A Few Gripes

I know what you're thinking: "Gripes? On this blog? Heavens!" But it's true. Here they are:

1) For the jillionth time, pro-lifers are pro-life because they believe abortion is the taking of an innocent human life, i.e. murder. It is not because they hate women, or want to keep women in their place, or think women should all be mothers instead of workers, etc.

2) Pro-lifers do not stop caring about babies after they are born. You lefties are making the classic mistake of thinking that just because your opponent doesn't hold with a given policy (i.e. a large welfare state), then he doesn't care about the intended beneficiaries of such policy. This is like thinking that a person is really pro-terrorist or anti-American just because he doesn't think invading Iraq or Libya is a good idea. Take statement p: " cares about children and the poor" and statement q: " is in favor of a large welfare state." You assume that p automatically implies q, and if !q is the case, then obviously !p. Your error is the assumption that p implies q. (propositional logic, do some reading)

3) There are many "controversies" in economics which are, for all intents and purposes, settled, and only persist in being controversies in the mainstream press or among politicians or whatever. They are settled because both the theory and (more importantly) the empirical data has pretty much made up every economist's mind on the subject. I say this because of a report by the Canadian Centre for Policy Alternatives published a "study" claiming that reductions in corporate tax rates do not spur investments, and thus do not "create jobs." This is, of course, total baloney, and akin to releasing a study claiming that tides do not actually go in and out but rather stay put. There are still plenty of areas for disagreement, but there are many "controversies" which can be settled empirically without a lot of hemming and hawing. Anybody who thinks of themself as a serious, reasoning person should begin their understanding of economics (and hence politics) by accepting these settled axioms and reasoning from there, not trying to "debunk" them in a vain attempt at salvaging a discredited ideology.

4) Ultra-rich liberals, exactly how does that work? I mean, Ted Turner once claimed to be a socialist. Friedrich Engels was a wealthy heir and incompetent factory boss. I can't make up my mind about whether these people are aberrations and distractions from the real debate or if this trend says something important and fundamental about left-wing philosophy. In either case, how can one possibly take them seriously? If Warren Buffett really believed that the wealthy weren't being taxed heavily enough, why does he have accountants to help him reduce his taxes at all? Why not write a bigger check to the government and say "nah, you keep it all"? Or why not give more to charity? In the case of Buffett, many people argue that he advocates higher progressive taxes because his financial services companies would personally benefit (and they certainly would), but if we're talking about multi-millionairess Whoopi Goldberg, communist sympathizer and talented actress, then what's the explanation?

5) Tax cuts do not "cost" anybody anything, it is outright lying to claim otherwise. There is no cost incurred by anybody, anywhere, when taxes are cut. "But what about people who rely on government spending? Aren't they bearing a cost?" No, when your parents decided you were too old for an allowance and had to get a job instead, it didn't cost you a thing. Your total stock of resources didn't diminish one iota. If a person works, and then doesn't get paid for their work, then they beared a cost--the opportunity cost of their labor. To say that it "costs the government money to cut taxes" means that, as a result of tax cuts, the government must now spend more money. That is literally what leftists are saying when they complain about tax cuts. It may not be what they mean (I know very well what they mean, they believe the government is de facto entitled to everybody's money and that tax cuts take away what's theirs), but it is what they actually say, it is the actual argument that they are using (in my experience leftists don't say what they really mean, but instead use other "dummy arguments" like "it's for the children" or something, rather than saying "line the pockets of the public sector unions and keep me in office!"). Pay attention to the wording next time. They say that as a direct result of cutting tax rates, the government will incur a cost. How else can the government incur a cost but by being forced to spend money? Now, how does being forced to spend money follow as a direct result of tax cuts?

