Are you a Liberal !?!?

 Charlie

Alex at MR posts an excellent article by European economists Alberto Alesina and Francesco Giavazzi.  Their question: why the Political Left–the so-called modern ”liberals”–refuse market philosophies with startling gusto (foolishness?).

“Our point is that the goals that are traditionally held dear by the European [and America] left – like protection of the economically weakest and aversion to excessive inequality and un-earned rewards to insiders – should lead the left to adopt pro-market policies. What has often been the norm in Europe from the 60s until recently – heavy market regulation, protection of the status quo, an enormous public sector which rewards not the very poor but the most-connected and requires highly distortionary taxation, universities which often produce mediocrity in the name of egalitarianism (while the very rich get a good education anyway, somehow) –all end up decreasing efficiency and justice at the same time.” 

The question–a topic I have been pondering for some time now–is highly nuanced and requires much study.    

I am similarly frustrated with those who support “free market policies” but see themselves–and their philosophies–as ”conservative”.  Often, when socializing with conservatives, I wonder aloud how we might elucidate the wisdom of restricted government and civil market society to those on the Progressive Left.  Most usually, I’m met with hostility; they remind me that it is an impossibility for Leftists to begin sympathizing with a market oriented position.  I do not agree.   

Nevertheless, modern liberals continue their paradoxical oposition to the market.  How can this be corrected?  Is this a fear? A failure of logic? A refusal?  Do they require centrally institutionalized altruism? How can we spread the positive message of decentralized liberty and market reliance to our Left leaning friends, family, colleagues?

Look for more in this vein under the new thread: “The Left and Liberalism”.

More to the Market

Sandeep
In this post I questioned the assumption that a tax break is a significant motivation for charitable donations. This assumption, though worthy of examination, is quite perilous if we don’t keep in mind how much we don’t know. We have certain methods of reading signals, like prices. But it is impossible to know all the myriad motivations that create prices: the process of objectively back-tracking through history breaks down at individual decisions. Although we may retrieve and better understand data, setting in stone others’ motivations is impossible.

Yes, perilous: in this day, when it is not uncommon to find people who emotionally equate market with evil corporations, more must be done to communicate how unfathomably bountiful is the goods-basket that exists within the scope of the market. Non-profits, open-source projects, and aid organizations are all enterprises included in the concept of the market but are often associated with government. Tyler at MR always has good examples of currently-fringe aspects of the market in his “Markets in Everything” series. Taborrok, also at MR, has edited a book called Voluntary City, which I recommend highly, as it will elucidate your understanding of free exchange in society.

Not only is there more to the market than is conventionally thought, there is necessarily more to the market than any one person could conceptualize. That we don’t know things is a blessing. Human action exists now in immense prosperity not because of higher collective ‘knowing’, but because the range of choices for most humans is increasing rapidly. One reason we systematically undervalue the immense variety of human action because it’s hard for our minds to grasp others’ multifarious motivations. Once we sit back, relax, and ponder the tremendous magnitude of human experience that always evades the single mind, we understand everything’s gonna be alright precisely because there’s more to the market than we think.

Harmonious with Anarchy?

Sandeep
Are some spiritual belief-systems more compatible with anarchy?

Hinduism also points out that a difference of metaphysical doctrine need not prevent the development of an accepted basic code of conduct. The important thing about a man is his dharma [roughly, the personal basis of behaviour], not necessarily his religion.

That’s Kshiti Mohan Sen (Amartya Sen’s grandfather) in Hinduism.

You know, like a plant

Sandeep
For some reason I get RNC campaign emails, and the latest one is from W. himself, who seems to believe that politicians have supreme control over complex, emergent phenomena.

Republicans also have a solid record when it comes to growing this economy.

Economists have failed if most people take these words seriously.

