But there is light at the end of the traffic-jammed tunnel: the driverless car. Thanks to millions of dollars in driverless technology investment by tech giants like Google and Tesla, the era of road rage, drunk driving, and wasted hours behind the wheel could be left in a cloud of dust within the next two decades.
Driverless vehicles are coming, and they are coming fast…. As close as 2025 — that is in a mere 10 years — our advancing state of technology will begin disrupting our economy in ways we can’t even yet imagine. Human labor is increasingly unnecessary and even economically unviable compared to machine labor.
The problem, Santens says, is that there are “over 10 million American workers and their families whose incomes depend entirely or at least partially on the incomes of truck drivers.” These professional drivers will face unemployment within the next two decades due to self-driving vehicles.
Many assume that any initial job loss accompanying new technology harms the economy and further impoverishes the most vulnerable, whether fast food workers or truck drivers. It’s true that losing a job can be an individual hardship, but are these same pundits ready to denounce the creation of the light bulb as an economic scourge because it put the candle makers out of business?
Just as blacksmithing dwindled with the decline of the horse-drawn buggy, economic demand for certain jobs waxes and wanes. Jobs arise and continue to exist for the sole reason of satisfying consumer demands, and the consumer’s demands are continuously evolving. Once gas heating devices became available, most people decided that indoor fires were dirtier, costlier, and less effective at heating and cooking, so they switched. While the change temporarily disadvantaged those in the chimney-sweeping business, the added value of the gas stove vastly improved the quality of life for everyone, chimney sweeps included.
There were no auto mechanics before the automobile and no web designers before the Internet. It is impossible to predict all the new employment opportunities a technology will create beforehand. Countless jobs exist today that were unthinkable in 1995 — and 20 years from now, people will be employed in ways we cannot yet begin to imagine, with the driverless car as a key catalyst.
The historical perspective doesn’t assuage the naysayers. If some jobs can go extinct, couldn’t all jobs go extinct?
Yes, every job we now know could someday disappear — but so what? Specific jobs may come and go, but that doesn’t mean we will ever see a day when labor is no longer demanded.
Economist David Ricardo demonstrated in 1817 that each person has a comparative advantage due to different opportunity costs. Each person is useful, and no matter how unskilled he or she may be, there will always be something that each person has a special advantage in producing. When this diversity of ability and interest is coupled with the infinite creativity of freely acting individuals, new opportunities will always arise, no matter how far technology advances.
Neither jobs nor labor are ends in themselves — they are mere means to the goal of wealth production. This does not mean that every person is concerned only with getting rich, but as Henry Hazlitt wrote in Economics in One Lesson, real wealth consists in what is produced and consumed: the food we eat, the clothes we wear, the houses we live in. It is railways and roads and motor cars; ships and planes and factories; schools and churches and theaters; pianos, paintings and hooks.
In other words, wealth is the ability to fulfill subjective human desires, whether that means having fresh fruit at your local grocery or being able to easily get from point A to point B. Labor is simply a means to these ends. Technology, in turn, allows labor to become far more efficient, resulting in more wealth diffused throughout society.
Everyone knows that using a bulldozer to dig a ditch in an hour is preferable to having a whole team of workers spend all day digging it by hand. The “surplus” workers are now available to do something else in which they can produce more highly valued goods and services. Over time, in an increasingly specialized economy, productivity rises and individuals are able to better serve one another through mutually beneficial exchanges in the market. This ongoing process of capital accumulation is the key to all meaningful prosperity and the reason all of humanity has seen an unprecedented rise in wealth, living standards, leisure, and health in the past two centuries.
Today, on the cusp of one of the biggest innovations since the Internet, there is, predictably, similar opposition. But those who wring their hands at the prospect of the driverless car fail to see that its greatest potential lies not in reducing pollution and road deaths, nor in lowering fuel costs and insurance rates, but rather in its ability to liberate billions of hours of human potential that truckers, taxi drivers, and commuters now devote to focusing on the road.
No one can know exactly what the future will look like, but we know where we have been, and we know the principles of human flourishing that have guided us here.
If society is a car, trade is the engine — and technology is the gas. It drives itself. Enjoy the ride.
https://drrichswier.com/wp-content/uploads/plane-cockpit-e1436888397393.jpg317640Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2015-07-14 11:41:462015-07-14 11:59:38Should We Fear the Era of Driverless Cars or Embrace the Coming Age of Autopilot? by Will Tippens
Sen. Bernie Sanders is a democratic socialist running for President of the United States, and his passionate populist message has won him many admirers on the left. His willingness to push for radical progressive policies (such as top income tax rates of 90 percent), which mainstream Democrats are too moderate to embrace, is steadily eroding Hillary Clinton’s dominance of the Democratic primary field.
There are several “facts” upon which Sanders has built his campaign. Probably the most important is the claim that the American middle class has been declining for quite some time. According to Sanders’s website:
The long-term deterioration of the middle class, accelerated by the Wall Street crash of 2008, has not been pretty…
Since 1999, the median middle-class family has seen its income go down by almost $5,000 after adjusting for inflation, now earning less than it did 25 years ago.
The situation is clearly dire, and the right man for the momentous job of saving the middle class is Sen. Sanders. Well, at least that’s [the] message his campaign seeks to convey.
But what if the middle class isn’t becoming worse off over time? What if the American middle class is actually doing as well as ever? Would Sanders’s supporters be as likely to endorse his more radical ideas if they weren’t convinced that the middle was becoming poorer over time — and that only progressive policies could reverse this trend?
It’s worth taking the time to examine Sanders’s claim that the middle class is worse off now than in the past. He doesn’t cite a source for his statistic, but it seems to rely on looking at the median household income over time and adjusting for inflation using the Consumer Price Index (CPI).
This is a problematic methodology because it does not control for the well-known fact that the median household has itself grown smaller over time. Even if median income stayed the same over time, a decline in the number of people in the median household over time would lead to an increase in income per household member.
Additionally, Sanders’s statistic looks at income before taxes and transfers. Transfer payments and tax credits (like the Earned Income Tax Credit) make up a significant portion of income for many lower-income families. Not controlling for these factors understates their true economic well-being.
The figures cited by Sanders also fail to take into account the fact that a larger proportion of worker compensation comes in the form of non-cash benefits (such as health insurance) now than in the past.
According to research published by the National Tax Journal, “Broadening the income definition to post-tax, post-transfer, size-adjusted household cash income, middle class Americans are found to have made substantial gains,” amounting to a 37 percent increase in income over the 1979-2007 period.
Similarly, in 2014, the Congressional Budget Office found that adjusting for changing household size and looking at income after taxes and transfers, households in all income quintiles are much better off than they were a few decades ago.
The incomes of households in the three middle income quintiles grew 40 percent between 1979 and 2011. Somewhat surprisingly, given the histrionics about the state of America’s poor, income in households in the lowest quintile was 48 percent higher in 2011 than it was in 1979.
Research from the Federal Reserve Bank of Minneapolis comes to even more optimistic conclusions.
The Consumer Price Index is widely understood to overstate inflation — among other reasons, by failing to accurately account for improvements in quality and consumer substitutions for newer or cheaper goods — which is why the Federal Open Market Committee uses an alternative measurement for inflation, the Personal Consumption Expenditures (PCE) price index, which includes more comprehensive coverage of goods and services than the CPI.
If the CPI does, in fact, overstate the extent to which prices rise over time, then it also consequently understates the growth in real, inflation-adjusted incomes over time.
Indexing median household income (post taxes and transfers) to inflation using the PCE, rather than the CPI, and adjusting for the long-run decline in household size shows that median incomes have “increased by roughly 44 percent to 62 percent from 1976 to 2006.”
Moreover, the focus on statistical categories ignores what is happening at the level of individuals and households, which may move up or down the income ladder, through different income quintiles. And studies have consistently shown that this income mobility has not changed in decades.
While the rate of growth for some income categories in recent years has been sluggish, the claim that middle incomes are declining precipitously is false. Based on these findings, it seems appropriate to conclude that Sanders’ claim that there exists a “long-term deterioration of the middle class” is patently untrue.
Learn more about wage “stagnation” from former FEE president Don Boudreaux:
Corey Iacono is a student at the University of Rhode Island majoring in pharmaceutical science and minoring in economics.
https://drrichswier.com/wp-content/uploads/bernie-sanders.jpg284460Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2015-07-14 07:17:522015-07-14 10:01:59Bernie Sanders Thinks the Middle Class Is Deteriorating: He’s Wrong! by Corey Iacono
Tell someone on the left that crony capitalism is not the same as the free market and they’ll often respond that capitalism as it really exists is crony capitalism. They will say that there has never been an instance of capitalism in which government-sponsored or government-abetted cronyism didn’t play a substantial role — either through war, taxation, or slavery — in a market economy. As a result, the failings of crony capitalism — corruption, privilege, oppression, business cycles — are simply the failings of capitalism itself.
One correct response is to show that the less intervention there has been, the less corrupt, privileged, oppressive, and unstable the socioeconomic order also has been. Many would simply reiterate that, historically, laissez-faire capitalism has never existed, nor could it exist, without interventionism. They simply will not or cannot distinguish the free market from state capitalism, corporate capitalism, or other forms of the mixed economy.
Which is perhaps why some on the left have adopted the term “neoliberalism,” a perfectly good word that has come to represent an imbroglio of vaguely market-cum-corporativist views. They can’t imagine how markets could work without some form of state intervention holding it all together. And that’s probably because they reject what economist Peter Boettke calls “mainline economics,” or economics in the tradition of Adam Smith, Frédéric Bastiat, and Carl Menger, among others.
It’s frustrating, but there are two points I’d like to make. The first is that in our libertarian critiques of collectivism, we often make an argument that sounds similar to the one people on the left make. But, second, if libertarians are careful, they may be more justified in doing so.
What Is the Turnabout?
Most socialists today have abandoned their earlier claim that socialism generates greater material prosperity, but many on the left still insist that under a pure collectivist system, greater justice and equality would prevail. Socialism, in other words, is a far more humane socioeconomic order than capitalism.
How do libertarians respond to such a claim?
Sometimes we react with contempt or with disbelief that anyone could be so stupid or so evil or both as to argue such a thing. I hope no reader of theFreeman would react that way, although I’m afraid some do. Sometimes we react with slightly more civility by aiming our dismissive contempt not at the person but at the leftist ideas she holds. I will only say that we should take to heart what John Stuart Mill wrote in On Liberty about so-called bad ideas and opinions:
Every opinion which embodies somewhat of the portion of truth which the common opinion omits, ought to be considered precious, with whatever amount of error and confusion that truth may be blended.
There are other responses to the claim that socialism is more just and humane than capitalism, but I would like to focus on the one that I’ve often used: socialism in practice has always and everywhere tended to lead, to the degree that it is consistently applied, not to freedom and material well-being, but to tyranny and want. In other words, while socialism in theory may be all good things to all good people, the more government has practiced collectivism and central planning to achieve its goals of justice and equality, the farther it has fallen short of those goals. (And if you think countries such as Sweden are the exception, you might read my March 2013 Freeman article, “The New Swedish Model.”)
How is that different from the left’s position that legal privilege, oppression, and other problems are part and parcel of capitalism in practice? Each side seems to be arguing that the historical failings we’ve witnessed in each system are necessary to that system and not exceptions — features, not bugs.
A Possible Resolution
Clearly, the die-hard socialist and the die-hard libertarian argue from different fundamental principles. While there are many varieties of socialism, all are suspicious to a fairly high degree of private property, prices, and profit as the central ordering forces of society. Libertarians, too, are diverse, but I believe we all share strongly opposite views to those on the left on private property, prices, and profit as necessary (and for some libertarians, mistakenly I believe, sufficient) for a civil and prosperous society.
Socialists and indeed interventionists of all stripes also seem confident that the intentions of government authorities (especially those who have been elected) are virtuous enough and their knowledge reliable and complete enough to succeed in promoting the general welfare. In this, I think, it boils down to the underlying economics.
As a rule, libertarians use mainline economic theory to reach their conclusions about socialism and the perverse dynamics of interventionism. (There are, of course, ethical and philosophical approaches, as well.) And while interventionists and perhaps even some collectivists may believe that mainline economic theory does an okay job of framing some questions and of finding some answers to those questions, they also believe that mainline economics is far too limited to address a significant proportion of economic issues.
But the problem with such a view is that there’s no principled way to say in what circumstances mainline economics has failed. Sure, no theory of the economic system, mainline or otherwise, gets it right in every instance. We then have to look to historical evidence to clarify when, under what circumstances, and to what extent mainline economics holds up. And the historical evidence is indeed on the side of the libertarian interpretation of what collectivism and various degrees of central planning are, and of what laissez-faire capitalism is.
