People interested in truth seek out those who disagree with them

Posted on March 27, 2013 by lawofmarkets

It is an article by Roger Scruton under the title “When Hope Tramples Truth“. And here is the relevant paragraph which I completely endorse from my own personal experience:

People interested in truth seek out those who disagree with them. They look for rival opinions, awkward facts and the grounds that might engender hesitation. Such people have a far more complicated life than the optimists, who rush forward with a sense of purpose that is not to be deflected by what they regard as the cavilings of mean-minded bigots.

The issue, if there is an issue, is gay marriage but he is trying to make a larger point how when those with what he describes as an “optimistic” view of social change seize on some idea and declare it to be the truth, rather than testing that idea against all objections that can be raised, will instead persecute anyone who holds a contrary view:

It is easy to trace disasters, in retrospect, to the bursts of unfounded optimism that gave rise to them. We can trace the subprime mortgage crisis to President Carter’s Community Reinvestment Act of 1977, which required lenders to override all considerations of prudence and fiscal rectitude in the pursuit of an impossible goal. We can trace the current crisis of the Euro to the belief that countries can share a single legal currency without also sharing loyalty, culture and habits of honest accounting. We can trace the disastrous attempt to introduce responsible government into Afghanistan to the idea that democracy and the rule of law are the default conditions of mankind, rather than precious achievements resulting from centuries of discipline and conflict. And we can trace the major disasters of 20th century politics to the impeccably optimistic doctrines of Marx, Lenin, Mao, and the many others for whom progress was the inevitable tendency of history. Pessimism, so obviously vindicated in retrospect, is almost always ineffective at the time.

Caution is so much the watchword. A reluctance to depend on our reasoning powers alone, while tempering any conclusions we reach on the accumulated wisdom of the past, is the essence of the conservative temperament, and the only recipe for long-term survival in the hostile environment in which every civilisation must live.

The private sector is the source of growth – the Indian case study

Posted on March 27, 2013 by lawofmarkets

Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries, by Columbia University professors Jagdish Bhagwati and Arvind Panagariya is reviewed by Diana Furchtgott-Roth in the Washington Examiner. The core quote:

Bhagwati and Panagariya show how India’s economic reforms started in earnest in 1991 after a balance-of-payments crisis. Before 1991, India’s economy was characterized by extensive government intervention, with strict industrial licensing for capacity creation and utilization. The results were Kafkaesque. Bhagwati told me that the problem with India was that Adam Smith’s invisible hand was nowhere to be seen.

Before 1991, India’s inefficient public sector tainted not just natural monopolies but every kind of activity. Public-sector enterprises were often given monopolistic positions, with no private entry allowed and with import controls preventing foreign competition as well. When India produced inputs such as steel, the inefficiency undermined several user sectors in turn. Hence, India’s share in world trade and trade-to-GNP ratio declined. Direct foreign investment shrank, and in 1991 equity investment into India had fallen almost to $100 million — less than the annual budget of some major American universities.

Bhagwati and Panagariya show that the 1991 economic reforms swept away industrial licensing, reduced tariffs and opened the way to entry by private firms into industries previously reserved for the public sector, forcing all to compete.

New businesses such as Jet Airways entered private aviation, forcing Air India to raise its level of performance. The effect was a sharp rise in India’s growth rate, followed by a reduction of poverty.

These are conclusions and observations so outside the textbooks of our time that it is a positive disgrace. A typical text tells you why shouldn’t trust the market. The real world shows you exactly why you should.

