Whose Right Is It, Anyway?

Mises Daily by Art Carden

Recently, the Shelby County Commission passed an ordinance that would make it illegal for employers and firms that contract with the county to discriminate against people based on sexual orientation. Unfortunately, the discussion got bogged down in questions about whether homosexuality is or is not moral. It was assumed that the government can intervene on behalf of favored groups in order to correct the perceived injustice of discrimination. The debate largely ignored the key issue, which is whether it is just, moral, and appropriate to use force to correct others' wayward beliefs. Now that the dust has settled, we can ask about this.

As a consumer, I am free to indulge whatever preferences I'm willing to pay for, and if I am a bigot the objects of my ignorance have no legal claim against me. If I am biased against the race and religion of the proprietors of a local ethnic restaurant, I am free to shop elsewhere. I don't have to eat at India Palace, El Porton, or Pho Saigon, and the owners of India Palace, El Porton, and Pho Saigon do not have the option to force me to patronize their businesses.

The legal right to prosecute thoughtcrime only works in one direction. Restaurants do not have the right to refuse me service if they disapprove of my race and religion. Something is amiss here. If I am a bigot, I am free to indulge my bigotry by refusing to trade my money for their goods and services. They do not have the same luxury: they cannot refuse to trade their goods and services for my money.

It has been said that "hard cases make bad law," and laws against discrimination are a perfect case in point. This is an issue where pragmatism must yield to principle. In his book Fair Play, economist Steven Landsburg states this eloquently in a passage on the importance of rights, tolerance, and pluralism (p. 92):

You and I disapprove of bigotry. But the private virtue of tolerance and the public virtue of pluralism require us to countenance things we do not approve. Tolerance means accepting the fact that other people's values might be very different than your own. Pluralism means eschewing the use of political power as a means for 'correcting' those values.

The idea of tolerating intolerance sounds suspiciously paradoxical, but so do a lot of other good ideas—like freedom of speech for advocates of censorship. In fact, freedom of speech has a lot in common with tolerance: Neither of them means a thing unless it applies equally to those we applaud and those who offend us most viscerally.

Tolerance is ennobling, which is why we should teach it to our children. Pluralism is insurance against tyranny, which is why we should demand it of our government. To speak up for even the most despised minorities is both morally right and politically prudent.

Calling on government to purify others' hearts and minds opens Pandora's box, pushes us farther down a very slippery slope, and invites all sorts of other hackneyed cliches. I hope that people find discrimination on the basis of race, religion, sexual orientation, physical "handicaps," and other arbitrary criteria morally repugnant. I do. However, my disapproval of another's attitude does not give me the right to use force to correct their erroneous ways. Indeed, it may backfire. From what I have observed, the conflagration surrounding the antidiscrimination ordinance has reinforced "us versus them" mentalities around Shelby County.

This also addresses another issue of crucial importance. If I give a government the power to force you to accept my values, I also give them the power to force me to accept your values at some point in the future. Another way of saying this is that any government with the power to take an atheist's money and give it to my church is also a government with the power to take my money and give it to Planned Parenthood. When we use force to restrict others' liberty, we endanger our own.

Governments coerce others with a two-edged sword: giving the state the power to do things you like necessarily requires giving the state the power to do things you don't like, and giving the state the power to restrict behavior of which you don't approve gives them the power to restrict behavior of which you do approve. The right way to change hearts and minds is not coercion. It is persuasion.

Australia's Uncreative Destruction

Mises Daily by Chris Brown

It turns out that Australia's Prime Minister Kevin Rudd is going around town breaking windows by, well, demanding they be built. There are over 35,000 construction and maintenance projects planned across Australia over the next 12 months. This includes AU$49 (US$39.4) billion dedicated to "nation building infrastructure," or crudely AU$2,200 in taxes for every man, woman, and child residing in Australia.

