Risk Takers

by Russ Roberts on November 10, 2009
in Financial Markets

From an article on Goldman Sachs, from a conversation with the CEO, Lloyd Blankfein:

He starts with a little humility. He understands that “people are pissed off, mad, and bent out of shape” at bankers’ actions. Goldman played its part in the meltdown that almost destroyed the global financial system. It, like most other banks, lent too much money, made its first quarterly loss for more than a decade last year and ended up taking bail-out cash from Washington. “I know I could slit my wrists and people would cheer,” he says. But then, he slowly begins to argue the case for modern banking. “We’re very important,” he says, abandoning self-flagellation. “We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle.” To drive home his point, he makes a remarkably bold claim. “We have a social purpose.”

I used to feel this way. I used to think that Wall Street innovation was part of our prosperity because the innovation made markets more efficient. But that only works when firms face profits and losses. When losses are truncated by bailouts, you get anti-social risk-taking. You get a cycle not of virtue but of vice. You get $1.5 trillion poured down the black hole of subprime lending. The bottom line of the current system is that Blankfein won and the we, the people, lost. Shame on the people who allowed him to play with our money instead of his own. Shame on him for pretending he earned our money and the profits he made playing with it.

1989: The Year of Miracles

Long and Confusing Rules

Now that the House has passed a health care bill that it promises will fix the health care system once and for all, we should stop and think about the proper use of the law before we go any further.

The law was not made to manage the many fine threads of complex human relationships. Trying to fix the health care system with legislation is like trying to fix a spider web with the broad end of a broom.

Properly used, the law should define the general rules of the game, and no more. When it goes beyond that, when it attempts to legislate every contingency, it morphs into a 2,000 page bill which no one will read...until it is too late. Then the 2,000 page bill will spawn 20,000 pages of regulation, and what used to be an individual decision will become a hopelessly public one.

In such a world, life will be a Kafkaesque journey where the rules are so long and confusing that they might just as well be arbitrary. In such a world, more will be lost and destroyed than ever will be saved.

The Government Cable "Option"

The Quotable Bastiat

"When legislators, after having ruined men by war and taxes, persevere in their idea, they say to themselves, 'If the people suffer, it is because there is not money enough. We must make some.' And as it is not easy to multiply the precious metals, especially when the pretended resources of prohibition have been exhausted, they add, 'We will make fictitious money, nothing is more easy, and then every citizen will have his pocket-book full of it, and they will all be rich.'"

"What is Money"?

Quand les législateurs, après avoir ruiné les hommes par la guerre et l'impôt, persévèrent dans leur idée, ils se disent: « Si le peuple souffre, c'est qu'il n'a pas assez d'argent. Il en faut faire. » Et comme il n'est pas aisé de multiplier les métaux précieux, surtout quand on a épuisé les prétendues ressources de la prohibition, « nous ferons du numéraire fictif, ajoutent-ils, rien n'est plus aisé, et chaque citoyen en aura plein son portefeuille! ils seront tous riches.»

Maudit Argent!

Atlas Continues to Shrug

"She would have been horrified," Anne Heller tells All Things Considered host Guy Raz. Heller's new book is titled Ayn Rand and the World She Made.

Over the past year, Rand's books have reappeared on the bestseller lists. Heller says that makes perfect sense.

"When there are periods of economic decline," she says, "people are more likely to absorb [Rand's] message."

At last summer's tea-party rallies, some people held signs with the famous first line from Atlas Shrugged, "Who is John Galt?" Galt is the character who personifies capitalist idealism.

Read and listen to the interview here.

Rap and Reality

From How Capitalism Will Save Us by Steve Forbes and Elizabeth Ames...

Is Capitalism Moral?

THE RAP: Capitalism is an amoral, dog-eat-dog system founded on greed and the survival of the fittest.

THE REALITY: Capitalism is the world's most humane economic system, promoting the democratic values of a free and open society: hard work, cooperation, generosity, charity, and devotion to the rule of law.

Isn't Capitalism Brutal?

THE RAP: The free market is brutal: Big players with too much power crush smaller competitors. People are laid off without warning or protection. Individuals are vulnerable to ups and downs in remote sectors of the economy that have little apparent connection to their daily existence, suffering untold disruption to their lives and businesses.

THE REALITY: Democratic capitalism can be disruptive and unpredictable. But the process of "creative destruction" is critical to a healthy economy and society. New products and industries render old ones obsolete. Some jobs may be destroyed. But other jobs--more of them--are created. In this way, individuals and resources go where they are most needed by people and businesses, and wealth-producing innovations are developed. Without creative destruction, the economy would stagnate. Living standards would be lower and unemployment would be far higher.

Aren't The Rich Getting Richer At Other People's Expense?

THE RAP: The rich are a privileged group that prospers at the expense of everyone else, exploiting employees and customers to stay on top, while getting special treatment and tax breaks? Meanwhile, the poor get poorer and the middle class struggles to keep from falling behind.

THE REALITY: Rich people make their fortunes by creating opportunity and wealth for others. They do this by launching businesses that create jobs, by investing in new ventures, or by spending money on other people's products and services. The rich are not a fixed aristocracy. Who is rich and who is poor is always changing. You can't have a prosperous or innovative economy unless people are allowed to become rich

Bastiat Meeting

November 4th

Please join us this Wednesday for our November Bastiat Society Meeting. Our guest speaker for this month is George Leef from the Pope Center for Higher Education Policy. His talk is entitled:

"The conventional Wisdom on Higher Education: Not Just Wrong, but Harmful"

Please RSVP by emailing us: BastiatSociety@gmail.com

_______
Time:
5pm - Reception
6pm - Speaker

_______
Place:
The Harbor Club
35 Prioleau St
Charleston, SC 29403

map

Monopoly Money

Would currency competition lead to a sounder U.S. dollar?


By Dr. Ron Paul (R-TX)
Submitted to CNN

"The prospect of American citizens also turning away from the dollar toward alternate currencies should provide an impetus to the U.S. government to regain control of the dollar and halt its downward spiral. Restoring soundness to the dollar will remove the government's ability and incentive to inflate the currency, and provide stability to the financial system. With a sound currency, everyone is better off, not just those who control the monetary system."

Read the entire op-ed here

We'll Be Broke

Another "successful" government program like cash for clunkers, and we'll all be broke...

Edmunds.com, the premier resource for online automotive information, has determined that Cash for Clunkers cost taxpayers $24,000 per vehicle sold.

Nearly 690,000 vehicles were sold during the Cash for Clunkers program, officially known as CARS, but Edmunds.com analysts calculated that only 125,000 of the sales were incremental. The rest of the sales would have happened anyway, regardless of the existence of the program.

