Jonah Goldberg writes one of the best explanations capitalism, i.e. free market economies, since Milton Friedman - warts and all.
Goldberg:
"Capitalism is the greatest system ever created for alleviating general human misery, and yet it breeds ingratitude."
Showing posts with label Milton Friedman. Show all posts
Showing posts with label Milton Friedman. Show all posts
8/04/2008
3/19/2008
David Mamet: Why I'm No Longer a Brain Dead Liberal
The Wall Street Journal's David Henninger writes about David Mamet, who wrote a piece in the Village Voice last week titled, Why I'm No Longer a Brain Dead Liberal - which likely caused The David Mamet Society to disband immediately. Drudge noticed, most ignored it though - but it clearly struck a nerve with some.
Mamet:
As a child of the '60s, I accepted as an article of faith that government is corrupt, that business is exploitative, and that people are generally good at heart.
He goes on:
the synthesis of this worldview with which I now found myself disenchanted: that everything is always wrong.
But in my life, a brief review revealed, everything was not always wrong, and neither was nor is always wrong in the community in which I live, or in my country. Further, it was not always wrong in previous communities in which I lived, and among the various and mobile classes of which I was at various times a part.
And on:
And I began to question my hatred for "the Corporations"—the hatred of which, I found, was but the flip side of my hunger for those goods and services they provide and without which we could not live.
And on:
I began reading not only the economics of Thomas Sowell (our greatest contemporary philosopher) but Milton Friedman, Paul Johnson, and Shelby Steele, and a host of conservative writers, and found that I agreed with them: a free-market understanding of the world meshes more perfectly with my experience than that idealistic vision I called liberalism.
David, here at The FDC, Sowell, Friedman, and Steele are some of our biggest heroes. If I may, I'd also like to suggest you read Julian Simon's The Ultimate Resource II.
3/03/2008
The Fallacy of Peak Oil
There's an interesting discussion going on over at Planet Gore: Peak Oil.
As The FDC is a student of Julian Simon as well as Adam Smith, Milton Friedman, and Thomas Sowell , and have learned from these teachers that the theory of Peak Oil is...well, a bunch of hooey.
I suppose that there is some finite amount of oil in the earth, but from an economic standpoint that is totally irrelevant. The idea of Peak Oil and that someday the gasoline pumps will just run dry is a popular concept among those with a casual understanding of supply and demand. But, casual knowledge of supply and demand doesn’t cut it. Casual obeservers don’t quite understand the miraculous role that prices play in the supply and demand equation – not to mention the role prices play in the incentives created to go out and discover more oil when higher prices dictate that it is needed. Low oil prices will dictate that lots of oil is not discovered – yet. Just as I have no need to have a lifetime supply of groceries available to me at all times, the world doesn’t need to acually discover now a well there is no economic need for - yet. When will this unknown well be discovered? If you guessed when the Central Planning Committee decides we need it, move to the back of the class. If you guessed when prices dictate and create incentives for further oil exploration(AKA, the Invisible Hand), move the front of the class.
The grocery example again: I’ll probably need to buy some groceries to feed myself for the second week in May of 2023. Why don’t I go out and buy them now? The easy answer is that I don’t need them now, because I’ll go out and buy them when I need them in 15 years. Right now, I’ve made the rational decision to apply my monetary resources to other goods and services that I’ve deemed are more important to me and my family in the nearer future. The groceries that I’ll need 15 years and three months from now is irrelevant. I am, however, applying some of my resources to more long-term needs, i.e. my retirement and my kids college education – because that is not irrelevant even at this time. But, as far as my groceries are concerned, I’ll just keep buying them about a week or so before I need them. But, of course, if the store has a real good sale on some items that are not perishable, I’ll probably stock up. There’s that miracle of prices again. Oil supply isn’t much different.
As I said, a casual knowledge of supply and demand won’t cut it here – the Peak Oil nuts are just going to have to read a few serious economics books to wrap their brain around this concept.
Julian Simon:
More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. The higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred.
A column by Nansen G. Salerit on tomorrow's Wall Street Journal Editorial Page agrees:
In fact, we are nowhere close to reaching a peak in global oil supplies.
