Red Clay Citizen

Libertarianism for Progressives

Print and read.
-Max Borders

WhoTube? Complexity and Economics

Wanted to share these video entries to the APEE/MBM Communicators contest. Check 'em out while gnoshing your lunch, maybe learn a lil something:

Part One

Part Two

Thanks,
Max Borders

Cooperation without Centralization

I love this fable. If you've never read "I, Pencil," you should.
-Max Borders

The Relationship Between Trade & Peace

My dear friend Michael Strong has a wonderful paper up detailing the relationship between peace and free trade. (Michael is co-founder along with Whole Foods CEO John Mackey of FLOW -- one of the coolest groups around advocating for conscious capitalism and social entrepreneurship.) Check it out.
-Max Borders

Ghetto Nihilism: Reflections on MLK Day

Civitas just had NPR's Juan Williams as a guest speaker. In his open forum discussion, he laid out a case against ghetto nihilism similar to this one made by Rod Dreher (whom I usually cannot stomach). Williams' basic point is that the black community must say "enough" to the adoration of no-account rap stars, pull itself up by the bootstraps, and stop buying into the victimology propogated by people like Al Sharpton, (not to mention so-called "scholars" in our institutions of higher education).

When it comes to all the trouble in the inner cities (gang violence, poverty, etc.) the problem many conservatives like to point to is a bankrupt culture - or set of cultural icons, such as hiphop stars and badboy athletes. But we should ask: are these causes or symptoms?

There are two major factors that could lead to all this death and ghetto nihilism in the black community, of which music and culture are probably just symptoms (albeit reinforcing symptoms):

a) the welfare state, which incentivizes people to live at subsistence poverty and abnegate personal responsibility;

b) drug prohibition, which creates high-profit margins on a black market. Gang wars are the result of protecting those markets and associated turf. Simple economics;

c) guilty white folks in academe who perpetuate the notion of institutionalized racism and the contemporary peddlers of race-baiting who feed upon such narratives;

When one considers all of these factors, it's a recipe for total failure in any urban community. But there is no political force in the world that will ever fully deny ghetto kids welfare checks. Nor is there a force strong enough to see decriminalization through. So these problems - particularly those in the urban black communities - are going to be with us for a long time to come. (One could say something similar about rural whites dependent on welfare and meth.) We can talk all day about Snoop Dog or lay blame at the feet of black athletes, but role models will never emerge from a community that the government has set up to fail.
-Max Borders

From Leftist to Libertarian?

Interesting interview with John Mackey, CEO of Whole Foods on his evolution from democratic socialist to compassionate free-marketeer. Mackey reminds us that even our most altruistic values are still values and we can create markets in them.
-Max Borders

Economic Freedom Index

Heritage's Economic Freedom Index is out. (I wish they would do this for the individual states within the US.) Not suprisingly, Hong Kong is still the most economically free place in the world. The US is 5th, behind Singapore, Ireland and Australia.
-Max Borders

Milton Friedman v. Naomi Klein

Posthumous argument.
-Max Borders (HT: Brian Balfour)

More Krugmania Debunking

Sheldon Richman uses this Freeman article to undertake a task that seems to be all too easy these days: exposing NYT columnist Paul Krugman for the statist and bad economist he is.

The latest Krugman gaffe is his recent column regarding America's trade with poor nations. In it, Krugman asserts:

"In fact, it’s hard to avoid the conclusion that growing U.S. trade with third world countries reduces the real wages of many and perhaps most workers in this country."

To this, Richman expertly reminds the reader of the concept of comparative advantage, something Krugman allegedly believes in but seems to ignore in his claim anyway. Krugman's prescription for this perceived problem? To his credit, he doesn't call for trade restrictions. Rather, he uses this as yet another excuse to clamor for....surprise! "strengthening the social safety net." In other words, an expansion of the already massive welfare state. Richman responds accordingly:

"We must not do what Krugman proposes. While he insists he does not want trade interfered with, his call for "strengthening the social safety net" would in fact require interference with trade. Welfare-state programs, which have their own perverse political dynamic, require financing through taxation. Taxation confiscates resources that would go toward creating new productive ventures, i.e., opportunities for the very people Krugman wants to help."

Richman counters with his own recommendation:

"It (government) should undertake the wholesale deregulation and desubsidization of the American economy. The way to make adjustment to economic change as swift and painless as possible is to maximize workers' options, self-employment included. And the way for the government to do that is to stop interfering with market activities. Every existing tax, regulation, subsidy, and trade barrier is a disadvantage to smaller and potential competitors and a protectionist privilege for incumbent firms. To the extent that the government -- unwittingly or not -- inhibits competition through intervention, it harms workers. The more precarious a worker's situation is, the more he's harmed."

