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Capitalism Is Good for the Poor by Steven Horwitz

Critics frequently accuse markets and capitalism of making life worse for the poor. This refrain is certainly common in the halls of left-leaning academia as well as in broader intellectual circles. But like so many other criticisms of capitalism, this one ignores the very real, and very available, facts of history.

Nothing has done more to lift humanity out of poverty than the market economy. This claim is true whether we are looking at a time span of decades or of centuries. The number of people worldwide living on less than about two dollars per day today is less than half of what it was in 1990. The biggest gains in the fight against poverty have occurred in countries that have opened up their markets, such as China and India.

If we look over the longer historical period, we can see that the trends today are just the continuation of capitalism’s victories in beating back poverty. For most of human history, we lived in a world of a few haves and lots of have-nots. That slowly began to change with the advent of capitalism and the Industrial Revolution. As economic growth took off and spread throughout the population, it created our own world in the West in which there are a whole bunch of haves and a few have-more-and-betters.

For example, the percentage of American households below the poverty line who have basic appliances has grown steadily over the last few decades, with poor families in 2005 being more likely to own things like a clothes dryer, dishwasher, refrigerator, or air conditioner than the average household was in 1971. And consumer items that didn’t even exist back then, such as cell phones, were owned by half of poor households in 2005 and are owned by a substantial majority of them today.

Capitalism has also made poor people’s lives far better by reducing infant and child mortality rates, not to mention maternal death rates during childbirth, and by extending life expectancies by decades.

Consider, too, the way capitalism’s engine of growth has enabled the planet to sustain almost 7 billion people, compared to 1 billion in 1800. As Deirdre McCloskey has noted, if you multiply the gains in consumption to the average human by the gain in life expectancy worldwide by 7 (for 7 billion as compared to 1 billion people), humanity as a whole is better off by a factor of around 120. That’s not 120 percent better off, but 120 times better off since 1800.

The competitive market process has also made education, art, and culture available to more and more people. Even the poorest of Americans, not to mention many of the global poor, have access through the Internet and TV to concerts, books, and works of art that were exclusively the province of the wealthy for centuries.

And in the wealthiest countries, the dynamics of capitalism have begun to change the very nature of work. Where once humans toiled for 14 hours per day at backbreaking outdoor labor, now an increasing number of us work inside in climate-controlled comfort. Our workday and workweek have shrunk thanks to the much higher value of labor that comes from working with productive capital. We spend a much smaller percentage of our lives working for pay, whether we’re rich or poor. And even with economic change, the incomes of the poor are much less variable, as they are not linked to the unpredictable changes in weather that are part and parcel of a predominantly agricultural economy long since disappeared.

Think of it this way: the fabulously wealthy kings of old had servants attending to their every need, but an impacted tooth would likely kill them. The poor in largely capitalist countries have access to a quality of medical care and a variety and quality of food that the ancient kings could only dream of.

Consider, too, that the working poor of London 100 years ago were, at best, able to split a pound of meat per week among all of their children, which were greater in number than the two or three of today. In addition, the whole family ate meat once a week on Sunday, the one day the man of the household was home for dinner. That was meat for a week.

Compare that to today, when we worry that poor Americans are too easily able to afford a meal with a quarter pound of meat in it every single day for less than an hour’s labor. Even if you think that capitalism has made poor people overweight, that’s a major accomplishment compared to the precapitalist norm of constant malnutrition and the struggle even 100 years ago for the working poor to get enough calories.

The reality is that the rich have always lived well historically, as for centuries they could commandeer human labor to attend to their every need. In a precapitalist world, the poor had no hope of upward mobility or of relief from the endless physical drudgery that barely kept them alive.

Today, the poor in capitalist countries live like kings, thanks mostly to the freeing of labor and the ability to accumulate capital that makes that labor more productive and enriches even the poorest. The falling cost of what were once luxuries and are now necessities, driven by the competitive market and its profit and loss signals, has brought labor-saving machines to the masses. When profit-seeking and innovation became acceptable behavior for the bourgeoisie, the horn of plenty brought forth its bounty, and even the poorest shared in that wealth.

Once people no longer needed permission to innovate, and once the value of new inventions was judged by the improvements they made to the lives of the masses in the form of profit and loss, the poor began to live lives of comfort and dignity.

