Archives for category: Economics

I try to read the MoveOn emails I receive several times a week. Yes, I try. But they are very trying.

Just this morning I got an email from “Bernie Sanders” . . . which began “Hi Timothy — I just wanted to make sure you saw my message from the other day.”

Must be important.

So what does “Bernie Sanders” say?

Well, he pushes what he (or his copywriter) call “the progressive agenda,” which is dead set against the “corporate giveaway” in the new tax reform bill. Here is how he begins:

Throughout my political career, I have asked us all to imagine what our nation’s future could be: a country with a minimum wage that is a living wage; with students graduating college without crushing debt that stifles their ability to pursue their dreams; where health care is recognized as a right for every man, woman, and child; and where we lead other nations in the fight against climate change.

I have asked us to believe that we could level the playing field and create a vibrant democracy where the billionaire class would no longer be able to buy and sell our candidates and elections.

I will always believe in that vision of America — even as I watch Republicans try to pass a tax scam that is literally the opposite agenda of what you and I have championed over the years.

A tax scam. I wonder: does it increase taxes on the poor and the proverbial “middle class”? I doubt it, but I honestly do not know. The only “fact” about the tax bill given is that it decreases taxes on the wealthy.

I assume by that he means decreases tax rates on the wealthy. There is a difference between rate and revenue. The difference should affect the way we talk about taxes. Somehow, it almost never does.

Bernie, if you could help me on this, please explain. Comments are open below.

Lacking many specifics from this pitch letter (and, after all, that is what most MoveOn emails are, pleas for funds — the only other regular pitch being calls for action, usually to complain to my congressperson), I wander back up to the top. Bernie Sanders imagines an America with “a minimum wage that is a living wage”; with college students not starting their remunerative careers buried in debt; “health care” treated “as a right” for all; and the country leading the world “in the fight against climate change.” Each point is worth thinking about. But I am going to avoid the “climate change” issue entirely, focusing, instead, on the climate-of-opinion change regarding matters nearer at hand.*

The Ass Ceiling

Minimum wage laws were one of the two big issues regarding economic policy that turned me away, forever, from Bernie’s brand of politics. The first time I heard someone assert that minimum wage laws hurt some low-skilled workers while helping competing workers with higher perceived skills, I got really interested in economics. As a science. I wanted to see how this could be the case, if it could at all.

I learned two things right away: one must move beyond slogans and look at what laws are at base, and then what their effects are beyond the policy’s immediate targets.

At base, minimum wage laws proscribe hiring people at a rate lower than set by the “minimum.” A minimum wage regulation does not require businesses to hire anybody at that rate. Such regulations prohibit businesses from hiring anybody below that rate. So, by their very nature, minimum wage laws are employment-limiting laws.

That puts the burden of proof on the proponent of the “minimum wage” to explain how it could increase the ranks of the employed, or, at the very least, not decrease those ranks. If employment decreases — either immediately or in the future — then minimum wage laws are not boons to the poor, lifting poor workers out of poverty. Instead, they would constitute mere redistribution-of-wealth schemes: in effect taking from some poor and giving to others, making them less poor.

The import of this idea has yet to hit at least half of the population.

The working out of the wider and long-term effects of wage-rate floors (as economists tend to characterize the regulation) gets complicated. It comes down to productivity — the marginal product, actually — and interesting scientific study can work out the complexities. There are debates to be had.† But what is interesting about political discussion, particularly from Bernie Sanders and his cadres, is that such discussion is never forthcoming. The usual defenses of minimum wage regulations that I hear point to the bizarre Card and Krueger studies, and not as economic explanations, but as excuses, as authority to dismiss economic reasoning entirely — with no more intellectual integrity than nyah-nyah taunting. “My study is better than your study”!

The popular use of these contrarian studies (and yes, most studies of minimum wage law effects disconfirm the stated utility of the regulations) is not to advance knowledge, much less explore how any particular study is constructed, but because it gives an excuse to hold to a policy endorsed for non-scientific reasons.

imageI know this because I felt their pull. The love of “minimum wage” regulations is part of a belief in the efficacy not merely of government but of activists who propound simple nostrums. It is a very religious commitment, and when I looked into the issue, nearly four decades ago, and studied my own psychology as well as economic theory, I concluded that my motives in promoting the wage floor were not pristine.

As always in such issues, it comes back to the Seen and Not Seen. What we “see” is a minimum wage law, and people employed above the prohibited low rates. We do not — and cannot — see the people that would have been employed had such regulations not existed. The counter-factual world is closed to us. And yet the reality of our experience is entirely encompassed precisely by such counter-factuals, since, when we choose either a job or a policy (or a career or a spouse or a philosophy) we are forecasting two or more possible worlds of effects that would result from a choice one way or the other, and those forecasts are not illusions, but guesses as to possible realities that, after the choice is made and the action (or policy) instantiated, only one of which becomes factual, actual.

By sticking to the Seen effects of minimum wage regulations, the enforced floor’s proponents allow themselves a smug sense of “sticking to the facts” while denying a basic part of reality. Meanwhile, they become acolytes to a particular religious view of life, wherein the State is savior and activism is ritual and prayer.

And, all the while they go about promoting one of their favored nostrums, they ignore the reality: wage floors are worse than the proverbial “glass ceilings” of feminist lore. The floor is raised, hiking the productivity requirements of workers, placing those unable to perform at the set level below the floor, looking up at the . . . feet and asses of those who remain employed. The People Under the Floor have been condemned by the regulation, with no more hope for them other than subsidy.

Oh, sure, they could get more skills, and that is indeed one thing progressives have always insisted upon: that people who want to work go to progressive-run schools where productivity is allegedly taught (it isn’t, for the most part) and the bills are paid from taxpayers. Indeed, unable to work because prohibited from doing so, the likelihood of skill acquisition is diminished for the low-skilled, since actual work is the single most important source for acquiring skills. And, indeed, most of those trapped under the floor are there in no small part because our society’s prescribed basic training ground, the public school, has proved to be ineffective (for a variety of reasons). No wonder, then, that The People Under the Floor turn to black markets and government handouts. That is pretty much all that is left them.

That is what Bernie Sanders and his kind have left them.

I shudder when I think about the People Under the Floor. And I try (often not successfully) not to be angered at the progressives most intent on policies that keep them there.

