Insta-Millard Pundit, economics edition: Adam Smith was a bleeding heart liberal

December 21, 2013

In a new book, author Jack Russell Weinstein argues that we should pay more attention to Adam Smith’s first book, The Theory of Moral Sentiments,  and not allow Smith’s humanitarian pleas for good community be hijacked by libertarians, conservatives or liberals.

Adam Smith’s Pluralism, Jack Russell Weinstein, Yale University Press, 360 pages

Adam Smith, updated. Illustration by Michal Hogue.

Adam Smith, updated. Illustration by Michal Hogue.

A review of the book explains further, at American Conservative, “Adam Smith, Communitarian:

Weinstein builds upon Smithian harmony, explaining that while life is not always commercial, it is always communal. Community, in turn, derives its lifeblood from “imagination,” because imagination creates the capacity for sympathy. Unlike Kant and other Enlightenment thinkers, Smith “presumes human difference” as a necessary and inherent aspect of civilization, rejecting the Kantian ideal of “noncontextual normativity.” Smith recognized that cultural, temporal, and social differences shaped norms and values, making it impossible to create a single, all-inclusive norm of human behavior. This is why sympathy is so important. It offers a means that is natural to the human condition—our desire to commiserate with our fellow man—to bridge the gap between our differences.

Smith believed that “political society is not derived from a social contract,” according to Weinstein. Instead, society is a natural expression of what it means to be human. The state of nature for Smith is one of community, and the ultimate questions related to human society are questions of morality and virtue, not economics and politics. Thus, a broad, morally robust education rooted in a particular community is essential to forming sympathetic individuals. While Smith did not idealize the role of education—it could not completely eliminate human selfishness and vanity—he believed it had the power to “direct vanity to proper objects” and to “convert competing passions into a harmonious character.”

[The blog post’s headline should be read with more than a hint of sarcasm; hate to have to explain that.]

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Milton Friedman really said higher wages make a nation prosperous?

December 18, 2013

Chicago University and Nobel-winning economist Milton Friedman, inspecting fruits of free markets.

Chicago University and Nobel-winning economist Milton Friedman, inspecting fruits of free markets. (Photo found at Crooks and Liars, with quote of Friedman’s explaining the benefits of things like that Earned Income Tax Credit)

In Free to Choose, Milton Friedman wrote:

But when workers get higher wages and better working conditions through the free market, when they get raises by firm competing with one another for the best workers, by workers competing with one another for the best jobs, those higher wages are at nobody’s expense. They can only come from higher productivity, greater capital investment, more widely diffused skills. The whole pie is bigger – there’s more for the worker, but there’s also more for the employer, the investor, the consumer, and even the tax collector.

That’s the way the free market system distributes the fruits of economic progress among all people. That’s the secret of the enormous improvements in the conditions of the working person over the past two centuries.

What would Friedman say about higher productivity and greater capital investment, an increasing pie, when the increases are denied to the worker, and the employer, and the consumer, and the tax collector?  Somehow, I think even Mr. No-government-regulation would cry, “Foul!”

Heck, that’s a good argument for raising the minimum wage, and for fixing income inequality.

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Quote of the moment repeat: Robert C. Lieberman, “Why the Rich Are Getting Richer: American Politics and the Second Gilded Age”

February 20, 2013

What? You missed this, on February 20, 2011? Well, here it is again. Please pay attention this time.

The U.S. economy appears to be coming apart at the seams.  Unemployment remains at nearly ten percent, the highest level in almost 30 years; foreclosures have forced millions of Americans out of their homes; and real incomes have fallen faster and further than at any time since the Great Depression.  Many of those laid off fear that the jobs they have lost — the secure, often unionized, industrial jobs that provided wealth, security and opportunity — will never return.  They are probably right.

