Friday, March 22, 2013

BIG Government Is Good for You

I am a BIG-government man. I disagree with the  dogma according to  which economic decisions should on principle incessantly, or whenever possible, be made by private individuals. I do concede that a sensible argument can be made for arranging social and economic institutions so that individuals are enabled to assume much of the responsibility for their own fate.

However that is largely an ethical and philosophical, and not a strictly economic issue. On the other hand there are extremely powerful reasons of a purely economic  nature to restrict  individuals’ right to make economic decisions, when these decisions affect not only their own fate, but also that of others.

That seems a bland, uncontroversial statement, but it leads directly to conclusions that invariably make libertarians’ hair stand on end.

This is because many sorts of economic decision that intuitively seem to be of the most private and personal nature actually exert substantial  effects on completely Bolivious third parties. This phenomenon is technically known as the “externalities” or “external effects” of private economic activity. Economists overwhelmingly acknowledge that private decisions characterized by large externalities should be strongly influenced, or outweighed, by government policy, whether it be by means of taxation or through other policy instruments.

Take education, for example. It has been repeatedly proven by statistical studies that the amount spent on a child’s education is only vaguely related to the child’s future earning power. On the other hand it is equally certain that aggregate investment made in education by a whole country or region is very strongly correlated with that country’s or region’s future prosperity.

In other words, for a family, money spent on its children’s education is by no means a safe investment. On the contrary, it is fairly risky. However the country  as a whole is extremely likely to benefit from any investment in the education of its youth. Accordingly, it is very  unwise to allow parents to decide alone all aspects of their own children’s education, because parents are unlikely to take into account the benefits such investments will confer upon utter strangers. Nonetheless such benefits are large.

Consequently families tend to invest much less in education than is desirable for the population as a whole. Accordingly the government should heavily subsidise education in order to optimize education investment from a social standpoint. The government must forcibly extract from individuals the funds needed for this investment in education, that the latter would otherwise squander on unproductive purchases.  If the money is wisely used, on average  taxpayers will greatly benefit from the fruits of this governmental coercion.

Scientific research is also an extremely unprofitable industry. A research laboratory devoted to studying the sex life of sardines is unlikely to make its owner rich, because the knowledge won from such research cannot be packaged and sold commercially. But  society as a whole will probably benefit greatly from such endeavours. Accordingly it is madness to let private investors decide how much a country will spend on scientific research. That must be done largely by the government. And the funding must come from taxes paid by people against their will, whose principal motivation in paying them is fear  of punishment if they refuse to cough up.

Private economic decision making is not generally characterized by any deep thinking. Investors lose interest after thinking three moves into the future. Perhaps that was the reason that when the Latvian economy was turned over to the free market, red in tooth and claw, it took private capitalists only 2 or 3 years to run the country’s economy into the ground. The decisions they made were presumably rational from the standpoint of their own private interests. But the upshot was a grave economic crisis in which the entire population suffered greatly. Naturally Latvia’s specific trait of being a small, middle-income   country played an important role  in how the crisis arose.

In a nutshell, individuals are selfish and unwilling to make sacrifices for abstract ideals and distant goals. They prefer to devote their efforts to attaining immediate material goals for themselves and their  close relatives.

That is why we need an 800-pound gorilla -- known as the government -- that can terrify and cajole people into  making sacrifices for the common good.

An individual’s welfare is only partly determined by his or her own decisions and efforts. Impersonal, macro-social phenomena – as well as blind chance -- are decisive in determining people’s fates. The decisions capable of influencing these macro-social phenomena either cannot or should not be made individually, but collectively through a process of public debate on how society should be organized and which policies the government should pursue.

Once those decision have been made by a majority, after free and earnest debate and mature reflection and within the constraints needed to protect the legitimate rights of minorities and individuals, such decisions should be imposed by force if need be.

Libertarians mock this attitude by calling it totalitarian, idolatrous and zombie-like. But they  can do so only by evading serious debate on a multitude of specific social, philosophical and theoretical issues. People with such viewpoints can prevail only by rigorously excluding most of the really important issues in people’s lives from public debate and banishing them to the limbo of private life. The method they employ to accomplish this act of censorship is to dogmatically impose the ideological straitjacket of free-market malarkey.

