"There are men, in all ages, who mean to exercise power usefully; but who mean to exercise it. They mean to govern well; but they mean to govern. They promise to be kind masters; but they mean to be masters." Daniel Webster
Friday, October 31, 2008
Wednesday, October 29, 2008
Monday, October 27, 2008
The late comedian Jerry Clower used to tell a story about an old man who attended a small rural church. The man didn't attend as often as he should have, but he heard that the church was going to vote on buying a chandelier and that concerned him greatly. He went that Sunday, and the pastor said he and the deacons recommended the church buy a chandelier and asked if anyone had any comments before they voted.
The old man stood up and addressed the church, telling them it was a bad idea.
"First of all, ain't nobody here knows how to play one of those things. Second, if we are going to spend that much money, we really ought to do something about the lights."
That story reflects the reality of democracy.
Studies have shown many American voters to be badly uninformed or misinformed, not only about the issues of the day, but about the basic structure of their government, an ignorance revealed by numerous surveys and polls.
"About half of all Americans do not know that each state has two senators, and three quarters do not know the length of their terms," writes George Mason university economist Bryan Caplan.
Caplan's new book "The Myth of the Rational Voter: Why Democracies Choose Bad Policies" lays out just how uninformed many voters are.
Just a couple of examples: Over half cannot name their congressman, and an even lower percentage cannot name his or her party affiliation.
But don't feel bad. We are no more ignorant than our ancestors. Since the birth of polling decades ago, surveys have shown voters have a low level of knowledge about political issues.
And "international comparisons reveal Americans' overall political knowledge to be no more than moderately below average," Caplan notes.
Using polling data, Caplan shows that a large number of voters suffer from four biases that lead them in the wrong direction on policy matters.
They have an antimarket bias, a tendency to underestimate the benefits of a free market.
They also have an anti-foreign bias, a tendency to underestimate the benefits or over estimate the costs of dealing economically with foreigners.
The fear about Japanese investment in the United States is a perfect example of this. Caplan notes that during the period when polls showed the greatest concern about Japanese companies buying up America, British investment in the United States by at least 50 percent every year, and there was no outcry over the Brits buying everything.
Voters also suffer from a make-work bias, a tendency to overestimate the costs of job losses.
The fourth and final bias is a pessimistic bias, a tendency to overestimate the severity of current economic problems and underestimate the future performance of the economy.
"This pessimistic bias is a general-interest prop to political demagoguery of all kinds. It creates a presumption that matters, left uncontrolled, are spiraling to destruction, and that something has to be done, no matter how costly or ultimately counterproductive to wealth or freedom. This mind-set plays a role in almost every modern political controversy, from downsizing to immigration to global warming," Caplan wrote in an article for Reason magazine.
Again, none of these four biases are unique to 21st-century American. In all times and in all places, a significant number of people have distrusted foreigners and, believed the world was going to hell even in the times of greatest peace and prosperity.
If voters views on economic matters are so out of skew with reality, how can we get them, and the people they elect, to make the write decisions?
In an ideal world, having read Henry Hazlitt's "Economics in One Lesson" and Julian Simon's "The Ultimate Resource" would be a requirement for voting.
But we don't live in that world.
Caplan notes that better-educated voters tend to be more knowledgeable about economic matters. He also notes that until 1949, Great Britain allowed graduates of its top universities and business owners to vote multiple times.
"Since more educated voters think more like economists, there is much to be said for such weighting schemes. I leave it to the reader to decide whether 1948 Britain counts as a democracy," he writes.
Perhaps a less controversial proposal is one he says was suggested by psychologist Steven Pinker. That calls for schools to change their curricula to help students uncover and overcome their biases. In this plan, statistics, economics and evolutionary biology would have a much larger place, while other subjects would be cut.
It certainly couldn't hurt.
Sunday, October 26, 2008
Future historians may someday refer to this sad episode as the Bernanke-Paulson Recession, concluding that it was the policies of those two individuals, more than any other factors, that turned what was not even a mild recession into a major economic downturn.
Saturday, October 25, 2008
Friday, October 24, 2008
Funny, it was just a few weeks ago some people were complaining that the stores, the oil companies, someone was unfairly hiking prices. When you'd try to talk to them about supply and demand, all they could say was that greed was running amok. I guess the oil companies just got less greedy all of a sudden.
I agree with Frederic Sautet that Greenspan's fundamental mistake took place decades earlier.
Thursday, October 23, 2008
Wednesday, October 22, 2008
Tuesday, October 21, 2008
The good news? Larry Kudlow says the two likely candidates for Treasury Secretary in a Barack Obama administration are Paul Volcker and Larry Summers.
