the collapse of Communism has taught political economists several things:
first, that economic policy is always nested within a set of institutions—that there are economic/financial, political/legal, and social/cultural issues, which all must be taken into account;
second, that leadership matters throughout the transition process;
and third, that historical contingency can either work in your favour or cut against the successful transition.
And I would add a fourth one: that political power corrupts even the most informed and idealistic of individuals, such that you cannot count on ideological alignment to win the day. You have instead a small window of opportunity in which ideological alignment can be utilized to establish institutions that make it difficult for even bad men to do much harm.
In other words, the goal of our political/legal institutions should not be to ensure that the best and the brightest can govern, but instead that if the worst get in power, they can do little damage. This is the idea of a “robust political economy”.
What Have We Learned from the Collapse of Communism? by Peter Boettke
13 Apr 2014 Leave a comment
in Austrian economics, constitutional political economy, development economics, entrepreneurship, law and economics, liberalism, Public Choice Tags: collapse of communism
BBC World Service – Documentaries – Useful Idiots
12 Apr 2014 Leave a comment
in liberalism, politics Tags: useful idiots
The phrase ‘useful idiots’, supposedly Lenin’s, refers to Westerners duped into saying good things about bad regimes.
In political jargon it was used to describe Soviet sympathisers in Western countries and the attitude of the Soviet government towards them.
Useful idiots, in a broader sense, refers to Western journalists, travellers and intellectuals who gave their blessing – often with evangelistic fervour – to tyrannies and tyrants, thereby convincing politicians and public that utopias rather than Belsens thrived.
In part one John Sweeney looks at Stalin’s Western apologists at http://downloads.bbc.co.uk/podcasts/worldservice/docarchive/docarchive_20100804-0905a.mp3
In part two he explores how present day stories of human rights abuses across the world are still rewritten at http://downloads.bbc.co.uk/podcasts/worldservice/docarchive/docarchive_20100811-1059a.mp3
Hayek’s spotty record as a prophet in The Road to Serfdom – Part 1
10 Apr 2014 Leave a comment
in Austrian economics, constitutional political economy, F.A. Hayek, liberalism, politics Tags: Hayek, Road to Serfdom, Tullock
Gordon Tullock used Sweden to support his argument that the basic problem with The Road to Serfdom was:
“that it offered predictions which turned out to be false. The steady advance of government in places such as Sweden did not lead to any loss of non-economic freedoms.”
When looking back longingly at the mixed economies of 1950s and 1960s, people often forget who won elections much of the time back then.
The period that managed to combine a large degree of state ownership and control of the UK economy with a free and diverse media and political pluralism was often under Tory rule (1951 to 1964) with the Labor governments (1964-1970) often with a margin of a few seats.
Then there was the Menzies era in Australia with Liberal party rule from 1949 to 1972; and then 1975 to 1983. Much the same in New Zealand. The Left rarely held power in the mid-20th century.
The Christian democrats usually ran both Italy and Germany in coalitions, as I recall, up until the late 1960 or the early 1970s. Gaullist France? The LDP in Japan?
That is where Hayek got it wrong. The left-wing parties were not the face of the future.
Power rotated in Schumpeterian sense. Governments were voted out when they disappointed voters with the replacement not necessarily having very different policies.
The right-wing parties won many western European elections by that well-proven old trick of being slightly to the right of the left-wing parties. Hayek failed to predict this.
Hayek was himself a major critic of detailed predictions:
“We can build up beautiful theories which would explain everything, if we could fit into the blanks of the formulae the specific information; but we never have all the specific information.
Therefore, all we can explain is what I like to call “pattern prediction.”
You can predict what sort of pattern will form itself, but the specific manifestation of it depends on the number of specific data, which you can never completely ascertain. Therefore, in that intermediate field — intermediate between the fields where you can ascertain all the data and the fields where you can substitute probabilities for the data–you are very limited in your predictive capacities.”
“Our capacity of prediction in a scientific sense is very seriously limited. We must put up with this.
