All posts by Warren Gibson

Professional engineer (co-founded CSA Engineering, Inc. in 1982). M.A. in economics (teaching at San Jose State University for the past several years). Lecturer (emeritus) in engineering at Santa Clara University and the math reader for Econ Journal Watch.

Gratitude to a Power Pole


Whilst ambling around San Carlos recently, I came upon the power pole shown here. Ugly, isn’t it? Or maybe not. In fact, my reaction was one of gratitude, prompted in part by the “Gratitude” chapter in Joel Wade’s excellent book, Mastering Happiness (available at I had listened to the chapter the previous evening.

What is there about this power pole that warrants gratitude, and to whom? The answer lies in really looking at the pole and pondering the devices, wires and cables attached to it.

The top crossbar holds wires that provide the electrical supply, probably three-phase 440 volts. I know the supply comes from a substation a mile away which in turn is fed from very high voltage transmission lines east of the freeway. Three transformers on the pole step the 440 down to 220 and feed it to surrounding buildings.

Ugly grey boxes? Not to me. Some anonymous engineers put their heart and soul into designing those transformers. The basic idea of a transformer has been known for years: use a pair of coils with different winding densities to convert electrical energy into magnetic energy and then back to electrical at a desired voltage. But to design a really good transformer requires careful attention to fabrication costs, reliability, safety, and operating efficiency. No transformer is perfect; some energy gets lost as waste heat, and heat must be dissipated even in the hottest weather lest temperatures exceed safe operating levels. (Notice the cooling fins on each transformer.) The fluid bath which enhances efficiency must never leak – or more precisely, the probability of leakage must be kept extremely low. Nice job, guys (maybe gals, too). Thanks!

I see telephone wires. Of course, wireline telephone service is declining but still there is a lot to ponder. Four blocks away is a big windowless AT&T building which I believe houses switching equipment that was a marvel in its day.

I see coaxial cables that transmit television and internet signals. Just think of the torrent of information coursing through those cables. These days we all take megabit download speeds as a God-given right. Try to picture millions, perhaps hundreds of millions of bits traversing one of those cables every second. In addition, the cables entering those poles from Comcast’s central office, wherever that may be, carry a mix of packets destined for different recipients. They must be sorted and delivered on time and in the proper sequence to the various recipients served by our pole. I see three small boxes on the pole that may perform that function. The Post Office is a block away. Imagine the sorters there sorting a million letters per second!

I see a small device which may be an antenna for the new wireless electric and gas meters. Predictably, there have been complaints about health effects from these devices, likely from people who have no clue about the difference between ionizing radiation and RF radiation. Others have complained about privacy. I personally feel no need to hide the details of my electrical usage. I look forward to the advent of time-of-day pricing that these meters will enable. The resulting incentives should save money for many people including me. In addition, PG&E will be able to forestall increases in peak power capacity.

The pole itself is a tree trunk treated with creosote. Aluminum is used in substation structures and transmission towers but is evidently uneconomical for street poles. Wooden poles eventually rot and require replacement. But replacing a pole requires far less time and labor than in past times because of the improved equipment and procedures that have been developed.

Now I grant you that such poles will remain ugly in the eyes of many beholders no matter how much they may learn about their function. So why not put all the wires underground? Just dig a trench and move them, right? Not so fast, it’s nowhere near that easy. Of course it can be done and has been done but there are many complex and expensive details. For one thing, most of the buildings served by the relocated lines would require interior modifications to accept cables from underground rather than overhead. It wouldn’t do, as part of a beautification project, just to run cables down the outside of a building from the old rooftop connection point to the new underground point. Underground transformers are costlier and harder to access. The old service must be kept running until the new service is ready, and the switchover must be done quickly and near-perfectly. The costs and benefits of an undergrounding project should be carefully weighed before it is undertaken.

