Wednesday, December 20, 2006
Tuesday, December 19, 2006
In the meantime, I wish y'all a Chappy Chanukah (what remains of it), a Carefree Christmas, a Kool Kwanzaa, or whatever winds your windmill.
Friday, December 15, 2006
What we don't know about the economy could hurt us. Many of the suggested remedies to problems that don't exist may leave us worse off.More careful analysis of data is provided in an Alan Reynolds article in the WSJ which Don Luskin posts and comments on here:
At last... Alan Reynolds' long-awaited blast against all the hype from the Left and the Right about so-called "income inquality," and the myth that the "top 1%" have suddenly started making all the money in this country. ... This is the best. I totally bow down before Alan Reynolds.
As many others have done, Virginia's Democratic Senator-elect Jim Webb recently complained on this page of an "ever-widening divide" in America, claiming "the top 1% now takes in an astounding 16% of national income, up from 8% in 1980." Those same figures have been repeatedly echoed in all major newspapers, including this one. Yet the statement is clearly false. The top 1% of households never received anything remotely approaching 16% of personal income (national income includes corporate profits). The top 1% of tax returns accounted for 10.6% of personal income in 2004. But that number too is problematic.
The incessantly repeated claim that income inequality has widened dramatically over the past 20 years is founded entirely on these seriously flawed and greatly misunderstood estimates of the top 1%'s alleged share of something-or-other.
The politically correct yet factually incorrect claim that the top 1% earns 16% of personal income appears to fill a psychological rather than logical need. Some economists seem ready and willing to supply whatever is demanded. And there is an endless political demand for those able to fabricate problems for which higher taxes are, of course, the preferred solution. In Washington higher taxes are always the solution; only the problems change.
Read the whole article - well worth it!
The Patent and Trademark Office (PTO) has a budget a bit under $2 billion. Chickenfeed.
There are almost 1/2 million patents filed every year now. I know my company's have averaged around $20,000 in legal fees and probably another $5,000 in internal engineering costs to file. I've also seen the $20,000 number batted about as a typical cost for filing and processing a patent in the United States. That'd work out to about $10 billion a year. Still chump change relative to the size of our economy.
People with patents are forever suing those they think are infringing their patents (that is, of course, the whole point of getting a patent). I've been unable to find any statistics on the annual aggregate cost of patent litigation, but I'm guessing it's somewhere in the tens of billions of dollars. Still less than 1% of GDP.
Monopoly rents is trickier. The actual increase in the cost of a product because of patent protection doesn't actually cost the economy anything as a whole. It only tends to shift wealth and income to businessmen, inventors and lawyers from others, but is otherwise cost neutral as far as direct effects are concerned.
Where the monopoly is devastating is in suppressing the innovation that comes from competition. Microsoft is a good example of this, even though they are admirably restrained when it comes to wielding patents as a weapon. There software is kinda crappy specifically because they have very limited competition in the desktop market. If Apple hadn't fallen apart and had gone head-to-head with Microsoft for longer, Microsoft's software would have been far better and we all would've benefited, in my opinion.
So what's the cost of this innovation suppression? Nobody knows. I think it's huge because one relatively small group effectively shuts down innovation in the entire rest of the population for each product area protected by patents. In the area of Open Source Software we see the benefit of thousands of pairs of eyes looking at problems, fixing them, and innovating further. Monopolies preclude that sort of interaction.
Lastly, the biggest cost, in my opinion, is the mine field created by patents. There's all kinds of areas in robotics that my company won't touch because there are patents that make it too difficult. Worse still, nobody else, including the patent holders, are bothering to pursue these areas. As a result, there are many technologies that lie dormant for decades while time slowly defuses the patent minefields.
Since humans are naturally creative, there's no doubt in my mind that patents stifle creativity overall. Whether or not patents enable capital aggregation to implement the creativity that's left will be the topic of another post.
Steve Waite at his Creative Destruction blog gives us this:
Here's an exchange between Mike Holland and Herb Greenberg from economist Larry Kudlow's TV show that discusses the unintended consequences of government regulation - in this case, the Sarbanes-Oxley Act...Given some luck, the overreaction will be modified. Donny Baseball is hopeful.
Mike Holland: I'd like to put a fact in here. Before Sarbanes-Oxley, 50 percent of all IPOs around the world listed in the United States. Would anyone, including Herb, like to guess how many since Sarbanes-Oxley have listed in the U.S.?
Herb Greenberg: Give me the number.
Mike Holland: It's 8 percent. And the last 25 largest IPOs, they all listed abroad. I was in Europe a couple weeks ago--they're talking about erecting statues to Sarbanes and Oxley in London's financial center.
