Sunday, 29 November 2015 03:39

Hendrickson's View

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Hendrickson's View

Mark W. Hendrickson

Mark W. Hendrickson is a faculty member, economist, and contributing scholar with the Center for Vision and Values at Grove City College, Grove City, Pennsylvania. These articles are from V & V, a web site of the Center for Vision & Values.

The Theory of Moral Sentiments: Adam Smith's Timely and Timeless Classic

Last year, 2009, marks the 250th anniversary of the publication of Adam Smith's masterful treatise on ethics, The Theory of Moral Sentiments. Smith, primarily known today for his hugely influential 1776 work on political economy, The Wealth of Nations, was a professor of moral philosophy. The Theory of Moral Sentiments is stunningly relevant today.

Whereas The Wealth of Nations featured the "invisible hand," the metaphor that dominates Moral Sentiments is "the impartial spectator." The "spectator" represents one's conscience -- one's ability to perceive the divinely ordained objective standard of right and wrong.

In Smith's view, conscience is both a divine spark in mankind and also the product of reason. Indeed, Moral Sentiments (like Western civilization itself) is a synthesis of Greek Stoic philosophy and Christian thought.

The genius of Moral Sentiments lies in its clear, thorough explanation of the necessary preconditions for social harmony. Smith cites three cardinal social virtues: prudence, justice, and beneficence. Indeed, as we survey our discordant, divided society today, we can see that many of our problems stem from confusion about these three virtues. Smith, in spite of writing his book so long ago, provides the solutions to today's most vexing social problems.

By "prudence," Smith means the practical steps that a person takes to provide for his own needs and wants. For able-bodied adults to shun this basic responsibility is self-destructive and antisocial.

Smith's second social virtue, justice, is "the main pillar that upholds the whole edifice" of society. As essential as it is, though, justice "is entitled to very little gratitude" because "it does no real positive good" and "is . . . but a negative virtue" that "only hinders us from hurting our neighbour."

Smith is right. We don't feel gratitude to others for not killing or robbing us, because they are simply refraining from what they ought never to do. Yet when people do not refrain from infringing our basic rights, society disintegrates. Thus, the irony that just behavior is at once the virtue that is least deserving of praise, but most indispensable for society's wealth.

Smith's third social virtue, beneficence, deserves the highest approbation, for it represents the greatest good that one can do beyond the call of duty. Beneficence, though, is never a duty. More specifically, it may be one's duty to God as a practicing Christian, but it can never be made a legally compulsory duty to one's fellow man. Here Smith illuminates the essential difference between law and gospel that still confuses and divides Christians today.

In Smith's words:

Beneficence is always free, it cannot be extorted by force, the mere want of it exposes to no punishment; because the mere want of beneficence tends to do no real positive evil.
Beneficence . . . is less essential to the existence of society than justice. Society may subsist, though not in the most comfortable state, without beneficence; but the prevalence of injustice must utterly destroy it.

Beneficence "is the ornament which embellishes, not the foundation which supports [society]."

Government force may only be used to enforce justice (i.e., to restrain or punish those who would infringe the rights of others) but not to enforce prudence or beneficence. A government that would presume to compel citizens to work (or threatens to lock up citizens who prefer not to purchase health insurance) violates the very rights it is supposed to protect. So does a government that compels the redistribution of property from some citizens to others, because such deeds would violate the necessary and fundamental principle of justice.

Meddlesome do-gooding -- the pseudo-charity whereby A and B use governmental force to bestow unearned benefits upon C that are paid for by D -- is unraveling the fabric of society today. When one looks to Washington, one sees that Smith has captured with uncanny accuracy the mentality and spirit of present-day social engineers, central planners, and redistributors of property:

The man of system . . . is apt to be very wise in his own conceit, and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it . . . he seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board.

The political reformer manifests "the highest degree of arrogance." He seeks "to erect his own judgment into the supreme standard of right and wrong." He:

. . . fanc[ies] himself the only wise and worthy man in the commonwealth, and [believes] that his fellow-citizens should accommodate themselves to him.

