Good Thing Coming to an End

Economist Thomas Sowell wrote his final column this week. Fortunately, he’s not dead; he’ll keep writing books, keep giving interviews. We just won’t have his frequent short pieces of wisdom to count on each week.

Thomas Sowell
image from here

He’s 86—and only retiring from the column. He said last spring he was on a photography trip to Yosemite with friends. For four days they had no access to news. And he really enjoyed that. While writing the column, he has felt obligated to keep current on news and events so he could comment intelligently about them. And now he’s letting that go.

I relate to that, since I write regularly here, and it does a good part of the time relate to current events. During this holiday season, surrounded by family, I’ve mostly tuned out radio and newspapers, and even much social media—and it is refreshing.

Thomas Sowell has me by nearly two decades, after an extraordinarily prolific career, so I think he’s entitled to the relief from news. Back before writing this blog, when I was writing a few pieces a year (mainly in defense of traditional marriage), I would take hours—weeks sometimes—to write a piece. I marveled at how Thomas Sowell could put out something so profound, well-researched, and well-reasoned a time or two a week.

Eventually I learned that there are differences in writing when you’re doing something quick and regular. I don’t polish as much. I don’t provide exhaustive footnotes as often. I just try to put out a complete thought. I think that’s what Thomas Sowell has done as well, compared to his books, which are longer, more polished, and more referential to specific research. It’s just that he has a huge body of research in his head, and all the thought connections he’s made over many thoughtful decades.

I mentioned his Basic Economics as a favorite influence in my very first blog post. I’ll probably continue to refer to his writings as a model and a resource.

In celebration of his column retirement, I thought I’d share some Thomas Sowell wisdom.

First, if you have half an hour, he did an interview on the Larry Elder radio show on Wednesday. Their conversation covers a wide range, and gives the flavor of his wit and wisdom:

You can read his final column here: https://www.creators.com/read/thomas-sowell/12/16/farewell

I wrote about a Thomas Sowell interview on Uncommon Knowledge in 2015, following the publication of his book Wealth, Poverty, and Politics. Worth a re-read. 

Townhall put together a list of “12 Fantastic Thomas Sowell Quotes in Honor of His Retirement.”

And now I’ll share a few of the quotes I’ve saved in my Spherical Model quote file:

The first lesson of economics is scarcity: there is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.

Character is what we have to depend on when we entrust power over ourselves, our children and our society to government officials.

We cannot risk all that for the sake of the fashionable affectation of being more non-judgmental than thou.—(article following resignation of NY governor Elliot Spitzer)

Someone once said that a con man's job is not to convince skeptics but to enable people to continue to believe what they already want to believe.—(article on Obama’s “faith” speech 3-19-08)

One of the biggest taxes is one that is not even called a tax—inflation. When the government spends money that it creates, it is transferring part of the value of your money to themselves. It is quiet taxation but often heavy taxation, falling on everyone, no matter how low their incomes might be.—(10-29-08)

How have intellectuals managed to be so wrong, so often? By thinking that because they are knowledgeable—or even expert—within some narrow band out of the vast spectrum of human concerns, that makes them wise guides to the masses and to the rulers of the nation.

But the ignorance of PhDs is still ignorance and high-IQ groupthink is still groupthink, which is the antithesis of real thinking.—(11-11-08)

The medical care stampede is about much more than medical care, important as that is. It is part of a whole mindset of many on the left who have never reconciled themselves to an economic system in which how much people can withdraw from the resources of the nation depends on how much they have contributed to those resources.—(8-19-09)

There is usually only a limited amount of damage that can be done by dull or stupid people. For creating a truly monumental disaster, you need people with high IQs.—(9-29-09)

People who call differences "inequities" and achievements "privilege" leave social havoc in their wake, while feeling noble about siding with the less fortunate.—(5-4-2010)

Among people who voted for Barack Obama in 2008, those who are likely to be most disappointed are those who thought that they were voting for a new post-racial era. There was absolutely nothing in Obama's past to lead to any such expectation, and much to suggest the exact opposite. But the man's rhetoric and demeanor during the election campaign enabled this and many other illusions to flourish.

Still, it was an honest mistake of the kind that decent people have often made when dealing with people whose agendas are not constrained by decency, but only by what they think they can get away with.

On race, as on other issues, different people have radically different views of Barack Obama, depending on whether they judge him by what he says or by what he does.—(7-19-2010)

Much of the social history of the Western world over the past three decades has involved replacing what worked with what sounded good.

