Competition in cows :P

I No doubt about it, the beef cattle industry
is in big trouble again. Several
friends and acquaintances in the feedlot
business are being forced into bankruptcy
and many others are teetering on the
brink. The small cow/calf producer has
been disappearing for years, seemingly
without notice or concern.
Today, many large
and formerly successful
large ranching operations
have exhausted
much of their equity,
are in danger of losing
the sacred trust (ranch)
passed on to them from
preceding generations.
Everyone in the cattle
business seems to be
feeling pain. But, this may just be the
needed motivation for producers at all
levels to ban together and seize this fleeting
opportunity to fix things.
We were supposed to have weeded out
excess production and inefficiency during
the bloody purge of the mid-eighties.
This being done, the industry would be
restored to balance and fairness for all
players. But, excessive and inefficient production
is clearly not the cause of this crisis
situation. The cliché; “the cure for low
prices is low prices” has been debunked.
A dysfunctional and totally broken marketing
system is
coming into focus as
the real culprit.
R a n c h i n g
and cattle feeding
has always been
tough. But today,
even those who have
traditionally been
above the fray are
feeling the pinch. In
the past, many cattle
feeders seemed to have believed that if
they became friends with the packers and
sided with them in lawsuits, they would
be able to get preferable prices for their
cattle. It didn’t work! Even the major
feeders, including those who had cozy
relationships and special deals with pack-
IT’S THE BROKEN MARKET SYSTEM
by Fred Stokes, Executive Director
ORGANIZATION FOR COMPETITIVE MARKETS POST OFFICE BOX 6486 LINCOLN, NEBRASKA 68506 ø www.competitivemarkets.com
OCM News FEBRUARY 2010
INSIDE...
What’s
the basic elements of
a solution
by Randy Stevenson 2
dig baby dig
by Richard Oswald 3
IT ’S THE PITTS ; CATTLE
FEEDE RS ANONYMOUS
by Lee Pitts 4
POEM - There’s No Lights
On In The Barn
by Lewis Baumgartner 5
ers, are now hurting and seem ready to
work (albeit clandestinely) with others to
reform the marketplace. However, they
remain concerned that if their involvement
in the ongoing market reform effort
becomes known, they will be subject to
reprisals by the packer.
This fear of packer reprisals brought
to memory an incident years back in a
local school here in Mississippi. A teenage
boy was lying helplessly on his back
with the school bully setting on his chest
pounding him in the face. The surrounding
kids yelled, “fight back Buddy”, who
replied “no that will just make him worser”.
Adults should have come to realize
that when you have to deal with a bully,
not resisting doesn’t work. Ultimately,
you’re going to either have to be totally
submissive or fight.
Please see STOKES on page 6 Cattle producers at
all levels need to rally
around their common
interests and agreements,
put aside their
differences and act to
fix this broken market
system.
What should the market look like?
In general terms that is not difficult to
describe. The market should possess
three key elements in order to function
properly. They are a balance of market
power, good procedural rules to maintain
the balance of power, and impartial
enforcement of the rules.
The balance of power, in turn consists
of elements that help describe and
determine that feature. First, there
should be no situation of asymmetric
information. That is not to say that one
side of the transaction may not be negligent
and overlook available sources
of information to his own detriment.
But rather it means that, for example,
a packer may not operate with information
about how many cattle he has
bought for next week’s kill while the
seller cannot know such information.
That information should be available
because the transactions to buy those
cattle have taken place in the open, and
not by contracts that are unavailable to
other market participants. That suggests
another feature that prevents an
imbalance of power, and that is market
transparency. When each individual
transaction between buyers and sellers
is open to the public, every market participant
can evaluate the same market
information. Nothing is hidden. Finally
the absence of compulsion for either
buyers or sellers is necessary. Buyers
and sellers may have their own internal
compulsions to buy or sell cattle, such
as pressing financial necessity, or a need
to supply a restaurant contract. That is
not what absence of compulsion means.
Absence of compulsion means that the
buyer is not giving the seller only 30
minutes to decide to sell today, or he
doesn’t get another opportunity to sell
for another week.
The second major element of a
competitive market is the presence of
a regulatory scheme to guarantee the
previously stated balance of power.
Such regulation is limited to the market
transactions and the market itself and
not to any other feature such as safety
and health. The desirability and extent
of health and safety regulations is a debate
that belongs outside the discussion
of the marketplace. Rules for a marketplace
are just as necessary as rules for
a football game. The outcome is never
determined or influenced by the rules.
Rules that preserve honesty would be
an example of something absolutely
necessary in the marketplace. The rules
simply make sure that the balance is
maintained in terms of market power.
The final major element is the impartial
enforcement of the rules. With-
Please see STEVENSON on page 7
The Basic Elements of a Solution
by Randy Stevenson
President
BOARD MEMBERS:
Randy Stevenson, President
Wheatland, WY 307-331-1980
double_s_livestock@lycos.com
Mike Callicrate, Vice President
St. Francis, KS 785-332-8218
mike@nobull.net
Brother David Andrews, Secretary
Washington, DC
Dan Hodges, Treasurer
Julian, NE
Steve Cady
Eskridge, KS
Cap Dierks
Ewing, NE
Jim Foster
Montgomery City, MO
Keith Mudd, Past President
Monroe City, MO
Paul Muegge
Tonkawa, OK
Eric Nelson
Moville, IA
Richard Oswald
Langdon, Missouri
Fred Stokes, Past President
Porterville, MS
STAFF:
Fred Stokes, Executive Director
Porterville, MS • 601-527-2459
tfredstokes@hughes.net
Pat Craycraft, Office Manager
Lincoln, NE • 402-817-4443
ocm@competitivemarkets.com
PROJECT ASSISTANTS
Jody Holland, Starkville, MS
Eric Lister, Brentwood, TN
OCM BOARD
MEMBERS & STAFF
OCM - February 2010 2
3 OCM - February 2010
DIG BABY DIG by Richard Oswald
ting close to being the best in the world.
They’re building them by the thousands
and selling most to their own people. But
analysts say that will change as more Chinese
products find their way into our markets.
Some big US retailers like Costco
may even have plans to sell them. (5)
That goes right along with our current
trade policies that I call “Buy Baby Buy”
According to the folks at the January
27th Clean Energy Works Forum in
Washington DC, (1) the US gets 60% of
its oil from foreign sources. If Baby gets
lucky and digs up a gusher, all that oil
will be sold on the open market. America
might never see a single gallon of it unless
we outbid Europe and Asia. So supply is
important to stabilizing world prices in the
short run, but not helpful to our long term
outlook as third world nations with expanding
industrial bases have more money
to spend.
Either way, it’s pay Baby pay.
Both Senators John Kerry of Massachusetts
and Lindsey Graham of South
Carolina took time to visit with forum
participants in the Russell Senate Office
Building. Graham went out on a conservative
limb by calling for carbon regulation,
saying that only through cap and
trade would America find the resolve to
be truly energy independent. That’s a fact
some forward looking investors like Warren
Buffet have recognized for quite some
time. Not only do Buffet’s newly acquired
railroads offer shipping profits, they also
offer right of way with some of the best
opportunities for renewable energy--like
solar and wind. (3)
But there were others who saw this
coming too, like the company based in
India that bought a down-on-it’s-luck
transformer factory in the Show-Me-State
where Nick Nickelson works. Nick Attended
the Clean Energy Forum as president
of IUE-CWA Local 86114 in Washington,
Missouri.
Nick said the place where he works was
on hard times because of the recession.
Business was bad even though the quality
of the products Nick and his co-workers
put out was second to none. Now with
fresh investment in wind and solar power
starting to pick up, the market for high
quality transformers like those made at
Nicks factory (4) are finding markets while
safeguarding American jobs.
There were plenty of stories like Nicks,
and other stories too. Like the one from
Hawaii State Representative Cynthia
Thielen, who came to remind delegates
that 90% of the Aloha state’s energy needs
are provided by imported oil. Cynthia
said that on the Islands, the military is the
strongest proponent of renewable energy.
Some folks want to make this energy
thing seem like a partisan issue, but as Representative
Thielen and Senator Graham
(both are Republicans) said, this is not a
Republican issue, it is not a Democratic issue,
it is an issue of national security.
While Graham believes that continued
drilling for more fossil fuel supplies is an
important part of our energy security, he
still supports carbon regulation. It’s kind of
a one-two punch for energy independence.
That’s what Cap and Trade does; it
regulates carbon by establishing a market
for it. In order to comply with EPA regulations,
coal fired power generators don’t
need to modernize right away, but slowly
over time as older equipment must be replaced.
In the meantime they just partner
with a farm or industry that removes carbon
from the air.
Winston, a Farmer’s Union friend
of mine says “You hafta call it something
else. Because all the farmers’ll say ‘we don’t
want cap and trade’”.
Winston has a point. Thielen and
Please see OSWALD on page 6
O One of the things I remember best
about my Dad was his shovel, because
Dad’s shovel was eternally shiny and rust
free. The last thing he always did when he
finished digging on the farm was clean and
oil his spade to perfection.
From irrigation ditches to postholes,
Dad could dig about anything. But even he
knew that when you’re too deep in the hole,
the first order of business is Stop Digging.
When oil was $12 a barrel we thought
we’d never see the end of it. America just
kept right on excavating. Then oil went to
$70 a barrel and the hole got deeper. At
$150 a barrel we put the shovel down and
started to think. That’s when America decided
that never again will we ever allow
ourselves to be suckered into imported petroleum
dependence. That didn’t last long.
When oil fell in a crack at $70 a barrel,
we went right back digging. Dad would
not approve.
If “Drill Baby Drill” is our best solution,
then Baby’s drill had better be shiny
and oiled, because right now the United
States of America imports 60% of the oil
we use. In fact we’ve never imported more.
Add to that the fact our Asian friends, the
ones who loan us money and keep Wal-
Mart stocked, are leading the pack in alternative
energy development.
The dirt is really starting to fly.
While Chevrolet was negotiating a
loan so they could make their delinquent
payments, China was putting up factories
to build electric cars,(2) solar cells, wind
generators…just about everything anyone
needs to be energy independent.
Like Daily Yonder Editor Bill Bishop
says about China; “It helps when you can
just decide something and tell everybody to
get busy!!!”
Some say China’s electric cars are getOCM
- February 2010 4
My name is Lee Pitts and I was
once a cattle feeder. Yes, I was addicted
to cattle feeding. I have seen
firsthand the impact this can have on
families and their net worth so I am
proud to say that I have been clean
now for 20 years.
Since there is no Betty Ford Clinic
for helping cattle feeding addicts I
had to cure my own addiction by developing
a 12 step program like those
used in Alcoholics Anonymous, Sexual
Compulsive Anonymous, Gamblers
Anonymous and over 200 other
such programs. (It may not have been
just the 12 step program that enabled
me to quit cold turkey; a 58 cent fat
market and a balky banker also contributed.)
I offer my 12 step program
in hopes that it may help others become
cattle-feeding-sober.
Step 1: Stand up in a gathering
of fellow cattlemen, in a bar or at a
convention, and admit you are an addict
and your behavior is unmanageable.
Admit that when you see a pen
of green feeders enter an auction ring
and hear the auctioneer’s chant you
are powerless in the face of your addiction
and your hand automatically
goes up.
Step 2: Because no one has yet
developed a patch, drug, or chewing
gum to rein in your cattle feeding addiction
chew on alfalfa stems. You’ve
already paid for them and you might
as well put the hay to a better use than
feeding it to cattle.
Step 3: If you absolutely must go
to an auction take a person of higher
authority with you, such as your wife,
banker or Cattle Feeders Anonymous
(CFA) sponsor to stop you when you
try to bid on a cheap set of preggy
Corriente feeding heifers.
Step 4: Remove the enablers; those
people or things that are enabling you
to feed cattle. These would include
your banker, order buyer and futures
trader. Sell your cattle truck and airplane.
Cancel your membership in the
Texas Cattle Feeders.
Step 5: Sell your calves at auction
and don’t even consider retaining
ownership. Let someone else have all
the fun.
Step 6: Rediscover the other days
in the week besides Thursdays when
the price of fat cattle is usually established.
Quit living solely for that 30
minute period when prices are set by
the Big Three and admit that there is
a higher power in this universe than
Tyson, JBS and Cargill.
Step 7: Remove the temptation to
be a farmer as well as a rancher. It is
a short slippery step from growing
your own hay or grain to building a
set of corrals and having 3,500 head
on feed.
Step 8: Cleanse your mind of the
obsession. Quit reading articles authored
by university professors or economists
that advise that you are leaving
$50 per head on the table by selling
your calves instead of feeding them.
Ask yourself, where are the teacher’s
and economist’s feedlots?
Step 9: Break old habits. Don’t check
the DTN machine first thing when you
get up in the morning and every ten
minutes thereafter until the markets
close. Don’t let the price of corn ruin
your day and rediscover a new life without
margin calls, feed bills, mad cows,
dairy buyouts and e coli outbreaks.
Step 10: Remove defects in your
character. Become a CFA sponsor and
don’t enable anyone to become an addict
by financing them. Help wives and
children who have been hurt by your
fellow cattle feeding addicts by forming
a CFA-anon group in your area.
Step 11: Pay your taxes. Stop buying
trainloads of grain in December just to
avoid paying taxes. Burn the money instead
and save yourself a lot of grief.
Step 12: Replace the risk-taking
behavior and euphoria you feel when
feeding cattle with other activities. You
may find you get the same rush from
less risky activities such as hang gliding,
sword juggling, car racing or bull
riding. LP
It’s The Pitts: Cattle Feeders Anonymous
By Lee Pitts
5 OCM - February 2010
There’s No Lights On In The Barn
Lewis Baumgartner
Not so many years ago,
If you were to take a drive,
Across America’s farmland
And thru the countryside;
If by chance your ride should happen,
As the day was nearly done,
Most every farmstead on the road,
Would have the barn lights on.
The farmer and a kid or two,
Or maybe even more.
Each one busy with a task,
Doin’ up the evenin’ chores.
Milk the cow, feed the chickens
And gather up the eggs.
Throw some hay down from the loft
And water the sow and pigs.
Sometimes my mind will wander back,
And I’ll recall those days, now gone,
Of peaceful winter evenings,
And the lights on in the barn.
The smell of all the cattle,
Mixed with the grain and hay.
To me it was a pleasing smell,
Though, to you, it may not sound that way.
And while filling up the water tank,
I’d watch the cats at play.
A nearly perfect ending,
To another busy day.
Then gazing toward the house,
I could see the kitchen light.
Momma’s fixin’supper,
To feed us all tonight.
And the warm glow from that window,
Made this country boy work hard,
To get in to that apple pie
And that chicken fried in lard.
But the trend today is larger,
And fewer family farms.
Not so many places left now,
With the lights on in the barn.
They tell us that it’s progress,
And nothin’ stays the same.
We must look toward the future,
And not the past from where we came.
And I know, that is true,
But tell me, what’s the harm?
If I feel a twinge of sadness,
Cause There’s No Lights On In The Barn.
Everything is gettin’ big,
And no one seems alarmed,
That the chickens and the hogs now,
Are mostly raised on Factory Farms.
We’ve taken out the fences,
And..the barn.... it’s been torn down.
It takes a lot of room,
To turn 16 rows around.
My favorite memories take me back,
To the way we used to farm.
To a peaceful winter evening,
With the lights on in the barn.
OCM - February 2010 6
STOKES (continued from page 1)
I don’t believe we’re going to see any
legislative relief from these rigged markets
anytime soon. The regulatory agencies
seem to be the only reasonable hope
in the near term. I know that there is lots
of cynicism and skepticism concerning
DOJ and USDA moving against these
big firms and their anticompetitive practices.
Some dismiss the upcoming joint
DOJ/USDA workshops as just the usual
bureaucratic smoke-blowing.
But I believe these folks are sincere
and that something good will come
from this new cooperation between DOJ
and USDA and the five workshops. I
view the formal inquiry DOJ launched
against Monsanto and Dean Foods and
the $900,000 fine against Smithfield for
jumping the gun on its merger with Seaboard
as pretty good evidence that they
are serious.
Trial and appellate court judges seem
to have a habit of legislating from the
bench and encroaching on the established
regulatory authority of GIPSA. In at
least three cases they reversed jury verdicts
that were sound and consistent with
the facts and plain language of the P&S
Act. But I am optimistic that the ongoing
rulemaking process for the Packers and
Stockyards Act of 1921 will reestablish
the original intent of this act which is so
vital for the protection of cattle producers.
I see this as a moment in time in which
the stars are in proper alignment for
bringing competition and fairness back
to the marketplace. If there was ever an
opportunity for market reform, this is it.
Cattle producers at all levels need to rally
around their common interests and agreements,
put aside their differences and act
to fix this broken market system. The
survival of our industry and our national
food security depends on it.FS
OSWALD (continued from page 3)
Graham haven’t won over fellow conservatives
who think “cap and trade”
caps profits, too. But farms could be the
biggest beneficiaries of carbon trading
when they sell the greenhouse gas credits
from their fields, ethanol refining,
biomass pellets, methane capture, or
farm based wind and solar energy.
In these troubled times with the domestic
budget facing cutbacks, farmers
can no longer be sure that low prices will
get the same helpful subsidy consideration
from USDA. That means new energy
products and markets might make
a difference between earning a profit, or
going in the hole.
Retired military officers Marine
Brigadier General Steve Cheney and
Army Major General Paul Eaton both
agree that climate and energy are important
to national security. General Cheney
said that sometimes our focus on current
problems like energy costs, keeps
us from focusing on problems down
the road. Things like our climate-- and
energy independence. General Eaton,
whose three children serve their country
in the military, agreed, saying “What
happens to them depends on climate
change (and US energy policy)”.
A lot of farmers haven’t made the
connection that without an energy bill
and carbon trading, there’s no real fundamental
support for the renewable energy
products we rely on to make our
farming profitable today. They, right
along with General Eaton’s offspring,
are at the mercy of big oil and lobbyists.
Ethanol was struggling against competition
from petroleum and the gasoline
additive MTBE, until MTBE in
ground water convinced EPA to require
it’s removal. That left ETBE (ethanol)
as the only oxygenate available for
blending. Big oil argued to have the
entire oxygenate rule rescinded because
they didn’t want to buy our product. It
was the only fuel additive they couldn’t
manufacture themselves. (6) EPA stuck
by their guns, and blended gasoline remains
a requirement, which is the main
reason most US ethanol refiners are still
in business.
Even if they don’t want to, the petroleum
companies have to provide us with
a market. Let’s face it, not many farmers
own a filling station.
Anytime a farmer says there’s nothing
wrong with CO2 in the atmosphere,
he’s also saying we don’t need biofuels.
It’s simple as that. The longer we oppose
carbon trading, the deeper we burrow
into big oil’s control.
Sometimes digging isn’t all bad. It
gets the crops watered and holds the
livestock in. It even keeps foxhole bound
soldiers out of harms way.
But for farmers, digging for the
wrong reason just makes the hole deeper.
RO
(1) http://www.cleanenergyworks.us/
(2) http://www.businesswire.com/portal/site/home/
permalink/?ndmViewId=news_view&newsId=201
00126006473&newsLang=en
(3) h t t p : / / w w w. g u r u f o c u s . c o m / n e w s .
php?id=83089
(4) http://www.pauwels.com/launch.cfm
(5) http://gas2.org/2009/03/31/chinese-electriccars-
coming-to-costco-wal-mart/
(6) http://www.cato.org/pub_display.php?pub_
id=4609
The opinions of the author are his own and are not intended to
imply the organizations position on this or any other issue. OCM
has membership with diverse viewpoints on all issues. OCM is
committed to one and only one principal; competition.
7 OCM - February 2010
Type of Membership: _____Renewal _____New
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__ Friend Of OCM (Non-Voting Member) ($50) __Donation $_________
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STEVENSON (continued from page 2)
out enforcement, rules are meaningless. As
previously stated transparency provides a head
start in rule enforcement. When the eyes of the
whole market are on each and every transaction,
it makes it easier to enforce the competitive marketplace
requirements.
We don’t have to re-invent the wheel in order
to find an example that has many of these
features. The stock exchanges provide many
examples of how to conduct a competitive market.
There is seldom a debate about whether a
stock price is the “natural” price. Adam Smith’s
“natural” price will occur anytime these features
exist in the marketplace.
Of course there would be many tweaks to
make such an exchange work for cattle. That
remains to be addressed. The fact is that a competitive
market is absolutely necessary for both
consumers and producers. Whatever is needed
to attain it should be done.RS
Organization for Competitive Markets
Tel: (402) 817-4443 • Fax: (360) 237-8784
P.O. Box 6486
Lincoln, NE 68506
ADDRESS SERVICE REQUESTED
February 2010
NON-Profit ORG
U.S. POSTAGE PAID
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PERMIT #1734
68506
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OCM - February 2010 8
See us on the web
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http://www.competitivemarkets.com/images/stories/2010Newsletters/ocmfeb10.pdf