From Instapundit

Keynesian theory is losing its grip

Posted on March 26, 2013 by lawofmarkets

Here we have a very nicely turned argument about Keynesian economics. It even includes the need for value adding activity as part of the explanation which definitely puts it a cut above the rest of those paltry few and far between anti-Keynesian bits of writing I tend to see. By Martin Hutchison at Prudent Bear, titled, “The Non-Existent Keynesian Contradiction”. The supposed contradiction is explained in the opening para:

The Keynesian U.S. commentariat, which includes quite a high percentage of nominal Republicans, has been proclaiming a “contradiction” between the needs of economic policy. The need to cut government spending to reduce the deficit is supposedly balanced by ill-effects from declines in government employment—even the Wall Street Journal’s economics blog claimed that the U.S. unemployment rate would be 7.1% had governments (mostly state and local) not cut their workforce. In Britain, infinitesimal spending cuts are blamed for continuing economic stagnation, while the sharp rise in the value-added tax (VAT) is ignored.

I’m afraid even those who are trying to cut back on spending are only doing so out of the necessity of having to trim their outlays to what they can actually pay for, not because they see the economic value in a lower deficit. I am forever on about Say’s Law but unless you understand the Law of Markets, you are blind to what needs to be done and how one might gauge success. But here we have some good solid sense:

Only in the world of the FDR Keynesian Simon Kuznets, the inventor of GDP accounting, does an increase in public spending matched by a decline in private spending leave you in the same place, let alone push you forward.

In reality, much public spending is wasteful, producing output of lower value than the input, whereas private spending by definition only takes place if it produces a net gain in welfare for the spender or a profit for the investor. If a government hires an extra worker, that worker’s wages are included in GDP, whereas a private sector hire of a worker has no effect on GDP until that worker produces something. Thus even though the unproductive public sector worker produces a gain in reported GDP, he produces a loss in overall wealth, because productive private activities are sacrificed through higher interest rates to pay for his unproductive public sector existence. As I said, there are lag effects, the new hire will produce a GDP gain in the short-term because of the government-friendly way the accounting is done, but in the longer term the GDP losses will outweigh the gains. ‘Stimulus’ public spending over any but the shortest period produces a negative economic effect.

So what to do? Pure good sense:

The solution is similar in both countries. Britain needs more “austerity” not less, cutting spending in the unproductive sectors of the NHS, green energy and foreign aid. In addition to lowering the deficit, however, it should return some of the savings to the public through tax cuts, with a bias towards middle-income consumers, thereby renewing economic growth. At the same time, it should raise interest rates well above inflation, thereby reducing the subsidies to the banking system, restoring returns to Britain’s beleaguered savers, and increasing the availability of small-business finance.

In the United States, tax cuts are less necessary; the priority should be deficit reduction through public spending cuts, especially in eliminating the appallingly wasteful subsidies to agriculture, green energy and, through the tax code, to housing and charities, as well as cutting the country’s global defense commitments down to size. Again, interest rates should be raised, increasing the excessively low savings rate, closing the balance of payments deficit and deflating the dangerous bubbles in stock, bonds and commodities. The result will be a surge in GPP and, more important, in private sector employment.

As I said, there is no contradiction. Once the central functions of government have been carried out on a minimal basis, increasing public spending contracts true output and reducing it increases it. The contrary is an ideological shibboleth of the Keynesians and a statistical illusion of distorted GDP accounting.

It may not be until disaster finally overtakes us all that we will walk away from the Keynesian theory that surrounds us and economic theory will be able to break free of the grip that Keynesian theory has had on policy. But it must come since whatever it might say in our economic texts, the world behaves in an entirely different way.

Conservatives and the academic world

Posted on March 26, 2013 by lawofmarkets

My own view of why the academic world is so to the left is because everyone uses whatever levers they have to gain their own small allotment of political power. Insinuating oneself into the decision making hierarchy for someone at a university is to put together some perspective that will convince others to follow your own lead. Being anti-establishment is the only means for the young, and for those who never grow up.

