Markets Vs Jungles

Markets - A Layman's Primer

By David R. Henderson

In his famous book, The Wealth of Nations, published in 1776, Adam Smith explained to his countrymen why some economies grew and others stagnated. Thus the book’s complete title: An Inquiry into the Nature and the Causes of the Wealth of Nations. Many of Smith’s keen insights have weathered the test of time and evidence, and thus are still relevant today. Particularly relevant, to the world and to this article, are Smith’s insights about markets. Economists since Smith, particularly Friedrich Hayek and Ludwig von Mises, have added their own insights about the power of markets in creating wealth and opportunity. In this article, I will not always identify the particular economist who first had a given insight. Rather, my focus in this article is on the insights themselves no matter what their origin.

Japan Runs Out Of Capital

Going Poof

By Jeff Harding

What did you think the odds were of seeing this headline when Japan was here buying up Rockefeller Center back in 1990: “In a Shift, Chinese Capital Flows to Japanese Firms.”

In late ’80s and early ’90s the Japanese were here buying large real estate projects such as Rockefeller Center and the Pebble Beach golf course. The way overpaid and by then mid ’90s, many of these projects were bought back. A syndicate comprising, among others, Arnold Palmer and Clint Eastwood, bought Pebble Beach back from the Japanese lender who foreclosed on the property. Mitsubishi bought Rockefeller Center for $1.4 billion in 1989 and lost the property in bankruptcy in the mid-’90s. It is now owned by an American syndicate.

Welfare and unintended consequences

The New York Times’s Welfare Myopia

Poverty remains a story of bad decision-making and out-of-wedlock child-rearing.

BY HEATHER MAC DONALD

Desperate single mothers are mugging illegal aliens, shoplifting, and fencing stolen goods in order to survive, and it’s all the fault of those heartless Republicans and spineless Democrats who passed the 1996 welfare reform law. Such, at least, is the message of a front-page article in the New York Times, the first salvo in a likely campaign to roll back the most successful federal law in recent memory.

Temporary Assistance to Needy Families (TANF) limited federal welfare payments to five years and conditioned them on a recipient’s effort to find work—in essence, stripping welfare of its entitlement status. As a result, the welfare rolls dropped two-thirds from 1996 to 2009, work rates of never-married mothers surged, and black child poverty fell to its lowest level ever.

Egypt on the Edge

State of chaos prevails over Egypt's divisive candidates

By Issandr El Amrani

Not the revolutionary groups that have become a sideshow as politics has moved from the streets to parliament and the courts. Not the politicians who, even if they were not spending most of their time bickering and manoeuvring for advantage, are bound by rules that are a bundle of contradictions. Not the generals now nominally running the country, who sulk at the ungratefulness of their subjects and have lost whatever moral authority they may once have had. Not even the country's leading presidential candidates, all of whom may be barred from the race on various technicalities by the time of the vote. And certainly not the Egyptian people, hostage to all this political confusion, who have seen their "glorious revolution" go from crisis to crisis since Hosni Mubarak was forced out over a year ago.

Egyptians have a dark sense of humour, and are used to making light of their misfortune. The present situation offers them plenty of material, but even so the jokes often seem half-hearted. Never over the tumultuous events of the last year has the country seemed more on the brink, or has there been more talk of a potential military coup or some other sort of political earthquake.

A framework to interpret the world

The Chicago School versus the Austrian School

By R. Murphy

People often ask me, "How are the Austrians different from the Chicago School economists? Aren't you all free-market guys who oppose big-government Keynesians?"

In the present article I'll outline some of the main differences. Although it's true that Austrians agree with Chicago economists on many policy issues, nevertheless their approach to economic science can be quite different. It's important to occasionally explain these differences, if only to rebut the common complaint that Austrian economics is simply a religion serving to justify libertarian policy conclusions.

