Shlaes looks to the New Deal’s history for signs of possible trouble for Obamacare

Amity Shlaes, who chronicled the history of Franklin Roosevelt’s New Deal in The Forgotten Man, explains for National Review Online readers why the political fate of that famous economic program could have implications for the future of President Obama’s Affordable Care Act.

The National Industrial Recovery Act, like the Affordable Care Act, aimed to do nothing less than change an entire sector of the economy — in that case, the industrial and business sector. After passage in 1933, NIRA created a bureaucracy labeled, in its turn, the National Recovery Administration, or NRA. NRA was hard to contradict: Its leader was a general; its emblem, the bald eagle. “Almighty God have mercy on anyone who attempts to trifle with that bird,” General Hugh Johnson told the public. The courts seemed to agree: Nine in ten NRA cases at first were decided in favor of the government.

NRA administrators led companies in the writing of codes for their respective trades. Like the ACA’s rules, these codes were offered in agonizing and counterintuitive detail. In those days NRA codes mandated minimum wages, minimum prices, new health and safety regulations, and business practices that efficiency experts recommended whether or not firms themselves saw their logic.

Just as the ACA stumbled over its own website this past winter, the NRA stumbled over it own forms and names, which were long enough to provoke ridicule. The name of the code that governed a family of Brooklyn chicken butchers called Schechter, for example, was “The Code of Fair Competition for the Live Poultry Industry for the Metropolitan Area In and About New York.” Nonetheless, as with the Affordable Care Act today, a general wait-and-see attitude prevailed. In 1933 and 1934 conservatives, mostly jurists, might protest that the NRA was too intrusive. But the rebuttal would come: “Intrude upon what? The Depression?” At a time when two in ten were unemployed, the country thought it had nothing to lose.

One of the many firms the NRA investigated was ALA Schechter Poultry, a Brooklyn butcher shop where authorities found numerous violations of the poultry code. After the Schechters were convicted in lower courts, the authorities grew increasingly confident that Schechter would be the case in which the Supreme Court would confirm the constitutionality of their law and the New Deal. Then as now, a kind of assumption, or at least a pretense, was at work. People pretended that the fact that the Schechters were Jewish and that the butcher shop they ran was kosher were ancillary details, a kind of coincidence, or even an annoyance.

But the fact that these particular butchers observed kashruth, the Jewish body of laws involving food, was not a coincidence of this case. It was causal. …

… What was evident was that two large bodies of law were clashing. On the one hand was the elaborate and new NRA poultry code. On the other hand there was the code of the Jewish dietary law, based on the Bible itself. In a contest between NIRA (48 stat. 195) and Deuteronomy (14:21), perhaps Deuteronomy had more authority. The government had its health inspectors, but who were they to go up against Maimonides himself, who had proclaimed that Jews were forbidden to serve “unwholesome” food?

The U.S. Supreme Court ended up ruling 9-0 against the federal government.

The best explanation for the shift in opinion is that such conflicts give the public a chance to consider what it is the government is intruding into or impinging on — not just a vacuum, but the private sphere, the personal sphere, the business sphere, and, yes, the sphere of faith. The spectacle of that intrusion is not easily forgotten once perceived. The chicken of daily business life and ritual can, from time to time, vanquish the eagle.

Another sign that the college bubble is about to burst?

If you’ve yet to accept the argument that the American system of higher education suffers from a bubble that’s overdue to burst, you might want to check out a Fortune magazine interview with Sebastian Thrun, chief executive of Udacity.

Fortune: You’ve been a Google executive and Stanford professor. Where did you get the idea for Udacity, your online-courses startup?

Sebastian Thrun: In 2011 I attended a TED talk by Sal Kahn, whom I adore. He explained how his Khan Academy’s math advice reached tens of millions. I was about to teach an artificial-intelligence course at Stanford that would reach 200. I suggested to [fellow teacher and Google executive] Peter Norvig we should take it online. We sent a message to 1,000 individuals about an AI class. We expected 500 to respond: 160,000 signed up.

How did the students perform?

The remote students outdid our classroom students. The best Stanford student came in No. 413. The whole exercise cost less than 60¢ a student. That made me believe it’s time to try something radically new in education. …

Establishment academia wasn’t crazy about you.

