Writing from another planet
Sometimes articles are so exasperating there is no sense in even attempting a response, but usually these don't appear in the Wall Street Journal. Selection from Thomas Frank:
What has overtaken America's working people is not a natural disaster like "globalization," and not even some kind of societal atavism in which countries regress mysteriously to their 19th-century selves. This is a man-made catastrophe, a result that proceeded directly from the deliberate beatdown of organized labor and the wrecking of the liberal state.
It is, in other words, a political disaster, with tax cuts, trade agreements, deregulatory measures, and enforcement decisions all finely crafted to benefit one part of society and leave the rest behind. Few of the voters who gave Ronald Reagan his landslide victories, it is fair to say, intended for this to be the outcome. They wanted their country to stand tall again, certainly; they wanted the scary regulators off their backs, maybe; but I can recall no conservative who trumpeted those long-ago elections - or any of the succeeding contests, for that matter - as a referendum on plutocracy.
So let us have one now. Instead of pleasant talk about "change" and feats of beer drinking at the corner tavern, let us hear our candidates address this greatest issue of them all: What kind of country are we to be? A land of equality? Or a bankers' utopia - where the law of the land has achieved mystical oneness with the higher law of classical economics, and devil take the bottom 80%.
So far as I can tell, the calamity discussed here owes entirely to the one statistic he thinks proves his case: the real hourly wages in the US for most workers has risen only 1% since 1979, where as the richest 20% of the country made more than the rest of the country combined. But perhaps we should consider how much less wages would have risen had the rich not permitted to become so, or maybe this is due not to the merciful loss of union's grip on the economy but rather to such forces as inflation. And as for the supposed dismantling of the interventionist state and the "tax cuts" and regulation, well, I guess people are just happy to make up the reality that they want to see.
It's true that the government policy is configured to help the rich and powerful of course but it is hard to see how putting government even more in charge of our economic lives is going to fix that. .
Economic Causes of War
There are no economic causes, said Ludwig von Mises in this 1944 lecture, for armed aggression within a world of free trade and free enterprise. In such a world, no individual citizen can possibly derive any advantage from the conquest of a province or a colony. But in a world of totalitarian states, many citizens may come to believe in an improvement of their material well-being from the annexation of a territory rich in resources. The wars of the 20th century have been, to be sure, economic wars. But they have not been caused by capitalism, as the socialists would have us believe. They are wars caused by governments aiming at complete political and economic omnipotence, and have been supported by the misguided masses of these countries. FULL ARTICLE
PRI Flat Tax Study Released
I realize purists will object to any advocacy of taxation besides absolute zero, but even so I encourage people to read at least the first few chapters of my new study (.pdf) on California tax reform. I know I was surprised at some of the charts, even though I already believed in marginal tax rate reductions for moral reasons.
Is Our Future Really $0?
Chris Anderson, a well-known business guru in the world of online commerce, imagines a world in which all internet services are free. But he has made an error, argues Fernando Herrera-Gonzalez. It is the competition for these resources that seems to explain this trend to "free" services in some Internet business models, and not the existence of marginal costs reducing to zero. The reason why some goods are given away for free in some markets has no relation to any hypothetical notion of "marginal costs tending to zero." In fact, those supposed free goods are "given" to us in exchange for our time and attention. As time is an increasingly scarce resource, its value is steadily rising, in terms of storage, processing, and bandwidth.
With time rightly identified as a scarce resource, economic theory is needed to understand the interchange process. And there is no place for the "freeconomics" of Chris Anderson. FULL ARTICLE
A Mother's Day Gift from the State
Mothers of Ohio, here you go. Ohio Treasurer Richard Cordray is using your tax dollars to provide you with the gift you desired all along. Though, for some reason, you couldn't recognize that desire -- a breakdown of Thymology I suppose.
Regardless, here it is. Enjoy. Cordray knew you would.
Thankfully, my mother lives in Florida and is unaware of Cordray trumping my measly gift. Well, at least I paid for mine.
Hey, wait a minute, I paid for both!
May 8, 2008Gift to Ohio Moms: Tools for Financial Security
Columbus, Ohio
As Ohio families recognize Mother's Day this weekend, Ohio Treasurer Richard Cordray is trying something new to encourage those moms in their quest for financial security.
The Treasurer's office will make available online its newly-revised Women & Money 2008 Workbook, from Saturday, May 10 through Saturday, May 17. The workbook contains information on a wide variety of personal finance topics and is used as part of the office's annual Women & Money free financial workshops held during the summer. The Workbook is usually distributed only at the workshops.
Continue reading (keep in mind that this gift from the state is only available for a short time)
Show Trial Planned for Energy Markets
The US House of Representatives will hold hearings on energy markets trying to determine who is causing oil prices to rise. The anti-market investigation will blame hedge funds and investment banks for manipulating the markets to make oil go to record levels.