Read the rest here.

Maximum Confusion over Minimum Wages

by D.W. MacKenzie, Mises Daily

"Common sense and a few basic concepts can guide most people through economic issues — provided that our thoughts overshadow our emotions. One small step of reason on the minimum-wage issue could be a giant leap for all mankind."

Read the entire article here



Special thanks to the Ludwig von Mises Institute

The Case for Freedom and Wealth Creation

You've never seen data presented like this. With the drama and urgency of a sportscaster, statistics guru Dr. Hans Rosling debunks myths about the so-called "developing world." He makes his point very clear - wealth and freedom creates better societies.

Click on Hans to watch the video

So Bad, It's Not Even Wrong

Michael Shermer on Michael Moore's documentary, Capitalism: A Love Story:

"In this latest installment in his continuing series of what’s wrong with America, Michael Moore takes aim at his biggest target to date, and the result is a disaster. The documentary is not nearly as funny as his previous films, the music selections seem contrived and flat, and the edits and transitions are clumsy, wooden, and not nearly as effective as what we’ve come to expect from the premiere documentarian (Ken Burns notwithstanding) of our time. And, most importantly, the film’s central thesis is so bad that it’s not even wrong."

Read the rest here.

No Dissent Allowed

The Reasons for Meetings

"What makes the sheer volume of office meetings even more remarkable is that there are only two possible reasons for any meeting: 1) Come listen to me talk, and 2) Come listen to me talk and then share the blame when this horrible idea explodes in my face. That's it. That is every meeting."

Charlie Grandy, a writer for "The Office" Forbes

A Prison for the Human Soul

Dan Mitchell delivers a short, on-the-target plea for smaller government.

Takings Versus Regulation

The Initiative for Public Choice & Market Process at the College of Charleston will present a lecture from University of Chicago Law professor Richard Epstein entitled "Takings versus Regulation: Where in Lies the Difference?" The lecture will be held on October 8 in the Beatty Center's Wachovia Auditorium begin at 7 p.m.

Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law at the University of Chicago, where he has taught since 1972. He is also the Faculty Director for Curriculum, and the Director of the Law and Economics Program. Epstein is author of the book Takings: Private Property and the Power of Eminent Domain.

This event is free and open to the public. It is sponsored in part by the Bastiat Society and the College of Charleston Pre-Law Club.

Help for the Overpaid

If Bastiat Could Do It...

If Bastiat could make economics intuitive, so can we. So says economist Bryan Caplan.

He offers a few examples of intuitive logic designed to overcome counterintuitive arguments:

1.Counterintuitive claim: Free trade makes countries richer, even if the other countries have big advantages like cheaper labor or more advanced technology.

Intuitive version: We'd be better off if other countries gave us stuff for free. Isn't "really cheap" the next-best thing?

2.Counterintuitive claim: Strict labor market regulation is bad for workers.

Intuitive version: Employers don't like hiring people if it's hard to get rid of them. Suppose you had to marry anyone you asked out on a date!

3. Counterintuitive claim: Egalitarian socialism creates poverty... even starvation.

Intuitive version: If everyone gets the same share whether or not they work, you're asking people to work for free. People don't like working for free, especially when the work isn't very fun. (This is my response to Sumner's Great Leap Forward Challenge: "But how do we explain to school children that millions had to starve because of a policy that encouraged people to share?")

4. Counterintuitive claim: Prices are determined by supply and demand.

Intuitive version: If the good were free, consumers would want a lot, but producers wouldn't feel like making much. If the good cost trillions of dollars, producers would want to make a lot, but consumers wouldn't want to buy any. In between there's got to be a price where consumers want to buy as much as producers want to make.

Read the rest, and Caplan's challenge to his readers, here.

Seeing Business Straight

The Economist has launched a new column on business and management. It's called "Schumpeter," named after the great economist Joseph Schumpeter.

An extract:

"Joseph Schumpeter was one of the few intellectuals who saw business straight. He regarded business people as unsung heroes: men and women who create new enterprises through the sheer force of their wills and imaginations, and, in so doing, are responsible for the most benign development in human history, the spread of mass affluence. “Queen Elizabeth [I] owned silk stockings,” he once observed. “The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort…The capitalist process, not by coincidence but by virtue of its mechanism, progressively raises the standard of life of the masses.” But Schumpeter knew far too much about the history of business to be a cheerleader. He recognised that business people are often ruthless monomaniacs, obsessed by their dreams of building “private kingdoms” and willing to do anything to crush their rivals."

Read the whole thing here.

The Quotable Bastiat

Lorsque la Spoliation est devenue le moyen d'existence d'une agglomération d'hommes unis entre eux par le lien social, ils se font bientôt une loi qui la sanctionne, une morale qui la glorifie.

Chapitre I de la seconde série des Sophismes Économiques

"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."

Economic Sophisms, Second Series, Chapter I

The Last Refuge

In 1775, the Englishman Samuel Johnson made the famous pronouncement, "Patriotism is the last refuge of a scoundrel."

Today, scoundrels can't rely on patriotism. It is too out of favor to provide much of a refuge.

Were the good Dr. Johnson alive today, he would most likely say "A charge of racism is the last refuge of a scoundrel."

Hiding Behind Racism

I just watched a network news report that made the astounding claim that any opposition to the agenda of President Obama is motivated by racism.

No less an authority than former President Carter confirmed the claim.

Nothing gets people on the defensive faster than the charge of racism. But the charge of racism doesn't stick this time around. People who oppose President Obama's agenda are not upset about his race. They are upset about his ideas.

Ideas deserve a full and serious debate. Bad ideas deserve the criticism heaped upon them. Really bad ideas try to hide behind something else.

The Lofty Legislature

"Government is not reason. It is not eloquence. It is force." George Washington

And, as this video of lofty legislative deliberation in Taiwan reveals, sometimes force doesn't have the patience to wait for reason or eloquence to finish.



Taken from a delightful tour of lofty legislative bodies around the world, found at "Hit and Run."

Tire Threat

Pardon my ignorance, but I didn't go to Harvard.

Then again, you probably didn't, either.

So let's ask this question together: "What, exactly, is the threat to the country presented by Joe Sixpack buying cheap tires from China?"

Are we trying to make the United States tire-independent? Do we rely on too many foreign tires? Are we trying to close a tire-gap vital to national security?

The answers all point to one conclusion. The United States is imposing a 35% tax on Chinese tires for one reason and one reason only: to discourage Americans from buying cheap Chinese tires.

