Markets work better than most people (including economists) think:

The resistance of southern streetcar companies to ordinances requiring them to segregate black passengers vividly illustrates how the market motivates businesses to avoid unfair discrimination. Before the segregation laws were enacted, most streetcar companies voluntarily segregated tobacco users, not black people. Nonsmokers of either race were free to ride where they wished, but smokers were relegated to the rear of the car or to the outside platform. The revenue gains from pleased nonsmokers apparently outweighed any losses from disgruntled smokers.

Streetcar companies refused, however, to discriminate against black people because separate cars would have reduced their profits. They resisted even after the passage of turn-of-the-century laws requiring the segregation of black people. One railroad manager complained that racial discrimination increased costs because it required the company to “haul around a good deal of empty space that is assigned to the colored people and not available to both races.” Racial discrimination also upset some paying customers. Black customers boycotted the streetcar lines and formed competing hack (horsedrawn carriage) companies, and many white customers refused to move to the white section.

In Augusta, Savannah, Atlanta, Mobile, and Jacksonville, streetcar companies responded by refusing to enforce segregation laws for as long as fifteen years after their passage. The Memphis Street Railway “contested bitterly,” and the Houston Electric Railway petitioned the Houston City Council for repeal. A black attorney leading a court battle against the laws provided an ironic measure of the strength of the streetcar companies’ resistance by publicly denying that his group “was in cahoots with the railroad lines in Jacksonville.” As pressure from the government grew, however, the cost of defiance began to outweigh the market penalty on profits. One by one, the streetcar companies succumbed, and the United States stumbled further into the infamous morass of racial segregation.

Bryan Caplan is right on target again:

Rand Paul is in the news for expressing (and then apparently recanting) what I’ve long seen as the standard libertarian view of civil rights legislation:

1. Government discrimination should be illegal.
2. Private discrimination should be legal.
3. Private discrimination is immoral.

In striking contrast, in his speech at the Cato Intern Alumni Reunion, Cato veep David Boaz seemed to say that the civil rights movement was one of the libertarian highlights of the Sixties.  This doesn’t mean, of course, that Boaz thought that everything about the civil rights movement was libertarian.  But unless my memory fails me, he didn’t qualify his praise.

It would be convenient for libertarians if the civil rights movement were indeed broadly libertarian.  But frankly, the glove doesn’t fit.  Like all decent people, libertarians can identify with the civil rights movement’s pleas for meritocracy and against blind hatred.  Libertarians can also embrace the Montgomery Bus Boycott and other resistance to state-sponsored discrimination - and point out that libertarians opposed pro-discrimination laws from the start.

But that’s about as far as the commonality goes.  Unlike libertarianism, the civil rights movement rarely distinguished between state and private discrimination - and even more rarely distinguished between discrimination and unequal outcomes.  By 1963, when Martin Luther King gave his "I Have a Dream Speech," his program already contained plenty for libertarians to oppose.  He called for "an end to racial segregation in public school [libertarian]; meaningful civil rights legislation, including a law prohibiting racial discrimination in employment [libertarian for government employment, not libertarian otherwise]; protection of civil rights workers from police brutality [libertarian]; a $2 minimum wage for all workers [not libertarian]; and self-government for Washington, D.C. [unclear]..."  By his 1968 Poor People’s Campaign, King was calling for the openly redistributive "second phase" of civil rights.  Of course, MLK wasn’t the only civil rights leader, but as far as I can tell, the most common internal complaint was that he was too moderate.

Overall, I see the civil rights movement much as I see the Protestant Reformation.  Both attacked blatant injustices, many of them government-imposed.  But the thrust of the Protestant Reformation wasn’t separation of church and state.  It was state-mandated Protestantism.  Similarly, the thrust of the civil rights movement wasn’t separation of race and state.  It was state-mandated group equality of result.  Whether they’re quoting Martin Luther or Martin Luther King, libertarians shouldn’t forget these facts.

...are winning:

(I)t becomes easier every day for me to find freely-shared copies of just about any song I could care to hear, or to find any number of supposedly copyrighted essays, available for free on the web, or to find any movie I could care to watch, whether it’s an old classic from the film-monopolist’s vaults, or a new release that just hit theaters. And because so much is so freely available, even officially-sanctified copies of copyrighted material are being dropped in price (typically below US $1.00 a pop) and DRM user-control schemes are being dropped one after another.

(...) the practical situation on the ground is remarkably good, and it’s getting better every day. Of course, things are far from perfect. Of course, lots of copyright-holders are still looking for a fight with people trying to exchange ideas without paying a premium for a license. And of course, the legal situation is such that they can get pretty nasty.

(...)

Why despair, or even care about the legal situation at all, if the practical situation makes the law irrelevant? A law that cannot be enforced is as good as a a law that has been repealed, and that is where we’re headed, faster and faster every day, when it comes to the intellectual monopolists and their jealously guarded legal privileges.

Timo:

Krugman is simply dogmatic when he claims that Japan’s policy of massive deficits failed because the deficits were not large enough(!). What if someone wrote that the deregulation of the American financial markets did not work just because they did not go far enough? Would Krugman accept this line of reasoning?

