Guantanamo: A Conservative Moral Blind Spot

02/05/201505/11/2015 Jacques Delacroix Current Events, Law, Politics Afghanistan, Al Qaeda, civil liberty, civil rights, CNN, ethics, globalization, Guantanamo Bay prison, legal theory, Mohamedou Slahi, terrorism, war and peace, War on Terror

A current Guantanamo detainee, Mohamedou Slahi, just published a book about his ordeal. The book is redacted of course but it still tells an arresting story.

M. Slahi was captured in 2000. He has been held in detention, mostly at Guantanamo prison since 2002 but in other places too . The motive was that he supposedly helped recruit three of the 9/11 hijackers and that he was involved in other terror plots in the US and Canada (unidentified plots.).

According to CNN:

Slahi admits to traveling to Afghanistan to fight in the early 1990s, when the US. was supporting the mujahedin in their fight against the Soviet Union. He pledged allegiance to al Qaeda in 1991 but claims he broke ties with the group shortly after.

He was in fact never convicted. He was not even formally charged with anything. Slahi has spent 13 years in custody, most of his young adulthood. If he is indeed a terrorist, I say, Bravo and let’s keep him there until the current conflict between violent jihadists and the US comes to an end. Terror jihadists can’t plant bombs in hotels while they are in Guantanamo. And, by the way, I am not squeamish about what those who protect us must do to people we suspect of having information important to our safety. I sometimes even deplore that we do to them is not imaginative enough. And, I think that the recent allegations to the effect that torture produces nothing of interest are absurd on their face.

But what if the guy is an innocent shepherd, or fisherman, or traveling salesman found in the wrong place? What if he is a victim of a vendetta by the corrupt police of his own country who delivered him over? What if he was simply sold to our intelligence services? What if, in short, he is has no more been involved in terrorism than I have? The question arises in Slahi’s case because the authorities had thirteen years to produce enough information, from him and from others, to charge him. They can’t even give good reasons why they think he is a terrorist in some way, shape or form. It shouldn’t be that hard. If he so much as lend his cellphone to a terrorist I am for giving him the longest sentence available. or simply to keep him until the end of hostilities (perhaps one century).

And if having fought in Afghanistan and having pledged allegiance to Al Qaeda at some point are his crimes, charge him, try him promptly even by a military commission, or declare formally, publicly that he is a prisoner not protected by the Geneva Conventions, because he was caught engaged in hostile action against the US while out of uniform and fighting for no constituted government. How difficult can this be?

I am concerned, because, as a libertarian conservative, I am quite certain that any government bureaucracy will usually cover its ass in preference to doing the morally right thing. (The American Revolution was largely fought against precisely this kind of abuse.) Is it possible that the Pentagon or some other government agency wants to keep this man imprisoned in order to hide their mistakes of thirteen years ago? I believe that to ask the question is to answer it.

This kind of issue is becoming more pressing instead of vanishing little by little because it looks like 9/11 what just the opening course. It looks like we are in this struggle against violent jihadism for the long run. Again, I am not proposing we go soft on terrorism. I worry that we are becoming used to government arbitrariness and mindless cruelty. I suspect that conservatives are often conflating their dislike of the president’s soft touch and indecision about terrorism with neglect of fairness and humanity. I fear we are becoming less American.

Let me ask again: What if this man, and some others in Guantanamo, have done absolutely nothing against us?

Of course, I hope the US will keep Guantanamo prison open as long as necessary. In fact, I expect fresh planeloads of real terrorist from Syria and Iraq to come in soon. I really hope that Congress will have the intestinal fortitude to call President Obama’s bluff on closing the prison. Congress has the means to stop it if it wants to.

Measles Vaccine? Not Me!

02/04/201512/20/2016 Warren Gibson Current Events, Liberty anti-vaxxers, free riding problem, property rights, public health, Rand Paul, scientific method, vaccines

That’s because the vaccine didn’t exist when I was a kid. I got the disease instead, leaving me with natural immunity. I think my chums all got it too and it amounted to a few days of discomfort, no big deal. But there must have been some who got it and suffered serious consequences, even death. News just didn’t get around in those days (ca. 1950) like it does today.

It’s terrific that a vaccine now exists, but like all vaccines it entails perverse incentives. When nearly everyone is vaccinated, there is little incentive for an individual parent to get it for his child because the disease can’t spread through a vaccinated population, and at least some incentive not to get it: cost, bother, and a remote chance of ill effects. And if enough parents skip the vaccine, the percentage of vaccinated children may fall low enough to permit the disease to propagate as, in fact, it has begun to do lately in some areas.

The solution for public schools is simple: require vaccination for all entering school children. As long as we have public schools, there have to be rules and this would be a quite sensible rule. For private schools the situation is trickier. Should the government require private schools to require vaccination? I think not. Most parents would have sense enough to keep their kids away from such schools. A no-measles policy would be a selling point for private schools.

From the Footnotes: Ignorance of Islam and of the Decentralization of Power

02/02/201501/01/2016 Brandon Christensen Books, Politics, Religion book review, China, Christianity, decentralization, European Union, footnotes, GDP (PPP) per capita, geopolitics, Islam, Islamic culture, Parag Khanna, United States, Western culture

There are widespread calls for an Islamic reformation such as Christianity experienced in the sixteenth century, but the Reformation cleaved Christianity into two major traditions and many splintered sects; each grew independently of the others, eroding any hope of a Christian center that could rein in extremes. After its early division into Sunni and Shi’a, Islam has come to suffer enough from this segmentation without a modern reformation. Indeed, Islam is a democratic religion, so thoroughly decentralized that even muftis are elected. Many Muslims are interested not in further schisms but rather in reconciliation among the competing doctrines and their extremist messengers, ultimately reducing the violence carried out against each other and other civilizations. As Gilles Kepel argues, though the rise of militant Islamism has been spectacular, its hyperviolence has proved to be a liability rather than an asset. (243)

This is from Parag Khanna’s 2008 book The Second World: Empires and Influence in the New Global Order. This footnote is in most respects a microcosm of the book as a whole: it’s on the cusp of providing theoretical insight into how the world works but just can’t seem to shake a certain type of dogma associated with the technocratic Left (I think he has done a better job of shaking this dogma post-2008).

This footnote is also in most respects why I’ll never be a Leftist again, even as a sleek, trade-friendly technocrat.

This footnote says to me that Khanna is arguing for a hands-off approach to Islam on the part of the West. Khanna is saying that Islam does not need a Christianity-style reformation. So far, so good. Khanna and I are in agreement. Then he goes off his rocker, though, by arguing that Christianity (and by implication European society) became a net loser because there was no Christian center to temper extremists.

What?

Correct me if I am wrong, but doesn’t Christian Europe have higher standards of living/tolerance/pluralist values today than anywhere else in the Old World? And isn’t Christian Europe the one place in the Old World where it is awfully hard to find Christian religious extremists? Wouldn’t you have a better argument if you stated that is was the lack of a Christian center which has been responsible for the dramatic increase in standards of living/tolerance/pluralist values in the West?

Maybe Khanna is thinking of medieval Europe, with its devastating series of religiously-inspired wars, but somehow I don’t think this is the case.

The Muslim world is decentralized culturally (like Europe) and is trying to decentralize politically (again, like Europe). The political decentralization is being hastened by trade liberalization and global economic integration. This same decentralization is being resisted by the international order (including, especially, Russia and China) due to nefarious but understandable interests of state but also to the severe lack of understanding that Western intellectuals like Khanna have of social organization. A center of cultural or political or economic power does not guarantee a waning of extremes. In fact, in some cases (in most?) such a center of power actually contributes to extremes.

Khanna was so blinded (and, again, I think he’s changed his tune post-2008) by technocratic Left-wing theory that he could not see what he was arguing: that a decentralized Christianity gave rise to Europe as we know it, therefore the West should step back so that the Muslim religion can build a monolithic consensus in order to combat “extremes.” Am I mischaracterizing Khanna’s footnote? Am I knocking down a straw man?

