Author Archives: Nuetzel

The Abolition of Wealth

12 Tuesday Feb 2019

Posted by in Free markets, Redistribution, Taxes

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Few weep for the wealthy when they are attacked by redistributionists, but perhaps we should. Recent expressions of hatred for the so-called super-rich extend to the merely affluent, of course, but billionaires are much less likely to find sympathy. Those proposing to “abolish billionaires” by laying public claim to their assets and incomes have little reason to expect a popular backlash. Nevertheless, there are strong reasons to defend the wealthy and their right to control the riches they accumulate. Don Boudreaux has some words we should all take to heart:

“While exceptions no doubt exist, the people who get rich in our economy are overwhelmingly people who have made the rest of us richer.”

Boudreaux is correct in noting that “anti-billionaire” sentiment is marked in people who know little of the complexities of actually producing things. Wealth creation is a two-way street. On one end is a cadre of innovators and risk-takers whose rewards are often concentrated. On the other end are the many beneficiaries of those innovations: eager buyers of value-enhanced products whose rewards are relatively diffuse but very meaningful nonetheless. The same dynamic takes place in generating lower levels of wealth, among hard-working small entrepreneurs and savers. Eliminate one set of rewards and the other will vanish.

Redistributionists are aware of scarcity at a basic level, but it’s as if they take for granted that a certain quantity of product will be on the shelves irrespective of the policy environment, incentives, and basic guarantees of economic liberty. As Boudreaux says:

“If food, clothing, medical care, automobiles, houses, diamond rings, airplane seats, rolls of paper towels, and all other good and services were randomly rained down onto earth by some heavenly being, it would then be true that the more of these goodies that I manage to grab, the fewer are the goodies available for you to grab, and vice versa. … And so if through simple luck or sinister cunning I grab more than you grab, then the resulting inequality in our wealth has no good justification. If the government seizes from me a chunk of ‘my’ stuff and gives it to you, no ethical offense is committed.”

That’s not how it works in a world in which effort and resourcefulness are required to satisfy wants. Under a truly liberal order, such efforts are voluntary, motivated by the promise and prospect of secure rewards. And so, as consumers, we can possess the riches made possible through the efforts of innovators and risk-takers. If successful, their rewards are earned by producing value that not only exceeds their own costs, but exceeds the prices buyers are asked to pay. Today’s most prominent billionaires have brought to market products, services, and ways of transacting that we’d never have imagined even a few years prior to their introduction. Computer operating systems, smart phones, on-line retailing, and room- and ride-sharing are just a few examples.

Nick Gillespie makes much the same point in quoting Joseph Schumpeter:

“The capitalist engine is first and last an engine of mass production which unavoidably also means production for the masses. . . . It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within reach of factory girls.”

Then there are the highly popular musicians and actors of the day, with wealth approaching (and in a few cases exceeding) $1 billion. Gillespie uses Paul McCartney as a case in point. Rather than “cheating” his way to wealth, McCartney’s fans would heartily agree that his talents are well worth the wealth he’s managed to accumulate. Would advocates of “abolishing” billionaires deny all this? They contend, in their own arbitrary judgment, that the market’s objective assessment cannot justify wealth of this magnitude.

Redistributionists also resent that anyone of wealth might have the gall to hold it or invest it rather than give it away. First, as noted above, secure rights provide the necessary incentives to create, produce, and take risks ex ante, which help enrich us all ex post. But those rights also must be secure ex post, and not subject to the whims of the next generation of socialist nitwits. In addition, as Gillespie says:

“Would there be less suffering in the world if [McCartney’s] money is expropriated and transferred to the wretched of the earth via higher taxes rather than through his own charitable donations and investments? Probably not, especially when you think about how much suffering, especially in the developing world, is the direct result of government action.”

Gillespie also marshals statistics on changes in measures of inequality that do not support the claims of redistributionists. In a separate post, Boudreaux makes that case here. Furthermore, the U.S. already has arguably the most progressive tax system in the developed world, even if transfers to the poor are not as generous as in some countries.

The sheer ignorance of many progressives is well illustrated by the “war against billionaires“. These critics of wealth demonstrate all the economic sophistication of preening high-school social studies students. Unfortunately, they are now coddled by certain established officeholders too eager to seek approval from the fringe left than to bother with responsible policy analysis.

It’s a short rhetorical step from condemning billionaires to condemning mere millionaires and sub-millionaires, and coveting their wealth. The victims here will ultimately include successful small business people and professionals who not only employ large segments of the population but also provide many of the services and wares we rely on in our day-to-day lives. Their success is not only well-earned: it is continuously exposed to risk from competitive forces. Rapacious politicians will never cease in their efforts to apply confiscatory taxes to the wealth of the very affluent. Soon enough, tax policy will reach farther down into the wealth distribution. These are games better suited to children or even vicious animals. Redistributionists think in zero-sum terms, with no appreciation for the positive-sum outcomes enabled by secure rights and free markets. Their failure to grasp the dynamics of free markets is at the root of their advocacy for disastrously negative-sum policies.

 

How Empowered Bleeding Hearts Do Harden

01 Friday Feb 2019

Posted by in Collectivism, Socialism, The Road To Serfdom, Tyranny

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Here’s an empirical regularity: altruists attaining power to collectivize society’s productive machinery do not stay nice for long. In fact, aggressive pursuit of their goals might compel them to participate in brutal tyranny. But why? What happens to these sweet egalitarians who are, after all, imbued with the most earnest desire to elevate the common man by equalizing the fruits of society’s bounty?

Bryan Caplan offers Venezuela as Exhibit A in “A Short Hop from Bleeding Heart to Mailed Fist“:

“When Hugo Chavez began ruling Venezuela, he sounded like a classic bleeding-heart – full of pity for the poor and downtrodden. Plenty of people took him at his words – not just Venezuelans, but much of the international bleeding-heart community. … Almost every Communist dictatorship launches with mountains of humanitarian propaganda. Yet ultimately, almost everyone who doesn’t fear for his life wakes up and smells the tyranny.”

Venezuela’s collapse is merely the most recent in a long history of socialist debacles. Authoritarians certainly come in other stripes, but collectivists seem especially prone to the development of vicious alter-egos. But again, why?

Caplan knows the answer, and in something of a dialectical exercise, he proposes several explanations for the nice-to-nasty phenomenon. It’s not the infiltration of “bad guys”. Plenty of evidence suggests that the same people are at both ends of the transition, and for now let’s give the benefit of the doubt to the nicest elements of the avant guarde, or even those who go simply along on the basis of their idealism. It’s implausible that such humanitarian souls could believe it will be necessary, at the outset, to crush their opposition by force. Moreover, that approach risks immediate outcomes that are far too dire. Might an authoritarian or militaristic turn be necessary to deter hostile foreign actors who might attempt to foil collectivization? If so, it still doesn’t explain why subjugation of domestic citizens is ultimately accepted as a legitimate use of force by sincere altruists.

