I'm Doling Out Free Information Today

This blog is coming to you today from the Portofino Hotel in Orlando, Florida. I'll post some pictures and some thoughts later, but until then, I'm offering a rude awakening to some people.

WSJ Opinion. Arthur Brooks. Here's the quote:

They are fighting a culture war of attrition with economic tools

Here's the free info: "They" are going to lose that war. As the TickerGuy is fond of saying, you can't fight the math. The rest of the article is equally impressive.

What Is Seen and What is Not Seen

Famous French Economist Frederic Bastiat wrote an enchanting paper entitled, "What Is Seen and What Is Not Seen" in 1848. My first exposure to economics literature was (fortunately) from Henry Hazlitt and his "Economics in One Lesson", published in 1979. The premise behind each piece is quite simple. I'll focus on Hazlitt. His one lesson is this: 

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

His example is that of a glassman. Suppose you are walking along the street one day and come across a tailor's store with the storefront's large pane of glass broken. Surely, you would soon see a glassman pull up in his truck, sweep up the broken glass, measure the window space, go to the back of his truck, pull out a new sheet of glass, and spend the rest of the afternoon installing the new storefront. The tailor, who owns the shop, will pull out his wallet and hand the glassman $100 for his troubles. "Wow! That's great," you say. The glassman has $100 new dollars to take home to his wife and family. That wife will take some of the money to the grocery store and purchase food and some of the money to the jeweler to buy a necklace. The grocer and jeweler will then in turn take their newly earned money and cylce it further and further into the economy. This observation inspires you. That night you decide to go around town breaking all the glass storefronts in town; generating a plethora of new business for our glassman, who will then give the money to his wife and in turn to the grocer and jeweler. You are, in essence, stimulating the economy. And the faster the wife passes the money to the grocer and the jeweler, the faster is the velocity of your new stimulus.

Hazlitt (and Bastiat) goes on to point out that you would be mistaken in this analysis. What is 'Not Seen' is the baker. Had the tailor been able to save his money, instead of paying the glassman, he would have bought his daughter a celebratory cake for her graduation. It is easy to 'See' the money pass hands from glassman, to wife, to grocer, to jeweler; but it is much more difficult to 'See' the baker, sitting idly in his shop with no demand for cakes, cookies, and sweets.

So what's the point of this lesson I am passing on? This. "Pipe Made in India Incenses Illionois Town". I just finished reading this article in the New York times, and it is a great learning tool. Besides its forced alliteration, the article goes on to lament about the fact that a union worker recently 'SAW' a train passing by with Indian steel piping aboard. The article continues to focus on the 'Seen' aspects. The town that is no-longer its once bustling economic center; the jobs that would be created if a congressional clause stipulated that piping be made domestically; the unfair 'dumping' being done by Indian and Chinese producers. All of this is easily 'seen'. What is not seen is the small business owner paying less taxes for cheaper steel; the local public school teacher getting a raise because her government saved money on steel and could afford to give her another $1,500/year; the janitor paying less for gas because the oil company used cheaper steel to bring in the Canadian oil. I feel badly for the small town and especially the man with 6 unemployed kids. But requiring the rest of the region to pay more for American, when a less expensive Indian alternative is readily available, is selfish. Using legislation to force a janitor to pay more for gas to support your kids would justifiably frustrated the janitor. Only the janitor would never 'See' this hidden cost.

There's yet another economics lesson to be learned within the article. Near the end, it talks about how the United Steelworkers union is teaming up with the Sierra Club to fight this problem. This lesson is about Bootleggers and Baptists. Here is an explanation of B&B:

Both groups want to ban Sunday liquor sales. One out of concern for others. One out of self-interest. Politicians who support such a ban always invoke the altruistic motive. The altruists give cover to the self-interested advocates for a particular policy.

The altruists often inspire the general public to encourage politicians to "do something." But they lose interest in the details of the legislation. The bootleggers, the self-interested folk, spend a lot of time on those details making sure that the legislation is structured to line their pockets.

The 'altruists' in the NY Times article are the Sierra Club. They'll push for pipes that meet a more stringent standard in order to 'protect the environment'. But when the legislation gets written, I'd imagine the United Steelworkers will have their hand on the pen.

And we're back....

My hiatus was restful. I hope you were able to survive without me. I hope you are prepared for a slew of posts. Let's start with this one:

So, I'm reading this article today and it's pretty anti-Obama, but that's not really the part I want to blog about. Let's focus on this segment:

In reality, of course, all of these choices are hard choices. Do we choose the warm feeling of a low-growth, government-managed economy over the dynamism and creativity of capitalism? Do we choose to destroy potential human beings in order to potentially save human beings? Do we stop law enforcement measures to preserve civil liberties or do we fight the threat of terrorism with every tool at our disposal? Do we choose green living over the continued expansion of our economy?

