Archived Posts July 2009 | Acton PowerBlog

Blog author: ken.larson
Friday, July 31, 2009
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In a Wall Street Journal article titled “The Great Philanthropy Takeover” Arkansas based writer David Sanders reports on a recent conference of the nationwide Council of Foundations in his home state. Sanders’ article aligns with Michael Miller’s blog of July 30 “Healthcare – Don’t Forget The Morality Of It” and deserves your attention because of the author’s conclusion that the Obama administration “is beginning to nationalize another sector of the American economy.”

How could that happen? Well it would happen because many of those folks who head up non-profit groups that rely on OPM — other people’s money — have a tough time identifying and convincing donors to give them some. Obama is offering an alternative: Bundled packages of tax payer’s money for “shovel ready” community help projects. If you’re a struggling non-profit with an iffy mission, it’s the greatest grant available.

And Obama knows about grants because when he was a community organizer in Chicago he and his associates, including William Ayres, were able to get over $120 million including matching funds from the Annenberg Foundation to spread around to their constituents. Eventually the Annenberg people cut off their funds because no good could be attributed to the use of all the money they’d supplied, but you get the picture.

Notwithstanding the deceitfulness of that Ayres-Obama Chicago enterprise, we generally should be wary of Greeks bearing gifts.

At the NCEA convention earlier this year I introduced and listened to a former lobbyist give advice to a room full of Catholic educators on how to get a piece of the stimulus money Obama had just announced would be available for schools. Just like Larry Arnn at Hillsdale College in Michigan and the American Council of Trustees and Alumni, I’m distrustful of the influence government has on curriculum and the mission of our schools and worry about the federal government’s intrusion into any enterprise. But at the NCEA event, the room was all ears to the application tricks being offered them.

That’s also what happened at the Foundation meeting in Arkansas, where as Sanders writes:

Carlos Monje, policy director of the White House’s Office of Social Innovation and Civic Participation, briefed the conference on how President Obama, who came up through the ranks of community organizing, wants to “change the ethic of service” for the country. Key to the administration achieving its desired results? Rewarding model nonprofits with federal dollars—seed capital—from the new $50 million “Social Innovation Fund.”

That phrase “ethic of service” calls to mind many things that hang on the tenets of faith to which Christians pay mind. But as we are consistently reminded by the scholars at Acton Institute, our charity is best left to the individual.

As Acton’s core principles state: “The government’s primary responsibility is to promote the common good, that is, to maintain the rule of law, and to preserve basic duties and rights. The government’s role is not to usurp free actions, but to minimize those conflicts that may arise when the free actions of persons and social institutions result in competing interests.” You might ask in this context who would declare a non-profit a proper “model” for funding or determine appropriate “social innovation?” If you said Mr. Monje you’re probably right.

Making the case to individuals for your “good deed” request is not an easy task, but it’s the only way we should be promoting the kind of Charity explicit in the ministry of Jesus Christ.

As I tell my friends in education, “Watch out for the serpent in your tent. Watch out for that Trojan Horse.”

Samuel Gregg, director of research at the Acton Institute, reflects on business ethics in his recent commentary.  Gregg explores the presence of business ethics courses in business schools; however, with the large presence of business ethics courses we still have a lack of ethics present in business.  The lack of ethics in business became a major factor in our current financial crisis.  Gregg further explains that business is not just about management or the business ethics that are taught, but businessmen and women need to also learn stewardship:

Business, however, is about more than management. It also involves stewardship (inasmuch as managers have moral and fiduciary responsibilities to their clients and investors) and entrepreneurship – the actual creation of wealth. Many business leaders would be shocked to discover that studying entrepreneurship remains optional in many business schools today.

This underlines another problem for some business schools. It’s not clear that all business professors are convinced of the morality of economies based on free enterprise, limited government, and rule of law. This ambivalence cannot help but be communicated to their students, which they take with them into the marketplace. It is very difficult for business schools to teach the moral habits associated with successful business when many business professors regard private enterprise and markets as, at best, useful but morally-insignificant phenomena.

Gregg also makes references it Pope Benedict XVI’s new social encyclical, Caritas in Veritate, to demonstrate the need for morality in business:

Hence, though Benedict speaks approvingly of the rise in ethics-consciousness in the worlds of finance and business, he cautions that simply attaching the label “ethical” to a given enterprise tells us nothing about the actual morality of its practices. What ultimately matters, the Pope affirms, is the precise vision of morality – and therefore the understanding of the human person – informing not simply a particular business, but the entire economy (CV 45).

