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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There is an interesting interview with Frank Shostak over on the Ludwig von Mises Institute.
The US Federal Reserve discourages savings whilst at the same time encouraging mal-investment. Simple common sense would suggest that if interest rates of a mere 1.75 percent have not jolted the US economy out of its torpor, then 1.25 percent is not going to do it either. Interest rates are effectively at zero in Japan and that has produced little or nothing in terms of economic revival.
Yet again the state’s capacity to do harm far outweighs its capacity to do good. The problem is not so much the policies of the Federal reserve, but that there is such a thing as ‘The Federal Reserve’.
Alas so many people everywhere cannot seem to imagine the world continuing to spin on its axis without things like The Federal Reserve, The Department of ‘Education’, The Bundesbank, the BBC, The National Health Service, Income Tax etc. etc… they are just part of their fabric of reality. I have often found that any person who suggest they simply be abolished is treated as if they had suggested amputating a limb, rather than excising a tumour. The truth hurts and no one ever thanks you for hurting them.
Paul Marks points out that there is no imposed structure can achieve what a real market can
Last Sunday there was a big storm in Britain, power was been cut off for a lot of people and some of these households are only now being reconnected.
There have been a lot of attacks on the power companies, but (as far as I know) no one in the media has pointed out that the present set up is not free enterprise at all – it is a government effort to create ‘perfect competition’.
Now ‘perfect competition’ is something that exists in neoclassical economics textbooks – here lots of similar companies (similar assets, similar knowledge, similar just-about-everything) compete in a sort of mathematical game.
In real life enterprises build things and own them. For example a railway is built, or a gas line, or a telephone line, or an electricity line.
Complexity may evolve (with different people owning the track and the trains on a railway, or there being ‘producers’ and ‘providers’ in electricity supply), but any attempt to impose a complex scheme is likely to turn out to be a mess.
In transport the natural competitors for a railway are roads, canals and airlines. The endlessly complicated spiders web of regulations in Britain (to make sure that different people owned the track and ran the trains and that the train operators only ran the trains for a certain period of time, and so on and so on), just caused a mess.
Against electricity the main competitors are gas and (to a much lesser extent) home generation (by solar cells, open coal fires or whatever). Again complexity may evolve (with different companies producing the electricity and supplying it and, perhaps, even different suppliers offering to supply the same household), but any attempt to impose a complex scheme (via endless regulations and administrators) is bound to cause problems – and it has.
In the end what matters is not ‘perfect competition’ but ownership – having a company that owns assets and is responsible if it fails to provide the power that people have paid for.
Paul Marks
What so many of capitalism’s defenders seem to miss is that just because a large company is doing something legally, that does not mean it is ‘kosher’ capitalism. In Germany in the 1930’s and 1940’s, companies like Krupp and Seimens remained under entrenched private management in spite of the National Socialist German Workers Party coming to power, or more accurately, because of the new overtly anti-capitalist government.
They did this by running their companies in such a manner as to support the objectives of the National Socialists. In return, the state ensured they maintained a privileged position, insulated from upstart new market entrants in their respective fields. These companies, working hand in glove with the state, could ensure that national laws would be adjusted as needed to support whatever business models the entrenched companies liked, and the state could be sure that company strategies would be based servicing the needs and objectives of the Nazi Party, not to mention paying backhanders to leading Party members.
Of course, one does not have to look as far back as National Socialist Germany of the 1940’s to see examples of companies trying to manipulate the state to prop up an entrenched way of doing things: for the last few years the music industry in the United States has been trying to use the law of the land to crush challenges to its old physical media based business models. Rather than running their business in the interests of the state, nowadays in modern democratic statist political systems, large companies spend vast sums on lobbyists and on funding the election campaigns of politicians who might as well have an hourly rate for their services stamped on their foreheads.
Now in Australia, Microsoft looks ready to try and buy themselves some legislation for much the same reasons after an Australian court declined to stop people modifying XBox hardware:
Microsoft would be forced to reconsider selling the Xbox video game system in Australia, or seek changes to the law, following the acquittal in July of a Sydney man alleged to have sold chips that modify a Sony PlayStation 2 to play imported games, Microsoft chief executive Steve Ballmer said yesterday.
