God is a Capitalist

Tuesday, December 4, 2018

Tim Keller Is Wrong: Helping The Poor Is Voluntary Compassion, Not Legally Required Justice

Does the Bible define giving to the poor as an act of mercy or justice? The question might seem like another medieval debate over how many angels can dance on the head of a pin. But the answer is crucial to the future of the country. Both socialists and capitalists claim to want to help the poor; they come to blows over the methods. If doing so is a matter of justice as socialists claim, then the government should enforce it because the sole reason for government in the Bible is to promote justice. If it’s justice, then the poor have a right, similar to the right to life, to the property of those who are not poor.

But if giving to the poor is an act of mercy then the state should have no role in the matter. It is a test of one’s love for God and people, but it’s voluntary and has no moral value if coerced by the state.

Dr. Timothy Keller, founder of the Redeemer Presbyterian churches in New York City, insists that helping the poor is a justice issue. In The Gospel and the Poor Keller wrote:

Friday, November 23, 2018

God is a Capitalist free December 1 - 5

The Kindle version of God is a Capitalist will be free from December 1 - 5. Merry Christmas!

Why not free universal health care?

Reading responses to an article on the Christianity Today web site I came across a lady who asked, "Why not free universal healthcare?" Her question reminded me of children who ask simple questions such as "Why is the sun hot?" If you give them the physics of how the sun works, they don't understand it. So I tell them God made it hot to keep us warm. Of course, then they ask, "Why?"

I gave the woman a brief response from economics and she responded that her Canadian friends were happy with their system so there was no reason for the US not to have something similar. Of course, if we limit our knowledge to just what the woman's friends in Canada say about their system then without a doubt we should rush to the ballot box and vote for the most socialist Democrat candidates we can find. The problem with her logic is that she assumes her personal experience and those of her Canadian friends are all she needs to solve the problem of healthcare.

Sunday, November 11, 2018

If socialist healthcare is so great, what are all those Canadians doing in our hospitals?

I was in a hotel in Houston recently and ran into several families from the UK who had a family member receiving medical treatment for cancer at the MD Anderson Cancer Center there. I have read many stories of Canadians flying south for medical treatment. I began to wonder, if socialized medicine is as great as the UK and Canada claim, why are these people here?

So I began looking into medical tourism. Most of the information you will find on the internet talks about US citizens going to Asia for great care at a much reduced price. I have no problem with that. The American Medical Association wielding the sword of government has made US healthcare insanely expensive. I once told a doctor from Scotland what Americans pay for an office visit and he called me a liar. He said no sane person would pay that much. I had to agree with his last statement.

The Reformation financed the Industrial Revolution

After millennia of stagnation, why did the European economy explode in the 17th century into what economic historians call the hockey stick of per capita GDP? We know that Christianity had finally made an impact on envy; Christian individualism had broken out; modern science, created by Christian theologians, began to contribute; the Salamancan scholars persuaded people to respect commerce and protect property. Those are all necessary ingredients. Still, where did business people get the money to invest?

Marx claimed that Europe stole it from the Americas when Spain began looting it colonies of gold and silver. But Spain never took part in the Industrial Revolution and declined in wealth and power throughout the 17th century.

Europe lacked the wealth needed to ignite the revolution for two reasons. One was the conspicuous consumption of the nobility. They held to an economic principle that their spending benefitted the poor, so they were required to spend as much as possible on moral/economic grounds. Also, their status in the community required them to spend lavishly on houses and throw parties with great banquets. Had investing in business interested the nobility, which it didn’t, they would have had no savings to invest.

Envy caused the Kavanaugh Kerfuffle

A Slavic folktale has an angel approach a peasant with an offer to reward him for some good deed. The angel asks the peasant what he would like. The peasant thinks aloud, “Well, my neighbor has a goat.” The angel interrupts, “So you want a goat like your neighbors?” “Heavens no!” answers the peasant. “I want you to kill my neighbor’s goat!”

Helmut Schoeck offers the tale as a distilled description of envy in his classic Envy: A Theory of Social Behavior. At the core, envy is resentful of the success of others and R.J. Snell, a contributing editor of Public Discourse, blames it for the Kavanaugh soap opera and similar dramas in US society. That may seem like a Grand Canyon leap in logic, but follow his argument for a moment. He includes a quote from Tocqueville:
The desire of equality always becomes more insatiable in proportion as equality is more complete... It perpetually retires from before [men], yet without hiding itself from their sight, and in retiring draws them on... To these causes must be attributed that strange melancholy which often haunts the inhabitants of democratic countries in the midst of their abundance, and that disgust at life which sometimes seizes upon them in the midst of calm and easy circumstances.

Monday, October 8, 2018

Why You Shouldn’t Be Afraid Of Options And Futures

Buy-and-hold is the standard investment advice for rookies. They tell young people to grit their teeth through bear markets like those of 2001 and 2008 where some investors lost half their savings. They say you will eventually make back your losses over time if you stay in the market. They call that “diversification across time.” They suggest old folks like me should have most of our money in good bonds because we don’t have the time left to make up for losses, but we can’t do that because the Fed has forced interest rates to near zero for almost a decade.

One reason that diversification across time is a bad idea for young people is simple math. If a market crash takes half your life savings, the market will have to double in order to make up your losses. That may take five years, but then you’re only back where you started and have missed five years of potential gains. The math looks bad.

Few investors would buy a $300,000 house and not buy insurance on it against fire, flood, tornados or hurricanes. A few more might go without insurance on a $100,000 BMW, but not many. Consider that the odds of a bear market in stocks that steals say 25% of your savings are far greater than your house burning down or totaling your BMW. Bear markets happen every decade. So why not insure your investment in the stock market as you would your house or car?

Tuesday, October 2, 2018

Big State Good For Growth? Then Why Did Humanity Starve For Millennia Under Big States?

