More weekend writing: “And I do not understand, why we grant particular grace to current democracies – the merit of which is still in play, until we observe how we fare now that the rest of the world has adopted capitalist instituions, and erased our prior advantage. It certainly appears, that instead of Democracy, the award goes to capitalist institutions, calculation and incentives. Democracy is irrelevant.”
Source date (UTC): 2010-12-05 14:19:00 UTC
In the contest between Denial, Skepticism and Faith, the only rational position is Skepticism. The problem is, that since we are never certain of our knowledge, the boundary between skepticism and denial is simply a difference in the perception of risk and reward between the people debating. Therefore, whenever such a debate arises, these are not questions of truth. They are questions of cost and benefit.
🙂
Source date (UTC): 2010-12-05 13:48:00 UTC
Myth of China’s Manufacturing Prowess
Myth of China’s Manufacturing Prowess
Contrary to the conventional view, manufacturing in the U. S. has been growing in the past two decades despite the decline in manufacturing jobs. The latest data show that the United States is still the largest manufacturer in the world. In 2008, U.S. manufacturing output was $1.8 trillion, compared to $1.4 trillion in China. This means that the United States is producing goods with higher value, such as airplanes and medical equipment. In addition, most jobs the United States lost to China are low-skilled jobs. By outsourcing those low-skilled jobs to China, Americans have actually become more competitive in high-skilled jobs such as management, innovation, and marketing. The low-skilled jobs also serve China well as Chinese rural migrants have opportunities to move up in life and gain some skills.
I love it: “manufacturing in the U. S. has been growing in the past two decades despite the decline in manufacturing jobs”. What she means is ” productivity has grown as jobs have decreased. Which is a silly metric when the reason people are talking about manufacturing jobs, not productivity. Secondly, what is hidden in those numbers is the vast difference between small plastics firms for example, that are struggling to survive, and vast, highly efficient manufacturing and engineering organizations that ship goods around the world. (I need to get my hands on this data and mine it a bit. I think that it’s far worse than we see. Productivity can jump simply by consuming capital stock, or temporarily slashing wages.) It is a logical fallacy, and perhaps, a socially destructive one, to compare productivity to unemployment. The question is what is the highest productivity available without redistribution of productivity gains? We have a lot of unemployed people due to government’s misallocation of capital over decades if not a century. We need more manufacturing jobs that are also more productive than elsewhere. Manufacturing job != manual labor. It means ‘PRODUCING GOODS FOR EXPORT”. And yes, we need more of them, and the people clamoring for them are right to do so. It’s as if ‘it’s good enough to win numerically, is the same as actually reaching maximum productivity”. I mean, what kind of over-intellectualizing nut makes these kind of comparisons? The problem is that MONETARY POLICY is NOT ENOUGH of a lever. We need policy that intentionally uses the private sector to create productivity enhancing exports that require the creation of jobs. But our ethic of non-involvement, our unsophisticated politicians who are far more skilled at redistribution and regulation are not skilled at, nor capable of, producing long-term investment. And they are very unlikely to ask the top 1000 business people in the country, exclusive of the multinationals, how to accomplish it. Even though we all know The top seven:
Some Simple Rules Of Thumb:
8) The private sector is not able to concentrate capital in capital-intensive industries that create exports without both removal of state disincentives, and the assistance of the state in creating a market in which people will risk time and capital. A polity does not always need leadership except in time of crisis. Crisis in this case, created by a government too foolishly dancing with the devil of socialism, dressed up in Keynesian costume, with a joyful following of clerks of the church of positivism chanting from tomes whose authors pretend wisdom. THEREFORE General Liquidity Is An Insufficient Lever For Altering A Distorted Economy. People need opportunities to flock together and exploit together. Opportunities to create exports. Not consumption but exports.
