Obstructing Social Responsibilty

"Social responsibility is exercised when individuals express their own values in their own acts, acting separately or in concert; it is not exercised when they force their views on others. A socially responsible individual objects to low wages by refusing to work for them. If he feels strongly about the evils of low wages, he can attempt to dissuade other workers from accepting them, and he can boycott products and producers who benefit from them. He can even try to persuade the owners of businesses to transform their firms into social welfare organisations. But if he acts to prevent other workers from accepting, or businesses from offering, wage levels that are acceptable to them both, he is obstructing social responsibility, not exercising it. Individuals have no more right to force other adults to adopt their moral priorities than they have to dictate their religious beliefs."

Elaine Sternberg, Just Business: Business Ethics in Action 

Not a Curse

"It is through exchange that difference becomes a blessing, not a curse."

Jonathan Sacks, Chief Rabbi of Great Britain

Nominated for "Sentence of the Year" at Marginal Revolution.

"A Lucid and Superb Writer"

"Bastiat was indeed a lucid and superb writer, whose brilliant and witty essays and fables to this day are remarkable and devastating demolitions of protectionism and of all forms of government subsidy and control. He was a truly scintillating advocate of an untrammeled free market."

Murray N. Rothbard, Classical Economics: An Austrian Perspective on the History of Economic Thought, quoted in The Bastiat Collection, Vol. 1.

"Let's Not Make that Mistake Again"

Ideas, both good and bad, are transmitted throughout a society by four important vectors.

First, there are the intellectuals, the truly original thinkers who first formulate the ideas. Second, there are those who control public policy where they use political power to implement the ideas. Third, there are the wealth creators, the business people who pay for the ideas. Finally, there are the leaders in popular culture, primarily in news, entertainment, and religion, who are the primary disseminators of ideas. 

With that in mind, consider this brilliant and funny video from the vector of popular culture. It is a clip from the television series South Park, a show that regularly takes a strong -- if irreverent -- individualist point of view.

The video illustrates the paradox of a consumer market success. Everyone hates Wal Mart  (called "Wall Mart" in the video) because everyone else shops there.

Assume you could do away with "Wall Mart" by convincing everyone not to shop there. What would be the result? The answer: the same mistake.

Political Extremes

Contrary to conventional wisdom, common political ground does not necessarily make it possible to forge a consensus. Instead, common ground may actually make every small difference between groups even more valuable as a tool for snatching donors and voters away from rivals. Indeed, the primary purpose of political parties is to create a group identity by exaggerating every difference between rival groups, and to obscure larger similarities sitting in plain view.

The reason political extremes fight one another so viciously is because they have so much in common. It is the job of the demagogue to convince you that it truly matters whether the chicken that laid the eggs you eat was white or black.

Money and Brains

Wealth is one way of measuring human accomplishment. It certainly is not the only measure nor does it measure all meaningful accomplishment, but what it lacks in breadth and quality it makes up for in ease of use.

What part of human nature is responsible for the creation of wealth? Is it intelligence? Determination? The willingness to risk failure and humiliation? The need for independence and control? Greed?

The question is an important one, both for individuals trying to take care of themselves and their families, and for societies trying to overcome mankind's natural state of poverty. The various answers determine various paths of action.

One study concludes that perseverance and determination are more important inputs for achievement than intelligence. Wasted genius is proverbial. Thomas Edison was right: "Genius is 1% inspiration and 99% perspiration."

Another article confirms what we all know: you don't have to be smart to be wealthy. "If you're an individual with relatively low intelligence, you shouldn't really believe that you're handicapped in achieving wealth," the author concludes. "Similarly, if you're intelligent, you shouldn't think you have an advantage in living the rich life."

Well, if being wealthy does not necessarily mean that you are smart, and not having money does not necessarily mean that you are stupid, at least we know with scientific certainty that money can buy happiness.

That is an accomplishment worth paying for.

What Voters Want

We all know that politicians make ridiculous promises. Could it be they only make the promises voters desperately want to hear? Are politicians merely delivering the product demanded by the marketplace? That is the view expressed in this passage from Robert Penn Warren's Pulitzer Prize-winning novel All the King's Men.