Caplan moves on to more compelling explanations of the disorder. Perhaps the expression of bleeding heart intentions is propaganda from the very start. Perhaps the rhetoric is really just hate speech disguised as noble intent. Surely those two explanations comport with the behavior of those having uglier motives for collectivism: envy and vengeance. And while those elements are certain to be active in any socialist front, they don’t explain why the bleeders also abecome beaters.

The best explanation for the horrid metamorphosis of empowered altruists is that egalitarian policies simply do not work very well. Caplan says:

“Bleeding-heart policies work so poorly that only the mailed fist can sustain them. In this story, the bleeding hearts are at least initially sincere. If their policies worked well enough to inspire broad support, the bleeding hearts would play nice. Unfortunately, bleeding-heart policies are exorbitantly expensive and often directly counter-productive. Pursued aggressively, they predictably lead to disaster. At this point, a saintly bleeding heart will admit error and back off. A pragmatic bleeding heart will compromise. The rest, however, respond to their own failures with rage and scapegoating. Once you institutionalize that rage and scapegoating, the mailed fist has arrived.” [Caplan’s emphasis]

The compulsory nature of policies advocated by leftists makes their system of social organization inherently unstable. With the imposition of every rule limiting the operation of private markets, with every compromise of the price mechanism, and with every new confiscatory policy, the economy becomes more feeble and inflexible. As several commenters on Caplan’s post note, socialists are people who simply do not understand economics.

The path to collectivism always involves promises that are impossible to keep. Personal concerns must be renounced in favor of the collective. Individuals are denied their freedom to act on creative impulses and their ability to cooperate freely with others in pursuit of personal well-being. Those are human rights that are quite unnatural to part with. That means it is impossible to achieve the collective without an implicit or explicit threat of enforcement through violent police power. Bleeding hearts will actually participate in the inevitable tyranny because they are so convinced of the righteousness of their cause.

Whether you call it socialism or social democracy makes no difference. The latter merely cloaks tyranny in a majoritarian dominance that would have enraged our nation’s founders. They understood the despotism inherent in allowing a majority to dictate the existence of basic rights. However, the bleeding hearts are always sure they know “what’s right” without weighing implications beyond the injustice du jour. That demands the application of force. And when confronted with the catastrophic results of their peremptory whimsy, they have no choice but to use still more force.

The banality of evil is truly a progressive disease. Fortunately, we have a preventive vaccine: the U.S. Constitution. But it will work only if we’re wise enough to rely on the framer’s original intent.

 

“Othered” By the Left

31 Thursday Jan 2019

Posted by in fascism, Identity Politics, Progressivism

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Progressivism certainly has its discards. The photo showed a trash bin labeled “CATHOLIC DUMPSTER”. Dead bodies were hanging out of the top. A “friend” had posted it on Facebook, ostensibly as humor. I thought it was in poor taste and had the temerity to say so in a comment; naturally I was immediately castigated by a mob for expressing that opinion. The “friend” said that if I really knew him, I’d realize that he loves everyone. That claim was quickly undermined by his partner, who joined the exchange to spew vitriol for Christians. A wiser person on the thread, perhaps detecting a whiff of hypocrisy, noted the likely outrage had the label on the trash bin said “JEWISH DUMPSTER”. Well yes…. Er, maybe. The political Left, it seems, is drifting ever closer to anti-Semitism as well as radical intolerance for Christians. This in addition to outright hostility toward whites, men, or anyone perceived as having “privilege”. The rhetoric is becoming increasingly hateful, vile, and violent.

A recent confrontation in front of the Lincoln Memorial wrapped together several objects of leftist hatred. It involved boys from Covington Catholic High School and left-wing activist Nathan Phillips, an Omaha Indian, as well as a group of black nationalists called the Black Hebrew Israelites. The Covington boys are white, male, Catholic, pro-life, and they wore MAGA caps. They were passive except for chants intended to drown-out shouts of “faggots” from the Black Israelites, but the media almost uniformly portrayed the boys as racist villains in the immediate aftermath, based on incomplete video evidence. It is difficult to ascertain who released the original video, but a longer version proved that the boys were not at fault. Meanwhile, Phillips proved to be a bald-faced liar. He lied about the sequence of events, the behavior of the boys, and about having served in Vietnam. But those lies fueled a media narrative as well as the fertile imaginations of many leftists. The full video reveals that Phillips marched from some distance straight up to one of the teenagers and proceeded to bang a drum in the kid’s face. The boy maintained his composure and kept a calm smile on his face. Later, however, that smile was cited as proof of racism!

A few members of the media retracted the awful things they said about the teenagers and the incident, but others continue to allege that the Covington teenagers were at fault, or that they at least share the blame. Some of the rhetoric is no less hateful than before the full video became available. This is a far cry from the heartfelt entreaties to avoid criticism of any controversial opinions expressed by “the children” in the wake of the Parkland High School shooting. In the present case. the kids have been targeted with a slew of insults and threats to themselves and their families.

Regarding the MAGA caps, I am by no means a Trump enthusiast, but I root for him to do well as our president despite my strong disapproval of some of his policies. You won’t ever catch me in a MAGA cap. However, I do not believe that he and his political base are racist. Trump is an equal opportunity denigrator, but he’s called a racist every time his target happens to be a person of color, as though people of color are always above criticism. Trump is called a racist for his promise to build a wall along the Mexican border to stem illegal crossings, though the same proposal has been offered by many Democrats over the years, including Barack Obama and Check Schumer. Therefore, the very idea that wearing a MAGA cap is a racist signal is transparently political and absurd. That some of the Covington boys wore MAGA caps has reinforced other excuses to target them for vicious criticism.

A further issue is that the Covington boys are privileged, you see, guilty of possessing white, male privilege, even as they defended a black classmate harangued by the Black Israelites. They attend a private school, and so they must be from wealthy families and worthy of progressive hatred. They were in DC for the March for Life, so they are opposed to reproductive choice and must hate women. In fact, it’s been alleged that they were in DC only to oppose the Women’s March. Misogynists!

Hatred for Catholics and for anyone who has attended private schools is always de rigueur on the Left. That was quite clear during the Brett Kavanaugh confirmation hearings. Hatred gushed from the Left not only because they were satisfied of Judge Kavanaugh’s guilt based on unsubstantiated, 11th-hour allegations leveled against him by an SJW, but apparently also because he attended a Catholic boys school! Oh, and he is male. I have another “friend” whose Facebook feed was littered with smears of Kavanaugh, including characterizations of private school kids as “smug little weasels”. As Caroline Lewis said at the time, these “critics” are barbarians. Do you think they don’t want to hurt those they’ve “othered”, or want someone else to hurt them in one way or another? The boundaries of grievance always expand, and will keep expanding until they eat their own.

