Talking About Greed

Quote of the Day

Politicians never accuse you of ‘greed’ for wanting other people’s money, only for wanting to keep your own money

                                                          - Joseph Sobran

Quote of the Day

Democracy, Fascism and Private Definitions

George Orwell noticed that political writing tended to be vague and wrote Politics and the English Language.

The word Fascism has now no meaning except in so far as it signifies “something not desirable.” The words democracy, socialism, freedom, patriotic, realistic, justice have each of them several different meanings which cannot be reconciled with one another. In the case of a word like democracy, not only is there no agreed definition, but the attempt to make one is resisted from all sides. It is almost universally felt that when we call a country democratic we are praising it: consequently the defenders of every kind of regime claim that it is a democracy, and fear that they might have to stop using that word if it were tied down to any one meaning. Words of this kind are often used in a consciously dishonest way. That is, the person who uses them has his own private definition, but allows his hearer to think he means something quite different.

Benjamin Constant on Liberty

Benjamin Constant, The Liberty of Ancients Compared with that of Moderns (1819)

Gentlemen,

I wish to submit for your attention a few distinctions, still rather new, between two kinds of liberty: these differences have thus far remained unnoticed, or at least insufficiently remarked. The first is the liberty the exercise of which was so dear to the ancient peoples; the second the one the enjoyment of which is especially precious to the modern nations. If I am right, this investigation will prove interesting from two different angles.

Firstly, the confusion of these two kinds of liberty has been amongst us, in the all too famous days of our revolution, the cause of many an evil. France was exhausted by useless experiments, the authors of which, irritated by their poor success, sought to force her to enjoy the good she did not want, and denied her the good which she did want. Secondly, called as we are by our happy revolution (I call it happy, despite its excesses, because I concentrate my attention on its results) to enjoy the benefits of representative government, it is curious and interesting to discover why this form of government, the only one in the shelter of which we could find some freedom and peace today, was totally unknown to the free nations of antiquity.

I know that there are writers who have claimed to distinguish traces of it among some ancient peoples, in the Lacedaemonian republic for example, or amongst our ancestors the Gauls; but they are mistaken. The Lacedaemonian government was a monastic aristocracy, and in no way a representative government. The power of the kings was limited, but it was limited by the ephors, and not by men invested with a mission similar to that which election confers today on the defenders of our liberties. The ephors, no doubt, though originally created by the kings, were elected by the people. But there were only five of them. Their authority was as much religious as political; they even shared in the administration of government, that is, in the executive power. Thus their prerogative, like that of almost all popular magistrates in the ancient republics, far from being simply a barrier against tyranny became sometimes itself an insufferable tyranny.

The regime of the Gauls, which quite resembled the one that a certain party would like to restore to us, was at the same time theocratic and warlike. The priests enjoyed unlimited power. The military class or nobility had markedly insolent and oppressive privileges; the people had no rights and no safeguards.

In Rome the tribunes had, up to a point, a representative mission. They were the organs of those plebeians whom the oligarchy -- which is the same in all ages -- had submitted, in overthrowing the kings, to so harsh a slavery. The people, however, exercised a large part of the political rights directly. They met to vote on the laws and to judge the patricians against whom charges had been leveled: thus there were, in Rome, only feeble traces of a representative system.

Hayek, the End of Communism, and Me

The new “fatal” conceit

By Václav Klaus

We all have our heroes, and Hayek was, for me, one of the greatest ones. It all started in the 1960s. My country, then Czechoslovakia, experienced at the beginning of the decade an unexpected and, for communist leaders, ideologically unexplainable and indefensible economic recession — the first that had happened in a centrally planned communist country in peacetime. It was something unheard of, something unimaginable. Planning was supposed to guarantee permanent and harmonious economic growth. That surprising and unpleasant experience led even the most dogmatic communist politicians to think about a relatively far-reaching economic reform and to start implementing it. As is well known now, they tried to accomplish an impossible mission, to put into reality “a third way,” this utopian dream of all socialists and progressives, based on a belief in a fuzzy combination of plan and market.

That reform led to the weakening of the planning system and to the increased independence of firms, most of them state owned. It was movement in the right direction. The Soviet politicians and our own hardliners criticized the reform from the left. The Czech economists of my generation (I founded and became president of the Club of Young Economists) criticized the reform from the right, for its evident insufficiency and inconsistency.

