Distributism ideology always leads to socialism

Christians are concerned about the rise to dominance of transgenderism and same-sex marriage in the US. But they shouldn’t worry because R.R. Reno, editor-in-chief of First Things, has the solution: a kinder, gentler capitalism. His essay last October spawned a series of rigorous rebuttals at Public Discourse, the last of which is here. Reno lamented the economic “freedom” that Michael Novak promoted in his classic book, The Spirit of Democratic Capitalism, has destroyed morality in the country:

The “new birth of freedom” that Michael championed largely came to pass. And it has tended to weaken the two other legs holding up society: democratic institutions and a vital religious and moral culture. Michael observes that “greater incentives will stimulate greater economic activism.” True, but he did not recognize that ever-greater economic activity can crowd out political engagement and sideline religious and moral authority. This is what has happened. Capitalism, now global in scope, is swallowing up more and more of civic life, so much so that in some contexts economists and policymakers present free market principles as ironclad laws about which we have no choice. Dwindling manufacturing jobs, technological displacement, global flows of labor and capital—we are told we have no alternative. This is a cruel reversal of what Michael commended as the source of freedom and openness...We are drowning in freedom... Age-old expectations of marriage and children have become choices. We can even choose to become male or female.

The dismal science gets morality

Several authors want to make an honest woman of dismal science. Among them are Nobel Prize winner George Akerlof and Rachel Kranton who wrote Identity Economics, and Sam Bowles who penned The Moral Economy. Project Syndicate posted a quick review by Ricardo Hausmann who wrote, “Two recent books indicate that a quiet revolution is challenging the foundations of the dismal science, promising radical changes in how we view many aspects of organizations, public policy, and even social life. As with the rise of behavioral economics, this revolution emanates from psychology.”

Cognitive psychology spawned behavioral economics and its proponents have grabbed six Nobel prizes for telling us that humans are not always rational. Behavioral economists tried to corral the older Efficient Market Hypothesis (EMF), which actually said that in the long run professionals make the market behave rationally. EMFers always knew that in the short run people could act irrationally and often did. Behavioral and EMF economists talked past each other for the most part because the first dealt with the short run and the latter with the long run.

The new economics proposed by Akerlof and company want to improve behavioral perspectives by adding morality to the dismal science, which hasn’t been a part of mainstream economics since Adam Smith. Behavioral economics led to calls for the state to nudge people in the direction economists thought best for them,

such as forcing them to opt out of rather than into better choices....The new revolution assumes that when we make choices, we do not merely consider which of the available options we like the most. We are also asking ourselves what we ought to do.”

Akerlof and Kranton propose a simple addition to the conventional economic model of human behavior. Besides the standard selfish elements that define our preferences, they argue that people see themselves as members of “social categories” with which they identify. Each of these social categories – for example, being a Christian, a father, a mason, a neighbor, or a sportsman – has an associated norm or ideal. And, because people derive satisfaction from behaving in accordance with the ideal, they behave not just to acquire, but also to become....In the process, we may understand that we vote because that is what citizens ought to do, and we excel at our jobs because we strive for respect and self-realization, not just a raise.

Will political polarization cause divorce?

A few writers have wondered since the election of President Trump if the country is so fractured that another great divorce like that of the Civil War is in our future. Pew Research has provided the statistics to fuel the debate. Recently, John Hawkins wrote “Do Conservatives And Liberals Have Enough in Common to Keep A Country Together Anymore?” on Town Hall. As if counseling troubled marriage partners, Hawkins asked what we have in common?

The Constitution? Conservatives believe in it. Liberals believe in a “living Constitution” which is fundamentally no different than having no Constitution at all.

Religion? Conservatives tend to believe in Judeo-Christian values. Even atheists who are conservative tend to at least be friendly to those values. Liberals mock Judeo-Christian values.

What about patriotism? Conservatives tend to love their country. Liberals love this country like a wife-beater loves his spouse.

Capitalism creates psychos according to professor

Socialists continually flail stuffed monster versions of capitalism they have sewn together from pieces of their fevered imaginations. Usually I just ignore them because their versions of reality are irrational and I don’t want to be the greater fool who debates with a fool. But a recent assault on capitalism caught my attention because it came from the University of Chicago, Hayek’s old haunt.

John Rollert, an adjunct assistant professor of behavioral science at Chicago Booth and in-house ethicist, wrote “The savage ethics of ‘American Psycho’” for the Booth School of Business blog. Now it’s hard enough to get the average US citizen to watch a You-Tube video on economics, let alone read a book. When they do, they often come across nonsense such as this from Rollert:

Don't let socialists ruin Thanksgiving

The socialist who claims to be an evangelical, Jim Wallis, posted an article in his Sojourners magazine recently encouraging families to debate politics while trying to digest turkey and dressing, cranberry sauce and pumpkin pie. Here is a portion:

A sad reality in the past year or more has been our ongoing struggle to engage in difficult conversations — with our longtime friends, with coworkers, or even with family members across the Thanksgiving table. We’ve always had differences around social and political issues — racial justice, immigration, religious identity, health care, guns, etc. — but those divisions are starker than ever. Our traditional and social media have become so fragmented and polarized that we find ourselves practically inhabiting a different reality than those we disagree with; we only really hear or engage with the perspectives of those with whom we already largely agree. This is not a tenable situation for our country — or for our families. If we are to maintain meaningful relationships, we need to actively engage in difficult conversations with people we disagree with and find some common ground for the common good.

I believe that there are moral issues, values choices, and faith matters that lie just beneath the political headlines. Conversations around those — leading to action — can get us further than our political debates. I also believe there are two great hungers in our world today: the hunger for spirituality and the hunger for justice, and the connection between the two is absolutely vital now.

Socialists like Wallis want to politicize every aspect of life. Socialists should put on the left pant leg first, and condemn as racist everyone who does the right first. Socialists should brush their teeth from left to right and those who go the opposite direction are guilty of hating the poor and wanting them dead. The left hates all police so the right has to defend them even if they’re guilty. The right supports the military so the left feels compelled to trash it.