David French claims that his defense of Christian education prompted an activist to start the #ExposeChristianSchools hashtag. Now, I’m sure everyone who has attended public or private schools can repeat a litany of stories about a few awful teachers they were forced to endure, not to mention the hostile environment that school children often create for one another. But private schools, and religious schools, are often superior options for parents and children. If you don’t like the curriculum, don’t send your kids there. If you don’t think the policies are sufficiently inclusive, or the environment will be unhealthy for your child, then send them elsewhere. But the vilification of an entire segment of the population based on how they choose to educate their children is despicable. They’d ban Christian education if they could… and religion!

Note that the Left’s insistence on state domination is itself a threat of violence. While capitalism and free markets are cooperative in nature, socialism is at its core authoritarian and coercive. If you resist you become an enemy of “the people”, and such enemies will have consequences to pay.

Antifa is unashamedly violent, but it might be only the tip of the iceberg. The rhetoric of the Left has become increasingly hostile toward Christians, Jews, males, whites, Republicans, and of course anyone achieving material success. There is no forgiveness nor genuine love of others in leftist doctrine. Indeed, the “otherism” inherent in leftist identity politics is dangerous and a source of increasing social instability. Their “eliminationist rhetoric” is becoming all too common (scroll down at the link).

For now I’ll continue to engage in the marketplace of ideas. Perhaps it’s becoming a war. Us “others” need to keep voting and never back down. And by all means, be prepared to defend ourselves and our loved ones by any means necessary.

 

 

 

 

 

Bad Idea: Campaign Finance Reform

25 Friday Jan 2019

Posted by in Campaign Finance, Free Speech

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Everyone seems to hate money in politics, and nearly everyone says campaign finance reform is needed to eliminate political corruption… nearly. Money in politics is blamed for allowing powerful interests to “buy” seats in the legislature, or in executive positions, as well as “tit-for-tat” influence over pieces of legislation. But not so fast: attempts at campaign finance regulation in the past have been largely unsuccessful in achieving their goals. Furthermore, campaign finance reforms may have perverse consequences, which I’ll discuss below. More importantly, while “taking money out of politics” sounds noble to many, it starkly implies abrogation of First Amendment rights. Far from “leveling the playing field”, there is a great danger that it would lead to suppression of minority opinions. For those reasons. it’s better to consider other means of ensuring that elected officials behave even-handedly in attending to their duties.

Protected Speech

Former Congressman Ron Paul is highly skeptical that any good can come of campaign finance legislation:

“…campaign finance reform legislation does not limit the influence of powerful special interests. Instead, it violates the First Amendment and burdens those seeking real change in government.”

Here is David Harsanyi on the same point:

“Reducing the power of ‘special interests’ in Washington is always a popular issue with voters. The problem, of course, is that every voter considers another group a special interest. … specific campaign finance reform legislation is always about inhibiting someone’s speech.”

Government attempts to curb speech are bad enough, but there is also interest in subsidizing speech arising from certain quarters. Harsanyi is rightly critical of a House bill that proposes to do just that, and Nancy Pelosi has promised to bring the bill to the floor. Among other things, it would authorize a 6-to-1 federal match of small-dollar campaign donations so as to promote “grass-roots” electoral efforts. It is quite simply a bad idea to create a mechanism whereby government bureaucrats can manipulate campaign funding, potentially favoring certain kinds of speech, via the explicit use of funds from taxpayers who might well blanche at the thought of funding certain campaigns.

The bill would also impose new disclosure requirements on large contributions to 501(c)(4) organizations, which qualify as “social welfare” groups under the tax code, and whose “primary” purpose is not campaign-related. To this he says:

“… this obsession with eliminating anonymity is also a transparent attempt to chill speech and undermine minority opinions.”

Let’s face it: to complain about the use of money in promoting speech is to complain about speech itself. We can all speak out loud, but one can’t hope to spread a message broadly without bringing resources to bear on the effort. That’s true whether you are printing, broadcasting, or spreading messages on social media. It almost always takes staff, including creative talent, equipment, media buying power, and usually office space. If you don’t have the requisite resources then you must hustle, press flesh, cajole members of the media, and join with other like-minded individuals, especially those who might agree to commit resources.

Barring a monopoly on speech, choosing a particular scale at which speech becomes unacceptable is itself a denial of the right to free speech. And that right can be exercised by individuals and by associations of individuals. As to the latter, the form of association makes no difference: the union, nonprofit, and for-profit corporate forms are all valid associations through which individuals can speak as one, just as all for-profit media corporations have always exercised their First Amendment rights. That was the Supreme Court’s ruling in Citizen’s United vs. Federal Election Commission (FEC) in 2009, which remains oddly controversial. Again, if you think the ability to speak from a large platform is too much, then you are also willing to restrict speech by for-profit newspapers and television networks, and you are a tyrant.

Money and Electoral Success

In any case, virtually all campaign contributions originating in the for-profit corporate sector come from employee political action committees (PACs), not from corporations themselves. And since Citizen’s United, there’s been little uptick in campaign contributions from for-profit corporations. In fact, according to this report on campaign finance, unions have been much more aggressive than businesses in leveraging the Citizen’s United decision. The report also demonstrates the unsurprising fact that incumbents tend to spend much more on elections than their challengers. However, the authors note that across incumbents, greater spending is associated with lower vote shares, while the reverse is true across challengers. That just means, however, that incumbents must spend a lot to defeat a serious challenger.

Jeffrey Milyo made the last point more than 15 years ago:

“Most systematic studies, however, find no effect of marginal campaign spending on the electoral success of candidates … How can this be so? The best explanation to date is that competent candidates are adept at both convincing contributors to give money and convincing voters to give their vote. Consequently, the finding that campaign spending and electoral success are highly correlated exaggerates the importance of money to a candidate’s chances of winning.”

There is also a lack of evidence that politicians trade their votes for campaign contributions:

“… donors tend to give to like-minded candidates. Of course, if candidates choose their policy positions in anticipation of a subsequent payoff in campaign contributions, there would be no real distinction between accepting bribes and accepting contributions from like-minded voters. However, studies of legislative behavior indicate that the most important determinants of an incumbent’s voting record are constituent interests, party, and personal ideology.”

A tremendous disparity exists between public perceptions of the importance of money in political campaigns and the actual magnitude of campaign spending. Again, from Milyo:

“If campaign contributions do not buy favors, then why is so much money spent on politics? In fact, scholars of American politics have long noted how little is spent on politics. Consider that large firms spend ten times as much on lobbying as their employees spend on campaign contributions through PACs, as individuals, or in the form of unregulated contributions to political parties (i.e., soft money).”

Milyo’s article was written well before the Citizen’s United decision. At the time it was still illegal for corporations to make campaign contributions, but that seems to have made little difference.

In an Appeals Court decision in 2010, Independent Expenditure Committees (Super PACs) won the right to accept contributions from corporations and individuals beyond federal limits. Super PACs, however, are technically prohibited from coordinating their activities with political candidates for federal office. In fact, Super PACs have been known at times to work at cross-purposes to the political parties whose candidates they generally favor. Furthermore, there is very little evidence that corporate contributions provide more than a small share of Super PAC funds, not even via “dark money” contributions via 501(c) organizations.

