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Image credit. The study of human institutions is always a search for the most tolerable imperfections. Richard A. Epstein Do you know what a just-so story is? I didn't, but looked it up: In science and philosophy, a just-so story, also called an ad hoc fallacy, is an unverifiable and unfalsifiable narrative explanation for a cultural practice, a biological trait, or behavior of humans or other animals. The source. In writing the following, Arnold Kling tempted me to add the below comment to his post Paul Krugman on the State of Macro: 4. So I have a PSST model for unemployment [see my post here, G.T.], and my “weak” model[s] for inflation. I think it is fair to criticize them as “just-so stories.” But I would say the same thing about the sorts of models preferred by Blanchard or Krugman. Just-so stories, dressed up in pretty math. To which I replied: Your concession as to the role of just-so theories in economics strikes me as significant, and even surprising. As I regard you as a serious thinker, I must rule out the conclusion that economics is idle prattle to you. But what is it? To the extent that economics is based on story telling, what is it in the nature of that narrative habit that sustains economics as a worthwhile form of thinking about human interaction? I hope, in writing this, I don't sound cynical or facetious. Increasingly, I get interested in the role of (rational) ignorance, which all conceivable societies are inevitably affected by in very considerable measure; and I wonder, how do we manage the vastness of our (rational) ignorance so well - in countries such as the US or Germany, where life is quite bearable? The consideration that (rational) ignorance is a virtually invariant phenomenon in all modern societies including all conceivable improved versions (such as, say, a significantly more libertarian society), has led me to become a lot more respectful of politics and the state (as a functional necessity that, of course, may fail) than I used to be, their tremendous dangers and deficiencies notwithstanding. Politics and the state seem to be (a) the result and (b) the instrumental basis of more or less successful story telling. For politics seems to be involved in seeking out procedures indispensable in dealing with large amounts of irreducible (rational) ignorance. We need to tell us reassuring stories to sustain sufficient levels of trust while living in a largely anonymous society. Politics is a spontaneous order - a hugely important aspect of spontaneous order totally disregarded by Hayek - that serves as a discovery procedure whose (functionally desirable) end product is at least a minimal level of trust etc. needed to support social order. A highly narrative enterprise, full of just-so stories. If there is something to this view, what role does economics play in it with its just-so stories? Arnold Kling replied: I limit the scope of “just-so stories” to macroeconomics. Microeconomics often generates predictions that are falsifiable. To which I replied: Politics is what happens when we have to tell people: “Sorry, serious economics cannot handle conclusively issues like unemployment or the nature of an advisable monetary regime.” And macroeconomics is what happens when economists participate in politics. Seriously, if there are vital topics of an economic nature that cannot be covered in a scientifically sound way, then there must inevitably develop a part of economics that deals in and is based on rhetoric and techniques of persuasion – not necessarily as something to be maligned, but possibly as a cultural pattern of mutual reassurance, just like free speech may work very well in maintaining peace (social order) even though what is being exchanged is partly of an acrimonious and a generally nonsensical nature, as the case may be. I believe, this has very serious implications for liberty. If vital social issues of an economic kind cannot be resolved conclusively in support of a certain vision of society, say a classical liberal society, then the case for classical liberalism is incomplete, inconclusive in vital regards, and thus open to severe contestation not only among classical liberals but all citizens, parties, and factions of a free society. The value of freedom lies in her ability to embrace and cope with the uncertainties and disunity underlying a community inevitably entertaining rhetorically constituted views of society. No less than free markets, politics ought to be conceived of in terms of a spontaneous order. Political structures evolve to seek out ways of attenuating the risks inherent in vast and widespread ignorance of the conditions giving rise to successful human coexistence. Freedom produces these risks, while at the same time providing an excellent laboratory in which to test insurance and abortive products to defend against the dangers of inevitable ignorance. Continue reading
Posted 5 days ago at RedStateEclectic
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Image credit. Small advances in freedom - small compared to the freedom we are taking for granted - can make a huge difference in the living conditions and outlook of people, and ultimately, in their political ambitions. The world barely noticed a remarkable achievement last year: For the first time in nearly three decades, North Korean farmers managed to produce enough food to meet the population's basic survival needs. In spite of a drought this spring, preliminary reports indicate that this year's harvest is likely to be good, too. This success, such as it is, arose out of necessity. In the 1990s, industrial output in North Korea halved and an agricultural collapse led to famine. The vast majority of North Koreans survived by establishing an underground market economy. They had little choice: With the shelves of state-run shops empty of food, rationing coupons suddenly became worthless pieces of paper. Most of these private enterprises started small. Farmers started growing their own food on mountainside plots. Workers began to use (or steal) equipment from state-owned factories to make their own products, which they then sold. Some people opened secret restaurants, others did informal tailoring. Markets, which the regime had barely tolerated, moved into the open. As one might expect, some elements of North Korea’s emerging entrepreneurial class became relatively rich and began to look for more lucrative opportunities. Private workshops, inns and eateries began to spring up. The source. True, revolutions seldom start when people are desperate; they are more likely to erupt when citizens have [attained a certain level of material advancement, G.T., and therefore] come to believe that life could be significantly better under different leadership. Economic growth brings more knowledge of the (more successful) outside world. The changes also make people less fearful of the government, since they are no longer as dependent on the state for their livelihoods. A brighter future for North Koreans could well mean a darker one for the regime. Continue reading
