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As promised, I have some thoughts following on from the talk given by Kevin Dowd, a professor at the Nottingham University Business School and a noted advocate of what is called “free banking”. He gave his talk at the annual Chris R. Tame Memorial Lecture as hosted by the Libertarian Alliance. (The LA was founded by Mr Tame, who died three years ago at a distressingly young age after losing a battle against cancer.)
Professor Dowd covered some territory that is already pretty well-trodden ground for Samizdata’s regular readers, so I will skim over the part of the lecture that focused on the damage done by unwisely loose monetary policy of state organisations such as central banks, or the moral-hazard engines of tax bailouts for banks.
→ Continue reading: The Kevin Dowd lecture on free banking
“It was John Maynard Keynes, a man of great intellect but limited knowledge of economic theory, who ultimately succeeded in rehabilitating a view long the preserve of cranks with whom he openly sympathised.”
F.A. Hayek, Choice in Currency, a Way to Stop Inflation, Institute of Economic Affairs (1975), page 10.
Prof. Hayek was usually a restrained and polite demolisher of nonsense but in this quote, I think we get a sense of the rage that he must have felt at how Lord Keynes, with his easy charm and confident manner, could persuade politicians of what they wanted to hear anyway – that you can create wealth by spending other people’s money. But even later on Hayek tries to argue that Keynes would have been alarmed at how his ideas have been used as cover for monetary insanity. I think that is a mark of how basically decent an intellectual opponent Hayek was.
Meanwhile, following on from Kevin Dowd’s lecture last night – which I thought was very good – I will have more to say about his talk later on.
Tyler Cowen has an interesting post up about the whole business of pundits betting their own money on their views. Economics students may remember a particularly satisfying one involving the late, great Julian L. Simon and the alarmist writer Paul Ehrlich. Simon, who might be thought as a “cornucopian” writer, bet that the price of a basket of commodities would not, when adjusted for inflation, rise over a certain period. Erhlich had been claiming that commodities were running out at an alarming pace and their price would therefore skyrocket. He lost the bet. Simon suggested they have another go but Erhlich, being at least not totally stupid, decided not to accept the offer. The affair has not blunted his views, a fact that demonstrates the incorrigibility of some so-called academics.
I wonder if there controversies over which you’d be prepared to stake a few pounds, dollars or pints of beer?
Regular Samizdata commentator Ian B made a good point on this comment thread (scroll down) about the issue of economic cycles. As he says, many of the boom-bust cycles have been associated with new products and markets where there is scanty information about how large a market might be. For instance, the technology boom of the 1990s involved an area – the Web – which was still unknown territory to most of us. Yes, most of us now are familiar to the nth degree with the Internet but that is because a lot of bold, not necessarily reckless, investors, geeks and entrepreneurs took a punt. With hindsight, some of these investment propositions were pie in the sky. Well, without perfect knowledge of the future, malinvestments get made. The same can be said of the 1840s railway boom. There were shysters and boosters like the 19th Century financier George Hudson, but out of the inevitable mistakes and broken dreams came a country that was criss-crossed with railways. Out of the bust of the tech boom came the Googles, Yahoos, Amazons and Facebooks of today. These technologies, for instance, have changed how I can do my job in all manner of ways, almost all of them for the better. Out of the hundreds of automobile companies set up at the start of the last century came the motoring titans of today. The examples multiply.
As Ian put it, if people don’t want these busts, then maybe they are expecting the impossible if they also want to get still all the good things that a boom can produce. For sure, it would be good to stop fuelling mad cycles with fiat money, and that is why I want genuine free market banking, and not the quasi-statist dog’s breakfast, instead. But I am most certainly not in favour of the “calm” that comes when there is no change or disruptions at all. That is to demand the peace and quiet of the grave.
Update: via the National Review’s Corner blog, I came across this in a similar mood to my point.
The BBC does not even pretend to be impartial these days. Iain Dale, the blogger for those junkies of Westminster politics, notes that for the second week running, the Andrew Marr Sunday politics show did not have a single guest from the opposition Conservative or Liberal Democrat parties. There may be a suggestion that the broadcaster is going along with the government’s refusal to put on any ministers if their opposite numbers appear on the show.