The takeaway that is so rarely taken, is this: the wage floor is an ass ceiling for the forcibly unemployed.

But Wouldn’t It Be Nice?

The interesting thing about progressivism is its relentless moralism. The subject line of Bernie’s email is “Stop this immoral disaster.” Calling something “immoral” often excuses one from thinking about it in any practical way. Bernie was talking about the tax issue, but his lack of any specifics is just indicative of this sort of mindset.

When I call something “immoral” or “evil,” that means that I have stopped careful consideration of it, too. Them’s fighting words, words of action.

One just hopes that there is some thought upon which that judgment of immorality can be based.

In his earnest (if under-thought) wishes for a debt-free beginning to careers (Bernie himself was a slacker, and then entered Congress in a great binge of living off the system) and for automatic, care-free medical assistance for all, Bernie seems driven by a utopian vision, an Edenic myth, backed only by

  1. activism and
  2. subsidy from the rich

IMG_4679Indeed, this email sums up his whole approach. It is an appeal to activists to support more activism that would (the scheme runs) lead to government action that would take from the rich and give to the not-rich. So no wonder, in all this, it is important to mention the awful spectacle of billionaires “buying and selling” — no talk of renting, interestingly enough — “our candidates and elections.” The big money game in politics is there, of course, because big money is what it is all about. Bernie S. and his fellow B.S.ers demand that “the rich” subsidize them more. Which is about money. Lots of it. The mere presence of the B.S. agenda ensures that those whom B.S.ers wish to plunder will lobby government to keep a bit more of what they have.

This is simply the nature of politics. When it is not about offense, it is about defense. And the more hits in offense a group takes, the more the group will spend in defense.

And by complaining about the rich defending themselves, the B.S.ers are trying to stack the game in their favor. Not only do they think it would be “nice” if other people paid for their college educations and their health care, they think it would be especially nice if those people who pay do not have a say in the “deal.”

How convenient.

Yet they are the ones always talking about “greed”!

This whole approach that they push seems a huge grab from a few to give to the many.

Quite a scheme they got, there.

None of This Is New

Nothing I have written here should strike anyone as in any way novel — except perhaps for a few quips and phrasings. After all, this is a very old debate. As soon as “socialism” became a word on the lips of reformers and revolutionaries, these debates became ubiquitous.

When I was young, the people who pushed the B.S. line were often called “liberals,” but with the rise of Reaganite conservatism, the l-word because a term of opprobrium. The word “progressive” became more popular. When I was younger, I read The Progressive magazine. I have been following this sort of thing all my adult life. But not close enough, apparently, for that magazine still exists. I have not seen it in years.

IMG_4680Indeed, I dropped the rag about the time I helped found Liberty magazine, which was published from Port Townsend until the death of its publisher in 2005. The third issue of Liberty appeared about 30 years ago exactly; the first had hit the mails in July (I think it was) of 1987. Liberty was a libertarian zine, and I had considered myself some sort of a libertarian for less than a decade at the time of its founding. But I had read a great deal of literature in both the individualist and collectivist movements. I had made an informed choice.

Perhaps I was destined to become a libertarian, for my individualism was built into the warp and woof of my psyche. Thinking in terms of groups seemed nuts to me. Indeed, I had interpreted my anti-racism and anti-sexism so big in the decades of my youth as anti-groupthink ethical philosophies. The error of sexism was to judge a person primarily in sex role terms, “by his or her sex” not his or her personhood. What an affront to civility, it seemed to me. And racism? Even less justifiable, for while the differences between men and women, boys and girls, were quite obvious and pronounced on the biological level, and even in psychological terms, the differences among the races were not that large, and from one person to another in any racial category could easily stretch the whole of human diversity.

And yet now the B.S. folks talk relentlessly of groups, of group identity, of one’s personal identity in terms of groups, and of victim groups and groups to be victimized (I mean, “oppressor” groups to be brought down and made “to pay”). Collectivism is alive and well. I have no sympathy for it any more. The whole “thinking in group terms” groupthink strikes me as pure madness.

And why “madness”? Why not use a nicer term? Well, madness is a word we usually use to describe the passionate people who are in some important way unhinged from reality.

The reality I see is that, right now, there are two federal governments: the constitutional government funded by income taxes, corporate taxes, other taxes, tariffs and “fees”; and the extra-constitutional government (consisting of Social Security and Medicare and Medicaid, mainly) funded by FICA and SECA and similar taxes. Interestingly, the unconstitutional government (which I designate as unconstitutional simply because, uh, none of its functions are listed in the Constitution) is basically run on a rough parity, mimic-insurance-contracts “public utility” basis, and what one gets out of the system does indeed depend on what one puts into it. The constitutional part is paid for mostly by the wealthy.

The nature of this tax situation is indeed quite amazing. The B.S.ers often yammer about “making the rich pay their fair share,” but the constitutional government is paid for almost entirely by the rich. This video explains this pretty well:

So when Bernie writes me to warn that current moves by the Republicans are designed to benefit the rich at the expense of “working families,” I am a bit skeptical:

And I’m going on the road again because we have to defeat this bill, too — a tax bill that will slash taxes for the rich, raise taxes on working families, and lay the groundwork for a massive attack on the most vulnerable people in our country.

This bill is an immoral disaster. If it passes, 13 million fewer Americans will be insured, and health care premiums will surge for tens of millions more. Further, the Republican budget cuts Medicaid by $1 trillion over 10 years and Medicare by over $400 billion. In order to give huge tax breaks to billionaires and large corporations, the Republican budget also makes enormous cuts to education, nutrition, affordable housing, and transportation — and will crush college students and college graduates struggling with debt.

In short: This budget will do incalculable harm to tens of millions of working families, women, kids, the sick, the elderly, and the poor. We have to fight this budget and stop it. That’s why I’m hitting the road with MoveOn, and why I’m asking you to support the work that we’re doing.

Then he asks for $3.

Thanks, but no thanks. I will spend $3 on a Coke. Or two. Or three.

Bernie makes no mention of how “rickety” is the current unconstitutional government sector, the Social Security/Medicare/Medicaid division. That is where most of his complaints about cuts are. But if it be unstable, financially unsound, we (if there is a “we” at all here . . . I know I have no power of choice in the matter) have basically two things to do: cut services and/or raise revenues. A normal person would probably suggest doing both, though one could see problems associated with doing either. The consequences of doing nothing? Almost unthinkable, for most people.

