Arsonists Running the Fire Brigade

Promoting Failure

By John Mauldin

The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.

– Alan Greenspan

If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.

– John Maynard Keynes

And He spoke a parable to them: "Can the blind lead the blind? Will they not both fall into the ditch?"

– Luke 6:39-40

Six years ago I hosted my first Thanksgiving in a Dallas high-rise, and my then-90-year-old mother came to celebrate, along with about 25 other family members and friends. We were ensconced in the 21^st floor penthouse, carousing merrily, when the fire alarms went off and fire trucks began to descend on the building. There was indeed a fire, and we had to carry my poor mother down 21 flights of stairs through smoke and chaos as the firemen rushed to put out the fire. So much for the advanced fire-sprinkler system, which failed to work correctly.

I wrote one of my better letters that week, called "The Financial Fire Trucks Are Gathering." You can read all about it here, if you like. I led off by forming an analogy to my Thanksgiving Day experience:

I rather think the stock market is acting like we did at dinner. When the alarms go off, we note that we have heard them several times over the past few months, and there has never been a real fire. Sure, we had a credit crisis in August, but the Fed came to the rescue. Yes, the subprime market is nonexistent. And the housing market is in free-fall. But the economy is weathering the various crises quite well. Wasn't GDP at an almost inexplicably high 4.9% last quarter, when we were in the middle of the credit crisis? And Abu Dhabi injects $7.5 billion in capital into Citigroup, setting the market's mind at ease. All is well. So party on like it's 1999.

However, I think when we look out the window from the lofty market heights, we see a few fire trucks starting to gather, and those sirens are telling us that more are on the way. There is smoke coming from the building. Attention must be paid.

I was wrong when I took the (decidedly contrarian) position that we were in for a mild recession. It turned out to be much worse than even I thought it would be, though I had the direction right. Sadly, it usually turns out that I have been overly optimistic.

This year we again brought my now-96-year-old mother to my new, not-quite-finished high-rise apartment to share Thanksgiving with 60 people; only this time we had to contract with a private ambulance, as she is, sadly, bedridden, although mentally still with us. And I couldn't help pondering, do we now have an economy and a market that must be totally taken care of by an ever-watchful central bank, which can no longer move on its own?

I am becoming increasingly exercised that the new direction of the US Federal Reserve, which is shaping up as "extended forward rate guidance" of a zero-interest-rate policy (ZIRP) through 2017, is going to have significant unintended consequences. My London partner, Niels Jensen, reminded me in his November client letter that,

In his masterpiece The General Theory of Employment, Interest and Money, John Maynard Keynes referred to what he called the "euthanasia of the rentier". Keynes argued that interest rates should be lowered to the point where it secures full employment (through an increase in investments). At the same time he recognized that such a policy would probably destroy the livelihoods of those who lived off of their investment income, hence the expression. Published in 1936, little did he know that his book referred to the implications of a policy which, three quarters of a century later, would be on everybody's lips. Welcome to QE.

It is this neo-Keynesian fetish that low interest rates can somehow spur consumer spending and increase employment and should thus be promoted even at the expense of savers and retirees that is at the heart of today's central banking policies. The counterproductive fact that savers and retirees have less to spend and therefore less propensity to consume seems to be lost in the equation. It is financial repression of the most serious variety, done in the name of the greater good; and it is hurting those who played by the rules, working and saving all their lives, only to see the goal posts moved as the game nears its end.

Central banks around the world have engineered multiple bubbles over the last few decades, only to protest innocence and ask for further regulatory authority and more freedom to perform untested operations on our economic body without benefit of anesthesia. Their justifications are theoretical in nature, derived from limited-variable models that are supposed to somehow predict the behavior of a massively variable economy. The fact that their models have been stunningly wrong for decades seems to not diminish the vigor with which central bankers attempt to micromanage the economy.

Seattle en route to Venezuela

A Socialist Wins in Seattle

By John Nichols

When Machinists union members rallied in Seattle in mid-November to protest Boeing’s demand for wage and pension cuts, the newest municipal official roused the crowd. “We salute the Machinists for having the courage to reject this blatant highway robbery from the executives of Boeing in pursuit of their endless, endless thirst for private profit.” Kshama Sawant, an economics professor and Occupy Seattle activist who had just won a citywide City Council seat, said threats to shift production out of state could be met with an eminent domain move allowing workers to “take over the factories.”

Condemning private profit and talking up worker control of factories? That sounds kinda socialist. And socialists don’t win elections in the United States, right? Wrong. Sawant is the most recent in a long line of “out” socialists elected to city councils, mayoralties and even seats in Congress over the past century. Yet her win drew headlines as far away as her native India.

What made Sawant’s victory historic was the context. Since 2008, Republican politicians and their media echo chambers have built a cottage industry around the comic claim that Barack Obama is a socialist. The man who took single-payer healthcare off the table and refused to break up “too big to fail” banks wouldn’t qualify as a mild social democrat, let alone the raging “Marxist” of Rush Limbaugh’s hallucinations.

