Posted by: erichosemann | October 18, 2010

The Mother Of Order

Sheldon Richman eloquently describes the tendency of people to believe that “markets” are unregulated absent government action, and why that tendency is misguided.

The dry, economic response to that tendency is “All demand curves slope down.”  Meaning: as a good’s price increases, fewer people buy it.  Richman uses a $100 dollar apple as a version of this statement.  Sure, we are all free to try and sell apples for a hundred dollars apiece.  No one would buy them, because there are plenty of substitutes to apples and others willing to sell apples for much less.

People are not satisfied with “All demand curves slope down,” even though there is a lot of mystery packed inside the statement.  Pathways and routines emerge in a society of cooperative individuals, criss-crossing and branching out, much like ice crystals do in slowly freezing water.  That’s a pretty image, but it isn’t quite right; as water turns to ice, it approaches equilibrium, stasis.  Society is just finding its legs as its component members begin to cooperate.  Stasis for human society is a shimmering pattern of change.  As patterns and pathways of action emerge between people, the society of individuals begins to cohere into a larger productive unit.  We aren’t frozen, caught with our demand curves sloping down.  We adjust our behaviors as we interact with each other.  Theoretically speaking, we shift our demand curves, and our supply curves, constantly.  We are sentient beings interacting with the scarcity and inequality of the universe.  We are free sentient beings.

Posted by: erichosemann | October 18, 2010

Darkness At Noon & The Middle of The Journey

The following is part of a post I scrubbed back in October (of last year!):

I read Arthur Koestler’s Darkness At Noon a few weeks ago, right after finishing Lionel Trilling’s The Middle of the Journey.  I read of Trilling’s novel in Sam Tanenhaus’s Whittaker Chambers: A Biography, which I was compelled to read after consuming Chamber’s Witness.

Trilling and Chambers were classmates at Columbia University in the 1920’s.  From what I remember of Tanenhaus’s biography, Trilling wasn’t anything like a close confidant of Chambers–he may have detested him–but he was in accord with Chamber’s view of communism as a stultifying and degrading force on the individual.

Chambers was a communist and a spy in the pay of agents of the Soviet Union.  The horrific show trials of the 1930’s and the subsequent disappearances of his handlers and contacts within the American Communist Party drove him  into hiding, and eventually into a dramatic ideological reversal.  He became a Christian and strove to uncover the activities of some of his communist confederates, an act which culminated in the trial of Alger Hiss, a young Washington operative hand-picked by Chambers.

I’m glad I read these books one after the other.  They fit each other hand-in-glove in important ways.

The Middle of the Journey is a fictional account of a sort of denouement between Chambers and the Hiss family as seen by John Laskell, a progressive intellectual recovering from a nearly deadly attack of scarlet fever and the death of his lover.   Trilling’s stand-in for Chambers is Gifford Maxim, a former communist firebrand who indoctrinated Arthur and Nancy Croom, a young and successful couple still tied to the ideology Maxim has painfully shed.

The break between Maxim and the Crooms occurs because of that great cleaning of house in the USSR that consumed members of the revolutionary vanguard in Russia and the United States.   Here’s Maxim, close to the end of the book, in an argument with Arthur Croom:

“It’s not so different as you think. We all have a passion for faith in the unseen. It is really the only thing we have faith in. You, for example, have a profound faith in what our clerical friend, Mr. Gurney, calls the Research Magnificent, the Great Experiment. You believed me when I brought you good news of it. Now that I bring you bad news of it, you not only will not listen to me, but you fear me and call me names. I am sure that you will say that I have no proof. But I had no proof before. You believe as you want to believe.”

Darkness at Noon is what Arthur Croom wouldn’t listen to.  It’s another fictional account, this time of the imprisonment of revolutionary father, Rubashov.   What’s haunting about the book is the cold rationality Rubashov brings to his arrest and imprisonment.  He knows what he’s going to go through because he put others through it.  He isn’t even surprised about the turn of events that lead to his arrest for “counter-revolutionary activities.”  While in prison, he patiently works through the sequence of events and perverse internal logic of the revolution.  The lesson I took from this book was that revolutionary aims must inevitably bend to reality, and how much blood gushes and sinew gets torn depends on how rigid the revolutionary ideology.  An illustrative passage:

“‘Why did you execute Bogrov?”
‘Why? Because of the submarine question,’ said Ivanov. ‘It concerns the problem of tonnage–an old quarrel, the beginnings of which must be familiar to you.
‘Bogrov advocated the construction of submarines of large tonnage and long range of action. The Party is in favour of small submarines with a short range. You can build three times as many small submarines for your money as big ones. Both parties had valid technical arguments. The experts made a big display of technical sketches and algebraic formulae; but the actual probelm la y in a quite different sphere. Big submarines mean: a policy of aggression, to further world revolution. Small submarines mean: coastal defense–that is, self-defense and postponement of world revolution. The latter is the point of view of No. 1, and the party.
‘Bogrov had a strong following in the Admiralty and amongst the officers of the old guard. It would not have been enough to put him out of the way; he also had to be discredited. A trial was projected to unmask the partisans of big tonnage as saboteurs and traitors. We had already brought several little engineers to the point of being willing to confess publicly to whatever we liked. But Bogrov wouldn’t play the game. He declaimed up to the very end of big tonnage and world revolution. He was two decades behind the times. He would not understand that the times are against us, that Europe is passing through a period of reaction, that we are in the hollow of a wave and must wait until we are lifted by the next. In a public trial he would have created confusion amongst the people. There was no other way possible than to liquidate him adminstratively. Would not you have done the same thing in your position?”

Conflict between the vanguard and the second generation is the logical consequence of revolution stubbing its toe against reality. Questions that linger with me:  which were the real revolutionaries? The ones who started the revolution or the ones who want to maintain it? The ones that said, no pun intended: “Damn the torpedoes, let’s get this world revolution thing on,” or the ones that said “We have to wait; we have to preserve the fatherland if we want revolution to spread?” I suppose the answer doesn’t really matter, or is dependent upon which party is in power. The Rubashovs light the fire, the Bogrovs stoke it, the Ivanovs kill the Bogrovs and Rubashovs presumably to preserve the kindling supply.

Leave aside for a moment whether Gifford Maxim or Whittaker Chambers was right in coming to oppose communism, and think instead about what revolution tends to mean for its early principle exponents. To maintain revolution, the ideas of the revolution must be preserved. Therefore ideological rigidity is necessary. But ideological rigidity prohibits dissent. What’s the point in revolt if your revolution is allowed to morph into something else? There was formal ideological rigidity in the Soviet Union; the revolution was perpetual and applied to everything from submarine tonnage to allocations of bread and jogging shorts. But reality asserted itself; treaties were made with capitalist countries, trade embargoes were lifted so that a former net-exporter of grain could feed its starving people. Those who noticed these ideological inconsistencies were liquidated. Were they to expose the ad hoc nature of the perpetual revolution, they would have created “confusion amongst the people.”  And that wouldn’t be good.

I’m reminded of this quote from The Teaching Company’s Great Ideas of Philosophy lectures(Daniel Robinson‘s my man):

Once one confers on a select and denominated group ultimate epistemological authority on core questions arising from the problem of knowledge, the nearly inevitable result is philosophical paralysis.  What is more likely to happen is positions will become quite hardened, and the only thing left for scholarship is to interpret the words of the wise.

Posted by: erichosemann | February 21, 2010

Scarcity and Inequality, Healthcare Edition

In this video you will see Paul Krugman canvas his audience for pro-government healthcare Canadian expats, and fail.  You will also hear a Canadian doctor say the following: “Healthcare is not a market like other markets!  It’s not even close to being a market like other markets!”  This same doctor claimed that reduced costs are a side-benefit of constructing a system based on equity of coverage.  That is to say, if everyone gets the same level of access to health care, the cost to provide health care will decrease.  Wow.

I can’t tell you how many times I thought of Bastiat while watching this debate.  The side in favor of universal coverage kept reminding me of Bastiat’s numerous foes in the legislature, those well-entrenched apologists for state power who endlessly claimed that price supports and tariffs were the secret engines of economic growth and prosperity.  All that is needed, they claimed, was government protection or action of some kind to overcome scarcity and create abundance.

Posted by: erichosemann | February 21, 2010

Coase and Freedom of Speech

At about 23 minutes into the video below, Mike Munger eloquently makes the argument that the freedom of speech of groups lowers the transaction costs that prohibit individuals from exercising their due political influence:

Posted by: erichosemann | February 8, 2010

Julian Simon

I’m being totally honest when I say I had no idea that today was the twelfth anniversary of Julian Simon’s death.  Here’s the wikipedia page for him.

I mention my unawareness only because I  had the urge to get The Ultimate Resource 2 out and page through it just last Thursday.  I’ve never read it, but as I said before, Simon’s was a household name for me, and I’d discussed his ideas with Dad quite a bit as a kid.   The book sat on my shelf, essentially neglected since I got it from my father.

