Dumb Laws

Before we ask the government to legislate all the details of our lives, perhaps we should ask how well it has done so far.

The answer: not very well. Check out a new blog series, Dumb Laws, from the Club for Growth.

The Club describes the blog as "a collection of truly dumb laws from across the country that we have sorted by state. For instance, Los Angeles banned the sale of bacon hot dogs. People in Pennsylvania are stirring up another Whiskey Rebellion after Allegheny County passed a beer tax. And the U.S. Senate just had a resolution this week honoring dirt. To learn about more dumb laws, go here."

In South Carolina, where the Bastiat Society is headquartered, the entry reads:

1. State law requires an individual to complete 1,500 hours of instruction to become a cosmetologist. It takes more hours of licensing to become a cosmetologist in SC than it does to become a police officer (396 hours) or carry a concealed weapon (8 hours).

2. Caskets and Stones, a retail funeral store in Greenwood, submitted their license application, paid their fee, were scheduled to go before the Board of Funeral Directors, and were told they could open. But then the Board gave them a “cease and desist” order - essentially telling them to stop selling caskets. The Board fined them $1,500 for “opening before their Board appointment.” They had to pay it before they could get their license.

3. Fortune Tellers are required to obtain a special permit in order to operate in South Carolina.

4. A proposed bill would require high school football and basketball playoff games to have replay for officials to use during these games.

5. Barbering schools are required by law to have at least ten instructional chairs -and those chairs are required by law to be upholstered and finished exactly the same way.

6. In 2003, a bill was introduced that would have required all drinking straws in South Carolina be sold in individual wrappers. The bill almost led to a fist fight on the House floor.

7. The fourth Friday in October in each year is designated by law in public schools as Frances Willard Day, and each public school is required “to prepare and render a suitable program on the day to the end that the children of the state may be taught the evils of intemperance.”

8. Circuses cannot exceed 48 hours at one place in any one year.

9. If a menu or advertisement states “frozen dessert,” it must correctly state the specific frozen dessert that is offered for sale so as not to mislead the consumer.

10. Musical instruments are not allowed to be sold on Sunday.

"Dumb law" is what happens when we rely on legislation to handle the details of a society. Legislation is a blunt instrument, effective for protecting private property rights, but more laughable than helpful when it tries to deal with the fine details of living, things like musical instruments, frozen desserts, and drinking straws.

Best Countries for Business 2008

You could call it "the revenge of the old world;" or you could say it's the ability to reinvent a country; or perhaps the advantages of small and nimble versus big and slow.

Whatever you call it, the United States is no longer the best country in the world for business. According to Forbes magazine, that honor goes to the land of the Danes. With all due respect to Shakespeare, there's nothing rotten in Denmark anymore.

Forbes gives Denmark credit for low inflation, low unemployment, entrepreneurship, lower taxes, innovation and technological savvy.

The United States ranked fourth, just ahead of the United Kingdom and behind Ireland and Finland.

The 2008 Forbes list of the top ten countries for business reads as follows:

1. Denmark
2. Ireland
3. Finland
4. United States
5. United Kingdom
6. Sweden
7. Canada
8. Singapore
9. Hong Kong
10.Estonia

Profits without Honor

"To the economically illiterate, if some company makes a million dollars in profit, this means that their products cost a million dollars more than they would have cost without profits. It never occurs to such people that these products might cost several million dollars more to produce than if they were produced by enterprises operating without the incentives to be efficient created by the prospect of profits."

Thomas Sowell, "Profits without Honor," www.townhall.com, December 23, 2003.

Novelty Sells

The human brain is attracted to novelty, according to Bianca Wittman, a neuroscientist at University College London's Institute of Cognitive Neuroscience.

This may explain why new packaging can stimulate the sales of old products. Or how shiny new politicians can get away with selling the same old ideas.

Read the whole story here.

The Klein Doctrine

In the Wednesday, June 25 Cato Daily Podcast, Johan Norberg takes on Naomi Klein's hatchet job on free markets and Milton Friedman. Norberg calls Klein's thesis that freedom is unpopular, "hopelessly flawed at every level."

