Tag Archive for: capitalism

The Pope’s Misplaced Focus

/in , , , /by

Pope John Francis’ upcoming visit to the U.S. is generating quite a bit of excitement here, especially among his Catholic faithful.  But for me and many others, his visit is generating consternation, not excitement.

Usually, most people tend to have great respect and affection for the Pope.  He is usually viewed by the public as a beacon of moral guidance, even for those who are non-Catholics.  This is definitely a view I once had of previous Popes.

But I must admit that my respect for this current Pope, John Francis is somewhat diminished.

I am totally confused by his constant advocating for policies that goes against the Catholic Church’s own teachings.  On the issue of homosexuality his position is, “Who are we to judge?”  Though church doctrine is very clear on this issue.

He is a fanatical supporter of open borders; in his view people have an inherent right to enter illegally into any country they choose as long as the ends justify the means.

He rabidly promotes theories in support of global warming, despite the fact that he is one of the biggest contributors to it.  When the Pope travels, he normally charters an Alitalia A320 jet.  It is estimated that the pope travels about 100,000 miles per year.  So this means based on the type of plane the Pope flies, he emits 20 pounds of CO2 for every mile of flight which is 2,000,000 pounds a year.

Every denomination has their own precepts that their members must abide by.  Likewise, nations have laws that their citizens or visitors must abide by.

Poverty or wanting a better life is not sufficient reason for people to break our laws to enter into our country.  The Pope expects Catholics to abide by the rules of Catholicism; so why should America expect anything less from those who seek entry into our country?

So, by the Pope’s standard I, as a Baptist, should still be able to participate in all things Catholic; even though I don’t adhere to Catholicism.

The Pope, in many ways, is operating just like Obama is in the U.S.  They both are picking and choosing which rules and laws they want to abide by.

Forgive me for not being able to get beyond the fact that the Pope has spent very little time dealing with the child abuse that has taken place in his church; but yet he seems to have plenty of time to meet with illegals, homosexuals and promote global warming

Am I the only one who finds it offensive that the Pope will be meeting with some of those in the U.S. illegally, but will not be meeting with families that have had family members killed, raped, or maimed by illegals?

Am I the only one who finds it offensive that the Pope will not be meeting with any of the victims of sexual abuse from within the Catholic Church?

Am I the only one who finds it offensive that the Pope constantly talks about income inequality and the need for employers to pay their employees more money; but he has never discussed what is the obligation of employees to their employers (more productivity and more efficiency, etc.)?

The Pope should not be aligned to a political agenda, but rather what is right or wrong.

America has no moral obligation to allow those who enter our country illegally to stay in our country no more so than the Pope allowing someone who refuses to abide by the rules of Catholicism should be allowed to say they are a member of the Catholic Church.

Furthermore, the Bible is very clear, a man’s first responsibility is for the well being of his family, not his neighbor’s family.

The Pope seems to be on a global tour to promote an entitlement agenda as opposed to being a beacon for right and wrong.  Even if you are poor and downtrodden, you still are responsible for being responsible.

Many of the illegals coming to the U.S. are having children that they can’t afford to provide for.  How many speeches has the Pope given on individual responsibility?

How many speeches has the Pope given on the need to fire and prosecute every priest that has molested or covered up sexual abuse of kids in the Catholic Church?

How many speeches has the Pope given about what are an employee’s obligations to his employer?

I really believe the Pope’s heart is in the right place, but the issues he is focusing on should be subservient to the more critical issues listed above.

I definitely think the church can and should play a constructive role in our society, especially to those who are in need.  In many respects, I think the faith community is better equipped to deal with a lot of the social ills of our society than our government is.

But the Pope cannot shine the light on my darkness until he is first willing to shine the light on his on darkness.  Until then, the Pope’s moral compass is pointing in the wrong direction.

How Sexist Is Your Office Temp? by Sarah Skwire

/in , , , , /by

My Facebook wall is bursting with people arguing over a recent article from theWashington Post that claims that air conditioning in the office is sexist.

Women, argues Petula Dvorak, are naturally inclined to suffer more from the cold, so office thermostats set at 68 or 70 degrees keep men comfortable, but make women miserable. Her article strongly implies that this is done because men lack consideration for the comfort of others and because women are denied the power and the agency to get temperatures set where they want them.

I am a small cold woman who keeps two blankets in her office. I sympathize.

But despite my sympathy, I think Dvorak — and most of my Facebook friends — are missing an extremely important point: The fact that there are women suffering in overly air-conditioned offices is not a sign of how oppressed we are. It is a sign of how far we have come.

The economist Claudia Goldin has written persuasively about the long-term changes in women’s work over the course of the 20th century. She notes that the soaring rate of women’s labor force participation from the 1950s-1970s is part of a greater, century-long revolution. And it is that revolution that means that there are more and more women who are able to be in an office to begin with.

Once we’re in the office, we’re cold. But let’s not allow the chill to lull us to sleep. We can complain so loudly about the A/C because women are present in working environments in increasing numbers. That’s a good thing.

Dvorak gets a lot of mileage from her outrage over men’s office attire. They wear suits and ties and broadcloth shirts and are thus comfortable in air conditioning, while women dressed in seasonally-appropriate attire shiver from cold.

Why, she wonders, don’t men simply dress more appropriately?

Office dress codes are certainly part of the answer, but a larger part of the answer seems to be that women got a revolution that has missed men entirely — a revolution in dress.

Underneath her conservative suit, the working woman of the 1950s would have worn something like the Playtex Living Girdle, made of perforated rubber, and designed to produce the sleek figure required by the fashions of the time.

Rubber girdles certainly did that. But they were also hot, sweaty, and uncomfortable. Women who were freed of them by the new fashions of the ‘60s and the invention of pantyhose were nothing but grateful.

And the current generation of women — who have rejected even pantyhose as a relic of the past — are freer than ever… and colder. Ditching girdles and hose means that we have fewer layers between us and the office air conditioning. We’ve burned our foundation garments, but the fire hasn’t kept us warm.

I certainly don’t suggest returning to girdles or leaving the workplace in order to stay warm.

But I do think it’s dumb to blame the patriarchy, as represented by the guy in the next cubicle, for the fact that we’re cold.

We’re cold because we won the revolution. And now we have the power to request more equitable dress codes for our male colleagues, or to design offices with individualized climate controls, or to recognize that the world isn’t perfect, but that sometimes a little sweater can help.

Sarah Skwire
Sarah Skwire

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

The War on Air Conditioning Heats Up: Is Climate Control Immoral? by Sarah Skwire

/in , , , , /by

It started with the pope. In his recent encyclical, Laudato Si’, he singled out air conditioning as a particularly good example of wasteful habits and excessive consumption that overcome our better natures:

People may well have a growing ecological sensitivity but it has not succeeded in changing their harmful habits of consumption which, rather than decreasing, appear to be growing all the more. A simple example is the increasing use and power of air-conditioning.

Now, it seems to be open season on air conditioning. From a raging Facebook debate over an article that claims that air conditioning is an oppressive tool of the patriarchy to an article in the Washington Post that calls the American use of air conditioning an “addiction” and compares it unfavorably to the European willingness to sweat through the heat of summer, air conditioning is under attack. So I want to defend it.

Understand that when I defend air conditioning, I do so as something of a reluctant proponent. I grew up in the Midwest, and I have always loved sitting on the screened-in porch, rocking on the porch swing, drinking a glass of something cold. I worked in Key West during the summer after my sophomore year of college, lived in an apartment with no air conditioning, and discovered the enormous value of ceiling fans. A lazy, hot summer day can be a real pleasure.

However, let’s not kid ourselves. There were frequent nights in my childhood when it was just too hot to sleep, and the entire family would hunker down in the one air-conditioned room of the house — my father’s attic study — to cool off at night. When we moved from that house to a place that had central air, none of us complained.

And after my recent article on home canning, my friend Kathryn wrote to say,

When I was growing up in the Deep South, everybody I knew had a garden, shelled beans and peas, and canned. It could have been an Olympic event. What I remember most — besides how good the food was — is how hot it was, all those hours spent over huge pots of boiling something or other on the stove in a house with no air conditioning.

There’s a lot to be said for being able to cook in comfort and to enjoy the screened-in porch by choice rather than necessity. Making your family more comfortable is one of the great advantages of an increasingly wealthy society, after all.

So when I read that the US Department of Energy says that you can save about 11 percent on your electric bill by raising the thermostat from 72 to 77 degrees, mostly I want to invite the Department of Energy to come over to my 1929 bungalow and see if they can get any sleep in my refinished attic bedroom when the thermostat is set to 77 degrees, but the room temperature is a cozy 80-something.