Still, the charge persists. In October, Sarah Palin was peddling the fantasy that problems with the Affordable Care Act website were part of an elaborate scheme to steer America toward “full socialized medicine.” The rhetorical strategy imagines that the mere suggestion of a socialist or socialized tendency is a deal killer. It’s not just Republicans who buy into the notion; Democrats, with rare exceptions like Representative John Conyers and Senator Bernie Sanders, are almost as quick as conservatives to distance themselves from the s-word.

But the American people are less concerned. Thirty-nine percent of Americans surveyed for a November 2012 Gallup poll said they had a positive image of socialism. In a 2011 Pew survey, 49 percent of Americans under 30 said they felt positive about socialism, while just 46 percent felt positive about capitalism. Among African-Americans, 55 percent had a positive reaction to socialism, versus 41 percent to capitalism. Among Latinos, it was 44 percent for socialism, 32 percent for capitalism.

Even socialists have a hard time agreeing on definitions of socialism, so there may not be a consensus on what all those Americans feel positive about. But in an era of lingering unemployment, cuts to public education and public services, and ever-widening incomeinequality, it should not be surprising that millions of Americans are ill at ease with capitalism—at least as it’s defined by Ted Cruz and Paul Ryan—and that many of them are open to alternatives. Nor should it be surprising that, after all the silly ranting about Obama’s “socialism,” voters are increasingly immune to redbaiting. In New York City this fall, Bill de Blasio’s Republican opponent seized on a New York Times story that said the Democratic mayoral candidate had once expressed an interest in “democratic socialism”; he attacked de Blasio for running a campaign “directly out of the Marxist playbook.” The New York Post featured an image of the Democrat next to a hammer and sickle. De Blasio laughed the attacks off, continued to describe himself as a progressive and won 73 percent of the vote.

Frustration with America’s constrained political discourse, and the dysfunctional governance that extends from it, is palpable, and people are looking for fresh policies and approaches. Virginia Libertarian gubernatorial candidate Robert Sarvis just won 15 percent of the under-30 vote, securing almost 150,000 votes statewide. Political and media elites acknowledge that libertarian ideas can attract votes, but they still wrestle with the notion that socialist ideas might also have appeal. Sawant put the prospect to the test in Seattle, a city with a population larger than the District of Columbia, Vermont and Wyoming. Identifying herself as a “Socialist Alternative” candidate who would fight for a $15 minimum wage, taxation of millionaires and expanded public services, she beat a sixteen-year incumbent who had broad support from mainstream Democrats and environmental groups. It’s fair to suggest that much of her backing came from Seattle voters who wanted to shake things up: on the same Election Day, the city turned out a mayor and changed its system of electing Council members. But it is also fair to suggest, as Sawant does, that her win has “shown the strongest skeptics that the socialist label is not a bad one for a grassroots campaign to succeed.”

That’s not a new notion. The acceptance of socialist candidates and ideas has waxed and waned in American history. With the rapid evolution of our politics in an age of instant communication and growing anger at income inequality, fear of the s-word is diminishing. And voters—especially younger ones—are beginning to demand a politics that, instead of rejecting solutions or candidates based on a label, considers their merits.

Venezuela’s Price Police

Sooner or later, price inflation will cause Maduro's demise

By Alvaro Vargas Llosa

The Venezuelan government’s war on price inflation is not a metaphorical one—last weekend President Maduro, who owes his title to April’s rigged election, ordered the military takeover of Daka, a chain of electronic stores, and the arrest of several managers from that and other retail companies. The rhetoric employed by Maduro was inevitably interpreted by the masses as an encouragement to loot—which is what they did in the city of Valencia.

Besides the images sent out by citizen-reporters in Valencia, the picture that best captures the essence of what is happening is the one tweeted by a government minister who tried to justify the measures. The photo shows a washer/dryer that, in the words of the minister, “cost 39,000 VEF on November 1 and today costs 59,000 VEF, a nearly 100 percent rise in a week...”

Yes, minister, that is precisely what happens when you are on the verge of hyperinflation! The inflation rate is now nearing 60 percent and, as anyone who has lived under those conditions (including yours truly) knows, going from 60 percent to 1,000 percent is a lot easier than going from 3 percent to 40 or 50 percent.

For many years Venezuela has produced nothing but oil (in decreasing quantities) and has therefore had to import pretty much everything the population consumes. The artificial level at which the government has kept the bolivar in spite of the massive outflow of hard currency required to meet those import needs has, of course, caused a severe drop in foreign-exchange reserves. Government controls and the militarization of the economy have not prevented the black market from taking the real exchange rate to a level ten times higher than the official one. No wonder people who have to obtain US dollars to import even the most basic stuff sell it at much higher prices than the government Wonderland economy dictates.

But that is not all. Since 2002 the money supply (M1) has grown at an annual rate of 54 percent while real GDP per capita has risen at an annual rate of just under 4 percent. The socioeconomic model based on producing nothing and consuming everything at subsidized prices, printing colossal amounts of money to paper over the government’s yawning fiscal gap, and waging literally a war on private businesses has led to a stagflation—minimal growth and skyrocketing prices that have turned ministers into photographers. A few weeks from the local elections that will be the first test of Maduro’s support since the rigged presidential election, the political consequences are already serious—he faces the possibility of such a big defeat that the numbers will simply overwhelm the government´s ability to commit yet another electoral fraud.

