Chicago crime

The Inflation Threat to Capital Formation

By

Michael T. Darda

Updated April 10, 2008 12:01 a.m. ET

The Federal Reserve's efforts to reflate the financial system with negative real short-term interest rates may have a dire consequence: sharply higher effective tax rates on capital.

History has not been kind to such episodes. The combination of a rise in the statutory tax rate on capital and rising inflation nearly doubled the effective tax rate on capital between 1986 and 1991. This period also witnessed a stock market crash and a recession. Bringing inflation and marginal tax rates down created a major pro-growth inflection point in the early 1980s. But this progress could be substantially undone if we allow easy money to once again collide with sharply higher tax rates on capital.

 

Capital gains are not indexed to account for inflation, which means that in times of rising inflation, the effective tax rate on capital can rise significantly above the statutory rate. If inflation is high enough, effective tax rates on capital can rise above 100%. This was the story of the 1970s.

The current effective tax rate on capital is around 30%, down sharply from the 60% rates seen as recently as the early 1990s. This drop has been occasioned by a long period of falling inflation and the reductions in the top tax rate on capital gains in 1997 and 2003. The result has been an extended period of economic growth, strong advances in productivity, falling unemployment and rising real wages and incomes for most Americans.

But this positive trend may not last. The statutory capital gains will automatically jump to 20% from 15% in 2011 unless legislative action is taken to extend the current rate. Democratic presidential front-runner Barack Obama has stated a preference to raise the top rate on capital gains to as high as 28%, a near doubling of the current rate. Even more worrisome is that the collision of a 28% tax rate on capital gains combined with inflation above 3% would raise the effective tax wedge on capital to nearly 60% – the highest in 17 years.

From the late 1960s to the early 1980s, effective tax rates on capital averaged more than 100%. Perhaps it is no coincidence that real equity values collapsed by nearly two-thirds from 1968 to 1982. This period saw sputtering productivity, rising inflation, high unemployment, and an American economy in general decline.

Work by my firm suggests that the combination of a 28% tax rate on capital with a sustained inflation rate of 3.25% would knock trend productivity growth down by 0.5% per year. But it could be even worse. A return to 5% inflation would raise the effective tax rate on capital to 70%, pulling trend productivity growth down by 0.7 percentage points or more – a direct threat to U.S. living standards.

Eliminating the tax on inflated gains, especially at a time when the inflation expectations have been on the rise, would help to boost asset values and whet the appetite for risk. This would complement Fed and Treasury efforts to reflate the financial system and stabilize the housing and credit markets. It may also reduce the potential for an inflationary flare up by putting some of the Fed's excess liquidity to work in the real economy.

One cannot achieve a capital gain unless after-tax income is placed at risk. The higher the real, after-tax reward to successful risk taking, the more willing individuals will be to make bets on long shots. This increases the efficiency of capital and spurs innovation and entrepreneurship. Output and employment are enhanced.

Maximizing noninflationary growth with sound tax policy – while restraining the growth of entitlement spending – is the only way to deal with long-term structural deficits, without a crushing tax burden. Allowing effective tax rates on capital to spike will restrain productivity and make fiscal integrity more difficult to achieve. It is the wrong way to try to raise revenues.

While indexing the capital gains tax for inflation would bring many benefits, the same cannot be said about the popular rebates and credits that currently pollute the U.S. tax code. This includes the bipartisan $168 billion stimulus package that recently sailed through Congress.

Consumer-based rebates in 1975 and 2001 proved largely ineffective. Rebates shift spending from one place to another without altering the incentive structure or adding new money to the financial system. Unless the Fed is running the printing press to finance the rebate checks, the spending by the recipient of the rebates is offset by a bond holder or taxpayer saving to finance it. In the global sink of dollar liquidity, only the Fed controls the faucet and the drain.

To the extent that rebates shift valuable resources away from more productive uses, they probably result in a net reduction in long-term growth. In other words, after a one- or two-quarter fillip, the rebate checks set to arrive in taxpayer mailboxes this summer likely will result in slower growth.

It would be helpful to increase the real, after-tax return to successful risk bearing. This could be done by indexing the capital-gains tax for inflation, as is currently done with the income tax brackets. This would also help head off a potentially destabilizing tax increase, preserve productivity gains, and restore the economy to a sustainable, noninflationary growth track.

Mr. Darda is the chief economist of MKM Partners.

original 

The Intimidation Game (excerpts)

The Intimidation Game: How the Left Is Silencing Free Speech  by Kimberley Strassel

January 21, 2010, is when the Supreme Court ruled on a case known as Citizens United. To listen to President Barack Obama, or Senator Harry Reid, or any number of self-proclaimed “good government” organizations, this decision mattered because it marked a new tidal wave of “dark” money and “shadowy” organizations into elections. It supposedly gave powerful special interests new control over democracy. Citizens United didn’t do any of that. But it did unleash a new era. It set off a new campaign of retribution and threats against conservatives. Citizens United launched the modern intimidation game.

…

They encouraged, explicitly and implicitly, the IRS to target and freeze conservative groups during election years. They called out conservative donors by name, making them the targets of a vast and threatening federal bureaucracy.

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They also cleverly cloaked all this behind a claim of good government. Citizens United, they said, threatened to put powerful and nefarious forces in charge of democracy. And therefore all of their actions and tactics were justified in the name of the people.

…

Nearly sixty years ago, the Supreme Court issued a groundbreaking decision, NAACP v. Alabama, that protected the rights of Americans to engage in politics with some degree of anonymity. This was the civil rights era, and blacks were being targeted, firebombed, and shot at for daring to speak out. The high court understood how corrosive this was to democracy, and declared that the Constitution provided some measure of refuge to citizens at risk of political retribution.

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Political memories are short, and Watergate had helped politicians to forget the way government had abused disclosure during the McCarthy and civil rights eras.

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Political operatives weren’t just using disclosure to punish citizens for their donations, but were wielding it to close off speech before it even happened. As Thomas wrote, the “success of such intimidation tactics has apparently spawned a cottage industry that uses forcibly disclosed donor information to pre-empt citizens’ exercise of their First Amendment rights.” He made special note of the Matzzie letter warning off donors in the 2008 election. Thomas then predicted another problem. It was bad enough, he noted, that citizens were using disclosure to threaten and retaliate against each other. But his colleagues needed to consider that transparency might ultimately prove a weapon in the hands of a more menacing power—government.

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As Thomas rang out in closing, “I cannot endorse a view of the First Amendment that subjects citizens of this Nation to death threats, ruined careers, damaged or defaced property, or pre-emptive and threatening warning letters as the price for engaging in ‘core political speech, the primary object of First Amendment protection.’”

