Title Change

In case you’ve noticed, the title of this blog has changed. This decision was made after googling my own name, and discovering that all of the results related to my scientific endeavors have been drowned out by links leading here.

Unfortunately, the world of a science is filled with people who are perfectly happy working for the government. Many scientists see their own intelligence as a reason to use politics to force their beliefs and lifestyle on others, rather than as a reason to be free of government intrusion. This stems from the belief that the public is too stupid to appreciate good science, and so the only way to get funding is to appeal to the confiscatory power of government, rather than by seeking out voluntary funding sources. Of course, this unenlightened view ignores the fact that the government is made up of the same descendents of Cro-Magnons that make up the general public, but with even less inspired variance. Yet, even scientists usually don’t have the courage to question their own funding. Just like everyone else, they don’t like to bite the hand that feeds.

So, to avoid being retaliated against in the professional world for my advocacy of liberty, I must distance my online presence from my professional name. Of course, I will never allow myself to be silenced, but I will be a more effective voice for my cause in the future if my career success is not hindered by butting heads with my colleagues. A name change seems the simplest way to achieve this.

Democracy is Not Freedom

The Arab Spring is supposed to be a wonderful thing because it is eliminating dictators and installing democracy throughout the Middle East, right? The people get to choose their government! That’s freedom! Right?

Well, is it freedom when majorities vote to install Islamic law with totalitarian reach in the government, as they are doing in many of these “liberated” Middle Eastern nations? How free do you think women in Egypt feel, now that a secular dictatorship has been replaced with a misogynistic Islamic democracy?

With this in mind, I’m going to put forward a radical concept that few in the democratic world have managed to grasp: Democracy is not freedom. Replacing a tyrannical dictator with a tyrannical majority does not free a people. Too many people believe that whatever the majority wants is right. That it’s oppression to deny the majority their will. But when the majority seeks to infringe on the inherent rights of the minority, they cannot possibly be supporting freedom.

Democracy is not the essence of freedom- it is merely a tool that can be useful for protecting freedom. True freedom comes from the principles of liberty, which must be protected for all people from the will of any minority or majority. That means protecting individual sovereignty for all, not just ensuring popular sovereignty. The democratic socialist governmental structures of the European Union as well as the Bolivarian governments of South America suppress the individual sovereignty of the people in favor of expressing the collective will of the majority. The majorities in these countries may feel pretty free because they’re getting everything they want, but the members of the minority who they oppress are having their liberty infringed upon every day.

That is why the United States government was originally founded with a Constitution and Bill of Rights strictly limiting the power of the democratic government to infringe on the liberty of individuals. This government was not meant to be an expression of collective will, but a means of ensuring that no individual could come under monarchical or majoritarian oppression. Yet, in recent generations, we’ve strayed from these principles, allowing charismatic leaders to convince us that they can solve the problems of poverty, of unemployment, of poor education and health care, if only we would give them more power to express the collective will of the people. What they leave out of these platitudes is the clarification that their solutions would express the will of the majority at the expense of the basic liberty of the minority. Yet, we’ve supplanted nearly all of our constitutional principles in favor of the democratic socialist perspectives of Franklin Roosevelt and Barack Obama.

This envisioning of the government as a mechanism of expressing collective will is wrong. It is an anti-liberty view, as should be clear from the oppressive horrors that voting majorities have brought everywhere from 1930′s Europe to the modern Middle East. The collective will of majorities can be very oppressive, and it is no better when this collective will is used to provide financial security to one group at the expense of another group. These so-called “positive freedoms” come at the expense of the “negative freedoms” (the liberty) that all humans have an inherent right to. The government cannot buy one person a service without stealing property and labor from another person. So please, don’t try to equate democracy with freedom. Unrestrained democracy can be just as oppressive against the liberties of the people as unrestrained hereditary leadership.

For true freedom to come to all citizens of a nation, we must refocus the role of government back on the protection of liberty and individual sovereignty. No democratic form of government should ever be built without a constitutional guarantee to liberty. There just cannot be freedom without it. When individuals are free from forcible forms of organization, they are free to create their own voluntary forms of communal organization that can solve the nation’s problems without the suppression of human rights.

The Separation of Ideology and State

Quite a few people in this country support the separation of Church and State, feeling that religion has no place in defining the role of the State. Yet, many of these same people have no problem forcing their own ideologies and beliefs of any other nature on others through the mechanism of government.

What’s the difference between the different religions and the different political ideologies of our day? Religions are old enough to base their righteousness in the idea of divine right. That’s all. In every other way, the different religions are not fundamentally different different types of belief than those various political factions that lead to our modern squabbles over the economy, over how people should live their lives. As time goes on and the major political parties take turns wielding the power of the State, we allow these ideologies and ways of life that we do not believe in to be imposed on us simply because they come from the will of 51% of the people. Is this right? Is it right for two neighbors to force the third to live as they do? Would you allow the majority religion of the country to force their beliefs on you? It would certainly be democratic, but is it liberty?

So I have a simple question to ask: Why don’t the people of this country drop the blatant contradictions in their beliefs and favor a total separation of Ideology and State? Stop using taxes and the power of the law to force others to live as you choose to live. Stop trying to force everyone in the country to support your favored programs. For liberty’s sake, just leave each other alone. The violent power of government should not be used for every goal you have in life. All it truly needs to be used for is defense against further imposition of violent power.

How can you favor the Separation of Church and state without also accepting the Separation of Ideology and State, unless your motives are duplicitous and hypocritical?