Are such decisions financially wise during economic recessions? Let's put Keynesianism aside and instead rely on common sense. While on an individual level you might think saving would be a good idea, apparently governments just want to build stuff. "We can always figure out later what to do with it or even just employ people to knock it down and build it again" is the unspoken idea. When "full employment" is the goal almost any type of labor will do. PM Rudd's Labor party is thus aptly named; as they state, "jobs are in our DNA."

Bastiat's timeless lesson of the fallacy of the broken window, later popularized and widely applied by Henry Hazlitt, is a perfect analogy of economic ignorance and the power of the seen vis-à-vis the unseen. And PM Rudd is illustrating this analogy, going to great strides to point out the "seen" — pictures of hard hats and fluorescent yellow vests have abounded in parliamentary proceedings. Labor Minister for Employment Participation Mark Arbib also confirms that construction projects are visible:

People are going to see the construction sites all over the countryside. They are going to know people who are working on stimulus projects or who are supplying the projects.

How can the broken-window fallacy be so widespread? Henry Hazlitt explained:

[T]he broken-window fallacy, under a hundred disguises, is the most persistent in the history of economics. It is more rampant now than at any time in the past. It is solemnly reaffirmed every day by great captains of industry, by chambers of commerce, by labor union leaders, by editorial writers and newspaper columnists and radio commentators, by learned statisticians using the most refined techniques, by professors of economics in our best universities. (Economics in One Lesson, p. 13)

Hazlitt points out many fallacies in the belief that government-mandated construction projects can create jobs. One problem is the confusion between need and demand. Because a politician may deem a project necessary for whatever reason, this in no way, despite political rhetoric, creates demand ex nihilo — government fiat rarely works. In fact, if a project is truly necessary, there will be an opportunity for entrepreneurs to meet that demand. Many entrepreneurial opportunities are thus demolished by government rewarding some industries — in this case construction — at the expense of others.

Another fallacy comes from seeing government statistics. It is easy to see the "hard data" — that there are 35,000 construction projects, X number of workers, etc., and much more difficult to understand that those resources — land, labor, and capital — are being artificially shifted from more productive uses to more destructive ones. The capital being spent on government projects is taken from individual taxpayers; jobs are at best diverted, at worst taken from others.

Regarding such projects, we may ask the fundamentally important question, "Cui bono?"

In this case we find, not surprisingly, that it's the construction industry that benefits, and in numerous ways. For example, the Australian government introduced an AU$2 billion "First Home Owners Boost" that was, in PM Rudd's own words, "to support the housing and construction industry." In addition, there are over 20,000 new "social and defense homes," and installing ceiling insulation is "free" for around 2.9 million homes. Finally, construction companies are also building at every school in the country, the "largest school modernization in Australia's history." Libraries, school halls, classrooms, community centers, parks, etc. will be involved in one way or another with construction. Unfortunately, just as in Bastiat's analogy, everyone else loses; government devises at best a zero-sum game.

Government decisions, which perhaps seem to make sense on a macro level, are disastrous on a micro level, due to the nature of knowledge. Hayek explained this knowledge problem best:

The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus … a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.

Hayek narrowed this down to one fundamental question: not if there will be planning but of who will do the planning — the central planner or the individual.

An excellent illustration of the inevitable unintended consequences that come from central government meddling is a local primary school in the area. In a recent "news bulletin" to parents they write the following:

We have now been advised that the Australian Government will be funding a new building for our school…. The old [building] … will be demolished as part of this project…. Because this is part of the government's Stimulus Package, construction must be completed by October 2010.

This is roughly the equivalent of digging holes and filling them. In fact, digging holes may be better since, in that case, only labor is wasted, for the most part, and not other natural resources. (Where are the environmentalist outcries over this destruction of resources in make-work construction projects?) Regardless, this is merely the broken-window fallacy in new clothes. The real gem, however, comes from later in the bulletin:

Council committees have met this week to consider a wide range of matters about our school. Major matters for discussion included possible uses of our new building.

