Monday, December 31, 2007

Speakers 2007

January – Ben Rast, President of The Bastiat Society

Topic: “The Future of The Bastiat Society in 2007 and Beyond”

Ben Rast is the founder and senior partner of The Rast Group, a team focusing on financial planning and asset allocation in the Columbia office of Morgan Stanley. His team works with a limited number of individuals and institutions to develop appropriate investment and financial planning strategies.
He holds the title of Senior Vice President – Wealth Advisor, and is a Certified Financial PlannerTM professional. He is also an Estate Planning Consultant, through the American College in Bryn Mawr, Pennsylvania. He completed executive education programs at the Stern School of Business, NYU. He ranks in the top seven percent of all Morgan Stanley financial advisors nationwide, and is a recognized leader in the firm.
Mr. Rast was formerly a weekly guest on NBC affiliate WIS-TV, the leading television news organization in the state. He hosted his own radio program for over thirteen years, and was a regular commentator on South Carolina Public Radio.
He has published numerous articles in local and national periodicals, including work for Barron’s. He is a member and past president of the SC Chapter of the Financial Planning Association. Mr. Rast frequently speaks to professional, civic, and fraternal groups on the topics of business, economics, investments and financial planning.
He has been an adjunct faculty member at Columbia College, has taught courses for the Department of Continuing Education at the University of South Carolina, and has served as an adjunct professor in the USC School of Business. Mr. Rast also has participated in continuing education for the South Carolina BAR.
Mr. Rast is a member of the Partnership Board of the SC Honors College, the Partnership Board of the Department of Political Science at the University of South Carolina, and a member of the Board of Directors for the Palmetto Opera. He is a member of the Columbia Economics Club. He is Chairman of the SC Club for Growth.

February -Robert Poole, Director of Transportation Studies, Reason Foundation

Topic: “Commercializing Highways: A New Paradigm for 21st Century Roadways”

Robert Poole founded the Reason Foundation in 1978, and served as its president and CEO from then until the end of 2000. He was a member of the Bush-Cheney transition team in 2000. Over the years, he has advised the Reagan, George H.W. Bush, Clinton, and George W. Bush administrations on privatization and transportation policy.
Poole is credited as the first person to use the term “privatization” to refer to the contracting-out of public services and is the author of the first-ever book on privatization, Cutting Back City Hall, published by Universe Books in 1980. He is also editor of the books Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington Books, 1981), Defending a Free Society (Lexington Books, 1984), and Unnatural Monopolies (Lexington Books, 1985). He also co-edited the book Free Minds & Free Markets: 25 Years of Reason (Pacific Research Institute, 1993).
Poole has written hundreds of articles, papers, and policy studies on privatization and transportation issues. His popular writings have appeared in national newspapers, including The New York Times, The Wall Street Journal, USA Today, Forbes, and numerous other publications. He has also been a guest on network television programs such as Good Morning America, NBC’s Nightly News, ABC’s World News Tonight, and the CBS Evening News. Poole writes a monthly column on transportation issues for Public Works Financing.
Poole earned his B.S. and M.S. in mechanical engineering at Massachusetts Institute of Technology (MIT) and did graduate work in operations research at New York University.

March - Dr. Yaron Brook, President of the Ayn Rand Institute

Topic: “The Moral Foundations of Capitalism”

Dr. Brook is a prominent advocate for Objectivism, a pro-business philosophy originated by novelist Ayn Rand. As president of the Ayn Rand Institute, an educational organization based in California, he appears frequently on national TV and radio to discuss financial and economic issues from the Objectivist viewpoint. He is a regular guest on CNBC’s “On the Money” for his expertise on a wide range of questions and events related to the business world. Many of his recent interviews have dealt with business-related individual rights issues, such as property and patent rights violations in antitrust regulations and free speech rights violations in Internet censorship cases.
A popular speaker at corporations, universities and community groups, Dr. Brook is known for his pro-capitalist ideas and his passionate speaking style. His talk “Why Conservatives are Anti-Business,” challenges the common notion that conservatives are allies of business and capitalism. He has also developed a series of multi-day seminars on business ethics which he delivers to corporations in the United States and abroad.
As a writer, Dr. Brook has been published in several newspapers and business journals. His most recent editorial on CEO pay appeared in USA Today. His academic publications include articles in The Journal of Investing and The Journal of Corporate Finance.
Dr. Brook is also an expert on foreign policy in the Middle East and recently co-authored an article called “‘Just War Theory’ vs. American Self-Defense,” which appeared in the inaugural issue of The Objective Standard, a new journal on the culture and politics.
Before joining the Ayn Rand Institute, Dr. Brook lived in Israel. He served in the Israeli military intelligence and received his B.Sc. degree in Civil Engineering from Technion—Israel Institute of Technology. In 1987 he moved to the United States and attended the University of Texas at Austin, where he earned his MBA and Ph.D. in Finance. For seven years he was a finance professor at the Leavey School of Business at Santa Clara University in Santa Clara, California, where he designed an award-winning MBA and undergraduate class on “Ethics and Finance.” He later co-founded a conferencing business, Lyceum International, and in 1998 he co-founded a financial advisory firm, BH Equity Research, for which he is presently managing director and chairman.

April - Jane Shaw, executive vice-president of the J.W. Pope Center for Higher Education Policy, a Raleigh-based nonprofit organization dedicated to improving higher education in North Carolina and the nation.

Topic: “Putting Higher Standards Back into Higher Education.”

May - John Blundell, Director General of the Institute of Economic Affairs, London. The IEA is the UK’s original free-market think-tank, founded in 1955. The IEA’s goal is to explain free-market ideas to the public, including politicians, students, journalists, businessmen, academics and anyone i nterested in public policy. The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analyzing and expounding the role of markets in solving economic and social problems.
Topic: “Achieving Change: What We Can Learn From Margaret Thatcher.”

June - Dr. Ed Hudgins

Edward Hudgins is the executive director of The Atlas Society and publisher of that organization’s magazine, The New Individual.Topic: Why Americans Are Confused About Freedom and What We Can Do About It

July

“Jeremiah, Milton Friedman, and Liberty”

ABOUT BOB CHITESTER

Bob Chitester is President and CEO of the Palmer R. Chitester Fund, Chitester Creative Associates, Inc. and The Idea Channel®; and is managing partner of Free to Choose Enterprise. These companies produce television programs and program elements, create and operate web sites, create print and CD-ROM materials, and distribute curriculum materials to high schools and colleges.

In 1977, Mr. Chitester convinced Milton Friedman to undertake a project which became, Free to Choose, an award winning PBS TV series and an international best selling book based on the series. Over 25 years later the series and book are still in wide use and have been notably influential. Mart Laar, first Prime Minister of a free Estonia and recent winner of the Friedman Prize, used Free to Choose as a guide in setting policies that gave Estonia a thriving economy.

August

“Putting Sound Economics into Politics”

About Chad Walldorf

Chad’s first government experience came when he took a year off from college to serve in President Reagan’s Office of Political Affairs. After the 1988 election cycle, Chad left the White House to return to the University of Virginia. Shortly after graduating, he and two high school friends moved to Mount Pleasant to create the first Sticky Fingers restaurant.

Their original concept has grown to over 1000 employees in their sixteen restaurants, catering, mail order, and wholesale businesses. Chad and his partners have been named Ernst and Young “Entrepreneurs of the Year” for the Carolinas as well as the Lowcountry’s “Most Philanthropic Company.”

In 2003 Chad took a two-year sabbatical from his business to serve as a Deputy Chief of Staff to Governor Mark Sanford.

September

The Bastiat Society was excited to host the South Carolina Premiere of Mine Your Own Business, by Phelim McAleer and Ann McElhinne, as our monthly Bastiat Meeting for September.

The film was shown at the American Theatre, 446 King Street in Charleston.

