Tag: adam smith

Is Libertarianism Selfishness?

That’s what Michael Gerson, former speechwriter for President George W. Bush, writes in the Washington Post. I take a different view in my new column at the Encyclopedia Britannica Blog:

Libertarians want to live in what Adam Smith called the Great Society, the complex and productive society made possible by social interaction. We agree with George Soros that “cooperation is as much a part of the system as competition.” In fact, we consider cooperation so essential to human flourishing that we don’t just want to talk about it; we want to create social institutions that make it possible. That is what property rights, limited government, and the rule of law are all about….

The American, and libertarian, belief in freedom is not a “mania,” nor is it “selfishness.” It’s a philosophy of individual rights, the rule of law, and the institutions necessary for social cooperation. Read Locke, Hume, Smith, TocquevilleHayek—and yes, Rand—if you seriously believe that the philosophy of freedom can be summed up as “selfishness.”

Much more at the Britannica.

A Happy Birthday to The Wealth of Nations

Today marks the 235th anniversary of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, otherwise known as The Wealth of Nations. I chatted with GMU economics professor Russ Roberts on the book and its enduring impact. This is the first of a two-part discussion:

And you might as well subscribe to the podcast via iTunes or your RSS reader.

Pro-Choice Activists Become Skeptics of Regulation

In the Richmond Times-Dispatch, Barton Hinkle notes that the Virginia General Assembly has just passed “tough new regulations on abortion clinics.” And

Suddenly, outraged liberals are sounding remarkably like libertarian advocates of laissez-faire capitalism and the industries they defend.

For instance, abortion-rights supporters already are warning that the heavy hand of government will impose requirements so absurd and so economically burdensome that they will force clinics to close their doors. “What they’ll do is put a burden of extra cost that is not backed up by sound science,” said one abortion provider who spoke on condition of … whoops! Actually, those were the words of Alva Carter Jr., chairman of a New Mexico dairy industry group, who was protesting new groundwater pollution regulations last April.

“The scale of the … current assault is unprecedented,” complained Planned Parenthood spokes — no, that was The Wall Street Journal, raging last November against the EPA. The paper said the agency “has turned a regulatory firehose on U.S. business and the power industry in particular.”

“The massive red tape … threatens to strangle … the industry,” complained — well, that was Investor’s Business Daily, writing about the Dodd-Frank financial bill last year. The paper cited a report by the American Bankers Association warning that “the coming ‘tsunami of regulations’ could wipe out hundreds of smaller banks.” Substitute “abortion clinics” for “smaller banks,” and you have the Virginia debate in a nutshell. (And yes, let’s stipulate right here that many so-called conservatives believe in limited government everywhere except the uterus.)

“They could require things that are completely unnecessary.” That actually was a quote from an abortion-rights supporter: Shelley Abrams, the director of A Capital Women’s Clinic in Richmond.

And she is entirely right. Sometimes government does require things that are not strictly necessary. And those requirements impose a heavy financial burden. This is hardly a revelation. Small-government advocates have been saying it for many years. Yelling it, actually, at the top of their lungs. To little avail.

Example: Supporters of abortion rights now worry that even existing clinics might have to obtain a Certificate of Public Need from the state. To which one might reply: Why should they be different? For years, certain voices in Virginia have been suggesting that the COPN process — essentially, a government permission slip for health-care providers — creates an unnecessary market entry barrier. They have argued that government has no business deciding whether a particular community needs a particular health-care facility.

He goes on to note that

when free-marketeers and industry groups gripe about the burden of governmental regulation, they often get truth-squadded by deeply skeptical liberals. On Monday, the AP’s “Spin Meter” gave the gimlet eye to predictions that the Obama administration’s new smog regulations could destroy more than 7 million jobs. The news service pointed out that the researcher who came up with the number was “industry-sponsored.” (Boo.) It lamented the “imprecise economic models” used. (Hiss.) And it pointed out that “those opposed to government regulations rarely mention the potential benefits to society.” Amen, brother.

Hinkle hopes that people concerned about the burden that regulation imposes on abortion clinics will eventually come to recognize that regulation also imposes costs and burdens on every other business.

Jerry Taylor and I have both noted in the past the differing media treatment of abortion and other science and health issues. Looking at two NPR stories on the same day, I praised one on the dangers of abortion pills:

It was a good example of careful, cautious reporting. But why are journalists seemingly much more cautious in reporting medical risks involving abortion than in reporting other kinds of risks? There are plenty of critics of the “junk science” involved in the Vioxx stories; why aren’t they interviewed in Vioxx stories? The numbers were small in the Vioxx study, as in the case of the abortion drugs, but that fact was dismissed in one report and emphasized in the other.

Cato’s Jerry Taylor noticed something similar in a Wall Street Journal column 11 years ago (January 3, 1995; not online). He noted that the Journal of the National Cancer Institute

caused quite a stir by publishing an epidemiological study suggesting that women who have abortions are 50% more likely to develop breast cancer than women who do not….”Not so fast,” countered epidemiologists; a 1.5 risk ratio (as epidemiologists put it) “is not strong enough to call induced abortion a risk factor for breast cancer.”

Taylor agreed that a 1.5 risk ratio is below the appropriate level of concern. But he wondered why “the same risk ratio that was so widely pooh-poohed by scientists as insignificant and inconclusive when it comes to abortion was deemed by the very same scientists an intolerable health menace when it comes to secondhand smoke. Actually, that’s not quite true. The 1.3 risk factor for a single abortion was significantly greater than the really hard to detect 1.19 risk ratio for intensive, 40-year, day-in-day-out pack-a-day exposure to secondhand smoke (as figured by the EPA).”