They try to sound very sage and distinguished, feigning to base their dogmas on rigorous scientific thought. But it is all humbug. Libertarian ideology has no roots in classical  economics, unless we classify screwballs like Frédéric Bastiat as classical economists.

Nonetheless I freely acknowledge that various currents of right-wing economic thought, despite their  occasional hubris, contain nuggets of wisdom that should be duly appreciated by leftists. I am thinking specifically of Austrian economics and social choice theory, but there may be others.

Thursday, March 21, 2013

De Souza the Loser

The time I really noticed what an colossal ignoramus Dinesh de Souza is was when I read  an article in National Review about health care policy written by that turkey a few years ago. At one juncture he mentioned the so-called “uninsurable” people, i.e. those who were unable to obtain health insurance policies from a commercial insurance company because they were judged a bad risk.

It gives you an idea of the reverence de Souza must feels for parasitical insurance executives  when he unquestioningly assumed that anyone whom an insurance company called “uninsurable"  must be truly at death’s door and would normally be unable to breathe or walk without the assistance of mechanical contraptions. 

It also shows that he knows practically nothing about health insurance.  I have known for many years, and I know many people who are likewise well informed, that the American insurance industry calls  EVERYONE  “uninsurable” who has ever had liver disease or cancer of any kind, in addition to other  grounds for exclusion.  In other words there are really healthy, sound, sturdy people who will outlive both you and me, and are classified as “uninsurable”. I was one of them for a while.

From this little anecdote I likewise deduce that de Souza‘s secretary or broker takes care of all his insurance matters. I presume his time is much too valuable to be taken up with such routine matters, when he has the duty to inform his loyal readers of the true state of affairs in the health care industry. .

So he obviously makes pots of money from all this pimping and lying he does for the extractive classes. And he's an ignorant bastard, too,  mostly because he's uninterested in facts, like Ronald Reagan. He does not really need any facts anyway to do his work. He just makes things up as he goes along, I suppose.

Most of those years I was uninsurable I was insured by the state, paying a pretty hefty fee of $300 a month in premiums and a big chunk of medicines as well. Well, every single year the State of Maryland made a profit on my health insurance. I incessantly paid more in premia and whatnot than the cost of the attention I received.

My main hobby at the time was karate. I'd train twice a week. Nonetheless my health  was uninsurable. I should really look into how the parasitical insurance industry gets away with all this shit. 

I expressly came to this Conservatism web site to check whether conservatives know anything I don't. And the preliminary answer to the  question appears to be “No”. I had already read more than half of the conservative authors recommended here, and had previously rejected them as unreliable, not for ideological reasons, but because of internal contradictions, inconsistency of their claims with information I received  from academic sources, etc The books that were recommenced here are on the whole of low quality, containing numerous inaccuracies of fact and of estimation. It is easy to detect the errors, because none of the writers recommended except perhaps Milton Friedman is or was a specialist in the field they were writing about, so it's easy to access really reliable sources that you can use for comparison. And pretty soon the incontrovertible fact emerges that  these people are just hacks, penny a liners, propagandists with no respect for the truth.

By the way, I  am equally unsentimental with dunces and bullshit artists on the left of the political spectrum. However I concede that I focus on the right, so many things on the left may escape me. 

Wednesday, March 20, 2013

A Liberalism of Convenience

A Liberalism of Convenience:
The Strange Case of Ludwig [von] Mises

by Carl Stoll

Ludwig von Mises says that the government can do no right, i.e., every government  intervention in the market must reduce the degree of competition. However he provides no argument to warrant this conclusion. Furthermore, he chides an author who proposes such a thing. Ludwig von Mises is on record on several occasions throughout his career as opposing government  intervention to increase competitiveness of markets.

Von Mises asserts that for a market to be competitive there is no need to supervise the competitors to make sure that they abide by the rules of fair competition.  The same passage can be construed to mean that competitiveness is not an important attribute of a market.[1]   Von Mises furthermore states that only monopolies created by the state are bad. Monopolies created by private parties are unobjectionable. All in all, von Mises persistently defies the ethos  of classical liberal economics. The entire concept of fair play and abiding by the rules is beyond his comprehension. He’s not a liberal. Instead he's an opponent of the state. But he does not justify his opposition to the state on moral grounds.  He's against state intervention even when it yields only benefits and no drawbacks. More precisely he refuses to consider, he rules out a priori  the possibility of government intervention increasing competitiveness or rendering any other benefit.

