Objectivism & Politics, Part 39

Moral argument for capitalism. In The Mind and Society, Pareto makes the following observation:


Theories of “natural law” and the “law of nations” are another excellent example of discussions destitute of all exactness. Many thinkers have more or less vaguely expressed their sentiments under those terms, and have then exerted themselves to link their sentiments with practical ends that they desired to attain. As usual, they have derived great advantage in such efforts from using indefinite words that correspond not to things, but only to sentiments… “Natural law” is simply that law of which the person using the phrase approves; but the cards cannot be so ingenuously laid on the table in any such terms; it is wiser to put the thing a little less bluntly, supplement it by more or less argument. [§401]

What Pareto says about “natural law” applies, by analogy, to Rand’s “moral argument for capitalism,” which is merely a series of loose assertions expressing Rand’s political preferences. It proves nothing beyond Rand’s emotional attachment to certain political convictions. It is rationalization through and through, with the vagueness of lofty abstractions used to carry forth what fact and logic could never have supplied.

Let us take a look at Rand’s argument:

The action required to sustain human life is primarily intellectual: everything man needs has to be discovered by his mind and produced by his effort. Production is the application of reason to the problem of survival . . . .

Since knowledge, thinking, and rational action are properties of the individual, since the choice to exercise his rational faculty or not depends on the individual, man’s survival requires that those who think be free of the interference of those who don’t. Since men are neither omniscient nor infallible, they must be free to agree or disagree, to cooperate or to pursue their own independent course, each according to his own rational judgment. Freedom is the fundamental requirement of man’s mind.

Rand begins with the usual vague truisms: human life, she insists rather sententiously, "depends" on the mind. Very well. She belabors the obvious, but that's okay. It's preferable to what she does next, when she declares, without clarifying what on earth she is talking about, that “production is the application of reason to the problem of survival.” Uncritical people fall for this kind of rhetoric; they fail to notice the egregious vagueness of the term reason. What, after all, is this “reason” that Rand and her disciples pontificate about ad nauseum? How does one distinguish between an individual allegedly using Rand’s “reason” and an individual using some other cognitive method, such as intuition or the scientific method? Objectivists still haven’t gotten around to providing a detailed, empirically testable description of this obscure faculty. Instead, the most they provide is vague descriptions in which reason is defined in terms of other indistinct words, such as their claim that reason “integrates man’s perceptions by means of forming abstractions or conceptions” and “the method ... reason employs ... is logic.” None of these descriptions tell us how reason integrates perceptions, or what Rand means by “logic”; nor do they allow us how to empirically test Rand’s assertions about “reason.” They are little more than a series of arbitrary claims, their dubiety masked by their inexactness.

Yet the difficulties embedded in Rand’s vague concept of reason pale in comparison to the much worse difficulties that confront us when we examine the next step in her argument, where she argues that “freedom is the fundamental requirement of man’s mind.” Here, again, we run into the problem of vagueness. What does Rand mean by the term “freedom”? Her disciples would probably say: “She means laissez-faire capitalism.” Very well. Why didn’t she just say so right from the start? The answer, again, is fairly simple: she used the more generic (and vague) term freedom because if she claimed that laissez-faire is “a fundamental requirement of man’s mind,” her argument would clearly go against obvious facts known by nearly everyone. As Rand and her followers are the first to admit, pure “laissez-faire” capitalism has never existed; yet this has not prevented all kinds of amazing scientific and technological advances, all of which can be vaguely attributed to the human mind (though not necessarily to “reason,” as we shall see). So it turns out that laissez-faire is not a “fundamental” requirement of man’s mind”: any sort of free enterprise, even one as “heavily” regulated as the American version, will do.

Rand’s argument has yet another glaring weakness. If we identify Rand’s “reason” with some type of formalized thinking (and after all, Rand invites us to make such identification with her claim that “logic” is the “method employed by reason”), then we have to reject Rand’s claim that “production is the application of reason to the problem of survival.” In point of fact, processes of production require a great deal more cognitive skills than can be encompassed by merely formalized thinking. Indeed, it is debatable whether formalized thinking plays much of a role in in most of the decisions involved in directing the processes of production—i.e., decisions involved in allocation of capital, where entrepreneurship comes into play. Business decisions require facing uncertainties that cannot be resolved by formal “reason.” As economist Frank Knight pointed out in Risk, Uncertainty, and Profit: “The powers and attributes of [economic] leadership form the most mysterious as well as the most vital endowment which fits the human species for civilized or organized life, transcending even that power of perceiving and associating qualities and relations which is the true nature of what we call reasoning.” The uncertainties and complexities facing the entrepreneur are so daunting that logic and reason break down: the entrepreneur must rely on his “intuition.” Market processes are therefore not merely “an application of reason to the problem of survival”; they also rely heavily on “intuition” and “trial and error.” As Knight explained:



...when we try to decide what to expect in a certain situation, and how to behave ourselves accordingly, we are likely to do a lot of irrelevant mental rambling, and the first thing we know we find that we have made up our minds, that our course of action is settled. There seems to be very little meaning in what has gone on in our minds, and certainly little kinship with the formal processes of logic which the scientist uses in an investigation. We contrast the two processes by recognizing that the former is not reasoned knowledge, but "judgment," "common sense," or "intuition." There is doubtless some analysis of a crude type involved, but in the main it seems that we "infer" largely from our experience of the past as a whole, somewhat in the same way that we deal with intrinsically simple (unanalyzable) problems like estimating distances, weights, or other physical magnitudes, when measuring instruments are not at hand.

