Posts tagged ‘Cafe Hayek’

Double-Speak is Alive and Well

This was funny, from labor boss John Sweeney (via Cafe Hayek):

Let's require big, profitable companies such as Wal-Mart to provide health care
to their employees instead of passing the cost along to everybody else, and
let's begin to develop a national health care plan that provides affordable
coverage to all Americans.

This is really, really funny.  Notice that in the first half of the sentence, he decries passing health care costs "along to everybody else" and then in the second half advocates a national health insurance plan that would pass individual health care costs onto... everybody else.  Also note that since Wal-mart, despite Mr. Sweeney's description as being big and profitable, has one of the lowest profit margins in the Fortune 100, it would likely have to raise prices in order to... pass these costs along to everybody else.

What Mr. Sweeney is actually frustrated about is that there are a large number of individuals in the labor force that he does not make decisions for and who do not in turn contribute to his personal power.

Cafe Hayek has more.

"Sweatshop" Wages

I have little patience for the campaign against American companies, particularly apparel companies, for operating "sweatshops" in other countries.  A bunch of American middle class protesters who have generally never been to the country involved complain that wages paid are too low.  Why too low?  Well, the only basis I can determine is that they are declare too low because the protesters involved would never take that $12 a day job themself.  Of course, the protesters have never wallowed in miserable poverty trying to live on $2 a day. As I wrote before:

Progressives do not like American factories appearing in third world
countries, paying locals wages progressives feel are too low, and
disrupting agrarian economies with which progressives were more
comfortable.  But these changes are all the sum of actions by
individuals, so it is illustrative to think about what is going on in
these countries at the individual level. 

One morning, a rice farmer in southeast Asia might faces a choice.
He can continue a life of brutal, back-breaking labor from dawn to dusk
for what is essentially subsistence earnings.  He can continue to see a
large number of his children die young from malnutrition and disease.
He can continue a lifestyle so static, so devoid of opportunity for
advancement, that it is nearly identical to the life led by his
ancestors in the same spot a thousand years ago.

Or, he can go to the local Nike factory, work long hours (but
certainly no longer than he worked in the field) for low pay (but
certainly more than he was making subsistence farming) and take a shot
at changing his life.  And you know what, many men (and women) in his
position choose the Nike factory.  And progressives hate this.  They
distrust this choice.  They distrust the change.  And, at its heart,
that is what globalization is all about - a deep seated conservatism
that distrusts the decision-making of individuals and fears change,
change that ironically might finally pull people out of untold
generations of utter poverty.

This week, with a hat tip to Cafe Hayek, I found this interesting new study by Powell and Skarbeck on wages at American plants in 3rd world nations.


We examined the apparel industry in 10 Asian and Latin American countries
often accused of having sweatshops and then we looked at 43 specific accusations
of unfair wages in 11 countries in the same regions. Our findings may seem
surprising. Not only were sweatshops superior to the dire alternatives
economists usually mentioned [such as working on subsistence farms], but they
often provided a better-than-average standard of living for their workers.


The apparel industry, which is often accused of unsafe working conditions and
poor wages, actually pays its foreign workers well enough for them to rise above
the poverty in their countries. While more than half of the population in most
of the countries we studied lived on less than $2 per day, in 90 percent of the
countries, working a 10-hour day in the apparel industry would lift a worker
above - often far above - that standard. For example, in Honduras, the site of
the infamous Kathy Lee Gifford sweatshop scandal, the average apparel worker
earns $13.10 per day, yet 44 percent of the country's population lives on less
than $2 per day.

Cafe Hayek concludes:

Powell's and Skarbek's lesson is straightforward and important. But it's a
lesson too often ignored by "activists" who would rather pose and prance as
moral crusaders than analyze situations in ways that might actually help people.
The lesson is summarized by what I call "The Economist's Question: "As
compared to what?"