Posted Oct 12, 2014 at RedStateEclectic
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I like the discernment in Arnold Kling's three-pronged argument according to which: (1) economy-wide wage growth is too highly aggregated a performance figure for analysing the economy, (2) the Fed is trailing the real economy, (3) the economy can be and presently is segmented so that certain layers of it experience vibrant economic activity, while others are mired in recession. On (1), I would note that a few years ago wage growth was violating the Phillips Curve on the high side [meaning, I suppose: too high employment relative to the level of inflation, with strong demand for labour and correspondingly high wage growth, G.T.], and now it is violating the Phillips Curve on the low side [employment is too low given the level of inflation, with insufficient demand for labour and correspondingly weak wage growth, G.T.]. And yet mainstream macroeconomists stick to the Phillips Curve like white on rice. I would emphasize that the very concept of “the” wage rate is a snare and a delusion. Yes, the Bureau of Labor Statistics measures such a thing. Instead, think of our economy as consisting of multiple labor market segments, not tightly connected to one another. There are many different types of workers and many different types of jobs, and the mix keeps shifting. I would bet that in recent years the official statistics on “the” wage rate have been affected more by mix shifts than by a systematic relationship between “the” wage rate and “the” unemployment rate. On (2), I view this as evidence for my minority view that the Fed is not a big factor in the bond market. Instead, the Fed is mostly just following the bond markets. When it actually tries to affect the bond market, what you get are “anomalies,” i.e., the failure of the bond market to do as expected by the Fed. On (3), I think that we are seeing a Charles Murray economy. In Murray’s Belmont, where the affluent, high-skilled workers live, I am hearing stories of young people quitting jobs for better jobs. On the basis of anecdotes, I would say that for young graduates of top-200 colleges, the recession is finally over. The machinery of finding sustainable patterns of specialization and trade is finally cranking again. In Murray’s Fishtown, on the other hand, the recession is not over. I would suggest that we are seeing the cumulative effects of regulations, taxes, and means-tested benefits that reduce the incentive for firms to hire low-skilled workers as well as the incentive for those workers to take jobs. As Sumner points out, President Obama’s policies have moved in the direction of making these incentives worse. Read the whole post on Arnold Kling's theory of the segmented wealth of nations. See also Patterns of Sustainable Specialization and Trade. For a broader context of Kling's take, consider his intriguing account of contemporary economic change: I am inclined to treat the financial crisis as a blip, one whose apparent macroeconomic impact was made somewhat worse by the very policies that mainstream economists claim were successful. This blip took place in the context of key multi-decade trends: –the transition away from goods-producing sectors and toward the New Commanding Heights of education and health care –the transition of successful men away from marrying housekeepers and toward marrying successful women –the integration of workers in other nations, most notably China and India, into the U.S. production system –the increasing power of computer technology that is more complementary to some workers than others These trends are what explain the patterns of employment and relative wages that we observe. The financial crisis, and the government panic in response, pushed the impact of some of these developments forward in time. The source. Continue reading
Posted Oct 12, 2014 at RedStateEclectic
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Image credit. One of the biggest problems worldwide is the absence of state structures capable of protecting economic liberty. Hernando de Soto claims that about 2/3 of the world population are affected by this bad state of affairs. It is incumbent upon those who are conscious of the value of liberty to promote the liberal state in the Third World - and, of course, as the below article shows, at home as well. Free markets do not just happen, they must be politically fought for and defended. Once again: the state is important for liberty, and so is politics. Writes Mark J. Perry: In today’s WSJ, Hernando de Soto argues that the cure for terrorism in the Middle East is capitalism, economic empowerment, and private property rights to help rescue “extralegal entrepreneurs” who have become trapped in their own countries as “economic refugees” by cronyism and burdensome over-regulation of market activity. Here’s an excerpt of “The Capitalist Cure for Terrorism” (emphasis mine): It is widely known that the Arab Spring was sparked by the self-immolation in 2011 of Mohamed Bouazizi, a 26-year-old Tunisian street merchant. But few have asked why Bouazizi felt driven to kill himself—or why, within 60 days, at least 63 more men and women in Tunisia, Algeria, Morocco, Yemen, Saudi Arabia and Egypt also set themselves on fire, sending millions into the streets, toppling four regimes and leading us to today’s turmoil in the Arab world. These suicides, we found, weren’t pleas for political or religious rights or for higher wage subsidies. Bouazizi and the others who burned themselves were extralegal entrepreneurs: builders, contractors, caterers, small vendors and the like. In their dying statements, none referred to religion or politics. Most of those who survived their burns spoke to us of “economic exclusion.” The source. In an interesting complement to de Soto, George Will makes a similar argument in today’s