Adam Smith Quote of the Day

“In great empires the people who live in the capital, and in the provinces remote from the scene of action, feel, many of them scarce any inconveniency from the war; but enjoy, at their ease, the amusement of reading in the newspapers the exploits of their own fleets and armies.  To them this amusement compensates the small difference between the taxes which they pay on account of the war, and those which they had been accustomed to pay in time of peace.  They are commonly dissatisfied with the return of peace, which puts an end to their amusement, and to a thousand visionary hopes of conquest and national glory, from a longer continuance of the war.”

- Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Book 5, Chapter 3

Was Bill Clinton Also an “Extremist” on Trade?

This has not been a good week for the national Democratic Party. Along with losing the Massachusetts Senate seat, the party took another step toward making hostility to trade liberalization a plank of party orthodoxy.

As my Cato colleague Sallie James flagged earlier today, the Democratic Congressional Campaign Committee issued a press release yesterday criticizing a Republican candidate in upstate New York for contributing to the Cato Institute. And, of course, everyone knows that Cato is “a right wing extremist group that has long been a vocal advocate for extremist, unfair trade policies that would allow companies to ship American jobs overseas.”

Among our sins, in the eyes of the DCCC, is that Cato research has supported tariff-reducing trade agreements, such as the North American Free Trade Agreement (NAFTA). Our work has also advocated unilateral trade liberalization—getting rid of self-damaging U.S. trade barriers regardless of what other countries do—which violates the conventional Washington wisdom that we can’t lower our own barriers without demanding “reciprocity” and “a level playing field” from other nations

There is nothing extreme about our work on trade. It fits comfortably within mainstream economics expounded not only by Adam Smith and Milton Freidman but by such liberals as Paul Samuelson and Larry Summers.

In fact, for decades, the Democratic Party embraced lower barriers to trade:

  • In the 1930s and ’40s, President Franklin Roosevelt and his Nobel-Peace-Prize-winning Secretary of State Cordell Hull lead the United States away from the disastrous protectionism of President Hoover and a Republican Congress.
  • Democratic Presidents Kennedy, Johnson, and Carter all supported successful agreements in the General Agreement on Tariffs and Trade to reduce trade barriers at home and abroad.
  • Bill Clinton, the only Democrat to be re-elected president since FDR, persuaded a Democratic Congress to enact NAFTA in 1993 and the Uruguay Round Agreements Act in 1994, which created the World Trade Organization. Clinton also championed permanent normal trade relations with China in 2000, which ushered that nation into the WTO.
  • In the previous Congress, scores of House Democrats co-sponsored “The Affordable Footwear Act,” which would have unilaterally lowered tariffs on imported shoes popular with low-income Americans. Liberal Democrat Earl Blumenauer of Oregon visited the Cato Institute in July 2008 to speak in favor of the bill. (Will he be the next target of a DCCC press release for cavorting with “extremists”?) In the current Congress, a similar bill in the Senate is currently co-sponsored by such prominent Democrats as Dick Durban (Ill.), Chuck Schumer (N.Y.), and Mary Landrieu (La.).

To learn more about why Democrats (and Republicans) should support free trade, I highly recommend two books: Mad about Trade: Why Main Street America Should Embrace Globalization, by yours truly; and Freedom From Want: Liberalism and the Global Economy, by Edward Gresser, a trade expert with the Democratic Leadership Council.

Do You Like Swedish Models?

No, not these kind. Instead, I’m in Stockholm for a meeting of the Mont Pelerin Society, and this gathering of classical liberals (i.e., the Adam Smith types that believe in freedom, not the modern liberals that favor collectivism) has featured some discussion of the Scandinavian social welfare state - often referred to as the Swedish Model.

What is particularly interesting is that Sweden is not the left-wing paradise that some imagine. Yes, government is far too big, consuming about 50 percent of economic output. But Sweden also has an extensive system of school choice. Equally remarkable, Sweden has a system of personal retirement accounts. Indeed, if one removed fiscal policy variables from the ratings, Sweden would be more free market than the United States in the Economic Freedom of the World rankings.

But even in the area of fiscal policy, Sweden is making progress. In recent years, policy makers have abolished both the death tax and the wealth tax. And the corporate tax rate has been reduced significantly below the U.S. level.

Sweden often is cited as an example of a nation that proves a big welfare state is not an obstacle to being a rich society. But as I wrote in my study comparing the United States and the Nordic nations:

Many prosperous nations in Western Europe have large welfare states. This leads unsophisticated observers to sometimes assume that high tax rates and high levels of government spending do not hinder growth. Indeed, they sometimes even conclude that bigger government somehow facilitates growth. …This analysis puts the cart before the horse. It is possible for a nation to become rich and then adopt a welfare state. …A poor nation that adopts the welfare state, however, is unlikely to ever become rich. Before the 1960s, Nordic nations had modest levels of taxation and spending. They also enjoyed—and still enjoy—laissez-faire policies and open markets in other areas. These are the policies that enabled Nordic nations to prosper for much of the 20th century. Once their countries became rich, politicians in Nordic nations focused on how to redistribute the wealth that was generated by private-sector activity. This sequence is important. Nordic nations became rich, and then government expanded. This expansion of government has slowed growth, but slow growth for a rich nation is much less of a burden than slow growth in a poor nation.

Wrong, Wrong, Wrong, Wrong, WRONG!!

The Pittsburgh Tribune-Review quotes Republican National Committee chairman Michael Steele on how Congress should go about reforming health care:

Having Congress reshape health care puts “the wrong people at the table,” Steele said. He said stakeholders — “doctors, lawyers, health care employees, insurance companies” — should develop a solution and present it to Congress, rather than the other way around.

Steele needs to brush up on his Adam Smith:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

Like I said, Jonathan Chait was on to something.