“Move over Michael Moore. You have competition in the art of political film making…but instead of advancing the cause of smug liberal hypocrisy, he’s [McAleer] debunking it.” – Wall Street Journal Online

www.mineyourownbusiness.org

October

Dane Starbuck, author of the official biography of James and Pierre Goodrich.

ABOUT DANE STARBUCK

James Goodrich (father) and Pierre Goodrich (son) built a successful business dynasty in Indiana during the first half of the 20th century. Pierre then used the family fortune to build a legacy of education and philanthropy, including the unique accomplishment of establishing the Liberty Fund, Inc. of Indianapolis, a non-profit educational foundation that promotes the study of a society of free and responsible individuals.

Every year, Liberty Fund sponsors hundreds of conferences around the world for professionals and academics. It also publishes an extensive list of classic texts on social theory.

Dane Starbuck is an attorney in private practice and member of the Board of Directors of Liberty Fund, Inc. His quest for knowledge has taken him from Huntington College (B.A. in English, magna cum laude) to Indiana University (M.A. in English Literature) to the University of Melbourne in Australia (M.A. in English Literature and Language with Honors) to Oxford University in England (B.A. and M.A. in Jurisprudence) to Georgetown University Law Center (J.D.).


November

The Separation of School and State: The Case for Abolishing America’s Government Schools

Brad Thompson from the Clemson Institute for the Study of Capitalism.

Why do so many Americans support a compulsory system of government-run education? What role should the State play in educating America’s children? Are government schools compatible with a free society? Is it possible to have a free market in education?

C. Bradley Thompson will examine the destructive effects of “public” education in America. He will critique the principal assumptions behind government schooling, and he will call for fully private system of education.

Thompson will present a principled argument for a free market in education that begins with the rights and responsibilities of parents to provide for the education of their own children.

ABOUT BRAD THOMPSON

C. Bradley Thompson is the BB&T Research Professor at Clemson University and the Executive Director of the Clemson Institute for the Study of Capitalism. He has also been a visiting fellow at Princeton and Harvard universities and at the University of London.
Professor Thompson is the author of the prize-winning book John Adams and the Spirit of Liberty. He has also edited The Revolutionary Writings of John Adams, Antislavery Political Writings, 1833-1860: A Reader and was an associate editor of the four-volume Encyclopedia of the Enlightenment. His current book project is on “The Ideological Origins of American Constitutionalism.”

Dr. Thompson is also an occasional writer for The Times Literary Supplement of London. He has lectured around the country on education reform and the American Revolution, and his op-ed essays have appeared in scores of newspapers around the country and abroad. Dr. Thompson’s lectures on the political thought of John Adams have twice appeared on C-SPAN television.

Sunday, December 30, 2007

What Won't Work

Over at EconLog, Arnold Kling offers a short explanation of why a single-payer health care system won't work...

On health care, I am certain that a single-payer system will not produce enough efficiency to solve the financial problems of health care. After all, Medicare is more fiscally unsound than our private health care system. As an aside, while I was in St. Louis we had dinner with a retired doctor. She told of an incident where, as a patient, she went to see a dermatologist about a rash. The dermatologist looked at her and told she was fine. This proved to be correct. However, he billed Medicare for $700 for surgery. She called Medicare to report the fraud, and, after she finally got through after considerable time in voice-mail hell, the person told her that, "No, everything is fine. Our records show that you had the surgery."

Saturday, December 29, 2007

The Barrier Between Capitalism and Democracy

Robert Reich, in a letter to the New York Review of Books, defends his new book, Supercapitalism, and posits his solution to the cacophony of business lobbyists that he says overwhelms the democratic process, and makes it impossible to hear "citizen values" in Washington.

He says the solution "...lies in erecting a more effective barrier between the economy and politics, between capitalism and democracy. That way, we as consumers can enjoy the benefits of the former, as informed by the citizen values we express in the latter.

The question left hanging in the air is who tore down the barriers between capitalism and democracy in the first place? In some cases, it was businessmen who successfully used the government to crush their competition and loot their customers. In other cases, it was ambitious politicians who used government to indiscriminately loot the wealthy. Either way, the barrier between capitalism and democracy never had a chance...so long as democracy possessed the power to make one group rich and another group poor.

Perhaps the best way to keep business out of government and government out of business is to limit the power of government, period. A healthy concern about the size of government may be the most important "citizen value" of all.

Friday, December 28, 2007

Power and Greed

Democratic Presidential hopeful John Edwards says corporate power and corporate greed threaten everything Americans hold dear.

Here is my comment, posted on The Nation's blog:

How can progressives insist that human nature is irredeemably corrupt when it works for a corporation, and then put all their faith in the belief that human nature becomes positively angelic when it collects a government paycheck -- so much so that it can be trusted with nearly unlimited power over the labor, property, and lives of others?

Corporate power and corporate greed are nothing compared to the nightmares of government power and government greed.

Thursday, December 27, 2007

Millions and Millions Served

From George Will, a rarely heard and desperately needed cheer for one of the icons of American business: McDonald's.

McDonald's exemplifies the role of small businesses in Americans' upward mobility. The company is largely a confederation of small businesses: 85 percent of its U.S. restaurants -- average annual sales, $2.2 million -- are owned by franchisees. McDonald's has made more millionaires, and especially black and Hispanic millionaires, than any other economic entity ever, anywhere.

What Will doesn't mention is the hard work that goes into running a successful restaurant. It begins with the headaches that go with managing squadrons of mostly young people. Small business owners all say the same thing: finding, getting and keeping good employees is their biggest challenge.

What happens without good employees? Imagine getting the same call, every day at 4:30 am, explaining why yet another employee cannot make it to work. Now you have to scramble to fill holes in your staffing.

Imagine investing everything you have in a venture where you rely exclusively on the good will of customers who spend less than five or six dollars apiece, and who expect their orders filled in a few minutes and without error, sometimes for twenty four hours a day. Imagine being in a business where, just to pay your taxes, you must successfully conclude hundreds of transactions each hour. The hours are long, the work is hard, and profits accumulate very slowly. McDonald's didn't make those millionaires. They made themselves.

The story of McDonald's and its franchisees is yet another example of the truth in the statement that a profitable business, honestly run, is one of mankind's greatest and least appreciated achievements.

Sunday, December 23, 2007

Evolution and Economics

From Scientific American, a nice summary of economics as a complex, adaptive process, with a hat-tip to Bastiat and von Mises.

Evolution and economics are not just analogous to each other, but they are actually two forms of a larger phenomenon called complex adaptive systems, in which individual elements, parts or agents interact, then process information and adapt their behavior to changing conditions. Immune systems, ecosystems, language, the law and the Internet are all examples of complex adaptive systems.


In biological evolution, nature selects from the variation produced by random genetic mutations and the mixing of parental genes. Out of that process of cumulative selection emerges complexity and diversity. In economic evolution, our material economy proceeds through the production and selection of numerous permutations of countless products.

Saturday, December 22, 2007

Radical Chic

From Reuters, via Reason...

From Reuters, the tale of a stammering representative of the bolibourgeoise who treated reporters to a stinging denunciation of capitalism...while wearing a $180 Louis Vuitton tie and $500 Gucci shoes:

A video of a Gucci- and Louis Vuitton-clad politician attacking capitalism then struggling to explain how his luxurious clothes square with his socialist beliefs has become an instant YouTube hit in Venezuela.

Venezuelan Interior Minister Pedro Carreno was momentarily at a loss for words when a journalist interrupted his speech and asked if it was not contradictory to criticize capitalism while wearing Gucci shoes and a tie made by Parisian luxury goods maker Louis Vuitton.