The Chinese are understandably miffed. They complain. So once again, we must witness the absurd comedy of Chinese communists lecturing the government of the United States on the importance of free trade.

Critics of the Chinese will no doubt argue that the Chinese aren't true believers in free trade, just political opportunists who want to use the rhetoric of free trade to sell their cheap products in our market.

To these critics any thinking man must respond, "Of course." Or, less politely, "Duh!" The beauty of free trade is that it turns self-interested human beings into other-interested human beings by appealing to their nearly ineradicable self-interest. How else could you possibly convince all those Chinese to make cheap tires for Joe Sixpack, a guy they will never meet and who lives in a place they will never visit?

The world only works as well as it does because so many people aim to satisfy themselves by satisfying the needs of others. When governments start trying to dam up and redirect the flow of mutually satisfying trade, they inject politics into private transactions, making trade policy a department of government located dangerously close to the department of defense.

Let's laugh about protecting America from cheap tires, and use ridicule to expose the nonsense of protectionism. We should also pray that this comedy does not turn into a tragedy. Trade wars have been known to start real ones.

Serving the Needs of Others

You won't find the best video on your television anymore. It's on the web now, and among the best of the best is reason.tv.

Check out this video with Paul Zack of Claremont University. He says that trading is a fundamental human activity, and the act of trading is inherently social and inherently virtuous. Markets serve the needs of others.

Provincial Amateurism

"An example of the provincial amateurism of current White House operations was the way the president's innocuous back-to-school pep talk got sandbagged by imbecilic support materials soliciting students to write fantasy letters to "help" the president (a coercive directive quickly withdrawn under pressure). Even worse, the entire project was stupidly scheduled to conflict with the busy opening days of class this week, when harried teachers already have their hands full. Comically, some major school districts, including New York City, were not even open yet. And this is the gang who wants to revamp national healthcare?"

Camille Paglia writing in Salon

The Consequences of Destroying Wealth

A new study says the United States risks becoming another Argentina, a country that falls from first world to third world status through a series of self-inflicted, wealth destroying government policy mistakes.

Nobel prize winning economist James Buchanan has endorsed the study, saying "We have learned some things from comparable experiences of the 1930s' Great Depression, perhaps enough to reduce the severity of the current contraction. But we have made no progress toward putting limits on political leaders, who act out their natural proclivities without any basic understanding of what makes capitalism work."

After a scathing review of US economic policy, the study concludes with the anticipation that "a return to the kind of laissez-faire capitalism that evolved so successfully throughout the last two decades of the twentieth century once again will enjoy majority support in the not-too-far-distant future once the electorate begins to suffer the severe economic downside of the Bush and the Obama administrations’ anti-capitalist policies."

Entitled "Economic Contractions in the United States: A Failure of Government," the study was prepared by Charles K. Rowley and Nathanael Smith, and is a joint publication of the Locke Institute in the US and the Institute of Economic Affairs in the UK.

You can download a pdf version of the complete study here.

Bastiat and South Carolina

What is the connection between Bastiat, who I admire, and South Carolina, where I live?

Louisa S. McCord. She was one of the first American translators of Bastiat into English. She was also a South Carolinian.

Born in 1810 into a wealthy and politically powerful family in Charleston, Louisa received an extraordinary education for anyone of her time, male or female. At age ten, her father discovered her hiding behind a curtain during her two brothers' math lessons, where she had been taking notes and working out the problems herself. Impressed, her father resolved to educate her along with the boys. She eventually attended a girl's school in Philadelphia, and returned to South Carolina to pursue a life as a translator, writer, plantation manger, wife, and mother.

While living on Lang Syne, the family cotton plantation near Fort Motte, she translated Bastiat's Sophismes économiques into English. Her translation appeared in 1848 as Sophisms of the Protective Policy.

Her work included an introduction by her husband, who had encouraged her to undertake the translation, and a letter from Francis Lieber, Professor of Political Philosophy and Economy at South Carolina College in Columbia (now the University of South Carolina).

In 1849, the McCords built a house in Columbia. It still stands today at the same address, 1431 Pendleton Street, directly across the street from the campus of the old South Carolina College. During the Civil War, the College became an army hospital, and Louisa used her house as a kitchen to prepare meals for the patients.

Louisa was one of those curious ante-bellum Southern intellectuals who could argue for free trade and liberty on the one hand, and for the institution of slavery on the other. She was a fierce and unapologetic Southern patriot, even refusing to take the loyalty oath that the Federal government required at the end of the war.

She died in Charleston in 1879.

Louisa McCord's life is an example of the truth that remarkably good cultural memes travel remarkably strange and even paradoxical paths.

The First Politicians

Politicians often sound more like prophets and messiahs than mere mortals.

This religious mimicry is no accident. The earliest politicians may have been the tribal shamans who promised their less gifted fellows some control over the mysterious and sometimes malevolent spirits that animated their world.

In The Evolution of God, Robert Wright says, "There is evidence that in shamanism lie the origins of formal politics. The Buryat of Asia told ethnographers that their first political leaders were shamans. And the Inuit words for 'shaman' and 'leader' are almost identical -- angakok and angajkok. Further, though there have been societies with shamans but no acknowledged political leader, there have been few if any societies with a political leader but no religious experts. And in some societies, the shaman and the political leader have been one and the same."

What does a good shaman do when his methods don't work? Sometimes his fellows murder him in their disappointment. Sometimes he is simply demoted. Sometimes he runs. Sometimes he hides. But most often, he blames his failure on another shaman, "like a modern politician who diverts attention from domestic failures by rattling the saber."

Thus, the Klamath shaman blamed the Modoc shaman,the Jivaro shaman in one village blamed the Jivaro shaman in a neighboring village, and the Democrats blamed the Republicans.

No Trouble Before Its Time

Entrepreneurs are born trouble makers. Sometimes the trouble they make is legal. Sometimes it's not. As they say in the American South, God bless 'em, they can't help it.

One thing is for sure. Like wine, they will make no trouble before its time.

Minimum Wage = Minimum Jobs

John Stossel explains the economic ignorance of the minimum wage.

New Video: Minimum Wage Brings Minimum Jobs - John Stossel's Take

Shared via AddThis

De mortuis

While some may chide Vin Suprynowicz for his brutally frank column on Ted Kennedy's legacy, saying De mortuis nihil nisi bonum, his criticism of Kennedy is mild compared to the unadulterated adulation of the last five days.

How ironic that between the media orgy of Michael Jackson's funeral and Ted Kennedy's funeral, a true champion of human freedom, Rose Friedman (wife of the late Milton Friedman) died almost unnoticed.