The fact that Bernie makes no mention of the problem, just focuses, instead, on the problem he sees with one solution, strikes me as irresponsible. If you want to know why there is such a strong divide, these day, look not merely the rhetoric on both sides, but on what they do not say. Bernie is mum about the secular disorder of the federal government, in which he serves as a prominent leader.

And his solution — make the rich pay more, not less — is even less responsible. He wishes to bail out the unconstitutional system that he himself helped strain (by voting for more benefits in the past) from the constitutional half of government, which already is paid for mainly by the very people he wants to soak further in his bailout.

I just shake my head.

I realize, this rambling blog entry is of little value. I am not really writing to convince anyone of any particular thing. Do I have any hope of convincing the progressives? No. They live in their reality, and its irreality they hope to impose on the rest of us. Meanwhile, we watch the Republicans speak only in half truths, and attempt only half-responsible reforms. I am just venting between jobs. (I have a video project to get to.)

I have never been less hopeful about the political future of the United States than I am right now. And I ascribe most of this to the unwillingness of partisans to deal with reality. Two sides and the middle are caught in a game where not seeing the whole is the most obvious feature.

It looks like the worst sort of game: not win-win; not win-lose; but lose-lose.

twv

 



* The willingness of people to become convinced of governments’ ability to manage the planetary climate while our federal government cannot even balance a budget is so astounding to me that I am, right now, at a loss for words. On that goofy subject.

† One of my readers made an astounding caveat to an earlier expression of mine about the marginal productivity theory of wages, which depended upon what seemed to me like a bizarre misreading of equilibrium theory, and a complete elision of knowledge problems —  but I confess, many of these are beyond my ken.)

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McInnes on Hannity with feminist

Gavin McInnes makes some good points in his recent video on a certain type of “journalist” he does not like, a group of censorious, moralistic women he calls the Spinster Police:

But he insists that these women writers are not good at their job. An odd charge. For it is quite obvious that the female journalists he is talking about are doing precisely what they are hired to do: give half-assed and half-assessed arguments mixed with invective, calumny and virtue signaling — all in the cause of “social justice” and “feminism” and a bunch of allied isms.

I would say that they are doing a fine job as demagogues, as harridans, as scolds. They may even win, and reap the whirlwind as ultimate reward. Cultists sometimes do.

Now, McInnes often repeats a claim that women would be happier, on the whole, were they to do what they are evolutionary designed to be best at, something that men cannot do: give birth to and nurture human life. Wasting time on once-predominantly male occupations does not make them happy, he says, it makes them frustrated.

And kind of pathetic.

This is no doubt true for many such women. The Cat Lady phenomenon is a little hard to take. And all the mantras of “independence,” the repeated rationales. Methinks the ladies do protest too much.

But from this it does not follow that women who forswear family life for dubious careers are bad at their careers. Many are fantastic writers, lawyers, doctors, what-have-you. But still unsatisfied. Why? For the simple reason that careers qua careers are not as satisfying as women have been told, have been telling themselves.

Feminism gained much impetus from envy. Or at least plain covetousness. Some women coveted the positions of successful, alpha males. And out of this covetousness feminism grew. In the cause of equal rights and responsibilities, this was fine, so far as it goes, but covetousness, once upgraded from vice to virtue, becomes all-consuming.

And the trouble with desiring what somebody else has is the tendency to forget what one already has, or has the best chance of obtaining. It is not much different than other vices, especially miserliness. The miser so obsesses about money that he forgets what money is for: spending now and saving to spend in the future. It is not about hoarding. Similarly, covetousness over-values what others have and under-values what the covetous have. And in the case of feminist women, what became under-valued is motherhood itself, the biological function and social institution necessary for the continuation of the species.

If you choose against your nature, prepare for the consequences. They can be vast.

In the case of many women, what careers get them is often a stunted or negligible family life: often no marriage, and either no children, one child only, or (the worst) de facto fatherless children.

Now, having only one or two children is part of a major pattern that comes with wealth acquisition: the substitution of quantity of children for quality of children. (See Theodore Schultz’s 1981 opus, Investing in People.) And, because of the small size of families, each child becomes super-important to the mothers, and that is quite a bond, one that I wish not to challenge at all — well, other than to note how big the cultural change is when most children come from small homes: risk averse parenting (because of the increased marginal utility of each child) leads to sheltered, over-protected children which in turn engenders spoiled, whiny, demanding, insufferable adults.

But back to our career women, especially those who are single and childless. They may be very good at what they do. But that does not mean that they have chosen wisely. Even if they are extremely competent, it can still be the case that it makes more sense to invest their lives in motherhood. Motherhood is natural, and one would have to cultivate an Epicurean or an existentialist anti-naturalism to make that pay off. More importantly, however, may be comparative advantage.

Say a woman has found a suitable mate with whom to procreate and establish a family. Even if the woman is better at her market-based job than be her husband, her comparative advantage may still be motherhood. What one should do is not always a maximization of a particular goal, but a situation- and opportunity-dependent satisficing.

No man can bear a child; most women can. Though men can indeed nurture children, women do tend to have a developed-by-evolution skillset to do that much better. Which means that time spent away from making a home and producing future humans, with all the joys and sorrows that entails, is apt to appear (ceteris paribus) much more enticing than doing the career thing.

Besides, as Dr. Jordan Peterson insists, most people do not have careers. They have jobs. Real careers are demanding and all-absorbing. Not univocally good life choices. Not without tremendous costs. If one can be fulfilled outside the market environment, why preclude it?

So, my point against Gavin McInnes is not that he is wrong about the advantages that women can find by embracing motherhood, or his oft-expressed arguments about how very different the fatherhood role is. It is just that the case for more women choosing motherhood and family life over careerism does not rest on the idea that they tend to suck at careers. It is, instead, that they have such a comparative advantage for family work that even in many cases where they are extremely competent — even genius — at their jobs, opting for family life often makes more sense.

The cream of the jest, though, resides in the cases Gavin focuses on: of extremely attractive women in media jobs. He mocks a professional woman who scorned the family option of motherhood but nevertheless got a facelift. Wives rarely get facelifts for husbands, unless very rich. They get facelifts to land a husband, or — and this is key — keep them in the job market longer.