The vocabulary of the political left is fascinating. For example, it is considered to be "materialistic" and "greedy" to want to keep what you have earned. But it is "idealistic" to want to take away what someone else has earned and spend it for your own political benefit or to feel good about yourself.—(3-22-2011)

Even if it could be proved that judges who are making rulings that go counter to the written law produce better results in those particular cases than following the letter of the law would have, that does not make society better off. When laws become unreliable and judges unpredictable, lawsuits become a bonanza for charlatans, who can force honest people to settle out of court, for fear of what some judge might do.—(3-22-2011)

The Obama administration seems to be following what might be called "the Detroit pattern"-- increasing taxes, harassing businesses, and pandering to unions. In the short run, it got mayors re-elected. In the long-run, it reduced Detroit from a thriving city to an economic disaster area, whose population was cut in half, as its most productive citizens fled.—(3-22-2011)

Since the government creates no wealth, it can only transfer the wealth required to hire people. Even if the government creates a million jobs, that is not a net increase in jobs, when the money that pays for those jobs is taken from the private sector, which loses that much ability to create private jobs.—(7-6-2011)

People who say they want a government program because "I don't want to be a burden to my children" apparently think it is all right to be a burden to other people's children.—(8-2-2011)

Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.

Like so many people, in so many countries, who started out to "spread the wealth," Barack Obama has ended up spreading poverty.—(10-17-2011)

Politicians can solve almost any problem—usually by creating a bigger problem. But, so long as the voters are aware of the problem that the politicians have solved, and unaware of the bigger problems they have created, political "solutions" are a political success.—(10-17-2011)

Let's stop and think, if only for the novelty of it.—(8-29-2012)

The black family survived centuries of slavery and generations of Jim Crow, but it has disintegrated in the wake of the liberals' expansion of the welfare state. Most black children grew up in homes with two parents during all that time but most grow up with only one parent today.—(1-15-2013)

There are no magic solutions [to getting out of poverty], at least none that I know of. Common sense, common decency, work and honesty are about all I can come up with. These things are not fancy or new or politically correct. But they have a better track record than much that we are doing today.—(5-20-2014, “Poverty and Snowstorms”)

I am so old that I can remember when most of the people promoting race hate were white.—(“Who Is Racist?” 7-2014 National Review)

If you don’t understand the issues, but want to do your patriotic duty, then stay home on election night, whether in the primaries or in the national election in November. Uninformed voters turn elections into a game of playing Russian roulette with the future of America.—(1-30-2016)

The old adage about giving a man a fish versus teaching him how to fish has been updated by a reader: Give a man a fish and he will ask for tartar sauce and French fries! Moreover some politician who wants his vote will declare all these things to be among his “basic rights.”—(http://l.prageru.com/29VdtqE)

Economic Glossary

The other day I was listening to the radio in the car; it was a “best-of” program from a couple of years ago, so not related to specific things in the news today. But a caller was having a conversation with Michael Medved, making the assertion that when a person makes money—such as Steve Jobs at Apple—it is at the expense of others, who will be worse off. Michael Medved tried to point out that the products Steve Jobs had provided to society, for which he earned the money, actually made consumers better off, so it was an even exchange, or even an improvement for all. The caller refused to agree, and insisted that there was a set amount of wealth, and if someone got more, others got less. Which shows a glaring lack of understanding of economics.

Economics may be a challenging prognosticating social science. But there are some things that aren’t too arcane for basic understanding. It doesn’t take an expert. So, as a public service, I thought I’d share a few basic definitions—with the purpose of helping good citizens feel confident enough to assert their right to decide how they spend the money they earn. (These terms are all defined with a little more depth in the economic section of the Spherical Model website.)

Wealth: the accumulation of the results of labor. It is created with additional labor and innovation, so there is no maximum amount that can be created. Wealth includes both money and material goods and real estate—anything that could be exchanged for value.

money image found here

Money: a representative, or symbol, of wealth, to make it easier to exchange. The purpose is to preserve surplus that has been produced. The materials used may have some intrinsic value, but mainly money is of value because people who exchange it agree that it symbolizes units of the results of work. There is an estimated total amount of money in the world, called, M3, which includes currency, bank accounts, certificates representing value (stocks, bonds, etc.), or anything quickly liquidated. It goes up as word wealth goes up. If there is inflation in the type of money used to measure (dollars, for example), then the number could appear to go up even though the actual value (representation of units of labor) has not gone up. I wrote about it in 2011.

Price: the point at which buyer and seller of goods and services agree that both are better off by making an exchange. Price conveys a lot of information, allowing buyers and sellers to decide if an exchange is worthwhile to them. If a seller prices something too high, it will have fewer willing buyers. If a seller prices something too low, there will be more buyers than supply.

Supply and Demand: Supply is the amount of goods available or the availability of a service; demand is the willingness of buyers to exchange money for a good or service. Willingness to make the exchange is determined in large part by price—just as price is determined by an accurate assessment of supply and demand. If there is no interference (government regulation, taxes, tariffs, price setting, etc.), then the interrelationship of supply, demand, and price are clear to the experts—the people involved in making an exchange.

Profit: the amount of money that exceeds the costs the seller put into a good or service; it allows the seller to then count that additional money as pay for labor—or as income.

Capital: represents work above and beyond what is essential, followed by careful use of the surplus toward a good idea, for the purpose of creating even more surplus. Capital itself is always moral—surplus work is an economic and social good.