In and of itself, situation A is neither good nor bad; it is good or bad only
in comparison with it's real alternatives.  This lesson is a hard one, perhaps
-- it's certainly an unromantic one -- but it's indispensable for sound


More on School Choice

A while back, I made a plea to the left to "come to the dark side" and consider school choice.  In this post, I didn't argue about quality or efficiency improvements, but about diversity:

At the end of the day, one-size-fits-all public schools are never
going to be able to satisfy everyone on this type thing, as it is
impossible to educate kids in a values-neutral way.  Statist parents
object to too much positive material on the founding fathers and the
Constitution.  Secular parents object to mentions of God and
overly-positive descriptions of religion in history.  Religious parents
object to secularized science and sex education.  Free market parents
object to enforced environmental activism and statist economics.   Some
parents want no grades and an emphasis on feeling good and self-esteem,
while others want tough grading and tough feedback when kids aren't
learning what they are supposed to.

I have always thought that these "softer" issues, rather than just
test scores and class sizes, were the real "killer-app" that might one
day drive acceptance of school choice in this country.  Certainly
increases in home-schooling rates have been driven as much by these
softer values-related issues (mainly to date from the Right) than by
just the three R's.

So here is my invitation to the Left: come over to the dark side.
Reconsider your historic opposition to school choice.  I'm not talking
about rolling back government spending or government commitment to
funding education for all.  I am talking about allowing parents to use
that money that government spends on their behalf at the school of
their choice.  Parents want their kids to learn creationism - fine,
they can find a school for that.  Parents want a strict, secular focus
on basic skills - fine, another school for that.  Parents want their
kids to spend time learning the three R's while also learning to love
nature and protect the environment - fine, do it...

Today, Jeff Jacoby, via Cafe Hayek, is making much the same argument:

From issues of sexuality and religion to the broad themes of US history and
politics, public opinion is fractured. Secular parents square off against
believers, supporters of homosexual marriage against traditionalists, those
stressing ''safe sex" against those who emphasize abstinence. Each wants its
views reflected in the classroom. No longer is there a common understanding of
the mission of public education. To the extent that one camp's vision prevails,
parents in the opposing camp are embittered. And there is no prospect that this
will change -- not as long as the government remains in charge of educating
American children....

Imagine how diverse and lively American education would be if it were
liberated from government control. There would be schools of every description
-- just as there are restaurants, websites, and clothing styles of every
description. Parents who wanted their children to be taught Darwinian evolution
unsullied by leaps of faith about an Intelligent Designer would be able to
choose schools in which religious notions would play no role. Those who wanted
their children to see God's hand in the miraculous tapestry of life all around
them would send them to schools in which faith played a prominent role.

Sounds good?  Well, unfortunately, as Cafe Hayek points out, Stacy Schiff in the NY Times recently went off on an anti-choice screed.  Not just anti-school-choice, but anti-all-choice, and readers were writing in in droves to agree!  Jeez, do people really want less choice? And just because you are too lazy to handle responsible decision-making, do you really want to limit my choice as well?  And by the way, who is going to be the official cull-er of choice, and what guarantees do you have that those officials will make the same decisions as you in culling choice?  Virginia Postrel has more thoughts on choice.

The bottom line of choice is that many of those in power do not trust you to make your own choices.  I wrote on distrust of individual decision-making here.  In my article on school choice, I ended with this caution:

Of course, there is one caveat that trips up both the Left and the
Right:  To accept school choice, you have to be willing to accept that
some parents will choose to educate their kids in a way you do not
agree with, with science you do not necessarily accept, and with values
that you do not hold.  If your response is, fine, as long as my kids
can get the kind of education I want them to, then consider school
choice.  However, if your response is that this is not just about your
kids, this is about other people choosing to teach their
kids in ways you don't agree with, then you are in truth seeking a
collectivist (or fascist I guess, depending on your side of the aisle)
indoctrination system.  Often I find that phrases like "shared public
school experience" in the choice debate really are code words for
retaining such indoctrination.

