Thursday, September 17, 2009

Pro-Freedom Republicans versus Roosevelt-Rockefeller-Bush Republicans

I have been active in my town's Republican Committee for the past few months and I have noticed that a meaningful contingent here supports freedom. By freedom I mean (1) limitation on government and (2) belief in rights to engage in business as well as to live, speak and write freely. The two, economic and civil freedom, are intertwined, as Milton Friedman makes clear in Capitalism and Freedom. We have seen this recently. Following Obama's election, left wing propagandists have called for curtailment of speech, specifically speech that favors libertarian political candidates or criticizes President Obama, which they claim is "hate speech" and, in their view, susceptible to regulation. So speech which criticizes the left becomes hate speech and in the left's view, illegal. Meanwhile, the state has the right to dispose of your earnings, not you. What is especially irksome is the chronic stupidity and incompetence of the advocates of big government. The fact that they are willing to use state violence to implement ideas that do not work does not trouble them. They cry for ever greater exactions and ever greater extensions on the power to coerce, to tax, to regulate and to imprison. Thus emerges totalitarianism.

Excessive taxation (by which I mean above the amount to cover public safety and stability) and freedom are incompatible. If you do not have the freedom to dispose of half of your income, as we do not today, we are not free. Similarly, excessive power granted to judges and government bureaucrats and freedom are incompatible. Judges are not neutral actors, and as often as not they're corrupt and biased. Recent scandals surrounding Clarence Norman in Brooklyn confirm that judicial corruption is as alive today as it was in the nineteenth century.

The ideas of Milton Friedman and Judge Richard Posner offer a version of the freedom philosophy that differs from one of limiting government. This is more true of Posner than of Friedman, who was primarily a libertarian but diverged in one key way: he advocated a central bank despite considerable historical evidence that banking in its present form does not work. Friedrich Hayek, Ludwig von Mises and Murray N. Rothbard rejected the claim, a claim that lacks empirical evidence, that banking in its present form contributes to social welfare or is necessary to an optimal economy.

The dispute over banking is political. However, there is economic evidence that (a) banking involves economic redistribution and (b) that it is the primary cause of the business cycle, of booms, busts, recessions, depressions and bubbles. Many economists claim otherwise much as many sociologists favor the 1960s welfare system. "Progressive" economists favor welfare for Wall Street while "progressive" sociologists favor welfare for those disinclined to get a job.

Friedman did not claim that central banking has worked. He wrote a monumental book on the subject, Monetary History of the United States, and says in Capitalism and Freedom that the persistent failure of central banking should give its advocates pause. Nevertheless, Friedman advocated a "fixed monetary rule" by which the Fed would print a percentage increase of new money each year and no more. Friedman was one of the few people to see his ideas implemented. This idea, the fixed monetary rule, did not work because the mechanics of money creation are too complicated for it. The amount of money depends on choices that bankers make as well as new reserves, hence the Fed cannot know in advance how much money to print. Friedman's idea was tried by the Carter Fed (note that the ones to try monetarism were Democrats and that Republicans Nixon, Reagan and Bush were all practitioners of Fed activism) and continued into the early years of the Reagan administration. It was then rejected because it did not work on a practical level.

Although his idea was rejected, Friedman did not conclude that the Austrians were right. He continued to support centralized banking. The result is that Friedman's ideas provide marginal improvement to big government but show that less is more. That is, despite his belief that government can be curtailed based on logical argument, the more Friedman's ideas have been adopted during the 1980s and 1990s the bigger government has become. Unless the money creation power of the central government is curtailed, totalitarian control will march forward. While Friedman is right in many details, and his imagination is wonderful, overall his ideas have failed to induce a more libertarian society.

Judge Richard Posner (a federal judge in Chicago and Professor at the University of Chicago) is more elaborate in his defense of centralized economic planning. He believes that it is best accomplished through the judiciary. In his textbook on "Law and Economics" Posner claims that judges have the ability, and historically have, made judicial decisions that optimize efficiency. Thus, the legal system has defended capitalism and ensured that economic growth can optimally occur. This view reflects utilitarianism, the idea that there can be optimization of the greatest good for the greatest number. But note that Posner believes that rational judicial planning, not spontaneous markets, achieves the utilitarian goal.

There is a problem with the maximization of efficiency by judges. It assumes that judges can know what decisions maximize efficiency. But unless they are gods they cannot. This is because no one can know what direction technological development can take. Thus, Posner's view is a reassertion of the belief system of the ancient Roman state. The Romans believed that their model of development was efficient and applying it through military violence to ever wider areas would make them better off. Similarly, in nineteenth century America many came to the conclusion that economies of scale are the dominant source of economic progress. In fact, this is not true. Experimentation is the dominant source of economic progress. And unless judges are experimenters, inventors or entrepreneurs, they cannot possibly know what will be efficient. But they can enforce scale at the expense of experimentation. Posner believes that efficiency means violent enforcement of scale and other big business practices that appear to be efficient in the short run. Posner's ideas lead to the belief that big business requires defense and that the brute violence that judges can enforce works better than spontaneous markets and technological advance.

Hence, Posner's utilitarianism is a euphemism for prenatal socialism. Socialism claims that central economic planners predict in advance what the optimal course of the economy will be. Claiming that the Fed can know what's best, as Friedman does, is very closely linked to that idea. Claiming that judges know has the additional vice of arrogating power to one of the less competent and more corrupt institutions--the courts. But Friedman's advocacy of giving power to the Fed is no less absurd. Indeed, outside of universities, I can think of few less functional boondoggles than the courts and the Fed. That the Chicago School of Economics devolved to claiming that these two failures function optimally suggests a fundamental error in utilitarianism: its emphasis on the infallibility of human rationality.

The question I have raised is whether those who believe in freedom can do business with big government Republican types. Milton Friedman represents the best of Progressive Republicanism. Although he is in many ways sympathetic to libertarianism, his support for the Fed leaves the back door open to Progressivism, and this has been the effect of his ideas.

Recently, a Forbes article quoted Posner as supporting the bail out. This is not surprising because the belief in judicial rationality and infallibility leads to a belief that planners are smarter than markets. Likewise, Friedman's and Posner's ideas suggest that government support for business (via the Fed and the Courts) is preferable to freedom. Hence, there is a insuperable gulf between Progressives and pro freedom Republicans.

At the local level free market Republicans are preferable to Democrats, and I am proud to be an active supporter of the Republican Party. At the national level, the utilitarianism of Progressive Republicans leads inexorably to socialism. The bail out is Progressivisim at its ugliest, most insipid and most incompetent.

I am not convinced at this point that I can support any Republicans who engineered the bail out. But the bail out's supporters include all of the nationally known Republicans. I am not certain that a Democratic President like Obama is worse than a Republican who follows Posner's ideas or who supports the Fed. Progressive Republicanism is insidious because it leads to socialism while claiming to reflect free market ideas. This debases the freedom philosophy and makes debate impossible.
I should not have to defend the market against socialist perversions like Enron or Wall Street.

1 comment:

Phil Orenstein said...

I wonder if Republicans, older and wiser now 9 months into the belly of the statist beast, would vote for a bail out of any other industries? They heard the roar of the dissafected citizens of America and will they now listen and trust the markets over planners??? Cap and trade had, I believe 5 or 7 republican turn coats voting for it and now even Sen Snowe and other RINO's are holding their ground on the healthcare disaster. Could they be listening? They better or 2010 will not forget them!