Enriching the Common Man

This is a picture of a common programmable coffee maker.  For about $60, you can have one of these nearly ubiquitous items.  However, 100 years ago, these items were not available.  Those rich enough to afford servants were able to have coffee ready for them when they woke up, but many Americans went without this small luxury.  However, since this invention came about, ordinary Americans have been able to have what had only previously been available to the very rich: hot coffee ready for them when they awoke in the morning.  With other programmable devices like slow-cookers, common Americans can have a whole breakfast waiting for them!  The luxuries of the 20th Century uber-rich were commonplace not 100 years later.

This marginal improvement in living standards reminds of of a very important fact: most innovations do not benefit the wealthy, but rather the poor.  Indoor plumbing did not benefit the wealthy; it just replaced running servants with running water.  It was the great masses of people who benefited from indoor plumbing; those who did not have the running servants.

It’s easy to dismiss capitalism and innovation as only benefiting the rich, since they are seen to be the ones who gain the most monetarily from it.  But to do so requires dismissal of the unseen mass of benefits accrued to the poorest, to the common man.  These benefits are unseen not because they are hidden, but rather because they are so obvious numerous as to not warrant noticing (similar to how one blinks or breathes without conscience effort for either).

In Service To Your Fellow Man

For much of human history, merchants, traders, and bankers were regarded in low esteem.  They were necessary evils, but still evil.  Merchants, bankers, and traders were seen as money-grubbing profiteers, only caring about the next penny.  As such, most of the brightest and best were shunned away from these professions, opting (to the extent they could) for law or education.  Even being a poor farmer was better than being a merchant.

But all that changed starting in the late 1700’s.  The “bourgeois values,” to use the term coined by Deidre McCloskey, became honorable.  Thinkers and moral philosophers like Adam Smith promoted the good merchants, traders, and bankers do, and the professions started to attract more and more people.  Consequently, human standards of living, which had been largely stagnant for nearly two thousand years.  Between 0 AD and 1800 AD, standards of living (as judged by GDP per capita) rose by approximately 40%, an average growth rate of 0.02% per year.  Between 1800 and 2016, it grew approximately 757%, an average growth rate of 3.5% per year.

Why was the acceptance of bourgeois values necessary to create this prosperity?  Perhaps it is because merchants, perhaps more than any other group, earn their keep in service to his fellow man.  To sell a good, the merchant must provide a good or service the other person wants, and s/he must be consistent at providing it.  The merchant who can best serve these needs becomes wealthy; the one that doesn’t will fail.  The woman who has her store open on Christmas Day so that a desperate parent can get food or diapers for their baby is doing a great service to her fellow man.  The man who runs the grocer and works long hours so that folks have a place to get food on their way home from work is doing a great service for his fellow man.  The foreigner who invents a new method of distribution so that he can bring goods to the market cheaper is doing a great service to his fellow man.  The woman who loans funds to a young couple so they can buy a home and start a new life together is doing a great service to her fellow man.  The “bourgeois revolution” helped bring these attitudes to the forefront, and launched mankind into a Golden Age.

I love markets and celebrate them as a moral good because of how they operate: by rewarding someone for serving his fellow man, and making the reward proportional to how good of a job they do.  Of course, the system is not perfect. There are those who get ahead by cheating.  But by creating the incentive system and supplementing it with just rewards (in a Christian sense, creating the Kingdom of Heaven on Earth), markets have done far more to make mankind better off in the past 300 years than previous millennia reliant on the whims of princes and priests.

Markets truly are a force for good.

Maximization in Economics and the Socialist Calculation

In the following post, I will be discussing maximization analysis in economics and the socialist calculation.  It may be a bit wonky.

What If We’re Wrong?

A technocracy is a style of governance where experts make the rules.  America is very much a technocracy: experts determine what medicine you can take (FDA), what jobs you can hold (licensing boards), what wages you may work for (NLRB, DOL), how you may build your home (permits), what food you may eat (USDA), who you may buy from (tariffs, DOC), and so on.  Like its religious cousin, theocracy, there are heretical questions one mustn’t ask, lest the whole system of faith it is built upon collapses.  In the technocracy, that question is “What if we’re wrong?”

The beginnings of the American technocracy started with the “Progressive Era,” a time where the leading minds in the universities, the government, business, religion, and social circles fancied themselves smart enough to run American lives.  They determined they were educated enough and the American experiment in laissez-faire had failed; America needed to be ruled by them.  Armed with such scientific methods as eugenics, Darwinism, and the like, they set themselves out to save America.  The results were horrific: minorities, immigrants, women, mentally ill or retarded, and all those deemed to be weakening the Anglo-American race were kept out of the workforce and forcibly prevented from reproducing (forced sterilization was a common practice during the Progressive Era).  Legislation like minimum wage was passed to prevent minorities from working. Mixed-race relations were strictly forbidden to prevent “race suicide.”  And these are just some of the crimes committed in the name of technocracy.

We now know eugenics is bunk, but lest we make the mistake of saying “this time it is different” with our 20/20 hindsight, we must remember that these were the leading scientists, economists, and thinkers of the day.  This was not a small movement of kooks, but what was honestly thought to be real science. And many people suffered.

And we see the same today, even in the 21st Century.  For years, FDA and other “food experts” told us eggs were bad.  That’s been changed.  Same with sodium.  And fat.  We were told ethanol would save our environment and car engines; turns out the opposite is true.  Other examples are legion.

