Leading the Revival of Individualism & Self Reliance

“The Market” Can Deliver Pho and Spring Rolls. It Can Deliver Vaccines.

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“Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that. When an animal wants to obtain something either of a man or of another animal, it has no other means of persuasion but to gain the favour of those whose service it requires. A puppy fawns upon its dam, and a spaniel endeavours by a thousand attractions to engage the attention of its master who is at dinner, when it wants to be fed by him. Man sometimes uses the same arts with his brethren, and when he has no other means of engaging them to act according to his inclinations, endeavours by every servile and fawning attention to obtain their good will. He has not time, however, to do this upon every occasion. In civilized society he stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons.”

Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations, Book I, Chapter II

The Covid-19 vaccine rollout redefines “debacle.” The Bureaucratic Deal made a mess of things and showed how vaccine production and distribution are too important to be left to the men and women of system or a National Supply Commander. It reminds me of something William Easterly discussed in his excellent 2006 book The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. For-profit firms can deliver millions of copies of a new Harry Potter book seemingly effortlessly. Nonprofit organizations have trouble moving medications that cost pennies a dose. Channeling his inner Adam Smith, Easterly identifies and explains what he would later call The Tyranny of Experts. The statespeople who think themselves fit to tell private people how to deploy their capitals (or their vaccines or other medications) are saddling themselves with a most unnecessary attention in a fit of folly and presumption.

In Book I, Chapter II of the Wealth of Nations, Smith explores the differences between people and other creatures, noting a distinctly human “propensity to truck, barter, and exchange” that allows us to use others’ labor, talents, and knowledge by letting them use ours. We survive as a species of talkers and traders, able to thrive because exchange engages for us “the cooperation and assistance of great multitudes.”

The problem, Smith points out, is that we have limited abilities to know and help. Your “whole life is scarce sufficient to gain the friendship of a few persons”– people who have the wherewithal to love you as they love themselves. If all we had to rely on were our friends and neighbors’ kindness, life would be solitary, nasty, poor, brutish, and short. We can’t depend on the kindness of strangers, either. We have limitless occasions for the help of our brethren, and it’s hard not to drown in the flood of news about others’ needs and wants. Smith asks, “How do we get the butcher, the baker, and the brewer to help us when they could be doing something else?”

Just think about the barrage of exhortations you get from pulpits, the press corps, and social media. You need to live a life dedicated to others, but you also need to take care of yourself. You should save prudently, but you should give generously. You should help other people in need and serve your community, but you should also make sure you spend plenty of time alone with God or reading great literature. You should work diligently, and you should also pick up a few hobbies. As something my wife and I read when our children were young, new mothers should take care of themselves: “Sleep when the baby sleeps. Clean when the baby cleans.”

You have infinite options but finite time and energy. Enter markets as coordinators of the division of labor and the division of knowledge. We cooperate to mutual advantage and deploy for our purposes expertise and skills we don’t have for purposes other people may not understand. Among other things, exchange collapses the incomprehensibly complex into simple bids and offers whereby people decide whether or not they want and are willing to pay for what is on offer at the requested price.

Our dinner on New Year’s Day illustrates nicely. I had planned to cook that evening and order takeout the next night, but there was a small complication. My beloved Alabama Crimson Tide would be playing the Notre Dame Fighting Irish, and I didn’t want to be busy with meal prep during the game. We decided to switch and do takeout that night and cook the next night, but even then, I didn’t want to have to go and get the food during such an important game. It brings into play the cooperation and assistance of great multitudes who made it happen after a seemingly-simple set of operations.

I pulled out my phone and opened a food delivery app called Waitr. A few flicks of my thumb later, I had scheduled delivery from Saigon Noodle House and paid for everything. At around 6:15, the game was winding down while we were sitting down to a lovely meal of chicken pho and spring rolls.

Think about all the hands and minds involved. Someone had to program the app and make sure it was compatible with Apple’s iOS operating system. Someone in a marketing department somewhere had to bring the app to the attention of the general public. Someone else in a strategy meeting somewhere said something like, “Let’s offer promotional free delivery for New Year’s.” Someone else is in charge of coordinating Waitr’s relationships with the businesses they serve. Others are in charge of payment processing, which is anything but simple. Waitr has to make sure the restaurant gets paid. My credit card company has to make sure Waitr gets paid. My bank has to make sure the credit card company gets paid. Software developers have to keep things running so that the auto-draft from my bank account works. Others make sure transactions are secure. Platoons of lawyers help everyone navigate an ever-changing regulatory environment. The food has to be prepared and then delivered promptly. That doesn’t even begin to get into secondary and tertiary relationships like the restaurant’s relationships with landlords and suppliers. If I’m not satisfied with Waitr, their competitors (Grubhub, DoorDash, Uber Eats, and others) are just a couple of phone taps away.

Thus do I enlist the cooperation and assistance of great multitudes: not by referring to my very exalted status as a noble lord or what have you but by offering the fruit of my labor (reflected in money) in exchange for the fruit of theirs. The winners? Everyone with a right to be consulted. The losers? No one. Exchange is mutual caring for even without mutual caring about. In a decentralized market where people pursue their interests (which might be selfish or benevolent), we can help one another get more of the things we want.

If we can trust the market to deliver relatively unimportant things like pho and spring rolls, we can trust the market to deliver important things like Covid vaccines. As John Cochrane has pointed out, the standard “externality” argument for government involvement is a nonstarter because so much of the debate has been about who deserves to get vaccinated first rather than market failures in pandemic mitigation–who should get the private benefit. As he has argued more recently, “Nothing Matters but the Reproduction Rate.” And yet actual mitigation seems not to be that important, at least politically.

I doubt we would be in this mess if we had left vaccine production and distribution to Walmart, Amazon, Grubhub, and Chick-fil-A. In the middle of a global pandemic, it’s too important not to.

Science Recognizes Self-Organization As The Best Strategy To Deal With Complexity. Top-Down Government Is The Worst Strategy.

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So you believe in science, eh? Excellent! So do I! Well, let me clarify. I don’t “believe” in science; I accept there is reality and this “science-way” of thinking has proven itself the best method for discovering this reality. What you or I believe has no impact on this reality.

And what of this reality? How can we discover it to ensure our continued success and even our continued survival?

Isaac Newton was one of the most influential scientists of all time. He was a titan of his time and a key figure in the culmination of the scientific revolution. His Philosophiæ Naturalis Principia Mathematica is perhaps the most influential book in all of science.

He discovered the laws of gravity and motion; creating a set of equations that were very accurate in describing many of the physical properties of the world around us. His laws describe how gravity seems to affect objects but it doesn’t explain why gravity occurs. His theories have thus been described as “descriptive.”

But to discover the more fundamental, underlying reality which could explain gravity we had to wait for Albert Einstein and his discovery of general relativity.

