Tag Archive for: capitalism

A Shrine to a Socialist Demagogue by Lawrence W. Reed

MANAGUA, Nicaragua — It’s May 27, 2015. Driving south on First Avenue toward Masaya on a hot, late-spring day in the Nicaraguan capital, my eye caught an image in the distance. “That looks like Curly from The Three Stooges!” I thought. Nah, what would he be doing here? Nyuk. Nyuk.

As we approached, I suddenly realized it only resembled Curly. It was actually somebody considerably less funny. The statue was a garish, tasteless manifestation of the late Venezuelan socialist strongman Hugo Chavez, surrounded by ugly, orange curlicues. I repressed the urge to gag as I stopped to take this photo:

Hugo Chavez shrine

This tribute to a man whose ceaseless demagoguery ruined his nation’s economy is the doing, of course, of Nicaraguan president Daniel Ortega and his party. Ortega, like Chavez, engineered constitutional changes that may make him effectively president for life. He has worshiped state power since the 1970s. He was a Cuban-trained Marxist and cofounder of the Frente Sandinista de Liberación Nacional, the Sandinistas. I visited the country five times in the 1980s to interview key political figures, and whenever I was there, Ortega was pushing government literacy programs; meanwhile, his government was harassing and shutting down the opposition press.

Back in the 1980s, Ortega relied heavily on subsidies from his Soviet and Cuban sponsors. But now that the Soviets are ancient history and the Cuban economy is on life support, he’s had to moderate. Nicaragua is a very poor country. Its per capita GDP is about a third of the world average, better than Yemen’s but not as deluxe as Uzbekistan’s. According to the 2015 Index of Economic Freedom, however, it’s ranked better than you might expect at 108th in the world. Seventy countries are actually less free.

Who do you think is ranked at the very bottom, at 176, 177, and 178?

None other than the workers’ paradises of Venezuela, Cuba, and North Korea.

If you want a glimpse of the current state of the Chavez/Maduro experiment in Venezuelan socialism, look no further than the relative scarcities of toilet paper (you’d better bring your own if you visit) and paper money (more abundant than ever at 510 percent inflation).

I asked my old friend Deroy Murdock, senior fellow with the Atlas Network, Fox News contributor, and keen observer of affairs in the Americas: How would you assess the legacy of the Venezuelan caudillo memorialized by Ortega’s regime in Nicaragua?

“Hugo Chavez arrived in Venezuela, determined to make his country a gleaming showcase of socialism, and renovate Cuba in the process,” Murdock said. “Now, Chavez is dead, Castro still lives, and both countries remain in dire straits. Chavez’s legacy is the enduring lesson that big government is bad, and huge government is even worse.”

Indeed. Seems pretty self-evident whether you look at the numbers from afar or walk the streets in person. Venezuela’s economy has been in free-fall for almost all of the past 15 years.

But there I was, gazing at a giant Hugo in Managua, a monument intended to say, “Way to go, man!” One wonders where an impoverished country gets the money or even the idea to construct such a hideous gargoyle.

Then I realized the answer: Ortega’s Nicaragua is run by socialists. And by typical socialist reasoning, you can be an architect of disaster but reckoned to be a “man of the people” just by claiming to be one.

If you produced the same results while advocating capitalism, you’d be reckoned a monster.


Lawrence W. Reed

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s.

A Simple Question for Minimum Wage Advocates by Donald J. Boudreaux

I will return in a later post to the topic of my previous post, namely, the validity or (as I see it) invalidity of the argument that proposes a tolerance of locally set minimum-wage rates if not of nationally or super-nationally set rates.

I state, however, here and again my conclusion: Legislating minimum wages – that is, enacting a policy of caging people who insist on entering voluntarily into employment contracts on terms that political elites find objectionable – is no more attractive or justified or likely to succeed at helping low-skilled workers if the particular caging policy in question is enacted locally than if it is enacted nationally or globally.

In this short post, I ask a simple question of all advocates of minimum wages:

If enforcement of minimum-wage policies were carried out in practice by policing low-skilled workers rather than employers – if these policies were enforced by police officers monitoring workers and fining those workers who agreed to work at hourly wages below the legislated minimum – would you still support minimum wages?

Would you be good with police officers arresting those workers who, preferring to remain employed at sub-minimum wages rather than risk losing their current jobs (or risking having do endure worsened employment conditions), refuse to abide by the wage terms dictated by the legislature?

Would you think it an acceptable price to pay for your minimum-wage policy that armed police officers confine in cages low-skilled workers whose only offense is their persistence at taking jobs at wages below those dictated by the government?

If a minimum-wage policy is both economically justified and morally acceptable, you should have no problem with this manner of enforcement.

(You might still prefer, for obviously aesthetic reasons, enforcement leveled mainly at employers. But if the policy is to unleash government force to raise wages above those that would be otherwise agreed to on the market voluntarily between employers and workers, then you should agree that, if for some reason enforcement aimed at employers were impossible or too costly, enforcement aimed at workers is morally and economically acceptable.)

If, however, you do have a problem with minimum-wage regulations being enforced by targeting workers who violate the legislature’s dictated wage terms, then you might wish to think a bit more realistically and deeply about just what it is you advocate in the name of economic improvement or “social justice.”

This post first appeared at Cafe Hayek, where Don Boudreaux blogs with Russ Roberts.

Donald Boudreaux

Donald Boudreaux is a professor of economics at George Mason University, a former FEE president, and the author of Hypocrites and Half-Wits.

Microaggressions and Microwonders: Are mountains out of molehills proof the world’s getting better? by Steven Horwitz

A recurring theme of recent human history is that the less of something bad we see in the world around us, the more outrage we generate about the remaining bits.

For example, in the 19th century, outrage about child labor grew as the frequency of child labor was shrinking. Economic forces, not legislation, had raised adult wages to a level at which more and more families did not need additional income from children to survive, and children gradually withdrew from the labor force. As more families enjoyed having their children at home or in school longer, they became less tolerant of those families whose situations did not allow them that luxury, and the result was the various moral crusades, and then laws, against child labor.

We have seen the same process at work with cigarette smoking in the United States. As smoking has declined over the last generation or two, we have become ever less tolerant of those who continue to smoke. Today, that outrage continues in the form of new laws against vaping and e-cigarettes.

The ongoing debate over “rape culture” is another manifestation of this phenomenon. During the time that reasonably reliable statistics on rape in the United States have been collected, rape has never been less frequent than it is now, and it is certainly not as institutionalized as a practice in the Western world as it was in the past. Yet despite this decline — or in fact because of it — our outrage at the rape that remains has never been higher.

The talk of the problem of “microaggressions” seems to follow this same pattern. The term refers to the variety of verbal and nonverbal forms of communication that are said to constitute disrespect for particular groups, especially those who have been historically marginalized. So, for example, the use of exclusively masculine pronouns might be construed as a “microaggression” against women, or saying “ladies and gentlemen” might be seen as a microaggression against transsexuals. The way men take up more physical space on a train or bus, or the use of the phrase “walk-only zones” (which might offend the wheelchair-bound) to describe pedestrian crossways, are other examples.

Those who see themselves as the targets of microaggressions have often become very effective entrepreneurs of outrage in trying to parlay these perceived slights into indications of much more pervasive problems of sexism or racism and the like. Though each microaggression individually might not seem like much, they add up. So goes the argument.

I don’t want to totally dismiss the underlying point here, as it is certainly true that people say and do things (often unintentionally) that others will find demeaning, but I do want to note how this cultural phenomenon fits the pattern identified above. We live in a society in which the races and genders (and classes!) have never been more equal. Really profound racism and sexism is far less prominent today than it was 50 or 100 years ago. In a country where the president is a man of color and where one of our richest entertainers is a woman of color, it’s hard to argue that there hasn’t been significant progress.

But it is exactly that progress that leads to the outrage over microaggressions. Having steadily pushed back the more overt and damaging forms of inequality, and having stigmatized them as morally offensive, we have less tolerance for the smaller bits that remain. As a result, we take small behaviors that are often completely unintended as offenses and attempt to magnify them into the moral equivalent of past racism or sexism. Even the co-opting of the word “aggression” to describe what is, in almost all cases, behavior that is completely lacking in actual aggression is an attempt to magnify the moral significance of those behaviors.