Warren modeled his story of the rise and fall of a character named Willie Stark on the real life of the populist Louisiana politician Huey Long (pictured at right). 

In the following passage, an idealistic and inexperienced Willie Stark is running for governor. Stark asks a jaded newspaper reporter, Jack Burden, how he thinks the campaign is going. Until this moment, Willie has been trying to reach the voters with facts, figures, ratios, and indexes, earnestly laying out the details of his plan to improve government. He is about to learn the brutal truth of politics.

If political promises are products manufactured to meet a persistant demand, they are nevertheless very unusual products: part necessity, part entertainment, part religious fervor, with the awesome power to either protect the life and property of every individual or to violently dispose of both.

"How you think it's going, Jack?"

It was one of those embarrassing questions like "Do you think my wife is virtuous?" or "Did you know I am a Jew?" which are embarrassing, not because of anything you might say for an answer, the truth or a lie, but because the fellow asked the question at all. But I said to him, "Fine, I reckon it's going fine."

"You think so, for a fact?" he asked. 

"Sure," I said.

He chewed that for about a minute and then swallowed it. Then he said, "They didn't seem to be paying attention much tonight. Not while I was trying to explain about my tax program."

"Maybe you try to tell 'em too much. It breaks down their brain cells."

"Looks like they'd want to hear about taxes, though," he said. 

"You tell 'em too much. Just tell 'em you're gonna soak the fat boys, and forget the rest of the tax stuff."

"What we need is a balanced tax program. Right now the ratio between income tax and total income for the state gives an index that --"

"Yeah, I said, "I heard the speech. But they don't give a damn about that. Hell, make 'em cry, make 'em laugh, make 'em think you're their weak erring pal, or make 'em think you're God-Almighty. Or make 'em mad. Even mad at you. Just stir 'em up, it doesn't matter how or why, and they'll love you and come back for more. Pinch 'em in the soft place. They aren't alive, most of 'em, and haven't been alive in twenty years. Hell, their wives have lost their teeth and their shape, and likker won't set on their stomachs, and they don't believe in God, so it's up to you to give 'em something to stir 'em up and make 'em feel alive again. Just for half an hour. That's what they come for. Tell 'em anything. But for Sweet Jesus' sake don't try to improve their minds."

The Chief Sources of Danger

"Business corporations in general are not defenders of free enterprise. On the contrary, they are one of the chief sources of danger....Every businessman is in favor of freedom for everybody else, but when it comes to himself that's a different question. We have to have that tariff to protect us against competition from abroad. We have to have that special provision in the tax code. We have to have that subsidy."

Milton Friedman, writing in reason 1978, quoted by Johan Norberg in "Defaming Milton Friedman," reason, October 2008.

The Quotable Frédéric Bastiat

"Certain nations seem particularly liable to fall prey to government plunder. They are those in which men, lacking faith in their own dignity and capability, would feel themselves lost if they were not governed and administered every step of the way....I have seen countries in which the people think that agriculture can make no progress unless the government supports experimental farms; that soon there will no longer be any horses, if the government does not provide studs; that fathers will not have their children educated, or will have them taught only immorality, if the government does not decide what it is proper to learn."

Initiative for Public Choice & Market Process

(Charleston, SC) The College of Charleston has announced the formation of the Initiative for Public Choice & Market Process, made possible by a generous gift from BB&T.

The purpose of the Initiative is to advance the understanding of the economic, political and moral foundations of a free society. It supports the growth and development of teaching and research, while engaging students and the greater Charleston community.

Economics traditionally focuses on the behavior of firms and consumers and how individuals interact in market settings. Public choice builds on the groundbreaking economic and political theories of Nobel Prize winning economist James Buchanan extending the tools of economics to analyze the behavior of voters, candidates, legislators, bureaucrats, and the institutions under which they operate.

The Initiative works to to enhance these economic and political theories for students and faculty through a variety of programs:

The BB&T Free Market Process Speaker Series invites speakers to address the underlying principles and institutions of a market economy. Students, faculty, and the greater Charleston community are invited to attend.

