A Bad White House Policy That Transcends Politics

As reported in the Wall Street Journal, the White House has had a long standing policy that it does not send condolence letters to the families of soldiers who commit suicide while in combat.

This is a terrible policy. Suicide is major problem and to continue to stigmatize it through policies such as these does nothing to help.

Suicides in the military are often caused by combat-related stress. I think that point is undeniable in the case of one who takes his life on the battlefield. How is this loss of life any less tragic or any less deserving of our sympathies than if he died from an enemy’s bullet?

A soldier losing his life on foreign soil, regardless of the circumstances, is a very grave situation and deserves the hallowedness of any combat-related death. Nothing is gained by sweeping suicides under the rug or by trying pretend they don’t exist. There is no reason that the White House not honor these deaths.

By continuing this policy, the White House is tacitly complicit in the Army’s terrible track record for dealing with suicides. As long as suicides are shunned and covered up, our soldiers will never be able to get the help they need. The Army has policies and training programs in place to deal with suicides, but they do nothing to address the underlying problem. These policies are largely lip service, instituted from the top down. Unless real change is instituted from the bottom up, we have little hope for getting real help for our soldiers.

Now, I write this as an outsider, so I admit the following is based on perception only. The problems in the Army are systemic. First of all, the Army’s mission is different from other military. They are the ones with boots on the ground that go door-to-door looking for the bad guys. That type of job description usually attracts a certain type of person: a gung-ho adrenaline seeker looking for adventure.

Also, the Army attracts those that come from diverse backgrounds and thought maybe they wouldn’t fit it, nor care to, in the Air Force or the Navy. The type of person who joins the Army might be blue-collar with a tough background. This is nothing bad, it’s just the nature of the situation. Perhaps those with more opportunities in life sought out the Air Force, with the perception that it’s more “white collar” to the Army’s “blue collar”.

Because of the nature of the Army, their job description and the type of people they attract, they have young officers that are sold-out to the “tough guy” image. The Army, by their own admission, pushes promotions on young soldiers, perhaps giving them too much too soon. This immaturity therefore carries up into the leadership. If a young soldier is feeling depressed or is thinking of suicide, he cannot go to his peers or superiors for help.

Countless soldiers that have experienced the situation have said they feared ridicule and belittlement if they admitted their problems. Their fellow soldiers and their leadership tell them to “suck it up,” that they are “warriors” and there can’t be any “crybabies on the battlefield”.

Obviously the Army has its problems. It has failed leadership at several key levels. It attracts a type of person that might be prone to trouble anyway. None of this armchair analysis is meant to disparage our soldiers. Rather it is an attempt to look at the causes of the problems facing the Army so that we might try to learn how to fix them.

A mandate coming from the Pentagon telling the Army to include more suicide prevention videos will do nothing to help. The Army doctors that, instead of treating the patient, simply attempt to cover up symptoms by psychomedication do not help. The White House that continues to treat suicides as something to be ashamed of does not help.

These are our young men. They made a conscious decision to join the Army and serve their country. If the Army breaks them – and it does break them, for that’s what happens when something that is already fragile is handled without care – it, and the entire country, especially the White House, has a duty to honor our fallen.

The Colorado Springs Gazette ran a two-part investigation into the violence of Army soldiers. It does a good job of exposing and explaining the failures of the Army that lead to the current problems. I highly encourage everybody to read it. Part one. Part two.

The Army has taken steps to address this problem. Hopefully they are sincere and effective, but I fear they are mostly lip service and nothing fundamental will change. Certainly nothing will change so long as the White House continues with a policy that is destructive and only adds to the problem.

The White House must send a strong, clear, consistent and unwavering message that every combat death is a tragedy, suicide or not. Once it’s out in the open, hopefully soldiers will feel comfortable getting help and hopefully the help they receive is of the highest quality. If that happens, then hopefully this entire article will become moot.

Thanksgiving and Independence

Thanksgiving. A time when we look back at our roots and continue with a proud tradition. I think I’ll do that today, only instead I’ll look back at the roots of our country, at the birth of a proud tradition of personal liberty and limited government – a proud tradition that I hope continues well into the future.

Perhaps one of the most important documents ever written was the Declaration of Independence. It’s unfortunate that this document gets overlooked. Oh sure everybody knows what it is and it’s always mentioned in the same breath as the Constitution, and you might have even been forced to memorize the first paragraph of it in elementary school; but do you understand it? Do you appreciate its gravity and relevance? Do you appreciate its radicalism?

Let’s take a closer look at it on this Thanksgiving Day to see why we truly should be thankful.

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

In other words, when the course of history requires a group of people to renounce allegiance from one country, and instead create their own, equal country, which they have every right to do, dignity dictates they must formally air their grievances by stating their case in writing.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

It is plain and obvious that all men are created equal. They are born with rights that are inherent and cannot be taken away. These include the right to life, liberty and private property. (The main inspiration for the Declaration was John Locke, who argued that government’s main duty was to protect property rights. Locke said, “Man... hath by nature a power.... to preserve his property - that is, his life, liberty, and estate - against the injuries and attempts of other men.” Property, to Locke, meant more than simple possessions as we think of it today. It meant being able to do with one’s body and labor as one saw fit; it meant opportunity. The Declaration summed this all up with the term “Pursuit of Happiness”).

--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed,

Man creates government and gives government authority to protect the rights that we are all born with. Government can only do as much as we say it can. If government does something the people don’t agree with, it is no longer a legitimate government.

--That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

If government ceases to protect life, liberty, or property, or if it gives itself powers that the people did not give it, the people have a right to throw off that government and start again. It is here that the Founders lay out their vision for government: “to effect their Safety and Happiness”. In other words, the legitimate functions of government are providing security and protecting liberty and property rights.

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.

It would be counter-productive to throw off government for trivial and temporary grievances. In fact, man has proven himself more likely to suffer under a corrupt and tyrannical government than to throw it off. It is easier to suffer than to institute the proper form of government.

But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

But when the people are constantly and continually abused with the goal of such abuse to suppress, silence and control the people, they have the right and the duty to provide for their own welfare and throw off the tyrannical government and institute a new one.

--Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

From here the writers list their grievances with King George of England. I won’t take up space by listing their specific reasons for abolishing ties with Great Britain, but what they write is important and I encourage you to read the entire Declaration here.

They conclude with these three paragraphs:

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our Brittish brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

Now are we, in the present time, anywhere close to this? No, thank God, we aren’t. This is still a strong country that we should be very proud of, despite our political failings. But just because we aren’t close to suffering the injustices that would necessitate a revolution, that doesn’t mean we should become complacent. Tyranny and socialism creep. We must constantly review the Declaration of Independence, the Constitution and the writings of our Founding Fathers. The message in them is clear – limited government that works to ensure the safety and property of its citizens, whom are free to enjoy their individual liberty, knowing that it is something we are all born with, and no government can ever take away.

I for one am thankful to live in such a country. I am thankful we have such a clear thesis statement for our government. I am thankful that we have such a history of liberty that citizens can become complacent and believe in government as a beneficent entity that seeks only to enhance our lives. It’s a good thing that we haven’t suffered the tyranny so common in governments. The down side is that people come to believe tyranny doesn’t exist and accept without question as government takes ever-increasing control of our lives.

The problem is that once the power is acquired, history has shown it almost always takes a revolution to restore individual liberty. I don’t want a revolution in this country. I would much rather constantly watch our government, constantly slap their hands as they reach for things that don’t belong to them, constantly question their motives and remind them of our founding ideals. I would rather constantly remind government and my fellow citizens of such things.

I am thankful that so far, our government hasn’t achieved a critical mass of power that it decides it no longer wants to let go, and is now finally strong enough to swat away any resistance or voice of protest. This country is a country we can all be very proud of. Let’s not become so complacent in our pride that we close our eyes.

Happy Thanksgiving.

Drilling For Oil to Preserve Nature?

Audubon Society Drills For Oil

Environmental conservation is a noble goal and is something we should all strive for – if it doesn’t cost too much. There are those that argue that regardless of the social cost, environmental protection must be pursued. But most people realize that, in order to live a higher quality of life, we are willing to impose some environmental damage. For most of us, we are willing to pollute by driving a car rather than walking to work or finding some other means of conveyance. On the margin – that is, on a personal level – the extra social cost of the added time and burden are not worth the benefit of reducing pollution by a negligible amount.

Does this mean we are doomed to ever-increasing pollution? After all, if I choose to drive to work and my neighbor chooses to drive to work and his neighbor chooses to drive to work and all of our co-workers choose to drive to work, then we have millions of people impacting the environment. What might have been negligible pollution at the individual level suddenly becomes a full blown environmental problem in aggregate.

The point is, choices are made at the individual level. If we can find a way to influence individual’s behavior, we might be able to come up with a solution to environmental protection. Mandates and regulations don’t work – at least not as effectively as other means. By just adding rules you have done nothing to change the incentives.

