Leading the Revival of Individualism & Self Reliance

Central Planning Is Poisonous To Innovation.

/in /by

“The more things change, the more they stay the same” is the best way to describe the lack of original thinking that is prevalent in politics. Take the recent resurgence of calls from politicians on both sides of the aisle to implement industrial policy.

These calls are motivated to address the (mythical) decline in American manufacturing — and because other countries are doing it. These policies are tired, utterly uninspiring schemes that governments around the world have tried and, invariably, failed at.

The latest example is a proposal by Sen. Gary Peters, D-Mich., to create a new federal agency called the National Institute of Manufacturing. Not to be confused with the National Institutes of Health, the senator explains, “This will be an executive branch agency that will house our national manufacturing programs under one roof,” and effectively coordinate a strategic vision for manufacturing.

But let’s examine the problems this scheme is supposed to address. The first is the supposed decline of American manufacturing. In reality, while manufacturing employment has gone down significantly over the last 40 years, U.S. manufacturing output is now near an all-time high. Ironically, it recently dipped a bit because of the trade war now being waged by the same government Peters thinks is necessary to revive manufacturing.

Industrial capacity — the existing ability of American factories and workplaces to produce industrial output — is also higher than at any time in the past, thanks to productivity growth brought about by labor-saving innovation. Contrary to popular belief, this transformation is beneficial, as the increased productivity fuels the significant wage growth enjoyed by those still employed in manufacturing.

As for the notion that “other countries are doing it,” I’m curious to hear what great successes have come out of, say, China’s industrial policies. In his latest book — “The State Strikes Back: The End of Economic Reform in China?” — Nicholas Lardy of the Peterson Institute for International Economics shows that China’s growth since 1978 has actually been the product of market-oriented reforms, not state-owned programs.

Lardy notes that in 2012, about 70% of China’s GDP was produced by private firms. He details the toll taken on the Chinese economy by the recent increase in ambitious industrial policies and the growth of the state-owned sector. His conclusion is that unless China reverses course and the growing weight of state-owned enterprises, government debt and malinvestments, China’s growth will wither away.

Why should we want America to become more like China? Here’s yet another politician thinking that somehow, the same government that started a war in Iraq on faulty intelligence, botched the launch of HealthCare.gov, gave us the Solyndra scandal and can keep neither Amtrak nor the Postal Service solvent, can effectively coordinate a strategic vision for American manufacturing.

There are already 58 existing federal programs that offer manufacturing funding through 11 federal agencies. These programs include the crony Export-Import Bank, which props up the bottom line of large domestic companies by offering taxpayer-backed loans to equally large, often state-owned, foreign firms. The senator believes that these agencies’ apparent failures are due merely to the fact that they aren’t all in the same place. Somehow, moving them all under the care of a manufacturing czar is supposed to unleash their magical powers.

U.S. industrial policies launched in response to the rise of Japan in the 1980s and the USSR before that failed, not because American policy mavens weren’t smart enough to do things right. The real problem with industrial policy, economic development strategy, central planning or whatever you want to call these interventions is that government officials are inescapably plagued by ignorance of localized knowledge. Government officials cannot outperform the wisdom of the market at picking winners. In fact, government intervention in any sector creates distortions, misdirects investments toward politically favored companies and hinders the ability of unsubsidized competitors to offer better alternatives. Central planning in all forms is poisonous to innovation.

As Peters notes, “If you go on the factory floor in Michigan, it’s not your father’s or grandfather’s factory.” Indeed! American companies are in fact fantastically innovative and productive on their own. They have evolved to produce more of what consumers want at lower costs — most of them without a central planner directing them from Washington. Old ideas that have never worked are no way to foster more innovation. Lighter regulations, a better tax code, more immigrants and freedom to do what they do best are what entrepreneurs need.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. 

 

Why Soaring Inequality Is The Greatest Enemy Poverty Has Ever Known.

/in /by

In 1989 then prominent computer maker Tandy released the Tandy 5000. Though the poorest of today’s poor would haughtily turn their noses up to the 5000 today, at the time this “most powerful computer ever!” was rather expensive. Try $8,499 (mouse and monitor not included) expensive. Nowadays one can buy a brand new Hewlett-Packard computer that’s exponentially more powerful than the 5000 for $200 (no monitor needed, mouse included) at Best Buy, not to mention computers that perform quite a bit better for not much more at any Apple Store or at Dell.com.

The nearly $9,000 “most powerful computer ever!” came to mind while reading New York Magazine writer Eric Levitz’s latest “damning indictment of capitalism.” What has Levitz worked up is that the richest 1 percent have increased their wealth to the tune of $21 trillion since 1989. To say that Levitz lacks nuance, or feel when analyzing numbers, brings new meaning to understatement. The simple plainly confuses Levitz. We know this because simple explains soaring ‘1 percent’ wealth: thanks to technological advances hatched by 1 percenters past and present, the strikingly talented can meet the needs of more and more people around the world. So shrunken by technology is the world in the figurative sense that it’s almost as though Jeff Bezos lives next door to all of us in terms of his ability to serve us.

After that, as a look at just about any wealth list from 1989 would make clear to the mildly sentient of today, the “1 percent” at the end of the 20th century’s penultimate decade in very few instances resemble the 1 percent of  today. With wealth, the team picture is constantly changing as innovators of the present replace yesterday’s. The previous truth explains why what gives the ultra-sensitive Levitz anxiety is in fact a sign of immense progress. Thank goodness the “1 percent” have seen their wealth increase $21 trillion. It’s a logical signal of rising living standards for everyone, not rising poverty as Levitz laughably concludes.

For readers to understand why, they need only consider yet again the “most powerful computer ever!” that came out the year that Levitz cites as the one that began the “damning indictment of capitalism.” Computers then were not very friendly, or usable, or even accessible. Few had them. They were too expensive. Does anyone remember the “internet cafes” of the early 2000s in which we’d rent internet and computer time? Nowadays Apple computers are seen by many as the luxury pricepoint computers of the moment, yet they can easily be had for not much more than $1,000. How lucky we all are that the late Steve Jobs revived Apple, and that Michael Dell mass produced excellent computers that are even cheaper than those made by Apple at his eponymous computer company. In defense of Tandy’s $8,499 5000, it seemed cheap relative to initial mainframe 360 computers marketed by IBM in the 1960s, and that set buyers back well over $1 million.