The Jekyll and Hyde nature of individualism and what is means for China

Nobel-prize winning economist Edmund Phelps ties economic growth to the spread of individualism in his forthcoming book. A November 3 Streetwise column by James Mackintosh, “What Martin Luther Says About Capitalism,” summarizes Phelps’ book:

The more individualistic a country is, the better it has used its labor and capital. ...even in recent years, countries with more individualistic cultures have more innovative economies. They demonstrate a link between countries that surveys show are more individualist and total factor productivity, a proxy for innovation measuring growth due to more-efficient use of labor and capital. Less-individualistic cultures, such as France, Spain and Japan, showed less innovation than the individualistic U.S. 

In God is a Capitalist I summarize the work of Geert Hofstede who trail blazed research on the connection between individualism and economic growth in the 1970s, Shalom Schwartz in the 1990s, and William Easterly in 2011. All found very strong correlations between individualism and economic growth.

Was the Reformation worth the deaths?

October 31 wasn't just Halloween. It was also the anniversary of Martin Luther nailing his 95 theses to the church door in Wittenburg, Germany and launching the Protestant Reformation. Tuesday was the 500th anniversary of that event. Economist Bryan Caplan asks if the lives lost in the wars that followed were worth it?

...the Reformation's main fruit was over a century of horrifying warfare. The Thirty Years' War, with a death toll around eight million, is the best known. The French Wars of Religion claimed yet another three million lives. These numbers are even more gruesome when you remember that Europe's population was far lower back then: For 1500 AD, Angus Maddison assigns twelve million to Germany and fifteen million to France.

For what did these millions die? The standard story, as far as I can tell, is that the Reformation helped free Christianity from the "corruption" of the Papacy. Priests stopped scalping tickets to heaven and supporting their mistresses with the proceeds. Is that supposed to be worth millions of lives? 

That's an odd question coming from a libertarian like Caplan because he is really asking “how much is freedom worth?” Of course, Caplan is an atheist so he sees no value in religious freedom.

Trump's tax plan doesn't excite

Knowing my interest in economics, several people have asked me what I think of President Trump’s tax plan. From what I understand, the plan would reduce corporate taxes and the top rate on personal income taxes. Politicians will spend enormous energy debating, editing and refining this plan over the next several months, but it amounts to little more than rearranging the deck chairs on the Titanic.

My attitude infuriates Republican groupies who see the plan as the salvation of the country. But we old folks have seen it before. President Reagan slashed the top personal income tax rate from about 90% to around 35% and the economy took off like a rocket, or so Republicans keep telling themselves. In reality, the economy rebounded sharply from one of the worst recessions in the 20th century if we sum the 1981 and 1982 recession that six months separated. Together they were as bad as the “Great Recession” that began in 2008. If the Fed or the government don’t do something stupid, as Hoover did with the Smoot-Hawley tariff, entrepreneurs will always make the economy rebound sharply after such a deep recession.

Next, Reagan pumped billions of dollars into the economy with a massive military buildup in his poker game with the USSR. The military spending caused the budget deficit and federal debt to explode. Republicans had until then opposed deficit spending for long periods but learned to love it under Reagan and still seem to be very fond of it. Deficits and the debt don’t disturb anymore.

Millennials are socialists for a reason part 2

Last week I wrote about the power of family values and envy to direct the political philosophies of young people and how that has become apparent in the tilt of millennials towards socialism. There is another reason why millennials are more socialist, although it may be a rationalization for it than a cause. That is the socialist propaganda that asserts the US and UK are free market economies.

An article at project-syndicate.org, “The Case Against Free-Market Capitalism” by Ngaire Woods, perpetuates the myth:

Free-market capitalism is on trial. In the United Kingdom, Labour Party leader Jeremy Corbyn accuses neoliberalism of increasing homelessness, throwing children into poverty, and causing wages to fall below subsistence level....

Just a quarter-century ago, the debate about economic systems – state-managed socialism or liberal democracy and capitalism – seemed to have been settled. With the Soviet Union’s collapse, the case was closed – or so it seemed.

Since then, the rise of China has belied the view that a state-led strategy will always fail, and the global financial crisis exposed the perils of inadequately regulated markets.” Woods calls the US “the paragon of free-market democracy.

Young people are socialist for a reason

Young people drove Bernie Sanders' campaign and near upset of the establishment Hillary Clinton in the latest election to the surprise of many.

An old saying goes, “If you’re not a socialist when you’re young you have no heart; if you’re still a socialist when you’re older you have no brain.”

Socialism comes naturally to humanity. Hayek thought that family life was partly to blame. Good moms and dads take care of the children, provide food and security, and distribute those equally among the children. Children get very upset when they think one sibling receives more of anything than the rest or enjoys special treatment.

Then we leave the safety of the home. venture into a more public sphere in school and we carry our family morality with us. We think school should function like a larger family with the teachers and principal substituting for mom and dad and it does that the most part. Eventually we get a job, but we still view the larger society and politics through the glasses of our family morality. The political elite, especially the President, becomes the “father” of the nation who should make certain that the benefits of his regime are evenly distributed and no one gets special treatment.

Hayek points out that the danger of such thinking lies in the fact that in the family we know everyone well. Even in larger groupings, such as school or a tribe, we are still familiar with most people and know their circumstances. But a nation is so large that citizens know only a tiny portion of the population and are dealing with strangers much of the time, especially in business. Transactions with strangers who don’t have your welfare in mind as mom and dad did require different rules of engagement. Treating family members as if they were strangers would destroy families just as using family values in dealing with strangers will destroy society.

The common good isn't so great!

A lot of ink is spilled in Christian publications promoting the concept of the common good. I’m not such a big fan and here is why.

The concept of the “common good” came from pagan Greek and Roman philosophy. As Peter Brown shows in several of his books on the history of the Church after Constantine, such as Through the Eye of the Needle, churches had a habit of making bishops out of recent converts from the Roman nobility. They did so for practical reasons: those converts had good educations, political power through family connections and wealth to contribute to the church and the poor. But those converts had been educated at the feet of pagan philosophers, especially Aristotle and Cicero, and were often babes in theology. So when they became bishops they preached what they knew, pagan philosophy that seemed agreeable to Christianity. Among the more prominent concepts carried over from paganism were the veneration of virginity (imitating the Vestal Virgins) and celibacy, contempt for business and wealth, and the common good.

