New Jersey Bans Tesla: Capitalism vs. Cronyism

2014-03-13 Tesla Store

Capitalism and free markets are good. Cronyism is bad. Sometimes trying to explain the difference between the two to people can be hard. The one upside to the state of New Jersey effectively banning Tesla from opening any stores in their state is that at least it makes it easier for people to tell which is which. It’s also helpfully in complete and total violation of your usual expectations for a story about economic liberty:

This is a startling inversion of political stereotypes: Northern Californian capitalists quashed by East Coast Republicans defending the use of government regulations to keep competition out of the marketplace.

In a nutshell, politically powerful car dealers are trying to slam the door on Tesla before Tesla has a chance to show people that buying a car need not be a painful ordeal. Meanwhile car makers, who are often at odds with car dealers, are united to do anything they can to prevent Tesla from changing the whole landscape for car manufacturing in the US. So they are both doubling down on old, outdated laws that gave car dealers geographic monopolies back in the day when car makers had all the power.

And that, in a nutshell, is the curse of government intervention in markets. Even in those cases where it might have been valuable and necessary once upon a time, the laws will still be around decades after their original purpose has been forgotten, and there will be plenty of politically powerful elites ready to pay whatever it takes to keep those laws on the books and in force to protect their business interests. That’s not socialism, but it’s not capitalism either. It’s cronyism. Wired has the rest of the story, by the way, and it’s worth a quick read.

The Dalai Lama and…Capitalism?

The American Enterprise Institute hosted His Holiness the Dalai Lama for an event titled “Happiness, Free Enterprise, and Human Flourishing.” The two panels were “Moral Free Enterprise: Economic Perspectives in Business and Politics” and “Unlocking the Mind and Human Happiness.” The speakers (besides the Dalai Lama) included Arthur C. Brooks (AEI), Jonathan Haidt (New York University), Glenn Hubbard (Columbia University), Daniel S. Loeb (Third Point LLC), Diana Chapman Walsh (MIT), Richard Davidson (University of Wisconsin), Otto Scharmer (MIT), and Arthur Zajonc (Mind & Life Institute). “This is such a wonderful day when a religious leader particularly loved on the left comes to a free market think tank,” said Jonathan Haidt (as quoted in a Yahoo News piece). “It makes me think we can break out of the rut we’ve been in for so many years in our arguments about business and government.”

Check it out.

The Pre-Protestant Ethic and the Spirit of Capitalism

Samuel Gregg of the Acton Institute has an excellent article at Public Discourse entitled “Why Max Weber Was Wrong,” packing in a wealth of information and resources regarding the development of capitalism. Far from having Protestant roots, capitalism grew up in the very Catholic West. “Even Catholic critics of modern capitalism,” writes Gregg, “have had to concede that “the commercial spirit” preceded the Reformation by at least two hundred years. From the eleventh century onward, the words Deus enim et proficuum (“For God and Profit”) began to appear in the ledgers of Italian and Flemish merchants. This…symbolized just how naturally intertwined were the realms of faith and commerce throughout the world of medieval Europe.” Drawing on the work of various researchers and historians, Gregg points to the increased sophistication and innovation of banking, business models, and wealth creation in the Middle Ages. He concludes, “The point…is that the widespread association of one form of Protestantism with capitalism is theologically dubious, empirically disprovable, and largely incidental. To make these observations is not to propose that modern capitalism was somehow constructed upon a “Catholic ethic.” That would be equally false. It is simply to note that much of Weber’s particular analysis is very questionable and that this should be acknowledged by economists, historians, and above all, by Catholics.”

Check it out.

I Cried Over A Washing Machine

Economist Steve Horwitz has a great post at Bleeding-Heart Libertarians on statistician Hans Rosling’s (if you haven’t seen his site Gapminder, you should) TED talk “The Magic Washing Machine.” Horwitz says, “A number of my male libertarian economist friends have, independently, told me that there is a video that brings them to tears when they watch it, and especially when they show it to student groups.  I have had that reaction to the video as well…Yes, those heartless libertarian male economists report getting choked up and teary-eyed when they show this video to students.” These “9 minutes, and especially the last 90 seconds or so,” had me in tears as well.