If who we honor is who we are as a country, we have plenty to worry about.

Economist Don Boudreaux of George Mason University is another counterbalancing voice to the choirs who would make Kennedy Saint Ted. He writes:

"Ted Kennedy’s canonization is too much. Every day brings the deaths of thousands of people, the vast majority of whom are known only to their families and friends. These people aren’t mourned by politicians, reporters, or the general public.

Yet almost every one of these unheralded persons has been more productive than has Ted Kennedy – or Chuck Grassley, Nancy Pelosi, the Georges Bush, or any other politician you name, whether he or she be still breathing or buried.

Who installed the windows in my house? I don’t know. Yet he provided value to me and never forced his hand into my wallet or his nose into my eating habits. Who will fly the plane that will carry me home tomorrow from Michigan to Virginia? I have no idea. Yet that pilot will render unto me (and dozens of others) a valuable service in exchange for funds that I voluntarily paid to his or her employer. That pilot doesn’t force me to fly. Nor does he or she presume to know better than I do what is best for my family and me.

Who caught the fish that I will eat tonight? Who trucked it from the sea to my hotel? Who will cook that fish? Who designed the dishwasher that cleaned the plate and utensils that I will use?

I know almost none of the millions of people whose daily efforts make possible my life and that of countless other Americans. These people don’t hatch grand plans for arrogantly re-working society. They offer only to deal voluntarily with me and with others, never pretending – unlike Mr. Kennedy – to be endowed with a mysterious genius and a saintly inspiration justifying haughty intrusions into the affairs of others.

Politicians are mortals. But as their greedy lust for power and glory reveals, they are mortals especially flawed."

Take Down

Watching Milton Friedman take down a 1970s radical is better than watching WWE Raw.

Investment Fraud

The language of government has morphed into the language of the market. Government spending is no longer spending, it is now an investment.

The first time I noticed this transformation was in the speech of President Clinton. Since then, it's become nearly universal. Politicians great and small talk so often about investing they sound like penny-stock brokers in a boiler room.

And why not? Investment does have a nice, responsible ring to it, better than nasty old spending. Investment numbs the suspicious nature of a public about to be fleeced again.

Using the same pitch, teenagers could pressure their parents to invest in telecommunications ("buy me a new phone"), invest in transportation ("buy me a new car"), invest in fabric and apparel ("buy me a new outfit"), invest in technology ("buy me a new laptop"), and invest in education ("spring break, Fort Lauderdale").

What is the difference between a teenager who wants to fleece his parents and a politician who wants to fleece his taxpayer?

Twenty years and two decimal places.

There are two possible reasons why politicians abandoned the vocabulary of the social progressive and adopted the vocabulary of the marketplace. One is that the general population has lost its confidence in private investments, and now seeks the reassurance of public investments whose benefits are shared more widely. Not insignificantly, this is also the explanation that puts the people in the public sector in the most favorable light. But this reason does not hold up.

If indeed the public has lost its confidence in private investment, why use the vocabulary of investment at all? The fact that politicians prefer the vocabulary of business over the vocabulary of government indicates that business still holds a competitive edge in public opinion, at least when it comes to efficiency and productivity.

Public investment is the worst kind of fraud. It has none of the redeeming features of private investment, namely voluntary participation and individualized risk and reward. Public investment is the dangerous combination of involuntary participation, socialized risk, and rewards that are all too often scooped up by politically powerful players.

Public investment is nothing less than taking other people's money under the threat of force while telling them it is for their own good. There may be cases where this is certainly true and necessary, but no one can doubt that this moral justification for the forceful redistribution of wealth is trotted out way too often. After awhile, it starts to sound like another stock pitch from Blindem and Robem.

Stop Now!

Economist Bruce Yandle on Cash for Clunkers...

"...over the eons, human communities have contrived all kinds of devices to transmit critical survival skills and compatible behavioral norms. One of these has to do with conservation of wealth. “Waste not, want not,” we are told. “A penny saved, is a penny earned,” we are reminded. Using politics to pay people who destroy valuable vehicles, or to hold crops off the market, or to produce ethanol that may use more energy in production than it adds when burned, teaches a lesson of anti-matter and wealth destruction. When all these considerations are made, Cash for Clunkers sounds like a sorry idea that should not be the model for future policy.

Let’s stop Cash for Refrigerators before the idea spreads further."

Read the whole thing here.

The Quotable Bastiat

Il faut le répéter, au risque de froisser le sentimentalisme moderne: L'économie politique se tient dans la région de ce qu'on nomme les affaires, et les affaires se font sous l'influence de l'intérêt personnel. Les puritains du socialisme ont beau crier: « C'est affreux, nous changerons tout cela; » leurs déclamations à cet égard se donnent à elles-mêmes un démenti permanent. Allez donc les acheter, quai Voltaire, au nom de la fraternité!

Chapitre IV des Harmonies Économiques, Échange

"We must repeat, at the risk of distressing modern sentimentalists: Political economy is restricted to the area that we call business and business is under the influence of self-interest. Let the puritans of socialism cry out as much as they will: "This is horrible; we shall change all this"; their rantings on this subject constitute their own conclusive refutation. Try to buy a printed copy of their publications on the Quai Voltaire, using brotherly love as payment!"

Chapter 4, Economic Harmonies, Exchange

National Shoe Care

If the government and only the government had had a monopoly of the shoe manufacturing and retailing business, how would most of the public treat the libertarian who now came along to advocate that the government get out of the shoe business and throw it open to private enterprise? He would undoubtedly be treated as follows: people would cry, “How could you? You are opposed to the public, and to poor people, wearing shoes! And who would supply shoes to the public if the government got out of the business? Tell us that! Be constructive! It’s easy to be negative and smart-alecky about government; but tell us who would supply shoes? Which people? How many shoe stores would be available in each city and town? How would the shoe firms be capitalized? How many brands would there be? What material would they use? What lasts? What would be the pricing arrangements for shoes? Wouldn’t regulation of the shoe industry be needed to see to it that the product is sound? And who would supply the poor with shoes? Suppose a poor person didn’t have the money to buy a pair?”

Murray Rothbard, For a New Liberty

The Piedmont Economics Club

Now entering its 40th year, the Piedmont Economics Club is South Carolina's oldest civic organization dedicated to the promotion and discussion of economic ideas and thought.

Holding dinner meetings at the Poinsett Club in Greenville, SC, the Club offers its members and their guests the opportunity to hear leading economists, financial analysts, journalists, and government policy makers.

The Club meets six to seven times a year, and always begins its meetings with a 6:00 pm reception and time of fellowship. This is followed by dinner and the speaker's presentation. A time for questions and reflection rounds out the club meeting.