I am agog. One of the the most unreconstructed liberal members of the Great Sausage Factory's Upper Chamber, my very own Senator, Chuck Schumer write this today in the WSJ:You'd think they might have discussed these matters before writing and passing the legislation!With the benefit of hindsight, the Sarbanes-Oxley Act of 2002, which imposed a new regulatory framework on all public companies doing business in the U.S., also needs to be re-examined. Since its passage, auditing expenses for companies doing business in the U.S. have grown far beyond anything Congress had anticipated. Of course, we must not in any way diminish our ability to detect corporate fraud and protect investors. But there appears to be a worrisome trend of corporate leaders focusing inordinate time on compliance minutiae rather than innovative strategies for growth, for fear of facing personal financial penalties from overzealous regulators.It gives you a sense of what a disastrous misfire Sarbanes-Oxley was that Chuck Schumer would even put his name to this let alone do so before his colleague Paul Sarbanes has even left the building.
Thursday, December 14, 2006
Let's start with our hypothetical static economy (HSE) as described in "Selfish Savings":
This hypothetical economy is completely stable with no loans or debt, constant population, constant demographics, constant (and moderately low) unemployment rate, constant GDP output consisting of the same products, etc.One specific aspect that needs to be clear is that the net savings in the HSE is zero. For each dollar that goes into savings there is a corresponding dollar that comes out of savings.
But, as I described in "Money's Inherent Value", since fiat currency issued by an authority that collects taxes has inherent value just like gold, let's use the currency instead of gold. In addition, since it's usually important for the control of the money supply for the government to have some debt, let's say the government has some small amount of debt, say 10% of GDP. The fiat currency in turn enables borrowing as described in "Paying off the National Debt". Also, assume that there is intergenerational borrowing as described in "Barn-Raising Borrowing". Let's denote the HSE with all these modifications as HSEb. We'll keep coming back to HSEb in future posts.
Now let's consider the story of Bob the bonbon maker in our hypothetical static economy. Bob has just thought of an ingenious way to double his production of bonbons. Unfortunately, to do so, Bob will have to build some bonbon making machines and it will take someone a year to do so.
There are many ways that this endeavor can be financed, all of which will slightly alter the hypothetical stable economy (innovations tend do that). But let's start with the simplest. Bob borrows bucks directly from the central bank and pays someone (call him Sam) who was unemployed to build the machines. In the real world, private entities don't usually borrow directly from the central bank, but a similar thing happens via the central bank's agents. Those agents are private banks within the banking system. But let's not get into those details right now.
Sam takes a year to build the bonbon making machines and after a year goes back to the trajectory he would've been on in HSEb. Assume for now that Sam didn't alter his consumption at all relative to his original trajectory in HSEb, either while employed building bonbon machines or afterward.
So let's take a look at the balance of savings at the end of that year. In the private sector, the net savings is still zero. Bob has borrowed, but Sam has saved an equal amount relative to what he would've since he hasn't changed his consumption. Nobody else has changed their consumption (or production) during that year either. Nobody had to save any more money. Yet the economy now has bonbon making machines. Investment and wealth has been created out of thin air. It's Magic!
Again, as shown by this example, savings is not necessary for investment. Admittedly, there are a few minor caveats. It is true that the central bank does now have a positive entry on the balance sheet (what Bob owes them). But the central bank has literally an infinite positive entry (since there is no limit to the amount of money that they can create) so this entry really changes nothing. When Bob pays back the loan, the payoff just goes back into the infinite pool.
It's also true that the unemployed can be thought of figuratively as "savings" as in we're saving them for later. So in this case, by employing Joe, we're using a previously "saved" resource. The concept here is that anytime we do something that increases employment, we pretty much get something for nothing, even if we have to "borrow" to do so. For example, when unemployment is high, the government should generally borrow more and tax less because that generally increases the demand for labor and ends up employing people who would otherwise been unproductive. In this case, the borrowing is very inexpensive per unit of created well being and productivity. Next time you're unemployed (if ever), you can consider yourself a saved resource. Rest up!
So what if there was nobody who was unemployed available to build the bonbon machines? We'll look at that in the next post in this series.
Monday, December 11, 2006
I want to pause here and talk about this notion of consensus, and the rise of what has been called consensus science. I regard consensus science as an extremely pernicious development that ought to be stopped cold in its tracks. Historically, the claim of consensus has been the first refuge of scoundrels; it is a way to avoid debate by claiming that the matter is already settled. Whenever you hear the consensus of scientists agrees on something or other, reach for your wallet, because you're being had.
Let's be clear: the work of science has nothing whatever to do with consensus. Consensus is the business of politics. Science, on the contrary, requires only one investigator who happens to be right, which means that he or she has results that are verifiable by reference to the real world. In science consensus is irrelevant. What is relevant is reproducible results. The greatest scientists in history are great precisely because they broke with the consensus.
There is no such thing as consensus science. If it's consensus, it isn't science. If it's science, it isn't consensus. Period.
In addition, let me remind you that the track record of the consensus is nothing to be proud of.
We would all do well to remember this!
"... drug companies have done a lot more to make my life better than their critics have. Maybe someone should point that out more often."I find it interesting that a guy who wrote "An Army of Davids", a book that celebrates that ability of small entities to efficiently utilize and further technology and commerce, is so enamored with an intensely centralized Goliath like the drug industry.