The bad news? Iain Murray says the most likely Treasury Secretary under Obama would be JP Morgan Chase CEO Jamie Dion.
Monday, October 20, 2008
Ilya Somin, Matt Welch and Jesse Walker ably take apart Jacob Weisberg's attempts to blame the current financial crisis on libertarianism.
I am convinced, however, that the link between free market economics and the Republican Party in general and Georeg W. Bush in particular has caused a serious problem in terms of public respect for free market ideas and will for some time.
Yes, many of of us who consider ourselves advocates of a free market know that Bush's policies were far from laissez faire. But look at how many self-proclaimed libertarians and free market types endorsed Bush, campaigned for him, served in his administration and covered for him. Some of them may have criticized the administration on particular issues, but many still stood by him until the last couple of years.
Can we blame the public for believing the policies of the Bush administration, the policies of the Republican Party and the free market are all one and the same?
President Bush came in and immediately began doubling the Department of Education budget and inaugurating the largest expansion of entitlements since Lyndon Johnson, in the form of the prescription drug benefit for seniors. In eight years he has doubled the national debt.
In the last month, both Bush and presidential candidate John McCain backed the most significant government intervention into the market in several decades, perhaps longer, when they signed and voted for the Emergency Economic Stabilization Act of 2008. This act gave the Treasury virtually dictatorial powers and nearly a trillion dollars to buy up practically any American financial instruments it deems desirable, making it the biggest player in the market and essentially nationalizing the entire financial sector.
McCain has gone on to propose an enormous plan for Washington to buy up troubled mortgages directly, at a price tag of hundreds of billions by conservative estimates. He copied the plan almost exactly from Hillary Clinton, called her to ask her advice on it, and has pitched it as resembling her proposal. Even Barack Obama thinks it is unwise and reckless.
Sunday, October 19, 2008
Hansen hits him with a series of forearms about three minutes in, which appears to be what does it. Vader pulls his mask off, sticks his eyeball back into the socket and wrestles another 12 minutes or so (the rest of the match is available on YouTube).
There's a fine line between badass and dumbass. I'm not sure which side Vader is on.
Saturday, October 18, 2008
What's odd is that this is treated as news. Anyone who knows anything about immigration to the United States knows that in ethnic enclaves foreign languages tended to persist and be predominant for many years.
In Texas, some communities founded by German immigrants continued to have heavy concentrations of people speaking primarily German into the 20th century. There's this myth that somehow today's immigrants are different, but the pattern seems much the same. The first generation often learns little English, especially if they come here as adults. The second generation is bilingual and may or may not be more comfortable in English, and the third generation and after tends to speak less and less of their grandparents' language.
our central bankers and our Treasury Department are getting it wrong again.
To understand why, one first has to understand the nature of the current "credit market disturbance," as Ms. Schwartz delicately calls it. We now hear almost every day that banks will not lend to each other, or will do so only at punitive interest rates. Credit spreads -- the difference between what it costs the government to borrow and what private-sector borrowers must pay -- are at historic highs.
This is not due to a lack of money available to lend, Ms. Schwartz says, but to a lack of faith in the ability of borrowers to repay their debts. "The Fed," she argues, "has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible."
So even though the Fed has flooded the credit markets with cash, spreads haven't budged because banks don't know who is still solvent and who is not. This uncertainty, says Ms. Schwartz, is "the basic problem in the credit market. Lending freezes up when lenders are uncertain that would-be borrowers have the resources to repay them. So to assume that the whole problem is inadequate liquidity bypasses the real issue."
In the 1930s, as Ms. Schwartz and Mr. Friedman argued in "A Monetary History," the country and the Federal Reserve were faced with a liquidity crisis in the banking sector. As banks failed, depositors became alarmed that they'd lose their money if their bank, too, failed. So bank runs began, and these became self-reinforcing: "If the borrowers hadn't withdrawn cash, they [the banks] would have been in good shape. But the Fed just sat by and did nothing, so bank after bank failed. And that only motivated depositors to withdraw funds from banks that were not in distress," deepening the crisis and causing still more failures.
But "that's not what's going on in the market now," Ms. Schwartz says.
In fact, by keeping otherwise insolvent banks afloat, the Federal Reserve and the Treasury have actually prolonged the crisis. "They should not be recapitalizing firms that should be shut down."
Rather, "firms that made wrong decisions should fail," she says bluntly. "You shouldn't rescue them. And once that's established as a principle, I think the market recognizes that it makes sense. Everything works much better when wrong decisions are punished and good decisions make you rich." The trouble is, "that's not the way the world has been going in recent years."
Instead, we've been hearing for most of the past year about "systemic risk" -- the notion that allowing one firm to fail will cause a cascade that will take down otherwise healthy companies in its wake.
