Where the Well Regulated Economy Begins

In this series on the "well regulated" economy, let me be clear that there is no small degree of sarcasm involved in what I mean by "well regulated".  What I mean by "well regulated" is an economy that's pretty much completely controlled, where the government "protects" employees from employers, "protects" consumers from producers, "protects" the poor from the rich, "protects" the rich from the poor, and, most importantly, "protects" all of us from ourselves.  For the "well regulated" economy, the government is essentially one giant protection racket.

The fundamental force that enables both protection rackets and governments to impose their will is violence. The German philosopher Max Weber "defined the state as an entity which successfully claims a 'monopoly on the legitimate use of violence.'" The main difference between government and organized crime in that definition is the word "legitimate," and the degree of legitimacy depends on the degree to which the citizens "voluntarily" comply with government legislation, where "voluntarily" means they would comply even if there were no penalties for not doing so.

In order for a government to be violent, it has to have the will to be violent, which in turn means that its capacity for violence needs to be fulfilled by people willing to order and commit violent acts.  The more "well regulated" an economy and the less "voluntary" the compliance of the citizens, subjects, or serfs, the greater the capacity for government violence is required.

One of the most "well regulated" economies the world has ever seen was the Soviet Union.  Not surprisingly, one of the most totalitarian, ruthless, and violent governments the world has ever seen was also the Soviet Union during the same time period.

Stalin pulls all of the concepts above into one nasty package.  Before he was chief thug of the Soviet Union and responsible for the deaths of at least 20 million people, he was the chief thug of an organized crime group. Via Stephen Hicks, we have the fascinating story of a major bank robbery orchestrated by Stalin:

[O]ne of its most swashbuckling leaders, Josef Djugashvili - better known as Stalin - was about to pull off a dazzling heist. [...] 

The carriages were transporting an enormous sum of money - as much as one million roubles (£7 million) - to the new State Bank. [...] 

Stalin knew it would require great daring to pull of such a coup. He also knew he’d need a dependable gang of fellow criminals to help. These were easy to find in Tiflis: Stalin had already been involved in previous robberies and had a trusty band of individuals who could be relied upon. 

The robbery was meticulously planned. [...] 

The carriages swung into the square exactly as expected. One of the gangsters slowly lowered his rolled newspaper, the signal for the attack to begin. Seconds later, there was a blinding flash and deafening roar as Stalin’s band hurled their hand grenades towards the horses. 

The unfortunate animals were torn to pieces. So, too, were the policeman and soldiers. In a matter of seconds, the peaceful square was turned into a scene of carnage. The cobbles were splattered with blood, entrails and human limbs. 

As the gangsters ran towards the carriages, one of the horses  - maimed but not killed - reared up and began dragging the money-bearing cavalcade across the square. He picked up speed and there was a real danger he would get away. 

One of Stalin's men chased after the horse and frantically hurled another grenade under its belly. It exploded beneath the animal, with devastating effect. The horse was blown apart and the carriages were brought to a definitive halt. 

Before anyone in the square could make sense of what was happening, Stalin’s most faithful accomplice - a bandit named Captain Kamo - rode into the square. The gangsters hurled the banknotes into his carriage and then Kamo rode off at high speed. 

The carnage caused by the attack was spectacular. Some 40 people were killed by the grenades and gunfire and a further 50 wounded. Amazingly, none of the gangsters was killed.

Lives and pain clearly meant nothing to Stalin.  With the bank robbery he proved beyond a shadow of doubt that he had both the ruthlessness and capacity for violence for both organized crime and government.

And with that capacity for violence we can see where the "well regulated" economy begins.

Addiction

I remember the event clearly.  All of the 5th and 6th graders in my school filed into the auditorium.  The mood was somber and quiet.  The look on everybody's face was perfectly serious, not a smile or even a smirk could be found.  There was a display on the stage which showed what various illegal drugs (marijuana, amphetamines, narcotics, etc.) looked like.  A policeman began the lecture.  He went through each of the drugs with stern face and furrowed brow, describing the terrible things that would happen to you if you were foolish enough to take them.  He ended with heroin.  He explained that taking it even a single time was guaranteed to leave you permanently and hopelessly addicted and that the craving would cause you to take ever larger amounts until you died from overdose or other factors.

While that lecture was a bit extreme, that pretty much was and still is the narrative of drugs: drugs are extremely addictive and damaging, should be avoided at all costs, and justify the huge costs of the so-called "War on Drugs" which is, of course, really a war on people.

I'm going to explain why I'm extremely skeptical of this narrative.  Let's start with heroin, the bogeyman of drugs.  Heroin is not quite as debilitating as you might think.  It has adverse effects, for sure, but "like most opioids, unadulterated heroin does not cause many long-term complications other than dependence and constipation."  The constipation can be overcome by increasing consumption of leafy greens and other fruits and vegetables.  Addiction (dependence) is an actual problem because it's illegal and expensive, but a perceived problem primarily because it makes us uncomfortable to think that someone might be addicted to something.  If heroin were legal and reasonably inexpensive, then a user who took heroin nightly in moderate doses, even if addicted, would be little different than a drinker who has a couple of glasses of wine nightly, addicted or not.

