Misdiagnosing Our Health

The March issue of The Atlantic has a heartening--especially for the venue--defense, in a fine Hayekian style (without ever mentioning Hayek, or any of the other libertarian thinkers who have been saying the same things for decades), of American capitalist freedom and a lament for how little most Americans seem to understand or appreciate it. The piece, "Capitalism: The Movie" by Clive Crook, is hooked to some of the usual (correct) observations about how the output of most of our big-deal pop culture storytelling is casually and consistently anti-capitalism as it is practiced in the U.S. of A.

Only the first two paragraphs of Crook's piece are available for free online to nonsubscribers. But some summational excerpts for you:

The point is not that…movies or the culture more generally, argue that capitalism is evil. Just the opposite: it is that they so often merely assume, innocently and expecting to arouse no skepticism, that capitalism is evil.
……
It is astonishing that in an economy of America's size--to say nothing of the world economy as a whole--a limitless variety of goods and services is continuously offered at prices people are willing to pay, without persistent gluts or shortages, entirely without central direction. That the system also calls forth an endless flow of innovation and improvement is a miracle…..And it gets better, because this infinitely complicated, decentralized system has an obvious affinity with personal liberty, in a way that a centrally directed system never could. Market exchange, after all, is voluntary; under central planning, you are told what to do--or else.

This popular unease with capitalism is important and regrettable, Crook says, because

the mood of discomfort and suspicion is a pity in itself, to the extent that it is unwarranted. Also, it fosters a demand for, or tolerance of, frivolous or wasteful interventions by government.

He goes on to blame economists mucked up in specialization unable to sell or explain the larger story of economics: the glorious and complicated and life-giving spontaneous orders that arise from free exchange. And he blames businessmen for talking free markets out of one side of their mouth while calling for subsidies and import protection from the other.

I similarly argued in this Washington Post book review that popular misunderstanding and disdain for free markets is an important dog that didn't bark in Gregg Easterbrook's musings on why increased wealth hasn't led to universal glee.

Comments

[Windypundit]

...he blames businessmen for talking free markets out of one side of their mouth while calling for subsidies and import protection from the other.

Oh yeah. One of the Great Economic Lies is that business and industry are synonymous with the Free Market. Captains of industry and leftist radicals both tell that lie but for different reasons.

[Akira MacKenzie]

I similarly argued in this Washington Post book review that popular misunderstaning and disdain for free markets is an important dog that didn't bark in Gregg Easterbrook's musings on why increased wealth hasn't led to universal glee.

No, increased wealth alone won't lead to universal glee (not that there is such a thing), but I'd like to see how happy a modern, sophisticated, Gregg Easterbrook would be if he gave up his posh, well-paid, pundit income for a life of ascetic poverty. He'd be bawling for his cappichino maker and his 401K in 30 minutes or less.

On a personal, rather than an "universal" level, more wealth would make me VERY, VERY happy. Not because I could purchase all manner of frivolous luxery, but so I wouldn't have to be dependent on anyone, nor would I have to worry (as I so often do) when times get hard. I could pay off my debts, expand on my level of education, save and invest for my retirement, etc.

So don't lecture me about how "money can't buy happiness." I'm dirt poor right now, and frankly, it sucks donkey dick.

[voyeur]

I'm not sure what your saying. A picture would help me understand that better Akira!

[voyeur]

I'm not sure what your saying. A picture would help me understand that better Akira!

[science]

"entirely without central direction"

That seems to be an unanalyzed (and clearly false) assertion.

[matt]

"He goes on to blame economists mucked up in specialization unable to sell or explain the larger story of economics"

That's the bloody truth. We need more Bastiat's and Hazlitt's and less applied mathemeticians.

[matt]

"He goes on to blame economists mucked up in specialization unable to sell or explain the larger story of economics"

That's the bloody truth. We need more Bastiat's and Hazlitt's and less applied mathemeticians.

[none]

On a personal, rather than an "universal" level, more wealth would make me VERY, VERY happy

Lotteries provide nice case studies of what happens to happiness with instant wealth. Anecdotally, it doesn't seem to be true that people become much happier, but I have to say I think I'd be an exception, so I won't tell someone else that they wouldn't be...