Considering something as basic as a phone call, one made on a landline phone back in 1989 was going to be very costly assuming the call recipient wasn’t nearby. In 1989 a call from Dallas to Ft. Worth was going to be expensive, New York to Los Angeles very expensive, and New York to London almost unthinkable unless you were very well-to-do. “Long distance call” is a descriptor of something that’s no longer a factor, but it wasn’t too long ago that expensive “long distance calls” (ssssshhh) were made from the office….Crucial here is that these calls took place on landlines simply because in 1989 mobile phones were so rare that the sight of them generally caused people to stop and gawk. Mobiles were the exceedingly obscure gadgets of movie producers in Beverly Hills and New York LBO specialists (“hedge funds” weren’t yet a thing as it were) in 1989, and they were because their cost could be measured in the thousands despite how expensive they were to use (remember roaming charges?), how poor the reception was, and how awful the battery life was. Nowadays a mobile phone brings new meaning to common.

Which brings up its own story. About it, technologist Bret Swanson was the source of the Tandy anecdote that begins this piece. Swanson likes to compare prices of technology throughout time, and some of his most exciting work has come in recent years with the growth of the iPhone. Figure that the brick size mobile phones of the late ‘80s were just that: phones. iPhones are actually supercomputers that fit in our pockets. Not only can we make calls on them that cost next to nothing, not only can they guide us anywhere we want in the world without having to annoyingly stop to get on a payphone in search of directions (the latter was the norm in 1989, and for more than a few it was still the norm in 2009), but they can also enable free global calling via Facetime. Though a simple voice call from Dallas to Ft. Worth once again used to be very pricey, nowadays individuals can talk to their loved ones from anywhere in the world, while seeing them, and there’s no bill to contest for doing just that. Back to Swanson, by his calculations the technology that makes these smartphones extraordinarily super would have set consumers back many, many millions not too long ago, assuming it had been around. The iPhones of today retail for roughly $500-$1,000, but can be had for quite a bit less assuming the buyer enters into a contract with a wireless provider.

Of course, the supercomputers that we carry around, and that are ubiquitous wherever there are people (rich and poor) in the U.S. (and seemingly everywhere else), have us connected to the world’s plenty. Though an interest in a specific book, restaurant, airplane route or clothing item would have potentially required endless amounts of research, expensive calls, interminable delivery waits, and frequently a lot of driving amid an often fruitless search in 1989, nowadays we can tap those computers made for us by billionaires only to summon books, restaurant information, airplane tickets and anything else that interests us from around the world. What about rides? Oh yes, that’s taken care of. In 1989 people were still familiar with taxi dispatchers who seemingly resembled Danny DeVito (most famous then for Taxi – look it up) in both voice and level of rudeness. Now we just tap an app icon on those trusty computers sitting in our pocket only for a driver to appear who knows our name, our route, and whose ongoing employment depends on our being endlessly satisfied.

It would be easy to go on and on, but hopefully the overly uneasy Eric Levitz and all those who think as he does rethink their unease related to the wealth of the “1 percent” having grown by $21 trillion. They should lament that it wasn’t $42 trillion, or $100 trillion. Indeed, imagine how much easier life would be for rich and poor alike. Wealth is created, not divided up. Steve Jobs didn’t hurt Levitz, nor you the reader. He just created.

As opposed to soaring inequality hurting the poor as Levitz so naively presumes, it’s in fact the greatest enemy that poverty has ever known. The wealth gap that has the triggered Levitz in the fetal position is just a happy sign that the lifestyle gap between the rich and poor is shrinking. Levitz can relax. The rich have gotten that way thanks to a world that shrinks figuratively by the day such that the super-talented can increasingly change the world with their tech discoveries. His life would be endlessly frustrating without the superrich, and so would all of our lives be.

John Tamny is editor of RealClearMarkets, and Director of the Center for Economic Freedom.

Adam Smith Conceived A Complex Synthesis Of Morality, Sociability and Economics. Sympathy And Fellow Feeling Motivate Us All.

/in /by

Born in Scotland in 1723, where he lived most of his life and where he also died in 1790, Adam Smith is a mythical figure who fathered the modern discipline of economics, embraced unbridled self-interest, and fought against the government to promote capitalism and the interest of business and the rich.

Jesse Norman’s goal in his recent biography, Adam Smith: Father of Economics, is to show that the mythical Adam Smith is, well… a myth. His tools are the availability of an immense body of scholarship and an awareness of current events.

But how it is possible? Adam Smith did coin the idea of “invisible hand” and claimed that we don’t get our dinner from the benevolence of the butcher, baker, and brewer, but from their self-interest.

True, we do not get dinner from the benevolence of the butcher, baker, and brewer, but that does not mean they are not benevolent, or that benevolence does not exist (or worse, should not exist), and it does not even mean that morality (or anything other than self-interest) is nowhere to be found in markets. “The reason why humans and not dogs can make ‘fair and deliberate exchange’ of one thing for another is because exchanges presuppose a shared context of fairness… ” (page 181).

In fact, Smith’s first published book, The Theory of Moral Sentiments [1759], is a study on how we humans develop shared ideas of fairness and morality. Our morality is not derived from a divinely inspired moral sense, as Smith’s teacher Francis Hutcheson suggested, nor is it a sham to cover our self-liking as Bernard Mandeville suggested. For Smith, it is the result of a triangulation between an actor, an action, and a viewer (being either real or imaginary). Morality and sociability are thus entangled, natural, and not corrupted by society, as Jean-Jacques Rousseau had claimed instead.