"I don't, uh ... I ... of course," stammered Carreno on Tuesday before regaining his composure. "It's not contradictory because I would like Venezuela to produce all this so I could buy stuff produced here instead of 95 percent of what we consume being imported." The video clip had been viewed more than 15,000 times on Thursday, a day after it was posted on the YouTube Web site.

Friday, December 21, 2007

America's Best Companies

One of the things that is most exciting and challenging about business is how quickly things change. Consider the 2008 version of Forbes magazine's list of America's Best Big Companies. Of the 400 companies on the list in 2007, 165 did not make it to the list in 2008. Sic transit gloria mundi.

Tuesday, December 18, 2007

Cheap Socks

Not very long ago, darning socks was a valuable personal skill.

Today, outside of the company of eccentrics who enjoy things like dressing up in period costumes and pretending for a mercifully short time that they don't live in the 21st century, finding someone who actually knows how to darn a sock is a challenge.

Why? Because socks used to be too expensive to throw away. Now, socks are so inexpensive, we would rather buy a new pair than spend time mending an old one.

Lost a sock in the wash? Don't despair. They're so cheap, you can buy another pair without regret. Only the curious, not the needy, spend time looking for a sock match at Lonely Socks.

What brought the human race to the point where socks with holes are disposable items, not precious clothing in constant need of repair? It wasn't the might of armies or the wealth of kings. It wasn't the will of history. It wasn't charity. It wasn't grand theories self-sacrifice and service to humanity.

One thing and one thing only made socks cheap enough to lose and throw away: self-interested business, trying to make a profit in the manufacture, distribution and retail of something as simple as a pair of socks.

One of mankind's greatest and least appreciated achievements is a profitable business, honestly run.

Monday, December 17, 2007

"The Lives of Others"

At the beginning of the Oscar-winning movie "The Lives of Others," East German Stasi agent Gerd Wiesler is teaching a class on interrogating the enemies of socialism. To illustrate his point, Wiesler uses a tape of his interrogation of a suspect known only as Prisoner 227.

"You think we imprison people on a whim?" Wiesler asks. "If you think our humanistic system capable of such a thing, that alone would justify your arrest." With chilling efficiency, Wiesler breaks down Prisoner 227. He dismisses the class with the warning, "Your subjects are the enemies of socialism. Never forget that."

What happens next makes this a "must-see" movie for anyone seriously interested in the issue of individual liberty. The trailer below sets the mood.

Sunday, December 16, 2007

Fascinating Uncertainty

“Although our intellect always longs for clarity and certainty, our nature often finds uncertainty fascinating.”

Carl von Clausewitz, On War
(1780 - 1831)

Saturday, December 15, 2007

International Business

We often hear that business must be more international -- or, to use a politically correct term, diverse -- or, to use another politically correct term, multicultural.

Whatever term you prefer, I offer the uniquely [insert preferred term here] world atlas, Our Dumb World, found at the humor-infested news site The Onion.

Warning: this atlas is designed to offend everyone.

This week's featured country:

"Iran: A Possible Threat to the Free World, Maybe"
"National Hazards: None. Just don't touch that button."

Friday, December 14, 2007

Disturbing Inventions

Business, at its best, is inventive. Sometimes we don't like inventive. It annoys us. It disturbs our social order, at least until we figure out where and when to use it. Take spam, for instance.

From the pages of the best magazine in the world, The Economist, here is the fascinating story of the invention of spam, and its social consequences. Hint: blame the dentists.

ON A May evening in 1864, several British politicians were disturbed by a knock at the door and the delivery of a telegram—a most unusual occurrence at such a late hour. Had war broken out? Had the queen been taken ill? They ripped open the envelopes and were surprised to find a message relating not to some national calamity, but to dentistry. Messrs Gabriel, of 27 Harley Street, advised that their dental practice would be open from 10am to 5pm until October. Infuriated, some of the recipients of this unsolicited message wrote to the
Times. “I have never had any dealings with Messrs Gabriel,” thundered one of them, “and beg to know by what right do they disturb me by a telegram which is simply the medium of advertisement?” The Times helpfully reprinted the offending telegram, providing its senders with further free publicity.

This was, notes Matthew Sweet, a historian, the first example of what is known today as “spam”. It shows that new communications technologies have been prompting questions about etiquette ever since the advent of the telegraph in the 19th century. The pattern is always the same: a new technology emerges on the scene, and nobody can be quite sure how it will be employed, or the appropriate etiquette for its use. So users have to make up the rules as they go along.

Enjoy the entire article here. Learn calling etiquette in Sweden and whether or not to answer your phone on a train in Japan.

Thursday, December 13, 2007

Specific Brilliant Visions

What is a corporation? Why does it exist?

The answers to these questions will determine your standard of living.

Brad Edmonds, writing for the Mises Daily Article, does a nice job summarizing the positive case for corporations.

Corporations owe their existence to the fact that, for hundreds of years, mankind has enjoyed technology that allows a single wily entrepreneur to improve the standard of living of millions of people. A single idea, such as the automobile, can bring about major changes for all of us. Many such important ideas are difficult to realize without the aggregated savings of hundreds or thousands of individuals. Hence the invention of the corporation: a fictional legal entity, a set of relationships governed by contract and statute, that makes possible great accumulations of wealth that can be focused on specific brilliant visions.

Simply stated, corporations allow us to enjoy the productive genius of our fellow humans in ways that would not otherwise be possible. A shackled corporation is shackled genius.

Wednesday, December 12, 2007

Tuesday, December 11, 2007

Individual Rights and Terrorism

I posted the following comments at Reason, in response to an article on the Randian Congressman John Campbell of California. Although he's a strong proponent of limited government and lower taxes, Campbell has no problem supporting the government's request for easier surveillance.

Reason quotes him as saying, “I’m very much a privacy guy...It’s something I feel strongly about. But there’s something I feel even more strongly about: I don’t want to be blown up. I am willing to give them some limited access to my phone records because of this war on terror.”

Of course, voicing support for easier surveillance attracts the just wrath of civil libertarians. They are concerned that rights, once sacrificed, will not be restored. All too often, that has been the pattern in history.

On the other hand, which is worse, a permanent loss of privacy or the permanent loss of thousands, perhaps hundreds of thousands of innocent lives? And one thing is absolutely certain: fewer civil liberties will be lost preventing terror than will be lost after a terrorist event.

My comments:

The only justification for war, taxation, and loss of privacy is the prevention of even greater war, taxation, and loss of privacy.

Unfortunately, events don't often present themselves in the form of a simple calculation of cost and benefit. To a large extent, we make many of our most important decisions on the basis of hope more than on the basis of sure knowledge.

Only time will tell whether the war in Iraq was a mistake or a success. It certainly will be one or the other. The final measure will not be the process. It will be the result.

Monday, December 10, 2007

Big Business (Heart) Big Government

From Reason, the disturbing comments of Congressman John Campbell (R, CA), a "pork-busting Randian":

“Of the first 50 meetings I had after I was elected,” he tells me, “47 were with businesses asking me for money. I was just stunned. Gee, I didn’t know I was just an ATM machine for taxpayer’s money.”

During the floor debate over the defense appropriations bill, Campbell honed in on a $2 million earmark for Sherwin-Williams, a paint company that is developing a “paint shield” for military vehicles. In the process, he locked horns with the fearsome chair­man of the Defense Appropriations Committee, Rep. John Murtha (D-Pa.). To everyone’s surprise, Campbell cleaned the 33-year congressman’s clock.

After Murtha rambled about how the military probably wanted the paint shield earmark even though it wasn’t on its “priority list,” Campbell pounced. “Mr. Chairman,” he said, “you said you’re ‘sure’ the military [wants it]. So you’re not aware if, in fact, the military has asked for this kind of technology?”

Campbell kept his eyes trained on the Democrat. Murtha didn’t have anything to say.

“I guess the answer to that is no,” Campbell said.

