy, but because people are sick of an intrusive government telling them how to live their lives. Perhaps its time to move to the step of revolution in the form of minimizing the amount of government @ play... abolish the executive branch. If we can survive with out them perhaps we could abolish the legislative branch next. Perhaps my meandering mind wasn't to far off track...

Origins of The Rule of Law

I found this weeks reading pretty engaging. Chapter #11 overall was quite informative and the development of the rule of law was of most interest to me. I thought Hayek did a really good job of making his point and showing the development of the rule of law system.

It is first noted that this system has its roots in antiquity, primarily with Athens and republican Rome. The idea for the formation of laws that applied to all citizens was a very important idea. However, I thought that equally important to note was the distinction between the laws being given consent by the people and then having them be held up as the "laws of the land" than people which govern the laws. If there is not a set of rules that cannot be tampered with then of what use are laws anyways?

It is sort of the "rules of the game" for liberty and government conduct that need to be clearly established and upheld. And if they are not, then who is to say what those in power might alter to receive a momentary benefit or personal gains? Basically anything is up for grabs in a system such as that and the people are bound to pay for it in sooner or later.

The Elegance of Simplicity

I thought chapter 12 the, “American Contribution: Constitutionalism” was a very interesting chapter. It was definitely written in a different tone. Even though this chapter was like Hayek’s others in the sense that it was written in a very academic manner. I believe that in comparison to the rest of the chapters read so far in this chapter Hayek is less vague and more concrete and to the point. In essence I believe that Hayek is trying to capture something that is fundamentally important in the development of the concept of liberty during the past centuries, but has a clear point with the establishment of the U.S. constitution.

“The main features of the American Constriction crystallized at so early a stage in the understanding of the meaning of a constitution, and so little use has been made of the amending power to embody in the written document the lessons learned, that in some respects the unwritten parts of the Constitution are more instructive than its text. For the purposes of this study, at any rate, the general principles underlying it are more important than any of its particular features.” (p. 192)

I like this point. When I was taught about the U.S. Constitution by my father an American History teacher extraordinaire he made clear why it was so important. You see what is so amazing and what I believe is a success is that as a living document our constitution can be amended and is not set in stone to reflect solely on its original content but the document has the freedom to change if needed. At the same time many of the most fundamental principles will not be changed and I believe this is what Hayek is getting at in the aforementioned quote. This is the beauty of what is not written in the Constitution. What instead is only implied through simply elegant language.

It quite frankly can speak for itself (Preamble)
“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

What it gives is a general purpose of the U.S. Constitution, this is not to give birth to document that gives a tyrannical coercive government powers to restrict others but instead to secure liberty. All of the laws and rules that could have been put in this document but wasn’t shows why our Constitution is so important. I provides a basic framework which is written down and agreed upon at the same time the founding fathers who wrote it took a very valuable philosophical stance originating from John Locke that we as people have unalienable rights, as mentioned in the Declaration of Independence (We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.). It is interesting that Americans are so interested in their individual rights. Some think that Americans have this focus simply only out of selfishness…dare I say that some of this might be the outcome of our founding fathers beliefs which centered a basis for our nation. This philosophical stance simplifies legislation and even in a constitution. By giving individuals their own rights and freedoms as long as they don’t obstruct other’s it makes everything so much similar than trying to do this for the group.

I am looking forward to this week’s discussion and listening to all of your takes on this week’s two chapters.

Democracy and Rome

While reading the earlier parts of chapter 11, a question arose that seemed to be staring me in the face: Where in Roman history, did the structure of the government consist of a democracy? During the classical period it formed a constitutional republic and eventually the nation became more autocratic, according to Wixipedia: ;-) Once the autocracy set in, Rome didn't establish set rules for a government budget and the senate was reduced to an "advisory cabinet" to the emperor.