Quote of the Day

Sandeep

Despite previously denouncing coercive and violent population control techniques, Jared Diamond still goes on to praise the Chinese government’s courage to “restrict the traditional freedom of individual reproductive choice…” It is this type of population control – coerced restrictions, forced abortion, infanticide – that apparently “contributes to [his] hope” and “may inspire modern First World citizens” to follow a similar path. Whether they recognise it or not, every advocate of anti-natal population programs must make a fateful choice. They must either opt for voluntarism, in which case their population targets will be meaningless. Or else they must opt for attempting to meet their population targets – in which case they must embrace coercive measures. There is no third way.

That’s Nicholas Eberstadt’s “Too many people?”

Oftentimes this is the case: either you choose liberty or cope with some element of coercion. What irritates me is when people embrace the dangerous idea that a little bit of coercion is innocuous in regard to the beneficence of the policy in consideration: that within our perfected minds we may rationally construct the various particulars upon which a superior society can stand strong.

Don’t fool yourself into believing that if you rack your brains and think really, really hard, the human experience will stupendously boil down to a few hard facts.

“Why be boring?”

Various advice to graduate students in economics, most of which I find useful regarding life-in-general,from Pete Boettke:

Philanthropy’s Motives

Tyler writes:

I am a fan of the tax break for American philanthropy for several reasons:

1. Organized religion is the biggest beneficiary. Religious organizations help poor people, help shape a unique and vital American ethos, and encourage people to have more children. The demographic effects alone probably makes this self-financing. ($40 billion in foregone revenue is one estimate.)

2. The arts receive about five percent of U.S. charitable donations. I am more than willing to stomach this degree of anti-egalitarianism in the non-profit subsidy, and yes we do get more beauty for it. Furthermore the alternative of more direct government arts funding would not work out well in the relatively Puritan United States, even if you think it has worked well in Europe.

3. Philanthropy for higher education is a major reason for American strength. Note that American higher education a) benefits the entire world, and b) is a major reason why we are richer than Western Europe (wasn’t there a recent NBER paper on measuring this effect?) The tax break is a politically acceptable way to subsidize elite intellectual activities — which benefit virtually everyone — yet without having government control those activities.

4. Allowing and encouraging people to give away their money causes them to work harder. Demonstration effects spread the power of this subsidy by creating social networks which favor philanthropy.

5. The general proliferation of non-profit institutions makes America a much more innovative and diverse place, intellectually and otherwise.

6. Relying so much on private philanthropy chips away at the dangerous attitude that there are clearly defined social priorities to which everyone must pay the same heed.

I question Tyler’s central assumption that the existence of tax-breaks is the sole motivation for philanthropy. Individuals give money to all sorts of organisations, from the Marijuana Policy Project to orphanages in poor countries. We also give money out-of-the-blue: think of Girl Scouts or old men with bells in front of your grocer. As Tyler himself has said in a recent podcast with Russ Roberts, money isn’t the only motivating factor out there. I wouldn’t assume that simply because tax-breaks exist and people give money, the absence of tax-breaks would dramatically alter giving. In fact, people may end up thinking more deeply about the recipient of their money.

“The Arts” today is totally different from what it was a decade ago. We spend more time in an environment where creative expression enhances our experience in all sorts of subtle ways. MySpace and iTunes are the obvious examples of how artists and consumers of art interact in a much more rich, more diverse paradigm. Creative expression in Ad-agencies, technology and design companies, and scores of consumer-goods companies is making user (not just logic of choice, but beauty of choice!) experience much more pleasurable.

Is there any evidence that without tax breaks we’d have less vigorous “elite intellectual activities”?

Kiva

Sandeep
Kiva is a new site that allows anyone to lend money to poor entrepreneurs in developing countries. 99.7% of loans are repaid, so visit the site and try becoming a micro-VC.

—
Charlie: Your friend Adama in Ghana may be interested in seeking loans through this site.