Ms. Schwartz doesn't buy it. "It's very easy when you're a market participant," she notes with a smile, "to claim that you shouldn't shut down a firm that's in really bad straits because everybody else who has lent to it will be injured. Well, if they lent to a firm that they knew was pretty rocky, that's their responsibility. And if they have to be denied repayment of their loans, well, they wished it on themselves. The [government] doesn't have to save them, just as it didn't save the stockholders and the employees of Bear Stearns. Why should they be worried about the creditors? Creditors are no more worthy of being rescued than ordinary people, who are really innocent of what's been going on."
It takes real guts to let a large, powerful institution go down. But the alternative -- the current credit freeze -- is worse, Ms. Schwartz argues.
"I think if you have some principles and know what you're doing, the market responds. They see that you have some structure to your actions, that it isn't just ad hoc -- you'll do this today but you'll do something different tomorrow. And the market respects people in supervisory positions who seem to be on top of what's going on. So I think if you're tough about firms that have invested unwisely, the market won't blame you. They'll say, 'Well, yeah, it's your fault. You did this. Nobody else told you to do it. Why should we be saving you at this point if you're stuck with assets you can't sell and liabilities you can't pay off?'" But when the authorities finally got around to letting Lehman Brothers fail, it had saved so many others already that the markets didn't know how to react. Instead of looking principled, the authorities looked erratic and inconstant.
Friday, October 17, 2008
Thursday, October 16, 2008
Wednesday, October 15, 2008
I covered politics, economics and government, not business. I really enjoyed my time there. Hey, I spent almost a decade working there. But I know that I and other writers were pretty convinced that we were just filler between the stock tables.
I'm glad they are doing well. I still have a couple of friends that work there. But the editorial page, which was always a "red meat for the bubbas" type page, seems to have veered off into Michael Savage territory in the past few years.
Tuesday, October 14, 2008
Let's leave aside just how persuasive his case was for Obama, as against voting for John McCain and focus on Buckley's thought's about the state of American conservatism and the Republican Party in the 21st century:
While I regret this development, I am not in mourning, for I no longer have any clear idea what, exactly, the modern conservative movement stands for. Eight years of “conservative” government has brought us a doubled national debt, ruinous expansion of entitlement programs, bridges to nowhere, poster boy Jack Abramoff and an ill-premised, ill-waged war conducted by politicians of breathtaking arrogance. As a sideshow, it brought us a truly obscene attempt at federal intervention in the Terry Schiavo case.
So, to paraphrase a real conservative, Ronald Reagan: I haven’t left the Republican Party. It left me.
In the future, libertarian and free market organizations should ask one simple question of any new hires and current employees. Did you vote for Bush in 2000 or 2004? If the answer is yes, send them packing to AEI or some other neocon outfit.
The capital injections are not voluntary, with Mr. Paulson making it clear this was a one-time offer that everyone at the meeting should accept.
Economist Tyler Cowen writes
No matter what your point of view, you ought to be stunned by this development.
Monday, October 13, 2008
Sunday, October 12, 2008
Saturday, October 11, 2008
At Fort McNair, an army base located along the Potomac River in the nation's capital, a chance reunion takes place one day between two former POWs. It's the spring of 1974, and Navy commander John Sidney McCain III has returned home from the experience in Hanoi that, according to legend, transformed him from a callow and reckless youth into a serious man of patriotism and purpose. Walking along the grounds at Fort McNair, McCain runs into John Dramesi, an Air Force lieutenant colonel who was also imprisoned and tortured in Vietnam.
McCain is studying at the National War College, a prestigious graduate program he had to pull strings with the Secretary of the Navy to get into. Dramesi is enrolled, on his own merit, at the Industrial College of the Armed Forces in the building next door.
There's a distance between the two men that belies their shared experience in North Vietnam — call it an honor gap. Like many American POWs, McCain broke down under torture and offered a "confession" to his North Vietnamese captors. Dramesi, in contrast, attempted two daring escapes. For the second he was brutalized for a month with daily torture sessions that nearly killed him. His partner in the escape, Lt. Col. Ed Atterberry, didn't survive the mistreatment. But Dramesi never said a disloyal word, and for his heroism was awarded two Air Force Crosses, one of the service's highest distinctions. McCain would later hail him as "one of the toughest guys I've ever met."
On the grounds between the two brick colleges, the chitchat between the scion of four-star admirals and the son of a prizefighter turns to their academic travels; both colleges sponsor a trip abroad for young officers to network with military and political leaders in a distant corner of the globe.
"I'm going to the Middle East," Dramesi says. "Turkey, Kuwait, Lebanon, Iran."
