On the Notion of Asymmetrical Information

Knowledge and preferences are asymmetrical and exist in a dispersed pattern within billions of individual minds; this is a basic fact of life. Therefore, the total knowledge and absolute preference of an entire society cannot be known within a single mind. This total knowledge and general will is revealed through the process of free exchange, the price system, and voluntary interaction in the marketplace.

Many mainstream economists—such as 2001 Nobel Prize winner Joseph Stiglitz of Columbia University, and 2017 Nobel Prize winner Richard Thaler of The University of Chicago—have suggested that this problem of what they call asymmetrical information, i.e, when either the consumer or producer has more information about any given transaction than the other, allows producers to easily swindle consumers and is a market failure which requires government intervention. While it seems almost impossible to coordinate this dispersed knowledge under conditions of such massive ignorance, the complex spontaneous system of incentives which make up the invisible hand are able to do so.

Before this claim is refuted, it is essential to note that “asymmetrical information” is essentially a synonym for “the division of knowledge (and labor) in society.”

Most market solutions to asymmetrical information problems are solved through one of three methods: a third party/information middleman, a review system establishing some sort of credibility for either the producer or consumer, or a system of product warranties that enable the buyer to return the product over a period of time for his or her money back/replacement at no extra cost to the buyer.

Suppose you want to go buy a good used car on Craigslist, however, there is a problem: half of these used cars are lemons—cars which will be nothing but expensive problems for you. Each seller knows he or she has a lemon (and won’t tell you so); you are not sure which cars are lemons and which are not. You value a good used car at $5000, and the seller is willing to sell a good used car for $4000. A lemon, lets assume, is worthless.

Since 50% of the used cars are lemons, and you value a good used car at $5000, you are therefore only willing to pay $2500 for what may or may not be a lemon. Since the used car vendor wants $4000 for the car, the costs will outweigh the benefits for most people. The used car market would be dominated by low quality cars and eventually fail altogether: and you still might pay $2500 for a lemon. However, the free market has multiple solutions: a third party sets up a satisfaction guaranteed used car dealership which has proved to be legitimate. Another solution is where someone sets up a website where people can write reviews on their experiences at different used car dealerships. Also, since a car is an experience good, the seller could create a warranty system to enable the buyer to return the car for his or her money back during a certain period of time.

Another example of asymmetrical information is banking. The bank does not know if the person who they are loaning money to will repay their loan, and the person putting money in a fractional reserve bank does not know if they will get their money back. The government has instituted the FDIC instead of allowing the market to coordinate this information on its own. A possible market solution is to have third party privately run bank insurance companies who do what the FDIC does but privately. Also the review system of a credit score allows banks to get a pretty good idea of whether people are likely to repay their loans.

The ground beef market is another good example of an asymmetrical information problem. Since there is a semi-decent probability of a ground beef patty being infected with a disease, consumers do not know which beef to trust. Imagine you value a good pack of ground beef patties at $12 and they are being sold for $10. There is a 20% chance that the patties are infected with E. coli. With these odds, you are only willing to pay about $9.50 for what may or may not infect you. This would put the quality beef vendors out of business and you still might be paying $9.50 for some poison beef. The government has instituted the FDA instead of allowing free markets to develop their own solution. A possible market solution is a trusted third party such as Whole Foods or Albertsons who take extra care to assemble trustworthy beef and then resell it to consumers.

The labor market for women is another example. Companies do not know if a woman they hire will get pregnant soon and have to take time off on maternity leave. Imagine a company values a normal worker at $1200 per month and someone is willing to work for $1000 per month. Assume that there is a 33% chance that the worker is a woman who will get pregnant and take a maternity leave and cost a company more money. Because of the odds, a woman is now worth only about $800 per month which she is not willing to work for. This will force women to work for less money and the company still might lose money. Although it is illegal to mention pregnancy in a work contract, markets and incentives cause companies to find other ways to deal with (and spread out the costs of) the possibility of a surprise pregnancy. For example, a company might give an employee a starting salary and promise to give them a raise if they don’t take time off for their first three years of work, incentivizing women to not take time off for maternity leave. Also the companies could use incentives to encourage harder and more productive work during the time people are at work to make up for taking time off.

