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

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


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.