Tag Archives: Socialism

Jay Richards: eight common myths about wealth, poverty and the free market

I have a key that will unlock a puzzling mystery
I have a key that will unlock a puzzling mystery

Have you read Jay Richards’ book “Money, Greed and God?” Because if you haven’t, he’s written a series of articles that summarize the main points of the book.

The index post is here.

Here are the posts in the series:

  • Part 1: The Eight Most Common Myths about Wealth, Poverty, and Free Enterprise
  • Part 2: Can’t We Build A Just Society?
  • Part 3: The Piety Myth
  • Part 4: The Myth of the Zero Sum Game
  • Part 5: Is Wealth Created or Transferred?
  • Part 6: Is Free Enterprise Based on Greed?
  • Part 7: Hasn’t Christianity Always Opposed Free Enterprise?
  • Part 8: Does Free Enterprise Lead to An Ugly Consumerist Culture?
  • Part 9: Will We Use Up All Our Resources?
  • Part 10: Are Markets An Example of Providence?

Parts 4 and 5 are my favorites. It’s so hard to choose one to excerpt, but I must. I will choose… Part 4.

Here’s the problem:

Myth #3: The Zero Sum Game Myth – believing that trade requires a winner and a loser. 

One reason people believe this myth is because they misunderstand how economic value is determined. Economic thinkers with views as diverse as Adam Smith and Karl Marx believed economic value was determined by the labor theory of value. This theory stipulates that the cost to produce an object determines its economic value.

According to this theory, if you build a house that costs you $500,000 to build, that house is worth $500,000. But what if no one can or wants to buy the house? Then what is it worth?

Medieval church scholars put forth a very different theory, one derived from human nature: economic value is in the eye of the beholder. The economic value of an object is determined by how much someone is willing to give up to get that object. This is the subjective theory of value.

And here’s an example of how to avoid the problem:

How you determine economic value affects whether you view free enterprise as a zero-sum game, or a win-win game in which both participants benefit.

Let’s return to the example of the $500,000 house. As the developer of the house, you hire workers to build the house. You then sell it for more than $500,000. According to the labor theory of value, you have taken more than the good is actually worth. You’ve exploited the buyer and your workers by taking this surplus value. You win, they lose.

Yet this situation looks different according to the subjective theory of value. Here, everybody wins. You market and sell the house for more than it cost to produce, but not more than customers will freely pay. The buyer is not forced to pay a cost he doesn’t agree to. You are rewarded for your entrepreneurial effort. Your workers benefit, because you paid them the wages they agreed to when you hired them.

This illustration brings up a couple important points about free enterprise that are often overlooked:

1. Free exchange is a win-win game.

In win-win games, some players may end up better off than others, but everyone ends up better off than they were at the beginning. As the developer, you might make more than your workers. Yet the workers determined they would be better off by freely exchanging their labor for wages, than if they didn’t have the job at all.

A free market doesn’t guarantee that everyone wins in every competition. Rather, it allows many more win-win encounters than any other alternative.

2. The game is win-win because of rules set-up beforehand. 

A free market is not a free-for-all in which everybody can do what they want. Any exchange must be free on both sides. Rule of law, contracts, and property rights are needed to ensure exchanges are conducted rightly. As the developer of the house, you’d be held accountable if you broke your contract and failed to pay workers what you promised.

An exchange that is free on both sides, in which no one is forced or tricked into participating, is a win-win game.

On this view, what you really need to fear as a consumer is government intervention that restricts your choices in the marketplace, or makes some choices more expensive than they need to be (tariffs).

If you care about poverty, it’s often tempting to think that it can only be solved one way – by transferring wealth from the rich to the poor. But that is a very mistaken view, as any economist will tell you. The right way to create prosperity is by creating laws and policies that unleash individual creativity. Letting individuals create innovative products and services, letting them keep what they earn, making sure that the law doesn’t punish entrepreneurs – that incentivizes wealth creation. Fixing poverty does not mean transferring wealth, it means giving people more freedom to create wealth on their own. Free trade between nations is an important way that we encourage people to create better products and services that what they have available in their own countries.