Even if we admit that some of such behaviors may well reflect various forms of animus, there are two problems with the focus on microaggressions.

First, where do we draw the line? Once these sorts of behaviors are seen as slights with the moral weight of racism or sexism, we can expect to see anyone and everyone who feels slighted about anything someone else said or did declare it a “microaggression” and thereby try to capture the same moral high ground.

We are seeing this already, especially on college campuses, where even the mere discussion of controversial ideas that might make some groups uncomfortable is being declared to be a microaggression. In some cases this situation is leading faculty to stop teaching anything beyond the bland.

Second, moral equivalence arguments can easily backfire. For example, if we, as some feminists were trying to do in the 1980s, treat pornography as the equivalent of rape, hoping to make porn look worse, we might end up causing people to treat real physical rape less seriously given that they think porn is largely harmless.

So it goes with microaggressions: if we try to raise men taking up too much room on a bus seat into a serious example of sexism, then we risk people reacting by saying, “Well, if that’s what sexism is, then why should I really worry too much about sexism?” The danger is that when far more troubling examples of sexism or racism appear (for example, the incarceration rates of African-American men), we might be inclined to treat them less seriously.

It is tempting to want to flip the script on the entrepreneurs of microaggression outrages and start to celebrate their outrages as evidence of how far we’ve come. If men who take the middle armrest on airplanes (as obnoxious as that might be) are a major example of gender inequality, we have come far indeed. But as real examples of sexism and racism and the like do still exist, I’d prefer another strategy to respond to the talk of microaggressions.

Let’s spend more time celebrating the “microwonders” of the modern world. Just as microaggression talk magnifies the small pockets of inequality left and seems to forget the larger story of social progress, so does our focus on large social and economic problems in general cause us to forget the larger story of progress that is often manifested in tiny ways.

We live in the future that prior generations only imagined. We have the libraries of the world in our pockets. We have ways of easily connecting with friends and strangers across the world. We can have goods and even services of higher quality and lower cost, often tailored to our particular desires, delivered to our door with a few clicks of a button. We have medical advances that make our lives better in all kinds of small ways. We have access to a variety of food year-round that no king in history had. The Internet brings us happiness every day through the ability to watch numerous moments of humor, human triumph, and joy.

Even as we recognize that the focus on microaggressions means we have not yet eliminated every last trace of inequality, we should also recognize that it means we’ve come very far. And we should not hesitate to celebrate the microwonders of progress that often get overlooked in our laudable desire to continue to repair an imperfect world.

Steven Horwitz

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Microfoundations and Macroeconomics: An Austrian Perspective, now in paperback.

Capitalism Defused the Population Bomb by Chelsea German

Journalists know that alarmism attracts readers. An article in the British newspaper the Independent titled, “Have we reached ‘peak food’? Shortages loom as global production rates slow” claimed humanity will soon face mass starvation.

Just as Paul Ehrlich’s 1968 bestseller The Population Bomb  predicted that millions would die due to food shortages in the 1970s and 1980s, the article in 2015 tries to capture readers’ interest through unfounded fear. Let’s take a look at the actual state of global food production.

The alarmists cite statistics showing that while we continue to produce more and more food every year, the rate of acceleration is slowing down slightly. The article then presumes that if the rate of food production growth slows, then widespread starvation is inevitable.

This is misleading. Let us take a look at the global trend in net food production, per person, measured in 2004-2006 international dollars. Here you can see that even taking population growth into account, food production per person is actually increasing:

Food is becoming cheaper, too. As K.O. Fuglie and S. L. Wang showed in their 2012 article “New Evidence Points to Robust but Uneven Productivity Growth in Global Agriculture,” food prices have been declining for over a century, in spite of a recent uptick:

In fact, people are better nourished today than they ever have been, even in poor countries. Consider how caloric consumption in India increased despite population growth:

Given that food is more plentiful than ever, what perpetuates the mistaken idea that mass hunger is looming? The failure to realize that human innovation, through advancing technology and the free market, will continue to rise to meet the challenges of growing food demand.

In the words of HumanProgress.org Advisory Board member Matt Ridley, “If 6.7 billion people continue to keep specializing and exchanging and innovating, there’s no reason at all why we can’t overcome whatever problems face us.”

This idea first appeared at Cato.org.

Health Insurance Is Illegal by Warren C. Gibson

Health insurance is a crime. No, I’m not using a metaphor. I’m not saying it’s a mess, though it certainly is that. I’m saying it’s illegal to offer real health insurance in America. To see why, we need to understand what real insurance is and differentiate that from what we currently have.

Real insurance

Life is risky. When we pool our risks with others through insurance policies, we reduce the financial impact of unforeseen accidents or illness or premature death in return for a premium we willingly pay. I don’t regret the money I’ve spent on auto insurance during my first 55 years of driving, even though I’ve yet to file a claim.

Insurance originated among affinity groups such as churches or labor unions, but now most insurance is provided by large firms with economies of scale, some organized for profit and some not. Through trial and error, these companies have learned to reduce the problems of adverse selection and moral hazard to manageable levels.

A key word above is unforeseen.

If some circumstance is known, it’s not a risk and therefore cannot be the subject of genuine risk-pooling insurance. That’s why, prior to Obamacare, some insurance companies insisted that applicants share information about their physical condition. Those with preexisting conditions were turned down, invited to high-risk pools, or offered policies with higher premiums and higher deductibles.

Insurers are now forbidden to reject applicants due to preexisting conditions or to charge them higher rates.

They are also forbidden from charging different rates due to different health conditions — and from offering plans that exclude certain coverage items, many of which are not “unforeseen.”

In other words, it’s illegal to offer real health insurance.

Word games

Is all this just semantics? Not at all. What currently passes for health insurance in America is really just prepaid health care — on a kind of all-you-can-consume buffet card. The system is a series of cost-shifting schemes stitched together by various special interests. There is no price transparency. The resulting overconsumption makes premiums skyrocket, and health resources get misallocated relative to genuine wants and needs.

Lessons

Some lessons here are that genuine health insurance would offer enormous cost savings to ordinary people — and genuine benefits to policyholders. These plans would encourage thrift and consumer wisdom in health care planning,  while discouraging the overconsumption that makes prepaid health care unaffordable.

At this point, critics will object that private health insurance is a market failure because the refusal of unregulated private companies to insure preexisting conditions is a serious problem that can only be remedied by government coercion. The trouble with such claims is that no one knows what a real health insurance market would generate, particularly as the pre-Obamacare regime wasn’t anything close to being free.

What might a real, free-market health plan look like?

  • People would be able to buy less expensive plans from anywhere, particularly across state lines.
  • People would be able to buy catastrophic plans (real insurance) and set aside much more in tax-deferred medical savings accounts to use on out-of-pocket care.
  • People would very likely be able to buy noncancelable, portable policies to cover all unforeseen illnesses over the policyholder’s lifetime.
  • People would be able to leave costly coverage items off their policies — such as chiropractic or mental health — so that they could enjoy more affordable premiums.
  • People would not be encouraged by the tax code to get insurance through their employer.

What about babies born with serious conditions? Parents could buy policies to cover such problems prior to conception. What about parents whose genes predispose them to produce disabled offspring? They might have to pay more.

Of course, there will always be those who cannot or do not, for one reason or another, take such precautions. There is still a huge reservoir of charitable impulses and institutions in this country that could offer assistance. And these civil society organizations would be far more robust in a freer health care market.

The enemy of the good

Are these perfect solutions? By no means. Perfection is not possible, but market solutions compare very favorably to government solutions, especially over longer periods. Obamacare will continue to bring us unaccountable bureaucracies, shortages, rationing, discouraged doctors, and more.

Some imagine that prior to Obamacare, we had a free-market health insurance system, but the system was already severely hobbled by restrictions.

To name a few:

  • It was illegal to offer policies across state lines, which suppressed choices and increased prices, essentially cartelizing health insurance by state.
  • Employers were (and still are) given a tax break for providing health insurance (but not auto insurance) to their employees, reducing the incentive for covered employees to economize on health care while driving up prices for individual buyers. People stayed locked in jobs out of fear of losing health policies.
  • State regulators forbade policies that excluded certain coverage items, even if policyholders were amenable to such plans.
  • Many states made it illegal to price discriminate based on health status.
  • The law forbade associated health plans, which would allow organizations like churches or civic groups to pool risk and offer alternatives.
  • Medicaid and Medicare made up half of the health care system.