The Debt Cliff

A simple analogy for those trying to understand the debt ceiling debates:

The debt ceiling is a brick wall that we’re running towards. If we hit that brick wall, it will hurt. Hence, the Democrats want to break down that wall and remove it altogether so that we don’t run into it.

However, the Republicans understand something which the Democrats do not: that this brick wall blocks the path to a sheer cliff. The Republicans want to keep this wall up because of the far more severe pain we will experience if we run off the cliff. They see that the entire nation of Greece is painfully trying to climb back up this cliff, having run off the edge and been safely caught before the bottom in a net laid out by Germany. Unfortunately, no nation in the world can afford a net big enough to catch us if we take the plunge.

In the past, we’ve avoided the pain of running into the wall by breaking it down and rebuilding it further up the road. This will not help us when we run out of road. The only solution to avoid further pain is to simply stop running down this road. Though the Democrats blame the Republicans for leaving a brick wall up for us to run into, it is those same Democrats who keep us running towards it by protecting ever-growing entitlement spending, and who will run us right off the cliff edge in the absence of such a wall.

If this wasn’t clear enough, the road is the national debt, and the cliff edge is the point where our interest payments on our national debt become too large for the national budget to ever achieve a surplus again.

According to recent Congressional Budge Office models, we will officially hit that cliff edge in 2058, though that assumes that we’re willing to completely eliminate our military, Medicare, Medicaid, Social Security, and just about every other government program in order to repay our debt. If we assume that a functioning military is more important than repaying our debts, then we’re going to hit that cliff in 2050. If we assume this, and that Social Security funds are untouchable because they’re owned by the people paying into the system, then we’re going to hit that cliff around 2034. With those assumptions in place, if we want to have even a single dollar available to fund Medicare and Medicaid, we better turn away from this cliff before 2026. And of course, in 2015 (just three years from now) we’re going to hit the point where it becomes exponentially more costly to steer away from the cliff every year.

Of course, all of these fiscal scenarios optimistically assume that our credit rating is never downgraded again, and that the government doesn’t add any additional spending to the current baseline scenarios. Basically, this is assuming that we don’t further speed up our run down the road, even though we have been accelerating faster than ever before under the current administration. The more realistic scenario is that all of those deadlines will approach far faster than is currently assumed.

Freedom Correlations, Part 2: The Most Important Form of Freedom

Last time, I examined how economic freedom (as defined by the Heritage Foundation) correlates with state failure (as defined by The Fund for Peace) by plotting each country on a graph of economic freedom score vs. failed state score. I found a strongly negative correlation between economic freedom and state failure, with the best-fit model being a monotonically negative sigmoidal curve. This model predicted that for countries at the extremes of economic freedom, changes in economic freedom have little effect on state failure, whereas countries with economic freedom scores in the middle of the pack compared to the rest of the world change rapidly with changes in economic freedom, gaining 40 points of state failure for every 15 points of economic freedom lost. Furthermore, it was found that with a (economic freedom score, state failure score) value of (76.3, 34.8), the United States is right on the brink of this “Fast Failure Region,” and headed in the the wrong direction, validating the widespread perception of U.S. decline. At this point, I would like to gain greater insight into the policy-based causes of state failure by investigating how each subcategory of economic freedom impacts state failure. This will give us information about which policies have the greatest effect on a country’s prosperity, hopefully presenting a feasible solution to prevent national decline.

For each subcategory of economic freedom, I performed an analysis similar to the one used to produce the graphs shown in Part 1. Definitions of each subcategory are provided in Part 1 of this series. I plotted the country scores for each subcategory from the Heritage Foundation’s Index of Economic Freedom against that country’s score in The Fund For Peace’s State Failure Index. I then searched for the curve of best fit that could be used to model each correlation, while being careful not to over-parameterize the functions. The resulting fits (described by R² value and the sign of the correlation) are summarized in Figure 4. It’s important to note that the correlations are not all described by the same functions.³

Figure 4: The magnitude and direction of correlations of each type of economic freedom with state failure. Freedom subcategories are arranged by increasing magnitude of correlation.

As can be seen from the chart, not all forms of economic freedom show a negative correlation with state failure, and not all forms show much of a correlation at all. For instance, Labor Freedom, which is the freedom for a business to make any voluntary contract it wants with its laborers, shows very little correlation at all with state failure. This would indicate that, contrary to the hopes of all the unions and the fears of all the business leaders out there, labor laws don’t really have any effect on a country’s overall prosperity. Also, providing a little bit of support for the Keynesian worldview, it would seem that the Freedom from Government Spending subcategory actually has some indirect positive relationship with state failure. An exception to the monotonicity of these correlations arises from the observation that State Failure is not actually a function of Fiscal Freedom, but still does have a correlation. Fiscal Freedom, which is the freedom from taxation, is actually dependent on State Failure, rather than the other way around, peaking around a State Failure score of 65, and declining towards the extremes of both national prosperity and national collapse. Perhaps this can be explained through the idea that both tyrannical governments and well-trusted, benevolent governments have the greatest capability to extract taxes from the people, but that’s a topic for another day.

Though not all forms of economic freedom stave off state failure, it’s clear that some categories do have a very strong record of keeping nations prosperous. Investment Freedom, Business Freedom, Financial Freedom, and Trade Freedom all have similarly strong levels of negative correlation with state failure. These four correlations also have similarly shaped models, giving the overall freedom correlation its Boltzmann Sigmoidal fit. It makes sense that these forms of freedom would act so similarly, as these are the forms which are most closely associated with the productive operations of our economy’s businesses. It should come as a major warning to regulation advocates that depriving businesses or the financial sector of their freedom has such a huge impact on the prosperity of a country. The initiation of the Great Depression in 1929 showed us what can go wrong if countries get too manipulative and protectionist with their trade policies, and the 2008 Great Recession showed us what can go wrong if countries get too manipulative with their financial sectors. The correlations here suggest that perhaps these devastating economic incidents weren’t freak accidents, but laws of nature.