We can only understand the principle on which things operate, but these explanations of the principle, as I sometimes call them, do not enable us to make specific predictions on what will happen tomorrow.”
Hayek’s warnings in The Road to Serfdom was against a background where democracy was still young and insecure in Europe and peacetime democratic governments were, up until then, not much bigger than a post office and a military. The big governments of his day were not democratic.
As Popper and Kuhn understood it, bold, risky hypotheses are at the heart of great advances in the sciences and scholarship generally.
Milton Friedman on the power of greed
06 Apr 2014 Leave a comment
So that the record of history is absolutely crystal clear. That there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.
The market is the basis of social peace as well as prosperity
06 Apr 2014 1 Comment
in economics, liberalism, Milton Friedman
Milton Friedman pointed specifically to the anonymity and impersonal nature of the market as a way that people that would otherwise hate each other if they met on any other basis could instead co-operate, work productively together and become friendly with each other.
“The great virtue of a free market system is that it does not care what colour people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.”
Benevolence is not enough. The market process ensures that the unpopular and unpleasant also get fed and have jobs. The market is the basis of social peace as well as the only method by which the masses escaped from grinding poverty.
The Economics of Foreign & Military Intervention with Chris Coyne
04 Apr 2014 Leave a comment
in applied welfare economics, constitutional political economy, development economics, law and economics, liberalism, Public Choice
One of the greatest moments in TV – The Wire – Major Colvins speech: A paper bag for drugs
02 Apr 2014 Leave a comment
the best single case made for ending the war on drugs from the greatest TV show of them all. A bit over 3 minutes long.
Years ago, I remember reading a short news note about a Rand study of occupational hazards facing drug gangs in Washington, DC in the 1970s.
In a typical career of a few years, the annual risks were these:
- The chances of being caught by the police was 22% – usually 18 months in prison;
- the chances of serious injury 7%;
- The chances of being murdered by a business associate or market rival was 1.4%;
- the pay for street dealers is rather poor and not much better than their next best job opening.
Gave up on the war on drugs right there and then. Death and injury are the main occupational hazards of a drug dealer.
Murder was the leading cause of death of young black Americans.
Another paper pointed out that one reason the death penalty did no work so well was because people spent so long on death row due to appeals that taking them out of the drug trade increased their life expectancy.
The execution rate on death row is about twice the death rate from accidents and violence for all American men, and only slightly greater than the rate of accidental and violent death for all black males aged 15 to 34.
Bad prison conditions—well known, pervasive and immediate—have a more significant deterrent role against crime. Death row is a rather safe place to be?
Three cheers for rude political discourse
25 Mar 2014 Leave a comment
in law and economics, liberalism, libertarianism Tags: Attack Ads, hate speech, Jerry Falwell, Larry Flynt, political discourse
There is nothing unusual about ill-mannered political discourse. In the 1980s, a cartoonist went in search of Ronald Reagan’s brain.
A good discussion on political manners is in the Supreme Court judgment on the Larry Flynt, Jerry Falwell case, which included a 200-year history of American political cartoons.
The Court noted that the political cartoon is a weapon of attack, of scorn and ridicule and satire. It is usually as welcome as a bee sting and is always controversial to some and continuously goes beyond the bounds of good taste and conventional manners.
From the viewpoint of history, the Court held that it is clear that our political discourse would have been considerably poorer without them. The Court stated:
Debate on public issues will not be uninhibited if the speaker must run the risk that it will be proved in court that he spoke out of hatred; even if he did speak out of hatred, utterances honestly believed contribute to the free interchange of ideas and the ascertainment of truth.
Shrillness is commonplace in political discourse as is ignorance and ill manners. The Court held that:
The appeal of the political cartoon or caricature is often based on exploitation of unfortunate physical traits or politically embarrassing events – an exploitation often calculated to injure the feelings of the subject of the portrayal.
Everyone has the right to speak and all adults can vote, including those who disagree with you and even fill you with revulsion.
