The End of the World Club (there seem to be quite a few – can’t find a link to the one I mean) is a bunch of Austrianist-inclined people who meet at London’s Institute of Economic Affairs every few weeks to talk about the state of the world, and than afterwards maybe drink and/or dine locally, to try to cheer themselves up again.
Simon Rose, the guy who runs the End of the World Club, has asked me to kick off the discussion on the evening of May 28th. The following is a hastily typed summary of what I have in mind to suggest that we all talk about. I emphasise the “hasty” bit. Under comment pressure I will surely want to modify or even abandon quite a few bits of what follows. My number one purpose here is not to be unchallengeably right about everything, although you never know your luck; my number one purpose is to provoke thought and talk, by looking at the world from a slightly different angle to the usual angles. It began as a mere email to Simon Rose, but as you can see, it got a bit out of hand. My email to Rose will now be the link to this.
Since it’s the “End of the World” Club, I thought it might make sense to think about optimism and pessimism. Is that title (“End of the World”) for real? Or is it playfully ironic? How optimistic or pessimistic are we End-of-the-Worlders about the near future, and the longer term future? How optimistic or pessimistic about the near and longer term future are our statist adversaries? How much difference does that make to anything?
In recent decades, it has been the Austrian School who have been most rationally and persuasively pessimistic about the short run (by which I mean the next few years and the next, say, couple of decades). And it has been the politically middle-of-the-road statists who have been most unthinkingly optimistic, first, that no sort of economic catastrophe was coming, and now, when they try to be as optimistic as they can about the catastrophe (that has happened despite their earlier unthinking optimism) not getting any worse. Austrianists, in contrast, regard the present turmoil as proof that they were and remain right about everything, and that their pessimism, now, about the short term (and actually not that short term) future will accordingly also be entirely justified. Austrianists are mostly pessimists now. (Think Detlev Schlichter.) But they are optimistic about their own thought processes, in which they have absolute confidence.
But when it comes to the bigger picture, it is the broader free marketeer tendency who are now the optimists.
Socialists used to be optimistic, about how their socialism would make humanity materially better off. They were only pessimistic in the sense that they feared that they might never be allowed to do socialism. But about half way through the twentieth century, socialists stopped saying that they would do affluence better than capitalism was doing it, because the claim that capitalism wasn’t doing affluence was becoming absurd. Instead they turned against affluence.
They became economic pessimists about their own policies, in other words. But they stuck with their policies and turned their backs on the idea of mass affluence being a good thing. The Green Movement, which is what socialism has mutated into, is a huge surrender on the economic policy front, and an attempt to engage with the world on a quite different front. Socialists have surrendered the happy future. You have to listen a bit carefully to hear this. It took the form of a huge change of subject, from making the future happier, to making it more virtuous and poverty-stricken. They used to like affluence. Now they trash it. (Have a listen, for instance, to this excellent Jeffrey Tucker talk.) They used to be leading us towards an imaginary heaven on earth. Now they claim merely to be saving us from an equally imaginary hell on earth (and thereby are actually trying to create a real one). I am optimistic that this imagined hell on earth is also now on the way to being abandoned (see, e.g., this blog posting by Pointman). (What will be their next Big Tyranny Excuse?)
Meanwhile, classical liberals (as opposed to the illiberal liberals of our own time) note how free market ideas have raised humanity from abject poverty to a standard of living that was formerly unimaginable even for kings and emperors. Some free marketeers are rationally optimistic (to echo Matt Ridley‘s recent book title) that life will continue to get better, despite everything the statists and socialists now try to throw at it. Other free marketeers are now supremely optimistic that free market policies will work superbly, provided those policies are followed. Think J. P. Floru (an earlier speaker to the End of the World Club – very eloquent, very confident, I was there). Conditional optimism, you might call this. This is the same optimism that the socialists had a hundred years ago or so. It is very potent. The future will be wonderful, but only if you join our cause and help us save this wonderful future from being trashed by our malevolent, idiotic adversaries.
