Buchanan and Market

LR ^ | Jeff Tucker

[VinnyTex]

Buchanan and Market

by Jeffrey A. Tucker

In all the commentary on Patrick J. Buchanan?s new book ( The Death of the West , NY: Thomas Dunne Books, 2002), has anyone discussed his silly economic fallacies and highly interventionist policy agenda? This is the conservative book of the year, the core thesis of which (the West needs higher rates of population increase to keep up with the Third World) impacts very strongly on economic issues.

What then does Buchanan propose?

The Family Wage: Buchanan says (p. 232) he favors amending the Civil Rights Act "to allow employers to pay higher wages to parents than to single people.... This should apply to single dads and moms.... Employers should be given tax incentives to pay higher wages to parents."

Does he really believe that employees want to pay higher salaries to people with children but are currently not doing so for fear of lawsuits? If anything, the pressure runs in the opposite direction, married people suing because single people are paid more.

Does he not understand that wages and salaries are determined by the supply and demand for an individual?s contribution to the productivity of the firm? Can he not grasp that employing federal law to raise the price of parent-labor would reduce, not increase, its marketability, and thus create incentives not to be married and have children?

Corporate Taxation: Buchanan says (p. 233) that "the burden of corporate taxation should be shifted off family businesses and farms onto the larger corporations. As Ronald Reagan used to say, corporations don?t pay taxes, people do. Corporations only collect taxes. Let the Fortune 500 do the collecting."

Huh? Buchanan is demanding that if a corporation is really successful at marketing its product and running a tight ship, and then becomes a Fortune 500 company, the government should only then start demanding that it function as a proxy for the IRS!

Reagan employed his quip as a case against taxing all corporations. His point was to say that corporations in the abstract aren?t doing the paying. They are being forced to collect from individuals, and its comes out of workers? wages and salaries. Buchanan?s suggestion will only lower the incomes of people who work for the best companies.

New Revenue : Buchanan says (p. 233): "If new revenue is needed to pay for these family tax cuts, it can be obtained through taxes on consumption and duties on imports."

Now there?s an idea! Prevent the Death of the West through higher prices on consumer goods!

Women in the Workforce: Buchanan says (p. 33): "As men?s jobs in manufacturing, mining, farming and fishing are no longer needed, or are shipped overseas, the skills and talents of women are now more desirable. Businesses, large and small, offer packages of pay and benefits to lure talented women out of the home and keep them out of the maternity ward."

Here we go again demonizing business, and with the weirdest theory ever: the conspirators behind economic development are really out to smash the employability of the male sex in favor of the female sex. It takes a heated imagination to dream up this stuff.

A major reason moms went to work was inflation and taxes, which caused the real standard of living of the American family to decline. The first year when both mom and dad were more likely to be working, rather than not, was 1985, and the biggest growth in this trend occurred at the same time real family income took its biggest postwar hit. To resist that impulse (and many do) requires a high income or deep convictions. In any case, it is going to take far more than a few taxes credits to restore the belief that one income is enough to provide for the family. Making government more intrusive won't help; intrusive government is the problem.

In any case, does he not know that the rap against high tech is that unfairly employs too many guys, that its work isn?t really designed for women? Does he believe that women on farms sit around and coddle the young?ns while Dad does all the work? Not so in any farm I?ve ever seen. Of course business is pleased to employ anyone who will assist in its desire to serve the consuming public. But women, like men, all face a choice. Is it really so hard to imagine that people can make choices consistent with their own best interest?

Evils of Riches: Buchanan says (p. 34): "The richer a nation becomes, the fewer its children, and the sooner it begins to die"; and (p. 37): "When the income tax rate for the wealthiest was above 90 percent in the 1950s, America, by every moral and social indicator, was a better country"; and (p. 47), today "young people are not concerned about their souls; they're worried about the Nasdaq."

Like the environmentalists, then, Buchanan has decided that poverty has a wonderful upside. That?s one way to save bad economic ideas: claim they are supposed to depress the standard of living! But there are a few problems with Buchanan?s theory that poverty makes people pious and pregnant. Poverty-stricken places like Bosnia-Herzegovina, among many other Hell holes, have lower birth rates than the US. And as even Buchanan has to admit, the first time US births fell below replacement level was during the Great Depression. Finally, for the record: I know many people who want to save their stock portfolios and their souls.

