No one needed stuffed animals

From the Facebook page of Steve Horwitz:

Isn’t it interesting that Bernie Sanders (and GOOD FOR HIM for doing so) can give a speech at the religiously conservative Liberty University, where his views are absolutely noxious to those students and where being pro-choice effectively makes him a supporter of mass murder in their eyes, yet no one protested, and no one said they were unsafe, and no one was triggered, and no one needed stuffed animals to feel comfortable with this wicked man on campus?

There’s something seriously wrong with the students at elite colleges when Liberty University is a more liberal, open, tolerant, and civil place, not to mention having students who are better able to engage with intellectual diversity, than the Ivy League or the top liberal arts colleges or the top public universities.

[Yes, maybe those students are just more passive in general, but if you read accounts of the speech, they actually asked good questions and engaged him intellectually. You also don’t see THAT enough when the roles are reversed.]

Larry White on lowering long-term risk

I’m taking Larry White’s Monetary Theory and Policy class this fall at George Mason University. Here’s a selection from his book, The Theory of Monetary Institutions on one interesting utilitarian argument for adhering to a gold standard.

A more reliable unit of account lowers the risk of long-term nominal contracts, as we have just noted with respect to bonds. Lower risk on long-term bonds encourages more long-horizon investment. When savers are more willing (do not demand so large a purchasing-power risk premium) to buy long-term bonds, a firm with a long-payback project, like a railroad company, can more cheaply sell bonds long enough to match the duration of its expected payoff stream from the real assets being financed. Such duration-matching eliminates the significant refinancing risk involved in relying on short-term debt, which is the risk that interest rates will be higher when the firm goes to roll over its debt. High-payoff long-horizon investment projects are therefore not shelved simply because of inflation risk, which undoubtedly aids economic growth, though the size of the effect would be hard to estimate.

A gold standard, then, has the effect of boosting confidence in money’s purchasing power in the long-term, thereby increasing general confidence in long-term investment and long-term bonds. Just a paragraph before, White explains that some railroad companies in the nineteenth century found willing buyers for 50- and 100-year bonds! Today, corporate bonds of 25 or more years are uncommon.

I recommend the book. Great so far.

OCA as normative theory

From a 1998 paper by Charles A.E. Goodhart (a great read, by the way):

One possible rationale is that the [Mengerian-form] theory was never meant to be a positive, explanatory theory, but instead a normative theory, of what should be. As one referee commented: ‘‘OCA theory is a normative, not a positive theory.’’ A weak form of this would be to recognize that, in practice, monetary institutions are inherently and au fond associated with considerations of political sovereignty, but that the subsidiary function of [Mengerian-form] OCA theory is to assess the balance of purely economic benefits and costs that this may generate. The problem with this is that the historical record of the association of money creation with the establishment and maintenance of a stable sovereign power is so overwhelming (apart from the case of tiny, and by the same token politically weak, states) that the balance of purely economic benefits and costs entailed by OCA must presumably be of second order importance.

Misusing “perfect competition”

From Peter Boettke’s 1997 paper Where did Economics Go Wrong? Modern Economics as a Flight from Reality:

Previously, the model of a perfectly competitive market was primarily used in thought experiments designed to be contrasted with real-world market institutions. Such counterfactual thought experiments illuminated the positive function of those institutions. In a world of complete information, for example, neither firms nor profits would logically exist. Therefore, the contrast of this imaginary world against the real world of firms and profits showed that such institutions may have some functional significance in coping with imperfect and incomplete information.

This counterfactual use of the theory of perfect competition was reversed by the formalist revolution in economics. The departures of reality from the model of perfect competition were now thought to highlight interventions in the market ecnomoy that would be necessary to approximate equilibrium. Competitive equilibrium and the maximizing behavior that would ideally produce it represented the hard core of the research program f economists from 1950 on. As this happened, economics as a discipline was transformed.

Drastic oversimplification

From Peter J. Leithart at First Things:

Evangelicalism is also a conversionist faith. The key crisis of life is the moment of commitment to Christ. In Woodlawn, most of the characters convert early in the film, necessarily so because the story is about the effect of the revival on race relations. But that means that the line of character development is flat. The really crucial character development has taken place in the moment of conversion. The main exception is Coach Gerelds, and not surprisingly, it’s Coach Gerelds who ends up being the dramatic focus of the film, the character whose emotions and motivations we get to know best.