It is interesting the angle Hayek takes by attributing the establishment of liberal ideology, or Democracy, to the classical period of Roman law. He seems to be attributing Democracy to the most successful ideals of freedom, but if this is true, then their best contributions to law would've come at the end of the empire. And the fall of Rome quickly followed, so I disagree that their Democratic leanings were the ideals that had established Roman law as the first to manufacture the writings of individual freedom, it was the writings of the common law and their formation of a senate, that created a system of individual freedom.

Another thought, Roman law also formed a Republic by a well mixed form of Democracy and Oligarchy, the oligarchy being stronger. This brings me to think that individual rights were represented in the oligarchic half (If that is a word, ha!) of the mix. What a brilliant idea!

I would like to know whether anyone has read this and has a different interpretation on it.

Tuesday, March 22, 2011

Law, Legislation and Spring Break

Good afternoon, folks, and welcome from sunny Florida, where I am visiting my grandparents over spring break.

I must start this week with a confession: my mind was addled by the tapioca pudding and hours of tantalizing bingo in the retirement home, and I... completely forgot until this morning about this week's post. This, of course, wouldn't be a problem on its own, except I conveniently left my copy of _Constitution of Liberty_ and my reading notes at home. I had considered BSing my way through this week's post and looking for summaries on-line (hey, I too was once an undergrad!), but I won't waste your time. Instead, I'll keep this week's comments general (with my apologies) and brief (no apology needed). Parenthetically, I resent the jab about economists (you know "an animmal on low sleep and socially awkward"; I get plenty of sleep, thank you very much).

All your good comments this week are inter-related, so I will respond by theme, rather than by comment.

First, we have in this chapter the classic Hayekian dichotomy between emergent rules (law) and constructed rules (legislation). Naturally, Hayek trusts the former, because they overcome the knowledge problem, having been "slowly forged on the anvil of time" (not Hayek, btw; Justice Hugo Blackman on the common law). Naturally, Hayek mistrusts the latter, as it is the engineered imposition of the Legislator's mind -- and thus a violation of the knowledge problem.

Second, this does not mean there can be NO order, no planning... but we have to be careful about it. Hayek writes in an earlier chapter about the importance of piecemeal changes, as we tinker at the margin, using our limited reason, to correct path-dependence, or existing law that was in fact legislation. Likewise, Hayek would never argue that we don't need planning, but should trust everything to spontaneous order. The question is the level of planning. So, to repeat my earlier example, if you try to engineer a country's economy, you're set for failure (exhibit one, Soviet communism). But if you don't get out of bed in the morning, because spontaneous order will do your homework, you're also in for a bad surprise. I think, then, this is the "middle way" between spontaneous order and planning (I use this expression cautiously, because middle way has come to mean light socialism, gentle central planning -- I mean it here in the sense of using reason to find the limits of reason, and also figuring out what we need to plan, and what we need to leave to spontaneous order).

Third, we can go back to the central them of Hayekian thinking: epistemology and overcoming the knowledge problem. The law, then, is knowledge -- knowledge about the limits of our individual sphere, knowledge about the limits of the individual spheres of others, knowledge about how we're expected to treat other people. This implies a few things: (1) legislation is not going to be knowledge, because it's not general, and because it imposes the goals of some over others; legislation, then, comes closer to coercion; (2) we will have to bow to rules that we don't understand; just as we don't understand where individual prices come from (but we don't need to... all we need to know is the price, and that's enough to act and plan); just as we don't need to know the origins of social rules (we just need to learn what it takes for peaceful cooperation, through the signal of approbation); we also don't understand the law, yet we submit to rules we don't understand (we don't need to understand them -- they're part of tacit knowledge -- and if they're really law, they're general rules and thus not discriminatory. If they're actually legislation, then they ARE discriminatory, and the excuse of conforming rules to which we don't understand is merely a tool of imposition (see next paragraph)... but there's always the option to correct past abuses.