This explains Maduro’s desperate move over the weekend. The man who openly encouraged people to loot and ordered the military to takeover several stores around the country in an attempt to lower consumer prices understands all too well that he is in danger. He lacks Hugo Chavez’s charisma, he is presiding over a regime that exhibits growing cracks, and he is fast losing support according to the few polls one can trust in that environment.

We don’t know if he will be able to rig the next election at this point. But we do know this: He cannot win the war on inflation (soon hyperinflation) no matter how many stores he takes over, how many managers he throws in jail, and how many businesses he allows the masses to loot. Sooner or later, price inflation will cause his demise.

Government is dangerous. Handle with care.

Government is dangerous. Handle with care.

The corruption of the federal government was a key element in the career of Whitey Bulger (seen here in a 1955 mug shot taken in Miami Beach). Officials charged with defending the public from gangsters like Bulger used their considerable influence to defend the gangster instead.

by Jeff Jacoby

THERE IS NO connection, of course, between the prosecution of notorious gangster James "Whitey" Bulger and the recent spate of scandals and revelations roiling the Obama administration. Or is there?

Law enforcement and criminal justice are essential functions of government. No civilized society could survive for long if it lacked tools to combat lawlessness or make dangerous villains answer for their crimes. And Bulger was certainly dangerous — "one of the most vicious, violent criminals ever to walk the streets of Boston," as Assistant US Attorney Fred Wyshak called him in summing up for the prosecution last week.

But Bulger wasn't the only one on trial in Boston's federal courthouse. So was the government trying him. Bulger and his henchmen may have been the degenerates who physically committed the gruesome murders and other crimes that jurors learned about during 35 days of sometimes stomach-churning testimony. But it was other degenerates, in the FBI and the Justice Department, who for so long enabled Bulger's bloody mayhem. They enlisted Bulger as an informant, protected him from police investigations, and warned him to flee when an indictment was imminent. "If the FBI had not made Whitey its favorite mobster, broken the rules, and rigged the game to his benefit," reporter David Boeri has concluded, "Bulger would never have reached as high as he did."

The corruption of the federal government was a key element in Bulger's trial, as it was in so much of his sadistic career. Officials charged with defending the public from gangsters like Bulger used their considerable influence to defend the gangster instead.

It would be comforting to believe that this was a one-off, that law enforcement agencies never abuse their authority, that the immense powers of the federal government are always deployed with scrupulous integrity. But no one believes that.

As Bulger's racketeering prosecution was playing out in Boston, other stories of federal overreach, secrecy, and obstruction were making headlines: The scandal at the Internal Revenue Service, which for more than two years had targeted conservative grassroots groups for intimidation and harassment. The Justice Department'sunprecedented designation of national-security reporter James Rosen as a "co-conspirator" in order to trawl through his personal email, and its surreptitious seizure of telephone records from up to 20 Associated Press reporters and editors. The disclosure that the National Security Agency's collection of domestic communications data is far more intrusive than was previously known, with the NSA reportedly collecting billions of pieces of intelligence from US internet giants such as Google, Facebook, and Skype.

President Obama insists that none of this should undermine confidence in the federal government. "You've grown up hearing voices that incessantly warn of government as nothing more than some separate, sinister entity," he told Ohio State's graduating class in May. "You should reject these voices."

At a press conference in June, he likewise assured Americans that they needn't worry about the NSA's vast data-mining operation being abused. "We've got congressional oversight and judicial oversight," he said. "And if people can't trust not only the executive branch, but also don't trust Congress and don't trust federal judges to make sure that we're abiding by the Constitution and due process and the rule of law, then we're going to have some problems here."

According to Gallup, nearly half of Americans believe that the federal government "poses an immediate threat to the rights and freedoms of ordinary citizens." A Rasmussen Poll asks whether the NSA's metadata is likely to be used by the government to persecute political opponents; 57 percent say yes. Maybe we do have some problems here.

(Un)Paving Our Way To The Future

Cutting Our Losses and Moving On

by James H. Kunstler

You can’t overstate the baleful effects for Americans of living in the tortured landscapes and townscapes we created for ourselves in the past century. This fiasco of cartoon suburbia, overgrown metroplexes, trashed small cities and abandoned small towns, and the gruesome connective tissue of roadways, commercial smarm, and free parking is the toxic medium of everyday life in this country. Its corrosive omnipresence induces a general failure of conscious awareness that it works implacably at every moment to diminish our lives. It is both the expression of our collapsed values and a self-reinforcing malady collapsing our values further. The worse it gets, the worse we become.

The citizens who do recognize their own discomfort in this geography of nowhere generally articulate it as a response to “ugliness.” This is only part of the story. The effects actually run much deeper. The aggressive and immersive ugliness of the built landscape is entropy made visible. It is composed of elements that move us in the direction of death, and the apprehension of this dynamic is what really makes people uncomfortable. It spreads a vacuum of lost meaning and purpose wherever it reaches. It is worse than nothing, worse than if it had never existed. As such, it qualifies under St. Augustine’s conception of “evil” in the sense that it represents antagonism to the forces of life.