Khanna’s latest stuff has been much better than what I found in his 2008 book. He still doesn’t go far enough, though. He needs to undertake Brandon-style libertarianism in order to really be a bad ass: let the process of decentralization happen, but (but) recognize new states where it is smart and safe to do so (Kurdistan? The Islamic State? Baluchistan?) and then integrate them into the imperfect but important international order that the West has slowly been building for the last hundred years or so.

Khanna’s incoherence on geopolitical matters is not limited to interesting footnotes. Check out what he wrote in the introduction (again, this is from 2008):

Many believe that the emerging world order is polycentric: China will remain primarily a regional power, Japan will assert itself more nationalistically, the EU will lack influence beyond its immediate region, India will rise to rival China, Russia will resurge, and an Islamic Caliphate will congeal as a geopolitical force. (xviii)

This is basically what has happened so far, and it largely falls in line of where I would bet my money (but not place my dreams) on future events (the Muslim world excepted; see above). Khanna has none of it though:

All these views ignore a much deeper reality: The United States, the European Union, and China already possess most of the total power in the world. (xviii)

I think this argument, if anything, reveals Khanna’s (and, by implication, the technocratic Left’s) authoritarian impulses and desires. The United States is the world’s sole hegemon, and it will be for a long, long time. The EU is a basketcase and China’s GDP (PPP) per capita stands at Intl$ 11,907 in 2013, just below the Dominican Republic, Serbia, the world average, and Iraq. Khanna’s inclusion of the EU – with the social democratic values that technocratic Leftists mistakenly believe Europe harbors – and China – an ode to both the condescending identity politics of the same technocratic Left and its fixation with centrally-planned but privately-run enterprises (“corporatism”) – in the troika of world powers illustrates nicely the weaknesses of the Left.

Khanna’s dogma gets him in more trouble (still on the same introductory page):

Russia, Japan, and India cannot assert themselves globally, militarily or otherwise […] In fact, they are being gradually outmaneuvered by the United States, the EU, and China in their own regions. (xviii)

Don’t cry for Khanna. Last time I checked, he was on the board of several prominent think tanks.

Khanna’s best chapter is on the Middle East (it starts with a useful map on p. 168 and ends on p. 253). His treatment of post-Soviet Europe is laughable (“Ukraine: From Border to Bridge”) and his treatment of China (“Asia”) is overly laudable. India gets just three dismissive pages.

Would I recommend reading it?

Yeah, sure. I like the concept of “second world” that Khanna tries (but fails) to convey. I like the way he thinks and his post-2008 work is especially good. There are a lot of facts that aren’t really facts in the book though, and he applies those facts to theories that I think are weak at explaining how the world works. Then again, when has reading a book ever hurt you?

Dumbing Down the World

02/01/201505/12/2015 Mike Reid Culture bureaucracy, colonialism, education, James Tooley, Murray Rothbard, schooling, the Freeman, the United Nations

Public education has been a slowly degenerating disaster throughout the West, and now it seems we’re exporting it to the rest.

At a United Nations meeting 15 years ago, the world’s governments agreed on the goal of enrolling every child on the planet in primary schooling by this year.

Indeed, they have nearly succeeded, with 2014’s reports indicating that 90 percent of children in developing regions now attend primary school. Presumably, the numbers for developed countries are above 95 percent.

But strangely, this lofty plan did not say anything about the quality of the schooling into which we have now driven more than 9 out of every 10 human children; the whole idea is to get children into government-approved classrooms, apparently regardless of what happens there.

The reports of UN agencies like Education for All (EFA) are full of ideas on how to get kids to go to school in developing countries: making education entirely taxpayer funded (commonly by taxpayers from richer countries), providing free medication or food to students who show up, or even just paying cash to the parents in return for kids’ attendance.

But are the pupils who spend more time at these schools actually learning more as a result? Has the goal of putting more kids into classrooms actually led to more kids getting a proper education? MIT’s Abdul Latif Jameel reports, “Several programs which have raised participation, from providing worm medicine to free meals, show no evidence that children are learning more as a result.”

And EFA’s Fast Track Initiative admits, “In nearly all developing countries the levels of learning achievement are shockingly low.… In many low-income countries students learn virtually nothing and end up functionally illiterate.”

In fact, the situation is so bad that Jameel says one area to be improved is “more regular attendance of teachers.”

A crucial fallacy

The international education agencies seem to have been duped by what Austro-libertarian Murray Rothbard calls “a crucial fallacy … confusion between formal schooling and education in general.”

Promising to educate every child in every culture through primary schooling is a bit like promising to clothe every child in every climate by giving them a parka.

In fact, until recently, nearly all children learned the important skills of life largely outside of schools, through observing and joining in with the activities of adults. Rothbard writes with respect to American education, “Education is a lifelong process of learning, and learning takes place not only in school, but in all areas of life. When the child plays, or listens to parents or friends, or reads a newspaper, or works at a job, he or she is becoming educated.”

All the medicine handouts and free school lunches EFA proposes are attempts to offset the direct economic opportunity cost of the child spending a day at school instead of working on the farm or in a factory. While these handouts do take into account the child’s economic contribution to the family’s labor, what about that labor’s educational contribution to the child? What about the educational opportunity cost?

If students in many schools are learning very little and graduating “functionally illiterate,” if attendance doesn’t actually produce real education, and if teachers sometimes don’t even bother to show up, perhaps the parents and children feel that they would learn more outside the schools than in.

The presence of this educational opportunity cost may help explain why, despite all the subsidies and bonuses meant to drive kids into classrooms, the 2014 report on this goal laments, “high dropout rates [of children] remain an impediment to universal primary education.”

The kids are going into school, they and their families are seeing the results, and they and their families are deciding they are better off elsewhere.

But sadly, this important educational opportunity cost doesn’t seem to be on the global pedagogical philanthropists’ radar. Jameel says only that “there is no consensus on why so many poor children don’t attend school, or the best way to increase participation. If children’s labor is crucial to their family’s welfare … it may prove very difficult to attract more children to school.”

There is no mention of any learning that might happen while the child is outside the classroom.

For the moment, let us grant this assumption: Only schooling is education. No learning happens outside of schools.

Under this assumption, not only do children’s minds profit nothing from a day spent at home or in the bush, but most of the parents of children in the developing world are themselves totally un-“educated” — benighted savages whose heads are filled with cobwebs.

Thus, for our benevolent pedagogical overlords, it could make sense to get those kids away from their parents and into schools as soon as possible, even if, as EFA acknowledges, “in some countries nearly every aspect of the schooling system is seriously deficient — infrastructure, teaching materials, teacher availability and qualifications, lack of student assessments and lack of incentives for improving learning outcomes.”

Furthermore, in many poorer countries, the office jobs (the only ones for which schooling is actually required) are nearly all government and international NGO jobs. That’s because these countries have not (or at least not yet) developed a strong market demand for literate and numerate workers. So those kids who do succeed in school end up moving to the capital and writing reports on the importance of international funding for schools.

The kids who do not do well in school go back home to the farms or the factories, having spent years of their lives learning, in some cases, “virtually nothing.” But since the bureaucrats seem to believe that the traditional cultures the children might have spent those years immersed in held no knowledge anyway, this result might not be seen as much of a loss.

Setting young minds free

No doubt, some kids who would profit from schooling are being kept out of it by very bad things: wars, forced prostitution, and outright poverty. EFA’s programs to make schooling more accessible could have a huge positive impact on these children’s lives.

But instead of focusing on gimmicks to get kids into the classes governments want to teach, educators should focus on materials that kids want to learn — or that their parents are willing to invest in.

James Tooley has reported on the existence of an entire underground economy of black- and gray-market private schools in the slums of India and Kenya. Since these schools either hide themselves from the local authorities (to avoid being shut down) or are hidden by the local authorities from the national and international authorities (to avoid embarrassing the public schools), it’s difficult to know how prevalent they are.

What is clear is that these dirt-cheap private schools are operating with a profit motive under serious competition. Students’ parents often have to choose whether to pay for a loaf of bread or a day in school. How good would your kid’s school have to be for you to pay for it under those circumstances?

Meanwhile, these schools’ profits are being siphoned off in bribes to the local inspectors.

We could unleash these not-quite-legal schools from their government shackles by breaking the chain between government and education. Ending the drive for compulsory, state-run, subsidized schooling would, in Rothbard’s words, “give children their head” and let them seek out “a genuine and truly free education, both in and out of formal schools.”

