Government or not? A review of Intellectuals and Society by Thomas Sowell

This recently published book (2010) makes a very thorough case against government action of most any kind, with the exception of war. I spent over an hour looking through Sowell's latest book at Borders. The blurb inside the jacket caught my attention because it mentioned how intellectuals influence our democratic process by shaping the thinking of the electorate, rather than directly persuading elected officials. I saw this as a significant insight into how our system works. I extend the theory to any media person with a large audience, the impact of their ideas is greatly amplified. Rush Limbaugh could be an example. A good communicator with a big audience has diproportionately expanded political speech, similar to the expansion of speech rights for corporations under the new Supreme Court ruling. I would argue that the media figure actually has greater power than the corporation. Remember the clashes between GOP chairman Michael Steele and Rush Limbaugh over which of them speaks for the Republican Party?

We have all understood how big business and lobbyists are dominating our political debate and many of us see this as very bad for our nation. But I haven't heard much discussion about the great influence of the very small minority of opinion shapers. So I was disappointed to see that Sowell turned from what could have been a full analysis of this phenomenon and instead chose to pursue a one-sided attack on government. That said, he makes some very good points that should give pause to anyone attempting to govern. There is no question that history is full of examples of unintended consequences, government actions that backfire and make the situation worse, and "public intellectuals" being proven totally wrong by unfolding events. Sowell lists these out with relish. It is a truth that we cannot generally see weaknesses in our own beliefs. People with different convictions are only too happy to point these out, and we can learn from them. Sowell is not immune to this, he sees none of the failings of his own hands-off dogma. I will point these out and show that his overall conclusions are incorrect even though much of what he says is true.

One of the main arguments of "Intellectuals and Society" is that there is far more intelligence distributed among the many actors in the market than can be contained in a small group of experts. This makes sense in a certain way, and is really just a restatement of the Adam Smith's invisible hand. Yet we have an example right before us in recent history where the invisible hand guided market players to make extremely risky loans against no collateral. I have heard Wall Street experts describe how in this climate even prudent managers were basically forced to participate because if they didn't they would be outperformed in the short term by those who did, due to the bubble economics at play. In fact, any bet against the bubble would be impossible to collect, since if you were right then the counterparty to the bet was bankrupt. So experts may frequently be wrong, but the market can also be "wrong", or at least lead us somewhere we don't want to go.

When experts attempt to tinker with complex systems they can easily cause big problems, sometimes bigger than the problem they're trying to solve. Sowell uses this to argue against intervening in the system. Taken to the extreme, this means essentially no government. But what is government other than a very greatly expanded version of a group of people combining forces for greater efficiency? If a neighborhood gets together and decides to take care of their own garbage service to save money, this takes some organization, a group decision, and a willingness to abide by that decision. We accept leadership and top-down decisions in the corporate structure (and all of us who have worked in this environment know how disconnected from day-to-day reality these can sometimes be). Yet corporations can have great success being guided by an elite at the top. Believe me, I'm very much in favor of keeping things simple and keeping an organization lean and small. But does that mean that you should forgo any consolidation of forces to protect individual freedom? This is the trade-off. If you never want someone to tell you what to do, then you are reduced to a lone-wolf status, with no benefit from others resources or know-how. I am arguing that good government may sometimes tell you what to do, but you are getting a great benefit from its efficiencies and combined resources. (I know the idea of efficiencies and government in the same sentence seems ridiculous, but bear in mind that we have a huge country here and so obviously there is a fair degree of waste in this process when you consider the many levels of government involved).

I would grant that our government is too big and too centralized, so we can easily find problems with it. I would be happier with a much more local level of organization. However, this is what we've got, I don't think that means that it is useless. I don't think it means that we would be better off with nothing.

Fanaticism is more destructive than extremism

Normally we seem to apply these terms to religious people in the non-Christian world. I am talking about a particular home-grown example I saw on last night's Charlie Rose show. The guest was former U.S. Representative and House Majority Leader Dick Armey. Armey is currently active as a leader of Freedomworks, a political organization that is a significant backer of the Tea Party movement.