Gratitude to a power pole? No, in the spirit of Leonard Read’s I, Pencil I owe my gratitude to the countless individuals who made it possible. I think of Faraday and Maxwell who gave us the keys to understand electromagnetism. Edison and Tesla who pioneered power generation. Anonymous engineers and linemen who make it happen. Bold thinkers of the Enlightenment who paved the way for what McCloskey calls bourgeois dignity and the consequent explosion of Western living standards in the last three centuries.

Some people are moved to gratitude by religious iconography. Good for them. For me, a power pole does the trick.

Seven Ways Libertarians Sometimes Run Off the Rails

I’m a dedicated libertarian but my first allegiance is to accuracy.  It pains me when I see libertarians making arguments that are inaccurate, irrelevant, or just plain wrong.  When they do so, they do themselves and our movement a big dis-service.  I list seven such arguments here.  More could be added.

  1. The Fed is privately owned. This is true only superficially. Member banks own shares of stock in one of twelve district Federal Reserve Banks and they receive dividends on those shares. But they have little in the way of genuine ownership privileges. They cannot sell their stock and their voting rights are very limited. The President of the United States appoints the Board of Governors. Just because a legal arrangement is given labels that suggest private ownership, that doesn’t make it so.

  2. The Bureau of Labor Statistics disguises the true unemployment situation by excluding workers who are “discouraged,” i.e., not seeking jobs. This is true of the U-3 unemployment figure which is the most widely cited figure, and the one the Fed says it is targeting. That figure is currently about 6.5%. The BLS also publishes its U-6 figure, which includes discouraged workers and currently stands at around 13%, down from about 17% at the height of the Great Recession. The BLS is not covering up anything here, although politicians may certainly choose to emphasize one figure or the other depending on what ax they’re grinding. Which is the “true” unemployment rate? There’s no such thing. The figures are what they are and observers can make of them what they will.

  3. “Chain-weighted” versions of the Consumer Price Index are politically motivated.  These adjustments are intended to recognize the substitution effect, the classic example of which is when the price of beef rises and the price of chicken doesn’t, people eat less beef and more chicken. Peoples’ cost of living rises less than it otherwise would. CPI increases as measured by a chain-weighted formula reflect this fact, and the resulting price inflation estimates come out lower than under the old approach. That flashes a green light to some conspiracy theorists. While these adjustments are tricky business, substitution effects are real and the attempt to compensate for them should not be impugned.
  4. The Consumer Price Index is politically manipulated by excluding food and energy. There are many versions of the CPI. One of them excludes food and energy because those prices are usually very volatile. That figure may be useful to economists who want to filter out volatile effects and focus on secular trends. Again, the figures are what they are, and politicians or for that matter we bloggers can use or misuse them as we wish.

  5. “Banksters” control the U.S. government. There is a grain of truth in this one. The big banks are both victims and beneficiaries of government dominance of banking and finance. The reality of government regulation is that regulated firms employ many very smart and very well paid individuals who are constantly finding ways to manipulate or sidestep the regulations to which they are subject. The fact is that the regulators and the regulated are very thick. Banking and finance are controlled by a cabal of government and Wall Street firms and individuals. It’s a mistake to say that either group totally dominates the other.

  6. Global warming is a myth and a scam. Ron Paul, whom I admire very much, blotted his copy book when he said on Fox News, “The greatest hoax I think that has been around for many, many years if not hundreds of years has been this hoax on [...] global warming.” A few basic facts are beyond dispute: (a) carbon dioxide is a greenhouse gas, (b) CO2 levels are at an all time high, and (c) human activity is the primary cause of the increase. Beyond that, the evidence starts to get sketchy and incomplete. We do seem to have melting polar ice caps, record high temperatures in some places, droughts, etc. But overall there has been almost no temperature increase during the last ten years or so.  Projections of rising temperatures and rising sea levels appear to be too pessimistic. This is a very complex issue and one where biases can overwhelm us if we aren’t careful. Statists are prone to accept the global warming thesis because they see it as a way to increase state power. Libertarians want the issue to go away for the same reason. This would be a great time for all parties to step back an exercise some epistemic humility. There’s a great deal about this issue that we just don’t know.

