Coyote Blog

Life is too short to spend much time on the Democratic Underground, but this article by Ernest Partridge popped up in one of my Google watch lists.  I highlight only because it contains this straw man:

The dogmatism of free market absolutism resides in the belief that the unregulated market never fails to be beneficial to all; the belief, in other words, that there are no malevolent effects of unconstrained market activity, no "back of the invisible hand." From this belief follows the insistence that the free market is self-correcting, and that there is thus no need for regulation � that, in Ronald Reagan�s enduring words, "government is not the solution to our problems, government is the problem."

I can't think of any thoughtful defender of capitalism and free markets that ever would have said that the market "never fails" or that it is "beneficial to all" or that there are never bad outcomes or that the market is perfectly self-correcting.

Bad, stupid shit happens all the time in free markets.  For example, BP idiotically dumps a few zillion barrels of oil into the Gulf of Mexico.  In a free society, BP will be out billions of dollars in cleanup costs and damage settlements -- it might even bankrupt itself if governments allow that to happen, and thus will never again be able to do something so careless.  Markets can't prevent a first dumb action, like huge leveraged bets on ever-increasing housing prices, but markets can make sure the folks involved don't have the resources to do it again -- that is, except if governments bail them out from their mistakes.

The point is not that markets are perfect -- the point is that they are superior in both function and the retention of personal liberty to the alternative of giving governments coercive power to use force against individuals to change market outcomes.  The point is not that individuals don't do destructive things within the context of free markets.  The point is that they have a lot less power to do harmful things over long periods of time than if one gave that person coercive power in a government job backed by police forces and armies.   There is only a limited amount of damage anyone can do when they depend on the uncoerced cooperation and agreement of their counter-party.   A tobacco company CEO doesn't have a hundredth the power to ruin peoples lives as does one member of Congress. Fifty years of slimy cigarette advertising doesn't have the power of one Congressional mandate.  Go to Chicago, Detroit, Baltimore -- which has been worse for these cities -- the private campaign to sell cigarettes or the government led war on drugs?

Its clear from later in the article that the author is yet another person with a list of pet peeves who wants to use force on the American citizenry to get his way.  The author doesn't like cigarettes, so intervention with tobacco companies is a valid role for government.  OK, well I can't stand reality TV shows, so much so that I would rather be in a room of smokers than a room with "the biggest loser" on TV, but you don't see me wanting to give government power to do something about it.

But what is amazing to me is how much his examples actually make the libertarian point for limitation of government.  Try his first one:

Private Prisons. Good for the corporations: more prisoners, "three strikes" laws, mandatory sentencing. The cost to society: less rehabilitation and early release, increased government expenditures and taxes. It is noteworthy that the United States has the largest prisoner to population ratio in the industrialized world.

You have to really re-read history to come to the conclusion that American incarceration rates are mainly driven by privatization of prisons.   My sense is the causality is the other direction - we have passed crazy drug laws and mandatory sentencing for sometimes petty crimes and have had to turn to private actors with private capital to keep up with the demand to construct new prisons.

Like the author, I hate this incarceration trend, but its really a stretch to blame this on privatization.  And, I am the first to deride the symbiotic relationship between powerful corporations and the government.  I have written on any number of occasions that both political parties in this country seem to be trying to build a European-style corporate state.  So, even if I don't think he has history quite right here, I am willing to concede the point.  Because, in fact, this seems to me an indictment of exactly what he is trying to defend -- the government interventionist state.

The only reason corporations lobby the government is that the government has the unique power to coercively intervene in markets.  Corporations try to engage this power for their own benefit and to step on competitors, both current and future.  The root cause failure here is not the fact that private companies try to engage this power, but that this power exists at all.

Amazingly, he makes the same argument about war:

War, Inc. Good for the corporations (i.e., the military-industrial complex and "private contractors" such as Halliburton and Blackwater): more wars, expenditure of rockets, bombs and ammunition (requiring restocking of inventories). Cost to society: avoidance of diplomatic solutions, increased military budget and battlefield casualties, disobedience to international law (e.g., the Geneva and Nuremberg protocols).

I am staggered to see that someone who is defending giving more power to the government is simultaneously highlighting examples where this power is misused so horribly  (and what could be a more despicable crime by legislators than incarcerating more people or starting wars just to help a favored corporate interests).  I don't think wars are started primarily to help armaments manufacturers, but if they are, then this kind of failure by politicians is FAR worse than any he could point out in unregulated markets, only making my point for me.  Markets are not perfect, but the cure of government use of force is worse than the disease.

Since the author dwells on cigarettes, just look at the so-called tobacco settlement.  Supposedly, this was the great government hammer wielded against cigarette companies to punish them for years of selling a dangerous product.  But in fact, all the settlement did was cement the market position of largest tobacco companies.  The settlement effectively made government a financial partner with tobacco companies, and since it was implemented, the government has wielded its power to protect the companies who were involved in the settlement against competition (particularly from low-price upstarts) so as to protect its own cash flow.  The position of the major tobacco companies has never been as secure and profitable.

I think the author's response would be that if we ban corporate election spending, then all would be well.  This does not pass any kind of smell test.  First, corporate giving has been effectively banned (or at least severely limited) for 20 years, and we see the staggering influence corporations have none-the-less.  We only have to look at Europe, where the troika of politicians, large corporations, and large unions run those states to their own benefit, to the detriment of all others (e.g. smaller businesses, business without political contacts, workers outside of favored fields like autos, young workers, etc.)  This symbiotic relationship occurs without campaign cash being a major element.