I do agree with Obama that fundamentally 99% of all Americans want the same thing. Heck, 99.9% of all the world wants the same thing. What is that thing? It's a combination of peace, love, prosperity, fairness, spirituality and a host of other abstract concepts all rolled into one. A small group of people aspire to murder, pillage, and destroy; and I believe that even most of those people are doing so because they want to think it will bring about the aforementioned goals of peace, love, prosperity....

I try not to see the political spectrum in a 2-D linear fashion so much as in a 3-D (or even mind-blowing 4-D or 5-D!!) dynamic fashion. At the core of this dynamic structure is that amalgamation of abstraction (peace, love, prosperity...). All progressives occupy the same latitudinal line in this symbiotic  structure. All conservatives occupy their own same latitudinal line as well; all libertarians occupy their own latitudinal line; all fascists/fundamentalists, etc. occupy their own distinct lines. I call this latitudinal line, the 'classifiable latitudinal line' (i.e. the 'class' of basic ideology to which they ascribe). Next, each individual fits somewhere upon that 'classification latitudinal line' depending upon the extent to which they believe in that particular credo. In my opinion, almost everyone in the world fits somewhere amidst this structure, all equidistant from the core goals at the middle. I try to avoid 'left-wing'-'right wing' dichotomies. Too limiting.

Ok, enough abstraction and back to the selected quote from above. Some Americans have priors that lead them to believe that universal healthcare for all is an unalienable right metaphorically guaranteed by the Constitution. Others believe that the right to bear arms means you have the right to carry a bazooka in the trunk of your Toyota Tacoma. As Americans, we are at a time crucial to the path of our nation. Do we want the "warm feeling of a low-growth, government-managed economy" or do we prefer the "dynamism and creativity of capitalism"? I think the former is flawed and here is why: it discredits possibility. Read Julian Simon's "The Ultimate Resource". Humans are ingenious. If there is a problem, humans will fix it. The majority of that fixing takes place in America because it has an environment friendly to fixing. 

Obama wants GM to produce energy efficient cars, but the reason GM hasn't produced them yet is because today's technology isn't sufficient to justify the costs of production. Granted, GM had (has?) lots of other problems, but the fact that NOBODY is successfully marketing the utopian "energy efficient" car is a sign that it's not feasible yet. Do we have the technology? Yes, in a way. If you sat a bunch of scientists down in a room and told them to make a battery-run car that can clear 80 MPH and needs only 2 hours to charge fully, I'll bet the scientists and engineers could find a solution. Scientifically it's possible, but economically? No. Lesson One in Economics: Life is about trade-offs. This battery could be produced but one of these batteries would cost millions. And who's going to buy a million dollar car? Believe me, companies and entrepreneurs and people tinkering in their garages are trying to solve this problem. And when they do find a solution, they will be handsomely rewarded. Remember when John McCain idiotically campaigned on the notion to offer a government prize/reward to anyone who can create a battery that fits a certain qualification? The free market would do that anyways Johnny!!!! And that prize would be a lot more than a measly million bucks (or whatever the number was).

Anyways, that's why I'm pro-growth/dynamism/creativity of capitalism. No other system we have encountered has allowed prosperity to multiply so. Despite all the attacks upon capitalism, and all the regulatory misshaping of capitalism, it still thrives. Capitalism is persistent, it is resilient, and it is the best way to help solve the problems of energy efficiency and healthcare and whatever else it is you care about. Most importantly, in my opinion, it is the best way to reach that abstract nucleus that I mentioned earlier.

Falcon has started blogging

Welcome to my world! I'm not sure if I'm coming early to this blogging game or late. I'm not sure if this is going to be a day by day thing or not. And I'm not sure what I will really be blogging on. You can count on some Economics, some Liberty, some policy, some China, some New York, some life, some food, some drink, some friends, some sports, some music, some stuff. Either way, I'd like to start off with some appreciation for the way things work....

I'm currently reading many books, one of which is Murray Rothbard's 'For A New Liberty'. In it he writes,

It so happens that the free-market economy, and the specialization and division of labor it implies, is by far the most productive form of economy known to man, and has been responsible for industrialization and for the modern economy on which civilization has been built. This is a fortunate result of the free market, but it is not, to the libertarian, the prime reason for his support of this system. That prime reason is moral and is rooted in the natural-rights defense of private property we have developed above. Even if a society of despotism and systematic invastion of rights could be shown to be more productive than what Adam Smith called "the system of natural liberty," the libertarian would support this system. Fortunately, as in so many other areas, the utilitarian and the moral, natural rights and general prosperity, go hand in hand.

That's cool. As you may know, I'm a big proponent of personal choice and liberty. I also so happen to be a big fan of prosperity. Life would be pretty interesting if liberty and prosperity were an "either/or" proposition. "You can be free, but you will be poor." Or, "you will be enslaved, but you'll have riches." Luckily, I believe (and apparently so does Rothbard), that the two go 'hand in hand'. How ever this world was designed and came to be, I think it's a beautiful thing that we can both be free and prosperous.

Enjoy your day and I hope you will continue to check in with me.