I had never heard Dick Armey speak before, I only knew him by reputation. I must say that he turned out to be more intellectually honest than I expected, and in many ways this makes him scarier. Let me elaborate: I expected him to use any argument that was convenient as long as it supported his anti-Obama attacks. Instead he turned out to be remarkably consistent in his opposition to rules and government of almost any kind. He really believes this.

Armey holds extreme positions on personal liberty and the (lack of) need for government. He objects to almost any rule that would regulate personal behavior, with a few exceptions. He sees government's role as mainly enforcement of property rights and maintaining a stable currency. This puts him way over on the fringe of our political spectrum (maybe not among economists and pundits, but at least speaking of the general populace) but there is a sizable group with him. What I don't like is that he sees anyone who believes otherwise as a danger to the American way of life, and feels they must be stopped. This is fanaticism.

There is something wrong with holding a belief so strongly that you don't consider that you might possibly be mistaken, and that anyone who disagrees is unfit to govern. Charlie Rose called him out with outrageous quotes from speeches he made at CPAC (a recent far-right political convention) and he stood solidly behind those statements. These were things like saying that almost every official in Washington aggressively hates the constitution.

We are a democracy of many different types of people and belief systems. Any kind of government is by definition a compromise. This fanatical allegiance to a single idea leaves no room for any compromise and by nature is anti-democratic.

Signs of change

Update: Oregonian writer/associate editor David Sarasohn had an interesting column in Sunday's paper observing that the voting on the two tax-increase measures did not follow the usual demographic of solidly opposed throughout the state and solidly in favor in Multnomah County (the Portland area). In this case the non-Multnomah County votes were opposed by a slim margin on one measure, and I think actually in favor on the other.
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Something very surprising happened yesterday: voters in Oregon passed two tax increases, upholding action by the State Legislature, raising 750 million dollars in order to balance the state budget without further cuts.

The two ballot measures passed by solid margins, along the lines of 55% to 45%. I have lived in Oregon for 30 years and I expected both measures to fail. The normal way it works around here is:

slightly progressive bill has early support

corporate money runs scare-add campaign

bill narrowly or solidly defeated

This time the same script was followed but with different results. I should say that these tax increases were in my opinion quite modest and no great hardship, and that significant cuts to state spending were made to complement the added tax. To me this seemed fair, and I view it as a reasonable adjustment of financial burden. I should also disclose that I work for the state and that I do not have to pay either of the taxes. I have a friend with a small business who is affected, and he still voted for them.

So what was different this time? As I said, based on past experience I had little hope that these would go through. My answer: I think the electorate is willing to hear some new ideas, and with high unemployment in Oregon, a little more desperate than in the past. They don't want state services further slashed because many more of them now depend on those services.

Let me also point out that what happened in Oregon is pretty much the opposite of what happened in Massachusetts when Scott Brown defeated the Democratic candidate for Ted Kennedy's Senate Seat.

The real issue: we need to value truth

I have mentioned before that our political system is non-functional, that we are not able to have productive, intelligent debate about the issues, and that something needs to change if we ever expect to deal with the many problems our country is facing. You could put this another way: why is it that a country with all the advantages of America - an open society, great wealth, the most powerful nation in the world, the only remaining superpower - has a social structure significantly poorer than the other developed countries, an infrastructure unprepared for higher energy prices, and is bogged down in two wars with no end in sight?

I have been reading George Soros' "The Age of Fallibility"; he has given this question a great deal of thought. Soros pins the blame on a lack of regard for truth. This resonates with me because it explains so much: how come the media and politicians are allowed to steer the public debate into meaningless side-tracks and frequently present a picture that is an outright lie? Why do we fall for it again and again? Now I understand why pundits like Paul Krugman and Glenn Greenwald are so frustrated. I understand now that we cannot expect logical outcomes and behavior until we deal with the root problem.

