Thursday, April 30, 2009

The Grasping Class

In these days of bailout and stimulus, it may be instructive to revisit the words of H. L. Mencken, written the last time the nation faced such challenges, and written about the industry most prominently demanding federal aid: farming.

"No more grasping, selfish and dishonest mammal, indeed, is known to students of the Anthropoidea. When the going is good for him he robs the rest of us up to the extreme limit of our endurance; when the going is bad be comes bawling for help out of the public till. Has anyone ever heard of a farmer making any sacrifice of his own interests, however slight, to the common good? Has anyone ever heard of a farmer practising or advocating any political idea that was not absolutely self-seeking–that was not, in fact, deliberately designed to loot the rest of us to his gain? Greenbackism, free silver, the government guarantee of prices, bonuses, all the complex fiscal imbecilities of the cow State John Baptists–these are the contributions of the virtuous husbandmen to American political theory. There has never been a time, in good seasons or bad, when his hands were not itching for more; there has never been a time when he was not ready to support any charlatan, however grotesque, who promised to get it for him. Only one issue ever fetches him, and that is the issue of his own profit. He must be promised something definite and valuable, to be paid to him alone, or he is off after some other mountebank. He simply cannot imagine himself as a citizen of a commonwealth, in duty bound to give as well as take; he can imagine himself only as getting all and giving nothing."

Wednesday, April 29, 2009

The Innovator and the Manager

What is the difference between an entrepreneur and a manager?

The innovator, the person who creates new ideas or ways of dealing with old problems (in business the entrepreneur), is by his very nature a destabilizing force. He initiates a process of change he doesn’t fully understand, and whose consequences he is utterly incapable of foreseeing in their entirety.

Management institutionalizes a successful innovation, the discovery of the entrepreneur, and in so doing, gives it an efficient, orderly, and useful life. But ultimately, management is the deathwatch of any successful entrepreneurial idea. Management, lacking its own creative instinct, wants to keep the entrepreneurial idea revenue-producing for as long as possible, usually through three phases: initial success and rapid growth, market dominance and slower growth, contracting markets and obsolescence. It is during the last phase that management is most likely to turn to the political process to protect the entrepreneurial revenue, now unable to earn its keep in open competition with other ideas. Political intervention can stabilize obsolescent ideas for years, even decades. But that stability only makes the inevitable adjustment more painful, as more and more capital and labor is drawn into an industry that only appears healthy, but is in fact, doomed.

Tuesday, April 28, 2009

The Detroit of Higher Learning

"Graduate education is the Detroit of higher learning. Most graduate programs in American universities produce a product for which there is no market (candidates for teaching positions that do not exist) and develop skills for which there is diminishing demand (research in subfields within subfields and publication in journals read by no one other than a few like-minded colleagues), all at a rapidly rising cost (sometimes well over $100,000 in student loans)."

Professor Mark C. Taylor of Columbia University, writing in the New York Times.

Monday, April 27, 2009

An Exodus of Talent

Composer Andrew Lloyd Webber writes in the UK Daily Mail: "The last thing this country needs is a pirate raid on the wealth creators who still dare navigate our stormy waters...

And don't lynch me as a rich b*****d flying a kite for his own cause - I really fear an exodus of talent."

Sunday, April 26, 2009

The Declaration of Cumaná

Capitalism: (n) a system of social organization based on private property, prices, and profits; responsible for the global economic crisis, climate change, the food crisis and the energy crisis; a threat to end life and the planet precisely in the year 2030.

Source: The Declaration of Cumaná, April 2009

Saturday, April 25, 2009

Happiness is Controlling the Lives of Others

Richard Epstein, of the University of Chicago, recently talked about the burgeoning economic research on happiness. He said that happiness has become a code word for controlling the lives of others.

Some highlights:

* "The standard economic model of human behavior is "Cooperation yes, aggression no."

* "Happiness research is designed to undercut the standard form of market calculus."

* "Researchers who find little connection between either income or wealth on the one hand and happiness on the other have failed to take account of the short-run trade offs people make to get wealth."

