Liberty & Power: Group Blog
David T. Beito
Jane S. Shaw
I’m not an economist, so here are just a few observations about the turmoil – the “tumultuous 10 days that have remade the American financial system” and today’s “day of high drama in Washington” (quotes from the Wall Street Journal).
Years ago, as an editor at Business Week, I wrote an article about the Kondratieff cycle, a boom-and-bust cycle that supposedly moves in periods of about fifty years. (The fifty-year wave was named for the Russian economist Nicolai Kondratieff, who died in a Siberian prison for suggesting that the Soviet Union had not eradicated business cycles.) Although these long waves were endorsed by Josef Schumpeter and some other leading lights (I forget who!), most economists don’t accept the idea that there are long cycles of rising and falling prices. Nathan Rosenberg looked at the historical evidence and concluded that such a cycle simply did not exist.
I’m not so sure; but even if predictable cycles do not exist, there is the cycle that reflects human memory.
Since people are always being born and dying, the changing “collective” memory affects how policy-makers act.
For example, fear of another Great Depression led to inflation in the 1970s, as policymakers kept “priming the pump,” on the theory that such efforts had pulled the nation out of the Depression. The inflation was ended by Federal Reserve chairman Paul Volcker, who let interest rates rise to then-astronomic levels (which we may see again).
The end of inflation ushered in a long wave of prosperity beginning in the early 1980s (which we have been happily riding until recently). It was possible because the Federal Reserve steadfastly refused to inflate the currency.
But time moves on. People forget. Policy-makers forget. A South Sea bubble mentality takes over and no one is willing to stop it. The high-tech boom did halt abruptly – but the bust was contained because a lot of smart people (famously, Warren Buffett) avoided firms that they couldn’t understand.
Inflation in housing was different. Just about everybody got involved. It was another South Sea bubble, but one that engulfed rich and poor, especially because the federal government’s stepchildren (Fannie Mae and Freddie Mac) did everything they could to wheedle people into debt. Although other lenders lacked the federal government support that Fannie and Freddie had, they did the same. The extent to which the housing boom was spread among lenders and investors through sophisticated financial instruments is something we are just beginning to discover.
I was not alive during the Great Depression so my knowledge of it (and the crises that preceded it) is based on reading, hearsay, movies, and whatnot. But I feel as though we are going through something similar – a probable stock market crash and a possible economic collapse preceded by the frantic efforts of well-intentioned government officials and not-so-well-intentioned rent-seekers.
In their efforts to avoid a worldwide economic catastrophe, policy-makers have abandoned all principles of limited government and individual responsibility. If they are lucky, their Maginot line will hold, and you and I will pay for their abandon with inflation for years to come. If they are not so lucky, the economy will crash. They will be out of their jobs, with even less competent people replacing them, and the rest of us will face hardships we never anticipated. Either way, we are likely to have an unpleasant awakening in the months and years ahead.
"But AIG takes the biscuit. Here was a huge multinational insurance group with a reputation for solid underwriting and risk management that decided to diversify from insuring risks it knew well – car crashes and fires – to covering derivatives it did not understand.
"Of course, it thought it understood them. In presentations to investors this year, it emphasised how thoroughly its AIG Financial Products arm assessed the risks of insuring CDOs. It ran all the data and decided that, in the worst case, it risked losing $2.4bn on the portfolio.
"Well, $24bn of write-downs later – a mere 10 times its maximum estimate – the company has burned through its equity, spread financial chaos to all corners of the earth and humiliated the US Treasury. The job of insurance companies is to guard others against catastrophes, not cause them.
"The word 'irresponsible' does not begin to describe AIG's behaviour. Like Bear, Lehman and others, it saw a way to get in on the growing action in mortgage-backed derivatives. Its bankers were soon earning huge fees for themselves and AIG by piling up unimaginable risks."
Read the entire article here.
Jane S. Shaw
David T. Beito
For the youtube, see here
Suppose we inserted a different referent in the statement, claiming, for example, that “the cost of communcation services (or computing power or consumer electronic products) has increased rapidly, thanks largely to the pace of technological innovation.” No one would accept such a claim, because we all know that technological innovation has drastically reduced the cost of these goods. For the same price (adjusted for inflation) that I paid for a simple calculator in 1970, I can now purchase a computer with thousands of times more computational power, owing to technological progress during the past several decades.