From Super-Economy:

In 1979, when Margaret Thatcher became prime minister, out of the 4 major European countries, the United Kingdom was the poorest. It had a lower gdp per capita than Germany, France and Italy.

But the U.K subsequently grew faster than the other European countries. By 2008, the latest available year, the U.K was the richest out of the 4.

White the U.K in per capita terms was 7% poorer than France in 1979, it was 10% richer than France in 2008.

This graph shows real per capita GDP (from OECD) for the U.K, and a population weighted average of the other 3 major west European nations: Germany, France and Italy. As you see they start of richer than the U.K in 1979, but by the end of the period the U.K is richer than the average (and richer than any individual country).

It will be interesting to see if this advantage is maintained after the crisis.

There was need for an "unprecedented" housing boom to turn CDO’s into weapons of mass destruction. The verdict of the "market" on CDO’s before 2005 was negative:

Using the anecdotal and empirical evidence presented in this paper, I offer the following interpretation of the CDO market meltdown. CDOs were flawed from the outset, used too often as a junkyard for risky and substandard assets. CDOs survived because of changes in the credit markets that produced an excess quantity of these assets and herds of investors hungry for higher yields. The first CDO underwriters entered the market before the peak of the credit boom, and many of their CDOs performed poorly.

For instance, JP Morgan’s CDOs, 80% of which were issued before 2005, showed the greatest underperformance among the top CDO underwriters. However, JP Morgan virtually exited the CDO market in 2005, possibly disheartened by its first failed creations. In contrast, for banks that discovered CDOs post-2005, the situation was markedly different. The U.S. was experiencing an unprecedented housing boom, kindling the belief that home prices would rise indefinitely, a belief which in turn incited the creation of previously unimaginable types of high-yielding mortgage loans. These new mortgages provided the perfect raw material for CDOs, intoxicating underwriters and rating agencies with record profits.

In terms of liberty there is no difference:

The so-called prohibitory liquor law prohibits no man, even theoretically, from indulging his desire to sell liquor; it simply subjects the man so indulging to fine and imprisonment. The tax imposed by the tariff law and the fine imposed by the prohibitory law share alike the nature of a penalty, and are equally invasive of liberty.

The FT’s Lex spell’s out the fundamental flaws:

The first is the unquestioning belief – naturally inherent in legislators – that more oversight is better. The bill is littered with new authorities, agencies and councils. But the truth is that the global financial system was already scrutinised by hundreds of governments, regulators and central banks, not to mention private rating agencies, consultancies and analysts. None of them spotted trouble last time – neither will this new lot next time.

Punishing the innocent is the bill’s second flaw. It is a real mystery why proprietary trading, private equity and hedge funds emerged as baddies. They had absolutely nothing to do with the financial crisis, and indeed performed pretty well over the period. Nor did mortgage-related structured derivatives blow up because they were traded “off exchange”. They exploded because house prices dropped.

The final flaw is that the real problems have not been addressed. In order of importance: banks remain woefully undercapitalised; no one really believes the biggest lenders will be allowed to fail; there are inherent distortions in the system such as government-insured deposit-capital; Wall Street and Washington remain bedfellows. This legislation guarantees plenty of paperwork and desk shuffling, but the next crisis is already germinating undetected somewhere.

With help from his little friends:

But his personal priority - and the corporate aim of Synthetic Genomics, the company he co-founded in California - is to transform the production of biofuels and at the same time tackle the causes of global warming. Synthetic Genomics is the main funder of research at the non-profit J. Craig Venter Institute.

Dr Venter wants to design synthetic algae that capture carbon dioxide from the air and produce hydrocarbon fuels with the same chemical composition as the petrol and diesel that are refined today from crude oil.

The company reached a $600m agreement with ExxonMobil last summer to make algal biofuels - and Dr Venter says synthetic organisms are the only way to go. "We have looked hard at natural algae and we can’t find one that can make the fuels we want on the scales we need."

Although algae are more complex organisms than bacteria, he says the leap from making a bacterial genome with 1m chemical letters to an algal genome twice as large is achievable.

From the Financial Times:

Historically, bans have come and gone since 1609, when the Dutch East India Company complained about short sellers - just seven years after it became the first listed company. Like others, the Dutch ban was eventually lifted, once authorities realised that short sellers help to grease the wheels of the market.

Finance theory sets out a clear role for short sellers. The price of shares is set by those who trade in them, with buyers pushing up the price and sellers pushing it down; the more people trade, the more views are reflected in the price. If there is no shorting, the price is set by investors who already own the shares, if they sell, and by those who buy. By allowing short selling, those who wish to sell but do not own the shares can also sell. The resulting price should be more accurate, as it now includes more views.

Finance history also shows the role of short sellers. In 1931, a two-day ban on shorting by the New York Stock Exchange - under pressure from Hoover - led to a brief rally as holders of short positions were forced to buy them back, a process known as a "short squeeze".

Again, in 1932, restrictions on lending shares led to a brief respite for the Dow Jones Industrial Average. Both times, shares continued to plunge, losing more than half their value in less than six months in 1932.

