Why Has the Stimulus Failed Us?

Posted on August 22, 2010 by john

Dear Friends,

It seems to me that anything that quenches the natural dynamism in the market system, results in lower economic growth, to the point of recession if the anti stimulus is sufficient. I contend that is exactly what is holding back the US economy now.

As Schumpeter said, everyone hates the entrepreneur. His innovations result in the destruction of whole industries and ways of living. But that dynamism, the “creative destruction” is what continually builds up the economic standard of living of society. Nations unwittingly quench the dynamism that drives economic growth. With regulation aimed at stifling the negative externalities that result in free entrepreneurial enterprise.

Much must be controlled else the markets would seize up. There must be accountability when dealing with people’s money. Especially money someone has saved over many years to have for retirement. Such funds are the most precious that a banker, broker, etc…. will ever handle. Someone went without, to put those funds in the hands of a person, so the capital can be invested effectively. That capital should be invested in the means of production resulting in a short and long term capital gain for the saver. Anything that misappropriates the money of investors must not, under any circumstances, be tolerated.

But regulation too often benefit’s the people regulated at cost to potential competitors. Existing companies get deferrals to upgrade to the new regulation. New businesses don’t. This keeps entrepreneurs from competing with established firms. The established firms then grow larger, taking up more market share and monopolizing their business sector.

Japan is an example of this type of corporatist regulation and banking. We see that when The Japanese corporations were growing entrepreneurially the Japanese economy grew at a fast pace. But for the past few decades the corporatist economy has shown it’s weakness. Once the corporation grows too large it becomes inefficient. In part due to the ever burgeoning bureaucracy. In this way the lack of entrepreneurial competition slows economic growth.

Japan’s embrace of Keynesian economic theory… Japan’s corporatist economic system is the most effectively stimulated by Keynesian economics. Large corporations have the in house legal ability to navigate government bureaucracy. Entrepreneurial companies do not. Even though the Japanese model is best suited for Keynesian intrusion Japan has stagnated, despite huge amounts of government spending, for decades. To the point of turning Japan’s huge government surplus into huge government deficits. I have heard that Japan pours more concrete than the US. That is a lot of government spending… Having produced economic stagnation.

The US economic system is far less responsive to Keynesian style stimulus for exactly the reason Japan is better suited for it. The US model is more entrepreneurial based. Except for some highly regulated sectors the US economy in which corporations are encouraged to grow too big to fail the US model is more free wheeling. Entrepreneurs are heroes in America. (To most people except romantic anti capitalists). But entrepreneurs are far less able to tap into government stimulus.

Entrepreneurs have some specialty. They obsess over something the rest of us overlook. In doing so they come up with a new way of organizing business, manufacturing a product or process for the delivery of goods. They are not good at changing their focus on governmental minutia. Rules to keep fraudsters from bilking the system.

So that is why the Keynesian economic stimulus that the Obama administration has been implementing has not worked. The US economic model is far too entrepreneurial in it’s nature. That nature will have to be changed for Keynesian stimulus to have any effect. But as we see with the Japanese model even under nearly ideal conditions Keynesian economics are no panacea. They still lead to stagnation. So why keep ignoring the obvious.

Take the brakes off the entrepreneurs.

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What Metric to measure the Moralality of an Economic System?

Posted on August 19, 2010 by john

Dear Friends,

It seems to me that the statement “I find it morally wrong that some people have so much while others have so little.” is comparative. It compares that which the speaker knows nothing to that which the speaker knows little. And so, it says more about the speaker than it does society.

Because how can anyone actually know the heart and the true worth of another? Is the person the speaker has in mind about to go bankrupt. Is a terrible accident about to happen to a loved one of the person with too much. Or is the person with too little actually a miser?

Groups are ever more slippery. Because statistics are so poorly done. They are wielded like scientific certainty when there is increasing evidence, (scientific evidence) that statistics are misleading at best. If they are done right they can be informative but they are so rarely done with the proper scientific scrutiny that most are useless. Since groups must be compared statistically the comparison is ever more flawed.