And when I read Petula Dvorak arguing that air conditioning is a tool of sexism because “all these women [are freezing] who actually dress for the season — linens, sundresses, flowy silk shirts, short-sleeve tops — changing their wardrobes to fit the sweltering temperatures around them. … And then there are the men, stalwart in their business armor, manipulating their environment for their own comfort, heaven forbid they make any adjustments in what they wear,” mostly I want to ask her if she’s read the dress codes for most professional offices. In my office, women can wear sleeveless tops and open-toed shoes in the summer. Men have to wear a jacket and tie. Air conditioning isn’t sexist. Modern dress codes very well might be.

But arguments based on nostalgia or gender are mostly easily dismissed. Moral arguments, like those made by Pope Francis or by those who are concerned about the environmental and energy impact of air conditioning, are more serious and require real attention.

Is it immoral to use air conditioning?

Pope Francis certainly suggests it is. And the article in the Washington Post that compares US and European air conditioning use agrees, suggesting that the United States prefers the short-term benefits of air conditioning over the long-term dangers of potential global warming — and that our air conditioning use “will make it harder for the US to ask other countries to continue to abstain from using it to save energy.” We are meant to be deeply concerned about the global environmental impact as countries like India, Indonesia, and Brazil become wealthy enough to afford widespread air conditioning. We are meant to set a good example.

But two months before the Washington Post worried that the United States has made it difficult to persuade India not to use air conditioning, 2,500 Indians died in one of the worst heat waves in the country’s history. This June, 780 people died in a four-day heat wave in Karachi, Pakistan. And in 2003, a heat wave that spanned Europe killed 70,000. Meanwhile, in the United States, heat causes an average of only 618 deaths per year, and the more than 5,000 North American deaths in the un-air-conditioned days of 1936 remain a grim outlier.

Air conditioning is not immoral. Possessing a technology that can prevent mortality numbers like these and not using it? That’s immoral.

Air conditioning is, for most of us, a small summertime luxury. For others, it is a life-saving necessity. I am sure that it has environmental effects. Benefits always have costs, and there’s no such thing as a free climate-controlled lunch. But rather than addressing those costs by trying to limit the use of air conditioning and by insisting that developing nations not use the technologies that rocketed the developed world to success, perhaps we should be focusing on innovating new kinds of air conditioning that can keep us cool at a lesser cost.

I bet the kids who will invent that technology have already been born. I pray that they do not die in a heat wave before they can share it with us.


Sarah Skwire

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

Capitalists from Outer Space by B.K. Marcus

/in , , , , /by

When the aliens stop trifling with crop circles, bumpkin abduction, and indelicate probes and finally introduce themselves to the rest of humanity, will they turn out to be partisans of central planning, interventionism, or unhampered markets?

This is not the question asked by the Search for Extraterrestrial Intelligence (SETI) Institute, but whether or not the institute’s scientists realize it, the answer is crucial to their search.

Signs of Intelligent Life

The SETI Institute was founded by Frank Drake and the late Carl Sagan. Its scientists do not believe we have been visited yet. UFO sightings and abduction stories don’t stand up under scientific scrutiny, they say. Nor are they waiting for flying saucers. Because the aliens’ signals will likely reach Earth before their spaceships do, SETI monitors the skies for transmissions from advanced civilizations orbiting distant stars.

The scientific search for evidence of advanced alien societies began in 1960, when Drake aimed a 25-meter dish at two nearby stars. The previous year, the journal Nature had published an article called “Searching for Interstellar Communications,” which suggested that distant civilizations might transmit greetings at the same wavelength as the radio emission of hydrogen (the universe’s most common element). Drake found no such signals, nor has SETI found any evidence of interstellar salutations since. But it’s not giving up.

The Truth Is Out There

Before we can ask after advanced alien political economy, we must confront the more basic question: Is there anybody out there? SETI has been searching for over half a century. That may seem like a long time, but there are, as Sagan underscored, “billions and billions of stars.” How many of them should we expect to monitor before finding one that’s transmitting?

In an attempt to address, if not answer, the question, Drake proposed an equation in 1961 to summarize the concepts scientists think are relevant to any educated guess.

Here is how Sagan explains the Drake equation in the book Cosmos:

N*, the number of stars in the Milky Way Galaxy;
fp, the fraction of stars that have planetary systems;
ne, the number of planets in a given system that are ecologically suitable for life;
fl, the fraction of otherwise suitable planets on which life actually arises;
fi, the fraction of inhabited planets on which an intelligent form of life evolves;
fc, the fraction of planets inhabited by intelligent beings on which a communicative technical civilization develops;
and fL, the fraction of a planetary lifetime graced by a technical civilization.

The End of the World as We Know It

Sagan expounds on all the terms in the equation, but it’s that last one that absorbs him: How long can an advanced civilization last before it destroys itself?

Perhaps civilizations arise repeatedly, inexorably, on innumerable planets in the Milky Way, but are generally unstable; so all but a tiny fraction are unable to survive their technology and succumb to greed and ignorance, pollution and nuclear war.

Sagan wrote Cosmos toward the end of the Cold War. He mentioned other threats — greed, ignorance, pollution — but the specter of mutual annihilation haunted him. When he imagined the end of an advanced society, he pictured something permanent.

“It is hardly out of the question,” he wrote, “that we might destroy ourselves tomorrow.” Perhaps, Sagan feared, the general pattern is for civilizations to “take billions of years of tortuous evolution to arise, and then snuff themselves out in an instant of unforgivable neglect.”

The Rise and Fall of Civilization

We cannot know if the civilizational survival rate on other planets is high or low, and so the final term in the Drake equation is guesswork, but some guesses are better than others.

“One of the great virtues of [Drake’s] equation,” Sagan wrote, “is that it involves subjects ranging from stellar and planetary astronomy to organic chemistry, evolutionary biology, history, politics and abnormal psychology.”

That’s quite an array of topics to inform an educated guess, but notice that he doesn’t mention economics.

Perhaps he thought politics covered it, but Sagan’s political focus was more on questions of war and peace than poverty and wealth. In particular, he considered the end of civilization to be an event from which it would take a planet billions of years to recover.

The history of our own species suggests that this view is too narrow. Yes, a nuclear war could wipe out humanity, but civilizations do destroy themselves in less permanent ways.

There have been two dark ages in Western history: the Mycenaean-Greek and the post-Roman. Both were marked by retrogression in technology, art, and literacy. Both saw a drop in overall population and in population density, as survivors left towns and cities for a more autarkic existence in the countryside. And both underwent a radical decline in foreign trade and the division of labor. Market societies deteriorated into disparate cultures of subsistence farming.

The ultimate causes of the Greek Dark Age are a mystery. As with the later fall of the Roman Empire, the Mycenaean demise was marked by “barbarian” invasions, but the hungry hoards weren’t new: successful invasions depend on weakened defenses and deteriorating infrastructure. What we know is that worsening poverty marked the fall, whether as cause, effect, or both.

The reasons for the fall of the Roman West are more evident, if still debated. Despite claims of lead poisoning, poor sanitation, too much religion, too little religion, and even, believe it or not, inadequate central planning, the empire’s decline resulted from bad economic policy.

To help us see this more clearly,Freeman writer Nicholas Davidson suggests in his magnificent 1987 article “The Ancient Suicide of the West” that we look to the signs of cultural and economic decline rather than to the changes, however drastic, in political leadership. While the Western empire did not fall to the barbarians until the fifth century AD, “The Roman economy [had] reached its peak toward the middle of the first century AD and thereafter began to decline.” As with the Mycenaean Greeks, the decay was evident in art and literature, science and technology. Civilization cannot advance in poverty. Wealth and civilization progress together.

How to Kill Progress

“The stagnation in all aspects of society,” Davidson writes, “was associated with a continuous extension of governmental functions. Social engineering was tried on the grand scale. The state relentlessly expanded into commerce, industry, and private life.”

As we look to our own future — or anticipate the politics of our alien brethren — we can draw on the experience of humanity’s past to help us appreciate the economics of progress and decline. Over and over, we see the same pattern: some group gains a temporary benefit from a world in flux. When further social and economic changes check those advantages, the old guard turn to the state to protect them from the dynamism of a healthy society. Adaptation is stymied. Nothing is allowed to evolve. The politically privileged — military and civilian, rich and poor — sacrifice their civilization in an doomed attempt to ward off change.

The Sustainable Society

Evolutionary science, economic theory, and cybernetics yield the same lessons: stability requires flexibility; complexity flourishes under spontaneous order; centralization leads to stagnation.

To those general lessons, economics adds insights specific to the context of scarcity: private property and voluntary exchange produce greater general wealth, longer time horizons, and ever more investment in the “luxuries” of scientific investigation, technological innovation, and a more active stewardship of the environment. Trade promotes peace, and a global division of labor unites the world’s cultures in mutual self-interest.

