A Blog of Prefaces

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2009-09-17T14:03:00.000-07:00

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The Federal Reserve on… The Federal Reserve

2009-09-15T06:36:00.001-07:00

http://www.federalreserveeducation.org/fed101/fedtoday/FedTodayAll.pdf (check for yourself if you don’t believe it)

Page 29:

Myth:

When the Fed prints money for banks it increases the national debt.

[Nice Strawman, should have stuck to that…]

REALITY:

Federal Reserve Banks do not print money, they manage the inventory of the existing stock of
currency. Money is printed by the Bureau of Printing and Engraving, an agency of the U.S.
Treasury Department. Government debt is generated by government borrowing.The amount
of bor rowing, measured by the deficit, is not decided by the Fed.The government’s debt and
deficit are the result of the budgetary decisions of the Congress and President.

Ok, then…

Myth:

The Fed is not a good supervisor of banks because it allows banks to keep only a fraction of
their deposits on hand.

REALITY:

The fact that banks are required to keep on hand only a fraction of the funds deposited with
them is a function of the banking business. Banks bor row funds from their depositors (those
with savings) and in turn lend those funds to the banks’ borrowers (those in need of funds).
Banks make money by charging borrowers more for a loan (a higher percentage interest rate)
than is paid to depositors for use of their money. If banks did not lend out their available funds
after meeting their reserve requirements, depositors might have to pay banks to provide
safekeeping services for their money.
For the economy and banking system as a whole, the practice of keeping only a fraction of
deposits on hand has an important cumulative effect. Referred to as the fractional reserve
system, it permits the banking system to “create”money.

Bob Murphy’s Response to Cochrane (who responded to Krugman)

2009-09-15T06:07:00.001-07:00

Here’s why I like Bob Murphy, and why it pains me to see him go off the deep end so often when it comes to non-economic issues.

Monday, September 14, 2009

==========
Cochrane Threatens Austrians More Than Krugman Ever Did
By Robert P. Murphy

Although some Austrian economists (e.g. Mario Rizzo) expressed disappointment with Chicago University economist John Cochrane's response to Paul Krugman's infamous NYT Magazine piece, for the most part the people on "my side" have high-fived Cochrane for kicking sand in Krugman's face.
This is a very short-sighted view. Just because someone gets in a fight with someone who we can't stand--and I've criticized Krugman enough to have credibility on that score--doesn't mean we should endorse any old arguments. There was quite a bit in Cochrane's response that should alarm an Austrian economist, and in fact his views are arguably more dangerous to the Austrian alternative than Krugman. After all, all Krugman did was ignore us. But Cochrane ignored us and defended himself from Krugman in a way that "proves" Austrian economics is a collection of second-rate ideas. I don't see how any Austrian economist can overlook all of that, just because he likes Cochrane's conclusions that "Keynesian economics is awful" and "Paul Krugman is a jerk," true those conclusions may be. In this brief essay I'll quote from Cohrane and show how his ostensible attack on Krugman actually takes down Austrian economics as collateral damage.

Most of all, [Krugman's article is] sad. Imagine this weren’t economics for a moment. Imagine this were a respected scientist turned popular writer, who says, most basically, that everything everyone has done in his field since the mid 1960s is a complete waste of time. Everything that fills its academic journals, is taught in its PhD programs, presented at its conferences, summarized in its graduate textbooks, and rewarded with the accolades a profession can bestow, including multiple Nobel prizes, is totally wrong. Instead, he calls for a return to the eternal verities of a rather convoluted book written in the 1930s, as taught to our author in his undergraduate introductory courses. If a scientist, he might be a global-warming skeptic, an AIDS-HIV disbeliever, a stalwart that maybe continents don’t move after all, or that smoking isn’t that bad for you really.

I don't need to dwell on why Austrians should dismiss this opening salvo from Cochrane. This is the incredibly naive Whig theory of history. Cochrane could just as easily blow up any Austrian who thinks Human Action contains better economic analysis than the latest edition of Mankiw.
(What's really ironic is that later in the essay, Cochrane says, "Occasionally sciences, especially social sciences, do take a wrong turn for a decade or two. I thought Keynesian economics was such a wrong turn. So let’s take a quick look at the ideas." So I'm not sure what to make of his opening paragraph. It seems Cochrane finds it "sad" that today's Keynesians would dare to use arguments that Cochrane had deployed against yesterday's Keynesians. A bit like the US government saying other countries shouldn't have nuclear weapons, because after all some evil regime might use them against civilians one day.)
After lamenting the sad day when someone would dare to criticize Nobel laureates (isn't Krugman a Nobel laureate?), Cochrane then says:

And that’s the biggest and saddest news of this piece: Paul Krugman has no interesting ideas whatsoever about what caused our current financial and economic problems, what policies might have prevented it, or what might help us in the future, and he has no contact with people who do. “Irrationality” and “spend like a drunken sailor” are pretty superficial compared to all the fascinating things economists are writing about it these days.

What is Cochrane talking about? Krugman has written boatloads on what could have prevented the current financial crisis. For example, Krugman has pointed to various types of (what he labels) "deregulation." And as for the "drunken sailor" wisecrack, Krugman has put up formal models showing his views on aggregate demand and so forth.
Don't get me wrong--I think Krugman is completely wrong (bordering on "insane" if that word is to have any meaning in reference to academics) in his views. But Cochrane's rude dismissal of Krugman is just as much a lie as anything Krugman said about Cochrane. So again, for those Austrians who can't stand what a dishonest thug Krugman is, you can't very well think Cochrane did a great job taking him down. Unless it's OK to lie for free markets (or in Cochrane's case, significantly-less-socialized markets).
But the next paragraph is what really made me lose it:

It’s fun to say we didn’t see the crisis coming, but the central empirical prediction of the efficient markets hypothesis is precisely that nobody can tell where markets are going – neither benevolent government bureaucrats, nor crafty hedge-fund managers, nor ivory-tower academics. This is probably the best-tested proposition in all the social sciences. Krugman knows this, so all he can do is huff and puff about his dislike for a theory whose central prediction is that nobody can be a reliable soothsayer.

How in the world can the proponents of the EMH continue to justify their belief in the EMH...by appeal to the EMH?!! I occasionally stop the radio channel seek on Christian stations, and it's hilarious during the short spots when they say things like, "A lot of people wonder how we can trust the Bible. But they need to read First Corinthians 5 where Paul writes..." (I am a Christian, by the way.)
There were plenty of economists (especially the Austrians--see e.g. Mark Thornton back in 2004) who "called" the housing boom. I don't know what exactly the EMH theorists make of this. Yes, you could argue that at any given time, you will have no shortage of economists (all of whom are ignorant of the EMH and the limits of their knowledge) shouting out all kinds of predictions, and then simple statistics show that some of them will be "proven right."
But on the other hand, what more could opponents of the EMH do than to point to the recent housing bubble?! When Cochrane says the EMH is the "best tested proposition in the social sciences," it is only because it is a tautology. Really, think about it: Do we need to go test the proposition that "if someone is making a bunch of money doing an activity, then other people will copy him and whittle away his returns, unless there is some reason that they don't"? (I'm exaggerating slightly, but when you read the actual empirical defenses of the EMH against its typical objections, you realize that it is a way of viewing the world. It is not a conclusion derived from the facts; it is a way of organizing the facts.)

Krugman writes as if the volatility of stock prices alone disproves market efficiency, and efficient marketers just ignored it all these years. This is a canard that Paul knows better than to pass on, no matter how rhetorically convenient....Data from the great depression has been included in practically all the tests. In fact, the great “equity premium puzzle” is that if efficient, stock markets don’t seem risky enough to deter more people from investing! Gene Fama’s PhD thesis was on “fat tails” in stock returns.

I am a bit out of my league here, but I still suspect that Cochrane is once again defining away his opponents. Again I ask: What would the world look like if the EMH were false? Wouldn't there be giant bubbles, during which many participants knew (or were quite sure) there was a bubble in progress--and invested and profited accordingly? (Of course that happened; don't let Cochrane fool you into thinking otherwise with his "best tested proposition in the social sciences" bluff.)
As far as the equity premium puzzle, proponents of Mandelbrot's "non-Gaussian" approach to financial markets say that it is the standard neoclassical use of a Gaussian distribution (calibrated with historical stock returns, yes including the Great Depression) that makes investors appear far too risk averse than we think they really are. What is happening is that the actual stock market is far more volatile than the calibrated models suggest. The housing bubble that just burst--as well as the 1987 crash--should have been "once-in-a-thousand-year events," according to the standard models that Krugman is attacking. (Of course I am making up that number. But the basic point is right.) That's one of the main themes in Nassim Taleb's work, that the value-at-risk and other risk measures used by Wall Street quants gave a false sense of security. I'm not accusing Cochrane of being ignorant of this fact, but at best he is throwing out a non sequitur to evade the very real problem that Krugman pointed out.
Oh wait, it turns out Cochrane isn't so sure about the usefulness of the EMH after all:

It is true and very well documented that asset prices move more than reasonable expectations of future cashflows. This might be because people are prey to bursts of irrational optimism and pessimism. It might also be because people’s willingness to take on risk varies over time, and is sharply lower in bad economic times. As Gene Fama pointed out in 1972, these are observationally equivalent explanations at the superficial level of staring at prices and writing magazine articles and opeds. Unless you are willing to elaborate your theory to the point that it can quantitatively describe how much and when risk premiums, or waves of “optimism” and “pessimism,” can vary, you know nothing. No theory is particularly good at that right now. Crying “bubble” is no good unless you have an operational procedure for identifying bubbles, distinguishing them from rationally low risk premiums, and not crying wolf too many years in a row.

There you have it, folks. After telling us that Krugman is attacking the best tested proposition in the social sciences, Cochrane falls back on, "Yeah we don't know anything, but neither do you. Until you can predict when a bubble will burst, stop complaining about my theory that predicts bubbles are impossible." (Again I am slightly exaggerating to make the point--but not much.)

In economics, stimulus spending ran aground on Robert Barro’s Ricardian equivalence theorem. This theorem says that debt-financed spending can’t have any effect because people, seeing the higher future taxes that must pay off the debt, will simply save more. They will buy the new government debt and leave all spending decisions unaltered. Is this theorem true? It’s a logical connection from a set of “if” to a set of “therefore.” Not even Paul can object to the connection.

Nope. Again I'm a bit out of my league here, but I am pretty sure that Cochrane is completely full of it on this point. Ricardian equivalence says that if the government finances a tax cut by running a higher deficit, while holding total government spending constant, that this won't change aggregate consumption, GDP, private sector investment, or interest rates. Rational taxpayers realize they will face higher tax bills in the future, and so they put aside the tax refund to roll over at interest and pay the bills. Thus, what the government gives back with the left hand, it borrows out of the private sector with the right. (Interest rates don't change because the extra saving by the private sector cancels out the extra borrowing by the government.)
Now there are all sorts of caveats in my argument above; it matters if it's a lump-sum tax cut versus a reduction in marginal tax rates, it matters if the current generation of workers will die before the higher taxes hit, etc. That's the tweaking of assumptions that Cochrane is referring to.
However, as Brad DeLong and Krugman have pointed out many times (in justified exasperation) on their blogs, Ricardian equivalence does not say that an increase in government deficit spending will be perfectly offset by the private sector. Think about it: The government decides to borrow and spend $100 billion more. Now for Ricardian "equivalence" to kick in, it means that the private sector must reduce its current consumption by $100 billion and increase savings by that amount, at the same interest rate. [UPDATE: I am assuming that the extra $100 billion in government spending is classified as "consumption" and not "investment."] In other words, faced with a higher future tax bill, the present generation decides to deal with it by slashing current consumption by $100 billion, while maintaining all future levels of consumption at their pre-announcement levels. Well why the heck would they do that? It would make a lot more sense to assume that consumers originally try to cushion the blow by reducing consumption across all future time periods. Then interest rates have to rise in the present in order to force consumers to make present consumption (and private-sector investment) channel an extra $100 billion into the government's coffers. So you can see, there is nothing "equivalent" going on here at all. Don't misunderstand--Krugman and DeLong are totally wrong in my opinion for thinking it's a good idea to boost "aggregate demand" (measured in nominal terms) by having the government borrow money and spend it. But Cochrane is totally wrong for invoking Ricardian equivalence to show that, to a first approximation, such a maneuver wouldn't boost aggregate demand in the present. (This is what Krugman is complaining about in the 7th paragraph here.)
Uh oh, now the Austrian reader isn't sure he can continue down this path with me. Suuuure, I didn't actually endorse deficit spending, but I suspiciously agreed with Krugman and DeLong when they claimed to defang one of the most popular Chicago School critiques of it (namely, that private sector reactions perfectly offset it in a frictionless world). Well maybe I can win you back with this final quotation from Cochrane:

Third, and most surprising, is Krugman’s Luddite attack on mathematics; “economists as a group, mistook beauty, clad in impressive-looking mathematics, for truth.” Models are “gussied up with fancy equations.”...
Again, what is the alternative? Does Krugman really think we can make progress on his – and my – agenda for economic and financial research — understanding frictions, imperfect markets, complex human behavior, institutional rigidities – by reverting to a literary style of exposition, and abandoning the attempt to compare theories quantitatively against data? Against the worldwide tide of quantification in all fields of human endeavor (read “Moneyball”) is there any real hope that this will work in economics?
No, the problem is that we don’t have enough math. Math in economics serves to keep the logic straight, to make sure that the “then” really does follow the “if,” which it so frequently does not if you just write prose. The challenge is how hard it is to write down explicit artificial economies with these ingredients, actually solve them, in order to see what makes them tick. Frictions are just bloody hard with the mathematical tools we have now.

I rest my case. Paul Krugman is a jerk and offers horrible policy advice. But John Cochrane's response is no friend-of-the-court brief in the Austrian critique of Keynesianism.
Robert P. Murphy holds a Ph.D. in economics from New York University. He is the author of The Politically Incorrect Guide to the Great Depression and the New Deal (Regnery, 2009), and is the editor of the blog Free Advice.

Libertarians that support Truthers are stupid

2009-09-14T20:04:00.001-07:00

Here’s a little rant I wrote in response to another wild and crazy post titled “Say what you will, Charlie Sheen isn’t giving Obama a pass” on what would otherwise be a fine Austrian Economics blog. Well, and if it wasn’t for the regular stupid religion postings. Bob Murphy was the first big name Austrian Economist I’ve communicated with, and I have to say in all fairness that he has always been very nice to me.

But Bobs wild and wacky lapses into religion and weirdness outside economics make it impossible for me to ever recommend him to others. A real shame, really, because his economic writings are excellent. One of his posts over at Mises.org provided me with the starting point for a chapter in my thesis. So, I do feel bad when I am less than kind in return – but as far as I’m concerned, it’s tough love – because Bob seems to be a genuinely decent fellow.

In any case, I responded to one of the comments on this post of his, according to which

“The point would be that a lot of innocent people died on that day and the truth of what happened has not been presented.

The freedom movement has only benefited from the 9/11 movement. I have friends that will listen to me and read Austrian economics books only because they believe that our Government is willing to take their lives to push an agenda, and they want to know how we could eliminate them from our lives. It is a heck of a lot easier to convince a 9/11 truther that we don't need the State then a Bush or O'bama supporter.”

[The wacky spelling is all his, and just to make sure there is no misunderstanding: Bob did NOT write THAT]

Ok, he’s right – there is a huge overlap between Libertarians and Truthers. Many Truthers found their way to Libertarianism because Libertarianism is the only ideology that openly opposes the State. I have observed this weird phenomenon before with my own eyes, and it puzzled me. Almost as much as it puzzles me that so many Atheists are Socialists – but that’s a big enough topic all by itself.

So, here’s what came to me, and I will try to elaborate on this sometime in the future.

The "Truth" of what happened has been presented. A group of people consisting mostly, or even exclusively, of (Saudi) Arabs conspired to crash planes into important American landmarks in something left-wing anarchists would have dubbed 'propaganda of the deed'. They succeeded beyond their wildest dreams, partially because they correctly anticipated the reaction of the American government. In another way, they failed - since the anticipated uprising of the "Arab Street" did not happen.

The American Government, wilfully and stupidly walked right into what COULD have been a major bear trap, only to go right ahead and dig themselves a massive hole, and succeed in achieving what the perpetrators of the 9/11 did not achieve directly.

Osama bin Laden is probably still giggling at this in utter disbelief.

The "Truth" movement, on the other hand, is little more than the outgrowth of a wild combination of hubris and paranoia.Hubris, because these people cannot believe that their powerful State has been outsmarted by a bunch of Arabs. After all, the Arabs are wild, uncivilized people who can barely count to ten and are too stupid to understand the first thing about our Great Nation. Paranoia, because the only way to explain the failue of the powerful state is to reinterprete the failure as a evil plan.

In reality, the Truth Movement is very much like the "Stab-in-the-back" movement in Germany post-WWI. Why, our powerful Empire could not have possibly succumbed to those Franzen and Tommies and Ivans and Amis - it must have been the evil people in our own government, probably the JEWS!!!!!!

Your Truthers are little more than the budding shock-troops of Fascism. Seriously. You think these crypto-Patriots, these flag-wavers, these paranoiacs are on the side of Liberty?

Maybe you people should broaden your reading list to include a little Hannah Arendt in addition to Rothbard, in particular her The Origins of Totalitariansm.

Not having read The Origins is a serious lack in your education, and probably one of the reasons you don't recognize the Truthers for what they are.

Get real, and stop embarassing the rest of us

Norman Borlaug - Scientist, Humanist, Life Giver, Dies at 95

2009-09-13T12:54:00.001-07:00

Nobody has saved more human lives than Norman Borlaug – Father of the Green Revolution. Billions live today thanks to him. May his legacy live on.

Norman Borlaug, 95, Dies; Led Green Revolution

By JUSTIN GILLIS

Published: September 13, 2009

Norman E. Borlaug, the plant scientist who did more than anyone else in the 20th century to teach the world to feed itself and whose work was credited with saving hundreds of millions of lives, died Saturday night. He was 95 and lived in Dallas.

The cause was complications from cancer, said Kathleen Phillips, a spokeswoman for Texas A&M University, where Dr. Borlaug had served on the faculty since 1984.

Dr. Borlaug’s advances in plant breeding led to spectacular success in increasing food production in Latin America and Asia and brought him international acclaim. In 1970, he was awarded the Nobel Peace Prize.

He was widely described as the father of the broad agricultural movement called the Green Revolution, though decidedly reluctant to accept the title. “A miserable term,” he said, characteristically shrugging off any air of self-importance.

Yet his work had a far-reaching impact on the lives of millions of people in developing countries. His breeding of high-yielding crop varieties helped to avert mass famines that were widely predicted in the 1960s, altering the course of history. Largely because of his work, countries that had been food deficient, like Mexico and India, became self-sufficient in producing cereal grains.

“More than any other single person of this age, he has helped provide bread for a hungry world,” the Nobel committee said in presenting him with the Peace Prize. “We have made this choice in the hope that providing bread will also give the world peace.”

The day the award was announced, Dr. Borlaug, vigorous and slender at 56, was working in a wheat field outside Mexico City when his wife, Margaret, drove up to tell him the news. “Someone’s pulling your leg,” he replied, according to one of his biographers, Leon Hesser. Assured that it was true, he kept on working, saying he would celebrate later.

The Green Revolution eventually came under attack from environmental and social critics who said it had created more difficulties than it had solved. Dr. Borlaug responded that the real problem was not his agricultural techniques, but the runaway population growth that had made them necessary.

“If the world population continues to increase at the same rate, we will destroy the species,” he declared.

Traveling to Norway, the land of his ancestors, to receive the award, he warned the Nobel audience that the struggle against hunger had not been won. “We may be at high tide now, but ebb tide could soon set in if we become complacent and relax our efforts,” he said. Twice more in his lifetime, in the 1970s and again in 2008, those words would prove prescient as food shortages and high prices caused global unrest.

His Nobel Prize was the culmination of a storied life in agriculture that began when he was a boy growing up on a farm in Iowa, wondering why plants grew better in some places than others. His was also an unlikely career path, one that began in earnest near the end of World War II, when Dr. Borlaug walked away from a promising job at DuPont, the chemical company, to take a position in Mexico trying to help farmers improve their crops.

The job was part of an assault on hunger in Mexico that was devised in Manhattan, at the offices of the Rockefeller Foundation, with political support in Washington. But it was not a career choice calculated to lead to fame or honor.

Indeed, on first seeing the situation in Mexico for himself, Dr. Borlaug reacted with near despair. Mexican soils were depleted, the crops were ravaged by disease, yields were low and the farmers could not feed themselves, much less improve their lot by selling surplus.

“These places I’ve seen have clubbed my mind — they are so poor and depressing,” he wrote to his wife after his first extended sojourn in the country. “I don’t know what we can do to help these people, but we’ve got to do something.”

The next few years were ones of toil and privation as Dr. Borlaug and his colleagues, with scant funds or equipment, set to work improving yields in tropical crop varieties.

He spent countless hours hunched over in the blazing Mexican sun as he manipulated tiny wheat blossoms to cross different strains. To speed the work, he set up winter and summer operations in far-flung parts of Mexico, logging thousands of miles over poor roads. He battled illness, forded rivers in flood, dodged mudslides and sometimes slept in tents.

He was by then a trained scientist holding a doctoral degree in plant diseases. But as he sought to coax better performance from the wheats of Mexico, he relied on a farm boy’s instinctive feel for the plants and the soil in which they grew.

“When wheat is ripening properly, when the wind is blowing across the field, you can hear the beards of the wheat rubbing together,” he told another biographer, Lennard Bickel. “They sound like the pine needles in a forest. It is a sweet, whispering music that once you hear, you never forget.”

Norman Ernest Borlaug was born on March 25, 1914, in his grandfather’s farmhouse near the tiny settlement of Saude, in northeastern Iowa. Growing up in a stalwart community of Norwegian immigrants, he trudged across snow-covered fields to a one-room country school, coming home almost every day to the aroma of bread baking in his mother’s oven.

He was a high-spirited boy of boundless curiosity. His sister, Charlotte Culbert, recounted in an interview in 2008 in Cresco, Iowa, that he would whistle aloud as he milked the cows, and pester his parents and grandparents with questions. “He’d wonder why in some areas the grass would be so green, and then over here it wouldn’t be,” Mrs. Culbert recalled.

At the time, most farm boys dropped out of school. But Norman’s grandfather Nels Borlaug, regretting his own scant education, urged his grandson to keep going. Norman worked his way through the University of Minnesota during the Great Depression. More than once in those desperate years he encountered townspeople in Minneapolis on the verge of starvation, which sharpened his interest in the problems of food production.

He first studied forestry, but fell under the influence of a legendary expert in plant diseases, Elvin C. Stakman, who encouraged him to switch to the broader field of plant pathology. After earning a doctorate in the field, he took a job with DuPont in 1942 and worked on chemical compounds useful in the war. But Professor Stakman helped persuade him to join the Rockefeller Foundation’s Mexican hunger project in 1944.

Dr. Borlaug’s initial goal was to create varieties of wheat adapted to Mexico’s climate that could resist the greatest disease of wheat, a fungus called rust. He accomplished that within a few years by crossing Mexican wheats with rust-resistant varieties from elsewhere.

His insistence on breeding in two places, the Sonoran desert in winter and the central highlands in summer, imposed heavy burdens on him and his team, but it cut the time to accomplish his work in half. By luck, the strategy also produced wheat varieties that were insensitive to day length and thus capable of growing in many locales, a trait that would later prove of vital significance.

The Rockefeller team gradually won the agreement of Mexican farmers to adopt the new varieties, and wheat output in that country began a remarkable climb. But these developments turned out to be a mere prelude to Dr. Borlaug’s main achievements.

By the late 1940s, researchers knew they could induce huge yield gains in wheat by feeding the plants chemical fertilizer that supplied them with extra nitrogen, a shortage of which was the biggest constraint on plant growth. But the strategy had a severe limitation: beyond a certain level of fertilizer, the seed heads containing wheat grains would grow so large and heavy, the plant would fall over, ruining the crop.

In 1953, Dr. Borlaug began working with a wheat strain containing an unusual gene. It had the effect of shrinking the wheat plant, creating a stubby, compact variety. Yet crucially, the seed heads did not shrink, meaning a small plant could still produce a large amount of wheat.

Dr. Borlaug and his team transferred the gene into tropical wheats. When high fertilizer levels were applied to these new “semidwarf” plants, the results were nothing short of astonishing.

The plants would produce enormous heads of grain, yet their stiff, short bodies could support the weight without falling over. On the same amount of land, wheat output could be tripled or quadrupled. Later, the idea was applied to rice, the staple crop for nearly half the world’s population, with yields jumping several-fold compared with some traditional varieties.

This strange principle of increasing yields by shrinking plants was the central insight of the Green Revolution, and its impact was enormous.

By the early 1960s, many farmers in Mexico had embraced the full package of innovations from Dr. Borlaug’s breeding program, and wheat output in the country had soared sixfold from the levels of the early 1940s.

Urgent queries began to pour in from other poor countries, for they were caught in a bind. After World War II, the introduction of basic sanitation in many developing countries caused death rates to plunge, but birth rates were slow to follow. As a result, the global population had exploded, putting immense strain on food supplies.

On the Indian subcontinent in particular, a crisis developed. The population was growing so much faster than farm output that it was not clear how the masses could be fed. In the mid-1960s, huge grain imports were required to avert starvation.

At the invitation of the Indian and Pakistani governments, Dr. Borlaug offered his advice. He met resistance at first from senior agricultural experts steeped in tradition, but as the food situation worsened, the objections faded. Soon, India and Pakistan were ordering shiploads of Dr. Borlaug’s wheat seeds from Mexico.

One vital shipment through the Port of Los Angeles was delayed by the Watts riots of 1965 in that city, and Dr. Borlaug spent hours yelling on the phone to get it through.

Indian and Pakistani farmers took up the new varieties, receiving fertilizer and other aid from their governments. Just as in Mexico, harvests soared: the Indian wheat crop of 1968 was so bountiful that the government had to turn schools into temporary granaries.

As with the Mexican effort, the Rockefeller Foundation and other donors set up a project in the Philippines to work on rice. It led to the creation of semidwarf varieties that also caused rice yields to soar. Chinese scientists ultimately followed in the footsteps of Western researchers, using semidwarf varieties to establish food security in China and setting the stage for its rise as an industrial power. And Dr. Borlaug and his colleagues helped spread the new crop varieties to additional countries of Latin America, notably Colombia, Ecuador, Chile and Brazil.

Dr. Borlaug’s later years were partly occupied by arguments over the social and environmental consequences of the Green Revolution. Many critics on the left attacked it, saying it displaced smaller farmers, encouraged overreliance on chemicals and paved the way for greater corporate control of agriculture.

In a characteristic complaint, Vandana Shiva, an Indian critic, wrote in 1991 that “in perceiving nature’s limits as constraints on productivity that had to be removed, American experts spread ecologically destructive and unsustainable practices worldwide.”

