By Simon Grey, on September 14th, 2012
Her name is Gina Rinehart:
Now, the Australian mining heiress, worth $19 billion and earlier this year thought to be the world’s richest woman, has sparked another controversy in her latest column in Australian Resources and Investment magazine. (Yes, I am a registered reader online.) Rinehart rails against class warfare and says the non-rich should stop attacking the rich and go to work.
“There is no monopoly on becoming a millionaire,” she writes. “If you’re jealous of those with more money, don’t just sit there and complain. Do something to make more money yourself – spend less time drinking, or smoking and socializing and more time working.”
I don’t disagree with these sentiments at all. Rather, where I have a problem is with things like this:
Union bosses are fuming that the government has approved a scheme to allow mining magnate Gina Rinehart to bring in 1700 overseas guest workers for her Pilbara iron ore project, without making proper attempts to find local workers first.
Immigration Minister Chris Bowen told the National Press Club today that the government had approved the first Enterprise Migration Agreement – which allows “mega” resource projects to negotiate temporary migration needs up-front – and that it would be for Mrs Rinehart’s $9.5 billion Roy Hill project in Western Australia.
And:
The part of Mrs Rinehart’s speech that drew the widespread criticism was: “The evidence is inarguable that Australia is becoming too expensive and too uncompetitive to do export-oriented business.
“Africans want to work, and its workers are willing to work for less than $2 per day. Such statistics make me worry for this country’s future.”
It’s one thing to say that people should work harder; it’s another thing to advocate and enact policies that negate the effects of hard work. In this instance, Mrs. Rinehart wants to expand the Australian labor pool to include impoverished Africans. The mere expansion of the labor pool drives down wages generally, but when said labor pool includes extremely marginal labor like this, it drives down wages quite a bit.
What Mrs. Rinehart faces is the corporatist’s conundrum. She espouses socially productive views (her advice to work harder and take care of one’s self is good advice, especially when you add getting a basic education and not getting pregnant out of wedlock to the mix), but she pursues socially destructive policies. She doesn’t really believe in hard work or freedom; what she really believes in is having slave labor, or its cheapest alternative. That’s why she imports African workers, and that’s why she tries to shame her country men into working harder. Ultimately, her policy is to encourage materialism (“if you want to be a millionaire…”), which should expand the labor pool (more people working more jobs) while simultaneously encouraging the free movement of labor, also expanding the labor pool. The net effect of both of these policies is to drive down her labor costs. What’s sickening is how she dresses this personal greed as patriotism.
One lesson that conservatives should take from this is that it is a foolish idea to link conservative principles (hard work, taking proper care of oneself) with political policies that are harmful to one’s fellow countrymen. If Mrs. Rinehart had told her fellow citizens to work harder and then offered them 1700 decently paying jobs, her message might have been received a little bit better. But when she told them to work harder and then offered 1700 jobs to Africans to work at slave wages, well, the resulting controversy could hardly have been avoided.
It calls to mind what God says in Malachi 3:5 (“And I will come near you for judgment… Against those who exploit wage earners…”). Conservatives often want to condemn the poor for being lazy, but often neglect to condemn employers who constantly try to exploit their workers. The reality of the matter is this: Employers ought to do what is best for their employees, and pay them fairly (and before anyone accuses me of being a Socialist, no I don’t think ensuring that employees are paid fairly requires government intervention). Employees ought to be honest and work hard. And these two messages ought to go hand-in-hand. And until conservatives start demanding that employers treat employees fairly, conservatives will likely fins that their call for people to “work harder” will go unheeded.
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By Thomas Knapp, on June 26th, 2012
As is often the case, it’s from dL, author of the Liberale et Libertaire blog. And the reason it’s the quote of the week is that brings together several things I’ve been thinking about in a way that I hadn’t managed to yet:
Our age of State Capitalism-intertwined in a million different knots with a political economy of State Security-promises to sever the remaining myth: the relationship between capitalism and opportunity, or the “opportunity society.” To be more precise, we are about to be given an object lesson that there is no logical relationship between Capitalism and Markets. The collapse of this paradigm, of course, is conveniently timed with the maturation of our State Security Apparatus. The reason you have a National Security State, of course, is largely because of a loss of legitimacy. Our era of State Capitalism will be marked by a general decline in popular sentiment regarding legitimacy. But our “bleeding heart libertarians” seek to reposition libertarianism as the legitimizing face of State Capitalism. You know the thing that served to hollow out your political freedom while reneging on its bribe of eternal economic growth. Now that’s quite a historical turn.
