The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Politicians and bureaucrats are notorious for manufacturing euphemisms -- clever but deceptive substitutes for what they really mean but don’t want to admit. That’s how the phrase “revenue enhancement” entered the vocabulary. Some of our courageous friends in government couldn’t bring themselves to say “tax hike.”
“It is difficult to make predictions, especially about the future,” says a proverb often attributed to Yogi Berra. Imagine the world of freedom, or lack of it. Who could foresee the technologies that make our lives so rewarding and convenient? The same technologies have us all under the government’s giant microscope. Thankfully, the brave have turned the microscope around.
In the months since Edward Snowden revealed the nature and extent of the spying that the National Security Agency (NSA) has been perpetrating upon Americans and foreigners, some of the NSA's most troublesome behavior has not been a part of the public debate.
National Treasury Union President Colleen M. Kelly recently described the 2014 IRS budget allocation as “woefully inadequate.” But the agency has not proven itself to be an efficient steward of taxpayer dollars. Here are ten ways the IRS lost the trust of the American people.
It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Given how poorly states like California and Illinois have funded the pension funds for their own employees, one would think that this would stop dead in its tracks any plan to have the government assist in managing private sector funds too. The spate of recent activity, however, suggests otherwise.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The problem for NSA apologist is that when guys like Snowden disclose that the government conducts comprehensive surveillance in ways that would have made 1984’s O’Brien drool, it puts the entire progressive agenda in jeopardy.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The financial world is plodding along like a drunken sailor avoiding debt collectors by keeping no cash in his wallet. It’s not the kind of calm that’s going to last or end well. But the storm will have to wait until after the Olympics.What a game! We’ve never watched ice hockey closely before. But watching […]
“When they come for my gun, they will have to pry it out of my cold, dead hands,” is a common refrain I often hear from the Neo-Cons when there is a threat, credible or otherwise, that the U.S. government is going to take their firearms.And, when I hear this crazy talk, I agree with […]
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
In times of war and national emergency, it’s sometimes necessary to sacrifice civil liberties to secure vital gains in public safety. In those cases, we may have to accept a loss of privacy or freedom rather than invite mass slaughter of Americans.The National Security Agency’s domestic phone records collection is not one of those.Never have […]
President Obama crowed in his State of the Union speech about the economy, even mentioning “a rebounding housing market.” Maybe he was referring to friends in high places, like the seller of Penthouse One in New York, which just closed for $50.9 million, all cash. Millions of mere-mortal homeowners likely wanted to throw something at […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
Amidst all the revelations about how the American people, many of whom are absolutely convinced they live in a free society, have their telephone calls, emails, website visits, and who knows what else under surveillance by their own government, let’s not forget the massive infringements on financial privacy that have gone on for decades.Consider, for […]
Image: ShutterstockBitInstant CEO Charlie Shrem, along with alleged co-conspirator Robert Faiella, was arrested by federal authorities last week for allegedly laundering more than $1 million worth of Bitcoins. This is a tiny amount compared to the largest drug-and-terrorism money laundering case ever. Yet when British bank HSBC was found guilty in 2012 of laundering billions, […]
Do you trust your doctor? Most patients assume their doctor is working in their best medical interests whenever he or she orders a diagnostic test or recommends a particular treatment. Customers might wonder whether an unscrupulous auto mechanic is being truthful when he recommends a brake job or a new transmission. But most patients trust […]
The exercise had an awesome name, inspired by the movies: “Quantum Dawn 2.”On July 18, scads of U.S. banks, stock exchanges and government agencies took part in a digital fire drill — a practice run in the event all of Wall Street came under massive cyberattack.This isn’t the first time banks have come under an […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
So you’ve maneuvered the Obamacare website, plugged in your top-secret information and found out how much you are forced to pay to avoid a fine.And for some of you, it turns out you qualify for a government subsidy — making the premium sound like a bargain. But signing on that line to accept the government’s […]
“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”As the inequality gap grows, there is an ideological battle unfolding in the West.On the one hand, there are those who think government can fix things. It must do more, tax more, […]
On Feb. 7 the United States will once again reach its statutory debt limit, meaning it cannot legally borrow any more money. Since the obvious option of cutting spending to match the amount of revenue that the government collects is off the table for some inexplicable reason, Congress will have to pass a new, higher […]
The New York Times published an interminable article on health care recently. Plenty of facts — how scrupulous are these journalists! — but the article displayed absolutely no comprehension of the basics of cause and effect. I was left wondering about the whole point.The article details how the health care system rewards specialists to an […]
For critics of the surveillance state, it is tempting to see President Obama’s speech a few weeks ago as a partial victory: Prompted by Edward Snowden’s leaks and the public pressure for National Security Agency reforms, he announced significant changes to the program that collects and stores information about all telephone calls. And he promised […]
Why do we let the police power of the state take over and inevitably wreck so many aspects of our life? Why do we tolerate the invasions of our homes, businesses, and bank accounts?
