Saturday, January 30, 2010

Agree or Disagree

From Bryan Caplan at GMU, three rules for tolerance and honesty in the discussion of ideas:

1. Don't think less of people who sincerely disagree.

2. Do think less of people who insincerely agree.

3. Do think less of people who think less of people who sincerely disagree.

These are as useful in the business world as at GMU.

Friday, January 29, 2010

The Quotable Bastiat

"Who will dare to say that we have been gifted with strength, not to defend our rights, but to destroy the equal rights of our fellow-men?"

From "LAW, Spoilation by", in Cyclopædia of Political Science, Political Economy, and the Political History of the United States, edited by John J. Lalor, first published 1881.

Thursday, January 28, 2010

Get to Know the Boom and Bust

Check out the "Learn More" page at Books, articles, and podcasts on Keynes and Hayek.

Make sense of the mess in the modern world.

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

John Maynard Keynes

Wednesday, January 27, 2010

Economics as Rap

Of all the battles confronting business, perhaps none is more important than the one in popular culture.

Movies, television, and music are powerful influences in shaping public opinion. Oliver Stone can convince more people than the Warren Commission. More people listen to music than read textbooks.

With that perspective in mind, enjoy what may well be the finest example of deep thinking and popular culture, an imaginary rap between the two economists Freidrich Hayek and John Keynes.

Hayek and Keynes held contrasting views of economic policy. Hayek was an advocate of the free market and warned of the dangers caused by easy money and interventionist government policy. Keynes advocated more government intervention to stimulate the economy and liberate it from the control of "animal spirits."

Watch. Enjoy. Learn.

Tuesday, January 26, 2010

An Old Lie

It is hard to believe that the party of President Obama is a direct descendant of the party of Thomas Jefferson.

In a letter to Thomas Cooper in 1802, Jefferson wrote, "If we can prevent the government from wasting the labors of the people, under the pretence of taking care of them, they must become happy."

Is there any better example of the unreliable nature of political parties? How the party of Jefferson became the party publicly committed to "taking care of" people is a lesson in the weakness of political virtue.

But perhaps the fault lies not in the party, but in the people. Perhaps political parties will become whatever kind of party people want the most.

This appears to be Jefferson's view, for in his letter to Cooper, he does not say we must prevent political parties, businesses, or religious institutions from "wasting the labors of the people." He specifically warns against government.

Today, we joke that the phrase "I'm from the government, and I'm here to help you" is one of most popular lies in the world. Reading Jefferson, we see that it is also one of the oldest.

Sunday, January 24, 2010

Buzz Saw

On the fast-fading topic of health care, President Obama said:

"We've gotten pretty far down the road, but I have to admit, we've run into a bit of a buzz saw along the way. The long process of getting things done runs headlong into the special interests, their armies of lobbyists, and partisan politics aimed at exploiting fears instead of getting things done. And the longer it's taken, the uglier the process has looked."

In other words, "Some people dared to disagree."

In business, if the consumer disagrees, you change the product or try another consumer. You do not whine about those who disagree. You do not press them to change their mind in the name of "getting things done."

In fact, business flourishes when consumers disagree. More room for the rest of us, you see. You don't like Starbucks' coffee? How about Seattle's Best, Coffee People, Timothy's, Gloria Jean's, Cafe Altura, Eight O'Clock, Douwe Egberts, Lavazza, Folgers, Jeremiah's Pick, Emeril's, Aloha Island, Gevalia, Wolfgang Puck's, Maxwell House, Yuban, All Day Gourmet, Dunkin Donuts, Peet's, Caribou, Van Houtee...need I go on?

But, if you don't like a particular piece of legislation, you have no choice, nowhere else to go. You have no choice but to resist or accept, and that is hardly a choice. That is the choice of a prisoner or a slave, not the choice of a consumer.

No wonder the President ran into a "buzz saw." We all might breath easier if only there were more of them out there.

Saturday, January 23, 2010

Power as Product

All is fair, when power is the only product, when power is the only justification for existence, when achieving power is a zero-sum game that must be won at all costs.

Witness the political landscape in the United States. Political parties aren't competing for voters; they are competing for power. Voters are merely the means to an end.

Political parties aren't really interested in ideas, either. Ideas are just another means to an end.

Finally, political parties aren't really interested in you. You are just the means to an end.

As George Orwell wrote in 1984, "The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power."

What kind of power? Power over the lives of others. Power over their property. Power to make them do what they don't want to do.

Not the kind of power that says "Don't kill" or "Don't steal" or "Don't cheat." Political parties seek the kind of power that says, "You will die" or "I will steal from you" or "I will lie to you," and "you can't stop me."