On Cafe Hayek, Don Boudreaux references a CATO posting which in turn references a Wall Street Journal article, that criticizes Donald Trump for stating that we need more manufacturing jobs. The libertarian sentiments held by my friends at CATO and Cafe Hayek, inform them that productivity gains show that we produce just plenty of manufacturing – thank you very much. Wherein Don supports the Cato position that we do not need more manufacturing, and that any perception that we do, is a myth. (Articles are linked below.) But they are mistaken. A polity desires not productivity, but employment, and not simply employment, but competitive, status-enriching employment — and the lower classes in particular find their social enfranchisement in producing these ‘collective goods’ we call competitive production. They cannot achieve status through individualism, so they seek to find it in collective membership: They want to ‘do good.’ For example, a friend of mine in the advertising business, says that all agency guys want to produce ads that lots of people see, so that if they go into a bar or club or social gathering that they can talk about it and ‘get laid’. They use the term doing “Get Laid Ads”. To some degree, this is kind of ‘fame’ or social status. The mechanic who produces a fine vehicle, or trendy bit of electronics feels the same. The janitorial staff at an elegant landmark feels the same way as long as they are invested in that cultural value system. Human beings flock to opportunities. Economics does not measure opportunities. It measures results. If we could measure opportunities, we would solve the problem of induction in economic theory instead of having to rely upon equilibria for our calculations. But we cannot read men’s minds. So we cannot measure opportunities. Yes, we can measure imbalances. We can measure asymmetry. But not innovation. Not creativity. That said, whether we can measure it or not, human beings flock behind opportunities until they are exhausted. This is the reason for the boom and bust cycle: People flock to opportunities, and the flocks accumulate people in vast complex networks in order to exploit those opportunities. The problem with fiat money and current monetary policy is that our attempts at keeping interests rates low block the information system that interest rates provide us with, and allow people to ‘flock’ well past when others who know better see the opportunity as having exhausted itself. This is the problem with monetary policy, rather that simple lending. We should not provide unbridled liquidity tot he market. We should provide loans with terms, including terms of use. But, back to the topic of status-enhancing work, these cooperative bits of social membership through work are the processes that create social bonds in the post-religious world. They are more effective than services, redistribution and transfer payments at creating a polity . And in case I haven’t made it clear, we need a cohesive polity in order for people to trust government, and to enable government to act on their behalf. So:
IE: TRUMP IS RIGHT. Productivity gains explain the data, but they do not solve the problem of unemployment and underemployment. It is perfectly possible for us to compete with Chinese skilled labor in manufacturing high quality electronics, because they are relying upon labor not mechanization. It may require tax incentives. It may require loans. And it will most definitely require design and development of machines that are faster and better than human hands at manufacturing. But that task as well, will create manufacturing jobs. Personally, I’m in the business solving for something else: maintaining the wealth created by the US ownership of the system of international trade, and maintaining western technological leadership. Because,as a minority, only technology can maintain our institutions, our system of defense, and relative economic status. That’s the lesson of western civilization – rate of adoption of technology. Western civilization is a minority strategy for competitiveness: invest in skill, knowledge and technology and you will keep the east at bay despite our inferior numbers. DEFINITIONS:
THE MYTHS
References:
From CATO http://www.cato-at-liberty.org/a-wall-street-journal-column-understates-the-size-of-u-s-manufacturing/ A Wall Street Journal Column Understates the Size of U.S. Manufacturing by Alan Reynolds “…the manufacturing share of GDP declined markedly over this period as measured in current dollar value of output.” “In 1950, the manufacturing share of the U.S. economy amounted to 27% of nominal GDP, but by 2007 it had fallen to 12.1%. How did a sector that experienced growth at a faster pace than the overall economy become a smaller part of the overall economy? The answer again is productivity growth.” “Those who imagine “we don’t make anything anymore,” as Donald Trump claims, don’t grasp the magnitude of America’s industrial productivity gains.”