I cried over a washing machine.

Why is this? Horwitz captures it beautifully:

What gets me about that video is the way Rosling captures an abstract intellectual argument about the power of markets and industrialization to improve people’s lives.  He uses a very concrete, emotionally rich example that combines our wanting to root for an underdog with a clear example of how markets have liberated both immigrants and women to live more flourishing lives.  We talk a lot about GDP per capita and human capital accumulation and women’s labor force participation rates.  But it is the idea that industrialization and capitalism made it possible for women to be freed from drudgery and to have the time to read and learn a new language and everything else that has characterized the dramatic improvement in women’s lives in the last century or more that really matters. Critics of markets sometimes say “you can’t eat GDP.” What they miss is that you can’t eat, or learn to read, or go to school, or leave a bad marriage, or do pretty much any of the basics that we might see as required for a flourishing life without the wealth and time created by the market economy.

The Tea Party Fights The Man

2013-10-08 Rand Paul

The Tea Party does not have a lot of friends in Washington. Conventional wisdom–the sort of thing you hear on NPR, for example–is that the GOP has redistricted itself to death. By creating solid red districts, they’ve turned over power to the loonies on the fringe. Complementary theories include the notion that the Tea Party consists of a bunch of delusional fools who are shoveling their hard earned life-savings to snake oil selling PACs who have no interest in making real changes, but just want to make a buck off of gullible fools.

Both of these narratives tap into deep political stereotypes, but neither actually make much sense. The problem with the gerrymandering explanation is that it’s the opposite of how gerrymandering actually works. Not that I’m defending redistricting games, but the essence of gerrymandering is called “packing and cracking“, and it means you pack your opposition into dense, homogeneous districts but you crack (spread out) your own supporters as much as possible. Think about it for a minute, if you’ve got 5 districts and the overall population is basically 50/50 Democrat and Republican, do you (as a Republican) want to put all of your voters in one dark red district and leave the Democrats to have 4 very slightly blue districts? No: that’s how you lose an election, not how you win it. The idea that the GOP created a bunch of ultra-conservative districts doesn’t make any sense.

Meanwhile, the idea of the huckster political operative taking grandma and grandpa’s money to go off on a doomed crusade to end Obamacare taps nicely into images of televangelist faith healers (i.e. negative stereotypes of the religious right) and the influential What’s the Matter With Kansas?, but all it really does is expose liberal arrogance. The idea is that conservatives are just too darn stupid to know what’s good for them (i.e. liberal policies) when the reality is that conservatives have different values than liberals. For example, conservatives believe that passing on staggering amounts of debt to their children is morally reprehensible and are willing to sacrifice their own interests to stop it.

But is this just spin? Nope, it turns out there are some pretty hard numbers behind this. I got tipped off to that fact when a Facebook friend posted this Washington Times opinion piece: Tea Party Loosens K Street’s Stranglehold on the GOP. The thesis of the article is pretty simple: before the Tea Party, Republican candidates depended on cash from big business and lobbyists to run their campaigns. But a proliferation of ideological PACs provided an alternative source of funds separate from the interests of big business. Carney, who wrote the piece, concludes that Tea Party candidates are therefore getting their money from small business owners and retirees: individuals.

I don’t think the article backs this up solidly, but the same friend who posted it followed it up with this: 

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The Importance of Economic Freedom in 6 Graphs

The Fraser Institute recently released its Economic Freedom of the World: 2013 Annual Report, which reveals the continual decline of the U.S. (#2 in 2000, now #17). Some may object to the term “economic freedom,” seeing it only as a pretty-sounding Trojan Horse for the evil bourgeois system of capitalism.

Guess what: it is.