Of course, Obamacare fixed none of these problems.

Many voices are calling for the repeal of Obamacare, but few of those voices are offering the only solution that will work in the long term: complete separation of state and health care. That means no insurance regulation, no medical licensing, and ultimately, the abolition of Medicare and Medicaid, which threaten to wash future federal budgets in a sea of red ink.

Meanwhile, anything resembling real health insurance is illegal. And if you tried to offer it, they might throw you in jail.

Warren C. Gibson

Warren Gibson teaches engineering at Santa Clara University and economics at San Jose State University.

Reich Is Wrong on the Minimum Wage by DONALD BOUDREAUX

Watching Robert Reich’s new video in which he endorses raising the minimum wage by $7.75 per hour – to $15 per hour – is painful. It hurts to encounter such rapid-fire economic ignorance, even if the barrage lasts for only two minutes.

Perhaps the most remarkable flaw in this video is Reich’s manner of addressing the bedrock economic objection to the minimum wage – namely, that minimum wage prices some low-skilled workers out of jobs.

Ignoring supply-and-demand analysis (which depicts the correct common-sense understanding that the higher the minimum wage, the lower is the quantity of unskilled workers that firms can profitably employ), Reich asserts that a higher minimum wage enables workers to spend more money on consumer goods which, in turn, prompts employers to hire more workers.

Reich apparently believes that his ability to describe and draw such a “virtuous circle” of increased spending and hiring is reason enough to dismiss the concerns of “scare-mongers” (his term) who worry that raising the price of unskilled labor makes such labor less attractive to employers.

Ignore (as Reich does) that any additional amounts paid in total to workers mean lower profits for firms or higher prices paid by consumers – and, thus, less spending elsewhere in the economy by people other than the higher-paid workers.

Ignore (as Reich does) the extraordinarily low probability that workers who are paid a higher minimum wage will spend all of their additional earnings on goods and services produced by minimum-wage workers.

Ignore (as Reich does) the impossibility of making people richer simply by having them circulate amongst themselves a larger quantity of money.

(If Reich is correct that raising the minimum wage by $7.75 per hour will do nothing but enrich all low-wage workers to the tune of $7.75 per hour because workers will spend all of their additional earnings in ways that make it profitable for their employers to pay them an additional $7.75 per hour, then it can legitimately be asked: Why not raise the minimum wage to $150 per hour? If higher minimum wages are fully returned to employers in the form of higher spending by workers as Reich theorizes, then there is no obvious limit to the amount by which government can hike the minimum wage before risking an increase in unemployment.)

Focus instead on Reich’s apparent complete ignorance of the important concept of the elasticity of demand for labor.  This concept refers to the responsiveness of employers to changes in wage rates. It’s true that if employers’ demand for unskilled workers is “inelastic,” then a higher minimum wage would indeed put more money into the pockets of unskilled workers as a group. The increased pay of workers who keep their jobs more than offsets the lower pay of worker who lose their jobs. Workers as a group could then spend more in total.

But if employers’ demand for unskilled workers is “elastic,” then raising the minimum wage reduces, rather than increases, the amount of money in the pockets of unskilled workers as a group. When the demand for labor is elastic, the higher pay of those workers fortunate enough to keep their jobs is more than offset by the lower pay of workers who lose their jobs. So total spending by minimum-wage workers would likely fall, not rise.

By completely ignoring elasticity, Reich assumes his conclusion. That is, he simply assumes that raising the minimum wage raises the total pay of unskilled workers (and, thereby, raises the total spending of such workers).

Yet whether or not raising the minimum wage has this effect is among the core issues in the debate over the merits of minimum-wage legislation. Even if (contrary to fact) increased spending by unskilled workers were sufficient to bootstrap up the employment of such workers, raising the minimum wage might well reduce the total amount of money paid to unskilled workers and, thus, lower their spending.

So is employers’ demand for unskilled workers more likely to be elastic or inelastic? The answer depends on how much the minimum wage is raised. If it were raised by, say, only five percent, it might be inelastic, causing only a relatively few worker to lose their jobs and, thus, the total take-home pay of unskilled workers as a group to rise.

But Reich calls for an increase in the minimum wage of 107 percent! It’s impossible to believe that more than doubling the minimum wage would not cause a huge negative response by employers.

Such an assumption – if it described reality – would mean that unskilled workers are today so underpaid (relative to their productivity) that their employers are reaping gigantic windfall profits off of such workers.

But the fact that we see increasing automation of low-skilled tasks, as well as continuing high rates of unemployment of teenagers and other unskilled workers, is solid evidence that the typical low-wage worker is not such a bountiful source of profit for his or her employer.

Reich’s video is infected, from start to finish, with too many other errors to count.  I hope that other sensible people will take the time to expose them all.

Donald Boudreaux

Donald Boudreaux is a professor of economics at George Mason University, a former FEE president, and the author of Hypocrites and Half-Wits.

EDITORS NOTE: Here’s how Reich cherry-picked his data to claim that the minimum wage is “historically low” right now; here’s why Reich is wrong about wages “decoupling” from productivity; here’s why Reich is wrong about welfare “subsidizing” low-wage employers; here’s why Reich is wrong that Walmart raising wages proves that the minimum wage “works”; Reich is wrong (again) about who makes minimum wage; and here’s a collection of recent news about the damage minimum wage hikes have caused.

This post first appeared at Cato.org, while Cafe Hayek was down for repairs. 

Are Markets Ruining Video Games? Or is intellectual property the real culprit? by MATTHEW MCCAFFREY

Capitalism is ruining video games. So says game producer Lorne Lanning, creator of the Oddworld series, who recently sparked controversy by blasting economic developments in the gaming industry.

Lanning blames “capitalism” for gaming’s recent financial and artistic troubles, especially its emphasis on commercial success over artistic creativity. His basic claim is the same one levied against the film industry: major studios have been squeezing out their smaller competitors, taking advantage of market dominance to produce an endless stream of big-budget, artistically uninspiring sequels and spin-off franchises.

It’s unclear what Lanning (or anyone, really) means by capitalism, but he seems to be condemning the largely corporate world of game design and marketing. For instance, he mentions bureaucratic corporate structure, the quest for constant growth, and the need to appeal to mass markets as problems undermining the industry.

Several criticisms have been raised against Lanning’s claims.

First, he mainly seems upset about declining demand for the kinds of games he likes, so his arguments may be little more than sour grapes.

Second, markets produce to satisfy consumer wants, so if the artistic quality of games is low, isn’t that the fault of consumers’ tastes, rather than the market itself?

Third, without markets, there wouldn’t be a gaming industry. Markets increase productivity and make leisure possible, which in turn allows for the production of leisure goods like video games.

While there’s some truth to these criticisms, it’s important not to dismiss Lanning’s views as run-of-the-mill anti-market bias. In particular, we shouldn’t assume the game industry is a poster child for consumer sovereignty and healthy economic competition. In fact, what Lanning objects to sounds more like corporatism in the game industry than unregulated commerce; if so, it’s misguided to respond by defending game developers as heroic entrepreneurs or appealing to the wonders of the free market.

Lanning’s complaints may be justified, though he has misdiagnosed their cause: it’s actually regulation and a lack of markets that are hurting the game industry.

As it happens, major game studios have developed in ways we expect from firms artificially protected from competition: they’ve become less innovative, more risk-averse, and more focused on short-term gains. As Lanning puts it, in the gaming world, it’s not personalities and it’s not companies. It’s capitalism. So you get that [large] scale and now it gets more ruthless. These are public companies. This is Wall Street.

The analogy to Wall Street is telling, because the finance industry is at the heart of our heavily regulated and monopoly-privileged economy, and is probably the best example of what happens when government helps to eliminate market competition.

But what kind of intervention could be hampering competition in the gaming world?

One culprit is intellectual property (IP) law, which produces exactly the kind of problems Lanning is complaining about. Major studios spend a lot of money developing their IP, which they often license jealously. A case in point: Nintendo takes 40 percent of the ad revenue from YouTube videos featuring its games, a tactic that drives some creators away from their content.

