EXCERPT:
"Curiously, the set of self-interested actions that are widely praised are those whose positive effects redound almost exclusively to each self-interested actor. If I exercise and eat right, the resulting health and beauty benefits are mine alone. My healthier heart, bulgier biceps, and more-slender body do nothing to improve my neighbor’s well-being. (In fact, my exercise and good diet might harm him, for they improve my chances of getting the pretty girl whom we’ve both been eyeing.)
In contrast, prominent among the self-interested actions that are popularly suspect are those whose fulfillment requires self-interested actors to provide benefits to others. Of course, the business firm that earns profits in the market yields benefits to its self-interested principals – but it does so only insofar as it yields benefits to others. And the greater the benefits provided to others, and the greater the number of others provided with these benefits, the greater are the benefits that the self-interested, profit-seeking business principals enjoy. That is, when someone selfishly jogs to improve his or her health, we applaud. When that same someone selfishly seeks financial profit by offering goods or services for sale to consumers, many of us are wary. (And even most of the other of us who aren’t wary don’t positively praise this variety of self-interested behavior. We merely tolerate it as necessary.)
Selfish behavior that is exclusively self-regarding is praised; selfish behavior that requires the selfish actor to consider and satisfy and please strangers is suspect."
Thursday, January 28, 2010
Tuesday, January 26, 2010
Richard W. Fisher: Congress Is Politicizing the Fed - WSJ.com
EXCERPT:
"Students of history are keenly aware of the course we chart when we discuss the possibility of politicizing the Federal Reserve system. They know the pathologies that afflicted Weimar Germany and modern Zimbabwe, and the economic mess that still cripples Argentina. Those who will determine the future scope and shape of our central bank would do well to keep these lessons in mind and to resist the agreeable urge to strike out at the Fed.
"Students of history are keenly aware of the course we chart when we discuss the possibility of politicizing the Federal Reserve system. They know the pathologies that afflicted Weimar Germany and modern Zimbabwe, and the economic mess that still cripples Argentina. Those who will determine the future scope and shape of our central bank would do well to keep these lessons in mind and to resist the agreeable urge to strike out at the Fed.
Federal Subsidy Programs Top 2,000! | Cato @ Liberty
EXCERPT:
"January 22, 2010 is a day that should live in infamy, at least among believers in limited government. On that day, the federal government added its 2,000th subsidy program for individuals, businesses, or state and local governments.
The number of federal subsidy programs soared 21 percent during the 1990s and 40 percent during the 2000s. The entire nation is jumping aboard Washington’s gravy train. My assistant, Amy Mandler, noticed the recent addition of two new Department of Justice programs, and that pushed us over the threshold to reach 2,001.
There is a federal subsidy program for every year that has passed since Emperor Augustus held sway in Rome. We’ve gone from bread and circuses to food stamps, the National Endowment for the Arts, and 1,999 other hand-out programs from the imperial city on the Potomac.
"January 22, 2010 is a day that should live in infamy, at least among believers in limited government. On that day, the federal government added its 2,000th subsidy program for individuals, businesses, or state and local governments.
The number of federal subsidy programs soared 21 percent during the 1990s and 40 percent during the 2000s. The entire nation is jumping aboard Washington’s gravy train. My assistant, Amy Mandler, noticed the recent addition of two new Department of Justice programs, and that pushed us over the threshold to reach 2,001.
There is a federal subsidy program for every year that has passed since Emperor Augustus held sway in Rome. We’ve gone from bread and circuses to food stamps, the National Endowment for the Arts, and 1,999 other hand-out programs from the imperial city on the Potomac.
Wednesday, January 20, 2010
Video: A New History of the Great Depression by Amity Shlaes
"Amity Shlaes, syndicated columnist and author of the bestselling The Forgotten Man: A New History of the Great Depression, discusses the Great Depression and how it relates to the current financial crisis.