In the first half of the twentieth century free marketeers were much more tentative and intellectually timid. They often agreed that material progress would only happen if big government (with or even without big business) made the running, but argued for freedom anyway, as something that should be sentimentally preserved despite its economic cost. No wonder they did so badly.
But free marketeers are now the optimists. In the long run this means we will win. Discuss. See also: optimism (even irrational optimism) as a technique for success, individually and collectively. See also: pessimism (even (especially?) rational pessimism) as a recipe for failure, individual and collective.
That is pretty much it, and is surely more than enough to keep us talking for however long is required. Email me (you surely know how by now) if the End of the World Club is of interest, and I’ll pass it on.
In my ongoing quest to read science fiction with sensible politics and economics, I thought I would give Robert Charles Wilson a try and am reading his novel Spin, which is very enjoyable so far. On his web site he has published some talks he has given, including this:
Total up the man-hours necessary to bring even a cheap conventional color TV into your home, and the result, I suggest, would be absolutely staggering. And that work in turn rests on an absolutely colossal body of prior knowledge, all of it generated piece-by-piece and preserved and transmitted over generations.
This reminded me of the famous pencil essay. He is writing about all the things that went into making a TV advert for a car:
So even something as inherently humble as an automobile commercial stands as striking evidence that we, as a species, have an absolute genius for collaboration. Even without conscious intent — and after all, of all the billions of people necessary to produce that ad, only a handful of them actually wanted it to exist — we can still create something in which our collective ingenuity is embedded and embodied.
Of course, he doesn’t mention what mechanism makes this collaboration possible, but we all know what it is.
Not the official QOTD, but pretty great anyway:
“If prices are information, then subsidies are censorship.”
- Russ Nelson
A typical reaction to global warming skepticism is to point to all the institutions that endorse global warming and argue that this would require a grand conspiracy if global warming were false.
I argue that all that is needed is for incentives to align in a certain direction. The awarding of grants, the publication of papers and the media attention all point in one direction and there is positive feedback between them.
As reported in the New York Times, Diederik Stapel literally made up results of psychological experiments that were never done. It is not necessary to go quite that far.
Fraud like Stapel’s — brazen and careless in hindsight — might represent a lesser threat to the integrity of science than the massaging of data and selective reporting of experiments. The young professor who backed the two student whistle-blowers told me that tweaking results — like stopping data collection once the results confirm a hypothesis — is a common practice. “I could certainly see that if you do it in more subtle ways, it’s more difficult to detect,” Ap Dijksterhuis, one of the Netherlands’ best known psychologists, told me.
Journals and reviewers can play a part:
If Stapel was solely to blame for making stuff up, the report stated, his peers, journal editors and reviewers of the field’s top journals were to blame for letting him get away with it. The committees identified several practices as “sloppy science” — misuse of statistics, ignoring of data that do not conform to a desired hypothesis and the pursuit of a compelling story no matter how scientifically unsupported it may be.
The adjective “sloppy” seems charitable. Several psychologists I spoke to admitted that each of these more common practices was as deliberate as any of Stapel’s wholesale fabrications. Each was a choice made by the scientist every time he or she came to a fork in the road of experimental research — one way pointing to the truth, however dull and unsatisfying, and the other beckoning the researcher toward a rosier and more notable result that could be patently false or only partly true. What may be most troubling about the research culture the committees describe in their report are the plentiful opportunities and incentives for fraud. “The cookie jar was on the table without a lid” is how Stapel put it to me once. Those who suspect a colleague of fraud may be inclined to keep mum because of the potential costs of whistle-blowing.
So there are incentives to take an easy path of painting a simple, neat picture because it is more persuasive and saleable.
Stapel did not deny that his deceit was driven by ambition. But it was more complicated than that, he told me. He insisted that he loved social psychology but had been frustrated by the messiness of experimental data, which rarely led to clear conclusions. His lifelong obsession with elegance and order, he said, led him to concoct sexy results that journals found attractive. “It was a quest for aesthetics, for beauty — instead of the truth,” he said.