Little did I know that, hidden within my copy of The Ultimate Resource 2 was a draft of a brief introduction my Dad gave at a dinner given in tribute to Simon a few months after his death.  I liked it, and I’d like to share it here:

John K. Hosemann, Chief Economist and Director, Public Policy Division
American Farm Bureau

Julian Simon Tribute, Union League Club of Chicago, June 10, 1998

Thank you. I’m honored and humbled by my assignment today. Think of where we would be as a people dedicated to liberty and responsibility had Julian Simon not been born! He worried about the elitist notion of too many people! So much of what Julian Simon is all about is captured in the preface to his book, The Ultimate Resource 2 where he writes about himself and his values. I’d like to read a brief passage:

“One spring day about 1969, I visited the U.S. AID office on the outskirts of Washington D.C. to discuss a project intended to lower fertility in less-developed countries. I arrived early for my appointment, so I strolled outside in the warm sunshine. Below the building’s plaza I noticed a road sign that said ‘Iwo Jima Memorial.’ There came to me the memory of reading a eulogy delivered by a Jewish chaplain over the dead on the battlefield of Iwo Jima, saying something like, How many who would have been a Mozart or a Michelangelo or an Einstein have we buried here? And I thought: Have I gone crazy? What business do I have trying to help arrange it that fewer human beings will be born, each one of whom might be a Mozart or a Michelangelo or an Einstein–or simply a joy to his or her family and community, and a person will enjoy life?

I still believe that helping people fulfill their desires for the number of children they want is a wonderful human service. But to persuade them or coerce them to have fewer children than they would like to have–that is something entirely different.”

His point, without stating it so, was that population controllers represent the ultimate in central planner arrogance!

To think of additional human beings as assets, not liabilities, drove Julian Simon’s critics and adversaries up and over the intellectual wall. But he had the facts to make his case and they did not!

I’m one of those ordinary people (who Paul Ehrlich didn’t get to stamp) who has, like the rest of you, tried to take advantage of opportunities that came my way–because I was born free! My only hope and wish is to protect that freedom for my own children. Julian Simon has helped me and them with his work and his optimism. Dr. Simon was not a “farm” economist. Thank God for that! He, above all else, saw the big picture of what really makes the world progress–human intellectual capacity and ingenuity and freedom and respect for private property.

He understood and wrote extensively about all the things that farmers worry about–land, water, food, population, energy, natural resources, and technology.

He made real clear the role of free people to problem solving of any kind especially in the natural resource and environmental debate. He taught us all to think deeper, question deeper, and document deeper. His own intellectual curiosity, creativity, and hard work have given us lay people a substantial backstop against the arguments in favor of population control, more regulations and economic austerity. What a treat to be reading Simon’s work only to find a straight-forward graph on the next page that made everything so abundantly clear.

To me one of the most important points he made to those of us who will try to carry on his ideas was captured in this quote: “the intellectual practice of focusing on a very short period which runs against the long-term trend–but which fits one’s preconceptions–has been the most frequent cause of error in understanding the relationship of natural resources to population growth and human progress.”

Seeing as how our own political economy is stuck forever in the short run paradigm and worsening each day with policy by poll-taking, we have a huge challenge to shift the policy debate to the longer term trends on major policy issues.

I discovered Dr. Simon’s work in the early 1980s. We had one phone conversation about an issue I was struggling with. I wanted to know if I had understood what he was talking about. (I can’t even remember the issue…) But I remember his kindness and patience with me over the phone. What a gentleman!

Thank you Dr. Simon for giving us the durable analytical framework–economic liberty, respect for property, and fair and sensible rules of the market enforced equally for all–for defending against the pessimism, doomsayers, controllers, and short-runners. We are forever in your debt!

Thank You!

A fitting tribue.  God Bless You, Julian Simon.

For more on Simon, go to the Master Resource.

Posted by: erichosemann | February 6, 2010

Adam Smith, Poet

There’s no escaping him.  If you read economics, you’re going to run into him.  And he was a wordsmith.  He cared about what he wrote enough to ask, from his deathbed, that his unpublished work be burnt.

