Monday, November 20, 2017

Automation and Jobs: Perfect Together

The following letter appeared in the New Jersey star-Ledger on 11/15/2016:

Especially now that the election is over, I'm concerned that our thinking about American jobs is short-sighted. Eventually, new jobs in infrastructure and services won't be enough. The problem is not immigration or globalization; it's automation.

Already, robots build cars, perform surgery, check us out at stores, clean floors, help fight wars, move merchandise in warehouses, and do most office work. Soon they will drive buses, taxis and trucks. Manufacturers are slowly returning to the U.S. from the cheap labor overseas, but they're looking to hire robots here more than workers.

So it's very possible that in the future, the idea of working for a living will become a thing of the past. Full-time work will be the exception; most adults will work part time or not at all. We will need to find new ways to provide people with the resources to live on. A universal basic wage for everyone, whether he or she works or not, may be one of them. Portable benefit arrangements for gig workers as they move among jobs may be another.

Such changes will be difficult and we should start talking about them soon.

Brock Haussamen, Manasquan

I left these comments, edited and expanded for clarity:

The entire history of technological progress, which is really only about 250 years young, has been that of more production with fewer, less hard hours worked, leading to higher real wages, cheaper goods, new and/or expanded industries, and steadily rising and healthier living standards. How is this possible? More automation frees up capital, labor, and consumer dollars, providing fuel for entrepreneurs to keep the virtuous, progressive cycle going. This is basic economics.

What new industries? Who knows? No one is omniscient. What history has shown is that so long as the their is intellectual, political, and economic freedom—the social pre-conditions for progress—new industries will emerge because the fundamental source of progress is the individual human mind. Free markets liberate all of the millions and billions of individual minds. No one can predict which minds will generate the new ideas and new initiatives that lead to progress. What we do know is that there will be progress, because there are plenty of progressive minds out there, and no limit to the field of ideas, the source of that progress. At the dawn of the Industrial Revolution, 90%+ of the people were farmers. Today, less than 2% are. Yet, we don’t have 88% unemployment. Anyone who wants to work can find work. Where did all those jobs come from? From industries the technology worrywarts didn’t and couldn’t see coming. What we do know is that free minds and free markets generate progress.

Haussamen worries that “Full-time work will be the exception.” Even if true, what’s wrong with that? Thanks to the new wave of robotic automation, we are probably headed for a 30-hour workweek (or less) and higher living standards to replace the 40-hour workweek that replaced the 100-hour work week that barely supported pre-industrial poverty. Imagine the extra free time—your precious time, to do something else you love, whether a hobby or another “part-time” job or [fill in the blank].

Of course jobs can become obsolete, creating unemployment problems for some. But no one is entitled to a job that no one is any longer willing to pay for. Neither is anyone entitled to a guaranteed “basic income” paid for by forcing others to provide it. How will permanently paying people not to work solve anything? Who will build and maintain the machines?

Haussamen does offer one good idea: portable benefits. But automation fear is as old as human progress, and just as short-sightedly anti-progress. We need dynamic full-context thinking, not the regressive stagnant views of the Brock Haussamens of the world. The last thing we need is to “Plan now for future labor issues”—i.e., individual mind-stifling central planning.

Related Reading:

The Myth of Technological Unemployment: If the nightmare of technological unemployment were true, it would already have happened, repeatedly and massively, by Deirdre Nansen McCloskey.

The Capitalist Manifesto—Andrew Bernstein

Saturday, November 18, 2017

Why Pick On ‘Rich Corporations’, Benefactors of the Middle Class?

The rhetoric over the Republican tax plan more often than not is long on meaningless generalities and short on rational analysis. Consider the New Jersey Guest editorial by NJ Senator Cory Booker, Trump's unfair tax plan will harm average New Jerseyans. Booke, whom I consider one of the more balanced Democrats, seems more concerned with not cutting taxes for the rich that fairness for average New Jerseyans:

At the start of every month, in New Jersey and across the country, countless families sit down to plan their household budget. They are making hard decisions about how to juggle their mortgage, college tuition for their kids, grocery bills, and the cost of medical care, all while hoping to have something left over to save. And too often, as costs rise and wages stay the same, instead of savings, bills stack up, payments are missed, and debt grows.