Dr. Borlaug declared that such arguments often came from “elitists” who were rich enough not to worry about where their next meal was coming from. But over time, he acknowledged the validity of some environmental concerns, and embraced more judicious use of fertilizers and pesticides. He was frustrated throughout his life that governments did not do more to tackle what he called “the population monster” by lowering birth rates.

He remained a vigorous man into his 90s, serving for many years on the faculty of Texas A&M and continuing to do vital agricultural work. In recent years, he marshaled efforts to tackle a new variety of rust that is threatening the world’s wheat crop.

Dr. Borlaug’s wife of 69 years, the former Margaret Gibson, died in 2007. He is survived by a sister, Charlotte Borlaug Culbert; a daughter, Jeanie Borlaug Laube; a son, William Borlaug; five grandchildren; and six great-grandchildren.

Gary H. Toenniessen, director of agricultural programs for the Rockefeller Foundation, said in an interview that Dr. Borlaug’s great achievement was to prove that intensive, modern agriculture could be made to work in the fast-growing developing countries where it was needed most, even on the small farms predominating there.

By Mr. Toenniessen’s calculation, about half the world’s population goes to bed every night after consuming grain descended from one of the high-yield varieties developed by Dr. Borlaug and his colleagues of the Green Revolution.

“He knew what it was they needed to do, and he didn’t give up,” Mr. Toenniessen said. “He could just see that this was the answer.”

Gerald Jonas and Sarah Wheaton contributed reporting.

How did Paul Krugman get it so Wrong?

2009-09-12T05:34:00.001-07:00

John H. Cochrane[1]

Many friends and colleagues have asked me what I think of Paul Krugman’s New York Times Magazine article, “How did Economists get it so wrong?”

Most of all, it’s sad. Imagine this weren’t economics for a moment. Imagine this were a respected scientist turned popular writer, who says, most basically, that everything everyone has done in his field since the mid 1960s is a complete waste of time. Everything that fills its academic journals, is taught in its PhD programs, presented at its conferences, summarized in its graduate textbooks, and rewarded with the accolades a profession can bestow, including multiple Nobel prizes, is totally wrong. Instead, he calls for a return to the eternal verities of a rather convoluted book written in the 1930s, as taught to our author in his undergraduate introductory courses. If a scientist, he might be a global-warming skeptic, an AIDS-HIV disbeliever, a creationist, a stalwart that maybe continents don’t move after all.

It gets worse. Krugman hints at dark conspiracies, claiming “dissenters are marginalized.” Most of the article is just a calumnious personal attack on an ever-growing enemies list, which now includes “new Keyenesians” such as Olivier Blanchard and Greg Mankiw. Rather than source professional writing, he plays gotcha with out-of-context second-hand quotes from media interviews. He makes stuff up, boldly putting words in people’s mouths that run contrary to their written opinions. Even this isn’t enough: he adds cartoons to try to make his “enemies” look silly, and puts them in false and embarrassing situations. He accuses us of adopting ideas for pay, selling out for “sabbaticals at the Hoover institution” and fat “Wall street paychecks.” It sounds a bit paranoid.

It’s annoying to the victims, but we’re big boys and girls. It’s a disservice to New York Times readers. They depend on Krugman to read real academic literature and digest it, and they get this attack instead. And it’s ineffective. Any astute reader knows that personal attacks and innuendo mean the author has run out of ideas.

That’s the biggest and saddest news of this piece: Paul Krugman has no interesting ideas whatsoever about what caused our current financial and economic problems, what policies might have prevented it, or what might help us in the future, and he has no contact with people who do. “Irrationality” and advice to spend like a drunken sailor are pretty superficial compared to all the fascinating things economists are writing about it these days.

How sad.

That’s what I think, but I don’t expect you the reader to be convinced by my opinion or my reference to professional consensus. Maybe he is right. Occasionally sciences, especially social sciences, do take a wrong turn for a decade or two. I thought Keynesian economics was such a wrong turn. So let’s take a quick look at the ideas.

Krugman’s attack has two goals. First, he thinks financial markets are “inefficient,” fundamentally due to “irrational” investors, and thus prey to excessive volatility which needs government control. Second, he likes the huge “fiscal stimulus” provided by multi-trillion dollar deficits.

Efficiency.

It’s fun to say we didn’t see the crisis coming, but the central empirical prediction of the efficient markets hypothesis is precisely that nobody can tell where markets are going – neither benevolent government bureaucrats, nor crafty hedge-fund managers, nor ivory-tower academics. This is probably the best-tested proposition in all the social sciences. Krugman knows this, so all he can do is huff and puff about his dislike for a theory whose central prediction is that nobody can be a reliable soothsayer.

Krugman writes as if the volatility of stock prices alone disproves market efficiency, and efficient marketers just ignored it all these years. This is a canard that Paul knows better than to pass on, no matter how rhetorically convenient. (I can overlook his mixing up the CAPM and Black-Scholes model, but not this.) There is nothing about “efficiency” that promises “stability.” “Stable” growth would in fact be a major violation of efficiency. Efficient markets did not need to wait for “the memory of 1929 … gradually receding,” nor did we fail to read the newspapers in 1987. Data from the great depression has been included in practically all the tests. In fact, the great “equity premium puzzle” is that if efficient, stock markets don’t seem risky enough to deter more people from investing! Gene Fama’s PhD thesis was on “fat tails” in stock returns.

It is true and very well documented that asset prices move more than reasonable expectations of future cashflows. This might be because people are prey to bursts of irrational optimism and pessimism. It might also be because people’s willingness to take on risk varies over time, and is lower in bad economic times. As Gene Fama pointed out in 1970, these are observationally equivalent explanations. Unless you are willing to elaborate your theory to the point that it can quantitatively describe how much and when risk premiums, or waves of “optimism” and “pessimism,” can vary, you know nothing. No theory is particularly good at that right now. Crying “bubble” is empty unless you have an operational procedure for identifying bubbles, distinguishing them from rationally low risk premiums, and not crying wolf too many years in a row.

But this difficulty is no surprise. It’s the central prediction of free-market economics, as crystallized by Hayek, that no academic, bureaucrat or regulator will ever be able to fully explain market price movements. Nobody knows what “fundamental” value is. If anyone could tell what the price of tomatoes should be, let alone the price of Microsoft stock, communism would have worked.

More deeply, the economist’s job is not to “explain” market fluctuations after the fact, to give a pleasant story on the evening news about why markets went up or down. Markets up? “A wave of positive sentiment.” Markets went down? “Irrational pessimism.” ( “The risk premium must have increased” is just as empty.) Our ancestors could do that. Really, is that an improvement on “Zeus had a fight with Apollo?” Good serious behavioral economists know this, and they are circumspect in their explanatory claims so far.

But this argument takes us away from the main point. The case for free markets never was that markets are perfect. The case for free markets is that government control of markets, especially asset markets, has always been much worse.

Krugman at bottom is arguing that the government should massively intervene in financial markets, and take charge of the allocation of capital. He can’t quite come out and say this, but he does say “Keynes considered it a very bad idea to let such markets…dictate important business decisions,” and “finance economists believed that we should put the capital development of the nation in the hands of what Keynes had called a `casino.’” Well, if markets can’t be trusted to allocate capital, we don’t have to connect too many dots to imagine who Paul has in mind.

To reach this conclusion, you need evidence, experience, or any realistic hope that the alternative will be better. Remember, the SEC couldn’t even find Bernie Madoff when he was handed to them on a silver platter. Think of the great job Fannie, Freddie, and Congress did in the mortgage market. Is this system going to regulate Citigroup, guide financial markets to the right price, replace the stock market, and tell our society which new products are worth investment? As David Wessel’s excellent In Fed We Trust makes perfectly clear, government regulators failed just as abysmally as private investors and economists to see the storm coming. And not from any lack of smarts.

In fact, the behavioral view gives us a new and stronger argument against regulation and control. Regulators are just as human and irrational as market participants. If bankers are, in Krugman’s words, “idiots,” then so must be the typical treasury secretary, fed chairman, and regulatory staff. They act alone or in committees, where behavioral biases are much better documented than in market settings. They are still easily captured by industries, and face politically distorted incentives.

Careful behavioralists know this, and do not quickly run from “the market got it wrong” to “the government can put it all right.” Even my most behavioral colleagues Richard Thaler and Cass Sunstein in their book “Nudge” go only so far as a light libertarian paternalism, suggesting good default options on our 401(k) accounts. (And even here they’re not very clear on how the Federal Nudging Agency is going to steer clear of industry capture.) They don’t even think of jumping from irrational markets, which they believe in deeply, to Federal control of stock and house prices and allocation of capital.

Stimulus

Most of all, Krugman likes fiscal stimulus. In this quest, he accuses us and the rest of the economics profession of “mistaking beauty for truth.” He’s not clear on what the “beauty” is that we all fell in love with, and why one should shun it, for good reason. The first siren of beauty is simple logical consistency. Paul’s Keynesian economics requires that people make logically inconsistent plans to consume more, invest more, and pay more taxes with the same income. The second siren is plausible assumptions about how people behave. Keynesian economics requires that the government is able to systematically fool people again and again. It presumes that people don’t think about the future in making decisions today. Logical consistency and plausible foundations are indeed “beautiful” but to me they are also basic preconditions for “truth.”

In economics, stimulus spending ran aground on Robert Barro’s Ricardian equivalence theorem. This theorem says that debt-financed spending can’t have any effect because people, seeing the higher future taxes that must pay off the debt, will simply save more. They will buy the new government debt and leave all spending decisions unaltered. Is this theorem true? It’s a logical connection from a set of “if” to a set of “therefore.” Not even Paul can object to the connection.

Therefore, we have to examine the “ifs.” And those ifs are, as usual, obviously not true. For example, the theorem presumes lump-sum taxes, not proportional income taxes. Alas, when you take this into account we are all made poorer by deficit spending, so the multiplier is most likely negative. The theorem (like most Keynesian economics) ignores the composition of output; but surely spending money on roads rather than cars can affect the overall level.

Economists have spent a generation tossing and turning the Ricardian equivalence theorem, and assessing the likely effects of fiscal stimulus in its light, generalizing the “ifs” and figuring out the likely “therefores.” This is exactly the right way to do things. The impact of Ricardian equivalence is not that this simple abstract benchmark is literally true. The impact is that in its wake, if you want to understand the effects of government spending, you have to specify why it is false. Doing so does not lead you anywhere near old-fashioned Keynesian economics. It leads you to consider distorting taxes, how much people care about their children, how many people would like to borrow more to finance today’s consumption and so on. And when you find “market failures” that might justify a multiplier, optimal-policy analysis suggests fixing the market failures, not their exploitation by fiscal multiplier. Most “New Keynesian” analyses that add frictions don’t produce big multipliers.

This is how real thinking about stimulus actually proceeds. Nobody ever “asserted that an increase in government spending cannot, under any circumstances, increase employment.” This is unsupportable by any serious review of professional writings, and Krugman knows it. (My own are perfectly clear on lots of possibilities for an answer that is not zero.) But thinking through this sort of thing and explaining it is much harder than just tarring your enemies with out-of-context quotes, ethical innuendo, or silly cartoons.

In fact, I propose that Krugman himself doesn’t really believe the Keynesian logic for that stimulus. I doubt he would follow that logic to its inevitable conclusions. Stimulus must have some other attraction to him.

If you believe the Keynesian argument for stimulus, you should think Bernie Madoff is a hero. He took money from people who were saving it, and gave it to people who most assuredly were going to spend it. Each dollar so transferred, in Krugman’s world, generates an additional dollar and a half of national income. The analogy is even closer. Madoff didn’t just take money from his savers, he essentially borrowed it from them, giving them phony accounts with promises of great profits to come. This looks a lot like government debt.

If you believe the Keynesian argument for stimulus, you don’t care how the money is spent. All this puffery about “infrastructure,” monitoring, wise investment, jobs “created” and so on is pointless. Keynes thought the government should pay people to dig ditches and fill them up.

If you believe in Keynesian stimulus, you don’t even care if the government spending money is stolen. Actually, that would be better. Thieves have notoriously high propensities to consume.

The crash.

Krugman’s article is supposedly about how the crash and recession changed our thinking, and what economics has to say about it. The most amazing news in the whole article is that Paul Krugman has absolutely no idea about what caused the crash, what policies might have prevented it, and what policies we should adopt going forward. He seems completely unaware of the large body of work by economists who actually do know something about the banking and financial system, and have been thinking about it productively for a generation.

Here’s all he has to say: “Irrationality” caused markets to go up and then down. “Spending” then declined, for unclear reasons, possibly “irrational” as well. The sum total of his policy recommendations is for the Federal Government to spend like a drunken sailor after the fact.

Paul, there was a financial crisis, a classic near-run on banks. The centerpiece of our crash was not the relatively free stock or real estate markets, it was the highly regulated commercial banks. A generation of economists has thought really hard about these kinds of events. Look up Diamond, Rajan, Gorton, Kashyap, Stein, and so on. They’ve thought about why there is so much short term debt, why banks run, how deposit insurance and credit guarantees help, and how they give incentives for excessive risk taking.

If we want to think about events and policies, this seems like more than a minor detail. The hard and central policy debate over the last year was how to manage this financial crisis. Now it is how to set up the incentives of banks and other financial institutions so this mess doesn’t happen again. There’s lots of good and subtle economics here that New York Times readers might like to know about. What does Krugman have to say? Zero.

Krugman doesn’t even have anything to say about the Fed. Ben Bernanke did a lot more last year than set the funds rate to zero and then go off on vacation and wait for fiscal policy to do its magic. Leaving aside the string of bailouts, the Fed started term lending to securities dealers. Then, rather than buy treasuries in exchange for reserves, it essentially sold treasuries in exchange for private debt. Though the funds rate was near zero, the Fed noticed huge commercial paper and securitized debt spreads, and intervened in those markets. There is no “the” interest rate anymore, the Fed is attempting to manage them all. Recently the Fed has started buying massive quantities of mortgage-backed securities and long-term treasury debt.

Monetary policy now has little to do with “money” vs. “bonds” with all the latter lumped together. Monetary policy has become wide-ranging financial policy. Does any of this work? What are the dangers? Can the Fed stay independent in this new role? These are the questions of our time. What does Krugman have to say? Nothing.

Krugman is trying to say that a cabal of obvious crackpots bedazzled all of macroeconomics with the beauty of their mathematics, to the point of inducing policy paralysis. Alas, that won’t stick. The sad fact is that few in Washington pay the slightest attention to modern macroeconomic research, in particular anything with a serious intertemporal dimension. Paul’s simple Keynesianism has dominated policy analysis for decades and continues to do so. From the CEA to the Fed to the OMB and CBO, everyone just adds up consumer, investment and government “demand” to forecast output and uses simple Phillips curves to think about inflation. If a failure of ideas caused bad policy, it’s a simpleminded Keynesianism that failed.

The future of economics.

How should economics change? Krugman argues for three incompatible changes.

First, he argues for a future of economics that “recognizes flaws and frictions,” and incorporates alternative assumptions about behavior, especially towards risk-taking. To which I say, “Hello, Paul, where have you been for the last 30 years?” Macroeconomists have not spent 30 years admiring the eternal verities of Kydland and Prescott’s 1982 paper. Pretty much all we have been doing for 30 years is introducing flaws, frictions and new behaviors, especially new models of attitudes to risk, and comparing the resulting models, quantitatively, to data. The long literature on financial crises and banking which Krugman does not mention has also been doing exactly the same.

Second, Krugman argues that “a more or less Keynesian view is the only plausible game in town,” and “Keynesian economics remains the best framework we have for making sense of recessions and depressions.” One thing is pretty clear by now, that when economics incorporates flaws and frictions, the result will not be to rehabilitate an 80-year-old book. As Paul bemoans, the “new Keynesians” who did just what he asks, putting Keynes inspired price-stickiness into logically coherent models, ended up with something that looked a lot more like monetarism. (Actually, though this is the consensus, my own work finds that new-Keynesian economics ended up with something much different and more radical than monetarism.) A science that moves forward almost never ends up back where it started. Einstein revises Newton, but does not send you back to Aristotle. At best you can play the fun game of hunting for inspirational quotes, but that doesn’t mean that you could have known the same thing by just reading Keynes once more.

Third, and most surprising, is Krugman’s Luddite attack on mathematics; “economists as a group, mistook beauty, clad in impressive-looking mathematics, for truth.” Models are “gussied up with fancy equations.” I’m old enough to remember when Krugman was young, working out the interactions of game theory and increasing returns in international trade for which he won the Nobel Prize, and the old guard tut-tutted “nice recreational mathematics, but not real-world at all.” How quickly time passes.

Again, what is the alternative? Does Krugman really think we can make progress on his – and my – agenda for economic and financial research -- understanding frictions, imperfect markets, complex human behavior, institutional rigidities – by reverting to a literary style of exposition, and abandoning the attempt to compare theories quantitatively against data? Against the worldwide tide of quantification in all fields of human endeavor (read “Moneyball”) is there any real hope that this will work in economics?

No, the problem is that we don’t have enough math. Math in economics serves to keep the logic straight, to make sure that the “then” really does follow the “if,” which it so frequently does not if you just write prose. The challenge is how hard it is to write down explicit artificial economies with these ingredients, actually solve them, in order to see what makes them tick. Frictions are just bloody hard with the mathematical tools we have now.

The insults.

The level of personal attack in this article, and fudging of the facts to achieve it, is simply amazing.

As one little example (ok, I’m a bit sensitive), take my quotation about carpenters in Nevada. I didn’t write this. It’s a quote, taken out of context, from a bloomberg.com article written by a reporter who I spent about 10 hours with patiently trying to explain some basics. (It’s the last time I’ll do that!) I was trying to explain how sectoral shifts contribute to unemployment. Krugman follows it by a lie -- I never asserted that “it take mass unemployment across the whole nation to get carpenters to move out of Nevada.” You can’t even dredge up a quote for that monstrosity.

What’s the point? I don’t think Paul disagrees that sectoral shifts result in some unemployment, so the quote actually makes sense as economics. The only point is to make me, personally, seem heartless -- a pure, personal, calumnious attack, having nothing to do with economics.

Bob Lucas has written extensively on Keynesian and monetarist economics, sensibly and even-handedly. Krugman chooses to quote a joke, made back in 1980 at a lunch talk to some business school alumni. Really, this is on the level of the picture of Barack Obama with Bill Ayres that Sean Hannity likes to show on Fox News.

It goes on. Krugman asserts that I and others “believe” “that an increase in government spending cannot, under any circumstances, increase employment,” or that we “argued that price fluctuations and shocks to demand actually had nothing to do with the business cycle.” These are just gross distortions, unsupported by any documentation, let alone professional writing. And Krugman knows better. All economic models are simplified to exhibit one point; we all understand the real world is more complicated; and his job is supposed to be to explain that to lay readers. It would be no different than if someone were to look up Paul’s early work which assumed away transport costs and claim “Paul Krugman believes ocean shipping is free, how stupid” in the Wall Street Journal.

The idea that any of us do what we do because we’re paid off by fancy Wall Street salaries or cushy sabbaticals at Hoover is just ridiculous. (If Krugman knew anything about hedge funds he’d know that believing in efficient markets disqualifies you for employment. Nobody wants a guy who thinks you can’t make any money trading!) Given Krugman’s speaking fees, it’s a surprising first stone for him to cast.

Apparently, salacious prose, innuendo, calumny, and selective quotation from media aren’t enough: Krugman added cartoons to try to make opponents look silly. The Lucas-Blanchard-Bernanke conspiratorial cocktail party celebrating the end of recessions is a silly fiction. So is their despondent gloom on reading “recession” in the paper. Nobody at a conference looks like Dr. Pangloss with wild hair and a suit from the 1800s. (OK, Randy Wright has the hair, but not the suit.) Keynes did not reappear at the NBER to be booed as an “outsider.” Why are you allowed to make things up in pictures that wouldn’t pass even the Times’ weak fact-checking in words?

Well, perhaps we got off easy. This all was mild compared to Krugman’s vicious obituary of Milton Friedman in the New York Review of Books. But most of all, Paul isn’t doing his job. He’s supposed to read, explain, and criticize things economists write, and preferably real professional writing, not interviews, opeds and blog posts. At a minimum, this leads to the unavoidable conclusion that Krugman isn’t reading real economics anymore.

How did Krugman get it so wrong?

So what is Krugman up to? Why become a denier, a skeptic, an apologist for 70 year old ideas, replete with well-known logical fallacies, a pariah? Why publish an essentially personal attack on an ever-growing enemies list that now includes practically every professional economist? Why publish an incoherent vision for the future of economics?

The only explanation that makes sense to me is that Krugman isn’t trying to be an economist, he is trying to be a partisan, political opinion writer. This is not an insult. I read George Will, Charles Krauthnammer and Frank Rich with equal pleasure even when I disagree with them. Krugman wants to be Rush Limbaugh of the Left. I still want to be Milton Friedman, but each is a worthy calling.

Alas, to Krugman, as to far too many ex-economists in partisan debates, economics is not a quest for understanding. It is a set of debating points to argue for policies that one has adopted for partisan political purposes. “Stimulus” is just marketing to sell Congressmen and voters on a package of government spending priorities that you want for political reasons. It’s not a proposition to be explained, understood, taken seriously to its logical limits, or reflective of market failures that should be addressed directly.

Why argue for a nonsensical future for economics? Well, again, if you don’t regard economics as a science, a discipline that ought to result in quantitative matches to data, a discipline that requires crystal-clear logical connections between the “if” and the “then,” if the point of economics is merely to provide marketing and propaganda for politically-motivated policy, then his writing does make sense. It makes sense to appeal to some future economics – not yet worked out, even verbally – to disdain quantification and comparison to data, and to appeal to the authority of ancient books as interpreted you, their lone remaining apostle.

Most of all, this is the only reason I can come up with to understand why Krugman wants to write personal attacks on those who disagree with him. I like it when people disagree with me, and take time to read my work and criticize it. At worst I learn how to position it better. At best, I discover I was wrong and learn something. I send a polite thank you note.

Krugman wants people to swallow his arguments whole from his authority, without demanding logic, or evidence. Those who disagree with him, alas, are pretty smart and have pretty good arguments if you bother to read them. So, he tries to discredit them with personal attacks.

This is the political sphere, not the intellectual one. Don’t argue with them, swift-boat them. Find some embarrassing quote from an old interview. Well, good luck, Paul. Let’s just not pretend this has anything to do with economics, or actual truth about how the world works or could be made a better place.

[1] University of Chicago Booth School of Business. Many colleagues and friends helped, but I don’t want to name them for obvious reasons. Krugman fans: Please don’t bother emailing me to tell me what a jerk I am. I will update this occasionally, so please pass on the link http://faculty.chicagobooth.edu/john.cochrane/research/Papers/#news not the document.

Comments on American Democracy #1

2009-08-30T19:07:00.001-07:00

Thanks to the Health Care debate, it should now be clear that to properly understand American democracy one should read Mencken, not Tocqueville. And should the absurd theatre that currently passes for public debate in America continue to degrade further – if that is indeed possible – it may even be time to dust off that long-forgotten tome by Spengler. Caligula’s horse would be too embarrassed to sit among the screaming lemurs that make up the US Congress. But what can one expect – after all, each nation gets the government it deserves, including the United States of America.

There is no public debate in America. A debate requires at least two parties who occasionally manage to say something meaningful to each other. Only a comedian could take that as a description of this ‘public debate’. What we have instead is dimwits untainted by the slightest hue of understanding spouting the most obvious stupidities on issues far beyond their ken to masses of ignorant blockheads.

There is the foul-mouthed underclass of barely educated right-wingers trying to protect a boondoggle government program from the government. There are the mealy-mouthed semi-educated left wingers wanting to replace a cobweb of private monopolies protected by the government with a single monopoly run directly government. None of these jackasses and squirrel brains manages to say anything that could withstand the analytical acuity of a clever twelve-year old – provided the poor child has successfully avoided the blessings of American public education.

But, what am I talking about? American’s voted for this. Every two years, they go and vote those lemurs, blowhards, jackasses, and dimwits into public office. Every two years, they do the same thing. Clearly, if they didn’t like the outcome, would they continue?

Vacation

2009-07-17T20:03:00.001-07:00

Dear readers,

I will be on vacation until August 25th. Thank you for stopping by, and please come back soon.

Economics Joke - #1

2009-07-17T14:37:00.001-07:00

If C+I+G+X-M=Y

then $10C+$10I+$10G+$10X-$10M = $10C+$0I+$20G+0X-$0M

If this isn’t funny, I don’t know what is.

Zoho vs. MS Office

2009-07-12T08:15:00.001-07:00

I just discovered by sheer accident this nifty on-line service which, at first glance, makes most of the Google applications look outright lame. I haven’t heard of Zoho until then, but I think I’m already becoming a believer. I’m not quite ready to ditch my MS Office – yet – but so far, the impression is good. For example, the Zoho Writer appears capable of reading the new Microsoft docx format. As I write this (not on Zoho, yet), it is uploading my Master’s thesis – very heavy on docx formatted features, graphs, etc. I’ll report back once it’s done and let you know how it went.

Until then, read this NYT review of Zoho – it’s a good reflection of my own experience so far.

Small Company Offers Web-Based Competition for Microsoft Word

By RANDALL STROSS

WITHIN Microsoft’s Office group, the calendar on the wall appears to be 1983, the year the company introduced Microsoft Word. The company still expects customers to buy its software applications as products and install and run them on PCs.

Recognition of the Internet has been slow in coming. Microsoft is finally preparing Web versions of its Office suite, though these are intended as supplements, not as replacements. The company maintains that Web versions of a Word or Excel will never match the functionality and responsiveness that software installed on one’s own machine provides.

It may be wrong.

Granted, Microsoft’s largest competitor, Google, has not yet marched up to the bulwarks guarding Microsoft Office and blown a gaping hole into its adversary’s complacency. Google Apps, its Office-like suite, contains an uneven bunch of services. I find Google Calendar far superior to Microsoft Outlook’s calendar, but Google’s word processor, Docs, lacks many features in Word that I rely on.

The best online word processor, however, may be the one from a tiny company, Zoho, a nimble innovator. Zoho Writer is running close enough to Word to imagine that it and other online word processors will be able to do most everything that Word can do, and more.

Zoho Writer handles the basics and provides many advanced functions without breaking a sweat — like the ability to edit a document when page breaks are displayed. Google Docs can’t. Writer works even when one is offline, thanks to open source technology developed by Google, and used by Zoho in its word processor four months before Google used it.

Zoho Writer also provides some esoteric features, like a choice of footnotes or endnotes, with note numbers in superscript, placed in the text. Google Docs does only footnotes and puts in a pound sign as a placeholder. You may never need to create the most complex mathematical equations, but Zoho Writer makes it easy to do so.