One theory: people find more comfort in the false security that the state provides over the uncertainty of a liberty-driven future.
We want a plan. We want a road map. We want assurance of what tomorrow will bring.
Politicians don’t provide that, but they are glad to promise it. Liberty makes no such promise.
Fine. In that case, if we are to treasure liberty, we need to find a way to embrace, to love, to understand, and to appreciate the beauty of an unknown future. Just because we can’t imagine it doesn’t mean that it won’t dazzle and delight us with creative surprises. How can we develop affection for and confidence in something we cannot yet see?
We need a better understanding of how society evolves. I think I have just the guidebook here.
“The true measure of human genius,” writes Daniel Cloud in The Lily, a poetically dazzling defense of economic freedom, “lies in the fact that we’re able to bring about things that exceed our own comprehension.”
And what is it we cannot comprehend? A future that is always clouded in uncertainty. That none of us know what tomorrow will bring is a universal fact that unites all of humanity.
Cloud has a radical judgment on this condition. He writes that this position of not knowing is the very source of society’s progress, creativity, inspiration, and productive learning. It is also why we need radical freedom to discover and adapt. He urges us to embrace what most people find scary, to learn to love what we do not know and to use uncertainty as our finest tool in building a bright future.
This unusual defense of freed institutions goes to the root of the problem that confronts every intellectual and every society: How can we confront the issue of change? Do we regret it as destabilizing and contrary to rational plans? Or do we welcome it with openness, playfulness and anticipation of learning tomorrow what we do not know today? His conclusions challenge the very core of the social sciences, including mainstream economics and the dominant assumptions about politics today.
Cloud has a most interesting background that prepared him to write this expansion of the case for the free society on themes first taught by F.A. Hayek. Cloud teaches the philosophy of science at Princeton University. Before that, he was the manager of several hedge funds and traveled and worked extensively in China. This book brings together his two loves: entrepreneurship in real markets and high-level philosophy with a focus on biological evolution.
In his business life, he observed how enterprise relies most fundamentally on adapting to unknown conditions: Those who excel at this difficult task are those most willing to acknowledge the limits of their understanding and learn as they go. They make “irrationality” work in their favor. In contrast, the world of academia is packed with people who are loath to admit any absence of understanding because they believe that their knowledge of the world and ideas is complete and fully rational.
This book, then, could be retitled What My Academic Friends Could Learn About Society From Understanding the Real World of Economics. The book is called The Lily by way of reference to the famous passage from the Sermon on the Mount: “Consider the lilies, how they grow: they toil not, they spin not; and yet I say unto you, that Solomon in all his glory was not arrayed like one of these.” As Cloud renders the passage, the lily was not weighed down by a rational plan for its well-being and, for this very reason, adapted and became the most beautiful of all the flowers.
So it is for societies. Free societies beat controlled societies every time. This is not because free societies get more attention and care from the intellectuals and political elites but rather the opposite. The more the intellectuals attempt to think them through and the more the state attempts to provide for them, the more they stagnate and eventually fall to ruin. But societies that are permitted to develop from the internal energy of problem-solving individuals, developing in unexpected and seemingly irrational ways, grow in a manner consistent with the well-being of everyone.
In a passage that is typical of the evocative poetry of this work, Cloud asks:
“Why, exactly, didn’t government of the people, by the people and for the people perish permanently from the earth, despite repeated contests with opponents, from the Duke of Alba to Stalin, who seemed to have everything going for them, who viewed their disorganized, disunited opponents with open contempt? We seem a bit like the Fool, continually stepping off cliffs, but repeatedly borne back up to the heights on the wings of angels, fighting off armored knights with a wooden stick, casting our bread on the water and getting it back a thousandfold, at our wisest when least sober. Is it pure dumb luck that keeps saving us from our own stupidity, or is there something else going on here, some new dispensation?”
This theory heightens the role of what the author calls “play” in the course of social and economic development. People must be free to try and fail, to learn on the job, to improvise and adapt on the fly, to find new ways of doing things that completely depart from the plan and tradition. To be free to do so becomes essential.