  7. Let’s get rid of the state entirely, and all will be well. Given the present primitive degree of evolution of our species, a new state will pop up wherever an existing one is overthrown. The key to peace and prosperity is not anything so simple as abolition of the state, but to convince enough people, thoroughly enough, of the advantages of long-term cooperation. Good institutions will follow.

Cell Phones on Airliners?

The FAA recently decided, tentatively, that cell phone use would be OK on commercial airplanes. But forthwith, moans went up from near and far and the FAA backed off. Lots of travelers understandably dread the prospect of captivity to loud conversations by boors seated inches away from them. It’s unclear at this time what the final decision will be.

Why does it never occur to anyone to let the owners of the airplanes decide this issue? They could experiment with various policies ranging from outright bans to unlimited use with all sorts of possibilities in between. Following Amtrak and some commuter railroads that have quiet cars, they could establish a no-talk section of the airplane like the non-smoking sections of yore. Or they could try pleading with talkers. Soon enough they will discover what their customers want and competitive pressures would force all airlines to fall into line.

That sort competitive experimentation works quite well in many market segments, as a moment’s reflection will confirm. So why do we hear nothing about this simple solution for the cell phone problem? Part of the answer, I fear, is that so many people are resigned to letting bureaucrats set the rules for practically all of life. An extreme example of this attitude is the kind of message that appears in my spam folder with a subject like “Obama lowers re-fi rates.” Of course this is nonsense but it suggests that a good many people think Obama has the power to set re-fi rates and worse: that it’s perfectly OK for him to wield such dictatorial powers.

Back to cell phones on airplanes: the whole issue came about as a result of determinations by the FAA technical staff that cell phone signals don’t really interfere with airplane communications as had been feared. That suggests a more difficult question: suppose there were credible evidence that cell phone use really was a threat to airplane communications. Should the FAA be empowered to ban cell phone use? I suggest that it does not. The airlines have an enormous incentive to avoid interference problems. If they were free to make their own decisions about this (again, assuming there was credible evidence of a real problem), their lawyers would be all over them about instituting their own prohibitions. The owners of the control towers (I’m envisioning a privatized FAA) would have strong incentives as well. Many passengers would be aware of the issue and would press for bans.

We have here another example of what a tough job we face, those of us who advocate free markets. The general public, Mencken’s “booboisie” if you will, hasn’t the mental horsepower to envision even modest deviations from the command and control paradigm that is smothering our society.

Freedom of Speech? No Such Thing!

I get lots of solicitations for libertarian groups and I’m very pleased that there are so many of them these days. I can’t possibly support them all but I recently ponied up for an organization called F.I.R.E. (Freedom for Individual Rights in Education). Their focus is on fighting suppression of free speech on college campuses. Thus, for example, FIRE announces its Speech Code of the Month for October 2013:

Salem State University in Massachusetts prohibits “cultural intolerance” in its residence halls—a broad ban that threatens debate on controversial issues in a place where students often speak the most freely. Making matters worse, the policy applies not only to “actions” but also to “omissions,” broadening its scope to include not only speech but also a student’s personal decision not to speak.

It burns me up to see self-appointed fascist administrators launching attacks on individuals who dare to speak their minds in unpopular ways. And yet, there is a problem, centered on the distinction between public and private institutions. Suppose a small Baptist college decided that students would not be allowed to mock Christianity or promote Islam on campus. Could there be any objection to such a policy? Now suppose that same college decided it would not admit black students. Any thoughtful libertarian would have to defend this policy, distasteful though it may be, on grounds of freedom of association. The bottom line is clear: owners of private colleges have every right to determine whom they will admit as students or hire as faculty and how they are required to act on campus.