We find ourselves now in a strange slough of history. Circumstances gathering in the home economics of mankind ought to inform us that we can’t keep living this way and need to make plans for living differently. But our sunk costs in this infrastructure for daily life with no future prevent us from making better choices. At least for the moment. In large part this is because the “development” of all this ghastly crap — the vinyl-and-strandboard housing subdivisions, the highway strips, malls, and “lifestyle centers,” the “Darth Vader” office parks, the infinity of asphalt pavements — became, for a while, our replacement for an economy of ecological sanity. The housing bubble was all about building more stuff with no future, and that is why the attempt to re-start it is evil.

Sooner rather than later we’ll have to make better choices. We’ll have to redesign the human habitat in America because our current environs will become uninhabitable. The means and modes for doing this are already understood. They do not require heroic “innovation” or great leaps of “new technology.” Mostly they require a decent respect for easily referenced history and a readjustment of our values in the general direction of promoting life over death. This means for accomplishing this will be the subject of Part II of this essay, but it is necessary to review a pathology report of the damage done.

Launching Nirvana

I have a new theory of history: things happen in human affairs because they seem like a good idea at the time. This helps explain events that otherwise defy understanding, for example the causes of the First World War. England, France, Russia, Germany, and Italy joined that war because it seemed like a good idea at the time, namely August of 1914. There hadn’t been a real good dust-up on the continent since Waterloo in 1814. Old grievances were stewing. Empires were both rising and falling, contracting and reaching out. The “players” seemed to go into the war thinking it would be a short,  redemptive, and rather glorious adventure, complete with cavalry charges and evenings in ballrooms. The “deciders” failed to take into account the effects of newly mechanized warfare. The result was the staggering industrial slaughter of the trenches. Poison gas attacks did not inspire picturesque heroism. And what started the whole thing? Ostensibly the assassination of an unpopular Hapsburg prince in Serbia. Was Franz Ferdinand an important figure? Not really. Was Austria a threat to France and England? It was in steep decline, a sclerotic empire held together with whipped cream and waltz music. Did Russia really care about little Serbia? Was Germany insane to attack on two fronts? Starting the fight seemed like a good idea at the time — and then, of course, the unintended consequences bit back like a mad dog from hell.

Inflation, Shortages, and Social Democracy in Venezuela

Venezuela’s economic policy is proving that economic intervention, leads to complete socialism and economic destruction

by Matt McCaffrey and Carmen Dorobat

The economic turmoil in Venezuela has received increasing international media attention over the past few months. In September, the toilet paper shortage (which followed food shortages and electricity blackouts) resulted in the “temporary occupation” of the Paper Manufacturing Company, as armed troops were sent to ensure the “fair distribution” of available stocks. Similar action occurred a few days ago against electronics stores: President Nicolás Maduro accused electronics vendors of price-gouging, and jailed them with the warning that “this is just the start of what I’m going to do to protect the Venezuelan people.”

Earlier this month, in another attempt to ensure “happiness for all people,” Maduro began to hand out Christmas bonuses, in preparation for the coming elections in December. But political campaigning is not the only reason for the government’s open-handedness. The annual inflation rate in Venezuela has been rapidly rising in recent months, and has now reached a staggering 54 percent (not accounting for possible under-estimations). Although not yet officially in hyperinflation, monetary expansion is pushing Venezuela toward the brink.

In such an environment, paychecks need to be distributed quickly, before prices have time to rise; hence, early bonuses. This kind of policy is nothing new in economic history: Venezuela’s hyperinflationary episode is unfolding in much the same way Germany’s did nearly a century ago.

Consequently, Venezuela’s economic policy is proving to be another example of Ludwig von Mises’s argument that economic intervention, if left unchecked, leads to complete socialism. The ever-expanding price controls testify to the fact that governments always search for new scapegoats in the market instead of admitting the failure of their own policies, and that it is always easier to increase government control than reduce it.

Maduro clearly knows the ropes when it comes to anti-market propaganda; like his predecessor, Hugo Chávez, he has placed blame for soaring prices on speculators and the “parasitic bourgeoisie.” But no witch-hunt for “price-gougers” will stop the eventual collapse of the economy that will result from further monetary expansion combined with crippling price controls. Inevitably, as Mises argued, “once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities and services will not cease to rise, everybody becomes eager to buy as much as possible and to restrict his cash holding to a minimum.”

Is France the New Italy?

With or without new monetary stimulus, though, France needs reform

By Bloomberg

If U.S. President Barack Obama thinks he’s having a difficult autumn, then maybe he should consider the season French President Francois Hollande is experiencing. Paris in springtime may have been lovely as usual, but fall has been horrible.

The French unemployment rate stands at 11 percent. After growing tepidly in the second quarter, the economy shrank again in the third. Standard and Poor’s just downgraded the government’s debt -- for the second time in less than two years. Hollande’s Socialist administration faces protests over taxes and burdensome regulation not just from business leaders, as you might expect, but also from farmers, shopkeepers, teachers, truck drivers and soccer players.

