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.
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From a WSJ review by Trevor Butterworth of Joel Mokyr’s The Enlightened Economy:
But the power of knowledge would not, by itself, have given Britain its formidable economic edge; the Continent, too, had an array of scientific genius as brilliant as any in Scotland and England. (Think only of the French chemist Antoine Lavoisier.) The reason for Britain’s exceptionalism, Mr. Mokyr says, lies in the increasing hostility to rent-seeking – the use of political power to redistribute rather than create wealth – among the country’s most important intellectuals in the second half of the 18th century. Indeed, a host of liberal ideas, in the classic sense, took hold: the rejection of mercantilism’s closed markets, the weakening of guilds and the expansion of internal free trade, and robust physical and intellectual property rights all put Britain far ahead of France, where violent revolution was needed to disrupt the privileges of the old regime.
Such political upheaval in Europe, notes Mr. Mokyr, disrupted trade, fostered uncertainty, and may well have created all kinds of knock-on social disincentives for technological and scientific innovation and collaboration with business. Much as we might deplore too many of our brightest students going into law rather than chemistry or engineering, it is not unreasonable to think that many of France’s brightest thinkers were diverted by brute events into political rather than scientific activism (or chastened by poor Lavoisier’s beheading during the Revolution).
Thus Montesquieu may have advocated free trade as passionately as Adam Smith, but Smith’s “Wealth of Nations” – the canonical text of the Industrial Enlightenment – fell upon a society primed to judge and implement it as an operating system. Evangelical and liberal alike shared in the vision of “frugal” government, as Mr. Mokyr puts it. In the opening decades of the 19th century, Parliament took an ax to itself, pruning the books of what were now seen as harmfully restrictive laws.
I have my doubts about whether robust intellectual property rights did much to encourage the industrial revolution, but apart from that …
This books is now in the post to me, thanks to Amazon, that characteristic trading innovation of our own time.
I suppose reading books like this is, for a British libertarian, an experience somewhat like that of a religious believer contemplating the delights of the Garden of Eden. It may be a bit bogus, in the sense that like all earthly Edens this one was decidedly imperfect and probably felt just as discouraging to its contemporaries as life seems to a lot of us now, a lot of the time.
For who knows? Maybe the times we are living through now may be looked back upon by later generations as similarly Eden-like, either because we are now making huge intellectual (as well as more obvious economic – think Amazon) progress, but we can’t quite see it (maybe any decade now our Parliaments will take axes to themselves), or because times are about to get a lot worse.
I hope (although I promise nothing) to report back here about whether the book deserves the above praise.
“As you march grimly forward through the detritus of economic debate, with a Sturmgewehr 90 assault rifle and fixed bayonet gripped firmly in your hand, thousands of blind Keynesian moles will leap up from deep dark holes in the mud to bite your ankles.”
Andy Duncan. Like Andy, I have read Thomas E. Woods’ Meltdown book and I wrote out some thoughts about it here. And here.
Glad to see Andy is writing away. Old Samizdata hands may remember he used to scribble for us occasionally.
Via National Review’s The Corner blog, I see that FA Hayek’s The Road To Serfdom is top of the Amazon charts. Wow.
Funny how these supposed golden oldies keep racking up the best-seller scores, isn’t it?
Mind you, I guess the same phenomenon applies to entertainers. Like it or not, Sinatra and Elvis keep selling.
There is a bit of a stir going on concerning a recent, very rude and unpleasant review of Matt Ridley’s recent book concerning how optimistic Man should be about the trend of events. George Monbiot, who wrote the review, is answered, at length, and with great restraint, by Matt Ridley.
Monbiot – known in these parts as George Moonbat – should be ashamed of writing such a piece. But then, as Bishop Hill notes, it is clear that Ridley has really got under Monbiot’s skin.
Optimism, I find, often really annoys a certain mindset, not just on the left, but to a certain “things were better in my day before we got infested by all those foreigners” sort of conservative. A pox on both their houses.
You can get Ridley’s book The Rational Optimist: How Prosperity Evolves here.
Dr Butler’s work is a follow up to his book “The Rotten State of Britain” – itself a fine book explaining many of the problems this country faces.
In “The Alternative Manifesto” Dr Butler concentrates on the terrible economic position that Britain finds itself in, what really caused this position and what should be done about it.
Unlike the United States there is little challenge in Britain to the establishment view that all our problems are caused by “greedy bankers” and “lack of regulations”. The “lack of regulations” point is utterly absurd as there are endless national and indeed international regulations (for example the “mark to market” rule was part of the international financial regulations agreed, years ago, in Basel, Switzerland).