Politics and hatred of your opponents go hand in hand. Politics is a blood sport for driven people.
More than a few hate capitalism and speak in unflattering, even hateful, tones of the successful and other class enemies. Mises explained the youthful allure of socialism:
It promises a Paradise on earth, a Land of Heart’s Desire full of happiness and enjoyment, and—sweeter still to the losers in life’s game—humiliation of all who are stronger and better than the multitude…
Liberalism and capitalism address themselves to the cool, well-balanced mind. They proceed by strict logic, eliminating any appeal to the emotions.
Socialism, on the contrary, works on the emotions, tries to violate logical considerations by rousing a sense of personal interest and to stifle the voice of reason by awakening primitive instincts.
Every day spent pondering on the rudeness of your opponents is a day not spent showing the middle ground that the opposing viewpoint is wrong.
You play into their hands by taking your eyes off the prize. Back to that former union boss Ronald Reagan:
American politics is littered with, as George Will added eloquently, the bleached bones of those who under-estimated Ronald Reagan.
Renegade liberals and the withering away of the proletariat
20 Mar 2014 2 Comments
in development economics, economic growth, growth miracles, liberalism, P.T. Bauer Tags: Animal Farm, colonialism, development disasters, George Orwell, immiseration of the proletariat, inconvenient truths, Renegade liberals
George Orwell, in his proposed preface of Animal Farm, wrote of the “renegade liberal”. Renegade liberals glorify socialist experiments and disdain middle-class life despite their own pleasant circumstances.
Renegade liberals search the globe for outlaw states and revolutionary movements to support, who, of course, would ship their local versions of these renegade liberals straight to the camps as soon as they won power. Iran, Castro and Hugo Chávez are their latest rebels without a clue.
The revolutionary excesses of the new socialist or Anti-American regimes are excused as the misadventures of ‘liberals in a hurry’, who understandably lost patience with the slow pace of democratic reform. It is all in the name of liberating the proletariat from their misery or throwing off the dead hand of colonial rule.
How is the immiseration of the proletariat going these days?
- The immiseration of the proletariat is the central prediction of Marxism, the driver of class conflict, and this growing misery and poverty is what will finally push workers to wage a revolution against the capitalists.
- It is a bit hard to argue that workers are poorer today than in 1848 when the Communist Manifesto was written. The central Marxist prediction is falsified by history.
I agree with G.A. Cohen when he argues that there is no group in advanced industrial societies united by:
- being the producers on which society depends;
- being exploited;
- being, in conjunction with their families, the majority of society; and
- being in dire need.
To avoid the inconvenient truth of modern affluence and the move of so many of the proletariat into the middle class, renegade liberals search endlessly for under-developed countries so they can blame their poverty on capitalism.
When they visit them in solidarity, these renegade liberals should read the visa stamp: ‘people’s republic’ or ‘socialist republic’ is so frequently on it. It is still mandatory for all political parties in India to be committed to socialism.
Nearly all of Asia (where much of the world’s population lives) has undergone rapid and sustained economic and social progress because they became market economies, starting with the Asian Tigers and recently in previously socialist India and communist China. Latin America adopted the inward economic polices of the mid-20th century that renegade liberals praise so much and they became development disasters.
As the world embraced free market policies in the late 20th century, living standards rose sharply; life expectancy, education and democracy improved and absolute poverty declined. Xavier Sala-I-Martin and Maxim Pinkovskiy (2010) found that between 1970 and 2006, poverty fell by 86% in South Asia, 73% in Latin America, 39% in the Middle East and 20% in Africa. The percentage of people living on less than $1 a day (in PPP-adjusted 2000 dollars) fell from 26.8% in 1970 to 5.4% in 2006.
To go further, P.T. Bauer disputed the lack of development in British colonies. Bauer argued that much of British colonial Africa was transformed in the colonial period.