Given a set of assumptions, forecasting the peak-oil-point -- defined as the onset of global production decline -- is a relatively trivial problem.
As The FDC is a student of Julian Simon as well as Adam Smith, Milton Friedman, and Thomas Sowell , and have learned from these teachers that the theory of Peak Oil is...well, a bunch of hooey.
I suppose that there is some finite amount of oil in the earth, but from an economic standpoint that is totally irrelevant. The idea of Peak Oil and that someday the gasoline pumps will just run dry is a popular concept among those with a casual understanding of supply and demand. But, casual knowledge of supply and demand doesn’t cut it. Casual obeservers don’t quite understand the miraculous role that prices play in the supply and demand equation – not to mention the role prices play in the incentives created to go out and discover more oil when higher prices dictate that it is needed. Low oil prices will dictate that lots of oil is not discovered – yet. Just as I have no need to have a lifetime supply of groceries available to me at all times, the world doesn’t need to acually discover now a well there is no economic need for - yet. When will this unknown well be discovered? If you guessed when the Central Planning Committee decides we need it, move to the back of the class. If you guessed when prices dictate and create incentives for further oil exploration(AKA, the Invisible Hand), move the front of the class.
The grocery example again: I’ll probably need to buy some groceries to feed myself for the second week in May of 2023. Why don’t I go out and buy them now? The easy answer is that I don’t need them now, because I’ll go out and buy them when I need them in 15 years. Right now, I’ve made the rational decision to apply my monetary resources to other goods and services that I’ve deemed are more important to me and my family in the nearer future. The groceries that I’ll need 15 years and three months from now is irrelevant. I am, however, applying some of my resources to more long-term needs, i.e. my retirement and my kids college education – because that is not irrelevant even at this time. But, as far as my groceries are concerned, I’ll just keep buying them about a week or so before I need them. But, of course, if the store has a real good sale on some items that are not perishable, I’ll probably stock up. There’s that miracle of prices again. Oil supply isn’t much different.
As I said, a casual knowledge of supply and demand won’t cut it here – the Peak Oil nuts are just going to have to read a few serious economics books to wrap their brain around this concept.
Julian Simon:
More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. The higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred.
A column by Nansen G. Salerit on tomorrow's Wall Street Journal Editorial Page agrees:
In fact, we are nowhere close to reaching a peak in global oil supplies.
Given a set of assumptions, forecasting the peak-oil-point -- defined as the onset of global production decline -- is a relatively trivial problem.
1/26/2008
The University of Google
Thomas Lifson, the Editor and Publisher of The American Thinker has a great essay today about the Internet, and the many ways it has transformed our culture.
Mr. Lifson's essay is one that I'd thought about writing myself. It's a topic that I regularly bring up at the dinner table with Mrs. FDC and the kids. A question pops up in the conversation that no one knows the answer to, The FDC speaks up with, "I'll go look it up on the Internet." This usually results in a lot of eye-rolling, and "there he goes again" all around the table. But, they are starting to come around.
The kids aren't that impressed, because they are being brought up in this age of instantaneous information. When I was my kids age, and I wanted to know the answer to a question about a subject of interest to me, I'd ask my mom and dad. If they didn't know, I'd ask my teacher. If they didn't know I'd try to remember to look it up in an encyclopedia or at the library the next time I was there. But, I'd usually forget that I wanted to look it up, and I as a result I remained ignorant on that subject.
With the advent of the Internet, that has all changed.
An example:
Years ago, while I was eating lunch, I read a magazine article that mentioned Milton Friedman. He sounded like an interesting fellow, so after lunch when I returned to my computer, I looked him up here. Reading that, I found out he was this. That surprised me. I thought to myself, he couldn't be one of those, because he sounds like one of these. But, I found he was indeed one of those, because to my surprise, those were not to be confused with these. I found all this information almost instantaneously, and the only real time I spent on it was the time it took me to read the information. I'd just expanded my mind to several ideas that I'd never pondered too hard. It lead me to read many new books that I'd never have read otherwise, and helped me to have a better understanding of our economic world.