With general relativity, Einstein developed a theory that actually explains gravity rather than simply describing its effects. Through mathematics, Einstein proved gravity is not really a force of attraction between all objects with mass. Instead, he discovered that gravity is a result of the warping, or curving, of space and time by any and all mass.

Unlike Newtonian physics, which is merely descriptive, general relativity describes a more fundamental reality and is thus predictive.

Even though no one has ever actually seen space or time or the supposed warping that mass causes, Einstein’s ideas have been supported by an ever-growing and interconnected body of evidence and are widely accepted today as an accurate reflection of reality.

My hypothesis is we confront a similar process when thinking about the founding of this country and the truths expounded in the Declaration of Independence and Constitution.

Like Newton’s, the Founders’ thoughts were descriptive. They had lived with the arbitrary power of kings and tyranny and knew that individual freedom was man’s God-given natural state. They then attempted to build a political and economic system that reflected this reality.

And just like Newtonian physics, the results have been amazingly accurate. Anywhere individual freedom is allowed to flourish, good things follow.

Like Newtonian physics, the laws America’s Founders discovered describe how freedom impacts societies but they don’t describe why this occurs.

But as with Einstein and general relativity, there is a more fundamental, underlying reality that does explain why individual freedom always works—and big government always fails.

And this more fundamental reality is the new science of swarm intelligence—especially as applied to human existence.

When free individuals—be they bison, elephants, fish, honey bees, or humans—collectively live their lives they experience something called swarm intelligence. It is the collective behavior of decentralized, self-organized systems.

Most of the time people think of swarm intelligence in living creatures when referring to hives of bees, schools of fish, or herds of animals but human “schools” have always existed. In fact, all of humanity across all time could and should be considered a school or herd.

A key ingredient in swarm intelligence is that no one is in charge. There is no “management” at all; just countless interactions between individual members with each following simple rules of thumb, each one acting on local information.

No member sees the big picture. No member tells any other what to do. No fearless leader is required or desired. Swarm intelligence acts as a huge intelligence multiplier. The swarm will always be far more intelligent than any single individual.

Bees, ants, herd animals, all life in fact—and, yes, that includes humans—have unknowingly experienced this same process since life itself began. This is a process whereby individual freedom leads to order, structure, and progress, not anarchy. It is true whether it is fish or human life. It may seem counterintuitive but it is reality.

On top of swarm intelligence, we humans have complex language, the ability to use tools, and the ability to store and transmit information over generations which has increased our collective swarm IQ even further. In effect, we each enjoy the fruits of millions and millions of lessons learned since the dawn of life itself, enabling us to collectively live like never before.

What is actually counterintuitive is the modern belief—a belief that is only milliseconds old in the scheme of things—that top-down, command-and-control systems are superior to this; that a boss of some sort is always required to drive and direct progress.

The reality is just the opposite. Attempting to put a boss in charge via the organizations we call government will act as a huge intelligence eraser. It will cause the swarm to cease to function, to the detriment of all.

Self-organizing systems are an incredible strategy to deal with complexity; government is not. Worse yet, top-down, command-and-control systems will sooner or later create catastrophic failures. Not so with self-organizing systems.

In self-organizing systems the solutions to various issues are emergent—they just seem to occur. In top-down systems, they must be pre-defined, and thus some “boss” must start out knowing more than the swarm—an impossibility from the start.

These top-down political beliefs and the governments they directed were created long before we had any knowledge and understanding of how these natural systems work. Thus, it is not surprising they took a “we know best” approach to action and design.

But now we do know of these fact- and reality-based processes. Our political beliefs and governmental organizations—including K-12 schooling—should adjust to these recently discovered facts immediately.

The discovery of general relativity profoundly changed the way we understood the world around us. It is one of the greatest scientific discoveries of all time.

his is no different. It will drive a reexamination and reframing of almost every area of our existence. And many will fight to ignore it. People seldom willingly give up power.

Others will attack the source. Einstein was just a patent clerk when he first proposed general relativity. I’m just some schmo from flyover country. But just as Einstein knew he was right and that he had discovered a more fundamental reality, so do I. The facts don’t lie.

 

Centralized Government Controls Imperil The Communities In Which Our Lives Have Meaning.

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During this seemingly endless pandemic, we now find so many of our freedoms not only under threat, but in some cases already severely curtailed or completely removed. Social-media accounts challenging the government’s illiberal response to the pandemic have been taken down. The police have cracked down hard on protests against lockdown restrictions. And even our freedom to associate with friends and family has been severely curtailed.

Freedoms which, until a few months ago, we had taken for granted, have been taken away. We now have to make do with enforced social distancing, stay-at-home orders, and warnings of Armageddon to come if we do not comply.

As a consequence of such harsh restrictions, we have been robbed, ultimately, of the freedom to be ourselves. Not in the identitarian sense. We have never been freer to declare ourselves the opposite of what we are – a man or woman, black or white, or indeed somewhere in between. We are free to adopt whatever identities we choose, increasingly with the sanction of the state and the promise of a Twitter pile-on if anybody transgresses against these strange new orthodoxies.

But we have been robbed of the freedom to be our social selves. The freedom to be our outward-facing selves. The freedom to be the people we are as part of our wider community.

This freedom may sound paradoxical, given community is sometimes portrayed as the enemy of individual freedom; something from which the individual must liberate himself; something that binds and inhibits him. And this, of course, can be true. Young people, for instance, can feel suffocated by the constraints imposed by the older members of their community. The unconventional and the ambitious want to escape their villages and suburbs. They want to be free of the community’s restrictions on their lives.

But, as we are now finding out, the opposite can also be true. Being separated from our communities and collectives deprives us of our freedom to be ourselves with others. We see the barriers everywhere. The churches are closed, the pubs shut and the cafes takeaway only. Conviviality is stifled on shuttered-up high streets, and conversation is muffled by masks. Everyday life is strained and undermined by the imposition of measures and laws that may or may not make sense, and in whose making we played no part.

We are separated from each other, whether out of obedience to the latest lockdown restrictions or out of fear and anxiety. In the absence of the conversations we used to have with each other, face-to-face and unencumbered, there is no freedom. For that is where our liberties spring from – other people. Through the expression of our sociality, through our engagement, our conflicts and our building of solidarities with others.

Conformity is a problem for any community, of course. There is not nearly enough questioning of what we are being put through. But in the end it is only through our collective actions and our interactions that pressure will be exerted and minds will be changed.

As relentless, continual lockdowns bear down on our social nature, we begin to understand how much we need each other. We wonder what became of those mutual-aid groups that sprang up in March almost overnight, only to disappear as they were crowded out by overbearing and authoritarian officialdom. We should remember their example. If we want to regain the freedom to be ourselves, to do things for ourselves and act in our own interests, then we must do so as a community of individuals, working together. That is the only way we will free ourselves from the tyranny of fear and restrictions that we are living under.

 

Why The New Deal Is The Most Undeservedly Deified Chapter In U.S. History.