In its first iteration we tried to work within the system, with the California State University system, to bring education to students not yet in it. While some loved the access, others were concerned it would erode the cost structure in existing education.

So you pivoted away from serving universities and toward corporate customers.

Some companies like Google, Cloudera, and Facebook approached us. They have a desire to get young new hires ready to start their jobs. They also want their existing employees to make sure they stay current. For example, Facebook has a class they’ve taught internally for data scientists. We’ve digitized it so everyone can be as good a data scientist on par with Facebook.

How do you make money?

We are a freemium business. Courseware is free, and we offer fee-based services to students, including study-buddy mentoring and experts who will look at your code and assess it. A full course costs roughly $100 to $150 per month. You get a lot of personal love: If you get stuck, a human being will help you within 30 seconds.

Murdoch responds to Fox News’ detractors

Within Fortune magazine’s lengthy interview of media mogul Rupert Murdoch, the following exchange struck this reader as particularly interesting.

Does it bother you at all, Rupert, that there is a view that Fox News has contributed in a big way to the political discontent in the U.S., degraded the political process, and maybe, in spotlighting the Tea Party, even hurt the Republican Party?

I think it has absolutely saved it. It has certainly given voice and hope to people who didn’t like all that liberal championing thrown at them on CNN. By the way, we don’t promote the Tea Party. That’s bullshit. We recognize their existence.

Imagine that? Recognizing an important element of today’s political debate. One might even label such a stance “fair and balanced.” This reminds me of Jon Ham’s Shaftesbury Society presentation on media bias, which reminded us of an independent analysis that confirmed Fox news reporting showed the least amount of political bias.

Fortune article shows value of the entrepreneurial spirit

Tech and telecom companies that benefit from the logistical and service support provided by LinkAmerica can thank the American free-enterprise system. As a new Fortune magazine profile shows, LinkAmerica’s “immigrant entrepreneur” founder failed in business multiple times before hitting on a winner with his current company. The headline tells the story succinctly: “The 18th Time Was the Charm.”

Andrés Ruzo isn’t your average immigrant entrepreneur. The son of a culinary TV personage in Peru, he came to the U.S. as a college student in 1980 and says he attempted 17 startups before creating his big success: LinkAmerica, which provides logistical and service support to tech and telecom companies. LinkAmerica is actually in its second incarnation; the first, which sold refurbished telecom equipment, nearly went under after the dotcom bust and 9/11. Last year the company generated $180 million in revenues, and Ruzo, 53, has become a classic example of entrepreneurial invention and reinvention … and reinvention. He says he still views himself as an immigrant — always hungry and never taking anything for granted.

Imagine if, instead of trying something new after any of his previous 17 false starts, Ruzo had opted instead to seek government protection or a bailout. He might have been able to keep one of his previous businesses afloat, but he would not have moved his time, energy, and entrepreneurial resources to a venture that could succeed on its own. And he would have become just another crony.

That’s why it’s important to remember that a system of profit and loss depends just as much on the loss as the profit.

Atlantic profiles chief ‘nudger’

Georgetown instructor David Cole might not see what’s so unsettling about libertarian paternalism, but his profile of Harvard Law School professor Cass Sunstein in the latest issue of The Atlantic might raise some red flags for fans of freedom.

Sunstein served in the Obama administration, but he’s not especially liberal. In Conspiracy Theories, he defends free markets and criticizes “command and control” planning. He favors soft government interventions like warnings and default rules, which leave people freedom of choice, over outright bans on dangerous behavior. He questions minimum-wage laws and argues that the United States has no particular obligation to enter into climate-change agreements that might impose domestic burdens even if such moves were to benefit the rest of the world. He does call for a social safety net for the poor, protections against animal cruelty, and, disturbingly, government subterfuge to counteract conspiracy theories. But if this is the most dangerous man in America, we can drastically reduce our homeland-security spending right now.

So far, so good. But Cole doesn’t stop there.

Sunstein’s current overarching project is the opposite of revolutionary. He seeks to tame our impulses and intuitions, to counteract the irrational and emotional errors we often make, in order to help us reach better decisions through deliberation and rational thinking. (Of course, to a fiery talk-show host, that may be precisely what makes him so dangerous.)