Free Enterprise (or Free Market): an economy in a society in which choices of what work to do , how to make exchanges, and what to do with earnings are decisions made by the individuals involved in the exchange. The term capitalism is sometimes used. Capitalism is actually a subset—a way of investing and making use of capital, leveraging the power of wealth to put a good idea into action in an attempt to make more wealth. Free enterprise generally means government doesn’t interfere, but only assures that contracts are kept, and wealth is safeguarded from theft. It is a system that leads to prosperity wherever it is tried. But for reasons of power being a greater priority than prosperity, it is seldom tried. The alternative to free enterprise is a controlled economy—with central planners deciding basic economic decisions, like who works in what jobs, how much people get paid, what prices are set, and how money will be spent. Central planning is a form of tyranny that always leads toward poverty rather than prosperity. 

If there is nothing else you know about economics, you should at least understand that the person who knows best how you should spend the money you earn—is you.

More of the Best, Part III

Economic Sphere

Today is the actual anniversary of the first Spherical Model blog post. Hurray! And this is the third day in our 4^th anniversary and 600^th post celebration. The first time I did a “best of” collection, it was at 400 posts. So this new list adds to that list from the past couple hundred posts. The celebration started with the Spherical Model concept, and part II was on the Political Sphere. Come back tomorrow when we look at Civilization.

Today’s list is the Economic Sphere. To start your studies, you might want to read the Economic section of the Spherical Model website. And also take a look at the original “best of” list of Economic Sphere posts. The posts below are more recent. I see the list is long. That’s the problem with being my own editor. I wrote them with the hope they would be of value to readers. They still seem that way to me. So while this isn’t every economic post, it’s more than a top 10. You’re not required to read every post, but I think they could all be useful.

The Spherical Model—Best of: Volume II, Economic Sphere

·         Doing Business:  August 23, 2013 

·         Poverty of Nations Review:

o   Labor:  September2, 2013 

o   Prices:  September 4, 2013 

o   Greed vs. Self-Interest:  September 9, 2013 

·         Beanie Baby Economics:  October 28, 2013 

·         Redistribution:  October 30, 2013

·         Interference and Consequences: November 6, 2013 

·         The Rhetorical Question:  November 22, 2013

·         Economic Schools of Thought:  November 25, 2013 

·         The Fifty-Year War, Part I and Part II: January 13 and 16, 2014 

·         Flat Lining:  May 5, 2014 

·         Prosperity vs. Poverty:  July 21, 2014 

·         Giving until It Hurts:  November 6, 2014 

·         How Much Is 18 Trillion?:  December 9, 2014 

·         Laffer Curve Turns 40:  January 12, 2015 

That Decision Mothers Make

Our president said something better not said—no surprise. But sometimes these misspeaks (accidentally) reveal what he truly believes, so they’re worth looking at. Here’s what he said last week at Rhode Island College on women and the economy: 

Obama speech on women and the economy
at Rhode Island College

Sometimes, someone, usually Mom, leaves the workplace to stay home with the kids, which then leaves her earning a lower wage for the rest of her life as a result. That’s not a choice we want Americans to make. [full speech here]

We could get rid of some of the indignation here if we assume he misspoke and meant to say, “That’s not a choice we want Americans to have to make.” In other words, if you take some years off to care for children, you face the reality of a lower wage, and he thinks that’s unfair.

That does in fact seem to be what he means, because he goes on to offer the solution of governmental institutional daycare—to solve the problem of women having to leave the workforce at all, which leads to what looks like uneven pay.

But he is, in fact, saying it’s a bad decision to choose to stay home and raise your kids. It’s bad because it could cost you the wage level rise you would presumably get if you didn’t take time off to raise those bothersome children. He doesn’t want you to make that wrong choice. That’s revealing.

We might be better off if we had a president who offered this in a speech instead:

The homemaker has the ultimate career. All other careers exist for one purpose only—and that is to support the ultimate career.—C. S. Lewis

Or there’s this, from the last paragraph of historians Will and Ariel Durant’s The Lessons of History about perpetuating civilization:

If a man is fortunate he will, before he dies, gather up as much as he can of his civilized heritage and transmit it to his children. And to his final breath he will be grateful for this inexhaustible legacy, knowing that it is our nourishing mother and our lasting life.

And let’s add this bit of wisdom:

Women who make a house a home make a far greater contribution to society than those who command large armies or stand at the head of impressive corporations.—Gordon B. Hinckley

The president seems to misunderstand what life is about. Certainly he misunderstands what civilization is and how to get there and then stay there.

The purpose of life is not to achieve some arbitrarily defined world equity by earning money for yourself that is equal to whatever anyone else can earn. It is not even to earn a valuable life by doing paid work. A mother, who dedicated her career years to raising children who have grown into successful contributing members of society and gone onto provide her with grandchildren to love—can you imagine this woman, in the wisdom of age, on her deathbed saying, “If only I’d spent more time at the office! If only I hadn’t wasted my career years on children—the government could have handled them, and then I would have made an equivalent amount to the men in my career!”

