Principles in Practice: The Blog of the Objective Standard

Wednesday, August 13, 2008

Retire Social Security by Alex Epstein

Posted by ARI Media at 6:59 PM

August 14 marks Social Security's 73rd  birthday—placing it eight years past standard retirement age. But, despite the program's $10-trillion-plus dollar shortfall, no politician dares to suggest that this disastrous program be phased out and retired; all agree on one absolute: Social Security must be saved. While the program may have financial problems, virtually everyone believes that some form of mandatory government-run retirement program is morally necessary.

But is it?

Social Security is commonly portrayed as benefiting most, if not all, Americans by providing them "risk-free" financial security in old age.

This is a fraud.

Under Social Security, lower- and middle-class individuals are forced to pay a significant portion of their gross income—approximately 12 percent—for the alleged purpose of securing their retirement. That money is not saved or invested, but transferred directly to the program's current beneficiaries—with the "promise" that when current taxpayers get old, the income of future taxpayers will be transferred to them. Since this scheme creates no wealth, any benefits one person receives in excess of his payments necessarily come at the expense of others.

Under Social Security, every aspect of the government's "promise" to provide financial security is at the mercy of political whim. The government can change how much of an individual's money it takes—it has increased the payroll tax 17 times since 1935. The government can spend his money on anything it wants—observe the long-time practice of spending any annual Social Security surplus on other entitlement programs. The government can change when (and therefore if) it chooses to pay him benefits and how much they consist of—witness the current proposals to raise the age cutoff or lower future benefits. Under Social Security, whether an individual gets twice as much from others as was taken from him, or half as much, or nothing at all, is entirely at the discretion of politicians. He cannot count on Social Security for anything—except a massive drain on his income.

If Social Security did not exist—if the individual were free to use that 12 percent of his income as he chose—his ability to better his future would be incomparably greater. He could save for his retirement with a diversified, long-term, productive investment in stocks or bonds. Or he could reasonably choose not to devote all 12 percent to retirement. He might plan to work far past the age of 65. He might plan to live more comfortably when he is young and more modestly in old age. He might choose to invest in his own productivity through additional education or starting a business.

How much, when, and in what form one should provide for retirement is highly individual—and is properly left to the individual's free judgment and action. Social Security deprives the young of this freedom, and thus makes them less able to plan for the future, less able to provide for their retirement, less able to buy homes, less able to enjoy their most vital years, less able to invest in themselves. And yet Social Security's advocates continue to push it as moral. Why?

The answer lies in the program's ideal of "universal coverage"—the idea that, as a New York Times editorial preached, "all old people must have the dignity of financial security"—regardless of how irresponsibly they have acted. On this premise, since some would not save adequately on their own, everyone must be forced into some sort of "guaranteed" collective plan—no matter how irrational. Observe that Social Security's wholesale harm to those who would use their income responsibly is justified in the name of those who would not. The rational and responsible are shackled and throttled for the sake of the irrational and irresponsible.

Those who wish to devote their wealth to saving the irresponsible from the consequences of their own actions should be free to do so through private charity, but to loot the savings of untold millions of innocent, responsible, hard-working young people in the name of such a goal is a monstrous injustice.

Social Security in any form is morally irredeemable. We should be debating, not how to save Social Security, but how to end it—how to phase it out so as to best protect both the rights of those who have paid into it, and those who are forced to pay for it today. This will be a painful task. But it will make possible a world in which Americans enjoy far greater freedom to secure their own futures.

Alex Epstein is an analyst at the Ayn Rand Institute, focusing on business issues. The Institute promotes Objectivism, the philosophy of Ayn Rand—author of Atlas Shrugged and The Fountainhead.

Copyright © 2008 Ayn Rand® Institute. All rights reserved.

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Friday, July 18, 2008

Medicare's 'Free Market' Facade

Posted by ARI Media at 10:21 PM

Irvine, CA—Some Republicans are bemoaning the passage of a new law they say undermines allegedly free-market elements of Medicare—in particular, Medicare Advantage, a program which gives seniors the option of receiving their government-financed care through private health plans. They claim that such "free market" elements are crucial to controlling the spiraling costs that are plaguing Medicare.

"The view that programs like Medicare Advantage have anything to do with free markets is a delusion," said Yaron Brook, executive director of the Ayn Rand Institute. "On a free market, each individual is responsible for his own—and only his own—health care. But Medicare Advantage is essentially no different from traditional Medicare: it forces some Americans to bankroll the health-care needs of other Americans. The inevitable result is our current health-care crisis.

"If the government guarantees health care to people, costs have to skyrocket. When someone else is footing the bill for health-care costs, consumers demand medical services without having to consider their real price. The artificially inflated demand this creates sends expenditures soaring out of control. It is irrelevant whether the government finances this spending spree directly, as it does with traditional Medicare, or indirectly, as with Medicare Advantage. In the end, the results are the same.