The assumption is that material wealth is the paramount attribute. All others are tangential to it. And so a large difference between the top ten percent and the bottom ten percent is seen as a metric on the moral value of society. But if that is so then they must believe that a society with perpetual want is preferable to one where obesity is a constant threat to the impoverished.

The Desiderata says, “If you compare yourself to others, you may become bitter or vain, for always there will be greater and lesser persons than yourself. “ How much worse comparing others to others?

If a metric to apply the morality of a system is needed then take the lowest segment and compare their lot with the aggregate world standard of living. If the impoverished in a society live at or above the average standard of living in the world then we can say, empirically, that society is moral.

On the other hand if the average standard of living in a society is lower than the world average then we can say that this society is less moral. There is some roadblock to that societies effective use of the market system.

In both cases we look at the fruits of a given economic policy not the intentions. If the results are a high standard of living for the lowest 10 percent then the difference between the lowest and the highest is irrelevant. If the intent is simply to make the economic outcome equal for all players then the only workable means is to lower everyone’s.

I cannot ski that well. It is too late for me to learn to ski at more than a remedial level. If skiing were economic outcome then the socialists, progressives and communists would have to break the legs of those that ski well. So I would n’t feel inferior to them. Because it is impossible to raise me to their level so it is only possible to lower them to mine. But there are people who cannot ski at all…

But, like most things romantic anti capitalists say, it sounds great until you actually think about it. Then it sounds pretty silly.

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Nuance

Posted on August 15, 2010 by john

Dear Friends,

It seems to me that the term, “nuanced view” is most often synonymous with dialectic defeating logic.

There once was an ancient Chinese sage, who made the argument that, a white horse is not a horse but a yellow or black horse is. Using dialectic Kung Sung Lung effectively proved that a white horse is not really a horse. (Knowing himself that a white horse is of course a horse). What he was really pointing out was that the deficiencies in language make it possible to prove that a white horse is not a horse. I.e. Prove the empirically impossible.

We all know that a white horse is a horse as is any other color horse. Because color is a subservient attribute to species. But in the language that Kung Sung Lung spoke it was possible to prove otherwise. He used language (dialectic) to defeat logic (or empirical reality).

It is taking advantage of these deficiencies in language that allow people to act, speak and think anti-Semitically but not be anti Semites. They have nuanced views on the subject. But people who have no opinion at all about Jews are anti Semitic, (There is no nuance in their view). Nuance allows a politician to claim that he didn’t realize doing personal business using company property, and premises, during working hours, is a bad thing. (Soliciting campaign contributions on government phones in his government office during working hours). Nuance is why an unborn baby is not a human being but in a matter of seconds it becomes a person. Nuance gives cover when a politician lobbies for a bank teetering on bankruptcy that her husband is a large stockholder in…

Twisting language to make the absurd seem plausible is the bailiwick of lawyers. (the modern incarnation of the ancient Greek sophists). That is why a sneak thief who cuts himself on a window, he broke, getting into a hose to rob it, gets millions of dollars from the lawsuit. But the guy’s legal bills, who invents delayed wipers, outweighs the settlement. Nuance is the side of the toast the butter is on… for lawyers. That butter is rendered from human flesh however.

For the rest of us it is a source of friction. A few examples include, higher taxes, more red tape, higher unemployment, lower wages, more off shoring of jobs and a generally higher stress level in society than would otherwise be. The extra costs associated with protecting a business, person or organization from lawyers is astounding. Much of the insurance industry is simply legal costs.

But to argue that this is a positive externality is spurious. As Bastiat said about the broken window. The economic stimulus from the broken window comes at a price. That price is, whatever other use that capital would have been put to, say… a new pair of shoes. So the window maker gets a windfall at the expense of the cobbler.

What incentive does the lawyers butter set up in society? The incentive to rob homes. If you get trapped in the garage and have to subsist on Gatorade, for a week, until you are rescued by your victims, they owe you millions. Legally… How about the incentive to improve the lot of Mankind?

