Category Archive 'Economics'
22 May 2018

Guilty Meritocrats

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The big think piece of the week is this exercise in class navel-gazing in the Atlantic. Its author, Matthew Stewart, is an obviously Very Smart Guy, who went to Princeton and Oxford and who’s written books on the American Revolution’s foundation in Philosophy and on why Management Consulting is typically a scam.

I’ve joined a new aristocracy now, even if we still call ourselves meritocratic winners. If you are a typical reader of The Atlantic, you may well be a member too. (And if you’re not a member, my hope is that you will find the story of this new class even more interesting—if also more alarming.) To be sure, there is a lot to admire about my new group, which I’ll call—for reasons you’ll soon see—the 9.9 percent. We’ve dropped the old dress codes, put our faith in facts, and are (somewhat) more varied in skin tone and ethnicity. People like me, who have waning memories of life in an earlier ruling caste, are the exception, not the rule.

By any sociological or financial measure, it’s good to be us. It’s even better to be our kids. In our health, family life, friendship networks, and level of education, not to mention money, we are crushing the competition below. But we do have a blind spot, and it is located right in the center of the mirror: We seem to be the last to notice just how rapidly we’ve morphed, or what we’ve morphed into.

The meritocratic class has mastered the old trick of consolidating wealth and passing privilege along at the expense of other people’s children. We are not innocent bystanders to the growing concentration of wealth in our time. We are the principal accomplices in a process that is slowly strangling the economy, destabilizing American politics, and eroding democracy. Our delusions of merit now prevent us from recognizing the nature of the problem that our emergence as a class represents. We tend to think that the victims of our success are just the people excluded from the club. But history shows quite clearly that, in the kind of game we’re playing, everybody loses badly in the end. …

The fact of the matter is that we have silently and collectively opted for inequality, and this is what inequality does. It turns marriage into a luxury good, and a stable family life into a privilege that the moneyed elite can pass along to their children. How do we think that’s going to work out?

This divergence of families by class is just one part of a process that is creating two distinct forms of life in our society. Stop in at your local yoga studio or SoulCycle class, and you’ll notice that the same process is now inscribing itself in our own bodies. In 19th-century England, the rich really were different. They didn’t just have more money; they were taller—a lot taller. According to a study colorfully titled “On English Pygmies and Giants,” 16-year-old boys from the upper classes towered a remarkable 8.6 inches, on average, over their undernourished, lower-class countrymen. We are reproducing the same kind of division via a different set of dimensions.

Obesity, diabetes, heart disease, kidney disease, and liver disease are all two to three times more common in individuals who have a family income of less than $35,000 than in those who have a family income greater than $100,000. Among low-educated, middle-aged whites, the death rate in the United States—alone in the developed world—increased in the first decade and a half of the 21st century. Driving the trend is the rapid growth in what the Princeton economists Anne Case and Angus Deaton call “deaths of despair”—suicides and alcohol- and drug-related deaths.

The sociological data are not remotely ambiguous on any aspect of this growing divide. We 9.9 percenters live in safer neighborhoods, go to better schools, have shorter commutes, receive higher-quality health care, and, when circumstances require, serve time in better prisons. We also have more friends—the kind of friends who will introduce us to new clients or line up great internships for our kids.

These special forms of wealth offer the further advantages that they are both harder to emulate and safer to brag about than high income alone. Our class walks around in the jeans and T‑shirts inherited from our supposedly humble beginnings. We prefer to signal our status by talking about our organically nourished bodies, the awe-inspiring feats of our offspring, and the ecological correctness of our neighborhoods. We have figured out how to launder our money through higher virtues.

Most important of all, we have learned how to pass all of these advantages down to our children. In America today, the single best predictor of whether an individual will get married, stay married, pursue advanced education, live in a good neighborhood, have an extensive social network, and experience good health is the performance of his or her parents on those same metrics.

We’re leaving the 90 percent and their offspring far behind in a cloud of debts and bad life choices that they somehow can’t stop themselves from making. We tend to overlook the fact that parenting is more expensive and motherhood more hazardous in the United States than in any other developed country, that campaigns against family planning and reproductive rights are an assault on the families of the bottom 90 percent, and that law-and-order politics serves to keep even more of them down. We prefer to interpret their relative poverty as vice: Why can’t they get their act together?

RTWT

Stewart’s mea culpa article is intelligent and well-written, but gravely flawed by many of the characteristic intellectual errors of the meritocratic community of fashion elite.

It’s true that life in America has changed. Economic, regional, and cultural changes enormously increased social and physical mobility over much of the last century, killed local industries, and drained, year after year, ever larger percentages of people with brains and talent and initiative out American small towns and rural counties, sending them off to the big cities and their posh suburbs.

The automobile and the shopping mall killed Main Street, and the big multiplex theaters killed the hometown movie palace. Now Amazon is killing off the malls, and digital streaming off the Internet is killing off the multiplexes.