Yet another example of asymmetrical information is the health care market. Patients (consumers) do not know if the doctor they are going to see is a legitimate doctor. Imagine a patient values a trip to the doctor’s office at $1000 and a doctor’s appointment costs $950. There is a 10% chance the doctor is fake and will accidentally kill you. Logically, the patient will only be willing to pay $900 for these odds which a real doctor is not willing to work for. This will put the legitimate doctors out of business and patients still might pay $900 to die. While the American healthcare system is far from a free market, and occupational licensing has been instituted in place of a market, there are still real market solutions to this asymmetrical information problem. An example is to have a trusted private hospital or clinic who assembles a large amount of trusted real doctors and acts as an informational middleman between doctor and patient. Also, someone could set up a website where people write reviews about experiences with their doctors to help real doctors develop credibility while weeding out the doctors with dubious training.

The most amazing thing about these examples and the way in which the invisible hand coordinates asymmetrical information is that individuals are driven to serve others through their own self interest, rather than through altruism.While there will always be people who dishonestly attempt to obtain what others have, free markets systemically reduce this type of fraudulent behavior and, and generate more honest and properly informed human interaction. As Adam Smith famously explained, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.” In this statement he truly captures the beauty of a free society governed by free markets. By living according to one’s own preferences and values, society benefits as a whole from the creation not only of wealth, but of beauty.

In his book, The Fatal Conceit, F.A. Hayek states that, “The curious task of economics is to demonstrate to men how little they know about what they imagine they can design.” In addition to misallocating of resources, government intervention solves these asymmetrical information problems far less efficiently than do private individuals operating based on a system of incentives. In the marketplace, a frustrated consumer can immediately stop doing business with a supplier who they believe has been dishonest or untrustworthy, forcing the supplier to suffer for his or her poor service. This is not so in the political arena. If a voter feels that a politician or his bureaucrats have been dishonest or inefficient, he must continue to fund their activities as well as obey the rules and regulations they have imposed on him. If the voter fails to comply, he pays with his life.

The claim that a board of central planners can some how coordinate this infinitely complex, dispersed, asymmetrical knowledge and information is the fatal conceit to which Hayek is referring. When allowed to work, the invisible hand does a far better job than any central planner or social engineer could at delivering goods and services to the people and places who need them most.

Lastly it should be pointed out that the reality of dispersed knowledge and asymmetrical information in society should be celebrated and cherished. This beautiful lack of symmetry is what gives humans their individuality and creative spirit. If we all had symmetrical information about the above tasks, it is safe to say that none of the above mentioned businesses and occupations would exist. It is neither possible nor desirable for symmetrical information to exist. Hence, the real lemon in this problem is the claim of a market failure.

Debunking Three Misconceptions About Free Markets

These days, while socialism and communism (Marx and Engels used the two interchangeably) are portrayed as rational and altruistic, the free-market capitalist system is vastly misrepresented in the general culture. A recent Pew study indicates that 44 percent of millennials would prefer to live in a socialist nation, rather than a capitalist one. While these misconceptions can arise in many different ways, they most frequently are spread by academia and the mainstream media, and the case for markets is no different. Misrepresentation breeds misconception, and although the myths surrounding capitalism are truly endless, here are three which seem to be most prominent today.

1: Capitalism Is Zero Sum

The existing western economic order constitutes a system of plundering and exploitation like no other in history. – Noam Chomsky

Before the notion of capitalism being zero sum is addressed, it must first be noted that socialism is truly a zero sum economic system in which the majority benefits at the expense of the minority through what Frédéric Bastiat accurately describes as “legal plunder,” all the while slowly crushing the creative and entrepreneurial spirit of the legally oppressed minority. As former Federal Reserve Board Chair Alan Greenspan states in his essay, “The Assault on Integrity” “Beneath all government regulation lies a gun” (the threat of physical coercion).

In a free-market capitalist society there can, however, be a general harmony of interests among rational, self-interested people because—as both Adam Smith and F.A. Hayek recognized—knowledge and preferences exist in a dispersed pattern within billions of individual minds. Therefore, the total knowledge and evolving preferences of an entire society cannot be known within a single mind. This total knowledge and general will is revealed through the process of free exchange and voluntary interaction in free markets. Since nobody is subjected to exactly the same circumstances in life, multiple parties with completely different preferences are able to mutually benefit through free trade.

The free market is truly positive sum. This mutual benefit happens every day in our society; as Smith famously stated, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.” In this statement he accurately captures the beauty of a free society governed by rational self-interest. By living according to one’s own preferences and values, society benefits as a whole from the creation not only of wealth, but of beauty.