This butter for lawyers is a pernicious incentive to inventors and entrepreneurs. The rise of the legal oligarchy coincides with the fall of the entrepreneurial ethos. Using nuance lawyers undermine the ability of entrepreneurs to bring dynamism to markets. Stability benefit’s the wealthy Elite. (Old money).

The very dynamism that has led to the largest increase in the standard of living of the human race ever. In only four hundred years, since the invention, of the market system Humanity has gone from a state of perpetual want to a state of constant surplus. The industrial revolution itself would not have been possible if not for the market system.

So while it is nice to have a segment of society that has means. It is not in societies best interest to have that segment’s means come at the cost to dynamism in our markets. That insures we go from growth to contraction. No matter to lawyers… They make money in growth or contraction. People can be induced to fight over an ever smaller pie easier than an ever growing pie.

Nuance, it has it’s place… in History.

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Good Intentions are the Road To…

Posted on August 12, 2010 by john

Dear Friends,

It seems to me that In all matters it is best if government use incentives instead of regulation. Incentives work universally. Regulation is bypassed universally.

Take the new banking regulation. While I haven’t read the 2000+ page bill I am no less ignorant of it than most (If not all) the people who voted for it. It seeks to move power to the Fed to regulate certain actions. But it is no different than the SEC. Remember the SEC who’s employees were looking at porn while the banking system burned? I have heard (on Bloomberg radio) the SEC as the most captured unit of government.

Industry capture is always an omnipresent pernicious force. It undermines the people’s trust in fairness of the financial system lowering GDP growth. Regulators, consciously or subconsciously, start to believe that their job is protecting the companies or industry they oversee, (an example of normalizing deviance), not protecting the consumer. This capture is especially prevalent where companies have access to huge amounts of capital and legal resources. They over awe the people who are tasked with keeping them honest.

But if the incentives are set up thoughtfully… I heard an excellent idea the other day. Unfortunately I don’t remember who said it but it was on Bloomberg Radio. He said that if banks or institutions grow beyond a certain size the amount of capital reserves would have to grow at a faster pace. Thus reducing the incentive to grow out of proportion. Basically like a transmission in a car.

In a transmission the ratio between the engine speed and the drive shaft speed changes given the gear ratio. In his idea the capital needed to be tied up unproductively as M1 money would change as the capital size of the corporation changed. An incentive like this would make growing too big to fail too expensive. The amount of capital needed to grow would make it more productive to spin off a division to handle a new opportunity. Reducing the risk to society if the new (or old) company fails.

Today there is no personal risk to management if a company were to fail that was too big to fail. The government would certainly step in to rescue them. In fact that in itself is a pernicious incentive to grow to be too big to fail. Once your company is too big to fail it will have a tacit free safety net. The precedent has been set on numerous occasions.

Regulation is always full of pernicious incentives. They are inevitable when extremely complex transactions are regulated. No person or group is omniscient. There will always be pernicious incentives when activity is regulated. No matter the activity.

The wise lawmaker keeps the law simple and thinks it through. A few years ago there was a spike in falls from aerial lift vehicles in the USA. The spike lasted a few months and the companies that were involved addressed the situation. (People not wearing their fall protection devices or lanyards). The Occupational Safety and Health Administration (OSHA) stepped in.

They did millions of dollars of taxpayer funded research and decided that the answer was to shorten the length of the lanyard and increase the fine to companies that didn‘t comply. The fine was the same whether the wrong lanyard was worn or not at all. The incentive for the person using the aerial lift vehicle was not to use the new shorter lanyards because they are far more restrictive. So the incentives the new rules set up were pernicious. They undermined the solution to the actual problem. Which was, people not wearing their lanyards while operating aerial lift vehicles. The result was lower productivity from the employees, higher operating costs to implement the new rules, (buying the new equipment) and I bet not one more lanyard was connected than had been done after the companies involved had addressed the situation in house.

