Knowing Friedom

John Maynard Keynes famously quipped, “Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” Free-market economist Milton Friedman, however, actually did manage to capture the minds not only of practical men, but of politicians and even other intellectuals. He understood that the world would change if people understood the meaning of freedom.

Historic social and political movements began with powerful ideas. For instance, the rise of the Roman Empire predicated itself on the idea of Roman citizenship and a sense of personal duty, and America’s founding relied on a distinct knowledge of personal liberty and its implied negative rights. Pivotal events, such as shifts of culture or the rise of a new state, occur in response to the outcomes of various conflicts in an ongoing war of ideas.

Milton Friedman joined this intellectual struggle knowing that education provides the best weapon. Most importantly, he believed education was a personal undertaking. This perception led to his recognition that most current “education” was actually compulsory schooling or training. The government mandated that children attend taxpayer-funded schools where little to no actual education ever occurred. His solution: school vouchers, which enabled parents to choose where they think their children will be best educated, whether it be public schools, private schools, charter schools or even home schools. Vouchers redirect taxpayer dollars from bureaucrats to the families who need them, coupling education and choice to make the greatest impact.

Friedman’s book “Free to Choose” and a subsequent television series highlight the tenets behind the power of ideas and an education’s role in shaping those ideas. Free markets result from a combination of individual choice and scarcity of information. They offer great benefits, but require individuals to trade with each other in order to obtain them. These types of exchanges only result when individuals possess freedom of choice. This idea undergirded America’s economy until progressive promotion of increased centralization eroded individual choice and increased government meddling in the economy. Thanks to their efforts, a large portion of Americans now hold the institution of federal government responsible for their every need, from the cradle to the grave.

Ultimately, Friedman recognized education’s foundational role in changing society’s institutions. Sustainable political change must be preceded by sustainable social change, which can only result from education. The battle of ideas starts in our schools. Friedman knew ideas like individual choice and freedom had lost significant ground there, but he also recognized that the ground could be regained by letting people choose how they want to educate themselves. He, like economist F.A Harper, knew that “men who know freedom will find ways to be free.”

Boxed In: A Need for Better Property Rights

On Monday, the Detroit News reported a new suit against Genesee County. Denise Miller of Linden, Mich., challenged the constitutionality of the parks department preventing petitioning without permits. She had been collecting petition signatures as part of the “Recall Rick Snyder” movement in a county park.  Park officials requested that she obtain a permit, which she had neglected to do, and then assigned her a three square foot space in a remote area of the park in which to continue her campaign (see picture below).

This rights infringement case adds to a disturbing trend of other recent, similar incidents. The City of Oak Park, Michigan, recently threatened Julie Bass with jail time for planting a vegetable garden in her front yard. City repairs to a ruptured sewer line destroyed her lawn, so, after determining that sod costs were too expensive, she decided to install several planter boxes. A city ordinance stipulates that front lawns “shall be planted with grass ground cover, shrubbery, or other suitable live plant material.” Apparently a vegetable garden does not qualify as “suitable live plant material.” The city dropped the charges after this story gained national attention, but the city reentered the public eye yesterday when they decided to pursue charges alleging that the Bass family dogs are not licensed with the City.

The City of Oak Park joins a long list of federal, state, and local governments who attempt to regulate daily life through ordinances, regulations, and zoning laws. These compromise basic property rights, preventing people from realizing all the benefits of private ownership. Julie Bass owns her front lawn and her dogs, but licensing and ordinances prevent her from fully enjoying fresh vegetables and a game of fetch. And while Denise does not own any physical property, her right to speak and assemble freely is piece of intellectual property. She owns her first amendment rights, but only a permit allows her to actually exercise those rights to act on an issue important to her.