Writer is offered free to individual users and to the first 10 users in a business. (So are 9 of Zoho’s 18 other online services at Zoho.com.) And free means free of advertising, too. “We don’t do advertising at all. We don’t believe in advertising,” says Raju Vegesna, a Zoho marketing executive.

Zoho hopes that word will spread and that larger businesses will sign up, willing to pay $50 a year a user for access to the 10 productivity applications, like Writer, and separate monthly fees for business applications.

Microsoft Office comes in various configurations and prices, and Microsoft doesn’t disclose its lowest price for volume purchases. But Office Professional 2007 is available from retailers for about $400.

Zoho is a division of AdventNet, which provides online software services to corporate I.T. departments and is based in Pleasanton, Calif. AdventNet, privately held, says its I.T. software is profitable but doesn’t claim the same for Zoho, which AdventNet created in 2005.

At Microsoft, Chris Capossela, senior vice president in Microsoft’s Business Division who manages its Office product line, explained to me how the company was preparing for “the future of computing — a combination of the best of software and the best of Internet services.” The next version of Office — being prepared for release in 2010 or after, he said — will have three incarnations, beginning with what Microsoft calls the “rich client” (“rich” refers to features) and installed on the user’s PC, and the mobile version for smartphones. Both of those exist today. The third, and new, form will be the Web-based service.

Mr. Capossela sees the Web version of Office as only a stopgap for users who are away from home or office and, in a pinch, must use a machine that isn’t their own. With Office on the Web, “users can do a little bit of work, between classes, or at the airport,” he said.

Asked whether Microsoft was interested in making the Web version as fully featured as the desktop version, he scoffed at the notion that a “browser experience” could be equivalent to a “rich client,” at least without the graphical help of an add-in like Adobe’s Flash.

Adobe’s Web site offers its own free Flash-equipped online word processor, Buzzword. But to my taste, Flash is visual overkill for word processing. Zoho Writer manages perfectly well without Flash.

Mr. Capossela sounded confident when he described the lead that Microsoft enjoys over online challengers like Zoho. “A lot of our competitors have to spend a huge amount of energy copying features that we already have in the Office suite,” he said. “We don’t have that burden to bear.”

Zoho, however, doesn’t seem burdened at all. It has moved well ahead of Word in some areas, such as offering multiple users the ability to edit the same document simultaneously.

Zoho Writer is not completely polished — I lose double-spacing when exporting to Word, and there’s an irksome extra step required to print a clean copy of a final draft, without the browser’s header. In all, though, these are small irritations, balanced by gaining the ability to edit and share documents online effortlessly, in many different ways.

Microsoft estimates that 500 million copies of Office are running on the world’s one billion Windows machines. Those were the easy wins, before the Web was ready to compete against installed software. The next 500 million copies, if won, will require staying ahead of what rivals can accomplish within the unassuming frame of the Web browser.

Randall Stross is an author based in Silicon Valley and a professor of business at San Jose State University. E-mail: stross@nytimes.com.

America’s New Money

2009-07-10T20:01:00.001-07:00

or – how do say “Weimar” in American?

Google to launch operating system

2009-07-08T06:02:00.001-07:00

[please note my quibble foot-notes below]

By Maggie Shiels
Technology reporter, BBC News, Silicon Valley

Google is developing an operating system (OS) for personal computers, in a direct challenge to market leader Microsoft and its Windows system.

Google Chrome OS will be aimed initially at small, low-cost netbooks, but will eventually be used on PCs as well.

Google said netbooks with Chrome OS could be on sale by the middle of 2010.

"Speed, simplicity and security are the key aspects of Google Chrome OS," the firm said in its official blog.

The operating system, which will run on an open source licence, was a "natural extension" of its Chrome browser, the firm said.

The news comes just months before Microsoft launches the latest version of its operating system, called Windows 7.

'Back to basics'

"We're designing the OS to be fast and lightweight, to start up and get you on to the web in a few seconds," said the blog post written by Sundar Pichai, vice-president of product management, and Google's engineering director Linus Upson.

Both men said that "the operating systems that browsers run on were designed in an era where there was no web" and that this OS was "our attempt to rethink what operating systems should be".

To that end, the search giant said the new OS would go back to basics.

"We are completely redesigning the underlying security architecture of the OS so that users don't have to deal with viruses, malware and security updates.

"It should just work," said Google.

Google already has an operating system for mobile phones called Android which can also be used to run on netbooks. Google Chrome OS will be aimed not just at laptops but also at desktops for those who spend a lot of time on the web.

'Truly competitive'

The announcement could dramatically change the market for operating systems, especially for Microsoft, the biggest player with around 90% share.

"This announcement is huge," said Rob Enderle, industry watcher and president of the Enderle Group.

"This is the first time we have had a truly competitive OS on the market in years. This is potentially disruptive and is the first real attempt by anyone to go after Microsoft.

"Google is coming at this fresh and, because it is based on a set of services that reside on the web, it is the first really post-web* operating system, designed from the ground up, and reconceived for a web world," Mr Enderle told the BBC.

Last year Google launched the Chrome browser, which it said was designed for "people who live on the web - searching for information, checking e-mail, catching up on the news, shopping or just staying in touch with friends".

Stephen Shankland at CNET said the move had widespread implications.

"One is that it shows just how serious Google is about making the web into a foundation not just for static pages but for active applications, notably its own such as Google Docs and G-mail.

"Another, it opens new competition with Microsoft and, potentially, a new reason for anti-trust regulators to pay close attention to Google's moves."**

Some commentators said Google's motivation in all this was pretty clear.

"One of Google's major goals is to take Microsoft out, to systematically destroy their hold on the market," said Mr Enderle.

"Google wants to eliminate Microsoft and it's a unique battle. The strategy is good. The big question is, will it work?"

At the popular blog, TechCrunch, MG Siegler said: "Let's be clear on what this really is. This is Google dropping the mother of all bombs on its rival, Microsoft."

Microsoft releases Windows 7 later this year to replace Windows Vista and Windows XP, which is eight years old.

The Redmond-based company claims that 96% of netbooks run Windows to date.

Out of beta

In a separate announcement Google also revealed that many of its most popular applications had finally moved out of trial, or beta, phase.

Gmail, for example, has worn the beta tag for five years.

"We realise this situation puzzles some people, particularly those who subscribe to the traditional definition of beta software as being not yet ready for prime time," wrote Matthew Glotzbach, the director of product management in the official Google blog.

The decision to ditch the beta tag was taken because the apps had finally reached the "high bar" mark, he wrote.

More than 1.75 million companies use Google apps, according to the firm.

===

*post-web? So there is no more ‘web’?

**Yes, they SHOULD. Because it proves once and for all that there is NO SUCH THING as a ‘monopoly’ in the free market.

Capitalist socialism in the works of Fellini

2009-07-08T05:40:00.001-07:00

J. John Hubbard
Department of Politics, Miskatonic University, Arkham, Mass.

1. The pretextual paradigm of consensus and dialectic construction

“Society is part of the defining characteristic of consciousness,” says Lacan; however, according to Finnis[1] , it is not so much society that is part of the defining characteristic of consciousness, but rather the fatal flaw, and thus the futility, of society. But the subject is contextualised into a that includes culture as a whole. The premise of capitalist socialism states that art serves to reinforce sexism, given that neoconstructivist objectivism is invalid.

However, if dialectic construction holds, we have to choose between the textual paradigm of context and postsemioticist situationism. Sartre’s model of capitalist socialism implies that consensus is created by the collective unconscious.

But la Fournier[2] states that we have to choose between neostructuralist dematerialism and material rationalism. Derrida promotes the use of dialectic construction to modify class.

2. Joyce and the textual paradigm of context

If one examines capitalist socialism, one is faced with a choice: either accept the textual paradigm of context or conclude that government is capable of truth. Thus, capitalist socialism holds that the task of the poet is deconstruction. If pretextual situationism holds, we have to choose between capitalist socialism and cultural demodernism.

“Sexual identity is dead,” says Sontag; however, according to Sargeant[3] , it is not so much sexual identity that is dead, but rather the meaninglessness of sexual identity. But in Reservoir Dogs, Tarantino affirms Batailleist `powerful communication’; in Pulp Fiction, although, he reiterates dialectic construction. The subject is interpolated into a that includes sexuality as a totality.

“Consciousness is intrinsically elitist,” says Foucault. Thus, the primary theme of the works of Tarantino is not discourse, but postdiscourse. Drucker[4] suggests that we have to choose between cultural pretextual theory and the cultural paradigm of expression.

In a sense, the feminine/masculine distinction prevalent in Tarantino’s Four Rooms emerges again in Reservoir Dogs, although in a more self-falsifying sense. The premise of the textual paradigm of context implies that sexual identity has objective value, but only if culture is distinct from consciousness.

It could be said that if capitalist socialism holds, we have to choose between the textual paradigm of context and subcapitalist capitalism. Sontag suggests the use of constructivist neocultural theory to challenge hierarchy.

But dialectic construction states that the significance of the observer is social comment. Bataille promotes the use of the material paradigm of consensus to read and modify society.

However, the main theme of Reicher’s[5] essay on dialectic construction is the common ground between sexual identity and society. An abundance of constructions concerning a mythopoetical paradox exist.

3. Subpatriarchialist discourse and capitalist pretextual theory

In the works of Tarantino, a predominant concept is the distinction between creation and destruction. Thus, the premise of capitalist pretextual theory implies that truth is a legal fiction. A number of dematerialisms concerning the textual paradigm of context may be found.

If one examines capitalist socialism, one is faced with a choice: either reject the textual paradigm of context or conclude that reality may be used to disempower minorities. In a sense, d’Erlette[6] suggests that we have to choose between capitalist pretextual theory and neotextual discourse. If the cultural paradigm of discourse holds, the works of Tarantino are an example of self-sufficient libertarianism.

Thus, Foucault suggests the use of the textual paradigm of context to attack class divisions. Baudrillard’s analysis of capitalist socialism states that the task of the poet is deconstruction, given that the premise of capitalist pretextual theory is valid.

But the subject is contextualised into a that includes language as a reality. In Four Rooms, Tarantino affirms capitalist pretextual theory; in Reservoir Dogs he denies capitalist socialism.

Therefore, Bataille uses the term ‘the subsemantic paradigm of consensus’ to denote the difference between reality and sexual identity. Sontag promotes the use of the textual paradigm of context to read art.

4. Realities of stasis

In the works of Tarantino, a predominant concept is the concept of dialectic truth. Thus, an abundance of theories concerning not narrative as such, but postnarrative exist. The subject is interpolated into a that includes art as a whole.

If one examines the textual paradigm of context, one is faced with a choice: either accept neocapitalist deconstructive theory or conclude that society, surprisingly, has significance. But Marx suggests the use of the textual paradigm of context to deconstruct hierarchy. The subject is contextualised into a that includes truth as a paradox.

It could be said that several theories concerning capitalist socialism may be revealed. The rubicon, and subsequent stasis, of the textual paradigm of context intrinsic to Tarantino’s Pulp Fiction is also evident in Reservoir Dogs.

But the subject is interpolated into a subcultural paradigm of consensus that includes art as a whole. In Jackie Brown, Tarantino examines capitalist socialism; inReservoir Dogs, however, he affirms the textual paradigm of context.

Thus, the characteristic theme of the works of Tarantino is the failure of capitalist class. The feminine/masculine distinction depicted in Tarantino’s Pulp Fiction emerges again in Reservoir Dogs, although in a more mythopoetical sense.

5. Capitalist socialism and Derridaist reading

“Sexuality is part of the stasis of culture,” says Debord. It could be said that the subject is contextualised into a that includes narrativity as a totality. The textual paradigm of context implies that the law is responsible for sexist perceptions of sexual identity, but only if culture is interchangeable with consciousness; if that is not the case, the significance of the writer is significant form.

If one examines modernist discourse, one is faced with a choice: either reject Derridaist reading or conclude that sexuality is capable of intentionality, given that the premise of the textual paradigm of context is invalid. Thus, the primary theme of Abian’s[7] model of subcultural structural theory is a self-supporting whole. Foucault promotes the use of the textual paradigm of context to analyse and read class.

The main theme of the works of Burroughs is the paradigm, and therefore the defining characteristic, of predialectic sexual identity. Therefore, in Queer, Burroughs analyses capitalist socialism; in The Soft Machine, although, he examines capitalist desituationism. Baudrillard suggests the use of the textual paradigm of context to challenge class divisions.

But the subject is interpolated into a that includes art as a reality. The primary theme of d’Erlette’s[8] essay on capitalist socialism is the role of the reader as participant.

Therefore, an abundance of materialisms concerning not, in fact, depatriarchialism, but subdepatriarchialism exist. Dietrich[9] states that we have to choose between Derridaist reading and materialist subsemiotic theory.

In a sense, the subject is contextualised into a that includes culture as a paradox. The characteristic theme of the works of Burroughs is the paradigm, and subsequent futility, of prematerialist language.

Therefore, Derrida promotes the use of capitalist socialism to analyse sexual identity. Debord uses the term ‘the textual paradigm of context’ to denote a mythopoetical reality.

6. Contexts of defining characteristic

If one examines dialectic posttextual theory, one is faced with a choice: either accept capitalist socialism or conclude that reality must come from the masses. Thus, any number of theories concerning constructive construction may be discovered. If capitalist socialism holds, we have to choose between the textual paradigm of context and the subtextual paradigm of expression.

“Society is fundamentally elitist,” says Sartre; however, according to de Selby[10] , it is not so much society that is fundamentally elitist, but rather the collapse, and some would say the economy, of society. It could be said that the subject is interpolated into a that includes truth as a whole. Many theories concerning the collapse, and subsequent fatal flaw, of capitalist culture exist.

The main theme of Pickett’s[11] model of the textual paradigm of context is a self-justifying reality. In a sense, Bataille suggests the use of Derridaist reading to deconstruct the status quo. Baudrillard uses the term ‘capitalist socialism’ to denote the common ground between class and society.

Thus, Buxton[12] suggests that the works of Burroughs are empowering. Lyotard uses the term ’semioticist postconceptual theory’ to denote not theory per se, but subtheory.

In a sense, in Nova Express, Burroughs deconstructs Derridaist reading; in The Last Words of Dutch Schultz he denies capitalist socialism. Sartre uses the term ‘Derridaist reading’ to denote the role of the artist as writer.

Therefore, a number of dematerialisms concerning dialectic theory may be found. If Derridaist reading holds, the works of Burroughs are reminiscent of Spelling.

Thus, Baudrillard promotes the use of the textual paradigm of context to read and modify class. Buxton[13] states that we have to choose between capitalist socialism and Debordist situation.

7. Burroughs and Derridaist reading

“Language is impossible,” says Sontag. In a sense, an abundance of narratives concerning the bridge between class and culture exist. If patriarchial theory holds, we have to choose between Derridaist reading and neotextual capitalist theory.

But Bataille uses the term ‘capitalist socialism’ to denote a precultural totality. In The Soft Machine, Burroughs examines the textual paradigm of context; in Port of Saints, although, he reiterates constructivist socialism.

Therefore, the characteristic theme of the works of Burroughs is the economy, and eventually the paradigm, of subsemantic society. Scuglia[14] implies that we have to choose between the textual paradigm of context and textual situationism.

But if Marxist capitalism holds, the works of Gibson are modernistic. Sargeant[15] suggests that we have to choose between Derridaist reading and the structural paradigm of discourse.

8. Capitalist socialism and subdialectic theory

If one examines the textual paradigm of context, one is faced with a choice: either reject capitalist socialism or conclude that the purpose of the participant is social comment, but only if reality is equal to language. Therefore, the subject is contextualised into a constructivist paradigm of consensus that includes art as a reality. If capitalist socialism holds, we have to choose between subdialectic theory and postdialectic nihilism.

But in Neuromancer, Gibson deconstructs capitalist narrative; in Count Zero, however, he examines capitalist socialism. Baudrillard suggests the use of subcultural textual theory to challenge class divisions.

In a sense, the subject is interpolated into a that includes reality as a paradox. Finnis[16] implies that we have to choose between capitalist socialism and Debordist image.

9. Gibson and the textual paradigm of context

In the works of Gibson, a predominant concept is the distinction between without and within. But Marx promotes the use of capitalist socialism to read consciousness. Foucault uses the term ‘the textual paradigm of context’ to denote the role of the artist as observer.

However, Bataille suggests the use of textual capitalism to attack hierarchy. Capitalist socialism states that narrative comes from communication.

In a sense, the main theme of McElwaine’s[17] essay on the textual paradigm of discourse is the paradigm of subdialectic class. If subdialectic theory holds, we have to choose between capitalist socialism and Lyotardist narrative.

Thus, Debord promotes the use of subdialectic theory to modify and deconstruct sexual identity. The subject is contextualised into a that includes truth as a reality.

10. Contexts of futility

“Society is part of the dialectic of consciousness,” says Sontag. But any number of sublimations concerning cultural pretextual theory may be revealed. Lacan suggests the use of subdialectic theory to attack class divisions.

It could be said that Dietrich[18] holds that we have to choose between dialectic narrative and the neopatriarchial paradigm of consensus. Lyotard promotes the use of the textual paradigm of context to modify class.

Therefore, several theories concerning the role of the reader as participant exist. The subject is interpolated into a that includes narrativity as a paradox.

1. Finnis, P. S. P. (1995) Neopatriarchial Desublimations: Capitalist socialism, rationalism and dialectic libertarianism. University of California Press

2. la Fournier, S. ed. (1981) Capitalist socialism and the textual paradigm of context. Schlangekraft

3. Sargeant, D. U. H. (1990) The Paradigm of Discourse: The textual paradigm of context in the works of Tarantino. Loompanics

4. Drucker, S. C. ed. (1975) The textual paradigm of context and capitalist socialism. Schlangekraft

5. Reicher, E. N. C. (1994) Precultural Materialisms: Capitalist socialism and the textual paradigm of context. O’Reilly & Associates

6. d’Erlette, L. S. ed. (1973) The textual paradigm of context and capitalist socialism. Yale University Press

7. Abian, Z. (1981) The Broken Sea: The textual paradigm of context in the works of Burroughs. University of Oregon Press

8. d’Erlette, B. K. S. ed. (1995) Capitalist socialism and the textual paradigm of context. Cambridge University Press

9. Dietrich, J. (1983) Capitalist Theories: Predialectic Marxism, capitalist socialism and rationalism. Panic Button Books

10. de Selby, E. N. V. ed. (1998) Capitalist socialism in the works of Lynch. University of Illinois Press

11. Pickett, S. (1986) Consensuses of Economy: The textual paradigm of context and capitalist socialism. Panic Button Books

12. Buxton, B. Y. ed. (1973) Rationalism, neotextual construction and capitalist socialism. O’Reilly & Associates

13. Buxton, L. (1988) The Stasis of Narrative: Capitalist socialism and the textual paradigm of context. Oxford University Press

14. Scuglia, A. K. I. ed. (1993) Capitalist socialism in the works of Gibson. Panic Button Books

15. Sargeant, B. (1974) The Absurdity of Class: The textual paradigm of context and capitalist socialism. Yale University Press

16. Finnis, A. S. W. ed. (1985) The neocapitalist paradigm of discourse, rationalism and capitalist socialism. Schlangekraft

17. McElwaine, S. (1972) Postdialectic Deconstructions: Capitalist socialism in the works of Cage. O’Reilly & Associates

18. Dietrich, K. I. ed. (1990) Capitalist socialism in the works of Smith. Loompanics

A Short History of Government Bailouts

2009-07-07T05:22:00.001-07:00

I would think that ProPublica can hardly be accused of being a nest of crazy economists on the Vienna Express to nowhere, so I thought their little history of government bailouts would be of some interest.

History of U.S. Gov't Bailouts

Updated: April 15, 2009 12:02 pm EDT

With the flurry of recent government bailouts, we decided to try to put them in perspective. The circles below represent the size of U.S. government bailout, calculated in 2008 dollars. They are also in chronological order. Our chart focuses on U.S. government bailouts of U.S. corporations (and one city). We have not included instances where the U.S. government aided other nations.

Check out how the Treasury did in the end after initial government outlays. Also, check out our ultimate bailout guide. We're tracking every taxpayer dollar, every recipient and every program in the current financial crisis. All searchable – and translated into English.

Want to receive an e-mail alert when we publish public data and documents on ProPublica? Sign up here.

2008 - Bear Stearns - $30 billion
Click bubble for more info

Industry/Corporation
Year
What Happened
Cost in 2008 U.S. Dollars

●
Penn Central Railroad
1970
In May 1970, Penn Central Railroad, then on the verge of bankruptcy, appealed to the Federal Reserve for aid on the grounds that it provided crucial national defense transportation services. The Nixon administration and the Federal Reserve supported providing financial assistance to Penn Central, but Congress refused to adopt the measure. Penn Central declared bankruptcy on June 21, 1970, which freed the corporation from its commercial paper obligations. To counteract the devastating ripple effects to the money market, the Federal Reserve Board told commercial banks it would provide the reserves needed to allow them to meet the credit needs of their customers. (What happened after the bailout?)
$3.2 billion

●
Lockheed
1971
In August 1971, Congress passed the Emergency Loan Guarantee Act, which could provide funds to any major business enterprise in crisis. Lockheed was the first recipient. Its failure would have meant significant job loss in California, a loss to the GNP and an impact on national defense. (What happened after the bailout?)
$1.4 billion

●
Franklin National Bank
1974
In the first five months of 1974 the bank lost $63.6 million. The Federal Reserve stepped in with a loan of $1.75 billion. (What happened after the bailout?)
$7.8 billion

●
New York City
1975
During the 1970s, New York City became over-extended and entered a period of financial crisis. In 1975 President Ford signed the New York City Seasonal Financing Act, which released $2.3 billion in loans to the city. (What happened after the bailout?)
$9.4 billion

●
Chrysler
1980
In 1979 Chrysler suffered a loss of $1.1 billion. That year the corporation requested aid from the government. In 1980 the Chrysler Loan Guarantee Act was passed, which provided $1.5 billion in loans to rescue Chrysler from insolvency. In addition, the government's aid was to be matched by U.S. and foreign banks. (What happened after the bailout?)
$4.0 billion

●
Continental Illinois National Bank and Trust Company
1984
Then the nation's eighth largest bank, Continental Illinois had suffered significant losses after purchasing $1 billion in energy loans from the failed Penn Square Bank of Oklahoma. The FDIC and Federal Reserve devised a plan to rescue the bank that included replacing the bank's top executives. (What happened after the bailout?)
$9.5 billion

●
Savings & Loan
1989
After the widespread failure of savings and loan institutions, President George H. W. Bush signed and Congress enacted the Financial Institutions Reform Recovery and Enforcement Act in 1989. (What happened after the bailout?)
$293.3 billion

●
Airline Industry
2001
The terrorist attacks of September 11 crippled an already financially troubled industry. To bail out the airlines, President Bush signed into law the Air Transportation Safety and Stabilization Act, which compensated airlines for the mandatory grounding of aircraft after the attacks. The act released $5 billion in compensation and an additional $10 billion in loan guarantees or other federal credit instruments. (What happened after the bailout?)
$18.6 billion

●
Bear Stearns
2008
JP Morgan Chase and the federal government bailed out Bear Stearns when the financial giant neared collapse. JP Morgan purchased Bear Stearns for $236 million; the Federal Reserve provided a $30 billion credit line to ensure the sale could move forward.
$30 billion

●
Fannie Mae / Freddie Mac
2008
On Sep. 7, 2008, Fannie and Freddie were essentially nationalized: placed under the conservatorship of the Federal Housing Finance Agency. Under the terms of the rescue, the Treasury has invested billions to cover the companies' losses. Initially, Treasury Secretary Hank Paulson put a ceiling of $100 billion for investments in each company. In February, Tim Geithner raised it to $200 billion. The money was authorized by the Housing and Economic Recovery Act of 2008.
$400 billion

●
American International Group (A.I.G.)
2008
On four separate occasions, the government has offered aid to AIG to keep it from collapsing, rising from an initial $85 billion credit line from the Federal Reserve to a combined $180 billion effort between the Treasury ($70 billion) and Fed ($110 billion). ($40 billion of the Treasury’s commitment is also included in the TARP total.)
$180 billion

●
Auto Industry
2008
In late September 2008, Congress approved a more than $630 billion spending bill, which included a measure for $25 billion in loans to the auto industry. These low-interest loans are intended to aid the industry in its push to build more fuel-efficient, environmentally-friendly vehicles. The Detroit 3 -- General Motors, Ford and Chrysler -- will be the primary beneficiaries.
$25 billion

●
Troubled Asset Relief Program
2008
In October 2008, Congress passed the Emergency Economic Stabilization Act, which authorized the Treasury Department to spend $700 billion to combat the financial crisis. Treasury has been doling out the money via an alphabet soup of different programs. Here’s our running tally of companies getting TARP funds.
$700 billion

●
Citigroup
2008
Citigroup received a $25 billion investment through the TARP in October and another $20 billion in November. (That $45 billion is also included in the TARP total.) Additional aid has come in the form of government guarantees to limit losses from a $301 billion pool of toxic assets. In addition to the Treasury's $5 billion commitment, the FDIC has committed $10 billion and the Federal Reserve up to about $220 billion.
$280 billion

●
Bank of America
2009
Bank of America has received $45 billion through the TARP, which includes $10 billion originally meant for Merrill Lynch. (That $45 billion is also included in the TARP total.) In addition, the government has made guarantees to limit losses from a $118 billion pool of troubled assets. In addition to the Treasury's $7.5 billion commitment, the FDIC has committed $2.5 billion and the Federal Reserve up to $87.2 billion.
$142.2 billion

====

Now for the real fun, check out their summary of ‘results":

What Happens After a U.S. Gov't Bailout?

September 25, 2008 4:56 p.m. EDT

With the flurry of recent bailouts, we decided to look beyond initial government outlays to see how the Treasury did in the end. The summaries that follow leave final judgment to you, in part because it's difficult to nail down exact profit or loss. Moreover, no one can say what might have happened without government intervention. Our chart focuses on U.S. government bailouts of U.S. corporations. We have not included United States government aiding other nations. Figures reflect 2008 constant dollars.

To read a history of U.S. government bailouts, click here or on the year of each bailout.

Want to receive an e-mail alert when we publish public data and documents on ProPublica? Sign up here.

Industry/Corporation
Start of Bailout
After the Bailout, What Happened?

Penn Central Railroad
1970
In 1971, the government provided $676.3 million in loan guarantees (What's this?A statutory commitment by the federal government to pay part or all of a loan's principal and interest to a lender or the holder of a security in case the borrower defaults. The Federal Credit Reform Act of 1990 requires that the cost of guaranteed loans be included in the computation of budget authority and outlays. The congressional budget resolution includes loan guarantee totals. (Parliamentary Outreach Program, U.S. House of Representatives)). In 1976, the federal government consolidated the still struggling Penn Central with five other railroad companies that were also failing to form Consolidated Rail, or Conrail. The government spent $19.7 billion, including roughly $7.7 billion for the initial investment, to keep Conrail operating. By 1981, Conrail began to earn a profit. The government sold Conrail in 1987 for $3.1 billion. In addition to the sale price, the Treasury received a $579 million dividend from Conrail.

