Flopping Aces--Reagan's Rightful Heir

The Flopping Aces Blog has changed history. Following Flopping Aces' posts about the false identity of a putative AP Source, a police Captain named Jamal Hussein who turned out not to exist, the story was picked up by Michelle Malkin, Gateway Pundit, Bruce Kesler of DP, and a number of other bloggers. Now, Yahoo! reports that the Iraqi Interior Ministry has announced that it is going to clamp down on false news reporting by the American news media. This represents a major triumph of blog over traditional news sources. It is an historical inflection point.

American liberalism, derived from progressivism of the early twentieth century, argues that markets need to be rationalized and competition curtailed. The reason, it argues, is that markets are unruly. It claims to protect workers and the poor against the ravages of competitive markets. But a moment's reflection reveals the nonsensical logic behind liberalism's (and "compassionate conservatism's") claims. "Unruliness" applied to markets merely means that a considerable degree of competition has forced down prices. As a result, workers and the poor benefit because they have to pay less for goods and services. Thus, liberalism (and "compassionate conservatism") always has been a pretext. Big business aims to clamp down on small business to forestall competition by making populist appeals and claiming to protect the poor. For example, it advocates unions whose goal is to raise wages, but a side-effect (what Richard Freeman and James Medoff term the monopoly effect) is to restrict employment. Liberals argue for increased regulation, complicated paperwork requirements and muckraking to attack firms that cheat in order to forestall competition and rationalize their position in markets. They attack competitive firms like Wal Mart that help the poor because liberalism has never been about helping the poor. It is about helping the inefficient large firm. Slightly higher wages for union members and the costs of regulation are a small price to pay for the privilege of forestalling competition.

The result of the concentration of industry (fewer firms with higher prices) that results from the liberals' agenda is that there are fewer entrepreneurs, fewer successful people, less variance in who is successful and much less diversity of ideas. Thus, findings that the American economy has resulted in greater income variance drives liberals crazy. They apply their familiar trick of claiming to be for the poor. They play on people's fears a la Lou Dobbs, and convince people that wage variance is a threat rather than an opportunity.

One of the side-effects of the liberal economy is elimination of intellectual diversity. In the 1920s there were something like a dozen New York City newspapers with a wide range of views. After 1970 there were three New York City newspapers, and only one serious one with an exclusively liberal view.

The liberal view turned out to be wrong. High taxes and inflation hurt the working class. Liberal (Keyensian) economics turned out to be nonsense, discrediting the subject of economics. The "Reagan Democrats" turned against the liberal world view, which depended on convincing them that high prices and limited competition was in their interest. The result was a reduction in regulation and advances in globalization via reductions in tariffs.

Such increases in flexibility lead to restructuring, which will continue ad infinitum. The costs of restructuring are that people must train for new jobs, learn new skills and even start businesses themselves. Such costs can be emphasized by ignorant demagogues like Lou Dobbs.

One of the truly beneficial effects of the Reagan revolution has been an escalation of the advances in technology. Following the Reagan revolution of the 1980s, there was a technology explosion. People seldom link the two, but the historical pattern is evident. The application of the internet (which had existed for decades before the Reagan revolution) did not occur until after taxes were cut and markets liberalized.

One effect in the advances of technology has been the World Wide Web, and one of the key effects of the World Wide Web has been the blogosphere. Now, for the first time since before World War II, there are alternatives to the failed progressive/liberal vision of the New York Times and the post World War II Democrats, the Inflatocrats.

So today's story is not only a triumph of Flopping Aces and Michelle Malkin. It is also a story about the triumph of the Reagan Revolution and of the intellectual diversity that free trade, low taxes, reduced tariffs and reduced regulation make possible. The New York Times can't elbow out conservatives any more. Its ideas just don't cut it.

The Republicans lack vision. They are too small minded. The Republicans need a new Regan revolution to further open markets, advance technnological innovation, increase demand for entrepreneurs, increase the wealth of the American public and to end terrorism. Such a vision rests on the Flopping Aces Blog's success today and on the triumph of Reagan's last revolution.