Update: I feel compelled to include this quote from Radley Balko:

Critics of capitalism once predicted that free markets would wreak mass
starvation, depletion of resources, pollution, and death.

They're now reduced to bitching about too many flavors of mustard.

We've won the debate.

Wealth of Nations

Socialists and "progressives" of various stripes always want to argue that the distribution of wealth among nations is basically due to luck, in large part related to the distribution of natural resources.

This is disprovable in about 2 seconds:  Russia (via Cafe Hayek) and the Netherlands.   Russia, resource-wise, is perhaps the richest country in the world.  It is, our could be, among the largest producers of any number of natural resources, from diamonds and gold to oil and uranium.  But its economy is a disaster.  The Netherlands, resource wise, has about nothing.  There are few third world economic hell-holes that don't begin with infinitely more resources than the Dutch, but the Dutch are among the richest nations in the world. 

Wealth comes not from labor or capital or resources - wealth comes from the mind, and as such requires a rule of law where the mind is free not only to imagine new ideas but to pursue and reap the fruits of these ideas.  As I said in this article:

From the year 1000 to the year 1700, the world's wealth, measured as GDP per capita, was virtually unchanged.
Since 1700, the GDP per capita in places like the US has risen, in real
terms, over 40 fold.  This is a real increase in total wealth - it is
not money stolen or looted or exploited.  Wealthy nations like the US
didn't "take" the wealth from somewhere else - it never even existed
before.  It was created by the minds of human beings.

How?  What changed? 

  1. There was a philosophical and intellectual
    change where questioning established beliefs and social patterns went
    from being heresy and unthinkable to being acceptable, and even in
    vogue.  In other words, men, at first just the elite but soon everyone,
    were urged to use their mind rather than just relying on established
  2. There were social and political changes that greatly increased
    the number of people capable of entrepreneurship.  Before this time,
    the vast vast majority of people were locked into social positions that
    allowed them no flexibility to act on a good idea, even if they had
    one.  By starting to create a large and free middle class, first in the
    Netherlands and England and then in the US, more people had the ability
    to use their mind to create new wealth.  Whereas before, perhaps 1% or
    less of any population really had the freedom to truly act on their
    ideas, after 1700 many more people began to have this freedom. 

So today's wealth, and everything that goes with it (from shorter
work hours to longer life spans) is the result of more people using
their minds more freely.


Interview with Bill James

If you were to make a list of 10 people in the 20th Century who had the ability to rethink whole industries, you might come up with names like Sam Walton or Herb Kelleher.  One guy you might not think of, but who should make the list, is Bill James.  James has helped to single-handedly rethink the game of baseball, one of the great bastions of not-invented-here thinking.  Here is an interview of James that is pretty interesting.  Hat Tip to Cafe Hayek, who also has some thoughts on James the economist.

James sounds a lot like Hayek, and more recent authors like Virginia Postrel, when he says things like this:

If I were in politics and presented myself as a Republican, I would be
admired by Democrats by despised by my fellow Republicans. If I
presented myself as a Democrat, I would popular with Republicans but
jeered and hooted by the Democrats.
        I believe in a universe that is too complex for any of us to
really understand. Each of us has an organized way of thinking about
the world"”a paradigm, if you will"”and we need those, of course; you
can't get through the day unless you have some organized way of
thinking about the world. But the problem is that the real world is
vastly more complicated than the image of it that we carry around in
our heads. Many things are real and important that are not explained by
our theories"”no matter who we are, no matter how intelligent we are.
        As in politics we have left and right"”neither of which explains
the world or explains how to live successfully in the world"”in baseball
we have the analytical camp and the traditional camp, or the
sabermetricians against the scouts, however you want to characterize
it. I created a good part of the analytical paradigm that the
statistical analysts advocate, and certainly I believe in that paradigm
and I advocate it within the Red Sox front office. But at the same
time, the real world is too complicated to be explained by that