This attitude leads to "the madness of fanaticism" among the political leaders of radical reform, while the mass of followers are:

. . . intoxicated with the imaginary beauty of the ideal system, of which they have no experience, but which has been represented to them in all the most dazzling colours in which the eloquence of their leaders could paint it. Those leaders themselves, though they originally may have meant nothing but their own aggrandizement, become, many of them, in time the dupes of their own sophistry.

Indeed, I don't believe it is possible for any current book analyzing contemporary America to surpass Adam Smith's classic Theory of Moral Sentiments in terms of lucid insight and timely (and timeless) wisdom.

Obama's Anti-jobs Policy

High and/or rising unemployment is always a political liability for a president, and so Barack Obama has taken the offensive in trying to persuade the American people that his team can get Americans back to work.

In November, Obama took credit for having created 640,000 jobs. That audacious assertion was less than persuasive, coming as it did near the end of a year during which the number of employed Americans declined by over four million while the unemployment rate rose from 8 percent to 10 percent.

Team Obama's credibility came into question again when alert reporters pointed out an embarrassingly large number of "inaccuracies" in the Obama administration's claims of jobs "saved" and "created" by the stimulus plan he pushed through Congress last winter. This included isolated stories about things like more than 900 jobs being saved in a Georgia business with only 500 employees. Then it quickly snowballed when researchers examined Obama's recovery.gov website and tabulated official claims of tens of thousands of phantom jobs in nonexistent congressional districts.

This unseemly episode raised issues of competence and trust in terms of whether Team Obama had what it took to help the unemployment situation (and never mind whether these are the people you want redesigning the country's healthcare and energy industries). In fact, it proved to be an advantageous diversion for Team Obama, because it deflected attention away from the administration's actual record of adopting policies that have increased the number of unemployed Americans.

In June, the minimum wage rate increased 75 cents. This government intervention priced many young Americans out of jobs, with the unemployment rate for black teens rising from an already-too-high 39 percent to an abominable 50 percent.

Team Obama's aggressive attempts to raise taxes on businesses and employees to pay for his healthcare plan would significantly increase the costs of employing people, making businesses afraid to hire. And the cap-and-trade scheme would increase energy costs dramatically, further adding to business worries. (Incidentally, economic studies have shown that Obama's cap-and-trade program would reduce American employment by between one to two million jobs per year.)

Another factor that has aggravated unemployment this year is that Uncle Sam's enormous budget deficit has consumed virtually all the available credit, crippling the ability of private businesses to hire new workers.

Obama's fundamental problem regarding jobs is that he believes all that baloney about government having quasi-deific powers as an alleged "creator" and "savior" of jobs. Yes, government can put people on its payroll or prop up certain jobs, but only by redirecting scarce capital and resources from elsewhere in the economy, thereby reducing employment in the private sector.

Examples abound:

What about the Obama hype about creating new "green" jobs? Lots of luck! Germany's government tried this, and every "green" job cost $240,000 and raised the overall unemployment rate. Each solar energy job in sunny Spain resulted in the loss of 2.2 other jobs.

Even in our own nation's history, it is no coincidence that unemployment stubbornly remained at atrocious levels for all the years that FDR's jobs programs were in place.

As history shows, governments are not creators and saviors of jobs on a net basis, but effective destroyers of jobs.

A little economic knowledge explains why this happens.

When a job exists only because of a government subsidy (whether in the form of a grant, a tax credit, or any other policy device), then what the job produces is worth less than the worker is being paid. Society as a whole is made poorer by the difference between the value of what the worker produces and what the government pays him, and that wealth is withdrawn from the private sector. Even if government could miraculously hire workers to do exactly the work that citizens want most and pay them true market wages (and no government planners ever have sufficient specific knowledge to make these decisions, which is why centrally planned economies always stagnate), such a program would make society poorer and therefore reduce overall employment. Why? Because of the overhead costs of administering the program: the armies of bureaucrats (with their cars and offices) needed to study, administer, and keep records on the government-employed "non-governmental" workers.

The Obama/Pelosi/Reid axis rushed to defuse the fake jobs scandal of November by holding a "jobs summit" in December. The outcome of that summit was more of the same failed policies of government spending and government subsidies that will finance uneconomical jobs at the expense of economically rational jobs in the private sector. As a result, high unemployment will persist throughout 2010.