You see, in media, as in the performing arts, it really helps to look great.

It is amazing, to me, to see so many good looking musicians. Does good looks naturally skew with musical talent? Writing talent? News commentary? Lawyering? That has not been my street-level, workplace-level experience. But it is so at the higher levels. Why? Because people like to look at good-looking people, and so, when the public is involved, or many clients are involved, good looks aids and even trumps talent.

Which brings us not to sexism but to lookism.

Looks, for women, has long been the chief lire for sexual attraction. But instead of honing their looks to obtain the coöperation of one man, for mating, career women hone their looks to obtain repeat business from a long string of customers, clients, and fans. This means they are nudged to pay more attention to their looks than they likely would under family life. Farding up for one man, invested primarily early in the relationship, swapped for farding up late in life for a huge audience? A daring exchange.

What a woman who swaps marriage for career finds out is what many men have long known: whoring is at the core of capitalism. The woman who marries and has children does is whore herself but once. In a career, she does what workingmen do: whore herself out every day.

Quite an inglorious end to the coveting of “what men have.”

And it is interesting to see what has really happened here: women have coveted only the top positions in society. They rarely covet the dangerous jobs, the messy jobs. There is, as is now common to notice, no cry for women’s workplace parity with men in logging, fishing, trash removal, etc. And the demands for the more glamorous of dangerous jobs, like policing and firefighting, have led to the erosion of standards in those callings. Women tend not to be as strong and hardy as men, so becoming cops and firefighters is harder for them, unless the bars for entrance are often lowered, to the public’s endangerment.

The problem with high-profile women scorning family life and marriage and even men, and scorning child-bearing, is not that it does not work for some of these women. After all, we want people of both sexes to choose what best suits them. The real problem is that it sets up a class system. The really attractive career women succeed in front of our eyes; they constantly defend their cause, ballyhooing their life choices — and this is not, for reasons unknown to me, usually interpreted as elaborate self-justification. And by doing this they provide a horrible example . . . for less attractive women, less career-oriented women. These less-blessed women go on to adopt values that channel them into unprofitable lifestyles wherein they become stuck in bad jobs while under-producing the one good that might make them happier: children. The reward is minimal, the opportunity cost tremendous.

And the now-common feminist scorn for men, the belief they are unimportant for women, sends too many mothers and their children into the Dependent Caste, perpetually stuck on state aid, trapped.

So, it is time for feminists to find it within themselves to praise motherhood. Further,

  • hating on men as fathers is not doing women in general any good;
  • the substitution of the welfare state for fathers has been a bad deal;
  • the valorization of that most unnatural of activities, market labor, above the more natural economy of family life, was doomed from the start to frustrate women.

And the great irony of this shift? Women forever courting the dreaded “male gaze” — but instead of to please one man, they fard up to please the masses of men.

Some swap.

twv

 

yet another attempt at a coherent answer:

I run hot and cold on the word “capitalism.” The institutional system? Fine with it. Would want more of it. But the word itself is less than perfect. (Like capitalism itself!)

AdamSmithA “capitalist” is not an advocate of “capitalism.” When I see the word used that way I flinch. A capitalist is someone who invests capital, specifically someone for whom such investment is a major source of income. Not all that many people are really capitalists.

But “capitalism” seems inapt for a more profound reason: the major institutional features of the capitalist system are

  1. extensive private property holdings
  2. self-ownership in one’s actions, meaning, especially
  3. free labor (not “free” in terms of price or fantasy, of course)
  4. free trade (unencumbered by prohibitions, regulations, etc)
  5. private markets in capital goods

Now, that last point might justify the term. It’s a profound concept that most people have no idea about. Even economists have balled it up.

But we traditionally note three factors of production: land, labor, and capital. And yet, when we use the word capitalism we identify the lack of criminal and governmental interference in the management of these factors by only one factor. That’s prejudicial. It’s rather lame.

There are huge demarcation problems associated with the word, too.

The economists of France and Britain began developing the science of the study of this set of institutions with the critique of a particular form of government policy, which Adam Smith called “mercantilism.” That’s a good term, an apt term, since it refers to the close relationship between some merchants and the State. It seems an apt moniker for the policy.

Under mercantilism, governments favors some over others, engages in various forms of protectionist trade restriction policies, and generally tries to keep production within a nation rather than outsource it (“free international trade” being the thing established, well-connected merchants most fear) while aiming to increase the supply of money (in the early cases, gold and silver) within the boundaries of a nation, and especially into the coffers of the king.

But mercantilism is not a bad term for what we have today, in many ways. Sure, international trade has been encouraged — but in a rather regulated way. The amount of regulations in America and Europe is astounding. The secular trend regarding this has been growth. And this hardly seems very “capitalistic,” if you mean it in the robust sense. And it certainly favors some capitalists and entrepreneurs and managers over their competitors, immediate and possible.

And yes, this feature makes a difference. The general effect of government regulation of markets — what Mises called “interventionism” and what Pareto called “restrictionism,” but which everybody else calls progressivism, fascism, democratic socialism, or the Administrative State — is to favor established business over upstarts. This is known. There is no real way around this. Current trends in hollowing out the upper-working class economy is largely a result of mechanization in combination with the suppression of small business by the regulatory state.*

So, while we certainly now live under “capitalism,” it is nothing like the laissez faire that economists dreamed up to regulate not business and market life, but the State itself (limited government being the flip side of laissez faire, with the constitutional limits it establishes being a form of anti-corruption regulation).

Recently, folks have been using the term “crony capitalism” to refer to the regulated/subsidized (“bailed out”) nature of current American economic policy. This reflects the old mercantilist practice of favoring well-connected insiders (“cronies”) at the expense of the masses of workers and entrepreneurs.

Anthony de Jasay calls the current form of governance/policy “the churning state,” since there is so much forced wealth distribution that we cannot really keep track of net winners  — instead, the interests and the transfers are merely “churned.”

I tend to dub the current mode of capitalism “neo-mercantilism,” but an adjective is in order: technocratic neo-mercantilism. The technocracy is important to this, for it gives college graduates cushy jobs while they pretend to manage “the economy.” Which doesn’t exist . . . but that’s another issue.