[thoreau]

I think I could be a very happy lotto winner if nobody knew that I had won.

[curiously]

why is that, matt?

[Akira MacKenzie]

Lotteries provide nice case studies of what happens to happiness with instant wealth. Anecdotally, it doesn't seem to be true that people become much happier, but I have to say I think I'd be an exception, so I won't tell someone else that they wouldn't be...

That's because lottery winners tend to be uneducated trailer park trash who are somehow capable of blowing through a couple of million dollars in less than a month, only to end up back at square one.

I would submit that if you gave that lotto money to someone with more intelligence (not to mention, class), there is a good chance they'll use it wisely.

[Ron]

Windypundit: You hit the nail on the head. I don't think movies are necessarily anti-capitalist; they are typically anti--big evil corporations oppressing the little guy. It all depends upon how you define "capitalism".

[Native NYer]

My kids have to learn about the various cultures that make up the US and how to express their feelings in school, yet any knowledge of captialism is learned behind the woodshed, or (even worse) at daddy's knee.

[kgsam]

Perhaps people are unhappy because they have the feeling that they are benefitting from an evil system.

[VM]

Native: good thing they didn't learn capitalism in catholic school. 🙂

akira: good call. cheers.

einstein:
still waiting to hear why math is bad... oh. like sigmund fraud and karl jung and the myers-briggs bullshit where you make shit up, don't test it, but run with it. good. gooooooooooood.

sounds like someone got his wee willie weenie stuck in the noam chomsky doll as it deflated ("AGF" returned it when it was still soiled).

no sweaty pillow fight for you.

[Native NYer]

VM - They ARE in catholic school, hence no business education.

They have great penmanship and can sure write stories, though!

[VM]

🙂

[Pro Libertate]

thoreau, I was curious about whether anonymity was a possibility if I won the Florida lottery. It's not--your identity has to be made available upon request. However, if the dollar amount were low enough, not many people would bother to ask for your name. Other than stock brokers and realtors, of course.

My advice to you, therefore, assuming the state(s) you play in take a similar approach, is to only win $10-15 million. Then legally change your name to thoreau. And pay me a small 10% gratuity for my legal advice 🙂

[REM]

I hit the lottery in a figurative manner when I married a woman with a multi-million dollar trust fund. I can't say it has made me any happier.

Life is pretty much exactly the same, except I live in a somewhat larger house with a bigger yard, and I drive a nicer car. I spend more money on travel, but I actually enjoyed the dirt cheap travel better (camping is more fun than staying in a $250 a night resort).

What has managed to make me infinitely more happy is having kids and marrying the woman of my dreams. The money, honestly, didn't make much difference.

Then again, it's not like I was poor before-hand, just normal middle-class....

[Tim Cavanaugh]

I'd like to see how happy a modern, sophisticated, Gregg Easterbrook would be if he gave up his posh, well-paid, pundit income for a life of ascetic poverty. He'd be bawling for his cappichino maker and his 401K in 30 minutes or less.

Easterbrook has pre-empted you on the hypocrisy-detection front. He's pretty straightforward in his belief that people poorer than himself should stay that way, that Mexicans shouldn't be able to buy SUVs, and that he's above the irresponsible behavior he's describing. And that The Jews are responsible for Kill Bill.

I would submit that if you gave that lotto money to someone with more intelligence (not to mention, class), there is a good chance they'll use it wisely.

Don't take it personally, but I despise people who say they want to get rich so they can avoid needless luxuries and use their money wisely. I want to get rich so I can BUILD A FUCKING DIRIGIBLE AND FLY AROUND DROPPING BALLOONS FILLED WITH BUTTERSCOTCH PUDDING ON PEOPLE! Who's to say an economy of people like me, each pursuing his own bliss, won't produce a rational economic result in the aggregate?

[Guy in the back row]

Tim, I'm with you.

I always wondered why people like Bill Gates throw cash away on all sorts of charities and yet don't set out to build a pyramidal tomb for themselves twice as big as the great pyramid. You know, osmehting that will last for the next 10,000 years.

Or carve their face onto the moon or something.