It is characteristic of members of the intelligentsia like Matthew Stewart to place limitless confidence in the calculative powers of human reason and the wisdom of credentialed experts and to imagine that the iron laws of economics and the choices of the gods of History can simply be set aside by the application of a bit of collectivist statism. That perspective is obviously dead wrong.

Unless you are prepared to go to the same lengths as Pol Pot and march people at gunpoint out of the city and into the countryside again, you are not going to change all this. A hundred years ago, many people were sad that the gods of Economics had decreed that the small family farm had to die and everyone had to move into town and take work at the factory or the mill, but it happened, and that is how economies progress and standards of living rise. But change always comes with some pain as its cost.

The establishmentarian feels guilty and suffers from an obsession with Equality. People like Matthew Stewart naturally believe that they are the cat’s pajamas, the winners in Life’s Olympic Race, and they assume that everybody is crying himself to sleep every night for not being one of them.

They are profoundly wrong in a couple of ways. First of all, it is possible to be a good man and a person of accomplishment and skill in all sorts of ways not measured by the SATs and entirely unconnected to graduation from elite schools or the publication of important books. There are circumstances in life in which you’d be better off having the assistance of a skilled automobile mechanic or a grizzled old hunting guide than that of an Oxford graduate or best-selling historian.

Then, it is also an important fact of life that it is simply impossible for everybody in the world to graduate from a top Ivy League school and grow up to be a doctor, lawyer, investment banker, or management consultant. The world really does have to have more Indians than chiefs. And not everybody thinks the same way. I have some things in common with Mr. Stewart: I went to Yale and I sometimes read The Atlantic. But they’d have to pay me by the hour to live in Brookline or any similar place. And I’m surrounded out here in rural Pennsylvania by people who feel the same way.

My Trump-voting neighbors here in the Central Pennsylvania boondocks are, it’s true, ill-educated, and unfashionable. They are also a lot less affluent than people like Mr. Stewart. They do have some problems, but most of them, at least most of the older ones, are not unhappy. I think younger people out here in the sticks are more decidedly the left-behinds, and are more demoralized by the decay of Religion and the local economy, and the weakening of all the institutions. And it is there, not in the areas Mr. Stewart talks about, that we meritocrats are to blame.

If you go to Princeton or Yale, you can reject bourgeois society, organized Religion, and Kipling’s gods of the copybook headings and (mostly) get away with it. You’re a clever person and probably a strong-willed person, so you can do drugs and get up and go to work anyway. You believe in free love, but somehow in the end, you wind up married anyway. But where we catch a cold, the ordinary people back home get the Plague. Without the old-time Religion and conventional bourgeois morality keeping them on the straight and narrow, for them, everything goes to shit. You get single mothers, jailbird fathers dead at 35 from booze or meth or crashed cars, neglected, badly-raised kids, and ruined lives all over the place.

Our guilt does not lie in erecting barriers to entry at Ivy League schools. Our class’s guilt lies in our snobbery, our boundless self-entitlement, and our abandonment of hometowns, home regions, and obligations of leadership and fellowship, in our home communities, and in the deplorable example we set with our wholesale rejection of tradition and conventional wisdom.

29 Mar 2018

An Irish Farmer’s Story

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The Guardian published a moving excerpt from extract from The Cow Book: A Story of Life on a Family Farm by John Connell. (Not on sale in the U.S., but you can buy it via Amazon.UK.)

It has been a busy week and I am tired, for between the days and nights I am but a servant to the cows. Sometimes I have wondered what it is all for. I do not earn money doing this work: the farm pays for itself and no more. To make a living through farming is hard work, and there are few full-time farmers in the area; most men have other jobs, as builders or tradesmen or teachers. Da is one of the few full-time farmers, but that was not always so. For more than two decades he was a builder with my uncle John, but he retired 10 years ago, for the work had grown too hard and, though he was still young, it had aged him. …

I take the calf in both my arms and the adrenaline is such that I do not feel his weight. I carry him to the fresh bedding, jack, ropes and all. I must move quickly , for we have lost calves with fluid on their lungs before. I pour water in his ears and he shakes his head and comes to life. But then he coughs, and I can hear the fluid, so I take a breathing tube with a mask on its end and fit it over the calf’s muzzle. You extend the pump and its vacuum pulls the fluid up and, in theory, the calf should cough up the fluid. I do this three times, but the fluid does not come up, and he begins to wheeze. I cannot lose him. I pick him up with a roar and carry him over to the gate and sling him across it.

I have seen this done before, but the calf has always been lifted by two men, so I must have found new strength. I massage his lungs and give him a slap, and soon I see the mucus emerge. He lifts his head and I know that he is won. I release him down into my arms and carry him back to the fresh bedding, alive and safe. And with that, the half-door opens – it is my father, bright and smiling.

And I know now that something has happened. I’ve passed a test of some kind, and I am glad. He opens the half-door and walks in. He is in his jobbing coat, which is his blue velvety coat for the mart. My uncle Davy follows behind, along with my young cousin, Jack.