…

Few people outside of Clarence Thomas remembered the ugly history of the NAACP, or McIntyre, or the risk of exposing Americans to retribution. Citizens had instead refocused Americans on the threat of “dark money” (undisclosed money)—and Democrats intended to use that to their favor.

…

In the 2012 election year, U.S. political actors spent about $7 billion attempting to get their favored candidates elected. It sounds like a lot, but then again, Americans spend roughly $7 billion every year on Halloween. National elections happen only every two years, which means that the U.S population spends twice as much every cycle buying Supergirl costumes and Milk Duds than they do electing the people who will govern their country. Of that $7 billion spent in 2012 to form a government, about $320 million of it was “dark money.” Do the math, and 96 percent of the money spent in elections is disclosed. Only 3 to 4 percent (it varies by cycle) is done anonymously, and even then, most of it is hardly anonymous.

…

In short, the IRS had been warned. It knew its own history. It knew the law. But it also had its boss, the president of the United States, sending it very clear signals every day about “shadowy” conservative “front” groups “posing” as tax-exempt entities and illegally controlled by “foreign” players, engaged in “unsupervised” spending that was a “threat” to democracy. It had formal complaints. It had some of the nation’s most influential Democratic senators demanding an investigation. It heard the call. And it acted.

…

Democrats also shouldn’t have been surprised by the news. They’d inspired the targeting. They knew that a Democratic administration and Democratic Senate and Democratic House members had called on an IRS staffed with Democratic appointees to go after conservative groups. They now knew that the IRS had done just that.

…

Once the IRS scandal was exposed, a lot of investigators began wondering just how much unsanctioned, two-way cooperation between Obama agencies was taking place in opposition to conservatives. If the FEC staff was funneling tips to Justice, was Justice influencing FEC staff reports? Was Lerner influencing FEC staff? McGahn explains that what makes the situation even murkier is the basic character of FEC staff. They are naturally biased. “The place in its early days was staffed by followers of Ralph Nader—Naderites who believed that all politicians are corrupt, and that both parties are awash in too much money,” he says. A younger generation is now in town, but the ghosts still linger.

…

The pressure on Democratic legislators in ALEC has become even more wild and nasty.

…

The left uses this information to hassle legislators, even going so far as to employ it in campaigns against them. “This is the part that I hate the most,” says Nelson. She acknowledges that some of the Democratic drop in ALEC membership is due to bigger forces. The Democratic Party has shifted to the left, and many of its pro-business Democrats were ousted in primaries, beaten by Republicans, or switched parties. “But those who are left are viewed and attacked as pariahs, just for deigning to work with the other side,” says Nelson. “These activists don’t want bipartisanship, they don’t want solutions. They want anyone who doesn’t agree with them shut down.” Nelson has even struggled in recent years to get a Democrat to serve in the rotating top ALEC leadership position. ALEC has even dealt with Democratic saboteurs.

…

But the most sinister part of the subpoena was this: “This John Doe search warrant is issued subject to a secrecy order. By order of the court pursuant to a secrecy order that applies to this proceeding, you are hereby commanded and ordered not to disclose to anyone, other than your own attorney, the contents of the search warrant and or the fact that you have received this search warrant. Violation of the secrecy order is punishable as contempt of court.” It was almost Orwellian.

…

It was a revenge attack for the success his side had had in defeating the recent recalls.

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O’Keefe’s view is that direct participation by these organizations—nonprofits, think tanks, 527s, the like—is the only way to keep politicians and government responsive. He just as fervently believes that money is a foundational aspect of that. “It always bugs me, this obsession with political spending,” he says. “Campaign spending as a percentage of the federal budget is a flat line—and it is all of 0.02 percent. The left, they act like there is too much money in politics. Really?

…

The outrage over the tactics, and public concern over government abuse, did at least give Republicans an opening to right a few wrongs. In October 2015, Walker signed a bill gutting the John Doe as a tool for political persecution. The new law outlaws John Doe investigations for allegations of political misconduct. Prosecutors can henceforth only use them for grave and specific lawbreaking—namely violent felonies and some drug crimes—and also must obtain permission from a majority of the state’s chief judges to extend probes beyond six months. Secrecy orders now only apply to prosecutors, court officials, judges, and investigators. There are no more gags on suspects or witnesses. Every Democrat in the Wisconsin Assembly and Senate voted against the measure. Which is another way of saying that Wisconsin liberals went on record in favor of gag orders, predawn raids, limitless warrants into e-mail, phone, and bank records, and the targeting of Americans for their ideology.

…

Nixon’s private “enemies list” was bad. Barack Obama’s public “enemies list” was arguably worse. Obama had used 2010 to alert and sic the IRS on Tea Party groups. But by calling out private citizens by name on his website, he was alerting and siccing every part of his government on Republican donors. The message from the man who controls the Justice Department (which can indict people), the SEC (which can fine people), and the IRS (which can audit people) was clear: Donate money to Romney, and you are fair government game. The posting was also an APB to every liberal group and activist in the country to target those donors.

…

In some ways, it shouldn’t have come as a surprise. The left started its intimidation campaign by trying to silence a nonprofit here, a company there, a big donor here, a trade association there. But along the way it wrapped in small donors, and scholars, and scientists, and petition signers, and shareholders, and free-market professors, and grassroots groups. It was only a matter of time before it came to the obvious conclusion: Everybody has too much speech. And so on September 11, 2014, fifty-four members of the Senate Democratic caucus voted to do something that had never been attempted in the history of this glorious country: They voted to alter the First Amendment. Henceforth, “Congress and the states may regulate and set reasonable limits on the raising and spending of money by candidates and others to influence elections,” and may outright “prohibit” corporations and nonprofits from spending any money “to influence elections.” The amendment gave incumbent legislators and state officials near-total power to suppress undesirable political speech. Why were Democrats proposing a change to the Constitution, rather than just legislation? Because such legislation is unconstitutional.

…

The Democratic Party as a whole is now adopting this proposal to overthrow the First Amendment. It won’t happen anytime soon—passing an amendment to the Constitution is hard. But the fact that Democrats are trying to marks a radical shift in the political culture. The left is done with debate.

…

Then again, there’s a good case to be made the left isn’t planning on there ever being another moment when the other side is in power. Their intention is to make sure they forever own the debate. That’s the point of shutting down speech. That’s the point of the intimidation game.

…

Instead, the laws that were designed to keep the political class in check are being used to keep the American people in check.

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The entire concept of disclosure has in fact been flipped on its head. The American people know almost nothing about the working of government. Instead, disclosure is trained on the electorate, allowing the government to know everything about the political activities of Americans.