Let’s be clear: technology refers to the knowledge used to transform resource inputs into product or service outputs. Technological progress means the acquisition of new knowledge that allows us to produce given outputs with fewer inputs or to produce entirely new outputs. Cost-reducing technological change, like any other source of cost reduction, has the effect of lowering prices in free, rivalrous markets.
Health-care markets, however, are anything but free, rivalrous markets. Instead, they are pervaded by countless government regulations, requirements, prohibitions, and other impediments to competition. A large share of the payments for health-care services is made by governments or by private payers whose own payment arrangements are constrained by tax rules and other regulations. When new health-care technology is developed, potential users may not be allowed to adopt it as they wish or to buy and sell freely the services whose production it enhances.
Many of the medical procedures, tests, instruments, and so forth that are available today did not even exist a few years ago. When people avail themselves of these innovations, they are not obtaining the same service at greater expense; they are obtaining a different (presumably superior) service, whose price is not readily comparable to the price paid previously for another type of service. A CAT scan or an MRI is not an X-ray. The newer types of images may cost more, but they provide more information to the user. Many medicines now in use are new products, not readily comparable with (presumably less effective) medicines used previously.
Health-care costs rise rapidly in our system because of the raft of government interventions in the relevant industries, especially those that involve setting the terms of reimbursement for services provided to patients. Other things being equal, the effect of technological change has been, as it always is, to lessen the costs of providing health-care services. But other things have decidedly NOT remained equal, in part because the process of technological change itself has transformed the very nature of what is involved in “health care.”
Let’s not blame technological progress, which is generally a benign and often a marvelously beneficial thing, for the baneful effects of government interventions in health-care industries.
David T. Beito
Iraqi legislators said Sunday that parliament had voted to lift the immunity of a Sunni Arab lawmaker who visited Israel.
Alusi at the funeral of his two sons who were killed in an assassination attempt in Baghdad in 2005.
The parliament has also banned Mithal al-Alusi from traveling outside Iraq or attending parliamentary sessions, they said.
Sunday's punishment was confirmed by Osama al-Nujeif, a Sunni Arab lawmaker, and Haider al-Ibadi, a Shi'ite lawmaker.
Aeon J. Skoble
Standard answers to this question in the literature are that these voters are in love with hierarchy, rigid, fearful of change, worshipful of authority, or just plain stupid.
I've long wished I could point out to these researchers that another answer to this question is right under their noses: maybe these people don't vote for you and your boys because they don't like smug, patronizing, narrow-minded, stuck-on-themselves jerks like you. This is an amateur opinion, though, based on no empirical research, so no one has any reason to take it seriously.
Haidt and his fellow researchers have come up with an answer that is the first cousin of mine: This phenomenon is about differences in values and in moral character. They have come up with evidence that conservative voters and liberal voters tend to view life through ethical categories that are profoundly different.
Briefly, liberals tend to think of people as individuals bound together my consensual relationships. Morality is a entirely about how one treats others, and is governed by norms like justice and reciprocity. Conservatives think this way as well, but they also think of morality, Haidt says, as something the binds people together into groups. Conservative moral responses are often governed by norms like authority and loyalty, as well as sanctity, purity, and the sacred. Liberals are Millian, conservatives are Durkheimian. Liberals are individualists, conservatives to some extent are tribalists.
Liberals and conservatives, according to Haidt, fail to understand each other because they are speaking different moral languages. Conservatives tend to use more of the full spectrum of moral responses that are available to human beings, and liberal discourse accordingly often has a thin and tinny sound to them.
I find this fascinating, but I am a little worried that Haidt has not interpreted his findings rightly. He argues that liberals might be able to get more conservative votes if they use more of the full spectrum of moral concepts -- apparently including, if I understand him rightly, seeing the criminal justice system as having a "quasi-religious importance" and seeing the state as "guarding the precious coherence of the whole" of society. I don't think that this would be to speak to conservatives in their own language at all.
Let me put it this way. Suppose that he had asked his informants to rate from "strongly agree" to "strongly disagree" a statement like Public officials have our best interests at heart, or maybe People who run governments are more likely to have good intentions and be well informed than people who head other sorts of organizations, such as families or business corporations. This is only a guess, of course, but I bet that liberals would agree with such statements more than conservatives. If that is so, I would take this to mean that liberals are the ones who are most likely to think of heads of state as a morally privileged priesthood.
