Law professor llya Somin notes a “lesson of the original Thanksgiving: that the Pilgrims nearly starved to death because of collectivism and eventually saved themselves by adopting a system of private property.” He then highlights an article by economist Benjamin Powell:
Many people believe that after suffering through a severe winter, the Pilgrims’ food shortages were resolved the following spring when the Native Americans taught them to plant corn and a Thanksgiving celebration resulted. In fact, the pilgrims continued to face chronic food shortages for three years until the harvest of 1623. Bad weather or lack of farming knowledge did not cause the pilgrims’ shortages. Bad economic incentives did.
In 1620 Plymouth Plantation was founded with a system of communal property rights. . .People received the same rations whether or not they contributed to producing the food, and residents were forbidden from producing their own food. . . Because of the poor incentives, little food was produced.
Faced with potential starvation in the spring of 1623, the colony decided to implement a new economic system. Every family was assigned a private parcel of land. They could then keep all they grew for themselves, but now they alone were responsible for feeding themselves. . .
This change, [Governor William] Bradford wrote, had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been. Giving people economic incentives changed their behavior. Once the new system of property rights was in place, the women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability.
Once the Pilgrims in the Plymouth Plantation abandoned their communal economic system and adopted one with greater individual property rights, they never again faced the starvation and food shortages of the first three years. . . .
Professor Somin also links to this 1999 article by Tom Bethell, which provides a more detailed account of how property rights saved the Pilgrims.
[youtube:http://www.youtube.com/watch?v=MEkpVXv0SYs 285 234]
As reported in Business Week’s BTW section, the U.S. Chamber of Commerce recently studied the word associations people have with various free-market terms.
The results were not surprising; some terms that generally mean the same thing bring starkly different associations. The piece quotes Rich Thau, who ran the testing, as saying:
“There were those who associated ‘capitalism’ with greed and with the powerful dominating the vulnerable.” But those negatives, he says, didn’t apply at all to “free enterprise.”
Call it capitalism or free enterprise; to me it doesn’t matter as long as it’s free. But indeed, for full impact in convincing those on the fence, it probably does matter how you say it.
HT to Claire S. Forman at the Mackinac Center for Public Policy.
[youtube:http://www.youtube.com/watch?v=VTE178mV0Cg 285 234]
We’ve all heard it before: “Oh, capitalism may be better than some alternatives, but it is still a bad way to go.” This is a commonly held view by many people around the world, that although better than socialism, capitalism is not the best way to promote economic growth.
For advocates of the free market, this can be one of the most annoying things to hear. How could capitalism, the system of free enterprise that has created massive quantities of wealth and brought billions out of illness and poverty, be undesirable? It certainly wasn’t socialism or central planning that devised the Industrial Revolutions.
How then does one respond to those who are unwilling to fully accept that capitalism is the best economic system?
Thankfully, Dr. Peter Leeson, an associate professor at George Mason University, has come up with a great answer in his new paper entitled “Two Cheers for Capitalism”. In the paper Leeson argues that capitalism, as a path toward development, deserves three cheers (not the two that most people reluctantly give it). Professor Leeson, author of the new book The Invisible Hook: The Hidden Economics of Pirates, that capitalism is the best possible path for development for both economic growth and quality of life reasons.
Here is a key quote from the paper:
“My findings are straightforward. The two cheers for capitalism view is wrong. Although
many relationships in the social sciences are unclear, capitalism’s relationship to development
isn’t one of them. Unless one is ashamed of unprecedented increases in income, rising life
expectancy, greater education, and more political freedom, there’s no reason to be a milquetoast
defender of capitalism. This is what sprawling free markets have meant for countries that became
more capitalist over the last quarter century. On the other side, there’s no evidence that countries
that eschewed the global trend toward freer markets and embraced substantially greater state
control performed better on any of these indicators. On the contrary, they performed
demonstrably worse. I also find that the two cheers for capitalism variant that desires markets,
but “within reason,” is wrong. There is no evidence for a Lorenz curve-type relationship between
capitalism and development. Rather, this relationship is linear. Maximal capitalism begets
maximal development.”
While some of the data used isn’t perfect, the arguments put forth by Leeson all strongly suggest that capitalism does indeed deserve three full rousing cheers. Leeson too deserves three cheers as well, both for his highly readable and relevant paper, as well for the fact that today is his birthday. I was lucky enough to take a class of Leeson’s during my time at GMU and I can attest that he is both a gentleman and a scholar. So three cheers for both capitalism and Peter Leeson!
There are many reasons for free-market advocates to be unhappy about current affairs. With numerous pieces of legislation being proposed to put shackles on our economy, it can be quite easy to take a pessimistic outlook on the present state of free markets. But sometimes to be optimistic you just need to look for the silver lining on otherwise dark clouds. Today’s dark cloud: news sources are reporting that a widespread outbreak of blight, the mold responsible for the Irish Potato Famine, is hitting the East Coast hard right now. The silver lining: because of entrepreneurial innovations and trade made possible through the open market, what would have been a major crisis 100 years ago is now a minor inconvenience to home gardeners.
Due to cooler than average temperatures and rainy conditions, the mold known as late-blight has taken hold and spread across the Northeast. The mold spreads spores that kill infected plants, generally those of the nightshade variety like tomatoes and potatoes. In the 1840s, late-blight struck Ireland’s main source of food –potatoes- and caused millions to starve and millions more to emigrate. So why not be afraid of the same thing happening here today in the U.S.? Why aren’t major news stations running this story 24/7 and interviewing experts on how to solve this crisis?