The crucial thing to understand about capitalism is that it rests on rights to private property (including one’s own body and person) and mostly unencumbered trade.

Destutt_de_TracyAnd trade, or market exchange, is pretty much what Thomas Jefferson’s favorite economist said it was, “a transaction in which the two contracting parties both gain. Whenever I make an exchange freely, and without constraint, it is because I desire the thing I receive more than that I give; and, on the contrary, he with whom I bargain desires what I offer more than that which he renders me. When I give my labour for wages it is because I esteem the wages more than what I should have been able to produce by labouring for myself; and he who pays me prizes more the services I render him than what he gives me in return.”

This is an elaboration of Condillac’s chief notion in his 1776 treatise. How this made sense in terms of value and distribution — how to think about it precisely — took another century of stumbling by economists. The work of Carl Menger and William Stanley Jevons, especially, clarified the exact nature of mutual benefit through exchange.

And it is indeed this concept, of ex ante mutual benefit in trade, that is the most essential feature of “capitalism.” The mutual benefit aspect is the core aspect. And it is why freedom — a division of responsibility and a general lack of coercive bullying — is the key concept, the entelechy, of the very idea of capitalism.

And it is what politicians of nearly all parties — and their supporters — attack daily, to the hobbling of civilization.

twv

 

* John Kenneth Galbraith’s notion of “countervailing powers” gets it exactly wrong. Big Government to adjudicate between Big Business and Big Labor is a nice model, and all. Nice and technocratic. But it ignores how things really work. These powers do not countervail, they reinforce each other. It just so happens that the Reinforcing Powers of the major institutional forces bolster each other up, at the expense of the masses. Which is why technocracy is anti-democratic and would only have a chance of working without free access to government bureaus and power centers. Only by setting up a caste of trained technocrats could government really ride herd over business in general. And only by prohibiting the right to petition one’s government — lobbying — and the revolving door between government and the private sector, could Galbraith’s vision even have a hope of a chance. And still, I hazard, the outcomes would likely be horrific, for reason described in The Road to Serfdom: the worst would get on top, because giving some people unchecked power of control over others cannot be a recipe for civilized life.

 

Santa's Gifts

Gift-giving can be a kind of revenge, or of affront: an expression, in either case, of the will to power. It is definitely not a univocally benevolent act. Charitable acts are often expressions of the starkest egoisms.

I noticed this as a child, amidst the mad scramble of wintertime celebrations: of Christmas wishes and expectations dashed and fulfilled and then undermined; of the sad parade of gift misfires and recipient regrets.

But perhaps sentimentality shields us from learning the lessons under the mistletoe. There are many other occasions for such reflection. Indeed, one need look no further than the native Americans in the area where I live. They engaged in a rivalry of benefaction. The point of the Potlatch was to demonstrate tremendous wealth. The recipients were honor-bound to, in turn, honor the benefactor. Indeed, it was almost a trade: goods for praise.

The white folk who came to the area, and not a few anthropologists, saw the Potlatch culture as amazingly, brazenly egoistic. It seemed indecent, all about puffing up the efficacious leader as chief, and praising the productive chiefdom over the under-productive.

But later anthropologists noticed that this egoism led, as if by an invisible hand, to serve as a redistributionist system for the whole region. If a salmon run was insufficient one year, another group in a more blessed region would help out, bestowing bounty. For the honor of it.

But the invisible hand has not been so kind in our age.

By adding a force of law and regularity to the redistributionist* emprise, denizens of modernity have aimed to supplant emergent order with over-arching planned order. And, when this happens, the “law of unintended consequences” plays not so much an invisible ordering role, but a disordering one.

Whether or not this slapback/blowback effect is overwhelmingly negative, I will leave for other occasions. But there is something we can conclude from the start, regardless of a weighing of outcomes: support for tax-funded state “charitable” aid is never wholly charitable in origin. Indeed, we should expect to witness a whole heckuva lot of Pharasaic posturing and moral preening by those who favor extensive “aid” to this group or that.

And we do.

As I see it, there are many advocates of “cheap charity” in today’s ideological combat. Proponents of increased levels of aid can take immediate satisfaction of “at least I care.” Even if, in nearly all cases, the proposals are far from certain to be enacted (and thus quite inexpensive to make), and the financial burden of the aid likely to descend mostly on some richer others (and thus being almost of zero cost to advance), the advantages in “honor” and social status are quite certain and immediate.

It seems obvious to me, when I look at the world of policy advocacy: state aid proponents’ lack of real beneficent interest is clear as ice on a winter pond . . . or cold heart. How better to explain their alarm at the very thought of means-testing “welfare”? Or considering any negative effect of state aid? If they really cared, being careful with limited resources would be foremost in their minds.

I usually suspect advocates of dirigiste statism to be little more than sub rosa power lusters and tribal bigots. I rarely find examples that prove otherwise.

Indeed, one of the things noticed by many among the new wave of African-American (and other “people of color”) libertarians and limited-government conservatives is the condescension of the rich white “liberals” and their assumption of incompetence, stupidity, folly and general witlessness among darker-hued populations in America. This reaches an apogee of ridiculousness in the cause of voter registration, which progressives have (naturally!) racialized:

It is hard not to conjure up from the chthonian collective unconscious a terrifying charge: that the welfare state has succeeded in turning large swaths of middle-class and rich white people into slave-owners by proxy — folks quite proud of their support “of support” . . . for dependent populations . . . dependent populations who seem to be valued as less-than-human. You know, like slaves in antebellum days.

Perhaps some day soon a once-obvious truth will once again gain some credence. Too much help is too much. Yes. There can be too much of a good thing. Aid is one of those good things that the “too much of” can prove disastrous.

Alternatively, with natural checks built into redistribution — the limits of charitable imagination and empathy, the hint of indeterminacy that ego-driven generosity provides — an invisible hand process can indeed yield wide social benefits even in situations not based on explicit trade.

But the sad truth seems to be that combining those all-too-human ego-driven pseudo-benevolences with legal plunder (taxation) and sanctioned tribal warfare (political and ideological contest) means, yes, we should expect long-cycle negative social instabilities and and rising anti-sociality.

