Author Archives: David Veksler

A brief case for evidence-based medicine

Few people would openly admit that they prefer irrational treatments and doctors.  But most people do in fact advocate irrational health practices – using pseudonyms for “irrational” as “holistic,” “alternative,” “homeopathic” and the deadly “natural.”

Medicine requires reason

The human body operates according to certain causal principles. If we wish to make a change in our health, we must understand some of those causal principles and act according to our understanding. To act without a rational basis is to disconnect our goals from their achievement. Irrationality does not guarantee failure — it just means that success, to the extent that it happens, will be due to other factors that our goals.

The study of human health is especially difficult

In the field of health, especially rigorous rationality is necessary for at least five reasons:

  1. The human body will solve, or at least try to solve most problems on its own. This makes establishing causality due external factors quite difficult and introduces biases such as the placebo effect and the regression fallacy.
  2. The body is very complex! Because it evolved over billions of years, the causal relationships in the body are extremely complex and interdependent.
  3. For example, even if we know that the body has too little of a certain substance, taking that substance may: a: not do anything b: cause the body to produce even less of the substance or c: cause an unpredictable side effect. On the other hand, if the body has too much of something, then the solution may be to a: consume less of that substance b: consume more of that substance or c: the consumption has no relationship at all to the level of that substance.
  4. It can be difficult to measure the extent to which medical problems are solved. While some things can be measured, many things, such as pain levels are very difficult to quantify.
  5. It is difficult to isolate causal factors in human beings since changes in health take time to develop and we can’t control every factor during an experiment or dissect human subjects when it is over.
  6. Humans tend to be irrational when it comes to their own mortality! We fear death, leading us to irrational over or under spending on health as well as being especially vulnerable to all the logical fallacies.

In medicine, rationality requires quality science research

There is a name for the field that applies rigor to the discovery of facts about nature: science. Science has been so successful in improving the state of human knowledge that many irrational, anti-scientific quacks have begun to use the term “scientific” to describe anti-scientific practices and ideas. In response to this, the medical community has come up with a term which identifiers the distinguishing aspect of rationality: “evidence based medicine.” This phrase is a necessary redundancy that identifies the essential characteristic of science: that it is based on sensory evidence. The alternative to non-evidence based science is not science at all, but emotionalism – “I feel it is true, so it must be.”

In the last hundred years, we have discovered certain practices for ensuring the conclusions of our medical experiments are valid. We know experimentally that observing these practices leads to more accurate conclusions. Let me emphasize that: the truth of medical claims is strongly correlated with the degree to which experiments follow accepted scientific standards. There are a number of objective scales for measuring the quality of an experiment.

Five characteristics of quality medical studies

  1. The experiment and its results are fully described in enough detail to reproduce and compare the results
  2. There is a randomized control group
  3. The selection of control subjects is double blind
  4. The methods of randomization and blinding are accurately described and appropriate
  5. There is a description of withdrawals and dropouts.

Further reading:

 


Addendum: How to judge health claims

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The one minute case for jury nullification

This is Swampyank's copy of "The Jury&quo...
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The role of a jury is to apply the law to the facts

A trial ought to be, a fact-finding process, conducted in order to determine whether pre-existing legal principles are applicable to a specific case.  It should not be a religious, philosophical, or political discourse – that is, the rules by which guilt or responsibility is determined must be known beforehand.  It is not up to the judge or jury to determine what the law ought to be, only to apply it to the established facts.  If the law was determined rather than applied at trial, it would be impossible for anyone to obey it.  Furthermore, a just legal system should be uniform – people must have assurance that outcomes will not depend on the particular judge and juror they stand before.

We have a personal moral responsibility to treat other men with justice 

However, while it is not the job of the juror to determine whether the law is just, it is his moral responsibility to treat other men justly.  Someone who is hired to be a repo agent may not have a contractual obligation to determine whether the collateral he collects is for debts which are legitimately are in default, but he has a moral obligation to refuse his assignments if he suspects that he’s seizing legitimate property.  If he refuses assignments based on tenuous grounds, he may justly be fired, but if he has some certainty that he’s seizing legitimate property, he becomes as much a thief as his employer.  Likewise with the juror.

A law based on invalid principles is inherently unjust

One criticism of jury nullification is that a jury is not neither qualified to judge the law nor does it have any legitimacy in doing so.  And this is certainly true as a matter of law.  A juror who disagrees with the practical implementation of the moral principles behind a law ought to defer to the established process.  He can always exercise his disagreement and try to effect change in his role as a private citizen.