I’ve been kind of outlining a piece I’d intended to call “Why I am not a ‘Bleeding Heart’ Libertarian.” Now I’m not sure I need to bother.
By Simon Grey, on June 13th, 2012
In reference to meteorites:
Approximately 5,000–17,000 meteorites plummet to earth every year—some the size of a washing machine, some as small as a golf ball. But when a particularly rare and scientifically valuable specimen like Tissint lands outside Antarctica, scientists and institutions such as the Natural History Museum must jockey with private collectors for the prize.
“We are competing within a commercial market, although we have extremely limited finances,” said Dr. Smith. “There’s a danger in the price hiking of the market. Institutions without much money to purchase things may be priced out.”
In the months after Tissint’s recovery, the Natural History Museum was approached by four different collectors, all hawking fragments of the rock. Pitt and Dave Gheesling, a meteorite collector based in Atlanta, Georgia, offered the largest piece of Tissint to the Natural History Museum for what Dr. Smith calls a “good price.”
“We could have made a lot more money,” says Pitt. “There are a lot of private collectors in Asia and the Middle East that would have paid far more than the Natural History Museum.”
Asked why he and Gheesling chose to sell it to the Natural History Museum, Pitt answered: “There exists a social obligation to make the extraordinary accessible. I would not have been able to sleep at night knowing that this object was in someone’s private vault.”
Nevertheless, the sum well exceeded the museum’s annual acquisition budget (neither Dr. Smith nor Pitt would disclose the exact sum). Half of the money was put up by an anonymous philanthropist, with dual American and British citizenship and a keen interest in the museum’s meteorite collection. [Emphasis added.]
I’ve noted multiple times before, within the pristine virtual walls of this highly esteemed blog, that the critics of the free market often rely on projecting their attitudes onto others when explaining why a free market will fail to take care of, say, poor people or science. Quite simply there are some people that have absolutely no concept of philanthropy.
The theory is that the market always allocates resources of particularly scarce variety to the highest bidder, who then enjoys said object rather selfishly. Of course, the above story indicates that this is not the case, as there apparently exist public-minded men who voluntarily take an economic loss for the public good.
Sadly, there are some people for whom such a concept is completely foreign. They simply cannot understand how anyone would willingly sacrifice their money, time, or any other scarce resource for another human being. Naturally, their political policies consist of having the government force other people to act in the public good because they, the proponents of acting in the public good, could themselves not think of any other way to act in the best interest of others.
More to the point, though, this story is simply a modern piece of evidence that the free market will not necessarily devolve into a dog-eat-dog world where everyone is self-absorbed and no one cares about anyone else. Quite simply, there will always be people who are willing to concern themselves about other people and act in their best interest. Because of this, one need not fear the free market or the absence of a welfare state.
By Simon Grey, on May 24th, 2012
People struggling with headaches, toothaches, and even feelings of loneliness are calling 911 — often several times a day.
This chronic abuse is overwhelming what industry experts call the 911 “safety net” system. It’s also wasting what could add up to billions of dollars every year, paid ultimately through higher taxes and medical fees.
This costly problem has gone unnoticed in the current debate on health care reform.
Oh wait; there is a way to efficiently allocate scarce resources: it’s called the free market. In the free market, people bear the direct costs of that which they consume, instead of offloading the costs onto a third party. While this might seem heartless, it’s actually better in the long run because it ensures that valuable resources—like emergency help lines—are given to people who have a substantial need for them instead of being given to someone who is, say, “suffering” from a cold.
Now, there are probably some who might object that deserving people may fall through the cracks. This is a rather insulting objection, though, as it presupposes that everyone is as uncharitable as the average leftist. The reality of the situation is that there will likely be some form of charity provided to poor people who are truly in need of emergency consultations. Of course, this charity will undoubtedly be provided for by those who defend the free market, and not by the socialists who want the government to provide for everyone’s needs, even if that means letting people suffering from the sniffles waste everyone’s time by tying up emergency help lines.
By Simon Grey, on May 11th, 2012
Many of you have been reared on the cliché that the purpose of education isn’t to stuff your head with facts but to teach you how to think. Wrong. I routinely interview college students, mostly from top schools, and I notice that their brains are like old maps, with lots of blank spaces for the uncharted terrain. It’s not that they lack for motivation or IQ. It’s that they can’t connect the dots when they don’t know where the dots are in the first place.
Now to Fact Two: Your competition is global. Shape up. Don’t end your days like a man I met a few weeks ago in Florida, complaining that Richard Nixon had caused his New York City business to fail by opening up China.