* "There is a part of the happiness literature that is designed to make everyone mutually miserable."

* "The conclusion is that, if the empirical studes show that there is only a weak correlation between happiness and wealth, it's okay to take away the wealth because it doesn't make the people who had it less happy."

* "Researchers on happiness fail to account for the kind of behavior that says, "I'll be miserable for five years as long as you make me rich."

Listen to the rest here.

Friday, April 24, 2009

Fraud, Waste, and Great Material for Comedy

The bank bailout/stimulus news starts to turn ugly. But out of the dross of fraud and government waste, a talented few can spin the gold of comedy.

First, the special inspector general assigned to monitor the bailout program warns that the program is so complex and loosely organized that it is open to fraud.

Second, tiny and remote John Murtha Airport gets $200 million in taxpayer dollars. Surprise, it is named after a member of Congress. 

These stories remind me of a recent episode of South Park, where Stan tries to return a margarita mixer his father bought on credit. Stan goes all the way to Washington DC, where he learns how bailout decisions are made according to a careful, precise, and rational process.

Watch that process here and tell me, is it life imitating art or vice versa?

Thursday, April 23, 2009

The End of Poverty

Coming soon to a theater near you, a new anti-capitalist documentary everyone will be talking about: The End of Poverty.

The trailer:

Prepare yourself by reading Tyler Cowen's scathing review in The American Interest.  An excerpt:

"In this movie, the causes of poverty are oppression and oppression alone. There is no recognition that poverty is the natural or default state of mankind and that a special set of conditions must come together for wealth to be produced. There is no discussion of what this formula for wealth might be. There is no recognition that the wealth of the West lies upon any foundations other than those of theft, exploitation and the oppression of literal or virtual colonies."

Wednesday, April 22, 2009

Kudlow: "Backdoor Nationalization"

Larry Kudlow writes, "Are we moving away from democratic capitalism, and toward some sort of corporatist state-directed economy?"

Read the rest here.

Tuesday, April 21, 2009

Anger's Aweigh

Colbert says granting vigilantes the right to shoot pirates on the high seas is the free market at its best.

The Colbert ReportMon - Thurs 11:30pm / 10:30c
Anger's Aweigh
Colbert Report Full EpisodesPolitical HumorNASA Name Contest

Monday, April 20, 2009

Are You a Terrorist?

You may already be a terrorist and not even know it!

Why not become a Certified Possible Terrorist -- CPT --(trademark designation pending)?

Impress your friends. Remove all doubt. Take the test now!

Via Reason magazine where you can take the test and print your very own certificate.

Here are the questions you should be prepared to answer:

* Have you ever rejected federal authority in favor of state or local authority?

* Do you worry about infringements on Constitutional guarantees to an individual's right to bear arms?

* Do you find yourself sometimes agreeing with Rep. Ron Paul (R-Texas) or Libertarian Party presidential candidate Bob Barr?

* Have you ever displayed or looked at a Gadsden flag (the one featuring a coiled snake and the logo "Don't Tread on Me")?

Saturday, April 18, 2009

The Path of Prices

What drives individual economic behavior? While there are many inputs, prices are the primary markers on the path of individual economic decision-making. The sum of such individual behavior is the emergent phenomenon we call the economy.

The economy is not something that happens to people, like an earthquake or a storm. It is something that emerges from people, as they react to the prices around them.

The quality of an economy is ultimately traced back to the quality of its prices. Bad prices equal bad decisions equal a bad economy. Reliable prices equal reliable decisions equal a reliable economy.

Much of the mess we see in the world today is the result of bad prices, or more accurately, prices that are distorted. The price of a loan, for example, became extraordinarily low after September 11, 2001 when the US central bank cut its interest rates. Businesses and individuals rushed to lever up their balance sheets, to buy more stuff with borrowed money. That sent the signal to business that people wanted to buy more stuff, so business had to produce more. That meant more jobs, more plant and equipment, more distribution, more marketing, more advertising, etc.

