Saturday, August 30, 2008

"I Approve This Message"

In the spirit of the campaign season, when politicians of all parties fill the airwaves with personally approved messages of their wildly exaggerated talent, abilities, and promises for the future, economist Arnold Kling offers his far more realistic -- and therefore politically useless -- list of campaign pledges.

1. That no politician will end America's consumption of foreign oil. Ever.

2. That no politician will figure out a way to bring the bottom half of America's children up to the level where they can benefit from a college education.

3. That no politician will figure out a way to make American health care--meaning virtually unlimited access to specialists and technology--affordable for everyone.

4. That no politician will alter the trends in technology and family structure that are driving the distribution of income and wealth.

5. That no politician will produce a sustainable fiscal outlook without trimming future Social Security and Medicare benefits. (I might have ended the previous sentence simply by putting a period after "outlook")

6. That no politician needs to create jobs. There is always too much work to be done. The problem is never to create jobs. The problem is for individuals to adapt their abilities to ever-changing job opportunities.

7. That no politician will be able to articulate an economic difference between moving labor or goods from country X to country Y and moving labor or goods from Maryland to Virginia.

Friday, August 29, 2008

The Moral and Economic Foundations of Capitalism

In this video from the Clemson Institute for the Study of Capitalism, Richard Epstein covers the relationship between capitalism, entrepreneurship, and the structure of legal rules.

Epstein doesn't like the term "capitalism," even though he likes the idea. He points out that Marx deliberately used the word because he wanted to evoke negative connotations for a system he viewed as exploitative, flawed, and immature. Why should fans of capitalism use a term cooked up by the other side?

Epstein prefers to describe capitalism as a social arrangement that favors voluntary behavior and promise-keeping, and forbids the use of force or fraud. Capitalist morality is a pretty good thing. Keep your promises. Don't use force. Don't steal. Don't lie.

Thursday, August 28, 2008

Market Evolution Vs. Market Design

Natasha Mitchell, host of All in the Mind, asks, "Are markets moral? Are we rational with our cash? Is our hunter/gatherer brain geared for modern capitalism? And do economies work a little like evolution, mutating and evolving through a process of cultural rather than biological natural selection?"

Listen to Mitchell moderate a debate between Michael Shermer and Stephen Mayne on the ABC Radio Network program All in the Mind.

Wednesday, August 27, 2008

A Magnificent Knot of Confusion

"In the left's eternal vigilance to fend off fascism, they have in fact created it, albeit with a friendly face. Like a medieval doctor who believes that mercury will cure madness, they foster precisely the sickness they hope to remedy. Good medicine, like good economics, depends on discarding unproven mythology. Yet for nearly a century the left and liberals have been using textbooks brimming with superstition. These myths are entwined with one another in magnificent knot of confusion. Among the strands of this knot are the palpably false notions that big business is inherently right-wing or conservative (in the American sense); that European fascism was a tool of big business; and that the way to keep business from corrupting government is for government to regulate business to within an inch of its life."

Jonah Goldberg, Liberal Fascism: The Secret History of the American Left from Mussolini to the Politics of Meaning

Sunday, August 24, 2008

Basically Evil Men

"How does the liberal elite view entrepreneurs and business leaders? It seems to me that they view capitalists as a group of basically evil men, inclined to exploit workers and rip off consumers. It would be better if we could do without capitalists, but they are ok as long as good guys from the liberal elite are in power, delegating tasks to markets only when appropriate and regulating capitalists to control their excesses."

Economist Arnold Kling at Econlog.

Saturday, August 23, 2008

Who was Frédéric Bastiat?

Who was Bastiat? Here is his biography from the online Concise Encyclopedia of Economics.

Joseph Schumpeter described Bastiat nearly a century after his death as "the most brilliant economic journalist who ever lived." Orphaned at the age of nine, Bastiat tried his hand at commerce, farming, and insurance sales. In 1825, after he inherited his grandfather's estate, he quit working, established a discussion group, and read widely in economics.

Bastiat made no original contribution to economics, if we use "contribution" the way most economists use it. That is, we cannot associate one law, theorem, or path-breaking empirical study with his name. But in a broader sense Bastiat made a big contribution: his fresh and witty expressions of economic truths made them so understandable and compelling that the truths became hard to ignore.

