An Optimist's Creed

Here is what you might call an Optimist's Creed, from Steven Horwitz, an economics professor at St. Lawrence University:

"If one thinks about all the bad economic policies and the general growth of the state that has taken place since the early 70s, the fact that life is still so much better in so many ways should lead one to think ... that the Smithian forces of the division of labor and the power of Schumpeterian innovation will indeed continue to conquer the stupidity of the state. No doubt the fight will be a tougher one in the years to come, thanks to the events of the last year, but both history and theory suggest that the combined efforts of humanity coordinated by even restricted markets will still win out over the stumbling and bumbling of the political class."

Miracles, Public and Private

Even as things get better, we find plenty to complain about. Our burden is a happiness that cannot last.

Chronic human discontent encourages a stream of extravagant promises, one miracle cure after another. Sometimes, these promises are small: know the future, find true love, lose weight, grow hair, or get rich quick.

Sometimes, these promises are big; end income inequality, manage climate change, provide quality health care for everyone, or put every child through college.

In principle, big miracle programs are no different than the little miracle products sold in infomercials. Both appeal to our chronic discontent. We are told "This way lies happiness."

The difference is in who pays and for how long. Private miracles are individual expenses and private disappointments. It's easy to deal with that kind of disappointment; just don't buy that promise again.

But everybody pays for the promise of public miracles, and there's no easy way to get out of the deal when it fails to deliver happiness or it costs more than you expected.

We are constantly reminded that we should be wary of miracle products, and rightly so. But we should be doubly wary of miracle programs. If it sounds too good to be true, it probably is.

Words Without a Language

Trying to control the price of health care without a market is like trying control the definition of words without a language.

The Great Recession of 2008 - 2009

Prof. Steve Horwitz puts the current recession into historical perspective and explores the different approaches to recovery. Taped at Evenings at FEE on July 18, 2009 in Irvington, NY.

A few highlights:

* To say that greed caused the housing bubble is like saying that gravity causes plane crashes.

* Interest rates are not the price of money. They are the price of time.

* Printing more money to get out of a recession is like drinking more to avoid a hangover.

* Why did so many financial institutions loan money to people who could not pay it back? FNMA and Freddie had a Congressional requiring that 52% of their financing would be with borrowers with income below the median household income.

* Everybody wants more affordable housing, until they discover what that really means.

* The three major rating services operate as a government-maintained cartel. They don't have any competition, therefore they don't learn.

* Alan Greenspan encouraged financially risky behavior by lowering interest rates when markets misbehaved.

* The recession is the recovery.

* The Obama administration sees every problem in terms of health care, the environment, and education.

Watch the whole presentation here.

Nearly Everything is Made Nearly Everywhere

Another fabulous job by the folks at reason.tv. Bikinis and Boudreaux, a winning combination.

Who was Frédéric Bastiat?

From Cercle Frédéric Bastiat:

Frédéric Bastiat was born in Bayonne in 1801, and died in Rome in 1850. But his family was from a little town called Mugron, where he spent most of his life, and where he has a statue.

Mugron is located to the North-East of Bayonne, in a French Department called "Les Landes". He spent the better part of his last years in Paris, as the editor of Le Journal des Economistes, and from 1848, as a member of Parliament.

As an economist, gifted with a very clear mind and a devastating sense of humor, he renewed the Economic science of his time by developing it from the standpoint of the consumer, i.e. the people. He was the tireless apostle of freedom of exchange and freedom of choice by individuals, without constraints or subsidies. His works are as fresh and relevant today as they were 150 years ago, and his numerous predictions about the evolution of Institutions and Societies have invariably come true.

As a philosopher, he was the precursor of many present day Libertarians, building normative ethics on the foundations of individual liberty and responsibility.

As a local judge, he was a paragon of efficiency and equity.

As a politician with a great foresight, he was an advocate of minimum government, and fought against the indefinite extension of public expenditure. He criticized colonial expeditions and slavery. He argued for the separation of powers, for preventing MPs from being ministers at the same time, and for limiting the number of civil servants in the Assembly. He was for a greater participation of women in politics.

His major writings are "The Law," "Economic Sophisms," "What Is Seen And What Is Not Seen," "Economic Harmonies". They have been translated into many languages.

Business as Usual

"Art is business, business art, -- that is all
Ye know on earth, and all ye need to know."

With apologies to John Keats, the lines above express what everyone in Hollywood privately knows but cannot publicly confess: For all of its posturing, Hollywood is not about art; it's not about meaning; it's not about beauty, and it's certainly not about truth. Hollywood is about business, with more contracts and bottom lines than you'll find in the board room at Wal-Mart.

Hollywood produces a product, movies, like McDonald's produces fast food. That's not a bad thing, at least not until Hollywood tries to get away with an ethical double standard.

Most movies portray business as inseparable from the sins of deception, intimidation, ridicule, mockery, and exploitation. Think bad guy = businessman.

Of course, this is a preposterous mischaracterization of business. According to Thomas Stanley, the best-selling author of The Millionaire Next Door, the average millionaire in the United States owns a small business, not a large corporation; he is married to his first and only wife; he drives a modest car, often a pick-up truck; he shops at Wal-Mart; and he lives in a nice house, but not a mansion. In other words, the average American millionaire is a pretty nice guy, the kind who pays his taxes, mows his lawn, values his customers and his employees, helps his friends, and takes care of his family. Hardly the stuff of villainy.

So where does the evil business caricature come from? Maybe Hollywood mistakes the way it does business for the way everyone else behaves. A guilty man sees the evidence of his crime everywhere.

Consider the legal storm surrounding the hit movie Bruno. Forbes reports,"To nab...unsuspecting interviews, Baron Cohen's production company had reportedly set up four "shell companies" with LA addresses and phone numbers, including Amesbury Chase, Chromium Films, Cold Stream Productions and Coral Blue Productions. Fake Web sites with bogus logos were created for all four of these shell companies, but they have since been taken down."

