Look to the Long Run

by Mario Rizzo

I have been away in France for almost two weeks. I missed the “earthquake” and Hurricane Irene for I which am very happy.

What being away reminds me is that if you follow the day-to-day news you can easily get bogged down in the small events — though they seem big and important at the time — and fail to see the bigger picture. Every little nervous twitch by the those in power becomes our daily obesession.

Blogs contribute to this because you must make your comment right away because the public attention moves to something else. But if there is any lesson to be learned from classical liberalism is that we ought to focus on the long run. It is really only the long run that we have any hope to change. Most of the propositions of economics apply to the long run — as Milton Friedman taught “fine tuning” is a fool’s errand. What we know about the institutions conducive to the free society and to prosperity apply mainly in the long run.

This the both the strength and the weeakness of the liberal doctrine. People demand short-run solutions but there are only long-run answers. This is why government needs to be constrained to a long-run focus. It is also why it can never be constrained permanently and why the struggle for economic progress and freedom is eternal.

“Enjoy” the daily news but don’t mistake it for something important. It generally is not.

Now which newspaper would hire me with that philosophy?

Fishy Federal Asset Seizures

by Chidem Kurdas

A Wall Street Journal article reports that the number of federal statutes giving the government the right to confiscate citizens’ assets has nearly doubled since the 1990s, by one count.  This is not something that happens only to convicted gangsters. Among the more than 400 federal statutes allowing for forfeiture is the Northern Pacific Halibut Act.

Violators of the Halibut Act, which prohibits fishing in certain areas in order to conserve stocks, can lose their boat and – this could get smelly – their fish as well.

“Last year, forfeiture programs confiscated homes, cars, boats and cash in more than 15,000 cases. The total take topped $2.5 billion, more than doubling in five years, Justice Department statistics show,” wrote John Emshwiller and Gary Fields in the WSJ. They don’t mention illicit halibut;

“National Competitiveness”

by Mario Rizzo

A new book has been published, Institutional Economics and National Competitiveness,  edited by long-time colloquium member — Professor Young Back Choi of St. John’s University. Here is the publisher’s description. Please ask your library to order it.

This book offers a strong contribution to the growing field of institutional economics, going beyond the question of why institutions matter and examines the ways in which different types of institutions are conducive to the enhancement of competitiveness and economic development. Adopting a variety of approaches, ranging from New Institutional Economics, Public Choice, Constitutional Political Economy and Austrian Economics, to more traditional economic approaches, contributors examine the important issues of interest to development economics.

This book asks whether democracy is a pre-condition for economic development, what the proper role of government is in the age of globalization and whether successful government led policies were the cause of South Korea’s economic development. As well as these key questions, the book covers the issues of whether the government should rely on the market process to encourage economic development or must they interfere, and by what criteria one can judge a proposal for policies for economic prosperity. The book tries to make a contribution by introducing a variety of perspective, some argue in favour of industrial policies while others argue for a lesser role for the government and a greater entrepreneurial freedom. Some question the wisdom of promoting democracy as a necessary condition for economic development while others argue that political liberalization is the basis of lasting competitive edge of an economy

Check out the details here at the Routledge site. This book is in their series, “Frontiers of Political Economy.”

Yale Model vs. Regulation

by Chidem Kurdas

David Swensen, the chief investment officer of Yale University’s endowment, rightly criticizes the behavior of mutual fund companies. Then he wrongly attributes the problems to regulators’ hands-off approach and argues for additional regulation. In fact the companies’ behavior reflects comprehensive rules dating to the Franklin Roosevelt administration. Mutual funds, among the most regulated of  financial services, would not be what they are without the regulatory system that spawned them. It is notable that no matter how much regulation exists, someone will want more.

To improve investment options for most Americans, the rules need to be changed and simplified to allow flexibility, not made even more cumbersome.