If, as Sagan contends, an advanced civilization would require political stability and sizable long-term investment in science and technology to survive an interstellar spacefaring phase, then we should expect any such civilization to embrace a planetwide system of free trade and free markets grounded in private property. For the civilization to last the centuries and millennia necessary to explore and colonize the stars, its governing institutions will have to be minimal and decentralized.

The aliens will, in short, embrace what Adam Smith called “the system of natural liberty.” Behind their transmissions, SETI should expect to find the invisible hand.

Scientists versus Freedom

When we do make contact, “the consequences for our own civilization will be stunning,” Sagan wrote. Humanity will gain “insights on alien science and technology, art, music, politics, ethics, philosophy and religion…. We will know what else is possible.”

What did Sagan himself believe possible? Had he survived to witness first contact, would he be surprised to learn of the capitalist political economy at the foundation of an advanced extraterrestrial civilization?

Neil deGrasse Tyson, who remade the Cosmos television series for the 21st century, recommends reading Adam Smith’s Wealth of Nations but only “to learn that capitalism is an economy of greed, a force of nature unto itself.”

We shouldn’t assume that Tyson represents Sagan’s economic views, but when Sagan did address questions of policy, he advocated a larger welfare state and greater government spending. When he talked about “us” and “our” responsibilities, he invariably meant governments, not private individuals.

Sagan wrote, “It may be that civilizations can be divided into two great categories: one in which the scientists are unable to convince nonscientists to authorize a search for extraplanetary intelligence … and another category in which the grand vision of contact with other civilizations is shared widely.”

Why would scientists have to persuade anyone else to authorize anything? Sagan could only imagine science funded by government. It was apparently beyond credibility that less widely shared visions can secure sufficient funding.

It’s a safe guess, then, that when he talks of civilizations that are “unable to survive their technology and succumb to greed,” Sagan is talking about the profit motive.

And yet, it is the profit motive that drives innovation, and it is the great wealth generated by profit seekers that allows later generations of innovators to pursue their visions with fewer financial inducements. Whether directly or indirectly, profits pay for progress.

Self-Interested Enlightenment

Why does it matter if astronomers misunderstand the market? Does SETI really need to appreciate the virtues of individual liberty to monitor the heavens for signs of intelligent life?

Scientists can and do excel in their fields without understanding how society works. But that doesn’t mean their ignorance of economics is harmless. The more admired they are as scientists — especially as popularizers of science — the more damage they can do when they speak authoritatively outside their fields. Their brilliance in one discipline can make them overconfident about their grasp of others. And increasingly, the questions facing the scientific community cross multiple specialties. It was the cross-disciplinary nature of Drake’s equation that Sagan saw as its great virtue.

The predictions of the astronomer looking for extraterrestrial socialists will be different from those of someone who expects the first signals of alien origin to come from a radically decentralized civilization — a society of private individuals who have discovered the sustainable harmony of self-interest and the general welfare.

After that first contact, after we’ve gained “insights on alien science and technology” and we get around to learning alien history, will we discover that their species has witnessed civilizations rise and fall? What was it that finally allowed them to break the cycle? How did they avoid stagnation, decline, and self-destruction?

How did they, as a culture, come to accept the economic way of thinking, embrace the philosophy of freedom, and develop a sustainable civilization capable of reaching out to us, the denizens of a less developed world?


B.K. Marcus

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

The Gig Economy Makes Karl Marx’s Dreams Come True And It’s All Capitalism’s Doing by Max Borders

/in , , , , /by

When Joe Average steps out of his car after completing his shift for Lyft, he does so on his own terms. Nobody tells him when to start. Nobody tells him when to stop. The siren song that is prime time pricing might have coaxed him off the couch, but ultimately it was his call. And with the rest of his day, he’s going to go fishing. You see, Joe loves to fish — even more than he loves making money. After dinner, he might take some time to criticize the second season of True Detective.

Would ole Karl Marx have been happy with this result?

In The German Ideology, Marx wrote,

For as soon as the distribution of labour comes into being, each man has a particular, exclusive sphere of activity, which is forced upon him and from which he cannot escape. He is a hunter, a fisherman, a herdsman, or a critical critic, and must remain so if he does not want to lose his means of livelihood; while in communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic.

Marx should be delighted — oh, except that it’s capitalism, not communism, that’s allowing Joe to be a fisherman and a critic on his own terms.

The sharing or “gig” economy is not only disrupting the way people live and work; it’s dividing the left considerably.

On the one hand, you have the nostalgic leftists who want Joe to work a nine-to-five job and skip the fishing. You know, like people did in the 1950s. As Freeman columnist Steve Horwitz writes, presidential candidate Hillary Clinton

longs for a time like the 1950s when workers had the structure of the corporate world and unions through which to lobby and negotiate for pay and benefits, rather than the so-called “gig” economy of so many modern freelance employees, such as Uber drivers. “This on-demand or so-called gig economy is creating exciting opportunities and unleashing innovation,” Clinton said, “but it’s also raising hard questions about workplace protection and what a good job will look like in the future.”

Joe already told us what a good job looks like. It’s one that lets him spend time fishing and criticizing.

More confusing (or confused, perhaps) is Paul Mason’s writing in the Guardian. He lauds “postcapitalism,” which has all the hallmarks of a society Clinton is worried about:

Postcapitalism is possible because of three major changes information technology has brought about in the past 25 years. First, it has reduced the need for work, blurred the edges between work and free time and loosened the relationship between work and wages.

Bingo. The gig economy. But does it make sense to give capitalism a different name? I suppose one could. After all, Marx coined the term. But Marx’s definition of capitalism is a system based on private ownership of the means of production. Has that dynamic fundamentally changed?

Far from it. The sharing economy is simply decentralizing power by allowing ordinary people to use their own small-scale means of production. By solving coordination problems and lowering transaction costs, technology is augmenting capitalism.

When Joe drives for Lyft, for example, his car is still his car. And now more of his time is his, too. Capitalism, even as Marx defined it, hasn’t fundamentally changed. But the use of technology to awaken sleeping private capital is allowing the system to evolve — and rather nicely if you’re Joe Average, or one of thousands of other workers like him.

Now, I’m not saying that there is nothing interesting going on in the electronic commons. Ideas are being configured and reconfigured in the networked economy. Many of those ideas are being taken out of the intellectual-property regime, thanks to open sourcing, and this can be a good thing. There are fierce debates about whether intellectual property (claims to property in ideas and in nonscarce goods) is justifiable. But passing over those debates, more and more open-source technologies are coming online for exploitation by everyone.

Do open sourcing and the creative commons take us to postcapitalism?

I don’t know. But fundamentally, as long as the process is voluntary and carried out peacefully by a community of cooperators, who cares what you call it? Should we be upset that the guy who founded Lyft is getting rich from the tech? Some people are, because they see the accumulation of wealth as taboo. But Joe’s life is better than it would have been in the absence of Lyft. The company allows him to live more of the life he wants to live.

As long as Joe Average is happier, who cares what Hillary Clinton thinks?


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.

Clinton’s Startup Tax Will Crush New Businesses by Dan Gelernter

/in , , , , /by

Hillary Clinton has announced that she will, if elected, raise the capital-gains tax to a maximum that equals the highest income tax bracket. She hopes to promote long-term investments by penalizing short-term ones with a tax rate that gets lower the longer an investment is held, reaching the current 20% rate only after six years.

This, Ms. Clinton says, would allow a CEO to focus on the company’s true interests rather than just making the next quarter. It is, unfortunately, exactly the sort of plan you would expect from someone who has never started a company — and who doesn’t seem to know anyone who has.

The CEO of a startup is unlike the CEO of an established business. He is not the head of a chain of command: he is the spokesman or agent of a few colleagues, entrusted for the moment to represent them. The startup CEO has one primary job, which is raising money. It is the hardest thing a young company has to do — and it is an unending process.

Most germinal startups never raise any money at all. The ones that get seed funding are already breathing rarified air, and can afford perhaps a day of celebration before they start pursuing the next round.

The picture is especially tough for tech startups. A startup that builds software doesn’t have any machinery or physical supplies to auction off if the company fails. This means that banks won’t make the kind of secured business loans of the sort small companies traditionally get.

As a result, tech startups are wholly reliant on a relatively small number of investors who are looking for something more exciting than the establishment choices and are willing to take a big gamble in the hope of a big, short-term payoff. Though Ms. Clinton’s proposal would only affect those in the top income bracket, she may be surprised to learn that those are the only people who can afford to make such investments.

Professional investors think in terms of risk: they balance the likelihood of a startup’s failure against the potential payoff of its success. Increasing the tax rate reduces the effective payoff, which increases risk. Investors can lower that risk by reducing the valuation at which they are willing to invest, which means they take a larger share of the company — a straightforward transfer of risk from investors to entrepreneurs.