6) A particular reason I have trouble taking leftists seriously is that I think they put ideology over pragmatism even when it hurts them. Going back to taxes for a good example: leftists want bigger government, to get bigger government you want more tax revenue so the government can afford to be big (the alternative is slavery and brainwashing, which worked for the Soviet Union for a while), and here is where leftists put ideology over pragmatism. Their stated goal is more tax revenue, the way you get more tax revenue is often (but not always) with tax cuts. I say often but not always for a reason, for now we'll focus on those times and places where taxes are to the right of the Laffer Curve (to use a broad analogy) and where reducing them would result in greater economic growth and thus more long-term tax revenue. This happened during the 80s. I know, I know, you've heard that the government had horrendous deficits as a result of tax cuts in the 80s. Not true, the government actually had enormous revenues as a result of the economic growth following the tax cuts, it was the spending spike that caused the deficits (deficits or surpluses are functions of both spending and revenue, if revenue goes up and so do deficits, then spending must have gone up too, that's not even economics that's just arithmetic). The facts bear me out on this one, tax cuts in the 80s spurred economic growth which gave the government more money. Now, if I were a leftist and my goal was more money in government hands, I'd root for tax cuts wherever it seemed appropriate as a means of maximizing government revenue for the long-term (obviously we could maximize government revenue tonight if we simply taxed everybody at 100% of their income right this minute). But as I said, this is where leftists reveal that their religion, their faith, their ideology of collectivism is more important to them than their stated goals: they opt for higher tax rates virtually every time. It's more important to them to see the government being large and overbearing than it is to actually maximize revenue. They may not all think along these lines, but a lot of them do. I hear some conservatives talk about peace, but what they really like to see is the military kicking some butt, whether it brings peace or not. Same kinda thing. I love when I get to compare left-wingers and right-wingers and show their similarities. :-) Maybe I should make a post all about stuff I love about politics and economics.

Privatization-Bashing

I'll try to keep this short (I really will).

I have noticed that privatization efforts get a lot of bashing from the left, or just from ordinary people. As an econ nerd acquainted with the pros and cons of privatization, I always get curious when I hear that somebody actually prefers government provision of a good or service to private provision, so do some digging on every instance of "failed privatization" I hear about. And I've noticed trends. When leftists complain about privatization, what they are really complaining about is either:

1) The failure of a particular public-private partnership

2) The failure of enforced monopolization

3) In developing countries, the lack of rule of law

Genuine privatization, with all of its savings, efficiency, etc., rarely gets attacked because it has been working so well we didn't even notice it. Did the same people who say that water is too important to be left up to profit-driven private corporations to supply ever stop to think about how the food they eat is provided by profit-driven corporations? Do you want to see a government-ran grocery story with government-produced goods? Go to Cuba or North Korea and take a look at what the typical citizen there shops at, it'll make Michael Moore beg for a Wal-Mart.

I would like to talk about this in more detail in a later post but I wanted to just float this idea out there, that when leftists and righties jabber back and forth about privatization, if you look at what leftists are actually saying, you can see the two sides are actually talking past each other.

Yeah, Been a While

Not that anybody reads this blog, but I felt like coming back to it because I had a lot of things I needed to get off my chest and stored somewhere else.  So I'm putting those things here.

I felt moved to talk about so-called progressive Christians, even though this is largely a political/economic blog.  They come in a variety of flavors.  Many of them are downright heretical.  These are your Shelby Spongs and others who merely dispense with whatever part of God's Word they do not like.  Many others strive to maintain Biblical integrity while fostering intimate alliances with secular political movements that are inherently anti-Biblical.

So-called conservative Christians aren't perfect.  But this post isn't about them.

What I'm getting at is that for the more serious leftist Christians who are pro-life, try to stay Biblically integral, etc., but happen to favor leftist politics and leftist means, I have a really hard time taking them seriously.  I'm not questioning their faith, but I mean taking them seriously as the agents for good they think they are.

In the first place, if you are serious about minimizing poverty, your first step is to educate yourself on how affluent people and affluent countries achieved their affluence, and then try to make the rest of the impoverished world mimic those institutions and habits that brought about the affluence in the first place.  Which means that you would be in favor of continuous maximized economic growth.  While there is room for debate over particulars (especially as regards social services i.e. welfare state programs) in broad terms this means you are in favor of:

1)  unfettered free trade between nations (not "fair" trade)

2)  as little regulation as possible over the economy

3)  no price floors or price ceilings, no monkeying around with the price system at all

4)  sound monetary policy

5)  maintaining law and order

6)  maximizing market competition, minimizing government central planning

You don't have to take my word for it, you just have to ask reality.  What's the track record of central planning, or interferences with free trade?  The track record is crap.  I'll save you the time of looking at the data, but feel free.

I see a lot of progressive Christians rooting for various schemes which undermine economic growth, foster dependency rather than stimulate productivity, and focus on wealth redistribution rather than wealth creation.  That "fair trade" coffee you buy may have put some extra money in some impoverished African farmer's pocket, but you deprived his neighbor of a living by making the price for coffee artificially high and thus the demand artificially lower than it would be, which means his neighbor's supply of coffee goes unbought.  Fair trade is like unionization:  great for those few who actually get to participate, very bad for those who don't.  It's econ 101, by keeping the price at higher-than-market levels, you stimulate oversupply, but since you are keeping the price high rather than allowing it to fluctuate with supply and demand, there is a surplus of coffee.  This result's in many farmers having to sell their coffee to non-fair-trade buyers at a *lower* price than they otherwise would.  Distorting the price system is never a good thing, except to the well-connected special interests.