These changes are not, as some would say, about technology. After all, the Soviets had great scientists but could not channel that knowledge into material comfort for their poor. And it’s not about natural resources, which is obvious today as resource-poor Hong Kong is among the richest countries in the world thanks to capitalism, while Venezuelan socialism has destroyed that resource-rich country.

Inventions only become innovations when the right institutions exist to make them improve the lives of the masses. That is what capitalism did and continues to do every single day. And that’s why capitalism has been so good for the poor.

Consider, finally, what happened when the Soviets decided to show the film version of The Grapes of Wrath as anticapitalist propaganda. In the novel and film, a poor American family is driven from their Depression-era home by the Dust Bowl. They get in their old car and make a horrifying journey in search of a better life in California. The Soviets had to stop showing the film after a short period because the Russian audiences were astonished that poor Americans were able to own a car.

Even anticapitalist propaganda can’t help but provide evidence that contradicts its own argument. The historical truth is clear: nothing has done more for the poor than capitalism.

Steven HorwitzSteven Horwitz

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions.

He is a member of the FEE Faculty Network.

What Killed Economic Growth? by Jeffrey A. Tucker

Debating why the economy is so sluggish is an American pastime. It fills the op-eds, burns up the blogosphere, consumes the TV pundits, and dominates the political debates.

It’s a hugely important question because many people are seriously frustrated about the problem. The recent popularity of political cranks and crazies from the left and right — backed by crowds embracing nativist and redistributionist nostrums — testify to that.

Sometimes it’s good to look at the big picture. The Economic Freedom of the World report does this with incredible expertise. If you believe in gathering data, and looking just at what the evidence shows and drawing conclusions, you will appreciate this report. It sticks to just what we know and what we can measure. The editors of the report have been doing this since 1996, so the persistence of the appearance of cause and effect is undeniable.

The report seeks measures of five key indicators of economic freedom: security of property rights, soundness of money, size of government, freedom to trade globally, and the extent of regulation. All their measures are transparent and heavily scrutinized by experts on an ongoing basis. If you question how a certain measure was arrived at, you are free to do so. It’s all there, even the fantastically detailed data sets, free for the download.

The report examines 157 countries with data available for 100 countries back to 1980. A total of 42 distinct variables are used in the index.

The big takeaway from this report: freer economies vastly outperform unfree economies by every measure of wellbeing.

The countries in the top quarter of the freest economies have average incomes more than 7 times higher than those countries listed into the bottom quarter (the least free). This is even true for the poor: the average income of the poor in free economies is 6 times that of the average in unfree economies. The lowest income group in free economies still 50% greater than the overall average is least free economies.

Life expectancy is 80.1 years in the top quarter as versus 63.1 in the bottom quarter.

The report further shows that civil liberties are more protected in freer economies than less free economies.

It’s a beautiful thing how this report puts to rest of a century of ideological debates. Indeed, these results are not generated by political ideology. They are generated by facts on the ground, the real conditions of law, regulation, institutions, legislation, and policy.

The implications are screamingly obvious. If you want a country to grow richer, you have to embrace freedom in economic life. If you want to drive a country into poverty, there is a way: grow the government, destroy the money, shut down trade, and heavily regulate all production and consumption.

One leaves this report with the question: Why are we still debating this?

What about the United States?

Everyone knows that the US has a problem. Despite living through the greatest explosion of technology and communication in the history of the world, a transformation that should have set off a wonderful economic boom similar to what we saw in the 19th century, we’ve seen pathetic results in growth and household income.

A quick casual look shows what I mean. Here’s percent change in GDP from the end of World War II to the present.

And here is real median household income from 1984 to 2013:

From those two pictures alone, you can discern the source of voter frustration, and also the general atmosphere of angst.

People want to know why, and whom to blame. The Economic Freedom Index gives you a strong hint.

From 1970 to 2000, the United States was generally listed as the third freest economy in the world, behind only Singapore and Hong. Starting in 2000, the US began to slip. Over the period between 2000 and today, the summary position in the index slipped 0.9%. This doesn’t sound like much, but “a one-point decline in the EFW rating is associated with a reduction in the long-term growth of GDP of between 1.0 and 1.5 percentage points annually,” says the report, and this adds up, year after year.