What did the common good mean? Benjamin Constant wrote about the “freedom” and “common good” enjoyed by ancient Greeks and Romans in his essay “The Liberty of the Ancients Compared with that of the Moderns:”

Adam Smith doesn't explain the wealth of nations

Adam Smith wrote in his Wealth of Nations,

That security which the laws of Great Britain give to every man that he shall enjoy the fruits of his own labor, is alone sufficient to make any country flourish... The natural effort of every individual is to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, ... capable of carrying on the society to wealth and prosperity. 

Smith missed two things that made Great Britain unique - individualism and admiration for commerce. He missed them in the same way that a fish might not think about water. Smith grasped that taxes punished farmers in France to the point that they refused to improve their plots. And he understood that rulers and nobility in the Ottoman Empire and China often confiscated the wealth of successful people and so discouraged them from investing.

The US rejected Obamacare in 1918

What a difference a mere hundred years makes! US voters rejected mandatory health insurance, or Obamacare, at the turn of the last century. It took supporters almost another century, but they finally won. 

For a quarter century before WWI, many of the nation’s young people had gone to Germany to complete their college education and had returned determined to recreate the US in the image of socialist Germany. Richard Ely was one. He founded the American Economic Association for that sole purpose. He and economist Irving Fisher would lead the drive for universal, mandatory healthcare insurance.

At the time, middle class and wealthier Americans paid a fee each time they visited a doctor. But the fees were too high for the working poor, so they had organized into mutual aid societies to help each other with medical costs. Known as lodges, such as the Elks, or secret societies such the International Order of Odd Fellows (IOOF) or the Free Masons, or just fraternal organizations, mutual help societies had existed for centuries. They followed the ancient guild practices of mutual aid to craft members. David T. Beito beautifully writes their history in his book From Mutual Aid to the Welfare State: Fraternal Societies and Social Services 1890-1967, published by the University of North Carolina Press in 2000.

The father of Nazism and ANTIFA violence and what it means for the future

The violence of the demonstration by neo-Nazis and white supremacists in Charlottesville, West Virginia recently shocked the mainstream media because of the media’s ignorance of history. We have seen it before with the anarchists at the turn of the last century, in the clashes between Nazis and Communists in Germany before WWII and in the student riots of 1968 in the US and Europe. They all have the same ideological father in George Sorel according to Mises who wrote in The Anti-Capitalist Mentality in 1956:

The most pernicious ideology of the last sixty years was George Sorel's syndicalism and his enthusiasm for the action directe. Generated by a frustrated French intellectual, it soon captivated the literati of all European countries. It was a major factor in the radicalization of all subversive movements. It influenced French royalism, militarism and anti-Semitism. It played an important role in the evolution of Russian Bolshevism, Italian Fascism and the German youth movement which finally resulted in the development of Nazism. It transformed political parties intent upon winning through electoral campaigns into factions which relied upon the organization of armed bands. It brought into discredit representative government and "bourgeois security," and preached the gospel both of civil and of foreign war. Its main slogan was: violence and again violence. The present state of European affairs is to a great extent an outcome of the prevalence of Sorel's teachings.

The intellectuals were the first to hail the ideas of Sorel; they made them popular. But the tenor of Sorelism was obviously anti-intellectual. He was opposed to cool reasoning and sober deliberation. What counts for Sorel is solely the deed, viz., the act of violence for the sake of violence. Fight for a myth whatever this myth may mean, was his advice. "If you place yourself on this ground of myths, you are proof against any kind of critical refutation." What a marvelous philosophy, to destroy for the sake of destruction! Do not talk, do not reason, kill! Sorel rejects the "intellectual effort" even of the literary champions of revolution. The essential aim of the myth is "to prepare people to fight for the destruction of what exists."

According to the Wikipedia article on him,

Sorel denounced the war and in 1917 praised the Russian Revolution, which was later printed in an official Soviet Union publication, Russian Soviet Government Bureau, calling Lenin "the greatest theoretician of socialism since Marx and a statesman whose genius recalls that of Peter the Great.”[12] He wrote numerous small pieces for Italian newspapers defending the Bolsheviks. Less than one year later in March 1921, Sorel turned his praise towards a rising Fascist leader in Italy, writing that “Mussolini is a man no less extraordinary than Lenin. He, too, is a political genius, of a greater reach than all the statesmen of the day, with the only exception of Lenin…”[13]

Zeev Sternhell mentions frequently Sorel [33] as one of the men who led the way to the fusion of the left-wing revisionists and of the right-wing ultranationalists into what later became fascism....Thus, the workers must return to strikes and violence as their main political tool, so Sorel says. This gives the workers a sense of unity, a return to dignity, and weakens the dangerous and mediocre middle-class in their struggle for power, and their attack on capitalism.

Politics according to the Bible – Keynesian conservatism

Outside the Department of Commerce building in DC are two statues of giant draft horses with muscular men restraining them bearing the title "Man Controlling Trade." It's a great metaphor but the wrong object. The drafts horses should represent the state, not trade, because the best government is that which governs least.

Unfortunately, theologian Wayne Grudem shows that he does not appreciate the value of limited government in his Politics According to the Bible: A Comprehensive Resource for Understanding Modern Political Issues in Light of Scripture. Grudem holds a PhD from Cambridge and is author of Systematic Theology. Grudem intended his to guide readers to what the Bible has to say about politics. As everyone “knows” the Bible is difficult to interpret:

But who can understand the Bible rightly? And who is to decide what is a right interpretation? My response is that it is not impossible to understand the Bible rightly.... Among responsible evangelical interpreters of the Bible there are vastly more areas of widespread agreement than disagreement....

How Baptists do economics

Baptists form the largest Protestant group of Christians in the US and so could have a large impact on how US voters understand political economy. But do Baptists have anything unique contributions to offer on economics? Chad Brand, professor of Christian theology at The Southern Baptist Theological Seminary in Louisville, KY, answers that in his 2012 book Flourishing Faith: A Baptist Primer on Work, Economics, and Civic Stewardship.

The most important contribution Baptists make is their history of distrust of government resulting from centuries of persecution. Lutheran, Reformed and Anglican Protestants all formed close ties with the state from their births. They were supported by taxes and used the brutal power of the state to enforce their particular views, often against Baptists, whereas Baptists generally insisted on a separation of the two spheres.