Get your own copy of Norberg's report, "The Klein Doctrine: The Rise of Disaster Polemics."

July 2008 Meeting

The Bastiat Society invites you to its next meeting in Charleston, SC on Wednesday, July 2nd.

Matt Kibbe, President of FreedomWorks will be the speaker for the evening. FreedomWorks is a non-profit organization designed to fight for lower taxes, less government and more economic freedom for Americans.

Topic: "Does Big Business Support Free Enterprise?"
Date: Wednesday July 2nd
Time: 5pm Hors d'oeuvres & 6pm Presentation
Location: Imaging Arts Gallery, 175 King Street
RSVP to Megan Rock

As always, guests are welcomed for an evening of hors d'oeuvres and stimulating dialogue.

About the speaker...

Matt Kibbe became President and CEO of FreedomWorks in June 2004. From 1984-2004, the FreedomWorks organization was called Citizens for a Sound Economy (CSE) and previously Matt served as its Executive Vice President from 1996-2004.

Today, as President/CEO, Matt manages FreedomWorks' overall operations and strategy, including public policy development, grassroots operations, and state and federal issue campaigns for the organization. Before joining Citizens for a Sound Economy, Matt served as Chief of Staff and House Budget Committee Associate for U.S. Representative Dan Miller(R-FL) from 1993 to 1996.

Between 1990 and 1993, Mr. Kibbe was Director of Federal Budget Policy for the U.S. Chamber of Commerce. Prior to that, he served as Senior Economist for the Republican National Committee during Lee Atwater's tenure as Chairman. Between 1988 and 1989, Mr. Kibbe was the Managing Editor of Market Process, an academic economics journal published by the Center for the Study of Market Processes at George Mason University. The journal developed Austrian and Public Choice approaches to economic theory, and a free market understanding of political economy.

Mr. Kibbe started his professional career at Citizens for a Sound Economy, serving as a policy analyst between 1986 and 1988. Matt did graduate work in the economics department at George Mason University and received his BA in Economics from Grove City College.

Mr. Kibbe has written extensively on economics, public policy and politics. His writings have appeared in outlets such as USA Today, The Wall Street Journal, The Washington Times, Reason, Market Process and The Journal of Regulation and Social Costs.

Best Books for Business

The Myth of the Robber Barons: A New Look at the Rise of Big Business in America by Burton W. Folsom, Jr. has just been added to the Bastiat Society's list of the Best Books for Business.

In his book, Folsom makes a critical but often overlooked distinction between market entrepreneurs that create wealth and benefit society, and political entrepreneurs that use government to enrich themselves at the expense of society.

Folsom summarizes his theme, "Market entrepreneurs made decisive and unique contributions to American economic development. The political entrepreneurs stifled productivity (through monopolies and pools), corrupted business and politics, and dulled America's competitive edge."

He also makes the point that "in the key industries we have studied, the state failed as an economic developer."

Myth of the Robber Barons joins The Law, Economics in One Lesson, and Can Capitalism Survive? on the Society's list of the best business books.

Burton Folsom is the Charles Kline professor of history and management at Hillsdale College in Michigan.

From Flat World to Free World

Yaron Brook, executive director of the Ayn Rand Institute, published this commentary "From Flat World to Free World" at Forbes.com on June 16. It is a vigorous defense of capitalism as an ideal.

Some excerpts...

"The expanding economic freedom of the past few decades was primarily a response to the bankruptcy of communism and socialism; it was not based on acceptance of capitalism as an ideal. Without such acceptance, recent political advances--despite the economic success they generated--are vulnerable to the new wave of anti-capitalist measures."

"Capitalism will remain the world's punching bag until such time as the profit motive is rescued from moral oblivion."

"For individual rights to prevail in politics, nothing less than a revolution in ethics will be required--a bloodless revolution--not of arms, but of ideas. You'll know that struggle is over when businessmen are finally viewed not as moral pariahs or ciphers but as paragons of virtue, precisely because they pursue profits."

Habits of Highly Effective Countries

From the Atlas Economic Research Foundation...

The report, “Habits of highly Effective Countries, Lessons for South Africa" by Leon Louw ( Law Review Project, South Africa), reveals how developing nations must make radical changes in order to ensure a prosperous future.