“There’s money being made here,” says Davy, and we laugh. I stand up now and they admire the calf. He is a fine wee bull. I unloose the cow and leave her and her newborn to each other. She licks him, gently and softly, despite her size. Nature will do the rest. I am 29, but I feel so much older tonight. …

When the weanling calves had reached 14 months and put on the required weight, Da decided it was time to sell them. There are just four calves left now, too young to sell; we will fatten them on spring grass soon. Walking through the shed, I miss the presence of the others, their noise and smell and rumble. But they are the payment to the bank for the land. They are money embodied, nothing more. That is what Da says.

On this we do not agree. I cannot see them just as products. They are animals, not mere steak-holders. They may carry flesh but they carry personality too – memories and feelings. But to go down this route is not businesslike. And farming above all is a business, I am told.

The reality of beef farming is that the cows live so that they can be killed. They are here so that they may die. If we did not eat meat, they would not exist, or not in such great numbers. All our cows on this farm will be killed at one time or other; they shall get old, or reach their weight, and all shall know the butcher’s knife. But even knowing this, and even for the businessman-farmer, I do not believe it is solely about the money, nor that he sees the animals only as future beef. If it were, I do not think he should get up so instinctively in the middle of the night to deliver a new calf or tend to a sick lamb. There must be nature in the man for the beast, nurturing in the human for the non-human.

Through its relationship with man, the cow has been transformed into a carefully programmed “product” in the food chain. Where once the cow was man’s most valued companion from the natural world, now its value in some nations depends on removing it entirely from this world. It has lost its sentience, it seems, in the minds of those involved in the industrial process.

In the west, the break with farm and butcher is nearly complete. As consumers, we buy most of our meat from supermarkets, packed and sealed. Sometimes it is dyed with red colourant to make it more appealing, or injected with water to add extra weight. Few children have seen farms other than on television, or in a bedtime storybook. Most people have never seen a slaughterhouse or a cattle carcass. When we are so alienated from the living source of our food, it is perhaps inevitable that the next step is to cut out the cow altogether. …

There may well come a day when cloned meat is available in the supermarkets of London and the delis of New York, when steaks are grown in labs and test tubes from stem cells. But we have a choice over whether we want this future.

And yet, even as some manufacturers are taking these radical steps towards an artificial future, other farmers are following an alternative path. The organic and grass-fed movement has allowed a small group of growers and farmers to survive corporations, conglomerates and cloners. Organic beef or grass-fed beef may be more expensive to the consumer, but the beast has had a better life, one free of housing, confinement and stress. We raise them to die, but they live a life of peace and nature. Our way of farming here in Ireland – our family’s way of farming – may be seen as a backward step, but it is a way in which the animal can live with dignity, and in which the farmer has retaken the old and respectful role of custodian of the land and the environment for the next generation.

RTWT

Nobody wins the fight against the iron laws of Economics in the long run. Nobody. But you can’t help rooting for John Connell, who is perfectly right, aesthetically and morally. Human beings have an ancient, countless millenia long, relationship with our domestic animals and fulfilling our role as their servants, masters, friends, and admiring associates makes us and them both happy.

Alas! the world only gets older, stupider, and more urbanized. The middlemen get all the money, and farming is either an impersonal heartless, soulless, factory operation or a personal hobby supported by the farmer’s real job. But the consumer gets cheaper meat. The cruel god of Economic reality giveth as well as taketh away.

John Connell is essentially the same kind of thing as the Jacobite rebels of the 18th century: sure to lose, a doomed cause, but a cause you cannot help rooting for.

09 Mar 2018

Tariffs in Perspective

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1910 Republican campaign poster.

Charles G. Mills does a good, and succinct, job of explaining tariffs, historically and politically.

President Trump has proposed significant tariffs on the importation of steel and aluminum. Should we support or oppose these measures? The answer is not simple; it lies in the details of the tariff law, rather than in a single principle about all tariffs. On balance, a significant tariff on steel and aluminum is worthy of support, despite its harmful effects.

RTWT

07 Mar 2018

Bring Back the Gold Standard!

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1927 $2.50 gold piece.

When my Lithuanian great grandparents arrived in the United States of the late 19th Century, we had beautiful gold money with images of Indians and Big Game Animals, there were no gun laws and there were no drug laws, and there was no Income Tax. No wonder they came here!

Ralph Benko, in Forbes, argues that if Trump really means to make America great again, restoring a gold standard would be a great first step.

In 1971 President Nixon, under the influence of his Svengali-like Treasury Secretary John Connally, “suspend[ed] temporarily the convertibility of the dollar into gold.” That closure proved durable instead of temporary. The dollar became, and remains, the world’s global currency.

What had been an “exorbitant privilege” devolved into an exorbitant liability. As my former professional colleague John D. Mueller, of the Ethics and Public Policy Center, formerly Rep. Jack Kemp’s chief economist, writing in the Wall Street Journal in Trump’s Real Trade Problem Is Money recently and astutely observed:

    a monetary system based on a reserve currency is unsustainable, since foreign official dollar reserves (for example) are acquired and must be repaid in goods. In other words, the increase in official dollar reserves equals the net exports of the rest of the world, which means it must also equal U.S. international payments deficits—an unsustainable situation.

