A Palestinian state? What kind of state?

I support the creation of a Palestinian state in a comprehensive two-state solution. More than 70% of Israelis do so as well. Not that I put much faith or value in the bureaucratic machinery of the political entity we call the nation-state for the achievement of human rights and prosperity; but given the realities of the world today, a two-state solution may be a substantial improvement.

So, what would a comprehensive two-state solution look like? There are some key ingredients that the new state of Palestine should have if it is to have a chance of peaceful coexistence with Israel. The most essential is that it should be a liberal democracy; by which I mean a state (a society) in which the rule of law prevails and not the rule of thugs and corrupt bureaucrats. This is a huge leap from where Palestinian society is now, but one senses it is one that would be welcomed by many, especially the incipient Palestinian business community. Perhaps if we turned negotiations over to the businesspeople on both sides we would have a practical solution in short-order.

Such a state would necessarily entail the acceptance of the existence of the Jewish state of Israel as legitimate. In an ideal world there would not be Muslim states, Jewish states or Christian states. In fact, in an ideal world there would probably not be states. We would all be free "citizens" of a peaceful world, free to practice whatever religion or lack thereof we chose as long as we allowed the same to all others. In a substantially less ideal world, but one better than we have, states would all be officially secular and religion would be a private matter. But this is not the reality of the Middle East today (nor has it ever been). In fact the "Jewish" state of Israel is probably the closest to a secular liberal democracy existing in the region. The "Jewish" aspect is an ill-defined cultural and ethnic aspect of Israeli society that comes from the history of its peoples and is essential in defining their individual identities, their values, their literature, their language, the tacit presuppositions by which they live their lives. The same dynamic is at work in the "Muslim" countries. The tension that this presents for Israel as a liberal society is real, and it is a tension that is continually been confronted and resolved in different ways. But the Jewish character of the society is not-negotiable. To demand that Israel give up its "religious" identity in favor of a secular state encompassing all peoples of the region (Muslim and Christian) is a disingenuous demand for cultural and most probably physical suicide.

So, if we are taking about a two-state solution, in the current context, we are talking about a Jewish state alongside a Palestinian one (in which predictably Muslim culture and values and laws will be prominent) - two states coexisting with mutual acceptance and respect.

Is this what the current initiative to unilaterally declare a Palestinian state in some forum of the United Nations portends? Not even its most ardent and charitable supporters would claim this. I confess I don't know exactly what the motivation for this high-profile initiative is, but I know it is certainly not about establishing the kind of co-existence described above. It certainly contains no change in the official and de facto position on Israel as an illegitimate occupier of Arab land. (I am not talking about the so-called occupied territories, I am talking about the whole of Israel.) It is clearly not about peace, co-existence and co-operation. It is not really about power to the Palestinian people either. Their miserable lot will not change. It seems to be about leverage of some kind. It is most probably about political leverage for the cynical and corrupt Palestinian leadership. They, in uneasy partnership with the principle jihadi groups, like Hamas, would most probably use such state recognition to try to further isolate Israel and in the process obtain international aid and support for their corrupt (or extremist) organizations. In other words it is really a strategic step in the 63 year old war to undo what happened in 1948.

I have blogged before about the sorry state of the Palestinians and how they have been used as pawns by their leaders and other leaders in the region - condemned to inter-generational refugee-status in a poverty-stricken, terror-sponsoring, welfare-state in which any economic initiative is stifled and any constructive cooperation with Israelis discouraged (for example here). Changing the official status of this territory to a "state" will not improve their situation. It could conceivably make it worse if it leads to an escalation of hostilities.

So, should the U.S. veto the initiative in the UN? As bad as this will look, I would still probably say yes, it should. But my purpose is not so much to urge this, as to confront the ill-considered rush of support for the initiative (including by many American Jews). This is yet another example of how Israel is struggling in the public relations war. After all, why should we deny the Palestinians a state when Israel has one? What well-meaning thoughtful person could be against that?

But, of course, as I am trying to show, things are not what they seem. Not all "states" are alike. What if we added the qualifier "terrorist" to the state that the Palestinians are seeking? We would no doubt be accused of shameless provocation. OK, but can we use the qualifier "peaceful" instead? How about "all-inclusive"? Are there no conditions to be demanded for support? Whether or not the U.S. vetoes the proposal is ultimately less important than establishing an accurate realization of what is really going on here.