By 2008, little had changed. A week after Lehman’s collapse, regulators around the world banned short selling of banks and insurers (the eclectic US ban also protected Ford, General Electric and, ironically, hedge fund GLG Partners). UK bank shares responded even faster than they had 77 years earlier, jumping 21 per cent on the day. But, just as before, banning short sellers did not stop holders of the shares from dumping them.

British banks eventually bottomed out six months later, down 70 per cent; US-protected stocks also tanked. The ban did not save bank shares. But it did dry up liquidity, making trading more expensive as bid-offer spreads widened.

He almost sounds like a libertarian:

As we tear through the statute book, we’ll do something no government ever has: We will ask you which laws you think should go.

Because thousands of criminal offences were created under the previous government. Taking people’s freedom away didn’t make our streets safe.

Obsessive law-making simply makes criminals out of ordinary people.

So, we’ll get rid of the unnecessary laws - and once they’re gone, they won’t come back. We will introduce a mechanism to block pointless new criminal offences.

Herbert Spencer:

The great political superstition of the past was the divine right of kings. The great political superstition of the present is the divine right of parlaiments.

From The Man versus the State

Yes, we can:

Did you for instance know this?

Think the American social safety net is stingy and full of holes compared to Europe’s? Think again. University of Arizona economist Price Fishback has a new paper out from the National Bureau of Economic Research headlined, "Social Welfare Expenditures in the United States and the Nordic Countries, 1900-2003." From the abstract: "The common view that America spends much less on social welfare than the Nordic countries does not survive closer inspection....Per capita net public social expenditures in the U.S. rank behind only Sweden. Add in the private spending, and per capita spending in the U.S. is higher than in all of the Nordic countries."

Jeffrey Miron is the voice of sanity:

The first is allowing more legal immigration. This point is obvious but worth emphasizing. The United States has an illegal immigration problem because it restricts legal immigration. So long as large wage differences persist between the U.S. and other countries, especially Latin America, the desire to immigrate will persist and occur illegally if it is not permitted legally.

Legal migration, moreover, is good for America and rest of the world. Immigration allows people in poor countries to seek a better life here, bringing ideas and energy with them, and it shows the world that many people still regard America as the land of opportunity. Many immigrants are far poorer than the poorest Americans, so helping them makes far more sense than operating a generous welfare state.

Restrictions on immigration are also costly, since they create black markets, generate violence, and spawn corruption. Fences and borders patrols are expensive, and they do not seem to reduce the flow of illegal immigrants. So any attempt to reduce illegal immigration should eschew enhanced enforcement and instead increase legal immigration.

The second way to reduce illegal immigration is to expand free trade. If goods can move freely across countries, the demand for low-skill labor will shift from the United States to poorer countries, raising wages there relative to here and reducing the incentive to immigrate. NAFTA and CAFTA, while steps in the right direction, still contain substantial impediments to trade between the U.S., Mexico, and Central America, and broader free trade agreements with South America do not yet exist. Since free trade makes sense independent of immigration concerns, this policy change is a no-brainer.

A more controversial way to shrink illegal immigration is de-escalate the war on drugs. Many Latin American economies are dysfunctional in part because of the corruption and violence that the war on drugs generates, and residents of those countries cross the U.S. border in part to escape that violence. Full legalization would be the most effective response, but even a major reduction in enforcement would shrink the violence significantly. Mexico’s drug trade has been violent for decades, but the explosion in deaths resulted from Felipe Calderon’s misguided escalation beginning in late 2006.

A further policy that might reduce immigration is scaling back the U.S. welfare state, although the impact of any such change is unclear. Despite common perceptions, immigrants do not make especially high use of the social safety net or migrate mainly to collect these benefits; most come to the United States seeking work. If immigration were substantially more open, however, large-scale migration in response to generous benefits would plausibly increase. So it makes sense to either reduce that generosity or condition benefits on legal residence for a significant number of years.

The conclusion from this paper:

Under reasonable conditions, we find that piracy may lower superstars’ incentives to spend on promotion, which makes entry and survival by niche and young artists easier. As a consequence, the number of artists and therefore artistic diversity may increase. Moreover, talented artists can only be sorted by the market after a period in the long tail as a young artist. Therefore, by giving more market opportunities to young and niche artists, piracy may also enhance high quality creation in the long run. It follows that it cannot be taken for granted that copy levies recently implemented in many Western countries, whose revenues are mostly allocated in proportion to sales, will favor artistic creation. These levies on copy equipment and other possible restrictive policies may reinforce the already strong market position of top artists.

(...)

The reason is that stronger copyright protection may provide too many incentives for superstar business, thereby choking the development of new artistic careers that are the long run source of ideas.

(...)

During the last century, technological progress in communication and recording devices (such as radio, TV, records, tapes, etc.) greatly concentrated some artistic markets in favor of fewer top artists who obtained increasingly larger revenues. This process may not be over, as some recent changes in the economic and political environment are facilitating the globalization of culture, thereby increasing cultural uniformity and favoring further concentration. However, new communication and copy technologies may have a counterbalancing effect. Borrowing Tom Friedman’s (2005) metaphor, new communication and copy technologies are flattening the artistic market by leveling it in favor of the long tail of young and niche artists. Governments should make sure that policies intended to favor artistic creation do not hinder this process.