At that moment, in the mid-1960s, we discovered the famous dispute about socialism, the so-called socialist calculation debate, between the Austrian economists Ludwig von Mises and F. A. Hayek on one side and the socialists Oskar Lange and Abba P. Lerner on the other, during the 1930s. This debate gave us many powerful arguments about the impossibility of economic calculation under socialism and about the futility of the idea of playing at markets instead of introducing a real market.

It enhanced the doubts we were developing from observing the evident inefficiency of our own economic system. It is a pity that this famous debate is not required reading for contemporary students. The highly regulated and subsidized economies in Europe (and in this country as well) should be discussed in light of Hayek’s arguments.

The real revelation came when we came across Hayek’s article “The Use of Knowledge in Society,” originally published in 1945. You may ask how it was possible to get access to such articles in a totalitarian communist regime. Yet, it was possible.

We scholars couldn’t get our hands on the Wall Street Journal, Newsweek, or Time, but in the libraries of academic institutions we could get the American Economic Review and similar journals. They were sufficiently scientific as to be incomprehensible for the communist censors. Even now, I give this article to my students as the best introduction to rational economic thinking. The impossibility of centralizing dispersed knowledge is one of the most important ideas in economic science, comparable to the classic formulations of Adam Smith.

BRINGING HAYEK TO LIFE IN PRAGUE
Our relatively far-reaching, and for that time, unique economic reforms led to significant changes in political life as well. In this respect, we got a lot of inspiration from Hayek’s The Road to Serfdom.

That book was illegally and unofficially translated in my country in the 1960s. It was widely read, and — what is even more important — it was understood as a decisive and final rejection of all kinds of totalitarianism, collectivism, and interventionism and as an authoritative defense of liberty. At least it was understood that way by my generation, which saw its task differently from students in Western Europe and America at that time. We wanted to introduce capitalism, not to destroy it.

C.S. Lewis on Tyranny “for the Good” of Its Victims

Quote of the Week

If we are to be mothered, mother must know best. . . . In every age the men who want us under their thumb, if they have any sense, will put forward the particular pretension which the hopes and fears of that age render most potent. They ‘cash in.’ It has been magic, it has been Christianity. Now it will certainly be science. . . . Let us not be deceived by phrases about ‘Man taking charge of his own destiny.’ All that can really happen is that some men will take charge of the destiny of others. . . . The more completely we are planned the more powerful they will be.

. . . .

Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth. Their very kindness stings with intolerable insult. To be ‘cured’ against one’s will and cured of states which we may not regard as disease is to be put on a level of those who have not yet reached the age of reason or those who never will; to be classed with infants, imbeciles, and domestic animals.

—                      C. S. Lewis, God in the Dock

Answer not a fool to his folly.....

A reflection that is at once comforting and depressing

By Theodore dalrymple

It astonishes me how many people take insult for refutation. They think that if they call someone a name – fool, for example, or dupe – they have successfully disposed of his arguments. For having decided that the person is, say, a fool, they go on to obey the Biblical injunction to 

‘Answer not a fool according to his folly, lest thou also be like unto him.’ 

The internet seems to have reinforced the human tendency to resort to the ad hominem. I cannot claim never to have resorted to it myself, in fact it is one of my chief pleasures in life; but I hope that I never use it as my sole method of argument. I am still intellectually conscientious enough to believe that something must first be shown to be mistaken before one begins to speculate (oh so enjoyably) as to why anyone is so foolish at to believe it. 

The spread of education has done little to raise the tone of argument, or the internet to improve its temper. The power of immediate response that the internet confers upon readers encourages them to give vent to their first and usually violent emotions on reading something with which they disagree. People would never have committed to paper what they are willing to commit to cyberspace; and since the way in which one expresses oneself becomes habitual, the internet causes a decline in civility. One longs for the calmer, slower, more civil world of books and hand-written letters.

My complaints about humanity’s indifference to proper argument, however, are nothing new. I happened the other day to be reading Bishop Butler’s Sermons (edited, incidentally, by Gladstone after his retirement from politics – if only our modern politicians would confine themselves to such noble tasks after their disappearance from national life). I came across the following passage, written nearly 300 years ago:

 Arguments are often wanted for some accidental purpose: but proof as such is what [people] never want for themselves…

Not to mention the multitudes who read merely for the sake of talking, or to qualify themselves for the world, or some such kind of reasons…

Several have no sort of curiosity to see what is true…

The great number of books and papers of amusement…

Have in part occasioned…this idle way of reading and considering things.     