And, as for “greedy bankers”, they are indeed greedy, but to blame their greed for the crises is like blaming the speculators of “charge alley” for the problems of Britain in the 18th century – many great figures of English literature did this (as to attack the wicked speculators diverted attention from the politicians who were paying many of the great figures in English literature), but that does not alter the fact that it was the “public credit” itself, the endless government borrowing, that was at the root of the economic problems and the political corruption – not the speculators in the debt, however wicked they may have been.
Even today with our fiat money and fractional reserve banking taking beyond any level of sanity – even the most crazy banker can only build a pyramid of debt on new money that the governments themselves have created, and indeed it is these governments who are normally the loudest voices demanding that banks “expand credit” – lend more money.
However, presently Dr Butler’s works are the only books dissenting from the establishment view (the view that the root of the problem is the greed of bankers and the solution is yet more taxes and regulations) that one can find in (for example) high street book stores.
→ Continue reading: ‘The Alternative Manifesto’ – Examining the diagnosis, and possible cure, of Britain’s ills
It is an interesting argument made here that so-called “instant books”, written in the aftermath of some crisis or big event, can be easily overturned by subsequent events, debate and analysis. Quite true. And it is also true that the internet, blogging and online debate is intensifying this process of making a book look dated within months of publication. But it seems to me that in the article I link to, the author of the item is making some mistakes about the book, Meltdown, written by Thomas Woods about a year ago.
For a start, I think that it is worthwhile that some authors, as soon as the hue and cry went up about “greedy bankers”, sought to challenge the establishment “narrative”, assiduously supported by parts of the mainstream media, that says that the meltdown in financial markets somehow proves that capitalism is flawed, needs more regulations, controls, etc. Getting a book out as quickly as possible makes sense because a book is a talking point. Even if some of its facts are challenged or overturned, the point is that the author gets invited to give talks, has to take questions, can be asked for more details, etc. A book, in other words, is a good starting point. No book, no launch party, no nothing.
And challenging the established narrative any way possible is important. The usual line is what I hear from David Cameron, Barack Obama, and of course our own government. To hear the contrary view, that what happened was primarily caused by state-established central banks distorting price signals of interest rates, and hence fuelling an asset bubble, is much rarer. For example, the other day I walked into Waterstones, and in the section on economics and current affairs were books such as Gillian Tett’s Fool’s Gold, or books with such racy titles as How I Caused The Credit Crunch. In these cases, the books will typically treat the issue as one where the crisis is caused by “greedy”, or naive bankers, who are treated as little different from wild animals, or caused by the supposed dangerous complexity of trading technologies.
The author of the article criticising Mr Woods’ book, Roger Donway, argues that Mr Woods’ book is flawed in many ways, as it, for example, does not give much of an idea of what caused the crisis beyond the standard “Austrian” analysis of what happens when central banks flood the world with fiat money. But why should Mr Woods write a 1,000-word tome to spell out the causes of the crisis in every last detail? The purpose of the book, as is pretty clear to someone like me who knows a thing or two about economics, is to spell out to the general reader what the broad, free market take on the crisis is. I happen to think that Mr Woods summary of the “Austrian” view on what money, banking, the business cycle, etc, are, is simply brilliant. There can never be enough books spelling out why, for example, it is necessary to understand the role of money, and what money is and more, what it is not.
Mr Donway just assumes that folk who might pick up Mr Woods’ book off the shelves are already well-versed in their von Mises, Hayek or Rothbard. But that is hardly likely. The sort of person who steps into a bookstore, and wants to read something about the current financial mayhem, and who might be the sort of person who doubts the current wisdom but who is not an economics specialist, is ideally suited to read this sort of book. Yet Mr Donway writes:
“Chapter 5 also presents material familiar to anyone who has perused some works of Austrian economists, particularly the works of Murray Rothbard. And this material is even less informative about the meltdown of 2008. Entitled “Great Myths about the Great Depression,” the chapter actually takes very brief looks at the depressions of the nineteenth century and the depression of 1920–21, as well as devoting 11 pages to the causes of the Great Depression. And how does an examination of the Great Depression help explain the collapse of 2008? “In both cases, an inflationary credit boom brought about by the Fed’s lowering of interest rates led to massive resource misallocation and a distorted capital structure.” (106) That’s not very helpful.”
The events of previous depressions/recessions will always be different in certain ways from what is happening now, but that is nitpicking. The point of why Mr Woods talks about the short-lived recession of 1920-21 (solved quickly without a Keynesian orgy of money-printing) and the decade-long stagnation in Japan in the 1990s, say, is to shed light on what ought to have been the approach of policymakers in the recent past. To say that an examination of the Great Depression gives no insight into what is happening now strikes me as a case of trying to shout debate down. After all, one can be sure that the advocates of Big Government and Keynesian demand management will call history in aid if they think it bolsters their case.