Ms. Clinton’s tax therefore will not be borne by wealthy investors: it comes out of the entrepreneur’s payday. The increased tax rate means a risk-equivalent decrease in the percentage of the company the entrepreneur gets to keep. And that’s just the best-case scenario.

The other option is that the tax doesn’t get paid at all, because the investor decides the increased risk isn’t worth it — the startup can’t attract funding and dies.

That sounds melodramatic, but it is no exaggeration. A startup company never has more offers than it needs; it never raises money with time spare. Even a slight change in the risk-return balance — say, the 3.8% which Obamacare quietly laid on top of the current capital-gains — kills companies, as investors and entrepreneurs see the potential upside finally shaved past the tipping point.

A tech startup has short-term potential. That is a major part of the attraction to investors, and that makes Ms. Clinton’s proposal especially damaging. In the tech world, we all hope we’ll be the next Facebook or Twitter, but you can’t pitch that to an investor. A good tech startup takes a small, simple idea and implements it beautifully.

The most direct success scenario is an acquisition by a larger company. In the app world — and this is the upside to not having physical limitations on distribution — the timescale is remarkably accelerated. A recent benchmark example was Mailbox, purchased by Dropbox just two months after it launched.

Giving investors an incentive to not to sell will hurt entrepreneurs yet again, postponing the day their sweat equity finally has tangible value, and encouraging decisions that make tax-sense rather than business-sense.

If Hillary Clinton really wants to help entrepreneurs, she should talk to some and find out what they actually want. A lower capital-gains tax — or no capital-gains tax — would be an excellent start.

Dan Gelernter

Dan Gelernter is CEO of the technology startup Dittach.

Government Ruins the Dishwasher (Again) by Jeffrey A. Tucker

/in , , , /by

The regulatory assault on the dishwasher dates back at least a decade. For the most part, industry has gone along, perhaps grudgingly but also with a confidence that dishwashers would survive. Surely government rules wouldn’t finally make them useless.

But the latest regulatory push by the Department of Energy might have finally gone too far. The DoE says that loads of dishes can’t use more than 3.1 gallons. This amounts to a further intensification of “green” policies that are really just strategies to wreck the consumer experience.

The agency estimated that this would “save” 240 billion gallons of water over three decades. It would reduce energy consumption by 12 percent. It would save consumers $2 billion in utility bills.

But as with all such estimates, these projections have three critical problems.

First, saving money and resources is not always an absolute blessing if you have to give up the service for which the resources are used. Giving up indoor plumbing would certainly save water, just as banning the light bulb would save electricity. The purpose of resources is to use them to make our lives better.

Second, the price system is a far better guide to rational resource use than bureaucratic diktat. If the supply of water or electricity contracts, prices go up and consumers can make their own choices about how to respond. This is true with one proviso: There has to be a functioning market. This is not always true with public utilities.

Third, the bureaucrats rarely consider the possibility that people will respond to rationing by using resources in a different way. A low-flow toilet causes people to flush two and three times, a low-flow showerhead prompts people to take longer showers, and so on, with the end result of even more resource use.

What does breaking the dishwasher accomplish? It drives us back to filling sinks or just running water over dishes for 10 minutes until they are all clean, resulting in vastly more water use.

The Association of Home Appliance Manufacturers, which has quietly gone along with this nonsense all these years, has finally said no.

“At some point, they’re trying to squeeze blood from a stone that just doesn’t have any blood left in it,” said Rob McAver, the lead lobbyist.

The Association demonstrated to the regulators that the new standards do not clean the dishes. They further pointed out that this can only lead to more hand washing. The DoE now says it is revisiting the new standards to find a better solution.

All of this is rather preposterous, since dishwashers are already performing at a far lower level than they did decades ago. Even when I was growing up, they were getting better, not worse. You could put dirty dishes in, even with stuck-on egg and noodles, and they would come out perfectly clean.

I started noticing the change about five years ago. It was like one day to the next that the dishes started coming out with a gross-me-out film on the glasses. I thought it was my machine. So I bought a new one. The new one was even worse, and it broken within a year. Little by little, I started hand washing dishes first, just to make sure they are clean.

It turns out that this was happening all over the country. NPR actually discerned this trend and did a story about it. The actual source of the problem was not the machine or the user, but something that everyone had taken for granted for generations: the soap itself.

The issue here is phosphorous. The role of phosphorus in soap is critically important. It is not a cleaning agent itself but a natural chemical that unsticks the soap from fabrics and surfaces generally. You can easily see how this works by adding phosphorus to a sink full of suds. It attacks the soap and causes it to bundle up in tighter and heavier units, taking oil and dirt with it and pulling it down the drain. It is the thing that extracts the soap, making sure that it leaves surfaces.

Painters know that they absolutely must use phosphorous to prepare surfaces for painting. If they do not, they will be painting on a dirty, oily surface. This is why the only phosphorus you can now find at the hardware store is in the paint department (sold as Trisodium Phosphate). Otherwise, it is gone from all detergents that you use on clothes and dishes, which is a major reason why both fabrics and dishes are no longer as clean as they once were.

Why the war on phosphorous? It is also a fertilizer. When too much of it is dumped into rivers and lakes, algae growth takes over and kills off fish. The bulk of this comes from large-scale industrial farms in specific locations around the country. Regulators, however, took on the easy target of domestic soaps, and manufacturers faced pressure to remove it from their soaps.

Now it is impossible to get laundry or dish soap with phosphorous as part of the mix. If you want clean, you have to physically add your own by purchasing trisodium phosphate in the paint department and adding it to the mixture by hand.

Welcome to regulated America, where once fabulous consumer inventions like refrigerators, freezers, washing machines, and dishwashers have been reduced to a barely functioning state. The reasons are always the same: 1) phosphorous-free detergent, 2) a fetish with saving water, 3) weaker motors that use less electricity, 4) more tepid water due to low default settings on hot water heaters, and 5) reduced water pressure in general.

Put it all together and you have an array of products that no longer function in ways that make our lives better. There is an element of dystopia about this, especially given that these household appliances were first invented and widely deployed in postwar America. This was the country where women, in particular, first started to enjoy the “freedom from drudgery.” It was machines as much as ideology that began to enable women to cultivate professional lives outside the home.

No, we are not going to be forced back to washboards by the river anytime soon. But suddenly, the prospect of having to hand wash our dishes does indeed seem real. If the regulators really do get their way, functioning dishwashers could become like high-flow toilets: contraband to be snuck across borders and sold at a high black market prices.

It seems that the regulators can’t think of much to do these days besides ruining things we love.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World. Follow on Twitter and Like on Facebook.

Is Politics Obsolete? How People Outpace Politicians by Max Borders and Jeffrey A. Tucker

/in , , /by

Hillary Clinton talks of cracking down on the gig economy. Donald Trump speaks of telling American corporations where they can and can’t do business abroad. Bernie Sanders says we have too many deodorant choices. They all speak about immigrants as if it were 1863.

What the heck are these people talking about?

More and more, that’s the response many people have to the current-day political speeches and rhetoric. It’s a hotly contested election, somewhat like 2008, but this time around, public engagement is low, reports Pew.

That’s no surprise, really. Whether it’s the leftists, the rightists, or everyone in between, all of these politicians seem to be blathering about a world gone by — one that has little to do with the 21st century. If they’re not tapping into people’s baser instincts of fear and nativism, they’re dusting off 20th-century talking points about creating “good jobs.”

Maybe there was a time when the political culture seemed to keep up with the pace of innovation. If so, those times are long gone. The rhetoric of electoral politics is exposing the great rift in civic life.

The tools we use every day, the technologies we love, the way we engage each other, the means by which our lives are improving are a consequences of innovation, markets, community, and globalization — that is, by the interactions of free people. Not by politics. And not by the systems politics creates.

The political election is a tired old ritual in which we send our hopes and dreams away to distant capitals. Why do we outsource them to politicians, lobbyists, and bureaucrats: people who are trapped in a system that rewards the worst in people? What’s left of governance is logrolling, spectacle, and unwanted interference in the lives of everyone else.

Politicians seem more concerned with putting the genie of innovation and entrepreneurship back in the bottle than doing anything meaningful. After the election, we try our best to ignore them and get on with life.

Politicians seem more concerned with putting the genie of innovation and entrepreneurship back in the bottle than doing anything meaningful.

In 2012, US voters reelected Barack Obama, and now we’re gearing up to elect someone else. Candidates will talk about their visions and their wonderful plans for the country. But in the last three years, virtually none of the incredible, beautiful upheaval we’ve seen has had anything to do with the presidency or with anyone politician’s plans.

In fact, when you think about what government has done for us in recent years, only one new program comes to mind: Obamacare. Opinions vary on whether that program has been deeply disappointing or an unmitigated disaster.

