Saturday, May 15, 2010

Regulations Are Back In Fashion, But Were They Ever Out?

They were according to the narrative the would like to construct:
Over the last year, the Obama administration has pressed forward on hundreds of new mandates, while also stepping up enforcement of rules by increasing the ranks of inspectors and imposing higher fines for violations.

A new age of regulation is well under way in Washington, a fact somewhat obscured by the high-profile debates over the health care overhaul and financial oversight system and by fresh calls for greater federal vigilance spurred by the oil spill in the Gulf of Mexico and the deaths of coal miners in West Virginia.

The surge in rule-making has resulted from an unusual confluence of factors, from repeated outbreaks of food-borne illnesses to workplace disasters. Some industry groups, wanting foreign competitors to adhere to the same standards they must meet, have backed new federal mandates. The push for some of the measures began at the end of the Bush administration, a tacit acknowledgment that its deregulatory agenda had gone too far.

Still, the new aggressiveness reflects the new cops on the beat, and the contrast with the Bush administration is an intentionally sharp one. While the Bush administration mostly favored voluntary compliance by industry, senior Obama administration officials argue that carefully crafted regulation can be a positive force.

We start from the perspective that we all want a cleaner environment, longer lives, improved safety,” said Peter R. Orszag, director of the Office of Management and Budget, which reviews major regulations. “Smart regulation can make people’s lives better off.” [emphasis added]
It's funny that Orszag should mention this: the Means-Ends Debate. As Ludwig von Mises noted, everyone but the ascetics are after the same ends, those being the gradual improvement of the general, material well-being of individuals in society. And because of various axiomatic truths and conclusions arrived at via deductive reasoning from those truths, praxeology tells us that the unhindered division of labor is the best, surest and only means of improving the material well-being of individuals in society.

In other words, "smart" regulation can not "make people's lives better off," as Orszag claims. Where people may disagree about the means to shared ends, reason can be employed to arrive at a common understanding of truth. You'll notice, then, that Orszag's preferred means do not involve reason, but force-- government regulation.

Mises made this point better than I can at the present, so instead of jabbering on I'd rather quote him at length, from his passage "World View and Ideology" in Human Action:
But where earthly things are involved, the natural affinity of all men and the identity of the biological conditions for the preservation of their lives come into play. The higher productivity of cooperation under division of labor makes society the foremost means of every individual for the attainment of his own ends whatever they may be. The maintenance and further intensification of social cooperation become a concern of everybody. Every world view and every ideology which is not entirely and unconditionally committed to the practice of asceticism and to a life in anchoritic reclusion must pay heed to the fact that society is the great means for the attainment of earthly ends. But then a common ground is won to clear the way for an agreement concerning minor social problems and the details of society's [p. 180] organization. However various ideologies may conflict with one another, they harmonize in one point, in the acknowledgment of life in society.

People fail sometimes to see this fact because in dealing with philosophies and ideologies they look more at what these doctrines assert with regard to transcendent and unknowable things and less at their statements about action in this world. Between various parts of an ideological system there is often an unbridgeable gulf. For acting man only those teachings are of real importance which result in precepts for action, not those doctrines which are purely academic and do not apply to conduct within the frame of social cooperation. We may disregard the philosophy of adamant and consistent asceticism because such a rigid asceticism must ultimately result in the extinction of its supporters. All other ideologies, in approving of the search for the necessities of life, are forced in some measure to take into account the fact that division of labor is more productive than isolated work. They thus admit the need for social cooperation.

Praxeology and economics are not qualified to deal with the transcendent and metaphysical aspects of any doctrine. But, on the other hand, no appeal to any religious or metaphysical dogmas and creeds can invalidate the theorems and theories concerning social cooperation as developed by logically correct praxeological reasoning. If a philosophy has admitted the necessity of societal links between men, it has placed itself, as far as problems of social action come into play, on ground from which there is no escape into personal convictions and professions of faith not liable to a thorough examination by rational methods.

This fundamental fact is often ignored. People believe that differences in world view create irreconcilable conflicts. The basic antagonisms between parties committed to different world views, it is contended, cannot be settled by compromise. [Taylor's note-- this is why a person like Orszag must resort to regulation, i.e., governmental force, as no reason-based compromise is possible for them.] They stem from the deepest recesses of the human soul and are expressive of a man's innate communion with supernatural and eternal forces. There can never be any cooperation between people divided by different world views.