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As we await fall semester grades, the end of my oldest daughter’s high school career is now in sight.  For all intents and purposes, the spring semester will have muted effect.

Still, I was happy to hear recently that her economics teacher apparently “hates” talking about the New Deal.  It’s no more an economic concept than is “trickle down,” both being more governmental in nature.

It’s also one of the most undeservedly deified chapters in American history.  Jacqueline L. Angel and Juan Fernando M. Torres-Gil, writing for the San Antonio Express-News, remain enthralled by it.

They recently added their names to the list of those who believe we need a 21st century version, ostensibly to “build a sense of social solidarity.”

This would be done with a “substantial financial investment that would mitigate the effects of a possible double-dip recession.”  That self-fulfilling prophecy doesn’t have to happen any more than did the impetus for the original New Deal.

What President Hoover faced early in his only term was a routine, cyclical downturn.  Painful though they are, recessions are a necessary cleansing, much like a hangover after tying one on the night before.  An economy gets purged of its excess and bad practices, and resources are consequently redeployed to more valuable endeavors.

When left alone, an economy is much more likely to snap back strongly, quickly.  See the recession of 1920-21.

Hoover should have known that given that he was commerce secretary at the time.  Alas, as president, he succumbed to the typical politician’s urge to “do something!”  After steep hikes in tariffs, spending and taxes, he had pounded the economy into submission.  Voila: the Great Depression.

He had teed it up for FDR to be the savior.  Except government isn’t a savior for anything but more government and well-connected cronies.

The New Deal served those people well by instituting price controls, facilitating industry collusion, greasing the skids for union strikes, etc.  Price signals were distorted, uncertainty reigned, investment tanked, and people continued to suffer.

One of the biggest defects in the American DNA that mutated from the New Deal is that the state can cure what ails us.  Sometimes FDR disciples take this literally, as when Ms. Angel and Mr. Torres-Gil assert that “all Americans” should be “assur(ed) access to basic health care coverage.”

An earlier devotee proved this to be a dicey proposition.

Following in the tradition of FDR’s New Deal was LBJ’s Great Society, which, in addition to wresting poverty from its freefall by declaring war on it, created health insurance for senior- and lower income citizens: Medicare and Medicaid, respectively.

By this time, insurance as we know it, conjured up to provide hospitals with a steady cash flow, had matured.  Baked into it though, were the seeds of the inflationary problems we see today: the third-party payer, which clouds consumers’ view of the price of health care services.

Introducing into this mix a sloppy entity like the government, unmoored by any spending discipline, added fuel to the fire.  There’s no reason to believe giving Uncle Sam a firmer grip on the reigns will improve things.

It’s difficult to know if prognosticating academics simply have a blind spot, are being disingenuous, or worse.  Assuming their heart is in the right place, one would be inclined to give them the benefit of the doubt.  They don’t make it easy though.  How else to explain the alleged need to “design a new social contract” to ensure “a minimum income in old age?”

Isn’t that what social security is for?

Since its first payout in 1940, there has been an almost twenty-year swing in the difference between life expectancy and the first year of eligibility then (63 and 65 years, respectively), and now (79 and 62).  Attaching more claims to it, like helping puppies find their mother, hasn’t helped.

Are they attempting to sweep under the rug the precarious position their forebears have put it in, and move on to the next monorail?  That the state, not subjected to competitive market pressures, would furthermore be able to “help small business” as Ms. Angel and Mr. Torres-Gil claim, is confounding.

Unlike central planners “assuring … useful jobs even if federally-provided” (an oxymoron if ever there was one), small businesses were part of a record-setting jobs-creating machine the last few years.  While the mere presence of the coronavirus might indeed have slowed that down, shutdowns have compounded the problem in a Hoover-like fashion.

The only help these heroic risk-takers need from state and local officials is for them to back off.

People who spend their lives in an “ivory tower” seem mentally inoculated from how things work in the real world.  They’re too busy moving the rest of us around on their modeling chessboards, waiting to be called up to the big leagues to show smooth-talking, bright-smiling politicians how to make all this government largesse work.

This farm system failed miserably in the 1930s, and it’s unlikely to work any better a century on.

Christopher E. Baecker manages fixed assets at Pioneer Energy Services, teaches economics at Northwest Vista College,

Jeff Bezos Makes Us 49 Times Richer Than We Make Him.

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This article, summarizing a National Bureau Of Economic Research working paper, is a bit technical but we present it to make a point. Many decry the excessive wealth of founder-innovators and CEO’s of today’s leading tech companies. But those executives and shareholders capture very little of the total value they create for customers. They are making us richer more than they are making themselves richer.

With the sharp rise in productivity growth over the last decade, economists have been curious about the extent to which the fruits of higher productivity are captured by innovating firms. Is the rapid technological change in the New Economy – with double-digit rates of productivity growth in computers and a phenomenal increase in new products and services via the Internet – leading to a similar rapid rise in the profits of New Economy firms?

In Schumpeterian Profits in the American Economy: Theory and Measurement (NBER Working Paper No. 10433), author William Nordhaus studies the impact of new technology on profits, emphasizing three important implications: first, understanding the role of innovational profits in total profits; second, identifying the impact of innovation in stock market returns; and third, gaining greater understanding of technology’s wealth effect on aggregate demand, as defined by Federal Reserve Chairman Alan Greenspan (an effect he labels the “Greenspan effect.”)

Nordhaus begins by considering the impact of technological change on prices and profits. Do technological improvements primarily result in lower prices for consumers or in higher profits for producers? If producers are able to capture (or appropriate) most of the social returns to innovation, then profits will rise and prices will fall relatively little.

How much of the profits from a new technology are captured by innovators will vary greatly across industries. For sectors where knowledge is in the public domain, such as weather forecasting, the new knowledge cannot be appropriated and productivity improvements are passed on in lower prices. In other industries with well-defined products and strong patents, such as pharmaceuticals, producers may be successful in capturing a large fraction of social gains in “Schumpeterian profits.”

Nordhaus begins by developing a model for explaining the size of Schumpeterian profits. In this context, Schumpeterian profits are profits above those that are associated with the normal return to investment and risk-taking. The Schumpeterian profit margin, defined as the ratio of Schumpeterian profits to total revenues, is determined by three parameters: the rate of innovation-driven total factor productivity; the instantaneous appropriability ratio; and the depreciation rate on Schumpeterian profits. The only novel parameter is the instantaneous appropriability ratio, which measures the fraction of the social surplus that is captured by the innovator in the first year. Depreciation is particularly important for Schumpeterian profits because they are often eroded by such factors as the expiration or non-enforcement of patents, the ability of competitors to imitate or to innovate around original innovations, and the introduction of superior goods and services.

Nordhaus presents a numerical example of the outcome of the model. If the rate of innovation-driven total factor productivity is 2 percent per year, the instantaneous appropriability ratio is 50 percent, and the depreciation rate on Schumpeterian profits is 10 percent per year, then Schumpeterian profits would be 2 percent of total sales. If the rate of profit on capital is 10 percent per year and the capital-output ratio is 2, then in this simple example, Schumpeterian profits would be half of the return to capital.