Peter Lewin Interview

| Peter Klein |

Adrián Ravier has put together a nice collection of Spanish-language interviews with economists of the Austrian school (volume 1, volume 2). The leading modern figures are all included: Mises, Hayek, Machlup, Lachmann, Rothbard, Kirzner, fellow travelers such as Buchanan and Shackle, and contemporary Austrians such as Garrison, Block, Hoppe, Higgs, Ebeling, Salerno, Boettke, and more.

Guest blogger Peter Lewin’s interview is coming out in a third volume, to be published later this year, and Adrián has given me permission to post the English version here. You’ll find Peter’s intellectual odyssey very interesting!

The Third Way

Many, if not most, people reading this will already know everything I am going to say. I am writing it, however, for those, however many, who have never heard it. They constitute the majority among the population at large and, more significantly, the majority among the population who think at all about political affairs. I am frustrated by how often I encounter these immovable presuppositions, so I am offering this in a modest effort to change some, maybe just a few, minds.

What has become the conventional wisdom, the common mode of thinking, imagines a political spectrum with the liberals on the one end (the left) and the conservatives on the other (the right). Anyone on either end is usually labeled an extremist, which means you don’t have to listen to them. This is true for both extremes, but it is especially true for the right, hence such terms as “hard right.” As a general rule the left end of the spectrum is more urbane, sophisticated, eloquent and educated. The right wing is often shrill, crass, repetitive, uninformed and transparently stupid. Like all generalizations these are not true characterizations of everyone who fits the label. Just impressions. The people somewhere in the middle to the slight right or left of the center are regarded (regard themselves) as the reasonable and normal majority. They vilify and demonize the extreme right and patronizingly dismiss the extreme left (who are to be admired for their idealism but discounted for their lack of realism). Perhaps you recognize this story.

This traditional dimension from liberal to conservative that I just described is deficient. It neglects to break down the liberal or conservative mindsets along two relevant sub-dimensions, social affairs and fiscal affairs. The following pictures will help illustrate.

Figure 1 below illustrates the traditional political spectrum.

Figure 1 - The Traditional Spectrum – Social and Fiscal
Left-wing liberal	Right wing conservative

Some clear issues divide the traditional left and right on the question of limiting or using the power of the government, the state. For example, the left believes in free speech, is pro-choice, supports  recognizing gay marriage and liberalizing immigration and perhaps decriminalizing drugs. The right vigorously opposes these advocating state power to restrict these choices. But there are other issues that divide them on the basis of whose state-sponsored agenda should be implemented. On the left we have anyone who wants to use the state to achieve a “liberal” social agenda (income redistribution, entitlement programs, socialized health-care, consumer regulation). On the right we have anyone who opposes these programs in the name of fiscal prudence, and maybe some other reasons, but who believes in using the state to achieve other agenda items like a strong defense, wholesome family values, a prominent role for religion and so on. Where do we put someone who opposes both of these agendas on the basis that they involve unwarranted, dangerous and inefficient uses of the state? There is no place for them in this spectrum. 

Figure 1 is a one dimensional spectrum. it combines fiscal and social issues. So it mixes the issues.  In Figure 2 we introduce a distinction between fiscal and social issues

Figure 2 - The Third Way – breaking it down
	Fiscal
Social		Liberal	Conservative
	Conservative	( Spindrift for socially conservative issues?)	Right wing conservative
	Liberal	Left-wing liberal	Libertarian – Classical Liberal

The traditional spectrum portrayed in Figure 1 now lies across the diagonal of Figure 2 from bottom left (left-wing liberal) to top right (right-wing conservative). The most significant additional information is provided by the third alternative to these two, namely the Libertarian or Classical Liberal in the bottom right cell. This characterizes my own perspective. It puzzles people. When I talk to traditional left-wing liberals they want to put me in the top right and are, therefore, puzzled by my support for gay marriage, decriminalization of drugs and liberalization of immigration. When I talk to right-wing conservatives they want to put me in the bottom left and are therefore puzzled by my support for limiting government spending, deregulation of business, a limited military and freedom of religion. They are confused because they are thinking in terms of a constraining spectrum.

