Image credit. Have a little rest and take pleasure in the little appreciated fact that politics helps us live peaceful and productive lives, even though our ignorance is so vast that instead of holding the same views, we differ widely and passionately in our convictions.
Those impatient with politicians tend to have good grounds for their discontent; however, there are also bad reasons to complain about politics, and we are prone to falling victim to these preconceptions once we lose sight of the full range of difficult functions that politics has evolved to serve.
Ignorance and the symbolic function of politics
When ignorance is a path the rational person should or simply must choose (as trade-offs in a persons's life demand, such as between earning a living and becoming knowledgeable about a political issue), and when ignorance is even insurmountable and constitutive as is the case regarding the unmanageable amount of information on all political issues considered important, we must find, or hope to chance upon special ways to interact that shield us from intolerably divisive or otherwise severely detrimental effects of the vast ignorance that affects all of us.
I begin to believe that politics has a crucial role to play in organising peaceful forms of negotiations, competition, and ritual reassurance that flow together to build
This may range from rituals of peaceful condemnation (as between partisan groups) to rituals of peaceful subordination ("okay, this time you guys won the election") or power splitting ("next time we'll prevail" and "the law you intend to issue must pass committees on which we too sit").
Data Mining, Number Crunching, and Our Old Friend Chaos
I find the below article interesting, as it demonstrates just how difficult it is to authenticate offerings of conjectural knowledge so as to shift information from the status of "uncertain credibility" to "credible conjecture" or even "fact" and "truth".
So, in any complex system, such as a football game involving complex aspects such as humans and weather, a significant component is simply not predictable and never will be, no matter how much data we collect. [...]
The unarguable truth is the answer is not always in the data. There is a general tendency at present to believe the data will magically yield the answer if you try hard enough – that is wrong. It is vital that we understand the limitations of analytics as well as their seductive, beautiful, irresistible, elegant and undoubted power.
The study of human institutions is always a search for the most tolerable imperfections.
Richard A. Epstein
Do you know what a just-so story is? I didn't, but looked it up:
In science and philosophy, a just-so story, also called an ad hoc fallacy, is an unverifiable and unfalsifiable narrative explanation for a cultural practice, a biological trait, or behavior of humans or other animals.
In writing the following, Arnold Kling tempted me to add the below comment to his post Paul Krugman on the State of Macro:
4. So I have a PSST model for unemployment [see my post here, G.T.], and my “weak” model[s] for inflation. I think it is fair to criticize them as “just-so stories.” But I would say the same thing about the sorts of models preferred by Blanchard or Krugman. Just-so stories, dressed up in pretty math.
To which I replied:
Your concession as to the role of just-so theories in economics strikes me as significant, and even surprising. As I regard you as a serious thinker, I must rule out the conclusion that economics is idle prattle to you. But what is it?
To the extent that economics is based on story telling, what is it in the nature of that narrative habit that sustains economics as a worthwhile form of thinking about human interaction?
I hope, in writing this, I don't sound cynical or facetious. Increasingly, I get interested in the role of (rational) ignorance, which all conceivable societies are inevitably affected by in very considerable measure; and I wonder, how do we manage the vastness of our (rational) ignorance so well - in countries such as the US or Germany, where life is quite bearable?
The consideration that (rational) ignorance is a virtually invariant phenomenon in all modern societies including all conceivable improved versions (such as, say, a significantly more libertarian society), has led me to become a lot more respectful of politics and the state (as a functional necessity that, of course, may fail) than I used to be, their tremendous dangers and deficiencies notwithstanding.
Politics and the state seem to be (a) the result and (b) the instrumental basis of more or less successful story telling. For politics seems to be involved in seeking out procedures indispensable in dealing with large amounts of irreducible (rational) ignorance.
We need to tell us reassuring stories to sustain sufficient levels of trust while living in a largely anonymous society.
Politics is a spontaneous order - a hugely important aspect of spontaneous order totally disregarded by Hayek - that serves as a discovery procedure whose (functionally desirable) end product is at least a minimal level of trust etc. needed to support social order. A highly narrative enterprise, full of just-so stories.
If there is something to this view, what role does economics play in it with its just-so stories?
Arnold Kling replied:
I limit the scope of “just-so stories” to macroeconomics. Microeconomics often generates predictions that are falsifiable.