I’m supplementing my macro text with nibbles on a book called Monetary Policy in the United States: An Intellectual and Institutional History. A case in point of Smith’s talent on page 5:

Smith cautioned that commerce and business were less secure when “suspended upon the Daedalian wings of paper money, [than] when they travel about upon the solid ground of gold and silver.”(emphasis mine)

The Daedalian wings of paper money. That really brings it home. It calls to mind a passage from Economic Policy wherein Mises sort of offhandedly mentions “over-developed” economies. Overdeveloped. We don’t hear too much about that concept, but it’s an interesting one.  People tend to take the status quo as, well, the status quo.  How could developed countries be “overdeveloped?”  People make choices, buildings get built, production rolls on.  Ah, but governments issue fiat currency.  And fiat currency floats on Daedalian wings, wings that might melt at any moment and send the whole thing plummeting down from the commanding heights.

P.S. As an introduction to Smith if you haven’t read him, or an appreciation of Smith if you have, I can’t recommend enough Coase’s The Wealth of Nations, reproduced in the collection Essays on Economics and Economists. The piece is reverential and honest all at once; a real treat.

Posted by: erichosemann | February 6, 2010

Rothbard versus Hayek

I won’t go on at length about what the differences between Murray Rothbard and Friedrich von Hayek. I don’t think what I think about them matters all that much right now. That’s not self-deprecation; I just haven’t read enough of their output to hold forth like a sage.

I did get to thinking on both of ’em after reading Brian Doherty’s piece on a recent collection of Rothbard’s unpublished memos and letters called Rothbard vs. The Philosophers.

Doherty spends some ink contrasting the “fallibilist, utilitarian” approach of libertarian thinkers like Hayek and the “Randian, Aristotelian” approach of Rothbard.  This sounds about right, based on what little I have read by the two men.  I take the characterization of Hayek to mean a sort of empirical, utilitarian approach to rights, i.e. let’s see what works best; let’s not dismiss policies that might require the power of the state to bring about  human well-being.  The characterization of Rothbard I take to mean: rights are something real, something discoverable through reason, something along the lines of Plato’s forms, i.e. human rights do not need the power of the state to exist.

I enjoyed Doherty’s article but a paragraph close to the end seemed to contradict the apparent divide between the two approaches that Doherty describes.  Doherty mentions Rothbard’s support of Pat Buchanan in the 1992 presidential election–yikes!–as an apparent turn towards cultural conservatism:

Rothbard never took the tack that many younger libertarians influence by him did, of rejecting politics altogether. He always thought, and talked about, better and worse choices in the political environment we were faced with.

Thinking about better and worse choices is utilitarianism, plain and simple. I think this paragraph is key and I wish the people most concerned about the “libertarian divide” would realize that Rothbard was a human being with an ordinal scale of choices available to him. When the s**t hit the fan, he used that scale to choose a horse named Pat. That’s weird to me but not surprising.

Posted by: erichosemann | February 4, 2010

Governments are Corporations Too

Bob Higgs is a lazer-guided libertarian rhetoric missile.

Here’s Higgs, writing on the progressive claim that governments are groups of individuals while corporations are something inherently more sinister:

When aggrieved persons complain about the state’s actions and speak as if it were nothing more than an alien aggressor against an individual’s rights—and an impudently highhanded one at that—progressives have long replied that “we are the government.” In this instance, they steadfastly maintain that the whole is identical with the sum of its parts. Thus, no person has a firm ground on which to complain about the government because, after all, he is (a part of) the government.

This reply is so manifestly silly and transparently false that libertarians seldom pause to consider it except to mock it and to denounce the seeming foolishness or arrogance of anyone audacious enough to advance it. And rightly so, I think. I did not buy shares in the U.S. government; I simply happened to be born in a place known as Oklahoma, and by virtue of this happenstance, the gang of armed bandits who style themselves the U.S. government has claimed the right to rob and bully me at its pleasure from the day of my birth till today. Nor do they have any plans to lighten this oppression, however unwelcome I may consider it to be. I cannot escape from it by “selling my shares” or by declining to deal with it.

I don’t think I’m as much of an anti-statist as Higgs. I think he’s probably glad to have been born in Oklahoma as opposed to Port-Au-Prince. But I enjoy reading Higgs and thinking long and hard about what he writes. And his laser-guided accuracy on this point cannot be disputed. Governments are corporate, that is, they are individuals collected into one body. And their power isn’t something to trifle with. It can’t easily be denied. I gave up eating cereal on a regular basis a while ago, and no one from the Kellogg’s corporation called my house to ask why their receipts fell off. Should I discount my tax bill because I gave up using public services or because I decided not to send our yet-to-be conceived children to public schools, I would most certainly get a call from the tax collector.

It is absurd to believe that private corporations are manifestly evil while corporations of individuals known as governments are either utterly benign at the most or eminently swayable through the ballot box at the least.