It doesn't take a graduate degree to learn about this, all it takes is the curiosity and the drive to understand how an economy works so that we can alleviate poverty.  It's the reason I studied economics in the first place.  But too many progressive Christians blindly swallow the leftist line about fair trade rather than listening to what hundreds of years of economic thought has to say about truly free trade.

The other big issue is that progressive Christians mistake the Biblical call for charity as a mandate for a welfare state.  Not at all.  There is nothing charitable about the government spending other peoples' money.  Charity is when I make a choice to give.  Taxes aren't a choice, they are coerced from the tax-payers.  Regardless of what you may think about the welfare state, do not blatantly misinterpret the Bible as an excuse.  Do not say that more welfare spending is required because the Bible says so, because it doesn't say so.  Defend or attack welfare on its own merits (or lack of).

STOP CALLING OBAMA A MARXIST!!!!

It makes as much sense for you to call Obama a Marxist as it does to call Rush Limbaugh a Hindu.

Obama isn't even a communist, even if he's forged alliances with communists in the past for political gain.

Karl Marx was a philosopher and economist of the 19th century who would be a footnote in the history of economic thought had his ideas not inadvertently influenced half the population of the globe, and served as a philosophical basis for the Soviet Union, Communist China, Cuba, North Korea, Vietnam, etc.

Why do I say inadvertent?  Because Marx wasn't a malicious totalitarian (misunderstandings of the term "dictatorship of the proletariat" notwithstanding), he did not advocate, and even implicitly or explicitly opposed many of the tactics later put into practice by communist countries--tactics and policies which were purely hypothetical in Marx's time but which were nonetheless considered by communists at that time as possible courses of action.

Marx's own opinions were all wrong (anything he said that happened to be true was existing economic theory that he had studied), but he was also taken out of context, distorted, and misrepresented by people claiming to be his followers.  And that just in his lifetime, he himself said "I am not a Marxist."

Whatever you can say about Marx, he never planned for a brutal police state (indeed his views on fighting crime centered around changing the social environment, not on more policing), brainwashing propaganda, education being controlled by the state for its own ends, a body of central planners deciding everything in the economy.  Quite the contrary.  In fact, the alleviation of poverty via was not his aim, it was rather incidental, a side effect, a natural outcome, to his true aim:  to free mankind of all restrictions and allow him to reach his full potential.  That's how he saw it anyway.

Now, I happen to think that a free country with a free market and a system of law and order allows that to happen far better than a communist country, and I sincerely believe, based on my understanding of Marx the man, that if he were alive today he'd recant his belief in socialism and become a libertarian free marketeer.  After all, he valued empirical fact and logical reasoning, and now that socialism has been discredited in the eyes of all serious, non-political economists, he'd have to admit that the free market works far better than he originally thought it did.  Economic theory has come a long way since the 1800s and the economies themselves have developed.

As the world economies modernized and became less and less dependent on simple manual labor, standards of living soared, productivity soared, mankind's potential to fulfill his own destiny has soared, and people have more freedom and options and luxuries than ever before.

Never forget that Marx believed that the free market was not something to squash, but a necessary step in mankind's evolution, as were the hunter-gatherer stages, the tribal stages, the feudal stages, the mercantilist stages, etc.  Given how far economic theory (and economies themselves) have advanced since then, he'd have no choice but to admit he was wrong about the free market.  And he certainly would weep with shame at his name and his face being attached to the horrors of real-world communism.

Back to Obama...

In no way, under no definition of the word, can Obama be called a Marxist.  He is not a follower of the historical Marx, nor is he one of the vulgar Marxists who never gave a fig about economics or what Marx really said.  Obama has borrowed a lot of communistic rhetoric and approaches, and he's appointed communists or far-left nutbars to meaningless, just-for-show cabinet posts (really, a "green jobs" csar?  nothing more than a PR stunt), but where the rubber meets the road, where the real economic policy of the administration is devised, he has hired mainstream market economists.  Christina Romer, Larry Summers, Austan Goolsbee, etc.  These are devotees of the so-called neoclassical synthesis, a take on Keynesianism that incorporates classical micro and macroeconomic thought and has become even more grounded in free market economics after the influence of the Chicago School and Austrian School.  He reappointed Ben Bernanke as "head" of the Federal Reserve Board, another mainstream economist (who fully recognizes that the Great Depression was caused by the Fed in the first place).