To which I replied:
Politics is what happens when we have to tell people:
“Sorry, serious economics cannot handle conclusively issues like unemployment or the nature of an advisable monetary regime.”
And macroeconomics is what happens when economists participate in politics.
Seriously, if there are vital topics of an economic nature that cannot be covered in a scientifically sound way, then there must inevitably develop a part of economics that deals in and is based on rhetoric and techniques of persuasion – not necessarily as something to be maligned, but possibly as a cultural pattern of mutual reassurance, just like free speech may work very well in maintaining peace (social order) even though what is being exchanged is partly of an acrimonious and a generally nonsensical nature, as the case may be.
I believe, this has very serious implications for liberty. If vital social issues of an economic kind cannot be resolved conclusively in support of a certain vision of society, say a classical liberal society, then the case for classical liberalism is incomplete, inconclusive in vital regards, and thus open to severe contestation not only among classical liberals but all citizens, parties, and factions of a free society.
The value of freedom lies in her ability to embrace and cope with the uncertainties and disunity underlying a community inevitably entertaining rhetorically constituted views of society.
No less than free markets, politics ought to be conceived of in terms of a spontaneous order.
Political structures evolve to seek out ways of attenuating the risks inherent in vast and widespread ignorance of the conditions giving rise to successful human coexistence.
Freedom produces these risks, while at the same time providing an excellent laboratory in which to test insurance and abortive products to defend against the dangers of inevitable ignorance.
Small advances in freedom - small compared to the freedom we are taking for granted - can make a huge difference in the living conditions and outlook of people, and ultimately, in their political ambitions.
The world barely noticed a remarkable achievement last year: For the first time in nearly three decades, North Korean farmers managed to produce enough food to meet the population's basic survival needs. In spite of a drought this spring, preliminary reports indicate that this year's harvest is likely to be good, too.
This success, such as it is, arose out of necessity. In the 1990s, industrial output in North Korea halved and an agricultural collapse led to famine. The vast majority of North Koreans survived by establishing an underground market economy. They had little choice: With the shelves of state-run shops empty of food, rationing coupons suddenly became worthless pieces of paper.
Most of these private enterprises started small. Farmers started growing their own food on mountainside plots. Workers began to use (or steal) equipment from state-owned factories to make their own products, which they then sold. Some people opened secret restaurants, others did informal tailoring. Markets, which the regime had barely tolerated, moved into the open.
As one might expect, some elements of North Korea’s emerging entrepreneurial class became relatively rich and began to look for more lucrative opportunities. Private workshops, inns and eateries began to spring up.
seldom start when people are desperate; they are more likely to erupt when citizens have [attained a certain level of material advancement, G.T., and therefore] come to believe that life could be significantly better under different leadership. Economic growth brings more knowledge of the (more successful) outside world. The changes also make people less fearful of the government, since they are no longer as dependent on the state for their livelihoods. A brighter future for North Koreans could well mean a darker one for the regime.
I like the discernment in Arnold Kling's three-pronged argument according to which:
On (1), I would note that a few years ago wage growth was violating the Phillips Curve on the high side [meaning, I suppose: too high employment relative to the level of inflation, with strong demand for labour and correspondingly high wage growth, G.T.], and now it is violating the Phillips Curve on the low side [employment is too low given the level of inflation, with insufficient demand for labour and correspondingly weak wage growth, G.T.]. And yet mainstream macroeconomists stick to the Phillips Curve like white on rice. I would emphasize that the very concept of “the” wage rate is a snare and a delusion. Yes, the Bureau of Labor Statistics measures such a thing.
Instead, think of our economy as consisting of multiple labor market segments, not tightly connected to one another. There are many different types of workers and many different types of jobs, and the mix keeps shifting. I would bet that in recent years the official statistics on “the” wage rate have been affected more by mix shifts than by a systematic relationship between “the” wage rate and “the” unemployment rate.
On (2), I view this as evidence for my minority view that the Fed is not a big factor in the bond market. Instead, the Fed is mostly just following the bond markets. When it actually tries to affect the bond market, what you get are “anomalies,” i.e., the failure of the bond market to do as expected by the Fed.