In other words, if President Trump wishes to address America’s merchandise trade deficit (balanced to perfection, of course, by a capital accounts surplus) he will find that allowing the dollar to be used as the global currency is the real snake in the economic woodpile. The dollar’s burden as the international reserve currency, not currency manipulation by our trading partners or bad treaties, is the true villain in the ongoing melodrama of crummy job creation.

Mueller’s Wall Street Journal column enumerates the three options open to President Trump:

    First, muddle along under the current “dollar standard,” a position supported by resigned foreigners and some nostalgic Americans—among them Bryan Riley and William Wilson at the Heritage Foundation, and James Pethokoukis at the American Enterprise Institute.

    Second, turn the International Monetary Fund into a world central bank issuing paper (e.g., special drawing rights) reserves—as proposed in 1943 by Keynes, since the 1960s by Robert A. Mundell, and in 2009 by Zhou Xiaochuan, governor of the People’s Bank of China. Drawbacks: This kind of standard is highly political and the allocation of special drawing rights essentially arbitrary, since the IMF produces no goods.

    Third, adopt a modernized international gold standard, as proposed in the 1960s by Rueff and in 1984 by his protégé Lewis E. Lehrman …and then-Rep. Jack Kemp.

To “muddle along” would, of course, be entirely antithetical to Trump’s promise to Make America Great Again. It would destroy his crucial commitment to get the economy growing at 3%+ — vastly faster than it has for the past 17 years — which also happens to be the recipe for robust job creation and upward income mobility for workers. It also is the essential ingredient for balancing the federal budget while rebuilding our infrastructure and military.

To turn the IMF into a world central bank would, of course, be anathema to Trump’s economic nationalism. To subordinate the dollar to the IMF’s SDR would be equivalent to lowering Old Glory and replacing the American flag with the flag of the United Nations on every flagpole in America. Unthinkable under a Trump administration.

That leaves the third option, to “adopt a modernized international gold standard, as proposed in the 1960s by Rueff and in 1984 by his protégé Lewis E. Lehrman … and then-Rep. Jack Kemp” (whose eponymous foundation I advise). To this one should add, as Forbes.com contributor Nathan Lewis has shrewdly observed, the removal of tax and regulatory barriers to the use of gold as currency.

RTWT

President McKinley would be proud.

02 Mar 2018

Regulated Antiquities Will Often Lack Good Provenance

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A papyrus fragment containing text from St. Paul’s Letter to the Galatians offered for sale on eBay in 2012. Oh me, oh my!

Roberta Mazza proves that you can have a graduate degree and specialized academic expertise and still be a total imbecile with respect to markets, governments, and reality.

We academics must help protect the objects we study. Some of my colleagues believe that scholarship comes first, or say that texts have no guilt, so we should be faithful to them. They publish what emerges from the market. I disagree. To publish papyri with suspicious — if not illegal — provenance is unethical. It lends a new identity to those artefacts and feeds the illicit market.

Looting and illicit excavations in Egypt not only destroy the archaeological landscape forever, but also have also caused deaths and injuries to Egyptians, including children, employed to dig in narrow shafts. In 2016, two archaeological guards, Ashrawy and Mustafa Ali, were shot dead by looters in action. And there is good reason to believe that many crimes go unreported in the current political and economic climate. (That said, in the UK, academics who facilitate exchanges of improperly-obtained antiquities can be charged for money laundering.)

So what should we do with all of these suspiciously-sourced fragments? They should be immediately returned to the legitimate owner: Egypt. (Egyptian authorities may eventually reach a deal with the collectors for study and publication before repatriation.) Those who study papyri must exercise due diligence before publishing anything, and academics should exercise an active role in educating collectors and keeping an eye on the market. Would you knowingly buy a stolen bike? Why would you buy — or publish — a stolen manuscripts?

RTWT

Ms. Mazza, firstly, suffers from the self-entitlement and inclination-to-control-the-universe syndrome which characteristically afflicts credentialed members of the academical elite. That naturally combines with uncritical left-wing statism, producing a pathological hostility to free markets and the voluntary and organic interactions of ordinary mortal human beings who lack badges, official positions, and doctorates, along with an uncritical bias in favor of the State, even when the State consists of a corrupt Third World kleptocracy and dictatorship.

The rational reader learns from Dr. Mazza’s article that this small papyrus fragment was offered for sale on Ebay by a source one might not want to invite home to meet the parents, but in the end a little way down the road, what do you know! was evidently purchased by some capitalistic plutocrat and donated to a museum, where it is obviously being carefully preserved and kept available for study and research.

Her problem, of course, is the absence of a good provenance. But Dr. Mazza expects everything her own way, and refuses to reflect on causes and effects and the nature of reality. Why is there no provenance? Obviously a provenance is lacking, because this papyrus fragment could not be bought and sold openly. It had to travel from valueless, totally inaccessible, probably dangerous occult obscurity to its resting place in a prominent collection via the black market.

