Kirchener to Investors: “You’re Meanies for Lending Me Money”

download (10)Well, she didn’t actually say that, but she might as well have. Her position is that the investors who loaned her regime money are now “terrorists” for wanting to be repaid, noting, in a speech at the United Nations, that “terrorists are also those who destabilize a country’s economy through speculation.”

Of course, Argentina wouldn’t even have needed those investors if the government had simply stuck to spending only what it collected in tax revenues. Instead, over the past decade, Argentina has been on a spending spree.

Kirchener, when she made these remarks, was perhaps anticipating Monday’s legal development in which Argentina was declared in contempt of court for refusing to pay its debts.

Now, as Christopher Westley has shown, the Argentinian state should just default on its debt, since the taxpayers have been abused enough at this point, and should not continue to be on the hook to pay for the state’s profligacy. And Argentina is indeed in the process of defaulting. But Kirchner wants to default and still be legally not in default, so that the next spending spree can get started all the sooner.

For more:

Understanding Argentina’s Coming Default by Nicolás Cachanosky 

Confiscatory Deflation: The Case of Argentina by Joseph T. Salerno

Myths and Lessons of the Argentine “Currency Crisis” by Joseph T. Salerno

Argentina’s Politicians Should Read Mises by Iván Carrino

Argentina’s Paper-Money Mire by Grant M. Nülle

Greenspan on Gold (again)

alan_greenspan22Alan Greenspan once vigorously defended the gold standard, before taking command of the world’s largest printing press. Now back in civilian life, and lacking any opportunity to put his professed principles into action, Alan is again friendly to gold:

The broader issue — a return to the gold standard in any form — is nowhere on anybody’s horizon. It has few supporters in today’s virtually universal embrace of fiat currencies and floating exchange rates. Yet gold has special properties that no other currency, with the possible exception of silver, can claim. For more than two millennia, gold has had virtually unquestioned acceptance as payment. It has never required the credit guarantee of a third party. No questions are raised when gold or direct claims to gold are offered in payment of an obligation; it was the only form of payment, for example, that exporters to Germany would accept as World War II was drawing to a close. Today, the acceptance of fiat money — currency not backed by an asset of intrinsic value — rests on the credit guarantee of sovereign nations endowed with effective taxing power, a guarantee that in crisis conditions has not always matched the universal acceptability of gold.

The September Issue of The Free Market is Now Online!

septfmThe September issue of The Free Market, the Mises Institute’s monthly is now online!

September’s issue features a new book review from David Gordon, and on the 100th anniversary of World War I, Hunt Tooley reflects on modern views of the war:

In his new book Money, Steve Forbes offers a new scheme for tying the dollar to gold.  But, of course, things are not what they seem, and in the Forbes plan, there is no true gold standard to be found. David Gordon writes:

Imagine that someone wrote an eloquent book about price and wage controls. The book showed how attempts to control prices led to economic disaster. Faced with an abundance of incontrovertible evidence that demonstrated the bad effects of these measures, an informed policymaker would find only one rational choice available to him. He should not impose comprehensive price controls but rather should use controls in moderation. Would it not be obvious what had gone wrong with our imagined book? If price controls do not work, they should be done away with altogether. “Moderation” in the use of a bad measure is no virtue. If cyanide is poison, “drink in small doses” is not the appropriate response. Money falls exactly into the bad pattern just described.

Also in this issue, historian T. Hunt Tooley examines how historians’  views of the First World War have varied greatly over time. Dr. Tooley looks in detail at how the written history of the war has evolved, and the role of Austrian economists in shaping those views:

Mises really offered the revisionist school a theoretical framework which had been missing. He also encouraged many students in this direction, including Murray N. Rothbard and Ralph Raico. Rothbard contributed very substantially to the field of technical studies of World War I as he folded the theory of Mises into the older revisionist school. His works on war collectivism, “war as fulfillment,” the financial history of the war, and other topics stand at center stage in modern paleo-revisionism.