But of course, the most significant correlations observed in this study were the State Failure negative correlations with Property Rights (R² = 0.73) and Freedom from Corruption (R² = 0.75) (Figure 5). Perhaps it should be obvious that increasing corruption leads to increasing state failure. That might even be considered a tautology, depending on how you define “corruption.” But therein lies the problem with this analysis: “Corruption” does not have a universally-accepted singular definition. Nobody tries to legislate corruption, and everybody agrees that corruption is bad. Furthermore, it’s probably a good assumption that corruption is probably already illegal in every country in the world. So how can we propose prosperity-promoting policy changes to reduce corruption when nobody can even agree on what it is?

Figure 5: The correlation between Freedom from Corruption score and Failed State score with an asymptotic exponential fit.

It turns out, it’s not important for this analysis how you or I or how any politician defines corruption. What’s important is how the Heritage Foundation defines corruption, because they’re the ones that made this index and assigned these scores. So how does Heritage define corruption? Well, they defer the definition to Transparency International’s Corruption Perceptions Index (CPI). And how does Transparency International define corruption for their index? Well…they don’t. As stated in their FAQ, “There is no meaningful way to assess absolute levels of corruption in countries or territories on the basis of hard empirical data,” so they instead base their index on, “how corrupt a country’s public sector is perceived to be” in population surveys. So Heritage’s definition of corruption is based on everyone’s definition of corruption, which nobody can agree upon. Great, we’re running in circles.

In order to get to the bottom of this quandary, I tried something that Heritage probably should have done when they first started publishing this index: I plotted the corruption scores for countries against the other measures of economic freedom, and found something very interesting. The Freedom from Corruption scores correlate with the Property Rights scores through an exponential relationship with an R² value of 0.92 (Figure 6). Given that the data for these two different measures come from two completely different type of surveys, this correlation is strong enough to suggest that they’re measuring the same thing. In other words, the correlation is definitional. Freedom from Corruption is the protection of Property Rights. The fact that the corruption perceptions data came from population surveys suggests that most people at least subconsciously feel that violations of property rights are corruption, even if they won’t necessarily acknowledge it on either the philosophical or practical levels. The lack of exceptions here is surprising, given that most countries are philosophically very socialist, and that there are even quiet a few shamelessly communist nations in the world. Perhaps this is a case of, “When it happens to me, it’s a crime, but when it happens to you, it’s business.”

Figure 6: The correlation between Property Rights score and Freedom from Corruption score with an exponential fit.

So, now that we know that Heritage (and world populations in general) think of property rights when judging the level of corruption in a country, we know that the most important form of economic freedom for promoting prosperity is indeed property rights. The correlation graph is shown in Figure 7. Though a Boltzmann Sigmoidal fit provides the best match to the data (R² = 0.73), it is only the lower Property Rights region that actually shows a deviation from a linear fit. Hence, a line with a slope of -0.79 can be fit to the data with an R² of 0.72. Averaged over the whole chart, every 10 points lost in the protection of Property Rights leads to an 8 point increase in in State Failure. This trajectory is extremely reliable given how empty the chart is in the bottom-left and top-right quadrants. The most extreme outlier with low State Failure even with low Property Rights is Argentina (20, 46.5), which seems to have narrowly dodged the bullet of state failure even with some of the worst protection of property rights in the world. The most extreme outlier in the other direction, with high State Failure even with reasonably high protection of Property Rights is Israel (70, 82.2), for reasons which are probably obvious. New Zealand (95, 25.6) is the bottom-right-most point, achieving very low State Failure with the absolute highest protection of Property Rights. The United States (85, 34.8) falls very close to the best-fit line, and could probably get down to a failure score of 25.8 just by protecting property rights as well as New Zealand.  That would bring us down to Canada’s or New Zealand’s low level of State Failure, even without any new social programs. In fact, it appears that no matter how many social programs a country puts in place, it can’t save them from failure if they do not protect property rights. It’s clearly property rights, not social services, that make a country generally prosperous.

Figure 7: The correlation between Property Rights score and Failed State score with a Boltzmann sigmoidal fit.

I also plotted the countries’ Property Rights scores against each subcategory of State Failure to determine the mechanism by which a country collapses after diminishing the right to private property (Figure 8).⁴ Property rights apparently have a negative correlation with every component of state failure, emphasizing their importance. There is absolutely no silver lining to the degradation of private property rights. Still, there are some mechanisms of state failure which are more directly related to a failure to protect property rights than others. The correlation with State Legitimacy (R² = 0.75) is extremely strong, suggesting that giving the government the power to deprive citizens of their property rights immediately leads to power struggles, cronyism, black markets, electoral manipulation, and protests of the whole mess. The Security Apparatus (R² = 0.66) also suffers severely from the loss of property rights, creating rebellion, militant groups, gang violence, and riots. Without private property rights, other Human Rights (R² = 0.62) also reliably suffer, leading to the loss of press freedom and other civil liberties, while increasing the incarceration and execution rates. Contrary to Marxist belief, private property rights are actually very good at inoculating a country against the entrenched aristocracy of Factionalized Elites (R² = 0.62) and the income inequality of Uneven Development (R² = 0.58). No matter how much money the government dumps into infrastructure, if that money is obtained by violating the private property rights of the people, then even Public Services (R² = 0.59) will suffer. Ultimately, Poverty and Economic Decline (R² = 0.51) is the result of any effort to replace private property rights with any philosophy deemed “more important.”