The Invisible Hand slaps back.

twv

* By “redistribution” I mean distribution after the fact of initial appropriation, and outside the scope of explicit voluntary trade. Contrary to recent libertarian theorists who object to the term redistribution on the grounds that, under laissez faire “there is no distribution, just trade,” I counter with this: all allocation of goods is distribution, which is an act, either of giving or lending, or abandoning; or giving in exchange for return gift (trade), lending in return for remuneration (rent and usury), or re-appropriating once-abandoned property. All these are forms of distribution. And by norming initial acquisition and trade, I see giving without exchange, and taking without exchange, as redistributive.

The naive idea that twice of something is twice as valuable as one of that same something lingers on in popular culture and especially in politics. The ideas of diminishing returns and diminishing marginal utility are not widely enough understood.

French economist Yves Guyot never quite grasped the full import of these ideas, either. He should have. But he did stumble around them over and over in his work, and his glancing encounters are often instructive. For example, he knew that government, while necessary, necessarily serves interests counter to the public interest the larger it grows.

Why? Well, one way governments exhibits this “hormetic” effect is by its increasing inability to direct resources efficiently to the merely necessary-to-the-public needs . . . as it takes on more tasks. It is hard to manage, centrally, an ever-increasing task load. This opens up the bureaucracies to outright corruption and the politicians to ideological corruption by special interests — public goods manqué.

Monkey business.

As I read through his oeuvre, I will be picking out more nuggets of wisdom. Indeed, I have a big Guyot-related project in dev. More to come.


Yves Guyot on corruption.


Yves Guyot on an atavism.

img_2320This morning I disengaged from the closed-but-unmoderated Libertarian Facebook group that my friend James Littleton Gill has promoted in the past. Why? It mostly consisted of posts about how libertarians are racist and really like or approve of Nazis. Yikes.

Apparently, if you set the cost of joining a group at FREE, and don’t vet anything, then, why, your enemies will ruin it!

Wow. Who would have thought!

It is almost as if private property and the legitimate threat of expulsion serve a function. In a free society. Read the rest of this entry »

Screenshot 2017-07-19 18.19.24

The “Elio” seemed so promising. Named for Paul Elio, the Dreamer-in-Chief, the three-wheel concept is beguiling; the design, elegant. But the dream may be over.

Elio Motors was funded largely by advance reservations, a risky scheme in itself. And the delivery date for the three-wheeled totally-enclosed “cars” has been postponed several times, ultimate production delivery nowhere in sight.

As of January, the company was over a hundred million in the red, with no firm date for the production units, and nothing but a few test vehicles delivered, according to Jalopnik. Cedric Glover, the mayor of Shreveport, Louisiana, where the factory resides, insists that early consumer-investors are “waiting for nothing”:

If you look at Paul Elio from 2009, certainly by the time you get to 2011 and 2012, it’s clear that what he is in fact is a dreamer and a schemer. It leads one to ask, what was the actual motivation behind committing these facilities, this equipment to Paul Elio and the Elio operation.

Easy to answer: hope. Though I suppose it could have been a scheme, a fraud, from the beginning.

Trouble is, it is the nature of start-ups that the difference, on paper, between a fraud and a hopeful long shot is a mere hair’s width . . . right up until the moment of success — or failure. This is one reason why government regulation of start-ups is such a bad idea. It should be up to entrepreneurs, bankers and investors to provide the desired checks and balances.

But the story has not stood still. Government demands obeisance. According to KSLA News 12, dateline Jefferson Parish, Louisiana’s “Motor Vehicle Commission is accusing Elio Motors of operating as a manufacturer/dealer of recreational products without a license.”

First I heard of a license, and I’ve been following the story for some time. I wonder when Mr. Elio heard about that license.

The panel decided during a hearing Monday in Metairie to fine Elio Motors $545,000 for offering reservations for the future purchase of its 3-wheel vehicles.

The commission also ordered Elio Motors to obtain both licenses to manufacture and deal in Louisiana and to place all refundable Elio Motors reservations into a trust account within 60 days.

This is awfully late in the game to try to secure some exit strategy for investors. Indeed, the whole thing looks more like a simple shake-down, or perhaps a pretense to prosecute for fraud. That is, government-as-usual.

I sniff something more, though: the influence of competitor greed. As the company made in its statement informing of an appeal to the recent ruling, it makes no sense now to grab funds from the production process. It is sure to doom the whole project. Which I would not be shocked to learn is precisely what a lot of other businesses want.

Which would not be unheard of.

This is how it works, folks: licensing and registration is instituted to help current businesses keep out upstarts.

Par for the course for mercantilism, protectionism, progressivism or whatever we call the modern corporate state. The sanctimonious tone to the mayor’s cavils, calling the company founder a “dreamer and a schemer,” is a little hard to take. Where does the mayor think new products come from? Other mayors? They come from dreamers, schemers, wheeler-dealers.

I understand — there was a goofy odor to the whole emprise from the start. Though excited about the concept, I wondered at the initial promised purchase price, less than half of what the in-production Polaris Slingshot (see  below) goes for. Further, funding by consumer investment (pre-order reservation charges) is so . . . “not done” . . . except that it is: GoFundMe and Kickstarter and all those other crowd-funding operations have proven how well this sort of endeavor can go. Perhaps the fact that Elio didn’t use one of those hubs suggests the fatal glitch.

It is worth noting that automobile guru Eric Peters suggested last year another problem besetting the Elio: it is not an “electric car,” so it got very little play in the news. There is indeed a cultural conspiracy (that is, no real conspiracy at all; just groupthink) to snub innovations in internal combustion tech while promoting even goofier (and much-subsidized) “alt-fuel” auto technology.

Had the major media not fixed its collectivist head so firmly up its collective colon, perhaps Paul Elio would not be in his current predicament. And maybe, just maybe, we would be seeing the Elio on the roads by now.

twv

 

Polaris-Slingshot

The debate over whether “capitalism” should be used by libertarians and other supporters of free markets waxes rather than wanes. Last week,* Sheldon Richman published “Is Capitalism Something Good?” on Freeman Online. And I can see why Stephan Kinsella calls this an “extremely frustrating” debate. We never get very far.

My favorite of Richman’s points is lexical:

At the semantic level, capitalism is an unfortunate word when applied to the free market. It suggests a privileged status for capital over other factors of production, which is not the case in a free market. A capitalist is not a believer in capitalism but rather an owner of capital. One can be a socialist capitalist, that is, one who owns capital while favoring a system called socialism.