"The only way to fix the problems caused by government interference in medicine is to eliminate government interference in medicine—not to have some mishmash of government controls and market elements. By returning to a truly free system where each individual is responsible for his own health-care costs, we would unleash the power of capitalism in the medical industry, leading ultimately to high quality, affordable medical care for Americans. Let's start looking at ways to phase out government interference in medicine."

Copyright © 2008 Ayn Rand® Institute. All rights reserved.

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Tuesday, June 17, 2008

Yaron Brook on the Moral Foundation of Freedom

Posted by Craig Biddle at 2:11 PM

Forbes has published a good article by Yaron Brook titled “From Flat World to Free World.” Following a brief survey of the decline of economic freedom and the expansion of nationalism, both globally and in America, Brook points to the underlying cause of the problem and indicates the only solution.

[W]e live in a culture that lauds self-sacrifice, community service and "giving back" as its moral ideals. Businessmen who selfishly pursue profits, in contradiction to those ideals, are consigned to a moral dungeon from which they can only hope to escape on evenings and weekends. This is why Barack Obama can get away with belittling the "money culture," his wife can smugly counsel youth to shun "corporate America" and John McCain can brag about working "out of patriotism, not for profit"….

Two centuries ago, the Founding Fathers blazed the path to a capitalist future by creating a nation based on the individual's right to life, liberty, property and the selfish pursuit of his own personal happiness.

For the first time, a nation's social system embodied approval of profit-seeking, the lifeblood of capitalism. America's founding principles, all but forgotten today, facilitated the explosive economic globalization of the 19th century and remain our only hope for freedom in the 21st century.

Those founding principles withered because no one could morally defend self-interest. For individual rights to prevail in politics, nothing less than a revolution in ethics will be required—a bloodless revolution—not of arms, but of ideas. You'll know that struggle is over when businessmen are finally viewed not as moral pariahs or ciphers but as paragons of virtue, precisely because they pursue profits.

Read the whole thing (and a few worthy readers’ comments) here.

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Thursday, June 05, 2008

An Open Letter to Borrowers and Lenders: Take Responsibility for Your Decisions by Alex Epstein

Posted by ARI Media at 7:00 PM

Throughout the housing crisis, we have heard demands from spokesmen for desperate homeowners, banks, and investors for every variety of government bailout. But there is one group from whom the nation has not heard: the millions of Americans who, like me, had nothing to do with the crisis, who entered into mortgage contracts they could meet or who refused to buy at exorbitant prices, but who will be forced to pay the bills for these bailouts. If we had a spokesman, this is what I wish he would say.

"Dear Struggling Borrowers and Lenders,

"Every day, the government is offering a new intervention for your sake: to protect the borrowers among you from foreclosure, to protect banks and investors from ruinous losses, and to protect all of you who bought houses during the boom from declining home values.

"The government is allowing taxpayer-backed, trouble-ridden Fannie Mae and Freddie Mac to add even more risky subprime loans to their trillion-dollar portfolios while holding even less cash in reserve. It is 'guaranteeing' more and more risky mortgages with taxpayer money through the Federal Housing Administration (FHA). Through the Federal Reserve, it is continuing to inflate the currency to give cheap money to struggling banks. And it is floating several proposals to allow courts to slash valid mortgage contracts, assaulting the sanctity of contract.

"All of this is profoundly unfair to those of us who will pay the price for your bailout.

"It is universally recognized that when you invest in stocks, you are taking a risk—and just as you deserve the profits if the investment goes well, so you must accept the losses if it doesn't.

"The same holds true for real estate. Whether you are an investment bank holding mortgage-backed securities, a borrower with an adjustable-rate mortgage facing foreclosure, or an 'underwater homeowner' who owes more than your home is worth, the essence of your situation is the same: you chose to enter into a real estate transaction that has gone bad. And just as you had every right to any gains that might have ensued—so you must bear full responsibility for your losses.

"Taking responsibility does not necessarily mean resigning yourself to foreclosure or to huge, irreversible write-downs. You should do everything possible to make the best of the situation by making voluntary offers to other market participants. A borrower can seek refinancing, a bank with a large mortgage portfolio can try to find a buyer, lenders and borrowers can renegotiate loan terms that are cheaper than foreclosure. But what is intolerable is to force us to bail you out—which is exactly what the government is doing more by the day.

"Your representatives blithely ignore the injustice of their bailout schemes, claiming that the health of the entire financial system is at stake—just as they did with Long-Term Capital Management in the '90s and Savings and Loans in the '80s. But if the financial system ever does need these bouts on government life support, it is only because of decades' worth of government interventions that have radically distorted private investments and camouflaged and shifted risks. To unwind these uneconomic policies and practices will be disruptive. But it is the only way to restore genuine financial health.

"The question we face today is: Do we let the market function, penalizing primarily those who made bad investments—or do we unfairly foist damage on those who did nothing to cause it, while gifting boom-era borrowers and lenders with propped-up housing prices, lower mortgages, and easy credit?