This paragraph is perhaps a bit fairer:
“Now, some critics might blame this tendency to abstractionism on Woods’s “ideological” economics, but I do not. If he believes in the pure Austrian theory of boom-and-bust, fine. Let him present his analysis using that theory and let his explanation be judged by its adequacy, not by its origins. But in order to judge the adequacy of Woods’s case, we need to hear him make it against those economists who understand his theoretical approach but disagree with it or at least disagree with his application of it. It is no help to hear Woods rebut mainstream economists who do not take Austrian economics seriously.”
Quite possibly true. I know for a fact that people operating in the free market school of thought differ about quite a lot of things, such as whether fractional reserve banking should be illegal, whether state central banks are an evil to be abolished or institutions to be placed under better, tighter rules, etc. But Woods cannot be expected to go into vast reams of text to debate every real or potential objection from such quarters; and in any event, he does, I think, point out the differences that exist between say, the Chicago school – in some ways closer to the Keynesian one – and his “Austrian” point of view.
Of course, there is a need – and this is where I think Woods’ book falls short as a piece of work – in showing exactly what practical steps governments could take in putting financial systems on a sounder footing. There is, in the UK for example, a move by economists such as Kevin Dowd and the folks over at the Cobden Centre to flesh out in detail as to what an “honest money” banking and financial system would actually look like. And as I have previously mentioned on this site, Professor Dowd has sketched out how, for example, a failed bank could be restructured and bankrupt banks be let go without crippling an economy.
And Professor Dowd has, or is about, to release a book on these matters. But for all that the Woods book may be a bit lacking in some respects, I do believe he did me a favour in helping to marshall some of my own thoughts about how to think about the credit crunch. I am glad he did that, and most impressed that he did so in such a short space of time, by focusing on the core ideas at stake.
I have started reading the book, Crashproof 2.0 by Peter Schiff, and I thought I would register some early impressions.
He is a guy who was once mocked for daring to suggest, only a few years ago, that the buildup of debt in the US and parts of the West, and its reliance on what amounts to “vendor financing” from Asia, was bound to end in tears. It did. “Vendor financing”, by the way, relates to the practice of a firm that offers temporary loans to the consumers of its own products. This, more or less, says Mr Schiff, is what happened in the past decade or so: Western consumers bought cheap products from China; Western manufacturers went bust or offshored production to Asia; China used the foreign earnings from its exports to buy up Western debt, enabling even more Western consumer spending, fuelling even more Chinese exports……until the whole process when up in smoke. (This process was aided by an artificially weak Chinese exchange rate, not to mention the recklessly loose monetary policy of the Fed.) So far, so good: Schiff makes a lot of sense in debunking all of this.
But then there is a rather rum argument. Schiff says that somehow, this process was bad because as a result of the low-cost production from China and other parts of the world, US manufacturing jobs were replaced by allegedly lower-paying, crappier service sector jobs. (It is simply assumed that non-manufacturing jobs are worse than manufacturing ones). This sounds a bit like the sort of attack on globalisation I have heard made by such economic illiterates such as Lou Dobbs of CNN. I was a bit surprised that an Austrian-leaning writer such as Schiff should be making it. If the service sector can generate wealth for those who work in it, what is the problem? If, in a proper free market without the distortions of fiat money etc, certain manufacturing jobs were to be done by low-cost nations and other jobs by us, how is this a cause for Apocalyptic treatises?
Another query I have is this: if the Chinese/whoever are earning real income by selling us stuff, and then use that real income to lend us money that is used to fund investment in things that will create wealth in the future, again, how is this a problem? Sure, if that Chinese money is simply fuelling consumer spending and encouraging feckless spending and low savings – which is what did actually happen, I can see the issue. But lending money for productive purposes is hardly an evil. In the 19th Century, for example, the UK, with its wealth generated in the Industrial Revolution, was a net investor into countries such as the US, Canada and Argentina. I guess the trick is to make sure that the money lent for productive purposes is money derived from genuine savings, not funny money.
Maybe Mr Schiff will answer these points later in the book.
As we await the UK government’s financial statement known as the Pre-Budget Report, expected to be full of stuff designed to appease Labour’s so-called “base” of banker haters, I have been re-reading Ludwig von Mises’ classic explanation of why there has been so much hatred for markets and business down the years from the likes of intellectuals and their media outlets. Some of the names and examples will be a little dated – who now remembers such old monsters like Harold Laski? – but the message is as pertinent as ever.
Following on from Michael Jennings’ item about how science research is actually conducted, I was reminded of a post I did several years ago about a fine Gregory Benford book that drew very much on the issue of political game-playing and science research. Timescape is a fine novel, and will resonate with those bemused by the antics of AGW alarmists and their media cheerleaders.
The name of Hunter Lewis’ book says it all: Where Keynes went wrong – and why world governments keep creating inflation, bubbles and busts.