To sum up: Rand’s “moral” argument for capitalism, to the extent that we can decipher any kind of distinct empirical content in at all, oversteps obvious facts. Rand in her argument appears to be guilty of conflating “freedom” with laissez-faire capitalism; in any case, her implication that survival requires freedom from “interference” (i.e., laissez-faire) is obviously contradicted by facts known to everyone (i.e, by the fact that, despite the absence of laissez-faire, we’re still alive). Nor is Rand’s assertions about “reason” empirically sound; for, in practical matters, men rely far more on “intuition”; nor is it clear, given the uncertainties and complexities faced in ordinary business, that it could be otherwise, since formalized systems of thought can’t handle great complexity and uncertainty.

Objectivism & Politics, Part 36

Politics of Human Nature 20: Grievance Politics. In any advanced society there will likely be a number of individuals whose political beliefs are strongly influenced by grievances, either real or imagined, against various groups or institutions. We see this on the left with identity politics and anti-capitalist hysteria and on the right among rabble-rousing conspiracy theorists and those who fear expanding government. Grievance politics is an important factor in the socio-political equation; and grievances against “capitalism,” “globalism,” “markets” serve as an important stumbling block to the political ideals of Objectivism. And even more to the point, grievances against the free market seem to be part and parcel of capitalism itself. As Schumpeter explained in Capitalism, Socialism, and Democracy:

There are the daily troubles and expectations of trouble everyone has to struggle with in any social system — the frictions and disappointments, the greater and smaller unpleasant events that hurt, annoy, and thwart. I suppose that every one of us is more or less in the habit of attributing them wholly to that part of reality which lies without his skin, and emotional attachment to the social order — i.e., the very thing capitalism is constitutionally unable to produce — is necessary in order to overcome the hostile impulse by which we react to them.… Secular improvement that is taken for granted and coupled with individual insecurity that is acutely resented is of course the best recipe for breeding social unrest.

We see these grievances in full regalia in the recent global-warming orgies at Copenhagen Summit. Although ostensibly held to save the world from imminent environmental catastrophe, the most prominent and real motive of the global-warming hysteria is hatred and grievance against capitalism. We saw that quite clearly during an anti-capitalist tirade by the Venezuelan leader Hugo Chavez. When Chavez said there was a “silent and terrible ghost in the room” and that ghost was called capitalism, the applause was deafening. When he concluded by saying “socialism, the other ghost that is probably wandering around this room, that’s the way to save the planet, capitalism is the road to hell….let’s fight against capitalism and make it obey us,” he received a standing ovation. Many global warming advocates are merely disappointed socialists nursing grievances against capitalism and making use of environmentalism as a pretext for sabotaging the free market. With the recent exposure of emails from leading climate “scientists” at East Anglia's Climate Research Unit, the fraudulent nature of the Global Warming movement is beyond a reasonable doubt. Yet the exposure of the fraud has exercised no effect on the vast majority of global warming hysterics—which proves the power of their real motivations, which stem, at least in part, from grievances against capitalism and the West.

So we have this powerful force fueled by grievances against capitalism. What about grievances operating in the opposite direction? Could they be used by Objectivists and other advocates of “laissez-faire” to counter-balance the grievances on the other side?

While such “pro-market” (actually anti-government) grievances obviously exist, whether they can be used to cancel out the anti-capitalist grievances is unlikely. There are two forces that operate against them. First, it should be noted that if these grievances actually managed to move the country away from big government and toward freer markets, this very effect would tend to undermine itself over time. As grievances against big government push society closer to the ideal of laissez-faire, this very movement toward freer markets and less government will at the same time lessen the grievance level against government interference in markets; for as the role of government is lessened in people’s life, government will become less of a target for grievances, since people tend to focus their grievances against those institutions that most directly affect their lives. As the government’s role shrinks in people's lives, the role of other institutions, such as corporations and unions, will increase, thus making them a riper target for grievance. So built into the institutional structure of society is a kind of mechanism which serves as a brake of any movement toward laissez-faire. As a country moves toward socialism, grievances against government increase until the movement is reversed. But the same thing happens as the market gains in strength.

In addition to this, there’s another type of grievance that has to be taken into account: the grievance that arises when a government service is abolished. Since Obama’s election and the dominance of the left-wing of the Democratic Party in Congress, there has been growing resentment against the expansion of government in America. This, in combination with the government's gross fiscal irresponsibility, could lead to a reduction in government when changes in the political climate work their way through the political system. Yet if any government services end up being curtailed, this itself would be a potential cause of widespread grievances. The American public may not like taxes or big government, but they are rather fond of government services like social security and medicare. Here, then, is another source of grievance which would act as a brake toward the Objectivist political ideals.

Socialistic and capitalistic movements in society tend to be cyclical, as the trend toward either tendency fuels opposition. Before Objectivism could achieve its social and political goals, it would have to attain ideological supremacy. But all the empirical evidence at our disposal strongly suggests that this would be impossible. Many human beings nurse grievances against dominant institutions. That is just the in the nature of things: nothing to be done for it.

Objectivism & Politics, Part 35

Politics of Human Nature 19: Businessmen and the state. In the last post, I examined how economic interests can bias even businessmen against laissez-faire. In this post, I will examine another side of this issue illustrated by Rand’s tendency to rigidly divide businessmen into two classes: (1) competent businessmen who, like the heroes of Atlas Shrugged, make “their fortunes by their own personal ability”; and (2) incompetent businessmen who need government help to compete with their betters. Rand’s conviction appears to be that “It is only with the help of government regulations that a man of less ability can destroy his better competition"—and he is the only type of man who runs to government for economic help.