Of course, the House isn’t a debat­ing club. The earmark survived any­way.

Sunday, December 9, 2007

"The Law," (Part 9 of 9)

Saturday, December 8, 2007

"The Law," (Part 8 of 9)

Friday, December 7, 2007

"The Law," (Part 7 of 9)

Thursday, December 6, 2007

"The Law," (Part 6 of 9)

Wednesday, December 5, 2007

"The Law," (Part 5 of 9)

Tuesday, December 4, 2007

"The Law," (Part 4 of 9)

Monday, December 3, 2007

"The Law," (Part 3 of 9)

Sunday, December 2, 2007

"The Law," (Part 2 of 9)

Saturday, December 1, 2007

Bastiat's, "The Law" (Part 1 of 9)

Here's a well-done online audio reading of Bastiat's, "The Law." If you'd like to read along, here's a pdf of the text from the Foundation for Economic Education.

Friday, November 30, 2007

The Man in the Street

Unless you are one of those people who has made a conscious decision to abstain from television, you have seen more than you want to of those "man in the street" commercials from British Petroleum (BP), where earnest men and women offer sixty seconds of commentary on bio fuels, solar power, or energy conservation.

These ads are expensive, but I am not concerned that someone at BP thinks it is a swell idea to spend millions of shareholder dollars to broadcast randomly collected snippets of energy policy from people who may have little or no energy industry experience. After all, CSPAN found a reason to exist by broadcasting what the people in Congress say, and it is hard to imagine a larger group of people who are ready to pontificate about everything.

No, it is not the possible waste of money that concerns me about BP's commercials. What worries me is the thought that someone at the company might actually take these ideas seriously. That would be like a surgeon walking up to a random person on the street and asking, "What do you think we should do about Mr. Jones' tumor?" Not exactly the best way to gather informed opinion, don't you agree?

If BP hopes its "man in the street" commercials will buy it some good PR before its next PR nightmare, good luck. If BP thinks its commercials will sell more stuff and make more money, good luck. But if BP actually tries to run one of the world's largest energy companies on the basis of what the "man in the street" thinks it should do, God help us.

Thursday, November 29, 2007

Paris is (Still) Burning

When a country is free, prosperous, and powerful, it can count on a great deal of European carping about its success, especially from those countries that used to be free, prosperous and powerful, and perhaps even more from those countries that wanted to be be, but never made it.

In short, envy motivates much of the political and intellectual criticism directed against the United States. Not that the US is blameless. That title may rest safely on the act of an individual, but never on a nation. Get enough people together, and someone will behave badly, just like in college, only with real money and full responsibility. Unless you're a Congressman or an English professor. Then you get to pretend you're in college your entire career.

But I digress. Writing in Reason, Michael Moynihan takes down European hubris a notch or two by reminding them of their self righteous analysis of the Columbine massacre: "blame Charlton Heston."

I'm sorry. I missed something. Was he actually at Columbine?

Now people are rioting in France. Again. If it weren't such an abuse of common sense, it might actually be entertaining to see how French intellectuals struggle to differentiate violence in the United States from mob violence in France. Recall that it was the French philosopher Jean Paul Sartre (image) who said of the 1972 Munich Olympic massacre, terrorism "is a terrible weapon but the oppressed poor have no others."

Wednesday, November 28, 2007

Subprime Humor

Subprime humor from the UK...

Fred Smith at December Meeting

Fred L. Smith, Jr., the President and Founder of the Competitive Enterprise Institute, will be the speaker at the December, 2007 monthly meeting of the Bastiat Society.

His topic will be "Corporate Social Responsibility."

Fred combines the intellectual and strategic analysis of complex policy issues ranging from the environment to corporate governance with an informative and entertaining presentation style. Well-known in academic and professional circles, Fred is a popular speaker at universities and conferences around the world.

Date: Wednesday, December 5th
Hors d'oeuvres: 5 pm
Presentation: 6 pm
Location: 175 King Street, Imaging Arts Gallery, Charleston, SC
RSVP: Stephanie.whitener@imagingarts.com

Tuesday, November 27, 2007

Kant, Revisited

Revisiting the discussion of the impact of the ideas of the German philospher Immanuel Kant on the way business ethics is taught, I received the following email from philosopher Nicholas Capaldi, the Legendre-Soule Distinguished Chair in Business Ethics at Loyola University in New Orleans.

Nick's email told me I have more to learn and like about Kant, but I'm not likely to learn it while reading books on business ethics.

"Business ethicists have misinterpreted Kant. Kant was a classical liberal; this comes out clearly in his historical essays. Most business ethicists are second-rate philosophers who invoke abstractions from philosophical literature without really understanding them.

One could argue, on Kantian grounds, that the redistribution of wealth is treating some individuals as means and not as ends."

In a sense, business ethicists who inappropriately borrow ideas from philosophy are like economists who inappropriately borrow equations from physics. Each tries to gain intellectual respectability for his own work by mimicking the terminology and methodology of another, more respected field of study.

Monday, November 26, 2007

Stakeholder Theory

One of the most influential ideas on modern business has been the stakeholder theory of the corporation, first proposed by William E. Evan and R. Edward Freeman in 1988.

Their idea was to replace the view that a firm has a primary obligation to its shareholders with the view that a corporation has a responsibility to every group affected by its actions. Evan and Freeman called these groups "stakeholders," and they included suppliers, customers, employees, stockholders, and the local community.

Far more than simply saying that a firm must be legally responsible for its actions, stakeholder theory gives these various groups legal claims on the resources of the firm, and powerful roles to play in its governance. Stakeholder terminology has been rapidly adopted by individuals and organizations that want to appear socially responsible, democratic, or progressive.

But before we make stakeholder theory the new norm for corporate governance, we should ask the questions: Is stakeholder theory logical? Is it possible to successfully run a firm using these ideas?

In a word, the answer to both questions is "No."

Stakeholder theory does not work because every decision quickly becomes political. First, it gives one group of people the privilege to control something owned by another group. Then, in a world where everyone has an equal claim on the resources of a third party, someone unequal must decide the outcome of competing and irreconcilable claims. That someone is almost always the state.

For example, if one group wants a plant to stay open because it fears rising unemployment, and another group wants the plant closed because it fears environmental degradation, who or what shall decide? Someone must, in the chilling words of Freeman, decide what is "in the interest of the collective." In a world ruled by the rights of owners, owners would decide. In a world ruled by the equal claims of all, only the government can decide.

If you want to see what a world looks like when it is run according to stakeholder theory, look at the defunct USSR. The picture that accompanies this post was taken during the collectivization campaign in the USSR during the 1930s. The slogan reads: "We kolkhoz farmers, on the basis of complete collectivization, will liquidate the kulaks as a class."

The kulaks were farmers who owned their own property. The kolkhoz were the stakeholders who claimed it, in the interest of the collective.

At its heart, stakeholder theory is a naive intuition about the way people should live, not a realistic version of the way they actually do. It is a diluted version of the old collectivist dream, dressed up for Western business schools, but as dangerous as ever.

Friday, November 23, 2007

Cartoon


From "Decline of the Old Right" by Murray Rothbard, available at the Ludwig von Mises Institute.

Thursday, November 22, 2007

What Moves Markets

Some useful thoughts on the mysterious forces that move markets from Roger C. Gibson, author of Asset Allocation: Balancing Financial Risk:

"Thus, when it comes to predicting short-term stock market movements, it is not of any value to know whether we are at war or at peace, have a Republican or a Democrat in the White House, or have been in an economic expansion or a contraction. What, then, moves the market? It is moved by information relevant to the pricing of investments that was not previously known. In essence, it is the surprises that no one sees coming that trigger price movements to establish new equilibriums in the markets. These surprises themselves are random events. Occasionally there are more good surprises than bad, and we have a bull market. Other times the reverse is true, and we have a bear market. There will always be bulls and bears, but the evidence indicates that there is no consistent way to predict the turning points."