Theologically speaking, character development is “sanctification.” A conversionist form of Christianity places less emphasis on sanctification than on conversion and justification. In films, that translates into drastic oversimplification of human psychology. For Evangelicals, there are only two sets of motivations, as there are two kinds of people: Saved and unsaved. While that is ultimately true, it is not the whole story.

Brief musings on the market

  1. The DJIA lost 3.57 percent today. Last Friday it lost 3.12 percent. This is nowhere near even the 20th worst day in the DJIA’s history—a 6.98 percent loss on September 29, 2008. But the past two trading days do represent the DJIA’s 19th and 20th worst daily point losses ever.
  2. Most economists think Greenspan’s Fed left interest rates too low for too long when rates hovered between one and two percent for 32 months between December 2001 and May 2004. But that’s nothing compared to today, which marks roughly 80 months of near-zero rates.
  3. Even if the U.S. stock market recovers somewhat in the next few weeks, problems in China have proven to be very fundamental and very serious. I take this as another good reason to believe my 8-month old prediction—that the Fed will not raise rates in 2015. China is in full-on stimulus mode, and sharp divergence between central banks’ policies makes conducting monetary policy in the U.S. difficult. If the Fed continues to flirt with the idea of a rate hike, it will be while China, Japan, and the Eurozone still meddle with stimulus. At the very least, this risks boosting the dollar’s value even further and weakening U.S. exports in the process. Larry Summers made this point in the Financial Times today. I explained it last fall.

Discouraging recidivism

From Stuart Butler, writing at RealClearMarkets.com.

Imagine if prisons faced a readmissions penalty. Let’s say that if an unusually high number of released inmates from a particular prison were convicted and sent back to prison within three years then the prison’s budget would be cut and the bonuses and salary increases of senior prison staff trimmed back. Just as with hospitals, the first reaction would be to complain at the “unfairness” of being held liable for a released inmate’s return to crime. But after that the prison management would start to do a much better job than today in preparing inmates for re-entry into the community. Petty restrictions and surcharges on phone calls to family members would quickly go – the erosion of family ties increases the likelihood of a return to crime. Limits on GED textbooks would certainly vanish.

Prisons would get serious not only about training inmates but also about working with potential employers to help line up jobs. Instead of dumping released prisoners on the street, prison managers, like today’s hospital managers, would become more interested in arranging stable housing for their ex-customers.

It rests on faith

From Philip Giurlando’s review of Mein Kampf:

This sad historical episode reveals an important point: that any moral system that rests on equal human dignity cannot flow from the scientific observations of biologists. In other words, universalist moral systems, like liberalism, socialism, or the United Nation Declaration of Human Rights (UDHR) rely on assumptions that are not scientific. The idea that all humans have equal worth is a statement of value that is not verifiable according to the standards of science. Rather, it rests on faith, but this does not make it less true. It means that a strictly scientific materialist worldview is insufficient for the belief in universal human equality. One could even assert that human decency is inversely proportionate to the distance that we create between ourselves and the dictates of nature. The natural world indeed operates in a hierarchical, predatory, and ruthless fashion that ensures the survival and reproduction of the strongest. Hitler not only recognized this, he celebrated and derived his morality from it, as did eugenicists. Universal moral systems like the ones mentioned above can accurately be characterized as attempts to use human agency to overcome these ruthless processes of the natural world. Therefore, attempts to derive moral systems from nature, or to ascribe some transcendental moral agency to the earth, should be taken with a grain of salt.

Love is the movement

Love is, as far as I can tell, the most mature response to any situation – the pinnacle of what it means to be truly human. Love is a wrench in the wheels of cause and effect, of reactionary living, of casual imitation. Yes, speed and events are all around us in the information age, but motion, true motion, is rare. Love is the movement.

-Jon Foreman

An educational outlook

I try to read First Trust’s Monday Morning Outlook every week. Today’s was especially good. Here’s a highlight:

The good reason for slow economic growth is that government statisticians are having a hard time measuring true output. Productivity and GDP growth are not as slow as the official numbers say. For example, when people download free apps to improve their communication and travel, that isn’t measured in GDP, yet our standard of living is clearly higher.

One thing we are confident about is that quantitative easing (QE) hasn’t made a dime’s worth of difference. Although it stuffed the banking system chock full of idle excess reserves, new figures from the government show weaker economic growth in 2012-13, while the Fed was engaged in expansive QE3, and then slightly faster growth in 2014, when the Fed was tapering and then ending QE.

When we put all this together, the picture is reasonably clear. The economy has been in recovery for six years and the unemployment rate has finally fallen to a level even the Fed thinks is close to full employment. Unemployment claims have been below 300,000 for twenty-one straight weeks, and at less than 0.2% of total jobs are at historical lows.