Life is bigger than that. We want to live a life we can enjoy with those we love and want to be with, through the good times and trials. There isn’t a better way to live than in a marriage and family, raising children in love. Family is the basic unit of civilization—in which people thrive, and in which social capital is built and passed on. It is possible to live a life otherwise, but civilization only happens when a critical mass live in functional families.

There is an interrelated economic component. We need income for housing, food, shelter, and all the other things needed for raising and educating our children. But the most economically sound way for that to happen is in a family with a mother and a father. No government program works as well. It isn’t a matter of tweaking policy, or getting the right leaders. It is a matter of allowing families to do the work of caring, providing, and civilizing—work that families are brilliantly designed by God to do.

If you care about civilization, you will consider the value of a parent, probably the mother, doing the long-term daily work of caring for them. Anyone who has done it knows it’s a lot more than feeding, clothing, and managing the children in a way that keeps them from wandering into the street or other dangers. It’s about loving them, responding to them as valuable human beings with their own personalities, gifts, and potentials. No daycare—no matter how well run—can offer a child what an abundance of time with a loving mother offers.

Not all women get to offer that. Some can’t make it financially without working. Some feel called to do a specific life’s work in addition, and choose to balance the mothering and other career. I do not want to demean any woman who makes a choice to work when she has children. But it is absolutely unconscionable to shame women for choosing to mother at home. It is especially wrongheaded to demean her choice by turning it into a math equation about earnings she’s expected by the state to work for.

It’s also wrong to blame natural economic laws that reward continuous years of work in a particular career more than fewer disconnected years in that career. And it’s more than wrong to claim government can or should override this economic natural consequence by taxing people more to institutionalize our children at younger and younger ages.

Did the president make yet another speaking gaffe? Yes. But we can make good progress even with a president who lacks speaking skills. Moses lacked speaking skills and still managed to free the Israelites from enslavement. Speaking skills are helpful (see Reagan for many examples). But what is better is good thinking—and believing the right and true things.

What we need is not a president who manipulates power to control women’s choices. We need a president, along with the rest of government, who appreciates the value of mothers and fathers working together to raise their own children—and gets out of their way.

Stop holding us down with variations of tyranny, poverty, and savagery. And let us move up to freedom, prosperity, and civilization.

Best of Spherical Model Part II

Today we celebrate the 400^th Spherical Model blog post. We’re celebrating all week by collecting some of the better examples of the Spherical Model in the three categories: political, economic, and civilization. Monday we covered both the definition of the Spherical Model and the Political Sphere. Today we’ll cover the Economic Sphere. Then the next post will cover some of the Civilization Sphere.

I started having fun with economics as a freshman in college. It was a basic econ class, but specialized for honor students (which anyone willing to take on the challenge could take). That meant the teacher was actually the person who wrote the book. And it turned out he was funny and delightfully entertaining. As a result I have always thought of economics as the fun numbers science. And I continue to find my favorite economists to be fun and entertaining: Thomas Sowell, Walter Williams, Milton Friedman, and Greg Mankiw, for example. Plus I have had the advantage of a son who graduated with a degree in economics, so when I have technical questions, I can turn to him. My understanding remains basic, but adequate for looking at principles in our real world.

Separating out topics for this Best Of series has been challenging, because there is so much about economics that ties into political freedom and the kindness and honesty of a civilized society. But there are some I want to recommend reading or re-reading. Some are series or are paired together. Starred ones are among the most popular re-reads:

·         Anything Evil about Capitalism, Part I (March 29,2011), Part II (March 30, 2011), Part III (March 31, 2011), Part IV (April 1, 2011)

·         Atlas Shrugged and the Sphere, Part I (April 13, 2011); Part II (April 14, 2011); Part III (April 15, 2011)

·         Global Money Supply and Debt (July 11, 2011)

·         Making Money (August 29, 2011) and The Glooper (August 30, 2011)

·         Numbers Don’t Lie; People Do (September 5, 2011)

·         Econ Lesson (September 20, 2011)

·         The Case for the Free Market (October 17, 2011) and *In the Interest of Brevity (October 20, 2011)

·         * Parabolas (November 21, 2011) and *The Trampoline Effect (March 23, 2012)

·         * Laffer Curve Primer (November 28, 2011)

·         * Bain Basics (January 16, 2012)

·         Fun with Economics (March 21, 2012)

·         Poster Household (April 11, 2012)

·         Low Taxes Don’t Cause Recessions, Part I (July11, 2012) and Part II (July 13, 2012)

·         Dave Built That (August 22, 2012)

·         Marriage: Anti-Poverty Weapon (September 28, 2012)

·         Old Words New Again (January 9, 2013)

·         Simple Math above His Pay Grade (February 20,2013)

·         Glass Breaking Fun (March 13, 2013)

·         Lessons from Economic Sphere (April 26, 2013)

Measuring Mitt Part II

Mitt Romney with some of the family,
from Parade Magazine article, here

Back on June 13^th I covered a quote from Mitt Romney that Rush Limbaugh dredged up yesterday, claiming it was disqualifying. It’s about climate change. Rush quoted a paragraph in which Romney acknowledges that many experts believe the climate is warming, and that human actions may contribute; Romney acknowledges this—and Rush ends the quote. But it was only an introduction to Romney’s policy statement. He talked about the economy being a priority. He’s against cap and trade schemes. And while he likes alternative renewable energies, the immediate need is to drill for oil and natural gas here in the US, as the only way to alleviate our dependence on foreign oil. His actions as governor of Massachusetts verified that his beliefs are much closer to Sarah Palin’s than Al Gore’s. But you wouldn’t know that if all you heard was the clip Rush aired—and which was the total provided in most news at the time.