In other words, distorted prices lead everyone down the wrong path. Distorted prices led consumers to make bad consumer decisions and businesses to make bad business decisions. The economy is not in trouble because of careless lenders, careless borrowers, or greed. It's in trouble because individuals acted in good faith and used bad prices.

This is not to argue that prices are an infallible guide to behavior. They're not. They flicker and fluctuate with frustrating frequency in even healthiest economy. Prices reflect the variable and uncertain nature of our existence. Indeed, in a world where so many things change so quickly, the price system is the only way we can convert a uselessly complex network of interactions into bits of actually useful information.

Like the economy itself, prices are an emergent phenomenon. We get into trouble when we try to set prices rather than relying on the prices that emerge from the peaceful, mutually beneficial behavior of individuals.

Thursday, April 16, 2009

Capitalism Down, But Not Out

Rasmussen reports...

53% of Americans say capitalism is better than socialism.

20% say socialism is better than capitalism.

27% can't say which is better.

Adults under thirty are divided roughly into thirds, with a slightly greater number favoring capitalism.

Adults over thirty strongly favor capitalism.

Wednesday, April 15, 2009

A Mooted New Scheme

An editorial from the FT of London...

"Frédéric Bastiat, the great economic journalist, wrote in 1850 that although breaking a shopkeeper’s window seemed to generate economic activity, all it really did was enrich glaziers. Shattering shop-fronts does not raise aggregate demand. The British government has yet to learn this lesson. A mooted new scheme to pay consumers up to £2,000 if they have an old car broken up and replaced with a new one would be a wasteful, distortionary subsidy to automakers."

Read the rest here.

Tuesday, April 14, 2009

The Madoff Stimulus Plan

The Chinese government is the largest foreign investor in the debt of the United States government. Economist Thomas Sowell points out that the United States government and Bernie Madoff have something in common: both took advantage of the investors who trusted them.

Sowell writes:

"The Chinese are no fools. They know that all this unbridled spending — even when it is called “investment” — means that inflation is coming. That in turn means that the dollars with which U.S. government bonds will be paid off will be worth a lot less than the dollars with which the bonds were bought.

Governments around the world have played this game for centuries, robbing those who trusted them enough to buy their bonds. Like Bernard Madoff, they call it “investment.”"

Perhaps we shouldn't send Madoff to jail, after all. It sounds like there might be a place in this Administration for a man with his kind of talent.

Monday, April 13, 2009

Reckless and Bold

If reckless spending got us into this mess, can bold spending get us out?

Approximately 2.40 minutes. Narrated by Nick Gillespie; sponsored by Americans for Prosperity, the Heritage Foundation, and

Sunday, April 12, 2009

State of Ignorance

"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a "dismal science." But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance."

Economist Murray Rothbard, 1970

Saturday, April 11, 2009

The Neo-Populists

Ira Stoll, writing in the Wall Street Journal, worries that the state of the economy "may trigger a new outbreak of anti-Semitism."

President Bill Clinton's secretary of labor, Robert Reich, warns that, "History shows how effective demagogic ravings can be when a public is stressed economically." Reich says Jews, along with gays and blacks, could become victims of populist rage.

I think not. Stoll and Reich are focused on yesterday's brand of populism, one formulated when Jews, gays, and blacks stood outside the political power structure. Now that the halls of power contain a black President, Jewish Presidential advisors, and gay Congressmen, it's hard to imagine that these powerful people would turn their power into rage against the groups they represent.

No, populism has changed; or rather its target has. Populists can no longer count on racist or religious attacks to gain political advantage. If a populist wants to get anywhere today, he must phrase his attack in terms of income and occupation. Only then can he can sound like a social progressive and not a social reactionary.

That done, his field of attack is wide open.

Friday, April 10, 2009

State of Fear and Violence

Author and economist Robert Higgs recently spent three hours on C-Span. A few choice comments:

"Nothing works better for a politician than making people afraid."

"Governments have always relied on fear to keep subjects in line."

"Most of what the government has come to do over time doesn't even fit into the category of public goods."

"The US has more than 87,000 separate governments, more than 60,000 with the power to tax."

"Don't just stand there. Undo something."