[MP]

I hit the lottery in a figurative manner when I married a woman with a multi-million dollar trust fund. I can't say it has made me any happier.

I am oozing envy out of every pore. Why? My dream life is simple...I don't want to have to work without losing my current lifestyle. If I had found a sugar mama, I know what I'd be doing right now, and it would be sitting here in the office.

[Dan T.]

Capitalism seems great to Americans because it's easy to forget that much of our stuff is made by child slave labor overseas.

[Wild Pegasus]

In the anarchy, if you dropped a balloon with butterscotch pudding on me, I'd blow you out of the sky with my backyard rocket launcher.

ObTopic:

"You know they say money can't buy happiness. Give me 50 bucks and watch me smile." - Bobby "The Brain" Heenan

- Josh

[matt]

curiosly/drf:

If economists ever want to reach the public at large and convince them of the superiority of the free-market over coercive government to solve society's problems they need to lay off the applied math published in your average econ journal. I've got nothing against math in general, but if economists ever want to be truly relevent they need to speak in a language that the public is capable of understanding. (Of course most economists are not libertarians and are fine with their mathematical models, but I was thinking specificly about libertrian-oriented economists.)

[REM]

MP - the flaw in your theory is that rich chicks (or any chick for that matter) don't respect guys who don't work. So, it doesn't matter that I have enough money to live comfortably for the rest of my life - I still have to go to work every day.

The only comfort is that I really couldn't care less if I get fired, so I don't work very hard.

What's really strange is that, just like in Office Space, my career has really taken off now that I don't care what anyone thinks and I stopped working so hard.

[Mike]

the glorious and complicated and life-giving spontaneous orders that arise from free exchange.

It actually has nothing to do with economists being unable to shout the good news across the land. The "problem" with the free market is the inevitability of there being losers. Yes, the vast majority win, but that's a dog bites man story. The man bites dog story is what gets the play: the people, no matter how few, who lose.

Until capitalists learn that 100 "look at that iPod you're holding!" stories don't balance out even one "homeless child freezes to death" story, the free market is going to be the bad guy in the plot.

[Dan T.]

Yes, the vast majority win

Are you sure? It seems to me for every Sam Walton there are thousands of Wal-Mart cashiers.

For every Phil Knight there are thousands of Asian children making shoes for $1 a day.

[Qbryzan]

The "problem" with the free market is the inevitability of there being losers.

I don't know, that seems to be the "problem" with reality is that there are inevitably losers. It's certainly not unique to the free market.

[matt]

Exactly, QB. You said it better than I.

[Tim Cavanaugh]

For a poor family, things can only get better.

Tell that to a poor person who's ever gotten sick, been in an accident, or accidentally shot somebody while hunting quail.

[gjm]

quasibill -

i think a lot of the problem you describe stems from the way econ is taught in schools. at least as an undergrad, you spend most of your time in class solving specific questions based on a model that is handed to you by the professor. e.g., given certain assumptions about demand, solve for the deadweight loss associated with a tax on some good. really, this is the easy part. what they should be teaching is how to come up with those certain assumptions.

math is really secondary to the goal of economics, but the way it is taught in colleges often makes it seem primary.

[tarran]

Quasibill, there is a school of economics that does just that, the Austrian School.

Two of their most comprehensive books are free online:

Cato Institute founder Murray Rothbard's "Man Economy & State": http://www.mises.org/rothbard/mes.asp

and his teacher Ludwig von Mises' "Human Action":

http://www.mises.org/humanaction.asp

[rob]

I think Dan T. took a wrong turn at Albuquerque on his way to the Marx-Lenin chat room...

[Pro Libertate]

Tim, if I ever get "stupid rich", I'm building a Roman villa. Out of marble. On a hill. And my girlfriend and I will walk around in togas speaking Latin. And we'll host chariot races ala Ben Hur.

But money will never change me.

[Peter K.]

Like Tim, I probably wouldn't do responsible things with my new-found wealth. First I'd lease a rocket from Russia and check out outerspace as that one rich dude recently did. Next, at my compound, I'd erect a ridiculously humungus rotating statue of myself, modeled on the one Khazakstan's post-Soviet dictator has.