Washington Post that America’s “teeth-whitening entrepreneurs” are being denied the right to earn a living, and have become “economic refugees” in North Carolina because of cronyism capitalism, protectionist rent-seeking, and the burdensome over-regulation of market activity. Here’s an excerpt of “Supreme Court Has a Chance to Bring Liberty to Teeth Whitening” (emphasis mine): On Tuesday, the national pastime will be the subject of oral arguments in a portentous Supreme Court case. This pastime is not baseball but rent-seeking — the unseemly yet uninhibited scramble of private interests to bend government power for their benefit. If the court directs a judicial scowl at North Carolina’s State Board of Dental Examiners, the court will thereby advance a basic liberty — the right of Americans to earn a living without unreasonable government interference. The source. See also Enculturated Poverty, Economic Illiteracy and Global Economic Worries, Egypt's Economy of Outcasts, A Shout for Inclusion, The Classical Liberal Constitution (1/2). And Tragedies of Arrest and Regression, with a great synopsis of P.T. Bauer's contribution to Development Economics, and an introductory text by myself that in its radicalism I find almost embarrassing today. Continue reading
Posted Oct 12, 2014 at RedStateEclectic
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Image credit and source of the below quoted text. In my youth, like many Germans, notwithstanding my admiration for the great country, to me America was a chaos of billboards. You must understand that - certainly in the 1960s, 1970s and 1980s - "Werbung" (advertisement) was almost a dirty word in Germany - something from the commercial world, yuck! A capitalist intrusion into your brain and soul. Billboard-plastered America was a symbol of how capitalism will run roughshod over decent citizens, if you let it. I still like a landscape free of ugly billboards, but is it right to ban advertisements? I am a great believer in capitalism. It should be possible for capitalism to advertise its products in pleasing and welcome manner, as indeed it already does in countless ways - see Freedom and Art. While relatively uncluttered by billboards, Germany must have been the world champion in awful TV ads, with patronizing scientists in white gowns admonishing the viewers to buy this, that, or the other. The idea being, I suppose - advertising is evil, so let's try symbols of respectable advice. In Britain in the 1980s, I learned that watching TV ads could be tremendous fun and that it was quite possible to draw crowds to "the telly" by entertaining them with funny advertisements. So how might capitalism cope with the billboard issue? See also my comments at The Season of Giving. Image credit. In 1968 the state of Vermont passed a landmark anti-billboard law and the landscape has been billboard-free ever since. The law was the result of the extraordinary efforts of one man, Ted Riehle (1924 – 2007), who was determined to preserve the natural beauty of Vermont. According to John Kessler, chair of the Travel Information Council, the law’s original goals remain the same today: “We need to provide information to the traveler, but do not want to compromise our natural scenery. Tourism is the number one industry in the state. And the lack of advertising is one of the most commonly reported things that visitors appreciate about Vermont.” [source] Nathaniel Gibson continues: “Businesses may display an on-premise sign up to 150 square feet… Off-premise signs — the official name for billboards — are not allowed, unless TIC grants an exemption. Exemptions are typically granted for reasons of public safety and convenience.” [source] Continue reading
Posted Oct 9, 2014 at RedStateEclectic
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Image credit. “The best way to get Keystone XL built is to make it irrelevant ...” Via Bloomberg: From the Canadian perspective, Keystone has become a tractor mired in an interminably muddy field. In this period of national gloom comes an idea -- a crazy-sounding notion, or maybe, actually, an epiphany. How about an all-Canadian route to liberate that oil sands crude from Alberta’s isolation and America’s fickleness? Canada’s own environmental and aboriginal politics are holding up a shorter and cheaper pipeline to the Pacific that would supply a shipping portal to oil-thirsty Asia. Instead, go east, all the way to the Atlantic. The source, including a useful synoptic map of the new pipeline project. See also Red Herring in the Pipeline. Continue reading
Posted Oct 8, 2014 at RedStateEclectic
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For more vintage pics from Lincoln, Nebraska, consult the image credit. My libertarian development Of a radical libertarian leaning until about two years ago, I have repositioned myself on many core issues. In particular, I have come to regret the shallow and dismissive handling of democracy in much of the libertarian discourse. I used to be strongly influenced by the Ludwig von Mises Institute (LvMI). Initially, I was much attracted to its message thanks to the vast and valuable stock of downloadable literature, and, of course, a coherent narrative of freedom and capitalism offered by the institute's exponents. Owing to a sense of friendly tolerance, I made rather light of two points of disagreement that would eventually manifest themselves as the cracks of a deep rupture: I always opposed (a) anarchism, and (b) aprioristic reasoning in the social sciences, and indeed, in any science whose subject matter is to be found in the empirical world. As for (a), structures of maximal power, i.e. the state in a modern context, are an irreducible feature of human interaction, especially in larger human communities. The whole point of a regime of liberty is to promote structures of maximal power that support an open society, where every citizen is reasonably free from arbitrary interference by other humans, private and public organizations, and most notably the state. The state is a precondition of liberty. Denying the indispensability of the state is to refuse giving attention to one of the most fundamental cornerstones of freedom. Anarcho-capitalism is, therefore, a distraction from freedom. Concerning (b), true science is by definition free science, it is based on recognising that no one has privileged access to (advances in our asymptotic convergence toward) truth. Apriorism makes the claim of having access to absolute, ultimate, and