As a matter of fact, the more society advances, the more commercial it becomes, that is, the more customs and mores refine and soften, rather than corrupt. Brutality and violence decrease. Women are better treated and increasingly recognized as equal. If in the past they were legally discriminated against, it was because men were the ones making the laws. (We still have a long way to go, given that in 2014 in the United States only 12% of the economists in academia were women). Slavery is also increasingly condemned. It faces the upward battle against our desire to domineer, but its inefficiency and the growing recognition of human equality that commercial societies foster brings hope.

“Smith’s attacks against crony-capitalism are even more remarkable when we think they were written before what we today call capitalism.”

But Smith is not Pollyanna. He recognizes the “pathologies” of commercial societies. Our tendency to admire the rich and powerful may blind our judgment. And our desire to better our condition may create powerful special interests that successfully lobby to create and maintain benefits for themselves at the expense of society. The entire “mercantile system” is an example of this pathology. The British built the system of tariffs and subsidies, as well as the entire colonial apparatus, to benefit themselves at the expense of a higher universal opulence which would have been present in their absence. Smith’s attacks against crony-capitalism are even more remarkable when we think they were written before what we today call capitalism.

The problem with mercantile special interests is that they also have asymmetric bargaining power compared to the working poor. The merchants and manufacturers can hold out for a long time, while the working poor can hold out only for a few days at best. The masters can and do maintain exceeding low wages and poor working conditions, and manage to do so with the backing of the law. The working poor, on the other hand, work from a very young age for long hours at repetitive tasks so much so that they eventually experience a sort of “mental mutilation.”

So while it is true that Smith loudly calls for government non-interference in the economy, when that interference is dictated by cronyism and special interests, it is also true that he does not hesitate to call for government intervention to favor the working poor. Compulsory education, with possible provision for building schools, and support for public diversions are examples to offer remedies to the possible deformation or destruction of the moral imagination and judgment of the working poor. Not to mention a series of public works—mostly of infrastructure but also a ban on small denomination notes and a cap on interest rates—that would facilitate commerce and thus bring that universal opulence that benefits mostly the poor (among whom child mortality was still astonishingly high).

Even the mythical invisible hand of the elegant mathematical general equilibrium or of the promoters of laissez-faire is not to be found in Smith. Smith’s invisible hand is more of a complex evolutionary phenomenon of historical markets, embedded in a political society which co-evolve with institutions, laws, and manners. Commerce, and the competition within it, not laissez-faire, does bring about both universal opulence and freedom. Global inequality is decreasing indeed. But the pathologies are not to be ignored, as the rising inequality within the most developed countries indicates. The “science of the legislator”, rather than the actions of “that insidious and crafty animal, vulgarly called… politician” (page 334, citing Smith) is thus a possible solution to contain the pathologies of commercial societies while keeping them flourishing and bringing all their unintentional and unplanned benefits.

Norman’s book is a remarkable analysis that shows both the complexity of an 18th century intellectual and his relevance for today. Even more so, given that this author is not a formal Smith scholar, but a British politician. Or shall we say, a legislator?

Norman’s prose is accessible to non-specialists and offers a fairly rounded and balanced picture of Smith. Specialists will not find any ground-breaking analysis. Yet they may find the book a valuable and complete general account of the state of the literature on Smith today as well as its continuous relevance. Even if the references in the text are extremely sparse, the bibliography is rich. And given the amount of secondary literature produced even just in the last decade, Norman had to pick his battle: he focuses on books, rather than articles, probably a wise choice as the number of articles is in the thousands. A stimulating book, worth reading.

Jesse Norman. Adam Smith: Father of Economics. Basic Books, 2018.

Maria Pia Paganelli is associate professor of economics at Trinity University.

Here’s What Bernie, Liz Et Al Are Really Peddling: Fully Automated Luxury Communism.

/in /by

Imagine a life in which all your basic needs were met, the bottom of Maslow’s hierarchy of needs forever lopped off. No concerns about college debt ruining your ability to buy a home. No worries about where meals would come from, or whether you would have enough cash to keep gas in the car. No problems paying medical bills.

Then, imagine a life in which virtually all of your needs were met. In this world, society would guarantee its members not just middle-income status, but the prospect of travel, the option of a fulfilling but nonremunerative career, time with family and friends, time spent with cats and gardens and on volunteering and road trips. Imagine that all your peers exercised regularly and watched as much Peak Television as they wanted. Imagine never retiring, because there would be no need to retire. And imagine this happening on a far greener planet.

If the former is the promise of today’s resurgent, left-tilting left, the latter is the promise of its revolutionary vanguard, its furthest flank. And it has a name, a great name: Fully Automated Luxury Communism, or FALC.

FALC is a strong brew of technological determinism, sunny utopianism, and souped-up socialism: Let the robots do all the work, and let humans enjoy the fruits of their labor in equal measure. A mainstay of science fiction and prophetic religious texts (minus the robots part), the idea has come into vogue over the past half-decade or so, both among progressive thinkers concerned about inequality and stagnation and among the internet’s meme makers, the promoters of FALC’s swervier cousin, Fully Automated Luxury Gay Space Communism.