Shell companies, air-tight contracts, deceptive promises, and large profits. It all sounds like the plot of a John Grisham thriller. But it's just business as usual in Hollywood.

Educating Drivers Everyday

Educating your fellow citizens about important figures in the history of freedom can be as simple as driving around town with a custom license plate.

Have you seen others?

Universal Car Care

The Galen Institute of Alexandria, VA describes itself as "a non-profit research organization devoted exclusively to health policy. We work to promote a more informed public debate over ideas that advance individual freedom, consumer choice, and competition in the health sector."

This video won first place in the Institute's "Do No Harm" video contest. View the other winners here.

A False and Dangerous Conclusion

"Too many people, especially in Europe, equate mistakes made by economists with a failure of economic liberalism. Their logic seems to be that if economists got things wrong, then politicians will do better. That is a false—and dangerous—conclusion."

Economist.com, "What Went Wrong With Economics"

Life, Inc.

It's hard to tell who's the comedian here, Rushkoff or Colbert. Both are over-the-top stereotypes. One of them isn't acting.

Douglas Rushkoff, author of the book Life, Inc., thinks corporations run the world and treat "the planet itself as a bunch of regions to be exploited and conquered rather than to be taken care of." This statement is absurd. If he wasn't so earnest, he'd be funnier than Colbert.

Rushkoff conflates government and corporations. This is a common mistake, especially among those people who want to believe in the goodness of government, but who don't want to trust business. To put it bluntly, these people are blaming the victim for the crime.

Government, not corporations, has always led the way in exploiting and conquering. In those cases where business got involved, it acted as an agent for government, often as a government-mandated monopoly. Such is the case of the early trading companies Rushkoff mentions in this interview.

No Mr. Rushkoff, corporations don't rule the world, but that ambition lurks in the breast of every politician where it is far more dangerous to the human race than any business expansion plan at Starbucks or Wal-mart. For, as H. L. Mencken said, "A good politician is as quite unthinkable as an honest burglar."

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
Douglas Rushkoff
www.colbertnation.com
Colbert Report Full Episodes Political Humor Jeff Goldblum

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Infallible Gods and the Humans Who Worship Them

Today's progressives are the intellectual heirs of the socialists of the last century and a half. They are the harshest critics of business, and they are among the most eager to use the power of the state.

Like their forefathers, they have no patience with anyone who displays the slightest doubt that the problems of society can be solved by smart people using vast political power for the greater good. As Dostoevsky said of the socialists of his day in late 19th century Russia, "they believe that a social system that has come out of some mathematical brain is going to organize all humanity at once and make it just and sinless in an instant, quicker than any living process!"

This perennial article of progressive faith requires a willful ignorance of two uncomfortable facts. We might even call them inconvenient truths:

1. No group of individuals is smart enough to run the complex and constantly shifting affairs of an entire nation. The hubris to claim such knowledge is a hallmark of our species; the actual possession of such knowledge is not. Like the ancient shaman who claimed a special knowledge of the supernatural, today's progressive claims a special knowledge of the super state.

2. Humans have a stubborn tendency to pursue their own self-interest. It's not that humans are always opposed to the greater good. It's just that self-interest is a more reliable bet.

The reality of human nature -- always bound by ignorance and regularly motivated by self-interest -- makes it unwise to hand anyone too much power, no matter what they promise to do with it. Like the ring in Tolkien's trilogy, power corrupts all those who use it, even when they begin with pure hearts and a noble purpose.

Socialism is a system fit only for infallible gods and the humans who worship them.

Cap and Trade = Tax and Control

""Cap and trade" is first a massive indirect tax on the American people and hence another source of revenue for Congress. More importantly "cap and trade" is just about the most effective tool for controlling most economic activity short of openly declaring ourselves a communist nation and it's a radical environmentalist's dream come true."

Economist Walter E. Williams.

Elmer Fudd Explains Capitalism

Entertainment both shapes and is shaped by culture. All too often these days, popular entertainment portrays business as unqualified evil. But that has not always been the case. In this short cartoon from the 1950s, Elmer Fudd does a remarkably good job explaining the individual and social benefits of capitalism.

Capitalism Works

Capitalism works. If not here, then somewhere. It springs from human nature, and capitalism is so necessary to human well-being that when it is suppressed in one place, it will appear in another.

That is the lesson to read in the following little bit of news: "Fortune magazine recently reported that the number of U.S. companies in the world’s top 500 fell to the lowest level ever, while more Chinese firms than ever made the list. Thirty-seven Chinese companies now rank in the top 500, including nine new entries. Meanwhile, the number of U.S. firms has fallen to 140, the lowest total since Fortune began the list in 1995."

From National Review Online, "The Road to Economic Demoralization," by Larry Kudlow

The Quotable Bastiat

"If two workers wish to combine their strengths in order to share the product in accordance with agreed proportions, or exchange their products with each other, or if one wishes to make the other a loan or a gift, what does the law have to do with this? Nothing, I think, other than require the fulfilling of agreements and prevent or punish misrepresentation, violence or fraud."

From the Frédéric Bastiat Circle.

No Magic Road

In "Making Work, Destroying Wealth," David Boaz of the Cato Institute writes:

"President-elect Obama proposes that the federal government “create or save” jobs by spending upwards of $600 billion. Where would this money come from? If it comes from taxes, it will be taken out of the more efficient private sector to be spent in the less efficient government sector, and the higher tax rates will discourage work and investment. If it is borrowed, it will again simply be transferred from market allocation to political allocation, and our debt burden will grow even greater. And if the money is simply created out of thin air on the balance sheets of the Federal Reserve, then it will surely lead to inflation.

There is no magic road to wealth. You have to work, save, and invest. And when the government lures individuals and businesses into making bad investments with cheap money, the malinvestment has to be liquidated. Avoiding that truth, prolonging the process of adjustment, is a good way to turn a recession into a depression. And you can’t get economic growth back by breaking windows...or spending money you don’t have."

Boaz cites Bastiat's famous work, "That Which is Seen, and that Which is Not Seen."