Man does not change very much, then, a reflection that is at once comforting and depressing. 

Quote of the Day

That’s not the way capitalism is supposed to work

You are not supposed to take money away from the competent people and give it to the incompetent so that the incompetent can compete with the competent people with their own money. That’s not the way capitalism is supposed to work.

- Jim Rogers tells Zero Hedge what he thinks of bank bailouts. 

Quotation of the Day…

From The Indispensable Milton Friedman 

… is from pages 250-251 of the collection of previously unpublished essays by Milton Friedman, The Indispensable Milton Friedman (Lanny Ebenstein, ed. 2012); specifically, it’s from the October 2000 interview with Friedman done by the producers of The Commanding Heights:

INTERVIEWER: Do you think the Chile affair damaged your reputation, or more importantly, made it harder for you to get your ideas across?

MILTON FRIEDMAN: That’s a very hard thing to say, because I think it had effects in both directions.  It got a lot of publicity.  It made a lot of people familiar with the views who would not otherwise have been.  On the other hand, in terms of the political side of it, as you realize, most of the intellectual community, the intellectual elite, as it were, were on the side of Allende, not on the side of Pinochet.  And so in a sense they regarded me as a traitor for having been willing to talk in Chile.  I must say, it’s such a wonderful example of a double standard, because I had spent time in Yugoslavia, which was a communist country.  I later gave a series of lectures in China.  When I came back from communist China, I wrote a letter to the Stanford Daily newspaper in which I said, “It’s curious.  I gave exactly the same lectures in China that I gave in Chile.  I have had many demonstrations against me for what I said in Chile.  Nobody has made any objections to what I said in China.  How come?” 

Designing Men vs. Spontaneous Order

Dedicated to Tyrants of all persuasions

By David Henderson

"The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder."

This is VI.II.42 from Adam Smith, The Theory of Moral Sentiments.

Why do I quote it? Because it's an answer to a commenter on some previous blog posts of mine. This commenter defended the existing laws that require people to spend substantial time as residents in a hospital before becoming doctors. I criticized those laws. The commenter, zdc, then wrote:

So, you think you can design an improved (not sure if this means in terms of outcomes or costs or what) system.

I answered that I don't think I can design an improved system. Why did he think that I thought I could? It's because he's stuck in the "man of system" or "design" paradigm. Over the years, various governments have designed a particular system. I criticize the idea that they get to design it. Then zdc assumes that means that I think I should be able to design it.

But I'm not a designer. I'm a person who believes in spontaneous order. That is, I think that people should be free to come up with other systems and I'm willing to predict that they will. As an economist, I could speculate about what they will come up with, but there's a good chance that my predictions would be wrong. Where zdc and I probably agree is that if I were to design such a system, it would be a disaster.

Fortunately, I don't need to design a system.

So what do I propose? Letting people come up with their own systems. And my prediction, which I'm fairly sure of, is that they would come up more than one.

Consider an example from outside medical care. Imagine that back in the 1960s, the government had given IBM a legal monopoly on computers. Imagine that some economist came along and said, "I think we shouldn't have a legal monopoly on computers." Then zdc's counterpart back then would likely have said, "Oh, yeah? Then tell me how you can make computers better." The economist would have had to admit that he couldn't. Then zdc's counterpart would likely have declared victory, confident that because the economist couldn't predict what kind of computers would be built in the absence of a legal monopoly, letting IBM have a legal monopoly on computers would clearly have been the right policy.

In the meantime, the debasement of paper money continues

Incredible confusions

Part 1: ‘Positive Money’ and the fallacy of the need for a state money producer

I am usually inclined to encourage the inquiry of the fundamental aspects of money and banking. This is because I tend to believe that only by going back to first principles is it possible to cut through the thicket of widely accepted but deeply flawed theories that dominate the current debate in mainstream media, politics and the financial industry. From my own experience in financial markets I can appreciate how convenient and tempting it is in a business context, where quick and easy communication is of the essence, to adopt a certain, widely shared set of paradigms, regardless of how flimsy their theoretical foundations. Fund managers, traders and financial journalists live in the immediate present, preoccupied as they are with what makes headlines today, and they work in intensely collaborative enterprises. They have neither the time nor inclination to question the body of theories – often no longer even perceived as ‘theories’ but considered accepted common wisdom – that shapes the way they view and talk about the outside world. Thus, erroneous concepts and even outright fallacies often remain unquestioned and, by virtue of constant repetition, live comfortably in the bloodstream of policy debates, economic analysis, and financial market reportage.