2: Capitalism Brings Out the Worst in Humanity

The bourgeoisie, wherever it has got the upper hand…has left no other nexus between man and man than naked self-interest…It has drowned the most heavenly ecstasies of religious fervor, of chivalrous enthusiasm, and of philistine sentimentalism in the icy water of egotistical calculation. – Karl Marx

There are two basic ways by which one can obtain wealth in a given society: plunder (both legal and illegal) and creation. Russian-American philosopher and novelist (she never differentiated between the two) Ayn Rand states that “Most people lump together into the same category all men who become rich, refusing to consider the essential question: the source of the riches, the means by which the wealth was acquired.” Socialism encourages plunder and discourages wealth creation while a free-market economy incentivizes altruism and the creation of value for others.

Today in the United States, nearly 100 percent of the Forbes 400 richest people have obtained their wealth through creation and by improving the lives of others. This is because, in the free market, individual ambition serves the common good—i.e., by helping oneself, society benefits as a whole. Only by fulfilling or serving the needs of others can one amass any sum of money, thus inventing the concept of a self-made man.

On the other hand, socialism truly does foster the dog-eat-dog mentality it claims to oppose. It is in our nature to resort to deception and physical exploitation in an environment where free thought and the creation of wealth are chastised, and property rights are non-existent. While socialism causes humans to retreat into a sort of postmodern tribalism, the capitalist free-market system encourages us to be peaceful, altruistic, and creative.

3: The Rich Get Richer and the Poor Get Poorer

We must work together to ensure the equitable distribution of wealth, opportunity, and power in our society. – Nelson Mandela

This myth—which was first popularized by Karl Marx in the Communist Manifesto—claims that in a free market capitalist economy, the rich will continue to get richer and the poor will continue to get poorer, thus slowly concentrating all the wealth into the hands of a few people and squeezing the middle class out of existence. While this assertion sounds plausible, history has proved it to be false on many occasions.

Just as all parties can benefit from free exchange, all of society benefits from free thought and innovation. In every society there are—as described by Ayn Rand — “…the men who take first steps down new roads, armed with nothing but their own vision.” These are the world’s great altruists. They convert the machinery of nature into the servant of their will. They are the individuals who cause society to evolve and offer humanity new and better opportunities through innovation and the creation of wealth. Both rich and poor benefit alike from the rational self interest of these entrepreneurial men and women. This basic truth that freedom of exchange fuels economic progress for all people has been mostly tossed aside by those who fail to recognize that it is in our nature to differ in talents, abilities, and preferences. Even if we were all magically made equal in wealth today, we would return to inequality by morning. Similar to the argument of Thomas Sowell in The Quest for Cosmic Justice, “cosmic” justice (a complete eradication of all injustice) is unattainable under any system of government. As soon as a central power enacts laws in an attempt to achieve this “cosmic” justice, it necessarily creates inherent injustice in a society. The degree of inequality that exists in a free market system is not something to be lamented; rather, it should be celebrated when creative individuals are free to pursue their unique talents, abilities, and preferences. In reality, when given political and economic freedom, the rich get richer and the poor get richer. The standard of living grows exponentially among all socioeconomic classes. It is only under socialism where all people are equally poor.

Why then are these particular myths so ubiquitous if they can be refuted so easily? Likely for many reasons, however—as Sowell recognized—the endless longing for a utopian society might simply be an aspect of the human condition. Perhaps we can not help but compare our clearly imperfect present with a perfect (but impossible) future.

Rousseau’s Social Contract Review: Books 1&2

Independent Study/23 September 2017

Summary:

Book one begins with Rousseau’s famous quote, “Man is born free but everywhere he is in chains.” He then states how he will attempt to answer this question: whether or not there can be legitimate political authority in a society. He begins his exploration by showing that the only example of natural authority in nature is a father to a child. Rousseau insults Hobbes and Grotius for their assertion of putting ruler and subject in the same category as father and child. Political authority has no basis in nature. He comes to the conclusion that legitimate political authority rests on a “social contract” between members of a society. He then explores the idea of whether anyone has the right to enslave or kill their enemy after defeating them in battle. He determines the answer is no because men are not naturally one another’s enemies (man is naturally good). Therefore, no conflict in men should result in anyone having a supreme right over another man.