It's impossible to really know what addiction rates are, especially for a drug that's illegal since that makes studying it somewhat difficult.  However, there are some statistics available.  For example, from the Substance Abuse and Mental Health Services Administration (whose charter is to reduce substance abuse), as of 2010 (latest available year) an estimated 4.1 million people in the United States have used heroin sometime in their life, yet only 618,000 used heroin in the last year and only 240,000 used heroin in the last month.  Even if every last one of the 240,000 users last month is addicted, that's only a 5.8% addiction rate when compared to lifetime use.  Compare this to marijuana (a drug considered to be much less addictive) where over 16% of those who have ever used it also used it in the last month.  While these numbers don't tell us anything terribly concrete, it's hard to reconcile them with the narrative of immediate and permanent addiction.

As Nobel Prize winning economist Gary Becker points out:

The likelihood of becoming and remaining addicted to drugs or other goods is not determined only by personal biological and psychological propensities to become addicted. For example, many individuals end their addictions to smoking and drinking alcohol when they get married, find good jobs, or mature.

This is also difficult to reconcile with immediate and permanent addiction.

At least some experts believe that "Alcohol More Harmful Than Crack or Heroin", with an overall harm index of 72 for alcohol, 55 for heroin, 20 for marijuana, and at the bottom end, a mere 5 for mushrooms.

The lead researcher for this study was David Nutt.  Unfortunately for Dr. Nutt, who was the chairman of the British Advisory Council on the Misuse of Drugs (ACMD) at the time of publication, the need for the evil drug narrative is so strong that he was summarily sacked for presenting this information.  His dismissal lead to several resignations from other researchers in protest.  As a society, we're clearly not ready to face the facts and strive to cling to The Narrative.

I've seen addiction up close because my father was a severe alcoholic who turned his back on his job, friends, and family and lived for years as a homeless drunk. He wasn't alone:  "In the United States and Western Europe, 10 to 20 percent of men and 5 to 10 percent of women at some point in their lives will meet criteria for alcoholism."  Note those are percentages of ALL adults, not just those who drink.

While the addiction rates for narcotics are probably somewhat higher than those for alcohol users, alcohol is a good representative for addictive drugs, especially since we all have experience with ingesting it and observing others who drink.  The spectrum for all drugs ranges from using the drug with no significant negative effects to having a devastating impact on quality and quantity of life with a distribution of these effects being similar to that for alcohol.  Alcohol is bad enough, but the others are no worse (per Nutt's research).  If fact, alcohol is the only drug (other than things like blood pressure medication) for which, when severely addicted, withdrawal can kill you.

To summarize so far, there is no drug that is immediately and universally addictive.  With the possible exception of alcohol, all non-medicinal dependencies can be beat, and indeed, most people do manage and eventually escape addictions to illegal drugs.

On the other hand, the majority of people are addicted to something.  Even ignoring food addiction (when it causes obesity, sometimes severe and even life-threatening), there are all kinds of medicines that keep users alive (for blood pressure, asthma, angina, etc.), there's caffeine (coffee, tea, and don't forget chocolate), there's alcohol and tobacco; and all sorts of other obsessions (video games, porn, sports, etc.) to which people are addicted.  Many of these addictions are beneficial or even life-sustaining.  Others may be detrimental, but it's not the addiction, it's the activity itself that's detrimental.

Even for potentially detrimental things, it's very hard to measure.  For example, smoking an occasional cigar statistically reduces life expectancy which is generally considered detrimental, but if it brings enough pleasure and enjoyment to the smoker, is it really detrimental overall?

The bottom line is that fear of addictive substances is terribly overwrought and has lead to bad policies that have damaged tens of millions of lives and prevented the use of substances that may enhance quality of life overall.

Glass Houses and All That

Instapundit writes about the "The Scientific 7-Minute Workout" and pokes fun at the New York Times reporters' limited math capabilities:

"Of course, if you do 12 exercises for 30 seconds each, with 10 seconds in between as recommended, that’s eight minutes, not seven. But they’re mostly English majors at the NYT."

The real answer is 7 minutes 50 seconds since there are 12 exercises but only 11 "in betweens", but Instapundit is only a lawyer, so you can't really expect arithmetic accuracy from him either.

Update: I sent an email pointing out the error to Instapundit and he responded: "I always start with a ten second rest period."  No smiley face emoticon or anything - sounds like a damn lawyer, doesn't it? :-)

Where the Well-Regulated Economy Ends

What would happen if you had a well-regulated economy and nobody came?

Several excerpts from a recent New Yorker article by James Surowiecki give an indication.  First, there's "Greece, where tax evasion is a national sport and the shadow economy accounts for twenty-seven per cent of G.D.P."  In other words, Greece is more than one-quarter of the way to operating outside the well-regulated economy.