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At the very least, it’s time to rethink the levels at which citizens are required to disclose contributions. They need to be dramatically raised. If the left’s argument is that democracy is at risk from “powerful” players, then it can have nothing to fear from the donor who gives $5,000 or $10,000 or even $20,000 to a candidate or party. That is peanuts compared to the more than $70 million that billionaire environmental activist Tom Steyer spent in the 2014 elections to (unsuccessfully) retain a Democratic Senate. It’s a simple fact that in today’s big-money political arena, no politician can be “bought” with a mere $10,000. The current disclosure requirement of $200 is primarily designed to ensure that every citizen’s political activity is known to the federal government.

…

That’s why it is also time to rethink the Federal Records Act and the Freedom of Information Act. Both need to be overhauled, to include provisions that ease and streamline the ability of outside groups to obtain records, and to impose severe penalties on agencies and federal employees who fail to comply.

…

It’s time to rethink campaign finance laws, at both the federal and state level.

…

Corporate actors have an enormous stake in the political debates that shape regulations and the tax system and trade policy. They have a right to speak.

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It’s time for the courts to wake up—and to recognize Clarence Thomas’s prescient observations about where today’s disclosure and speech law regime has left the country. It’s time for the courts to recognize that we are once again in an environment in which average citizens are afraid to speak.

…

Mostly, it’s time for Americans to speak up. The intimidation game only works if its targets let it. When citizens blow the whistle on abuse and stand up to it, they are by definition rejecting intimidation. They inspire others to come to their defense and to speak out themselves.

Government Controlled Healthcare

Macra: The Quiet Health-Care Takeover

A 962-page rule puts the federal government between doctors and patients.

ENLARGE 
Photo: Getty Images

By

James C. Capretta and

Lanhee J. Chen

May 31, 2016 6:33 p.m. ET

82 COMMENTS

The American people have become familiar with ObamaCare’s failings: higher premiums, fewer choices and a more powerful federal health bureaucracy. Yet another important piece of health-care legislation, signed into law last year, has gone almost unnoticed.

The Medicare Access and CHIP Reauthorization Act, known simply as Macra, was enacted to replace the outdated and dysfunctional system for paying doctors under Medicare. The old system, based on the universally despised sustainable-growth rate formula, perennially threatened to impose unsustainable cuts in physicians’ fees. Macra passed Congress with bipartisan support and President Obama quickly signed it. Unfortunately, the law empowers the federal bureaucracy at the expense of the doctor-patient relationship, putting the quality of American health care at risk.

In an effort to secure broad support, Congress wrote into the law general guidance but left important details of implementation to the executive branch. What happened next was predictable: In April the administration presented a 962-page regulatory behemoth. This new set of rules uses the power of Medicare to put the federal government in charge of almost every aspect of physician care in the U.S.

Macra adopts the same theory of cost control embedded in ObamaCare. It assumes that the federal government has the knowledge and wherewithal to engineer better health care through “delivery system reforms,” forgetting the utter failure of the bureaucracy’s previous effort. ObamaCare and now Macra use Medicare’s payment regulations to force hospitals and physicians to change how they care for their patients. The administration’s regulations will force doctors to comply with scores of new reporting requirements and intrusions into their practices. Physicians who refuse to bend will see their Medicare fees cut.

Macra and the new regulations force physicians to pick between a “merit-based incentive payment system” or an “alternative-payment model.” Doctors who choose the former will get paid fee-for-service, but they will receive meager annual increases of only 0.25% starting in 2019. Some doctors could earn “bonus payments” but only if the federal bureaucracy approves of their performance.

These rules are purposely onerous because the administration wants physicians to opt into the alternative-payment model. In that system, the government shifts regulatory control from individual physicians to organizations with responsibility for managing patient care. Physicians serving patients through this system will be eligible for annual payment increases of 0.75%, plus bonuses distributed if their organizations hit the government’s spending targets.

The not-so-hidden agenda of the Obama administration is to use Macra and related regulations to force physicians into joining accountable-care organizations. ObamaCare nudged hospitals and physician groups to form these organizations to manage patient care. But they are an unproven concept in Medicare, weighed down by a mountain of rules and information systems. Early data from the administration shows that they haven’t done much to cut costs or improve quality compared with traditional Medicare.

Another major flaw is patient retention. ObamaCare stipulates that a Medicare-eligible patient be automatically put in an accountable-care organization if his doctor is affiliated with one. However, the patient remains free to see any doctor he wants, and the patient usually doesn’t even know he has been placed in such an organization. It is difficult to control costs when the patient has no knowledge of or reason to stay within the system. In 2014, only one-quarter of the 333 accountable-care organizations received bonus payments for hitting financial and quality targets.

Many hospitals, physician groups and managed-care entities have ceased participating in the program because of its excessive rules and small rewards. Macra and the administration’s regulations are simply attempts to resuscitate accountable-care organizations through coercion. Physicians fed up with the bureaucratic rules and low payments of fee-for-service will have no recourse except to join one of the organizations. And when physicians join, their patients come with them, whether they know it or not.

The administration’s rule ignores that Medicare already has a thriving alternative-payment model. Private Medicare Advantage plans, many of which are HMOs with decades of experience managing care, have developed new ways of identifying and compensating the most cost-effective physicians. Some 30% of Medicare beneficiaries have voluntarily elected to get their care through these plans without being coerced, according to the 2015 Medicare Trustees Report.

Congress understandably jettisoned the failed sustainable-growth rate formula, and it is important to reward quality health care, rather than pay more for high volume. But Macra threatens to sidetrack this movement by embracing the same bureaucratic mind-set that underlies ObamaCare. A better plan would use competition and consumer choice to reward physicians for providing high-quality care at affordable and easily ascertained prices, without coercion by the federal government. The results would be better for physicians and their patients—not to mention taxpayers.


Mr. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute. Mr. Chen is a research fellow at the Hoover Institution and director of domestic-policy studies in the Public Policy Program at Stanford University.

wsj.com

Barack Obama Checks Out

Bret Stephens

March 14, 2016 7:42 p.m. ET

Barack Obama—do you remember him?—will remain in office for another 311 days. But not really. The president has left the presidency. The commander in chief is on sabbatical. He spends his time hanging out at a festival in Austin. And with the cast of “Hamilton,” the musical. And with Justin, the tween sensation from Canada.

In his place, an exact look-alike of Mr. Obama is giving interviews to Jeffrey Goldberg of the Atlantic, interviews that are so gratuitously damaging to long-standing U.S. alliances, international security and Mr. Obama’s reputation as a serious steward of the American interest that the words could not possibly have sprung from the lips of the president himself.

I was a bit late in reading Mr. Goldberg’s long article, “The Obama Doctrine,” which appeared last week and is based on hours of conversation with the president, along with ancillary interviews with John Kerry, Hillary Clinton, Leon Panetta, Manuel Valls of France, Benjamin Netanyahu of Israel and other boldface names. Kudos to Mr. Goldberg for his level of access, the breadth of his reporting, the sheer volume of juicy quotes and revealing details.