Tiger Hawk then jumped on the bandwagon with:
The pharmaceutical companies deliver extraordinary value to their customers, yet there is apparently great political advantage in bashing them. It is not obvious why this is so.One obvious answer comes from the "any profits are evil" crowd. Perhaps that even explains most of the big Pharma bashing. But let's ignore this explanation for now since I don't agree with them because I'm all for profits in open and competitive markets.
My perspective is different: I'm very suspicious of any industry whose profits are the result of monopoly rents. And I think that despising monopolies is very much part of the American psyche.
Firmly believing that "pharmaceutical companies deliver extraordinary value" requires an inability or refusal to think outside the box. The four sides of this "box" are the series of monopoly rents imposed by the Patent Office, the AMA, the FDA, and big Pharma. Within this box, I would agree that pharmaceutical companies deliver value. However, I think the box is extremely expensive, both in terms of money and health, and once that's taken into account, I'm not convinced that there's any positive value at all delivered outside the box. If there is value delivered outside the box, I doubt it's extraordinary - it's at best marginal.
There are, of course, gazillions of arguments about why each of those four sides of the box are necessary and I can't possibly begin to address them in a single blog post. Each one of those arguments, however, is only valid within the box. If the box didn't exist, if drugs were developed and deployed using another paradigm, the arguments wouldn't be valid. In fact, they'd be nonsensical.
With this instigation, I'm going to start an Intellectual Property thread of posts where I will propose alternate paradigms for drug development and pick apart the arguments that support the current paradigm. Stay tuned.
Friday, December 08, 2006
As the late Milton Friedman explains:
FRIEDMAN: Because the story they tell is a very simple story, easy to sell. If there's something bad, it must be an evil person who's done it. If you want something done, you've got to do it. You've got to have government step in and do it. The story Hayek and I want to tell is a much more sophisticated and complicated story, that somehow or other there exists this subtle system in which, without any individual trying to control it, there is a system under which people in seeking to promote their own interests will also promote the well-being of the country -- Adam Smith's invisible hand.The desire to right every perceived wrong in the world is very strong in some people. The law of unintended consequences ends up being like a banana peel when real world tradeoffs are ignored in attempts to remake the social and economic order. Another point made by Milton Friedman is that good things that arise from a free society are simply taken for granted. This is human nature and it is especially easy to do while harboring an ill-conceived notion of how things work.
Now, that's a very sophisticated story. It's hard to understand how you can get a complex interrelated system without anybody controlling it. Moreover, the benefits from government tend to be concentrated; the costs tend to be disbursed. To each farmer, the subsidy he gets from the government means a great deal. To each of a much larger number of consumers, it costs very little. Consequently, those who feed at the trough of government tend to be politically much more powerful than those who provide it with the wherewithal.
The most basic ideas of economics such as supply and demand may be simple enough, but even this construct is rejected by some people in practical application. The coordination and discovery aspect of prices and a market order are somehow too mysterious for many to grasp.
The collectivists arguements are based upon false claims and logical errors but for many people the emotional appeal of such ideas is overwhelming. Yet again Dr. Sanity nails it with this post. Be sure to see the other links within...
Not until Adam Smith was it recognized that wealth can grow without limits, but obviously even now people have a hard time wrapping their minds around this idea.One of the difficult tasks for defenders of freedom, also described as the extended order of human cooperation, is to develop explanations of key ideas that are understandable to most people. Hopefully the explanations are good enough to overcome both misconceptions and misguided emotionalism.
Progressives, he argues, operate under an economic model that is more genetic as opposed to cognitive. They are still functioning with the herd mentality and have yet to embrace modern civilization or individualism, preferring instead to function on an instinctual, rather than a rational level. This is why they find capitalism and market economics so repugnant.
The economic primitivism that is unceasingly promoted by the political left is a remnant of the cave-dwelling days of mankind; an idyllic era of history to which the left desperately yearns to return. The word "Progressive" is thus a simple rhetorical manipulation to diguise the essential backwardness of the left's economc thinking.
Wednesday, December 06, 2006
Having the community raise your barn is essentially accepting debt. You pay your debt to the community back over the course of your lifetime by helping to build other people's barns.
A barn raising is a one or two-day event during which a community comes together to assemble a barn for one of its households. [...]
Generally, participation is mandatory for community members. These participants are not paid. All able-bodied members of the community are expected to attend. Failure to attend a barn raising without the best of reasons leads to censure within the community.
