Agree or Disagree

From Bryan Caplan at GMU, three rules for tolerance and honesty in the discussion of ideas:

1. Don't think less of people who sincerely disagree.

2. Do think less of people who insincerely agree.

3. Do think less of people who think less of people who sincerely disagree.

These are as useful in the business world as at GMU.

The Quotable Bastiat

"Who will dare to say that we have been gifted with strength, not to defend our rights, but to destroy the equal rights of our fellow-men?"

From "LAW, Spoilation by", in Cyclopædia of Political Science, Political Economy, and the Political History of the United States, edited by John J. Lalor, first published 1881.

Get to Know the Boom and Bust

Check out the "Learn More" page at Econstories.tv. Books, articles, and podcasts on Keynes and Hayek.

Make sense of the mess in the modern world.

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

John Maynard Keynes

Economics as Rap

Of all the battles confronting business, perhaps none is more important than the one in popular culture.

Movies, television, and music are powerful influences in shaping public opinion. Oliver Stone can convince more people than the Warren Commission. More people listen to music than read textbooks.

With that perspective in mind, enjoy what may well be the finest example of deep thinking and popular culture, an imaginary rap between the two economists Freidrich Hayek and John Keynes.

Hayek and Keynes held contrasting views of economic policy. Hayek was an advocate of the free market and warned of the dangers caused by easy money and interventionist government policy. Keynes advocated more government intervention to stimulate the economy and liberate it from the control of "animal spirits."

Watch. Enjoy. Learn.

An Old Lie

It is hard to believe that the party of President Obama is a direct descendant of the party of Thomas Jefferson.

In a letter to Thomas Cooper in 1802, Jefferson wrote, "If we can prevent the government from wasting the labors of the people, under the pretence of taking care of them, they must become happy."

Is there any better example of the unreliable nature of political parties? How the party of Jefferson became the party publicly committed to "taking care of" people is a lesson in the weakness of political virtue.

But perhaps the fault lies not in the party, but in the people. Perhaps political parties will become whatever kind of party people want the most.

This appears to be Jefferson's view, for in his letter to Cooper, he does not say we must prevent political parties, businesses, or religious institutions from "wasting the labors of the people." He specifically warns against government.

Today, we joke that the phrase "I'm from the government, and I'm here to help you" is one of most popular lies in the world. Reading Jefferson, we see that it is also one of the oldest.

Buzz Saw

On the fast-fading topic of health care, President Obama said:

"We've gotten pretty far down the road, but I have to admit, we've run into a bit of a buzz saw along the way. The long process of getting things done runs headlong into the special interests, their armies of lobbyists, and partisan politics aimed at exploiting fears instead of getting things done. And the longer it's taken, the uglier the process has looked."

In other words, "Some people dared to disagree."

In business, if the consumer disagrees, you change the product or try another consumer. You do not whine about those who disagree. You do not press them to change their mind in the name of "getting things done."

In fact, business flourishes when consumers disagree. More room for the rest of us, you see. You don't like Starbucks' coffee? How about Seattle's Best, Coffee People, Timothy's, Gloria Jean's, Cafe Altura, Eight O'Clock, Douwe Egberts, Lavazza, Folgers, Jeremiah's Pick, Emeril's, Aloha Island, Gevalia, Wolfgang Puck's, Maxwell House, Yuban, All Day Gourmet, Dunkin Donuts, Peet's, Caribou, Van Houtee...need I go on?

But, if you don't like a particular piece of legislation, you have no choice, nowhere else to go. You have no choice but to resist or accept, and that is hardly a choice. That is the choice of a prisoner or a slave, not the choice of a consumer.

No wonder the President ran into a "buzz saw." We all might breath easier if only there were more of them out there.

Power as Product

All is fair, when power is the only product, when power is the only justification for existence, when achieving power is a zero-sum game that must be won at all costs.

Witness the political landscape in the United States. Political parties aren't competing for voters; they are competing for power. Voters are merely the means to an end.

Political parties aren't really interested in ideas, either. Ideas are just another means to an end.

Finally, political parties aren't really interested in you. You are just the means to an end.

As George Orwell wrote in 1984, "The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power."

What kind of power? Power over the lives of others. Power over their property. Power to make them do what they don't want to do.

Not the kind of power that says "Don't kill" or "Don't steal" or "Don't cheat." Political parties seek the kind of power that says, "You will die" or "I will steal from you" or "I will lie to you," and "you can't stop me."

If it is wise to be skeptical about the claims of business, it is even wiser to be skeptical about the claims of politicians and their parties, even the ones we like. At least consumers have a choice. Voters get stuck with the results for years.