Surowiecki notes that the U.S. is headed in the direction as well:

"When we all finished filing our tax returns last week, there was a little something missing: two trillion dollars. That’s how much money Americans may have made in the past year that didn’t get reported to the I.R.S., according to a recent study by the economist Edgar Feige, who’s been investigating the so-called underground, or gray, economy for thirty-five years. It’s a huge number: if the government managed to collect taxes on all that income, the deficit would be trivial. This unreported income is being earned, for the most part, not by drug dealers or Mob bosses but by tens of millions of people with run-of-the-mill jobs—nannies, barbers, Web-site designers, and construction workers—who are getting paid off the books. Ordinary Americans have gone underground, and, as the recovery continues to limp along, they seem to be doing it more and more."

There are many factors pushing in that direction.

But the forces pushing people to work off the books are powerful. Feige points to the growing distrust of government as one important factor. The desire to avoid licensing regulations, which force people to jump through elaborate hoops just to get a job, is another. Most important, perhaps, are changes in the way we work. As Baumohl put it, “For businesses, the calculus of hiring has fundamentally changed.” Companies have got used to bringing people on as needed and then dropping them when the job is over, and they save on benefits and payroll taxes by treating even full-time employees as independent contractors. Casual employment often becomes under-the-table work; the arrangement has become a way of life in the construction industry. In a recent California survey of three hundred thousand contractors, two-thirds said they had no direct employees, meaning that they did not need to pay workers’-compensation insurance or payroll taxes. In other words, for lots of people off-the-books work is the only job available.

Most, if not all of those factors, are strongly related to the desire to avoid being well-regulated.

Increasingly onerous regulations can be followed by either draconian enforcement which strongly discourages private business formation leading to requiring massive government intervention in the economy ultimately leading to the situation where people pretend to work and the government pretends to pay them (per the old saying about the Soviet Union), or continuing lax enforcement, where the regulations are ignored and are therefore pointless and counterproductive (like in Greece).

A well-regulated economy is a shrinking and/or non-existent economy that exists mostly in the minds of collectivists.

That's Why the Chicks Swarm All Over Me!

Via BrothersJudd, apparently "Holding A Guitar Makes You More Attractive".  There's me with a guitar below (on the cover of my Let's Party album).  What do you think?  Is it true? Does holding a guitar make a guy irresistible?

I had written early at my surprise at seeing my CD available on eBay.  In searching for the above picture (I think I've lost the original "art"), I found that it's also available on Amazon and a slew of other sellers.  I wonder if anyone has actually sold one?  Should I write myself a fantastic review?  Or a scathing one?

My other album, which I consider to be a lot better, is still only available at last.fm (right where I left it).  I'm guessing that the Let's Party title is more catchy which is why it has shown up other places, though it may just be that the overlap of what I think is good and what other people like might be very small.

Of Tides and Werewolves

In a peer reviewed paper a few years back, authors Rain and Rogue (RR) noted that there is a statistically significant correlation between high tide levels and werewolf attacks, and, in fact, werewolf attacks increased dramatically at a tide greater than 2 feet.  While RR never explicitly stated that high tides were responsible for increased werewolf activity, politicians interpreted the paper in this manner and the government has instituted a number of extremely expensive projects to hold back the tide (with no more success than King Canute).  A new paper by Histamine, Ash, and Pollen (HAP) shows that RR had made mistakes in their calculations and that the correlation of tides and werewolves, while still positive, was not a strong as shown in RR's paper.  Many have now expressed their outrage that the erroneous RR calculation was used as an excuse by policy makers to try and control the tide.

I'm joking, of course.

However, there are striking parallels with a recent brouhaha involving a paper by Reinhart and Rogoff which correlated government debt levels with poor economic growth.  In particular, they found that growth cratered as debt approached and exceeded 90% of GDP.  The cratering turned out to be wrong (as noted by Herndon, Ash, and Pollin), but not the direction of correlation.  According to Keynesians, the paper was allegedly used as an excuse to limit government borrowing in both the United States and Europe and prolonged the recession as a result.

However, just as high tides don't cause werewolf activity, high government debt in a government's own fiat currency does not directly cause poor economic growth.  Just as high tides and werewolves are caused by the full moon, large deficits (and the resulting debt) and poor economic conditions are symptoms of the same underlying causes.  In either case the observable symptoms have very limited direct effect on each other.

If you have no idea what I'm talking about (I readily admit this is somewhat obscure though numerous economists and pundits such as Krugman have written about it), and are interested to learn more, you can read about the Reinhart-Rogoff tempest in a teapot here.

The Case Against Well Regulated Economies...

...can be summed up in one chart:



Not a whole lot of socialism was happening when the world exploded from universal poverty two centuries ago.  Note that the most free market during the period also had the most growth.

This post is stimulated due to the comments on this post.