Indeed, the historical evidence overwhelmingly shows that social mobility, innovation, prosperity, per capita income, and per capita wealth are all tightly and positively correlated with economic freedom. And contrariwise, to the extent that economic freedom is lacking, social and economic stagnation, want, and shrinking civil rights have followed. (See, for example, the most recent publication of FreetheWorld.com.)
Someone might retort that correlation is not causation, and they would be right if there wasn’t a causal theory linking economic freedom with all those great things. But libertarians do have such a theory, and it’s called mainline economics.
Those on the left, however, don’t have a coherent theory of the mixed economy. Indeed, no such theory exists. There are several theories of so-called “market failure,” but they do not together constitute a coherent theory. What does exist is a critique of the mixed economy that is based on the realization that the ordering principle of the free market and the ordering principle of collectivist central planning are logically incompatible. One is based on open-ended entrepreneurial competition, the other on some form of constraining central planning. Interventionist approaches that attempt to combine them aren’t really systems at all. They are literally incoherent, and what makes them incoherent is the absence of a consistent ordering principle.
Instead, what you’re left with, given the cognitive limits of the human mind and the spontaneous complexity of real-world systems, is expediency. Each problem is addressed not on the basis of principle, but in ad hoc fashion according to the prevailing interests of the moment. In the case of capitalism, while opportunism and cronyism do constantly pull in the direction of expediency, the force resisting that pull is entrepreneurial competition. That’s because cutting corners opens opportunities for one’s rivals to do a better job. Moreover, that competition operates more effectively to resist and absorb all forms of intervention, crony or otherwise, the less interventionist the system is.
So while the form of the critiques of the left and of libertarians may sound similar, they are vastly different in substance.
Sandy Ikeda is a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.
https://drrichswier.com/wp-content/uploads/monopoly-board-2.jpg223450Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2015-07-10 07:09:382015-07-10 07:10:55Capitalist Theory Is Better Than Socialist Reality by Sandy Ikeda
In a book I recently read, Complexity and the Art of Public Policy by David Colander and Roland Kupers, I was surprised to find a chapter entitled “I Pencil Revisited.” Yes, they meant Leonard Read’s famous essay showing how market prices and competition work to coordinate production in a way that no single person, however powerful or intelligent, possibly could.
The authors aren’t exactly hostile to Read’s message but say that it leaves out something important — the role of government.
They write,
For me to be produced, someone had to protect the property rights upon which the market is based, someone had to guarantee that the contracts between individuals would be enforced, and someone had to be on the lookout for lead, for the safety of machines, and similar problems, which if not addressed might well lead to a society to undermine the institutional structure that produced me.
And, again writing through the voice of a pencil, Colander and Kupers say,
The reason I, Pencil downplayed government’s role is that he was afraid its inclusion would lead some people to expand the role of government to solve the inevitable problems that come about in coordinating production.
I believe that they are mistaken on that. The reason why Leonard Read focused exclusively on the remarkable story of voluntary market cooperation and did not expand the piece to discuss the proper role of government was that he figured most people already had some understanding of the need to protect property, enforce contracts, and settle disputes.
What very few people had any comprehension of was the way individuals all across the globe are brought into cooperation by the market for pencils.
Going into the role of government in the essay would have been like Mozart adding a few extra movements to his Jupiter Symphony.
Here is why the authors make this argument. They don’t like what they call the “market fundamentalism” of Leonard Read, former FEE president Don Boudreaux, and others (like me) who argue that the people of any society will be the most productive, happiest, and best able to deal with the problems they see if the government is kept only to the functions of protecting the rights of life, liberty, and property.
Instead of laissez-faire, Colander and Kupers favor what they call “laissez-faire activism.”
In short, they want us to believe that there is an ideal middle ground between unsophisticated “market fundamentalism” and top-down government planning and control of the economy. The latter, they understand, is bad because such authority will squelch innovation and competition, but the former supposedly doesn’t do enough to allow people to realize their “collective goals.” Here is a crucial passage:
What simplistic or fundamentalist free market advocates sometimes miss is that a complex system works only if individuals self-regulate, by which we mean that they do not push their freedom too far, and that they make reasonable compromises about benefiting themselves and benefiting society.
Of course, the common law framework that thinkers in the Adam Smith, Frederic Bastiat, Leonard Read line advocated does put limits on individual action. Rights and the sphere of legitimate action are clearly established, and to the extent that people have collective goals, they are free to pursue them voluntarily. But Colander and Kupers think government can and should do just a bit more.
One of their ideas is that government should adopt policies that will “nudge” people to do what they “really want to do,” but can’t sufficiently discipline themselves to do. They extol the book Nudge by Cass Sunstein and Richard Thaler, which purports to show how government can “encourage” people to act in preferable ways, without dictating behavior to them.
But why can’t we rely entirely on voluntary efforts by concerned individuals and organizations to do that encouraging? Churches, for example, have been encouraging people to behave better for millennia; Alcoholics Anonymous has been helping people recover from alcohol abuse since 1935; parents have been “nudging” children to make wiser decisions since time immemorial. Why look to government policy?
Sometimes, the reason why people seem to need “nudging” is that current government policy encourages undesirable behavior. Few Americans save much these days, for instance. But instead of trying to “nudge” them to save more, why not change the tax laws that discourage thrift? Going back towards “laissez-faire fundamentalism” would solve or ameliorate many of our problems.
Moreover, Colander and Kupers ignore the great and, I maintain, insuperable problem of keeping government interference within bounds. If the state has the authority to “nudge” people, what keeps politicians from ratcheting up the power if it doesn’t work? Nudging turns into pushing, then shoving. Interest groups will importune politicians with arguments for policies they favor, crafting them as merely helping “the people” to realize the social goals they “really” favor.
They way democratic politics tends to be captured by interest groups is the big message of Public Choice theory, but Colander and Kupers never think to explain how they’d prevent their “laissez-faire activism” from turning into plain old activism.
After reading Complexity and the Art of Public Policy, I fail to see how government can improve upon capitalism combined with the host of voluntary organizations that spring up in a free society. I, Pencil does not need to be revisited.
George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.
https://drrichswier.com/wp-content/uploads/20140814_pencildetail.jpg313631Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2015-07-06 15:25:092015-07-06 15:26:58Does “I, Pencil” Need a Pro-Government Update? by George C. Leef
Gaining the right to be married is a win for liberty because it removes a barrier to free association. But how easily a movement for more freedom turns to the cause of taking away other freedoms!
Following the Supreme Court decision mandating legal same-sex marriage nationwide, the New York Timestells us that, “gay rights leaders have turned their sights to what they see as the next big battle: obtaining federal, state and local legal protections in employment, housing, commerce and other arenas.”
In other words, the state will erect new barriers to freedom of choice in place of the old ones that just came down!
To make the case against such laws, it ought to be enough to refer to the freedom to associate and the freedom to use your property as you see fit. These are fundamental principles of liberalism. A free society permits anything peaceful, and that includes the right to disassociate. Alas, such arguments seem dead on arrival today.
So let us dig a bit deeper to understand why anti-discrimination laws are not in the best interests of gay men and women, or anyone else. Preserving the ability to discriminate permits the market system to provide crucial information feedback to a community seeking to use its buying power to reward its friends and noncoercively, nonviolently punish those who do not share its values.
Ever more, consumers are making choices based on core values. Does this institution protect the environment, treat its workers fairly, support the right political causes? In order to make those choices — which is to say, in order to discriminate — consumers need information.
In the case of gay rights, consumers need to know who supports inclusion and who supports exclusion. Shutting down that information flow through anti-discrimination law robs people of crucial data to make intelligent buying decisions. Moreover, such laws remove the competitive pressure of businesses to prove (and improve) their commitment to community values, because all businesses are ostensibly bound by them.
A market that permits discrimination, even of the invidious sort, allows money and therefore success and profits to be directed toward those who think broadly, while denying money and profitability to those who do not. In this way, a free market nudges society toward ever more tolerant and inclusive attitudes. Money speaks far more persuasively than laws.
Notice that these proposed laws only pertain to the producer and not the consumer. But discrimination is a two-edged sword. The right can be exercised by those who do not like some groups, and it can be exercised by those groups against those who do not like them.
Both are necessary and serve an important social function. They represent peaceful ways of providing social and economic rewards to those who put aside biases in favor of inclusive decision making.
If I’m Catholic and want to support pro-Catholic businesses, I also need to know what businesses don’t like Catholics. If I’m Muslim and only want my dollars supporting my faith, I need to know who won’t serve Muslims (or who will put my dollars to bad use). If a law that prohibits business from refusing to serve or hire people based on religion, how am I supposed to know which businesses deserve my support?
It’s the same with many gay people. They don’t want to trade with companies that discriminate. To act out those values requires some knowledge of business behavior and, in turn, the freedom to discriminate. There is no gain for anyone by passing a universal law mandating only one way of doing business. Mandates drain the virtue out of good behavior and permit bad motivations to hide under the cover of law.
Here is an example from a recent experience. I was using AirBnB to find a place to stay for a friend. He needed a place for a full week, so $1,000 was at stake. The first potential provider I contacted hesitated and began to ask a series of questions that revolved around my friend’s country of origin, ethnicity, and religion. The rental owner was perfectly in his rights to do this. It is his home, and he faces no obligation to open it to all comers.
On the other hand, I found the questions annoying, even offensive. I decided that I didn’t want to do business with this person. I made a few more clicks, cancelled that query, and found another place within a few minutes. The new renter was overjoyed to take in my friend.
I was delighted for two reasons. First, my friend was going to stay at a home that truly wanted him there, and that’s important. Force is never a good basis for commercial relationships. Second, I was able to deny $1K to a man who was, at best, a risk averse and narrow thinker or, at worst, an outright bigot.
Declining to do business with him was my little protest, and it felt good. I wouldn’t want my friend staying with someone who didn’t really want him there, and I was happy not to see resources going toward someone whose values I distrusted.
In this transaction, I was able to provide a reward to the inclusive and broad-minded home owner. It really worked out too: the winning rental property turned out to be perfect for my friend.
This was only possible because the right to discriminate is protected in such transactions (for now). I like to think that the man who asked too many questions felt a bit of remorse after the fact (he lost a lot of money), and even perhaps is right now undergoing a reconsideration of his exclusionary attitudes. Through my own buyer decisions I was actually able to make a contribution toward improving cultural values.
What if anti-discrimination laws had pertained? The man would not have been allowed to ask about national origin, religion, and ethnicity. Presuming he kept his room on the open market, he would have been required under law to accept my bid, regardless of his own values.
As a result, my money would have gone to someone who didn’t have a high regard for my friend, my friend would have been denied crucial information about what he was getting into, and I would not be able to reward people for values I hold dear.
This is precisely why gay rights leaders should be for, not against, the right to discriminate. If you are seeking to create a more tolerant society, you need information that only a free society can provide.
You need to know who is ready to serve and hire gay men and women, so they can be rewarded for their liberality. You also need to know who is unwilling to hire and serve so that the loss part of profit-and-loss can be directed against ill-liberality. Potential employees and customers need to know how they are likely to be treated by a business. Potential new producers need to know about business opportunities in under-served niche markets.
If everyone is forced to serve and hire gays, society is denied important knowledge about who does and does not support enlightened thinking on this topic.
Consider the prototypical case of the baker who doesn’t want to make a wedding cake for a same-sex couple. He is within his rights. His loss of a potential customer base is his own loss. It is also the right of the couple to refuse to give this baker business. The money he would have otherwise made can be redirected towards a baker who is willing to do this. It is equally true that some people would rather trade with a baker who is against gay marriage, and they are within their rights as well.
Every act of discrimination, provided it is open and legal, provides a business opportunity to someone else.
How does all this work itself out in the long run? Commerce tends toward rewarding inclusion, broadness, and liberality. Tribal loyalties, ethnic and religious bigotries, and irrational prejudices are bad for business. The merchant class has been conventionally distrusted by tribalist leaders — from the ancient to the modern world — precisely because merchantcraft tends to break down barriers between groups.
We can see this in American history following the end of slavery. Blacks and whites were ever more integrated through commercial exchange, especially with the advance of transportation technology and rising incomes. This is why the racists turned increasingly toward the state to forbid it. Zoning laws, minimum wage regulation, mandatory segregation, and occupational licensing were all strategies used to keep the races separate even as the market was working toward integration.
The overwhelming tendency of markets is to bring people together, break down prejudices, and persuade people of the benefits of cooperation regardless of class, race, religion, sex/gender, or other arbitrary distinctions. The same is obviously and especially true of sexual orientation. It is the market that rewards people who put aside their biases and seek gains through trade.