Economists agree on the benefits of free trade

Who could possibly disagree with free trade? Well, many people on the left do. But economists across the spectrum of ideology (university and private sector and public sector) agree on the benefits of free trade.

Harvard economist Greg Mankiw explains what most professional economists agree on.


Here is the list, together with the percentage of economists who agree:

  1. A ceiling on rents reduces the quantity and quality of housing available. (93%)
  2. Tariffs and import quotas usually reduce general economic welfare. (93%)
  3. Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
  4. Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
  5. The United States should not restrict employers from outsourcing work to foreign countries. (90%)
  6. The United States should eliminate agricultural subsidies. (85%)
  7. Local and state governments should eliminate subsidies to professional sports franchises. (85%)
  8. If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
  9. The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)
  10. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
  11. A large federal budget deficit has an adverse effect on the economy. (83%)
  12. A minimum wage increases unemployment among young and unskilled workers. (79%)
  13. The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
  14. Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)

Socialist economic policies don’t work because they are making policies that are based on economic myths. We know that these myths are myths because of economics is a mathematical science, and because we have tried good and bad policies in different times and places. We have calculations and we have experience to know what works and what doesn’t work. If you want to help the poor, you have to respect what economists know about how wealth is created. The solution is not to “spread the wealth around”, it’s to encourage people to create more wealth by inventing things that people freely choose to buy.

Why is it so hard for a working man to provide for a family these days?

Welfare spending
Welfare spending

Here’s my argument which answers the question:

  1. Feminism was behind no-fault divorce.
  2. Making it easier to divorce means that more divorces will occur.
  3. Marital instability causes women to vote for bigger government.
  4. Unmarried women vote mostly for Democrats.

*Please note that I am talking about unmarried (never married, divorced) women throughout this post.

Here’s the evidence for each point.

1. Feminism was behind no-fault divorce, according to this feminist, pro-no-fault-divorce writer.


Households of 2010 don’t look quite like they did in 1969, when no-fault divorce actually was a controversial topic and these counter-arguments held some weight. The working dad/stay-at-home mom model of the middle class has been replaced by two-parent earner households and a growing number of working mom/stay-at-home dad arrangements. In working poor and impoverished families, the one-parent provider model was never the norm. No-fault divorce seemed scary when it had never before existed, but the truth is that its introduction was long overdue. Feminist groups at the time supported no-fault divorce, as it provided women an escape hatch from desperately unhappy marriages in a society where they were already disadvantaged on almost every level, regardless of their marital status. Imagine an abusive marriage in 1968, when the court-savvy abuser could actually force the victim to stay in the relationship forever. Imagine that now, and you know why domestic violence attorneys are in full support of introducing no-fault divorce to New York. And the judges aren’t the only problem.

Note that the author of this piece thinks that it is not women’s fault that they choose men who they then want to divorce. It’s not the woman’s fault that she is unhappy with the man she courted with and then chose and then made vows to – women need a no-fault escape hatch, and children do fine without fathers.

2. Easier divorces means more divorces.


This paper analyzes a panel of 18 European countries spanning from 1950 to 2003 to examine the extent to which the legal reforms leading to “easier divorce” that took place during the second half of the 20th century have contributed to the increase in divorce rates across Europe. We use a quasi-experimental set-up and exploit the different timing of the reforms in divorce laws across countries. We account for unobserved country-specific factors by introducing country fixed effects, and we include country-specific trends to control for timevarying factors at the country level that may be correlated with divorce rates and divorce laws, such as changing social norms or slow moving demographic trends. We find that the different reforms that “made divorce easier” were followed by significant increases in divorce rates. The effect of no-fault legislation was strong and permanent, while unilateral reforms only had a temporary effect on divorce rates. Overall, we estimate that the legal reforms account for about 20 percent of the increase in divorce rates in Europe between 1960 and 2002.