Relative to other countries, listed most free to least free, the US has slipped from the number 3 spot all the way to number 16. Countries that are ahead of the US include Australia, Chile, Ireland, Canada, Jordan, Taiwan, New Zealand, Hong Kong, and Singapore.

And here is a fact that I found incredible: The former Soviet state of Georgia ranks at number 12. And can you guess which country is just behind the US at number 17? The formerly Communist nightmare of Romania. That Romania is only slightly less free than the United States is great progress for Romanians, but should be an embarrassment for Americans.

The fall in economic freedom in this country has been precipitous. The authors of the report further note that this decline is highly unusual. Most all countries in the world are getting freer, which accounts from the thrilling fall in global poverty.

But the US is going the opposite direction, fast: “Nowhere has the reversal of the rising trend in the economic freedom been more evident than in the United States.”

What in particular accounts for the largest portion of this slide? It’s about the security of property. The drug war, the bailouts, the rise of forced transfers to political elites, eminent domain, and asset forfeiture all contribute. There are other problems with regulation and taxation, but it is the lack of security in what we own that has been decisive. This is what kills investment, confidence in the future, and the ability to accumulate capital that is so essential to prosperity.

What’s strikes me when looking at all this data, and the crystal clear connections here, is the strange silence on the part of the opinion class. People are flailing around for answers. Where’s the growth? Who is stealing the future? Maybe it’s the immigrants, foreign nations, and the rise of inequality. Maybe technology is taking jobs. Maybe people are just lazy and incompetent.

Or maybe we should look at the data. It’s all about freedom.

Jeffrey A. Tucker
Jeffrey A. Tucker

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

The New Paganism? The Case against Pope Francis’s Green Encyclical by Max Borders

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.

Do not take it on faith: here are data.

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.

Michael Munger puts matters a little differently:

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.

This might be true. What the Holy Father fails to appreciate is that the heaviest impacts of policies designed to mitigate climate change will definitely fall upon developing countries. (That is, if the developing countries swear off cheap energy and embrace any sort of global climate treaty. If history is a guide, they most certainly will not.)

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

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

Daniel Bier is the editor of Anything Peaceful. He writes on issues relating to science, civil liberties, and economic freedom.

Against Eco-pessimism: Half a Century of False Bad News by Matt Ridley

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 GenomeThe 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 now 32 years, nearly a third of a century, since Julian Simon nailed his theses to the door of the eco-pessimist church by publishing his famous article in Science magazine: “Resources, Population, Environment: An Oversupply of False Bad News.”

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.

2012 Julian L. Simon Memorial Award Dinner from CEI Video on Vimeo.

Anything Peaceful

Anything Peaceful is FEE’s new online ideas marketplace, hosting original and aggregate content from across the Web.

Kelo: Politicians Stole Her Home for Private Developers and Started a Legal War by Ilya Somin

Most of my new book, The Grasping Handfocuses on the broader legal and political issues raised by the Supreme Court’s ruling in Kelo v. City of New London.

As explained in the first post in this series, I wrote the book primarily to address these big-picture issues.

But the story of how such a momentous case arose from unlikely origins is interesting in its own right.

The case originated with a development project in the Fort Trumbull area of New London, a small city in Connecticut. The neighborhood had fallen on difficult economic times in the 1990s after the closure of a naval research facility.

City officials and others hoped to revitalize it. The administration of Republican Governor John Rowland hoped to expand his political base by promoting development in New London; but to avoid having to work directly through the heavily Democratic city government, they helped resuscitate the long-moribund New London Development Corporation, a private nonprofit organization established to aid the city with development planning.

The NLDC produced a development plan that would revitalize Fort Trumbull by building housing, office space, and other facilities that would support a new headquarters that Pfizer, Inc. – a major pharmaceutical firm – had agreed to build nearby.

The development plan produced by the NLDC was in large part based on Pfizer’s requirements, which NLDC leaders (some of whom had close ties to Pfizer) were eager to meet. Pfizer would not be the new owner of the redeveloped land, but did expect to benefit from it.

I believe that NLDC leaders genuinely thought the plan would serve the public interest, as did the city and state officials who supported it. But it is also true, as one of those who worked on the plan put it, that Pfizer was the “10,000-pound gorilla” behind the project.