Results are irrelevant when government is involved. It is good intentions that counts. Regulation that produce the worsening of a situation requires more government intervention. It’s obvious. If the result of the new government intervention make things even worse, then it requires a cabinet post in the Executive branch…

Government’s ineptitude and outright corruption coupled with good intentions always result in more government. Regulation is simply the road to it…

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UN and Climate Taxation

Posted on August 8, 2010 by john

Dear Friends,

It seems to me that If the nations of the world are stupid enough to give taxation rights to the UN they do not deserve to exist as nations… and soon will not.

Once the UN has the right to tax individuals in sovereign nations then the governments of those nations become redundant. The services and functions can be easily moved to the higher level of government. The power that the UN will gain will be an even more corrupting force on them.

The UN is already profoundly corrupt. To it’s core. The putrefaction drips from it’s every word. From the self serving Ban Ki Moon to the corrupt Kofi Annan the UN is a entity that exists to perpetuate the power of the corrupt Elite.

But why shouldn’t they be utterly corrupt? There is no oversight of them. They are not held to any standard of personal action. The list of infractions that UN diplomats have committed are enormous. They have been let off Scot free on the most heinous of charges. Diplomatic immunity.

To fight global warming is the reason given to tax us. Then the UN can pass climate legislation that will slow economic progress for the rest of our lives. Regulation that will require ever more taxation to enforce. Increasing the power of the bureaucrats at the UN. The Elite will argue that it is redundant for nation states to exist. The UN can handle the world’s problems. It only needs more money and more power.

For the UN to seize power under the guise of a hoax is elegant. Those that seek to lower the lot of Mankind have at their disposal a perfect hoax. Global warming. They are using it to move sovereignty from the individual in some States and the nation state in others to a world state. World tyranny.

They defend manmade global warming like a religion. Because it is. Like the cigarette companies defending the healthy aspects of cigarette smoking. The fact that there are none is irrelevant. It is the same to global warming proponents. Self interest whether individualist or egoist trumps community interests. Look at the money trail. Who wants your money and to do they what to do with it.

To them the dishonorable means of gaining the world state is acceptable because the ends are so good. They honestly believe that the philosophical progress made in the last few centuries is a bad thing. They believe that the masses are living outside their station in life. Like the precedes of the modern Elite (aristocracy) arguing that such luxuries as sewing needles are too much for the average person to have. It only makes them want more.

Once government is moved farther away from the people it governs the less responsive it is to their concerns. Like all bureaucracy government has great moment of inertia. That moment of inertia protects the bureaucrats from having to actually do anything. They are busy all the time but accomplish nothing.

Because if government solved a problem there would be less need of government. It is not in bureaucrat’s interests to solve problems. It is in their interests to create problems for them to fix. The larger the government the greater the propensity.

The larger goal is to take capital from those that would use it to produce an ever expanding standard of living for the people of the world and squander it by redistributing it. Government projects and lavish vacations for the Elite will be commonplace . Bureaucrats will find more and more uses for money they did not earn. Don’t have the intelligence to earn, but have the hubris to want to control.

If this passes, the lot of the average person in the world will go down but, the lot of the Elite will go up… dramatically. If you think it is a good idea to lower your standard of living so the elite can raise theirs you simply have to back this proposal. But if you think that merit has some standing in the way money is spent you are adamantly against this proposal.

Either way the Elite back it one hundred percent. They are self interested. Does that make them individualists or egoists?

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Human Heartedness and Government

Posted on August 4, 2010 by john

Dear Friends,

It seems to me that to hold another person to a higher standard of personal conduct than one holds himself is not human hearted. To be “not human hearted” in this way, historically, qualifies a person to hold public office.

For all of human history people in power have never been held to a standard of personal conduct that is close to the demands placed on the people. The ancient Greeks with the temporary ostracism, and Romans with the Censors made gestures in the direction of holding powerful people to standards. But those two systems were flawed in that they still hadn’t solved the problem of power of personality or cults of personality.