Anti-Corporate Mentality: Buchanan says (p. 229): "The transnational corporation is a natural antagonist of tradition. With its adaptability and amorality, it has no roots; it can operate in any system. With efficiency its ruling principle, it has no loyalty to workers and no allegiance to any nation. With share price and stock options its reasons for being, it will sacrifice everything and everyone on the altar of profit. The global capitalist and the true conservative are Cain and Abel."

Or one might point out that multinational corporations increase competition and quality, expand access to new technology, reduce the price of goods for consumers and producers, create hundreds of millions of new paying jobs, lift the developing world out of poverty, permit the developed world to specialize in what it does best, foster peace among nations, promote financial stability, undermine the power of dictators, break up entrenched producer cartels, expand economic opportunity, undermine the welfare state, crush the menace of union power, and spread prosperity and liberty to the entire human race.

Or is it better to sacrifice everything and everyone on the altar of losses?

Dogs Eating Dogs: Buchanan says (p. 33): "The Global Economy works hand in hand with the New Economy, transferring manufacturing jobs from high-wage Western nations to the low-wage, newly industrializing nations of Asia and Latin America."

Last check, the unemployment rate was 5.8 percent and falling, and this in a recession. This is below what the Keynesians used to call full employment. The number of people working in manufacturing has indeed fallen, which reflects a sectoral shift due to economic development: witness the steady rise in household income since the mid-1990s. Thus, the Latin American, Asia, and Westerns nations are growing wealthier together by cooperating through trade and exchange.

Surprise: trade works! Why must Buchanan see conflict where there is none? Is it really necessary to point out that getting rid of high tech and global trade at this point would reduce the standard of living rather dramatically? How the heck does Buchanan expect the massive population increases he hopes for to be sustained absent economic development?

Freedom Is Heresy: Buchanan says (p. 37): "Many conservatives have succumbed to the heresy of Economism, a mirror-Marxism that holds that man is an economic animal, that free trade and free markets are the path to peace, prosperity, and happiness...."

Sorry, but free trade and free markets are the path to peace and prosperity. There?s a word for people who deny it: socialists. As for happiness, Thomas Jefferson was right that freedom allows only for its pursuit.

Disastrous Trends: Buchanan says (p. 127): "People identify less and less with the nation-state, more and more with kith and kin."

This is supposed to be bad news. To stop this horrible trend, Buchanan offers no proposals to curb big government and plenty to expand it (like instituting a National History Bee administered by Historian-in-Chief George W. Bush).

I know Buchanan?s book is about more than economics. Buchanan is right (p. 55) that John Lennon shouldn?t have said, 36 years ago, "We?re more popular than Jesus." He?s right that "American Beauty" was an awful movie (p. 84). He is right that Confederate symbols are not racist, that the left is engaged in cultural jihad, that high Third World immigration has been invasive.

But what he suggests as a replacement is another central plan, one that would promote impoverishment. But he has put zero thought in the core issue: if you want a huge population increase, you have to come up with some system of economics to sustain it. The capitalist process of economic progress is the only system that does so. As even Buchanan notes in passing (p. 13), the welfare state brings about depopulation.

Buchanan hasn?t made his peace with the market economy, but his book is not highly unusual in this regard. Economic fallacy is everywhere. I shudder to think of the errors unleashed on the world simply because people haven?t taken a weekend off to read a basic text like Murray N. Rothbard?s Power and Market .

March 23, 2002

Jeffrey Tucker [send him mail ] is vice president of the Mises Institute .

[VinnyTex]

.

[VinnyTex]

.

[AmericaUnited]

Ahh...So much nonsense...so little time.

Pat's star shone brightest when he was the attack pitbull against liberals and demonrats on CrossFire. Since then he's been in a freefall straight down.

[VinnyTex]

.

[fporretto]

It's a pity, isn't it? Buchanan can write. He can also think, if history is any guide. But he's been seduced by a set of premises and priorities which appear to have blocked his rational powers.

Intelligence is a tool, not a goal. If your goals are perverse or your postulates are in error, high intelligence will only get you to Hell by the express route.

Freedom, Wealth, and Peace,
Francis W. Porretto
Visit the Palace Of Reason: http://palaceofreason.com

[G.Mason]

Facinating!

