President Barack Obama recently sat down with the Today Show’s Ann Curry to discuss jobs and private sector hiring.  Curry asked him why during a time of “record profits” for corporations they had only spent 2% more toward hiring new workers but 26% percent more on new equipment.

Obama explained how structural economic changes have shifted businesses toward using more equipment and technology, explaining how “businesses have learned to be more efficient with fewer workers” in response to the recession. He provided some examples: “You see it when you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate.”

Much coverage of the interview falsely claimed that Obama blamed technology, or ATMs for high unemployment. This is simply untrue. He did not claim that technology is driving unemployment, but instead that employment is changing as technology increases the productivity of labor.

The interview did reveal that his alleged solution to the problem is more government control of the economy, administered by a panel of experts: “What we have to do now, and this is what the jobs council is all about, is identifying where the jobs for the future are going to be, how do we make sure that there’s a match between what people are getting trained for and the jobs that exist, how do we make sure that capital is flowing in those places with the greatest opportunity.” This may sound good in theory, yet the question remains: how does he know where the jobs of the future are going to be, and how can he determine which job training will prove most valuable, and how can he know which areas have the greatest opportunity, and how can he know where to send capital?

It is not likely that the President’s Council on Jobs and Competitiveness, made up of about two dozen bright and capable business men and women, will have sufficient knowledge either to determine where capital should flow or where the future jobs will be, or what job training will be best rewarded. Private investors, risking their own capital, cannot consistently predict what markets will succeed or which technologies will flourish. How can we expect a council of political appointees wagering other people’s money to do any better?

Nobel laureate FA Hayek discussed the problems associated with central economic planning in his seminal American Economic Review article, “The Use of Knowledge in Society” and in his book The Fatal Conceit. Hayek argued that the economy is a very complex system, fueled by the knowledge and actions of millions of independent actors. Hayek warned that any plan to centrally control production would be doomed to inevitable failure because central planners lack sufficient information to ensure that supply equals demand in every market in the economy. The abysmal standard of living and collapse of the Soviet Union validated Hayek’s theory of the impossibility of planning something as complex as a country’s economy.

Clearly, Obama is not suggesting anything nearly as extreme as centrally planned production. Nevertheless, President Obama makes his assumptions clear in this interview that he believes this jobs council holds the capacity to gain sufficient knowledge to help guide capital investments and encourage job creation in the areas they identify. Instead of having our President and a few smart individuals making decisions with limited information, we could allow the market mechanism, made up of millions of individual decision markers, to transmit the information and knowledge necessary for market actors to guide capital appropriately.

For President Obama to assume that he and or his council have the knowledge sufficient to make these determinations is a fatal conceit.

The Fatal Conceit Continues is a post from Cato @ Liberty - Cato Institute Blog

The media makes it hard for ordinary people to be libertarians. In large part, this is because journalism is in the business of selling panic—panic about terrorism, panic about drugs, panic about food, panic about pornography, panic about our health care system. If it’s not an emergency, it’s not news. To the lazy journalist, everything becomes an emergency—and emergencies always—always—demand state action.

The media makes things hard for the would-be libertarian in other ways, too. Consider this story from today’s Washington Post, about… well, it’s hard to say, actually:

Senate Democrats unveiled a plan Tuesday to save $21 billion over the next decade by eliminating tax breaks for the nation’s five biggest oil companies, a move designed to counter Republican demands to control the soaring national debt without new taxes.

With the proposal, Democrats sought to reframe the debate over debt reduction to include fresh revenue as well as sharp cuts in spending. For the first time, Democratic leaders suggested an equal split between spending cuts and new taxes — “50-50,” said Senate Majority Leader Harry M. Reid (Nev.).

That represents a larger share for taxes than has been proposed by either President Obama or the bipartisan commission he appointed to recommend how to cut the national debt.

So far, the Democratic tax agenda is focused on ending subsidies for big oil companies, a hugely popular proposal involving what Democrats see as a prime example of wasteful giveaways in the tax code. By raising the issue, Democrats are trying to force Republicans either to drop their rigid stance against new taxes or to defend taxpayer subsidies for some of the world’s most profitable corporations, including Ex­xon Mobil, Shell, BP, Chevron and ConocoPhillips.