In my younger days of argumentation, people would sometimes accuse me of being a capitalist. Well, in those younger days I was broke. I had no savings. I had nothing to invest, and invested in nothing but my own mind. So I would correct them: “Hey, I’m near the poverty line. No enjoy-capitalismcapitalists down here! Besides, I support laissez-faire because it regulates businesses: It enforces a rule of law that disallows businesses from demanding I pay for their goods if I don’t want their goods, or pay more than I would under competition, which laissez faire also enforces. I am not a capitalist, because I insist that we keep capitalists in their place.”

This is the basic truth about the word: A “capitalist” was first known not as a defender of any system, but as one who had money to invest, or investments that returned money. It is logically odd, then, to use the word “capitalism” to identify a system whose supporters  could very well be not capitalists!

I’m not quite in the same place as I was in those days, and don’t take that rhetorical tack as often. I have a long history of being leery of the word. I cannot remember Herbert Spencer, whose general approach I admire, making a pitch for “capitalism” as a system. (His witty acquaintance Henry Makepeace Thackeray first used that term in this fashion. He was no anti-capitalist, but he was an ironist, and I won’t wager on what the precise meaning of his intent.) But Ayn Rand, notoriously, did. She published a book under her name entitled Capitalism: The Unknown Ideal. When Spencer and Rand appear at odds, I long ago learned to side with Spencer.

But there are some things to be said in favor of “capitalism.” For one, it is known. It is less cumbersome than, say, “free enterprise,” a phrase that traditionalists conservatives have abused for years, as a synonym for the Main Street variety of crony capitalism.

I recently argued** for an open, inclusive use of the term capitalism. Capitalism describes any system with private means of production and a labor market. Existing forms of capitalism are, in most every case, dirigistic — that is, subject to multiple and dominating government controls. But the less government direct, micromanaging control you have, and the more the whole system rests upon a rule of law, the more it exhibits the libertarian ideal of laissez faire. Yes, another French term . . . but it’s a lot better known than dirigisme.

The sad truth of the situation is that dirigisme is the letter and spirit of modern law far more than laissez faire is.

So we can continue to use the term “capitalism” as long as we are clear about its modifier, dirigistic or laissez-faire.

However, let’s be frank: All terms have been contested and are therefore contestable. Every term has its problems of connotation as well denotation. “Laissez Faire” suffered under Herbert Spencer’s able attack as “That Miserable Laissez Faire.” We all know what’s happened to “liberalism.” And “Libertarianism” has been caught in a tug-of-war between, uh, pro-capitalists and anti-capitalists for a long time.

Such it is in ideological debate — and yes, every one of us who espouses some policy or some regime or another is an ideologue. None of us are above that (despite Marx’s attempt to squelch the term low in the echelon of epistemics).

For the same reason, we must use the words in circulation, no matter how tainted they may be. We have only a limited ability to influence their meaning. The meanings are “out there,” in the realm of intersubjectivity, if not objectivity, where truth is said to reside.

So, the term “capitalism” is not one that I’d fight much over. “Liberal,” on the other hand, is a great term to defend. I like to call modern so-called liberals by a much more apt term: Prodigal.

But most people don’t know what that means, either. And that’s mainly because most people are sloppy users of language who can write whole sermons on a contested word without once looking it up.

A prodigal is someone who spends too much, too extravagantly. Prodigality is the excess of which “liberality” is the virtue. Which fits an observation of Leonard Read’s from about the time I was born: A liberal, today, is liberal only in the sense that he’s liberal in spending other people’s money. Similarly, a progressive, today, notoriously believes in no form of progress other than the growth of the state.

It’s the prodigal advocates of dirigisme that we must oppose, today. I’m not sure giving them the word capitalism is the way to wrest victory from their rapacious desire to take, take, take from the liberalism of yore.

In fact, there’s not much I’d give them. Not even their pretense to good intentions.

But, if we do end up defending the word “capitalism” now and then, let’s not univocally ever defend capitalists, as such. Not any more than we defend wage laborers or entrepreneurs or professionals. Any person from any group, no matter how good, can stray to the point of demanding special favors from governments, bailouts and subsidies and the like. Besides, I’ve known a number of asshole capitalists, not a few who did not bother placing themselves above the practice of petty fraud as modus operandi. Shun them, even if (insofar as they cannot be caught in their frauds) one grants them their rights to trade and, in general, live their asshole lives.

Now that I think of it, one could generally hate capitalists, but love the system.*** Laissez faire is a form of regulation, a check upon business power. The rule of law, in which rights to liberty receive general protection, is an amazing defense against rapaciousness. Indeed, that’s probably the reason why most people oppose it. They want to act rapaciously while pretending to act nobly.

Ah, anti-capitalist capitalism! Not, I gather, a great motive force for progress or political reform or revolution. But there’s a t-shirt slogan in there somewhere.

twv

* This article first appeared on The Libertarian Standard on April 20, 2010. A very few words have been changed or elided in this reprint, and one new link placed.

** This “recent” argument was reprinted yesterday at this location.

*** The sheer number of possibile takes on “capitalism” is the result of a general confusion over the meaning of the word, Daniel Kian Mc Kiernan explained a year after I wrote the above. I will have to address his points in a future essay. One of the reasons to unearth and repost these blog entries is to provide an excuse to consider Mc Kiernan’s perspective.

A number of writers from across the political spectrum have been writing about the word “capitalism” recently.* What does it mean? Do we have what it signifies? Does talking about such a seemingly vague thing increase our understanding?

enjoy-capitalismJohn Stossel argues that we don’t live under capitalism, unless you modify the word to mean “crony capitalism.” His essay “Let’s Take the ‘Crony’ Out of ‘Crony Capitalism’” makes a very familiar case:

The word “capitalism” is used in two contradictory ways. Sometimes it’s used to mean the free market, or laissez faire. Other times it’s used to mean today’s government-guided economy. Logically, “capitalism” can’t be both things. Either markets are free or government controls them. We can’t have it both ways.

The truth is that we don’t have a free market — government regulation and management are pervasive — so it’s misleading to say that “capitalism” caused today’s problems. The free market is innocent.

But it’s fair to say that crony capitalism created the economic mess.