Rather what we need is a free-market approach to environmental protection. The Audubon Society can attest to this approach. For years environmental groups have been lobbying congress to create laws to protect the environment. These groups have been spending money for somebody else to advance their cause. Regulations, while maybe partially effective, are expensive to get put into place, come with a negative backlash, and offer no return on investment.

The Audubon Society realized it could better advance its agenda if bought property it valued instead of just lobbying for its protection. Property rights are the surest way to accomplish almost any economic goal. If we want to protect a diminishing or scarce resource, simply assign property rights.

The Audubon Society bought the Rainey Sanctuary in Louisiana. Buying property is the most efficient way to gauge our values. If we value protecting the environment more than we value other activities, we will choose to spend our money protecting the environment. The fact that the Audubon Society was able to purchase this land, that they were willing to pay more for it than any other potential buyer, shows that we valued that land as an environmental sanctuary more than other uses it could have been used for. The Audubon Society gets many donations from members and the general public. So they were using the people’s money to buy that land. That’s a good thing. It means that land is being put it most highly valued use.

To simply protect the land through laws means there very well might be a use for that land that society values more highly. Laws in no way can be used to reflect what we as a society value. The Audubon Society sought to buy the land instead of seeking protection for it because it made economic sense to do so. They put their money where their mouth is and actually bought the land, instead of standing on the sidelines and essentially paying somebody else to protect it. This tactic eliminated much of the negative backlash that comes from regulation.

Since they were spending money anyway to protect the land, they might as well use that money to purchase it. This way, they can use the land as they see fit to further advance their goals. This includes drilling for oil. Yes, the Audubon Society drills for oil in a wildlife refuge.

They see it as in their interest to allow the drilling and use the money they receive to purchase other wildlife areas. This is a win-win situation for everybody. Environmentalists get to advance their cause by generating revenue that they can use productively. Oil companies and those of us who benefit from oil (everybody) get to continue to reap the benefits, and personal liberty and economic principles are maintained. In all cases, the land is being put to its most highly valued use.

It’s easy to decry the environmental damage done from oil drilling when you don’t have a stake in the game. Without ownership of the property, it’s easy not to take into account the benefits of drilling. Since, if you don’t own the property, you don’t reap the benefits, drilling is seen as only costly. It’s easy to tell other people what to do with their property. But when you can benefit by allowing drilling, it suddenly makes sense to do so. The Audubon Society weighed the benefits of drilling against the costs and decided that the added revenue would be more valuable than keeping the land drill-free. With the money generated, they buy other land where they may decide to keep it pristine. Again, everybody wins.

Property rights are essential to solving almost every economic problem. We ensure the land is going to its most highly valued use, there is no excuse nor pressure for government to overstep its bounds, and we ensure that benefits to society are exceeding or at least equal to costs. None of these things are possible with simple regulation and government protection.

For a great article on this very subject, please read Dwight R. Lee’s article, To Drill or Not to Drill, from the Independent Institute.

'Rainy Day' Bailout Fund?

Have bailouts become such a part of our culture that we now introduce taxes that exist for no other reason than to fund them? Talk about the ultimate case of moral hazard.

Once again politicians have hijacked economic policy and are trying to use it for political gains. In the UK, politicians including Gordon Brown, want to create a fund that will be held until the next bailout is required. Where will the money for this fund come from? From the Tobin Tax.

The Tobin Tax, an idea from economist James Tobin, seeks to impose a small tax on currency exchange, with the idea of reducing instability caused by speculation. This article isn't about the merits or economic sense of the Tobin Tax, but to get an idea of it, see Greg Mankiw's view or Aswath Damodaran's view on the subject.

When economists propose excise taxes, which is what the Tobin Tax is, the goal is not to raise revenue as with conventional taxes. Rather, the goal of an excise tax is to alter behavior. Economists don’t care what the money goes to, although in this case Tobin wanted the money to go towards helping economic development in third world countries.

The point is, it’s not the goal of an excise tax to raise revenue to achieve some political end. But, politicians will be politicians and I guess it’s reasonable to expect them to always have a political end in mind.

What’s scary about this is that they want to collect the money generated by the Tobin Tax and use it to fund future bailouts.

From the Forbes article:

“The Group of 20 emerging and developed economies has asked the International Monetary Fund to look at ways banks could help pay for taxpayer bailouts, such as a 'Tobin Tax' on transactions or a levy towards a global fund.”

Have we really come to rely that much on government assistance? Are we getting to the point that the essence and beauty of the free market – that failing companies die out, thus ensuring a competitive, cheap, high quality marketplace – is soon to be something of the past?

When businesses cease to be competitive and instead become subsidized by the state, that’s when we make the transition from capitalism to socialism. In contrast to Karl Marx, it seems the dawn of socialism won’t come from a massive workers’ revolt, but rather by a slow creep that nary a soul sees coming – until it’s too late.

To Promote the General Welfare...

I once heard a preacher say, referencing the Bible, “When you can’t figure it out, read the directions.” This article won’t be about religion or the Bible, but it will be about reading the directions. We are very fortunate that our country came with an instruction book: The Declaration of Independence and the Constitution. Both documents very clearly make the case for a limited government with very clearly defined roles.

Let’s say you buy something that requires some complicated assembly. If you don’t read the directions, you may very well put it together wrong, and it could potentially fall apart and hurt someone. The same is true for our country. When we try to build our government without deference to our Constitution, some quirky things happen that can become very dangerous.

We can begin to misinterpret or deliberatly reinterpret clauses and words in the Constitution. For instance, we can interpret the term “public use” as meaning “public purpose.” Or we can use the term “promote the General Welfare” as a “loophole” to accomplish pretty much whatever we want.

There is obviously much to be written about the Constitution, and I’m sure I will write more as time goes by, but this article will confine itself to the General Welfare clause.

The term “general welfare” appears twice in the Constitution, once in the preamble and again in Article I Section VIII. Thankfully, James Madison and others recognized that this could be a dangerous term and thus went well out of their way to explain exactly what they meant by this term.

The General Welfare clause was very clearly not meant as carte blanche for the government to do whatever it saw fit to accomplish the nebulous goal of promoting the general welfare. The Founders recognized that if they were to use such a broad term, they must qualify it and specifically enumerate what they meant by it.

In The Federalist Papers #41 Madison explains,

“It has been urged and echoed that the power to ‘lay and collect taxes, duties, imposts, and excises, to pay the debts, and provide for the common defense and general welfare of the United States’ amounts to an unlimited commission to exercise every power which may be alleged to be necessary for the common defense or general welfare. No stronger proof could be given of the distress under which these writers labor for objections, than their stooping to such a misconstruction.

“Had no other enumeration or definition of the powers of the Congress been found in the Constitution than the general expressions just cited, the authors of the objection might have had some color for it; though it would have been difficult to find a reason for so awkward a form of describing an authority to legislate in all possible cases…

“But what color can the objection have, when a specification of the objects alluded to by these general terms immediately follows and is not even separated by a longer pause than a semicolon?”

What Madison is saying here is that to use the term “general welfare” as an open ended authority for government to accomplish anything it sees fit is to undermine the entire premise of the Constitution. He says that for one to “[stoop] to such a misconstruction” immediately exposes one as having an ulterior motive other than that of limited government.

To use the term “general welfare” to accomplish a goal in which the Constitution provides no other means, is to blatantly disregard the specific enumerations that immediately follow it. Indeed it would be ironic if one tried to resort to “general welfare” because he couldn’t find justification for his desired action anywhere else in the Constitution, because the term “general welfare” is just a summation of the limited power specifically enumerated in the other areas of the Constitution.

It’s like a dog trying to find a bone by chasing its tail. It will never work.

Here is Article I, Section VIII so you can see for yourself.

“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

To establish Post Offices and Post Roads;

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

To constitute Tribunals inferior to the supreme Court;

To define and punish Piracies and Felonies committed on the high Seas, and Offenses against the Law of Nations;

To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

To provide and maintain a Navy;

To make Rules for the Government and Regulation of the land and naval Forces;

To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;

To provide for organizing, arming, and disciplining the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;

To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings; And

To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”

As you can see, there is a list of enumerated powers that immediately follows the term “General Welfare”. It is these enumerated powers – and no others – that the government may use to “promote the general welfare”.

Dirty Laundry and Property Rights

U.S. Residents Fight for the Right to Hang Laundry

This seemingly silly article has very important implications. Those of us who are subject to Home Owners Association (HOA) rules are often frustrated by the silly tenets stating what we can and cannot do. For instance, some of the tenets I have to follow are that the side of the drapes that one sees from outside must be white. This forces me to buy two sets of drapes, a white one for against the window, and then one of my choice covering it that those of us inside the house can enjoy. Another silly tenet is that I have to get permission and submit a request – with drawings (I am not kidding) – for installation of a satellite dish.