The proposal came in response to remarks Tuesday by House Speaker John A. Boehner (R-Ohio), who said raising taxes is “off the table.” A day earlier, he gave a speech demanding more than $2 trillion in spending cuts in exchange for GOP support for an increase in the legal limit on government borrowing through the end of next year.

Where am I confused, you ask? On almost everything a libertarian ought to care about. I’ll explain.

One of the key aspects of any good law is generality—that is, equality before the law. As F. A. Hayek put it:

[T]hough government has to administer means which have been put at its disposal (including the services of all those whom it has hired to carry out its instructions), this does not mean that it should similarly administer the efforts of private citizens. What distinguishes a free from an unfree society is that in the former each individual has a recognized private sphere clearly distinct from the public sphere, and the private individual cannot be ordered about but is expected to obey only the rules which are equally applicable to all….

The general, abstract rules, which are laws in the substantive sense, are… essentially long-term measures, referring to yet unnkown cases and containing no references to particular persons, places, or objects. Such laws must always be prospective, never retrospective, in their effect (The Constitution of Liberty, chapter 14, section 2).

Now, with every passing day our government stomps all over this generality requirement again and again, chiefly in the economic sphere. But is it doing so on the front page of today’s Washington Post? That’s a good question.

I can think of lots of ways we might deny a tax break to a certain five oil corporations. Some are decidedly better than others in their generality. Consider the following, ranked from least general to most:

1. “The corporations known as Ex­xon Mobil, Shell, BP, Chevron and ConocoPhillips are hereby denied tax break X. All others still qualify, or not, as they did before.”
2. “Oil corporations with an annual revenue above $198 billion are denied tax break X.”
3. “We find that tax break X itself is lacking in generality. It is hereby repealed, and the overall corporate tax rate is increased accordingly.”

Which one are they proposing? From the story’s first paragraph, we could easily conclude that it was (1). Many people on the left would be happy with (1), because big corporations are anathema to them, and everything they do is evil, and punishing them—generality be damned—is just great.

But then, it could also be (2), and this measure is somewhat more general, even if ConocoPhillips—the smallest company on the list—just so happens to have an annual revenue of $198.655 billion. As Hayek noted, “[C]lassification in abstract terms can always be carried to the point at which, in fact, the class singled out consists only of particular known persons or even a single individual” (ibid., section 4). Hypocrisy is the tribute vice pays to virtue.

And finally, there’s (3), clearly the winner in terms of generality. Is that in fact the proposal being discussed by members of Congress? Or is it still more general than that—something perhaps as described by my colleagues Jerry Taylor and Peter Van Doren earlier this month?

Last week President Barack Obama responded to rising public anger over soaring gasoline prices by banging the drums for the elimination of various tax breaks enjoyed by the oil and gas industry…

[L]et the record show that President Obama is right… about these tax breaks. They make the economy less — not more — efficient and do nothing to reduce prices at the pump.

Rigging the tax code to make investments in manufacturing artificially more attractive than investments in something else is an enterprise designed to harm non-manufacturers for the benefit of … manufacturers. Conservatives who want government to leave markets alone have no business throwing their political bodies in front of this tax break. If their political rhetoric means anything, they would see the president’s bid and raise him by calling for total repeal of this tax break for everyone, not just for oil and gas companies.

If only we were so lucky! Getting back to the Post, we learn much later in the story—in the fifteenth paragraph —that the congressional proposal “would close several long-standing tax loopholes, yielding roughly $2 billion a year in savings to be applied to lowering the deficit. It would affect only the five largest oil companies, excluding smaller producers.”

This is confusing to the point of deception. Does it really “close” a loophole to take a few entities and exclude them from the prior exclusion from the tax? By my understanding, it makes the law less general, more convoluted and more arbitrary, than it was before. Close the loophole—or just don’t close it, I think a Hayek might say. Don’t make companies play human Tetris to figure out whether they aren’t not un-disincluded.

One day I think people will look back on our era—from roughly the civil rights movement to the present—and marvel. They will be amazed at how, while the law grew much more general regarding many non-economic matters, it became increasingly partial and favoritist when it came to running a business. At times our journalism and even our language seemed blind to this contradictory development, which only encouraged it. Even thinking about the generality of our laws is made difficult when it’s just not a topic on the national media’s radar.

But equality before the law should apply, well, equally. Shouldn’t it?