Meanwhile, down in Washington, Congressional Republicans and President Trump are also working on a budget. But despite the real needs of everyday Americans, the plan the President and Congressional Republicans are announcing today is a massive tax giveaway to the largest corporations and wealthiest individuals at the expense of those who need tax relief the most.

I'm fighting hard to make sure that New Jersey families and homeowners aren't made to shoulder the burden of a massive tax giveaway to the very richest corporations and individuals in this country. That begins with stopping schemes like eliminating the state and local tax deduction, and your voice is critical in this effort.

Booker’s complaint seems to be that eliminating the state and local tax deduction while cutting corporate tax rates (individual rates appear to be staying at 39.6%) amounts to forcing middle class taxpayers “to shoulder the burden” of the “tax cuts for the rich.” This seems superficially true but they are really two separate issues.

I left these comments:

I can see debating the merits of the GOP tax plan. By why the railing about the rich? This mindset is particularly bizarre in regard to corporations. How do “rich corporations” grow? By catering to the middle and lower classes (statistically speaking). They grow through mass market products.

We have successful business corporations to thank for the fact that we have the rich assortment of choices relating to home mortgages, college tuition, groceries, medical care, and all the other myriad choices corporations give us, including job opportunities. Historically, people couldn’t even dream about having all these opportunities to “balance”. We have successful business corporations operating in a relatively free market to thank for that. The simplistic political demagoguery that pits “us against them” ignores the fact that the corporation is an alignment of individual interests that benefits all. What we call “the economy” is an integrated entity, not a disintegrated zero-sum. People grow wealthy in America primarily by starting, building, running, and investing in great entrepreneurial businesses. Investors, employees, and consumers grow along with the corporations. The “very richest, largest, and most profitable corporations” are truly middle class institutions.

A business corporation—what Steve Jobs called “one of the most amazing inventions of humans”—is a legal and abstract framework for people to work together toward a common productive mission. The money the company earns in revenues and profits furthers that mission, until and unless it is paid out in employee compensation, dividends, interest, and capital gains for investors, and mass market products to consumers—at which point it is taxed through sales taxes. A corporate tax is in effect double taxation.

A corporate tax is dishonest and regressive. We can see the property taxes we pay. We can see the personal income taxes. We can see the sales taxes. But it’s not so clear that we as investors, employees, and consumers are actually the ones paying the corporate income tax. But, one way or another, we are. The corporate income tax is a way for politicians to suck more money out of all of us without us seeing it. Given that corporate profits fuel innovation and growth, it hurts us all. Only individuals pay taxes, and we can debate how these taxes should be distributed (I favor a single flat-rate tax). But it’s stupid to tax the corporation, before it filters into individuals’ hands. Far from complaining about the corporate tax cuts, we should demand an end to corporate income taxes.

Related Reading:

Thursday, November 16, 2017

Studebaker Review, Part 5: Conclusion

Studebaker highlights the period “between the 1930’s and the 1970’s, [when] the United States drastically reduced economic inequality” through wealth redistribution policies. Well, let’s take a look.

First, the 1930s:

Consider two depressions—the one starting in 1920 and the one starting in 1930. The 1920 depression was actually the sharper downturn. Yet, the 1920 depression ended in 1921, followed by a powerful job and innovation filled boom under the relatively free market Coolidge policies. The 1930 collapse (which succeeded the 1929 stock market crash) lasted 4 years, followed by economic stagnation and depression that didn’t end until Truman took over and WW 2 ended. It’s utterly ridiculous to say that economic inequality caused the Great Depression. Both the 1920 and 1930 downturns were corrections to the inflationary Federal Reserve policies. But the differing aftermaths were the result of the differing federal policies in response to the downturns. In 1920, Wilson (and later Harding) did nothing but let the economy run its course. In 1930, Hoover responded with “a whirlwind of intervention,” which was followed by FDR’s even bigger whirlwind, which he largely built upon Hoover’s policies. The result was not a quick recovery and boom but a 15 year Great Depression. (See my review of 1921: The Forgotten Depression.)