Indeed, Rothbard really expanded the agenda of revisionism to encompass a variety of new topics in intellectual, economic, and social history relative to the first conflict. Along with Mises, Rothbard took revisionism in a direction away from the unqualified support of Germany under the Kaiser, a kind of caricature position in which some revisionists had become stuck. Rothbard critiqued the state as state, including the German version of it.

And don’t miss our round-up of this year’s exciting Mises University.

War is Good for the Economy: Defense Stocks Soar

1280px-US_Navy_020712-N-5471P-010_EOD_teams_detonate_expired_ordnance_in_the_Kuwaiti_desertWell, war is good for certain sectors of the economy. For example: weapons manufacturing. Taxpayers and holders of US dollars won’t fare quite as well.

Writes Bloomberg:

Led by Lockheed Martin Corp. (LMT), the biggest U.S. defense companies are trading at record prices as shareholders reap rewards from escalating military conflicts around the world.

Investors see rising sales for makers of missiles, drones and other weapons as the U.S. hits Islamic State fighters in Syria and Iraq, said Jack Ablin, chief investment officer at Chicago-based BMO Private Bank. President Barack Obama approved open-ended airstrikes this month while ruling out ground combat.

“As we ramp up our military muscle in the Mideast, there’s a sense that demand for military equipment and weaponry will likely rise,” said Ablin, who oversees $66 billion including Northrop Grumman Corp. (NOC) and Boeing Co. (BA) shares. “To the extent we can shift away from relying on troops and rely more heavily on equipment — that could present an opportunity.”

Basically, it’s party time at places like Lockheed Martin where highly paid engineers live off the sweat of the taxpayers to develop more efficient ways to kill people 10,000 miles away. The idea of a war with few American casualties, but with incredibly expensive weaponry, is a crony capitalist’s dream come true. Politically, there’s no down side, from their perspective. Voters don’t care about dead Arabs, and with so few American personnel likely to be killed, there’s virtually limitless potential for the defense industry in this open-ended conflict. Thousands of bombs, each costing $250,000 will be dropped, with thousands more rolling off the production lines.

Thanks to the central bank and American enthusiasm for limitless spending on wars, there’s no better business than the war business. In fact, with election season right around the corner, watch for conservatives to be claiming that the administration isn’t spending enough on war.

 

Uncle Sam´s Annual Borrowing 14 Times Worse Than Thought

SONY DSCLots of people like to concentrate on the deficit when looking at public finances. In 2013, he federal government of the United States ran a budget deficit of $614 billion, which is quite a bit, but seemingly small relative to the $17 trillion economy. (Though as I recently showed, if you want to understand how precarious public finances are you should assess them relative to tax receipts and not a country´s total income.)

David Stockman´s recent article raises a whole new reason to be scared.

The actual amount of borrowing that the federal government did in 2013 was over $8 trillion! Because so much of Uncle Sam´s debt is of a short-term nature, it is necessary for the federal government to continue seeking the kindness of strangers to keep its debt rolled over.

Since total federal tax receipts amount to just shy of $2 trillion last year, the government needed to borrow four times more than its annual “income” just to stay afloat.

The problem is not just that the total amount of public debt outstanding is high, or that the yearly deficit adding to this debt is significant. It´s that so much debt is of a short-term nature, which necessitates the Treasury to continually seek out new borrowers. The risk is that one day borrowers will demand more than the paltry interest rates T-Bills are currently yielding, a situation that would result in either a terrible auction at low rates or significantly higher interest charges. I can´t really see Uncle Sam liking either of these options.

(Cross posted at Mises Canada.)

Subsidies, Market Prices, and the 2014 Farm Bill

farm2Mises Daily Wednesday by Dick Clark:

2014’s new US Farm Bill eliminates many direct subsidies to farmers, while replacing them with subsidized insurance programs. This will lead to higher costs for taxpayers and distorted markets in the future.

