We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Samizdata slogan of the day

Gun control? It’s the best thing you can do for crooks and gangsters. I want you to have nothing. If I’m a bad guy, I’m always gonna have a gun. Safety locks? You’ll pull the trigger with a lock on, and I’ll pull the trigger. We’ll see who wins.
- Sammy ‘The Bull’ Gravano, Mafia hit man

Bogus flying rights

Nice piece by fellow blogger Patrick Crozier on Tuesday about the tale of a group of passengers using low-cost British airline Easyjet who refused to leave a plane and make way for a different set of customers.

It centres around the wrong-headed idea that a consumer has a “right” to something beyond the specific contents of a contracted service, such as a flight taking one from A to B at a set time. Enforcing such “rights” via government intervention will inevitably mean higher costs on the rest of us. If folk want to be able to fly at flexible times, then that entails a higher cost, since airlines can’t be sure exactly when their planes will be full.

The price mechanism is a great way to let consumers and providers balance the pros and cons of flexibility versus cost. I should know. I just booked a return flight to San Francisco from London on the Web for just 450 pounds. It is non-refundable and requires me to fly at a set time. If I turn up late and bawl about my “rights”, I’d rightly be regarded as a fool.

And some Englishmen don’t think all that much of Leah either…

Canadian Leah McLaren‘s remarks about the sexuality of English males amused Adriana but a gentleman who actually dated the winsome Ms. McLaren has a rather less charitable view on why she wrote the things she did.

Sometimes there is a quick fix.

Remember my July 10 post, “Tell me about special reading”? Well, you can all stop thinking I’m just another middle class mama boasting about my wonderful offspring. I am and I do, but not today. The purpose of this post is to downplay my kid and up-play, if the term is allowable, the system that taught him to read so quickly. Evidence that this might be a group rather than an individual effect was provided by a little sign posted up on his classroom door at the end of term. It said that 95% of the children in his year were ahead of the national average in literacy, and 54% of them were more than a year ahead. In case you are wondering, the school is an ordinary state school in an area that is mostly middle and respectable working class but includes some children from welfare enclaves.

So what’s this post doing on Samizdata? Early Reading Research (ERR) certainly is not a system designed to appeal to libertarians. The teacher is boss. The kids listen and participate as a group, in unison. Scientific it may be, but in spirit it is a throwback to systems the Victorians would have recognized.

But that doesn’t matter. The libertarian morals to be drawn are (a) it’s taken thirty freaking years or more to overthrow the fraudulent orthodoxy that monolithic state education enthroned, and the job ain’t done yet; (b) that when you next hear statists moan on about how horrifically complicated, interconnected and hard to solve social problems are, mentally add the words “so long as you refuse to admit that you were wrong”; (c) watch the buggers in the educational establishment. Watch them with the eyes of a hawk. Sure, they are by now in their heart of hearts convinced that phonics is the system that works. But a little matter like the interests of actual children won’t override the fact that the last thing the Special Needs “community” want is sudden, clear improvement in children’s literacy. It would make them look bad. Worse, it would make them look unecessary. Expect them to obfuscate, distort and delay reform in every way imaginable. They’ll tell themselves that gradual change and a “mixed approach” are the best thing all round, which is true when the best thing is defined as covering their tails.

One final point. I can talk “mixed approach” too. I’m not saying ERR is the best and only system for all time, just that it knocks the National Literacy Strategy into a cocked hat. I’m not saying that there are no children with real special needs, just that there are much fewer of them than will keep all today’s legion of special needs teachers in their jobs. And I have no idea of what Jonathan Solity’s political opinions are. If he ever reads this and finds himself agreeing with me, I suggest that he keep very, very quiet about it.

A milestone

Happy birthday, Professor Milton Friedman! Chicago’s greatest academic passes the 90-year milestone today. Now there are many ways we Samizdatistas got to hold the views we do, but speaking for myself, Prof. Friedman was a key factor.

I recall reading his book Free to Choose when I must have been in my mid-teens, and found the clarity of his writing and often wry comments about the insanity of Big Government a compelling combination. As a youngster, I found his arguments easy to understand but they never patronised the reader. He surely ranks alongside Ludwig Mises, Murray Rothbard, Ayn Rand, F.A. Hayek and Robert Nozick as one of the giant figures in the libertarian counter-revolution after the Second World War.

Big media’s credo: Don’t Know, Don’t Care

Remember Clinton’s “Don’t Ask, Don’t Tell” policy for admitting gays into the US military? It appears that Big Media has adopted a “Don’t Know, Don’t Care” approach to covering the tumultuous stock market. Cal-Berkeley journalism prof Orville Schell says that Big Media’s obliviousness to the looming financial scandals stemmed in part from the fact that they are part of the corporate world too.

