"Unfettered private exchange cannot be limited -- as the Chinese government thinks it can -- to things. Material items are indivisible from the knowledge of how to make them and the ideas upon which that knowledge is based. All the more so, now, in an "information age." Free markets lead to thinking, that eternal enemy of politicians."
"In the middle of the 19th century, Frederic Bastiat, the French popularizer of classical economics, titled one of his most famous books Economic Sophisms. 'Sophism' is Bastiat's synoym for 'systematic error,' and he assings sophisms broad consequences: They 'are especially harmful, because they mislead public opinion in a field in which public opinion is authoritative -- is, indeed, law.' Bastiat attacks dozens of popular protectionist sophisms, for example, but does not bother to criticize any popular free trade sophisms. The reason is not that bad arguments for free trade do not exist, but that -- unlike bad arguments for protection -- virtually none are popular!"
Bryan Caplan, The Myth of the Rational Voter
"Social responsibility is exercised when individuals express their own values in their own acts, acting separately or in concert; it is not exercised when they force their views on others. A socially responsible individual objects to low wages by refusing to work for them. If he feels strongly about the evils of low wages, he can attempt to dissuade other workers from accepting them, and he can boycott products and producers who benefit from them. He can even try to persuade the owners of businesses to transform their firms into social welfare organisations. But if he acts to prevent other workers from accepting, or businesses from offering, wage levels that are acceptable to them both, he is obstructing social responsibility, not exercising it. Individuals have no more right to force other adults to adopt their moral priorities than they have to dictate their religious beliefs."
"Bastiat was indeed a lucid and superb writer, whose brilliant and witty essays and fables to this day are remarkable and devastating demolitions of protectionism and of all forms of government subsidy and control. He was a truly scintillating advocate of an untrammeled free market."
Ideas, both good and bad, are transmitted throughout a society by four important vectors.
First, there are the intellectuals, the truly original thinkers who first formulate the ideas. Second, there are those who control public policy where they use political power to implement the ideas. Third, there are the wealth creators, the business people who pay for the ideas. Finally, there are the leaders in popular culture, primarily in news, entertainment, and religion, who are the primary disseminators of ideas.
With that in mind, consider this brilliant and funny video from the vector of popular culture. It is a clip from the television series South Park, a show that regularly takes a strong -- if irreverent -- individualist point of view.
The video illustrates the paradox of a consumer market success. Everyone hates Wal Mart (called "Wall Mart" in the video) because everyone else shops there.
Assume you could do away with "Wall Mart" by convincing everyone not to shop there. What would be the result? The answer: the same mistake.
Contrary to conventional wisdom, common political ground does not necessarily make it possible to forge a consensus. Instead, common ground may actually make every small difference between groups even more valuable as a tool for snatching donors and voters away from rivals. Indeed, the primary purpose of political parties is to create a group identity by exaggerating every difference between rival groups, and to obscure larger similarities sitting in plain view.
The reason political extremes fight one another so viciously is because they have so much in common. It is the job of the demagogue to convince you that it truly matters whether the chicken that laid the eggs you eat was white or black.
Wealth is one way of measuring human accomplishment. It certainly is not the only measure nor does it measure all meaningful accomplishment, but what it lacks in breadth and quality it makes up for in ease of use.
What part of human nature is responsible for the creation of wealth? Is it intelligence? Determination? The willingness to risk failure and humiliation? The need for independence and control? Greed?
The question is an important one, both for individuals trying to take care of themselves and their families, and for societies trying to overcome mankind's natural state of poverty. The various answers determine various paths of action.
One study concludes that perseverance and determination are more important inputs for achievement than intelligence. Wasted genius is proverbial. Thomas Edison was right: "Genius is 1% inspiration and 99% perspiration."
Another article confirms what we all know: you don't have to be smart to be wealthy. "If you're an individual with relatively low intelligence, you shouldn't really believe that you're handicapped in achieving wealth," the author concludes. "Similarly, if you're intelligent, you shouldn't think you have an advantage in living the rich life."
Well, if being wealthy does not necessarily mean that you are smart, and not having money does not necessarily mean that you are stupid, at least we know with scientific certainty that money can buy happiness.
That is an accomplishment worth paying for.
We all know that politicians make ridiculous promises. Could it be they only make the promises voters desperately want to hear? Are politicians merely delivering the product demanded by the marketplace? That is the view expressed in this passage from Robert Penn Warren's Pulitzer Prize-winning novel All the King's Men.
