property rights

Free Banking Beats Central Banking

Fred Foldvary Economics , , , , , , , , , , , ,

In “More Bits on Whether We Need a Fed,” a November 21 MarginalRevolution blogpost, George Mason University economics professor Tyler Cowen questions “why free banking would offer an advantage over post WWII central banking (combined with FDIC and paper money).”  He adds, “That’s long been the weak spot of the anti-Fed case.”

Free banking is better than central banking because only in a free market can the optimal prices and quantities of goods be determined.  Those goods include the money supply, and prices include the rate of interest.

There is no scientific way to know in advance the right price of goods.  With ever-changing population, technology, and preferences, markets are turbulent, and there is no way to accurately predict fluctuating human desires and costs.

The quantity of money in the economy is no different from other goods.  The optimal amount can only be discovered by the dynamics of supply and demand in a market.  The impact of money on prices depends not just on the amount of money, but also on its velocity, that is, how fast the money turns over. The Fed cannot control the velocity since it cannot control the demand for money, that is, the amount people want to hold. Also, even if the Fed could determine the best amount of money for today, the impact on the economy takes several months to take effect, and so the central bankers would need to be able to accurately predict the state of the economy months into the future. Continue reading →

Baby’s a Tuna, and It’s Feeling Blue

Fred Foldvary Current Events , , , , , , ,

Bluefin tuna are being hunted to extinction. They have already been reduced to a small fraction of the global numbers of a hundred ago. They may disappear from the Atlantic Ocean by 2012. The average weight of those caught has already been dropping. Other kinds of tuna and related fish are also being slaughtered, but the bluefish will be the first to go under.

Bluefin tuna are the genus Thunnus in the family Scombridae, with several species, among them Thunnus atlanticus (blackfin tuna), Thunnus orientalis (Pacific bluefin), and Thunnus thynnus (Northern bluefin).

The bluefin have a big problem: they taste very good. Tuna have been eaten for centuries. Indeed, the word “tuna” comes from ancient Greek. Canned tuna greatly increased the consumption, but what is finally terminating the bluefin is sushi. Four fifths of the bluefin tuna consumption is for sushi and sashimi. Sushi is seaweed-coated vinegar rice wrapped around a morsel of food such as raw fish, and sashimi is the raw fish by itself.

Bluefin tunas taste good because unlike most fish, they are homeothermic (warm blooded); they metabolize their temperature, like mammals and birds. With a higher body temperature than the surrounding cold water, tuna have a large ocean range. The warmth also enables tuna to swim fast (“tuna” in Greek means “to rush”), which enables them to catch more prey. So bluefin tuna grow up to a size of up to four meters. Continue reading →

Making Whistle-Blowing Pay

Warren Gibson Current Events, Economics, Law, Politics , , , , , , , , ,

The federal bureaucracies are hard at work churning out rules to implement the Dodd-Frank financial “reform” act. In May the Securities and Exchange Commission announced rules for its new whistleblower program, which rewards individuals who provide the agency with “high-quality tips that lead to successful enforcement acts.”

The minimum amount of recovered funds that can earn a reward is $1 million, but the sky’s the limit on the upside. The whistleblower gets to keep 10 to 30 percent of the amount collected, including fines, interest, and disgorgement of ill-gotten gains. We’re talking about big game here, with awards conceivably topping $100 million.

Eric Havian, an attorney with a law firm that represents whistleblowers, noted in an interview with the San Francisco Chronicle’s Kathleen Pender that the securities laws cover a “huge category of bad conduct,” such as illegal insider trading, cooking the books, market manipulation, stock option back-dating, false or misleading disclosures, and the deceptive sales of securities. Almost anything potentially can be illegal, and these vaguely defined offenses leave much room for government mischief. As for insider trading, this is a practice that does little harm and may actually provide benefits to small investors. (See my January/February 2011 Freeman article, “Inside Insider Trading.”)

If corporations felt they needed limits on insider trading or other conduct to attract shareholders, they could write prohibitions into their bylaws so that violations, if not settled internally, could be remedied under civil law. Continue reading →

Possession

Jacques Delacroix Economics, Liberty , , , , ,

Part One: Drying up the tax fountain

I suspect many people have troubling getting a good grasp of the on-going conservative struggle to prevent large-scale takeover of the economy by the federal government. I think there are two main obstacles to their understanding.

First, the idea of the virtuousness of the market as a regulator and organizer of economic life is difficult to communicate. It’s an abstract idea and it does not correspond well to people’s own experience. In their personal life, people think that when good things happen it’s a because someone (some one) made good decisions. First, it’s Mom, and then, it’s the “leadership” of the many organizations within which they live, schools, churches and especially employing organizations. To an extent, the one is themselves.