This shows that Obama has no intentions of communizing America--this isn't the crowd he'd hire if he were.  Heck, he could have surrounded himself with even more far to the left (but still mainstream) economists such as Krugman, Stiglitz, Blinder, Tyson, etc. (and indeed many of these characters have worked as informal advisors at one point or another), but for his core economic team he chose mainstream market economists.  He could have gone whole-hog heterodox and hired nothing but Galbraitheans and socialists and communists to devise his economic policy.  But he hasn't.  So stop saying he's a Marxist or a communist, it just makes you look foolish and extreme.

Now I'm not naive, clearly Obama sees a larger role for the government in peoples' lives, he clearly wants to shape society according to his own vision rather than letting the dictates of the market (i.e. the demands of the people themselves) shape society.  But he's not so stupid to think that he doesn't need economic growth to fund his projects and that requires a market economy.  It needs businesses turning a profit and hiring people, it needs people getting rich, making millions, people spending their money on stuff.  He's under the delusion that the government can stimulate growth, but he's not so delusional that he thinks the government alone can make the economy "run."

So what role does Obama see for the government?  Clearly he sees a larger welfare state.  Indeed, making people dependent on the government for something as basic as their health care guarantees that the welfare state will become a way of life for the whole population.  It puts a floor on whatever government-shrinking measures reformers will try in the future.  Nothing short of a world-war level catastrophe or depression-level recession can create enough turmoil to force a government to drop socialized medicine, once enacted.  Or a very severe debt crisis.....

He sees greater government involvement in education, in using education to foster collectivism and "volunteering" as an end to itself.  I don't think Obama has any grand end in mind other than being able to shape society according to his vision, or the vision of "people like him," i.e. elitist leftists who never produce anything of value yet are wealthy anyway.

Paul Krugman's Latest Piece of Economic Quackery

It's my belief that the economics profession suffers from a lack of backbone.  They tend to give their quacks a pass, sometimes they even lionize them.  I don't think you see this nearly as much in other sciences.  But, for purely political reasons, hacks and quacks not only survive in economics, they thrive.  And other academic economists are too scared to call them out.

I'm not a professional economist, so I'll say it:  Paul Krugman is a quack of an economist, and so are most other saltwater school economists.  Yes, I'm a market fundamentalist, and a proud one.  To me, economics is a science, and if you can't see things for the way they are, you shouldn't be an economist.  Economists who can look at the past thirty years of the financial sector in this economy and say it was lightly regulated are quacks.  Any economist who can say market liberalization doesn't bring universal prosperity wherever it's unleashed is a quack.

More dangerous than mere quacks are the people who want to tailor society to their vision, the would-be social engineers.  If you got into economics because you want to change society, you probably won't be a good one, no matter how famous you get or how many awards you win.  If you got into economics to understand and explain how an economy, and thus, the world, and human psychology, works, then you are on the right track.

Greg Ransom said "Paul Krugman received his Nobel Prize for putting into mathematical form insights which older economists say already exited[sic] in economics in non-mathematized presentations."

Exactly.  He's an economic engineer, not an economist.  Oh, he knows the theory, and he knows the facts, but he doesn't truly understand how an economy works.  He has the same understanding of economics that the devil has of the Bible, an understanding that is centered around his own vision.

Which brings me to Krugman's latest column, which is about the healthcare "reform" debate.

Washington, it seems, is still ruled by Reaganism — by an ideology that says government intervention is always bad, and leaving the private sector to its own devices is always good.

Call me naïve, but I actually hoped that the failure of Reaganism in practice would kill it. It turns out, however, to be a zombie doctrine: even though it should be dead, it keeps on coming.

What's laughable about Krugman, and which reveals what's laughable about elite universities and the elite people who teach at and attend them, is that Krugman's articles are always full of the most amateurish debate tactics.  Really, if he weren't a professor at Princeton and the LSE, but just some guy with an opinion, he wouldn't get printed.  Here we have the classic mistake of stating your opponent's argument in black and white terms, as if anybody but an anarchist thinks that intervention is always bad, or that market failures never happen (even the Mises people don't believe that--I think).  So right off the bat we have a straw man argument, a VERY typical Krugman tactic.  Reading on....

First of all, even before the current crisis Reaganomics had failed to deliver what it promised. Remember how lower taxes on high incomes and deregulation that unleashed the “magic of the marketplace” were supposed to lead to dramatically better outcomes for everyone? Well, it didn’t happen.