"Business corporations in general are not defenders of free enterprise. On the contrary, they are one of the chief sources of danger....Every businessman is in favor of freedom for everybody else, but when it comes to himself that's a different question. We have to have that tariff to protect us against competition from abroad. We have to have that special provision in the tax code. We have to have that subsidy."
"Certain nations seem particularly liable to fall prey to government plunder. They are those in which men, lacking faith in their own dignity and capability, would feel themselves lost if they were not governed and administered every step of the way....I have seen countries in which the people think that agriculture can make no progress unless the government supports experimental farms; that soon there will no longer be any horses, if the government does not provide studs; that fathers will not have their children educated, or will have them taught only immorality, if the government does not decide what it is proper to learn."
(Charleston, SC) The College of Charleston has announced the formation of the Initiative for Public Choice & Market Process, made possible by a generous gift from BB&T.
The purpose of the Initiative is to advance the understanding of the economic, political and moral foundations of a free society. It supports the growth and development of teaching and research, while engaging students and the greater Charleston community.
Economics traditionally focuses on the behavior of firms and consumers and how individuals interact in market settings. Public choice builds on the groundbreaking economic and political theories of Nobel Prize winning economist James Buchanan extending the tools of economics to analyze the behavior of voters, candidates, legislators, bureaucrats, and the institutions under which they operate.
The Initiative works to to enhance these economic and political theories for students and faculty through a variety of programs:
The BB&T Free Market Process Speaker Series invites speakers to address the underlying principles and institutions of a market economy. Students, faculty, and the greater Charleston community are invited to attend.
The BB&T Free Enterprise Award is a cash prize awarded to the best investigative paper or case study by a student that examines the underpinnings of a capitalistic economy and public choice theory.
The Initiative provides funding for faculty to develop courses that provide a solid understanding of public choice and free enterprise capitalism in the context of economics, business and philosophy. The program will also accept applications from faculty members for research support in the areas of public choice and free enterprise.
For more information, contact Dr. Peter Calcagno in the Department of Economics & Finance, 843-953-4279 or by email at calcagnop@cofc.edu.
"The charge that business in general is exploitative can only be plausible if the nature of business is radically misconstrued. Coercion is not intrinsic to business, but to government; contrary to Marx, business can only be coercive if it acts against the law, or with the law's connivance. And despite confused ideological claims to the contrary, profits are no more theft than property is; business is not conducted at the expense of its non-owner stakeholders. In the long-term, owner value is unlikely to be maximized by an organisation that lies or cheats or steals, or even by one that is widely believed to do so. Business is by its nature based on contractual exchanges of value, voluntarily entered into; to be successful, business must therefore act in ways that encourage others to deal with it."
Elaine Sternberg, Just Business: Business Ethics in Action
The leaders of this country have committed themselves to protecting human rights, including:
1. The right to a useful and remunerative job in the industries or shops or farms or mines of the nation.
2. The right of every family to a decent home.
3. The right to adequate medical care and the opportunity to achieve and enjoy good health.
4. The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment.
5. The right to a good education.
6. The opportunity to work.
7. That no disabled person be left without adequate mean of subsistence.
8. That no sick person be left without medical care.
9. That no child be left without schooling, food and clothing.
10. That no young person be left without the opportunity to study.
11. That no one be left without access to studies, culture and sports.
12. That no family be left without a comfortable place to live.
Answers:
1-5, President Franklin D. Roosevelt's State of the Union Address, January 1944
6-11, Constitution of the Republic of Cuba
Is big business taking all the business away from the little guy? Not if the little guy is smart, plays to win, and spends more time worrying about his customers than protesting.
Chandra Bhan Prasad, a former pistol-toting Maoist revolutionary who once urged his fellow untouchables to murder members of India's upper caste in the name of social justice, admits he was wrong. Now he understands that it is not violence that allows poor people to "escape hunger and humiliation."
Neither is it government welfare, nor a return to nature, nor affirmative action. It is India's economic liberalization that will "neutralize" the caste system and liberate the poor. In a word, it is capitalism. Prasad says those who oppose capitalism in India, “have a hatred for those who are happy.”
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.
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.
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.
"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
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.
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 www.calloftheentrepreneur.com. The movie's trailer appears below.
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."
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.
"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)
"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,
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.
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.
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.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030
"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)
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.
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.”