Journalism and Generality is a post from Cato @ Liberty - Cato Institute Blog

President Obama has been saying that if the United States government can find and eliminate Osama bin Laden after ten years of searching, it can do anything:

Already, in several appearances since the raid, Obama has described it as a reminder that “as a nation there is nothing that we can’t do,” as he put it during an unrelated White House ceremony Monday. On Sunday night, during his first comments about the operation, he linked it to American values, saying the country is “once again reminded that America can do whatever we set our mind to.”

This is, of course, nonsense. Finding bin Laden, difficult as it proved to be, was an incomparably simple task compared to using coercion and central planning to bring about desired results in defiance of economic reality. You can’t deliver better health care to more people for less money by reducing the role of incentives and markets, even if you set your mind to it. As Russell Roberts said about a similar concept, “If we can put a man on the moon, then…”:

Putting a man on the moon is an engineering problem. It yields to a sufficient application of reason and resources. Eliminating poverty is an economic problem (and by the word “economic” I do not mean financial or related to money), a challenge that involves emergent results. In such a setting, money alone—in the amounts that a non-economic approach might suggest, one that ignores the impact of incentives and markets—is unlikely to be successful.

Obama should listen to Bill Clinton, who last fall seemed to be channeling Hayek:

Friedrich Hayek, The Fatal Conceit: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

Bill Clinton, 9/21: “Do you know how many political and economic decisions are made in this world by people who don’t know what in the living daylights they are talking about?”

Clinton, Obama, and Hayek is a post from Cato @ Liberty - Cato Institute Blog

Keynes and Hayek are at it again in this new video from EconStories.tv.

According to the National Bureau of Economic Research, the Great Recession ended almost two years ago, in the summer of 2009. Yet we’re all uneasy. Job growth has been disappointing. The recovery seems fragile. Where should we head from here? Is that question even meaningful? Can the government steer the economy or have past attempts helped create the mess we’re still in?

The video was produced by Russ Roberts, advisor to the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, and John Papola for EconStories.tv. I could be mistaken, but I believe that’s Duke professor Michael Munger as the bumbling security guard.

Look Who’s Back. Keynes and Hayek. is a post from Cato @ Liberty - Cato Institute Blog

I’ve been meaning to write about how ObamaCare’s unelected rationing board — innocuously titled the Independent Payment Advisory Board — is yet another example of the Left leading America down the road to serfdom.  (Efforts to limit political speech — innocuously called “campaign finance reform” — are another.)

As Friedrich Hayek explained in The Road to Serfdom (1944), when democracies allow government to direct economic activity, the inevitable failures lead to calls for a more authoritarian form of governance:

Parliaments come to be regarded as ineffective “talking shops,” unable or incompetent to carry out the tasks for which they have been chosen. The conviction grows that if efficient planning is to be done, the direction must be taken “out of politics” and placed in the hands of experts — permanent officials or independent autonomous bodies.

The problem is well known to socialists.  It will soon be half a century since the Webbs began to complain of “the increased incapacity of the House of Commons to cope with its work.”

Sound familiar?  National Review‘s Rich Lowry picks up on the theme here.

Making this connection got a lot easier the other day when the University of Chicago’s Harold Pollack, a leading advocate of a “public option,” vented his frustrations over at The American Prospect blog about how Congress is likely to defang the Independent Payment Advisory Board. And he ends up just where Hayek predicted:

Despite many reasons for caution — the words George W. Bush foremost among them — I’m becoming more of a believer in an imperial presidency in domestic policy. Congress seems too screwed up and fragmented to address our most pressing problems.

This isn’t how it starts. This is how it snowballs.

Paging Dr. Hayek…

Inside Every Leftist Is a Little Authoritarian Dying to Get Out is a post from Cato @ Liberty - Cato Institute Blog

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, Tocqueville, Hayek—and yes, Rand—if you seriously believe that the philosophy of freedom can be summed up as “selfishness.”

Much more at the Britannica.

Is Libertarianism Selfishness? is a post from Cato @ Liberty - Cato Institute Blog

I’ve been noticing a game lately played in the bookish corners of the left side of American politics. We’ll call it “We Know Hayek Better Than You.” It’s a game not without some attendant dangers. But it’s nothing if not fun.