"There is no conflict between individual responsibility and a functioning housing market; to the contrary, the second requires the first. If we let the market function, home values would fall to some market bottom, new buyers would eagerly seize on lower home prices, borrowing from lenders who would have learned to lend rationally—and mortgage-backed securities would be valued accordingly.

"The bailout policy, on the other hand, is creating indefinite uncertainty about home values and mortgage-backed securities, exposing taxpayers to trillions of dollars in future risks, further devaluing our savings through inflation, encouraging more irresponsible behavior in the future, and creating destructive new government interventions that destroy the vital protection of contracts.

"Clearly, the just and the American solution is for all of us to tell the government that we will take responsibility for our decisions, and that no one has the right to make anyone else pay for his mistakes."

Alex Epstein is an analyst at the Ayn Rand Institute, focusing on business issues. The Institute promotes Objectivism, the philosophy of Ayn Rand—author of Atlas Shrugged and The Fountainhead.

 Copyright © 2008 Ayn Rand® Institute. All rights reserved.

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Thursday, May 29, 2008

Investigate Big Congress, Not Big Oil by Alex Epstein

Posted by ARI Media at 11:38 AM

With gasoline prices exceeding $4 a gallon in some states, politicians are responding as usual: Blame Big Oil First. Several prominent senators have once again summoned industry leaders to Capitol Hill, subjecting them to yet another barrage of rhetorical questions, interruptions, accusations, and sermons. The lawmakers' goal, claims Sen. Patrick Leahy, is to identify "causes of the rising price of oil on which Congress can act." But the foregone conclusion is that "price gouging," "collusion," and "market manipulation" by Big Oil, or speculation by financiers, is responsible.

The simple fact that such Congressional investigations are designed to obscure is that the prices of oil and gasoline are determined by supply and demand—which neither private oil companies nor speculators have any power to dictate in their favor. If they had such market mastery, then why didn't they use it in the 1990s, when gasoline was selling at a barely profitable $1 a gallon? To be sure, speculators can bid up prices—but they only do so when they believe that oil will become even more expensive in the future, and only make money when they are right.

The question Congress should really be asking, then, is: What nonmarket factors are distorting supply and demand? If they sought an honest answer, they would discover that much of the blame lies with Congress itself.

No one disputes that environmentalist laws passed by Congress have cut off some of our most promising and plentiful sources of oil. In the name of safeguarding a tiny portion of caribou habitat in the Alaskan wilderness, drilling is prohibited in the Alaska National Wildlife Refuge—a potential source of 1 million barrels a day, 5 percent of America's daily oil consumption. Also off-limits is 85 percent of America's coastline, which Shell estimates contains some 100 billion recoverable barrels—13 times America's annual oil consumption—and the vast majority of oil shale in Colorado, which Shell estimates at 1.5 trillion barrels.

Congress should publicize these facts, prepare an inventory of how many oil-rich areas they have blocked off, and bring in economists to estimate how much all of this raises gas prices.

And how about the effects of Congress's open hostility toward the future of oil? Our politicians damn oil as an "addiction" to be eliminated, and seek to cut—by up to 90 percent—the use of oil and other vital fossil fuels that make our standard of living possible. Congress should ask oil executives how this possible forced cut in demand affects their industry. It should ask whether they feel safe to make the billion dollar investments and decades-long plans that oil production requires when Barack Obama, a leading presidential candidate, can uncontroversially proclaim that "the country that faced down the tyranny of fascism and communism is now called to challenge the tyranny of oil." Is it a coincidence that the much-maligned speculators think oil will become even scarcer in the future, and are acting accordingly?

In addition to investigating its own impact on gasoline prices, Congress should investigate how its economic policy partner, the Federal Reserve, has raised our gas prices by lowering the value of the dollars we buy gasoline with. The Fed, along with the Treasury Department, has for years had an inflationary policy that has caused the value of the dollar to plummet relative to other currencies. Were it not for this devaluation of the dollar, oil prices would likely be 40 percent lower—as they are for those on the Euro. Why not call a free-market economist to the stand and ask how much more expensive Alan Greenspan, Ben Bernanke, and Henry Paulson have made our gasoline?

Americans deserve to know the story—in all its gory detail—of what their government has done and is doing to cause high prices at the pump, and to make gasoline—indeed, all energy—more scarce and more expensive in the future. A congressional investigation of Congress would be a great public service.

Alex Epstein is an analyst at the Ayn Rand Institute, focusing on business issues. The Institute promotes Objectivism, the philosophy of Ayn Rand—author of Atlas Shrugged and The Fountainhead.

Copyright © 2008 Ayn Rand® Institute. All rights reserved.

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Friday, May 09, 2008

The Morality of Capitalism

Posted by ARI Media at 12:48 PM

Who: Eric Daniels, research assistant professor at the Clemson Institute for the Study of Capitalism and speaker for the Ayn Rand Institute

What: A talk explaining why capitalism is the only moral social system. A Q&A will follow.

Where: Hilton Costa Mesa, 3050 Bristol Street, Costa Mesa, CA  92626

When: Thursday, May 22, 2008, at 7:30 PM

Admission is FREE.