He requires compliance with  the rules of competitiveness  only when these rules hamper the action of the state. When the rules limit the freedom of private parties, he's against the rules. I suspect that somewhere von Mises explains that not just ANY private party is eligible, but only those who fulfil certain conditions  ….(you can imagine the rest).

Von Mises is a mere opportunist. His attachment to classical economics is mere show. He is an aristocrat who despises plebeians.  In the early 20th century a wave of statism swept over the world, assuming various disguises: Fascism, Communism, various sorts of authoritarian régime. Von Mises was not opposed to Fascism as such. On the contrary he welcomed Fascism in Austria when Fascism was useful in oppressing the Austrian working classes. He opposed Fascism only to the extent that Fascism hampered the free market. His specific argument was that when trade unions are so strong, the free market can no longer function!  Accordingly the  moment the free market cannot function there is no longer any reason to oppose Fascism.

As a matter of fact, I read somewhere that von Mises was an economic adviser, perhaps even the principal economic adviser, of the Austro-Fascist dictator Engelbert Dollfuss, who ruled from 1930 until 1934. However I have not seen any record of the advice he gave Dollfuss, or any account of Dollfuss’ economic policy, for that matter.   In general terms, Dollfuss tended toward the typical Fascist thing, which was opposed to international commerce, in favor of high customs duties. However that need not mean that  von Mises encouraged those tendencies. As a matter of fact I doubt it very much. But I will abstain from all speculation until I have been able to examine this period of von Mises’ career more carefully.  

Furthermore, when I state that von Mises associated with Fascists, I must stress the fact that Austro-Fascism was a fairly benign strain of authoritarianism, with a strong Catholic streak.[2] Dollfuss established many concentration camps in Austria, but there was no forced labor and there is no record of anyone having ever been killed or mistreated in the Austro-Fascist concentration camps. Thus there can be no question of associating von Mises with a terror régime like that of the Nazis or with Franco’s Spain.. Nonetheless I'm sure von Mises grunted with satisfaction in 1934 when he heard that the Social Democratic insurgency had been crushed.

[1] Von Mises wavers back and forth between two arguments:  in some places he justifies the market  on utilitarian grounds – I hold these statements to be mere lip service to liberalism, since they are expounded in the abstract. However when the time comes when he should apply utilitarian standards to denounce anti-competitive behavior,  he refuses to do so and instead chuckles indulgently on seeing injustice done. “Boys will be boys!” he seems to imply.

[2]  On the other hand, a neighboring country, Croatia, was likewise governed a few years later, by a  Catholic oriented authoritarian régime that was brutal eyond belief.: Ante Pavelic killed almost  one million civilians (mostly Serbs, Jews and Gypsies) in his concentration camps run by renegade Franciscan monks.  

Free-Market Environmentalism

Critique of free-market environmentalism

Going With the Flow:
Expanding the Water Markets

by Terry L. Anderson and Donald R. Leal

Terry L. Anderson and Donald R. Leal are associates of the Political Economy Research Center in Bozeman, Mont. This paper is excerpted from their forthcoming book, Free Market Environmentalism. Anderson is also the author of Water Crisis: Ending the Policy Drought (Cato Institute, 1983).

This is C Stoll’s preliminary critique:

Not to put too fine a point on it, this  essay bears all j symptoms of being a bunch of dogmatic trash and propaganda. Heavy on slogans but no analysis of the economic facilities. “Oh, wouldn't it be wunnerful if everybody  could decide by themselves how much water they’re going to  use and for what?”

I grant it may have some advantages if you want to seize collective property and transform it into private property. The argument in favor of market solutions is only as strong  as the guarantees you offer that the market  will be competitive and not subject any participants to exploitation. But allocative efficiency is only one of many sorts of efficiency, and when measured by the other sorts of efficiency the market solution  stinks. If you claim otherwise, prove it.