What Mr Lewis has done is to update Henry Hazlitt’s “The Failure of the New Economics” – the classic line by line refutation of Lord Keynes that the older ones among us read as undergraduates (before such works were purged from university libraries). Of course Hunter Lewis uses work on Keynes that was not available to Hazlitt in the 1950’s and he explains the terrible effects that the influence of Keynesian ideas on the policies of modern governments (especially in the United States), but basically Hunter Lewis is a Hazlitt for our time.
To say this is not to diminish the achievement of Mr Lewis – which is a considerable one. Many people when the first come upon Keynesian doctrines at school and then at university spot some of the absurdities (such as the idea that the government spending more money makes a nation more wealthy), and when not satisfied by textbooks and by the explanations of teachers and lecturers, we go on to seek out J.M. Keynes’ “General Theory of Employment, Interest and Money” (1936) but then we are confronted with a tested mess. Not just a very badly written book (so different from the witty paragraphs that are quoted in the textbooks), but such a complex mass of absurdities and contradictions that one despairs (or let me be honest “one despairs” means “I despaired”) of writing a full refutation of the work that was actually readable.
For example, the use of mathematics. It was obvious even to someone as ignorant of mathematics as me that Keynes used mathematics improperly – he used mathematical means that assumed, in their very structure, the very things the mathematics were supposed to “prove”. Yet Keynes also downplayed the importance of mathematics in the “General Theory…” and in other works – so what was the point of trying to explain his misuse of mathematics? Hunter Lewis deals with this problem (as he deals with all the other problems that trying to seriously examine Keynes presents), by using enough words to fully explain what Keynes is doing – whilst not falling into the trap of making the language so complex that his book becomes unreadable. The great strength of Keynes’ “General Theory…” is that it is almost unreadable – the nature of the writing is not an accident (Keynes could write perfectly clearly if he wanted to), it is deliberate – in order to obscure the line of “argument” and intimidate the reader into thinking “I can not follow this – Keynes must be a genius”. Paul Samuelson (the main American spreader of the ideas to undergraduates in the post World War II world) admits all of the above, but then (without irony) takes it as proof of the ‘genius’ of Keynes – as Hunter Lewis explains in chapter 20 of his work, especially on pages 267 to 268. → Continue reading: “Where Keynes went wrong : and why world governments keep creating inflation, bubbles and busts” by Hunter Lewis
I recently read David Friedman’s latest book, A Future Imperfect, and thoroughly enjoyed it. He has now posted a series of lectures he has given at different venues, touching on many of the subjects in the book, as well some that were not in the book. Subjects, for example, such as encryption, copyright, how technology is changing legal systems, society, our view of family life, and the like. Definitely worth downloading some of these lectures if you have the time. Ideal for playing on the MP3 player on the way to the office. A definite improvement on listening to the BBC’s Today programme, that is for sure.
In the meantime, here is a quote from the book that I particularly liked. It is about nanotechnology and some of the fears people have, including the “grey goo” issue:
“Before you conclude that the end of the world is upon us, you consider the other side of the technology. With enough cell repair machines on duty, designer players may not be a problem. Human beings want to live and will pay for the privilege. The resources that will go into designing protections against threats, nanotechnological or otherwise, will be enomously greater than the (private) resources that will go into creating such threats – as they are at present, with the much more limited tools available to us. Unless it turns out that, with this technology, the offense has an overwhelming advantage over the defense, nanotech defenses should almost entirely neutralise the threat from the basement terrorist or careless experimenter. The only serious threat will be from organisations willing and able to spend billions of dollars creating really first-rate molecular killers – almost all of them governments.”
(page 272.)
“If spending on munitions really makes a country wealthy, the United States and Japan should do the following: Each should seek to build the most spectacular naval fleet in history, an enormous armada of gigantic, powerful, technologically advanced ships. The two fleets should then meet in the Pacific. Naturally, since they would want to avoid loss of life that accompanies war, all naval personnel would be evacuated from the ships. At that point the US and Japan would sink each other’s fleets. Then they would celebrate how much richer they had made themselves by devoting labor, steel, and countless other inputs to the production of things that would wind up at the bottom of the ocean.”
– Thomas E. Woods Jnr, in Meltdown: A free market look at why the stock market collapsed, the economy tanked, and government bailouts will make things worse. (Page 105).
This is a marvellous, succinct and pretty devastating indictment of bailouts and an excellent little primer on the Austrian school’s analysis of the business cycle and the role of money. I thought I knew quite a lot about the subject but this book explains the idea of money, as a claim on resources, and the importance of understanding the balance of supply and demand for savings, quite beautifully. The book also highlights how the sharp recession of 1920-21 ended with no bailouts and is an episode that seems to baffle Keynesians.
Rather amusingly, this has been a New York Times best seller, much to the chagrin, no doubt, of NYT columnist Paul Krugman. Krugman, needless to say, believes that the sort of massive government spending seen during WW2 helped end depression. To think that he actually won a Nobel. Oh, wait a minute…
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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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