When you hear Romney in full, it turns out he’s really a conservative, pro-Constitution, pro-free-enterprise American. So why do we so seldom hear him in full?

I think there’s a style issue—not good or bad; it just is. Romney acknowledges the opposition; he expresses what they believe, to let all parties know he’s listening to them, that he has fully examined the information, and that he does not dismiss their viewpoint out of hand. Then he goes on to express his policy position, based on the priorities he believes are best for all. So, on a number of issues, when he is doing the preface, the “I see your point of view and understand your concerns” part, he gets quoted by media and other opposition looking for sound bites that work toward their goals, rather than the ones that best express his actual positions.

It might be that I am being too generous, that what he is doing is playing to all sides. But I don’t think so. If you do believe that, try suspending your belief on some of the so-called flip-flops to separate preface from policy statement.

The most cited actual policy change is on abortion, so let’s take that one. Mitt has always said that his personal position is pro-life; it would be best if there never had to be any abortion. But you’ve probably seen quotes of him back when he was running against Ted Kennedy in 1994, or for Massachusetts governor in 2002, saying things that sound pleasing to a “pro-choice” (anti-life) crowd. I am not in favor of saying whatever you have to say, whether you mean it or not. But the circumstances of these quotes were in response to direct questioning about how he would govern in a state with an 85% Democrat congress. Everyone knew he was conservative; they don’t vote for conservatives there—that was a given. But they were in dire need of someone with Mitt’s business skills to bring the state out of a spiral toward bankruptcy. And he knew he could serve the state well. So he was assuring them that his goals as governor were mainly limited to economic issues; he was not planning to conduct a crusade against abortion, which was settled in the law for the time being. What he promised them was that he would not take action as governor to further limit abortions—actions he couldn’t have accomplished with the congress in that state anyway.

Let’s put this in the form of preface and policy, with me paraphrasing for him (so quotes aren’t his actual words; they’re my suppositions of what he meant): “I understand that, as a state of mostly Democrats, you have a belief at odds with my own concerning abortion. But I also understand the law stands, and changing it in this state is neither within my ability nor is it my purpose in running for office. I believe I can serve this state well economically. In order to have that opportunity, I promise not to try to further limit abortion while I am in office.” His policy, then, isn’t purposely to protect abortion; it is to avoid acting at variance with the overwhelming majority of the state on that issue, despite his personal beliefs.

What did he actually do in office? A law came before him intended to make it even easier to get an abortion in the state. He looked at this; it put him in the position of not just leaving the laws as it stood, but in bringing about more abortions than would have happened without the change. That meant he himself would be responsible for abortions happening. He vetoed the bill.

In reality he has a perfect pro-life record. Facing this dilemma did in fact lead to a change in his policy. While he kept his promise to the state, he came to realize that coming out against abortion, and pressing for legislation, either state by state or nationally (including overturning Roe v. Wade), would be necessary to keep legislation such as he faced in Massachusetts from causing more damage.

Is that a flip-flop? I don’t think so. It is technically a subtle change in policy—in the right direction.

Back in the 90s Romney used the phrase that he believed abortion should be “safe, legal, and rare.” We all know, because of Bill Clinton, that the phrase is code for “abortion on demand.” But that doesn’t mean it always meant that. The timing of Romney’s saying it was when it still likely meant only when the mother’s life (and usually then also the baby’s life) was at risk, or in cases of rape and incest—which means that the mother never made the choice to act in a way that could bring about pregnancy; her body was used against her will. We can argue the validity of that point of view another day, but I believe the only GOP candidate who doesn’t hold this view is Cain, who believes there should be no exceptions at all for any abortion. Romney’s, not Cain’s, is the typical conservative viewpoint.

Romney has consistently held that view, then, for a couple of decades or longer. The only change was whether, as an elected official, he could promise not to deal with the issue. He found that even in Massachusetts he had to face it, and at every level he has been unfailingly pro-life.

This is the one issue conservatives think they know for certain against Romney. But they’re wrong. So maybe there are more of those things, as Reagan says, “It’s just that they know so much that isn’t so.” My goal is not to be an apologist [i.e., one who argues in defense of something or someone, not to be confused with making excuses for]for Romney; my goal is to find out what’s true, about him and the other candidates. To that end, measuring Romney will probably take at least another post or two.

I still believe most of our candidates agree on most conservative issues. And we’re fortunate that all of them understand that they can only appeal to voters by expressing conservative ideas. So our efforts are to identify the best one for our country—all of whom would be better than their eventual opponent.