Figure 8: The magnitude and direction of correlations of Property Rights score with each type of State Failure. Failure types are arranged by increasing magnitude of correlation.

Collectivist philosophies survive on the belief that private property rights cause income inequality, poverty, bribery, and entrenchment of an elite class. However, these data sets show that the beliefs of socialists, Marxists, and communists are simply incorrect. The world very clearly does not work the way they believe it does. In fact, private property rights protect a nation from the economic and political ills that create squalor, stagnation, and sectionalism. And contrary to the beliefs of Liberals, it is impossible to protect the civil liberties of a nation without maintaining strong private property rights. Economic freedom is absolutely crucial to the protection of personal freedom. No country in the world has managed to lift its people out of poverty and socioeconomic turmoil without protecting private property rights. So, if you truly care about the prosperity of the people, and the lifting of the underclasses out of poverty, then beware of socialist politicians who advocate taking the property away from certain demonized groups as a means of bringing prosperity to the honest working people. They advocate the impossible. As they diminish the property rights of the people in general, they will drive their country towards failure, using the resulting socioeconomic collapse as further fuel for their cause. In reality, no matter how many scapegoats they identify, these socialists and communists and so-called “liberals” are the source of the pain that they rail against, even if they are very good at redirecting the perception of cause. They are their own demons. Any nation which falls into a popular mindset of “we just need more socialism and it will fix everything,” will trap itself in a perpetual spiral of self-destruction. The data presented here proves this.

As Americans used to know, the only true way to lift “your poor, your tired, your huddled masses” from squalor is through liberty. Protect the private property rights of the people, and give them the freedom to innovate, and they will find their own ways to survive with a prosperity that no central authority could have ever imagined. This is how Libertarianism aspires to help the people.

This analysis will be continued in Part 3.

Footnotes
3. The correlations of State Failure with Business Freedom, Financial Freedom, Investment Freedom, Monetary Freedom, Property Rights, and Trade Freedom  were modeled with Boltzmann sigmoidal fits trending monotonically in the negative direction. The correlation with Freedom from Corruption was modeled with an asymptotic exponential decay function. The correlations with Labor Freedom and Freedom from Government Spending were modeled with linear fits, with negative and positive slopes, respectively. The correlation with Fiscal Freedom was modeled with an extremes peak function to account for the non-monotonic nature of this relationship.
4. The correlations of Property Rights with Demographics, External Intervention, Factionalized Elites, Group Grievances, Human Flight, Poverty and Decline, Public Services, Refugees, Security Apparatus, State Legitimacy, and Uneven Development were modeled with Boltzmann sigmoidal fits trending monotonically in the negative direction. Not all of these models showed the full range of the sigmoidal shape within the range of the charts, but the sigmoidal model was still necessary to capture the fluctuations in the monotonic trends in the data.

Socialist Myths That Just Won’t Die, Part 1

I end up encountering these myths far too often when debating socialist-minded individuals. I’m putting these myths and my responses to them here so that I don’t have to rewrite these responses so many times later. I expect this won’t be the last of this sort of post I’ll be publishing. To prove that I’m not just beating up on straw men, this is the guy I was responding to this time.

Myth: When the economy grows, only the wealthy benefit.
Truth: If that were even close to true, then you wouldn’t see people below the poverty line talking on their cell phones, going to McDonald’s, driving it home to eat in their shared 2-bedroom apartments, and putting the leftovers in the refrigerator. Compare this to poverty in North Korea, or Venezuela, or India, or even France. There’s a stark contrast between these pictures. Now, which picture do you think compares more effectively with 19th century American poverty? Did the American poor have cell phones or cars or refrigerators or even apartments in the 19th century? Not at all. There are countless ways in which the growth of the American economy has made life easier and more prosperous for the poor over the last 100 years. Lower-class wages first began to grow in the US in the 1870s, right in the middle of the “Gilded Age,” and stopped only recently, due to the replacement of wages with “benefits” (health benefits, retirement benefits, etc.).
Now compare this story with the one Argentina has lived for the last century. Argentina was far wealthier than the US on a per capita basis in 1900. However, their Socialist Party was on the rise at that time, and soon succeeded in irreversibly converting Argentina into a devoutly socialist nation. So how are the Argentinian poor doing now? Would you rather be poor in Argentina or the US? Argentina or Australia? Argentina or Switzerland? Argentina or Singapore? Note that poverty-stricken Central Americans looking for a better life tend to migrate north, not south.

Myth: Australia/Germany/Canada/etc is more socialist than most countries because they have socialist health care.
Truth: You can’t just base your entire idea of how socialist a country is on one policy, and expect to be correct. At one time, the US was the least socialist country in the world, but that’s simply not true anymore. If you think the US represents the epitome of capitalism, your preconceptions are entirely subjective and out-of-date. If you want to determine which countries are actually “more socialist” and which are less, you need a more objective measure, like the economic freedom indices I’ve posted countless times.
You’ll find in those indices that both Australia and Canada are consistently less socialist than the US. Germany is more socialist, but not by much, and they’re certainly not faring as well as their less socialist neighbors.
So how can you even pretend that it’s these countries’ socialist elements that brought them prosperity, when in fact these are some of the most economically libertarian countries in the world? In reality, prosperity correlates strongly with economic freedom, with private property rights being the strongest driving force.