Now what about state colleges such as Salem State? Such institutions are “public property,” an oxymoron if we think about it. “Property” denotes the right to use or dispose of some valuable asset, implying an exclusion of non-owners or others who have not been invited to use the property. On the other hand “public” means, if anything, that anybody is allowed to use the asset and nobody is excluded. Who owns San Jose State University where I teach? The California State University Board of Trustees is the most likely candidate, but the faculty has a lot of control through the faculty unions and faculty senates. The Governor and the legislators wield a lot of influence too. The citizens own the place in theory but the connection between SJSU and the citizenry is so remote that it might as well be non-existent. The lack of clarity about who owns the place is the source of most of the idiotic, wasteful, and sometimes downright offensive policies that we see at SJSU and all other government agencies.

So what sort of speech is to be allowed at SJSU? I would say anything goes except shouting down lecturers. Objectionable behavior such as name-calling should be met with ostracism and boycotting or perhaps tit-for-tat. No need for prohibitions. But the people who have power over these matters no doubt see it differently.

Thinking about it more, there really isn’t any such thing as freedom of speech. Speech is not carried out in a vacuum (literally: there can be no sound waves!). If you’re speaking you are standing on someone’s property; if writing you’re using pen and paper or a computer. Land, pen, paper and computers are all resources whose owners have the right to determine who uses them and how. I have no right to invade your house and deliver a speech in your living room nor to grab your computer and compose a blog. Freedom of speech can only mean freedom to use one’s property, or the property of another who has given consent, for speaking purposes. (This, by the way, solves the fire-in-a-crowded-theater conundrum. Prohibitions on yelling “fire” are not a diminution of freedom of speech but rather a recognition of a theater owner’s right to control behavior on his property. See Rothbard’s excellent Ethics of Liberty p. 114.)

In the end, as Rothbard points out, there is no dichotomy between property rights and “civil” rights. There are only property rights, recognizing one’s own body as one’s primary form of property.

Obamacare: Working As Planned?

There has been a lot of talk about the problems of Obamacare as its rollout begins. “Obamacare may be imploding,” says Reason Magazine.  “Obamacare’s Website Is Crashing Because It Doesn’t Want You To Know How Costly Its Plans Are” says Forbes.

But what if these “problems” were fully expected and even desired by the more sophisticated perpetrators of Obamacare? What if they wanted it to fail? Why would they? Because they want its failure to lead to a total government takeover.

Ayn Rand’s villain Dr. Floyd Ferris in Atlas Shrugged comes to mind.  At one point he lays all his cards on the table:

We’re after power and we mean it. You fellows were pikers, but we know the real trick, and you’d better get wise to it. There’s no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them…you create a nation of lawbreakers – and then you cash in on guilt.

Translation to 2013: if you don’t want to purchase health “insurance” we’ll make you a criminal. We’ll break your spirit and make you a helpless dependent.  (Incidentally, I put “insurance” in quotes because, as Dr. Beth Haynes so ably demonstrated in a recent Huffington Post piece, health insurance has been almost entirely abolished and replaced by prepaid medical expenses).

Of course the millions of boobs who believed Obama’s lies about the “Affordable Care Act” won’t be told any of this. They will continue to get the party line spoon-fed to them.

And the Obamacare perpetrators will never acknowledge that it was doomed from the start. They’ll acknowledge glitches, delays and screwups. They’ll blame them on software designers, Republican sabotage, anything and anybody but themselves. They will echo Wesley Mouch, Rand’s bureaucrat-dictator: “I need wider powers.” When they feel the timing is just right, and just enough problems have become evident, they’ll spring the trap: “single payer;” translation: total government takeover.

Ah, but this is a fine line they’re walking. Obamacare’s failure could be more catastrophic than they figured. There just might be enough of the spirit of liberty left in the American electorate to generate a backlash. The Republicans might take the Senate next year (not that they deserve it). Ludwig von Mises taught that a mixed economy is unstable but whether a particular mixed institution (Obamacare being perhaps 90% statist and 10% market) will move toward freedom or away from it.   Already the defenders of Obamacare are getting a little shrill, along the lines of, “it’s the law, get over it.”  And speaking of law, Obamacare is not law at all. It’s a statute. It utterly fails the test of genuine law, grounded in the natural rights of man. No one has any moral obligation whatever to obey this statute.