She explores the economic atmosphere that led to the Depression, and proposes ways to avoid the mistakes of the 1930s."
She explores the economic atmosphere that led to the Depression, and proposes ways to avoid the mistakes of the 1930s."
Video: Thomas Sowell on his book "The Vision of the Anointed"
"A rebroadcast of a discussion with author Thomas Sowell about the civil rights movement and his book 'The Vision of the Anointed: Self Congratulation As a Basis for Social Policy,'"
Video: Thomas Sowell on his book "A Conflict of Visions"
"Sowell describes the critical differences between interests and visions. Interests, he says, are articulated by people who know what their interests are and what they want to do about them. Visions, however, are the implicit assumptions by which people operate.
In politics, visions are either 'constrained' or 'unconstrained.' A closer look at the statements of both McCain and Obama reveals which 'vision' motivates their policy positions, particularly as they pertain to the war, the law, and economics - Hoover Institution"
In politics, visions are either 'constrained' or 'unconstrained.' A closer look at the statements of both McCain and Obama reveals which 'vision' motivates their policy positions, particularly as they pertain to the war, the law, and economics - Hoover Institution"
Sowell on Economic Facts and Fallacies | EconTalk | Audio and transcript
"Thomas Sowell of Stanford University's Hoover Institution talks with EconTalk host Russ Roberts about the ideas in his new book, Economic Facts and Fallacies. He discusses the misleading nature of measured income inequality, CEO pay, why nations grow or stay poor, the role of intellectuals and experts in designing public policy, and immigration"
Video: Thomas Sowell on the Housing Boom and Bust
"Thomas Sowell discusses how we got into the current economic disaster that developed out of the economics and politics of the housing boom and bust."
Video: Thomas Sowell on economic facts and fallacies concerning gender, race, and income differentials
"Peter Robinson speaks with Thomas Sowell about his new book Economic Facts and Fallacies in which Sowell exposes some of the most popular fallacies about economic issues.
Sowell takes on the conventional thinking on a wide swath of America's economic life, from male-female economic differences to income stagnation, executive pay, and social mobility to economics of higher education. In all cases he demonstrates how economics relates to the social issues that deeply affect our country - Hoover Institution"
Sowell takes on the conventional thinking on a wide swath of America's economic life, from male-female economic differences to income stagnation, executive pay, and social mobility to economics of higher education. In all cases he demonstrates how economics relates to the social issues that deeply affect our country - Hoover Institution"
video: Thomas Sowell on Intellectuals and Society: Chapter 1 of 5 - Uncommon Knowledge on National Review Online
"Thomas Sowell on Intellectuals and Society: Chapter 1 of 5. Thomas Sowell introduces his new book, Intellectuals and Society, and expounds on what he calls “the fatal misstep of intellectuals.”
About Thomas Sowell
Thomas Sowell has studied and taught economics, intellectual history, and social policy at institutions that include Cornell, UCLA, and Amherst. Now a senior fellow at the Hoover Institution, Sowell has published more than a dozen books. His latest book is Intellectuals and Society."
About Thomas Sowell
Thomas Sowell has studied and taught economics, intellectual history, and social policy at institutions that include Cornell, UCLA, and Amherst. Now a senior fellow at the Hoover Institution, Sowell has published more than a dozen books. His latest book is Intellectuals and Society."
Monday, January 18, 2010
Will the Fed Use Its Whole Arsenal Against Inflation? - Greg Mankiw NYTimes.com
EXCERPT:
"IS galloping inflation around the corner? Without doubt, the United States is exhibiting some of the classic precursors to out-of-control inflation. But a deeper look suggests that the story is not so simple....
"IS galloping inflation around the corner? Without doubt, the United States is exhibiting some of the classic precursors to out-of-control inflation. But a deeper look suggests that the story is not so simple....