Among the debates between socialists and capitalists is the question of who made the West so rich? Was it private enterprise or the state? Former President Barack Obama energized the discussion when he told us, "If you’ve got a business, you didn't build that. Somebody else made that happen" during a 2012 election campaign speech.

The left continues to prop up the idea that the state is the fount of all blessings. Mariana Mazzucato, Professor of the Economics of Innovation and Public Value and Director of the Institute for Innovation and Public Purpose at University College London, wrote recently that western economies are failing because the people have hobbled the state:

Who Can We Blame For The Great Recession?

This year marks the tenth anniversary of the “Great Recession” and the media are trying to determine if we have learned anything from it. The Queen visited the London School of Economics after the “Great Recession” to ask her chief economists why they hadn’t seen this disaster coming. They told her they would get back to her with an answer. Later, they wrote her a letter saying that the best economic theory asserts that recessions are random events and they had successfully predicted that no one can predict recessions.

Still, George Packer, a staff writer at the New Yorker magazine since 2003, thinks he knows more than the LSE academics. He wrote the following in the August 27 print issue:
It was caused by reckless lending practices, Wall Street greed, outright fraud, lax government oversight in the George W. Bush years, and deregulation of the financial sector in the Bill Clinton years. The deepest source, going back decades, was rising inequality. In good times and bad, no matter which party held power, the squeezed middle class sank ever further into debt...
In February, 2009, with the economy losing seven hundred thousand jobs a month, Congress passed a stimulus bill—a nearly trillion-dollar package of tax cuts, aid to states, and infrastructure spending, considered essential by economists of every persuasion—with the support of just three Republican senators and not a single Republican member of the House.
Typically, journalists will defer to an expert on matters in which they aren’t trained, which is most subjects. But Packer didn’t bother to ask an economist as the Queen did. Had he done so, he would have received the same answer from mainstream economists – recessions are random events and can’t be predicted. If economists knew the causes of recessions they could predict them when they see the causes present.

Do European Social Engineers Know More About Products Than Their Actual Engineers?

Socialists love central planning, but they hate another type – planned obsolescence. According to the report “EU aims to abolish planned obsolescence,” they have banned the practice before they identified what it is.

The European Parliament now wants the European Commission to create a clear definition of the term “planned obsolescence" and to develop a system to track that aging process. It also wants longer warranty periods and criteria to measure a product’s strength. Each and every device should also have a mention of its minimal life expectancy.
Devices should also be easier to repair: batteries and other components should be freely accessible for replacement, unless safety dictates otherwise. Manufacturers will also need to give other companies access to their components so that consumers can visit those companies for repairs.
The resolution should prevent situations like Samsung’s Galaxy Note 7 fiasco. The battery proved to be an explosion hazard and seeing how it could not be replaced, the South Korean company was forced to recall every single device.
The European Parliament also hopes the resolution will also stimulate job creation, because it should result in more independent repair services. The second-hand market should also benefit from the resolution, because products will get a new lease on life.

That Study Claiming 30% Of Jobs Are BS Is BS

When a writer calls something BS, he usually means it’s not only worthless but a nuisance. However, I have learned that BS in one person’s eyes is gold in another’s. For example, a club in Ft. Worth used to sell cow patties covered in polyurethane with a tiny cowboy wearing snow skies perched on top and a label that read “Ski Texas!” Many businesses sell cow manure compost for millions of dollars every year.

Still, a few academics want to advertise their arrogance by giving themselves the authority to declare some jobs as BS:
David Graeber of the London School of Economics argues that as much as 30% of all work is performed in “bullsh*t jobs,” which are unnecessary to produce truly valuable goods and services but arise from competition for income and status...
 Numerous jobs fall into that category: cyber criminals and the cyber experts employed by companies to repel their attacks; lawyers (both personal and corporate); much of financial trading and asset management; tax accountants and revenue officials; advertising and marketing to build brand X at the expense of brand Y; rival policy campaigners and think tanks; even teachers seeking to ensure that their students achieve the higher relative grades that underpin future success.

Tuesday, August 14, 2018

Why we have a trade deficit with China

President Trump has said that the US trade deficit with China should have been “fixed” years ago. I agree, but for different reasons. Why do we run a deficit in trade with China?

The administration wants China to quit violating our copyright and patent laws, stop stealing our technology and forcing companies doing business in China to share technology. But what does that have to do with a trade deficit? We buy mostly consumer goods from China that are made using low tech, labor intensive processes. And why would we expect China to enforce our laws? Anyway, all countries since World War II have grown by importing better technology from the West. Japan was first. We should want that to happen so their people can grow out of poverty.

Some have accused China of being a currency manipulator, meaning that they keep their yuan artificially low in exchange for the US dollar so that their products are cheaper for Americans. That may have been true in the past but China has allowed its currency to float on the market for years and it has still drifted lower. Besides, no country in the world manipulates its currency the ways the Fed does the US dollar.

Washington Irving predicted our next recession

The US stock market was stuck “in irons,” as sailors describe a ship sitting still in a windless ocean, for most of this year. But recently it tested new highs as earnings reports from banks and the tech sector inflated its sails. Mainstream economists can see no icebergs ahead in their crystal balls. One might describe the current investing climate this way:
Every now and then the world is visited by one of these delusive seasons, when “the credit system” as it is called, expands to full luxuriance; everybody trusts everybody; a bad debt is a thing unheard of; the broad way to certain and sudden wealth lies plain and open; and men are tempted to dash forward boldly, from the facility of borrowing.