Then, Rousseau talks about slavery. He says that if we have our freedom taken away from us, our humanity and morality is also taken. Our actions can only be moral if they are done freely. Rousseau condemns slavery. In a society he says, there will come a time when people need to work together and combine sources in order to survive. They must find a way to do this while preserving their individual freedom. Rousseau concludes that men must surrender themselves unconditionally to the community as a whole and submit themselves to what he calls “the general will,” which he later defines as “the sum total of wills among the members of the social contract.” He then draws three implications from this: everyone will want to make the terms of the social contract easiest for all, the individual can have no rights that stand in opposition to the state, and people don’t lose their natural freedom when entering into the social contract. He then clarifies that the contract can hold no binding regulations on the sovereign. If not done voluntarily, subjects will be forced to submit to the general will or as Rousseau puts it, they will be “forced to be free.” The general will always tends toward the common good; however, the deliberations of the people do not always reflect the general will, thus distinguishing between the general will and the will of all.

Rousseau then spends a few pages talking about the sovereign and how he has the right to administer the death penalty. He talks about the difficulties of finding a good lawmaker who does not wish to rule. He concludes by explaining the burden of government and how it is the most important and difficult job but if handled correctly, can result in a truly well governed and good society

My Review:

I knew I wouldn’t agree with most of Rousseau’s ideas, however, there were a few that I found made logical and moral sense. I liked his view of slavery. He said to renounce one’s Liberty is to renounce his morality, humanity, rights and duties. One cannot make moral decisions unless they make them willfully. This is true; however, Rousseau contradicts himself later by saying that man must be “forced to be free.” While Rousseau can be interesting and fun to read, he starts with the wrong foundational principals. He believes that man is naturally good. Most of his arguments appear logical but rely on this huge assumption that man is good. A smart person with the wrong foundational principles can reason their way into just about anything, just as Rousseau does. I enjoyed this book because it is interesting and fun to read. However, I would not recommend it to others because I believe it has the potential to justify a lot of violence and evil deeds. Ideas have consequences and if taken to heart, Rousseau’s social contract could cause a level of terror not yet experienced by man.

Independent Study Reading List

Philosophy and Politics:

Aristotle, Politics
Rousseau: Social Contract
JS Mill, On Liberty
Nietzche: Beyond Good and Evil
FA Hayak, Fatal Conceit
Robert Nozick, Anarchy, State and Utopia
Sowell, Quest for Cosmic Justice
Rawls: The Main Idea of A Theory of Justice
Locke: Two Treatises of Government

Economics:

Michael Novak, A Christian Perspective on Economics (article)
PJ O’Rourke, On The Wealth of Nations
Marx: Value, Price and Profit
Swartz, General Theory of Employment Summary (article)
Mises, Planned Chaos
Per-Olof Samuelsson, Schumpeter (article)
Friedman, Capitalism and Freedom

*This is the reading list for my Philosophy, Politics & Economics Independent Study plan my junior year in high school 2017-18. I met bi-weekly with my advisor and wrote a precis on each reading.

The Prisoner’s Dilemma & Rational Self-Interest in Society

The Prisoner’s Dilemma and Rational Self-interest in a Society

John Nash was a Princeton mathematician, economist, and game theorist who argued in favor of collectivism and the welfare state while opposing a world based on rational self interest. Interestingly, his position took shape on an evening out with his friends in the late 1940’s, which formed a foundation for his work for many years to come in the field of noncooperative game theory, eventually winning him the Nobel Prize in in Economic Sciences in 1994. His epiphany lead to The Prisoner’s Dilemma — a thought experiment that simulates a scenario in which acting rationally and according to one’s own self interest does not lead to the optimum outcome — countering Adam Smith’s claim of mutual benefits resulting from rationally self interested behavior.

The Prisoner’s Dilemma

Having committed a crime, Bonnie and Clyde are arrested and taken in by the police for questioning. They are each led to a separate interrogation room where they are encouraged by the attending officers to confess. Assuming each is rational and self interested, each must decide if he or she will tell the truth about their crime. If they both confess, they are each sentenced to five years in prison. If neither confesses, they are both sentenced to three years in prison. If Bonnie confesses and Clyde does not, Clyde is sentenced to ten years in prison and Bonnie is not sentenced at all. Similarly, if Clyde confesses and Bonnie does not, Bonnie is sentenced to ten years in prison and Clyde goes free.