Myth: We had a recession 5 years ago, so it makes sense our economy would still be growing slowly.
Truth: Not even close to true. Anyone who has studied recessions throughout US history knows that a big recession usually means a big recovery. The only two exceptions to this rule come from the results of FDR’s New Deal politics, and the results of Obama’s New Deal-inspired concentrations of power. Jimmy Carter brought this country into a rather long series of recession, but it took the pro-liberty policies of Ronald Reagan to bring real recovery. The fact is, so long as we have Obama continuing to suppress the economy with further regulation and taxes, we will always be on the brink of a new recession. If we had elected Mitt Romney instead, and if he had followed through on his promises to reduce tax rates, repeal ObamaCare, and reduce the burden of socialist welfare programs (a huge “IF”), I can guarantee you there would have been a near-instantaneous economic boom.

Myth: The economic crisis was caused by capitalist greed.
Truth: I’ve debunked this one too many times before. The economic crisis was caused by government programs that encouraged risky lending for the sake of racial benefits.

Myth: Clinton’s higher tax rates balanced the budget.
Truth: At the time the budget was balanced, Clinton’s tax rates were bringing in 20.8% of the GDP in revenue. The truth is, Clinton’s tax rates could never balance Obama’s spending, because he’s been spending about 25% of the GDP every year he’s been in office. This is why libertarians say, “Sure, we can go back to Clinton-era tax rates- if we go back to Clinton-era spending and regulation.” To go back to those spending levels, we would need to cut projected spending over the next 10 years by more than $8 trillion, not the mere pittance of $400 billion that Obama has proposed, or the slightly higher pittance of $800 billion that the Republicans have been toying around with. Obama is not even close to serious about balancing the budget- even the Republicans need to step up their spending cuts game if they want to get anywhere close to taking America off the path to Greece. Either we deal with this through spending cuts now, or we deal with this through even larger spending cuts later. That much is inevitable.

Do the Math: The Second Great Depression

I’ve posted versions of all of these charts here at one point or another, but it’s nice to have them all in one place to give a full picture of the Second Great Depression that we are currently in. What these numbers show is that the Obama “Recovery” is the worst post-recession period since the Great Depression, and is the second-worst post-recession period in American history. This is quantified through a number of measures:

• This is the worst post-recession job growth since the Great Depression.
• This is the worst post-recession GDP growth since the Great Depression.
• The unemployment rate has only improved through people dropping out of the workforce. If you include those people, we’re worse off than we were at the peak of the depression. The Keynesian models have been tested and proven to fail.
• To get a true measure of how many jobs are out there, we need to look at the civilian employment ratio. This number has been fully stagnant since Obama’s “Recovery” began.
• And of course, we can actually show how many people are dropping out of the workforce by looking at the labor force participation rate. It’s dropping very fast. Under Obama’s policies, we’re becoming a nation of government dependence with a large permanent welfare class.

I’m surprised they didn’t include a graph showing the declining median incomes as well, but that would be implied by the persistently high unemployment.

It’s time to face the facts. Obama has brought our country into a new Great Depression. America has been losing its economic strength, its prevalence of opportunity, and its philosophy of individual achievement under Obama. Franklin Roosevelt’s original experiment in Keynesianism, the New Deal, led to an era of economic stagnation and financial hardship. Now, Obama has repeated the experiment with his stimulus and “New Economic Patriotism” plan, and achieved the same results. The conclusion we can draw from this should now be very clear: Trickle-Down Government is not the solution to recessions. It only draws them out and increases hardship for everyone while forcing us to pay off its debts in the future.

To encourage rapid recoveries from recessions, we need to restore the free-market focus of our economy. There are millions of innovators and entrepreneurs out there who want to start businesses and create jobs, but can’t because of the maze of regulations, licensing laws, labor laws, government fees, taxes, and incentives not to work that threaten to crush their attempts. Additionally, their large competitors are all receiving government assistance, making it impossible for a new business to compete.

Let’s get the government out of the business of picking winners and losers in the economy. As Mitt Romney pointed out in his first presidential debate, Obama has a habit of only picking losers, simply because the winners don’t need any help. That’s how we end up with such monumentally expensive failures like Solyndra and the Chevy Volt. The government should not be using taxpayer money to invest- let us keep our money so that WE can choose where to invest it. We know better how to handle our own money than the government does. Romney made an excellent case for his election when he demonstrated that he understood this.

Obama claims to believe in the free market, but every policy he seeks to enact seeks to restrain the markets and put more of its resources in his own personal control. This is the path to national failure.
It’s time to get the failures out of office and replace them with people who actually trust the capabilities of the general public to make their own investments without the government being an eternal middleman. Through liberty, we can return to the path of rising prosperity.

Freedom Correlations, Part 1: Economic Freedom and State Failure

A significant portion of my political debates involve discussing the effects of libertarian-style economic freedom on a country’s well-being. This type of debate includes two major components: quantifying economic freedom and quantifying a country’s well-being. Measuring these quantities alone is a challenge in itself, but in order to really make an argument regarding their effects on each other, they must be measured independently, without having one measure create bias in the other. When looking at just one country’s policies and well-being, any number of historical events with any number of interpretations can be invoked to suggest that any of these measures are outliers. As an example, just think about how many different explanations there are regarding the causes of the 2007 global financial meltdown. Each different ideological group will adhere religiously to their own explanation, and reject all others. In order to get past all of these political games, we need to find a way to look at every country at once, averaging out the effects of historical anomalies and coincidences. Only if we find a way to do this, can we truly evaluate the general effects of economic freedom on the well-being of countries without politically biased interpretations of events getting in the way. I believe that I have found a set of indices that makes this possible.