Business Competition (Neg)

“The realities of global competition and the ineffectiveness of old business recruitments strategies demand new strategies for rural economic development. Local communities that adapt a common region vision and that cooperate rather then compete can attract private investments without excessive giveaways. This creates a significant competitive advantage.” ~Bill Kuhn, Fulton County Engineer [The Rural Research Report Spring 2008 Volume 2, Issue 2]

World War II: Wartime Alliance

Despite deep-seated mistrust and hostility between the Soviet Union and the Western democracies, Nazi Germany's invasion of the Soviet Union in June 1941 created an instant alliance between the Soviets and the two greatest powers in what the Soviet leaders had long called the "imperialist camp": Britain and the United States. Three months after the invasion, the United States extended assistance to the Soviet Union through its Lend-Lease Act of March 1941. Before September 1941, trade between the United States and the Soviet Union had been conducted primarily through the Soviet Buying Commission in the United States.
Lend-Lease was the most visible sign of wartime cooperation between the United States and the Soviet Union. About $11 billion in war material was sent to the Soviet Union under that program. Additional assistance came from U.S. Russian War Relief (a private, nonprofit organization) and the Red Cross. About seventy percent of the aid reached the Soviet Union via the Persian Gulf through Iran; the remainder went across the Pacific to Vladivostok and across the North Atlantic to Murmansk. Lend- Lease to the Soviet Union officially ended in September 1945. Joseph Stalin never revealed to his own people the full contributions of Lend-Lease to their country's survival, but he referred to the program at the 1945 Yalta Conference saying, "Lend-Lease is one of Franklin Roosevelt's most remarkable and vital achievements in the formation of the anti-Hitler alliance."
Lend-Lease material was welcomed by the Soviet Union, and President Roosevelt attached the highest priority to using it to keep the Soviet Union in the war against Germany. Nevertheless, the program did not prevent friction from developing between the Soviet Union and the other members of the anti-Hitler alliance. The Soviet Union was annoyed at what seemed to it to be a long delay by the allies in opening a "second front" of the Allied offensive against Germany. As the war in the east turned in favor of the Soviet Union, and despite the successful Allied landings in Normandy in 1944, the earlier friction intensified over irreconcilable differences about postwar aims within the anti-Axis coalition. Lend-Lease helped the Soviet Union push the Germans out of its territory and Eastern Europe, thus accelerating the end of the war. With Stalin's takeover of Eastern Europe, the wartime alliance ended, and the Cold War began.

http://www.ibiblio.org/expo/soviet.exhibit/wartime.html

ENRON

Lessons from Enron: just say 'sorry'
A new crop of executives under fire are learning that cooperation may be their best strategy.

By Katie Benner, Fortune magazine

October 25 2006: 11:22 AM EDT


(Fortune Magazine) -- Sometimes it's good to be guilty. Just ask Andy Fastow: he pleaded guilty and worked to nail the other smart guys at Enron, and got a reduced six-year prison sentence. By contrast, Jeffrey Skilling, who has long proclaimed his innocence, seems likely to serve 24 years and four months behind bars.

So when David Kreinberg, the ex-chief financial officer at Comverse Technology (Charts), became the first executive swept up in the options backdating scandal to plead guilty to charges of conspiracy and securities fraud yesterday, it's not hard to imagine that Kreinberg took a good long look at the Enron sentencing before he called up his lawyer and started pointing fingers.

"The new buzzword for dealing with regulators is cooperation, cooperation, cooperation," says Scott Meyers, head of litigation at Levenfeld Pearlstein in Chicago. "The first person on the bus usually gets the best seat. If you're representing someone who is the first person to cooperate with authorities, you'll do better at the end of the day than those who have chosen to fight."

Some believe that a new era in white-collar crime has dawned, when it's better to cop a plea rather than fight for your innocence and reputation. It follows naturally from the corporate excess of the 1990s and a post-Sarbanes-Oxley-Spitzer world in which executives can be given multi-decade sentences behind bars. In this environment, extreme cooperation with authorities seems like a better deal, even though it can often mean sacrificing Constitutional rights and attorney-client privilege. As odd as it may seem, public corporate confessions seem to resonate in the same way as those from fallen politicians or celebrity rehab refugees.

In the backdating scandal, companies including UnitedHealth, Broadcom and McAfee, have already begun cooperating with authorities and paying penance via fines, financial restatements and the ouster of higher ups. Of course, the strategy may not work for everyone. As Meyers says, "People like to put a face on crime. This is what will happen to [Ex-Comverse chief executive] Jacob Alexander." So perhaps the bottom line is: it's important to be among the first to say "I'm sorry." When you're the last man standing, the government doesn't need your cooperation, and you become the target.

http://money.cnn.com/2006/10/25/magazines/fortune/pleabargains/index.htm

Posting Stuff

I need to fix one of my mistakes.

I don't think you'll be able to post stuff. I'm thinking that it would be best to email it to me (landonframe@gmail.com) and I'll have to post it.

~Landon

Energy Security: Cause for Cooperation or Competition?

Published March 13, 2006
Author:
Richard G. Lugar
In this speech Senator Lugar stated that "energy is the albatross of U.S. national security"; he discussed the relationships between the United States and other oil producing countries and the ramifications of U.S. dependence, and offered ideas for confronting these challenges.

Also go to http://www.brookings.edu/comm/events/20060313.pdf for more info.

Stimulating Global Economic Revival U.S. – India Cooperation in Economics, Trade, and Agriculture

Published November 24, 2009

This fact sheet on economic trade and agriculture is an outcome of the November, 2009 visit between President Obama and Indian Prime Minister Singh.
The United States, the world’s largest economy, and India, one of the world’s fastest growing economies, are committed to working together to stimulate a global economic revival, to strengthen global economic and financial institutions, to work toward a balanced and ambitious outcome in the Doha Round negotiations, and to promote global food security. The following activities under the Economics, Trade, and Agriculture Pillar of the United States – India Strategic Dialogue are designed to make these shared goals a reality:

• The United States – India CEO Forum brought together leaders of the U.S. and Indian business communities — approximately ten from each side across various industry sectors — with senior government officials on November 23. Forum members conveyed their interest in working on recommendations on how the public and private sectors can work together to strengthen economic and commercial ties between the two countries, stimulate innovation, spur job creation, and promote sustainable inclusive growth.

• U.S. Trade Representative Ron Kirk and Indian Minister of Industry and Commerce Anand Sharma opened discussions on a “United States – India Framework for Cooperation on Trade and Investment” during the Trade Policy Forum on October 26 in New Delhi. Work under this Framework would encourage the expansion of bilateral trade and investment opportunities, including for small and medium sized businesses. To support these efforts, the Department of Commerce has scheduled two trade missions focused on small and medium-sized enterprises in early 2010, one focused on solar power technologies and one on healthcare and medical equipment. The two leaders also agreed to re-launch the Private Sector Advisory Group, a group of U.S. and Indian international trade experts who will provide recommendations and insights to the Trade Policy Forum.