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."
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.
At reason.tv, Johan Norberg, author of In Defense of Global Capitalism, sits down with reason.tv'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."
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.
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.
"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.
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."
" Hard-headed though businessmen are supposed to be, they are all too often perplexed and embarrassed by a very basic question. Having struggled to present their ethical credentials, having proudly shown how they have treated their employees fairly, and their customers honestly, and their waste products responsibly, businessmen are nonetheless frequently stumped when the question is posed: if what the business has done is good for the business, can it really be ethical? They shuffle about, and examine their shoes, and fall silent, unable to rebut the implied accusation that because the business has benefited, it and its good acts are somehow less moral.
But such moral diffidence is quite unnecessary. The answer to the question is simply, emphatically, Yes: if it's good for the business, it certainly can be ethical."
Elaine Sternberg, Just Business: Business Ethics in Action
The Bastiat Society invites you to our next meeting on Wednesday evening, August 6th.
We are delighted to have Ashley Landess, President of the South Carolina Policy Council join us as our speaker. She will provide insight into state tax dollar spending on economic development as well as the dangers associated with the state meddling in free markets.
Please feel free to invite a friend or two for an evening of hors d'oeuvres and stimulating dialogue.
As usual, we will host a reception at 5 pm, and our program will begin at 6 pm.
Please R.S.V.P to megan.rock@imagingarts.com
About our speaker:
Ashley Landess was born in Spartanburg, S.C. She has also lived in Dallas, Washington, D.C. and Chicago. She has a journalism degree from the University of North Texas. Her twenty-year career in communications includes a public policy background as well as consulting work for private businesses and charitable organizations.
She is president of the South Carolina Policy Council, a non-partisan public policy research organization located in Columbia. She has been at the Council since 1998, and previously served as its Vice President for Public Affairs. Ms. Landess has served on the SC Lottery Commission since 2003, when she was appointed by then-House Speaker David Wilkins. Landess is on the Executive Committee of the Commission, and chairs its advertising and marketing committee.
She was also appointed by Governor Sanford in 2005 to chair the School District Consolidation, which was legislatively charged with analyzing the cost savings from consolidation. Landess also served as a member of the Governor's Health Care Task Force in 2003.
Landess writes opinion columns on issues such as education reform, tax policy and government transparency, and those columns are published in dailies and weeklies across the state. Landess has appeared on statewide television and radio and delivered expert testimony on several issues. She is a member of St. John's Episcopal Church in Columbia
Prosperity begins with freedom. But what is freedom?
Freedom is a process, not a result. It is a process that taps all the knowledge scattered among the human race, knowledge that is impossible to collect in time or in one place. Freedom utilizes more knowledge than any one person could ever gather and manage. On a large scale, everything freedom produces is indirect, unpredictable, and sometimes even unpleasant. That is why it is so difficult to "manage" a free society. It is endlessly adaptable and endlessly creative.
At the same time, freedom must have commonly accepted rules of behavior in order to get anything done. These rules evolve in the culture, where they are drawn from human nature. Secondarily, they are expressed in legislation and regulation, which codify the evolving norms of behavior.
Understanding the nature of freedom makes it possible to understand prosperity, whether we are talking about individual wealth, the wealth of a successful company, or national wealth. Unless it is accumulated by force or fraud, wealth must be earned in a free society. That means dealing with an environment that is constantly evolving and with knowledge that is rarely complete. The image of the confident entrepreneur who never makes a mistake or is haunted by doubt is about as accurate as belief in a god-king.
Individual liberty, private property rights, and free trade do not guarantee a utopia. But they do make it possible to efficiently utilize all the knowledge that humans discover, and do so morally, without violence or theft.
Freedom is a process that does not guarantee prosperity; it make prosperity possible. But what form and shape that prosperity might take is anyone's guess, an adventure into one new world after another.
Thomas Sowell, a senior fellow at the Hoover Institution, writes in one of his recent columns, "We don’t look to arsonists to help put out fires but we do look to politicians to help solve financial crises that they played a major role in creating."
Politics had a leading role in creating the current housing crisis, says Sowell. Consider the following:
1. Political pressure forced lenders to loan money to unqualified borrowers.
2. Land use regulations forced up the price of housing, leading borrowers to seek "creative financing."
3. The Federal Reserve pushed interest rates to historic lows, encouraging even more borrowing, bigger loans, and more "creative financing."