Finally, I close with a question. Instead of a generous reading of Hayek, how about a public choice reading. Hayek seems to think that most rules will be emergent (if we gets things right), and the occasional bad rule (or the plainly visible, thinly veiled legislation) will be easy to fix, because fixes will be marginal. But what if Hayek is being overly optimistic. I'm thinking of the extreme scenario of the noble lie (from Plato, that famous noble liar); basically (pardon my lack of philosophical sophistication), if a political order is to persist, people need to be made to follow it, so you have to lie to them about certain things, like the specialness of the regime, like the fact that the government is of/by/for the people, etc. So it's noble because it allows for order, cooperation, civilization. But it's a lie because... well, it's not true. Think about it for a second. Back to the US founding. The heavens parted, the selfless founders wrote a perfect constitution, and then went back to farming? Well, again, the American founding is pretty amazing, and we lucked out on many margins. But there was public choice at work, horsetrading and compromising left and right, agricultural v. commercial v. antifederalist interests, jockeying for post-constitutional power, etc. And need I really, with this audience, question the claim that the government serves the people and that democracy works?

Well, Hayek comes along and argues that we have to submit to rules that we don't understand. I am inclined to agree. After all, we can't simply rely on everybody making an on-the-spot cost-benefit analysis or philosophical argument; instead, we rely on the past, we rely on emergent rules, we rely on custom, and we rely on law, all of which are heuristics to aid our limited reason, with the simple goal of social cooperation, so we can all thrive and not kill each other. I wonder, though, if Hayek is a touch too optimistic about the law-to-legislation balance, and if he is not accidentally playing into the noble lie. After all, if it is indeed noble, let us not forget that it's also a lie. Thoughts?

I'll mop up next week with any particularly relevant passages I want to re-examine. My apologies for the sloppiness. Until next week then, NW

Sunday, March 20, 2011

" The Ring": long and boring only read if bored

I found myself often drifting away from the text in chapter ten and into a Hayekian safari as I read. It was the language at the beginning of chapter ten about the most fundamental foundations of what we know as law. It seems we all obey rules with no active thought, I thought about us as not being different from animals in this way, and an imaginary animal confrontation.

Hayek begs us to think about our own action as we stray from our home turf. He brings up the example of animals and their likely hood to fight over food or basic resources with its proximity to the animals home turf. Naturally, this likelihood to initiate a conflict drops the farther an animal goes from its home. Two animals living at a reasonable distance will realize a natural equilibrium where if each animal goes farther it know it will risk starting a conflict and it is unwilling to partake in one at that distance from its home turf. This equilibrium will define the borders of each animals territory with respect to the other.

Are we any different? Look at two college room mates in the UAF dorms. They both have as there home turf with in a shared room furniture and a bed. Typically from my experience and observations each room mate will respect the others territory. However what would you do if you came back to your room to find your room mate had emptied out one of your drawers and replaced the contents with his or her own? Most people would engage in a conflict of some sort. I have never seen this happen, and it is because no rational person wants to invite this sort of conflict upon themselves. There are these natural mutually respected laws, it seems regardless of if you are human or animal.

Imagine a pair of the most entertaining animals you can, exotic monkey variants, lamas, etc. They follow the natural laws as mention above but sometimes one or the other or both can error in stressful situations. Imagine animal one is at the communal watering hole and has in its possession something of great importance but it does not belong to it, yet for the time being animal one exercises total control over it. Animal two also had a perfect substitute of similarly great importance but as animal one watched in horror a great big demonic lightening bolt shot out of the crystal clear ocean blue sky and in an instant vaporised animal twos object of great importance. There is only one object of great importance and both animals need it. Here we have a set up for a potential conflict.

Animal two lacking the object of great importance goes over to animal one. As animal two approaches its follows another typical rule, smile when you great someone. Animal one felt badly for animal two. It also knew the object of great importance was not animal ones to give. Animal one was also stressed out knowing it would be forced to reject animal twos plea for help since the object was not its to give. In addition animal one also was low on sleep and generally socially awkward. Thus when animal one greeted animal two back with a smile it either over smiled and or smiled to long thus giving animal two the impression that it was enjoying animals twos loss when in fact ironicly the opposite had happened. The stage was completely set.

