By Simon Grey, on February 10th, 2012
If Beijing’s intervention into the Chinese economy justifies U.S.-government ‘retaliation’ to ‘correct’ market distortions created by those interventions, shouldn’t the still-significant lingering negative consequences of Beijing’s interventions into the Chinese economy from 1949-1978 be considered? Shouldn’t Beijing’s artificial destruction, during the middle decades of the 20th century, of production efficiencies in Chinese factories be weighed against Beijing’s artificial creation, in the early decades of the 21st century, of such efficiencies?
In short, the answer is no.
Boudreaux, in asking the question, implicitly accepts the validity of the state and of citizenship. He must also accept that the state must act in the best interest of its citizens. While the government should seek to redress the negative effects that its citizens face as a result of foreign market intervention, it has no responsibility to address the negative effects that non-citizens face as a result of foreign intervention. China is not the US, and Chinese aren’t Americans. As such, the US government has no obligation to concern itself with addressing negative economic outcomes faced by the Chinese people that arose as a result of the Chinese government’s economic policy.
By Simon Grey, on January 25th, 2012
Parlier earns about $13 an hour. She’d like to become one of the better-paid workers in the plant, but, in today’s factories, that requires an enormous leap in skills. It feels cruel, Davidson writes, to mention all the things Parlier would have to learn to move up. She doesn’t know the computer language that runs the machines. “She doesn’t know trigonometry or calculus, and she’s never studied the properties of cutting tools or metals. She doesn’t know how to maintain a tolerance of 0.25 microns, or what tolerance means in this context, or what a micron is.”
A good attitude and hustle have taken Parlier as far as they can. It’s hard, given her situation, to acquire the skills she needs to realize the American dream.
But skills aren’t always necessary. A dumbed-down UI can serve as a substitute for knowledge, particularly if a firm can hire a technician to know the technical aspects of the technology in use so other workers don’t have to. In fact, the trend of technology has generally been to serve as a substitute for knowledge and ability. Why learn Trig if you can run a fairly simple program on a computer?
Anyhow, this story is evidence of my claim of a technology gap. If labor were allowed to compete freely in a deregulated economy, technological growth would be slower and technological innovations implemented less frequently. This in turn ensures that labor is not stagnant or regressive, and also gives less intelligent laborers a chance to remain on the market longer as technology remains relatively expensive. In order to make technology more appealing, then, technological innovators will find it useful to dumb down the UI to make the device more readily accessible by lower-intelligence labor.
The point in all this, then, is that the government has basically set policies in place that pulls demand for technology forward, leaving less-intelligent laborers in the lurch. And since less-intelligent laborers tend to also be poor, it can be said that the government hates poor people.
By Thomas Knapp, on January 4th, 2012
Our household transitioned to Compact Fluorescent Lamp (CFL) light bulbs years ago. We did it over time, replacing our incandescent bulbs as they burned out. At this point, the only remaining incandescents in the house are those “makeup bulbs” in the significant other’s vanity lamp.
Why did we change over? Because the CFLs were advertised — truthfully, so far as I can tell — as longer-lasting and more efficient, such that they more than cover the higher cost. My recollection is that in four years or so, we’ve had one CFL “burn out” (and a couple get broken, but incandescents would have broken in similar situations too). We’re happy with the quality of light, I don’t have to climb around changing bulbs as often, and the effect on our electric bill, if relatively small, has at least been in the right direction.
Personally, I think CFLs, LEDs, etc. are the bee’s knees. But let’s get one thing straight: The “incandescent light bulb ban,” intended to make you use them, has little or nothing to do with energy efficiency. It’s about money and it’s about using government regulation to strangle competition.
Here’s how it works:
Big light bulb players (General Electric, Phillips, Osram Sylvania) develop and patent CFL technologies, and put big money into facilities to mass produce them. Then they milk what money they can out of their patent-protected monopolies.
But it turns out to not be as much as they’d have liked — most people would still rather spend 50 cents on a 100-watt incandescent bulb than three bucks on a 26-watt CFL. And there are plenty of smaller companies still making those cheaper bulbs. When the patents expire, instead of rushing to produce CFLs too, those smaller companies just keep cranking out those cheap incandescents. And the big guys keep taking it in the shorts, or at least not making nearly as much money as they believe they’re entitled to make.
Solution? “Hey, we spent bazillions of dollars developing and implementing this technology that not everybody wants … let’s spend a little lobbying forcing them to use it … and while we’re at it, let’s force those smaller firms to either spend bazillions of dollars implementing it as well or get out of the light bulb business, too.”