“Through statistical analysis of the world’s most and least successful countries we found that, out of hundreds of options, there is a short list of policies associated with winners and losers respectively. This report provides an outline of effective policies that any country seeking growth should adopt,” according to Louw.

A selection of effective habits that the report reveals are:
• Prosperous countries are in the minority and seem exceptional but it is poverty that is the economic miracle: left to their own devices, people appear to trade and manufacture, thus producing wealth spontaneously. Only bad policies can curtail this natural propensity.
• Improving the legal system, from guaranteeing contracts to reducing crime, is a major factor.
• Free trade, leading to more foreign trade. Protectionism is a big favourite with many aid activists and they like to point to South Korea and Japan as successful examples: in those cases, that bad policy was simply outweighed by other good policies.
• There is no evidence that foreign aid, debt relief, subsidies, technical assistance or protectionism have the potential to “make poverty history.” There is plenty of evidence that aid, instead, makes poverty by feeding corruption and sustaining policies that perpetuate poverty and keep the aid money flowing. This study can be adopted to other countries and has the potential to be an extremely effective tool for think tanks in countries across the globe.

To download the full study, please click on Habits of Highly Effective Countries (PDF, 63pp, 1.6 MB)

The Quotable Frédéric Bastiat

"In the sweat of thy face shalt thou eat bread." But everyone wants as much bread and as little sweat as possible.

Petition of the Light Bulb Makers

With echoes of Bastiat's famous essay, "Petition of the Candlemakers" ringing in your head, enjoy Congressman Ted Poe's five minute speech on light bulbs and the constitution.

Resource Independence

Consider this scene: politicians are complaining loudly about the United States' reliance on other countries for an essential input to the nation's economy. They say resource independence is long overdue.

Oil?

No, iron. In the 19th century, cheap iron and steel meant farm tools, pipes, nails and -- most important of all -- railroads for a young and rapidly growing nation. Iron rails were to the American economy then what oil is to it now. Europeans took the place of Arabs.

In 1839, Nicolas Biddle, the former president of the Bank of the United States, complained, "With all the materials for supplying iron in our own lands, the country has been obliged to pay enormous sums to Europeans for this necessary article....This dependence is horrible....This costly humiliation ought to cease forever."

It wasn't until 1846, however, that the first iron rails were produced in America. They came from a most unlikely source. George Selden Scranton, Joseph Scranton and William Henry Scranton set up their iron works in Pennsylvania. They tried to make pig-iron at first, and then nails. Neither product made them any money. To add insult to injury, their work earned them the political and social ill-will of nearby Wilkes-Barre and surrounding farmers. Rather than being welcomed as wealth-creators and innovators, the Scrantons were personae non gratae.

Desperate for a success and on the edge of bankruptcy, the gutsy Scrantons decided to try making iron rails, even though they had never made one before. They were stepping into the ring with the British, the reigning heavyweight champ of rail making. In a classic entrepreneurial move, they managed to win a two-year contract for 12,000 tons of rails for the New York and Erie Railroad.

Now all they needed to know was how to make the product they had agreed to deliver. Amazingly, they figured out how to make the rails, build bthe last furnaces, import the ore and limestone, and to transport the finished rails to the work site. They delivered their final shipment four days before the end of their contract.

The story of the Scrantons contains two lessons. First, politicians have always worried about resource dependence. Today's calls for energy independence are just new words to an old song. Second, entrepreneurial determination, bravado, and desperation, not political favors or high poll numbers, is what the Scrantons used to succeed.

Source: The Myth of the Robber Barons: A New Look at the Rise of Big Business in America by Burton W. Folsom, Jr.

Who Said It?

1. "Every man holds his property subject to the general right of the community to regulate its use to whatever degree the public welfare may require."

2. "All rights are derived from the purposes of the society in which they exist."

3. "True individual freedom can't exist without economic security...the right to a useful and remunerative job...a decent home...good health...and a good education."

4. "In a country where the sole employer is the state, opposition means death by slow starvation. The old principle, 'Who does not work shall not eat,' has been replaced by a new one: 'Who does not obey shall not eat.'"