"We desperately need to reduce the size, scope, and power of government."

"Government is not what it purports to be. It represents itself as everybody's friend or everybody's savior."

"The social safety net [which some people say has been shredded] has never been denser than it is today."

"When you add up all the elements of military spending [not explicitly in the defense budget] can approximately double the DOD total."

"If you think that's it's bad without government...just imagine what happens when you place enormous power in the the hands of government officials."

"Governments have killed 200 millions of their own citizens, not counting those killed in wars."

"Whenever we resort to government, we're resorting to a gun."

"The government's way is the violent way."

"Greed does not cause bubbles. Greed is a social constant. [It] doesn't fluctuate. What does fluctuate is government policies."

"The idea that we are bailing out big institutions by basically stealing from the taxpayers is wrong, and I denounce it."

"I would like to see everything deregulated. Because then everyone would have an incentive to be more careful...Every time the government regulates something, it creates a false sense of security."

"If we got rid of all the risks, the world would be a nightmare."

"I have little faith in the ability [of cost benefit analysis] to divert government from what it's really trying to do, which is help its friends, hurt its enemies, and line somebody's pockets."

"I'm opposed to anyone using government power to feather his nest."

"Government purports to help the little guy...but it is beholden to special interest groups...The way to get rid of that problem is to take power away from government."

"Government is organized is like a loaded gun lying there waiting for someone to pick it up and use it for illicit purposes."

"To my recollection, no corporation forces anyone to buy its product...corporations have only as much power as they wield through government. Corporations didn't run the Holocaust. Corporations weren't running Pol Pot's regime. Corporations weren't running Stalinist Russia...only governments have the means and often, sad to say, the incentive to carry out great crimes."

"It's a big mistake for people to fear corporations as such. They're not dangerous. What's dangerous is the corporation allied with and making use of government force."

"I call it the military-industrial-congressional complex."

"Some people have a lot more income than others for altogether legitimate reasons...the grotesque thing would be if we all had the same income."

"If you exert enough force, you can bring about equality, but you'll also create a hell on earth."

"A lot of the government actions to help poor people are frauds."

"War and prosperity were not linked, not even in World War II."

"Poor people don't run governments...Governments are captured by people who have knowledge, money, or connections."

"Limited government is extremely rare and short-lived."

Thursday, April 9, 2009

Presidential Address

Part humor, part scary truth, Saturday Night Live portrays the President's economic plan.

A notable excerpt, "Let me assure you that in the days ahead my administration intends to do to every industry in this country exactly what we are doing to the auto industry."

Wednesday, April 8, 2009

Stopping Trade Makes Things Worse

As the pace of global trade slows, a new generation of protectionists emerge. Protectionism is not just inefficient; it is dangerous. This video from the Atlas Economic Research Foundation tells the story well.

You can sign a petition for free trade at Freedom to Trade.

Tuesday, April 7, 2009

Travel to Cuba

Headline in the Wall Street Journal: "U. S. to Lift Some Cuba Travel Curbs." 
Makes sense, doesn't it, now that there is so little difference between the two governments?

Monday, April 6, 2009

The Political Allocation of Credit

Stuart Vareny, a host on the Fox Business Channel, writes in the Wall Street Journal...

"Our prosperity has never been based on the political allocation of credit -- until now.

Which brings me to the Pay for Performance Act, just passed by the House. This is an outstanding example of class warfare. I'm an Englishman. We invented class warfare, and I know it when I see it. This legislation allows the administration to dictate pay for anyone working in any company that takes a dime of TARP money. This is a whip with which to thrash the unpopular bankers, a tool to advance the Obama administration's goal of controlling the financial system.

After 35 years in America, I never thought I would see this. I still can't quite believe we will sit by as this crisis is used to hand control of our economy over to government. But here we are, on the brink. Clearly, I have been naive."

Sunday, April 5, 2009


In France, four executives have been kidnapped in the last month by union workers demanding jobs, better severance packages, or that old chestnut of the labor movement, justice.