The myths surrounding Hoover, FDR, and the Great Depression have come under scholarly scrutiny in recent decades and are being corrected. The 1930s depression was caused and exacerbated by government interventions. Obama’s policies are a weaker version of FDR,s so of course we have the weakest recovery in American history.

Likewise, Studebaker blames the 1970s on the oil price shocks engineered by the OPEC oil cartel. But the 1970s “stagflation” followed the big regulatory welfare state expansion of Johnson and Nixon, as well as Nixon’s abandonment of a gold-backed dollar. The job and innovation-filled 1980s/90s expansion followed the Carter/Reagan deregulations and Reagan tax rate cuts. In 2001, big government resurfaced, and the results were predictable. the economy sagged. But economic inequality and alleged lack of consumption are not causes of economic stagnation. The ups and downs of the economy correlate roughly and inversely with the increase or restraint in government intervention.

What about the 1950s? That period of 91% income tax rates was marked by chronic recession and rising unemployment, which led John F. Kennedy to run, and win, on a platform of “getting America moving again.” He cut income tax rates across the board, bringing the top rate down to 70%, paving the way for 1960s recovery. The actual history of the 1950s through the 1980s is laid out in JFK and the Reagan Revolution: A Secret History of American Prosperity by Lawrence Kudlow and Brian Domitrovic.

Even by Studebaker’s macro viewpoint, his conclusions don’t make any sense. A glance at Studebaker’s chart showing inequality trends between 1913 and 2012 shows a clear correlation between rising inequality and a rising economy. I can point to more macro data to show this. Despite all of the Leftist shouting about inequality—which, of course, has increased—“the masses” are getting better, not worse as the propaganda would have us believe. As Pew research reports, every world economic income classification—low, middle, high, and upper—increased between 2001 and 2011. Only one category—extreme poverty—declined, from 29% to 15%. Progress continues. According to the World Bank, extreme poverty worldwide is now about 10%. This is no coincidence. True, some people get rich by graft and pull. But, by and large, fortunes are market driven.

And periods of market-driven “extreme inequality” correlate with periods of rapid economic progress, not depression. In the U.S., the period between the Civil War and World War 1, and the “Second Industrial Revolution” between 1980 and 2010 are two periods marked simultaneously by rising economic inequality, rapid technological advance, and rapidly rising living standards as entrepreneurs seized on the relatively increased freedom to flourish, pulling the rest of us up with them. Correlation doesn’t prove causality, of course. But the mass-market products that fill the lives of consumers and the millions of people who flock to work for the entrepreneurs’ companies is proof. Again, relate to “individuals and personal narratives.” Now, its spreading around the world. Who would want to shackle “the 1%”—the best, brightest, most visionary, and most ambitious? Not anyone concerned with “lifting the poor,” or of reversing the alleged decline of the middle class.

And since the world is getting richer overall, the consumer market is bigger overall. It follows that the rewards for creating mass-market products increases commensurately. Simple statistics show growing inequality, but not the whole story. Of course the “wealth gap” is larger. Fortunes of the most productive entrepreneurs are larger because the sheer numbers of consumers is larger. The attack on the so-called “1 percent” is an attack on all of us, in the same way as the oppression of any group hurts us all.

Studebaker’s article is so full of fallacies, omissions, and non sequiturs that it would take a book to refute; in fact, books have been written. But on one thing I’ll agree with Studebaker—the Clinton/Sanders rivalry matters more than people think. It’s not so much a matter of policy: Clinton’s policies aren’t all that different from Sanders’. It’s ideological. It’s a battle between the old Left and the New Left—which means, between the mixed economy welfare state and explicit nihilistic, totalitarian socialism.

The old Left—e.g., JFK, Humphrey, Carter, Bill Clinton—was primarily concerned with lifting the poor, and their welfare state policies reflected that. Despite her recent politically expedient New Left-style rhetoric, I see Hillary as one of the last of the old Left. The New Left—e.g., Obama, Elizabeth Warren—is nihilist to its core. It is primarily concerned with destroying economic success, based on a radical egalitarian vision that runs counter to human nature. Ideologically, if not by age, Sanders is squarely with the New Left. Yes, the 2016 Clinton/Sanders rivalry does matter. Will Sanders’ Leftward/statist,collectivist lurch prove to be a temporary thing? Or did he pull the Democrats permanently more toward socialism? I think the latter. And that’s not good.