But once understood, the expanded framework is very simple. It is based on the key question of the appropriate role of power, hence of the state. In fact "liberal" as commonly used is a distortion of its original meaning. Originally “liberal” meant someone who believed in individual liberty and supported policies to guarantee it especially limiting government power. It retains much of that meaning in European political discourse. I am not sure what “conservative” means in this context, but the other end of the spectrum is anyone who supports using the state for their social agenda whatever it is, so we can them the a “statist.” So if we were to re-collapse Figure 2 into a one dimensional spectrum we would get the picture depicted in Figure 3

Figure 3 – A better conceptualization
Classical Liberal	Statist

This is how I think of it. The statists are dangerous because they either support the use of state power for their agendas and don’t care about freedom (like fascists, Nazis, Soviets, etc.) or else they are naïve in thinking they can use the state for noble ends and still preserve individual freedom (like democratic socialists, some anti-poverty activists, most environmentalists, etc.). They tend to underestimate the power for good of the free market and overestimate the power for good of the state. Much of what I and like-minded friends and colleagues are trying to do is to shift the debate to this spectrum.

School Vouchers - Ivry Man (IM) asks Dr. Know (DK) for Guidance

Ivry man finds himself in the park and, as expected, sees Dr. Know seated on his usual bench looking agitated.

IM.	Dr. Know, how are you? I was hoping to see you here. It has been too long since we spoke.
DK.	[Warm smile] Indeed it has my dear friend. The responsibility for this lies with the guy who writes this dialogue. Apparently he has been very busy with other things and could not find the time to bother with the likes of us. Who am I to argue with that?
IM.	As you said the last time we met. But you seemed to be a bit preoccupied a moment ago. Is something worrying you?
DK.	How perceptive you are. Yes, in truth, I am very frustrated. For years I have been arguing the case for school vouchers – of course I am not alone in this – yet such little progress has been made. Support is growing, especially among low income families in the worst school districts in the United States, but the educational establishment is very powerfully against them; even now when the current president has a real opportunity to get behind them, he refuses to do so.
IM.	I see you are upset. I am not sure I understand this issue very well. My intuition tells me that vouchers are a threat to the whole idea of public education and all it stands for. But perhaps you can help me understand better.
DK.	Indeed. I will be happy to. After all, that must be the reason that this dialogue is being written, right?
IM.	I am not sure I understand.
DK.	Never mind. Actually your intuition is shared by many people. One might say it is the conventional wisdom. Although the public school system is only about 150 years old, the notion of public schooling runs very deep in the American psyche. Many believe it is a key, indispensible element of American democracy.
IM.	Yes. How are they wrong?
DK.	They are tragically wrong. While public schooling may have been a good experience for many children, for the majority of children today it is at best very mediocre and mostly a disaster. The public school experiment is a failure. In terms of its own goals and principles it has failed. It is time we disabused ourselves of mindless prejudices in its favor and started to look hard at the facts and at the logic.
IM.	I am sure you can elaborate for me.
DK.	I’ll try. The goals of public schooling as an ideal are probably noble, admirable. To provide every American child with certain minimal educational opportunities – who can argue with that? It is seen as a way to implement basic democratic principles, allowing children of poor families, as well as of middle class and rich families, access to that great solvent of American society, education – and thereby to break down persistent and dysfunctional racial, ethnic and economic barriers.
IM.	Yes, indeed!
DK.	Actually the original impetus for the public school system was not so noble. It was basically a question of Protestant paranoia over Catholic private education and an attempt to negate the subversive progress of the latter. But this not so relevant now.
	The voucher system I have in mind is one that would provide parents a choice of where to send their children to school by providing them with the equivalent in vouchers (or tax credits, or some such refund scheme) of the cost to the taxpayer of educating their children in the public schools. So it is not an argument for getting the state out of the business of subsidizing education. It is an argument for getting the state out of the business of producing education. Or, since I could imagine a dual system (such as we have in higher education), it would remove the monopoly of the state in producing education. A voucher system would closely resemble the GI bill.
IM.	Yes I follow that.