Now, take a step back and observe the evolution of commercial society and how it is bringing us unprecedented bounty. The digital sector of emergent, market-generated, people-driven, technology-fueled innovation is fulfilling human aspirations and spreading useful services to people in all walks of life. National borders seem ever more arbitrary. Surprises await us around every corner. Our political systems can claim credit for none of it.

And yet, we are once again being asked to turn to politicians to drive progress.

Consider how much our lives and technologies have changed since the last presidential election. Smartphone ownership has gone from 300 million to 2 billion, meaning that most of the population of the developed world — and large parts of the rest — now have access to a wireless supercomputer in their pockets. As a result, we are more in touch than ever.

There are now dozens of ways for anyone to keep in contact with anyone else through text messaging and video, and most of the services are free. Transportation in cities has fundamentally changed due to ridesharing and app-based systems that are outcompeting municipal taxis. Traditional travel lodging has been disrupted through mobile applications that turn every empty room into a hotel, and finding permanent lodging is easier than ever. You can find the ratings for any service or establishment instantly with a click or a tap, long before you purchase. You can feasibly shop for and buy a house without ever having stepped inside of it.

Cryptocurrency is becoming a viable alternative to national monies, and payment systems on distributed networks are being customized for peer-to-peer exchanges of property titles.

The mass distribution and availability of mobile applications with maps means that you are never lost, and, moreover, that you can be intensely aware of everything around you, wherever you are or wherever you are planning to be. Extended families that are spread out over large geographic regions can stay constantly in touch, chatting and playing games.

The way we help our neighbors and communities is improving. We can contribute to charitable causes with just a click. We are closer to our neighbors and their needs — whether it’s a missing cat, a call for a handyman, or childcare for Saturday night. We can be on the lookout after a break-in and share video of the perpetrators instantly.

The way we consume music has fundamentally changed. We once bought CDs. Then we downloaded particular tracks and albums. With Internet everywhere, we now stream a seemingly endless variety of genres. The switch between classical and indie rock requires only a touch. And it’s not just new music we can access, but vast archives and recreations of music dating to antiquity. Instantly.

Software packages that once cost thousands are now low-cost downloadable apps. Many of us live in the cloud now, so that no one’s life is ruined by a computer crash. Lost hardware can be found with built-in tracers — even stealing computers is harder than ever.

Where we work no longer matters as much. 4G LTE means a powerful Internet connection wherever you are, and WiFi on airlines means staying in touch even while above the clouds. Online document signing means total portability and the end of the physical world for most business transactions. You can share almost anything — whether grocery lists or whole writing projects — with anyone and work in real time. More people than ever work from home because they can.

News is now crowdsourced through Twitter and Facebook — or through mostly silly sites like BuzzFeed. There are thousands of competitors, so that we can know what we want to know wherever we are. Once there was only “national news”; now a news event has to be pretty epic to qualify, and much of the news that we are interested in never even makes old-line newspapers.

Edward Snowden revealed ubiquitous surveillance, escaped prosecution, and now, thanks to technology, has been on a worldwide speaking tour, becoming the globe’s most famous public intellectual. This is despite his having been censored and effectively exiled by the world’s biggest and most powerful state. He has a great story to tell, and that story is more powerful than any of the big shots who want him to shut up.

Pot has been effectively legalized in many American cities, and the temperature on the war against it has dropped dramatically. When dispensaries are raided, the news flies all over the Internet within minutes, creating outrage and bringing the heat down on the one-time masters of the universe. There is now a political risk to participating in the war on pot — something unthinkable even 10 years ago. And as police continue to abuse their power, citizens are waiting with cameras.

Oil prices have collapsed, revealing the fallacy of peak oil. This happened despite pressure in the opposite direction from every special interest, from environmentalists to the oil industry itself. The reason was again technological. We discovered better and cheaper ways of drilling, and, in so doing, exposed vastly more resources than anyone thought accessible.

At the very time when oil and gas seemed untouchable, we suddenly saw electric cars becoming viable options. This was not due to government mandates — regulators tried those for years — but due to some serious innovation on the part of one remarkable company. It’s not even the subsidies, such as they are, that are making the difference; it’s the fine-tuning of the machine itself. Tesla even took it a step further and released its patents into the commons, allowing innovation to spread at a market-based pace.

We are now printing houses in one day, vaping instead of smoking, legally purchasing pharmaceuticals abroad, using drones to deliver consumer products, and enjoying one-day delivery of just about everything.

In the last four years, the ebook became a mass consumer item, outselling the physical book and readable on devices within the budget of just about everyone. And despite attempts to keep books offline, just about anything is now available for download, putting all the world’s great literature, in all major languages, at our fingertips.

Here we go again, playing “let’s pretend” and electing leaders under the old-fashioned presumption that it is politics that improves the world and drives history forward.

And speaking of languages, we now have instant access to translation programs that allow us to email and even text with anyone in a way he or she can understand regardless of language. It’s an awesome thing to consider that this final barrier to universal harmony, once seen as insuperable, is in the process of melting away.

These are all ways in which the world has been improved through markets, creativity, and free association. And yet, here we go again, playing “let’s pretend” and electing leaders under the old-fashioned presumption that it is politics that improves the world and drives history forward.

Look around: progress is everywhere. And it is not because we are electing the “right people.” Progress occurs despite politics and politicians, not because of them.

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.

Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World. Follow on Twitter and Like on Facebook.

Who Is Building the Private, Peer-to-Peer Marketplace? An Interview with Sam Patterson

/in , , , /by

Sam Patterson (sam@samuelrpatterson.com) is an author and technology enthusiast from Virginia. He has written about decentralized technologies such as bitcoin and OpenBazaar. Sam recently cofounded a company called OB1 to help build the decentralized marketplace OpenBazaar.

The Freeman: Your project, OpenBazaar, has been awarded $1 million in seed funding so far. Congratulations. What is it, and what does it do?

Patterson: OpenBazaar is an open source project to create a decentralized marketplace online where anyone in the world can buy or sell any goods or services with anyone else in the world, for free, using bitcoin. A few of the core project members (including myself) recently started a company called OB1, which received the funding in order to hire full-time developers and make OpenBazaar a reality.

Online commerce today is mostly centralized; companies own websites where users visit to buy and sell things. Those companies charge fees, monitor their users’ data, and censor their transactions based on their own rules and on behalf of the government.

OpenBazaar is different. Instead of relying on a centralized third party, trades occur directly between buyers and sellers. Users install peer-to-peer software on their computers, similar to bitcoin or BitTorrent, and this connects them to other users running the same software. They transact in bitcoin. Since there’s no middleman, there are no fees, no collection of data, and no censorship of trade.

The Freeman: Some people will object to OpenBazaar by saying it’s not transparent — that it will help criminals thrive. How do you answer such charges?

Patterson: Some have inaccurately labeled us as an evolved Silk Road — an underground drug marketplace. This is absolutely false, for many reasons. The Silk Road was centralized and run by a small group for profit. It catered to a specific group of people who traded in illicit goods.

In contrast, OpenBazaar is a decentralized marketplace, not run for profit. It doesn’t cater to any group, or any type of trade, but is open for all users to buy and sell anything they want with each other. It’s a much bigger vision than these narrow dark markets.

We expect that use of OpenBazaar will reflect markets in society. There will be some users who engage in activity that is morally or legally objectionable, but the vast majority of users will be engaging in positive and constructive trade. We don’t know exactly how people will use OpenBazaar to better their lives, but we believe that it will, and we can’t wait to see it happen.

The Freeman: What are the implications of this kind of technology for the world’s poorest people?

Patterson: Most of the existing centralized market platforms that I mentioned earlier don’t focus on the developing world, or even if they do, the payment methods used aren’t accessible for many of the world’s poor. Bitcoin requires no credit checks to use; an Internet connection and computer are all that’s needed. OpenBazaar is the same as bitcoin in this sense. It costs nothing to join and use, and the trade is direct between buyers and sellers; there are no middlemen to take a cut. We hope that by lowering the barriers to entry for online trade, OpenBazaar and bitcoin will bring millions of new users into the online economy.

The Freeman: What are the implications of this kind of technology for most of our readers — that is, wealthier Westerners?

Patterson: Establishing a protocol, client, and network for people to directly engage in trade with each other allows for more efficient transactions. Sellers on eBay who use PayPal regularly pay up to 10 percent fees on each sale. Those are 0 percent on OpenBazaar.

OpenBazaar is also more private. Instead of the centralized platforms getting all the information about your buying or selling habits, now that information is only available to the parties you directly engage with.

Also, if some of your readers are already bitcoin users, OpenBazaar is the first decentralized platform for them to spend their decentralized money. Many value decentralized technology simply because it takes power away from the gatekeepers in our world.

The Freeman: How do you market OpenBazaar? How do you build culture around it?