Bastiat was supremely effective at popularizing free market economics. When he learned of Richard Cobden's campaign against the British Corn Laws (restrictions on the import of wheat, barley, rye, and oats), Bastiat vowed to become the "French Cobden." He subsequently published a series of articles attacking protectionism that brought him instant acclaim. In 1846 he established the Association of Free Trade in Paris and his own weekly newspaper. He waged a witty assault against socialists and protectionists.

Bastiat's "A Petition," usually referred to now as "The Petition of the Candlemakers," displays his rhetorical skill and rakish tone, as this excerpt illustrates:

We are suffering from the ruinous competition of a foreign rival who apparently works under conditions so far superior to our own for the production of light, that he is flooding the domestic market with it at an incredibly low price.... This rival... is none other than the sun....

... We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull's-eyes, deadlights and blinds; in short, all openings, holes, chinks, and fissures....

This reductio ad absurdum of protectionism was so effective that one of the most successful postwar economics textbooks, Economics by Paul A. Samuelson, quotes the candlemakers' petition at the head of the chapter on protectionism.

Bastiat also emphasized the unintended consequences of government policy (he called them the "unseen" consequences). Friedrich Hayek credits Bastiat with this important insight: if we judge economic policy solely by its immediate effects, we will miss all of its unintended and longer-run effects and will undermine economic freedom, which delivers benefits that are not part of anyone's conscious design. Much of Hayek's work, and some of Milton Friedman's, was an exploration and elaboration of this insight.

Friday, August 22, 2008

September 2008 Meeting

Our Bastiat Society monthly meeting on September 3rd, 2008 will be the South Carolina premier of the documentary, "The Call of the Entrepreneur."

The film explores how entrepreneurs, in search of profit, shape our world for the better.

When: Wednesday, September 3, 2008, 5pm-7pm

Where: Riviera Theater at Charleston Place

RSVP: Megan Rock

Phone: 843-577-7501

For more information, check out The movie's trailer appears below.

Thursday, August 21, 2008


Here is the trailer for a new documentary, I.O.U.S.A., about all the irresponsible spending and borrowing that parades around under the mask of "fiscal policy." It's like calling a lottery ticket "short term government paper."

Wednesday, August 20, 2008

Let Parents Decide

This video, from the 1980s British sitcom Yes, Prime Minister, effectively uses humor to make the case for school choice. A laugh is worth a thousand editorials.

Tuesday, August 19, 2008

Fascism in America

"If fascism is the work of a handful of brutal and lawless men, we need have no fear of it here. We are never without leaders both able and corrupt. But they are not sufficiently numerous and powerful to make very much headway against the peculiar structure of our government. If the phenomenon is merely a manifestation of the paranoid mentality of the German people then certainly we are in no danger of infection unless we, too, are a little demented.

But alas, the most terrifying aspect of the whole fascist episode is the dark fact that most of its poisons are generated not by evil men or evil peoples, but by quite ordinary men in search of an answer to the baffling problems that beset every society. Nothing could have been further from the minds of most of them than the final brutish and obscene result. The gangster comes upon the stage only when the scene has been made ready for him by his blundering precursors."

John T. Flynn, As We Go Marching (1944)

Monday, August 18, 2008

Blurring the Lines Between Business and Government

"Since the dawn of the Progressive Era, reformers have constructed an army of straw men, conjured a maelstrom of myths, to justify blurring the lines between business and government. According to civics textbooks, Upton Sinclair and his fellow muckrakers unleashed populist rage against the cruel excesses of the meatpacking industry, and as a result Teddy Roosevelt and his fellow progressives boldly reined in an industry run amok. The same story repeats itself for the accomplishments of other muckrakers, including the pro-Mussolini icons Ida Tarbell and Lincoln Steffens. This narrative lives on as generations of journalism students dream of exposing corporate malfeasance and prompting government-imposed "reform."

The problem is that it's totally untrue, a fact Sinclair freely acknowledged. "The Federal inspection of meat was, historically, established at the packers' request," Sinclair wrote in 1906. "It is maintained and paid for by the people of the United States for the benefit of the packers." The historian Gabriel Kolko concurs: "The reality of the matter, of course, is that the big packers were warm friends of regulation, especially when it primarily affected their innumerable small competitors." A spokesman for "Big Meat" (as we might call it today) told Congress, "We are now and have always been in favor of the extension of the inspection, also to the adoption of the sanitary regulations that will insure the very best possible conditions." The meatpacking conglomerates knew that federal inspection would become a marketing tool for their products and, eventually, a minimum standard. Small firms and butchers who'd earned the trust of consumers would be forced to endure onerous compliance costs, while large firms not only could absorb the costs more easily but would be able to claim their products were superior to uncertified meats."