In his commentary, Matt Cavedon, communications associate at the Acton Institute, addressed new taxes that are being proposed to combat the high obesity rates in the United States and to provide financial support for health care reform.  The new taxes proposed to help fund health care reform will begin to tax what Congress deems junk food or unhealthy food.  Cavedon exposes the hypocrisy fostered by taxes on such junk or unhealthy food:

In “The Sin Tax: Economic and Moral Considerations,” the Rev. Robert A. Sirico, president of the Acton Institute, has argued against the idea of taxing sins to pay for public services. If the government relies on taxes on unhealthy foods to pay for health care programs, how can it both fight obesity and maintain steady revenue? Sirico says it cannot: “Under a sin tax, the state finds itself professing to discourage certain behaviors while relying on their continuance as a source of revenue.” The government may say unhealthy eating is bad, but it would rely on it for tax money.

The problem of hypocrisy leaves aside the question of whether government is qualified to be the moral police officer of our pantries in the first place. Sirico points out that “the government’s sense of morality, especially when it is influenced by excessive power, is often at war with traditional standards and common sense.” With food taxes, eating apple pie would become more of a punishable sin in the eyes of the government than cheating on a spouse.

Cavedon further explains the hypocrisy of taxes on junk and unhealthy food while also articulating the moral disorientation of such taxes.  “Obesity is a problem” Cavedon states, “but higher taxes are not the answer.”

Now that the saga of Dr. Henry Louis Gates Jr. and Officer James Crowley has moved to the back-burner, let’s look at three less obvious lessons from Skip and Jimmy’s not-so-excellent adventure.

Understand that government is the use of legitimate force. Not necessarily “legitimate” in terms of morals and ethics, but legitimate in terms of what is legal. Police officers have moral and legal authority to use force in order “to serve and to protect”. At times, they may exceed or fail to exercise their authority. But the nature of their job implies a readiness to apply force.

It follows that one should be on their best behavior around the police. It doesn’t take a Ph.D. to know that yelling at police officers will increase the probability that one will be arrested. In this case, even if Professor Gates was treated improperly, he clearly had it within his power to avoid being arrested.

At its root, government policy is about the use of force—whether to regulate behavior, to redistribute income, or to restrict mutually beneficial trade. We can miss this point by focusing on a democratic process where we seem to exercise tremendous choice over those who govern us. Or we can underestimate this point by assuming that government is typically benign.

President Obama’s word choice tells us something about his worldview. His now-famous decision to speak to the specifics of the Gates case was an over-reach of startling proportions.

It was surprising in that Obama “spoke stupidly” when he is usually so careful—often painfully so—with his words. (As a corollary, perhaps it should worry us that he values “diplomacy” so much, but is willing to speak out-of-pocket on awkward and sensitive issues.)

It was odd in that he is the Commander in Chief and chooses the Attorney General to be the chief law enforcement officer in the United States. A president’s default position should be to support the police.

It was sad in that our “post-racial” President botched a key moment for race relations. Instead of sticking to eloquent but general remarks about the underlying issues, Obama extended his comments to inappropriate specifics that created a firestorm and deepened unfortunate stereotypes.

Finally, it seems revealing in terms of what he thinks about his powers of intellect and assessment. This connects to the current debate on health care. In both cases, the President believes that a federal solution is the best way to handle problems. Instead of deferring to the locals who knew far more about the Gates situation, Obama presumed to be able to speak with expertise. In health care, he imagines that a single, grand, federal experiment in a remarkably complex and important arena is preferable to 50 state-wide experiments.

Everyone discriminates.

Labor economists distinguish between “personal discrimination” and “statistical discrimination”. Interestingly, both stem from a form of ignorance. The former is a subjective preference rooted in a socially unacceptable form of ignorance. A person doesn’t like a group of people out of bigotry.

The latter is more interesting because it is based in the reality that all of us make important decisions with imperfect and costly-to-obtain information. Out of varying degrees of ignorance, we make choices with the best information available to us at reasonable cost. Often, our best information about individuals involves their affiliation with groups. So, we stereotype from what we know about a group to members of that group. By definition, all of us discriminate in this manner.