Writing at Ezra Klein’s spot in the Washington Post, Karl Smith quotes Friedrich Hayek as follows:

That the ideal of justice of most socialists would be satisfied if merely private income from property were abolished and the differences between the earned incomes of different people remained what they are now, is true. What these people forget is that in transferring all property in the means of production to the state they put the state in a position whereby its action must in effect decide all other incomes.

He glosses:

That is, as Hayek goes on to explain, there is nothing fundamentally wrong with communal ownership of the means of production. The mistake is to think that the government could facilitate such ownership because then the government is effectively a monopolist and that would give the government almost unlimited power.

The idea that in principle it would be okay to completely redistribute all capital wealth is far to the left of anything proposed in modern America.

I hate to say it, but this is quite the dog’s breakfast of confusion, misinterpretation, and strained reading. One ought to be suspicious when your author writes an entire book entitled The Mirage of Social Justice. Perhaps he’s not really too enthused about social justice, you know.

Although it’s probably true that most socialists‘ idea of justice would be satisfied if income from private property were abolished, it does not follow that this was Hayek’s idea of justice. Hayek didn’t think it was “okay” to collectivize the entire means of production, whether by the state or by private action.

The ability to accumulate capital and to believe that one held it justly was, for Hayek, a most important incentive for the formation of responsible individuals. If the means of production were collectivized, individual character would suffer, and society would suffer with it. He wrote:

A free society will not function or maintain itself unless its members regard it as right that each individual occupy the position that results from his action and accept it as due to his own action. Though it can offer to the individual only chances and though the outcome of his efforts will depend on innumerable accidents, it forcefully directs his attention to those circumstances that he can control as if they were the only ones that mattered (The Constitution of Liberty, Chicago: University of Chicago Press, 1978, p. 78).

The sense of responsibility has been weakened in modern times as much by overextending the range of an individual’s responsibilities as by exculpating him from the actual consequences of his actions… To be effective, responsibility must be both definite and limited, adapted both emotionally and intellectually to human capacities. It is quite as destructive of any sense of responsibility to be taught that one is responsible for everything as to be taught that one cannot be held responsible for anything…

Responsibility, to be effective, must be individual responsibility. In a free society there cannot be any collective responsibility of the members of a group as such, unless they have, by concerted action, all made themselves individually and severally responsible… If the same concerns are made the responsibility of many without at the same time imposing a duty of joint and agreed action, the result is usually that nobody really accepts responsibility. As everybody’s property in effect is nobody’s property, so everybody’s responsibility is nobody’s responsibility (ibid., p 83).

So no, Hayek wouldn’t have thought it was a good idea to collectivize the means of production. There are some interesting theoretical questions hereabouts regarding corporations, their appropriate size, responsibilities, and attendant knowledge problems, but I suspect that my friends on the left aren’t actually pining for one megacorporation to rule them all. (Are they? I know it can be tough to keep up, but really, this is too much. Even I don’t support that.)

Hayek tells us we have private property and private capital because it does good things to the individual character. While there will be accidents, and while life is sometimes truly unfair, the best course of action is nonetheless for everyone to work as though their efforts actually mattered. And the best way to ensure that they will do so is to allow their efforts, whenever possible, to matter.

And when individual initiative has failed, what did Hayek want then? He wanted a modest system of social insurance — with emphasis on the modesty. After that, he wanted very stern incentives for people to get back up on their feet and leave that system.

One incentive that he considered at least reasonable was to forbid welfare recipients (and government workers!) from voting — an idea far to the right of anything now being considered in America. But not a bad idea in the abstract. He wrote:

It is also possible for reasonable people to argue that the ideals of democracy would be better served if, say, all the servants of government or all recipients of public charity were excluded from the vote (ibid., 105).

I look forward to my friends on the left continuing to deepen their knowledge of Hayek, and maybe entertaining this modest proposal. Were it not for my overwhelming concerns about how our current welfare system entraps its recipients, I might even support it myself.

Saving Hayek from the People Who Think They’re Saving Hayek is a post from Cato @ Liberty - Cato Institute Blog

In his recent book Ill Fares the Land, a passionate defense of the democratic socialist ideal, the historian Tony Judt writes that Hayek would have been (justly) doomed to obscurity if not for the financial difficulty experienced by the welfare state, which was exploited by conservatives like Margaret Thatcher and Ronald Reagan.