George Soros is quite an interesting character. He has a deeply philosophical approach to life, it might not be what you would expect from a hedge fund manager. Indeed, his philosophy and life experience have formed the basis for his approach to financial speculation. He lived under Hitler's Nazi government as well as the Soviet Communist government, so he has seen the result of totalitarianism and of ideology dogmatically and relentlessly pursued. The key to his philosophy is what he calls "reflexivity", which is the idea that reality can never be perfectly understood because your own actions and thoughts and the actions and thoughts of others alter reality. This should lead you to realize that you may be wrong, i.e. you see your own fallibility. His ideal of an open society is based on the realization that we are all fallible, no one has the absolute understanding of the truth, and so we should not suppress ideas. He also talks about "far-from-equilibrium" situations, where the normal rules don't work anymore. He has had great success recognizing these times and capitalizing on them.

Why then with a philosophy based on being unable to perfectly know reality, does he value the search for truth? Because the further your actions stray from reality the more likely that reality will at last intrude and you will pay the price.

The philosophy acknowledges that we can manipulate reality to a certain extent. We have seen this in the various financial bubbles, and as someone in the George W. Bush administration said, "we make our own reality". This can be true to a point, but eventually the Iraq war looked unsuccessful even to those who championed it.

The American public, says Soros, is too easily manipulated. We value success too much in this country, and tend to have an end-justifies-the-means attitude. We are not as concerned as we should be about the truth and reality. This should be our focus if we hope to change our country.

Where we stand at the end of 2009

UpdateII: President Obama should also get credit for engagement with Iran and the Muslim world, something that is politically risky at home but does great good for the U.S. image in the world and steers us away from yet another ill-chosen confrontation. Also, under his administration the EPA has begun taking on climate change, a very significant development.

4/17/2009: "The Environmental Protection Agency on Friday formally declared carbon dioxide and five other heat-trapping gases to be pollutants that endanger public health and welfare, setting in motion a process that will lead to the regulation of the gases for the first time in the United States."
http://www.nytimes.com/2009/04/18/science/earth/18endanger.html

In summary he is doing some significant good. I'm not sure if this outweighs the bad of the decision to escalate in Afghanistan. And the economic situation is a whole other level of problem, something which demands much more than we usually expect from a President or from our political system. But here it is - it must be dealt with.
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Update: Forgot to also give Obama credit for the stimulus which although too small, kept us from immediate bad times. Also should have mentioned that the health care bill would be a huge accomplishment in normal times, but right now it is not as significant because of the economic threat. Should have also pointed out that the bold economic and structural action required, which Obama has not taken, would not have been taken by anyone who could get elected President. Remember that FDR had 3 years of inaction and its consequences before he came into office. This greatly discredited the argument for inaction and gave a strong argument for large-scale intervention.
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What a year it has been. The scary financial events of the fall of 2008 were not matched in 2009, but U.S. government spending and intervention this year seem unprecedented in modern times. Barack Obama begin his presidency with promise but after a year of what I would call Washington business-as-usual I am convinced that he will not be an agent of change. He and his administration have behaved as politicians always behave, trying to insure future power for their party and collaborating with big business in exchange for financial support. That is not to say that it doesn't matter that Obama was elected president instead of John McCain. It appears that we are going to get health care coverage for many more people thanks to the flawed health care bill now in the works. This is definitely good, although much more work is needed here to control costs. The health care bill is the only difference so far between an Obama presidency and a potential McCain presidency; the troop increase in Afghanistan seems like McCain's policy, and on most other fronts Obama has continued the policies of the second half of the George W. Bush administration, with some exceptions for things like the Bush tactics of using Justice Department appointments as a partisan instrument or actively suppressing scientific findings. John McCain would also have ended these abuses.

At the end of 2009 we remain waiting for the full effects of the 2008 financial meltdown. These have not been put on the books yet, so we may have the false sense that things are turning around. While the workout seems to proceed very slowly, it must happen eventually. I think we will start to see some of it this year. There is no way you can lose a trillion dollars of real wealth without some change in standard of living. Some people have already experienced this change, but we are ultimately headed for a national leveling.

The saving grace about having Barack Obama as President is that he does seek input from a lot of people, including Paul Krugman. Krugman was quite impressed with Obama's ability to understand an analysis. If things get bad enough he may change his approach. So far he has listened to people like Larry Summers and has not understood how bad our situation really is (if he did understand he would have taken bolder action).