In a real free market, CFLs, LED bulbs, etc., would — in my opinion — have eventually triumphed over the incandescent bulb (with some niche/aesthetic exceptions) by getting ever cheaper and ever more efficient. But why continue to compete and innovate when you can just drag a few papers sacks full of cash down K Street and get your competition outlawed?
Some people refer to this as “light bulb socialism.” I call it “actually existing capitalism.”
By Simon Grey, on August 25th, 2011
Q: Who said this:
Second, the idea that U.S. economic difficulties hinge crucially on our failures in international economic competition somewhat paradoxically makes those difficulties seem easier to solve. The productivity of the average American worker is determined by a complex array of factors, most of them unreachable by any likely government policy. So if you accept the reality that our “competitive” problem is really a domestic productivity problem pure and simple, you are unlikely to be optimistic about any dramatic turnaround. But if you can convince yourself that the problem is really one of failures in international competition—that imports are pushing workers out of high-wage jobs, or subsidized foreign competition is driving the United States out of the high value-added sectors—then the answers to economic malaise may seem to you to involve simple things like subsidizing high technology and being tough on Japan. [Emphasis added.]
A: Paul Krugman (Pop Internationalism p. 16 [1996], The MIT Press, Cambridge).
In spite of his remarkable daily stupidity, Krugman actually correctly recognizes the problem of American competitiveness in international trade. What hampers America is not foreign trade, but domestic productivity. And one of the biggest hindrances to domestic productivity is government, both at the state and municipal level, and particularly at the federal level. Thus, if one wants to know why Americans are losing manufacturing jobs, one need only look at domestic policy. The federal government has increasingly hamstrung manufacturing jobs over the past several decades.
Furthermore, instead of allowing consumers to feel the pain that domestic production policy would naturally incur, the federal government instead decided to promote increased foreign trade (under, it should be noted, the auspices of so-called “free” trade). This policy has then had the effect of subsidizing foreign production at the expense of domestic production because foreign manufacturers do not have to face the massive regulatory costs that domestic manufacturers face, giving foreign manufacturers a leg up on their competition.
As I have undoubtedly noted before, there are only two correct positions for a domestic government that presumably claims to represent the people over which it governs. Either the government can highly regulate domestic business and place tariffs on imports that approximate the costs faced by domestic producers or the government can reduce the burden of regulation on domestic business in conjunction with the decreased cost of importing. It is, however, quite foolish to do what the U.S. government is doing now: highly regulate domestic business while decreasing the cost of importing. Either a high degree of regulation is desirable or it is not. If it is, whatever regulations that exist should be applied to every person and corporation that wishes to do business in America. If it is not, the domestic market should be deregulated posthaste. There is no excuse for the current state of affairs.
By Ajay Shah, on July 8th, 2011
The Competition Commission of India (CCI) has written an order on NSE and MCX-SX in the currency derivatives market. Even if you do not take interest in financial markets, this is an interesting episode in Indian governance. It illuminates the larger problems of
building regulatory agencies, and India’s middle income trap.
In an impressive show of strength with the media, there was a flurry of editorial and other commentary praising CCI for this order
- even before the order had been released. The files are now on the CCI website. Here is the main order and here is the dissent by two members of CCI.
Gautam Chikermane has written an excellent analysis of the order in the Hindustan Times. Unlike much of the other commentary on
this order, he has actually read the two PDF files above.
The order has breathtaking ramifications. If this works as a precedent, it would impose huge complexities upon an array of industries where some products and services are given out free. This feature is particularly prevalent in the new economy, where systems such as google search are free and have been free for the longest time, and where a blizzard of new product launches (e.g. google plus) are free. In India, regulatory organisations are still finding their feet. They have to gradually build up credibility and respect. When
a regulatory body signs on a breathtakingly large penalty which will have huge implications for the economy, they have to be absolutely sure they are right. Otherwise, the institution loses credibility. I fear that with this order, CCI is now in a soup. If the appeals process is half decent, the order will be overturned, which will make CCI look bad. If the appeals process is not half decent, CCI will be seen as a nutty source of trouble in the Indian regulatory landscape. In numerous industries, zero pricing will run into
trouble. More generally, such muggings will be a new dimension of the political risk faced by firms operating in India.
India’s crisis of governance is about the puzzle of building agencies like the Competition Commission of India or the Forward
Markets Commission, of taking these agencies closer to the competence and honesty seen at SEBI in recent years. How do we master the intricate recipe of public administration, so that such events don’t happen? Until this is done, the structure of incentives encourages a certain kind of entrepreneur.