Description: Despite capitalism's enormous success in producing material abundance and political freedom, it faces a crisis—one that may lead to its demise. Capitalism is perishing because its supposed defenders lack a real defense.

In this lecture, Eric Daniels explores the most common arguments in favor of capitalism. He finds that they all break down in the face of the popular argument that capitalism is immoral and destructive—because it is selfish. Dr. Daniels explains that only Ayn Rand's crucial insight—that capitalism is the only moral social system because it is based on "the virtue of selfishness"—can truly defend capitalism. He illustrates the need for a moral, and not just an economic, defense of capitalism.

Bio: Eric Daniels is a research assistant professor at the Clemson Institute for the Study of Capitalism. He has lectured internationally on American ethics, on American business and legal history, and on the American Enlightenment. Dr. Daniels's publications include a chapter in The Abolition of Antitrust and five entries in the Oxford Companion to United States History.

For more information on this talk, please e-mail events@aynrand.org.

###  ### ###

Eric Daniels is available for interviews now and after his talk.
Contact: Larry Benson
E-mail: media@aynrand.org
Phone: (949) 222-6550, ext. 213

For more information on Objectivism's unique point of view, go to ARI's Web site at http://www.aynrand.org/. Founded in 1985, the Ayn Rand Institute promotes the philosophy of Ayn Rand, author of Atlas Shrugged and The Fountainhead.

Copyright © 2008 Ayn Rand® Institute. All rights reserved.

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Thursday, May 01, 2008

Set Yahoo! Free by Alex Epstein

Posted by ARI Media at 3:00 PM

Yahoo! has just released its first-quarter earnings numbers, and neither the market nor analysts are impressed. What will be the company's next move? Multiple suitors claim that they can leverage Yahoo!'s online products and talented employees better than Yahoo!'s widely criticized management is doing. The leading bidder is Microsoft, whose $40 billion offer it is prepared to take directly to Yahoo! shareholders via a proxy fight. Other proposals said to be in the running are an advertising collaboration with Google, a merger with AOL, and a possible deal involving News Corp (including MySpace).

The stakes are high. The right move could lead Yahoo! to a new level of innovation and profit, while the wrong move could cause the company's value to plummet.

Unfortunately, the fate of Yahoo! will not be determined simply by who makes the best proposal to shareholders—but by whose proposal antitrust bureaucrats arbitrarily deem sufficiently "competitive."

Consider the Microsoft bid. If Yahoo! shareholders decide the Microsoft bid is best for their company, and want to move forward immediately with the challenging task of combining two companies with thousands of employees, they may be prohibited from doing so. Antitrust enforcers could hold up progress for months deliberating whether the merger is "anticompetitive"—and then possibly kill it altogether. Competitor Google is cheerleading this outcome, claiming on its official blog that "Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet."

But a Microsoft and Yahoo! combined market share offers no threat to competition whatsoever—a fact that search-giant Google should know, given that the once-puny company was able to out-compete the once-dominant Yahoo! and the mighty Microsoft. Whether a market is competitive is not determined by the number of competitors or the percentage of customers that choose to buy their products; it is determined by whether companies are free to attempt to outdo one another to win over customers with superior products. The fact that someone is winning in a market by a large margin does not make the situation anti-competitive. It illustrates that competitive freedom has produced a company with superlative products.

Google, Microsoft, and Yahoo! have high market shares only insofar as their products are more appealing to consumers than are their competitors'. None of these companies, or any combination of two or even three of them, can force a single consumer to use its services instead of a more attractive search engine or web portal available—nor can it prevent competitors from outdoing it with superior products.

A Microsoft-Yahoo! combination could not threaten competition. To the contrary, it would be an act of free competition, an ambitious attempt by two companies to improve their products by combining strengths. What would actually stop competition would be to prevent the shareholders of these companies from making a move they regard as vital to their success.

The threat of antitrust prosecution is also impeding Google's own efforts to make a deal with Yahoo!. Google has proposed that Yahoo! outsource its search advertising to Google, a move that some analysts say could boost Yahoo!'s ad revenue by 25 percent. Unfortunately, if Yahoo! agrees to the deal, the government will likely kill it because, once again, the companies have a high combined market share. According to Reuters, "Antitrust experts said regulators would likely oppose any permanent alliance between Google and Yahoo." And, just as Google is calling Microsoft's bid anti-competitive given its market share, Microsoft is saying the same of Google: "Any definitive agreement between Yahoo and Google would consolidate over 90 percent of the search advertising market in Google's hands," Microsoft's general counsel complained. "This would make the market far less competitive."

In reality, no deal between Google and Yahoo! is a threat to anyone besides inferior competitors; neither company can force even one person to click on http://www.google.com/. Yahoo! should be able to field and accept any offer from Google it chooses—including a full-blown acquisition. Indeed, it is very possible that if cash-rich Google were not terrified of antitrust prosecution, it, like Microsoft, would try to acquire Yahoo! outright. Such a deal might be Yahoo! shareholders' best option and make possible a whole new level of Internet content—but under antitrust, it won't even come to the table.