Patterson: We haven’t needed to market OpenBazaar so far. The bitcoin community is very excited to see it built. Once we look to go beyond bitcoin users and into the broader e-commerce space, then we’ll need to consider how to market ourselves. Likely, it will be around the lack of fees, which is compelling to retailers who have small margins.

Our culture is one that supports free trade and voluntary interactions in society. The ability to engage in trade directly with someone in person is a great thing, and it’s a shame that hasn’t been possible online — until now.

The Freeman: How flexible, robust, and “anti-fragile” is this system — especially with respect to predatory states who will likely try to foil its development?

Patterson: OpenBazaar is very robust, similar in design to bitcoin or BitTorrent. Because it’s run locally on users’ computers, there’s no central point of failure to attack. We don’t anticipate that OpenBazaar will face opposition from governments any more than other online platforms have; they have the same tools at their disposal to go after individual storeowners. But they cannot take down the whole system at once, unlike the existing platforms.

The Freeman: When will OpenBazaar be ready to use?

Patterson: We plan on publishing the first full release in November this year. The code is open source so developers can view it any time at our Github.

The Freeman: Thank you for speaking with us, Sam.


The Freeman

The Freeman is the flagship publication of the Foundation for Economic Education and one of the oldest and most respected journals of liberty in America. For more than 50 years it has uncompromisingly defended the ideals of the free society.

“Green Banks” Will Drown in the Red by Jonathan Bydlak

/in , , , /by

Why does federal spending matter? There are many reasons, but perhaps the most fundamental is that free markets allocate resources better than governments because markets rely on price instead of politics. Many industries show this observation to be true, but the emerging field of “green banks” offers perhaps one of the clearest recent examples.

A green bank is a “public or quasi-public financing institution that provides low-cost, long-term financing support to clean, low-carbon projects by leveraging public funds…to attract private investment.” Right now, only a handful of green banks are scattered across Connecticut, California, New York, Rhode Island, and Hawaii.

Free marketers rightly doubt whether public funds should be used to finance private startups. But regardless of where one stands in that debate, the states’ struggles serve as a valuable testing ground for future investments.

The State of Connecticut operates under a fairly significant budget deficit. California has been calculating its budgets without taking unfunded pension liabilities into account, and it’s gambling with its ability to service its debt. New York continues to live beyond its means. Rhode Island’s newest budget does little to rehabilitate its deficit spending addiction, and, despite having a balanced budget clause in its state constitution, Hawaii has a pattern of operating at a deficit.

In fact, a state solvency report released by the Mercatus Center has each of these five states ranked in the bottom third of the country, with their solvency described as either “low” or “poor.”

This all raises the question of whether these governments are able to find sound investment opportunities in the first place. Rhode Island couldn’t even identify a bad investment when baseball legend Curt Schilling wanted $75 million to make video games about something other than baseball!

Recently, though, there have been calls to extend the struggling green banking system to the federal level. Mark Muro and Reed Hundt at the Brookings Institute argued in favor of federal action in support of green banks. Somewhat paradoxically, they assert that demand for green banking institutions and the types of companies they finance is so strong that the existing state-based green banks cannot muster enough capital to meet demand.

Wherever there is potential for profit and a sound business plan, lending institutions are likely to be found, willing to relinquish a little capital for a consistent and reasonable rate of return. So where are the private lenders and other investment firms who have taken notice and are competing for the opportunity to provide loans to such highly sought-after companies and products?

Even assuming that there is demand for green banking services, recent experience shows that a federally-subsidized system would likely lead to inefficiency, favor trading, and failure. For instance, the Department of Energy Loan Program is designed to facilitate and aid clean energy startup companies. Its portfolio exceeds $30 billion, but following a series of bad investments like Solyndra, Inc., new loan guarantees have been few and far between. The program has already lost over $700 million.

Even the rosiest measurements do not show particularly exciting returns from this system. The Department of Energy itself estimates that over the lifetime of the loans it’s guaranteed, there exists the potential to see $5 billion in profit. However, those estimates also depend on the peculiar accounting methods the DoE itself employs.

This problem is apparent in other government sectors. For instance, determining how much profit the federal government makes off of student loans depends on who is asked. Some say none, while others say it’s in the billions. Gauging the economic impact or solvency of government programs is notoriously difficult, and different methods can yield what look like very different results. Add to that the consistently uncertain nature of the energy market, and profits are hardly guaranteed.

Examples abound of wasteful federal spending, and the growing green technology and renewable energy industry is no exception. The DoE Loan Program has already faced issues that go well beyond Solyndra: Abound Solar, a Colorado-based solar panel manufacturer, was given a $400 million DoE loan guarantee, only to later file for bankruptcy, potentially costing taxpayers $60 million. The Ivanpah Solar Electric Generating System, a 175,000 unit heliostat array in California, received a $1.6 billion federal loan and, because it failed to produce the amount of power estimated, was forced to later request more than$500 million in federal grants from the Treasury Department. A recent Taxpayers Protection Alliance study showed that risky investments in heavily subsidized solar energy could even lead to a bubble similar to the disastrous 2008 housing bubble.

Those who want to expand the government’s role in green banking likely want to see more clean and renewable energy reach the consumer market, and a lot of people probably applaud that goal — but the real question is whether the proposed means can reliably achieve that end. A wise manager with a solid business plan can find investors who will willingly take a chance. Considering the struggles of several states, trusting the federal government to build an even bigger system would exponentially increase that risk.

In contrast, the market offers opportunity to entrepreneurs in the green technology and renewable energy industries. For instance, GreatPoint Energy, a company specializing in clean coal, successfully went the route that other companies do: Design a product or service, find investors, and compete in the marketplace.

SolarCity, a California-based and publicly traded corporation of over 2,500 employees, entered the industry before many government loan programs were established. Thanks to a sound business model and subsequent horizontal and vertical expansion, it has become a leader in the industry. SolarCity’s success, however, cannot be touted by the Department of Energy’s Loan Program, which declined to invest in the company, leading SolarCity to try — and succeed — in finding private investment.

If GreatPoint or SolarCity had failed, only those who willingly participated in the startup would suffer the consequences. The issue with green banking — and indeed government “investments” more generally — is that taxpayers are not party to the negotiations but are the ones ultimately on the hook for failures.

In absolute terms, these billions of dollars are a lot of money. But in the grand scheme of government spending, the amount of money invested in green banks and renewable energy production is relatively small. If Social Security is the Atlantic Ocean, and wasteful defense appropriations are the Mediterranean, then green energy investments fall somewhere in the range of the Y-40 pool: easily measurable but certainly not insignificant.

Your odds of drowning may be smaller in the pool than the ocean, but that doesn’t make the drowning itself any more pleasant. The federal government is already under water; adding new liabilities on the hope that politicians can guess the future of energy is merely a step towards the deep end, not the ladder out.


Jonathan Bydlak

Jonathan Bydlak is the founder and president of the Institute to Reduce Spending and the Coalition to Reduce Spending.

The Politics of Nostalgia: Why Does the Left Want to Take Us Backwards? by Steven Horwitz

/in , , , /by

One of the more curious developments in the last couple of years has been left-wing nostalgia for the economy of the 1950s.

Don’t political progressives usually portray themselves as being on “the right side of history” — representing, as the term suggests, the march of “progress”?

Not when it comes to the economy.

Paul Krugman has written a number of columns over the last decade about how much better things were in the middle of the 20th century. More recently, we have presidential candidate Hillary Clinton making a major economic policy statement in which she longs for a time like the 1950s when workers had the structure of the corporate world and unions through which to lobby and negotiate for pay and benefits, rather than the so-called “gig” economy of so many modern freelance employees, such as Uber drivers. “This on-demand or so-called gig economy is creating exciting opportunities and unleashing innovation,” Clinton said, “but it’s also raising hard questions about workplace protection and what a good job will look like in the future.”

To protect Americans from the uncertain future, Clinton promised she would “crack down on bosses that exploit employees by misclassifying them as contractors or even steal their wages.”

In an economy where technology has enabled people to have a great deal more flexibility with their workdays and independence with their work choices, it’s now the “progressives” who are complaining about the economic organizations that have been agents of more efficient resource use, expanded choice for workers, and cheaper goods for consumers.

In short, the progressives are complaining about what would otherwise be called progress.

And let’s not let the conservatives off the hook here either, as they demonstrate their own nostalgia for an economy of the past, with cheers for Donald Trump’s anti-immigrant and anti-trade tirades and for his general love of dirigiste policies. Immigration and trade have also expanded the range of work available, lifted millions out of poverty through better-paying jobs in the United States, and enriched the rest of us through more affordable goods and services.