Oil is too global a commodity for speculators to determine its price. We know, for instance, that oil prices are high not only in spot markets but in futures markets, not only on the Nymex but in the UK (Brent), Dubai, Malaysia, and numerous smaller, less liquid markets not accessible to speculators. Are we to believe that the conspirators somehow entered all these markets at once?
The argument for speculation also ignores the fact that numerous other commodities are soaring in price, namely gold, silver, platinum, palladium, copper, iron ore, tin, corn, rice, etc, etc. Did the oil conspirators cause all that, too? The commodities that do not trade on futures exchanges (making them less susceptible to speculation) have risen slightly more than exchange traded commodities, indicating that fundamentals are driving prices higher.
The House show trial is surely designed to bamboozle the general public. The one entity that engages in activities directly linked to the scarcity of oil vis a vis dollars, the Federal Reserve, appears to be exempt from government scrutiny.
Anarchy in the Skies
The thought of abolishing all government regulation of the aviation sector and handing this task over to the free market is, to most people, as unthinkable and alien an idea as that of privatizing all police and courts. The general perception is that air travel requires central and international control and regulation by governments in order to prevent total anarchy in the skies (in the derogatory sense). But are governments really needed to accomplish this task, asks Marcus Bergstrom, or can it and should it be handled entirely by the free market? FULL ARTICLE
Mom or government?
It's tornado season here in Ohio.
This afternoon as a few funnel clouds were forming miles from my house, I received a call from my mother living in Florida. Seems she was not about to wait for her son to make his yearly Mother's Day call as she had urgent news. CNN and other news outlets were reporting funnel clouds and tornados in central Ohio, with my county noted as a likely target. This was sometime before 2:00. I turned on the TV and hit the web for detailed updates. Luckily, the storms passed overhead without even a significant touchdown.
With the menace long gone, I received another phone call; an automated call from the county 911 department notifying me of the tornado warning. This was 2:25, with the warning to expire at 2:30. And, more importantly, with the storms no longer in the county or even a threat to adjoining counties.
Then I learned that Franklin County -- just to my south -- also had a delayed tornado warning because "Franklin County EMA deputy director Jim Leonard said the communications room is not manned during weekends and holidays, but there are two people on-call at all times."
Do I complain to management? No way. Those folks are looking for complaints as a means to justify additional funding. Do I keep my mother happy? You bet! Her warning was neither delayed nor costly.
Remember mom, and not just on Mother's Day.
Spotlight on Keynesian Economics
All Keynesians conceive of the State as a great potential reservoir of benefits, ready to be tapped. The prime concern for the Keynesian is to decide on economic policy -- what should be the economic ends of the State and what means should the State adopt to achieve them? The State is, of course, always synonymous with "we": What should "we" do to insure full employment? is a favorite query. (Whether the "we" refers to the "people" or to the Keynesians themselves is never quite made clear.) FULL ARTICLE
Machine to explain the economy (1949)
Thanks to Don Lloyd for this link to an interesting story about a British machine that modeled the workings of the British economy:
A sensation when it was unveiled at the London School of Economics in 1949, the Phillips machine used hydraulics to model the workings of the British economy but now looks, at first glance, like the brainchild of a nutty professor. Where the Bank's team of in-house economists are equipped with state-of- the-art digital computers, the profession's first stab at modelling was very much a do-it-yourself affair with a whiff of the Heath Robinson about it.
The prototype was an odd assortment of tanks, pipes, sluices and valves, with water pumped around the machine by a motor cannibalised from the windscreen wiper of a Lancaster bomber. Bits of filed-down Perspex and fishing line were used to channel the coloured dyes that mimicked the flow of income round the economy into consumer spending, taxes, investment and exports. Phillips and Walter Newlyn, who helped piece the machine together at the end of the 1940s, experimented with treacle and methylated spirits before deciding that coloured water was the best way of displaying the way money circulates around the economy.
But whoops:
By today's standards, the Phillips machine was limited. It made no provision for inflation and, with capital controls in force, had no need to take account of the curse of the modern UK economy - the wild swings in the credit cycle. Professor Brian Henry, a visiting fellow at the National Institute for Economic and Social Research, said: "It was a child of its time. It looked at how the economy could be stabilised when people were worried about the stabilisation of aggregate demand. That is the way things were in the 1950s.
"Things are different now. There is a different financial system and a completely different global economy. But Phillips was a brilliant guy. He came up with interesting ways of providing practical advice on policy."
Even so, Henry says the machine is far more than a museum piece. Today the Bank of England's models are supposed to show how shocks affect the economy and the time it takes for a change in policy to have an effect, precisely the sort of problems that the Phillips machine helped identify. Even with the most up-to-date computers, the Bank is still finding it hard to come up with the right answers.