Jonah Goldberg, Liberal Fascism: The Secret History of the American Left from Mussolini to the Politics of Meaning,

Sunday, August 17, 2008

The World is Getting Better

In this audio file, the Swedish writer Johan Norberg explains how globalization and individual liberty are making the world a better place to live.

For more on Norberg, click here.

Saturday, August 16, 2008

Illegal Horse Massage

Occupational licensing is one area where a reasonable idea has morphed into either a joke or a nightmare, depending your point of view. Consider this news story about a licensed massage therapist in Maryland who has been ordered to stop massaging horses until she becomes a licensed veterinarian. What's next? A licensed-horse-massage-vet?

By the way, a quick Google search of videos on the subject of horse massage comes up with 556 videos, and Amazon offers at least 48 books on the subject. Imagine the threat to public safety if some amateur watches any of those videos or reads any of those books, and then tries to massage a horse without state approval!

As a newcomer to the subject of horse massage, it seems to me that getting the horse's approval would be more important. But what do I know? I don't have a license.

Friday, August 15, 2008

The Worst Crime

"The worst crime against the working people is a company that fails to make a profit."

Samuel Gompers (1850 - 1924), founder of the American Federation of Labor, quoted in Just Business: Business Ethics in Action by Elaine Sternberg

Thursday, August 14, 2008

Ugly Rumor Confirmed

ABC News and The New York Times (free registration required) confirm an ugly rumor that has been circulating among tabloids and blogs for years: politicians are self-focused, egotistical, narcissistic, and think they can do whatever they want.

Wednesday, August 13, 2008

No Moral Claim

A letter from economist Don Boudreaux...

7 August 2008

Director, Coalition for Pulmonary Fibrosis

Dear Sir or Madam:

I received your e-mail encouraging me to ask my representatives in Congress to vote for H.R. 6567, which would "increase federal research funding for idiopathic pulmonary fibrosis."

Even though in March IPF stole the life of my dear mother, I cannot join your crusade for more taxpayer funding to fight this horrible disease. Congress does not conjure resources from thin air; any resources devoted to finding a cure for IPF must be taken from some other use - and there's no reason to suppose that Congress can judge better than private individuals how best to use resources. Who's to say that resources taken by government from the private sector to support IPF research would not yield even greater long-term benefits by being left in the private sector? Perhaps resources devoted to IPF research would otherwise have been used to cure leukemia or to develop an automobile engine powered by water.

More importantly, being touched tragically by that disease gives me no moral claim to have Congress, in my name, take resources from other people. I can, and do, ask people to voluntarily fund IPF research. I cannot, and will not, support any effort to force them to do so.

Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030

Tuesday, August 12, 2008

Economics in Service of the State

"Statistics is a vital, though much underplayed, requisite of modern government. Government could not even presume to control, regulate, or plan any portion of the economy without the service of its statistical bureaus and agencies. Deprive government of its statistics and it would be a blind and helpless giant,with no idea whatever of what to do or where to do it. It might be replied that business firms, too, need statistics in order to function. But business needs for statistics are far less in quantity and also different in quality. Business may need statistics in its own micro area of the economy, but only on its prices and costs; it has little need for broad collections of data or for sweeping, holistic aggregates. Business could perhaps rely on its own privately collected and unshared data. Furthermore, much entrepreneurial knowledge is qualitative, not enshrined in quantitative data, and of a particular time, area, and location. But government bureaucracy could do nothing if forced to be confined to qualitative data. Deprived of profit and loss tests for efficiency, or of the need to serve consumers efficiently, conscripting both capital and operating costs form taxpayers, and forced to abide by fixed, bureaucratic rules, modern government shorn of masses of statistics could do virtually nothing."

Murray Rothbard,"World War I as Fulfillment: Power and the Intellectuals," The Journal of Libertarian Studies, Vol. IX, No. 1 (Winter 1989)

Monday, August 11, 2008

The Myth of the Rational Voter

What does the average voter know? Does he vote as an informed, rational being? Bryan Caplan, an economist at George Mason University, says the answers to those questions are, respectively, nothing and no.

This is an audio file of Bryan Caplan discussing his provocative and troubling work on the myth of the rational voter.

Listen to it here.