In addition to promoting economic thought and discussion among its members and their guests, the Club seeks to enrich the teaching of economics at area universities. Faculty members at Clemson University, Furman University, and Wofford College enjoy a standing invitation to attend meetings as guests of the Club. The Club also hosts university students as guests.

Fall Programs for 2009-2010

September 8 – Susan Bies. Dr. Bies is former Governor of the Federal Reserve with a career career spent in academia, banking, and as member of key national financial policy organizations. Susan will share insights on the Fed, on activities that led to the 2007-08 financial collapse, and on future prospects for the economy.

October 7 – Robert Lawson. Dr. Lawson leads a center for economic freedom at Auburn University. Robert was the coauthor and project director for the first Economic Freedom Index of the World. He continues to be the leading world figure in measuring and analyzing economic freedom. Robert will discuss his work and what he sees happening to economic freedom around the world.

November 11 – Larry White. Dr. White is the Frederich v. Hayek Professor of Economics at the University of Missouri--St. Louis and a leading scholar in monetary history and policy. Larry has published widely on the relative merits of commodity money and is currently completing a book on history of economic thought. He will share ideas about money and the economy.

January 19 - Doug Woodward. Dr. Woodward is director of research and lead economic forecaster at the University of South Carolina's Moore College of Business. Doug is widely known for his work as a forecaster and for his research on economic development. Dr. Woodward will share his thoughts on the 2010 outlook for the nation, region, and state.

February 16. Robert Ariail. Robert Arial is a nationally syndicated editorial cartoonist. His widely published cartoons capture the essence of the risks and uncertainties of economic policies embraced by politicians. Robert will give a presentation on the history of cartooning and will show and comment on a sample of his artistic renderings

March 16. Susan Dudley. In December 2008, Susan Dudley ended a two-year stint as Director of the White House Office of Information and Regulatory Affairs. As the nation's regulatory czar, Susan oversaw the regulatory activities of the federal government. Susan will tell us about what is going on with regulation in the United States and beyond

Last Season’s Speakers

Michael Schermer -- The Mind of the Market: Evolutionary Economics

Karol Boudreaux -- Enterprise Africa: Can Capitalism Work in Africa?

Richard Ebeling -- Why the Specter of Communism is Still Haunting the World

Mark Vitner -- The Outlook for 2009

Scott Baier -- The Economic Council of Advisors

Gerald O’Driscoll -- Life after the Sub-Prime Mess

Bill Poole -- Monetary Policy Effects on Today’s Economy

Membership Information

Membership is open to all who are interested in the discussion of economic ideas, trends, and related topics. The membership fee for 2008-2009 is $475.00. Members may bring guests for a fee of $50.00. The regular guest fee is $85.00.

For more information, contact:

Piedmont Economics Club
PO Box 1805
Greenville, SC 29602

Sydney Taylor at sydney@canal-ins.com

Bottom-Up

"The supreme example of bottom-up, rather than top-down, complexity is the market itself. As the economist Paul Seabright has written, the almost miraculous system by which he can go out and buy a cotton shirt on a whim — and expect the cotton grower, the weaver, the shirtmaker, the shipper and the retailer to have got it ready for him just when he enters the shop — is not planned or designed, it evolves. The top-down alternative does not have a great track record. Can you doubt that if the shirt industry was run by a National Shirt Service, there would now be queues, quotas and shortages?

Author Matt Ridley, "The Natural Order of Things." The Spectator (UK)

Behavioral Economics

Here is a fascinating discussion of behavioral economics, or the story of how people behave outside of economic models. Useful for any business with employees, customers, or both.

Greg Davies on behavioral economics.

Public Service

"The government of my country snubs honest simplicity but fondles artistic villainy, and I think I might have developed into a very capable pickpocket if I had remained in the public service a year or two."

Mark Twain, Roughing It

Free to Choose

In 1980, the United States was mired in a deep recession. Unemployment would eventually hit 10%. Interest rates would rise to the high teens. The United States appeared exhausted and helpless. The Soviet Union bristled with nuclear weapons and imperial ambition. The Japanese appeared economically ascendant.

1980 was also the year that Milton and Rose Friedman broadcast the first episode of the PBS series Free to Choose: A Personal Statement. Those broadcasts played an important role in the popular revival of free market ideas.

Now the entire series is available via IdeaChannel.tv.

At a time when we are wrestling with our own economic demons, it may be useful to revisit some old friends.

Protest Capitalism! Spend Money!

Demonstrating either a matchless entrepreneurial instinct or a hopelessly muddled morality, a Dutch designer is promoting the post-capitalist society by selling expensive T-shirts.

Twan Verdonck launched a new fashion project he calls "We Are Numbers." It consists of selling designer T-shirts for the price of 25 euros each (about US $37). He says his T-shirt project is about consumerism, identity, and fashion. The ultimate goal of the project is "universal love, low consumption and unlimited creativity."

Tactfully, he did not mention his personal goal of earning a comfortable living from satisfying the kind people who believe that they can contribute to universal love, low consumption, and unlimited creativity by buying a T-shirt.

Public Instability

"The internal effects of a mutable policy are still more calamitous. It poisons the blessing of liberty itself. It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?

Another effect of public instability is the unreasonable advantage it gives to the sagacious, the enterprising, and the moneyed few over the industrious and uniformed mass of the people. Every new regulation concerning commerce or revenue, or in any way affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace its consequences; a harvest, reared not by themselves, but by the toils and cares of the great body of their fellow-citizens. This is a state of things in which it may be said with some truth that laws are made for the few, not for the many."

James Madison, The Federalist Papers, 62

Rationing Health Care

"Virtually all nationalized health systems, neither nourished nor updated by profit-driven private investment, eventually lead to rationing."

Camille Paglia, in Salon.com

Hayek on Bastiat

The great free market intellectual Friedrich Hayek (1899 - 1992) wrote the following introduction to an edition of Bastiat's selected essays:

"Even those who may question the eminence of Frédéric Bastiat as an economic theorist will grant that he was a publicist of genius. Joseph Schumpeter calls him "the most brilliant economic journalist who ever lived." For the purpose of introducing the present volume, which contains some of the most successful of his writings for the general public, we might well leave it at that. One might even grant Schumpeter's harsh assessment of Bastiat that "he was not a theorist" without seriously diminishing his stature. It is true that when, at the end of his extremely short career as a writer, he attempted to provide a theoretical justification for his general conceptions, he did not satisfy the professionals. It would indeed have been a miracle if a man who, after only five years as a regular writer on public affairs, attempted in a few months, and with a mortal illness rapidly closing in on him, to defend the points on which he differed from established doctrine, had fully succeeded in this too. Yet one may ask whether it was not only his early death at the age of forty-nine that prevented him. His polemical writings, which in consequence are the most important ones he has left, certainly prove that he had an insight into what was significant and a gift for going to the heart of the matter that would have provided him with ample material for real contributions to science.