However, if we pass in review the programs of all parties--both the cleverly elaborated and publicized programs and those to which the parties really cling when in power--we can easily discover the fallacy of this interpretation. All present-day political parties strive after the earthly well-being and prosperity of their supporters. They promise that they will render economic conditions more satisfactory to their followers. With regard to this issue there is no difference [p. 181] between the Roman Catholic Church and the various Protestant denominations as far as they intervene in political and social questions, between Christianity and the non-Christian religions, between the advocates of economic freedom and the various brands of Marxian materialism, between nationalists and internationalists, between racists and the friends of interracial peace. It is true that many of these parties believe that their own group cannot prosper except at the expense of other groups, and even go so far as to consider the complete annihilation of other groups or their enslavement as the necessary condition of their own group's prosperity. Yet, extermination or enslavement of others is for them not an ultimate end, but a means for the attainment of what they aim at as an ultimate end: their own group's flowering. If they were to learn that their own designs are guided by spurious theories and would not bring about the beneficial results expected, they would change their programs.

The pompous statements which people make about things unknowable and beyond the power of the human mind, their cosmologies, world views, religions, mysticisms, metaphysics, and conceptual phantasies differ widely from one another. But the practical essence of their ideologies, i.e., their teachings dealing with the ends to be aimed at in earthly life and with the means for the attainment of these ends, show much uniformity. There are, to be sure, differences and antagonisms both with regard to ends and means. Yet the differences with regard to ends are not irreconcilable; they do not hinder cooperation and amicable arrangements in the sphere of social action. As far as they concern means and ways only, they are of a purely technical character and as such open to examination by rational methods. When in the heat of party conflicts one of the factions declares: "Here we cannot go on in our negotiations with you because we are faced with a question touching upon our world view; on this point we must be adamant and must cling rigidly to our principles whatever may result," one need only scrutinize matters more carefully to realize that such declarations describe the antagonism as more pointed than it really is. In fact, for all parties committed to pursuit of the people's welfare and thus approving social cooperation, questions of social organization and the conduct of social action are not problems of ultimate principles and of world views, but ideological issues. They are technical problems with regard to which some arrangement is always possible. No party would wittingly prefer social disintegration, anarchy, and a return to primitive barbarism to a solution which must be bought at the price of the sacrifice of some ideological points. [p. 182]

In party programs these technical issues are, of course, of primary importance. A party is committed to certain means, it recommends certain methods of political action and rejects utterly all other methods and policies as inappropriate. A party is a body which combines all those eager to employ the same means for common action. The principle which differentiates men and integrates parties is the choice of means. Thus for the party as such the means chosen are essential. A party is doomed if the futility of the means recommended becomes obvious. Party chiefs whose prestige and political career are bound up with the party's program may have ample reasons for withdrawing its principles from unrestricted discussion; they may attribute to them the character of ultimate ends which must not be questioned because they are based on a world view. But for the people as whose mandataries the party chiefs pretend to act, for the voters whom they want to enlist and for whose votes they canvass, things offer another aspect. They have no objection to scrutinizing every point of a party's program. They look upon such a program only as a recommendation of means for the attainment of their own ends, viz., earthly well-being.

What divides those parties which one calls today world view parties, i.e., parties committed to basic philosophical decisions about ultimate ends, is only seeming disagreement with regard to ultimate ends. Their antagonisms refer either to religious creeds or to problems of international relations or the problem of ownership of the means of production or the problems of political organization. It can be shown that all these controversies concern means and not ultimate ends.

Let us begin with the problems of a nation's political organization. There are supporters of a democratic system of government, of hereditary monarchy, of the rule of a self-styled elite and of Caesarist dictatorship.[1] It is true that these programs are often recommended by reference to divine institutions, to the eternal laws of the universe, to the natural order, to the inevitable trend of historical evolution, and to other objects of transcendent knowledge. But such statements are merely incidental adornment. In appealing to the electorate, the parties advance other arguments. They are eager to show that the system they support will succeed better than those advocated by other parties in realizing those ends which the citizens aim at. They specify the beneficial results achieved in the past or in other countries; they disparage the other parties' programs by relating their failures. [p. 183] They resort both to pure reasoning and to an interpretation of historical experience in order to demonstrate the superiority of their own proposals and the futility of those of their adversaries. Their main argument is always: the political system we support will render you more prosperous and more content.