Early Warning: Michael Moore at Work

Entertainment Weekly reports that Michael Moore says his new movie is to be titled Capitalism: A Love Story. The film will focus on "the disastrous impact that corporate dominance and out-of-control profit motives have on the lives of Americans and citizens of the world" and will be released on October 2nd.

United Breaks Guitars

Traveling by air lost its romance years ago. Instead of a consumer experience, flying is an ordeal we endure.

But not every consumer suffers in silence. Some create art out of their suffering.

From BusinessWeek Management IQ.

A National Straitjacket

T.Boone Pickens was recently on CNBC calling for a national energy plan. Without such a plan, he says that in ten years the United States will be importing 75% of its energy, and that oil will be $300 a barrel.

Such precision in long range forecasting is admirable, but it is not credible.

We've heard this kind of thing before. Remember Uncle Joe's Five Year Plans? Or the Great Helmsman's Great Leap Forward? Now we have the paradox of an American businessman promoting the same kind of national-scale economic planning that worked so well in the USSR and Mao's Red China.

With friends like this, who needs enemies?

There is no reason to believe that T. Boone Pickens is any better at telling the future than the rest of us. Ten years ago, the number one planning issue was Y2K. It turned out to be a non-event.

In 1999, the most important things to come were apparently unimaginable, even to a visionary like Mr. Pickens: a major terrorist attack in New York, the near death of the American airline industry, a war in Afghanistan, another war in Iraq, record low interest rates, the drowning of New Orleans, a housing bubble, a stock market bubble, the worst recession since the Great Depression, a government takeover of GM, Wachovia at 76 cents per share, two bankrupt Wall Street firms, and a government rescue and significant ownership of Citigroup.

Alas, the world we live in is so messy and filled with so many surprises that it makes any national ten year plan a joke. Such a plan leaves no room for individual preferences or the discovery of new knowledge. Inevitably, such a plan turns into a national straitjacket.

If Mr. Pickens really wants to help the nation, he should promote the kind of planning that made him a success in business. That kind of planning is individual and opportunistic, not national and proscriptive. Long-term results emerge from individuals responding to rapidly changing opportunities, not from one individual commandeering an entire industry.

Mr. Pickens has demonstrated the ability to make opportunistic business decisions, and for that he should be admired. But success in business does not qualify him or anyone else to engineer a master plan for America's Great Leap Forward. Believing in such a plan is a mistake; following it would be an even bigger one.

Driving Like Crazy

In this interview with reason.tv, author P. J. O'Rourke talks about his new book, Driving Like Crazy, and the once-great American automobile business.

A few choice moments:

"The automobile is the source of no bad stuff in America."

"There's something romantic about the train, but try getting the tracks to come to your house."

"Politics is the attempt to achieve power and prestige without merit."

"The success of capitalism has everything to do with failure. People talk about the wealth that capitalism creates, but the poverty that capitalism creates -- in capitalists, not in poor people -- is extremely important. When a business fails...there's a reason for the business failing. They're making a product that no one wants to buy. You don't come in there and save that product."

The Education Bubble

"The next bubble to burst will be the education bubble. Make no mistake about it, education is big business and, like other big businesses, it is in big trouble. What people outside the education bubble don’t realize and people inside won’t admit is that many colleges and universities are in the same position that major banks and financial institutions are: their assets (endowments down 30-40 percent this year) are plummeting, their liabilities (debts) are growing, most of their costs are fixed and rising, and their income (return on investments, support from government and private donations, etc.) is falling...

One of the dirty secrets of many research universities is that they treat master’s students as cash cows that fund other activities. To make matters worse, with many faculty members uninterested in teaching, students cannot assume they will get what they are paying for."

Mark C. Taylor, chairman of the religion department at Columbia University, writing in the New York Times.

The Next Bubble?

"Consumers who have questioned whether it is worth spending $1,000 a square foot for a home are now asking whether it is worth spending $1,000 a week to send their kids to college. There is a growing sense among the public that higher education might be overpriced and under-delivering."

"Will Higher Education Be the Next Bubble to Burst?" The Chronicle of Higher Education

This Execrable Commerce

In his first draft of the Declaration of Independence, Thomas Jefferson tried to address the issue of slavery, but it was edited out of the final copy by Georgia and South Carolina in the messy process of political compromise.

Here are the words Jefferson originally wrote, himself a slave owner, though not a willing one.

"...he [the king of Great Britain] has waged cruel war against human nature itself, violating it’s most sacred rights of life & liberty in the persons of a distant people who never offended him, captivating & carrying them into slavery in another hemisphere, or to incur miserable death in their transportation thither. This piratical warfare, the opprobrium of infidel powers, is the warfare of the CHRISTIAN king of Great Britain. Determined to keep open a market where MEN should be bought & sold, he has prostituted his negative for suppressing every legislative attempt to prohibit or to restrain this execrable commerce: and that this assemblage of horrors might want no fact of distinguished die, he is now exciting those very people to rise in arms among us, and to purchase that liberty of which he has deprived them, by murdering the people upon whom he also obtruded them; thus paying off former crimes committed against the liberties of one people, with crimes which he urges them to commit against the lives of another. In every stage of these oppressions we have petitioned."

Government of the Least Expense

"Society in every state is a blessing, but government even in its best state is but a necessary evil; in its worst state an intolerable one; for when we suffer, or are exposed to the same miseries BY A GOVERNMENT, which we might expect in a country WITHOUT GOVERNMENT, our calamity is heightened by reflecting that we furnish the means by which we suffer. Government, like dress, is the badge of lost innocence; the palaces of kings are built on the ruins of the bowers of paradise. For were the impulses of conscience clear, uniform, and irresistibly obeyed, man would need no other lawgiver; but that not being the case, he finds it necessary to surrender up a part of his property to furnish means for the protection of the rest; and this he is induced to do by the same prudence which in every other case advises him out of two evils to choose the least. WHEREFORE, security being the true design and end of government, it unanswerably follows that whatever FORM thereof appears most likely to ensure it to us, with the least expence and greatest benefit, is preferable to all others."

