The Parasite Economy

I had an argument with someone of the Left last night.  We both agreed that crony government protections and favors of businesses were one of the worst problems in the country.  But we couldn't agree on solutions.   It was a chicken and egg thing.  She thought corporations were at fault for seeking them.  I argued that the problem was given the government the power in the first place to grant such requests.  She thought the only way to fight it was by empowering government to put more restrictions on business.  My argument was that increasing the power of government to intervene in the economy only increased the problem.    No resolution.  I run into this all the time and need to think my way through a better way of expressing my concerns.

Anyway, I am reminded of all this because Stossel has a nice piece on the parasite economy and cronyism.

Postscript:  I can say from this discussion that OFA and Media Matters and Common Cause and the like have really done their job on the Kochs because this particular person was absolutely convinced the #1 best thing we could do to improve the future of America was to shut the Kochs up and prevent them from spending any more money on politics and speech.   My son says that is nearly impossible to argue any issue at all on campus without someone laying into the Kochs at some point in the conversation.   I find this whole tendency to conduct politics by vilifying individuals rather than discussing issues -- individuals with absolutely no political position -- totally depressing.  But it must work, because the Republicans did it too, in fact really pioneered this when they went after George Soros and made him the the secret villain behind everything Conservatives hated.   People like Rush Limbaugh may get on the Left nowadays for vilifying the Kochs but go listen to his radio shows from 5 or 10 years ago -- he couldn't go three sentences without saying "Soros".


  1. Mike Powers:

    The problem is that you're trying to argue against the left/liberal version of the Efficient Markets Hypothesis; sort of a "Good People Hypothesis". The idea is that Good People will act in a manner that doesn't produce negative outcomes, and therefore if a situation results in negative outcomes then there must have been Bad People involved somehow and that's what screwed everything up.

    And you *can't* say anything to refute that because it's nonfalsifiable. If something is wrong, there were Bad People. Sometimes you have to look quite hard to find them, and maybe redefine your terms, and maybe expand your scope of inquiry, but eventually you find the Bad People and therefore it's still true that Good People Wouldn't Have Done That.

    I guess you could try "sure, Good People wouldn't have acted that way, but what if we set the system up so that it didn't *matter* whether Bad People screwed things up?"

  2. Richard Harrington:

    I've had that same conversation many times as well. My usual rejoinder, and usually ignored, is to point out the direction of the money flow - from corp to politician. The politicians have the power. Look up the phrase, "milker bills".

    Re your postscript: my position now is that I'm happy to talk about policies but I refuse to talk about politicians or politics. I simply don't care what politicians (or other public people) say, look like, do in their private lives, wear, or even think. All I care about is whether or not the actions & policies make sense.

  3. Arthur Felter:

    I have previously answered this chicken-egg problem with this question: when a person sins, is it the devil's fault for tempting the sinner, or the sinner's fault for obeying the temptation?

  4. Evan Þ:

    If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.

    – Madison, Federalist #51

  5. TruthisaPeskyThing:

    I am not familiar with George Soros but I am familiar with the Koch Brothers. That could be because I listen to the words of Mainstream politicians such as Harry Reid rather than spending any time on the utterances of extremists like Limbaugh.

  6. sean2829:

    I think the best argument against the parasitic economy (and this included both corporate and government) is to look at portions of the economy that are very dependent on government largess such as defense, healthcare and education. The government is almost the only customer in defense, it purchases about half the healthcare and besides being mostly responsible for K-12 education, now is also directly financing or guaranteeing financing a very large part of the higher education system. When was the last time a major defense project came in on time and under budget? The healthcare industry has an inflationary trajectory that is more than double the CPI for most other goods and services (and is likely the biggest beneficiary from the ACA). Traditional K-12 education probably in big cities is often failing the kids but the needs of the education providers slow, stall or stop efforts from successful charter schools to fix the problem. In higher education, the loans made to nearly anyone applying has created a higher inflationary spiral then even healthcare. In essence, government largess creates affluent dependencies which use their significant resources to keep the largess flowing. And this works no matter what party is in charge.