If you want to understand how this works, just look at recent legislation like cap-and-trad and health care.  Legislators propose some populist interventions in a market to help themselves get re-elected.  Corporations who might naturally oppose such interventions agree to support legislation in exchange for a number of subsidies and special protections. Trades occur that have little to do with campaign contributions.  Just look at the influence GE wields in getting special deals for itself.

The GM bankruptcy was a classic example.   GM is given a big taxpayer bailout and some cuts in labor costs.  In exchange for labor cost cuts, unions get the government to squash secured creditors of GM in their favor in dividing up ownership and also get some special considerations in pending health care legislation.  Secured creditors allow this to occur because they got TARP funds from the government.   Politicians get active support from GM and the UAW in getting out the vote, positive PR, etc.  The only people who lose are taxpayers, all the other automobile competitors, and workers in every other industry who must pay taxes to support auto workers special deal.

By the way, don't tell me that this is not what you want, that if only we have the right people (e.g. yourself) in power this will never happen.  Wrong.  It always happens.  Every dang time.  The incentives are overwhelming.  Given politicians the power to do that one good intervention you want, and you have also given them the power to do a thousand that you don't want.

Postscript: By the way, please do not ever take a "progressive" seriously when they say they care about the poor.  Take this for example:

Outsourcing of jobs. Good for the corporation: increased profits and return on investment of stockholders. Cost to society: poverty, loss of educational opportunities, redistribution of wealth "upward," shrinkage of customer base, economic depression.

Another way of stating outsourcing is say that it is "transferring a job from a rich American to a poor person in a developing nation."  As a country becomes richer and more educated, low-skilled jobs are not going to continue to get done by college grads.  PhD's, in general, are not going to stitch underwear.  Low skilled jobs in a wealthy society do get outsourced, and these new low-skilled jobs in developing nations become the seed or the catalyst for future wealth-creation and development.

This is one ironic problem that progressives in this country have -- even the poorest Americans would be middle class in many of the countries of the world.  If progressives really want to transfer wealth from the rich to the poor, everyone in the US would pay and no one would receive a dime, it would all flow to other countries.

I was going to write a long post on Krugman's article, but Michael Cannon takes care of it with one sentance:

Paul Krugman says libertarianism is not a serious political philosophy because politicians are corruptible, do stupid things, et cetera.  My colleagues Aaron Powell and David Boaz demonstrate why that's a bigger problem for Krugman than for libertarians: Krugman's statism wouldn't make politicians any less ignorant or corruptible, it would just give those ignorant and corruptible politicians more power.

By the way, I thought this earlier article by Brett Barkley was pretty interesting.  He investigated which economists changed their views the most based on who occupied the White House.  Want to lay any bets on who won the title of most politicized economist?

When the White House changes party, do economists change their tune on budget deficits? Brett Barkley does a systematic investigation. Six economists are found to change their tune "“ Paul Krugman in a significant way, Alan Blinder in a moderate way, and Martin Feldstein, Murray Weidenbaum, Paul Samuelson, and Robert Solow in a minor way "“ while eleven are found to be fairly consistent.

At least, that is, when the government is managing the ice supply:

Venezuela's economy is in trouble despite the country's huge oil reserves. Blackouts plague major cities. Its inflation rate is among the world's highest. Private enterprise has been so hammered, the World Bank says, that Venezuela is forced to import almost everything it needs.....

This is not the way it was supposed to be. Venezuela is one of the world's great energy powers. Its oil reserves are among the world's largest and its hydroelectric plants are among the most potent.

False dichotomy, via Mother Jones:

Faced with a world that can support either a lot of us consuming a lot less or far fewer of us consuming more, we're deadlocked: individuals, governments, the media, scientists, environmentalists, economists, human rights workers, liberals, conservatives, business and religious leaders. On the supremely divisive question of the ideal size of the human family, we're amazingly united in a pact of silence.

My guess is that the authoritarians at Mother Jones don't particularly care which is the outcome, so long as they get to wield the coercive power to make the choice for us.  Thank God these guys didn't run things in 1900.  Or 1800.  Or 1700.  Or 1600.  Or 1500.  Given their belief in zero sum choices and their complete lack of confidence in the power of the human mind to innovate, who knows what kind of sub-optimal world we would have been locked into?

I don't know that I have ever seen a clearer example of the disconnect of thinking between libertarians and authoritarian political thinking than in this brief paragraph from Dahlia Lithwick.  She is writing about a court case reviewing whether it should be a crime to deny police your identification.  She writes, making fun of libertarians:

It would be easier to credit the Cato and ACLU arguments if we didn't already have to hand over our ID to borrow a library book, obtain a credit card, drive a car, rent videos, obtain medical treatment, or get onto a plane. So the stark question then becomes this: Why are you willing to tell everyone but the state who you are? It's a curious sort of privacy that must be protected from nobody except the government.

Really??  It is strange to her that we would treat privacy uniquely with the one and only organization in this country that can legally use force against us, legally take our money without our permission, and legally throw us in prison?  Is she really so blinded by a love for state authority that she can't tell the difference between a transaction at Blockbuster, which we can choose not to patronize if we don't like their terms of sale, and an interaction with police, where there is not even a hint of it being an arms-length, consensual, balanced interaction.