The Political Economy of Morality

Political Pretense vs. Market Performance

by Dwight R. Lee

There is a large gap between the performance of markets and the public's approval of markets. Despite the clear superiority of free markets over other economic arrangements at protecting liberty, promoting social cooperation and creating general prosperity, they have always been subject to pervasive doubts and, often, outright hostility. Of course, many people are also skeptical about government. Yet when problems arise that can even remotely be blamed on markets, the strong tendency is to "correct" the "market failures" by substituting more government control for market incentives. Recent evidence of this bias is healthcare reform, which, instead of freeing up healthcare markets to correct the distortions created by government subsidies and mandates, made the distortions worse by expanding the subsidies and mandates.

The Trouble with Money

A Broken Narrative

By Chris Martenson

Recently I was asked by a high school teacher if I had any ideas about why students today seem so apathetic when it comes to engaging with the world around them. I waggishly responded, "Probably because they're smart."

In my opinion, we're asking our young adults to step into a story that doesn't make any sense.

Sure, we can grow the earth's population to 9 billion (and probably will), and sure, we can extract our natural gas and oil resources as fast as possible, and sure, we can continue to pile on official debts at a staggering pace -- but why are we doing all this? Even more troubling, what do we say to our youth when they ask what role they should play in this story -- a story with a plot line they didn't get to write?

What Are Economists For?

Economics is extremely useful as a form of employment for economists

By Tim Price

Most economists, it seems, believe strongly in their own superior intelligence and take themselves far too seriously. In his open letter of 22 July 2001 to Joseph Stiglitz, Kenneth Rogoff identified this problem. “One of my favourite stories from that era is a lunch with you and our former colleague, Carl Shapiro, at which the two of you started discussing whether Paul Volcker merited your vote for a tenured appointment at Princeton. At one point, you turned to me and said, “Ken, you used to work for Volcker at the Fed. Tell me, is he really smart?” I responded something to the effect of, “Well, he was arguably the greatest Federal Reserve Chairman of the twentieth century.” To which you replied, “But is he smart like us ?”

               - Satyajit Das.

Greece without the sunshine

Austerity in the U.K.

Britain discovers that shrinking government is a lot harder than expanding it.

BY THEODORE DALRYMPLE

In Britain, government spending is now so high, accounting for more than half of the economy, that it is increasingly difficult to distinguish the private sector from the public. Many supposedly private companies are as dependent on government largesse as welfare recipients are, and much of the money with which the government pays them is borrowed. The nation’s budget deficit in 2010, in the wake of the financial crisis, was 10.4 percent of GDP, after being 12.5 percent in 2009; even before the crisis, the country had managed to balance its budget for only three years out of the previous 30.

Deficits are like smoking: difficult to give up. They can be cut only at the cost of genuine hardship, for many people will have become dependent upon them for their livelihood. Hence withdrawal symptoms are likely to be severe; and hardship is always politically hazardous to inflict, even when it is a necessary corrective to previous excess. This is what Britain faces.

Animal care is too important to be left to the wiles of the free market

The Good News on Health Care

By Jeffrey Tucker

One sector, technology, is advancing at a pace never seen before. Customers have a range of services to choose from, and price competition is very intense. The doctor sees you whether you have insurance or not. Customers mostly pay directly for services. Overall spending is increasing, but that’s because there are more services to purchase. Competition between providers is very intense.

Sadly, for humans, all this is taking place within veterinary medicine, and the beneficiaries are animals, mostly pets. According to The New York Times,  the demand for advanced treatment is booming, and supply is responding. The paper cites the case of Tina, the 10-year-old chow that recently underwent chemotherapy and a bone marrow transplant at a clinic associated with the Mayo Clinic. The $15,000 spent on this may sound like a lot, but it is far cheaper than the same services provided to people.

The False Civil Rights Vision

Frederick Douglass’s suggestion

By Walter E. Williams

For all intents and purposes the civil rights struggle is over and won. At one time black Americans did not have the constitutional guarantees afforded other Americans; now we do.