Another application of the model would be to the New Economy (computers, software, telecommunications, and similar industries). To what extent, he asks, did the phenomenal rise in the stock prices of New Economy firms in the late 1990s reflect rapid innovation and high appropriability in that sector. He suggests the following example: The new economy amounts to 5 percent of nominal output. Assume that, after 1995, costless productivity growth in this sector shot up from 5 percent per year to 15 percent per year. The new economy would then be adding about $75 billion in social surplus in the initial years. If the new entrepreneurs could capture 90 percent of the new economy surplus in Schumpeterian profits, then with other plausible parameters, the increase in value of new economy firms would be $6 trillion. This in fact is close to the increase in value of new economy firms from 1995-2000.

But is this parable plausible? For the entire postwar period and for the nonfarm business sector, Nordhaus estimates that innovators are able to capture about 2.2 percent of the total surplus from innovation. This figure results from an instantaneous appropriability estimated at 7 percent and a rate of depreciation of Schumpeterian profits of 20 percent per year. This number implies that Schumpeterian profits were 0.19 percent per year of the replacement cost of capital over the period 1948-2001.

Using these estimates for the New Economy suggests that entrepreneurs could capture only $400 billion, not $6 trillion. Nordhaus speculates that part of the New Economy bubble might have arisen because investors overestimated the appropriability of innovations in that sector. Indeed, there is some evidence that appropriability in New Economy sectors is even lower than in Old Economy sectors. The new economy’s industries are marked by easy entrance and exit: bright ideas were readily funded, but imitators are just as quick to follow. Additionally, information is expensive to produce but inexpensive to reproduce, a factor that will erode the value of intellectual property rights and reduce the durability of Schumpeterian profits in that sector.

Nordhaus next considers the role of Schumpeterian profits through the Greenspan effect, which Nordhaus defines as the impact of rising productivity on aggregate demand through the wealth effect on consumption. Nordhaus’s calculations suggest that the Greenspan effect on aggregate demand through consumption is about one-quarter of the effect on potential output. In other words, the impact of productivity growth on potential output is about three times the effect on aggregate demand.

These estimates of Schumpeterian profits may seem implausibly low, Nordhaus says, given the inventiveness of the American economy. But they do fit into one of the major puzzles of corporate America: Why is the rate of profit on corporate capital so low? The rate of profit after tax on non-financial corporations over the past 40 years has averaged 5.9 percent annually, which was very close to the cost of capital. How could the rate of profit be so low, considering that profits include so much (such as monopoly and Schumpeterian profits) and the denominator omits several important assets (such as land and intangible investments)? At least part of the answer lies in Nordhaus’s finding that only 20 basis points of the rate of return to capital were attributable to Schumpeterian profits.

Markets Work. Government Doesn’t.

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The year 2020 gave us a huge amount of evidence about the relative merits of government intervention and free markets. The bottom line is that government failed massively and free markets triumphed spectacularly (with one major exception) within the constraints that government placed on them. The one apparent exception to government failure is Operation Warp Speed but, as we shall see, that apparent exception may not be an exception at all.

As early as April 8, when most of the government lockdowns had been in place for only about three weeks, I noted, in “Covid v. Capitalism,” the drastically different performances of private individuals and businesses on the one hand and government on the other. In the intervening nine months, these differences have become even more pronounced.

Consider first the bad news: government. An important step early on in the pandemic would have been to have widespread testing for the coronavirus. On February 6, the World Health Organization (WHO) announced that it had shipped 250,000 tests to over seventy laboratories worldwide. But the US Centers for Disease Control insisted on producing its own. The test that the CDC came up with at first had huge problems so the insistence on rejecting something not invented in the United States cost the country valuable weeks, which is a lot of time when a highly contagious disease is spreading. When CNN’s chief medical correspondent, Dr. Sanjay Gupta, asked Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Disease and an important member of the White House Coronavirus Task Force, if the United States should have used the WHO tests, Fauci answered, “If you look back and Monday morning quarterback, it would have been nice to have had a backup.”

It’s hard to blame Fauci for this mess-up. For one thing, he’s not an employee of the CDC. But it’s not hard to blame government. After all, the Food and Drug Administration insists that people and companies that develop medical tests, even if those tests are not drugs, first get approval before marketing them. So regulation by the FDA was a culprit here, and, as we shall see, was a culprit in slowing down the all-important COVID-19 vaccine.

A Blunt Instrument

One of the biggest government mess-ups was state and local government lockdowns of their economies. Although this has not been well publicized, epidemiologists themselves, before the pandemic, seemed to have a consensus that lockdowns were a bad idea. In a September 2019 report from the Johns Hopkins Center for Health Security, for instance, the authors stated:

In the context of a high-impact respiratory pathogen, quarantine may be the least likely NPI [nonpharmaceutical intervention] to be effective in controlling the spread due to high transmissibility. To implement effective quarantine measures, it would need to be possible to accurately evaluate an individual’s exposure, which would be difficult to do for a respiratory pathogen because of the ease of widespread transmission from infected individuals.

Yet massive quarantines were the main policy implemented by state and local governments.

The first state to lock down was my state of California, where Governor Gavin Newsom announced a statewide lockdown on March 19. Why do I call this a mess-up? Because the lockdown was not based on a careful analysis but, rather, was a one-size-fits-all approach. It took no account of differences between urban and rural areas, for example. Also, Newsom and other governors, in deciding which sectors to exempt from the lockdown, took an off-the-shelf list from the Department of Homeland Security of sixteen sectors regarded as “critical infrastructure.” Many of the sectors in the list of sixteen make sense. For example, food and agriculture, dams, health care, and energy are pretty important. But listed also in the “Transportation Systems Sector” is a subsector called “Mass Transit and Passenger Rail.” Yet mass transit would seem to be an area ripe for closing down given the likely spread of the virus among people close to each other on, say, a subway.

And how have the lockdowns worked? Remember that the original purpose of the lockdowns was to “flatten the curve.” This strategy was based on two ideas. The first was that it was important to reduce the number of people needing to go to hospitals so that the hospitals would not be overwhelmed. The second was that if disease and death were postponed, they might be postponed indefinitely, because we would either find cures or get effective vaccines.

Yet a look at the evidence as of January 4 gives little basis for the view that lockdowns reduced deaths. It’s true that the COVID-19 death rate for locked-down California, at 675 per million residents, is well below the 988 and 1,029 for, respectively, Texas and Florida, which are relatively open. But the death rates for locked-down Michigan, New York, and New Jersey, at 1,341, 1,980, and 2,180 respectively, are well above the rates for Texas and Florida. To be sure, a more careful analysis that sifts through the data and accounts for factors other than lockdown—maybe climate matters—is needed. But on their face, the data give cold comfort.