[VM]

m:

the thing about econ is that there is a ton of room for mathematics. there are massive methodological problems with the austrians, especially in their "rejection" of mathematics. most of it sounds like these people were too smart to pay attention or study hard, and they whine off into the sunset.

just because the populace and the press don't understand math and probablitiy/statistics doesn't mean the disciplines are bad. you have a bad choice of medium, that's one thing, but it doesn't suggest that quantitative tools are broad brush bad. nor does it suggest when the populace and press misunderstand the report that you can immediately finger who was being obtuse. as with press/populace "understanding" of medical studies (viz. 2003 hypertension study), the press and populace are the ones who are missing the boat, however.

i'm working with someone right now on fleshing out some of the methodologies (inclusion of game theory) with austrian econ. i'm just a peripheral, small player here, but i'm helping. lots of the traditional, naive proponents of austrian econ do what many of the austrians do - look at neoclassical economics as it stood in the 50s.

it is not a question of synthesizing micro and macro into one discipline. they (contemporary austrians) have had massive problems with that, including resorting to ad hoc hypotheses. there is room for micro and macro.

it has a lot to add to contemporary economics, but it is far too lacking to replace. it's like your friendly neighborhood chriopractor - maybe has some good techniques, but those who advocate replacing all medicine with chiropractice are fucking quacks. austrian is an alternative/supplemental school at best, right now. its importance lies in its contributions that it can make (and this is where i'm actually assisting)

a study of arbitrage would dovetail nicely in the austrians' rejection of equilibrium. however, it can be explained by arbritrage, and many other components of the austrians cannot explain other observed happenings. (and there's a ton of ad hoc explanation about this, too).

related to this are contributions austrians make to consumer choice under uncertainty - rejecting "perfect information" is a good thing. however, it's dropped after the basic theory is understood. "perfect competition" is also dropped - instead you draw endless fucking edgeworth boxes and talk about cornhole... cournot and bertrand... argh!!!

the usual clif clavin'esque complaints about mathematics are valid for the small group that tries to bombard with math. I have yet to come across such a person or a paper. i've heard about 'em, but never seen 'em. actually, the worst group are the dogmatic few who use ad hoc hypotheses and misdirections and hair splitting. the most recent example was from an austrian. and he, unfortunately, was just as bad as the euro-social-weenie that spoke last semester.

often, people are "frightened" of math and run from there. you need intermediate level math to do advanced economics. it is a shorthand. it is a tool of analysis. just as econometrics is a tool of analysis. nobody credible claims it's The Answer. However, my critique of the austrians is that they claim to have "the Answer" in a Jungian sense.

one thing with econ is that people rush to ask "is X a Keynesian?" and many here on this board then "get worried". the thing is, what most here understand as "supply side" is a mere smoke screen for policies that can be better explained by the keynesian multiplier. Bush's plans are basic demand stimulation. N.G. Mankiw is a "keynesian". and the laffer curve, although it exists, doesn't explain a damn thing about any stimulus from any econ policy we've seen.

nor is t(max) = t(optimal), by the way, but that's how naive laffer curve denizens try to go about it. we're on the ascending side of the curve. all explanations that try to show that economic policy "prove" the laffer curve have to show it, and surprise, none of them do. they're using the words together, but they're not showing a damn thing. one reason could be that they're talking the supply side game, but are playing short term stimulus of keynes. the current administration and the NRO types are big into this right now.

instead of worrying about the mathematics, i'd suggest that we join forces and push to get better rigor in the principles level courses (with most undergrad econ, you're not gonna get into calculus and linear until later on, but you can get a strong foundation before then).

austrian econ offers quite a lot, not as much as Mises et al would like to suggest, as many of their criticisms are no longer relevant, but there is good room for them. they need to relax a bit, 86 the "this is how it is" lingo (like freud and jung), and hop aboard.

(many books and discussions about the gold standard are also naive in this way - i have yet to read anything credible that really suggests going back on gold)

cheers,
VM

[Larry Edelstein]

The thing about capital letters is that they make it easy to read stuff.