The Prisoner’s Dilemma was designed to make confessing the best course of action. Since both Bonnie and Clyde are presented with the same circumstances, and both act rationally, it is logical for both to confess. However, assuming the villains do confess, they will both be sentenced to five years in prison and both end up in a very poor situation.

In his book, The Darwinian Left, Australian philosopher Peter Singer — who was greatly influenced by the work of Nash — explores this problem as a study in the ramifications of a society made up exclusively of rationally self-interested men and women. He states, “The individual pursuit of self-interest can be collectively self-defeating.” This idea, popularized by the work of Nash and Singer, flies in the face of Adam Smith and his position in The Wealth of Nations: that in a free society, both parties benefit in the creation of wealth through acting rationally, and in their own self interest — that individual ambition serves the common good. While Singer’s logic seems to make sense at first, more consideration brings one to the understanding that most of the time, the Prisoner’s Dilemma is not an applicable model to an actual society.

The Use of Coercion

In the Prisoner’s Dilemma, man lives in shackles and his reality is a holding cell. Coercion is used to bind him and enforce strict boundaries upon him. While all institutional systems of government — even capitalism — involve coercion in some way, (i.e. capitalism has rules of property and contract that are enforced via coercive power) a free capitalist society uses coercion to expand individual liberties, whereas the society presented in the Prisoner’s Dilemma uses it as a means of legal plunder. In the Prisoner’s Dilemma, man can do nothing save what has been explicitly permitted. However, in a free society governed by property rights and a rule of law, man’s rights only end where his neighbor’s nose begins. Rational self interest causes man to thrive in the absence of government regulation and coercion, not while being bound by force. As Adam Smith recognized, when individuals are permitted to pursue their self-interest through markets, they are amazingly good at finding ways of bettering not only themselves, but society as well.

Individuals Who Change the Rules of the Game

In every society there are — as described by philosopher Ayn Rand — “…the men who take first steps down new roads, armed with nothing but their own vision.” These are the individuals who change the rules of the game. They convert the machinery of nature into the servant of their will. They cause society to evolve and offer man new and better opportunities through innovation and the creation of wealth. Both the rich and the poor benefit from the rationality and self interest of the movers and shakers of society. Because of these groundbreaking individuals, we are not forced to choose between three years in prison and five years in prison (a lose/lose scenario). We are free to be ourselves and make choices according to our fundamental convictions and personal preferences. Contrary to the reality proposed in the Prisoner’s Dilemma, the rules of the game are rarely ever static, thanks to these entrepreneurial men and women.

Pretense of Knowledge

The Prisoner’s Dilemma radically over-simplifies the complexities of pay offs, trade offs, and information we receive in our everyday lives. In his book, The Fatal Conceit, F.A. Hayek states that, “The curious task of economics is to demonstrate to men how little they know about what they imagine they can design.” The Prisoner’s Dilemma cannot be compared to real life because our everyday circumstances cannot be explained in a single paragraph — nor a million paragraphs. This thought experiment treats human preference and decision making as a science that can be calculated, mastered, and predicted; it is the “Fatal Conceit” to which Hayek is referring. In addition to this vast oversimplification, the Prisoner’s Dilemma is also centrally planned. When allowed to work, the invisible hand does a far better job than any central planner or social engineer could at delivering goods and services to the people and places who need them most. Political anarchy breeds economic order and prosperity.

It is for these reasons that Nash’s Prisoner’s Dilemma is not a correct model of real life interaction on most issues. Ultimately, similar to the argument of Thomas Sowell in The Quest for Cosmic Justice, “cosmic” harmony (a complete eradication of all disharmony) of interests is unattainable under any system of government. As soon as a central power enacts laws in an attempt to achieve this “cosmic” harmony, it necessarily creates inherent disharmony and injustice in a society. In a truly free, real-life environment, there can, however, be a general or “traditional” harmony of interests among rational self interested people because — as Smith and Hayek recognized — knowledge and preferences exist in a dispersed pattern within billions of individual minds. Therefore, the total knowledge and evolving preferences of an entire society cannot be known within a single mind. This total knowledge and general will is revealed through the process of free exchange and voluntary interaction in the marketplace. Since nobody is subjected to exactly the same circumstances in life, both parties are able to benefit through free trade. Contrary to the Prisoner’s Dilemma, the free market is a positive sum game. This mutual benefit happens every day in our society; as Smith famously stated, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.” In this statement he truly captures the beauty of a free society governed by rational self-interest. By living according to one’s own preferences and values, society benefits as a whole from the creation not only of wealth, but of beauty.