On (3), I think that we are seeing a Charles Murray economy. In Murray’s Belmont, where the affluent, high-skilled workers live, I am hearing stories of young people quitting jobs for better jobs. On the basis of anecdotes, I would say that for young graduates of top-200 colleges, the recession is finally over. The machinery of finding sustainable patterns of specialization and trade is finally cranking again.
In Murray’s Fishtown, on the other hand, the recession is not over. I would suggest that we are seeing the cumulative effects of regulations, taxes, and means-tested benefits that reduce the incentive for firms to hire low-skilled workers as well as the incentive for those workers to take jobs. As Sumner points out, President Obama’s policies have moved in the direction of making these incentives worse.
Read the whole post on Arnold Kling's theory of the segmented wealth of nations.
For a broader context of Kling's take, consider his intriguing account of contemporary economic change:
I am inclined to treat the financial crisis as a blip, one whose apparent macroeconomic impact was made somewhat worse by the very policies that mainstream economists claim were successful.
This blip took place in the context of key multi-decade trends:
–the transition away from goods-producing sectors and toward the New Commanding Heights of education and health care
–the transition of successful men away from marrying housekeepers and toward marrying successful women
–the integration of workers in other nations, most notably China and India, into the U.S. production system
–the increasing power of computer technology that is more complementary to some workers than others
These trends are what explain the patterns of employment and relative wages that we observe. The financial crisis, and the government panic in response, pushed the impact of some of these developments forward in time.
One of the biggest problems worldwide is the absence of state structures capable of protecting economic liberty. Hernando de Soto claims that about 2/3 of the world population are affected by this bad state of affairs. It is incumbent upon those who are conscious of the value of liberty to promote the liberal state in the Third World - and, of course, as the below article shows, at home as well. Free markets do not just happen, they must be politically fought for and defended. Once again: the state is important for liberty, and so is politics.
Writes Mark J. Perry:
In today’s WSJ, Hernando de Soto argues that the cure for terrorism in the Middle East is capitalism, economic empowerment, and private property rights to help rescue “extralegal entrepreneurs” who have become trapped in their own countries as “economic refugees” by cronyism and burdensome over-regulation of market activity. Here’s an excerpt of “The Capitalist Cure for Terrorism” (emphasis mine):
It is widely known that the Arab Spring was sparked by the self-immolation in 2011 of Mohamed Bouazizi, a 26-year-old Tunisian street merchant. But few have asked why Bouazizi felt driven to kill himself—or why, within 60 days, at least 63 more men and women in Tunisia, Algeria, Morocco, Yemen, Saudi Arabia and Egypt also set themselves on fire, sending millions into the streets, toppling four regimes and leading us to today’s turmoil in the Arab world.
These suicides, we found, weren’t pleas for political or religious rights or for higher wage subsidies. Bouazizi and the others who burned themselves were extralegal entrepreneurs: builders, contractors, caterers, small vendors and the like. In their dying statements, none referred to religion or politics. Most of those who survived their burns spoke to us of “economic exclusion.”
In an interesting complement to de Soto, George Will makes a similar argument in today’s Washington Post that America’s “teeth-whitening entrepreneurs” are being denied the right to earn a living, and have become “economic refugees” in North Carolina because of cronyism capitalism, protectionist rent-seeking, and the burdensome over-regulation of market activity. Here’s an excerpt of “Supreme Court Has a Chance to Bring Liberty to Teeth Whitening” (emphasis mine):
On Tuesday, the national pastime will be the subject of oral arguments in a portentous Supreme Court case. This pastime is not baseball but rent-seeking — the unseemly yet uninhibited scramble of private interests to bend government power for their benefit. If the court directs a judicial scowl at North Carolina’s State Board of Dental Examiners, the court will thereby advance a basic liberty — the right of Americans to earn a living without unreasonable government interference.
See also Enculturated Poverty, Economic Illiteracy and Global Economic Worries, Egypt's Economy of Outcasts, A Shout for Inclusion, The Classical Liberal Constitution (1/2). And Tragedies of Arrest and Regression, with a great synopsis of P.T. Bauer's contribution to Development Economics, and an introductory text by myself that in its radicalism I find almost embarrassing today.