Lockheed
1971
By 1977, Lockheed had paid off its loans, and its dependency on the federal loan guarantees came to an end. The government earned about $112.22 million in loan fees.

Franklin National Bank
1974
As the story behind Franklin National's failure unfolded, evidence emerged of corruption and shady business practices among the bank's executives -- several were eventually convicted. With the need for further intervention apparent, the FDIC stepped in as receiver that same year and sold Franklin National's104 branches and other assets to European American Bank. By 1981 the FDIC had sold Franklin assets worth about $5.1 billion. The agency was still owed another $185.3 million in interest.

New York City
1975
Until 1986, the government continued using loan guarantees and direct loans to support the fiscally-troubled city. All the loans, loan premiums and fees have since been repaid.

Chrysler
1980
By 1983, seven years earlier than the scheduled deadline, Chrysler had paid back its loan with the aid of the guarantees from the U.S. government. The corporation bought back the 14.4 million stock warrants (What's this?)A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This "warrant" is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are usually issued as a "sweetener" bundled with another class of security to enhance the marketability of the latter. Warrants are like call options, but with much longer time spans -- sometimes years. (Washington Post) given to the government in exchange for the loan guarantee. Because Chrysler's finances had improved and its stock had bounced back -- it reported $1.7 billion in profits for the second quarter of 1984 -- the government netted a profit of more than $660 million from its bailout investment.

Continental Illinois National Bank and Trust Company
1984
It took the FDIC seven years to completely divest itself of Continental Illinois -- the bailout plan had given the government 80 percent ownership over the bank -- through the gradual sale of its share holdings. By 1991, Continental Illinois had been returned to the private sector, but the FDIC had suffered a $1.8 billion loss. Three years later BankAmerica Corp. acquired the bank.

Savings & Loan
1989
The Financial Institutions Reform Recovery and Enforcement Act authorized $293.8 billion dollars to finance the folding of numerous failed S&Ls. The final tab for the bailout was roughly $220.32 billion. Of that total, taxpayers were responsible for about $178.56 billion; the private sector covered the rest.

Airline Industry
2001
The Chrysler and airline bailout plans had a commonality: stock warrants. A provision inserted into the ATSS Act, which allowed the Treasury to purchase stock at below-market prices from any airline receiving a loan guarantee, allowed the Treasury to earn money. Reports varied on the total net profit, ranging from $141.7 million to $327 million. The loan guarantee program suffered one loss of about $23.2 million when ATA Airlines filed for bankruptcy protection.

Would you pledge your soul as loan collateral?

2009-07-05T19:03:00.001-07:00

Fri Jul 3, 11:53 AM

RIGA (Reuters) - Ready to give your soul for a loan in these difficult economic times? In Latvia, where the crisis has raged more than in the rest of the European Union, you can.

Such a deal is being offered by the Kontora loan company, whose public face is Viktor Mirosiichenko, 34.

Clients have to sign a contract, with the words "Agreement" in bold letters at the top. The client agrees to the collateral, "that is, my immortal soul."

Mirosiichenko said his company would not employ debt collectors to get its money back if people refused to repay, and promised no physical violence. Signatories only have to give their first name and do not show any documents.

"If they don't give it back, what can you do? They won't have a soul, that's all," he told Reuters in a basement office, with one desk, a computer and three chairs.

Wearing sunglasses, a black suit and a white shirt with the words "Kontora" (office) emblazoned on it, he reaches into his pocket and lays out a sheaf of notes on the table to show that the business is serious and not a joke.

Latvia has been the EU nation worst hit by economic crisis.

Unemployment is soaring and banks have sharply reduced their lending, meaning that small companies offering easy loans in small amounts have become more popular.

Mirosiichenko said his company was basically trusting people to repay the small amounts they borrowed, which has so far been up to 250 lats ($500) for between 1 and 90 days at a hefty interest rate.

He said about 200 people had taken out loans over the two months the business was in operation.

(Reporting by Patrick Lannin; Editing by Steve Addison)

Source

The really funny story is, however, that close to 90% of people on a yahoo poll said they would NOT sign this contract:

Close to 90% of these people actually believe they have a soul? Or are at least some of them simply kind-hearted folks who feel it is unfair to agree to such a contract?

And – what is the legal situation for an atheist here?

What they won’t tell you about the Iranian Election on CNN

2009-07-04T13:11:00.001-07:00

The War Nerd comes from the same stable as Taibbi – the now defunct and on-line only Exile(d), which once was probably the most scurrile and frustrating weekly paper ever published anywhere. The War Nerd was one of those columns you simply had to read – even if you didn’t want to, if only because its creator takes a deliciously dark-humour approach to all things military and revolutionary.

Enjoy.

War Nerd: Iran’s Cedar Show, A.K.A. Don’t Get Excited, the Protestors Are Just Letting Off Some Steam

By Gary Brecher

It took me a while to figure out why everybody was nagging me to do a column on the Iranian elections. Everybody seemed to think it was all mysterious and world-shaking. Finally I realized, you’re all het up because every news service in the US and England has been selling these riots like a new Star Wars episode, and people are just trying to figure out what’s going on and what it all means.

Well, I can answer that in one note: nothing much is going on, just letting off steam; and what little is happening isn’t mysterious at all. Basically, this is simple steam release, something the Mullahs have to allow now and then when the kids, and there are a lot of young adults in Iran, need to remind everybody they’re tired of being bossed around. There’s a huge, huge difference between that kind of “revolution” and the kind that has a real foundation in tribal differences or religion or city/country, the real fault lines. What’s going on in Iran now is a lot like the big fizzle in Lebanon after Hariri’s assassination in 2005. So if y’all will permit me to digress, let me take you back to the Cedar Revolution that supposedly “gripped” Lebanon. All that really happened was that some of the few Christian/Sunni elite Lebanese kids who hadn’t emigrated yet got so pissed off at the Syrians for just blowing Hariri away in broad daylight that they came out and waved the Lebanese flag–the one with the Cedar tree on it. Well, you’d have thought the Berlin Wall had fallen all over again. The same Anglo news networks that are declaring an outbreak of democracy in Iran now were screaming into microphones all over Lebanon, just so touched by these rich Christian/”Phoenician” Lebanese kids announcing that no durn Hezbollah Iranian-puppet thugs were gonna repress their craving for freedom…and discos, and wearing about a quart of perfume, and all the other accessories that go with what they call a Western orientation in the Middle East.

These are the kind of people Anglo news crews glom onto like horny refrigerator magnets: young, well-dressed, a lot of them speak English, and they talk about nice familiar stuff like “freedom” and “democracy.” They make great TV. But they can’t win a war. You win wars with poor people, numbers and toughness and discipline. Hezbollah proved it had the numbers by producing counter-demos with a million people cheering the Syrians and asking Allah to zap the West and Democracy and that Cedar Tree. If democracy means “we got more people with us than you do,” that should’ve proved Hezbollah beat the Cedar All-Stars, but that story never came out much. Hezbollah’s demonstrators weren’t the kind of people the BBC or CNN really felt comfortable around. It’s hard for a Western news crew to relax with a huge crowd of agitated lower-class Shia. Their way of making a point is by getting bloody, showing off wounds and cuts and shaving nicks, whatever they’ve got. Nobody at CNN wants that to be the future; nobody wants to go to commercial with a bunch of shrieking Shia mothers like hysterical Hefty Bags proudly saying they hope their 14 or so sons become martyrs, and the sooner the better. No, what you want for an upbeat TV story is a bunch of taller, skinnier, paler, English-speaking rich kids.

Which brings us to Iran. Iranians aren’t Arab, but they are Shia, and excitable. Keep that in mind. Different countries explode at different temperatures. There are places where yelling is a declaration of war. If a Norwegian raises his voice, Hell is about to break loose. If a Canadian yells at you, get a restraining order. But Iranians will scream at each other over how to cook an egg, and be all chummy and laughing the next minute. They used to keep that hysterical side in control with opium–the whole country was on the pipe until the sixties–but it’s harder to get now, so they just keep yelling.

So when Iran has a national election, it’s going to be loud. People are going to yell in the streets, people are going to shoot guns off, sometimes in the general direction of the opposition, and anybody who gets hit is going to tweet his bloodstains, youtube his bulletholes, and send it all over the world.

And if the people doing the demonstrating are mostly that same Cedar-Rev demographic: rich young city kids–then duh, they’re also the ones who are going to be web-savvy tweet freaks. In fact, Iran has probably the biggest dissident blog network in the world. I don’t read Farsi–I wish I did–but I read this pretty decent book, I Am Iran, about the anti-mullah blog scene there. Check it out if you want a better idea of who the opposition is, the people flooding the streets in Tehran. They’re sick of it, which is easy to understand; living in the Islamic Republic of Iran must be a lot like going to a Catholic school where you never, ever graduate, where kissing is a felony and not wearing the uniform is a crime against God. Hell yes, they’re sick of it, and they have every right to be.

But, to get coldblooded about it, so what? They’re not going to overthrow the state. I don’t usually like that word, “the state,” but I’m using it here because it works better than “Ahmedinajad.” He’s the official bad guy here, the classic bigmouth runt who wants Israel turned into a gravel pit and America turned into a colony of Venezuela. Hell, he’s all kinds of obnoxious, down to the ratty beard and beady eyes and the way he dresses like a hungover Soviet janitor.

But he’s not the Islamic Republic of Iran.

He’s only the president. The way the Iranian government is put together, the Prez is more like a noisemaker, official annoyer-of-the-Anglos, than a decider. Way, way above him is the “Supreme Leader,” sort of an Ayatollah version of the Pope, Khomeini’s official successors. Right now the Supreme Leader is Ali Khamenei. He doesn’t talk to the press, or make official trips to hug Chavez. He just sits there in his big black turban and says “No” every time somebody asks for a little relaxation of all this pious crap. He’s seen’em come and go, these reformer types; he crushed Rafsanjani, Khatami, anybody who even suggested that the way Khomeini laid it down in 1979 might not be good enough for all eternity.

See, that’s the pattern I’m talking about: the people who matter in Iran won’t talk to foreign news crews, and the people who will, the ones in the streets right now…well, they may be brave, noble people, but they don’t have a chance in Hell.

That’s because the IRI government is a bunch of rival militias, intelligence agencies, and religious committees. There’s even a legislature, although nobody takes that seriously. If you remember the way the Iranian side was organized in the Iran/Iraq war, you might have a better idea how the people at the top like things to run: always with rival forces competing for power. That’s because Khomeini was thinking coups in 1979. So alongside the regular Army he set up the Revolutionary Guards, hardcore jihadis loyal to the Supreme Leader, not the Army Brass. To make sure the Revolutionary Guards weren’t vulnerable to a sudden decapitation by the army or anyone else, their cadres were placed with every agency, like Islamist commissars, and they set up militias in every city in Iran.

You get the same thing in any new militarized state, even tiny Hellholes like Duvalier’s Haiti, with the Ton=ton Macoutes balancing the army, bypassing the official channels so they could kill at Duvalier’s command.

Then there’s the Basij, a million or so amateur thugs who do what the Revolutionary guards tell them to do. When you see cop types firing into demonstrating crowds in footage from Tehran, it’s usually the Basij. The hottest hate of all right now is between the city kids, sick to death of being whacked around by Shia nuns, and the Basij, a bunch of redneck bigots with guns and clubs. That’s not to take away the amazing suicide courage they showed when they fought the Iraqis. I mean, the Pasdaran elite used the poor Basij suckers as human landmine detonators: “Here, go walk across that field for us please. You can’t lose; either Allah welcomes you to Paradise or you live and get to do it again!”.

Lots of people are brave, after all. Most young male humans are brave, when they’ve got a gang leading them on and backing them up. The Basij are brave and so are the kids marching in the Tehran streets. Like a lot of people in the same tribe who hate each other, they’ve probably got more in common than they wanna think about right now, starting with that whole martyrdom thing the Shias get off on. The Basij died like flies in the minefields, and the demonstrators are on twitter right now showing off their bloody wounds. Iranian to the core, both of them.

But they don’t feel a lot of common ground right now. There’s what you might call a culture clash between these pious thug dudes and the city people, the marchers and tweeters and bloggers. If you want an idea how snotty this kind of Iranian feels about the other kind, read that woman’s comic book (whoops, you’re supposed to call them “graphic novels”) Persepolis. There’s her and her high-school friends slipping Iron Maiden LPs under their chadors.

Kind of a sixties thing, kind of a hippie thing, if Kent State was happening ten times a day. But then Iranians are tough, brave people; you couldn’t scare them with just one Kent State. The problem is, not that many people were actually willing to die for the hippies. They all grew up and went into real estate.

That kind of divide doesn’t cut deep enough to make a war. Even those Lebanese Cedar Revolution camera hogs had a real ethnic/religious grudge, but from what I’ve been reading about Iranian election demographics, the divide between rioters and loyalists is pretty damn blurry. Here’s a link to the best of the articles I’ve found on the way the elections break down in class, ethnic, regional, and age terms. I warn you though, it’s written by a professor, and they train those bastards to write as bad as possible. It’s worth checking out, though, if you can slap yourself awake.

https://netfiles.uiuc.edu/esfahani/www/IndexFiles/Esfahani-Resume.pdf

He takes 45 pages to say that Ahmedinajad won in 2005 because he was the ‘populist’ candidate, meaning he promised to bring the oil money home to ordinary people, instead of opening it up for a scary free-market scenario. It wasn’t an ethnic divide; it can’t be, in Iran, because the ethnic Persians are way bigger and stronger than the other groups (Kurds, Azeri, Arab) put together. Kurds barely even vote–their rate is 20% lower than Persians’, just like “minorities” here. The people who back Ahmedinajad are mostly Persian, and so are the protestors who want him gone. You can’t even call it a city/country divide, which I’ve been tempted to do, because according to this Iranian professor Ahmedinajad got a big vote in the cities as well as the villages. The only dividing lines he can find are pretty shallow ones, like hippie/straight back in the day: Ahmedinajad’s supporters have larger family sizes, and a cluster of other things that go along with conservative attitudes no matter where you are. And that’s about it; he says you can’t even claim that education levels matter much, because–and I love this bit:
The most visible impact of higher education is a sizable increase in the share of invalid ballots, implying that the educated are more likely to display their disenchantment with the system through invalid ballots than through non-participation.

That’s the key here, if you ask me. This isn’t a revolution, it’s a lot bummed-out, frustrated people wriing “Fuck You Goddamn Mullahs!” on their ballots in their best overeducated handwriting. They’ve got good reason to be pissed off–imagine being stuck in a giant Catholic school where girls have to wear black ghost sheets every day when you’re hitting 30–but it’s not the kind of fault-line that makes revolutions. What we’re seeing only looks big or historical for two reasons: one, it’s fuckin’ Persians, damn it, and they live large. They fight like this over whether rose-water ice cream is what Allah eats in Paradise or tastes like grandma’s cologne spilled on freezer scrapings (my vote, cuz I’ve tried the filthy stuff). Persians are like that amp in Spinal Tap: they go to eleven. And on the Persian scale, this is a two or a three, fun for a while but no biggie.

The other reason this seems big is that a lot of people on our side of the world have been waiting a long, long time to see Ahmedinajad take a big fall. They’re hyperventilating just thinking about what a great movie this is, with the people rising up to send the loud-talking shrimp back to midget wrestling. They’re so desperate they’re putting cellphone videos on the nightly news, desperate for some sign that Iran’s having its democracy rapture.

It ain’t gonna happen. Hell, for all I know Ahmedinajad actually did win the election. I admit it’s kinda weird how they counted almost 40 million paper ballots in a few hours, but who knows? Maybe they hire a better class of precinct worker there, math teachers or something.

Even if he fell, the IRI, the real system, would barely wobble. The President is a mouthpiece; the real power is purposely divided up by a half dozen creepy Islamic gangs that never talk to the BBC or CNN. All of them are seriously armed; they’re mixed up in everything from religious seminars to land deals; they’re sleazy but smart, a bunch of mean old survivors.

So the yelling will die down, the daredevils will get laid, if you can get laid in an Islamic Republic, by showing off their riot scars, and da regime, if you want to call it that, will let the pressure ease, release a little steam. If things get serious, and I doubt they will, somebody will take the big fall for Allah and the team. It might be Ahmedinajad, even. But there are about a million guys like him waiting for their chance to step up. The IRI will last a long time, whether the BBC or CNN face that fact or not.

It’s good discipline for a war nerd, facing depressing fact like that, reminding yourself that these people, whoever you’re looking at, don’t want what you want, don’t think like you do. Me, I thought the Shah was pretty cool, with those F-14s and trying to revive the great days of the real Persians, before Islam dulled them down. (And by the way, the Pagan Persia/Islamic Iran thing is still a sore point: on the government soap operas, the bad guys always have old-Persian names like Darius and the heroes are always something totally Arab/Quranic like Mohammed. Then there’s the Nowruz traditions, jumping over a crypto-Zoroastrian fire, also very cool and very frowned-on by the Islamic hicks.)

The point is, the Iranians disagreed with me: they kicked the Shah’s ass out, set him adrift with his cancer and picked Khomeini, who to us looks like Dracula’s mean uncle. To them, that freakin’ nosferatu was comfort food for the soul. I can’t see it; if there was a poster of that old demon on my bedroom wall I’d sleep with a garlic necklace and a shotgun. But they got their own world. Some of them may be pissed off with the mullahs, but what if some of them like it? I don’t know, CNN doesn’t know–and for every dissident blogger or tweeter they interview, there might be ten silent-majority types wanting those damn hippies in the streets of Tehran gassed.

Imagine the other way around; imagine Iranian Islamic tv covering, say, a classic culture-war US election like Nixon in 1972. You’d see Persians in expensive turbans blanket-covering every demonstration, every love-in (well, maybe not those so much), every draft-card burning…and then the US government announces that Nixon just stomped McGovern in the biggest landslide ever. Who’d believe it? That is, unless you knew that for every loud camera-hog hippie you saw on tv there were about a hundred fat nobodies wishing Kent State was a daily event.

Until those Ahmedinajad silent-majority hicks start tweeting, we’ll never have a clue what they think. And like Nixon’s people, or Forrest’s dragoons, they’re not really the Twitter type.

The U.S. National Deficit – 1979 to 2009

2009-07-04T12:48:00.001-07:00

Source

Bury your gold?

2009-06-28T16:37:00.000-07:00

Ok, so here I am listening to LeftJabRadio.com on Sirius 137 - approximately 7:35pm on Sunday, June 28 - and you won't believe what one of the commentators (one of either Mike Walsh and David Goodfriend) claimed to have been told by somebody high-up in the Obama administration:

Apparently, some unnamed billionaires are so afraid of what is going to happen in the next few months, they have been burrynig gold ignots in their back yard. Their fear - and that of the unnamed source in the Obama administration: by the end of the year, it's economic amargeddon for the US of A.

No, it wasn't Glen Beck saying this. Those two are your run-of-the-mill social-democrat Obama admirers.

Oh, and even LeftJab Radio is running ads for Goldline...

Great.

A Former IMF Functionary on the American Gangster Economy

2009-06-25T19:28:00.000-07:00

Now, Simon Johnson is not as inclined to strong language as Mark Taibbi, but... same message.

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Mark Taibbi on the American Gangster Ecoromy

2009-06-25T19:11:00.000-07:00

This deliciously scathig article by Mark Taibbi on the unbelievable shenanigans of Goldman-Sachs, Al Gore, and pretty much the entire financial 'regulatory' system of the United States should be read while sitting down: it's simply too much.

Of course, Taibbi misses out on some of the economic subtleties of what transpired during the events he describes - and thereby deprives himself of some real gems - but he has the politics down pat.

[And considering that Mark cut his journalistic teeth at the irreplaceable The Exile in Moscow during some of Russia's wilder days, he probably has good reasons for using the term "gangster economy" to describe the current day U.S.A.]

In case any of you thinks Mark is hallucinating, I'll put up a little gem from the Atlantic Monthly as well. Same economic blind-spots, same political acuity.

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The Shining – as You never remembered it…

2009-06-16T07:12:00.001-07:00

If You thought Ecclesiastes is the Best Book of the Bible…

2009-06-16T07:03:00.001-07:00

Here’s proof you are right:

The Best Book in the Bible

In the SAB, I identify the Bible's verses that contain good advice about how we should live our lives, whatever our religious views might be. For example, I think it's a good idea to try, at least as much as possible, to treat others kindly. So I include Leviticus 19:18 ("Love thy neighbor as thyself.") in the "Good Stuff". Of course, not all the verses that I've marked good are as good as this verse, but I marked them good because they seemed (at least somewhat) good to me.

So take a look at the SAB's good stuff to see if you agree, at least most of the time, that the verses that are marked good are, in fact, good. If so, then the following analysis should be reasonable for you, as well.

I'll begin with a plot of the number of good things in each book of the Bible.

There are two far outliers in the data: Ecclesiastes and Proverbs. Proverbs has the most good stuff, but it is also a much bigger book. Here is how it looks when size is taken into account. (The graph on the left is a histogram; the graph on the right is a box plot.)

So Ecclesiastes has nearly twice as much good stuff (per 100 verses) than any other book in the Bible.

But what about all the bad stuff in the Bible? Shouldn't we try to find a way to rate the goodness of a book by weighing both the book's good and bad stuff?

The simplest solution, I think, is to count up the good things in each book and subtract the bad. The result is the net good. (I totaled cruelty, injustice, intolerance, family values, women, and homosexuality to get the number of bad things, since the verses marked with these categories are all morally objectionable.)

When I did that, I found that there are only two good books in the Bible: Ecclesiastes (of course) and Proverbs. There are three others that have a zero net goodness. The other 61 books are all more bad than good (with a negative net goodness).

Here are the statistics for the two good and three not bad books in the Bible. (I'll deal with the bad books elsewhere.)

	Good Verses	Bad Verses	net good (good - bad)	net good / 100 verses
Ecclesiastes	37	1	36	16.22
Proverbs	54	47	7	0.77
James	9	9	0	0
Jonah	0	0	0	0
3 John	1	1	0	0

And here's a plot of the net good / 100 verses.

Check out the rest on that site – it’s brilliant – and don’t miss the fact the authors did the same to the Koran and the Book of Mormon

Krugman is actually stupid

2009-06-15T12:42:00.001-07:00

I don’t think Krugman is stupid because he disagrees with Austrian Economics – I think he’s stupid because he so obviously is, as revealed in this particular gem:

[w]hy doesn't the investment boom—which presumably requires a transfer of workers in the opposite direction—also generate mass unemployment?

Yup – that’s what he asks. Not rhetorically, but in all seriousness. You don’t believe it? Check it out here.

Krugman really went to pot.

Being gay in Russia

2009-06-14T10:07:00.001-07:00

seems so unfortunate – a bit like being vegetarian in Argentina; fine, if your tastes run that way, but you are certainly missing out on the best of the local cuisine!

Eric Kraus

Russia’s Limousine Liberals

2009-06-14T00:32:00.001-07:00

by Anatol Lieven
06.10.2009

EMAIL ARTICLE | PRINTER FRIENDLY

Over the last several days, two pieces attacking the realist approach to Russia were published in prominent media outlets in the United States and Russia. One, co-authored by Lev Gudkov of the Levada Center, Igor Klyamkin, vice president of the Liberal Mission Foundation, Georgy Satarov, president of the Russian NGO the Indem Foundation and Lilia Shevtsova, a senior associate at the Carnegie Moscow Center was featured on the editorial page of the Washington Post. The other, by Andrei Piontkovsky, a visiting fellow at the Hudson Institute, was released in the Moscow Times.

I read these pieces concerning the moves to improve relations between America and Russia with a profound feeling of depression. This is not just because there is something bizarre and twisted about pro-Western Russian liberals attacking the recommendations of the Hart-Hagel Commission or statesmen such as Henry Kissinger and James Baker. It is also because their criticism serves as a mouthpiece for the agendas of the most bitterly anti-Russian and geopolitically aggressive liberal interventionists and neocons who help maintain tensions between Russia and the West—and actually between the United States and the rest of the world.

And these tensions are extremely damaging to any hopes of the long-term liberalization and Westernization of Russia which these liberals want to further. Do Piontkovsky, Shevtsova and the others seriously think that the U.S.-Russian rivalry in the Caucasus, and the war over South Ossetia which resulted, helped the cause of liberalism in Russia? Do they ever actually talk to any ordinary Russians, one wonders? Or do their duties briefing Americans simply leave them no time for this?

My depression is also because Russia does in fact desperately need a strong liberal movement which can influence the state in a positive direction. Thus figures like Igor Yurgens, a leading businessman and adviser to President Medvedev, are playing an extremely valuable role in resisting moves to further authoritarianism, centralization and nationalization in response to the economic crisis. They could do much better if they had bigger support within the population at large.

Tragically however, many Russian liberals in the 1990s—through the policies they supported and the arrogant contempt they showed towards the mass of their fellow Russians—made liberals unelectable for a generation or more across most of Russia; and to judge by these and other writings of liberals like the ones under discussion, they have learnt absolutely nothing from this experience. They think that they form some kind of opposition to the present Russian establishment. In fact, they are such an asset to Putin in terms of boosting public hostility to Russian liberalism that if they hadn’t already existed, Putin might have been tempted to invent them.

Two aspects of their approach are especially noteworthy. The first is the profoundly illiberal—even McCarthyite—way in which Piontkovsky tries to disqualify views with which he disagrees by suggesting that they are motivated purely by personal financial gain, rather than conviction. Where, one wonders, would this leave all those Russian liberals, and U.S. think tanks, which took money from Mikhail Khodorkovsky and other Russian oligarchs in the past? Where would it leave those U.S. officials linked to leading U.S. private financial companies whose shares benefited so magnificently from the plundering of Russia in the 1990s? Where, indeed, does it leave Russians—like two of the writers under discussion—who draw their salaries from U.S. think tanks? Actually, I do believe that most are motivated by sincere conviction—but all the same, they would do well to remember the old adage about people who live in glass houses.

The other is the intellectual sleight of hand by which Shevtsova, Gudkov and the others suggest—without arguing or substantiating the suggestion—that the desire of ordinary Russians for greater democracy and the rule of law equates both with hostility to the present Russian administrationtout court, and to acquiescence in U.S. foreign-policy goals in Georgia and elsewhere. According to every opinion poll I have seen, it is entirely true that most Russians would like to see more of certain elements of democracy in Russia, including, as the authors mention, the rule of law and a freer media.

But, according to the same polls, this certainly does not add up to approval of “democracy” as it was practiced under the Yeltsin administration, and praised by some of the authors. Georgy Satarov was, in fact, a top official in Yeltin’s political machine with direct responsibility for some of the undemocratic practices of that administration. What is also absolutely certain according to the same polls is that whatever their feelings about Russian domestic policies, the overwhelming majority of Russians support the basic foreign-policy line of the present Russian administration and oppose that of the United States vis a vis Russia. This is not to say that every American policy decision has been wrongheaded and Russia remains justified in all of its positions, but rather that people who blindly back a U.S. democracy-promotion line are doing an injustice to the very liberalization they seek.