Unfortunately our country has forgotten the scare of 2008 and has lost the sense of desperation that helped us be willing to listen to new ideas. Instead we have polarized along out-dated lines of conflict based on economic schools of thought, of all things. This must be contrived, I think the real conflict is more of a cultural one: conservative-religious vs. non-religious (or even mainline protestant or socially liberal catholic), or intellectual elites vs. working class average Joe.

Because of this polarization and the intensity of hatred that it generates, President Obama is reviled as a would-be-communist for very moderate increases in the power of government (like the health care bill), and is given no slack for the big government intervention that was necessary and done only because of the severity of the economic calamity. Instead this is also held against him, although it is clear that he never would have done this in normal economic times.

In this climate, the bold action that is needed is politically impossible. That is, unless things get bad enough; then I think it becomes possible again - remember the fall of 2008.

If you don't like economic stimulus, what do you do about unemployment?

Just to be up front about this, I favor a WPA-type jobs program (also suggested by Paul Krugman). I would go further in saying that I think it should be for something like rebuilding our passenger rail system, something that will give us a big pay off and make sense when the future seems to hold increasing oil prices.

Now maybe you're concerned about the deficit, or just believe that government should not be involved in the economy except for expanding or contracting the money supply. I would argue that while the deficit is a very bad problem and that government intervention is generally bad, now is a time when we really have no choice. Now is one of those rare times when the government should be very active. The deficit concerns me more, but I feel that unless we want to write off our society and life as we know it, we have to do something.

I would be interested in hearing arguments/proposals for dealing with unemployment that do not involve stimulus spending. If Republicans end up controlling Congress in 2010, this is the problem they will be faced with.

If you don't think anything should be done about unemployment I'd like to hear how this will work. What will prevent a continued downward spiral of the economy as more and more consumers are unable to consume? And what about the people who are unemployed and now homeless on the streets. Doesn't our society have some duty to them? And if not, they at least would be a great source of disorder and social strain.

Reagan was right, but he did not get elected in 1932

Ronald Reagan won the 1980 Presidential Election by campaigning against government. After almost 50 years of uninterrupted government growth had created a bloated beauracracy, his argument that "government is not the solution to the problem, it is the problem" had traction. In 2008 Barack Obama was swept into office by a sudden populist desire for more government. When about 30 years of deregulation and hands-off federal policy culminated in a financial crisis that came very close to destroying the world economy, the American public wanted the government to remedy the situation. I generalize here because in both cases there were a significant number of the electorate who dissented from the majority opinion, but in a democracy the voice of the majority of the people does mean something. I suggest that in the United States, this is how our system works. It is ugly and imperfect, leaving many dissatisfied and angry, but we first veer to one extreme and then to the other, with no attempt to correct our course until things get bad enough to force action.

These lurching shifts are due to the way the parties in our two party system have chosen to define themselves, namely Republicans wish to limit government and Democrats wish to increase it. There is no thought in either party of tempering or altering these philosophies as the situation demands. While office holders may govern in a sensible way, they are not allowed to campaign honestly, their constituents demand strict adherence to the party doctrine. So for instance, President George W. Bush bailed out Bear Stearns and AIG, in total violation of party ideology, because it was necessary given the situation. However, a Republican could not run for office promising to do something like this.

I have startling news for you: the people on the other side are not idiots. They have good reasons for believing as they do; their beliefs hold a part of the truth. It's too bad they can't use the other part too. I say this about both Democrats and Republicans, conservatives and liberals.

So Reagan's 1980 policy was right for the time and situation, but it would not have worked in 1932, and he certainly could not have gotten elected then had he run the same campaign. There were problems created by Reagan's policies, as there were problem's created by New Deal policies, and no doubt will be by Obama's actions. But as I said, our system is ugly. It is necessary from time to time to change course, and this is how we do it. While you might not agree with these specific examples, I don't see how you can deny that the continual practice of either party's pure doctrine will eventually lead to catastrophe.