God is a Capitalist

Tuesday, March 20, 2018

Climate change is socialist groupthink

Public relations research tells us there are two types of people in the world: one relies on an authority figure to tell him what to do and the other decides for himself by gathering evidence and using reason. If you’re someone who can think for himself, you have probably wondered why climate science is such a mess. Why do they torture the temperature data to get it to look like a hockey stick in graphs? Why do they ignore or slander critics instead of answering their concerns when they offer good evidence?

A short period existed when climate science was real science and not socialist ideology. Back in the 1980s when the science was in its infancy, scientists openly debated the evidence. A startling experiment in that decade proved CO2 to be an excellent fertilizer for trees and plants.

Christopher Booker thinks the reason climate scientists act like ideologues is because of “groupthink,” referring to the book with that title by Yale psychologist Irving Janis:
Janis’s first rule is that a group of people come to share a particular way of looking at the world which may seem hugely important to them but which turns out not to have been based on looking properly at all the evidence. It is therefore just a shared, untested belief.”
Rule two is that, because they have shut their minds to any evidence which might contradict their belief, they like to insist that it is supported by a “consensus.” The one thing those caught up in groupthink cannot tolerate is that anyone should question it. 
This leads on to the third rule, which is that they cannot properly debate the matter with those who disagree with their belief. Anyone holding a contrary view must simply be ignored, ridiculed, and dismissed as not worth listening to.
Booker describes the behavior of most climate scientists well, but doesn't answer how they fell into the groupthink trap? The answer lies with the collapse of socialism in the late 1980s. Socialism’s main selling point from its fabrication by Saint-Simon in the early decades of the 19th century had always been economic. Socialism would make everyone equally rich as it ended the waste inherent in the anarchy of markets.

The world suffered through 120 years of experimentation with socialism launched by the welfare state of Germany in 1870 through the Russian Revolution and creation of the Soviet Union, the annexation of Eastern Europe, and the victory of Mao in China. China abandoned pure socialism after Mao’s death. Then the Berlin Wall fell; Poland rebelled and the USSR disintegrated, all because socialism had impoverished those nations to the point that they couldn’t feed their own people. Socialism lost the economic debate that had burned through the 20th century.

Reasonable people divorced socialism, but most socialists had never been reasonable. They are aflame with envy. Robert Heilbroner wept ink for twelve pages over the death of his utopia in “The Triumph of Capitalism,” which appeared in the January 23, 1989 issue of The New Yorker magazine. He began with, “Less than seventy-five years after it officially began, the contest between capitalism and socialism is over; capitalism has won.” He concluded with this:
And finally, what of socialism?...I do not think that the triumph of capitalism means its assured long and happy life or that the defeat of socialism means its ignominious exit from history. The collapse of central planning shows that at this moment socialism has no plausible economic framework, but the word has always meant more than a system of economic organization. At its core, it has stood for a commitment to social goals that have seemed incompatible with, or at least unattainable under, capitalism – above all, the moral, not just the material elevation of humankind...the vision has retained its inspirational potential, just as that of Christianity has survived countless autos-de-fe and vicious persecutions.”
Helbroner soon regained his composure, dried his tears and nailed his 95 theses to the door of capitalism in his September 10, 1990 The New Yorker article, “After Communism.” Near the end he wrote,
For all these reasons, I am not very sanguine about the prospect that socialism will continue as an important form of economic organization now that Communism is finished...But the collapse of the planned economies has forced us to rethink the meaning of socialism. As a semireligious vision of a transformed humanity, it has been dealt devastating blows in the twentieth century...
There is, however, another way of looking at, or for, socialism. It is to conceive of it not in terms of the specific improvements we would like to embody but as the society that must emerge if humanity is to cope with the one transcendent challenge that faces it within a thinkable timespan. This is the ecological burden that economic growth is placing on the environment. The challenge has drawn its first blood in the epidemic rise in skin cancer that is a consequence of the depletion of the ozone layer. It threatens to open far deeper and more serious wounds as the atmosphere gradually forms its invisible panes of carbon dioxide and other gases...The ecological crisis toward which we are moving at a quickening pace has occasioned much scientific comment but surprisingly little economic attention. Yet if there is any single problem that will have to be faced by any socioeconomic order over the coming decades it is the problem of making our economic peace with the demands of the environment.
Whatever its other consequences, the closing window of environmental tolerance will impose an utterly new condition of caution and constraint on a civilization...It is perhaps, possible that some of the institutions of capitalism – markets, dual realms of power, even private ownership of some kinds of production – may be adapted to that new state of ecological vigilance, but, they must be monitored, regulated, and contained to such a degree that it would be difficult to call the final social order capitalism.

Heilbroner gave socialists their new marching orders: take over the environmental movement and use it to forge their socialist utopia. And they did. Climate change scientists embraced their new role as the vanguard of socialism and acted just as FA Hayek had predicted they would in Road to Serfdom fifty years earlier.