Without noticing the irony, Lanning mentions several times the importance of retaining and nursing his own IP, all while protesting the sad state of small and medium-sized developers.

He may even have fallen prey to the anti-innovation incentive provided by IP, given that his recent projects have involved re-releasing classic titles rather than working on more ambitious (and uncertain!) projects. While IP law tends to favor the largest competitors, smaller firms can rely on it as well.

Ultimately, if developers want to pursue more artistic projects that appeal to smaller audiences, they need to take a step away from the one-size-fits-all corporate development supported by government regulation and toward genuine entrepreneurship and innovation.

If Lanning thought more about free exchange, he’d realize that markets produce exactly the kind of high-quality product he wants:

As craftsmen, our opportunity lies in finding the niches where we know our audience, we focus on it, we listen to it, we respect it, we treat it with some grace and … if you can keep mobilizing that audience, keep informing that audience, then how much is that worth?

It’s worth a lot. Yet, it’s markets that cater most effectively to diverse needs and niches, and it’s entrepreneurs who nurture value for consumers. Their success depends on it. We’re all better off when we turn our controllers over to the invisible hand.


Matthew McCaffrey

Matthew McCaffrey is assistant professor of enterprise at the University of Manchester and editor of Libertarian Papers.

Is the “Austrian School” a Lie?

Is Austrian economics an American invention? by STEVEN HORWITZ and B.K. MARCUS.

Do those of us who use the word Austrian in its modern libertarian context misrepresent an intellectual tradition?

We trace our roots back through the 20th century’s F.A. Hayek and Ludwig von Mises (both served as advisors to FEE) to Carl Menger in late 19th-century Vienna, and even further back to such “proto-Austrians” as Frédéric Bastiat and Jean-Baptiste Say in the earlier 19th century and Richard Cantillon in the 18th. Sometimes we trace our heritage all the way back to the late-Scholastic School of Salamanca.

Nonsense, says Janek Wasserman in his article “Austrian Economics: Made in the USA”:

“Austrian Economics, as it is commonly understood today,” Wasserman claims, “was born seventy years ago this month.”

As his title implies, Wasserman is not talking about the publication of Principles of Economics by Carl Menger, the founder of the Austrian school. That occurred 144 years ago in Vienna. What happened 70 years ago in the United States was the publication of F.A. Hayek‘s Road to Serfdom.

What about everything that took place — most of it in Austria — in the 74 years before Hayek’s most famous book? According to Wasserman, the Austrian period of “Austrian Economics” produced a “robust intellectual heritage,” but the largely American period that followed was merely a “dogmatic political program,” one that “does a disservice to the eclectic intellectual history” of the true Austrian school.

Where modern Austrianism is “associated with laissez-faire economics and libertarianism,” the real representatives of the more politically diverse tradition — economists from the University of Vienna, such as Fritz Machlup, Joseph Schumpeter, and Oskar Morgenstern — were embarrassed by their association with Hayek’s bestseller and its capitalistic supporters.

These “native-born Austrians ceased to be ‘Austrian,'” writes Wasserman, “when Mises and a simplified Hayek captured the imagination of a small group of businessmen and radicals in the US.”

Wasserman describes the popular reception of the as “the birth of a movement — and the reduction of a tradition.”

Are we guilty of Wasserman’s charges? Do modern Austrians misunderstand our own tradition, or worse yet, misrepresent our history?

In fact, Wasserman himself is guilty of a profound misunderstanding of the Austrian label, as well as the tradition it refers to.

The “Austrian school” is not a name our school of thought took for itself. Rather it was an insult hurled against Carl Menger and his followers by the adherents of the dominant German Historical School.

The Methodenstreit was a more-than-decade-long debate in the late 19th century among German-speaking social scientists about the status of economic laws. The Germans advocated methodological collectivism, espoused the efficacy of government intervention to improve the economy, and, according Jörg Guido Hülsmann, “rejected economic ‘theory’ altogether.”

The Mengerians, in contrast, argued for methodological individualism and the scientific validity of economic law. The collectivist Germans labeled their opponents the “Austrian school” as a put-down. It was like calling Menger and company the “backwater school” of economic thought.

“Austrian,” in our context, is a reclaimed word.

But more important, modern Austrian economics is not the dogmatic ideology that Wasserman describes. In his blog post, he provides no actual information about the work being done by the dozens of active Austrian economists in academia, with tenured positions at colleges and universities whose names are recognizable.

He tells his readers nothing about the  books they have produced that have been published by top university presses. He does not mention that they have published in top peer-reviewed journals in the economics discipline, as well as in philosophy and political science, or that the Society for the Development of Austrian Economics consistently packs meeting rooms at the Southern Economic Association meetings.

Have all of these university presses, top journals, and long-standing professional societies, not to mention tenure committees at dozens of universities, simply lost their collective minds and allowed themselves to be snookered by an ideological sleeper cell?

Or perhaps in his zeal to score ideological points of his own, Wasserman chose to take his understanding of Austrian economics from those who consume it on the Internet and elsewhere rather than doing the hard work of finding out what professional economists associated with the school are producing. Full of confirmation bias, he found what he “knew” was out there, and he ends up offering a caricature of the robust intellectual movement that is the contemporary version of the school.

The modern Austrian school, which has now returned to the Continent and spread across the globe after decades in America, is not the dogmatic monolith Wasserman contends. The school is alive with both internal debates about its methodology and theoretical propositions and debates about its relationship to the rest of the economics discipline, not to mention the size of the state.

Modern Austrian economists are constantly finding new ideas to mix in with the work of Menger, Böhm-Bawerk, Mises, and Hayek. The most interesting work done by Austrians right now is bringing in insights from Nobelists like James Buchanan, Elinor Ostrom, and Vernon Smith, and letting those marinate with their long-standing intellectual tradition. That is hardly the behavior of a “dogmatic political program,” but is rather a sign of precisely the robust intellectual tradition that has been at the core of Austrian economics from Menger onward.

That said, Wasserman is right to suggest that economic science is not the same thing as political philosophy — and it’s true that many self-described Austrians aren’t always careful to communicate the distinction. Again, Wasserman could have seen this point made by more thoughtful Austrians if he had gone to a basic academic source like the Concise Encyclopedia of Economics and read the entry on the Austrian school of economics.

Even a little bit of actual research motivated by actual curiosity about what contemporary professional economists working in the Austrian tradition are doing would have given Wasserman a very different picture of modern Austrian economics. That more accurate picture is one very much consistent with our Viennese predecessors.

To suggest that we do a disservice to our tradition — or worse, that we have appropriated a history that doesn’t belong to us — is to malign not just modern Austrians but also the Austrian-born antecedents within our tradition.

Steven Horwitz

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Microfoundations and Macroeconomics: An Austrian Perspective, now in paperback.

B.K. Marcus

B.K. Marcus is managing editor of the Freeman.

Are Markets Myopic? The illusion of government looking out for the long term by ROBERT P. MURPHY

We often hear that individual investors are myopic. They make decisions based on a relatively short time horizon, so forget about the long run. That’s why we need government officials to step in with regulations, as well as corrective taxes and subsidies, to guide the market toward long-term social goals. Or so the story goes.

Though this view of markets versus government is common, it has things exactly backwards: markets do contain sophisticated mechanisms for rewarding long-term planning, and democratic political institutions encourage extremely short-term thinking.

The fundamental institution for promoting proper planning is private property. The owner of a piece of property has an incentive to take actions that enhance its market value. For example, consider the owner of a giant tin deposit who must decide how rapidly to extract the resource.

Those who are naïve about the operations of a market economy might suppose that the greedy capitalist owner would “strip mine” the deposit as quickly as possible, channeling all of the accessible tin into projects serving the current generation while ignoring the needs of future generations. A moment’s reflection shows this is nonsense.

The greedy capitalist owner is at least vaguely familiar with the notion that tin deposits — unlike apples and wheat — do not naturally replenish themselves year after year. An extra pound of tin extracted and sold this year means exactly one fewer pound of tin that this deposit can yield in some future year. Once we realize that the greedy capitalist doesn’t want to maximize revenue but instead wants to maximize market value, it is obvious that he must take the future into account when making current decisions.