Moreover, what if a more careful analysis did show that lockdowns prevented COVID-19 deaths? That’s not a slam-dunk case for lockdowns because the costs of lockdowns are huge. They are shattering the careers and livelihoods of hundreds of thousands of restaurant workers, haircutters, gymnasium workers, and others. One might argue that the sacrifice is worth it, but isn’t it easier for vulnerable people, most of whom are old and have co-morbidities, to stay home? They would have to stay home anyway, so why insist that others who are younger and have fewer co-morbidities also stay home? Interestingly, California’s Secretary of Health and Human Services, Mark Ghaly, let the mask (pun intended) slip on December 9 when he admitted that the newly imposed ban on outdoor dining was “not a comment on the relative safety of outdoor dining.” You read that right. What, then, was his and Newsom’s purpose in putting tens of thousands of restaurant livelihoods at risk? Ghaly ’fessed up that the measure had to do “with the goal of keeping people at home.” But wouldn’t he and the other officials need to know what people prevented from dining out would do? What if a number of them instead went to other people’s houses and dined in? We were told again and again that policy decisions must be based on science, only to learn that many such decisions were made by politicians and bureaucrats who had no scientific basis for their decisions.

And where the lockdowns get close to insane is in K-12 schools. As fellow economist Ryan Sullivan and I wrote in “End the School Shutdown,” on October 20 in the Wall Street Journal, [the ungated version is here], data presented on 200,000 kids in forty-seven states in the last two weeks of September showed a low COVID-19 case rate of 0.13 percent among students and 0.24 percent among staff. Recent data collected by the Centers for Disease Control show that as of December 26, only 102 US residents fourteen or younger have died of COVID-19. As we wrote, “During the 2019-20 flu season, the CDC estimates, 434 children under eighteen died of the flu. Yet we don’t shut down schools over the flu.” Interestingly, the schools that are open are disproportionately private schools. In San Diego County, for example, “about 84 percent of private school students are attending school in-person to some degree,” compared to only 32 percent of public school students. That’s predictable. Public schools get their funds whether or not the students attend in person. Private schools, by contrast, have to earn those tuitions. The children who are suffering most tend to be low-income, mainly because they tend to be in public schools.

While the harshest lockdowns were disproportionately those of Democratic governors—think Whitmer, Cuomo, and Newsom, governors of Michigan, New York, and California, respectively—one large bipartisan failure at the federal level was and is massive increases in government spending. The $2.2 trillion CARES Act, passed in March, was badly targeted, giving up to $1,200 to adults and $500 per child under age seventeen, depending on income, but not depending on income loss. And a major part of the act that was targeted, the increase in unemployment benefits by $600 per week, was badly thought out, giving many millions of unemployed workers substantially more to be unemployed than to be employed. Peter Ganong, Pascal Noel, and Joseph Vavra, all economists at the University of Chicago, in an August 24 study, “US Unemployment Insurance Replacement Rates During the Pandemic,” found that between April and July 2020, 76 percent of workers would receive benefits that exceeded their lost earnings.

I detail other major failings of the CARES Act in “The Anti-Stimulus Bill.”

Private Sector Heroes

Consider, by contrast, the private sector. One reason that millions of people have been able to stay at home is that companies like Zoom have made our work from home possible. Note also that one reason we have Zoom is that years ago the US government allowed the founder of Zoom, Eric Yuan, to immigrate from China. If you want to count that as a success of government, you should note that the US government denied his visa applications eight times. The ninth time was the charm. And one reason we have been able to buy items when stores are closed is that Amazon has heroically stepped up to sell us items over the web and, although deliveries are slower than they were, presumably because of volume, they are still relatively quick. In case you’re worried that Yuan and Amazon pioneer Jeff Bezos are getting rich off us, they are. But our wealth from them is forty-five times their wealth from us. In 2004, Yale University economist and Nobel Prize winner William D. Nordhaus found that innovators keep for themselves approximately 2.2 percent of the value they create and that the rest goes to consumers.

In “Covid v. Capitalism,” I give a number of examples of private sector innovation and also voluntary charitable activity that broke out all over the country. But I’ve left out possibly the most important private sector victory: the discovery and production of two highly effective vaccines in under a year.

I noted above that in one major area the private sector did not perform well. That sector is the mainstream media. The media tended not to report on any dissent from lockdowns or, if it did so report, looked for visuals that would make lockdown opponents look bad. In the spring, for example, many in the media highlighted the appearance of swastikas on posters at a protest against lockdowns in Lansing, Michigan, failing to point out that the people who held the signs were probably not Nazis but, instead, were accusing Governor Whitmer of totalitarian tendencies. Overdone? Yes. And the media could have made that point. But they settled for the sleazy hit.

Also, when prominent medical experts such as former Trump adviser and Hoover Senior Fellow Scott Atlas argued that the lockdowns had terrible costs, many in the media attacked him for not being an epidemiologist, a charge that they could have also applied to infectious-disease expert Anthony Fauci, and falsely accused Atlas of advocating a strategy of “herd immunity.” Many in the media harped on the idea that “we’re all in this together.” The statement is literally true—and incredibly misleading. Much more helpful would have been a reminder of how low the risk is for children and for adults under age sixty who don’t have co-morbidities. Moreover, the media reported easy-to-measure COVID-19 cases rather than infections, which, research showed, were a large multiple of cases. By dividing fatalities by cases rather than infections, they reported fatality rates of well over 1 percent, whereas the percent of infections that result in death is well under 1 percent.

Readers might wonder if I’ve left out the biggest government triumph, Operation Warp Speed. Yes and no. On the one hand, it’s reasonable to claim that without the federal government’s pre-commitment to purchasing hundreds of millions of vaccine doses, progress would have been slower. It’s also reasonable to claim that the pharmaceutical companies, understanding the huge amount that millions of people would have been willing to pay for the vaccine, didn’t need that commitment. Moreover, putting the government in charge of distribution has slowed down vaccinations even more than I had feared when I wrote “Vaccines’ Last Hurdle: Central Planners,” (Defining Ideas, December 4). It is true that the Trump administration pushed the FDA to get off its butt and approve vaccines more quickly than is its wont, but that’s an example of reducing government intervention, not increasing it. Finally, as Charles L. Hooper and I have shown in “The FDA’s Deadly Caution,” (AIER, December 16), without FDA regulation we likely could have had vaccine production by the spring of 2020.

A careful look at 2020 shows us the multitude of ways that governments fail and markets succeed.

 

David R. Henderson is a research fellow with the Hoover Institution. He is also a professor of economics at the Naval Postgraduate School in Monterey, California.

Get Ready For The Californication Of America.

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Joe Biden promised Georgians a $2,000 check if they elected his party’s Senate candidates in the state’s runoff elections, and his bribery worked, with Democrats winning both, handing them control of the White House and Congress again.