Here, however, is a review of a book, Why Are Professors Liberal and Why Do Conservatives Care? that looks at the phenomenon through the eyes of a leftist academic. The reviewer’s own conclusion:

The key moment, Gross maintains, is the decision whether or not to go to graduate school. Young conservatives may not know all that much about academia at the faculty level, but popular stereotypes and a few off-putting experiences in class can sufficiently discourage them from pursuing academia as a site for success. A freshman orientation session that divides white males from everyone else, incessant talk about diversity, multiculturalist reading assignments, and so on may not bother them that much (and they can always find safe spaces such as College Republicans), but such things do convince young conservatives that staying on campus as a career move is foolish. An English major who reveres Great Books needs only one occasion of a teaching assistant ridiculing him for a dead-white-male fixation to decide, ‘I don’t need this.’

For a conservative, it’s pretty bleak in the academic world, but then it’s pretty bleak just about everywhere else as well.

A stunningly selfish woman beyond comprehension

Posted on March 24, 2013 by lawofmarkets

I tend to think of socialists as the meanest people I ever meet. It seems to be almost the defining characteristic, an uncharitableness that goes right to the bone. They make up for their personal lack of altruism by a feigned show of concern through various aims at redistribution which typically means taking from the productive to give to those who are not quite as good at earning an income as those with more money. Their middleman’s fees are usually quite a rewarding experience as well.

But Julia Gillard is in a class of her own. There is such a morbid inability to see anyone else’s needs or desires other than her own worthy of consideration that it is almost impossible to believe just how selfish she is. Given the havoc she creates around her, the absence of any evidence of even a touch of self-reflection is unique. She is a monster of self regard and self conceit, never feeling those self doubts that anyone in her shoes might feel. She has ploughed through any and all obstacles on her way to whatever she has wanted without a moment of remorse at any single moment.

She and Obama have a similar mentality. Far far left, the incalculable damage they cause merely a necessity on the road to the better world they will create. I think both are rather dull to normal so far as their level of intelligence may go but are as brazen and willing to lie to any extent necessary to have their way. Destructive but never in retreat.

That two such personalities should rise to the top of the political tree in both countries at the same time requires an explanation. And the best I can come up with is the absence of any seriously strident media criticism. Neither ever receives anything other than a momentary rebuke and never more than the absolute minimum and never sustained.

The kind of ear splitting on-going never-ceasing banshee wailing of the media in attacking anything done by someone on the right that can in any way be portrayed as tainted and less than perfect drives the political atmospherics in just about every democratic community where the remains of a free press makes it almost impossible for right of centre parties to thrive. In Australia, it is only Gillard’s complete incompetence that may in the end make the difference since the media will have to at least acknowledge some of it and the community can see it everywhere they turn even though it is not validated through the commentary in the press.

But at the core of it is a woman whose self-regard is so total that it is hard to imagine her ever owning up to a failing of any kind in any circumstance. Shameless and selfish to an extraordinary degree.

The free press and the free market

Posted on March 23, 2013 by lawofmarkets

An article by Boris Johnson, the mayor of London, on why a free press lowers the level of corruption and leads to a stronger economy.

OK, don’t take it from me. Listen to the voice of international business. Every year they do surveys, and they ask global executives to name the best place to do business – and every year London is named number one commercial capital in Europe, if not the world.

I could offer you all sorts of glib explanations. We have an outstanding financial centre; we have more green space than any other European city, more museums than Paris, less rainfall than Rome, twice as many bookshops as New York (and about a quarter of the murder rate). Crime has fallen 13 per cent in the past four or five years – to pick a period entirely at random.

We now boast a fast-improving transport network that includes the best bike hire scheme on earth, and a beautiful new hop-on, hop-off Routemaster-style bus. We have just put on a fantastic Olympic and Paralympic Games that showed off some of London’s opportunity areas, where the money is now piling in – as if from bullion-bearing spaceships that have been circling the planet for the past five years in search of the safest place to land.

All these are fabulous advantages, and yet I don’t think they quite explain the world’s confidence in London as a location to trade and invest. When the moneymen are deciding where to do a deal, there is something more fundamental that brings them here – a feature of our culture and society that has been true for hundreds of years.