This is all very well and good. Accurate in its own way. But I am not sure we should give in to either libertarians who want to defend free markets or statists who want to bury them in red tape. “Capitalism” isn’t a word that means just one thing, just as “democracy” isn’t a word that means just one thing. One usage isn’t obviously better than another. Thackeray’s coinage serves more than one master.

I support laissez-faire. It’s a great and noble — and ultra-civilized — policy. But laissez-faire isn’t the only form of capitalism. Indeed, the dominant form has always been some form of dirigisme, or piecemeal state control of market activity.

So, I suggest letting everybody use the word “capitalism” in a broad sense, as an economic system featuring a large degree of private property both at the consumer and producer levels, wide market interaction in both consumer and producer goods, and fully developed labor markets.

It nevertheless remains the case that laissez-faire is more capitalistic than dirigisme. For, the more state control of markets, the more limitations on private property — particularly with command-and-control regulation, rather than rule-of-law oversight — capitalism morphs into socialism. The more government you have, the less the capitalist element dominates.

To put this more straightforwardly, capitalism is defined by the features that laissez-faire unreservedly supports: private property, freedom of contract, markets in capital goods, and contract labor. So, though dirisgistic capitalism is indeed capitalism, laissez-faire capitalism is “more capitalistic,” by the standards of its very definition.

There is one sense that this understanding, however, is not true. That’s the sense in which dirigistic capitalism serves capitalists, that is, people with money. It is a truism of government that it rarely serves all, equally. And it is also a truism that money talks in politics. So, dirigistic capitalism amounts to little more than plutocracy.

This sad truth comes as a shock to those who hail from the left. Those leftists who propose to make capitalism more dirigistic often merely serve as useful idiots for the very rich. Businesses have a long history supporting mercantalist policies, policies that so-called “progressives” thought “regulated business.” Instead, regulations most often help business cartelize, even monopolize, their positions. Getting the upper hand is something many businessmen attempt, and attempt through government.

Such operations have taken many forms, from anti-trust (which actually makes businesses less competitive) through micromanaging regulation to outright subsidy.

It can be quite amusing to watch a standard-brand leftist make all the arguments necessary for businesses to trump their market competition. The trump being, of course, government.

This was most entertainingly seen in the recent bailouts, where it was a whole class of bankers and intermediaries who were aided, not the general run of market participants. Indeed, bankers’ jobs and intermediaries’ jobs were made secure, and their fortunes restored, while the economy lurched out of control and into double-digit unemployment. Such is the logic of dirigisme: Not very logical.

Very political, though.

The great rule of capitalism is that everybody’s worth differs in differing contexts. Laissez-faire is a form of regulating capitalism by the rule of law, trying to set a political limit on the value of human beings. In laissez-faire, the political value of people are equalized by their equal rights to liberty and free contract. But under dirigistic capitalism, the fluctuating value of human beings is re-introduced into the political system because rights no longer regulate human interaction, micromanaging policy-makers do. So everything goes up for grabs.

Under dirigisme you get the general exploitation of the politically weak by the politically powerful — two classes that continually shift, according to the deals and machinations of politicians. You get what Anthony de Jasay calls “the churning state.”

I have no special love for the term “capitalism,” and see no great and overriding reason to shore it up. I just want people to be able to talk to each other about the realities of the current (and past) social world. Capitalism obviously exists in some form today. But it is obviously not laissez-faire capitalism. What we are blessed with and suffer under is dirigistic capitalism.

Two French terms. Why not?

It should be remembered, though, that dirigisme is the ancient, traditional state practice. It flows naturally out of the limited-access society’s basic deal: Tough guys provide order, and in “exchange” we — each of us — gets a fairly stable, quasi-guaranteed place in that state, however lowly.

The idea of laissez-faire, though perennial, is much newer, and quite revolutionary. It is deeply associated with the idea of a rule of law, and its main feature, on the personal level, is personal freedom, the ability to choose what you do in life.

It is always amusing to me how advocates of dirigistic capitalism so readily devolve into advocates of ancient political notions of status. Both centrist Republicans and Democrats tend to move in that direction, and leftists, in particular, keep reviving ancient notions of class and “my station and its duties.”

The great thing about laissez-faire is that it allows us that opportunity to throw off the shackles of time and chance and programming, it conjures up the ability to remake oneself, correct course. This allows for a great amount of progress and flexibility. But stability? Nothing can be guaranteed.

Those who want guarantees of place and position, they tend to hate the freedom in laissez-faire. They don’t want government to “let others act” within the confines of a rule of law, they want more regulation.

Ah, regulation!

The lifeblood of dirigisme. The command structure of socialism. The inheritance of the conquerors who established the first states. At one with military orders, the darling of bureaucracies, the goal of most politicians. It is coercion instantiated in its most paradigmatic act.

The paradigmatic acts of laissez-faire, on the other hand? First, the trade; and, second, being held responsible for one’s own actions.

But I’m more than willing to admit that “capitalism” fits a broader history than the ideal of laissez-faire. So the word must be modified. “Dirisgistic” will do. I offer it to those reasonable people — see, for instance, Stephan Kinsella in his recent essay “Capitalism, Socialism, and Libertarianism” — who wish to keep their terms straight and move beyond semantic disagreement to substantive argument.

And perhaps more French words could be found for the varying degrees of control that have characterized American market life.

twv

* This essay was originally posted April 16, 2010, on The Lesson Applied, by Wirkman Virkkala. A very few changes have been made to the original text.

According to rumors, some of the President’s Goldman-Sachs economy czars gave him a good talking-to.

Donald Trump had bolstered his political standing, in part, for pushing two policy positions, both of which resonate with many (though not necessarily the same) Americans:

1. Trade deficits are bad . . . and are caused by a too-strong dollar.

2. Taxes on businesses and investments should be cut to encourage growth.

The Goldman-Sachs folks informed him (the rumor mill has it) that doing the second (2) would likely subvert the first (1) by strengthening the dollar.

Economist Bob Murphy (on Contra Krugman) notes that Trump’s lack of understanding here is hardly surprising, since only by studying economics would one see the connection, follow the chain of cause and effect that far. One would not learn this “by running a business.”

Most of everybody’s economic understanding and policy is on this level, because economics is not necessary to success in most enterprises.

Arguably, lack of economic understanding has long been a prerequisite for success in politics. People like to hear simple untruths stated boldly.

twv