The most ardent advocate for FALC, Aaron Bastani, a London-based media executive and writer, has written a new book on the topic. In it, he advances a curious, passionate argument, with a dire assessment of the present and a messianic vision for the future. Bastani believes that we are already living through a potentially epochal transformation of the economy, as epochal as the establishment of agriculture and the introduction of engines and electricity. Artificial intelligence, machine learning, and advanced computing might be about to eliminate the need for human labor in no small part, Bastani claims.That could mean the continued ruination of the planet, as oligarchs throw thought conferences on yachts and the masses struggle to make rent. Or it could mean the healing of the planet and the thriving of all its inhabitants. What it might take is converting the world to solar and other renewable forms of energy, mining asteroids for raw materials, implementing Communist political systems, and guaranteeing everyone basic services. Enter utopia—a healthy world and an economy of abundance, free and accessible to all.Bastani is certain about the viability of all of this, yet has a topsy-turvy understanding of recent history and the contemporary economy. He fails to give capitalism much credit for moving billions of lives out of poverty, for instance, and fails to recognize the preeminence of race and racism in explaining the success of President Donald Trump or Europe’s far right. He has a long argument with Francis Fukuyama, underpants-gnomes away the political difficulty of what he describes, and seems awfully sure about the potential of space mining. But the vision is compelling and the terminology is useful.Not that the vision is a new one. John Maynard Keynes’s famous essay“Economic Possibilities for Our Grandchildren” imagines a world with far less work and far more leisure; Shulamith Firestone wrote about “cybernetic communism.” Yet the most complete picture of FALC or FALGSC might come not from radical leftists or academic economists, but from Star Trek. In that imagined universe, replicators produce physical goods and artificial intelligence takes care of services. There is no need for money, no need for work, and no problems with resource competition. People do what they want.Living on the USS Enterprise, visiting far-flung planets, going on adventures with your friends while wearing a modular outfit and a cute pin: Now that’s Fully Automated Luxury Communism. (Where does the “Gay Space” part come from? Who knows, though here’s one answer: “Gay and space were added because of the tolerance the communist movement has on sexuality and space because space is f***ing cool.”)Maybe FALC is best understood not so much as a diagnosis of the present or a prediction of the future but as a kind of guide star. Many of the world’s richest countries already guarantee citizens their basic needs. Saving the planet by promoting a complete conversion to renewable fuels is possible and necessary. More progressive, redistributive forms of politics are becoming more popular, arguments for full-fat communism aside. And advanced, mind-bending technologies are already here.

Perhaps the most radical part of the FALC ideology is an emphasis on eliminating labor for the good of humans, rather than fearing the obsolescence of human work. Humans in rich societies could and arguably should work far less than they do, and might thrive far more if they did, FALC argues. There is no need for the world to look like Star Trek for that to become reality.

ANNIE LOWREY is a staff writer at The Atlantic, where she covers economic policy.

Central Banks Cause Income Inequality. We’ve Known It For 300 Years, And It’s Proven Again And Again.

/in /by

Inequality is possibly the buzzword of our day, having been called “the biggest challenge of our time” by the likes of Oxfam and being seen across the political spectrum as one of the most crucial issues today. It is argued that our economic – supposedly capitalist – system would lead to more wealth for ‘the rich’ to the detriment of ‘the poor’ and ‘the middle class.’ It would lead to less mobility between different classes as well as possibly even cultural disintegration, for instance like the urban-rural divide which is seen with dismay by conservatives.

There are countless proposals to tackle inequality, however exaggerated it may be, though they all have one thing in common: the government needs to do more. Taxes should be increased or new ones introduced for ‘the 1%,’ for those having inherited too much wealth, for corporations, or ‘Big Tech’. All of them should finally pay their ‘fair share.’ More welfare should be provided for ‘the poor,’ for families, for single moms. Cities left behind would need to receive more funding from D.C.

What is easy to overlook in this frenzy for money is that the government plays a significant part itself in initiating inequality. After all, rather than living in a capitalist system, we instead often live in a system of cronyism. Companies are courting for more subsidies (see Amazon’s HQ2 huntor Tesla as just two prominent examples), are arguing for regulations that would hurt their competitors, or even make life tougher for the Average Joe (for instance, the Average Joe who is writing this article is unable to visit pages like the Chicago Tribune or Los Angeles Times because the EU introduced a “data protection” law for consumers last year that, in reality, major corporations primarily benefit from).

Even worse, when it comes to inequality, central banks – regardless of whether it is the Federal Reserve, the European Central Bank (ECB), or the Bank of England – have contributed to the problem. These behemoths, in charge of monetary policy, have been on a spending spree ever since the financial crisis of 2008 with so-far unconventional monetary tools, with bond purchasing programs and one round of Quantitative Easing after another.

In classical, standard economics, it is assumed that these money-printing processes will merely stimulate economic activities, otherwise being neutral. The assumption of money neutrality says, according to Ludwig von Mises, that “changes in purchasing power were brought about simultaneously in the whole market and that they affected all commodities to the same extent.” That is, everyone is affected by monetary expansion in the same way. But, argues Mises, this assumption is also a fallacy.

As a largely-forgotten economist with the name of Richard Cantillon – the few who have heard of him often frantically attempt to pronounce his name in a French way, despite him having been Irish – pointed out, when new money is introduced into an economy, as it has happened on a massive scale over the last decade, it is not neutrally introduced at all.

In the words of the man himself, “by doubling the quantity of money in a state, the prices of products and merchandise are not always doubled. The river, which runs and winds about in its bed, will not flow with double the speed when the amount of water is doubled. … Market prices will increase more for certain goods than for others, however abundant the money may be.

The money enters the economy at a certain point – in our central banking system, at processes close to the central bank – and then trickles through the economy. Thus, it is being more beneficial for some than for others. Those that receive the money first will still face the market at its old, non-inflated prices, but with the new money already at hands. They can use it to their advantage. These first-receivers are, in our world, those well connected or close to central banks: commercial banks, financial institutions, big corporations, governments, and bureaucracies. Meanwhile, those farthest away from the money production will lose out. In our world, these are those lower on the economic ladder and those that are less politically connected.

Relatively little research has been done on whether the Cantillon Effect is actually holding up in reality. Michele Lenze and Jiri Slacalek argued last year that the monetary policy of the ECB had no significant effects on income distribution. The paper was sponsored by the ECB itself, however, and reeked of Keynesian assumptions, such as that the ECB’s Quantitative Easing led to unemployed getting jobs, thus, obviously, raising their income (that it was loose monetary policy that got us into the crisis and led that high unemployment in the first place is not considered).

Meanwhile, a brand-new study by Mehdi El Herradi and Aurélien Leroy from De Nederlandsche Bank, which looks at twelve industrialized countries from 1920 to 2015,  shows some strong results in favor of Cantillon: “our evidence suggests that monetary policy has a significant impact on income inequality.” Indeed, they argue, loose monetary policy results in much higher income for ‘the 1%’ – their share of income could increase between one and six percent.