But, the situation is different when a juror disagrees with the moral principles behind a law.  A law based on incorrect moral principles is unjust regardless of the facts of the case.  The conviction of anyone based on such as law is necessarily an act of aggression.  Any participation in the process, even solely in the function of determining the facts, is an immoral act.  No judge can honestly ask a juror to breach his integrity, or blame him for refusing to do so.    Everyone, regardless of his role, has a personal moral obligation to treat others justly and refrain from willingly participating in injustice.

Jurors should refuse to enforce unjust laws

What should  a juror do if he objects to the morality of a law?  He should refuse to serve if he believes that the principles of a law are inherently unjust.  By doing so, he does not undermine the legal process, since another juror can be substituted, nor does he violate his own integrity.  A juror exceeds his role if he refuses to convict because he thinks that the punishment for an action is too harsh, but he acts properly if he refuses to serve because he does not believe the act being prosecuted to constitute an act of coercion at all.

If the court is unable to find enough jurors who accept the morality of the law, it has two choices:  either require the charges to be dropped, or offer the dissenting jurors to serve anyway.  If they do so, they cannot be blamed for acquitting the defendant based on their judgment of the law, in addition to their judgment of the facts. If laws are consistent with the basic moral principles of citizens, it should not be difficult to find sufficient jurors.

Further reading

  • Wikipedia: Jury nullification

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The One Minute Case For Usury

There is no objective criteria for what rate of interests is “usury”

Usury originally meant the practice of charging interest on loans.  Sometime during Medieval times, the charging interest as such became politically acceptable and the term change to mean charging excessive interest rates.  However, there is no objective definition of what a “fair” interest rate is beyond the rate agreed to by the parties involved, so an attack on usury is an attack on interest rates as such.  There is no such thing as a single “just” interest rate because interest rates in a free market move towards an equilibrium determined by the time-preferences of individual debtors and lenders.

Traders have the right to trade by any terms they wish

The borrower of a loan voluntary enters into a contract. As long as the contract is voluntary, it is immoral for any third party to use coercion to prevent voluntary agreements.

Interest is essential to the investment process

Charging interest is essential to guiding the investment process, which cannot be sustained by charity even it were forthcoming due to the economic calculation problem.  Interest rates are required to direct investments to their most productive use.  Interest-driven investment is essential to economic growth, and therefore to the very existence of industrial civilization. If charging interest were outlawed, industrial societies would quickly collapse due to the inability to efficiently allocate savings.

“Loan sharking” is caused by government failure

Loan-sharking (charging high interest rates backed up by the threat of violence) reflects the fact that the loans are being given to creditors with a high risk of default. The need for violence is due to the failure of governments to see this fact, or to adequately enforce the loan contracts (such as with overly lax bankruptcy laws), rather than any immorality inherent in moneylenders.

Further reading

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The one minute case against “special interests” as the cause of corruption in politics

It is often said that  “special interests” are to blame for economic problems and corruption. But “special interests” are only a symptom, not the cause of the disease.

Pressure groups are inherent in a mixed economy

In a populist democracy with a mixed economy, every group that participates in the political system is a “special interest”, with the incentive and the power to use the political system to extract benefits for its members at the at the expense of everyone else. Corporations, unions, disease-awareness organizations, “minority” groups, and anyone who organizes around a common cause has the power believes that their fate or cause is more legitimate, important, and “special” than that of everyone else.

In a mixed economy, the state functions as a redistribution mechanism

The welfare and regulatory systems are the primary means to coercively redistribute property and confer monopoly benefits to various groups. In a mixed economy, everyone is constantly on the defensive against organized groups extracting benefits from him, and on the offensive attempting to use the coercive power of the state to extract benefits from others. Interventionism creates a vicious cycle hardly unique to corporations: first a lobby tries to extract special privileges from some politically neutral group, the group hires lobbyists to defend itself, and ends up using the influence it has gained to extract privileges at the expense of another neutral group, which must defend itself in turn.

“Special interests” are a consequence of the coercive power of government 

The existence of “special interests” is just a symptom of the disease: the growth of government power to a degree that allows those in power to violate our rights and steal our property for the benefits of their constituents. Populist “maverick” politicians who claim that they will “fight special interests” and “change the culture in Washington” are just attempting to subvert the power of the state to favor their particular constituency. Campaign finance regulations are just monopoly privileges created by the political élite to hide corruption from the public and make it more difficult for those without political connections and money to get elected and in order to defend themselves or join in the looting.