It seems obvious, but more evidence never hurts. About 70% of divorces are initiated by women, either because they chose to marry the wrong man, or because they are unhappy with the right man.

3. Marital instability causes women to vote for bigger government for security.


Giving women the right to vote significantly changed American politics from the very beginning. Despite claims to the contrary, the gender gap is not something that has arisen since the 1970s. Suffrage coincided with immediate increases in state government expenditures and revenue, and these effects continued growing as more women took advantage of the franchise. Similar changes occurred at the federal level as female suffrage led to more liberal voting records for the state’s U.S. House and Senate delegations. In the Senate, suffrage changed voting behavior by an amount equal to almost 20 percent of the difference between Republican and Democratic senators. Suffrage also coincided with changes in the probability that prohibition would be enacted and changes in divorce laws.

[…]More work remains to be done on why women vote so differently, but our initial work provides scant evidence that it is due to self-interest arising from their employment by government. The only evidence that we found indicated that the gender gap in part arises from women’s fear that they are being left to raise children on their own (Lott and Kenny 1997). If this result is true, the continued breakdown of the family and higher divorce rates imply growing political conflicts between the sexes. 19

Bigger government must be paid for by higher taxes, of course, which makes it harder for one working man’s income to provide for a family. In fact, feminists wanted men to be displaced as sole-providers. They would prefer that women are “equal” to men, and that means making women get out and work like men. Feminists had every reason to want bigger government and higher taxes to make traditional single-earner families unfeasible financially. They did it for equality.

4. Women are in fact observed to vote for bigger government.


On Tuesday, the nation made history. It made history in electing the first African American president; it made history in building a bigger margin for the first female Speaker of the House; it made history in delivering the biggest Democratic margin since 1964; it made history in sending a record number of people to the polls and the highest percentage turnout since the 1960 election. Analysts will spend the next few months sifting through the data, trying to figure out what happened and why. Historians will likely spend the next several years and decades studying this election, as well. But one thing is immediately clear. Unmarried women played a pivotal role in making this history and in changing this nation. They delivered a stunning 70 to 29 percent margin to Barack Obama and delivered similarly strong margins in races for Congress and the U.S. Senate. Although unmarried women have voted Democratic consistently since marital status has been was tracked, this election represents the highest margin recorded and a 16-point net gain at the Presidential level from 2004.

In fact, there was a recent (2011) study showing that unmarried women do in fact vote for higher taxes and more government as a substitute for a husband’s provider role.


The last three decades have witnessed the rise of a political gender gap in the United States wherein more women than men favor the Democratic party. We trace this development to the decline in marriage, which we posit has made men richer and women poorer. Data for the United States support this argument. First, there is a strong positive correlation between state divorce prevalence and the political gender gap – higher divorce prevalence reduces support for the Democrats among men but not women. Second, longitudinal data show that following marriage (divorce), women are less (more) likely to support the Democratic party.

What follows from voting Democrat?

Since the Democrats took the House and Senate in 2006, and then the Presidency in 2008, the national debt has more than doubled from about 8 trillion to 20 trillion. A lot of that money was spent in welfare for single mothers, which only makes the women and their fatherless children more dependent on government. Children raised in unmarried home are far less likely to marry themselves, and to be independent of government. Which means that they will vote for bigger government when they start to vote, since they can’t make it through life on their own strength.

If more people vote for Democrats then we will get higher taxes to pay for all the government spending. Higher taxes means that a married man can no longer retain enough of his earnings to support a family. And that means his wife has to work, and that means that his children will learn what the government schools decide they should learn – so that all the children will be equal and think the same (pro-government) thoughts. This should not be controversial, because it is what it is. But if we want to talk about the decline of marriage honestly, then we need to be talking to single women about how they choose men, when they have sex with men, and how they vote at election time. You really can’t have it all.