[…]
“Given the way the economic model works, and that is a subsidy followed, essentially, by fees for every piece of software sold, our licence framework has to do that,” Mr Ballmer said. “If there are aspects that are not allowed, it would encourage us to require a change in the legal framework. Otherwise, it wouldn’t make economic sense.”
As usual a pure laissez-faire solution beckons: if Australia refuses to criminalize innovation and therefore Microsoft declines to sell its XBox Games Consols down under, then simply abolish all the idiotic import restrictions and tariffs currently clogging up Australia’s economy and then… who gives a damn where Microsoft chooses to sell their products: if there is a demand for XBox in Oz, a ‘grey market’ will rapidly appear as capitalist importers across the world buy up XBoxs by the container load elsewhere (such as Taiwan, USA, India) and ship them in themselves.
If that busts MS’s business model, so what? Let them find another one that actually works without the involvement of police around the world to make it succeed.
End of problem.
There’s a little flurry of debate going on about oil, and what it’s used for. Alex Knapp of Heretical Ideas (Tuesday Oct 22 – the direct link doesn’t work) has just one word to say to us: plastics. His point is a good one: oil is not just for making cars and lorries go. Our entire economies now depend on it.
And here’s another point about oil. It is said by some of its opponents that the war that GWB2 wants to start Real Soon Now is really only about oil, only about keeping western economies well supplied, only about economics. And it is agreed by almost everyone that the President is being so delicate with the Saudis, again only because of the vast amounts of oil that they dispose of.
Only? War is a matter of life and death, but so is economics. I’m not saying that this war is/will be only an oil war. (I don’t think this at all as it happens, but that’s not my argument here.) Nor am I saying that all oil wars are good wars. Nor am I saying that the Saudis should be allowed to get away with absolutely anything, and with paying for absolutely anything, for ever, because giving them a seeing to would be too costly, in oil. I’m merely saying this: that when economies flounder people die. They go out of business, get divorced, get stressed and die of heart attacks, commit suicide. They torment one another, beat their kids, the kids leave home, the kids rob people, the kids kill people, the kids die, …
How many gallons of oil are worth the life, by which I mean the death, of one young soldier? It’s not a stupid or merely a rhetorical question. The serious answer cannot be that no amount of oil could possibly be worth any blood. No amount? Any? Just think about that.
All those studies proving that poverty is bad for you and can even kill you are true. They’re wrong only when they say that the way to reduce poverty is to nationalise it.
If you are anything like me, then you missed out on the annual Socially Responsible Investors in the Rockies Conference, which commenced this past weekend. Luckily, Reuters told us all about it.
Socially Responsible Investing, as we will see shortly, has become a big business in and of itself. But what to make of this concept? You might expect me to ridicule the whole movement, but I am not going to. Libertarians believe that the “responsibilities” of a corporation boil down to maximizing shareholder value while complying with the law, but I can find a lot of common ground with the SRI crowd. The problem is that an investor who tries to incoporate SRI principles into his portfolio will be led down any number of blind alleys.
In theory, I think that SRI is a great idea. If progressive types feel the need to bathe themselves in self-congratulatory rhetoric before participating in the capitalist system, that is fine with me. We would all be better off if environmentalists and consumer advocates used their own actual money to try to make things better, rather than pester the rest of us with their demands for more burdensome regulatory restrictions. Under the right conditions, even the most avowed socialists are willing to play — as his financial disclosure for the 2000 presidential race makes clear, Ralph Nader invests heavily in corporate equities (PDF file, requires Adobe Acrobat Reader or similar). (Heh heh, OpenSecrets.org strikes again!)