Cover of Winner-Take-All Politics, by Jacob Hacker and Paul Pierson

Cover of Winner-Take-All Politics, by Jacob Hacker and Paul Pierson

And yet a curious thing has happened in the midst of all this misery.  The wealthiest Americans, among them presumably the very titans of global finance whose misadventures brought about the financial meltdown, got richer.  And not just a little bit richer; a lot richer.  In 2009, the average income of the top five percent of earners went up, while on average everyone else’s income went down.  This was not an anomaly but rather a continuation of a 40-year trend of ballooning incomes at the very top and stagnant incomes in the middle and at the bottom.  The share of total income going to the top one percent has increased from roughly eight percent in the 1960s to more than 20 percent today.

This what the political scientists Jacob Hacker and Paul Pierson call the “winner-take-all economy.”  It is not a picture of a healthy society.  Such a level of economic inequality, not seen in the United States since the eve of the Great Depression, bespeaks a political economy in which the financial rewards are increasingly concentrated among a tiny elite and whose risks are borne by an increasingly exposed and unprotected middle class.  Income inequality in the United States is higher than in any other advanced democracy and by conventional measures comparable to that in countries such as Ghana, Nicaragua, and Turkmenistan.

Robert C. Lieberman, reviewing the book Winner-Take-All Politics:  How Washington Made the Rich Richer — and Turned Its Back on the Middle Class, by Jacob S. Hacker and Paul Pierson, Simon and Schuster, 2010, 368 pages.  $27.00.; review appears in Foreign Affairs, January/February 2011, pp. 154-158.

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Two years later, even more:


Ben Stein off the rails again

October 10, 2012

Ben Stein is nominally a smart guy, with a degree in economics and a law degree and enough moxie to wangle his way into the movies . . . lives a sort of a charmed life.

Ben Stein

Ben Stein

Which may be good on one hand, because he runs off the rails sometimes.  Bad on the other hand if others follow him off the rails, assuming he’s smart and knows where he’s going.

Stein’s latest droppings at American Spectator include this gross misunderstanding of the drive for justice and equality (all links added here):

But right now, which is Sunday, I am looking in my favorite book, Bartlett’s Familiar Quotations, for a quote by Hayek about how you cannot clearly associate economic effects with economic causes because so many different circumstances are at work each time.

I cannot find that quote in this edition — maybe a 1976 edition — but I did find a better one from Hayek which I paraphrase here: the attempt at social justice causes more misery than almost any other factor in human life (again, a paraphrase).

Yes. The Communists. The Jacobins. The Communards. The Maoists. The Khmer Rouge. They all caused untold suffering in the phony and vain attempt to make everyone equal… phony because it was just a fig leaf for terrible people to seize power.

We are not supposed to be all equal. Let’s just forget that. We are supposed to have equal rights under law. If we do that, we have done enough. If we try to engineer outcomes, if we overturn tradition to make everyone the same, we ruin society. If we upset tradition to allow for an equal shot at the starting gate, everyone wins, except for the charlatans and would be dictators.

Yet another reason to be a Republican. Give everyone an equal shot — but do not require equal outcomes or even roughly equal outcomes by law. That way lies catastrophe.

Every soul deserves a shot at a Cadillac, but not everyone should be guaranteed a Cadillac… that way lie the tumbrels and the guillotine.

Other groups in history caused untold suffering in the phony and vain attempt to keep everyone from having equal rights.  What’s his point, that he’s forgotten history and has so far avoided a visit from Santayana’s Ghost?

Consider the anti-Jacobins, the monarchy and strict class system against which the French revolted — better?  The Jacobins themselves were mostly upper-class, including a future King of France among them, and the club being composed almost completely of wealthy people or merchants on the rise, quite like a modern Republican-leaning country club.  Does Stein really know this history?