This article was originally published in the Freeman online, and is based on an older article written for Mises Daily. Many thanks to Max Borders and BK Marcus for the opportunity to publish in the Freeman, and to Dan Sanchez for the opportunity to publish in the Mises Daily during his tenure.

The Dalai Lama on Inequality

02/01/201505/13/2015 Fred Foldvary Economics, Liberty, Philosophy Buddhism, capitalism, Dalai Lama, decentralization, Henry George, inequality, market regulation, Marxist socialism, political thought, Tibet

There are many people who blame “capitalism” for the world’s economic problems, such as poverty, unemployment, inequality, and environmental destruction. This common belief is based on a confusion of meaning, and a lack of analysis. It is neither surprising nor noteworthy that many people fail to apply consecutive thought to economic issues, but it is sad that the Dalai Lama, as an influential religious leader, has not fully applied his compassionate thought to examine the causes and effective remedies of social problems.

The Dalai Lama, leader of Tibetan Buddhists, has identified himself as a Marxist socialist. He blames “capitalism” for economic inequality, and sees the Marxist alternative as the alternative that would increase equality. He advocates a more “human approach,” which implies less “capitalism” and more socialism. The Dalai Lama adds that he is not a Leninist, meaning that his Marxist views do not imply a desire for a totalitarian state.

The Dalai Lama believes that Marxism is founded on moral principles, such as economic equality, while “capitalism” is founded only on the pursuit of profit. His social and economic views were published in the 1996 book Beyond Dogma: Dialogues and Discourses. He said there that Marxism is concerned with the poor and with exploited minorities. Therefore, he said, “I think of myself as half-Marxist, half-Buddhist.” The Dalai Lama had studied Marxist ideology in China during the 1950s, and became attracted to it.

The essential problem with the word “capitalism” is that it is used both as a label for current economies, which are a mixture of markets and governmental interventions, and for the concept of private enterprise and free markets. Its use as a label for mixed economies makes it meaningless to blame “capitalism” for economic problems.

This confusion is similar to blaming diets for ill health. The diet of most people is a mixture of healthy foods such as vegetables and unhealthy stuff such as excessive sugar. The proposition that “diets” cause illness may be true, but it tells us nothing about which elements of our diets are causing the problem.

Likewise, to blame “capitalism,” meaning the mixed economy, for economic inequality, is meaningless, as this does not tell us which elements of the economy are causing the problem, whether it is markets or interventions. Blaming “capitalism” is worse than useless; it fogs the mind, because the label for mixed economies gets confused with the other meaning, private enterprise, so that, in a sly tacit shift of meanings, markets get blamed for economic woes.

It is meaningless to accuse “capitalism,” as a label, as only caring about profit and ignoring the poor, because the actual “mixed economy” cannot have any thoughts or feelings. Moreover, the concept of a pure market economy does have an ethical basis. The pure market is an economy in which all activity is voluntary. The concept of voluntary human action implies the existence of a universal ethic, or natural moral law, that designates acts as good, evil, or neutral, with voluntary action being good or neutral, and involuntary action consisting in coercive harm, which is evil.

One of the premises from which natural moral law is derived is the concept of human equality, that human beings have an equal moral worth, and should therefore be equal in the application of law. Human equality does not imply that all persons should have an equal income or wealth, because moral equality implies an equal self-ownership (or ownership of one’s body) of all persons. Therefore, each person properly owns his wage and the goods and investments bought from his wage. Income, however unequal, that comes from labor, including entrepreneurship, is not an evil outcome.

The mixed economy does create poverty, but not from private entrepreneurship. The poverty comes from government’s taxing the poor and subsidizing the rich. A study by the Institute on Taxation and Economic Policy and the Pew Research Center recently concluded that the poorest fifth of households pay more than twice the state and local tax rate (11 percent) as the richest one percent. Also, although the rich pay a much higher tax rate on their income, many of the rich get their money back implicitly in the form of the higher rent and land value generated by government spending, paid for by taxes on wages, goods, and enterprise profits. The taxes on the poor are even higher than that found in the study, as there are federal excise taxes included in goods, and also, federal taxes and restrictions on labor and self-employment add to the interventionist burden of the poor.

The economist Henry George wrote that “There is in nature no reason for poverty.” Poverty and excessive inequality are caused by human institutions. If Marxism implies income redistribution or government ownership of industry, this treats, and mistreats, the symptoms, not the causes. The main causes are the stifling of labor and enterprise from taxation and imposed barriers. The ultimate remedy is a completely free market, with voluntary, contractual, decentralized governance. Given today’s states and taxes, government interventions can be minimized with a constitutional prohibition of restrictions and imposed costs on peaceful and honest enterprise, thus with taxes only on bad effects – pollution – and on the ground rent generated by government’s public goods.

If he understood the ethics and economics of liberty, then the Dalai Lama would become a much greater global leader in promoting effective reforms that would not only promote liberty but also greater prosperity and social peace.

Around the Web

01/31/2015 Brandon Christensen Links Adam Garfinkle, American Conservative, Anthony Grafton, Eugene Volokh, freedom of religion, Political Correctness, Samuel Goldman, the American Interest, the Classics, the Nation, Volokh Conspiracy

The Saudis, the Holy Lands, and double standards

01/28/2015 Brandon Christensen Current Events, Politics, Religion Abdullah bin Abdulaziz Al Saud, France, Irfan Khawaja, Islamism, Israel, Jacques Delacroix, Liberty magazine, Policy of Truth, Saudi Arabia, Tashbih Sayyid

I know we’ve been linking to Irfan and the PoT heads a lot lately, but there’s a good reason for it. Check out Dr Khawaja’s thoughts on the recent death of King Abdullah:

The late Pakistani journalist Tashbih Sayyid, editor of Pakistan Today, put the point to me in this way: “Muslims complain so loudly about the Israeli occupation of Jerusalem and the West Bank. What about the Saudi occupation of Mecca and Medina?” It sounds like a joke, but it really isn’t one. He might well have added: What about the Saudi occupation of the Arabian peninsula?

Here’s an article on Saudi Arabia’s criticizing Norway’s human rights record. This criticism comes from a country where it’s illegal for women to drive. Of course, to be fair, Saudi Arabia is making progress. It abolished slavery in 1962.

I don’t agree with defenders of Israel who insist that the movement to divest from Israel is “anti-Semitic,” but I do think there is a double standard in the way activists think about and deal with Israel by contrast with Saudi Arabia. Saudi Arabia has all the features that members of BDS find objectionable in Israel. Like Israel, Saudi Arabia is guilty of systematic human rights abuses. Like Israel, Saudi Arabia gets massive and systematic U.S. support. Like Israel, Saudi Arabia exerts enormous influence over the U.S. government. The difference is just that Saudi Arabia is a lot worse than Israel on every relevant dimension.

Read the rest, it’s an excellent analysis as usual.

Jacques has a piece on Islam in France up over at Liberty that you might want to check out, too. He doesn’t make any new arguments that he hasn’t made before, and I don’t think he is advancing the conversation at all (see here and here, for example), but it’s still worth the read.

The Gold Standard is Not Without its Costs

01/27/201501/27/2015 Warren Gibson Current Events, Economics free banking, gold as money, gold standard, San Francisco, Well Fargo

News from the department of “life is bigger than art:” A few days ago I posted a fictitious account of a future Wells Fargo Bank operating on a revived gold standard. Turns out the real Wells Fargo, now a regular large commercial bank with its roots in the California gold rush, has a branch in downtown San Francisco at the site where the bank was first opened in 1852. The branch had an exhibit of historic artifacts, including gold nuggets from the gold rush era. I say had, because last night thieves rammed an SUV into the lobby and made off with the nuggets!

All of which underscores the fact that security is among the real costs associated with a gold standard. There is no law of nature that says free banking has to be based on gold, as I pointed out in my post. The market would, if free to do so, sort out costs and benefits and find the sort of system or systems that best satisfies consumers.

I love Wells Fargo; They Hate Me.

