A Libertarian Reacts to ‘What’s A Rigged Economy’, from AJ+

February 26, 2016

I think Dena Takruri would make a good libertarian.

AJ+ and Now This are the new producers of hip, left-wing minute-news designed for the facebook attention span. It’s a brilliant format from which propagandists of all political stripes could benefit. I don’t really see a whole lot of short, flashy, hip-looking conservative videos ‘splaining the whole one-man, one-woman thing, or how to beat the terrorists with more military boondoggles.

Libertarians have Learn Liberty from the Institute for Humane Studies, but I don’t know if it has quite the same allure. The focus is more on economic theory than current events. Reason.tv produces short videos, but they are often kind of jokey. It’s not quite the same as a sweet, punchy AJ+ video, like the one I saw this morning about our rigged economy. Please watch this video now, and read my libertarian reaction below.  Read the rest of this entry »

Capitalism Creates Scarcity of resources Artificially? A Rebuttal.

June 7, 2014

I’ve lately frequented the facebook page called Still Laughing at ‘Anarcho’-capitalism (SLANCAP), which is maintained by self-described anti-capitalist anarchists. They believe the that phrase Anarcho-capitalist is an oxymoron, and, as far as I can tell, they believe the that the phrase anti-capitalist Anarchist is redundant. Hence, they feel no need to specify the flavor of Anarchy to which they subscribe. I’ll call them anti-capitalist Anarchists, redundant as that may be.

Maybe I’ll get into the merits of these labeling choices another time. Suffice to say here that I have learned a great deal about anti-capitalist Anarchist objections to capitalism by following the SLANCAP facebook page. The authors of the page have yet to change my mind about how I think the world ought to work, but they have convinced me to pay more attention to the self-congratulatory rhetoric the libertarians and anarcho-capitalists often employ without realizing they’re doing it.

The page admins have launched a traditional website at slancap.com for anyone interested. I think I’m good for trolling only the facebook page for now, whereupon I recently spotted the following video about scarcity. Capitalists and anti-capitalist Anarchists will never come to an understanding about scarcity until they each learn to understand how the other uses the term. This is yet another a definition problem, at the core. Here is the post:

I appreciate this anti-capitalist gentleman’s polite, constructive criticism. Here are a capitalist’s, rebuttals, responses, and apologies. This is going to be a long response, so I’ll sum up the main rebuttals first, and then I’ll launch into details afterwards. The rebuttals are:

  1. Anti-capitalist Anarchists use the word scarcity differently than capitalists do.
  2. Private property and markets create the illusion of abundance where, in reality, there is not enough of each commodity to satisfy all demand.
  3. Describing private property as “an unlimited amount of property that [the owners] never personally interact with” does injustice to those who interacted with the property in the first place to increase its utility.
  4. Where dwellings go unsold, unused, and vacant, owners have a capitalist financial incentive to let others use the dwellings in exchange for maintenance services, and many property owners have begun to do just that.
  5. Government manipulation of incentives away from those of the capitalist price system, often at the behest of an economically naive populace, is why so many people built so many houses so uneconomically in the first place.

Read the rest of this entry »

Robert Reich’s arguments against “paid-what-you’re-worth” are a garble.

March 17, 2014
Robert Reich's arguments are curiously poor for a former cabinet member.

Robert Reich’s arguments are curiously poor for a former cabinet member.

Okay, so we’re comparing who to what, now?

Robert Reich is the former Secretary of Labor under Bill Clinton who has made waves on the internet with provocative YouTube videos assailing income inequality and other apparent economic problems in America. His arguments generally have ready responses among libertarians that, unsurprisingly, I find convincing. Reich’s latest exposé is against the economic theory that workers are generally “paid what their worth”. Libertarians use this argument to oppose to minimum wage laws. Because Robert Reich favors an increase in the legal minimum wage, he argues that the “paid-what-you’re-worth” theory of wages as a myth. Salon.com thought Reich’s exposé merited republication, but I was not so impressed. Entitling it, The “Paid-What-You’re-Worth” Myth, Robert Reich begins his exposé by stating the economic theory this way:

It’s often assumed that people are paid what they’re worth. According to this logic, minimum wage workers aren’t worth more than the $7.25 an hour they now receive. If they were worth more, they’d earn more. Any attempt to force employers to pay them more will only kill jobs.

According to this same logic, CEOs of big companies are worth their giant compensation packages, now averaging 300 times pay of the typical American worker. They must be worth it or they wouldn’t be paid this much. Any attempt to limit their pay is fruitless because their pay will only take some other form.