Unfortunately, determining which companies are “socially responsible” quickly degenerates into a Sisyphean task. What will be the next “politically incorrect” technology or product? Fast food? Cell phones? Tanning salons? Big Chocolate? What will be the next country to face a Chomsky-approved “divestment campaign” a la Israel? I have some very recent finance textbooks that celebrate the exemplary corporate citizenship of… Enron. → Continue reading: Socially Indifferent Investing
Paul Marks holds the line in his worthy ongoing mission to rubbish Keynesianism
Some time ago I sent in a blog claiming two things – first that many of the doctrines of Keynesianism were nonsense, and secondly that one did not need to be an Austrian economics person to see this.
I have had some replies to what I wrote. No one has claimed that one needs to be an Austrian school person to see there is something very wrong with Keynesianism (that no one claimed this surprised me – but then I am an Austrian school person myself).
Some people opposed my opinion that Keynesianism is nonsense (and opposed my strong language with strong language of their own). However, no one has produced any evidence in favour of Keynesianism – either directly or via the books they have suggested I read.
Such concepts as the ‘multiplier’ (presented in almost all basic economics text books) remain without argument in their defence. The idea that government can help the economy by (for example) issuing money and using this money to buy sand and hire people to shovel this sand into the sea, is absurd. To teach such doctrines someone must either be a knave (someone who teaches something he does not believe), or a fool (someone who believes nonsense).
Of course even if one insisted that government ‘investment’ actually be about buying capital goods (rather than ‘investment’ simply being another word for government spending) the idea would still make no sense – investment must be based on real saving (not credit money games).
It is tragic that fallacies refuted by such men as Bastiat almost two centuries ago (such as the fallacy of the broken window) are treated as ‘scientific’ by the vast majority of basic economics text books (often with lots of formulas and pseudo scientific language shoved in to try and hide the basic absurdities).
Even as I type this many nations in the world are undergoing rapidly rising prices (and prices rising at an increasing rate) whilst at the same time these nations have falling output and rising unemployment. If Keynesianism means anything the above should not be possible.
An Austrian economics person does not rely on empirical examples, but such examples are noteworthy. When one sees the rising inflation, falling output and rising unemployment of such nations as Venezuela and Argentina the concepts of Keynesianism fall apart. As some of these nations export oil and some import oil the idea that ‘oil shocks’ are a magic way out for the Keynesianism falls apart also.
When I see that most undergraduate textbooks that do not have concepts such as the various ‘multiplier’ in them (or treat such concepts with the contempt they deserve) then I will apologise for being too hard on the economics profession. I would apologise if even ONE textbook recommended at a British state university exposed such concepts as nonsense.
As far as I am aware no apology is in order at this time.
Paul Marks
Alan Greenspan, the chairman of the United States Federal Reserve, has delivered a rather splendid kick in the orbs to the pro-€uro/anti-sterling campaign. Greenspan said whilst speaking in the City of London (London’s powerful financial district):
The City of London is thriving outside the eurozone and has not suffered from Britain’s decision not to join the single currency in the first wave […] and was a sterling place to do business. London has stayed on top in the provision of financial services despite the euro…
Now I am no fan of the whole concept of central banking (and hence no fan of central bankers) but the fact is it would be bonkers to deny that Alan Greenspan is probably, hell, certainly, the most influential voice on the subject of economic affairs alive in the world today. His remarks are therefore going to cause some gnashing of teeth in certain circles, which has to be a good thing, as the pro-€uro campaign is predicated upon turning the abolition of sterling from a constitutional issue into a purely practical economic issue… and thus having Greenspan point out that Britain is managing just fine outside the eurozone is not what Brussels’ fifth column in Britain want to see splashed across UK newspapers.
Ah, but you should have seen the size of the one that got away. It was this big I tell you!
Paul Marks points out that John Maynard Keynes’ theories are not just wrong but are complete nonsense.
Libertarians tend to reject the economic doctrines of J.M. Keynes. Some people may argue (as Lady Thatcher once did) that Lord Keynes’ thought was distorted by his followers, but most people (or most libertarians anyway) would accept that Lord Keynes and/or his follows were in error in regard to the understanding of political economy.