While I have this blog window open I’ll add some unrelated comments about Wells Fargo. I am a happy customer and I credit this to the stiff competition among banks at the retail level. I regularly get solicitations from banks offering $100 bonus to open an account, with strings attached, of course but I stick with Wells Fargo. At the macro level our current banking system is gravely flawed but it works well for us retail customers.

I get free checking, a handy web site, and ATMs all over the place. When my credit card was hacked recently, they replaced it promptly and took my claims about false charges at face value. My average credit card balance last year was nearly $4,000 and I paid zero interest. That’s because I pay it off at the last possible date, which is 25 days after billing. I pay an $18 annual fee but got $300 in cash rebates last year. I never pay late fees or penalties of any kind.

I do not have a savings account with Wells Fargo because those accounts are a joke. Their most popular savings account yields (drum roll) 0.01%. Not one percent, but one hundredth of one percent. For every thousand dollars I might keep in a savings account, I would get ten cents in annual interest, taxable. I do, however, hold shares of Wells Fargo preferred stock which pay 6.8% current yield (for you experts, a somewhat lower yield to call). The shares appreciated about 70% since I bought them at the bottom of the Great Recession.

So I am a money loser for Wells Fargo. They earn merchant fees from my credit card use and that’s about it. They count on their average customer’s ignorance and lack of financial discipline to generate fee income and to carry high-interest balances on their credit cards. Dear reader, if that describes you, don’t despair. You can get out in front of the wave and let the banks work for you, not the other way around. It just takes a little knowledge and some discipline. Most important: if you can’t pay cash for a purchase (or use a credit card paid off before interest kicks in), you can’t afford it! That includes cars. Save up your money and buy a junker. Mortgages are OK for home purchases because of tax breaks, but even there, start with a healthy down payment.

Here endeth today’s sermon. Go in peace and freedom!

Mexican Underdevelopment: Pop-Sociology

01/26/201505/13/2015 Jacques Delacroix Culture corruption, economic development, entrepreneurship, GDP (PPP) per capita, libertarianism, media studies, Mexican culture, Mexico, underdevelopment, Western culture

It’s six a.m., I am sipping my first cup of coffee on the small balcony near the tall coconut tree. It’s still dark but I can see a short stocky woman sweeping the ground of the open space in front of the hotel next door. Right away, I detect that something is wrong in the picture although I am not fully awake. The broom the woman is using is too short, its straw end is frayed. She is bending over more than should be necessary; some of her energy is being misspent because she pushes harder than she would have to with a newer broom. No big deal! Except…

Mexico is the kind of country where the dentist kisses you when you leave. (This particular dentist is a pretty willowy blonde.) Perhaps, Mexico is the only country of its kind. I don’t know; I have not been everywhere. No American dentist has ever attempted this maneuver on me, or on my attractive wife either. I have avoided French dentists since 1960. A dentist in Morocco once gave me a root canal with no anesthesia whatsoever. I forgave him long ago but I wouldn’t let him kiss me if you paid me. The universal amiability of Mexicans might color everything I say below. You are warned.

I just spent three weeks in Mexico, in the pleasant resort city of Puerto Vallarta. With a population of 250,000, it does not feel much larger than Santa Cruz, California with its population 4/5 smaller. Still it’s large enough to be considered a real place, not a boutique resort. I was staying in a small hotel on the beach, of course, which limits observation. But my wife and I did most of our own cooking and therefore, we had to shop often in an ordinary supermarket located in an ordinary commercial center. This is important as a kind of regular and forced immersion into normal local life. We did not have a car so, we took taxis several times a day. This is important too because cab drivers everywhere are a rich fount of information if you manage to steer them from small talk. Yes, I know Spanish, and not only in my imagination as described in my masterful “Foreign Languages and Self-Delusion in America” (if I say so myself) but for real. I understand everything that is said to me in that language; I am able to eavesdrop on conversations between strangers; I can read the newspaper; I listen to television news without effort.* In brief, I was in a reasonable good position to observe, interpret and ask questions.

This stay in Mexico was like a refresher course on a topic that occupied me professionally for about twenty-five years: Why some countries are poorer than others. (When you begin thinking seriously about this simple question, you quickly discover that the plausible answers are numerous and complex.) I used to do it in a rigorous, quantitatively based manner, estimating statistical models and the like. This time, I am indulging myself frankly in pop-sociology. It does not imply any rejection of my past endeavors.

Comparisons between the way things are done in Mexico and in the US come naturally because the surface similarities between there and here are obvious. Mexicans want what we want and they work openly for it and, in time, they get it. Material progress usually takes a familiar American form, from shopping malls to cineplexes, to the Discovery Channel…, you name it.

Mexico’s GDP per capita is less than one third of the American equivalent (about USD 16,500 vs 52,000, Purchasing Power Parity, a formulation which makes the two figures comparable) Mexico is a poor country but not one of the poorest by a long shot. Why would it be poor?

Mexicans are not a short on entrepreneurial spirit. Every nook and cranny shelters a business of sorts. I enter a tiny corner shop in a non-touristy part of town selling I don’t know what. A toddler sleeps on a blanket on the cold floor. (It’s hot.) Against one wall, three cramped stalls offer Internet access. The owner, the toddler’s father, tells me he is opened from 7 am to 10 pm. He charges me forty cents to recharge my cellphone battery, not an especially low price considering his cost and the little labor involved. There are restaurants everywhere, also far from the tourist tracks. Some have only four tables. Most are still empty at 8 pm. Two social mechanisms seem at work. One is simple mimicry: The guy across the street has one. What does he know about birria that I don’t know? The other is a version of the Chinese eating place economic rationale: If people don’t come to dine here, my family can always eat the food; I have many children anyway. Nothing is going to go to waste. The economic risk is small. It can’t hurt. Perhaps, rents are low because there is not much alternative use for the relevant spaces.

Food is everywhere anyway. If someone goes hungry in Mexico, it’s somewhere else. Yet, food prices are low but not very low. Rice is cheap, avocados are cheap; apples are the same price as in California perhaps because they come from afar. This is an undeveloped capitalism, with poor infrastructures; moving foodstuff is still expensive. A cup of reasonable good coffee costs USD 1,40; that’s probably more than in an Arkansas diner. That’s what it means to be poor: Your money does not reach very far.

Three facts of possible economic relevance strike you quickly; two are concrete and easy to verify; the third is intangible, or kind of unsubstantial, but that does not make it irrelevant. First, nearly every shop is overstaffed by a significant factor. That’s easy to see when people perform identical jobs with identical technologies as in the US. There are twice or more salesladies in the clothing area of a department store as there would be in KMart, the perennially failing chain. In the butcher section of the supermarket, employees are waiting for you. That’s nice but it’s probably superfluous. I could wait two minutes instead, so could Mexican housewives. In the restaurants that actually have some business, the waitpersons (waiters and waitresses ) seem to be spending most of their time standing still.

The second observation concerns low individual productivity. It’s not that Mexicans don’t work hard. In Mexico as in the US, Mexicans are remarkable for working hard for long hours. They seem to know no coffee breaks and little even by way of lunch breaks. The problem is that you see everywhere people doing work for which they have received little or no training. I watched with increasing fascination, several times a day, a laborer failing to finish a simple brick path. He did not manage to complete in three days what I am ready to bet an American bricklayer would have done in less than a day. (Yes, I know something about bricklaying too.) That’s a big productivity differential. Even the pharmacists filling my prescriptions seemed hesitant. They did not exude the authority of American pharmacists with an advanced education. Since Mexicans in general rarely lack in personal authority and, by elimination, I am forced to hypothesize that my pharmacists where just sort of learning their job as they went along.

Incidentally, I have reasons to believe that this shortage of training does not extend to superior occupations: Mexican doctors and Mexican engineers are not inferior to their American counterparts, I am guessing. (The fast development of medical tourism into Mexico from both the US and Canada testifies to the quality of the former, I think.)

The third observation, which I called intangible is difficult to render, of course. It’s almost only an impression but one that is redundantly encountered. The information dispensed by the conventional Mexican media seems very thin. The nightly news program on major channel serves poor fare as compared to the Spanish language but American Univision. If there are new or substantive programs on radio, I have not discovered them. (I may very well have missed such.) I mean that I almost missed National Public Radio there ( a difficult admission for me, obviously). Whether you read the daily newspaper or not does not make much difference in your level of information. Here is a test case.