If it is wise to be skeptical about the claims of business, it is even wiser to be skeptical about the claims of politicians and their parties, even the ones we like. At least consumers have a choice. Voters get stuck with the results for years.

Friday, January 22, 2010

Money on the Dark Side of the Moon

As is often the case, I recently had music playing in the background at my house. This particular morning I had Pink Floyd's Dark Side of the Moon record playing (yes, among other forms of media, I listen to records). As some of you know, the song Money is the first song on side two of the album. As I dropped the needle, it occurred to me that, even though the word "money" has a specific meaning to me in economic terms, I had never really studied the lyrics to this well-known song. So I dared to examine what "money" means to songwriter and bassist Roger Waters of Pink Floyd - at least what it meant to him in the early 1970's when he wrote the song.

By 1973, Pink Floyd had already recorded eight albums, including a movie soundtrack and a #1 album in 1970 called Atom Heart Mother. Therefore, it is safe to assume that when the song was written, Roger Waters was already struggling with his new found fame, and enjoying the money that accompanies a #1 album release.

Now, I am not a lyricist by any means, and I may very well be interpreting the song completely wrong. Nevertheless, with the historical context in place, here is my amateur interpretation of Money by Pink Floyd.

Artist: Pink Floyd

Album: Dark Side of the Moon
Lyrics by: Roger Waters

Click here for to see it performed in London in 1994.


Original lyrics in bold font

Layman interpretation of the lyrics in normal font

Money, get away

Get a good job with more pay
And you're okay

At first, money is good and it is allows you to live comfortably.

Money, it's a gas
Grab that cash with both hands
And make a stash

Life becomes fun once you have a little disposable income.

New car, caviar, four star daydream
Think I'll buy me a football team

Once you become wealthy, your wants become a little more expensive - sometimes they seem absurd (i.e. buying a football team). But, who are we to judge him on his wants.

Money get back
I'm all right Jack
Keep your hands off my stack

With wealth comes friends, agents, managers, and obligations. These people are normally looking for an easy handout.

Money, it's a hit
Don't give me that
Do goody good b&ll$h!t

There are no shortage of suggestions as to how you should spend your money. Even though keeping your money for yourself is considered "greedy" to some.

I'm in the hi-fidelity
First class traveling set
And I think I need a Learjet

It's funny how
wants become needs. He "wanted" a football team, and now he "needs" fancy luggage and a Learjet to match. However, again, who are we to judge him on his wants and needs - it's his money.

Money, it's a crime

Share it fairly
But don't take a slice of my pie

Once you become rich, it is easy to judge others and tell them how to live and spend their money, but leave his lifestyle out of it - remember it's his success.

Money, so they say
Is the root of all evil

But if you ask for a rise

It's no surprise that they're
Giving none away

Those who do not have money, and some that do, point to money as the "root of all evil." But, if you notice, they rarely part with theirs. It's fairly easy to sit back judge others based on what they do (or don't do) with their money. But, in reality, it is their money, and they should be allowed to spend it on football teams, matching luggage, Learjets, or maybe even give it all away to charity. Besides, the common man enjoys watching football, making luggage, and building Lear jets.

In the end, money is not the "root of all evil"; however, mandating what one does with their money is not far from it.

A quick note: In a 1987 interview, Roger Waters was asked, "Apart from [being successful as a band] what were the main problems associated with such immense success?"

"Mainly the one of what to do with all the money!" he answered, "You go through this thing where you think of all the good you could do with it by giving it away. But, in the end, you decide to keep it!"

Thursday, January 21, 2010

To Preserve a Free Society

“If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion”

Friedrich August von Hayek

Wednesday, January 20, 2010

Same Old Idea

Coming soon, from the kind of progressive thinking that brought you "the worst car in history."

"Reliable, no-frills health care."

"Health care designed to make new economic sense."

"Everybody needs health care sometime."

and the marketing slogan that says it all...

"Introducing the same old idea."

Honestly, you can't make this stuff up.

As the Economist writes, "The idea of a reliable, no-frills car from an exotic source attracted millions of dollars’ worth of media coverage.

The only flaw was the car itself. Even after strenuous efforts to raise quality control at the Zastava plant, it was still hopelessly unreliable, and obsolete by the standards of the modern auto industry. The verdict of outside commentators was damning and unanimous. For the price of a new Yugo, consumers would find a second-hand car (of almost any kind) better value."