They are also very bad for the interests of America. The military overstretch produced by Iraq and Afghanistan has now been compounded by the colossal burden on U.S. resources created by the present economic recession. In these circumstances, as the Obama administration has recognized, the United States needs firstly to identify its truly important international interests and prioritize them; to reduce the hostility of other states to America wherever this can be done without surrendering important U.S. interests and values; and to enlist the help of other states, including Russia, in dealing with truly important issues like Iran’s nuclear program and the long-term future of Afghanistan.

Do these Russian authors really think that U.S. interests and values are served by giving lectures on democracy that only infuriate ordinary Russians? By making further commitments to a regime such as that of Mikhail Saakashvili in Georgia? By pressing upon Ukraine a NATO membership which most Ukrainians oppose? The truth of the matter is that like Ahmed Chalabi and other “democracy promoters” who have sought U.S. aid, these writers care neither for American nor for Russian interests, but only to enlist U.S. help in trying to bring themselves and the groups they represent to power and influence in their countries—and do not even know enough about their countries to see that appealing for U.S. help in this way only reduces whatever popularity they still have.

By this kind of approach, foreign liberal informants like the Russians who authored these editorials have contributed to a deep flaw in Western journalism, reflecting in turn a tragic flaw in humanity itself: namely an extreme difficulty in empathizing with those whose background, culture, experience and interests differ from your own.

For of course, for better or worse, other peoples are just as nationalist as Americans themselves. They may well wish for democracy—but not always or necessarily if it comes with unconstrained capitalism and the assumption that to be a democrat means sacrificing your national interests to those of the United States. In the case of Russia, these American assumptions in the 1990s helped lead to the reaction of Vladimir Putin. And Putin’s Russia isn’t the worst we could see by a very long chalk. If the present Russian system falls, as the writers under discussion so ardently desire, we can be very sure of one thing: It would not be Russian liberals like them who would rise from the resulting ruins.

In none of the statements by the Hart-Hagel Commission or the likes of Henry Kissinger, is anyone an apologist for potential Russian aggression. Instead, they argue that compromise, when the West can afford it to get cooperation from Russia in the areas we need it, is the ultimate goal of sensible and realistic U.S. policy—not all or nothing strategies that will never achieve anything, and which these Russian liberals in any case never spell out in detail.

Understanding what narrative a specific nationalism is based on is key to creating better outcomes for U.S. policies in a number of countries of the world, including Iran and Pakistan. It is equally crucial in establishing better relations not just with the present Russian administration, but much more importantly with the Russian people; and thereby over time helping Russians get the freer media and more open elections they desire.

Part of the reason why both Russian liberals and many Western analysts tend to get Russia so badly wrong is that they instinctively compare that country with former Communist states, Soviet satellites in Eastern Europe and the Baltic nations. There, mass movements were generated in support of economic reform and democratization processes which, however flawed, spared them from the dreadful experience of Russia and Ukraine in the 1990s.

This comparison is dead wrong, and wrong for a reason that goes to the heart of the Russian liberals’ failure to win mass support in Russia. In Eastern Europe, successful democratization, the adoption of successful economic reform, and the eventual achievement of economic growth proceeded in tandem because they were backed up by very powerful mass nationalist drives in these countries that were directed first and foremost towards taking these countries out of the orbit of Moscow, and into their “rightful” historical place as members of the West.

The other aspect of Eastern Europe that cannot be replicated for Russia – or indeed, anywhere else in the world - is the pull, and the discipline, provided to the East Europeans and Baltics by the genuine offer of membership in the EU and NATO. The need to conform to the EU accession process in turn greatly limited opportunities for the kind of outright kleptocracy seen in Russia.

The failure to date to generate mass support for Westernizing reform in Russia has been a key factor in the extremely hesitant pace of such reforms compared to the central European countries and the Baltic states. This is due simply to the obvious fact that among Russians, anti-Russian nationalism cannot be a force of reform; and that, indeed, the whole drive to escape from the Soviet past has a completely different meaning.

If nationalism is to play a part in Russian development, then it will inevitably be along very different lines, and linked in some form to the restoration of Russia’s position as a great power (not of course a superpower) in the world. A key problem for Russia, however, is that given the geopolitical ambitions of both Russia and Western powers, such a course of development inevitably brings with it a strong measure of rivalry with the West.

That pro-Western Russian liberals like Lilia Shevtsova have the greatest difficulty confronting or even recognizing this dilemma stems from the tragic nature of their situation. They genuinely believe not only that their program is in Russia’s national interest, but that reform in Russia requires the closest possible relations with the West. This necessarily means that Russia has to sacrifice a range of lesser interests for the sake of their higher, indeed all-encompassing goal of “integration into the Western community” (a virtual leitmotif of her 2005 book Putin’s Russia).

But integration into the Western community, whether it be NATO or the EU, is not on offer at least for the foreseeable future. From the point of view therefore not only of Russian nationalists, but of ordinary nonideological Russians, there just are not enough benefits on offer in return for the concessions that Shevtsova and her allies are willing to make to the West in international affairs: like agreement to NATO membership for Ukraine and Georgia, reincorporation of Abkhazia and South Ossetia into Georgia, acquiescence in a U.S. missile shield in central Europe and so on. And indeed, even for a non-Russian, there is something a bit nauseating about Shevtsova’s determination in her published writings to agree with the United States and condemn her own country on every single issue on which they have disagreed.

This goes not only for issues where America was in the right, for example over past Russian interference in Ukraine’s presidential election campaign; but for issues where by far the greater part of the world supported Russia’s position, as over Bush’s abrogation of the anti-Ballistic Missile Treaty in 2002. The Putin administration’s efforts to maintain the treaty were, however, attributed by Shevtsova in her book to Soviet-style “complexes” and “neuroses.”

Nausea aside, the point once again is that such sentiments on the part of these sorts of liberals contribute to making them unelectable in Russia. And this of course is not the result of some form of unique Russian chauvinism or hatred of the West. Any American political grouping which openly and repeatedly identified with foreign interests over those of the United States would not, I think, be very likely to do well in an American election.

But then, Shevtsova and her allies do not really give a damn what ordinary Russians think or feel, and certainly take no interest in minor issues such as their incomes or living standards. The radical decline in the real value of state pensions in the 1990s, accompanied by long arrears in payments and the destruction of savings through devaluation, condemned many elderly Russians to hunger, despair and a premature death. Every reliable opinion poll on Putin’s popularity in his first years gave as one of the chief reasons the fact that under his rule pensions were paid on time, and their value had risen. The same was true of state wages.

By ignoring these issues, Shevtsova is able to write in her book that “For the intelligentsia, people who lived in large cities, and the politicized section of society, 2000 was much harder than 1999.” Statements of this kind consign the mass of the Russian population—including the elderly and the state-employed workers of the big cities—to non-existence. They implicitly state that the only sections of society whose opinions and interests should be of concern to the government are educated, young and dynamic urbanites. This was the approach of brash elite globalizers everywhere. They should not be surprised however if populations disagree, sometimes violently.

Gary Kasparov, treated by much of the Western media as the political face of Russian liberalism, has a very different approach. It has been to plan for Russian economic collapse, and with this in mind, to forge an alliance with savagely chauvinist neo-fascist groups, which will provide the tough street fighters who will exploit mass economic discontent. Shevtsova and her colleagues should take a close look at this repulsive but insightful strategy and ask themselves whether they really understand the country, and the world, that they are living in.

Anatol Lieven, a senior editor at The National Interest, is a professor in the War Studies Department of King’s College London and a senior research fellow at the New America Foundation.

Laughing at yourself is good, but

2009-06-13T23:19:00.001-07:00

I've always found it much more satisfying to laugh at other people.

Brian Cantin
(who ever he may be)

Wendy McElroy on Abortion

2009-06-13T22:59:00.001-07:00

I have been struggling with the question of abortion and libertarianism for some time now, and while my instincts tell me that abortion would probably be at least tolerated in a libertarian society, I am not sure whether it is compatible with the strict logic of libertarian thought.

I’m therefore quite pleased to have found Wendy McElroy’s thoughts on the issue, and while they are probably not the last word on it, I think they make a good case that libertarians have no choice but to support the right to abort foetuses, regardless of their status as human beings:

9 implications of anti-abortion arguments

Abortion is still hotly debated within libertarianism. This has always seemed odd to me since I believe libertarianism is based on self-ownership and that a pregnant woman has an unquestionable right to her own body, including the right to expel the fetus or have any other body part amputated. This right has been subjected to critical scrutiny by anti-abortionists in the movement who claim the fetus is a human being with full individual rights that are violated in an abortion. Basically, anti-abortionists pit the woman's rights against the alleged rights of the fetus, and give the latter priority.

The argument is a weak one and open to attack from several directions. But my purpose here is a bit different. I want to explore some of the implications of the anti-abortion position because they are usually ignored even though they are vicious in nature.

Implication #1: If the fetus is accorded individual rights, then the aborting woman and anyone who assists her are murders and must be subject to whatever penalty society metes out for that crime, up to and including capital punishment. The punishment should be applied to past abortions as there is no statute of limitation on murder. If anti-abortionists shy away from this conclusion, then they do not really consider abortion to be murder. Note: it does not matter that the woman didn't view the fetus as a child; if her state of mind exonerates her, then it follows that a racist should be exonerated for killing blacks.

Implication #2: if a woman cannot 'kill' her fetus because it is a separate human being, then she also cannot injure it. If she does, she should be prosecuted in the same manner as if she assaulted an innocent bystander. If she ingests harmful substances, then the law should view the act as though she had strapped down a child and force-fed a toxin to it. Thus, the pregnant woman is vulnerable to criminal prosecution based on her diet, her lifestyle choices, etc. If anti-abortionists do not follow their own logic this far, it is not because the logic doesn't lead here. It is because the conclusion makes them uncomfortable.

Implication #3: if a woman wishes to abort or to take actions that will harm the fetus -- e.g. smoking crack -- then she should be imprisoned or otherwise forcibly restrained from inflicting death and/or injury on the innocent "child." Constant monitoring would be required -- presumably by the state; the woman would be a slave to her fetus. Anti-abortionists must explain how -- short of totalitarianism -- they intend to protect fetuses in peril.

Implication #4: anti-abortionists are effectively defining pro-choice libertarians out of the movement. If anti-abortionists are correct, then pro-choice libertarians are morally sanctioning and/or legally encouraging the deliberate mass murder of defenseless children. If there is any line that cannot be crossed without losing all claim to the word "libertarian", then surely the advocacy of mass murder is that line.

Implication #5: anti-abortionists are destroying the concept of natural righs itself which claims that every human being properly has jurisdiction over his or her own body. It is only because each human being is a self-owner that is is improper to initiate force against another. But if the fetus possesses the right to live off the pregnant woman's body functions -- to share the food she eats, the blood her heart pumps -- then this is tantamount to saying that one human being can properly own the body functions of another. It is tantamount to saying one human being can properly enslave another.

Implication #6: anti-abortionists are destroying the idea of "a natural harmony of rights" between human beings. If rights are based on being human, then everyone has the same ones to the same degree. The self-ownership of one person in no way violates the self-ownership of another; my freedom of religion in no way violates yours. Consider if human nature were different, however. If I had a biological need to eat human flesh in order to live, then the structure of universal rights would make no sense. One man's life would require another man's death. This would be Hobbes' "war of all against all" and to demand the non-initiation of force would be to condemn mankind to extinciton. Similarly the anti-abortionists posit a fetus whose right to self-ownership is in direct opposition to the self-ownership of the pregnant woman. They posit a biological disharmony of interests. Although such disharmonies can occur in nature -- e.g.. Siamese twins -- these occurences are extremely rare and not commonplace, like pregnancy. If they were not rare, then the idea of natural rights or "harmony of interest" would have no application to human nature.

Implication #7: anti-abotionists are claiming, "The fetus is an individual with rights" and, so, the onus of proof logically rests on the one who asserts a claim rather than upon those who see no evidence for the assertion.
Implication #8: if a pregnancy threatens a woman's life, anti-abortionists must legally require the woman to remain pregnant even if it means her death. Otherwise they do not take their own argument seriously. If the fetus is a separate individual with full rights, then the ill woman has no more right to kill it to save her life than a woman who needs a liver has the right to kill another person to secure a 'donor' organ. You cannot kill an innocent bystander just because your health requires it.

Implication #9: pregnancies that result from rape must also be brought to term. Anti-abortionists who make exceptions for e.g. a 12-year-old who becomes after being raped are saying that it is alright to kill an innocent baby under the 'proper' circumstances... which denies their entire argument, of course.

Why Star Wars is even worse than You thought it Was

2009-06-13T21:48:00.001-07:00

I just came across an idiosyncratic and very good critique of the Star Wars series. I could never stand Star Wars very much, at least not since I stopped being a teenager – but I never spent much effort analysing why. The obvious absurdity of lightsabers and superluminal flight always seemed enough for me, but it wasn’t until today that I realized how outright malevolent the Star Wars mythology really is. Read it here.

Funny. And Disturbing. But... Funny.

2009-06-11T12:38:00.000-07:00

Why Atheism?

2009-05-28T05:04:00.001-07:00

There really shouldn’t be a need to write a post with the title Why Atheism? The absurdity of theistic beliefs has been exposed for centuries, again and again, on strictly logical grounds only, but recent advancements in science have really put the final nail into whatever pseudo-empirical rejoinder the theists had to offer. However, as Atheism still remains the minority opinion globally, it is from time to time necessary to repeat the obvious.

For those who think the issue calls for some humour there’s always the Internet Infidels’ classic “Hundreds of Proofs of God’s Existence”, made famous in Dawkin’s “The God Delusion”. Some of my personal favourites:

ARGUMENT FROM THE BIBLE
(1) [arbitrary passage from OT]
(2) [arbitrary passage from NT]
(3) Therefore, God exists.

ARGUMENT FROM NUMBERS
(1) Billions of people believe in God.
(2) They can't all be wrong, can they?
(3) Therefore, God exists.

ARGUMENT FROM FALLIBILITY
(1) Human reasoning is inherently flawed.
(2) Therefore, there is no reasonable way to challenge a proposition.
(3) I propose that God exists.
(4) Therefore, God exists.

ARGUMENT FROM ARGUMENTATION
(1) God exists.
(2) [Atheist's counterargument]
(3) Yes he does.
(4) [Atheist's counterargument]
(5) Yes he does!
(6) [Atheist's counterargument]
(7) YES HE DOES!!!
(8) [Atheist gives up and goes home.]
(9) Therefore, God exists.

But, for the more seriously inclined, this discussion should refresh the memory.

"The State of the Intellectual Property Debate at LRC"

2009-05-26T19:38:00.001-07:00

Not sure this is a proper way of doing it, but I’m going to steal the debate and move it here.

"The State of the Intellectual Property Debate at LRC"

25 Comments - Show Original Post Collapse comments

Stewart said...

I think there is an important distinction between what Tucker is speaking against, and what Rockwell is speaking against.
In the former case, Tucker thinks that the "property" aspect of intellectual property is no such thing. That is, that publicly-available information cannot be owned. In the latter case, Rockwell is speaking against the idea that government should use force to compel private organizations to give away private information.
These two positions are entirely reconcilable. If the manufacturers decided, ultimately, to make their repair codes etc. public, then that information could be copied by anyone. But if they don't make it public, the government has no business forcing them to do so.

May 22, 2009 12:11 PM

Robert Wenzel said...

@ Stewart
Just when does something become "publicly available" in your world? The owner of the book Tucker is discussing is clearly not interested in the terms Tucker is offering. Yet somehow, in your world, Tucker has the right to usurp this owners rights and not those of the owner of manufacturing code?

May 22, 2009 12:28 PM

savecapitalism said...

Is there a title/release-date planned for the coming book? The intellectual property debate is raging here in Sweden, so it would be very interesting to read more on the topic ....

May 22, 2009 12:36 PM

Robert Wenzel said...

I should have more details on a release date, etc. in about a month.

May 22, 2009 1:04 PM

Stewart said...

@Robert, I don't think the distinction between what is public and what is private is actually that important here. I shouldn't have placed so much emphasis on those words in my earlier post.
What's important for Rockwell's post is whether there is government coercion involved in forcing the dissemination of information. For Tucker's series of posts, the critical factor is whether government coercion is involved in preventing the dissemination of information.
If a car manufacturer uses cryptography or secrecy to prevent others from accessing the car's electronic data, Rockwell's position is that the government should not force them to give the decryption keys away. Tucker's position is that, once those keys are known to the public (whether through reverse engineering, espionage, or the owner's manual), the car manufacturer has no basis for claiming ownership of that information. That also applies to the data which is later acquired using those decryption keys, such as internal programming data for the onboard computer.
So these are two different arguments. Whether Rockwell and Tucker agree on them is unclear from the posts you linked to. I suspect that they do, given their respective roles at the LvMI, but it's not necessary that they do in order to reconcile the two positions, because they aren't mutually exclusive.

May 22, 2009 2:07 PM

Robert Wenzel said...

@ Stewart
Let me make it simple. I write a one page analysis of the economy, I give it to you under the condition that you do not show it to anyone else, are you saying I have no righht to contract with you this way, that I must encrypt it?

May 22, 2009 2:42 PM

Stewart said...

If I sign that contract, and if I do show it to someone, then I've obviously violated our contract. To that extent, I think you're correct.
In order to extend that logic to the contemporary system of copyrights, however, you have to believe that everyone is implicitly agreeing to contracts between themselves and the creators of every piece of original material that they encounter.
Suppose that I do violate our contract, and I distribute your work to my colleagues. Even if we agree that I hold some moral culpability for that transgression, it's not at all clear that my colleagues have done anything wrong by accepting the paper from me. And if they continue to distribute it on their own, it's hard to see how they're violating any contract with you, since no such contract existed.
Now, you may see that as being akin to accepting and reselling stolen goods. That presupposes that the information itself is your property, however. The contract alone cannot establish that.

May 22, 2009 3:26 PM

James Rothfeld said...

It is actually possible - conceptually - to have something resembling current copyright in a libertarian social order: ISP companies, copy machine manufacturers, and others, can make a condition in their terms of use that copyright is to be respected, and that if anybody uses their technology to violate copyright, then they are liable to pay damages to the ISP or manufacturer. You could further make a condition of purchase that you shall only sell the copy machine if you agree to have the purchaser agree to these terms as well, and so forth.
Even better, manufacturers of computers can make this a condition for the use of their product, and if you violate that provision, you will be taken to court under common contract law for violating the terms of your contract.
There is nothing in libertarian theory that makes such conditional ownership transfer illegitimate.
Of course, this leaves the possibilities of rival companies offering their products without such contracts... and let free competition take care of the argument.

May 23, 2009 2:49 PM

Robert Wenzel said...

@ James Rothfeld
I absolutely agree.
@James Rothfeld and @Stewart
I do note that both of you are not specifically addressing the Tucker view, but if you check his writings,it is clear in his world that private contracts for intellectual creations would not be legitimate.
In his world intellectually created works would not come with ownership rights, even if the creator will only release them under those terms! They are free for all to use, and some how not violate property rights.

May 23, 2009 3:09 PM

James Rothfeld said...

The reason I do not address Tucker's argument is because it is probably one of the lousiest articles on the issue I have read in a long time. :)
And I've no hesitation to rant and rail against the patent laws and argue till the cows come home that patent law as it exists now creates a) plain old rent-seeking, and b) creates waste by forcing people to invent around the patent law.
Basic question about tucker's argument: does the noodle company KNOW how the noodle is designed? Because once it KNOWS it, there is no legitimate way to stop it from using this knowledge.
So, while you the economist have a right to bind the person you gave your paper to a promise not to publish it, should this person LOSE the paper, and I find it, I can, of course, publish it - provided I am not in the process violating any contractual obligations I may have entered to otherwise (such as using a copy machine I bought under condition of NOT violating copyright)....

May 23, 2009 4:43 PM

Stewart said...

@Robert, if Tucker really does believe that individuals can't enter into voluntary contracts regarding their own behavior, then I agree with you entirely. That idea is ridiculous on its face.
@James, your question about the noodles is essentially Tucker's point. It's only the temporary monopoly that the government grants patent-holders which prevents the company from making whatever kinds of noodles it likes.
And your last paragraph captures my earlier point nicely: A contact can only (voluntarily) constrain the behavior of the parties who sign it. For everyone else, there is no constraint, and therefore no sense of intellectual ownership.

May 23, 2009 6:51 PM

Robert Wenzel said...

Tucker on rights to your own intellectual creations:
If you have an idea, it is yours. You can do with it what you want. If you share it (sing, speak, broadcast, let others see the products of your ideas), others then have copies of it. They are entitled to do with their copies of the idea precisely what you can do with your idea. They can use it how they want provided they don't prevent others from doing with it what they want. This is a simple application of the non-aggression principle that governs a free society. Whether it is fashion, language, know how, or whatever, people are free to copy...What can you copy? Anything and everything. This is not "taking" anything from anyone. The original idea owner still has his. Other people now have their copies, and are free to improve it...You can even re-republish it under your own name, though that would amount to the socially repudiated vice of plagiarism (vice, not crime).
http://tinyurl.com/qlayfr

May 23, 2009 7:46 PM

James Rothfeld said...

I don't see an immediate contradiction between Tucker's position in the last article you quote, and mine - maybe only because it does NOT discuss the issue of what happens when I have a contract with the person I share my idea with not to copy it.
I think that's the point about the book issue: if it is my book, and i gave it to you - the publisher - with the condition you not publish it without my consent, or that of my heirs, then you are bound to honor that commitment.
no?

May 23, 2009 8:26 PM

Stewart said...

Robert, I think you may not fully understand Jeff Tucker's position. Nothing in that excerpt suggests that a person can't enter into a contract regarding intellectual creations. A constraint based on contracts is entirely different from a constraint based on a natural, default right to intellectual property.
Suppose that I possess the only known copy of a never-published play by Shakespeare. I don't have any intellectual property rights over this play, but I nonetheless have complete control over its distribution, since I hold the only copy. As a condition of giving you a copy, suppose that I make you sign a contract saying that you will never redistribute it.
I don't think that Jeff Tucker would have any problem with that contract. The excerpt you posted earlier is a description of what you, me, or anyone else can do with a Shakespearean play qua a Shakespearean play. Of course he isn't talking about the works of a long-dead author. But for Tucker, there is no difference (property-wise, anyway) between the intellectual works of Shakespeare, and the intellectual works of you or me. For most people, the informational content of the play cannot be owned due to its age, but for Tucker that content cannot be owned period.If you throw a contract into the scenario, it is no different. In my example above, you may very well be contractually prevented from redistributing the play, but you would not be under that constraint by default, or because of the nature of the play itself. With true intellectual property, the constraint is there even without your agreement, and it's that implicit constraint which Tucker argues against.

May 23, 2009 9:25 PM

Stewart said...

Oh drat.
I need to qualify what I just wrote. Upon a closer reading, Jeff does seem to contradict my interpretation:
"They can use it how they want provided they don't prevent others from doing with it what they want."If he means what you are implying he means, then I think you're right to criticize him. That statement is just silly.

May 23, 2009 9:28 PM

Robert Wenzel said...

@JamesRothfeld and @Stewart
One problem with Tucker is that he is not a very precise writer. When he says you can copy anything, it is of course open to the clause, unless the original creator by contract prohibits such.
Tucker in the passage I quote simply does not address this point clearly yeah or nay. However, I am quite sure that a full reading of Tucker's views on the topic would clearly show my interpretation of his meaning in the quote that he does not believe that you can have a contract based on the work of intellectual property. That's why he says you can copy anything.
I quote Tucker from another piece:
"But some may object that protecting IP is no different from protecting regular property. That is not so. Real property is scarce. The subjects of IP are not scarce, as Stephan Kinsella explains. Images, ideas, sounds, arrangements of letters on a page: these can be reproduced infinitely. For that reason, they can't be considered to be owned."
http://tinyurl.com/23toxg

May 24, 2009 6:36 AM

Robert Wenzel said...

@JamesRothfeld and @Stewart
Here's Tucker explaining Kinsella:
"He made a strongly theoretical argument that ideas are not scarce, do not require rationing, are not diminished by their dissemination, and so cannot really be called property. All IP is unjust, he wrote. It is inconsistent with libertarian ethics and contrary to a free market. He favors the complete repeal of all intellectual-property laws."
http://tinyurl.com/9px9gd
Tucker again is not completely clear, but it is implied, if something can't be owned, you really can't have a contract about it.
I really believe that Tucker would say you can't contract with regard to a book. May I suggest you email him and ask. I would do it myself, but he has advised me that he has blocked my emails, after I published, here at EPJ, examples of the vulgar language he sent to me in emails!

May 24, 2009 6:56 AM

Erick said...

@Robert,
Who gets the copyright/patent when two people invent something independently?
Are thoughts alienable?

May 25, 2009 6:09 AM

Robert Wenzel said...

@Erick
One of the problems with current IP thought is that it is generally viewed within a statist framework and there is further aggregation of IP protection than is appropriate.
Are thoughts alienable?Absolutely.
What is a consultant, if not a seller of thoughts?
Who gets the copyright/patent when two people invent something independently?This question implies the aggregation trap which I am going to address in detail in my book.
But, the short answer is they both do. If they both invent something independent and are not stealing from each other, then why shouldn't they both have the right to their creations?

May 25, 2009 6:50 AM

James Rothfeld said...

Erick,
we are not talking about a centrally administered state monopolisitic IP system, but about a common law system. If two people invent something at the same time, both have the right to use it, and to contract it out. Also, if somebody else figures out how do duplicate the invention simply by knowing about what it does, then that is fine, too.
The idea as such is not protectable.
Historic example: Mozart famously attended the performance of a piece of music that the author and owner had protected in so far that any copies of the music were not allowed to be duplicated, and that all performers were contractually obliged not to transcribe it. However, there was no contract that prohibited members of the audience to memorize it and then recreate it indepedently.
http://www.classical.net/music/comp.lst/works/allegri/miserere.php
So that's what Mozart did.
Similar rules can be applied to cinemas: it may not be possible to prohibit the recording of a movie in principle, but it is possible for movie theaters to prohibit its patrons to record it. If anybody does, he would be guilty of violating the property rights of the cinema owner (analog to crying 'fire' in a theater not being illegal, but a property right violation).

May 25, 2009 7:24 AM

earth that was said...

I think Lawrence Lessig has staked out a "middle of the road" position on Copyright somewhere to the right of the "abolish all property in IP" position of some libertarians, and the corporatist statist machine that we have seen under DMCA, WIPO and the US government's, essentially protectionist, use of "free trade treaties" to extend it's IP regime around the world.
Lessig's "copyleft" argument strikes me as the genuine "free market" / libertarian one, even though Lessig himself is something of a liberal (a.k.a. social democrat).
More to the point, Lessig's defense of copyright shows that the founders of the American republic knew something about economics too. The following is a brief intro to Lessig's thinking, see here.