Sunday, August 10, 2008

A Factory for Unhappy People

It is a common mistake to elevate the academic study of business above the actual practice of business. While academic study can yield useful information, there are many important differences between business as it is conceived by people in school, and business as it is practiced by the vastly larger universe of people who did not attend business school. Among those differences, motivation may be the most important. Why do some people "study" business, while others act? A new book may shed some light on the first part of that question.

From The Economist, here is a review of an unflattering book about Harvard Business School written by Harvard grad Philip Delves Broughton. He calls HBS, "a factory for unhappy people."

Broughton's book is being published in the UK with the title of What They Teach You at Harvard Business School: My Two Years in the Cauldron of Capitalism. Its US title is Ahead of the Curve: Two Years at Harvard Business School.

An excerpt:

He graduated healthily “unintimidated by business and its practitioners”, not least by HBS itself, which had two failings in his view. First, it pushed the idea that its alumni would be equipped as leaders capable of solving all the world’s problems, rather than merely doing a decent job of running a company. “Business needs to relearn its limits, and if the Harvard Business School let some air out of its own balloon, business would listen,” he grumbles. His second worry was that so many of his classmates seemed destined for careers that would leave them no space for a happy personal life. He opted for more time with his family, rather than follow in the footsteps of the “Goldman Sachs executive who came to talk about leadership and values…I just remember this look of total defeat on his face when he said how he had four ex-wives.”

Saturday, August 9, 2008

America's Epitaph

Some worthwhile reading on the "rush to pen America's epitaph" from Robert J. Lieber. He is professor of government and international affairs at Georgetown University. His most recent book is The American Era: Power and Strategy for the 21st Century.

This is an excerpt from his article, "Falling Upwards: Declinism, The Box Set" in World Affairs, (Summer 2008).

"Gloomsayers have been with us, after all, since this country’s founding. Late eighteenth- and early nineteenth-century European observers, especially royalists and reactionaries, commonly disparaged and discounted the prospects of the new American enterprise. (As the French author Phillip Roger has written in his insightful history of anti-Americanism, influential Parisian authors deprecated not only the new country, but also its animals and plants.) In the 1920s and 1930s, Communist and fascist critics alike offered sweeping condemnations of the U.S. as a degenerate nation. “The last century [the 19th] was the winter of the West, the victory of materialism and skepticism, of socialism, parliamentarianism, and money,” proto-declinist Oswald Spengler famously wrote. “But in this century blood and instinct will regain their rights against the power of money and intellect. The era of individualism, liberalism and democracy, of humanitarianism and freedom, is nearing its end.”

It was in the 1970s that declinism began to take on its modern features, following America’s buffeting by oil shocks and deep recessions, a humiliating withdrawal from Vietnam, victories by Soviet-backed regimes or insurgent movements in Africa, Central America, and Southeast Asia, and revolution in Iran along with the seizure of the U.S. embassy there. A 1970 book by Andrew Hacker also announced The End of the American Era. At the end of the decade, Jimmy Carter seemed to give a presidential stamp of approval to Hacker’s diagnosis when he used concerns about a flagging American economy, inflation, recession, and unemployment as talking points in his famous “malaise” speech calling for diminished national expectations.

By the early 1980s, declinism had become a form of historical chic. In 1987, David Calleo’s Beyond American Hegemony summoned the U.S. to come to terms with a more pluralistic world. In the same year, Paul Kennedy published what at the time was greeted as the summa theologica of the declinist movement—The Rise and Fall of the Great Powers, in which the author implied that the cycle of rise and decline experienced in the past by the empires of Spain and Great Britain could now be discerned in the “imperial overstretch” of the United States. But Kennedy had bought in at the top: within two years of his pessimistic prediction, the Cold War ended with the Soviet Union in collapse, the Japanese economic miracle entering a trough of its own, and U.S. competitiveness and job creation far outpacing its European and Asian competitors."

Friday, August 8, 2008

To Infinity, and Beyond!

How many zeros can you append to a number before the mind can't process them? Six? Nine? Twelve? Fifteen?

The question is one of more than theoretical importance. Until just a few days ago, the poor folks of Zimbabwe had to deal with household budgets that regularly used numbers once limited to describe the distance between objects in space: quadrillion, quintillion, and sextillion. In July, a loaf of bread cost between $2 billion and $5 billion, depending on when you bought it.

