DMI Omnibus Update on Disraeli’s Birthday

Earl of Beaconsfield

While research and writing at DMI continue unabated, I have been remiss at sending out update notices for several published columns over the last several months. And so without further delay — and in honour of Benjamin Disraeli’s 208th birthday! — here are links to recent postings at the Institute of Economic Affairs and the Adam Smith Institute to get you caught up:

• ‘The organic roots of oaks and free markets’ takes a tongue-in-cheek Telegraph column and illustrates why the Conservative party’s modern icon of an oak tree is an excellent exemplar of the organic dynamism of free markets, and why a return to the ‘Thatcher torch’ — representing the light of liberty — is a bad omen if taken to mean more robust government intervention in the economy.


• ‘Tax Freedom for the Poor!’ is an appeal to raise the threshold at which the low-paid begin to pay income tax — allowing them to keep more of what they earn will build their self-respect and act as a work incentive, while at the same time curbing the extent of government redistribution. (A second theme of this posting is that while the poor who earn less than the threshold will necessarily be removed from the income tax register, they nevertheless still do pay any number of ancillary taxes, which may itself be considered a good thing: An esprit de corps is fostered with their fellow citizens while making them conscious of the true costs of government.)


• ‘Without capitalism, can there be culture?’ argues that we owe much of our cultural attainment because of the free market and the division of labour which it encourages — not despite of them. (I will admit that other factors contribute to culture, too.) This avenue of defence will be familiar to students of Adam Smith and to admirers of Josef Pieper’s small classic Leisure: The Basis of Culture.


• ‘America’s Chief Magistrate and the Spirit of ’76’ looks at American politics from the perspective of the Founders’ vision of individual liberty and limited government. Intended to be a rather minor position, the Presidency has assumed powers never intended either for the Chief Executive or the Washington establishment. Intrusions into the actions of individuals and the marketplace are hallmarks of ‘government failure’ that only a spirited return to constitutionalism can avert.


• ‘Can Americans afford compromise on the fiscal cliff?’ demonstrates that, à la Laffer Curve analysis, if higher tax revenues are the object, then raising the marginal tax rate on the wealthy is not the answer; though Aristotle taught that compromise as a mean between deficiency and excess is oftentimes the route to realising the common good, when the options are between right and wrong there is only one option. (Cross-posted at Public Finance International.)

Well, that’s a wrap. A reminder, too, to join the discussion on DMI’s Facebook page (please sign-up if you are not already a member) and tell your friends and neighbours about us.

Wishing you a very Merry Christmas, Season’s Greetings, and all best wishes for 2013!

Smith’s ‘Division of Labour’ Is Source of Society’s Wealth, Mr President, Not the State

In a revealing passage from The Wealth of Nations, Adam Smith wrote: 

Political œconomy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects; first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the publick services.  It proposes to enrich both the people and the sovereign (IV.1).

For Smith, it is obvious that wealth is created by civil society — especially through the division of labour — which in turn sets aside a portion to the State, for those public amenities deemed necessary to the common good.  In a recent speech, however, the American president overturns this relationship, suggesting rather that the State is the source of wealth, from which a dependent citizenry seeks its sustenance and survival. 

Empowering the political class with such influence — even if only in its own self-aggrandising imagination — is a recipe for trouble, and much the cause for Smith’s writing Wealth of Nations, as he argued against the protectionist and mercantilist policies which marked the economic landscape of his time.  Indeed, Smith’s classic text has many contemporary lessons for those who once more aim to put the hierarchy of political economy back into proper perspective. 

Click here for my full argument at the Adam Smith Institute.

The Diamond Jubilee: A Cheer for Constitutional Monarchy’s Restraint on Government

Queen Elizabeth II’s Diamond Jubilee has encouraged me to reflect on one of the key tenets of public choice theory: The principle that politicians and bureaucrats are the same self-interested individuals in their public capacities as in their private lives. One virtue of constitutional monarchy is that it serves as a brake — however imperfectly — upon political aggrandisement.

From a quick survey, the reasons are twofold. First, politicians are jealous of their political powers to aggrandise all within their ambit, so embellishing the royal Head of State (unlike the practice of the American presidency) benefits neither them nor their masters, the electorate. Second, the Westminster parliamentary system itself forbids the prime minister is assume de jure (if not always de facto) all of the appurtenances that pertain to the Head of State.

On a more theoretical basis, Austrian economist Hans-Hermann Hoppe has examined the effectiveness of both monarchies and democracies to restrain the growth of government and, of the two, he credits the former with a better relative record for preserving individual liberties and fostering an atmosphere of economic prudence.

All of which leads me to wonder why classical liberals are so often enamoured of the republican ideal. One can understand their inability to appreciate a Tory reverence for tradition and continuity, yet why do they so cavalierly dismiss the public choice arguments which demonstrate that limited government in the age of the Welfare State is held hostage to democratic fortune?

