Some thoughts on the fallacy of representative government

So I am reading an article in the NYT about the recent Republican healthcare plan. Ignoring the plan itself and all surrounding issues I want to briefly touch on one aspect of the article that I found quite revealing. Now remember this is about a vote on a Medicare bill. Rightly or wrongly, I am sure everyone would agree that the issue of Medicare and healthcare in general is about taking care of elderly people, more specifically taking care of elderly people when they are ill. Now on to the quote from the article I want to discuss:

Others still, like George Allen, a Republican candidate for Senate in Virginia, appear to be trying to suss out where the political minefields are, and refuse to say if they support the plan or not.

This is such a non-controversial statement that the article rightly pays no more attention to it, other than mentioning why some congressman have yet to declare their stance on this bill. That is to say, it is a given that politicians make their decisions based on political incentives as opposed to the content of the bill itself.

So here is what I find fascinating. No one will find anything I have written so far even remotely interesting or original. Politicians don't vote on bills based on the merits of the bill itself, but instead based on political incentives. This is common knowledge and widely accepted to be true, even by ardent supporters of government.

So my question is, how does a system comprised of thousands of people making decisions based solely on political incentives spit out results that are supposedly in the best interest of the people? In this particular example those people whom government is supposedly taking care of is elderly people in need of medical attention.

Yet the merits of the bill that will totally overhaul and define the mandatory nationwide healthcare plan that will affect virtually every senior citizen has almost nothing to do with whether or not a particular politician votes for it. Do you see the problem here?


Is Rollback the most important book of our time?

That's obviously impossible to say, but the lessons learned from it are of paramount importance to every living person on this planet.

For now I want to focus on one small subsection of Chapter 5 of the book, "Less Bang for the Buck: Pentagon Spending, the Military, and the U.S. Economy."

Specifically what I found so illuminating about this part of Dr. Thomas Woods' overall fantastic new book, Rollback, is the unseen costs of Pentagon spending, the military, and its effects on the U.S. economy as a whole.

It is common knowledge that there is a tremendous amount of waste associated with military spending. Even the most ardent supporters of big government don't contest this point, but rather say the associated inefficiencies and waste endemic to the nature of military spending are a necessary sacrifice for the greater good of a strong military. While I will not delve into combating that argument now, I do want to highlight how Dr. Woods' new book demonstrates with shocking clarity that the unseen costs of military spending are so much greater than one can even comprehend.

Drawing from the great Frederic Bastiat's essay, "What is Seen and What Is Not Seen" Woods documents the destruction of capital, productivity, and resources that stems from our current military-industrial complex. Some examples include things like: "Over a period of two years, the average U.S. motorist uses about as much fuel as does a single F-16 training jet in less than an hour."

The most disturbing cost of military spending in my view, however, is the capital consumption. Dr. Woods highlights that as a result of decades of the Pentagon routinely over-bidding on the goods it buys (the government is much less willing to shop for the best possible price and will frequently pay above market value) the cost of producer goods, such as machine making tools, have been artificially inflated. After coming to depend on the government as your primary buyer, there is much less incentive to compete on price and, consequently, the price of these capital goods are artificially inflated.

When the cost of capital rises, the productivity of the economy as a whole falters. This should be fairly straightforward to grasp, but mind numbing to truly comprehend its total effect. When the costs for new capital and improved means of production rises, entrepreneurs (whom don't have access to the taxpayer derived spigot of funds) will tend to delay or eschew purchasing new forms of capital as their budgetary needs require.

The result of this, to have an economy using decades-old infrastructure, delaying upgrading machinery to more productive models, is felt everywhere. The economy as a whole is made poorer. Innovation and new products that otherwise would have been created are never seen. The average worker sees his marginal productivity value and wages rise slower than they would have otherwise. It goes on and on.

This phenomenon makes perfect sense when you realize that by driving up the cost of capital and machine-making tool prices, production everywhere, not just in military, is going to see its cost rise. The trickle down effect that is a result of this is truly incalculable.

I've long known that government and the military in specific is a giant parasite on productive wealth, I've never before truly grasped the magnitude of the unseen costs as well though. Rollback peels back the curtain to expose this, and many other aspects of government that leaves the reader feeling dazed and left to ponder what riches we might have uncovered if this enormous cost was not forced upon the taxpayer and our society as a whole.

For more information and even to be able to read Chapter 1 for free, please visit: http://www.tomwoods.com/books/rollback/


Chaos Theory!

The new issue of Bloomberg Businessweek is out with an article titled, "The Arms Race Against the Pirates." This article reads like a real world example of how the free market would deal with the problems of police and security in a world absent of any government whatsoever, as outlined in the short book, Chaos Theory, by Robert Murphy.

The article is really a very interesting read and highlights how in the absence of any government provided protection in 2.8 million square miles of ocean, insurance companies provided the impetus for innovation in the market for security and protection. A quote from the article:

To deal with this 21st century version of an ancient threat, ship owners, often at the behest of their insurers, have resorted to tactics old and new-from razor wire, fie hoses, and safe rooms to long range acoustic devices, laser dazzlers, and, most recently, armed guards.

I mean I thought the idea of a sonic gun that propels sound waves that can incapacitate your enemy was only something that exists in Spiderman comics!

The statist might now remark on how the burden for providing for this protection is unfairly placed onto the innocent ship owners. Let's continue reading:

In the eyes of insurers, however, there is no equal to the threat of lethal force. Says Clive Stoddart, global head for kidnap and ransom for Aon Risk Solutions insurance brokerage: "There really is no substitute for having a weapon: live ammunition carried by people who have the right training." Marsh's Gustafson states the case simply: "Not one ship has been taken that has an armed security team on board." For a tanker transiting high-risk waters, an armed, four-person security detail costs about $30,000. That's expensive, but insurers are willing to discount premiums by as much as $20,000 for ships that use them, says Catlin underwriter Stuart Allen. Catlin's Dobbs relays the report of one security firm: In 1,000 transits through treacherous waters there were 90 encounters with pirates. Seventy-two were resolved simply by showing arms. Of the remaining 18, three were deterred by warning shots fired into the air, and 15 by single shots fired near the pirate vessel.

So again we see Dr. Murphy's hypothesis that it would be insurance companies that would bear most of the cost and provide the most effective forms of policing and security. Their reasons for doing so are simple and based on the one certainty we know of human action, self-interest. That is to say, simply due to their own self interest to not have to pay out massive insurance claims, it is in the insurance companies best interest to provide discounts and incentives for ships that are more secure and thus less likely to be robbed, than their counterparts. Unfortunately the article ends by bringing us back to reality and reminding us the brilliance of the free market is still not appreciated even when it rises up and slaps you in the face with a giant sonic cannon. Referring to the ultra effective armed security detail that had emerged spontaneously with no central planning required, the article closes out with the following quote:

"There aren't enough of these guys to protect the ships," says Frodl. "And by the time you start hiring guys to fill in the void, you're going to get guys who really aren't qualified for the job."

Well, that's one possibility. Or, and bear with me here, quite possibly the increased demand for high level security personnel could result in greater pay for said security personnel. Which then leads to more people becoming interested in this profession to fill this alleged void that those whom have not fully grasped the workings of the market appear to be concerned with.

Damn, it's good to be an anarchist!