5. "Property doesn't have rights, and people don't either."

6. "The fundamental principle of Socialism, which would make all possessions public property, is to be utterly rejected because it injures the very ones whom it seeks to help."

7. "The Soviet growth rate generally exceeded that of the United States in the post-World War II period as a whole."

8. "In 1989, per capita income was higher in East Germany than in West Germany."

9. "In 1980, East Germany's GDP per capita was higher than Japan's."

10. "A constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the State, or of laissez faire."

Answers:

1. President Theodore Roosevelt, 1910.

2. Justice Louis Brandeis of the Supreme Court of the United States, 1921.

3. President Franklin D. Roosevelt's State of the Union Address, 1944.

4. Leon Trotsky, one of the leaders of the Russian October 1917 Communist Revolution.

5. Nadine Strossen of the NYU School of Law and the ACLU, 1993, pointing out that if people don't have property rights, they don't have any rights.

6. Pope Leo XIII in Rerum Novarum, 1891.

7. America's best-selling economics textbook, 1987.

8. The Statistical Abstract of the United States, 1989.

9. The Statistical Abstract of the United States, 1989.

10. Justice Oliver Wendell Holmes of the Supreme Court of the United States in the 1905 Lochner case, where he wrote a dissenting opinion that property rights -- a mere "economic theory" -- were not protected by the Constitution.

Source: The Noblest Triumph: Property and Prosperity Throughout the Ages, by Tom Bethell

The Private Property Solution

"Normally it is said that if population trends continue, starvation will result, resources will be depleted, and the environment ravaged. But private property solves all these problems. It is in the thinly populated countries, where property is communal by custom or controlled by the state -- Somalia, Ethiopia and Sudan, for example -- that we have seen the worst of famine and environmental destruction. Countries that do not enjoy secure and transferable private property will certainly remain backward, however. That is because human nature is everywhere the same."

From The Noblest Triumph: Property and Prosperity through the Ages, by Tom Bethell

History and Humiliation

Historians used to search through piles of dry facts looking for a grand underlying law of history, one that could shape years, even centuries of human action and make the future as predictable as the sum of two numbers. They failed.

Not only did they fail, but they ended up contributing to some of humanity's darkest chapters. Fascism and Communism were both products of the attempt to create a "science of history."

Perhaps historians have finally learned that history is simply the record of the way people react to their surroundings. Any apparent cycles in history have less to do with predictable laws and more to do with universal human nature. Consider how three once proud and mighty civilizations responded after suffering a humiliating military defeat.

From the 8th century AD to the middle of the 13th, the Arab world enjoyed the world's most successful civilization. It was the center of learning, art, commerce and religious tolerance. Over the next eight hundred years, it suffered one stunning defeat after another, first at the hands of the Mongols, then at the hands of European colonial powers, and finally at the hands of the tiny state of Israel, carved out of Arab land and created by the Western powers.

How did Arab civilization respond? It institutionalized violence, xenophobia, and racism.

In the late 19th and early 20th century, many Western intellectuals pointed to the new German state as an example of a progressive, scientific government. Then came its crushing defeat in WWI and the humiliating Treaty of Versailles.

How did Germany respond? It elected Adolph Hitler.

In 1820, China was the largest economy in the world. Trade with Britain left the British with a huge trade deficit, and the British decided to solve that problem by selling Indian opium in China.

The Chinese responded with their own version of the Boston Tea Party: they sank some of the British ships. Britain retaliated with the First Opium War, which ended in a humiliating Chinese defeat. The Chinese army was simply no match for modern weapons.

China tried to rebel again, and it lost the Second Opium War. Over the next forty years, two more Chinese rebellions were unsuccessful, leaving China at Britain's mercy.

Then came the Japanese, a nation China had long considered inferior, but one that had made the decision to modernize its industry and military after its own string of European colonial humiliations. After the end of WWII and the end of its own civil war, China finally regained control of its destiny under the Communist leader Mao Tse Tung, "the Great Helmsman," who promised to restore China to its greatness with a planned economy. It didn't work.