Saturday, March 3, 2018

Free markets celebrate individualism

Individualism is the root of all evil if you believe many theologians and sociologists today. For example, Philip bond wrote in First Things,
Liberalism finds its quintessential form in a market state that enforces individualism. The market state must abolish anything that stands in the way of unconstrained freedom; it must eliminate solidarity or shared associations with other people, places, or things. This gives liberalism a curious Maoist cast, as it seeks to dispel our settled notions, be they sexual, biological, or even of who counts as human. 
The current Pope has been a leading critic of individualism, according to a Catholic writer:
The Pontiff acknowledged that our Western culture ”has exalted the individual to the point of making him an island, almost as if one could be happy on one’s own.” Stemming from it are ideological visions and political powers that “have squeezed the person, have standardized him, thus making room for economic powers that wish to exploit globalization, instead of fostering greater sharing among men, simply to impose a global market of which they themselves dictate the rules and draw the profits...the concept of person, born and matured in Christianity, helps in fact to pursue a fully human development.” Moreover, the word “person” always means relation, not individualism; it affirms inclusion, not exclusion, a unique and inviolable dignity and not exploitation, freedom and not constriction.

Monday, February 26, 2018

Free market capitalism requires respect for commerce

Last installment in the series defining free market capitalism, we reversed engineered Karl Marx’s definition of capitalism and found that it referred to the economic system that produced the hockey stick effect in per capita GDP beginning in the Dutch Republic of the 17th century, picking up England and Anglo nations then the rest of Western Europe. The first principle of that system was protection of private property. That was a necessary, but by itself insufficient cause of the hockey stick. The remaining necessary traits are 1) respect for commerce, 2) mass production and3) individualism.

Deirdre McCloskey has expressed well the importance of respect for commerce in his trilogy about bourgeois virtues. If a country protects property but has contempt for commerce, the people won’t go into business but will do what most people in the world have always done: get into government or the military where the “respectable” means to wealth attainment reside. This was one of the main reasons most of Europe remained as poor in 1700 AD as it was in 2000 BC.

People in government extracted wealth from the masses through heavy taxation and enriched themselves. Generals grew rich through looting in war. Until the advent of capitalism, looting in war, kidnapping for ransom, and taking bribes as a government official were the respectable means to wealth. Commerce held as much appeal as prostitution.

In spite of the fact that much of Europe was predominantly Christian after say the year 500, the Church taught people to hold commerce in contempt. And they did. Businessmen were told that the sins inherent in their profession were so great that it would be impossible for them to go to heaven. So businessmen who grew wealthy in trade would give half of their wealth to the Church in hopes of buying their way into heaven, and spend the other half buying land and titles to nobility so they could rob their fellow citizens.

But the Church fathers didn’t get their views of commerce from the Bible or the Judaism from which Christianity sprang. Many of the Church fathers were recruited from among the nobility because of their education, political influence and wealth, according to Peter Brown in Through the Eye of a Needle: Wealth, the Fall of Rome, and the Making of Christianity in the West, 350-550 AD. Many were new to the faith and filled in the holes in their Biblical knowledge with the writings of pagan philosophers from Plato to Cicero, all of whom held commerce in low regard.

Pagan philosophy dominated the theology of wealth from the second through the 15th century. In fact, pagan intellectuals have always dominated Church teaching on social issues with few exceptions. E. R. Norman drives home that point in Church and Society in England 1770 – 1970. The only exceptions took place when the leading intellectuals were also Christians, such as the Salamancan theologians, the founders of the Dutch Republic and the “clerical” economists in the UK and US during the 19th century. In the late 19th century most intellectuals were atheists and socialists, so Protestant and Catholic theologians became socialists as well.

The theologians of the University of Salamanca had the courage to break with the pagans and distill their economics from the Bible and natural law. McCloskey described the radical change in European values from the pagan contempt for commerce to the bourgeois virtues but fails to offer a convincing reason for the change. But the teaching of the Salamancan scholars explains it well. Their theology gave people permission to be pro-business and godly at the same time.

All of the poor countries today have failed to make the change in values that would give them respect for business as a means to wealth. The great economist Thomas Sowell details the trials and tribulations of “middleman minorities” in his Black Rednecks and White Liberals. Jews in Europe are the prototypical middleman minorities. Christians persecuted them relentlessly because Christians restricted them to business as their only means of support, barring them from government or the military. As business people, they became wealthy and inflamed the envy of Christians.

Christians in Muslim nations, Chinese in Southeast Asia, Lebanese in West Africa and Koreans in Los Angeles recently have all been middleman minorities engaged in commerce that made them wealthier than their neighbors. That wealth and their hated professions ignited envy, which boiled over into frequent riots and murder.

The issue of mass production is simpler. Many historians locate the origins of capitalism in the commercial cities of Northern Italy, such as Venice. Those cities did enjoy a healthy respect for commerce, but the lacked mass production. All production except for ship building in Venice, which was state owned, was craft production in guilds. Craft production has always existed and so cannot explain an explosion in wealth like the hockey stick because it never produced large increases in productivity. Such wealth creation can only take place when business people invest their wealth in new and better machines to aid workers and boost productivity. Ludwig von Mises wrote in Planned Chaos, “There is no means by which the height of wage rates can be raised for all those eager to earn wages other than through the increase of the per capita quota of capital invested.”