Needless to say, such empirical studies on large-scale economic processes – by using intricate mathematical models, need to be observed cautiously. In addition, much more work needs to be done in the field to make more comprehensive statements. Despite this, this new study from the Netherlands gives a sign – a sign backed up by rapidly rising prices in stocks, financial assets, and housing, i.e. of goods in which wealthy people are mostly economically active – that the Cantillon Effect could indeed be in effect today.

A rethink, thus, might be in order among those particularly invested in fighting against inequality. They would do well to look more often to central banks and governments, which redistribute money from those that are poor to those that are rich, to find those guilty of contributing to inequality.

Entrepreneurship Is The Science Of Making People More Valuable To Each Other.

/in /by

Adam Smith wrote, “Man naturally desires, not only to be loved, but to be lovely.” That may strike you as an odd sort of language for an economist to use, but it is not. Smith was a system builder, and the system he was exploring was what Enlightenment scholars called The Science Of Man. In Theory Of Moral Sentiments, he was making the case that moral relations between human beings can emerge naturally from collaboration. In any society, people are engaged in exchange – exchanging words, exchanging morals, exchanging relationships.  We quickly realize that the greatest good for all is achieved when those relationships are based on mutually acceptable and beneficial moral values. The goals we seek are to be loved – to be seen by others as morally worthwhile – and to be lovely – to deserve and earn the praise of others.

 

Adam Smith went on to study another aspect of exchange between people, the one today we call economics. To enjoy the fruits and benefits of economic life, people also engage in exchange. We exchange our skills, our labor, and the products of our work. For this exchange to be mutually beneficial it must be not only moral but also a source of value for both parties. Each one feels that they got more out of the exchange than they gave. They feel loved (their offer was accepted) and lovely (they did a good job).

 

One form of economic exchange is giving labor in exchange for wages, in the arrangement we call employment. When we do this, we have in mind the creation of a future stream of value. We anticipate that, if we continue to exert valuable effort for our employer, we will receive a flow of money wages extending into the long term future. We might also anticipate some promotions and wage increases, especially if we increase our valuable skills through experience (learning-by-doing) and incremental educations (qualifications and certifications).

 

If we choose the entrepreneurial route, we anticipate the creation of two future streams of value. First, we must create value for others – that means, making them more valuable. If an entrepreneur sells a service to a customer, the customer enters into the exchange because they believe they’ll be more valuable after the exchange. The customer buys marketing services because they feel they’ll create more consumer awareness or conversion as a result. Or buys legal services because they feel they’ll write better contacts or avoid some anticipated problems of litigation. Or buys technical services because they feel they will operate with greater efficiency.

 

Similarly, with the sale of products to consumers. The consumer, of course, buys the product because they would rather experience its benefits than retain the dollars they spend to acquire it. The consumer becomes more valuable to their kids as a mom as a result of their purchase decisions on their behalf. A father becomes more valuable when he buys a baseball bat in order to introduce his son to a sport, and all the learning that accompanies participation and team play. A tax accountant might help parents retain more of their income for the good of their family. A car dealer helps workers with their daily commute. A yoga trainer helps people with their physical and mental health.

 

Moreover, the entrepreneur’s taking the product to market where it can be purchased makes many more economic actors more valuable. The entrepreneur who sells products through Walmart or amazon.com helps all the workers at those firms to earn their wages, feel stability and feel useful in the economy. Another entrepreneur who sells plumbing services helps fellow entrepreneurs who sell tools or accounting or tires or gasoline or phone service.

Viewed in this way, capitalism is a system in which people try to make each other more valuable and are rewarded for doing so. They don’t have to feel charitable. To quote Adam Smith again, “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest”. If they know what others need in order to feel more valuable, entrepreneurs can design and offer products and services to meet that need, and find out quickly, through the market feedback of customers buying or not buying, whether they got it right or not. If the signals are negative, or not so good, the entrepreneur adjusts to improve the product, until the market indicates that it’s right. How does the entrepreneur read the mind of the consumer? Through empathy. Adam Smith called it Sympathy. It’s the natural fellow-feeling that we all have for each other, and we feel better – more loved – when we exercise it effectively.

Adam Smith wrote over 200 years ago. Since then, we have had more time and multiple market cycles to hone the science of making each other more valuable. And we’ve succeeded, as measured by GDP per capita or other measures of individual value.

There are many calling for an end, or a drastic change to this system, imposed from the top down, through government programs and government regulation. The problem with these top-down solutions is that the capitalist system of each of us helping our fellow man in the pursuit of our own self-interest is a self-governing system. It’s spontaneous. Every constraint renders it less effective and productive. Every subsidy and every entitlement gives someone permission not to try as hard as they otherwise would to help his or her fellow. Why should they, when their own income is secured by an entitlement, rather than by the rewards of the market? Or when their special interest group is subsidized so that they don’t have to try so hard to help others?

Untrammeled entrepreneurial capitalism makes everyone more valuable.

 

 

 

 

San Francisco: The City That’s More Politically Correct Than It Is Livable.

/in /by

In a city that permits pot smoking, distributes free needles to heroin-addicted junkies, sticks up for its sanctuary city status even as locals get shot, and permits the entire cityscape to become the homeless community’s public bathroom, San Francisco’s Board of Supervisors has decided to ban … e-cigarettes, which are a kind of vaping.

For its own good, of course.

According to the San Francisco Chronicle:

The San Francisco Board of Supervisors on Tuesday unanimously voted to approve first-of-its-kind legislation to suspend the sale of e-cigarettes in the city, amid concerns over underage use of the addictive nicotine products. The measure is already being challenged by the nation’s largest e-cigarette company, Juul, which is laying the groundwork to take the issue to voters in November.

The bill still requires final approval, but the board voted 11-0 to pass the ordinance on the first reading, telegraphing its intent to make it official as early as next week.

The measure, if passed, would go into effect seven months after it is signed by the mayor. It would halt the sale of e-cigarettes in San Francisco’s brick-and-mortar stores and bar the delivery of e-cigarettes bought online to San Francisco addresses until the U.S. Food and Drug Administration reviews the safety of the products, which it has not yet done.