Specifically, to maximize the market value of his asset, the owner should extract additional pounds of tin in the present (putting the proceeds in a financial investment earning the market rate of interest), until the point at which he would earn a greater return by leaving the next pound of tin in the deposit, to be sold next year at the expected market price. For example, if tin is selling today at $8 per pound, and the interest rate on financial assets is 10 percent, then the owner would halt his operations if he ever came to confidently expect the price of tin next year to be $8.80 or higher. (I’m assuming the marginal costs of extraction and selling are the same, year to year, just to keep things simple. See this article for a more comprehensive explanation using oil.) Once he reaches this point, the best “investment” of his additional units of tin would be to leave them in the mine, “ripening” for another year.

Thus we see that a greedy capitalist would implicitly (and unwittingly) take into account the desires of consumers next year when making current production decisions. He would be guided not by altruistic concern, but instead by personal enrichment. We see the familiar pattern of market prices guiding even selfish individuals into promoting the general welfare. If for some reason tin were expected to be scarcer in the future, then its expected spot price in the future would be higher. This would lead owners to hold tin off the market in the present, thus driving up its price even today, in anticipation of the expected future price. Modern financial and commodities markets — with futures and forward contracts, as well as more exotic derivatives — refine things even more, drawing on the dispersed knowledge and different risk appetites of millions of people.

The critics of capitalism would probably complain again at this point, bemoaning the fact that the greedy owner was now “undersupplying tin” and gouging today’s consumers with artificially higher prices. But if so, the critics need to make up their minds: do we want the tin going to the present or to the future? There’s a finite amount of it to go around — that’s the whole (alleged) problem.

Notice that even if a particular owner of a tin deposit is diagnosed with terminal cancer, he still has an incentive to behave in this “efficient” manner. The reason is that he can sell the tin deposit outright. The market value of the entire deposit will reflect the (present discounted) future flow of net income derived from owning the deposit and operating it in the optimal manner indefinitely. If the owner ever thinks, Well, if I had 10 years left, I would run the operation in such-and-such a way, then that decision won’t change just because he only has one year left. Instead, he can sell the operation to the highest bidder, including people who do have 10 or more years left of expected life.

Thus, we see that contrary to the critics, a pure market economy contains sophisticated mechanisms to guide owners into acting as farsighted stewards of depletable natural resources. In complete contrast, political officials who control natural resources face no such incentives. Because they can’t personally pocket the revenues, or bequeath the asset to their heirs, political officials have the incentive to maximize thecurrent income from the natural resources under their temporary control, to the extent that they are guided by pecuniary motives.

Even here, it’s usually not the case that the government sells access to a resource in order to maximize current receipts. Rather, what often happens is that the government officials will give sweetheart deals to private interests (such as a logging company operating in a state-owned forest), allowing these officials to develop a business relationship that will benefit them after leaving government.

Private owners in a free-market economy have the incentive to maximize the long-term value of their property, which implicitly leads them to consider the desires of future generations. Democratically elected government officials, on the other hand, act as temporary custodians who will not personally benefit from maintaining the market value of the assets they control.

Rental car companies would be foolish to suppose that their customers will put the more expensive high-octane gas into their vehicles, even though the customers might do so if they personally owned the rental car. Yet, for some reason, millions of voters think that politicians with two-year terms will be more farsighted when it comes to economic resources than private shareholders will be.

ABOUT ROBERT P. MURPHY

Robert P. Murphy has a PhD in economics from NYU. He is the author of The Politically Incorrect Guide to Capitalism and The Politically Incorrect Guide to The Great Depression and the New Deal. He is also the Senior Economist with the Institute for Energy Research and a Research Fellow at the Independent Institute. You can find him at http://consultingbyrpm.com/.

Decentralization: Why Dumb Networks Are Better

The smart choice is innovation at the edge by ANDREAS ANTONOPOULOS…

“Every device employed to bolster individual freedom must have as its chief purpose the impairment of the absoluteness of power.” — Eric Hoffer

In computer and communications networks, decentralization leads to faster innovation, greater openness, and lower cost. Decentralization creates the conditions for competition and diversity in the services the network provides.

But how can you tell if a network is decentralized, and what makes it more likely to be decentralized? Network “intelligence” is the characteristic that differentiates centralized from decentralized networks — but in a way that is surprising and counterintuitive.

Some networks are “smart.” They offer sophisticated services that can be delivered to very simple end-user devices on the “edge” of the network. Other networks are “dumb” — they offer only a very basic service and require that the end-user devices are intelligent. What’s smart about dumb networks is that they push innovation to the edge, giving end-users control over the pace and direction of innovation. Simplicity at the center allows for complexity at the edge, which fosters the vast decentralization of services.

Surprisingly, then, “dumb” networks are the smart choice for innovation and freedom.

The telephone network used to be a smart network supporting dumb devices (telephones). All the intelligence in the telephone network and all the services were contained in the phone company’s switching buildings. The telephone on the consumer’s kitchen table was little more than a speaker and a microphone. Even the most advanced touch-tone telephones were still pretty simple devices, depending entirely on the network services they could “request” through beeping the right tones.

In a smart network like that, there is no room for innovation at the edge. Sure, you can make a phone look like a cheeseburger or a banana, but you can’t change the services it offers. The services depend entirely on the central switches owned by the phone company. Centralized innovation means slow innovation. It also means innovation directed by the goals of a single company. As a result, anything that doesn’t seem to fit the vision of the company that owns the network is rejected or even actively fought.

In fact, until 1968, AT&T restricted the devices allowed on the network to a handful of approved devices. In 1968, in a landmark decision, the FCC ruled in favor of the Carterfone, an acoustic coupler device for connecting two-way radios to telephones, opening the door for any consumer device that didn’t “cause harm to the system.”

That ruling paved the way for the answering machine, the fax machine, and the modem. But even with the ability to connect smarter devices to the edge, it wasn’t until the modem that innovation really accelerated. The modem represented a complete inversion of the architecture: all the intelligence was moved to the edge, and the phone network was used only as an underlying “dumb” network to carry the data.

Did the telecommunications companies welcome this development? Of course not! They fought it for nearly a decade, using regulation, lobbying, and legal threats against the new competition. In some countries, modem calls across international lines were automatically disconnected to prevent competition in the lucrative long-distance market. In the end, the Internet won. Now, almost the entire phone network runs as an app on top of the Internet.

The Internet is a dumb network, which is its defining and most valuable feature. The Internet’s protocol (transmission control protocol/Internet protocol, or TCP/IP) doesn’t offer “services.” It doesn’t make decisions about content. It doesn’t distinguish between photos and text, video and audio. It doesn’t have a list of approved applications. It doesn’t even distinguish between client and server, user and host, or individual versus corporation. Every IP address is an equal peer.

TCP/IP acts as an efficient pipeline, moving data from one point to another. Over time, it has had some minor adjustments to offer some differentiated “quality of service” capabilities, but other than that, it remains, for the most part, a dumb data pipeline. Almost all the intelligence is on the edge — all the services, all the applications are created on the edge-devices. Creating a new application does not involve changing the network. The Web, voice, video, and social media were all created as applications on the edge without any need to modify the Internet protocol.

So the dumb network becomes a platform for independent innovation, without permission, at the edge. The result is an incredible range of innovations, carried out at an even more incredible pace. People interested in even the tiniest of niche applications can create them on the edge. Applications that only have two participants only need two devices to support them, and they can run on the Internet. Contrast that to the telephone network where a new “service,” like caller ID, had to be built and deployed on every company switch, incurring maintenance cost for every subscriber. So only the most popular, profitable, and widely used services got deployed.

The financial services industry is built on top of many highly specialized and service-specific networks. Most of these are layered atop the Internet, but they are architected as closed, centralized, and “smart” networks with limited intelligence on the edge.

Take, for example, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the international wire transfer network. The consortium behind SWIFT has built a closed network of member banks that offers specific services: secure messages, mostly payment orders. Only banks can be members, and the network services are highly centralized.

The SWIFT network is just one of dozens of single-purpose, tightly controlled, and closed networks offered to financial services companies such as banks, brokerage firms, and exchanges. All these networks mediate the services by interposing the service provider between the “users,” and they allow minimal innovation or differentiation at the edge — that is, they are smart networks serving mostly dumb devices.

