Lectures with the Sutherland Institute

Last week at the invitation of Paul Mero and Stan Rasmussen of the Sutherland Institute (www.sutherlandinstitute.org), I gave two lectures before a group of Utah legislators.

First was a lecture about my pamphlet, “Persuasion vs. Force” (see
http://www.mskousen.com/Books/PvF/pvftext.html). I made the point that legislators are often too quick to pass new legislation to solve a problem without fully relying on private alternatives, such as churches, charities, schools and colleges, foundations, clubs, private companies, and other non-government programs. Thus, passing a new law is often a sign of failure, not success, that they had to resort to force over persuasion to accomplish a social goal.

Taxation is not the price we pay for civilization, but rather the price we pay for not building a civilized world. The higher the tax rate, the higher the failure. A truly successful society is based on persuasion, not force.

I gave a modern-day example of persuasion vs. force: two books had recently been published on dealing with the giant company Wal-Mart. “How Wal-Mart is Destroying America and What You Can Do About It,” by Bill Quinn, outlines a strategy to get city and county boards to reject Wal-Mart’s bid to open a new store. It’s all about force. “Up Against the Wal-Marts: How Your Business Can Prosper in the Shadow of the Giants,” by Don Taylor, takes the higher road of persuasion. It outlines a wide variety of management techniques to compete with Wal-Mart and persuade customers to shop at local stores.

By the way, last week I received a letter from a Canadian wanting to pass around copies of “Persuasion Vs. Force” to Canadian legislators who were considering a law requiring motorcyclists to wear helmets. I hope it helps!

The A & W Solution

My second lecture was based upon my new book, “The Power of Economic Thinking” (Foundation for Economic Education, 2002). I focused on two simple but powerful principles that can help legislators decide between good and bad law.

I call the two principles “A & W”–Accountability and Welfare Principles.

The “Accountability” principle is also known as the “benefit” principle. That is, those who benefit from a good or service should pay for it; the user pays. When someone else pays for your food, clothing, car, or medical expenses, you don’t pay much attention to what it costs.

The accountability principle is helpful in business, government and your personal life. For example, students who pay for their own education choose their majors sooner, get better grades, and graduate on time.

Why have medical costs risen so rapidly? Because most of the time a third party pays–either the employer, an insurance company, or the government. When someone else pays for your medical bills, expect increasing costs, less quality service, and more fraud. Medicare is a clear example of a law that violates the accountability principle.

The “Welfare” principle is straight-forward: You help those who need help; but you don’t help those who don’t need help. Otherwise you destroy their initiative and independence. A minister has an obligation to help the needy; but what if the preacher decides to help everyone in his congregation, irrespective of their needs? It might be a popular welfare program, but it inevitably becomes a burden when the minister tries to pay for everyone’s material needs.

The same holds true in the government. The food stamp program honors the welfare program in the sense that only the needy qualify for food stamps; there’s a means test. Not so with Medicare or Social Security. Both violate the welfare principle. They are universal plans for anyone 65 or older, whether they need help or not. Millions of Americans are on Social Security and Medicare, when they could afford their own private pension plan and private medical insurance. Why should the government pay for Bill Gates retirement and medical bills? It’s clearly a waste.

Note that during the Presidential Debates in October, there was lots of talk about Social Security and Medicare, but did either candidate say a word about the food stamp program? No, because it is one of the few welfare programs under control. It does not violate the welfare principle, but Social Security and Medicare do. If we are ever going to get control of these costs, we must impose a means test on Social Security and Medicare. And then we can start talking about reducing payroll taxes.

The response to “Persuasion vs. Force” and the A&W principle was good. I think the legislators came away with a new sense of direction. The next time they are faced with voting on a new bill, they will have some sound economic principles to use to make a wise decision.

At the end of the lectures, we passed around some A&W root beer and toasted the A&W principles.

Until next Monday, this is Mark Skousen saying AEIOU.

All the best, AEIOU, M. Skousen

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