It’s complete lunacy, starting on merit grounds alone. Vaping is not an evil thing, and neither are e-cigarettes, which are the poor man’s version of vaping. Vaping is a hipster thing found mostly in urban areas, where people who vape typically will go to a vape shop loaded with kitchen-table-created specialties, pick out the flavors of vape fluid and nicotine they like, place them into their vape pipes (sometimes fancy or custom-made), and then steam up a storm. Sometimes they do it at the shop bar, sometimes they take it home or vape in their cars or on the streets. It’s not a completely nicotine-free endeavor but it’s far less risky than real cigarettes or cigars because vaping has fewer chemicals. It also doesn’t stink, it doesn’t hold significant risk to anyone inhaling the steam, and it often helps people who otherwise smoke quit. That’s because the people who vape can adjust the level of nicotine within their devices to gradually lower the levels to the point where it’s not difficult to quit. E-cigarettes are pre-packaged cartridges where the nicotine level cannot be adjusted and the flavors tend to be predictable ones, such as menthol, but they are nevertheless popular, too, often purchased in convenience stores.

I investigated vaping in a long piece that ran in the New York Observer a couple of years ago and learned all this stuff. I was completely neutral about the matter before I started. I learned a lot about why people vape and how vaping works, particularly with its valuable role in helping customers drop their tobacco habits and nicotine addictions. I learned that it was a social thing, and smokers and non-smokers often compromised to vape together so they could mix company without the non-smokers getting sick from the smell. The other thing I learned was how questionable the FDA was, refusing to answer reporter questions, taking forever to approve vaping or e-cigs, refusing to admit that vaping is less harmful than smoking, and operating a revolving door with related lobbies. And most appalling, I learned it was not Big Tobacco that was trying to stomp out a rival, it was Big Pharma, which had smoking cessation devices of its own to market, with a lot of Democratic politicians on its string. Democrats playing Mrs. Grundy, trying to take away the hipster punch bowl? If there’s enough money involved, it seems to be their story.

Which draws attention to a couple of details. Juul Labs, which makes the targeted e-cigarettes about to be banned, is headquartered in San Francisco. It’s a successful company, with 1,500 employees and $2 billion in market cap on $1 billion in revenue at the very least, and it may be greater now. Why would San Francisco be targeting one of its own homegrown companies, this city that permits pot and poop on the streets, and along with it, all vaping, really, because we are talking about an actual ban? Not only are they targeting what must be a big taxpaying entity for their city, they are also targeting the native flora and fauna of that city, which is its famous hipsters. It is the city of Lawrence Ferlinghetti and Jack Kerouac, after all. Why?
It almost makes one wonder if there could be the Big Pharma-war-on-Big Vape going on. Might there be some Big Pharma in that city that really wants to make vaping or e-cigs a bannable thing nationwide as other cities take their cue from politically correct San Francisco? I have no information on this, but it’s probably worth noting that McKesson, a Fortune 100 mega-star, has a big glassy skyscraper headquarters in San Francisco – and what a coincidence, makes a smoking cessation product. They may not be involved in this stupidity, but so far nobody’s asking. And they may not be the only one, either. Could there be other players putting the squeeze to upstart Juul (founded in 2015)? It’s well worth looking at now that the craziness has reached even the hipsters who vote for these people.

In any case, the decision is bad, it’s an extension of the city’s straw ban, plastic bag ban, and all the other Big Brother bans that make San Francisco more politically correct than liveable. Nothing is solved with these bans and quality of life is never improved any more than the earth is saved. All this ban will do is drive vaping and e-cigs underground, where the taxmen can’t visit. It’s stupid and disgusting. And it ought to be reversed pronto.

This article appeared at https://www.americanthinker.com

Grant No Respect To Government. It’s A Weapon Fought Over By People Who Want To Smash Each Other—And You.

/in /by

The government in the United States has increasingly become a powerful weapon that two warring tribes repeatedly seize control of and then use against each other. For those of us who are averse to being smashed, it’s long past time to consider the machinery of the state as nothing more than a bludgeon in the hands of dangerous maniacs.

Dangerous? Indeed. It’s hard to beat the insight into the malicious heart of government offered by Rep. Ted Lieu on CNN in December.

“I would love to be able to regulate the content of speech,” the California Democrat told CNN’s Brianna Keilar. “The First Amendment prevents me from doing so, and that’s simply a function of the First Amendment.”

Lieu obviously takes it for granted that many politicians would muzzle their enemies if it were permitted and that only meddlesome legal strictures prevent them from enacting their dark desires.

Those strictures no longer look so strict. New York state’s blue-tribe government last year repeatedly abused regulatory power in assaults against independent institutions. First, it sought to intimidate financial firms and insurance companies into breaking ties with organizations that advocate self-defense rights. This emulated the Obama administration’s earlier Operation Choke Point scheme by which “powerful bank regulatory agencies engaged in an effort of intimidation and threats to put legal industries they dislike out of business,” according to John Berlau of the Competitive Enterprise Institute. New York officials followed up by threatening to declare “truant” any children attending private schools whose curricula didn’t win state approval.

For his part, Donald Trump, red tribe jefe, demands unwavering personal loyalty. He promised to punish companies that defy his nationalistic economic schemes by moving production overseas. “They will be taxed like never before,” he vowed last summer of Harley-Davidson. And the president, who once described freedom of the press as “frankly disgusting,” doubled down on his predecessor’s hostility to journalistic independence by threatening to retaliate against the critical Washington Post with antitrust action, higher postage rates, and taxes on Amazon, which shares Jeff Bezos as its owner.

Yes, politicians have misbehaved in the past. But pollsters continuously report that the dominant modern political factions hate each other to an unprecedented degree, and their chosen standard bearers are seeking to act on that loathing. It’s enough to make you think government officials shouldn’t be trusted with the powerful tools of the state—and to worry that the restraints intended to prevent misuse of those tools have broken down.