Before British rule, there were no rubber trees in Malaya, no cocoa trees in West Africa, no tea in India:
“…Much of British colonial Africa was transformed during the colonial period. In the Gold Coast there were about 3000 children at school in the early 1900s, whereas in the mid-1950s there were over half a million. In the early 1890s there were in the Gold Coast no railways or roads, but only a few jungle paths…
Before colonialism, Sub-Saharan Africa was a subsistence economy, because of colonialism it became a monetized economy.
Before colonialism, the absence of public security made investment impossible.
After it, investment flowed. So too was scientific agriculture introduced by colonial administrations, or by “foreign private organizations and persons under the comparative security of colonial rule, and usually in the face of formidable obstacles…
In British West Africa public security and health improved out of all recognition… peaceful travel became possible; slavery and slave trading and famine were practically eliminated, and the incidence of the worst diseases reduced..” (P.T. Bauer)
Some colonial powers were better than others. After 500 years of Portuguese rule in East Timor, in 1975, there was one road – to the governor’s house – and the phone number of the Australian consulate was 7! Portugal itself may have not been much better at that time too. Colonial masters are like parents. You must choose them well.
Trade is a powerful force for peace in the Ukraine
18 Mar 2014 Leave a comment
in liberalism, Public Choice, war and peace Tags: free trade, Putin, Richard Cobden, Russian gas pipelines, Ukraine
Russian TV is starting to spin a Putin back-down in the Ukraine. Channel surfing, I came cross a Russian TV story alluding to Russians that the revenues from the Russian gas pipelines across the Ukraine to the EU are a major lifeline of the Russian economy.
The mere threat of repeated sabotage of these gas pipelines to Western Europe are an easy way to hurt Russia if it overplays its hand. That was the round-about topic of the TV story.
Trade was a powerful force for peace and is a defence against war, as the great Manchester liberal Richard Cobden championed in mid-19th century.
Both Russia and China have much more to lose and much less to gain from war because of their extensive trade links with their neighbours and their former Cold War rivals, including with each other. China’s extensive trade and investment links with Taiwan are the best guarantee of peace between them.
As Joseph Schumpeter observed, when free trade prevails, “no class” gains from forcible expansion: “foreign raw materials and food stuffs are as accessible to each nation as though they were in its own territory”. Patrick McDonald recently called free trade the invisible hand of peace.
Should we fight for the Ukraine?
16 Mar 2014 15 Comments
in liberalism, Murray Rothbard, Public Choice, war and peace Tags: Canon Sydney Smith, crusading, European wars, expressive politics, Ukraine
Murray Rothbard, in the context of the 1980 Afghan war, quoted Canon Sydney Smith – a great classical liberal in early 19th century England who wrote to his warmongering Prime Minister, thus:
“For God’s sake, do not drag me into another war!
I am worn down, and worn out, with crusading and defending Europe, and protecting mankind; I must think a little of myself.
I am sorry for the Spaniards – I am sorry for the Greeks – I deplore the fate of the Jews; the people of the Sandwich Islands are groaning under the most detestable tyranny; Baghdad is oppressed, I do not like the present state of the Delta; Tibet is not comfortable. Am I to fight for all these people?
The world is bursting with sin and sorrow. Am I to be champion of the Decalogue, and to be eternally raising fleets and armies to make all men good and happy?
We have just done saving Europe, and I am afraid the consequence will be, that we shall cut each other’s throats. No war, dear Lady Grey! – No eloquence; but apathy, selfishness, common sense, arithmetic!”
Living in the 70s – the BBC documentary Electric Dreams
16 Mar 2014 2 Comments
in economics, liberalism, technological progress Tags: 1970s, Brad De Long, technological progress, the good old days
I grew up in the 70s. But were they the ‘good old days’?
A BBC television documentary placed two parents and four children in their home with only the amenities available during each of the previous three decades (1970s, 1980s and 1990s) and recording their responses to technological change.
The programme follows the family’s adaption and reaction to being thrown back in time to a more technologically sparse period and how their pastimes and attitudes change in response to both landing in the early 1970s and coming up-to-date.