In "Selfish Savings" I noted that the primary purpose of savings is to give us the "option of consuming in the future instead of today" enabling us to withstand bouts of unemployment and take care of ourselves in retirement. The barn-raising concept enriches this temporal nature of savings. Instead of the typical savings cycle over the lifetime of an individual being "save when you're young, then spend when you retire", it's "spend, then save, then spend". In other words, young adults borrow in order to have places to live, in order to set up households, and in order to have transportation to their jobs. Perhaps they also borrow to pay for an education so they can get a job. Then they occupy their productive years paying off debt and then saving for retirement. Finally, they spend down their savings during retirement. Instead of being the recipient of a barn and then being compelled to attend barn raisings forever, modern young adults simply borrow money and (usually) buy an existing house (or barn). Then they pay back the debt at a pace that works for them (and the lender).
This cycle of borrowing, spending and saving over the course of a person's lifetime would occur in the hypothetical economy outlined in "Selfish Savings" where everything is perfectly stable (GDP, population, production, etc.) and does occur in a real, dynamic economy such as the economy of the United States. So far, in the hypothetical examples I've described, the amount of money going into savings is exactly matched by the amount of money coming out of savings and individual entities (and families) receive virtually all of the benefits of savings (and borrowing).
In my next post on savings, we'll start with the hypothetical static economy and see what it takes to get a little growth to happen and how savings relates to that.
Tuesday, December 05, 2006
When we buy and sell things from each other here in the United States, we almost always use dollars. But we don't have to. We can trade goods directly for other goods (barter), we can use other currencies such as the Euro, and private entities can even make up their own currencies for trading with each other. There is no law in the United States that says that two private entities must use dollars when buying and selling.
But even if we all decided to barter or use other currencies, even if we all stopped using the dollar on a day-to-day basis, the dollar would still have inherent value. That's because we must pay our taxes with dollars. Thus, dollars are rather like a get out of jail free card (except for the "free" part), since if you don't pay your taxes (in dollars), those nice men associated with IRS will come and haul you off to jail. You must acquire enough dollars to pay the taxes you owe to the government. That makes dollars inherently valuable.
This is why every national government in the world, no matter how rinky dink, no matter how unstable, can have its own fiat currency. This is why its citizens, who must pay taxes to that government in that government's currency, use that currency. This is why currencies need not be gold backed and citizens of a country need not have a lot of confidence in the currency, yet the currency has value and finds widespread use within that country, whether or not there are laws requiring the use of that currency. People need the currency to pay their taxes.
Warren Mosler wrote in "Soft Currency Economics" (hat tip: Skeptical Optimist):
A government using fiat money has pricing power that it may not understand. Once the government levies a tax, the private sector needs the government's money so it can pay the tax. The conventional understanding that the government must tax so it can get money to spend does not apply to a fiat currency. Because the private sector needs the government's money to meet its tax obligations, the government can literally name its price for the money it spends. [...]
The concept of fiat money can be illuminated by a simple model: Assume a world of a parent and several children. One day the parent announces that the children may earn business cards by completing various household chores. At this point the children won't care a bit about accumulating their parent's business cards because the cards are virtually worthless. But when the parent also announces that any child who wants to eat and live in the house must pay the parent, say, 200 business cards each month, the cards are instantly given value and chores begin to get done. Value has been given to the business cards by requiring them to be used to fulfill a tax obligation. Taxes function to create the demand for federal expenditures of fiat money, not to raise revenue per se. In fact, a tax will create a demand for at LEAST that amount of federal spending. A balanced budget is, from inception, the MINIMUM that can be spent, without a continuous deflation.Again, it's taxes that form the basis of the value of a currency. To be sure, there are many other factors such as the size of the money supply, total GDP, etc., but taxation is the fundamental driver of a currency's inherent value.
With this understanding, we can now turn our attention back to the meaning of savings and investment in the next posts in this series.
Monday, December 04, 2006
Since we've specified that there is no debt, that means that each entity (personal, business, or government) saves and/or spends gold coins as they choose. Since there aren't any loans, that means that nobody makes a return on savings.
Yet people will still save quite a bit. Young people will save for retirement and/or bouts of unemployment. Retired people will draw down there savings. Business will save in order to replace capital equipment that wears out. In this perfectly stable system, each additional coin saved by someone who's young or a business saving against depreciation is exactly matched by someone who's old or temporarily unemployed who's drawing down their savings or a business purchasing capital equipment. In this hypothetical economy it has to be true. Where else would the gold coins come from?
This is the primary purpose of savings. It benefits us as individuals and businesses. It gives us the option of consuming in the future instead of today. In some sense, saving more than you need for the future is miserly, as it prevents others from saving what they need and takes away opportunity for employment from others.
One thing that's moderately interesting is that you can't necessarily substitute paper money for gold. Since it's a hypothetical system, I suppose we can do anything we want, but there might be an inherent difference. Humans seem to have an affinity for gold (giving gold inherent value) even though gold isn't all that important a material for production. Humans may or may not have an affinity to pieces of paper with numbers on them. In this closed system those pieces of paper wouldn't have any inherent value (assuming no affinity). However, in the economy of the United States, dollars do have an inherent value which I'll explain in the next post.