Boudreaux on Today's Krugmania

I'm starting to think that Paul Krugman is so enamored with being a darling of the left, that he has forgotten - or perhaps abandoned - even the fundamentals (law of comparative advantage). Boudreaux pits him against himself again:

Paul Krugman worries that, although trade between high-wage countries is mutually beneficial, "trade between countries at very different levels of economic development tends to create large classes of losers as well as winners" - and so is suspect because it likely harms ordinary American workers (“Trouble With Trade,” December 28).

A famous trade economist argues that this concern is misplaced.  In a 1996 essay, this economist - responding to a protectionist who worried that western trade with low-wage countries would harm workers in the west - wrote that this protectionist "offers us no more than the classic 'pauper labor' fallacy, the fallacy that Ricardo dealt with when he first stated the idea, and which is a staple of even first-year courses in economics. In fact, one never teaches the Ricardian model without emphasizing precisely the way that model refutes the claim that competition from low-wage countries is necessarily a bad thing, that it shows how trade can be mutually beneficial regardless of differences in wage rates."

Oh - the economist who wisely warned against the pauper-labor fallacy is none other than Paul Krugman.*

-Max Borders

Roberts on Economic Pessimism

Sky falling? Nah. Onward and upward.
-Max Borders

Post-Tryptophan Titter

...from the crazy kids over at Bureaucrash. "Consume Nothing Day."
-Max Borders

Naomi Klein Again

Professor Boudreaux has yet another excellent response:

"Although reviewed in the Washington Post Book World's "Economics" section, Naomi Klein's book is to economics what Spiderman comic books are to arachnology."

Dear Editor

In her new book, Naomi Klein reveals what she sees as a smoking gun in the hands of the late Milton Friedman.  It's true that Mr. Friedman wrote that "only a crisis - actual or perceived - produces real change" ("Doing Well by Doing Ill," November 25).  From these words Ms. Klein draws the fantastically mistaken conclusion that Mr. Friedman was summoning capitalists to wreak havoc upon an unsuspecting world.  Unfortunately, reviewer Shashi Tharoor's defense of Mr. Friedman - that he should not be read literally - also misses the point.

Ms. Klein's mistake is the sophomoric one of confusing description with prescription.  Mr. Friedman's claim was descriptive.  It is of the same genre as the claim made to my family years ago by a physician who shared our frustration at my overweight father's refusal to eat a healthier diet: "It'll likely take a heart attack to convince him to eat less and exercise more."  If Ms. Klein had heard this statement, I suspect that she would have warned us that my dad's doctor was prescribing for him a heart attack!

Don makes blogging easy.
-Max Borders

Naomi Klein? No. Peace Through Commerce

Dr. Turner over at the Prog Pulse has a post on Naomi Klein's latest effort in postmodern revisionist history:

She outlines in great detail the violence that accompanied, or more accurately was required, in order to "liberate" world markets in Friedman's name.  From Chile and Argentina to Tiananmen Square; from Poland and the Soviet Union to South Africa and Southeast Asia; from 9/11 and the Department of Homeland Security to New Orleans and Iraq.  It's all there.  When disaster strikes the corporatists always have only one solution…privatize or die.  And if you have to crack a few heads to crack open a few markets…well, that's the price you pay for economic freedom.

The trouble with Klein's and Turner's argument is that it fails to separate war from trade. While there have been many who argue - plausibly, I think - that failed states (read failed institutions) require institutional change. This can be carried out exogenously or endogenously, which I discuss at length here. But the attempt to conflate trade with war is a rhetorical trick that would invite the ire of many dovish free traders whose mantra is "peace through commerce". In any case, history proves time and again that people who trade are less likely to fight (all of which has little to do with the relative socialism within a border -- unless said socialism contributes to corruption or bellicosity -- i.e. anti-institutions.)

And does Dr. Turner really want to go back into history and look at the relative body counts?
-Max Borders

On the Anniversary of Friedman's Death

On the virtues of greed and the question: "where are your angels?"

Where right, left and center agree?

Daniel B. Klein argues that there is a consensus about global free trade despite the nativist, protectionist, xenophobic and otherwise confused rhetoric of anti free-traders everywhere.
-Max Borders

Private Post: Germany, now Japan

We should watch the privatization of the Japanese postal service very carefully. It's long overdue here, too. When are we going to wake up?