Thomas Paine, Common Sense, 1776

Bind Him Down From Mischief

Harper's has a superb quotation from Thomas Jefferson, perfect for the Fourth of July.

"It would be a dangerous delusion were a confidence in the men of our choice to silence our fears for the safety of our rights; that confidence is every where the parent of despotism; free government is founded in jealousy, and not in confidence; it is jealousy, and not confidence, which prescribes limited constitutions to bind down those whom we are obliged to trust with power; that our Constitution has accordingly fixed the limits to which, and no farther, our confidence may go; and let the honest advocate of confidence read the Alien and Sedition Acts, and say if the Constitution has not been wise in fixing limits to the government it created, and whether we should be wise in destroying those limits; let him say what the government is, if it be not a tyranny, which the men of our choice have conferred on the President, and the President of our choice has assented to and accepted, over the friendly strangers, to whom the mild spirit of our country and its laws had pledged hospitality and protection; that the men of our choice have more respected the bare suspicions of the President than the solid rights of innocence, the claims of justification, the sacred force of truth, and the forms and substance of law and justice. In questions of power, then, let no more be said of confidence in man, but bind him down from mischief by the chains of the Constitution."

A Rigged Game

Darryl Campbell, a Ph.D. candidate in history, has published a sneering obituary for Billy Mays, the hard-working television pitchman who died last month.

Campbell's carefully phrased criticisms ring with intellectual condescension:

"...the loudest practitioner of the old-school hard sell."

"...cookie-cutter ads and the questionably useful devices and chemicals he peddled."

"...he still existed mainly to give us sincere advice about problems we didn't even know we had."

"But the aw-shucks, nice-guy persona, all smiles and shouts, hid a cunning businessman who was fully aware that his persona was every bit a fetish as the trinkets he sold."

"...professional huckster."

"...he promised that acquiring superfluous junk could be a ticket to a better life, even at a time when that life seems to be slipping further and further out of reach for so many of us."

How ironic that Campbell should sneer at Billy Mays, when Campbell himself is purchasing what may the world's most questionably useful degree.

William A. Pannapacker, Ph.D. in English, writes about the academic profession for the Chronicle of Higher Education. In a recent column, he pointed out that only half of all doctorate holders in the humanities -- after nearly a decade of preparation -- will ever find a tenure-track position, the academic equivalent of a full time job.

Pannapacker warns aspiring humanities graduate students, "What almost no prospective graduate students can understand is the extent to which doctoral education in the humanities socializes idealistic, naïve, and psychologically vulnerable people into a profession with a very clear set of values. It teaches them that life outside of academe means failure, which explains the large numbers of graduates who labor for decades as adjuncts, just so they can stay on the periphery of academe."

Given a choice of professional values, I choose the values of the salesman over the values of the professor. The motives of the salesman are transparent. He wants the customer to buy. The values of the professor are carefully disguised. Behind the veneer of scholarly inquiry, he wants to exploit "naïve, and psychologically vulnerable people." Under the noble banner of knowledge, he promises that a superfluous degree is the ticket to a better life. Who is the better huckster here?

Professor Pannapacker concludes, "It's hard to tell young people that universities recognize that their idealism and energy — and lack of information — are an exploitable resource. For universities, the impact of graduate programs on the lives of those students is an acceptable externality, like dumping toxins into a river. If you cannot find a tenure-track position, your university will no longer court you; it will pretend you do not exist and will act as if your unemployability is entirely your fault. It will make you feel ashamed, and you will probably just disappear, convinced it's right rather than that the game was rigged from the beginning."

If Billy Mays really did sell some crap, at least it wasn't as individually expensive or socially toxic as the crap universities are selling some graduate students in the humanities.

Dissecting Health Care Plans

Health care reform is in the air again, and this short video from the Cato Institute frames the issue nicely.

Business and Slavery

The Financial Times reports that Rothschild, the merchant bank, and Freshfields, the City law firm, are the first UK businesses to say they “greatly regret” their links with slavery.

In the United States, JPMorgan and Aetna have already apologized for slavery. Several states have passed laws that require companies to disclose any links they had with slavery.

With all this apologizing going on, you might get the impression that human slavery and business were really the same thing. Perhaps that is precisely the motive of those who demand such apologies. If their goal is to undermine the moral legitmacy of business, what better way than to connect business with such a reprehensible institution?

Connecting slavery and business may be effective politics, but it is awful history. The truth is that the campaign to end human slavery was, in the words of Thomas Sowell, "spearheaded by people who would today be called "the religious right" and [the anti-slavery] organization was created by conservative businessmen. Moreover, what destroyed slavery in the non-Western world was Western imperialism."

Sowell explains why those who go around demanding apologies for slavery do not acknowledge the real history of the fight to end the institution: "nothing could be more jolting and discordant with the vision of today's intellectuals than the fact that it was businessmen, devout religious leaders and Western imperialists who together destroyed slavery around the world."

The world we live in was built with so many immoral acts that blaming other people is easy. What is hard is giving the credit for good deeds to people you don't like. Slavery was a business, but business was not slavery.

Et tu, Big Business?

The truth only hurts if it ought to:

"...capitalism’s murder is at the hands of its most successful child: big business.

Everywhere we look we see the great and once-great beneficiaries of free markets running to the state for protection from the cruel bullying of competition."

Jonah Goldberg, "Et tu, Big Business?" National Review Online

Your Money, Our Schedule

Reason.tv is a smart look at our world through the lens of free minds and free markets. It's consistently interesting, thought-provoking, and often funny, as you will see in this one-minute video on what health care might be like, once the government's in charge.

"It's All About the O"

The CEO of Overstock.com, a self-proclaimed libertarian, defends school choice and short-sellers, attacks bad regulations and naked short-sellers, and says "the government should pave the roads, run the Post Office, and stay off my porch."

Shop Class as Soulcraft

Every kind of human labor can be an expression of human genius. We are surrounded by the evidence of human genius everyday. We just don't recognize it because it is not our genius.