Sowell says the housing crisis is more political failure than market failure. But that won't slow don't the political rush for action. "The last thing politicians can do in an election year is nothing. So we can look for all sorts of “solutions” by politicians of both parties. Like most political solutions, these are likely to make matters worse."
Although there is more than enough evidence that every business person should be skeptical about the academic push to teach business ethics, I offer as Exhibit A. the following paragraph from an article entitled "The Ethics of Governance," by Josef Wieland.
Wieland is the director of the German Business Ethics Network's Centre for Business Ethics. I challenge anyone to read this paragraph through and make any sense of it the first time.
"The elements of governance ethics are the moral resources and behavioral constraints and extensions deriving from organizational rules and values as well as their communication in and via cooperation projects. Accordingly, it is not the notion of action, but of governance which is its point of relfexion. Governance structures are sets or matrices of communicated formal and informal rules and value that constitute the cooperative actor as constraints and furnish him or her with explicit and implicit rules of the game for contractual and organizational relations for the realisation of specific transactions."
Alan Greenspan, in Congressional testimony, could not have said it any better. The only thing more painful than trying to digest such a mass of words must have been the labor required to get it out.
Here is what Wieland is trying to say. "The written rules of ethical behavior in organizations can help promote ethical conduct."
Good news, Mr. Average American! As of July 16th, you stopped working to pay your taxes and started working for yourself, according to Americans for Tax Reform.
For 2008, the average taxpayer worked for the government the first 197 days of the year, four days longer than last year.
Free at last, free at last!
In his inimitable style, Stephen Colbert comments on international trade and transnational ownership of a vital American industry.
Trust is essential for trade. No trust, no trade, no society, no business, no wealth. You could say trust is the very basis of a prosperous society.
But what is the basis for trust? Why do we trust some people and not others? How do we deal with breaches of trust?
It turns out trust may have a neurochemical basis. An article in Scientific American discusses the possibility that oxytocin, "a hormone recognized for its role in social attachment and facilitation of social interactions, is also important in the formation of trust."
The higher the levels of oxytocin in the brain, the more likely an individual is to trust another person. This could explain why some people trust everyone, indiscriminately, while other people trust no one. It may not be a part of their behavior they can easily control.
Those who lobby for the stakeholder theory of the corporation believe that it is possible for a corporation to ignore its unhappy customers, compromise its accounting standards, produce faulty products, pollute its environment, ignore its competition, and still create value for its shareholders.
They claim this rather remarkable feat is possible under the shareholder theory of the corporation, which elevates shareholder value over the values of all other groups (i.e., "stakeholders") affected by the corporation.
In their attack on the primacy of shareholders, the advocates of the stakeholder theory make three serious errors, mistakes that doom their entire argument. These errors concern the difference between short term and long term shareholder value; the difference between monopolies and competitive corporations; and the reliability of prices.
Is it truly possible to create shareholder value by ignoring unhappy customers, etc? Yes, such an outcome may be possible, but only for a little while. It is impossible to create long term shareholder value with such behaviors, because customers, accountants, employees, communities, and investors all have other choices.
Such an outcome is far more likely -- almost guaranteed -- in situations where people are forcibly deprived of other choices. But we don't call those situations markets. We call them monopolies, and monopolies exist only with the collusion of the state. Only the state has the power to limit competition, set prices, and compel non-shareholders to create value for shareholders.
But such value is not earned; it is extracted from one group for the benefit of another. Governments that create monopolies may create the appearance of a market economy, but in reality those "markets" are centrally planned.
Examine the heart of a planned economy, and you may find the form and substance of a corporation, but you will not find competition. This is the critical distinction that stakeholder theory glosses over. All corporations are not created equal. The more a corporation is protected from competition, the more likely it is to be a mechanism for involuntary wealth transfer, not voluntary wealth creation.
Prices matter as much as competition. Ultimately, shareholder value is just another price. Like all prices, it is sensitive to dynamically changing factors in a complex web of action. Just as the price of any good captures the varied interests of producers, manufacturers, distributors, wholesalers, retailers, and customers, long term shareholder value captures the varied interests of customers, employees, suppliers, communities, shareholders, and even competitors, and it does this better than any other measure of corporate responsibility.
Denying that the purpose of a corporation is to increase long term shareholder value is nothing less than an attack on the reliability of the price system itself. Stakeholder theory elevates other forms of value over the value contained in prices, especially that price we call shareholder value. It is a theory of business that has more in common with price control than with profit and loss.