A person’s property must be their own, free from any infringements, if society is to function properly. Without well-defined and defended property rights, citizens lack the motivation to improve what they own, or use it for the benefit of others.  The only alternative to well-protected private ownership is public ownership. Publicly-provided goods like education, roads, and housing are infamous for the rampant disrepair and overuse that occurs because people have no personal, private investment them.

However, securing property rights guarantees personal investment, private ownership, and the widespread enjoyment of the associated benefits which include the creation of improved goods and services, higher levels of personal responsibility, and better stewardship. In order to achieve this security, all public ownership must be eliminated, and ridding our communities of cumbersome regulations and invasive laws that drive people away from private ownership is a good way to start.

Fear Politics: Emotional Rhetoric’s Effect on Michigan’s Labor Debate

Last Thursday, charged union protests met Michigan Freedom to Work’s new drive to enact a state right-to-work law. Here, unions again used the politics of fear to achieve their ends. But these tactics, while seemingly effective, distort reality and confuse level-headed thinking. Unions must stop their politicking and join right-to-work supporters in a civil dialogue about how best to promote worker’s interest.

Union supporters and right-to-work supporters do agree on the problem: Michigan workers find it increasingly hard to find good paying jobs. But each side disagrees on who is responsible for creating this economic mess. Union supporters believe big business outsourced jobs to other states and countries to benefit their bottom line. Right-to-work supporters counter that unions bargained for unwarranted higher wages and drove companies to move jobs to states and countries where wages were more competitive.

As a result, each side presents different solutions. Union supporters believe unions helped workers with their past problems and can help them again today. Right-to-work supporters believe the path forward lies not in antiquated union structures, but in empowering individual worker choice.

But the tone of each side’s rhetoric determines who holds the high ground in the debate. Michigan Freedom to Work spent Thursday peacefully engaging the public with their ideas. They presented their perception of the problem, its proper solution, and the impediments to change. However, union supporters responded with loud interruptions and cat calls, shouting things like “It’s not unions fault,” “You are just corporate puppets,” and “Right-to-work states are not worker friendly.” These overtones possess a decidedly emotional edge different from right-to-work supporters’ controlled tone; an edge undergirded by fear

Emotions like these cloud judgment and prevent many in the labor movement from honestly engaging with the facts and with others who are sympathetic to their cause. The facts do not lie: unions caused much of Michigan’s economic mess and it is unions who prevent movement towards a sustainable future. Right-to-work supporters do not seek to abolish unions or attack workers. They simply ask that workers be allowed the chance to choose who they think best represents their interests, knowing this to be the best way to benefit workers. In this regard, right-to-work can actually be an ally in bringing about the change workers desire. Any further attempts by union supporters to attack these positions with emotionally charged degradations will only continue to delegitimize their standing in the labor debate. Right-to-work supporters have entered the labor debate seeking to teach a new perspective and to learn from their opponents. They want to enter into a civil dialogue with workers, unions and the state about how best to improve Michigan’s economy.  Union supporters must join right-to-work supporters at this table free from their fear politics and prejudices. This is the only way for Michigan workers to move forward.

Right-to-Work Press Conference Held in Downtown Flint

Today, supporters of a right-to-work law in Michigan held press conferences in locations around the state. Five of those supporters appeared in downtown Flint. The main speaker, Stacy Swimp, President of the Fredrick Douglas Foundation of Michigan, addressed the crowd, saying: “All employees should be free to join and financially support a labor union if they choose, without fear of discrimination or penalty. We believe all employees should be equally free to choose not to join or financially support a union, again without fear of discrimination or penalty.”

According to Swimp, this kind of employment discrimination loses jobs and placed Michigan at the bottom of the United States’ economically. He went on to say, “This July Fourth weekend, and every day of the year, individual freedom is the issue.” Laws that promote freedom of choice, argued Swimp, will create jobs, as evidenced by the progress made in current right-to-work states. He ended by saying, “Workers want the opportunity to work for more.”