Yes, if Hayek had been wrong about the viability of the welfare state, then his warnings would have had less resonance.

This line appears in a generally thoughtful treatment of how The Road to Serfdom has stayed in print for decades and become a bestseller in the past two years. The article by Jennifer Schuessler appeared in the New York Times Book Review last July, but has only just come to my attention.

Good Point is a post from Cato @ Liberty - Cato Institute Blog

New York Times reporter Kate Zernike generated a lot of spit-takes in the blogosphere when she wrote on October 2 about how Tea Party activists are reading “once-obscure texts by dead writers“:

The Tea Party is a thoroughly modern movement, organizing on Twitter and Facebook to become the most dynamic force of the midterm elections.

But when it comes to ideology, it has reached back to dusty bookshelves for long-dormant ideas.

It has resurrected once-obscure texts by dead writers — in some cases elevating them to best-seller status — to form a kind of Tea Party canon. Recommended by Tea Party icons like Ron Paul and Glenn Beck, the texts are being quoted everywhere from protest signs to Republican Party platforms.

Pamphlets in the Tea Party bid for a Second American Revolution, the works include Frédéric Bastiat’s “The Law,” published in 1850, which proclaimed that taxing people to pay for schools or roads was government-sanctioned theft, and Friedrich Hayek’s “Road to Serfdom” (1944), which argued that a government that intervened in the economy would inevitably intervene in every aspect of its citizens’ lives.

So that’s, you know, “long-dormant ideas” like those of F. A. Hayek, the winner of the Nobel Prize in Economics, who met with President Reagan at the White House, whose book The Constitution of Liberty was declared by Margaret Thatcher “This is what we believe,” who was described by Milton Friedman as “the most important social thinker of the 20th century” and by White House economic adviser Lawrence H. Summers as the author of “the single most important thing to learn from an economics course today,” who is the hero of The Commanding Heights, the book and PBS series by Daniel Yergin and Joseph Stanislaw, and whose book The Road to Serfdom has never gone out of print and has sold 100,000 copies this year.

So that’s Kate Zernike’s idea of an obscure, long-dormant thinker.

Meanwhile, over the next few weeks after that article ran, the following headlines appeared in the New York Times:

• Cuts in Britain Ignore Views of Keynes

• What Would Keynes Say Today?

• Democrats Are at Odds on Relevance of Keynes

Apparently the Times isn’t always opposed to looking in the dusty books of long-dead writers. By the way, Keynes died in 1946, Hayek in 1992.

Dusty Bookshelves and Long-Dead Writers is a post from Cato @ Liberty - Cato Institute Blog

From Greg Mankiw:

Friedrich Hayek, The Fatal Conceit: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

Bill Clinton, 9/21: “Do you know how many political and economic decisions are made in this world by people who don’t know what in the living daylights they are talking about?”

Bill Clinton Channels Friedrich Hayek is a post from Cato @ Liberty - Cato Institute Blog

Glenn Reynolds, a law professor at the University of Tennessee but better known as Instapundit, writes in the Washington Examiner that the controversy over big corporations’ reporting the impact of the new health care legislation on their tax bills illustrates the “Knowledge Problem” identified by Nobel laureate F. A. Hayek in “The Use of Knowledge in Society” and other writings. Hayek pointed out that the information needed to run an economy doesn’t exist in any one database or agency. It is scattered among millions of people and made available to others by means of the price system. Planning and regulation do away with the information embodied in prices and try to improve on market outcomes by making use of far less information.

Reynolds writes, “Recent events suggest that it’s not just the economy that regulators don’t understand well enough — it’s also their own regulations.”

Regulation and the Knowledge Problem is a post from Cato @ Liberty - Cato Institute Blog

Bruce Caldwell, editor of The Collected Works of F. A. Hayek and Director of the Center for the History of Political Economy at Duke University, writes in today’s Washington Post about the booming interest in Hayek:

Friedrich Hayek, Nobel-prize winning economist and well-known proponent of free markets, is having a big month. He was last seen rap-debating with John Maynard Keynes in the viral video above, (in which Hayek is portrayed as the sober voice of reason while Keynes overindulges at a party at the Fed). His 1944 book, “The Road to Serfdom,” provided the theme for John Stossel’s Fox Business News program on Valentine’s Day.

