Liberty & Power: Group Blog
David T. Beito
Our efforts only met with humorless irritation from the, otherwise lethargic, leadership of HAW. While the whole interview is well worth your time, here are Russell's comments about the experience HAW:
Libertarian historian] David Beito somehow found out about me and asked me to participate in this Historians Against the War organization. He had basically taken over their blog; no one else was interested in doing it. He was putting libertarian stuff on the blog, and they weren’t happy about it, but there was so little energy in that organization that they couldn’t bother one way or another. Then I came along and we really went after Obama hard, especially over what I would call his imperialist foreign policy prescriptions.
We also then were chastising the organization for not criticizing him. Even after Obama was elected, even after the inauguration, all they would do is put anti-Bush stuff on the front of the website, and it just drove us crazy. For months we kept saying, “Would you please now talk about the guy who’s in office?” Finally they expelled us.
Comments are welcome.
Jane S. Shaw
The book is one of those grand-themed books like Jared Diamond’s Guns, Germs, and Steel and Kenneth Pomeranz’s The Great Divergence but it is not nearly as insightful as those (I’ve directed conferences on both). Morris’s ambition is to explain the progress of mankind starting about 50,000 years ago and, in particular, to answer the question of why the West overcame the East in social development.
But his theories are pallid, almost nonexistent. The major theory is that people are greedy, lazy, and afraid. Social development (his label for progress) occurs because people respond to changing circumstances—especially climate change—in ways that reflect these attributes.
Yes, that's basically it. And it's a pretty horrifying book because in his view history is mostly about the slaughter inflicted by a changing array of brutal chieftains, kings, and emperors. The history of the world is like a chessboard; sometimes White dominates, sometimes Black, but all the pieces are playing the same game.
There’s not a word here about institutions. Thus, in the end, in spite of 750 pages of sometimes arresting detail, history turns out to be just one damn thing after another, as Arnold Toynbee once characterized it.
According to the National Bureau of Economic Research, the recession began in December 2007, so we can take 2007 as the last pre-recession year for purposes of annual comparison.
Between 2007 and 2010, real GDP fell slightly (2.6 percent) in 2009, then recovered fully in 2010, reaching a new high (but only slightly above the figure for 2007, too small an increase to take seriously).
Examining the major components of GDP, we find that personal consumption expenditures fell in 2008 and 2009, reaching a level 1.5 percent lower in the latter year. Consumption then increased in 2010, more than recovering its loss during the previous two years. In 2010, it stood three-tenths of 1 percent higher than in 2007–again, probably too small a gain to consider a significant difference, in view of the likely measurement error.
So, according to the official data, the recession has come and gone in so far as it has left its mark on real GDP and real consumption spending.
Gross private domestic investment reached a peak in 2007, then fell during each of the following years, reaching a level 30 percent lower in 2009. Although it increased by 17 percent in 2010, it remained 18 percent below its 2007 peak.
Chronically negative net exports actually took a substantially smaller chunk of the real GDP in 2010 than they had in 2007.
Finally, real government expenditures rose relentlessly, before, during, and after the contraction. In 2010, they stood 5.6 percent higher than in 2007. Remember, we are examining real (i.e., inflation adjusted) figures here. Obviously, government made no contribution to falling GDP during the contraction, a fact in which all Keynesians take great pride. However, because government spending increased while other components of GDP (except net exports) either fell or held their own, the government’s share of GDP rose between 2007 and 2010, from 19.2 percent in 2007 to 20.5 percent in 2010 (these percentages I’ve calculated from a different table because chained price-level adjustments, which underlie Table 1.1.6, make such intertemporal comparisons of proportions inaccurate). That government has increased its share of GDP may be good news for Keynesians, but it’s bad news for the long-run performance of the economy.
The most important lessons to draw from the preceding information are (1) that the recession has been associated with a sharp drop in private investment expenditure, and the recovery to date, though already complete in regard to private consumption and total GDP, remains far from complete for investment spending; and (2) government spending has forged ahead, in good weather and bad, thereby increasing its share of total GDP.
To repeat my question: What’s holding back the recovery? My answer: the failure of private investment to recover fully. Let us hear no more about the allegedly pressing need for the government to stimulate consumer spending. Moreover, let us insist that the relentless growth of government spending–not only the kind represented in the National Income and Product Accounts, but also the massive transfer payments–must be stopped. For the government to continue insisting that it must stimulate the economy in the short run, however harmful such government spending might be in the long run, is a recipe for ruin.