  7. Max Lybbert:

    It appears that people learned that there are three branches of government, but never realized why (how do you keep the government from falling apart if corrupt people run for office? Answer: by making three branches and putting the corrupt people in charge of those branches in competition with each other).

    I'll concede that the world would be a better place if all CEOs were incredibly good people. In fact, the world would be a better place if everybody was better people (yes, it's a tautology). But we need a solution for a world where both the corporations and the government are run by imperfect people.

    I guess the best way to get that point across is what Coyote used to argue (
    , ): OK, give all the power you want to the government; now what happens when your party loses power?

    There's a really goo, related, argument ( , quoteing somebody else):

    > I don't promote government failure, I expect it. And my expectations are met fairly often. ...
    > When government fails, people ... and, well, the government claim it's a sign that we need more government. It's not that government
    > did a poor job, or is a poor mechanism for addressing that particular problem, it's that there just wasn't enough government. Of course,
    > the same people will point to what they call government success as, also, a good argument for more government.

  8. Earl Wertheimer:

    More government and restrictions only drives the activity underground. Drug War, Prohibition are examples. Then only the criminals benefit.
    Increasing restrictions on business makes them into government entities (aka Socialism). Look at Venezuela and Cuba today.
    I really think that the underlying problem is the fear of the unknown. Markets work without controls. I, Pencil is a great example of how markets _really_ work when not controlled by the government.

  9. roystgnr:

    To the extent that businesses lack control over the government, cronyism isn't a problem. To the extent that some businesses possess that control, "empowering government to put more restrictions on business" means "empowering the businesses in control to put more restrictions on their competitors".

    Likewise for campaign finance reform. What failure of logic leads to the belief that politicians are corrupt, therefore they should be allowed to censor political publications? Even if you tack "by corporations" to the end of that, what do you think The New York Times Company, Wenner Media LLC, etc. are?

  10. Zeev Kidron:

    Could it be that people believe more in government than in business because:

    1. They feel that politicians are somehow more accountable to them, because politicians "need my vote next time". While the businessman could care less because he only wants money. This reasoning ignores the fact that the businessman wants me to voluntarily give him my money, repeatedly and frequently. Which of course most people value more than their vote. And gives them far more power than their vote.

    It's amazing that people will argue "every vote counts" and then say "what does ACME Corp care about my little purchase" within the same conversation.

    2. They feel that having elected the Government they have a stake and a responsibility in the game. Cognitive Dissonance of a sort.

    3. Ignorance of basic economics, public choice theory and human nature.

    There is no easy, quick way to make people reconsider basic beliefs.

  11. stanbrown:

    The idea that the GOP started the politics of personal destruction is utterly insane.

    As for the people of the left and their belief in unicorn government and the power of pixie dust, see

    "Ever argued public policy with people whose State is in fantasyland? Our problem is that we have to fight unicorns....

    When I am discussing the State with my colleagues at
    Duke, it's not long before I realize that, for them, almost without
    exception, the State is a unicorn. I come from the Public Choice
    tradition, which tends to emphasize consequentialist arguments more than
    natural rights, and so the distinction is particularly important for
    me. My friends generally dislike politicians, find democracy messy and
    distasteful, and object to the brutality and coercive excesses of
    foreign wars, the war on drugs, and the spying of the NSA.

    But their solution is, without exception, to expand
    the power of "the State." That seems literally insane to me—a non
    sequitur of such monstrous proportions that I had trouble taking it

    Then I realized that they want a kind of unicorn, a
    State that has the properties, motivations, knowledge, and abilities
    that they can imagine for it. When I finally realized that we were
    talking past each other, I felt kind of dumb. Because essentially this
    very realization—that people who favor expansion of government imagine a
    State different from the one possible in the physical world—has been a
    core part of the argument made by classical liberals for at least 300

  12. Sam L.:

    And I see Harry Reid and Mainstream Politicians and the media telling us about them as crooks and liars.