Israel Kirzner for the Nobel Prize!

KirznerThomson Reuters has been predicting Nobel Prizes for the last dozen years, with modest success, and this year names Israel Kirzner as a potential economics winner, in a hypothetical joint prize with William Baumol for research in entrepreneurship. (This is one of three scenarios imagined by Thomson Reuters, the others being Philippe Aghion and Peter Howitt for growth theory and Mark Granovetter for economic sociology.)

Like most Austrians, I will be delighted if Kirzner wins the prize, not only as recognition of Kirzner’s work and the general field of entrepreneurship, but also for the attention it would bring to the Austrian school itself. Kirzner’s accomplishments are many, not only in entrepreneurship theory but also in economic methodology, capital theory, and the history of economic thought. I will also be surprised — as I have argued (e.g., here and here), Kirzner’s influence on the specialized field of entrepreneurship is vast, but his influence on economic theory has been modest. Kirzner’s theory of entrepreneurship is not, after all, a theory of entrepreneurship per se, but a theory of what he calls the entrepreneurial market process. “My work has explored, not the nature of the talents needed for entrepreneurial success, not any guidelines to be followed by would-be successful entrepreneurs, but, instead, the nature of the market process set in motion by the entrepreneurial decisions.” As I put it in a 2008 article: “Kirzner’s aim is not to characterize entrepreneurship per se, but to explain the tendency for markets to clear. In the Kirznerian system, opportunities are (exogenous) arbitrage opportunities and nothing more.Entrepreneurship itself serves a purely instrumental function; it is the means by which Kirzner explains market clearing.”

The irony is that while management scholars interested in entrepreneurship and innovation have embraced Kirzner’s concept of entrepreneurial opportunities, neoclassical economists have continued to embrace Walrasian equilibrium, with little interest in the processes of adjustment and coordination highlighted in Kirzner’s work. (The influence of Kirzner’s work on both groups of scholars is easily demonstrated with citation data, which I provide in the links above.) This is not a criticism of Kirzner, of course, but a comment on the state of neoclassical economics. To be sure, the Nobel committee has previously recognized economists whose contributions have not been fully incorporated into the mainstream (Simon, Coase, North, Schelling, Williamson, Ostrom, and of course Hayek). And Baumol’s contributions, which focus on the economics of innovation and technical change, are far more “mainstream” than Kirzner’s. Still, I will be pleasantly surprised if Kirzner gets the early morning phone call!

Scottish Referendum Gives Reasons to be Hopeful

cat_flagMises Daily Tuesday by Ron Paul:

Devolving government into smaller units promotes economic growth. The smaller the size of government, the less power it has to hobble free enterprise with taxes and regulations.

Just because people do not wish to live under the same government does not mean they are unwilling or unable to engage in mutually beneficial trade. By eliminating political conflicts, secession could actually make people more interested in trading with each other. Decentralizing government power would thus promote true free trade as opposed to “managed trade” controlled by bureaucrats, politicians, and special interests.

Economic Isolationism in The Walking Dead

Back To The DeadMises Daily Tuesday by Mark Tovey:

When dealing with people in a potentially hostile environment (such as a zombie apocalypse) how do we decide if we should trade with strangers or kill them? It turns out time preference and the division of labor have a lot to do with it.

 

Does ‘Neoliberalism’ Make Psychopaths Rise to the Top?

220px-Phrenologie1-157kWhenever you see someone use the word “neoliberalism” you are probably dealing with someone who spends most of his or her time in a left-wing echochamber where people believe they are being oppressed by “free markets” and that things will be set right only when the kind, calming hand of government is able to tame the vile “free for all” that is people enjoying personal freedom.

So, one can hardly be surprised by the conclusions found in a recent article by Belgian psychology professor Paul Verhaeghe in which he declares that “neoliberalism” is “an economic system that rewards psychopathic personality traits has changed our ethics and our personalities.”