Or let's put it another way: if you want citizens to control society’s assets, how come you don't propose more citizen control and participation, and public debate on environmental decisions, electoral and review mechanisms that exert effective control over the bureaucracy? Why do you never call for democratization of public life? Why do you detest the concept of collective decision-making?  Why does everything have to be decided by some so-called “individual”? Especially when it turns out that that individual is Rupert Murdoch, say, or Honeywell International.

Tell you what, if you (1) show me why public ownership is bad, I’ll accept your argument. Also you must guarantee that the market solution will be equitable, and not allow resources to be hogged by a few fat-cats.

Furthermore  you have to decide what the technical requirements for a free-market  are. A freer market in water requires an efficient transport system for water. Who builds canals? The government does.  Is that accidental? No, it isn’t.


Would Lincoln Be a Republican today?
Matthews Questions the Party of Lincoln
By Don  |  April 10, 2010
MSNBC Hardball host Chris Matthews trashes the GOP and questions whether or not Lincoln would be a Republican today.

Bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla  bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla                                    From
April 10  at  10:13 pm  |  #1  |  Link


That’s a good question, and it so happens that by sheer coincidence, I know just barely enough about US history to answer that question without a moment’s hesitation.

And the answer is “HELL NO! If Lincoln were alive today he wouldn’t touch the GOP with a ten-foot barge pole!”

And now I’ll tell you why I think that:
Now I’m telling you up front that I’m pretty hazy about 19th-century US history. But it so happens that a few weeks ago I chanced to read something about Lincoln’s monetary policy. And I discovered that Lincoln struggled throughout his presidency with the greedy US banksters of his day. And he played a particularly nasty trick on those worthies.

And for this trick may Lincoln’s name live in glory forevermore!

He told the banksters that the federal government no longer needed their assistance in managing the US currency. (As you can well imagine, that “assistance” was not coming cheap!). And he proceeded to issue a new currency (which was still called the dollar, just like before) which the federal government would issue in its own name and not in the name of any bank, as had occurred until then. And this new sort of dollar bill was called the “greenback”. And none of the banks ever made a single penny on shuffling that paper money around.


Flash forward to 2008. The president of the US is great buddies with all the banksters. He continually does favors for them. For example, when after a decade of reckless speculation by the banksters suddenly the banksters found they had lost their respective shirts, the President, loyal friend that he is, told them not to worry, he’d fix that problem. And he cheerfully collected close to a TRILLION DOLLARS from you, and from me, and from Ms Gómez down the road, and from lots of other people, and he gave away all our money to the reckless banksters! (with the selfless support of most Republican and most Democratic senators and congressmen, by the way).
I don’t know much about Lincoln, but that little anecdote warmed the cockles of my heart. And now you know why Lincoln, if he were alive today, WOULDN’T TOUCH THE GOP WITH A TEN-FOOT BARGE POLE!”

Because Lincoln was no crook.

O Cruel Fate!

O cruel fate!  The  assignment that history appears to have reserved for the Austrian School of economics  is the mission of hypocritically -- in the name of freedom -- defending rule by an oligarchy.  Much the same ideological role as the one played in the late unlamented Soviet Union by the “politburo Marxism” diligently churned out by the yard by professional Communist ideologues/propagandists.  Dear comrade Mikhail Suslov! Where are you now?

And not on account of too much planning, but rather on account of control of government policy by powerful interest groups and constant duping of the population by new bogus reformers to replace the previous bogus reformers.  So WTF?

I concede that certain Austrian arguments are persuasive. However  insofar as they are misused in order to defend the present rule of corrupt oligarchies, they lack all credibility and should be ignored. No conceivable economic system could be less efficient than the US  economy right now (2010). I do not for an instant believe that Austrian School arguments make a damn bit of difference in practice.   

Those who brand government planning coercive should enquire further into which segments of society benefits by the current dispensaysh, or perhaps who has the motive to impel such coercion. At this point, however, the Austrians prudently adjourn the debate. Those who brand government planning inefficient must also brand as inefficient the current squalid, higgledy-piggledy and corrupt manner of setting policy at the dictate of a tiny oligarchy of billionaires.   