Hayek, who died in 1992, is also reemerging as a bestselling author. A new edition of Hayek’s seminal book, “The Road to Serfdom,” was published in March 2007 by the University of Chicago Press as part of a series called “The Collected Works of F. A. Hayek,” for which I serve as editor. For over a year-and-a-half, the book sold respectably, at a clip of about 600 copies a month.

But then, in November 2008, sales more than quadrupled, and they haven’t slowed down since. What’s more, the Kindle edition went on sale in late May 2009 and is now the best-selling book that the University of Chicago Press has offered in that format.

I reported on the rising sales of The Road to Serfdom last July. I argued that a Wall Street Journal op-ed by Dick Armey had sent sales jumping in February. Caldwell has a slightly different answer. After noting the general concern about President Obama’s big-government program and the talk about socialized medicine, he writes:

But perhaps the biggest stimulus to sales was, well, the stimulus package. The macroeconomic analyses of John Maynard Keynes had gone quickly out of vogue in the 1970s, when a decade of stagflation delivered a death blow to the notion of Keynesian fine-tuning of the economy. But in early 2009, people were talking about Keynes again, and indeed the fiscal stimulus package, to the extent that it had a theoretical underpinning, would find one in Keynesian economics….

Because Keynes and Hayek actually did have a great debate over their rival theoretical models of a monetary economy in the early 1930s, just as the Slump of 1930 was turning into the Great Depression, it seemed natural for opponents of these policies to turn to Hayek’s writings. (For those who are interested in this episode, I recommend a perusal of volume 9 of The Collected Works, Contra Keynes and Cambridge.)

Not only is “The Road to Serfdom” still relevant in our own time, it has something else going for it, too. It is actually readable. Anyone who has tried to master Keynes’s “General Theory,” or for that matter Hayek’s rival title “Prices and Production,” will find the going pretty tough.

Not so for “The Road to Serfdom,” a book that was condensed by Reader’s Digest in April 1945, just as the war in Europe was ending. Plus, “The Road to Serfdom” is, simply put, a great, evocative title. And with 10 percent unemployment, people certainly have more time to read it.

In the end, however, I think that the underlying reason for the sustained interest in Hayek’s book is that it taps into a profound dissatisfaction in the public mind with the machinations of its government. Both Presidents Bush and Obama have presided over huge growth in the size of the federal government and in the size of the federal deficit, with little obvious effect on unemployment. Things seem out of control.

Whether it was the financial crisis, the stimulus package, Dick Armey’s endorsement, or general fears about the growth of government, I’m glad to see people rediscovering F. A. Hayek. His ideas are a good foundation for a coherent and consistent response to the collectivist resurgence that now seems to be on the defensive.

The Hayek Boom is a post from Cato @ Liberty - Cato Institute Blog

• Health care insurance mandates: Why it is unconstitutional for the government to force you to purchase a product you don’t want to buy.

• Should malpractice reform be included in the pending health care bill?

• The end of globalization? Cato’s trade policy expert Daniel Griswold debates.

• Doug Bandow on the minaret ban in Switzerland: “Swiss voters underestimated the impact on religious liberty when they voted to ban minaret construction. But Muslims whose nations persecute Christians, Jews, and other religious minorities have no standing to complain. The Islamic world needs to respect religious liberty at home before lecturing the West about intolerance, racism, hatred and Islamophobia.”

• More debate over Hayek and spontaneous order at Cato Unbound.

• Podcast: “Obama’s nation-building in Afghanistan“

Weekend Links is a post from Cato @ Liberty - Cato Institute Blog

• Well, so much for the peace presidency…

• Patrick Michaels on Copenhagen: “Expect a lot of heat, not much light, and a punt right into our next election.”

• Why the Supreme Court should strike down the Public Company Accounting Oversight Board: “Imagine a government agency with the authority to create and enforce laws, prosecute and adjudicate violations, and impose criminal penalties. Then throw in the power to levy taxes to pay for all the above. And for good measure, make the agency independent of political oversight.”

• Discussing Hayek over at Cato Unbound: Four problems with spontaneous order.

• Podcast: “Obama’s Patriot Act Duplicity.”