Ideas Have Consequences

The way we think determines the way we live. This is a fact of life. Though some may argue the contrary (the way we live determines the way we think), it will always be made clear that no idea is epiphenomenal.

Karl Marx believed the opposite of this. He argued that history has a certain material pattern, and ideas naturally come from that pattern; that the way we live determines the way we think. To quote the Communist Manifesto, “The history of all hitherto existing society is the history of class struggle.” Marx believed that man’s ideas come from his environment: or more specifically, his “class”.

A man writing in favor of the materialistic non-autonomy of ideas is a man who, as described by Ayn Rand, “seeks to reverse the law of cause and effect.” It is a performative self contradiction. In the communist manifesto, Marx explains, “In a bourgeois society, the past dominates the present; in a communist society, the present dominates the past.” Marx denies that ideas themselves have an independent influence on society and can absolutely develop on their own. While our environment does have at least some effect on us, ideas themselves are paramount and the external world is simply responsible for spreading those ideas. The Bolshevik Revolution in Russia was a result of Marx’ writings in Germany, the killing fields in Cambodia were a result of philosophical discussions in Paris, and people who walk the road to serfdom are eventually victims of omnipotent government. Life itself is objective but the way we interact with it is subjective. The way man functions in the world is a result of his fundamental convictions. Form follows function. The physical is a result of the metaphysical—not the other way around.

The Pen of Thomas Paine

The American Revolution was a bloody war. Killing three times more Americans than World War II, it was responsible for more death than almost any other war in American history. Worst of all, it had no apparent moral grounds until 1775 when Thomas Paine released his magnum opus, Common Sense: a pamphlet advocating independence from Great Britain. It was written on the moral grounds of taxation without representation, the immorality of a tyrannical monarchy, and the inevitability of British oppression. These simple ideas completely changed the ideology of the war. It gave people something concrete to fight for, helped us gain foreign assistance, and eventually resulted in independence from Britain. Paine (and Locke) universalized the American Revolution (and later the French Revolution), making it a crusade for humanity. It dignified what was otherwise easily interpreted as a nasty civil war of conflicting self interests.

Albert Einstein and Relativism

In 1905, German born theoretical physicist Albert Einstein released his “Theory of Relativity” to the world for the first time. His theory essentially states that all motion must be defined based on one’s frame of reference and that space and time are relative, not absolute concepts. At the time it seemed like just another scientific theory; however, its unforeseen implications on relativism and the modern world would be astronomical.

For almost all of history, space and time were seen as basic objective and absolute principles; however, Einstein’s theory seemed to crush the traditional inherit value system humans had held for so long. Einstein’s Theory of relativity paved the way for a broader ideology of moral and philosophical relativism which contributed an even broader movement of modernism. Since space and time are relative, art, beauty, virtue, happiness, and even truth started to be viewed subjectively as well.

Ideas Make us Rich

In his Magnum Opus, An Inquiry into the Nature and Causes of the Wealth of Nations, moral philosopher and economist Adam Smith asks the question, How did we (the west) get to where we are now? He correctly answered that the wealth of nations is a result of peace, easy taxes, and a tolerable administration of justice. In her book—Bourgeois Dignity—economic historian Dr. Deirdre N. McCloskey states that, “Our riches did not come from piling brick on brick, or bachelors degree on bachelors degree, or bank balance on bank balance, but from piling idea on idea.” The classical understanding that we are all created equal and unique in the image of God has greatly contributed to the rise of property rights and rule of law in the west, and has made us the richest society in history.

“Ideas have consequences,” said Richard M. Weaver in his 1948 philosophical masterpiece. And for better or for worse, each of these ideas have had clear consequences. They demonstrate that ideas which entered the stream of thought centuries ago have continued to inform our cognation and unfold the directions implicit in them. Regardless of their possible danger, man’s ability to freely share and debate these big ideas is what has made the west great. Philosopher Ayn Rand eloquently states that “The present state of the world is not the proof of philosophy’s impotence, but the proof of philosophy’s power. It is philosophy that has brought men to this state—it is only philosophy that can lead them out.” In this statement, Rand truly captures the momentous concept that ideas have very real and possibly unanticipated implications on society. A misunderstanding of this integral fact of life can and will lead man down deadly and unforeseen ideological paths, while understanding that the way we think determines the way we live will result in the creation not only of wealth, but of beauty.