There is an largeand growing body of evidence that police take advantage of their power mismatch with citizens and abuse their power in multiple ways, large and small.  These abuses have likely always existed, but were covered up by police officers standing up for each other.  Only the advent of portable video cameras has started to really document what really goes on in these interactions.  Just read a few posts at this site to get a flavor.  And cops sure don't like when you ask them for their ID, as they hate anything that might impose accountability on them:

And in today's daily contempt-of-cop story, Ft. Lauderdale Police Officer Jeff Overcash did not appreciate a man asking him for his badge number, so he pulled out his handcuffs and arrested him.And it was all caught on video.

The video shows Brennan Hamilton walking up to Overcash in a calm manner with a pen and notepad in his hand. Overcash, who is leaning against his squad car with other cops, then pulls out his handcuffs and arrests Hamilton.

Overcash charged him with resisting arrest without violence and disorderly intoxication.

Alex Tabarrok makes a good point.   Based on these arguments, Lithwick must be A-OK with Arizona's new immigration laws, right?

Update:  It is interesting that while sneering at slippery slope arguments, she proves their merit.

The slippery-slope arguments"”that this leads to a police state in which people are harassed for doing nothing"”won't really fly, although I guarantee that you'll hear more and more of them in the coming weeks.

But in the immediately proceeding lines she wrote:

Is there something about stating your name or handing over a driver's license that differs from being patted down or frisked, which is already constitutional for Terry purposes?I, for one, would rather hand over my driver's license to a cop than be groped by one.

This is a perfect illustration of the slippery slope, almost textbook.  Libertarians certainly opposed current pat down and frisking rules, but since these are legal, Lithwick uses their legality to creep the line a little further.  And then the legality of these ID checks will in turn be used to justify the legality of something else more intrusive.

Bill Clinton joined a number other leftish writers of late trying to marginalize those who criticize the government (and in particular, I think, the Tea Party folks).   I am really not going to comment much on this attempt, except to say that we endured something identical during the Iraq war, with the BS about not criticizing the President during wartime.

Here is the key bait and switch in Clinton's argument:

But we should remember that there is a big difference between criticizing a policy or a politician and demonizing the government that guarantees our freedoms and the public servants who enforce our laws.

The government that guarantees our freedoms?  I suppose this sounds sort of good if one just lets it roll by, but in the context of our country's formation, this is absurd.  The only threat to freedom that the founders of this nation were concerned about was the government itself.

The government is the only entity with the power to use force and the power to grab money without permission.  As such, the founders recognized it as the single most potent threat to freedom that could possibly exist.  All their efforts were aimed at constructing limitations and protections from the power of government itself.

It would be far more correct to say "the Constitution that guarantees our freedoms" by limiting the power of government, but in fact that is exactly what the left is trying to overturn, with a hundred years of efforts to slowly whittle the Constitutional limitations on the power of government down to zero.

Update: Wow, this is an amazing excerpt from a 1995 memo from Dick Morris to Clinton just after the Oklahoma City bombing.  Seems like he is still following the same playbook:

Later, under the heading "How to use extremism as issue against Republicans," Morris told Clinton that "direct accusations" of extremism wouldn't work because the Republicans were not, in fact, extremists. Rather, Morris recommended what he called the "ricochet theory." Clinton would "stimulate national concern over extremism and terror," and then, "when issue is at top of national agenda, suspicion naturally gravitates to Republicans." As that happened, Morris recommended, Clinton would use his executive authority to impose "intrusive" measures against so-called extremist groups. Clinton would explain that such intrusive measures were necessary to prevent future violence, knowing that his actions would, Morris wrote, "provoke outrage by extremist groups who will write their local Republican congressmen." Then, if members of Congress complained, that would "link right-wing of the party to extremist groups." The net effect, Morris concluded, would be "self-inflicted linkage between [GOP] and extremists."

Cross-posted from Park Privatization

Len Gilroy of the Reason Foundation links my Glenn Beck interview and then goes deep on park privatization issues.  Check it out.  Potentially the biggest benefit to the public:

Appropriation risk: State parks operating under a concession no longer bear the appropriation risk that we're seeing play out in real life across the country, as parks get axed from state budgets amid rampant state fiscal crises (some examples include California, New York and Louisiana). Really, this is more of a risk that's eliminated, rather than transferred to the concessionaire (see revenue risk discussion above), so revenue/demand risk and appropriations risk are really two sides of the same coin.

Talking about park privatization around 5:40 Eastern (though the segment has gotten bumped once before).

I have started a new blog because, you know, I don't have enough to do already.  To some extent this is a reaction to a lot of interest I am getting on the topic of recreation privatization, and in part because the nature of climate blogging has changed of late to requiring one to keep up with a fast flow of stories, and I just don't have the time.  Anyway, the new blog is called Park Privatization.  I hope those who are interested in the topic find it compelling.  If nothing else, at least with this post Google will now find it.  I will still post here regularly and on the climate blog as often as I can.

A friend of mine from Princeton days writes:

... and you seem in favor of the Supreme Court decision in Citizens United vs the FEC, I was wondering how you feel about being a customer or supplier or competitor of large businesses who can spend far more than your business to influence the rules of the game.

From what I read, I am sure you have a compelling answer, but I would be scared to death. (Maybe that's why I work for a large corporation [Target] instead of attempting to run my own business.)