Tuesday, November 28, 2006
I've always marveled at how long the antique internal-combustion engine has survived. By 2006 standards, my car's power plant is a noisy, heat-blasting, poison-spewing monster with way too many moving parts. One spin in a Tesla made me realize that the gas engine might finally be on its last legs—and not because electric cars will help wean us from Saudi oil and save us from global warming. Rather, the Tesla Roadster is a rolling demo that proves electric cars now outperform their gas-guzzling counterparts in comfort, convenience, and, best of all, speed.Check out the tesla website. Here are some pertinent technical points:
Eberhard says traditional carmakers have failed with electrics for two reasons. First, they market them as "penalty boxes" for environmental do-gooders and gas-mileage-obsessed penny-pinchers. Second, they just don't understand batteries. The Tesla's giant lithium-ion battery pack gives it the power to hit 60 in four seconds, to run 250 miles without a recharge, and to charge rapidly at its home charging base (a one-hour charge will take you 80 miles; it takes a 3.5-hour charge to go 250 miles). You can even plug into a wall socket at a roadside stop in a pinch. That makes the Roadster a viable commuter car and weekend day-tripper. The company claims energy costs as low as a penny per mile.
When you build a car that’s electric, you start with one built-in advantage: Electric cars just don’t have to be as complex mechanically as the car you’re probably driving now. Sophisticated electronics and software take the place of the pounds and pounds of machinery required to introduce a spark and ignite the fuel that powers an internal combustion engine.Way, way cool!!!
Most of the subsystems in the Tesla Roadster are completely electronic and under direct software control. But unlike all other cars, these systems are not a hodge-podge of independent systems — instead, they are designed as an integrated system, the way complex network and computer systems are designed today.
Acceleration 0 to 60 in about 4 seconds Top Speed Over 130 mph Range 250 miles EPA highway Battery Life Useful battery life in excess of 100,000 miles
Monday, November 27, 2006
Statistics seem like straightforward, unambiguous facts; they're not. Care is required not only in their gathering but also in your interpretation of them.Data may be as advertised by the label but no longer have the same meaning or relevance. They may have been a useful crude approximation but are now wildly misleading because of the methodology or accounting construct employed. As Don points out, care is required.
We get an additional caution to exercise care via this post about Alan Reynolds new book which I am looking forward to reading.
Conventional wisdom tells us that: (1) the vast majority of US households have experienced no increase in real income for more than a quarter century; (2) real wages have been stagnant for that same period; (3) low-wage burger-flippers have replaced high-paid factory jobs; (4) only the top one percent or ten percent have benefited significantly from rising productivity or asset prices; and (5) the once-robust middle class has been shrinking.
Just about everybody treats those assertions as if they are facts. That includes politicians on both sides, talking-head partisans, economics correspondents, and columnists—many with undisguised or thinly-veiled political agendas. They are supposed to be the experts, and the masses (like me) have to trust them; after all, our busy lives permit us only a limited amount of time for paying attention to politicians and the press. When the experts are nearly unanimous, that’s a good signal that the five conventional wisdom assertions have to be true . . . isn’t it?
That brings us to the big surprise, which Alan Reynolds sums up clearly and concisely: “Not one of those statements is even remotely close to being true.”
Why, then, do so many people seem to accept the false conventional wisdom without question? I have a guess: Each of us likes to think the person we heard it from must have done their homework; otherwise they wouldn’t be talking like that. Let’s face it, assumptions like that save us a lot of work. In this case, however, I now realize that, by trusting conventional wisdom, I was being too lazy—and I strongly suspect that most of our country’s so-called “economics correspondents” are guilty of the same thing I was.
I am thankful that Alan Reynolds is one who actually did the homework on this subject, then wrote a book laying out his findings. His attitude is one we should all adopt: “I accept nothing as an article of faith. I want to hear the logic and see the evidence. And you should demand nothing less. In the absence of logic and evidence, you should not give a hoot about my opinion. Reality is not a matter of opinion.”
In a recent on-air discussion with guests Art Laffer and Jared Bernstein, Mr. Bernstein of EPI asserted that by any and all measures the average person was worse off during the recent past and that it wasn't open for discussion. Don't you love such intellectually open approaches to analysis? Why do I doubt that he read Alan Reynolds book or the work of Cox and Alm?
Cox and Alm sound a timely warning: What we don't know about the economy could hurt us. Many of the suggested remedies to problems that don't exist may leave us worse off. Myths of Rich and Poor, therefore, gives us the facts that could help ward off further government interference in the economy. It may even help us turn the clock back to a better day, when Americans were truly free.
By pretending to know what just ain't so we risk doing more harm than good. Exercise great care!
Friday, November 24, 2006
Globalization, in conjunction with its essential prerequisite of respect for private property rights, and thus the existence of substantial economic freedom in the various individual countries, has the potential to raise the productivity of labor and living standards all across the world to the level of the most advanced countries. In addition, it has the potential to bring about the radical improvement in productivity and living standards in what are today the most advanced countries, and to provide the strongest possible foundation for unprecedented further economic advance everywhere.Change is certainly disruptive but the benefits are enormous. Reisman does a good job of addressing many though not all concerns.
