Thursday, October 27, 2011

Crisis Haiku

Here's my contribution to the universe of economic crisis haiku (as seen in the The Economist):
Uncertainty rules
While the economy suffers
Politics rejoices
You can vote for the best haiku here.

Tuesday, October 11, 2011

The Century-Old Death of Jefferson's America

This interesting segment from Rothbard's "A History of Money and Banking in the United States" discusses the role of puritanism in 19th century American politics and how the original libertarian tendencies of the Democratic Party of Jefferson had disappeared by the beginning of the 20th century and given place to the populist and corporatist party in the tradition of Jennings Bryan (a prohibitionist and opponent of Darwinism) that is yet alive today:

The Transformation of 1896 and the death of the third party system meant the end of America's great laissez-faire, hard-money libertarian party. The Democratic Party was no longer the party of Jefferson, Jackson, and Cleveland. With no further political embodiment for laissez-faire in existence, and with both parties offering "an echo not a choice," public interest in politics steadily declined. A power vacuum was left in American politics for the new corporate statist ideology of progressivism, which swept both parties (and created a short-lived Progressive Party) in America after 1900.

The Progressive Era of 1900–1918 fastened a welfare-warfare state on America that has set the mold for the rest of the 20th century. Statism arrived after 1900 not because of inflation or deflation, but because a unique set of conditions had destroyed the Democrats as a laissez-faire party and left a power vacuum for the triumph of the new ideology of compulsory cartelization through a partnership of big government, business, unions, technocrats, and intellectuals.

Bastiat on Slavery and Tariffs as Plunder

Here's what he said in the opus "The Law" (1850):

Slavery and Tariffs Are Plunder

What are these two issues? They are slavery and tariffs. These are the only two issues where, contrary to the general spirit of the republic of the United States, law has assumed the character of plunder.

Slavery is a violation, by law, of liberty. The protective tariff is a violation, by law, of property.

Its is a most remarkable fact that this double legal crime - a sorrowful inheritance of the Old World - should be the only issue which can, and perhaps will, lead to the ruin of the Union. It is indeed impossible to imagine, at the very heart of a society, a more astounding fact than this: The law has come to be an instrument of injustice. And if this fact brings terrible consequences to the United States - where only in the instance of slavery and tariffs - what must be the consequences in Europe, where the perversion of law is a principle; a system?

Monday, October 10, 2011

And the Economics Nobel Goes to Sargent and Sims

Here's the announcement. A slap on the face of fiscal stimuli that only stimulate politicians' hunger for power. Congratulations to both for a deserved prize.

PS: an accessible and important interview with Sargent on the state of macroeconomics and the crisis is available here.

Saturday, October 8, 2011

Bastiat's Nightmare

Winter is coming, and with it a new labor strikes season commences in France, a lively symbol of what's wrong with Europe. But differently from what many people think, unions and strikes by themselves are not the problem, as so brilliantly explained Bastiat in his historical defense of freedom of association and right to unionize.

We hear about how Europe is in trouble because of not being an "optimal currency area," or because of excessive debt, or because of bailouts.

Rubbish. The US, Brazil and China shouldn't qualify as optimal currency areas and won't disappear in a ground hole because of that. The Soviet Union didn't end because it wasn't an optimal currency area.

Excessive government debt is a big problem, but Japan is not burning in Third World hell because of excessive debt. The speed of debt accumulation in the US after the misadministrations of the dynamic duo Bush & Obama is probably more significant than in most European countries (hard to be sure due to skeletons in the closets here and there), but the US will not go "puff" because of debt.

Bailouts create moral hazard and injustice for sure. But bailouts are as old as the creation of the very first human government, and repeat themselves with amazing regularity throughout history. Humanity progressed everywhere despite bailouts.

So, why is Europe in trouble then? It's because of the deeply entrenched entitlement culture of its citizens. This is the real problem behind European strikes, bailouts and debt. It beats bad governance, it beats corruption, it beats silly monetary theories. It represents the rejection of Bastiat's hope:
I want not so much free trade as the spirit of free trade for my country. Free trade means a little more wealth; the spirit of free trade is a reform of the mind itself, that is to say, the source of all reforms.
Europe is in trouble because it lives Bastiat's nightmare. As simple as that.

Friday, October 7, 2011

Fame and Merit Don't Correlate

Steve Jobs was a political motivator, and that's why we hear all the ludicrous comparisons with Thomas Edison and Graham Bell (yes, the press deeply tires me). The truth is that, even at the peak of Apple's recent success, it barely surpassed 10% of the personal computer market share. How can somebody be so revolutionary while having to work so hard to achieve a 10% market share is one of those puzzles that can only be explained by political scientists, not by economists.

If you want to know about the real heroes of modern technological business and innovation, people who really changed the world and who made America the power it is today, then don't look for those who had time to worry about the color of computer cases. Look for people that in only 40 years multiplied single machine processing capabilities by six orders of magnitude. Learn about people like Gordon Moore, Andy Grove and Robert Noyce, among many others of equal importance but even lower popular fame.

Thursday, October 6, 2011

Not Only the Death of a Technological and Business Giant

Yes, Steve Jobs was a great entrepreneur and contributed immensely to human innovation. Absolutely true. The world would be a better place if more people would have his genius and drive, and if they could also enjoy today that rare (and gone) moment of entrepreneurship and innovative freedom that took place in the America of his youth.

Now, in the name of historical correctness, let's make it clear that Jobs was much more a political motivator and a salesman than a great engineer or designer. Many of his misattributed inventions did exist much before he marketed them, and were created by other inspired technical minds, inside and mostly outside of Apple. His main skills - obviously very important ones - were the ability to capture the spirit of times, coordinate the efforts of talented designers and engineers, and discover the free lunch sitting around.

I've never been an Apple user, I never bought even 1 cent of Apple products for myself, and I'll tell you why. First, because Jobs' business model was directed to people that couldn't do it by themselves (don't take it as an offense, his is an important contribution). You cannot get a technical and business model that's more centralized, proprietary, closed, overpriced, and, why not, paranoid than the Jobs' model. So I just rejected it - doesn't match my personality and preferences - and many of my geekiest friends did the same. He was a political motivator after all, so his products have the characteristics of political cult (driven by quality, point taken), and true geeks, true engineers, true hackers, in the great old Vernian tradition of a world of unbridled innovation, would run away from Jobs like they would run from the devil. Besides, Jobs was known for his authoritarian tendencies and for questionable political judgements.

Anyway, his passing represents more than the loss of a technological and business giant. With him dies the last cycle of joyful technical innovation and free enterprise that humanity experienced. Sad and dark times those we've been living through instead.

PS: I don't say it from the perspective of somebody that has never used an Apple product. Others in my family use Apple products, and I need to deal with their qualities and weaknesses on a daily basis.