These tenets, while frustrating, are the part of the rules I agreed to by purchasing the house – that is, I had a choice on whether or not I wanted to abide by them. These tenets are agreements within the community in which I choose to live. So what happens when someone outside the community tries to tell me what I can or cannot do with my property?

This is where it gets interesting, but thankfully, it doesn’t have to be complicated. The article mentioned and cited above raises the issue of who has what right. Does the property owner have the right to hang her laundry outside? Does the neighbor across the street have the right to a laundry-free view? The answer might seem obvious, but in today’s world where property rights are eroding right and left, the answer is not always so clear.

Because of disastrous Supreme Court rulings like Hawaii-Housing v. Midkiff and Kelo v. New London, what once was a fundamental property right can now be called into question. Where before the neighbor would be laughed at and ridiculed for complaining about someone hanging laundry on their own property, now, articles like this one must be written to clarify and stress the importance of property rights.

Because nobody seems to have the answer (due in large part to the rules always changing, ala the cases mentioned above), we turn to lawyers and legislators to come up with laws about what we can and cannot do, about how we can and cannot use our own property. This is the wrong tactic, and luckily (as always) economics gives us clear direction.

Ronald Coase articulated the brilliantly simple idea of what is now known as the Coase Theorem. What it basically says is that we don’t need legions of lawyers, legislators and judges to decide who can do what with their property. All we need to do is decide which person has the property right.

Does the property owner have the right to hang her laundry or does the neighbor have the right to an unobstructed view? This is significant for an important reason: it doesn’t matter who is assigned the property right. As long as property rights in general are enforced, an efficient allocation will result regardless who is actually assigned the property right.

For example, let’s assume that a court rules that the neighbor has the right to an unobstructed view. This doesn’t mean that the property owner can no longer hang her laundry; it simply means that the table is now set to negotiate. Whoever values their behavior more will be allowed to continue with that behavior.

Let’s put this idea in context first and then we’ll illustrate with an example. As the situation is now, if a court decided that the neighbor had a right to an unobstructed view, it would be illegal for the property owner to hang her laundry. A law would have to be written specifically banning laundry hanging. If she continued to hang her laundry anyway, the police would have to come, issue her a ticket and a court date (or a fine). If she did go to court, the judge would have to decide if she really did or did not violate the law and if so, to find an appropriate punishment. In any case, whatever happens, even if she’s found innocent, there is clearly a waste of resources. Everybody’s time could be much better served if they didn’t have to deal with such a trivial issue. That is how the situation is handled as things currently stand.

Now, if we apply the Coase Theorem, things instantly become much simpler. Let’s continue with the assumption that it’s the neighbor who was assigned the right to an unobstructed view. The property owner that wants to hang her laundry, if she truly values that activity, can negotiate with her neighbor. She could, for instance, offer to pay her neighbor $20 to help offset the inconvenience of the compromised view.

If the neighbor agrees to that, then obviously the view was worth less than $20 to her, while the ability to hang laundry was worth more than $20 to the property owner. Everybody wins and all at lowest cost. If the neighbor does not agree and instead asks for $50, the property owner can decide if hanging her laundry outside is worth $50. If it’s not, then the neighbor valued her right to a view more than the property owner valued her right to hang clothes, so again everybody wins at lowest cost.

As the situation stands now, if the court said it was illegal to hang your clothes outside, then regardless of how much one did or did not value an activity, the situation would never change. For example, let’s say the neighbor valued her view at $10. That is, if the property owner would offer her $10, the neighbor would say it’s okay to hang the laundry. But now, even if the property owner valued hanging laundry at $1000, it’s still illegal. No matter how much one might value an action, and no matter that both neighbors might agree, it’s still illegal.

This is not a lowest cost solution because not only do you have the explicit costs that are required to enforce such a law, you have the implicit costs of value. There is an activity that has potentially $1000 of value that is not allowed to continue. If the neighbors were allowed to negotiate, the property owner could pay the neighbor $10 for something she values at $1000, thus giving society a savings of $990. In other words, there is now $990 worth of social welfare that we otherwise wouldn’t have had, all at a cost of $10.

With the law approach, the social benefit is only $10 (that of the neighbor), while the cost is at least $1000 plus the extra cost of administering and enforcing the law.

The beauty of the Coase Theorem is that we will get the same result even if the right is assigned to the other party, the property owner. Let’s say that the property owner has the right to hang her laundry. Her neighbor can either offer her money to not hang her laundry, or she can live the obstructed view. Whichever costs her the least, in her mind, is the action she will choose.

If she values her view at only $10, she might offer that $10 to the property owner. If the owner says no, the neighbor is okay with that because she doesn’t value her view that much. If however, the neighbor REALLY values the view, say at $1000, that might be enough to convince the property owner to not hang her laundry.

In the article, the property owner hangs her laundry outside because it saves her $80 a month in energy bills. So long as she gets more than $80 to not hang her laundry, she will be happy to use the dryer. Either way, whoever values their action the most is the one that will be able to continue.

Since this will all come about as an agreement between the parties (a contract), by default both of the will be better off. A contract would never be entered into if both parties weren’t better off. Thus, by simply assigning property rights, we can save everybody time and resources, can achieve our goals at lowest cost, and can ensure that everybody is better off. With the law approach, it’s a lose-lose situation. While it may arguably achieve its goal, it is not lowest cost and at least one person is definitely worse off.

In economics, we call the Coase Theorem a “Pareto Improvement”. That is, it is possible to allocate resources in such a way that people are made better off and nobody is made worse off. We have achieved “Pareto Optimality” when it’s impossible to change the allocation of resources in such a way that we make one person better off without at the same time making one person worse off.

The Coase Theorem, assuming transactions costs are low, can be applied to many areas of our lives, and can be critical for helping us evaluate public policy like cap-and-trade.

For many many many many reasons, property rights are critical to liberty, economics and just about everything that’s important in our lives. Property rights must be vigorously defended and held in a sacred regard. Property rights provide the underpinning of our entire society, affecting everything – even our dirty laundry.

A "Helpful" Program That Really Hurts

"Philadelphia Gives Homeowners a Way to Stay Put"

This article, from the New York Times by Peter S. Goodman, frustrates me. This is a good illustration of how bad economic policies have come back to bite us. At first, while reading it, I actually had some hope. This sounded like good-faith effort on everybody’s part to try to reach a deal and keep people in homes. If the lender and borrower could reach a deal on their own, then it was obviously in each party’s interest to make the deal. When freedom of contract is upheld, everybody wins.

But then I read this:

“Those outcomes are similar to the ones produced by the Obama administration’s $75 billion program aimed at stemming foreclosures, which gives cash subsidies to mortgage companies as an inducement to accept lower payments. But in Philadelphia there is one crucial difference: the mortgage companies have no choice but to participate. They have to attend the conferences and negotiate in good faith or they cannot proceed with a sheriff’s sale.”

Both policies are bad. Obama’s policy of providing subsidies to mortgage companies to help stave off foreclosures may sound like a good thing, but its economic consequences are very real. In economics, we should only give subsidies in very specific circumstances, that is, to encourage more behavior that results in a positive externality.

While staving off foreclosures certainly sounds like something that is positive and should therefore be encouraged, we must recognize the foreclosures in the first place are the market’s attempt at correcting the housing bubble. By intervening and not letting the market go where it wants to, we are just drawing out a bad situation. Recovery will be no faster or less painful if we continue to try to stifle necessary forces.

Philadelphia’s program is similar. If both parties agreed on their own, that would be one thing. But forcing one party to agree to terms that are not in its interest to agree to is damaging from an economic and a liberty standpoint. A major reason the mortgage crisis happened in the first place is because mortgage companies were forced to lend when it did not make financial sense to do so. As a result, some creative financing was born, resulting in very bad programs like adjustable-rate mortgages and interest only mortgages. Nothing good can happen by again forcing banks to loan when it doesn’t make financial sense to do so.

It’s easy to empathize with the homeowners who are in this regrettable situation. Surely nobody wishes a foreclosure on anybody. Houses are homes and to be forced to give that up can be devastating one’s family life. But the fact remains we won’t get out of this mess until some hard necessary corrections are allowed to happen. In the long run, it’s in everybody’s interest for the market to correct itself. By not allowing the short term pain in the meantime, we’re just assuring our economy remains in a perpetual state of uncertainty.

“…three years ago, Mr. Hall committed the sort of mistake that has upended millions of households. At the recommendation of a for-profit credit counselor, he took out a new mortgage — a variable-rate loan from Countrywide Financial, which is now owned by Bank of America. He paid off some credit card debt, and he borrowed an extra $15,000 to renovate his home, expanding his mortgage balance to $63,000.
The loan began with manageable payments of about $500 a month. But Mr. Hall’s interest rate soon soared — something he says was never explained to him — lifting his payments to $950 a month.

“When I got the mortgage, I didn’t really understand it,” he said. “They told me this would improve my credit and that was it. It was just, ‘sign here,’ and ‘initial here.’ ”

No More Construction Work

He might still have managed had construction not come to a halt. By 2007, Mr. Hall’s employer was cutting work hours. In August 2008, it shut down, turning his $1,000 weekly paycheck into an $800 monthly unemployment check.