Maybe that’s why Big Media failed on the investigative side, but that still doesn’t explain how it is that the largest and most reputable media outlets in the world are simply at a loss to tell their readers what is happening in the financial markets. Instead of providing answers, they rely on pop-culture cliches, psychobabble and a Rolodex full of self-serving “experts.” Here are three of the worst examples of the DK/DC mentality in recent days from three major news sources: MSNBC, the New York Times, and CNN.

Exhibit 1: MSNBC on Market timing

MSNBC wonders out loud whether it is possible to “time” the market — that is, can investors count on making extra money in the stock market by picking the optimal times to buy and sell? This is hardly a controversial issue in the finance community — the weakest version of the Efficient Market Hypothesis (EMH) says that you cannot forecast stock prices by extrapolating present trends or by overlaying historical cycles — that “market timing” is fool’s gold. Yet in an attempt to make the story “balanced,” MSNBC gives disproportionate weight to the crankish opinions of a “stock cycle” fetishist named Peter Eliades. The author of the story is totally unable to critically assess Eliades’ claims.

Never mind that stock cycle theory is the phrenology of the finance world — Peter Eliades is telling us that he can make money timing stocks. His “proof”: stock prices fluctuate, so it is critical to buy and sell at the right times. Gee, you mean I would make more money if I bought at a lower price and sold at a higher one? That is a tautology, not an argument; it is not proof that any valid strategy for forecasting the peaks and valleys of the market can be devised. The MSNBC author seems totally incapable of making this critical distinction.

As for Mr. Eliades, we are told that he “[has] his money in cash until the market shows clearer signs of its next move.” So he essentially concedes that he doesn’t know how to time the market either, but this point is also lost on the author of the piece. And why on earth is he in cash? Is cash the only alternative to corporate equities? But since MSNBC knows as much about securities markets as Mr. Eliades — next to nothing — he is their peer, and as such is taken at face value by clueless Big Media scribes.

If you are concerned about when to get out of the stock market, you can always hedge your bets by selling off your stock portfolio a little at a time, smoothing out the bumps in the ride. Market timing poses no crisis to smart, disciplined investors.

Exhibit 2: The NY Times on the recovery

I picked this next quote not because I felt like picking on the New York Times, but because I think that it is all too typical of pseudoscientific analysis of the stock market and the sheer pervasiveness of the DK/DC policy by Big Media in general. It could have come from any newspaper. This is how The Gray Lady attempts to explain Monday’s stock market rally:

Emboldened by the broad market’s ability last week to snap a three-week losing streak, investors jumped back into the market on Monday, scooping up stocks with beaten-down prices.

Stock prices rose because investors jumped back into the market? Hmmm … how did these investors “jump into” the stock market? By purchasing stocks from the Stock Market Fairy, right? No, they bought shares from willing sellers who were already in the market and wanted to reduce their exposure to those particular securities. Every share of stock that is traded on the NYSE is simultaneously bought and sold, by definition. Duh!

And what is with this psychobabble? In an absurd anthropomorphosis, the Times tells us that the market had the “ability” to snap a losing streak. Markets don’t have “abilities” — markets do not “struggle” to “find their level” or “seek to reverse their losses” or whatever other characteristics journalists assign; markets simply calculate the prices needed to avoid surplus or shortage conditions. If the buyers were “emboldened,” what does that say about the investors who sold their shares to the emboldened buyers? Are they wusses?

Exhibit 3: CNN on the scandals

This CNN piece is typical of the media’s DK/DC attitude toward the
corporate earnings scandals. Investors, we are told over and over again, have been “alarmed” and “shaken” by various scandals in which senior management “cooked the books” to overstate profits. Well, maybe rank amateurs and ham-fisted day traders allow measures like “earnings per share” drive their investment decisions, but as they tell you in accounting courses — profit is opinion, cash flow is fact.

If I am a CFO, which would I rather do: report higher earnings or lower earnings? Suppose that I have the option of valuing inventory in two ways, one of which would result in a higher cost of goods sold; or suppose that I can choose from two depreciation schedules for my fixed assets, one of which would cause me to take more depreciation expense sooner in the life of the asset. In either case, I’ll take the option that depresses current earnings, thus minimizing current tax liability and giving me more cash sooner. Tax reforms such as accelerated depreciation and LIFO (last in, first out) inventory modelling would allow corporations to report LESS taxable income while INCREASING their cash flow by decreasing their tax liability. Investors value a stock for the company’s ability to generate cash to pay dividends, not for its ability to enrich Uncle Sam.