From the Economist, a review of Cars for Comrades, a survey of the auto industry in the old USSR.
THEY were the butt of jokes in the West. (“How do you double a Lada’s value? Fill up the tank”). Inside the Soviet Union, however, the quantity and quality of the cars it produced epitomised both the system’s failure and the capitalist world’s advantage....
The Lada was an obsolete Fiat, produced at the Togliatti factory south-east of Moscow: bought new, it required extensive repair in order to become roadworthy. Soon after that it would start rusting. Getting it serviced was a nightmarish process involving long waits, the use of personal favours, and unpleasant discoveries (light-fingered mechanics would steal scarce items such as the wing mirrors or windscreen wipers).
"Campaign Econ says the American economy is a certain way because Americans think it is. Campaign Econ competes with real economics and often wins..."
Amity Shlaes, in The Washington Post
"We start with the biological observation that no individual could survive in a world of scarce resources without a strong measure of self-interest, one that includes at the very least his own family and close associates. That self-interest can manifest itself in one of two ways when dealing with strangers; through either aggression or cooperation."
Richard Epstein, "Coercion vs. Consent," Reason, Vol. 35, No. 10, pp. 40-50.
Every law, tax, rule, or regulation of the state is ultimately enforced at the point of a gun. This reality is often ignored by progressives and communitarians, who believe in the positive goodness of coercive state action.
Markets, on the other hand, rely on voluntary behavior. In a market, we don't call coercion a good thing. We call it theft, and we use the state to punish thieves.
Therein lies the difference between the two groups. The first believes it should use the power of the state to improve people's lives, even if it has to act against people's preferences. The second believes it should only use the power of the state to punish those who use force or fraud to get what they want.
In The Law, published in 1850, Frédéric Bastiat praised the United States as the nation that had most successfully developed the law as a means of protecting private property from those who would plunder it. He noted only two exceptions: slavery and tariffs.
He wrote,"But even in the United States, there are two issues—and only two—that have always endangered the public peace....What are these two issues? They are slavery and tariffs. These are the only two issues where, contrary to the general spirit of the republic of the United States, law has assumed the character of a plunderer."
Bastiat was prescient. Those were the very issues that would drench the country in blood and nearly tear the United States apart a little more than ten years later in the Civil War.
The Civil War settled the question of slavery. The question of tariffs remains, as dangerous to the public peace as ever.
On July 4th, outside St. Giles' Cathedral in Edinburgh, Professor Vernon Smith of George Mason University unveiled a statue of the Scottish intellectual known as "the father of economics," Adam Smith.
Who says television can't deal with serious issues in just sixty seconds?
Too many people assumed this vintage 1980s Wendy's ad was a harsh criticism of Russian women. It should be viewed as a humorous take on what happens to the human spirit when it is not free to choose.
As the announcer says, "Having no choice is no fun."
From The Economist, evidence that the Old Left has become the New Establishment.
Apparently, the ineradicable youthful urge to rebel against the establishment is moving more and more students toward the Conservative party.
What do young people in the United Kingdom want? Fiscal prudence, low taxes, and secure private property rights have taken the place of drugs, sex and rock and roll.
Although it doesn't capture the eloquence of the original, the lyrics of the 1984 glam rock anthem We're Not Gonna Take It by Twisted Sister capture the spirit of the Declaration of Independence.
At its heart, the Declaration was nothing less than flipping the most powerful monarch in the world the bird.
It might help to think of this cultural reference across the centuries as Thomas Jefferson with makeup, a guitar, and a backup band. Considering the male fashions of the 18th century, that wouldn't be too far off the mark.
You may never think of American history the same way again.
We're Not Gonna Take It (Lyrics)
Oh we're not gonna take it
No, we ain't gonna take it
Oh we're not gonna take it anymore
We've got the right to choose it
There ain't no way we'll lose it
This is our life, this is our song
We'll fight the powers that be just
Don't pick our destiny 'cause
You don't know us, you don't belong
{Refrain}
Oh you're so condescending
Your gall is never ending
We don't want nothin', not a thing from you
Your life is trite and jaded
Boring and confiscated
If that's your best, your best won't do
We're right, we're free, we'll fight, you'll see
For additional shock value, here's the video. Imagine King George III in the role of the father, and you'll see the parallels.