The solution to special interests is to remove to interventionist power of the state

The only solution to the problems caused by interventionism is to end interventionism – to separate government and economy. Take away the power of the government, and you will remove both the incentive and the power of the “special interests.” As long as governments try to control people and businesses with laws that go beyond the protection of property rights, the “special interests” will have the incentive to control governments.

Further reading:

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The One Minute Case For Philosophy

What is philosophy?

Philosophy is the field that looks at the most basic, universal questions about existence. While other sciences study certain aspects of things, or certain types of things, philosophy is concerned with the most abstract questions about existence and man’s role in it. Philosophy asks questions such as: How can we know what is true? What is our purpose in life? How should we act? How should we organize society?

Philosophy is inescapable

Why are you reading this? Do you want to learn something? Why value learning? Is it because you value knowledge or because you want to have a successful career? Why should those things matter to you? Is it because your parents said so, because you enjoy something, or because society needs it? Is your own happiness or obligation to others more important to you? How should you decide? If I tell you that something is good for me, does that also mean that it is good for you? Is the good the same for everyone or different because of culture or nationality or personality? Is something is true, is it true forever, or only for today? Are people good or bad? Are you? Why are some people more successful than others? Is happiness a matter of luck? What is a good life? How should you pick your friends? Can anyone know any of these things, with certainty, in the same way that we know that 1+1=2?

All these questions are answered by philosophy. You may never have thought about philosophy until today, but all conscious human action depends on a certain view of existence. All actions assume a certain view of existence, causality, and values. We have no choice about whether we have a philosophy. We can only choose what philosophy to adopt. We can subconsciously, passively, and uncritically accept the philosophy we are exposed to or, we can consciously, actively, critically, examine the ideas around us and accept them because they are true, not because we happened to live in a particular time and place.

Philosophy is the science of universal principles

Philosophy asks: what can we know and how can we know it? We re-examine the world as if discovering it for the first time and accept only that which we can prove to be true.

Why is this important? You might say that you know what is real because I can see and touch it. But not all knowledge is perceptual. If I tell you about an abstract idea, such as justice, how do you know if it is true? Because you feel it is true? Because others tell you it is true? Because you see it is true? But what can you point at to show what justice is? And can you be sure that something that is true to you is also true for everyone else and at all times?

The point of treating thinking as a science is to arrive at firm principles. You can live without an explicit philosophy if you live a primitive life and hunt animals in the jungle. But if you want to build an airplane to fly you across the world, you need a formal science of physics and engineering. And to live a successful life as a civilized human being and create a better future than the past, you need an integrated, scientific view of existence provided by philosophy. Philosophy has the power to make abstract concepts such as justice as clear as the things we can see and touch.

History is philosophy in action

The politics, culture, and economy of any society are formed by the ideas of the people who live in it. If most people believe that it is impossible for them to live without using violence against each other, than their society will be poor and violent. If people believe that whatever their ancestors practiced and believed is good enough for them, then they will continue to live just like their ancestors.

A few hundred years ago, most of the world believed that history was just an account of one ruling regime being replaced with another. If anyone believed in a better time, it was in the past, when great empires had existed and fallen. Today, people had a very different view of history. We believe in progress, in continuous improvement, in fundamental change in society and economy. These ideas have power: during the last 200 years, the world population increased from under 1 billion to over 7. Why did this happen? The world has embraced the technological and economic progress made possible by Western philosophy. A rational philosophy can offer a unifying explanation of man and his universe and a guide for people and societies to achieve values and peacefully coexist.


World human population (est.) 10,000 BC–2000 AD.

World human population (est.) 10,000 BC–2000 AD.

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The One Minute Case for Rational Self-Interest

Ayn Rand’s philosophy of Objectivism proposes a radical new theory of ethics: an objective, scientific theory of rational self-interest.  How does Ayn Rand justify her theory?

What is a moral code?

Morality is a code of rules or principles to guide one’s actions. Before deciding which principles man should live by, any moral theory must first explain why it is needed at all. Is it an arbitrary invention, or does it have some basis in reality? Is it universally true or different for every person? According to Objectivism, morality is objective: it is derived from our nature of human beings.