The trouble is that most libertarians think that showing the errors of Keynesianism is very complicated and that one needs a detailed knowledge of Austrian School economics to show these errors – this is not so.
Lord Keynes’ 1936 book (“The General Theory of Employment, Interest and Money”) implies that one can increase the money supply up to the “full employment level” without a trend of rising prices (as long as the new money is spent on such things as public works – rather than being hoarded or spent on imports). However, it does not matter if one interprets the “General Theory” to hold that Keynes accepted that his policy of money supply expansion would lead to a trend of rising prices (rather than, say, just restoring the prices of goods to the level they were at before some fall in prices).
It does not matter because there is no long term trade off between unemployment and rising prices. In the 1950’s and after Keynesians played with such concepts as the “Phillips Curve” to claim that there was such a trade off – but eventually no amount of moving the curve (to fit the fact that the unemployment and inflation numbers did not fit the curve) could hide the fact that such concepts would not save Keynesianism. → Continue reading: Keynesianism is rubbish
Today in Johannesburg, the delegates at the Earth Conference moved onto the next important phase in the proceedings: water sports.
Having accepted the monumental challenge of solving the problems of poverty and environmental degradation, the delegates have maintained their unanimous opening day resolution, that they were all having far too much fun to worry about that sort of thing and that the world would be far better off if they all did as little as humanly possible during the ten-day Conference.
So, this morning, the Conference moved en masse to the Lakeside Pavilion where they will have a choice of jet-skiing, windsurfing, snorkelling or simply soaking up that radiant South African sunshine with a selection of cocktails and a trashy novel. All eyes, though, will be on the Head of the Brazilian Rainforest Foundation who is rumoured to be something of a dab-hand at Beach Volleyball.
But not all the delegates have been this proactive. Back at the hotel, Indian Development Minister Laxmi Ennerjee spent the entire day languishing in the Tropical Hothouse Spa Jacuzzi, together with his, erm, ‘Research Assistant’ Trudi. While the sparkly Trudi toyed with his greying chest hairs, the Minister lay motionless in the warm, herb-infused bubbles; his head occasionally lolling to one side in order to lick a dollop of tangerine-flavoured yoghurt from between Trudi’s quivering breasts. In an attempt to explain away this apparent lack of wordly concern, he said:
“Look, it’s really very simple. We were charged with the responsibility of ending poverty, saving the planet and maintaining an economic equilibrium between all nations and people of the entire world. But when we got right down to it”, he sighed heavily, “it was all too much like hard work and we decided that we just couldn’t be bothered”
Despite what some would regard as a refreshing candour, the delegates have, nevertheless, come under fierce criticism from Inactivists who accuse the delegates of being a part of the problem not a part of the solution. Daniel Le Thargy spokesperson for the Coalition Against Movement said:
“You just have to observe the furious vigour with which these guys play Canasta around the poolside to realise they are actually heating up our atmosphere. They should learn to do something much less productive, like sleeping. Sleeping is fun and involves no carbon emissions whatsoever.”
Denying accusations that he was simply a luddite, Mr.Le Thargy went onto to explain:
“Our aim is get Third World farmers off of their knees, and put them flat on their backs.”
But the Conference has brushed aside these protests and, following the afternoon’s recreation by the waterside, the delegates then went into a delicate round of complex negotiations, wrangling and horse-trading before a resolution was passed calling for tonight’s dinner to consist of an open barbecue with a Thai & Vietnamese theme. Speaking to a Dutch correspondent, British Prime Minister Tony Blair expressed confidence that agreed targets for at least 80% attendance at tomorrow’s Bingo & Billiards party would be met.
Daniel Antal, who is a Strategic Economic Policy Advisor to the Secretary of State for Economic Affairs and Transport in Hungary, has spotted a fascinating article about some very different protesters in Johannesburg.
It has been a while since I posted comments to Samizdata. I would just like to draw readers attention to a very interesting Reuters articles.