But while Biden made the election all about battling COVID-19 and “healing the nation,” that is not what the far left that controls the Democratic Party cares about. It has bigger plans — namely, to turn the nation into a California-style one-party state.

By all rights, the 2020 elections should be a warning to extremists on the left. Biden eked out a victory with extremely narrow – and often questionable – victories in a handful of states after promising voters only that he would be a non-Trumpian nice guy.

Meanwhile, Democrats lost ground in the House, with the edge in their majority dropping from 36 seats to 10. And with the two Georgia wins, Democrats managed only a tie in the Senate, which is now split 50-50. (With Biden in the White House, Democrats can control the Senate because Kamala Harris will serve as the tie-breaking vote.)

Biden keeps talking about the need to “heal” the nation, which seems to fit the precarious position his party is in at the moment. Even if he believes that, his party doesn’t. And Democrats have been clear about the priorities they will pursue should they get control of the White House and Congress again.

No, we’re not talking about things like huge tax hikes or Obamacare, which is what they imposed the last two times they controlled both branches.

The stated goal today is to ensure a permanent Democratic majority so they can finally get their far-left agenda enacted.

In other words, they want to replicate what Democrats have already achieved in California.

This isn’t some right-wing conspiracy. This is what Democratic leaders have already stated as their plans or have already approved in the House.

For example, the very first thing Democrats did in the House this year, after seeing their lead shrink dramatically, was to approve a set of rules designed to neutralize Republicans as much as possible. Among others is a rule that will allow the House to pass massive new spending bills – a la the Green New Deal – without having to show how they’d be paid for. There’s a reason that socialist Rep. Alexandria Ocasio-Cortez is celebrating these new rules.

Republicans said the changes are intended to muzzle their party. “It is all designed to take away the voice of 48% of this House chamber,” said Minority Whip Steve Scalise of Louisiana.

Meanwhile, over in the Senate, Sen. Chuck Schumer made it clear last year that ditching the filibuster is on the table should Democrats get control of the Senate and Biden win the White House. He is certain to act on that as soon as Republicans attempt to use the filibuster to thwart Biden’s ambitions. Democrats will then have free rein to get even the most radical proposals to Biden’s desk.

As we’ve noted in this space before, Democrats have also promised to pack the Supreme Court so they can have a rubber stamp for their expansionist, Constitution-bending promises. They’ve also openly talked about packing the Senate by adding two new states to the union that will elect Democrats: Puerto Rico and Washington, D.C.

Democrats are also certain to pass legislation that will make it easier for them to win future elections, whether legitimately or not. In fact, the first bill the Democratic-controlled House introduced in 2019 was the “For the People Act,” which was designed to make election fraud easier on a national scale.

Had it become law, it would have forced states to implement policies such as early voting, automatic voter registration, same-day registration, online voter registration, and no-fault absentee balloting. It would have required states to count ballots cast by voters outside of their assigned precincts and crippled state voter ID laws. And, it would have put onerous restrictions on campaign speech that would have hampered Republican candidates most.

Californians are witnessing the fruits of the Democrats’ relentless determination to control government. After having successfully shoved Republicans off to the fringes, the state has imposed a seemingly endless series of tax hikes, intrusive environmental regulations, and costly mandates on businesses.

Californians at least have the ability to pick up and move to another less politically monolithic state – as they have been doing in droves over the past few years. But where are Americans supposed to flee should Democrats succeed in expanding California policies across the rest of the country?

What can stop this from happening? Biden could stand up to the far left in his party and try to find common ground with Republicans.

Or the few moderate Democrats who remain in the House and Senate could take a stand against their own party’s socialist leanings, either by siding with Republicans or switching parties.

We hope those happen, but we’re not overly optimistic. The next best thing is that Biden and his fellow Democrats try to do too much too fast, alienate voters with their leftist ambitions, and lose their congressional majorities in the mid-term elections.

But by that time, it might be too late to fix whatever damage they manage to inflict in those two years. History has made clear that once Democrats get a law on the books, it stays on the books. Anyone notice that Obamacare is still the law of the land?

In the meantime, it will be up to the public to do everything in its power to stop Democrats from making good on their plan to turn this country into the United States of California.

Your Attitude And My Attitude Are The Sources Of Economic Growth And National Prosperity.

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Who are the drivers of prosperity? Economists would say it’s them. At least the ones who work for the Federal Reserve and the US Treasury and numerous think tanks and lobbying firms in Washington DC would say that. They capture economics in mathematical models, with variables like money supply, government spending, workforce participation, and mysterious forces like technological advance. By tweaking their variables, they believe they can forecast outputs such as GDP and employment levels. The economy is a mathematical machine and they are the geniuses in charge.

Bezos, Zuckerberg, and Cook would say it’s them. They run the tech companies that dominate global commerce, employ people, provide retail platforms for minion companies that sell apps and gadgets and groceries. Without them, there’d be no economy and no prosperity.

Larry Fink at BlackRock, Jamie Dimon at JPMorgan Chase, David Solomon at Goldman Sachs, Warren Buffet at Berkshire Hathaway, and the other titans of finance would say it’s them. They are the financial capitalists who supply the juice to keep the economic lights burning.

Edmund Phelps was awarded the economics Nobel Prize for revealing that it’s none of these. It’s you and me. You can read his theorizing in Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, And Change.

Prosperity on a national scale—mass flourishing—comes from broad involvement of people in the processes of innovation: the conception, development, and spread of new methods and products—indigenous innovation down to the grassroots. This dynamism may be narrowed or weakened by institutions arising from imperfect understanding or competing objectives. But institutions alone cannot create it. Broad dynamism must be fueled by the right values and not too diluted by other values.

Note the term “broad involvement”. Phelps means everyone in the nation: he describes a culture of innovation.

the stuff of flourishing—the change, challenge, and lifelong quest for originality, discovery, and making a difference.

Modern economies display what he calls dynamism: the appetite and capacity of “indigenous innovation”, and “original ideas born of creativity and grounded on the uniqueness of each person’s private knowledge, information and imagination”. Phelps is not an Austrian economist – he can’t afford to be, since he chooses to make his name and his living inside the academic fortress of Keynesianism, not assaulting it from the outside. But he certainly sounds like one in his invocation of subjectivity in identifying these personal, individual, and psychological drivers of prosperity.

There are great benefits for the individuals who populate and participate in a dynamic modern economy:

the mental stimulus, the problems to solve, the arrival of a new insight, and the rest. I have sought to convey an impression of the rich experience of working and living in such an economy. As I considered this vast canvas, I was excited to realize that no one had ever depicted what a modern economy felt like.

“What a modern economy felt like”! Isn’t that the ultimate in subjectivism in economics? He goes further into subjectivism by identifying attitudes and beliefs as the drivers of economic results.

attitudes and beliefs were the wellspring of the dynamism of the modern economies. It is mainly a culture protecting and inspiring individuality, imagination, understanding, and self-expression that drives a nation’s indigenous innovation.. (with) a new set of values – modern values like expressing creativity for its own sake, and personal growth for one’s own sake.