Life is the standard of value

All living entities must satisfy certain requirements (food, shelter, air, etc.) to remain alive. This is what sets life apart from inanimate matter. Life is a continual process of self-generated, goal-directed action. Only living things face the possibility of death and therefore the need to achieve values to remain alive. Only for living things can something be good or bad. The fact that life is conditional is the basis of values.

Values are automatic for non-volitional beings

The values needed for life are specific to the nature of each being: fish need water and worms; man needs food, clothes and shelter. Animals have claws, fangs, fur, and other traits to allow them survive in nature. These are their means of survival. For non-human animals, values are automatic: their instinct tells them that they must act in a certain way (hunt, run, reproduce) in order to remain alive. Animals neither need nor are capable of morals because they act according to instinct. Their instinct tells them that they must act in a certain way (hunt, run, reproduce) in order to remain alive.

For humans, our conscious, rational mind is our primary tool of survival

Human beings live by using our mind as the primary tool of survival. We pursue long-term goals to achieve the values needed for our life. Imagine a human being trying to live without choosing his values, like any animal: he would act on whatever he felt like doing from moment to moment. He would experience the drives to eat, reproduce, fight, and fear. But humans have urges, not instincts — it is up to our minds to decide how to achieve values. For a human being in nature, living without long-term goals is suicide.

Ethics provides a framework for long-term goal achievement

To consistently act towards long-term values, we need a consistent set of principles for living: a moral code. We need to recognize the facts relevant to our nature as human beings and live according to them over a lifetime. To recognize and act in accordance with reality is rationality. Morality is a means to an end — the end being life. If you want to live, then you must be rational.   The purpose of morality is to fulfill and enjoy one’s own life.

Rationality is the primary virtue 

The Objectivist ethics recognizes rationality as the primary virtue for man and productive achievement as his central purpose. To remain alive, we must focus on the facts and act accordingly. The choice to think and act rationally is the basis of virtue and life, and the choice to evade reality and abandon reason is the basis of evil. The primary virtue, from which all other virtues derive, is rationality, and the proper beneficiary of values is oneself.

Happiness is man’s highest moral purpose

According to Objectivism, each person should act to achieve the values required for his own life, neither sacrificing himself to others nor sacrificing others to himself. Productive achievement is the central purpose of life, which integrates all his other values. Virtues such as productivity, independence, honesty, integrity, and justice are aspects of rationality: living according to the requirements of life as a human being. Happiness is the result of successfully achieving values, and man’s highest moral purpose.

 

Further reading

 

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A One Minute Guide to Political Identification

Political perspectives can roughly be grouped into three historical camps: Conservatism, (classical) Liberalism, and Marxism.

The essential difference between these schools is in their solution to the problem of human values. Liberals see individuals as rational, self-interested, and autonomous beings who can best resolve their conflicting material and spiritual values through voluntary cooperation. This means advocating a free market with a free marketplace of ideas (i.e. a pluralistic society) being its essential corollary.

Conservatism and Marxism also sees the individual as self-interested, but therefore as fundamentally irrational, corrupt, and unable to resolve conflicting values independently. Conservatives believe that individual desire is inherently corrupting and therefore advocate centralized guidance and control of spiritual values, and prohibition of material goods which might lead to spiritual corruption. Marxists believe that the pursuit of material goods is inherently violent and conflicting, and the essential controls must be of material pursuits. Marxists belittle ideas as irrelevant and advocate control of self-interested motivates through centralized social structures such as compulsory state-run schools. Conservatives are explicitly opposed to the marketplace of ideas, while Marxists explicitly view ideas as irrelevant, but in practice ruthlessly suppress dissent when it conflicts with their policy goals.

Since man is an integrated being, both Conservatives and Marxists end up advocating the same policies in the downward spiral to prevent the perverse consequences of the controls they instrument. Unchecked, they both lead to tyranny.
It should be noted that these are only tendencies and the vast majority of people are some combination of these three perspectives.  Judging intellectuals means evaluating the particular combination of these perspectives. Furthermore, these perspectives are not primaries, but derivates of a basic perspective of human nature. This means that political views rarely change directly, but rather filter up through changes in a person’s basic view of human nature.

See Also

  • Wikipedia: the development of Western conservatism
  • Wikipedia: Marxism
  • Wikipedia: Classical Liberalism

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The One Minute Case for Designer Babies

The term “designer baby” is a derogative term for the use of reproductive and genetic technologies to accomplish an optimal recombination of the parents’ genes. This case argues that the voluntary use of genetic technologies, as well as prenatal screening and abortion is both moral and desirable. It does not address the morality of abortion (defended in this case) or the safety of particular technologies – an important consideration, but not a fundamental issue.