Every immigrant without a high school degree will cost taxpayers $640,000

Major welfare programs as of 2012
Major welfare programs as of 2012

I am very much in favor of expanding and streamlining immigration processes for skilled immigrants, especially for areas where there is more demand than supply. But I am not in favor of letting in refugees or other unskilled immigrants, especially if they will be eligible to collect benefits paid for by other working taxpayers.

The Daily Signal explains what the cost is:

On Thursday, the National Academies of Sciences, Engineering, and Medicine will release its report on “The Economic and Fiscal Consequences of Immigration.” According to the report, first generation immigrants as a group increase the nation’s fiscal deficit. In other words, the government benefits they receive exceed the taxes paid.

The National Academies’ report provides 75-year fiscal projections for new immigrants and their descendants. The fiscal impact varies greatly according to the education level of the immigrant. Low-skill immigrants are shown to impose substantial fiscal costs that extend far into the future. The future government benefits they will receive greatly exceed the taxes they will pay.

On average, a nonelderly adult immigrant without a high school diploma entering the U.S. will create a net fiscal cost (benefits received will exceed taxes paid) in both the current generation and second generation. The average net present value of the fiscal cost of such an immigrant is estimated at $231,000, a cost that must be paid by U.S. taxpayers.

The concept of “net present value” is complex: it places a much lower value on future expenditures than on current expenditures.

One way to grasp net present value is that it represents the total amount of money that government would have to raise today and put in a bank account earning interest at 3 percent above the inflation rate in order to cover future costs.

Thus, as each adult immigrant without a high school diploma enters the country, the government would need to immediately put aside and invest $231,000 to cover the future net fiscal cost (total benefits minus total taxes) of that immigrant.

Converting a net present value figure into future outlays requires information on the exact distribution of costs over time. That data is not provided by the National Academies.

However, a rough estimate of the future net outlays to be paid by taxpayers (in constant 2012 dollars) for immigrants without a high school diploma appears to be around $640,000 per immigrant over 75 years. The average fiscal loss is around $7,551 per year (in constant 2012 dollars).

Slightly more than 4 million adult immigrants without a high school diploma have entered the U.S. since 2000 and continue to reside here. According to the estimates in the National Academies report, the net present value of the future fiscal costs of those immigrants is $920 billion.

If you want to take in refugees or unskilled immigrants or sponsor elderly family members, then they should not be allowed to collect benefits paid by other taxpayers. The family that is here already must provide for them, and be held accountable should anything go wrong. Unfortunately, that’s not how the system works now, and it’s not what the Democrats want. They want to import more people who will depend on big government, and then give them the right to vote.

Now, you might think that young American students who expect to find jobs will also expect to keep most of what they earn. It’s very surprising then that they keep voting for a party (the Democrats) that seeks to enslave them with the obligation to pay for other people. I know that the next generation will be paying more in taxes than I ever did during my lifetime.

UK judge sentences radical Islamist imam who lived on welfare to 20 years in prison

Democrats think that the real threat to America is not radical Islamic terrorism
Democrats think that the real threat to America is not radical Islamic terrorism

This story is from the UK Telegraph.


A senior judge has challenged Islamist extremists who live on benefits while claiming to “despise” Western democracy, as he sentenced hate preacher Anjem Choudary to five-and-half years in prison.

Choudary has lived on benefits in the UK for the past 20 years, during which time it is understood he has claimed up to £500,000 from the state.

While living off the state – dubbing his benefits ‘Jihadiseekers’ Allowance’ – Choudary became one of the country’s most notorious radical preachers – professing hatred against the West.

But he managed to avoid a criminal conviction until he was charged last year with drumming up support for a terrorist organisation by pledging allegiance to Islamic State of Iraq and Levant (Isil).

On Tuesday he was sentenced alongside fellow radical Islamist Mohammed Mizanur Rahman after both being convicted of inviting support for the terrorist group.

[…]The judge said Choudary had invited support for Isil while it was “engaged in appalling acts of terrorism”.

He said: “At no point did either of you say anything to condemn the violent means by which [Isil] claimed to have established a caliphate.”