One of the tragedies of Barack Obama's presidency is that the more he tries to use government to improve the job market, the more he throttles that market. Let go, Mr. President. You're making things worse.

The Student Loan Problem

You may have seen the recent story about the 41-year-old doctor who graduated from medical school in 2003 with student-loan indebtedness of $250,000 that has since swelled to more than $555,000. She is now scheduled to pay $990 per month until she is 70 years old. Ouch!

This is an extreme example of a widespread problem. Only 40 percent of the $730 billion of outstanding student loans are actively being repaid. This isn't healthy for financial institutions and it isn't healthy for many young Americans. Just as was the case with the ongoing mortgage fiasco, there is plenty of blame to go around for this sorry state of affairs.

It's easy to say that those who borrow to pursue their post-secondary education bear the primary responsibility. The first rule of survival in a market economy is caveat emptor ("let the buyer beware"). Nobody forced anyone to go into debt.

Still, it is significant that almost all student loans are taken out by Americans too young to know what it takes to pay their bills and make a living on their own. Undoubtedly, some unscrupulous students will borrow money with every intention of avoiding repayment; however, I believe that most borrowers sincerely intend to fully repay their debt. The problem is -- due to their lack of maturity and, yes, intellectual development -- they literally have no idea how hard it can be to repay $50,000 or $100,000 of debt.

My wife and I recently entertained two of her former college students -- intelligent, talented young ladies laden with considerable debt. The one owes over $100,000 and has a bachelor's degree in theater. She has an entry-level position with a business, and no realistic prospect of repaying her debt before she turns 40. Much wiser now at age 23, she realizes the gravity of her predicament. She most emphatically wouldn't have sustained such debt if she had known then what she knows now, but now she's stuck.

Like many young adults in her position, the price for her indebtedness is more than monetary. There are very few young men out there who are willing to marry somebody with a six-figure debt chained to her ankle. (Apologies to all the romantics out there, but that's the way it is.) Here you have someone whose strongest desire is to be a wife and a mother, but her student-loan debt makes her a leper to most men in the marriage market. Sad.

I have heard people suggest that colleges and universities provide debt counseling to students so they don't get in too deep. My employer, Grove City College, requires students to attend debt management seminars as a requirement for participating in its privately funded loan program. That is a wonderful program, but the reality is that colleges are businesses and, like all businesses, are hungry for revenue. Expecting them to counsel students to drop out or transfer to an inexpensive junior college is like expecting a fox to warn chickens not to go into foxholes because they might be eaten. It just isn't the nature of the beast.

That leaves the lenders. As was the case with defaulted mortgages, lenders protest that they explained the dollars and cents of the student loans thoroughly. And again, it is safe to assume that some of them really did, just as some of them really did not alert starry-eyed, naive youngsters to the pitfalls inherent in taking on large debts. Let's face it, if loan officers profit from issuing loans, they have every incentive to write as many as they can.

Normally, I would say there is nothing objectionable about that, but in this case, I believe that public policy once again is guilty of having altered normal market incentives. I refer to laws that make it almost impossible for student loans to be erased through bankruptcy.

Now don't get me wrong -- I believe strongly that debts should be repaid. A society that makes it too easy for individuals to walk away from their financial obligations does not sufficiently uphold the foundation of economic progress -- property rights -- and consequently jeopardizes economic progress. But in the student-loan market, government has created moral hazard: Knowing that government will take extraordinary measures (even garnishing unemployment checks) to see that student loans are repaid, issuers of student loans feel bulletproof, and proceed to crank out as many loans as they can. If they knew that they might lose their loans through normal bankruptcy proceedings, they would do what prudent lenders always should do: Assess risk very carefully and issue fewer loans to starry-eyed kids who want to pay $30,000 per year for a degree with minimal market value.

I don't pretend to know how to get out of the current mess. It would have been much preferable had we never gotten into it. I do believe, though, that it isn't right for financially incompetent young Americans to be penalized for decades because no adult who knew better stopped them from making a foolish financial mistake. Let's have some mercy here.

A Moment of Illumination

We've all had those sudden epiphanies where the proverbial light bulb clicks on and understanding comes into clear focus. I had one of those moments over the Christmas holiday season. In this case, the light bulb experience was literal as well as figurative.