This goes a long way in explaining the undeserved survival of a number of persistent modern myths: deflation is the gravest economic danger we face; Japan has been crippled by deflation for years and would grow again if it only managed to create some inflation; lack of ‘aggregate demand’ explains recessions and must be countered with easy monetary policy; and money-printing, as long as it does not lead to higher inflation, is a free lunch, i.e. we can only expect good from it. None of these statements stand up to scrutiny. In fact, they are all utterly absurd. Yet, we can barely open a newspaper and not have this nonsense stare us in the face, if not quite as bluntly as stated above, than at least as the intellectual soil from which the analysis or commentary presented has sprung. Deep-rooted misconceptions can only be dismantled through dissection of their building blocs and a discussion of basic concepts.

The dangers of going back to basics

However, going back to basics and to first principles, analyzing critically the fundamental aspects of our financial system, is not free of danger. Here, too, lies a minefield of potentially grave intellectual error, and when things go wrong here, at the basic level, the results and policy recommendations derived from such analysis are bound to be nonsensical too, if not even more nonsensical than what the mainstream believes. In this and the following essays I am going to address some of the erroneous notions at the fundamental level of money and banking that seem to have gained currency in the public debate of late.

The Quiet Revolution

As Country Club Republicans Link Up With The Democratic Ruling Class, Millions Of Voters Are Orphaned

By Angelo Codevilla

On January 1, 2013 one third of Republican congressmen, following their leaders, joined with nearly all Democrats to legislate higher taxes and more subsidies for Democratic constituencies. Two thirds voted no, following the people who had elected them. For generations, the Republican Party had presented itself as the political vehicle for Americans whose opposition to ever-bigger government financed by ever-higher taxes makes them a “country class.”  Yet modern Republican leaders, with the exception of the Reagan Administration, have been partners in the expansion of government, indeed in the growth of a government-based “ruling class.” They have relished that role despite their voters. Thus these leaders gradually solidified their choice to no longer represent what had been their constituency, but to openly adopt the identity of junior partners in that ruling class. By repeatedly passing bills that contradict the identity of Republican voters and of the majority of Republican elected representatives, the Republican leadership has made political orphans of millions of Americans. In short, at the outset of 2013 a substantial portion of America finds itself un-represented, while Republican leaders increasingly represent only themselves.

By the law of supply and demand, millions of Americans, (arguably a majority) cannot remain without representation. Increasingly the top people in government, corporations, and the media collude and demand submission as did the royal courts of old. This marks these political orphans as a “country class.” In 1776 America’s country class responded to lack of representation by uniting under the concept: “all men are created equal.” In our time, its disparate sectors’ common sentiment is more like: “who the hell do they think they are?”

The ever-growing U.S. government has an edgy social, ethical, and political character. It is distasteful to a majority of persons who vote Republican and to independent voters, as well as to perhaps one fifth of those who vote Democrat. The Republican leadership’s kinship with the socio-political class that runs modern government is deep. Country class Americans have but to glance at the Media to hear themselves insulted from on high as greedy, racist, violent, ignorant extremists. Yet far has it been from the Republican leadership to defend them. Whenever possible, the Republican Establishment has chosen candidates for office – especially the Presidency – who have ignored, soft-pedaled or given mere lip service to their voters’ identities and concerns.

Thus public opinion polls confirm that some two thirds of Americans feel that government is “them” not “us,” that government has been taking the country in the wrong direction, and that such sentiments largely parallel partisan identification: While a majority of Democrats feel that officials who bear that label represent them well, only about a fourth of Republican voters and an even smaller proportion of independents trust Republican officials to be on their side. Again: While the ruling class is well represented by the Democratic Party, the country class is not represented politically – by the Republican Party or by any other. Well or badly, its demand for representation will be met.

Representation is the distinguishing feature of democratic government. To be represented, to trust that one’s own identity and interests are secure and advocated in high places, is to be part of the polity. In practice, any democratic government’s claim to the obedience of citizens depends on the extent to which voters feel they are party to the polity. No one doubts that the absence, loss, or perversion of that function divides the polity sharply between rulers and ruled.