Tuesday Links is a post from Cato @ Liberty - Cato Institute Blog

“My critics say that I’m taking over every sector of the economy,” President Obama sighed to George Stephanopoulos during his Sunday media blitz.

Not every sector. Just

• health care
• energy
• local schools
• banks
• insurance companies
• automobile companies
• compensation at financial firms
• newspapers
• the internet

This president and his Ivy League advisers believe that they know how an economy should develop better than hundreds of millions of market participants spending their own money every day. That is what F. A. Hayek called the “fatal conceit,” the idea that smart people can design a real economy on the basis of their abstract ideas.

This is not quite socialism. In most of these cases, President Obama doesn’t propose to actually nationalize the means of production. (In the case of the automobile companies, he clearly did.) He just wants to use government money and government regulations to extend political control over all these sectors of the economy. And the more political control achieves, the more we can expect political favoritism, corruption, uneconomic decisions, and slower economic growth.

Taking Over Everything is a post from Cato @ Liberty - Cato Institute Blog

In the 2009 Economic Freedom of the World Report, Chile is now #5, one place ahead of the United States.

In 1975, of 72 countries, Chile was No 71. How did this happen? The explanation lies in what I call the “Chilean Revolution,” because it was as important and transformative to my country as the celebrated American Revolution that gave birth to the United States.

The exceptional political circumstances of this period have obscured the fact that from 1975 to 1989 a true revolution took place in Chile, involving a radical, comprehensive, and sustained move toward economic and political freedom (from a starting point where there was neither one nor the other). This revolution not only doubled Chile’s historic rate of economic growth (to an average of 7% a year, 84-98),  drastically reduced poverty (from 45% to 15%), and introduced several radical libertarian reforms that set the country on a path toward rapid development; but it also brought democracy, restored limited government, and established the rule of law.

In 1998, The Los Angeles Times described the importance of the Chilean Revolution to the world:

In a sense, it all began in Chile. In the early 1970s, Chile was one of the first economies in the developing world to test such concepts as deregulation of industries, privatization of state companies, freeing of prices from government control, and opening of the home market to imports. In 1981, Chile privatized its social-security system. Many of those ideas ultimately spread throughout Latin America and to the rest of the world. They are behind the reformation of Eastern Europe and the states of the former Soviet Union today… which demonstrates, once again, the awesome power of ideas.

The role and achievements of Chile’s team of classical liberal economists is well known. They were the ones who in 1975, once the quasi-civil war was over, decided to carry out a principled, “friendly takeover” of the military government that had arisen from the breakdown of democracy in 1973 (here is my essay, published in “Society”, on that drama). Much less well-known, however, is that they were also the foremost proponents of a gradual and constitutional return to a limited democracy.

In fact, on August 8, 1980, a new Constitution, containing both a bill of rights and a timeline for the restoration of full political freedom, was proposed and approved in a referendum. In the period 1981-1989, what Fareed Zakaria has called the “institutions of liberty” were created—an  independent Central Bank, a Constitutional Court, private television and universities, voting registration laws, etc—since they were crucial for having not only elections but a democracy at the service of freedom. Then on March 11, 1990, an extraordinary event happened: the governing military Junta surrendered its power to a democratically elected government in strict accordance to the 1980 Constitution (here is my note on the restoration of democracy in Chile).

Since 1990, Chile has had four moderate center-left governments and, despite minor setbacks on tax, labor and regulation policies, the essence of the free-market reforms are still intact. The 1980 Constitution is the law of the land, and has been amended by consensual agreements among all parties represented in Congress. Not only is Chile now at the top of rankings on free trade (number 3 in the world after Hong Kong and Singapore) and transparency (less corruption that in most western European countries), but it is expected to be a developed country by 2018, the first in Latin America.

Nobel Laureate Friedrich Hayek proved, again, to have been a visionary when he stated in 1981: “Chile is now a great success. The world shall come to regard the recovery of Chile as one of the great economic miracles of our time.”

Why Chile Is More Economically Free Than the United States is a post from Cato @ Liberty - Cato Institute Blog

Lobbying expenditures are up in the second quarter of the Obama administration, reports the Center for Responsive Politics. Well-connected Democratic lobbyists like former House majority leader Richard Gephardt and Tony Podesta, the brother of Obama transition director John Podesta, did especially well. Given the administration’s focus on nationalizing health care and energy, it’s no surprise that health care and energy companies were the biggest spenders. Businesses don’t have unified interests, of course; some health care companies and industry sectors lobby against a government-run insurance plan while they support a federal mandate that every American purchase health insurance. Other firms may just work to get their own members onto the gravy train.