A healthy firm is going to try to err on the low side when reporting earnings. For a struggling, nearly insolvent firm like MCI WorldCom or Enron, the incentives might be reversed if, for example, reporting very low or negative earnings would cause the firm’s bond rating to fall substantially. WorldCom and Enron were highly leveraged, which means (1) that they are extremely sensitive to the cost of financing their debt and (2) that they are extremely sensitive to downturns in the business cycle. Firms that are fighting for survival, and management that is trying to hold on to power, might try anything. But it is fatuous to treat every business as the exception to the rule.

Here is something that Big Media is not going to tell you: the outright majority of the value of the US stock market is owned by financial institutions (e.g. investing intermediaries such as mutual funds, and contractual intermediaries such as pension funds and life insurance.) Households are net sellers of individual stocks, but they are net buyers of mutual funds. In other words, households are still heavily vested in the stock market, but they are investing indirectly through professionally managed mutual funds and pension funds, etc. A pension fund manager is not going to be swayed by a cash flow statement that tries to shift $4 billion from operating activities to financing activities (as WorldCom did) — these people are just not duped that easily.

So is “shattered investor confidence” the reason the stock market is falling? Call me a heretic, but I think the scandals have relatively little to do with the declining US stock market. I think it has more to do with the EU Savings Tax Directive, which Perry has discussed below. The US stock market was fueled in the ’90s by massive foreign investment in American equities (British Petroleum buying Amoco, Daimler-Benz buying Chrysler, etc.) Europeans prefer to set up American holding companies to invest in the US, earning income on their investments that is taxed at (comparably low) American corporate tax rates.

The US attracts massive amounts of foreign investment (another way to say this is that the US has a massive current account deficit) because the US has relatively low tax rates, and relatively light regulatory burdens. But the EU considers this “unfair tax competition” and is trying to establish a tax cartel that would tax receipts of income earned in the US by Europeans at higher European rates. To the extent that such a thing would make investment in the US less profitable, it has reduced the global demand for American corporate equities. It’s just a theory, but at least it is a theory backed by some evidence, not just a bunch of tiresome cliches pastiched together into a jejune news story.

Strange views of the ‘European’ mind

Victor Davis Hanson has written a truly bizarre and confused article in National Review in which he attempts to define the widening gulf between the ‘Europeans’ and the United States (he does not really explain which Europeans he has in mind… Greeks? Germans? Portuguese? Finns?).

He suggests that one reason for ‘European’ disdain for the United States, not just amongst some poisoned social elite ruling class but the man in the street, comes from dislike of the middle and lower class orientation of American culture.

[America is] the only one in history in which the hard-working and perennially exhausted lower and middle classes are empowered economically and have fully taken control of the popular culture to create strange institutions from Sunday cookouts and do-it-yourself home improvement to tasteless appurtenances such as Winnebagos, jet skis, and Play Station IIs.

Ah yes, I frequently hear ‘European’ taxi cab drivers, nurses, office workers and house painters bemoan those tasteless Americans whilst listening to Beethoven on the radio and discoursing on Sartre with each other… oh pleeeease. I don’t know who Victor Davis Hanson hung out with on his trip to ‘Europe’ (I guess ‘Europe’ is all just a homogenous mass to a Mexican Canadian Yank like Hanson) but mass culture in western Europe is pretty much overrun with Winnebagos, jet skis, and Play Station IIs… and ghastly low brow Euro pop music, tabloid newspapers, celebrations of half-wittedness like ‘Big Brother’ on television and other such manifestations of lower and middle class ‘cultural empowerment’. The reality of what common people in ‘Europe’ think about the United States is that for the most part they don’t really think about it much at all. The USA does not loom as large in the popular psyche as Hanson thinks.

As for me, describing the United States as ‘the only one in history in which the hard-working and perennially exhausted lower and middle classes are empowered economically’ causes a wry smile. I wish it was more generally true. Unfortunately the USA is just as much in the grip of statist corporatism as Europe, only unlike Europe, the opposition to it is better organised. I wish Hanson’s rose tinted view of the USA was correct because I see much in American enterprise culture to admire but there are two Americas… one of which twice elected President Clinton on a platform not of economic empowerment but of welfare dependency and statism. Unfortunately it is not too hard to find the views Hanson thinks particularly ‘European’ being aired in Los Angeles and Boston.