Or this, closer to the sports world:

Honestly, major league baseball"”and all sports"”would be far better off
if they would permit teams to do more to make one park distinctive from
another"”even so far as making the bases 85 feet apart in one park and
95 in another. Standardization is an evil idea. Let's pound everybody
flat, so that nobody has any unfair advantage. Diversity enriches us,
almost without exception. Who would want to live in a world in which
all women looked the same, or all restaurants were the same, or all TV
shows used the same format?
        People forget that into the 1960s, NBA basketball courts were
not all the same size--and the NBA would be a far better game today if
they had never standardized the courts. What has happened to the NBA
is, the players have gotten too large for the court. If they hadn't
standardized the courts, they would have eventually noticed that a
larger court makes a better game"”a more open, active game. And the same
in baseball. We would have a better game, ultimately, if the teams were
more free to experiment with different options.
        The only reason baseball didn't standardize its park
dimensions, honestly, is that at the time that standardization was a
dominant idea, they just couldn't. Because of Fenway and a few other
parks, baseball couldn't standardize its field dimensions in the
1960s"”and thus dodged a mistake that they would otherwise quite
certainly have made.
         Standardization destroys the ability to adapt. Take the high
mounds of the 1960s. We "standardized" that by enforcing the rules, and
I'm in favor of enforcing the rules, but suppose that the rules allowed
some reasonable variation in the height of the pitching mound? What
would have happened then would have been that, in the mid-1990s, when
the hitting numbers began to explode, teams would have begun to push
their pitching mounds up higher in order to offset the hitting
explosion. The game would have adapted naturally to prevent the home
run hitters from entirely having their own way. Standardization leads
to rigidity, and rigidity causes things to break.

I love it.  Maybe those guys who want to use baseball as a paradigm for life had something after all.

Can Entrepeneurship Survive at Harvard?

Its pretty clear that open academic discourse is on life support at Harvard in the wake of the recent Larry Summers vote of no confidence.  Now, there is a question about whether simple entrepreneurship can survive.   Via Cafe Hayek, several Harvard students created dormaid to provide maid services to dorm students that wanted to pay for it.  Seemed like a great idea to me, which I would have loved at school, but the Harvard student magazine has hammered the entrepreneurs:

By creating yet another differential between the haves and have-nots on
campus, Dormaid threatens our student unity.... We urge the student
body to boycott Dormaid

Socialism has been rejected by countries around the world.  It seems like it is still alive and well at Harvard.  Here is the angst coming through of a frustrated top-down Stalinist planner:

A service like Dormaid can bring many levels of awkwardness into this
picture. For example, do two people sharing a double split the cost?
What if one wants the service and the other does not? What if one
cannot afford it? Hiring someone to clean dorm rooms is a convenience,
but it is also an obvious display of wealth that would establish a
perceived, if unspoken, barrier between students of different economic

Here is the Cafe Hayek response:

This episode is too typical. An enterprising soul perceives a need
and creatively offers a product or service -- at his own financial risk
-- to satisfy that need. Everything is voluntary. No one is forced to
buy the service; no one is forced to work for it. But well-read
ignoramuses, infatuated with their own imaginary higher capacity for
caring for others, viscerally react against commercial exchange. In
this case, those opposed to Dormaid worry that because some but not all
students will find it worthwhile to buy maid service, "inequality"
among the Harvard student body will increase.

Is the typical Harvard student so immature that he suffers envy when
some of his fellow students buy maid service that he chooses not to
buy? (Bonus question for economics students: Why did I say "that he
chooses not to buy?" rather than "that he can't afford?")  Is he so
sensitive, so very, very tender, that he loses emotional stability at
the sight of a friend's dorm room freshly cleaned by maids?  Is he so
intellectually and socially inept that he can't work out an amicable
arrangement with his roommate if one wants to use Dormaid and the other
prefers not to do so?