It is true enough that conservatives sometimes seem to base policy initiatives on religious considerations. It is partly for religious reasons that they want the state to pursue, capture, and punish doctors who perform abortions (and perhaps the women who have them performed as well). Religious considerations might also be part of the reason why they are so interested in having the state torture and kill jihadists. But they don't think that these policies would bring more virtue into the world, nor that they would in any other way make the world a positively better place. These policies are purely negative moves against (as they see it) injustice and evil.
Of course the values they associate with the family are important to them, but that is why they have families. They want to get in touch with the sacred, but that is why they go to church. They don't go to the state for such things.
On the other hand, liberals do seem to see the state as closely associated with virtue and moral purity, and as a source of not merely happiness but to some extent of the very meaning of life itself. Conservatives often allow the state to overlap with the church, while liberals want the state to be a sort of church. I am just guessing here because, as may be obvious, I am neither a liberal nor a conservative myself, but this, it seems to me, is part of the difference between them.
On Wednesday, the TruthOut site had a fascinating article entitled"Lose Your House, Lose Your Vote." The gist: Republicans in Macomb County, Michigan (Detroit area) are using foreclosure lists in an attempt to disqualify voters who are listed on it. The justification is that 'foreclosed' people have no proof of residence within the voting district and, so, they no longer have a provable right to vote there; no one is suggesting that the people did not legally register to vote at some point. The real reason (not stated by the article): people who have been foreclosed are more likely to be black than white, poor than wealthy, outraged by Bush's handling of the economy rather than pleased with it. In short, foreclosed people in the Detroit area are likely to vote en masse for the Democrats. If successful, the number skewing by the Republicans could be significant; in July, one household in every 285 in Macombe (or 1,834 families) went into foreclosure. If you assume a modest 2 voters per household, that's close to 4,000 voters who could be neutralized from July alone.
Moreover, the GOP tactic is not isolated to Michigan. TruthOut explains,"In Ohio, Doug Preisse, director of elections in Franklin County (around the city of Columbus) and the chair of the local GOP, told The Columbus Dispatch that he has not ruled out challenging voters before the election due to foreclosure-related address issues."
I call the article fascinating because the heart-and-soul of this election is proceeding at the grassroots leve and the machinations in microcosm by both Republicans and Democrats reveal its true face. Besides which, I have taken a firm stand with myself: I am NOT sickened; I am NOT outraged; I am officially amused and bemused. That stance makes the morning coffee sit more easily on my stomach.
Jonathan J. Bean
Roderick T. Long
David T. Beito
Palin's comments yesterday on foreign policy, however, show her complete agreement with John McCain. The only difference is that she was relatively more candid than McCain in her hawkishness.
Roderick T. Long
[cross-posted at Austro-Athenian Empire]
Another gift from IP: Fox is trying to block the release of this cool-looking movie based on one of the greatest comic books of all time. (Conical hat tip to Geoff Plauché.) Rumor has it that the Tolkien estate is likewise trying to block the upcoming Hobbit movie(s).
Note: for those who support IP, but do so on consequentialist grounds (mainly incentival) rather than rights-based ones, wouldnt it be reasonable to allow the copyright holder only to demand a percentage of the profits, and not be able to block its release absolutely as Fox and the Tolkien estate are apparently seeking to do?
Although the ludicrously primitive Iraqi drones had no capacity whatsoever to harm the American public, the lethality of U.S. drones is another matter. Predator drones equipped with Hellfire missiles now provide the U.S. government with a means of flying over territory that U.S. ground troops dare not penetrate, observing activities on the ground, and killing people there with, shall we say, a minimum of due process.
In November 2002, for example, BBC News reported: “America’s Central Intelligence Agency (CIA) carried out an attack in Yemen that killed six suspected members of Osama Bin Laden’s al-Qaeda network, according to US officials. The men died when the jeep they were travelling in was hit by a missile fired from an unmanned CIA plane - believed to be a Predator drone, the US sources said."
U.S. forces have also used the Predator actively in Afghanistan and, most recently, in the Waziristan region of Pakistan. Today, I read an account of a drone attack near the town of Miramshah in North Waziristan that is reported to have “killed at least 14 people and injured 12 others,” including “at least six women and children.”
In Afghanistan, such aerial attacks, not always by drones, of course, have created a ticklish dilemma for the Karzai government as it pretends to be a real government, rather than the U.S. puppet it actually is. Official protests have become increasingly vociferous, though I have seen no evidence that the U.S. forces intend to change their operations in response.
