I readily admit that "capitalism" has a bad press, and its historical use is none too salutary either. But, the enemies of libertarianism are always trying to take words away from us. They have already long ago stolen "liberal." We must now call ourselves "classical liberals" if we want to use that appellation at all. Some have recently had the audacity to try to take away the word "libertarian."

One final point. If we libertarians "refuse to use the word 'capitalism' to describe what we favor," what, then, can we make of the phrase "laissez faire capitalism"? Based on the interpretation of the Libertarians Against Capitalism, this phrase would have to be considered a logical contradiction, like "square circle." For, in their view, "capitalism" is a synonym for "crony capitalism."

The free-market revolution didn't create the pluralistic decentralized economy. It created a centralized financial monoculture, which requires a gigantic government to audit its activities.

I describe elite finance, including both regulators and big bankers, as like an exclusive country club. The club members cannot conceive of anyone outside of the club as having any valuable knowledge or important function . They are sure that saving their club is the same thing as saving the U.S. economy.

The rest of Brooks' essay is even more provoking. He praises British writer Philip Blond, who favors "radical transformative conservativism." Gag. Blond's solution for overly concentrated power is this:

reduce the power of senior government officials and widen the discretion of front-line civil servants, the people actually working in neighborhoods. He would decentralize power, giving more budget authority to the smallest units of government. He would funnel more services through charities. He would increase investments in infrastructure, so that more places could be vibrant economic hubs. He would rebuild the "village college" so that universities would be more intertwined with the towns around them.

Brooks really likes the elite. He is disturbed by people who resent the elite. I also like the elite (that is, I would enjoy sitting down to dinner with a Larry Summers or a Barack Obama). But I am disturbed by what the elite believes.

For Brooks, the elite is relatively sane and the Tea Partiers are beserk. I think it's the reverse. Again, read my book. I believe that the essential point to understand about where we are today is that John Kenneth Galbraith's New Industrial State gets something exactly right and something else spectacularly wrong.

What Galbraith gets right is that large organizations must use bureaucratic planning. Hence, giving more power to "front-line civil servants" would be a disaster. They would be even less accountable than high-level planners for the success or failure of their work. Entrepreneurs need to be in their own businesses, with their own well-being on the line. You don't want to encourage entrepreneurial behavior among people who are writing checks using other people's money.

What Galbraith got wrong was his view that the economy had no use for entrepreneurs at all, and that it would forever be dominated by the likes of Union Carbide, U.S. Steel, International Nickel, and Johns-Manville (members of the Dow Jones Industrial Average in 1959, and now either deceased, merged out of existence, or relatively insignificant today). Galbraith wrote when the industrial economy was at its peak, or shortly afterward. The information economy works quite differently.

In this information age, the Progressives may be as threatened with irrelevancy as the industrial labor unions that they romanticize about. I think even most progressives recognize that it would be crazy to put a central control point or regulator in charge of all Internet content. Well, the economy as a whole shares the same complexity and dynamism as the Internet--indeed, the economy is in some sense merging with the Internet. So a highly-regulated economy is just not where trends are suggesting we should go.

At a point in history where the trend has been toward the diffusion of information, already the concentration of political power is creating anomalies, crashes, and mismanagement. Yet for now, the elite responds to this historical trend favoring diffusion of power by trying to grab more and more power for monopoly government in general and for Washington in particular.

David Brooks represents the elitist view, which is that the threat to social order comes from the libertarian streak in American society. Instead, the elites these days should be quoting Pogo: "we have met the enemy and he is us."

What troubles me is the substantive precedent of using future cuts in Medicare benefits as a funding source. This is really weird, if you think about it.

Imagine that your crazy uncle Fred had bought a dozen cars on credit. As a result, he faces car payments far in excess of what he can afford. He comes to you and says he has a plan that in a couple of years will reduce his car payments by a few thousand dollars. "Now I have the money for a down payment on a boat!" he exclaims, as he runs off to the boat dealer.

The equivalent is for Congress to treat future cuts in Medicare as if they were a newfound source of wealth to be tapped. Once they adopt this precedent, they can increase spending on whatever they want, in unlimited amounts, while claiming deficit neutrality. Future Medicare spending is so high that you can always come up with cuts, as long as they deferred.