Is that really true? No, not at all. There is a third class of businessmen: (3) competent businessmen who use government as a source of additional capital. This class includes even those businessmen Rand singles out for praise for making their fortunes by their own personal ability, James Jerome Hill, Commodore Vanderbilt, Andrew Carnegie, and J.P. Morgan. Yet each of these men either took government funds or lobbied for funds or supported measures which involved transfers of money to the business class. Early in his career Hill took advantage of several government land grants. For instance, he attempted to reacquire a grant forfeited by a railroad company he had taken over. This grant had already been settled by farmers who, alarmed at the prospect of eviction, appealed to Congress. The dispute was resolved by merely giving Hill valuable timber lands in Montana and Idaho.

Vanderbilt's dealings with government were very complex. Local government in New York City was extraordinarily corrupt, and so bribery was a necessary part of doing business in that city—so in one sense you could argue that Vanderbilt had no choice but to engage in bribery. Yet it would be a mistake to argue, as Rand did, that Vanderbilt engaged in political chicanery merely for defensive reasons, to protect his legitimate interests. Vanderbilt, for instance, persuaded the city to pay him $4,000,000 to replace a dangerous section of his railroad with a tunnel. There are, in addition to this, many other government financed favors done for Vanderbilt of a more ambiguous nature, such as building streets that benefited Vanderbilt’s business interests.

Andrew Carnegie admitted "the single most important event" in prompting him to enter the steel business was the $28-per-ton tariff on imported steel, passed by Congress in 1870. J.P. Morgan, for his stead, rejected the notion of a pure free market, believing it would lead to “ruinous competition.” Morgan began his career selling faulty rifles to the army; and while his subsequent dealings with the government seem to have at least honored the letter of the law, it would be naive to conclude he achieved a Roark-like level of integrity in his affairs with the state.

Rand’s belief that only men of less ability go to the government for economic help is not supported by the facts. Regardless of their ability, entrepreneurs are always looking for ways to get their hands on capital. Their function is to “lead” the means of production into new channels—hardly a trivial task. Economic development did not arise due to capital accumulation or to increases in the quantity of labor. As Schumpeter explained more than a century ago: “The slow and continuous increase in time of the national supply of productive means and of savings is obviously an important factor in explaining the course of economic history through the centuries, but it is completely overshadowed by the fact that development consists primarily in employing existing resources in a different way, in doing new things with them, irrespective of whether those resources increase or not.” [Theory of Economic Development, 68]

So it’s not necessarily how an entrepreneur gets ahold of the necessary resources: it’s what he does with it once he gets control of it that counts. If he makes good decisions with his capital, it will create new products, new jobs, increase productivity, and lead to what is broadly described as economic “development.” In this, we see both the splendor and moral ambiguity at the heart of capitalism. An entrepreneur, a capitalist, a businessmen can enrich himself and help raise society’s general standard of living by resorting to methods that are not entirely honorable. As a zealous advocate of “capitalism,” Rand could not admit the seamier sides of free enterprise. To admit such a thing would hurt the cause. Moreover, Rand tended to resent the very notion of ambiguity, particularly of the moral variety. So she created her rigid division between the heroic entrepreneurs who never soiled themselves with the spoils of the state and the Wesley Mouches who required the state to keep their businesses from going under.

The willingness of even competent entrepreneurs to use the state as a means of raising capital and fending off "ruinous competition" adds yet another obstacle to finding support for laissez-faire. If Rand's vision of Capitalism were correct, we would expect to find the most zealous advocates of laissez-faire among prosperous businessmen. Is that what we find in reality? Not exactly. While most businessmen advocate free enterprise, the majority of them don't exactly embrace the "laissez-faire" version of free enterprise propagandized by Rand and her disciples. Nor should this be in the least surprising: for it is not always clear that laissez-faire is in the interest of the business class. The state is too rich a source of business and capital to be shunned altogether by the intrepid entrepreneur.

Objectivism & Politics, Part 34

Politics of Human Nature 18: Economic interests and “rationality.” The current economic debacle has once and for all refuted the belief in the rational actor model, otherwise known as Homo economicus, and for that at least we can be thankful. That everyone pursues economic interests, and some pursue them to the exclusion of other interests and passions, is well testified by basic facts observed by all; and that some people pursue these economic interests with a modicum of “rationality” and good sense, is also eminently plausible; but the idea that many people either do or can pursue economic interests with the sort of full fledged rationality imagined by economists and preached by Rand and her disciples is no longer tenable. It is only due to the optimist view of human nature, propagated by reality-evading sentimentalists, that this rational actor theory was ever allowed to elude the scorn it deserved. All the best authorities on human nature have stood against it, from Machiavelli to the Founding Fathers; from Pareto to Steven Pinker.


The view of man as a nonrational animal is hardly the invention of Freud or Pareto. It was well known, for example, well before these alleged pioneers of the non-rational, that wishful thinking, rather than reason, plays an enormous part in human affairs, and that man, far from being a “rational animal,” could more accurately be described as “a nonrational rationalizer.” “The passions always seek to justify themselves and persuade us insensibly that we have reason for following them,” wrote Malebranche. “When one loves, hates, fears, desires, one has an imperative wish to have a reason for loving, hating, fearing, desiring … and by the force of one’s wish for it, one imagines that one has found it,” wrote Jean La Placette. Pascal wrote: “I think, not that a thing offends us for the reason which we find afterwards, but that we find the reasons because the thing offends us.” And John Adams wrote: “There is nothing in the science of human nature more curious, or that deserves a critical attention from every man so much, as the principle which moral writers have distinguished by the name of self-deceit.”