In order to implement the plan, the NLDC sought to acquire land belonging to some ninety different Fort Trumbull property owners.

In 2000, the New London city council authorized the NLDC to use eminent domain to condemn the land of those who refused to sell. Some defenders of the takings emphasize that all but seven of the owners sold “voluntarily.”

But as New London’s counsel Wesley Horton noted in oral argument before the Supreme Court, many did so because there was “always in the background the possibility of being able to condemn… that obviously facilitates a lot of voluntary sales.”

Moreover, owners who were reluctant to sell were subjected to considerable harassment, such as late night phone calls, dumping of waste on their property, and locking out tenants during cold winter weather.

Seven individuals and families, who between them owned fifteen residential properties, refused to sell despite the pressure. One was Susette Kelo, who wanted to hold on to her “little pink house” near the waterfront.

Some of the other families involved had deep roots in the community and did not want to be forced out. Wilhelmina Dery, who was in her eighties, had lived in the same house her whole life, and wished to continue living there during the time left to her.

The Cristofaro family were also strongly attached to their property, which they had purchased in the 1970s after their previous home had been condemned as part of an urban renewal project.

Susette Kelo’s famous “little pink house” in 2004 (photo by Isaac Reese)The resisting property owners tried to use the political process to prevent the takings. They managed to attract the support of a wide range of people in the community, including many on the political left who believed that it was wrong to forcibly expel people from their homes in order to promote commercial development.

But the Coalition to Save Fort Trumbull organized by the resisters and their allies had little, if any, hope of prevailing against the vastly more powerful forces arrayed against them.

The owners also tried to hire lawyers to fight the taking in court. But the lawyers they approached told them that there was little chance of success, and that – in any event – they could not afford the necessary prolonged legal battle.

The owners would almost certainly have had to capitulate, if not for the intervention of the Institute for Justice, a libertarian public interest law firm. IJ had long been interested in promoting stronger judicial enforcement of “public use” limitations on takings, and one of the members of the Coalition reached out for help.

As IJ lawyer Scott Bullock put it, the Fort Trumbull situation was an “ideal public interest case” for the Institute. Legally, the case was a good one because the city did not claim that the property in question was “blighted” or otherwise causing harm, thereby making it harder to prove that condemnation would genuinely benefit the public.

The case also featured sympathetic plaintiffs who were determined to fight for their rights. That made it likely that it would play well in the court of public opinion, and that it would not be settled before it could lead to a precedent-setting decision.

IJ hoped to achieve a ruling holding that takings that transfer property from one private individual to another for “economic development” do not serve a genuine “public use” and are therefore unconstitutional.

Thanks to IJ’s pro bono legal representation, the case went to trial. In 2002, a Connecticut trial court invalidated the condemnation of 11 of the 15 properties because the city and the NLDC did not have a clear enough plan of what they intended to do with the land.

Both sides appealed to the Connecticut Supreme Court, which upheld all fifteen takings in a close 4-3 decision. The majority ruled that almost any public benefit counts as a “public use” under the state and federal constitutions, and that courts must generally defer to government planners.

In a dissenting opinion, Justice Peter Zarella argued that “the constitutionality of condemnations undertaken for the purpose of private economic development depends not only on the professed goals of the development plan, but also on the prospect of their achievement.”

Presciently, he warned, “The record contains scant evidence to suggest that the predicted public benefit will be realized with any reasonable certainty,” and that it was “impossible to determine whether future development of the area… will even benefit the public at all.”

At this point, most legal commentators (myself included) believed that the case was almost certainly over. Few thought that the federal Supreme Court was going to take a public use case.

Supreme Court precedent dating back to 1954 held that virtually any possible public benefit counts as a public use, and the Court had unanimously reaffirmed that view in 1984. Most experts thought that the debate over the meaning of “public use” had been definitively settled.

But Scott Bullock and Dana Berliner – the IJ lawyers who represented the property owners – thought the conventional wisdom was wrong. And they were vindicated when the Supreme Court unexpectedly agreed to take the case. At that point, much new national media attention was focused on the New London condemnations.

Property law experts were well aware that longstanding Supreme Court precedent permitted the government to take property for almost any reason. But very few members of the general public knew that. Many ordinary Americans were shocked to learn a city could condemn homes and small businesses in order to promote private development – a reality they were unaware of until the publicity surrounding Kelo drove it home to them.