CBO's Doug Elmendorf discusses the use of promised future cuts in budget scoring, and it is evident that he is queasy about it. I think it sets a very dangerous precedent. Even if health care reform passes, I hope that Congress does something to close this loophole in its budget scoring procedures. If I were the Republicans, I would introduce a bill that bans the use of promised future cuts as a financing mechanism.

In his pitch for the Obama health care restructuring, Paul Krugman quotes a Reuters story about a young man who was denied benefits for a pre-existing condition even though he didn't have such a condition when he got his health insurance. A check of the article shows that Krugman referenced it accurately. The young man sued and got a $10 million settlement. It's hard to read that story and not believe that the company, Assurant Health, cheated him. If so (and the only reason I'm hedging is that my only source on this is Reuters), then the verdict was just.

Krugman uses this case to argue for the Obama bill. What's the connection? Well, if insurance companies couldn't exclude people for pre-existing conditions, then such cases would no longer occur.

But here's what he doesn't tell you. First, in that same Reuters story, someone else agrees with Krugman, namely, Don Hamm. Who's he? None other than the president and CEO of the self-same Assurant Health. Here are the last two paragraphs of the Reuters story:

During his appearance on June 16 before the House Energy and Commerce Committee, Hamm, the CEO and President of Assurant, urged Congress to pass the new health care legislation, in part, to prevent such practices.

"We can achieve the goal we share -- providing health care coverage for all Americans," Hamm said. "If a system can be created where coverage is available to everyone and all Americans are required to participate, the process we are addressing today, rescission, becomes unnecessary."

1. I can't remember the name. I read it when I was home sick at about age 12. It was a book on Lincoln that leads off each chapter with a quote from the book-length poem, John Brown's Body, by Stephen Vincent Benet. That's when I became a Lincoln fan. I'm no longer a fan of his politics, given what I've learned since, but I loved his persistence. My favorite quote is this one and I took it to heart and made it part of who I've become:

"No-he ain't much on looks-or much on speed-
A young dog can outrun him any time,
Outlook him and outeat him and outleap him,
But, Mister, that dog's hell on a cold scent
And, once he gets his teeth in what he's after,
He don't let go until he knows he's dead."

2. Pride and Prejudice, by Jane Austen. We covered it in high school, but I read it three times because I loved it so much. I still have to be reminded of the lesson: don't make quick judgments but, instead, get more information when that is low cost.

3. Yes, I Can, by Sammy Davis, Jr. I read this during the summer between high school and college. The way he ran his career and the way he dealt with racial discrimination was inspiring.

4. Elmer Gantry, by Sinclair Lewis. My aunt, who was more evangelical than the minister she was married to, convinced me that I would burn in hell if I didn't become born again. I kept trying to be born again and I kept failing at it. When I read this book the same summer as #3 above, I relaxed.

5. The Fountainhead, by Ayn Rand. I read it in my third month of college. If I hadn't done so, I'm not sure I'd be a libertarian, an economist, or an American. It, and Ayn Rand generally, influenced a huge number of the choices I made, most very good, one very bad that is too personal to talk about.

6. To Kill a Mockingbird, by Harper Lee. I loved the way Atticus kept his principles while still dealing in an every day world that he didn't create. This helped me work in jobs where Howard Roark would have had trouble. I reread this book every decade.

7. The Virtue of Selfishness, by Ayn Rand. This book, more than any other, convinced me that you could actually think about many issues and often resolve them or at least narrow them down. My favorite was her essay on racism as a crude form of collectivism.

8. Capitalism and Freedom, by Milton Friedman. Besides learning a lot of economics and some history from this book, I also learned that one can be relatively radical and successful in the mainstream.

9. The Road to Serfdom, by Friedrich Hayek. A friend gave this to me for my 18th birthday. When I started to read it, I hated it. I couldn't stand the fact that Hayek treated his intellectual foes with respect rather than attacking them. He kept pulling his punches. When I picked it up to read about 6 months later, I loved it. Not only did I learn his explicit message, but also I learned a style of debate that I still practice: zeroing in on the issue and assuming good intentions of the "other side."

10. The Calculus of Consent, by James Buchanan and Gordon Tullock. I read this during the year I took off to study economics on my own. My introduction to public choice. I wrote separate fan letters (at age 20) to Buchanan and Tullock. Both answered gracefully and with actual content.