Posted by Georg Thomas on 10/12/2014 at 07:19 AM in American Culture, Barack Obama, Books & Media, Current Affairs, Economics, Electoral Prospects, Georg Thomas, Grassroots Activism, History Lessons, Liberty Laid Bare, Media/Media Bias, National/International Affairs, Presidency, U.S., Pure Politics, Social Philosophy, Socialism Gone Wild | Permalink | Comments (0)
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Image credit and source of the below quoted text.
In my youth, like many Germans, notwithstanding my admiration for the great country, to me America was a chaos of billboards. You must understand that - certainly in the 1960s, 1970s and 1980s - "Werbung" (advertisement) was almost a dirty word in Germany - something from the commercial world, yuck! A capitalist intrusion into your brain and soul. Billboard-plastered America was a symbol of how capitalism will run roughshod over decent citizens, if you let it.
I still like a landscape free of ugly billboards, but is it right to ban advertisements?
I am a great believer in capitalism. It should be possible for capitalism to advertise its products in pleasing and welcome manner, as indeed it already does in countless ways - see Freedom and Art.
While relatively uncluttered by billboards, Germany must have been the world champion in awful TV ads, with patronizing scientists in white gowns admonishing the viewers to buy this, that, or the other. The idea being, I suppose - advertising is evil, so let's try symbols of respectable advice.
In Britain in the 1980s, I learned that watching TV ads could be tremendous fun and that it was quite possible to draw crowds to "the telly" by entertaining them with funny advertisements.
So how might capitalism cope with the billboard issue?
See also my comments at The Season of Giving.
In 1968 the state of Vermont passed a landmark anti-billboard law and the landscape has been billboard-free ever since. The law was the result of the extraordinary efforts of one man, Ted Riehle (1924 – 2007), who was determined to preserve the natural beauty of Vermont.
According to John Kessler, chair of the Travel Information Council, the law’s original goals remain the same today:
“We need to provide information to the traveler, but do not want to compromise our natural scenery. Tourism is the number one industry in the state. And the lack of advertising is one of the most commonly reported things that visitors appreciate about Vermont.” [source]
Nathaniel Gibson continues:
“Businesses may display an on-premise sign up to 150 square feet… Off-premise signs — the official name for billboards — are not allowed, unless TIC grants an exemption. Exemptions are typically granted for reasons of public safety and convenience.” [source]
“The best way to get Keystone XL built is to make it irrelevant ...”
From the Canadian perspective, Keystone has become a tractor mired in an interminably muddy field.
In this period of national gloom comes an idea -- a crazy-sounding notion, or maybe, actually, an epiphany. How about an all-Canadian route to liberate that oil sands crude from Alberta’s isolation and America’s fickleness? Canada’s own environmental and aboriginal politics are holding up a shorter and cheaper pipeline to the Pacific that would supply a shipping portal to oil-thirsty Asia.
Instead, go east, all the way to the Atlantic.
The source, including a useful synoptic map of the new pipeline project.
See also Red Herring in the Pipeline.
Posted by Georg Thomas on 10/08/2014 at 07:48 AM in "Goin' Green", Barack Obama, Books & Media, Current Affairs, Georg Thomas, Goin' Green, Grassroots Activism, Media/Media Bias, National/International Affairs, Presidency, U.S., Presidential Race--Then and Later, Pure Politics, State/Nebraska Politics, Technology, Internet | Permalink | Comments (0)
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For more vintage pics from Lincoln, Nebraska, consult the image credit.
My libertarian development
Of a radical libertarian leaning until about two years ago, I have repositioned myself on many core issues. In particular, I have come to regret the shallow and dismissive handling of democracy in much of the libertarian discourse.
I used to be strongly influenced by the Ludwig von Mises Institute (LvMI). Initially, I was much attracted to its message thanks to the vast and valuable stock of downloadable literature, and, of course, a coherent narrative of freedom and capitalism offered by the institute's exponents. Owing to a sense of friendly tolerance, I made rather light of two points of disagreement that would eventually manifest themselves as the cracks of a deep rupture:
I always opposed
As for (a), structures of maximal power, i.e. the state in a modern context, are an irreducible feature of human interaction, especially in larger human communities.