Futile Reforms 

Ron Paul (linked above) notes that powerful interests will always find ways to support policies by which they stand to profit. Those interests often benefit from regulatory policies that create burdens for smaller competitors, spending programs that bring fat government contracts, and subsidies in support of favored activities or technologies. However, restricting campaign finance is a particularly troubling and ineffective approach to combating these efforts. As Milyo says:

“The consensus among academic researchers is that money is far less important in determining either election or policy outcomes than conventional wisdom holds it to be. Consequently, the benefits of campaign finance reforms have also been exaggerated.”

Beyond the lack of evidence that reform is needed, Milyo argues that restrictions on campaign contributions may have nasty unintended consequences. First, cross-sectional studies across states have shown that limits on contributions lead to less electoral competition and lower voter turnout. Second, less campaign advertising reduces interest and awareness of candidate positions among voters, also suppressing turnout. Finally, there is a real danger that incumbents can manipulate reform legislation in order to create electoral barriers to potential challengers.

Alternatives

There may be better ways to reduce the influence of moneyed interests on policy than campaign finance reforms. Term limits obviously shorten the duration of the incumbent advantage as well as corrupt actions by any office-holder who is somehow “bought and paid-for”. Most Libertarians favor term limits to reduce corruption and encourage the kinds of “citizen legislators” idealized by the nation’s founders. Others make an opposing argument that it is our electoral duty to remove legislators from office at the ballot box, and therefore term limits were left out of the Constitution for good reason. Still others say that term limits might make corrupt politicians too keen to act quickly.

Another idea is based on the “revolving door tax” often mentioned by Glenn Reynolds. Not infrequently, government bureaucrats are offered lucrative positions with firms whom they regulate, or they take on these firms as private clients once they leave government. Needless to say, this creates perverse incentives for self-interested public servants. Reynolds suggests an additional tax on subsequent income earned after accepting such an offer. Extending the idea to politicians would mean an additional tax on income earned by any former office-holder accepting work for a firm or industry specifically targeted for benefits under legislation they sponsored during their term. There is much detail to be fleshed out, but the idea is fascinating.

Conclusion

Campaign finance reform is futile: there will always be creative ways around it, so it generally doesn’t reap rewards. Campaign funding itself is rather ineffectual at the margin in generating electoral gains. Moreover, campaign finance reform is an endeavor that is almost guaranteed to run afoul of our First Amendment protections of free speech. In addition, the result may a reversion to a less-informed and less interested electorate, lower voter turnout, as well as manipulation of the reform process itself.

Closing “Nonessential” Government

19 Saturday Jan 2019

Posted by in Big Government, Regulation, Uncategorized

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Contrary to the cartoon above, it’s not back up and running, though tax withholding and the impacts of regulatory rules continue unabated, and almost assuredly surveillance as well. After all (!), the federal government shutdown affects only “nonessential” activities of the federal government. Federal workers who are furloughed will receive back pay when the partial shutdown ends, but for now, federal spending is down roughly 25%.

The very real inconveniences for furloughed workers are regrettable. TSA employees continue to work while their paychecks are deferred indefinitely, though rates of absenteeism are high. So, we have slowdowns in security lines at airports, a lack of services at national parks (at least those not managed by private firms collecting revenue from visitors on-site), and a variety of other disruptions. For the time being, however, the lives of most Americans are largely unaffected. Except for the news coverage, my life hasn’t changed in any way, though I haven’t traveled during the shutdown.

Unfounded rumors about the shutdown have been rampant. For instance, I’ve heard that Social Security checks and weather forecasts would be suspended. Nancy Pelosi said the Secret Service would be unable to protect the President at the State of the Union address in the House chamber, a statement which the Department of Homeland Security promptly refuted. Many of the federal agencies with the highest shares of furloughed employees are regulators whose services are arguably counter-productive.

The White House Council of Economic Advisors (CEA) estimates that each additional week of the shutdown will reduce first quarter GDP growth by 0.13%. That means the interruption would take about 0.5% off first quarter growth if it lasts through January (say, from an annual rate of 2.5% to 2.0%). To the extent that people view the shutdown as temporary, and most do, the so-called “multiplier effects” of the shutdown should be relatively minor.

GDP is intended to measure of the value of the economy’s physical output. It is calculated in two independent ways based on 1) all income earned, and 2) the total of all spending on final (not intermediate) goods and services. Most components of final spending are well defined by the values assigned to goods and services traded in markets. Likewise, most incomes are based on the value assigned by labor markets to a given productive effort. Government “output”, however, is rather suspect as a component of spending because it is generally not subject to a market test of value. On the income side of the ledger, do government workers produce actual outputs? Some do, of course, but those outputs cannot be measured except by assigning a value based on what the workers are paid, and the payer is spending other peoples’ money! It’s not too speculative to suggest that the government’s output is a fraction of its spending. If that’s the case, the actual reduction in output caused by the shutdown is much smaller than the measured reduction in GDP. Therefore, the CEA’s estimates are a fiction.

To put an even finer point on it, many nonessential functions absorb resources while contributing very little to the nation’s wealth. Adam Brandon and John Tamny assert that private economic growth gives us the luxury of a large government sector, not the other way around. Government absorbs resources when it spends, but only by virtue of the taxes it imposes on private activity that is otherwise more highly productive. In the long run, as Brandon and Tamny argue, a smaller government (given a permanent shutdown of certain functions) might well yield greater economic output, not less.

Read this interesting essay for a discussion of the wasted, even counterproductive, utilization of human resources in government:

“They do nothing that warrants punishment and nothing of external value. That is their workday: errands for the sake of errands — administering, refining, following and collaborating on process. ‘Process is your friend’ is what delusional civil servants tell themselves. Even senior officials must gain approval from every rank across their department, other agencies and work units for basic administrative chores.

Process is what we serve, process keeps us safe, process is our core value. It takes a lot of people to maintain the process. Process provides jobs. In fact, there are process experts and certified process managers who protect the process. Then there are the 5 percent with moxie (career managers).

Again, many and perhaps most Americans view the shutdown itself with a certain degree of cynicism. In “America’s shutdown indifference“, Matthew Walther recalls this entertaining aspect of the last shutdown under President Obama:

“…of barriers being erected around various D.C.-area landmarks, including open-air war memorials. To this day I cannot think of any good reason for this save sheer caprice. If the idea was that 550-foot obelisks made of granite simply could not be meaningfully serviced during those lean two weeks in 2013, then who was responsible for putting up the rent-a-fence barricades around them? Civic-minded volunteers? The U.S. Marine Corps? Barack Obama himself? It was beautifully cynical, and I congratulate whoever came up with it.”

Both sides of the aisle play politics at the expense of the federal workforce. I certainly don’t wish to denigrate all federal workers. They perform varied functions and many are hard-working individuals. But still, it’s hard to feel very sorry for them given that they out-earn their private sector counterparts at almost every education level. Again, here’s Walther:

“Government employees, at both the state and federal level, are among the only workers in the United States who continue to be represented by powerful unions, despite the fact that by definition they’re not bargaining against capital but against their fellow citizens.”