DK.	Note, vouchers or tuition credits or something similar is provided rather than cash because of the standard liberal objection that parents can’t be trusted to use the money for education rather than booze or drugs. Liberals love humanity, it’s just people they have contempt for.
IM.	Nice Dr. Know. Now that you have that off your chest, what are the objections to vouchers?
DK.	It seems to me there are two main arguments against vouchers, the "church-state separation argument" and the "social responsibility argument".
IM.	I am more interested in the second.
DK.	Mostly the reluctance to even consider vouchers seems to come from the conviction that a voucher system will be harmful to the cause of "social equality" (as I mentioned a moment ago). There is the perception that vouchers will destroy the public school system and that this will exacerbate or perpetuate poverty..
	This is a very bad argument. It is now pretty much undeniable that, as I asserted earlier, the public school systems are, in general, failing in their overall mission to provide all elements of the population with at least an "adequate" education. The public school system as an institution is supposed to advance the aims of "equality of opportunity" for all Americans regardless of gender, race, national origin or other educationally irrelevant characteristics and of provide opportunities for those who have different learning styles and approaches as well. It has been thought that schools that were segregated by ethnic group could not deliver on these aims and so the aim of desegregation has evolved along with our national educational policy.
IM.	Yes you pretty much said as much already. So what is the reality?
DK.	If you will be patient I will get to that soon enough.
IM.	A thousand pardons Dr. Know.
DK.	Very well. As it stands now, seen in the light of these aspirations, I believe we should be bitterly disappointed. There are some very good public schools, even some superlative ones. These are few in number and they are located primarily in the affluent suburban areas. They are attended mainly by children from upper income families, mostly white. But, most of our public schools are substandard, overcrowded and bureaucratic. Many of those in the inner-cities are downright dangerous - they are breeding grounds for the drug-traffic, for teenage-pregnancy, for gang-warfare and much else besides. And they do not educate the children who attend them, who are mostly poor and from minority families. The worst nightmares of those who oppose segregated schools are fulfilled by the public school system as it now operates. At best we have institutionalized mediocrity. At worst we have exacerbated the cycle of poverty and deprivation. It is no exaggeration to say that the public school system is perpetuating and exacerbating the very problems it was apparently designed to solve!
IM.	So how would vouchers solve this?
DK.	Well. Vouchers would provide at least the potential of a way out for some, maybe many, maybe most families. That is why, I believe, many families and leaders from minority communities are now actively and vigorously supporting them. As I said earlier, the proposal I am considering, and which all leaders in the field of education should actively support, is one which provides to parents the equivalent of the cost of educating their children in the public schools. At least this way parents would have a choice and schools would start to be accountable to them.
IM.	I think I see where this is going.
DK.	Well, there are two usual objection at this stage. One, those parents who could afford to "top up" (add to) the value of the voucher would take their kids to private schools in the more affluent areas, and this would exacerbate inequality. Two, even the poorer parents armed with a voucher will pull their kids out of the public schools, so the public school system would collapse. There would be nowhere for some kids to go, especially those with special learning needs.
IM.	And what do you say to that? You have an answer I am sure.
DK.	In answer to the first objection: I wonder how much more segregated the system could become than it is now. I suspect actually that with a voucher system schools would become less segregated, not more segregated, as kids from the poorer neighborhoods take their vouchers to schools of their choice. In any case, it is one more spurious argument in favor of the sacrifice of individual economic and social advancement in the name of equality – as Milton Friedman pointed out; those who try to achieve equality by sacrificing freedom of choice end up sacrificing both.
IM.	Aha! And what about the second objection, precipitating the collapse of the public system?
DK.	If the public school system is that fragile that, at the earliest opportunity, its clients would abandon it for preferred alternatives, one might wonder why it is indeed worth saving at all. To the supporters of public schools as an ideal in itself, I would ask how bad do the public schools have to get before you will consider that perhaps they are not worth saving? There are currently a variety of private scholarship programs that provide 50% of the tuition of private schooling for the child, the other 50% being provided by the parents. Parents are invited to apply. The programs are incredibly oversubscribed – by many hundred percent. In other words, hundreds of thousands of families, many of them very poor, are prepared to pay 50% of a private school tuition in preference to the “free” education their kids could get in the public schools. What does that tell you about the value to them of each of these alternatives? This is not hypothetical, this is fact!