Craft production was always small production for the wealthy. Capitalism is mass production for the masses and that requires investment in capital goods. Hence the appropriate name, capitalism. That began to happen first in the Dutch Republic.

Capitalism requires 1) protection of property and free markets, 2) respect for commerce, 3) mass, capital-intensive production and 4) individualism. I saved individualism for last because it is the most difficult and will discuss it next week.

Originally published at Townhall Finance

Saturday, February 17, 2018

Is it time to sell?

The two recent plunges in the stock market have investors’ knees shaking. Is this a normal, healthy correction that forces expectations to align more with reality, or is this the beginning of the big one, the aftershocks of which will take the market down 50% as happened in 2000 and 2008? I’ll be able to tell you in about six months. I only predict the past because forecasting the future is too difficult.

A recent paper by the University of Chicago Booth School of Business professor George M. Constantinides and McGill University’s Anisha Ghosh, “What Information Drives Asset Prices?” offers some insights. One is that the Consumer Price Index and average hourly earnings provide better guidance about the direction of the market than does consumption spending alone. In other words, Keynes was wrong.

But the best insight is that the phase of the business cycle we are in offers the best advice on the market’s future. The authors call the phases “regimes” and use just two, expansion or recession.
The consumption and dividend growth rates have higher means in the first regime than in the second one. Therefore we identify the first regime as the regime of economic expansion, with a higher mean of consumption and dividend growth rates and longer duration than the second regime...In other words, the investor is able to effectively forecast the regime in the next period...”
So the investors who accurately guess whether the next period will usher in a recession or continue the expansion will do better at predicting the market. The authors of the paper assume that investors use a range of macroeconomic variables, including Consumer Price Index and average hourly earnings, to guess what regime or phase of the cycle comes next.

Wednesday, February 14, 2018

Free God is a Capitalist

Since I can't offer the PDF version of God is a Capitalist anymore because of the Kindle contract, I can offer the Kindle book free for five days each quarter. The first free days will be March 1-5. I cleaned up the PDF, corrected many errors and added some new material to the Kindle version. Please leave a review whether negative or positive! Just click on the picture of the book on the right to go to the Amazon web page for the book.

Monday, February 12, 2018

What is free market capitalism?

People in the West are confused about capitalism because they don’t know enough about socialism. Karl Marx had a greater respect for capitalism than do modern socialists or conservatives. 

Karl Marx fabricated the term “capitalism” and defined it as the private ownership of the means of production. He did not conflate capitalism with commerce, as do most historians today who see shoots of capitalism sprouting throughout human history. Neither did the monasteries of medieval Europe birth capitalism as some historians claim. Is it really necessary to remind historians that monks owned no property and took vows of poverty? Monasteries were closer to the many small socialist experiments, like the kibbutzim of Israel. Marx saw the origins of capitalism in the 17th century.

Marx pretended to have discovered the secret forces of history that had led mankind from tribal economies through feudalism to capitalism and ultimately will usher in socialism. And he insisted that society must follow that sequence. They could not jump from feudalism to socialism because only capitalism could produce the wealth necessary for its socialist heirs to live in abundance. Trying to shorten the path would perpetuate poverty and misery. That’s why Marx was skeptical about the possibility of backward nations such as Russia succeeding with socialism.

Sunday, February 4, 2018

Don’t nudge; reform Social Security

My sister-in-law taught me to do the “Dallas nudge.” It’s sort of a dance, like the Texas Two-Step, except it’s a tactic for getting onto one of Dallas’ many twelve-lane expressways. So you floor the gas pedal to match the speed of the traffic you want to merge with and then look away. The other drivers think you can’t see them and make room for you.

Behavioral economists have been pushing the government to nudge us since some of their own won the Nobel Prize. Like CS Lewis’ “do gooders,” we’ll never be free from their needling and meddling. The latest comes from the Chicago Booth School of Business in an article “Why policy makers should nudge more" by Alex Virkhivker. He wrote,
In one case, the researchers looked at a nudge by the tax-preparation firm H&R Block, which offered clients assistance in filing college financial-aid paperwork, and compared that approach with subsidies and tax incentives offered at the state and federal levels. The nudge produced 1.5 additional college enrollees per $1,000 spent—making it 40 times more effective than the next most effective intervention the researchers analyzed.
Likewise, nudging turned out to be the most cost-effective way of encouraging energy conservation. One program to nudge consumers into lower electricity use, sending letters comparing a household’s energy consumption to that of its neighbors, saved 27 kilowatt-hours per dollar spent. In contrast, a rebate offered by California utility companies produced savings of only 3.4 kWh per dollar, and other demand-management policies that relied on a combination of consumer education and monetary incentives averaged 14 kWh per dollar.