He was opposed by several union supporters who interrupted his speech on multiple occasions, saying things like, “It’s not unions fault,” “You are just a corporate puppet” or, “Right-to-work states are not worker-friendly.”

Both sides seemed to agree that Michigan is in terrible economic shape, but disagreed on how Michigan got there and how it can regain prosperity. Those who supported unions believe big business was at fault, and that any changes that seem to benefit their bottom line will only serve to perpetuate Michigan’s dismal economic situation. In contrast, those who supported right-to-work believe unions are partly at fault and that the way out is through greater worker choice and freedom outside union structures.

“The Cash Register Comes of Age”: Innovation at Work

Transaction costs are always a constant problem in today’s society but entrepreneurs everywhere consistently find new ways to create efficiency. The most recent example can be found in a company called simply Square.

Square is a privately owned company whose namesake comes from a small square add-on that plugs into the headphone jack on your Smartphone or Tablet PC.

This little device has the potential to revolutionize the way businesses and customers interact. According to their website, “Square is the simplest way to accept credit cards. It’s easy to use and comes with a free credit card reader for your phone or iPad. Sign-up is quick. No complicated contracts, monthly fees, or merchant account. When you swipe cards with Square there is just one fee: 2.75%. Download the free app from the Android Market or iTunes App Store.” The company provides free apps, free hardware, and universal credit card acceptance all for a small fee of 2.75% of each transaction.

They have abolished the cash register. Stores can accept cash and credit payments straight from a smart device and they get the money in their account the next day. In so doing the company has eliminated the transaction costs that result from building and maintaining a standard point of sale station, printing receipts, and from having to wait for the proceeds from sales. The software also records transaction history so business owners can even get live sales data throughout the day.

And Square simplifies the shopping experience for customers. Businesses can create virtual shops that allow the customer to instantly peruse relevant product information and prices. It also eliminates the need to carry cash; you can pay with your card or simply start a tab and pay online from the comfort of your own home. Plus, you no longer have to deal with paper receipts. You conveniently receive them either in an e-mail or via a text message.

Transaction costs prevent trade benefits from being realized. But in a free market society individuals are free to find solutions that allow those benefits to be better realized by both parties. Square is just one example of the continuous innovation process.

Vigilant Watchmen: Informed Citizens and Government Accountability

Last night I attended a lecture by Jerry Brito of the Mercatus Center where he highlighted his project, Stimulus Watch. The site tracks all projects funded by federal stimulus money and allows individuals to comment and vote on the projects’ effectiveness. The site highlights the importance of accountability in a free society.

Organizations and individuals need response mechanisms. Prices and profit/loss signal businesses and individuals about the effectiveness of their actions and decisions within the market. Performance reviews within an organization signal employees about whether or not their labor adds value. Neighborhood associations signal members about whether or not they are effectively adding to the community. And a good friend will inform you of inconsistencies within your own life. Each mechanism provides accountability by responding to actions.

Unfortunately, the government today has no such response mechanism. And as Thomas Sowell once said, “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” Why would anyone invest in an institution or an individual with so much of their personal power and resources and yet not hold them accountable for their use?

Yet the solution lies within the problem. Individuals must be ready and eager to hold their elected officials and their governments accountable for their actions. Government derives its power from the consent of the governed and thus we are responsible for ensuring its right use.

Sites like Stimulus Watch, Open Secrets, and Michigan Capitol Confidential, among others, empower individuals to hold government accountable by providing information on what exactly government is doing. Citizen accountability must begin with informed citizens. Only once we know what works and what does not work can we then begin to propose solutions. And these are only first steps towards broader institutional change.

A Power Forgotten: Nullification; Yesterday, Today, and Tomorrow

A Michigan circuit court recently penned an opinion on the Michigan Medical Marijuana Act. The opinion bases its reasoning in the Constitution’s Supremacy Clause, which binds all courts to uphold Federal law. While the opinion is logically sound in the instance it addresses, it fails to consider a critical constitutional check on federal authority: state nullification.