The economic system he refers to, by the way, isn’t the modern system of state-subsidized and controlled corporatism that actually prevails in the world today. No, he means that basically every voluntary economic transaction rewards psychopathic behavior. With that in mind, we can turn to Predrag Rajšić who points out:

The thesis of his article is that neoliberalism[1] has brought out the worst in people, that it rewards psychopathic personality traits and thus brings people with such traits to the top of the social structure.

Dr. Verhaeghe is, according to most criteria, a successful academic, close to the top of the academic achievement scale and pretty high in the general social structure. To avoid ad hominem criticism, I will assume that Dr. Verhaeghe is an outlier, that he climbed to the top despite the goodness of his heart, and not because of some psychopathic personality traits on his part.

Having this out of the way, I can critique the logic of his argument on its own merit. Dr. Verhaeghe claims that

A highly skilled individual who puts parenting before their career comes in for criticism. A person with a good job who turns down a promotion to invest more time in other things is seen as crazy – unless those other things ensure success.

From this, he concludes that this system rewards career and penalizes one’s love for his family. There are at least two problems with this conclusion. First, we don’t know how other social systems perform in this regard. Did feudalism favour “success” to a lesser extent than the system Dr. Verhaeghe is critiquing? How about communism? Were there fewer psychopaths at the top of the social structures in the communist/socialist Yugoslavia or the USSR than in the current system?

I don’t have quantitative answers to these questions, but neither did Dr. Verhaeghe offer any. I do know however, that the Yugoslav dictator Tito sent about 16 thousand political prisoners to something that looked more like a concentration camp than a prison. No one of the top Yugoslavian political or economic officials complained strongly enough to change this system. Did they exhibit more or less psychopathic tendencies than the people at the top of today’s social structures in neoliberal societies?

Second, Dr. Verhaeghe’s conclusion assumes that rewards and punishments are objectively determined outside of our minds. This is problematic because, from what we know about the logic of choice, human choice is based on subjective valuations. This means that the definition of success and failure is subjective. Each individual defines her own success. For me, for example, choosing a promotion over spending enough time with my family would be a failure, not success. I value time spent with my family more than a promotion if that promotion implies less family time.

Read the whole thing.

More European “Growth” Shenanigans

10530873-european-union-logoEurope got some good news in early June as the EU changed its statistical guidelines on how to compute GDP. Among other changes, expenditures on prostitution and illicit drugs (hookers and blow, colloquially) will now be included.

Of course, some countries have been including these items for years. Back in 2006, the Greek government was able to increase its reported GDP by 25% overnight by including these items! The reason the Greek government made the change back then was to have more flattering debt and deficit to GDP figures than otherwise. We now know how that story ended.

As Tim Harford recently brought to light about Britain´s Office of National Statistics´ (ONS) attempts to include some of these less savory expenditures into its GDP calculation:

The ONS has made valiant assumptions in estimating that 60,879 sex workers are each employed 1,300 times a year at an average rate of £67.16. If true, that is an industry big enough to allow every man in the country between the age of 15 and 64 to visit a sex worker every three months.

For government officials putting stock in GDP figures when drafting new policies, maybe it´s time to come to the realization that these numbers obscure more than they expose.

(Cross posted at Mises Canada.)

The Radicalism of Mises

On Mises’s Birthday:

We live in a time in which many people claim to be libertarians or at least hint that they are. This includes many obviously unlibertarian people such as Bill Maher, Paul Ryan, and Michelle Bachmann. It’s arguably a good thing when people who have no real interest in your ideas claim to be part of your movement, although having people identify your ideology with the likes of Paul Ryan and Bachmann certainly has its downside.

The antics of ersatz libertarians offers us a reminder that there was once a time when virtually no one was a libertarian, and even fewer admitted to being one.  Ludwig von Mises lived through that time, and he was one of a tiny group of Western intellectuals who carried the torch for the ideology of laissez-faire from the dark times of the 1940s, 1950s, and 1960s into today.