Saturday, January 16, 2010
Deflation: The Good, the Bad, and the Ugly | The Freeman | Ideas On Liberty
EXCERPT:
During the Great Depression, what should have just been a Bad deflation became an Ugly one. This deflation was unlike earlier ones for two reasons. First, the scale of the deflation was unmatched. The U.S. money supply fell over 30 percent between 1929 and 1933, a period in which the demand for money was actually rising as a consequence of the stock market crash and the bank failures that followed it. The combined effect was a massive downward pressure on prices....
The second difference from earlier recessions was that policymakers adopted the view that the key to recovery was to “maintain” prices and wages at their pre-deflation levels. Both Presidents Hoover and Roosevelt strong-armed business leaders into keeping prices and wages up and pushed laws that directly or indirectly did the same.
The effects of these misguided attempts at price and wage maintenance were devastating. Firms continued to pay unjustifiably high wages, while watching sales slacken because prices also stayed high; they covered their losses out of their profits, causing some firms to fail and others to see severe declines in their stock prices. This contributed to the low levels of private investment that prolonged the depression since firms did not have profits to recycle back into their own activities. More brutally, keeping wages so high led to the horrific unemployment rates of the Great Depression, which peaked at around 25 percent in 1933. Only by around 1934 did prices and wages fall enough to start bringing unemployment rates back down. However, unemployment remained at historic highs because even with the declines in prices and wages, private investors were hesitant to take risks in light of the policymakers’ earlier mistakes and the constantly shifting political environment. During the Great Depression, unemployment stayed above 14 percent from 1931 through 1940.
Current observers are quite right to point to the Great Depression as an example of what can go wrong from deflation. There is no doubt that the very large monetary deflation of the early 1930s made the recession that began in the summer of 1929 much deeper and more severe than it would have been otherwise. But even so, had prices and wages been allowed to adjust, that recession would have been Very Bad, but not Ugly. Attempting to keep prices and wages high during the monetary deflation prevented the cleansing price adjustments from taking place and forced sellers to make “quantity” adjustments in the form of reduced production and historic levels of unemployment....
During the Great Depression, what should have just been a Bad deflation became an Ugly one. This deflation was unlike earlier ones for two reasons. First, the scale of the deflation was unmatched. The U.S. money supply fell over 30 percent between 1929 and 1933, a period in which the demand for money was actually rising as a consequence of the stock market crash and the bank failures that followed it. The combined effect was a massive downward pressure on prices....
The second difference from earlier recessions was that policymakers adopted the view that the key to recovery was to “maintain” prices and wages at their pre-deflation levels. Both Presidents Hoover and Roosevelt strong-armed business leaders into keeping prices and wages up and pushed laws that directly or indirectly did the same.
The effects of these misguided attempts at price and wage maintenance were devastating. Firms continued to pay unjustifiably high wages, while watching sales slacken because prices also stayed high; they covered their losses out of their profits, causing some firms to fail and others to see severe declines in their stock prices. This contributed to the low levels of private investment that prolonged the depression since firms did not have profits to recycle back into their own activities. More brutally, keeping wages so high led to the horrific unemployment rates of the Great Depression, which peaked at around 25 percent in 1933. Only by around 1934 did prices and wages fall enough to start bringing unemployment rates back down. However, unemployment remained at historic highs because even with the declines in prices and wages, private investors were hesitant to take risks in light of the policymakers’ earlier mistakes and the constantly shifting political environment. During the Great Depression, unemployment stayed above 14 percent from 1931 through 1940.
Current observers are quite right to point to the Great Depression as an example of what can go wrong from deflation. There is no doubt that the very large monetary deflation of the early 1930s made the recession that began in the summer of 1929 much deeper and more severe than it would have been otherwise. But even so, had prices and wages been allowed to adjust, that recession would have been Very Bad, but not Ugly. Attempting to keep prices and wages high during the monetary deflation prevented the cleansing price adjustments from taking place and forced sellers to make “quantity” adjustments in the form of reduced production and historic levels of unemployment....