So stay tuned. While Single Payer may seem inevitable, to be followed by assaults on the remaining semi-free areas of the economy, one never knows. We live in interesting times.

What Obamacare is Really About

The good folks at the Reason Foundation, who have the stomach to follow such things, tell us that the bureaucrats entrusted with implementing Obamacare have missed half their deadlines. Even well-connected consultants, they tell us, remain largely in the dark. And for sure, the general public is totally in the dark and generally suspicious.

This I can predict with confidence: there will be train wrecks but some parts will work well. Some people will be happy and others won’t. Republicans will holler I-told-you-so while Democrats will hail the successes and call for patience while the glitches are fixed. How could it be otherwise? Such a complex piece of legislation, even as it falls way short of Obama’s initial promises, will inevitably stumble into a few successes, if only for the short term.

But does anyone believe the perpetrators of Obamacare didn’t know that? While playing up its seeming successes, feeble as they might be, they will blame its failures on the greedy private sector. A mixed system won’t work, they’ll say, and they’ll be right. (A central theme of the great Ludwig von Mises was the instability of a mixed economy.) They will then trumpet the slogan they’ve kept under wraps for some years: single payer!

Single payer, of course, means total government seizure of the health care sector. Having already achieved near total control of the education and financial industries and a heavy grip on energy, they will be one step further along the road to their real goal: the extinguishment of the last of our freedom and prosperity and the establishment of total fascist dictatorship. That’s what Obama, Hillary, et. al. are really after, folks.

Another Housing Bubble?

Last year I wandered down the street to an open house for sale. Even though I announced myself as a looky-loo, the agent welcomed me. We sat around talking and eating cookies for an hour; no prospects showed up.

It was a nice day today and I decided to walk to another open house thinking I’d again look around and chat with the agent. Hardly – the place was mobbed! It looks great in this picture but the reality is it’s stuck way up on a hill with a steep driveway and no garage. It’s 80 years old and although it’s been fixed up cosmetically it’s nothing to write home about; not in my book anyway. Nevertheless, I’m betting they’ll have multiple offers before this first day on the market is over.

This is the San Francisco Peninsula which is by no means representative of the whole country but I hear that Las Vegas has turned around too, as have tony places in New York. Why? Although I can’t prove it, I believe a good part the gusher of money that the Fed has been printing is now making its way into housing. The stock market has stalled, the bond market is in retreat, gold has plummeted, and that pretty much leaves housing.

So although the basic premise of monetary stimulus is plausible, it just doesn’t work. The new money seems to go careening around the economy in search of the Next Big Thing. Bubbles form and collapse, malinvestments are revealed and the cycle starts anew. What’s different this time is that it’s been such a short time since the collapse of the previous housing bubble to what looks like the start of another.

If these wasteful cycles of boom and bust are to end, the Fed must cease its stimulus programs. But it can’t. When the Fed dropped just a hint last week that it might start “tapering” off its bond-buying (money-printing) program, the bond market panicked. Why should we care about the bond market? For one thing, the average maturity of the federal debt is just a couple of years. Maturing debt must be rolled over into new debt, and if the new debt carries higher interest rate, the total annual interest payment could quickly swell from a “mere” $345 billion for the current fiscal year toward a trillion dollars per year, swamping any efforts to contain spending, like the $80 billion sequester that just took effect. We could end up needing a bailout from China.

The Fed will very likely continue or even accelerate its bond buying, depending on who occupies Bernanke’s seat come January. We should expect continuing cycles of bubbles and busts and the real possibility of some very nasty fiscal consequences.

The Real IRS Problem

It’s heartening to see distrust and resentment of the IRS building up in the wake of the targeting of tea party groups and such. But let’s not overlook the daily predations of the IRS, small and large, which add up to a mountain of costs borne by citizens – not just monetary costs but also mental anguish and occasionally violent confrontations.