Aeon J. Skoble
On the former, it had occurred to me that since I started using Facebook, I haven't been nearly as active blogging here at L&P. But now that the NYT has run a story confirming my hypothesis I may start blogging more just to be ornery.
On the latter, well, today is"presidents day." When I was a lad, we had"Washington's Birthday" - a day to celebrate one particular person and his accomplishments. Now we have to celebrate all presidents? Um, no thanks. I resent being obliged to celebrate all presidents with a common holiday. Fillmore? Nixon? FDR? Please. I am happy to have a day to celebrate George Washington, but changing that to a generic"presidents day" dilutes any possible meaning of that. And don't start with"we're celebrating the office of the presidency, not any one particular president" - that's worse! A national holiday to celebrate authority generally? That seems, well, un-American. But then we're back to it being a joint celebration of all the presidents, Jefferson and Hoover, Madison and Bush. Not interested. Give me back the Washington's Birthday of my youth please!
Notice that every aspect of this awkwardly named variable is critical.
• First, it has to do with private investment, not so-called government investment. The latter, which looms fairly large in the official accounts, ought never to have been labeled as investment, because it comes about not as a result of wealth-seeking motives and rational economic calculation, but as a result of political motives, calculations, and actions that often clash with the creation of real wealth, rather than contributing to it.
• Second, we are looking here at business investment, excluding what the Bureau of Economic Analysis calls private “household and institutions” investment, which has somewhat murky underlying objectives, determinants, and consequences.
• Third, we are examining net, rather than gross, investment. The latter includes a large element of expenditure aimed merely at compensating for the wear and tear and obsolescence of the existing stock of private business capital. For example, even at the most recent peak for gross private domestic business investment, in the third quarter of 2007, it was running at $1,661 billion (annual rate), whereas net private domestic business investment was only $463 billion (annual rate), or about 28 percent of the total. (The investment data cited in this article are taken from Table 5.1, Saving and Investment by Sector, in the National Income and Product Accounts, accessed 02/16/11.)
It is obviously important that businesses compensate for ongoing depreciation of their existing stock of capital goods, which includes structures, tools and equipment, software, and inventories. But unless firms do more than make up for depreciation, they do not expand their productive capacity except to the extent that they can embed improved technology in their replacements for worn-out or obsolete capital goods. In general, economic growth requires net investment, and more rapid economic growth requires a greater rate of net investment.
With that essential idea in mind, let us examine what has happened recently to private domestic business net investment, which I will henceforth call simply net private investment. Such investment reached its recent cyclical peak in the third quarter of 2007, at $463 billion (annual rate). It then fell steadily for the next four quarters, reaching $336 billion in the third quarter of 2008. At that point, it plunged steeply, falling to only $159 billion, or by 53 percent, in the fourth quarter of 2008.
Although the financial-market panic that had flared up in late September 2008 began to subside early in 2009, net private investment continued to fall, becoming negative (-$53 billion, annual rate) in the first quarter of 2009 and even more negative in the second quarter (-$119 billion). Although some improvement began in the third quarter of 2009, net private investment remained negative during the third and fourth quarters. For the entire year 2009, the amount of net private investment amounted to a large negative amount (-$69 billion). So, in other words, the value of the private business capital stock fell by that amount. Hardly by coincidence, real GDP also fell substantially in 2009, by 2.6 percent.
In 2010, net private investment increased smartly for three quarters, reaching an annual rate of $270 billion in the third quarter, then contracted sharply – by almost 47 percent – to $144 billion in the fourth quarter. For the entire year, the amount of private net investment was $177 billion. Whether the collapse in the final quarter of 2010 will turn out to have been a fluke or the beginning of a longer-term decline, we shall have to wait to see.
According to the National Bureau of Economic Research, the most recent business-cycle peak occurred in December 2007, and the trough was reached in June 2009. As we have seen, net private investment peaked slightly sooner, in the third quarter of 2007. So, we are now more than three years past the economy’s overall peak and some 20 months past its trough, yet net private investment in the most recent quarter was running at only 31 percent of the annual rate at its previous peak.