	Of course “free” public schooling is not really free. Right now the state and local governments are spending a fortune per child in the public schools, actually much more than is generally known and much more than in the private schools!! The sums are actually breathtaking, and the worst school districts are spending the most! All or most of this money would be available for vouchers, implying a substantial sum in the hands of parents when choosing among educational options for their children. This makes the schools accountable to parents – not to administrators, to unions or to government committees.
IM.	Yes, but what about those who are left in the dysfunctional public school system, and what about those kids with special needs?
DK.	I thought you might say that. And it brings me to perhaps the most important point of all – pay careful attention to what I am now going to say.
IM.	Yes sir, Dr. Know. You know I will!
DK.	When schools are accountable to parents, who have many thousands of dollars of potential revenue for the them, the extent and type of response that might develop is literally unimaginable. The variety of schools of many types, sizes, qualities and specialties (including those for special needs children) is likely to be very large. There is likely to be a high degree of innovation in educational styles (responding to parents who have different opinions and desires in relation to aspects of educational philosophy), and a high degree of dynamism in educational development. Schools will most likely be smaller, safer and more enjoyable. There will be fewer administrators per child, more (and better-performing) teachers per child.
	Educational experts don’t like this at all. They have all sorts of objections based on their own visions of how they think an educational system should be structured, based on their “expert” knowledge. So they are willing to denounce and condemn the very idea of a state- or nation-wide voucher system on the basis that, for example, it might imply the segregation, rather than main-streaming of special-needs kids, or the teaching of subjects not to their liking, etc. The arrogance of this amazes me. Because of their ideological commitments, these people are prepared to sanction the holding of our children hostage in failing American schools and foreclose fantastic opportunities for them in order to be able to try to achieve the doubtful benefits of their visions – many of which have already been tested and found wanting.
IM.	But what if these experts are right about their arguments for a good educational system for all and the deprivation of some?
DK.	Even if there were any merit to the very dubious argument that unfortunate minorities like special-needs families, or kids of dysfunctional parents, or who knows-what, would suffer as a result the introduction of a comprehensive voucher program, it does not follow that one should sacrifice the considerable benefits of the majority in order to preserve the status quo for the special minority. Surely not! A better argument would be to accept vouchers with the proviso that this apparent shortcoming be attended to if necessary by special provisions.
IM.	Hmm! So are you telling me that but for the opposition of these educational elites, the facts and your logic would prevail?
DK.	Sadly no. If it were just the opposition of the educational elites, who are, to be sure, powerful, I believe the arguments for choice in education would have prevailed long ago. It is, rather, overwhelmingly the power of the teachers’ unions that stand against rationality, progress and real reform in education. The teachers’ unions are self-serving, politically very powerful, unmovable bureaucracies. They are in bed with many parts of the executive and Congress. Introducing choice in education would remove protection for bad teachers, would spotlight unnecessary administrative positions and would take away educational decisions from the bureaucracy and put them in the hands of parents. The survival of the unions is threatened by vouchers and they are able and willing to use whatever opportunistic means they can to oppose them. Their opposition is not a principled one! It is based on their vested interest. In my book what they are doing to America’s youth is basically criminal. Yet, thus far they have been able to hide the consequences of their actions from most of us.
	Recently, however, the realization has dawned on parents in the most miserable school districts – in Wisconsin, in DC, in Florida and some other places. And there is a growing groundswell in favor of parental choice in education. This is a non-partisan, non-class issue. Poor minority families are rising up against the teachers’ unions. The outrage is growing. It is heartening, but also frustrating. These are low-income minority families appealing for the right to send their kids to charter schools or voucher-accepting private schools of their choice. The president has a real opportunity to do something really different – to bring real and beneficial change now. But, so far, he has not had the courage to oppose the teachers’ unions and I doubt he, or any other president, ever will. If a breakthrough comes it will probably be in the courts and maybe also in the Congress. It is long overdue.