Now on the other end of the spectrum, if you just want to learn how to play Beer Pong, you can find that too. Instantaneously. It's a beautiful thing isn't it?
Mr. Lifson's essay is one that I'd thought about writing myself. It's a topic that I regularly bring up at the dinner table with Mrs. FDC and the kids. A question pops up in the conversation that no one knows the answer to, The FDC speaks up with, "I'll go look it up on the Internet." This usually results in a lot of eye-rolling, and "there he goes again" all around the table. But, they are starting to come around.
The kids aren't that impressed, because they are being brought up in this age of instantaneous information. When I was my kids age, and I wanted to know the answer to a question about a subject of interest to me, I'd ask my mom and dad. If they didn't know, I'd ask my teacher. If they didn't know I'd try to remember to look it up in an encyclopedia or at the library the next time I was there. But, I'd usually forget that I wanted to look it up, and I as a result I remained ignorant on that subject.
With the advent of the Internet, that has all changed.
An example:
Years ago, while I was eating lunch, I read a magazine article that mentioned Milton Friedman. He sounded like an interesting fellow, so after lunch when I returned to my computer, I looked him up here. Reading that, I found out he was this. That surprised me. I thought to myself, he couldn't be one of those, because he sounds like one of these. But, I found he was indeed one of those, because to my surprise, those were not to be confused with these. I found all this information almost instantaneously, and the only real time I spent on it was the time it took me to read the information. I'd just expanded my mind to several ideas that I'd never pondered too hard. It lead me to read many new books that I'd never have read otherwise, and helped me to have a better understanding of our economic world.
Now on the other end of the spectrum, if you just want to learn how to play Beer Pong, you can find that too. Instantaneously. It's a beautiful thing isn't it?
1/18/2008
Feel-Good Economics
Writing in the Wall Street Journal today, Bruce Bartlett agrees with The FDC that President Bush's proposed $800 tax rebate will do little if anything to "stimulate" the economy.
Now, don't get me wrong. I want to keep more of my money, and I like the idea of the government giving it back to me. Honestly, I wish they'd give me back even more. But, I don't have any hope that these one-time cash hand-outs will do what they are intended to do.
Bartlett also brings up Milton Friedman's concept of "permanent income" which we posted about in this space (see FDC post 1/15/2008). In short and $800 check isn't permanent income, but an immediate, permanent, marginal tax rate cut does increase permanent income, and would stimulate the economy. It's not only the immediate $800 (or whatever your tax savings may be) in your pocket, but the knowledge that the same thing is going to happen again, and again, and again is what spurs consumers to actually spend the money, rather than save it, or pay down debt.
Now, don't get me wrong. I want to keep more of my money, and I like the idea of the government giving it back to me. Honestly, I wish they'd give me back even more. But, I don't have any hope that these one-time cash hand-outs will do what they are intended to do.
Bartlett also brings up Milton Friedman's concept of "permanent income" which we posted about in this space (see FDC post 1/15/2008). In short and $800 check isn't permanent income, but an immediate, permanent, marginal tax rate cut does increase permanent income, and would stimulate the economy. It's not only the immediate $800 (or whatever your tax savings may be) in your pocket, but the knowledge that the same thing is going to happen again, and again, and again is what spurs consumers to actually spend the money, rather than save it, or pay down debt.
1/15/2008
"...politicians have predicted nine of the last five recessions."
So says the National Review's editorial today.
And eventually the politicians will get it right. So, just in case they do get it right, something must be done, and since we are in the midst of a presidential primary...let the cash hand outs begin!
The National Review's Rich Lowry gets it right on these so-called "stimulus plans" to "jump-start the economy". The FDC loves that Lowry cited Milton Friedman's (one of our heroes) "permanent income hypothosis" that Lowry boils down to: "You can’t fool people into thinking that they are richer than they really are. "
Meanwhile, it should come as no surprise that New York Times columnist, Paul Krugman, praises the hand-outs. Krugman disregards the lessons he learned earning his undergraduate economics degree at Yale and his Ph.D. at MIT, to wallow in what Lowry calls the "the lowest common denominator of sophomoric economic policy".