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
Matthew Crawford
www.colbertnation.com
Colbert Report Full Episodes Political Humor Stephen Colbert in Iraq

A Governor Every Day

As the whole world knows by now, the governor of South Carolina went on a four day hike and did not announce where he was going.

Listening to the media reaction, you would have thought that a pilot had bailed out of a passenger plane in mid-air. Peculiar. Irresponsible. Unprofessional. And these were the words his allies used.

Yet, who really needs a governor every day? David Henderson, Associate Professor of Economics at the Graduate School of Business and Public Policy, Naval Postgraduate School, makes a good point when he writes, "many people think that without a governor in charge, our lives would be in chaos. But ask yourself. How often through the day or even through the year do you consult the governor before taking action? You could argue that without the governor around, certain big spending or regulatory decisions would not be made. And that's necessarily bad?"

Henderson concludes, "The thinking behind the headlines is the same as the thinking behind the claim that a governor runs a state or a president runs the country. Fortunately, they don't. The headlines would be hilarious if not for the seriously distorted understanding of the world that it demonstrates."

Promoting Prosperity

"Our next speaker will be Jo Kwong of the Atlas Economic Research Foundation. Her topic will be:

"Promoting Prosperity Around the World – Is There a Recipe for Success?"

Date: Wednesday, June 24
Time: 5 pm reception, 6 pm speaker
Location: Imaging Arts Gallery, 175 King Street, Charleston, SC

Why are some nations rich, while others seem trapped forever in poverty? Many authors and great thinkers have tackled this subject, offering a fascinating variety of explanations. One small non-profit organization called the Atlas Economic Research Foundation believes it has something to contribute to this debate.

Atlas believes that economic freedom sows the seeds for prosperity. When people are free to develop and act on innovative ideas, entrepreneurship develops and wealth is created. Institutions that unleash human action, creativity, and ingenuity offer the best hope to lead millions out of poverty. Join us to hear how Atlas is actively working to promote economic freedom around the world, and why it sees this freedom as vital to human flourishing. Unless you travel the globe regularly, you are likely to leave feeling grateful for the many freedoms Americans take for granted on a daily basis. Come hear how people are working in countries around the world to fight for the freedom to work, produce, consume and invest the fruits of their labor.

Jo Kwong is the Vice President of Institute Relations at the Atlas Economic Research Foundation in Washington, DC.

Not the Enemy

Big business rarely gets a favorable review. But it does happen.

Earlier this year, writer Charles Platt went undercover to get the real story on what it is like to work at Wal-Mart. Rather than a soulless corporation and exploited co-workers, he found an environment like a Silicon Valley start-up: "There was the same gung-ho spirit, same lack of dogma, same lax dress code, same informality - and same interest in owning a piece of the company. All of my coworkers accepted the offer to buy Wal-Mart stock by setting aside $2 of every paycheck."

Platt says, "I reached a conclusion which is utterly opposed to almost everything ever written about Wal-Mart. I came to regard it as one of the all-time enlightened American employers, right up there with IBM in the 1960s. Wal-Mart is not the enemy. It's the best friend we could ask for."

Read the whole story here, in the New York Post.

The Quotable Bastiat

"All men's impulses, when motivated by legitimate self-interest, fall into a harmonious social pattern."

Economic Harmonies, 1850

Green Yachts

Being Green once meant being something like a Hippie, a rebel against the machine and the lust for money, a person in search of an authentic experience in an uncorrupted world.

It certainly did not mean you owned a yacht. How times have changed!

Now Green has become a ubiquitous marketing term for everything Good. Everything can be Green, from fruit to jobs. Even big, expensive boats. No less an authority than Yachting magazine has an article advising recreational yacht owners on steps they can take to make their boats environmentally friendly.

This in the same issue where they advertise the eight best watches for yachtsmen. Average price: $11,941.

What does all this Green Goodness mean for the future of being Green? Perhaps the term is on its way to death by overuse. If everyone and everything is Green, what's left to feel smug about?

Another possibility is that an earnest discussion of how to go Green in a yachting magazine is a sign of the success of the environmental movement. It has reached an important target market. If it can convince the kind of people who own luxury yachts and buy $11,000 watches that they are part of something Green and Good, it will have a much easier time getting them to make contributions.

It's like telling a successful businessman that his success is a sign of election by God, then asking if he'd like to return God's favor.

One final possibility: the Green movement has gone mainstream. So mainstream, in fact, that people want to be Green, so long as it does not mean a major disruption in the way they live. Thus Green yachts.

What's next? Green jets?

A Socialist Model City

Only the New York Times could travel to the former GDR (East Germany) and nostalgically recall a "socialist model city."

Nostalgia for the past -- especially childhood -- is normal. But the past of East Germany is anything but normal. Its long nightmare of secret police, shoddy consumer products, and mind-numbing bureaucracy should have overwhelmed this kind of uncritical navel-gazing.

For history without rose-colored glasses, check out the BBC report "Inside the Stasi's Dungeons." The BBC reminds us that, "The GDR imposed its will through the feared secret police, the Stasi, with dissidents being imprisoned and tortured for such "crimes" as trying to leave the country, or telling political jokes."

Business and the Box, Continued

More Business and the Box...

MBA: "Master in Box Administration"

Ph.D. in Business: "I've never actually made one, but I've read a lot about boxes."

B2B: "Box to box."

A blindly loyal junior corporate executive: "Box boy."

Neo-Communism

From Vanity Fair via the New York Times...

"As Washington fails to practice the fiscal discipline it has long preached to the world, the current crisis will prompt rising economies to reject free-market democracy — a toxic legacy, a Nobel laureate warns."

“Old-style Communism won’t be back, but a variety of forms of excessive market intervention will return. And these will fail."

Class Warfare Tax Policy

From the Center for Freedom and Prosperity, five good reasons higher taxes on the rich aren't a good idea:

1. High tax rates reduce incentives for productive behavior.
2. High tax rates won't raise much revenue.
3. High tax rates don't help the poor.
4. High tax rates reduce competitiveness.
5. High tax rates on the rich lead to high tax rates on everyone.