What was widely believed in the seventeenth and eighteenth centuries has been confirmed by scientific research in recent decades. As psychologist Daniel Gilbert explains:

Whether by choosing information or informants, our ability to cook the facts that we encounter helps us establish views that are both positive and credible…. When Democrats and Republicans see the same presidential debate on television, both sets of viewers claim that the facts clearly show that their candidate was the winner. When pro-Israeli and pro-Arab viewers see identical samples of Middle East coverage, both proponents claim that the facts clearly show that the press was biased against their side….

When facts challenge our favored conclusion, we scrutinize them more carefully and subject them to more rigorous analysis…. Volunteers in one study were asked to evaluate the intelligence of another person, and they required considerable evidence before they were willing to conclude that the person was truly smart. But interestingly, they required more evidence when the person was an unbearable pain in the ass than when the person was funny, kind, and friendly.” [Stumbling on Happiness, 185-186]

So it’s well established that human being’s are prone to rationalizing. There is plenty of evidence for it in everyday life and, if that doesn't suffice, we find even more evidence in countless psychological experiments. Rand herself would not deny the pervasiveness of rationalizing. She would only insist it is not an innate tendency in human nature. Yet given the ubiquity of rationalizing throughout human history, Rand’s view is grossly implausible. She cannot, after all, blame Kant for all this rationalizing, for it existed long before the sage of Königsberg began spinning his pedantic webs.

Now when we combine this insight with the issue of economic interests, we have another potential source of opposition to laissez-faire. Nor is it opposition merely from the usual suspects, such as civil servants, welfare recipients, and socialists. No, the opposition comes from the very class that one might think would be most prone to supporting laissez-faire: the business class.

There’s a long tradition of businesses receiving financial assistance from state and local governments in America. In 2006 the federal government spent $92 billion in direct and indirect subsidies to businesses and private- sector corporations. With the corporate bailouts of 2008 and 2009, this number obviously rises dramatically. Tariffs are another source of economic assistance to business; and while these tariffs have been relatively light in recent decades (despite recent tariffs on steel and tire imports), historically, they have been quite high in the United States, and even constituted a secondary cause of the Civil War. Nor should we forget altogether the efforts made by the Federal Reserve and the Treasury to encourage reckless speculation during the last two decades and exasperate market failures brought on by portfolio theory, over-securitization, and wildcat leveraging.

Now of course we all know that Objectivists oppose all these pro-business interventions as contrary to laissez-faire. “None of this will be a problem under laissez-faire, because it wouldn’t be allowed,” they would be eager to tell us. The problem is, first you have to reach laissez-faire, and how will this be possible when many businessmen are against it on account of economic interests?

If it is argued that these businessmen can be educated, by or through “reason,” to understand that corporate welfare and other government sponsered favors are not in their “real” or “true” economic interest, then I would simply point back to what I presented earlier in this post: human beings are rationalizers and self-deceivers. Whatever irrationality there may be in accepting government assistance, it’s easy to rationalize it away, particularly for those benefiting from it. Rand tried to argue that “rationality” (i.e., agreement with Objectivism) was necessary to life, as if to suggest that anyone who is not rational will simply die. But for better or worse, corporate subsidies in America have not killed anyone who has benefited from them. Nor have they destroyed the economy. At worse, they have made the economy somewhat less efficient and somewhat less prosperous; at best, they may have had a slight beneficial effect. The tariffs in the nineteenth century transferred wealth from farmers, who probably would have spent most of it, to industrialists, who invested most of their protectionist-derived loot in the development of the economy.

The general logic of so-called “corporate welfare” works like this: such transfers of wealth provide large benefits to a small number of people, causing a slight loss to everyone else. To try to convince the few who benefit from these transfers that it is “irrational” and contrary to their “enlightened” self-interest to enrich oneself (or one’s business operations) in this manner is, for all intents and purposes, futile. On the one hand, the benefits of the corporate welfare are obvious, tangible, and immediate; whereas its potential long-range costs are abstract, uncertain, and theoretical. As the old cliche has it, A bird in the hand is worth two in the bush. When placed against the power of rationalization, the Objectivist arguments against corporate subsidies and for laissez-faire will likely have no effect. And indeed, that is precisely what we find in the real world. How many businesses (or people in general) turn down subsidies, grants, privileges from the government? Very few. And on those rare instances when government money is rejected, it is usually because of some proviso in the handout that greatly reduces its attractiveness (as when corporations turned down bailout money because they didn’t want the government cutting their salaries).

Thanks to the power of rationalization, even an Objectivist can convince himself that his theoretical commitment to laissez-faire should not be allowed to get in the way of a chance to stick his snout deep into the public trough and begin chomping away. John Allison, the chairman and CEO of BB&T, the largest bank in West Virginia, rationalized the $3 billion he accepted in federal rescue money as follows. "While we feel these proposals are slightly negative for healthy banks like BB&T,” he said shortly before accepting the loot, “we are evaluating the extent to which we will participate. Frankly, it is difficult not to participate when your competitors are benefiting from the program. Consistent with our values and philosophy, we will make the decision that is in the best long-term interest of our shareholders and clients."

If even Objectivists accept corporate welfare and rationalize about it, what hope is there for the rest of us?

Objectivism & Politics, Part 33

Politics of Human Nature 17: Vanity and “social metaphysics.” Closely related to the obsession with preeminence and status is vanity. The pervasiveness of this emotion in human nature was satirized to good effect in a bit of amusing doggerel by an unnamed poet as follows:

I am hungry for praise:
I would to God it were not so—
That I must live through all my days
Yearning for what I’ll never know.
I even hope that when I’m dead
The worms won’t find me wholly vicious,
But as they masticate my head
Will smack their lips and cry “delicious!”

