Weinberg and Choate wrong on Idiot Savants
Inside Liberty Watch Today - July 17, 2006
Last week's piece questioning the universal fawning over Bill Gates and Warren Buffett's philanthropic endeavors by the mainstream press prompted an editor's note in the Penny Press from that publication's editor Fred Weinberg and his friend Pat Choate.
The previous week, these two had joined the chorus of mainstream commentators everywhere including Sherm Fredrick at the RJ in extolling the virtues of the two wealthiest men in America, as they embark on the arduous task of giving away their fortunes.
My questioning whether the two idiot savants have any economics knowledge and whether their donations would actually improve the world evidently annoyed Weinberg to high dungeon and that in order to stomach running the untoward piece, he used his editor's prerogative to tack on a paragraph at the end in order to have the last word.
For those who didn't pick up the Penny Press, Weinberg and Choate, essentially invited me outside to see who can color the snow bank out the furthest. "Doug's logic is, in our humble opinion, a little faulty because of his lack of historical perspective," the two begin. They say that Bill Gates made his money in the free market and Buffett made his money investing in the same free market. Talk about a lack of historical perspective. Do these two really believe the American economy is now a "free" market? I wish Buffett's father Howard was alive to respond.
Maybe Weinberg and Choate have read something about a certain anti-trust case involving Microsoft in the last few years? I'm sure Bill Gates doesn't believe that he competes in a free market. As economist Tom Dilorenzo wrote in the Wall Street back in 1999, Microsoft competitors fought for market share through the political process not the market process. "Economists call the kind of behavior displayed by Microsoft's rivals (including the hiring of Mr. [Robert] Bork) 'rent seeking,' defined as the use of the political process to procure special privileges, including regulations that harm one's competitors. Lobbying for protectionism is a classic example of rent seeking, as is harassing one's more successful competitors with antitrust lawsuits."
By the way, Doug Casey believes Gates was spineless in the way he responded to the U.S. Government's anti-trust suit against Microsoft back in 1998. "If it had been my company, I promise I would have transplanted it to a friendlier clime-and paid for the move with just a couple of years tax savings."
As for Buffett's Berkshire-Hathaway, the conglomerate's largest investment is in the insurance business. Other than banking, health care and gaming, there is likely no more regulated industry than insurance. Buffett has said on numerous occasions his investment strategy is to invest in businesses that have significant barriers to entry, of which government is the largest provider.
"They [Gates and Buffett] didn't get rich because of their ignorance of capitalism," Weinberg and Choate complain. I didn't imply that they did, just that it obviously doesn't take economics knowledge to get rich.
Next, Weinberg and Choate say something about Gates and Buffett not sharing "our more conservative viewpoint…" I mentioned in last weeks piece Buffett's zeal for high property taxes, how about his stumping for high estate taxes?
Back in 2001, Buffett, Bill's dad William Gates, anti-capitalist speculator George Soros, lefty ice-cream magnate Ben Cohen, at least two Rockefellers, and many others, signed an ad that decried the proposed estate tax cuts on many spurious grounds.
The billionaires said at the time that inheritance elevates privilege above merit. "But this is a false distinction that asserts an egalitarian view of merit," Lew Rockwell wrote. "It is also very dangerous because it puts government instead of the private sector in charge of deciding who merits what."
"The existence of billionaires is a wonderful testament to the glories of the capitalist system," Rockwell points out, "but let us not forget that many of them are loony tunes on issues outside their core business."
Segueing to Weinberg and Choate's next contention, "logic dictates that if they apply the same principals to their charitable efforts that they applied to their business, they will get similar results." Logic does not any more dictate that than logic dictates that since Fred Weinberg is in his third year of publishing the Penny Press that he can build a rocket ship successfully. "They might as well be Thomas Aquinas and Mahatma Gandhi setting up a fireworks display; smart men, but not likely to know what they're doing," Bill Bonner wrote this week.
The problem with non-profits and foundations is that there is no price system to provide signals as to whether the organization is being successful. Gates and Buffett have the benefit of a price system in their given disciplines. In philanthropy, no such guidance is provided. "Acts of grand benevolence," writes Bonner, "on the other hand, whatever good they do in the short term (and we don't deny that they do great good in the short term) usually make things worse in the long term. Instead of getting to choose what they want, people get what the givers choose to give them, not as customers, but as charity cases. Of course, acts of personal charity are enjoined on us. And we hope we take pleasure in doing them. But when the scale is large enough, charity begins to smack more of a public spectacle than a private virtue...more of a government program than of an unalloyed act of generosity. Along with hope and help, it carries with it, ever so faintly, the acrid whiff of humbug."
Weinberg and Choate wind up by emphasizing that the money is Gates' and Buffett's to do with as they wish. Of course. I'd be the last to stop them. But, what they are doing is not worthy of the praise they are receiving, and in fact will likely be damaging in the long run, and that's the point.
Doug French, Liberty Watch Columnist
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