What an awesome power the president and, with his authorization, his subordinate officers possess: they can kill people at will, including those persons’ wives and children, with no risk whatever of receiving return fire or other retribution. Surely this is the long-sought culmination of the Republican’s quest to establish “law and order.”
What leads me to remark on this matter, however, is not its technological nuts and bolts or its connection with master-puppet relations in southwest Asia, but rather the complete insouciance with which the American public greets reports of deaths by drone. I do not exaggerate if I say that the general reaction is “ho-hum.” Well, the average American says, that disposes nicely of another “bad guy.” The gratuitous murder of the bad guy’s family members, neighbors, and other innocent persons in the vicinity appears to create no blip on the average American’s moral radar screen. Perhaps Americans do not consider Yemenis, Afghanis, and Pakistanis to be real human beings whose right to life we are obliged to respect?
Is death by drone simply another occasion when the president’s having labeled a set of actions as a “war” establishes his moral authority to dish out death and destruction willy nilly?
Of course, reports of drone attacks usually refer to militants, Taliban forces, or al Qaida members. To this information, we might well respond: yeah, who says? If we are content to assume that U.S. intelligence agents, who nearly always get their information from collaborators in the target territories, really know whom they are targeting, then we are certainly easily satisfied. One does not have to make an extensive survey of U.S. government claims about Iraq, Afghanistan, Pakistan, and other places in southwest Asia over the past seven years to see that for the most part the U.S. commanders, from the Commander in Chief on down to the sweatiest noncom on patrol, are either more or less clueless or the biggest liars on the planet. I do not rule out that they are both.
The upshot is that the people who cooperate in getting to the point at which someone pushes the button to send the Hellfire toward its selected target may in fact not know for sure whom they are about the kill, or how many others will be killed along with this ostensible “enemy” or who those others are. Without launching into a massive geopolitical inquiry, we might well pause from time to time to ask, What are U.S. forces doing in Afghanistan and Pakistan anyhow? Surely they are not there to capture or kill the persons responsible for the crimes of 9/11, because they have already proved beyond all doubt that they are incapable of doing so (as Osama bin Laden’s videos periodically remind us). They are, however, all too capable of diverting their energies from that objective toward unrelated goals, such as attacking and occupying Iraq.
We Americans find ourselves, then, observing with extreme moral disengagement as the president and his subordinates murder persons whose identities remain uncertain along with assorted others whose only crime is being in the same area as the targeted individuals–after all, the Hellfire, which makes a very big blast, can scarcely be described as a surgically precise killing instrument.
Moreover, the president’s use of this remote-control-execution device apparently has no geographical limits, because, as he assures us, the “war on terror” has none. Today, a dirt road in Waziristan; tomorrow, the Santa Monica Freeway. It will be interesting to see, when drone attacks are carried out in this country, whether the American public gives a damn.
David T. Beito
But it's funny to argue that"Libertarians may agree with Greens on the need for a foreign policy based on nonaggression, but it is for very different reasons." I never understood this argument. There are a THOUSAND good reasons to oppose war. Libertarians should embrace every single one. Indeed, contra this LP rhetoric, the LP has long been focusing on too narrow a reason to oppose war: because it is unconstitutional, or because it's a waste of money. The biggest reason for a libertarian to support"a foreign policy based on nonaggression" is because, under libertarianism, aggression is per se evil. And on this issue, many Greens are at least as good as many libertarians. In fact, the LP has long tried to be somewhat neutral on war, since it's been seen as a debatable issue among libertarians. Well, if we libertarians can disagree with each other over mass murder, I don't see what a little domestic socialism is between friends.
After all, the LP is now the party of"the principle of individual sovereignty, limited government and lower taxation." With such a broad, watered down"philosophy," many leftists would fit right in: Most leftists I know think government is too unlimited and taxes are too high. Believing in lower taxes is not enough, and neither is believing that it's time to come home from Iraq. Real libertarianism is anti-tax, anti-war and anti-state, across the board, and yet ecumenical enough to work with fellow travelers on important issues. It seems the Libertarian Party, in trying to broaden its appeal by watering down its own dedication to the non-aggression principle, has actually alienated itself and marginalized its outreach. I would suggest the LP become less sectarian when it comes to working with people and become more principled in its own internal devotion to philosophy. Now it's sort of floundering with the worst of both worlds.