Those unfamiliar with the intellectual zeitgeist of the mid-20th century might be unaware of just how radical Mises’s views were at the time, but it’s perhaps safe to say that Mises’s philosophy of laissez-faire was beyond heretical in those days. The “third option” of actually free markets, as opposed to debating how exactly the state should intervene, simply was not an option. In the introduction to The Essential von Mises, Murray Rothbard explained:

In the world of politics and ideology, we are often presented with but two alternatives, and then are exhorted to make our choice within that loaded framework. In the 1930s, we were told by the Left that we must choose between Communism and Fascism: that these were the only alternatives open to us. Now in the world of contemporary American economics, we are supposed to choose between the “free market” Monetarists and Keynesians; and we are supposed to attribute great importance to the precise amount that the federal government should expand the money supply or to the exact level of the federal deficit.

Virtually forgotten is a third path, far above the petty squabbles over the monetary/fiscal “mix” of government policy. For almost no one considers a third alternative: the eradication of any government influence or control whatsoever over the supply of money, or indeed over any and all parts of the economic system. Here is the neglected path of the genuine free market: a path that has been blazed and fought for all his life by one lone, embattled, distinguished, and dazzlingly creative economist: Ludwig von Mises. It is no exaggeration to say that if the world is ever to get out of its miasma of statism or, indeed, if the economics profession is ever to return to a sound and correct development of economic analysis, both will have to abandon their contemporary bog and move to that high ground that Ludwig von Mises has developed for us.

tumblr_m915tkbMa31qjj6ono1_1280

Image credit.

 

“Why Managers Still Matter”

BxrnIo-CQAA8lk7Some Austrians and libertarians think that managerial hierarchies, even within fully private companies, are inherently inefficient (or, worse, the indirect result of government intervention). I think this view is mistaken, for a variety of reasons (see these links for some discussion). There is nothing inherently inefficient (or illegitimate) about managerial authority. Decentralized forms of organization offer many advantages — effective use of Hayekian “tacit knowledge,” strong performance incentives, the development of esprit de corps — but there are drawbacks too. Under certain conditions, the appropriate use of managerial authority fosters better coordination, more timely responses, stronger incentive alignment, and better use of shared resources. (I need hardly mention that there is nothing “coercive” about voluntary agreements between employers and employees.)

Nicolai Foss and I have an article in the current edition of the MIT Sloan Management Review, “Why Managers Still Matter,” arguing that managerial authority still plays an important and valuable role, even in our knowledge-based, networked, Wikipedia-style, peer-to-peer economy. (The piece is firewalled but you can read it with free registration.) We write:

“Wikifying” the modern business has become a call to arms for some management scholars and pundits. As Tim Kastelle, a leading scholar on innovation management at the University of Queensland Business School in Australia, wrote: “It’s time to start reimagining management. Making everyone a chief is a good place to start.”

Companies, some of which operate in very traditional market sectors, have been crowing for years about their systems for “managing without managers” and how market forces and well-designed incentives can help decentralize management and motivate employees to take the initiative. . . .

From our perspective, the view that executive authority is increasingly passé is wrong. Indeed, we have found that it is essential in situations where (1) decisions are time-sensitive; (2) key knowledge is concentrated within the management team; and (3) there is need for internal coordination. . . . Such conditions are hallmarks of our networked, knowledge-intensive and hypercompetitive economy.

The article builds on earlier writings such as Nicolai’s “Misesian Ownership and Coasian Authority in Hayekian Settings” (QJAE, 2001), my Capitalist and the Entrepreneur (2010, e.g., pp. 20-21), and our “Original and Derived Judgment” (Organization Studies, 2007). As we point out, all forms of organization have benefits and costs, and most firms feature a blend of “market” and “hierarchy,” the exact mix varying with firm and market conditions. A vigorous embrace of free-market principles within the economy does not imply that private organizations must always be as decentralized, or “market-like,” as possible.