This is why states devoted to racialist and hateful policies always resort to violence in control of the marketplace. Ludwig von Mises, himself Jewish and very much the victim of discrimination his entire life, explained that this was the basis for Nazi economic policy. The market was the target of the Nazis because market forces know no race, religion, or nationality.
“Many decades of intensive anti-Semitic propaganda,” Mises wrote in 1944, “did not succeed in preventing German ‘Aryans’ from buying in shops owned by Jews, from consulting Jewish doctors and lawyers, and from reading books by Jewish authors.” So the racists turned to the totalitarian state — closing and confiscating Jewish business, turning out Jewish academics, and burning Jewish books — in order to severe the social and economic ties between races in Germany.
The biggest enemy of marginal and discriminated-against populations is and has always been the state. The best hope for promoting universal rights and a culture of tolerance is the market economy. The market is the greatest weapon ever devised against bigotry — but, in order to work properly, the market needs to signaling systems rooted in individuals’ freedom of choice to act on their values.
And, to be sure, the market can also provide an outlet for people who desire to push back for a different set of values, perhaps rooted in traditional religious concerns. Hobby Lobby, Chick-Fil-A, In-and-Out Burger, among many others, openly push their religious mission alongside their business, and their customer base is drawn to them for this reason. This is also a good thing. It is far better for these struggles to take place in the market (where choice rules) rather than through politics (where force does).
Trying to game that market by taking away consumer and producer choice harms everyone. Anti-discrimination laws will provide more choices at the expense of more informed choices. Such laws force bigotry underground, shut down opportunities to provide special rewards for tolerance, and disable the social learning process that leads to an ever more inclusive society.
New laws do not fast-track fairness and justice; they take away opportunities to make the world a better place one step at a time.
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.
https://drrichswier.com/wp-content/uploads/gay-men-getting-married-e1435861924144.jpg318640Dr. Rich Swierhttp://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngDr. Rich Swier2015-07-02 14:32:142015-07-02 14:35:11Gays Need the Freedom to Discriminate by Jeffrey A. Tucker
At midnight, the gears of crony capitalism ground to a halt at 811 Vermont Avenue, NW, Washington, D.C.
After 81 years of funneling taxpayer dollars to favored companies, projects, and geopolitical outcomes under the guise of advancing some vague conception of the “U.S. economic interest,” the Export-Import Bank of the United States will end its financing operations at midnight tonight.
No more subsidies to Fortune 100 businesses. No more siphoning revenues from unwitting U.S. firms and industries. No more loan guarantees to wealthy, autocratic foreign governments. No more crowding out of private lending. No more taxpayer exposure to a Fannie Mae-like fiasco. No more bribery and corruption scandals. No more collaboration and lending to China’s Export-Import Bank – you know, the entity whose support for Chinese companies is alleged to threaten U.S. exporters and jobs, and is the most frequently cited imperative for reauthorizing Ex-Im.
No more of any of this… for now.
Champions of small government and market capitalism should savor this rare victory. It was won with solid arguments, including over 20 years of analyses from Cato Institute scholars including Ian Vasquez, Aaron Lukas, Steve Slivinsky, Chris Edwards, Doug Bandow, Sallie James, and – perhaps most comprehensively and tirelessly – Veronique de Rugy.
It was won because of columnist/scholar Tim Carney’s persistence in focusing the public’s attention on the corruption bred of corporate welfare and because of the analytical contributions of Heritage’s Diane Katz, the Competitive Enterprise Institute’s Ryan Young, and others who continued to make compelling arguments for shuttering the Bank, despite steep odds against that outcome.
It was won because certain libertarian groups and conservative activists made the issue a priority, recognizing that corporate welfare is as great a threat to liberty as is the Welfare State, and that reining it in should be a priority because success there would lend greater credibility to the effort to rein in the Welfare State.
It was won against great odds, including vast political expenditures and arm-twisting by U.S. business interests on Capitol Hill, a mainstream media that is reflexively unsympathetic to any cause associated with “Tea Party Types,” and a general aversion among establishment organizations to any challenges to the status-quo.
Radical and reckless, excessive and extreme, ideological and idiotic have been the characterizations assigned by media, politicians, and Boeing lobbyists in their attempts to discredit legitimate efforts to purge “crony” and make “market” the new brand of capitalism.
And it was won because House Financial Services Committee Chairman Jeb Hensarling and Senate Banking Committee Chairman Richard Shelby, knowing the case against Ex-Im reauthorization was more substantive than the New York Times would allow, made good gatekeepers by putting the onus on Ex-Im proponents to answer the critics – a task at which they failed.
So, at midnight, the Export-Import Bank ceased in its capacity to issue new financing. That is something to cheer. It may also be short-lived.
Proponents of the Bank have been regrouping and strategizing to move legislation to reauthorize the Bank at the soonest possible chance. In fact the White House is hosting a conference call for the purpose of advancing that outcome. Here’s the text of the email:
Dear Friend,
Please join us for a conference call on Tuesday, June 30th, at 2:35 PM with President Barack Obama, Senior Advisor to the President, Valerie Jarrett, and Director of the National Economic Council, Jeff Zients, to discuss the importance of reauthorizing the Export-Import Bank of the United States.
The Export-Import Bank is a critical tool to help U.S. businesses and workers succeed in global markets and grow their exports – it supports high-quality jobs, is a vital tool for small businesses, and doesn’t cost taxpayers a penny. Its reauthorization is vital to U.S. competitiveness and leveling the playing field for American small business owners and workers. …
This call is off the record and is not for press purposes nor amplification on social media.
Thank you,
The White House Business Council
The battle may be over but the war continues. Given the sway that conservatives have had on this issue, it will be interesting to see whether and how Speaker Boehner tries to circumvent Hensarling’s committee to get a reauthorization bill to the floor. Majority Leader McConnell believes there’s enough support in the Senate for reauthorization, but most of the Republican presidential hopefuls have expressed opposition to reauthorization.
It seems to me that if Ex-Im reauthorization resurfaces in the weeks and months ahead, it will be an issue that provides Republicans with yet another opportunity to demonstrate commitment to limited government, free market principles. Maybe this time they’ll see the value in reclaiming that brand.
Dan Ikenson is director of Cato’s Herbert A. Stiefel Center for Trade Policy Studies, where he coordinates and conducts research on all manners of international trade and investment policy.
https://drrichswier.com/wp-content/uploads/zombie-land-e1435860828899.jpg318640Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2015-07-02 14:15:342015-07-02 14:16:10The Ex-Im Bank Is Dead — But Watch Out for Corporate Welfare Zombies by Daniel J. Ikenson
After Salon.com stopped being interesting, they needed a way to drive traffic. Competition for eyeballs is tough, after all. In the dog-eat-dog world of attracting eyeballs, you’ve got to find clever ways to pull in new readers.
One way to drive traffic is to poke people you know disagree with you. And by poking, I mean turning them into a Voodoo Doll.
This variation on beating up a Straw Man has the benefit of the Internet’s sharing magic. That is, if you pick on some group they will feel it. Then they will turn around and express their outrage by sharing your stuff! Voila: instant Internet gold.
In making Voodoo Dolls, you don’t always have to pick on a specific person. You can go for a worldview. Salon has given libertarianism a lot of flak, of course. But now they’re going for an even bigger boogeyman, because the idea is to paint as many people as you can with the same tarbrush.
What better place to go for a big, sweeping label than the academy?
Here’s UC-Berkeley political science professor Wendy Brown talking “neoliberalism” in a Salon interview.
And how do you define neoliberalism? It’s not uncommon for me to experience people I’d consider neoliberals telling me the term is meaningless.
I think most Salon readers would know neoliberalism as that radical free-marketeering that comes to us in the ‘70s and ‘80s, with the Reagan-Thatcher revolution being the real marker of that turn in Euro-Atlantic world. It means the dismantling of publicly owned industry and deregulation of capital, especially finance capital; the elimination of public provisions and the idea of public goods; and the most basic submission of everything to markets and to unregulated markets.
So free enterprise is its clarion call, and even though it requires a lot of state intervention and state support, the idea that goes with it is usually also minimal state intervention in markets. Even if states are needed to prop or support or sometimes bail out markets, they shouldn’t get into the middle of them and redistribute [wealth]. That’s all true. That’s certainly part of what neoliberalism is.
Okay, let’s see if we can make heads or tails of this magician’s patter.
Start with Professor Brown’s concern that people have criticized the term neoliberalism as being meaningless. This doctrine, Brown says, “requires a lot of state intervention and state support, the idea that goes with it is usually also minimal state intervention in markets.”
Huh? If neoliberalism isn’t exactly libertarianism or anarcho-capitalism — because these doctrines certainly do not include or require state intervention and support of markets — then we might say she’s talking about cronyism. And certainly if someone were to build a doctrine around cronyism, that would not be meaningless.
It turns out such a doctrine does exist. But it’s not neoliberalism; it’s corporatism — and it’s a progressivist ideology.
According to Nobel laureate Edmund S. Phelps, quoted in the Freeman:
The managerial state has assumed responsibility for looking after everything from the incomes of the middle class to the profitability of large corporations to industrial advancement. This system . . . is . . . an economic order that harks back to Bismarck in the late nineteenth century and Mussolini in the twentieth: corporatism.
Phelps says,
In various ways, corporatism chokes off the dynamism that makes for engaging work, faster economic growth, and greater opportunity and inclusiveness. It maintains lethargic, wasteful, unproductive, and well-connected firms at the expense of dynamic newcomers and outsiders, and favors declared goals such as industrialization, economic development, and national greatness over individuals’ economic freedom and responsibility.
Today, airlines, auto manufacturers, agricultural companies, media, investment banks, hedge funds, and much more has [sic] at some point been deemed too important to weather the free market on its own, receiving a helping hand from government in the name of the “public good.”
But where does this idea come from? Contra Brown, it’s not from the “free marketeers”. Economist Thayer Watkins says:
In the last half of the 19th century people of the working class in Europe were beginning to show interest in the ideas of socialism and syndicalism. Some members of the intelligentsia, particularly the Catholic intelligentsia, decided to formulate an alternative to socialism which would emphasize social justice without the radical solution of the abolition of private property.
The result was called Corporatism. The name had nothing to do with the notion of a business corporation except that both words are derived from the Latin word for body, corpus.
To be fair, Brown might protest, arguing that she would subsidize, cartelize, and manage the right industries, such as finance. At least she laments the liberalization of these industries, citing Thatcher as an example of neoliberal excess, despite what a basket case Britain had been under prior governments.
So which industries would she leave private and which “require a lot of state intervention”? And what sort of magic makes any such scheme immune to rent-seeking and capture?
It appears state support of business originated among certain less-communist advocates of social justice. But surely this is not something the more moderate progressives had in mind.
After all, says Brown, “What’s more, if those of us who oppose neoliberalism misinterpret it as simply another word for capitalism, we make the job of fighting it even more difficult. Franklin Delano Roosevelt was a capitalist, after all. But a neoliberal, he most certainly was not.”
Libertarian philosopher Jason Brennan says it’s time to point fingers and name names. In a rare polemic called “Dear Left: Corporatism is Your Fault” he writes,
America is suffering from rampant, run-away corporatism and crony capitalism. We are increasingly a plutocracy in which government serves the interests of elite financiers and CEOs at the expense of everyone else.
You know this and you complain loudly about it. But the problem is your fault. You caused this state of affairs. Stop it.
But the moderate left didn’t want radical socialism. They just wanted regulatory agencies to rein in the excesses of the market. They wanted the government to subsidize or own areas that ought to be considered public goods, like healthcare, transportation, education, and the environment. But good intentions are not enough, writes Brennan.
We told you this would happen, but you wouldn’t listen. You complain, rightly, that regulatory agencies are controlled by the very corporations they are supposed to constrain. Well, yeah, we told you that would happen. When you create power—and you people love to create power—the unscrupulous seek to capture that power for their personal benefit. Time and time again, they succeed. We told you that would happen, and we gave you an accurate account of how it would happen.
You complain, perhaps rightly, that corporations are just too big. Well, yeah, we told you that would happen. When you create complicated tax codes, complicated regulatory regimes, and complicated licensing rules, these regulations naturally select for larger and larger corporations. We told you that would happen. Of course, these increasingly large corporations then capture these rules, codes, and regulations to disadvantage their competitors and exploit the rest of us. We told you that would happen.
Brennan was probably a little upset when he wrote this, but fairly so. People like Wendy Brown have been trying to emblazon corporatism on the tunics of free marketeers and liberalizers for a while now. And they’re generally pontificating from the academy, rather than from the brothels of K St. in Washington, or Venezuela’s Ministry of Planning and Finance.