To libertarians, this is not a bare assumption. To libertarians, this is the expected result of a market process. Ph.D. economist Matt Zwolinski explains the process, also known as the Marginal Revenue Productivity Theory of Wages:

Well, first, it’s absolutely correct that capitalists want to exploit workers. they want to pay as low a wage as possible, and get as much work out of workers as possible, in order to maximize profit. but the fact that other capitalists also want to exploit workers in this way makes it difficult for any of them to do so. This is because competitive pressures force capitalist to pay workers close to the value of what those workers produce, whether they want to or not. If you tried to pay someone less than they’re worth, someone else will offer them more, because they can profit by doing so. Imagine you’re in an auction bidding against others for a dollar [symbolic of the value a worker might produce in some short amount of time ~eds]. Of course, you’d like to pay as little as possible for that dollar. But if someone else was bidding 60¢ for it, wouldn’t it be worth your while to bid 62¢? And wouldn’t someone else then bid 64¢, and so on? In a competitive market, that same process leads capitalists to pay workers close to the value of what they produce, not because they want to, but because they have to.

Sounds convincing to me. At least I can’t refute it on the spot. Let’s consider Robert Reich’s rebuttal. Ladies and gentlemen, Robert Reich:

Fifty years ago, when General Motors was the largest employer in America, the typical GM worker got paid $35 an hour in today’s dollars. Today, America’s largest employer is Walmart, and the typical Walmart workers earns $8.80 an hour.

Does this mean the typical GM employee a half-century ago was worth four times what today’s typical Walmart employee is worth? Not at all. Yes, that GM worker helped produce cars rather than retail sales. But he wasn’t much better educated or even that much more productive. He often hadn’t graduated from high school. And he worked on a slow-moving assembly line. Today’s Walmart worker is surrounded by digital gadgets — mobile inventory controls, instant checkout devices, retail search engines — making him or her quite productive.

I see. So, rather than expose the flaws in a libertarian’s actual economic argument, our former Secretary of Labor instead tosses us a pure apples-to-oranges comparison. He wants us to compare the productivity and earnings of 1964’s auto workers to those of today’s retail workers. Well, I’m sorry, but in my tiny little libertarian brain, this comparison is completely opaque. Yes, I see that today’s Walmart workers are surrounded by digital gadgets that make them “quite” productive. Could Mr. Reich show us, perhaps a little more quantitatively, just how quitely the productivity of Walmart workers now approaches that of 1964’s auto workers? Maybe I’m dumb, but “quite” doesn’t quite draw a clear enough picture. Why not at least compare 1964’s apples to today’s apples by sticking with either auto workers or retail workers?

Well, let’s let Reich continue:

The real difference is the GM worker a half-century ago had a strong union behind him that summoned the collective bargaining power of all autoworkers to get a substantial share of company revenues for its members. And because more than a third of workers across America belonged to a labor union, the bargains those unions struck with employers raised the wages and benefits of non-unionized workers as well. Non-union firms knew they’d be unionized if they didn’t come close to matching the union contracts.

Today’s Walmart workers don’t have a union to negotiate a better deal. They’re on their own. And because fewer than 7 percent of today’s private-sector workers are unionized, non-union employers across America don’t have to match union contracts. This puts unionized firms at a competitive disadvantage. The result has been a race to the bottom.

Guess which company's business model the former secretary of labor prefers.

Guess which company’s business model the former secretary of labor prefers.

Hmm. So, aside from being in a completely different industry, with a completely different demand curve, and living in a completely different era, the real difference between the two is that, whereas GM workers a half-century ago had a strong union behind them, today’s Walmart workers do not. I see. Well, another difference that I think should not pass without mention is that, whereas GM is a complete failure of a company that would have gone under but for a massive government bailout, Walmart thrives as one of America’s most successful businesses. Of course governments throw favors at Walmart cronies in a variety of ways, so I’m not holding Walmart up as a paragon of free-market excellence, but let’s try to acknowledge some the recent failures of GM’s business model before lionizing unions for negotiating extravagant wage and benefits packages. A business that is not profitable can not employ people, and not all industries can always rely on governments to bail them out, nor should they.

I know Mr. Reich feels that he put together a decent case here, but just in case you found his anachronisms to be unconvincing, he continues:

If you still believe people are paid what they’re worth, take a look at Wall Street bonuses. Last year’s average bonus was up 15 percent over the year before, to more than $164,000. It was the largest average Wall Street bonus since the 2008 financial crisis and the third highest on record, according to New York’s state comptroller. Remember, we’re talking bonuses, above and beyond salaries.

All told, the Street paid out a whopping $26.7 billion in bonuses last year.

Are Wall Street bankers really worth it? Not if you figure in the hidden subsidy flowing to the big Wall Street banks that ever since the bailout of 2008 have been considered too big to fail.