Case in point: your humble servant. This morning I received a notice demanding $8,900 in back taxes. Needless to say that ruined my day even though it took me only five minutes to realize that they made a mistake and I owe them nothing. I have high hopes that this will be resolved quickly but you never know. I mentioned my plight to a friend this morning and he chuckled. He once had a $1,400 claim which he fought for ten years until finally he got to the right person at the IRS who found their mistake in five minutes. Did he get an apology? Restitution or compensation of any kind? Of course not.

The complexity of the tax code is often cited as a significant drag on the economy, in terms of time spent gathering information and preparing returns, money paid to tax preparers and tax attorneys, etc.  But there are lots of other bad effects.  No one understands the tax code in its entirety and most IRS agents understand little of it — or worse, what they often think they understand is wrong.  Nor do taxpayers understand it.  This opens the door for errors, misunderstanding, cheating and consequent confrontations, anguish, time and money wasted, and sometimes violence.

If we have to have an income tax (which I’m unwilling to concede), let’s have a simple flat tax and do away with, if not the inherent coercion of any tax, at least the enormous expense and anguish that are part and parcel of the current insane system.

The Obama Administration: RIP

OK, that pronouncement is a bit premature. But if the Republicans hold the House next year as seems likely, it’s a done deal. Just keeping track of all the attacks on the administration has become quite a chore. And quite a few of those attacks are coming from Obama’s base of support.

  • The press is howling about the Justice Department’s heavy-handed subpoena of journalists’ phone records. “A fishing expedition for sources and an effort to fend off whistleblowers” is how the New York Times editorial board describes it. This issue isn’t going away any time soon.
  • Then there’s Guantanamo, the closing of which was to be Obama’s first priority upon taking office in 2009. Thus New York Times commentator Joe Nocera:  “The president could have jumped through the hoops Congress now requires and continued moving prisoners out of Guantánamo. But he didn’t. Instead, he froze all transfers, including 56 men from Yemen who had been ‘cleared’ for transfer by a national security commission that Obama himself established. The government, the commission essentially said, has no national security interest in holding these men. Yet Obama continued to let them rot in that Cuban hell. And you wonder why they are on a hunger strike?”
  • Some unions are mad at Obama as Brandon Christensen pointed out on this blog, where he quotes one union’s demand: “repeal or complete reform” of Obamacare.
  • The IRS scandal may have a shorter half-life. The Times correctly points out that Presidential use of the IRS to bludgeon political enemies goes back at least to Franklin Roosevelt and Richard Nixon. Still, it’s heartening to see the Tea Party rejuvenated, with street protests and blogs pointing out that thuggish behavior is a long-standing and probably irremediable attribute of the IRS.
  • Waiting in the wings is Dodd-Frank. This financial “reform” act is mostly not yet in effect because the agencies are trying to figure out how to write the rules that will actually put into practice the clear-as-mud intent of the law. It’s a near-certainty that this law has fixed nothing and that another financial crisis will hit, possibly before Obama leaves office.  Already we see signs of bubbles in the housing and stock markets.

“This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer,” said Will Rogers. Three years of gridlock, if we’re fortunate enough to get it, should hide away the hammer, at least for a time, from both Congress and the President.

University Graduation Rates are Too High

A proposal has surfaced to “punish” California state universities, including San Jose State where I teach, if they either (1) continue to raise tuition rates or (2) fail to raise their graduation rates. The punishment would take the form of reduced state support.

First of all, we taxpayers (including me; I’m a net tax payer) should rejoice at such “punishment” as it would lessen the burden on us. Taxpayers aside, how might the state universities respond to such punishment? On the fiscal side, they could recruit more out-of-state and foreign students who pay full freight. The UC campuses are already cutting admissions of in-state students in favor of out-of-state full payers – will UC eventually become UNC – University of Non-Californians? Furloughs are unlikely; they were tried once and didn’t work. They can’t cut salaries; there’s a faculty union. They’ll never cut out administrators. No, all bureaucracies, when forced to cut expenses, make cuts that are most painful to the public. Therefore, in addition to recruiting more full payers, they will cut classes.