incontrovertible truth. It is contrary to freedom, which is, like science, based on the presumption that no one has privileged access to truth. Science, free markets and a free society are perfectly analogous in that they rely on advancement by trial and error, by conjecture and refutation, by respect for the constructive force of human fallibility. All three of them are constitutively open systems, producing in large measure unpredictable outcomes that feed back into the development of the overall system. While there is a firm structure to science, to markets, and to the system of freedom, their scaffoldings form a semi-circle, as it were, opening up to a vast frontier of indeterminacy. About two years ago, certain encounters with exponents of anarcho-capitalism and apriorism spurred me on to look very carefully at the moot issues between us. In the meantime, I have discovered that anarcho-capitalism is a great pointer to weaknesses in (classical) liberalism, as the former tends to radicalise the errors or fuzzy ends contained more or less pronouncedly in the latter, as well as ignoring its strengths. Liberty, democracy, and trust Anarcho-capitalism, and to a considerable extent (classical) liberalism as defended by Ludwig von Mises or Friedrich Hayek, offer at best a shallow theory of the embeddedness of markets, political institutions, and the state in modern civil society. The state is largely seen as the (1) adversary and saboteur of (a) personal autonomy and (b) the natural spread and viability of free markets, and (2) an agent of illegitimately dominant persons and groups (special interests). Politics and democracy as spontaneous order This conception of the state as an agent of evil is related to a truncated view of spontanenous order, which disregards the deeper level and still more comprehensive spontaneous order of conditions enabling, historically and presently, the development of relatively free markets and the open societies in which they thrive. A modern democracy is a web of complex negotiations functionally aiming to fit different, diverging, and adverse views and interests. A free society depends on democracy as an arsenal of tools to balance interests many of which can never be perfectly reconciled; it is the political bazaar that admits any comer among free citizens, ensures the permanent contestability of incumbents, as well as a constant flow of new entrants both in term of interest groups, ideas, and cultural preferences. Reconciliation among the ignorant One of the key insights of classical liberalism is that all of us are rationally ignorant of countless important issues - we do not have the resources to understand all the issues in the air with reasonable accuracy. Also, there are many issue that represent political scarcity (reconciliation cannot be established by market-type transactions), and there may be issues that are either for the time being or even in principle unresolvable, as we simply may never know enough to penetrate the subject matter fully. Just as the market helps us cope successfully with a plethora of information that we can not possibly ever fully absorb and comprehend, so is a political system a means to come to grips with forms and consequences of human interaction whose full information content we can never collect and assess. Like markets, a good political system is a think-tool, a means of orientation in a world that contains more information than we can ever hope to use for our personal orientation. At some point, good orientation, mutual respect, tolerance, and trust, become more important that exact and non-contradictory results. Trust Ultimately, the political system has the task of generating enough trust among human beings such that even in a population of 300 million most people are able to spend most of their life time without fearing destructive or even deadly distrust from their fellow citizens. Democracy is a complicated web of institutions and practices signalling that (a) we can trust each other by and large, or that (b) we are able do something about it if our expectations of trust are seriously challenged. Democratic politics is the way in which we keep our values and concerns in touch with those of others, so as to keep a balance between our differing convictions. The strong adversarial taste that politics often leaves us with is a... Continue reading
Posted Oct 6, 2014 at RedStateEclectic
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Image credit--including the history of wolves in Yellowstone. Following up on Wolves and Creative Destruction: The US economy has a competitive intensity problem, and [a] decline in startups is at its core. Startups are the straw that stirs the drink. They generate new innovation (and new jobs) and force incumbents to improve or die. They change everything, creating a healthier, more vibrant economy in the process. [...] In the US economic ecosystem, startups are wolves. And we need more of them, and the creative destruction they bring, to transform our stagnating economy. The source. See also Market Dynamism, Patters of Sustainable Specialization and Trade (PSST), Related articles Anthropocene Reinvention vs. Intervention Continue reading
Posted Oct 3, 2014 at RedStateEclectic
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Image credit. Today is Germany Unity Day, a public holiday. An occasion to ponder political developments in the country. German Christian Democrats, the CDU, and their sister party in Bavaria, CSU, have followed a policy since the 1960s which left no room for a sizeable political movement to their right. This worked well with only negligible groups of no consequence emerging. But German Chancellor Angela Merkel seems to have changed this strategy, writes Prince Michael of Liechtenstein. --- A new party, the AfD (Alternative for Germany), emerged in 2013, first with just an economic programme, promoted in principle by some well-recognised economists. The party’s main issue was criticism of the euro. Although it was not a populist or extreme party, the political establishment, including Chancellor Merkel, labelled it right wing and towards the extremist corner. Propaganda against the AfD by government, the established parties and large parts of the media, was enormous. However their programme was defendable and certainly not radical. Realising the deficiencies of the euro and questioning transfer payments is part of normal political debate. The new party took almost