I mean the way you use the question mark as an apostrophe.

You may be starting a whole new trend in writing!

As for Mr. Buchanan? He is no more of a threat to America's future than, say, you are.

As my dear old mother would say, " No one is always 100 percent right and no one is always 100 percent wrong."

[G.Mason]

Sorry..Post # 7 should have read ......

"Facinating. I mean the way (you) Jeffrey Tucker uses the question mark as an apostrophe.

[ffrancone]

PB continues to lurch further and further to the left.

[11th Earl of Mar]

More nonsense from Pat. Sheesh! And he now tries to use Reagan to support his nutty ideas? It was just a few years ago he wrote an article bashing Reagan's [and Thatcher'] ecomomic policies.

[11th Earl of Mar]

PB continues to lurch further and further to the left.

Agreed. But then again, how much farther to the left is he now than when he had Lenora Fulani as his campaign co-chair? Or when he asked liberal, pro-choice, union-boss Jimmy Hoffa to be his running mate?

[johnny7]

Pat's all over the road like horse $hit.

The only good thing he ever did (and it was unintentional) was to take votes away from Gore in FL.

Credit really goes to the elderly and blacks who can't figure out how to fill out a ballot.

[jlogajan]

Pat has the same disease as many cultural conservatives -- they are extremely socialistic in their approach to imposing their brand of morality at all levels of government. Scratch a cultural conservative, reveal a socialist.

[AmericaUnited]

I believe the root of Pat's disease is bitterness, which breeds fouler fruit the more it grows, as we are all seeing.

I truly feel sorry for Buchanan.

[x]

Buchanan may be right or wrong, wise or foolish. He may well be an economic illiterate. And it is true that the idea of the family wage doesn't seem to have worked when it's been applied. But Tucker really doesn't refute or disprove Buchanan.

He simply contradicts him by repeating Misean orthodoxy. It may be that shifting burdens from home production to imports, from savings and earnings to consumption, from small business to large corporations doesn't work, but these are all questions that should be dealt with more seriously than Tucker does.

What's irritating about Tucker is that the state does impose a very large burden on Americans. Perhaps that tax burden can be decreased, but it's is unlikely to stop imposing liability on the citizenry at any time soon. One can argue that the burden is too large and shouldn't be levied here or there, on this or on that. But in the real world such burdens are imposed. The question for the present is not the philosophical justifications for anarchy or taxation, but how such a burden should be divided. One can throw libertarian or anarcho-capitalist rhetoric at any suggested change in policy, but that's not a serious response or a refutation.

The irony is that by not looking at how things may be done better elsewhere, Tucker is more a friend to the status quo than Buchanan.

[4Freedom]

You folks are confused.

You label Buchanan a leftist, socialist for urging that we keep our wealth home, to nurture the American family, and laud these transnational corporations that have been actively engaged in the Marxist redistribution of American wealth, to the 3rd world, the true capitalists?

No wonder we're happily on our way to a $10 trillion dollar national debt and an illegal immigration bloated population of 600 million.

These globalist, borderless, one-worlder, nationless, practitioners of 'Marxist Economics', like Jeffrey A. Tucker, are making suckers out of the American taxpayers.

[jlogajan]

You label Buchanan a leftist, socialist for urging that we keep our wealth home, to nurture the American family

Well, what are the alternatives to socialism, i.e. the collective. I can think of two alternatives, authoritarianism and individualism. So you could be right that Buchanan is no, in fact, a socialist, but an authoritarian. Okay, find.

He is not, however, an individualist because he wants the government, either as an authoritarian or socialistic enterprise, to restrict the freedom of individuals to go about their peaceful business as they see fit.

Cultural conservatives should stop being stealth socialist/authoritarians and just come out and proudly admit what they are. Why the embarrasment?

[4Freedom]

Any steps advocated by strong Nationalists/Conservatives, like Buchanan, to begin reversing the 'Marxist' economic policies of the transnational corporations that are responsible for the redistribution of almost $10 trillion dollars of America's wealth are described, by you, as Authoritarian/Socialist?

Things are worse than I thought. We'll never get our money back.

[Cacophonous]

Nicely said.

