Why Government Must Be Small: The Unseen

John Hasnas illuminates Frederic Bastiat’s 1850 essay, “That Which is Seen, and That What is Not Seen.”  An essential point of these essays is that when government acts to pass or enforce a law it (hopefully) does so to achieve some positive result.  However, it is difficult if not impossible to foresee all of the secondary and collateral consequences of an action, which may be detrimental to others.  These “unseen” victims of action or inaction deserve as much consideration as the proximate beneficiaries of an action.

Big government and its advocates tend to tout the positive primary effects of acts.  They downplay negative side effects, and they tend not to temper their enthusiasm for action to effect positive change with the unpredictable and unknowable secondary effects.  This Knightian uncertainty is a fundamental argument for minimalist government.

Hasnas gives some excellent examples that should give the current government pause:

One can have compassion for workers who lose their jobs when a plant closes. They can be seen. One cannot have compassion for unknown persons in other industries who do not receive job offers when a compassionate government subsidizes an unprofitable plant. The potential employees not hired are unseen.

One can empathize with innocent children born with birth defects. Such children and the adversity they face can be seen. One cannot empathize with as-yet-unborn children in rural communities who may not have access to pediatricians if a judicial decision based on compassion raises the cost of medical malpractice insurance. These children are unseen.

One can feel for unfortunate homeowners about to lose their homes through foreclosure. One cannot feel for unknown individuals who may not be able to afford a home in the future if the compassionate and empathetic protection of current homeowners increases the cost of a mortgage.

In general, one can feel compassion for and empathize with individual plaintiffs in a lawsuit who are facing hardship. They are visible. One cannot feel compassion for or empathize with impersonal corporate defendants, who, should they incur liability, will pass the costs on to consumers, reduce their output, or cut employment. Those who must pay more for products, or are unable to obtain needed goods or services, or cannot find a job are invisible.

Congress Imitates Homer Simpson — II

Some federal legislators have decided that all of that government-subsidized sugar we’ve been adding to soft drinks all these years might not be so good for us.  Since government has assumed responsibility for the health of American citizens our representatives are ready to take action.  Naturally, they’ve decided to reduce those crop subsidies.

Oh wait, no, they’ve actually decided that the way to fix this problem is to impose an excise tax on sweetened drinks.  I.e., they’ll continue to pay farmers to grow more corn and sugar than the market wants, but they’ll discourage Americans from drinking it with a “soda tax.”

Because of course the best way to correct the unintended consequences of government is with more government.

Reminds me of Homer Simpson’s solution to overdosing on stimulants:

Clerk: Hey, you can’t take that many pep pills at once.

Homer: No problem, I’ll balance it out with a bottle of sleeping pills.

QOTD: The Climate-Industrial Complex

The always incisive Bjorn Lomborg describes the emergence of a “climate-industrial complex” of politicians, special-interest groups, and for-profit corporations.

 Spending a fortune on global carbon regulations will benefit a few, but dearly cost everybody else.

Government Can’t Order Results

The Obama administration plans to order auto makers to increase the fuel economy of automobiles sold in the U.S. to 35.5 miles per gallon by 2016.

Well gosh, if the government can just order automobiles to be more efficient, why stop there?  Wouldn’t 50mpg be even better?  Indeed, it is not clear how the government intends to effect this order.  If it’s anything like past enforcement of CAFE mandates then:

1. Domestic companies will try to comply by building fleets of efficient cars nobody wants and selling them at a loss.
2. Foreign companies will generally try to make a profit, either by seeking subsidies or by paying government fines for noncompliance and passing them on to their customers.
3. All companies will game the regulations — e.g., redefining “automobile” to exclude SUVs, or substituting diesel engines for gasoline (thereby achieving the nominal goal, but probably not in the way proponents wanted.)

Two years ago I noted that any bad regulation is just a disguised tax, and it is usually helpful to rephrase regulation in terms of taxation.  In this case, there is a simple tax that would achieve the government’s stated goal:

“If gasoline is cheap, there’s going to be a huge disconnect” between the vehicles available and what consumers will want, argues AutoNation Inc. Chief Executive Mike Jackson. He has long advocated a higher federal gasoline tax to ensure that gas prices stay above $4 a gallon, the level that drove demand for small cars last summer.

I.e., if the government really thinks it’s important to increase the distance an average car travels on a gallon of gasoline, it can avoid all gamesmanship and politics in achieving that goal simply by raising the existing gasoline tax.

But apparently The People don’t think it’s worth paying more at the pump to get more efficient cars on the road.  So instead the government pursues its agenda through supply-side regulation, disguising the costs to such a degree that nobody can hope to quantify them.  Of course, in the process all sorts of special interests crowd into smoke-filled rooms with bureaucrats and politicians to trade favors.  If the objective is met, it is at a much higher economic cost than the transparent and straightforward tax would have accumulated.

Grammar: Against Backward Compound Nouns

English has acquired a small number of compound nouns that violate rules of grammar by putting an adjective after the noun.  Because these are not used frequently enough to form canonical exceptions they result in errors and confusion when people try to form their plural.  Examples (followed by the correct plural form) include:

• Attorney general  (attorneys general)
• Court martial  (courts martial)
• Notary public  (notaries public)
• Mother-in-law  (mothers-in-law)

These exceptions also make plural possessives downright unwieldy — e.g., the attorneys general’s conference.