five per cent of the vote in Germany’s last national elections, despite the hostile propaganda. This was a real success, but just missed the five per cent threshold for a seat in the German Federal Parliament. The party reached some seven per cent in the European Elections in May 2014 and is now represented in the European Parliament in Strasbourg. The big leap came when the party topped some 10 per cent in elections for three German lander or states. AfD is a political factor now. Its members are fierce free market supporters who promote entrepreneurship. But analysis shows gains from the centre – their base – and from the left. Now the CDU has a real competitor in the centre right. Chancellor Merkel’s election tactics have been to destroy opposition campaigns by taking over their issues. Her decision to phase out nuclear energy left the Green Party without a popular cause. The introduction of minimum wages damaged the Social Democrats. This short-term tactic was successful for Mrs Merkel’s CDU, but may have alienated supporters on the centre right. The classic economic party, the liberal FDP, was Mrs Merkel’s coalition partner until the last elections and was almost annihilated by following her policies. So will Mrs Merkel continue to pursue her old tactics and adopt the AfD’s cause? Will she become less supportive of the euro and reduce or stop transfer payments to fiscally shaky eurozone countries? The AfD’s success in local elections could have European implications. The source. Continue reading
Posted Oct 3, 2014 at RedStateEclectic
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SS Great Eastern. Following up on Patterns of Sustainable Specialization and Trade (PSST), at Reason's Hit and Run, Stephanie Slade has a fine piece of incisive journalism on Austrian/Hayekian dynamic (as opposed to equilibrium) market theory: The belief that had (mistakenly) evolved among mainstream economists at the time [Austrian economics elicited a correcting view of the economy, G.T.] was that the goal of market competition was to bring about a general equilibrium in which all the facets of an economy are balanced with each other and all the resources are efficiently allocated. These economists thought it realistic to expect central planners to be able to replicate, and perhaps even improve upon, that equilibrium state. The Austrians were meanwhile busy reminding people that market competition is a process that creates value precisely when an economy is in disequilibrium. In equilibrium, profits converge to zero—there can be no new profit opportunities by definition. But outside of a perfect equilibrium, people who are clever enough can find gaps in the market and fill them. Entrepreneurs are therefore able to drive societal improvements through dynamic competition—to literally innovate their way to greater wealth. Markets are a process, not an equilibrium state, Hayek said. More specifically, they are a process for discovering new knowledge. The absolute best a central planner can hope to do is to aggregate the information that already exists at a given moment. But the market process not only gathers and makes sense of vast, disparate information—it ushers into being knowledge that was not there before at all. Vernon Smith, [...] a [...] Nobel laureate in economics, quoted Hayek as saying, "I propose to consider competition as a procedure for the discovery of facts as [otherwise] would not be known to anyone." This was actually a fresh and exciting revelation, Kirzner concluded [at the conference on which Slade is reporting], and it came at the very moment most onlookers were declaring the Austrian tradition dead. Mainstream economists at the time truly believed it was possible for central planners to acquire the requisite information and construct from it a utopia. Fortunately, Hayek and his Austrian school contemporaries were there to show the economics profession that the journey—an ongoing process of experimentation and discovery driven by the pursuit of profits—is far more important than the destination. The source. Related articles Forgotten Emergence - The Spontaneous Order of Politics Public Choice Continue reading
Posted Oct 3, 2014 at RedStateEclectic
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In the New York Times, Arnold Kling presents an outline of his intriguing theory of the conditions of economic health and dislocation, an approach to business cycles which he abbreviates as patterns of sustainable specialization and trade (PSST): How are jobs created? For Keynesians, job creation is simple. Entrepreneurs have knowledge of how and what to produce. All that is required is more demand, in order to induce them to undertake more hiring. In contrast, in our Smith-Ricardo story, the knowledge of how and what to produce has to be discovered. Entrepreneurs have to figure out ways to utilize resources that satisfy wants in an efficient way. The market mechanism first must undertake trial and error to create production processes that exploit comparative advantage. Until these new patterns of sustainable specialization and trade are discovered, there are no job slots. Experimenting with new patterns of specialization and trade is relatively easy. Discovering patterns of sustainable specialization and trade is much harder. Our economic well-being depends on the ability of entrepreneurs to make these discoveries. Make sure to read the rest at the source. For more click here. Related articles Reinvention vs. Intervention Rickety Economics An Archaic Habit of Thought ... Continue reading
Posted Oct 2, 2014 at RedStateEclectic
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Concerto for percussion Frozen in Time by Avner Dorman, conducted by Martin Grubinger and featuring one of the great contemporary percussionists - Simone Rubino: Continue reading
Posted Oct 2, 2014 at RedStateEclectic