"Why are you going to the Middle East?" McCain asks, dismissively.
"It's a place we're probably going to have some problems," Dramesi says.
"Why? Where are you going to, John?"
"Oh, I'm going to Rio."
"What the hell are you going to Rio for?"
McCain, a married father of three, shrugs.
"I got a better chance of getting laid."
Dramesi, who went on to serve as chief war planner for U.S. Air Forces in Europe and commander of a wing of the Strategic Air Command, was not surprised. "McCain says his life changed while he was in Vietnam, and he is now a different man," Dramesi says today. "But he's still the undisciplined, spoiled brat that he was when he went in."
The name John Dramesi seemed slightly familiar, so I Googled it and quickly found he's a controversial figure among former Vietnam POWs. He's as admired for his toughness as he is reviled for his, well, toughness. The Chicago Reader explains
He was so tough he was viewed as a danger to the health, and even the lives, of the other POWs.
Dramesi knows what they thought about him, and still think. He told me, "If you talk to another POW -- and I've been told this -- if you mention my name to another POW, if you meet somebody and you find out they were a POW, and they'll be telling you stories, and you say 'I know a POW.' 'Who do you know?' 'I know John Dramesi.' All of a sudden the conversation will come to a complete standstill and they’ll probably walk away."
As Dickinson noted, Dramesi escaped and was recaptured twice. The second time, the North Vietnamese made vicious reprisals against the rest of their prisoners, and Dramesi and Ed Atterberry, the POW he escaped with, were beaten so badly that Atterberry died. Dramesi planned a third escape, but the senior POWs at his camp ordered him not to try it. Nobody wanted to be tortured again. Dramesi says he once got a letter from McCain that called the escape with Atterberry "infamous."
This is how the Reader article concludes
In my experience the mind of John Dramesi has never betrayed the slightest confusion. I asked him for his thoughts on the present war. "The Iraqi war never should have happened," he said. "I'm convinced and I think Congress is convinced -- but Congress never had guts enough to impeach Bush."
And who will he vote for next month? "Knowing John, and what I know of Barack Obama, I would say I would vote for an individual who is certainly more intelligent and who has discipline, which is the key factor I'm concerned with. A president without discipline. . . . Again, the old adage 'Country first' with John McCain really doesn’t apply."
And here's a review of Dramesi's book by another Air Force officer.
Friday, October 10, 2008
Thursday, October 9, 2008
Wednesday, October 8, 2008
Tuesday, October 7, 2008
Sunday, October 5, 2008
Saturday, October 4, 2008
One final thought: if one really believes this bailout will make matters worse, especially significantly worse, I think it's a reason to vote/root for Obama. Should McCain win and things go downhill, it will be much easier to blame the mess on "free markets" and "deregulation," not because McCain believes those things but because of GOP lip-service to them and the perception that they've acted on that lip-service. With Obama in office, and things going south, it might be more akin to the late 70s under Carter, where the blame is less likely to be laid at the feet of markets. I might be wrong about this, but given the disastrous combination of free market "talk" but statist action by the GOP, I think I'd rather have the folks who don't even talk the talk at the helm when the waters get very choppy.
I don't know if the movie is funny or not. If it is, it would be the first funny one David Zucker has made in 15 years. I'll probably catch it when it comes to cable, just like I did "Scary Movie 3," though that is more than I can say for Bill Maher's new movie.
Friday, October 3, 2008
The more I see of here, the more I regret that H.L. Mencken isn't still around to cover this election. For that matter, Palin seems like the sort of character Sinclair Lewis would have dreamed up if he'd lived in the 21st Century.
Thursday, October 2, 2008
Wednesday, October 1, 2008
Two years ago, the hardline Islamic Courts regime, allied with a number of regional warlords, had brought a measure of stability to Somalia after 15 years of civil war. The Courts suppressed piracy to its lowest level in years. But U.S. suspicions that the Courts were actively harboring Al-Qaeda operatives led the U.S. to sponsor an joint invasion by Ethiopia and an alliance of outside Somali clans, destroying the Courts and sparking a bloody, Iraq-style insurgency. In the wake of the invasion, piracy flared up again.
I think Big Player influences are an important part of how we got into this mess. Clearly, they are a characteristic feature of the current crisis. What do many Washington politicians wish to do in this environment? Increase Big Player influence! We are suffering now from over-politicized markets. Making markets more politicized can only make things worse. In the past, only government entities such as the central bank could be Big Players beyond the short run. A “rescue” that effaces the difference between private and public ownership (by giving the state stock warrants for example) and enshrines the too-big-to-fail doctrine turns the biggest private, profit-seeking corporate enterprises into Big Players.