Money on the Dark Side of the Moon

As is often the case, I recently had music playing in the background at my house. This particular morning I had Pink Floyd's Dark Side of the Moon record playing (yes, among other forms of media, I listen to records). As some of you know, the song Money is the first song on side two of the album. As I dropped the needle, it occurred to me that, even though the word "money" has a specific meaning to me in economic terms, I had never really studied the lyrics to this well-known song. So I dared to examine what "money" means to songwriter and bassist Roger Waters of Pink Floyd - at least what it meant to him in the early 1970's when he wrote the song.

By 1973, Pink Floyd had already recorded eight albums, including a movie soundtrack and a #1 album in 1970 called Atom Heart Mother. Therefore, it is safe to assume that when the song was written, Roger Waters was already struggling with his new found fame, and enjoying the money that accompanies a #1 album release.

Now, I am not a lyricist by any means, and I may very well be interpreting the song completely wrong. Nevertheless, with the historical context in place, here is my amateur interpretation of Money by Pink Floyd.

Artist: Pink Floyd
Album: Dark Side of the Moon
Lyrics by: Roger Waters



Click here for to see it performed in London in 1994.

___________________________________________

Original lyrics in bold font
Layman interpretation of the lyrics in normal font

Money, get away
Get a good job with more pay
And you're okay

At first, money is good and it is allows you to live comfortably.

Money, it's a gas
Grab that cash with both hands
And make a stash

Life becomes fun once you have a little disposable income.

New car, caviar, four star daydream
Think I'll buy me a football team

Once you become wealthy, your wants become a little more expensive - sometimes they seem absurd (i.e. buying a football team). But, who are we to judge him on his wants.

Money get back
I'm all right Jack
Keep your hands off my stack

With wealth comes friends, agents, managers, and obligations. These people are normally looking for an easy handout.

Money, it's a hit
Don't give me that
Do goody good b&ll$h!t

There are no shortage of suggestions as to how you should spend your money. Even though keeping your money for yourself is considered "greedy" to some.

I'm in the hi-fidelity
First class traveling set
And I think I need a Learjet

It's funny how wants become needs. He "wanted" a football team, and now he "needs" fancy luggage and a Learjet to match. However, again, who are we to judge him on his wants and needs - it's his money.

Money, it's a crime
Share it fairly
But don't take a slice of my pie

Once you become rich, it is easy to judge others and tell them how to live and spend their money, but leave his lifestyle out of it - remember it's his success.

Money, so they say
Is the root of all evil
Today

But if you ask for a rise
It's no surprise that they're
Giving none away

Those who do not have money, and some that do, point to money as the "root of all evil." But, if you notice, they rarely part with theirs. It's fairly easy to sit back judge others based on what they do (or don't do) with their money. But, in reality, it is their money, and they should be allowed to spend it on football teams, matching luggage, Learjets, or maybe even give it all away to charity. Besides, the common man enjoys watching football, making luggage, and building Lear jets.

In the end, money is not the "root of all evil"; however, mandating what one does with their money is not far from it.

______________________________________________________________
A quick note: In a 1987 interview, Roger Waters was asked, "Apart from [being successful as a band] what were the main problems associated with such immense success?"

"Mainly the one of what to do with all the money!" he answered, "You go through this thing where you think of all the good you could do with it by giving it away. But, in the end, you decide to keep it!"

To Preserve a Free Society

“If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion”

Friedrich August von Hayek

Same Old Idea

Coming soon, from the kind of progressive thinking that brought you "the worst car in history."

"Reliable, no-frills health care."

"Health care designed to make new economic sense."

"Everybody needs health care sometime."

and the marketing slogan that says it all...

"Introducing the same old idea."

Honestly, you can't make this stuff up.

As the Economist writes, "The idea of a reliable, no-frills car from an exotic source attracted millions of dollars’ worth of media coverage.

The only flaw was the car itself. Even after strenuous efforts to raise quality control at the Zastava plant, it was still hopelessly unreliable, and obsolete by the standards of the modern auto industry. The verdict of outside commentators was damning and unanimous. For the price of a new Yugo, consumers would find a second-hand car (of almost any kind) better value."

The Moral Choice

"Suppose, for example, that someone is a devout Muslim who is anxious to have as many people as possible bow to Mecca three times a day; to him let us suppose this is the highest moral act. But if he wields coercion to force everyone to bow to Mecca, he is thereby depriving everyone of the opportunity to be moral — to choose freely to bow to Mecca. Coercion deprives a man of the freedom to choose and, therefore, of the possibility of choosing morally."

Murray Rothbard, For a New Liberty, pages 104-105.

IEA Climate Change Debate

From the London-based Institute of Economic Affairs, the granddaddy of free-market think tanks and one founded by a business intellectual.

Videos of the presentations at the IEA Climate Change Debate are available. The participants discussed the question: “Do Science and Economics Support Government Action on Climate Change?”