What we are observing in the battle over Yahoo! is not genuine, merit-based competition, but competition based on political pull. He who cajoles antitrust bureaucrats to endorse his deal and stop his competitors, wins.

Instead of attempting to outdo one another in crying to the government, Google and Microsoft should take a principled stand in favor of open competition for Yahoo!—a competition in which the company's fate is decided by who makes the best business proposal and not who has the craftiest lobbyists and lawyers.

More broadly, they—and we—should call into question the antitrust laws that make competition-by-pull possible.

Alex Epstein is an analyst at the Ayn Rand Institute, focusing on business issues. The Institute promotes Objectivism, the philosophy of Ayn Rand—author of Atlas Shrugged and The Fountainhead.

Copyright © 2008 Ayn Rand® Institute. All rights reserved.

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Wednesday, April 30, 2008

How Government Makes Disasters More Disastrous by Thomas A. Bowden

Posted by ARI Media at 12:36 PM

In a speech from New Orleans last week, Republican presidential candidate John McCain lashed out at the Bush administration for its response to Hurricane Katrina. McCain's remarks, which appeared calculated to make disaster relief a key campaign issue, revived harsh memories of the savage storm that inundated the Mississippi Delta in late August 2005, leaving more than 1,800 people dead and causing widespread property damage.

Although the floodwaters long ago receded, government officials are still counting the disaster's costs. Earlier this year, the U.S. Army Corps of Engineers disclosed that 489,000 claimants are seeking damages caused by poorly designed levees. Of those claimants, 247 want more than $1 billion each, including one whopper for $3 quadrillion (a stack of a quadrillion dollar coins would reach beyond Saturn).

The tax dollars spent resolving those claims will augment the tens of billions already paid to restore and repopulate New Orleans, a below-sea-level bowl situated precariously amidst a lake, a major river, and a gulf, in a known path for hurricanes.

Disasters can sometimes shock a nation into questioning entrenched practices. But Hurricane Katrina, perhaps the worst natural disaster ever to befall America, has failed to spark serious challenge to long-standing government policies that actively promote building and living in disaster-prone areas.

The Katrina tragedy should have called into question the so-called safety net composed of government policies that actually encourage people to embrace risks they would otherwise shun—to build in defiance of historically obvious dangers, secure in the knowledge that innocent others will be forced to share the costs when the worst happens.

Without blaming the victims for having followed their own government's lead, it is time to question whether those policies should continue.

The first strands of today's safety net were spun in the nineteenth century, as the Army Corps of Engineers shouldered the burden of constructing and maintaining levees and other flood controls along the Mississippi River. From then to now, Congress and the states have responded to each new flood by installing newer, higher, and stronger barriers at public expense, as if the preservation of a city like New Orleans in its historical location were a self-evident necessity.

Throughout the twentieth century, new strands were woven into the safety net, first in the form of loans to disaster victims, then by direct grants, infrastructure repairs, loan guarantees, job training, subsidized investments, health care, debris removal, and a host of similar rehabilitative measures.

In 1968, the National Flood Insurance Program began supplying subsidized coverage for structures and their contents in flood-prone areas. Similar state-subsidized insurance programs arose for hurricanes in Florida and earthquakes in California. In 1978, the Federal Emergency Management Agency was created to coordinate the increasingly complex job of government disaster response.

At each juncture, more aid was funneled to disaster victims without serious challenge to the wisdom of encouraging people to occupy vulnerable locations.

In response to Mississippi floods, Florida hurricanes, and California earthquakes, the number of major disaster declarations almost doubled from the 1980s to the 1990s, from an annual average of 24 up to 46. At century's end, Congress was paying an average of $3.7 billion a year in supplemental disaster aid, with state taxpayers contributing many millions more. As of August 2007, Katrina relief alone had cost federal taxpayers $114 billion.

By gradual steps, this disaster safety net became part of the legal landscape, taken for granted by private investors and owners deciding to undertake new projects or rebuild storm-damaged areas. Relief programs—by minimizing, disguising, and shifting the real risks of defying natural hazards—became an active force distorting private decision-making and inviting even worse future tragedies.

Thus if a pre-Katrina Mississippian asked himself, "Should I build my house 10 feet above sea level, a quarter-mile from the Gulf Coast?" the answer came back: "Sure, why not? The government will look after me if disaster strikes."

This entitlement mentality ensured that each new tragedy would generate fresh demands to expand the safety net. In Katrina's aftermath, those demands centered on State Farm, which dared to deny certain claims under homeowners policies that covered wind damage but expressly excluded floods. Mississippi's attorney general immediately sued to void flood exclusion clauses as "unconscionable" and "contrary to public policy" and even launched a criminal investigation of State Farm's claims adjusting practices.