The whole point of a regime of liberty is to promote structures of maximal power that support an open society, where every citizen is reasonably free from arbitrary interference by other humans, private and public organizations, and most notably the state. The state is a precondition of liberty. Denying the indispensability of the state is to refuse giving attention to one of the most fundamental cornerstones of freedom. Anarcho-capitalism is, therefore, a distraction from freedom.
Concerning (b), true science is by definition free science, it is based on recognising that no one has privileged access to (advances in our asymptotic convergence toward) truth. Apriorism makes the claim of having access to absolute, ultimate, and incontrovertible truth. It is contrary to freedom, which is, like science, based on the presumption that no one has privileged access to truth.
Science, free markets and a free society are perfectly analogous in that they rely on advancement by trial and error, by conjecture and refutation, by respect for the constructive force of human fallibility. All three of them are constitutively open systems, producing in large measure unpredictable outcomes that feed back into the development of the overall system. While there is a firm structure to science, to markets, and to the system of freedom, their scaffoldings form a semi-circle, as it were, opening up to a vast frontier of indeterminacy.
About two years ago, certain encounters with exponents of anarcho-capitalism and apriorism spurred me on to look very carefully at the moot issues between us.
In the meantime, I have discovered that anarcho-capitalism is a great pointer to weaknesses in (classical) liberalism, as the former tends to radicalise the errors or fuzzy ends contained more or less pronouncedly in the latter, as well as ignoring its strengths.
Liberty, democracy, and trust
Anarcho-capitalism, and to a considerable extent (classical) liberalism as defended by Ludwig von Mises or Friedrich Hayek, offer at best a shallow theory of the embeddedness of markets, political institutions, and the state in modern civil society.
The state is largely seen as the (1) adversary and saboteur of (a) personal autonomy and (b) the natural spread and viability of free markets, and (2) an agent of illegitimately dominant persons and groups (special interests).
Politics and democracy as spontaneous order
This conception of the state as an agent of evil is related to a truncated view of spontanenous order, which disregards the deeper level and still more comprehensive spontaneous order of conditions enabling, historically and presently, the development of relatively free markets and the open societies in which they thrive.
A modern democracy is a web of complex negotiations functionally aiming to fit different, diverging, and adverse views and interests.
A free society depends on democracy as an arsenal of tools to balance interests many of which can never be perfectly reconciled; it is the political bazaar that admits any comer among free citizens, ensures the permanent contestability of incumbents, as well as a constant flow of new entrants both in term of interest groups, ideas, and cultural preferences.
Reconciliation among the ignorant
One of the key insights of classical liberalism is that all of us are rationally ignorant of countless important issues - we do not have the resources to understand all the issues in the air with reasonable accuracy. Also, there are many issue that represent political scarcity (reconciliation cannot be established by market-type transactions), and there may be issues that are either for the time being or even in principle unresolvable, as we simply may never know enough to penetrate the subject matter fully.
Just as the market helps us cope successfully with a plethora of information that we can not possibly ever fully absorb and comprehend, so is a political system a means to come to grips with forms and consequences of human interaction whose full information content we can never collect and assess. Like markets, a good political system is a think-tool, a means of orientation in a world that contains more information than we can ever hope to use for our personal orientation. At some point, good orientation, mutual respect, tolerance, and trust, become more important that exact and non-contradictory results.
Ultimately, the political system has the task of generating enough trust among human beings such that even in a population of 300 million most people are able to spend most of their life time without fearing destructive or even deadly distrust from their fellow citizens.
Democracy is a complicated web of institutions and practices signalling that (a) we can trust each other by and large, or that (b) we are able do something about it if our expectations of trust are seriously challenged.
Democratic politics is the way in which we keep our values and concerns in touch with those of others, so as to keep a balance between our differing convictions. The strong adversarial taste that politics often leaves us with is a sign that we are on track in confronting the potentially dangerous differences between us.
When it works, democratic politics shares the formeost merit of competition in science - where scientists let their theories be killed instead of themselves.
Democratic dialogue and dissent is a way of bashing other people's ideas in lieu of their bearers.
But, to repeat, democracy is a lot more. It is a complicated game of reassurance in the face of a world that hankers after perfect partisan solutions, but where perfect partisan solutions are impossible.