The view that vanity is a dominant motive in human nature was fairly common among writers and poets in the 17th and 18th centuries. Pascal is representative in this respect:



Vanity is so anchored in man’s heart that a soldier, a camp-follower, a cook, a porter, boast and wish to have admirers; and the philosophers wish the same; and those who write against the desire for glory, glory in having written well; and those who read it, desire to have glory for having read it; and I who write this have perhaps the same desire; and also those who will read what I write.

While Rand did not address vanity per se, her disciple Nathaniel Branden formulated a concept that dealt with one of the manifestations of vanity, “social metaphysics.” Rand describes social metaphysics as follows:

A social metaphysician is one who regards the consciousness of other men as superior to his own and to the facts of reality. It is to a social metaphysician that the moral appraisal of himself by others is a primary concern which supersedes truth, facts, reason, logic. The disapproval of others is so shatteringly terrifying to him that nothing can withstand its impact within his consciousness; thus he would deny the evidence of his own eyes and invalidate his own consciousness for the sake of any stray charlatan's moral sanction. It is only a social metaphysician who could conceive of such absurdity as hoping to win an intellectual argument by hinting: "But people won't like you!"

Now while some people may be overly concerned with the opinion of others, it is not clear that this concern involves regarding “the consciousness of other men as superior … to the facts of reality.” That is a caricature. Many human beings wish to be admired by others. This may cause them, for example, to try to say things they don’t really believe or pretend to admire things they don’t like. It may even cause them to defer to another persons judgment on particular issues, like Objectivists frequently defer to Rand’s or Peikoff’s judgment. But this merely means the individual trusts another person’s judgment more than his own—a view not at all inconsistent with being an Objectivist, as the facts attest. To describe this trust as invalidating one’s own consciousness or denying the evidence of one’s own eyes is clearly to engage in gross hyperbole.

Yet the exaggerations in the doctrine are not what’s most critical for the current discussion. Even more important is the implication that “social metaphysics”—and indeed any of the manifestations of vanity—are merely the consequences some stray premise that has been integrated in the individual’s subconscious. There is nothing innate about it. The fact that vanity has been a preponderant motive throughout human history is a sheer coincidence. Why so many human beings throughout the ages have held this premise is not explained but is evaded. Apparently, Rand wished to believed that things could be different, that social metaphysics, vanity, the desire for status—that all these troublesome emotions could be abolished; that human beings did not have to be dominated by them. The desire to be rid of these emotions is understandable, particularly for a philosopher advocating laissez-faire capitalism: because these emotions serve as an important obstacle to the implementation of that system.

John Adams, the most psychologically astute of the Founding Fathers, described vanity (which he called the “passion for distinction”) as “the great leading passion of the soul”:

This propensity, in all its branches, is a principal source of the virtues and vices, the happiness and misery of human life; and … the history of mankind is little more than a simple narration of its operation and effects… The desire of esteem is as real a want of nature as hunger; and the neglect and contempt of the world as severe a pain as gout and stone. It sooner and oftener produces despair and detestation of existence… Every personal quality, every blessing of fortune, is cherished in proportion to its capacity of gratifying this universal affection for the esteem, the sympathy, the admiration and congratulations of the public. [Life and Works of John Adams, 232ff]

Now it is often argued by advocates of laissez-faire that one of the chief merits of that system is that it is not a zero-sum game. Peter can get rich without harming Paul. In Objectivism, this characteristic of laissez-faire is exemplified in Rand’s contention that “there are no conflicts of interests between rational men.” But if Pascal, Adams, and most other observers of human nature through history are right about the psychological importance and predominance of vanity, then the obvious retort to Rand’s contention is that most men simply are not rational in the sense meant by Rand. Conflicts of interest between men are ingrained in the very nature of things, because men compete for esteem, status, approbation, fame, etc, and this competition will inevitably breed conflict between various human beings.

Furthermore, these conflicts, as well as the emotions that inspire them, will continue to predispose individuals against laissez-faire. Every form of society tends to favor some abilities at the expense of others. A capitalist society favors those well-endowed with commercial virtues; a military society favors those well-endowed with martial virtues; a monarchal society favors those well-endowed with the gifts of the courtier. Even if it is true, as is not implausible, that individuals short in commercial virtues and the talents necessary to thrive under free market competition will nevertheless be better off, in terms of economic well-being, under a free market system, it doesn’t follow that they can be persuaded to favor that system. For at the end of the day, many individuals will prefer distinction to wealth, and will hence prefer the system in which they expect to gain the most distinction. As Steven Pinker notes, “ People go hungry, risk their lives, and exhaust their wealth in pursuit of bits of ribbon and metal [i.e., for vanity].” Despite attempts to denigrate and caricature these emotions as “social metaphysics,” they nevertheless exist and cannot be changed or eliminated merely by refuting Kant and Plato and preaching Rand.

Objectivism & Politics, Part 32

Politics of Human Nature 16: Struggle for preeminence. Social darwinists use to argue that within society there existed a brutal “struggle for existence” in which stronger types “eliminate” weaker types. Although we now know this theory to be erroneous, at one time it seemed plausible; and the reason it did so is because there really does exist a kind of struggle or competition in society. This struggle, however, is not a struggle of life and death; it is, rather, a struggle for preeminence. As the Italian political scientist Gaetano Mosca put it:

If we consider … the inner ferment that goes on with the body of every society, we see at once that the struggle for preeminence is far more conspicuous there than the struggle for existence. Competition between individuals of every social unit is focused upon higher position, wealth, authority, control of the means and instruments that enable a person to direct many human activities, many human wills, as he sees fit. The losers, who are of course the majority in that sort of struggle, are not devoured, destroyed or even kept from reproducing their kind, as is basically characteristic of the struggle for life. They merely enjoy fewer material satisfactions and, especially, less freedom and independence. [The Ruling Class, 30]

The tendency in Objectivism is to ascribe the struggle for preeminence as a mere manifestation of “power lust,” which is itself “only a corollary or aspect of dependence.”