South Dakota and Jury nulification

Paul Marks reports on some interesting developments in the USA… and the politico-legal establishment do not like it one bit!

Our old friend jury nulification is back. For those people who have not heard of jury nulification it is the doctrine that a jury has the right to judge, not just the “facts of the case”, but THE LAW as well. All the Founding Fathers of the United States believed in this doctrine, but it tends to make modern legal folk froth with rage – things like the “war on drugs” might get into some difficulty if jury nulification makes a come back.

This November in South Dakota an amendment to the Constitution of the State will be on the ballot. The amendment will explicitly give a defendent the right to argue against the law (whether in terms of what it makes illegal or in terms of the severity of the sentance) .

Now I am not claiming that the admendment will pass (no doubt the legal establishment will do just about anything to defeat it), but it would be interesting to see “judge made” and “politician made” law mitigated by a real jury.

Of course, I should not assume that a jury would be more libertarian than a judge or a group of politicians in a legislature – but it may put an obstruction in the way of the statists.

Paul Marks

Samizdata slogan of the day

The supposed quietude of a good man allures the ruffian; while on the other hand, arms, like laws, discourage and keep the invader and the plunderer in awe, and preserve order in the world as well as property. The same balance would be preserved were all the world destitute of arms, for all would be alike; but since some will not, others dare not lay them aside…Horrid mischief would ensue were one half the world deprived of the use of them…
- Thomas Paine, Thoughts on Defensive War in 1775

Interesting developments in New Zealand

Paul Marks has been keeping his eye on the antipodes

The recent election in New Zealand was widely predicted to be another triumph for the left. Certainly I predicted that this is what would happen (and my predictions have to be treated with some care – I tend to assume that things will go badly), but I was not alone – the BBC and the rest of the international media were all expecting the victory of their comrades (with the only dispute being between those media people who supported Labour and those that supported the Greens).

Sure enough the Labour party has got the most votes (about 40%) but even with the Greens (and fringe leftists “the progressive list”) it would not have a secure majority (even assuming these various factions of collectivists did not tear each others eyes out over things like G.M. crops).

So Labour is looking to the “United” party. I had a look at this parties web site (just go to “New Zealand” on your searcher – then go to the elections and then on from there). And it does not seem to be in favour of greater statism.

That is the thing about New Zealand – it has a lot of political groups (perhaps thanks to P.R.). I looked into all of the political groups and “ACT”, the National Party and New Zealand First can not be described as supporting greater statism (if anything the reverse – even judged by a negative minded old swine like me).

Now here is the rub. If one adds up the votes of United and the National Party and “ACT” and New Zealand First one gets very near to a majority of the voters. Now I am not saying that there is any chance of all these factions getting together – but I am saying there are a lot of “right of centre” (for want of a better term) voters out there (far more than there are in Britain). So the next election (three years time) may well see Labour kicked out and some real reform in New Zealand.

This is certainly not what I thought I would be reporting when I decided to look into this.

Final points – yes there are Christian and Rural parties in New Zealand (I have not dealt with them for reasons of time and space – they do not change the overall picture). And yes there is a Libertarian Party in New Zealand (and they seem like fine people), but as hardly anyone votes for them (they do not seem to have got one per cent of the vote) I decided not to examine them here.

Paul Marks

Samizdata slogan of the day

No kingdom can be secured otherwise than by arming the people. The possession of arms is the distinction between a freeman and a slave. He, who has nothing, and who himself belongs to another, must be defended by him, whose property he is, and needs no arms. But he, who thinks he is his own master, and has what he can call his own, ought to have arms to defend himself, and what he possesses; else he lives precariously, and at discretion.
- James Burgh from Political Disquisitions: or, an Enquiry into Public
Errors, Defects, and Abuses
, London, 1774-1775

Michigan’s Ruling Communist Party?

Now whilst I have long known that there are tiny fringe communist parties quixotically tilting at windmills in the United States, until I read an article about so-called September 11th ‘profiteers’ on the Ludwig von Mises Institute website, I had no idea that any of them were in fact in power. Yet it seems that Michigan’s Attorney General Jennifer Granholm not only believes that the State owns the means of production and distribution, but is willing to use the force of state to simply impose by edict (not even by ‘law’) how people dispose of property they have legally purchased for resale.

I strongly recommend this article to anyone who still blithely feels that ‘America is the freest country in the world’ and ‘it couldn’t happen here’ and ‘that sorta thing only goes on in Europe’. Dream on. The enemy is not at the gate enviously looking in, she is sitting in an office in a state capital near you.