May 25, 2009 7:41 AM

Robert Wenzel said...

@Earth
I am taking things in a completely different direction. See my most recent post:
http://tinyurl.com/h7u6cs

May 25, 2009 9:59 AM

Erick said...

Interesting discussion!
Robert, this makes a lot of sense to me:
If they both invent something independent and are not stealing from each other, then why shouldn't they both have the right to their creations?I am curious to see how you develop the idea in your forthcoming book!
What is a consultant, if not a seller of thoughts?How does a consultant sell thoughts?
The way I see it, a consultant sells his promise to appear in a certain place, at a certain time, in order to perform certain actions.
I can see how my finger is alienable. I can cut it off and give it to you. I no longer have that finger. I cannot see how I can alienate my thoughts: I can always continue thinking whatever I want.
Nor is there any guarantee that the person purchasing the person's time will gain any specific thinking process. At best there is a guarantee that he will feel certain feelings like "satisfaction".
The closet thing that might come to this are SAT prep classes that guarantee a specific rise in test scores. But how do "your thinking will improve" and "you will have my thoughts" differ?
@James,
there was no contract that prohibited members of the audience to memorize it and then recreate it indepedentlySuppose there was, would it be valid?
Can I sign a contract alienating rights to my brain?

May 25, 2009 11:00 PM

James Rothfeld said...

Yes, it would have been valid, since it would be a contract regarding action, or restraint from action. "Alienation" has nothing to do with this. Free market copyright regulates not 'ideas' as such, but actions of individuals. Last time I checked, nobody ever argued that we cannot contractually agree to limit our actions - whether it is loud singing in the middle of the night, or looking after somebody kids. Not to copy or reproduce something is merely refraining from a specific type of action.
If I gave you a million dollar under the condition that you never again sing in public, and you accepted this - would that be a valid contract?
If I paid you a million dollar to not reveal a secret about me - would that not be a valid contract?
How is this different from a contract that obliges you not to copy or reproduce something?
At the same time, if two people invent something simultaneously, they are NOT bound contractually to any kind of action.
What would, of course, be possible, is that you happen to work at a private university which stipulates in its contract with you that any invention you make must first be cleared with registry xyz for competing inventions. However, only people who directly or indirectly agreed to this system of clearance would be bound to it.
Again, none of this has anything to do with deep discussions about whether ideas or not are properly 'property' - it's about human action, which any libertarian will agree can be regulated bindingly by contractual agreement.

May 26, 2009 7:20 AM

Erick said...

What do you think about Rothbard's thoughts on the matter:
Suppose that Smith makes the following agreement with the Jones Corporation: Smith, for the rest of his life, will obey all orders, under whatever conditions, that the Jones Corporation wishes to lay down. Now, in libertarian theory there is nothing to prevent Smith from making this agreement, and from serving the Jones Corporation and from obeying the latter’s orders indefinitely. The problem comes when, at some later date, Smith changes his mind and decides to leave. Shall he be held to his former voluntary promise? Our contention—and one that is fortunately upheld under present law—is that Smith’s promise was not a valid (i.e., not an enforceable) contract. There is no transfer of title in Smith’s agreement, because Smith’s control over his own body and will are inalienable. Since that control cannot be alienated, the agreement was not a valid contract, and therefore should not be enforceable. Smith’s agreement was a mere promise, which it might be held he is morally obligated to keep, but which should not be legally obligatoryShould we move the conversation to the new post?

May 26, 2009 7:41 PM

How to contract Swine Flu – if You absolutely must

2009-05-25T11:24:00.001-07:00

Tata – Good Bye

2009-05-24T20:53:00.001-07:00

A Boss looking through his Mail Box was astonished to see a mail from an Employee who was supposed to be busy working at Client side on a critical project. It had the subject - "TaTa - Bye Bye". With the worst premonition he opened the mail and read the content with trembling hands:-

Dear Sir,
It is with great regret and sorrow that I'm writing you, but I'm leaving the job. The offer was too lucrative and attractive for me to turn down. I had to abscond because I wanted to avoid a scene with the HR and you. I am sorry but I had no choice.
The project is working fine. There are only 108 issues pending, out of which only 38% issues are High Priority. Hence I am sure there is no need to worry about. The next Phase of major enhancements I have been working upon, have been completed halfway. I am sure the new person who would replace me would not understand what all I had done so far. Hence, for his and your convenience, I have taken care to remove all the work that I had been doing this far for nearly 3 months now. I am sure you will appreciate my insight and "big heart".
I am of course retaining the Originals that I had retrieved for the purpose of Passport verification with me, considering it as a parting gift from you. Of course, I will not pay the bond amount that I owe the company (since I Am breaking the bond). But I will consider this as a parting gift from our Dear company. I moving out of town since the new company is situated in another City.
Also, I have changed my contact number. So you will not be able to get in touch with me, to congratulate me. But I know your blessings are always with me. Last but not the least. I also have the Rs 12000 entrusted to me by our company's cultural events group, for the upcoming movie event. I am sure you would have wanted me to keep it with myself as an added bonus from our company. I respect you very much, hence your wish is my command.
Don't worry sir. I am 2 years experienced now, learning so much from your company. So I will surely use this knowledge to write better programs for the new company. Someday I'm sure we will meet sometime in the future. If you wish, I will surely be glad to give my employee reference for you to apply for a job in the new company which I am joining.
Your faithful employee,
S. W. Engineer

At the bottom of the page were the letters "PS". Hands still trembling, the Boss read:

PS: Dearest Boss, none of the above is true. I'm am still busy working at client side. I just wanted to remind you that there are worse things in life than my "Request to reconsider my Salary Appraisal" attached with this mail. Please approve it and call when it is safe for me to come to our Office to discuss this. My respect and Best Regards to you!

North Korean Traffic Cop tells Mini Driver to take a Hike

2009-05-24T12:33:00.001-07:00

I’ve been doing a lot of watching of documentaries on North Korea these days, and while I would certainly recommend this and this, I thought the video below provides some more light-hearted view of that place:

I really do, however, recommend to watch this one as well, though it may haunt you.

Maybe they like us better now…

2009-05-22T04:52:00.001-07:00

Top Ten Myths of Entrepreneurship

2009-05-21T17:19:00.001-07:00

This is an excellent summary of why going out on your own is generally not a very good idea, unless you know exactly what you are doing. For the majority of people, staying employed is probably the best shot.

Top Ten Myths of Entrepreneurship

This is a guest post by Scott Shane as a follow up to his entrepreneurship test. He is the A. Malachi Mixon Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of seven books, the latest of which is The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By. Many entrepreneurs believe a bunch of myths about entrepreneurship, so here are ten of the most common and the realities that bust them:

It takes a lot of money to finance a new business. Not true. The typical start-up only requires about $25,000 to get going. The successful entrepreneurs who don’t believe the myth design their businesses to work with little cash. They borrow instead of paying for things. They rent instead of buy. And they turn fixed costs into variable costs by, say, paying people commissions instead of salaries.
Venture capitalists are a good place to go for start-up money. Not unless you start a computer or biotech company. Computer hardware and software, semiconductors, communication, and biotechnology account for 81 percent of all venture capital dollars, and seventy-two percent of the companies that got VC money over the past fifteen or so years. VCs only fund about 3,000 companies per year and only about one quarter of those companies are in the seed or start-up stage. In fact, the odds that a start-up company will get VC money are about one in 4,000. That’s worse than the odds that you will die from a fall in the shower.
Most business angels are rich. If rich means being an accredited investor –a person with a net worth of more than $1 million or an annual income of $200,000 per year if single and $300,000 if married – then the answer is “no.” Almost three quarters of the people who provide capital to fund the start-ups of other people who are not friends, neighbors, co-workers, or family don’t meet SEC accreditation requirements. In fact, thirty-two percent have a household income of $40,000 per year or less and seventeen percent have a negative net worth.
Start-ups can’t be financed with debt. Actually, debt is more common than equity. According to the Federal Reserve’s Survey of Small Business Finances, fifty-three percent of the financing of companies that are two years old or younger comes from debt and only forty-seven percent comes from equity. So a lot of entrepreneurs out there are using debt rather than equity to fund their companies.
Banks don’t lend money to start-ups. This is another myth. Again, the Federal Reserve data shows that banks account for sixteen percent of all the financing provided to companies that are two years old or younger. While sixteen percent might not seem that high, it is three percent higher than the amount of money provided by the next highest source – trade creditors – and is higher than a bunch of other sources that everyone talks about going to: friends and family, business angels, venture capitalists, strategic investors, and government agencies.
Most entrepreneurs start businesses in attractive industries. Sadly, the opposite is true. Most entrepreneurs head right for the worst industries for start-ups. The correlation between the number of entrepreneurs starting businesses in an industry and the number of companies failing in the industry is 0.77. That means that most entrepreneurs are picking industries in which they are mostlikely to fail.
The growth of a start-up depends more on an entrepreneur’s talent than on the business he chooses. Sorry to deflate some egos here, but the industry you choose to start your company has a huge effect on the odds that it will grow. Over the past twenty years or so, about 4.2 percent of all start-ups in the computer and office equipment industry made the Inc 500 list of the fastest growing private companies in the U.S. 0.005 percent of start-ups in the hotel and motel industry and 0.007 percent of start-up eating and drinking establishments made the Inc. 500. That means the odds that you will make the Inc 500 are 840 times higher if you start a computer company than if you start a hotel or motel. There is nothing anyone has discovered about the effects of entrepreneurial talent that has a similar magnitude effect on the growth of new businesses.
Most entrepreneurs are successful financially. Sorry, this is another myth. Entrepreneurship creates a lot of wealth, but it is very unevenly distributed. The typical profit of an owner-managed business is $39,000 per year. Only the top ten percent of entrepreneurs earn more money than employees. And the typical entrepreneur earns less money than he otherwise would have earned working for someone else.
Many start-ups achieve the sales growth projections that equity investors are looking for. Not even close. Of the 590,000 or so new businesses with at least one employee founded in this country every year, data from the U.S. Census shows that less than 200 reach the $100 million in sales in six years that venture capitalists talk about looking for. About 500 firms reach the $50 million in sales that the sophisticated angels, like the ones at Tech Coast Angels and the Band of Angels talk about. In fact, only about 9,500 companies reach $5 million in sales in that amount of time.
Starting a business is easy. Actually it isn’t, and most people who begin the process of starting a company fail to get one up and running. Seven years after beginning the process of starting a business, only one-third of people have a new company with positive cash flow greater than the salary and expenses of the owner for more than three consecutive months.

Read more: "How to Change the World: Top Ten Myths of Entrepreneurship" - http://blog.guykawasaki.com/2008/01/top-ten-myths-o.html#ixzz0GBq6Q3Hp&A

Whiners

2009-05-21T13:17:00.001-07:00

That pretty much sums it up for me…

Why Spelling Don’t Matter

2009-05-21T12:27:00.001-07:00

The Galactic Core seen from Earth

2009-05-21T12:18:00.001-07:00

It is astounding what beauty and wonder exists all around us that we just can never see with unaided eyes. Regretfully so.

Galactic Center of Milky Way Rises over Texas Star Party from William Castleman on Vimeo.

Steven Hayward and the Resilient Earth

2009-05-20T05:44:00.000-07:00

The missing sunspots: Is this the big chill?

2009-05-08T08:52:00.001-07:00

The Independent has a really interesting article on the current sunspot doldrums.

[A]round the turn of the century things started to change. Within a few years of the Sun’s activity starting to decline, the rise in the Earth’s temperature began to slow and has now been constant since the turn of the century. This was at the same time that the levels of atmospheric carbon dioxide carried on rising. So, is the Sun’s quietness responsible for the tail-off in global warming and if not, what is?

Read the entire article here

Krugman was sane once

2009-05-06T11:21:00.001-07:00

Ok, I have made at least one nasty comment about Krugman on this site. For the sake of fairness, I would like to point out that Krugman was not always a raving madman. One may quibble and nibble on small details in the article below, but it is straight-forward, sound economic analysis.

So, back in 1994, Krugman was still sane. When did that change – and how did that happen?

Without further ado, I present to you – the sane Krugman:

The Myth of Asia’s Miracle

Paul Krugman^*

A CAUTIONARY FABLE

ONCE UPON a time, Western opinion leaders found themselves both impressed and frightened by the extraordinary growth rates achieved by a set of Eastern economies. Although those economies were still substantially poorer and smaller than those of the West, the speed with which they had transformed themselves from peasant societies into industrial powerhouses, their continuing ability to achieve growth rates several times higher than the advanced nations, and their increasing ability to challenge or even surpass American and European technology in certain areas seemed to call into question the dominance not only of Western power but of Western ideology. The leaders of those nations did not share our faith in free markets or unlimited civil liberties. They asserted with increasing self confidence that their system was superior: societies that accepted strong, even authoritarian governments and were willing to limit individual liberties in the interest of the common good, take charge of their economics, and sacrifice short-run consumer interests for the sake of long-run growth would eventually outperform the increasingly chaotic societies of the West. And a growing minority of Western intellectuals agreed.

The gap between Western and Eastern economic performance eventually became a political issue. The Democrats recaptured the White House under the leadership of a young, energetic new president who pledged to "get the country moving again"--a pledge that, to him and his closest advisers, meant accelerating America's economic growth to meet the Eastern challenge.

The time, of course, was the early 1960s. The dynamic young president was John F. Kennedy. The technological feats that so alarmed the West were the launch of Sputnik and the early Soviet lead in space. And the rapidly growing Eastern economies were those of the Soviet Union and its satellite nations.

While the growth of communist economics was the subject of innumerable alarmist books and polemical articles in the 1950s, Some economists who looked seriously at the roots of that growth were putting together a picture that differed substantially from most popular assumptions. Communist growth rates were certainly impressive, but not magical. The rapid growth in output could be fully explained by rapid growth in inputs: expansion of employment, increases in education levels, and, above all, massive investment in physical capital. Once those inputs were taken into account, the growth in output was unsurprising--or, to put it differently, the big surprise about Soviet growth was that when closely examined it posed no mystery.

This economic analysis had two crucial implications. First, most of the speculation about the superiority of the communist system including the popular view that Western economics could painlessly accelerate their own growth by borrowing some aspects of that system--was off base. Rapid Soviet economic growth was based entirely on one attribute: the willingness to save, to sacrifice current consumption for the sake of future production. The communist example offered no hint of a free lunch.

Second, the economic analysis of communist countries' growth implied some future limits to their industrial expansion--in other words, implied that a naive projection of their past growth rates into the future was likely to greatly overstate their real prospects. Economic growth that is based on expansion of inputs, rather than on growth in output per unit of input, is inevitably subject to diminishing returns. It was simply not possible for the Soviet economies to sustain the rates of growth of labor force participation, average education levels, and above all the physical capital stock that had prevailed in previous years. Communist growth would predictably slow down, perhaps drastically.

Can there really be any parallel between the growth of Warsaw Pact nations in the 1950s and the spectacular Asian growth that now preoccupies policy intellectuals? At some levels, of course, the parallel is far-fetched: Singapore in the 1990s does not look much like the Soviet Union in the 1950s, and Singapore's Lee Kuan Yew bears little resemblance to the U.S.S.R.'s Nikita Khrushchev and less to Joseph Stalin. Yet the results of recent economic research into the sources of Pacific Rim growth give the few people who recall the great debate over Soviet growth a strong sense of déjà vu. Now, as then, the contrast between popular hype and realistic prospects, between conventional wisdom and hard numbers, remains so great that sensible economic analysis is not only widely ignored, but when it does get aired, it is usually dismissed as grossly implausible.

Popular enthusiasm about Asia's boom deserves to have some cold water thrown on it. Rapid Asian growth is less of a model for the West than many writers claim, and the future prospects for that growth are more limited than almost anyone now imagines. Any such assault on almost universally held beliefs must, of course, overcome a barrier of incredulity. This article began with a disguised account of the Soviet growth debate of 30 years ago to try to gain a hearing for the proposition that we may be revisiting an old error. We have been here before. The problem with this literary device, however, is that so few people now remember how impressive and terrifying the Soviet empire's economic performance once seemed. Before turning to Asian growth, then, it may be useful to review an important but largely forgotten piece of economic history.

'WE WILL BURY YOU'

LIVING IN a world strewn with the wreckage of the Soviet empire, it is hard for most people to realize that there was a time when the Soviet economy, far from being a byword for the failure of socialism, was one of the wonders of the world--that when Khrushchev pounded his shoe on the U.N. podium and declared, "We will bury you," it was an economic rather than a military boast. It is therefore a shock to browse through, say, issues of Foreign Affairs from the mid 1950s through the early 1960s and discover that at least one article a year dealt with the implications of growing Soviet industrial might.

Illustrative of the tone of discussion was a 1957 article by Calvin B. Hoover. Like many Western economists, Hoover criticized official Soviet statistics, arguing that they exaggerated the true growth rate. Nonetheless, he concluded that Soviet claims of astonishing achievement were fully justified: their economy was achieving a rate of growth "twice as high as that attained by any important capitalistic country over any considerable number of years [and] three times as high as the average annual rate of increase in the United States." He concluded that it was probable that "a collectivist, authoritarian state" was inherently better at achieving economic growth than free-market democracies and projected that the Soviet economy might outstrip that of the United States by the early 1970s.

These views were not considered outlandish at the time. On the contrary, the general image of Soviet central planning was that it might be brutal, and might not do a very good job of providing consumer goods, but that it was very effective at promoting industrial growth. In 1960 Wassily Leontief described the Soviet economy as being "directed with determined ruthless skill"--and did so without supporting argument, confident he was expressing a view shared by his readers.

Yet many economists studying Soviet growth were gradually coming to a very different conclusion. Although they did not dispute the fact of past Soviet growth, they offered a new interpretation of the nature of that growth, one that implied a reconsideration of future Soviet prospects. To understand this reinterpretation, it is necessary to make a brief detour into economic theory to discuss a seemingly abstruse, but in fact intensely practical, concept: growth accounting.

ACCOUNTING FOR THE SOVIET SLOWDOWN

IT IS A TAUTOLOGY that economic expansion represents the sum of two sources of growth. On one side are increases in "inputs": growth in employment, in the education level of workers, and in the stock of physical capital (machines, buildings, roads, and so on). On the other side are increases in the output per unit of input; such increases may result from better management or better economic policy, but in the long run are primarily due to increases in knowledge.

The basic idea of growth accounting is to give life to this formula by calculating explicit measures of both. The accounting can then tell us how much of growth is due to each input--say, capital as opposed to labor--and how much is due to increased efficiency.

We all do a primitive form of growth accounting every time we talk about labor productivity; in so doing we are implicitly distinguishing between the part of overall national growth due to the growth in the supply of labor and the part due to an increase in the value of goods produced by the average worker. Increases in labor productivity, however, are not always caused by the increased efficiency of workers. Labor is only one of a number of inputs; workers may produce more, not because they are better managed or have more technological knowledge, but simply because they have better machinery. A man with a bulldozer can dig a ditch faster than one with only a shovel, but he is not more efficient; he just has more capital to work with. The aim of growth accounting is to produce an index that combines all measurable inputs and to measure the rate of growth of national income relative to that index--to estimate what is known as "total factor productivity."

So far this may seem like a purely academic exercise. As soon as one starts to think in terms of growth accounting, however, one arrives at a crucial insight about the process of economic growth: sustained growth in a nation's per capita income can only occur if there is a rise in output per unit of input.

Mere increases in inputs, without an increase in the efficiency with which those inputs are used--investing in more machinery and infrastructure--must run into diminishing returns; input-driven growth is inevitably limited.

How, then, have today's advanced nations been able to achieve sustained growth in per capita income over the past 150 years? The answer is that technological advances have lead to a continual increase in total factor productivity--a continual rise in national income for each unit of input. In a famous estimate, MIT Professor Robert Solow concluded that technological progress has accounted for 80 percent of the long-term rise in U.S. per capita income, with increased investment in capital explaining only the remaining 20 percent.

When economists began to study the growth of the Soviet economy, they did so using the tools of growth accounting. Of course, Soviet data posed some problems. Not only was it hard to piece together usable estimates of output and input (Raymond Powell, a Yale professor, wrote that the job "in may ways resembled an archaeological dig"), but there were philosophical difficulties as well. In a socialist economy one could hardly measure capital input using market returns, so researchers were forced to impute returns based on those in market economies at similar levels of development. Still, when efforts began, researchers were pretty sure about what they would find. Just as capitalist growth had been based on growth in both inputs and efficiency, with efficiency the main source of rising per capita income, they expected to find that rapid Soviet growth reflected both rapid input growth and rapid growth in efficiency.

But what they actually found was that Soviet growth was based on rapid growth inputs--end of story. The rate of efficiency growth was not only unspectacular, it was well below the rates achieved in Western economies. Indeed, by some estimates, it was virtually nonexistent.

The immense Soviet efforts to mobilize economic resources were hardly news. Stalinist planners had moved millions of workers from farms to cities, pushed millions of women into the labor force and millions of men into longer hours, pursued massive programs of education, and above all plowed an ever-growing proportion of the country's industrial output back into the construction of new factories. Still, the big surprise was that once one had taken the effects of these more or less measurable inputs into account, there was nothing left to explain. The most shocking thing about Soviet growth was its comprehensibility.

This comprehensibility implied two crucial conclusions. First, claims about the superiority of planned over market economies turned out to be based on a misapprehension. If the Soviet economy had a special strength, it was its ability to mobilize resources, not its ability to use them efficiently. It was obvious to everyone that the Soviet Union in 1960 was much less efficient than the United States. The surprise was that it showed no signs of closing the gap.

Second, because input-driven growth is an inherently limited process, Soviet growth was virtually certain to slow down. Long before the slowing of Soviet growth became obvious, it was predicted on the basis of growth accounting. (Economists did not predict the implosion of the Soviet economy a generation later, but that is a whole different problem.)

It's an interesting story and a useful cautionary tale about the dangers of naive extrapolation of past trends. But is it relevant to the modern world?

PAPER TIGERS

AT FIRST, it is hard to see anything in common between the Asian success stories of recent years and the Soviet Union of three decades ago. Indeed, it is safe to say that the typical business traveler to, say, Singapore, ensconced in one of that city's gleaming hotels, never even thinks of any parallel to its roach-infested counterparts in Moscow. How can the slick exuberance of the Asian boom be compared with the Soviet Union's grim drive to industrialize?

And yet there are surprising similarities. The newly industrializing countries of Asia, like the Soviet Union of the 1950s, have achieved rapid growth in large part through an astonishing mobilization of resources. Once one accounts for the role of rapidly growing inputs in these countries' growth, one finds little left to explain, Asian growth, like that of the Soviet Union in its high-growth era, seems to be driven by extraordinary growth in inputs like labor and capital rather than by gains in efficiency.

Consider, in particular, the case of Singapore. Between 1966 and 1990, the Singaporean economy grew a remarkable 8.5 percent per annum, three times as fast as the United States; per capita income grew at a 6.6 percent rate, roughly doubling every decade. This achievement seems to be a kind of economic miracle. But the miracle turns out to have been based on perspiration rather than inspiration: Singapore grew through a mobilization of resources that would have done Stalin proud. The employed share of the population surged from 27 to 51 percent. The educational standards of that work force were dramatically upgraded: while in 1966 more than half the workers had no formal education at all, by 1990 two-thirds had completed secondary education. Above all, the country had made an awesome investment in physical capital: investment as a share of output rose from 11 to more than 40 percent.

Even without going through the formal exercise of growth accounting, these numbers should make it obvious that Singapore's growth has been based largely on one-time changes in behavior that cannot be repeated. Over the past generation the percentage of people employed has almost doubled; it cannot double again. A half-educated work force has been replaced by one in which the bulk of workers has high school diplomas; it is unlikely that a generation from now most Singaporeans will have Ph.D's. And an investment share of 40 percent is amazingly high by any standard; a share of 7O percent would be ridiculous. So one can immediately conclude that Singapore is unlikely to achieve future growth rates comparable to those of the past.

But it is only when one actually does the quantitative accounting that the astonishing result emerges: all of Singapore's growth can be explained by increases in measured inputs. There is no sign at all of increased efficiency. In this sense, the growth of Lee Kuan Yew's Singapore is an economic twin of the growth of Stalin's Soviet Union growth achieved purely through mobilization of resources. Of course, Singapore today is far more prosperous than the U.S.S.R. ever was--even at its peak in the Brezhnev years--because Singapore is closer to, though still below, the efficiency of Western economies. The point, however, is that Singapore's economy has always been relatively efficient; it just used to be starved of capital and educated workers.

Singapore's case is admittedly, the most extreme. Other rapidly growing East Asian economics have not increased their labor force participation as much, made such dramatic improvements in educational levels, or raised investment rates quite as far. Nonetheless, the basic conclusion is the same: there is startlingly little evidence of improvements in efficiency. Kim and Lau conclude of the four Asian "tigers" that "the hypothesis that there has been no technical progress during the postwar period cannot be rejected for the four East Asian newly industrialized countries." Young, more poetically, notes that once one allows for their rapid growth of inputs, the productivity performance of the "Tigers" falls "from the heights of Olympus to the plains of Thessaly.

This conclusion runs so counter to conventional wisdom that it is extremely difficult for the economists who have reached it to get a hearing. As early as 1982 a Harvard graduate student, Yuan Tsao.) found little evidence of efficiency growth in her dissertation on Singapore, but her work was, as Young puts it, "ignored or dismissed as unbelievable." When Kim and Lau presented their work at a 1992 conference in Taipei, it received a more respectful hearing, but had little immediate impact But when Young tried to make the case for input-driven Asian growth at the 1993 meetings of the European Economic Association, he was met with a stone wall of disbelief.

In Young's most recent paper there is an evident tone of exasperation with this insistence on clinging to the conventional wisdom in the teeth of the evidence. He titles the paper "The Tyranny of Numbers"--by which he means that you may not want to believe this, buster, but there's just no way around the data. He begins with an ironic introduction, written in a deadpan, Sergeant Friday, "Just the facts, ma'am" style: "This is a fairly boring and tedious paper, and is intentionally so. This paper provides no new interpretations of the East Asian experience to interest the historian, derives no new theoretical implications of the forces behind the East Asian growth process to motivate the theorist, and draws no new policy implications from the subtleties of East Asian government intervention to excite the policy activist. Instead, this paper concentrates its energies on providing a careful analysis of the historical patterns of output growth, factor accumulation, and productivity growth in the newly industrializing countries of East Asia."

Of course, he is being disingenuous. His conclusion undermines most of the conventional wisdom about the future role of Asian nations in the world economy and, as a consequence, in international politics. But readers will have noticed that the statistical analysis that puts such a different interpretation on Asian growth focuses on the "tigers," the relatively small countries to whom the name "newly industrializing countries" was first applied. But what about the large countries? What about Japan and China?