• U.S. Secretary of Agriculture Vilsack and Indian Deputy Chairman of the Planning Commission Montek Singh Ahluwalia met to discuss cooperation on agriculture and food security. They renewed their commitment to work together bilaterally, and in cooperation with other countries, using the principles and objectives agreed at the L’Aquila G-8 Summit. They also agreed to launch a new Agriculture Dialogue and agreed on a Memorandum of Understanding on Agricultural Cooperation and Food Security that will set a pathway to robust cooperation between the governments in crop forecasting, management and market information; regional and global food security through the L’Aquila Food Security Initiative; science, technology, and education; nutrition; and expanding private sector investment in agriculture. The United States and India expect cooperation under the agreement to expand access to knowledge to improve productivity, safety, and nutritional quality of food crops; to strengthen market institutions and foster growth of agribusiness investment and improve food security and access to adequate quantities and quality of food, particularly for women and young children.

• In August, the United States and India launched negotiations on a Bilateral Investment Treaty. This treaty would ensure protection for investors and would facilitate robust investment flows both from the United States to India and from India to the United States. Both sides committed to the active continuation of negotiations.

• The U.S. Department of Commerce International Trade Administration “Invest in America” program and “Invest India,” a Joint Venture of the Ministry of Commerce and Industry Department of Industrial Policy and Promotion, signed a Memorandum of Intent to facilitate foreign direct investment in their respective countries by investors of the other country.

• U.S. Secretary of the Treasury Geithner and Finance Minister Pranab Mukherjee will establish a new U.S.-India Economic and Financial Partnership to strengthen bilateral engagement on macroeconomic, financial sector, development, and infrastructure related issues. Treasury Secretary Geithner will visit India in early 2010 for the launch of this new Partnership with Finance Minister Mukherjee and other economic and regulatory counterparts. The financial sector working team under this Partnership, which brings together financial regulators from the U.S. and India to discuss the rapidly-changing regulatory landscape and share best practices, will hold its next meeting in early December 2009 in New Delhi.

• The United States Patent and Trademark Office of the Department of Commerce and Indian Ministry of Commerce and Industry signed a Memorandum of Understanding renewing bilateral cooperation in the field of intellectual property. The memorandum will focus on human resource development, capacity building and public awareness programs in intellectual property protection and enforcement. The parties also signed an Action Plan to implement the objectives of the memorandum. In addition, the U.S. Patent and Trademark Office and Indian Council of Scientific and Technical Research signed a Traditional Knowledge Digital Library Access Agreement. The agreement will help to prevent the improper patenting of Indian traditional knowledge by providing a new search tool to USPTO Patent Examiners.

Essential Documents are vital primary sources underpinning the foreign policy debate.

(http://www.cfr.org/publication/20856/fact_sheet.html)

Commensalism

Commensalism (kumen'suliz"um) [key], relationship between members of two different species of organisms in which one individual is usually only slightly benefited, while the other member is not affected at all by the relationship. For example, some flatworms live attached to the gills of the horseshoe crab, obtaining bits of food from the crab's meals; the crab is apparently unaffected. In many cases commensalism cannot be distinguished from parasitism. (http://www.infoplease.com/ce6/sci/A0813031.html)

Competition in Biology

competition, in biology, relationship between members of the same or different species in which individuals are adversely affected by those having the same living requirements, such as food or space. Intraspecific competition, i.e., competition among members of the same species, is illustrated by some species of birds and mammals, the males of which set up territories from which all other males of the same species are excluded. In interspecific competition members of different species compete for the same ecologically limiting factors, such as a food source. Not all relationships among organisms are competitive; for example, the commensal relationship between members of different species is noncompetitive (see commensalism).

Does competition improve health care quality?

January 30, 2009 in Academic Articles, Health Insurance, Quality, Supply of Medical Services

If economists decided to re-write the Ten Commandments, “Thou shalt love Competition” may make the list. However, does competition always improve quality? Even in the case of health care?
A paper by Scanlon et al. (2008) “…found no evidence of a strong and consistent relationship between HMO competition (measured either by the HHI or the number of HMOs) and plans’ scores on the CAHPS and HEDIS measures of health plan performance.” The authors did find, however, that increased competition can lead to lower health premiums.
Because price is easily observable and quality is not, it seems sensible that increased competition will push down prices, but may not improve quality. Further, more competition means more fragmented medical care, which can increase the cost to provide quality health care services.

Health Care Competition

http://reason.com/archives/2009/07/16/health-care-competition

If the policy elite really wanted to cut costs, they would deregulate medicine.

John Stossel July 16, 2009
The statist establishment would love a single-payer health-care system like Canada's if it were politically achievable. Barack Obama said that if we were starting from scratch, single payer is what he'd back. But, thankfully, Americans are still libertarian enough to cringe at turning the medical system entirely over to government.
So with single payer out of reach, the fans of government control have grabbed for second best: the "public option." This would be government-run health insurance that would "compete" with private insurance. (It wouldn't compete fairly because it could do something no private firm can do: milk the captive taxpayers.) But the public option is proving hard to get. Even some Democrats are nervous about it.
What's a statist to do?
Leading Democrats in the Senate say the answer might be nonprofit health cooperatives. Sen. Charles Schumer wants some method "to keep the companies honest," and if the "public competitor" can "do those things in a co-op form, I think we're open to it."
One sign that this may be the way things are heading is that the New York Times, the mouthpiece of the statist establishment, ran a front-page article last week that begins with glowing praise for a co-op where doctors have lots of time to spend with patients because of its "collaborative model of primary care." Among the media it's an article of faith that the "collaborative model" is more consumer friendly than a profit-seeking business.
The Times connects the dots in case anyone missed the point. "On Capitol Hill, those innovations have made Group Health a prototype for a political compromise that could unclog health care negotiations in the Senate and lead to a bipartisan deal. ... [T]he Senate Finance Committee seems poised to propose private-sector insurance cooperatives ... as its primary mechanism for stoking competition and slowing the growth of medical costs."
Give me a break. Since when is government needed to stoke competition? Competition is what happens when government lets people alone. I defy anyone to give me an example of lack of competition that doesn't have its roots in government intervention.
Since co-ops are nonprofit organizations owned by their members, the Times' story subtly implies that the profit motive is responsible for the absence of competition and higher medical costs. But that's ridiculous. In a free market without government barriers to entry, it's the quest for profit that produces competition and lower costs.
If health cooperatives were really more efficient and innovative, wouldn't they be copied all over the country? That's how the market works. When someone comes up with an innovative way of doing business, it is quickly imitated and improved on. But buried late in the Times story is the revealing fact that the co-op is "a rare survivor among the hundreds of rural health insurance cooperatives."
Hello? Don't the Times editors see the disconnect? If co-ops worked well, today there would be thousands of them. Why should taxpayers fund a method of delivering health care whose success is "rare"?
The newspaper story made another point that is a favorite of the policy elite: Preventive care will save tons of money. If that's true, there is nothing (but government) to keep people from implementing that principle. But is it true?
This seems to be one of those things we know that isn't so.
I take Lipitor. The drug may extend my life. But this doesn't lower my health-care costs. Years of pill-taking increases costs. If the pill works, I may live long enough to get an even more expensive disease. And maybe I, like millions of others, take Lipitor unnecessarily because we would never have had heart attacks. We then spend more, not less, on health care.
Health-care expert John Goodman of the National Center for Policy Analysis says there are "literally hundreds of studies from over the past 40 years that show preventive medical services usually increase medical spending ... Contrary to popular belief, checkups for children and adults do not save the health care system money."
If the policy elite really wanted cost-cutting competition, they would deregulate medicine. No one has ever found a better way to stimulate competition than freedom.
John Stossel is co-anchor of ABC News' 20/20 and the author of Myth, Lies, and Downright Stupidity.
COPYRIGHT 2009 BY JFS PRODUCTIONS, INC.DISTRIBUTED BY CREATORS.COM
Copyright 2010, Reason Magazine

Health Care Needs a Dose of Competition

by Michael F. Cannon
Michael F. Cannon is director of health policy studies at the Cato Institute, and co-author of Healthy Competition: What's Holding Back Health Care and How to Free It from which this article is adapted.

Added to cato.org on September 27, 2005
This article appeared on cato.org on September 27, 2005.
Hurricane Katrina has brought to the fore the strengths and weaknesses of America's health care delivery system. Millions of individual Americans, acting on their own initiative, rushed to meet the dire need Katrina created. Those efforts include providers rushing to assist in person, as well as charitable contributions made by those who never left home. In contrast, the response of government has been alarmingly slow and has even thwarted private efforts.
Why the discrepancy? Entrepreneurs and private charities often respond much faster than government because they are more agile and flexible. Just as important, they avoid wasting valuable resources, allowing help to go where it's needed the most.
These considerable advantages emerge from the fact that government must follow cumbersome rules, and that individuals are more careful with their own resources than with other people's. There is a lesson here for America's daily struggle with how to make health care more accessible.