Peace and Free Enterprise

by Jerry O’Driscoll  

Initially, the headlines about the Iowa straw poll said Bachmann won. That was literally true, but hardly interesting. Libertarian Ron Paul basically tied her. The two candidates blew out the rest of the field with 57% of the vote. Under pressure from rapid blog postings, the established media have caught up with the facts.

All candidates spoke of the need for smaller government. Reasonable voters might have suspected, however, that not all candidates were as seriously committed to that as Bachmann and Paul. Both have unassailable Tea party credentials. The Tea Party in part grew out of Ron Paul’s 2008 presidential campaign. Bachmann jumped on the bandwagon early, before it was popular.

Paul finished fifth in Iowa in 2007. He surged this year on two other issues: end the wars and end the Fed. His call to bring home the troops and end the wars resonated with Iowa Republican voters. We’ll see how it plays out in other contests.

(Ending the Fed was actually his most popular issue in 2008. I thinking ending the wars mattered more this time.)

The linkage between peace and free markets was central to classical liberalism in 19^th century Britain, right up through the Gladstone Liberal victory in 1906. Nineteenth-century economist James Mill summed it up when he said that war was the worst calamity that can befall a country. Randolph Bourne summed it up in 20^th century when he described war as the health of the state. That is a favorite Ron Paul quote.

What won in Iowa is liberty.

Take That, Joseph Stiglitz!

Hayek as Street Art

Seen near Columbia University, Broadway and 112th Street.

HT: Daniel Chiarilli

 

 

The Führer Principle – Light

by Mario Rizzo

David Gergen has written a piece decrying the lack of leadership on the debt-deficit “crisis” and calling for a new Churchill. David Gergen, who saw no problem working for both Ronald Reagan and Bill Clinton, now teaches at the JFK School of Government at Harvard. He has a claim to being a member of the political establishment if anyone has.

This call is not confined to Gergen, however. It appears as a widely agreed-upon diagnosis in the news media, whether old or new. It is the conventional wisdom of the day.

Yet it is dangerously superficial. It completely misdiagnoses the problem before us.

Dodd-Frank Starves Congo; Advocates Win

by Chidem Kurdas

While I decided the financial regulation act Dodd-Frank is a gigantic dud after scanning its thousands of pages, I missed the bit on Congo that David Aronson brought to light in a NYT op-ed column this Monday.

Activist-lobbyists apparently inserted into the act a requirement that public companies buying minerals from Congo show how they prevent their purchases from benefiting warlords. Predictably, the companies did not want to risk being accused of financing bloodshed and simply switched to alternative mineral sources. Congolese who worked in mining lost that income and are now starting to go hungry.

What Is Old Can Be New

by Mario Rizzo

This is the unedited version of my letter which appears in today’s (August 9th) Wall Street Journal. The first sentence was edited out. Too bad. 

————

There is a lot of discussion of the need for “new economic thinking” these days. Henry Kaufman (“Excessive Optimism and Other Economic Biases,” August 2nd) correctly criticizes many economists for underestimating the importance of structural changes in economic behavior and overestimating the capacity of economics to forecast.  

But sometimes the “old” is really the new. Echoing an older skeptical tradition in economics, the Austrian economist Ludwig von Mises said in 1949,” The fundamental deficiency implied in every quantitative approach to economic problems consists in the neglect of the fact that there are no constant relations between what are called economic dimensions. There is neither constancy nor continuity in the valuations and in the formation of exchange ratos between various commodities. Every new datum brings about a reshuffling of the whole price structure.”  

In a sense, it was the the “new” that misled us.

Politically Feasible

by Mario Rizzo

Many years ago, the distinguished economist, William H. Hutt, wrote a pamphlet called “Politically Impossible?” He argued that economists should not seek political relevance by proposing only those policies that they perceive as politically possible, practical or feasible. They should speak truth to power, so to say, and advocate those policies that they perceive to be in the “public interest.” (Interestingly, it is often considered a key element of the economic rationality of agents to be able to distinguish the desirable from the feasible.)