In other words, the school will have a building demolished, a new one constructed, and still has little idea as to what the new building will be used for. Contrast this situation with that of the entrepreneur. The entrepreneur takes calculated risks, and typically "builds" using the carpenter's rule: measure twice, cut once. If it does not make financial sense to build, the entrepreneur will not do so. In addition, the entrepreneur would later know — through the profit-and-loss mechanism — whether such a decision was prudent or foolish.

PM Kevin Rudd and Minister Arbib believe government's construction efforts are working because they are seen. He has likened the government's massive spending program to "a war effort involving all levels of government." I think he about sums it up with that statement. War breaks windows, and sometimes, as Bastiat and Hazlitt taught, so does building them.

A coup in Honduras

Booted out

A coup in Honduras brings an unwelcome old habit back to Latin America

THE scene was reminiscent of many in the 20th century, when military coups against democratic governments were sadly common across much of Latin America. At dawn on Sunday June 28th a group of soldiers barged into the residence of Manuel Zelaya, Honduras’s president, disarmed his guards, dragged him to an air base and flew him to exile in San José, Costa Rica. The army silenced the state television station, cut electricity supplies and the bus services in the capital, Tegucigalpa, and sent tanks and planes to patrol the city. “I was brutally taken out of my house and kidnapped by hooded soldiers who pointed high-calibre rifles at me,” said Mr Zelaya. “But until the next elections, I will continue to be the president of Honduras. Only the people can remove me.”

The toppling of Mr Zelaya took the region by surprise. Honduras, although small, poor and ravaged by corruption and violent gangs, has seemed a more solid democracy than, for example, neighbouring Guatemala. Mr Zelaya, a Liberal, alienated the leaders of the country’s main political parties last year by joining the leftist Bolivarian Alternative for the Americas, an alliance led by Venezuela’s populist president, Hugo Chávez. Yet Mr Zelaya’s policies have been only mildly social-democratic, such as an increase in the minimum wage.

The cause of Mr Zelaya’s downfall was his attempt to emulate Mr Chávez by organising a referendum to call a constituent assembly. He seemed to hope that this would enable him to remain in power, perhaps by changing the constitution to allow him to stand for a second term in an election due in November. This embroiled Mr Zelaya in a conflict of powers. The Congress and the courts both rejected the referendum.

But Mr Zelaya would not be stopped. He issued a decree for a consultative poll on Sunday, asking Hondurans whether they wanted presidential-election ballots in November to include a question about holding a constituent assembly. And he ordered the army to distribute ballot papers (which by one account came from Venezuela).

When the head of the armed forces, Romeo Vásquez Velázquez, refused to carry out the directive, the president sacked him. The Supreme Court reinstated the general, and an independent electoral tribunal ordered the ballots to be confiscated. In response, Mr Zelaya himself led a group of supporters to an airforce base where they carted off the ballots.

But hours before voting was set to begin, the army seized the president—“arresting” him for defying the Supreme Court, they said. The president of the legislature was quickly installed as Mr Zelaya’s successor. Though several hundred supporters of Mr Zelaya protested in the streets, Tegucigalpa was mainly quiet, as the army imposed a curfew. There were no reports of casualties.

The story is unlikely to end there. The coup was swiftly condemned, not just by Mr Chávez, whose ambassador (along with those of Cuba and Nicaragua) was briefly roughed up by troops, but also by the United States, European Union and Organisation of American States. Barack Obama called on Honduras “to respect democratic norms”, and the administration said it would not recognise the new government. “It brings back nightmares of a period we thought was over in this region, one full of blood and abuses of power,” says José Miguel Vivanco, of Human Rights Watch, a campaign group.

Mr Zelaya was unpopular, thanks to Honduras’s economic troubles, violent crime and corruption. But the new government will find itself friendless. For the region’s diplomats, the task now is to restore Mr Zelaya to power but oblige him to respect the constitution until November’s election allows a new president to take office in January.