Friday, July 20, 2018

The US doesn’t need to protect Mideast oil

A few weeks ago the President tweeted a threat to Saudi Arabia about its oil production:
The OPEC Monopoly must remember that gas prices are up & they are doing little to help. If anything, they are driving prices higher as the United States defends many of their members for very little $’s. This must be a two way street. REDUCE PRICING NOW!
OPEC is not a monopoly. It’s a cartel, but that is nitpicking. The idea is to anger Americans and the word monopoly does that more efficiently than does cartel. The President is worried about the US economy, but in addition he knows that higher oil prices will increase revenues to Iran’s wealthy politicians, whom Trump’s sanctions don’t affect. Economic sanctions only hurt Iran’s poorest people who have no influence over their government.

The US spends almost 4% of its GDP on the military. That includes billions the US spends to protect the sea lanes around the world to make a clear path for oil transportation. But we get only about 13% of our total oil from Persian Gulf states. Is that a good tradeoff, or as economists say, a good cost/benefit analysis?

Monday, July 9, 2018

The Death Gap: how socialists deceive

For some reason David Ansell, MD, thinks dropping the names of two famous socialists will add legitimacy to his book, The Death Gap: how inequality kills:

In many ways my insights about premature death in the neighborhoods along Ogden Avenue follow directly in the footsteps of Friedrich Engels and Rudolf Virchow, both of whom wrote in the mid-1800s about social conditions and health...This book is written in the spirit of Engels and Virchow.

Anyone who knows real history understands that Engels flat out lied about factory working conditions in his day as well as the “blissful” lives of peasants before the Industrial Revolution. Ansell doesn’t have the courage to lie as blatantly as Engels did. As a magician uses sleight of hand to make the audience think he really is cutting the half-naked assistant in half while distracting them from the deception happening inside the box, Ansell fixes the readers’ attention on certain facts without allowing them to see other facts that would give them a different opinion of matters. For example, he wrote,
A greater proportion of Americans lived in poverty in 2015 – a staggering 45 million – than in the late 1960s.

Why China will not be the world’s innovation leader

Remember Laura D'Andrea Tyson? A Republican Congress and Monica Lewinsky rescued us from her leftist economics when she was Chair of the under Bill Clinton's Council of Economic Advisers. As far as we know she and Hillary were the only women in the White House that Clinton did not have an affair with.

Recently, Ms. Tyson warned us in “Avoiding the Sino-American Technology Trap” that China is about to become the innovation leader of the world because they have a five-year plan:
Building on its 13th Five Year Plan (in May 2016), the authorities established objectives for China to become an “innovative nation” by 2020, an “international innovation leader” by 2030, and a “world powerhouse of scientific and technological innovation” by 2050. It also committed to increasing its expenditure on research and development to 2.5% of GDP and almost doubling the number of patents filed per 10,000 people by 2020.
Tyson should know better than to place so much faith in central planning. After all, the defunct Soviet Union enjoyed similar five-year plans for much longer. If this is China’s 13th plan, they began in 1953 and their economy didn’t take off until the 1980s. What happened to the previous five-year plans?

Who's afraid of Wendell Berry?

Why would anyone be afraid of Wendell Berry? As an icon of the left, many readers may never have heard of him. He’s a Kentucky farmer in his mid-80s who farms like the Amish, hates technology and has written scores of books of poetry, essays, novels, and short stories idolizing his lifestyle, the land and rural living. 
Wendell Berry is everywhere. Patrick Deneen praised him in Why Liberalism Failed. Christianity Today and The Gospel Coalition regularly honor him. Allen Stanton wrote “Why I hate Wendell Berry,”
If you are in rural ministry, he is inescapable. His poems are read as lectio divina at retreats. He is quoted in conference presentations and referenced in sermons. He is the subject of documentaries. An album of his poems arranged for a choral group can be downloaded on Spotify (which seems ironic, given his disdain for technology)...
A preacher from an affluent urban church will address small-church pastors at conferences, quoting Berry to us, speaking about how necessary our ministry in rural communities is. Between the lines, though, you can hear the real message: “I’m glad it’s you and not me.”

Healthcare in the US follows Nazi model

Few Americans understand how socialist our healthcare system is. The evidence comes from the many articles that trash Europeans socialist healthcare and refer to the US system as free market. The truth is that the US system is about as socialist as any in Europe, but in worse ways. It follows the National Socialist pattern.
Ludwig von Mises, the greatest economist of the twentieth century, wrote in Planned Chaos that there have been two means of achieving socialism, the Soviet and the German, or Nazi. In the Soviet system,
All economic enterprises are departments of the government just as the administration of the army and the navy or the postal system. Every single plant, shop or farm, stands in the same relation to the superior central organization as does a post office to the office of the Postmaster-General.
The second pattern – we may call it the German or Swangswirtschaft system – differs from the first one in that it, seemingly and nominally, maintains private ownership of the means of production, entrepreneurship, and market exchange. So-called entrepreneurs do the buying and selling, pay the workers, contract debts and pay interest and amortization. But they are no longer entrepreneurs. In Nazi Germany they were called shop managers of Betriebsfuhrer. The government tells these seeming entrepreneurs what and how to produce, at what prices and from whom to buy, at what prices and to whom to sell. The government decrees at what wages laborurers should work, and to whom and under what terms the capitalists should entrust their funds. Market exchange is but a sham.
Property requires control of it by the owner. When the state controls the property, as it did in Germany, people no longer have property regardless of what the paper title says. Now keep the Nazi flavor of socialism in mind as we discuss healthcare pricing.

Sunday, June 10, 2018

Anti-Freedom Book Praised By Evangelicals, Why?

Patrick Deneen’s book Why Liberalism Failed should have remained an obscure academic publication discussed on web sites such as Public Discourse. But Christianity Today and The Gospel Coalition published favorable reviews. Now second hand dealers in ideas, especially preachers, will read it and its fallacies will show up on in the sermons and Facebook pages of popular socialist evangelists such as Russell Moore, Rod Dreher, Ron Sider and Jim Wallace.

Deneen is an associate professor of political science at the University of Notre Dame. Most of the opposition challenges Deneen’s depiction of the founding fathers of the US even though Deneen spent little ink on that subject. Deneen devoted his book to listing the tragedies of modern life and laying the blame on the rise of liberalism in the West.