The Wisdom of Outstanding Men

Sandeep
I firmly believe we are a more prosperous, dynamic society when normal people are exposed to economic insights. We are perpetually bombarded with sophistries, nonsense, teleological hocus-pocus, self-important rationalism, and trumpeted statistics–in addition to coping with the disorienting position of living in many orders at once.

Economics provides powerful insights about human action that, when popularly understood, will fortify the foundations of an enduring free society. I assert that this popular understanding also assists our happiness. Some people (B.A.’s in English Lit., welfare-apologists, socialists of all parties) fume and snarl and generally become angry over what at its root is ‘class struggle’. Such anger leads to despondency, so it’s important to show people why it’s all so unnecessary (Be Easy!!).

I find that it’s good to direct people’s attention towards successful Outstanding Men.

Fuck You Lou Dobbs

Sandeep
A few moments ago I was reading MR and Alex alerted me to his appearance on Lou Dobbs.

They only aired a few words of his conversation with the show. The self-ordained Grand Priest and Wise-man of intellectuals, Lou Dobbs, went on to viciously attack free market economics, calling Alex an “idiot”, that economists were “dumb” and “out of their minds”.

How do people take this xenophobic fool seriously?

As if Communism was Yesterday’s News

Sandeep
A Polish man recently awakened from a 19-year coma. It’s as if you have traveled a good length down the road to serfdom, and then suddenly find yourself at the beginning.

(HT: Mises Blog)

China Milking Milk

Sandeep

They have been blamed for putting up the price of everything from bicycles to garden fences. Now the Chinese have been dubbed “milk snatchers” by German consumers for buying so much milk that prices of dairy products in Germany are expected to soar by 50%.
The Germans are being made to feel the effect of China’s new-found taste for milk, sparked by a remark by China’s president Wen Jiabao: “I have a dream – a dream to be able to provide all Chinese, especially our children, with half a litre of milk a day.”
…
The only effective way to increase global milk yields without breaking the milk quotas, according to experts, is to encourage the breeding of cows outside the EU. German dairy farmers have duly been selling their best high-performance milk cows to Chinese farmers, who are receiving government subsidies if they switch to dairy farming.

The Guardian speciously entitles the article “China’s new appetite for milk forces price rise in Germany”. More suitable title: “Chinese Prez.’s dream: plunder rural poor, “free” milk for urbanites, starve German babies”.

(HT: Johan Norberg)

Cowen on Karelis on Poverty

Charlie 

As always, Tyler Cowen (spurred by Karelis) demonstrates the fundamental importance of incentives.  He points out that the poor–and especially the poor who have been poor for generations–maximize utility in different ways than the rest of us. 

Poor enough people will accept risk in the downward direction rather than smoothing consumption, so they buy lots of lottery tickets.  They also commit more crime, so they can have at least some joyous times, and they take lots of “stupid” chances.  Yet the poor are not irrational or necessarily dysfunctional in terms of procedural rationality, but rather they are optimizing given constraints.  They are taking the Friedman-Savage model very very seriously.

“Getting tough” with the poor through policy is more likely to backfire than succeed, as it just encourages more mean-reducing, risk-taking behavior….

The more the poor regard themselves as lagging the rich (rather than doing better than, say, their peers back home in Gujarat), the more stupid risks they will take.  That’s why poor immigrants are more value-maximizing than the poor that have lived in America a long time and adapted to American norms and expectations.  The immigrants don’t regard their burdens as insuperable and they are on standard downward-sloping marginal utility curves. 

This makes for a fascinating–and challenging–argument.  

If your interested…

Here’s a snipet of the Amazon review of Dr. Karelis book, The Persistence of Poverty: Why the Economics of the Well-Off Can’t Help the Poor.

With rigor and passion, Karelis offers a radical reconsideration of the problem, resting on twin premises: the importance of distinguishing between enjoyment and relief (e.g., eating ice cream vs. taking aspirin for a headache), and acknowledging that these motivators/rewards have a different effect on the poor than they do the well-off. Karelis argues that while the middle and upper classes seek an even distribution of “pleasers” to increase “positive satisfaction” over the long-run, those acting from a position of insufficiency work for “relievers… goods that reduce pain, unhappiness, or misery” in the moment. As such, what is rational or efficient behavior for the poor is not so for the well-off, and vice-versa.