The ancient Greeks ostracism was a direct attack at charismatic power. If an aristocrat would get too powerful the people would call a vote. They would write yea or nay on a piece of pottery or ostrakon
and count the vote. If the ayes had it the person was sent away for a few years to let his partisans cool and his charismatic power to wane. His possessions were kept safe as were his family and slaves. When he returned he could participate in public life again. This practice visited any number of catastrophes on Athens. From Pericles (with the misshaped head) to Alcibiades the ostracism was a wash.

The Romans had the Censors. Powerful aristocrats that had draconian powers to look into the personal dealings of other aristocrats. Unfortunately with no effective public oversight the Censors used their offices to garner bribes and indulgences from the powerful people they were supposed to regulate. An early form of regulatory capture. Both pernicious and both inevitable if the conditions are right. Human nature being what it is.

Human nature is unchangeable. When faced with the choice of; Let someone burn you with a cigarette and they will give a million dollars, to charity the charity of your choice, for each hour of torture. No one would submit to it. Unless they were sadomasochistic. Despite the obvious societal good from the windfall to charity…. But give another that choice over someone else and the perspective is widened considerably. They would have no problem with this Faustian bargain. The fact that they feel no pain when the cigarette is applied is irrelevant. Or so they will say. It is universal and it is human nature.

To decry human nature is foolish as it is to decry gravity. Without it we could not exist as we are. The wise lawgiver looks human nature in the eye and works with it. Doesn’t try to change it in others while waxing his own.

That has been the problem with governments through the ages. The Elite try to force others to live as the Elite wish and the Elite live as they wish too. This sets up a fundamental tension in human governments. That tension is the underlying energy source for class struggle.

The ancient Chinese had it close. Despite their arguments and the internecine squabbles of the States the Chinese philosophers in classic times had it by the tail. That their governments ignored the good teachings and embraced the bad is just a function of human nature….

Perhaps, if some nation at some time held their leaders to the same standards they hold the people to, this fundamental tension would be relived. So maybe, to be not human hearted should disqualify a person from public office.

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Markets as Ecology

Posted on August 1, 2010 by john

Dear Friends,

It seems to me that the ultimate example of capitalism is nature. Does the flower address the bee’s charity? No… the flower addresses the bee’s self interest. In that way the bee gets a need met and the flower gets a need met. A basic capitalist exchange.

Nature is filled with other examples of capitalist exchanges throughout. From ants protecting a fig tree to people planting cucumbers that is the way the ecosystem has grown. One species of fauna eating a species of flora and thus spreads the seeds of it’s preferred food. Small Wins adding up to a great win for the ecosystem.

There are examples of fraud in the natural world, (corpse flowers and pitcher plants are a few) as there are examples of monopoly (miles of forest… all one aspen tree, duplicated over and over, monopolizing the habitat). The environment around us is rife with examples of the market economy complete with division of labor. (Our little self interested bee handle’s the pollinating segment of the tomato production process).

On a meta scale plants produce sugars and oxygen, and animals use those sugars and oxygen to produce locomotion to move plant‘s seeds and pollen. On a personal scale soy produces oil, sheep-wool, dogs-protection, apple trees-apples… the list is endless. The division of labor in nature is there for anyone to see… if they only open their eyes and look. Marx pointed out that capitalism (the market system) is dynamic. As is nature.

The term capitalist and markets are human words created to explain a phenomenon. There is nothing unnatural at all about exchanging one thing for another or specializing in a job. That is what separated cats from dogs millions of years ago. There is something unnatural about demanding charity from individuals in the form of slavery to government. Benign or otherwise.

I have never heard a complaint about how the flower exploit’s the bee‘s labor. In fact if someone did complain that the flowers were exploiting the bee’s labor and getting rich doing it I suspect people would give the argument the weight it deserves…. None. When we look at a phenomenon from a distance we have perspective. We can see the big picture. But an attribute of perspective is that the closer we get to something the less of it we can see. Like the story of the three blind men describing an elephant.