Animal two was naturally offended at its interpretation of animal ones smile and called out animal two on it in, what animal one believed to be, a most extremely highly offensive manner. In retaliation animal one broke out the equivalent of a verbal tactical nuclear war head of epic proportions and ran off with the object of great importance. Shortly there after animal one began to piece together what had happened and understand animal twos perspective. While still offended by animal two's accusation that it had enjoyed animal twos pain, animal one began to regret using the nuclear arsenal. It was an overreaction. Also animal one was saddened that animal two believed it was evil for enjoying suffering. Since animal one still had respect for animal two, the situation sorely ruined its week.

And so the imaginary confrontation ended and I realized Hayek had just told me that we need only uniform laws, and if they are equally applied to law makers, enforcers, and civilians the likelihood of overly coercive laws being created and enforced is very low.

Hayek the Anti-Machiavelli

In reading chapter nine “Coercion and the State” I was swept away in Hayek’s artful and well thought out definition of the term Coercion. I could imagine the little man with his horn rimmed glasses sitting in his office and pondering away asking himself, if he missed anything in his definition.

What I enjoyed about reading Hayek is that even though he has a philosophical feel with his vague language and tone he is a straight up realistic. This chapter in particular reminded me of a work I read about coercion and manipulation once before. This work was Machiavelli’s Prince and even though its focus was on how to use coercive powers to be an effective young prince much of the work was an application of Hayek’s examples and definitions. Though both of these men’s views on how coercion should be used are completely oppositional; they both are similar in their view of human nature and interpersonal relationships and the corresponding opportunity for coercion to be prevalent. I really follow Hayek’s further suggestion that little can be done by society to circumvent coercion in impersonal relationships “beyond making such associations with others truly voluntary.” (p. 138)

I think that in terms of making mistakes in dealing with others one huge mistake that is very common, is one which is highlighted in the Prince and many other works. This is the idea that a person has the power to change who another person is. I think that this is possible though coercion, but many try to do it in sake of making others “better” people. Our benevolent feelings that aim to help others need to have limits in place, as it may be hard to determine where the line is drawn between helping someone or trying to help someone by changing them. Change is important, but in the end the person who is changing can only make that change last if it comes deep within them. I feel like those who specialize in the art of being a fake manipulator often abuse the idea of acting as if they are helping others but acting for their own means. Machiavelli makes that clear when he notes that the prince should appear to be a sheep, but in reality be the powerful lion controlling the entire show. I really think that Hayek’s view is that of the Anti-Machiavelli where to let individuals truly be free we step back and let them make their own choices so they can be who they really are.

Sunday, March 6, 2011

Freedom isn't Free

Perhaps I am to idealistic, and to much of a rebel, but something about the statement,
"freedom does mean and can mean only that what we may do is not dependent on the approval of any person or authority and is limited only by the same abstract rules that equally apply to all." really just did not sit well in my stomach. In my head being forced to follow rules is not freedom, and the picture of "freedom" Hayek paints is not freedom it is just accepted conformity. I am not saying that this accepted conformity is a bad thing, by all means it just might be the best way for society to interact with each other but don't call it freedom, there is no freedom in conformity.

Some disjunct thoughts

I thought it to be an insightful point that a lost job is not coercion, even if it is terribly unfortunate for the worker. Very often we dwell on these situations as a failure of society. We can easily see the feelings of the worker. They have lost a position they valued more highly than any other option available, and the businesses interest in revenue over their livelihood is difficult for the worker to fathom. What is lost here is the plight of the business owner. His livelihood is also compromised. A failed business would put the owner into precisely the same position as the worker now finds himself. There is no malice, ill will or evil in pursuing one's optimal condition. In fact such a pursuit is the only rational thing to ask of a person.

I suppose if there is something in this chapter I do not like, it would be the apparently arbitrary line between coercion which must be prevented and coercion that is not noteworthy. Hayek writes "We cannot prevent all harm that a person may inflict upon another, or even all the milder forms of coercion to which life in close contact with other men exposes us; but this does not mean that we ought not to try to prevent all the more severs forms of coercion...". I disagree with this division of acceptable an unacceptable coercion. Hayek goes on to claim that a protected sphere exists within which the coercion is not acceptable, but I do not believe the distinctions are comprehensive. To this point there have been no uncertainties, but now it appears our author is willing to accept a blurry line. How unpraxeological...