Related Reading:

My Objective Standard review of  The Forgotten Depression—1921: The Crash That Cured Itself by James Grant

Equal Is Unfair: America's Misguided Fight Against Income Inequality—Yaron Brook and Don Watkins

Wednesday, November 15, 2017

Studebaker Review, Part 4: the Money-Equals-Wealth Fallacy

Steve Forbes sets the record straight on money:

Today the U.S. and the world are suffering grievously from a cart-before-the-horse mentality when it comes to how central banks approach money. Reflecting obsolete thinking that grew out of a misdiagnosis of what caused the Great Depression, these institutions and their political masters believe that money controls the economy. Manipulate interest rates–the price lenders charge borrowers–and, voilà!, you can steer the economy like a driver does a car. Regarding this, Keynes and his followers had it exactly backward. Money reflects the real economy, which is the production of products and services. It no more directs what we buy and sell than scales control a person’s weight. Money is not wealth; it measures value the way watches measure time. Money is a claim on services and products, just as a ticket can be a claim on attendance at a concert or for a coat checked at a restaurant.

We often hear the absurdity that goes something like this, “The 1% owns 95% of the wealth.” But when you take a proper understanding of money into account, you’ll find that we have amazing wealth equality.

As Barry Brownstein observes:

The essential consumption goods we couldn’t even imagine a hundred years ago are almost universally available in the United States today. The marketplace, aided by many creative, pioneering entrepreneurs and every person who strives to put in a good day’s work, is generating consumption equality.

And as Andy Kessler observes, quoted in Brownstein’s article:

Just about every product or service that makes our lives better requires a mass market or it’s not economic to bother offering. Those who invent and produce for the mass market get rich. And the more these innovators better the rest of our lives, the richer they get but the less they can differentiate themselves from the masses whose wants they serve.

Industrialist Charles Koch calls this simply “Good Profit.” Thank the “1%” for our incredible standard of living! Thank capitalism for allowing economic inequality to flourish. And reject the inequality alarmists. These economic egalitarians are no friend of “the 99%.”

Again, all it takes to know this truth is introspection—and observation. Which are the biggest retailers? Not Jaguar. It’s the Wal-marts and the Home Depots that cater to average folks.

Studebaker’s premises don’t add up. Then where does that leave his macro observations?

To be continued.

Related Reading:

My Objective Standard review of  The Forgotten Depression—1921: The Crash That Cured Itself, by James Grant

Equal Is Unfair: America's Misguided Fight Against Income Inequality—Yaron Brook and Don Watkins

Tuesday, November 14, 2017

Studebaker Review, Part 3: the Economic Inequality Fallacy

2-- Economic inequality comes in two forms—government-favor driven (a bad kind, such as resulting from Fed-driven financial speculation and business subsidies), and market driven (the good kind, such as resulting from investment in private enterprise). Financial speculation driven by artificial monetary expansion and government subsidies allows some people to gain at others’ expense, leading to unjust economic inequality—in fact, it’s not the economic inequality that’s the problem, it’s the unjust that’s the problem. Investment- and work-driven inequality lifts everyone through trade, in which every participant wins and no one losses, leading to perfectly just economic inequality—once again, it’s not the inequality that’s the good, it’s the investment. In fact, economic and income inequality are irrelevant side effects. But I’ll use the terms “good” versus “bad” inequality just to make my point. Since the subject of Studebaker’s article is economic health, I will focus on the “good” kind, because only market inequality correlates to overall economic health. Once again, it’s important to get past the economic mysticism and focus on real people.

Market driven economic inequality is a sure sign of a just and prosperous society, because it indicates a society where individuals are free to rise as far as their unique individuality—their talent, ambition, temperament, moral character, values, and personal circumstances—will carry them. Since a free society is one of freedom of production and trade, every dollar earned represents wealth created and passed on to someone else, in exchange for that person’s money which she herself earned by creating wealth for someone else in exchange for monetary payment. What one earns is determined by the economic value of his work product, as determined by the judgement of the people who buy from (trade with) him. The amount of value one creates for others determines how much he makes, so it logically follows that the people who create the most value for the most people make the biggest fortunes. Keep in mind that the basic source of wealth is intellectual labor, which has unlimited potential, not physical labor, which is obviously very limited. The so-called “top 1%”—a euphemism for “anyone who makes more than me”—don’t take “more than their fair share” from some mystical pie. They get there by trade, the win-win transaction based on mutual benefit—i.e., getting better together. Every earned dollar represents a unit of wealth created, and a fortune represents a lot of wealth created. Unfettered economic activity is not a zero-sum game, but a cooperative human process of ever-expanding production to meet ever-expanding human desires.