..maar het gaat in de goede richting. Dank u, Frits:

In het kader van de ‘brede heroverwegingen’ hebben ambtelijke werkgroepen onderzocht hoe de rijksoverheid zo’n 30 miljard euro kan bezuinigen. Alle onderzochte opties doen pijn. Maar er is één optie die een weldadige opluchting zou zijn: regulering van drugs. Onder regulering van drugs verstaan wij het toestaan van productie en verkoop onder voorwaarden, gericht op een zo gering en veilig mogelijk gebruik.

Regulering is echter een kolossaal taboe, en hoewel het kabinet had verklaard dat voor de heroverwegingen geen taboes zouden gelden, heeft de desbetreffende werkgroep ‘veiligheid’ zijn vingers er nauwelijks aan durven branden. Hij heeft alleen gekeken naar regulering van softdrugs. Dat zou, met allerlei slagen om de arm, wellicht 183 miljoen euro aan uitgaven voor politie, justitie en bestuur besparen, en 260 miljoen euro aan belasting opleveren. Over de andere drugs zwijgt men.

Al ruim veertig jaar zijn drugs verboden. Maar het gebruik is groter dan ooit en niets wijst er op dat het verbod werkt. Wél staat als een paal boven water dat het verbod schade veroorzaakt. De ongehoorde omvang daarvan dringt echter nauwelijks tot de publieke opinie door. Minstens de helft van alle criminaliteit in ons land is er direct of indirect het gevolg ervan.

De meest recente gegevens van Justitie melden: „Tussen de 27 en 33 procent van de detentiejaren is opgelegd wegens een opiumwetdelict.” En: „In 2006 is driekwart van de ruim 300 onderzoeken naar ernstige vormen van georganiseerde criminaliteit gericht op de handel in of productie van drugs.” (WODC- Nationale Drugsmonitor, Jaarbericht 2007.) Deze cijfers geven alleen de directe opiumwetdelicten weer. Denk aan dealers en runners, veelplegers, cannabiskweek in woonhuizen en loodsen, bolletjesslikkers, xtc-labs en uit- en doorvoer. Erbovenop komt indirecte criminaliteit: omkoping, bedreiging, corruptie, witwassen, aantasting van sectoren als vastgoed, afrekeningen tussen drugsbenden, gebruik van drugsgeld voor illegale wapenhandel. En dan zwijgen we nog maar over de internationale gevolgen, waaronder de ontwrichting van hele landen.

Deze – ook letterlijk – ongehoorde feiten zijn de grote afwezige in het drugsdebat. En, even verbijsterend, in het debat over veiligheid. Iedereen die zich zorgen maakt over veiligheid zou zich moeten afvragen of er geen alternatief is voor het drugsverbod. Het verbazingwekkende is echter dat juist crimefighters verbeten vasthouden aan het verbod. Beseffen zij niet dat ze zich tot steunpilaren van de drugsmaffia maken?

Kan het beter? Zeker, en dat is bewezen. Het dertigjarige experiment met de verkoop van cannabis via coffeeshops is uniek. Regulering van deze drug heeft niet geleid tot meer gebruik, noch van cannabis noch van andere drugs. Gebruik en verslaving van soft- en harddrugs liggen in Nederland op of onder het Europese gemiddelde. Heel wat lager dan in meer repressieve landen als Frankrijk, Engeland en de VS. Ook hebben de coffeeshops bereikt dat honderdduizenden cannabisconsumenten geen strafblad hebben gekregen, geen intrekking van hun rijbewijs of erger, zoals elders.

Het verbod blijkt dus niet nódig. We kunnen deze uitzonderlijke maatregel om burgers tegen zichzelf te beschermen afschaffen. Regulering wérkt.

Bij deze gigadoorbraak verbleken de problemen rond regulering. Zoals bij coffeeshops: overlast in grensstreken. Die is door Venlo effectief opgelost door verplaatsing van enkele coffeeshops naar buiten de bebouwde kom, vlakbij de grens.

Om de coffeeshops volledig uit de criminaliteit te halen moet de kweek van cannabis gereguleerd worden. Gemeenten staan ervoor in de rij. Al twee keer is een motie van die strekking in de Tweede Kamer aangenomen. Voor de overige drugs dienen, voorzichtig maar vastberaden, proefprojecten te worden opgestart met regulering. Het gaat hierbij met name om cocaïne, xtc, amfetamine en heroïne. Voorstellen daartoe liggen klaar.

Staan de drugsverdragen in de weg? Nee. Juridisch is goed te beargumenteren dat ze regulering toestaan. Maar het eenvoudigste is, regulering net zoals bij de coffeeshops in te voeren via het opportuniteitsprincipe: niet-vervolgen als gestelde voorwaarden in acht zijn genomen. Ons land heeft zich dit recht altijd voorbehouden.