I happen to think this is, unwittingly of the BBC perhaps, a good thing. By making the bias of that channel so blatant, it advances the BBC closer to the guillotine. At least when Fox News puts “fair and balanced” on its strapline, we know it is having a bit of a snigger.
This is a tremendous rebuttal of the claim that British manufacturing is in decline. Of course, there is nothing specifically wonderful in having a large or small manufacturing sector, but for those who care about such things, this article nails a lot of cliches about how Britain is supposedly losing the art of making stuff well. In fact, a lot of the manufacturing that goes on in the UK is first class. Take the aero-engine business, for example.
Well, it is nice to grasp at positive news that is going.
I posted this item almost as Brian hit the button on his own entry on the same subject. But I think it is worth a second bite at this cherry.
Great work by Fraser Nelson at the Spectator for revealing that Royal Bank of Scotland, which is now almost totally owned by the UK government, has been asking prospective clients about their political affiliations. The exact term is to ask whether a wannabe client is a “politically exposed person”. Now, this maybe more of a cockup than a sign of anything more sinister, so my trigger finger may be getting unnecessarily twitchy, but still. This is, as the commenters on the article Fraser writes says, a classic demonstration of why state-owned banks are bad and ripe for corruption. Special favours will be demanded by the ruling party’s clients. In France, remember, the former state-run Credit Lyonnais bank was a sink of corruption.
RBS is also the parent of Coutts, the private bank, and RBS Coutts, the international version of said. These banks provide clients with offshore accounts. The risk is that such a bank could be put under political pressure to deliver details about its clients, a fact that becomes particularly relevant with so many governments currently trying to shut down so-called “tax havens” such as Switzerland.
If it is the case that RBS has been trying to prize out details of potential clients’ political affiliations, then at the very least the management responsible for this dim-witted idea should resign. In fact, the Chancellor of the Exchequer, Alistair Darling, should serious consider his own position. On his watch, the once very solid, in fact gloriously dull, UK banking group Lloyds has been pressured into buying the debt-laden UK banking group HBOS. Result: Lloyds’ share price has crashed and most of that bank is now owned by the government. (Full disclosure: I bank with Lloyds).
Unbelievable.
Bloomberg carries this article today about the willingness of China to go on holding Western debt that might deteriorate in value:
China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe, Premier Wen Jiabao said.
“We have lent a huge amount of money to the United States,” Wen said at a press briefing in Beijing today after the annual meeting of the legislature. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”
Good luck with that. As Brian Micklethwait noted the other day, the fact that the US, or indeed the UK, might be downgraded in credit terms as nations or even default on certain debts, is no longer unthinkable. Defaults are not just things that happen in Ecuador, Russia, or competelyfuckedupistan. They can happen in the supposedly rock-solid financial centres of the world.
As Glenn Reynolds says sarcastically of the new US government of Mr Obama, the country is in the best possible hands.
Following on my from recent SQOTD about property rights, it seems poignant to link to this item by Roger Thornhill.
This issue is also related to that of compulsory purchase/eminent domain that I wrote about some time ago. It is also somewhat related to the idea that the government is entitled to take money out of “dormant” bank accounts if, after a certain period, the account-holder does not use the account. The assumption seems to be, that if in doubt, it belongs to the collective.
Well sod that, quite frankly.
I do not like all of Will Farrell’s movies. But this one, about a nutty US TV anchorman, is wonderful. I wonder if any actual broadcasters have ever dreamed of doing this? I bet Jeremy Paxman has.
“The trouble is that because schools fail to teach history, especially legal and constitutional history, the vast majority of today’s citizens have no inkling to what they owe their liberty and prosperity, namely a long and successful struggle for the rights of which the right to property is the most fundamental. They are therefore unaware what debilitating effect the restrictions on property rights wil, over the long run, have on their lives.”
– Richard Pipes, Property and Freedom, page 291.
Of course, by property, one does not just mean physical property, but also to the whole idea that individuals, not the state, own their lives.
Well, full marks for trying, I guess. Ross Clark – a columnist whom I enjoy reading – argues that the fuss about proposals to reduce certain speed limits on UK roads are unwarranted. This is his argument:
It didn’t take long for the militant motorists’ lobby to get into gear to attack the Government’s proposal to reduce the national speed limit from 60mph to 50mph.
That’s true.