Read the rest - Cafe Hayek has links to the original Harvard Crimson article.  I will tell you that my roommates would have been fine if I had used this service in college.  In fact, I was such a mess that they might have paid for it for me!


Trade Deficit? Don't Panic!

I have never been bothered by the trade deficit.  Concern over the trade deficit always seems to be a holdover of 18th century mercantile thinking.  The key failure seems to be thinking of wealth as static or zero sum.  In a zero sum world, running a consistent trade deficit might indeed pour all of a countries wealth overseas like a tank springing a leak.

Wealth, of course, is not zero sum.  New ideas, productivity, technology create wealth.  Ever year, the US creates tremendous amounts of new wealth.  If we spend some of it overseas, so what?   

Often, problems like the deficit that seem problematic at a macro level fall apart when studied as part of individual behavior.  Cafe Hayek takes this approach in a nice post on why not to panic about the deficit:

If my paying my Virginia neighbor $10 to mow my lawn creates neither
debt nor other economic problems, how would my paying a Canadian $10US
to mow my lawn create debt or other economic problems? What conceivable
economic difference can the latitude or longitude of the seller's
residence make?

UPDATE: I always felt this same way, from Steve Landsburg:

I hold this truth
to be self-evident: It is just plain ugly to care more about total
strangers in Detroit than about total strangers in Juarez. Of course we
care most about the people closest to us-our families more than our
friends and our friends more than our acquaintances. But once you start
talking about total strangers, they all ought to be on pretty much the
same footing. You could say you care more about white strangers than
black strangers because you've got more in common with whites. Does
that make it okay to punish firms for hiring blacks?....

Stealing assets is wrong, and so is stealing the right to earn a living, no matter where the victim was born.

Lisencing eBay Sellers

I wrote before of the cost that licensing imposes on the economy.  I love Milton Friedman's take on licensing and certification:

The justification offered is always the same: to protect the consumer. However, the reason
is demonstrated by observing who lobbies at the state legislature for
the imposition or strengthening of licensure. The lobbyists are
invariably representatives of the occupation in question rather than of
the customers. True enough, plumbers presumably know better than anyone
else what their customers need to be protected against. However, it is
hard to regard altruistic concern for their customers as the primary
motive behind their determined efforts to get legal power to decide who
may be a plumber.

Now, from Ohio (and via Cafe Hayek) comes this attempt to regulate auctioneers:

Besides costing $200 and posting a $50,000 bond,
the license requires a one-year apprenticeship to a licensed auctioneer, acting
as a bid-caller in 12 auctions, attending an approved auction school, passing a
written and oral exam. Failure to get a license could result in the seller being
fined up to $1,000 and jailed for a maximum of 90 days.

Keep Friedman's quote in mind.  Note that under this system, auctioneers have an automatic veto over new competition, since all potential competitors must find an existing auctioneer to take them on as an apprentice.  Imagine the consumer electronics business - "I'm sorry, you can't make or sell any DVD players until Sony or Toshiba have agreed to take you on as an intern for a year".  Yeah, I bet we'd see a lot of new electronics firms in that system - not.

It gets better, though.  The law is written in a way that it applies to Ohio residents trying to sell on eBay:

Here's the response offered by state Senator Larry
Mumper, author of the legislation: "It certainly will not apply to the casual
seller on eBay, but might apply to anyone who sells a lot," he said. "If someone buys and sells on eBay on a
regular basis as a type of business, then there is a need for

This is the kind of regulation mentality that is killing us.  eBay has a great rating system, and while the system sometimes trips for small sellers (since they can just start a new account) but big volume competitors ruthlessly protect their reputation on eBay because it is so visible.


Individual Choice and Vioxx

I mentioned in this post on individual choice the example of the FDA risk-reward decisions for Americans as a whole, an impossible task when each individual's needs and decision making are different (also see here).  This is a couple of weeks old, but is a good article from USAToday about the millions of people who are suffering in the wake of Vioxx's removal from the market. 