Communards organized and rebelled against a patrician government (think Occupy Wall Street with real venom, tired of eating cats and rats, and with the support of hungry front-line soldiers who sympathized with them).  They did not perpetrate misery in support of social justice, not so much as 18,000 Communards were murdered to put down the rebellion and  continue the social injustice, several thousands more were executed, and a few thousands were “deported” to prison colonies in New Caledonia.  Stein seems to have this history exactly backwards — it was the GOP-style Bismarck-Farve alliance that delivered misery to perpetuate inequality.

One might make a claim that the Maoists in China worked for a degree of a classless society, but not on the scale and not with the success of George Washington — which is probably a clear view into why Mao’s successors beat such a hasty retreat to more capitalistic-bent programs, but still leaving the peasants in the countryside and especially coal miners on the short end of the rights stick.  It’s simply fatuous to claim the Khmer Rouge worked to make people equal under the madman dictator Pol Pot.  It’s  a good, short debate line, but it doesn’t stand up to scrutiny of history — and remember, it was the communist North Vietnamese Army who chased Pol Pot out of power and restored order to Cambodia.

Consider the Roman Empire (which oddly is more akin to modern U.S. Republicans than the Roman Republic), or Czarist Russia before the Bolsheviks.  It’s not like the failed attempts by so-called communists brought down societies that honored equality for citizens.  Stein has the telescope of history by the wrong end, which means he really can’t see what he’s claiming to describe.

Did Hayek really say that working for social justice is error?  I doubt it.  He wrote about wrong-headed attempts to impose social justice, like keeping everyone from having a Cadillac, through formal legal means, or through informal, economic and class means such as closing off opportunities for the poor and middle class to rise.  Stein, a Jew with an Ivy League education, should be sensitive to the closing of opportunities, and appreciative that opportunities are generally open in this nation.  Religion once operated as keys the doors to Ivy League schools, to the detriment of Jews; once recast, those keys provided a door to economic and intellectual achievement for many Jews.

Stein’s column is titled “A Reason to Be Republican.”  Instead he outlines reasons to question the current Republican platform and candidates for the presidency, U.S. Senate and U.S. House of Representatives.  Somehow he confuses Republican policy with the phrase “Equal Justice Under Law,” the words engraved on the West Portico of the U.S. Supreme Court.  It’s useful at such times to remember the building was completed in 1935, and that its design and construction was supervised by Chief Justice William Howard Taft, the former Democrat.  It’s also useful to remember that the GOP has fought against those words ever since, but especially after Richard Nixon determined to jettison GOP dedication to civil rights for African Americans, women and Hispanics, in pursuit of electoral success with the votes of bigots from the South angry at the Democratic Party for having successfully pushed the Civil Rights Act of 1964 and the Voting Rights Act of 1965.  Stein wrote speeches for Nixon.  He should remember that history better, or study it more if he can’t recall.

Especially not the rich should be guaranteed a Cadillac by the government.  They already have the money to get what they need; but having money should not confer rights to take everything while walking on the heads of the middle class and poor.  Everyone deserves a shot, Stein said.  I wish he’d support that claim with his actions, his political contributions, and his endorsement of candidates.

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Taking from the poor to give to the rich, 1979-2007

August 14, 2012

For honest seekers of economic truth, the question about what went wrong that led to the recent great economic collapse has deep roots — but not complicated roots.

Our increases in wealth came at the expense of the poor and especially middle class, and they went to the tiny fraction of people at the very top who now own much of your nation.

Redistribution of wealth, Paul Krugman from CBO figures

Paul Krugman’s graphic of redistribution of wealth in the U.S., figures from the Congressional Budget Office

Our most vocal Nobel-winning economist, Paul Krugman noted at his blog:

The top quintile excluding the top 1 percent – which is basically the abode of the well-educated who aren’t among the very lucky few – has only kept pace with the overall growth in incomes. Just about all of the redistribution has taken place from the bottom 80 to the top 1 (and we know that most of that has actually gone to the top 0.1).