Michael F. Cannon is director of health policy studies at the Cato Institute, and co-author of Healthy Competition: What's Holding Back Health Care and How to Free It from which this article is adapted.
More by Michael F. Cannon
In many sectors of the economy, market competition consistently improves quality while reducing costs. Health care is an exception, but not because competition cannot work. In fact, the recent rise in cash-paying patients traveling abroad for medical care shows that market competition makes even urgent, high-cost acute care more affordable.
Rather, health care is an exception because market competition is not allowed to work. Market competition requires three key elements: (1) a large pool of actual and potential producers with new ideas; (2) consumers who are free to choose different products; and (3) consumers who weigh the costs and benefits of those products. At every turn, government tax, spending, and regulatory policies thwart these necessary conditions of a free market.
To mention just one example, heavy government subsidies (through programs such as Medicare and Medicaid) and tax penalties (for workers who do not let an employer purchase their health care) discourage patients from weighing costs against benefits. As a result, Americans pay for more of their medical care through third parties (86 percent) than patients in 17 other advanced countries, including Canada.
Time and again, free markets have proven an effective framework for making products of ever-increasing quality available to an ever-increasing number of consumers. To make high-quality care available to more Americans, we need reform that will allow markets to work in health care. That should include:
More flexible health savings accounts.Though promising, this new health insurance option is too restrictive. Congress should create large HSAs that are more flexible and give workers ownership of all their health care dollars and decisions.
Injecting choice, competition, and ownership into Medicare.This federal program for the elderly engenders enormous waste and will soon impose a crushing tax burden unless we act soon. Congress should give seniors greater choice of health plans, and allow workers to save their Medicare taxes in personal accounts for their health care needs in retirement.
Reforming Medicaid as Congress reformed welfare.This federal-state program for the poor creates the same harmful incentives as the welfare system Congress reformed in 1996. Those reforms should be applied to Medicaid.
Health insurance deregulation.Costly state regulations make health insurance too expensive for many, and each state prohibits the purchase of coverage licensed in other states. Congress should tear down those barriers.
Provider deregulation.Regulation of medical professionals (e.g., licensing, scope-of-practice, and telemedicine laws) and facilities (e.g., certificate-of-need laws) restrict the availability of medical care, particularly for the poor. Those laws should be relaxed.
Competitive certification of medical technologies.Private markets already certify the effectiveness of secondary uses of drugs, and faster than the FDA does. That same process should be put to work for initial uses of drugs and medical devices.
Letting patients and providers negotiate malpractice protections.Patients can choose different levels of malpractice protection by going abroad for care. They should be able to have the same choice at home.
Though not comprehensive, these reforms would go a long way toward improving the quality and convenience of medical services, while making care more accessible.
People are suffering in the wake of Katrina. But others suffer every day because our health care system is not what it should be. The gains are there to be had. We must build the will.

Center for American Progress | Health Care Competition

Insurance Market Domination Leads to Fewer Choices
Ben Furnas and Rebecca Buckwalter-Poza June 2009
Today many Americans have few choices when it
comes to health insurance. This is because many
insurance markets are dominated by only a handful
of firms, even though there are over 1,000 private
health insurance carriers in the United States. This
concentration limits employers’ and families’ health
insurance options as well as the care they receive.
In many states small insurers compete against one
another in the individual market to insure only
low-risk, healthy individuals. They refuse to insure
Americans with pre-existing conditions such as
high blood pressure, asthma, cancer, or diabetes
and those who have ever taken certain prescription
drugs—and they create barriers to needed care for
those who are insured.
The table shows that in many states insurance
markets are dominated by only one or two insurance
carriers. In at least 21 states, one carrier
controls more than half the market. More than half
of the market is controlled by two carriers in at
least 39 states. In 2007, a survey conducted by the
American Medical Association found that in more
than 95 percent of insurance markets, a single
commercial carrier controlled at least 30 percent of
the insurance market.1
The result of this market concentration is that health
insurance interests come before Americans’ health
care needs. Where markets are dominated by only
a few firms, health insurers revenues are growing
faster than health inflation as insurers maximize
rates they charge employers and families and create
barriers to care.2 Employers are then unable
to afford meaningful health insurance options for
their employees or, in the case of small businesses,
are unable to offer their employees insurance at all,
while most Americans seeking health insurance in
the individual market never purchase coverage.
Real health care reform, which includes the creation
of a new public health insurance plan, will
encourage the type of competition that benefits patients, employers, and health care providers. As a new
competitor in consolidated insurance markets, the public plan will force private insurers to compete on
price and value and require them to increase accountability and efficiency. The ultimate result of vigorous
competition will be to give American families more and better choices.
Endnotes
1 American Medical Association, “2007 Update: Competition in Health Insurance, A Comprehensive Study of US Markets: 2007 Update,” available at
http://www.ama-assn.org/ama1/pub/upload/mm/368/compstudy_52006.pdf.
2 Peter Harbage and Karen Davenport, “Competitive Health Care: A Public Health Insurance Plan that Delivers Market Discipline” (Washington, D.C.:
Center for American Progress Action Fund, March 2009), available at http://www.americanprogressaction.org/issues/2009/03/pdf/competitive_health.pdf
Most American insurance markets dominated by one or two large companies
State
Health insurer with
largest market share
Market
share %
Health Insurer with
second largest
market share
Market
share %
Combined
market share
% of top two
insurers
Alabama Blue Cross Blue Shield AL 83% Health Choice 5% 88%
Alaska Premera Blue Cross 60% Aetna Inc. 35% 95%
Arizona Blue Cross Blue Shield AZ 43% UnitedHealth Group Inc. 22% 65%
Arkansas Blue Cross Blue Shield AR 75% UnitedHealth Group Inc. 6% 81%
California Kaiser Permanente 24% WellPoint Inc. (Blue Cross) 20% 44%
Colorado WellPoint Inc. (BCBS) 29% UnitedHealth Group Inc. 24% 53%
Connecticut WellPoint Inc. (BCBS) 55% Health Net Inc. 11% 66%
Delaware CareFirst Blue Cross Blue Shield 42% Coventry Health Care Inc. 23% 65%
District of Columbia Data Unavailable
Florida Blue Cross Blue Shield FL 30% Aetna Inc. 15% 45%
Georgia WellPoint Inc. (BCBS) 61% UnitedHealth Group Inc. 8% 69%
Hawaii Blue Cross Blue Shield HI 78% Kaiser Permanente 20% 98%
Idaho Blue Cross of ID 46% Regence BS of Idaho 29% 75%
Illinois HCSC (Blue Cross Blue Shield) 47% WellPoint Inc. (BCBS) 22% 69%
Indiana WellPoint Inc. (BCBS) 60% M*Plan (HealthCare Group) 15% 75%
Iowa Wellmark BC and BS 71% UnitedHealth Group Inc. 9% 80%
Kansas WellPoint Inc. (BCBS) 59% Health Partners 10% 69%
Kentucky Data Unavailable
Louisiana Blue Cross Blue Shield LA 61% UnitedHealth Group Inc. 13% 74%
Maine WellPoint Inc. (BCBS) 78% Aetna Inc. 10% 88%
Maryland CareFirst Blue Cross Blue Shield 52% UnitedHealth Group Inc. 19% 71%
Massachusetts Blue Cross Blue Shield MA 50% Tufts Health Plan 17% 67%
Michigan Blue Cross Blue Shield MI 65% Henry Ford Health System 8% 73%
Minnesota Blue Cross Blue Shield MN 50% Medica 26% 76%
Mississippi Data Unavailable
Missouri WellPoint Inc. (BCBS) 68% UnitedHealth Group Inc. 11% 79%
Montana Blue Cross Blue Shield MT 75% New West Health Services 10% 85%
Nebraska Blue Cross Blue Shield NE 44% UnitedHealth Group Inc. 25% 69%
Nevada Sierra Health 29% WellPoint Inc. (BCBS) 28% 57%
New Hampshire WellPoint Inc. (BCBS) 51% CIGNA Corp. 24% 75%
New Jersey Horizon Blue Cross Blue Shield 34% Aetna Inc. 25% 59%
New Mexico HCSC (Blue Cross Blue Shield) 35% Presbyterian Hlth 30% 65%
New York GHI 26% WellPoint Inc. (Empire BCBS) 21% 47%
North Carolina Blue Cross Blue Shield NC 53% UnitedHealth Group Inc. 20% 73%
North Dakota Data Unavailable
Ohio WellPoint Inc. (BCBS) 41% Medical Mutual of Ohio 17% 58%
Oklahoma BCBS OK 45% CommunityCare 26% 71%
Oregon Providence Health & Services 25% Regence Blue Cross Blue Shield 23% 48%
Pennsylvania Data Unavailable
Rhode Island Blue Cross Blue Shield RI 79% UnitedHealth Group Inc. 16% 95%
South Carolina Blue Cross Blue Shield SC 66% CIGNA Corp. 9% 75%
South Dakota Data Unavailable
Tennessee Blue Cross Blue Shield TN 50% Total Choice 12% 62%
Texas HCSC (Blue Cross Blue Shield ) 39% Aetna Inc. 20% 59%
Utah Regence Blue Cross Blue Shield 47% Intermountain Healthcare 21% 68%
Vermont Blue Cross Blue Shield VT 77% CIGNA Corp. 13% 90%
Virginia WellPoint Inc. (BCBS) 50% Aetna Inc. 11% 61%
Washington Premera Blue Cross 38% Regence Blue Shield 23% 61%
West Virginia Data Unavailable
Wisconsin Data Unavailable
Wyoming Blue Cross Blue Shield WY 70% UnitedHealth Group Inc. 15% 85%
Source: Health Care for America Now, available at http://hcfan.3cdn.net/dadd15782e627e5b75_g9m6isltl.pdf.