THE GREAT JAPANESE GROWTH SLOWDOWN

MANY PEOPLE who are committed to the view that the destiny of the world economy lies with the Pacific Rim are likely to counter skepticism about East Asian growth prospects with the example of Japan. Here, after all, is a country that started out poor and has now become the second-largest industrial power. Why doubt that other Asian nations can do the same?

There are two answers to that question. First, while many authors have written of an "Asian system"--a common denominator that underlies all of the Asian success stories--the statistical evidence tells a different story. Japan's growth in the 1950s and 1960s does not resemble Singapore's growth in the 1970s and 1980s. Japan, unlike the East Asian "tigers," seems to have grown both through high rates of input growth and through high rates of efficiency growth. Today's fast growth economics are nowhere near converging on U.S. efficiency levels, but Japan is staging an unmistakable technological catch-up.

Second, while Japan's historical performance has indeed been remarkable, the era of miraculous Japanese growth now lies well in the past. Most years Japan still manages to grow faster than the other advanced nations, but that gap in growth rates is now far smaller than it used to be, and is shrinking.

The story of the great Japanese growth slowdown has been oddly absent from the vast polemical literature on Japan and its role in the world economy. Much of that literature seems stuck in a time warp, with authors writing as if Japan were still the miracle growth economy of the 1960s and early 1970s. Granted, the severe recession that has gripped Japan since 1991 will end soon if it has not done so already, and the Japanese economy will probably stage a vigorous short-term recovery. The point, however, is that even a full recovery will only reach a level that is far below what many sensible observers predicted 20 years ago.

It may be useful to compare Japan's growth prospects as they appeared 2O years ago and as they appear now. In 1973 Japan was still a substantially smaller and poorer economy than the United States. Its per capita GDP was only 55 percent of America's, while its overall GDP was only 27 percent as large. But the rapid growth of the Japanese economy clearly portended a dramatic change. Over the previous decade Japan's real GDP had grown at a torrid 8.9 percent annually, with per capita output growing at a 7.7 percent rate. Although American growth had been high by its own historical standards, at 3.9 percent (2.7 percent per capita) it was not in the same league. Clearly, the Japanese were rapidly gaining on us.

In fact, a straightforward projection of these trends implied that a major reversal of positions lay not far in the future. At the growth rate of 1963-73, Japan would overtake the United States in real per capita income by 1985, and total Japanese output would exceed that of the United States by 1998! At the time, people took such trend projections very seriously indeed. One need only look at the titles of such influential books as Herman Kahn's The Emerging Japanese Superstate or Ezra Vogel's Japan as Number One to remember that Japan appeared, to many observers, to be well on its way to global economic dominance.

Well, it has not happened, at least not so far Japan has indeed continued to rise in the economic rankings, but at a far more modest pace than those projections suggested. In 1992 Japan's per capita income was still only 83 percent of the United States', and its overall output was only 42 percent of the American level. The reason was that growth from 1973 to 1992 was far slower than in the high-growth years: GDP grew only 3.7 percent annually, and GDP per capita grew only 3 percent per year. The United States also experienced a growth slowdown after 1973, but it was not nearly as drastic.

If one projects those post-1973 growth rates into the future, one still sees a relative Japanese rise, but a far less dramatic one. Following 1973-92 trends, Japan's per capita income will outstrip that of the United States in 2002; its overall output does not exceed America's until the year 2047. Even this probably overestimates Japanese prospects. Japanese economists generally believe that their country's rate of growth of potential output, the rate that it will be able to sustain once it has taken up the slack left by the recession, is now no more than three percent. And that rate is achieved only through a very high rate of investment, nearly twice as high a share of GDP as in the United States. When one takes into account the growing evidence for at least a modest acceleration of U.S. productivity growth in the last few years, one ends up with the probable conclusion that Japanese efficiency is gaining on that of the United States at a snail's pace, if at all, and there is the distinct possibility that per capita income in Japan may never overtake that in America. In other words, Japan is not quite as overwhelming an example of economic prowess as is sometimes thought, and in any case Japan's experience has much less in common with that of other Asian nations than is generally imagined.

THE CHINA SYNDROME

FOR THE skeptic, the case of China poses much greater difficulties about Asian destiny than that of Japan. Although China is still a very poor country, its population is so huge that it will become a major economic power if it achieves even a fraction of Western productivity levels. And China, unlike Japan, has in recent years posted truly impressive rates of economic growth. What about its future prospects?

Accounting for China's boom is difficult for both practical and philosophical reasons. The practical problem is that while we know that China is growing very rapidly, the quality of the numbers is extremely poor. It was recently revealed that official Chinese statistics on foreign investment have been overstated by as much as a factor of six. The reason was that the government offers tax and regulatory incentives to foreign investors, providing an incentive for domestic entrepreneurs to invent fictitious foreign partners or to work through foreign fronts. This episode hardly inspires confidence in any other statistic that emanates from that dynamic but awesomely corrupt society.

The philosophical problem is that it is unclear what year to use as a baseline. If one measures Chinese growth from the point at which it made a decisive turn toward the market, say 1978, there is little question that there has been dramatic improvement in efficiency as well as rapid growth in inputs. But it is hardly surprising that a major recovery in economic efficiency occurred as the country emerged from the chaos of Mao Zedong's later years. If one instead measures growth from before the Cultural Revolution, say 1964, the picture looks more like the East Asian "tigers": only modest growth in efficiency, with most growth driven by inputs. This calculation, however, also seems unfair: one is weighing down the buoyant performance of Chinese capitalism with the leaden performance of Chinese socialism. Perhaps we should simply split the difference: guess that some, but not all, of the efficiency gains since the turn toward the market represent a one-time recovery, while the rest represent a sustainable trend.

Even a modest slowing in China's growth will change the geopolitical outlook substantially. The World Bank estimates that the Chinese economy is currently about 40 percent as large as that of the United States. Suppose that the U.S. economy continues to grow at 2.5 percent each year. If China can continue to grow at 10 percent annually, by the year 2010 its economy will be a third larger than ours. But if Chinese growth is only a more realistic 7 percent, Its GDP Will be only 82 percent of that of the United States. There will still be a substantial shift of the world's economic center of gravity, but it will be far less drastic than many people now imagine.

THE MYSTERY THAT WASN'T

THE EXTRAORDINARY record of economic growth in the newly industrializing countries of East Asia has powerfully influenced the conventional wisdom about both economic policy and geopolitics. Many, perhaps most, writers on the global economy now take it for granted that the success of these economies demonstrates three propositions. First, there is a major diffusion of world technology in progress, and Western nations are losing their traditional advantage. Second, the world's economic center of gravity will inevitably shift to the Asian nations of the western Pacific. Third, in what's perhaps a minority view, Asian successes demonstrate the superiority of economies with fewer civil liberties and more planning than we in the West have been willing to accept.

All three conclusions are called into question by the simple observation that the remarkable record of East Asian growth has been matched by input growth so rapid that Asian economic growth, incredibly, ceases to be a mystery.

Consider first the assertion that the advanced countries are losing their technological advantage. A heavy majority of recent tracts on the world economy have taken it as self-evident that technology now increasingly flows across borders, and that newly industrializing nations are increasingly able to match the productivity of more established economics. Many writers warn that this diffusion of technology will place huge strains on Western society as capital flows to the Third World and imports from those nations undermine the West's industrial base.

There are severe conceptual problems with this scenario even if its initial premise is right. But in any case, while technology may have diffused within particular industries, the available evidence provides absolutely no justification for the view that overall world technological gaps are vanishing. On the contrary, Kim and Lau find "no apparent convergence between the technologies" of the newly industrialized nations and the established industrial powers; Young finds that the rates in the growth of efficiency in the East Asian "tigers" are no higher than those in many advanced nations.

The absence of any dramatic convergence in technology helps explain what would otherwise be a puzzle: in spite of a great deal of rhetoric about North-South capital movement, actual capital flows to developing countries in the 1990s have so far been very small--and they have primarily gone to Latin America, not East Asia. Indeed, several of the East Asian "tigers" have recently become significant exporters of capital. This behavior would be extremely odd if these economies, which still pay wages well below advanced-country levels, were rapidly achieving advanced-country productivity. It is, however, perfectly reasonable if growth in East Asia has been primarily input driven, and if the capital piling up there is beginning to yield diminishing returns.

If growth in East Asia is indeed running into diminishing returns, however, the conventional wisdom about an Asian-centered world economy needs some rethinking. It would be a mistake to overstate this case: barring a catastrophic political upheaval, it is likely that growth in East Asia will continue to outpace growth in the West for the next decade and beyond. But it will not do so at the pace of recent years. From the perspective of the year 2010, current projections of Asian supremacy extrapolated from recent trends may well look almost as silly as 1960s-vintage forecasts of Soviet industrial supremacy did from the perspective of the Brezhnev years.

Finally, the realities of East Asian growth suggest that we may have to unlearn some popular lessons. It has become common to assert that East Asian economic success demonstrates the fallacy of our traditional laissez-faire approach to economic policy and that the growth of these economics shows the effectiveness of sophisticated industrial policies and selective protectionism. Authors such as James Fallows have asserted that the nations of that region have evolved a common "Asian system," whose lessons we ignore at our peril. The extremely diverse institutions and policies of the various newly industrialized Asian countries, let alone Japan, cannot really be called a common system. But in any case, if Asian success reflects the benefits of strategic trade and industrial policies, those benefits should surely be manifested in an unusual and impressive rate of growth in the efficiency of the economy. And there is no sign of such exceptional efficiency growth.

The newly industrializing countries of the Pacific Rim have received a reward for their extraordinary mobilization of resources that is no more than what the most boringly conventional economic theory would lead us to expect. If there is a secret to Asian growth, it is simply deferred gratification, the willingness to sacrifice current satisfaction for future gain.

That's a hard answer to accept, especially for those American policy intellectuals who recoil from the dreary task of reducing deficits and raising the national savings rate. But economics is not a dismal science because the economists like it that way; it is because in the end we must submit to the tyranny not just of the numbers, but of the logic they express.

Krugman can’t think straight.

2009-05-06T07:43:00.001-07:00

According to this NWY article, Paul Krugman – Nobel Prize laureate in economics – is worried about falling wages. Never mind the ‘sticky wages’ theorem the Keynesians have been bantering around for decades, here’s what the world looks like today – according to Krugman:

Suppose that workers at the XYZ Corporation accept a pay cut. That lets XYZ management cut prices, making its products more competitive. Sales rise, and more workers can keep their jobs. So you might think that wage cuts raise employment — which they do at the level of the individual employer.

But if everyone takes a pay cut, nobody gains a competitive advantage. So there’s no benefit to the economy from lower wages. Meanwhile, the fall in wages can worsen the economy’s problems on other fronts.

In particular, falling wages, and hence falling incomes, worsen the problem of excessive debt: your monthly mortgage payments don’t go down with your paycheck. America came into this crisis with household debt as a percentage of income at its highest level since the 1930s. Families are trying to work that debt down by saving more than they have in a decade — but as wages fall, they’re chasing a moving target. And the rising burden of debt will put downward pressure on consumer spending, keeping the economy depressed.

Never mind that at last a Keynesian admits that wages are not sticky – and hence falling prices do NOT result in lay-offs due to relatively increased labour cost, and hence deflation does NOT create unemployment. Never mind that the term ‘competitive advantage’ makes no sense in this context. Never mind that we have an institution called ‘bankruptcy’ that allows people to rid themselves of debt once and for all and allows for the reassessment of values. Never mind that since Keynes wrote his silly tract, none of his ideas have stood up to either logic of evidence.

Krugman – you are an incompetent fool.

Buy-American rules shutting out Canadians – and costing Americans

2009-05-06T07:05:00.001-07:00

Canadians have been whining for some time now about moves by Americans to buy only American goods. Well, it does indeed hurt Canadian exporters, but it certainly also hurts Americans. According to the Toronto Star, a Canadian company has lost a contract for supplying plastic pipes to a navy base in the US. But it only mentions in passing the really dumb part of the story.

But the piping [already installed] is now being ripped out of the ground. Why? Because the pipes are branded with the words Made in Canada.

How this can possibly benefit Americans eludes me. Broken window fallacy anyone?

Ontario now in business of 'reverse Reaganism'

2009-05-05T16:38:00.001-07:00

I don’t expect our political ‘leaders’ to have much understanding of economics, foreign affairs, or general science. However, I do from time to time indulge myself in the strange delusion that they have at least some very basic education and some very basic grasp of reality. And then comes along a dolt like Ontario’s Economic Development Minister Michael Bryant and disabuses me of my silly notions by saying something so outrageously barmy and inane, it hurts.

According to this plank,

"The state has got to be strategic and if that's the case, then we need to act as an entrepreneur and invest directly in businesses," Mr. Bryant told a luncheon crowd in Toronto. "This is government choosing winners and losers. This is supposed to be the thing that governments weren't supposed to do. But this is the business that we are in."

Read more on how Ontario is now in the business of 'reverse Reaganism', whatever that means.

Not that it matters what it means, since words seem to have lost all their meaning. There was a time and a place when the word entrepreneur meant something along the lines of “a person who has possession of an enterprise, or venture, and assumes significant accountability for the inherent risks and the outcome”. How does this apply to government? Since when is a government an enterprise? How is anybody in government significantly accountable for the inherent risks and the outcomes?

Mr. Bryant, next time before you open your silly gob, why don’t you do some basic research? I don’t expect you to read Kirzner’s brilliant little tract on the entrepreneur. You wouldn’t understand it anyway. For you, Wikipedia is probably demanding enough.

Gold Standard no Protection against Inflation

2009-04-30T07:16:00.001-07:00

In this fascinating letter to the editor from June 1, 1917 Irving Fisher discusses inflation brought about by an increase in the supply of gold. It seems that increasing the supply of money always causes inflation, regardless of what kind of money is used.

War Is Tribal

2009-04-30T06:46:00.001-07:00

The implicit and largely unacknowledged justification for war – not pitched battle between armed units in a defined field of combat, but war – is that some humans are inherently of greater value than others. Waging war denies the universal equality of all human life, and to wage war in the defence of universal human rights is not therefore logically possible. All wars are tribal.

Who ever said this man is stupid?

2009-04-29T13:30:00.001-07:00

Is this the same guy who could not string two sentences together during scripted speeches? Ok, his intonation is odd , and his accent is not exactly New England – but once you get over that, I don’t think this is a stupid man talking. He knows exactly what he’s doing – including the intimidating body language. If anything, the man is nasty.

Peter Schiff on why Mankiw and Co are nut

2009-04-27T16:52:00.001-07:00

Not that anybody with half a brain needed to be told this, but still…

What’s in a Name?

2009-04-27T07:23:00.001-07:00

I was wondering all weekend what the impact would be on faithful Muslim or Jewish individuals if they contracted Swine Flu…

Well, it’s good to know the authorities are on the ball.

According to Haaretz

Ultra-Orthodox Deputy Health Minister Yakov Litzman on Monday declared that Israel would call the new potentially deadly disease that has already struck two continents 'Mexico Flu,' rather than 'Swine Flu, as pigs are not kosher.

Now I’m only waiting for the protest note by the Mexican government….

Makin Money – the Easy Way #2

2009-04-26T20:15:00.001-07:00

If you even think of trying this, consider yourself scum.

Making Money - The Easy Way #1

2009-04-26T20:10:00.001-07:00

Of course, if you really did this to anybody, you’d be nothing but a scumbag lowlife.

West traps Russia in its own backyard

2009-04-24T12:07:00.001-07:00

M K Bhadrakumar explains how the US is trying to get back some of the influence it has been loosing to Russia over the last three years or so. I have little to complain about his analysis, except that he seems to ignore the far greater threat to Russian interests from the slow but determined attempts at detente between the US and Iran. Few things scare the Russians more than a pro-Western, or at least no longer anti-Western Iran. Stay tuned.

A concerted US effort has begun to somehow detach Ashgabat from the Russian sphere of influence and thereby kill the prospects of Russia's plans for laying new gas pipelines for the European market. Alongside, there is also a determined bid to develop a northern supply route to Afghanistan via the Caucasus and the Caspian that would bypass Russia. While Russian cooperation is welcome, the US will not want its vulnerability in Afghanistan to be exploited for a reciprocal accommodation of Russian interests in Europe.

Sound the Alarm – A New Ice Age is Coming

2009-04-23T14:03:00.001-07:00

Well, maybe not quite. However, it seems that low solar output is puzzling astronomers all over the world, wondering whether the recent dearth in sunspot activity and a serious case of solar doldrums are indicators for a little cold spell on Earth.

We had those before, and the world is not going to end, but a few years of this won’t be fun. Serious changes in climate are never fun, and can bring about all kinds of nasty side-effects, like… famines, war, intellectual revolutions, and all that jazz.

One thing is for sure, though – no matter what the computer model wizards are telling us, predicting climate is about as solid a science as predicting the economy: it’s all about ceteris paribus, and that’s just never the case.

Poland & Brazil as model economies?

2009-04-21T07:09:00.001-07:00

While it seems that the vast majority of governments around the world are engaged in economic insanity,

“There are some countries for which this is not true; those which, for one reason or another, did not adopt the prevalent global pattern of monetary laxity and fiscal hysteria. Poland, for example, was always likely to get in trouble from this recession, because it ran a balance of payments deficit, and over 5% of its gross domestic product (GDP) came in through foreign direct investment, which has dropped sharply. However, instead of engaging in massive stimulus, Poland allowed the zloty to depreciate by about 30% against the euro since July 2008, while its M3 money supply, up 17% in zloty terms, declined in euro terms by over 10%.”

Read on...

Molecular Expressions: Science, Optics and You - Secret Worlds: The Universe Within - Interactive Java Tutorial

2009-04-13T19:23:00.001-07:00

View the Milky Way at 10 million light years from the Earth. Then move through space towards the Earth in successive orders of magnitude until you reach a tall oak tree just outside the buildings of the National High Magnetic Field Laboratory in Tallahassee, Florida. After that, begin to move from the actual size of a leaf into a microscopic world that reveals leaf cell walls, the cell nucleus, chromatin, DNA and finally, into the subatomic universe of electrons and protons. Click here.

And try not to become dizzy.

The dark side of Dubai

2009-04-12T19:20:00.001-07:00

(though one could just as well call it the Jane Jacob’s revenge. In case you don’t know why, you better get going and read her book on the economy of cities.)

Once the manic burst of building has stopped and the whirlwind has slowed, the secrets of Dubai are slowly seeping out. This is a city built from nothing in just a few wild decades on credit and ecocide, suppression and slavery. Dubai is a living metal metaphor for the neo-liberal globalised world that may be crashing – at last – into history.

Read on.

The Myth of Efficiency

2009-04-11T16:17:00.001-07:00

This is, in my opinion, one of the most elegant and devastating criticisms of standard economic thinking Rothbard has ever produced. Goodbye Pareto. Bye, bye transaction cost.

--------

The Myth of Efficiency

by Murray Rothbard

I am delighted that Dr. Rizzo, in chapter 4 [of Time Uncertainty, and Disequilibrium], is calling the highly touted concept of "efficiency" into grave question. I would like to carry his critique still further.

One of Rizzo's major points is that the concept of efficiency has no meaning apart from the pursuit of specified ends. But he concedes too much when he states, at least at the beginning of his paper, that "of course it [the common law] is efficient" relative to certain specified goals. For there are several layers of grave fallacy involved in the very concept of efficiency as applied to social institutions or policies: (1) the problem is not only in specifying ends but also in deciding whose ends are to be pursued; (2) individual ends are bound to conflict, and therefore any additive concept of social efficiency is meaningless; and (3) even each individual's actions cannot be assumed to be "efficient"; indeed, they undoubtedly will not be. Hence, efficiency is an erroneous concept even when applied to each individual's actions directed toward his ends; it is a fortiori a meaningless concept when it includes more than one individual, let alone an entire society.

Let us take a given individual. Since his own ends are clearly given and he acts to pursue them, surely at least his actions can be considered efficient. But no, they may not, for in order for him to act efficiently, he would have to possess perfect knowledge—perfect knowledge of the best technology, of future actions and reactions by other people, and of future natural events. But since no one can ever have perfect knowledge of the future, no one's action can be called "efficient." We live in a world of uncertainty. Efficiency is therefore a chimera.

Put another way, action is a learning process. As the individual acts to achieve his ends, he learns and becomes more proficient about how to pursue them. But in that case, of course, his actions cannot have been efficient from the start—or even from the end—of his actions, since perfect knowledge is never achieved, and there is always more to learn.

Moreover, the individual's ends are not really given, for there is no reason to assume that they are set in concrete for all time. As the individual learns more about the world, about nature and about other people, his values and goals are bound to change. The individual=s ends will change as he learns from other people; they may also change out of sheer caprice. But if ends change in the course of an action, the concept of efficiency—which can only be defined as the best combination of means in pursuit of given ends—again becomes meaningless.

If the concept of efficiency is worthless even for each individual, it is a fortiori in far worse straits when the economist employs it in an additive way for all of society. Rizzo is being extremely gentle with the concept when he says that it amounts "to little more than maximizing gross national product" which immediately breaks down once externalities are introduced into the system." The problem, however, is far deeper. For efficiency only makes sense in regard to people's ends, and individuals' ends differ, clash, and conflict. The central question of politics then becomes: whose ends shall rule?

The blindness of economic thought to the realities of the world is systematic and is a product of the utilitarian philosophy that has dominated economics for a century and a half. For utilitarianism holds that everyone's ends are really the same, and that therefore all social conflict is merely technical and pragmatic, and can be resolved once the appropriate means for the common ends are discovered and adopted. It is the myth of the common universal end that allows economists to believe that they can scientifically" and in a supposedly value-free manner prescribe what political policies should be adopted. By taking this alleged common universal end as an unquestioned given, the economist allows himself the delusion that he is not at all a moralist but only a strictly value-free and professional technician.

The alleged common end is a higher standard of living, or, as Rizzo puts it, a maximized gross national product. But suppose that, for one or more people, part of their desired "product" is something that other people will consider a decided detriment. Let us consider two examples, both of which would be difficult to subsume under the gentle rubric of "externalities." Suppose that some people pursue as a highly desired end the compulsory equality, or uniformity, of all persons, including each having the same living conditions and wearing the same shapeless blue garment. But then a highly desired goal for these egalitarians would be considered a grave detriment by those individuals who do not wish to be made equal to or uniform with everyone else. A second example of conflicting ends, of clashing meanings allotted to the concept of "product," would be one or more people who greatly desire either the enslavement or the slaughter of a disliked ethnic or other clearly defined social group. Clearly, the pursuit of product for the would-be oppressors or slaughterers would be considered a negative product, or detriment, by the potential oppressed. Perhaps we could jam this case into an externality problem by saying that the disliked social or ethnic group constitutes a "visual pollutant," a negative externality, for the other groups, and that these external "costs" can be 'should be?) internalized by forcing the disliked group to pay the other groups enough to induce the latter to spare their lives. One wonders, however, how much the economist wishes to minimize social costs, and whether or not this proffered solution would really be "value-free."

In these cases of conflicting ends, furthermore, one group's "efficiency" becomes another group's detriment. The advocates of a program—whether of compulsory uniformity or of slaughtering a defined social group—would want their proposals carried out as efficiently as possible; whereas, on the other hand, the oppressed group would hope for as inefficient a pursuit of the hated goal as possible. Efficiency, as Rizzo points out, can only be meaningful relative to a given goal. But if ends clash, the opposing group will favor maximum inefficiency in pursuit of the disliked goal. Efficiency, therefore, can never serve as a utilitarian touchstone for law or for public policy.

Our cases of clashing ends bring us to the question of minimizing social costs. The first question to raise is: why should social costs be minimized? Or, why should externalities be internalized? The answers are scarcely self-evident, and yet the questions have never been satisfactorily addressed, let alone answered. And there is an important corollary question: even given the goal of minimizing costs, for the sake of argument, should this goal be held as an absolute or should it be subordinated, and to what degree, to other goals? And what reasons can be given for any answer?

In the first place, to say that social costs should be minimized, or that external costs should be internalized, is not a technical or a value-free position. The very intrusion of the word should, the very leap to a policy position, necessarily converts this into an ethical stand, which requires, at the very least, an ethical justification.

And second, even if, for the sake of argument, we consent to a goal of minimized social costs, the economist still must wrestle with the problem: how absolute should this commitment be? To say that minimized social costs must be absolute, or at least the highest-valued goal, is to fall into the same position that the cost-benefit economists scorn when it is taken by ethicists: namely, to consider equity or rights heedless of cost-benefit analysis. And what is their justification for such absolutism?

Third, even if we ignore these two problems, there is the grave fallacy in the very concept of "social cost," or of cost as applied to more than one person. For one thing, if ends clash, and one man=s product is another man's detriment, costs cannot be added up across these individuals. But second, and more deeply, costs, as Austrians have pointed out for a century, are subjective to the individual, and therefore can neither be measured quantitatively nor, a fortiori, can they be added or compared among individuals. But if costs, like utilities, are subjective, non-additive, and non-comparable, then of course any concept of social costs, including transaction costs, becomes meaningless. And third, even within each individual, costs are not objective or observable by any external observer. For an individual's cost is subjective and ephemeral; it appears only ex ante, at the moment before the individual makes a decision. The cost of any individual's choice is his subjective estimate of the value ranking of the highest value foregone from making his choice. For each individual tries, in every choice, to pursue his highest-ranking end; he foregoes or sacrifices the other, lower-ranking, ends that he could have satisfied with the resources available. His cost is his second-highest ranking end, that is, the value of the highest ranking end that he has foregone to achieve a still more highly valued goal. The cost that he incurs in this decision, then, is only ex ante; as soon as his decision is made and the choice is exercised and his resource committed, the cost disappears. It becomes an historical cost, forever bygone. And since it is impossible for any external observer to explore, at a later date, or even at the same time, the internal mental processes of the actor, it is impossible for this observer to determine, even in principle, what the cost of any decision may have been.

Much of chapter 4 [in Time, Uncertainty, and Disequilibrium] is devoted to an excellent analysis demonstrating that objective social costs make no sense outside of general equilibrium, and that we can never be in such equilibrium, nor could we know if we were. Rizzo points out that since disequilibrium necessarily implies divergent and inconsistent expectations, we cannot simply say that these prices approximate equilibrium, since there is an important difference in kind between them and consistent equilibrium prices. Rizzo also points out that there is no benchmark to enable us to decide whether existing prices are close to equilibrium or not. I would simply underline his points here and make only two comments. To his point that tort law would not be needed in general equilibrium, I would add that torts themselves could not be committed in such a situation. For one feature of general equilibrium is certainty and perfect knowledge of the future; and presumably with such perfect knowledge no accidents could possibly occur. Even an intentional tort could not occur, for a perfectly foreseen tort could surely be avoided by the victim.