The European Commission recently called on the government to speed up economic reform. Speaking from its conveniently located Paris headquarters, the Organization for Economic Cooperation and Development restated the message in a detailed report issued last week: “In recent years, a significant adjustment has been under way in several European countries that have accelerated the introduction of essential reforms. This adjustment hasn’t yet happened in France.”

The White House is concerned that some recent polls have shown Obama’s approval rating dropping below 40 percent. For Hollande, who was elected only last year, it stands at 15 percent.

Even discounting for the French flair for umbrage, the backlash against Hollande is extraordinary. The economy -- the second-biggest in the euro area after Germany -- is in deep trouble, and the government looks helpless. Seemingly intractable problems and a lack of effective leadership threaten to turn France into Europe’s new Italy.

The New York Times versus the New York Times

Sometimes, the New York Times is not that bad

by David Henderson

I have known Hoover colleague, economist Paul Gregory, for about 5 years, and gotten to know him better in the last 3. An expert on Russia's economy and increasingly on China's economy, he has written two articles on those topics for Econlib. I had no idea, until reading this New York Times article, "Lee Harvey Oswald Was My Friend," earlier this month, that he had known Lee Harvey Oswald, the Communist ex-Marine who murdered John F. Kennedy. The whole piece is fascinating. Here are three paragraphs that make the case for Oswald's motivation and why Gregory finds it implausible that someone would conspire with Oswald:

On the Saturday morning after Kennedy was killed, I was sitting in my small apartment in Norman when a Secret Service agent and the local chief of police arrived and took me some 20 miles down I-35 to Oklahoma City for questioning. As we drove, I began telling them about how I met Oswald, the evenings driving around Fort Worth, the Dallas Russians and how a college kid got caught up with an accused assassin. After they escorted me into a nondescript conference room in a downtown building, the agents homed in on the question of the day, which, of course, has lingered over the past 50 years: Did I think Oswald worked alone or was part of a larger conspiracy? I told them simply that, if I were organizing a conspiracy, he would have been the last person I would recruit. He was too difficult and unreliable.

Gross Domestic Freebie

The gap between what’s actually happening in the economy and what the statistics are measuring is getting wider than ever before

BY JAMES SUROWIECKI

Titter’s recent I.P.O. bonanza gave us all some striking numbers to consider. There’s the company’s valuation: an astounding twenty-four billion dollars. And its revenue: just five hundred and thirty-five million. It has more than two hundred and thirty million active users, and a hundred million of them use the service daily. They collectively send roughly half a billion tweets every day. And then there’s the starkest number of all: zero. That’s the price that Twitter charges people to use its technology. Since the company was founded, ordinary users have sent more than three hundred billion tweets. In exchange, they have paid Twitter no dollars and no cents.

Ever since Netscape made the decision to give away its browser, free has been more the rule online than the exception. And even though traditional media companies have been erecting paywalls to guard revenue, a huge chunk of the time we spend online is spent consuming stuff that we don’t pay for. Economically, this makes for an odd situation: digital goods and services are everywhere you look, but their impact is hard to see in economic statistics.

Our main yardstick for the health of the economy is G.D.P. growth, a concept devised in the nineteen-thirties by the economist Simon Kuznets. If it’s rising briskly, we know that the economy is doing well. If not, we know it’s time to worry. The basic assumption is simple: the more stuff we’re producing for sale, the better off we are. In the industrial age, this was a reasonable assumption, but in the digital economy that picture gets a lot fuzzier, since so much of what’s being produced is available free. You may think that Wikipedia, Twitter, Snapchat, Google Maps, and so on are valuable. But, as far as G.D.P. is concerned, they barely exist. The M.I.T. economist Erik Brynjolfsson points out that, according to government statistics, the “information sector” of the economy—which includes publishing, software, data services, and telecom—has barely grown since the late eighties, even though we’ve seen an explosion in the amount of information and data that individuals and businesses consume. “That just feels totally wrong,” he told me.

Brynjolfsson is the co-author, with Andrew McAfee, of the forthcoming book “The Second Machine Age,” which examines how digitization is remaking the economy. “We’re underestimating the value of the part of the economy that’s free,” he said. “As digital goods make up a bigger share of economic activity, that means we’re likely getting a distorted picture of the economy as a whole.” The issue is that, as Kuznets himself acknowledged, “the welfare of a nation . . . can scarcely be inferred from a measure of national income.” For instance, most Web sites are built with free, open-source applications. This makes running a site cheap, which has all sorts of benefits in terms of welfare, but G.D.P. ends up lower than it would be if everyone had to pay for Microsoft’s server software. Digital innovation can even shrink G.D.P.: Skype has reduced the amount of money that people spend on international calls, and free smartphone apps are replacing stand-alone devices that once generated billions in sales. The G.P.S. company Garmin was once one of the fastest-growing companies in the U.S. Thanks to Google and Apple Maps, Garmin’s sales have taken a severe hit, but consumers, who now have access to good directions at no cost, are certainly better off.

New technologies have always driven out old ones, but it used to be that they would enter the market economy, and thus boost G.D.P.—as when the internal-combustion engine replaced the horse. Digitization is distinctive because much of the value it creates for consumers never becomes part of the economy that G.D.P. measures. That makes the gap between what’s actually happening in the economy and what the statistics are measuring wider than ever before.