To lop 10 mph off the speed limit on country lanes, apparently, is tantamount to declaring a fascist dictatorship. “These corporate Nazi New Labour bastards are intent on turning law-abiding citizens into criminals,” began one of hundreds of angry posts on the website of a prominent motorists’ pressure group yesterday – before, bizarrely, imploring his fellow petrolheads to vote for the British National Party.
A classic bait and switch. For sure, some opponents of speed limits might like to clam they are the equivalent of bringing back the Gulag, but for most of us who do not see the logic of ever more draconian controls on the car, the case can be made without invoking images of Soviet Russia or Hitler’s Germany.
That the leaders of the motorists’ lobby are not quite the defenders of liberty they often profess to be is obvious from reading their output over the years. They have never been slow to demand the prosecution of cyclists, jaywalking pedestrians and motorists who drive too slowly or in any other fashion that impedes their progress.
That has probably something to do with the fact that a lot of pedestrians and cyclists do not think the highway codes in countries such as the UK applies to them. But he does make a fair point, but so what? Just because some motorists are hypocrits does not undermine the broader point.
Unfortunately, Mr Clark descends into nonsense:
The assertion that tighter motoring law is tantamount to dictatorship is further confused by a paradox. The world’s most illiberal regimes happen to have some of the most anarchic and dangerous of roads, while the most liberal nations tend to have the strictest traffic enforcement and safest roads. For all the conspiracy theories, Morgan Tsvangirai now says that the car crash that tragically killed his wife on Friday was an accident. It shouldn’t come as a surprise: reporters who have used the road between Harare and Beitbridge paint a terrifying picture of speeding, overloaded lorries and complete lawlessness – this in a country where if you criticise the President you can expect a rapid visit from Robert Mugabe’s thugs.
He’s right that consistently enforced rules of the road are hardly the same as political oppression, forced labour or torture. Of course. Rules of the road are a bit like etiquette: if consistently followed, it helps us all to rub along, which in a small island like the UK is not a trivial matter. But Mr Clark needs to think this through. Take countries such as post-war Germany or France, with their excellent motorways. Speed limits are, and can be, quicker than in the UK and in the case of Germany, some of their autobahns have had no limits at all (this may have changed, I’ll have to check). When that fella with the silly moustache was in power, the autobahns got built, and the quality of driving in Germany is, in my experience, high. But that example, when set against the chaos of Zimbabwe, proves little. In India, which is a democracy and fairly free place, the driving is absolutely terrible. There’s no correlation between oppression and driving like Jeremy Clarkson on crack. None.
Local authorities would love to reduce speed limits on a great number of roads, but they are hampered by bureaucracy. Whenever they want to designate a limit on a rural road lower than the default 60mph they must justify it through accident statistics. It may be obvious that motorists are driving too fast on a stretch of road, but a council must wait for the required number of people to be killed or injured before it can take any action. And even when, finally, sufficient coffins have been filled to justify a speed limit on a rural road, it remains legal to drive along surrounding lanes at 60mph, giving reckless motorists an incentive to divert on to even more dangerous rat-runs.
Well obviously, if we had privately owned roads, rather than roads run by bureaucrats, then speed limits would be dealt with without the need for all this sort of wrangling. This is, by the way, a powerful argument for privately owned roads.
The only problem is that the proposal does not go far enough. Many country roads are no more than cart tracks covered with tarmac, where 50mph is still far too fast.
Match the speed to the conditions – that is a sensible principle. But if that is the case, that does rather mess up the idea of blanket speed limits in the first place, unless one is going to adopt a sort of “if in doubt, walk” approach to getting from A to B.
And Mr Clark makes no reference whatever to the glaringly obvious fact that the profusion of speed cameras is, and has been, driven in part by a desire to raise revenue. Now, if roads were privately owned and the driver, as consumer, knowingly signs up to the deal, that would not be an infringement of liberty. But as things stand, the obsession with restricting use of the car is all of a broader assault on these machines, for ideological and environmentalist reasons. And the proposal to cut speed limits comes across, at a time like this, as just another, petty little squeeze on private citizens and their desire to get around relatively quickly. It has nothing to do with a yobbish desire to drive as fast as one likes and damn the results.
Notwithstanding traffic congestion – which private road ownership would help solve – the car is a symbol of freedom for millions. Mr Clark, who has written brilliantly about the assaults on freedoms in this country, should focus his ire elsewhere.
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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