How to save capitalism? Try it first.
The Fed speaks in Charleston Thursday night!
The Initiative for Public Choice & Market Process is pleased to announce the first BB&T Free Market Process Speaker Series.
Dr. Gerald Dwyer, Vice President, the Federal Reserve Bank of Atlanta, will present a current analysis of financial markets. This event is open to all faculty and members of the business community.
If you would like more information about this event please contact Peter Calcagno, Department of Economics and Finance, 843-953-4279, or email ipcmp@cofc.edu.
Date: Thursday, 23 October 2008
Time: 7 pm
Venue: College of Charleston Beatty Center, Wachovia Auditorium
Location: 5 Liberty Street, Charleston, SC
Massive government intervention in the banking system is driving the political left into delirious pronouncements that the free market is finally dead.
It is also driving conservatives and libertarians into apoplexy for the same reason.
Neither side has it right. Since the creation of the Federal Reserve in 1913, the banking system has been a government construction, from its foundation to the top floor. Within this imposing structure, most bankers have tried to operate according to the laws of the market, but government has repeatedly destabilized those laws by arbitrarily ignoring or rewriting them.
Consumers and bankers are both the victims of a massive government failure, not a market failure. It was not greed that led consumers to borrow too much money, and it was not greed that led bankers to lend it. It was not greed that led investment banks to turn those loans into securities, and it was not greed that led investors to buy them. All along the way, through this chain of economic decision making, one thing remains constant: government encouraged consumers to borrow, encouraged bankers to lend, encouraged investment banks to securitize loans, and encouraged investors to invest. More than any other agent, government is to blame.
Blaming the market for the collapse of the entire structure is like blaming the occupants of a building for its shoddy construction, not the architects.
What does this phrase describe: "...complete freedom and a relentless pressure to produce?"
The dreams of Milton Friedman? Friedrich Hayek? The nightmares of Naomi Klein?
No. This actually describes the Princeton University math department in 1948 under its chairman, Solomon Lefschetz. In her bestselling biography of the Nobel laureate and Princeton graduate John Nash, A Beautiful Mind, Sylvia Nasar says that Lefschetz's goal was to get his graduate students producing original research as quickly as possible. Anything else was a waste of time.
In complete defiance of the traditional rules of university administration, the department "subjected its students to a maximum of pressure but a wonderful minimum of bureaucracy." The department had no course requirements. When a student took a course, he always received a passing grade, whether he attended class or not. Transcripts were "works of fiction" prepared "to satisfy the Philistines." Students could earn a passing grade in a foreign language competency exam simply by promising they would learn the text later.
In return for providing such freedom, Lefschetz expected a graduate mathematician to either brilliantly succeed or pack off to a lesser institution. At Princeton, the only thing that mattered was honestly achieved results. It was a pure meritocracy.
At its best, business is also a meritocracy. Unfortunately, there are many places where the creative spirit of business falls prey to the mindless and stultifying adherence to pointless rules. Creativity that changes the world cannot be planned, but it can be smothered.
We should always remember that a set of policies and procedures is not real genius. At best, it can create and sustain the conditions that encourage genius, the "freedom and the relentless pressure to produce." These are the essential conditions that have, can, and will open up the full range of human genius, in every kind of work and in every human endeavor. We are surrounded by acts of genius everyday; we just don't recognize them because they are not our kind of genius.
Beautiful minds don't all come from Princeton, but they do come from places that share the atmosphere of the Princeton math department in 1948.
John Stossel's "Politically Incorrect Guide to Politics" will air on ABC's news magazine 20/20 on Friday, October 17 at 10pm ET.
Amid the claims and counter-claims of what one or the other candidate will do, we have to stop and ask: Are we voting for a competent human being, or hoping for a savior?
Stossel says, "Give me a break. Obama and McCain would have to be a combination of Superman and Santa Claus to do what their supporters say they will do."
Click here for more details.
From NPR...
"The idea that an economy serving 300 million souls in a dangerous world can be well-served by a "small government" was always silly — as silly as the idea that more government automatically solves more problems."
Read more here.
"What one thing do you think that countries, companies or individuals must do to make the world a better place in 2008?"
Daniel Klein, economist at George Mason University, offers his answer to the Davos Question, saying that drugs approved in Canada, Britain, and other places gain automatic approval in the United States. The drug-approving agencies of recognized countries would become more responsive to the needs of humanity. The proposal is called Drug Approval Denationalization.
Steve Forbes, a strong defender of deregulation and market forces, makes a case for the bailout, while adding cautionary notes about the future.
An excerpt: "The great danger going forward will be the political reaction. Will we apply growth-stunting regulations in the name of "never again"? Will we raise taxes in part to punish the "rich," harming the capital creation so necessary for growth? The answers will determine whether we have a Reaganesque recovery or the drawn-out stagnation of the 1930s."