The UK had Labour Party rule for well over a decade, and they opened up their immigration policy to import many, many unskilled immigrants from countries with a significant presence of radical Islam. The idea of the secular leftists was that they would be able to buy the votes of unskilled workers with welfare money paid by the people who actually had jobs. And it worked. Well, there are some problems: they have gangs of Muslims raping and sex-trafficking children, but the strategy of importing anti-conservative voters worked.

I think that a lot of Western countries with welfare states and open-borders immigration policies often have problems like the UK does. And in especially leftist countries that have weakened marriage by redefining it, you get even more welfare fraud.

In Canada, polygamous Muslims can already collect multiple welfare checks for their multiple wives.


Hundreds of [Greater Toronto Area] Muslim men in polygamous marriages — some with a harem of wives — are receiving welfare and social benefits for each of their spouses, thanks to the city and province, Muslim leaders say.

Mumtaz Ali, president of the Canadian Society of Muslims, said wives in polygamous marriages are recognized as spouses under the Ontario Family Law Act, providing they were legally married under Muslim laws abroad.

“Polygamy is a regular part of life for many Muslims,” Ali said yesterday. “Ontario recognizes religious marriages for Muslims and others.”

He estimates “several hundred” GTA husbands in polygamous marriages are receiving benefits. Under Islamic law, a Muslim man is permitted to have up to four spouses.

However, city and provincial officials said legally a welfare applicant can claim only one spouse. Other adults living in the same household can apply for welfare independently.

The average recipient with a child can receive about $1,500 monthly, city officials said.

Note that expanding the welfare state and increasing unskilled immigration from countries with anti-Western populations is a central plank in leftist political parties such as our own Democrat Party. The Democrat Party itself is very much in favor of expanding welfare (Obama repealed the 1996 welfare reform policy) and are also in favor of weakening border security.

More details emerged today in the Wall Street Journal about the payments that Obama sent to Iran: (H/T Ari)

The Obama administration followed up a planeload of $400 million in cash sent to Iran in January with two more such shipments in the next 19 days, totaling another $1.3 billion, according to congressional officials briefed by the U.S. State, Treasury and Justice departments.

The cash payments—made in Swiss francs, euros and other currencies—settled a decades-old dispute over a failed arms deal dating back to 1979. U.S. officials have acknowledged the payment of the first $400 million coincided with Iran’s release of American prisoners and was used as leverage to ensure they were flown out of Tehran’s Mehrabad on the morning of Jan. 17.

[…]The Obama administration briefed lawmakers on Tuesday, telling them that two further portions of the $1.3 billion were transferred though Europe on Jan. 22 and Feb. 5. The payment “flowed in the same manner” as the original $400 million that an Iranian cargo plane picked up in Geneva, Switzerland, according to a congressional aide who took part in the briefing.

The $400 million was converted into non-U.S. currencies by the Swiss and Dutch central banks, according to U.S. and European officials.

The Treasury Department confirmed late Tuesday that the subsequent payments were also made in cash.

Do you ever wonder where your taxpayer money is going? Obama is using it to prop up dangerous Islamic regimes who sponsor terrorism and kill our troops on the battlefield in Iraq. That’s what every Democrat voter voted for, as well. They are responsible, whether they intended these consequences or not.

Venezuela solves hunger by banning bread lines, and solves crime by banning self-defense

Two socialists shake hands: Barack Obama and Hugo Chavez
Two socialists shake hands: Barack Obama and Hugo Chavez

First, let’s review who has been running Venezuela, and what they’ve been doing in the last few decades.

Here is an article from March 2013 from the radically leftist Slate. The headline is “Hugo Chavez’s economic miracle: The Venezuelan leader was often marginalized as a radical. But his brand of socialism achieved real economic gains”. The author is “a senior writer for the International Business Times”.