Readers today might be confused about that historical antipathy toward the state because since the rise of the Moral Majority in the 1980s Baptists seem to have decided to take a shortcut to building the Kingdom of God by using the power of the state. Dr. Brand reminds us, “Scripture teaches that all humans are sinners. A PhD from Harvard does not diminish that, and might even make it worse if those elites believe that their education makes them morally better people.” Brand echoes the public choice political economy of James Buchanan that economists and politicians are not saints or angels and usually have some goal in mind besides the public good:

Supervisors are killing your business!

Research has shown that high turnover rates at companies are largely due to supervisors who are jerks. Why should that matter to business people? One reason it should be important is because the expenses of attracting, hiring and training good workers are much higher than business people recognize and can mean the difference between success and failure. As a Forbes article said,

...people don’t leave jobs, they leave managers, and a survey by B2B marketplace Approved Index confirms that this adage is true. In its survey of 1,374 employees in the U.K., nearly half (42%) of them have left a job because of a bad boss and almost a third of them feel their current boss is a bad manager. When asked why they disliked their managers, 41% cited a lack of recognition, while 40% said they felt overworked.

One of the reasons employees feel overlooked, overworked and underappreciated is because supervisors focus on pleasing the manager above them, not on developing a well-functioning team below them. That is human nature.

White supremacy is part of the left, not the right

The white supremacist organizers of the tragedy in Charlottesville, WV last week called their rally “Unite the Right.” That title reveals a deep ignorance of history and sorry reasoning skills. Racism has never been part of any definition of the right by any leader of the right in history.

There are two divisions within the right and left today – economic and social. Economically, the left is socialist and demands state control of the economy; the right favors free markets. The free market right opposed slavery in the 19th century, which caused the left, socialists who favored slavery, to give their discipline the name of the “dismal science.” See Wikipedia’s article on Thomas Carlyle.

Leaders of the left have often claimed that slavery was the natural consequence of capitalism, in spite of the historical evidence that all of the leaders of capitalism opposed slavery. Capitalists have always and at all times insisted that the only job of the state is to protect the life, liberty and property of every person equally. The left knows this but doesn’t want the public to know it. So they lie. Slavery was not a market failure or the logical result of capitalism. Slavery was the largest failure of government in the history of the West.

Is God a Capitalist?

The title is similar to that of my book, God is a Capitalist, but this is a different book that I only recently discovered and it makes some really good points. 

Pastors in the US have abandoned their flocks to the mercy of atheist wolves according to Gregory B. Grinstead in his book Is God a Capitalist? God’s Perspective on Governments and Economic Systems. Grinstead writes with authority, to evangelicals at least, having pastored the Palmdale Christian Fellowship for over 25 years.

Grinstead is referring to the desertion of pastors on the subject of economics and government. I don’t have the author’s background as a pastor, but my own experience and reading suggest that pastors throughout history have tended to baptize the status quo. If tyrannical emperors were in power that was God’s will. Now that democratic socialism is in fashion, that’s God’s will. Christianity failed to develop a sound, Biblical theology of government and economics until the 16th century when Catholic scholars at the University of Salamanca devoted their work to the task. Their principles bore miraculous fruit for three centuries, but it has all been forgotten in the deluge of atheistic socialism that began a century ago.

Zuckerberg – Embarrassed by riches

Mark Zuckerberg, the founder of Facebook, attracted a lot of attention with his commencement speech last May at Harvard, the school he dropped out of. He started off with some good advice to the graduates:

Now it’s our turn to do great things. I know, you’re probably thinking: I don’t know how to build a dam, or get a million people involved in anything.

But let me tell you a secret: no one does when they begin. Ideas don’t come out fully formed. They only become clear as you work on them. You just have to get started.

If I had to understand everything about connecting people before I began, I never would have started Facebook.

Movies and pop culture get this all wrong. The idea of a single eureka moment is a dangerous lie. It makes us feel inadequate since we haven’t had ours. It prevents people with seeds of good ideas from getting started. Oh, you know what else movies get wrong about innovation? No one writes math formulas on glass. That’s not a thing.

Then he wanders into fantasy land. But I want readers to understand that I’m not criticizing Zuckerberg alone because he is merely regurgitating all of the nonsense that he swallowed through public education, college and the media, all of which promote unvarnished Marxism. He said,

Let’s face it. There is something wrong with our system when I can leave here and make billions of dollars in 10 years while millions of students can’t afford to pay off their loans, let alone start a business.

Look, I know a lot of entrepreneurs, and I don’t know a single person who gave up on starting a business because they might not make enough money. But I know lots of people who haven’t pursued dreams because they didn’t have a cushion to fall back on if they failed.

Even at his young age, Zuckerberg should know that there are thousands of angels investors and venture capitalists scouring the country looking for the next killer app like Facebook. No one who has an idea for anything will be short of interested listeners. What’s really lacking are 1) people willing to put in the hard work to refine their ideas and 2) good ideas. No one deserves to have someone else pay to implement their idea if it’s a lousy idea. So how do we know it’s a good idea? Someone else is willing to pay to make it a reality. Experienced angel investors and venture capitalists do the hard work of analyzing ideas and risking their wealth to see that good ideas bear fruit. 

Then Zuckerberg delivers the socialist pitch:

We all know we don’t succeed just by having a good idea or working hard. We succeed by being lucky too. If I had to support my family growing up instead of having time to code, if I didn’t know I’d be fine if Facebook didn’t work out, I wouldn’t be standing here today. If we’re honest, we all know how much luck we’ve had.

How can it be luck if he spent so much time coding? Luck is the spin of a roulette wheel. Success at it requires no skill, hard work, intelligence or good ideas. If luck, then a defensive lineman on the Harvard football team who never wrote a line of code would have as much chance at starting Facebook as Zuckerberg did. But he admits he did work a little on the project, and suffered criticisms, before he succeeded :

Ideas don’t come out fully formed. They only become clear as you work on them. You just have to get started. If I had to understand everything about connecting people before I began, I never would have started Facebook....

But be prepared to be misunderstood. Anyone working on a big vision will get called crazy, even if you end up right. Anyone working on a complex problem will get blamed for not fully understanding the challenge, even though it’s impossible to know everything upfront. Anyone taking initiative will get criticized for moving too fast, because there’s always someone who wants to slow you down.