This article shows that by incorporating billions of additional people into the global division of labor, and correspondingly increasing the scale on which all branches of production and economic activity are carried on, globalization makes possible the unprecedented achievement of economies of scale—the maximum consistent with the size of the world's population. First and foremost among these will be the very substantial increase in the number of highly intelligent, highly motivated individuals working in all of the branches of science, technology, and business. This will greatly accelerate the rate of scientific and technological progress and business innovation. The achievement of all other economies of scale will also serve to increase what it is possible to produce with any given quantity of capital goods and labor.
Thursday, November 23, 2006
On August 1, 1620, the Mayflower set sail. It carried a total of 102 passengers, including forty Pilgrims led by William Bradford. On the journey, Bradford set up an agreement, a contract, that established just and equal laws for all members of the new community, irrespective of their religious beliefs. Where did the revolutionary ideas expressed in the Mayflower Compact come from? From the Bible. The Pilgrims were a people completely steeped in the lessons of the Old and New Testaments. They looked to the ancient Israelites for their example. And, because of the biblical precedents set forth in Scripture, they never doubted that their experiment would work.
"But this was no pleasure cruise, friends. The journey to the New World was a long and arduous one. And when the Pilgrims landed in New England in November, they found, according to Bradford's detailed journal, a cold, barren, desolate wilderness," destined to become the home of the Kennedy family. "There were no friends to greet them, he wrote. There were no houses to shelter them. There were no inns where they could refresh themselves. And the sacrifice they had made for freedom was just beginning. During the first winter, half the Pilgrims – including Bradford's own wife – died of either starvation, sickness or exposure.
"When spring finally came, Indians taught the settlers how to plant corn, fish for cod and skin beavers for coats." Yes, it was Indians that taught the white man how to skin beasts. "Life improved for the Pilgrims, but they did not yet prosper! This is important to understand because this is where modern American history lessons often end. "Thanksgiving is actually explained in some textbooks as a holiday for which the Pilgrims gave thanks to the Indians for saving their lives, rather than as a devout expression of gratitude grounded in the tradition of both the Old and New Testaments. Here is the part [of Thanksgiving] that has been omitted: The original contract the Pilgrims had entered into with their merchant-sponsors in London called for everything they produced to go into a common store, and each member of the community was entitled to one common share. "All of the land they cleared and the houses they built belong to the community as well. They were going to distribute it equally.
All of the land they cleared and the houses they built belonged to the community as well. Nobody owned anything. They just had a share in it. It was a commune, folks. It was the forerunner to the communes we saw in the '60s and '70s out in California – and it was complete with organic vegetables, by the way. Bradford, who had become the new governor of the colony, recognized that this form of collectivism was as costly and destructive to the Pilgrims as that first harsh winter, which had taken so many lives. He decided to take bold action. Bradford assigned a plot of land to each family to work and manage, thus turning loose the power of the marketplace.
"That's right. Long before Karl Marx was even born, the Pilgrims had discovered and experimented with what could only be described as socialism. And what happened? It didn't work! Surprise, surprise, huh? What Bradford and his community found was that the most creative and industrious people had no incentive to work any harder than anyone else, unless they could utilize the power of personal motivation! But while most of the rest of the world has been experimenting with socialism for well over a hundred years – trying to refine it, perfect it, and re-invent it – the Pilgrims decided early on to scrap it permanently. What Bradford wrote about this social experiment should be in every schoolchild's history lesson. If it were, we might prevent much needless suffering in the future.
"'The experience that we had in this common course and condition, tried sundry years...that by taking away property, and bringing community into a common wealth, would make them happy and flourishing – as if they were wiser than God,' Bradford wrote. 'For this community [so far as it was] was found to breed much confusion and discontent, and retard much employment that would have been to their benefit and comfort. For young men that were most able and fit for labor and service did repine that they should spend their time and strength to work for other men's wives and children without any recompense...that was thought injustice.' Why should you work for other people when you can't work for yourself? What's the point?
"Do you hear what he was saying, ladies and gentlemen? The Pilgrims found that people could not be expected to do their best work without incentive. So what did Bradford's community try next? They unharnessed the power of good old free enterprise by invoking the undergirding capitalistic principle of private property. Every family was assigned its own plot of land to work and permitted to market its own crops and products. And what was the result? 'This had very good success,' wrote Bradford, 'for it made all hands industrious, so as much more corn was planted than otherwise would have been.' Bradford doesn't sound like much of a..." I wrote "Clintonite" then. He doesn't sound much like a liberal Democrat, "does he? Is it possible that supply-side economics could have existed before the 1980s? Yes.