On a weekend day, there is a massive protest march in Mexico City. The demonstration is to protest the disappearance of 43 young people from the same teachers school. Everyone except their parents knows they have been murdered. The demonstration is both very large and quite orderly as compared to anything of the same kind in the US. The police uses tear gas but only sixty people are arrested. There is no mention of anyone seriously hurt.

I buy the Sunday version of what has been designated to me as the best national daily newspaper in the country (“El Excelsior“). A description of the demonstrations and photographs cover the front page, as you would expect. The two innermost pages are devoted to the same events. In addition to eyewitness accounts are included serious interviews of government officials, of protest march organizers and of several pundits. I make myself read every word. At the end, I have learned close to nothing and I have no new perspective on the crime, sociologically, politically or otherwise. I just get confirmation of the fact that the mayor of the town where the young men disappeared and his wife have been arrested. I turn to the “global” page and get a reading of events in Iraq and Syria that I would probably not understand absent my previous familiarity based on American media. In three weeks, I see and hear not a single reference to President Obama’s executive order concerning illegal immigrants about half of whom are of Mexican origin.

I think that Mexicans, including well-educated Mexicans, are not well informed unless the Internet makes up for the obvious deficiencies of the conventional press, which is hard to believe. I would be hard put to explain how this affects Mexican economic development except that it may result in a blindness to new economic opportunities. Mexican entrepreneurs dedicate themselves to old pursuits or they imitate the gringo model late and imperfectly, perhaps (perhaps). Even where a Mexican industry has experienced notable global success such as the brewery industry, it did not innovate much, if at all. No innovation, no temporary super-profits, no generous wages (as we see in Silicon Valley, for example). This is all speculation. Others may have written on the relationship between the general level of information of a population and its overall productivity and it may have escaped my attention or, I may have forgotten it. Maybe readers will come to my rescue on this.

So, here you have it: skimpy training of ordinary workers, inferior tools, a poor physical infrastructure, an under-informed populace, together make for much lower gross productivity than what we are used to in the US. But, overall, in a sort of rough way, wages follow productivity. Mexican workers produce little and they get paid accordingly little. Note that the same factors of poverty interact with one another: Low pay encourages the hiring of a surfeit of workers; modestly paid workers may not be perceived as deserving good tools; an underdeveloped infrastructure buffers business decision-makers from all kinds of competition, including competition for workers, thereby keeping wages lower than they need be. Workers may not be well informed enough to struggle for higher wages. And, of course, workers with low pay make poor consumers. Among other things, they fail to fill the restaurants their entrepreneurially inclined neighbors open for them.

By now, you may wonder why something is missing from this story. I mean corruption, small corruption and especially, big corruption. Two reasons for this absence. The first is that, naturally, corrupt behavior is not readily amenable to casual observation. The second reason is that I am not convinced that corruption of any kind goes much way toward explaining Mexican underdevelopment.

Low level corruption first. In Mexico, it’s common to deal with an ordinary traffic transgression by asking the policeman who stopped you to pay the fine on your behalf because “I am too busy, sorry.” I am told that any amount of cash close to half of the amount of the official fine will do the trick. This sort of practice pervades Mexican life, I am still told. (I have not had a personal experience of it for twenty years myself.) It’s not clear to me that it has any relation to underdevelopment. In the above example, what is basically a tax gets diverted from the government to private pockets. Likewise, when building permits are sold by building inspectors rather than earned and deserved, a relaxation of anti-growth regulations takes place, doesn’t it ?

I don’t know, incidentally, that there is much private corruption in Mexico. I must have taken more than sixty taxis while I was in Puerto Vallarta. They have no meters but rates are fixed by zone. Only one tried to take me, for about USD 3. That’s an extremely low hit rate as compared to say, New York City.

Now, on to big-time corruption. By its nature, it’s hard to observe except if you read the paper carefully and with great, diligent constancy. (See above.) Here is one possible case that came to my attention while I was in Mexico. A big house on a golf course comes up for sale for USD 1.5 million. The seller is a police official described to me as not very high on the totem pole. Someone I know makes an offer. The asking price shrinks to USD 750,000 if he will pay cash. How did a police official get his hands on that house? Did he inherit a pile of money from his father, from a rich aunt? By insisting on cash, is he simply trying to avoid taxes or does he have a more sinister reason? I don’t know and here again, I am not sure it matters. Perhaps, it does in relation to the accumulation of capital; I wouldn’t know which way though.

People of libertarian inclination have to choose: If government is inimical to happiness in general and to economic prosperity in particular then, the suspension of government efficacy, as with corrupt government practices, must be for the better. Or, another, more benign theory of government must be developed.

* If you wonder at my linguistic prowess, don’t. First, Spanish is a dialect of Latin, like French, my native language. Second, I have been studying Spanish for a straight sixty years. It stands to reason that I have made some progress.

Cuando la sangre llega al río

01/25/201501/25/2015 Adrián Lucardi Liberty

La muerte de Nisman–y más en general el enfrentamiento entre el gobierno argentino y el poder judicial–hacen recordar el argumento de Milan Svolik sobre la intervención de los militares en política (este libro, cap. 5).

¿Por qué los militares hacen golpes? A primera vista la respuesta parece obvia: porque sus preferencias políticas difieren de las del gobierno de turno. Pero organizar un golpe implica un riesgo, porque si las cosas salen mal los cabecillas pueden esperar ser pasados a retiro, y el país puede llegar a caer en una guerra civil. En otras palabras, para los militares el mejor de los mundos posibles es uno donde la amenaza de un golpe es suficiente para inducir al gobierno a cambiar sus políticas. Pero si las autoridades civiles intuyen que los militares no quieren sacar los tanques a la calle, van a hacer caso omiso de las amenazas que reciban (o cumplir con ellas sólo en parte). Dependiendo del nivel de credibilidad del que goce la amenaza de dar un golpe, las relaciones cívico-militares pueden van a estar caracterizadas por uno de tres equilibrios:

Sujeción militar al poder político. Cuando la amenaza de lanzar un golpe nunca es creíble, las autoridades civiles implementan sus políticas preferidas y los militares obedecen sin chistar. En otras palabras, no hay golpes porque las fuerzas armadas son muy débiles. Ejemplos: países desarrollados, Argentina post-1995.
Tutela militar. Cuando el gobierno depende absolutamente del apoyo de los militares, la amenaza de golpe es tan creíble que las decisiones del poder civil están absolutamente subordinadas a las preferencias castrenses. Pero aunque los militares tienen mucho poder, los golpes son escasos porque no resultan necesarios. Ejemplos: El Salvador durante la segunda mitad del s. XX.
Riesgo calculado (“brinkmanship“). Cuando la amenaza de intervención militar no puede ser descartada de plano pero tampoco resulta enteramente creíble, los militares y el gobierno se embarcan en un juego de póker: los unos piden más de lo que esperan obtener, el otro estima que puede evitar un golpe dando menos de lo que le piden. En otras palabras, nadie sabe hasta dónde el otro está dispuesto a ceder, y entonces ambos tratan de correr los límites un poco más allá, hasta que alguno comete un error de cálculo:

Military interventions occur when, in this push-and-shove play for influence between the military and the government, the latter oversteps and “rocks the boat” too much. (Milan Svolik, The Politics of Authoritarian Rule, Cambridge University Press, 2012, ch. 5)

El enfrentamiento entre el kirchnerismo y la justicia puede ser descrito con la misma lógica. Por supuesto, el poder judicial no hace golpes pero decide estratégicamente si investiga a los funcionarios gubernamentales que cometen delitos. Pero como en el caso anterior, independientemente de quién gane la pulseada, tanto el gobierno como los jueces están mejor si no hay conflicto: si a la larga va a ganar el gobierno, jueces y fiscales prefieren no quedar marcados como enemigos del poder de turno; mientras que si va a predominar la justicia, los funcionarios gubernamentales prefieren no incurrir en comportamientos que puedan ser juzgados. Como en el caso de las relaciones cívico-militares, esto da lugar a tres equilibrios:

En un escenario de subordinación judicial al poder político, ningún juez o fiscal investiga a los funcionarios de turno porque es absolutamente inútil; los únicos políticos investigados–posiblemente con causas armadas–son los de la oposición. Como en el caso de la sujeción militar al poder político, el conflicto no existe: si a algún funcionario judicial quijotesco se le ocurre investigar al poder de turno, es removido inmediatamente de su cargo.
Cuando se respeta la independencia judicial, jueces y fiscales se sienten en libertad de investigar, porque el gobierno no puede responder cargando contra el poder judicial. Por supuesto, los funcionarios acusados tienen el derecho a defenderse, pero dicha defensa de limita a una causa concreta; la investigación de un funcionario, por importante que sea, no termina en un conflicto con el poder judicial in toto.
Cuando el poder judicial no es completamente autónomo pero tampoco opera como un apéndice del poder político, el resultado es un enfrentamiento entre poderes que vemos en la Argentina de hoy: unos disparan con causas e investigaciones no siempre creíbles, en tanto que los otros responden con presiones, operaciones mediáticas, y reformas institucionales destinadas a subordinar la justicia al poder de turno. Como en el caso de las relaciones cívico-militares, aunque ninguna de las partes quiere el conflicto, ambas tienen incentivos para exagerar su posición y descubrir dónde están los límites. Hasta que la sangre termina por llegar al río.

Desde mediados de los 90, la Argentina se encuentra empantanada en este último equilibrio. La acusación de Nisman y su muerte son tanto un reflejo de ello como un intento de extender los límites un poco más allá y establecer un equilibrio diferente. Nuestra reacción va a determinar con qué nos vamos a encontrar mañana: si la muerte de Nisman permanece impune, la muerte del fiscal que acusó a la presidenta va a colgar como espada de Damocles sobre el resto de los funcionarios judiciales, independientemente de que el gobierno sea el responsable directo de su muerte; sólo si el caso se resuelve de manera satisfactoria vamos a avanzar a un escenario donde jueces y fiscales se sienten dispuestos a investigar al poder de turno.

(Publicado originalmente en https://elpaisgeneroso.wordpress.com/)

“Mohammed — in pictures”

01/23/201501/23/2015 Brandon Christensen Culture, History, Religion aesthetics, Arab culture, art history, Barnaby Rogerson, cultural Islam, Islam, medieval Islamic thought, Persian culture, Spectator, Turkish culture, Wahhabism

That is the title of this piece by Barnaby Rogerson in the Spectator. There are three beautiful pieces of medieval art (two Persian and one Turkish), and those alone are worth the price of the click. There is, of course, a short essay explaining why there is now so much resistance to depicting Mohammed in art (of both the high and low brow variety). Check it out:

Whatever the heritage of their medieval past, Sunni Islam — in the Arab-speaking Middle East — had decisively turned its back on depictions of the Prophet well before the 18th-century emergence of Wahhabism. Once again there are no definite answers. It may have been a gut reaction to the magnificent art produced by their Iranian Shiite rivals but it also reflects a very real fear that Mohammed was slowly being turned into a demi-god and that in the process his actual prophetic message would be ignored. This was especially true in the far eastern frontiers of Islam, such as India and Indonesia (numerically the two largest Muslim nations in the world) with their ancient syncretic traditions. So the attack on imagery can also be seen to have a constructive element embedded within it, concentrating all attention on the text of the Koran and reinforcing the Arab nature of that revelation.

Take this as you will. My instinct is to suspect “the Arab nature of that revelation” as the initial reason for this change in Islamic aesthetics. That is to say, I suspect that a medieval notion of Arab chauvinism is responsible for the shift.

The Best Book I Have Read Recently

01/21/2015 Jacques Delacroix Books, History anthropology, bilingualism, book review, Jared Diamond, learning a language, linguistics

I make some notes about almost all the books I read. I am thinking my notes may be useful to others. Here is an instance; it’s about a good book I read recently:

Jared Diamond’s 2012 The World Until Yesterday: What Can We Learn from Traditional Societies?

A confession first: When I die, I want to come back as Jared Diamond. He had the exemplary academic career; he wasted no time; he took advantage of academia’s largess and low standards to change himself several times into a different kind of scholar. He addresses ordinary literate people with much success. He is a great teacher.

What Diamond means by “traditional societies” (in the title) is an imaginary aggregate of what social scientists call “hunters-gatherers” and “horticulturalists.” The latter are largely hoe cultivators, people who don’t use the plow but who grow food. Horticulturalists live entirely in tropical and equatorial climates.

Diamond’s book makes very good reading and, in addition, he tries to make it practical, useful at every step. His guiding theme is that by observing traditional people more closely, we may be able to improve many of our civilized practices. He visits in turn how his traditional societies define strangers and how they deal with war, child rearing, the treatment of the aged, attitudes toward danger, religion, language and health.

Traditionals, in general (also called “primitives”) live in fairly small units because their technologies (plural) cannot support large concentrations of people. They have no cities; they are not “civilized.” Diamond makes the implicit assumption (implicit, I think) that small scale and the preservation of “traditional beliefs” go hand in hand. He makes the further assumption – a fairly common one – that today’s traditional societies are similar to the societies in our own past. Thus, the part of the title that says, “Until Yesterday.” According to this assumption, the observation of such societies has much to teach us about how we – civilized people – grew up, so to speak, and about what we lost while growing up.

I am skeptical about both assumptions, not rejecting, skeptical. First, I don’t really believe that tradition does not change. I think that traditional people live in environments that change to some extent, sometimes rapidly. They change, in particular, because the powerful civilized societies in which they are embedded tend to grow, thus threatening or reducing the traditionals’ physical space and their resources. The tragedy of the Plains Indians reduction to near nothing must have happened many times before. Thus the thing that defines traditional people, “tradition” itself must change to some extent to accommodate change in their environments. The mere fact that traditional societies are around to be observed at all tells us that they must have adjusted to some extent. Thus, when considering them we don’t know if we are looking at our own past, or at pathetic survivors next to extinction, or on the contrary, at extraordinarily skillful ones. That’ s a problem for the generalizing Diamond invites us to engage in. That’s my second main objection to Diamond’s overall approach.

In point of fact, the traditional societies to which Diamond alludes include none situated in the temperate zone. It’s not his fault, of course, Lapps in Northern Scandinavia and Finland may be the only ones left more or less intact. But this fact aggravates my skepticism about the exemplarity of the primitive groups Diamond describes. I cannot eliminate from my mind the fact that civilization arose only in temperate zones, in the Middle East, in Europe, and in China. And independently, in the temperate elevations of meso-America and of South America. Perhaps, possibly, probably this is not a coincidence. Diamond’s tropical, desert, and far north groups may be in no way similar to our ancestors.

Beyond these general remarks, I have two specific quarrels with Diamond. The first is about health and the second about language acquisition. Diamond contends that the maladies of old age that affect civilized people today, including arthritis, cardiac illness, and diabetes, are practically non-existent among primitive people. He also says that primitive people have low life expectancy, I think he means at all ages. So, I am wondering if the first statement is not simply the result of a major sampling error, of a major optical illusion: If people seldom live beyond age fifty-five there will be few of the illnesses associated with old age in their society. It would seem like a gross error for a man of Diamond’s intellectual distinction to make. He may have in fact taken care of this objection and I missed it. Or, he did not do it loudly enough and then, why?

My second specific objection concerns one of the many statement he makes on language acquisition. At one point, he declares himself in favor of “crib bilingualism.” That’s the practice of speaking to babies in more than one language from birth. Personally, I think it’s a dangerous gamble. I don’t have any systematic data. My judgment relies on anecdotal evidence spread over fifty years. So does his. I believe he has not done enough due diligence of tracking possible downsides of the practice. (I don’t need to track its upsides because they are obvious: Get two languages for the same price, same as heads of cabbage at the flea market.)

I may write Prof. Diamond soon at UCLA where he teaches to ask him to discuss these points. Don’t wait on me to act to read this wonderful book though. Do it, do it critically if you can.