The washing of his brain in socialist ideology through almost sixteen years of the US educational system programmed Zuckerberg to ignore reality and fixate on socialist fantasy. In spite of his insight and hard work, his entrepreneurial skills, he has been trained like Pavlov’s dog to express false humility and give credit to luck. Christians might ask why not claim it was an act of God? But that’s another essay. Socialists worship luck today. He continues:

Previous generations fought for the vote and civil rights. They had the New Deal and Great Society. Now it’s our time to define a new social contract for our generation.

We should have a society that measures progress not just by economic metrics like GDP, but by how many of us have a role we find meaningful. We should explore ideas like universal basic income to give everyone a cushion to try new things.”

And yes, giving everyone the freedom to pursue purpose isn’t free. People like me should pay for it.

Of course, he and his wife created the Chan Zuckerberg Initiative to give much of their wealth to help others and that is very admirable, but he has not done anything that most other wealthy people in the US have not done since the founding of the nation. The wealthy in the US have always been very generous to the poor. So why admire the socialist programs of the New Deal and Great Society? And why promote universal basic income? And why credit luck for his success? Because giving his money is not penance enough for his success. He will still be very rich and it embarrasses him.

Helmut Schoeck explains the psychology of wealthy people promoting socialism in his amazing book, Envy: A Theory of Social Behavior. Most people suffer incurable envy of those in their social class who succeed more than others. They resent successful people and want to see them crash and burn. Before he achieved his dream, Zuckerberg probably envied (resented) the success of others, so he knows what others are thinking of him. He seeks to deflect the resentment of others and he knows the ritual to accomplish it, having watched other wealthy people perform it often. He must put on his wool shirt and attribute his success to something other than his own work and abilities, such as luck. And he must declare the system to be unfair and call for greater “justice,” that is, wealth redistribution, by the state. These rituals performed on a regular basis pacify the resentful spirits of the media and academia.

If Zuckerberg were a Christian he would be able to handle his amazing success much more gracefully. He would find no virtue in recommending a satanic system that oppressed the people of the USSR, China, North Korea, Venezuela, Greece and many other socialist countries. He would be grateful to God, give a portion of his wealth to the poor and enjoy his wealth, knowing he deserves it.

 

As Solomon wrote, "A person can do nothing better than to eat and drink and find satisfaction in their own toil. This too, I see, is from the hand of God," Ecclesiastes 2:24.

Macronomics will not save France

Anatole Kaletsky wrote in “A ‘Macroneconomic’ Revolution?” that the new French President has figured out the golden mean of economic policy that will lead France out of the swamp of despair into which its economy has sunk for a decade.

Typical of socialists, Kaletsky blames Europe’s lost decade on too much capitalism, or as he says, market fundamentalism. In the great film Casablanca, the Police Chief tells his deputy to “round up the usual suspects” after a crime has been committed. There was no effort to investigate or search for evidence. He had a standard set of criminal types that he harassed on a regular basis in order to appear to be doing something. Socialists respond to every economic crisis by rounding up one usual suspect – capitalism.

The US had become increasingly socialist since the election of Wilson. A nation that takes 45% of GDP for all levels of government, has over three million pages of business regulations that grow at the rate of 100,000 pages per year, and most of its citizens get their income from the government cannot be considered a capitalist or market fundamentalist nation. Europe has been socialist much longer. See Hayek’s Counter-Revolution in Science and Bastiat’s essays for evidence from the 19th century France. Germany was completely socialist by 1918 and still indicted capitalism for its problems.

JP Morgan Chase CEO explodes over socialist policies

Jamie Dimon, CEO at JP Morgan Chase, exploded during a recent earnings call over Congress’ failure to jump start the US economy. He said,

It’s almost an embarrassment being an American citizen traveling around the world and listening to the stupid s--- we have to deal with in this country… And at one point we all have to get our act together or we won’t do what we’re supposed to for the average Americans.

Since the Great Recession, which is now 8 years old, we’ve been growing at 1.5 to 2 percent in spite of stupidity and political gridlock, because the American business sector is powerful and strong… What I’m saying is it would be much stronger growth had we made intelligent decisions and were there not gridlock. 

He added that the United States has become “one of the most bureaucratic, confusing, litigious societies on the planet,” and that “it’s hurting the average American that we don’t have these right policies.”

Macron tries extortion on Merkel

French President Emmanuel Macron pressured German Chancellor Angela Merkel recently to bail out the failed southern conference of the Big EZ. According to a Dow Jones Newswires report,

The French leader said the eurozone has deepened disparities, loading indebted nations with yet more debt and making competitive countries even more competitive.

France's public debt stands at more than 96% of economic output, compared with 68.3% in Germany at the end of last year. Unemployment is above 9% in France but closer to 4% in Germany.

Mr. Macron is calling for a shared eurozone budget that could be used to for a variety of reasons, including helping currency members in economic distress, believing that would help address flaws revealed by the 2010 debt crisis.

For the eurozone to have a future, the French leader said, it must have "powerful solidarity mechanisms."

The French leader said Germany should assist with a stimulus of public and private investment in Europe and work with France to find "the right macroeconomic plan."

OECD wants every nation to be Greece

Greece's financial troubles have slipped from the headlines lately, but the financial apocalypse that began there with the Great Recession continues. Now the Organization for Economic Cooperation and Development has made it clear it wants the rest of the developed world to imitate Greece, as it stated in a recent report:

Fiscal redistribution through taxes and transfers plays a crucial role in containing the impact of market income inequality on disposable income… Policies aimed at promoting growth should consider how growth will have an impact on many other outcomes, and how to ensure that those policies avoid the “grow first, distribute later” assumption that has characterised the economic paradigm until recently. It is now clear that growth strategies need to consider from the outset the way in which their benefits will be distributed to different income groups. … Inequalities tear at the fabric of our societies. Inequality of incomes translates seamlessly into inequality of opportunities for children, including education, health and jobs, and lower future prospects to flourish individually and collectively. …inequalities are reaching a tipping point.

Strengthening inheritance and gift taxes can support inclusive growth. … Inheritance taxes can…help achieve intergenerational equity goals. …In order to be effective, inheritance taxes must also be combined with taxes on gifts and wealth transfers during the taxpayers’ lifetime, as well as with measures to address avoidance and evasion.