They know that London is about as uncorrupt as any jurisdiction on earth. They know that the deal will be honoured. They know that the law will be clear, and that their security to title is good. They know that they will not be tipped out of their hotel beds before breakfast and detained by the emanations of the state. They know that they will not be imprisoned without trial. They know that to do a deal in London, you don’t have to cut some minister in on the action, or employ their half-witted relative.

You cannot hope to win a contract in London by sending some public official a Rolex or a midnight poule de luxe; and that is because that official would be too amazed to accept, too honourable to accept, and above all too terrified to accept. British business, and British politics – and the nexus between business and politics – have been kept cleaner than in virtually all other countries because for centuries we have had a free press.

It was in the late 18th century that the libertine MP and Mayor of London John Wilkes had his epic battles with the governments of George III, and vindicated his right to publish his scabrous views of that government, as well as an idiotic and pornographic poem. It was in the following decades that London grew into the richest and most powerful city on earth – the first since imperial Rome to be home to a million souls.

There can be absolutely no doubt that this rise to commercial greatness was partly made possible by those freedoms won in the 18th century – an independent judiciary; habeas corpus; freedom of assembly; the right of voters to choose their representatives; and above all the freedom of the press to speak truth to power: to ridicule, to satirise – even to vilify – and to expose wrongdoing.

Of course, not every businessperson or investor may personally relish the exuberance and ferocity of the British media. They may not enjoy reading about their salaries, yachts and subterranean swimming pools. But they also know – or should rationally accept – that it is the very boldness of the British press, and its refusal to be bullied or cowed, that makes those deals risk-free and helps them create the wealth they enjoy. Like any strong detergent, the work of the British media may cause a certain smarting of the eyes. But if you want to keep clean the gutters of public life, you need a gutter press.

Since the days of Wilkes, the media have been lifting up the big, flat rocks to let the daylight in on the creepy-crawlies; and in all that time we have never come close to the state licensing of newspapers. Not, that is, until today, when MPs must vote on the potentially calamitous proposals put forward by Labour and the Lib Dems.

Everyone accepts that the papers have behaved with vileness and stupidity towards the McCann family, and the bereaved relatives of Milly Dowler. Everyone wants to protect innocent members of the public from such bullying and abuse, and all would now accept that the old Press Complaints Commission was about as much use as a chocolate teapot.
Yes, as some of us have been saying since long before Leveson was even a twinkle in the PM’s eye, it would be a good thing if there was a beefed-up regulatory body that had the power to impose rapid and draconian fines and to demand apologies for the falsehoods and intrusions perpetrated by all contracting papers.

But if Parliament agrees to anything remotely approaching legislation, it will be handing politicians the tools they need to begin the job of cowing and even silencing the press; and what began by seeming in the public interest will end up eroding the freedoms of everyone in this country. It is a completely retrograde step, and will be viewed with bemusement by human rights organisations around the world.

All my life I have thought of Britain as a free country, a place that can look around the world with a certain moral self-confidence. How can we wag our fingers at Putin’s Russia, when we are about to propose exemplary and crippling fines on publications that do not sign up to the regulatory body? How could we have criticised the Venezuela of Hugo Chavez?

I wholly approve of the stance taken by my fellow Daily Telegraph columnist Fraser Nelson in refusing to sign up to any of it, and if I were editing The Spectator today, I hope I would do the same. It is time for Parliament to remember the commercial and political freedoms that made this country great. Think of Wilkes, and Liberty, and vote this nonsense down.

Maximising male incomes

Posted on March 22, 2013 by lawofmarkets

An article by Meagan McArdle, “Why Do Economists Urge College, But Not Marriage?“, reaches this conclusion after having made the point that marriage is as good for one’s life prospects as a university degree:

All economists are, definitionally, very good at college. Not all economists are good at marriage. Saying that more people should go to college will make 0% of your colleagues feel bad. Saying that more people should get married and stay married will make a significant fraction of your colleagues feel bad. And in general, most people have an aversion to topics which are likely to trigger a personal grudge in a coworker.