“To whatever extent an unfree society necessarily depends on the fear of punishment, rather than the desire to impress as a motivation for good performance,” the author writes, “willingness to make mistakes or introduce playful variations is likely to be less, and the incremental evolution of complex new skills correspondingly more unlikely. Nobody wants to be shot for trying something frivolous; Stalin was very successful in eradicating that kind of boldness.”
He applies the model to the issue of capitalist firms. Management textbooks tend to map out plans for how firms should work. But the plans are next to useless so far as this author is concerned. How do you keep large organizations from stagnating in the same way that societies ruled by large states die? By the freedom and willingness of employees and managers to try new things and to come and go. Those firms who attract and retain great talent — and that includes creative and playful talent — are the ones that thrive, while those that cannot tend to shrivel, become technologically backward and die. This determines which institutions flourish or decay.
The Cloudian perspective helps illuminate what makes great entrepreneurs last and last. It has nothing to do with the alleged power of capital. Capital can vanish as quickly as it came. “How do people make abnormal profits in markets? By being in the minority and being right and being persuasive.”
The real stickiness of wealth in certain hands has to do with the speed at which competitors learn:
“The real reason the entrepreneur’s profits don’t quickly get arbitraged away is that it takes people who aren’t quite as creative a long time to realize that he is not crazy and begin to imitate him, and by that time, he’s already moved on to some other uncertain project on the basis of some new keen hunch. You become Bill Gates or Steve Jobs or Warren Buffett by doing this over and over and being right almost every time. People seldom get rich by just correctly measuring a risk; the real source of economic profit in a technologically dynamic capitalist economy is individual intuitions about objective uncertainties.”
The ultimate example of the institution that forbids coming and going, experimentation and play, is the state:
“The economic planner who wants to actually succeed in rationally planning an economy has to first suppress exactly the sort of negotiation individuals might be able to do if they weren’t chained to their desks, because he has to get people to follow the plan, to stay where they are and do what they’re told. This suppression seems to bring the evolution of institutions and skills to a grinding halt — with grave consequences a few years or decades down the line.”
The state always favors the rational and certain plan, rather than permit the unforeseen in an environment of freedom. For this reason, states oppose what they consider the waste of competition, business failure, research and entrepreneurship.
“In a world where we all just cooperated like sensible people, there would be no real room for conversations with two sides, and that is what the political rationalist always finds himself trying to eliminate. To keep things rationally optimal,” writes Cloud, “he needs to stop social evolution in its tracks, but that brings him into direct conflict with the things that make us human.”
This tendency becomes the source of failure. Social evolution can never been planned or designed:
“Planned markets are sick markets, markets that are always in crisis, because their most-important social function — facilitating selection between competing pools of capital on the basis of what way of doing things in the real world works best in practice, distinguishing between real capital formers and fools — has been disrupted by the planner’s clumsy interference. When the state tries to plan a market, it must try to make clever contrarians into mindless lemmings who follow where they are led; but then they become useless for their old function of picking good risks.”
Sometimes it can be hard to see the costs associated with state planning, simply because the changing and advancing that comes with freedom is not permitted to occur and we cannot observe what fails to happen:
“As long as you’re just installing old technology invented by someone else, a planned economy and a managed society can be made to work, but as soon as you reach the technological frontier, as soon as the free play of endogenous innovation is genuinely needed to maintain the pace of growth, as soon as you actually have to cope with real uncertainty, the whole thing is likely to grind to a halt at some arbitrary point on the tortoise-blanket-pea landscape, and begin to die as the tortoise moves away.”
Even worse and more dangerous are the frenzied attacks on commercial society that keep reemerging in our history — the loathing of the entrepreneurial class that leads to utter destruction. He cites Cambodia as a case in point: the application of political rationalism gone mad and leading to unthinkable bloodshed and extinction of society itself. He issues a warning that people have not yet learned from these experiments in hyper-rationalism in politics and that no people are immune from such frenzies.
This is professor Cloud’s first major work, but it follows a lifetime of exciting experience in the two very different worlds of capitalist speculation in emerging markets and the staid and static world of academia. He brings the two together to urge intellectuals to learn from the experience of real-world markets and for market participants to gain more confidence over their primary role of embracing a changing and developing society. To this end, he uses many tools from economic science to create biological metaphors about the philosophy of society from the ancient world to modern times.
The prose style is like nothing you’ve seen from a thinker of his caliber. It is rhapsodic, imaginative and poetic. His erudition is often startling. His vision is refreshing and new. You can’t escape the feeling that he has put his finger on something very important, very profound. Here he acts as our teacher to help us learn to love and appreciate the very point about freedom that most people have considered regrettable. He teaches us to love what we do not yet know.