I can imagine a bee flying into a hive. Tired and frazzled. Birds tried to eat her all day. The flowers were picked over. Her wings are tired and her stinger is sore. She lands with a paltry amount of pollen and nectar for the receivers. They complain she must be slacking off to have so little nectar… It would be easy to convince her that the flowers were exploiting her labor. Then further to convince her the flowers need to be controlled and many would have to be killed in the revolution. In the long term… Would it be in the bee’s best interest to follow, and kill many of the flowers? Does it make a diffrence if the flowers trying to convince the worker bee that other flowers care nothing and do nothing to help the bee cope with, Verona mite, tracheal mite or even the dreaded colony collapse disease?

Today most people know what would happen if we allowed an open river of effluent to run down our streets. We also know what would happen if vermin lived too close to us… Black Plague. Or some other deadly disease. By not taking care to have a full waste cycle we open opportunities for the smallest players in the ecological market to exploit the niche. They will step in and use the nutrients available to them with devastating results for other larger players in the ecological market.

Government policies that restrict supply or demand for a service or thing forces inefficiency into the system. This drives capital into the streets so to speak. This inefficiency is like effluent running down the streets. The wasted capital (effluent) becomes a source of funding (nutrients) for the underground economy. Government policies directly incentivize the underground economy. With the negative externalities that all underground economies have.

Ironically in some countries people are more virtuous to each other in underground economies than they are in the open markets. Because in the underground economies participants are held to their actions. If someone lies or cheats, if they are not executed, they will be ostracized. In the open market they are protected by government policies. Unenlightened policies that are tantamount to flushing effluent into the open streets.

But as with Tracheal mites, it is better to keep the hive free, than to use menthol to control them.

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Individualism vs Egoism

Posted on July 29, 2010 by john

Dear Friends,

It seems to me that when a millionaire ten times over says he or she will hurt the rich and help me… I know I am being lied to. Because for a rich person to hurt the rich violates human nature. They would have to hurt themselves. No one hurts themselves… No one. Unless they are mentally deranged. I hope not many of our lawmakers are mentally deranged… but their actions an the other hand…

John Kerry is a perfect example. He went to New Zealand to buy a 7 million dollar yacht. (Apparently he doesn’t like union workers in Massachusetts). Then he moored it in Rhode Island to avoid paying the five hundred thousand dollar sales tax bill and the seventy thousand dollar a year excise (luxury) tax, (that Kerry supports). Here is an example of a man who claims to help the poor by hurting the rich. I.e. Raising taxes on the rich. Apparently he doesn’t believe himself rich… People who have exponentially less money then him are rich. Their taxes are going up. But the billionaire is not.

The best part of this story is that a reporter asked Kerry; if he docked the boat in Massachusetts would he have to pay the Massachusetts tax then. Kerry responded, “It depends on who owns the boat.” [A very rare example of honesty in a lawgiver.]

The premise of this statement is that some people are subject to taxation and others are not. I ask you… What incentive does this set up in society? Where the people who set tax law are not held to that law? Is it likely, self interested, human beings will keep tax law fair if they are not subject to it? Of course not.

It is not human nature to hold the interests of others as high as one hold’s his or her own. In this instance Hsun Ching is correct that the congenital nature of Man is evil… Self centered. Philosophies that hold human nature to be wrong and force whatever the Elite believe, today, is “virtue” are flawed. To have at the core of a philosophy of ruling people a premise that is diametrically opposed to human nature is like building a gasoline motor and trying to run water in it. It is flawed. Not the motor… or the water… just that they will not work together.

Over and over we have examples of why people cannot self police yet we staunchly believe that the Elite will violate human nature. I.e. be un-self-interested. Even when we have grievous examples like the one above before us many say; “so what.” To them tomorrow is a white fog. Impossible to predict and mysterious as a Stephen King novel. I dare say too many people are of this persuasion. When the fruit of their nonchalance is visited on them they will lament that it was unforeseeable.