What’s particularly amusing about both sides, but especially the progressives, is how wrong they are about life for the average American being better back in the 1950s, including how much more secure they were. In a terrific paper for the Cato Institute, Brink Lindsey effectively demolished Krugman’s nostalgia with some actual data about the economy of the 1950s. He pointed out that the increase in income inequality since then noted by so many progressives is largely overstated, and that the economy they are nostalgic for is one that restricted competition in a variety of ways, mostly to the benefit of the politically influential. Limits on immigration and trade, in particular, prevented the 1950s economy from achieving the reductions in cost and increase in variety that we associate with our economy today.

Does anyone really want to go back to the stagnant, conformist, more poverty-stricken world of the 1950s?

It is more than a little ironic that modern progressives are nostalgic for the very economy that GOP front-runner Donald Trump would appear to want to create.

As I argued in a recent paper, when we look at the cost of living in terms of the work hours required to purchase basic household items, most goods and services are far cheaper today than in the 1950s. The equivalents of those items today are also of higher quality: think about the typical household TV or refrigerator in 1955 versus 2015. These substantial decreases in cost have had another effect. They have made these goods increasingly accessible to the poorest of Americans. American households below the poverty line are far more likely to have a whole variety of items in their homes than did poor families in the 1950s. In fact, they are more likely to have those things in their houses than was a middle-class American family in the 1970s.

When you also consider the number of goods that weren’t even available in the 1970s or 1950s, from technology like computers and smartphones, to innovative medicines and medical procedures, to various forms of entertainment, to a whole number of inventions that have made us safer, healthier, and longer-lived, it’s difficult to argue that things were better “back then.”

The effect of all of this change driven by increased competition is that our world is one in which the middle class and poor are better off, and the gap between poor and rich as measured by what they consume has narrowed substantially. Does anyone really want to go back to the stagnant, conformist, more poverty-stricken world of the 1950s?

Politicians do. And here’s one reason why: back then, it was easier to influence and control people’s economic lives. Progressives with a desire to shape their ideal economy aren’t happy with the world of freelancers, Uber, and independent contractors.

The economy of the 1950s and 1970s had organizational focal points where politicians could exercise leverage and thereby influence the lives of large numbers of citizens.

I’m thinking here of the auto companies in the 1950s, the oil companies in the 1970s, and any number of industries where large firms were created by restrictions on domestic and foreign competition, which were easy points of contact for politicians with a desire to control, and which had corporate leaders who were happy to reap the benefits of corporatism.

In a world of Uber, Airbnb, and all the rest, there are no central points of leverage. Facebook produces no content, Uber owns no cars, Alibaba owns no inventory. More important: Uber has no employees, only contractors. If you are Clinton or Trump, or even Krugman, there’s nowhere to go to exercise your power or to drum up support from workers in one place. There’s nothing to grab hold of. There are just people trading peacefully with each other, enriching everyone in the process.

The real irony, once again, is that what this decentralized economy has produced is more freedom and more flexibility for more workers. The same progressives who railed against the conformism of the 1950s a decade later are now nostalgic for what their predecessors rejected and are rejecting exactly the “do your own thing” ethos their 1960s heroes fought for.

The “gig” economy works for people who want options and who want flexible hours so they can pursue a calling the rest of the day. Or perhaps they want to spend a few hours a week driving an Uber because Obamacare caused their employers to cut their hours at their other job.

Whatever the reason, this economy offers the freedom and flexibility for workers, and the benefits for consumers, that represent the progress progressives should love. That progressives (and conservatives) with power are fighting against it tells you that they are much more concerned with power than with progress.

Nostalgia is a dangerous basis for making policy, whether left or right.


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.

Why Is Economics “the Dismal Science”? The Reason May Surprise You! by David R. Henderson

/in , , , /by

In an otherwise excellent post responding to Noah Smith about economic growth, my Hoover colleague and friend John Cochrane makes a mistake in the history of economic thought.

John writes:

They do not call us the “dismal science” because we think the current world is close to the best of all possible ones, and all there is to do is haggle over technical amendments to rule 134.532 subparagraph a and hope to squeeze out 0.001% more growth.

Usually, the role of economists is to see the great possibilities that every day experience does not reveal. (“Dismal” only refers to the fact that good economics respects budget constraints.)

Actually, that’s not what dismal refers to. David M. Levy and Sandra J. Peart write:

Everyone knows that economics is the dismal science. And almost everyone knows that it was given this description by Thomas Carlyle, who was inspired to coin the phrase by T. R. Malthus’s gloomy prediction that population would always grow faster than food, dooming mankind to unending poverty and hardship.

While this story is well-known, it is also wrong, so wrong that it is hard to imagine a story that is farther from the truth. At the most trivial level, Carlyle’s target was not Malthus, but economists such as John Stuart Mill, who argued that it was institutions, not race, that explained why some nations were rich and others poor.

Carlyle attacked Mill, not for supporting Malthus’s predictions about the dire consequences of population growth, but for supporting the emancipation of slaves. It was this fact–that economics assumed that people were basically all the same, and thus all entitled to liberty–that led Carlyle to label economics “the dismal science.”

They go on to write:

Carlyle disagreed with the conclusion that slavery was wrong because he disagreed with the assumption that under the skin, people are all the same. He argued that blacks were subhumans (“two-legged cattle”), who needed the tutelage of whites wielding the “beneficent whip” if they were to contribute to the good of society.

In a speech at Susquehanna University earlier this year, I quoted this and pointed out that it was the classical economists, John Stuart Mill, et al, who believed that black lives matter.

This post first appeared at Econlog, the blog of the Library of Economics and Liberty. © Liberty Fund, Inc., reprinted with permission.


David Henderson

David Henderson is a research fellow with the Hoover Institution and an economics professor at the Graduate School of Business and Public Policy, Naval Postgraduate School, Monterey, California. He is editor of The Concise Encyclopedia of Economics (Liberty Fund) and blogs at econlib.org.

Don’t Agree with the Mayor’s Politics? No Permits for You! by Walter Olson

/in , , , , /by

Boston mayor Martin Walsh gives Donald Trump the Chick-Fil-A rush* over his immigration opinions. Via the Boston Herald:

If Donald Trump ever wants to build a hotel in Boston, he’ll need to apologize for his comments about Mexican immigrants first, the Hub’s mayor said.

“I just don’t agree with him at all,” Boston Mayor Martin J. Walsh told the Herald yesterday. “I think his comments are inappropriate. And if he wanted to build a hotel here, he’d have to make some apologies to people in this country.”

More on the use of permitting, licensing, and other levers of power to punish speech and the exercise of other legal rights at Overlawyered’s all-new regulatory retaliation tag. (And no, I’m not exactly thrilled with Mayor Walsh for making me take Trump’s side in an argument.)

* In case you’d forgotten the infamous Chick-Fila-A brouhaha, here’s Overlawyered’s coverage:

The uproar continues, and quite properly so (earlier here and here), over the threats of Boston Mayor Thomas Menino and Chicago alderman Proco (“Joe”) Moreno to exclude the Chick-Fil-A fast-food chain because they disagree (as do I) with some of the views of its owner.

Among the latest commentary, the impeccably liberal Boston Globe has sided with the company in an editorial (“which part of the First Amendment does Menino not understand?…A city in which business owners must pass a political litmus test is the antithesis of what the Freedom Trail represents”), as has my libertarian colleague Tom Palmer at Cato (“Mayor Menino is no friend of human rights.”)

The spectacle of a national business being threatened with denial of local licenses because of its views on a national controversy is bad enough. But “don’t offend well-organized groups” is only Rule #2 for a business that regularly needs licenses, approvals and permissions. Rule #1 is “don’t criticize the officials in charge of granting the permissions.”

Can you imagine if Mr. Dan Cathy had been quoted in an interview as saying “Boston has a mediocre if not incompetent Mayor, and the Chicago Board of Aldermen is an ethics scandal in continuous session.” How long do you think it would take for his construction permits to get approved then?

Thus it is that relatively few businesses are willing to criticize the agencies that regulate them in any outspoken way (see, e.g.: FDA and pharmaceutical industry, the), or to side with pro-business groups that seriously antagonize many wielders of political power (see, e.g., the recent exodus of corporate members from the American Legislative Exchange Council).

A few weeks ago I noted the case of Maryland’s South Mountain Creamery, which contends through an attorney (though the U.S. Attorney for Maryland denies it) that it was offered less favorable terms in a plea deal because it had talked to the press in statements that wound up garnering bad publicity for the prosecutors. After that item, reader Robert V. wrote in as follows:

Your recent article about the [U.S. Attorney for Maryland] going after the dairy farmers reminded me a case in New York state where the Health Department closed down a nursing home in Rochester. They claim is was because of poor care, the owner claims it was because he spoke out against the DOH.

The state just lost a lawsuit where the jury found the DOH targeted the nursing home operator because he spoke out against them.