By early August, a loaf of bread cost $200 billion. So the government finally decided to do something about its exponential inflation problem. It acted swiftly and decisively by declaring that it was dropping ten zeros off of its currency. Overnight, $10,000,000,000 became a $1, and bread cost $20.

Rapidly adding zeros was not the problem, and rapidly removing zeros is not the solution. Inflation is a monetary phenomenon, caused by an irresponsible expansion of the nation's money supply. In Zimbabwe's case, that means running the printing presses to crank out more and more worthless paper. Unless the monetary authority begins to behave responsibly -- an unlikely event -- it won't be long before all those zeros reappear.

Thursday, August 7, 2008

Swedish Myths

At, Johan Norberg, author of In Defense of Global Capitalism, sits down with's Michael C. Moynihan to sort out the myths of the Sweden's welfare state, health services, tax rates, and its status as the "most successful society the world has ever known."

Wednesday, August 6, 2008

"Not Evil, Just Wrong"

From the filmmakers who brought us Mine Your Own Business comes a new documentary on the human cost of the campaign to stop global warming. Its title is Not Evil, Just Wrong. The trailer appears below.

Tuesday, August 5, 2008

The World is Getting Better

Here is some evidence that the world is, in fact, getting better, and not just for the super-rich.

In Oliver Stone's 1987 movie Wall Street, Michael Douglas played the role of Gordon Gecko, a ruthless corporate raider whose character became iconic with its "Greed is good" speech.

Stone spared no effort in creating the impression of a character who lived life at the top of the economic food chain: expensive cars, expensive paintings, expensive hobbies, even more expensive girlfriends, a private jet, and a mobile phone.

The Motorola DynaTAC 8000X used in the scene above was introduced in 1984. It sold for $3,995, and local calls went for $0.50 per minute.

In inflation adjusted terms, the DynaTAC cost the equivalent of $8,215 in 2007, and local calls cost more than $1 per minute.

Compare that with what mobile communication actually costs today. One carrier offers a free phone with unlimited minutes, unlimited long distance, unlimited text, and unlimited data for less than $100 per month, or just $49.99 in 1984 dollars. Teenagers, and even pre-teens, carry around mobile phones that are more powerful and less expensive than Gordon Gecko's brick.

When products get less expensive and more powerful, it must be called progress. Now if someone could just do something about that private jet.

Sunday, August 3, 2008

Postel's Law

"Be conservative in what you do; be liberal in what you accept from others."

This is Postel's Law, also known as the Robustness Principle. Originally, it had nothing to do with politics. It was advice for software designers. But in a strage twist of science -- and what is science but one strange twist after another? -- Postel's law has important implications for any group of people attempting to live and work together, whether that group is a business, a non-profit society, a small state, or an entire civilization.

In short, Postel's Law is applicable to any complex, adaptable organization that is faced with a dynamically changing environment. It might just as well be described as a general law of the evolution of robust organizations.

In business, Postel's Law is particularly applicable in encouraging innovation. In a world where no one person can collect and use all the knowledge dispersed throughout a group, innovation must be a collaborative effort. At the same time, there has to be some reliable process that sorts through the nearly endless stream of innovations and successfully captures the best of those new ideas, without destabilizing the entire effort. The combination of reliability and innovation creates a "robust" system, i.e. a system that can withstand stress.

The most successful organizations do not encourage "gales of creative destruction" so much as they acknowledge the necessity to adapt to the stresses of an ever-changing environment. Innovation is the key to adaptation. The conservative use of a liberal range of ideas is the best way to build an organization that is stable and reliable where it needs to be, and creative and adaptable when it needs to be.

Saturday, August 2, 2008

Serving Others vs Exploiting Them

What is the difference between a market economy and a political economy? It is the difference between serving others and exploiting them. Here is how Ludwig von Mises defines the market economy in his great work, Human Action:

"The market economy is the social system of the division of labor under private ownership of the means of production. Everybody acts on his own behalf; but everybody's actions aim at the satisfaction of other people's needs as well as at the satisfaction of his own. Everybody in acting serves his fellow citizens. Everybody, on the other hand, is served by his fellow citizens. Everybody is both a means and an end in himself; an ultimate end for himself and a means to other people in their endeavors to attain their own ends. This system is steered by the market. The market directs the individual's activities into those channels in which he best serves the wants of his fellow men."

And here is how Frédéric Bastiat defines political economy:

"The state is that great fiction through which everyone tries to live at the expense of everyone else."