[Larry Edelstein]

Since I spend most of my time talking and socializing with people who would identify as liberal progressive, and find it hard to embrace capitalism, and think libertarians are right-wingers, I get to hear their concerns about capitalism all the time. Here are my impressions on why capitalism is defamed:

- Government interference is habitally ignored and industry is habitually blamed. Example: anybody read the first chapter of Fast Food Nation? It talks about how the government subsidized the roads, and then Firestone et al bought up all the rails and destroyed them. Never mind whether that last part is an accurate reflection of events. The point is that it was the government's interference that got them much more than a foot in the door. But my feeling is that nobody really thinks much about that part when they read it, at least not after they read the rest.

- I make a moral claim for capitalism - that it works best for everyone overall. But I am making a tradeoff. I'm trading the welfare of today for more of it tomorrow. I argue that by not attempting to alleviate pain collectively now, we will foster the evolution of better mechanisms in the future. And this is surely true, and more or less fair, since someone should not in general be forced to support someone else. But it IS a tradeoff worth considering, is it not?

- We exercise our prerogatives in the real world, where our trading partners are sometimes in collusion with corrupt governments and their customers and competitors are less well-connected, and less free and educated than ourselves. When we strike deals with these partners, we may be part of the problem.

- Perhaps to state the obvious, capitalism doesn't hide its unpleasantness. When people fail, they fail, it sucks, the market doesn't claim that they're going to be all fine and dandy because of some bureaucrat's largesse.

[ray_g]

Perhaps money can't buy happiness. But it can sure make your miserable, lonely existence a lot more comfortable.

[tarran]

VM, I think you significantly misrepresent the characteristics that diffrentiate the Austrian school from other schools of Economics.

The fundamental axiom that drives the Austrian school is the "Subjective Theory of Value". This axiom posits that value exists only in the mind of someone evaluating an object, and that every individual has an their own valuation of objects.

This leads to a rejection of aggregation of values such as when computing the GDP, since to add the values of various items and services, one has to settle on some unique conversion factor. Since each person has their own matrix of conversion factors, the values that one picks will be by necessity inaccurate.

(An example: I value 10 apples as being equal in value to 2 cups of sugar and four lbs of butter. My neighbor values 10 apples as being equal to 3 cups of sugar and 3 lbs of butter. If my neighbor and I are the sole producers in a little economy, and we produce 15 apples 15 cups of sugar and 60 lbs of butter, what is the GDP of our little economy? The Austrians argue that any calculation will be flawed and thus of very limited utility)

The Austrians do not reject the use of mathematics (this is a common misconception), but rather the usefulness of econometrics as a predictive art.

Again, let us perform a thought exercise. I come up with a theory that caqn be used to definitely predict the demand for commercial passenger aircraft for a year in the future. My theory is so good that any person plugging in the effects of regulations and prices for all major suppliers can arrive at the number of units sold in the next 12 months accurate to within 4 days and 1 unit.

Being a wolly-headed academic I publish my theory, and it proves remarkably predictive and everyone starts to use it.

Now, let us assume that due to some changing condition, there will be a surge in demand, and my theory predicts it. Now how do all the varous players in the economy act?

The aircraft makers may try to maximize their profits by announcing price increases. The airlines will attempt to adjust their demand so that they need fewer aircraft delivered or raise their prices to allow them to pay for their additional costs. Bus manufacturers, railroads and the cruise ship industry will attempt to siphon of passengers affected by the reduced service and rising costs.

In essence all the actors in the economy will attempt to turn the prediction to their own profit, and through their actions negate the prediction. This leads the Austrian school to consider ecnometrics to be a tool for analysing the past, of some use for making qualitative predictions about the future, but pretty worthless for making quantitative predictions about the future.

Now let me turn to gold or "gold-buggery". VM, I fear you have been snared into the common trap of thinking the status-quo is natural.

Money is a comoddity used for indirect exchange. For example, let us say I am an egg farmer, and I want to buy a blanket. If the blanket-maker is allergic to eggs, or does not like them, I cannot get a blanket from him in exchange for my eggs. On the other hand, perhaps he likes potatoes, so I trade my eggs for potatoes and the potatoes for the blanket. In a free market, as thousands or millions of people make millions or billions of exchanges, various comodities will be used for indirect exchange. Just in this century, we have had wheat, gold, silver, cigarettes, green pieces of paper and even stale loaves of bread used in this manner.