Tuesday, November 20, 2007

Kant Can't Be Right

Unbeknownst to many business people, their actions today are often evaluated by accredited experts according to the ethical theory of the German philosopher Immanuel Kant (1724 - 1804).

Kant maintained that people should always behave as if their actions were going to become universal law. He also stated that we should never think of other people as simply a means to our ends. We should deal with other people only as ends in themselves.

Kant's ethical theory has lead many a modern business ethicist to preach the idea that self-interested business activity is inherently unethical. These modern Kantians argue that business needs an ethical overhaul, and they are just the guys to do it.

However, there is a fatal logical flaw in their argument. Kant's insistence on a standard of "universal law" for ethical behavior assumes that man's rational mind can correctly identify each and every action that should be a universal law, and all of its consequences.

That is one great, big assumption. So big, in fact, that even a casual student of history must sardonically say to our dead German philosopher and all of his living disciples, "Viel Erfolg" ("I wish you success").

The reality is that the human mind is pitifully limited in its ability to discover universal laws, and even more limited in its ability to confidently predict the consequences of all of its actions.

Rather than theorize omniscience and god-like selflessness, business ethicists should look at what works in a world of limited knowledge and self-interested individuals.

A Mutually Beneficial Proposal

From the irrepressible economist, Don Boudreaux:

"Iran’s president Ahmadinejad insists that the dollar is "a worthless piece of paper." I'm happy to relieve him of the burden of holding valueless scrip. I invite President Ahmadinejad, and everyone else who shares his assessment of the dollar, to mail to me every one of their worthless pieces of paper. I'll even pay the postage. "

Sunday, November 18, 2007

Entrepreneurs and Managers

Entrepreneurs are agents of change. They explore design space in search of something that works. Managers exploit a successful design. Together, they make modern business.

Saturday, November 17, 2007

Modern Messiah

Something in human nature needs one person who personifies hope. Is it a good idea?

Wednesday, November 14, 2007

Ditch the Rich Hits

Writing in the National Review, Jonah Goldberg reflects on those who would improve the United States by taxing "the rich"...

"I don’t know what the best tax rates are, for rich or poor. But I’m pretty sure that it’s unhealthy for a democracy when the majority of citizens don’t see government as a service they’re reluctantly paying for but as an extortionist that cuts them in for a share of the loot."

Monday, November 12, 2007

Friedman Takes Donahue to School

In his book "Capitalism and Freedom" (1962) Milton Friedman (1912-2006) advocated minimizing the role of government in a free market as a means of creating political and social freedom.

An excerpt from an interview with Phil Donahue in 1979.

Sunday, November 11, 2007

Church, Dictator or Majority

"The political principle that underlies the political mechanism is conformity. The individual must serve a more general social interest -- whether that be determined by a church or a dictator or a majority. The individual may have a vote and say in what is to be done, but if he is overruled, he must conform. It is appropriate for some to require others to contribute to a general social purpose whether they wish to or not."

Milton Friedman, "The Social Responsibility of Business is to Increase Its Profits," The New York Times Magazine, September 13, 1970

Saturday, November 10, 2007

We Won the Peace

This report from CNBC is proof that in Vietnam, the United States lost the war, but won the peace. Vietnam today is more capitalist than communist.

The tourists, great beaches, luxury hotels, one of the fastest growing economies in the world, and more cars than bicycles on the streets of Ho Chi Minh City all make me wonder: was capitalism inevitable in Vietnam because it is the economic system that fits human nature best, or did the death and destruction of the Vietnam war have anything to do with this outcome? Was the war utterly pointless, or did it provide some unintended cultural benefit for the prosperous Vietnamese of today?

The transmission of superior cultural institutions is not always pretty or painless. And one generation's agony quickly becomes another generation's dusty history.

Friday, November 9, 2007

The Ten Commandments

Jaroslav Romanchuk, Executive Director of the Scientific Mises Research Center in Minsk, Belarus, has ten commandments of real corporate social responsibility. They are:

1. Thou shall not ask for government subsidies.
2. Thou shall not use state officials to kill competitors.
3. Thou shall not ask for privileges for your business.
4. Thou shall not support trade protectionism.
5. Thou shall not take part in government programs.
6. Thou shall support political competition and an independent court.
7. Thou shall support transparency of your own finances and the public finances.
8. Thou shall live by law, not by its bureaucratic interpretations.
9. Thou shall support a man in need.
10. Thou shall be a partner of the local community.

The Mises Research Center is the winner of the 2007 Templeton Freedom Prize for Initiative in Public Relations.

Thursday, November 8, 2007

Not Cadillac Care: Trabant Care

This short film, The Lemon, demonstrates how much single-payer health care systems have in common with the failed economic systems of Soviet-era eastern Europe.

It is written, directed, produced, edited and narrated by Stuart Browning

The Lemon is part of the Free Market Cure Video Series created by Browning to inform Americans about the dangers of collectivized medicine and the benefits of free markets in health care.

Browning states he has received no funding from the health insurance industry or the health care industry.

Wednesday, November 7, 2007

Empty Phrases

Thomas Sowell, in a column for National Review, unloads on two popular but empty phrases: "giving back" and "making a difference."

On "making a difference"...

"I would be scared to death to “make a difference” in the way pilots fly airliners or brain surgeons operate. Any difference I might make could be fatal to many people.

Making a difference makes sense only if you are convinced that you have mastered the subject at hand to the point where any difference you might make would be for the better.

Very few people have mastered anything that well beyond their own limited circle of knowledge. Even fewer seem to think far enough ahead to consider that question. Yet hardly a day goes by without news of some uninformed busybodies on one crusade or another...

Among those who make a difference by serving food to the homeless, how many have considered the history of societies which have made idleness easy for great numbers of people?

How many have studied the impact of drunken idlers on other people in their own society, including children who come across their needles in the park — if they dare to go to the parks?"

On "giving back"...

"Giving back” is a similarly mindless mantra. I have donated money, books, and blood for people I have never seen and to whom I owe nothing. Nor is that unusual among Americans, who do more of this than anyone else.

But we are not “giving back” anything to those people because we never took anything from them in the first place."

Tuesday, November 6, 2007

Business in the Swamp of San Francisco


Late in his life, the legendary Civil War general William T. Sherman remarked about his time as the president of a bank in real-estate-speculation-mad San Francisco: "I can handle a hundred thousand men in battle, and take the City of the Sun, but am afraid to manage a lot in the swamp of San Francisco."

Monday, November 5, 2007

The Tragedy of the Commons

From Econtalk...

Bruce Yandle of Clemson University and George Mason University's Mercatus Center looks at the tragedy of the commons and the various ways that people have avoided the overuse of resources that are held in common. Examples discussed include fisheries, roads, rivers and the air. Yandle talks with EconTalk host Russ Roberts about the historical use of norms, cooperative ventures such as incorporating a river, the common law, and top-down command-and-control regulation to reduce air and water pollution.

Sunday, November 4, 2007

They Will Remember My Carbuncles

From Scientific American, something you didn't know about Karl Marx...

"Workers of the world, unite!: You have nothing to lose but your—pustules!"
Karl Marx may have erred in predicting the "withering away" of the state under communism, but he got one thing right: "The bourgeoisie will remember my carbuncles until their dying day," he wrote in an 1867 letter to his longtime collaborator Friedrich Engels, referring to painful boils on his rump and nether regions. In a paper slated for the January British Journal of Dermatology, dermatology professor Sam Shuster of the University of East Anglia concludes from Marx's correspondences that the radical 19th-century political theorist suffered from hidradenitis suppurativa, a blockage and chronic inflammation of the sweat glands in the armpits and groin that can cause painful boillike lumps, swelling and scarring. The unsightly pustules made it hard for Marx to work and may have contributed to the alienation and self-loathing expressed in his writings, Shuster told Reuters. The revolutionary consoled himself by noting that it was at least a "proletarian disease."