Nothing illustrates this better than the celebrated title of the first essay in the present volume. "What is seen and what is not seen in political economy!" No one has ever stated more clearly in a single phrase the central difficulty of a rational economic policy and, I would like to add, the decisive argument for economic freedom. It is the idea compressed into these few words that made me use the word "genius" in the opening sentence. It is indeed a text around which one might expound a whole system of libertarian economic policy. And though it constitutes the title for only the first essay in this volume, it provides the leading idea for all. Bastiat illustrates its meaning over and over again in refuting the current fallacies of his time. I shall later indicate that, though the views he combats are today usually advanced only in a more sophisticated guise, they have basically not changed very much since Bastiat's time. But first I want to say a few words about the more general significance of his central idea.

This is simply that if we judge measures of economic policy solely by their immediate and concretely foreseeable effects, we shall not only not achieve a viable order but shall be certain progressively to extinguish freedom and thereby prevent more good than our measures will produce. Freedom is important in order that all the different individuals can make full use of the particular circumstances of which only they know. We therefore never know what beneficial actions we prevent if we restrict their freedom to serve their fellows in whatever manner they wish. All acts of interference, however, amount to such restrictions. They are, of course, always undertaken to achieve some definite objective. Against the foreseen direct results of such actions of government we shall in each individual case be able to balance only the mere probability that some unknown but beneficial actions by some individuals will be prevented. In consequence, if such decisions are made from case to case and not governed by an attachment to freedom as a general principle, freedom is bound to lose in almost every case. Bastiat was indeed right in treating freedom of choice as a moral principle that must never be sacrificed to considerations of expediency; because there is perhaps no aspect of freedom that would not be abolished if it were to be respected only where the concrete damage caused by its abolition can be pointed out.

Bastiat directed his arguments against certain ever recurring fallacies as they were employed in his time. Few people would employ them today quite as naively as it was still possible to do then. But let the reader not deceive himself that these same fallacies no longer play an important role in contemporary economic discussion: they are today expressed merely in a more sophisticated form and are therefore more difficult to detect. The reader who has learnt to recognize these stock fallacies in their simpler manifestations will at least be on his guard when he finds the same conclusions derived from what appears to be a more scientific argument. It is characteristic of much of recent economics that by ever new arguments it has tried to vindicate those very prejudices which are so attractive because the maxims that follow from them are so pleasant or convenient: spending is a good thing, and saving is bad; waste benefits and economy harms the mass of the people; money will do more good in the hands of the government than in those of the people; it is the duty of government to see that everybody gets what he deserves; etc., etc.

None of these ideas has lost any of its power in our time. The only difference is that Bastiat, in combatting them, was on the whole fighting on the side of the professional economists against popular beliefs exploited by interested parties, while similar proposals are today propagated by an influential school of economists in a most impressive and, to the layman, largely unintelligible garb. It is doubtful whether there is one among the fallacies which one might have hoped Bastiat had killed once and for all that has not experienced its resurrection. I shall give only one example. To an account of Bastiat's best-known economic fable, The Petition of the Candlemakers against the Competition of the Sun (contained in a companion volume to this), in which it is demanded that windows should be prohibited because of the benefit which the prosperity of the candlemakers would confer on everyone else, a well-known French textbook of the history of economics adds in its latest edition the following footnote: "It should be noted that according to Keynes—on the assumption of underemployment and in accordance with the theory of the multiplier—this argument of the candlemakers is literally and fully valid.

The attentive reader will notice that, while Bastiat grapples with so many economic panaceas which are familiar to us, one of the main dangers of our time does not appear in his pages. Though he has to deal with various queer proposals for using credit which were current in his time, straight inflation through a government deficit seemed in his age not a major danger. An increase of expenditure means for him necessarily and immediately an increase in taxation. The reason is that, as among all people who have gone through a major inflation within living memory, a continuous depreciation of money was not a thing with which people would have put up with in his day. So if the reader should be inclined to feel superior to the rather simple fallacies that Bastiat often finds it necessary to refute, he should remember that in some other respects his compatriots of more than a hundred years ago were considerably wiser than our generation."

What's Wrong With Business Education

Professor Henry Mintzberg is a long-time critic of business schools, even though (or perhaps because) he graduated from one and is employed by another.

In this dialogue with businessman Ricardo Semler, Professor Mintzberg drops one gem after another, such as:

"Canada is one country that works remarkably well in practice, but doesn't work at all in theory."

"You can't create a manager in a classroom. If you try, you create hubris."

"Management is where art and craft and science meet. You can't do anything with craft when people have no experience, 'cause craft by definition is rooted in experience. And art tends to get treated in the classroom in a kind of voyeuristic way, we have cases about entrepreneurs and things...so the emphasis is really on the science or the analytical side and I think that distorts things. I wouldn't close down the MBA programs...I would simply recognize them for what they are: training in analytical skills for analytical jobs...just don't pretend we're creating them as managers...Don't close them down but recognize them for what they are."

"You shouldn't be a manager because you got an MBA. You should earn your managerial stripes."

"Regular MBA programs train the wrong people in the wrong ways with the wrong consequences."

Semler gets a good line in, too, when he says that most business schools bring in business people like zoo animals, and have a sign outside the classroom that says "Don't feed the businessman."

Vodoo Economics

Over at Organizations and Markets, economist Peter Klein reminds us of the subject of the boring lecture in the late, great John Hughes classic, Ferris Bueller's Day Off.



Reading the script is almost as funny as hearing Ben Stein act it out.

"In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the... Anyone? Anyone?... the Great Depression, passed the... Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act? Which, anyone? Raised or lowered?... raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression. Today we have a similar debate over this. Anyone know what this is? Class? Anyone? Anyone? Anyone seen this before? The Laffer Curve. Anyone know what this says? It says that at this point on the revenue curve, you will get exactly the same amount of revenue as at this point. This is very controversial. Does anyone know what Vice President Bush called this in 1980? Anyone? Something-d-o-o economics. "Voodoo" economics."

Ferris Bueller's Day Off came out in 1986. Do you think it did to the economics profession what Sideways did for merlot?

