What is the right size of government?

In response to a newsletter from a thinker I respect, I was moved to reply and it turned into a mini-essay that I felt had some valuable insights. 

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One of your comments struck me as almost accurate and I thought it worthy of a response.

o Also, note that government doesn’t produce anything but simply redistributes capital from producers of capital to consumers of capital.

o   And while government has an important role to play in a thriving economy, it is one of facilitating the production of wealth, not creating it.

o  Therefore, the larger the government, the greater a drag it is on the productive capacity of the economy.

One of the obvious differentiators between Objectivism (which is a full philosophical system) and the economics-focused Libertarianism we commonly see is the role of government in a proper society. 

Libertarians fall into a range of camps that include Anarchy, Anarcho-capitalism, Minarchy, and related ideas. According to Rand, these are all anti-concepts that attempt to fuse a negative into a positive, thus destroying people’s ability to properly conceive and consider the positive. Anarchy is the absence of a central government. Anarcho-capitalism is the worst because it names the positive and then destroys it. Minarchy generally means the smallest government necessary and might be the closest to a proper formulation, but unnecessarily clouds the issue by creating a new term for what is simply capitalism. 

The positive is capitalism, the political and economic system where all property is privately owned and government is created to protect the rights of every individual citizen to life, liberty, and property. So long as the individual does not violate the rights of others, the government has no role, no policy, and takes no action. 

In a free society, government is an unalloyed good, an absolute necessity. Such a government is generally very small, but it may expand sometimes if needed to protect the country from external threats. Such a government is not good because it is small – size is not the standard of value – but because of what is does: protect rights from internal and external threats.

The first bullet could be improved by stating that through economic policy and the resultant use of force against innocent citizens, the government seizes the capital of producers and gives it to those people and groups favored by government policymakers. Some of those receiving the favours are also producers.

Your second bullet is almost perfect but can be improved by reformulating it as “A free society requires Government to play an essential role in the economy by protecting the rights of producers and consumers, creating the optimal conditions for production and trade.”

The third bullet is the weakest because it implies a negative correlation between government size and economic productivity. This is contradicted by Objectivism. A better formulation would be that since government is essential, there is a Kuznets curve something like this:

 At the origin point, there is essentially no economic production due to the condition of anarchy. This was the state of humanity for most of its history, with almost no production other than that needed for subsistence, and even then, subsistence was miserable. This is the fixed-pie view of wealth where anything can be stolen or destroyed with relative impunity.

The introduction of a government that starts to protect rights enables a sharp increase in production such as seen in the transition from the Enlightenment re-discovery of the power of reason and the consequent introduction of rights through the Industrial Revolution. In the U.S. and other relatively capitalist countries this persisted into the late 19th century and economic growth was 6% or even higher for long periods. 

Once the government started to adopt and enforce policies that did not protect rights, but violate them, the rate of economic growth started to decline. Controls, regulation, tariffs, taxes and other types of non-objective law are all forms of rights violations. The decline side of the curve is much more gradual than the increase side because it still contains significant rights protection, and these are usually gradually eroded. Because all the infrastructure created during a period of rights protection is difficult to destroy, both physically and intellectually, it is possible for a fascist government to commandeer production yet not rapidly destroy it. I think a good case in point is Argentina, in the news these days due to the election of a relatively free-market figure, which was once among the wealthiest of nations but then suffered a slow decline as collectivism became entrenched. 

A proper formulation of the third bullet point would thus be: “Once a proper, rights-protecting government has been instituted, any further growth of government will of necessity be rights-violating and thus lead to lower economic production.”

All this started with just the idea that the third bullet point was weak, but I am very happy with the thoughts that emerged, particularly the shape of the graphic, the form of which I have not seen before. 

The cancer stories you never hear

This story makes me think of the heroes among us who work, mostly quietly, to overcome the bureaucracies of government and the endlessly tangled health care outcomes created by the thousands of controls imposed by government and their regulators, and then by the companies and professionals subject to those regulations. It seems that no matter where you live these days, the remnants of individual rights and freedoms are being eroded and the barriers between patient and medical professionals are growing.