A technocracy is just as dangerous to the secular Man as a theocracy is to the immortal Man.  Both rely upon unassailable priests to interpret the Scriptures and who give orders that must be obeyed without question.  Both promise Heaven but deliver Hell.  And both cannot tolerate heretics and freedom of thought.

Make no mistake, the experts and those who support them likely believe themselves to be correct.  They likely do want what is best for humanity.  But they make one simple, but highly flawed, assumption: that they have reached the pinnacle of knowledge.  They all suffer from hubris, which applied to a single man is a sin.  Applied to a whole nation, it is damnation.

A technocrat being wrong can have disastrous consequences.  That is why I advocate for freedom.

Merry Christmas!

Merry Christmas and Happy Hannukah from the F4G crew!

PS, that is me smiling

Economic Disenfranchisement Has Costs

The following is an open letter to Mr. Donald Trump:

Mr. Donald Trump
Trump Tower
New York, NY

Dear Mr. Trump,

I urge you to reconsider your proclamations both during and since the Presidential campaign to economically disenfranchise certain residents in this country, such as Muslims, immigrants, and poor people.  Economic disenfranchisement has its costs, and they are substantial.  Disenfranchisement has economic costs (lower economic growth resulting in a generally poorer country), but it also has social costs.

The social costs of economic disenfranchisement are real and dangerous.  Radicalization and violence in Europe from Muslims and immigrants is partially due to their economic disenfranchisement through tight labor laws favoring domestic residents over foreign ones.  The Ferguson, MO and other riots of the past year are partially due to African-Americans’ (and other minority groups) economic disenfranchisement stemming from minimum wage, the drug war, and other illiberal policies.  Historically, this holds true as well.  Economic disenfranchisement through apartheid and other colonial systems lead to unrest in Africa (of which we are still feeling the effects).  Jim Crow economic disenfranchisement lead to the Civil Rights movement and other unrest in the 1960’s.  And we cannot leave out probably the largest, and most violent, example in US history: the slave riots and subsequent Civil War.

Mr Trump, you ran on a platform of restoring law and order.  However, many of your economic policies (building a wall, increasing tariffs, registering/deporting Muslims and immigrants, etc) are contradictory to that goal.  In order to make America great again, we do not need economic disenfranchisement, but economic opportunities for all (not just the politically favored).  If we want to bring back American exceptionalism, we need to show the world why we are exceptional; show we are a nation of laws not legislation, of principles not panic, of innovation not intimidation, and above all of freedom not fear.

Mr Trump, I urge you to tear down these walls and to honor the words of our Founders, that “all men are created equal and endowed with certain unalienable rights, that among those are life, liberty, and the pursuit of happiness.”

Sincerely,

Jon Murphy

George Mason University

Fairfax, VA

*Versions of this letter have also been sent to House and Senate leadership

The Optimistic Science

In 1849, Thomas Carlyle deemed economics the “dismal science” (it was labeled such for the horrible crime of showing men rule themselves best and are better off when left alone).  But economics is anything but dismal.  In my opinion, it is quite optimistic and uplifting.  Economics is marginal analysis, that is it focuses on shifts from the status quo and how they effect outcomes (what does eating one more cupcake do to your happiness, what does hiring one more worker do to output, that sort of thing).  This analysis allows us to see how even small changes affects the big picture.

What this marginal revolution means is that everything, no matter how small, matters.  That, to me, is a comforting thought.  As the late Robert Tollison would say,”we’re all part of the equilibrium.”

Ideas not Diktats

My post yesterday on central planning has an important implication, one which I suspect some of you, dear readers, may not like: free markets will not be advanced through the ballot box.  Voting is, generally speaking, an exercise in futility.  It’s not just because the odds of your vote changing anything is virtually zero, for from a cost-benefit viewpoint voting is irrational.  It’s that, without a change in culture, no free market legislation will survive long term.

Take, for example, this article written in EconLog today by Emily Skarbek.  She tells us the story of Richard Nixon’s price controls in the 70’s.  Nixon knows the costs of price controls.  Knowledge of the politician is not in question here.  But he goes ahead with the scheme anyway for “pragmatic” reasons (to use his term).  Nixon knew if he took a stand and refused price controls, his political career would be in danger, so he submitted to the general culture, despite his principles and knowledge of price controls.  If he had refused, he may have lost the following election and the controls implemented anyway.

That is why I, along with so many of my laissez-faire brethren, focus our attention on changing the climate of ideas rather than effect ballot-box changes.  Any effort at the ballot-box is doomed to fail until the general culture changes to become more freedom friendly.  Liberty cannot be sustained when imposed top-down; it must be grown bottom-up.

Ruminations on Central Planning

Since the semester ended, I have had some more free time on my hands to read for pleasure, not just for work.  One of the books I picked up was Don Lavoie’s 1985 book Rivalry & Central Planning: The Socialist Calculation Debate Reconsidered.  While I have only just started reading it, it’s an interesting reexamination on the age-old central planning question.  What follows are two thoughts of mine on the same matter.

Finals Are Over. Back To Work

My finals are, for all intents and purposes, over (I have one more tomorrow).  I will be returning to a more normal posting schedule.  Thank you for your patience.