This comment relates to another point I would make about general equilibrium; not only has it never existed, and is not an operational concept, but also it could not conceivably exist. For we cannot really conceive of a world where every person has perfect foresight, and where no data ever change; moreover, general equilibrium is internally self-contradictory, for the reason one holds cash balances is the uncertainty of the future, and therefore the demand for money would fall to zero in a general equilibrium world of perfect certainty. Hence, a money economy, at least, could not be in general equilibrium.

I would also endorse Rizzo's critique of attempts to use objective probability theory as a way of reducing the real world of uncertainty to certainty equivalents. In the real world of human action, virtually all historical events are unique and heterogeneous, though often similar, to all other historical events. Since each event is unique and non-reproducible, it is impermissible to apply objective probability theory; expectations and forecasting become a matter of subjective estimates of future events, estimates that cannot be reduced to an objective or "scientific" formula. Calling two events by the same name does not make them homogeneous. Thus, two presidential elections are both called "presidential elections," but they are nevertheless highly varied, heterogeneous, and non-reproducible events, each occurring in different historical contexts. It is no accident that social scientists arguing for the use of the objective probability calculus almost invariably cite the case of the lottery; for a lottery is one of the few human situations where the outcomes are indeed homogeneous and reproducible, and, furthermore, where the events are random with no one possessing any influence upon its successors.

Not only is "efficiency" a myth, then, but so too is any concept of social or additive cost, or even an objectively determinable cost for each individual. But if cost is individual, ephemeral, and purely subjective, then it follows that no policy conclusions, including conclusions about law, can be derived from or even make use of such a concept. There can be no valid or meaningful cost-benefit analysis of political or legal decisions or institutions.

Let us now turn more specifically to Rizzo's discussion of the law, and its relation to efficiency and social costs. His critique of the efficiency-economists could be put more sharply. Let us take, for example, Rizzo's discussion of the Good Samaritan problem. As he poses the problem, he supposes that B could save A "at minimal cost to himself," and he concludes that, from the point of view of the efficiency theorists, B should be liable for injuries to A if B doesn't save A. But there are more problems with the efficiency approach. For one thing, there is the characteristic confusion of monetary and psychic costs. For, since B's costs in this case are purely psychic, how can anyone but B, say a court, know what B's costs would entail? Suppose indeed that B is a good swimmer and could rescue A easily, but that it turns out that A is an old enemy of his, so that the psychic costs of his rescuing A are very high. The point is that any assessment of B's costs can only be made in terms of B's own values, and that no outside observer can know what these are.[1] Furthermore, when the efficiency theorists put the case that, in Rizzo's words, "clearly . . . A would have been willing to pay B more than enough to compensate his costs in order to be rescued," this conclusion is not really clear at all. For how do we know, or how do the courts know, if A would have had the money to pay B, and how would B know it—especially if we realize that no one except B can know what his psychic costs may be?

Furthermore, the question of causation could be put far more sharply. Rizzo's quotation from Mises on non-action also being a form of "action" is praxeologically correct, but is irrelevant to the law. For the law is trying to discover who, if anyone, in a given situation has aggressed against the person or property of another—in short, who has been a tortfeasor against the property of another and is therefore liable for penalty. A non-action may be an "action" in a praxeological sense, but it sets no positive chain of consequences into motion, and therefore cannot be an act of aggression. Hence, the wisdom of the common law's stress on the crucial distinction between misfeasance and nonfeasance, between a wrongful aggression against someone's rights, and leaving that person alone.[2] Vincent v. Lake Erie Transport was a superb decision, for there the court was careful to investigate the causal agent at work—in this case, the boat, which clearly slammed against the dock. In some ways, tort law can be summed up as: "No liability without fault, no fault without liability." The vital importance of Richard Epstein=s strict liability doctrine is that it returns the common law to its original strict emphasis on causation, fault, and liability, shorn of modern accretions of negligence and pseudo-"efficiency" considerations.

I conclude that we cannot decide on public policy, tort law, rights, or liabilities on the basis of efficiencies or minimizing of costs. But if not costs or efficiency, then what? The answer is that only ethical principles can serve as criteria for our decisions. Efficiency can never serve as the basis for ethics; on the contrary, ethics must be the guide and touchstone for any consideration of efficiency. Ethics is the primary. In the field of law and public policy, as Rizzo wittily indicates, the primary ethical consideration is the concept that "dare not speak its name"—the concept of justice.

One group of people will inevitably balk at our conclusion; I speak, of course, of the economists. For in this area economists have been long engaged in what George Stigler, in another context, has called "intellectual imperialism." Economists will have to get used to the idea that not all of life can be encompassed by our own discipline. A painful lesson no doubt, but compensated by the knowledge that it may be good for our souls to realize our own limits—and, just perhaps, to learn about ethics and about justice.

Quotes on Censorship

2009-04-11T11:37:00.001-07:00

Just found this site on forbidden books, with a number of great quotes. My particular favourite is the following by Churchill – simply because it has been one of my own observations and pet peeves for many years.

"Everyone is in favor of free speech. Hardly a day passes without its being extolled, but some people's idea of it is that they are free to say what they like, but if anyone else says anything back, that is an outrage."
-- Winston Churchill

Frankly, the list is a little tame and seems to focus on books banned by local busy-bodies in the United States. There are a number of books out there that are really banned, and for which one can go to prison if caught distributing or even just owning them.

Granted, the works of the Nazis and the Holocaust deniers are intellectually offensive, but that’s no reason to ban them. The difference between prohibiting books that deny the reality of Holocaust and prohibiting books that deny the divine nature of the Koran is, after all, not a matter of principle but of taste.

It is hard to credibly accuse the Iranian Mullahs and Chinese Communists of censorship when they go after the authors novels and cute self-help pamphlets, while Western democracies jail the authors of pseudo-historical tracts.

Luke 6:42 is and remains a good general principle.

Bow-ow-ow: Obama's painful missteps | Salon

2009-04-10T13:48:00.001-07:00

Cute.

Bow-ow-ow: Obama's painful missteps | Salon

1934 FDR Depression Era Cartoon - Look Familiar?

2009-04-10T13:31:00.001-07:00

Bob Murphy had this one up, but he also got it from somewhere else.

1934 FDR Depression Era Cartoon - Look Familiar?

Imagining the Tenth Dimension

2009-04-10T09:51:00.001-07:00

I’m sure what you can see in this video is very clever – and possibly true – but I still can’t imagine the tenth dimension. I have a hard time imagining the fourth dimension, and apparently problems navigating the third. But – it’s still neat, and if you memorize it properly, a great way to impress people at the next party.

Cheerio,

Frodo Baggins would feel right home.

2009-04-10T09:26:00.001-07:00

I’m not big fan of all these eco-panic inspired harebrained schemes that have infested our popular culture, but I have to admit that this “Low Impact Woodland Home” is pretty.

Though I wonder how long that kind of construction will last.

The Icelanders have build something comparable for centuries, but without the Tolkien look:

There may have been no Housing Crisis, but don’t worry…

2009-04-10T05:54:00.001-07:00

Over at the Austrian Economist, Steve Horowitz posted this neat item from Forbes, according to which Todd Zwyicki of George Mason argues that the Housing Crisis isn’t a crisis, and that Obama should stop treating it as one.

For example,

Instead of frightening people by talking about the end of the American dream, Zywicki argues, the Obama administration should offer reassurance, stressing the specific, limited nature of the foreclosure problem. "Heck," Zywicki says, "41 out of the 50 states have foreclosure rates below the national mean."

I will take his word for it – but don’t even think for a minute we are out of the woodworks – no matter how limited the housing crisis has been, our collective governments are now doing everything they can to make sure the economy – at least in North America, and possibly Europe - as a whole is going to go belly-up, what with billions of dollars of new funny money for their “stimulus”.

And in case you were wondering why that has not yet translated into massive inflation, look no further:

Enjoy your day.

The Straight Dope - Fighting Ignorance Since 1973

2009-04-10T05:11:00.001-07:00

I love this site – every day, Cecil answers another weird question you never thought of asking but had wondered about while sitting behind the wheel of your car in traffic.

Like this one, for example:

Why do Eskimo people stay there?

April 18, 1980

Dear Cecil:

Why do Eskimo people stay there?

— David K. and Phil V., Chicago

Gentlemen:

Why do you guys stay in Chicago? At least the Eskimos have cheap rent and easy parking. In addition, Arctic peoples possess various physiological properties that make them well suited to life amid the icebergs, and in fact cause them to endure considerable discomfort if transported to a warmer locale.

For one thing, Eskimos are compactly built, which minimizes loss of body heat. The average Eskimo's height is only about 5'2", and most of that consists of a massive torso. The lower portions of their arms and legs are shorter than the upper halves, and their hands and feet are distinctly petite. That means they don't lose a lot of heat through their extremities, which are most vulnerable to the cold.

Eskimos have a higher-than-ordinary basal metabolism rate (they burn their food faster), which enables them to keep their blood temperature at a tolerable level despite the cold. Their blood vessels are arranged in such a way that there is increased blood flow to exposed body parts, such as the hands. In addition, blood returning from the hands is warmed before re-entering the heart.

In extreme cold, some northern people are capable (via the autonomic nervous system) of shunting blood from one artery to another so that temperature can be reduced in the extremities without affecting more important organs. It has been reported that some Arctic natives could work for considerable periods in subzero temperatures with their bare hands, and would strip to the waist and complain of the heat if the temperature rose above 40 degrees. You guys might cut a more dashing figure on the beach in the summer, but Eskimos are better equipped to shovel the snow.

— Cecil Adams

Random House’s Modern Library - 100 Best - Novels

2009-04-09T19:26:00.001-07:00

I don’t know – if the Random House ‘Reader’s List’ is truly a reflection of what people think are the 100 best novels of all times, I think we are all in more trouble than even I thought.

And, yes, I do include Ayn Rand’s novels in this – I have read her, and I found her style insufferably clunky while her characters did nothing for me. However, I have to admit that that Rand’s musings on architecture in The Fountainhead were quite thought provoking and my taste has been strongly influenced by it.

After reading The Fountainhead, how could anybody possibly tolerate this:

PLEASE!

Anti-Capitalist

2009-04-09T19:14:00.001-07:00

I really like Stumbledupon, because when you set it properly, it lets you discover the weirdest things with very little effort.

For example, today I found this neat little picture below – I remember it from one of my high-school social studies texts, and while I haven’t given it much thought since then, it’s neat in weird way to have found it again. It’s from this weird website that calls itself Anti-Capitalist and does not seem to have anything else on it.

Back in my youthful and foolish days (I once voted for a socialist party, believe it or not) – I thought it quite witty, though now I just think it’s hilarious in it’s incredible irony.

Judge denies Galloway's bid to enter Canada – or maybe not?

2009-04-09T10:39:00.001-07:00

It seems that the story about Canada banning George Galloway from entering the country may not be entirely correct after all.

Galloway a shameless self-promoter? Who would have thought.

Still, I think Galloway does make good points quite often, but I think he is morally confused.

My personal favourite is this debate between Hitchens and Galloway - nothing is more amusing than have two jackasses have a go at each other (It's more than one section, but I trust you know how to operate youtube)

New addition to my growing reading list: The Tunnel People of Las Vegas

2009-04-09T08:47:00.001-07:00

Just came across this rather curious item about an underground world inhabited by the ‘homeless’ in Las Vegas. Notice that the conditions in the tunnels appear to be safer than elsewhere. Maybe another little glimpse at how societies DO self-organize without the State?

Zotero: The Next-Generation Research Tool

2009-04-09T08:03:00.001-07:00

Are you a student, researcher, or information hog? Then you should check out Zotero.

I have been using Zotero about six months now and it is probably the single best reference management software I have ever tried – and I have tried (and paid for) all the big ones (ProCite, RefMan, EndNote). Not only is Zotero free, it’s better. Seriously.

And considering the downright nasty lawsuit by Thompson-Reuters against the makers of Zotero, I regret ever having paid the big bucks for their comparatively lousy products.

Penguins April Fool - The Making Of - BBC

2009-04-09T07:03:00.001-07:00

I guess by now most people have seen the BBC’s 2008 April Fools on Flying Penguins, but I think this little background clip on how they did it is just as cool.

Stop Spending Our Future - The Crisis

2009-04-09T04:25:00.001-07:00

Found this over at Reason, who got it from here.

Funny how a Democrat in the White House can make the Heritage Foundation find religion on fiscal prudence…

Canada recession may recover in late 2009: poll - Yahoo! Canada Finance

2009-04-09T02:52:00.001-07:00

Canada recession may recover in late 2009: poll - Yahoo! Canada Finance

Ok, so they are hedging their bets with very, very tentative language. Still – I’m of the mind to keep track of all these silly predictions and call them out when things have gone to hell. Recovery? If you call another ‘boom’ based on funny money recovery, fine.

Want to feel all bad and guilty about being human?

2009-04-08T20:33:00.001-07:00

This may just be the site for you.

Too tired to rant about it. If you feel up to it – leave a comment.

What’s wrong with Econometrics?

2009-04-08T17:22:00.001-07:00

To an econometrist there is no difference between 50 cellular phones costing $100 each and 5 rotary phones costing $1,000 each. Both are worth $5,000.

That’s what’s wrong with Econometrics.

Cheerio,

The Wall Street-Washington Complex

2009-04-08T13:31:00.001-07:00

This Story is definitely not getting enough play, so I’ll do my part to promote it. It’s also in my ‘shared’ items, but for some reason, Jeff’s blog seems to be down for the moment.

from The Daily Capitalist by Jeff Harding

By Jeff Harding

Larry Summers worked for hedge fund D. E. Shaw for one day a week for a year and received $5,200,000. Assuming they gave him a couple weeks off, that’s 50 days of work. $104,000 per day is pretty good work if you can get it. He also made a lot of money from speaking engagements: $2,770,000. If you average the 40 or so engagements, he got about $69,000 per speech. Most of his speeches were to financial companies like Goldman Sachs, Merrill Lynch, JP Morgan, Citigroup, Lehman Brothers, and American Express.

After getting his Ph.D. in economics from Harvard he became one of the youngest ever tenured professor at Harvard (1982). He also worked on the Reagan Council of Economic Advisers (1982-1983). In 1991 he left Harvard to be the Chief Economist for the World Bank until 1993. From 1993 to 2001 he served in the Clinton Administration in several positions, lastly being Secretary of the Treasury when his mentor Robert Rubin left for Citigroup. After Clinton he became President of Harvard University until 2005 when he resigned over an argument that deemed him sexist according to university politics.

By all accounts this son of two professors of economics at U of Penn is a brilliant man, going to MIT at age 16. Two of his uncles won Nobel prizes for economics: Paul Samuelson and Kenneth Arrow. Must be some pretty stiff competition in that family.

Mr. Summers never had what most people consider to be a real job. He made money because he was a political trophy for D. E. Shaw, not because he had some extraordinary insight into economic or financial matters. According to the NY Times:

Mr. Summers and Shaw executives say his role there was to be a sounding board for Shaw’s traders. But interviews with friends and former colleagues suggest that Mr. Summers’s role at D. E. Shaw was wider and more complex.
Mr. Summers, these people say, was a marquee hire, a prized spokesman for Shaw. He routinely made himself available for private consultations with Shaw’s clients, an attractive perk for investing with the firm, as one client put it.
Mr. Summers, who taught economics and public policy at Harvard while advising Shaw, also met with investors in the United States, as well as in the cash-rich Middle East and Asia. He spoke at industry conferences, mixing with officials from public pension funds, endowments and other large institutions with many billions of dollars to invest. …
A spokesman for Shaw said Mr. Summers’s main job was not to act as a salesman. But in the fall of 2007, as the financial crisis simmered, Mr. Summers traveled to Dubai for a series of meetings with Shaw’s marketing staff and potential investors. Bankers from across the region flew in for the event. Mr. Summers spoke at several lavish dinners and met with local parties involved in Shaw’s real estate investments in the area, people briefed on his trip said.

Mr. Summers, as Director of the National Economic Council, is now the most powerful person in the Obama Administration on economic issues.

* * * * *

President Eisenhower warned of a “military-industrial complex,” which was his term for the combination of defense contractors, the military, and politicians who’s goal was, and still is, to influence military, foreign policy, and spending decisions for their benefit. Eisenhower saw it as a threat to individual liberty since it existed to perpetuate its power and money through military spending.

This same issue was raised by Nobel Prize winner and Austrian School economist, Friedrich von Hayek in his classic 1944 book, The Road to Serfdom. His point was that central planning eventually leads to tyranny, as evidenced by the Soviet Union or Nazi Germany. The inevitable failures of central planning leads to demands for more power to accomplish the failed goals which in turn would curtail individual liberty and result in a totalitarian state. He was critical of a war machine driven by former warriors reluctant to give up power.

While we still have the military-industrial complex, we are now seeing the rise of the Wall Street-Washington complex. While not exactly a new phenomenon, actions of the Obama and Bush administrations reveal the power of Wall Street and politics in the arena of economic policy. We have the constant shuffling back and forth between government and Wall Street of very familiar faces who share common ideas and ideals.

It’s been going on for quite a while. Paul Volker (Princeton/Harvard) left the Fed to become chairman of J. Rothschild, Wolfensohn & Co, a New York investment bank. Allen Hubbard (Vanderbilt/Harvard) was a successful entrepreneur and friend of George W. Bush who became Bush’s chief economic adviser. Laura Tyson (Smith/MIT), another adviser to Clinton, has been a Director of Morgan Stanley, AT&T, and Eastman Kodak. Hank Paulson (Dartmouth/Harvard), Bush’s last Treasury secretary, was a Goldman Sachs man, like Robert Rubin. Stephan Friedman (Columbia) also came from Goldman to be another of Bush’s chief economic advisers.

Fed Chairman Ben Bernanke (Harvard/MIT) and Secretary of the Treasury Tim Geithner (Dartmouth/John Hopkins) fit into this mold, although neither has been employed in the private sector. To round it out, Christina Romer, the Chair of Obama’s Council of Economic Advisers, went to William & Mary and MIT.

Mr. Summers made a lot of money for being a trophy schmoozer for D. E. Shaw. I think he sold himself a bit short; Robert Rubin (Harvard/Yale), his predecessor at Treasury, made an estimated $115 million while at Citigroup.

* * * * *

It is well known that after spending time at certain regulatory agencies, former bureaucrats seek financial gain in private industry by dealing with the same agencies they worked for. But what I’m talking about is different.

The Wall Street-Washington complex is a relatively small political-financial-economic clique that revolves around a common orbit:

Degrees from Harvard and MIT;
Employment with Wall Street banks, especially Goldman Sachs, Merrill Lynch, and JP Morgan;
Economics professors, especially at Harvard and MIT;
A revolving door for the above to become economic policy advisers in government;
The politicians and their advisers who have been funded or endorsed by the above.

They share the same basic philosophies in government (interventionist), economics (Keynesian), and finance since they were educated in the same institutions and worked in the same places, public or private. They easily slip back and forth between government and Wall Street and reap the rewards of power and money. As a result they represent current mainstream thinking in economics and finance in America. They are our leaders in government and in finance and investments.

What’s wrong with this picture?

They are the same people who got us into this economic crisis and are now in charge of leading us out. The bailout is emblematic of this problem because it implements their world view: Wall Street and their friends are of prime importance and bailing them out is the key to economic recovery. You can look at the bailout as kind of a payback.

In light of what Eisenhower and von Hayek warned, here’s what the Wall Street-Washington complex is doing:

They continue to employ the same risk models of finance and investment on Wall Street that helped cause our crisis.
They are demanding more political power to “correct” the economy to save us.
They are imposing new laws to restrict the ability of entrepreneurs and businesses to create wealth and economic well being in America.
They will continue to blame “capitalism” for the crisis instead of the government intervention in the economy which caused this crisis.
They are implementing the same Keynesian “remedies” that were tried in Japan and failed with catastrophic results for them.
They will leave us with huge debt that will be a drag on the economy for generations to come.
They are creating the foundation of a new credit bubble which will bring us another boom-bust business cycle.
They are cutting their Wall Street cronies in on plum deals to buy bank “legacy” (“toxic”) assets.
They are changing the entire nature of the relationship of government to business.

* * * * *

This Wall Street-Washington complex is the most dangerous clique in America today. They are repeating the same economic mistakes that got us into this mess and are leading us into very dangerous territory.

Your reaction to this statement may be that I am exaggerating or have paranoid delusions or am a conspiracy theorist. As you know from the title of this blog, I support capitalism and the activities of free market traders in the financial markets. Despite the fact that some of my friends went to Harvard, I think I am a reasonable person and not prone to exaggeration. I don’t think they have secret meetings in the basement of the Washington Monument and I don’t think they see themselves as a clique.

There is a word for this type of cozy arrangement where a business and government elite use their power for mutual benefit. It’s a very common political system that has been used many times in many countries under different names: national corporatism, mercantilism, crony capitalism, oligarchy or plutocracy, dirigisme, and fascism. It isn’t capitalism, the free market, or the libertarian vision set forth in our constitution and Bill of Rights.

The reason that capitalism works is that it is a system that allows millions of people to act for their own financial benefit without a Gang of Four or a Gang of 500 telling them what to do. By substituting their decisions for the decisions of millions, this small powerful group can impact much of the world. When we ordinary citizens make mistakes the collateral damage is usually minimal. When the Wall Street-Washington complex makes mistakes we all suffer. This concentration of power is why they are dangerous.

Larry Summers is the poster boy for this world. He put in his time in academia and politics and cashed in big-time during the interregnum. All of his relationships in academia, Wall Street, and Washington are part of this complex and now he is at its center. It’s been good for Larry Summers and his friends. It’s bad for us. The bottom line is that we, the taxpayers, will pay for their mistakes. As will our children, grandchildren, and our great-grandchildren.

Change to Comment Policy

2009-04-08T13:22:00.001-07:00

As an experiment, I have removed the member-only limitation on commenting. However, I will moderate all comments. Let’s see how that goes.

Cheerio,

The Mogambo Guru

2009-04-08T07:15:00.001-07:00

Asia Times Online :: Asian news and current affairs

Some of you may already know Richard Daughty, the Mogambo Guru, also known as the ‘angriest man in economics’. He has a regular column over at Asia Times Online, and I read him on a regular basis.

Apart from being completely off the wall, and repetitive – buy gold! buy silver! buy oil! – his columns include some often incredibly informative references. If you can figure out how to find them, since he does not link, and regularly quotes second-hand.

But, he’s fun, and he makes me laugh. So, without further ado, here’s the man in action.

The End of American Naval Superiority

2009-04-07T20:11:00.001-07:00

I still don’t know who the War Nerd is – but he posts some of the most interesting articles on all things related to war. This latest one got my real attention, because it shouldn’t come as a surprise at all to anybody who has read a little bit about military theory – and if it was only Edward Luttwack’s slim but impressive “Strategy” (it’s absolutely worth the read, particularly Luttwack’s discussion on the military usefulness of aerial bombing of cities during WWII, but I digress).

That there are means of getting at the carriers is not exactly news. Remember the Kursk? Well, rumour back then had it it was carrying a neat little toy called the Shkval; no need to get into details here, the layman simply needs to know that this is a really, really fast torpedo that scares the bejeezus out of every honest navy man.

So, while there was once fear the Russian were going to sell the Shkval to the Chinese, who would then use it to blow the Kitty Hawk out of the Pacific in case of a little Taiwan Anschluss, we can relax: China won’t be needing any help from dem Russkies anymore.

Though when it comes down to it, maybe the Chinese will just buy America’s blue water fleet rather than blow it up?

Interesting times.

A Blog of Prefaces

This Blog has moved to Wordpress

The Federal Reserve on… The Federal Reserve

Myth:

REALITY:

Myth:

REALITY:

Bob Murphy’s Response to Cochrane (who responded to Krugman)

Monday, September 14, 2009

========== Cochrane Threatens Austrians More Than Krugman Ever Did By Robert P. Murphy

Libertarians that support Truthers are stupid

Norman Borlaug - Scientist, Humanist, Life Giver, Dies at 95

How did Paul Krugman get it so Wrong?

Comments on American Democracy #1

Vacation

Economics Joke - #1

If C+I+G+X-M=Y

then $10C+$10I+$10G+$10X-$10M = $10C+$0I+$20G+0X-$0M

More Health Insurance is Not the Answer

More Health Insurance is Not the Answer

When someone else pays, costs always go up

Zoho vs. MS Office

Small Company Offers Web-Based Competition for Microsoft Word

America’s New Money

Google to launch operating system

[please note my quibble foot-notes below]

Capitalist socialism in the works of Fellini

J. John Hubbard Department of Politics, Miskatonic University, Arkham, Mass.

1. The pretextual paradigm of consensus and dialectic construction

2. Joyce and the textual paradigm of context

3. Subpatriarchialist discourse and capitalist pretextual theory

4. Realities of stasis

5. Capitalist socialism and Derridaist reading

6. Contexts of defining characteristic

7. Burroughs and Derridaist reading

8. Capitalist socialism and subdialectic theory

9. Gibson and the textual paradigm of context

10. Contexts of futility

A Short History of Government Bailouts

History of U.S. Gov't Bailouts

What Happens After a U.S. Gov't Bailout?

Would you pledge your soul as loan collateral?

What they won’t tell you about the Iranian Election on CNN

The U.S. National Deficit – 1979 to 2009

Bury your gold?

A Former IMF Functionary on the American Gangster Economy

Mark Taibbi on the American Gangster Ecoromy

The Shining – as You never remembered it…

If You thought Ecclesiastes is the Best Book of the Bible…

Krugman is actually stupid

Being gay in Russia

Russia’s Limousine Liberals

Laughing at yourself is good, but

Wendy McElroy on Abortion

9 implications of anti-abortion arguments

Why Star Wars is even worse than You thought it Was

Funny. And Disturbing. But... Funny.

Why Atheism?

"The State of the Intellectual Property Debate at LRC"

"The State of the Intellectual Property Debate at LRC"

25 Comments - Show Original Post Collapse comments

How to contract Swine Flu – if You absolutely must

Tata – Good Bye

North Korean Traffic Cop tells Mini Driver to take a Hike

Maybe they like us better now…

Top Ten Myths of Entrepreneurship

Top Ten Myths of Entrepreneurship

Whiners

Why Spelling Don’t Matter

The Galactic Core seen from Earth

Steven Hayward and the Resilient Earth

The missing sunspots: Is this the big chill?

Krugman was sane once

Krugman can’t think straight.

Buy-American rules shutting out Canadians – and costing Americans

Ontario now in business of 'reverse Reaganism'

Gold Standard no Protection against Inflation

War Is Tribal

Who ever said this man is stupid?

Peter Schiff on why Mankiw and Co are nut

==========
Cochrane Threatens Austrians More Than Krugman Ever Did
By Robert P. Murphy

J. John Hubbard
Department of Politics, Miskatonic University, Arkham, Mass.

This Story is definitely not getting enough play, so I’ll do my part to promote it. It’s also in my ‘shared’ items, but for some reason, Jeff’s blog seems to be down for the moment.

from The Daily Capitalist by Jeff Harding