Tuesday, January 19, 2010

The Moral Choice

"Suppose, for example, that someone is a devout Muslim who is anxious to have as many people as possible bow to Mecca three times a day; to him let us suppose this is the highest moral act. But if he wields coercion to force everyone to bow to Mecca, he is thereby depriving everyone of the opportunity to be moral — to choose freely to bow to Mecca. Coercion deprives a man of the freedom to choose and, therefore, of the possibility of choosing morally."

Murray Rothbard, For a New Liberty, pages 104-105.

Monday, January 18, 2010

IEA Climate Change Debate

From the London-based Institute of Economic Affairs, the granddaddy of free-market think tanks and one founded by a business intellectual.

Videos of the presentations at the IEA Climate Change Debate are available. The participants discussed the question: “Do Science and Economics Support Government Action on Climate Change?”

Each speaker provided a different perspective on the economics or the science. Debating the topic (in the order of the videos below) were: Prof. Fred Singer from Science and Environmental Policy Project; Nigel Lawson from The Global Warming Policy Foundation; Prof. Mike Hulme from the University of East Anglia; and Dr. Sam Frankhauser from the London School of Economics.

You can play the individual speeches or play a video of all four speakers.

Prof. Fred Singer
Nigel Lawson
Prof. Mike Hulme
Dr. Sam Frankhauser
All Four Speakers

Sunday, January 17, 2010

When in Doubt, Blame a Banker

Below is an interview with Treasury Secretary Timothy Geithner regarding the proposed Bank Tax. Among other things, it exposes the fact that the federal government obviously made no provisions to recoup TARP funds. However, when the Troubled Asset Relief Program was passed, I remember them saying it was an "investment" and that taxpayers would "benefit" in the long-run. Well, now the government is turning to their old friend (taxes) to vilify and punish the banking industry.

The first question that came to my mind was, what about the banks that were forced to take TARP funds? For example, according to former BB&T CEO John Allison, BB&T did not request nor did they want TARP funds. However, they, among several other healthy and responsible banks, were summoned into a closed-door meeting with the Treasury Department and essentially forced to receive funds. This was in an effort to hide which banks were stable and which were on the brink of failure. Naturally, BB&T was among the first to repay their TARP funds. Therefore, it doesn't seem "fair" (to use the parlance of our times) that they should now be taxed for receiving the TARP funds?

The more obvious question may be, what about the other industries which received bailouts? Shouldn't we tax the automobile or the insurance industries? Or should we continue rewarding GM for continuing to fail?

At one point, all the TARP recipients were "too important to fail." Obviously they are not too important to vilify and throw under the bus. Or was that the point? Maybe the plan all along was to bail out the important industries in order to rob them of their sovereignty and enable the federal government to use them as political punching bags, fiscal scapegoats, and enact targeted policy in the name of taxpayer fairness. Okay, maybe that wasn't the plan, but it sure is becoming a very convenient strategy for the current administration.

Well, enough from me - see a sample of the interview below, and click on the link to read the entire transcript.


In an exclusive interview, Treasury Secretary Timothy Geithner, discusses the reason behind this move. He also talks about the risk of a double-dip recession and the unemployment rate.

Q: Jamie Dimon said you should not have tax policy that punishes individual firms.

A: This policy is not designed to punish. It is designed to meet the simple, practical, legal obligation, and we are doing it in a way, I think, it makes economic sense because we are doing it in a way that is, in effect, a tax on leverage, it is a tax on risk in some ways, and it is borne by the people that benefited most from the crisis. That seems fair.

Q: Do you have any concern that this tax will have any damaging effect on the economy, on lending? And if not, why not make it higher, since we have got a rather large budget deficit right now?

A: Let me start with the second. The ultimate costs of solving this financial crisis are going to be dramatically lower than anybody thought was possible. But a financial crisis like this caused a lot of damage, there is still going to be some cost. But the legal obligation is to make sure we cover that cost. So, conservative estimates, the cost of the crisis may be in the range of USD 100 million, slightly higher. So this is designed to make sure we cover those costs. That is why we did the size this way.

Click here for the entire interview.

Saturday, January 16, 2010


The law can be an instrument of equalization only as it takes from some persons and gives to other persons. When the law does this, it is an instrument of plunder.

~ The Law, by
Frederic Bastiat

Below is a sampling of new or revised tax proposals since the Fall of 2009:

  • Reinstate 36 and 39.6 percent rates for high-income taxpayers
  • Reinstate personal exemption phaseout and limitation on itemized deductions for high-income taxpayers
  • Impose 20 percent rate on capital gains and dividends for high-income taxpayers
  • Limit value of itemized deductions to 28%
  • Reduce the tax gap and make reforms
  • Tax carried interest as ordinary income
  • Codify “economic substance” doctrine
  • Reform U.S. international tax system
  • Repeal first-in-first-out (FIFO)
  • .15% Tax on banking profits to repay TARP
  • Climate revenues (i.e. Cap and Trade)
Information on most of these tax proposals can be found here.