Excellence

The quality of being excellent; state of possessing good qualities in an eminent degree; exalted merit; superiority in virtue.
An excellent or valuable quality; that by which any one excels or is eminent; a virtue.
A title of honor or respect; -- more common in the form excellency. (All the above from Dictionary.com UnabridgedBased on the Random House Dictionary, © Random House, Inc. 2010)

“We need to internalize this idea of excellence. Not many folks spend a lot of time trying to be excellent.” ~Barack Obama

“All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence.” ~Martin Luther King, Jr.

“Perfection is not attainable, but if we chase perfection we can catch excellence.” ~Vince Lombardi

“The quality of a person's life is in direct proportion to their commitment to excellence, regardless of their chosen field of endeavor.” ~Vince Lombardi

“The will to win, the desire to succeed, the urge to reach your full potential... these are the keys that will unlock the door to personal excellence.” ~Confucius

“We are what we repeatedly do. Excellence, then, is not an act, but a habit.” ~Aristotle

"Excellence is an art won by training and habituation. We do not act rightly because we have virtue or excellence, but we rather have those because we have acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit.” ~Aristotle

“Moral excellence comes about as a result of habit. We become just by doing just acts, temperate by doing temperate acts, brave by doing brave acts.” ~Aristotle

“Excellence, then, is a state concerned with choice, lying in a mean, relative to us, this being determined by reason and in the way in which the man of practical wisdom would determine it. ~Aristotle

“Perfect friendship is the friendship of men who are good, and alike in excellence; for these wish well alike to each other qua good, and they are good in themselves.” ~Aristotle