See also Elementary Errors of Anarchism (1/2), Elementary Errors of Anarchism (2/2), Classical Liberalism vs. Anarchism (1/3), Classical Liberalism vs. Anarchism (2/3), Classical Liberalism vs. Anarchism (3/3), Two Views of Democracy.
Image credit--including the history of wolves in Yellowstone.
Following up on Wolves and Creative Destruction:
The US economy has a competitive intensity problem, and [a] decline in startups is at its core. Startups are the straw that stirs the drink. They generate new innovation (and new jobs) and force incumbents to improve or die. They change everything, creating a healthier, more vibrant economy in the process.
In the US economic ecosystem, startups are wolves. And we need more of them, and the creative destruction they bring, to transform our stagnating economy.
Posted by Georg Thomas on 10/03/2014 at 04:11 PM in "Goin' Green", A Climate of Changes, American Culture, Barack Obama, Books & Media, Current Affairs, Economics, Film, Georg Thomas, Goin' Green, Grassroots Activism, History Lessons, Liberty Laid Bare, Media/Media Bias, National/International Affairs, Presidency, U.S., Presidential Race--Then and Later, Pure Politics, Social Philosophy, Socialism Gone Wild, State/Nebraska Politics, Taxes and Spending, Technology, Internet | Permalink | Comments (0)
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Today is Germany Unity Day, a public holiday. An occasion to ponder political developments in the country.
German Christian Democrats, the CDU, and their sister party in Bavaria, CSU, have followed a policy since the 1960s which left no room for a sizeable political movement to their right. This worked well with only negligible groups of no consequence emerging. But German Chancellor Angela Merkel seems to have changed this strategy, writes Prince Michael of Liechtenstein.
A new party, the AfD (Alternative for Germany), emerged in 2013, first with just an economic programme, promoted in principle by some well-recognised economists. The party’s main issue was criticism of the euro. Although it was not a populist or extreme party, the political establishment, including Chancellor Merkel, labelled it right wing and towards the extremist corner.
Propaganda against the AfD by government, the established parties and large parts of the media, was enormous. However their programme was defendable and certainly not radical. Realising the deficiencies of the euro and questioning transfer payments is part of normal political debate.
The new party took almost five per cent of the vote in Germany’s last national elections, despite the hostile propaganda. This was a real success, but just missed the five per cent threshold for a seat in the German Federal Parliament.
The party reached some seven per cent in the European Elections in May 2014 and is now represented in the European Parliament in Strasbourg.
The big leap came when the party topped some 10 per cent in elections for three German lander or states. AfD is a political factor now. Its members are fierce free market supporters who promote entrepreneurship. But analysis shows gains from the centre – their base – and from the left.
Now the CDU has a real competitor in the centre right. Chancellor Merkel’s election tactics have been to destroy opposition campaigns by taking over their issues. Her decision to phase out nuclear energy left the Green Party without a popular cause. The introduction of minimum wages damaged the Social Democrats.
This short-term tactic was successful for Mrs Merkel’s CDU, but may have alienated supporters on the centre right. The classic economic party, the liberal FDP, was Mrs Merkel’s coalition partner until the last elections and was almost annihilated by following her policies.
So will Mrs Merkel continue to pursue her old tactics and adopt the AfD’s cause? Will she become less supportive of the euro and reduce or stop transfer payments to fiscally shaky eurozone countries?
The AfD’s success in local elections could have European implications.
Following up on Patterns of Sustainable Specialization and Trade (PSST), at Reason's Hit and Run, Stephanie Slade has a fine piece of incisive journalism on Austrian/Hayekian dynamic (as opposed to equilibrium) market theory:
The belief that had (mistakenly) evolved among mainstream economists at the time [Austrian economics elicited a correcting view of the economy, G.T.] was that the goal of market competition was to bring about a general equilibrium in which all the facets of an economy are balanced with each other and all the resources are efficiently allocated. These economists thought it realistic to expect central planners to be able to replicate, and perhaps even improve upon, that equilibrium state. The Austrians were meanwhile busy reminding people that market competition is a process that creates value precisely when an economy is in disequilibrium.
In equilibrium, profits converge to zero—there can be no new profit opportunities by definition. But outside of a perfect equilibrium, people who are clever enough can find gaps in the market and fill them. Entrepreneurs are therefore able to drive societal improvements through dynamic competition—to literally innovate their way to greater wealth.