IM.	What about the church-state separation argument?
DK.	It’s really hard to know if this is a genuine argument, a real worry, or simply another strategy. Many who oppose vouchers assert that they violate the constitutional separation of church and state "because state money can be used for religious education." I believe the logic is faulty. Right now the state is involved in the choice that parents make regarding their children’s religious education. That is because the state makes the price of a non-religious education much cheaper, at the margin, than a religious one. An education containing, or based on, a religious tradition has to be obtained in a private school. This implies that those parents who choose this option end up paying twice. Once, through their taxes, for the public school they don’t use, and again, from their after tax income for the private tuition. Saying that the state is uninvolved adopts the myth that an education that is devoid of religious content is somehow to be considered "neutral". It is not neutral. It discriminates against those who, at equal prices, would have chosen a positive religious content. It discriminates against those who would rather have their tax money educate children in a religion of their parents’ choice. Can a case not be made that the only neutral situation is one that gives the parents a choice, that is to say, is non-coercive with regard to both imposing or depriving religious content?
	In any case, as a practical, legal matter, the argument seems to be wrong. A number of current supreme court decisions indicate that, as does the fact that under the GI bill veterans can choose religiously based universities. The money goes to the parents, not to the schools. And then the parents decide. There is no violation of church-state separation. These are private choices.
IM.	Is that it?
DK.	Pretty much. I would finally add this. Apart from anything else, as a fundamental moral question, on what basis can one support the denial of educational choice to parents?
IM.	So every argument to the contrary you consider to be soundly refuted. Are there any valid arguments against vouchers?
DK.	Yes, indeed, there is one. But it comes not from those who support the public school system. It comes rather from those who oppose any kind of government involvement in education, it comes from those who regard vouchers, or any educational subsidies, as dangerous insofar as they may extend the power of government over the private education sector. Schools qualifying for vouchers would be state-certified thus extending state discretion. This has obvious potential for abuse. One could hardly think of anything more dangerous than giving power over education to powerful governments. The power to command huge resources for the education of young minds is indeed an awesome and dangerous power that one should keep out of the hands of potentially opportunistic bureaucrats. And vouchers would extend this power over private schools who chose to accept the vouchers. We can already see the corrupting influence of this type of thing in our higher educational systems – in the runaway tuition costs and in the state discretion over aspects of the curriculum that they fund.
	I have no argument against this objection. I accept it. I too am against the involvement of government in education at any level. I firmly believe that educational quality and achievement at all levels would be better without it. But my strong advocacy of vouchers is based on the judgment that a comprehensive voucher system would be infinitely better than what we now have, infinitely better. And the probability of achieving a comprehensive voucher system (or even an expanding piecemeal one) that would bring so much benefit to so many children being introduced soon, is so much higher than the probability of achieving a more ideal (from my point of view) system. So my argument is also a strategic one. I judge the benefits of subsidized parental choice to be worth the risk of its very really pitfalls and dangers. I would hope that if ever there were a comprehensive scaling back of the size of the state at all levels, education would be included, whenever such a remote possibility ever arrives.
	I strongly prefer parental choice to what we have now because I believe that, in general, parents want the best for their children and that competition through the educational market will work to give it to them. But even if, as you hear this, my dear friend, you have lingering doubts, ask yourself "how could it be worse than it is now?!!" How could it be worse?! The standard to hold any proposed alternative to is not perfection, it is relative improvement. I don’t see how giving parents of children a choice between schools could make them (their children) worse off.
IM.	As usual Dr. Know, this has been a most enlightening discussion. But I have a few questions for you on another subject if you don’t mind.
DK.	Ah, I wish I could. Unfortunately that will have to wait for our next meeting. So good to see you. Until next time.