Sales of the drug were halted worldwide on Sept. 30, after a study showed it doubled the risk of heart attack and stroke. But, for Rubinstein, relief trumps risk.

Vioxx "was the best pain drug I had been on in 27 years," says the 47-year-old Manhattan resident, who has fibromyalgia, a chronic condition that causes pain in muscles and joints. "I felt good enough to do some exercise. Getting to work was not such a difficult thing.

These people would gladly accept the increased risk of heart problems to reduce their debilitating pain, if only the government and/or the courts would allow them to make this choice.  (yes, I know that Vioxx was pulled by the maker, but this is only anticipation of a tort system that punishes the manufacturer for informed choices made by individual users).


This is a good post from Cafe Hayek on presecription drugs and individual choice

Walmart: The New Collectivist Target

Collectivists, Progressives, and anti-capitalists have apparently moved on from Halliburton and targeted Walmart as the Satan of the moment.  Walmart is charge with everything from destroying communities to mistreating employees.

What most of these attacks overlook is that no one shops or works at Walmart except by their own free will - that shopping there or working there are better than their other choices.  Cafe Hayek points out this rather obvious but consistently overlooked point.  However, it is a hallmark of "progressives" that they distrust individual decision-making, so I guess it is not so surprising.  You can't compare jobs to some mythical ideal and claim that they don't measure up - jobs measure up or not only in comparison to other available opportunities.

Global Warming and Poverty

Several days ago in this post I made the point that the only connection between the recent tsunami deaths and global warming I could find was that 3rd world poverty, which global warming treaties will likely help lock in place, made people more vulnerable to the disaster.  Kendra Okonski makes a similar point in the Asian Wall Street Journal.  Note:

Appropriate infrastructure, including warning systems that can save lives, communications systems, transportation infrastructure, medical facilities, and sophisticated construction methods are the tangible benefits of economic development. Just look at the much lower death tolls when tsunamis strike Japan, where the average citizen is 43 times wealthier than his counterparts in countries such as Indonesia, and so much better placed to afford the infrastructure needed to minimize loss of life.

He goes on to point out how focus on the focus on global warming, combined with growth destroying treaties like Kyoto as well as a hodge-podge of other statist policies will conspire to keep many people locked in poverty:

This week's tragedy illustrates why environmentalists' proposals are preposterous and counterproductive. Policies such as the Kyoto Protocol -- a global treaty to limit emissions in industrialized countries -- would in fact harm the poor the most, by slowing economic growth and distracting attention from real and present problems.

So, in conclusion

The real problem for most of the people affected by the disaster is poverty. Whatever the earth, or its climate, may have in store in the next few decades, the best strategy to minimize human deaths and suffering is to tackle poverty through economic development and technological progress.

UPDATE:  More here at Cafe Hayek

Dude, Managing my Retirement Fund is Like, Way Too Much Stress

In this post on Social Security reform at Powerline (Time blog of the year, congrats guys) they take as a starting point a Sabastian Mallaby article in the WaPo who says:

Privatizing social security would increase stress levels, says Mallaby, because determining where to invest one's retirement money entails making tough choices and taking risks. Thus, Mallaby believes that many, perhaps even most, people would prefer to have the government handle their social security funds as it does now than to "agonize over health stocks vs. Asian bonds."

In this we see two things that characterize liberals and progressives:  "1) distrust of individual decision-making and 2) willingness to accept much less wealth in return for more certainty.  By the way, I have no particular problem with #2 when this decision is made on an individual level.  However, I do have a problem when politicians make this decision at a societal level.  As regards Social Security, I have no problem with people being offered the "let the government continue to keep your money" option as long as it is voluntary.  The Powerline guys have other good comments, read the whole thing.

By the way, I will take a moment for a bit of "I told you so" here.  This "capitalism is too stressful for us dude" attitude is entirely consistent with what I said about progressives and capitalism here.


Here is a nice post on the same topic at Cafe Hayek.