According to Democrat and Chronicle reporters Gary Craig and Steve Orr, the jury found state health officials had engaged in a “vendetta” against the nursing home owner:

Beechwood attorneys maintained that an email and document trail showed that Department of Health officials singled out Chambery for retribution because he had sparred with them in the past over regulatory issues. The lawsuit hinged on a Constitutional argument — namely that the state violated Chambery’s First Amendment rights by targeting him for his challenges to their operation.

The Second Circuit panel opinion in 2006 permitting Chambery/ Beechwood’s retaliation claim to go forward is here. It took an extremely long time for the nursing home operators to get their case to a jury; the state closed them down in 1999 and the facility was sold at public auction in 2002.

Versions of these posts first appeared at Overlawyered.com, Walter Olson’s indispensable law blog, published by the Cato Institute. 


Walter Olson

Walter Olson is a senior fellow at the Cato Institute’s Center for Constitutional Studies.

Lessons from the Richest Duck in the World by Robert Anthony Peters

/in , , , , /by

Scrooge is an unlikely name for a hero. Since Dickens’s A Christmas Carol, it has elicited thoughts of disagreeable skinflints. That all changed with Scrooge McDuck.

At first, Donald Duck’s Uncle Scrooge was quite Dickensian in character, but creator Carl Barks knew that a churlish miser would not sustain an audience’s sympathy. To really give this character legs (or wings), he would have to give him the kind of morals that resonate with readers.

It worked. Disney’s Duck universe has been popular for over 60 years. My generation enjoyed Duck Tales on TV. An older generation avidly read Uncle Scrooge comics, the first issue of which has Scrooge explaining how he earned his fortune: “I made it by being tougher than the toughies, and smarter than the smarties! And I made it square!”

Barks created a wealth of economic lessons through fables that are still enjoyed around the globe today.

A Modern-Day Aesop

Barks was born in rural Oregon to a farming family at the turn of the 20th century. Growing up, he had a hardscrabble existence. Due to several moves, living far from schools, and poor hearing from childhood measles, he had minimal education. He worked as a farmer, cowboy, swamper, railroad worker, printer, and more. His first gig as an illustrator was for a men’s humor magazine. In late 1935, he discovered an ad in the newspaper for Disney. Though the job offered only half his current pay, he decided to join the animation department and eventually the comic book publisher. Barks was a man who was willing to work hard, work well, and take a chance on great possibilities. The storytelling in these comics featured Barks’s strongly individualist outlook, his belief in the entrepreneur, and his optimism in markets resulting in human benefit.

Trade, Trade Again

Before Barks created Uncle Scrooge, he was already exploring the beneficial nature of trade in 1947’s “Maharajah Donald,” an issue of the Donald Duck comic book series, which featured Donald and his nephews Huey, Dewey, and Louie. The story begins with the boys cleaning out the garage at Donald’s behest, with the understanding that they could keep whatever he did not want. Predictably, he wanted all the things and was only willing to part with one stub of a pencil that’s “not worth a thing.” Less than thrilled, the boys keep it to trade for something else. They run into Piggy, who offers them a ball of string. Figuring it is not worse, they trade. As luck would have it, they run into a kid whose kite flying is limited by his length of string. Eager to get it really soaring, he trades them his knife for their string. One of the nephews feels a pang of guilt, but in short order, the other two chime in, “Don’t let it bother you” because “he’s happy!”

Eventually, they trade up to a pearl and decide to cash in. There happens to be a man in the jewelry store who was about to sail to India to obtain a pearl much like what they have in their hands. They exchange it for the steamboat ticket, which Donald promptly steals from them. Donald boards, the nephews stow away, and they arrive in India, only for Donald to run afoul of the local magistrate to the point of being fed to the royal tigers. While wracking their brains to find ways to save him, his nephews run over their list of assets: “We don’t know a soul we could ask for help … and we haven’t a cent for bribing the guards … we just can’t do something that is impossible.” But lo and behold, what do they spy next but an old stub of a pencil! To which the nephews declare, “We’re rich!” They then commence trading goods until they have acquired a creative solution to free their uncle from his predicament.

The story presents a cornucopia of economics lessons: subjective value, mutual gains from trade, and entrepreneurship. What better display of subjectivity than to have your life saved by the application of market exchange to a good that you considered worthless? Mutual gains are clear by the voluntary nature and perceived benefit of each party to the trade. (Most poignant is the Kirznerian alertness to the pencil and its use in trade.)

A Land without Greed

“Tralla La” is the tale of an exasperated Uncle Scrooge. Tired of being hounded for his wealth and time by charities, businessmen, and tax collectors, he finally snaps, telling Donald, “I want to go someplace where there is no money and wealth means nothing!” From his physician, he hears of the land of Tralla La, a land without gold, jewels, or money, deep in the Himalayas. Scrooge, Donald, and nephews set forth, and as they fly overhead, they see a land of abundance. The leader explains, “We Tralla Lallians have never known greed! Friendship is the thing we value most!”

All is serene until a farmer discovers a bottle cap that Scrooge had carelessly tossed out of the plane window. The honest peasant attempts to return it to Scrooge, who declines it, considering it worthless. Subjective value makes its appearance here, when the farmer and his fellow villagers invest this item with great desirability, leading to a bidding war that goes from 10 sheep to 20 and finally to a year’s yield of rice. When it is discovered that Scrooge has a case of bottles, all with caps, the Tralla Lallians attempt to purchase it, to no avail. Finally, the mob declares him a “meanie” and wants his taxes raised. The only solution to this problem is to call in an air strike — not of bombs, but bottle caps.

Even a humble bottle cap can spark desire because of its scarcity. Its price will be high if it is the only one around and perceived to have value. The results of “Helicopter Ben’s” strategy are on display here as well. Though the Federal Reserve may believe that it can make people wealthier by increasing the money supply, Uncle Scrooge knows that increasing the number of bottle caps will diminish their worth.

From Riches to Rags to Riches

Finally, and probably the most famous Uncle Scrooge story in economics circles, we have “A Financial Fable.” Beginning as a bucolic idyll, the story opens with  the entire Duck clan working the fields and tending the livestock. The nephews sing the praises of hard work while Donald complains, wanting money for nothing.

Scrooge investigates his new bank, a corn crib, hiding his money in plain sight. This may not have been his brightest idea: a cyclone whips through and takes all of his money, scattering it over the countryside. The nephews are distraught, but Scrooge simply replies, “If I stay here and tend to my beans and pumpkins, I’ll get it all back.”

Donald and the rest of the country quit their jobs and set off to “see the world.” Meanwhile, Scrooge and the boys continue to labor on their farm. With no one else working and nothing being produced, Donald and the rest of the world come straggling back. Scrooge is happy to feed them — at new market prices. Eggs are a million dollars apiece, cabbage is two million, and ham is a bargain at a cool trillion. With each purchase, the money from Scrooge’s corn crib trickles back and he becomes, yet again, the richest duck in the world.

With another “helicopter” scenario, we see the inflationary effects of a massive injection of money. We also get a glimpse into many aspects of wealth — how it is created, how it is maintained, and what happens when we redistribute in ways that are not related to market performance. Barks knew he was creating a morality tale of capitalism, admitting, “I’m sure the lesson I preached in this story of easy riches will get me in a cell in a Siberian gulag someday.”

Economic Tales

Economics is all around us — even in our comic books.

Now cable channel Disney XD has announced plans to relaunch Duck Tales in 2017. As long as the show sticks to the characters and stories inspired by the great Carl Barks, it will offer us plenty to enjoy — and economics lessons that are sure to fit the bill.

Robert Anthony Peters

Robert Anthony Peters is an actor, director, producer, and member of the FEE alumni advisory board.

Could Hillary Really “Restore” the Middle Class? by Donald J. Boudreaux

/in , , , /by

Eduardo Porter opens his column today by asking “Could President Hillary Clinton restore the American middle class?” (“Sizing Up Hillary Clinton’s Plans to Help the Middle Class”).

Mr. Porter illegitimately presents as an established fact a proposition that is anything but. It’s true that between 1967 and 2009 the percent of American families with annual incomes between $25,000 and $75,000 (in 2009 dollars) fell from 62 to 39 – a fact that, standing alone, might be interpreted as evidence that the middle class is disappearing.

Yet this fact does not stand alone, for it’s also true that the percent of families with annual incomes lower than $25,000 also fell (from 22 to 18) while the percent of families with annual incomes of $75,000 and higher rose significantly – from 16 to 43.*

So given these Census Bureau data – which are strong evidence that America’s middle class, if disappearing, is doing so by moving into the upper classes – to ask if President Hillary Clinton could restore the American middle class is to ask if she will make the bulk of today’s prosperous families poorer rather than richer.

This post first appeared at CafeHayek.

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.