Tegenstand vanuit het buitenland dan? Bij beperking van de proefprojecten tot Nederlandse ingezetenen valt geen onoverkomelijke Europese weerstand te vrezen. Met bekwaam diplomatiek handwerk kan juist interesse worden gewekt. Overal heeft men immers dezelfde problemen. President Obama heeft verklaard dat hij het drugsbeleid zal stoelen op zakelijke, niet op ideologische basis. Het internationale politieke getij oogt zeldzaam gunstig.

Zodra de binnenlandse drugsmarkt is gereguleerd, is er voor drugsbendes geen droog brood meer aan te verdienen. . De samenleving wordt substantieel veiliger. En krijgt substantiële besparingen in de schoot geworpen. Het WODC berekende de totale kosten van de criminaliteit in 2006 op 31,5 miljard euro. De misdaad die het drugsverbod veroorzaakt kost de samenleving minstens de helft, 15,75 miljard euro, dat wil zeggen aan elke Nederlander 924 euro per jaar. De kosten van rechtshandhaving van het drugsverbod bedroegen volgens prof. Rigter (Erasmus Universiteit) over 2003 1,6 miljard euro. Daar bovenop komen dan nog de indirecte handhavingskosten. Bovendien wordt belasting op drugs geheven. Drugsregulering biedt dus een formidabele kans voor lastenverlichting.

Ook is de volksgezondheid ermee gediend. Door het wegvallen van de zwarte markt is met name de jeugd veel beter beschermd. De kwaliteit van de drugs is gewaarborgd, ze zijn voorzien van bijsluiters, en voorlichting wordt geloofwaardig.

Drugs laten zich niet wég-verbieden, ze zullen er altijd zijn. Een minderheid van de gebruikers zal erdoor in de problemen raken. De gevaren van drugs zijn echter véél kleiner dan die van alcohol en tabak: ons land kent dertien keer meer alcoholisten, vijftien keer meer alcoholdoden en 333 keer meer tabaksdoden. Maar juist omdat drugs gezondheidsrisico’s meebrengen, is regulering noodzakelijk. De drugscriminaliteit kunnen we echter missen.

The search for investment opportunities was not the cause of imperialism:

Was the Hobsonian-Leninist analysis of international capitalism a true picture either then or now? Has the struggle for overseas investments ever been the mainspring of international politics?

The export of capital was certainly a striking feature of British economic life in the fifty years before 1914.  But its greatest periods were before and after the time of ostensible Imperialism. What is more, there was little correspondence between the areas of capitalist investment and political annexation. Hobson cheats on this, and Lenin after him. They show, in one table, that there has been a great increase in British investments overseas; in another that there has been a great increase in the territory of the British Empire. Therefore, they say, the one caused the other. But did it?  Might not both have been independent products of British confidence and strength? If openings for investment were motive of British Imperialism, we should surely find evidence for this in the speeches of British imperialists, or, if not in their public statements, at any rate in their private letters and opinions. We don’t. They talked, no doubt quite mistakenly, about securing new markets and even more mistakenly, about new openings for emigration; they regarded investment as a casual instrument. Their measuring-stick was Power, not Profit. When they disputed over tropical African territory or scrambled for railway concessions in China, their aim was to strengthen their respective empires, not to benefit the financiers of the City. Hobson showed that Imperialism did not pay the nation. With longer experience, we can even say that it does not pay the investors. But the proof, even if convincing, would not have deterred the advocates of Imperialism. They were thinking in different terms.

(...)

(T)he capitalist may be sometimes corrupted and softened by his wealth; the Soviet dictators have nothing to wear them down. If the evils which Hobson and Brailsford discovered in capitalism had been in fact the greatest of public vices, we should now be living in an easier world. It is the high-minded and inspired, the missionaries not the capitalists, who cause most of the trouble. Worst of all the men of Power who are missionaries as well.

Herbert Spencer on colonies:

(H)istory presents us with proof that whilst government colonization is accompanied by endless miseries and abominations, colonization naturally carried on is free from these. Notwithstanding the misconduct he is accused of, to William Penn belongs the honour of having shown men that the kindness, justice, and truth of its inhabitants, are better safeguards to a colony than troops and fortifications and the bravery of governors. In all points Pennsylvania illustrates the equitable, as contrasted with the inequitable, mode of colonizing. It was founded not by the state, but by private individuals. It needed no mother-country protection, for it committed no breaches of the moral law. Its treaty with the Indians, described as “the only one ever concluded which was not ratified by an oath, and the only one that was never broken,” served it in better stead than any garrison. For the seventy years during which the Quakers retained the chief power, it enjoyed an immunity from that border warfare, with its concomitant losses, and fears, and bloodshed, to which other settlements were subject. On the other hand, its people maintained a friendly and mutually-beneficial intercourse with the natives; and, as a natural consequence of complete security, made unusually rapid progress in material prosperity.