However, I have not noticed much of that on Austrian websites.  

Once, in a magnificent display of my rapier wit, I termed the Austrian School a ”necessary evil”. What I meant by that is that there must always be a sector of opinion that is opposed to government as such. An anti-state ideology represents a fairly clear political choice. The Austrians’ lack of subtlety has the benefit of permitting their doctrine to be packaged in few and powerful words. "We need no government, or as little as  possible.” I think it is a great help for the ongoing discussion on the role of the state that such a faction exists. The Austrian School is a guidepost, a compass that defines one extreme of political philosophy. As such it is a structural necessity, since it constitutes part of the definition of the political sphere.  

How Needful Is Deregulation?


Compare these figures on overregulation in various Latin America countries with growth figures. Brazil is one of the more regulated countries, but it has a strong economic growth and beneficial distribution trends.

Number of procedures needed to open a business in some Latin American countries:

Cost of becoming operational as a share of GNP/capita:


From Latin America failed to remove entry barriers

Market vs. Plan in economic development

Reading article by Saad-Filho[1] on effects of neolib on development economics. He makes the classic claim of the left that Asian tigers disprove neolib doctrine. The right-wingers claim the opposite. Actually I think neither are right. The East Asia tigers (Japan, Korea, Taiwan, Hong Kong, Singapore, more recently Malaysia, Thailand) display a broad array of econ policies, from centrally organized Korea, reminiscent of Soviet U in 1930s, to laissez-faire HK, with Taiwan close behind.

Korea: huge firms, heavy-handed state planning & financing;
Taiwan: small firms, very little planning.

But both were successful. So it appears that the actual policy pursued is not so important. Deng Hsiao-Ping said: “It’s not so important if the cat is black or white, the main thing is that it catches mice.”

There is another possibility, namely that the correct econ growth policy depends on very specific country factors.

One common element in the E Asia tigers is the export orientation. However they did not shy from import substitution as a tactical measure to save foreign exchange (other exceptions?).

The important elements may be instead the factors for growth outlined in R Barro's books.[2]

These are:

Positive correlation:
Regression coeff. X 1000
Terms of trade change
Democracy index
Life expectancy                             
Rule of law index
Male secondary & higher education    

Negative correlation:

Gov’t spending ratio
Democracy index squared
Inflation rate
Fertility rate
Log GDP x Male education                       

In a single series:

Terms of trade change
Gov’t spending ratio
Democracy index
Democracy index squared
Inflation rate
Life expectancy                             
Rule of law index
Fertility rate
Male secondary & higher education    
Log GDP x Male education                       

There is little that can be done about the most important factor, terms of trade, except reduce production of exports whose TOT are falling and increase those whose TOT are rising. This is usually difficult to do except over very long term. So we’ll discard this factor as a possible policy measure.

Consequently the most significant policy measures to promote growth are, in order of importance:

  1. Reduce gov’t spending
  1. Democratise (but not too much)
  1. Reduce inflation rate
  1. Invest in public health & improve nutrition
  1. Make courts & administration more efficient and law-abiding
  1. Reduce birth rate
  1. Increase male secondary & higher education         

There is an obvious contradiction between 1 on the one hand, and 4, 5 & 6 on the other. Other factors that are not taken into account are reduction in military spending and in education of females. (For some reason “defense” & educ are not included in “gov’t spending” figure.)

So the revised list is:

1. Reduce overall gov’t spending and reallocate it


  • military
  • female educ
  • gov’t production (to the extent it creates deficits)
  • etc. (which others?)
  • corruption


  • health & family planning
  • nutrition
  • adm & judicial reform (incl raising salaries)
  • male secondary & higher educ. (only at low GDP/cap levels)

2. Democratise (but not too much)

3. Reduce inflation

Factors 2 & 3 are relatively cheap but require strong political base.

Historical examples

It is interesting to compare Barro’s list with English society & government in the early 19th cent, when England became the first industrialised country: It fails every single test. 90% of gov’t spending was on the military, none on health, educ, nutrition, adm reform. Corruption was high. The rule of law was so-so. Democratisation was minimal. Fertility?[3]

Perhaps England was able to grow because it had no competition, above all no countries that were more advanced and that could force England into disadvantageous divisions of labour.