Parents ought to want healthy children

While there are many valid motivations to become a parent, in choosing to create a human being, parents assume a moral obligation to provide for and educate their children to become independent, mature adults. Beyond the legal obligation of providing minimum care, to the extent that parents love and value their children (and there is no reason to have children otherwise), parents ought to strive to maximize their child’s ability to become fully functional adult human beings – physically, spiritually, socially, romantically, etc. This means providing both appropriate education, and taking care of their physical needs.

Health can be objectively defined in relation to the requirements of human life

It is possible to make judgments about which mental and physical states are objectively superior in relation to other states. For example, a broken leg, a bout of flu, or a headache are undesirable because they prevent one from accomplishing a whole range of actions which are required for human life. We recognize this when we use technology (medicine) to help people overcome and heal from their injuries and illnesses. The same applies to genetic physical and mental deformities, which adversely impact one’s ability to accomplish his values. If someone suffers from clinical depression or schizophrenia, we offer them drugs that improve their ability to use reason to deal with reality and achieve the values they desire. If healthy, successful, productive human life is a value, then it is moral to use all available technology to maximize human potential to achieve the values they desire.

Biotechnology adds new tools to an ancient arsenal of genetic techniques for better offspring

If health is desirable and can be objectively defined, then parents ought to choose to have healthy children. They do this in a variety of means: Genetically, humans instinctively seek mates likely to produce healthy offspring – this is the basis of selective sexual attraction based on physical traits. Consciously, parents choose partners who share their child-rearing values. They also take measures to prevent child defects, such as abstaining from drugs during pregnancy and choosing to have children earlier in their life. Genetic counseling and prenatal screening are just two new tools for enhancing an ancient process.

The Gattaca objection confuses the potential for the actual

The Gattaca objection to screening undesirable traits is that people with undesirable traits have made many valuable contributions, and are capable of living fully productive lives. Supporters often give examples of great scientists like Albert Einstein or Stephen Hawkins with genetic or developmental abnormalities, or of people with serious impairments such as Down Syndrome who nevertheless hold jobs and assume most of the functions of normal adults.

This objection confuses between the seen and the unseen. What we see is that many people with undesirable traits are unusually successful, either in relation the average person, or to people with their symptoms. What we don’t see are all the people who failed to achieve their values because of their symptoms. If their genotype or embryo had been eliminated before birth, the unhealthy people would not exist, but an equal number of healthy people would. Unless the undesirable symptom itself contributed to their success, the percentage of unusually successful healthy people would be far higher than the number of extraordinarily successful unhealthy people. Certainly, healthy people would have a better chance at a normal life than someone with a chronic syndrome such as Down Syndrome, Tay-Sachs, or Spina bifida.

Genetic diversity is valuable – but only if it is used to enhance human life, not impair it

The “neurodiversity” movement opposes genetic screening on the grounds that atypical neurological development should be recognized and respected. The movement has a valid point insofar as neurodiversity has played a critical part in the development of human civilization. If every human being had exactly the same intelligence and developed in the same way, we would have no great scientists, artists, intellectuals, or entrepreneurs.

Unfortunately, the neurodiversity advocates only support “diversity” when it is due to ignorance, not conscious choice. They support a baby being born with Autism, Parkinson’s disease, dyslexia, or other disorders because the parents had no choice in the matter, but they oppose giving the parents the power to choose to have a child which is healthier than he would “naturally” be. If most parents could consciously choose what traits to give their children, they might prefer more intelligence, curiosity, a longer life, or stronger muscles. These are also varieties of genetic diversity.

Objections to genetic counseling and gene engineering are ultimately objections to technology

Few parents would choose to have their children be born blind, deaf, retarded, or crippled. Yet this is precisely what the “diversity” advocates want: to prevent parents from being able to improve on the “natural” forms of biodiversity.  Traits due to  sexual selection, random genetic mutation, and embryonic variation are acceptable to them, but traits due to conscious human choice are not.

Genetic screening via sexual selection has been practiced since the dawn of life itself.  No one suggests that we should pick a mate entirely at random, so the objection to genetic screening and engineering is due to the element of technology. Their objections are not to “designer babies” as such, but to the use of technology to improve the lives of human beings. They apply equally to a child whose genes are altered after birth, or to an adult. The logical conclusion of this neo-luddism is the opposition of all man-made improvements to human life as “unnatural.”