Also, read my book : I Used to Be French: an Immature Autobiography

A Tale of Free Banking

01/20/201501/20/2015 Warren Gibson Economics currency, free banking, gold as money, gold standard, Larry White, market-based regulation, money, resource cost

Herewith we visit an imaginary future where free banking prevails. Government regulation of banks is a thing of the past. Banks have the freedom and the responsibility that they lacked under government regulation. In particular, private banks are free to print money, either literally, in the form of paper banknotes for the shrinking number of customers who want them, but in electronic form for most.

Print money? Horrors, you say! Fraud! Runaway inflation!

Not so fast. Come with me on a fantasy visit to the local branch of my bank, a future incarnation of Wells Fargo to be specific.

The first thing we notice is a display case showing a number of gold coins and a placard that says, “available here for 1,000 Wells Fargo Dollars each, now and forever.” I have in my wallet a number of Wells Fargo banknotes in various denominations. I could walk up to a teller and plunk down 1,000 of them and the smiling young lady would hand over one of these coins. More likely I would whip out my smartphone and hold it up to the near-field reader, validate my thumbprint, and complete the transaction without paper.

I have a few of these beautiful gold coins socked away at home but I don’t want any more today nor do I want to carry them around. Electronic money is ever so much safer and more convenient. Still, I am reassured by the knowledge that I could get the gold any time I wanted it. That is the basis for my confidence in this bank, not the FDIC sticker we used to see in the bank’s window.

Confidence? What about inflation? Wells Fargo can create as many of these dollars as they want, out of thin air. Without government regulation, who will stop them from creating and spending as many dollars as they want?

The market will stop them, that’s who.

In my scenario, Consumer Reports and a number of lesser known organizations track Wells Fargo and other banks. These organizations post daily figures online showing the number of Wells Fargo dollars (WF$) outstanding and the amount of gold holdings that the bank keeps in reserve to back these dollars. Premium subscribers, I imagine, can get an email alert any time a bank’s reserves fall below some specified levels. Large depositors will notify Wells Fargo of their intention to begin withdrawing deposits and/or demanding physical gold. Small depositors piggyback on the vigilance efforts of big depositors. They know it is not necessary for them to pester the bank when the big guys are doing it for everybody.

Wells Fargo practices fractional reserve banking. They cannot redeem all their banknote liabilities and demand deposit liabilities at the stated rate of one ounce of gold per thousand WF$. This situation is clearly outlined in the contract that depositors sign and is printed on their banknotes.

Let’s assume Wells Fargo backs just 40% of its banknotes and deposits with physical gold. How is this figure arrived at? By trial and error. Managers believe that if they let the reserve ratio slip much below 40% they will start getting flak from the monitoring websites and their big depositors. If they let it rise much above that figure their stockholders will begin complaining about missed profit opportunities.

Under fractional reserve banking, bank runs are possible. A bank run is a situation where a few depositors lose confidence in a bank and demand redemption of their deposits in gold or in notes of another bank. Seeing this, other depositors line up to get their money out, and if left unchecked, the bank is wiped out along with the depositors who were last in line. Bank runs are not a pretty sight.

Wells Fargo has a number of strategies for heading off a bank run. They have an agreement with the private clearing house of which they are a member that allows the bank to draw on a line of credit under certain circumstances. There is a clause, clearly indicated in the agreement with their depositors, allowing them to delay gold redemption for up to 60 days under special circumstances. They can reduce the supply of WF$ by calling in loans as permitted by loan agreements. Most important, though, is Wells Fargo’s reputation. Not once in their long history has Wells Fargo been subject to a bank run. Management is keenly aware of the value of their reputation and will move heaven and earth to preserve it.

To sum up, Wells Fargo’s ability to create unbacked money is limited by the public’s willingness to hold that money. The bank can respond to changes in the demand to hold WF$ whether those changes are seasonal in nature or secular. They have strategies in place to head off runs should one appear imminent or actually begin.

What about competing banks, you may ask. Does Bank of America issue its own money? If so, there must be chaos with several different brands of money in the market. Are there floating exchange rates? Is a BofA$ worth WF$1.05 one day and WF$0.95 the next? What else but government regulation could put an end to such chaos?

The market, that’s what else.

Competing suppliers of all sorts of products have an incentive to adhere to standards even as they compete vigorously. If we were in a classroom right now I would point to the fluorescent lights overhead. The tubes are all four feet long and 1.5 inches in diameter, with standard connectors. They run on 110 volt 60 Hz AC current. Suppliers all adhere to this standard while competing vigorously with one another. If they don’t adhere to the standards people won’t buy their light bulbs.

So it is that competing banks in my fantasy world have all converged on a gold standard. They all adhere to the standard one ounce of gold per thousand dollars. (I trust it’s obvious that I just made up this number. Any number would do.)

Why gold? Gold has physical properties that have endeared it to people over the ages—durability, divisibility, scarcity to name a few. But other standards might have evolved such as a basket of commodities—gold, silver, copper, whatever.

You may raise another objection. All this gold sitting in vaults detracts from the supply available for jewelry, electronics, etc. That’s a real cost to these industries and their customers.

Yes, it is. It’s called the “resource cost” of commodity-backed money. To get a handle on this cost we must recognize that gold sitting in vaults is not really idle, but is actively providing a service. It is ensuring a stable monetary system immune from political meddling. How valuable is that? The market will balance the benefits of stability against the resource costs of a gold standard.

Furthermore we can expect resource costs to decline slowly as confidence in the banking system increases and people are comfortable with declining reserve ratios. Wells Fargo may find that a 30% reserve ratio rather 40% will be enough to maintain confidence. Other things equal, this development would boost profits temporarily, but those profits would soon be competed away, to the benefit of depositors and the economy as a whole.

Let’s go back to bank runs. Aren’t they something horrible, to be avoided at all costs?

Actually an occasional bank run is something to be celebrated. Not for those involved, of course, but to remind depositors and bank managers alike that they need to be careful. The same is true of the recent Radio Shack bankruptcy. Bad news for stockholders, suppliers and employees but an opportunity for competitors to learn from this bankruptcy.

Under my free banking scenario, depositors must take some responsibility for their actions. That doesn’t mean they have to become professional examiners. They just have to take some care to check with Consumer Reports or other rating organizations before signing on with a bank.

Have I sketched out a perfect situation? There’s no such thing as perfection in human affairs but I submit that this situation would be vastly superior to what we have now, where the Federal Reserve’s policy of printing money to finance government deficits will end badly. Furthermore, relatively free banking has existed in the past and worked well. To learn more, start with Larry White’s “Free Banking in Britain.”

From the Comments: Foucault, Obscurity, and Liberty

01/20/201508/08/2018 Brandon Christensen Culture, History, Philosophy Enlightenment, John Calvin, linguistics, Martin Heidegger, Michel de Montaigne, Michel Foucault, obscurity

Jacques and Barry had an excellent back-and-forth on Barry’s post about Foucault’s contributions to liberty. Here is Dr Stocker’s final response to Dr Delacroix’s questions:

Well Jacques, my last comment was not supposed to be the full reply to your preceding comment, as I tried to make clear. As I said I needed time to think before posting anything from Foucault. I was just preparing the way with comments on the background to Foucault’s style. On Montaigne, how easy is Montaigne? Maybe he seems clear to you and other French people who read him in the Lycée. I teach a lot of Montaigne in Istanbul and students don’t find him easy. Maybe his style at a sentence by sentence level is clearer than Foucault, but I would say only Foucault at his most supposedly obscure. Montaigne can seem clear because he writes in a conversational way, appearing to just comment informally on something in his mind. However, his essays are endlessly digressive and shifting in viewpoint and claim within just one essay, some of which are very long and very detached from the starting point. He mixes quotations from classics, historical illustrations, unreliable anecdotes, and personal memories, in ways which could be often said to obscure as much as clarify any underlying claim, though sometimes a relatively simple maxim seems to be the point. Even there, one really has to think about the relation between the apparent maxim and Montaigne’s shifting point of view to get the underlying point/points. The way that the style interacts with Montaigne’s mind and the uncertainties of his point of view, and the persistent anxieties about saving his world of experience from extinction in death, all have some echoes in Foucault and in various ways it seems to be me that Foucault works on a basis in Montaigne, even if adding the kind of abstract language, vocabulary and sentence construction coming from a mixture of German philosophy since Kant, and poetic-literary language since the Romantics.