As Craig Holman of the Nader-founded Public Citizen told Marketplace Radio the last time such a report was issued, “the amount spent on lobbying . . . is related entirely to how much the federal government intervenes in the private economy.”

Marketplace’s Ronni Radbill noted then, “In other words, the more active the government, the more the private sector will spend to have its say…. With the White House injecting billions of dollars into the economy, lobbyists say interest groups are paying a lot more attention to Washington than they have in a very long time.”

Of course, this is not a new story. I pointed out in the Wall Street Journal in 1983 that Hayek had told us what to expect back in 1944:

If more money can be made by investing in Washington than by drilling another oil well, money will be spent there.

Nobel laureate F.A. Hayek explained the process 40 years ago in his prophetic book The Road to Serfdom: “As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power.”

In a graphic on page A6 of the February 13 edition, not available online, the Washington Post reported that “A Washington Post analysis found that more than 90 organizations hired lobbyists to specifically influence provisions of the massive stimulus bill.” The graphic showed that the number of newly registered lobbying clients had peaked on the day after Obama’s inauguration and continued to grow as the bill worked its way through both houses of Congress. More on the frenzied efforts to get a piece of the taxpayers’ money in the spending bill here and here.

And the beat goes on: The congressional newspaper The Hill reports, “Lobbyists lining up for shot at climate bill.”

And that of course is why Patrick Appel reports at the Andrew Sullivan blog that Washington is the hottest city for job-seekers these days.

If you want money flowing to the companies with good lobbyists and powerful congressmen, then all these spending and regulatory bills may accomplish something. But we should all recognize that we’re taking money out of the competitive, individually directed part of society and turning it over to the politically controlled sector. Politicians rather than consumers will pick winners and losers.

Just as important, businesses will devote their time, money, and brainpower to influencing decisions made in Washington rather than to developing better products and delivering them to consumers. The tragedy is that the most important factor in America’s economic future — in raising everyone’s standard of living — is not land, or money, or computers; it’s human talent. And an increasing part of the human talent at America’s companies is being diverted from productive activity to protecting the company from political predation. With every spending program and every new regulation, the parasite economy sucks in another productive enterprise. Do we really want the best brains at companies from General Motors and General Electric (this quarter’s biggest lobbyist) to Google and Goldman Sachs focused on working Washington rather than serving consumers?

Lobbying: A Booming Business in a Politicized Economy is a post from Cato @ Liberty - Cato Institute Blog

The AP reports today that president Obama wants the nation’s school districts to close 5,000 failing schools and re-open them with new principals and teachers. Here is why this won’t work:

• Typically, public schools only dismiss teachers when they are forced to reduce their workforce for budget reasons, but the president has just infused the system with $100 billion to prevent such dismissals. And when teachers are let go, it is done starting with those with the least seniority, not the lowest performance. So the hundreds of thousands of teachers displaced from failing schools will simply move to other schools rather than being replaced by better teachers. This has been going on for decades. It is called “the parade of the lemons.” Overall, it achieves nothing.
• The new principals who take over the formerly failing schools have to come from somewhere. So for every school that gets one of the system’s “good” principals, there will be another school that loses one. Public schooling has no incentive structure to ensure that it can identify, hire, and retain competent administrators to strengthen its ranks.

What the president is trying to do in education — as in the auto industry — is to replace the web of market forces that close failing businesses in the private sector with his own personal diktat. This is Hayek’s Fatal Conceit.

The market solves the problem of failing schools by allowing consumers to chose the ones that serve them best, which simultaneously accomplishes two things: it drives failing schools to either improve or go out of business, and it provides incentives for the expansion of successful schools and the hiring of effective teachers and administrators.

As I wrote here, and in expanded and updated form in vol. 3, no. 1, of the Journal of School Choice, the international scientific evidence reveals the overwhelming superiority of market over monopoly schooling. President Obama’s educational dirigism will fail.

Barack Obama “Fatally Conceited” on Education is a post from Cato @ Liberty - Cato Institute Blog