Upon which he rises and ambles off in the direction of the library.

Somewhere over the rainbow!

I am guest-blogging on Organizations and Markets.

Here is my latest post:

I am envious. My brother in law and my nephew are in the Serengeti National Park in Tanzania. He is sending short reports via his Blackberry. His descriptions are graphic — he is awe-stricken. Sounds incredible, beyond imagination — to those of us veteran Africans used to having to search hard for game on our game park safaris. In the Serengeti there is game in exaggerated profusion. Lions, leopards, and cheetah virtually next to each other. Huge migrations of herds, hundreds of thousands strong. A trip for a lifetime. I should live so long.

It seems clear that this wonder of nature (a giant crater-bubble full of wild life) would not exist in the absence of the revenue from international tourism. Though government managed, it is subject to vigorous competition from other game parks in that part of Africa. The area is the traditional homeland of the legendary Masai tribe, who have a cattle-based economy. Population growth, technological change, and the pace of modernity threatened to destroy their world. Now they seem to be flourishing. The Masai have turned out to be successful entrepreneurs! I wonder if this is an instance of Ostrom’s successful local initiatives.

More generally, the preservation of wild-life in Africa has turned on the successful management of a plethora of wild-life game parks (many of them quite small relatively speaking), some having the status of super luxury hotels. There is an irony in there somewhere. (I wonder what it is like to have to manage a wild-life park as a business firm).

Of course most of the environmentalists never tell you about the preservation successes of market competition.

The Truth lies in the Middle??

I just watched a movie that made me feel very uncomfortable.

Its called Defamation and you can find information about it here: http://www.imdb.com/title/tt1377278/. It is available in various forms on the internet (for free). I watched it on Netflix.

Although it is fairly recent, I would think that more people would have heard about it. I think I know why there is a strong avoidance impulse connected to it. It takes aim at some staple Jewish communal motifs connected to anti-semitism and at a prominent Jewish organization and its leader, the ADF (Anti-defamation League). But this is no simple-minded propaganda piece. It touches some sensitive nerves. It made me want to look away. Although it seems to have been carefully edited to support the author-film-maker's point of view, I found it hard to dismiss - and some of it was downright embarrassing. Maybe you will have a different reaction and a more critical appraisal. Let me know.

The film-maker's name is Yoav Shamir and he is a young Israeli who traveled to the U.S. and Eastern Europe (with a group of teenage Israeli, on a Holocaust memorial trip) to shoot this movie.

I don't want to say too much. Maybe you will want to watch it and you should make up your own minds. I will just say this:

I have emphasized that just because a particular statement or position critical of Israel may not be anti-Semitic it does not mean that it isn't - and I do think that Melshheimer and Walt, Norman Finkelstein and Noam Chosky and company - if not antisemitic are, at least, unconscionably opportunistic and biased in their approach (and at least two on the list are also seriously troubled).

But having said this, and having watched this movie, it also seems to me to be true that the notion of antisemitism can be and has been abused. This is very upsetting. (It is reminiscent of the refusal by many black Americans to give up the mantle of victimhood.) It is productive of its own insidious form of racism - against non-Jews (you see this in the movie).

The most disturbing idea is the exploitation of the Holocaust in this context. There is, unfortunately, an element of truth in Finkelstein's notion of a "Holocaust industry". This exploitation cheapens and desecrates the suffering of the victims and the enormity of the crimes against them. When it comes to the Holocaust, the events speak for themselves and the hype is distracting, sacrilegious noise.

I am in favor of the Holocaust memorial trips for teenagers and others (the "march of the living"). We need to remember and the world needs to know. But we need to be really careful to guard against the temptation to manipulate emotions into conformity with the communal slogans putting the Holocaust behind every anti-Jewish slur.

Finally, it seems clear to me that many Jews need (economically or emotionally) antisemitism to continue to be a perceived threat. Many are thus inclined to see antisemitism in every criticism of Israel or of individual Jews. Trivial events, and crazy outliers, are highlighted out of proportion and ultimately this leads to a loss of credibility and respect. This is particularly true in the context of the modern Israeli-Palestinian conflict. Double standards invoked against Israel can be tackled on their own merits (or lack thereof) - one does not need the Holocaust for this.

Does it need to be said that we need to keep a strong and critical sense of reality in our pursuit of the truth no matter what our personal affiliations?

The Power of Presuppositions

We probably all know this – that presuppositions often prevent clarity of thought and action. Yet when I encounter these presuppositions I am often surprised anew – even by the same cases over and over again. Here are some examples.

1. Consider this simple riddle: “Brothers and sisters have I none; this man’s father is my father’s son”. Who is “this man”?

Most people, upon hearing this, quickly assume that the answer is “I” – that I am this man. My late father-in-law could not be budged from this. Pushing him, I discovered that he began by assuming that the quote is from someone looking in the mirror – which means, if you are saying the quote, you are looking at yourself. I tried to point out that in this case the quote is contradictory or nonsense – it implies that you are your own father and son. I could never convince him.