The Incremental Adoption of Electronic Currencies

Bitcoin-coinsElectronic currencies are typically viewed as “disruptive” innovations that will upset the existing structure of the banking industry (and even the economy and society at large), rather than “sustaining” innovations that generate incremental changes within the existing structure (here I’m borrowing Clayton Christensen’s famous terms). But people sometimes forget that technologies such as Bitcoin are both currencies and payments systems, and in the latter capacity they are integrated into the existing network of payment providers. As Charlotte Bowyer puts it, “the ‘Bitcoin revolution’ (if it is to happen at all) could be less explosive, more incremental, and far more reliant on existing processes than many might believe.” Bowyer argues that existing financial institutions and payments systems and Bitcoin are at least partly complements, not substitutes.

It . . . looks like Bitcoin’s success will be increasingly related to its integration with established payment, merchant and finance companies such as PayPal, Amazon, Apple and Visa. Bitcoin is a disruptive technology with the capacity to bring about huge changes, even within the confines of today’s regulated industries. However, these changes look likely to come with the help and blessing of today’s commercial giants, rather than by a process of immediate disintermediation.

For instance, Bitcoin is much more than the new PayPal, for it’s simultaneously both a currency and a payment processor. Despite this, Bitcoin’s price rallied significantly after a long period  of decline following the PayPal announcement. Whilst the Bitcoin protocol has absolutely no need for an Apple Pay or a debit card to transmit it (in fact Bitcoin was developed to render such third parties obsolete), there’s no denying that it would also work wonders for user adoption. As the Bitcoin ecosystem grows and seeks increasing legitimacy, integration with established companies is a very realistic route to long-term success. In addition these companies have much to gain from embracing Bitcoin early, rather than risk competing with it later.

Government “Security” Dictated by Prank-Calling Sadist in Walmart Shooting

3810394260_77e20bf59a_oThe shooting death of John Crawford in an Ohio Walmart store well illustrates the difference between private security and monopoly government security which is the final judge of its own actions, and which enjoys essentially limitless access to cash via the taxpayer.

The basic facts are these: Crawford picked up a BB gun (which is not in any way a “firearm”).  The BB “gun” is store merchandise and is sold in the store by Walmart. Crawford walked around the store holding the non-firearm in a non-threatening manner while talking to the mother of  his children on the phone. In response to a phone call from another shopper, police stormed the store, guns drawn, and shot Crawford dead on sight with no warning. Another woman, a 37-year old mother Angela Williams, also died of a heart attack in the ensuing police-caused chaos.

We  now know that the person who called the police, Ronald Ritchie, lied to the 911 operator when he said that Crawford was pointing the toy BB “gun” at people and that he was trying to load bullets into it. Ritchie lied when he said that Crawford was pointing the gun at children. And just as an illustration of Ritchie’s reliability, we also know that Ritchie lied about being “an ex-marine.” Nonetheless, police officers and dispatchers unquestioningly deferred to Ritchie, and based their response on Ritchie’s claims.

So, we apparently live under a system of public-sector policing in which a phone call from a single “witness” can trigger an aggressive police response based on no evidence, no intelligence gathering, and no regard whatsoever for whether or not the person calling into 911 is to be regarded as a credible source or just a lying man-child.

This isn’t the first example of this sort of thing, of course. We know that police engage in SWAT raids and other forms of police violence based on nothing more than a single phone call from a single witness with not even the most cursory investigation into whether or not the “tip” is based any anything other than boredom, spite, racism, or simply sadism . If anyone has an enemy, he need only call the police and report that the target of one’s ire is selling drugs out of one’s home or that he’s some sort of “terrorist.” Police with then descend on the “perp” with assault weapons drawn and smash up the person’s home. In fact,  a violent police response is so reliable, that the “game” of calling police with the intent of calling out military-style police raids on innocent victims in called “swatting.”