Private net investment is currently running far below the rate required to sustain a rapid rate of economic growth. Real consumer spending, in contrast, peaked in the fourth quarter of 2007, fell only slightly (about 2.5 percent) to the second quarter of 2009, and by the fourth quarter of 2010 exceeded its previous quarterly peak (by almost 1 percent). Despite the wailing and gnashing of teeth among Keynesian economists and politicians with regard to allegedly inadequate consumption, a collapse of consumption is not to blame for the economy’s anemic recovery to date. However, looking elsewhere for the cause, we find that the economy’s true engine of growth – private business net investment – continues to sputter, running in the most recent quarter at less than a third of its previous peak rate and, for the entire year 2010, at only 40 percent of its rate for the entire year 2007.
Unless net private investment recovers more rapidly, the overall economy’s recovery is sure to remain slow, at best, certainly too slow to bring down significantly the high unemployment rate that has been stuck for a long time between 9 percent and 10 percent (and would be substantially greater if we took into account the millions who have left the labor force recently because they did not believe they could find a job even if they searched for one). As matters now stand, real stagnation is a likely prospect and, given the Fed’s massive ongoing purchases of Treasury debt and the stupendous amount of excess reserves in the commercial banks’ accounts at the Fed, stagflation also seems to be a credible expectation.
Investors continue to view the future with major misgivings, owing to the unsettled condition of the government’s future actions with regard to health care, financial regulations, energy regulations, taxation, and other matters that have serious implications for business costs and the security of private property rights in business capital and its returns. Although ObamaCare and the Dodd-Frank bill have already been enacted, these massive statutes leave scores of important details awaiting determination by administrative agencies and courts whose actions will be fiercely contested at every step. Future tax rates also remain up for grabs in Congress.
Nor are the investment-paralyzing uncertainties confined to the United States. Europe in particular continues to wrestle with the aftermath of the malinvestments and other distortions wrought in its asset markets and financial institutions during the boom of 2002-2006, and several countries teeter on the brink of sovereign default. Given the close linkages of national markets in today’s world, U.S. companies will feel a great impact from any new crises in Europe – something else to worry about as they contemplate the desirability of increasing their investment spending.
Of course, the major trading countries and their governments may ultimately find a way to muddle through. They have eventually weathered major storms in the past. Yet, however the world’s economy moves in the longer term, the immediate prospect for investors in the U.S. economy remains troubled, at best. A substantial, rapid recovery of private business net investment must await the clearing of these clouds. Until such a recovery does occur, however, overall economic prospects must remain rather gloomy for the near and medium terms.
Charles W. Nuckolls
Clearly, some autocratic countries become democratic briefly, and then lapse back into some form of autocracy. The Weimar republic lasted from 1919 to 1933, for example, before Hitler effectively abrogated the constitution. However, I can't think of any case, in the modern era, of a multi-generational democracy that has ever reverted back. For example, Britain managed to lose an entire empire without ever any serious threat to its status as a democratic country. Britain and the US made it through two world wars and a great depression without losing their democratic status. Indeed the US managed to fight a civil war with itself, without either side actually giving up on the democratic form of governance.
So my question is this: what is the longest period that a country has been a democracy, and then reverted to some non-democratic form of government? Let's confine it to the post-industrial revolution era.
Jane S. Shaw
Top row: Steve Horwitz, t1, t2, t3, Dave Prychitko, Pete Boettke
Middle row: m1, Ralph Raico, Leonard Liggio, Walter Grinder, Emilio Pacheco
Bottom row: b1, b2, b3
If you can fill in the blanks, please put the info in the comments by putting name to the identifying space (e.g:"t1 = Adam Smith"). Thanks! (I've cross-posted this to The Austrian Economists as well.)
Jeffrey Rogers Hummel
Apparently, the Mathletes have bamboozled the Pentagon into giving them God knows how much taxpayer money to write…here it comes…”computer models that are supposed to forecast political unrest”. By the use of standard deviations and t-scores and coefficients, they promised, simply enter a few variables, push a button, and one could predict which countries would soon experience rebellion.
So how’s that working out? About as well as the Fed’s mathematical software has . We have far too much respect for math in this country, it’s practically a cult.
October 29 – November 1, 2011
Sise Inn, Portsmouth, NH.