I. The Indices

I’ve often referred to the Heritage Index of Economic Freedom, which tries to quantify how “economically free” a country is. Their index is compiled from a purely capitalist perspective, which may lead those who operate from a socialist perspective to reject their ordering as a measure of “true freedom.” However, what we can say is that their index is a great measure of how closely the policies of various countries adhere to the capitalist libertarian vision of economic freedom. This excludes any direct description of non-economic personal freedoms. Their scoring system is broken down into 10 categories:

1. Rule of Law
-Property Rights: The extent to which a country’s laws protect the right of individuals to acquire and keep private property.
-Freedom from Corruption: The extent to which a country’s people perceive their government to be free from corruption.

2. Limited Government
-Fiscal Freedom: A measure of how low the tax burden is upon the people.
-Government Spending: A measure of how little of the GDP the government spends.

3. Regulatory Efficiency
-Business Freedom: A measure of how easy it is to start, operate, and close a business in the country’s regulatory framework.
-Labor Freedom: A measure of the absence of regulations on employers’ hiring, use, and firing of employees.
-Monetary Freedom: A measure of the stability of prices, and the absence of government control of prices.

4. Open Markets
-Trade Freedom: A measure of the absence of tariffs, and other government-imposed barriers to international trade.
-Investment Freedom: A measure of how little the government controls investment activities, and the flow of investment resources.
-Financial Freedom: A measure of the independence of banks from government control.

Again, I’d like to emphasize that I’m not asking anyone to assume that these measures are an objective way of measuring freedom. The Heritage Foundation’s index is clearly a measure of how closely a country’s policies adhere to a minarchist libertarian’s view of economic freedom. The higher a country’s score on the index, the more that country’s economic laws and governmental activities follow the libertarian view of individual liberty, avoiding government activism, socialism, technocracy, and other forms of centralization of economic control. It is this description that I will be referring to when I talk about economic freedom throughout the remainder of this series. According to this description, Hong Kong has the world’s most economic freedom with a score of 89.9, and the United States is down at #10 with a score of 76.3. The country with the least economic freedom (that’s fully ranked and scored)¹ is Zimbabwe.

So what effects do these policies have on a country’s well-being? A socialist or progressive or technocrat would argue that these policies would destroy a country by making the poor poorer and the rich richer, destroying a country’s foundations. They say that Hong Kong and Singapore can only prosper with such policies because they’re so small, making them outliers. But a libertarian or conservative or capitalist would disagree, saying that these forms of economic freedom allow for the investment, competition, and innovation that make a country grow and prosper. So how do we resolve these differences and ferret out the effects on a country’s well-being of the economic policies originating from these two different perspectives?

Well, I found another index out there which takes an entirely different approach to ranking countries. The Fund for Peace Failed States Index tries to quantify the extent to which a country has failed and collapsed based purely on symptomatic observation of the conditions people live in under the various governments of the world. Their mission is humanitarian rather than ideological, so their scoring system is based purely on an observation of the components of a failed state (things that nobody wants to end up with), and the extent to which each country has experienced those symptoms. Their scores are also broken down into a number of categories:

1. Social Indicators
-Demographic Pressures: The extent to which a population suffers from hazards beyond their own immediate control, such as natural disasters, scarcity, and environmental degradation.
-Refugees and Internally Displaced Persons (IDPs): The magnitude of the problems associated with populations being removed from their homes, creating refugees.
-Group Grievance: The extent of tension between different factional groups (racial, ethnic, religious, etc.), in the form of discrimination or violence.
-Human Flight and Brain Drain: A measure of the net emigration of the populace, especially the emigration of educated individuals.

2. Economic Indicators
-Uneven Economic Development: The extent of disparities and inequality in income, wealth, and economic opportunities among different groups.
-Poverty and Economic Decline: A measure of how severely a country suffers from economic recession, inflation, high public debt, unemployment, and other indicators of economic decline.

3. Political and Military Indicators
-State Legitimacy: The extent to which a government fails to represent its citizens through corruption, power struggles, or disenfranchising votes.
-Public Services: A measure of the effectiveness and prevalence of the infrastructure that most governments provide as public services, including police, fire, communications, transportation services, and others.
-Human Rights and Rule of Law: The extent to which a government violates human rights through deprivation of civil liberties, arbitrary exercise of the law, or cruel and disproportionate punishment.
-Security Apparatus: The level of militarized internal conflict, and the number of fatalities that result.
-Factionalized Elites: A measure of political entrenchment, brinksmanship, and other tactics that make real political change impossible.
-External Intervention: The extent to which a country has failed to meet its international obligations, leading to foreign intervention in their affairs.

The Failed State Index does not measure policy. It directly measures reports of how far a country has progressed towards failure, in terms of establishing a stable legal framework, protecting the people, and ensuring their prosperity. With such a comprehensive description of the factors involved in the collapse of a country, this index acts as an appropriate measure of a country’s well-being. Somalia gains the #1 spot in state failure, with a score of 114.9, while Finland comes in last place at #177 (in the game where you want to lose) with a score of 20.0. The United States sits at #159, with a failure score of 34.8.