The New York Times reports, "So far, no one has been hurt in the “séquestrations,” as the French refer to the hostage-taking. The unions, and most French people, have refused to condemn the actions, saying it is understandable, if not defensible, that people faced with the loss of their livelihoods would take such risks."

What justice is there in violence directed at innocent people? What would the French people say of a boss who kidnapped his workers, even if he treated his hostages to meals of "mussels and French Fries" while in captivity? Has justice in France become two different sets of laws for two different sets of people?

The conclusion is obvious. The French are playing a new variation on an old and unhealthy theme. It is the same theme played against the Jews in Europe, the Chinese in Southeast Asia, or African-Americans in the Deep South during the Jim Crow Era: violence is acceptable -- even laudable -- so long as it is limited to unpopular members of society. 

Saturday, April 4, 2009

Blame the Greedy Rich

The Economist warns of rising resentment of the rich. The comments section includes some ripe invective and occasionally struggling English:

* "Those who you call wealth producers I call parasites. What they do is shuffle money around and draw interest and fees actually reducing the capital that can be used for production."

* "Have you ever watched a "Laissez-Fairest" play Monopoly? "It" takes 99% of the money in the bank for itself and gives 1% to everyone else."

* "The riches cannot think for themselves, they are too greedy to see beyond their noses. They have become a parasitic burden for the society. Time to shake the shoulders of the world is near."

* "The rich are untouchable because they own the politicians. Its extreme capitalism of the worst kind for the mass of the population and salmon and champagne socialism for the rich....and their lackeys."

* "No wonder we normal people have a sense of revolt against them. They look more like gangsters robbing banks than bank employees."

* "The rich have always felt entitled to loose the poor's money as they so fit, this only a continuation of history."

* "A few stones falling or a few heads rolling seem to extract a disproportionate sympathy from The Economist."

* "They are more deserving of the Guillotines than the French Nobility in 1790s, and by a very wide margin at that."

* "But for those Modern Day Robber Barons & Thieves, to escape with a PUNCH in the Face & getting Knocked Out (KO'd) is being Mercifull, and a small price to pay for their Transgressions & Theft!!!!!

Back in the day of the "French Revolution" it would've been: "Off with their Heads"!!!!!!

Now it's up to us, the almost OLD so-called ADULTS. We must insure that there's not only Reform (as the article espouses) but Punishment as well."

* "The sad, ugly reality is that 1% of a special breed of humanoids control & own over 90% of the global wealth: a heinous tribe who abuse, mis-use & treat the rest of humanity as disposable pawns, to be utilised any-which-way-they-can, to further their insatiable selfish desires & amass even more wealth for themselves!

* "We've seen what the rich do, they buy the government and use it to run the country their way. Tax the greed right out of the system."

* They control Newspapers, Think Tanks, companies ... almost all our live. They are the ones with the resources to finance bright intelectuals just for inventing ideologies that justify their position in society as deserved or at least necessary."

* "I think the average people are clearly showing a lot of restrain, because as I see it the place of "the lords of the universe" is on the street light posts, hanged by their fat necks.*

Here is my modest contribution to the "discussion":

"May I respectfully remind your readers of what happened in Europe the last time Social Progressives went on a witch hunt for a prosperous but politically unpopular minority?"

Friday, April 3, 2009

The Auto Warranty of Last Resort

I've checked the Constitution, and there's nothing there about the federal government's role as the auto warranty of last resort, but greater legal minds than mine have found it there anyway.

And here's what it will mean...

Thursday, April 2, 2009

Rehabilitating Smoot Hawley

Uh oh. The New York Times has allocated some of its precious space to an economist trying to rehabilitate the Smoot Hawley Tariff Act.

"The Smoot-Hawley Tariff Act got a bad rap in the Great Depression, an economist argues. Temporary protectionism can be a good thing, he says, giving businesses and workforces time to adjust to downturns."

When intellectuals provide the cover for populist politicians, can more trouble be far behind?

Wednesday, April 1, 2009

TARP in Pictures

A picture is worth a thousand words...
The TARP, in Pictures The TARP, in Pictures DealBook From DealBook: The TARP, in pictures.