“How could this possibly have happened? I voted for the same people over and over but things never got better. They only got worse and worse.” is the lament of the willfully ignorant.

Another sophist argument that I hear and am dumbfounded at is that I personally have it ok now so why worry about the future. To make this argument and believe it a person must live in a one dimensional world. A point in time with no past no future, and no other possibilities then what is.

I love the way de Tocqueville called American individualism as opposed to egoism; “The doctrine of self interest rightly understood.” What a beautiful way to explain the truly civilized person. Someone who understands that sometimes we have to subordinate immediate gratification for long term gratification. To understand that self interest is intricately tied to societal interest. And that safe streets are in our own best interests. Of course the progressives are working to undermine this character trait in the American ethos.

The Elite are not held to the law in most places and times on the Earth. Their self interest need not be rightly understood. If they are not subject to a law will they give it the same scrutiny that they would if they were subject to it?

The modern Elite (progressives) seek to change people from individualists to egoists. Then the egoists will willingly forge the chains for the Elite and even bind themselves with them. Egoism is stupid self interest. It requires that one not think critically about our leaders. An egoist lives in a singularity. Egoism makes a person think a job flipping burgers is beneath him but being on the public dole is honorable. An egoist believes that the world owes him or her. An egoist calls another greedy because he doesn’t want to give more of his hard earned money to the lazy egoist but the egoist will scream like a scalded cat if a dollar of his money is missing.

By the way… did you hear about Barney Frank flipping out over not getting a senior citizens discount that he was not entitled to?

It cost him an extra dollar for the ride.

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Environmentalism

Posted on July 25, 2010 by john

Dear Friends,

It seems to me that the environmentalists always look at everything as a zero sum game. They couch every choice as an either-or. In doing so they always overlook alternatives that would enhance both sides. Instead of destroying the interests of landowners in the name of the environment. In doing so they ensure the destruction of that which they seek to save.

When the market system was first being debated. Some argued that it would smooth out the differences among men and lower their disposition to violence. As I have said before, the guy who sells sofas doesn’t care what color your skin is… all he cares about is the color of the money. Hobbes and Voltaire was of this persuasion. Others argued that some lost while others gained. Rousseau took this side. The argument has raged from then to now. It lands in our laps with Rousseau’s side ceding some ground.

Most educated people realize that the market system is not a zero sum game. When people are involved in the market system their wealth is much higher then if they participated in some other system. The caste system, Where distributed justice says that the goods of society are distributed to those according to caste. Or the feudal system where the goods of society are distributed depending on patronage and parentage. Or still the communist system where the goods of society are distributed by one’s political power. All these other systems have one thing in common. Their version of distributive justice has, at it’s core, that the goods of society go to those with power. And from those that produce. This sets up a pernicious incentive that feeds back and lowers the economic output of every person. While the market system distributes to those with, at least, an eye to their production.

This analogy can be applied to environmental science as well. It is becoming obvious that economic prosperity and a healthy ecosystem can go hand in hand. It is also historical truth that countries that have overly powerful Elite have a very poor track record with the environment. When a small percent of the people make all of the decisions they can simply order environmental disasters be created far from their homes. They have economic incentive to disregard environmental concerns and little incentive to protect the environment of their slaves.

But all the means the environmentalists propose move power from those that live near to those who live far away. From the people to the Elite. They claim if so and so project goes through an owl, ent or sage grouse will cease to exist.

There is a controversy of just this nature going on in the US Midwest. It is over wind towers to produce clean energy or a sage grouse that is loosing the ecosystem it needs to survive. The environmentalists are arguing that the sage grouse must be protected and the BLM land should be “protected” exclusively for them.

To me the obvious answer is to place as many towers as possible. Then replant sage brush around them leaving only access roads to the towers for maintenance. The more land that is taken by towers and replanted with perfect habitat for sage grouse that more you ensure the survival of the sage grouse. In perpetuity. The economic value of the towers will ensure the protection of the land.