Once again, a little introspection à la Obama can prove this point. I’m writing on a Dell computer, driven by Microsoft 10. My wife uses Apple products. We both use Facebook and Google. In so doing, we are contributing to the fortunes of Michael Dell, Bill Gates, Steve Jobs, Mark Zuckerberg, and Larry Page & Sergey Brin. Are these “1 percenters” hurting us? No. They’ve made our lives better. And they make the lives of hundreds of millions of people better as their fortunes grow. You will find that all market fortunes, including the so-called “robber barons” of the 19th Century early capitalism, arose by making untold millions of lives better, not just in terms of goods and services but in terms of jobs and opportunity. This does not mean the producers are altruists. Far from it. Thankfully, they’re selfishly driven, like the rest of us. And that’s a good thing. The nature of trade is voluntary exchange to mutually selfish gain. We should want more fortune-builders—market driven “1 percenters.”

The fact is, market fortunes of every kind trace back to the creation of mass-market products made affordable to the average person. J.K. Rowling, the novelist, is now a billionaire. Think of how many millions of people enjoy Harry Potter. How many people are worse off for Rowling’s fortune? How many of us are threatened by the Rowlings or the Dells of the world, as the anti-1% purveyors of paranoia say we are? None. Economic inequality—the good, market kind—doesn’t make the economy worse. How can it, when the result is improvements to untold millions of people’s lives. You can bet that the purchase of virtually every mass-market product that fills the shelves of merchants is adding to someone’s wealth and/or fortune. And every one of those purchases is done by consumers who judge the transaction to be a net gain. If it’s not, why buy the product?

In fact, The vast majority of benefits of successful entrepreneurs, no matter how big their fortunes, accrue to consumers—up to 96%, according to a Yale University Study. Again, let’s look at the personal narrative. How much did my Dell laptop add to the fortune of Michael Dell? An undetectable amount. Dell’s fortune is built on benefits given to hundreds of millions of consumers like me. Consumers have gotten $trillions in benefits. That amount dwarfs Dell’s $24 billion fortune. (And this doesn't take into consider the value of the jobs Dell created, both for his company and his suppliers.)

Be careful of statistics, which rank below damned lies. Statistics showing wealth inequality typically ignore the value of the products received by consumers in exchange for the money the provider receives. The inequality alarmists look at money in the hands of the rich, but ignore the value of what really counts—the material wealth in the hands of consumers. Why? Because they commit another fallacy: They equate money with wealth.

Related Reading:

My Objective Standard review of  The Forgotten Depression—1921: The Crash That Cured Itself, by James Grant

Equal Is Unfair: America's Misguided Fight Against Income Inequality—Yaron Brook and Don Watkins

Monday, November 13, 2017

Studebaker Review, Part 2: the Consumption Fallacy

1-- Consumption, as such, is not a primary factor in the economy. Production and trade are the primary factors. Consumption is the end goal of economic activity. Consumption is the motivator. But it is not the driver. Production is the driver. It’s not enough to need or desire something to consume. Need and desire won’t bring the non-existent consumer products into existence. Only productive work—reason-guided physical labor—can bring consumer goods into existence. To consume, we must work so we can consume what we created through our work—or trade our work product for the product of others’ work.

When we speak of the economy, we speak of production and trade. The economy is production and trade—specifically, creating wealth in the form of goods and services for the purpose of trading with other producers to obtain all of the goods and services we need and desire. Money greatly facilitates and expands production and trade, by enabling producers to create value for one producer in order to obtain values from another producer. But the basic principle—production comes before consumption—is the basic law of nature that can’t be escaped from. Production, of course, is driven by investment. Those of us who save $1 dollar or more—i.e., consume less than we earn—contribute to future production, which is needed to fuel future consumption.