Figuring out the invisible value created by the Internet is no easy task. One strategy that economists have used is to measure how much time we spend online (on the assumption that time is money). A recent study by Brynjolfsson and Joo Hee Oh concluded that in 2011 the value of free goods on the Internet was hundreds of billions of dollars, and that it was increasing at a rate of more than forty billion dollars annually. Another study, by the economist Michael Mandel, contended that the government had underestimated the value of data services (mobile apps and the like) by some three hundred billion dollars a year. These are rough estimates, but they give a sense of how much better off the digital economy has made us. 

A Great Society Grounded in Private Property Rights and Bourgeois Dignity

And somewhat less of a Commonwealth

  

In this delightful, humorous, and spot-on correct short video from Reason, we learn of the true source of America’s bounty: private property rights (to which I would add also – influenced as I am by Deirdre McCloskey – Americans’ cultural embrace, by and large, of bourgeois dignity).

America’s Coastal Royalty

The real national divide isn’t between red and blue states

By  Victor Davis Hanson

The densely populated coastal corridors from Boston to Washington and from San Diego to Berkeley are where most of America’s big decisions are made. 

They remind us of two quite different Americas: one country along these coasts and everything else in between. Those in Boston, New York, and Washington determine how our government works; what sort of news, books, art, and fashion we should consume; and whether our money and investments are worth anything.

The Pacific corridor is just as influential, but in a hipper, cooler fashion. Whether America suffers through another zombie film or one more Lady Gaga video or Kanye West’s latest soft-porn rhyme is determined by Hollywood — mostly by executives who live in the la-la land of the thin Pacific strip from Malibu to Palos Verdes.

The next smart phone or search engine 5.0 will arise from the minds of tech geeks who pay $2,000 a month for studio apartments and drive BMWs in Menlo Park, Palo Alto, or Mountain View.

The road to riches and influence, we are told, lies in being branded with a degree from a coastal-elite campus like Harvard, Yale, Princeton, Stanford, or Berkeley. How well a Yale professor teaches an 18-year-old in a class on American history does not matter as much as the fact that the professor helps to stamp the student with the Ivy League logo. That mark is the lifelong golden key that is supposed to unlock the door to coastal privilege.

Fly over or drive across the United States, and the spatial absurdity of this rather narrow coastal monopoly is immediately apparent to the naked eye. Outside of these power corridors, our vast country appears pretty empty. The nation’s muscles that produce our oil, gas, food, lumber, minerals, and manufactured goods work unnoticed in this sparsely settled fly-over expanse.

People rise each morning in San Francisco and New York and count on plentiful food, fuel, and power. They expect service in elevators and limos that are mostly made elsewhere by people of the sort they seldom see and don’t really know — other than to influence through a cable-news show, a new rap song, the next federal health-care mandate, or more phone apps.

In California, whether farms receive contracted irrigation water, whether a billion board feet of burned timber will be salvaged from the recent Sierra Nevada forest fires, whether a high-speed-rail project obliterates thousands of acres of ancestral farms, whether gas will be fracked, or whether granite should be mined to make tony kitchen counters is all determined largely by coastal elites who take these plentiful resources for granted. Rarely, however, do they see how their own necessities are procured. Instead, they feel deeply ambivalent about the grubbier people and culture that made them.

In Kansas or Utah, people do not pay $1,000 per square foot for their homes as they do on the Upper West Side of Manhattan. They do not gossip with the people who write their tax laws, as is common in the Georgetown area of Washington. Those in the empty northern third of California do not see Facebook or Oracle founders at the local Starbucks any more than they bump into the Kardashians at a hip bistro.

The problem is not just that the coasts determine how everyone else is to lead their lives, but that those living in our elite corridors have no idea about how life is lived just a short distance away in the interior — much less about the sometimes tragic consequences of their own therapeutic ideology on the distant, less influential majority.

In a fantasy world, I would move Washington, D.C., to Kansas City, Mo. That transfer would not only make the capital more accessible to the American people and equalize travel requirements for our legislators, but also expose an out-of-touch government to a reality outside its Beltway.

I would transfer the United Nations to Salt Lake City, where foreign diplomats would live in a different sort of cocoon.

I would ask billionaires like Bill Gates, Warren Buffet, and the Koch Brothers to endow with their riches a few Midwestern or Southern universities. Perhaps we could create a new Ivy League in the nation’s center.

I would suggest to Facebook and Apple that they relocate operations to North Dakota to expose their geeky entrepreneurs to those who drive trucks and plow snow. Who knows — they might be able to afford a house, get married before 35, and have three rather than zero kids.

America is said to be divided by red and blue states, rich and poor, white and non-white, Christian and non-Christian, old and new.

I think the real divide is between those who make our decisions on the coasts and the anonymous others who live with the consequences somewhere else. 

None Dare Call It Fascism

It is happening right now

By John C. Goodman

Here is something that is odd.

For the past six years President Obama and the Democrats in Congress have waged a relentless attack on the health insurance industry. In the most recent iteration, the president assures us he is not responsible for the wave of health insurance policy cancellations. The insurance companies are.