But rhetoric is important (as economist Deirdre McCloskey has explained) and “economic freedom” is, in my view, a more accurate description. And far from living up to its caricature (i.e. a system of power and greed that exploits the poor), economic freedom–as shown by the graphs below–does more to raise the living standards of all involved, rich and poor alike, than any other economic system yet discovered. Descriptions are at the bottom of the graphs.

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Ronald Coase, 1910-2013

Nobel Prize-winning economist Ronald Coase died recently at the age of 102. Many fine tributes have been written over the past week, but a common theme in many of them is that Coase was an economist interested in what actually happens in the economy. Or, as he explains below, “the approach [to economics] should be empirical.”

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The Decline of France

2013-09-03 French Decline

This article is over a week old, but still relevant. Part of the subtext of the broad left vs. right dichotomy in America politics is the whole question: should we follow the European model or not? Of course there isn’t just one “European” model, but France is often held up as an exemplar of what to do by the left (socialized healthcare) and also what not to do by the right (overbearing labor regulation).

In either case, the fate of France is of interest, and this article describes the grim reality.

At stake is whether a social democratic system that for decades prided itself on being the model for providing a stable and high standard of living for its citizens can survive the combination of globalization, an aging population and the acute fiscal shocks of recent years

These are high stakes indeed.

Bono: Africa Unchained

Everyone loves Bono. He’s a good man. And U2 rocks. He has also been one of the strongest proponents of foreign aid. This is why the following has come as a bit of a shock:

Foreign aid has been blasted by the likes of economists William Easterly and Dambisa Moyo. But Bono? While not blasting it per se (not all aid is created equal, mind you), he recognized that it is economic development that is the key to reducing poverty. As The Economist recently reported,

The world’s achievement in the field of poverty reduction is, by almost any measure, impressive. Although many of the original [Millennium Development Goals]—such as cutting maternal mortality by three-quarters and child mortality by two-thirds—will not be met, the aim of halving global poverty between 1990 and 2015 was achieved five years early…The MDGs may have helped marginally, by creating a yardstick for measuring progress, and by focusing minds on the evil of poverty. Most of the credit, however, must go to capitalism and free trade, for they enable economies to grow—and it was growth, principally, that has eased destitution…[T]he biggest poverty-reduction measure of all is liberalising markets to let poor people get richer. That means freeing trade between countries (Africa is still cruelly punished by tariffs) and within them (China’s real great leap forward occurred because it allowed private business to grow). Both India and Africa are crowded with monopolies and restrictive practices.

Many Westerners have reacted to recession by seeking to constrain markets and roll globalisation back in their own countries, and they want to export these ideas to the developing world, too. It does not need such advice. It is doing quite nicely, largely thanks to the same economic principles that helped the developed world grow rich and could pull the poorest of the poor out of destitution.

Bono appears to have grasped this concept (he is a self-proclaimed “evidence-based activist”). And he rocked it at Georgetown University (if for nothing more than his Bill Clinton impression). He spoke of how “it’s not just aid. It’s trade, it’s investment, it’s social enterprise. It’s working with the local citizenry to help them unlock their own domestic resources so they can do it for themselves. Think anyone in Africa likes aid? C’mon.” He said that the hero will be “the nerd” and, more specifically, “Afro-nerds.” These individuals have been using technology and social media to expose government corruption and increase transparency.

Bono with George Ayittey at TEDGlobal. The book is Ayittey’s ‘Africa Unchained: The Blueprint for Africa’s Future’.

Where did this come from? While it may have come from multiple sources, I’m willing to bet economist George Ayittey’s (above with Bono) impassioned TED speech and post-speech discussions with Bono had an influence. See why below.

Red Mars – An Accidental Tyranny

I did not like Red Mars (by Kim Stanley Robinson or just KSR) very much. I was pretty clear about this in my Goodreads review, where I gave the book a solitary star. I got a couple of responses to that review, and they asked me to go into more detail about the problems I had with that book. So, in this post, I shall. Along the way I can promise fun with economics and political philosophy for everyone!

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