As measures of prosperity, Phelps focuses largely on survey data: people answering questions about how they feel. Among the most important of these, in Phelps’s mind, are job satisfaction scores and life satisfaction scores. He conducts a comparative analysis across (mostly Western) countries that leads him to conclude that people derive more life satisfaction from activities as producers than activities as consumers. This finding stands in opposition to many of the critics of capitalism, who deride the system for making conspicuous consumers of us all, focused on what we buy rather than what we make.

As producers, it is our individual knowledge that gives us power:

it would appear that only increasing economic knowledge—knowledge of how to produce and knowledge about what to produce—could have enabled the steep climb in national productivity and real wages in the take-off countries.

With time, the modernist emphasis on increasing knowledge—and the presumption that there is always more knowledge to come—triumphed over traditional emphases on capital, scale, commerce, and trade. But where did that knowledge come from? Whose “ingenuity” was it?

The ingenuity is yours and mine.

In a follow-up work called Dynamism: The Values That Drive Innovation, Job Satisfaction And Economic Growth, Phelps gives us more specificity about the “modern values” people in dynamic, innovative economies hold:

  • More satisfaction from non-material rewards than from material rewards;
  • An outsize desire for achieving something through one’s own efforts (and being recognized for it);
  • Huge satisfaction in succeeding and prospering;
  • Delight in the sense of flourishing that comes from life’s journey and the thrill of voyaging into the unknown;
  • Satisfaction from making a difference, making a mark.

Underlying these satisfactions are the values of individualism, vitalism, and self-expression. Modernist satisfactions are inherently individualistic: one’s own and one’s closest family. Vitalism looks to challenges and opportunities that contribute to the feeling of being alive. Self-expression is the imagination and creation of new things and new ways that enable an individual to reveal who they are. Mass flourishing occurs in a dynamic economy where these humanist values fuel the necessary desires and attitudes for innovation and growth.

Phelps fears (and presents data to support those fears) that these values are being eroded in today’s America. Opposing values are gaining ground. There is considerable dissatisfaction among many participants in the modern economy. There appears to be a falloff in the non-material rewards of work. Household surveys show losses in reported job satisfaction and life satisfaction. There is a loss in the sense of agency, of the experience of succeeding at something and the sense of voyaging into the unknown. Some sociologists point to a rising narcissism among young people that makes them self-indulgent. They place more value on trying to be someone than on trying to do something.

We may be losing the dynamism of indigenous innovation that leads to mass flourishing. Check your attitude.

 

 

Unions Fight For Teachers At The Expense Of Our Children.

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One of the first things we learned about the coronavirus is that it has a near-zero death rate for kids. We also soon found that children are far less likely to transmit the virus than adults.

Considering these facts, one might reasonably expect that schools would be some of the first institutions to reopen amid government-mandated pandemic lockdowns and stay-at-home restrictions. Because there are very few public health risks—and because education and childcare are among the most essential functions of our society—allowing schools to reopen should have been the easy choice.

This, however, is not what has happened. Many schools across the country have remained closed since March, and even those which opened have done so with tremendous unpredictability and usually within a limited framework. Some schools have opened this fall only to be ordered to close once again when a second wave of COVID-19 cases emerged.

Why have our elected officials chosen to shut down schools despite all the evidence?

Contrary to what you may think, it is not primarily because of scientific recommendations made by experts, but rather largely due to deals cut between politicians and teachers’ unions. This is evidenced by a working paper authored by two political science professors that looked at over 10,000 school districts across the country. It found that regardless of the virus’s actual prevalence in local communities, districts with stronger teachers’ unions were less likely to reopen schools for in-person learning.

In New York City, for example, the United Federation of Teachers struck a deal with Mayor Bill de Blasio. They agreed that teachers would only return to the classroom if the mayor promised to re-close schools if the city’s COVID-19 positivity rate—the percentage of tests coming back positive—hit 3 percent. The positivity rate inevitably rose above that low 3 percent bar, and the schools were promptly closed down again.

If science had actually been paramount to this decision, it would be important to note that while the city-wide positivity rate was 3 percent, the positivity rate within schools themselves was only 0.15 percent. There was no actual scientific reason to close schools down again. But far more influential than scientific considerations were raw politics—raw politics at the expense of children’s education.

Unfortunately, these decisions to keep schools closed have had far-reaching consequences, such as increased mental-health challenges, decreased educational quality, and added stress on families that may have no stay-at-home parents. This, however, is evidently of no concern to the leaders of teachers’ unions because it is not their job to represent children, but rather only their dues-paying members.

“Union leaders say the narrative that they’re acting as obstructionists and pushing to keep schools closed is unfair,” EducationWeek reports. “They say they’re only asking for reopenings to be done safely.”

This excuse doesn’t cut it. Studies have consistently shown that school reopenings are not a major contributor to outbreaks of COVID-19. So, if 2020 has taught us anything, it’s that we never should have underestimated the sheer power of teachers’ unions.

Earlier this year, economist Thomas Sowell released a book titled Charter Schools and Their Enemies. In it, he issues a stunning indictment of the traditional public school system, teachers’ unions, and the politicians who will face political consequences if they defy incumbent powers. He masterfully analyzes the educational outcomes of low-income students who go to charter schools compared to their similarly situated peers in traditional public schools. By the end of the book, the reader is left outraged at the injustice done to ordinary students by those in power.

Sowell points out that while only 10 percent of the traditional public schools he studied had a majority of students passing at the “proficient” level on the mathematics exam, 68 percent of charter schools achieved that level. When it comes to the English test, the numbers are 14 percent and 65 percent respectively.

This is regrettable, because students who are not provided a quality education when they are young may never gain the marketable skills necessary to compete for a well-paying job later in life. Foundational skills in math and English are of crucial importance and the stakes here are high.

The reason charter schools are consistently more successful than comparable traditional public schools is simple: they operate under different incentives and constraints. Charter schools can only remain operational if they are providing a service that is desirable enough to attract students. Traditional public schools, on the other hand, operate as a monopoly where students are given no other choice than to attend that school.

Another key difference is the extent to which teachers are held accountable for the educational outcomes in their classrooms. In New York City, it takes an average of 830 days and $313,000 to fire a single incompetent teacher, largely due to policy negotiated by teachers’ unions. In charter schools, teachers are generally not unionized, and they can be fired for incompetence much more easily.

So, despite its widespread success, teachers’ unions and their political allies consistently fight to block and limit the charter school system. Why, Sowell ponders, is there such hostility toward such a successful system?

“There are millions of reasons,” he writes. “Namely, millions of dollars.”

This points to a fundamental truth: The interests of teachers’ unions seldom align with those of children. This was true prior to the pandemic, and it has only been underscored in recent months.

Of course, that’s not to say that teachers’ unions are inherently evil, but rather that their job is to advance the interests of teachers—not students. The issue arises when the interests of teachers sharply diverge from those of students.