Typical readers will cheer the book’s title because liberalism today means progressivism, which is a flavor of socialism. All libertarians and conservatives know the damage that kind of liberalism has caused and Deneen does a good job of repeating them. But Deneen refers to classical liberalism as well, the father of conservatism and libertarianism. The professor acknowledges that classical liberalism preceded modern liberalism and that modern liberalism is different from the original. But where conservatives and libertarians would rightly claim that atheist socialists hijacked the term “liberal” in order to better peddle their ideology, Deneen asserts that classical liberalism chased its own tale, caught it, devoured itself, and morphed into modern socialist liberalism.

Tuesday, May 29, 2018

When the market kills

After the market collapsed in 2008, stress killed people according to research by the Economic Policy Institute.  
We’ve long known that a financial shock causes immediate distress. Suit-clad men leaping from buildings were dismal hallmarks of the Great Depression, and soon after a major recession began in 2007, there were notable spikes in clinical depression, substance abuse and suicides...
Loss of control was front and center for the 26% of those in the survey who had endured a wealth shock. They were 50% more likely to have died during the period of the study, compared with participants whose savings remained intact. The researchers statistically controlled for other causes of mortality, such as ill health, job loss, insurance loss and marital breakdown.
Interestingly, women were more likely to have experienced a wealth shock than men, but they were not more likely to die as a result. They were, in short, more financially vulnerable but more resilient physiologically.

Monday, May 14, 2018

Death of retail is premature

Does anyone remember Montgomery Wards? What about TG&Y? Wikipedia has a longer list of dead brands here. That Sears, K-Mart and many other brands wither in retail hospice is frightening to many:
The amount of retail space going dark in 2018 is on pace to break a record, as companies with massive floorplans are either trimming back their store counts or liquidating entirely... Since 2008, commercial real estate services firm CoStar Group has been tracking the amount of retail square footage slated to close annually. Already in April, more than 90 million square feet of space is expected to be vacated, including Bon-Ton's stores, in 2018. That's easily on track to surpass a record 105 million square feet of space shuttered last year, said Suzanne Mulvee, a senior real estate strategist at CoStar. All it will take is another handful of closures.” 

Tuesday, May 1, 2018

The real Gilded Age - The US economy's best performance ever

Libertarians looking for the cause of the younger generation’s infatuation with socialism need look no further than the PBS series American Experience and the episode aired in February, “The Gilded Age.” A press release described the age this way:
By the end of the 19th century, the richest 4,000 families in the country — less than one percent of all Americans — possessed nearly as much wealth as the other 11.6 million families combined. The simultaneous growth of a lavish new elite and a struggling working class sparked passionate and violent debate over questions still being asked today: How is wealth best distributed, and by what process? Should the government concern itself with economic growth or economic justice? Are we two nations — one for the rich and one for the poor — or one nation where everyone has a chance to succeed? A compelling portrait of an era of glittering wealth contrasted with extreme poverty...”
Jobs were abundant, but employers often expected everyone —including children — to work 12-hour days, six days a week.
Throughout the Gilded Age the economy grew at a furious pace, but financial markets were wracked by instability. On May 4, 1893, Wall Street investors saw much of the nation’s wealth disappear. As many as a million workers lost their jobs. People starved to death.

Saturday, April 21, 2018

Macroenomics fails again

The economist Axel Leijonhufvud quipped in his essay “Life among the Econ” that,
The Math-Econ [tribe] make exquisite models finely carved from bones of Walras. Specimens made by their best masters are judged unequalled in both workmanship and raw material by a unanimous Econographic opinion. If some of these are “useful” – and even Econ testimony is divided on this point – it is clear that this is purely coincidental in the motivation for their manufacture.
Read the whole essay because it's very funny. It’s an inside joke; the father of math models in economics was Leon Walras. I thought of the essay when reading Martin Wolf’s recent article in the Financial Times, “Economics failed us before the global crisis.”Wolf’s is only the latest in a long line of laments over the “usefulness” of macroeconomics after the Great Recession. He wrote,
The tests of this discipline are whether its adepts understand what might go wrong in the economy and how to put it right. When the financial crisis that hit in 2007 caught the profession almost completely unawares, it failed the first of these tests. It did better on the second. Nevertheless, it needs rebuilding.”
How does Wolf know that macroeconomists did better at the second, putting the economy right? Because we didn’t have another Great Depression:
A comparison between what happened in the 1930s and this post-crash period shows we have indeed learnt some important things. Compared with the Great Depression, the immediate declines in output and rises in unemployment were far smaller. Moreover, prices have also been far more stable this time. These are true successes.”
In other words, because we didn’t have a depression like the Great D that proves the money printing and deficit spending worked to save us. Wolf reminds me of another joke: a police officer approached a man furiously blowing a trumpet in the park and asked him why he was doing that. The man said he was keeping elephants away. The policeman said there never have been elephants in the park, to which the trumpeter responded, “It’s working!”

Wolf’s problem is he doesn’t know economic history, but then few economists do. The US has suffered through about 70 recessions/depressions since 1790. Before 1929, the US economy recovered from depressions with no help whatsoever from a central bank or the federal government. All of them were milder than the Great one. The Great D became the worst ever because the government decided to rescue us. The Smoot-Hawley tariff destroyed international trade so much that it took another 70 years to recover. Other efforts by FDR to “save” us caused equally bad outcomes and made the depression in the US last longer than in any other country.

Some think the Great Recession was almost as bad in terms of GDP decline, but combining the recessions of 1981 and 1982 (six months apart) produces one equally as bad. In response, the Fed kept interest rates high and Reagan did nothing to bail us out, yet the economy recovered very fast.