Economists on "Market Failure" and Gov't Failure

Russ Roberts and Don Boudreaux offer us (and more importantly, progressives) a long overdue lesson on so-called "market failure." Listen and learn.
-Max Borders

Markets: Boudreaux on Regulation

Markets are self regulating. Boudreaux:

Reviewing "skeptical environmentalist" Bjorn Lomborg's new book, Tim Flannery describes Lomborg and other advocates of free markets as "those who believe that markets should not be regulated" ("Is It Hot in Here?," September 9).  This description is incorrect.

Those of us who advocate free markets believe that markets should be tightly regulated, and that such regulation is best achieved by maximum possible consumer choice along with freedom of producers to enter and exit all industries and freedom of consumers and suppliers to determine the terms upon which they will trade.  We believe also that government regulation of markets too often shields producers from competition and, hence, from the need always to pay close attention to consumers' wishes.  Such "regulation" by government makes markets less, not more, regulated.

Perhaps we're mistaken; perhaps we're correct.  Either way, it is inaccurate to say that we "believe that markets should not be regulated."

Water: Raleigh's Soviet Rationing is Failing

The politicians are all in a tizzy about Raleigh's water shortages. Maybe they could use, oh, I don't know: PRICES!

Prices allow people to make rational responses to scarcety. Water markets are the best way to conserve water and institute prices (Duh.) Brian Balfour has pointed out on this blog before that if we go to a single payer healthcare system, our country's medical system will mirror Raleigh's water crisis. Markets work folks. Call it "market fundamentalism" if you like, but shortages are rarely, if ever, a problem where there is a market free of price caps, controls, and socialist rationing.

Intelligent Design a la NC Policy Watch

Rob Schofield (I actually mention his name out of respect for him and in the spirit of open inquiry) has penned a delightful little piece on the relationship between the sub-prime mortgage fallout and global warming. The connective tissue, by Schofield's lights, is the need for the expansive regulatory state:

In effect, those who would promote and benefit from the continued short-term expansion of a carbon-fueled economy are the equivalent (albeit in many cases unwitting) of the rapacious mortgage brokers who helped propel the home foreclosure crisis. Both groups perceive themselves to be in accord with some set of immutable natural laws in which the pursuit of individual wealth is the highest form of human behavior. Each is oblivious to the broader effects of their own action for the rest of society.

This narrative, of course, is not new. I'm actually surprised that Schofield didn't blame the subprime mortgage issue on global warming itself. Most zealots of the Big Green Church are as eager to blame global warming, as old world zealots blame the Devil. But no, Schofield simply thinks that individual market actors need to be reined in -- kept from their excesses under government jackboots. Or, if you like, government nannies who must keep people from making risky judgements (as if the market hasn't punished the both parties - mortgagers and mortgagees - enough in the case of the sub-prime fiasco). Nevermind that mortgage companies are changing their own rules as they see fit to contain risk.

Schofield's answer is simply to remove risk from life by fiat. He overlooks all the people who are currently benefiting from those subprime loans; people who have been financially responsible and would not have otherwise qualified under his utopian regime. But nevermind them. He and a handful of bureaucrats are prepared to make your household financial decisions for you -- to take away your ability to attempt to live beyond your means and a mortgage company's risky decision to allow you to.  The current market punishment for such excesses is not enough. Excess must be proscribed by law.

But what about Schofield's general celebration of the regulatory state? Does it protect "freedom and prosperity"? Is it possible for an elite to adjust the rheostats of the market to make it work toward some ideal envisioned by Schofield? I'd argue no. Schofield is suffering under the planner's illusion. You might say Schofield believes in Intelligent Design. Allow me to quote myself at length:

Consider quotes like this from the New York Times’ Paul Krugman: “What's interesting about [the Bush Administration] is that there's no sign that anybody's actually thinking about ‘well, how do we run this economy?’”

The very idea of “running” an economy is predicated upon the notion that economies can be run and fine-tuned, much like a machine. But what Krugman and folks like Galbraith fail to understand is that the economy isn’t a machine at all, but an ecosystem. And ecosystems aren’t designed, they evolve.

Recall the last time you were in a room with both liberals and conservatives. If the liberal heard the conservative start to talk about Intelligent Design, you might have seen him shake his head rather smugly. Why? Because he will have read his Kaufmann, his Dawkins, and of course, his Darwin. He’ll let the creationist say his piece, and then he’ll reply along these lines:

As long as the basic regularities of nature are in place, Darwinism and complexity theory predict that the myriad forms of life and details of the world will emerge from the simplest substructures -- i.e. atoms, amino acids, DNA and so on. The world doesn’t need a designer. The complexity of the world is a spontaneously generated order. The laws of nature yield emergent complexity through autocatalytic processes.