What the public didn’t realize, he said, was that academic science, too, was becoming a business. “There are scarce resources, you need grants, you need money, there is competition,” he said. “Normal people go to the edge to get that money. Science is of course about discovery, about digging to discover the truth. But it is also communication, persuasion, marketing. I am a salesman.
It is not just money; the rewards are the respect and admiration of one’s peers. In my talk on open source software on Friday I mentioned that this is one of the reasons individuals give away their source code or donate their time to open source projects. It feels good to make something that others find impressive.
I am lucky enough to work in software. There, the most aesthetically pleasing solution is usually the best one. And software can not easily be faked; it becomes apparent very quickly if it does not work. I can imagine software that appears to do what it claims to do without actually doing it, such as an encryption program that leaks your secrets. Open source software has largely solved this problem. In fact, science could learn a lot from open source software.
H/T Watts Up With That?
Sometimes, a straight, even dryly-written news-wire report can tell you about the vastly different interpretations of certain issues out there. This Bloomberg report about the world of “offshore money” is a classic case in point. The whole article is worth reading, but this caught my eye:
“According to Tax Justice Network, a U.K.-based organization that campaigns for transparency in the financial system, wealthy individuals were hiding as much as $32 trillion offshore at the end of 2010. Fewer than 100,000 people own $9.8 trillion of offshore assets, according to research compiled by former McKinsey & Co. economist James Henry.”
That is one hell of a contrast. You have the TJN’s $32 trillion, or $9.8 trillion. Take your pick.
Suppose TJN is correct. $32 trillion is a lot of money. And I ask myself how on earth a leftist campaign group such as the Tax Justice Network comes up with that figure. According to Wikipedia’s page on the size of the global economy, the latest available figure for the value of total GDP, based on the 20 richest countries, is $18.8 trillion. So maybe there is a “long tail” of money from smaller economies, but even so, it is a bit of a stretch to arrive at $32 trillion, and then to assume that this money is all parked, or routed via, offshore centres. And even if some of this huge amount of money does pass via offshore centres (such as Bermuda, Caymans, Jersey, Delaware, Zurich, Geneva, and er, cough, London) it does not stay there, but is invested in various places. (What would be the the point of just stashing money in a nice Caribbean island rather than putting it to work?)
I have come to the conclusion that while some of the concerns about offshore wealth might be justified if we are worried about finances of criminals and the like, some of the amounts being bandied about are so vast that the credibility of the attacks is seriously compromised. And I remain convinced that much of the current furore about the offshore world is based on a desire by some policymakers to stamp out tax competition and create a sort of global fiscal cartel.
I looked at my screen this morning and saw this…
BILLIONS was temporarily wiped off the US stock market last night after hackers broke into the Twitter account of the Associated Press and announced that two bombs had exploded at the White House, injuring Barack Obama
Sayeth the news article and my immediate thought is… why?
If the White House… hell, let us think big… and indeed all of Washington DC was
fortuitously tragically blasted into a huge smoking crater by an unexpected meteorite, killing every politician, government functionary and policy wonk who works there, surely that would be a economic windfall that should add billions to the US stock market, at a stroke removing a significant portion of the most active members of the parasite class from the world’s largest economy.
One of the many excellent things about the excellent Indian Premier League is the opportunity that it has given to West Indian cricketers to do great things on a cricket field, as impressive as the great things done by their great fast bowlers in the 1970s and 1980s. There are now about half a dozen West Indians making their mark on the IPL. It is no exaggeration to say that what the Indians are doing is saving the West Indies for cricket.
Not that long ago, there was talk of West Indians, dispirited by the failure of their players to do the sort of grafting you have to do to do well in five day international cricket matches in places like England, giving up on cricket altogether, and switching to basketball, or some such American alternative.