During the Great Recession, Congress passed no Smoot-Hawley tariff so there was no reason to think the latest recession would turn into a Great Depression. Wolf and most mainstream economists predicted that the Great Recession would turn into an “elephant in the park” so when no elephants appeared they declared victory. It’s an old political ploy to predict the worst and when it doesn’t happen take the credit. Politics is all about taking credit for the work of others and most macroeconomists act like politicians.

Wolf blames macroeconomist’s assumptions of the efficient markets hypothesis and rational expectations for their failures, but those were never problems. The roadblock has always been the desire for precise math model, like those “carved from the bones of Walras.” Making their models work required the assumption of equilibrium, which assumes away the very things we want explained, such as recessions. Wolf is correct that “It is better to be roughly right than precisely wrong.” But he doesn’t seem to know that the quote comes from FA Hayek’s Nobel speech, not from Minsky. Hayek was trying to convince economists to get some therapy for their obsession with their equilibrium models.

Wolf stepped dangerously close to the truth about the causes of crises with this: “Moreover, crises are endogenous: that is to say, they come from within the economy. They are a result of the interaction between tendencies towards excessive optimism and the fragility of any system of highly leveraged financial intermediaries.” But then he flinches and runs away. Had he been made of sterner stuff, he would have asked, where does the excessive optimism and high leverage come from if not from central bank monetary policies flooding the world with cheap money? And if high leverage is the problem, how is it also part of the cure? Is bourbon the solution to alcoholism?

And his remedy shows some promise: “Obvious solutions include eliminating the incentives towards leverage in our tax systems, encouraging greater use by the economy of equity finance and debt that can be readily converted into equity, raising the reserve and capital requirements of banks and moving swiftly towards the issuance of digital central bank cash.” But what about the chief dealer of the drug he calls leverage, the Federal Reserve? Even without the policies he mentions, excessive leverage could never happen if the Fed allowed the market to determine interest rates and didn’t keep them near zero for over a decade. And those same policies can never prevent the Fed from flooding the country with cheap money and increasing leverage.

Wolf and mainstream economists see the impact of money printing as asymmetric: it produces only good outcomes in the short run and nothing worse than inflation in the long. He thinks that because he has an emaciated theory of money. If he learned a robust theory of money as the Austrian school teaches he would see the devastating effects of money printing in the near term. Keynes was addressing economists like Wolf when he said, “In the long run we’re all dead.” Most fail to quote the next sentence: “Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again.” In other words, mainstream economists fixate on the long run effect of inflation to the exclusion of the near term storms.

Wolf sets before economists two tasks: “The first is how to make the body economic more resistant to the consequences of manias and panics. The second is how to restore it to health as quickly as possible. On both counts, we need to think more and do more.”

By identifying the problem with leverage, Wolf is very close to the Austrian business-cycle theory (ABCT), which blames central bank policies for creating high leverage through 1) below market interest rates and 2) expanding the money supply by buying US treasuries from banks. Loose monetary policy encourages people to go into debt and causes unsustainable expansions that end in manias. The inevitable crash causes panics. Why can’t he connect the dots?

He can’t because of his socialist tendencies. Wolf, like all mainstream economists, wants to blame capitalism for crises. He can’t indict the real culprit, the quasi-governmental central bank, because that would let capitalism off the hook and put the burden on his idol, the state.

We are probably now in another recession, which typically last 18 months. What will mainstream econ say about it in two years?

Wednesday, April 4, 2018

Socialist Eat Their Young

It’s well known that “millennials” prefer socialism to capitalism. That doesn’t worry me, though. Someone said that if you aren’t a socialist when you’re young you don’t have a heart; if you’re not a capitalist when you age you have no head.

Most young people think they can transfer the morality of the family to the nation and it takes a while for them to understand the fallacy, if they ever do. A lot of PhD economists haven’t caught on.

The public school system has taught them “milk cow” economics for twelve years that says socialism is about sharing and caring while capitalism is nothing but greed. Who would want to identify with capitalism after a dozen years of such brainwashing?

But the main reason millennials oppose capitalism is that they can see how the student debt problem, lack of jobs, slow wage growth, etc. assault them, while the media, economists and conservative politicians chant daily that this is a capitalist system. Why wouldn’t they hate capitalism?

Tuesday, March 20, 2018

Climate change is socialist groupthink

Public relations research tells us there are two types of people in the world: one relies on an authority figure to tell him what to do and the other decides for himself by gathering evidence and using reason. If you’re someone who can think for himself, you have probably wondered why climate science is such a mess. Why do they torture the temperature data to get it to look like a hockey stick in graphs? Why do they ignore or slander critics instead of answering their concerns when they offer good evidence?

A short period existed when climate science was real science and not socialist ideology. Back in the 1980s when the science was in its infancy, scientists openly debated the evidence. A startling experiment in that decade proved CO2 to be an excellent fertilizer for trees and plants.

Christopher Booker thinks the reason climate scientists act like ideologues is because of “groupthink,” referring to the book with that title by Yale psychologist Irving Janis:
Janis’s first rule is that a group of people come to share a particular way of looking at the world which may seem hugely important to them but which turns out not to have been based on looking properly at all the evidence. It is therefore just a shared, untested belief.”
Rule two is that, because they have shut their minds to any evidence which might contradict their belief, they like to insist that it is supported by a “consensus.” The one thing those caught up in groupthink cannot tolerate is that anyone should question it. 
This leads on to the third rule, which is that they cannot properly debate the matter with those who disagree with their belief. Anyone holding a contrary view must simply be ignored, ridiculed, and dismissed as not worth listening to.
Booker describes the behavior of most climate scientists well, but doesn't answer how they fell into the groupthink trap? The answer lies with the collapse of socialism in the late 1980s. Socialism’s main selling point from its fabrication by Saint-Simon in the early decades of the 19th century had always been economic. Socialism would make everyone equally rich as it ended the waste inherent in the anarchy of markets.