But does our smug Darwinist extend this self-same rationale beyond life’s origins?

...

People on the political left, while characterizing conservatives as being flat-earthers, do believe in a form of Intelligent Design. For like their conservative counterparts who believe that nothing as complex as nature could possibly have emerged without being designed, Beltway bureaucrats and DNC Keynesians believe nothing as complex as an economy can exist without being shaped in their image.

What both fail to realize is that neither needs a planner. Markets (individual actors in cooperation) do a better job of self-regulation than any government official can do from on high. Ecosystems (complex flora and fauna interacting in complex ways) regulate themselves better than the most determined ecologist ever could.

In fact, the intersession of bureaucrats in the economy almost always make things worse -- as harmful unintended consequences follow from their actions. Because unlike the Intelligent Designer favored by Creationists, bureaucrats are neither omniscient, nor omnipotent.

The final irony in Schofield's post is that he misses this parallel between the subprime issue and global warming. (Computer models can't map complex systems -- climate or economic.) All of this reflects the conceit of the central planner in thinking he can fully understand and adjust a complex systems to his whim. But he cannot. And that is why people like Schofield, despite all their good intentions, are paving the road to serfdom... And if people are truly being harmed by virtue of some commercial activity, there is a way to adjudicate without central planning. -Max Borders

Compassion and Capitalism

Stossel has a column on Brink Lindsay's new book The Age of Abundance: How Prosperity Transformed America's Politics and Culture. To tip off the article, Stossel makes a simple, elegant point that must be repeated time and again:

"In political life today, you are considered compassionate if you demand that government impose your preferences on others. But what's compassionate about that? Compassionate is "live and let live.""

I would add that the so-called compassion of state welfare also strips the most important aspect of our compassion -- the impetus to help others. When government bureaucrats use the coercive state apparatus to help people in the manner they see fit (crowding out private charity, introducing government inefficiency, and social dependence), they invariably make individuals less inclined to direct resources or cares to causes they deem worthy. The onus of charity is removed from the citizen and given to the state. Social entrepreneurship and markets in benevolence suffer.

I'm looking forward to reading Brink's book and hope that the upshot is that we can reconcile personal wealth and our sense of benevolence without government elites and philosopher kings. From Brink's book:

"American capitalism is derided for its superficial banality, yet it has unleashed profound, convulsive social change," he writes. "Condemned as mindless materialism, it has burst loose a flood tide of spiritual yearning. The civil rights movement and the sexual revolution, environmentalism and feminism, the fitness and health-care boom and the opening of the gay closet, the withering of censorship and the rise of a 'creative class' of 'knowledge workers' -- all are the progeny of widespread prosperity." -Max Borders

Economic Security vs. Economic Opportunity

Prof. Don Boudreaux writes eloquently in a letter to the Baltimore Sun:

"Thomas Schaller writes that "Working people value 'economic security' over 'economic opportunity'" ("Bush also earns low marks for economic policy," July 18).  If so, working people believe in a false choice, foolishly forgetting the source of the very things that they want to be secure in.  Almost everything that workers today fear losing - housing, automobiles, abundant food, scientifically sound health care, WiFi; you name it - is the result of economic opportunity.  This opportunity created these goods and services and ensures their continued abundance.  Kill economic opportunity in the quest to create more economic security and we'll have neither."

We should not forget this lesson in North Carolina, either.

NC Policy Watch Advocates Intelligent Design

Returning from a nice little mini-vacation, I arrived at the office and made my usual rounds in the blogosphere. Before I even got a cup of coffee in me, I was greeted by this lecture on intelligent design - albeit from an unlikely source.

You see, the left - while so very fond of the distributed, unplanned selection processes that form vital ecosystems - fail to see any analog in markets (you know, those places where human values are exchanged). They believe that there is a perfect utopia out there to be created by, well, intelligent designers. And corresponding to this utopia are sacred ueber-values that somehow supercede the values of market actors. To build this utopia, an all-benevolent, omnipotent government should be able to implement these values by brute force of will. And who will do the forcing? The smart kids!

Rob Schofield would like to be an intelligent designer, too -- joining that cadre of smart kids who grew up thinking that if you got all As in your Public Administration classes, you could figure out how to violate the laws of economics. It would be like scientists sitting around trying to figure out how to violate the laws of gravity. The central planners over at NC Policy Watch think demand curves magically bend at the will of people with politically correct ueber-values.