But the solution is beyond simple, it is trivial. Let’s use the kind of math everyone can follow:

This man = X

This man’s father, X’s father = Y

Re-forming the quote: “X has no brothers and sisters; Y is X’s father. Y is my father’s son”.

So I am Y, X’s father and X is my son.

Answer: X, this man, is my son.

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2. More significant: I frequently put the following multiple choice question on my economics exams, even at a fairly advanced level.

"What is the effect of imposing a minimum wage in an economy at a level below the already existing (uniform) market wage”?

a. The average wage will rise

b. The average wage will fall

c. The average wage will be unaffected

d. It is impossible to tell.

This is a question anyone, including anyone with absolutely no economics training whatsoever, should be able to answer correctly. But presuppositions get in the way.

Most people go immediately to option b. “The average wage will fall”. In a class of 21 bright high school seniors that I just taught this semester, everyone picked this option, in spite of repeated explanation of this very case in class over the preceding weeks. The mental barrier is formidable.

Here is what is going on: people’s intuition is to assume that laws imposed by government are more important than the spontaneous, hidden workings of the market place – aka, the private decisions of buyers competing with buyers and sellers competing with sellers. When people hear that in the question the government imposes a minimum wage lower than the wage currently paid, their minds immediately translate this as “permission” to pay a lower wage and they see no constraints against doing so. Its almost as if employers of labor operate in a vacuum and this new minimum wage law now allows them to pay less than they were paying – because, we all know after all, that they pay a little as they can.

Of course, the correct answer, again trivially, is option c. “The average wage will be unaffected”. It is a “minimum” wage law; not a “maximum” wage law. It does not prevent employers from paying more than the minimum, which, by assumption, they are already doing. Yet most people cannot see it. [Notice how the simple meaning of the words is missed.]

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3. More topical: “Tax-breaks” for the oil companies.

The politicians are much exercised about (see a political opportunity in) the question of repealing tax-breaks currently in place for the oil companies.

This resonates with much of the public, because they hate having to pay such high prices for gasoline – it really bites. The most common initial reaction is to welcome the initiative to repeal the tax-breaks.

As I understand it, two things are going on here – punish the oil companies and bring down prices. People are angry with the oil companies. They see prices going up and oil company profits going up. So they think if the tax-breaks are removed that will hurt oil company profits. They are right about that. They also seem to think that it will cause oil and gas prices to fall. They are completely wrong about that – I can’t even see how they get there. But when I point out that removing the tax-breaks will force prices even higher I am mostly met by blank stares. Some sort of presumption is getting in the way.

Let’s be clear about one thing, removing a tax-break is just another way of imposing a tax. Imposing a tax clearly leads to higher prices paid by the buyer (and lower prices received by the seller). Money is taken out of production by the government. The amount supplied at any price goes down, so prices will rise for any given amount demanded. Not rocket science.

It is also relevant to point out, as I always do, mostly to no avail, that companies do not pay taxes in any meaningful sense. A tax imposed on a company is actually “paid” by the customers, workers, suppliers and others connected with the company. The ones who probably pay the least are the fat-cat executives whom the politicians love to scapegoat and the public loves to punish. It’s all a grand and harmful illusion signifying destruction of value.

It probably all boils down to the power of language to shape thought. Wittgenstein would be proud.

A difference in philosophy? I don't think so.

Not everyone who opposes rational and responsible economic policy can be stupid, and not even the majority can. But they can be, and I think they are, ignorant. Their ignorance is protected by their hard-held presuppositions. This enables them to dismiss any deviant views as "extreme," as "cooky". I have people tell me I am wrong who cannot tell me why. I have people tell me it is a "difference in philosophy". But actually it isn't. It is a difference in understanding of how reality works. It is a difference in models of reality. A shared understanding of reality would produce an agreement on economic policy. Disagreements over economic policy come not from wanting different things, they come from wanting the same things (peace, prosperity and individual freedom) but disagreeing on how to get there. I don't think it is helpful or accurate to call that a difference in philosophy. To do so is to cut off debate, to suggest there are unbridgeable differences, when actually what it means is "I don't want to seriously consider what you have to say".

When it comes to macroeconomic policy, it would seem that it takes an economic earthquake to shake the belief in government job-creation. No amount of argument can do the trick. Does this mean more mindless inflationary stimulus is around the corner? Let's hope not.