For roughly the past 15 years, Sunstein has sought to apply the lessons of behavioral economists to difficult legal and policy questions. Their findings have shown what most of us already suspected—that the “rational actor” upon whom classical economics is based is a myth. In reality, people’s decisions are determined not by careful comparison shopping and cold, calculated reason, but by emotions, fears, unwarranted confidence, aversion to loss, acute susceptibility to peer influences, and all sorts of other cognitive biases. In Conspiracy Theories, as well as another new book, Why Nudge?, Sunstein maintains that such insights can assist us in resolving a variety of social problems. …

… [H]ere he deploys behavioralism to take on John Stuart Mill’s famous case against paternalism. In On Liberty, Mill argued that paternalism was unwarranted in large part because individuals know better than others do what will serve their interests. For that reason, unless an individual’s actions harm someone else, Mill maintained, the state should stay out of her business. This “harm principle” is one of the foundations of modern liberalism.

Mill’s case against paternalism is undermined, Sunstein says, by man’s propensity to err and sabotage his own interests. If we know that people make predictable mistakes, then paternalistic interventions designed to mitigate those mistakes may increase people’s welfare overall. Even when our actions harm no one else, government intervention may therefore be justified. And because the way that choices are presented to us inevitably influences our decision making (for example, people are more likely to choose the first item on a list over subsequent items), Sunstein advises the government to design “choice architecture” in ways that nudge us toward choices that better serve our ultimate ends.

The obvious question for both Sunstein and Cole is: How do either of them know how best to serve “our” ultimate ends?

Who should make that determination? Harvard law professors? Government bureaucrats?

New Carolina Journal Online features

Dan Way reports for Carolina Journal Online on the Democratic primary in North Carolina’s 2nd Congressional District.

Terry Stoops’ Daily Journal urges state lawmakers to continue their discussions about the best way to pay public school teachers.

Dispatches from the campaign trail, April 23, 2014

• Ad wars in the 2nd Congressional District! Democratic candidate Clay Aiken releases an ad citing his work with disabled children as his reason for running.

Meantime, rival Keith Crisco releases his own ad contending that Aiken was AWOL when he served on a presidential task force dealing with children’s issues.

• GOP Senate Debate No. 2, sponsored by WRAL News, takes place tonight at 7 p.m. Greg Brannon, Heather Grant, Mark Harris, and Thom Tillis square off once again.

• The hits just keep on coming for Republican Senate candidate Dr. Greg Brannon, as Buzzfeed digs up some controversial quotes from the Cary physician’s past.

• A New York Times political blogger suggests that incumbent Senate Democrats from the South, including North Carolina’s Kay Hagan, may not be in that much trouble after all. A New York Times poll for the Kaiser Family Foundation finds Hagan leading Tillis 42-40 (no other Republicans were included). But Obamacare remains a sore spot, as 53 percent said they would never vote for a candidate who doesn’t share their views on health care. The poll didn’t publish responses to questions about the approval rating of President Obama or his health care law.

• In a candidate forum, Democrats running for the 12th Congressinal District nomination say the proposal raising the federal minimum wage to $10.10 an hour is far too timid. Can you say, “15″?

The broken window fallacy as applied to Obamacare

Tucked within John Hayward’s interesting Human Events article about a government shakedown for money used to promote the Affordable Care Act is this little nugget:

Crucially, the media’s aggressive shredding of inconvenient history kept it from putting ObamaCare’s enrollment “achievement” in any sort of larger context whatsoever. The vast majority of those “enrollments” were people whose previously satisfactory health care plans were destroyed by ObamaCare; as Sen. Ted Cruz (R-TX) put it, government agents busted their car windows, then other government agents came along to sell them new windows, while the President touted the success of the Department of Window Repair. Also, the “success” of this operation relied heavily upon the little detail that failure to buy the product was against the law. We sold 7 million units of a product people are legally required to purchase! Yay!

Anyone who has read Henry Hazlitt’s Economics In One Lesson or its source material — the writing of Frederic Bastiat — will recognize Cruz’s description of the broken window fallacy.