To be sure, the wealthy benefited enormously: the real incomes of the top .01 percent of Americans rose sevenfold between 1980 and 2007. But the real income of the median family rose only 22 percent, less than a third its growth over the previous 27 years.

Ah, "Reaganomics," the term that can mean whatever a left-winger wants it to mean, but which usually means that cutting taxes tends to stimulate economic growth and CAN raise government revenue.  Both of these are very true.  Some clowns on the right, mostly non-economists, tried to make the case that tax rate cuts ALWAYS lead to higher tax revenues for the government.  This is not always true.  In fact, as Milton Friedman said, if you cut tax rates and revenues rise, you haven't cut them enough, meaning you're still on the right-hand side of the so-called Laffer Curve.

The second paragraph is where Krugman really shoots himself in the foot.  He makes a basic blunder that would get you a lower grade in Econ 101, and what's remarkable is that he knows he is making this blunder.  He discusses "family income," and as anybody who has read even an introductory text on economics can tell you, "family income" figures are highly unreliable as family demographics change.  The big change over the past forty or so years is the dramatic rise in single-parent households, which are still called "families."  To use "family income" or "household income" as a measure of income can be highly misleading and, if used to express incomes in America in recent decades, can make incomes--and income growth over time--seem like less than they are.  This is why left-wingers tend to use these figures rather than more exact and reliable figures which take these demographic changes into account.

In reality, economic growth has been SPECTACULAR from the eighties onwards, a few recessions notwithstanding.  We have become a more prosperous nation by virtually every material measure.  Our standard of living, including the standard of living of the poor, is phenomenal.  A country where the poorest, THE POOREST, have obesity as their number one health problem, would have been, literally, a joke a hundred years ago, and still is in many parts of the world.

I want to say one more thing about incomes, and that's there are a few other factors affecting statistics which, on paper, downplay our spectacular economic growth over the past several decades.  The first is that health care benefits, which many people get through their employer, as well as other non-pecuniary benefits, are taking up a larger and larger chunk of our total compensation, thus the actual dollar figure in take-home pay doesn't rise as much as you might think in many instances, but our total incomes are going up, up, up.  The second is that, even "adjusted for inflation," incomes have grown beyond more than just their dollar amount, as their purchasing power has gone up.  Many things, especially technology, have come down in price so much that even an income that has remained flat--even adjusting for inflation--over twenty years is actually a higher income because it buys more stuff.  A problem here is that when a figure is "adjusted for inflation" that doesn't mean exactly what you think it does, depending on how it was adjusted.  Adjusting based on measures such as the Consumer Price Index (a popular method) is unreliable, as these figures don't take into account the enhanced purchasing power of money, as well as changing technology itself.  An "intro-level four-door sedan" in 1982 is not the same as an "intro-level four-door sedan" in 2009.  Power windows, cruise control, CD players, etc., the list goes on.  We have prospered in many ways that crude income statistics, even the best ones, do not fully reflect.  This has allowed unscrupulous hack economists to say that the spectacular economic growth of the past three decades never really happened.  This is purposefully forgetting one of the most important economic lessons, and one of the oldest:  wealth isn't money, wealth is made up of actual goods and services.

By any measure, we have the greatest abundance of wealth we've ever had.  And Krugman knows all this.  He knows he's making a phony argument that any economist could tear to shreds in five minutes.  Why is he doing it?  Because he thinks most of his readers don't know the truth about his cooked statistics.

There’s a lot to be said about the financial disaster of the last two years, but the short version is simple: politicians in the thrall of Reaganite ideology dismantled the New Deal regulations that had prevented banking crises for half a century, believing that financial markets could take care of themselves. The effect was to make the financial system vulnerable to a 1930s-style crisis — and the crisis came. 

“We have always known that heedless self-interest was bad morals,” said Franklin Delano Roosevelt in 1937. “We know now that it is bad economics.” And last year we learned that lesson all over again.

Krugman's "short version" is a bunch of crap.  One thing hack economists like him don't do is explain how the removal of a few regulations, most of which had nothing to do with the area of the financial sector that collapsed, caused this crisis.  Economists are still piecing together exactly what has happened, from one year to the next, to cause this recession, and there are almost as many views as there are economists.  But this meme of deregulation is a purely political one, it's not economics.  The financial sector is the second-most tightly regulated and controlled sector of the economy, and has been, ever since the Great Depression.  Nothing about that has changed.  Tell somebody actually working in the financial sector, either in banking or stocks or bonds or whatever, that their industry was deregulated, and then get out of the way as they laugh their heads off.  Most people do not work in the financial sector, so most people are unaware of how much red tape there is and how all of this regulation stifles competition, raises prices, and turns the industry into a bunch of oligopolies.