Sufficiently generous unemployment benefits and social-assistance systems with a wide coverage are also a key.

Seattle proves economics is not physics

The ongoing fight about min wage in Seattle magnifies some of the things wrong with mainstream economics. In 2014 the city council voted to phase in a $15 wage over the next few years and in 2015 increased the wage floor from $11 to $13 per hour. Recently, the University of Washington conducted a study that showed the increase caused low-wage workers’ annual pay to go down and overall low-wage jobs to also shrink.

Keep in mind that mainstream economists cling to their gods, guns and economic models because, as they insist, math makes economics a science like physics. Yet with all of the veneration of the math and statistics, I have seen no econometric study such as this one change anyone’s mind or change mainstream economics in my 40 years of watching the game. The usual suspects in economics greeted the study in the same old way they have met with similar studies for the past half century: the right (free market) celebrated and the left (socialists) poo-pooed it.

No one sees such behavior in the truly math oriented sciences such as physics. There aren’t five schools of physics that dispute gravity or the speed of light as there are five different schools of macroeconomics. But why aren’t the econometric analyses of economic data more convincing? The problem lies with the subject matter. Physics is child’s play compared to economics because gravity and light and electrons always act the same way under similar circumstances. Humans, the subject of economics, don’t. And the number of relevant variables in a physics problem is small compared to those in economics, not to mention the complex interactions.

Christian laissez-faire built this country

I have been looking for an economics text book for non-majors for years and finally found it in Francis Wayland’s Elements of Political Economy – published in 1837. It’s shocking how little good economics has changed in almost 200 years. But first, readers need a little background in order to appreciate the book.

Puritan economics in the US followed Calvin’s ideas closely and gave absolute control over commerce to the government. However by the turn of the eighteenth century, Puritan ministers no longer equated commerce with greed, but with “industriousness and prudence, moral reform and Protestantism’s interest in the world. They maintained that providence used overseas traders to protect English liberty and spread civilization,” according to Mark Valeri in Heavenly Merchandize: How Religion Shaped Commerce in Puritan America. And Isaac Newton, having been a great theologian as well as history’s greatest scientist, influenced Puritan pastors. Instead of viewing the hand of God directly causing events in the physical world, Newton described “nature as a system integrated into a regular pattern by universal physical laws” that God had created. God worked indirectly through natural laws.

Soon theologians began to find similar natural laws working in society to promote prosperity and order as well as to restrain vice. Prosperity no longer resulted from God’s favor at a Christian’s devotion but from following the natural laws of the market, and financial hardship was not a sign of God’s wrath as much as failure to understand and abide by God’s natural laws according to Valeri.

Writers on both sides of the Atlantic probed the meaning of the economy as a subset of this cosmic order. They described commerce as a series of natural exchanges that, by the law of nature, coalesced into a balanced system. This reading prompted pastors and merchants to imagine the natural dynamics of exchange as a divinely sanctioned, moral good. Innate desires brought people together into networks of trade that depended on mutuality, confirming the natural integration of variety into a whole; as Foxcroft put it, nature “impresses men with a deep sense of the bonds and benefits of society; and so excites them to feel the good of others” as they pursued their own economic good, “rendering their work daily more and more natural.” God designed the market system that ran by moral laws.

PhD’s and computers explain market volatility since 1980

Richard Bookstaber’s 2007 work, A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation, examines the huge increase in stock and bond market volatility since 1980. He notes that GDP volatility has shrunk while market volatility has increased. And if you graph the S&P 500, especially the year-to-year change, the massive increase in volatility is obvious.

Bookstaber, who has a PhD from MIT, writes that before the rise of computer trading, investment banks tended to hire college graduates who were also former athletes because managers thought they had the right temperament to handle the stresses of trading. Then computers came along and of course they need models to work with. Who had better models than PhD professors at universities? So the banks loaded up on PhD’s to create models for computer trading.

Bookstaber provides an insider’s account of the victories and tragedies of investment banking and arbitrage trading from the mid-1980s on because he labored in the trenches as a risk analyst, much of the time with Salomon Brothers. Two things stand out to Bookstaber: computer trading and innovation.

Trump still off key about trade

At the recent summit held in Europe of the seven richest countries, the G-7, President Trump trashed the German trade surplus, “The Germans are bad, very bad. Look at the millions of cars that they’re selling in the USA. Horrible. We’re gonna stop that.” German newspapers translated “very bad” as “evil.” Many "reputable" financial publications, including the Wall Street Journal, sang harmony with Trump. Here is a sample of the lyrics:

Germany’s current account surplus–the amount its exports outpace its imports–recently hit 270 billion euros, close to 8.9 percent of its gross domestic product. This upward trending trade surplus shows little signs of slowing and Germany’s current account balance may rise above 9 percent of its this year. Despite years of criticism from the Obama administration and the International Monetary Fund, Germany has shown no willingness to address the persistent imbalance.

Germany’s persistent current account surpluses add to German GDP while they subtract from the GDP elsewhere around they [sic] world. Germany is not just exporting products–it is exporting stagnation, job losses, and deflation.

Germany’s trade surplus with the U.S. is particularly large and damaging. It exports high-end manufactured goods to the United States–such as cars, auto-parts, chemicals and airplanes. Cars, for instance, make up more than 10 percent of its exports to the U.S. A more balanced trade in these goods would mean many more high quality jobs in the United States in regions that badly need them.

D-Day lesson - decentralize decision making

June 6, 1945, Allied forces invaded the Nazi fortress of Europe. Not everyone cheered. General Douglass MacArthur said of the invasion that he would court martial the SOB who had planned it. Of course, he knew well the planner. He had worked as MacArthur’s aid for several years: General Dwight Eisenhower. The mass slaughter of Allied troops in the invasion horrified MacArthur. His philosophy had been to land where the enemy wasn’t and then attack. In dozens of amphibious landings MacArthur lost fewer men than the Allies lost at Anzio alone. Churchill had lobbied for the main landing in the south of France where the German presence was much thinner. Instead, Eisenhower and the Allied command chose to jump right into the the teeth of German troops in Western Europe.

The D-Day invasion succeeded in spite of being a very poor military strategy. But why? The Germans held a significant advantage and were very confident. The answer lies mostly in the field of organizational behavior, specifically, the issue of centralized versus decentralized decision making. In organizational theory, the larger and more complex the situation, the more decentralized decision making must become. Centralized decision making works best with routine and simple operations.