The decisive elements in England’s rise were its sheltered strategic position, its traditional autonomy from Roman Catholicism’s stifling dogmas, the prodigious inventiveness of its artisans, the convergence of science and technology, the traditionally self-confident yeomanry [?], its relatively free political & social atmosphere, its possession of a colonial empire [?].

On the other hand it shared with N Italy & Holland the commercial culture that facilitated division of labour.[4]

It is evident that the factors that impelled England’s rise were much more fundamental than the Barro factors. They were connected to the creation of new technologies and new forms of social organisation. Modern LDCs however, mostly adapt existing technologies, instead of creating their own. A developing country only starts creating technologies when it has reached an advanced stage of development (see Korea). Hence the factors that impelled England are much less important to today’s LDCs. So the Barro factors step in to fill the gap.

Postscript May 2006

Since writing that I have read “Governing the Market” about the single-minded control of Taiwan development by Kuomintang. They were shamelessly import-substituting in the 1950s & 60s. However they did not make the mistake of the LAmericans, let the manufacturers make shoddy merchandise unscathed. If domestic quality was bad, the imports would roll in.

Secondly, “Growing Public” makes a couple of claims about the Barro parameters, namely that if Zimbabwe and other kleptocracies were excluded, the negative effect of large state sectors would disappear from the statistics. What was the other one?

[1] Saad-Filho (ed.) “Neoliberalism – A Critical Reader”, Pluto Press 2005.
[2] “Determinants of Ec Growth", MIT Press, 1997 & “Getting It Right -– Mkts & Choices in a Free Soc", MIT Press, 1996.
[3] Theodore S Hamerow: The Birth of a New Europe. State and Society in the Ninetheenth Century, Univ of N Carolina Press, 1983, part 3. [Since Jan I have read “Kicking away the ladder” by that Korean guy.]
[4] Douglass North & Robert P Thomas: The Rise of the Western World. A New Ec History, Cambridge U Press 1973

Murky Markets

You use of the term "Obamalini” to denote President Obama -- implying that Obama is a Fascist or resembles one -- indicates that your relationship to reality is murky, to say the least. I grew up in a Fascist country and spent years studying the history of various European Fascisms. Nothing, but NOTHING, President Obama has done has shown the slightest resemblance to any kind of Fascism.  Your use of this cheap and mendacious slogan indicates that your ideas are controlled by your political fantasies.

By the way, I don't even like Obama. I think he's a stooge of Wall Street.

You have adroitly missed my point.

A “market” as such is a guarantee OF NOTHING AT ALL. For there to be any assurance of a Pareto-optimal outcome, the market MUST BE COMPETITIVE. You expressly proposed that the oligopolistic finance sector decide how to allocate investment. We tried that. It didn't work.
That is the Big Lie of conservative economics: attributing to ologoplistic markets subject to all kinds of market failure all the virtues of a free, competitive market.

Conservative hypocrisy is nauseatingly obvious: all of you turkeys are saying “Let the market do it!” I HAVE NEVER ONCE HEARD A CONSERVATIVE RECOMMEND THAT THE MARKET BE RENDERED MORE COMPETITIVE BY STRUCTURAL REFORMS.
You took the term “competitive market” and amputated the “competitive" part, but you continue praising this rump market as if it were the genuine article.

A cui bono analysis of your statements would indicate that, while claiming to favor the free market, you are actually nothing but a pimp for ologopolistic capital.
Wall Street’s claim to be a “free market” resembles Communist East Germany calling itself the “German Democratic Republic”. You conservatives are the new communists. But more ruthless and less simpático.

You proposed that the oligopolistic finance sector decide where to invest. In addition to being oligopolistic, Wall Street is run by crooks. Goldman Sachs selected the worthless securitized mortgages to be packaged and sold to investors -- lavishly decorated with  triple A ratings -- and then turned around and sold the very same securities short, because he knew they were going to  tank. Are you seriously proposing that investment decisions be made by con men like Henry Paulson?
That means you're not only a pimp for big corporations, but you are actually proposing that we subsidize organized crime.

Read my article The Austrian School of Corporate Crime at