The world suffered through 120 years of experimentation with socialism launched by the welfare state of Germany in 1870 through the Russian Revolution and creation of the Soviet Union, the annexation of Eastern Europe, and the victory of Mao in China. China abandoned pure socialism after Mao’s death. Then the Berlin Wall fell; Poland rebelled and the USSR disintegrated, all because socialism had impoverished those nations to the point that they couldn’t feed their own people. Socialism lost the economic debate that had burned through the 20th century.

Reasonable people divorced socialism, but most socialists had never been reasonable. They are aflame with envy. Robert Heilbroner wept ink for twelve pages over the death of his utopia in “The Triumph of Capitalism,” which appeared in the January 23, 1989 issue of The New Yorker magazine. He began with, “Less than seventy-five years after it officially began, the contest between capitalism and socialism is over; capitalism has won.” He concluded with this:
And finally, what of socialism?...I do not think that the triumph of capitalism means its assured long and happy life or that the defeat of socialism means its ignominious exit from history. The collapse of central planning shows that at this moment socialism has no plausible economic framework, but the word has always meant more than a system of economic organization. At its core, it has stood for a commitment to social goals that have seemed incompatible with, or at least unattainable under, capitalism – above all, the moral, not just the material elevation of humankind...the vision has retained its inspirational potential, just as that of Christianity has survived countless autos-de-fe and vicious persecutions.”
Helbroner soon regained his composure, dried his tears and nailed his 95 theses to the door of capitalism in his September 10, 1990 The New Yorker article, “After Communism.” Near the end he wrote,
For all these reasons, I am not very sanguine about the prospect that socialism will continue as an important form of economic organization now that Communism is finished...But the collapse of the planned economies has forced us to rethink the meaning of socialism. As a semireligious vision of a transformed humanity, it has been dealt devastating blows in the twentieth century...
There is, however, another way of looking at, or for, socialism. It is to conceive of it not in terms of the specific improvements we would like to embody but as the society that must emerge if humanity is to cope with the one transcendent challenge that faces it within a thinkable timespan. This is the ecological burden that economic growth is placing on the environment. The challenge has drawn its first blood in the epidemic rise in skin cancer that is a consequence of the depletion of the ozone layer. It threatens to open far deeper and more serious wounds as the atmosphere gradually forms its invisible panes of carbon dioxide and other gases...The ecological crisis toward which we are moving at a quickening pace has occasioned much scientific comment but surprisingly little economic attention. Yet if there is any single problem that will have to be faced by any socioeconomic order over the coming decades it is the problem of making our economic peace with the demands of the environment.
Whatever its other consequences, the closing window of environmental tolerance will impose an utterly new condition of caution and constraint on a civilization...It is perhaps, possible that some of the institutions of capitalism – markets, dual realms of power, even private ownership of some kinds of production – may be adapted to that new state of ecological vigilance, but, they must be monitored, regulated, and contained to such a degree that it would be difficult to call the final social order capitalism.

Heilbroner gave socialists their new marching orders: take over the environmental movement and use it to forge their socialist utopia. And they did. Climate change scientists embraced their new role as the vanguard of socialism and acted just as FA Hayek had predicted they would in Road to Serfdom fifty years earlier.

Saturday, March 3, 2018

Free markets celebrate individualism

Individualism is the root of all evil if you believe many theologians and sociologists today. For example, Philip bond wrote in First Things,
Liberalism finds its quintessential form in a market state that enforces individualism. The market state must abolish anything that stands in the way of unconstrained freedom; it must eliminate solidarity or shared associations with other people, places, or things. This gives liberalism a curious Maoist cast, as it seeks to dispel our settled notions, be they sexual, biological, or even of who counts as human. 
The current Pope has been a leading critic of individualism, according to a Catholic writer:
The Pontiff acknowledged that our Western culture ”has exalted the individual to the point of making him an island, almost as if one could be happy on one’s own.” Stemming from it are ideological visions and political powers that “have squeezed the person, have standardized him, thus making room for economic powers that wish to exploit globalization, instead of fostering greater sharing among men, simply to impose a global market of which they themselves dictate the rules and draw the profits...the concept of person, born and matured in Christianity, helps in fact to pursue a fully human development.” Moreover, the word “person” always means relation, not individualism; it affirms inclusion, not exclusion, a unique and inviolable dignity and not exploitation, freedom and not constriction.

Monday, February 26, 2018

Free market capitalism requires respect for commerce

Last installment in the series defining free market capitalism, we reversed engineered Karl Marx’s definition of capitalism and found that it referred to the economic system that produced the hockey stick effect in per capita GDP beginning in the Dutch Republic of the 17th century, picking up England and Anglo nations then the rest of Western Europe. The first principle of that system was protection of private property. That was a necessary, but by itself insufficient cause of the hockey stick. The remaining necessary traits are 1) respect for commerce, 2) mass production and3) individualism.

Deirdre McCloskey has expressed well the importance of respect for commerce in his trilogy about bourgeois virtues. If a country protects property but has contempt for commerce, the people won’t go into business but will do what most people in the world have always done: get into government or the military where the “respectable” means to wealth attainment reside. This was one of the main reasons most of Europe remained as poor in 1700 AD as it was in 2000 BC.

People in government extracted wealth from the masses through heavy taxation and enriched themselves. Generals grew rich through looting in war. Until the advent of capitalism, looting in war, kidnapping for ransom, and taking bribes as a government official were the respectable means to wealth. Commerce held as much appeal as prostitution.

In spite of the fact that much of Europe was predominantly Christian after say the year 500, the Church taught people to hold commerce in contempt. And they did. Businessmen were told that the sins inherent in their profession were so great that it would be impossible for them to go to heaven. So businessmen who grew wealthy in trade would give half of their wealth to the Church in hopes of buying their way into heaven, and spend the other half buying land and titles to nobility so they could rob their fellow citizens.