Still, it’s a deep dive into a shallow mind. Mr. Obama’s recipe for Sunni-Shiite harmony in the Middle East? The two sides, says Mr. Obama, “need to find an effective way to share the neighborhood,” sounding like Mr. Rogers. The explanation for the “sh— show” (the president’s words) in Libya? “I had more faith in the Europeans,” he says, sounding like my 12-year-old blaming her 6-year-old sister for chores not done. The recipe for better global governance? “If only everyone could be like the Scandinavians, this would all be easy,” he says, sounding like—Barack Obama.

Then there’s Mr. Obama the political theorist. “Real power means you can get what you want without having to exert violence,” the president says in connection to Vladimir Putin’s gambles in Ukraine and Syria. That’s true, in a Yoda sort of way. But isn’t seizing foreign territory without anyone doing much to stop you also a form of “real power”? Is dictatorial power fake because it depends on the threat of force?

Elsewhere, Mr. Obama airily dismisses the concept of “credibility” in U.S. foreign policy, noting that Ronald Reagan’s decision to pull U.S. troops from Lebanon after the 1983 Marine barracks bombing didn’t affect U.S. credibility with China or Russia. That’s debatable. But the withdrawal affected our credibility with Iran, which was behind the bombing, and with a young Saudi named Osama bin Laden.

“Where was this false courage of yours when the explosion in Beirut took place in 1983?” bin Laden asked in his 1996 declaration of war on the U.S., which also cited Bill Clinton’s abrupt withdrawal from Somalia after the 1993 Black Hawk Down incident. “You left the area carrying disappointment, humiliation, defeat and your dead with you.”

As for current threats, Mr. Goldberg asks Mr. Obama what he would do if Mr. Putin made a move against Moldova, “another vulnerable post-Soviet state.”
 Mr. Obama’s answer—“if it’s really important to somebody, and it’s not that important to us, they know that, and we know that”—is of the April Glaspie school of diplomacy. So long, Moldova.

Mr. Goldberg also discloses that Mr. Kerry has begged the president to launch cruise missile strikes against the Assad regime in Syria, for the sake of a little leverage in negotiations. Mr. Obama has brushed the requests away. Mr. Assad can at last rest easy, if he isn’t already.

U.S. allies fare less well under Mr. Obama’s gaze. David Cameron comes in for a scolding on U.K. military spending, as well as for getting “distracted” on Libya. Nicolas Sarkozy, the former and possibly future president of France, is dismissed by Mr. Obama as a posturing braggart. Regarding the president’s commitment to Israel’s security, Mr. Goldberg reports, citing Mr. Panetta, that the president “has questioned why the U.S. should maintain Israel’s so-called qualitative military edge, which grants it access to more sophisticated weapons systems than America’s Arab allies.”

As for those allies, Mr. Obama treats the Saudis with such naked contempt that it prompted former intelligence minister Turki al-Faisal to denounce the president in an op-ed: “Could it be,” the prince asked, “that you are petulant about the Kingdom’s efforts to support the Egyptian people when they rose against the Muslim Brothers’ government and you supported it?”

Summing up the president’s worldview, Mr. Goldberg describes him as a “Hobbesian optimist”—which philosophically must be the equivalent of a Jew for Jesus. But Mr. Obama has shown that he lacks Hobbes’s understanding that Leviathan must fill the vacuums that will otherwise be filled by an ISIS or a Putin, or an optimist’s belief that American power can shape the world for the better.

The French diplomat Charles de Talleyrand once said of the (restored) Bourbon dynasty that “they had learned nothing and forgotten nothing.” Given the mix of score-settling and delusion on display in this interview, that may well be the president’s foreign-policy epitaph, too.
 
Write bstephens@wsj.com.

Brief ideas on the history of property (excerpts from Pipes and Hayek)

PROPERTY

Property and Freedom by  Richard Pipes

pp. 25-26

Sometime during the period in European history vaguely labeled “early modern,” there occurred a major break in the attitude toward property.  It was the consequence of a remarkable expansion of commerce which began in the late Middle Ages and accelerated following the discovery of the New World.  Prior to that time, “property” essentially meant land; and since land was inextricably bound up with the powers of sovereignty, discussions of property raised questions of royal (or papal) authority.  With the surge of commerce, however, property in some parts of Europe came also to mean capital; and capital was free of association with politics, being treated as a personal asset and, as such, owned without qualifications.  A change of attitude followed: whereas in theoretical discussions of the preceding millennium property had been treated as an unavoidable evil, it now could be regarded as a positive good.  This attitude prevailed until the second half of the eighteenth century, when egalitarian sentiments led to a renewed assault on the institution of property, this time in an uncompromising manner for which there was no precedent.

Two further factors contributed to the ascendancy of property.  One was the rise of individualism.  Increasingly the community came to be viewed as an abstraction made up of individuals, and communal well-being as the sum total of individual prosperity.  Individual prosperity, in turn, came to be seen as the reward of a rational life.  The early Florentine humanist Leonardo Bruni (c. 1370-1444) praised riches as indispensible to an active public life, which alone deserved to be called “virtuous.”  “All in all,” he wrote, “we need many material goods in order to accomplish deeds, and the greater and more excellent our acts of virtue, the more we depend on those means.”  Leon Battista Alberti (1404-1472), an even more prominent Italian humanist of the Renaissance, preached a “bourgeois” morality very much like the one that would be propounded by Benjamin Franklin three hundred years later.

 

PROPERTY2

selected excerpts from ch. 2 (pp 29-37) of The Fatal Conceit by F.A. Hayek    (full pdf)

If morals and tradition, rather than intelligence and calculating reason, lifted men above the savages, the distinctive foundations of modern civilisation were laid in antiquity in the region surrounding the Mediterranean Sea. There, possibilities of long-distance trade gave, to those communities whose individuals were allowed to make free use of their individual knowledge, an advantage over those in which common local knowledge or that of a ruler determined the activities of all. So far as we know, the Mediterranean region was the first to see the acceptance of a person's right to dispose over a recognised private domain, thus allowing individuals to develop a dense network of commercial relations among different communities. Such a network worked independently of the views and desires of local chiefs, for the movements of naval traders could hardly be centrally directed in those days. If we may accept the account of a highly respected authority (and one certainly not biased in favour of the market order), `the Graeco-Roman world was essentially and precisely one of private ownership, whether of a few acres or of the enormous domains of Roman senators and emperors, a world of private trade and manufacture' (Finley, 1973:29).



Such an order serving a multiplicity of private purposes could in fact have been formed only on the basis of what I prefer to call several property, which is H. S. Maine's more precise term for what is usually described as private property. If several property is the heart of the morals of any advanced civilisation, the ancient Greeks seem to have been the first to see that it is also inseparable from individual freedom.