In the field of society's economic organization there are the liberals advocating private ownership of the means of production, the socialists advocating public ownership of the means of production, and the interventionists advocating a third system which, they contend, is as far from socialism as it is from capitalism. In the clash of these parties there is again much talk about basic philosophical issues. People speak of true liberty, equality, social justice, the rights of the individual, community, solidarity, and humanitarianism. But each party is intent upon proving by ratiocination and by referring to historical experience that only the system it recommends will make the citizens prosperous and satisfied. They tell the people that realization of their program will raise the standard of living to a higher level than realization of any other party's program. They insist upon the expediency of their plans and upon their utility. It is obvious that they do not differ from one another with regard to ends but only as to means. They all pretend to aim at the highest material welfare for the majority of citizens.

The nationalists stress the point that there is an irreconcilable conflict between the interests of various nations, but that, on the other hand, the rightly understood interests of all the citizens within the nation are harmonious. A nation can prosper only at the expense of other nations; the individual citizen can fare well only if his nation flourishes. The liberals have a different opinion. They believe that the interests of various nations harmonize no less than those of the various groups, classes, and strata of individuals within a nation. They believe that peaceful international cooperation is a more appropriate means than conflict for the attainment of the end which they and the nationalists are both aiming at: their own nation's welfare. They do not, as the nationalists charge, advocate peace and free trade in order to betray their own nation's interests to those of foreigners. On the contrary, they consider peace and free trade the best means to make their own nation wealthy. What separates the free traders from the nationalists are not ends, but the means recommended for attainment of the ends common to both.

Dissension with regard to religious creeds cannot be settled by rational methods. Religious conflicts are essentially implacable and irreconcilable. Yet as soon as a religious community enters the field [p. 184] of political action and tries to deal with problems of social organization, it is bound to take into account earthly concerns, however this may conflict with its dogmas and articles of faith. [Taylor's note-- for reference, consider any articulated system which believes that "free lunches" can be had, to be a religious system and Mises's critique becomes even more trenchant.] No religion in its exoteric activities ever ventured to tell people frankly: The realization of our plans for social organization will make you poor and impair your earthly well-being. Those consistently committed to a life of poverty withdrew from the political scene and fled into anchoritic seclusion. But churches and religious communities which have aimed at making converts and at influencing political and social activities of their followers have espoused the principles of secular conduct. In dealing with questions of man's earthly pilgrimage they hardly differ from any other political party. In canvassing, they emphasize, more than bliss in the beyond, the material advantages which they have in store for their brothers in faith.

Only a world view whose supporters renounce any earthly activity whatever could neglect to pay heed to the rational considerations which show that social cooperation is the great means for the attainment of all human ends. Because man is a social animal that can thrive only within society, all ideologies are forced to acknowledge the preeminent importance of social cooperation. They must aim at the most satisfactory organization of society and must approve of man's concern for an improvement of his material well-being. Thus they all place themselves upon a common ground. They are separated from one another not by world views and transcendent issues not subject to reasonable discussion, but by problems of means and ways. Such ideological antagonisms are open to a thorough scrutiny by the scientific methods of praxeology and economics. [Taylor's note-- all bold emphasis is mine]
Regulation, being backed by governmental force and thereby being a form of involuntary exchange, is a rejection of the value of social cooperation (that is, voluntary exchange and the division of labor) according to Mises. It's a rejection of the entire Means-Ends debate in favor of a gun.

In other words, Pete Orszag, eat your heart out! Your anti-reason philosophy of regulation to "make people's lives better off" is a pathetic, trivial notion. Striking with an iron fist of indomitable logic through the sands of time, Ludwig von Mises has called you out, and you've been thoroughly exposed and shamed for the being the tyrant of "faith in free lunches" that you are!


  1. God-help-me, I do love Mises. But I can see no way that his logic will ever penetrate the political class.

    For instance, you quote von Mises writing about political leaders:

    "If they were to learn that their own designs are guided by spurious theories and would not bring about the beneficial results expected, they would change their programs."

    But they have learned just the opposite. While their policies may devastate a country (USSR or East Germany or Cuba...)many (most) of the leaders of these countries escaped with their booty. The US offers an even more inviting playground for these political pirates. The utter failure of the policies of every presidential administration since Hoover seems manifest. Yet after each failure these hooligans simply step away from office with their loot and live a life of leisure.

    Do you really think that education is the answer after such a dismal record?

  2. Efinancial,

    I think Mises problem was he was a "liberal", not an anarchist. He gave too much credit to government-- like Rand, he didn't seem to see the inherent contradiction between an institution tasked with upholding the law and property rights, which funded itself by violating those two things. Or maybe he did, but he took that as a "worthwhile" tradeoff, or that he convinced himself government was inevitable, etc. etc.