I thought this was a pretty good question, and I answered:

1. I try hard not to make utilitarian arguments to Constitutional and rights issues.  As an example, I am sure we might have less crime if the police were empowered to incarcerate anyone they wanted without trial, but we don't do it that way.
2. I worry most about corporate lobbying (e.g. by Immelt at GE) and this is unaffected by this ruling - it was legal before and after.   This decision allows corporate advertising, which is public and visible, which I can at least see and react to, as opposed to back room deal making.
3. Libertarians certainly worry about your question, and why many of us fear that what we are creating in this country is a European-style corporate state, rather than socialism.  To a libertarian, the answer is not less speech, but less government power to pick winners and losers in commerce.

Mark Perry suggests allowing tiger ranching to save tigers, and offers the alligator example as an analog of how commercial use helped revive an animal' fortunes.  This kind of ownership rights has revived a number of fisheries, and hasn't hurt either buffalo or ostriches either.

This video below is pretty funny, and gets at these issues towards the end.  "There might be a few polar bears left if people wanted one for breakfast."

A Russian immigrant  (escapee?) discusses how he got out of Russia as part of an ongoing series of videos pleading with Americans not to head down the path to socialism.

Via Greg Pollowitz:

Environmentalism should be regarded on the same level with religion "as the only compelling, value-based narrative available to humanity," according to a paper written two years ago to influence the future strategy of the United Nations Environmental Program (UNEP), the world's would-be environmental watchdog.

The purpose of the paper, put together after an unpublicized day-long session in Switzerland by some of the world's top environmental bureaucrats: to argue for a new and unprecedented effort to move environmental concerns to "the center of political and economic decision-making" around the world "” and perhaps not coincidentally, expand the influence and reach of UNEP at the tables of world power, as a rule-maker and potential supervisor of the New Environmental Order.

The positions argued in that paper now appear to be much closer at hand; many of them are embedded in a four-year strategy document for UNEP taking effect next year, in the immediate wake of the much-touted, 11-day Copenhagen conference on "climate change," which starts on Dec. 7, and which is intended to push environmental concerns to a new crescendo.

The major difference is that the four-year UNEP plan expresses its aims in the carefully soporific language that U.N. organizations customarily use to swaddle their objectives. The Swiss document makes its case passionately -- and more important, plainly -- than any U.N. official document ever would.

I would have said that classical liberalism and the protection of human liberty would be a competing such narrative, but its not surprising the UN wouldn't think so.

It is interesting that after years of skeptics being derided for comparing modern environmentalism to a religion, this characterization is starting to be accepted by the environmentalists themselves.

On any number of occasions from October through February, I predicted that this recession would top out at perhaps 9% unemployment at the most, and would probably not be as bad as the recession of the early 1980's.  My logic was that we had a mortgage-driven banking crisis, but that the crisis was perhaps not as bad as that of the late 1980's and that many fundamentals (e.g. interest rates) were looking way better in this recession than in the early 1980's.  I honestly thought that Bush and Obama Treasury and Fed officials were declaring the sky was falling more from the danger to their beloved former employers on Wall Street than due to any economic fundamentals.

Well, obviously I was wrong.  Unemployment has topped 10% and could be headed higher.

So the question is, do I accept that others saw something I did not, or do I crack open the self-serving excuses.  Well, at the danger that this will fall into the latter category (I will leave that to readers to decide) I do think some things have changed since late last year that have contributed to worsening the economy.

Businesses are reluctant to invest when the returns on their investment are wildly unpredictable, particularly when future income changes are more driven by changing acts of Congress rather than fluctuations in the market.   Over the last year the Congress and Administration have:

• Printed trillions of dollars of new money, raising the risk of future inflation
• Borrowed trillions of dollars, sucking capital out of private lending markets
• Run up deficits that pretty much guarantee future tax increases
• Toyed with health care bills that will substantially increase the cost of labor
• Toyed with climate bills that will substantially increase the cost of fuel and electricity
• Demagogued industries with average to below-average profitability for making obscene profits that must be reduced (e.g. health insurance companies who make 3-4% of sales)
• Taken over whole industries (autos, banks) and run them to the benefit of favored political constituencies, even when it violates the law (e.g. trashing for secured creditors of auto companies in favor of the UAW).
• Demonstrated a disdain for money-making by imposing populist compensation limits on executives of out-of-favor companies and industries.
• Spent money in the stimulus mainly to add government jobs, every one of which is generally focused on making my life running a business harder.  If you do not understand or believe this, you have not run a business that employs people.
• Shown a general philosophic hostility towards markets and capitalism

I am sure this is just a subset (Louis Woodhill has more in this vein here), but these all have negative effects on investment.  My company for one has backed out of several planned expansions this winter for four reasons:

1. Half of my costs are labor, and I don't know how much Congress is going to increase my labor costs.  Current health care bills will increase it at least 8% -- given that my typical margin in 5-8% of sales, a government action that increases half my costs by 8% is worrisome.  Worse, my smaller competitors will not bear this expense under certain versions of the legislation.
2. My second highest expense is fuel and electricity.  I have no idea right now how much Congress may raise these expenses.
3. Capital for small businesses is gone.  I can get secured equipment financing, but that is it.
4. Assuming I make any money from these investments, I have no idea how much I will be able to keep.  I would not be surprised at all if Obama pushes my marginal rates over 50% -- and investments in my business are just too much work and risk to keep less than half if I make any money.