The environmentalists way forces land to be “protected.” But they never think about the consequences. ( Or maybe they do). The incentive is set up for the locals to, at best, ignore the interests of the sage grouse. But people being people, when our interests are subdued for the interests of others, we resent it. Especially people who are used to being free. Outright hostility may even be shown. No matter the best or the worst the interests of the sage grouse will hurt under the benevolent “protection” of the overly powerful State. Just like family farms have languished under the benevolent “protection” of the State.

Eventually the “protected” land will be put to some other important use and the sage grouse will go extinct. By putting people in charge who have less and less direct impact from the consequences of their decisions, give them less and less oversight and, you have a recipe for environmental degradation… down the road.

The very policies of the environmentalists will destroy that which they seek to protect… Because the benevolent protection of the State is neither benevolent nor protection.

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Capitalism

Posted on July 22, 2010 by john

Dear Friends,

It seems to me that there has always been capitalism. The market system may be a relatively new invention but capitalism is as old as humanity. From the first time Ug traded Grug a spear head for a dear head there has been capitalism.

The market system has it’s roots in the time just before Adam Smith. It was the invention of the factory and the division of labor factories brought about that made production cheap and of higher quality. These innovations along with a capitalistic ethos have made our modern society so prosperous.

Imagine if the Romans had discovered the market system. Today Humanity would be striding among the stars. But they didn’t. It was after the last gasp of Roman Civilization (about a century after the fall of Constantinople) that the market system was being born in Denmark. The market system has evolved and devolved in steps since then.

But capitalism is a consequence of mankind’s social nature. It is a fact of our sociability that we mingle and trade. Each getting a need met in the trade. The one a plow and the other funds to build another plow and to feed his family for the day. Each getting more than he had before in the trade. No matter if the product or service is a spear head or fiber optic service the result is the same. It is a win-win.

That is the driving force of capitalism. That we all win when we engage in it. The buyer gets a good or service that in some way enhances his life and the seller gets to make a livelihood. Both have a positive outcome from the transaction. The small personal gains translate to huge societal gains in the aggregate.

Taxation lowers the good for each person. Some profit is diverted from new production or personal wealth to government use. Or some good or service costs more than it otherwise would, The good is lessened by taxation. Regardless of the societal good gained by the service paid for by the tax. There is a cost to a tax.

It is a valid role of government to protect the persons and property of it’s citizens. To that end taxation is a necessary evil. But it is never stopped at that end. Taxes are like an unstoppable tide. They rise and rise until they have drowned economic progress. Then the lawmakers responsible lament the lack of economic progress. But more importantly… the Elite lament the lack of tax revenues. So they raise taxes more…

This is because; if taxation lowers the good to the point that it is equal to or greater than the positive effects from all transactions, transactions will only go on, “under the table.” Off balance sheet transactions become more and more prevalent, when government taxation or other interference in markets are too onerous, erasing the benefit of a free exchange transaction.

If, a country want’s to measure how much it’s interference in the markets effect their markets, they need only compare the size of the black market to the legal market. If there is almost no black market the government is doing a good job not interfering in the markets. If there is a large black market then the government must look into it’s policies else it will face poverty and hunger in the future.

Capitalism is like air. The level of economic activity being like the pressure… The positive outcome is like the oxygen in the air. You can have plenty of air pressure but if there is no oxygen, (Because of government interference) then you cannot breathe. But if there is plenty of oxygen but little pressure you can breathe… If labored.

In other words… Business can go on in a poor country if the government doesn’t, tax too much, impose unnecessary rules, licenses, or other ways governments cause friction in their markets. The profit motive is still there. Even though business conditions are poor. But when government makes doing business too expensive to make a profit…

The point being that government policies have a direct bearing on the state of their economies. To blame capitalism for poor performance is like knowingly depleting the oxygen in a closed room then blaming the inanimate oxygen itself for our shortness of breath…

… if you use rhetoric, like “capitalism is dead.” no one points out the idiocy of the statement, and I believe it…who‘s the fool?

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