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The crucial point is that the prior development of several property is indispensable for the development of trading, and thereby for the formation of larger coherent and cooperating structures, and for the appearance of those signals we call prices.

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Similarly, of the revival of European civilisation during the later Middle Ages it could be said that the expansion of capitalism - and European civilisation - owes its origins and raison d'etre to political anarchy (Baechler, 1975:77). It was not under the more powerful governments, but in the towns of the Italian Renaissance, of South Germany and of the Low Countries, and finally in lightly-governed England, i.e., under the rule of the bourgeoisie rather than of warriors, that modern industrialism grew. Protection of several property, not the direction of its use by government, laid the foundations for the growth of the dense network of exchange of services that shaped the extended order.

Nothing is more misleading, then, than the conventional formulae of historians who represent the achievement of a powerful state as the culmination of cultural evolution: it as often marked its end.

…

The institutions of property, as they exist at present, are hardly perfect; indeed, we can hardly yet say in what such perfection might consist. Cultural and moral evolution do require further steps if the institution of several property is in fact to be as beneficial as it can be. For example, we need the general practice of competition to prevent abuse of property. This in turn requires further restraint on the innate feelings of the micro-order, the small group discussed earlier (see chapter one above, and Schoeck, 1966/69), for these instinctual feelings are often threatened not only by several property but sometimes even more so by competition, and this leads people to long doubly for non-competitive `solidarity'.

While property is initially a product of custom, and jurisdiction and legislation have merely developed it in the course of millennia, there is then no reason to suppose that the particular forms it has assumed in the contemporary world are final. Traditional concepts of property rights have in recent times been recognised as a modifiable and very complex bundle whose most effective combinations have not yet been discovered in all areas.

…

Just to illustrate how great our ignorance of the optimum forms of delimitation of various rights remains - despite our confidence in the indispensability of the general institution of several property - a few remarks about one particular form of property may be made.

The slow selection by trial and error of a system of rules delimiting individual ranges of control over different resources has created a curious position. Those very intellectuals who are generally inclined to question those forms of material property which are indispensable for the efficient organisation of the material means of production have become the most enthusiastic supporters of certain immaterial property rights invented only relatively recently, having to do, for example, with literary productions and technological inventions (i.e., copyrights and patents).

…

Yet it is not obvious that such forced scarcity is the most effective way to stimulate the human creative process.

…

Similarly, recurrent re-examinations of the problem have not demonstrated that the obtainability of patents of invention actually enhances the flow of new technical knowledge rather than leading to wasteful concentration of research on problems whose solution in the near future can be foreseen and where, in consequence of the law, anyone who hits upon a solution a moment before the next gains the right to its exclusive use for a prolonged period (Machlup, 1962).

…

Another, related, matter could also mislead. Earlier we mentioned the growing differentiation of various kinds of property rights in a vertical or hierarchical dimension. If, elsewhere in this book, we occasionally speak about the rules of several property as if the contents of individual property were uniform and constant, this should be seen as a simplification that could mislead if understood without the qualifi- cations already stated. This is in fact a field in which the greatest advances in the governmental framework of the spontaneous order may be expected, but which we cannot consider further here.

excerpts from How the West Won (subchapter on Venice)

from How the West Won: The Neglected Story of the Triumph of Modernity  by Rodney Stark

Venice

Shielded by remarkable natural barriers and with unimpeded access to the sea, Venice fended off all Lombard efforts to subordinate it and instead became a province of the Byzantine Empire. This gave the growing city many commercial advantages, such as being free from Byzantine tolls or customs in its trade with the East. That commerce became increasingly important as Islam developed a trading network throughout the region, including Spain, Sicily, the toe of Italy, and North Africa. In fact, Venice probably was the first society to live by trade alone.34 It also was a pioneer in the return of democracy. Distance, and growing Venetian sea power, made Byzantium’s sovereignty over Venice nominal at best.

And as time passed, the “people” became an increasingly inclusive group. Meanwhile, the power of the doge was gradually reduced as elected councils took greater authority, leading to what came to be known as the commune—made up of the body of citizens with voting rights and the executives and legislators elected by them.

In early days, participation in Venetian politics was limited to various elites, but as time passed, and especially as Venice became a major manufacturing center as well as a trading port, the franchise was extended. The principal mechanism by which this was accomplished was by the organization of guilds—associations of persons engaged in a specific craft or trade.

Capitalism was not invented in the Italian city-states, for all that they were fully developed capitalist centers by the end of the eleventh century. Weber was correct in asserting that capitalism had religious roots. It was not, however, originated by Protestants: capitalism first appeared in the great Catholic monastic estates back in the ninth century.

…having originated not as an economic concept but as a pejorative term used by nineteenth-century leftists to condemn wealth and privilege. To adapt the term for serious analysis is a bit like trying to make a social-scientific concept out of a reactionary pig.

Notions of the dignity of labor were incomprehensible in ancient Rome or any other precapitalist society. Traditional societies celebrated consumption while holding work in contempt. In China, for example, the Mandarins grew their fingernails as long as they could (even wearing silver sheaths to protect them from breaking) to make it evident that they did no labor. Capitalism required and encouraged a remarkably different attitude, one that saw work as intrinsically virtuous. Max Weber identified this as the Protestant ethic, so-called because he believed it to be absent from Catholic culture. But Weber was wrong. Belief in the virtues of work arose centuries before Martin Luther was born.

Although capitalism developed in the great monastic estates, it soon found a receptive setting in the newly democratic Italian city-states. In the tenth century these city-states emerged as the banking and trading centers of Europe. Subsequently they industrialized and began producing a large volume of manufactured goods for export across the Mediterranean and to northern Europe and the British Isles. For example, eyeglasses (for nearsightedness as well as farsightedness) were mass-produced by plants in both Florence and Venice, and tens of thousands of pairs were exported annually. Perhaps the most striking aspect of Italian capitalism was the rapid perfection of banking. The Italian bankers quickly developed and adopted double-entry bookkeeping. To facilitate trade, they invented bills of exchange, making it possible to transfer funds on paper rather than transporting coins or precious metal over long distances, which was both difficult and dangerous. Italian bankers also initiated insurance to guard against loss of long-distance shipments by land or sea. Perhaps the most important of all the Italian banking innovations was the perfection of modern arithmetic, based on the adoption of Hindu-Arabic numerals and the concept of zero.

The proximate cause of the rise of Italian capitalism was freedom from the rapacious rulers who repressed and consumed economic progress in most of the world, including most of Europe. Although their political life often was turbulent, these city-states were true republics able to sustain the freedom capitalism requires. Second, centuries of technological progress had laid the necessary foundations for the rise of capitalism, especially the agricultural surpluses needed to sustain cities and to permit specialization. In addition, Christian theology encouraged the idea of progress, which justified long-term investment strategies, and provided moral justifications for the business practices fundamental to capitalism.