Friday, January 15, 2010

Close to Nature

Most of the commentary on the situation in Haiti understandably focuses on the immediate effects of the earthquake. We are deeply disturbed by the suffering of our fellow human beings.

But there is a larger, longer running tragedy at work here. We call it poverty. Poverty is what "being close to nature" really looks like.

Behind the popular romance of nature as a pretty park where happy creatures play lurks the awful truth. Nature is not cruel, but it is clumsy, indifferently stumbling over land and people alike.

We can only love such a thing after we have contained its potential to do us harm. That does not come from prayers and worship; it comes from wealth and the security that wealth provides.

Earthquake relief does not make a nation wealthy. Wealth comes from the peaceful and profitable trade of individuals.

Until Haitians can securely own and trade property, they will continue to face the harrowing prospect of one disaster after another, one relief program after another, with no end in sight.

Thursday, January 14, 2010

The Long Shadow of Frédéric Bastiat

"Frédéric Bastiat's legacy has two key components: his artful polemics for free markets and his uncompromising conviction that men's interests are "naturally harmonious" to the extent that their property rights are respected. He was an artist with an unfailing loyalty to logic, and a revolutionary who fought the interventionist schemes of both the Right and Left despite suffering from a debilitating terminal illness."

From "The Long Shadow of Frédéric Bastiat" by George Smith, at Mises Daily.

Wednesday, January 13, 2010

Stopping Terror Costs Jobs!

From The Onion, evidence that some satire never goes out of style:

BREAKING: Terror Attack Failure Costs Detroit 10,000 Construction Jobs

Monday, January 11, 2010

John Stossel on Ayn Rand

Given the topic of our last meeting, last week's episode of "Stossel" on the Fox Business channel was rather timely. Thanks to Dr. Jennifer Baker for a fantastic presentation, and also reminding me to post this link.

Parts 2-6 can be found here.

Sunday, January 10, 2010

An Intellectual Adventure

"It may be that a free society as we have known it carries in itself the forces of its own destruction, that once freedom has been achieved it is taken for granted and ceases to be valued, and that the free growth of ideas which is the essence of a free society will bring about the destruction of the foundations on which it depends. There can be little doubt that in countries like the United States the ideal of freedom today has less real appeal for the young than it has in countries where they have learned what its loss means. On the other hand, there is every sign that in Germany and elsewhere, to the young men who have never known a free society, the task of constructing one can become as exciting and fascinating as any socialist scheme which has appeared during the last hundred years. It is an extraordinary fact, though one which many visitors have experienced, that in speaking to German students about the principles of a liberal society one finds a more responsive and even enthusiastic audience than one can hope to find in any of the Western democracies. In Britain also there is already appearing among the young a new interest in the principles of true liberalism which certainly did not exist a few years ago.

Does this mean that freedom is valued only when it is lost, that the world must everywhere go through a dark phase of socialist totalitarianism before the forces of freedom can gather strength anew? It may be so, but I hope it need not be. Yet, so long as the people who over longer periods determine public opinion continue to be attracted by the ideals of socialism, the trend will continue. If we are to avoid such a development, we must be able to offer a new liberal program which appeals to the imagination. We must make the building of a free society once more an intellectual adventure, a deed of courage. What we lack is a liberal Utopia, a program which seems neither a mere defense of things as they are nor a diluted kind of socialism, but a truly liberal radicalism which does not spare the susceptibilities of the mighty (including the trade unions), which is not too severely practical, and which does not confine itself to what appears today as politically possible. We need intellectual leaders who are willing to work for an ideal, however small may be the prospects of its early realization. They must be men who are willing to stick to principles and to fight for their full realization,however remote. The practical compromises they must leave to the politicians. Free trade and freedom of opportunity are ideals which still may arouse the imaginations of large numbers, but a mere "reasonable freedom of trade" or a mere "relaxation of controls" is neither intellectually respectable nor likely to inspire any enthusiasm.

The main lesson which the true liberal must learn from the success of the socialists is that it was their courage to be Utopian which gained them the support of the intellectuals and therefore an influence on public opinion which is daily making possible what only recently seemed utterly remote. Those who have concerned themselves exclusively with what seemed practicable in the existing state of opinion have constantly found that even this had rapidly become politically impossible as the result of changes in a public opinion which they have done nothing to guide. Unless we can make the philosophic foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our liveliest minds. But if we can regain that belief in the power of ideas which was the mark of liberalism at its best, the battle is not lost. The intellectual revival of liberalism is already underway in many parts of the world. Will it be in time?"