Contractarianism

First published Sun Jun 18, 2000; substantive revision Wed Apr 4, 2007

"Contractarianism" names both a political theory of the legitimacy of political authority and a moral theory about the origin or legitimate content of moral norms. The political theory of authority claims that legitimate authority of government must derive from the consent of the governed, where the form and content of this consent derives from the idea of contract or mutual agreement. The moral theory of contractarianism claims that moral norms derive their normative force from the idea of contract or mutual agreement. Contractarians are thus skeptical of the possibility of grounding morality or political authority in either divine will or some perfectionist ideal of the nature of humanity. Social contract theorists from the history of political thought include Hobbes, Locke, Kant, and Rousseau. The most important contemporary political social contract theorist is John Rawls, who effectively resurrected social contract theory in the second half of the 20th century, along with David Gauthier, who is primarily a moral contractarian. There is no necessity for a contractarian about political theory to be a contractarian about moral theory, although most contemporary contractarians are both. It has been more recently recognized that there are two distinct strains of social contract thought, which now typically go by the names "contractarianism"and "contractualism."
Contractarianism, which stems from the Hobbesian line of social contract thought, holds that persons are primarily self-interested, and that a rational assessment of the best strategy for attaining the maximization of their self-interest will lead them to act morally (where the moral norms are determined by the maximization of joint interest) and to consent to governmental authority. Contractarianism argues that we each are motivated to accept morality, as Jan Narveson puts it, "first because we are vulnerable to the depredations of others, and second because we can all benefit from cooperation with others" (1988, 148). Contractualism, which stems from the Kantian line of social contract thought, holds that rationality requires that we respect persons, which in turn requires that moral principles be such that they can be justified to each person. Thus, individuals are not taken to be motivated by self-interest but rather by a commitment to publicly justify the standards of morality to which each will be held. Where Gauthier, Narveson, or economist James Buchanan are the paradigm Hobbesian contractarians, Rawls or Thomas Scanlon would be the paradigm Kantian contractualists. The rest of this entry will specifically pertain to the contractarian strain wherever the two diverge.
1. Fundamental Elements of Contractarianism
2. The Metaphor of the Social Contract
3. Morals by Agreement — David Gauthier's Contractarianism
4. Critiques of Contractarianism
5. Subversive Contractarianism
6. Disability, Reciprocity, and Trust
Bibliography
Other Internet Resources
Related Entries
1. Fundamental Elements of Contractarianism
The social contract has two fundamental elements: a characterization of the initial situation, called variously the "state of nature" by the modern political philosophers, the "original position" by Rawls, or the "initial bargaining position" by Gauthier, and a characterization of the parties to the contract, particularly in terms of their rationality and motivation to come to agreement. The initial situation posits what in bargaining theory is called the "no agreement position," the situation to which the individuals return in case of failure to make an agreement or contract. This situation may be more or less hostile, and more or less social, depending on what the theorist sees as human nature in the absence of rules of justice. But crucial to all contractarian theories, there is some scarcity or motivation for competition in the initial situation and there is some potential for gains from social interaction and cooperation.
In contemporary normative contractarian theories, that is, theories that attempt to ground the legitimacy of government or theories that claim to derive a moral ought, the initial position represents the starting point for a fair, impartial agreement. While contractualists justify the requirement of a fair, impartial agreement by reasons external to the contract itself, contractarians hold that the success of the contract in securing cooperative interaction itself requires that the starting point and procedures be fair and impartial.
Some points of controversy among contractarians concern the role of the initial situation in the theory: is it to be considered an actual historical situation, a possible historical moment, or is the contract situation completely hypothetical? Hume (1987/1777, 470–1) raised the decisive objection to any normative moral or political theory based on a historical contract: the consent of one's ancestors do not bind oneself. But Ronald Dworkin has raised similar concerns about a hypothetical contract: a hypothetical agreement, he objects, is no agreement at all. Hypothetical contract contractarians such as Gauthier counter that the point of the contract device is not to directly bind the contractors, but rather to provide a kind of thought experiment by which to discover the requirements of practical rationality. That is, they argue that if one is rational, and among rational others in circumstances in which agreement is both possible and beneficial, then rationality requires that one abide by the terms of the contract. While mainstream contractarian theories are hypothetical contract theories, an interesting and powerfully subversive use of contractarianism (Mills,1997; Pateman, 1989 — see section on Subversion of Contractarianism below) reads the contract situation as historical agreements to erect and maintain white supremacy and patriarchy or male dominance. These latter contractarian theories are not justifications of the status quo, of course, but rather explanations and condemnations, and therefore do not face Hume's objection. Other questions that divide contemporary contractarians include: What are the ideal conditions and who are the ideal contractors that will make obligatory the outcomes of the contract for actual persons? What is the content of the hypothetical agreement?
The second element of a contractarian theory is the rationality of the contractors. First, contractarian (as opposed to contractualist) theories usually take persons to be self-interested in order to justify rules of morality or justice. This is because persons are assumed to have given preferences and interests, that do not necessarily include the well being of others, which is taken to be a moral preference and as such not prior to morality. Such preferences are called (by Gauthier, following the economist Wicksteed) "non-tuistic" preferences. Secondly, persons are presumed to want the benefits of social interaction if they can be had without sacrifice of individual self-interest. (See Feminist Perspectives on the Self (Section 1. Critique) for a critique of this conception of the rational person.) These two aspects of the contractarian individual in part imply what Rawls called the "circumstances of justice": the conditions under which rules for justice could be both possible and necessary. Justice, and so a social contract, is only possible where there is some possibility of benefit to each individual from cooperation. Social contract theories take individuals to be the best judges of their interests and the means to satisfy their desires. For this reason, there is a close connection between liberalism and contractarianism. However, that is not to say that all contractarian thought is liberal. Hobbes, for example, argued in favor of what Jean Hampton has called the "alienation contract," that is, a contract on the part of a people to alienate their rights to adjudicate their own disputes and self-defense to a sovereign, on the grounds that that was the only way to keep the peace given the nature of the alternative, which he famously characterized as life that would be "solitary, poore, nasty, brutish, and short." Thus, given a bad enough initial situation, contractarianism may lead to the legitimation of totalitarianism. Another point of criticism that arises from the characterization of the parties to the contract is that they must be able to contribute to the social product of interaction, or at least to threaten to destabilize it. This is because each individual has to be able to benefit from the inclusion of all those included. But this threatens to leave many, such as the severely disabled, outside the realm of justice, an implication that some find completely unacceptable (Kittay, 1999).
Social contract theories also require some rules to guide the formation of agreement. Since they are prior to the contract, there must be some source of prior moral norms, whether natural, rational, or conventional. The first rule that is normally prescribed is that there must be no force or fraud in the making of the agreement. No one is to be "coerced" into agreement by the threat of physical violence. The reasoning for this is quite straightforwardly prudential: if one is allowed to use violence, then there is no real difference between the "contract" arrived at and the state of nature for the threatened party, and hence no security in the agreement. However, there is a fine line between being coerced by the threat of violence to giving up one's rights and being convinced by the threat of penury to make an unfavorable agreement. For this reason contractarians like Gauthier are able to argue for a fair and impartial starting point for bargaining that will lead to secure and stable agreements. The second rule of contract is that each individual who is a legitimate party to the contract must agree to the rules of justice, which is the outcome of the contract.
2. The Metaphor of Contract
The metaphor of the social contract requires some interpretation in order to apply it to the situation of morality or politics. The interpretation can be specified by determining answers to three questions. First, what is the agreement on? Possible answers include the principles of justice (Rousseau, Rawls), the design of the basic social institutions (Rawls), the commitment to give up to a sovereign government (some or all of) one's rights (Hobbes, Locke), the adoption of a disposition to be (conventionally) moral (Gauthier, Hampton). The second question is how the agreement is to be thought of: as a hypothetical agreement? An actual historical agreement? An implicit historical situation? The third question is whether the contract device is to be used as justification or explanation. As discussed above, normative contractarianism uses the contract device primarily as justification, but it may be that Hobbes and Locke thought that there was an explanatory element to the contract device. As will be discussed below (Subversive Contractarianism), an important contemporary contractarianism uses an implicit contract to explain the origin of oppression.
3. Morals by Agreement — David Gauthier's Contractarianism
A brief sketch of an influential contractarian theory, David Gauthier's, is in order. Gauthier's project in Morals By Agreement is to employ a contractarian approach to grounding morality in rationality in order to defeat the moral skeptic. Gauthier assumes that humans can have no natural harmony of interests, and that there is much for each individual to be gained through cooperation. According to Gauthier, moral constraint on the pursuit of individual self-interest is required because cooperative activities almost inevitably involve a prisoner's dilemma: a situation in which the best individual outcomes can be had by those who cheat on the agreement while the others keep their part of the bargain. This leads to the socially and individually sub-optimal outcome wherein each can expect to be cheated by the other. But by disposing themselves to act according to the requirements of morality whenever others are also so disposed, they can gain each others' trust and cooperate successfully.
The contractarian element of the theory comes in the derivation of the moral norms. According to Gauthier, the compliance problem — the problem of justifying rational compliance with the norms that have been accepted — must always drive the justification of the initial situation and the conduct of the contracting situation. Gauthier likens the contract situation to a bargain, in which each party is trying to negotiate the moral rules that will allow them to realize optimal utility, and then he argues in favor of a bargaining solution that he calls "minimax relative concession." The idea of minimax relative concession is that each bargainer will be most concerned with the concessions that she makes from her ideal outcome relative to the concessions that others make. If she sees her concessions as reasonable relative to the others, considering that she wants to ensure as much for herself as she can while securing agreement (and thereby avoiding the zero-point: no share of the cooperative surplus) and subsequent compliance from the others, then she will agree to it. What would then be the reasonable outcome? Gauthier argues that it is the outcome that minimizes the maximum relative concessions of each party to the bargain.
Equally important to the solution as the procedure is the starting point from which the parties begin. For Gauthier there is no veil of ignorance — each party to the contract is fully informed of their personal attributes and holdings. But Gauthier argues that the initial position must have been arrived at non-coercively if compliance to the agreement is to be secured. He thus adopts what he calls the "Lockean proviso" (modeled after Locke's description of the initial situation of his social contract): that one cannot have bettered himself by worsening others. In sum, the moral norms that rational contractors will adopt (and comply with), according to Gauthier, are those norms that would be reached by the contractors beginning from a position each has attained through her own actions which have not worsened anyone else, and adopting as their principle for agreement the rule of minimax relative concession.