That a like policy would have been similarly advantageous in other cases, may reasonably be inferred. No one can doubt, for instance, that had the East India Company been denied military aid and state-conferred privileges, both its own affairs, and the affairs of Hindostan, would have been in a far better condition than they now are. In sane longing for empire would never have burdened the Company with the enormous debt which at present paralyzes it. The energy that has been expended in aggressive wars would have been employed in developing the resources of the country. Unenervated by monopolies, trade would have been much more successful. The native rulers, influenced by a superior race on friendly terms with them, would have facilitated improvements; and we should not have seen, as now, rivers unnavigated, roads not bridged or metalled, and the proved capabilities of the soil neglected. Private enterprise would long ago have opened up these sources of wealth, as in fact it is at length doing, in spite of the discouragements thrown in its way by conquest-loving authorities. And had the settlers thus turned their attention wholly to the development of commerce, and conducted themselves peaceably, as their defenceless state would have compelled them to do, England would have been better supplied with raw materials, the markets for her goods would have enlarged, and something appreciable towards the civilization of the East would have been accomplished.

This is why I like the United States (at least the people):

During the Clinton years the country edged left on issues of private autonomy (sex, divorce, casual drug use) while continuing to move right on economic autonomy (individual initiative, free markets, deregulation). (...) Americans saw “no contradiction in holding down day jobs in the unfettered global marketplace…and spending weekends immersed in a moral and cultural universe shaped by the Sixties.” Democrats were day-trading, Republicans were divorcing. We were all individualists now.

(...)

Many Americans, a vocal and varied segment of the public at large, have now convinced themselves that educated elites—politicians, bureaucrats, reporters, but also doctors, scientists, even schoolteachers—are controlling our lives. And they want them to stop. They say they are tired of being told what counts as news or what they should think about global warming; tired of being told what their children should be taught, how much of their paychecks they get to keep, whether to insure themselves, which medicines they can have, where they can build their homes, which guns they can buy, when they have to wear seatbelts and helmets, whether they can talk on the phone while driving, which foods they can eat, how much soda they can drink…the list is long. But it is not a list of political grievances in the conventional sense.

Historically, populist movements use the rhetoric of class solidarity to seize political power so that “the people” can exercise it for their common benefit. American populist rhetoric does something altogether different today. It fires up emotions by appealing to individual opinion, individual autonomy, and individual choice, all in the service of neutralizing, not using, political power. It gives voice to those who feel they are being bullied, but this voice has only one, Garbo-like thing to say: I want to be left alone.

(...)

If we want to understand what today’s populism is about, we first need to understand what it isn’t about. It certainly is not about reversing the cultural revolution of the Sixties. Despite the rightward drift of the Republican Party over the past decade, the budding liberal consensus on social issues I noted in the Nineties has steadily grown—with the one, complicated exception of abortion.

Consider the following:

• Since 2001 the proportion of those favoring more religious influence in society has dropped by a fifth, while those wanting less influence rose by half.³

• Today a majority of Americans find single parenthood morally acceptable, and nearly three quarters now tolerate divorce.⁴ Roughly a third of adults who have ever been married have also been divorced at least once, and that includes born-again Christians, whose rate is roughly the national average.⁵

• Though opposition to gay marriage has declined over the past quarter-century, a majority still opposes it. Yet more than half of all Americans find homosexuality morally acceptable, and a large majority favors equal employment opportunities for gays and lesbians, health and other benefits for their domestic partners, and letting them serve in the military. A smaller majority now approves of letting them legally adopt children as well.⁶

Though there’s been a slight conservative retrenchment since the 2008 election, it’s clear that the Sixties principle of private autonomy is rooted in the American mind.

And so is the Eighties principle of economic autonomy. For three decades now a consistent majority of Americans has agreed with the following statements when asked: “when something is run by the government, it is usually inefficient and wasteful,” “the federal government controls too much of our daily lives,” “government regulation of business usually does more harm than good,” and “poor people have become too dependent on government assistance programs.”

No wonder most academics are anti-market:

The fact is that most academics simply aren’t that important. In a free society, there would be far fewer of them than there are today. Their public visibility would no doubt be quite low. Most would be poorly paid. Though some would be engaged in scholarly research, the vast majority would be teachers. Their job would be to pass the collective wisdom of the ages along to the next generation. In all likelihood, there would also be far fewer students. Some students would attend traditional colleges and universities, but many more students would attend technical and vocational schools, where their instructors would be men and women with practical knowledge.

Today, many professors at major research universities do little teaching. Their primary activity is research, though much of that is questionable as real scholarship. One needs only to browse through the latest specialty journals to see what passes for scholarly research in most disciplines. In the humanities and social sciences, it is likely to be postmodern gobbledygook; in the professional schools, vocationally oriented technical reports. Much of this research is funded in the United States by government agencies, such as the National Science Foundation, National Institutes of Health, the National Endowment for the Humanities, the USDA, and others. The large universities have tens of thousands of students, themselves supported by government-subsidized loans and grants.

Karl Otto Pöhl geeft mij gelijk:

Karl Otto Pöhl, voormalig topman van de Duitse centrale bank, heeft het omvangrijke reddingspakket voor de zwakke eurolanden bestempeld als "ingaand tegen alle regels". "Er staat uitdrukkelijk in het verdrag over de werkwijze van de EU, dat geen land voor de schulden van een ander kan instaan", aldus Pöhl in Der Spiegel. "Wat we vandaag doen, is precies dat."
 