This, in a nutshell, provides two of the main causes of America’s inevitable failure: free trade and shitty education. I’ve hammered of the fallacies of free trade for a while now, and if anyone has any doubts about the abject stupidity of the theory of free trade, I highly recommend reading Ian Fletcher’s work. As for education, let me simply point out that what currently passes for education—particularly higher education—is nothing less than a sick a joke.
In the first place, children are not taught the basics, like reading, writing, and arithmetic. Instead of being told that 2+2=4, young students are expected to discover this “organically,” the same goes for reading and writing. The theory is that children best learn subjective, arbitrary truths by discovering them on their own. In essence, children are assumed to be able to think adequately and abstractly.
Then they get to high school, and the idea that students can think independently disappears, and so students are expected to memorize massive amounts of boring, trivial facts, with little explanation of their importance and meaning. History becomes a string of numbers instead of a set of moral lessons. Science becomes math instead of being a method of direct observation. Literature is taught to kids who can’t and math is taught to kids who can’t think logically. It’s basically a mess.
To top it all off, children are viewed as inputs rather than individuals. Thanks to Dewey and his ilk, the current paradigm of the modern educational system in the united states is predicated on the assumption that children are like absorbent sponges that will soak up knowledge and education if they simply have good teachers. Furthermore, the children-as-inputs model fundamentally denies not only the individuality of each child, but their humanity as well. The focus of the modern education system is to ensure uniform outputs. Thus, all children are expected to know the same things and be identically apt in the same subject areas. Hence the current emphasis on testing, which reduces the children to mere numbers.*
This is a sick system, and one that handicaps people. They are not able to think, and they have no knowledge base. They are treated as worker cogs, stripped of their individuality and stunted intellectually. And then they are told to compete with foreigners. They cannot compete, and so they hasten the united states’ inevitable decline.
*Incidentally, Finland—a country whose students score well on PISA tests—places almost no emphasis on standardized tests or other markers of creating standardized student outputs, focusing instead on developing students as thinkers. Finland does a better job than the US at treating students as individuals, and teaching them to think instead of simply viewing them as empty vessels to be filled with knowledge that has been carefully selected by bureaucrats.
By Simon Grey, on May 1st, 2012
Levels of copper, cadmium, lead and other metals in Southern California’s coastal waters have plummeted over the past four decades, according to new research from USC.
Samples taken off the coast reveal that the waters have seen a 100-fold decrease in lead and a 400-fold decrease in copper and cadmium. Concentrations of metals in the surface waters off Los Angeles are now comparable to levels found in surface waters along a remote stretch of Mexico’s Baja Peninsula.
Sergio Sañudo-Wilhelmy, who led the research team, attributed the cleaner water to sewage treatment regulations that were part of the Clean Water Act of 1972 and to the phase-out of leaded gasoline in the 1970s and 1980s.
Three questions that spring readily to mind are: 1) is this correlation or causation? 2) Are there free market alternatives that could have attained similar results? 3) Does this prove, carte blanche, that all government regulation of the environment is similarly beneficial?
Regarding the first question, it’s difficult to answer clearly from the synopsis of the paper. The lead regulations seem like they would generally contribute to decreases in lead content in the ocean, for lead particles would be in the water vapor that is a by-product of burning automotive fuel. This lead would then enter the oceans from the atmosphere. It’s not so clear with the other metals, so it might be possible that these levels had begun to decline prior to the introduction of regulation (much like how automobile fatalities had begun to decline prior to seatbelt laws). At any rate, it seems likely, though it is not conclusive from the summary, that the environmental regulation worked.
Regarding the second question, it’s difficult to say that government interference is necessary when it would be possible to establish property rights on the coastal waters that were polluted. Under a system of private property rights, owners of said property—in this case the ocean—would be able sue those who polluted (i.e. altered and damaged) their property. As such, it would fallacious to use this study as proof that the government regulation is necessary for environmental protection. Governmental regulation may be efficacious, but that is not the same as saying that it is necessary.
Regarding the third question, it seems obvious that many environmental regulations are misguided, to say the least, and often counterproductive. As such, it does not necessarily follow that one effective, or even necessary, set of environmental regulation proves that all sets of environmental regulations will be similarly effective and necessary. Stated another way, it dangerous to extrapolate a trend from a single data point.
The conclusion to be drawn from this study is that there appears to be one instance where governmental regulation yielded positive results. Of course, this regulation was necessary because of a prior failure (i.e. the non-allowance and/or enforcement of property rights), but nonetheless the government did something useful. However, trying to prove that governmental regulation is universally necessary and effective from this single data point seems rather ludicrous, particularly in light of government’s other failures.