Krugman has a soft spot for FDR and the New Deal, even though neither ended the Great Depression.  In fact, the New Deal simply made it worse by tying up money and resources that otherwise would have gone towards economic growth.  Krugman likes to imply, without actually saying, that the Great Depression was caused by a market failure.  As we now know, and as Milton Friedman had been teaching since at least the early 60s, the Great Depression had one simple cause:  The Federal Reserve.  Not market failure.  GOVERNMENT failure.

But it’s much the same on other fronts. Efforts to strengthen bank regulation appear to be losing steam, as opponents of reform declare that more regulation would lead to less financial innovation — this just months after the wonders of innovation brought our financial system to the edge of collapse, a collapse that was averted only with huge infusions of taxpayer funds.

The bad innovation Krugman is alluding to is the "stock market crash" of this recession, the evil boogey man, the alleged cause of the recession, rather than simply being seen as a symptom of the underlying problems in the financial sector.

I want to finish this up by making it clear to everybody what's going on here.  Countless times I have seen sentence fragments here and there such as "laissez faire capitalism is dead," or "libertarian economics is discredited" or "we are all socialists" or "markets don't work," etc.  The key word is "discredited," and that's on purpose, and I'll tell you why.

For decades, from the Great Depression onward, statists economists of one stripe or other, let's call them Keynesians (although this isn't entirely accurate but let's keep it simple), ruled the roost in mainstream economics.  They ruled academia.  They had the ears of prime ministers, presidents, and financial people.  They assured everybody--and for a while it seemed like they were right--that they could successfully engineer the economy as one might run a train or a power station.  And adjustment here, a correction there, lower inflation there, raise unemployment there, lower unemployment here, raise inflation there.  This went beyond party lines (economics isn't about political parties, so don't fall for the line that there is such a thing as "Democrat economics" or "Republican economics").  Nixon said, in 1970 I think, "We are all Keynesians now," and people who believed in a mostly unfettered free market, people who identified as libertarians, were a joke, they were seen as the economic equivalent of doctors who balance humors and use leeches to cure cancer.  I don't want to paint things too black and white, but the situation was grim if it was 1959 and you were against Social Security.  The University of Chicago was the one place where economists like that could thrive, and thrive they did.

One of the main beliefs of economic engineers at the time was that there was an inherent tradeoff between inflation and unemployment, and that if you raised one, the other would go down.  There were also a lot of kooky ideas about inflation back then, about what caused it and what its effects were.  I have one econ textbook from the 70s which argues that inflation has no negative effect on workers because their wages rise along with inflation and thus it doesn't harm them!  Oh, BTW, one of the authors of this textbook is an advisor to Obama.

Anyway, during the 70s something happened called "stagflation."  Unemployment AND inflation rose at the same time, and they rose pretty high (and yes, it hurt workers).  The seesaw effect between the two (which seemed to fit available data at the time) was broken.  The economic engineers, the statists, could explain this.  But Milton Friedman and the other Chicago School economists could.  Their achievements started getting recognized.  As Larry Summers, big wig econ advisor to Obama says, Friedman was once viewed as a devil figure in his youth (he economically came of age in the 70s, like Krugman), then earned grudging respect, and then open admiration.  A half dozen Nobel Prizes later, and the Chicago School economists were made in the shade.  They turned out to be right about all sorts of things (ESPECIALLY monetary policy), and the public and politicians, who had been sold on the "sure, we can manage the economy" line for decades now, soured on the economic engineers.  It was even said at the time that Keynesianism had been "discredited," and it seemed like libertarian economics had a shot at becoming the mainstream school of thought in econ.

Then the other shoe dropped.  The Soviet Union rapidly, and unexpectedly collapsed.  Now, throughout the Cold War, statist economists in the free world would say that a command economy (such as the Soviets had) might not only work, but might even be superior to any kind of free market or mixed economy.  With the right people in charge (hint hint) and the right policies, making all of the right decisions, a centrally planned economy might work.  Hayek defeated this in theory, but statistics from behind the Iron Curtain, including those from the CIA itself, were used to bolster the theory that command economies might actually be more productive and prosperous.