Reality mugs mainstream economist – what it means for investors

A conservative is just a liberal (socialist) who has been mugged by reality. Reality can sometimes change an old economist, too. That happened to Richard Bookstaber and he writes about it in his latest book The End of Theory: Financial Crises, the Failure of Economics, and the Sweep of Human Interaction.

Bookstaber, a Ph.D. in economist from the Massachusetts Institute of Technology, ran risk management for Morgan Stanley, Salomon Brothers and Bridgewater and worked at the Treasury Department and the Securities and Exchange Commission. He is now the chief risk officer for the investments office of the University of California. Not a bad resume. He has a message for mainstream economists – the weakest part of mainstream economics is the math:

We are not robots with fixed, mechanistic responses to inputs. We face a changing world that, in turn, changes the context with which we view the world, and that changes us, again all the more so during periods of crisis. The critical implication is that we cannot plug numbers into a model and solve for the future. We cannot know where we will end up until we take the journey. And we cannot retake that journey once completed.

Socialists frighten about climate change and AI

I’m sure Elon Musk would be highly offended to know that he is a promoter of Marxism. After all, look at the number of businesses he has started. But he has admitted he only started those companies to promote change to cleaner forms of energy until the governments of the world recognize the problem of global climate change and pass the necessary laws to save us. By promoting global climate change (GCC) hysteria and fear about artificial intelligence (AI), while asserting that the problems are so large only governments can solve them, he is unwittingly promoting socialism. It’s an old socialist technique.

After centuries of attempts at socialism beginning with the Spartans, Plato’s Republic and Christian monasteries, atheists and deists (sentimental atheists) introduced the latest iteration of socialism in early 19th century France. Henri de Saint-Simon convinced his followers that the problems of the world were so large than only powerful states could solve them. He considered the chief problems to be poverty and inequality. Socialists were shocked and awed by the meager advances in the natural sciences so Saint-Simon proposed that a junta of scientists, led by a mathematician, should work together to solve France’s problems and dictate the solutions to compliant citizens. That has been the model for socialism since.

Investing tips from socialist Soros

Even though George Soros is a devout socialist, he knows something about investing. He writes about a typical cycle in the stock market in his book The Crisis of Global Capitalism. He calls his theory “reflexivity,” but the general idea is that the stock market usually tracks profits closely until near the end of the cycle.

As the reader can see from the chart below, the variance in profits isn’t as great as that in stock prices. The two begin to diverge about halfway through the expansion. All that means is that the PE ratio begins to inflate because credit expansion by the Fed is pumping new dollars into the economy. 

If stock prices remained tethered to earnings, stock prices would level off. To prevent that, the media send in the clowns. In a rodeo, clowns distract the bulls to prevent them from stomping the cowboy into the arena dirt, but in the market the clowns distract the investor. The clowns pull from their shirt sleeves old tricks to make the fundamentals look better. They use performance measures that rely on creative accounting, alternative profit measures, pro forma statements, and complicated valuation techniques. The clowns break the connection to earnings so that prices continue their ascent unrestrained by fundamentals. If the market was an actual rodeo, the clowns would be lynched for letting the bulls pulverize the cowboys.

We are all socialists now – review of Demons of Democracy

If the US has as tolerant society as it advertises, then why did the mainstream media attack North Carolinians so viciously when they voted to keep traditional bathrooms? And why do bakers go to jail for refusing to crown a wedding cake with two men? Doesn’t diversity and tolerance require, well, diversity and tolerance? Not in the smoky hall of warped mirrors that is liberal democracy according to Polish professor and author Riszard Legutko in The Demon in Democracy: Totalitarian Temptations in Free Societies. He does not mention Hans-Hermann Hoppe’s Democracy: The God that Failed but he makes many similar points.

Legutko is a professor of philosophy at Jagellonian University in Krakow and a writer on politics and philosophy. He co-founded the Centre for Political Thought after the collapse of communism. He has been elected to parliament, held cabinet positions and is currently a member of the European Parliament.

Mamas don’t let your babies turn out to be economists

The credibility of mainstream economics took a punishing punch from the Great Recession that hit in 2008. It should have been a fatal blow, but the profession had made itself nearly impervious to the effects of empirical data. The field took so much criticism that Harvard economist Dani Rodrik decided to write a book to defend it - Economic Rules: the rights and wrongs of the dismal science.

This is the book readers should give to any poor soul considering a degree in mainstream economics. Hopefully it will discourage them. It’s easy to read. Rodrik is a much better writer than most economists. And it’s not too long, about 200 pages.

Brick and mortar retail is falling down

Brick and mortar retail is dying according to many reports. Here’s an example:

American retailers are closing stores at the fastest pace ever.

Roughly 10% of mall retail space - or 1 billion square feet - is on the verge of being closed, having rents slashed or transformed into something else. And in March, retailers cut 30,000 jobs, the same as in February.

It was the worst two-month span of job cuts for the sector since 2009 - during the depths of the Great Recession!

This year, as many as 8,640 total stores may close - which would outpace the 6,200 closed in 2008.

And as I've pointed out for years, it's because the companies failed to adapt. They were slow to recognize the changing tides and are now being destroyed by a single company... Amazon .”

Morgan Stanley says ride the raging bull

Morgan Stanley’s analysts suggest running with the bulls this week. They recently announced that they expect the S&P 500 to rise 15% in the next twelve months and possibly to reach 3,000, a gain of 27.4%. They wrote, 

Although optimism is a late cycle phenomenon, history tells us the best returns often come at the end."

Essentially, they are shouting “the end is near!” but “party while you can!” They credited President Trump for their optimism:

While acknowledging that the pro-business agenda of President Trump has awakened "animal spirits" in the economy, the Morgan Stanley strategists feel that Trump has simply "turbocharged" a global business recovery that already has been underway since the first quarter of 2016. They note that one of the worst economic contractions in 30 years, as measured by U.S. GDP, bottomed out a year ago. Since then, their favorite economic indicators have been accelerating, including those capturing business conditions, business outlook and global trade.

Creative destruction becoming less destructive

Investors should worry about productivity growth of the firms they invest in because it is one of the major determinants of profits and market share. Innovation should drive old technology firms out of business and improve productivity but that hasn’t been the case for half a century.