Bitcoin is the Internet of money. It offers a basic dumb network that connects peers from anywhere in the world. The bitcoin network itself does not define any financial services or applications. It doesn’t require membership registration or identification. It doesn’t control the types of devices or applications that can live on its edge. Bitcoin offers one service: securely time-stamped scripted transactions. Everything else is built on the edge-devices as an application. Bitcoin allows any application to be developed independently, without permission, on the edge of the network. A developer can create a new application using the transactional service as a platform and deploy it on any device. Even niche applications with few users — applications never envisioned by the bitcoin protocol creator — can be built and deployed.

Almost any network architecture can be inverted. You can build a closed network on top of an open network or vice versa, although it is easier to centralize than to decentralize. The modem inverted the phone network, giving us the Internet. The banks have built closed network systems on top of the decentralized Internet. Now bitcoin provides an open network platform for financial services on top of the open and decentralized Internet. The financial services built on top of bitcoin are themselves open because they are not “services” delivered by the network; they are “apps” running on top of the network. This arrangement opens a market for applications, putting the end user in a position of power to choose the right application without restrictions.

What happens when an industry transitions from using one or more “smart” and centralized networks to using a common, decentralized, open, and dumb network? A tsunami of innovation that was pent up for decades is suddenly released. All the applications that could never get permission in the closed network can now be developed and deployed without permission. At first, this change involves reinventing the previously centralized services with new and open decentralized alternatives. We saw that with the Internet, as traditional telecommunications services were reinvented with email, instant messaging, and video calls.

This first wave is also characterized by disintermediation — the removal of entire layers of intermediaries who are no longer necessary. With the Internet, this meant replacing brokers, classified ads publishers, real estate agents, car salespeople, and many others with search engines and online direct markets. In the financial industry, bitcoin will create a similar wave of disintermediation by making clearinghouses, exchanges, and wire transfer services obsolete. The big difference is that some of these disintermediated layers are multibillion dollar industries that are no longer needed.

Beyond the first wave of innovation, which simply replaces existing services, is another wave that begins to build the applications that were impossible with the previous centralized network. The second wave doesn’t just create applications that compare to existing services; it spawns new industries on the basis of applications that were previously too expensive or too difficult to scale. By eliminating friction in payments, bitcoin doesn’t just make better payments; it introduces market mechanisms and price discovery to economic activities that were too small or inefficient under the previous cost structure.

We used to think “smart” networks would deliver the most value, but making the network “dumb” enabled a massive wave of innovation. Intelligence at the edge brings choice, freedom, and experimentation without permission. In networks, “dumb” is better.

ABOUT ANDREAS ANTONOPOULOS

Andreas M. Antonopoulos is a technologist and serial entrepreneur who advises companies on the use of technology and decentralized digital currencies such as bitcoin.

Do You Have the Civil Disobedience App?

You might be downloading tomorrow’s law by MAX BORDERS…

If the injustice is part of the necessary friction of the machine of government, let it go, let it go: perchance it will wear smooth — certainly the machine will wear out… but if it is of such a nature that it requires you to be the agent of injustice to another, then I say, break the law. Let your life be a counter-friction to stop the machine. What I have to do is to see, at any rate, that I do not lend myself to the wrong which I condemn. 

 Henry David Thoreau

In the peer-to-peer revolution, the most important elections will happen outside the voting booth. And the most important laws won’t be written by lawmakers.

Consider this: The first time you hopped into a Lyft or an Uber, there was probably, at the very least, a legal gray area associated with that trip. And yet, in your bones, didn’t you think that what you were doing was just, even if it wasn’t yet clearly legal?

If you felt that way, I suspect you weren’t alone.

Today, ridesharing apps are operating in most major cities around the country. And municipalities are having to play catch-up because the people have built massive constituencies around these new services.

This is just one example of what Princeton political scientist James C. Scott calls “Irish democracy,” where people simply stop paying attention to some rule (or ruler) because it has outlived its usefulness.

One need not have an actual conspiracy to achieve the practical effects of a conspiracy. More regimes have been brought, piecemeal, to their knees by what was once called “Irish Democracy,” the silent, dogged resistance, withdrawal, and truculence of millions of ordinary people, than by revolutionary vanguards or rioting mobs.

Now, let’s be clear: the right rules are good things. Laws are like our social operating system, and we need them. But we don’t need all of them, much less all of them to stick around forever. And like our operating systems, our laws need updating. Shouldn’t legal updates happen not by waiting around on politicians but in real time?

“But Max,” you might be thinking. “What about the rule of law? You have to change the law through legitimate processes.”

And that’s not unreasonable. After all, we don’t want mob rule, and we don’t want just anyone to be able to change the law willy-nilly — especially those laws that cover our basic rights and freedoms. There is an important distinction, however, between justice and law, one that’s never easy to unpack. But Henry David Thoreau said it well, when he wrote,

Unjust laws exist; shall we be content to obey them, or shall we endeavor to amend them, and obey them until we have succeeded, or shall we transgress them at once? Men generally, under such a government as this, think that they ought to wait until they have persuaded the majority to alter them. They think that, if they should resist, the remedy would be worse than the evil. But it is the fault of the government itself that the remedy is worse than the evil. It makes it worse. Why is it not more apt to anticipate and provide for reform? Why does it not cherish its wise minority? Why does it cry and resist before it is hurt? Why does it not encourage its citizens to be on the alert to point out its faults, and do better than it would have them?

Today’s peer-to-peer civil disobedience is tomorrow’s emergent law.

In other words, the way the best law has always come about is not through a few wise rulers getting together and writing up statutes; rather, it emerges among people interacting with each other and wanting to avoid conflict. When peaceful people are engaging in peaceful activity, they want to keep it that way. And when people find new and creative ways to interact peacefully, old laws can be obstructions.

So as we engage in peer-to-peer civil disobedience, we are making choices that are leading to the emergence of new law, however slowly and clumsily it follows on. This is a beautiful process, because it requires not the permission of rulers, but rather the assent of peer communities. It is rather like democracy on steroids, except we don’t have to send our prayers up through the voting booth in November.

Legal theorist Bruce Benson calls this future law the “Law Merchant.” He describes matters thus:

A Law Merchant evolves whenever commerce emerges. Practices that facilitated emergence of commerce in medieval Europe were replayed in colonial America, and they are being replayed in Eastern Europe, Eastern Asia, Latin America, and cyberspace. Law Merchant arrangements also support “underground” economic activity when states constrain above-ground market development.

It might be a while before we evolve away from our outmoded system of sending politicians to capitals to make statutes. And the issue of lawmakers playing catch-up with emergent systems may be awkward and kludgy for a while. But when we think that the purpose of law is to help people interact peacefully, peer-to-peer civil disobedience might be a necessary ingredient in reweaving the law for the sake of human flourishing.

ABOUT MAX BORDERS

Max Borders is the editor of The Freeman and director of content for FEE. He is also cofounder of the event experience Voice & Exit and author of Superwealth: Why we should stop worrying about the gap between rich and poor.

The Garage That Couldn’t Be Boarded Up Uber and the jitney … everything old is new again by SARAH SKWIRE

August Wilson. Jitney. 1979.

Last December, I used Uber for the first time. I downloaded the app onto my phone, entered my name, location, and credit card number, and told them where my daughters and I needed to go. The driver picked us up at my home five minutes later. I was able to access reviews that other riders had written for the same driver, to see a photograph of him and of the car that he would be using to pick me up, and to pay and tip him without juggling cash and credit cards and my two kids. Like nearly everyone else I know, I instantly became a fan of this fantastic new invention.

In January, I read Thomas Sowell’s Knowledge and Decisions for the first time. In chapter 8, Sowell discusses the early 20th-century rise of “owner operated bus or taxi services costing five cents and therefore called ‘jitneys,’ the current slang for nickels.” Sowell takes his fuller description of jitneys from transportation economist George W. Hilton’s “American Transportation Planning.”

The jitneys … essentially provided a competitive market in urban transportation with the usual characteristics of rapid entry and exit, quick adaptation to changes in demand, and, in particular,  excellent adaptation to peak load demands. Some 60 percent of the jitneymen were part-time operators, many of whom simply carried passengers for a nickel on trips between home and work.

It sounded strangely familiar.