Anarchy, actually

Sandeep

“…for many LDCs with these limited options anarchy may very well be the best feasible choice.”

From Peter T. Leeson’s excellent Cato Unbound article. I think we would live in a much better world if the industrialized nations hadn’t drawn states into Africa and Asia after WWII.

The Highest Degree of Disorder

Sandeep
From the LA Times, “Illegal Immigrant crackdown looms”:

In the coming days, the Department of Homeland Security is expected to issue a rule outlining how businesses must respond when they receive notice that there are discrepancies in a worker’s tax records. Many businesses simply ignore such notices now. Under the new rules, employees would have a limited time to contact the Social Security Administration to correct the information, or face termination. The rule would transfer more responsibility for enforcement to companies — part of a Homeland Security effort to break through the complacency that some officials say the corporate world has about illegal workers. The initiative follows warnings by Homeland Security Secretary Michael Chertoff that his department would toughen enforcement if efforts to overhaul the flawed immigration system failed.

Michael Chertoff is, naturally, a man of system. He believes he can arrange the several parts of a dynamic society with the same rational, determined method as one designs movement of chess pieces. To himself he appears brave and honorable, willingly shouldering the great burden of relieving us of the illegal menace. In actuality, Chertoff is neither brave nor honorable, but rather, a greater menace than what could ever be dreamed up by people living and working in peace, regardless of their belonging to a particular government.

The very existence of an immigration “system” is a flaw, as is its reform apart from nullification. Society has evolved in such a manner that the decision to hire a worker leaves little room for a consideration of her bondage to a state. The game of human society will be successful when politicians and statesmen understand that attempting to impress upon humans legislation that is thoroughly irreconcilable with evolved norms will always lead to the highest degree of disorder.

A Few Links…

…for your enjoyment!

 1) Extremely rare Roy Buchanan.  Prepare to be blown away. 

 2) From his ironic home base at Murky Coffee, the always lucid, expresso infused Chris W.

3) New GMU guru Pete Lesson on anarchy and pirates, dominoes, and revolutions.

Reducing taxes causes shady business?

Sandeep
In response to this ridiculously unintelligent editorial in the NYT, I sent the following letter:

To the Editor:

In addition to erroneously suggesting that international trade is a new phenomenon, you demonstrate a fundamental misunderstanding of tax incentives (“Taxes in the Global Economy,” July 25). A marginal increase in corporate taxes is more likely to compel a business to behave errantly than a reduction would, since the business must contend with a reduced reward for operating successfully. Drug companies’ layoffs may have something to do with repatriated profits, that is, if we ignore their lawsuits, costs, and inability to predict the future. Otherwise we simply view their profits as a measure of transient success, not a gracious offering by the government.

Businesses, like people, work hard if they expect to be rewarded. Increasing taxes achieves more laziness, more shady business, or both.

Sincerely,
Sandeep Prakash

The point is that you have deliberately and blunderingly chosen apostasy

Sandeep
I was initially attracted to economics because of the profound subtlety of its insights. I was fascinated by how long it took me to understand something so beautifully simple as comparative advantage: once I understood the subtle knowledge I realized just how powerful the concept is. I most admire those thinkers who choose to present the subtle insights of economic knowledge with passionate advocacy, like Bastiat and Hayek. I realized then how important it is for non-economists to understand economic knowledge, that the consequences of economists’ success and failure are severely diametric.

So all I want to say here is booo! to those economists who would attempt a crude short-cut to passionate advocacy by self-sycophantically presenting their ideas as lone Truth standing up to a faith-based free-market hegemony.

See Outstanding Men Boudreaux, Tabarrok, and Mankiw.