The trouble with this kind of thinking - nevermind your opinion about global warming or what people ought to value instead of air conditioning - is that it doesn't work. You can explain how subsidies destroy wealth. You can explain the law of supply and demand yet again. You can explain opportunity costs and even the reality that subsidizing renewables results in all manner of negative unintended consequences (even for the environment) All the intelligent designer will do is make some grumblings about "free market fundamentalism" as if such a nifty bromide counts as an argument for why economic fundamentals (and yes freedoms) can (or should) be waved away by government fiat.

But understanding market fundamentals is not about preaching a gospel. It's about communicating a science. And the fact is, economics is a science central planners would just as soon ignore. Marx did. Schofield, acting as a priest for the Big Green Church, would like you to accept his version of intelligent design. (He probably wants it taught in the schools.) But science is science, and scarcity is a solemn and severe master.

The only way faith-based central planning would ever be able to make a return is by the 21st Century's version of an apocalypse myth. Clearly, when it comes to climate change, NC Policy Watch has been washed in the blood. Hallelujiah!

(If large-scale anthropogenic climate change turns out to be true, try adaptation.) -Max Borders

NC Energy Division: Bang or Whimper, Just Die

Another journalist-qua-editorialist with no economics training, who's never even seen a Julian Simon book, peddles another mythical crisis to justify another useless bureaucracy.

Burning Food, Expensive Beer

More evidence (hat tip, Inner Banks Eagle) of ethanol subsidies driving up the costs of food and drink. And beer! Not the beer! -MB

Smoked Out

The Charlotte Observer says Phillip Morris's departure from the Charlotte area is a "downside of globalization." Perhaps. But its also an indication that the government's witchhunt against Big Tobacco is taking its toll--not to mention NC's declining business environment and corporate taxation, currently among the worst in the Southeast (nay, the nation). This move also suggests that so-called "economic incentives" don't work. Put that in your pipe and smoke it. -Max Borders

If it's good enough for Tanzania...

Tanzania has a hit song about privatization. The African country has had far too many years of less-than-competent government controlling its economy. If the ratio of private-to-public sector jobs (currently it's less than 5-to-1) doesn't stop sliding in North Carolina, we're going to need a song of our own.

Minimum Wage Blues

Congress, in exchange for caving on war funding, must have struck a deal to get in their economically unsound minimum wage legislation that is sure to hit to small businesses particularly hard. I have argued elsewhere that this type of intervention in the economy is a bad idea for a number of reasons. Congressional lefties clearly don't understand the nuances of labor supply and demand -- clouded as they are by meaningless concepts such as "living wage." Alas, here we have another blow against the margins of businesses already plagued by the price of healthcare they've been saddled with the responsibility for providing due to our skewed tax code. Sigh. No joy watching these government circuses in our state and in Washington trying to fix and plan our economy like 'intelligent designers.'

Conscious Capitalism, Peace and Education Reform

Here's a great Podcast by a radio station in Texas of FLOW's Michael Strong.  Michael gets it in so many ways. I would strongly encourage leftish types to listen to this.

What Should They Do with Dix?

According to Under the Dome, they're still smoking over what to do with Dorothea Dix hospital and the grounds. How can it to go to its best and highest valued use?

Auction it.

Speaking of Poverty

Food for thought for our 'progressive' friends, from Arnold Kling. The moral? Unrestricted capitalism is by far the best poverty alleviation tool. This suggests to me that the term 'progressive' is being woefully misapplied these days.

Fishy Fears and 'Buy Local' Fetishism

Andrea Verykoukis over at the Progressive Pulse urges us to "buy local" in light of the feed scare created by a Chinese company having adding chemicals to animal fodder.

First, there is no reason to think that local farmers might not have bought the feed, themselves. To think otherwise would suggest a deep faith in local farmers' also buying local -- particularly when they can buy more cheaply abroad (and - gasp - profit).

Second, the "buy local" fetish is based on a very narrow understanding of how wealth is created and concentrated as these bright economists discuss (posted here before). Obviously Verykoukis should be free to shop where she likes -- and I certainly love my local farmer's market -- but encouraging people only to "buy local" as a matter of principle misses out on the gains from buying abroad (notwithstanding the miniscule risks associated with tainted feed from China). [Oh, and poor people in other countries live better lives when we trade with them.]

Finally, the "dose makes the poison." Irrational fears of chemical toxicity underlie almost all liberal warnings for people to buy local and organic.  But even water can be toxic if consumed at a certain level. Most pesticides and other agents are not toxic at the concentrations found in foods. Such is not to apologize for this Chinese food fraud, but for heaven's sake -- go, eat, and buy what you like. You have a better chance of having your health adversely affected by your drive to the farmer's market.

(Note: We should probably be more concerned about germs like e Coli found in organic food.)