Archives for category: Economics

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

 

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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.

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* 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.

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One does not normally insure against chosen and regularly incurred costs, like fill-ups and oil changes in cars . . . or haircuts, waxes, and contraceptive devices on people. When insurance companies’ policies do cover regular, pre-injury/-illness purchases, they are not economically engaging in an insurance contract. They are offering a payment system, a kind of premium savings plan.

Why would they do that? Sometimes to attract customer with a convenience — an expensive convenience they expect to make money off of. But also for another reason: because they are compelled by law.

The corruption of the insurance industry by government policy has been ongoing for decades.

Especially in medical markets.

How? At a fundamental level.

Economist Friedrich Freiherr von Wieser (Social Economics, 1928, p. 149) noted that there are three kinds of “binding compensatory contracts”: exchange contracts, insurance contracts, and social contracts. Wieser noted that insurance contracts sometimes look like social contracts, sometimes like exchanges. But the resemblance to explicit social contracts is that they mimic the widespread effects usually aimed at by social contractors, but through private exchanges. An ingenious invention. Insurance provides a public good by private means. The core nature of insurance contracts Wieser explains thusly:

Its purpose is to distribute the effects of loss over many private economies. It has attained great importance in developed economies. But it has to do only with the security of the economic body, not with its creation.

Wieser did not examine this form of contract in detail. He also, in developing economic theory, put aside discussion of the social contract:

One should expect that it be adopted to the integration of the social economy. Nevertheless in its effect it has been overshadowed by the exchange contract, which although as a rule is made only between two parties, has manifested itself the coördinating instrument that binds individual economies into the national economy.

This manifestation of unexpected and unintended coördination puzzles many people. Which is perhaps one reason why, as Wieser’s student F. A. Hayek suggested, we witness much social distress regarding — and political pressure to undermine and control — market order. The coördination provided by markets is “spontaneous,” as Hayek metaphorically put it (“inadvertent” is more exact), and its mechanisms and processes mysterious, in no small part because of its inadvertence. Folks balk at accepting an unplanned order.

This is especially true of insurance contracts, which often seem “unfair.” For example, I was a very good and safe driver as a young man, ages 16–28. Never an accident. Never even a complaint. But an appreciable number of my peers drove recklessly (but not “wrecklessly”!), skewing the actuarial tables that make insurance bets doable, so my insurance rates were high. Young women, on the other hand, had far lower rates — despite my personal knowledge of many dangerous young female drivers.

But I understood the unfairness, and rallied through. Meanwhile, during that same period, feminists pushed through in my state regulations that forced insurers and their customers to pay equal rates, disregarding the sexes. Young women tend to have more medical issues, especially regarding pregnancy — which, one should note, are usually the result of free choices, not wholly accidental events — and thus are greater risks for insurance companies, requiring higher rates.

But . . . unfair!

For some reason, feminists did not push for a forced equalization of auto insurance rates.

So, consider what that regulation did: it increased the pool of insured people, bracketing out of consideration reliable data upon which insurance businesses calculated profitable rates. So, it decreased the information content of insurance rates — prices, really — and made the business decisions less efficient, and less capable of adding efficiency over the course of time.

And by equalizing men’s and women’s rates, it swept into the mix a mostly non-insurable expense: pregnancy and birth. One insures for things out of one’s control. And, except in case of rape, one can choose not to engage in sexual intercourse, the activity that causes pregnancy. So, under modern regulatory requirements, more and more people are swept into the pool with more social contract problems associated with such pools: that is, “the tragedy of the commons.” When some gain at the expense of others, they tend to opt to do just that. A common resource subject to individual exploitation tends to degrade, as has been understood since the time of Aristotle, but clarified by William F. Lloyd, Garret Hardin, and Richard Stroup. In the case here made as an example, what would normally be unforeseeable and insured-for is now intermingled with eventualities placed under a woman’s or couple’s control. Thus they are able to game the system and free ride off of it. Basically, shifting their avodiable medical expenses onto other people who do not choose to produce babies.

This jiggering with the insurance industry basics changes its very nature. But not without costs.

And it is certainly not limited to just the one example. Tax policy, regulation and now subsidy have been contriving to turn medical insurance contracts wholly into social contracts. And politicians and activists have succeeded in convincing many simpletons and distracted citizens into thinking insurance should cover events that no honest business would cover — events such as already existing disabilities, or expenses that are wholly voluntary.

Remember: One cannot “insure” against the present; one cannot “insure” against controlled outcomes. It is only future uncontrolled events with assignable probabilities that make sense to insure. Only these eventualities that can make for stable, long-term and sustainable and efficiently provided buffering of the effects of loss or injury.

But, to repeat, tax law, regulations and now subsidy — by state and federal governments — have so twisted the industry that it now is a badly run redistribution scheme, something one would normally expect from governments pretending to enforce “social contracts.”

Wieser’s “coördinating instrument” of the exchange system, and the pricing (in this case) of insurance rates, has been scuttled by people more comfortable with the seemingly “rational” — but much more ungainly and discoördinative — government policy. Also, the instrumentality of force quickens the vindictive soul, spurring folks to demand a great cause — fairness, justice. Which allows, naturally enough, for the heady mix of self-righteousness and outright oppression (for what else is forcing others?) as well as the precious social signaling that moral crusades engender.

But because information is thereby decreased, and the tragedy of the commons introduced into the industry, society is corrupted, hobbled, injured.

The very opposite result, you might think, of medical insurance policy.

And witless Americans carry on with the fiction and lies. As if they were being smart and wise. Anyone who repeats the current wisdom about medical “insurance” — such as demanding “coverage” for a wholly voluntary aid, like contraception — is a dupe or a liar.

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Friedrich von Wieser portrayed at top, in sketch; the current blogger immediately above.