There are lots of things worth saying that people don’t say because it will annoy someone else so they never get said at all and disappear from polite conversation. But for someone to get the benefits from marriage, the marriage must stay intact for otherwise it is a very bad bet for any male. The following is from an article titled, “Study of Men’s Falling Income Cites Single Parents“. The argument, basically stated is this:

The decline of two-parent households may be a significant reason for the divergent fortunes of male workers, whose earnings generally declined in recent decades, and female workers, whose earnings generally increased, a prominent labor economist argues in a new survey of existing research.

If we are looking at what will allow men the highest disposable incomes, avoiding marriage and university may be the best strategy of all as this comment at Instapundit makes clear:

I think most men would deny they’re in decline. Men are having just as much sex but without the legal liabilities marriage impose on them. All I’m hearing from women in these articles is that men need to grow up and take responsibility for their actions, meaning they need to legally sign a paper imposing government sanctions on them if said marriage dissolves. There is no question that men are getting the shaft from the courts financially when divorce occurs. Furthermore women are also more likely to get custody of any children as well as more decision making responsibility.

Men have wised up after hearing horror story upon horror story from their older friends and family when the court system utterly destroyed their lives and have simply decided to go galt from the entire marriage process.

Divorce courts have become the ultimate nanny state intrusion into the lives of men and the average man has decided that it simply is not worth the risk. Exactly how is that irresponsible to the man? This is the ultimate unexpected consequence Virginia slim gets.

Best comment to date on the ALP

Posted on March 22, 2013 by lawofmarkets

Ten propositions that define Austrian economics

Posted on March 17, 2013 by lawofmarkets

This is a list that was put together by Peter Boettke in The Concise Encyclopedia of Economics:

Only individuals choose.

The study of the market order is fundamentally about exchange behavior and the institutions within which exchanges take place.

The ‘facts’ of the social sciences are what people believe and think.

Utility and costs are subjective.

The price system economizes on the information that people need to process in making their decisions.

Private property in the means of production is a necessary condition for rational economic calculation.

The competitive market is a process of entrepreneurial discovery.

Money is nonneutral.

The capital structure consists of heterogeneous goods that have multispecific uses that must be aligned.

Social institutions often are the result of human action, but not of human design.

I will have to think about this since on my first reading I agree with each of these and yet they do not sum to my own structure of beliefs about what I think is important. Nor do they give me a sense of policy direction since I cannot see what in particular is prohibited to governments even if all of this is true.

I also have a list of five axioms and ten principles at the start of my Free Market Economics but they are very different in character since their focus is to explain why a market economy with limited direct government involvement is optimal. It is aimed at what should and should not be done and who should or should not do which parts of it. In looking at the list, since modern socialism doesn’t seek to expropriate the commanding heights of the economy, I do not see anything that a socialist in the modern mould or a John Maynard Keynes might not assent to in full and yet remain a socialist and a Keynesian. You can read Peter Boettke’s complete article at the link and see what you think.

I might note that the list came by way of a posting on the Austrian website in which the writer stated his own disappointment with the ten propositions, as part of a letter of resignation from further commenting at the website:

My own interests might or might not be contained in #9, but it is too vague to have any clear meaning. The rest of the 10 propositions are excess baggage, or worse. #6, followed by #2, may be taken to put an arbitrary blessing on the existing distribution of private property, however arrived at, and however property may be defined.

IMHO, the term ‘Austrian’ should refer back to ideas found in the Austrian pioneers: Menger, Wieser, EvBB, and Wicksell, especially their capital theory. Later writers have wrongly hijacked the term to mean the above 10 propositions. Most participants, however, apparent do subscribe to them, and would have no positive interest in my criticisms.

The major economic question of our own day and age is the role and worth of a government spending and regulation. Yea or nay, how much and when, where and what are the questions I think need to be resolved. The ten propositions do not seem to me to provide answers one way or the other for any of this.

Unnatural selection