Saturday, November 3, 2007

Liberation Technology

In some of the poorest nations of Africa, cell phone subscriptions are growing at a rate of 100% per year. This makes large parts of Africa a study in dramatically contrasting details, cell phone societies without running water.

As any successful innovation must, the mobile phone is transforming African society. In Kenya, a person living on $1 a day can buy an old cell phone for $10 in Cell Phone Alley, and instantly join a communication network that leaps from village to village. Before, news traveled at a walk or a run. Now, news about weather, crops, cattle, what people are buying and what they are not, travels around the country almost instantly.

The social transformation extends well beyond more speed and profits. Cheap phone calls and flash messaging make it nearly impossible for the governments in these nations to control opinions and information the way they used to. More than just a convenience, mobile telecommunication is a liberation technology.

Friday, November 2, 2007

"Science Isn't Special"

These paragraphs from Michael Crichton's new novel, Next, are classic Crichton: truth in the guise of fiction.

"Fraud in science is not rare, and it's not limited to fringe players. The most respected researchers and institutions have been caught with faked data. Even Francis Collins, the head of NIH's Human Genome Project, was listed as co-author on five faked papers that had to be withdrawn.

The ultimate lesson is that science isn't special -- at least not anymore. maybe back when Einstein talked to Niels Bohr, and there were only a few dozen important workers in every field. But there are now three million researchers in America. It's no longer a calling, it's a career. Science is as corruptible a human activity as any other. Its practitioners aren't saints, they're human beings, and they do what human beings do -- lie, cheat, steal from one another, sue, hide data, fake data, overstate their own importance and denigrate opposing views unfairly. That's human nature. It isn't going to change."

Thursday, November 1, 2007

The Ultimate Resource

In the promo for a new documentary, see what happens when ordinary people are given the necessary tools to help themselves. Scheduled for broadcast on PBS stations November 2, at 8 pm Eastern.



From Free to Choose Media.

Wednesday, October 31, 2007

Conspicuous Poverty

Capitalism did not invent poverty. It made poverty conspicuous.

Tuesday, October 30, 2007

The Jungle

In the early years of the twentieth century, the socialist writer Upton Sinclair vowed that he would write a novel that would become "the Uncle Tom's Cabin of the Labor Movement!" That novel, published in 1906, was The Jungle.

Sinclair told the story of Lithuanian immigrants who came to Chicago looking for work, freedom, and a better life, only to find "wage slavery" and cruelty in the capitalist system. The novel became a national sensation, and was an important player in the movement to make the federal government responsible for food quality.

No one will argue that the Chicago stockyards in 1906 were a pleasant place to work, especially by today's standards. Immigrants suffered many hardships and injustices. However, with the benefit of hindsight, let's consider the subsequent course of history. We know what happened in Chicago: the children of immigrants fully integrated into American society and produced generations of workers, business owners, sports celebrities and politicians. Chicago is now home to Little Lithuania, the largest concentration of Lithuanians outside of Lithuania. The current president of Lithuania is a former resident of Chicago. Out of grinding poverty came success.

What happened in Lithuania? It had the dubious distinction of suffering under both the Gestapo and the NKVD, the forerunner of the KGB. Christian Caryl wrote movingly about the tragic course of Lithuanian history in an article in US News and World Report entitled "Ghosts from the Gulag" (October 12, 1997).

In 1940, the country was occupied by Joseph Stalin. Tens of thousands of Lithuanians were shot or deported to Siberia. In 1941, Nazi Germany invaded. Soviet power returned in 1944, and 100,000 Lithuanians or 5 percent of the population died at the hands of the Soviet army and secret police. Mutilated bodies were left lying in the streets as warnings for anyone thinking about resistance.

In the Paneriari forest outside of Vilnius, the Germans shot 100,000 people. In the Vilnius neighborhood called Tuskulenai, next to a red-clay tennis court, a grave contains 700 victims of Stalin's secret police, "each skull neatly perforated by a single bullet."

Given the choice between the misery of the stockyard, the misery of the Gestapo, or the misery of the KGB, I think we would all agree the fictional Lithuanian immigrants of Sinclair's novel made the right choice. A rotten job in Chicago beats a death squad in a forest every day of the week.

Of course, Upton Sinclair, being a loyal Socialist, could overlook the misery of the KGB, but not the stockyard.

Monday, October 29, 2007

I Object!

Who objects to an economy run by selfless technical specialists, guided by incorruptible science, and for the benefit of all?

I do. First, human nature is not reliably selfless. Second, science is not incorruptible. Third, it is impossible to make everyone happy.

What's the alternative? An economy run by no one, guided by the rule of law, and for the benefit of widely different and sometimes contradictory individual preferences.

Sunday, October 28, 2007

Men Work Together

"Men work together, I told him from the heart,
Whether they work together or apart."

From "The Tuft of Flowers," by Robert Frost

Friday, October 26, 2007

Red Tape Injustice

Ordinary red tape is bad enough, a time consuming and expensive annoyance.

Far worse is the kind of red tape maliciously created to drive the competition out of businesses. More than an annoyance, it is a legal injustice. This kind of red tape flies in the face of everything capitalism stands for. It smells more like organized crime than laissez-faire.

Unfortunately, using red tape to limit competition is distressingly popular. In Texas, veterinarians use it to threaten unlicensed "floaters" who file down horses' teeth. In Minnesota, barbers and cosmetologists used it to threaten unlicensed hair-braiders. In several states, interior designers use it to threaten unlicensed interior designers. In every case, the groups making the threats hide their self-seeking motives under a virtuous claim of consumer protection.

Consumers rarely benefit from such schemes. Competition for business, not red tape, is the most effective consumer protection.

Thursday, October 25, 2007

Dirty Job

From the irrepressible economist Don Boudreaux, thoughts on the question of Candidate or Deity?, this time from the point of view of the politician. A candidate must:

"...confidently insist that no issue is beyond your comprehension and no problem beyond your ability to solve. You pretend to be simultaneously a master of foreign policy, military strategy, economics, law, political horse-trading and even environmental science. If elected, you will publicly swear to uphold the Constitution and then immediately proceed to violate it in ways too numerous to count.

In short, in this job you must soil your honor and sell your soul by behaving foolishly and by saying things that you know to be false. Without question it is the dirtiest and most repellent job that anyone with a conscience can possibly try his or her hand at."

Read more here.

Wednesday, October 24, 2007

Candidate or Deity?

The most troubling thing about the various campaigns to elect the next President of the United States is how completely they have become religious revivals in form and substance. We are no longer looking for a candidate; we are looking for a savior.

I'm not talking about a simple breakdown in the separation of church and state. I am talking about the bi-partisan revival of an old religion, perhaps the oldest, the religion that satisfies the desire for a god you can see and touch, the religion that makes a god out of someone merely human. It is a religion built on desperate hopes, wild promises, and blind ambition.

Consider what the candidates are promising they can accomplish. The following list, by no means complete, is compiled from the platforms of just a few of the candidates:

* Shorten the work day
* Make college more affordable
* Increase the minimum wage
* Provide affordable and accessible health care
* End war
* Make the US energy independent
* Stop man-made global warming
* Support parents
* Care for children
* Expand the middle class
* Restore America's reputation in the world
* Improve the lot of women and minorities
* Reform government
* Strengthen democracy

This isn't a list of realistic political objectives for a four-year term in office; it's a prayer list, a list of hoped-for miracles. Unfortunately, it appears to be the kind of desiderata that gets people elected -- and deified.

Tuesday, October 23, 2007

Monday, October 22, 2007

I, Pencil

Perhaps the best explanation of how free markets use more knowledge than any one person can possess. A classic.