Here is what happened: My wife came home all excited because she had found strands of battery-powered Christmas lights to add some pizzazz to a couple of wreathes in our living room. The excitement gave way to glumness as soon as the "on" switch was turned. Instead of bright, cheery, Christmassy points of light, the LED bulbs emitted a pale, weird, sickly light of indeterminate bluish hue. Yuck!

Welcome to the dreary world of politically correct Christmas lights. Such wan, ghastly Christmas lights may bring joy to the hearts of worshipers of Gaia and those who put up "unity trees" instead of Christmas trees, but for those of us who are still quaint and old-fashioned enough to want a festive and joyous atmosphere in which to celebrate the birth of our Savior, those ugly-though-energy-efficient LEDs were a big humbug.

The austerity of a green future was apparent again when I turned on our new energy-efficient outdoor light on the back porch. I thought the new bulb must have already broken, because the twilight seemed as dark as it had before I flipped the switch. When I went outside to check, I saw that the light "worked." The bulb was emitting about half the light that a match would provide. As most of you readers probably know already, these "modern" energy-efficient bulbs take time to warm up. Do environmentalists really believe that using bulbs that no longer give us instant illumination is progress?

Some of these wretched new bulbs also represent a retrograde step in terms of human safety. They contain mercury. For decades, we have searched for ways to lessen human exposure to this highly toxic element. Now our environmentally enlightened leaders have legislated a phase-out of tried-and-true incandescent bulbs in favor of bulbs that give inferior performance while posing a greater health hazard.

For those naive enough to believe that environmentalism is about making the world more livable for humans, these new-fangled, pathetic excuses for light bulbs should suffice to correct that misapprehension. The greens want to punish us for having dared to convert Mother Earth's raw materials into products that improve our quality of life so magnificently.

President Obama is a believer in this grim green Puritanism. During his presidential campaign he chastised the American people for our affluence, asserting moralistically:

We can't drive our SUVs and, you know, eat as much as we want and keep our homes on, you know, 72 degrees at all times . . . and then just expect that every other country is going to say OK. You guys go ahead and keep on using 25 percent of the world's energy, even though you only account for 3 percent of the population.

The implication is that Americans have been piggish, hogging an unfair percentage of the world's depleted resources. This view is flawed.

In the first place, we have consumed so much energy simply because we have been free to do so. Whenever countries adopt market economies -- that is, when they protect property rights and protect legitimate (i.e., non-coercive, non-fraudulent) profit-seeking behavior -- human productivity, energy consumption, and prosperity all rise in lockstep. It is NOT the United States' fault that foreign governments so long impeded the economic freedom and concomitant energy consumption of their citizens.

Secondly, it is fallacious to view energy supplies as nearing exhaustion. In their book, The Bottomless Well, Peter W. Huber and Mark P. Mills tell us that human beings consume approximately 350 Quads (a quadrillion BTUs) of energy per year. KNOWN (I'm emphasizing "known," because more will surely be found) global coal deposits contain some 200,000 Quads of energy; oil shale deposits, 10 million Quads; uranium and its cousin elements contain even more; and the deuterium in the world's oceans contains at least 10 trillion Quads of energy that will be unlocked when nuclear fusion technology is developed.

Since the Huber and Mills book was written, Brazil has found billions of additional barrels of recoverable oil off its shores. BP has found billions more in the Gulf of Mexico. Humans will never use all the energy that our energy-rich world contains.

Someday, our descendants will look back at the vigorous efforts of greens and liberals to keep us from developing the most economical forms of energy with bemusement and bewilderment. The energy is there. What would you rather do -- tap in to nature's bountiful supplies, or put up with light bulbs that don't give instant light and the eerie, gloomy beams of politically correct light bulbs at Christmastime? *

"The hardest arithmetic to master is that which enables us to count our blessings." --Anonymous

Read 1423 times Last modified on Sunday, 29 November 2015 09:39
Mark Hendrickson

Mark W. Hendrickson is a faculty member, economist, and contributing scholar with the Center for Vision and Values at Grove City College, Grove City, Pennsylvania. These articles are from V & V, a web site of the Center for Vision & Value, and Forbes.com.

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