I used to work as for several years in St. Louis as VP of Planning for Emerson Electric.  I worked for a guy named Chuck Knight, who could be a real pain in the *ss to work for, but was a) brilliant and b) always willing to speak his mind without the typical filters a lot of other executives apply.  It appears that his successor Dave Farr, who I also knew at Emerson, is following in this tradition:

Emerson Electric Co. Chief Executive Officer David Farr said the U.S. government is hurting manufacturers with regulation and taxes and his company will continue to focus on growth overseas."Washington is doing everything in their manpower, capability, to destroy U.S. manufacturing," Farr said today in Chicago at a Baird Industrial Outlook conference. "Cap and trade, medical reform, labor rules."...

Companies will create jobs in India and China, "places where people want the products and where the governments welcome you to actually do something," Farr said.

The unemployment rate in the U.S. jumped to 10.2 percent in October, the highest level since 1983. Emerson, which Farr said employs about 125,000 people worldwide, has eliminated more than 20,000 jobs since the end of 2008 to lower expenses.

"What do you think I am going to do?" Farr asked. "I'm not going to hire anybody in the United States. I'm moving. They are doing everything possible to destroy jobs."

Politicians in both parties are generally clueless about this kind of thing, because very few of them have ever run a business or even even been in a real business position other than as lawyer or lobbyist.  Just look at how George McGovern feels now that he has run a business.

But the Obama administration is almost scary clueless.  In defending their promotion of a good business environment, they cite the most hostile item on their agenda:

"This administration has made a significant commitment to U.S. manufacturing, including reforming the country's health insurance system to bring down costs and make American companies more competitive globally," Griffis said.

Not. One. Single. Clue.

Actually, I think the Obama administration may believe this, which just accentuates their preference for a corporate state wherein "business friendly" means support for the top 20-30 corporations in the country.   In the context of a few old-line corporations with politically powerful unions, health care reform is helpful in that it dumps a bunch of the corporation's commitments to present and past workers onto the taxpayers.  But these are not the companies that grow the economy -- they are just the ones with out-sized power in political elections.

From a press release from the Environmental News Network that landed in my inbox:

It's Time to Re-think Economic Growth for Advanced Nations

LONDON - In Prosperity Without Growth: Economics for a Finite Planet, published by Earthscan this week, Professor Tim Jackson raises fundamental questions about the economics needed to tackle climate change. Jackson argues that, faced with the limits imposed by carbon sinks and the scale of "˜de-carbonization' of the world's economy required to stay within them, continued economic growth in the already affluent world does not offer the solution; it represents the problem....

there is a strong case for the developed nations to make room for growth in poorer countries. It is in these poorer countries that growth really does make a difference. In richer countries the returns on further growth appear much more limited; for example subjective well-being diminishes rapidly at higher income levels."

Assuming that such thinking is not just a crass excuse for totalitarian control, it represents an enormous failure of imagination.  The author cannot imagine what benefits increased wealth would provide, so he assumes those benefits to be zero.  There is absolutely no reason that this same exact thinking could not have been applied in 1300 or 1750 or 1900.    Fortunately it was not.

Wonder where the communists went when their philosophy was shown to be bankrupt?  Wonder where the anti-globalization folks went after they looted in Seattle.  Look no further than the global warming movement.  The author suggests, among other things:

• support for "˜ecological' enterprise "“ resource efficient, community-based activities that offer meaningful employment and deliver low-carbon goods and services
• clear restraints on unbridled consumerism
• the protection of public spaces and a renewed vision of social goods
• investment in the capabilities for people have to participate in society in less materialistic ways

Just say no to ecological Marxism.

In Europe, economies are run by a troika of politicians, leaders of large corporations, and major unions.  These groups run the economy to their benefit and against entrepeneurs, nwe competitors, foreign competition, low-skilled workers, upstart competitors, and (most of all) consumers.   Q&O discovered someone on the HuffPo of all places starting to see what is going on:

When I heard the word "corporatist" a couple of years ago, I laughed. I thought what a funny, made up, liberal word. I fancy myself a die-hard capitalist, so it seemed vaguely anti-business, so I was put off by it.

Well, as it turns out, it's a great word. It perfectly describes a great majority of our politicians and the infrastructure set up to support the current corporations in the country. It is not just inaccurate to call these people and these corporations capitalists; it is in fact the exact opposite of what they are.

Capitalists believe in choice, free markets and competition. Corporatists believe in the opposite. They don't want any competition at all. They want to eliminate the competition using their power, their entrenched position and usually the politicians they've purchased. They want to capture the system and use it only for their benefit.

This applies to workers as well as employers -- just replace capitalists with "free workers" and corporatists with "unions" in the above paragraph.  This helps to explain why Obama is not actually pro-labor, but pro-union.  Via TJIC:

Workers in Barack Obama's new economic order fall into two categories "” those who are worthy of the president's energies, and those who aren't. You may be surprised to learn where you rank.

Obama doesn't weigh the value of workers based on their paychecks, what they do or whether they slip their feet into wingtips or steel-toed boots in the morning. His sole interest is in whether they have a union card in their wallet.

If they do, the president is in their corner, working hard to make sure they don't get the short end of any stick. But if they are among the 88 percent of American workers who don't belong to a union? Ask Delphi's salaried employees what Obama thinks of them.

As part of Delphi's restructuring in bankruptcy court, the Troy-based auto parts maker dumped its pension plan onto the federal Pension Benefit Guarantee Corp.

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That usually means a continued pension check, but one that is much smaller. And for Delphi's salaried workers, that's what they can expect.

Delphi's union-represented workers, however, will dodge that bullet. The Obama administration swooped in and, in an extraordinary deal, is forcing General Motors to make the 46,000 union workers and retirees whole. GM used to own Delphi, and relies on the supplier for much of its parts.