If there is a single factor responsible for the rise of the West, it is freedom. Freedom to hope. Freedom to act. Freedom to invest. Freedom to enjoy the fruits of one’s dreams as well as one’s labor.

Righteous Mind (excerpts)

RighteousMind

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The Righteous Mind: Why Good People Are Divided by Politics and Religion  

by Jonathan Haidt

I study moral psychology, and I’m going to make the case that morality is the extraordinary human capacity that made civilization possible.

But I chose the title The Righteous Mind to convey the sense that human nature is not just intrinsically moral, it’s also intrinsically moralistic, critical, and judgmental.

Our righteous minds made it possible for human beings—but no other animals—to produce large cooperative groups, tribes, and nations without the glue of kinship. But at the same time, our righteous minds guarantee that our cooperative groups will always be cursed by moralistic strife. Some degree of conflict among groups may even be necessary for the health and development of any society.

Part I is about the first principle: Intuitions come first, strategic reasoning second.

Part II is about the second principle of moral psychology, which is that there’s more to morality than harm and fairness.

But people have so many other powerful moral intuitions, such as those related to liberty, loyalty, authority, and sanctity.

Part III is about the third principle: Morality binds and blinds. The central metaphor of these four chapters is that human beings are 90 percent chimp and 10 percent bee. Human nature was produced by natural selection working at two levels simultaneously. Individuals compete with individuals within every group, and we are the descendants of primates who excelled at that competition.

But human nature was also shaped as groups competed with other groups.

Our bee-like nature facilitates altruism, heroism, war, and genocide.

Once you see our righteous minds as primate minds with a hivish overlay, you get a whole new perspective on morality, politics, and religion.

I’ll show that religion is (probably) an evolutionary adaptation for binding groups together and helping them to create communities with a shared morality. It is not a virus or a parasite, as some scientists (the “New Atheists”) have argued in recent years.

Understanding the simple fact that morality differs around the world, and even within societies, is the first step toward understanding your righteous mind.

…all societies must resolve a small set of questions about how to order society, the most important being how to balance the needs of individuals and groups.

The sociocentric answer dominated most of the ancient world, but the individualistic answer became a powerful rival during the Enlightenment. The individualistic answer largely vanquished the sociocentric approach in the twentieth century as individual rights expanded rapidly, consumer culture spread, and the Western world reacted with horror to the evils perpetrated by the ultrasociocentric fascist and communist empires.

Even in the United States the social order is a moral order, but it’s an individualistic order built up around the protection of individuals and their freedom.

I was chagrined to discover that psychology in Latin America was not very scientific. It was heavily theoretical, and much of that theory was Marxist, focused on oppression, colonialism, and power.

…had found evidence for Hume’s claim. I had found that moral reasoning was often a servant of moral emotions, and this was a challenge to the rationalist approach that dominated moral psychology.

We’re born to be righteous, but we have to learn what, exactly, people like us should be righteous about.

We do moral reasoning not to reconstruct the actual reasons why we ourselves came to a judgment; we reason to find the best possible reasons why somebody else ought to join us in our judgment.

The bottom line is that human minds, like animal minds, are constantly reacting intuitively to everything they perceive, and basing their responses on those reactions.

As hominid brains tripled in size over the last 5 million years, developing language and a vastly improved ability to reason, why did we evolve an inner lawyer, rather than an inner judge or scientist? Wouldn’t it have been most adaptive for our ancestors to figure out the truth, the real truth about who did what and why, rather than using all that brainpower just to find evidence in support of what they wanted to believe? That depends on which you think was more important for our ancestors’ survival: truth or reputation.

Human beings are the world champions of cooperation beyond kinship, and we do it in large part by creating systems of formal and informal accountability. We’re really good at holding others accountable for their actions, and we’re really skilled at navigating through a world in which others hold us accountable for our own.

Anyone who values truth should stop worshipping reason. We all need to take a cold hard look at the evidence and see reasoning for what it is. The French cognitive scientists Hugo Mercier and Dan Sperber recently reviewed the vast research literature on motivated reasoning (in social psychology) and on the biases and errors of reasoning (in cognitive psychology). They concluded that most of the bizarre and depressing research findings make perfect sense once you see reasoning as having evolved not to help us find truth but to help us engage in arguments, persuasion, and manipulation in the context of discussions with other people. As they put it, “skilled arguers … are not after the truth but after arguments supporting their views.”

The authors pointed out that nearly all research in psychology is conducted on a very small subset of the human population: people from cultures that are Western, educated, industrialized, rich, and democratic (forming the acronym WEIRD). They then reviewed dozens of studies showing that WEIRD people are statistical outliers; they are the least typical, least representative people you could study if you want to make generalizations about human nature. Even within the West, Americans are more extreme outliers than Europeans, and within the United States, the educated upper middle class (like my Penn sample) is the most unusual of all.

Morality is so rich and complex, so multifaceted and internally contradictory. Pluralists such as Shweder rise to the challenge, offering theories that can explain moral diversity within and across cultures. Yet many authors reduce morality to a single principle, usually some variant of welfare maximization (basically, help people, don’t hurt them).1 Or sometimes it’s justice or related notions of fairness, rights, or respect for individuals and their autonomy.2 There’s The Utilitarian Grill, serving only sweeteners (welfare), and The Deontological Diner, serving only salts (rights). Those are your options. Neither Shweder nor I am saying that “anything goes,” or that all societies or all cuisines are equally good. But we believe that moral monism—the attempt to ground all of morality on a single principle—leads to societies that are unsatisfying to most people and at high risk of becoming inhumane because they ignore so many other moral principles.

Hume believed that “moral science” had to begin with careful inquiry into what humans are really like. And when he examined human nature—in history, in political affairs, and among his fellow philosophers—he saw that “sentiment” (intuition) is the driving force of our moral lives, whereas reasoning is biased and impotent, fit primarily to be a servant of the passions.8 He also saw a diversity of virtues, and he rejected attempts by some of his contemporaries to reduce all of morality to a single virtue such as kindness, or to do away with virtues and replace them with a few moral laws.

Hume got it right. When he died in 1776, he and other sentimentalists10 had laid a superb foundation for “moral science,” one that has, in my view, been largely vindicated by modern research.11 You would think, then, that in the decades after his death, the moral sciences progressed rapidly. But you would be wrong. In the decades after Hume’s death the rationalists claimed victory over religion and took the moral sciences off on a two-hundred-year tangent.