I think it is fair to say that black Americans, as a group, have made the greatest gains, over some of the highest hurdles, in the shortest span of time of any racial group in history. If we were to think of black Americans as a nation and add up their spending power, they would be the 17th or 18th richest nation on earth. Black Americans have been chief executives of some of the world’s largest and richest cities. Black Americans rank among the world’s most famous personalities, and a few black Americans are among the world’s richest people.

Plato's take on next Greek elections

People who bite the hand that feeds them usually lick the boot that kicks them

By Ed Kaitz

It might be worth everyone's while in these troubled times to set aside an evening in order to carefully read Book VIII of Plato's Republic.  The dialogue is nothing less than chilling in its illustration of what happens in a popular government when corrupt politicians inflame the vices of undisciplined citizens in order to destroy the business class and establish a tyranny.

Here's a link to Book VIII.  Plato's objective is to show how highly self-disciplined regimes gradually devolve into more inferior and immoderate governments.  Socrates begins the discussion showing how Aristocracies (rule of the wisest) devolve into Timocracies (rule of the military) which then descend into Oligarchies (rule of the wealthy).  Oligarchies descend into Democracies (rule of the people) which in turn become Tyrannies.

The Population Boon

Progress? You ain’t seen nothin’ yet

By PHILIP E. AUERSWALD

As U.S. troops were massing in England for the Normandy invasion, the U.S. Congress engaged in a heated debate about how to avert mass unemployment when millions of servicemen came home at war’s end. Their concern followed precedent. Only a dozen years earlier, at the nadir of the Great Depression, World War I veterans had converged on Washington to demand early disbursement of congressionally mandated payments. The result was an ugly confrontation between the “Bonus Marchers” and U.S. Army units led by none other than the chief of staff, General Douglas MacArthur. Wishing to avoid a repetition of this disturbing scenario, Congress enacted the GI Bill, signed into law by President Roosevelt on June 22, 1944. 

Bureaucratic Gas

To lower prices at the pump, abolish the boutique fuel regime

By Steven F. Hayward

Quick: How many kinds of gasoline do we use in America? Most people would say three or six: regular unleaded, mid-grade, and premium, along with the ethanol blends of the same that have become nearly universal. The actual number is somewhere above 45, though hard to pin down exactly, according to the Government Accountability Office (GAO). It might even be closer to 70. Thirty-four states use specially blended gasoline, usually during the summer, which is one reason gasoline prices always rise during the “driving season.”

The Corzine Family officially in charge of US Justice Department

Corzine Steals Billions Sans Charges, Errant Whale Watcher Faces Prison

By Bill Frezza

Justice may be blind, but who works overtime to make it deaf, dumb, and stupid?

Which would you imagine might attract more aggressive enforcement from the Justice Department: the theft of $1.2 billion from supposedly segregated customer brokerage funds, or lying about an alleged incident of whistling to attract the attention of a whale so that whale watchers could get a better peep? If you said the latter, then you appreciate the extent to which federal law enforcement priorities have run off the rails.

End Game for Argentina

Argentina to Seek Controlling Stake in YPF

By MATT MOFFETT &TAOS TURNER

President Cristina Kirchner, in a move that marks a watershed in expanding the state's grip on the economy, said she will send a bill to Congress to nationalize Argentina's largest oil-and-gas company, YPF YPF -11.16% SA.

Under the proposal, which declares the petroleum industry of "national public interest," Argentina's federal and provincial governments would take 51% of the company, now majority owned by Repsol YPF SA of Spain. The move is sure to be approved in Argentina's Congress, where the leftist Mrs. Kirchner's governing Peronist party holds a majority.

The nationalization marks the culmination of a months-long battle between YPF and the Kirchner government. The administration blames YPF for low production that has forced Argentina to spend heavily for imported energy, at a time when it is enduring a scarcity of dollars due to capital flight.

