Previously I made a post entitled ‘Pink Slime: What is Seen and Unseen.’ Having made its way through some social media channels, it has received some interesting comments. A couple common arguments that seem to stand out, not only in my posts, but also in other articles could be generalized as follows:

 

 

"Why even mention it. So what if consumers are uninformed. Education and evidence are really irrelevant to this issue (or any issue for that matter) because people are irrational. "

 

These comments really help to clarify the real issue here. The supply chain is really at the heart of the issue for many of those slamming pink slime. Its not pink slime in and of itself that is their only problem. They don't like modern food supply chains (think ADM, Monsanto, Wal-Mart), and if they get their way, our food supply chains would more closely resemble the balkanized gasoline market, with all of the restrictions and the required bottlenecking boutique of gasoline blends etc. and of course the high prices.

 

If I thought this were simply about food preferences, food choices, and consumers making decisions based on those preferences, and the markets  responding, then of course this would all be a moot discussion. Those that simply choose to avoid finely textured lean beef, are not necessarily the problem. The goal of the purveyors of the pink slime propaganda isn't simply to persuade consumers to choose alternative products, but to build the sentiment that will support coercive government intervention in the market place. (as has happened in other states with laws regarding 'child labor', ‘dust’ regulation, 'CDL  requirements for operating farm machinery', 'battery cages' in egg  production, 'gestation crates' in pork production, fat taxes, sugar taxes, salt  taxes, hormones, antibiotics, biotechnology...pick your technology,  ingredient, and regulation).

 

From fiction to reality, biotechnology, 'pink slime', pharmaceuticals, modern  food supply chains and processing, (name your villain) are all contemporary  analogs to 'Rearden Metal' from the book Atlas Shrugged. When Dagney had to go out on her own and  start the 'John Galt Line' it was in fact largely in part a response to the loss in demand as a result of the dynamics of public opinion regarding Rearden Metal, penalized for being virtue. Given the negative public perception and the heavy burden of the regulatory environment for the railroads, Taggert Transcontinental stock was plummeting.

 

Recognizing this dynamic between public opinion, market forces, and the regulatory apparatus and making it known is essential to the  perpetuation of a free society. As Don Boudreaux of George Mason  University states so well:

 

 

But, can we really affect public opinion for the better? Are people obstinate and irrational in their views?  Is evidence irrelevant?

 

 "Reason, my dear fellow is the most naive of all superstitions...logic is a primitive vulgarity" -Dr. Pritchett, Atlas Shrugged.

 

 Is evidence always and everywhere irrelevant, or is it just minimized by propaganda and undervalued in general?  Does the assumption of perfectly rational behavior have to hold to make these arguments, or to approach these issues utilizing the analytical way of thinking that economics teaches?  Should we just assume that all behavior is mindless and throw in the towel?  That would certainly relieve many of us a lot of stress and of course, that's what the interventionists like Dr. Pritchett in Atlas Shrugged wanted people to think. They desire a public that has grown disdainful of facts and evidence, looking to intellectuals and politicians to make things right.

 

But, as Steve Horowitz points out in his textbook 'Lessons for the Young Economist':

 

 

As Dr. Horowitz goes on to explain, even if people often 'miscalculate' or aren't "perfectly rational people" the logic of economic thinking holds. As Economist Peter Boettke states:

 

 

And in fact, blogs, even 'micro bloggers' with just a few thousand imprints or less, all have a role to play in adding to this pool of knowledge. Even if they are preaching to the choir (i.e. read mostly by like minded individuals) they provide an arsenal of ideas that help everyone to better structure their thoughts, and share them with others, and occasionally someone that may actually change their mind.  Not everyone is a general like Bodreaux and Roberts at Cafe Hayek,  but given this war of ideas and the role they play in a free society, every soldier counts. Post by post, line by line. While its origins are disputed, the quote often attributed to Thomas Jefferson is no less true:

"The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt."

By Matt Bogard

 

Previously I had said "Time will tell if those occupying Wall Street calling for ending the Fed and crony capitalism are the true voice of the movement, or if they will ultimately find themselves tools for more interventionism through a progressive policy agenda." With a recent article in the Washington Post, I think I’m starting to piece together an answer, at least from one protester.

 

See:  Why Occupy Wall Street Will Keep Up the Fight

 

Take, for instance, the following quote:

"Only a soft regime change can end the pervasive corruption at the heart of our political system, in which corporate money wins elections, drafts laws and trumps citizen desires."

 

How is it that corporate money wins elections, drafts laws, and trumps citizen desires? I've discussed previously the issue of disproportionate political power and abuse as it relates to extreme wealth and corporate influence. In short, it's the nature of unrestrained democracy, not unrestrained capitalism. By granting government powers beyond those specifically enumerated in the Constitution, progressive policies have represented bounty to be won by whoever can exert the most political muscle, as put by Public Choice economist Dennis Mueller. If we are going to be concerned with the outlier that is the 1% of wealthiest Americans, our concern should be with those that achieved their wealth via progressive coercive political means as opposed to those that achieved it through socially cooperative means enriching the lives of multitudes. The ignorant, shortsighted, prejudiced view of the 1% as being a homogenous group of thieves and manipulators is not enlightening.

 

The writer goes on:

 

 

While financial instruments may be difficult to understand, they are not bets made at the track or in a casino, they are tools for managing risk and directing capital to fill the most urgent needs of society based on the knowledge and preferences of multitudes of individuals, all giving their input via the price system. While not perfect, as the great economist Frederick Hayek put it, I would prefer imperfect prices over the pretense of knowledge. It was through the pretense of knowledge and the Federal Reserve’s actions in the social planning of money, interest and housing ("without a hint of concern or regard for the millions of lives that such speculation can destroy") that we got the financial crisis and the current recession.