Bovendien houdt de Europese Centrale Bank (ECB) "zich nu ook met staatsfinanciering bezig, tegen alle beloftes en het uitdrukkelijke verbod in haar reglement in", aldus Pöhl.
 
Daarmee heeft de eurozone in zekere zin "een garantie gegeven voor een hele reeks zwakke munten, die niet hadden mogen opgaan in de euro". De euro is bijgevolg zelf in gevaar om een zwakke munt te worden, luidt het.
 
In het geval van de Griekse schuldencrisis hadden de Europese Commissie en de ECB volgens Pöhl vroeger moeten ingrijpen. "Ze hadden moeten inzien dat een klein onbeduidend landje als Griekenland, dat bovendien geen industriële basis heeft, nooit 300 miljard euro schulden zal kunnen terugbetalen."

Two, maybe even three, cheers for neoliberalism:

When I read liberal pundits, I often get the impression that they have no idea how much the neoliberal revolution has affected their worldview.  As you know, Krugman often argues that it was a sort of right-wing plot adopted by a racist Republican Party.  Many younger and fairly rational progressives have the view that “of course sensible liberals have always favored a market economy, we just don’t support laissez-faire capitalism.”  In fact, in the 1970s sensible liberals did not support a market economy, nor did sensible conservatives, nor did right-wing conservatives.  Here is John Gray on the 1979 Thatcher election manifesto:

Thatcher did not begin with the full-blown neoliberal policy agenda with which she was later identified. There was no mention of privatisation in the 1979 election manifesto, which focused on reining in inflation and limiting the power of trade unions.

In 1979 the British government owned many of the large manufacturing firms in industries like autos and steel.  Even a candidate as conservative as Thatcher dared not suggest that perhaps the government had better things to be doing than manufacturing cars.  (BTW, in Britain the election manifestos are taken much more seriously than in America.)  In the 1950s, Eisenhower presided over 90% income tax rates.  Until the late 1970s the US government set prices in many industries.

So it is not true that liberals have always believed communism is a bad idea, if by communism you mean an economic system where the government owns the major industries, sets prices, and has confiscatory tax rates on wealth.  Of course they never bought into the (totalitarian) communist political system, but they most certainly did buy into its economic system.  Samuelson’s textbook once predicted the Soviet living standards would surpass the US by 1990.  If true, shouldn’t we adopt a democratic form of socialism in America?

We’ve come a long way.  Right-wingers should not get too discouraged about the regulatory “reforms” being considered.  Of course the crackdown on derivatives will probably do more harm than good, but the key point is that the harm it does will be trivial compared to the harm done by policies in the 1970s that even conservatives bought into.

The reason everything changed after the mid-1970s is that most economies hit a brick wall around 1974.  And it wasn’t just the oil shock; most economies downshifted permanently into a much lower real GDP growth rate.   Italy went from around 7-8% growth to around 2-3% growth.  The more statist economies were often the ones that suffered the most.  This is important keep in mind, as those who aren’t old enough to remember this period might draw misleading conclusions from time series data.  For instance, here’s something I found in Tyler Cowen’s blog:

Stan Tsirulnikov forwards to me this very interesting paper (JSTOR, gated for many of you).  Here is an excerpt from the summary:

“For twenty years up to 1974, Greece enjoyed rapid growth, high investment and low inflation; during the next twenty years, growth and investment collapsed and inflation became high and persistent.”

After 1974, debt and deficits rose sharply as well, and later EU transfers helped postpone the necessary fiscal adjustments.  At this same time Greece was becoming more democratic, in part because the previous autocratic arrangements were collapsing.  The figure on p.150, representing the difference between the two periods, is a knockout.  And after 1974, the average rate of gdp growth goes from 7.1 percent to 2.1 percent.

In other words, the Greek economy slowed after 1974 pretty much as lots of other middle-income, statist, corrupt economies slowed after 1974.  Democracy may have played a role, but how would we know that?  After all, countries as diverse as Italy, Brazil and Japan also slowed sharply after 1974, and without any change in political system.  And note that Italy and Greece are both relatively statist and corrupt economies in southern Europe.

Of course there are a few economies that did not slow sharply, such as Chile, Britain, and America.  Those few countries bucked the tide of history, and kept growing just about as fast.  And how do progressives interpret that fact?  Well obviously the neoliberal policies of Pinochet, Thatcher, and Reagan (and yes Carter and Clinton) were a complete failure, after all, growth did not speed up.

A few countries even grew faster after 1974.  I hope I don’t need to explain what happened in China.

Counteractuals are tricky.  Without a plausible alternative timeline, a before and after comparison is nearly meaningless.  Growth in the Soviet Union slowed sharply after the 1960s, and then again after the 1970s and 1980s.  By 1992, when free market economic reforms first began, Russia was already in a deep depression.  What caused the depression?  Obviously economic reforms!  It doesn’t matter that the more aggressive Soviet bloc reformers did better than Russia.  It doesn’t matter that those slowest to reform (the Ukraine) did even worse.  Or that those communist countries than never reformed (North Korea) did even worse than that.  It must have been the reforms.