To all who see in politics the culmination of human effort and the end of all earthly activity, this essay is written in tribute to the Roman slave who, while accompanying the conquering general in his chariot, held a wreath of laurel over the commander’s head while whispering into his ear, ‘Remember, you are only a man...’

Public choice theory reminds us to-day that in the absence of mindful supervision, the State and its servants are liable to aggrandise themselves while encroaching on our liberty.

Click here for my full argument at the Adam Smith Institute.


Commemorating the death of Sir John A. Macdonald (1891)

From Doctrine to Detail: Why Conservatism Is Doomed

In this week’s essay, I examine some of the implications for British Toryism arising from recent local elections — extrapolating from a Telegraph column by Ed West, ‘Conservatism is doomed. Head for the hills’.

West looks at three factors affecting the decline of the Conservative party: its loss of identity, the voting pattern of its supporters, and the relationship between its MPs and the electorate. These are key ingredients of study for public choice theory, and I argue that one step in the right direction is for Toryism to return to first principles. Paraphrasing Sir Ernest Benn, a Conservative renaissance must begin with a return from detail to doctrine.

Click here for my full argument at the Institute of Economic Affairs.

Electoral High-Jinks Mar Canadian Politics

A national controversy that first reared up in late February continues to simmer in Canadian politics: Revelations that, during the federal electoral campaign in May 2011, numerous constituents across the Dominion were subjected to harassing telephone calls in the late of night and directed to non-existent polling stations on election day.

These are disconcerting developments, regardless of the political parties involved and the final outcome of the ballot results. Nevertheless, for students of public choice economics, such shenanigans are unsurprising; the gains from winning high office are great, and never more so in the age of the all-encompassing Welfare State. When the possibilities for self-enrichment and aggrandising one’s friends are so tempting, is it any wonder that our political class behaves so badly?

Click here for my full argument at the Institute of Economic Affairs.

The Global Economics of Corporate Tax Cuts

With the burgeoning of the modern welfare state, taxes on corporations are widely accepted as one of the least offensive ways to raise funds to pay for them. But is this true?

Corporations — and, more accurately, their fiduciary officers — are self-interested organisations, which pass along tax burdens in the form of increased prices to consumers; where competition limits such price flexibility, costs are borne by employees or by reductions in capital accumulation.

As students of the Laffer curve theory know, too, raising taxes does not necessarily mean increased tax revenues; as the wit says, oftentimes less is more.

Moreover, in to-day’s globalised economy, nations seeking to attract businesses must compete with other countries by offering levels of taxation that are conducive for enterprises to set up shop within their borders — and to remain as satisfied tax-payers, untempted by the allure of foreign tax incentives.

Recent Canadian economic news — both in relation to arguments for higher corporation taxes and the revenue generated through lower taxes — is instructive.

Click here for my full argument at the Adam Smith Institute.

Can the GOP Defend Capitalism?

No doubt like many non-Americans, I too have been caught up in the drama — farce? — of the Republican party’s race to select a presidential candidate to face Barack Obama in November.

Many political issues are of especial concern for conservatives: limited government and fealty to the, respect for States’ and individual rights, and defence of the Republic. One of America’s more immediate (and seemingly more intractable) problems concerns its growing debt burden, a situation made worse by continuing billion-dollar deficits, high unemployment numbers, and unfunded liabilities (principally Medicare, Medicaid, and Social Security).

On all of these issues, though, the Republican presidential contenders — save for one individual (with some candidates better or worse, depending on the issue) — are showing themselves woefully inadequate. Recent debate on reviving America’s economy highlights the GOP’s weakness in understanding the philosophy of capitalism, let alone crafting a pro-marketplace campaign that will resonate with voters.

Click here for my full argument at the Adam Smith Institute. (My appreciation to Sam Bowman, Director of Research.)

Mapping the Dangers of Competitive Harm

Last week a Cato Institute report caught my eye, about a French commercial court awarding damages to a map-maker for losses incurred through potential customers’ use of Google Maps.

Serendipitously, at the time I was reading Richard Epstein’s Free Markets Under Siege, where he examines ‘competitive markets and compensation for competitive harms’. In the free market system, sellers compete for buyers, who base their purchases on such qualities as price and quality. If the seller can meet consumer demands, free exchange will occur; if not, consumers will go elsewhere and the seller must either improve his business model or close up shop.

Yet the practice of competitive harm means that successful businesses must compensate businesses that are unable to attract trade — a practice that, if followed to its logical conclusion, means that the dynamic free market must ultimately succumb to the deadened economics of socialism.

Click here for my full argument at the Institute of Economic Affairs.