The Fund for the Study of Spontaneous Orders at the Atlas Economic Research
Foundation is seeking papers exploring the theme
“Coping With Tensions”
FOURTH CONFERENCE ON EMERGENT ORDER AND SOCIETY
October 29 – November 1, 2011
Sise Inn, Portsmouth, NH.
We are particularly seeking original work in two areas, (although we will consider any papers on emergent order and society. For example, papers discussing the impacts of new technologies such as computers and the web on emergent social processes):
1. Exploring the relations between emergent orders and the instrumental organizations within them with particular reference to where the interests of the order as a system adapting impersonally is at odds with the interests of organizations pursuing their ends within them. For example, the role of political parties within democracy that seek to make their environment predictable and perhaps controllable.
2. Exploring organizations that straddle the borders of different emergent orders, such as the market and democracy, democracy and the environment, the market and science, and so on. Different emergent processes are coordinated by different rules biased
towards different values. Is it possible for organizations to act in ways in harmony with the principles underlying all the emergent orders within which they exist, and if not, what are the consequences? For example, a forestry corporation must make a profit in the market and maintain a viable forest ecosystem if it is to operate sustainably. Yet the time horizon for market decisions is quite different from the time horizon for natural sustainability. Is this a problem and if so, what can be done about it?
Acceptable papers may be either case studies or more general theoretical explorations.
Conference participants are required to submit their papers for possible publication to Studies in Emergent Order (http://studiesinemergentorder.org/).
To be guaranteed consideration, proposals must be in by May 15. Ideally the proposal should describe the anticipated argument and how it relates to at least one of the conference themes. Proposals should be no more than two pages double-spaced, not including an optional bibliography of works the author anticipates discussing. Submit your proposal or inquiries to
The Fund will select a maximum of 12 papers for inclusion in its conference, and will
notify authors by May 30, 2011. Final papers must be submitted to the Fund by
September 1, 2011.
The Fund will reimburse authors of accepted papers for their conference expenses (round trip coach class airfare or tolls and mileage for drivers, and lodging and group meals), to be held in at the historic Sise Inn in Portsmouth New Hampshire. Authors will also receive $1,500 for accepted papers and full participation in the conference events. In return, the Fund will have the right to first publish any accepted papers in Studies in Emergent Order.
For the Fund for the Study of Spontaneous Orders
William C. Dennis
David T. Beito
Though he respectfully disagrees with Ron Paul on several issues, such as cutting entitlements, John Nichols offers strong overall praise:
.....Paul's willingness to defend civil liberties without apology, to criticize dictators and the U.S. policies that support them, to call for bringing troops home, to attack the military-industrial complex and to condemn bank bailouts and crony capitalism is not just on target. It's compelling.
If Democrats are interested in identifying themselves as anything more potent than a kinder, gentler variation on mainstream Republicanism, if they recognize that drab managerialism does not excite the American people, if they want not only to win elections but to make those wins mean something, they should borrow the best lines from Ron Paul's text.
But what about other drugs created by Big Pharma? Where do we draw the line, if at all?
Yesterday, The Washington Post recounted the increased use of PCP and the increase in violence associated with that drug. What are the Police, the Insurance companies if involved, and other entities in our Society to do about this, one might ask?
Today, The Post revealed a suppressed, “Study 15,” about the effects of another drug, Seroquel.
The web site streetdrugs.org offers the following description of PCP:
“PCP (phencyclidine) is classified as a hallucinogen and has many of the same effects as LSD, but can be much more dangerous. In the 1950's, PCP was investigated as an anesthetic, but due to its severe side effects, its development for human use was discontinued. PCP is known for inducing violent behavior and for inducing negative physical reactions such as seizures, coma, death. There is no way to predict who will have a bad reaction to the drug. Maybe this is because PCP has so many faces--it acts as a hallucinogen, stimulant, depressant, and anesthetic---all at the same time. In its original state, PCP is a white crystalline powder. PCP is available in tablet, liquid, and powder forms and is either ingested orally or smoked by applying the liquid form to tobacco or marijuana cigarettes or by lacing these and other cigarettes, sometimes containing herbs such as mint or parsley, with PCP powder.