Business and the Box

The vocabulary of business is laced with cliches. Here are a few, broken down by occupation:

CEO: "Think outside the box."

Entrepreneur: "Born outside the box."

Bureaucrat: "Shut up and get into the box."

Diversity Consultant: "Isn't it wonderful that we have so many different kinds of people in our box?"

Legal Department: "It's safer in the box."

Chief Financial Officer: "This box doesn't balance."

Logistics Department: "Has anyone seen our box?"

Competitor Analysis: "Check out that other box."

Leadership Consultant: "Come on, let's all get in the box!"

Negotiation Consultant: "My box is better than yours."

Chamber of Commerce: "All our boxes are beautiful."

Human Resources: "What are you doing in the box?"

IT: "We're gonna need a bigger box."

Business Ethics Consultant: "We all should decide on what to do with the box."

Environmentalist: "Boxes are murder."

Gay Activist: "Come out of the closet and into the box!"

Angry Feminist: "Smash the ceiling in the box!"

Marxist: "Smash the box!"

Union: "Screw the box."

Economic Development Consultant: "We need more jobs in the box."

Politician: "How many votes are in the box?"

Rast's Law

I propose, and have rather immodestly named, a new law of business. I call it Rast's Law. It states, "Every successful corporation, if it lasts long enough, eventually turns into the Department of Motor Vehicles."

This insight occurred to me while reading an essay by Robert Jackdall on how bureaucracy shapes the morality of the people who work in it.

Many of the moral dilemmas discussed in business ethics texts are not drawn from small, entrepreneurial business organizations; they are drawn from large, bureaucratic business organizations, almost always publicly traded corporations and often government contractors. Why?

Because big bureaucratic organizations are precisely where great ethical dilemmas occur, where the temptation to serve oneself is greater than the reward 0f serving others. This is true whether the bureaucracy in question is a publicly traded corporation, a university department, or a government agency.

Consider the following business life cycle. An entrepreneur creates a new idea or tries a new way to deal with old problems. He is motivated by his reward for serving others. If he is successful, he will attract those professionals who are skilled at institutionalizing successful ideas, i.e. managers. Managers give the idea an efficient, orderly, and useful life by building a bureaucracy around it.

But ultimately, bureaucracy is the free radical of a successful organization. The larger the bureaucracy, the greater the chance that managers will use the organization for their own purposes, not necessarily consistent with the goal of the original entrepreneur or the organization itself.

Bureaucracy appears as a benefit; it finishes as a liability. The amount of time between the two depends on many things, but the path seems sure. Without the spirit of the entrepreneur to disrupt the organizational status quo, even successful organizational bureaucracies are destined to evolve into something that looks and acts like the DMV.

"Honey, I've Changed...Really!"

GM has announced that it is working hard, seven days a week to build, not cars, but a brand new marketing plan.

What they've come up with sounds like a sorry husband trying to talk his way back into a locked house.

"I've changed."

"I'm sorry."

"I am so humiliated."

"Have pity on me, please."

"I'm the underdog here."

Is GM missing the point again? The Japanese car companies did not beat GM in the marketing department. They beat GM on the factory floor.

The Most Ridiculous Faith

After discussing Bastiat, Lew Rockwell wraps up a column about the economy with a conclusion worthy of the great man himself:

"We are a generation that proudly shows off its accomplishments in all areas of science, and we preen about our love of facts and our detachment from mythology. Yet our culture is imbued with the most ridiculous faith in government to turn stones into bread, to accomplish miracles with a printing press before our very eyes."

Read the whole thing here.

Free Money!

The U.A.W. Flexes Its Protectionist Muscle

Flush with his victory over the American taxpayer and GM bondholders, Ron Gettelfinger of the United Auto Workers makes it clear that he is going to use his growing political might to fight free trade.

A few of his telling comments:

“If they’re going to sell them here, they should build them here … Why wouldn’t they build them here as apposed to transporting them from the Far East?"

"This country needs an industrial policy."

“General Motors is on that road and we intend to make sure they stay down that path."

View the entire interview here:



The Wall Street Journal calls Gettelfinger's position what it really is, "raw trade protectionism."

Small, Not Smart Cars

How they made small cars people wanted to drive -- or rather, had to drive in East Germany.

An Emergency Psychology

Here's another lesson of history we should consider in our present crisis.

How did a small number of Southern slave owners convince a larger population of non-slave owners to go along with the act of secession that started the American Civil War?

One historian concluded that "the secessionists succeeded less because of the intrinsic popularity of their program than because of the extreme skill with which they utilized an emergency psychology."

In other words, beware ambitious men who speak of emergencies as "an opportunity to do things that you think you could not do before."

The Burden of Freedom

We often hear that our government must do something to protect people who have been injured by the brutal world of free market competition, especially the poor.

What we don't know is that this argument has been used before, to justify the ultimate social safety net. We called it slavery.

In 1854, the antebellum slavery apologist George Fitzhugh published Sociology of the South or The Failure of Free Society.

Fitzhugh argued slavery was preferable to free society, especially for the poor. He wrote, "The dissociation of labor and disintegration of society, which liberty and free competition occasion, is especially injurious to the poorer class; for besides the labor necessary to support the family, the poor man is burdened with the care of finding a home, and procuring employment, and attending to all domestic wants and concerns. Slavery relieves our slaves of these cares altogether, and slavery is a form, and the very best form, of socialism."

When does freedom become a burden? When does relief become slavery?

Judicial Compassion and Empathy

What might be wrong with judicial compassion and empathy? John Hasnas writes in the Wall Street Journal...

"Frederic Bastiat answered that question in his famous 1850 essay, "What is Seen and What is Not Seen." There the economist and member of the French parliament pointed out that law "produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them." Bastiat further noted that "[t]here is only one difference between a bad economist and a good one: The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen."