I haven’t even mentioned the debate over open borders and the proposed wall, but that’s not my purpose here. All parties to that debate seem to think the shutdown is unlikely to harm their side politically. That’s either because the shutdown isn’t perceived as very impactful, or the “other” side can be blamed. One theory making the rounds is that the shutdown is part of a larger plan to institute permanent Reductions in Force (RIFs) at federal agencies, which are permissible after a furlough of 30 days or more (by January 19th). The argument plausibly suggests that some federal agencies might operate more effectively once the bureaucracy is pruned back via furloughs and/or RIFs. That’s especially true if “deep-state” sabotage of efforts to roll-back regulations are as common as the author asserts. Is the shutdown therefore a trap for unsuspecting congressional Democrats? Who knows, but to my way of thinking, government RIFs might even be worth the trouble of building a wall!

Climate Change and Disorders of the Mind

13 Sunday Jan 2019

Posted by in Environment, Global Warming, Socialism

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Let’s hear from an environmentalist and radical animal-rights activist:

“… the extinction of Homo Sapiens would mean survival for millions if not billions, of Earth-dwelling species. Phasing out the human race will solve every problem on earth, social and environmental.”

Okay then, you first! That is an actual quote of Ingrid Newkirk, the misanthropic president of People for the Ethical Treatment of Animals (PETA), as documented by Tom Harris and Tim Ball in “Extreme Environmentalists Are Anti-Human“. I’m no psychologist, but I believe most shrinks would categorize misanthropy as a condition of general dislike for humanity that usually poses no real threat to others. Not always, however, and by my reckoning the sentiments expressed by Newkirk are the ramblings of a disturbed individual. But she’s not alone in her psychosis, by any means.

The sheer lunacy of the environmental Left is nowhere more evident than in the call for mankind’s extinction, and it is not unusual to hear it these days. Here’s a similarly deranged and tyrannical statement from the Voluntary Human Extinction Movement:

“Phasing out the human race by voluntarily ceasing to breed will allow Earth’s biosphere to return to good health … the hopeful alternative to the extinction of millions of species of plants and animals is the voluntary extinction of one species: Homo sapiens … us.“

The policies advocated by many environmentalists don’t go quite that far, but they nevertheless tend to be anti-human, as Harris and Ball demonstrate. In particular, the emphasis on eliminating the use of fossil fuels over the next three decades would consign most people , but especially those in developing countries, to ongoing lives of penury. Here are Harris and Ball:

“Of course, the poor and disadvantaged would be most affected by the inevitable huge rise in energy costs that would accompany the end of fossil fuels. … By promoting the idea that CO2 emissions must be reduced, climate mitigation activists are supporting the expanded use of biofuels. This is resulting in vast quantities of the world’s grain being diverted to fuel instead of food, causing food prices to rise — also causing the most pain among the world’s poor.“

I am highly skeptical of the risks presented by climate change. The magnitude of climate changes on both global and regional scales, even to the present, are subject to so much uncertainty in measurement as to be largely unworthy of policy action. Climate models based on “carbon forcings” have been increasingly in error, and the risks about which we are warned are based on forecasts from the same models far into the future — taking little account of the potential benefits of warming. The purported risks, and the benefits of mitigating actions, are translated into economic terms by models that are themselves subject to tremendous uncertainty. Then, the future calamitous outcomes and the benefits of mitigation are discounted so lightly as to make the lives of future human beings… and plants and animals, and their hypothetical preferences, almost just as important as those of actual human beings who, in the present, are asked to bear the very certain costs of mitigation. The entire pursuit is madness.

Last spring I had a brief discussion with an economist engaged in research on the economics of climate change at the University of Missouri. I mentioned the uncertainties in measuring and aggregating temperatures over time and place (here is one example). He said, with a straight face, that those uncertainties should be disregarded or else “we can’t say anything”. Well yes, as a matter of scientific principle, a high variance always means a greater likelihood that one must accept the null hypothesis! Yet the perspective adopted by the alarmist community is that a disastrous outcome is the null hypothesis — the sky is falling! If it weren’t for government grant money, I’m sure the sense of impending doom would be psychologically debilitating.

And now we are presented with a “Green New Deal” (GND), courtesy of a certain congressional freshman, Alexandria Ocasio-Cortez, whose apparent media appeal is disproportionately greater than her intellectual acumen. The GND would eliminate fossil fuels and nuclear power (which emits zero carbon) from the U.S. energy mix by the impossibly early 2035. That would require the replacement of 88% of U.S. energy sources in about 17 years, which would cripple the U.S. economy and real incomes. The poor would suffer the most, but of course the GND promises much more than a makeover of our energy sources. In fact, it would mandate the replacement of “non-essential individual means of transport with high-quality and modern mass transit”. Welcome to the new authoritarian paradise! All transportation and anything else requiring power would be electrified, a massive infrastructural investment. Oh, and the proposal calls for a slew of socialist programs: a federal job guarantee, a living wage, universal health care, and of course income redistribution. Interestingly, this proposal is consistent with the agenda described in the most widely-reported climate paper in 2018, which Michael Bastasch describes as a call for global socialism.

Cortez’s desperate hope is that all this can be paid for via reductions in defense spending, high taxes on the rich, and “Modern Monetary Theory”. She really doesn’t understand the latter except that it sounds expedient. Like many other leftist numbskulls, she undoubtedly thinks that printing money offers society a free lunch. But printing money simply cannot be transformed into real resources, and such attempts generally have destructive consequences. So the GND might not reflect mental illness so much as sheer stupidity. Anyone familiar with the history of socialism and the realities of public finance knows that the GND would have punishing consequences for everyday people. The so-called Yellow Vests in France should serve to warn of the affront taken by those oppressed by over-reaching government: their protests were originally motivated by a proposed increase in the fuel tax on top of already high energy taxes and other policies that artificially increase the cost of energy.

The environmental lobby has long promoted doomsday scenarios: population growth would outstrip the globe’s capacity for producing food, and resources would become increasingly scarce. In fact, the opposite has occurred. This is demonstrated by Gale L. Pooley and Marian L. Tupy in “The Simon Abundance Index: A New Way to Measure Availability of Resources“. The index is named after the brilliant Julian Simon, who famously made a bet with the doomsayer Paul Erlich on the likely course of prices for five metals. Simon was correct in predicting that markets and human ingenuity would lead to greater abundance, and that prices would fall. But the deep paranoia of the environmental Left continues today. They are oblivious to the lessons of history and the plain market solutions that lie before them. Indeed, those solutions are rejected because they rely on positive action by the presumed villains in their delusional tale: free people. The demonization of mankind, private action, and markets is not just symptomatic of misanthropy; it reflects a deeply paranoid and manipulative psychological state. These would-be tyrants are a real danger to the human race.