Now for a couple of quotations. The first is a random selection from the book that first made him famous, History of Madness. The second is a less random selection from his late essay ‘What is Enlightenment?’.

History of Madness, page 29 (2006 Routledge edition translated by Murphy and Khalfa)

Rising up in spirit towards God and sounding the bottomless depths into which we find ourselves plunged are one and the same, and in Calvin’s experience madness is the measure of man when he is compared to the boundless reason of God.

In its finitude, man’s spirit is less a shaft of the great light than a fragment of shadow. The partial and transitory truth of appearances is not available to his limited intelligence; his madness discovers but the reverse of things, their dark side, the immediate contradiction of their truth. In his journey to God, man must do more than surpass himself—he must rip himself away from his essential weakness, and in one bound cross from the things of this world to their divine essence, for whatever transpires of truth appearances is not its reflection but a cruel contradiction.

‘What is Enlightenment?’ (as published in Michel Foucault Essential Works vol 1, ed. Rabinow, 2000), p 315

We must obviously give a more positive content to what may be a philosophical ethos consisting in a critique of what we are saying, thinking, and doing, and through a historical ontology of ourselves.
1. This philosophical ethos may be characterised as a limit-attitude. We are not talking about a gesture of rejection. We have to move beyond the outside-inside alternative; we have to be at the frontiers. Criticism indeed consists of analysing and reflecting upon limits. But if the Kantian question must was that of knowing what limits knowledge must renounce exceeding, it seems to me that the critical question today must be turned back into a positive one: In what is given to us as universal, necessary, obligatory, what place is occupied by whatever is singular, contingent, and the product of arbitrary constraints? The point in brief, is to transform the critique conducted in the form of necessary limitation into a practical critique that takes the form of a possible crossing-over.

In the first passage above, Foucault uses a language recognisable to anyone who has read much Heidegger to discuss the thought of the 16th century religious reformer Calvin. Since Heidegger’s thought in Being and Time has some roots in Reformation theology this maybe a particularly intriguing way of using Heidegger. The finitude of man compared to God is something that alludes to Heidegger’s understanding of the essential mortality, finitude, temporality of humanity. It also brings out how for Calvin, madness is an aspect of the limitation of human consciousness compared with that of God. In this passage Foucault is bringing together 16th century religious thought, the way that some 20th century philosophy approaches the themes of earlier philosophy and religion when concerned with questions of the limit of experience, how the question of defining ‘madness’ relates to the questions of defining consciousness, experience and limits from the viewpoints of the dominant ways of thinking and organising experience at the time, the ideology operating in the institutions and laws which are applied to the ‘mad’. What Foucault also brings out is that madness’ was closely related to a positive idea of transcending human bounds, so that the stigmatisation of madness then as now is intimately associated with altered states of consciousness that are given value. The use of a ‘mad’ perspective in 20th century Surrealism is one of the aspects that Foucault is alluding to here, an the ways that such aestheticised encounters with the limits of consciousness and rationality relate to earlier religious ideas of exalted spiritual states.

In the second passage above, Foucault is still concerned with the limit and while individual passages in Foucault may seem obscure, he had a very persistent interest in limits of experience, and related questions over some decades, so it is possible to build up an accumulating familiarity with Foucault’s treatment of the issue. The ‘message’ in that passage is the value of moving from Enlightenment of a Kantian kind, which places limits on the claims of universality, to a a kind of Enlightenment based on exploration of the non-necessity of limits, the exploration of the plurality of individual instances unlimited by rationalistic limitations. This is a very Montaigne-like thought, even if the language is more ‘obscure’. There is a commitment to a ‘historical ontology’, that is the understanding of ourselves as individuals and of the ‘human’ in general as the product of contingency and circumstances rather than a deep self or deep humanity detached from experience and history. This is both a proposal for the study of human institutions and discourses as Foucault already had been doing for decades and a proposal for an ethics which values subjectivity in its variability and different contexts. There is no clear limit to knowledge or consciousness, just as there is no clear limit between different areas of knowledge or experience. Foucault’s idea of Enlightenment knowledge and ethics is to keep exploring and pushing at the limits that have been assumed, which is a way of showing their continent constructed nature as well as the way that consciousness is always dealing with a sense of inside and outside that is open to transformation.

In both passages above, I would argue, Foucault uses allusion and compression of multiple allusions, to show connections and differences, and to make us think about those connections and differences. Calvin’s thought about theology has implications for defining ‘madness’, Enlightenment scientific inquiry is related to assumptions about limits of reason and experience. The ‘obscurity’ arises from the way that the syntheses, allusions, and challenges to a priori boundaries are put in a language which shows these things at work rather than just saying that they exist and makes us aware that the language we constantly use is structured and energised by the unions and tensions contained within these thoughts.

If one simply wants the ideas about institutions, history, discourse and so on in Foucault, without the ‘obscure’ language, then to some degree these can be found in Foucault’s lectures, and then maybe more so in those commentators committed to a clarification of Foucault for those not immersed in the use of philosophical language to convey meaning beyond the most literal transmission of messages, commentators including Gary Gutting, Ian Hacking, and Hans Sluga. I recommend them to anyone who finds Foucault’s style to be a chore but wants to find out about ideas which have certainly influenced a lot of work in the humanities and the social sciences.

The whole dialogue between the two starts here, if you’re interested.

Martin Luther King Jr Day and Civil Rights: A (True?) Libertarian’s Lazy Perspective

01/19/201505/11/2015 Brandon Christensen Links, Politics civil liberty, civil rights, conservatism, equality, inequality, Jonathan Bean, liberalism, Mahatma Gandhi, Malcolm X, Martin Luther King Jr, No True Scotsman?

History professor and fellow Notewriter Jonathan Bean has an op-ed out in the Daily Caller titled “Civil Rights Are Too Important To Be Left To Special-Interest Advocates.” From the opening paragraph:

“War is too important to be left to the generals,” the saying goes. Similarly, civil rights are too important to be left to professional advocates who champion only their own particular racial, ethnic, or religious causes. Unfortunately, in the “official” civil rights community of today a spirit of inclusiveness may be the exception, not the rule.

Read the rest.

Dr Bean’s post has reminded me of how to best tell the difference between a libertarian and a conservative (overseas readers: here is my reminder to you that, in US parlance, libertarian means liberal): libertarians have a deep, principled commitment to equality that is simply missing in conservative thought.

Libertarians will argue that all individuals are born equal, whereas conservatives will tell you individuals are not. Libertarian notions of equality are thus caught in the middle of two extremes: on the Right you have conservatives who believe that ~~inequality~~ equality is not possible on an individual, regional, national, or international scale and on the Left you have egalitarians who harbor all sorts of utopian pipedreams based on “equality.” These three paradigms are by no means obvious, and sometimes you have to think about the implications of a person’s argument.

The libertarian notion is utopian, as it has never been reached and probably never will be, but it is always within reach and is based upon civil and legal equality rather than some of the asinine notions of the Left. When I say “civil and legal equality” I mean that all human beings are deserving of the same fundamental individual rights. Conservatives don’t believe in this (think about their views on immigrants, for example, or ethnic/religious minorities).

So the libertarian, when faced with a hypothetical that looks at an immigrant who came to the US illegally, will say the immigrant is deserving of the same legal and civil rights as a native. A conservative will not. I know many self-described libertarians will give the second answer, and my response to them would be, “well, I guess you’re a conservative then, and not a libertarian.”

Ouch!

I understand that the complexities of politics in federal democracies make ideological arguments useless, so my only goal with this post is to help readers clarify their own political views. If you don’t support the civil and legal rights of illegal immigrants (for example), you are not a libertarian. I don’t mean to be in such a purge-y mood, but that’s a fairly basic tenet of the creed.

Also, Malcolm X did more for the civil rights of Americans than MLK did. The government chose MLK to represent the civil rights struggle, though, because he never toted a gun in public. Same thing happened in South Asia just before the UK left. Gandhi didn’t have nearly as much influence as the armed insurrections happening all over the subcontinent. Bring it!

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From the Comments: Foucault, Obscurity, and Liberty

Martin Luther King Jr Day and Civil Rights: A (True?) Libertarian’s Lazy Perspective

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