The BB&T Free Enterprise Award is a cash prize awarded to the best investigative paper or case study by a student that examines the underpinnings of a capitalistic economy and public choice theory.

The Initiative provides funding for faculty to develop courses that provide a solid understanding of public choice and free enterprise capitalism in the context of economics, business and philosophy. The program will also accept applications from faculty members for research support in the areas of public choice and free enterprise.

For more information, contact Dr. Peter Calcagno in the Department of Economics & Finance, 843-953-4279 or by email at calcagnop@cofc.edu.

The Charge Against Business

"The charge that business in general is exploitative can only be plausible if the nature of business is radically misconstrued. Coercion is not intrinsic to business, but to government; contrary to Marx, business can only be coercive if it acts against the law, or with the law's connivance. And despite confused ideological claims to the contrary, profits are no more theft than property is; business is not conducted at the expense of its non-owner stakeholders. In the long-term, owner value is unlikely to be maximized by an organisation that lies or cheats or steals, or even by one that is widely believed to do so. Business is by its nature based on contractual exchanges of value, voluntarily entered into; to be successful, business must therefore act in ways that encourage others to deal with it."

Elaine Sternberg, Just Business: Business Ethics in Action

Name That Country!

The leaders of this country have committed themselves to protecting human rights, including:

1. The right to a useful and remunerative job in the industries or shops or farms or mines of the nation.

2. The right of every family to a decent home.

3. The right to adequate medical care and the opportunity to achieve and enjoy good health.

4. The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment.

5. The right to a good education.

6. The opportunity to work.

7. That no disabled person be left without adequate mean of subsistence.

8. That no sick person be left without medical care.

9. That no child be left without schooling, food and clothing.

10. That no young person be left without the opportunity to study.

11. That no one be left without access to studies, culture and sports.

12. That no family be left without a comfortable place to live.

Answers:
1-5, President Franklin D. Roosevelt's State of the Union Address, January 1944
6-11, Constitution of the Republic of Cuba

Big Business and The Little Guy

Is big business taking all the business away from the little guy? Not if the little guy is smart, plays to win, and spends more time worrying about his customers than protesting.

"A Hatred for Those Who Are Happy"

Chandra Bhan Prasad, a former pistol-toting Maoist revolutionary who once urged his fellow untouchables to murder members of India's upper caste in the name of social justice, admits he was wrong. Now he understands that it is not violence that allows poor people to "escape hunger and humiliation."

Neither is it government welfare, nor a return to nature, nor affirmative action. It is India's economic liberalization that will "neutralize" the caste system and liberate the poor. In a word, it is capitalism. Prasad says those who oppose capitalism in India, “have a hatred for those who are happy.”

"I Approve This Message"

In the spirit of the campaign season, when politicians of all parties fill the airwaves with personally approved messages of their wildly exaggerated talent, abilities, and promises for the future, economist Arnold Kling offers his far more realistic -- and therefore politically useless -- list of campaign pledges.

1. That no politician will end America's consumption of foreign oil. Ever.

2. That no politician will figure out a way to bring the bottom half of America's children up to the level where they can benefit from a college education.

3. That no politician will figure out a way to make American health care--meaning virtually unlimited access to specialists and technology--affordable for everyone.

4. That no politician will alter the trends in technology and family structure that are driving the distribution of income and wealth.

5. That no politician will produce a sustainable fiscal outlook without trimming future Social Security and Medicare benefits. (I might have ended the previous sentence simply by putting a period after "outlook")

6. That no politician needs to create jobs. There is always too much work to be done. The problem is never to create jobs. The problem is for individuals to adapt their abilities to ever-changing job opportunities.

7. That no politician will be able to articulate an economic difference between moving labor or goods from country X to country Y and moving labor or goods from Maryland to Virginia.

The Moral and Economic Foundations of Capitalism

In this video from the Clemson Institute for the Study of Capitalism, Richard Epstein covers the relationship between capitalism, entrepreneurship, and the structure of legal rules.

Epstein doesn't like the term "capitalism," even though he likes the idea. He points out that Marx deliberately used the word because he wanted to evoke negative connotations for a system he viewed as exploitative, flawed, and immature. Why should fans of capitalism use a term cooked up by the other side?