Productivity growth has been falling since about 1970 for many companies according to Andrew Haldane, Bank of England Chief Economist, in his speech “Productivity puzzles” at the London School of Economics last month in which he reported what’s happening to productivity in the UK and globally.

Haldane said the future is already here — it’s just not very evenly distributed. Some companies are highly innovative with rapidly growing productivity, but most lag far behind. There are broad differences in productivity growth between advanced economies and emerging market economies, between the US and other advanced economies, across industries and within industries. After providing the fruits of excellent research, however, Haldane offered an anticlimactic solution:

The Mayfield Commission aims to create an app which enables companies to measure their productivity and benchmark themselves against other companies operating in similar sectors and regions. By shining a light on companies’ relative performance, the aim is that this would serve as a catalyst for remedial action by company management.”

Show me the money

Most business cycle models include the money supply as a leading indicator of the economy, meaning that changes in the money supply tend to precede and signal changes in the economy in the near future. The money supply year-to-year change spiked late last year, giving some money watchers goose bumps.

According to Ryan McMaken at the Mises Institute, the money supply jumped 11.3 percent on the Austrian money supply (AMS) index late last year. Murray Rothbard and Joseph Salerno created the Austrian money supply index to provide a better measure than the Fed’s M2. That spurt in money occurred after a several years of sedate money growth. 

McMaken wrote that since 2014, money supply growth has ranged from about 7 percent to 8.5 percent. In October of last year, money supply growth hit a seven-year low of 6.8 percent. The AMS spiked to 11.3 percent in the fourth quarter, then in February it collapsed back to a year-to-year growth rate of 7.7 percent.

The four biggest mistakes in option trading

Years ago I had a friend attend a seminar on options in which he learned to buy out-of-the-money options on commodities and keep buying them until he hit the jackpot. Theoretically, the one big win would pay off all of the losses and add a hefty profit.

That strategy is pure gambling according to Jay Kaeppel, author of The Four Biggest Mistakes in Option Trading. The four are 1) relying solely on market timing to trade options, 2) buying only out-of-the-money options, 3) using strategies that are too complex and 4) casting too wide of a net.

Options and futures originated in the 17th century in the Dutch Republic to provide farmers a way to protect themselves against falling prices at harvest time and as a way for processors to protect their businesses against shortages caused by drought or disease. Options are still a good way to protect all kinds of assets, including shares of stocks. For example, a simple strategy for protecting one’s nest egg from a market collapse is simply to buy put options on an index of on the stock of specific companies. If the market declines, the option should increase in value enough to make up for the loss in the stock portfolio.

Now economists want to steal your wealth

Keeping your hard-earned wealth is hard. The state wants most of it in taxes. A couple of weeks ago I explained how socialists use randomness to steal your wealth. Now economists want to use a cashless society to take it. 

Many of the world’s top economists want to get rid of paper currency and force all of us to use electronic banking. One of the top mainstream economists, Kenneth Rogoff, has written a manifesto for them in his 2016 book, The Curse of Cash. Rogoff is the Thomas D. Cabot Professor of Public Policy at Harvard and former chief economist of the International Monetary Fund. Many economists around the world have subscribed to his manifesto. Here are Rogoff’s main reasons for wanting a cashless society:

The real issues involve the ability to use monetary policy to (1) stabilize the economy, (2) issue credit in response to financial crises (act as lender of last resort), and (3) be able to inflate the price level in an emergency where it is necessary to engage in partial default (in real terms) on government debt. To achieve these ends effectively, it is extremely helpful for the government to control the unit of account and the currency to which most private contracts are indexed. 

God is a Capitalist! Markets from Moses to Marx

The PDF version is no longer available because I published the book on Kindle and the contract forbids me to distribute it in any other format. You can find it on Amazon here. However, I will take advantage of Kindle's policy to allow the book from free for five days every 90, so stay tuned.

In his book, Jesus in Beijing, author David Aikman describes a lecture that he attended in Beijing in 2002. The speaker, a scholar from one of China’s premier academic research institutes, the Chinese Academy of Social Sciences, said the following:

One of the things we were asked to look into was what accounted for the success, in fact, the pre-eminence of the West all over the world . . . We studied everything we could from the historical, political, economic, and cultural perspective. At first, we thought it was because you had more powerful guns than we had. Then we thought it was because you had the best political system. Next we focused on your economic system. But in the past twenty years, we have realized that the heart of your culture is your religion: Christianity. That is why the West has been so powerful. The Christian moral foundation of social and cultural life was what made possible the emergence of capitalism and then the successful transition to democratic politics. We don’t have any doubt about this.

Baptists and bootleggers explains lofty stock market

Jason Zweig, who writes the Intelligent Investor column for the Wall Street Journal, posted recently about “Disturbing New Facts about American Capitalism.” He wrote:

“Modern capitalism is built on the idea that as companies get big, they become fat and happy, opening themselves up to lean and hungry competitors who can underprice and overtake them. That cycle of creative destruction may be changing in ways that help explain the seemingly unstoppable rise of the stock market."

Zweig cites new research by academics that claims the US is moving to a “a winner-take-all system in which giants get stronger, not weaker, as they grow.” The evidence consists of higher concentrations of market share among just a handful of companies. For example, the top four grocery chains hold 89% of the market. The top four real-estate service companies command 78%. In intro to economics those are called oligopolies.

The idol of randomness wants to steal your wealth

If you’re reading this post, I assume you have built some wealth and are wondering how to keep it and possibly make it grow. You should know that many people claim you have no right to that wealth because you didn’t earn it. You got it by luck, like a lottery winner.

Alexander Green, Chief Investment Strategist at the Oxford Club, wrote a great post recently on the topic, “Is Business and investment success due to skill...or luck?” The post issued from a debate he had with a New York Times columnist, Robert Frank, author of the book Success and Luck: Good Fortune and the Myth of Meritocracy.

Frank wrote in his book that “If you have been so economically successful that your income and net worth put you in the top 1% or 2% in the country, the deciding factor was not talent, education, hard work, risk-taking, persistence, resilience or all of the above...It was luck, plain and simple.” Frank is clever to assault only the top 2% of wealthy. They have no friends and attacking them will excite envy in the rest.