The episodes revealed the huge transformation that technological change has wrought on British family life over the past 40 years. The children have to cope when they swapped Facebook for black-and-white telly and vinyl records.
It was goodbye to their three game consoles, three DVD players, five mobile phones, six televisions and seven computers, not to mention their dishwasher, two washing machines and tumble dryer. The teenager had to do a pre-dawn paper boy run.
Filming occurred over the winter of 2009, which was particularly cold and snowy for England, a fact which figured into the story when the family had to endure cold nights early in the project. The lack of central heating was simulated for the 70s episode.
How much would you pay to go back to the 1970s or whenever you define as the good old days?
A way to grasp the conceptual difficulties of measuring changes in living standards and life expectancies across the decades is to step into Brad De Long’s time machine.
In this thought experiment, De Long asks how much you would want in additional income to agree to go back in time to a specific year. De Long was an economic historian examining the differences in American living standards since 1990.
De Long would have refused to go at all to 1900 unless he could at least have taken mid-20th century modern medicine with him. Otherwise, it would have meant dying from a childhood phenomena. I would have probably died from appendicitis if I was a teenager in 1900. Instead, I spent 10 days in hospital in the 1970s.
The economics of the Dallas Buyers Club
15 Mar 2014 Leave a comment
in liberalism, politics - Australia, politics - USA, Public Choice, regulation Tags: AIDS, AZT, Dallas Buyers Club, David Friedman, drug lags, FDA, Matthew McConaughy, Sam Peltzman
Deciding if a new drug is safe is a serious issue. Separate to this is whether the drug is better than existing drugs.
In 1962, an amended law gave the FDA authority to judge if a new drug produced the results for which it had been developed. Formerly, the FDA monitored only drug safety. It previously had only sixty days to decide this. Drug trials can now take up to 10 years.
Who cares if a safe drug works or not? If a new drug does not work or is no better than the existing drugs on the market, the investors in the development of the new drug bear the (unrecoverable) development costs. Capitalism is a profit AND loss system. Losses are a signal that you should try something else.
Sam Peltzman showed in a famous paper in 1973 that these 1962 amendments reduced the introduction of effective new drugs in the USA from an average of forty-three annually in the decade before the 1962 amendments to sixteen annually in the ten years afterwards. No increase in drug safety was identified.
Drugs became available years after they were on the market outside the USA. To quote David Friedman:
“In 1981… the FDA published a press release confessing to mass murder. That was not, of course, the way in which the release was worded; it was simply an announcement that the FDA had approved the use of timolol, a ß-blocker, to prevent recurrences of heart attacks.
At the time timolol was approved, ß-blockers had been widely used outside the U.S. for over ten years.
It was estimated that the use of timolol would save from seven thousand to ten thousand lives a year in the U.S. So the FDA, by forbidding the use of ß-blockers before 1981, was responsible for something close to a hundred thousand unnecessary deaths.”
AZT double-blind trials collapsed in the mid-1980s in the USA because participants sold the drug in the black market.
If memory serves right, Australian drug regulators planned to duplicate these double-blind trials in Australia before approving the drug. Last time I checked, the physiology of Australians was the same as any other human being. What did they plan to find that justified the delay in approving AZT?
The duplicate double-blind AZT trials in Australia were abandoned not because they were mad and evil, but because again the participants sold the drug in the black market. That was to be expected too so the duplicate double-blind AZT trials in Australia in the 1980s were a double evil.
Free Speech for Me – But Not for Thee
15 Mar 2014 Leave a comment
in liberalism Tags: culture wars, free speech, hate speech laws, Nat Hentoff, political correctness
Nat Hentoff wrote a nice book in 1992; Free Speech for Me–But Not for Thee: How the American Left and Right Relentlessly Censor Each Other. It was about those from the right and the left who would suppress the rights of individuals to voice opposing viewpoints.