Every day, he set the alarm clock and headed to the union hall at 5 a.m., waiting and hoping for work. Every day, he went home, still jobless and discouraged, now confronting the displeasure of his wife, who worked as a nurse, and who he said never came to terms with their diminished spending power. After months of bickering, she left him last December, taking their daughter.

“She was saying, ‘How are we going to have Christmas? How are we going to go on vacation?’ ” he recalled. “She just seen it getting worse instead of better, and she got depressed.”

In January, his truck was repossessed, leaving him to walk through the winter dawn to the union hall for his daily ritual of defeat.”

This is a tragic situation, but one that could have been easily avoided. Had Mr. Hall not borrowed against his mortgage, had he refinanced right away to lock in a low rate as soon as his mortgage started climbing (as millions of others did), had he taken the time to understand his mortgage as any responsible borrower should have done, perhaps he wouldn’t be in this situation.

This also illustrates the economically damaging role unions play. Because of the high wages demanded by unions, it makes it infeasible for construction companies to pay them their wages in tough economic times. Instead, the company was forced to go out of business (which might have happened anyway, but unions certainly took away any competitive advantage it might have had).

Now, Mr. Hall depends on the union to find him another job, but since unions worked to destroy his job, how can they be expected to find him another? I’m sure the unions of other trades are quite effective at keeping outsiders out, ensuring a high wage for them, while ensuring joblessness for everybody else. Unions are very very damaging to an economy.

Of course, all this criticism is easy to see in hindsight, but that’s the point. Mr. Hall was just playing by the rules of the game at the time, he was just responding to the incentives that were in play. People respond to incentives. That’s why it’s imperative that we let the market work. We must pay the painful price of foreclosures and lower wages. If we continue to subsidize the risk, thus lessening the impact, our hindsight might not be 20/20 and we could easily make the same mistakes again. Indeed we’re already making them.

Why Don't Politicians Listen to Economists?

This is a frustrating topic for me. Those of us who understand economics – especially those of us who appreciate liberty – cheat. We already know the answers ahead of time. Okay, well not really (the old saying “If all economists were laid end to end they still wouldn’t reach a conclusion”…). But I do think that those economists that neglect liberty are missing a big part of the picture.

Economics gives us a blueprint for how the world works. Really. If we know how to read the blueprint, we can identify what policies are good and what policies are bad. It’s funny because usually the first thing out of a first year economics student is “Man! Why do politicians keep instituting policies that clearly don’t work?!”

That seems a befuddling idea. Here we have an entire discipline that is dedicated to studying how our economy works, how people behave when confronted with incentives, and how to best allocate scarce resources. These people have doctorate degrees. They are smart! Why on Earth, then, don’t politicians listen to them?!

The answer to that question is simple. Unfortunately it does nothing to relieve our frustrations.

I’ll begin with a quote by Henry Hazlitt, "Economics is preeminently a practical science. It does no good for its fundamental principles to be discovered unless they are applied, and they will not be applied unless they are widely understood."

This is a simple place to begin. Most people simply do not understand economics. Economics, though mostly common sense, is something that can be confounding at first glance. It’s a reality of economics that the consequences of our actions are often the exact opposite of what we intend.

For example, let me illustrate with basic minimum wage. This is a politicians’ seemingly great solution to a terrible problem. When the politicians say, “It’s wrong that you’re not receiving a living wage. I have enacted a policy to give you more money!” the people say, “More money?! Wow! What a great idea! Who could be against giving people more money?”

This unfortunately puts the economist in the awkward position of actually being the person arguing against giving people more money. It’s no wonder people listen to politicians over economists. Politicians tell people what they want to hear; economists tell people the truth.

The fact is, minimum wage artificially raises the wage above the market rate. As labor is now more expensive, companies demand less of it. The result is they pay a few workers more money, while laying off even more employees. Minimum wage was meant to help the worker, but it actually did more harm by making it harder to find a job.

This argument is the same for many political “solutions” to problems – they cause more harm than good. Tariffs, rent control, agriculture subsidies, Medicare, “cash-for-clunkers”, bailouts, welfare, unemployment, capping-salaries, certain taxes, social security… this list could go on and on. Even ignoring their effects on liberty, these policies have disastrous economic consequences.

All of the above programs sound good and are doubtlessly implemented with the best of intentions. Therefore it’s easy to understand and empathize with the politician that wants to pursue these policies, and it’s equally easy to understand why nobody listens when economists speak out against them. To argue in favor of these policies is easy, takes just a few minutes and requires no advanced education. To argue against them can be complicated, lengthy, counter-intuitive and requires an education that most Americans just don’t have.

This is not to say that Americans are stupid, for that clearly is not the case. America is one of the smartest countries in the world. Americans, in spite of their intelligence, are just simply ignorant of economic principles. Is it any wonder people listen to politicians ahead of economists?

That said, there is also another force working against sound economic policy: the nature of politics. What I mean by this is that the incentives created by our political system work against economics.

Most economics works in the “long-run”. That is, it takes time for prices and supply to adjust to bring the economy into equilibrium. How long does it take? Nobody really knows. What is certain though, is that while the economy is in disequilibrium, it is painful. Politicians feel the duty to “save” us from that pain so they enact legislation that “fixes” the problem. All this really does, though, is to draw out the disequilibrium and delay the economy from self-correcting. Since we’ve now extended the painful period instead of just enduring it for a short while, the politicians feel the need to re-“save” us. Oh what a vicious negative cycle it turns into.

There is an inherent conflict in politics and economics. As mentioned, economic policy requires a long view. Politics, however, requires a very short view. Political terms range anywhere from 2 years to 6 years. As such, politicians are only looking, at a maximum, 6 years into the future.

In order to get elected, the politician must prove himself capable, he must be a problem solver, he must have “vision.” Ambition may be a good thing politically, but economically it’s not always so positive. A politician might see a “crisis” unfolding and shout, “Don’t just stand there, do something!” This leads to politicians clamoring over each other to be the first to “do something.”

An economist might just look at the same “crisis” and shout, “Just stand there!” Often more damage is done by acting hastily and in an economically reckless manner than if we just did nothing. This works in the politicians’ favor. By “solving” the first problem, they can take credit for action. Conveniently, their solution only delayed the problem or created another one for them to “solve.” This puts politicians in the enviable position of ensuring they have job security while constantly looking like the hero to their constituents.

But what’s good for the politician may not be good for us.

So, we’re left with a seemingly unsolvable problem. Oh sure I think we can go a long way by ensuring economic education becomes a pillar of our school system, with continuous economic education from middle school all the way through high school; thus ensuring we’re at least economically literate enough to recognize a poor policy when we see one, but that only solves half the problem.

Politicians, regardless of their economic education, will never “just stand there.” But I suppose that’s a pretty good problem to have, for it’s a reminder that we are living in a thriving democracy with regular elections and freedom to choose our government. If our only complaint is that our society is so free that it’s hard to look beyond the next election, that we want to replace our politicians with someone more like ourselves, and that it’s possible to do so, then I suppose we have nothing to complain about at all.

An Economic Look at Healthcare - Part II

In part I, we examined why government intervention in the healthcare market leads to higher prices. Specifically, we looked at why Medicare and Medicaid create many more problems than they solve. If we abolish these socialist forms of healthcare, we would already have gone a long way towards reducing costs and increasing efficiency.

While abolishing Medicare and Medicaid must be the first step in reforming healthcare – and it would be very big step – more must be done. Government does not provide the answer to this important question. It has been government intervention in the healthcare industry that has caused prices to spiral upwards, so it makes no sense to think that even more government intervention would fix the problem.

We must dig deep and try to find the root of the problem instead of just addressing the symptoms. Government “fixes” to the problem will never work because they only address the most recent, obvious symptom of the problem, while doing nothing to address the cause.

For example, a recent proposal seeks to “solve” the problem by simply capping premiums and co-insurance payments. Just capping the price so they can’t climb any higher does nothing to address why prices were climbing in the first place. In fact, it’s through governmental policies such as these that directly lead to higher prices in the first place.

It’s an unfortunate reality that most government programs have consequences opposite of their intended effect. By capping prices, the government just creates perverse incentives. Insurance already has a built-in flaw. People don’t pay the full amount of treatment so it seems cheaper than it really is. Capping prices exacerbates this problem. By capping prices, people are in effect encouraged to use more healthcare, thus causing prices to spiral upwards.

If increased government intervention in the healthcare market is not the proper way for reform, then what is?

Many people argue that healthcare is a right, that some things just transcend economics. If that’s the case, then people don’t care if government healthcare is efficient or not because people’s health is much more important than efficiency.