Okay, so where is the other side?

When is the last time you saw an insurance industry executive interviewed on a TV talk show, presenting the industry’s answer to all these attacks? You can’t remember seeing that? I can’t either.

Well what about the health insurance industry trade groups, the folks who are supposed to explain to Congress and the general public the industry’s position? When is the last time you saw one of those representatives on TV? Can’t remember? Nor can I.

Okay, let’s try one more option. When is the last time you saw someone from a university or independent think tank giving the health insurance industry side of all the complaints that are being slung their way? Don’t bother responding. We both know that answer as well.

I submit that this is not a small matter.

A free society requires the free flow of information. In any public policy dispute, if only one side is heard from, we are likely to get further and further away from the truth. The attackers will find there is no penalty for getting minor facts wrong or shading the truth. That will embolden them to make more serious errors, eventually resorting to downright lying. If the only entity providing any push back is the Washington Post fact checker, we are in real trouble. Roughly 99.99% of the population doesn’t read the Washington Post.

But what threatens the foundations of a free society most of all is when it is the government (and its allies in the private sector) who are doing the attacking, and when the reason there is no response is that the victims of the attacks have been threatened and bullied into silence.

I believe that is where we are today ? not just with respect to health insurance, but with respect to health care generally. I’m afraid other industries are not far behind.

During the debate leading up to the passage of the Affordable Care Act, I talked to a number of CEOs of large health insurance companies. I frequently heard such comments as, “Don’t tell anyone I told you this” or, “If you use this information, don’t mention my name” and even, “Don’t tell anyone that we ever had this conversation.”

As far as I can tell, things have gotten worse. In fact I don’t know any employee of any health insurance company that is willing to go on the record with any statement that is critical of the Affordable Care Act.

Now it’s possible that my experience is unique. And I know that there are many readers of this blog who also interact with folks in the industry. So if I’m wrong about this, please correct me in the comments.

Slouching Towards Sharia

At what point will the Darwinian survival instinct take hold?

by Richard Butrick 

The post WW1-2 attack on the authoritarian institutions of Western Civilization launched by The Frankfurt School created the opening and the intellectual foundation for Political Correctness - or so the story goes.

Horkheimer, Adorno, Marcuse and The Frankfurt School

Their targets?  The evil institutions that brought us World War I-II. Their weapon? Critical Theory. Their base of operations? Academe. The lasting effect was to provide a vacuum or an opening for the legitimization of a new metric of good and evil  - a  “transvaluation of values” -  which is now enshrined in the PC-think which dominates our culture today.

Critical theory was the brain child of Max Horkheimer, the founder of the Frankfurt School. The three leaders of the Frankfurt School (FS) of main interest here are Horkheimer, Ardorno and Marcuse. All three started out as Marxists of one stripe or another and all three became influenced by the newly hatched “sciences” of Psychology and Sociology. Their writing is a wondrous overblown admixture of techno-babble from  Marx, Freud and Weber strung together with post-Hegelian philosophical patois. Shall we say dense? Shall we say a sophomoric affinity for the polysyllabic? Shall we say a sophomoric affinity for hyperbolic juxtaposition (“Indelible in resistance to the fungible world“, “in semblance nonsemblance is promised“)?

Here is a key passage from Horkheimer:

Although most people never overcome the habit of berating the world for their difficulties, those who are too weak to make a stand against reality have no choice but to obliterate themselves by identifying with it. They are never rationally reconciled to civilization. Instead, they bow to it, secretly accepting the identity of reason and domination, of civilization and the ideal, however much they may shrug their shoulders. Well-informed cynicism is only another mode of conformity. These people willingly embrace or force themselves to accept the rule of the stronger as the eternal norm. Their whole life is a continuous effort to suppress and abase nature, inwardly or outwardly, and to identify themselves with its more powerful surrogates—the race, fatherland, leader, cliques, and tradition. For them, all these words mean the same thing—the irresistible reality that must be honored and obeyed. However, their own natural impulses, those antagonistic to the various demands of civilization, lead a devious undercover life within them.

Let me see now if I get this. Those of us who are too weak to stand up against reality? What do we do? We honor and obey the irresistible reality of more powerful surrogates? I just thought we were ducking reality but evidently we are identifying with “the” irresistible reality? Not only that, we secretly accept the identity of reason with domination! No wonder we obliterate ourselves by identifying with “it” and lead a devious undercover life.

Now check out this valiant attempt to explain critical theory. It is from Wikipedia but I could just as well taken the Stanford Encyclopedia of Philosophy. Here it is:

Obamacare Will Follow the Fate of Prohibition

"Unintended Consequences" will be written on the tombstone of Obamacare

by Norman Berdichevsky

It may take as long, but Obamacare will certainly follow the ignominious example of Prohibition (the notorious 18th amendment that was the law of the land from 1920 to 1933) and ultimately be rescinded whether by simple legislative majorities in Congress with the approval of a sitting President or the much longer and demanding route of a constitutional amendment (the 21st which simply repealed the 18th).