Well, yes. Fair enough. Like GM’s auto workers, Wall Street’s bankers are also unworthy of a government bailout. The solution to the problem, of course, is for the government to stop making it rain on Wall Street with bailout money that it either borrowed or forcibly confiscated from taxpayers. Understand, though, that this has absolutely nothing to do with the minimum wage debate, where the pay-what-you’re-worth theory tends to surface.

As for the run-of-the-mill CEO who makes 300 times that of an average worker, Mr. Reich observes:

By the same token, today’s CEOs don’t rake in 300 times the pay of average workers because they’re “worth” it. They get these humongous pay packages because they appoint the compensation committees on their boards that decide executive pay. Or their boards don’t want to be seen by investors as having hired a “second-string” CEO who’s paid less than the CEOs of their major competitors. Either way, the result has been a race to the top.

The operators of facebook’s Being Classically Liberal page have rebutted this repeatedly and convincingly, in my opinion. Running a multi-billion dollar corporation is not as easy as these CEOs make it look. Balancing all of the factors takes a great skill that not many people have. CEOs’ decisions can generate either billions of dollars in wealth for consumers and shareholders alike, or billions of dollars in losses for the latter. Does the CEO who generates billions of dollars in wealth for others by soundly making difficult decisions not earn a multi-million-dollar paycheck? I think so. I do not find convincing Mr. Reich’s explanation that a CEO is little more than a multi-million-dollar figurehead—a veneer of machismo to parade before gullible investors. I think CEOs do more than that.

In conclusion, Mr. Reich offers a great case study in why I am still a libertarian after all these years. As a former Secretary of Labor, Mr. Reich is supposed to offer the best of the best arguments in favor of his preferred economic policy of higher minimum wages. In this case, as is typical, the best of the best arguments against a good libertarian idea consists of complete unresponsiveness, anachronistic apples-to-oranges comparisons, unhelpful caricatures, and the unrelated failures of other government interventions. Isn’t it about time for voters to listen more carefully to what libertarians are saying?

An Anti-capitalist-to-Reality Pocket Translator

September 14, 2013
Sister Teresa Forcades: to where does the road paved with good intentions lead?

Sister Teresa Forcades: to where does the road paved with good intentions lead?

A friend of mine shared this article with me on facebook:

Sister Teresa Forcades: Europe’s most radical nun

The article begins:

A Spanish nun has become one of Europe’s most influential left-wing public intellectuals. This year, thousands have joined her anti-capitalist movement, which campaigns for Catalan independence, the reversal of public spending cuts and nationalisation of banks and energy companies.

Where one sees the word “anti-capitalist”, a to-do list of pie-in-the-sky fantasies generally follows. This article provides about the best example I’ve seen in a long time. Sister Theresa’s goals are all well-intended, I’m sure, but evaluating them through even the thinnest lenses of economic clarity yield immediately unpleasant results.

According to the article, she drew up her 10 point plan “with economist Arcadi Oliveres”.  I’d like to learn more about this apparently anti-capitalist economist, but early Google searches turn up only Spanish language web sites. Perhaps he is the Richard D. Wolff of the Spanish-speaking world.

Here is Sister Teresa Forcades’s 10 point plan, with my Anti-capitalist-to-Reality translations:

• A government takeover of all banks and measures to curb financial speculation

Translation: Forcefully monopolize the banking industry. Applaud as the monopoly charges whatever interest it see fit. Create a new class of criminals called unlicensed usurers. Earning a profit by foregoing consumption and lending money without the government’s permission shall be a crime. Build police forces and penitentiaries as appropriate.

Create a new class of criminals called unlicensed investors. The act of buying now for the purpose of selling later at a profit shall be a crime, unless done with the government’s permission and to its specifications. Build police forces and penitentiaries as appropriate to imprison unlicensed investors.

• An end to job cuts, fairer wages and pensions, shorter working hours and payments to parents who stay at home

Translation: Firing or laying off an employee for any reason shall be a crime. Applaud as employment falls to near-zero, because employers will take far fewer chances when hiring people they may not lawfully fire or lay off. Build police forces and penitentiaries to warehouse the former employers who have fired or laid off workers..

‘Fair wages’, in the anti-capitalist lexicon, generally means ‘more wages than are currently being paid’. Cutting wages, or continuing to pay wages at the current amount, shall be a crime. Build police forces and penitentiaries to imprison employers who carry on their businesses but fail to increase wages to the arbitrary, ever-increasing, State-mandated minimum. Applaud as the forced increase in the price of labor causes a decrease in the demand for labor. Applaud as established, entrenched mega-corporations thrive and upstart competitors struggle to either launch or maintain their businesses.