In daily life, there are few occasions to reflect upon the fact that the myriad decisions made by anonymous decision-makers, including bad decisions, aggregate into good outcomes. The market processes involved are both too magical-seeming and too abstract.

At any rate, for some reason, schools and universities do a bad job of explaining these processes. Liberal Arts teachers don’t understand them themselves and they are hostile to them. Most of them are born socialists. If you eat the King’s bread long enough, you become a monarchist.  Continue reading →

Rare Earth Elements: Stockpile or Markets?

Warren Gibson Economics , , , , , , , , , ,

Quick, what do you know about lanthanum, praseodymium, neodymium, or dysprosium? If you said they are chemical elements, you are right: numbers 57, 59, 60, and 66, to be exact. They and their neighbors on the periodic table, collectively “rare earths,” were once mere curiosities tucked in between barium and tungsten. Now they’re having their day in the sun, thanks to new technology, as did uranium and plutonium when atomic energy was developed. The military may begin stockpiling them.

Good idea or not?

My first encounter with these elements was a project that developed high-tech shock absorbers to protect a replacement camera for the Hubble telescope during the camera’s rough ride to orbit. These devices, called M-Struts, pioneered the use of permanent magnets for shock mitigation. The only material our team found that would provide sufficient magnetic flux density (a measure of the strength of a magnetic field at a given point) was a rare earth alloy, NdFeB (neodymium-iron-boron). This material could only be procured from China.

M-Struts were a one-off project that had no discernible effect on the demand curve for neodymium. But now the demand curve is crowding up against the supply curve largely because of rare earth applications in “green” energy devices such as wind turbines (extra points if you knew that). Continue reading →

America and Firearms (Explained to Overseas Readers)

Jacques Delacroix Current Events, History, Law, Liberty, Politics , , , , , , , , , , ,

The other day, I am watching the news on TV5, the international French language network. I am doing this to get away from the spectacle of the impending economic disaster in the US where I live. This is shortly after the massacre of school children in Connecticut. One item draws my attention: The cute, airhead French female announcer (or “anchorette”) states that last year about 28,000 people in the US lost their lives to guns.

Here we go again, I think. More half-assed information that is worse than no information at all. I have witnessed European media disseminating misleading information about the US for more than forty years. This time again, I have to intervene to help overseas of observers of the international scene who want to know about reality and who might happen to read this blog.

I can’t tell you how often I have witnessed the following: European commentators making sarcastic, superior comments about some American event or custom, or some American way of doing things and then, their society adopting uncritically the same American event, or custom, or way of doing things ten years later, or even later. Right now, for example, I would bet you anything that one of the novelties on French radio is 1990s American popular music. That would be especially true on the channel that calls itself without batting an eye-lash, “France culture.”

The tendency of Europeans to copycat the United States is so pronounced that it even affects social pathologies, the last thing you should want to imitate. Accordingly, it seems that the French expression for “serial killer” is: “serial killer.” N.S. ! (Would I make this up?) Continue reading →

The Mystique of Hedge Funds

Warren Gibson Economics, History , , , , , , ,

Hedge funds are controversial these days. Though it’s unlikely that the average citizen or the average congressman could say just what hedge funds do, many are certain they must be reined in by additional regulation because they can—and do—cause widespread damage to our financial system. Almost everyone takes it for granted that regulation of some sort is the solution, ignoring the possibility that at least some of the problems are actually caused by regulation.

What is a hedge fund? The name implies hedging, a strategy that reduces risk. If you bet on several horses in a race, you are hedging your bets—spreading your risk. You can buy gold to hedge against inflation. You can sell interest-rate futures to hedge the risk that rising interest rates would pose to your bond portfolio.

The first hedge fund was created in 1949 by Alfred Jones. He believed he could pick stocks that would outperform and those that would underperform the overall market. But Jones didn’t know where the overall market was going, so he would buy his expected outperformers and sell short the expected underperformers. He thereby insulated his portfolio from general market moves, which would affect about half his holding positively and half negatively.

Most present-day hedge funds don’t do much hedging, but the name persists. Instead, they engage in a bewildering variety of trading methods, including buying on margin (using borrowed funds) and selling short (selling borrowed assets so as to profit from a price drop). They trade stocks, bonds, options, currencies, commodity futures, and sophisticated derivatives thereof. Some try to anticipate global political or economic events, while others seek opportunities in specific industries or companies. Continue reading →

The Case for More States in Africa? Anarchy, State or Utopia?

Brandon Christensen Current Events, Law, Liberty , , , , , , , ,

Yes please! There is an old article in the Atlantic arguing that more states are just what Africa needs, and I’d like to highlight why I think more states are a good thing, and at the same time pick up Dr. Delacroix’s argument on states and libertarianism from a little while back and explain why I think that more states are a good thing and why Dr. Delacroix doesn’t really understand libertarian thought.