Last year, a jury inflamed by adverse public opinion awarded $1 million in punitive damages against State Farm for having stood on its contract rights in a dispute involving a single house. That case was recently reversed on appeal, but the victory is cold comfort for State Farm, which in the meantime elected prudently to calm the litigation storm by paying tens of millions of dollars to settle claims for unproven wind damage. Voila! The safety net had a brand new strand, woven at the insurance company's expense.

Disgusted, State Farm announced last year that it would cease writing new homeowners policies in Mississippi.

As more private insurers withdraw from high-hazard areas—or raise their rates to reflect the staggering legal and public relations costs of offering disaster insurance—a predictable lament arises: the free market has failed, and government must fill the vacuum so that the statist safety net remains strong. Thus it surprises no one to hear Florida Gov. Charlie Crist challenging this year's presidential candidates to support creation of a federal catastrophic fund that would keep insurance premiums artificially low in disaster-prone areas across the country.

But the solution is not more of the market distortions and perverse incentives that have lured so many people into harm's way. The solution is to replace the prevailing entitlement mentality with a free market in disaster prevention, insurance, and recovery.

In a free market—without tax-paid levees, government disaster relief, or subsidized insurance—anyone who contemplates building or buying property in a high-hazard area will need to face hard facts about the local history of natural disasters, the efficacy and cost of preventive measures, and the availability of insurance.

For example, the high price—or total unavailability—of private insurance will resound like a clanging alarm bell, signaling the market's objective view that a particular building plan is abnormally risky compared to less dangerous locales.

With their own lives and wealth at stake, people will have every incentive to evaluate risks objectively. And if hardy souls still choose to occupy and fortify New Orleans, or build on an earthquake fault, or live in a tornado alley, the risk and reward will be theirs alone. No longer will government make disasters more disastrous by pretending that citizens have a right to defy the forces of nature at others' expense.

Thomas A. Bowden is an analyst at the Ayn Rand Institute, focusing on legal issues. Mr. Bowden is a former attorney and law school instructor who practiced for twenty years in Baltimore, Maryland. The Ayn Rand Institute promotes Objectivism, the philosophy of Ayn Rand—author of Atlas Shrugged and The Fountainhead.

Copyright © 2008 Ayn Rand® Institute. All rights reserved.

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Wednesday, April 09, 2008

Why Unregulated Capitalism is the Only Moral Social System

Posted by ARI Media at 9:27 AM

Who: Dr. Yaron Brook, executive director of the Ayn Rand Institute

What: A lecture and Q&A explaining the philosophical and moral basis of capitalism.

Where: UCI, Crystal Cove Auditorium, Irvine, CA

When: Monday, April 14, 2008, at 7 PM

Admission is FREE.

Description: Capitalism is blamed for exploitation, environmental destruction, cut-throat competition, sweatshops, child labor, and the rising cost of education. But are these claims true? What is capitalism's essential nature? How can it be considered good? Find out the answers

Bio: Yaron Brook is president and executive director of the Ayn Rand Institute and is a contributing editor to The Objective Standard. A former finance professor, he has published in academic as well as popular publications. He is frequently interviewed in the media and appears weekly on the new Fox Business Network to debate and discuss current economic and business news. His columns and opinion-editorials are published on forbes.com and in major newspapers. Dr. Brook lectures on Objectivism, business ethics and foreign policy at college campuses, community groups and corporations across America and throughout the world.

For more information on this talk, please e-mail events@aynrand.org.

###  ### ###

Dr. Yaron Brook is available for interviews now and after his talk. Contact: Larry Benson E-mail: media@aynrand.org Phone: (949) 222-6550, ext. 213

For more information on Objectivism's unique point of view, go to ARI's Web site at www.aynrand.org. Founded in 1985, the Ayn Rand Institute promotes the philosophy of Ayn Rand, author of Atlas Shrugged and The Fountainhead.

Please note: The above event is organized, hosted and sponsored by an individual campus club. Although ARI provides financial support, educational materials and speakers for eligible student clubs, campus clubs are organizations independent of ARI.

Copyright © 2008 Ayn Rand® Institute. All rights reserved.

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Tuesday, April 08, 2008

The Real Meaning of Earth Hour by Keith Lockitch

Posted by ARI Media at 10:25 AM

On the evening of Saturday, March 29, cities around the world turned off their lights for one hour to "raise" awareness about global warming. In observation of Earth Hour, iconic landmarks such as the Sears Tower and the Sydney Opera House went dark, while participating individuals turned off residential lights.

The purpose of Earth Hour, according to its organizers, who plan to make it an annual event, is to encourage people to think about how they can reduce their energy consumption. While the event itself—one hour with the lights off—admittedly had little effect on carbon emissions, what matters, say the organizers, is the symbolic meaning of the event. So what is the meaning of Earth Hour?

We hear constantly that the debate is over on climate change--that it is now an indisputable fact that human carbon emissions are causing a planetary emergency. Earth Hour is intended to showcase public concern about global warming and to inspire people to take practical actions to reduce their "carbon footprints."