 

The idea of a "'true cost' market regime" is an even more futile exercise in the pretense of knowledge. As I mentioned in a previous article, when we as a society fail to have the knowledge to determine the correct price and quantity of ice cream for our community or nation, how can we determine the correct price or quantity of carbon (or the ecological cost of any good, for that matter)? Aren’t those sorts of calculations what would be necessary to implement a "‘true cost’ market regime"? The command and control structure necessary to implement this ("without a hint of concern or regard for the millions of lives that such speculation can destroy") would be demeaning to the millions in the 99% and empowering to the wealthiest and politically connected in the 1%. We’ve seen the effects of economics of scale in compliance in agriculture before. We saw how empowering the Waxman-Markey attempt to ecologically price carbon was to the world's largest corporations.

 

I think through all of their rhetoric and their own model of direct democracy, many of the OWS crowd may confuse the virtues of the market with democracy. Unfortunately, people think that there is something mystical and blessed about the end result of tallying votes. They fail to see how arbitrary this can be, and how poorly voting can work as a means to express and represent individual preferences about very specific issues that deal with the minute details of everyday life and work. They confuse voting with the role and social function of the price system. What we need isn’t more democracy, or fascist price-fixing regimes. What we actually need is more of the Coke vs. Pepsi choices of the past. I know the author was probably analogizing the little difference between political parties, but Coke vs. Pepsi is a great example of how empowering the price system is compared to the democratic decision making by two barely indistinguishable parties. Anyone recall how empowering markets were to the 99% with regard to New Coke? How about more recently Netflix’s change in pricing structure? Agvocates are well aware of how empowering markets and social media were when it came to the corporate policies of Yellowtail and Pilot Travel Centers. Could you imagine having to implement these types of changes and  getting these responses through our political system or any number of political parties? Of course not. Voting  is too blunt an instrument to do this.When we try to democratize these types of choices, votes are not empowering tools of democracy for the masses, they are empowering instruments for the politically connected 1%.  The answer isn't more voting or additional choices in political parties. The answer is, as our founders put it, a republic if we can keep it, restrained from interfering with the minute details and choices of our everyday lives.

 

So I conclude by asking, is the OWS movement really about empowering the masses, or will they ultimately find themselves tools for more interventionism through a progressive policy agenda? If the movement is more concerned about wealth redistribution and things like "‘true cost’ market regimes," they are fighting the wrong fight.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance." - Murray Rothbard Making Economic Sense (1995)

 

Should we really be thinking about making national tax policies based on the single random anecdotal observation of a celebrity businessman? Recently there has been a lot of talk from the media, politicians, and other commentators about a ‘Buffet Tax’ to ensure that billionaires pay their fair share of taxes. The battle cry comes from comments by very successful businessman and investor Warren Buffet, who claims that his secretary pays more in taxes (as a percent of income) than he does. There are also claims that income for middle Americans has stagnated, while the wealthiest Americans have enjoyed most of the gains in income growth over the last decade. This is a long post, but the short of it is that these claims may sound good politically, and make great headlines for the media, but they don’t stand squarely with the facts.

 

Let’s look at the first claim. Do billionaires really pay less in taxes as a percent of income than their secretaries? 

 

Source: The Myth of Middle-Class Stagnation, Steve Conover

 

Of course, if we are concerned about the distribution of income in society, the important thing isn’t so much who’s gaining in which category, but instead it is how often people move up and improve their standard of living.  After all, the American dream is not based on how much the rich pay in taxes vs the poor, or who gets the biggest piece of the pie. The American dream is about going out and getting your own piece of pie, or in other words, income mobility.  As economist Steve Horowitz explains in this video, even if you insist on looking at ‘median’ income earned by ‘households’ vs. individuals, when we follow these people over time we see lots of income mobility as they move from one part of the income distribution to another.  The data shows that income mobility in the U.S. has been very robust.  As reported in the U.S. Treasury report Income Mobility in the U.S. from 1996 to 2005:

 

"Economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups. The degree of mobility in the overall population and movement out of the bottom quintile in this study are similar to the findings of prior research on income mobility."

 

So, we’ve debunked the myth that the wealthiest Americans aren’t paying there fair share, we’ve shown that middle class Americans have received significant gains in income over the last decade, and that income mobility in the U.S. is a reality. What other excuses can we/they come up with to raise taxes? One might claim that this is necessary to increase revenues, or reduce the budget deficit. In a previous post I’ve already shown how revenues actually increased while the budget deficit drastically dropped after the Bush tax cuts.  Quite a bit of additional research actually shows that higher income individuals are extremely sensitive to tax increases, and that tax increases can contribute to decreased job creation and investment. 

 

Were it not for the recession, the data shows that the middle class and the American dream was thriving. Instead of focusing on class warfare inspired non-issues (at least when it comes to real data), the media, commentators and our law makers should focus on the real issues at hand, chiefly the regulatory climate and the uncertainty  (as mentioned last month) that it is creating.  Bad government policies, interventons, and regulations created the financial crisis which lead to the recession, and just as in the Great Depression, regulatory uncertainty is currently impeding the turnaround. Besides being based on bad evidence and false perceptions, talk about a ‘Buffet’ tax rule only adds to the cloud of uncertainty keeping us in the current economic rut.