The Supreme Court upheld the takings in a 5-4 ruling. But the resulting controversy created a major political backlash and shattered the seeming consensus in favor of a broad approach to public use.

As for the City of New London, Justice Zarella and other skeptics turned out to be right. The NLDC’s flawed development plan fell through, as did a number of later efforts. Richard Palmer, one of the state supreme court justices who voted with the majority, later apologized to Susette Kelo, telling her he “would have voted differently” had he known what would happen.

Today, the condemned land still lies empty, though city officials now plan to build a memorial park honoring the victims of eminent domain, on the former site of Susette Kelo’s house.

The former site of Susette Kelo’s house – May 2014 (photo by Ilya Somin)

In the meantime, feral cats have been using the property. So far, at least, they have been the main local beneficiaries of the takings.

Feral cat near the former site of the Kelo house – March 2011 (photo by Jackson Kuhl)

(I should point out that the events in New London leading up to the Supreme Court case are the subject of an excellent earlier book by journalist Jeff Benedict. My book primarily focuses on the broader legal and policy issues raised by the Kelo case, which Benedict touched on only briefly. But I also cover the origins of the case in Chapter 1, and post-decision developments in New London in the conclusion.)

This post first appeared on the Volokh Conspiracy, where Ilya Somin is a frequent blogger.

You can buy The Grasping Hand on Amazon here.


Ilya Somin

Ilya Somin is Professor of Law at George Mason University School of Law. He blogs at the Volokh Conspiracy.

Venezuela Hits 510% Inflation by Steve Hanke

Venezuela’s bolivar is collapsing. And as night follows day, Venezuela’s annual implied inflation rate is soaring. Last week, the annual inflation rate broke through the 500% level. It now stands at 510%.

With free market exchange-rate data (usually black-market data), the real inflation rate can be calculated. The principle of purchasing power parity (PPP), which links changes in exchange rates and changes in prices, allows for a reliable inflation estimate.

Using black-market exchange rate data that The Johns Hopkins-Cato Institute Troubled Currencies Project has collected over the past year, I estimate Venezuela’s current annual implied inflation rate to be 510%. This is the highest rate in the world. It’s well above the second-highest rate: Syria’s, which stands at 84%.

Venezuela has not always experienced punishing inflation rates. From 1950 through 1979, Venezuela’s average annual inflation rate remained in the single digits.

It was not until the 1980s that Venezuela witnessed a double-digit average, and it was not until the 1990s that Venezuela’s average inflation rate exceeded that of the Latin American region.

Today, Venezuela’s inflation rate is over the top.

A version of this post first appeared at Cato.org.

More on the Venezuelan Collapse


Steve H. Hanke

Steve H. Hanke is a Professor of Applied Economics and Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore.

How Government Turned Baltimore into Pottersville by James Bovard

Baltimore’s recent riots are not surprising in a city that has long been plagued by both police brutality and one of the nation’s highest murder rates. Though numerous government policies and the rampaging looters deserve blame for the carnage, federal housing subsidies have long destabilized Baltimore neighborhoods and helped create a culture of violence with impunity.

Yet just last week, Baltimore officials were in Washington asking for more. Given the history, it defies understanding.

The U.S. Department of Housing and Urban Development was created in 1965, and Baltimore received massive subsidies to build housing projects in the following years. Baltimore’s projects, like those in many other cities, became cornucopias of crime.

One 202-unit sprawling Baltimore subsidized housing project (recently slated for razing) is known as “Murder Mall.” A 1979 HUD report noted that the robbery rate in one Baltimore public housing project was almost 20 times higher than the national average. The area in and around public housing often becomes “the territory of those who do not have to be afraid — the criminals,” the report said. Baltimore Mayor Kurt Schmoke in 1993 blamed maintenance problems at one public housing projects on drug dealers who refused to let city workers enter the buildings.

In the 1990s, the Baltimore Housing Authority began collecting lavish HUD subsidies to demolish public housing projects. But critics complained that HUD was merely replacing “vertical ghettos with horizontal ones.” Baltimore was among the first cities targeted for using Section 8 vouchers to disperse public housing residents.