Why the black market? Obviously because greedy, pompous, grasping primitive governments like that of Egypt despotically claim total ownership of all antique, archaeological, and historically valuable material found, discovered, unearthed, or passed along in some chain of private or corporate possession in their territory. Better that artifact lie buried in the ground than that some Egyptian peasant carry on the millenia-old antiquities hunting trade, find it, profit privately, and let the item go to some institutional collection in a civilized Western country. No, no, no, that would be a theft from, and an affront to, the People’s Collectivist State.

Obviously, if in a different world, a world in which academicians looked objectively at economic reality, Human Nature, and the legitimacy, ethical qualities, and level of sophistication and culture of different governments and societies, those academics would do the really ethical thing and dismiss out of hand the insolent claims of ephemeral contemporary brigandish regimes to the inherited legacy of mankind generally, and they would insist that private initiative and market forces be permitted to operate freely, recognizing the former as by far the most efficient, effective, and reliable mechanisms, those being actually in accord with individual self interest, for the recovery and preservation of antiquities of every kind.

In a free market situation, instead of being covertly offered on Ebay, a valuable papyrus fragment would have been advertised widely with every bit of documentation and provenance possible in order to maximize the object’s value and to bring it to the attention of every possible interested individual and institutional collector. The missing provenance isn’t the fault of market processes. It is the fault of over-reaching, oppressive Statism.

15 Feb 2018

It Ain’t What You Don’t Know, It’s What You Know That’s Not So

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Hendrik Gerritsz Pot, Floraes Mallewagen (Flora’s wagon of fools), c.1640.

Anne Goldgar explains that the cautionary story of the great 17th century Dutch Tulip Bubble is mostly wrong.

Why have these myths persisted? We can blame a few authors and the fact they were bestsellers. In 1637, after the crash, the Dutch tradition of satirical songs kicked in, and pamphlets were sold making fun of traders. These were picked up by writers later in the 17th century, and then by a late 18th-century German writer of a history of inventions, which had huge success and was translated into English. This book was in turn plundered by Charles Mackay, whose Extraordinary Popular Delusions and the Madness of Crowds of 1841 has had huge and undeserved success. Much of what Mackay says about tulip mania comes straight from the satirical songs of 1637 – and it is repeated endlessly on financial websites, in blogs, on Twitter, and in popular finance books like A Random Walk down Wall Street. But what we are hearing are the fears of 17th-century people about a 17th-century situation.

It was not actually the case that newcomers to the market caused the crash, or that foolishness and greed overtook those who traded in tulips. But this, and the possible social and cultural changes stemming from massive shifts in the distribution of wealth, were fears then and are fears now. Tulip mania gets brought up again and again, as a warning to investors not to be stupid, or to stay away from what some might call a good thing.

RTWT

11 Feb 2018

George Gilder On Technology

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George Gilder

Forbes interviews Gilder on the future of Big Tech.

Q: One of your lifelong theories, which reaches back to your 1980s bestsellers https://www.amazon.com/gp/product/1596988096?ie=UTF8 and The Spirit of Enterprise, is the role of the human spirit and human agency, something economists and governments don’t see or don’t want to acknowledge.

Gilder: It’s the greatest of all forces. Think about what’s going on in the U.S. today, particularly in our university system. As Tyler Cowen describes in his book The Complacent Class, we’ve adopted a kind of ideology of cautionary principles and stationary states. He really puts his finger on it. We’re not living in an age of boldness and abundance, but in an age of retrenchment and shrinking horizons and careful rearrangements of existing resources. A lot of it is epitomized by this whole idea that unless human beings stop moving, the climate’s going to collapse on us.

The climate-change paralysis has been very destructive, not only to our national economy but particularly to Silicon Valley. Every time I find a company that’s doing everything right, I discover a peculiar feature of its technology that’s designed chiefly to stop it from emitting carbon dioxide. And that feature twists the technology into a pretzel, making it less useful and less promising. Take Google. It’s making an elaborate effort to render all of its massive data centers around the world “carbon-neutral.” They’re all linked up to various druidical Sunhenges of solar panels or quixotic kites or windmills. I mean, that’s some archaic way to produce energy!

I think we’re really in the middle of a loss of confidence, a loss of courage that is expressed and perpetrated by a massive expansion in regulations. This began in the Bush era, was vastly expanded during the Obama years, but has now been marginally retrenched. My hope is that the Trump retrenchment signals a truly new approach to the world and the human predicament.

02 Aug 2017

Milton Friedman on Inflation

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“Only government can take perfectly good paper, cover it with perfectly good ink and make the combination worthless.”

— Milton Friedman

19 Jul 2017

Deirdre McCluskey’s Classical Liberalism Manifesto

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Patric Park, Adam Smith, 1845, Kelvingrove Art Gallery.

A must-read essay.