    It's always something.

  13. Matthew Slyfield:

    "The State" is a religion for them. Trying to convince them that "The State" that they imagine does not exist is an impossible task. An atheist trying to convince the Pope that God does not exist would have better odds of succeeding.

  14. Joe:

    "She thought the only way to fight it was by empowering government to put more restrictions on business. My argument was that increasing the power of government to intervene in the economy only increased the problem. "

    You hit the nail on the head with the financial bubble & housing crisis. It was too much money available to lend caused by greenspan& company - not the greeedy bankers. the excess money to lend caused the bubble.

  15. TruthisaPeskyThing:

    One of the many disadvantages of government taking over financing higher education loans: student loans are now a political entity. Want to buy a some more votes? Pledge lower interest rates on student loans.

  16. Trevor:

    The very best argument against increased government regulation of the economy would be Hayek's The Road to Serfdom. But because very few on the left will ever read and consider Hayek's arguments, I think a possible second-best argument is to highlight how regulations fall unevenly within a specific industry. Big entrenched corporations love most regulations because it puts the squeeze on their less established competition. They take a hit, but they can absorb the extra burden of compliance and they may gain market share when their lesser competition has to go out of business. If regulations are so bad for big business, why do they keep lobbying for them?

  17. Swami Cat:

    I spent some time asking "progressives" what it was about the Kochs that bothered them after they mentioned the duo. The only answers I ever got were that:

    1) they are rich (1%) and
    2) they support the other political side

    I didn't realize either was considered a moral breach in polite company.

    They were figureheads, boogeyman, personifications of the enemy.

  18. mesocyclone:

    The ironic thing is that the Koch bashers don't realize that the Koch's are libertarian. Young lefties like to imagine themselves as some sort of libertarian, although they are really statist libertines. Those "L" words confuse them, especially those with the best educational credentials (not to be confused with best educated).

  19. Q46:

    Should you have a rematch or meet another regulation addict, the simple response is to ask where would the regulation stop and why stop at all; why not go the whole hog and have ultimate regulation and nationalise all business?

    That is the sure way to stop cronyism.

    You could then point to USSR, North Korea.

    If your interlocutor insists that is a step too far, then you can point to a lesser degree of regulation, co-option of business or National Socialism where you leave businesses in private hands but they work exclusively at the direction of the State, which allows business to keep just enough money to keep the owners cooperative if not entirely cock-a-hoop.

    Hitler did well out of that... for a while.

    No? So who decides and how the 'correct' amount of regulation?

  20. Mercury:

    The larger and more powerful government gets, the more there is to buy.

    Besides, this country was explicitly founded on and is still technically bound by strictures that limit the scope of government powers.

  21. jhertzli:

    One sound bite against regulation: "You cannot use the Ring. Regulation answers to the Establishment alone. It has no other master."

    As for defending the Koch brothers, I might point out that they paid for the BEST study on global warming and did not hide the results.

  22. JW:

    So, her answer to her children eating too many sweets and desserts and spoiling their appetite for dinner, is to feed them more ice cream.

    You didn't lose the argument, Warren. You can't argue rationally with irrational people.

  23. markm:

    It's the standard American leftist logic disconnect - I see an imbalance of powerful, therefore I'll hand _more_ power to someone who already has lots of it.

  24. Magua1952:

    All the college kids vilify the Koch brothers. When I was that age everyone despised "corporations" and capitalism was destructive. At the same time global freezing was destroying the planet. The only hope for survival was to give up our jungle freedoms and submit to some nebulous world government. Nearly all professors believed this drivel. If they were credible the youth would have been corrupted. Before graduating the students begin to realize the college professor is one of life's minor functionaries. A bit of working for a paycheck, and seeing the long list of taxes therein has a remarkable effect on the indoctrinations of school days.

    We would hope today's youth are smarter than we were. After all they have to pay the bills for several worthless spendthrift generations. Unfortunately they might be more soft and helpless than their parents.