Insuring Health Insurability

22 Saturday Dec 2018

Posted by in Health Insurance

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The latest blow to Obamacare went down just before the holidays when a federal judge in Texas ruled that the individual mandate was unconstitutional. The decision will be appealed, so it will have no immediate impact on the health-care law or insurance markets. But as Eugene Volokh noted, the mandate itself became meaningless from an enforcement perspective after the repeal of the penalty tax for non-coverage in 2017, despite the fact that some individuals might still opt for coverage out of “respect for the law”. What will really matter, when and if the decision is upheld, is the nullification of the complex web of regulations created by Obamacare, officially known as the Affordable Care Act or ACA. Perhaps most important among these is the requirement that buyers in good health and those in poor health must be charged the same price for coverage. That is “community rating” and it is the chief reason for the escalation of insurance premiums under Obamacare.

One Size Misfits All

Community rating means that everyone pays the same premium regardless of health. Those in good health must pay higher than actuarially fair premiums to subsidize the sick or high-risk with premiums that are less than actuarially fair. Two provisions of the ACA were intended to make this work: first, the individual mandate required everyone to remain in the game (and paying the subsidies) rather than going uninsured and paying the “tax” penalty. But the penalty was so light that many preferred it to actually buying insurance. Now, of course, the penalty has been repealed. Second, individuals with incomes below 250% of poverty line receive premium subsidies from the federal government to offset the high cost of coverage. That means low-income buyers do not have to confront the high premiums, which was hoped to keep them in the game.

Community rating caused premiums in the individual insurance market to increase dramatically. This was compounded by the law’s minimum coverage requirements, which are more comprehensive than many consumers would have preferred. Lots of younger, healthier consumers opted out while the sick opted in, or even worse, opted in only when they became sick. This deterioration in the “risk pool” is the so-called insurance “death spiral”. The pool of insureds becomes increasingly risky, premiums escalate, more healthy consumers opt out, and the process repeats. At the root of it is the distortion in the way that risk is priced by community rating.

Tailored Coverage

The coverage and pricing of risk is better left to markets. That means consumers and insurers will reach agreement on policy provisions that are mutually beneficial ex ante. Insurers will offer to cover risks up to the point at which the expected marginal cost of underwriting is equal to value, or the buyer’s willingness to pay. An insurer who offers unattractive policies or charges too much will find its business undercut by competitors. But when risk is priced by government fiat and community rating, this natural form of market information discovery is impossible.

Tax vs. Premium Subsidies

Many in the high-risk population will be unable to afford coverage in the absence of community rating. There are only two general options: they pay what they can for care but otherwise go without insurance coverage, accepting charity care if they are willing; or, taxpayers pay, as under Medicaid. Most lack coverage because they simply cannot afford it, even when they earn too much to qualify for Medicaid.

That situation can be resolved in the long-term (as I’ll describe below), but an overhang of individuals with pre-existing conditions in need of subsidies will persist for a period of years. Under Obamacare, subsidies were paid by charging higher premia to healthy individuals through community rating. Again, that distorted signals about risk and value, creating unhealthy incentives among insurance buyers. The death spiral is the outcome. Subsidies funded by general taxation do not create these price distortions, however, and should be relied upon for assisting the high-risk population, at least those who are determined to qualify.

Health Status Insurance

The overhang of individuals with pre-existing conditions requiring subsidies can never be eliminated entirely—every day there are children born with critical, unanticipated health needs. However, the overhang can shrink drastically over time under certain conditions. A development that is already receiving meaningful attention in the market is the sale of health insurance options, as described by John Cochrane. I have written about this method of protecting future insurability here.

Cochrane raises the subject within the context of new HHS rules allowing insurance companies to offer “temporary” insurance coverage up to a year, but with guaranteed renewability through a total of 36 months of coverage. Unfortunately, if you get sick before the end of the 36th month, you’ll have to give up your policy and pay more elsewhere.  But Cochrane speculates:

“Unless, perhaps, they really are letting insurance companies offer the right to buy health insurance as a separate product, and that can have as long a horizon as you want? If they haven’t done that, I suggest they do so! I don’t think the ACA forbids the selling of options on health insurance of arbitrary duration.”

Cochrane links to this earlier article in which John C. Goodman discusses the ruling allowing the sale of temporary plans:

“The ruling pertains to ‘short-term, limited duration’ health plans. These plans are exempt from Obamacare regulations, including mandated benefits and a prohibition on pricing based on expected health expenses. Although they typically last up to 12 months, the Obama administration restricted them to 3 months and outlawed renewal guarantees that protect people who develop a costly health condition from facing a big premium hike on their next purchase.

The Trump administration has now reversed those decisions, allowing short-term plans to last up to 12 months and allowing guaranteed renewals up to three years. The ruling also allows the sale of a separate plan, call ‘health status insurance,’ that protects people from premium increases due to a change in health condition should they want to buy short-term insurance for another 3 years.”

That is far from permanent insurability, but the concept has nevertheless taken hold. An active market in health status insurance would reduce the pre-existing conditions problem to a bare minimum. The financial risks of deteriorating health would be underwritten in advance. Once stricken with illness, those unlucky individuals would then have coverage at standard rates by virtue of the earlier pooling of the risk of future changes in health status. At standard rates, relatively few high-risk individuals would require subsidies in order to afford coverage .

Will healthy, temporarily insured or uninsured individuals buy these options? Some, but not all, so subsidies will never disappear entirely. Still, the population of uninsured individuals with pre-existing conditions will shrink drastically. In the meantime, a healthy market for health insurance coverage should flourish, reestablishing the authority of the consumer over the kind of health care coverage they wish to purchase and the kinds of financial risks they are willing to bear.

 

 

You’re Welcome: Charitable Gifts Prompt Statist Ire

14 Friday Dec 2018

Posted by in Central Planning, Charity, Uncategorized

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Charitable acts are sometimes motivated by a desire to cultivate a favorable reputation, or even to project intelligence. Perhaps certain charitable acts are motivated by guilt of one kind or another. Tax deduction are nice, too. But sometimes a charitable gift is prompted by no more than a desire to help others less fortunate. It’s likely a combination of motives in many cases, but to gainsay the purity of anyone’s charitable motives is rather unseemly. Yet Gaby Del Valle does just that in Vox, casting a skeptical eye at Jeff Bezos’ efforts to help the homeless through his Day 1 Fund.

“Last week, Amazon founder and CEO Jeff Bezos announced that he and his wife, MacKenzie Bezos, were donating $97.5 million to 24 organizations that provide homeless services across the country. The donation is part of Bezos’s $2 billion ‘Day 1 Fund, a philanthropic endeavor … that, according to Bezos, focuses on establishing ‘a network of new, non-profit, tier-one preschools in low-income communities’ and funding existing nonprofits that provide homeless services.”