What about graduation rates? They can’t raise admission standards because that would be “unfair” to racial minorities who are disproportionately ill-prepared for college work. They already have programs to try to coax students to study, with marginal results, and the obligatory special privileges for students with “learning disabilities.” It’s not clear what more could be done along those lines. No, I contend that the most humane policy for state universities would be to cut graduation rates. Here’s why.

It is indeed unfortunate that so many students, more than half at SJSU and other state universities, fail to graduate within six years. Those students have paid a big price in terms of money spent, debt incurred in many cases, and foregone income, with almost nothing to show for it. A bachelor’s degree from a state university, unless it’s in engineering, is worth little enough; two or three years of class work is worth nothing. Those who do make it all the way to the sheepskin gain a marginal advantage; their degree signals a certain amount of persistence. Their value to an employer remains uncertain; many, I fear, couldn’t be trusted with such simple tasks as reading with understanding, writing, doing simple calculations or, perish the thought, critical thinking.

All too many students who enter SJSU are ill-prepared and/or poorly motivated. Large numbers must take remedial math or English because they learned nothing in their public high schools. Many have little or no idea why they are there – some seem to view college as a way to delay their entry into responsible adulthood.

A good number surely have aptitudes for jobs that may require some specialized training, but not a college degree. I’m thinking of welders, hospitality workers (wait – you can get a B.A. in hospitality!), tile setters, carpenters, electricians, roofers, beauticians, nannies; the list goes on and on. What a tragedy that such students fall into the sinkhole (for them) that is a university campus.

Since admissions standards aren’t likely to be raised, the only humane thing to do is to get these students out the door as fast as possible. I expect to give a lot more D’s and F’s in my class this semester than I normally do, not because I’m pursuing any agenda but because they won’t have learned the material. Those students will be hurt, short term, but it’s the right thing for them, long term, especially if it hastens their exit from a university where they don’t belong.

Looking Backward: A Review

My Amazon review of Beth Cody’s “Looking Backward: 2162-2012, A View From a Future Libertarian Republic”

The author’s stated goal was to write a libertarian equivalent of Edward Bellamy’s socialist utopian novel “Looking Backward.” She achieves that goal with room to spare.

If I were to judge this novel by its plot, characterization, or dialogue, I would have to knock off a couple of stars. I won’t because those elements, which are crucial to most novels, don’t matter here. The flimsy plot is quite adequate to the author’s purpose which is to portray a near-ideal libertarian society. I wouldn’t call her vision a “utopia” because at several points, Prof. Seeton, the expositor and defender of the new society, admits that it has flaws. He even says it will collapse eventually and only hopes that event will be peaceful.

I almost wished that I too could crawl into a time capsule, as her protagonist does, and go back to a time before I became a libertarian. That’s because this would be such a dandy introduction for someone new to the philosophy. A novice with an open mind would find a trove of solid arguments on nearly every aspect of human life.

Get copies of this book for the young people in your world.

Borderless Economics: Chinese Sea Turtles, Indian Fridges and the New Fruits of Global Capitalism

Robert Guest, the business editor for The Economist, has organized insights gleaned from 20 years of reporting on and analyzing events around the world into a breezy yet profound account of the flow of people and ideas across borders.

Raw immigration statistics miss the “networks of innovation,” as Guest calls them. Immigrants may find it difficult to adapt to a new land with strange customs and a new language. But in just about any American city they find a community of people like themselves who can ease the transition and help them get established. This process is good for everyone involved.

For example, Indian immigrants to America—most notably Silicon Valley engineers—are tightly networked among themselves and have contacts in India and around the world. Having made their fortunes, some then return to India to pursue business or philanthropic activities. To illustrate, Guest describes the Universal Identity program. Hundreds of millions in India have no public identity beyond their immediate communities. A team of Indian expatriates returned to India and launched a program to create a computer-based system that would allow Indians to submit to fingerprinting and retina scans and to receive a national ID number that would serve as their entrée into the modern Indian economy. Libertarians look askance at government identification numbers, but in rich countries we take for granted our ability to prove our identities. Continue reading

FDR, Uncle Fred, and the NRPB

In Ayn Rand’s epic novel Atlas Shrugged, government officials regulate the economy through something called the Bureau of Economic Planning and Natural Resources. She clearly chose that name to reflect their belief that productive people were bound to produce just because of their “conditioning” and could therefore be treated pretty much like coal in the ground—as resources ripe for exploitation.