II. Correlations in the Overall Rankings and Scores

In the Heritage Index of Economic Freedom, we have a good measure of how extensively countries adhere to the policies of libertarian-style economic freedom, and in the Failed State Index, we have a direct measure of various conditions that describe the well-being of countries. So if we can find any correlations between these two scoring systems, then we can determine the extent to which certain policies may create the conditions of a failed state. Though we must be careful not to say that correlation necessarily implies causation, we can certainly say that the stronger the correlation, the more closely a policy is related to the condition.

To elaborate, there are three scenarios that may be implied by a generalized correlation between a policy and a condition:
1. The policy caused the condition.
2. The condition leads countries to adopt this policy.
3. Some external factor leads both to the condition and the adoption of a policy.

No country is absolutely bound to legislate policy based on the conditions it experiences. In other words, while a policy can directly cause a condition, a condition can only indirectly cause a policy to be implemented, by exerting pressure on whatever legislative process a country uses. Thus, we would necessarily see stronger correlations in scenario #1 than in scenarios #2 and #3. Hence, we can say that the stronger the correlation observed, the more likely it is that the policy directly causes the condition, rather than any indirect relationship occurring between the policy and the condition. Using this standard, we can distinguish relationships that describe the direct effects of a policy from other types of relationships that may pop up.

With this evaluation standard in mind, I’ve plotted every available² country on a graph comparing their Failed State rankings to their Economic Freedom rankings (Figure 1).

Figure 1: The correlation between Economic Freedom rank and Failed State rank. Each data point represents a country. The highest rank is 1.

As can be seen in Figure 1, there definitely is some sort of correlation between economic freedom ranking and state failure ranking. A linear fit can be applied to the data with an R-squared value of 0.55 and a slope of -0.731. This is a fairly strong, negative correlation, indicating there is indeed a relationship between these two rankings. Based on this data, we cannot be 100% certain that every component of economic freedom prevents state failure, but we can at least say that economic freedom clearly is not the cause of state failure.

Because of the high R-squared value, there must be at least some influence from economic freedom that prevents state failure. No nation with less economic freedom than Slovenia (Economic Freedom rank #69) has managed to avoid failure better than Italy or Argentina (tied Failed State rank #145). Additionally, no nation with more economic freedom than Jordan (Economic Freedom rank #30) has ended up failing worse than Cyprus (Failed State rank #119). For every 10 ranks a country drops in economic freedom, you can expect them to go up about 7 ranks in state failure. Interestingly, between 2008 and 2012, the US has dropped 5 ranks in economic freedom, and gone up 2 ranks in state failure, whereas the linear fit would predict an increase in failed state status of 3 or 4 ranks. The predictive power there is not bad, though not perfectly accurate.

One source of error in predicting the trends a country will follow is the fact that each ranking is a measure relative to every other country, rather than an absolute measure. So, if a country is improving or worsening their economic freedom or state failure, they may remain at the same rank if the countries surrounding them in the ranking are moving in the same direction. To account for this error, we can plot the countries based on their absolute Economic Freedom and Failed State scores, rather than their rankings (Figure 2).

Figure 2: The correlation between Economic Freedom score and Failed State score with a linear fit.

Even if we look at the raw scores, there still appears to be a correlation. With a linear fit, the R-squared value is about the same, at 0.53, and the slope is -1.54. The data appears better grouped, but the similar R-squared value comes as a result of some bias in the residuals. Instead of a linear fit, a sigmoid might fit better (Figure 3).

Figure 3: The correlation between Economic Freedom score and Failed State score with a Boltzmann sigmoidal fit.

Indeed, a sigmoid curve fits the data comparing freedom and failure scores far better, with an R-squared value of 0.61. The correlation is apparently very negative, with a loss in 15 freedom points translating into a gain of over 40 state failure points in the steepest part of the curve. No country with a freedom score higher than 76 has a failure score higher than 45. Additionally, no country with a freedom score lower than 48 has a failure score lower than 67. With such a reliable negative relationship between economic freedom and state failure, this now appears to be a strong enough correlation to establish causation.

If a country’s freedom score drops below 76, they will end up in severe danger of rapidly climbing in state failure score. Countries with an economic freedom score as low as 70 already span nearly the entire spectrum of state failure, including failure scores from 20 to 85. Ominously, the United States currently has a freedom score of 76.3, putting this country right at the edge of the cliff of rapid state failure. Perhaps this observation relates to the general perception that the U.S. is headed towards decline. The curve fit predicts the U.S. state failure score to be about 34.96, and the actual state failure score is 34.8. The U.S. economic freedom score has dropped more than 4 points over the last 4 years, increasing its failed state score from 32.8 (predicted: 30.3). So far, this correlative model is very accurately predicting the trajectory of the United States as it abandons policies of economic freedom, putting this country on pace to be worse off than Spain by the end of a second Obama term, worse off than Greece and Kuwait within 10 years, worse off than Cuba, Mexico, and Vietnam within just 15 years, worse off than Israel and Madagascar in 20 years, and putting us among the worst failed states in the world within just 25 years.

I would hope that Americans would remember their heritage of liberty and stop this decline before we get far enough along to consider ourselves equal to any of the above-mentioned countries in well-being. But before this decline can be prevented, Americans need to recognize how great of an effect economic liberty has on our lives. We cannot continue to function as a successful, developed nation if we continue electing politicians who publicly disparage the principles of liberty, equating economic freedom with an attack on the poor. As the data presented here shows, it simply is not true that economic freedom creates poor social conditions, and in fact, the opposite appears to be true. If we favor the principles and policies of economic freedom, we will gain prosperity as a country. Australia (89.1, 23.2), New Zealand (82.1, 25.6), and Switzerland (81.1, 23.3) appear to have learned this lesson, so why can’t we?