Representation can be perverted. Some regimes (formerly the Communists, and currently the Islamists) allow dissent from the ruling class to be represented only by parties approved by the ruling class. Also, in today’s European Union the ruling class’ wide spread and homogeneity leaves those who do not like how their country is run with no one to represent them. Though America’s ruling class is neither as narrow as that of Communist regimes nor as broadly preclusive as that of the European Union, the Republican leadership’s preference for acting as part of the ruling class rather than as representatives of voters who feel set upon has begun to produce the sort of soft pre-emption of opposition and bitterness between rulers and ruled that occurs necessarily wherever representation is mocked.

To see how America’ country class can be represented, let us glance at how the current division of American politics into a ruling class and a country class came about and why it is inherently unstable.

Ins and Outs 

Those who attribute the polarization of American politics to the partisan drawing of congressional districts at the state level have a point: The Supreme Court’s decision in Baker v. Carr (1962) inadvertedly legalized gerrymandering by setting “one man one vote” as the sole basis of legitimacy for drawing legislative districts. Subsequent judicial interpretations of the 1965 Voting Rights Act demanded that districts be drawn to produce Congressmen with specific features. No surprise then that Democratic and Republican legislatures and governors, thus empowered, have drawn the vast majority of America’s Congressional districts to be safe for Democrats or Republicans respectively. Such districts naturally produce Congressmen who represent their own party more than the general population. This helped the parties themselves to grow in importance. But the U.S. Senate and state governments also have polarized because public opinion in general has.

Political partisanship became a more important feature of American life over the past half-century largely because the Democratic Party, which has been paramount within the U.S. government since 1932, entrenched itself as America’s ruler, and its leaders became a ruling class. This caused a Newtonian “opposite reaction,” which continues to gather force.

Leszek Balcerowicz: The Anti-Bernanke

The man who saved Poland's economy, on America's mistakes and the better way to heal from a financial crisis

By MATTHEW KAMINSKI

As an economic crisis manager, Leszek Balcerowicz has few peers. When communism fell in Europe, he pioneered "shock therapy" to slay hyperinflation and build a free market. In the late 1990s, he jammed a debt ceiling into his country's constitution, handcuffing future free spenders. When he was central-bank governor from 2001 to 2007, his hard-money policies avoided a credit boom and likely bust.

Poland was the only country in the European Union to avoid recession in 2009 and has been the fastest-growing EU economy since. Mr. Balcerowicz dwells little on this achievement. He sounds too busy in "battle"—his word—against bad policy.

"Most problems are the result of bad politics," he says. "In a democracy, you have lots of pressure groups to expand the state for reasons of money, ideology, etc. Even if they are angels in the government, which is not the case, if there is not a counterbalance in the form of proponents of limited government, then there will be a shift toward more statism and ultimately into stagnation and crisis."

Looking around the world, there is no shortage of questionable policies. A series of bailouts for Greece and others has saved the euro, but who knows for how long. EU leaders closed their summit in Brussels on Friday by deferring hard decisions on entrenching fiscal discipline and pro-growth policies. Across the Atlantic, Washington looks no closer to a "fiscal cliff" deal. And the Federal Reserve on Wednesday made a fourth foray into "quantitative easing" to keep real interest rates low by buying bonds and printing money.

As a former central banker, Mr. Balcerowicz struggles to find the appropriate word for Fed Chairman Ben Bernanke's latest invention: "Unprecedented," "a complete anathema," "more uncharted waters." He says such "unconventional" measures trap economies in an unvirtuous cycle. Bankers expect lower interest rates to spur growth. When that fails, as in Japan, they have no choice but to stick with easing.

Corn-Pone Opinions

Association and sympathy vs reasoning and examination

by Mark Twain

Fifty years ago, when I was a boy of fifteen and helping to inhabit a Missourian village on the banks of the Mississippi, I had a friend whose society was very dear to me because I was forbidden by my mother to partake of it. He was a gay and impudent and satirical and delightful young black man – a slave – who daily preached sermons from the top of his master's woodpile, with me for sole audience. He imitated the pulpit style of the several clergymen of the village, and did it well, and with fine passion and energy. To me he was a wonder. I believed he was the greatest orator in the United States and would some day be heard from. But it did not happen; in the distribution of rewards he was overlooked. It is the way, in this world.