No one who calls herself a political science professor should have earned her letters without having read public choice theory. No, it’s time to admit that all progressive attempts to stitch together old scraps of socialism with markets will create perverse effects and corruption of one form or another.
Maybe Prof. Brown is okay with “corporatizing” some industries while leaving others in private hands, a la FDR. Hers seems to be an attempt to synthesize the heart of Marx with the will of the people. She says:
“Demos kratia” — “people rule” — is really the term that, however differently it’s been interpreted over different variations of democracy and different centuries, is one that we all cherish on some level. Demos is important because it’s the body, it’s the people, that we imagine are in control of the basic conditions and laws that govern our lives.
Ah, yes “the body,” the corpus. Haven’t we heard that one before? We’re supposed to cherish democracy, because, well, it’s as American as apple pie. Any more reflection would require admitting that the “demos” disagrees about stuff. And that’s a slippery slope to individualism and recognizing the need for tolerance and personal autonomy. This is the fact of pluralism that even the liberal philosopher John Rawls starts with.
Whenever you hear the world neoliberalism, be wary. It could be completely meaningless filler, but it’s always as squishy as silly putty. It’s a label that’s designed to demonize those who would never support it — a word to be accompanied by a sneer. It is a means of defining oneself as against something — preferably a nice soft Straw Man — rather than doing the hard business of coming out ideologically and defending your ideas.
When you realize that accepting degrees of state intervention is a problem of degree and not of kind, it becomes clear the Wendy Browns have nowhere to run but to nebulous concepts like “demos.” That is because between corporatism and communism there is no magical third way, only shades of state coercion, justified by a flimsy majoritarian facade. The choice between nationalized or regulated industries is binary, so the ideological choice set is really only between communism and corporatism. But communism screwed things up. Corporatism screws things up. All the variations screw things up because each permutation involves power and business forming unholy alliances.
People like Wendy Brown and her Salon interviewer Elias Isquith aren’t stupid. And like most people, they have good intentions. They are committed to a particular theory of angels. Demos, that golden calf, is the tired old notion that if we could just blur the peculiarities, individuality, and desires of 300 million people into a single prayer and send it up through the voting booth, what will come out the other side — in Washington, D.C. — is a kind of secular salvation. But this sort of thinking turns on hypostatization, that timeless fallacy of ambiguity that seduces people into collectivism.
We have to look them squarely in the face and say: “You caused this state of affairs. Stop it.”
Max Borders is the editor of the Freeman and director of content for FEE. He is also co-founder of the event experience Voice & Exit and author of Superwealth: Why we should stop worrying about the gap between rich and poor.
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Last week I was contemplating a post having to do with driverless cars when, wouldn’t you know it, I received word that the Bank of England had just started a new blog called Bank Underground, and the first substantive post on it had to do with — you guessed it — driverless cars.
As it turned out, I needn’t have worried that Bank Underground had stolen my fire. The post, you see, was written by some employees in the Bank of England’s General Insurance Supervision Division, whose concern was that driverless cars might be bad news for the insurance industry.
The problem, as the Bank of England’s experts see it, is that cars like the ones that Google plans to introduce in 2020 are much better drivers than we humans happen to be — so much better, according to research cited in the post, that “the entire basis of motor insurance, which mainly exists because people crash, could … be upended.”
Driverless cars, therefore, threaten to “wipe out traditional motor insurance.”
It is, of course, a great relief to know that the Bank of England’s experts are keeping a sharp eye out for such threats to the insurance industry. (I suppose they must be working as we speak on some plan for addressing the dire possibility — let us hope it never comes to this — that cancer and other diseases will eventually be eradicated.)
But my own interest in driverless cars is rather different. So far as I’m concerned, the advent of such cars should have us all wondering, not about the future of the insurance industry, but about the future of…the Bank of England, or rather of it and all other central banks.
If driverless cars can upend “the entire basis of motor insurance,” then surely, I should think, an automatic or “driverless” monetary system ought to be capable of upending “the entire basis of monetary policy,” as such policy is presently conducted.
And that, so far as I’m concerned, would be a jolly good thing.
Am I drifting into science fiction? Let’s put matters in perspective. Although experiments involving driverless or “autonomous” cars have been going on for decades, until as recently as one decade ago, the suggestion that such cars would soon be, not only safe enough to replace conventional ones, but far safer, would have struck many people as fantastic.
Consider for a moment the vast array of contingencies such a vehicle must be capable of taking into account in order to avoid accidents and get passengers to some desired destination. Besides having to determine correct routes, follow their many twists and turns, obey traffic signals, and parallel park, they have to be capable of evading all sorts of unpredictable hazards, including other errant vehicles, not to mention jaywalkers and such.
The relevant variables are, in fact, innumerable. Yet using a combination of devices tech wizards have managed to overcome almost every hurdle, and will soon have overcome the few that remain.
All of this would be impressive enough even if human beings were excellent drivers. In fact, they are often very poor drivers indeed, which means that driverless cars are capable, not only of being just as good, but of being far better — 90 percent better, to be precise, since that’s the percentage of all car accidents attributable to human error.
Human beings are bad drivers for all sorts of reasons. They have to perform other tasks that take their mind off the road; their vision is sometimes impaired; they misjudge their own driving capabilities or the workings of their machines; some are sometimes inclined to show off, while others are dangerously timid. Occasionally, instead of relying on their wits, they drive “under the influence.”
Central bankers, being human, suffer from similar human foibles. They are distracted by the back-seat ululations of commercial bankers, exporters, finance ministers, and union leaders, among others. Their vision is at the same time both cloudy and subject to myopia.
Finally, few if any are able to escape altogether the disorienting influence of politics. The history of central banking is, by and large, a history of accidents, if not of tragic accidents, stemming from these and other sorts of human error.
It should not be so difficult, then, to imagine that a “driverless” monetary system might spare humanity such accidents, by guiding monetary policy more responsibly than human beings are capable of doing.
How complicated a challenge is this? Is it really more complicated than that involved in, say, driving from San Francisco to New York? Central bankers themselves like to think so, of course — just as most of us still like to believe that we are better drivers than any computer.
But let’s be reasonable. At bottom central bankers, in their monetary policy deliberations, have to make a decision concerning one thing, and one thing only: should they acquire or sell assets, and how many, or should they do neither?
Unlike a car, which has numerous controls — a steering wheel, signal lights, brakes, and an accelerator — a central bank has basically one, consisting of the instrument with which it adjusts the rate at which assets flow into or out of its balance sheet. Pretty simple.
And the flow itself? Here, to be sure, things get more complicated. What “target” should the central bank have in mind in determining the flow? Should it consist of a single variable, like the inflation rate, or of two or more variables, like inflation and unemployment? But the apparent complexity is, in my humble opinion, a result of confusion on monetary economists’ part, rather than of any genuine trade-offs central bankers face.
As Scott Sumner has been indefatigably arguing for some years now (and as I myself have long maintained), sound monetary policy isn’t a matter of having either a constant rate of inflation or any particular level of either employment or real output. It’s a matter of securing a stable flow of spending, or Nominal GNP, while leaving it to the marketplace to determine how that flow breaks down into separate real output and inflation-rate components.
Scott would have NGDP grow at an annual rate of 4-5 percent; I would be more comfortable with a rate of 2-3 percent. But this number is far less important to the achievement of macroeconomic stability than a commitment to keeping the rate — whatever it happens to be — stable and, therefore, predictable.
So: one goal, and one control. That’s much simpler than driving from San Francisco to New York. Heck, it’s simpler than managing the twists and turns of San Franscisco’s Lombard Street.
What Friedman could not have imagined then was a protocol like the one that controls the supply of bitcoins, which has the distinct advantage of being, not only automatic, but tamper-proof: once set going, no-one can easily alter it. The advantage of a bitcoin-style driverless monetary system is that it is, not only capable of steering itself, but incapable of being hijacked.
The bitcoin protocol itself allows the stock of bitcoins to grow at a predetermined and ever-diminishing rate, so that the stock of bitcoins will cease to grow as it approaches a limit of 21 million coins.
But all sorts of protocols may be possible, including ones that would adjust a currency’s supply growth according to its velocity — that is, the rate at which the currency is being spent — so as to maintain a steady flow of spending, à la Sumner. The growth rate could even be made to depend on market-based indicators of the likely future value of NGDP.
This isn’t to say that there aren’t any challenges yet to be overcome in designing a reliable “driverless money.” For one thing, the monetary system as a whole has to be functioning properly: just as a driverless car won’t work if the steering linkage is broken, a driverless monetary system won’t work if it’s so badly tuned that banks end up just sitting on any fresh reserves that come their way.
My point is rather that there’s no good reason for supposing that such challenges are any more insuperable than those against which the designers of driverless cars have prevailed. If driverless car technology has managed to take on San Francisco’s Lombard Street, I see no reason why driverless money technology couldn’t eventually tackle London’s.
What’s more, there is every reason to believe that driverless money would, if given a chance, prove to be far more beneficial to mankind than driverless cars ever will.
For although bad drivers cause plenty of accidents, none has yet managed to wreck an entire economy, as reckless central bankers have sometimes done. If driverless monetary systems merely served to avoid the worst macroeconomic pileups, that alone would be reason enough to favor them.
But they can surely do much better than that. Who knows: perhaps the day will come when, thanks to improvements in driverless monetary technology, central bankers will find themselves with nothing better to do than worry about the future of the hedge fund industry.
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The publication of Thomas Piketty’s bestseller Capital in the Twenty-First Century has led to widespread attention on the rising gap between rich and poor, and to populist calls for government to redistribute income and wealth.
Purveyors of that rhetoric, however, overlook the reality that when the state plays a major role in leveling differences in income and wealth, economic freedom is eroded. The problem is, economic freedom is the true engine of progress for all people.
Income and wealth are created in the process of discovering and expanding new markets. Innovation and entrepreneurship extend the range of choices open to people. And yet not everyone is equal in their contribution to this process. There are differences among people in their abilities, motivations, and entrepreneurial talent, not to mention their life circumstances.
Those differences are the basis of comparative advantage and the gains from voluntary exchanges on private free markets. Both rich and poor gain from free markets; trade is not a zero- or negative-sum game.
Attacking the rich, as if they are guilty of some crime, and calling for state action to bring about a “fairer” distribution of income and wealth leads to an ethos of envy — certainly not one that supports the foundations of abundance: private property, personal responsibility, and freedom.
In an open market system, people who create new products and services prosper, as do consumers. Entrepreneurs create wealth and choices. The role of the state should be to safeguard rights to property and let markets flourish. When state power trumps free markets, choices are narrowed and opportunities for wealth creation are lost.
Throughout history, governments have discriminated against the rich, ultimately harming the poor. Central planning should have taught us that replacing private entrepreneurs with government bureaucrats merely politicizes economic life and concentrates power; it does not widen choices or increase income mobility.
Peter Bauer, a pioneer in development economics, recognized early on that “in a modern open society, the accumulation of wealth, especially great wealth, normally results from activities which extend the choices of others.”
Government has the power to coerce, but private entrepreneurs must persuade consumers to buy their products and convince investors to support their vision. The process of “creative destruction,” as described by Joseph Schumpeter, means that dynastic wealth is often short-lived.
Bauer preferred to use the term “economic differences” rather than “economic inequality.” He did so because he thought the former would convey more meaning than the latter. The rhetoric of inequality fosters populism and even extremism in the quest for egalitarian outcomes. In contrast, speaking of differences recognizes reality and reminds us that “differences in readiness to utilize economic opportunities — willingness to innovate, to assume risk, to organize — are highly significant in explaining economic differences in open societies.”
What interested Bauer was how to increase the range of choices open to people, not how to use government to reduce differences in income and wealth. As Bauer reminded us,
Political power implies the ability of rulers forcibly to restrict the choices open to those they rule. Enforced reduction or removal of economic differences emerging from voluntary arrangements extends and intensifies the inequality of coercive power.
Equal freedom under a just rule of law and limited government doesn’t mean that everyone will be equal in their endowments, motivations, or aptitudes. Disallowing those differences, however, destroys the driving force behind wealth creation and poverty reduction. There is no better example than China.
Under Mao Zedong, private entrepreneurs were outlawed, as was private property, which is the foundation of free markets. Slogans such as “Strike hard against the slightest sign of private ownership” allowed little room for improving the plight of the poor. The establishment of communes during the “Great Leap Forward” (1958–1961) and the centralization of economic decision making led to the Great Famine, ended civil society, and imposed an iron fence around individualism while following a policy of forced egalitarianism.