But the Church fathers didn’t get their views of commerce from the Bible or the Judaism from which Christianity sprang. Many of the Church fathers were recruited from among the nobility because of their education, political influence and wealth, according to Peter Brown in Through the Eye of a Needle: Wealth, the Fall of Rome, and the Making of Christianity in the West, 350-550 AD. Many were new to the faith and filled in the holes in their Biblical knowledge with the writings of pagan philosophers from Plato to Cicero, all of whom held commerce in low regard.

Pagan philosophy dominated the theology of wealth from the second through the 15th century. In fact, pagan intellectuals have always dominated Church teaching on social issues with few exceptions. E. R. Norman drives home that point in Church and Society in England 1770 – 1970. The only exceptions took place when the leading intellectuals were also Christians, such as the Salamancan theologians, the founders of the Dutch Republic and the “clerical” economists in the UK and US during the 19th century. In the late 19th century most intellectuals were atheists and socialists, so Protestant and Catholic theologians became socialists as well.

The theologians of the University of Salamanca had the courage to break with the pagans and distill their economics from the Bible and natural law. McCloskey described the radical change in European values from the pagan contempt for commerce to the bourgeois virtues but fails to offer a convincing reason for the change. But the teaching of the Salamancan scholars explains it well. Their theology gave people permission to be pro-business and godly at the same time.

All of the poor countries today have failed to make the change in values that would give them respect for business as a means to wealth. The great economist Thomas Sowell details the trials and tribulations of “middleman minorities” in his Black Rednecks and White Liberals. Jews in Europe are the prototypical middleman minorities. Christians persecuted them relentlessly because Christians restricted them to business as their only means of support, barring them from government or the military. As business people, they became wealthy and inflamed the envy of Christians.

Christians in Muslim nations, Chinese in Southeast Asia, Lebanese in West Africa and Koreans in Los Angeles recently have all been middleman minorities engaged in commerce that made them wealthier than their neighbors. That wealth and their hated professions ignited envy, which boiled over into frequent riots and murder.

The issue of mass production is simpler. Many historians locate the origins of capitalism in the commercial cities of Northern Italy, such as Venice. Those cities did enjoy a healthy respect for commerce, but the lacked mass production. All production except for ship building in Venice, which was state owned, was craft production in guilds. Craft production has always existed and so cannot explain an explosion in wealth like the hockey stick because it never produced large increases in productivity. Such wealth creation can only take place when business people invest their wealth in new and better machines to aid workers and boost productivity. Ludwig von Mises wrote in Planned Chaos, “There is no means by which the height of wage rates can be raised for all those eager to earn wages other than through the increase of the per capita quota of capital invested.”

Craft production was always small production for the wealthy. Capitalism is mass production for the masses and that requires investment in capital goods. Hence the appropriate name, capitalism. That began to happen first in the Dutch Republic.

Capitalism requires 1) protection of property and free markets, 2) respect for commerce, 3) mass, capital-intensive production and 4) individualism. I saved individualism for last because it is the most difficult and will discuss it next week.

Originally published at Townhall Finance

Saturday, February 17, 2018

Is it time to sell?

The two recent plunges in the stock market have investors’ knees shaking. Is this a normal, healthy correction that forces expectations to align more with reality, or is this the beginning of the big one, the aftershocks of which will take the market down 50% as happened in 2000 and 2008? I’ll be able to tell you in about six months. I only predict the past because forecasting the future is too difficult.

A recent paper by the University of Chicago Booth School of Business professor George M. Constantinides and McGill University’s Anisha Ghosh, “What Information Drives Asset Prices?” offers some insights. One is that the Consumer Price Index and average hourly earnings provide better guidance about the direction of the market than does consumption spending alone. In other words, Keynes was wrong.

But the best insight is that the phase of the business cycle we are in offers the best advice on the market’s future. The authors call the phases “regimes” and use just two, expansion or recession.
The consumption and dividend growth rates have higher means in the first regime than in the second one. Therefore we identify the first regime as the regime of economic expansion, with a higher mean of consumption and dividend growth rates and longer duration than the second regime...In other words, the investor is able to effectively forecast the regime in the next period...”
So the investors who accurately guess whether the next period will usher in a recession or continue the expansion will do better at predicting the market. The authors of the paper assume that investors use a range of macroeconomic variables, including Consumer Price Index and average hourly earnings, to guess what regime or phase of the cycle comes next.

Wednesday, February 14, 2018

Free God is a Capitalist

Since I can't offer the PDF version of God is a Capitalist anymore because of the Kindle contract, I can offer the Kindle book free for five days each quarter. The first free days will be March 1-5. I cleaned up the PDF, corrected many errors and added some new material to the Kindle version. Please leave a review whether negative or positive! Just click on the picture of the book on the right to go to the Amazon web page for the book.

Monday, February 12, 2018

What is free market capitalism?

People in the West are confused about capitalism because they don’t know enough about socialism. Karl Marx had a greater respect for capitalism than do modern socialists or conservatives. 

Karl Marx fabricated the term “capitalism” and defined it as the private ownership of the means of production. He did not conflate capitalism with commerce, as do most historians today who see shoots of capitalism sprouting throughout human history. Neither did the monasteries of medieval Europe birth capitalism as some historians claim. Is it really necessary to remind historians that monks owned no property and took vows of poverty? Monasteries were closer to the many small socialist experiments, like the kibbutzim of Israel. Marx saw the origins of capitalism in the 17th century.

Marx pretended to have discovered the secret forces of history that had led mankind from tribal economies through feudalism to capitalism and ultimately will usher in socialism. And he insisted that society must follow that sequence. They could not jump from feudalism to socialism because only capitalism could produce the wealth necessary for its socialist heirs to live in abundance. Trying to shorten the path would perpetuate poverty and misery. That’s why Marx was skeptical about the possibility of backward nations such as Russia succeeding with socialism.

