Bad vs Evil

 

In this corner, Herman & Kittle Properties Inc (Herman & Kittle), Indianapolis property developer.  Ready to build “low income” housing, just as the politicians want.

In that corner, the politicians who make up the rules and then complain when people follow them.

The round starts with a flurry.  Quickly penning a letter to the Indiana Housing & Development Authority King Tony Roswarski asks the State to turn down the application for tax credit. “It’s just not right – it’s not how we do things here,”  Indeed it’s not.  Apparently Herman & Kittle forgot that the divine right of Kings still has power in Lafayette.  No need for that pesky rule of law (the restriction of the arbitrary exercise of power by subordinating it to well-defined and established laws). Tony knows what is right, just kiss his ring and he will tell you so.

The referee steps in and reminds King Tony he is actually an elected official and instructs the judges to subtract a point from his score.

With nimble movements, Joseph Caldron, Herman & Kittle’s attorney counters. His client is “prepared to meet the list of other stipulations laid out in the county’s land use rules.”  The politicians made the rules, Herman & Kittle simply follow them.  The Mayor’s nose is bloodied.

State House Representative Sally Siegrist, sensing the mayor is in trouble, steps in,  but  trips over her feet and falls.  Preventing complete embarrassment before she tries “a remedy in the form of a bill in the General Assembly“.   The General Assembly needs a law, to fix a law that the General Assembly wrote and Herman & Kittle are following, because they are not doing what the lawmakers, who wrote the laws, want them to do and we can not have that.  Woodrow Wilson and FDR are cheering from their grave as liberty is being buried alive.

Sensing the fight is almost over and he has almost missed an opportunity to look like a hero, the petulant U.S. Congressman Todd Rokita runs into the fray with a blistering admonition to the Indiana Housing & Development Authority,  “I urge you to consider the objections of Mayor Roswarski.”  Remarkable courage.  Another “Fire Rokita” sign just went up.

Mercifully, the fight is stopped, by a bunch of dead people who will actually decide that outcome.  The irony,  by following the rules, a bunch of dead people could accomplish what a mayor, a state house representative and a U.S congressman could not do.

Is the Wealth Gap Bad?

The wealth gap is getting a great deal of attention recently. USA Today, CNN and the Urban Institute have all recently published stories chronicling wealth gap disparities. The New York Times, after stating global inequality has stabilized, proclaimed “But here’s the bad news: The respite probably won’t last”. The criticism of the wealth gap is criticism of individual liberty and the free market.

How so?

Humans are complex and that complexity is understood by considering all the various wants and needs we have. The similarity in general wants and needs is obvious, but so is the complexity in satisfying them. Generally, humans want/need housing, but have you ever seen two homes that are identical? The exact same aesthetic inside and out? What about he music playing on Pandora?

The complexity of our desires, right down to the music we listen to, is best met by a system that allows the mutually beneficial exchange between those who create music and those who want music. The exchange benefits both parties: One party enjoys the product and the second creates income which can become wealth. As a specific musician’s music satisfies more people’s wants, their income increases to the point where profit (income exceeding expenses) is realized and wealth (the accumulation of assets) is created.

The market is a mechanism that rewards those who meet the needs of others. Those who meet the needs of others best are compensated accordingly and create wealth faster than others. Thus a gap is created between those who meet the needs and desires of others in an extraordinary way and those who do not. As strange as it seems, Taylor Swift is compensated more than the Avett Brother’s and has accumulated more wealth. There is a gap.

There in lies the problem

Critics of the wealth gap make a moral judgment that regardless of who serves the wants/needs/desires of others more, one individual or group is more deserving. This person, business or industry deserves more wealth because they are more meritorious. The Avett Brothers deserve more because their music is more authentic than Taylor Swift’s and the gap in wealth should be lessened. The beginning of the totalitarian state finds it’s roots in this shift from a free market to a planned market.

The liberty of the individual to create and maintain wealth is subordinated to an outcome of equalized wealth that authorities determine for the rest. Either taking from those who create wealth (Taylor Swift) by satisfying the needs of others in an extraordinary way and redistributing it to those who do not (The Avett Brothers) , or barring the individual from participating in the market all together.

Is there really a problem?

The wealth gap is not a problem. It is the product of individuals using their liberty to pursue interests that are most satisfying to them. Either producing goods and services for others or consuming what others produce. Those who serve many accumulate wealth.