Each speaker provided a different perspective on the economics or the science. Debating the topic (in the order of the videos below) were: Prof. Fred Singer from Science and Environmental Policy Project; Nigel Lawson from The Global Warming Policy Foundation; Prof. Mike Hulme from the University of East Anglia; and Dr. Sam Frankhauser from the London School of Economics.

You can play the individual speeches or play a video of all four speakers.

Prof. Fred Singer
Nigel Lawson
Prof. Mike Hulme
Dr. Sam Frankhauser
All Four Speakers

When in Doubt, Blame a Banker

Below is an interview with Treasury Secretary Timothy Geithner regarding the proposed Bank Tax. Among other things, it exposes the fact that the federal government obviously made no provisions to recoup TARP funds. However, when the Troubled Asset Relief Program was passed, I remember them saying it was an "investment" and that taxpayers would "benefit" in the long-run. Well, now the government is turning to their old friend (taxes) to vilify and punish the banking industry.

The first question that came to my mind was, what about the banks that were forced to take TARP funds? For example, according to former BB&T CEO John Allison, BB&T did not request nor did they want TARP funds. However, they, among several other healthy and responsible banks, were summoned into a closed-door meeting with the Treasury Department and essentially forced to receive funds. This was in an effort to hide which banks were stable and which were on the brink of failure. Naturally, BB&T was among the first to repay their TARP funds. Therefore, it doesn't seem "fair" (to use the parlance of our times) that they should now be taxed for receiving the TARP funds?

The more obvious question may be, what about the other industries which received bailouts? Shouldn't we tax the automobile or the insurance industries? Or should we continue rewarding GM for continuing to fail?

At one point, all the TARP recipients were "too important to fail." Obviously they are not too important to vilify and throw under the bus. Or was that the point? Maybe the plan all along was to bail out the important industries in order to rob them of their sovereignty and enable the federal government to use them as political punching bags, fiscal scapegoats, and enact targeted policy in the name of taxpayer fairness. Okay, maybe that wasn't the plan, but it sure is becoming a very convenient strategy for the current administration.

Well, enough from me - see a sample of the interview below, and click on the link to read the entire transcript.


From MoneyControl.com




In an exclusive interview, Treasury Secretary Timothy Geithner, discusses the reason behind this move. He also talks about the risk of a double-dip recession and the unemployment rate.

Q: Jamie Dimon said you should not have tax policy that punishes individual firms.

A: This policy is not designed to punish. It is designed to meet the simple, practical, legal obligation, and we are doing it in a way, I think, it makes economic sense because we are doing it in a way that is, in effect, a tax on leverage, it is a tax on risk in some ways, and it is borne by the people that benefited most from the crisis. That seems fair.

Q: Do you have any concern that this tax will have any damaging effect on the economy, on lending? And if not, why not make it higher, since we have got a rather large budget deficit right now?

A: Let me start with the second. The ultimate costs of solving this financial crisis are going to be dramatically lower than anybody thought was possible. But a financial crisis like this caused a lot of damage, there is still going to be some cost. But the legal obligation is to make sure we cover that cost. So, conservative estimates, the cost of the crisis may be in the range of USD 100 million, slightly higher. So this is designed to make sure we cover those costs. That is why we did the size this way.

Click here for the entire interview.

Plunder

The law can be an instrument of equalization only as it takes from some persons and gives to other persons. When the law does this, it is an instrument of plunder.

~ The Law, by Frederic Bastiat

Below is a sampling of new or revised tax proposals since the Fall of 2009:

• Reinstate 36 and 39.6 percent rates for high-income taxpayers

• Reinstate personal exemption phaseout and limitation on itemized deductions for high-income taxpayers

• Impose 20 percent rate on capital gains and dividends for high-income taxpayers

• Limit value of itemized deductions to 28%

• Reduce the tax gap and make reforms

• Tax carried interest as ordinary income

• Codify “economic substance” doctrine

• Reform U.S. international tax system

• Repeal first-in-first-out (FIFO)

• .15% Tax on banking profits to repay TARP

• Climate revenues (i.e. Cap and Trade)
  

Information on most of these tax proposals can be found here.

Close to Nature

Most of the commentary on the situation in Haiti understandably focuses on the immediate effects of the earthquake. We are deeply disturbed by the suffering of our fellow human beings.

But there is a larger, longer running tragedy at work here. We call it poverty. Poverty is what "being close to nature" really looks like.

Behind the popular romance of nature as a pretty park where happy creatures play lurks the awful truth. Nature is not cruel, but it is clumsy, indifferently stumbling over land and people alike.

We can only love such a thing after we have contained its potential to do us harm. That does not come from prayers and worship; it comes from wealth and the security that wealth provides.

Earthquake relief does not make a nation wealthy. Wealth comes from the peaceful and profitable trade of individuals.