In February, I read August Wilson’s play, Jitney, written in 1979, about a jitney car service operating in Pittsburgh in the 1970s. As we watch the individual drivers deal with their often tumultuous personal relationships, we also hear about their passengers. The jitney drivers take people to work, to the grocery store, to the pawnshop, to the bus station, and on a host of other unspecified errands. They are an integral part of the community. Like the drivers in Sean Malone’s documentary No Van’s Land, they provide targeted transportation services to a neighborhood under served by public transportation. We see the drivers in Jitney take pride in the way they fit into and take care of their community.

If we gonna be running jitneys out of here we gonna do it right.… I want all the cars inspected. The people got a right if you hauling them around in your car to expect the brakes to work. Clean out your trunk. Clean out the interior of your car. Keep your car clean. The people want to ride in a clean car. We providing a service to the community. We ain’t just giving rides to people. We providing a service.

That service is threatened when the urban planners and improvers at the Pittsburgh Renewal Council decide to board up the garage out of which the jitney service operates and much of the surrounding neighborhood. The drivers are skeptical that the improvements will ever really happen.

Turnbo: They supposed to build a new hospital down there on Logan Street. They been talking about that for the longest while. They supposed to build another part of the Irene Kaufman Settlement House to replace the part they tore down. They supposed to build some houses down on Dinwidee.

Becker: Turnbo’s right. They supposed to build some houses but you ain’t gonna see that. You ain’t gonna see nothing but the tear-down. That’s all I ever seen.

The drivers resolve, in the end, to call a lawyer and refuse to be boarded up. “We gonna run jitneys out of here till the day before the bulldozer come. Ain’t gonna be no boarding up around here! We gonna fight them on that.” They know that continuing to operate will allow other neighborhood businesses to stay open as well. They know that the choice they are offered is not between an improved neighborhood and an unimproved one, but between an unimproved neighborhood and no neighborhood at all. They know that their jitney service keeps their neighborhood running and that it improves the lives of their friends and neighbors in a way that boarded up buildings and perpetually incomplete urban planning projects never will.

Reading Sowell’s book and Wilson’s play in such close proximity got me thinking. Uber isn’t a fantastic new idea. It’s a fantastic old idea that has returned because the omnipresence of smartphones has made running a jitney service easier and more effective. Uber drivers and other ride-sharing services, as we have all read and as No Van’s Land demonstrates so effectively, are subject to protests and interference by competitors, to punitive regulation from local governments, and to a host of other challenges to their enterprise. This push back is nothing new. Sowell notes, “The jitneys were put down in every American city to protect the street railways and, in particular, to perpetuate the cross-subsidization of the street railways’ city-wide fare structures.”

Despite these common problems, Uber and other 21st-century jitney drivers do not face the major challenge that the drivers in Jitney do. They do not need to operate from a centralized location with a phone. Now that we all have phones in our pockets, the Uber “garage” is everywhere. It can’t be boarded up.

ABOUT SARAH SKWIRE

 Sarah Skwire is a fellow at Liberty Fund, Inc. She is a poet and author of the writing textbook Writing with a Thesis.

The Force That Liberated Women

The innovations and opportunities of modern markets freed women more than men by STEPHEN DAVIES:

Everyone in the world today has cause to be thankful that they live in a world and a time shaped by modern capitalism. However, women have particular cause to be thankful above and beyond the gains in material well-being that they share with men.

The contrast between the great majority of human history and the world that has grown up since the mid-18th century, most notably the enormous and unprecedented increase in wealth and physical comfort that has taken place since then, even for those who count as poor today, means that everyone alive today is very fortunate compared to their ancestors.

This huge and measurable increase in well-being is mainly due to modern capitalism and its central feature, sustained innovation, along with the crucial supporting institutions that make that possible: the rule of law, free exchange and inquiry, and individual liberty.

The condition and prospects of women have changed profoundly for the better in the modern world, and this is due centrally to capitalism as an economic and social system. Ideas and thinking have also played an enormous part, but this is one of those cases where the material circumstances and relations of human beings are fundamental. Women have gained a capacity of self-direction and a range of opportunities and options that were denied to their predecessors.

We may truly say that capitalism has liberated women.

Liberated from what, exactly?

The short answer is that capitalism liberated women from material constraints arising from the reality of living in a world of little innovation, slow or nonexistent growth, and chronic material deprivation. This was also true for men of course, but for reasons both natural and social, the conditions of premodern life affected women much more severely and stringently than they did men.

Physical strength

In traditional society, hard physical labor was the lot of everyone except a very small and privileged minority; the alternative was to starve. At the same time, the threat of violence played a much larger part. Innovation of any kind was seen as dangerous at best, blasphemous at worst.

Given the natural contrasts in physical strength between men and women, this was a world with a very clear sexual division of labor. Women did all kinds of productive work, but many tasks — including many that were more highly rewarded — were monopolized by men. Even more significantly, institutions that wielded power were dominated by men because of their ultimate basis in physical force, which men could exercise more readily. Individual women might enjoy power and influence, but women in general did not.

Fertility

Most importantly, women had little control over their fertility. Unless they chose a life of chastity, they were almost certain to have children.

This huge biological fact had extensive social consequences. On the one hand, it gave women great social influence by virtue of their maternal role. This influence was outweighed by the way that their maternal role led to stringent regulation of their behavior and options. Men faced many restrictions as well, but nothing so severe.

Women had even less in the way of choices about what to do in their lives than the majority of men did. Even women from the elite had a much more constrained set of possible roles than their male counterparts. This arrangement was rationalized and supported by an ideology of female subordination, a sexual double standard, and an array of ideas about women’s ultimately inferior and limited function.

New economic opportunities

The advent and development of capitalist modernity steadily undermined the constrained and limited world of women. A range of new economic opportunities arose for them, even before the advent of machinery and the factory but massively accelerated by them. Increasingly, women could earn an independent income and support themselves, something that was practically (as well as legally) difficult in traditional society. This meant that not being married, but rather being independent, was no longer an utter disaster nor tantamount to a death sentence.

Technology

Later on, modern capitalism produced a suite of devices and innovations that physically freed women from the demands and limitations of domestic labor. To take one example, the modern washing machine freed women from the need to spend one or often two entire days of each week doing laundry. Other domestic appliances had similar effects.

The automobile gave women personal mobility and freedom of movement in a way that they had not often had before. The advent of cheap books, newspapers, and magazines created opportunities for many more women to become writers and to communicate their ideas and experiences. It also brought about a level of contact with the wider world and with other women than had ever been feasible.

Eventually, the innovation at the heart of modern capitalism brought about cheap, reliable, and effective contraception and liberated women from the constraints of a central aspect of their biology. None of this would or could have happened without modern capitalism.

The steady decline in the importance of physical strength meant that the variety of life paths open to women expanded even more than it did for men. All of these material changes were matched by intellectual ones that again would not have amounted to more than a jeu d’esprit in the absence of the material conditions created by modern capitalism.

Starting with early figures such as Mary Wollstonecraft and Olympe de Gouges, a succession of women attacked traditional ideas of the nature and role of women and made the case for women’s autonomy and independence.

The ladies of laissez-faire

One thing that is little known but should be pointed out is that almost all of these pioneer feminists were ardent laissez-faire liberals and supporters of capitalist industry. They were well aware of the connection between the autonomy and freedom of choice that they advocated for women and the economic transformations that had made freedom possible as a lived reality.

All women today should reflect on how the scope of their agency and self-determination has increased far more than that of their fathers, husbands, and brothers in the last 200 years.

Modern capitalism and its innovations have disproportionately benefited women and changed the material conditions of humanity. To be a woman is no longer to be in a state of natural and inevitable disadvantage in the course of life.

ABOUT STEPHEN DAVIES

Stephen Davies is a program officer at the Institute for Humane Studies and the education director at the Institute for Economics Affairs in London.

Bitcoin Technology: A Festival of the Commons

Open-source currencies create new property paradigms by ANDREAS ANTONOPOULOS:

Open-source technologies such as bitcoin are a combination of open-source software, common technology standards, and a participatory decentralized network. These layers create a three-tiered commons where innovation contributed by users adds to the common platform, which makes it better for everyone.

But for the last few hundred years, we have generally thought of goods as best belonging to the private domain. Consider that, in economic terms, the “tragedy of the commons” is a market-failure scenario where a shared public good is overexploited. In this scenario, each user has an incentive to maximize his or her own use until the good is depleted.