While it is in the best interest of many children to learn in-person, teachers’ unions will advocate for online learning in order to look out for the health and comfort of their members—no matter how low the actual risk may be. While it is in the best interest of children to go to successful charter schools, it is in the interest of teachers to be protected by their union irrespective of performance.

It is because of these political pressures, Sowell explains, that 50,000 kids remain on waitlists to get into charter schools in New York City despite their proven success.

While these were all issues before the pandemic, COVID-19 has solidified the case against the traditional public school monopolies and the immense power of teachers’ unions. Their willingness to put children last and fight to keep schools closed has proven once and for all that teachers’ unions do not, in fact, have kids’ best interests at heart.

Fighting for teachers at the expense of the children they are teaching is the exact opposite of noble. For this reason, we must fight to reign in the influence of teachers’ unions and embrace the emergence of charter schools, private school choice programs, and homeschooling around the country.

 

Cast Down Your Bucket Where You Are: Entrepreneurs Must Use The Institutions of Entrepreneurship To Thrive In the Technological Epoch

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How can institutions such as education, family, language, laws, and economy be understood as the catalysts for emerging institutions of entrepreneurship?

From an entrepreneurial perspective, institutions result from emerging social phenomena based on subjective experience and perspective. Institutions of entrepreneurship include action, technology, knowledge and learning, culture, and values. You see, institutions of entrepreneurship do not thwart marketplace initiatives; instead, they are instrumental for entrepreneurial action to advance into the near future. Many of our institutions are the result of human action and not of design, but over time, predetermined narratives tend to come into existence. From an entrepreneurial point of view, set narratives of entrepreneurship are guides toward a general framework of individual potentialities and should not be deterministic. Institutions serve as constraints and, at the same time, as action enablers.

As in all entrepreneurial matters,  subjectivity applies. The subjectivity of entrepreneurial institutions should allow individuals the ability to take advantage of newly emerging market opportunities. If nascent entrepreneurs go about serving others in the marketplace the same way as previous actors, they will ultimately get the same result. As a case in point, it was Einstein who changed Newton’s longtime theory of gravity by pointing out there is a special and a general relativity. Einstein replaced Newton’s theory, not using the same thoughts and processes as Newton, but from his subjective institutional experiences, knowledge, and skills that he possessed at a particular point in time as new ideas emerged. The theory of relativity gave physics a massive leap in science. The conventions of physics allowed Einstein to use the institutional framework to discover and attempt to be part of something useful for science and the layperson.

Can we extend this same sentiment to the entrepreneur to advance using the institutions of entrepreneurship?

I say yes! An entrepreneur’s experience within institutional environments is subjective, so in the words of Booker T. Washington, nascent entrepreneurs should “cast down your bucket where you are.” Ideally, everyone should have the opportunity to “cast down a bucket where they are,” particularly via emerging entrepreneurial institutions, as a means to learn from the marketplace and participate in the market economy.

Emerging entrepreneurship institutions – such as starting a business on the internet – are the key to entry into markets that may have once been unobtainable for some people, primarily because institutions are subjectively experienced. In many ways, institutions can be identity-producing. If Mary Kay started her business a certain way, it does not mean others following her footsteps have to do it the same way to be successful as she was. Like Isaac Newton, she inspired. Emerging entrepreneurial institutional environments, for those individuals steeped in institutional identity, provide a chance for individuals to realize an alternative to the normative ways of participating in a given marketplace. Moreover, nascent entrepreneurs can use emerging institutions via institutional superhighways through multiple technological devices (i.e., smartphones, laptops, social, and e-commerce platforms) to make transaction-based sales that can serve consumers across the globe.

Institutional environments ought to allow everyone the chance to pursue their entrepreneurial plans. As we know, plans are often diverted due to unexpected events, which is why entrepreneurial institutional environments should serve as market feedback mechanisms and not barriers to market entry. Dropping a bucket means using production factors to serve consumers in the best possible way, not waiting for the ideal circumstance to participate in the marketplace. Entrepreneurs should not wait for an ideal situation, ideal investment, or the perfect business idea.

Within the institutions of entrepreneurship, one should be able to drop down their bucket where they are. Institutions of entrepreneurship should make room for new entrepreneurial participants via technological devices, i.e., smartphones, tablets, laptops. Higher levels of entrepreneurship are not the cause but the effect of technological advancements. Technology is not static but dynamic and the same for the people using it. “Tools and machinery are primarily not labor-saving devices, but means to increase output,” as Ludwig von Mises once said.

A recent report showed that 14% of business owners are between 30-39, and 4 % are between 18 and 29. These demographics (especially 18-29) own smartphones or laptops with access to e-commerce platforms and digital media – basically access to consumer markets at their fingertips. The next logical question is: if 13% of millennials spend over 12 hours on their phones daily, how can they participate in the marketplace? The data speak to the fact that everyone has the chance to drop their buckets where they are and serve their fellow man.

“At least 81% of entrepreneurs do not have access to a bank loan or venture capital,” says a recent Kauffman Foundation report. The report goes on to say, “Very little of the total capital flow to entrepreneurs is geared toward women and people of color.” Again, institutional environments are entirely subjective, as there is too much diversity among people and circumstances to assume that everyone interested in entrepreneurship might uniformly enter the market and participate evenly. Nevertheless, that is the point! Instead of institutional barriers preventing entrepreneurship, institutions of entrepreneurship and emerging institutions ought to function as superhighways of entrepreneurial accessibility via the means of one’s talent and resources where they are, as indeed most people have access to technological devices.

There are 272.6 million smartphone users across the United States, which means that 272.6 million business opportunities are waiting for people to drop down their buckets. Not to mention, 52.4% of the population worldwide use their smartphone to access the internet.

Entrepreneurship is a function of the market process, an activity that should be open to anyone willing to serve others’ needs. Internet searches are now an institution; they’re how people express needs. There are vast amounts of these internet searches, providing the inquisitive entrepreneurial mind with a million ways to start a business. However, the problem is that not all potential entrepreneurs will experience the same institutional environments uniformly. We all have different plans and expectations of how entrepreneurial institutions should facilitate entrepreneurial pursuits, whether it be the production of music, art, lectures, reading material, cooking lessons, painting services, or exercise tutorials. If buckets are dropped where the person is, the only cost incurred by the nascent entrepreneur is time, and the chances are that someone got served, which is the first step towards the ideal success narrative that we often connotate with entrepreneurship.

Again, there are entrepreneurial opportunities only if entrepreneurial institutional environments create an entry for anyone willing to drop their bucket where they are. Entrepreneurial institutions should operate as uncertainty reducers and not uncertainty enhancers. Therefore, the conventional institutional environments ought to support emerging entrepreneurial opportunities and individual action. The institutions of entrepreneurship should accommodate action in emerging institutions so that the entrepreneurial spirit can pour the horn of plenty on all of us.

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