Would private police respond in a similar way? Would one phone call from an anonymous caller precipitate a private police agency to send out an armored vehicle filled with para-military assault-rifled soldiers pointing weapons at innocent bystanders? When government police point loaded weapons at innocent women out walking their dogs, they regard it as their prerogative to do so and make no apologies. As we know in the case of Crawford, even when an innocent person is gunned down, we’re told it’s “policy” and can’t be avoided.

Read More→

In Mises’s Birthday: Rothbard on Mises’s Contribution to Understanding Business Cycles

mises2Mises Daily Monday: Rothbard explains how Mises laid the foundation for Austrian Business Cycle Theory:

In The Theory of Money and Credit, Mises provided the basics for the long-sought explanation for that mysterious and troubling economic phenomenon — the business cycle.

 

Happy Birthday, Mises! Save 20% in the Mises Store

Save 20% in the Mises Store, today only. Use coupon code MISES133 at checkout. 

BirthdayMises133

The Japanese Deflation Myth and the Yen’s Slump

yen2Mises Daily Monday by Brendan Brown

The Japanese government claims it’s still fighting deflation, although there are no signs of it in Japan. Through a mixture of chance, habit, and economic sclerosis, prices have been stable in Japan, but Abenomics makes the future of the yen anyone’s guess.

 

Academics and Social Media

8539048913_3328e8545c_bAt this week’s Strategic Management Conference in Madrid I participated in an interesting session on Media Innovations, along with Will Mitchell and Wiley’s Caroline McCarley. My remarks focused on academics and their use of social media. How (if at all) can professors use blogs, videos, wikis, and other social media products to disseminate their research, to improve their teaching, and even to discover new ideas? Are social media and “serious” activities like research and class preparation substitutes or complements? Should untenured faculty avoid such distractions?

I began my remarks — where else? — with Kim Kardashian. Biologist Neil Hall made a bit of a splash a few months back by introducing the Kardashian Index, basically the ratio of an academic researcher’s Twitter followers to citations in peer-reviewed journals. (For a rough approximation, just divide Twitter followers by Google Scholar cites.) Someone with a very high K-index, the story goes, has a large popular following, but hasn’t made any important scientific contributions — in other words, like Kim, famous for being famous.

Science published a rejoinder suggesting that the K-index gets it wrong by implying, incorrectly, that popular and scholarly influence are inversely related. Indeed, among the top 20 natural scientists, by Twitter followers, are some scientific lightweights like Neil deGrasse Tyson (2.4 million Twitter followers and 151 citations), but also serious thinkers like Tim Berners-Lee (179,000 followers and 51,204 cites) and Steven Pinker (142,000 and 49,933). I haven’t run the numbers for economists and management scholars but I think you’ll find the same general pattern. E.g., among the biggies on the LDRLB Top Professors on Twitter list you find a mix of practitioner-oriented writers with modest academic influence (Bill George, Richard Florida, Stew Friedman, Gary Hamel) and scholars with huge citation counts (Mike Porter, Clay Christensen, Adam Grant).

I went on to emphasize (as usual) that, for the most part, these issues are nothing new. Scholars and thinkers throughout history have used whatever media are available to disseminate their ideas to wider audiences. In the 17th-19th centuries there were pamphlets, handbills, newspapers, and lecture halls; in the 20th century radio, magazines, TV, and other outlets. Classical economists like John Stuart Mill published anti-slavery tracts; the Verein für Socialpolitik took positions on important social issues of the day; the American Economic Association was founded to combat lassiez-faire; Mises and Hayek advised governments and wrote popular books; C. S. Lewis gave his famous wartime radio lectures; Paul Samuelson and Milton Friedman dueled in the pages of Newsweek, and Friedman took to the airwaves for the PBS series “Free to Choose”; Rothbard wrote countless newspaper, magazine, and newsletter articles, and popular books, and spoke to lay and professional audiences. So academic bloggers, Tweeters, Facebookers, YouTubers, LinkedInners, and Instagrammers are following in a grand tradition. Of course, what’s new today is the scale; without a contract for a newspaper column or TV show, any of us can set up shop, and have the potential to reach a very wide audience. Read More→