As Boaz says at the outset of The Libertarian Mind, “In a sense, there have always been but two political philosophies: liberty and power.” …

[The new liberalism, by inspiriting for the first time in history a great mass of ordinary people, produced a massive explosion of betterments. Steam, rail, universities, steel, sewers, plate glass, forward markets, universal literacy, running water, reinforced concrete, automobiles, airplanes, washing machines, antibiotics, the pill, containerization, free trade, computers, the cloud. It yielded in the end an increase in real income per head by a factor of thirty, and a startling rise in the associated ability to seek the transcendent in Art or Science or God or Baseball.

I said 30. It was a stunning Great Enrichment, material and cultural, well after the classic Industrial Revolution.

The Enrichment was, I say again in case you missed it, three thousand percent per person, near enough, utterly unprecedented. The goods and services available to even the poorest rose by that astounding figure, in a world in which mere doublings, increases of merely 100 percent, had been rare and temporary, as in the glory of fifth century Greece or the vigor of the Song Dynasty. In every earlier case, the little industrial revolutions had reverted eventually to a real income per head in today’s prices of about $3 a day, which was the human condition since the caves. Consider trying to live on $3 a day, as many people worldwide still do (though during the past forty years their number has fallen like a stone). After 1800 there was no reversion. On the contrary, in every one of the forty or so recessions since 1800 the real income per head after a recession exceeded what it had been at the previous peak. Up, up, up. Even including the $3-a-day people in Chad and Zimbabwe, world real income per head has increased during the past two centuries by a factor of ten, and by a factor of thirty as I said, in the countries that were lucky, and liberally wise. Hong Kong. South Korea. Botswana. The material and cultural enrichment bids fair to spread now to the world.

And the enrichment has been equalizing. Nowadays in places like Japan and the United States the poorest make more, corrected for inflation, than did the top quarter or so two centuries ago. Jane Austen lived more modestly in material terms than the average resident of East Los Angeles.

HT: Arnold Kling.

04 Jun 2017

What the Paris Treaty Was Really About

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Sundance explains that the Paris Climate Treaty was only ever pretending to be about the climate.

The Paris Treaty was/is always about distribution of economic wealth; and the convenient use of “climate phrases” as branding instruments used to create political policy favorable to multinational corporate interests who control the shifting of economic wealth.

Listen to the responses from participating EU corporate comptrollers discussing climate and the entire purpose of the Paris Treaty becomes self-evident. Example:

    “The preservation of our competitive position is the precondition for successful climate protection. This correlation is often underestimated.”

    ~ Matthias Wissmann, President of German Auto Industry Group VDA

The preservation of Germany’s competitive auto manufacturing position is contingent upon the U.S. exporting it’s wealth and handcuffing itself to a faux-climate treaty. Do not take my word for it, read Wissmann’s own interview. The Paris Treaty is nothing about climate, and everything about economics and multinational corporate interests.

To understand the larger objectives of the global and financial elite it is important to understand the three-decade global financial construct they now seek to protect. Global financial exploitation of national markets:

    ♦Multinational corporations purchase controlling interests in various national elements of developed industrial western nations.

    ♦The Multinational Corporations making the purchases are underwritten by massive global financial institutions, multinational banks.

    ♦The Multinational Banks and the Multinational Corporations then utilize lobbying interests to manipulate the internal political policy of the targeted nation state(s).

    ♦With control over the targeted national industry or interest, the multinationals then leverage export of the national asset (exfiltration) through trade agreements structured to the benefit of lesser developed nation states – where they have previously established a proactive financial footprint.

RTWT

28 Jan 2017

The Triumph of Free Trade

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An elaborate allegorical illustration used as the frontispiece in Jane Cobden’s book The Hungry Forties (1904) which was part of the free trade campaign against Joseph Chamberlain’s pro-tariff movement in 1903. There is a very large sheaf of wheat (the “Fairy Wheatsheaf”) in the centre with the heads of Cobden and Bright near the base (other heads are visible in the grass beneath and around the sheaf but these are hard to identify); to the left is a destitute family which has been impoverished by tariffs; to the right is a prosperous family which has been enriched by free trade. The writing at the bottom of the page is hard to read but it is called “The fairy Wheatsheaf. Free Trade & Protection Contrasted”

Richard Ebling, at the Foundation for Economic Education, explains how free trade triumphed in the mid-19th century making Europe into a great and prosperous modern civilization.

Great Britain became the first country in the world to institute a unilateral policy of free trade. For the rest of the nineteenth century — indeed, until the dark forces of collectivism enveloped Europe during World War I — the British Empire was open to the entire world for the free movement of men, money, and goods.

Its economic success served as a bright, principled example to the rest of the globe, many of whose member countries followed the British lead in establishing, if not complete free trade, at least regimes of much greater freedom of trade and commerce.

British free trade policy helped to usher in the age of nineteenth-century free trade, and fostered what has been called the classical liberal era of “the three freedoms” which only came to an end with the First World War in 1914. The German free market economist Gustav Stolper explained these three freedoms in his book, This Age of Fable (1942), written while in exile in America during the Second World War:

    They were: freedom of movement for men, for goods and for money. Everyone could leave his country when he wanted and travel or migrate wherever he pleased without a passport. The only European country that demanded passports (not even visas!) was Russia, looked at askance for her backwardness with an almost contemptuous smile. Who wanted to travel to Russia anyway? …

    There were still customs barriers on the European continent, it is true. But the vast British Empire was free-trade territory open to all in free competition, and several other European countries, such as the Netherlands, Belgium, Scandinavia, came close to free trade.