And eventually the politicians will get it right. So, just in case they do get it right, something must be done, and since we are in the midst of a presidential primary...let the cash hand outs begin!
The National Review's Rich Lowry gets it right on these so-called "stimulus plans" to "jump-start the economy". The FDC loves that Lowry cited Milton Friedman's (one of our heroes) "permanent income hypothosis" that Lowry boils down to: "You can’t fool people into thinking that they are richer than they really are. "
Meanwhile, it should come as no surprise that New York Times columnist, Paul Krugman, praises the hand-outs. Krugman disregards the lessons he learned earning his undergraduate economics degree at Yale and his Ph.D. at MIT, to wallow in what Lowry calls the "the lowest common denominator of sophomoric economic policy".
1/12/2008
We don't need to build a wall...
...and we don't need to deport illegal aliens. With all due respect to many of my conservative friends who want to solve the illegal immigration crisis here in the US with either of these two options, there is one solution that is almost never considered. The Mexican government needs to create incentives for illegal aliens in the US to self-deport themselves, or to not export themselves to our country in the first place. How in God's name can we do that? The Mexican government needs to establish firm property rights and rule of law that the citizens can trust to protect their personal interests.
Here in the US, we take property rights and rule of law for granted. Americans enter into contracts and such willy-nilly without a care in the world. Whether it be to buy a car, buy real estate, apply for a patent on a new invention, or even just sign a contract for two-years of service when we purchase a cell phone. Why are we so carefree? Because we know that if the other party fails to perform on their end of the contract that we have legal recourse. If you stop and think about it, property rights and rule of law bound together really are the linchpins holding all of America's economic wheels on - and liberty is the engine making it go. Not so in Mexico - and it is what's holding back the country from having a productive economy that creates enough jobs to keep their population home.
The FDC had a tough time finding a link to find some support for my position, but I did find this two year-old article here (the author has a cool eye patch, eh?) Although, this seems to be a solution that is not really on the table, I'm sure that the late Milton Friedman would concur.
Here in the US, we take property rights and rule of law for granted. Americans enter into contracts and such willy-nilly without a care in the world. Whether it be to buy a car, buy real estate, apply for a patent on a new invention, or even just sign a contract for two-years of service when we purchase a cell phone. Why are we so carefree? Because we know that if the other party fails to perform on their end of the contract that we have legal recourse. If you stop and think about it, property rights and rule of law bound together really are the linchpins holding all of America's economic wheels on - and liberty is the engine making it go. Not so in Mexico - and it is what's holding back the country from having a productive economy that creates enough jobs to keep their population home.
The FDC had a tough time finding a link to find some support for my position, but I did find this two year-old article here (the author has a cool eye patch, eh?) Although, this seems to be a solution that is not really on the table, I'm sure that the late Milton Friedman would concur.
1/11/2008
"Reduced marginal tax rates have stood the test of time...."
" They are an effective economic stimulant...."
Larry Kudlow goes on to point out that most of Eastern Europe has adopted a flat tax, and not surprisingly, their economies have taken off like a rocket.
Since Kudlow, brings up Eastern Europe, that reminds me...
Estonia is one of the fastest growing economies in the world (the annual GDP growth rate in 2006 amounted again 11.4%!) After their young Prime Minister, Mart Laar, read Milton Friedman's Free to Choose, Laar was inspired enough to reform Esonia's economy by adopting a flat tax. Now Estonia is known as "The Baltic Tiger".
I like the idea of a flat tax in the US, but when will it happen? When hell freezes over. But that's another post for another day.
Larry Kudlow goes on to point out that most of Eastern Europe has adopted a flat tax, and not surprisingly, their economies have taken off like a rocket.
Since Kudlow, brings up Eastern Europe, that reminds me...
Estonia is one of the fastest growing economies in the world (the annual GDP growth rate in 2006 amounted again 11.4%!) After their young Prime Minister, Mart Laar, read Milton Friedman's Free to Choose, Laar was inspired enough to reform Esonia's economy by adopting a flat tax. Now Estonia is known as "The Baltic Tiger".
I like the idea of a flat tax in the US, but when will it happen? When hell freezes over. But that's another post for another day.
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