Who among us has not witnessed a family member or friend do battle with health care bureaucracies to figure out what is wrong and how to fix it? Time is money. Time is life. Precious individual lifetimes and lives are being sacrificed to the idea that collectivist/altruist fantasies of health care are better than a system where the people with the power are the patient and the medical professional. A system that protects individual rights and never violates them. A system known as freedom and which has been branded as capitalism.

https://www.commonsense.news/p/the-cancer-stories-you-never-hear

Regulators must not act now to forestall climate disaster

 The March 2022 edition of Canada's Investment Executive trade newspaper published an Editorial that was so badly done I had to comment. I sent them a letter to the editor but don't expect it will be published. Here is what I sent.

It is a disservice to the readership served by the Investment Executive that the editor promotes political IPCC climate alarmism rather than proven science on this subject. 

There are many sources if you want to learn about the state of scientific knowledge related to our climate, including the reports of the Non-Governmental International Panel On Climate Change (NIPCC), the annual “the State of the Climate” report, dozens of carefully researched books such as those by Bjorn Lomborg, Alex Epstein, Patrick Moore, Steve Koonin and of course thousands of articles from the peer-reviewed scientific literature demonstrating that the hypothesis for dangerous man-made global warming is false and the proposed political actions are destructive. The IPCC Summary For Policymakers is as far as many journalists go, and this document is not scientific but political. 

When it comes to climate-related risks, by far the greatest is that of government and regulatory interference. A perfect example of this is playing out these days with huge increases in energy prices caused by years of governments attacking the most abundant, cheap, dense, flexible and scalable energy known to man: fossil fuels. Now that the folly of relying on the Russian dictator for oil and gas is apparent and the insanity of relying on dictators in China for the minerals required for intermittent and unreliable energy sources like wind and solar is becoming apparent, economically and scientifically illiterate politicians who have threatened to “end fossil fuels,” promoted net-zero and pushed ESG are blaming high energy prices on the very businesses they have been trying to destroy. 

Human beings, left free to innovate and produce (especially in the energy field that powers all other industries) has easily and can continue to adapt even better to the historically modest changes recently seen in our climate. When coercion is used against producers and one-size-fits-all political rules are made, then risks become systemic instead of diversified. The editors of a newspaper giving voice to the investment sector should do proper due diligence instead of promoting ideas that are demonstrably false and causing great damage to human flourishing.

The Ontario government wants to hear ideas

In September 2018 the newly elected Ontario government surveyed the public regarding areas of priority for government action. Part of the questionnaire asked for up to three ideas that will improve the delivery of programs and services. The idea must:

• not ask for funding for a specific individual, group, organization, company and/or business 
• be within scope of the Ontario government to deliver (please check to make sure your idea is not the responsibility of a municipal government or the federal government) 
• follow our terms of use – your idea will not be considered if it violates our terms
• be feasible, practical and affordable for us to implement in the short term
• be sustainable and provide long-term benefits.

Here are my ideas as submitted.

Sector: economic development.  Government is the agency of force in society and should only act when force is required. Any other action can only serve to distort, override and negate the choice citizens have already made or want to make - it cannot be otherwise. All such interventions make society poorer, less free and slow progress. All forms of subsidies, incentives, grants, programs, agencies and the like should be dismantled in an orderly fashion with a clear explanation of why they have no place in a free society and state the benefits of stopping such interference. It must be based on a clear an unambiguous moral principle so it can withstand the inevitable outrage and attacks by leftists. Such actions would eliminate a great amount of government spending while also liberating millions of Ontarians to follow their own ideas instead of those chosen by a handful of ineffective bureaucrats.

Sector: resources and environment. Aside from laws related to the protection of individual rights in the resources and environmental domain, provincial government should withdraw from all interventions, including programs, subsidies, incentives, campaigns, etc. If government will properly protect rights and stop violating them, Ontarians can use their minds to pursue their own reasoning and develop resources through win-win transactions. In the environmental arena, all that is needed is for government to protect our property rights - to not have our water, land and air polluted in a way that is demonstrably harmful to human life and to set levels that are realistic in the context of an industrial society and do not impair human progress.