Basically, the power-luster holds the premise that men live either by ruling or by being ruled. The dictator is just as dependent, just as unsure, as his followers; he merely chooses a variant—and, in fact, a lower—mode of expressing it. When you find a great many power-lusters in a nation, the explanation is still the psychology of dependence, and the philosophy that gives rise to it. [Leonard Peikoff, “Philosophy and Psychology in History”]

In other words, the struggle for preeminence, which has characterized every society known to history, is brought about by a “psychology of dependence” and “the philosophy that gives rise to it,” particularly the premises “that men live either by ruling or being ruled.” Here we have the typical strategy deployed by orthodox Objectivists whenever they find themselves confronted by an unpleasant fact: they seek to evade the fact by making it appear weak and pathetic. It may be comforting to think of Hitler and Stalin and Mao as suffering from a “psychology of dependence”; but it is not clear that such “dependence,” whether “psychological” or not, accounts for what is objectionable in these mass murderers. Nearly all human beings depend on other human beings to some extent. The businessman depends on his customers; the stay-at-home wife on her husband; children depend on their parents, etc. etc. A ruler depends on his sources of power: his army, his police, his supporters among the elite; but why this dependence constitutes a “psychology of dependence” is not explained and seems to be a product of wishful thinking. It’s a rationalization aimed at making evil appear less threatening, and therefore easier to accept and live with. It ignores the real issue, however: the fact, for example, that the worst “power lusters,” the most dangerous men who struggle for preeminence, are those who use terror to achieve their dominance. It also, and even more critically, ignores the pervasiveness of this struggle through history: the fact that it involves not merely blood soaked dictators, but even ordinary folks, who, although they don’t necessarily lust for political power, nonetheless experience an obsession with status that leads to irrational outcomes and threatens the achievement of Rand’s laissez-faire. Consider Steven Pinker’s summary of the work done by economist Robert Frank on this issue:

Frank has appealed to the evolutionary psychology of status to point out … shortcomings of the rational-actor theory and, by extension, laissez-faire economics. Rational actors should eschew not only forced retirement savings but other policies that ostensibly protect them, such as mandatory health benefits, workplace safety regulations, unemployment insurance, and union dues. All of these cost money that would otherwise go into their paychecks, and workers could decide for themselves whether to take a pay cut to work for a company with the most paternalistic policies or go for the biggest salary and take higher risks on the job….

The rub, Frank points out, is that people are endowed with a craving for status. Their first impulse is to spend money in ways that put themselves ahead of the Joneses (houses, cars, clothing, prestigious educations), rather than in ways that only they know about (health care, job safety, retirement savings). Unfortunately, status is a zero-sum game, so when everyone has more money to spend on cars and houses, the houses and cars get bigger but people are no happier than they were before. [Blank Slate, 303]

The inborn craving for status doesn’t merely cause people to behave irrationally in the economic realm, it makes them ripe targets for the politics of envy. In an earlier post, I have discussed Rand’s take on egalitarian envy: she saw envy as a manifestation of nihilism arising out of the influence of Immanual Kant. But a far more plausible explanation for this envy is the craving for status, which inspires various individuals to act against their economic self-interest in order to inflict an injury on those who have attained a higher position in the social scale than themselves. Since this obsession with status is at least partially influenced by innate factors, it cannot be cured or gotten rid of through refuting the premises through which this obsession is expressed. People don’t crave status because they have accepted this or that premise; rather, the craving predisposes these individuals to accept premises which encourage hostility toward free market outcomes.

Objectivism & Politics, Part 29

Politics of Human Nature 13: Canaille. John Adams, in a letter to Thomas Jefferson, wrote that "there is a natural Aristocracy among men; the grounds of which are Virtue and Talents." There exists also a kind of natural Chandela or rabble, the grounds of which are vice and incompetence. Of course, in a society besotted with egalitarian sentiments , no one wants to admit such a thing. But it is true nonetheless. There exists a type of person who seems congenitally dysfunctional and incapable of living even a life of genteel and honorable poverty. One may pity such people as much as one wishes—for they really are pitiful—but one should not sentimentalize them. They may be unfortunate, unlucky, entirely blameless for what they have become. Their dysfunction may be cause by mental illness or some other congenital or acquired defect, such as injury to the fore brain or an innate chemical imbalance. Or it may be that these individuals (or at least some of them) are entirely or largely to blame for their sorry plight. Their dysfunction may be an expression of a narcissistic craving to avoid work, or an irresponsible preference for wiling away one’s time in a drunken stupor. Whatever the cause, the fact is that there will always exist some individuals who either can’t or won’t take care of themselves and who therefore cause problems for the rest of us. What is to be done about such people?

We know what Rand opposed in terms of “solutions” to this problem. She opposed any public financed welfare state or “safety net” that might take care of these people and get them off the streets. From Rand’s perspective, it is immoral to take money from the productive and give it to the unproductive. Very well. Then what is to be done? It simply will not do to say: “Leave them alone: let ‘reality’ or ‘nature’ take care of them.” Reality and nature won’t take care of them without first causing great inconvenience for the rest of us. I live in an area which attracts vagrants like a corpse attracts flies. These vagrants cause all kinds of problems for local businesses, from driving away customers through aggressive panhandling to defecating on the sidewalks and on the street.