Damon Linker’s “terrible, horrible, no good, very bad idea”

Damon Linker, the writer who believes that the State is the Measure of All Things Great, has declared that the concept of what F.A. Hayek called the “spontaneous order,” is a “terrible, horrible, no good, very bad idea.” This is how Linker describes the concept:

Simply stated, the idea holds that when groups of individuals are left alone, without government oversight or regulation, they will spontaneously form a social and economic order that is superior in organization, efficiency, and the conveyance of information than an order arranged from the top down through centralized planning.

This view, declares Linker, is ” utter fiction. A fairy tale.”

So, what is the proof that Hayek and others were wrong?

President Obama got a lot of flack during his 2012 campaign for re-election for saying that wealthy business owners “didn’t build that” all by themselves, but his point was indisputable. The president mentioned the internet, roads and bridges, firefighting, and other public works that make it possible for the market economy to function and thrive. He could have said far more. How about the culture of general law-abidingness that we call the rule of law? The Federal Reserve’s regulation of the money supply? An independent judiciary for the settlement of civil disputes? Law enforcement at local, state, and federal levels that fights violent crime, fraud, corruption, monopolistic business practices, and a host of other behaviors that would otherwise scuttle the working of markets? And on and on and on.

Please understand that Linker does not elaborate on any of these points, just that he accepts his statements as pure and unvarnished truth and that they are self-evident. The only problem is that none of what he says is self-evident, and there is plenty of proof on the other side to show that these things he cites as being the true creator of social order are not what they say they are.

North Korea has all of the things Linker claims are the real source of prosperity, yet the country is dirt poor. For that matter, we can look at Venezuela, where the social order is falling apart. On the home front, I bet the citizens of Ferguson, Missouri, do not see the police as holding a society together, and anyone who has been involved in the American court systems on local and federal levels can attest to a corrupt and unjust system.

5015267945_d9d594466c_b

North Korea: A well-ordered society?

And the Fed being a source of stability? When the Fed has touched off speculative bubbles and has steered the U.S. economy into numerous boom-and-bust cycles? Or that the government “protects” markets? How does government do that? Instead, it promotes Crony Capitalism which undermines the free market system and steers resources away from higher-valued uses toward uses that promote the interests of the political classes.

Unfortunately, Linker does not stop with giving bad examples of government as the Source of Prosperity and Freedom. He then presents some examples of what supposedly were “spontaneous orders,” those being Iraq and Libya.

But there is one situation where it’s possible to see genuine spontaneity in action: when an established political order is overthrown. Now it just so happens that within the past decade or so the United States has, in effect, run two experiments — one in Iraq, the other in Libya — to test whether the theory of spontaneous order works out as the libertarian tradition would predict.

In both cases, spontaneity brought the opposite of order. It produced anarchy and civil war, mass death and human suffering.

How does one begin here? In both cases, the governments of these countries were overthrown by U.S. armed forces or groups supported and funded by the U.S. Government. Furthermore, after using violent means to kill indiscriminately, destroy property, and sever links of established communication and trade between individuals, no libertarian or anyone else with even a cursory knowledge of political economy, would not expect a happy, prosperous order to emerge from a vicious military invasion and subsequent occupation.

By claiming that the destruction of Iraq and Libya actually were done in the name of a Hayekian “spontaneous order,” Linker demonstrates his own ignorance of Hayek and of political economy in general. And by insisting that state control (the more the better, I suppose) is the real source of freedom and prosperity, then how does he explain North Korea? And should he and his statist followers claim that North Korea is irrelevant to the discussion, then I think we can add that Iraq and Libya would fall into that irrelevant category, too.