The Balance-of-Payments Deficit: Not to Worry | The Freeman | Ideas On Liberty
EXCERPT:
"Quick. What’s the trade deficit between California and the rest of the world? Don’t try Googling it because you won’t find an answer. No government agency—or private entity—computes the dollar value of goods that people in the rest of the world sell to or buy from Californians. Why not? Because it doesn’t matter.
Yet governments do that computation for countries. Do trade deficits between countries matter? They do, but a lot less than most people think. A high trade deficit is not a definite sign of an economy’s weakness, and a low trade deficit or high trade surplus is not a definite sign of an economy’s strength....
"Quick. What’s the trade deficit between California and the rest of the world? Don’t try Googling it because you won’t find an answer. No government agency—or private entity—computes the dollar value of goods that people in the rest of the world sell to or buy from Californians. Why not? Because it doesn’t matter.
Yet governments do that computation for countries. Do trade deficits between countries matter? They do, but a lot less than most people think. A high trade deficit is not a definite sign of an economy’s weakness, and a low trade deficit or high trade surplus is not a definite sign of an economy’s strength....
On Trade and Currency Manipulation | The Freeman | Ideas On Liberty
EXCERPT:
"Americans are importing more from China. Protectionists abhor this fact.
Explaining that American imports from China reflect nothing more sinister than the voluntary choices of American consumers does not satisfy simple-minded protectionists. It is sufficient that these imports take business away from some American producers. In the minds of simple-minded protectionists, international trade is harmful whenever it causes domestic business to lose market share to foreign rivals.
Not all protectionists, though, are this simple-minded. Some of them understand that resources have alternative uses and that prosperity is enhanced when each specific resource is used to produce that good or service that consumers value more highly than any other good or service that that resource can be used to produce.
The “sophisticated” protectionist (if we may call him that) also understands the argument based on comparative advantage—namely, free trade encourages resources to be used in their most efficient ways.
But the sophisticated protectionist is still a protectionist. He cannot shake off his uneasy sense that imports somehow harm his country’s prosperity. So he eagerly latches onto almost any excuse to proclaim that he of course staunchly supports free trade “but not when foreigners do” this, that, or the other thing that allegedly nullifies the case for free trade.....
"Americans are importing more from China. Protectionists abhor this fact.
Explaining that American imports from China reflect nothing more sinister than the voluntary choices of American consumers does not satisfy simple-minded protectionists. It is sufficient that these imports take business away from some American producers. In the minds of simple-minded protectionists, international trade is harmful whenever it causes domestic business to lose market share to foreign rivals.
Not all protectionists, though, are this simple-minded. Some of them understand that resources have alternative uses and that prosperity is enhanced when each specific resource is used to produce that good or service that consumers value more highly than any other good or service that that resource can be used to produce.
The “sophisticated” protectionist (if we may call him that) also understands the argument based on comparative advantage—namely, free trade encourages resources to be used in their most efficient ways.
But the sophisticated protectionist is still a protectionist. He cannot shake off his uneasy sense that imports somehow harm his country’s prosperity. So he eagerly latches onto almost any excuse to proclaim that he of course staunchly supports free trade “but not when foreigners do” this, that, or the other thing that allegedly nullifies the case for free trade.....
A Tale of Two Quakes - from Cafe Hayek
"Registering 7.0 on the Richter scale, the Haitian earthquake killed tens of thousands of people. But the quake that hit California’s Bay Area in 1989 was also of magnitude 7.0. It killed only 63 people.
This difference is due chiefly to Americans’ greater wealth. With one of the freest economies in the world, Americans build stronger homes and buildings, and have better health-care and better search and rescue equipment. In contrast, burdened by one of the world’s least-free economies, Haitians cannot afford to build sturdy structures. Nor can they afford the health-care and emergency equipment that we take for granted here in the U.S.