Offering work in excess of a state approved number of hours per day shall be a crime. Those who either want or need more money must take a second job to acquire it, because employers who dare employ will avoid paying extra money for overtime. Applaud as workers pay higher travel costs.

Take more money from the people who leave their homes during the day and give it to the people who stay at home. Those who leave their homes during the day, acquire money, and attempt to bring all of that money back to their homes shall be criminals. Build police forces and penitentiaries as appropriate to house them.

• Decent housing for all, and an end to all foreclosures

Translation: Siphon resources from other worthy projects in the economy to build houses of State-mandated luxuriety for which no-one shall be responsible for paying. Applaud as practically everything else in the economy becomes impossible to afford. To refuse the State the use of one’s resources shall be a crime. Build police forces and penitentiaries as necessary to house those who refuse to forgo their other projects in furtherance of the State housing project.

• Genuine “participatory democracy” and steps to curb political corruption

 [I’m not quite sure what this means yet, so I’ll pass on it.]

• A reversal of public spending cuts, and renationalisation of all public services

Translation: Siphon resources from other worthy projects in the economy so that the State may “serve the public” in its discretion, and without the inhibitions of cost accounting. Applaud as practically everything in the economy, including these services, becomes impossible to afford. To refuse to the State the use of one’s resources shall be a crime. Build police forces and penitentiaries as necessary to house those who refuse to forgo their other projects in furtherance of the services that the State, in its discretion, deems worthy of pursuit.

• An individual’s right to control their own body, including a woman’s right to decide over abortion.

Translation: Same meaning. This is a cognate.

• “Green” economic policies and the nationalisation of energy companies.

Translation: Criminalize all forms of energy that do not enjoy the license of the state. Applaud the Solyndra-style scandals as the State hand-picks “green” winners in what is left of the marketplace.

Forcefully monopolize the energy industry. Applaud as the monopoly charges whatever prices it see fit. Create a new class of criminals called unlicensed energy providers. Earning a profit by providing energy without the State’s permission shall be a crime. Build police forces and penitentiaries as appropriate.

• An end to xenophobia and repeal of immigration laws

Translation: Same meaning. This is a cognate.

• Placing public media under democratic control, including the internet

Translation: Repeal the First Amendment. The majority of voters is authorized to quash unpopular viewpoints. Pirate websites, radio stations, television stations, and newsletters shall be illegal. Build police forces and penitentiaries as necessary to imprison those who publish or broadcast them.

• International “solidarity”, leaving Nato, and the abolition of armed forces in a future free Catalonia

[I’m not quite sure what this means yet, so I’ll pass on it.]

Perhaps as this pocket translator grows, I’ll make it a full feature of the blog…..

Image via Lrubiope, Wikimedia Commons

On George Selgin, Fractional Reserve Banking, and the Curious Sport of Insulting Austrian Economists

August 12, 2013
Don't make cats sad.

Don’t make cats sad.

Insulting Austrian economists is a popular sport among non-Austrian economists. Paul Krugman reigns as champion, with his latest feat of derogatory dexterity appearing in his column of July 16th, entitled The Paradox of Flexibility:

Well, Hazlitt has been wrong about everything for more than 80 years, and is still regarded as a guru. Bad ideas, it appears, are extremely robust in the face of contrary evidence.

Nice jab, Paul. Good one!

I was nonplussed this morning to witness George Selgin get in on the fun. Selgin is a self-styled former Austrian economist whom I understood as well regarded among the Austrian marketeers that I’ve heard speak. His lecture for the Austrians at the Ludwig von Mises Institute entitled The Private Supply of Money is one of my all time favorites from that outfit, so imagine my perverse interest when I happened upon a post of his entitled A Theory of Banking Made Out of Thin Air, which began thus:

Instances of self-styled Austrian economists bungling their banking theory seem almost as common these days as instances of theologians bungling their cosmology were six centuries ago.

Ouch, George! I didn’t know you could dish ’em out like that!  Read the rest of this entry »

The Amazing Atheist: Capitalism doesn’t work because shoppers are too stupid.

July 4, 2013

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” ~ Murray Rothbard

The Amazing Atheist thinks he’s got this economics stuff figured out. The relevant part begins a minute in:

Mr. Atheist actually begins his account of market economics with uncommon accuracy. He describes hamburger/harmonica exchange well enough, at least to start:  Read the rest of this entry »

Student Loan Interest Rates: Elizabeth Warren Promises Bread and Circuses

May 24, 2013

At least two of my followees posted this on their FB feeds:

Oh gawd.

Oh gawd.

Posting something like this, without any caveats or qualifications, to me, is a symptom of Acute Economic Unawareness (AEU). Read the rest of this entry »