Epstein prefers to describe capitalism as a social arrangement that favors voluntary behavior and promise-keeping, and forbids the use of force or fraud. Capitalist morality is a pretty good thing. Keep your promises. Don't use force. Don't steal. Don't lie.

Market Evolution Vs. Market Design

Natasha Mitchell, host of All in the Mind, asks, "Are markets moral? Are we rational with our cash? Is our hunter/gatherer brain geared for modern capitalism? And do economies work a little like evolution, mutating and evolving through a process of cultural rather than biological natural selection?"

Listen to Mitchell moderate a debate between Michael Shermer and Stephen Mayne on the ABC Radio Network program All in the Mind.

A Magnificent Knot of Confusion

"In the left's eternal vigilance to fend off fascism, they have in fact created it, albeit with a friendly face. Like a medieval doctor who believes that mercury will cure madness, they foster precisely the sickness they hope to remedy. Good medicine, like good economics, depends on discarding unproven mythology. Yet for nearly a century the left and liberals have been using textbooks brimming with superstition. These myths are entwined with one another in magnificent knot of confusion. Among the strands of this knot are the palpably false notions that big business is inherently right-wing or conservative (in the American sense); that European fascism was a tool of big business; and that the way to keep business from corrupting government is for government to regulate business to within an inch of its life."

Jonah Goldberg, Liberal Fascism: The Secret History of the American Left from Mussolini to the Politics of Meaning

Basically Evil Men

"How does the liberal elite view entrepreneurs and business leaders? It seems to me that they view capitalists as a group of basically evil men, inclined to exploit workers and rip off consumers. It would be better if we could do without capitalists, but they are ok as long as good guys from the liberal elite are in power, delegating tasks to markets only when appropriate and regulating capitalists to control their excesses."

Economist Arnold Kling at Econlog.

Who was Frédéric Bastiat?

Who was Bastiat? Here is his biography from the online Concise Encyclopedia of Economics.

Joseph Schumpeter described Bastiat nearly a century after his death as "the most brilliant economic journalist who ever lived." Orphaned at the age of nine, Bastiat tried his hand at commerce, farming, and insurance sales. In 1825, after he inherited his grandfather's estate, he quit working, established a discussion group, and read widely in economics.

Bastiat made no original contribution to economics, if we use "contribution" the way most economists use it. That is, we cannot associate one law, theorem, or path-breaking empirical study with his name. But in a broader sense Bastiat made a big contribution: his fresh and witty expressions of economic truths made them so understandable and compelling that the truths became hard to ignore.

Bastiat was supremely effective at popularizing free market economics. When he learned of Richard Cobden's campaign against the British Corn Laws (restrictions on the import of wheat, barley, rye, and oats), Bastiat vowed to become the "French Cobden." He subsequently published a series of articles attacking protectionism that brought him instant acclaim. In 1846 he established the Association of Free Trade in Paris and his own weekly newspaper. He waged a witty assault against socialists and protectionists.

Bastiat's "A Petition," usually referred to now as "The Petition of the Candlemakers," displays his rhetorical skill and rakish tone, as this excerpt illustrates:

We are suffering from the ruinous competition of a foreign rival who apparently works under conditions so far superior to our own for the production of light, that he is flooding the domestic market with it at an incredibly low price.... This rival... is none other than the sun....

... We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull's-eyes, deadlights and blinds; in short, all openings, holes, chinks, and fissures....

This reductio ad absurdum of protectionism was so effective that one of the most successful postwar economics textbooks, Economics by Paul A. Samuelson, quotes the candlemakers' petition at the head of the chapter on protectionism.

Bastiat also emphasized the unintended consequences of government policy (he called them the "unseen" consequences). Friedrich Hayek credits Bastiat with this important insight: if we judge economic policy solely by its immediate effects, we will miss all of its unintended and longer-run effects and will undermine economic freedom, which delivers benefits that are not part of anyone's conscious design. Much of Hayek's work, and some of Milton Friedman's, was an exploration and elaboration of this insight.