Monday, November 26, 2007

The Invisible Gun: YouTube Edition

In the following speech on YouTube, I try to explain why we should exercise caution before we decide to pass even more laws to address social concerns. The speech is based on essays that are here and here.

Monday, November 12, 2007

Honoring Veterans for Fighting for Life

Paul McKeever of Canada's Freedom Party provides a tribute to all soldiers who fight to defend us.

Likewise, Alex Epstein writes about what we should remember on Veteran's Day.

Sunday, November 11, 2007

Privatization is not Simple

There is nothing simple about privatization as it will be difficult to not only overcome entrenched interests but also to earn the trust and participation of our people in the process. Privatization is much more than just handing a government function over to a private company. It is about creating an environment that is conducive to competition, investment and growth, and it’s that environment that will ensure that the hard work we do put in to improve our lives does not continue to go down the drain.

Our first hurdle will be to prevent crony capitalism. This occurs when private companies find favor with government officials to obtain monopolies, exclusive licenses, regulations and trade barriers that inhibit competition or the potential thereof. In this environment, private companies will simply replicate our government’s tendency towards high costs, poor customer service and lackluster quality.

Competition is the cornerstone of the private sector, which tends to make things better everyday. The letter to the Editor by “A friend of…” (Friday’s Issue 11/9/07) has the underlying argument that not enough money can be made in American Samoa to support the competition necessary to improve services, lower prices and raise wages.

“If you build it, they will come”, as a wise saying from a movie starring Kevin Costner goes. There are places in the world where few thought money could be made: Hong Kong, Dubai , Taiwan and Estonia . They’re either some rocky island with few natural resources or a desert kingdom in the middle of nowhere. But after these countries have relatively freed their economies, businesses went knocking on their doors. There must be something about freedom they find attractive, who knows?

Characteristics of a free market economy include minimal taxation, protection of property rights, enforcement of contracts, quick licensing procedures, a flexible labor force, freedom from price/wage/benefit controls and an absence of government competition. Our territory hasn’t fared too well on this list, and it would be ridiculous to expect people from abroad, let alone our own people, to want to compete in such a hostile and risky environment.

Competition is possible, and there are indications that a healthy market exists in areas once thought to be the sole domain of government. The facts that Star Kist rebuffed ASPA rate increases by planning to generate their own power and investors from Hawaii want to build a lucrative solar powered generator show market potential in electricity.

Texas has successfully deregulated their power utilities, and the market is credited for restraining prices in light of rising fuel costs. Argentina has successfully privatized their roads, and the market is credited for increasing capacity, improving quality and lowering the need for government funding. Chile has successfully privatized their "Social Security" programs, and their retirement scheme is secured while the US Social Security program threatens to bring the entire economy down with its and Medicare’s trillions of dollars in unfunded liabilities. We owe it to ourselves and future generations to look at how other countries and states were able to improve their lives through privatization.

It will not be easy, especially since many of our family and friends work in these departments. Maybe a condition of sale could be for the acquiring interest to hire and retain ASG employees for a period of time in which they could prove themselves to the company or gain the necessary skills and education necessary to be a valuable asset.

There is a right way and a wrong way to privatization. The wrong way leads to crony capitalism, and we would be no better off than if we stuck with the status quo. The right way requires that government just get out of the way and allow the people and the market to improve our lives.

Saturday, November 10, 2007

The Soul of an Individualist

This is the climactic courtroom speech from the movie version of Ayn Rand's classic, The Fountainhead. I should mention that the book is vastly superior to the movie. Even the speech is better in the novel than in the film.

For those who are interested in gaining insights about applying free-market principles to real-world situations, I recommend the nonfiction Virtue of Selfishness.

Friday, November 09, 2007

The Book That Changed My Life

Stuart K. Hayashi

There is a wonderful book about economic freedom that changed my life, and it is emphatically not Atlas Shrugged. The truly influential book is of the same author, however -- Ayn Rand.

The book that really rocked my world was the nonfiction The Virtue of Selfishness: A New Concept of Egoism.