Bruce Kesler writes:

>"I agree with what you say, but have some difficulties that I wrestle with:

"There are some "public goods", or near, that do require some regulation or government-aid to support; the difficulty being pragmatic not ideological;

"At Slate, Jack Schaeffer resurrects a 1976 analysis of why big media will fragment, of which the yet to come Internet is an indicator; but, don't we need the resources concentration of some big media in order to present a comprehensive, thorough news, so the need is for big-$ for Weekly Standards rather than just I, you, and others with the resources only sometimes for some part of an issue.

"In short, we have to pick and choose, which naturally raises difficulties. BUT, shouldn't "difficulties" be better than ideological lock-steps?"

My response

With respect to media fragmentation, there will always be a need for professionally run newspapers, magazines, reporters and intelligence. But the days when regulation combined with capital requirements and the incompetent training reporters receive in our benighted universities and schools of journalism are over. No longer will liberal bigots be able to idelogically dominate coverage. Questions that once were confined to living rooms are now publicly available on the World Wide Web. A wider range of reporting is possible. Smaller magazines such as Weekly Standard prove better at reporting and analysis than behemoths that formerly dominated the news.

With respect to public goods, public goods have been classified as involving information asymmetries, monopoly, indivisibility and externalities. Of these, indivisibility is the most important reason for government spending. Monopoly and externalities are as much the product of government policy, so fairly simple reversals of government policy can limit them. Information asymmetries are not effectively remedied by government regualtion.

Indivisibility refers to goods like military spending and the courts. If one person pays the whole cost, then everyone else will benefit. Hence, in order to get everyone to pay, there needs to be a federal government. This was the historical reason for a centralized government. Robert Morris, one of the less-remembered founding fathers, was the new government's finance chief under the Articles of Confederation. Morris was a successful business man but he was unable to get the states to contribute to the federal government. As a result, the federal government couldn't function. At one point Morris paid part of the government's expenses out of his own pocket. This is the classic illustration of why some government is probably needed. Robert Morris was a hero of the first rank, without whom the United States wouldn't exist today. However, government cannot rely on heroes, and so some degree of government is needed. That degree was achieved in the nineteenth century.

Externalities were the result of court decisions permitting them. In the nineteenth century the courts decided that pollution was not battery or trespass. Judge Posner has argued for the utilitarian or profit-maximizing orientation of the courts. What this did, though, was impose externalities on those who did not benefit from increased production because of pollution. There is no reason why the court decisions permitting pollution cannot be reversed and pollution turned into a tortious claim. Regulation is not needed.

Information asymmetries are where producers (e.g., automobile manufacturers) have better information than consumers (e.g., automobile purchasers). I do not think government helps in this regard. Often, industry captures government regulators so that their watchdog function is ineffective or corrupt. Private agencies, such as Standard and Poor's in the financial world, could perform many of the tasks that government forms with respect to food, restaurants and utilities, and perform them more effectively. Regulation of banking and insurance, for instance, are cozy worlds that heavily favor the producers.

Last, although government has claimed to pursue monopoly, most of its efforts have been absurd. Early in the twentieth century the Sherman Act was used to break up Standard Oil and the American Tobacco Company. It is questionable whether those break ups did anything to help consumers. Subsequently, the Sherman anti-trust act was used against firms such as A&P and IBM that subsequently (and not too long after) were subjected to vicious competition and in both cases nearly shut down.

In contrast, government has done much to create monopoly. Government contracts, regulation, tariffs, labor laws and outright illegalization of competition in fields like utilities have been government efforts to mandate monopolies, bloating prices and reducing quality.

Government does not do a convincing job of confronting monopolies or externalities. Indivisiblity makes spending in areas like military and the courts necessary. Government is too incompetent to address informational asymmetries appropriately.

Bruce Kesler Responds

>"Amen"