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Image credit. Since water is one of the vital ingredients for life on Earth, scientists want to know how it got here. One theory is that the water in our solar system was created in the chemical afterbirth of the Sun. If that were the case, it would suggest that water might only be common around certain stars that form in certain ways. But a new study, published today in Science, suggests that at least some of Earth’s water actually existed before the Sun was born -- and that it came from interstellar space. That’s certainly something to ponder the next time you drink a glass of water. But the discovery is also cool because it means water -- and maybe life -- may be ubiquitous throughout the galaxy. Read more at the source. As for us earthlings, the inestimable Coyote has a lot to complain about the way in which we deal with the precious resource. Virtually every product and service we purchase has its supply and demand match by prices. Higher prices tell buyers they should conserve, and tell suppliers to expend extra effort finding more. Except for water. Every water shortage you ever read about is the result of refusing to let prices float to dynamically match supply and demand. And more specifically, are the result of a populist political desire to keep water prices below what would be a market clearing price (or perhaps more accurately, a price that maintains reservoir levels both above and below ground at target levels). [...] Commenting on a 100,000 prize to help solve the water shortage in Arizona, the Coyte notes: I will say that it is nice to see supply side solutions suggested rather than the usual demand side command and control and guilt-tripping. But how can we possibly evaluate new water supply solutions like desalinization if we don't know the real price of water? Accurate prices are critical for evaluating large investments. If I find the time, I am going to tilt at a windmill here and submit an entry. They want graphics of your communications and advertising materials -- I'll just show a copy of a water bill with a higher price on it. It costs zero (since bills are already going out) and unlike advertising, it reaches everyone and has direct impact on behavior. If you want to steal my idea and submit, you are welcome to because 1. The more the merrier and 2. Intelligent market-based solutions are never ever going to win because the judges are the people who benefit from the current authoritarian system. PS- the site has lots of useful data for those of you who want to play authoritarian planner -- let some users have all the water they want, while deciding that other uses are frivolous! Much better you decide than let users decide for themselves using accurate prices. The source. Writes another observer: We actually have no shortage of water in Arizona. Rather, we have too much government. The web of subsidies and regulations of water use creates a false shortage. The source. Related articles The Vision of the Anointed and Science in the Public Square Shale Gas (Fracking) Opponents Entitled to Their Own Facts Continue reading
Posted Sep 29, 2014 at RedStateEclectic
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Image credit. Sight or sound of the word "regulation" should not be a cue triggering reflexive reactions - which unfortunately they do with many of us. Liberty calls for regulation, its supporters ought to be aware of the liberating and wonderfully facilitating effects that proper regulations bring about. For the sake of liberty, we need to step in the political arena to defend and foster reasonable regulation, but also to unmask the manifold abuses to which regulation may lead. There are those who think because most people hold political views different from theirs, we therefore live in a decaying civilization dominated by the basest forces. The below article by Cory Doctorow will be "happy news" for them. "Didn't I tell you!" they will shout. And indubitably, there is much foul in the State of Denmark, and deplorably, Segarra's case may well be as egregious as it appears at first reading. Carmen Segarra is a former FTC regulator who joined the fed after the financial crisis to help rescue the banking system -- but she was so shocked by the naked regulatory capture on display that she ended up buying a covert recorder from a "spy shop" and used it to secretly record her colleagues letting Goldman Sachs get away with pretty much anything it wanted to do. The source. At the same time, we should not lose sight of other developments in the regulatory field. I see an important role for those on the side of liberty not just to track down - rarely done by those who think they know it's all one big deceit anyway - and denounce regulation, but to make it better; and an important part of improvement consists in admitting and honing one's faculties of fair and open perception so as to be able to identify, understand, develop and strengthen reasonable forms of regulation. When the watchdogs aren't working too well, it is partly because of the submissive fascination of the left with everything involving state control, which seems to trump their dislike of corporate symbols of capitalism such as Goldman Sachs; and it is also partly because other forces potentially critical of regulation go over the top in a different way, dreaming a nirvana-fallacy-dream that keeps them inactive, apart perhaps from verbal outrage. What they overlook is that no matter how much more free our society might become, regulation will always be an area of contention, of fallible trials, and of hard-to-decide or even undecidable issues, with loads of regulatory problems happening at once and dynamically, i.e. changing their decisive features constantly. Ayres and Braithwaith have written an interesting book ("Responsive Regulation. Transcending the Deregulation Debate") on dimensions of regulation that lie beyond uncritical approval and wholesale rejection of regulatory efforts. See also Administrative Creep and Intellectual Property - Patents as Prizes. Related articles The Liberal Pull of Technology Continue reading
Posted Sep 28, 2014 at RedStateEclectic