Of course, many people are shocked and horrified by the title. When I sat in public and read it, many passers-by looked at the title and then gave me the most . . . er, interesting stares and glares. But that is precisely the point. The book has the title it does because it intends to demystify the horribly overused epithet of "selfishness."

The problem with the word "selfishness" is that it has two meanings. The first meaning is the conventional meaning -- it is bad to be "selfish" because a "selfish" person lies, steals, and murders other people for his own benefit. That is "selfishness" as it is commonly understood.

However, there is another type of person commonly accused of being "selfish" -- the honest, hardworking entrepreneur. Suppose that Entrepreneur Hank respects other people's rights -- he does not lie, steal, or cheat anyone. In fact, his business creates many jobs and products that benefit other people. If Entrepreneur Hank is in the pharmaceutical industry, his products and services might even prolong many people's lives.

But what if one of Entrepreneur Hank's main motivations is to make a lot of money for himself and his family, so that he might be able to buy a big mansion, hire a butler and maids, and procure a big yacht and many other expensive toys? Many advocates of government regulation accuse Entrepreneur Hank of being "selfish" in this case. And the dictionary definition does indeed apply in this situation -- Entrepreneur Hank is looking out of his own interests, and he is taking care of himself. The profit motive, by its very nature, is self-oriented.

The accusation of "selfishness" will be applied even more vociferously toward Entrepreneur Hank if he objects to government regulations that forcibly redistribute much of his income to poorer people. If he wants to protect his own private property, when other people demand that he be forced to hand over his property to them, is he not being "selfish"?

Note that Entrepreneur Hank is not even in the same category as the "selfish" robber and murderer. Yet all of the negative connotations of "selfishness" that come from the robber/killer are then attached to Entrepreneur Hank, just because the "robber" and Entrepreneur Hank have this in common: they look out for their own self-interest, and so the word "selfish" technically applies to them.

Many conservatives and libertarians become defensive about the "selfish" label, and so they come up with all sorts of unconvincing arguments about how a self-interested, self-made billionaire entrepreneur is somehow behaving in a materially self-sacrificial manner when pursuing wealth. That doesn't work. Advocates of regulation do not buy it, and I don't either.

Thus, we are fortunate that Ayn Rand has come along and cleared the air on the issue. She makes clear to us in The Virtue of Selfishness that there is nothing inherently evil about peaceably living in accordance with one's own self-interest.

As I have written elsewhere,

The real problem isn't "pro-self-ism," but "anti-others-ism."

This is especially true because, contrary to a popular Marxian fallacy that pervades the thought of too many people, one man's gain does not translate into material losses for someone else. In the market economy, entrepreneur and customer work together for mutual gains.

There is much discussion of this in Atlas Shrugged, but that is fiction. How does one apply such philosophic insights to everyday living? That is superbly answered in the nonfiction Virtue of Selfishness.

This same tome also deals much with issues pertaining to government. It is actually the book that best explains why a morally ideal government would be financed consensually, rather than with compulsory taxation.

Here are some of my favorite quotations from it.

P. 126:

The precondition of a civilized society is the barring of physical force from social relationships -- thus establishing the principle that if men wish to deal with one another, they may do so only by means of reason: by discussion, persuasion and voluntary, uncoerced agreement.

P. 106:

Remember that there is no such dichotomy as "human rights" versus "property rights." No human rights can exist without property rights. Since material goods are produced by the mind and effort of individual men, and are needed to sustain their lives, if the producer does not own the result of his effort, he does not own his life. To deny property rights is to turn men into property owned by the state. Whoever claims the "right" to "redistribute" the wealth produced by others is claiming the "right" to treat other human beings as chattel.

P. 110:

Bear in mind that the right to property is a right to action, like all others: it is not a right to an object, but to the action and the consequences of producing or earning that object. It is not a guarantee that a man will earn any property, but only a guarantee that he will own it if he earns it.

P. 113-14:

If some men are entitled by right to the products of the work of others, it means that those others are deprived of rights and condemned to slave labor.