There is a problem when there is no wealth gap. Through various means of wealth redistribution authorities attempt to equalize outcomes and inadvertently create a permanent underclass. Also, the reduction in wealth via property confiscation reduces the incentive to meet the needs of others. Fewer goods and services are produced and less wealth is created. Ultimately a death spiral occurs and we all lose.

Why do we all lose?

The satisfying of wants/needs/desires and creation of wealth benefits all, especially the poor. The gap is still there but the standard of living for the poor has increased dramatically. What were once luxuries, financially available to only the wealthy, have become ordinary possessions for even the “poor”. Refrigerators, air conditioners, automobiles, telephones, computers, washer and driers have become common place. Why? Because the creative and industrious had the freedom to serve the needs of many, lifting standard of living of both parties. The consumer has their needs met and the producer has created wealth.

State and Education, Markets or Coercion

Know Your Neighbor

How well do you know your neighbors? Besides their names, their children’s name and where they work etc.; how well do you know them?

Do you know their favorite book, movie, type of music? What about more personal details? How do they view the world? Do they have religious beliefs? Maybe eastern mysticism, pantheism? What do they believe about the origins of man? Evolution, theistic evolution, literal creation? What about how they view raising children? Do they ever consider any of these questions? Do you?

It’s pretty obvious that we know very little about our neighbors, which make sense. Individually, we are working hard to keep our own lives under control. We hardly have time to understand our neighbor’s issues.

Limited Knowledge

Nonetheless, we collectively insist that we know enough about our neighbors to solve their problems. Although it is established that as an individual I am not omniscient, we collectively believe and consequently behave like we are.

As a society we claim to know what’s best. Usually, our opinion is based upon another’s (experts) findings. But does this make sense? Does studying a matter in-depth make you more knowledgeable about those you offer advice too? Try planning and fixing meals for your neighbor. You may be a great Italian cook, but if your neighbors are vegan, your veal scampi might end up in the trash.

Humans are frightfully complicated. Regardless of the attempts by social scientists to reduce human action to determinism we are all unique. Reducing the irreducible complexity of human desires to an objective standard of “what people want” is almost non-sense. The result is so broad (food, shelter and love) that it offers no guidance to those who desire to govern others activity. Maybe those who govern should leave somethings to the individual to pursue independent of government coercion.

Many Ways or the State’s Way?

Apply this axiom to education. Is it possible to reconcile a society of unique individual’s or family’s desire for knowledge with a system that meets that need? What would it look like?

The dominant paradigm today is a forced education. The state forces the individual to pay for the system and then provides a curriculum that the state also establishes. “We will take your wealth from you and then give you the education we want for you”. Does not leave much, if any room, for individuality or innovation and what does pass for innovation is last decade’s “latest greatest”.

What does the state know about every individual and family that it governs? Very little. How successful is any endeavor where one party knows very little about the group it serves? Reading, writing and arithmetic does not qualify as “knowing your customer”.

Markets Give Diversity and Choice

Try identifying all the non-government schools that offer differing methodologies, curriculum and calendars in one paragraph. The diversity is far too great to categorize other than to say there is a plethora. Quite a contrast to the government schools touting magnet, charter, special and traditional as being “diverse”. A six pack of Crayola crayons is diverse when compared to black and white. But a 64 pack of Crayola crayons is truly diverse.

Why are there so many varieties of education offered? Because there are families willing to suffer the burden of taxation to support government education and simultaneously demand something different. They demand an education for their children that meets their personal needs and are rejecting the “least objectionable” form of state education.

One Size Does Not Fit All

These parents are rejecting the model of federal, state and county politicians, teachers, teacher unions, administrators, elected and unelected board of educations at the local and state level (state board of education officials being a separate group than the Governor, state house and senate members), focus groups and education “experts” (all, expect the unelected officials, are taxpayer supported) in favor of a model of administrators and teachers that listen to their individual desires and delivers what they want individually. Parents are rejecting the bland, monolithic and inferior state education for a choices that are market driven; their needs are being met.

The Issue is Freedom

Why would a society elect a group that insists on a system of education that demands compliance in the face of civil and some cases criminal penalties? The issue is not education, it is freedom. Milton Friedman properly observed, “Underlying most arguments against the free market is a lack of belief in freedom itself.”

The Rule of Law, or “I gotta do what to use my property?”

The Rule of Law

The rule of law has fallen on hard times, principally because the concept itself is misunderstood. Consequently the application of the principle is misapplied. Classical liberalism teaches the rule of law is the principle of protecting the broadest interest of the individual from the arbitrary use of power.