The Quotable Bastiat

Si l'on trouvait en France une mine d'or, il ne s'ensuit pas que nous eussions intérêt à l'exploiter. Il est même certain que l'entreprise devrait être négligée, si chaque once d'or absorbait plus de notre travail qu'une once d'or achetée au Mexique avec du drap. En ce cas, il vaudrait mieux continuer à voir nos mines dans nos métiers. — Ce qui est vrai de l'or l'est du fer.

"If someone found a gold mine in France, it does not follow that it would be to our interest to work it. In fact, it is certain that the enterprise should not be undertaken if each ounce of gold absorbed more of our labor than would an ounce of gold bought from Mexico with cloth. In that case it would be better to continue to regard our looms as gold mines. And what is true of gold is no less true of iron."

Chapitre XVII de la seconde série des Sophismes Économiques/Economic Sophisms, II.17.11

Thoughts on Business

Business schools don't teach business. They teach technocratic social science and produce the kind of people who still believe in five year plans.

*****

A business plan is just a hunch dressed up to make a good first impression.

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A business plan is a prim analysis of what will work. Business is the messy search for what actually does.

*****

A profitable business, honestly run, is one of mankind's greatest achievements. It is also one of his least appreciated.

The New Wall Street

Investor Wilbur Ross comments on what I call the last boom town in America: Washington, DC.

"Washington is becoming the new Wall Street...The $64 question is will government be able to re-exit from that, and yet leave the economy intact, or are we moving toward a permanent socialization of the capital markets?"

From NPR.

The better question is, why human nature should operate any differently in Washington than it does in New York?

Clunkers, Winners, and Losers

The "cash for clunkers" program is popular, but that's because we are only celebrating the program's winners.

There are losers, too. Lots of them. Nothing in Washington happens without somebody losing something.

To paraphrase the old truth about poker, take a look around Washington and spot the sucker. If you can't, you're it.

Here's how the program really works:

Winners:
Auto rental companies
Automakers
Auto dealers
New auto buyers
Scrap metal dealers
Politicians

Losers:
Automobile mechanics
Tire stores
Automobile parts dealers
Taxpayers
Low-end used car buyers

In the final analysis, it is not clear that the benefit to the winners is greater than the cost to the losers. In fact, what has probably happened is a zero-sum transfer of money from one group to another.

Moving money around creates a lot of excitement, especially for the receiver. But this kind of excitement is not prosperity. It is the illusion of prosperity, creating a Potemkin village in a land left poorer for the effort.

Rather than create the appearance of prosperity by rushing money around from one place to another by decree, we should rely on the boring but effective policy of simply leaving money in the hands of those who made it in the first place. Let them decide where to spend it.

Utopia or Freedom

Thomas Sowell on chronic human discontent:

"The universe was not made to our specifications. Nor were human beings. So there is nothing surprising in the fact that we are dissatisfied with many things at many times. The big question is whether we are prepared to follow any politician who claims to be able to “solve” our “problem.”

If we are, then there will be a never ending series of “solutions,” each causing new problems calling for still more “solutions.” That way lies a never-ending quest, costing ever increasing amounts of taxpayers money and — more important — ever greater losses of your freedom to live your own life as you see fit, rather than as presumptuous elites dictate.

Ultimately, our choice is to give up Utopian quests or give up our freedom."

The Failings of Capitalism

"...moaning and groaning about the failings of capitalism are really part of political theatre in a recession. In my youth, the Communist Party would meet delightedly during every recession and proclaim that capitalism was now in its final death throes. Even after the collapse of communism, dirges are still sung by other parties. The singing ends abruptly as economies pick up again, and turns out to be more a recession ritual than an anthem for reform."

Swaminathan S Anklesaria Aiyar, consulting editor of The Economic Times (India)

When is Big Too Big?

We all know government is big. But when is big too big?

A new study by the Institute for Market Economics (IME) in Bulgaria concludes the government sector should be no larger than 20% to 30% of the national economy.

The average government sector for the OECD countries now exceeds 41% of GDP.

The results of the study indicate that trying to stimulate the economy by expanding government probably won't work.

The study was sponsored by the non-partisan Center for Freedom and Prosperity Foundation in the United States and the European Coalition for Economic Growth based in Vienna, Austria.

World's Oldest Proof

Strained logic appears over and over again in human discourse, especially when passion overwhelms the requirement for proof.

Or, better yet, when passion becomes the proof. This is the flaw in Life, Inc., the book that I reviewed on this site yesterday.

Consider the following additional examples of passionate but faulty logic, culled from history:

Adolf Hitler:
I don't like Jews.
People behave badly.
A lot of people are Jews.
Therefore, Jews make people behave badly.

Islamic Extremist:
I don't like Americans.
People behave badly.
A lot of people envy Americans.
Therefore, Americans are the reason people behave badly.

Naomi Klein:
I don't like Milton Friedman.
People behave badly.
A lot of people read Milton Friedman.
Therefore, Milton Friedman makes people behave badly.

Richard Dawkins, scientist and militant atheist:
I don't like religion.
People behave badly.
People are religious.
Therefore, religion makes people behave badly.

Ben Stein, star of the anti-evolution movie, Expelled
I don't like evolution.
People behave badly.
People are taught evolution.
Therefore, evolution makes people behave badly.

Gun Control Advocates:
I don't like guns.
People behave badly.
People own guns.
Therefore, guns make people behave badly.

PETA, People for the Ethical Treatment of Animals
I don't like meat.
People behave badly.
People eat meat.
Therefore, meat makes people behave badly.

The variations are endless. Perhaps the world's oldest and weakest proof begins with "I don't like..."

On the other hand, it is apparently a very effective way to demonize a race, a nation, a man, a product, or an idea.

Carrots and Corporations

Life, Inc. is a book that might have been great. It deals with an important topic, the role of the corporation in society, and there are moments when it hits the mark, such as:

"The current situation resembles the managed capitalism of Mussolini's Italy, in particular. It shares a common intellectual heritage (in disappointed progressives who wanted to order society on a scientific understanding of human nature), the same political alliance (the collaboration of the state and the corporate sector), and some of the same techniques for securing consent (through public relations and propaganda). Above all, it shares with fascism the same deep suspicion of free humans."

But the author cannot free himself from his self-described "hip, overgentrified, Brooklynite" world view. He drops complaints about "the toxically wealthy." He doesn't like mini malls or superstores. He complains about "hermetically sealed food courts." He wants to dismantle society and replace it with something more livable and sustainable.

In the end, his argument boils down to this:

I don't like corporations.
People behave badly.
People use a lot of corporate stuff.
Therefore, corporations are the reason people behave badly.