Any alleged "right" of one man, which necessitates the violation of the rights of another, is not and cannot be a right.

No man can have a right to impose an unchosen obligation, an unrewarded duty or any involuntary servitude on another man. There can be no such thing as "the right to enslave."

A right does not include the material implementation of that right by other men; it includes only the freedom to earn that implementation by one's own effort.

P. 114:

There is no such thing as "a right to a job" -- there is only the right of free trade, that is: a man's right to take a job if another man chooses to hire him. There is no "right to a home," only the right of free trade: the right to build a home or to buy it. There are no "rights to a 'fair' wage or a 'fair' price" if no one chooses to pay it, to hire a man or to buy his product. [...] There are only the Rights of Man -- rights possessed by every individual man and by all men as individuals.

P. 156:

A man's rights are not violated by a private individual's refusal to deal with him.

P. 115:

Potentially, a government is the most dangerous threat to man's rights: it holds a legal monopoly on the use of physical force against legally disarmed victims. When unlimited and unrestricted by individual rights, a government is men's deadliest enemy.

P. 103:

Since there is no such entity as "the public," since the public is merely a number of individuals, any claimed or implied conflict of "the public interest" with private interests means that the interests of some men are to be sacrificed to the interests and wishes of others. Since the concept is so conveniently undefinable, its use rests only on any given gang's ability to proclaim that "The public, c'est moi ['is me']" -- and to maintain the claim at the point of a gun.

P. 165-66:

Many professors use the Argument from Intimidation to stifle independent thinking among students, to evade questions they cannot answer, to discourage any critical analysis of their arbitrary assumptions or any departure from the intellectual status quo. [...]

"Professor X"? (X standing for the name of a distinguished theorist of free-enterprise economics.) "Are you quoting Professor X? Oh no, not really!" -- followed by a sarcastic chuckle intended to convey that Professor X has been thoroughly discredited. (By whom?[...)]

Such teachers are frequently assisted by the "liberal" goon squad of the classroom, who burst into laughter at appropriate moments.

P. 154:

But the smallest minority on Earth is the individual. Those who deny individual rights, cannot claim to be defenders of minorities.

P. 130:

A unilateral breach of contract involves an indirect use of physical force: it consists, in essence, of one man receiving the material values, goods or services of another, then refusing to pay for them and thus keeping them by force (by mere physical possession), not by right -- i.e., keeping them without the consent of their owner.

P. 108:

Individual rights are the means of subordinating Society to moral law.

P. 121:

A nation that violates the rights of its own citizens cannot claim any rights whatsover. [...]

The right of "the self-determination of nations" applies only to free societies or to societies seeking to establish freedom; it does not apply to dictatorships. Just as an individual's right to free action does not include the "right" to commit crimes (that is, to violate the rights of others), so the right of a nation to determine its own form of government does not include the right to establish a slave society (that is, to legalize the enslavement of some men by others). There is no such thing as a right to enslave. A nation can do it, just as a man can become a criminal -- but neither can do it by right.

There are so many more gems in the book.

If you think you've seen it all in Atlas Shrugged, you haven't seen anything yet. Atlas Shrugged is only a doorway to a land of new wisdom about personal and economic freedom. The Virtue of Selfishness is a fantastic guide for further traveling down this road of enlightenment. :-)

And, for more information, here are some videos from Ayn Rand expert Brandon Cropper.

* "Selfish -- Did Ayn Rand Choose a Bad Word for Her Ethics?"

* "I'm Selfish" (in two installments)

Question for Tali: Could Atlas Shrug in American Samoa?

Stuart K. Hayashi

I have a question for this blog's owner -- Talifaitasi "Tali" Satele. I have long spoken about how Atlas has been shrugging in the state of my birth, Hawaii.

For readers of this blog unfamiliar with the term "Atlas shrugging," I have described the metaphor as follows:

If a globe symbolizes [the] economy, and Atlas holding the Earth symbolizes the entrepreneurs who keep the economy afloat, the government's perpetual addition of burdens on Atlas's shoulders will eventually make him shrug, causing the "world"/economy to fall and shatter.