11. The Theory of Price, by George Stigler. I read this during that same econ study year. I loved the mix of theorizing and more-than-casual empiricism. After Stilger died, I reread the whole book and realized just how much of what I thought I came up with to use in class, I had learned from Stigler.

12. University Economics, by Armen Alchian and William R. Allen. I TAed from this book my first year in graduate school at UCLA. Every Sunday afternoon and evening, I would work my way through a chapter and through every single question at the back of each chapter. I did so just in case some 18-year-old the next day in my TA section asked a question from the back of the chapter. It never happened. But I learned more from this book my first year at UCLA than from any other.

13. A Guide to Rational Living, by Albert Ellis. I hit some bumps in my last year in the Ph.D. program at UCLA. I got extreme writer's block and was getting nowhere on my dissertation. I write about this in Making Great Decisions in Business and Life, co-authored with Charley Hooper. I went to see a therapist, Roger Callahan, who gave every one of his new patients a copy. That one book has helped me deal with so many life situations.

14. Lucky Jim, by Kingsley Amis. This fun book helps me not take academic bulls**t too seriously. I reread it every decade.

15. How I Found Freedom in an Unfree World, by Harry Browne. When I was visiting a friend in Australia in 1999, I found this book in his library and decided to reread it. I had first read it the late 1970s. I had the same kind of experience I'd had when rereading Stigler: I realized that I had used a whole lot of Browne's ideas in my life but had thought I had come up with them.

16. The Autobiography of Malcolm X, by Malcolm X and Alex Haley. I loved the story of Malcolm X's struggle and how he turned away from a life of crime and became a very strong man.

17. The Ropes to Skip and the Ropes to Know, by Richard Ritti and G. Ray Funkhouser. I learned more about how to survive and thrive in organizations from this book than from anything else in my life. I read it when I started the job at the Council of Economic Advisers and it helped immensely. Moreover, I could see how I had screwed up at the Cato Institute in 1979-80 by not having followed these lessons.

What is missing is the political demand for tests of what really works. Too many policies on education, welfare and criminal justice are just so much homeopathy: cute-sounding stories about what works leaning more on faith than on evidence. Politicians and civil servants, faced with some fancy new idea, should get into the habit of asking for a proper randomised trial. And we, as citizens, should be equally demanding.

Thanks to Mark Thoma for the pointer.

If, as Heyman says, "drug-induced brain change is not sufficient evidence that addiction is an involuntary disease state," then how are we to distinguish between voluntary and involuntary behavior?

Heyman's answer is that "voluntary activities vary systematically as a function of their consequences, where the consequences include benefits, costs, and values."

In "The Economics of Szasz," I gave many examples of this point.  Here are some of Heyman's, as filtered through Satel:

Take, for example, the case of addicted physicians and pilots. When they are reported to their oversight boards they are monitored closely for several long years; if they don't fly right, they have a lot to lose (jobs, income, status). It is no coincidence that their recovery rates are high. Via entities called drug courts, the criminal justice system applies swift and certain sanctions to drug offenders who fail drug tests--the threat of jail time if tests are repeatedly failed is the stick--while the carrot is that charges are expunged if the program is completed. Participants in drug courts tend to fare significantly better than their counterparts who have been adjudicated as usual. In so-called contingency management experiments, subjects addicted to cocaine or heroin are rewarded with vouchers redeemable for cash, household goods, or clothes. Those randomized to the voucher arm routinely enjoy better results than those receiving treatment as usual.

The lesson:

Contingencies are the key to voluntariness. No amount of reinforcement or punishment can alter the course of an entirely autonomous biological condition. Imagine bribing an Alzheimer's patient to keep her dementia from worsening, or threatening to impose a penalty on her if it did.

Thus Heyman reinvents my "Gun to the Head Test."  Sweet.

In fairness, the scientists who forged the brain disease concept had good intentions. By placing addiction on equal footing with more conventional medical disorders, they sought to create an image of the addict as a hapless victim of his own wayward neurochemistry. They hoped this would inspire companies and politicians to allocate more funding for treatment. Also, by emphasizing dramatic scientific advances, such as brain imaging techniques, and applying them to addiction, they hoped researchers might reap more financial support for their work. Finally, promoting the idea of addiction as a brain disease would rehabilitate the addict's public image from that of a criminal who deserves punishment into a sympathetic figure who deserves treatment.