But it is far from indisputable that we face any sort of planetary crisis. Predictions of catastrophic global warming have long been disputed, and continue to be disputed, by numerous serious scientists skeptical of the global warming "consensus."

Furthermore, what is never mentioned is the fact that reducing greenhouse gases to the degree sought by global warming activists would, itself, cause great harm.

Politicians and environmentalists, including those behind Earth Hour, are not calling on people just to change a few light bulbs, they are calling for a truly massive reduction in carbon emissions—as much as 80 percent below 1990 levels. Because our energy is overwhelmingly carbon-based (in 2005, fossil fuels made up 86 percent of world energy production), this necessarily means a massive reduction in our energy consumption.

People don't have a clear sense of what this would mean in practice. We, in the industrialized world, take our abundant energy for granted and don't consider just how much we benefit from its use in every minute of our every day. We drive our cars to work and school, we sit in our lighted, heated homes and offices, powering our computers and countless other labor-saving appliances, and we count on the indispensable values that industrial energy makes possible: hospitals and grocery stores, factories and farms, international travel and global telecommunications. It is hard for us to project the degree of sacrifice and harm that global-warming policies would force upon us.

This blindness to the vital importance of energy is precisely what Earth Hour exploits. It sends the comforting-but-false message: Cutting off our use of fossil fuels would be easy and even fun! People spent the hour star-gazing and holding torch-lit beach parties; restaurants offered special candle-lit dinners. Earth Hour makes the renunciation of energy seem like a big party.

The participants of Earth Hour spent an enjoyable sixty minutes in the dark, but all the while they remained safe in the knowledge that the comforts and life-saving benefits of industrial civilization were just a light switch away. This bears no relation whatsoever to what our lives would actually be like under the sort of draconian carbon-reduction policies that global-warming activists are demanding: punishing carbon taxes, severe emissions caps, outright bans on the construction of power plants.

What is really needed is greater awareness of just how indispensable carbon-based energy is to human life. Forget one measly hour with just the lights off. How about Earth Month, without any form of fossil fuel energy? Let those who claim that we need to stop emitting carbon dioxide try spending a month shivering in the dark without heating, electricity, refrigeration; without power plants or generators; without any of the labor-saving, time-saving, and therefore life-saving products that industrial energy makes possible. Those who claim that we must cut off our carbon emissions to prevent an alleged global catastrophe need to learn the indisputable fact that cutting off our carbon emissions would be a global catastrophe.

It is true that the real importance of Earth Hour is its symbolic meaning. But that meaning is the opposite of the one intended. The lights of our cities and monuments are a symbol of human achievement, of what mankind has accomplished in rising from the cave to the skyscraper. Earth Hour presents the disturbing spectacle of people celebrating those lights going out. Its call for people to abandon their use of energy and to rejoice at the sight of skyscrapers going dark makes its real meaning unmistakably clear: what Earth Hour represents is the renunciation of industrial civilization.

Keith Lockitch, PhD in physics, is a resident fellow at the Ayn Rand Institute, focusing on science and environmentalism. The Institute promotes Objectivism, the philosophy of Ayn Rand—author of Atlas Shrugged and The Fountainhead.

Copyright © 2008 Ayn Rand® Institute. All rights reserved.

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Global Capitalism: The Solution to World Oppression and Poverty

Posted by ARI Media at 10:20 AM

Who: Dr. Andrew Bernstein, professor of philosophy and speaker for the Ayn Rand Institute

What: A talk arguing for the morality and practicality of global capitalism. A Q&A will follow.

Where: Rogers State University, Will Rogers Auditorium, Claremore, OK

When: Wednesday, April 9, 2008, at 7 pm

Description: The opponents of global capitalism overlook the key points in the debate. The capitalistic nations of Europe, North America and Asia are by far the wealthiest societies of history—with per capita incomes in the range of at least $20,000 $30,000 annually. But capitalism is not merely the system of prosperity; fundamentally, it is the system of individual rights and freedom.

Capitalistic nations protect their citizens’ freedom of speech, of the press and of intellectual expression. Similarly, their citizens possess economic freedom, including the right to own property, to start their own businesses and to seek profit. By stark contrast, the pre-capitalist systems of history, and the non-capitalist systems of the present, are politically oppressive and economically destitute; their citizens have no rights and, consequently, little or no wealth.

What deeper principles make possible the freedom and wealth enjoyed under capitalism—and lacking in its political antipodes? How has capitalism already greatly enhanced the lives of millions of human beings in formerly impoverished Third World countries? What can the men of the free world do to further promote the spread of capitalism into the repressed nations of the globe?

Bio: Dr. Bernstein is a Visiting Professor of Philosophy at Marist College; he also teaches at SUNY Purchase. Dr. Bernstein lectures regularly at American universities and appears frequently on radio talk shows. His op-eds have been published in The San Francisco Chronicle, The Chicago Tribune, The Baltimore Sun, The Atlanta Journal-Constitution, The Washington Times, The Los Angeles Daily News, and The Houston Chronicle. Dr. Bernstein is the author of three Ayn Rand titles for CliffsNotes: Atlas Shrugged, The Fountainhead, and Anthem. He also authored The Capitalist Manifesto: The Historic, Economic and Philosophic Case for Laissez-Faire.