I read part of Tucker's ad hominem attack; even if it had had any merit (it does not; as has been pointed out, Tucker refutes nothing) its impact is lessened by Tucker's snide and condescending tone.

Sadly, many on this forum seem to have adapted that same strategy-slander, lie and obfuscate. They are not just confused, as you pointed out, they are confused boors.

[Jethro Tull]

IN THE FOLLOWING ARTICLE,
JEFFREY TUCKER PONDERS, "IS CHRISTMAS INEFFICIENT?"

TUCKER IS A FULL BLOWN WHACK JOB.

Monday, December 24, 2001

Is Christmas Inefficient?
By Mr. Jeffrey Tucker

After hundreds of years of attacks on Christmas, economists have finally gotten into the act. Yale University's Joel Waldfogel, writing in the American Economic Review, condemns what he calls "The Deadweight Loss of Christmas." Once you cut through the calculus and graphs, his conclusion is clear: though Christmas generates a $50 billion gift-giving industry, a tenth to a third of that is sheer loss. Why? Because the recipient doesn't always get what he wants. Given the chance, the recipient would have purchased something else.

All of this follows directly from his underlying theory. In neoclassical economics, the consumer is best off when he chooses, within his means, the highest-rank good or service on his "utility" scale. If he can afford a steak, and he has to settle for a hot dog because the restaurant is out of t-bone, he experiences dead-weight loss. It's even worse if he has to pay the price of steak and gets a wiener instead.

So it is with gifts. They generate a net loss, this theory says, unless the recipient would have otherwise purchased, with his own cash, precisely what he unwraps. Of course, this is rarely the case. To provide empirical meat to his theory, Professor Waldfogel interviewed students. The students received an average of $438 in gifts, for which these kids reported they would have paid only $313 if they had done the shopping themselves. The gap narrows when the gift is from a friend, and widens when it's from the family.

Imagine Mr. Waldfogel attending your next Christmas gathering. Aunt Janie gives her nephews soap-on-a-rope, and they all praise her for her generosity and thoughtfulness. The economist then prods the youngsters to 'fess up that soap-on-a-rope isn't so great after all, and with the $9.95, they would have bought the newest Spice Girls tape. He declares the gathering a waste and encourages the party to break up in the interest of everyone's economic welfare.

Professor Waldfogel proposes that we could eliminate these losses, which could be as high as $13 billion per year, by giving money instead of gifts, and letting the recipient spend it as he chooses. But then why not take matters one step further? What is the point of all this shuffling around of cash in the first place? According to neoclassical theory, it would be far better if everyone just clung to his own bank account and spent his own money as he saw fit. Indeed, we'd all be better off economically if Christmas were merely abolished--heck, maybe the Congress should do it--until such time as we all have perfect knowledge of each other's preferences and are willing to act on them.

Far from being one man's opinion, this thesis is becoming a classic "extra credit" question on microeconomics tests. Waldfogel is only distinguished for having formalized the model and tested it against his own students' experience. The conclusion allows economists to presume they are smarter than the mass of the buying public, which persists in the irrational habit of buying things for each other instead of sending money or, even better, just spending it on themselves.

So, what's wrong with the theory? Plenty. It equates personal utility with dollars spent, the classic conflation of value and price. In fact, a gift is a special kind of good with its own value. For example, we value the soap from the Aunt precisely because of its tie-in with familial affection. Even if the recipient would never have bought it, his personal utility is enhanced by the knowledge that his extended family is thinking about him and cares enough to give.

The source matters. If soap were given by a classmate who complains that you are odoriferously challenged, the "gift" is an insult in disguise. It has negative value. "Rich gifts wax poor when the givers prove unkind," writes Shakespeare, who seemed to have a more complete view of economics than Professor Waldfogel. Neither is the person who receives a gift purchased under duress likely to be grateful. People on long-term welfare, for example, tend to think of taxpayers as suckers.

A comment later published in the same journal picked up on this. The authors (one from Harvard, one from the University of Miami) also did an empirical test. They used a different method (asking students about prices of specific gifts, not whole bundles), a larger sample of students (209 instead of 78), and asked more detailed questions. The results were the opposite of Waldfogel's. The authors showed that more than half valued the gift above its retail price, suggesting that Christmas giving actually represents a gain in social welfare.