Consider a pool of job applicants. The firm has relatively little information about candidates. So, they generalize from what they do know: where the applicants went to school, their GPA and field of study, the quality of reference letters, job experience, and so on. None of those are definitive; they are only somewhat predictive. For example, will someone with a 3.8 GPA be a more productive worker than someone with a 2.8 GPA? Usually, but not always.

Think about the term “prejudice”. Taken literally, it means to “pre-judge”, implying that someone is making a decision with too little information. At times, such decisions are necessary—and hopefully, people do the best they can with the info they have. At other times, it implies an unnecessary rush to judgment.

In this particular moment of crisis, both parties—Gates dealing with the police and the police dealing with him—were making important decisions with (very) limited information. By definition, Gates and the police were engaged in stereotyping. Of course, it is ironic that Gates did this while self-righteously accusing the police of doing the same. And it is absolutely fascinating that, by their training, both Professor Gates and Officer Crowley are “experts” on racial profiling.

Sadly, in judging the events from the outside, many people have been unnecessarily quick in a rush to prejudicial judgments in favor of Professor Gates or the police. The irony here is greatest among those, including President Obama, who have pre-judged by accusing Officer Crowley of discrimination.

One of my colleagues reduced the Gates situation to the following: Would a 58-year old man, with the same attire, etc.—but white—have been treated the same way? The question is only somewhat helpful. Interestingly, it sets up potential accusations of age-ism, sexism, and “clothes-ism” (or class-ism). Should it have mattered to Officer Crowley if Gates was 18, 38, or 88 years old? Would a similar woman have been arrested in this case? What if Gates had been dressed in a ripped t-shirt or a tuxedo?

At the end of the day, the police and our President must make vital decisions with information that is far less than ideal. Hopefully, they do the best they can with what they have—in humility and patience—drawing the best, reasonable inferences from a competent worldview, formidable character, and the best available data.

One of the main arguments for nationalized health care is a moral argument: Health care is a right and a moral and just society should ensure that its people are taken care of–and the state has the responsibility to do this. Bracketing for the time being whether health care is actually a right or not–it is clearly a good, but all goods are not necessarily rights–whether the state should be the provider of it is another question.

But there is another question as well: It is often assumed that those arguing for national health care and socialized medicine have the moral high ground and those of us who oppose it are always arguing on economic terms. I would argue that this is a ground too easily given and not deserved. While the economics are pretty clear (see Hunter Baker’s post), the moral arguments against nationalized health care are sometimes overlooked. Here are a couple of reasons why nationalized health care is in fact not a morally pure as proponents would like us to believe.

1. Handing something off to the state so citizens don’t have to take responsibility for themselves and others doesn’t doesn’t really contribute to the moral fabric of a society.
We love to talk about solidarity and the common good but too often solidarity gets turned into “let the state take care of it.” A broader and I would argue morally rich concept of the solidarity and the common good would look to human flourishing and a rich civil society and turn to the state only as the last resort.

It hurts the common good to have the state take over responsibilities that we should bear ourselves or for our fellow citizens. A large nanny state contributes to the “individualism” that Tocqueville warned about: a turning into self that isolates us from everyone but our nearest circle. If the state does everything for us then we don’t need to care about our brothers and sisters and fellow citizens. This means the breakdown of guess what–solidarity. Solidarity is the driving principle behind subsidiarity, voluntary organizations, and charity. Love of neighbor should prompt us to help each other not pass it it off to the state.

From a moral point of view, having the state take over health care breaks down solidarity and harms the common good.

2. At least equally important–how moral is a health care system based on utilitarian cost benefit calculus and consequentialism? Not very, but that’s how nationalized healthcare operates.

Think about what this means for a minute. Health care decisions are made based on cost benefit and utility which itself puts us on dangerous moral ground. This danger becomes clear when when we realize the consequences. A utilitarian, data driven or what ever you want to call it system ends up by putting pressure on the weak and especially targets the disabled and the elderly. Why? Because if decisions are make based on utility then why would we want to spend health dollars on the disabled and the elderly when their “usefulness” is minimal. Keeping the elderly and the disabled alive costs money. For Christians or other who accept the inherent dignity of life the value of this is obvious, but for secular utilitarians and a utilitarian health care system this is a waste of money–which means that after a time within a national health care system, pressure will mount to euthanize the elderly and infirm. If this sound ridiculous and conspiratorial to you I suggest that you look at Europe and what is beginning to happen there. After years of population decline Europe is a demographic disaster and guess what? Euthanasia has been legalized in three countries (Holland, Belgium, and Luxembourg), is widely practiced in a fourth (Switzerland) and many pro-euthanasia advocates are starting to introduce cost-effectiveness arguments into their position.