Much of our current difficulty in climbing out of recession can be told from this chart.  People who would normally be spending money for food, gasoline, clothing, cars, home repairs and incidentals, simply don’t have the money to spend.  Consequently, demand is down.  Consequently, the top 1% will not invest their money in the U.S. to meet that non-existent demand.  This is the ultimate failure of “supply-side” economics writ large.  The very rich can consume only so much.  Additional wealth stashed away, even in domestic accounts, will not be spent for more food, or more housing, or more transportation.  Even the very rich can eat only so much, travel so much, and few of them behave exactly like Saddam Hussein, with palaces they will never even see.  Meanwhile, the bottom 80%, which includes the middle class, lacks money to spend on education, housing, durable goods, and transportation — despite needing more of all of those things.

Below the fold, the CBO report’s highlights press release, from the Congressional Budget Office.

Read the rest of this entry »


Cold War propaganda: “Make Mine Freedom,” 1948

October 10, 2011

Designed to promote democracy versus communism, and free enterprise (capitalism) over communism’s totalitarian governments then in vogue in the Eastern Bloc, this film was targeted to young college students who did not have the opportunity to fight for freedom in World War II.  “Make Mine Freedom” was produced by Harding College in 1948, preserved by the Prelinger Archives.

Is it a bit heavy handed? Is this an accurate portrait of economic or political freedom?  Are the characters in this animated short movie quite stereotyped?

In Blogylvania, the movie has been seized on as a sort of parable for our times.  Those bloggers who say it is a parable see a lot more in the movie than I do.  Almost any Lewis Hine photograph of child labor should be a good rebuttal.  Some say it seemed far-fetched in 1948 (then why did anyone bother to make it?).  It’s much, much more far-fetched now.

It’s a good departure point for discussions about propaganda in the Cold War.

Harding College resides in Searcy, Arkansas, and is affiliated with the Church of Christ.  It is now Harding University.


Quote of the moment: Robert C. Lieberman, “Why the Rich Are Getting Richer: American Politics and the Second Gilded Age”

February 20, 2011

The U.S. economy appears to be coming apart at the seams.  Unemployment remains at nearly ten percent, the highest level in almost 30 years; foreclosures have forced millions of Americans out of their homes; and real incomes have fallen faster and further than at any time since the Great Depression.  Many of those laid off fear that the jobs they have lost — the secure, often unionized, industrial jobs that provided wealth, security and opportunity — will never return.  They are probably right.

Cover of Winner-Take-All Politics, by Jacob Hacker and Paul Pierson

Cover of Winner-Take-All Politics, by Jacob Hacker and Paul Pierson

And yet a curious thing has happened in the midst of all this misery.  The wealthiest Americans, among them presumably the very titans of global finance whose misadventures brought about the financial meltdown, got richer.  And not just a little bit richer; a lot richer.  In 2009, the average income of the top five percent of earners went up, while on average everyone else’s income went down.  This was not an anomaly but rather a continuation of a 40-year trend of ballooning incomes at the very top and stagnant incomes in the middle and at the bottom.  The share of total income going to the top one percent has increased from roughly eight percent in the 1960s to more than 20 percent today.

This what the political scientists Jacob Hacker and Paul Pierson call the “winner-take-all economy.”  It is not a picture of a healthy society.  Such a level of economic inequality, not seen in the United States since the eve of the Great Depression, bespeaks a political economy in which the financial rewards are increasingly concentrated among a tiny elite and whose risks are borne by an increasingly exposed and unprotected middle class.  Income inequality in the United States is higher than in any other advanced democracy and by conventional measures comparable to that in countries such as Ghana, Nicaragua, and Turkmenistan.

Robert C. Lieberman, reviewing the book Winner-Take-All Politics:  How Washington Made the Rich Richer — and Turned Its Back on the Middle Class, by Jacob S. Hacker and Paul Pierson, Simon and Schuster, 2010, 368 pages.  $27.00.; review appears in Foreign Affairs, January/February 2011, pp. 154-158.

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