    For a time the Great Powers on the European continent seemed to veer in the same direction. In the sixties of the nineteenth century the conviction was general that international free trade was the future. The subsequent decades did not quite fulfill that promise. In the late seventies reactionary trends set in. But looking back at the methods and the degree of protectionism built up at that time we are seized with nostalgic envy. Whether a bit higher or a bit lower, tariffs never checked the free flow of goods. All they affected was some minor price changes, presumably mirroring some vested interest.

    And the most natural of all was the free movement of money. Year in, year out, billions were invested by the great industrial European Powers in foreign countries, European and non-European … These billions were regarded as safe investments with attractive yields, desirable for creditors as well as debtors, with no doubts about the eventual return of both interest and principal.

The nineteenth-century victory of free trade over Mercantilism and Protectionism represented one of the great triumphs in the history of classical liberalism. It was the achievement of the Scottish Moral Philosophers and those that are now referred to as the “Classical Economists” in demonstrating the spontaneous order and coordination arising from a free, competitive market system – Adam Smith’s “system of natural liberty” and the cooperative gains for all through a system of division of labor.

The momentous importance in human history of this triumph is not always appreciated for what it was: a crucial institutional transformation that heralded the beginning of the material and cultural improvement of mankind through the private and peaceful associations of humanity for the mutual betterment of the mass of mankind. This transformation continues today, even in the face of the reactionary return to paternalistic government and political interference with human life over the last century.

14 Dec 2016

“A Christmas Carol? Bah, Humbug!”

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Tom Mullen argues that Dickens and Hollywood got everything wrong about Scrooge.

As Butler Shaffer demonstrated in his brilliant defense of poor Ebenezer, Scrooge was an invaluable benefactor to English society before the events of Dickens’ story. We are not given details of his business dealings other than they had something to do with finance. That Scrooge had been in business so many years and had amassed such wealth is enough for us to conclude he had made many more wise decisions on where to direct capital than unwise ones.

Who knows what housing, stores, railways or other benefits to society Scrooge had made possible through his wise judgment? How many thousands of jobs had he created? Dickens is unjustly silent on this. Whatever Scrooge had financed, we know it was something the public wanted or needed enough to pay for voluntarily. Thanks to Scrooge, however crusty his demeanor, the common people of London were far richer than they otherwise would have been without his services.

His only weakness seems to be sentimentality towards the whiny, presumably mediocre-at-best Bob Cratchett. We know Scrooge was paying Cratchett more than anyone else was willing to or Cratchett would surely have accepted a higher-paying job to put additional funds towards curing Tiny Tim. But we really don’t have any evidence anyone else was willing to employ Cratchett at all, at any salary level. Still, we must defer to Scrooge’s judgment on this and perhaps even laud him for finding a way to employ a substandard employee without jeopardizing the firm as a whole.

Thus, all was as well as it could have been on December 23. Scrooge’s customers were happy, Bob Cratchett was at least employed, thanks to Scrooge, and Scrooge himself was as happy as he could be, considering the ingratitude with which his genius had been rewarded and all the panhandlers constantly shaking him down.

Everything changed on Christmas Eve, when Scrooge was terrorized – there really is no other word for it – by three time-traveling, left-wing apparitions. It wasn’t enough to frighten an elderly man with the mere appearance of ghosts. They took him on a trip through time, scolding him for supposed mistakes made in the past and blaming him for the misfortunes of others in the present and future. And let’s not forget the purpose of this psychological waterboarding. They are not, as Shaffer observes, pursuing Scrooge’s happiness, but his money. They are William Graham Sumner’s A & B conspiring to force C to relieve the suffering of X. Politicians A & B use the polite coercion of legislation; the spirits make use of more direct and honest threats of violence.

Their plot was successful. Scrooge awoke from his night of terror obviously out of his senses and began making one poor financial decision after another. Perhaps buying the largest turkey in the local shop could be excused on Christmas Day. But then, without any evidence of improvement in performance, he raised Bob Cratchett’s salary and promised to take on the Cratchett family’s medical expenses.

After that, we are told Scrooge was “transformed” completely, which we can only interpret to mean he no longer made the kind of decisions that had previously benefited so many. We are told Scrooge’s subsequent behavior was so foolhardy that some people laughed at him. But even this wasn’t enough to snap him out of the permanent delirium with which the spirits had inflicted him.

How many profitable ventures were never financed, both before and after Scrooge went out of business?

The story ends on that foreboding note. We are told Scrooge never again returned to the prudent decision-making that had brought on the supernatural terror attack on Christmas Eve. We have to assume the “transformed” Scrooge eventually went out of business, perhaps solely due to overpaying Cratchett, who is 50% of his labor force, perhaps due to the cumulative effect of the many unwise decisions we are told continued afterwards.