    I really am not enough of a "history of Mises' thought" scholar to know for sure so I apologize to any who might be reading who are frustrated by my guesses. Whatever the reason, it's clear Mises was an apologist of the State to the degree he was not an anarchist. As such, he seemed to truly believe that the politicians kept doping it up not because they were mischievous, self-interested, black-hearted, but because they did not know any better, by and large.

    I do believe education is "the answer", but not the education of politicians. They won't learn, either because they can't or because, more likely, they don't want to-- not in their interest to do so. I look at politicians as parasites; I don't think you could ever reason with a flea or a tick so I wouldn't bother trying.

    Education is useful for other people though-- those that would unwittingly support these politicians without hearing the other side of the story and being convinced of it.

    I see two possible benefits to be gained from wide-spread education on these issues: less open, enthusiastic support of socialism from the masses, and outright flippancy from the "elite" of the producers. Think of something like Atlas Shrugged, where the heroic "do-ers" and makers of society, routinely flip the bird to these criminals and call them what they are without apologizing for it.

    The whole thing is a CONfidence game. Dispel the myth and the magic, point out that the emperor is naked or that the philanthropist is actually a thief and, if that doesn't unravel the hustle by itself, it should go a long way toward reducing the extent of the depravity.

    That's based off of a belief that, at some level, these cretins actions rest on some implicit "consent." But if you reject that there is any consent involved, then I guess I'd have to recalibrate my calculation as far as how important I find persuading people via reason.

    Either way, education freed you from your bonds, right Efinancial? So there's at least that to be said for it.

  3. Taylor Conant, economic Guru extrodinaire.

    It took me 30 minutes to read and digest this post, but it kicked ass. Way to throw down the intellectual gauntlet!

  4. Question: I see you referencing atlas shrugged - have you ever considered striking? That is, withdrawling all support (tax revenue) for the state?

  5. Tom,

    I seek to give you your money's worth, 30 minutes is the least I could do.

    And yes, I have considered striking. I consider it a viable strategy-- for some people. Not sure yet if I am one of them. But I wouldn't discount it entirely!

  6. Taylor - thanks for the thoughtful response. But education did not free me, it allowed me to see how enslaved I was and why. Human nature drives each of us to live large on minimal effort. A kind of biological efficiency that results in a very successful species. However, it leads many people to steal and even kill their fellow man if they can get away with it. Politics is the best way to get away with it and this won't change unless human nature changes. Education can't change human nature.

    So while a strike of the "men of the mind" or a withholding of support sounds appealing it proves useless and even self-sacrificing. All people live on an ethical spectrum from pacifism (Ghandi came close) to might makes right (all politicians). I like to think of this spectrum as from commerce without coercion (free markets) to theft (communism). While most people say they believe in pacifism with a caveat of self-defense their actions suggest they really believe in might makes right.

    The only solution I see is the balance of power the founding fathers constructed when they created the U.S. government. Both within the federal government (SC vs. congress vs. pres.) and without (fed vs. state vs local vs. individual). In addition they didn't view democracy as anything more than a crude decision making tool. Given human nature one road to more freedom might be to strengthen the local/individual and weaken the fed while minimizing democracy. I believe this requires deeds not words, action not education.

  7. Efinancial,

    I am not sure what to say other than to express some surprise at your response. There's a number of non sequiturs here. You seem familiar with Austrian econ and specifically Mises "Human Action" from your other comments, yet in this response you fall back on "human nature", some kind of seeming argument-from-instinct and totally deny human reason.

    As Mises observed in HA, how does man possibly "act" (as he defines action... ie, not automatic, reflexive or instinctual behaviors) without ideas and reasons first?

    I am still not certain what role you believe consent plays in political systems, but if it plays any role at all then consent must be based upon a belief or understanding that the system being consented to is somehow legitimate- this is where ideas/education come in. I would assume you agree that there have been differing levels of tyranny/exploitation within different institutional environments over the course of human history, and that you would attribute this to the consent/legitimacy of these institutions amongst their host populations. In other words, for example, there is a reason why the American Revolution took place in America and not GB, and why British monarchy predated British parlimentarianism.

    I feel I have misunderstood your last paragraph because I have trouble believing you do not see that your "only solution" has already failed miserably to accomplish the goals you ascribe to it.