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My point here does not concern the rate of actual abuse - though I tend to believe that by and large there is a reasonable correlation between top management pay and performance -, it concerns the question of who should be in charge of payment decisions. It really shouldn’t surprise that an awful lot of people are remarkably ignorant about the world that they inhabit ... ... erroneously thinking they are competent and entitled to call the tune on executive pay. The error though is in what is then assumed should be done about it. For of course you can already hear the screams (from people like the High Pay Commission) insisting that as the average voter doesn’t want there to be this income disparity therefore there should not be this income disparity. The error being that what the CEO of a large company gets paid is none of the damn business of the average voter. It’s the business of those doing the paying: and if the shareholders in a company wish to pay the person managing their business handsomely then that’s entirely up to them. Nothing to do with the jealousy of the mob at all. There is a small coda: some argue that it’s the same old interlocking boards that keep raising the CEO’s pay, knowing that their own will get raised in turn. The theory that the managerial class is ripping off the owners, the shareholders. It’s true that this could happen, principal/agent theory is true. However, if this were true then private equity would be paying their managers considerably less than public companies do as they would not be subject to this rip off. Given that in reality, out here in the world, private equity pays very much better than public companies do then this isn’t true either. The source. Related articles How Adam Smith Taught Karl Marx Nonsense A Binge of Non-Value-Adding Spending Continue reading
Posted Sep 28, 2014 at RedStateEclectic
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Image credit. The intellectual standards of academics nowadays! Fred Block refers to capitalistic freedom as the "the Robinson Caruso [!!!] freedom", at time mark 09:43, if you care to watch this not-a-must-see-interview, and immediately goes on to explicate: The freedom of some people to make a lot of money has a lot of consequences for the lack of freedom for other people who then have to work in Wal-Mart at low wages or whatever ... I quote this excerpt not because I am particularly eager to point you to the interview. For the purpose of this post, I am solely concerned with a widely held attitude resonating in Block's pronouncement, which is congeneric with a rather popular argument that never fails to annoy me for being immensely absurd and hypocritical. What I have in mind is the subliminal idea that there is a special class of people with a duty, call it the E-duty, as basic as the most elemental personal rights, to create opportunities for safe, durable and satisfying employment for another class consisting of people that are either not willing to or not capable of providing employment to anyone, while at the same time being fully exempt from the E-duty. When people attack, say, "capitalist swine X" for laying off employees or not paying wages deemed sufficient by their recipients, I ask the accusers why it is that they do not provide these workers with employment at agreeable wages? In not even trying to provide jobs, are the accusers not being even more egotistical than "capitalist swine X"? Apparently, it is perfectly virtuous for employees not to even begin to create employment and a flow of income to the employed, while the same inability or unwillingness in employers is being considered a moral failing of the severest kind. If the accusers thought matters through, they would find that the non-employing employee would by definition have to be regarded as being morally more base than the employing employer, who at least provides some employment and some income for others. See also La donna è mobile. And more on it here. Related articles Letter to Nebraska - The Causative Precedence of Profits over Wages The Conscience of a Liberal Continue reading
Posted Sep 25, 2014 at RedStateEclectic
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Image credit. Kevin Williamson notes, New York City is not only poorer than the New York State average, its median household income is, in absolute dollar terms, lower than that of such dramatically less expensive areas as Austin, Texas, or Cleveland County, Okla., where the typical household income is a few thousand dollars a year more than in New York City but the typical house costs less than a third of what the typical New York City home costs So [- asks Arnold Kling -] why don’t people move from NY to cheaper cities, until something closer to parity is restored in the cost of living? How can the poor afford to live in New York? Any ideas? Tentative answers by Arnold Kling and others. Continue reading
Posted Sep 25, 2014 at RedStateEclectic
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The study of human institutions is always a search for the most tolerable imperfections. Richard A. Epstein The Classical Liberal Constitution (1/2), The Case for Classical Liberalism, Classical Liberal vs.Libertarian vs. Anarcho-Capitalist, Cheese and Liberty. Related articles The Classical Liberal Constitution (2/2) Continue reading
Posted Sep 23, 2014 at RedStateEclectic
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Image credit. Foie Gras, a speciality of my Alsatian neighbours, is among the top ten of my favourite dishes. An hors d'oeuvre to be accompanied by a glass of Muscat d'Alsace, a delicious apperitive wine, best cherished in a cosy automnal or winter environment. Related articles Do Not Watch This food & wine of the Alsace Class 3 Part 1 J'adore l'Alsace: Amanda's Bike Tour in Alsace Continue reading
Posted Sep 23, 2014 at RedStateEclectic
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Image credit. No comment. See also A Ship with the Engine Off. Continue reading
Posted Sep 23, 2014 at RedStateEclectic
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Now, this is exceptional. Continue reading
Posted Sep 22, 2014 at RedStateEclectic
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Image credit. "Ukelele Serenade" by Aron Copland is a truly remarkable piece of music; it has a pantomimic quality to it, if I may use this oxymoronic phrase, conjuring funny characters before my eyes. I am not sure I have ever been amused by music before I heard "Ukelele Serenade". See also Die Schreibmaschine. Continue reading
Posted Sep 22, 2014 at RedStateEclectic