An Objectivist might (and probably would) argue that these activities are (or ought to be) crimes and that the offenders should be arrested, convicted and punished. Yet, given the costs of convicting and then incarcerating vagrants, we would still find ourselves taking money from the productive to support the unproductive. Indeed, it would probably be cheaper to set up tents and a soup kitchen a few miles outside of town and try to draw the homeless hither. But how many Objectivists could bring themselves to accept such a solution, given their horror of anything that smacks of “welfare” or state assistance? In other words, they are not serious about the problem: they merely wish to repeat their various laissez-faire mantras and slogans. They do not wish to be bothered with the practical challenges that vagrancy poses to society. Instead, they bury these details under the vagueness and obscurity of their abstract doctrines.

Why should the idea of public assistance be so very dreadful to a reasonable person? Even from the point of view of the most callous self-interest, it is better to get the homeless off the street and into shelters, if only to keep them from spreading disease and being a nuisance to the rest of us. There is, after all, no cheaper solution to the problem, short of declaring open season on the poor wretches and exterminating them. Rand claims that the moral is the practical; but in this case, Objectivists have taken their moral principles to impractical conclusions.

Objectivism & Politics, Part 21

Politics of Human Nature 6: The Problem of Aggression. I suggested in my previous “Objectivism & Politics” post that Rand had failed to present a solution to the “problem of the man of force,” a problem which can be subsumed under the broader “Problem of Aggression.” How do you deal with individuals who, for one reason or another, seek to use violence to attain wealth and status? “To ask whether or not force ought to be used in society, whether the use of force is or is not beneficial, is to ask a question that has no meaning,” wrote Pareto; “for force is used by those who wish to preserve certain uniformities and by those who wish to overstep them.” §2174

The only way to prevent the initiation of violence is by a countervailing source of violence—preferably, by a constitutional state under the rule of law. But this solution itself is problematic, for reasons that have to do with the tendency of free governments to come under the sway of people who are not good at using force. Consider how Pareto frames the issue:

Suppose a certain country has a governing class, A, that assimilates the best elements, as regards intelligence, in the whole population. In that case the subject class, B, is largely stripped of such elements and can have little or no hope of ever overcoming the class A so long as it is a battle of wits. If intelligence were to be combined with force, the dominion of the A’s would be perpetual… But such a happy combination occurs only for a few individuals. In the majority of cases people who rely on their wits are or become less fitted to use violence, and vice versa. So concentration in class A of the individuals most adept at chicanery leads to a concentration in class B of the individuals most adept at violence; and if that process is long continued, the equilibrium [of society] tends to be come unstable, because the A’s are long in cunning but short in the courage to use force and in the force itself; whereas the B’s have the force and the courage to use it, but are short in the skill required for exploiting those advantages. But if they chance to find leaders who have the skill—and history shows that such leadership is usually supplied by dissatisfied A’s—they have all they need for driving the A’s from power. Of just that development history affords countless examples from remotest times all the way down to the present. [§2190]

Now Pareto wrote that passage nearly a hundred years ago, before the advent of tanks and tear gas and other such devices that make is very much easier to control violent crowds. So one could argue that Pareto’s framing of the issue no longer applies to contemporary domestic politics. But even if it no longer applies domestically, there is still the issue of foreign aggression, which remains as serious as ever:

These considerations must to some extent be applied to international relations. If the combination-instincts are reinforced in a given country beyond a certain limit, as compared with the instincts of group-persistence, that country may be easily vanquished in war by another country in which the change in relative proportions has not occurred…. People who lose the habit of applying force, who acquire the habit of considering policy from a commercial standpoint and of judging it only in terms of profit and loss, can readily be induced to purchase peace; and it may well be that such a transaction taken by itself is a good one, for war might have cost more money than the price of peace. Yet experience shows that in the long run, and taken in connexion with the things that inevitably go with it, such practice leads a country to ruin. [§2179]

In other words, a commercial society, a society dominated by people who live by their wits and have become increasingly habituated by market forces to think almost exclusively in terms of profit and loss, becomes, over time, less fit for using force to defend the country and prevent the “initiation of force” by foreign aggressors.

Consider, in this respect, the threat posed to the United States by Iran. It may be thought Iran, a country governed by zealous yet primitive Islamic clerics, could not possibly pose any serious threat to America. Not necessarily so, however. There are reports of the Iranians attempting to shoot scud missile from ships in the Caspian Sea. Why would they be doing such a thing? The speculation is that they are rehearsing an Electromagnetic Pulse (EMP) attack against the United States. Such an attack would cripple, if not destroy, America’s electronic infrastructure. According to Dr. William Graham, the former White House science adviser under President Ronald Reagan, “70 to 90 percent of the population would not be sustainable after [an EMP] attack.”

Why is it that the United States is so vulnerable? At least part of the reason is that people have acquired “the habit of considering policy from a commercial standpoint and of judging it only in terms of profit and loss.” The U.S. electronic infrastructure could be hardened to withstand EMP attacks; such hardening, however, would cost billions of dollars and require massive government interference, in the form oversight, of the commercial electronic infrastructure. In other words, defending a nation against EMP weapons is not compatible with the small government, laissez-faire, anti-tax ideals embalmed within the Objectivist politics. Nor is it compatible with the ruling elite generated within nations dominated by a market-based economy, where Pareto’s “combination instincts” dominate the ruling elite at the expense of group-persistence sentiments, and men of courage and force are marginalized by lawyers, bureaucrats, capitalists and entrepreneurs.