By Simon Grey, on April 23rd, 2012
In a prior post, I offered an alternative explanation for socialism’s failure. In doing so, I critiqued economists that defend the free market on the grounds of monetary incentive structure of being too narrow in their thinking. While monetary incentives play a role in human behavior, they are not the only motivator, and are often not the primary motivator.
Unfortunately, many economists ignore this simple truth in their analysis of various market-related issues. I suspect the main reason for this has to do with the very simple fact that many economists have a sort of penis envy towards physicists, by which I mean that economists seem to love complex mathematical models. Price points are extremely useful to these models, as they lend the models an air of objectivity and, in some cases, finality. While some of the more sophisticated economists know that they can assign value functions to non-monetary indices, the assignments of value often feel arbitrary, thus undermining the air of objectivity that economists are so desirous of, perhaps in their quest to gain some sort of influential power over policy-makers, which is thus ultimately a form of status-seeking.
This mechanistic approach to economic analysis is quite autistic in that it generally fails to account for value that humans place on things that cannot be quantified monetarily, like emotions. Indeed, the economics profession is filled with sundry examples of autistic jackassery that is fundamentally predicated on economists being, for whatever reason, completely unable to understand what motivates human behavior. To their surprise, humans are motivated by things other than money. The economists call these motivations irrational.
The most egregiously autistic economists are those that defend free trade and free labor, which usually requires the denial of the social constructs broadly known as culture and society. This in turn undermines the concept of the sovereignty of nations and states. Whether this is a good thing is debate best reserved for another post. For now, the relevant consideration is that not everyone thinks that free trade and free labor are good ideas because some people drive some value from what they perceive to be patriotism. To put it another way, there are a decent number of people who find the feelings they get from identifying with a collective entity (say, the US) or supporting a concept (say, Americanism) to be worth the cost of excluding foreigners. Because this imposes some quantifiable monetary costs without providing quantifiable benefits, those who oppose free trade and free labor are derided as ignorant, xenophobic, and/or simply stupid.
This autism extends to even the presumably least autistic branch of economics: behavioral economics. Here, people are defined and accepted as being irrational. As such, it is the policy makers who need to get on board with man’s irrationality and adjust accordingly.
But even this view, where human idiosyncrasies are tolerated and occasionally celebrated, is essentially predicated on the notion that value is only measured monetarily. For example, leading behavioral economist Dan Ariely tried to prove irrationality in his book Predictably Irrational. The irrefutable experiment undertaken by Ariely consisted of offering people chocolate for purchase. There were two options: one with a simple, sticky price (two pieces for five cents, if memory serves me correctly) and one with a more complex price (a differently-weighted piece for three or four cents, assuming my memory serves me correctly). The utility maximizing option was the latter one, yet the vast majority of people chose the former. From this Ariely concludes that people are irrational. He does not ever think to consider whether such a trivial decision merits any significant consideration as regards to utility maximization. Stated another way, when the stakes are so low, there is little point in weighing your options.
Like the mainstream economists, Ariely and other behavioral economists fail to account for non-monetary value, which in the aforementioned case would be the value of time. Is it really rational to use much mental energy for such a negligible decision? If not, how can it be considered irrational to not use one’s time to maximize a miniscule amount of utility?
Beyond this, economists seem to be unable to recognize the motivating forces behind common interactions, like gift-giving. Economists soullessly deride people for giving non-cash gifts, declaring such interactions to be “inefficient.” The theory is that if people valued the gifts they received at par with or in excess of market price, they would have bought the gifts themselves. That the recipients of a certain gift did not buy the gift for themselves is proof positive that they did not value the gifts at price, and therefore the giver is wasting money because the value the recipient places on the gift is not equal to or greater than the price of the gift. This analysis fails because it fails to account for the value of the gift exchange itself. Both the giver and the recipient place value on the interaction itself, and simply that which is being exchanged. The giver enjoys an emotional response to pleasure exhibited by the recipient and vice versa. Furthermore, the broader signal that the giver cares for the recipient presumably has long-term non-monetary value. Unfortunately, economists’ autism prevents them from seeing the emotional and social value of a gift exchange, thus leading them to deride a longstanding tradition.
This autism is occasionally, and quite perversely, worn as a badge of honor. Some economists often seem to view themselves as somewhat superior for having overcome some of their petty irrationalities. But doing this can be dehumanizing, since it is our so-called irrationality that makes each of us unique, and provides some meaning in our lives. Who cares if we’re more likely to buy chips when their cost is 2 for $5 than when they’re $2.50 a bag? This heuristic may not be totally rational from a pricing standpoint, but it is an efficient way of dealing with a trivial decision, which means less time is wasted thinking about trivial things and is instead spent enjoying life. Should people be begrudged for that?