After the Soviet Union fell, and there was no communist party to protect communist secrets, the truth came out, and settled the debate once and for all.  The statistics had been utterly, totally, phenomenally WRONG all along.  Centrally planned economies not only failed, they failed for exactly the reasons Hayek and other economists of the Chicago School had said they would--the lack of a free price mechanism to coordinate the economy would ultimately mean its utter ruin.  They would have gluts of one thing and shortages of another, and with no market prices based on supply and demand, but rather, based on what economic engineers decided to set, there was no way of correcting these gluts and shortages.  It is now universally agreed, even among the Krugmans and Blinders of the world, that a centrally planned, command economy cannot work, and many of those economists who saw that the economic engineering policies and theories they'd been pushing their entire careers, be they mixed economy or command economy, repented of their sins, saw the light, and converted.

Some didn't.  In fact, some harbor a big grudge, and they've been waiting, desperately, for the moment when they could turn the tables and say "free market economics has failed," and "libertarianism has been discredited," and "nobody serious now believes in the free market," etc.  You saw much of the same rhetoric after the Great Depression (which, as I've said, was the creation of the Federal Reserve, and if you don't believe me, go ask Ben Bernanke, Great Depression expert, Princeton economist, and CURRENT HEAD of the Federal Reserve, who will tell you exactly what I said), and that rhetoric has been confined to the ash heap of history as we now know.  This too shall pass.  But right now it's gaining a lot of traction, in spite of the fact that Reagan wasn't nearly as much of a deregulator or government-shrinker as he's been made out to be (rather he was a tax reformer and cutter), and even though the financial sector, where the crises began, was the second most tightly-controlled industry in the country (and that's before the great recession), and even though the government, and its role in the economy, continues to get bigger and bigger every year in spite of the odd deregulation here or there.

It's a convenient myth for the hacks like Krugman who want to engineer society, and who don't want people to take a good long look at them and the burdensome regulations and market interventions that they've endorsed over the years.

The Fatal Conceit of City Planners

Read this article.  It's about how America's "fastest dying cities" are sending government representatives (that is, representatives of the governments of these cities, not the people) to a summit in Dayton to come up with ideas to bring these cities back.

Of course, nobody is asking the questions, "is it even in our power to restore the population and economic growth of these cities, and it is right to use the taxes of what citizens remain to subsidize this effort?"

Although I'm sure the citizens of these cities may be wondering that.  The truth is, people and businesses are not geographically confined, in theory they can go anywhere.  And cities, like businesses and individuals, rise and fall.  Cincinnati used to be America's second city, then that became Chicago.  Now it's LA.  In twenty or thirty years it could be Houston or Atlanta, and in a hundred years it could be some place none of us has heard of.  The number one retailer in this country used to be Sears.  Now it's Wal-Mart.  I could come up with a jillion more examples to prove my point, but this is a blog, not an academic paper.

These cities shrank because of the combined actions of thousands, and, actually, millions of people.  Individuals made choices about where was the best place for them to live, whether one place was more affordable or had better policing or schools or whatever other community amenities were important.  Business leaders, led by the profit motive, made decisions about whether to stay in these cities or if they could have larger profits by moving elsewhere (either to escape taxes, find better labor supplies, or whatever).  Nobody planned for these cities to shrink, although the actions of a small number of political decision makers certainly inadvertantly contributed to this decision, either by raising taxes, extending business regulations, providing poor public services, or whatever.  Other reasons are beyond the control of anybody.  Frankly, people like to live in a place that's attractive and where the weather is nice.  As air conditioning becomes affordable, it makes sense that people would move further south and away from the largely unattractive and featureless terrain of the north.

In short, people weighed up the costs and benefits of staying versus moving (led primarily by the price system), and many moved.  A greaty many of them probably don't want to move back.  My father recently told me that, after moving back to the town he grew up in, he was shocked by how bored he was living there, when all his life away from his hometown he imagined he'd love living there again.

It's only natural that as economies change, and technology changes, and tax and business conditions change in various areas, that new generations of workers will change their location.  These "dying cities" aren't filled with young people, they are filled with older people.  It is primarily the younger and more educated people (who otherwise would have replenished the community's population) who have moved out of the rust belt and other "dying cities."  In other words, society is saying, through the combined actions of millions of people, "we want these cities to shrink."