He interrupted his preaching, now and then, to saw a stick of wood; but the sawing was a pretense – he did it with his mouth; exactly imitating the sound the bucksaw makes in shrieking its way through the wood. But it served its purpose; it kept his master from coming out to see how the work was getting along. I listened to the sermons from the open window of a lumber room at the back of the house. One of his texts was this:

"You tell me whar a man gits his corn pone, en I'll tell you what his 'pinions is."

Quote of the Day

Majority Rule vs Rule of Law

"Imagine if all of life were determined by majority rule. Every meal would be a pizza. Every pair of pants, even those in a Brooks Brothers suit, would be stone-washed denim. Celebrity diet and exercise books would be the only thing on the shelves at the library. And -- since women are a majority of the population -- we'd all be married to Mel Gibson." -- P. J. O'Rourke, 1991

Quotation of the day

Kidney Failure

 “So Alvin Roth wins the Nobel Prize for, among other things, figuring out the best way to allocate kidneys subject to the constraint that you’re too damned dumb to use the price system. Next up: A Nobel prize in medicine for figuring out the best way to prolong your life while repeatedly shooting yourself in the head.”

                                                ~ Steven Landsburg

Quote of the day

The Road to Utopia

'It is only those who hope to transform human beings who end up by burning them, like the waste product of a failed experiment.'

                                                       - Martin Amis

Economics : The Foundation of Human Civilization

The Essential Problems of Human Existence

    This article is excerpted from chapter 39 of Human Action

by Ludwig von Mises

1. Science and Life

It is customary to find fault with modern science because it abstains from expressing judgments of value. Living and acting man, we are told, has no use for Wertfreiheit; he needs to know what he should aim at. If science does not answer this question, it is sterile. However, the objection is unfounded. Science does not value, but it provides acting man with all the information he may need with regard to his valuations. It keeps silence only when the question is raised whether life itself is worth living.

This question, of course, has been raised too and will always be raised. What is the meaning of all these human endeavors and activities if in the end nobody can escape death and decomposition? Man lives in the shadow of death. Whatever he may have achieved in the course of his pilgrimage, he must one day pass away and abandon all that he has built. Each instant can become his last. There is only one thing that is certain about the individual's future — death. Seen from the point of view of this ultimate and inescapable outcome, all human striving appears vain and futile.

Moreover, human action must be called inane even when judged merely with regard to its immediate goals. It can never bring full satisfaction; it merely gives for an evanescent instant a partial removal of uneasiness. As soon as one want is satisfied, new wants spring up and ask for satisfaction. Civilization, it is said, makes people poorer, because it multiplies their wishes and does not soothe, but kindles, desires. All the busy doings and dealings of hard-working men, their hurrying, pushing, and bustling are nonsensical, for they provide neither happiness nor quiet. Peace of mind and serenity cannot be won by action and secular ambition, but only by renunciation and resignation. The only kind of conduct proper to the sage is escape into the inactivity of a purely contemplative existence.

Yet all such qualms, doubts, and scruples are subdued by the irresistible force of man's vital energy. True, man cannot escape death. But for the present he is alive; and life, not death, takes hold of him. Whatever the future may have in store for him, he cannot withdraw from the necessities of the actual hour. As long as a man lives, he cannot help obeying the cardinal impulse, the élan vital. It is man's innate nature that he seeks to preserve and to strengthen his life, that he is discontented and aims at removing uneasiness, that he is in search of what may be called happiness. In every living being there works an inexplicable and nonanalyzable Id. This Id is the impulsion of all impulses, the force that drives man into life and action, the original and ineradicable craving for a fuller and happier existence. It works as long as man lives and stops only with the extinction of life.

Economics and the Citizen

In Western democracies today, the study of economics is practically outlawed

This article is excerpted from Human Action, chapter 38, "The Place of Economics in Learning."

by Ludwig von Mises

Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man's human existence.

To mention this fact is not to indulge in the often-derided weakness of specialists who overrate the importance of their own branch of knowledge. Not the economists, but all the people today assign this eminent place to economics.

All present-day political issues concern problems commonly called economic. All arguments advanced in contemporary discussion of social and public affairs deal with fundamental matters of praxeology and economics. Everybody's mind is preoccupied with economic doctrines. Philosophers and theologians seem to be more interested in economic problems than in those problems which earlier generations considered the subject matter of philosophy and theology. Novels and plays today treat all things human — including sex relations — from the angle of economic doctrines. Everybody thinks of economics whether he is aware of it or not. In joining a political party and in casting his ballot, the citizen implicitly takes a stand upon essential economic theories.