HUD and the city housing agency presumed that simply moving people out of the projects was all that was necessary to end the criminal behavior of the residents. Baltimore was one of five cities chosen for a HUD demonstration project — Moving to Opportunity (MTO) — to show how Section 8 could solve the problems of the underclass.

But the relocations had “tripled the rate of arrests for property crimes” among boys who moved to new locales via Section 8. A study published last year in the Journal of the American Medical Association reported that boys in Section 8 households who moved to new neighborhoods were three times more likely to suffer post-traumatic stress disorder and behavioral problems than boys in the control group.

A 2009 research project on Section 8 published in Homicide Studies noted that in the one city studied, “Crime, specifically homicide, became displaced to where the low-income residents were relocated. Homicide was simply moved to a new location, not eliminated.”

Ed Rutkowski, head of a community development corporation in one marginal Baltimore neighborhood, labeled Section 8 “a catalyst in neighborhood deterioration and ghetto expansion” in 2003.

Regardless of its collateral damage, Section 8 defines Valhalla for many Baltimoreans. Receiving a Section 8 voucher can enable some recipients to live rent-free in perpetuity. Because recipients must pay up to a third of their income for rent under the program, collecting Section 8 sharply decreases work effort, according to numerous economic studies.

Last October, when the local housing agency briefly allowed people to register for the program, it was deluged with 73,509 applications. Most of the applications were from families — which means that a third of Baltimore’s 241,455 households sought housing welfare. (Almost 10% of Baltimoreans are already on the housing dole.) Section 8 is not an entitlement, so the city will select fewer than 10,000“winners” from the list.

HUD’s Federal Housing Administration also has a long history of destabilizing neighborhoods in Baltimore and other big cities. A HUD subsidized mortgage program for low-income borrowers launched in 1968 spurred so many defaults and devastation that Carl Levin, then Detroit City Council president and later a long-term U.S. senator, derided the program in 1976 as “Hurricane HUD.

In the late 1990s, more than 20% of FHA mortgages in some Baltimore neighborhoods were in default — leading one activist to label Baltimore “the foreclosure capital of the world.” HUD Inspector General Susan Gaffney warned in 2000: “Vacant, boarded-up HUD-owned homes have a negative effect on neighborhoods, and the negative effect magnifies the longer the properties remain in HUD’s inventory.”

The feds continued massive negligent mortgage lending in Baltimore after that crisis, creating fresh havoc in recent years. In late 2013, more than 40% of homes in the low-income Carrollton Ridge neighborhood were underwater. Reckless subsidized lending in Baltimore and other low-income areas helped saddle Maryland with the highest foreclosure rate in the nation by the end of last year. One in every 435 housing units in Baltimore was in foreclosure last October, according to RealtyTrac.

President Obama said the Baltimore riots showed the need for new “massive investments in urban communities.” What Baltimore needs is an investment in new thinking. The highest property taxes in the state and oppressive local regulation often make investing in jobs and businesses in Baltimore unprofitable. Only fixing that will produce a stable community. Shoveling more federal money into the city is the triumph of hope over experience.

James Bovard

James Bovard is the author of Public Policy Hooligan. His work has appeared in USA Today, where this article was first published.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Steven Horwitz

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

Capitalism Defused the Population Bomb by Chelsea German

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

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

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

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

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

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

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

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

This idea first appeared at Cato.org.

Los Angeles Pummels the Poor: A $15 an hour wage floor is a cruel and stupid policy by JEFFREY A. TUCKER

Does anyone on the Los Angeles City Council have a clue about what they have just done? It really is unclear whether reality matters in this legislative body. Rarely have we seen such jaw-dropping display of economic fallacy enacted into law.

The law under consideration here is a new wage floor of $15, phased in over five years. Why phased in? Why not do it now? Why not $30 or $150? Perhaps the implied reticence here illustrates just a bit of caution. Somewhere in the recesses of the councilors’ minds, they might have a lurking sense that there will be a price to pay for this.

Such doubt is wholly justified. Recall that the minimum wage was initially conceived as a method to exclude undesirables from the workforce. The hope, back in the time when eugenics was the rage, was that a wage floor would cause the “unemployable” to stop reproducing and die out in one generation.

Racism drove the policy, but it was hardly limited to that. The exterminationist ambition applied to anyone deemed unworthy of remunerative work.