Del Valle says Bezos deserves little credit for his big gift for several reasons. First, Amazon very publicly opposed a recent initiative for a $275 per employee tax on large employers in Seattle. The proceeds would have been used to fund public programs for the homeless. This allegation suggests that Bezos feels guilty, or that the gift is a cynical attempt to buy-off critics. That might have an element of truth, but the tax was well worthy of opposition on economic grounds — almost as if it was designed to stunt employment and economic growth in the city.

Second, because Amazon has been an engine of growth for Seattle, Del Valle intimates that the company and other large employers are responsible for the city’s high cost of housing and therefore homelessness. Of course, growth in a region’s economy is likely to lead to higher housing prices if the supply of housing does not keep pace, but forsaking economic growth is not a solution. Furthermore, every large city in the country suffers from some degree of homelessness. And not all of those homeless individuals have been “displaced”, as Del Valle would have it. Some have relocated voluntarily without any guarantee or even desire for employment. As for the housing stock, government environmental regulations, zoning policies and rent control (in some markets) restrains expansion, leading to higher costs.

Finally, Del Valle implies that private efforts to help the homeless are somehow inferior to “leadership by elected officials”. Further, she seems to regard these charitable acts as threatening to “public” objectives and government control. At least she doesn’t disguise her authoritarian impulses. Del Valle also quotes a vague allegation that one of the charities beholden to Amazon is less than a paragon of charitable virtue. Well, I have heard similar allegations that government isn’t celebrated for rectitude in fulfilling its duties. Like all statists, Del Valle imagines that government technocrats possess the best vision of how to design aid programs. That attitude is an extension of the scientism and delusions of efficacy typical of central planners. Anyone with the slightest awareness of the government’s poor track record in low-income housing would approach such a question with trepidation. In contrast, private efforts often serve as laboratories in which to test innovative programs that can later be adopted on a broader scale.

While selfishness might motivate private acts of charity in some cases, only voluntary, private charity can ever qualify as real charity. Government benefits for the homeless are funded by taxes, which are compulsory. Such public programs might be justifiable as an extension of social insurance, but it is not charity in any pure sense; neither are it advocates engaged in promoting real charity, despite their conveniently moralistic positioning. And unlike private charity, government redistribution programs can be restrained only through a political process in which substantial payers are a distinct minority of the voting population.

Public aid and private charity have worked alongside each other for many years in the U.S. According to Russ Roberts, private giving to the poor began to be “crowded-out” during the Great Depression by a dramatic increase in public assistance programs. (Also see Doug Bandow’s “War On Charity“.) It’s certainly more difficult to make a case for gifts to the poor when donors are taxed by the government in order to redistribute income.

The statist war on private charity can take other forms. The regulatory apparatus can crowd-out private efforts to extend a helping hand. Chloe Anagnos of the American Institute for Economic Research (AIER) writes of a charity in Kansas City that wanted to provide home-cooked soup to the homeless, but health officials intervened, pouring bleach into the soup. I am aware of similar but less drastic actions in St. Louis, where organizations attempting to hand-out sandwiches to the poor were recently prohibited by health authorities.

Private charity has drawn criticism because its source has driven economic growth, its source has opposed policies that stunt comic growth, and because it might interfere with the remote possibility that government would do it better. But private charity plays a critical role in meeting the needs of the disadvantaged, whether as a substitute for public aid where it falls short, or as a supplement. It can also play a productive role in identifying the most effective designs for aid programs. Of course, there are corrupt organizations and individuals purporting to do charitable work, which argues for a degree of public supervision over private charities. But unfortunately, common sense is too often lost to overzealous enforcement. In general, the public sector should not stand in the way of private charities and charitable acts, but real generosity has little value to those who press for domination by the state.

Relieving the U.S. Public Toilet Shortage: User Fees

12 Wednesday Dec 2018

Posted by in Price Mechanism, Social Costs

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The musical comedy Urinetown opened in 2001 and ran for 965 performances, not a bad run by Broadway standards. The show, which is still performed in theaters around the country, is a melodramatic farce: a town tries to deal with a water shortage by mandating that all townspeople use pay toilets controlled by a malevolent private utility. Despite the play’s premise, pay toilets are a solution to the very real problem of finding decent facilities, or any facility, in which to relieve oneself in public places. Anyone who has ever strolled the streets of a city has encountered this problem from time-to-time. But in the U.S., where local budgets are typically strapped, the choice is often between scarce and decrepit free toilets or no toilets at all. Otherwise, those seeking relief must rely on the kindness business owners or pass laws allowing non-patrons to commandeer businesses’ bathrooms at will. Toilets with user fees, however, are an alternative that should get more emphasis.

In part, the theme of Urinetown reflects a longstanding notion among anti-capitalists that pay toilets are a disgustingly unfair solution to these urgent needs. One can imagine the logic: everyone has a need and a right to make waste, so we should all have access to sparkling public toilets for free! There is also the presumed misogyny of charging at stalls but not urinals (which are cheaper to maintain, after all), but overcoming that problem should not present a great technical hurdle. And surely pay toilets could be made to accept EBT cards, or locally-issued pee-for-free cards for the homeless.

Yes, we all make waste. However, most of us are so modest and fastidious that we quite literally “internalize the externality” we’d otherwise impose on others were we to seek relief in the street or behind trees in the park. We hold it and sometimes incur high costs in search of a restroom. Those are costs many of us would willingly pay to avoid.

As Alex Tabarrok says in “Legalize Pay Toilets“, outrage over pay toilets, very much like the kind expressed in Urinetown, is what led to outright bans on pay toilets in America during the 1970s (also see Sophie House’s discussion of the need for pay toilets at Citylab). According to Tabarrok, “In 1970 there were some 50,000 pay toilets in America and by 1980 there were almost none.” Many travelers know, however, that pay toilets are fairly commonplace in Europe.

In the wake of pay-toilet bans in America, and without the flow of revenue, those one-time pay toilets were not well-maintained nor replaced. In that sense, hostility to the concept of pay toilets is responsible for the paucity and abysmal condition of most public restrooms today. Public restrooms are often plagued by a tragedy of the commons. And when you do see a “free” public restroom in relatively good condition (in an airport, on a turnpike, or elsewhere), it is usually because its costs are cross-subsidized by payments for other goods and services offered in those facilities. It’s not as if you don’t pay for the bathrooms.

There is no question of a willingness to pay, but legal obstacles to pay toilets remain. Pay toilets are still very uncommon. New York City actually decriminalized public urination a few years ago, an odd way to deal with the shortage of restrooms. Some cities, such as Philadelphia, have initiated efforts to bring back pay toilets, but they have made little headway. Just last year, the toilet paper producer Charmin ran a successful publicity campaign in New York City by testing a mobile toilet-sharing service (à la Uber ride-sharing) called Charmin Van-GO. The company described the test as a big success in terms of publicity, but apparently the service has not been offered on a continuing basis.