That argument seems logical and has a lot of appeal. However, we can do much better. Is it really okay to settle for a broken healthcare system and dismiss it away as okay because “healthcare isn’t about efficiency anyway?” Efficiency means we’re putting our money and our resources to their most highly valued use. It means that we get the maximum value out of our dollar, our capital, and our healthcare workers. It means, in short, that we get the most bang for our buck.

Isn’t our healthcare worth our maximum effort? Don’t we deserve to see our dollar go as far as it can possibly go? Don’t we deserve to know that we’re getting the maximum and most beneficial use out of our healthcare equipment and employees? To say that the government has a duty to provide healthcare is to accept that we will never strive for efficiency and in turn will ensure we settle for a healthcare system that falls far short of its potential.

Excuse me for wanting and demanding better.

Government-run healthcare may seem like the easy fix, but if we really examine it we’ll find that it’s neither a fix nor is it easy. Please don’t accept the “easy” way out just because it’s obvious and appears to require very little work. Government-run healthcare will not give you want you want, no matter the humanitarian arguments behind it.

Instead, we can follow simple economic principles to reform healthcare. There is a role for government in the healthcare market; it’s a very limited role, but very, very important. Government’s failure in healthcare is twofold:

First, it intervenes when it shouldn’t by providing healthcare in the first place.

Second, it doesn’t intervene when it should. One of the legitimate functions of government is step in when there’s a market failure. One of the few areas the market fails is in the case of monopoly. By not enforcing anti-trust legislation against insurance companies, they giving in to large insurance lobbies and fostering monopolies.

This is a problem for several reasons. Insurance companies have been granted special legislation by politicians which has led to the fostering of monopolies, perverse business practices and an upward spiraling of prices.

If the proper kind of reform was implemented, healthcare costs would be pushed low enough that everybody would be able to afford it and nobody would be excluded, this eliminating government’s urge to “save” us from the healthcare debacle.

Most people are risk-averse. They would gladly pay $1,000 to avoid a potential loss of $100,000. But if government interventions cause prices to increase, suddenly they have to pay $5,000 to avoid a potential $100,000 loss. The change in the situation might make a risk-averse person decide to take the risk of losing $100,000 rather than pay the $5,000.

As costs continue to increase, all of the healthy people that would normally choose to purchase insurance decide not to. This leaves only those high-risk customers as the ones who carry insurance. Because they are high risk, the company must increase premiums in order to make a profit. Since the healthy, low-risk people choose not to carry insurance, the risk pool is very shallow and thus the company cannot afford to take on those who are already sick or are a high risk. This leads to insurance companies dropping coverage and refusing to cover pre-existing conditions. The fewer people they have, the higher costs rise. The higher costs rise, the fewer people they have. This is clearly an ugly negative reinforcing cycle.

This terrible cycle could be easily broken if the government let competition work like it is supposed to. If insurance companies were allowed to operate in such a way that they don’t need to seek protection from the government in order to make a profit, the costs wouldn’t be so high as to discourage people from enrolling in insurance.

If the risk-averse people find that costs are low enough that it’s in their interest to carry coverage, the risk pool becomes deeper. With this deep risk pool, outlays by the insurance company wouldn’t be nearly so damaging. Since insurance companies would be taking in more money than they pay out, costs would drop even further. The further costs drop, the more people will decide to carry coverage. The more people that enter the pool, the less damaging outlays become. In order to stay competitive, if their costs went down, they would be forced to pass this savings on to the customer, thus lowering premiums. The lower the premiums, the more people will choose to participate. Thus, a negative reinforcing cycle is turned into a positive one.

Since insurance companies would no longer be offered protection from the government and would no longer be forced to comply with legislation that creates perverse incentives, there would be no reason to not cover pre-existing conditions. The risk pool would be deep enough and overall healthcare costs would have dropped so much that a pre-existing condition would no longer be a catastrophic liability to an insurance provider.

Also, if true competition were allowed to flourish, it would no longer be in an insurance company’s interest to deny coverage for any reason. They only do so now because it makes financial sense to do so. As the situation exists now, a pre-existing condition would hurt their bottom line and they don’t have anything to fear by angering their customers because they are protected by the government from competition.

If the right kinds of reforms were implemented, where insurance companies truly had to compete with one another, not only would costs be low enough that pre-existing conditions wouldn’t be an issue, but the negative backlash against any company that denied coverage would be devastating.

People do business with companies for many reasons, only one of which is price. If an insurance company got the reputation for dropping bad customers, it would turn people off. You can bet there would be another insurance company willing to exploit its "heartless" competitor. If the system were constructed in such a way that true competition could flourish, dropping bad customers wouldn't be nearly the problem it is today (not even close).

Okay, so what about the indigent and the people that really, truly, can't afford healthcare? Don't we need a program like Medicaid to provide for them? The intentions of Medicaid are something to be proud of. It's a great thing that, in this country, nobody will be denied medical care because they lack monetary resources. That's the theory anyway.

In reality, Medicaid is so broken that it often leads to doctors refusing to treat patients. If they find care in an emergency room, the cost is passed along to insurance holders contributing further to rising prices. As medical costs go up, the Medicaid system becomes even more inadequate leading to even more patients being unable to get treatment. It's a tragic negative cycle.

This problem is only compounded by the outrage that many Americans feels because they are already forced to pay for Medicaid through taxes and then they have to pay for it again through rising insurance costs.

We can do much better, all through the free-market and personal choice. Consider this: CSPAN is a commercial free channel that airs government proceedings. It receives no tax support. CSPAN is funded through a small fee that is added to your cable or satellite bill. We could fund medical care for the indigent in a similar way.

If you choose to make a claim on your insurance, it will be with the understanding that you will also be paying a small fee that will go towards healthcare for the poor. If you don't want to pay the fee, then you will choose to pay for your healthcare costs out of your pocket. This will lead to a decrease in insurance claims which will further drive down insurance and healthcare costs.

Many people will gladly pay the small extra fee on their claim, knowing it's a matter of choice and it will go towards a good cause. The backlash that comes with paying taxes will be eliminated and personal choice and liberty will be maintained.

In light of all of this, it is clear that government intervention in the healthcare market does nothing but increase costs. It would be insanity to think that more government involvement in healthcare would reduce costs. It’s government that created the problem in the first place so why on Earth would we think that more of the same would fix the very problem it created?

Einstein said it best, “The definition of insanity is doing the same thing over and over again and expecting different results.” Government-run healthcare will NEVER solve our problems. Government might seem like the easy answer, but just because it seems easy doesn’t mean it’s right. We need take a step back and look at the problem critically and logically. We need to address the causes of the problem, not just the symptoms.

If we take a detached, clinical look at the problem, it becomes clear that a free-market approach to reform is where the answer is. It truly will work and it truly is that simple. This is the real “easy” solution. Imagine, we just sit back and let the market work. It really is that simple. No massive bureaucracies, no million pages of legislation, no committees, no formulas, no rules and regulations, no ever-increasing government whose only purpose is to support itself.

Why would we so vehemently fight for a policy that is so clearly not in our interest? Are we really that insane?

An Economic Look at Healthcare - Part I

Healthcare reform is certainly a very hot topic. Emotions run very high on this issue on both sides of the debate. This issue seems to capture all the hot-button issues: liberty, economics, religion, politics, the proper role for government, compassion, interest groups, capitalism, socialism… the list goes on and on.

In such a cacophony of opinions and debates, very rarely do people address the root issue of rising costs. They bemoan high prices and seek to “teach the robber baron insurance companies a lesson!” Well, we must ask ourselves: what is the actual cause of rising healthcare costs? Why are prices rising? People and insurance companies play by the rules they’re given, that is, they respond to the incentives they are presented with.

As such, we must look deeper, we must find out why insurance companies don’t accept pre-existing conditions and why premiums keep rising. It’s not just that they’re evil and they want to exploit the sick and dying patient to line their pockets with money. That argument is far too simplistic and contributes nothing to the debate.

If we truly want healthcare reform, if we truly want to reduce costs, if we truly want to make healthcare available and affordable to everyone, we must roll up our sleeves and dive in. I wish it were as easy as saying “the government will fix it.” Unfortunately, if we want to fix the problem, real work must be done to peel back the layers until we find out what’s actually causing the problem. For too long we’ve sought to only address the symptoms.

This is the first of a two part series on health-care reform. This part will look at the major cause in the distortion of the healthcare market, Medicare and Medicaid, and show exactly how they contribute to rising healthcare costs.
Step one in reforming healthcare should be to get the government out of it. Its two major healthcare programs, Medicare and Medicaid, create most of the problems a government-run healthcare plan is meant to fix.

The following is a straight-forward explanation of how Medicare and Medicaid actually work. I will insert commentary from time to time, but I assure you, the way these government programs work and the resulting economic consequences is presented truthfully, with no fabrication. This can be found in any economics textbook. It is neither complicated nor a secret.

The bulk (71%) of government healthcare spending is to Medicare and Medicaid as of 2004. This money mostly goes to direct payments to physicians, hospitals and other health care provided through Medicare and Medicaid.