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Image credit. Absence of Nuisance, Increased Options, and Happiness I am reading Arnold Kling's recommendable Learning Economics. Perusing his chapter on "Can Money Buy Happiness?" prompted me to rephrase my view of the happiness-matter. I wrote these encapsulating comments in the margins: Happiness is finite in all stages of human and civilisatory development -- unlike the inclination of human beings to extend freedom from nuisance and increase the options available to pursue one's developing interests and preferences. One cannot be infinitely happy or content, but there are no limits to man's ability to improve his lot by shielding himself from nuisance and attaining better options. Painless dental care or the right to choose freely among a large number of occupations rather than being forced to pursue one's father's occupation -- the attainment of aims such as these will not move the ceiling of happiness any higher than advancements achieved at earlier stages of human development. Yet, they will be pursued because they remove nuisances and widen the range of options from which one may choose. This assessment is based on my anthropological views, whose core tenet states that man is the animal that adjusts to its environment by constantly developing new desires, needs, interests and preferences. Humans are neither built to enjoy permanent rapture, nor is their personal and social weal dependent on constantly high levels of happiness. What is far more important for human wellbeing is (a) the absence of nuisances and (b) the presence of fruitful avenues for personal development; both of which conditions will be accompanied predominantly by low levels of emotional involvement - think of the meditative quality of much of what one likes doing -, though they may lead to an overall situation associated with words such as "happiness" or "contentment". Two Meanings of Happiness Happiness as the object of assessment and happiness as an emotional state are two very different kinds of animals. The former will tend to refer to a cluster or series of episodes most of which do not involve high levels of emotionally present happiness. While writing this post, I am largely free from disturbances and enjoy the pursuit of a large range of options (to argue this or that, to do something else) allowing me to apply myself to activities that I feel drawn to. None of these components of the overall activity are of an emotional quality that I would designate as "happiness". In fact, it is not rare that pain and effort are involved, as when I fail to find the right words or discover contradictions in my beliefs. It is the overall activity, including the satisfactory result brought about by it, that I tend to refer to when speaking of happiness - happiness as the object of assessment. And this seems to be rather in keeping with my anthropological theory: to be in balance, man does not so much need a permanent stream of ecstatic feelings but the ability to adopt to his environment by creating and fulfilling new desires, which is why I do not read the same book a million times and do not stop playing tennis after the first match, but look for renewed challenges. So, happiness can be either (1) a localised feeling, mostly of high intensity, or the object of a broader assessment, in which latter sense it is (2) the expression of a balance between our manifold human faculties and the surrounding in which we find ourselves. In its second import, happiness is not necessarily an event of high emotional intensity; in fact, it may be deemed pleasant precisely because it lacks the grip of passion. At any rate, while happiness as a localised feeling, mostly of high intensity, is finite both in its intensity and frequency, and a mere component among many other components of wellbeing, happiness as expression of a balance between the human and her environment is infinite in its permutations, a challenge to be approached in an infinite number of ways, and a complex achievement comprising many components of very different kinds. Striving for happiness in this sense is part of human nature, and does not lose its high significance for a person because she has surpassed a certain level of income or wealth. Happiness Research and Behavioural Economics Happiness research and behavioural economics tend to be popular with those who believe in a world view that seeks to infantalise and hospitalise the average man, i.e. turning him into the subject on which political paternalism is eager to perform its human experiments. The happiness researchers' perfidious argument then runs like this: our studies show that an income/wealth level above $ 50.000 does no longer increase happiness; so it is fine to take income/wealth above that threshold and to redirect it to those who at lower levels still stand to enhance their happiness either by receiving the redistributed funds directly or by the help of authorities thus funded. "The rich" are thieves of happiness; they misappropriate resources that are needed to make other people happy. Wastefully happy, "the rich" are denying "the poor" their share of happiness, as the latter are lacking the very resources squandered on the richmen's exhausted capacity for happiness. Headline: "Economic Research Shows Politics Needed to Achieve Just Distribution of Happiness" - when in fact, there is no economics involved whatsoever, but a highly biased, agenda-driven, and ill-thought through concept of happiness. Behavioural economists, in their turn, work ardently on "proving" that human beings are (far more) irrational (than previously thought) and hence dubious candidates for responsible action that need to be taken custody of. See also Equality - the Robber's Excuse and Enculturated Poverty. Related articles Happiness and Freedom Community Service - A Graduation Speech Continue reading
Posted Sep 21, 2014 at RedStateEclectic
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Gas attack on the West Front, near St. Quentin 1918 -- a German messenger dog loosed by his handler. Dogs were used throughout the war as sentries, scouts, rescuers, messengers, and more. (Brett Butterworth) - image credit. The first world war was only two months old, one hundred years ago, a maelstrom gorging on everything living and alive. Vintage everyday has a fascinating series of black and white pictures showing humans and animals in World War I. See also 28 July 1914 - Outbreak of World War I. Continue reading
Posted Sep 21, 2014 at RedStateEclectic
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Image credit. I think, this is a very creative question, and good exercise for one's mind: Whenever I interview someone for a job, I like to ask this question: “What important truth do very few people agree with you on?” His rationale for asking the question is that if you cannot be truly contrarian, then you cannot be an innovator. My answer would be that I believe that the Fed has very little influence on inflation and interest rates. I think it is fair to say that very few people agree with me on that. The source. Related articles Reinvention vs. Intervention The Political Asymmetry of Truth and Falsehood Continue reading
Posted Sep 21, 2014 at RedStateEclectic