Now, I know more states seems at first glance to be a counterintuitive position for a libertarian to take, but upon second glance I hope to show you why this isn’t true.

First up, from the Atlantic‘s article:

The idea that Africa suffers from too few secessionist campaigns, too few attempts to carve a few large nations into many smaller ones, flies in the face of conventional wisdom. One of the truisms of African politics is that traditional borders, even when bequeathed by colonizers without the least sympathy for African political justice, ought to be respected. The cult of colonial borders has been a cornerstone not only of diplomacy between African nations but of the assistance programs of foreign governments and multinational non-governmental organizations.

I’ve pointed this out from a number of different angles previously here on the blog, so I don’t want to delve too deeply into this, but the article, written by a professor of journalism at Arizona State, has more: Continue reading →

The Myth of the Noble Savage

Brandon Christensen Books, History , , , , ,

Although most academic books and even standardized textbooks for American “students” in public schools no longer explicitly condescend to minorities in this country, there is a certain sense of condescension that still underlies the Left’s rhetoric when it comes to non-European peoples. Jacques Delacroix has given as good an explanation as any, so I’ll just outsource to him on that question, but what I’d like to do is highlight just how much human beings have in common.

When I was in Santa Cruz I found a fairly rare book that I had been looking for forever in one of that wonderful town’s many used bookstores, and it hasn’t disappointed. From Daniel K. Richter’s book The Ordeal of the Longhouse, a book about the Iroquois confederacy and how it dealt with the European factions that arrived in the Americas :

“[…] Champlain and a handful of French musketeers accompanied an army of Algonquins and Montagnais to somewhere near Ticonderoga, north of present-day Albany, to do battle with his native allies’ enemies, the Mohawks.  That hostile encounter was probably the first time [1609] an Iroquois had laid eyes on a European, but it certainly would not be the last (51).”

The French soldiers were essentially mercenaries at this point in time, and albeit mercenaries that had the blessing of the Crown.  Further along in the book, Richter writes on Iroquois slavery practices: Continue reading →

Conservative Environmentalism

Jacques Delacroix Politics , , , ,

Conservatives often affirm that creating alarm over alleged global warming is meant to lead to another attempt at collectivist control of our lives. They say that radical environmentalism is the new communism. This makes sense but I think it misses two marks. First, it makes it sound as if the attempt would be innocent enough if only it failed. Second, it implies a certain conscious cynicism on the part of proponents of the climate change view of the world. I think both assumptions are wrong and that it matters that they are wrong.

The religious cult of climate change generates fervent belief in its followers and it will have done our society much damage even if they fail utterly to impose on us the massive socio-economic transformations toward global poverty they pursue. Its applications are ridden with large, crude errors: Today’s Wall Street Journal (10/29/09) mentions an article in the current issue of Science . The article explains how tax-subsidized ethanol turns out more carbon than gasoline.

My judgment that the climate change movement is a religious cult is based on common, ordinary observations: The forceful denial of contrary evidence, the demonization of non-believers, the attempt to shut up effective contradictors by having them fired, the apocalyptic beliefs, are all religious hallmarks of fanatical religiosity. Accordingly, most of the believers are completely sincere, I think, and all the more dangerous for that reason. It’s a strategic mistake to think they are corrupt. It’s easier to change the minds of the corrupt than of the religiously stupefied.  Continue reading →

The Mysteries of Nature

Jacques Delacroix Liberty , , ,

There is a big stupid redwood tree in the tiny plot in front of my house. It’s stupid because it would be much better off in the forest with its brothers, less than two miles away, rather than littering the sidewalk and threatening my roof. To make matters worse, the utilities company appears to have the right to trim it any way it wants. So, my sequoia looks like an old toilet brush. The city of Santa Cruz won’t let me cut it down and it has the impudence to ask for a special high fee merely to hear my appeal.

Santa Cruz has no manufacturing. It was all run out of town in past years by the left-wing/Green political class. It’s squeezed between the usually breezy Pacific Ocean one one side and wooded mountains on the other. The wind is from the west, from the ocean, four days out of five. My stupid redwood tree right downtown is essential to maintain air purity, I am sure!

Anyway, the redwood tree has one redeeming virtue: It’s home to an abundant and varied fauna. At the apex is a large population of squirrels. They seem to be divided into two tribes, or two ethnic groups. One tribe is red with a tinge of brown, as you would expect in California. The other tribe’s coloring ranges from jet-black to kind of black. The racial strife between the two groups is incessant. At sunrise, they pursue one another across my roof. All day, they set ambushes and they chase the other guys up and down the tree and on the ground.