One wonders whether she had ever heard of the National Resources Planning Board (NRPB). The NRPB was a real agency, part of the kaleidoscope of bureaus that formed the New Deal. Its history is in some ways as dry as dust, but a closer look reveals some interesting and timeless insights into the planning mentality and the role of personalities in shaping history.

The philosophy underlying Roosevelt’s New Deal, if one can call it that, was to try something and if it didn’t work, try something else. In that same spirit the NRPB mission changed frequently; even its name changed four times before it was killed in 1943. It had been authorized as part of the National Industrial Recovery Act, but that program was ruled unconstitutional in 1935, leaving the National Planning Board, as it was called then, in danger of extinction. It was quickly rescued by FDR, however, and established as an independent agency. Casting about for a new name, one planner suggested “natural resources,” whereupon another commented that human beings were America’s most important resource. “National Resources” was suggested. The President chewed the phrase over a few times, then, pleased with its sound, grinned and announced, “That’s it. Get that down, boys, because that’s settled.” Continue reading

Unemployment: What’s To Be Done?

In Part 1 I outlined natural unemployment, government-caused unemployment, and the attempts to measure these. We saw how ambiguous and subjective some of the concepts of unemployment are and how the government, specifically the Federal Reserve, is charged with managing it. Now we turn to current conditions and what can be done about them.

There have been huge advances in technology and substantial declines in trade barriers in recent years. While these developments have raised living standards they have been hard on people whose skills were rendered obsolete or uncompetitive. When changes evolve gradually, as when so many people left farming in the last century, the disruption is not so great. Changes are now coming faster and are extending to some high-paid professional jobs. Automated systems can now handle at least the routine aspects of some legal research and medical diagnosis.

Time and time again new doors have opened to workers as old doors closed. Machines replace workers, but they raise productivity and produce new employment opportunities. We can expect this pattern to continue for a long time to come. Still, it is within the realm of possibility that robots and computers could take over so much work that the demand for human workers would shrink drastically. But those very machines would mean higher productivity and thus higher living standards.

A great deal of work can be now be done remotely, providing an advantage to areas with low living costs. Substantial outsourcing of such jobs to foreign countries has occurred (though that trend may be reversing as low-cost areas of the United States become competitive and as customer dissatisfaction and problems with managing offshore workers come up). The benefits of outsourcing and other productivity enhancements are spread across all consumers, but the job losses are concentrated among small and sometimes vocal minorities. Continue reading

Unemployment: What Is It?

Unemployment has regained center stage now that the debt crisis has receded from that position, at least for a time. Unless things change dramatically over the next year unemployment will be the number one issue in the forthcoming presidential election. Hardly any proposal will escape being labeled “job-killing” or “job-creating” or both.

To begin with some basics, what is work and what is a job? For economists, work is any activity that we would not perform without tangible compensation, usually money. In our work lives almost all of us are also motivated by nonmonetary considerations, and to the extent we diverge from the most remunerative activity available to us, we are blending work and leisure. A retired person who takes up college lecturing may do the work primarily for the satisfaction it brings. If his salary were withdrawn and he continued to teach, he would be enjoying leisure.

The goal of all economic activity is consumption, which to economists means not just mundane goods like faster cars but also “noble” ends like cathedrals. Jobs are therefore not ends in themselves, as much as public discussion would suggest otherwise. They are means to acquire income to be used for consumption and saving, in addition to personal satisfaction, learning opportunities, or socializing.

A person who lacks a job is unemployed if he or she wants work, has suitable skills, and has realistic expectations about compensation. These are vague terms; they make unemployment a murky concept. That goes double for underemployment, though both remain very real phenomena. Continue reading