In 2004 Medicare cost the government $309 Billion and Medicaid cost $290 Billion.
What do we get for our money? Medicare benefits are subject to strict limits that are less generous that most private health insurance programs. Medicare does not cover long-term care for the elderly in nursing homes and provides only optional and limited prescription drug coverage. Many people over 65 in the US have private insurance plans to cover the things Medicare misses. All this funding for “free” healthcare and people STILL buy private insurance.

Because our population is rapidly aging, leading to an inverted population pyramid, we have less people in the work force (taxes) and more people receiving Medicare benefits. Because of this (and many other things as we’ll see) the cost of administering Medicare is spiraling upwards.

In order to try to keep an unsustainable program going, Medicare started limited payments to physicians in what’s known as the Medicare Fee Schedule (MFS) that sets payments according to time, skill, and the intensity of the services rendered. It’s a complicated formula designed to limit payments.

The fact is that anytime you have a committee trying to work out a complicated formula, the price won’t be accurate and at the very least will lag behind the true market cost of the procedures. As a result physicians are vastly underpaid by Medicare and it’s leading some to refuse to accept Medicare patients or offer them lower-quality care in an attempt to re-coup costs. This system turns patients into a liability for the doctors, creating the incentive to NOT treat them. Something you never want to see.

Medicare limits payments for specific hospital providers to certain amounts independent of the actual costs of the procedures. The current law pays hospitals a flat fee for illnesses classified into Diagnosis Related Groups (DRGs). Under the DRG system, payment for a medical procedure is the same regardless of any complications that might develop during the medical procedures.

For example, a hospital treating a heart-attack patient will be eligible for a certain flat fee no matter how much is actually spent caring for the patient. This obviously can work both ways, but it can create the incentive for the hospitals to “cut-corners” in order to maximize profit by reducing the quality of medical care provided to the elderly.

The payment for each DRG is based on the average cost of treatment for the illness in all US hospitals, adjusted for differences in local wage costs, the greater cost of providing care for Medicare patients in hospitals with teaching programs, and higher costs related to treating a disproportionately large share of low-income patients.

At the extreme, this system could lead to some hospitals shutting down if they have a high proportion of elderly patients.

The MFS and DRG amount to nothing more than committees, review panels and complex formulas. Can you imagine the administrative costs of such a system? All this central planning and extra time and costs to try to accomplish something the market does automatically and much much more effectively.

As with any insurance system, Medicare encourages the consumption of medical services beyond the efficient level (prices are seen as lower resulting in a higher quantity demanded). The government has chosen to limit overconsumption by placing limits on reimbursement to medical providers.

Medicare increases the quantity of medical services demanded by the elderly. The DRG system acts to limit the quantity of medical services supplied to the elderly by capping the price per unit of service to medical providers. Clearly a backwards policy as far as economics is concerned.

Despite these attempts by the government to limit costs, spending on Medicare has risen faster than the average rate of cost increases in healthcare spending for the nation as a whole. Private sector spending increased by 2.9% while Medicare spending increased by 8.7%.

In 1997 congress passed legislation that sharply reduced payments to healthcare providers for most medical procedures and encouraged those covered by Medicare to enroll in managed care programs. This is clearly and band-aid solution and yet another example of government intervention that only makes a bad problem worse.

The sad fact of Medicare is that it’s unsustainable. To keep it going the government must do either: cut benefits, raise taxes or limit eligibility. All bad options.

It is crucial to control spending per beneficiary under the program in the future as the number of beneficiaries begins to swell due to the aging of the US population. Since Medicare constitutes such a large share of demand for medical services in the United States, its policies affect both medical service prices and the use of those services. In other words, Medicare has monopoly power to in effect become a price setter. The rising costs of healthcare are largely due to Medicare itself! And by expanding the idea of it through similar programs we’re supposed to reduce costs? Does that make any sense?

The Medicare payment system, in some cases, has perverse effects that actually increase spending. For example, the prospective payment system limits the amounts that Medicare pays for hospital stays. In doing so it has encouraged hospitals to transfer patients quickly to skilled nursing facilities or to long-term facilities where Medicare is obligated to pay on a fee-for-service basis, thereby contributing to increased costs.

Costs could be reduced sharply by increasing deductibles and coinsurance payments for those covered by Medicare. This would increase the portion of medical expenses borne by patients themselves, and as I will discuss later, would decrease the quantity of such services demanded. Medicare combined with medigap often reduces the out-of-pocket cost per service to zero, thereby encouraging consumption beyond the point at which marginal benefit falls to marginal cost.

The current legislation wants to cap and reduce coinsurance payments and deductibles! EXACTLY the wrong idea! You couldn’t be more backwards if you tried. Yet another example of a government intervention that does nothing but make a bad problem worse.

In regards to prescription drugs Medicare also contributes to the rising prices. Medicare subsidizes spending on medicine for the elderly which provides incentives to increase total expenditure on prescription drugs. It is also increases the incentive for health care providers to prescribe drugs for the elderly. The increase in demand for pharmaceuticals puts upward pressure on prices.

Okay. On to Medicaid.

The biggest difference between Medicaid and Medicare, besides the people they target (Medicare is for the elderly, Medicaid is for the poor), is that Medicaid is primarily administered by state governments.

Much of the problems are the same – soaring prices, limits on reimbursements which changes incentives, and unsustainable structure.

Medicaid is the insurance of last resort- it takes many patients with no other insurance programs like crack-addicted babies, the homeless with disabilities and AIDS patients who run out of private insurance and exhaust all other financial means of paying medical bills. It’s also pays for long-term care for the elderly who have run out of their savings. Definitely a noble program, unfortunately it’s flawed.

Medicaid has created the incentive for many elderly people to conceal their financial assets from the government so they can get their nursing home and medical expenses paid through Medicaid instead of spending their own money.

Because of reduced reimbursement rates, many physicians are refusing to treat Medicaid patients. Even though spending for Medicaid is constantly increasing, many poor patients are finding it harder to obtain medical care from physicians and must resort to hospital emergency rooms for routine medical care.

This increases the demand for medical services in the emergency room, extends wait times and leads to those who do have insurance being charged extra for the patients who theoretically should be covered under Medicaid. It is easy to see how a program meant to help poor people actually hurts them and everybody else by driving up medical costs and leading to declining coverage.

What are states doing to try to control medical costs? A common strategy has been to reduce reimbursement rates to Medicaid providers. Because pharmaceuticals are a major factor in higher costs, many states are restricting reimbursement rates to providers of prescription drugs and even requiring Medicaid recipients to pay some of the costs. Healthcare only works when people pay something. Even state-run “free” programs like Medicaid realize that their patients have to pay at least something.

Some states are actually placing limits on how much they will pay for Medicaid recipients’ medical costs. Other states are making it more difficult for low-income people to qualify for Medicaid, and as a result hundreds of thousands of individuals are losing their Medicaid health insurance. These cut have been especially severe in Florida, Vermont, and Tennessee. As we can see, it’s the STATE (not private insurance) that is refusing to cover these people. It’s the state that is dropping coverage.

These distortions we see in the private sector arise and are a necessary response to backward government policy. It’s not that the private sector created their perverse policies and the benevolent government must come along and save us poor people from the evil insurance industry. Clearly the private sector has had no choice but to respond in a similar way because government policies have tied their hands where they have no other choice. Don’t you see how government intervention leads to the exact opposite effect it’s meant for? Don’t you see that continuing down this road will NEVER fix anything?

Just a few final thoughts on Medicaid and Medicare.

During the period from 1984-1986, Medicare actually froze payments to physicians, but the cost of treating those patients increased at a rate of about 10%. During that time physicians were able to increase the volume of patients they saw in order to offset the price freeze. Clearly just capping fees is not an adequate solution to the problem.

Medicare, in an attempt at reform, tried using the Prospective Payment System which pays hospitals a fixed amount per patient regardless of the length of stay. These fixed payments or DRGs (discussed earlier) have the intended goal of physicians not over-treating patients and discharging them from the hospital efficiently. Again, a noble goal that unfortunately misses the mark. The result is physicians are paid too little, which forces them to over-treat privately insured patients to try to make up the difference. Combine that with lower quality care for those that need it most and I’d say that’s another example of a lose-lose situation caused by government policy.

State governments tried the same approach with Medicaid. They limited their reimbursement to hospitals for Medicaid patients to covering the minimum possible average cost of hospital services. The average reimbursement rate under Medicaid is about 80 percent less than hospital cost of services.

Unfortunately, low rates of reimbursement under Medicaid have reduced access to medical care for those enrolled under the program. Many doctors are unwilling to accept Medicaid patients and some hospitals are reluctant to admit them. Because of difficulties in finding physicians to treat them, Medicaid patients often seek treatment at hospital emergency rooms, where costs of treatment are more expensive.