From "The Intellectuals and Socialism" by F. A. Hayek, 1949

Saturday, January 9, 2010

Why I Drive

1. Jonah Goldberg writes accurately of air travel outside of first class...

"The petty humiliations, the routine deceptions from airline employees desperate to rid themselves of troublesome travelers (“Oh, they can definitely help you at the gate!”), the stress-position seats, the ever-changing rules for what can and cannot be in your carry-on, being charged for food that the Red Cross would condemn if it were served at Gitmo: Air travel is the most expensive unpleasant experience in everyday life outside the realm of words ending in -oscopy."

2. While the TSA adds more frustration than security...

3. Finally, once glamorous air travel has become a bus system with wings.

Not entirely a business, not entirely an organ of the state, not profitable, not credit-worthy, not reliable, not customer friendly, not consistent, rewarding to run but not to invest in, the airline industry is everything you would expect from an economic arrangement that encourages the same kind of moral behavior you find on French farms and in dictatorships receiving large amounts of foreign aid.

Friday, January 8, 2010

Bubble Warning

from the Economist

The False Boom

In 2008, falling markets caused a vicious circle of debt defaults and fire sales by investors, pushing asset prices down even further. The market rebound was necessary to stabilize economies last year, but now there is a danger that bubbles are being created.

[The] more immediate risks may be posed by fiscal policy. Many governments responded to the crisis by, in effect, taking the debt burden off the private sector’s balance-sheets and putting it on their own. This caused a huge gap to open up in government finances. Deficits in America and Britain, for instance, stand at more than 10% of GDP.

The Real Bust

Markets have already tested the ability of the weakest governments to bear the burden of their debt. Dubai had to turn to its wealthy neighbor, Abu Dhabi, for help. In the euro zone, doubts have been raised about the willingness of Greece to push through the required austerity measures. Electorates are likely to chafe at the cost of bringing down government deficits, especially if the main result is to repay foreign creditors. That will lead to currency crises and cross-border disputes like the current spat between Iceland, Britain and the Netherlands over the bill for compensating depositors in Icelandic banks. Such disputes will lead to further outbreaks of market volatility.

Investors tempted to take comfort from the fact that asset prices are still below their peaks would do well to remember that they may yet fall back a very long way. The Japanese stock market still trades at a quarter of the high it reached 20 years ago. The NASDAQ trades at half the level it reached during dot-com mania. Today the prices of many assets are being held up by unsustainable fiscal and monetary stimulus. Something has to give.

Read the Entire Article Here

Thursday, January 7, 2010

No Apology Necessary

"The truth is that capitalism has not only multiplied population figures but at the same time improved the people’s standard of living in an unprecedented way. Neither economic thinking nor historical experience suggest that any other social system could be as beneficial to the masses as capitalism. The results speak for themselves. The market economy needs no apologists and propagandists. It can apply to itself the words of Sir Christopher Wren’s epitaph in St. Paul’s: Si monumentum requires, circumspice." [“If you seek his monument, look around.”]11

Ludwig von Mises, Human Action

Tuesday, January 5, 2010

Bastiat Society Meeting - January 6th

Please join us in welcoming Dr. Jennifer Baker from the College of Charleston. She will be discussing her recent paper published in the Journal of Libertarian Studies, entitled:

"Money is the Product of Virtue: Tensions in Rand's Invocation of Market Success"

Please RSVP by emailing us here (

About Dr. Jennifer Baker:

Jennifer Baker is a graduate of Brown University (B.A. in Philosophy and Political Science, 1995) and the University of Arizona (Ph.D., 2003).

Her research is on virtue ethics, and she looks to ancient ethical theories as positive examples of how ethics ought to be done today. She teaches courses on ethical and political theory, environmental ethics and philosophy, business ethics, bioethics, and American philosophy.

Saturday, January 2, 2010

The Quotable Bastiat

Voulez-vous que la loi remédie à tout ? C’est impossible ; il faudrait alors dire qu’un marchand qui attend, pour vendre son café, son sucre, de meilleurs temps, nuit à la société ; il faudrait donc invoquer toujours la loi, toujours l’État !

Discours sur la répression des coalitions industrielles

"Do you want the law to cure everything? It is impossible; in that case, we must say that a merchant who waits for a better time to sell his coffee or his sugar harms society. Then we must always invoke the law and call upon the state to intervene."

Speech on the Suppression of Industrial Combinations