Hentoff deals with traditional censors–religious fundamentalists and political right-wingers–but does not neglect the new ones, e.g. feminists who tried to prevent a pro-life women’s group from participating in Yale University’s Women’s Center.
Hentoff discusses everything from college campuses preventing non-politically correct subjects from being discussed to censorship he faced while writing his columns. Then there were hate-speech ordinances, speech codes on campus, flag-burning amendments to the Constitution, and feminist-Moral Majority coalitions to ban pornography.
A group of librarians in New York suggested that the following label be put on particular books in school libraries, as needed: “WARNING: It has been determined that these materials are sex-stereotyped and may limit your sense of freedom and choice”.
He especially criticizes “civil libertarians” who use the First Amendment as protection of things they like and then ignore it when trying to ban what they hate (racist writing, sexual harassment, etc.). Voltaire would be turning in his grave.
Rather than set up left-wing straw men to knock down, Hentoff details stories of how the Left censors, while acknowledging that the Right censors. Since conservatives admit their intentions, they are not as dangerous as the duplicitous people on the Left.
Free speech has been on balance an ally of those seeking change. Change in any complex system ultimately depends on the ability of outsiders to challenge accepted views and reigning institutions. Without a strong guarantee of freedom of speech, there is no effective right to challenge the status quo.
British Columbia has an extremely broad hate speech law that prohibits the publication of any statement that “indicates” discrimination or is “likely” to expose a person or group or class of persons to hatred or contempt.
Professor Sunera Thobani of the University of British Columbia faced a hate crimes investigation after she delivered a vicious diatribe against American foreign policy. Thobani, a Marxist feminist and multiculturalist activist, remarked that Americans are “bloodthirsty, vengeful and calling for blood”.
The Canadian hate-crimes law was created to protect minority groups from hate speech. But in this case, it was invoked to protect Americans. Priceless.
Meddlesome preferences or ban smoking, but keep your hands of my dope
14 Mar 2014 3 Comments
in liberalism, Public Choice Tags: meddlesome preferences, political correctness
I was having a conversation in the pub about social control of private behaviours that harmed no one else.
James Buchanan captures the essence of this mind-set with his phrase “meddlesome preferences”, whereby:
“the elitist, who somehow thinks that his or her own preferences are ‘superior to,’ ‘better than, ‘ or ‘more correct’ than those of other[s], tries to control the behaviour of everyone else, while holding fast to his or her own liberty to do as he or she pleases.”
Much of the culture war over political correctness is about resentment that the other side has had a chance to enact into law their meddlesome preferences when they were last in government.
From “Politics and Meddlesome Preferences”, in volume 13 of the Collected Works of James Buchanan:
Consider the following politically orchestrated regulations:
- Prohibition on private leaf burning.
- Prohibition of the possession of handguns.
- Prohibition of the sale or use of alcoholic beverages.
- Prohibition of smoking in public places or places of business.
- Prohibition on driving or riding in an automobile without fastening seat belts.
- Prohibition on driving or riding on a motorcycle without wearing crash helmets.
It seems quite possible that at least in some political jurisdictions, a majority of voters might be found to support at some time or another in the past each and every one of the six activities above.
In a democracy, politicians respond to the electorate, and electoral majorities may, in a piecemeal fashion, close off one liberty after another. The political process may well work so as to make each and every person in the relevant community worse off with enactment and enforcement of all of the prohibitions listed than he or she would be if none of the prohibitions were enacted.
To add to Buchanan, the progressive left preaches deference to government – reverence for experts and the need to protect society from itself – and the right of democratic majorities, guided by elite experts, to govern very much as they see fit, as long as they do not interfere with their stash of dope and sexual privacy. Free choice for me, but not for thee!
The conservative Right has its own taboos and plenty of meddlesome preferences but is stout in the defence of religious freedom (for Christians and Jews at least).
The powers of government should be limited to the power you would give to those crazies and busy-bodies to the Left or Right of you when they next get their turn in power, as always will happen in 3, 6 or 9 years’ time or so.
Utopia, you are standing in it! 
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