FROM Cafe Hayek Trumped-Up Fiction by DON BOUDREAUX on DECEMBER 2, 2010
Trumped-Up Fiction“If myths could be buried, this item would be yet another nail in the coffin of the data-less myth that Americans “don’t make things any more.” Alas, one can neither reason nor empirically demonstrate people out of positions that they reached without reason or empirical support.”
http://www.stratfor.com/analysis/20101202_geopolitical_journey_part_7_polandBrilliant, insightful, and possibly profound advice. As always.
OTOH, I do not think it is a forgone conclusion that a German-Russian Entent is bad for europe or the world. In fact, I think such a relationship is economically, and socially useful for both germany and russia. Such an alliance mat be a necessity that the anglo world should see as a useful and necessary one — largely because ours is fragmenting.
Be
Source date (UTC): 2010-12-03 14:55:00 UTC
The nature of man is to reap the rewards of a market economy, while spending his efforts on avoiding any and all PARTICIPATION in the economy. In other words, the vast majority of people would prefer to live in countries with advanced market economies, largely because of the quality of life that can be obtained due to the lower price of goods and services. On the other hand, they also want bureaucratic jobs, government jobs, union jobs, and any other kind of employment that insulates them from the unique and necessary property of the market economy: taking risks with one’s resources in an effort to fill the needs of others.
Today, someone, in an obscure little news group, expressed his libertarian sentiments by saying:
“Common law is good enough for all: You must not cause harm, damage or loss, infringe on the rights of others or use mischief in business. To be accused you must have a flesh and blood accuser who can provide proof of claim against you.A jury of 12 decide your fate.”
Which is true, albeit insufficient. And that insufficiency warrants a little scrutiny. Starting with the fact that the other distinguishing factor of common law is that judges ‘discover’ new properties of dispute resolution as need arises. Men do not make laws. They discover them in the habits and conventions used by real people in the process of developing written and unwritten contracts with one another. But more importantly, the common law, because it is reactive, and evolutionary, and organic, rather than intentional and proscriptive prevents “legal plunder”: the use of the violence of POSITIVE LAW (law enacted versus discovered) to plunder the population. In other words, our freedom depends upon the common law, and our prosperity depends upon our freedom. But that doesn’t mean it’s perfect. THE WEAKNESS OF COMMON LAW The weakness in common law is this: When the rate of expansion of an economy results in new entrants into the middle class, new forms of business, new forms of contract, and new technologies, then the evolutionary process of adaptation embodied in the common law comes under duress, since patterns of similarity are difficult for judges to identify. This judicial epistemic delay and lack of coordination can result in return to the perceptoin of ‘arbitrariness’ on behalf of the population which in turn can lead to ‘regime uncertainty’ (fear of trade and exchange due to fear of legal action) which decreases the volume of economic activity and subjects the population to economic vulnerability from external competition. Furthermore, ‘regime uncertainty’ may drive entrepreneurs to seek jurisdictions more favorable to business, which results in capital flight, and a loss of jobs. LAW AND THE COMPLEXITY OF MULTIPLE DIMENSIONS Law becomes cumbersome and incalculable when the competing interests of:
compete with the organically driven properties of:
These two sets create no less than is six dimensions of complexity. Unfortunately, human beings are almost never capable of making more than a single-axis comparison. Property rights are the only clear epistemological device for creating a legal system that is calculable. Every other layer of dimensional complexity will lead to (the opposite) Instead of “regime uncertainty”. TERMINOLOGY IN CONTEXT – AND NEW TERMS TO REPLACE THE OLD When our English ancestors, and our Founders, fought for ‘their rights as englishmen’, they fought for common law, and the personal sovereignty over their property that must accompany the common law in order for the common law to have coordinated purpose, rather than chaotic result. Only property rights allow rational adjudication of differences between men. All else is chaos. For these reasons you should never surrender your sovereignty to the state. That we need a government in order to resolve differences among us is one thing. That we should surrender our nobility (rights to allocate our own property) to others is not only illogical, it is impoverishing. We generally use the terms ‘Freedom’ and ‘Property Rights’. But Freedom has become an ‘appropriated term’ and Property ‘rights’ has become a ‘laundered term’. The more precise and utilitarian terms, that preserve rational debate are:
**[glossary:Sovereignty]**
2) **[glossary:Calculability]** for the purpose of cooperation and coordination instead of ‘rights’. (Rights are now an abused appropriated term. Something can only be a ‘right’ if it can be given by each individual to each other individual equally. Therefore, we can only NOT do things, not DO things, in order to grant one another ‘rights’. There can be no ‘positive’ rights without fiat law.) 3) **[glossary:Property]** (or several property) instead of property rights. 4) **[glossary:Foregone Opportunity Costs]** instead of duties or obligations. 5) **[glossary:Portfolio of Forgone Opportunity Costs]*** instead of cultural values Since these terms, Self-Sovereignity, Calculatibity, and Several-Property are NECESSARY properties of human cooperation, rather than indistinct, appropriated, logically inconsistent or emotionally loaded terms, (n-dimensional terms: those that contain unarticulated dimensions for the purpose of distorting causality –ie: fraud — and most commonly for the purpose of mixing emotional reaction, which is a property of the past, with epistemic necessity, which is a property of the future). USEFUL DEFINITIONS: 0) LAWS
1) COMMON LAWS:
2) FIAT LAWS:
Manners, Ethics, Morals and the Common Law are a “self evolving, organic system” of rules for coordinating the actions of people in large numbers. As long as judges are allowed to use manners, ethics and morals in concert with the common law, in adjudicating differences. THE RESULT OF MULTICULTURALISM For this reason alone – ‘common law competition’, multiculturalism is an extremely high burden on an economy when combined with Fiat laws. Political Multiculturalism causes competition between common law systems, that may only be resolved through fiat law. Multiculturalism is then, “The Other Road To Serfdom”.
SURPRISE? NO SURPRISES IN WIKILEAKS AT ALL. These are common diplomatic cables, written in the common business-language-of-state. Anything ‘shocking’ is simply the result of how people speak when they believe that their communications will remain private. Look at your own email, or personal conversations. We all trash-talk whenever we can. It vents our frustrations. For example: Everyone knows that Berscolini is a vain and incompetent man. But he’s a politician in Italy. Putin? We’ve all known Putin’s ambitions and position for years. Is confirmation something we needed? There is nothing so far in these docs that hasn’t been discussed to death. The docs only give legitimacy to those previously debated topics. *** Fools will always find a source of conspiracy in the natural incompetence of bureaucracy. *** WHAT WE LEARNED: There are only three things to learn from these docs:
[callout]There is no competent leadership in washington, and it is possible that there cannot be competent leadership, that can develop a consistent policy across that divergent a set of interests.[/callout]
1) The people who work on these communications are simple white collar government clerical bureaucrats, covering the communications of a vast and diverse state department, running a large naval empire during a time of enormous economic and political power changes. 2) The state department bureaucracy is too big, and american political and military reach is larger than the competence of the individuals in the State Department can coordinate — which is true of all bureaucracies. 3) There is no competent leadership in washington, and it is possible that there cannot be competent leadership, that can develop a consistent policy across that divergent a set of interests. HOWEVER The solutions to most of these diplomatic issues has been covered by Huntington in the Clash Of Civilizations. That is the only policy document necessary to coordinate the vast national interests abroad. We need a strong russia. We need a non-nuclear iran. Islam needs a different core state. We need to help south american, asian, hindu and the vast, ignorant, poor islamic states come into power, while we gracefully reduce our scope of responsibilities.
I don’t particularly like criticizing Tyler Cowen, but this is a bit ridiculous, and I”m going to have to chalk it up to excess holiday tryptophan. Last time I read Road To Serfdom was this fall, driving cross country. Actually, I listened to it on tape. And I cautiously pulled aside whenever I needed to take notes. I took ten pages of notes. But that’s OK. It helped with fatigue. Tyler recently re-read Road To Serfdom. Here are his comments.