Sector: Heath. Health care is so monopolized and stifled by government control and monopoly power that it creates a shortage of supply, excess demand, long waiting lists and an inflexible industry. Health is much too important for human flourishing to have it so dominated by the agency of force in society. Doctors cannot innovate in service delivery. Hospitals cannot prioritize and innovate. Patients have no idea of the true cost of anything and the vital price signals generated by a population of millions, each acting according to their own values and priorities, are destroyed and cripple the system. In health areas where there is little or no government control, progress is rapid, efficiencies are steadily improved, innovation flourishes and providers compete for the attention of customers. Look at dentists, chiropractors and other professionals that spring up in an endless supply to meet all conceivable demand.For the sake of all our futures, Ontario must begin to de-control health care and return the decision-making power to individual citizens. The current massive interference in the health care decisions of Ontarians is patently immoral, impractical, dysfunctional and has no place in a free society.

Do taxi drivers DESERVE to work?

An October 1, 2015 editorial in the Ottawa East News titled “Taxi drivers deserve to work” gave me pause stop and think about the fundamental ideas behind the writer’s words, and I was not impressed. Whereas the writer does identify government as a problem, the article is replete with common economic fallacies and falsehoods.  In fact, every single problem that currently besets taxi drivers is caused by the intervention of government force in the economy - force that removes freedoms, causes stagnation of business development, raises prices, makes services less accessible and harms social harmony.

The taxi business is a monopoly - a business that is banned by force except for all but the few who are allowed to buy a forcibly limited number of taxi license plates.  Those who attempt to run an honest taxi service outside the monopoly are subject to potential threats, fines, seizure, arrest, imprisonment and condemnation.  Such a situation is intolerable to advocates of a truly free society but eagerly encouraged by our current political and intellectual leaders.

When a business is under monopoly powers, meaning power backed by the government’s ability to initiate force, the result can only be stagnation and lack of innovation. Monopoly power removes the possibility of competition, removes the requirement for steady innovation and improvement of quality of service that true competition requires. In truth, innovation and experimentation are banned by law in such a situation and this too is intolerable in a free society.  Who benefits? The few are granted economic power at the expense of the many.

Under monopoly powers the result must be higher prices than in a free market.  It is a basic economic fact that when you limit supply, the price must rise. In many cases, the initial forced limiting of supply causes harm and then there are calls for enforcing price controls, such as is the case in the taxi business.  In a free market all prices are subject to competition and eventually the profit margin approaches the average of all other free sectors.  If the profit is higher than average, new competition enters and brings profits back down, and vice versa. Under monopoly rule all consumers are deprived of access to a competitive market. Who is harmed the most? Those among us who are poorest.  In the case of the current taxi business, the drivers are squeezed between the monopoly on license plates and the price controls.  They are victims of government interference also.

Enter Uber - the current free market innovation in the personal transportation business.  Uber is simply a creation of free thinking people, provided by free thinking entrepreneurial drivers and used by free-thinking customers, who for the first time in their lives have the choice of using the monopoly service or a free-market alternative, and customers are voting for the free-market service in droves.  Too bad few of them fully recognize the principles involved and vote for politicians who advocate for freedom.

Drivers in the monopoly system do not deserve to work - that is an invalid concept because it implies the work must be provided for them.  What they deserve is freedom to work, freedom from people, organizations and most especially governments that would stop them from working, so long as they are not violating the rights of others.  In fact, government is the agency peaceful people create to protect their rights, not violate them through the imposition of monopolies.

The fact drivers are not rich is of no consequence. The vast majority of people are not rich, so what?  In a free market every individual is able to make his own choices, build a business if he is able, and become rich if that business creates phenomenal value for many customers.  This appears to be impossible for an individual driving a taxi, but possible if the driver has a good mind for customer value creation and builds a superior taxi business, employing many and servicing a great many at an attractive price for value ratio.

The editorial writer insults human reasoning, ingenuity, perseverance and value creation when the term “Wal-mart-ization” is used as a term of slander.  Not a single Wal-Mart employee is forced to work there or forced to accept less money than they earn. Every employee is free to rise as far as his ability and work ethic allows, or is free to leave and find an employer who agrees he is worth more than Wal-Mart is paying him.  In a free market, justice prevails and each person receives precisely what he deserves, as determined by his free trade with other like-minded souls.  If the taxi business was a free as Wal-Mart, the business would be a thriving, innovative concern, offering an abundant variety of price points and services to everyone.