“We are at the end of the American project as the founders intended it,” political scientist Charles Murray wrote in 2015’s By the People: Rebuilding Liberty Without Permission (Crown Forum). That project, as he saw it, was an effort to “demonstrate that human beings can be left free as individuals, families, and communities to live their lives as they see fit as long as they accord the same freedom to everybody else.” Given the U.S. government’s intentional erosion of that ideal, however, Murray proposed mass civil disobedience against intrusive rules and overreaching officials.

“You have the right to defend yourself and others from state injustice, even when government agents act ex officio and follow the law,” philosopher Jason Brennan wrote in the January 2019 issue of this magazine. “Innocent people have a right not to be subject to badly made, high-stakes political decisions,” he adds in his 2018 book, When All Else Fails: The Ethics of Resistance to State Injustice (Princeton University Press). Brennan doesn’t suggest that overt resistance is risk-free, but he argues that it’s morally justified and often better than knuckling under.

Both Murray and Brennan see the government as frequently oppressive and out of control—but also as subject to correction, or at least a good knee-capping, if enough people are willing to gum up the works. “Government is the Wizard of Oz…impotent to impose its will in the face of widespread refusal to comply with its rules,” argues Murray.

There’s evidence that something as simple as shaming and social ostracism can effectively sap government agencies of energy, recruits, and resources.

Long-despised for its grabbiness and brutality, the IRS further alienated the public when it acted against Tea Party groups during the Obama years. Since then, it’s lost funding, cut way back on intrusive audits into Americans’ finances, and suffered deep demoralization. “Almost a third of its remaining employees will be eligible to retire in the next year, and with morale plummeting, many of them will,” ProPublica reported in December. That’s one-third fewer arm-twisters—at least for a while—to be called upon by Lieu and his colleagues, even as restrictions on their power erode.

Like the IRS, the FBI compounded the bad will it engendered with lethal misbehavior and the shenanigans of a habitually dishonest crime lab by allowing itself to be drawn into contentious political issues, such as investigations into the bad conduct, real and alleged, of the major 2016 presidential candidates. “Public support for the FBI has plunged,” Time reported last year. And that skepticism appears to have affected juries, which are returning 11 percent fewer convictions in FBI-led cases than they did five years ago.

Employment applications to the FBI dropped from 21,000 per year to 13,000 per year, The Washington Post has reported, necessitating a marketing campaign to haul in reluctant recruits. State and local police agencies, also tainted by news reports of brutality and bias, have likewise seen sharp drops in applicants, resulting in fewer officers to enforce the government’s will. “The number of full-time sworn officers per 1,000 U.S. residents has dropped from 2.42 in 1997 to 2.17…in 2016,” the Post notes.

Come to think of it, that just might leave a little room in the hiring process for applicants who see Edward Snowden as a role model—or even as a starting point in the necessary process of sabotaging from within overpowerful and much-misused agencies.

Most of us will prefer quieter acts of disobedience—ignoring regulations and perhaps assisting others who get caught doing the same, as Murray recommends. We might also choose to respond to the excesses of government agents as we would those of any other thugs, without offering undeserved deference, as Brennan suggests. We could refuse private services to state employees, damage government property, dox officials, and even directly intervene in incidents of oppressive action.

There’s no reason to show respect to a system that sees us as nothing more than enemies to be smashed.

Since We All Believe In Different Values, Are we Still A United Nation And One People?

/in /by

“My religion defines who I am. And I’ve been a practicing Catholic my whole life,” said Vice President Joe Biden in 2012. “I accept my church’s position on abortion as … doctrine. Life begins at conception. … I just refuse to impose that on others.”

For four decades, Biden backed the Hyde Amendment, which prohibits the use of the tax dollars of Joe’s fellow Catholics to pay for what they view as the killing of the innocent unborn.

Last week, Joe flipped. He now backs the repeal of the Hyde Amendment.

Ilyse Hogue of NARAL Pro-Choice America welcomed home the prodigal son: “We’re pleased that Joe Biden has joined the rest of the 2020 Democratic field in coalescing around the Party’s core values — support for abortion rights.” Nixonu2019s White Hous…Patrick J. BuchananBest Price: $10.90Buy New $10.20(as of 10:40 EDT – Details)

But when did the right to an abortion — a crime in many states before 1973 — become a “core value” of the Democratic Party?

And what are these “values” of which politicians incessantly talk?

Are they immutable? Or do they change with the changing times?

Last month, Disney CEO Bob Iger said his company may cease filming in Georgia if its new anti-abortion law takes effect: “If (the bill) becomes law, I don’t see how it’s practical for us to continue to shoot there.”

The Georgia law outlaws almost all abortions, once a heartbeat is detected, some six to eight weeks into pregnancy. It reflects the Christian conservative values of millions of Georgians.

To Iger and Hollywood, however, Georgia’s law radically restricts the “reproductive rights” of women, and is a moral outrage.

What we have here is a clash of values.

What one side believes is preserving the God-given right to life for the unborn, the other regards as an assault on the rights of women.

The clash raises questions that go beyond our culture war to what America should stand for in the world.

“American interests and American values are inseparable,” Pete Buttigieg told Rachel Maddow. Secretary of State Mike Pompeo told the Claremont Institute: “We have had too little courage to confront regimes squarely opposed to our interests and our values.”

Are Pompeo and Mayor Pete talking about the same values?

The mayor is proudly gay and in a same-sex marriage. Yet the right to same-sex marriage did not even exist in this country until the Supreme Court discovered it a few years ago.

In a 2011 speech to the U.N., Secretary of State Hillary Clinton said, “Gay rights are human rights,” and she approved of U.S. embassies flying the rainbow flag during Pride Month.

This year, Mike Pompeo told the U.S. embassy in Brazil not to fly the rainbow flag. He explained his concept of his moral duty to the Christian Broadcasting Network, “The task I have is informed by my understanding of my faith, my belief in Jesus Christ as the Savior.”

The Christian values Pompeo espouses on abortion and gay rights are in conflict with what progressives now call human rights.

And the world mirrors the American divide.

There are gay pride parades in Jerusalem and Tel Aviv, but none in Riyadh and Mecca. In Brunei, homosexuality can get you killed.

To many Americans, diversity — racial, ethnic, cultural, religious — is our greatest strength.