The 1970s were the turning point in modern history.  Statism was exposed as a flawed economic system.  The more idealistic countries like Denmark and New Zealand reformed most rapidly when new information showed that markets worked better than government.  You’ve heard me talk ad nauseum about Denmark, which is number one in all sorts of rankings, from free markets to happiness to equality to civic virtue.  But I actually looked at all 32 economies with per capita income above $20,000/year (i.e. as rich as Portugal.)  Interestingly, just as Denmark was number one in both markets and civic virtue, the same country placed dead last in both the free markets and civic virtue rankings.  And what is the country with both the lowest level of civic virtue and the least reformed statist economic system among 32 developed countries on four different continents?

You’ve probably guessed it by now . . . Greece.

Paul - big government - Krugman again misses the point:

Paul Krugman rightly notes the enormous regulatory failure that allowed BP to drill in the Gulf without an emergency plan to deal with a spill. However, he misses part of the story when describing the problem as one of anti-government sentiment.

The government actually played a big role in this spill. Congress passed a law following the Exxon-Valdez spill in 1991 that restricted the liability of oil companies in these incidents to $75 million. There are estimates that the damage from this spill to the fishing and tourism industry in the region could exceed $100 billion. Would BP be as anxious to drill recklessly if it knew that it could be picking up this tab?

The problem is not just a failure of the government to regulate. The problem was a government policy that effectively expropriated property rights from the people in the region and gave BP and other would be polluters the right to do damage without providing compensation.

Bryan Caplan writes:

I’ve been against bail-outs from the beginning.  So should have all economists.  It’s reasonable to debate the merits of contracyclical monetary policy.  It’s not reasonable to debate the merits of rewarding failure on a grand scale.

Alas, in "practical politics" almost no one’s interested in figuring out whether we took the wrong course two years ago.  Instead, it’s all about the latest crisis - and the next crisis on the horizon.  It really does seem like the crises just keep getting bigger: Wall St., Greece, then what?  Italy?

My point: One bailout seems to lead to another, but bailouts have to stop eventually.  What begins as "too big to fail" eventually becomes "too big to save."  So here’s my question: Where will the line be drawn?   Who’s going to be in the water when the "sink or swim" verdict finally comes in?

Not a great talker, but fascinating anyway:

Tja. En hoe denkt de Sp.a dan ook nog eens de pensioenen te verhogen?

Als de geruchten kloppen, is de ECB bereid om schuldpapier van Spanje, Portugal en Griekenland (en…) op te kopen uit de markt.
Nu is dat verboden door het Verdrag. De ECB is bereid om een achterpoortje te zoeken: opkopen via de secundaire markt.
Dit is nog niet bevestigd, maar als het waar is, dan :

• wordt het Maastricht-Verdrag een vodje papier
• is de ECB bereid om de euro te ontwaarden voor de Griekse en andere zuiderse problemen
• zijn we het tijdperk ingetreden van de drachme-euro , en vergeten we het oorspronkelijke project, dat een DEM-euro inhield
• is de ECB de FED-doctrine bijgetreden, en wordt de euro even zwak als de dollar

Het is nog prematuur, en ik hoop dat morgenvroeg dit maar een kwade droom bleek.

De ECB zegt dat ze de aankopen gaat steriliseren, maar het is me niet duidelijk hoe dat gaat gebeuren, en of deze belofte niet gaat sneuvelen. Anderzijds is het ook niet duidelijk hoe dit gaat betaald worden. Er is opnieuw sprake van bilaterale financiering, wat de factuur voor België van 3 miljard euro tot 18 miljard zou kunnen verhogen. Opnieuw, dit is allemaal een gissing, want tot nu toe wordt vooral gezwaaid met een erg groot bedrag, en weinig met de concrete details en vooral de gevolgen.

Libertarians voted for Obama McCain in 2008:

Libertarians shifted back to the Republican column in 2008, supporting John McCain over Barack Obama by 71 to 27 percent. Although many libertarian intellectuals had a real antipathy to McCain, the typical libertarian voter saw McCain as an independent, straight-talking maverick who was a strong opponent of earmarks and pork-barrel spending and never talked about social issues. Also, the prospect of a Democratic president working with a Democratic majority in Congress at the height of a financial crisis scared libertarian voters.

David Henderson watches Capitalism. A love Story and catches Moore in a few contradictions:

70:00: A company from outside the state of Michigan hires workers in Flint, Michigan to send out foreclosure notices. The tone of this segment suggests that this is bad. Why? Moore doesn’t want workers in Flint, Michigan to have jobs? Or Moore doesn’t want workers in Flint, Michigan to have jobs sending out foreclosure notices? I’m guessing you chose the second option. Then consider the 123:00 point right at the end where he tells us that the company no longer employs those workers in Michigan. So we should be happy for them, right? Well, no.

(...)

106:30: Miami police back off when people in a neighborhood threaten an employee of a lender who comes to foreclose. Moore seems to like this. Message: you shouldn’t have to pay your debts.

107:30: Republic Windows & Doors in Illinois closes down, owing its workers back wages. The workers take over the plant and end up getting President-elect Obama’s support for their violation of the owners’ property rights. Moore seems to like this. Message: you should have to pay your debts.