There is no good reason to preserve these exceptions.  Putting the adjective first always makes the compound more wieldy:

• General attorney / general attorneys / general attorneys’ conference
• Martial court / martial courts / martial courts’ guidelines
• Public notary / public notaries / public notaries’ council
• In-law mother / in-law mothers / in-law mothers’ meeting

Grammar: Don’t Use “Woman” as an Adjective

Is it grammatically correct to speak of “woman doctors?”

“Woman” is not an adjective, but that fact does not mean it cannot modify a noun.  Nouns that properly modify other nouns are referred to as “noun adjuncts” or “attributive nouns.”  For example, “chicken soup” or “arms race.”

However, the use of “woman” as a noun adjunct is grating because there is an adjective (“female”) that almost always serves the same purpose.  One should never use a noun adjunct when a bona-fide adjective will do.

The only time “female” might not suitably substitute for “woman” is when one needs to qualify the noun not only as female, but also as adult and human.  I.e., one may prefer “woman friends” to “adult human female friends” (as distinct from, say prepubescent human male friends, or monotreme friends).

It is never correct to use “women” as a noun adjunct.  Hence, “women doctors” is as ungrammatical as “chickens dinners.”

Sodium, Salt, and High Blood Pressure

Excessive consumption of sodium can raise blood pressure.  High blood pressure causes all sorts of expensive and deadly diseases.

Leave it to Bloomberg’s New York City to jump in at this point and conclude that we need government action to reduce sodium in everyone’s diet.

Of course, it’s not that simple.  But it is interesting.  I contacted the CDC, FDA, and NYC Health Department to compile and confirm the following information.

First of all, extreme imbalances of any electrolyte — high or low — can cause health problems, including permanent organ damage and death.  There is no question that on average Americans consume more sodium than is nutritionally necessary.  It is also medically proper for people with hypertension to reduce their intake of sodium as a first step to lower their blood pressure.  But if you don’t have high blood pressure there is no reason to specifically worry about your sodium intake.  (Although you may notice that if you stick to a healthy diet you are avoiding a lot of junk foods with elevated sodium content.)

Health officials seem to warn interchangeably about excess “sodium” and “salt.”  But it’s the sodium that matters, and there are salts in your diet that do not contain sodium.  Yes, table salt is conventionally sodium chloride, and sodium chloride does happen to be the primary source of sodium in human diets.  But it’s not the only one: you probably also regularly consume sodium bicarbonate and sodium nitrate.  When you look at the FDA nutrition label for a food, the “sodium” line is supposed to list the entire mass of elemental sodium regardless of what molecules it is bound up in.

A Moral Basis for Income Taxation

Barry Bennett proposes a coherent moral basis for taxation:

Wealth is created primarily by the vast societal infrastructure that we take for granted. Nobel prize-winning economist Herbert Simon estimated that at least 90% of wealth derives from social capital — the trust, shared values and behaviors that allow a society to function effectively — and therefore concluded that a 90% tax was morally justified.

A 2005 World Bank study concluded that most of a nation’s wealth derives from intangible capital; that is, from human capital and the quality of institutions, especially the rule of law. The wealthier the nation, the more this is so. The study concluded that 82% of America’s wealth derives from intangible capital, and a full 56% from the rule of law. There’s a reason American entrepreneurs don’t invest in failed states. Average talent allows one to live a very good life in the U.S. Without the web of social and governmental institutions, however, even our greatest entrepreneurs would have nothing. High taxes concentrated on the wealthy may raise legitimate issues of public policy. They raise no moral issues.

This does seem reasonable.  Unless you live alone on an island you benefit from social capital.  If you really object to implicit social contracts it is possible to opt out of society to a large degree and thereby avoid a large degree of taxes.  (The Amish come to mind as a measured example.)

Several writers objected to this argument.  The core moral objections seem to be:

1. Government is not the sole source of social capital, so government does not have an unmitigated moral claim on taxing the dividends of social capital.
2. Even though income taxation may be justified in principle, governments can and do levy taxes that are structurally immoral.

As Laura Sozio suggests: the only moral tax on social capital would be a flat tax (or more accurately, I would argue, a head tax) on the assumption that every person in a society enjoys the same social capital.  The fact that one person makes more wealth from it than another should not obligate the former to pay more for it than the latter.  Indeed, any disproportions in the taxation of social capital reward the lazy and incompetent at the expense of the productive and diligent.

Unfortunately, this argument can quickly bog down in practical details.  Does every person in a society truly enjoy the same social capital?  Are “fortune” and “misfortune” structural defects in the allocation of social capital that taxation should mitigate?  These are fair questions that deserve lengthy treatment, though I aver that in general we should not take unprincipled or immoral actions in an attempt to mitigate practical problems.

Tax Competition: Swiss Update

I’m a huge fan of tax competition.  Bloomberg reports that the combination of increasing British income taxes (a 50% marginal rate was promised last month) and EU efforts to increase the regulatory burden on alternative investment funds are driving fund managers from London to Switzerland.  There:

Personal taxes for wealthy foreigners can frequently be negotiated with the local authorities in Switzerland, depending on the canton … and may be based on projected expenditures, not income….

Grammar: Symmetric vs Symmetrical

Unless you’re paid by the syllable or intentionally bombastic you should never use symmetrical instead of symmetric, or asymmetrical instead of asymmetric.  The only reason to add -al is to convert the adjective to an adverb, as in symmetrically.

Dictionaries seem to have given a pass to adding the extra syllable to these two adjectives.  But that is no more correct than turning basic into basical, or ironic into ironical (unless, perhaps, you’re speaking sarcastically).

These examples illustrate that you should only add -al as part of -ally to convert a -ic adjective to an adverb.