STREET TERMS: include Wet, Illy, Angel Dust, Supergrass, Killer Weed, Embalming Fluid, Rocket Fuel, Hog, Wack, Squeeze, Water, Dust, Oxone, Zoot, Peace Pill, and Elephant tranquilizer. Killer Joints, and Crystal Supergrass are names for the combination of marijuana laced with PCP."Smoking wet" and"wetting it up" are two terms for smoking cigarettes or joints dipped in PCP. PCP is known as Space Base when mixed with Crack.
EFFECTS OF USE: A moderate amount of PCP often causes the user to feel detached, distant and estranged from his surroundings. Numbness, slurred speech and loss of coordination may be accompanied by a sense of strength and invulnerability. A blank stare, rapid and involuntary eye movements, and an exaggerated gait are among the more observable effects. Auditory hallucinations, image distortion, severe mood disorders, and amnesia may also occur. In some users, PCP may cause acute anxiety and a feeling of impending doom, in others paranoia and violent hostility, and in some it may produce a psychoses indistinguishable from schizophrenia. PCP use is associated with a number of risks and many believe it to be one of the most dangerous drugs of abuse.”
So, according to libertarian theory, is such a drug, increasingly associated with violence, to be freely available along with marijuana? In Milton Friedman’s memorable phrase, are we all to be “Free to Choose” whatever drug suits our fancy?
With respect to a drug like Seroquel, the total failure of the Federal Drug Administration to regulate the drug, and its cooperation with Big Pharma to suppress an adverse study about the drug, is nothing new. What are we to do about this kind of failure of drug information and regulation, in a way at the same level of the failure of banking and Wall St. financial regulation that has brought the whole global economic community a growing sense of crisis?
The FDA’s failure to explore the effects of another drug, was documented yesterday at Lew Rockwell.com. The number of these is legend.
Over the years this failure of Drug regulation as well as the manipulation of the studies of such drugs is on a par with the massive failure to properly regulate the Fed, theSEC or Wall St.
Jack Ruby & Preludin:
With two of my students, I happened to be in Dealy Plaza on November 22, 1963, not too far from the assassination of President John F. Kennedy. For many years I taught a course using that event to teach historical methodology. This included examining Jack Ruby’s shooting of Lee Harvey Oswald as well.
Ruby mentioned the fact he was taking a “harmless” diet pill, available without prescription. At his later trial, his sister commented on his odd behavior during the previous summer while using that drug. Some years later while doing research in Washington for the Congress, I secured permission to examine the FDA’s records on this drug, Preludin. I was interested when several colleagues on the Congressional staff mentioned that in their opinion, among regulatory agencies, the FDA was perhaps the biggest “whore” in Washington.
Well, Prelude and was a prescription drug, with a long history of causing psychosis under stress. Among the records that I found, were a number of such cases, one for example, where a young man on the diet pill, preparing to take the law exam, had to be placed literally in a straitjacket for three weeks.
One semester, in my class of 85 students, six of them were taking Preludin on a prescription from their doctor, and none of them had been told the possible side affect of this supposedly harmless diet pill. I doubt that the doctors knew very much of its history either.
We now have enormous numbers of such drugs, with very little understanding, with or without manipulation of studies by big Pharma and the FDA, about the effects of the interaction of such drugs on the physical health of the person taking the drugs, or the way in which their behavior may become modified in ways very detrimental to our society.
I consider it highly unlikely that any of this will be solved in the near future, certainly not by those with a view that anyone should be free to take any drugs that they desire from marijuana on down the line, including the various drugs that continue to be pumped out by Big Pharma.
Mark Gilbert, Complicit (2010)
I had decided that day to teach my six-year-old son to play checkers and so picked up a set at Wal-Mart for a mere $4.99. Life seemed good, we happily set up the game, and all was going well until he declared his red pieces able to"throw bombs" at my black. A rout ensued. It was only afterward, while cleaning up the widespread carnage, that I noticed the"Made In China" emblazoned on the box. It was then I had my epiphany.
China, I finally realized, has officially replaced Japan as the"economic threat" to America’s well being. Japan, come to think of it, is so Duran Duran at this point. Their heyday was years ago, their best economic export since 1990 has been Ichiro, and his baseball career is nearing its end. The Red Dragon of China has taken center stage in America’s Pantheon of Bogeymen. Congress appears suitably frightened. Should I be?
Read the rest here.