In the 16th and 17th centuries religion was the main issue in European political controversies. In the 18th and 19th centuries in Europe as well as in America the paramount question was representative government versus royal absolutism. Today it is the market economy versus socialism. This is, of course, a problem the solution of which depends entirely on economic analysis. Recourse to empty slogans or to the mysticism of dialectical materialism is of no avail.

How Change Happens

Risk and Uncertainty

By John Mauldin

"To trace something unknown back to something known is alleviating, soothing, gratifying and gives moreover a feeling of power. Danger, disquiet, anxiety attend the unknown – the first instinct is to eliminate these distressing states. First principle: any explanation is better than none… The cause-creating drive is thus conditioned and excited by the feeling of fear …"

                                                – Friedrich Nietzsche

"Any explanation is better than none." And the simpler, it seems, in the investment game, the better. "The markets went up because oil went down," we are told. Then the next day the opposite relationship occurs, and there is another reason for the movement of the markets. But we all intuitively know that things are far more complicated than that. As Nietzsche noted, dealing with the unknown can be disturbing, so we look for the simple explanation.

"Ah," we tell ourselves, "I know why that happened." With an explanation firmly in mind, we now feel we know something. And the behavioral psychologists note that this state actually releases chemicals in our brain that make us feel good. We literally become addicted to the simple explanation. The fact that what we "know" (the explanation for the unknowable) is irrelevant or even wrong is not important for the chemical release. And thus we look eagerly for reasons.

And that is also why some people get so angry when you challenge their beliefs. You are literally taking away the source of their good feeling, like drugs from a junkie or a boyfriend from a teenage girl.

Thus we reason that the NASDAQ bubble happened because of Greenspan. Or that it was a collective mania. Or any number of things. Just as the proverbial butterfly flapping its wings in the Amazon triggers a storm in Europe, we may conclude that a borrower in Las Vegas triggered the subprime crash.

Crazy? Maybe not. Today we will look at what complexity theory tells us about the reasons for phenomena as apparently diverse as earthquakes and the movement of markets. Then we’ll look at how New Zealand, Fed policy, gold, oil, and that lone investor in St. Louis are all tied together in a critical state. Of course, how critical and which state are the issues.

"Sense And Nonsense"

 Assorted Thoughts

“Government interference into economic affairs almost never alleviates the problem it set out to solve. The unintended, and perhaps intended, consequences only rally more calls for further intervention. Because of its countless edicts, the majority of people who reside in Western economies have no concept of how and why markets function as they do. They have mistaken crony capitalism or socialism for genuine capitalism. While mistaken, this distrust of the market has been the lifeblood of the parasitic state.”

                                   —James E. Miller, “Learning to Laugh at the State,” 

“We have been living beyond our means. We have been paying ourselves more than our efforts were earning. We sought political leaders who would assure us that the good times would never end and that the centuries of boom and bust were over; and we voted for those who offered that assurance. We sought credit for which we had no security and we gave our business to the banks that advertised it. We wanted higher exam grades for our children and were rewarded with politicians prepared to supply them by lowering exam standards. We wanted free and better health care and demanded chancellors who paid for it without putting up our taxes. We wanted salacious stories in our newspapers and bought the papers that broke the rules to provide them. And now we whimper and snarl at MPs, bankers and journalists. Fair enough, my friends, but, you know, we really are all in this together.”

                                                                      —Matthew Parris

 “Suppose I’m a fund manager worried that if I underperform the market over a twelve-month period I’ll be out of a job. What value would I attach to a boring business with dependable and robust cash flows, and therefore represents an excellent place to allocate preserve and grow my client’s capital over time but which, nevertheless, is unlikely to ‘perform over the next twelve months? The likelihood is that I will value such cash flows less than an investor who considers himself the custodian of his family’s wealth, who attaches great importance to the protection of existing wealth for future generations, values permanence highly, and is largely uninterested in the next twelve months. In other words, an institutional fund manager might apply a ‘higher discount rate’ to those same expected cash flows than the investor of family wealth. They arrive at different answers to the same problem. The same cash flows are being valued subjectively and there is no such thing as an objective or ‘intrinsic value’ embedded in the asset, even though it has cash flows.”

                             —Dylan Grice in SocGen’s Popular Delusions, 17 July 2012.