The economic problem posed by full bladders and bowels on the public square can be solved with relative efficiency using the price mechanism: pay toilets. The flow of revenue can defray the costs of restrooms and their maintenance, easing the strain on public budgets and covering the cost of keeping them clean. Pay toilets can be provided publicly or built and operated by private providers. Pricing the use of toilets, whether offered publicly or privately, helps focus resources at the point of need. Free public toilets, in contrast, are scarce and typically unsanitary. Funding public restrooms through taxation, rather than user fees, involves a loss of efficiency because taxpayers are often distinct from actual users. Forcing purveyors of food and drink (or anything of value) to offer bathroom access to “free riders” creates another obvious source of inefficiency. Allowing the use of EBT cards at pay toilets, while overcoming certain objections, would also involve inefficiencies, but at least they’d be limited to subsidies for a small proportion of the bathroom-going public. Given the alternatives under the status quo, our cities would be far more pleasant if they were flush with pay toilets.

Certainty Laundering and Fake Science News

05 Wednesday Dec 2018

Posted by in Global Warming, Risk, Science

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Intriguing theories regarding all kinds of natural and social phenomena abound, but few if any of those theories can be proven with certainty or even validated at a high level of statistical significance. Yet we constantly see reports in the media about scientific studies purporting to prove one thing or another. Naturally, journalists pounce on interesting stories, and they can hardly be blamed when scientists themselves peddle “findings” that are essentially worthless. Unfortunately, the scientific community is doing little to police this kind of malpractice. And incredible as it seems, even principled scientists can be so taken with their devices that they promote uncertain results with few caveats.

Warren Meyer coined the term “certainty laundering” to describe a common form of scientific malpractice. Observational data is often uncontrolled and/or too thin to test theories with any degree of confidence. What’s a researcher to do in the presence of such great uncertainties? Start with a theoretical model in which X is true by assumption and choose parameter values that seem plausible. In all likelihood, the sparse data that exist cannot be used to reject the model on statistical grounds. The data are therefore “consistent with a model in which X is true”. Dramatic headlines are then within reach. Bingo!

The parallel drawn by Meyer between “certainty laundering” and the concept of money laundering is quite suggestive. The latter is a process by which economic gains from illegal activities are funneled through legal entities in order to conceal their subterranean origins. Certainty laundering is a process that may encompass the design of the research exercise, its documentation, and its promotion in the media. It conceals from attention the noise inherent in the data upon which the theory of X presumably bears.

Another tempting exercise that facilitates certainty laundering is to ask how much a certain outcome would have changed under some counterfactual circumstance, call it Z. For example, while atmospheric CO2 concentration increased by roughly one part per 10,000 (0.01%) over the past 60 years, Z might posit that the change did not take place. Then, given a model that embodies a “plausible” degree of global temperature sensitivity to CO2, one can calculate how different global temperatures would be today under that counterfactual. This creates a juicy but often misleading form of attribution. Meyer refers to this process as a way of “writing history”:

“Most of us are familiar with using computer models to predict the future, but this use of complex models to write history is relatively new. Researchers have begun to use computer models for this sort of retrospective analysis because they struggle to isolate the effect of a single variable … in their observational data.”

These “what-if-instead” exercises generally apply ceteris paribus assumptions inappropriately, presuming the dominant influence of a single variable while ignoring other empirical correlations which might have countervailing effects. The exercise usually culminates in a point estimate of the change “implied” by X, without any mention of possible errors in the estimated sensitivity nor any mention of the possible range of outcomes implied by model uncertainty. In many such cases, the actual model and its parameters have not been validated under strict statistical criteria.

Meyer goes on to describe a climate study from 2011 that was quite blatant about its certainty laundering approach. He provides the following quote from the study:

“These question cannot be answered using observations alone, as the available time series are too short and the data not accurate enough. We therefore used climate model output generated in the ESSENCE project, a collaboration of KNMI and Utrecht University that generated 17 simulations of the climate with the ECHAM5/MPI-OM model to sample the natural variability of the climate system. When compared to the available observations, the model describes the ocean temperature rise and variability well.”

At the time, Meyer wrote the following critique:

“[Note the first and last sentences of this paragraph] First, that there is not sufficiently extensive and accurate observational data to test a hypothesis. BUT, then we will create a model, and this model is validated against this same observational data. Then the model is used to draw all kinds of conclusions about the problem being studied.

This is the clearest, simplest example of certainty laundering I have ever seen. If there is not sufficient data to draw conclusions about how a system operates, then how can there be enough data to validate a computer model which, in code, just embodies a series of hypotheses about how a system operates?”

In “Imprecision and Unsettled Science“, I wrote about the process of calculating global surface temperatures. That process is plagued by poor quality and uncertainties, yet many climate scientists and the media seem completely unaware of these problems. They view global and regional temperature data as infallible, but in reality these aggregated readings should be recognized as point estimates with wide error bands. Those bands imply that the conclusions of any research utilizing aggregate temperature data are subject to tremendous uncertainty. Unfortunately, that fact doesn’t get much play.

As Ashe Schow explains, junk science is nothing new. Successful replication rates of study results in most fields are low, and the increasing domination of funding sources by government tends to promote research efforts supporting the preferred narratives of government bureaucrats.

But perhaps we’re not being fair to the scientists, or most scientists at any rate. One hopes that the vast majority theorize with the legitimate intention of explaining phenomena. The unfortunate truth is that adequate data for testing theories is hard to come by in many fields. Fair enough, but Meyer puts his finger on a bigger problem: One simply cannot count on the media to apply appropriate statistical standards in vetting such reports. Here’s his diagnosis of the problem in the context of the Fourth National Climate Assessment and its estimate of the impact of climate change on wildfires:

“The problem comes further down the food chain:

  1. When the media, and in this case the US government, uses this analysis completely uncritically and without any error bars to pretend at certainty — in this case that half of the recent wildfire damage is due to climate change — that simply does not exist
  2. And when anything that supports the general theory that man-made climate change is catastrophic immediately becomes — without challenge or further analysis — part of the ‘consensus’ and therefore immune from criticism.”

That is a big problem for science and society. A striking point estimate is often presented without adequate emphasis on the degree of noise that surrounds it. Indeed, even given a range of estimates, the top number is almost certain to be stressed more heavily. Unfortunately, the incentives facing researchers and journalists are skewed toward this sort of misplaced emphasis. Scientists and other researchers are not immune to the lure of publicity and the promise of policy influence. Sensational point estimates have additional value if they support an agenda that is of interest to those making decisions about research funding. And journalists, who generally are not qualified to make judgements about the quality of scientific research, are always eager for a good story. Today, the spread of bad science, and bad science journalism, is all the more virulent as it is propagated by social media.

The degree of uncertainty underlying a research result just doesn’t sell, but it is every bit as crucial to policy debate as a point estimate of the effect. Policy decisions have expected costs and benefits, but the costs are often front-loaded and more certain than the hoped-for benefits. Any valid cost-benefit analysis must account for uncertainties, but once a narrative gains steam, this sort of rationality is too often cast to the wind. Cascades in public opinion and political momentum are all too vulnerable to the guiles of certainty laundering. Trends of this kind are difficult to reverse and are especially costly if the laundered conclusions are wrong.