Sunday, February 4, 2018

Don’t nudge; reform Social Security

My sister-in-law taught me to do the “Dallas nudge.” It’s sort of a dance, like the Texas Two-Step, except it’s a tactic for getting onto one of Dallas’ many twelve-lane expressways. So you floor the gas pedal to match the speed of the traffic you want to merge with and then look away. The other drivers think you can’t see them and make room for you.

Behavioral economists have been pushing the government to nudge us since some of their own won the Nobel Prize. Like CS Lewis’ “do gooders,” we’ll never be free from their needling and meddling. The latest comes from the Chicago Booth School of Business in an article “Why policy makers should nudge more" by Alex Virkhivker. He wrote,
In one case, the researchers looked at a nudge by the tax-preparation firm H&R Block, which offered clients assistance in filing college financial-aid paperwork, and compared that approach with subsidies and tax incentives offered at the state and federal levels. The nudge produced 1.5 additional college enrollees per $1,000 spent—making it 40 times more effective than the next most effective intervention the researchers analyzed.
Likewise, nudging turned out to be the most cost-effective way of encouraging energy conservation. One program to nudge consumers into lower electricity use, sending letters comparing a household’s energy consumption to that of its neighbors, saved 27 kilowatt-hours per dollar spent. In contrast, a rebate offered by California utility companies produced savings of only 3.4 kWh per dollar, and other demand-management policies that relied on a combination of consumer education and monetary incentives averaged 14 kWh per dollar.

Monday, January 29, 2018

Book on race advertises failure of state programs

Divided by Faith: Evangelical Religion and the Problem of Race in America by Michael Emerson and Christian Smith rocked the white evangelical world when it came out in 2000. It appealed to the evangelical’s love of wool shirts and launched a new genre of books and articles promoting white evangelical guilt over racism. In 2013, Christians and the Color Line: Race and Religion after Divided by Faith was the booster rocket to keep the movement in orbit.

 Structural racism in the US in spite of the Civil Rights movement horrified the authors of Divided by Faith. By structural racism they mean free markets. They wanted to tax the rich at higher rates and redistribute it to poor. That such taxation would hurt rich blacks and that most of the poor are white (though the poverty rate among blacks is higher) didn't enter their calculations. 

Frustrated by the white evangelical insistence on individual responsibility and personal evangelism, they determined to move white evangelicals away from their fixation on the individual and toward solving structural issues through the government. Their solution was for white evangelicals to get to know blacks personally by having them to dinner and integrating churches. They reasoned that if whites could know black people well enough they would become as socialist as the authors. 

Tuesday, January 23, 2018

The derelict economics of the Benedict Option

Rod Dreher’s book The Benedict Option: A strategy for Christians in a post-Christian nation was a best seller last year. It’s difficult to complain about most of what Dreher has to say in his book. It would be like opposing motherhood and apple pie. He advocates building stronger churches and communities, praying and reading the Bible more and improving our children’s education.

The problem with this book and his earlier one, Crunchy Cons, is that his solutions have nothing at all to do with the causes of the illnesses he associates with modern Western culture. The first chapter of the Benedict Option laments the moral decline of the US as evidenced in the endorsement of homosexual marriage and the full hug of transgenderism. The second chapter traces the origins of these problems to the following:
Fourteenth century: The defeat of metaphysical realism by nominalism in medieval theological debates removed the linchpin linking the transcendent and the material worlds...
Fifteenth century: The Renaissance dawned with a new, optimist outlook on human potential and began shifting the West’s vision and social imagination from God to man...
Sixteenth century: The Reformation broke the religious unity of Europe...
Seventeenth century: ...The Scientific Revolution struck the final blow to the organic medieval model of the cosmos, replacing it with a vision of the universe as a machine...
Eighteenth century: The Enlightenment attempted to create a philosophical framework for living in and governing society absent religious reference...

Nineteen century: The success of the Industrial Revolution pulverized the agrarian way of life, uprooted the masses from rural areas, and brought them into the cities...
Twentieth century: The horrors of the two world wars severely damaged faith in the gods of reason and progress and in the God of Christianity...

Thursday, January 18, 2018

Is the GOP tax plan moral?

Socialists complain that the recent tax reform package passed by Republicans in Congress and lauded by President Trump as America’s Christmas present is immoral because it provides some relief to the wealthy. Behind the complaint lies the offense to socialists that rich people exist at all. Unless a tax plan euthanizes the rich, socialists will consider it immoral.

It’s important to keep in mind that when socialists talk about morality they don’t mean what people have meant for two thousand years. For most of Christian history morality meant those principles that would cause humanity to prosper if we follow them. We got them from God because only our Creator knows what is best for us. Socialists murdered God in the Enlightenment and changed the definition of morality to mean whatever socialists prefer. That is the socialist MO: redefine words so that their arguments win by default.

Saturday, January 6, 2018

Why executives make the big bucks

Socialists suffer seizures when the subject of CEO salaries surfaces. They never tell us how much more money than a janitor a CEO should make, so it’s clear that no matter what the salary they will harm themselves by their extreme response if it is any higher.

British socialists are advertising their envy in a new report “of companies that Theresa May said risk damaging ‘the social fabric of our country’ by paying bosses too much money,” according to comments by the Adam Smith Institute. The author explained,

"The public register was published on Tuesday by the Investment Association, a trade body of investment firms that manage the pensions of millions of Britons."
The register lists every company in the FTSE All-Share Index which has suffered at least a 20% shareholder rebellion against proposals for executive pay, re-election of directors or other resolution at their shareholder meetings.
Of course, the source of the outrage is pure envy and no amount of economic reasoning or facts will dissuade the left. But can free marketeers justify the highest CEO salaries? There are two reasons that CEOs earn such salaries: 1) marginal revenue and 2) knowledge.