That is basically the plot of the Ayn Rand novel Atlas Shrugged. It takes place in a dystopian future United States in which government regulation of for-profit enterprise becomes so burdensome that it becomes terribly difficult for entrepreneurs to remain in business. Most of them roll back on their operations or outright fold their companies. This, of course, leads to economic stagnation and eventual collapse.

Such a cycle has occurred in real life. It happened in the former Soviet Union. It continues to happen in the Third World, as this John Stossel video obviates. As long as the governments of Third World countries continue to abrogate private property rights rather than secure them, then would-be entrepreneurs in these countries have little reason to build up productive, stable industries. Indeed, those who do valiantly try to run productive enterprises find themselves thwarted by arbitrary government edicts anyway.

This has also been the cause of Hawaii's economic travails from the 1980s on to 2002. When Republican Linda Lingle became Hawaii's governor in 2003, prospects improved and Hawaii's economy has begun to recover. The state of my birth now has an unemployment rate lower than the national average. However, Hawaii's regulatory state still creates a horrendous amount of red tape, so Hawaii's economy is not exactly prospering as wonderfully as it could.

So, I ask you, Tali, could Atlas conceivably shrug in American Samoa? What might happen if Hawaiian Airlines becomes so fed up with regulations on its pricing that it cut back on its services to American Samoan air travelers? What if StarKist was hit with a minimum-wage hike so incredibly large that it could no longer economically justify keeping its plants in the region?

What do you think, Tali? Would you recommend this book to people who want to understand why some economies flourish and others falter?

Sunday, November 04, 2007

The Case for Privatization

The world of business is fashioned by freedom. Each part is inspired by the incentive to make money: money that people trade in exchange for food, clothing, shelter or anything in their individual pursuits of happiness.

One needs capital to start a business, and in a free world, one has to offer incentives to attract that capital from his neighbors. One established way is to offer ownership in a company through stocks, which investors make money by obtaining dividends through their stocks or selling their stocks later on after stocks have gained more market value. Some investors prefer bigger dividends from companies while others prefer companies to retain earnings in order to grow the business, leading to higher stock prices.

The other established way is to take out a loan, which creditors make money by lending capital people are not using (savings) for an interest rate. People expect a certain rate of return over a certain period of time for lending their money, and they plan accordingly. That is why paying off a loan too early incurs costs to lenders, and they recoup such costs through prepayment penalties.

In a free world, any business can offer stock and any group of savers can lend money. So things such as what interest rates lenders offer or what dividend payments companies pay out are set in an environment where companies are competing for a desired level of capital and investors are competing with each other to offer that capital. All of this in an effort to find the best way to make money according to our own individual circumstances.

While investors and creditors provide much needed capital, their roles go beyond mere financing. Because it’s their money, investors and creditors review a company’s financial statements more carefully than those who don’t have a personal financial stake. Oversight by shareholders (who vote for the board of directors and thus have a voice in corporate governance), creditors and regulators provides a level of transparency that is virtually nonexistent in our government and semi-autonomous agencies.

The capital is available in the free market for private entities to take over such agencies as ASPA, ASTCA, LBJ, and the rest of the alphabet soup group. We would want that capital to come from the market and not local or federal governments, because they don’t have to tax the people or raid the retirement fund to obtain such capital. Also investors, creditors and regulators do a better job together at keeping such activities transparent and accountable, whereas our government has shown such a dismal record in regulating itself.

With ASTCA failing to connect our cell phone calls to Public Works failing to drain floods in Utulei to antennas falling off of KVZK-TV to ASPA failing to lower electricity rates to the ASG failing to make good on employees’ paychecks, our people rightfully demand solutions.

We need an honest discussion about what the costs are (frivolous regulations, excise taxes on fuel, unjustifiable spending), what incentives or disincentives exist to encourage investment and competition, and what we have to do to change the status quo in order to get from point A to point B.

Point B being a higher standard of living for all.