"The U.S. government is taking care of a select group of people and tossing the rest of us under the bus," Peter Beiter, a retired financial manager for a Delphi plant in Rochester, N.Y., told the New York Times.

And it's doing so with the tax dollars of those like Beiter who aren't in the favored class of workers. GM is operating with more than $50 billion in government bailout money.

That gives Obama the freedom to force GM to subsidize the pensions of union workers it has no legal obligation to, and who are employed by an entirely different company.

If you want to see where we are going, read this (and this) about the National Industrial Recovery Act, which FDR modelled after Mussolin-style fascism, whose economic system he greatly admired.

We sometimes forget the good news.  Growth is not the enemy.  Growth, technology, trade, markets, capitalism -- these have improved the lives of more people more quickly than any number of Irish rock stars putting on benefit concerts.  Via Carpe Diem

I find myself stuck in a Flagstaff city council meeting. I am listening to a truly irritating public comment. She is currently pounding on absentee landlords (apparently a large number of Flagstaff residents, as many as 50%, rent from out-of-town landlords. She just said basically that these landlords should get no consideration in such and such ordinance because they contribute nothing to the city but a thin sliver of property taxes.

Well, my guess is that "thin sliver" of property taxes pretty much funds all the schools, but I really wanted to stand up and ask - what about the capital they have invested in the city? Obviously half of the town is unable to construct their own house and have housing by the grace of these evil out of town landowners who have invested capital in the city to build out the housing stock.

Via John Stoessel:

Moore declares capitalism evil, but he's never clear about what "capitalism" means. Considering how much time he spends documenting the cozy relationship between business and government, I thought he might mean "state capitalism."

But then he uses the term "free market" as a synonym for what he doesn't like.

What does the free market have to do with businesses manipulating government and strong-arming Congress for bailouts? Moore properly condemns both.

A libertarian student at GWU pushes Michael Moore on this issue, captured on video.

In the movie, Moore apparently:

visits the National Archives to see if the Constitution establishes capitalism as the country's economic system. Seeing the words "people," "union," and "welfare" in the document, he says, "Sounds like that other ism."

The reason is because free-market capitalism is not a system.  It is the un-system.  It is the lack of a system.  It is the chaotic, anarchic, bottom-up actions of 300 million people acting to direct their lives as they see fit and improve their own financial well-being.  The fact that it works without top-down coordination, that the right number of pencils get manufactured each year without a pencil czar, is a testament to the power of a few simple tools, particularly price, in signaling to individuals where they might best employ their own time and capital.

Thank god English is generally defined bottom-up rather than top down, a mirror of the liberal capitalist society both we and England used to have.  The alternative is absurd:

The word on the table that morning was "cloud computing."To translate the English term for computing resources that can be accessed on demand on the Internet, a group of French experts had spent 18 months coming up with "informatique en nuage," which literally means "computing in cloud."

France's General Commission of Terminology and Neology -- a 17-member group of professors, linguists, scientists and a former ambassador -- was gathered in a building overlooking the Louvre to approve the term.

"What? This means nothing to me. I put a 'cloud' of milk in my tea!" exclaimed Jean Saint-Geours, a French writer and member of the Terminology Commission.

"Send it back and start again," ordered Etienne Guyon, a physics professor on the commission....

Before a word such as "cloud computing" or "podcasting" ("diffusion pour baladeur") receives a certified French equivalent, it needs to be approved by three organizations and get a government minister's seal of approval, according to rules laid out by the state's General Delegation for the French Language and the Languages of France. The process can be a linguistic odyssey taking years.

"Rigor cannot be compromised," said Xavier North, the 57-year-old civil servant who heads the General Delegation.

In particular, its heartening that the French have a finely-tuned understanding of their rights.  They have no hard and fast right to free speech as we have in the US, but

Article Two of France's Constitution states that, "The language of the Republic shall be French." The French government, therefore, has a duty to offer citizens French alternatives to English words, he says. "Our citizens have a right to communicate without speaking English."

I discussed this same topic earlier.  This makes for another excellent reason to oppose laws mandating English as our official language, promulgated by folks who are outraged at having to press 1 for English -- it can't be a good idea if the French do it.

I found this incredible:

Each of France's government ministries has at least one terminology committee attached to it. The job of the people on the committee is to spot new English words and create and define French alternatives before the English version catches on. Ms. Madinier called on the committee in charge of computing terminology -- which is part of the French Finance Ministry -- to handle the expression "cloud computing."

I would have thought that the influx of so many new concepts and technologies in English might have been a clue that maybe France needed to do something about innovation; but no, apparently it will be fine to gravy train off American and English innovation as long as they can come up with a French name for everything.  The only other country I know of that was so fixated on making Anglo-American innovation look homemade was the Soviet Union.

From John Hasnas via Matt Welch:

Libertarians spend their lives accurately predicting the future effects of government policy. Their predictions are accurate because they are derived from Hayek's insights into the limitations of human knowledge, from the recognition that the people who comprise the government respond to incentives just like anyone else and are not magically transformed to selfless agents of the good merely by accepting government employment, from the awareness that for government to provide a benefit to some, it must first take it from others, and from the knowledge that politicians cannot repeal the laws of economics. For the same reason, their predictions are usually negative and utterly inconsistent with the utopian wishful-thinking that lies at the heart of virtually all contemporary political advocacy. And because no one likes to hear that he cannot have his cake and eat it too or be told that his good intentions cannot be translated into reality either by waving a magic wand or by passing legislation, these predictions are greeted not merely with disbelief, but with derision. [...]