The example used to illustrate this economic theory is a grassland (a “village commons” in British English) that is unregulated and overgrazed by cattle until it deteriorates to a muddy field. The tragedy of the commons occurs when individual self-interest combined with a large economic externality (the cost to the commons) create a market failure for all.

The opposite of the tragedy of the commons is called a “comedy of the commons,” but I prefer to use the term “festival of the commons,” which conjures a better visual example: a grassland used to hold a community festival that benefits everyone. The comedy of the commons was first stipulated as an economic theory governing public goods such as knowledge, where individual use of the common good does not deplete the good but instead adds to it.

The sharing economy, which consists of open-source software (for example, Linux), participatory publishing (Wikipedia), and participatory networks (BitTorrent), creates conditions where increased participation adds to the good’s underlying value and benefits all participants. In such cases, the underlying good is knowledge, software, or a network, and its availability is not depleted by individual use.

Software applications are themselves open-sourced and add to the commons, offering new capabilities for all subsequent innovators. Enhancements to the protocol bring new features across the entire network, allowing the ecosystem to build new services around them. Finally, as more users adopt the technology and add their resources to the P2P network, the scalability and security of the entire network increases.

Open-source currencies have another layer that multiplies these underlying effects: the currency itself. Not only is the investment in infrastructure and innovation shared by all, but the shared benefit may also manifest in increased value for the common currency. Currency is the quintessential shared good, because its value correlates strongly to the economic activity that it enables. In simple terms, a currency is valuable because many people use it, and the more who use it, the more valuable it becomes. Unlike national currencies, which are generally restricted to use within a country’s borders, digital currencies like bitcoin are global and can therefore be readily adopted and used by almost any user who is part of the networked global society.

The underlying festival-of-the-commons effect created by open-source software, shared protocols, and P2P networks feeds into the value of the overlaid shared currency. While this effect may be obscured in the early stages of adoption by speculation and high volatility, in the long run, it may create a virtuous cycle of adoption and value that become a true festival of the commons.

The festival is now open. Who will join it?

ABOUT ANDREAS ANTONOPOULOS

Andreas M. Antonopoulos is a technologist and serial entrepreneur who advises companies on the use of technology and decentralized digital currencies such as bitcoin.

The EPA’s Agenda: Undermine Capitalism and America

The Environmental Protection Agency has been in a full assault on the U.S. economy since the 1980s when the global warming hoax was initiated. It has been assisted by the National Oceanic and Atmospheric Administration and NASA.

To put it in other terms, our own government has engaged in lying to Americans and the result has been the expenditure of billions of taxpayer dollars on something that was not happening and is not happening.

On January 22, the House Oversight and Government Reform Committee released the deposition transcript of former senior EPA official John Beale. After defrauding the agency of nearly $900,000 and spending weeks and months away from his office by claiming he was on assignment for the CIA, the transcript contained a bombshell.

Discussing his job, at the time as a close associate of Gina McCarthy, the new EPA administrator, Beale revealed that he was there to come up with “specific proposals that could have been proposed either legislatively or things which could have been done administratively to kind of modify the capitalist system…”

EPA - BustedDan Kish, senior vice president of the Institute for Energy Research, responded to the revelation saying “In his testimony under oath, Beale, perhaps unwittingly, has laid bare the administration’s end goal. The President’s policies are not about carbon, they are not about coal, and they are not even about energy and the environment. They are about fundamentally altering the DNA of the capitalist system. These policies are not about energy, but power.”

When the new EPA administrator, Gina McCarthy, in testimony before a congressional committee in mid-January was asked by Sen. Jeff Sessions (AL-R) to confirm a statement made by President Obama last year that global temperatures were increasing faster in the last five or ten years than climate scientists had predicted.

She said, “I can’t answer that question.”

“You’re asking us to impose billions of dollars of cost on this economy and you won’t answer the simple question of whether (temperature around the world is increasing faster than predicted) is accurate or not?” Sessions responded.

“I just look at what the climate scientists tell me,” said McCarthy.

The Earth is in a cooling cycle that has lasted seventeen years at this point, but the EPA administrator was not inclined to accept this fact, nor question the climate scientists who provided the data based on computer models that have been consistently wrong now for decades.

We owe the Heartland Institute, a free market think tank a debt of gratitude for the eight international conferences it has held to debunk global warming. Joseph Bast, its president and CEO, has said, “The toll our EPA is taking on the country is staggering, putting hundreds of thousands of Americans out of work at a time when millions of people are unemployed and our reliance on foreign sources of energy threatens to compromise our nation’s security.” Heartland’s science director points out that “EPA’s budget could safely be cut by 80 percent or more without endangering the environment or human health, Most of what EPA does today could be done better by state government agencies…” I serve as an advisor to Heartland.

This is the same EPA that proposed restrictions for new wood stoves in early January. The reason given was to reduce the maximum amount of fine particulate emissions (soot) allowed for new stoves sold in 2015 and 2019. The soot is made up of solid particles and liquid droplets that measure 2.5 micrometers or less. The EPA claims, as it does for virtually all its regulations, that it is linked to heart attacks, decreased lung function, and premature death in people with heart and lung disease. This is worse than junk science. It represents no science whatever, being an invention of EPA employees who specialize in such nonsense. The Earth produces soot every day and circulates it globally.

The only way Americans will be protected against the EPA’s attack on our economy will be a Congress controlled by the Republican Party and a Republican President that will support the oversight that is needed and the reversal of its vast output of regulations. It will have to do this as well for NOAA, NASA, and other governmental departments and agencies that, until recently, spewed forth all manner of “data” supporting the global warming hoax.

At the heart of the global warming hoax, now called climate change, is the assertion that carbon dioxide (CO2) and other “greenhouse gases” have been dangerously warming the Earth by trapping heat, but you don’t have to be a scientist to know that the current cold spell, comparable to the 1500-1850 mini-ice age, is the result of lower solar emissions by a sun. CO2 is a minor (0.038) element of the Earth’s atmosphere, but the second most vital gas for all life on Earth because it is the “food” that maintains all vegetation.

Little wonder, during the government shutdown, more than 93% of EPA employees were furloughed when designated as “non-essential.” That was more than nine out of every ten employees!

In September 2013, the Republican members of the Senate Environmental and Public Works Committee issued a report that EPA officials had, from the beginning of President Obama’s tenure had “pursued a path of obfuscation, operating in the shadows, and out of the sunlight.” It detailed violations of the Freedom of Information Act and other federal laws and regulations intended to encourage transparency and accountability in the government.

In mid-January, the Energy and Environmental Legal Institute revealed that emails obtained through the Freedom of Information Act revealed that the EPA used official events to help environmental groups gather signatures for petitions on agency rulemaking. “The level of coordination in these documents is shocking” said an EELI spokesman. The EPA has a long history of this, including a policy of “sue and settle” working with environmental groups to bring a suit to advance regulations and settling the suit to enable it to implement those regulations.

In an April 2013 article in Investor’s Business Daily, John Merline reported that “Overall air pollution levels dropped 62% from 1990 to 2012, while GDP grew 69% and population climbed 26%.” The pollution the EPA keeps claiming is rising includes carbon monoxide, soot, sulfur dioxide, ozone, and others, all well below the EPA’s safety threshold. Water quality, too, has also improved over several decades.

In May 2013, Paul Driessen, a senior policy advisor for the Committee for a Constructive Tomorrow (CFACT) noted that the EPA, since Obama’s inauguration in 2009, had generated 1,920 new regulations. “The EPA’s actions are forcing us to expend vast financial, human and technological resources to achieve minimal or even zero health benefits.”

This is the same EPA leading the effort to shut down coal-fired plants that produce electricity. It is the same EPA seeking to stop the Pebble Mine, described as “a natural resource project in Alaska that could yield more copper than has ever been found in one place anywhere in the world.”

The EPA is the instrument of those who want to undermine capitalism in any way it can. Only that can explain why entire books have been written about its impact on the economy of the nation and the deceptive way it has imposed regulations responsible for it.

President Obama called for “hope and change” when he first ran for office. We can only hope that a new Congress and President will bring about the change we need to shut down the EPA and return control over the nation’s environment to its 50 sovereign states.

© Alan Caruba, 2014