The correct and moral response by a free citizen to the current taxi imbroglio not to support the striking drivers but is a cry to end the license plate monopoly in the taxi business and all other government intervention in the taxi business. Only thus will justice be served: drivers freed to compete in a free market and customers freed to choose from among the variety of business models a free market offers. A free market is a harmonious society.

The immense cost of cutting off price information in health care

A National Post article explained how the simple act of informing surgeons about the price of some of the items they use can result in huge cost savings, and thus free up money for spending in more beneficial areas.  Unfortunately the article stopped well short of revealing the full importance of this realization.

In a free society the price of a thing is the indicator of its value relative to all other things.  All the individuals in society prioritize their values using the price integrating mechanism known as the free market.  In this way, millions of people with individual priorities have their say about what is important and what is not.

When a government acts to throttle (regulation) or totally block (monopoly) the price mechanism, the members of society lose the extremely valuable information provided by the price mechanism and thus loses access to the brain power of millions of human beings, substituting for it the opinion and dictates of a few bureaucrats.  No matter how smart the bureaucrats are, it is impossible for them to even come close to applying the reasoning power of the millions who are cut off from the thinking process by government interference.  

This is why a free society sees the price of the most valued things rise so that competitive attention is directed towards that specific area, resulting in higher production, higher efficiency and thus lower costs in the future.  Interference in the price mechanism is thus truly cutting off the values of citizens and leaving them unable to direct competition towards their preferred areas.  A good example in the medical field is laser eye surgery, an area that has seen little government interference and a mostly free price mechanism.  The quality of service has steadily risen while the cost and accessibility of the service has declined to the point where this life-improving treatment is available for just hundreds of dollars per eye.

To provide the best, lowest cost, most diverse market for health care the government must stop using its powers to coerce and punish the producers and consumers of health care services and return to protecting the rights of all citizens to participate and benefit from a free market.

2013 Ottawa South by-election debate, July 17

This debate was organized by the Professional Engineers of Ontario and so focused on the issues of infrastructure, energy and regulation.  I had prepared written responses but time allowed only a minute or so for each, so I paraphrased and ad-libbed instead.  For the record, here are my full responses.

1.       Infrastructure - Ontario and Canada has under invested in infrastructure for the past 20 or more years. If elected what would you and your party do to establish secure long term funding for essential infrastructure projects?

I note that it is not Canada that has underinvested in anything, but rather it is government owned assets that are poorly managed and maintained.  This is because the only proper role  of government is the protection of individual rights and when it interferes in economic activities this naturally leads to a poor allocation of capital.  By taking capital away from the free market and healthy competitive forces, government owned or operated assets MUST be inefficient, less innovative, and ultimately serve customers worse than assets in a free market.  The idea that government should be building any infrastructure is one that comes from collectivist ideologies and not from those who defend individual rights and capitalism.

If elected, I would work to remove the thousands of obstacles government currently has in place that prevent Ontarians from planning, financing, building and operating all the infrastructure they need and want.  No project that is truly essential in a free market remains unconstructed for long.  In a free market, individuals and their companies seek opportunities to create value that is recognizable by large numbers of citizens being willing to pay for it.  

Let me give one example: hospitals.  In Ontario today, it is against the law for patients to choose experimental drugs they believe may help them, it takes tens of millions of dollars and many years for new treatments to be approved, it is against the law for patients to pay doctors, against the law for doctors to charge patients for services, against the law for companies to build and operate hospitals in a way proper for a free market.  Government has essentially declared war on innovative, efficient, competitive, lower cost and widely available health care.  Hospitals today contain massive inefficiencies and struggle to adopt technologies that are rapidly implemented in the more free market.  If Apple was run the way Ontario health care is run, it would still be trying to sell big, slow desktop computers.  If engineers were all forced to work in a government monopoly, bridges would be still made out of wood.