Calvin Coolidge

In his veto of a congressional salary increase, our 30th president, Calvin Coolidge told Congress that, “No person was ever honored for what he received. Honor has been the reward for what he gave.” This statement truly characterizes Coolidge for who he was as a man. Not only was he deeply concerned with tax reduction and the federal budget, but he was also highly dedicated to the servitude of both his neighbor and nation. Coolidge had a special understanding of public service and never swayed from his foundational beliefs. These qualities made him the beloved man that he was. Calvin Coolidge —although soft-spoken— showed immense amounts of courage in serving his nation and staying true to his fundamental convictions.

An important way in which Calvin Coolidge showed courage is in his approach to public service. Prior to his term as Commander in Chief, government had grown unchecked for years under the Roosevelt, Taft, and Wilson administrations. Wealth redistribution, government regulation, and the strength of unions were on the rise in America during this era of progressivism. Soon after stepping foot in the oval office, Coolidge promptly went on a budget and tax cutting spree to abolish what he referred to as, “Despotic Exactions.” Although scoffed at by many, this decrease in taxation and government spending saved the average American over 200 dollars per year (about 1,500 dollars today). Coolidge wanted to help the poor and he saw that this was the only way to enact true, long term change toward raising the American standard of living. He and his Secretary of the Treasury, Andrew Mellon, referred to this policy as “Scientific Taxation.” Coolidge once said that, “Collecting more taxes than is absolutely necessary is legalized robbery.” This informed approach was his creative service to the least of these. It took an immense amount of courage on Coolidge’s part to abandon previous methods and take a new approach to public service. This new approach was both utilitarian and grounded in a strong respect for people’s basic human rights. Though unorthodox, his principled fiscal stewardship caused many poor Americans to succeed in achieving a better life. With the national debt being cut almost in half, the 17.5% increase in the nation’s wealth, and illiteracy being cut in half as well, his presidential term was a golden age by any standard.

His ability to stand by his fundamental convictions is another way in which Coolidge exhibited courage. Former American Congressman, Bruce Barton, described Coolidge as, “…a man cut from granite.” Although seemingly reserved, Coolidge was a man of strong principles. He called his fellow citizens to return to the proven principles of the American political tradition and encouraged them to examine their own beliefs in light of these principles. He believed strongly in the limits of social engineering, the nature of wealth, individual responsibility, and society’s dependance on moral and religious values. His ability to stand by these fundamental convictions in the face of adversity is rare among men. In her book entitled Coolidge, Amity Shlaes refers to President Coolidge as, our “Great Refrainer.” She suggests that inaction can benefit a nation more than action, as demonstrated by his numerous amount of vetoed bills. “This was the boy with his finger in the dike, stopping a great progressive tide,” she accurately states. Throughout his life, Calvin Coolidge rejected what Bastiat called “legal plunder” and worked toward the creation not only of wealth, but of beauty.

Calvin Coolidge’s messages regarding public service and his fundamental convictions have held true for almost a century. These firm principles were the groundwork for his ability to enact change for the better in America through public service. The way he thought determined the way he lived; his form followed his function. Calvin Coolidge lived by the principles that defined him. His belief system never aged. Even in the culturally diverse, globalized world we live in where people are desperate for new answers, ideas, and solutions, the simple social and moral code by which he lived remains as relevant as ever.

The Rat Pack and Equal Opportunity in America

It was a warm summer evening in 1965 and the stage was set at the Kiel opera house in St. Louis, Missouri. The lights dimmed and the crowd waited in anticipation. Suddenly, five men coolly took the stage: a Jew, an Englishman, an African-American with one eye, and two Italian-Americans. As the crowd erupted, the men were smiling a each other -mesmerizing the audience with a style and glamour that overwhelmed. Everyone knew they were in for an electric evening of laughter, song, and overall charming artistry that was unknown just a handful of years earlier. They were Frank Sinatra, DeanMartin, Sammy Davis Jr, Peter Lawford, and JoeyBishop: The Rat Pack. Sinatra, one of the most influential artists of the 20th century and leader of the Rat Pack, was born to two Italian immigrants in a small town in New Jersey. His family was extremely poor and from a very young age he found himself singing at local bars and begging for meals and cigarettes.