By Thomas Knapp, on July 7th, 2011
This is intended as a brief response to Tibor R. Machan’s latest piece:
It has always been my view that corporations are groups of people united for various purposes, often to benefit from a business venture guided by competent management. Initially I worried little about the legal details, nor even about the legal history. A bunch of people incorporate or form a company to achieve certain perfectly acceptable, even admirable goals. Sometimes this can be done via a partnership, sometimes by incorporating, sometimes for profit, sometimes not.
Then I started to get involved in political philosophy and found that there is a whole lot of hostility toward these outfits, mainly from Leftists but also from some so called left-libertarians. I am not sure why from the latter.
First, let’s narrow this down to corporations specifically (as opposed to other types of partnerships).
The corporation as such is not just a large partnership — a joint stock company, or something of the sort.
Rather, the corporation is a creature of the state from beginning (its claim to legitimacy is based on state charter) to end (it receives “artificial personhood” and “limited liability” by state edict).
These state-bestowed privileges result in state-imposed injury on others. For example, a person injured by someone acting on behalf of a corporation is limited as to the damages he can seek to recover.
These state-bestowed privileges also distort the market by making the corporation artificially competitive/profitable. The single proprietor or partners in a non-corporate business must either carry liability insurance that corporate owners get automatically from the state (in the form of that “limited liability”), or else run a perpetual risk of personal financial ruin that corporate “shareholders” don’t run. This raises their costs, and therefore their prices, but not the corporation’s.
The corporation’s artificially inflated profits produce additional distorting ripples in the market. Corporations grow faster than they could in a free market because they have more capital to invest in that growth. And the bigger they get, the more effectively they lobby government for additional privileges, subsidies and “protections.”
It’s a snowball effect that starts with that one little thing — “here’s a corporate charter — you aren’t bound by the same rules as other market actors, the state will protect you from risk.”
Corporations are not pure market actors. They are part-market, part-state actors. The “market” part is privatized profits. The “state” part is socialized risk. Aside from the obvious prima facie unfairness of that kind of setup, it has consequences. Negative consequences. Sort of like Gresham’s Law — bad business drives out good.
By Ethan Zuckerman, on June 13th, 2011
Mathematical biologist Martin Nowak talks to us about the evolution of cooperation. Cooperation is a puzzle for biologists because it doesn’t make obvious evolutionary sense. In cooperation, the donor pays a cost and the recipient gets a benefit, as measured in terms of reproductive success. That reproduction can be either cultural or biological and the challenge to explain remains.
It may be simplest to consider this in mathematical terms. In game theory, the prisoner’s dilemma makes the problem clear to us. Given a set of outcomes where we’re individually better off defecting, it’s incredibly hard to understand how we get to a cooperative state, where we both benefit more. Biologists see the same problem, even removing rationality from the equation. If you let different populations compete, the defectors win out against the cooperators and eventually extinguish them. Again, it’s hard to understand why people cooperate.
There are five major mechanisms that biologists have proposed to explain the evolution of cooperation:
- kin selection
- direct reciprocity
- indirect reciprocity
- spatial selection
- group selection
Nowak works us through the middle three in some detail.
In direct reciprocity, I help you and you help me. This is what we see in the repeated prisoner’s dilemma. It’s no longer best to defect. As originally discovered by Robert Axelrod in a computerized tournament, the three-line program “Tit for Tat” wins:
At first, cooperate.
If you cooperate, continue to cooperate.
If you defect, defect.
While it’s a powerful strategy, it’s very unforgiving. If there’s a mistake, there’s an endless cycle of retaliation. Nowak wondered what would happen if natural selection designed a strategy. He created an environment to allow this, and permitting random errors to create a harder environment. If the other party plays randomly, the best strategy is to defect every time. But when tit for tat is introduced, it doesn’t last for long, but it does lead to rapid evolution. You’ll see “generous tit for tat” – if you cooperate, I will. If you defect, I will still cooperate with a certain probability. Nowak suggests that this is a good strategy for remaining married, and step towards the evolution of forgiveness.
In a natural selection system, you’ll eventually reach a state where everyone communicates, always. A biological trait needs to be under competition to remain – we can lose our ability to defect and become extremely susceptible to a situation where an always defect strategy can come into play. Cooperation is never stable, he tells us – it’s about how long you can hold onto it and how quickly you can rebuild it. Mathematically, direct reciprocity can come about if the benefits of cooperation, on average, outweigh the costs of playing a new round.