Experts

Wouldn’t it be a good idea if experts—the really smart people with all the information—could make decisions about our economy and our lives? Um, no. If you have a clear idea of who the experts are and what they really know, especially about your life, you tend to prefer making your own choices. 

When I took basic economics my first year of college, we talked about the Nixon price controls, what they had done to the economy and why. I have been a free market economist ever since. And I’ve always been very wary of anyone who considered Nixon a conservative. 

The Nixon price controls happened when I was old enough to be aware of them, but too young to have much understanding of the politics and economics involved. But I got a new up-close perspective on this piece of history from Dick Cheney’s memoir, In My Time. Just out of college he was an assistant to Donald Rumsfeld at the Office of Economic Opportunity. Here’s how he tells it: 

The inflation rate that had hovered comfortably around 1.5 percent at the beginning of the 1960s had climbed to 5 percent. The unemployment rate had nearly doubled to 6 percent.

            The Democratic majority in Congress was urging the president to use powers they had given him when they passed the Economic Stabilization Act, legislation that effectively authorized him to commandeer the economy by imposing controls on wages, prices, salaries, and rents. The Democrats voted these extraordinary powers confident that no Republican president, much less a solid free market one named Richard Nixon, would ever use them, and in the meantime, they could criticize him for not taking action. But Nixon took them up on their offer, and on Sunday night, August 15, 1971, he announced a freeze for ninety days on all wages and prices. The Cost of Living Council was created to monitor the freeze and to achieve an orderly return to the free market when the ninety-day period was over.

            The freeze was simple enough. Nobody was to raise wages or prices. But the follow-on, which became known as Phase Two, would have to have rules covering all sorts of things, from permitted increases in union contracts to the price of dill pickles, for the period until market forces ruled again. The deadline for moving from the freeze to Phase Two came fast, and the two entities that were supposed to write the regulations, the Pay Board and the Price Commission, wrangled and dithered. When it looked as though they were going to miss a crucial deadline for getting regulations published in the Federal Register, Rumsfeld decided to take things in hand. He assembled Jack Grayson, the chairman of the Price Commission, and about a dozen of our CLC staff and said that we wouldn’t be leaving until we had the regulations ready for the printer. We set up in Rumsfeld’s outer office, and as others paced and dictated, I sat at one of the secretary’s desks and typed everything on an IBM Selectric typewriter. By nine the next morning, when the secretaries arrived and emptied the ashtrays and replenished the coffee, we had written the regulations that would now be governing a major share of the U.S. economy. The degree of detail we achieved during our overnighter was truly impressive. We drew distinctions between apples and applesauce; popped and unpopped corn; raw cabbage and packed slaw; fresh oranges and glazed citrus peel; garden plants, cut flowers, and floral wreaths. We regulated seafood products “including those which have been shelled, shucked, iced, skinned, scaled, eviscerated, or decapitated.” We covered products custom-made to individual order, including leather goods, fur apparel, jewelry, and wigs and toupees….

            As assistant director for operations, I oversaw some three thousand IRS agents tasked with enforcing wage and price controls. At one point I sent a team of them to visit the major food chains, such as Safeway and Giant, and report on how they were complying with our regulations. The agents reported back that, depending on how a single regulation was applied, any one of several different prices might result, from one high enough to give the chain a significant profit to one low enough to cause a terrible loss. It was pretty clear which option the chains would pick—and who could blame them? They were dealing rationally with the arbitrary rules we were trying to impose (pp. 59-61).   

In 1973 Nixon imposed another price freeze:  

apparently hoping in the midst of Watergate for some political benefit. But he didn’t get it. Among other things, the freeze made raising animals for market unprofitable. A Texas hatchery drowned forty-three thousand baby chicks. Pigs and cows were slaughtered—and the president announced an early end to his 1973 effort to freeze prices.

            By this time I had grown wary of government economic control. At the start of my tenure at the Cost of Living Council, when I had been immersed in getting things going, I hadn’t had much time to think about it, but by now I realized that every day millions of people were making millions of economic decisions, and it didn’t matter how smart we were or how many regulations we wrote. There wasn’t any way we could intervene without doing more harm than good.

These thoughts confirmed my innate skepticism about what government could and couldn’t do. We could write checks, and we could collect taxes. We could run the whole military and defense side of things. But when something as big and ham-handed as the federal government tries to run something as complex and dynamic as the American economy, the result is sure to be a train wreck (p. 62). 

There are some interesting insights here. The people involved—the experts—were really smart, measured by IQ and education, as far as I can ascertain. And many of them were conservative; they were the ones who mainly believed in free markets. Imagine the damage that could have been done if they had truly believed in sabotaging the free market to bring about socialism. (On the other hand, in our time maybe we can see without having to imagine.)

Best case scenario: the experts are people who have very little idea about what I need, what I want, what I value; they can only make generalized decisions likely to displease the fewest people. No one can expect them to make exceptions for every individual, so it would be better if you changed yourself to become less exceptional. And the decisions they make, no matter how much data they may say they have, will ultimately be arbitrary. That is the one thing you can count on. 