“We have not reached the stage where we can proceed to chloroform them once and for all,” lamented the progressive economist Frank Taussig in his 1911 bookPrinciples of Economics. “What are the possibilities of employing at the prescribed wages all the healthy able-bodied who apply? The persons affected by such legislation would be those in the lowest economic and social group.”

Professor Taussig spoke for a generation of ruling-class intellectuals that had egregiously immoral visions of how to use government policy. But for all their evil intentions, at least they understood the basic economics of what they were doing. They knew what a wage floor excludes marginal workers, effectively dooming them to poverty — that’s precisely why they favored them.

Today, our situation seems reversed: an abundance of good intentions and a dearth of basic economic literacy. The mayor of LA, Eric Garcetti, was elated at the decision: “We’re leading the country; we’re not going to wait for Washington to lift Americans out of poverty.”

Leading the country, maybe, but where is another question. This is a policy that will, over time, lock millions out of the workforce and forces many businesses to cut their payrolls. Machines to replace workers will come at a premium. The remaining workers will be expected to become much more productive. Potential new business will face a higher bar than ever. Many enterprises will close or move.

As for the existing unemployed, they can forget it. Seriously. In fact, it is rather interesting that in all the hooplah about this change, there’s not been one word about the existing unemployed (officially, 7.5% of the city’s workforce). It’s as if everyone intuitively knows the truth here: this law will not help them at all, at least not if they want to work in the legal economy.

The underground economy, which is already massive in Los Angeles, will grow larger. New informal enterprises will pop up everywhere, doing a cash-only business. The long, brawny arm of the state will not be powerful enough to stop it. Sneaking around and hiding from the law is already a way of life for millions. Look for this tendency to become the dominant way of work for millions more.

All of this will happen, and yet the proponents of the minimum wage will still be in denial, for their commitment to the belief that laws can make wealth is doctrinal and essentially unfalsifiable.

As for those who know better, business owners all over the city pleaded for the Council not to do this. But their pleas fell on deaf ears. The Council had already been bought and paid for by the labor unions and interests that represent the already employed in Los Angeles. Such union rolls do not include the poor, the unemployed, or even many of the 50% of workers in the city who work for less than $15. They represent the working-class bourgeoisie: people rich enough to devote themselves to politics but do not actually own or run businesses.

Will such unions be helped by this law? Perhaps, a bit — but at whose expense? Those who work outside union protection.

This is a revealing insight into why unions have been so passionate about pushing for the minimum wage at all levels. Here is the truth you won’t read in the papers: a higher wage floor helps cartelize the labor market in their favor.

You can understand this by reflecting on your own employment. Let’s say that you earn $50,000 for a task that could possibly done by others for $25,000, and those people are submitting resumes. This is your situation, and it potentially applies to a dozen people in your workplace.

Let’s say you have the opportunity to enact a new policy for the firm: no one can be hired for less than $50,000 a year. Would this policy be good for you? In a perverse way, it would. Suddenly, nobody else, no matter how deserving, could underbid you or threaten your job. It’s a cruel way to go about padding your wallet, but it might work for a time.

Now imagine pushing this policy out to an entire city or an entire country. This would create an economic structure that (however temporarily) serves the interests of the politically connected at the expense of everyone else.

It certainly would not create wealth. It would not help the poor as a whole. And it would do nothing to create a dynamic and competitive marketplace. It would institutionalize stasis and cause innovation to stall and die.

The terrible effects are many and cascading, and much of the damage will be unseen in the form of business not formed, laborers not hired, efficiencies not realized. This is what the government of Los Angeles has done. It is a self-inflicted wound, performed in the name of health and well-being.

The City Council is cheering. So are the unions. So are the ghosts of the eugenists of the past who first fantasized about a labor force populated only by the kinds of people they approved.

As for everyone else, they will face a tougher road than ever.


Jeffrey A. Tucker

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

Profiles In Exceptionalism: Steve Jobs

He “gave back” by creating by RICHARD LORENC.

This week, I’m beginning a new series that will profile exceptional individuals. The criteria for being an exceptional individual is simple: The person will have changed the way people think and behave purely through persuasion. Thus, no one who ever occupied an official post in government will qualify.