Posted by: erichosemann | February 4, 2010

Procrastination and Julian Simon

One of my goals with this blog was to read The Wealth of Nations, and summarize it.  Well, I’m still going to do that, even though I’ve broken off for a bit.  It’s not like I’ve done nothing over the last few months.  Christmas happened, relatives visited, my math class and principles of macro began.  We moved some furniture around and I now have what amounts to an “office” but what is really the result of a wise move by my wife to sequester my clutter into one manageable area, as opposed to having it strewn about the house.  I’ve also read Mises’ Economic Policy: Thoughts for Today and Tomorrow, Coase’s The Problem of Social Cost, a goodly portion of Bastiat’s Economic Sophisms and a collection of Henry Hazlitt’s writings entitled The Wisdom of Henry Hazlitt. That isn’t enough reading to solidly occupy two months’ time, but I’ve been distracted by a few things and I’ve been distracting myself by reading things like Steve Horwitz vs. J. Bradford De Long, Tom Palmer vs. Johnathan Chait, and trying to keep up with Scott Sumner, who with this post single-handedly brought me back from the brink of writer’s block-induced despair.

Moving into my new “digs” required me to take stock of the books that I’ve piled up into a defensive cocoon.  One of those books is the 2nd edition of Julian Simon’s The Ultimate Resource. Most people who know who Julian Simon is know him because of the famous bet he made with Paul Ehrlich.  Julian Simon was a kind of legend to me.  Dad told me about his famous wager, but he explained to me what Simon’s winning the wager actually meant: that scarcity is managed and overcome by a free market, and that imagination is the only real limit on the exploitation of finite resources.  I read Atlas Shrugged and I, Pencil in high school, and although I never read The Ultimate Resource, the implications of Simon’s wager colored and informed my readings of those books and others.

I’m in the middle of a marathon reading of The Road to Serfdom right now, but I thought I’d break for a minute and reproduce a passage from The Ultimate Resource that I wish I had read twenty years ago:

A conceptual quantity is not finite or infinite in itself. Rather, it is finite or infinite if you make it so–by your own definitions. If you define the subject of discussion suitably, and sufficiently closely so that it can be counted, then it is finite–for example, the money in your wallet or the socks in your top drawer. But without sufficient definition the subject is not finite–for example, the thoughts in your head, the strength of your wish to go to Turkey, your dog’s love for you, the number of points in a one-inch line. You can, of course, develop definitions that will make these quantities finite, which shows that the finiteness inheres in you and your definitions rather than in the money, love or one-inch line themselves. There is no necessity either in logic or in historical trends to state that the supply of any given resource is “finite,” and to do so leads to error.

Someone coined the label “cornucopians” for those who believe that the natural resources are available in practically limitless abundance, to contrast with “doomsters.” But the stream of thought that I represent here is not cornucopian. I do not suggest that nature is limitlessly bountiful. Rather, I suggest that the possibilities in the world are sufficiently great so that with the present state of knowledge–even without the additional knowledge that human imagination and human enterprise will surely develop in the future–we and our descendants can manipulate the elements in such fashion that we can have all the raw materials that we desire at prices ever smaller relative to other goods and to our total incomes. In short, our cornucopia is the human mind and heart, and not a Santa Claus natural environment. So has it been throughout history, and therefore so is it likely to be in the future.”

Posted by: erichosemann | January 26, 2010

The Let ‘Em In Club

The putative president of the Let ‘Em in Club is David Henderson.  It’s membership appears to be growing.

I agree with Bill Easterly and Henderson that open borders are best for alleviating poverty on net.  Emigrating to the U.S. will certainly be good for those Haitians that choose to leave.  But I’m not sure that a mass immigration of Haitians to the U.S. will be good for Haiti.

I don’t think the lack of data showing that the richest Haitians are likeliest to leave challenges the idea that a large-scale emigration may have a negative impact on Haiti, as Easterly suggests.

From the standpoint of a wealthy Haitian, especially a politically well-connected one, the boom-times may be just around the corner.  The U.S. and U.N. are as we speak negotiating plans for Haiti’s future with its political and economic leaders.  Right now, despite the ubiquity of news stories about the difficulty of life in Haiti, it might be a good place to be for a wealthy and politically powerful Haitian.

Furthermore, those Haitians brave enough to try something like this

may be those Haitians most likely to succeed in bettering their lives in the U.S.; in other words, those Haitians endowed with a greater amount of entrepreneurial spirit than those they leave behind.

Where would the desperately poor of Haiti be then?

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