Gauthier concludes that contractarianism produces liberal individuals, who seem well suited to join the kind of society that Rawls envisioned. Jan Narveson, on the other hand, sees the Hobbesian contractarian argument leading toward the sparse government of libertarianism. The controversy here turns on the primary motivation for individuals to make agreements and cooperate. As we said before, there are two such motivations for the Hobbesian contractarian: fear of the depredations of others and benefits from coooperation with others. Libertarianism results when the first of these is primary, whereas when the second is primary, the kind of recriprocity and supportive government that will be discussed in the final section becomes possible.
4. Critiques of Normative Contractarianism
Many critiques have been leveled against particular contractarian theories and against contractarianism as a framework for normative thought about justice or morality. (See the entry on contemporary approaches to the social contract.) Jean Hampton criticized Hobbes in her book Hobbes and the Social Contract Tradition, in a way that has direct relevance to contemporary contractarianism. Hampton argues that the characterization of individuals in the state of nature leads to a dilemma. Hobbes' state of nature as a potential war of all against all can be generated either as a result of passions (greed and fear, in particular) or rationality (prisoner's dilemma reasoning, in which the rational players each choose to renege on agreements made with each other). But if the passions account is correct, then Hampton argues, the contractors will still be motivated by these passions after the social contract is drawn up, and so will fail to comply with it. And if the rationality account is correct, then rational actors will not comply with the social contract any more than they will cooperate with each other before it is made.
This critique has an analog for Gauthier's theory, in that Gauthier must also claim that without the contract individuals will be stuck in some socially sub-optimal situation that is bad enough to motivate them to make concessions to each other for some agreement, yet the reason for their inability to cooperate without the contract cannot continue to operate after the contract is made. Gauthier's proposed solution to this problem is to argue that individuals will choose to dispose themselves to be constrained (self-interest) maximizers rather than straightforward (self-interest) maximizers, that is, to retrain themselves not to think first of their self-interest, but rather to dispose themselves to keep their agreements, provided that they find themselves in an environment of like-minded individuals. But this solution has been found dubitable by many commentators. (See Vallentyne, 1991)
Hampton also objects to the contemporary contractarian assumption that interaction is merely instrumentally valuable. She argues that if interaction were only valuable for the fruits of cooperation that it bears for self-interested cooperators, then it would be unlikely that those cooperators could successfully solve the compliance problem. In short, they are likely not to be able to motivate morality in themselves without some natural inclination to morality. Interestingly, Hampton agrees with Gauthier that contractarianism is right to require any moral or political norms to appeal to individuals self-interest as a limitation on self-sacrifice or exploitation of any individual.
In an important article, "On Being the Object of Property," African-American law professor Patricia Williams offers a critique of the contract metaphor itself. Contracts require independent agents who are able to make and carry out promises without the aid of others. Historically, while white men have been treated as these pure wills of contract theory, Blacks and women have been treated as anti-will: dependent and irrational. Both ideals are false; whole people, she says, are dependent on other whole people. But by defining some as contractors and others as incapable of contract, whole classes of people can be excluded from the realm of justice. This point has been taken up by other critics of contractarianism, such as Eva Kittay (1999) who points out that not only are dependents such as children and disabled people left out of consideration by contractarian theories, but their caretakers' needs and interests will tend to be underestimated in the contract, as well.
5. Subversive Contractarianism
A descriptive use to which contractarianism has been put is to exploit the in-group/out-group nature of the contractarian project to illuminate the phenomenon of oppression. Carole Pateman's The Sexual Contract (1989) uses contractarian theory to argue that there has been an implicit contract among men to enforce patriarchy. She calls her approach a "conjectural history," which she uses both to illuminate the actual history of patriarchal oppression of women and the ideology of social contract theory. Similarly, Charles Mills argues in The Racial Contract (1997) that whites have had an actual, historical, sometimes explicit, though often only implicit, contract to enforce white supremacy. The arguments are similar in their contractarian outlines, though they differ in the historical and factual details. According to both theories, there are moral, political, and epistemological terms of the contract, and its effect has been to allow one group of persons effectively to dominate, subordinate, and exploit another group. The moral terms require the dominant group to evaluate the lives of their group more highly than those of the subordinated, the political to deprive the subordinate group of effective political power, and the epistemological terms require the members of the dominant group to see themselves as intellectually superior to the dominated. The social contract then can be seen as a justification by the parties to the contract of their interaction, and of their exploitation of those who are not parties to the contract, but only if the fundamental division of in-group and out-group is accepted. If the racial and sexual contracts were to be shown to be rational, they would constitute prima facie critiques of normative contractarianism, since they would then seem to justify racism and sexism.
Several of the critiques surveyed above, then, center on the questions: who is allowed to be a party to the contract, and how are those who are excluded from the contract to be treated? On the normative contractarian view, it is only rational to include all of those who can both benefit and reciprocate benefits to others. Normative contractarianism, then, on the assumption that non-whites and women can both benefit and reciprocate benefits to others, shows the sexual and racial contracts to be fundamentally irrational. Gauthier, in fact, explicitly argued that his contractarianism aids the feminist project of ending exploitative intimate relationships. Contractarian morality disapproves of relationships that are not mutually advantageous without assuming ties of affection. He writes, "sociality … becomes a source of exploitation if it induces persons to acquiesce in institutions and practices that but for their fellow-feelings would be costly to them" (1984, 11). Jean Hampton (1993) takes up this theme in her defense of what she calls feminist contractarianism, although she claims that to be feminist it must shift to the Kantian contractualist strain that begins from the assumption of the intrinsic value of persons. Ruth Sample (2002) furthers the debate over contractarianism in feminist thought, arguing against Hampton's contractualist version on grounds that contractualists beg the question of intrinsic value. Sample argues, however, that (Hobbesian) contractarianism can underwrite feminist claims about the exploitative nature of caring relationships without the intrinsic value assumption.
6. Disability, Reciprocity, and Trust
Disability rights activists, however, would still seem to have a serious complaint to lodge against normative contractarianism, since it is surely the case that there are persons who cannot reciprocate benefits to others. Such persons would be, on the normative contractarian view, beyond the scope of the rules of justice. Recent literature on disability argues that, to the contrary, contractarianism can be inclusive of the disabled. Lawrence Becker (2005) argues that in fact most disabled persons and all caregivers would be included in the bargaining group for clear strategic reasons. The basic contractarian insight that cooperation is mutually advantageous implies that whenever someone can be included as a contributing cooperator there are gains to be realized for all. Many disabled people are either already capable of contributing or could be so with accommodation or rehabilitation, and thus it is to the advantage of society to provide accommodations or rehabilitation at some level, requiring then reciprocal contributions from those thus benefitted. For those disabled persons who cannot be rehabilitated, Becker argues that contractarianism provides a different solution, namely a "mutually advantageous" social insurance scheme that offers a dignified standard of care for anyone who needs it. One might object that the currently healthy contractors would not see the need to pay premiums as high as the already disabled, since they have a lower probability of needing the care. For this insurance scheme to work (and to avoid adverse selection problems), everyone would need to agree to equal premiums without prior knowledge of their condition. But it is hard to see how a contractarian can justify this agreement. A contractualist, on the other hand, could argue that such an agreement could not be reasonably rejected. Furthermore, Becker's argument would have to show that a similar argument could not be made for any form of bad luck, on pain of this view devolving to egalitarianism.
Becker's view raises the objection that there is a level of need for rehabilitation or accommodation that goes beyond any possible future expected contribution for a given disabled person. And disabled persons are not well placed to hold out a threat to destabilize society, so the motivation to contract with them must be the expected benefit. Relying on only ideas of mutual advantage and reciprocity would continute to leave these people — the "outliers" — outside the contract, languishing below an acceptable level of functioning which they could, given another moral theory, rightfully claim. Anita Silvers and Leslie Francis (2005) advance an interpretation of contract theory that attempts to eliminate this outlier problem. They argue that contracting is not essentially adversarial. Since the benefits of mutual agreement are best achieved by "promoting stable compliance with mutual agreements," the essential element of contract is the development of trust, and the deeper and more widespread the trust, the lower the enforcement costs to contracting. Granting the importance of trust development, then, the disabled are as capable of contributing to this climate, perhaps more so because of their greater vulnerability, as the able-bodied. By this they mean that disabled persons who rely on others for care can decide to put aside fears of betrayal or neglect and remain positive and forward looking, and thereby bring about a positive affective climate in themselves and their caregivers. This affective work toward trust building becomes their contribution to the social good. Thus by focusing on the motivation of cooperation for mutual advantage rather than fear of the depredations of others, a more inclusive and positive contractarian political theory comes into view. This view depends on the assumption (similar to one made by Gauthier) that our moral psychology is such that, once we develop our disposition to cooperate, we lose the disposition to cheat on agreements we have made or harm others to satisfy our immediate self interest. As mentioned earlier, this assumption has often been questioned by critics of contractarianism.
Bibliography
Becker, Lawrence C. 2005, "Reciprocity, Justice, and Disability," Ethics, 116/1: 9–39.
Binmore, Ken. 1994 and 1998, Game Theory and the Social Contract, (Volume 1: Playing Fair; Volume 2: Just Playing), Cambridge, MA: MIT Press.
Boucher, David and Paul Kelly, eds. 1994, The Social Contract from Hobbes to Rawls, New York: Routledge.
Gauthier, David. 1986, Morals By Agreement, Oxford: Oxford University Press.
Gauthier, David. 1990, Moral Dealing: Contract, Ethics, and Reason, Ithaca: Cornell University Press.
Hampton, Jean. 1993, "Feminist Contractarianism" in A Mind of One's Own, Louise Antony and Charlotte Witt (eds), Boulder, CO: Westview Press.
Hampton, Jean. 1998, Political Philosophy, Boulder, CO: Westview Press.
Hume, David. 1777, "Of the Original Contract," in Essays, Moral, Political, and Literary, Indianapolis, IN: Liberty Classics, 1987.
Kittay, Eva Feder. 1999, Love's Labor, New York: Routledge.
Mills, Charles. 1997, The Racial Contract, Ithaca: Cornell University Press.
Narveson, Jan. 1988, The Libertarian Idea, Philadelphia: Temple University Press.
Pateman, Carole. 1989, The Sexual Contract, Stanford: Stanford University Press.
Sample, Ruth. 2002, "Why Feminist Contractarianism?", Journal of Social Philosophy, 33/2: 257–281.
Silvers, Anita, and Francis, Leslie Pickering. 2005, "Justice Through Trust: Disability and the ‘Outlier Problem’ in Social Contract Theory", Ethics, 116/1: 40–76.
Vallentyne, Peter, ed. 1991, Contractarianism and Rational Choice, Cambridge: Cambridge University Press.
Williams, Patricia. 1991, "On Being the Object of Property," in The Alchemy of Race and Rights, Cambridge, MA: Harvard University Prss.