If you'd like a taste of what it feels like to be a libertarian, try telling people that the incoming Obama Administration is advocating precisely those aspects of FDR's New Deal that prolonged the great depression for a decade; that propping up failed and failing ventures with government money in order to save jobs in the present merely shifts resources from relatively more to relatively less productive uses, impedes the corrective process, undermines the economic growth necessary for recovery, and increases unemployment in the long term; and that any "economic" stimulus package will inexorably be made to serve political rather than economic ends, and see what kind of reaction you get. And trust me, it won't feel any better five or ten years from now when everything you have just said has been proven true and Obama, like FDR, is nonetheless revered as the savior of the country.

Sure, we all know that a series of carefully edited anecdotes on film constitute better evidence than comprehensive data and statistics, but Mark Perry soldiers on and does what he can anyway to rebut Michael Moore's new movie.  He has lots of good charts, but his summary is:

the evidence clearly demonstrates that along with capitalism and greater economic freedoms come: a) higher per-capita incomes, b) higher incomes for the poorest 10%, c) greater life expectancy, d) less corruption, e) cleaner environments, and f) greater political rights and civil liberties. Not a bad record for a system that Michael Moore portrays as evil, and says did "nothing for him."

I am always amazed at these attempts to portray countries like Cuba as superior to the US for the common man.  One only has to look at immigration patterns (and even better some measure of desired immigration intent, since our ridiculously restrictive immigration laws keep so many people out of this country) to see the common man's preferences.   Moore and his pears are like a man who looks at a river running from north to south and then arguing that the land in the south must be higher.

Just as an aside, there have probably been thousands of states in world history.   Of all those thousands of states and regimes from history, including the hundreds that exist today, there are probably only 15-20 that would have  social, economic, and political systems that would allow a man born to modest circumstances to make a fortune through criticism of the government and the social elite.

Ezra Klein writes:

For a long time, I took questions about stifling innovation very seriously. So did a lot of liberals. But then I realized that the people making those arguments wanted to do things like means-test Medicare, or increase cost-sharing across the system, and generally reduce costs in this or that way, which would cut innovation in exactly the same way that single-payer would hypothetically cut innovation: by reducing profits.

I also found that I couldn't get an answer to a very simple question: What level of spending on health care was optimal for innovation? Should we double spending? Triple it? Cut it by 10 percent? Simply give a larger portion of it to drug and device manufacturers? I'd be interested in a proposal meant to maximize medical innovation. I've not yet seen one.

The reason he could not get an answer to this very simple question is that it is stupid.  It is a non-sequitur.  It is, as Ayn Rand used to warn, a statist trying to force the argument to conform to his statist assumptions.

Let's take a different example, because medicine is so screwed up by government intervention that it can be confusing.  Let's imagine ourselves in the computer market in 1974.  The market is dominated by IBM mainframes, and innovation at the time was considered to be the penetration of mini computers (not to be confused with PCs, these were really just smaller mainframes) by DEC and HP.

Let's say that for some reason the US government decides it is fed up with the IBM "monopoly" and the high cost of mainframe computing and it wants to take over.  It feels like there is a lot of waste in mainframes as some people are using them for frivolous reasons while other companies who really need them can't afford them.  They might have created review boards to make sure that they thought each dollar spent on computing hardware and software was "worth it."

So, how much spending is needed to maintain innovation?  We know in hindsight that the PC revolution is looming in the next few years.  And in that context, Klein's question is absurd.  The answer is that spending per se, and even profits, in the mainframe computing market were irrelevant to the coming series of innovations.    The necessary preconditions were that entrepreneurs saw that new technology provided potential new value to consumers, and were allowed the freedom to launch these new products in hopes that the value these new products provided would be sufficiently high that consumers would pay enough for them to return their cost of manufacture and development and return them a profit.  Some succeeded, and some failed, but entrepreneurs were allowed to try, despite most "experts" predicting the PC was a silly toy.

Note that computer innovators were not required to trundle into some government computing board to justify the PC and its price, to justify how much, as Klein would say, needed to be spent on PC's.   If in fact they were forced to do so, if Jobs and Wozniak had to fly to Washington to justify the Apple I to the Computing Spending Decisions Board, they would have almost certainly been shot down.  Or told they could sell it but only for $200 and not their initial price of $2000.  We would have never had a PC revolution in a government single payer computing world, no matter how much, as Klein asks, was "spent" by the government.   It is possible that the government might eventually have greenlighted a PC (years later) just as the increasingly bureaucratic IBM did, but can you imagine how frail the PC revolution would would be if only IBM had ever sold PCs, without the slew of competitors that emerged, and if every innovation had to pass the scrutiny of a government review board before it could be launched?   Only a tiny percentage of PC innovation and of what we think of as a PC today, mostly in the basic architecture, ever came from IBM.

The very problem is that when government runs computers or health care, innovation is seen as a cost.  Klein, by asking the question in this way, is betraying exactly what is fundamentally wrong with a single-payer system.  The single-payer tends to think in terms of trying to deliver the current value proposition (ie the 2009 level of health care technology) as cheaply as possible.  The problem is that in 2039, it will still be focused on delivering the 2009 level of health care technology.  For the government -- a new drug, a new procedure, a new test -- these are all incremental costs, to be avoided.  Klein just wants a number he can plug into budget projections to say, "see, innovation is covered."  Its like Wesley Mouch asking John Galt near the end of Atlas Shrugged to tell him what orders to give.