The facts are that a state run health system, while sounding very moral, actually undermines the common good and ends up putting pressure on the unborn, the elderly, and the disabled.

Proponents of nationalized health care attempt to make emotional arguments because economic and medical data supporting their position doesn’t exist. Let us not grant them the moral high ground on this debate. Nationalized health care is scientifically, spiritually, and morally bankrupt—oh yes as Europe is demonstrating, financially bankrupt as well.

The Radio Free Acton crew is back in the studio! On today’s broadcast, Dr. Donald P. Condit and Dr. Kevin Schmiesing join our host Marc VanderMaas for a discussion of the ins and outs of the US health care system. Dr. Condit gives us some background on how the current system came into being, the problems associated with it, and the pitfalls of the current healthcare reform proposals in Washington.

Next week RFA will be back for part 2, bringing us alternate ideas for reforming the system in ways that will both increase the availability of care for all who need it and make economic sense.

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The argument from federalism: One of the great benefits of federalism is that the states can act as the laboratories of democracy. If a new public policy is tried in the states and works (as happened with welfare reform in Michigan and Wisconsin), then a similar program has a good chance of succeeding at the national level. The welfare reform went national and proved to be one of the most successful public policy initiatives of the last half century. On the other hand, major governmental healthcare initiatives have been tried in Tennessee and Massachusetts. Neither of those have panned out. That should be a cautionary sign to avoid rushing ahead to just get a bill done!

The argument from misery: I cannot think of any encounter with my government that I willingly seek out. I hate going to the DMV. I hate going to the post office. I hate getting my car inspected. I hate getting a passport renewed. All of these things eat up productive time in my day and are filled with useless, inefficient waiting. This basic situation also applies to people who rely on the government for their healthcare. When my wife did indigent care in Houston, her clients did not pay for her services. They paid with their time. LOTS OF WAITING. I don’t need more waiting in my life. And because government employees are typically unionized, I don’t need to be at the mercy of a bunch of unionized employees any more than I already am.

The argument from incentivization: If the government provides the care too cheaply, then there will be a glut of clients who overwhelm the system and create the nightmare of waiting as the price to pay. If the government offers the care too expensively, people will opt out which is exactly what they wanted to avoid. If the government tries to control utilization by deciding what services you can and can’t have, then you are up against a far worse foe than the worst HMO you ever faced. And the government will go where the insurance companies fear to tread. They will decide who should live or die.

The argument from missing the verdammten point: It is exceedingly clear that a huge reason for the skyrocketing costs of medicine is the problem of predatory litigation driven by lawyers looking for 30-40% of a bloody fortune from an industry thought to be able to afford it. Between the cost of malpractice insurance, the payouts, and the defensive medicine that must be practiced to ward off lawsuits, it is easy to see why healthcare is outrageously expensive. Yet, the president very clearly said he would not seek to deal with that problem in the legislation. WHAT? WHY? Because the trial lawyers are very good political donors? Not a compelling reason for the formation of a particular public policy.

The argument from economic theory: Look at two sectors of the healthcare market that are typically paid out of pocket without the influence of insurance providers or the government. I am thinking of plastic surgery and lasik procedures for improving eyesight. Both of those services are becoming less expensive in real dollars rather than skyrocketing out of control. This happens to be the portion of the healthcare industry where actual market conditions apply. Customers pay for and receive value at a price that is becoming more reasonable all the time.

Blog author: hunter.baker
Wednesday, July 29, 2009
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Spurred on by listening to and reading Samuel Gregg, I’ve been making my way through Wilhelm Ropke’s A Humane Economy which is really a special book.

The following passage (on p. 69) really caught my attention with regard to our current situation:

Democracy is, in the long run, compatible with freedom only on condition that all, or at least most, voters are agreed that certain supreme norms and principles of public life and economic order must remain outside the sphere of democratic decisions . . . It is this fundamental agreement which imbues the concept of inviolable law as such with an absolute content, and once it can no longer be taken for granted, we are in the presence of mass democracy of a pretotalitarian kind.