For more information on this talk, please e-mail media@aynrand.org

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Andrew Bernstein is available for interviews now and after his talk.
Contact: Larry Benson          
E-mail: larryb@aynrand.org          
Phone: (949) 222-6550, ext. 213


Please Note: The above event is organized, hosted and sponsored by an individual campus club. Although ARI provides financial support, educational materials and speakers for eligible student clubs, campus clubs are organizations independent of ARI. ARI does not necessarily endorse the content of the lectures and sessions offered.

Copyright © 2008 Ayn Rand® Institute. All rights reserved.

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Monday, March 31, 2008

More on the Propriety of Donations with 'Strings'

Posted by Craig Biddle at 5:30 PM

The latest attack on BB&T’s educational donations—and on academic freedom—comes by way of this Charlotte Observer editorial, which opens with the obvious truth that “A public university's faculty and administration—not donors—should have the final say on the content of courses.” The editorial closes with the obvious truth that “it’s wrong to strike fund-raising deals that suggest a university's curriculum can be shaped by the highest bidder.” Unfortunately, what lies between those two undeniable truths is a series of non sequiturs, non-principles, and nonsense having nothing to do with the factual nature of BB&T’s grants.

Of course the faculty and administration of a university should have the final say on the content of courses—and of course it is wrong for a university’s curriculum to be shaped by the highest bidder. If a university were to permit the content of its curriculum to be shaped by the highest bidder, imagine the cognitive destruction that could be wrought by the likes of George Soros or British Petroleum (BP). But for the Observer to suggest that BB&T somehow has or seeks the final say regarding the content of university curricula is absurd.

Certain universities and professors have chosen to include Ayn Rand’s books in the reading material of their courses, and some of them have sought and received BB&T grants that are contingent on including her works. This voluntary meeting of minds is called academic freedom and moral responsibility: The academics are free to choose their course content and to accept or reject the grants—and BB&T is being morally responsible with respect to its donations by ensuring that its money is put toward curricula consonant with its values.

The second sentence of the Observer editorial claims: “Otherwise, the college classroom becomes just another a [sic] arena of commerce, not a place where independent learning and research take place.” If an arena of commerce (i.e., free trade) is somehow incompatible with learning, does this mean that no one can learn anything by reading the Charlotte Observer, which is certainly an arena of commerce? The notion that free trade is incompatible with independent learning or research is utterly refuted by such obvious examples as the private-school industry, the pharmaceutical industry, the computer and software industries, and libraries—which are filled with the products of the book-publishing industry. If the Observer’s editors want to proceed with their “logic” they will have to contend with these facts.

The editorial continues: “That’s why the University of North Carolina system ought to enact a clear policy that forbids universities to seek or accept private funds that come with strings about what will be taught to students. This is an important principle, one that affects each of the 16 campuses.” If the Observer’s editors had read and understood the works of Ayn Rand when they were in college, they wouldn’t call such a non-principle a “principle.” A principle is a general truth on which other truths depend. The actual and relevant principle here is that of academic freedom: recognition of the fact that teachers and universities should be free to choose their materials and to seek funding for their courses—including, if they choose, funding that comes with strings. If the Observer’s editors have a principled argument against academic freedom, they should put it forth. To do so, however, they will have to specify the general truth by reference to which professors and universities should be forbidden to choose their materials and curricula and to accept funding in support of their choices.

As to the alleged impropriety of businessmen and corporations donating money to support educational initiatives of which they approve, the fact of the matter is that it is illogical and immoral to give money to an educational organization without stipulating in principle (if not in detail) how that money is to be used. If you blindly give money to a biology department rather then specify what the department must teach in order to receive your donation, the department might use your money to teach “intelligent design” as science. Likewise, if you blindly give money to a political science department rather than attach strings stating what the department must teach in order to receive your funds, the department might use your money to teach such nonsense as the notion that socialism is compatible with freedom.

Donating money without strings to universities is not noble; it is irrational and irresponsible. Nor does the attachment of strings to a donation in any way violate the autonomy of the recipient (be it a professor or department or university); he (or it) remains (and should remain) free to accept or reject the offer.

In sum, this is how educational donations should work: Professors and universities seeking funding for their courses should say—and be free to say—in effect, “Here is what we want to teach, and we will accept donations to teach it.” Likewise, businessmen and corporations who want to support higher education should say—and be free to say—in effect, “Here is what we would like to see taught, and we’re willing to donate money to those who are willing to teach it.” To argue against this approach is to argue against academic freedom and moral responsibility.

BB&T’s donations would not have ruffled a feather had they gone toward teaching the ideas of Jean-Jacques Rousseau or John Stuart Mill or Thomas Hobbes. It is high time that the anti-Rand academics and the rabbl