It’s not always clear what the squirrel warfare is all about. There seems to be plenty of living space for all (“lebensraum,” in German). Or it’s only the old guys fighting over mating rights. Or the old females just being bitchy. Or it’s the young guys that are aggressive because they seldom get any. I know however what they are not fighting about. They are not merely fighting about food as you would expect ordinary forest-dwelling squirrels to do, for example, that must tear each others’ eyes out for every tiny pine cone seed, even every little bitter-tasting acorn. Continue reading →

State of Florida Wants NASA Land

Brandon Christensen Current Events, Economics , , , ,

…so Tallahassee can develop a commercial spaceport.

This is both good and bad. Here’s why:

Liquidating NASA as a government entity will likely have the same type of effect on society that liquidating the computer industry had. There is a lot of technology in NASA that is just waiting to be developed by average, everyday geeks wanting to get rich.

Unfortunately, when I read that the state of Florida wants to buy up land and, presumably, technology from NASA I see a big problem ahead. It’s the same type of problem that always happens when “privatization” occurs. Instead of full-fledged privatization, as was the case when computer-based technology was passed on to the private sector, what we are seeing is a hybrid-type of privatization where the state still has a say in the process.

What’ll end up happening if Florida is any indication is probably nothing with big financial loses. “Nothing” by itself, however, is a bad sign, because again, there is a lot of potential bottled up in the NASA program. If the politicians in Florida really want a commercial spaceport, they would do well to heed to historical precedent and let the greedy geeks of the world make it happen with their own time and money being invested and potentially lost, rather than the taxpayers.

Many good economists have been talking about a “great stagnation” looming ahead for the West – a period where all of the available technology has been used up, as have all the available new ideas – and this stagnation may well come true, but I think that the de-socialization of NASA could help to alleviate this looming problem in a major way. It’s a shame that politicians think so lowly of their fellow citizens.

Also on the backburner: aside from the inevitable failure of a project like this, think of the ominous associations being created with ventures like these. Government and business working hand-in-hand to create a new niche in the economy for the citizens of Florida and the United States. This is the worst kind of fascism at work. The private sector could do much better, as could the American people.

Property Rights in Africa: More Decentralization Please

Brandon Christensen Current Events, Law , , , , , , , , ,

From the economist Camilla Toulmin:

While land registration is often proposed as a means of resolving disputes, the introduction of central registration systems may actually exacerbate them. Elite groups may seek to assert claims over land which was not theirs under customary law, leaving local people to find that the land they thought was theirs has been registered to someone else. The high costs of registration, in money, time, and transport, make smallholders particularly vulnerable to this.

You can read the rest of her article here [ungated version can be found here]. It goes on to elaborate upon how more decentralization is needed, as well as the need for more incorporation of indigenous legal practices. Highly recommended, but grab a cup of coffee first.

Arguments to ponder:

  1. James Buchanan’s work on public choice (elite groups seeking to capture the rent)
  2. Friedrich Hayek’s work on tacit knowledge and the inability to plan societies from the top
  3. Elinor Ostrom’s work on governing the commons and how states muddle the intricate “rules of the game”

Any thoughts? Suggestions for further reading?

Property Rights in the Post-Colonial World

Brandon Christensen Current Events , , , , , , ,

Land grabs and crony capitalism at its finest. From Reason magazine:

Politicians in the affected countries are key partners in operations that resemble the late-19th-century scramble for control of Africa. The land grabs aim at enriching privileged companies and their political allies, usually at the expense of those already on the land. States, companies, and their frequent close friend, the World Bank, see no reason to respect sitting owners and resource users, whatever their rights under customary law and (sometimes) postcolonial statutes. Pastoral nomads get even less respect. In Tanzania, for example, governments and safari capitalists have reduced the traditional grazing lands of the Maasai herdsmen to a fraction of what they were. And in Ethiopia, the government’s “villagization” policy, Pearce writes, resettles peasant farmers “in the manner of Stalin, Mao, and Pol Pot,” clearing the way for deals with foreign capital.

You can read the rest here. I hope to have some more academic articles up as links soon.

Native American Property Rights and European Contact

Brandon Christensen History, Law, Liberty , , , ,

Despite the claim to rights based on discovery, British colonists often acquired land by contract. For example, almost all of Massachusetts was acquired by purchase from local tribes. The primary exceptions there, Salem and Boston, were uninhabited areas, having been depopulated earlier by the diseases the colonists unwittingly brought with them. Although the British crown claimed the sole right to negotiate transfer of land rights from the Native Americans, many colonists thought otherwise and regularly made individual arrangements with various tribes to secure land.

This is from Europe Meets America, a heavy post in the Freeman.