Ropke is making a very important point here. We are naturally quite comfortable with saying that certain rights are not really within the ambit of the democratic process. For example, a simple majority cannot take away my right to stand on a soapbox on a street corner and declaim on American politics. The right of free speech has our fundamental agreement, despite the fact that our mood may change from time to time. The right is firmly enshrined. But shouldn’t that same agreement hold with regard to our economic freedom? What good are our so-called civil rights if we enact a system that continues to eat up giant chunks of our economic prerogatives?

The Supreme Court, for example, has made much of how important it is that we each be able to make our own decisions about the mysteries of sex and reproduction. Are the questions of how we earn our living, how we plan for our financial future, how we choose to protect ourselves against health problems, and the ability to start a business without excessive encumbrance from the government not equally massive in their implications?

[update below] British physician Theodore Dalrymple weighs in on government healthcare and “the right to health care” in a new Wall Street Journal piece. A few choice passages:

Where does the right to health care come from? Did it exist in, say, 250 B.C., or in A.D. 1750? If it did, how was it that our ancestors, who were no less intelligent than we, failed completely to notice it?

When the supposed right to health care is widely recognized, as in the United Kingdom, it tends to reduce moral imagination. Whenever I deny the existence of a right to health care to a Briton who asserts it, he replies, “So you think it is all right for people to be left to die in the street?”

When I then ask my interlocutor whether he can think of any reason why people should not be left to die in the street, other than that they have a right to health care, he is generally reduced to silence. He cannot think of one.

Not coincidentally, the U.K. is by far the most unpleasant country in which to be ill in the Western world. Even Greeks living in Britain return home for medical treatment if they are physically able to do so.

The government-run health-care system—which in the U.K. is believed to be the necessary institutional corollary to an inalienable right to health care—has pauperized the entire population. This is not to say that in every last case the treatment is bad: A pauper may be well or badly treated, according to the inclination, temperament and abilities of those providing the treatment. But a pauper must accept what he is given.

After 60 years of universal health care, free at the point of usage and funded by taxation, inequalities between the richest and poorest sections of the population have not been reduced. But Britain does have the dirtiest, most broken-down hospitals in Europe.

[update] Also, later today we’ll be posting the first part of a conversation our multimedia manager, Marc Vander Maas, had with Kevin Schmiesing and physician Donald Condit on healthcare reform. Schmiesing is an Acton research fellow and has posted regularly on health care topics here on the PowerBlog. Condit is the author of Acton’s new monograph, A Prescription for Health Care Reform.

The Public Discourse recently published my article, Rethinking Economics in the Post-Crisis World. Text follows:

In the wake of the financial crisis, we need an economics with greater humility about its predictive power and an increased understanding of the complicated human beings who, when the discipline is rightly understood, lie at its center.

Apart from bankers and politicians, few groups have received as much blame for the 2008 financial crisis as economists. “Economists are the forgotten guilty men” was how Anatole Kaletsky, former economics editor and current editor-at-large for the London Times, put it earlier this year when explaining why “a bank with just $1 billion of capital [would] borrow an extra $99 billion and then buy $100 billion of speculative investments.”

Greed and sheer imprudence played a role, but so too, Kaletsky argued, did those (unnamed) economists who posited that their models proved that events such as the collapse of Lehmann Brothers in 2008 or Long Term Capital Management in 1998 were mathematically likely to happen once every billion years.

Kaletsky’s broader point was that contemporary mainstream economics had been sufficiently discredited by the financial crisis that the entire discipline required what he called an “intellectual revolution,” or it risked being dismissed as a rather suspect sub-branch of statistical analysis and mathematical modeling.

Kaletsky is hardly alone in arguing that economists need to rethink key aspects of their discipline. Though unwilling to call for a total paradigm shift, the Economist recently opined that the financial crisis has raised profound questions of coherence about two areas of economics: macro-economics and financial economics. “Few financial economists,” the Economist observed, “thought much about illiquidity or counterparty risk, for instance, because their standard models ignore it.” Likewise, the Economist commented, “Macroeconomists also had a blindspot: their standard models assumed that capital markets work perfectly.”

All this is certainly true. But the key expression to note here is “their standard models.” (more…)