Markets are a process, not an equilibrium state, Hayek said. More specifically, they are a process for discovering new knowledge. The absolute best a central planner can hope to do is to aggregate the information that already exists at a given moment. But the market process not only gathers and makes sense of vast, disparate information—it ushers into being knowledge that was not there before at all. Vernon Smith, [...] a [...] Nobel laureate in economics, quoted Hayek as saying, "I propose to consider competition as a procedure for the discovery of facts as [otherwise] would not be known to anyone."
This was actually a fresh and exciting revelation, Kirzner concluded [at the conference on which Slade is reporting], and it came at the very moment most onlookers were declaring the Austrian tradition dead. Mainstream economists at the time truly believed it was possible for central planners to acquire the requisite information and construct from it a utopia. Fortunately, Hayek and his Austrian school contemporaries were there to show the economics profession that the journey—an ongoing process of experimentation and discovery driven by the pursuit of profits—is far more important than the destination.
In the New York Times, Arnold Kling presents an outline of his intriguing theory of the conditions of economic health and dislocation, an approach to business cycles which he abbreviates as patterns of sustainable specialization and trade (PSST):
How are jobs created?
For Keynesians, job creation is simple. Entrepreneurs have knowledge of how and what to produce. All that is required is more demand, in order to induce them to undertake more hiring.
In contrast, in our Smith-Ricardo story, the knowledge of how and what to produce has to be discovered. Entrepreneurs have to figure out ways to utilize resources that satisfy wants in an efficient way. The market mechanism first must undertake trial and error to create production processes that exploit comparative advantage. Until these new patterns of sustainable specialization and trade are discovered, there are no job slots.
Experimenting with new patterns of specialization and trade is relatively easy. Discovering patterns of sustainable specialization and trade is much harder. Our economic well-being depends on the ability of entrepreneurs to make these discoveries.
Make sure to read the rest at the source.
For more click here.
Concerto for percussion Frozen in Time by Avner Dorman, conducted by Martin Grubinger and featuring one of the great contemporary percussionists - Simone Rubino:
Since water is one of the vital ingredients for life on Earth, scientists want to know how it got here. One theory is that the water in our solar system was created in the chemical afterbirth of the Sun. If that were the case, it would suggest that water might only be common around certain stars that form in certain ways. But a new study, published today in Science, suggests that at least some of Earth’s water actually existed before the Sun was born -- and that it came from interstellar space.
That’s certainly something to ponder the next time you drink a glass of water. But the discovery is also cool because it means water -- and maybe life -- may be ubiquitous throughout the galaxy.
Read more at the source.
As for us earthlings, the inestimable Coyote has a lot to complain about the way in which we deal with the precious resource.
Virtually every product and service we purchase has its supply and demand match by prices. Higher prices tell buyers they should conserve, and tell suppliers to expend extra effort finding more.
Except for water.
Every water shortage you ever read about is the result of refusing to let prices float to dynamically match supply and demand. And more specifically, are the result of a populist political desire to keep water prices below what would be a market clearing price (or perhaps more accurately, a price that maintains reservoir levels both above and below ground at target levels). [...]
Commenting on a 100,000 prize to help solve the water shortage in Arizona, the Coyte notes:
I will say that it is nice to see supply side solutions suggested rather than the usual demand side command and control and guilt-tripping. But how can we possibly evaluate new water supply solutions like desalinization if we don't know the real price of water? Accurate prices are critical for evaluating large investments.
If I find the time, I am going to tilt at a windmill here and submit an entry. They want graphics of your communications and advertising materials -- I'll just show a copy of a water bill with a higher price on it. It costs zero (since bills are already going out) and unlike advertising, it reaches everyone and has direct impact on behavior. If you want to steal my idea and submit, you are welcome to because 1. The more the merrier and 2. Intelligent market-based solutions are never ever going to win because the judges are the people who benefit from the current authoritarian system.
PS- the site has lots of useful data for those of you who want to play authoritarian planner -- let some users have all the water they want, while deciding that other uses are frivolous! Much better you decide than let users decide for themselves using accurate prices.
Writes another observer:
We actually have no shortage of water in Arizona. Rather, we have too much government. The web of subsidies and regulations of water use creates a false shortage.