Saturday, October 20, 2007

A Convenient Crusade

From John Stossel's report on global warming last night...

"In all the confusion surrounding the global warming debate, one thing is clear: Global warming activists don't welcome the skepticism.

Those who call their extreme projections into question are compared with Holocaust deniers and accused of being paid off by big business. I've questioned the extreme global warming predictions in the past, and for that I've been branded a "corporate toadie" and a "flat-earther." I don't mind being called names, but is this what the global warming debate has come to? One side saying, "Shut up. Dissent should not be heard?"

The truth is, that while everyone agrees that the earth has warmed, lots of good scientists don't agree that it's mostly our fault, and don't agree that it's going to be a catastrophe. So when Gore says, "The debate is over," I say, "Give Me a Break!""

Read more here.

Friday, October 19, 2007

Stossel v Gore Smackdown

Tonight on ABC's 20/20...

"20/20 co-anchor John Stossel is going on the attack against “experts” who warn about manmade global warming – along the way berating Al Gore for saying the debate over climate change is over.

In a release from ABC previewing Stossel’s report on Friday’s “20/20,” the veteran newsman and Newsmax pundit – who won 19 Emmys exposing scammers and con artists – says:
“This week on ‘20/20’ (in our new 8 p.m. Eastern time slot) I say ‘Give Me a Break!’ to our Nobel Prize-winning Vice President.

“Mr. Gore says ‘The debate is over,’ and those who disagree with his take on global warming have been ‘purchased’ in order to create ‘the illusion of a debate.’ Nonsense. It's as if the Vice President and his allies in the environmental movement plan to win the debate through intimidation. I interview some scientists who won't be intimidated, even though one has had his life threatened for speaking up.""

Read more here.

Thursday, October 18, 2007

November Monthly Meeting

We often hear that the business community must do more to support education. But before business people rush to contribute their time and money, they should seek the answers to some fundamentally important questions.

What role should the State play a role in educating America's children? Are government schools compatible with a free society? Is it possible to have a free market in education?

C. Bradley Thompson, the Executive Director of the Clemson Institute for the Study of Capitalism, will examine the destructive effects of "public" education in America. He will critique the principal assumptions behind government schooling, and he will call for fully private system of education. Thompson will present a principled argument for a free market in education that begins with the rights and responsibilities of parents to provide for the education of their own children.

DATE: Thursday, November 8th
LOCATION: Imaging Arts Gallery, 175 King Street, Charleston, SC
TIME: 5 pm reception, 6 pm speaker
RSVP: Stephanie Whitener

Wednesday, October 17, 2007

Gridlock

From Reason.tv...

Host Drew Carey examines the costs and consequences of traffic jams and explores several solutions that can get our roads moving. How does a speedy trip on the "Drew Carey Freeway" sound? Plus, one lucky commuter gets a helicopter ride to work, courtesy of Drew.

Tuesday, October 16, 2007

The Accident of Discovery

From the pages of Forbes, another reminder that discoveries can't be reliably planned. If they could, they wouldn't be discoveries, they would be proofs.

The act of discovery is more like an accident than a plan. It is that moment when someone stumbles across a remarkable truth other than the one he was looking for.

An excerpt:

"Things, it turns out, are all too often discovered by accident--but we don't see that when we look at history in our rear-view mirrors. The technologies that run the world today (like the Internet, the computer and the laser) are not used in the way intended by those who invented them. Even academics are starting to realize that a considerable component of medical discovery comes from the fringes, where people find what they are not exactly looking for.

It is not just that hypertension drugs led to Viagra or that angiogenesis drugs led to the treatment of macular degeneration, but that even discoveries we claim come from research are themselves highly accidental. They are the result of undirected tinkering narrated after the fact, when it is dressed up as controlled research. The high rate of failure in scientific research should be sufficient to convince us of the lack of effectiveness in its design."

Conclusion: if you want a steady stream of innovation and discovery, encourage a lot of random tinkering. This is true not only for scientific research, it's true in all areas of human endeavor. A strictly enforced orthodoxy is the enemy of anything new.

Monday, October 15, 2007

Business Humor from "The New Yorker"

A great business cartoon video from the latest issue of The New Yorker. Watch it here!

Saturday, October 13, 2007

Around the World, Clusters Aren't Working

The Palmetto Institute, a Columbia, South Carolina-based non-profit think tank, hired Harvard professor Michael Porter to develop an economic game plan to improve per capita income and wealth in the state.

In 2004, Darla Moore, a member of the Palmetto Institute board, said Porter's foundational principles are that "we must...identify and grow inherent industry clusters, and two, that economic development must be led by the private sector in cooperation with government."

Now The Economist reports that private/public clusters in Europe have been a huge waste of money. The magazine reports that all across Europe, government bureaucrats have been "obsessed with creating geographic clusters like Silicon Valley. The French have poured billions into pôles de compétitivité; and Singapore, Dubai and others are doing much the same. There are dozens of aspiring clusters worldwide, nicknamed Silicon Fen, Silicon Fjord, Silicon Alley and Silicon Bog. Typically governments pick a promising part of their country, ideally one that has a big university nearby, and provide a pot of money that is meant to kick-start entrepreneurship under the guiding hand of benevolent bureaucrats.

It has been an abysmal failure. The high-tech cluster in and around Cambridge, England, is the most often-cited counter example. Hermann Hauser, of Amadeus Capital, a leading British venture capitalist (who, curiously, also hails from Vienna), is an optimist: “Silicon Valley is still the lead cow but Cambridge is the best in Europe.” Perhaps, but that is faint praise. The main problem, argues Georges Haour, of IMD, a Swiss business school, is that Cambridge suffers from the Peter Pan complex: “inventors never want to grow up, they are happy with modest success.” One veteran of the city's start-up scene even argues that its success came “in spite of, not because of” government and university support.

Experts at Insead looked at efforts by the German government to create biotechnology clusters on a par with those found in California and concluded that “Germany has essentially wasted $20 billion—and now Singapore is well on its way to doing the same.” An assessment by the World Bank of Singapore's multi-billion dollar efforts to create a “biopolis” reckoned that it had only a 50-50 chance of success. Some would put it less than that."

Like convention centers and professional sports teams, government planned clusters are not the key to prosperity. If community leaders really want to create a more prosperous society, the best thing they can do is get out of the way. Simplify or eliminate red tape. Insist on a meritocracy. Do not prop up or protect companies or industries that cannot compete in a global marketplace. More than accepting the creative destruction that innovation brings, they should insist on it. Recognize that the most successful innovations are the ones that make the most trouble for the status quo.



Friday, October 12, 2007

Prices and Human Nature

When large numbers of people are free to spend their money on whatever they want, the resulting pattern of spending can reveal a great deal about human nature. Unrestrained commerce cuts through the thick ropes of legal and social restrictions, and it lets us see the kinds of things that people really think are worth paying for.

As I've noted before, the auction of Internet domain names is as close as we've come to a global consumer market. Each domain has the potential to reach every person on the planet. The value of a domain is therefore directly related to its likely appeal to six billion potential customers. It is hard to imagine a bigger or better commercial test.

With that in mind, consider this story from The Financial Times of London. Tomorrow, the auction of the domain "wallstreet.com" is expected to fetch $10 million, which would make it the second most expensive domain ever sold. Obviously, the bidders will be counting on a strong human interest in money and markets to drive traffic to the site and justify that price.

What is the most expensive domain name ever sold? "Sex.com" for $12.5 million.

Thursday, October 11, 2007

The Rational Animal

Aristotle defined man as a rational animal. New scientific research adds the qualifier, "but not all the time." In fact, chimpanzees appear to be more consistent rational maximizers than humans.