Of the second chapter this week I have only this to say: the free market and spontaneous order of economic law are not a perfect replacement to the informed organization of a centralized authority. Of course the problems of a central power are greater than the problems of the given alternative, but I maintain a belief that some preferred middle ground will always exist.

Tuesday, March 1, 2011

Employment, Mental Models and Killing the Goose

I know you will all be shocked, shocked, to discover that I was particularly excited by chapter 8. I don't think it contains the same kind of foundational insights as other chapters (e.g. knowledge problem, responsibility, the value of liberty, etc.), but I find it to be -- finally! -- one of the rare practical illustrations in a brilliant but overly theoretical book.

First, then, I want to comment on the problem of the employed v. entrepreneurs (in combination with the franchise). Hayek points to an important problem in mental models, and one that ties in with his thoughts on responsibility. Indeed, most people who are employed simply lack a sense of where the money comes from, and come to view their job as an entitlement, rather than an opportunity to create value -- and their salary as automatic, as opposed to a reward for the value they create. In Hayek's language, most people are "largely unaware of the kinds of problems and views that determine the relations between the separate units within which they work" (121) and have "little knowledge of the responsibilities of those who control resources and who must concern themselves constantly with new arrangements and combinations" (122). Think back to responsibility and freedom...

In the non-profit world, I understood this only when I worked in fundraising, as program officers tend to have a sense that there exists a pot of money from which to draw, but the fundraiser knows the money must be raised. In a more direct market sense, think of an associate lawyer at a law firm. Take the example of an associate billing, say 1,500 to 2,000 hours/year, at a billing rate of $200/hour, which represents $300k to $400k of income for the firm. Yet the associate will make (typically) only about $150k per year in salary. "Exploitation!" "Unfair!" cries the associate. But... think about this... the firm is paying, out of what the associate is billing, for overhead (rent, telephones, HVAC), health insurance, secretarial services, paralegals, insurance, partners for mentoring -- and, perhaps most importantly, partners who go out and make rain, i.e. get clients. A law school graduate is perfectly welcome to hang his own shingle and look for clients, but good luck making that kind of money immediately! I have a friend who is now established as a lawyer. After working for a few years as an associate, he took out big loans to open his own law firm. For about the first five years, his employees (associates) made more money than he did, because they were paid a guaranteed salary and he kept the profit (which was minimal, and sometimes negative) after paying his bills and his employees.

Perhaps people in specific professions have a sense of this, but I think most people don't, and come to see their jobs as a responsiblity to punch in, put in eight hours, punch out, and do a decent job in between -- but not necessarily create value. I am reminded of this sometimes when I consider that I have an average of 30 students/class, each of which is paying about $20,000/year in tuition, or $4,000/class if you assume five classes/semester. I certainly don't make $120,000/year for each class that I teach. However, I'm grateful that I can spend my working hours reading, researching, and preparing lectures, rather than having to find students and a building in which to teach them... and face certain semesters where I have many students and make tons of money, and other semesters where I have but a handful of students and can't pay my mortgage. I like having a steady monthly paycheck. Check out Adam Smith's writings on alternate models for professor remuneration if you're interested.


First, I think the employed-voter combination is troublesome, as Hayek points out, because most people don't understand where the wealth comes from that allows them to have a job... and vote accordingly.

