The writings of Reverend Thomas Robert Malthus (1766-1834) inspired Victorian historian Thomas Carlyle to condemn economics as “the dismal science.” Witnessing the deplorable crowding, poverty, and disease of England’s dirty cities and struck by a grim historical record of famines and epidemics, Malthus embodied academic pessimism. The work that made his reputation and popularized his name was An Essay on the Principle of Population. Malthus felt he was a Cassandra, admonishing utopians to beware of a catastrophic inevitability they could not see: The human population would inevitably exceed the carrying capacity of its environment.
This natural inequality of the two powers, of population, and of production of the earth, and that great law of our nature which must constantly keep their effects equal, form the great difficulty that appears to me insurmountable in the way to the perfectibility of society.
Surrey’s sour scholar essentially believed that human population grew exponentially, whereas agricultural productivity grew arithmetically, i.e., in a straight line. He was partially right. England’s population growth was undergoing a historical uptick during Malthus’ lifetime. However, agricultural productivity was too. Like civilization itself, urbanization was driven by rural agricultural and urban industrial productivity increases and the surpluses attending them. The same process drew Malthus’ eye, ironically enough.
This pattern repeated in the 1970s. Productivity increased in previously undeveloped areas. Population growth swung upward. Cities became crowded. Demographers and economists went into a tizzy. Then huge segments of the global population surged from miserable poverty to genuine prosperity.
Malthus made other contributions to his field, a true intellectual force. How did the latter halves of the previous two centuries so wildly, wonderfully contradict dismal expectations? Here we find the fatal flaw of his argument, and the worldview of many environmentalists. They appraise humanity as an “infant, mewling and puking in the nurse’s arms,” helpless, mouth open, desperately consuming the resources around it.
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Economics seems to be unique among the sciences. Few lay people presume expertise in an empirical science such as mechanical engineering or neurology. If something seems universally obvious, it is said to be “not rocket science” for this reason. Likewise, other social sciences such as psychology (Cosmopolitan, et al. notwithstanding) and anthropology are generally perceived as opaque, technical minefields of jargon which require extensive formal training to navigate. Few letters to the editor offer specific explanations for the Permian–Triassic extinction event (aliens, obviously).
But everyone is an expert when it comes to economics. Or rather, everyone acts like one. Everyone seems to have an opinion about marginal tax rates, notably for the wealthy. Everyone seems to have a prediction about whether China will economically overpower the United States, whatever that means. Everyone seems to have a theory about why the financial system collapsed, blaming a wide variety of culprits including greedy bankers, unregulated bankers, corrupt bankers, stupid bankers, and central bankers. And everyone seems to have a theory about the high unemployment rate (aliens, obviously).
Most tellingly, when presented with a simple argument against trade protectionism, familiar to any diligent student who has spent two weeks in an introductory economics course, they are apt to dismiss the informed party as brainwashed, elitist, or mentally retarded (none of which I am, thank you very much, random YouTube commenter).
My best guess as to why is twofold. Economics is difficult to distinguish from the mundane happenings of daily life because its focus, the allocation of scarce resources, is the stuff of daily life. People take for granted that they know how their own lives work on a basic level. They apply the ‘logic’ of common sense from their own lives to economic issues out of a sense of familiarity. On a related note, economic issues such as taxation and regulation affect everyone. The stock market affects everyone. People have a stake in the game, and feel not only entitled but obligated to have something to say about it. And their sense of involvement makes them feel that they are right.
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As was was widely reported this morning, JPMorgan Chase today released its quarterly earnings statement, disclosing $5 billion of net income after accounting for a pre-tax loss of $4.4 billion due to poorly-executed securities trades made this spring. I previously discussed the political fallout from this episode in an op-ed published by The American Spectator.
Regulators and members of Congress expressed concern that the trading losses illustrated possible systemic risk which could undermine the stability of the financial system and even spark a liquidity crisis, precipitating a financial meltdown, resulting in a global depression.
My basic point was then and is now that even the possibility of crisis virtually never existed. The large, fundamentally sound bank (which under the leadership of Chairman, President, and CEO Jamie Dimon avoided entanglement in the CDO and CDS markets at the center of the housing meltdown and financial crisis) absorbed the hit, made the appropriate “personnel adjustments,” studied what had happened, learned what it could, applied the lessons to its operations, and moved on. This process was well underway before anyone outside of the firm knew about the losses, which Dimon chose to disclose.
Free market advocates are not shills for big banks like JPMorgan Chase, which play politics as well as firms in any other industry. Yet even in this fallen world of crony capitalism, we appreciate the visible contrast between the basic competence of private action conditioned by market signals and the fecklessness and amateurish self-importance of bureaucrats and lawyerly politicians.
Google has been in the news lately for all the right reasons, but also some wrong ones. The FTC is investigating its use of patents held by Motorola Mobility, recently acquired in a deal thought by many to be as much about intellectual property as hardware expertise. The European Union has also fined Google on antitrust grounds, claiming that it unfairly leverages its dominance of online search to serve its promote its own content.
This is not the first time the technology, advertising, and media giant has faced pressure from regulators. Google has fingers in lots of pies. Its name is synonymous with the dominant search engine that made its reputation, and with search itself. It arguably boasts the most popular and capable email platform, Gmail, integrated with a constellation of cloud services and social networks including Docs, Play, YouTube, Maps, Picasa, and Drive. Indeed, the same integration that draws competitors’ ire and regulators’ scrutiny is a crucial element of the firm’s UVP. It has turned Android into a mobile operating system that rivals and in some cases surpasses Apple’s iOS. And its Chrome web browser recently overtook Internet Explorer as the most popular in the world, commanding almost a third of global market share barely four years after its release. The question is, does Google constitute a monopoly?
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Michael Bloomberg is as notorious as any American politician of our time. The New York Mayor’s recently proposed ban on “sugary drinks” larger than 18 ounces is the latest example of nannyism that has included a ban on trans-fats and a threatened ban on salt in food preparation. However, the soft drink ban stands out as almost charmingly arbitrary. Sodas and sweet teas are affected, but not fruit smoothies, for example, which are highly caloric. The ban applies to restaurants, but not grocery stores. And it is entirely possible that vendors will simply offer special deals on multiple small drinks, though they would risk the wrath of what might be called food fascism.
People whose livelihoods are not directly tied to New York City’s hospitality and tourism industries may not live in fear of Mayor Bloomberg’s edicts, but the fact is that they are backed up by force. Non-compliance will result in fines and other penalties, which if ignored will result in arrest, which if resisted will result in the initiation of force by law enforcement officials. Consider that term: law enforcement. The law is effected by the police force, not the “police suggestion.” Said body is given an awesome responsibility, a monopoly on the initiation of force in civil society.
This is a serious matter, which is why every law must have some sort of legal justification. The Fifth Amendment, which applies to state and local governments according to a process of incorporation under the Fourteenth Amendment, forbids the deprivation of rights to life, liberty, or property without due process of law. Thus, there must be a compelling state interest in the prohibition of certain businesses from selling certain sugary drinks of a certain size. The interest Mayor Bloomberg cites is promotion of the general welfare.
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