Redefining human relations

This linguistic engineering invades our lives and loves

Officialdom’s frenetic replacement of words like son and wife with words like ‘carer’ and ‘partner’ diminishes our identities.

by Frank Furedi 

I have always been fascinated by the language we use to express our view of everyday life. But it wasn’t until the death of my mother three years ago that I realised how words could be used to diminish our identity and pressure us to adopt new values.

As soon as I heard that my mother had a stroke, I went to see her at our local hospital in Kent, England. On arrival, I introduced myself to the nurse with the words, ‘I’m Frank Furedi, I’m Clara’s son’. The woman looked up at me and said, ‘You mean you’re her carer’. ‘No, her son’, I responded. But she was insistent: ‘No, you are her carer.’

Later, one hospital administrator explained to me that they used the word carer because it included all; apparently not every patient has a close relative to look after them.

In Australia, the Department of Health and Ageing defines everyone who provides help to an ill or frail person as a carer. On its website it notes that ‘many carers don’t consider themselves to be carers - they see themselves as just family members’. Outwardly, this is a simple and uncontroversial statement of fact. But when you examine it closer, it offers a chilling reminder of who defines your identity. You may think you are family but, according to this administrative formula, you are ‘carers’.

The word carer may be inclusive, but if a special connection between mother and son is transformed into a bureaucratic typology, then something very important has been lost. The relationship between patients and their family, friends and paid help all involve care, but they convey fundamentally different meanings to the people concerned.

Concealing the mechanisms of change

Mr. Keynes’s Aggregates

By Steven Horwitz

One of F. A. Hayek’s most accurate, and oft-repeated, lines about John Maynard Keynes comes from a review of Keynes’s 1930 book, A Treatise on Money.  Hayek wrote: “Mr. Keynes’ aggregates conceal the most fundamental mechanisms of change.”  That Austrian macroeconomics rests firmly on the microeconomic “mechanisms of change” that ultimately comprise economic activity remains a crucial reason why that insight can better explain both the mistakes of the boom and the way out of the bust.

The Austrian insight is relevant to both capital and labor.  In standard Keynesian models (as well as most other macroeconomic models), capital is understood as an undifferentiated mass.  The Keynesian model also assumes that interest rates do not equilibrate the supply of savings and the demand for investment funds.  Thus when people save more, there’s no signal transmitted to investors that they should build more for the future.  As a result, the decline in consumption that accompanies the increase in savings causes firms to invest less as their inventories pile up without any offsetting increase in investment elsewhere due to the lower interest rate.

Small wars loom large on China's horizon

The "Malacca Dilemma"

By Jens Kastner

Broad hints have been coming out of China that the country might start small-scale military strikes over disputed waters that are believed to hold rich energy reserves. The consequences of such endeavors would be tolerable to Beijing, international experts say.

Bitter territorial disputes China has with neighbors in the East and South China Seas have long grabbed media headlines. Virtually all countries in the region are involved in spats with China, from South Korea and Japan to the Philippines and Vietnam. In March alone, Beijing had verbal clashes with Seoul over a submerged rock; with Manila over the Philippines' plan to build a ferry pier; and with Hanoi over China's biggest offshore oil explorer's moves to develop oil and gas fields.

Fighting fire with fire

Muslim Brotherhood chooses chaos

By Spengler 

Egypt's Muslim Brotherhood signaled its intent on Sunday to push the country into economic chaos. With liquid foreign exchange reserves barely equal to two months' imports and panic spreading through the Egyptian economy, the Brotherhood's presidential candidate Khairat al-Shater warned that it would block a US$3 billion emergency loan from the International Monetary Fund (IMF) unless the military government ceded power. 

"We told them [the government], you have two choices. Either postpone this issue of borrowing and come up with any other way of dealing with it without our approval, or speed up the formation of a government," Khairat al-Shater said in a Reuters interview. [1] 

The news service added that al-Shater "said he realized the country's finances were precarious and a severe crunch could come by early to mid-May as the end of the fiscal year approached, but that this was the government's problem to resolve".