Until Haitians can securely own and trade property, they will continue to face the harrowing prospect of one disaster after another, one relief program after another, with no end in sight.

The Long Shadow of Frédéric Bastiat

"Frédéric Bastiat's legacy has two key components: his artful polemics for free markets and his uncompromising conviction that men's interests are "naturally harmonious" to the extent that their property rights are respected. He was an artist with an unfailing loyalty to logic, and a revolutionary who fought the interventionist schemes of both the Right and Left despite suffering from a debilitating terminal illness."

From "The Long Shadow of Frédéric Bastiat" by George Smith, at Mises Daily.

Stopping Terror Costs Jobs!

From The Onion, evidence that some satire never goes out of style:

BREAKING: Terror Attack Failure Costs Detroit 10,000 Construction Jobs10:38 AM Jan 5th from TweetDeck

TheOnion

The Onion

John Stossel on Ayn Rand

Given the topic of our last meeting, last week's episode of "Stossel" on the Fox Business channel was rather timely. Thanks to Dr. Jennifer Baker for a fantastic presentation, and also reminding me to post this link.



Parts 2-6 can be found here.

An Intellectual Adventure

"It may be that a free society as we have known it carries in itself the forces of its own destruction, that once freedom has been achieved it is taken for granted and ceases to be valued, and that the free growth of ideas which is the essence of a free society will bring about the destruction of the foundations on which it depends. There can be little doubt that in countries like the United States the ideal of freedom today has less real appeal for the young than it has in countries where they have learned what its loss means. On the other hand, there is every sign that in Germany and elsewhere, to the young men who have never known a free society, the task of constructing one can become as exciting and fascinating as any socialist scheme which has appeared during the last hundred years. It is an extraordinary fact, though one which many visitors have experienced, that in speaking to German students about the principles of a liberal society one finds a more responsive and even enthusiastic audience than one can hope to find in any of the Western democracies. In Britain also there is already appearing among the young a new interest in the principles of true liberalism which certainly did not exist a few years ago.

Does this mean that freedom is valued only when it is lost, that the world must everywhere go through a dark phase of socialist totalitarianism before the forces of freedom can gather strength anew? It may be so, but I hope it need not be. Yet, so long as the people who over longer periods determine public opinion continue to be attracted by the ideals of socialism, the trend will continue. If we are to avoid such a development, we must be able to offer a new liberal program which appeals to the imagination. We must make the building of a free society once more an intellectual adventure, a deed of courage. What we lack is a liberal Utopia, a program which seems neither a mere defense of things as they are nor a diluted kind of socialism, but a truly liberal radicalism which does not spare the susceptibilities of the mighty (including the trade unions), which is not too severely practical, and which does not confine itself to what appears today as politically possible. We need intellectual leaders who are willing to work for an ideal, however small may be the prospects of its early realization. They must be men who are willing to stick to principles and to fight for their full realization,however remote. The practical compromises they must leave to the politicians. Free trade and freedom of opportunity are ideals which still may arouse the imaginations of large numbers, but a mere "reasonable freedom of trade" or a mere "relaxation of controls" is neither intellectually respectable nor likely to inspire any enthusiasm.

The main lesson which the true liberal must learn from the success of the socialists is that it was their courage to be Utopian which gained them the support of the intellectuals and therefore an influence on public opinion which is daily making possible what only recently seemed utterly remote. Those who have concerned themselves exclusively with what seemed practicable in the existing state of opinion have constantly found that even this had rapidly become politically impossible as the result of changes in a public opinion which they have done nothing to guide. Unless we can make the philosophic foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our liveliest minds. But if we can regain that belief in the power of ideas which was the mark of liberalism at its best, the battle is not lost. The intellectual revival of liberalism is already underway in many parts of the world. Will it be in time?"

From "The Intellectuals and Socialism" by F. A. Hayek, 1949

Why I Drive

1. Jonah Goldberg writes accurately of air travel outside of first class...

"The petty humiliations, the routine deceptions from airline employees desperate to rid themselves of troublesome travelers (“Oh, they can definitely help you at the gate!”), the stress-position seats, the ever-changing rules for what can and cannot be in your carry-on, being charged for food that the Red Cross would condemn if it were served at Gitmo: Air travel is the most expensive unpleasant experience in everyday life outside the realm of words ending in -oscopy."

2. While the TSA adds more frustration than security...



3. Finally, once glamorous air travel has become a bus system with wings.

Not entirely a business, not entirely an organ of the state, not profitable, not credit-worthy, not reliable, not customer friendly, not consistent, rewarding to run but not to invest in, the airline industry is everything you would expect from an economic arrangement that encourages the same kind of moral behavior you find on French farms and in dictatorships receiving large amounts of foreign aid.