A little introspection proves the point. Studebaker says we “focus too much on individuals and personal narratives.” That suits his propaganda purposes. But as Obama once said in discussing government finances, “What’s true for individuals is also true for nations, even the most powerful nation on earth.”

The macro view is useful, up to a point. But, if you want to properly judge economic policies, just ask yourself what they would mean for you if you implemented them on a personal level (which is exactly what Studebaker doesn’t want you to do).

Try eating a cake before you’ve baked it. You can’t. And neither can you trade an unbaked cake for money. If you haven’t produced a cake to offer in a trade (or the contractual promise to deliver a cake on some future fixed date), who’s going to give you money? So how can you do it as a nation, through massive deficit spending? You can’t. Yet Studebaker advocates just that; a reinvigoration of massive redistribution of wealth not only from the rich on down (He praises 90% tax rates) but within the middle and lower income groups (Studebaker praises Social Security and Medicare). Every dollar a government spends is a dollar taken from someone who first had to earned it through productive work. A government can not create demand. It can only redistribute it. It can not increase consumption. It can only divert it. Can you help yourself by running up credit card bills to fund overconsumption? Not for long. The government can seem to do it only because it can stick producers—taxpayers—with the bill. This may show up, temporarily, in higher GDP numbers. But the economy hasn’t expanded one iota.

A nation, taken as a whole, cannot consumption spend its way to prosperity any more than can an individual can. The crew and passengers of the USS Minnow couldn’t do it on Gilligan's Island. They had to work. Chuck Noland (played by Tom Hanks) couldn’t do it on his Castaway island. He had to work. No individual can do it, and neither can a government through “stimulus” schemes. “What’s true for individuals is also true for nations.”

Part of the confusion regarding “consumption economics” comes from the idiotic method we use for calculating the economy, which is based on the ridiculous idea that consumption is 70% of the economy, as if you can consume twice as much as you produce. In fact, consumption represents only about 40% of gross domestic product, which measures money changing hands. The rest is production and investment, as it logically must be. But the consumption theory of economics lives on because it serves as a great rationalization for “stimulus” programs of the Bush and Obama kind, which in turn adds to political control of our economic lives.

Once again, you can’t consume before you produce; nor consume more than you produce. The  idea that you can has led to disastrous political policies of government officials spending our money to “stimulate” the economy, including forced redistributionism, which in turn drains savings and investment capital and punishes (disincentivizes) producers, in turn hampering production and trade. George Reisman zeroed in on the essence of consumption economics—slavery. Studebaker says government should confiscate the savings of the rich, give it to the non-rich so they can spend it, which in turn will spur the rich to invest and work to replace the money that was taken from them to begin with. Reisman explains:

The idea that by consuming his product, one benefits the producer, by giving him the work to do of making possible one’s consumption, is absurd, the productionist holds. Only the use of money lends it the least semblance of plausibility. If it were true, then every slave who ever lived should have cherished his master’s every whim, the satisfaction of which required of him more work. A slave should have been grateful if his master desired a larger house, an improved road, more food, more parties, and so on; for the provision of the means of satisfying these desires would have given him correspondingly more work to do.

The belief that the consumption of the government benefits and helps to support the economic system is on precisely the same footing, the productionist argues, as the belief that the consumption of the master benefits and supports the slave. It is a belief the absurdity of which is matched only by the injustice it makes possible. It is the means by which parasitical pressure groups, employing the government as an agent of plunder, seek to delude their victims into imagining that they are benefitted and supported by those who take their products and give them nothing in return.

Why would anyone voluntarily perform unrewarded work so others can consume? One wouldn’t. Let’s break it down to the thing Studebaker dreads, the “personal narrative.” Suppose you owned a convenience store. Now suppose some thief came into your store and emptied your cash register. Now suppose the thief went home and handed the money to his wife, who then takes the money and returns to the convenience store, loads up her shopping cart with goods off the shelves of the convenience store, and pays for the stuff with the money her husband stole from your cash register. Would you be better off? In Studebaker’s policies, the government is the thief. This is what Studebaker advocates when he lauds policies instituted “between the 1930’s and the 1970’s” when, to “drastically reduced economic inequality,” the United States

redistributed wealth from the top to the middle and the bottom, resulting in consistent wage increases and consequently consistent consumption increases. This allowed investment to be put to effective use–because the bottom and the middle were rising, they were able to support the additional spending that business owners needed to successfully expand.