Indirect reciprocity is a bit more complex. The good Samaritan wasn’t thinking about direct repayment. Instead, he was thinking “if I help you, someone will help me.” This only happens when we have reputation. If A helps B, the reputation of A increases. The web is very good at reputation systems, but we’ve got simple offline systems as well. We use gossip to develop reputation systems. “For direct reciprocity, you need a face. And for indirect reciprocity, you need a name and the ability to talk about others.” In indirectly reciprocal systems, cooperation possible if the probability to know someone’s reputation exceeds the costs associated with cooperation. And this only works if the reputation system – the gossip – is conducted honestly.
In spatial selection, cooperation happens based on people who are close geographically, in terms of graph theory. Graph selection favors cooperation if there’s a few close neighbors – it’s much harder to do with lots of loose collaborators. A graph where you’re loosely connected to a lot of people equally doesn’t tend towards cooperation.
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By Bron Suchecki, on April 22nd, 2011
I consider comments like these below from a high profile business executive (as reported by The Australian) as significant. You can be sure the smart money is now positioning itself. THE world economy is on “life support”, living beyond its means, with the threat of a cataclysmic shock within the next eight years, ABC chairman Maurice Newman warned yesterday. The former chairman of the Australian Securities Exchange, who is also a director of the Queensland Investment Corporation, said the Australian economy was better placed than many others to withstand the potential major shock to the world trade and financial system. But he warned that Australia had only a few years to get its economic house in order …
“We are nearing an endgame, which I put at no more than eight years away, possibly less,” he said. He warned that policy failures of governments, rising social costs and financial market volatility would “create a crisis” that would trigger “widespread trade and capital market dislocation”. …
But investors needed to prepare for the crisis by de-risking their portfolios and cleaning up their balance sheets. Australians needed to press their political leaders to make the economy more competitive.
Mr Newman predicted that the coming financial crisis could trigger an end to the role of the US dollar as the reserve currency of the world. He said it could be replaced by a system of International Monetary Fund drawing rights, which could be made up of a basket of currencies including the Chinese renminbi and gold.
By Simon Grey, on April 4th, 2011
I came across this other day when stumbling around In Mala Fide:
God may be dead, but the cubicle jockeys and castrated middle-class drones of this land still think of themselves as part of a warped Calvinist elect. To them, their willingness to have their humanity stripped away day by day sucking at Mammon’s teat is proof that they are God’s chosen people. Anyone who questions the presuppositions of the American cult of “hard work” and “self-reliance” is ostracized from polite society…
The biggest flaw in Puritan doctrine, as I see it, is that there is a worship of work. Being a worker is a false idol unto itself. Yes, man was created to work. And yes, man is to put his best effort into his work. The problem, however, is that the Puritan work ethic has been twisted into a doctrine of worshiping workaholics, and, with that, a doctrine of materialism.
Perhaps this is another reason why America has started its decline: materialism is being used as a substitute for spiritualism. Everyone in America is told, from childhood onward, to be a good student, to get good grades in school, to get into a good college, to get a good job, to be a good worker, and then all the rewards in life will be given to you. And this message always takes a turn for the ruthless.
Good now becomes best, and everything becomes cutthroat. Lots of people begin to compete for limited elite pre-school slots, who in turn compete for elite primary school slots, elite middle school slots, elite colleges and universities, and finally elite jobs. And all these things start to get treated as entitlements (if I go to a good college, I deserve a top position in a Fortune 500 company, etc.) All these things are pursued with intense rigor, as if having an elite education or an elite job is the most meaningful thing in the world.
There’s a reason this is a cliché: “no one sits on their deathbed, wishing they spent more time in the office.” We have allowed our education and jobs, and little beyond that, to define who we are. In reality, though, we’re more than a sum of numbers attached to us by teachers and bosses. Each one of us, at the least, is someone’s child. We’re someone’s spouse, parent, sibling, or friend. We belong to families, to churches, to civic groups. And yet we define our worth by what we make and where went to school.
Now, it is true that our jobs/careers play some role in defining us. We can’t fully escape that. But we don’t have to let our job or our education be the sole (or even main) component of self-definition. Instead, we should let go of this materialistic mindset, and embrace our spiritual and social side. Maybe that’s what we need to do to get rid of the social cancer called materialism.
By Russ Nelson, on September 22nd, 2010
Unions are against globalization. To listen to them, unions are a force for good for all workers (rather than just the workers who pay the union its dues). But to watch them, you can see that they’re in favor of cartelization. They don’t mind other people
competing against them, as long as those people are hobbled by the same pay rate, protections, and benefits as the union members have. In other words, they’re not allowed to use a lower cost of living, or a lower regard for their own safety, or a longer work week as a competitive advantage.
Sigh. Unions! Still selfish, after all these years.
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