So, even though growth remains slow, it’s hard to argue rates should stay at zero. While some investors fear rate hikes, we see them as ratifying the strides the economy has made in the past several years. Surely, this is no economic boom like 1980s or 1990s. But even a modestly growing economy should have short-term rates higher than zero.

Sick minds and capital flight

From Christopher Westley in today’s Mises Daily:

Sick minds deemed the supply of death perfectly inelastic and therefore worthy of tax. But it’s not just people who die in Connecticut. Wealth does too, illustrating what happens when greed is unconstrained by market forces. Some writers might consider Connecticut’s economy something of a model worth emulating, but the fact is that Connecticut — like every other tax jurisdiction — grows its public sector at the expense of its private, and that when capital predictably flows elsewhere, economic opportunity diminishes.

Be Germanicus

From Eusebius’ The History of the Church:

Special mention is made of the noble Germanicus, who by divine grace overcame his natural physical fear of death. The proconsul tried to dissuade him, stressing his youth and begging him as one still in the very prime of life to spare himself, but without a moment’s hesitation he drew the savage beast towards him, wellnigh forcing and goading it on, the more quickly to escape from their wicked, lawless life. After his glorious death the whole crowd were so astounded by the heroism of God’s beloved martyr, and the courage of Christian people everywhere…

Cool interchanges and great movies

Here’s a cool Politico piece featuring aerial photos of some of the world’s largest highway interchanges. I hoped to find the Springfield Interchange on this list—one of the highlights of my otherwise-boring morning commute—but to no avail. It serves about 430,000 cars per day, which I guess isn’t enough to earn a spot on this list. I can’t find a list of the world’s largest highway interchanges. Can you?

The Springfield Interchange in Springfield, VA. I drive on this almost every day.

The Springfield Interchange in Springfield, VA. I drive on this almost every day.

On a totally unrelated note, here’s a cool list from someone on Reddit of the 250 Greatest Films of All Time. I’ve looked for a list like this before, but I never found anything definitive. Most of them seemed skewed toward modern movies. Some of them definitely over-weighted old movies. But this list seems pretty fair. It aggregates various reviews from IMDB, Rotten Tomatoes, Metacritic and Letterboxd, accounts for the general population’s ignorance of older films, and even discounts reviews of brand new movies that always fall in ratings over the years.

I’ve seen exactly 36 of these movies (14.4%), a handful of which are animated movies I saw as a child. That should show you how little my adult self enjoys watching movies. I average about one per month, and I usually regret that one about halfway through.

Within limits

From Ludwig von Mises:

Science does not give us absolute and final certainty. It only gives us assurance within the limits of our mental abilities and the prevailing state of scientific thought. A scientific system is but one station in an endlessly progressing search for knowledge. It is necessarily affected by the insufficiency inherent in every human effort. But to acknowledge these facts does not mean the present-day economics is backward. It merely means that economics is a living thing–and to live implies both imperfection and change.

Can climate change be good?

Dr. Ivar Giaever has the same thought I’ve had for years.

What is the optimum temperature for the earth? Is that the temperature we have right now? That would be a miracle! Maybe it’s two degrees warmer. Two degrees colder. But no one has told me what the optimum temperature is for the whole earth.

Climate change poses a threat to some of our present-day lifestyle. But is it altogether bad, on net? Is it not even possible that climate change could make life easier for many humans?

As far as I understand, some climate change models have cities like New York and Miami underwater if warming continues its course for the next 100 years. That doesn’t sound good. But what happens to the rest of the earth? Do we gain billions of acres of arable land, once too cold to support life? Will droughts become less frequent and less severe?

I have no idea how to answer my question. But if we could derive an optimum temperature for the earth, based on maximizing the amount of arable land, minimizing drought and extreme weather activity in populated areas, etc., might that temperature be outside the range climate change alarmists believe we must maintain, even at the cost of expensive carbon taxes and slowed industrial development?

I’m not convinced. Any serious discussion of climate change ought to talk about why global warming is bad—not take that idea for granted. Maybe such talk is about there, but I don’t see it from popular commentators except insofar as they paint scary pictures of flooding coastal cities and stronger hurricanes. That doesn’t sound good, but what happens to the world on net? What happens, if you will, to the human race’s prospects for long-term survival (if you like thinking in such terms…I don’t)? Is it possible that things will improve in this regard?

Let’s first establish exactly why climate change is bad, then talk about whether it’s worth fighting. Because neither of those goes without saying.