If there were an expert I’d be persuaded to trust, it might be Thomas Sowell, and fortunately he can be trusted because he knows better than to take on the job of “expert decision maker.” Here are a couple of favorite quotes on trusting the experts:

There is usually only a limited amount of damage that can be done by dull or stupid people. For creating a truly monumental disaster, you need people with high IQs.

                                             —Thomas Sowell, Sept. 29, 2009

Whether the particular issue is housing, medical care or anything in between, the agenda of the left is to take the decision out of the hands of those directly involved and transfer that decision to third parties, who pay no price for making decisions that turn out to be counterproductive.

—Thomas Sowell, October 17, 2011

Laffer Curve Primer

In the past week I came across a couple of reminder’s of the Laffer Curve, grabbing my attention enough to cover it in a post here.

First, I just finished reading Dick Cheney’s autobiography, In My Time. I’m sure I’ll have more to say on that in future posts, but this little anecdote was fun: 

It was in the wake of our loss [Ford’s election bid in 1976] that Don Rumsfeld and I had dinner one night at the Two Continents restaurant in the Hotel Washington with economist Art Laffer, a creative guy who certainly captured my imagination with a curve he drew on the back of my napkin. What it showed was that you can raise taxes only so high before people become disinclined to work. On the other hand, it’s possible to create incentive—and economic growth—with tax cuts. The Laffer Curve subsequently became one of the hallmarks of supply-side economics. I wish I had known how historic my napkin would become so that I could have saved it (p. 78). 

I had a similar response when I first heard of the Laffer Curve. Eye opening. 

Then later in the week I came across an article by Daniel Mitchell spelling out a few basics on the Laffer Curve. One of the interesting illustrations shows how much more revenue (about 5 times more) the government took in when Reagan lowered the upper tax rate of 70% down to 28%, comparing 1980 to 1988.  

The article had links to three short videos (about 7 minutes a piece) on the theory and real world evidence for the Laffer Curve, and then the frustration with the way tax bills are measured. They are all informative and clear, but the third one may make you want to do something to change the world. The three together take less time than half a television show without commercials. Definitely worth the time investment. 

The first video gives you the basic theory of the Laffer Curve.

http://www.youtube.com/watch?v=fIqyCpCPrvU&feature=player_embedded

Video II offers real-world examples of the Laffer Curve in action.

http://www.youtube.com/watch?feature=player_embedded&v=YsB_rnzBA08

The third video covers the frustratingly inaccurate “satic scoring” used by the Joint Committee on Taxation, causing bias toward higher taxes. 

http://www.youtube.com/watch?v=Mw7LtVwDCbs&feature=player_embedded

If these concepts make sense to you, share them with a friend.

Fun with Economics

I think I’ve mentioned before (several times) that I think economics is fun. I don’t do the heavy-math predict-the-market kind of economics, just basic common sense stuff about how markets work and what the terms mean. 

Greg Mankiw, blog photo

So this week I was amused by some incidents at Harvard. It seems some Ec 10 (Basic Economics) students protested Greg Mankiw’s class by walking out during his lecture and joining the Occupy crowd in Boston for a day.  

“I urge all students to walk out of Ec 10, [because it] represents the ideology that brought about our current economic situation,” shouted organizer Gabriel H. Bayard ’15 (quote from The Harvard Crimson on Wednesday).  

Greg Mankiw's blog on Wednesday points out what the protesters would miss: “Ironically, the topic for today’s lecture is the distribution of income, including the growing gap between the top 1 percent and the bottom 99 percent. I am sorry the protesters will miss it.”

The whole sequence of events was in his Wednesday blog, so I’m just giving you the highlights from some of the links here. First off, the Ec 10 protesters published an open letter to Prof. Mankiw, accusing him of right-wing bias.

Then former student Jeremy Patashnik, a self-proclaimed liberal, published a very supportive piece identifying what is actually taught in the course, and challenging anyone to find something biased in it. The article is long, but thorough and well done. There’s a philosophical explanation in the middle that is particularly informative: 

One lesson from the first day of Ec 10 that will stick with me for the rest of my life is learning to separate positive questions from normative ones. Most of the economics that we read about in the news involves normative questions (eg. Should Congress raise the marginal tax rate on the highest income bracket?) whereas most of what economists actually study involves positive questions (eg. What would happen if the marginal tax rate on the highest income bracket were raised?). Ec 10 is an introduction to the academic discipline of economics, and the vast majority of the course focuses on teaching students how to answer positive economics questions. 

Economics is not philosophy, and the primary goal of Ec 10 is not to teach students how to make the world a fair place. If protesters feel that the course spends too much time discussing how to make the economic pie as big as possible and not enough time discussing how to slice the pie equitably, I would point out that it is Professor Mankiw’s desire to avoid bias that drives this. After all, asking how to make the pie bigger generally entails positive questions; asking how to slice the pie fairly almost exclusively involves normative questions….  