Many U.S. businesses did indeed “successfully expand.” But not thanks to redistribution. Would you call it a “successful expansion” when the thief returned to your hypothetical convenience store? Studebaker’s article is full of such non sequiturs. Now you know why Studebaker doesn’t want you to focus on “personal narratives”: Such real-life examples refute his premises. Macroeconomics is an escape hatch from economic reality. That’s why statists love macroeconomics.

Government spending has correlated to the grinding down of the economy over the past 15 years. Government spending is not the only cause. But it is a big one. Consumption economics is a fraud. But it serves a useful purpose: It serves as a justification to redistribute the wealth away from the successful, who do most of the investing, to lower income groups, who are more likely to spend on consumption, or to simply feed tax-and-spend government policies.

Related Reading:

My Objective Standard review of  The Forgotten Depression—1921: The Crash That Cured Itself, by James Grant

Equal Is Unfair: America's Misguided Fight Against Income Inequality—Yaron Brook and Don Watkins

Sunday, November 12, 2017

My Review of the Article Why Bernie vs Hillary Matters More Than People Think by Benjamin Studebaker

The 2016 election is over. But the lessons of the Democrats’ primary clash between Hillary Clinton and Bernie Sanders still matters.

Why Bernie vs Hillary Matters More Than People Think by Benjamin Studebaker is a rehash of Leftist economic thinking long established, oriented toward another attack on income inequality. However, Studebaker is on to something important in highlighting the 2016 Clinton/Sanders Democratic presidential primary clash. I’ll get to that later. First, I want to wade into Studebaker’s economics.

I completely reject Studebaker’s two main premises: the idea that consumption drives the economy, and the idea that economic inequality is in and of itself a harmful economic phenomena. The first premise ignores the fact that production comes before consumption. The second is based on two interrelated fallacies: One is the idea that the economy is a wealth “pie” of fixed quantity in which one person’s gain necessitates another person’s loss. The other is that money is wealth.

Studebaker uses a common trick to sneak in those false premises—macroeconomics. Macroeconomics was pioneered by Keynes, and consists essentially of the idea that the thing we call “the economy” is an entity in and of itself, apart from the actions of the individuals that comprise it. Statistics is a common tool of macroeconomics. Studebaker focuses strictly on the macro view, and thus statistics, while steering away from actual individual activity, where “the rubber meets the road” (where theory meets practice). Studebaker is explicit about this. He wants to deliberately turn our attention away from the human connection; We “focus too much on individuals and personal narratives,” he says.

But you can’t understand the economy, or candidates’ economic policies, without remembering that the economy is about “individuals and personal narratives,” and nothing else. “The economy” is not some mystical entity above and apart from individuals. Nor is wealth a fixed quantity, where one person gains only at the expense of another (or others). Studebaker would like us to believe both fantasies. People who want to put something over on others always resort to collectivism, which is a specie of mysticism—i.e. an escape from reality. Individuals—you, me, anyone who works, spends, saves, trades—are the economy, each to the extend of his work and trade. The economy is nothing more than the sum of these individual activities. To say we should not focus on individual narratives is to ignore the real economy.

It’s not that a macro view is of no use. I use statistics myself sometimes. It’s that the macro (big picture) view is useless without the validation of individual connection. That’s where the evidence is. Statistics are not evidence. They are correlations, not causality. No wonder Studebaker steers away from that connection to reality. That paves the way for statistics, from which he is free to draw arbitrary conclusions. Without those two false premises, Studebaker’s whole article collapses. Nothing new there. It is a hodge-podge of fallacies, omissions, and non sequiturs, intended not to educate but to obfuscate. In my next few posts, I’ll give my thoughts on each in turn.

Related Reading:

My Objective Standard review of  The Forgotten Depression—1921: The Crash That Cured Itself, by James Grant

Equal Is Unfair: America's Misguided Fight Against Income Inequality—Yaron Brook and Don Watkins