At the Johannesburg Earth summit, besides to usual white middle class college dropouts typically supporting ‘good causes’ against globalization, libertarian policies and effective corporations, some poor third world farmers and street traders have been demonstrating for Free Trade.
The trade debate spilled onto the streets outside the tightly guarded conference center in the wealthy suburb of Sandton, where 200 poor farmers and local street traders from nearby shanty townships shouted slogans demanding freer trade.
“We want the freedom to grow what we want, when we want, with what technology we want, and without trade-distorting subsidies or tariffs,” said Barun Mitra, an Indian farm activist leading about 30 farmers from his country.
Quite so!
Daniel Antal, Hungary
British academic John Gray, based at the London School of Economics, is well-known in Samizdata circles as the former ‘Thatcherite’ professor, author of interesting books about FA Hayek and John Stuart Mill who in the late 1980s turned sharply away from classical liberalism and embraced the doom-and-gloom agenda with the fervour of the convert. His depressing prose can be occasionally seen in such idiotarian enclaves as the New Statesman and the Guardian. OK, it’s a shame to lose a potentially good guy to the Forces of Lunacy, but such is life.
But even I did not realise that the chap has pretty much decided that the planet would be better off if we all dropped dead. Really. His pessimism has attained heroic proportions. Check out this superb piece of Fisking of the guy by leftist writer Helene Guldberg. It surely points to something pretty chilling about what some folk who use the Green banner really believe in.
Update: link and attribution now corrected
Since curbing pollution seems to rank high among the aims of the delegates in Johannesburg they could start by dissolving back into their relatively harmless constituent parts and thereby avoid releasing into the atmosphere the several thousand tons of toxic gases that will result from the mixture of bureaucratic ambition, junk science and high-octane idiocy that is currently being manifested. Just let them mingle long enough to gobble down their ostrich canapes, give them their complimentary set of South African Airways in-flight cabin slippers and let them bugger off back to Absurdistan (or ‘Europe’ as its more commonly known) or wherever else it was they came from in the first place.
This Grand Conference for Solving All The Problems In The World should, on the fact of it, at least, prove to be a heaven-sent gift for bloggers. Over the next two weeks it will produce more Fiskable material than the Daily Wanker could produce in several lifespans.
Again, on the face of it, eye-watering, snot-inducing hilarity is just about all that will actually materialise from Johannesburg. The sheer scale of the ambitions leads me to believe that it is a project that almost seems destined to fail. However, since most people believe that the way to abolish poverty and all other problems is to gather together vast numbers of Well-Meaning People together in one big room to make grand pronouncements and write lots of impressive things on lots of bits of paper, there will be months of outrage, anguish, recriminations and accusations. Angry media pundits will turn their cynical (for the wrong reasons) indignation on caught-in-the-headlight politicians who will squirm off the hook by blaming their failure on those greedy Americans who ‘steal all the world’s resources’.
Sane people, however, will look around them and note that they still have their cars, washing machines, supermarkets and flushing toilets and breathe a sigh a relief that danger has passed.
That would be wrong.
Like all such conferences there is a primary public agenda and secondary real agenda. The real agenda is to be found among the brightest and best of Tranzi talent that is among the 65,000 or so delegates and for whom ‘Sustainable Development’ is a euphamism for a Global Economic Plan. These are the direct descendants of the people who once provided the intellectual tools for the Bolsheviks and, over the next two weeks, they will formulate their plans, cement their relationships, hammer out their various protocols and generally quicken each other. By the time the other delegates have applauded the final conference condemnation of US unilaterlism, the Tranzis will have welded together the skeleton of World Government.
At just about the same time as the rest of us are watching Baghdad light up like a Christmas Tree, various innocuous-sounding International Agreements will start materialising; this is the flesh on the bones. The process will continue step by stealthy step, away from the limelight and at a safe distance from anyone anywhere who might want to vote on any of it.
The first task in defeating an enemy is identifying the enemy and the second step is knowing how they operate. So warn your family, your friends and your neighbours and ring the village bell to warn the townsfolk. Tell them that the enemy is coming and be prepared to repel all borders.
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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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