Not only was Tiny Tim’s medical care cut off, but the whole Cratchett family was rendered destitute and starving. As Scrooge had already been paying Cratchett more than anyone else was willing to, even before the imprudent raise, we have to assume Cratchett made less after Scrooge went out of business than he did at the beginning of the story, if he convinced anyone to employ him at all.

Worse even than the misfortune that befell Scrooge, Cratchett and Tiny Tim was the misfortune visited upon society as a whole. How many profitable ventures were never financed, both before and after Scrooge went out of business from investing with his heart instead of his head? How many future jobs were destroyed and children of unemployed fathers left sick and hungry?

27 Apr 2016

US GDP 25% Smaller Due to Federal Regulation

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RegulatoryCosts

Investors Business Daily cites a George Mason University Study of the compliance cost of federal regulations which finds that those costs are truly staggering.

Economists scratch their heads when asked to explain the economy’s tepid growth over the past several years. A new study gives a possible answer: the growing, cumulative burden of federal regulations.

Under President Obama, annual GDP growth never once even hit 3%. Under Bush before him, there were only two years when growth topped 3%. But in the two decades before that, annual GDP growth was above 3% in all but six years.

Growth has been so anemic for so long, we’re now being told that this is the “new normal.” As the Bureau of Labor Statistics put it, “annual U.S. GDP growth exceeding 3% … is not expected to be attainable over the coming decade.” It lists everything as a cause, except for one thing: federal regulations.

Whenever a new regulation gets passed, the government puts out a cost analysis, which focuses on annual compliance costs. That’s fine for a point in time. But these regulations don’t go away. And every year more get added to the pile. The Code of Federal Regulations is now more than 81,000 pages long.

What’s the cumulative impact of all these rules, EDIT3-regu-042616regulations and mandates over several decades? A new study by the Mercatus Center at George Mason University tries to get an answer, and what it found is mind-boggling.

The paper looked at regulations imposed since 1977 on 22 different industries, their actual growth, and what might have happened if all those regulations had not been imposed.

What it found is that if the regulatory state had remained frozen in place in 1980, the economy would have been $4 trillion — or 25% — bigger than it was in 2012. That’s equal to almost $13,000 per person in that one year alone.

Looked at another way, if the economic growth lost to regulation in the U.S. were its own country, it would be the fourth largest economy in the world, as the nearby chart shows.

Read the whole thing.

16 Feb 2016

Laissez-Faire, Not Socialism, Made Sweden Prosperous

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SwedenEconomy

Johan Norberg notes that the Left loves to point out Sweden as a model of Socialism with Economic Prosperity. The problem is that all the prosperity is a legacy from an economic system which Socialism is determined to change.

Once upon a time I got interested in theories of economic development because I had studied a low-income country, poorer than Congo, with life expectancy half as long and infant mortality three times as high as the average developing country.

That country is my own country, Sweden—less than 150 years ago.

At that time Sweden was incredibly poor—and hungry. When there was a crop failure, my ancestors in northern Sweden, in Ångermanland, had to mix bark into the bread because they were short of flour. Life in towns and cities was no easier. Overcrowding and a lack of health services, sanitation, and refuse disposal claimed lives every day. Well into the twentieth century, an ordinary Swedish working-class family with five children might have to live in one room and a kitchen, which doubled as a dining room and bedroom. Many people lodged with other families. Housing statistics from Stockholm show that in 1900, as many as 1,400 people could live in a building consisting of 200 one-room flats. In conditions like these it is little wonder that disease was rife. People had large numbers of children not only for lack of contraception, but also because of the risk that not many would survive for long.

As Vilhelm Moberg, our greatest author, observed when he wrote a history of the Swedish people: “Of all the wondrous adventures of the Swedish people, none is more remarkable and wonderful than this: that it survived all of them.”1

But in one century, everything was changed. Sweden had the fastest economic and social development that its people had ever experienced, and one of the fastest the world had ever seen. Between 1850 and 1950 the average Swedish income multiplied eightfold, while population doubled. Infant mortality fell from 15 to 2 per cent, and average life expectancy rose an incredible 28 years. A poor peasant nation had become one of the world’s richest countries.

Many people abroad think that this was the triumph of the Swedish Social Democratic Party, which somehow found the perfect middle way, managing to tax, spend, and regulate Sweden into a more equitable distribution of wealth—without hurting its productive capacity. And so Sweden—a small country of nine million inhabitants in the north of Europe—became a source of inspiration for people around the world who believe in government-led development and distribution.

But there is something wrong with this interpretation. In 1950, when Sweden was known worldwide as the great success story, taxes in Sweden were lower and the public sector smaller than in the rest of Europe and the United States. It was not until then that Swedish politicians started levying taxes and disbursing handouts on a large scale, that is, redistributing the wealth that businesses and workers had already created. Sweden’s biggest social and economic successes took place when Sweden had a laissez-faire economy, and widely distributed wealth preceded the welfare state.

Hat tip to Karen L. Myers.

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