Not now. The innings of Chris Gayle in this game, which I am now watching (thank goodness for the recent multiplication of digital TV channels in the UK) on my telly, open mouthed, is already the talk of the West Indies. Got to be. I don’t know what time of day it is over there, but trust me, they are awake and cheering themselves hoarse. As of now, Gayle is 154 not out, off 54 balls. Even if you know nothing of cricket, know this: that’s dynamite stuff. Gayle is only a handful of runs away from breaking the record for the biggest twenty-twenty innings ever, set in the very first IPL game by a guy from New Zealand.
Yes. West Indian IPL Commentator: “This is now the highest score ever in all twenty-twenty cricket.” Gale 161 not out. And counting.
West Indian IPL Commentator: This is now the biggest twenty-twenty total ever. 251-3 and counting. The South African AB de Villiers has just got out for 31, made in 8 balls. South African cricket has been somewhat in the doldrums ever since the Hanse Cronje match-fixing scandal, and the IPL has been a shot in the arm for South African cricket also. They are now the top team in the world, at test cricket. Twenty-twenty mania hasn’t done them any harm either.
Globalisation, commerce, free people spending their own money on what they love, previously poor countries getting rich, individual people in previously poor countries getting rich, by cheering up the entire world – well, my version of the entire world anyway. I love it. Love it. Opposition players all clustering around Gayle to shake his hand. 175 not out. Kiwi Commentator: “You’ve broken record after record tonight. It was one of the best innings anyone here has ever seen.” Amen.
I just wish that more of my fellow countrymen could see all this. The English continue to talk head-in-sand nonsense about the IPL. In this silly piece, David Hopps talks about the IPL being “an essentially trivial Indian T20 tournament”. As so often, the word “essentially”, as the late Kingsley Amis observed many years ago, here means “not”.
There is actually an Englishman playing in this match, Luke Wright of Sussex. And good on him, because he has had a pretty good IPL so far, once he got to play. Good on him today, because he bowled in this game, and his bowling figures were: 4-0-26-1. In a game like this one, those are impressively normal numbers, even if the reason Wright did that well was that he was bowling some of his overs just after Gayle got to a hundred, and Gayle was having a bit of a chill, man.
LATER: The Guardian sums it up.
As the editor of CityAM points out, getting the narrative right is essential. The Left is great at understanding this, whereas classical liberals/libertarians have tended not to be, although part of it comes down to numbers of people. That is why it is essential, in my view, for people who want to push the tide of affairs in a better direction to break into the MSM, as well as keep pushing new channels of media in the internet age.
With that thought of narratives in mind, it seems to me vital to keep pushing back at the idea that 2008 was caused by “unregulated capitalism”. It is utter nonsense. And the “Austrian” school is the best place to go in figuring this out:
Austrian economists were among the main critics of the pre-2007 economy and financial system – there, were, of course, critics from other backgrounds too – warning of the absurd monetary policies being pursued by central banks, of the moral hazard from the authorities’ interventions, and of the hubris inherent in many mathematical financial models. Neo-Hayekians criticised Alan Greenspan and Ben Bernanke long before it became fashionable to do so, blaming them for the dot.com and housing bubbles. Austrians were aghast at the bailouts.
Hayekian ideas form the basis for an alternative intellectual framework being developed by a record number of scholars, especially in eastern Europe, the US, Latin America and even China. They are looking at ways in which market institutions can be harnessed to prevent another crisis, tackle the environment and find better ways of providing welfare, education and health. Politics is in a deeply statist phase. Eventually, however, the tide will turn, and Thatcher’s guru will be celebrated once again.
Heath is right – we are in a statist phase right now, not just in the UK. Perhaps the turning point may come from a country that hasn’t been considered. Maybe, for example, one of the continental European nations takes a dramatic turn towards sanity, although at present the odds look low on that. I still think Asia is going to be where the impetus will come from. Consider what might happen if China, India or, say, Indonesia adopts a gold-backed currency and other radical reforms. If Asian policymakers quote Hayek and Mises more than, say, Keynes or Krugman.
Hong Kong’s example of vibrant, laissez faire success eventually changed the mainland of China. Could Asia eventually force the old West to change course and come to its senses?