Yet Poland and Hungary are proudly ethnonationalist. South Korea and Japan fiercely resist the racial and ethnic diversity immigration would bring. Catalans and Scots in this century, like Quebecois in the last, seek to secede from nations to which they have belonged for centuries.

Are ethnonationalist nations less righteous than diverse nations likes ours? And if diversity is an American value, is it really a universal value? The Greatest Comeback:…Patrick J. BuchananBest Price: $4.67Buy New $6.00(as of 09:55 EDT – Details)

Consider the treasured rights of our First Amendment — freedom of speech, religion and the press.

Saudi Arabia does not permit Christian preachers. In Afghanistan and Pakistan, converts to Christianity face savage reprisals. In Buddhist Myanmar, Muslims are ethnically cleansed.

These nations reject an equality of all faiths, believing instead in the primacy of their own majority faith. They reject our wall of separation between religion and state. Our values and their values conflict.

What makes ours right and theirs wrong? Why should our views and values prevail in what are, after all, their countries?

Under our Constitution, many practices are protected — abortion, blasphemy, pornography, flag-burning, trashing religious beliefs — that other nations regard as symptoms of a disintegrating society.

When Hillary Clinton said half of all Trump supporters could be put into a “basket of deplorables” for being “racist, sexist, homophobic, xenophobic, Islamophobic,” she was conceding that many Trump’s supporters detest many progressive values.

True, but in the era of Trump, why should her liberal values be the values America champions abroad?

With secularism’s triumph, we Americans have no common religion, no common faith, no common font of moral truth. We disagree on what is right and wrong, moral and immoral.

Without an agreed-upon higher authority, values become matters of opinion. And ours are in conflict and irreconcilable.

Understood. But how, then, do we remain one nation and one people?

Wages Are Growing And Inequality Is Narrowing. Don’t Expect To Hear Much About It.

/in /by

With the Democratic presidential campaign under way, get ready to hear a lot about economic inequality. Sen. Elizabeth Warren, who’s surging in the polls, has complained about “a rigged system that props up the rich and the powerful and kicks dirt on everyone else.” In reality, the strongest economy in more than a decade is bringing benefits to everyday Americans.

According to an April study by the New York Federal Reserve, the average starting wage offer for full-time employees jumped from $58,035 in November to a series high of $66,415 in March. The average expected likelihood of receiving a job offer was also the highest recorded since the survey began in 2014—and the gain was “most pronounced for respondents without a college degree.”

The Bureau of Labor Statistics’ employment data have been reflecting significant income growth for working-class Americans for months. With more Americans working than at any time in history, the unemployment rate near a 50-year low, and 14 consecutive months with more job openings than unemployed people, for the first time in decades it’s harder to find blue-collar workers than white-collar ones. This competition for employees is driving wages up, which narrows income inequality.

Wages in May for nonsupervisory employees increased 3.4% year over year, the 10th consecutive month at or above 3%—after a stretch in which wage growth had been below 3% for every month since May 2009. The recent gains were even more significant for workers in traditional low-wage sectors. For retail workers, wages rose 3.8% in April, the 14th consecutive month at or above that rate (December’s 5.1% increase was the largest since 1998). For hotel and restaurant workers, the April increase was 4.7%, the eighth consecutive month at or above 4% (and March’s 4.7% increase was the largest since 2008).

Large employers are driving hourly wages closer to the Democrats’ $15 goal without a federal mandate. Within the past six months Costco and Amazon have raised their minimum wages to $15, and Target said that it will reach $15 by next year. In April Bank of America announced an increase to $17 an hour, and to $20 by 2021.

The minimum wage is bad policy, but prosperity renders it moot. With its starting wage already over $10 an hour and wages rising, even McDonald’s has withdrawn its opposition to a minimum-wage increase. Walmart ’s CEO recently went a step further and called for a minimum-wage increase. Walmart already pays an average wage of $17.50 an hour including benefits.

This trend will continue as employers compete for working-class employees—if the economy keeps growing. In a recent Wall Street Journal survey of economists, nearly 70% expected faster wage growth during the coming year.

Economic growth won’t eliminate all income inequality—and that’s good. Capitalist economies reward people for meeting the needs of others—their customers. Steve Jobs and Jeff Bezos didn’t get rich by stealing. They accumulated disproportionate wealth because they provided disproportionate benefit.

Meanwhile, politicians who say they want to alleviate income inequality overstate the problem. Sen. Bernie Sanders asserts that the income gap is “wider than at any time since the 1920s.” This claim is based on research by Emmanuel Saez, an economics professor at the University of California, Berkeley. But Mr. Saez ignores the impact of taxes on high earners. The top marginal income-tax rate in the late 1920s was 25%, vs. 37% today. Nor does he take account of welfare benefits. Food stamps, public housing, Medicaid and Social Security didn’t exist in the 1920s.

Under Mr. Saez’s analysis, liberal interventions—both increasing taxes on the wealthy or increasing benefits for the needy—are omitted from considerations of income inequality. Thus Mr. Sanders, Ms. Warren and others demand government action to stem what they claim is a long-term and rapidly worsening trend but fail to take into account the impact on inequality of the government actions they advocate.

A 2018 study by nonpartisan economists David Splinter (of Congress’s Joint Committee on Taxation) and Gerald Auten (of the Treasury’s Office of Tax Analysis) came to a far different conclusion. Messrs. Splinter and Auten used 1960 as the base year and used “measures of pretax and after-tax incomes” including government transfers. They found that while economists including Mr. Saez had determined that the top 1%’s share of income “increased by two-thirds since 1960,” the actual increase was “relatively modest” at “less than half a percentage point.”

No matter how you measure income inequality, the most effective way to reduce it is through policies that encourage job-creating, wage-increasing economic growth. Unlike government redistribution, economic growth creates the competition for employees that lifts working-class wages, and that’s what it’s doing today.

Mr. Puzder is a former CEO of CKE Restaurants and author of “The Capitalist Comeback: The Trump Boom and the Left’s Plot to Stop It.”

Write for CFI