In contrast, China’s paramount leader Deng Xiaoping allowed the resurgence of markets and opened China to the outside world. Now the largest trading nation in the world, China has demonstrated that economic liberalization is the best cure for broadening people’s choices and has allowed hundreds of millions of people to lift themselves out of poverty.
Deng’s slogan “To get rich is glorious” is in stark contrast to Mao’s leveling schemes. In 1978, and as recently as 2002, there were no Chinese billionaires; today there are 220. That change would not have been possible without the development of China as a trading nation.
There are now 536 billionaires in the United States and growing animosity against the “1 percent” — especially by those who were harmed by the Great Recession. Nevertheless, polls have shown that most Americans think economic growth is far more important than capping the incomes of the very rich or narrowing the income gap. Only 3 percent of those polled by CBS and the New York Times in January thought that economic inequality was the primary problem facing the nation. Most Americans are more concerned with income mobility — that is, moving up the income ladder — then with penalizing success.
Regardless, some politicians will use inflammatory rhetoric to make differences between rich and poor the focus of their campaigns in the presidential election season. In doing so, they should recognize the risks that government intervention in the creation and distribution of income and wealth pose for a free society and for all-around prosperity.
Government policies can widen the gap between rich and poor through corporate welfare, through unconventional monetary policy that penalizes savers while pumping up asset prices, and through minimum wage laws and other legislation that price low-skilled workers out of the market and thus impede income mobility.
A positive program designed to foster economic growth — and leave people free to choose — by lowering marginal tax rates on labor and capital, reducing costly regulations, slowing the growth of government, and normalizing monetary policy would be the best medicine to benefit both rich and poor.
James A. Dorn is vice president for monetary studies, editor of the Cato Journal, senior fellow, and director of Cato’s annual monetary conference.
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Paganism as a distinct and separate religion may perhaps be said to have died, although, driven out of the cities, it found refuge in the countryside, where it lingered long — and whence, indeed, its very name is derived. In a very real sense, however, it never died at all. It was only transformed and absorbed into Christianity. – James Westfall Thompson, An Introduction to Medieval Europe
In 2003, science-fiction writer Michael Crichton warned a San Francisco audience about the sacralization of the environment. Drawing an analogy between religion and environmentalism, Crichton said:
There’s an initial Eden, a paradise, a state of grace and unity with nature, there’s a fall from grace into a state of pollution as a result of eating from the tree of knowledge, and as a result of our actions there is a judgment day coming for us all.
We are all energy sinners, doomed to die, unless we seek salvation, which is now called sustainability. Sustainability is salvation in the church of the environment. Just as organic food is its communion, that pesticide-free wafer that the right people with the right beliefs, imbibe.
This analogy between religion and environmentalism is no longer a mere analogy.
Pope Francis, the highest authority in the Catholic Church — to whom many faithful look for spiritual guidance — has now fused church doctrine with environmental doctrine.
Let’s consider pieces of his recently released Encyclical Letter. One is reminded of a history in which the ideas of paganism (including the worship of nature) were incorporated into the growing medieval Church.
Excerpts from Pope Francis are shown in italics.
This sister protests the evil that we provoke, because of the irresponsible use and of the abuse of the goods that God has placed in her. We grew up thinking that we were its owners and rulers, allowed to plunder it.
Notice how Pope Francis turns the earth into a person. Sister. Mother. This kind of anthropomorphic trope is designed to make you think that, by virtue of driving your car, you’re also smacking your sibling. We’ve gone from “dominion over the animals and crawling things” to “plundering” our sister.
The violence that exists in the human heart wounded by sin is also manifested in the symptoms of the disease we feel in soil, water, air and in the living things. Therefore, among the most abandoned and ill treated poor we find our oppressed and devastated Earth, which “moans and suffers the pains of childbirth” [Romans 8:22].
First, if the state of the soil, water and air and living things is indeed symptomatic of our violent, sinful hearts, then the good news is that sin is on the decline. On every dimension the Pope names, the symptoms of environmental harm are getting better all the time — at least in our decadent capitalist country.
There are forms of pollution which affect people every day. The exposure to air pollutants produces a large spectrum of health effects, in particular on the most poor, and causes millions of premature deaths.
This will always be true to some degree, of course, but it’s less true than any time in human history. Pope Francis fails to acknowledge the tremendous gains humanity has made. For example, human life expectancy in the Paleolithic period (call this “Eden”) was 33 years. Life expectancy in the neolithic period was 20 years. Globally, life expectancy is now more than 68 years, and in the West, it is passing 79 years.
Yes, there is pollution, and, yes, the poor are affected by it. But the reason why the poor are affected most by air pollution is because they’re poor — and because they don’t have access to fossil fuel energy. Pope Francis never bothers to draw the connection between wealth and health because he thinks of both production and consumption as sinful. Brad Plumer writes at Vox,
About 3 billion people around the world — mostly in Africa and Asia, and mostly very poor — still cook and heat their homes by burning coal, charcoal, dung, wood, or plant residue in their homes. These homes often have poor ventilation, and the smoke can cause all sorts of respiratory diseases.
The wealthy people of the West, including Pope Francis, don’t suffer from this problem. That’s because liberal capitalist countries — i.e., those countries who “plunder” their sister earth — do not suffer from energy poverty. They do not suffer from inhaling fumes and particulate matter from burning dung becausethey are “sinful,” because they are capitalist.
See the problem? The Pope wants to have it both ways. He has confused the disease (unhealthy indoor air pollution) with the cure (cheap, clean, abundant and mass-produced energy from fossil fuels).
Add to that the pollution that affects all, caused by transportation, by industrial fumes, by the discharge of substances which contribute to the acidification of soil and water, by fertilizers, insecticides, fungicides, herbicides and toxic pesticides in general. The technology, which, connected to finance, claims to be the only solution to these problems, in fact is not capable of seeing the mystery of the multiple relationships which exist between things, and because of this, sometimes solves a problem by creating another.
It is strange to read admonitions from someone about the “multiple relationships that exist between things,” only to see him ignore those relationships in the same paragraph. Yes, humans often create problems by solving others, but that doesn’t mean we shouldn’t solve the problems. It just means we should solve the big problems and then work on the smaller ones.
Solving problems even as we discover different problems is an inherent part of the human condition. Our creativity and innovation and struggle to overcome the hand nature has dealt us is what makes us unique as a species.
Perhaps this is, for Pope Francis, some sort of Green Original Sin: “Thou shalt just deal with it.” But to the rest of us, it is the means by which we live happier, more comfortable lives here under the firmament.
The Earth, our home, seems to turn more and more into a huge garbage dump. In many places on the planet, the elderly remember with nostalgia the landscapes of the past, which now appear to be submerged in junk.
If you get your understanding of waste management and the environment from the movie Wall-E, then you might have the impression that we’re burying our sister in garbage. But as the guys over at EconPop have pointed out, land used for waste management is also governed by laws of supply and demand — which means entrepreneurs and innovators are finding better and less expensive ways to reuse, reduce, recycle, and manage our waste.
The industrial waste as well as the chemicals used in cities and fields can produce an effect of bio-accumulation in the bodies of the inhabitants of neighboring areas, which occurs even when the amount of a toxic element in a given place is low. Many times one takes action only when these produced irreversible effects on people’s health.
People, on net, are living longer and healthier than they ever have in the history of our species. What evidence does the Holy Father have that irreversible effects on people’s health rises to the level of an emergency that demands drafting in a papal encyclical? And why focus on the costs of “chemicals” without a single mention of overwhelming their human benefit? Indeed, which chemicals? This kind of sloppy thinking is rather unbecoming of someone who is (we are constantly reminded) a trained chemist.
Certain substances can have health effects, but so can failing to produce the life-enhancing goods in the first place. The answer is not to beg forgiveness for using soaps and plastics (or whatever), but to develop the institutions that prevent people and companies from imposing harmful costs onto others without taking responsibility for it.
The key is to consider the trade-offs that we will face no matter what, not to condemn and banish “impure” and unnatural substances from our lives.
These issues are intimately linked to the culture of waste, affecting so much the human beings left behind when the things turn quickly into trash.
Now we’re getting somewhere. This is where Pope Francis would like to add consumerism to production on the list of environmentally deadly sins.
Let us realize, for example, that most of the paper that is produced is thrown away and not recycled.
Heaven forfend! So would Pope Francis have us burn fossil fuels to go around and collect processed pulp? Is he unaware that demand for paper is what drivesthe supply of new trees? We aren’t running out of trees because we throw away paper. The Pope’s plan sounds like it could have been hatched in Berkeley, California, instead of Vatican City. And yet worlds have collided.
Mandatory recycling, by definition, takes material that would not be recycled voluntarily, diverts it from the waste stream, and handles it several times before using it again in a way that wastes resources.
The only explanation for this behavior that I can think of is a religious ceremony, a sacrifice of resources as a form of worship. I have no problem if people want to do that. As religions go, it is fairly benign. Butrequiring that religious sacrifice of resources is a violation of the constitutional separation of church and state.
Well, Professor Munger, this is the Pope we’re talking about.
We find it hard to admit that the operation of natural ecosystems is exemplary: plants synthesize nutrients that feed the herbivores; these in turn feed the carnivores, which provide a lot of organic waste, which give rise to a new generation of plants. In contrast, the industrial system, at the end of its cycle of production and consumption, has not developed the ability to absorb and reuse waste and slag.
Where is the evidence for this? These are matters of faith, indeed. All this time I thought the industrial system did have the ability to absorb and reuse waste: It’s called the system of prices, property, and profit/loss. The problem is not that such a “recycling” system doesn’t exist, it’s that corruption and government distorts the system of property, prices and profit/loss so that our economic ecosystem doesn’t operate as it should.
Indeed, when you have the Pope suggesting we burn gas to save glass, you have to wonder why the industrial system is so messed up. A system that “requires us to limit the use of non-renewable resources, to moderate consumption, to maximize the efficiency of the exploitation, to reuse and to recycle,” is called the market. And where it doesn’t exist is where you’ll find the worst instances of corruption and environmental degradation.
Then, of course, there’s climate change. In the interests of brevity I won’t quote the whole thing. But here’s the punchline, which might have been plucked straight from the IPCC Summary for Policymakers:
Climate change is a global problem with serious environmental, social, economic, distribution and policy implications, and make up one of the main current challenges for humanity. The heaviest impacts will probably fall in the coming decades upon developing countries.
Meanwhile, the biggest benefits of burning more carbon-based fossil fuels will accrue the poorest billions on earth. The Pope should mention that if he really has their interests at heart or in mind.
But many symptoms indicate that these effects could get worse if we continue the current patterns of production and consumption.
“Patterns of production and consumption”? This is a euphemism for wealth creation. What is wealth except production and consumption of resources to further human need and desire?
His suggested cure for our dangerous patterns of wealth creation, of course, is good ole demand-side management. Wiser, more enlightened minds (like his, he hopes) will let you know which light bulbs to buy, what sort of car to drive, and which insolvent solar company they’ll “invest” your money in. You can even buy papal indulgences in the form of carbon credits. As the late Alexander Cockburn wrote,
The modern trade is as fantastical as the medieval one. … Devoid of any sustaining scientific basis, carbon trafficking is powered by guilt, credulity, cynicism and greed, just like the old indulgences, though at least the latter produced beautiful monuments.
But the most important thing to realize here is that the “current” patterns of production and consumption are never current. The earthquakes of innovation and gales of creative destruction blow through any such observed patterns. The price system, with its lightning-quick information distribution mechanism is far, far superior to any elites or energy cronies. And technological innovation, though we can’t predict just how, will likely someday take us as far away from today’s energy status quo, just as we have moved away from tallow, whale oil, and horse-drawn carriages.
The Pope disagrees with our rose-tinted techno-optimism, saying “some maintain at all costs the myth of progress and say that the ecological problems will be solved simply by new technical applications.”
The Pope sits on his golden throne and looks over the vast expanse of time and space — from hunter-gatherers running mammoths off cliffs to Americans running Teslas off electric power, from the USA in 1776 and 2015, from England before and after the Industrial Revolution, from Hong Kong and Hiroshima in 1945 to their glorious present — and sneers: progress is a myth, environmental problems can’t be fixed through innovation, production is destroying the earth, consumption is original sin.
Innovation is the wellspring of all progress. Policies to stop or undo innovation in energy, chemistry, industry, farming, and genetics are a way to put humanity in a bell jar, at best. At worst they will put some of us in the dark and others in early graves. They are truly fatal conceits.
And yet, the Pope has faith in policymakers to know just which year we should have gotten off the train of innovation. William F. Buckley famously said conservatives “stand athwart history, yelling ‘Stop!’” Greens are similar, except they’re yelling “Go back!”