Now, none of this is to suggest that the study of economics is worthless and unworthy of support. On the contrary, economics is an important subject, and most analysis is useful and worthy of study. However, economics does have some blind spots, mostly due to its current autism. Understanding economics’ autism is helpful, then, because it enables one to see the limits of economic analysis and adjust one’s interpretation accordingly. Thus, economics need not be scrapped; rather, people should be aware of its limits imposed by the autistic tendencies of its practitioners.
By Simon Grey, on April 3rd, 2012
Alex Tabarrok, in reference to encouraging people to become organ donors:
I am not in favor of messing with the insurance system for this purpose but have argued for a more direct approach. Under what I call a “no-give, no-take” rule if you are not willing to sign your organ donor card you go to the bottom of the list should you one day need an organ. Israel recently introduced a version of no-give, no take which gives those who previously signed their organ donor cards points pushing them up the list should they need an organ transplant–as a result, tens of thousands of people rushed to sign their organ donor cards.
This doesn’t strike me as a difficult issue to solve. Open the market up, and allow people to buy and sell their organs. I realize that this sounds crude, and possibly exploitative to some. But if this increases the number of organ donations, and consequently the number of lives saved, wouldn’t it be worth it? Or must we insist on moral posturing at the expense of human life?
By Simon Grey, on March 2nd, 2012
And so began the downward trend in America’s free market in medicine. With fewer medical schools — and thus fewer doctors — wages can be kept higher than would exist in a market dominated by free enterprise and the unobstructed entry into practice. Consumers, who ordinarily determine the success of producers, have lost out as they face higher costs on top of being deemed too ignorant to choose an adequate doctor without the aid of the state. Rent seeking becomes ingrained in an industry that must devote increasing amounts of financial resources to appease public officials.
At first, the problem was presumably that doctors weren’t getting paid as much as they truly deserved because they had to compete with hacks. Therefore, the government had to step in to ensure that doctors got paid the proper amount of money. This led, unsurprisingly, to increasing health care costs, and so the government was asked to step in again to reduce the costs of medical care, this time in the form of subsidy. And so the government obliged.
The lesson to be learned from this is that once the government interferes in the market, it must continue and increase its interference in the market so as to preserve equity. What’s interesting, though, is that governmental interference, when all is said and done, is only intended to produce a minor tweak. That is, the result of governmental interference is only supposed to lead to a result that is only slightly different from the market result. What actually happens is that the government’s result is different by an order of magnitude, which leads to more and increasing “corrections.”
At some point, though, it has to be asked of whether the slight market modification is worth the massive cost, for government interference has a tendency to spiral out of control and become very costly. As the costs of modifying the market increase while the benefits for doing so remain small, it becomes increasingly reasonable to ask whether it is better to accept the market’s perceived imperfections so as to save money and scarce resources, especially since the market is self-adjusting and will likely solve the problem more equitably anyway.
By Simon Grey, on February 13th, 2012
Capitalism is currently undergoing its most serious crisis since the Great Depression. The solutions offered by the Right are the same as they were then: Do nothing and let the natural cycle of business (the invisible hand of the free market) straighten itself out. Well, that’s not going to work. Hoover did that for three years and had nothing to show for it. Rooseveldt’s [sic] approach of course made sense. Recessions and depressions mandate an activist state and its massive intervention, otherwise, you’re in Hell forever. But then, I’m a Keynesian, eh?
First, we have a little bit of term conflation to start things off. If capitalism is defined as anything approaching the free market, then what’s happening right now in America is not a crisis of capitalism. Corporatism, maybe.
Or the-electorate-wants-all-the-benefits-of-socialism-without-actually-paying-for-it-or-allowing-the-government-to-regulate-them-ism (aka magical-rainbow-unicorn-ism). At any rate, the current crisis is not one of capitalism, the free market, or laissez-faire, because none of those actually exist outside of theory in America these days.
Second, Hoover was not laissez-faire by any stretch of the imagination. Unless laissez-faire now means interventionist statism. The difference between Hoover and Roosevelt is like the difference between Bushitler and Obamao: it’s of degree, not kind.
Third, the solutions offered by the right are not, so far as I know, “do-nothing.” They might be non-interventionist, but that now requires removing market impediments (which, it should be noted, is the very definition of doing something). At any rate, most of the right’s proposals ten to be along the lines of reducing* taxes, deregulating* businesses, and reducing* spending.
There are probably other fallacies I’ve overlooked. If so, point them out in the comments.
*Note that all of these words are verbs, which are action words. In essence, each of these words means doing something.
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