The first in this series is Steve Jobs. Jobs died in October 2011 after a long struggle with pancreatic cancer. Walter Issacson’s biography on him became available shortly after Jobs’s death and became the best-selling book of 2011, destined to become a classic in biographical work.

People obviously like Steve Jobs, but why?

Why would everyone from Larry Ellison – Jobs’s friend and the billionaire boss of Oracle – to teenaged Occupy Wall Street protestors idolize a man who, by most accounts, was not the most congenial fellow? After all, his biggest accomplishment, some say, was making computers prettier.

The answer lies in Jobs’s story.

Jobs’s life experience mirrored what comparative religions scholar Joseph Campbell called the “monomyth” The monomyth idea outlines three major choices a potential hero must undertake. He must first leave his familiar world, then claim victory over immensely powerful (often supernatural) forces, and finally return home to share the wisdom of his journey with others.

After growing up in the apricot orchards of what’s now called Silicon Valley, the teenaged Jobs left that world for India, half a world distant. There, over several months, he encountered and experimented with new ideas, including Zen Buddhism.

He later credited Zen thought in the development of his design philosophy: “The main thing I’ve learned is intuition, that the people in India are not just pure rational thinkers, that the great spiritual ones also have an intuition.”

In India, Jobs obviously did not battle physical demons, but spent his time there addressing some personal ones. He then chose to return to begin to share a unique vision of how technology could enrich people’s human relationships.

Like most successful entrepreneurs, Jobs was extremely tenacious. After forming Apple Computer with Steve Wozniak, he found it wasn’t easy to convince people that they should have a computer at home. In fact, I’ve heard that if you were to ask most people in the early 1970s whether there would ever be such a thing as a “personal computer industry,” they would laugh in disbelief.

But Jobs had a vision for how the computer could become a useful, beautiful, and extremely personal tool for every person to use to communicate with others.

His Indian sojourn wouldn’t be the last time Jobs would leave the familiar to slay dragons. He was kicked out of Apple shortly after debuting the Macintosh personal computer, emerging a few months later with a new company called NeXT. After NeXT failed to catch on, he returned to Apple as a consultant, taking the position of “iCEO” (interim CEO) until becoming the company’s permanent CEO a couple years later.

During all of this, he also set Pixar on the road to become the world’s preeminent computer animated film company.

Each of these appearances and withdrawals, like his time in India, marks a different adventure Jobs undertook. And each ended with his sharing with the world the insights he gleaned.

But it wasn’t always easy.

You can imagine (or even remember) what people might have said at various points throughout Jobs’s career:

“No one needs a computer in their home.”

“I’d shut [Apple] down and give the money back to the shareholders” (Michael Dell actually said this in 1997.)

“No one will see a film without live actors.”

“Who wants 1000 songs in their pocket?”

“The iPad is just a big iPod touch. Also, it has a stupid name.”

(That last thought hurt Jobs deeply. It had forever been his vision to create a beautiful, useable computer that the user would love to touch.)

Amidst the naysayers, Jobs created products that people never before knew they wanted. Some would even say today they “need” Apple’s computers, phones, and software.

Jobs also demonstrated another exceptional characteristic among high-profile business leaders: He was content to allow Apple’s record of employing thousands and serving millions speak for itself.

Unlike other wealthy businesspeople, Jobs never felt it was important to make a show of his philanthropic or civic works. Under his leadership, Apple didn’t match employees’ charitable contributions, and never attached its name to nonprofit efforts.

Jobs “gave back” by making.

I’m certain Jobs contributed to his chosen causes – competition in schooling, for example – privately. By choosing not to match his employees’ gifts, however, he made a subtle point that charity must be given entirely freely or it is no charity at all.

Perhaps that was another insight he gleaned in India or on another adventure.

His biggest insight, I think, relates to a long perspective on life, which he communicated beautifully:

When you grow up you tend to get told the world is the way it is and you’re life is just to live your life inside the world. Try not to bash into the walls too much. Try to have a nice family, have fun, save a little money.

That’s a very limited life. Life can be much broader once you discover one simple fact: Everything around you that you call life was made up by people that were no smarter than you and you can change it, you can influence it, you can build your own things that other people can use.

Once you learn that, you’ll never be the same again.

ABOUT RICHARD LORENC

Richard N. Lorenc is FEE’s chief operating officer.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.