This observation is just as true for judges as it is for economists. As important as compassion and empathy are, one can have these feelings only for people that exist and that one knows about -- that is, for those who are "seen."

One can have compassion for workers who lose their jobs when a plant closes. They can be seen. One cannot have compassion for unknown persons in other industries who do not receive job offers when a compassionate government subsidizes an unprofitable plant. The potential employees not hired are unseen."

Powerful and Secure

Every ruling class wants to enjoy feeling powerful and secure. This usually means power over others, and security at someone else's expense.

Once a ruling class feels powerful and secure, it will not relinquish either its power or its security without a fight. Sometimes it will fight with words, sometimes with fists, sometimes with vast armies, but it will always fight.

It will use public money to defend its private advantages. It will call on the intellectual community to provide justifications and, when necessary, mythologies to defend its actions. Finally, as a ruling power, it will use its police and armies in the name of law and order to harass, imprison, and destroy its opposition. A threatened ruling class is the one of the most dangerous things on earth.

Consider the American Civil War. The ruling class of the Old South depended on slavery for its feelings of power and security. From the beginning of the United States, the South did not stop using words and violence to justify, preserve, and expand slavery, until it was humiliated by a military defeat, exhausted by war, and economically crushed by uncompensated emancipation. In short, the ruling class of the Old South refused to surrender its power and security until they were taken from its cold dead hand.

The price of this defeat is staggering. Over 600,000 citizens died, a vast region of the country lay impoverished for a century, and bitterness and humiliation led directly to a political legacy of racism enshrined in law.

History provides us a stark warning, for today we exist under a new generation of the ruling class. This one lives in Washington, DC, the last boom town in America. It believes with all the fervor of an ante-bellum slave owner that it is leading a less-enlightened population down the path of civilization and progress. Towards that goal, it is justified in all that it does, from taxation, to regulation, to fines, punishment, and imprisonment. It is the modern equivalent of the Master. We are the modern equivalent of the property it governs for our own good.

Like all ruling classes, ours will attempt to characterize any opposition as ill-informed, misguided, irrational, delusional, dangerous, disloyal, treasonous, or evil. But the opposition is not the dangerous group here. In fact, simple humanity means that we should be pulling for those who object to being treated like human inferiors. We should hope that they will win this fight with words. The consequences of losing are too terrible to imagine.

The goal of the good society should never be class power or class security. That simply creates a group of especially dangerous people willing to set the world aflame rather than surrender their position. The goal of the good society should be individual power, what used to be called autonomy or individual liberty.

In liberty, every individual is free to seek as much or as little security as he or she sees fit, and no group of individuals can insist on dragging the rest of us through another Götterdämmerung.

The Bastiat Prize for Online Journalism

The Bastiat Prize for Online Journalism is awarded to journalists who defend the principles of the free society with wit and vigour.

Judges have included Milton Friedman and Margaret Thatcher. For the first time this year, there is an additional $3,000 prize for online journalism to recognise the role of bloggers and others in promoting freedom through their writing.

Get the full details of this year's competition at: www.bastiatprize.org.

The Bastiat Prize is sponsored by the International Policy Network, and is not affiliated with the Bastiat Society.

Corporate Sellouts

"Communist Godfather Vladimir Lenin is alleged to have famously said, "The capitalists will sell us the rope with which we will hang them.

Nowhere is that observation more relevant than in the sorry spectacle taking place in Congress as corporations, in exchange for short-term government handouts, fall over themselves to endorse a carbon dioxide regulation bill that will impose a crushing energy tax on the American people."

From "Corporate Sellouts" in The American Spectator.

Corporate Sanction

The National Journal reports, "key business interests have decided to cut deals with a dominant Democratic Party rather than bet on a weakened Republican Party that is hoping to ride uncompromising opposition to Obama back to power. "You've got business that has sometimes opposed everything Democrats have done lining up to help get it done," White House Chief of Staff Rahm Emanuel said."

Leave the Economists at Home

Via Organizations and Markets,  evidence that business is alive and well as long as it leaves the economists at home. 

A Good Explanation

"Human beings are as good at devising ex post facto explanations for big disasters as they are bad at anticipating those disasters. It is indeed impressive how rapidly the economists who failed to predict this crisis — or predicted the wrong crisis (a dollar crash) — have been able to produce such a satisfying story about its origins. Yes, it was all the fault of deregulation."

Niall Ferguson writing in the New York Times

USA, Double A Credit

SR Rating, a Brazilian firm, will soon issue a judgment on American government bonds. Its verdict is not pretty: the company says it will issue a AA rating.

From The Economist.

The Briefing Book

"If there's one thing worse than being governed by Nancy Pelosi and Harry Reid and a bunch of idiot Republicans, it's being governned by our neighbors who have brain farts and write email letters to the president."

The Great Ethanol Scam

"Not only is ethanol proving to be a dud as a fuel substitute but there is increasing evidence that it is destroying engines in large numbers."

From Business Week.

A New Foundation

What does the economic policy of a New Foundation look like?

Higher taxes

More regulation

Attacks on business

Illegal takings

Limits on compensation

A brewing trade war with Canada

Mexico

and Europe.

Behind the glittering phrase "A New Foundation" lurks the more sinister one, "Private Ownership, Public Control."

Obama Attacks Business

"Relations between President Barack Obama and U.S. corporate leaders have grown tense in recent weeks, with business groups bristling over his sharp rebukes of lenders and multinational companies in particular."

Read the rest here.

The Stand Up Economist

Stand-Up Economist Yoram Bauman: 

"Asking me about macroeconomics is like asking someone who works in a bank how to make money."

A Savior-Based Economy

CNN's John King interviews South Carolina Governor Mark Sanford.

The Governor warns, “We’re moving precipitously close to what I would call a savior-based economy....what you see in Russia or Venezuela or Zimbabwe or places like that where it matters not how good your product is to the consumer but what your political connection is to those in power.”

An Assault on Business

US News wonders, "Another week, another assault on business-as-usual by President Obama. Or is it, as some critics are starting to wonder, an assault on business, as usual?"