Philip Booth, of the Institute of Economic Affairs (peace be upon him), has this excellent article about the mix of reforms enacted in the 1980s, which have come in for some criticism from those who claim it contributed to the late unpleasantness in 2008. He refers, in particular, to the “Big Bang” reform changes to the City of London.
So, two things are clear when it comes to Thatcher’s legacy. In many respects she increased regulation of the financial sector in ways previous governments had not considered. Secondly, the most important feature of the Big Bang was that it took regulatory responsibility away from the markets and gave it to the state. In this area Thatcher was a pragmatist, not an unalloyed free market supporter. If these policies led to the crisis, those on the left have some thinking to do.
As always, whether looking at the Cold War, or financial crisis of 2008, or other issues, it is crucial to see how certain groups are trying to “shape the narrative”. The reactions to the death of Mrs T. are a textbook example of how these sort of things play out. Someone should make a film about it.
Since the Cyprus crisis the price of Bitcoins has rapidly increased. Felix Salmon wrote one of the better articles about this. But the article has its problems.
He opens by talking about someone who lost all his Bitcoins when his computer was hacked. This is avoidable by storing funds in an off-line wallet, which is just a file containing a private key used to transmit funds. It is not much different from storing gold, except that it takes up less space, backups can be made, a thief would need to both steal your wallet and know your password, and it is possible to pay money in to an off-line wallet. You only need to expose your wallet to the Internet to pay money out of it. All this requires a certain amount of skill and knowledge but so does any method of storing value.
Salmon uses the word “anonymous” carelessly. Bitcoin is not anonymous and not intended to be. It is pseudonymous. Every transaction is visible, and it is possible for the government to find out, for example, which bank account was used to buy some Bitcoins. You can probably take steps to make this so expensive that law enforcement could not afford it. But that is a practical point, not a mathematical one, and it would be a mistake to think that anonymity is built in.
Salmon complains that Bitcoin needs too much technical expertise to use. But not everyone need use Bitcoins directly for them to serve as a store of value, any more than people need to handle physical gold themselves. That one has the option to do so if one does not trust others is nice, but trusting others for convenience is possible too. If Bitcoin were widely adopted, I would expect to see secondary currencies backed by Bitcoin to be used as cash, and the equivalent of Visa and Paypal to be implemented by someone.
Salmon points out that the value of Bitcoin is very volatile and closely tracks media coverage of it. This is because there is a fixed supply (there will only ever be 21 million Bitcoins) and new people are still discovering the currency. After every media report the number of people who want Bitcoins increases. Once everyone knows about it who would want to buy it, the price should settle down as the overall demand for money is not so volatile.
Salmon’s main point is that Bitcoin is doomed to fail because as it is adopted its price will increase rapidly, which hyperdeflation will mean no-one spends it. But such a situation can not persist; as soon as the price settles spending will resume.
Although I am optimistic, there are plenty of ways it could fail. Something better might come along, or governments may attempt to put a stop to it and may succeed enough to make it fail.
Or in twenty years’ time you could find yourself having bought one 21-millionth of the global money supply for a very good price.
There has been a lot of commentary in the general news recently about Bitcoin, the digital currency that its creators and users hope will have the same, inelastic qualities ascribed to such things as gold. At a time when mainstream, fiat money has seen its value trashed in certain cases by central banks’ money-printing policies, it is easy to see the attractions.
But what the hell is Bitcoin? How does it work? And what do free marketeers of an “Austrian” bent make of it? Well, here is an essay by Jeffrey A Tucker, which I think is well worth reading.
Bitcoin is certainly making the news at the moment, judging by some very sharp market movements over the past day or so. Even if it turns out not to be quite as successful as hoped, if it sparks off more thinking about alternatives to government funny-money, that has to be a good thing.
A Bitcoin hedge fund has been set up in Malta. I am actually going down to Malta in May for a few days – perhaps I’ll look up the managers there to find out more.