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The One Minute Case Against Consumptionism

There is a tradeoff between economic growth and consumption

Economic growth is made possible by forgoing current consumption. For example, consider the case of a teenager considering whether to save money for his future. If he spends his salary on toys and trinkets, he will never accumulate any savings. If, on the other hand, he minimizes expenses and saves money for college, he will forgo current consumption and invest in capital improvements. The same tradeoff applies to all consumers and producers: capital improvements require a sacrifice in current consumption to invest resources needed to expand future production.

Production, not consumption drives economic growth

The lack of a consumer culture is not an impediment to economic growth, as resources that are not consumed are invested into new markets and production capital. If a consumer forfeits a new car now to buy a better car at some point in the future, his savings are not lost. Instead of being directed into present consumption, his savings become the investment capital for new factories and R&D into cheaper and better cars. This is why such high economic growth is possible in “Asian tigers” such as Hong Kong and South Korea – high rates of savings support rapid technological progress and investment into industry at the cost of a much more frugal lifestyle than in the West.

Capital has structure

Politicians and the media treat GDP as a single number, but it is crucial to understand that producers face a choice between producing consumer goods and investing in intermediate goods used to create consumer goods. Those goods differ as well: a factory owner can invest in merely maintaining his factory, building a similar factory to expand production, or engaging in a long-term research and development program in a new product or production process. Thus, the goods produced by an economy can be one, two, or more level removed from consumer goods.

Capital investments require savings and stability

Economic and technological progress requires that entrepreneurs make long-term investments in intermediate production goods many levels removed from the consumer. In order for this to happen, two things are necessary: that consumers forgo current consumption to invest in future production, and that reliable long term predictions can be made about future savings rates and demand patterns.

Monetary policy disrupts economic growth

Governments control over the currency allows them to use monetary policy to achieve short-term economic goals, such as increasing GDP. But the consequences of artificially manipulating interest rates are disastrous. By expanding the money supply through manipulation of interest rates or (as is happening now) sending money directly from the printing presses to banks and other corporations, the government is devaluing savings and redirecting them into increased consumer spending. This improves the economic statistics in the short run at the cost of wiping out the resources set aside for long-term capital improvements. Furthermore, the arbitrary nature of government intervention in the economy makes long-term predictions about future savings and demand impossible.

Let the market direct savings and investment or face financial ruin

There is no single right answer  to the tradeoff between current consumption and the savings available to invest in future production and increased economic growth. Every individual must choose for himself how to balance present spending with investments in his future. In a free market, the sum of individual savings rates becomes the real interest rate.

For the last few decades, America’s spending binge has been funded by foreign investment and rapid technological innovation, but ultimately, unless we drastically cut our consumption, and direct our income into savings and repaying our debts, we will find our money increasingly worthless both here and internationally.  The dire consequences of hyperinflation can be seen in Zimbawbe, where life expectancy has declined from 60 to 37/34 years, unemployment is at 80%, and as much as half the surviving population has left the country.

Further Reading

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The One Minute Case Against Wage and Price Controls

What is a job?
A job is a contract between two parties, in which one party agrees to provide certain services on a certain schedule in exchange for payment from the other party. By definition, an employee agrees to do job for a particular wage by his own voluntary consent. This is opposed to slavery, in which a slave is forced to work without his consent or compensation.

What determines wages? Can employers pay workers whatever they want?

A wage is the price an employer pays for the services his employee. While the two may negotiate any wage they come to mutual agreement on, the mutual self-interest of both and market forces intersect at a market-set price that represents the intersection of their interests. Disregarding non-economic factors, an employer wishes to pay his employee as little as possible. The maximum amount he will pay however is the value of the marginal productivity a given worker provides. (The marginal productivity is the value per unit of time the worker provides to the employer.) If the worker refuses to work at or below his marginal productivity, then the employer will not hire him, since doing so will incur a loss. Conversely, disregarding non-economic factors, the employee wishes to be paid an infinite amount. The minimum wage he will actually accept is the marginal value of his labor. This can be measured in terms of the next-most useful value-producing activity the workers may engage in.