Thus Ended Capitalism

Today's Dilbert is too good to be missed. Click on the strip below to see it in its entirety.



View more capitalist humor at the official Dilbert website.

State and Corporation

"The function of the state -- to record the creation of corporations -- is not essential to their existence any more than the registrar of births is essential to the conception or birth of a child.

This mere procedural requirement of filing the articles with a state official is equated with state creation. Procedural requirements, though, are not unique to corporations. On the contrary, procedural requirements apply to virtually all contracts. For example, to be legally valid, a marriage contract must follow specified procedural requirements: it must be performed by someone authorized by the state, it must be witnessed, and a signed certificate must be filed with the state If these requirements make the state a party to a contract, then every marriage is a menage a trois: bride, groom, and government. Quite literally, the government plays a smaller role in the creation of a corporation than of a marriage. Yet who, for that reason, would describe marriage as a creature of the state or claim that a marriage certificate contains a promise to serve the public interest?"

*****

"The essence of capitalism is the inviolability of individual rights, including the right to use or invest wealth as one chooses and the right to associate with others for any purpose and under any mutually acceptable terms of association."

*****

"Investment without control is not an evil if the owners freely consent to that relationship. Rather, it is an example of what has been called 'capitalist acts between consenting adults.'"

*****

"Anyone whose professed goal is to give shareholders the widest possible range of choices would be unable to conceive of or to create the stock exchange system that spontaneously evolved over the past century. Far from being the antithesis of free choice and continuous accountability, the publicly traded giant corporation is the highest embodiment and expression of those ideals."

Robert Hessen. "A New Concept of Corporations: A Contractual and Private Property Model." The Hastings Law Journal 30 (1979)

It Cannot Happen Here

Over at Cafe Hayek, they commemorate the anniversary of F. A. Hayek's birth by recalling the opening paragraph of one of his chapters, "Totalitarians in Our Midst," published in 1944:

"Probably it is true that the very magnitude of the outrages committed by the totalitarian governments, instead of increasing the fear that such a system might one day arise in more enlightened countries, has rather strengthened the assurance that it cannot happen here....  But let us not forget that fifteen years ago the possibility of such a thing happening in Germany would have appeared just as fantastic, not only to nine-tenths of the Germans themselves, but also to the most hostile foreign observers (however wise they may now pretend to have been)."

From The Road to Serfdom.  View an illustrated version here.

No Shame

I guess it is too much to expect any politician -- even a disgraced one -- to resist the federal open hunting season on banks and bankers.

May 2009 Meeting

Dr. Eric Daniels is the speaker for our May 2009 monthly meeting.

Dr. Daniels is a Research Assistant Professor at Clemson University's Institute for the Study of Capitalism. He previously served as a postdoctoral fellow and visiting assistant professor at Duke University's Program on Values and Ethics in the Marketplace, where he was nominated for a teaching award. In addition, Daniels has taught at the University of Wisconsin, where he earned his doctorate in American history. He has lectured internationally on the history of American ethics, American business and entrepreneurship, and the American Enlightenment. He has appeared on C-SPAN's "American Writers" series and his articles have appeared in the Atlanta Journal-Constitution and the San Diego Business Journal. Daniels's other publications include a chapter in The Abolition of Antitrust and five entries in the Oxford Companion to United States History. Most recently, he co-authored the U.S. Economic Freedom Index, 2008 Report.

View a pdf of the Report here.

The Secret to Economic Development

The secret to economic development in one sentence:

"If there were omniscient men, if we could know not only all that affects the attainment of our present wishes but also our future wants and desires, there would be little case for liberty. And, in turn, liberty of the individual would, of course, make complete foresight impossible. Liberty is essential to leave room for the unforeseeable and unpredictable; we want it because we have learned to expect from it the opportunity of realizing many of our aims. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it."

Friedrich Hayek, 1960
Quoted by economist William Easterly

Property Without Law? You Must be Joking!

Which came first, private property or the law? Or, to ask the question another way, do humans recognize property rights even when there is no explicit legal protection of those rights?

The answer appears to be that property preceeds law, that humans acknowledge the right to private property before they write down legal codes to protect it. In other words, law emerges from cultural norms, not the other way round.

The case study in question comes from the business of comedy, where there is no established law concerning the copyright or ownership of jokes. Why do comedians continue to write jokes if they can't own them? The reason is that comedians have worked out a set of cultural norms that take the place of written law.

Read a synopsis of the study here.

The important conclusion is that law is not the primary force shaping human relationships, and thereby, human societies. Simply passing a law, without first considering the existing informal arrangements that are in place and working will have very little effect on subsequent behavior. That is why centuries of laws against prostitution, alcohol, adultery, drugs, and particular forms of worship have largely been ineffective.

Law, alone, cannot make man better. That is a crushing blow to both social progressives and social conservatives, both of whom want to use the law to remake human behavior and human society in their own image. 

Just Say Non

From reason.tv, Sorbonne-trained economist Veronique de Rugy of the Mercatus Center at George Mason University argues that embracing the French way would be nothing less than a train wreck, leaving Americans with fewer jobs and less disposable income.

A Simple Cloud

Physicist Freeman Dyson sounds reasonably skeptical about climate change, reported reasonably well in Scientific American:

"Too much of the science of climate change relies on computer models, he [Dyson] argued, and those models are crude mathematical approximations of the real world. After all, a simple cloud—small in scale, big in climate effects, the product of evaporation and condensation, all of which it is difficult to create equations for—eludes the most sophisticated climate models.

So climate modelers turn to what they call parameters or, as Dyson likes to call them: "fudge factors." These are approximations, such as the average cloudiness of a particular spot at a particular time, that are then applied globally. With the help of about 100 of these parameters, models can now closely match the world's present day climate, Dyson says. These models then, like the one developed at Princeton University where Dyson is a professor emeritus, are "useful for understanding climate but not for predicting climate."

That's too much of a temptation for scientists working on the problem, however. "If you live with models for 10 to 20 years, you start to believe in them," Dyson said."