Objectivism & Politics, Part 15

The Objectivist cure for faction. In Capitalism: The Unknown Ideal, Rand equates political faction (i.e., "Lobbying") with a mixed economy:

“Lobbying” is the activity of attempting to influence legislation by privately influencing the legislators. It is the result and creation of a mixed economy—of government by pressure groups. Its methods range from mere social courtesies and cocktail-party or luncheon “friendships” to favors, threats, bribes, blackmail. [168]

Rand, however, appears go beyond merely equating a mixed economy with government by pressure groups. She seems to have believed that a mixed economy is the cause of warring pressure groups; that, in other words, there would exist no pressure groups, no political faction, no competing political interests under laissez-faire capitalism, so that the problem of faction could be cured merely (per impossible) by instituting laissez faire.

What is wrong with this point of view? The main error is one of mistaking the effect for the cause. Faction (Rand’s “government by pressure groups”) is not the inevitable byproduct of a mixed economy; rather, a “mixed economy” is the inevitable byproduct of faction. As James Madison put it: “Liberty is to faction what air is to fire, an aliment without which it instantly expires.”

Rand’s cure for faction is no cure at all, but on the contrary, is the very cause of faction. Indeed, for Madison, there exists no cure for faction, because faction is “sown in the nature of man.” Madison therefore concludes that, since “the causes of faction cannot be removed, … relief is to be sought in the means of controlling its effects.”

What reasons are there to believe that Madison, rather than Rand, is right on this issue? Well, besides the testimony of history, we have the evidence of the science. As Steven Pinker explains in The Blank Slate:

Liberal and conservative political attitudes are largely, though far from completely, heritable. When identical twins who were separated at birth are tested in adulthood, their political attitudes turn out to be similar, with a correlation coefficient of .62… Liberal and conservative attitudes are heritable not, of course, because attitudes are synthesized directly from DNA but because they come naturally to people with different temperaments… But whatever its immediate source, the heritability of political attitudes can explain some of the sparks that fly when liberals and conservatives meet. When it comes to attitudes that are heritable, people react more quickly and emotionally, are less likely to change their minds, and are more attracted to like-minded people. [283]

In other words, political divisions are built-in: they part of the hardware of human nature and cannot be abolished by merely changing people's premises. There exists an ingrained psychopathology behind the phenomenon of faction that we will expore in the following "Objectivism & Politics" posts, which will cover the politics of human nature. It is on the issue of human nature that Rand’s politics goes awry. Human beings are not constituted so that they are likely to ever fully accept Rand’s political ideals. This is why her politics, in the final analysis, must be reckoned as “utopian.”

Objectivism & Economics, Part 22

Ayn Rand's insistence on the separation of the economy and the state means that she opposes all regulations, even those that would prevent serious market failures with widespread externalities. Indeed, there is a tendency among Objectivists to deny that regulations can ever have a positive effect. The implicit argument is that, because regulations infringe on individual rights, they are immoral; and since Objectivists insist on equating the moral with the practical, this suggests that any infringement of "individual rights" must lead to bad results (such as aversely affecting millions of people). But if this isn't true, if certain types of financial instruments produced by the market lead to extreme financial dysfunction which harms millions of people, shouldn't the government seek to regulate those financial instrumen? Martin Hutchinson over at prudentbear.com presents a convincing argument for regulating the CDS (Credit Default Swaps) market:

In the early years of the London insurance market, it was possible to buy a life insurance policy on a complete stranger. Then insurance companies noticed the high incidence of unexpected homicides among their lives assured, and the concept of insurable interest was devised, codified by the Life Assurance Act of 1774. Today, you can’t buy a life insurance policy unless you can demonstrate some loss by the assured party’s death. The business is safer that way!

The same consideration must surely apply to the CDS market. The legitimate hedging purpose of CDS today represents only a tiny proportion of contracts outstanding.... With multiple bankruptcies and huge market instability owing at least part of their provenance to CDS, the public policy consideration for closing or at least sharply restricting the CDS market is even clearer than that promoting the restriction of the insurance market in 18th century London (at least taxpayers weren’t expected to pick up the tab for insurance policies on murder victims!)

As a minimum, therefore, CDS writing should be restricted to those holding bond, loan or swap obligations against which CDS might reasonably hedge. CDS should be distinguished from stock short positions and stock options (which have similar theoretical possibilities) because their greater leverage and higher outstanding volume make them uniquely dangerous. Such a market would be highly illiquid, but it would fulfill CDS’s essential function of enabling credit risk transfer. CDS’s other advantages, of demonstrating credit spreads over a public marketplace, allowing the hedging of baskets of similar credits, providing an instrument for hedge fund “investment” and making huge returns for the major dealers, would be lost. However, CDS’s destabilizing effect on global financial markets would also be lost, and the cost to taxpayers of rescues for those major institutions which had either got the CDS market wrong or were victims of CDS “bear raids” would be eliminated.

The free market is a wonderful thing. However, allowing unrestricted free markets in everything, without regard to the real-world economic effect of those markets, is a Whig shibboleth similar to the “Repeal the Corn Laws” unilateral free trade policies that destroyed Britain’s economic strength in the 19th century. The great and economically highly sophisticated Tory Prime Minister Robert Lord Liverpool, a generation prior to the mid-century free traders, also believed in free markets, but was a realist in their application to the world in which he lived.

The real world is messy and does not conform to simplistic equations either mathematical or moral. The wise policymaker will legislate accordingly, providing the maximum market freedom but inserting restrictions where the temptations to malfeasance are too great. The CDS market forms an open and shut case for restrictive regulation.