After the death of Mao, Deng Xiao Peng abandoned a planned economy in favor of old-fashioned capitalism with a Chinese twist. He said, "I don't care if the cat is black or white, only that it catches mice."

Deng was a pragmatist, not an ideologue like Hitler or Mao, nor a zealot bent on revenge like Osama Bin Laden. Deng correctly reasoned that the best way to recover from China's humiliation at the hands of the West was to unleash the talent, energy, and self-interest of the Chinese people. Make money, not war.

In two of the three cases, the desire for revenge led to war and more suffering. In one, the desire for respect led to a dramatic increase in wealth and peaceful world trade.

Both desires reside in all human hearts. The question for all of us is, which one shall we satisfy?

"Give Me Liberty"

The picture below is of an engraved stone on the exterior base of the Chicago Tribune Tower on Michigan Avenue. It is a quotation from Areopagitica by John Milton (1608-1674), one of the most famous arguments for freedom of speech.

Although some say Milton composed his tract in response to the severe criticism he received for his publications arguing in favor of the freedom get a divorce, his plea for freedom of speech still resonates today, especially when we attempt to discuss the most contentious issues of our day: global warming, globalization, health care, wealth creation, wealth distribution, and the social responsibilities of business.

The Ghost of 1969

In 1969, the United States enacted the Alternative Minimum Tax (AMT). The AMT was a rapid-fire political response to a newspaper story that 155 high income individuals legally paid no income taxes.

Since 1969, the US has had not one, but two income tax codes: the regular tax and the AMT. A taxpayer has to calculate his or her income taxes twice, and pay the greater of the two taxes.

The AMT was built and deployed to catch just a handful of people. These people were not criminals. They had complied with the law as it was. They were just very good at legally avoiding the income tax.

In 1969, they discovered that their success had made them a political target. But the target was small, and no one else cared. Today, that target is much bigger.

According to Ira Weiss of the University of Chicago, the AMT will affect 30% of American taxpayers this year. These taxpayers will find themselves in a Kafkaesque world of English language sentences that make no sense. These modern taxpayers are paying the price for the class warfare, envy and political expediency of 30 years ago. If ever there was a case for why we should be cautious before letting the government fight all our fights, right all our wrongs (both real and imagined), and pander to our most selfish instincts, the AMT is it.

Crusading for justice, the government created greater injustice. In the name of fairness, it destroyed what is fair. In the name of the people, it loots the property of an ever larger number.

The ghost of 1969 haunts us today, no longer imaginable as the face of justice. We can see it for what it really is.

George Will on Government

According to George Will, conservatives understand that the government's job is to deliver the mail, defend the shores, and get out of the way.

And, in a priceless quip, the lungs are not the seat of wisdom.

The Flat Tax,

The US tax code is horribly complex, needlessly wasteful, socially unfair and economically destructive.

What's the alternative? Around the world, some of the fastest growing small economies owe their prosperity to a flat tax. In this video, Dan Mitchell of the Cato Institute presents a quick survey of the global flat tax revolution.

The Quotable Frédéric Bastiat

"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe."

The Ministry of Happiness

In his book The Moral Economy of Labor, Dartmouth professor James Bernard Murphy argues that business, as it is currently practiced, is an obstacle to human happiness. His solution is to reorganize everything, from the division of labor to ownership and control.

Who should spearhead the grand redesign of our economy? Why, a government agency, of course. Murphy writes:

"Government should be concerned with the distribution of meaningful work not because of a putative right to such work but simply because meaningful work is so fundamental to human happiness and well-being. How should government go about the business of enhancing the opportunities for self-realization in work? The obstacles to self-realization are so deeply rooted in the institutions of our economy that only profound changes in the ownership and control of industry can create the opportunity for greater access to meaningful work. Government can play a significant though indirect role supporting institutional change in our economy -- change that might well be desirable even apart from its role in helping to create meaningful jobs."

He should just call it what he wants it to be: The Ministry of Happiness.

This is a prime example of the intellectual threat to business. This is not the scribbling of some isolated philosopher. He teaches students at one of the most prestigious colleges in the world. His ideas influence the teaching of business and business ethics in many more universities around the world.

Here, a man who has never run a business presumes to recreate not just one business, but the whole social order.