Rereading *The Road to Serfdom* Given all the recent fuss, I picked it up again and found: 1. It was more boring and less analytic on matters of public choice than I had been expecting. 2. Although some of Hayek’s major predictions have been proven wrong, they are more defensible than I had been expecting. 3. The most important sentence in the book is “This book, written in my spare time from 1940 to 1943…” In those years, how many decent democracies were in the world? How clear was it that the Western powers, even if they won the war, would dismantle wartime economic planning? How many other peoples’ predictions from those years have panned out? At that time, Hayek’s worries were perfectly justified. 4. If current trends do turn out very badly, this is not the best guide for understanding exactly why. It’s fine to downgrade the book, relative to some of the claims made on its behalf, but the book doesn’t give us reason to downgrade Hayek.
Straw man. Self serving at that. No direct criticisms. Obtuse criticisms are illogical. a) The book contributed to the current state of affairs. b) The book was written for the masses, and that is why it has been widely read., and why it contributed to the current state of affairs. (more so than Braudel – although no discredit to him – and others.) c) The book’s criticism of central planning is not the same as the current criticism of the welfare state. And I do not understand, nor does it appear others here do, why you grant particular grace to current democracies – the merit of which is still in play, until we observe how we fare now that the rest of the world has adopted capitalist instituions, and erased our prior advantage. It certainly appears, that instead of Democracy, the award goes to capitalist institutions, calculation and incentives. Democracy is irrelevant. Other than, under democracy, it appears, it is far more common to vote one’s self into tyranny, than is possible under parliamentary monarchy, or oligarchy. I believe the three points above refute all four of your observations. In fact, I’m having trouble understanding why you even view it through your empirical framework. It is a narrative pedagogical work. And as a narrative pedagogical work it will very likely be as durable as most innovative narrative works are, versus the very perishable empirical works of political economy that are fashionable flashes of the moment. AFWIW: Whether one lives under tyranny or not is a matter of perspective determined by one’s definition of property. Cheers
“To suppose that any form of government will secure liberty or happiness without any virtue in the people is a chimerical idea.” — James Madison Becomes: “Liberty represents the ability of each individual to achieve his greatest happiness, but only by servicing the wants and needs of others, and to do so by participating in the market. By doing so he reduces prices and increases choices, and creates value through exchange and decreasing prices through a division of knowledge and labor. It is an impossible supposition, that any form of government that we create, and any system of incentives and punishments we invent, will secure us our desired prosperity without the willing contributions of citizens, who daily pay for that prosperity by their expenditure of effort in production and exchange, but also by their forgoing of opportunity for gain by means of legal plunder, or by fraud, or by theft, and therefore avoiding paying the high cost of maintaining that prosperity.” “To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical.” — Thomas Jefferson Becomes: “A man pays for his government first, in forgone opportunity costs, and second, by the expenditure of his time and labor in production and trade, and third, by the taxes he directly pays to the government. He pays with all three: since all three are avoidable, he pays with all three methods. Manners, Ethics, Morals, and most importantly, his avoidance of corruption: to live off the productive results of others without voluntary exchange – provide his easiest means of cheating – of obtaining the benefits of such a society at a discount. A man who does not pay the cost of manners, ethics, morals, AND observation of the cultural system of obligatory payments we call culture, is a thief. Therefore when the government ‘tolerates’ counter-cultural behavior it condones theft. When it supports people who do not make such payments, it pays one group to steal from another. Therefore, no man who makes payments to the state either in taxes or in forgone opportunity costs, should ever tolerate redistribution of his efforts to brigands, and thieves. The purpose of a government is to disallow people to obtain extra-market discounts while obtaining the benefits of participating in the market. A barbarian is someone who does not participate in the market, and in particular, someone who steals from the payments of citizens by avoiding the forgone opportunity costs we call ‘culture’.