This difference is due chiefly to Americans’ greater wealth. With one of the freest economies in the world, Americans build stronger homes and buildings, and have better health-care and better search and rescue equipment. In contrast, burdened by one of the world’s least-free economies, Haitians cannot afford to build sturdy structures. Nor can they afford the health-care and emergency equipment that we take for granted here in the U.S.
Tuesday, January 12, 2010
H&R Blockheads and the Regulating IRS - WSJ.com
EXCERPT:
"We're guessing that when Americans think of outlaw industries, tax preparers aren't the first rogues that come to mind. But lo, the nation's green eyeshades are now destined to come under the regulatory rule of the Internal Revenue Service as part of the Obama Administration's latest revenue grab.
Under the plan, which would begin with the 2011 tax season, anyone who takes money to help people with their taxes will have to register with the IRS, and eventually pass competency tests and sign up for continuing education. So having made tax filing so complicated that most Americans need help with their forms, Washington now wants to raise the price of such counsel by regulating advisers in a way that may reduce their supply.
Defending the decision, IRS Commissioner Douglas Shulman declared that regulating tax preparers was reasonable because 'In most states you need a license to cut someone's hair.' Yes, the cosmetology guild does like to raise the barriers to entry for competitors."
"We're guessing that when Americans think of outlaw industries, tax preparers aren't the first rogues that come to mind. But lo, the nation's green eyeshades are now destined to come under the regulatory rule of the Internal Revenue Service as part of the Obama Administration's latest revenue grab.
Under the plan, which would begin with the 2011 tax season, anyone who takes money to help people with their taxes will have to register with the IRS, and eventually pass competency tests and sign up for continuing education. So having made tax filing so complicated that most Americans need help with their forms, Washington now wants to raise the price of such counsel by regulating advisers in a way that may reduce their supply.
Defending the decision, IRS Commissioner Douglas Shulman declared that regulating tax preparers was reasonable because 'In most states you need a license to cut someone's hair.' Yes, the cosmetology guild does like to raise the barriers to entry for competitors."
Monday, January 11, 2010
The old delusion of protectionism - The Boston Globe
EXCERPT:
"why stop there? In addition to boycotting goods and services made in other countries, let’s avoid spending money on products from other states. Those of us who live in Massachusetts should refuse to buy dryer sheets from California, Ohio lightbulbs, and hoses made in California. My Boston cabbie should be curling his lip at cars made not just by companies headquartered in Japan or Germany, but by those based in Michigan, too.
Crazy? Of course. Refusing to trade across state lines wouldn’t make us economically stronger. It would make us weaker, condemning us to higher prices, less variety, reduced purchasing power, and inferior quality. Granted, such protectionism might work to the advantage of a few local producers. But it would do so only by depriving everyone else of economic opportunity and improved quality of life. To turn state borders into trade barriers would be irrational and self-defeating.
What protectionists never seem to grasp is that it is no less irrational and self-defeating to treat the borders of countries as barriers to trade. Free trade isn’t a battle that countries (or states) win or lose. It is a human right - the liberty to engage in voluntary transactions that leave both participants better off. If John wants to sell something that Mary wants to buy, it should make no difference to the lawfulness of their exchange whether they are residents of different neighborhoods, different states, or different nations."
"why stop there? In addition to boycotting goods and services made in other countries, let’s avoid spending money on products from other states. Those of us who live in Massachusetts should refuse to buy dryer sheets from California, Ohio lightbulbs, and hoses made in California. My Boston cabbie should be curling his lip at cars made not just by companies headquartered in Japan or Germany, but by those based in Michigan, too.
Crazy? Of course. Refusing to trade across state lines wouldn’t make us economically stronger. It would make us weaker, condemning us to higher prices, less variety, reduced purchasing power, and inferior quality. Granted, such protectionism might work to the advantage of a few local producers. But it would do so only by depriving everyone else of economic opportunity and improved quality of life. To turn state borders into trade barriers would be irrational and self-defeating.