There are no easy solutions to the healthcare crisis. But continuing down the same road that caused the crisis in the first place is just plainly a short-sighted bad idea. If the MANY government interventions in healthcare are lifted, the market can and will work like it’s supposed to and you’d find that everybody is able to afford coverage, perhaps even without insurance at all.

The economic consequences of government intervention in healthcare are clear. Why would we think that any politician would know the answer? Why would we trust them with an issue as big as this? We need to listen to economists. We need to follow sound economic policy if we’re to solve the problem. I wish it were as easy as just saying, “the government will fix it,” but the sad truth is it’s not. Don’t be willing to settle for the easy answer just because it seems easy.

The Undying Legacy of Keynes

John Maynard Keynes was an extraordinary man. He completely and totally revolutionized economics. He meant well. He truly believed he had the country’s best interest at heart when he rolled out his theories on recession and his ideas for a government fix.

People either love him or hate him. I think it’s impossible to do either if we truly understand him. It is impossible to divorce Keynes from modern economics. Keynes is famous for what is now called “Keynesian Economics”. But even classical economics has been greatly influenced by Keynes, so much so that we probably never know that much of our current economic thought, even that which isn’t “Keynesian” comes from Keynes.

His ideas on the relationship between savings and investment and the Keynesian Cross gave rise to the IS/LM model, perhaps the most thorough understanding of international economics our science has yet come up with.

Keynes indeed contributed very much to economics. Despite being a reluctant revolutionary, Keynes remained modest to a fault. He was just a good guy.

As such, it’s almost with reluctance that I criticize him.

Keynes believed there were unseen forces in place that prevented the economy from reaching efficiency (or as close as we can get in the real world to this theoretical idea of “efficiency”). He believed prices were fixed in the short run. As such the supply side of the economy couldn’t adjust to balance wages and prices with output.

Keynes theorized that since wages and prices wouldn’t adjust, the only thing that could adjust was output. Since something had to give, if prices didn’t adjust to bring us to full employment, output would have to drop, thus putting us in a recession.

To guard against the fall in output, Keynes proposed that we stimulate the demand side. Who says we have to wait for prices to adjust; are we just supposed to suffer in the mean time? From this, government intervention was born. Cutting taxes or increasing spending to stimulate aggregate demand was seen as the solution by Keynes.

Once politicians got a hold of that idea, it was over. While the occasional tax cut may have occurred from time to time, it’s as if the politicians just discarded that half of the equation and focused only on increased spending.

It’s this type of thinking that gave rise to government provided welfare. By the government creating minimum wage and backing labor unions, the “sticky wages” that Keynes bemoaned were cemented in place. I have a few disagreements with Keynes, but this is his biggest failure.

He recognized sticky wages were problematic to the economy. His policies were meant to temporarily offset that problem by using government intervention. That temporary fix might be nice, but it led to a temporary problem becoming a permanent one.

Instead, Keynes should have addressed the problem and not the symptom. Keynes was brilliant. He had unprecedented authority. People in high places listened to him. If he had encouraged governments to discourage sticky wages, the country we call America would be much different today.

If he had encouraged government to avoid policies like minimum wage and backing labor unions, his problem of sticky wages would have gone away. If he had used his considerable influence to explain to people that prices needed to adjust, that the worker should expect fluctuations in his wage, then instead of reinforcing the idea of sticky wages, instead of giving it credibility, he could have dismissed it. If Keynes had said we should do everything in our power to avoid sticky wages, it would have happened.

Instead we have had generations believing they are entitled to a certain wage that is not market determined. We have had generations believing that they need not worry because the government is there to solve their problems.

Keynes didn’t care much for notoriety. He didn’t care if he went down in history as the greatest (certainly the most notorious) economist ever. If he had put pressure on the correct issue – fighting sticky wages – instead of a reactive government policy, the whole idea of “Keynesian economics” might not exist today.

Keynes, by trying to solve a problem, just ensured that it continues forever. So I guess we can call him the greatest economist ever, certainly so if greatness is measured by relevance. Keynes, by his misguided policies, ensured that he remain forever relevant.

The Case For Free Immigration - Part III

This is the third of a three part series. Parts I and II.

This country was founded on liberty. This country was founded on free immigration. For much of our history, the government had nothing to say about immigration. Anybody who wanted to come here could. There were no visas, no quotas and no laws regarding this issue.

Indeed our country is one of the few in the world that was actually founded on a principle. We came together with a common idea, with a common view of liberty and government’s proper role. We were able to shape the befuddling idea of the history of our own future.

Are we willing to sacrifice the ideas our country was founded on at the expense of an artificially high wage? On the idea that “I got mine”? Does that make any sense? Are we willing to sacrifice the “soul” of liberty?

I think Ronald Reagan can say this much more eloquently than I can, so I offer the following from Reagan’s famous “city on a hill” farewell address:

“I've been reflecting on what the past eight years have meant and mean. And the image that comes to mind like a refrain is a nautical one--a small story about a big ship, and a refugee and a sailor. It was back in the early '80s, at the height of the boat people. And the sailor was hard at work on the carrier Midway, which was patrolling the South China Sea. The sailor, like most American servicemen, was young, smart, and fiercely observant. The crew spied on the horizon a leaky little boat. And crammed inside were refugees from Indochina hoping to get to America. The Midway sent a small launch to bring them to the ship and safety. As the refugees made their way through the choppy seas, one spied the sailor on deck and stood up and called out to him. He yelled, "Hello, American sailor. Hello, freedom man…

“The past few days when I've been at that window upstairs, I've thought a bit of the "shining city upon a hill." The phrase comes from John Winthrop, who wrote it to describe the America he imagined. What he imagined was important because he was an early Pilgrim, an early freedom man. He journeyed here on what today we'd call a little wooden boat; and like the other Pilgrims, he was looking for a home that would be free.

“I've spoken of the shining city all my political life, but I don't know if I ever quite communicated what I saw when I said it. But in my mind it was a tall proud city built on rocks stronger than oceans, wind-swept, God-blessed, and teeming with people of all kinds living in harmony and peace, a city with free ports that hummed with commerce and creativity, and if there had to be city walls, the walls had doors and the doors were open to anyone with the will and the heart to get here. That's how I saw it and see it still.”

Let me further illustrate this idea. Come with me back in time to 1775, to Patrick Henry’s famous line, “Give me liberty or give me death!” What was he really saying here? Patrick Henry’s willingness to sacrifice his life for liberty, as profound as that is, is only the surface.

What, after all, is liberty? What is a free country? What is this idea that Patrick Henry is obviously so passionate about? Freedom means liberty for all. Liberty is not subject to temporal bounds. Liberty is not something that can be given and taken away. Liberty, in its eternity, is not subject to the whims of a finite government. Liberty is something that lives within us, which drives us. People are not satisfied until they have achieved liberty. Lives have been sacrificed for it, wars fought over it.

Patrick Henry was making a statement to the world (and I believe he knew it at the time): Liberty lives here! Here, we value liberty above all things, even our lives! If you try to take away our liberty, you will have to kill us! Anybody who loves liberty can come here knowing they will find refuge, just as we found refuge here! Fight with us! We will fight with you!

Is that idea already dead? After a mere 200 years? Is that the lifespan of liberty? Once, we were willing to die for liberty for all. Now we won’t even reduce our wage. Once, we would fight to the death to defend the idea of liberty. Now we just fight those most seeking it. Once, we found refuge in liberty. Now that refuge has turned to comfort and complacency.

Let’s pause here a moment and reflect on the founding values of our country. They are literally written in stone at the base of the Statue of Liberty, in a poem by Emma Lazarus titled The New Colossus:

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
"Keep ancient lands, your storied pomp!" cries she
With silent lips. "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!"

This poem is incredible and I think it’s worth breaking it down a little bit.

With all the power and fury of lighting, she is the “Mother of Exiles.”

She stands vigilant with a beacon of “world-wide welcome.”

“Keep ancient lands, your storied pomp!” Keep your ceremony, give me liberty.

“Give me your tired, your poor, your huddled masses yearning to breathe free, The wretched refuse of your teeming shore.” Though you cast them aside, they are welcome here, and welcome with open arms.

“Send these, the homeless, tempest-tossed to me, I lift my lamp beside the golden door.” The homeless. We are all homeless until we find the land of liberty. The tempest-tossed. We are all battered by storms until we find shelter in liberty. I lift my lamp beside golden door. Follow me to the place of liberty. I light the way and I stand guard to ensure you safe passage. You are welcome here.

Yes Patrick Henry and Ronald Reagan both shared Winthrop’s vision of a shining city upon a hill; a shining beacon calling out to all who love liberty. Because Patrick Henry was willing to die for liberty, he lit a fire that started this nation. Ronald Reagan realized that this country was founded on eternal values, and to stay consistent with liberty, he must not restrict freedom of movement. Emma Lazarus recognized the inherent compassion in this country. Liberty is consistent with compassion. Compassion is consistent with free immigration. To change course now would be to betray the cause that Patrick Henry and so many others were willing to die for. In a very real sense, to restrict immigration is to kill the soul of liberty.