So why stop a natural process?  Part of it is nostalgia and hometown pride, it's not nice to see the city you grew up in and love become a dystopia.  Part of it is money.  The bigger the city, the bigger the tax base and the more money the politicians have to spend on things (particularly themselves).  Big city mayors can make six figure incomes.  Small town mayors make much less.  There are also the government employees.  As the city shrinks, the need for public services dwindles, which necessitates layoffs.  This makes the gangsters that run the labor cartels (IOW the unions) unhappy.  Another reason is sheer vanity.  Every mayor of a sizeable city wants their city bigger, they all want to be the mayor of NYC, LA, Seattle, Chicago, or some other huge cosmopolitan town.  They want huge, ornate opera halls and sports teams, promenades, piazzas, "revitalized downtowns," shopping centers with upscale boutiques.   You often see city governments throw away tax-payer money on such glittery, showy projects, which often fizzle.

I see three ways for these cities to grow.  Either they need to lure new citizens, bring back the citizens who left, or somehow get their existing citizens to reproduce more.  The latter is unthinkable.  The first two can be done only by giving people an incentive to move to your town, not just urging them.  How do you give incentives?  Create a better business climate, lower taxes, improve public services (if they stank), and generally becoming a leaner, meaner, more efficient government.  This is hard if not impossible for most governments to do.  Another way of creating an incentive is to, essentially, pay people to move to your town.  In desperate circumstances, it can even mean paying people to *stay* in your town.

Ohio gives out money to college graduates to have a down payment on a home (most Ohio college grads plan to leave the state after graduation because if you don't want to be a teacher or a nurse or work at a pizza or sub place, Ohio is not the state for you).  Many times you will see states or cities or counties give tax cuts to a particular industry or a particular business.  This (in theory) amounts to a subsidy, as other businesses which are not so favored by the government pay normal tax rates, so the business in question benefits from government services such as police, trash collection, courts, etc. without paying as much as the other businesses.  Again, I said "in theory," as our tax system is so convoluted and perverse that many other factors are at work besides this one principle.  And, finally, sometimes governments will simply give money to businesses.

Do any of these ways sound very good?  I think the only one that sounds appetizing to an informed, economically literate, thinking person is for the government to clean its own act up.  In the rust belt, one of the biggest things governments could do to improve their economies would be to become right-to-work states, where unions cannot force businesses to make contracts with them or force workers to join them, in short, where unions must stand or fall on their own merits, and not because they receive special "rights" from the government.  More likely than this is more of the same old tactics: handouts, bribes to bring in businesses and hopefully people.  This amounts to ripping off existing citizens, making the place even less amenable.

These city planners are exhibiting just a small example of the fatal conceit of government planners everywhere, the fatal conceit that not only do they know what's best for everybody, but that it is also in their power to make it happen.

Intro to Libertarianism

I hate politics, which might seem strange for somebody who writes a political blog. But I also hate that I have to take out the trash, and yet I do it anyway. Why? Because it must be done.

But I have a true passion for economics, which unfortunately gets beat up and left in a ditch by politics quite frequently. Underlying all politics is economics. You could describe all government action in terms of economics. Economics explains why we need governments, why they operate the way they do, and what governments are doing wrong.

The branch of economics that deals with politics is called political economy, and it has its various schools of thought (public choice theory, various kinds of Keynesianism, etc.). I fall into the libertarian category, although libertarianism (a misunderstood school of thought in a misunderstood science) is less of a political ideology and more of an apolitical ideology. Keynesians, protectionists, mercantilists, special interests, socialists, communists, etc., all have some idea about what the government ought to be doing, how it ought to spend the tax-payers money, how it needs to interfere with peoples' affairs, and so on. Libertarianism provides a rationale for why the government should not be interfering with peoples' affairs, for why it ought to be spending as little taxpayer money as possible, and why it doesn't need to "do" nearly as much as many people seem to think.

I should point out that there is a difference between politically-minded libertarians cranks on the one hand (the people who campaign for legalized child prostitution, borderline-anarchy, etc.) and the more pragmatic economically-minded libertarians (such as Hayek, Smith, Friedman, Becker, etc.) who hold to various policies not necessarily for moral reasons or for the sake of "rights," but for pragmatic reasons. They hold to libertarianism because it works. Libertarianism is pretty close to what used to be called "liberalism."

Libertarianism, contrary to what you may have heard, is not necessarily atheistic or socially liberal. Many religious, socially conservative individuals subscribe to libertarianism. The idea that there is a conflict between social conservatives on the one hand and libertarians on the other is a false dichotomy. The real conflict is between those who understand economics and those who don't. And I'm sad to say, most of my fellow conservative Christians do not understand economics any better than the average person--which is to say their understanding is downright crappy. But crappy is average. It ain't call the "dismal science" for nothing.