Indeed, one early demonstration of the machine displayed the difficulties that can arise when monetary and fiscal policy are not synchronised. Phillips asked one of his students to be chancellor of the exchequer and control taxes and spending; the other to be governor of the Bank and control interest rates. Predictably, the policies were uncoordinated and the upshot was that water overflowed on to the floor.
Independent plug in for Community
I'm really taken with this gizmo designed to change the header for Community users.
The Uses of History
Gordon Wood's defense of objective history is salutary, and besides this, as one would expect from a historian of his eminence, he makes many illuminating remarks about concrete issues in American history. Despite its considerable merits, though, his book suffers from a fundamental flaw. He protests against ideologists who impose their own concerns on the past; but Wood himself has definite views about the nature of the past that are as much theoretical impositions as those of the writers he challenges. FULL ARTICLE
Does Money Taint Everything?
Let's pull this sentence out of the civic pieties of our time and see what's wrong with it: "We should all volunteer our time in charitable causes and give back to the community in a labor of love."
We can't argue with the instruction here, or the sentiment behind it. There is nothing wrong with giving and sacrifice. My argument is with the choice of language. It contains a word and three phrases the common usage of which can be highly misleading. FULL ARTICLE
Natural Disasters, It Turns Out, Are Bad
It seems that we may never rid ourselves of the broken-window fallacy. it's not only that disasters just have a silver lining: economists have long believed that natural disasters and wars are actually good for the economy! Until recently they have not made any attempt to empirically test their views. Now the good news. A recently published paper in Economic Inquiry by Cuaresma, Hlouskova, and Obersteiner brings the positive benefits of disasters into question. FULL ARTICLE
Wage and Price Controls Failed...
...in Massachusetts during 1630-50.
From Murray Rothbard's Conceived in Liberty: "Maximum-wage control always aggravates a shortage of labor, as employers will not be able to obtain needed workers at the statutory price. In trying to force labor to be cheaper than its price on the free market, the gentry only made it more difficult for employers to obtain that labor." (p. 254, Vol. I, Chapter 31).
Listen to Chapter 31 in MP3 audio format: Economics Begins to Dissolve the Theocracy: The Failure of Wage and Price Controls.
Are We Running Out of Food?
If we had free world markets, writes Kel Kelly, food would be exported from some countries, such as the United States and Europe, where food is plentiful, to countries where it is needed. This is because it would be profitable to ship goods to needy areas like Africa, where shortages were making prices rise.
The fact that this is not currently happening can be a result only of government price controls (which prevent prices from rising in needy countries), trade restrictions, or some other government barrier that prevents people from getting what they need. FULL ARTICLE
How profitable is big oil?
In the context of the recent spike in oil prices, this clip from Glenn Beck show might be of interest to some.
Particularly noteworthy is the fact that the oil industry has been facing a thirty years [sic] moratorium on exploring new fields within the United States. According to the president of Shell Oil, John Hofmeister, the US is dependent on the order of over 60% of its overall consumption on oil imports. The moratorium, though not mentioned in the clip, I suspect has got a great deal to do with environmentalism. Speaking about sponsoring of international terrorism!
Another fact is that the profit margin of oil companies is about 8% on capital invested. There are other extremely interesting facts in the clip as well.
Are eulas contrary to property rights?
One of my favorite blogs on Mises.org is Copyfascism Watch because it always raises challenging questions and offers great arguments and documentation. Today, the top item concerns End User License Agreements: "One of the problems that needs to be resolved in the copyfight is the validity of licenses, which not only includes all EULAs, but Creative Commons and open-source licenses like the GNU as well. An argument cannot be made that the consumer and seller participated in a voluntary-exchange, when often the terms of the EULA are not agreed to prior to the purchase. How legitimate are the claims of manufacturers that consumers are merely buying the CDs and not the permission to install and use the software for which the consumer (rightly, I might add) believed he is paying? We do not accept that Ford or American Eagle (a clothing company) has any say in how we use the products they sell us after it is sold to us. Why then do we give software companies this right?"
On the other hand, maybe eulas can be considered a kind of covenant with the user, and we readily accept such restrictions when buying homes, for example. I want to think that the blogger is right but I'm not sure. Thoughts?
Up with Iron Man; Down with the Merchants of Death
The phrase Merchants of Death takes center stage in the movie Iron Man, which is a spectacular expose of a subject that dominates the American economic landscape but about which Americans have very little knowledge. The phrase and the movie deal with the odd juxtaposition of capitalism and war as found in the weapons industry. Here we have innovations and efficiency of the type we associate with the private commercial sector but serving ends that are the very opposite of capitalism. The industry serves war, not peace, depends on coercion, not human volition, and profits from destruction, not creation. FULL ARTICLE
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