2.       Energy – Reliable, affordable and sustainable energy is essential in a modern society.  In the last several years the cost escalation for electrical energy has placed many Ontario industries at a competitive disadvantage compared to their trading competitors. If elected what would you and your party do to address the reduced electricity demand and the rising cost of electricity in Ontario?

Energy is indispensible for human life.  There is a direct relationship between energy production and quality and longevity of life.  Housing, clothing, food, education, transportation, work, health care and almost every other area of human life are improved dramatically with access to energy.  With discoveries of new ways to access energy, the industrial revolution lifted humanity out of a structural poverty that had persisted for all of history.

In a free market the natural trend is for products to become better at a lower cost and energy has been no exception.  Sources of energy undreamed of have been brought into reality by scientists, engineers and industrialists and new ones are being explored every day.  In just the last few years, vast new supplies of natural gas and oil have been identified, enormous supplies of methyl hydrates have been discovered below the ocean floor, nanotechnologists are working on ways to multiply the efficiency of photovoltaic panels, biofuels are being developed and it appears that safe, small scale and inexpensive fusion may be only a handful of years away.  In truth, energy is essentially limitless if humans are permitted to use their minds to explore for it.  

In contrast to a free market, Ontario has a monopoly electrical power system that makes a mockery of efficiency.  I have operated solar panels at my off-grid cottage for 20 years and know how inefficient they still are, despite large improvements.  Over ten years ago it was shown that with steady progress, solar panels would be able to compete with fossil fuels by around 2030.  The current government has spent billions of dollars on technologies that are far less efficient than existing standard technologies and saddled Ontarians with associated debt for decades. The government is taking money from all taxpayers, including those who can least afford it and paying it to relatively wealthy Ontarians and foreign companies to place solar panels on their roofs and accept giant windmills in their towns.  This money is completely wasted as Ontario has all the energy it can use and the excess produced by these projects is taken off our hands by New York and we have to pay them to take it!  Insanity.

The Freedom Party would move towards a free and competitive market for energy and remove all subsidies, programs and interference in the energy industry, except to protect citizens from physical harm.  The price of energy would go down dramatically while the variety and availability of energy would rise steadily.  New technologies that prove useful would be rapidly implemented.

3.       Regulation - On June 12^th this year, the current government prevented implementing legislation in the manufacturing sector that would have ensured publicly accountable professional engineers oversee machinery that could cause harm to workers. Instead, the current government chose to favour the interests of business. According to the Association of Workers’ Compensation Boards of Canada, Ontario is the worst province in Canada for worker safety in manufacturing, with worker deaths more than double the rest of Canada. If you were elected, what would you and your party do to protect Ontario manufacturing workers from bad engineering even if there was some cost to business? There are over 100 deaths in Ontario manufacturing businesses each year. Is saving one life or preventing one worker injury not worth putting this legislation in place?

The protection of citizens from physical harm IS the proper role of government - it’s only proper role.  This does not extend to regulating voluntary exchange.  In a free society every worker is be free to contract with any employer and to terminate that contract if he believes his workplace is not safe enough.  Similarly, every employer is free to run business as he sees fit.  If he does not offer a safe workplace he will not be able to compete for valuable employees and will suffer according to his degree of irrational business practices.  Unless it can be shown that an employer is using force against an employee then government should not interfere.  

On the other hand, a free society has lots of room for standards organizations and professional designations.  Professional engineers must have educational qualifications and maintain standards to hold their designation.  Their association may reprimand or eject them for violations and may publicize this.  In a free society you earn your reputation through good performance and serving customers, not through government approval.  

A free market ensures that the opinions of consumers are heard through their buying choices, the opinions of employees are heard through their wage preferences and that the most efficient businesses eventually succeed.  Ontario law is riddled with regulations that prevent many goods and services from being offered, or makes them so expensive they are not accessible to part of the population.  Some people may want the comfort of a certified professional for a job while others may be willing to risk using someone with lower qualifications.  No one has the right to prevent a buyer and seller from freely negotiating their own terms.  Many jobs have risks and in a free society compensation rises accordingly.  You can’t use government guns to make the world completely safe, and who would want to live in such a society?