Moreover, these authors found that gifts asked for were less valued than gifts that were not. This fits with experience: we're pleased to get what we want, but especially appreciative when we like something we had not expected. Indeed, good gift shoppers think about this ahead of time. They buy someone a tie he would never buy for himself. They buy items the receiver might be too modest or frugal to purchase himself, even if he had the resources.

Some items are just gifts and nothing more: fancy soaps, paisley boxer shorts, blankets with school logos, coffee cups printed with witty slogans, and the like. That's why there can be such things as "gift shops" as distinguished from regular stores. Gifts have a different value because they are altogether different goods. They embody not only themselves but also their meaning. Imagine if someone came to dinner, and instead of bringing a bottle of wine, gave you $15 and told you to spend it on anything you wanted. It's just not the same.

For his part, Waldfogel responds by accusing the authors of biasing their results. The very nature of their survey questions encouraged students to report "sentimental value" instead of pure "material value." Going back to the drawing board, and correcting for this and other supposed errors, Waldfogel surveyed another group of students—455 this time—and still found a dead-weight loss, less than before, but a substantial one nonetheless. Christmas is inefficient: that's his story and he's sticking to it.

Of course there is no way to decouple one kind of value from another kind of value, since all economic value is ultimately subjective. Surveys can't reveal what people value; only action in the marketplace does that. What's deeply odd about this wrangling is that everyone seems to agree that only the value to the recipient should matter. That leaves out the really crucial point of gift giving: that it benefits the giver as well as the receiver.

People feel good in being generous, especially towards family and friends. Giving is an act of charity and liberality, virtues people practice because they're good for the soul. And even if they aren't, economists should follow the rule of "demonstrated preference": if a person gives a gift, it is because he preferred giving the gift to keeping his own money. The action is "utility enhancing" on its own terms. Why? Because it, as opposed to something else, took place. Value is revealed in the preferences people demonstrate voluntarily. A well-chosen gift also reveals something about ourselves: we care enough to make our affections known in a personal way.

Again, the problem of the welfare state presents itself. In its form of "charity," people do not give voluntarily. So resistant are people to dumping billions of dollars on millions of freeloaders, that the government has to threaten them with fines and jail terms (that's what taxation is) to get them to fork over this "gift." No one demonstrates a preference for the welfare state (voting doesn't count since people are not using their own resources to purchase the services for which they vote). This degree of redistribution has to be imposed. Taxation, in contrast to Christmas, is a clear example of a utility-reducing activity.

But economists of the neoclassical school have rarely bothered with such distinctions. Their theories leave little room for reflection on property rights, individual choice, and the distinction between market exchange and forced redistribution. For them, a mathematically determined standard of efficiency is the only test that matters. Not even an absurd conclusion—for instance, that giving gifts is inefficient—causes them to rethink their core theory.

Economists are hardly alone in this. Skeptics and opponents of the market economy have long had a beef with the idea of giving and charity, especially as it occurs at Christmas.

Perhaps the socialists have long understood something about Christmas that others, even advocates of the market, have overlooked. In the institution of the gift, we find a strong rationale for the establishment and protection of private property and the capitalist economy. In order to give, we must first produce, acquire, own.

G.K. Chesterton, a great defender of Christmas against English Puritans who regarded it as corrupt and pagan, observed that collective ownership would mean the end of voluntary giving. Moreover, he clarified, "giving is not the same as sharing: giving is the opposite of sharing. Sharing is based on the idea that there is no property, or at least no personal property. But giving a thing to another man is as much based on personal property as keeping it to yourself."

And contrary to the complaints of materialism at Christmas, meaningful gifts can be as elaborate as gold, frankincense, and myrrh, or as humble as two fish and five loaves.

It's no wonder, then, that history's dreariest socialists have denounced Christmas. The economic core of its gift giving centers on private property, while its ethical core belies the claim that private property institutionalizes greed.

"There is the greatest pleasure in doing a kindness or service to friends or guests or companions," wrote Aristotle in The Politics, "which can only be rendered when a man has private property. These advantages are lost by excessive unification of the state.... No one, when men have all things in common, will any longer set an example of liberality or do any liberal action; for liberality consists in the use which is made of property."

As for intellectuals—economists no less—who have failed to understand this simple truth, it's staggering to think of the dead-weight loss their ideas have imposed on society