The Declaration of Independence is one of those documents everyone talks about and nobody reads. In the spirit of the 4th of July, I once again offer the meaning of the original document expressed in modern idiom.
Date: July 4, 1776
To: Posterity
CC: Government
From: Second Continental Congress, Philadelphia
Subject: "We're Not Going to Take it, Anymore"
God knows, sometimes a man has to stand on his own two feet. We think that time is now. Let us explain what we're about to do and why. We know you'll understand.
Who do you think should run your God-given life? You, or the government? The answer is as plain as the nose on your face: you should. The government is here to protect your life, not to run it. When it tries to run your life, you have the right to say no. If it gets really pushy, you have the right to tell it to drop dead. Of course, you shouldn't cause big trouble for nothing. It's best to put up with most of the crap in the world. It's not a perfect world and never will be. But when a government keeps insisting that it owns your life and all your stuff too, you have the right to start a revolution.
Well, we're starting one, right here, right now. Here's why. If this list doesn't convince you, nothing will:
1. The government is ignoring its duty to protect us.
2. The government won't allow us to handle all the business that it ignores.
3. The government won't allow us the right to vote on our laws and our taxes.
4. The government has made it difficult for us to protest.
5. The government has stripped all power from any of us who disagree.
6. Power to the people! But until we get this mess straightened out, the government is inviting all kinds of trouble, and we're the ones who are going to have to deal with it.
7. The government refuses to let us live where we want to.
8. The government refuses to let us peacefully settle our own disputes in our own courts.
9. The government insists on treating our judges like its puppets.
10. The government is growing too big, too fast, and it cost too much.
11. We are occupied by the government's army.
12. The government keeps us quiet at the point of a gun.
13. No matter what we say, the government keeps trying to run our lives. For example:
a. There are a lot of soldiers with guns around here
b. These soldiers are killing people, and nobody does a thing.
c. The government won't let us trade with the rest of the world. We can't earn a living.
d. We have to pay taxes, but don't have any say in which ones or how much.
e. Kangaroo courts.
f. Kangaroo justice.
g. The government intimidates innocent people.
h. The government makes up its own rules.
i. The government usurps the power of the people.
j. The government kills innocent people.
k.The government kills more innocent people, and destroys their property.
l. The government kills even more innocent people.
m. The government takes innocent people captive, and forces them to kill other innocent people or be killed.
n. The government encourages Indians to kill innocent people.
It's not our fault that it has come down to this. God knows we've tried to get along. But the government insists on treating us like slaves.
The rest of the civilized world isn't listening to us. We've warned them about what's going on. We've asked for their help, begged for it, really. But they have ignored us, even though we speak the same language and share many family ties. Now we have no choice. Reluctantly, we are forced to call them our friends if they don't fight us, and our enemies if they do.
That's the way we see it. Who are we? We represent the United States of America. We ask the Big Guy upstairs to help us do the right thing for the right reasons. Power to the people! The old government is finished. It doesn't matter anymore. If we want a war, we'll decide that, no one else. If we want peace, we'll decide that, too. It's our business if we want to trade and make money.
As of right now, it's our country. We hope like hell we're right and this thing works.
Sincerely,
[Sign Here]
On the eve of another celebration of the independence of the United States, it might be educational and fun to consider what life has been like in those places and times where human freedom has not been given the respect it deserves. Any place, for example, that has suffered the cruel joke of communism.
Under communism, life became a grim struggle against a state that was, in turns, malevolent or indifferent. How grim? Consider these jokes from Hammer & Tickle, a collection of humor from behind the Iron Curtain by Ben Lewis.
Some of these jokes would have earned you a trip to a police station; others, a jail term; others would have cost you your life.
“How do you deal with mice in the Kremlin?” “Put up a sign saying ‘collective farm’. Then half the mice will starve and the others will run away.”
“Who built the White Sea canal [Stalin’s single most murderous slave-labour project]?” “The left bank was built by those who told the jokes, and the right bank by those who listened.”
"A flock of sheep approaches the Finnish border in a panic, pleading to be allowed entry. “Beria [Stalin’s secret police chief] has ordered the arrest of all elephants,” they explain. “But you’re not elephants,” reply the Finnish border guards in puzzlement. “Yes, but try explaining that to Beria.”"
Stalin appears to Vladimir Putin in a dream and says: “I have two bits of advice for you: kill your opponents and paint the Kremlin blue.” Putin asks, “Why blue?”