We’ve advanced a lot since the 1970s in our understanding of the brain, and now we know that traits can be innate without being either hardwired or universal. As the neuroscientist Gary Marcus explains, “Nature bestows upon the newborn a considerably complex brain, but one that is best seen as prewired—flexible and subject to change—rather than hardwired, fixed, and immutable.”2 To replace wiring diagrams, Marcus suggests a better analogy: The brain is like a book, the first draft of which is written by the genes during fetal development. No chapters are complete at birth, and some are just rough outlines waiting to be filled in during childhood. But not a single chapter—be it on sexuality, language, food preferences, or morality—consists of blank pages on which a society can inscribe any conceivable set of words. Marcus’s analogy leads to the best definition of innateness I have ever seen: Nature provides a first draft, which experience then revises.… “Built-in” does not mean unmalleable; it means “organized in advance of experience.”

We are the descendants of the individuals who were best able to play the game—to rise in status while cultivating the protection of superiors and the allegiance of subordinates.

To put this all together: Moral Foundations Theory says that there are (at least) six psychological systems that comprise the universal foundations of the world’s many moral matrices.53 The various moralities found on the political left tend to rest most strongly on the Care/harm and Liberty/oppression foundations. These two foundations support ideals of social justice, which emphasize compassion for the poor and a struggle for political equality among the subgroups that comprise society. Social justice movements emphasize solidarity—they call for people to come together to fight the oppression of bullying, domineering elites. (This is why there is no separate equality foundation. People don’t crave equality for its own sake; they fight for equality when they perceive that they are being bullied or dominated, as during the American and French revolutions, and the cultural revolutions of the 1960s.)

The remaining three foundations—Loyalty/betrayal, Authority/subversion, and Sanctity/degradation—show the biggest and most consistent partisan differences. Liberals are ambivalent about these foundations at best, whereas social conservatives embrace them.

Liberals have a three-foundation morality, whereas conservatives use all six. Liberal moral matrices rest on the Care/harm, Liberty/oppression, and Fairness/cheating foundations, although liberals are often willing to trade away fairness (as proportionality) when it conflicts with compassion or with their desire to fight oppression. Conservative morality rests on all six foundations, although conservatives are more willing than liberals to sacrifice Care and let some people get hurt in order to achieve their many other moral objectives.

Until Democrats understand the Durkheimian vision of society and the difference between a six-foundation morality and a three-foundation morality, they will not understand what makes people vote Republican.

But my goal here is not just to build a legal case in an academic battle that you might care nothing about. My goal is to show you that morality is the key to understanding humanity. I’ll take you on a brief tour of humanity’s origins in which we’ll see how groupishness helped us transcend selfishness. I’ll show that our groupishness—despite all of the ugly and tribal things it makes us do—is one of the magic ingredients that made it possible for civilizations to burst forth, cover the Earth, and live ever more peacefully in just a few thousand years.

But if we simply ask whether humans went through the same evolutionary process as bees—a major transition from selfish individualism to groupish hives that prosper when they find a way to suppress free riding—then the analogy gets much tighter. Many animals are social: they live in groups, flocks, or herds. But only a few animals have crossed the threshold and become ultrasocial, which means that they live in very large groups that have some internal structure, enabling them to reap the benefits of the division of labor.

Tomasello believes that human ultrasociality arose in two steps. The first was the ability to share intentions in groups of two or three people who were actively hunting or foraging together. (That was the Rubicon.) Then, after several hundred thousand years of evolution for better sharing and collaboration as nomadic hunter-gatherers, more collaborative groups began to get larger, perhaps in response to the threat of other groups. Victory went to the most cohesive groups—the ones that could scale up their ability to share intentions from three people to three hundred or three thousand people. This was the second step: Natural selection favored increasing levels of what Tomasello calls “group-mindedness”—the ability to learn and conform to social norms, feel and share group-related emotions, and, ultimately, to create and obey social institutions, including religion. A new set of selection pressures operated within groups (e.g., nonconformists were punished, or at very least were less likely to be chosen as partners for joint ventures)58 as well as between groups (cohesive groups took territory and other resources from less cohesive groups).

We are 90 percent chimp and 10 percent bee.93 If you take that claim metaphorically, then the groupish and hivish things that people do will make a lot more sense.

Among the few useful scholars she found in her quest was Emile Durkheim. Durkheim insisted that there were “social facts” that were not reducible to facts about individuals. Social facts—such as the suicide rate or norms about patriotism—emerge as people interact. They are just as real and worthy of study (by sociology) as are people and their mental states (studied by psychology).

Durkheim argued, in contrast, that Homo sapiens was really Homo duplex, a creature who exists at two levels: as an individual and as part of the larger society. From his studies of religion he concluded that people have two distinct sets of “social sentiments,” one for each level.

In humans the mirror neuron system is found in brain regions that correspond directly to those studied in macaques. But in humans the mirror neurons have a much stronger connection to emotion-related areas of the brain—first to the insular cortex, and from there to the amygdala and other limbic areas.37 People feel each other’s pain and joy to a much greater degree than do any other primates. Just seeing someone else smile activates some of the same neurons as when you smile. The other person is effectively smiling in your brain, which makes you happy and likely to smile, which in turn passes the smile into someone else’s brain. Mirror neurons are perfectly suited for Durkheim’s collective sentiments, particularly the emotional “electricity” of collective effervescence.

Fascism is hive psychology scaled up to grotesque heights. It’s the doctrine of the nation as a superorganism, within which the individual loses all importance.

It would be nice to believe that we humans were designed to love everyone unconditionally. Nice, but rather unlikely from an evolutionary perspective. Parochial love—love within groups—amplified by similarity, a sense of shared fate, and the suppression of free riders, may be the most we can accomplish.

Religions are social facts. Religion cannot be studied in lone individuals any more than hivishness can be studied in lone bees. Durkheim’s definition of religion makes its binding function clear: A religion is a unified system of beliefs and practices relative to sacred things, that is to say, things set apart and forbidden—beliefs and practices which unite into one single moral community called a Church, all those who adhere to them.3 In this chapter I continue exploring the third principle of moral psychology: Morality binds and blinds. Many scientists misunderstand religion because they ignore this principle and examine only what is most visible. They focus on individuals and their supernatural beliefs, rather than on groups and their binding practices.

In Wilson’s account, human minds and human religions have been coevolving (just like bees and their physical hives) for tens or hundreds of thousands of years. And if this is true, then we cannot expect people to abandon religion so easily. Of course people can and do forsake organized religions, which are extremely recent cultural innovations. But even those who reject all religions cannot shake the basic religious psychology of figure 11.2: doing linked to believing linked to belonging. Asking people to give up all forms of sacralized belonging and live in a world of purely “rational” beliefs might be like asking people to give up the Earth and live in colonies orbiting the moon. It can be done, but it would take a great deal of careful engineering, and even after ten generations, the descendants of those colonists might find themselves with inchoate longings for gravity and greenery.