Second, a consequence can be taxation of wealth. "Unfair!" they scream. But where does wealth go, and what does wealth do? Well, I doubt many of "the rich" like to swim in pools full of dollar bills, like Scrooge McDuck. Instead, the money goes to consumption (which creates jobs, even if the consumption itself is "wasteful" or "ridiculous" or "ostentatious" -- and frankly, it probably often is, if by my subjective standards); or it goes to investment. "What?" The rich will get richer by investing?" Sure they will! By investing in the economy and making jobs. Check out Mandeville's "Fable of the Bees" on private vices and public virtues." Check out also Frederic Bastiat, generally on "what is seen and what is not seen" and specifically on "frugality and luxury",

Third, what of waste? Yes, it's troublesome, and the human in me (as opposed to the economist... check out Deirdre McCloskey's _How to Be Human, Though an Economist_) recoils at the thought of parallel poverty of the many and waste of the few. But... what of the benefits of "waste" (consumption and investment)? Who gets to determine what is waste anyway (back to the knowledge problem)? And what of the unintended consequences of social engineering that violate the knowledge problem (next paragraph?). Hayek has a nice solution, in the form of non-coercive shame like "admiration for the moral tradition that frowns upon idleness where it means lack of purposeful occupation" (127). Even taking the above into consideration, shame lacks the unintended consequences of coercive engineering.

Fourth, on coercive engineering... Again, the market isn't perfect. How could it be? It's made up of fallible humans, who all suffer from a knowledge problem. But let's compare market failure to government failure, rather than comparing the market to some idealized, stylized, fictional Nirvana, then run off to declare that we need government intervention to solve market failure without looking at the shortcomings of coercive intervention. The market may not be perfect, and it may generate outcomes with which we are not comfortable, like income inequality (btw, check out the writings of Gerald Scully, e.g. _Constitutional Environments and Economic Growth_ who shows that income inequality is LESS in freer countries!)... or like poverty side-by-side with wealth. But let's be careful about engineering outcomes that we would prefer. My grad school professor Pete Boettke of George Mason University talked about the analogy of the superhighway of development for post-communist countries. While it would be tempting to take early exits by redistributing income, such myopic considerations would ultimately kill the goose that lays the golden eggs and prevent growth and development... thus preventing the very help to the poor that we're trying to offer. Let us not forget both history and geography. Historically, the poor today and in the 19th century have an awful situation compared to the rich... but not compared to the poor, or to the mass of humanity before the industrial revolution. Geographically, the poor in free societies (those very people who suffer from income inequality) have a hard time compared to the rich, but are doing remarkably well compared to the mass lot of humanity. Last I looked, 50% of humanity was living of $2/day (or roughly $750/year). That's the real problem, and the consequence of interventionism. Compare that to the poor in the US, earning $10k, $15k, $20k/year. Not easy. And we can do better (let's start by cutting welfare programs, regulations and other impediments to growth). But 13 to 25x better than half of humanity... and better rule of law, treatment by police, sanitation, access to courts, etc. Not optimal, and more work to be done (non-coercively, of course, through charitable associations and civil society, outside the growth-stunting effects of government intervention and coercion). But still better.

To finish, then, in Hayek's words:

To prevent some from enjoying certain advantages first may well prevent the rest of us from every enjoying them. If through envy we we make certain exceptional kinds of life impossible, we shall all in the end suffer material and spiritual impoverishment. Nor can we eliminate the unpleasant manifestations of individual success wihtout destroying at the same time those forces which make advance possible. One may share to the full the distate for the ostentation, the bad taste, and the wastefulness of the new rich and yet recognize that, if we were to prevent all that we disliked, the unforeseen good things that might thus be prevented would probably outweigh the bad.

Thanks, Professor Hayek, for encouraging us to be cautious and humble: "A world in which the majority could prevent the appearance of all that they did not like would be a stagnant and probably a declining world." (130)

So the next time I have an extra $200 in disposable income, I'm going to donate $100 to charity, and spend $100 on a nice bottle of vintage champagne... and wonder if I shouldn't feel guilty for being inefficient about donating $100, when I could have spent it on goods or services, no matter how ostentatious, luxurious or wasteful, and thereby help create economic activty, jobs, and growth....

I became an economist, and a libertarian, because I became convinced that the market can feed the poor. I am outraged and shocked and saddened by poverty. But I still believe that markets will do a better (not perfect) job of feeding the poor than will coercive statist inverventionsim.

Perhaps I am a bleeding heart libertarian? Perhaps Hayek was also?