Dean Martin, nicknamed “the King of Cool,” was said to be one of the best overall entertainers of the mid 20th century. He was born in a small town in Ohio to Italian parents; his father was a poor barber. Young Martin dropped out of high school to help provide an income for his family by bootlegging liquor, working in a steel mill, working as a blackjack dealer, and prize fighting.

Sammy Davis Jr. grew up in Harlem, street performing at age 7, which kickstarted his musical career.

Peter Lawford grew up in a very wealthy household as the only child of Lieutenant General Sir Sydney Turing who had strong connections to the English aristocracy. Young Lawford was rejected by the British military after suffering an arm injury while on vacation in the south of France.

Joey Bishop was born in The Bronx to two Polish-Jewish immigrants. He grew up doing stand up comedy with his older brother on the streets of South Philadelphia. After being discovered, he appeared on the Ed Sullivan show in 1950 which launched his career as an entertainer.

Though these men clearly came from a wide array of upbringings, they were somehow able to reach the pinnacle of world entertainment in a very short time. Their rapid rise to fame showed that it was a time when there was opportunity for all to realize their dreams. America was relatively free during the rise of the Rat Pack, and although the implementation of Keynesian principles was just beginning to occur, it was too early in the process to restrain market forces. The government was not yet as interested in top down central planning – an economic system rooted in what F. A. Hayek would describe as “a pretense to knowledge.” Flawed government programs concerning low income areas were still in their experimental phases and were much less prevalent than they are today.

The government was also absorbed by the war against communism in Vietnam, and by the mid 60’s, a mass movement promoting free thought and questioning of

authority was on the rise in America. People had the ability to exchange goods, services, and ideas in an open market, and artists enjoyed the freedom to innovate and work toward the creation of wealth while pursuing their passions.
Sammy Davis Jr. explained their success very simply: “The success of the Rat Pack was due to the camaraderie, the five guys who work together and kid each other and love each other.” His words captured the essence of the moment: Only in a free society are people able to climb life’s ladder of success so quickly, simply by doing what they love. They may not have recognized the timeless, universal truths behind their journey, but their accomplishments clearly demonstrate the anarchic beauty of markets. The Rat Pack truly lived the American dream. They showed that markets treat all equally, no matter their race, income, or nationality, all while working toward the creation not only of wealth, but of beauty. As stated by Leonard E. Read, “The free market ignores the poor just as it does not recognize the wealthy.” All that’s needed is sheer hard work, enjoyment of what one does, and the freedom to charge a wage for one’s service in the open marketplace. The Rat Pack’s freedom, grit, perseverance, and ability to entertain, coupled with hands off government policy, allowed these men to reap the full benefits that came to mark their success on a level no one had expected from the new age in which they were living.
In the early 60’s, we caught a glimpse of the possibilities of a free society. The Rat Pack enjoyed the new level of social and ideological freedom of the day, and also held a similar level of economic freedom to the 50’s. This wider boom of creativity in the early 60’s is another perfect example of how the dreams and plans of individuals and

their personal initiative create wealth far more effectively than top-down central planning.
While presenting his plan to eradicate poverty and racial injustice through bigger government, President Lyndon B. Johnson said that as a result, “We will have an opportunity to move not only towards a rich society, or a powerful society, but a great society.” Though this rhetoric sounds promising, these social programs did quite the opposite of what the president predicted. The government programs that were just being introduced at the time have grown unchecked since the mid 60’s. This growth has rapidly diminished the equality of opportunity that made The Rat Pack great. Occasionally, extraordinary individuals manage to break free of this government tyranny and change the world through innovation. As described by Ayn Rand, they are “the men who take first steps, down new roads, armed with nothing but their own vision.”
The Rat Pack, on that magical summer evening in 1965, embodied the immense freedom and possibility available in the America of the time.
Frank Sinatra, Dean Martin, Sammy Davis Jr., Peter Lawford, and Joey Bishop all lived freely; they entertained for their own pleasure and gain, and also brought immense joy to those around them: and, maybe not so surprisingly, they still do.

About Me

The Torch is an extension of an independent study I co-created with my high school humanities teacher to explore the academic disciplines of philosophy, politics & economics. It is a platform to review books and speakers, and share ideas. Specifically, I am interested in ideas of freedom and how they intersect in the three discplines. I am a Distinguished Libertas Scholar at Providence High School, who enjoys chess and competitive soccer.