What protectionists never seem to grasp is that it is no less irrational and self-defeating to treat the borders of countries as barriers to trade. Free trade isn’t a battle that countries (or states) win or lose. It is a human right - the liberty to engage in voluntary transactions that leave both participants better off. If John wants to sell something that Mary wants to buy, it should make no difference to the lawfulness of their exchange whether they are residents of different neighborhoods, different states, or different nations."
Saturday, January 9, 2010
Greg Mankiw's Blog: Unemployment Update
"Unemployment Update"
Interesting graph showing the Obama administration's unemployment forecast versus actual rates.
Interesting graph showing the Obama administration's unemployment forecast versus actual rates.
Thursday, January 7, 2010
Intellectuals and Society: Part II - Thomas Sowell
EXCERPT:
"If there is any lesson in the history of ideas, it is that good intentions tell you nothing about the actual consequences. But intellectuals who generate ideas do not have to pay the consequences.
Academic intellectuals are shielded by the principles of academic freedom and journalists in democratic societies are shielded by the principle of freedom of the press. Seldom do those who produce or peddle dangerous, or even fatal, ideas have to pay a price, even in a loss of credibility."
"If there is any lesson in the history of ideas, it is that good intentions tell you nothing about the actual consequences. But intellectuals who generate ideas do not have to pay the consequences.
Academic intellectuals are shielded by the principles of academic freedom and journalists in democratic societies are shielded by the principle of freedom of the press. Seldom do those who produce or peddle dangerous, or even fatal, ideas have to pay a price, even in a loss of credibility."
Monday, January 4, 2010
Uncertainty and the Low Recovery - Gary S. Becker, Steven J. Davis, and Kevin M. Murphy - WSJ.com
EXCERPT:
"In terms of U.S. output contractions, the so-called Great Recession was not much more severe than the recessions in 1973-75 and 1981-82. Yet recovery from the latest recession has started out much more slowly. For example, real GDP expanded by 7.7% in 1983 after unemployment peaked at 10.8% in December 1982, whereas GDP grew at an unimpressive annual rate of 2.2% in the third quarter of 2009. Although the fourth quarter is likely to show better numbers—probably much better—there are no signs of an explosive take off from the recession.
We believe two factors are behind this rather tepid rebound...."
"In terms of U.S. output contractions, the so-called Great Recession was not much more severe than the recessions in 1973-75 and 1981-82. Yet recovery from the latest recession has started out much more slowly. For example, real GDP expanded by 7.7% in 1983 after unemployment peaked at 10.8% in December 1982, whereas GDP grew at an unimpressive annual rate of 2.2% in the third quarter of 2009. Although the fourth quarter is likely to show better numbers—probably much better—there are no signs of an explosive take off from the recession.
We believe two factors are behind this rather tepid rebound...."
Saturday, January 2, 2010
The anti-capitalist mentality - WSJ.com
"The anti-business mindset . . . is worthy of a pampered adolescent who is searching for a cause with which to display his unique moral sensibility. It is not worthy of an adult who should be able to use his imagination, if not actual experience, to appreciate the extraordinary human effort that has gone into creating the delightful tools that we daily take for granted. On my desk sit various humble objects—a tiny clock, a stapler, a paper clip box, a Lucite cook book stand for holding up drafts and other papers while I type. Each object represents a fractal geometry of complexity, composed as it is of parts that themselves require enterprise to manufacture, assemble, and deliver, all born along on waves of energy and infrastructure to which yet another set of entrepreneurs contributed. The fact that all of those distributors and manufacturers tried to make a profit does not detract from the fact that they offered goods which enhance our lives. . . .
It is the ingratitude that kills me the most among anti-business types. The materials that furnish a single room in an American home required daring, perseverance, and organizational skill from millions of individuals over generations. I hope they all got filthy rich."
It is the ingratitude that kills me the most among anti-business types. The materials that furnish a single room in an American home required daring, perseverance, and organizational skill from millions of individuals over generations. I hope they all got filthy rich."
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