2. George Goodman, aka 'Adam Smith,' The Money Game and Supermoney. He was the Michael Lewis of his time--a great storyteller who also understood the substance of finance. I think his books still read well, although I could understand it if others find the stories themselves too dated. These books sparked my interest in finance theory and in the temptation to both believe and refuse to believe in efficient markets.

3. Carl Shapiro and Hal Varian, Information Rules. Again, you may find that the examples seem old, but no better book has been written on the economic issues of the information-driven economy. Among other things, this book convinced me that Price Discrimination Explains Everything.

4. Ray Kurzweil, The Age of Spiritual Machines. At first, I did not buy it. However, I have mostly come around. It is now possible to evaluate his predictions for 2009 (made around 1997). He did score with this one (p. 190):

Computers routinely include wireless technology to plug into the ever-present worldwide network, providing reliable, instantly available, very-high-bandwidth communication. Digital objects such as books, music albums, movies, and software are rapidly distributed as data files through the wireless network, and typically do not have a physical object associated with them.

5. Amity Shlaes, The Forgotten Man. Folks on the left scorn this book, and it is not without its flaws. But ultimately, I think the left hates Shlaes not for what she gets wrong but what she gets right. What she gets right pokes huge holes in the high school book narrative of the Depression (Herbert Hoover sat back and did nothing, Roosevelt saved the economy). My takeaway from this book is the importance of the battle over historical narrative. We see that today in the determination of the left to blame the financial crisis entirely on "free-market ideology," even though that narrative is not such a good fit for the facts.

6. George Gilder, Microcosm. This was his history of the microprocessor. My guess is that it will not read well today, but at the time his emphasis on the relative unimportance of the materials in computers (he refers to silicon as "sand") stimulated me to focus on intangibles in the modern economy.

7. Thomas Sowell, The Vision of the Anointed. This book got me started thinking about the origins of the differences between the left and the right. I do not think anyone has fully satisfactory answers, but it is a fascinating question.

8. Amar Bhide, The Origin and Evolution of New Businesses. He breaks down the business ecosystem into two dimensions--degree of capital intensity and degree of ambiguity, and he gets remarkable mileage out of the resulting matrix.

9. Bill James, The Baseball Abstact, 1987. Others can be equally analytical about baseball. What is striking about Bill James is how well he wrote--when he cared. If only Amar Bhide wrote this well...

10. Ernest GrahamKenneth Grahame, The Wind in the Willows. The character of Toad is brilliantly drawn and offers great insights.

11. Neal Stephenson, The Diamond Age and Snow Crash. How I came to understand nanotechnology and competitive government, respectively.

In response to one of the comments, I do mean by "capitalism" a system of free markets with respect for private property, contract, etc. What I saw in Manteca was not capitalism, at least not the kind I advocate.

I'm aware of my friend Sheldon Richman's attempt to get us to replace the word "capitalism" with "free market." Like co-blogger Bryan, though, I'm not sure that this is a battle worth joining.

I went in and went straight for the motorboats. When I was a kid, we had so little money that I learned just to appreciate looking at things I couldn't ever imagine being able to buy. I remember during the long winter months in Canada going to the same page in our Eaton's catalogue and looking at and dreaming about motorboats. Today, I can easily afford to buy a boat but I'm not planning to and I still get that same enjoyment out of just looking at the boat and run my hand the whole length of it. Indeed, I taught myself so well when I was a kid that I can go through a store and see lots of things I love, leave empty-handed, and still have a good time.

But the deals at Bass were so good that I actually did buy three things. I love collecting caps but, with rare exceptions, won't buy them unless I can get them for well under $10.00. Their own Bass Pro Shops cap was priced at only $5.99: I'm sure it's because of the free advertising they get when people wear their hats. The next thing that I put in my cart was a beautiful head lamp for only $20. Then I found a part of shorts made of nylon and tried them on: they fit perfectly. Also, one of my big frustrations with shorts in the last 10 years or so is how long they make them: I don't like shorts that come close to my knees. These were actually shorts. Price? $15.00 (actually, $14.99, but I round.)

I love capitalism.

Few deals can guarantee to get everyone more of what they want, but by encouraging and enabling more better wider deals, the use of efficiency analysis sure seems to me to tend to get most everyone more of what they want.  Isn't that good enough?

It would have been sufficient if you said: "When I said 'everyone,' I meant 'most everyone.'"  I'm not jumping on you for lack of disclaimers, but for stubborn overstatement.