I wrote about it just the other day.  You can see it in everything the Left writes -- increased spending is equated with increased costs which are therefore bad.  They all say that America's health care spending is rising and our per capita spending is higher than other nations and that this rising spending is somehow a problem to be fixed.  But there is a value side of the equation.  What are we getting from the spending?  When you leave out things the health care system can't do anything about (homicides and fatal accidents) Americans have the longest life expectancy in the world.  We are getting something for that extra money.  It is not just "cost" to be contained.  Is a year of life worth an extra $100,000 spending?  Everyone has a different answer, which is why we typically let each individual make these tradeoffs, and why people are uncomfortable having someone in the Post Office make the tradeoff for them.

But, the left will say, we will put really smart people on this board, who are angels of public service, who will make perfect decisions on the price-value tradeoffs of innovation (have you noticed that all their programs seem dependent on this assumption?)  Back to our computer example, these guys, they would argue, would have been smart enough to have given Jobs and Wozniak the green light.  This is a fantasy.  It never happens.  No matter how good the people, every such government entity is driven by its incentives, and this group's incentives will be to cut spending.  Innovations that result in a net total increase in spending are not going to be well-received.

Further, these boards get politicized, always.  Companies will quickly learn they have a better chance, say, of getting a new breast cancer treatment rather than a new prostrate cancer treatment past the board because the current administration is closely tied to women's groups.  Just look at current government R&D spending, this already happens.  AIDS was under-funded given its mortality because Conservative administrations thought it a disease mainly of groups it found distasteful; today, women's cancers get far more funding than men's due to the strong political activism of women's groups and the success of the pink ribbon campaign.  Drug companies will learn that the quickest way to board approval may not be winning over the board, but getting certain interest groups to lobby the board, or maybe lobby Congress to override the board.  Just look at the promise not to politicize ownership of GM -- that lasted about 2 days before Congress was passing legislation reversing internal GM decisions and GM was making plant closures based on political rather than economic concerns.

But even beyond these problems, there are Hayekian ones as well.  In the mid-seventies, there might have been only a few thousand people who were excited enough to buy an early microcomputer and see its potential.  What are the odds that one of those folks would be on the government review board, particularly since few of them were in the mainstream establishment of the computing field (heck, few of them were over 19 years old).  And even if one were on the board, would they have approved a technology with only a few initial adherents?  The fact is innovation often requires adoption of bleeding edge risk-takers who are willing to try a new technology and iron out its kinks before the mainstream catches on.   The iPod was not the first music player -- a few of us struggled for years before the iPod with large and sometimes hard to use early mp3 players  -- but if these early MP3 players had not existed, the iPod would not exist.

Perhaps most importantly, everyone makes different tradeoffs.  It may make perfect sense for some person in Washington that a biopsy is not required for certain kind of positive cancer test results.  This may make perfect price-value sense to the beauracrat, but I know a number of people who would lose months or years of their life to worry -- worry that could be short-circuited with an inexpensive biopsy.   Or consider a new cancer treatment -- is a year of life worth an extra $100,000 spending?  Would I prefer to extend my life through chemo or increase the quality of life of the time I have left by avoiding chemo?   Everyone has a different answer, which is why we typically let each individual make these tradeoffs, and why people are uncomfortable having someone in the Post Office make the decision for them.

One could say that all of this does not answer Klein's question.  That is because his question, built on the wrong premise, is unanswerable.  I suspect he knows this and is, as Brad Warbiany posited in the link above, just setting up a straw man.  All I can do is try to give a feel what what innovation does require, and help folks to understand that it has little if anything to do with Klein's question.

So, if I had to come up with a pithy one sentence answer, here it would be:

Klein:  What level of spending on health care is optimal for innovation?

Me:  The very fact that you intend to control spending centrally, at any level high or low, is what kills innovation.

Postscript: For a totally different reason, I was reading this article on the Russian T-34 tank, probably the best all-around tank for its time ever made when considering its production volume (the Panther was theoretically a better tank but volume production of the scale of the T-34, not to mention mechanical reliability, eluded the Germans).  Apropos of government boards and innovation was this:

The L-11 gun did not live up to expectations, so the Grabin design bureau at Gorky Factory No. 92 designed a superior F-34 76.2 mm gun. No bureaucrat would approve production, but Gorky and KhPZ started producing the gun anyway; official permission only came from Stalin's State Defense Committee after troops in the field sent back praise for the gun's performance.

Democrats: The people in power can't be trusted.  You need to remove them and put our guys in charge

Republicans: The people in power can't be trusted.  You need to remove them and put our guys in charge

libertarians: People in power can't be trusted.  You need to remove their power and be in charge of your own damn self

I found this a bit odd.  In Arizona, you can actually make a voluntary contribution to certain causes or political parties via your tax return.  This is not a checkoff, but an amount that is added to the amount you owe in taxes and then passed on by the state to a short list of approved organizations.  As a libertarian, I find it unsettling that the state acts as a collection or sales agent for certain political causes.  In particular, how can the state make fair and reasonable choices as to who is on and not on the list of eligible recipients?

I found this data for 2009 FY giving:

What was odd for me is that of all the political giving, libertarians had the highest average donation.  I find it weird that libertarians would want to financially support the libertarian cause but they want to do it via the mechanism of the state income tax return.

The good news here is that the combined $28 thousand or so in political donations was dwarfed by every other cause.