I will be continuing this analysis in Part 2 of the series, with an analysis of how the subcategories of Heritage’s Economic Freedom measures correlate with State Failure.

Footnotes
1. North Korea is included in the ranking, but is not fully scored. Afghanistan, Iraq, Liechtenstein, Sudan, and Somalia are not ranked due to the difficulty of obtaining reliable data.
2. Countries were excluded if and only if data was not available from one of the two indices.

Socialism Defined

I’ve never understood why those of a socialist persuasion try to pretend that they’re not socialist. Well I found the Encyclopaedia Britannica definition of socialism, and boy does it have something to say about the Democratic Party:

socialism, social and economic doctrine that calls for public rather than private ownership or control of property and natural resources. According to the socialist view, individuals do not live or work in isolation but live in cooperation with one another. Furthermore, everything that people produce is in some sense a social product, and everyone who contributes to the production of a good is entitled to a share in it. Society as a whole, therefore, should own or at least control property for the benefit of all its members.

Holy Hell, it’s almost like it’s exactly the perspective that Barack Obama and Elizabeth Warren were arguing for when Obama said, “You didn’t build that.”

This conviction puts socialism in opposition to capitalism, which is based on private ownership of the means of production and allows individual choices in a free market to determine how goods and services are distributed. Socialists complain that capitalism necessarily leads to unfair and exploitative concentrations of wealth and power in the hands of the relative few who emerge victorious from free-market competition—people who then use their wealth and power to reinforce their dominance in society. Because such people are rich, they may choose where and how to live, and their choices in turn limit the options of the poor. As a result, terms such as individual freedom and equality of opportunity may be meaningful for capitalists but can only ring hollow for working people, who must do the capitalists’ bidding if they are to survive. As socialists see it, true freedom and true equality require social control of the resources that provide the basis for prosperity in any society. Karl Marx and Friedrich Engels made this point in Manifesto of the Communist Party (1848) when they proclaimed that in a socialist society “the condition for the free development of each is the free development of all.”

If we replaced the term “socialism” in that excerpt with “unnamed philosophy,” and then walked around the Democratic National Convention asking people whether they believe in this unnamed philosophy, how many do you think would say no? One? Maybe Two?
Let’s face it: The supporters of the Democratic Party are socialists, through-and-through.

This fundamental conviction nevertheless leaves room for socialists to disagree among themselves with regard to two key points. The first concerns the extent and the kind of property that society should own or control. Some socialists have thought that almost everything except personal items such as clothing should be public property; this is true, for example, of the society envisioned by the English humanist Sir Thomas More in his Utopia (1516). Other socialists, however, have been willing to accept or even welcome private ownership of farms, shops, and other small or medium-sized businesses.

And this point is how we distinguish between the communist forms of socialism and the fascist forms of socialism.

The second disagreement concerns the way in which society is to exercise its control of property and other resources. In this case the main camps consist of loosely defined groups of centralists and decentralists. On the centralist side are socialists who want to invest public control of property in some central authority, such as the state—or the state under the guidance of a political party, as was the case in the Soviet Union. Those in the decentralist camp believe that decisions about the use of public property and resources should be made at the local, or lowest-possible, level by the people who will be most directly affected by those decisions. This conflict has persisted throughout the history of socialism as a political movement.

And there’s your split between the Democratic Party and the Occupy Movement.
The current political climate is really just the same battle between socialism and capitalism that has raged throughout history. The only difference is, we’re now fighting that war at home rather than on foreign shores.

Breaking: Obama fought for race-based subprime loans

As most should know by now, the financial crash of 2008 was caused by the housing crisis of 2007, which happened because banks were putting out so many subprime loans. There are many reasons why so many banks were putting out all these risky loans, from the Clinton version of the Community Reinvestment Act (which required banks to lower their lending standards for minorities), to Fannie Mae and Freddie Mac (who were required to buy up these risky loans to insure against losses), to the Federal Reserve (which lowered lending standards by keeping interest rates low).

But now we know of another direct contributor to the subprime lending culture that has torn economies apart across the world: Barack Obama

In 1995, Obama led a class action lawsuit against Citibank, claiming they were racist because they weren’t issuing enough subprime loans. Yes, that’s right. According to (now President) Barack Obama, it is racist to not put out enough subprime loans, because such a cautious policy disproportionately hurts African Americans. This is the same argument he uses against Voter-ID laws and to fight cuts in welfare programs.

So Obama won that case in 1998. He and his fellow lawyers profited to the tune of nearly a million dollars. The plaintiffs got a $60,000 pittance. And Citibank was forced to institute a policy of lowered lending standards with more subprime loans, so that African Americans can have greater access to loans and mortgages. Yes, Barack Obama personally forced Citibank to embrace the subprime loans that would spell doom for our financial sector.

But do you think it stops there? When a class action suit like this is settled, every other similar company in the country will rush to adjust their own policies to avoid being the targets of similar lawsuits. Without a doubt, most other banks in the nation would have increased their subprime lending activities to avoid being sued.

In other words, Barack Obama, through the cries of racism that he is so fond of, helped push our entire financial system over the edge. And then we made him President. And gave him a Nobel Prize. All because people were afraid of being called racist.

Those cries of racism have caused a financial crisis, have gotten one of the men personally responsible for the crisis elected president, and are now being used to try to reelect that same man. I think it’s time to treat those who cry “Racist!” as they deserve to be treated: as pariahs in our society. No person who tries to racialize an issue should be given any better treatment than absolute disdain.

Barack Obama represents everything that is wrong with America, and he must be defeated.