The “rule of law” restricts authoritative powers, not enhance them. Today the principle is understood to mean quite the opposite; increase authority over the individual. It is applied through administrative rules and legislation that actually increase arbitrary power.

The rule of law, applied especially to private property, is the fountainhead of both economic development and civil liberties. Risk and reward belonged to the owner of property. The risk associated with a venture was the property owner’s and so was the reward, it could not be confiscated. The “right” moral convictions were not a prerequisite for property ownership.

Social Justiced

The perversion started with the belief that laws could correct injustice (both real and perceived). Broad rules securing equality before the law gave way to narrow, targeted rules and laws to promote a specific outcome. Once the rules and laws were codified, their proponents would argue, “It’s the law” as they took your property. The divine right of king’s has been replaced with the new rule of law, is essentially the divine of right of the few.

The rule of law has morphed into a collective consensus of the few (unelected boards, citizen groups authorized by unelected boards, elected officials) to determine good/bad, ugly/pretty, sustainable/unsustainably etc.

Real Life Example

Consider the plight of Old National Bank’s sign in downtown Lafayette Indiana.

“This sign is so bad, it’s just bad”.

“It totally destroys the skyline. It’s just too big.”

“I personally think it looks tacky as hell,” said Ken McCammon, president of Friends of Downtown, “Not a fan.” At least he is honest enough to omit it is his opinion leaving the discussion open to contrary opinions.

The irony is that Old National had to go through an administrative process that was designed decades ago to correct perceived injustices (too big signs). In other words, they followed “the (new definition) rule of law” and are still considered “too big” and “too ugly”. Which creates a new problem? Will more rules and laws be enacted to correct the perceived “too big”, “too ugly” problem that the current rules and laws were to correct? When will it end?

Will rules, regulations and laws become so onerous that all economic activity must be anointed by the king? By a proletarian dictatorship? Is there a difference between the two?

Nothing New

Classical liberals saw the problem almost one hundred years ago. Dictatorship does not breed planning, planning breeds dictatorship. As the rule of law continues to be perverted, more rules and laws are necessary to continue correcting perceived problems, that in some cases are caused by the perversion itself. The political authority must claim more power over individuals to enforce more and more rules.

Old National has found that to be the case: Follow the rules made decades ago to prevent “too big/ugly (fill in the adjective of your choice)” yet their sign is still “too big/ugly/etc”. The inevitable next step according to the “new rule of law”? More rules, regulations and laws to correct the perceived wrong such that the next person will have to pay for the sins of the previous person.

Something Old

This spiral of power is best observed by a small business owner in Lafayette when lamented “Small businesses are forced to jump through multiple hoops in order to uphold a standard of historic preservation. We are limited in scale and scope as to what we are allowed by the city. And this? A bit of a slap in the face.” Indeed he is right, property owners in historic districts face burdensome regulations that others do not.

Historic property districts distort economic activity. The skewer that stuck the small business owner, intrusion in the market, is the very thing they seem to be wanting for Old National. Instead of calling for a rollback of onerous rules, he seems to be advocating for more. “Let’s share the misery”.

The rule of law was instrumental in the development of a market economy that produces unprecedented material blessing. It also allows for very rich and diverse market of ideas. Changing the principle into something different changes the structure of society. It has been tried many times and it’s failure has always been catastrophic.

How to Kill the Town of Dayton Indiana

Words are generally used to convey beliefs.

Consider the Dayton Area Community Coalition use of words: “We are residents of the town of Dayton and the extended community, and we recognize the danger profit-centered growth and development presents to our very way of life. We are in favor of growth for the town, but only on the condition that it causes the town and its residents no harm, offers demonstrable benefits, and will serve to complement and enhance our small town atmosphere.”

They are very clear, but wrong, in their beliefs: They believe there are two kinds of growth and they alone can determine good from bad. Accordingly, good growth is not profit driven, causes no harm, offers demonstrable benefits, complements and enhances small town atmosphere. At best the Coalition’s is naive, at worse it is dangerous.

In a free market economy, “not-profit driven growth and development ” is charity. Soup kitchens and homeless shelters are “not profit driven”. From the largest business enterprise to the shoe cobbler on Main Street, both have one thing in common: profit. Both must make more than it costs to operate their respective businesses (profit) or they will  cease to exist. Both are excluded from the town the Coalition hopes for. “Shame on the consumer who wants more for less, or their shoes repaired. We want charity based businesses.”