"Read the story of Joseph and Pharaoh in Genesis 41. Following Joseph's suggestion (Gen 41:34), Pharaoh reduced the tax on Egyptians to 20% during the 'seven years of plenty' and the 'Earth brought forth in heaps.' (Gen. 41:47) In no time, the Pilgrims found they had more food than they could eat themselves.... So they set up trading posts and exchanged goods with the Indians. The profits allowed them to pay off their debts to the merchants in London. And the success and prosperity of the Plymouth settlement attracted more Europeans and began what came to be known as the 'Great Puritan Migration.'" Now, other than on this program every year, have you heard this story before? Is this lesson being taught to your kids today -- and if it isn't, why not?
Can you think of a more important lesson one could derive from the pilgrim experience? So in essence there was, thanks to the Indians, because they taught us how to skin beavers and how to plant corn when we arrived, but the real Thanksgiving was thanking the Lord for guidance and plenty -- and once they reformed their system and got rid of the communal bottle and started what was essentially free market capitalism, they produced more than they could possibly consume, and they invited the Indians to dinner, and voila, we got Thanksgiving, and that's what it was: inviting the Indians to dinner and giving thanks for all the plenty is the true story of Thanksgiving. The last two-thirds of this story simply are not told.
Now, I was just talking about the plenty of this country and how I'm awed by it. You can go to places where there are famines, and we usually get the story, "Well, look it, there are deserts, well, look it, Africa, I mean there's no water and nothing but sand and so forth." It's not the answer, folks. Those people don't have a prayer because they have no incentive. They live under tyrannical dictatorships and governments. The problem with the world is not too few resources. The problem with the world is an insufficient distribution of capitalism.
Happy Turkeyday to the socialists of all parties and to everbody else.
Update: other sources for this story are here and here.
Thursday, November 16, 2006
A major source of objection to a free economy is precisely that it ... gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself.
Wednesday, November 15, 2006
This article is a wakeup call to the West from someone who should know. The man holding forth wants us to get serious.
Dr. Tawfik Hamid doesn't tell people where he lives. Not the street, not the city, not even the country. It's safer that way.
This medical doctor, author and activist once was a member of Egypt's Al-Gama'a al-Islamiyya (Arabic for "the Islamic Group"), a banned terrorist organization. He was trained under Ayman al-Zawahiri, the bearded jihadi who appears in Bin Laden's videos, telling the world that Islamic violence will stop only once we all become Muslims.
He's a disarmingly gentle and courteous man. But he's determined to tell a complacent North America what he knows about fundamentalist Muslim imperialism.
"Yes, 'imperialism,' " he tells me. "The deliberate and determined expansion of militant Islam and its attempt to triumph not only in the Islamic world but in Europe and North America. Pure ideology. Muslim terrorists kill and slaughter not because of what they experience but because of what they believe."
"The first thing you have to understand is that it has nothing, absolutely nothing, to do with poverty or lack of education," he says. "I was from a middle-class family and my parents were not religious. Hardly anyone in the movement at university came from a background that was different from mine.
"I've heard this poverty nonsense time and time again from Western apologists for Islam, most of them not Muslim by the way. There are millions of passive supporters of terror who may be poor and needy but most of those who do the killing are wealthy, privileged, educated and free. If it were about poverty, ask yourself why it is middle-class Muslims -- and never poor Christians -- who become suicide bombers in Palestine."
"We're not talking about a fringe cult here," he tells me. "Salafist [fundamentalist] Islam is the dominant version of the religion and is taught in almost every Islamic university in the world. It is puritanical, extreme and does, yes, mean that women can be beaten, apostates killed and Jews called pigs and monkeys."
I can tell you what it is not about. Not about Israel, not about Iraq, not about Afghanistan. They are mere excuses. Algerian Muslim fundamentalists murdered 150,000 other Algerian Muslims, sometimes slitting the throats of children in front of their parents. Are you seriously telling me that this was because of Israel's treatment of the Palestinians or American foreign policy?"
He's exasperated now, visibly angry at what he sees as a willful Western foolishness. "Stop asking what you have done wrong. Stop it! They're slaughtering you like sheep and you still look within. You criticize your history, your institutions, your churches. Why can't you realize that it has nothing to do with what you have done but with what they want."
The PostModernist delusion and baby boomer self absorbtion make this difficult to accept. Then again, it may be even more in our face sooner than we think.
With Iraqi society decomposing - or, at best, reverting to a medieval state with cell phones - the debate in Washington over whether to try to save the day by deploying more troops or withdrawing some is of secondary relevance.
What really matters is what our forces are ordered - and permitted - to do. With political correctness permeating our government and even the upper echelons of the military, we never tried the one technique that has a solid track record of defeating insurgents if applied consistently: the rigorous imposition of public order.
That means killing the bad guys. Not winning their hearts and minds, placating them or bringing them into the government. Killing them.
If you're not willing to lay down a rule that any Iraqi or foreign terrorist masquerading as a security official or military member will be shot, you can't win. And that's just one example of the type of sternness this sort of fight requires.