Of course, this makes as much sense as saying

I don't like carrots.
People behave badly.
People eat a lot of carrots.
Therefore, carrots are the reason people behave badly.

Corporations, like individuals, deserve criticism and punishment when they lie, cheat, steal, or resort to violence. But it is a metaphysical stretch -- dare I call it a lie? -- to say that the very nature of the corporation is immoral.

No doubt, it is easier to denounce corporations as inherently corrupt rather than to directly confront the common thesis in all such arguments: People behave badly. But we might as well blame that unpleasant fact on carrots.

People behaved badly long before corporations existed. Carrots have been around a lot longer. Therefore it must be true that carrots are more likely to cause bad behavior than corporations.

Note: Here is an earlier post on Life, Inc.

No Choice is No Fun

Forbes magazine just published an article on the funniest US television commercials. The top spot went to an IKEA commercial about a lamp.

My personal favorite, the Wendy's Soviet fashion show, was number 19 on the list. It not only sells hamburgers, it makes comparative economic analysis funny.

Remember, "Having no choice is no fun."

The High Priests of Job Creation

Across the land the cry was heard, "Give us more jobs!"
And Lo, many jobs were given, but little work was done.

Of course these lines do not appear in any sacred text. At least none yet. But when the job-creation epic of our time is finally set to paper, they surely will, in one form or another.

You are reading a short meditation on the growing metaphysical distinction between doing "work" and having a "job." And metaphysical is not too strong a word here. The meanings of these words are separating as surely as day from night or land from water.

Once, they meant roughly the same thing. "Job" entered the English language around the 16th century with the meaning "a piece of work," as distinguished from continuous labor. The first use in the sense of "work for pay" was in the 17th century. Over the next three centuries, the two words became interchangeable. Until now.

Now, a job is something you do for somebody else. Employees have jobs. Owners and housewives have work.

Now, politicians throw the word "job" around like it is a talisman that can produce wondrous effects and will justify any sacrifice. Politicians have become the high priests of job creation, but they rarely stop to ask if the job they invoke is valuable or necessary. You will hear about green jobs, high-paying jobs, jobs of the future, and good jobs, but you won't hear about valuable or necessary work.

Even when politicians talk about putting people back to work, they don't mean the kind of work done by small businesses or the self-employed. They are talking about corporate jobs, the kind they can recruit with tax incentives and great fanfare; the kind of jobs they can count, not the work done by plumbers, electricians, shopkeepers, bar tenders, auto mechanics and the like.

The news media aids the politicians in promoting this new faith in jobs. It tracks the job count like augurs used to count the geese in the sky of ancient Rome: 7 jobs here, 15 jobs there, 1,000 jobs somewhere else. Jobs, like victories, are won or lost. Jobs are omens, portents of our future. More are a sign that the sacrifices are working, less a sure sign that we must sacrifice even more.

Somewhere, in the enthusiasm about jobs, we have lost our concern about work. "We pretend to work and they pretend to pay us," was the jest about jobs in the old USSR. Has it found new life on the job in the USA?

Business and Biology

What are the connections between business and biology? Economic progress depends on the hybridization of ideas, or as Matt Ridley likes to put it, "Ideas having sex."

Author Ridley is a rare find: smart, funny, easy to understand, and though-provoking. In short, he's everything you'd hope for in an intellectual. Even better, he understands markets.

His background includes science, journalism, and business. Ridley studied zoology at Oxford. In 1993, he began a career in journalism with the Economist, first as the science reporter, then as its Washington correspondent, and finally as the magazine's American editor.

In this video, he discusses the connections between his prior work his upcoming book on economics.

The Quotable Bastiat

Supposez, si cela vous amuse, que l'étranger nous inonde de toutes sortes de marchandises utiles, sans nous rien demander; que nos importations sont infinies et nos exportations nulles, je vous défie de me prouver que nous en serons plus pauvres.

"Suppose, if that amuses you, that the foreigner inundates us with all sorts of useful goods, asking nothing in return; that our imports are infinite and our exports, nil; I defy you to prove to me that we should be poorer on that account."

Chapitre VI Sophismes Économiques/Chapter 6, Economic Sophisms

Free Download: "Mind of the Market"

Michael Shermer's book, Mind of the Market, is a thought-provoking look at economics from an evolutionary point of view.

He challenges conservatives and liberals alike to consider evolution as the fundamental process of both the natural world and the world economy.

For the next week or so, you can download a free MP3 of a chapter of Mind of the Market.

I've discussed Shermer's work in previous posts, referenced here.

Laugh, Don't Cry!

Just because creating wealth is morally and materially important doesn't mean that business can't laugh at itself.

Despair, Inc. is a business that makes fun of business. It makes parodies of those motivational posters found in offices large and small.

Some examples:

MEETINGS: None of us is as dumb as all of us.

BLAME: The secret to success is knowing who to blame for your failures.

DREAMS: Dreams are like rainbows. Only idiots chase them.

These posters look great in government offices, too, as the line between business and government gets blurrier. And this tee shirt says it all:

GOVERNMENT: If you think the problems we create are bad, just wait until you see our solutions.

Despair, Inc. joins a select group of humor links in the lower left hand corner of the Bastiat Society's home page. Laugh, don't cry!

Is the Federal Reserve Broken?

George Selgin, of the University of Georgia, has been described as "a scholar's scholar."

In this video, he participates in a panel discussion of the topic, "Is the Federal Reserve System Broken?" The event is sponsored by the Smith Family Foundation.

Other participants include Stephen Axilrod, a former member of the Federal Reserve Board of Governors; Sharyn O'Halloran of Columbia University; and Peter Schiff of Euro-Pacific Capital.

Get full screen video and the embed code here.

Signs of Progress

From Berlin, some encouraging signs of humanity's progress.

Not so long ago, the radical German Left used to labor day and night to justify the Berlin Wall (under construction in the photo), the guard towers, the fences, and the shoot-to-kill orders of the East German worker's paradise.

Now it is reduced to just complaining about the trains.

According to the Financial Times, the radical Left is blaming capitalism for the shutdown of the Berliner S-Bahn commuter railway. Last week, the company that runs the railway withdrew about two-thirds of its cars from service, after a derailment and safety checks showed about 4,000 wheels needed to be replaced.

Ulrich Maurer, the party's chief whip, complained, "The chaos in the Berliner S-Bahn is a lesson in the consequences of capitalism. It is a graphic depiction of where subservience to financial markets' greedy pursuit of profit ultimately leads."

Regretfully, Comrade Maurer missed a superb opportunity to trot out that old chestnut of authoritarian self-justification, "We caused death and suffering when we ran the country, but at least the trains ran on time."