  8. Taylor - sorry for the delay but my day job is relentless.

    Non sequiturs? Let me try to connect my thinking. First, human reason is part of human nature. My intent is not to "totally deny human reason." In fact it is the most important tool we have for a successful life. It can inform and enlighten but it cannot change our nature. So while I believe education is important Idon't believe it can change human nature.

    We are by nature greedy for life and thats a good thing. Our reason helps us to live as well as possible while expending as little effort as possible. And while our reason informs us that a division of labor is our best bet to live the good life and so encourages cooperation, our nature can drive us to steal and even kill our fellow humans if we can get away with it. And our reason has developed the most successful way to get away with it - politics. Although we will engage in war if necessary.

    Although stealing, killing and war are short-sighted from a social point of view, individual life is short, time is valuable and so these actions can be rationalized. This nature and these actions are self-evident throughout history. Which leads me to believe that most humans embrace might makes right as their guiding ethic. This leads me to believe that withholding support of coercive regimes is useless. Again, most people believe might makes right and will ignore you or throw you in jail.

    So how to control this stealing and killing? Bastiat suggested making it more painful than working for a living. As in imprisonment as punishment for such actions. Of course most politicians and all winning warriors avoid this punishment. But it seems the best we humans have so far come up with. Which leads me to suggest the balance of power the founding fathers strived for.

    You claim it "failed miserably" but it has succeeded longer than most political structures. And it succeeded by being realistic about human nature. It just needs to be renewed by the right action. To paraphrase T. Jefferson, every so often the tree of liberty must be replenished by the blood of patriots.

  9. Efinancial,

    The relevance of the first several paragraphs to the point you're trying to make continues to elude me. As the points you make are also points in favor of your "opponent" (me), their relevance seems ambiguous at best in settling this disagreement.

    Your final paragraph, however, is truly a puzzler. Do you not know much about history, specifically the history of "most political structures"? Your comment seems incredibly ignorant of just about every historical, multi-century, massively multi-generational political structure that mankind has known and lived under over the last 5,000 years.

    Either way, as "success" has not been defined here by you (success at what? At existing? At limiting government?) your supporting evidence remains your opinion, not a contrary fact and so I can't say much about it other than to observe that it is so.

    Why on earth "most people" who "believe might makes right" would agree to live under a system based upon the "balance of power" is beyond me, but even with my limited intellectual capability in this regard I have the slight inkling that you have no idea what you're talking about!

  10. "...historical, multi-century, massively multi-generational political structure..." Wow, thats quite a mouthful, professor. But I tHinK i gEt YoUr pOiNt. My ignorance is limitless, and so it is. In my defense, I will quote H.L. Mencken from his essay In Defense of Women.

    "It must be obvious to even so pathetic an ass as a university professor of history that very few of the genuinely first-rate men of the race have been, wholly civilized..."

    While I have yet to reach the status of "first-rate men" I strive for this achievement in a most uncivilized manor, and leave you to your "slight inkling."

  11. Efinancial,

    Your original comment was about whether or not education was a sound means for attaining liberty amongst society.

    You later brought up a "balance of power" and specifically referred to the US govt/constitutional system as an example of a successful political system that guaranteed liberty, for a time (your perception).

    The trouble is, it's impossible to argue your point when you give yourself the backdoor exit of "well, it does need to be watered with the blood of patriots now and then." Excuse me? I quote you:

    So while a strike of the "men of the mind" or a withholding of support sounds appealing it proves useless and even self-sacrificing.

    So it's good to be self-sacrificing when the tree of liberty needs watering, but it's useless and bad when the producers of society decide they've had enough of the looting and parasitism and decide to take their lives elsewhere?

    This is what I am saying when I say I don't think you know what you're talking about on this topic. You have made a number of thoughtful comments on other topics on EPJ over the last few months but on this particular topic we are not making any inroads to reason because you've given yourself the option of contradicting yourself whenever your logic runs into a wall.

    Your ignorance is not limitless. At all. But if I am supposed to allow you to argue a point arbitrarily and get away with ignoring gross historical circumstantial evidence that runs entirely contrary to your point (again, the American experiment has lasted less than 250yrs, appears to be quickly drawing to its finale and hasn't even begun to compete with the duration of something like the British Empire-- but most importantly, how many of those years have actually been a period where the rights of the individual have been protected?!), I will not do that. Sorry if that ruffles your feathers. I've expressed confusion at various points in hopes that you'd make your response more specific but you have only gone deeper into your contradictions so I feel I have no choice but to express my opinion that you don't really know what you're talking about in this situation. I'd love for you to prove me wrong, of course.