When an authoritative individual or group, makes decisions for the community in regards to what economic activities are acceptable, the free market is eliminated. Because the Coalition determines what “causes no harm, offers demonstrable benefits, and complements and enhances small town atmosphere”, there is no need for a market that sorts out these very qualities. People don’t buy what causes them harm, offers no demonstrable benefit, nor complements and enhances their life, there by enhancing the life of the community and businesses that do not meet these qualities cease to exist.

By claiming the mantle of moral arbitrator, the coalition casts those who work and shop at, for example, WalMart, Costco, Verizon Wireless, Subway as well as the for profit shoe cobbler, lawyer, hair stylist as morally inferior and relegates them to second class citizenship. Can re-education camps will soon be far behind?

It will be “soup kitchens” and “homeless shelters” if the Coalition exercises their collective will. But I doubt many citizens would consider standing in line for a free meal at a shelter “date night”. Whether it is “Hope you can believe in”, “Or make America Great Again” really does not matter when the totalitarians are in our midst on both sides of the political aisle.

If this group existed 100 years ago, the town would still be waiting for electricity, flush toilets, paved roads, pizza delivery and cable tv.

Historic Perservation

Historic Property Preservation:  Market or Mandate?

 

In Lafayette Indiana, 11 endangered historic properties  have been identified by the Wabash Valley Trust for Historic Preservation (the Trust).  The Trust has determined these properties be worthy of preservation.  But what should be done and who should do it?

 

Who Determines Value?

The Trust believes the properties have value.  What creates value in these properties? Architecture? Location? History? Time?  Current market factors?  Probably all of the above, but in varying proportions depending on who is doing the valuation. One person has no interest and another an intense interest.  Hence the value can range from zero to unquantifiable depending on who is doing the valuation.  Set aside the issue of who determines what is “Historical”?

 

One may value the location with no regard for the structure. Another may value the architectural style with no regard for the history of the structure (think Lincoln slept here).  Still another may value the historical significance (Lincoln slept here) with no regard for the location.

 

Mutually Agreed to Valuation

A market based system can simultaneously reconcile all the conflicting and complimentary valuations by allowing those values to be expressed based upon the individual’s interest in the property.

 

Terms and conditions mutually agreed to by buyers and sellers determine the value which is expressed as a price.  A seller of a historical property can preserve it via restrictive covenants incorporated into the deed and stipulate the architectural style, square footage, use of property and other conditions of preservation, to which a buyer who agrees and accepts the risk of owning the property.

 

Market Interference and Undefinable Objectives

Contrary to mutual agreement, an authoritarian system ignores the variety of valuations and eliminates those that are not consistent the desired outcome. Through zoning regulations ( Historic Property Overlay Zones), taxation and   grants third party interference is used to achieve a desired result with no risk to those making the rules.  The result is not the product of the reconciling process  open to all, but rather an arbitrary goal that ignores all interests other than the “preferred “.

 

 

Under the promise of “improving the quality of life”, “maintaining the character of a neighborhood” or other banners with no objective meaning, elected and/or appointed officials use laws and regulations to impose their collective imagination of what they want property to look like.

 

“Doesn’t my quality of life matter?”

The individual who wants to raze the 100 year structure and replace it with an avant-garde design is just as concerned with the “quality of life” or “neighborhood character” as the individual who desires to maintain or restore property to the original aesthetic.

 

Individuals see things differently and a market based approach allows for individuality to be realized. A market approach allows all who are interested in the property the opportunity to express that interest. An authoritarian approach dismisses all interest not in favor of the singular interest of the subjective goal.

 

Unintended Consequences

Market interference creates more problems than it solves:

 

  • Property values are distorted. The use of zoning regulations can simultaneously increase the value of a property and decrease the value of another in the same zone. Thereby conferring an artificial gain to one and robbing another.  A “Historic” designation can create demand for a property that would likewise not be realized by a similar property in a non-historic zone.  Diminution occurs when grandma’s house, at the corner of Main and First, is determined to have historical value and should be    Whereas a market based transaction would determine the ‘dirt’ to be far more valuable for development than the house for preservation.

 

  • Individuality and consequently innovation are stifled. Consider the builder of the Victorian home 150 years ago; it potentially would never have been built.  The house he razed then, could have been deemed “historic”.  Today’s modern architecture is the future’s historic property, but only if it is built.

 

 

 

 

The worse that can be said about a market based system is that somebody is not going to “get their way”.  The same is true in an authoritarian system, but at least in a market based system, grandma will potentially be able to afford retirement.

 

What should the Wabash Valley Trust for Historic Preservation, or anybody do to preserve the endangered buildings?  Buy the property.