Therefore it has become urgent and compelling to develop policies so that in the coming years the emission of carbon dioxide and other highly polluting gases is reduced drastically, for instance by replacing fossil fuels and by developing renewable energy sources.
I reflect again on the notion that this effort might be just another way of the Church embracing and extending a competitor religion. Then again, Pope Francis so often shows that he is a true and faithful green planner. In an unholy alliance with those who see the strategic benefit in absorbing environmentalism, the Holy Father has found the perfect way to restore the power of the Church over politics, economics, culture, and the state to its former glory.
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.
Daniel Bier is the editor of Anything Peaceful. He writes on issues relating to science, civil liberties, and economic freedom.
https://drrichswier.com/wp-content/uploads/vatican-e1434989477829.jpg317640Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2015-06-22 12:16:232015-06-22 12:20:39The New Paganism? The Case against Pope Francis’s Green Encyclical by Max Borders
Pope Francis’s new encyclical on the environment (Laudato Sii) warns of the coming environmental catastrophe (“unprecedented destruction of ecosystems, with serious consequences for all of us”). It’s the latest entry in a long literary tradition of environmental doomsday warnings.
In contrast, Matt Ridley, bestselling author of Genome, The Agile Gene, and The Rational Optimist, who also received the 2012 Julian Simon Memorial Award from the Competitive Enterprise Institute, says this outlook has proven wrong time again. This is the full text of his acceptance speech. Video is embedded below.
It is also 40 years since The Limits to Growth and 50 years since Silent Spring, plenty long enough to reflect on whether the world has conformed to Malthusian pessimism or Simonian optimism.
Before I go on, I want to remind you just how viciously Simon was attacked for saying that he thought the bad news was being exaggerated and the good news downplayed.
Verbally at least Simon’s treatment was every bit as rough as Martin Luther’s. Simon was called an imbecile, a moron, silly, ignorant, a flat-earther, a member of the far right, a Marxist.
“Could the editors have found someone to review Simon’s manuscript who had to take off his shoes to count to 20?” said Paul Ehrlich.
Erhlich together with John Holdren then launched a blistering critique, accusing Simon of lying about electricity prices having fallen. It turned out they were basing their criticism on a typo in a table, as Simon discovered by calling the table’s author. To which Ehrlich replied: “what scientist would phone the author of a standard source to make sure there were no typos in a series of numbers?”
Answer: one who likes to get his facts right.
Yet for all the invective, his critics have never laid a glove on Julian Simon then or later. I cannot think of a single significant fact, data point or even prediction where he was eventually proved badly wrong. There may be a few trivia that went wrong, but the big things are all right. Read that 1980 article again today and you will see what I mean.
I want to draw a few lessons from Julian Simon’s battle with the Malthusian minotaur, and from my own foolhardy decision to follow in his footsteps – and those of Bjorn Lomborg, Ron Bailey, Indur Goklany, Ian Murray, Myron Ebell and others – into the labyrinth a couple of decades later.
Consider the words of the publisher’s summary of The Limits to Growth: “Will this be the world that your grandchildren will thank you for? A world where industrial production has sunk to zero. Where population has suffered a catastrophic decline. Where the air, sea, and land are polluted beyond redemption. Where civilization is a distant memory. This is the world that the computer forecasts.”
Again and again Simon was right and his critics were wrong.
Would it not be nice if just one of those people who called him names piped up and admitted it? We optimists have won every intellectual argument and yet we have made no difference at all. My daughter’s textbooks trot out the same old Malthusian dirge as mine did.
What makes it so hard to get the message across?
I think it boils down to five adjectives: ahistorical, finite, static, vested and complacent. The eco-pessimist view ignores history, misunderstands finiteness, thinks statically, has a vested interest in doom and is complacent about innovation.
People have very short memories. They are not just ignoring, but unaware of, the poor track record of eco-pessimists. For me, the fact that each of the scares I mentioned above was taken very seriously at the time, attracting the solemn endorsement of the great and the good, should prompt real skepticism about global warming claims today.
That’s what motivated me to start asking to see the actual evidence about climate change. When I did so I could not find one piece of data – as opposed to a model – that shows either unprecedented change or change is that is anywhere close to causing real harm.
Yet when I made this point to a climate scientist recently, he promptly and cheerily said that “the fact that people have been wrong before does not make them wrong this time,” as if this somehow settled the matter for good.
Second, it is enormously hard for people to grasp Simon’s argument that “Incredible as it may seem at first, the term ‘finite’ is not only inappropriate but downright misleading in the context of natural resources.”
He went on: “Because we find new lodes, invent better production methods and discover new substitutes, the ultimate constraint upon our capacity to enjoy unlimited raw materials at acceptable prices is knowledge.” This is a profoundly counterintuitive point.
Yet was there ever a better demonstration of this truth than the shale gas revolution? Shale gas was always there; but what made it a resource, as opposed to not a resource, was knowledge – the practical know-how developed by George Mitchell in Texas. This has transformed the energy picture of the world.
Besides, as I have noted elsewhere, it’s the renewable – infinite – resources that have a habit of running out: whales, white pine forests, buffalo. It’s a startling fact, but no non-renewable resource has yet come close to exhaustion, whereas lots of renewable ones have.
And by the way, have you noticed something about fossil fuels – we are the only creatures that use them. What this means is that when you use oil, coal or gas, you are not competing with other species. When you use timber, or crops or tide, or hydro or even wind, you are.
There is absolutely no doubt that the world’s policy of encouraging the use of bio-energy, whether in the form of timber or ethanol, is bad for wildlife – it competes with wildlife for land, or wood or food.
Imagine a world in which we relied on crops and wood for all our energy and then along comes somebody and says here’s this stuff underground that we can use instead, so we don’t have to steal the biosphere’s lunch.
Imagine no more. That’s precisely what did happen in the industrial revolution.
Third, the Malthusian view is fundamentally static. Julian Simon’s view is fundamentally dynamic. Again and again when I argue with greens I find that they simply do not grasp the reflexive nature of the world, the way in which prices cause the substitution of resources or the dynamic properties of ecosystems – the word equilibrium has no place in ecology.
Take malaria. The eco-pessimists insisted until recently that malaria must get worse in a warming 21st century world. But, as Paul Reiter kept telling them to no avail, this is nonsense. Malaria disappeared from North America, Russia and Europe and retreated dramatically in South America, Asia and Africa in the twentieth century even as the world warmed.
That’s not because the world got less congenial to mosquitoes. It’s because we moved indoors and drained the swamps and used DDT and malaria medications and so on. Human beings are a moving target. They adapt.
But, my fourth point, another reason Simon’s argument fell on stony ground is that so many people had and have a vested interest in doom. Though they hate to admit it, the environmental movement and the scientific community are vigorous, healthy, competitive, cut-throat, free markets in which corporate leviathans compete for donations, grants, subsidies and publicity. The best way of getting all three is to sound the alarm. If it bleeds it leads. Good news is no news.
Imagine how much money you would get if you put out an advert saying: “we now think climate change will be mild and slow, none the less please donate”. The sums concerned are truly staggering. Greenpeace and WWF, the General Motors and Exxon of the green movement, between them raise and spend a billion dollars a year globally. WWF spends $68m alone on educational propaganda. Frankly, Julian, Bjorn, Ron, Indur, Ian, Myron and I are spitting in the wind.
Yet, fifth, ironically, a further problem is complacency. The eco-pessimists are the Panglossians these days, for it is they who think the world will be fine without developing new technologies. Let’s not adopt GM food – let’s stick with pesticides.
Was there ever a more complacent doctrine than the precautionary principle: don’t try anything new until you are sure it is safe? As if the world were perfect. It is we eco-optimists, ironically, who are acutely aware of how miserable this world still is and how much better we could make it – indeed how precariously dependent we are on still inventing ever more new technologies.
I had a good example of this recently debating a climate alarmist. He insisted that the risk from increasing carbon dioxide was acute and that therefore we needed to drastically cut our emissions by 90 percent or so. In vain did I try to point out that drastically cutting emissions by 90% might do more harm to the poor and the rain forest than anything the emissions themselves might do. That we are taking chemotherapy for a cold, putting a tourniquet round our neck to stop a nosebleed.
My old employer, the Economist, is fond of a version of Pascal’s wager – namely that however small the risk of catastrophic climate change, the impact could be so huge that almost any cost is worth bearing to avert it. I have been trying to persuade them that the very same logic applies to emissions reduction.
However small is the risk that emissions reduction will lead to planetary devastation, almost any price is worth paying to prevent that, including the tiny risk that carbon emissions will destabilize the climate. Just look at Haiti to understand that getting rid of fossil fuels is a huge environmental risk.
That’s what I mean by complacency: complacently assuming that we can decarbonize the economy without severe ecological harm, complacently assuming that we can shut down world trade without starving the poor, that we can grow organic crops for seven billion people without destroying the rain forest.
Having paid homage to Julian Simon’s ideas, let me end by disagreeing with him on one thing. At least I think I am disagreeing with him, but I may be wrong.
He made the argument, which was extraordinary and repulsive to me when I first heard it as a young and orthodox eco-pessimist, that the more people in the world, the more invention. That people were brains as well as mouths, solutions as well as problems. Or as somebody once put it: why is the birth of a baby a cause for concern, while the birth of a calf is a cause for hope?
Now there is a version of this argument that – for some peculiar reason – is very popular among academics, namely that the more people there are, the greater the chance that one of them will be a genius, a scientific or technological Messiah.
Occasionally, Julian Simon sounds like he is in this camp. And if he were here today, — and by Zeus, I wish he were – I would try to persuade him that this is not the point, that what counts is not how many people there are but how well they are communicating. I would tell him about the new evidence from Paleolithic Tasmania, from Mesolithic Europe from the Neolithic Pacific, and from the internet today, that it’s trade and exchange that breeds innovation, through the meeting and mating of ideas.
That the lonely inspired genius is a myth, promulgated by Nobel prizes and the patent system. This means that stupid people are just as important as clever ones; that the collective intelligence that gives us incredible improvements in living standards depends on people’s ideas meeting and mating, more than on how many people there are. That’s why a little country like Athens or Genoa or Holland can suddenly lead the world. That’s why mobile telephony and the internet has no inventor, not even Al Gore.
Not surprisingly, academics don’t like this argument. They just can’t get their pointy heads around the idea that ordinary people drive innovation just by exchanging and specializing. I am sure Julian Simon got it, but I feel he was still flirting with the outlier theory instead.
The great human adventure has barely begun. The greenest thing we can do is innovate. The most sustainable thing we can do is change. The only limit is knowledge. Thank you Julian Simon for these insights.
Anything Peaceful is FEE’s new online ideas marketplace, hosting original and aggregate content from across the Web.
https://drrichswier.com/wp-content/uploads/smoke-stacks-with-skulls-e1434553147172.jpg317640Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2015-06-17 10:59:182015-06-17 10:59:18Against Eco-pessimism: Half a Century of False Bad News by Matt Ridley
I was in an elevator and heard a conversation between a young worker in information technology and an old timer involved in heavy industry. They were talking professions. The young man told the old man that he was in digital marketing. You could feel the sense of incredulity in the small space, and (though he didn’t say it) I just knew what the old man was thinking: “Another fake job in the unsustainable Facebook economy.”
So it has always been. The belief that unless you are making stuff you are not really producing has been with us since the ancient world. Even Aristotle found retailing to be disgusting, and money lending even more so. After all, these people are not actually contributing to the physical store of wealth in society, so in what sense are they creating value? We read similar opinions every day.
Such views completely misconstrue the nature of wealth and the job of enterprise. “The characteristic feature of capitalism that distinguishes it from pre-capitalist methods of production,” writes Ludwig von Mises, “was its new principle of marketing.”
The consumers rule. The makers and sellers of products seek their approval. What influences the decision to buy are the ideas people hold. It thereby becomes incumbent on the sellers to explain, persuade, convince, and inspire. They can only do this with good ideas.
To contemplate the value of an idea, the potentially immense worth of a single product of the human mind, dreamed up from non-existence to the stage of realization, communicated in a way that causes people to change their minds even in the absence of any physical change to the world, is to come to terms with a realm in which matter and spirit meet.
Exploring this realm is where the television series Mad Men (2007-2015) truly excels. It is set in the early 1960s, a time when the modern advertising industry began to take on critical economic importance due to innovations in communications technology. This industry sought to move already-produced goods (and services) from warehouse shelves to become part of people’s lives.