Two Kinds of Competition

by Llewellyn H. Rockwell, Jr.by L
Americans love the competitive element of elections, just as we like competition in sports and economics. But there is an important difference in the substance and result of political competition. Rather than improving performance and driving the teams to improve, political competition seems to have the opposite result. The two approved parties appeal ever more to the lowest common denominator and seem to replicate each other’s worst traits. Instead of excellence, we get mediocrity and downward drift.
The thought comes to mind after the disgraceful spectacle of the Bush-Kerry argument on the Iraq War. Bush lied the country into war, pointlessly smashed a civilized country, and embroiled the US in an unwinnable conflict (not that winning would thereby recommend it). Under genuine competition, the GOP would have an albatross around its neck. The Democrats would hardly talk about anything else. Instead, we have the Bush campaign crowing about how Kerry admitted that he would have done essentially the same thing.
It's a rhetorical victory for Bush, of a certain sort. Bush might as well say: my opponent is as much of an opportunist as I am, and, had he been in charge, he would have been equally complicit in the use of mass violence. In short, we are being instructed that we may not accuse Bush of anything of which his opponent is or could be just as guilty.
One might think it would be good for Kerry to campaign against the Iraq War, but there is the issue of the voting-record. More importantly is the reality that Kerry already owns the antiwar vote: what he seeks are the swing voters who they can only assume are mostly jingoistic pigeonheads who prefer patriotic songs and Fox News to facts and serious thought.
And so it goes for many issues. Bush has been terribly protectionist. Kerry promises to be worse. Bush has been an outrageous big spender. Kerry says that he hasn't spent enough. Bush dramatically expanded the welfare state. Kerry says it is not nearly enough. This is competition of a very strange sort: a contest to see how one can outdo the other in bad ideas and bad behavior.
Competition in the marketplace is of a different sort. It leads to relentless improvements in quality. The enterprise that performs its job with excellence relative to others promising similar goods and services succeeds. The marketplace is always open to new entrants who can show the existing producers how to do the same thing better or do something else entirely. The price of services and goods is always falling (apart from government inflation). Obsolete production lines are folded. Consumers reward shrewd producers and punish the dull ones, so that the best get on top. There is accountability for error and it is punished.
In politics, competitive pressures yield exactly the opposite. The quality is constantly declining. The only improvements take place in the process of doing bad things: lying, cheating, manipulating, stealing, and killing. The price of political services is constantly increasing, whether in tax dollars paid or in the bribes owed for protection (also known as campaign contributions). There is no obsolescence, planned or otherwise. And as Hayek famously argued, in politics, the worst get on top. And there is no accountability: the higher the office, the more criminal wrongdoing a person can get away with.
We often talk about the analogy between political and market competition, but they are radically different. To understand why, consider the differences in the competitive environment in public versus private school.
The public school is rooted in coercion. No one really wants to be there, so the pressures run in the direction of control, mediocrity, non-accountability, waste, and stupidity. In private school, the pressures tend toward excellence, accountability, and learning. It is not a universal rule, of course, but it is a dominant tendency. What marks the difference is the institution of private property, the structural prerequisite to productive competition.
Public school-like pressures exist for the entire political system. Under socialism, competition leads to constant declines in quality, morality, and performance. Ultimately this tendency destroys civilization itself. Under capitalism, competition leads to improvements in quality, morality, and performance. It is the very basis of modern civilization.
Public elections replicate all the worst aspects of socialism. Two candidates are unleashed to lie to the public for purposes of acquiring power over an institution that they do not own but will manage for four years, during which time this winning gang will sign off on the spending of some $8 trillion and have power to destroy just about any other government in the world. They risk virtually nothing in this game. The worst consequence they face is being voted out of office four years from now, and being made rich by the special interests they funded with your money.
In private enterprise, every decision of management is tested by the marketplace, every minute of every business day. Owners are constantly on watch and the consumers determine the course of all production. The people at the top only have power in the most superficial sense: it can be taken away immediately by the consumers who gave them power in the first place.
Just about everyone you talk to these days admits serious dissatisfaction with the election choices this year. And yet most people will eventually decide for the "lesser of two evils" – whatever that is, and there is probably no way to know in advance – realizing that no real viable option is going to emerge. In private enterprise, unmet needs are profit opportunities. In public elections, they are opportunities for graft.
The whole process is enough to make one cynical toward campaigns and elections. That's the wrong response. There is nothing wrong with campaigns and elections – they are a normal part of corporate life and institutional management of all sorts, even in religion. The real issue is the fundamental problem of public property. Give me a chance to vote against that, and I might register again.
August 12, 2004
Llewellyn H. Rockwell, Jr. [send him mail] is president of the Ludwig von Mises Institute in Auburn, Alabama, editor of LewRockwell.com and author of Speaking of Liberty.
Copyright © 2004 LewRockwell.com