The only thing that was reliably and powerfully associated with the moral benefits of religion was how enmeshed people were in relationships with their co-religionists. It’s the friendships and group activities, carried out within a moral matrix that emphasizes selflessness. That’s what brings out the best in people. Putnam and Campbell reject the New Atheist emphasis on belief and reach a conclusion straight out of Durkheim: “It is religious belongingness that matters for neighborliness, not religious believing.”

Putnam and Campbell’s work shows that religion in the United States nowadays generates such vast surpluses of social capital that much of it spills over and benefits outsiders.

Societies that forgo the exoskeleton of religion should reflect carefully on what will happen to them over several generations. We don’t really know, because the first atheistic societies have only emerged in Europe in the last few decades. They are the least efficient societies ever known at turning resources (of which they have a lot) into offspring (of which they have few).

Utilitarians since Jeremy Bentham have focused intently on individuals. They try to improve the welfare of society by giving individuals what they want. But a Durkheimian version of utilitarianism would recognize that human flourishing requires social order and embeddedness. It would begin with the premise that social order is extraordinarily precious and difficult to achieve. A Durkheimian utilitarianism would be open to the possibility that the binding foundations—Loyalty, Authority, and Sanctity—have a crucial role to play in a good society.

I just want Bentham to read Durkheim and recognize that we are Homo duplex before he tells any of us, or our legislators, how to go about maximizing that total good.

In the book Moral, Believing Animals, the sociologist Christian Smith writes about the moral matrices within which human life takes place.27 He agrees with Durkheim that every social order has at its core something sacred, and he shows how stories, particularly “grand narratives,” identify and reinforce the sacred core of each matrix.

Smith wrote this narrative before Moral Foundations Theory existed, but you can see that the narrative derives its moral force primarily from the Care/harm foundation (concern for the suffering of victims) and the Liberty/oppression foundation (a celebration of liberty as freedom from oppression, as well as freedom to pursue self-defined happiness). In this narrative, Fairness is political equality (which is part of opposing oppression); there are only oblique hints of Fairness as proportionality.29 Authority is mentioned only as an evil, and there is no mention of Loyalty or Sanctity.

Muller went through a series of claims about human nature and institutions, which he said are the core beliefs of conservatism. Conservatives believe that people are inherently imperfect and are prone to act badly when all constraints and accountability are removed (yes, I thought; see Glaucon, Tetlock, and Ariely in chapter 4). Our reasoning is flawed and prone to overconfidence, so it’s dangerous to construct theories based on pure reason, unconstrained by intuition and historical experience (yes; see Hume in chapter 2 and Baron-Cohen on systemizing in chapter 6). Institutions emerge gradually as social facts, which we then respect and even sacralize, but if we strip these institutions of authority and treat them as arbitrary contrivances that exist only for our benefit, we render them less effective. We then expose ourselves to increased anomie and social disorder (yes; see Durkheim in chapters 8 and 11).

Based on my own research, I had no choice but to agree with these conservative claims. As I continued to read the writings of conservative intellectuals, from Edmund Burke in the eighteenth century through Friedrich Hayek and Thomas Sowell in the twentieth, I began to see that they had attained a crucial insight into the sociology of morality that I had never encountered before. They understood the importance of what I’ll call moral capital.

Moral communities are fragile things, hard to build and easy to destroy. When we think about very large communities such as nations, the challenge is extraordinary and the threat of moral entropy is intense. There is not a big margin for error; many nations are failures as moral communities, particularly corrupt nations where dictators and elites run the country for their own benefit. If you don’t value moral capital, then you won’t foster values, virtues, norms, practices, identities, institutions, and technologies that increase it.

And while high moral capital helps a community to function efficiently, the community can use that efficiency to inflict harm on other communities. High moral capital can be obtained within a cult or a fascist nation, as long as most people truly accept the prevailing moral matrix.

Nonetheless, if you are trying to change an organization or a society and you do not consider the effects of your changes on moral capital, you’re asking for trouble. This, I believe, is the fundamental blind spot of the left. It explains why liberal reforms so often backfire,43 and why communist revolutions usually end up in despotism. It is the reason I believe that liberalism—which has done so much to bring about freedom and equal opportunity—is not sufficient as a governing philosophy. It tends to overreach, change too many things too quickly, and reduce the stock of moral capital inadvertently.

Throughout this book I’ve argued that large-scale human societies are nearly miraculous achievements. I’ve tried to show how our complicated moral psychology coevolved with our religions and our other cultural inventions (such as tribes and agriculture) to get us where we are today. I have argued that we are products of multilevel selection, including group selection, and that our “parochial altruism” is part of what makes us such great team players.

If you destroy all groups and dissolve all internal structure, you destroy your moral capital. Conservatives understand this point.

Robert Putnam has provided a wealth of evidence that Burke and Smith were right. In the previous chapter I told you about his finding that religions make Americans into “better neighbors and better citizens.” I told you his conclusion that the active ingredient that made people more virtuous was enmeshing them into relationships with their co-religionists. Anything that binds people together into dense networks of trust makes people less selfish. In an earlier study, Putnam found that ethnic diversity had the opposite effect. In a paper revealingly titled “E Pluribus Unum,” Putnam examined the level of social capital in hundreds of American communities and discovered that high levels of immigration and ethnic diversity seem to cause a reduction in social capital.

In particular, liberals often have difficulty seeing moral capital, which I defined as the resources that sustain a moral community. I suggested that liberals and conservatives are like yin and yang—both are “necessary elements of a healthy state of political life,” as John Stuart Mill put it. Liberals are experts in care; they are better able to see the victims of existing social arrangements, and they continually push us to update those arrangements and invent new ones.

The philosopher Isaiah Berlin wrestled throughout his career with the problem of the world’s moral diversity and what to make of it. He firmly rejected moral relativism: I am not a relativist; I do not say “I like my coffee with milk and you like it without; I am in favor of kindness and you prefer concentration camps”—each of us with his own values, which cannot be overcome or integrated. This I believe to be false.1 He endorsed pluralism instead, and justified it in this way: I came to the conclusion that there is a plurality of ideals, as there is a plurality of cultures and of temperaments.… There is not an infinity of [values]: the number of human values, of values which I can pursue while maintaining my human semblance, my human character, is finite—let us say 74, or perhaps 122, or 27, but finite, whatever it may be. And the difference this makes is that if a man pursues one of these values, I, who do not, am able to understand why he pursues it or what it would be like, in his circumstances, for me to be induced to pursue it. Hence the possibility of human understanding.

We may spend most of our waking hours advancing our own interests, but we all have the capacity to transcend self-interest and become simply a part of a whole. It’s not just a capacity; it’s the portal to many of life’s most cherished experiences.

We are deeply intuitive creatures whose gut feelings drive our strategic reasoning.