The entire goal of the firm is to bring consumers to a position decision to buy. The right messaging, well placed, can make the difference between a multi-million dollar success and a complete flop. It’s all about entering and influencing the headspace of the consumers — the ultimate decision makers in a capitalist economy.
Time and again, an outsider asks what it is that these advertising executives actually make. They try to explain. They fail. It seems too elusive, or perhaps too fake.
Like any good drama, Mad Men avoids didacticism concerning its point of view. There is plenty of good and evil to go around in the firm and the industry.
But over time, the viewer begins to cheer on the success of these ad men (and women), particularly Don Draper, the series’ main protagonist. You can’t help but sympathize with him on as he struggles to stay in a game in which the rules are always changing and the value systems of the mass of consumers are in constant flux.
For many people, Mad Men has been the first behind-the-scenes exposure to the world of advertising and the capitalistic machinery that manages it. The series is revealing in a historical sense, taking us through the systematic social, political, and economic upheaval of the 1960s. The characters are so well drawn that we actually come to believe we can psychologically deconstruct them one by one.
So let me try to deconstruct Don Draper, at least in a professional sense. He has one skill: creativity. And that creative skill has a test: profitability. In this sense, his creativity is different from a regular artist such as a painter or poet or musician. His one single goal is to generate ideas that sell product. There is a metric to reveal success or failure: It is the balance sheet. If the balance sheet responds, he has succeeded. If it does not, he has failed, and there are dozens of others ready to take his place to try their hands at idea creation.
Where do these marketing ideas come from? They are anything but automatic. If the answer to the question of marketing were obvious, his skills wouldn’t be needed. His job is to discover a message that rearranges the preference scales of possible consumers, which requires discerning the way that a mere physical product can most deeply meet human needs.
When he gets a new client, he extracts the most necessary known data: What is the product and what does it do? To whom is it most likely to be useful? Why would anyone want to obtain it through market exchange, giving up their property for someone else’s?
Once he has processed all known data, he turns his attention to what is unknown. How does this directly benefit people in their daily lives? And how can this product provide an even deeper benefit by causing life to better than it has been thus far?
The people who hire him do not know the answer. Draper does not know the answer either. He has to generate that answer from within his creative capacity. He will be tested on whether he gets it right, which is why he needs time to reflect. The answer for one product is not the same as another. Each case is unique. As he finds the best possible strategy, he also knows that there is no faking it: He either gets it right or he gets it wrong.
Every day, he faces this struggle to discover, see, codify, and pitch — to sell his idea to sell a product. He goes to bed each night with a profound sense of uncertainty. The answer is elusive. He looks through the glass darkly. Beyond the horizon of the present is the abyss of the future.
To cross it, he has to put himself in the shoes of countless people who know nothing about the product, peer into their hearts and souls, discern the inner workings of their minds, connect the results with a product, map out a memorable message, strategize on the right paths for conveying that message, and explain it all in a way that persuades those who have hired him that he is right and becoming willing to take the risk.
When you consider the whole of the responsibility here, it is awesome. Most people can’t live in this constant state of not knowing today what is essential to know tomorrow. But Draper has learned to have confidence that his knowledge will be greater tomorrow than it is today. He has learned to put his faith and trust in an emergent process that operates within his mind.
Notice that there are two levels of challenge here, both within and without.
Externally, he must put himself in the mindset of a random and unknown consumer, potentially millions of them. He must be outward looking, one might even say public spirited. He has to discern the workings of the human spirit.
Internally, the challenge is just as great. He has this gray matter that has to generate something fresh, wonderful, and effective. He has to believe that the answer is in there somewhere; it just needs the right configuration of outside stimuli and careful reflection to shake it loose.
He must manage his life to maximize the chances that these external and internal forces will come together to reveal the answer he is seeking. He lives an edgy and sometimes horrible life. Why does he seem to disappoint and betray so many people? Why does he so often disappoint us with his antics, his insensitivities, his erratic wanderings? How can he appear to have such intense convictions in one setting and then blow them up again in a different setting later in the same day?
In the course of his life, Draper is cultivating his capacity for thinking and creating in the best way he knows how. The ideas have to emerge: where they come from and how they rise from the recesses of his brain is not completely known to him.
But this much he knows: living a static and ritualized existence does not do it. He must at all times be ready to destroy a previous mode of thought, no matter what the costs that went into making it, and replace it with something completely new. In order to disrupt his own staid patterns of thought and open new ways of thinking, he seeks out change with new stimuli, risk, and even danger.
It’s the way the truly creative mind works — not through repeating what is known but by progressively discovering what has been unknown. In this task, past data is useful and interesting but also potentially distracting and even completely irrelevant in a world of ceaseless change. A plan based on known metrics alone is a recipe for total failure. The real source of value comes from understanding, anticipating, and acting on what is next. Even more value comes from actually creating what is next.
This method is not only Don’s own. It is also the source of progress in our world. Our lives are strictly divided into three experience of time: the unchangeable data of the past, the tactile experiences of the present, and the darkened and mapless path of the future. The forward motion of time, from past to present to future, never stops. The job of the advertiser — or the creative artist or the entrepreneur or the manager of any firm — is to find the light switches that illuminate the best route to leave the unchangeable past, improve the unsatisfactory present, and pave the way to a more wonderful world of tomorrow.
Don Draper is seeking those switches. When he finds one, there is a moment of rejoicing but then the reality dawns. He must find another. Then another. He must create or die. And so it must be for as long as he pursues his career.
Draper is a very flawed figure. So are we all. So will always be the ideas and structures and institutions created by mortal beings. His drive to succeed seems to come at the expense of his own soul. His obsession with knowing the minds of others displaces the need to be honest with himself.
All of this is true, and well portrayed. But consider what is being criticized here. The problem with Draper, we are being told, is that he gives of himself too much. And perhaps he does. It’s a struggle everyone faces, no matter the institutional and professional setting.
Still, even given his flaws, we should not fail to observe the piety at work here. It is because of the daring and courageous will to think something new, to seek out the workings of the public mind, to live day-to-day with radical uncertainty, to dive into the crucible of profit-and-loss that we move ever further from the state of nature toward the promise and possibility of a flourishing society of prosperity and peace.
The advertisers and marketers are seeking to have a role in creating that future. Think of how you spend your time. Think of how you spend your money. There are infinite choices before us, but at any one moment, you can only do one thing at a time.
Very often, as you reflect on your life and what you do, you will find that the goods and services that capture your attention, have behind them a massive apparatus of genius, risk, and creativity, all constructed to convey an idea.
That is called marketing. It is devised by human beings, portrayed so beautifully, flaws and all, on Mad Men.
In a market economy, geniuses are gathered to care about the life and decisions of the common person. They regard us as valuable. This is a wonderful thing. We should be grateful for it. It all happens because of an idea — an idea that begins in one mind that can eventually teach the world to sing.
Is there value in that? Absolutely — even if it can’t be explained in an elevator pitch.
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.
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AMC’s Halt and Catch Fire is a brilliant achievement. The show is a vibrant look at the emerging personal computer industry in the early 1980s. But more than that, the show is about capitalism, creative destruction, and innovation.
While we all know the PC industry changed the world, the visionaries and creators who brought us into the information age faced uncertainty over what their efforts would yield. They risked everything to build new machines and to create shaky start-ups. Often they failed and lost all they had.
HCF has four main characters: Joe, a visionary and salesman; Cameron, an eccentric programming geek; Gordon, a misunderstood engineering genius; and Gordon’s wife, Donna, a brilliant but unappreciated housewife and engineer.
The show pits programmers, hardware engineers, investors, big businesses, corporate lawyers, venture capitalists, and competing start-ups against each other and, at times, shows them having to cooperate to overcome mutual problems. The result is innovation.
Lee Pace gives an award-worthy performance as Joe MacMillan. The son of a never-present IBM tycoon and a negligent, drug addicted mother, Joe struggles with a host of mental and emotional problems. He’s a man with a brilliant mind and an amazing vision — but he has no computer knowledge or capabilities.
The series begins with his leaving a sales job at IBM in the hope of hijacking Cardiff Electric, a small Texas-based computer company, and launching it into the personal computing game.
As part of his scheme, he gets a low-level job at Cardiff where he recruits Gordon Clark, played by the equally talented Scoot McNairy. Enamored with Gordon’s prior writings on the potential for widespread personal computer use, Joe pleads with Gordon to reverse engineer an IBM-PC with him. The plot delves into the ethical ambiguities of intellectual property law as the two spend days reverse engineering the IBM BIOS.
In 1981, when Canion and his cohorts set out to make a portable PC, the market was dominated by IBM. Because IBM had rushed their IBM-PC to market, the system was made up entirely of off-the-shelf components and other companies’ software.
As a result, it was possible to buy those same components and software and build what was known as an IBM “clone.” But these clones were only mostlycompatible with IBM. While they could run DOS, they may or may not have run other programs written for IBM-PCs.
Because IBM dominated the market, all the best software was being written for IBMs. Canion wanted to build a computer that was 100 percent IBM compatible but cheaper — and portable enough to move from desk to desk.
Canion said in an interview on the Internet History Podcast, “We didn’t want to copy their computer! We wanted to have access to the software that was written for their computer by other people.”
But in order to do that, he and his team had to reverse-engineer the IBM BIOS. They couldn’t just steal or copy the code because it was proprietary technology, but they could figure out what function the code executed and then write their own code to handle the same task.
Canion explains:
What our lawyers told us was that not only can you not use [the copyrighted code], anybody that’s even looked at it — glanced at it — could taint the whole project. … We had two software people. One guy read the code and generated the functional specifications.
So it was like reading hieroglyphics. Figuring out what it does, then writing the specification for what it does. Then once he’s got that specification completed, he sort of hands it through a doorway or a window to another person who’s never seen IBM’s code, and he takes that spec and starts from scratch and writes our own code to be able to do the exact same function.
In Halt and Catch Fire, Joe uses this idea to push Cardiff into making their own PC by intentionally leaking to IBM that he and Gordon had indeed reversed engineered the BIOS. They recruit a young punk-rock programmer named Cameron Howe to write their own BIOS.
While Gordon, Cameron, and Joe all believe that they are the central piece of the plan, the truth is that they all need each other. They also need to get the bosses and investors at Cardiff on their side in order to succeed, which is hard to do after infuriating them. The show demonstrates that for an enterprise to succeed you need to have cooperation between people of varying skill sets and knowledge bases — and between capital and labor.
The series is an exploration of the chaos and creative destruction that goes into the process of innovation. The beginning of the first episode explains the show’s title:
HALT AND CATCH FIRE (HCF): An early computer command that sent the machine into a race condition, forcing all instructions to compete for superiority at once. Control of the computer could be regained.
The show takes this theme of racing for superiority to several levels: the characters, the industry, and finally the economy and the world as a whole.
As Gordon himself declares of the cut-throat environment in which computer innovation occurs, “It’s capitalism at its finest!” HFC depicts Randian heroes: businessmen, entrepreneurs, and creators fight against all odds in a race to change the world.
Now into its second season, the show is exploring the beginnings of the internet, and Cameron is running her own start-up company, Mutiny. I could go on about the outstanding production quality, but the real novelty here is a show where capitalists, entrepreneurs, and titans of industry are regarded as heroic.
Halt and Catch Fire is a brilliant show, but it isn’t wildly popular. I fear it may soon be canceled, so be sure to check it out while it’s still around.
Keith Farrell is a freelance writer and political commentator.
https://drrichswier.com/wp-content/uploads/AMC-halt-and-catch-fire-e1434548568807.jpg317640Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2015-06-17 09:46:262015-06-17 09:47:03AMC’s “Halt and Catch Fire” Is Capitalism’s Finest Hour by Keith Farrell
It must have been pretty rotten to sleep in, say, the 12th century Europe. Your floor was dirt. Your mattress was made from hay or bean husks. The biggest drag of all must have been the bed bug problem. It’s not so fabulous to lie there asleep while thousands of ghastly critters gnaw on your flesh. You wake with rashes all over your body.
They heal gradually in the course of the day, but, at night, it starts all over again.
No, they don’t kill you. But they surely make life desperate and miserable. They know where you are. They sense the carbon dioxide. They are after your blood, so they can stay alive. No wonder some people have been driven to suicide.
It stands to reason that among the earliest priorities of civilized life was the total eradication of bed bugs. And we did it! Thanks to modern pesticides, most especially DDT, generations knew not the bed bug.
That is, at least in capitalist countries. I have a friend from Russia whose mother explained the difference between capitalism and socialism as summed up in bed bugs. In the 1950s, capitalist countries had eliminated them. The socialist world, by contrast, faced an epidemic.
But you know what? They are back with an amazing ferocity, right here in 21st century America.