While making these trades gradually people will begin to prefer some commodity over others as having the most universal appeal. In the late 19th century, the commodity happened to be gold, but it could have easily but for an accident of history been platinum, glass beads, or uranium. The choice of commodity is not important, the fact that it was arrived at as a result of people exercising voluntary choice is what matters.

The demise of the gold standard was not due to a failure of the standard itself. Rather, various governments during and after World War I sought to purchase items or services for which they did not have the means to pay. So they created the means to pay by first printing receipts for gold that they did not posess, and when the receipts began to lose value relative to other commodities(inflation), and the attempts of people to convert these receipts into gold threatened to bankrupt them, they arbitrarily redefined money to be whatever they said it was, often forbade or severely limited people's ability to own gold and forced people to use the tokens they had decreed in all their trading. This allowed them tocontinue to create more tokens out of thin air and enjoy the term benefits of spending them.

To me, it is not the gold standard (or platinum standard or cigarette standard) that requires defending, but rather the current system of cetnral banks printing paper currencies that are unbacked by any commodity. So far I have not heard any convincing argument in their favour.

Personally, I strongly urge anyone interested in advocacy for free-markets to read Rothbard's work. At a minimum, you will be entertained.

[matt]

VM/drf:

My main point is that economists do not do enough writing aimed at the common man (hence my reference to both Hazlitt and Bastiat.) Most of what they write is read by other economists and ignored, to everyone's detriment, by the rest of the population.

Also,I never said all math was useless. I do believe that there is too much emphasis on model building and not addressing fundamental questions in economics. But even if economists' mathematical models are correct and I am wrong, what good do they do if no one outside of academic economists is familiar with them?

[Dogzilla]

While I agree with Crook, I don't really care for terms like "astonishing" and "miracle".
The fact that the market provides more variety at lower cost, with more innovation is no more a miracle than a rock falling to the ground when you drop it.

[Vanya]

No one has brought up the fact that people seem to instinctively dislike meritocracies, and a real free market would be the perfect meritocracy. People still love what are essentially anti-Capitalist myths - Lord of the Rings, Star Wars, Christianity etc. In all of these world views success is granted by "grace". You are chosen by God, or by birthright (which amounts to the same thing). If you're not chosen by God - if you're an Orc or a Philistine - than the hell with you. I think these kinds of stories make it much easier for people to face up to their own failures. What would you rather tell yourself - 1) I don't work hard enough and can't compete with people who are better at innovation and organization than I am or 2) I wasn't born a King of Gondor so why should I be expected to do anything? As people have pointed out, a true meritocracy is very hard on the losers. At least in feudalism if you were a peasant you could curse God for making you be born into peasantry, it wasn't your fault.

Another problem with free markets is that people are clannish - when given a choice they will instinctively favor their family members, their neighbors, even people of the same ethnic background. The genius of the free market is that it erases the efficiencies this nepotism creates, but on the other hand elites will always fight this tooth and nail and will recreate "crony capitalism" to a greater or lesser degree creating an inherent contradiction. The free market is constantly destroying inefficient family businesses, but most Americans are very sentimental and view this as a "bad thing."

[quasibill]

"a real free market would be the perfect meritocracy."

I don't think I buy that. There are plenty of things that are supremely valuable that the free market doesn't automatically reward, and plenty of things that have nearly zero value that get rewarded handsomely. Think Mother Theresa (or perhaps a clinic doctor in Africa) and Paris Hilton, respectively.

The beauty of a truly free market lies not so much in the good that it provides (which it certainly does) but in the evil that it avoids.

[VM]

terran:

no i haven't been. but thank you for your golden concern 🙂

m:

cool. the problem with many of the books for laypeople is that they frequently are overly simplified and ignore basic principles. the start would be to have better principles in school.

[Jadagul]

VM: if you're still here, do you have any references or stuff I could read? That sounds like a lot of the issues I've been thinking about personally; I'd love to read some more detailed stuff, if you have it.