Another criticism that some protesters have raised against Ec 10 is that its models are oversimplified and it is difficult to extrapolate real-life conclusions on important normative questions from the course. Again, I disagree here. You can’t hold informed positions on these normative questions without being able to answer the positive ones, and you can’t answer the positive questions without a fundamental understanding of the principles of economics. But building this foundations takes time. Premeds don’t grumble that Life Science 1a does not qualify them to practice medicine; Ec 10 students should understand that the class will not equip them to fully understand the vast complexities of economic policy. Ec 10 builds a foundation to begin to answer these questios intelligently, but as in all academic disciplines, if you want to be an expert, you’ll have to invest more than one year of study.

Mankiw describes walk-out day: “About 5 to 10 percent of the class participated in the walk-out. At the same time, some previous Ec 10 students came in to sit in the lecture as counter-protesters. The lecture then proceeded as planned.” 

The Harvard Crimson followed up with an editorial pointing out the lack of intellectual integrity of the protesters:  

Even if Ec 10 were as biased as the protesters claim it is, students walking out to protest its ideology set a dangerous precedent in an academic institution that prides itself on open discourse. This type of protest ignores opposition rather than engages with it. Instead of challenging a professor to back up his claims, it tries to remove him from the dialogue.

It was my experience in college that basic economics teachers had a great sense of humor and entertainment. That seems to hold true for Greg Mankiw. 

Now, if only our current president had taken enough basic economics to gain a fundamental understanding. More on that another day.

Three-Legged Stool

Yesterday in the car I had the radio on. Rush was responding to an email accusing him of being anti-Romney. He used a clip from his show four years ago to claim otherwise. One thing he said caught my attention—because it relates to the Spherical Model.

I want to take you back to the archives of this program, February 4^th of 2008. From my website, RushLimbaugh.com: “One candidate now stands for all three legs of conservatism.” February 4^th, 2008. You people have forgotten. I supported Romney in 2008. I was defending Romney against the fact that Huckabee and McCain were ganging up on him in the West Virginia primaries. I did everything but endorse Romney in 2008….

From this program, February 4, 2008: “I think now, based on the way the campaign has shaken out, that there probably is a candidate on our side who does embody all three legs of the conservative stool, and that’s Romney. The three legs of the stool are national security/foreign policy, the social conservatives, and the fiscal conservatives. The social conservatives are the cultural people; fiscal conservatives, the economic crowd, low taxes, smaller government, get out of the way.”… Back in 2008 Romney was the guy. There weren’t too many alternatives.

In Spherical Model language, we have three overlaying spheres: the political sphere (freedom vs. tyranny), the economic sphere (free enterprise vs. controlled economy), and the social sphere (civilization vs. savagery). The things we as conservatives intend to conserve are freedom, free enterprise, and civilization. They interrelate; you can’t get freedom and prosperity without living the rules of civilization. And it’s hard to get to civilization when freedom and prosperity are hindered. At this point it’s not so much about “conserving” those things as getting back to them—reinstituting. But when we say “conservative ideology,” we mean the principles the bring about freedom, prosperity, and civilization.

Rush went to say:

Conservatism is the solution, proud, unabashed, cheerful conservatism. I believe the campaign ought to be run on ideology. I know there are a lot of people, “No, no, we can’t go ideological, Rush; it’s too limiting. It thwarts, it scares off the independents.” I think ideology is what sells conservatism….

I know the effort is intense to force conservative ideologues to tamp it down. I fully understand that. I see the evidence of it each and every day. But who is it, name a name. When you get excited about a candidate or an elected official, public figure, who says something that really rallies you, why has that happened? That person’s engaged in ideology. And what I mean by that is principles. The person has supported, can explain, optimistically advance principles.

Conservative principles, I believe, are the principles that founded this country. They work.

Then he points out Bobby Jindal’s reelection as governor of Louisiana—as a principled conservative. In a landslide—in liberal (and historically corrupt) Louisiana! The press doesn’t want to mention it, because that whole principled conservative thing wins elections. It’s what worked in November 2010. It will work again in 2012—even more.

He’s not endorsing Romney—not yet anyway. He agrees with me:

I think any of our candidates could beat Obama, especially if the election were tomorrow, any of our candidates could beat Obama. Well, maybe two exceptions. I’m not sure that Huntsman could, and I’m not sure that Ron Paul could. But the rest of them up there….

Why not those two? Rush didn’t say, but if there must be three legs of the stool, Paul says things that make us not trust him to keep us safe. He’s very good, however, on economic and social issues (except for a few libertarian issues, for example, drug legalization). When Huntsman has a good day, he sounds pretty conservative, but there’s often indefiniteness, a hint of not being firmly there on principle on all three legs of the conservative stool—more policy than ideology. He’s comfortable dwelling near the equator, maybe even a little south of the equator, in the political, economic, and social spheres. And that won’t do when what we want is an anti-Obama. Clarity on principles the lead to freedom, economic prosperity, and civilization—that’s what we need.