Like Prohibition, Obamacare is a massive intrusion into the private lives of ordinary citizens with respect to the decisions they had always deemed their own responsibility in the marketplace. Like Prohibition, all sorts of pseudo-moral arguments about providing “care” for everyone, regardless where (if anywhere at all) on their list of priorities. Like Prohibition, it was exploited by politicians who argued that it was a step to protect the most innocent, defenseless segment of the population – women, the disabled, the aged, infirmed and very young.

This goes against the grain of many on today’s political scene who, when recalling Prohibition, cast it in terms of a move made by the most conservative elements in society attempting to impose their religious or moral values on those citizens who had other and more “liberal” social mores. This was a screen as is Obamacare today, hiding the triumph of massive federal power over individual liberties and states’ rights. Prior to 1920, the prohibition of the manufacture, sale and transport of alcoholic beverages had only been regulated at the county or state level.

The enforcement of Prohibition was beyond the capabilities of the Federal government and led to widespread flouting of the law and a massive “unintended” increase in violent crime, smuggling and the rampant corruption of public officials and the police forces of many major American cities. Although the  arguments used by some conservative and very naïve clerical circles made it initially appear that support for Prohibition came from the conservative Right and “traditionalists," it was criminal organizations, notably the organized Mafia and corrupt politicians working hand in glove through the Democrat Party in big city machines that protected racketeering and the ill-gotten gains of the bootleggers and smugglers. By 1925, in New York City alone, there were anywhere from 30,000 to 100,000 speakeasy clubs. Only when the Democrats finally understood that Prohibition was costing them votes, did they call for its repeal.

Prohibition lost its advocates one by one but it still took the hard and very long route of a constitutional amendment to alter the law. Obamacare’s victory in the Supreme Court promises that it too will resist all attempts to get rid of it because of the legal precedent. What had been a local issue in many “dry counties” where fundamentalist protestant sects predominated was elevated into a nationwide movement at the end of the 19^th century largely by what we would call the LEFT.

Who originally supported Prohibition and why it reveals much the same “logic” as the one behind Obamacare, the protection of the weak and the cries for social justice. The leading advocate on the national scene arguing for prohibition was the American Temperance Society (ATS). By 1845, a decade after its founding, the ATS had reached 1.5 million members. Predictably, women constituted from 35% to a majority of 60% of membership in local chapters. They argued from the very beginning that alcohol and saloons were intimately connected with prostitution and violence against women. Just as the Democrats cast their approach to health care with accusations that anyone opposed were mean spirited and lacking in compassion, they framed their arguments over prohibition in the same way as many in the clergy arguing that failing to ban alcoholic beverages would leave women and children unprotected.

When there was no going home

For the Pilgrims "going home" wasn't an option

by Jeff Jacoby

Thanksgiving is the quintessential American holiday. Nearly four centuries have passed since that first celebration in 1621, when, as Edward Winslow wrote in a letter to a friend back in England, the settlers of Plymouth Colony paused to "rejoice together after we had gathered the fruit of our labors" and "for three days … entertained and feasted" with 90 of their Wampanoag neighbors. What Thanksgiving was at the outset — part joyful harvest festival, part expression of prayerful gratitude, part occasion for games and reunions — it remains recognizably to this day.

The story of that first Thanksgiving is also a story of immigrants, whose journey to the New World prefigured tens of millions of immigrant stories that followed. There is irony in the fact that Thanksgiving today is so bound up with "going home," as the crowded highways and packed airports of the long holiday weekend attest. For the Pilgrims "going home" wasn't an option. When they left Europe the year before, they left for good. As they parted from friends and familiar surroundings, recalled Plymouth's governor William Bradford, "what sighs and sobs and prayers did sound amongst them; what tears did gush from every eye."

Well into the 19^th century, most immigrants to America knew there would be no turning back. Before telephones, air travel, and the internet revolutionized modern society, immigration typically meant not only transplanting yourself to a new home, but severing your links with the old. Once that boat to America sailed, you left behind people and places and connections you had known your whole life, yet would likely never see again.

The United States, we glibly tell ourselves, is a nation of immigrants, who have transformed America in the process of becoming American. Tens of millions of us have foreign-born loved ones, colleagues, neighbors, teachers. I grew up in Cleveland, where it was common to hear English spoken with Eastern European accents. Cleveland once had the world's second-largest Hungarian population and more Slovaks than any city on earth. I'm sure it never occurred to me how astonishing this was.

If you're a US native, it's so easy to take it for granted that waves of people from other lands uproot themselves to come here. Yet try to imagine the opposite: throngs of US citizens forsaking life in America in order to start anew in Hungary or Slovakia (or Ireland or Vietnam or Nigeria). Try to imagine yourself among them, undergoing such dislocation.

Recently I have been reading Becoming Americans, a sweeping collection of immigrant writing that conveys the experience of coming to America through the firsthand accounts of immigrants reaching back to 1623. Published by the Library of America, the anthology was edited by Amherst College professor Ilan Stavans, a Mexican Jew of Polish-Ukrainian ancestry who immigrated to America in 1985. He describes the book as his "love letter to the United States," but as many of the selections make clear, becoming Americans could be a wrenching ordeal.