While it is true that people generally behave in rational ways, there are many well-documented occasions when people consistently behave in ways that defy reason. The systematic study of such behavior is known as "behavioral finance" or "behavioral economics."

One of the best-known tests in behavioral finance is the ultimatum game. In this test, two individuals must agree on how to divide a reward. No agreement, no reward.

Researchers at the Max Planck Institute report that when chimpanzees play the ultimatum game, the chimps behave the way traditional economic theory predicts that a rational economic agent should. Chimps will accept whatever they are given, and are thereby rationally better off. Humans, on the other hand, will reject any deal that strays too far from a 50-50 division of the reward, thereby sacrificing a rational improvement in their condition in favor of some other value.

The difference between the two species appears to be a sense of fair play. Chimps don't care about it. People do. Apparently, for humans, fair play trumps reason.

Wednesday, October 10, 2007

The Recipe for Successful Candidates

Take half a measure of celebrity. Combine with half a measure of blind faith. Add a tablespoon of extract of ideas. Stuff with cash. Bake for fifteen months. Serve on election day. Goes especially well with denial, avoiding the blame, evading the question, and taking all the credit. Leftovers can be frozen and thawed to serve again and again. Just change the name to create the illusion of variety. Serves millions of people who cannot accept the limitations of a merely human candidate.

Tuesday, October 9, 2007

A Society of Wealth Creators

The great strength of capitalism is that it is an economic system wherein everyone has the opportunity to be successful without ever thinking about the intellectual and cultural context that makes success possible. We don't have to know everything. We just have to know something useful to other people, and have sense enough to use it for our mutual advantage.

Unfortunately, an economy built on limited individual knowledge is also capitalism's great weakness. It leaves the system vulnerable to those who claim that their perfect knowledge or their theory of the will of history is more important than individual knowledge or the will of the individual.

If the individuals who benefit most from capitalism -- the wealth creators -- do not understand the intellectual and cultural institutions that make business possible, what chance do they have to withstand a steady series of attacks from the intellectuals, populists, collectivists, and religious extremists who want to bring capitalism and the life of the individual to an end?

That is why we formed the Bastiat Society: to educate other wealth creators on their right to the moral high ground, and on the intellectual and cultural institutions that are necessary for individuals to be successful. Our motto is "Those who work in freedom should know how freedom works."

We call on successful business people everywhere to join us in an organization unlike any the world has ever seen: a society of principled wealth creators, the benefactors of the human race, committed to reclaiming the moral high ground and the life of the individual.

Monday, October 8, 2007

Pinker on "The Myth of Violence"

We often hear the world is getting worse, not better. Stephen Pinker argues that what we hear is simply not true.

Listen to it here.

Friday, October 5, 2007

They Meant Well

From 18 Doughty Street...

Shane Greer presents Brought to Book and speaks to the author of an analysis of six major schemes, including Concorde and the Millennium Dome.

D. R. Myddelton is Emeritus Professor of Finance and Accounting at the Cranfield School of Management, and chairman of the managing trustees of the Institute of Economic Affairs.

Thursday, October 4, 2007

When A Miss Is As Good As A Hit

Noam Chomsky, well-known voice of the left, aims a few salvos at the free market, manages to hit a few free market pretenders, and claims success.

Wednesday, October 3, 2007

Tax Credits for Everybody

Political power is primarily the opportunity to redistribute the property of others, and the tax code is the primary political tool. That's why politicians of both major parties love to tinker with the tax code: it's their universal wrench.

There are two major problems that come from using the tax code to solve political problems. First, every change in the code makes it more complex. Like a computer program that contains millions of lines of code, a continuously amended tax code eventually makes it impossible to anticipate how a change in one place might affect the entire program. As the system grows more complex, the possibility of contradictory logic grows as well. Eventually, a growing list complex and contradictory rules will result in a total system failure.

The second problem with using the tax code to solve political or social problems is that few of the intended beneficiaries of any tax policy have the time and expertise to find and use the tax policy directed their way. This is another problem related to complexity. In order to find the benefits in a complex system of rules, you need an intimate understanding of the rules or you need to hire a competent guide. Most taxpayers have neither.

More on the problem with tax credits in Forbes.

Tuesday, October 2, 2007

A Child of the State

There is no other place on earth that has a greater reputation for free-wheeling, creative capitalism than the southern part of the San Francisco bay area known as Silicon Valley. Every economic development officer in every state drools over the thought of capturing just a little of its glory. Cities and states have spent millions, perhaps billions in attempts to duplicate some measure of Silicon Valley's success in biotechnology, computers, and venture capital.

How did it happen? How did the business people in the Valley develop a culture of successful innovation that is the envy of the world? Tom Abate, staff writer for the San Francisco Chronicle, explains it all with the help of Chritophe Lecuyer, author of the book, Making Silicon Valley.


It all started more than a hundred years ago, with the then-new technology of radio. Radio engineers in the area formed hobby clubs, swapped ideas and tinkered with their equipment. Whoever came up with a workable idea that made things cheaper, faster and more reliable got respect. Even better, he got whatever money there was available.

At first, the United States military was the most important customer of Silicon Valley. The military needed lots of help with the new technology for World War I. Military contracts poured enough money into Silicon Valley to bring companies like Magnavox to life.

Over time, the culture of engineering innovation and meritocracy created at the beginning of the twentieth century, sustained and nurtured with military contracts, evolved into what it is today.

There are two remarkable conclusions we should take away from this tale. First, like the Internet itself, Silicon Valley is the child of the state and of war.

Second, radical innovation rarely comes from the dominant institutions in an economy. It usually comes from some out-of-the way place where people are free to explore crazy new ideas, the kind of ideas that usually get shot down in the board meetings of large, well-capitalized corporations.

In 1906 American big business was essentially industrial, not technological. Steel, railroad, utilities and oil dominated the economy. Mass production was cutting edge technology. The high-tech tinkering near San Francisco was viewed as of secondary importance to bigger business concerns in the Mid West and East.

In the end, it was the high-tech tinkering that launched an industry and revolutionized a world. The question is, can Silicon Valley retain its entrepreneurial culture in the face of its success, or will it, like every successful industry before it, eventually turn into a group of organizations not terribly different from the Department of Motor Vehicles?

Or, to put the question another way, must every child become his father?

Photo of the San Jose, California skyline in 2006. Photo created and uploaded by SCUMATTMount Hamilton in the Diablo Range. 01:08, 16 January 2006 (UTC). North is to roughly to the left; looking roughly southeast towards

Monday, October 1, 2007

The Crimes of Communism

From the Acton Institute...

Professor Yuri N. Maltsev, former member of a senior team of Soviet economists that worked on President Gorbachev's reforms package of perestroika, discusses the reversal of liberalized reforms in Vladimir Putin’s Russia and the variety of ways in which communism oppresses people, especially religion.

Listen to it here.

Sunday, September 30, 2007

Rich and Hardworking

John Tamny has published an excellent defense of every hardworking American, even the rich ones, in National Review.

An excerpt:

"Hillary Clinton wants to distinguish between the rich and the hardworking. But the two are not mutually exclusive. And while the senator is correct in lauding the efforts of industrious Americans, she is unwise to demean the staggering efforts of the vital few rich who have done so much to make America great."

Saturday, September 29, 2007

Myths Christians Believe About Wealth and Poverty

From the Acton Institute, Jay W. Richards presents the key economic mistakes religious people in general, and Christians in particular, make when thinking about wealth and poverty.

Acton summarizes his lecture below:

"For Christians, compassion for the poor is a non-negotiable. Compassion alone, however, doesn’t help the poor. In fact, many ideas that Christian leaders advocate really exacerbate the very problems they were intended to solve. So how do we insure that we not only mean well, but also do good? Jay Richards discusses the need to think economically about wealth and poverty in the Christian community."

Listen to his lecture here.