Article 6 of the U.S. Constitution states that “this Constitution, and the Laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the constitution or laws of any state to the contrary notwithstanding.”

At first glance it appears that states and judges are bound in all instances by federal law. But further examination reveals an important distinction. Article 6 explicitly states that only federal laws made “in pursuance” of the Constitution may receive supremacy. The supremacy clause only holds in situations when federal law is constitutional. The 10th Amendment gives further credence to this distinction: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Any and all actions outside the federal government’s constitutional jurisdiction are reserved to the states and the people.

These two constitutional provisions establish a necessary check (nullification) on federal power. The federal government is a binding collection of states which are themselves a collection of individuals. Thus, the federal government derives its power from the states and the consent of the governed, which can and must use this power to hold the federal government accountable. The 1798 Kentucky Resolution states “that the several states composing the United States of America are not united on the principle of unlimited submission to their general government . . . and that whensoever the general government assumes undelegated powers, its acts are unauthoritative, void, and of no force.” The 1799 Virginia Resolution adds “that it views the powers of the federal government as resulting from the compact to which the states are parties . . . and that, in case of . . . dangerous exercise of other powers, not granted by the said compact, the states . .  have the right . . . to interpose . . for maintaining . . . the authorities, rights and liberties, appertaining to them.” The federal government resulted from a compact of the member states. They lend the federal government its powers and are the ultimate judge of the use of those powers. To give the federal government universal authority to judge the legality of its own laws is illogical and dangerous.

While much of current judicial opinion sides against state nullification, the movement is still afoot. After the Institute for Justice lost its case in Kelo v. City of New London, it turned to state courts and legislatures; a majority of which – including Michigan - took steps to amend their own eminent domain laws, nullifying the Supreme Court ruling. And if the Supreme Court upholds the constitutionality of the Patient Protection and Affordable Care Act, a similar movement is sure to begin.

Nullification is a necessary constitutional check on federal power. The states, not the federal government, are the final arbiters of federal power.

Market Failurists: A Critique of Neo-Conservative Economics

Markets fail. We live in a dynamic world and as a result we are constantly experiencing change, both good and bad. It can come in the form of surpluses or shortages, high prices, apparent favoritism, etc.

Public goods and negative externalities indicate the most common consequential situations indicative of a market failure.  A public good is a good or service that appears to be non-rival and non-excludable. (One’s consumption of the good does not reduce the availability of the good to others and no one can be excluded from that goods’ consumption.) An example of a public good is broadcasting. Anyone can tune in to a radio program and their consumption does not take away from the consumption of another. Negative externalities occur when a producer fails to account for all of the costs of a process and passes those negative costs onto others without their consent. A good example of a negative externality is pollution. It is a cost that producers often do not have to pay for but by which others are negatively affected.

The neo-conservative response comes mainly in the form public choice theory. They hold that a market failure necessitates a government intervention. Hence, public choice theorists study politics as economics. This study empowers individuals and groups to effectively influence the political process for the efficient provision of public goods. And public choice theorists can be found on both sides of the aisle. Both Republicans and Democrats seek to use government as a means to provide what each deems public goods.

But, government intervention results in government failure. While neo-conservative public choice theory correctly identifies market failures and government failures, it then wrongly assumes that a continuing political process will eventually provide public goods (chief among them being good public policies) efficiently. They assume a central authority possess all of the information necessary to bring about the same innovations as markets. But knowledge is dispersed and no amount of centralization will ever change that. They fall into the nirvana fallacy, assuming that since markets fail, their governmental solutions are the only solutions.

Market failures are actually constructive because they provide information to entrepreneurs. Prices promote competition, reveal inefficiencies, and incentivize others to discover alternatives. As a result, there are no such things as permanent public goods. They are merely exciting and motivating opportunities for innovation. The solutions to market failures lie within the problem itself: Markets fix market failure.