He writes:

Chavez became the bugaboo of American politics because his full-throated advocacy of socialism and redistributionism at once represented a fundamental critique of neoliberal economics, and also delivered some indisputably positive results. Indeed, as shown by some of the most significant indicators, Chavez racked up an economic record that a legacy-obsessed American president could only dream of achieving.

What did Chavez do, precisely, that caused the Venezuelan economic to boom? Well, he nationalized private industry and redistributed wealth from job creators and entrepreneurs to the poor.

As The Week correctly put it, while “Chavez’s policies of redistribution and nationalization of oil assets endeared him to Venezuela’s working class” and produced many laudable results, the country’s “oil-centric economy has taken away resources from other areas that are badly in need of development.”

It’s a miracle! Yay for socialism! Well, that’s what leftists thought – this time, for sure, the laws of economics would be suspended and unicorns would fly.

Reason.com reports on what happened next:

The tragedy of Venezuela continues unabated, but that doesn’t mean the government of President Nicolás Maduro has stopped trying to fix problems like the devastating scarcity of food which has led to malnutrition, riots, food truck hijackings, vigilante lynchings of petty thieves, and the starvation of zoo animals.

No, Maduro hasn’t admitted the failure of Chavismo — the brand of Bolivarian socialism imposed on the oil-rich country by his late predecessor Hugo Chavez — instead, Venezuela’s embattled leader has launched a war on “anxiety.”

The National Superintendency of Fair Prices has reportedly instituted a policy of fining bakeries that allow lines to stretch out their front doors, according to PanAmPost. The head of this particular bureaucracy, William Contreras, claims the lines aren’t a true indicator of a severe shortage of bread, but rather, a political “strategy of generating anxiety.”

[…][T]his is indicative of the magical thinking of Venezuela’s socialist government: the breakdown of the economy couldn’t possibly because of failed economic policy, and scarcity must be the result of a greater conspiracy.

Fine, so they solved the problem of not enough bread by banning line-ups for bread. Great. But what about Venezuela’s astronomically high murder rate? What will they ban to solve that?

Easy, peasy: by seizing the guns of law-abiding people, just like Hillary Clinton wants to do.

Daily Wire reports:

Venezuela is descending further into the misery of socialism, as their government confiscated 2,000 pistols, shotguns and other firearms on Wednesday.

Reuters reports that the firearms were “crushed and chopped up” at a square in Caracas and ammunition was registered through laser technology as part of Interior Minister Nestor Reverol’s recent initiatives to further disarm the Venezuelan citizenry.

“We are going to bring disarmament and peace,” Reverol declared.

Venezuela currently has the second highest murder rate in the world, and Caracas is the most violent city in the world. In 2012, dictator Hugo Chavez completely banned private gun ownership, and yet crime rose.

Naturally, taking away the guns of law abiding people increases the rate of violent crime. In the UK, where the ban on handguns resulted in the doubling of violent crime in the four years after the ban. This is known by anyone who has spent more than two minutes studying the history of these laws in other times or places.

In my last post, I reported about how Venezuela had resorted to forced labor (slavery) to grow more food.

Here’s what CNBC reported:

The government of Venezuela has issued a decree that “effectively amounts to forced labor” in an attempt to fix a spiraling food crisis, according to a new report from Amnesty International.

A Venezuelan ministry last week announced Resolution No. 9855, which calls for the establishment of a “transitory labor regime” in order to relaunch the agricultural and food sector. The decree says that the government must do what is “necessary to achieve strategic levels of self-sufficiency,” and states that workers can be forcefully moved from their jobs to work in farm fields or elsewhere in the agricultural sector for periods of 60 days.

It’s so bad that Venezuelans are breaking into zoos to kill and eat the animals. Now that’s real progressive animal rights for you. But they can solve this by banning the eating of meat.

Slavery, food lines, lousy health care, crime sprees, confiscating guns from law abiding citizens. All to be expected when Democrat party policies go into effect. If Democrats wins the House, Senate and Presidency, we’ll see the same here – we’re not any better than any other country. Nothing magic about the United States, if we get away from our Constitution.

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