For example, suppose that my marginal productivity as a programmer is $30 per hour. I will accept any job paying above $30 an hour, but no job below it, since I can find an employer paying that much in another computer or tech-related industry. A fast-food worker might have a marginal productivity of say, $6 an hour – the value per hour that his labor creates for the business. From the employer’s perspective, I create $40/hour of value, and the fast food workers creates $7 of value, so he will be willing to hire us. (Assuming that no one is willing to provide the same value for a lower wage.) However, if I only provide $20 of value, the employer will not hire me, because he would incur an hourly loss of $10 in doing so. Similarly, if the fast food worker only provides $5 of value, he would not be hired either because he would cause a loss of $1 for each hour he works.

Can the government increase wages when employers don’t pay enough?

Suppose that the government imposed a minimum wage of $8. Would the fast food worker who provides a value of $7 per hour now be paid $8? No, he would lose his job – because keeping him would mean a $1 loss for each hour he works to his employer. All minimum wage laws have a similar effect – they cause everyone with a marginal productivity below the minimum wage to lose their jobs – most often teenagers and the very poor. Wage caps (including progressive income taxes) have a similar effect – they lead the most productive individuals of our society to retire early or forgo new opportunities — resulting in a lost opportunity for them, and for everyone who might have benefited from their ideas.

What if the government creates a job by paying an unemployed worker to do make-work such as digging holes in the ground?

Where would the money to pay for his wage come from? It would have to be taken by force from the remaining employed fast food workers and computer programmers. Everyone will be paid less to pay for the government workers, but has a job been created? No – now the fast-food employer has $1 less to pay to his other $8 employees, so he must fire some of them or go out of business. Each new $7 government worker costs at least one $7 privately employed worker. This is always a social loss because by definition, the government worker is less productive. If he were not, then the private business would voluntarily employ workers to perform his job.  While a minimum wage causes everyone who produces less than the marginal productivity of the minimum to lose his job, each new government job causes at least one more productive worker to lose his job.

If the government cannot raise wages, can it lower prices?

Prices are determined by the marginal value of a given good, just as a wage is determined by the marginal productivity of an employee. Attempts to regulate the cost of goods have the same effect as wage controls: if the price is set below the cost of a good, producers will be unable to make any.   Since different producers have different costs, lowering the prices of a good will decrease the percentage of producers able to supply them, until they can make none at all.

So how can prices be lowered?

The only way for prices to go down is to increase the productivity of workers.  Productivity in the production of a good comes from the application of mental effort to the production of values. A profit (the difference between the value of a good to a consumer and the cost to produce it) is the reward of an entrepreneur for bringing about the new wealth he’s created. In the absence of government coercion, profits can exist only as long as men continue to create new values ,or improving on existing ones.  The only to make goods cheaper is to allow entrepreneurs the freedom to invest in improvements in the capital and labor methods used in production

Doesn’t a more efficient product result in lost jobs for those who were replaced by automation or better processes?

When oil lamps replaced candles, the cost of producing affordable lighting greatly decreased. In the absence of a government monopoly, competing lamp-makers quickly started making their own lamps, which brought the price decrease to the consumer. In the process of transitioning from candles to laps, many thousands of candle-makers lost their jobs.  However, oil lamps did created a new industry of their own and increased the prosperity of society as a whole, just as electric lighting did in the 20th century.  Since consumers could buy cheaper lamps, they now had more money to spend on other things, ,creating new industries, and raising their overall standard of living.

Technological progress and capital accumulation has both created new careers made us enormously more productive – we not only have a wider range of vocations to choose from but work far fewer hours.

Can government “soften the blow” when all these candle-makers lose their jobs?

In today’s world, the government would probably try to subsidize the candle or lamp-makers when their chief product became outdated. What would that subsidy accomplish? It would save the candle-makers jobs – but it would cost the jobs of everyone who stood to benefit from the increase wealth that came from cheaper lights. In the short term, the candle-makers might benefit – but in the long term, they would lose too, since they would lose the new, higher paying jobs the could have making electric lights and the new products the cheaper lights would allow consumers to afford. Meanwhile, the Thomas Edison’s, Graham Bells, Thomas Moore’s, and Bill Gates’ would be too busy working to pay off taxes to have the time or money for research.

Of course, we know that these inventors and entrepreneurs succeeded. But how many didn’t because they never got their first break in the field because of a minimum wage, or gave up before they tried because the red tape was too much, or the taxes too high, or they knew that the old, outdated industries would use the government to tax and regulate them out of existence? The real tragedy is that we will never know.

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