Free immigration has very important implications. On the economic side, free immigration is essential to the division of labor and economic output and growth. It is well documented that an autarkic society is not sustainable. While restricting immigration does not equal autarky, it is a step in that direction. In an age of globalization, free information and (increasingly) free enterprise, it seems almost barbaric to restrict the liberty of an individual to move where his output could be greater. Restricted immigration has the same negative economic effects as do labor unions, tariffs and minimum wages.

On the human side, the consequences of restricted immigration can be dire indeed. Free immigration often times means the difference between life and death. It is absolutely inconsistent with liberty if your actions cause harm to another individual. Restricting immigration is an action (in the natural world, movement would be absolutely free, so restricted movement must be artificial; anything artificial is the cause of an action) that can and does cause harm to innocent individuals every day.

And finally on the intangible side, on the “soul” side, some of the greatest thinkers of our time, indeed some of the fiercest advocates of liberty contend that immigration must be free. Our ancestors came here because they loved liberty. Liberty is not subject to temporal bounds, so how now can we seek to restrain it by restricting immigration?

The Case For Free Immigration - Part II

This is the second of a three part series. Parts I and III.

The arguments for free immigration from a liberty perspective are less empirical, but perhaps more important and with greater consequences. I will start with the most obvious example of restrictions on migration being inconsistent with liberty: emigration.

It is almost universally condemned if someone wishes to leave a country but cannot. Why then, is the inverse not true? What good would emigration be if there were no immigration? Let me paint a picture: during World War II, many Jews were the subject of unspeakable oppression. It didn’t have to be this way. It’s no secret that the Germans hated the Jews. When Hitler came to power, he first tried to force the Jews to move from Germany.

As Hitler’s influence increased, as the Nazi empire expanded, there was no place left in Europe for the Jews to go. While some were lucky enough to emigrate to North and South America, most of them simply were not wanted by any other country. Since Hitler could no longer force them out, he had to come up with another solution to the Jewish problem: the final solution.

As tragic as that story is, imagine how much more tragic it could have been if there was no immigration. Free immigration is paramount because without it, free emigration means nothing. Germany was happy to see the Jews go. It wanted them to leave. But since most other countries in the world closed their doors to the Jews, they couldn’t leave. This is just as outrageous and deserves just as much condemnation as if Germany had told the Jews they couldn’t leave and were going to be put to death.

Imagine if that were the case. Let’s pretend that every country on this planet had their doors open to the Jews but the Germans would not let them leave, despite the Jewish pleas. The outcry would have been enormous: how dare you not let them leave?! Look what will happen to them if you force them to stay! Unfortunately without free immigration the argument is exactly the same, only instead it’s directed at the countries that told the Jews “no”.

Because most countries didn’t open their doors, the Jews were not allowed to leave. They were forced to stay and we all know what happened to them. Free immigration can very well mean the difference between life and death. While that may be true only in the most extreme circumstances, liberty demands that the door be always kept open, just in case.

Furthermore, since free emigration is something most of the world’s countries can agree on, it is equally important to have free immigration for a second reason. If all the countries in the world adopted a policy of free immigration, the one country that didn’t would be very conspicuous. In a world of restricted immigration, the country that doesn’t allow its citizens to emigrate can basically go unnoticed because nobody will take its emigrants anyway, so what is the big deal if it’s illegal for them move?

Immigration must be free to put the spotlight on those countries that don’t allow emigration. Even if the entire world is free except for the population of one country, it’s just as much of an injustice as if all people of the world were not free. The liberal demands freedom for others just as much as he demands it for himself. All the freedom in the world means nothing if one can’t get to it. If there is even one country in this world that does not allow either free immigration or free emigration, liberty has not been achieved.

Let me frame the importance of free immigration in another way. Liberty says that people should be free to do as they please unless their actions cause harm to another. Similar to the argument made in part one for efficiency, who exactly is being harmed by free immigration? It is perfectly acceptable to prevent someone from coming on to your private property. If you don’t want someone on your property, and they come anyway, they are violating your liberty and can be arrested or sued, immigrant or otherwise. If the argument against free immigration is that of property and being invited, it’s already illegal to trespass; you don’t need an additional restriction on top of it.

A key function of government is to maintain and secure property rights. This entails many things, including the knowledge that I will feel secure that, if I buy something, it will be mine. If I buy a car from someone, I know the government will protect me if that person decides to take his car back. If he steals the car, he will go to jail. If he sues me for the car, there will be a justice system in place so I can argue why the car is mine and not his. In other words, contracts would be impossible to enforce if there weren’t a stable government backing up and defending property rights.

One of our key liberties is the freedom to contract. We own our bodies and, as such, can do with them what we please so long as we don’t harm another person. Since I own my body, I own my labor. If I want to sell my labor to someone who is willing to buy it, it is government’s responsibility to enforce and protect that right. Indeed it is the most important duty of government. I’ve said it before and I will continue to say it: all of our rights mean nothing if we aren’t secure in our property. All of the legitimate functions of government (that of the protective state) are for naught if we aren’t secure in our property rights. I cannot stress enough the importance of this.

This is very important. It means that a buyer and a seller should be allowed to find each other and make a deal. If it weren’t in both parties’ interests, the deal would never be made anyway. Thus, by default, when a contract is agreed to, both parties are better off.

For a government to restrict this, not only is it preventing a mutually beneficial transaction, it is violating the very core of personal liberty. For a government to prevent the freedom of contract of a buyer and a seller just because one has to cross an imaginary line to do so is the most ridiculous thing I’ve ever heard.

Property rights themselves mean nothing if the freedom to contract is undermined. Indeed, you cannot separate the two. If there is no freedom to contract, there are no property rights. If the government fails to enforce the freedom to contract, it has failed in its most basic responsibility.

Some “defenders” of liberty put forth the argument that a country, just like a property owner, has the right to deny entry if it feels like it. These people say that it’s only okay for an immigrant to come to this country if invited. While at first this may sound consistent with what I have argued above, it most certainly is not. The country is not a piece of private property, therefore it cannot be owned. If it is not owned, the idea of trespassing doesn’t work.

A country is nothing more than a collection of individuals’ property with an imaginary line drawn around the whole thing. There is nothing magical that happens when one crosses that imaginary line. Who is the guardian of the line? Our government? Why would the power of an imaginary line overrule the right to freedom of contract? If I want to hire an immigrant worker if I live in Colorado, does it make any sense that I can’t because there is an imaginary line stopping him from coming?

Or, pretend you live in Texas. Your backyard backs up to a Mexican’s back yard. If you wanted to hire him to mow your grass, it would be illegal to do so. It would be illegal to walk five feet into your property and do work that you invited him to do and are willing to pay him for. This is your neighbor we’re talking about! While this example might seem a little silly, the point it illustrates is an important one. Whether a potential immigrant lives next door or a thousand miles away, the argument is exactly the same. It’s only when we boil it down to its most basic, like the example just illustrated, that the true lunacy of such a policy becomes apparent.

These same so called “defenders” of liberty say the country acts as a club. As such we can decide for ourselves what our policy of immigration can be. Just as a private club can vote on whether or not to accept new members, so should the country be able to. Again, this may sound good on the surface, but it’s just as hollow as any other excuse to deny immigration.

In a private club, members make a conscious effort to join and join because of some shared vision or goal. Who among us chose to join this country? Most people who vote to exclude outsiders are ones who never made the conscious decision to join in the first place, but rather had the good fortune to be born here. Isn’t it ironic that the only people who would make the country more like a club, thus maybe giving this argument some legitimacy, are immigrants, the very ones that are excluded!

Similarly, what is our common goal as a country? I doubt you can say we have one, for the collection of individuals here is about as heterogeneous as you can get. I suppose if we had to say what our common goal was though, it might be to live the “American dream”. The American dream is that anyone can succeed here, regardless of your background. Again do you feel the irony that we want to exclude the only people who the “American dream” might apply to?

America is very clearly not like a club, so to defend a backwards policy based on the assumption is faulty. Rather, I suspect that “defenders” of liberty are simply trying to reconcile their own personal views on immigration with the idea of liberty. Since restricting immigration is plainly and obviously inconstant with liberty, they have to come up with some creative arguments for them to avoid looking like hypocrites. But even a quick examination of those arguments shows how faulty they are.

As just mentioned, a border between one country and another is nothing more than a line drawn on a map. An imaginary line acting as a barrier to free movement is inconsistent with liberty. By crossing that imaginary line, the immigrant is simply agreeing to leave his country’s sphere of influence and enter into another country’s sphere of influence; he is agreeing to no longer be governed by the laws of his country and instead be governed by the laws of another country. Provided he does not harm anybody, liberty has nothing to say regarding his movement, anymore than it can have a say if he crosses the street.

An important aspect of liberty is freedom from government coercion. Liberty would never have government intervention trump an individual’s liberty of movement. Immigration is, in the truest sense, a victimless crime.