From Arnold Kling at EconLog...
"The myth is that mortgage securitization reflects the genius of Wall Street. The reality is that it reflects the stupidity of the way that regulatory capital requirements are calculated...
...It is not widely understood, and most people would rather believe a different narrative. The Left wants to blame deregulation. The Right wants to blame lending to minorities. But this blog is giving you the true narrative. I have not seen anyone refute it."
The Initiative for Public Choice & Market Process is pleased to announce the first BB&T Free Market Process Speaker Series. Dr. Gerald Dwyer, Vice President, the Federal Reserve Bank of Atlanta, will present a current analysis of financial markets.
This event is open to all faculty and members of the business community. If you would like more information about this event please contact Peter Calcagno, Department of Economics and Finance, 843-953-4279, or email ipcmp@cofc.edu.
Date: Thursday, 23 October 2008
Time: 7 pm
Venue: College of Charleston Beatty Center, Wachovia Auditorium
Location: 5 Liberty Street, Charleston, SC
"Mistakes this huge require an impoverished political philosophy to grease the skids. Fannie and Freddie didn't design their horrific lending policies by chance. No, behind this lending fiasco lay the strong collective preference for the "patterned principles" of justice that Robert Nozick attacked so powerfully in his 1974 masterpiece, Anarchy, State, and Utopia."
In November, the Bastiat Society is offering two meetings.
In our first meeting on Monday, November 3rd, Professor Russ Sobel will discuss his book Unleashing Capitalism: Why Prosperity Stops at the West Virginia Border and How to Fix It. This book on West Virginia economic policy reform has been the subject of over 200 speeches and media appearances (including presentations to the West Virginia Governor and Legislature) and the book was named winner of the 2008 Sir Anthony Fisher Award for best state policy publication of the year.
Russell S. Sobel is Professor of Economics and holder of the James Clark Coffman Distinguished Chair in Entrepreneurial Studies at West Virginia University. He has published over 150 books and articles on economic policy, including a nationally-best-selling collegiate Principles of Economics textbook. Dr. Sobel served as the founding Director of the WVU Entrepreneurship Center from 2002-2006. His research has been featured in the New York Times, Wall Street Journal, Washington Post, US News and World Report, and The Economist Magazine, as well as appearances on CNBC, Fox News, CSPAN, and the CBS Evening News. He has received numerous awards for both his teaching and research.
Dr. Sobel gives lectures and teaches economic principles at various seminars across the country each year, including an annual course in economics for U.S. Congressional Staff. He also serves on the advisory boards of five major professional and academic organizations, and as Senior Economist and Director of the Center for Economic Growth for the Public Policy Foundation of West Virginia. He received his Ph.D. in Economics from Florida State University in 1994.
"Barney Frank's talking points notwithstanding, mortgage lenders didn't wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so - or else..."
"To blame laissez faire for today's economic crisis is akin to blaming the human body's natural and normal functioning for the illness suffered by someone who's overdosing on heroin."
Economist Don Boudreaux of George Mason University writing at Cafe Hayek.
Populism flatters the people, contrasting their virtue with the alleged vices of some minority -- in other times, Jews or railroad owners or hard-money advocates; today, the villain is "Wall Street greed," which is contrasted with the supposed sobriety of "Main Street."
Conservative columnist George Will, "A Vote Against Rashness," Washington Post, Wednesday, October 1.
Chinese capitalism has run its course.
That is the conclusion of a new book by Yasheng Huang, a professor at the Massachusetts Institute of Technology. The Economist reports:
"Mr Huang has gone far beyond the superficial data on gross domestic product (GDP) and foreign direct investment that satisfy most researchers. Instead, he has unearthed thousands of long-forgotten pages of memoranda and policy documents issued by bank chairmen, businessmen and state officials. In the process he has discovered two Chinas: one, from not so long ago, vibrant,entrepreneurial and rural; the other, today’s China, urban and controlled by the state."
Read the rest here.
New research finds that business students lie more often in e-mail than when communicating using pen and paper. Christie Nicholson reports at Scientific American's podcast, 60-Second Psych.
Here is an interview with Chip Mellor of the Institute for Justice, discussing his new book The Dirty Dozen: How Twelve Supreme Court Cases Radically Expanded Government and Eroded Freedom.
The Institute for Justice uses the court system to fight for private property and individual liberty.
Chip Mellor on economic freedom
The Bastiat Society has named Elaine Sternberg's book Just Business: Business Ethics in Action as one of its "Best Books for Business."
With all the news about government bailouts, I'm reminded of the government loan guarantees to save Chrysler in 1980. If memory serves me correctly, the government took either stock or options on stock as collateral, and ended up making money on the deal.
In this video, students ask New Yorkers to talk about free trade. Out of the mouth of babes...
"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."