You can attend Bed Bug University, which is “an intensive four day course that covers bed bug biology and behavior, treatment protocols and explores the unique legal challenges and business opportunities of bed bugs.”
You can browse the Bed Bug Registry, with dozens of reports coming in from around the country. You can call a local company that specializes in keeping them at bay.
Welcome to the post-DDT world in which fear of pesticides displaced fear of the thing that pesticides took away. Oh, how glorious it is to embrace nature and all its ways — until nature begins to feed on you in your sleep.
The various restrictions and bans from the 1970s have gradually brought back the nightmares that wonderful, effective, killer chemicals took away. Some people claim that today not even DDT works because the new strain of bed bug is stronger than ever.
Forget innovating with new pesticides: the restrictions are just too tight. There is not a single product at your local big box hardware store that can deal with these blood suckers. And the products that more-or-less work that are available online, such as Malathion, are not approved for indoor use — and I know for sure that everyone obeys such rules!
In our current greeny ethos, people are suggesting “natural” methods such as: “take all of your laundry and bedding to the Laundromat and wash and dry it at high temperatures.”
Why not do it at home? Well, thanks to federal regulations, your hot water heater is shipped with a high temperature of 110 degrees, which is something like a luxurious bath for the bed bug. Add your detergent — which, by government decree, no longer has phosphates — and your wash turns into Mr. Bubble happy time for Mr. Bed Bug.
So you could stand over gigantic pots of boiling water in your kitchen, fishing beddings in and out, beating your mattresses outside with sticks, and otherwise sleeping in plastic bags, like they do in the new season of “Orange Is the New Black.” You know, like in prison. Or like in the 12th century.
No matter how modernized we become, no matter how many smartphones and tablets we acquire, we still have to deal with the whole problem of nature trying to eat us — in particular, its most wicked part, the man-eating insect. There is no app for that.
Google around on how many people die from mosquitos, and you are immediately struck by the ghastly reality: These things are even more deadly than government. And that’s really saying something.
But somehow, starting in the late 1960s, we began to forget this. Capitalism achieved a wonderful thing, and we took it for granted. We banned the chemicals that saved us, and gradually came to prohibit the creation of more. We feared a “Silent Spring” but instead created a nation in which the noise we hear at night is of an army of bugs sinking their teeth into our flesh.
A little silence would be welcome.
So here we are: mystified, afraid to lie down and sleep, afraid to buy a sofa from Craigslist, boiling our sheets, living in fear of things we can’t see. It’s the Dark Ages again. It gets worse each year, especially during summer when the bed bugs leave their winter hibernation and gather en masse to become our true and living nightmare.
How bad does it have to get before we again unleash the creative forces of science and capitalism to restore a world that is livable for human beings?
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.
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Richard Nixon stood by a lemon-yellow refrigerator in Moscow and bragged to the Soviet leader: “The American system,” he told Nikita Khrushchev over frosted cupcakes and chocolate layer cake, “is designed to take advantage of new inventions.”
It was the opening day of the American National Exhibition at Sokol’niki Park, and Nixon was representing not just the US government but also the latest products from General Mills, Whirlpool, and General Electric. Assisting him in what would come to be known as the “Kitchen Debates” were attractive American spokesmodels who demonstrated for the Russian crowd the best that capitalism in 1959 had to offer.
Capitalist lifestyle
“This was the first time,” writes British food historian Bee Wilson of the summer exhibition, that “many Russians had encountered the American lifestyle firsthand: the first time they … set eyes on big American refrigerators.”
Laughing and sometimes jabbing fingers at one another, the two men debated the merits of capitalism and communism. Which country had the more advanced technologies? Which way of life was better? The conversation … hinged not on weapons or the space race but on washing machines and kitchen gadgets. (Consider the Fork)
Khrushchev was dismissive. Yes, the Americans had brought some fancy machines with them, but did all this consumer technology actually offer any real advantages?
In his memoirs, he later recalled picking up an automatic lemon squeezer. “What a silly thing … Mr. Nixon! … I think it would take a housewife longer to use this gadget than it would for her to … slice a piece of lemon, drop it into a glass of tea, then squeeze a few drops.”
Producing necessities
That same year, Khrushchev announced that the Soviet economy would overtake the United States in the production of milk, meat, and butter. These were products that made sense to him. He couldn’t deliver — although Soviet farmers were forced to slaughter their breeding herds in an attempt to do so — but the goal itself reveals what the communist leader believed a healthy economy was supposed to do: produce staples like meat and dairy, not luxuries like colorful kitchenware and complex gadgetry for the decadent and lazy.
“Don’t you have a machine,” he asked Nixon, “that puts food in the mouth and presses it down? Many things you’ve shown us are interesting but they are not needed in life. They have no useful purpose. They are merely gadgets.”
Khrushchev was displaying the behavior Ludwig von Mises described in The Anti-Capitalistic Mentality. “They castigate the luxury, the stupidity and the moral corruption of the exploiting classes,” Mises wrote of the socialists. “In their eyes everything that is bad and ridiculous is bourgeois, and everything that is good and sublime is proletarian.”
On display that summer in Moscow was American consumer tech at its most bourgeois. The problem with “castigating the luxury,” as Mises pointed out, is that all “innovation is first a luxury of only a few people, until by degrees it comes into the reach of the many.”
Producing luxuries
It is appropriate that the Kitchen Debate over luxury versus necessity took place among high-end American refrigerators. Refrigeration, as a luxury, is ancient. “There were ice harvests in China before the first millennium BC,” writes Wilson. “Snow was sold in Athens beginning in the fifth century BC. Aristocrats of the seventeenth century spooned desserts from ice bowls, drank wine chilled with snow, and even ate iced creams and water ices. Yet it was only in the nineteenth century in the United States that ice became an industrial commodity.” Only with modern capitalism, in other words, does the luxury reach so rapidly beyond a tiny elite.
“Capitalism,” Mises wrote in Economic Freedom and Interventionism, “is essentially mass production for the satisfaction of the wants of the masses.”
The man responsible for bringing ice to the overheated multitude was a Boston businessman named Frederic Tudor. “History now knows him as ‘the Ice King,’” Steven Johnson writes of Tudor in How We Got to Now: Six Innovations That Made the Modern World, “but for most of his early adulthood he was an abject failure, albeit one with remarkable tenacity.”
Like many wealthy families in northern climes, the Tudors stored blocks of frozen lake water in icehouses, two-hundred-pound ice cubes that would remain marvelously unmelted until the hot summer months arrived, and a new ritual began: chipping off slices from the blocks to freshen drinks [and] make ice cream.
In 1800, when Frederic was 17, he accompanied his ill older brother to Cuba. They were hoping the tropical climate would improve his brother’s health, but it “had the opposite effect: arriving in Havana, the Tudor brothers were quickly overwhelmed by the muggy weather.” They reversed course, but the summer heat chased them back to the American South, and Frederic longed for the cooler climes of New England. That experience “suggested a radical — some would say preposterous — idea to young Frederic Tudor: if he could somehow transport ice from the frozen north to the West Indies, there would be an immense market for it.”
“In a country where at some seasons of the year the heat is almost unsupportable,” Tudor wrote in his journal, “ice must be considered as outdoing most other luxuries.”
Tudor’s folly
Imagine what an early 19th-century version of Khrushchev would have said to the future Ice King. People throughout the world go hungry, and you, Mr. Tudor, want to introduce frozen desserts to the tropics? What of beef? What of butter? The capitalists chase profits rather than producing the necessities.
It’s true that Tudor was pursuing profits, but his idea of ice outdoing “most other luxuries” looked to his contemporaries more like chasing folly than fortune.
The Boston Gazette reported on one of his first shiploads of New England ice: “No joke. A vessel with a cargo of 80 tons of Ice has cleared out from this port for Martinique. We hope this will not prove to be a slippery speculation.”
And at first the skeptics seemed right. Tudor “did manage to make some ice cream,” Johnson tells us. And that impressed a few of the locals. “But the trip was ultimately a complete failure.” The novelty of imported ice was just too novel. Why supply ice where there was simply no demand?
You can’t put a price on failure
In the early 20th century, economists Ludwig von Mises and F.A. Hayek, after years of debate with the Marxists, finally began to convince advocates of socialist central planning that market prices were essential to the rational allocation of scarce resources. Some socialist theorists responded with the idea of using capitalist market prices as a starting point for the central planners, who could then simulate the process of bidding for goods, thereby replacing real markets with an imitation that they believed would be just as good. Capitalism would then be obsolete, an unfortunate stage in the development of greater social justice.
By 1959, Khrushchev could claim, however questionably, that Soviet refrigerators were just as good as the American variety — except for a few frivolous features. But there wouldn’t have been any Soviet fridges at all if America hadn’t led the way in artificial refrigeration, starting with Tudor’s folly a century and a half earlier. If the central planners had been around in 1806 when the Boston Gazette poked fun at Tudor’s slippery speculation, what prices would they have used as the starting point for future innovation? All the smart money was in other ventures, and Tudor was on his way to losing his family’s fortune and landing in debtor’s prison.
Only through stubborn persistence did Tudor refine his idea and continue to innovate while demand slowly grew for what he had to offer.
“Still pursued by his creditors,” Johnson writes, Tudor
began making regular shipments to a state-of-the-art icehouse he had built in Havana, where an appetite for ice cream had been slowly maturing. Fifteen years after his original hunch, Tudor’s ice trade had finally turned a profit. By the 1820s, he had icehouses packed with frozen New England water all over the American South. By the 1830s, his ships were sailing to Rio and Bombay. (India would ultimately prove to be his most lucrative market.)
The world the Ice King made
In the winter of 1846–47, Henry David Thoreau watched a crew of Tudor’s ice cutters at work on Walden Pond.
Thoreau wrote, “The sweltering inhabitants of Charleston and New Orleans, of Madras and Bombay and Calcutta, drink at my well.… The pure Walden water is mingled with the sacred water of the Ganges.”
When Tudor died in 1864, Johnson tells us, he “had amassed a fortune worth more than $200 million in today’s dollars.”
The Ice King had also changed the fortunes of all Americans, and reshaped the country in the process. Khrushchev would later care about butter and beef, but before refrigerated train cars — originally cooled by natural ice — it didn’t matter how much meat and dairy an area could produce if it could only be consumed locally without spoiling. And only with the advent of the home icebox could families keep such products fresh. Artificial refrigeration created the modern city by allowing distant farms to feed the growing urban populations.
A hundred years after the Boston Gazette reported what turned out to be Tudor’s failed speculation, the New York Times would run a very different headline: “Ice Up to 40 Cents and a Famine in Sight”:
Not in sixteen years has New York faced such an iceless prospect as this year. In 1890 there was a great deal of trouble and the whole country had to be scoured for ice. Since then, however, the needs for ice have grown vastly, and a famine is a much more serious matter now than it was then.
“In less than a century,” Johnson observes, “ice had gone from a curiosity to a luxury to a necessity.”
The world that luxury made
Before modern markets, Mises tells us, the delay between luxury and necessity could take centuries, but “from its beginnings, capitalism displayed the tendency to shorten this time lag and finally to eliminate it almost entirely. This is not a merely accidental feature of capitalistic production; it is inherent in its very nature.” That’s why everyone today carries a smartphone — and in a couple of years, almost every wrist will bear a smartwatch.
The Cold War is over, and Khrushchev is no longer around to scoff, but the Kitchen Debate continues as the most visible commercial innovations produce “mere gadgets.” Less visible is the steady progress in the necessities, including the innovations we didn’t know were necessary because we weren’t imagining the future they would bring about. Even less evident are all the failures. We talk of profits, but losses drive innovation forward, too.
It’s easy to admire the advances that so clearly improve lives: ever lower infant mortality, ever greater nutrition, fewer dying from deadly diseases. It’s harder to see that the larger system of innovation is built on the quest for comfort, for entertainment, for what often looks like decadence. But the long view reveals that an innovator’s immediate goals don’t matter as much as the system that promotes innovation in the first place.
Even if we give Khrushchev the benefit of the doubt and assume that he really did care about feeding the masses and satisfying the most basic human needs, it’s clear the Soviet premier had no idea how economic development works. Progress is not driven by producing ever more butter; it is driven by ice cream.
https://drrichswier.com/wp-content/uploads/ice-cream-cones-e1433879667612.png317640Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2015-06-09 15:56:192015-06-12 08:03:51How Ice Cream Won the Cold War by B.K. Marcus
The incomes of households in the three middle income quintiles grew 40 percent between 1979 and 2011. Somewhat surprisingly, given the histrionics about the state of America’s poor, income in households in the lowest quintile was 48 percent higher in 2011 than it was in 1979.