To master Iraq now - if it could be done - we'd have to fight every faction except the Kurds. Are we willing to do that? Are we willing to kill mass murderers and cold-blooded executioners on the spot?
If not, we can't win, no matter what else we do.
Arrest them? We've tried that. Iraq's judges are so partisan or so terrified (or both) that they release the worst thugs within weeks - sometimes within days.
How would you like to be one of Iraq's handful of relatively honest cops knowing that any terrorist or sectarian butcher you bust is going to be back on the block before your next payday? And yeah, they know where you live.
Our "humanity" is cowardice masquerading as morality. We're protecting self-appointed religious executioners with our emphasis on a "universal code of behavior" that only exists in our fantasies. By letting the thugs run the streets, we've abandoned the millions of Iraqis who really would prefer peaceful lives and a modicum of progress.
We're blind to the fundamental moral travesty in Iraq (and elsewhere): Spare the killers in the name of human rights, and you deprive the overwhelming majority of the population of their human rights. Instead of being proud of ourselves for our "moral superiority," we should be ashamed to the depths of our souls.
We're not really the enemy of the terrorists, militiamen and insurgents. We're their enablers. In the end, the future of Iraq will be determined by its people. The question is, which people?
Our naive version of wartime morality handed Iraq to the murderers. Will our excuse for a sectarian bloodbath be that we "behaved with restraint?"
Any code of ethics that squanders the lives of tens of thousands and the future of millions so we can "claim the moral high ground" is hypocrisy worthy of the Europeans who made excuses for the Holocaust.
If we want to give Iraq's silent - and terrified - majority a last chance, we would have to accept the world's condemnation for killing the killers. If we are unwilling to do that, Iraq's finished.
Doing the right thing is not about feeling good or seeking praise from others!
Doing the right thing is not about feeling good or seeking praise from others!
My two cents' worth--and I think it is the two cents' worth of everybody who worked for the Clinton Administration health care reform effort of 1993-1994--is that Hillary Rodham Clinton needs to be kept very far away from the White House for the rest of her life. Heading up health-care reform was the only major administrative job she has ever tried to do. And she was a complete flop at it. She had neither the grasp of policy substance, the managerial skills, nor the political smarts to do the job she was then given. And she wasn't smart enough to realize that she was in over her head and had to get out of the Health Care Czar role quickly.
So when senior members of the economic team said that key senators like Daniel Patrick Moynihan would have this-and-that objection, she told them they were disloyal. When junior members of the economic team told her that the Congressional Budget Office would say such-and-such, she told them (wrongly) that her conversations with CBO head Robert Reischauer had already fixed that. When long-time senior hill staffers told her that she was making a dreadful mistake by fighting with rather than reaching out to John Breaux and Jim Cooper, she told them that they did not understand the wave of popular political support the bill would generate. And when substantive objections were raised to the plan by analysts calculating the moral hazard and adverse selection pressures it would put on the nation's health-care system...
Hillary Rodham Clinton has already flopped as a senior administrative official in the executive branch--the equivalent of an Undersecretary. Perhaps she will make a good senator. But there is no reason to think that she would be anything but an abysmal president.
I think this says quite alot!!
Tuesday, November 14, 2006
"(Hillary) also said Democrats would focus on improving the quality and affordability of health care _ a touchy matter for the former first lady, who in 1993 led her husband's calamitous attempt to overhaul the nation's health care system. The failure of that effort helped Republicans win control of both the Senate and House the following year.
"Health care is coming back," Clinton warned, adding, "It may be a bad dream for some."
Whereas incremental steps in this direction might help.
...a recent New York Times letter-writer asserted, "a human right and a universal entitlement."
Sounds noble. But not everything that is highly desirable is a right. Most rights simply oblige us to respect one another's freedoms; they do not oblige us to pay for others to exercise these freedoms. Respecting rights such as freedom of speech and of worship does not impose huge demands upon taxpayers.
Healthcare, although highly desirable, differs fundamentally from these rights. Because providing healthcare takes scarce resources, offering it free at the point of delivery would raise its cost and reduce its availability.
Medicare, Medicaid, and tax-deductibility of employer-provided health insurance created a system in which patients at the point of delivery now pay only a small fraction of their medical bills out of pocket.
This situation leads to monstrously inefficient consumption of healthcare. Some people consume too much, while many others with more pressing needs do without.
Because the wasteful consumption caused by heavily subsidized access drives up healthcare costs, taxpayers must pay more and more to fund Medicare and Medicaid, while private insurers must continually raise premiums. The sad and perverse result is that increasing numbers of people go without health insurance.
The solution is less, not more, government involvement in healthcare. Market forces have consistently lowered the cost and improved the quality and accessibility of food - which is at least as important to human survival as is healthcare. There's no reason markets can't do the same for healthcare.
It's ironic but true: Only by abandoning attempts to provide healthcare as a "right" that's paid for largely by others will we enjoy surer access to it.
If we can avoid the pitfalls of even more socialized medicine, we can reach here.