Mainly there is little to worry about because free markets work. While food markets have been regulated, they still have been free enough to encourage innovation in food technology and trade with other nations. Due to the profit motive driving entrepreneurial activity there have been many advances in biotechnology that have helped develop crops that can withstand diseases like blight. Genetically-engineered foods that are resistant to viruses, fungi, and disease are now available on the market.
Furthermore, despite some barriers, international trade still exists for food. The international food market is diverse and allows for different foods to come from many different sources. It is nothing short of amazing that – because of free trade- you can buy fresh produce like strawberries year round even if they are out of season in your hemisphere. If we were totally independent nationally for our sources of food, an outbreak of blight like this could very well be a huge crisis. If, as some environmentalists propose, we were all only able to purchase locally-grown produce then blight could be regionally devastating. Luckily, we are not restricted to only buying food from our home regions and can trade with other nations. If blight were somehow to cripple East Coast food production, while highly inconvenient and costly, food could be imported from other regions or countries.
Although many home gardeners will have problems with their tomato plants this summer, the average American will not notice any differences in everyday life. While there are many problems facing advocates of free markets, worrying about blight-induced famine should not be one of them. It can be easy to get caught up in defending open markets and to forget the unseen benefits that they constantly provide. So this summer, be sure to thank the process of free exchange as you eat non-blighted potatoes and tomatoes.
“Mars Sets Goal for Sustainable Cocoa Sources”
Another Washington Post story suggests that “sustainability” –whatever it may mean — still can stir the cold hearts of capitalist managers. Utopians have long been distressed by the differential working conditions around the world. Poverty does have less pleasant impacts than affluence. The problem is that associated with all egalitarian policies.
Our desire to improve the plight of the poor too often merely cuts away the rungs on the ladder out of poverty.
During the G20 summit something like 40,000 plus protesters slated to descend upon London. Of that number, there is a small but growing and prodigiously brave group of idealists planning to throw their message and bodies into the breach. They are not there to demand government action against climate change, stricter business regulations, nor are they requesting money for the poor, hungry, or infirm. Their message is simple, but profound: Get out of our way.
This small band, comprised mostly of university students and recent graduates wants only to communicate the message to the world that capitalism is not to blame for the current economic crisis. In fact, they want people to know that interventionist policies are what got us into the mess in the first place and increased state intervention is unacceptable.
“The point must be made, essentially, that we do not live in a Capitalist system and certainly not a Laissez-Faire Capitalist system. The sectors of the economy that failed were the most regulated sectors of a ‘mixed-economy’,” said Rory Hodgson, University of York student and protest organizer.
Perhaps because those still in university and recent graduates have the most to lose that they are willing to risk physical harm in order to oppose the ever-tightening choke-hold the government has on the economy. But we should all be as worried about the future and willing to fight the increasing anti-capitalist sentiment and the vulnerability of individual liberty.
With the G-20 meeting looming in the midst of a worldwide recession, President Barack Obama sent an essay published today in about 30 newspapers to urge world leaders to work together to take “bold, comprehensive and coordinated action that not only jump-starts recovery, but also launches a new era of economic engagement to prevent a crisis like this from ever happening again.”
In his essay, Obama puts blame on the financial institutions for causing the crisis and the “absence of oversight.”
We must put an end to the reckless speculation and spending beyond our means; to the bad credit, over-leveraged banks and absence of oversight that condemns us to bubbles that inevitably bust.
He intimates that he would support some sort of global financial regulatory system, as he states:
Only coordinated international action can prevent the irresponsible risk-taking that caused this crisis. That is why I am committed to seizing this opportunity to advance comprehensive reforms of our regulatory and supervisory framework.
All of our financial institutions — on Wall Street and around the globe — need strong oversight and common sense rules of the road. All markets should have standards for stability and a mechanism for disclosure. A strong framework of capital requirements should protect against future crises. We must crack down on offshore tax havens and money laundering.
Rigorous transparency and accountability must check abuse, and the days of out-of-control compensation must end. Instead of patchwork efforts that enable a race to the bottom, we must provide the clear incentives for good behavior that foster a race to the top.
His essay ends with–
But I also know that we need not choose between a chaotic and unforgiving capitalism and an oppressive government-run economy. That is a false choice that will not serve our people or any people.
Sounds like a false dichotomy to me.
I revoke my previous apology to the Swiss, and reiterate my previous disapproval. As evidenced by the latest outcome in the U.S. tax case involving UBS, we have moved beyond troubling and into something much worse.
...the world’s largest wealth manager in terms of assets, agreed to pay a $780 million fine and disclose information about some of its clients to settle a landmark U.S. tax case.
As I said in my older post: “In direct contradiction to their own legal view of tax evasion. Even though some may argue that this is moot because the U.S. does not consider a financial transaction as something beholden to privacy rights, the Swiss do–and besides, the U.S. view is wrong. A person’s financial records should be considered as sacred as their medical records.”
And with an eye toward history, let us not forget:
One issue of the time that reinforced the passage of this law [Swiss Banking Secrecy Act] came during the era of Hitler when a German law stated that any German with foreign capital was to be punished by death. Swiss banks were watched closely by the German Gestapo. It was after Germans began being put to death for holding Swiss accounts that the Swiss government was even more convinced of the need for bank secrecy.
Reading the comments on left-leaning blogs, you hear cheers and a tinge of jealousy about the whole thing. No matter if UBS did or did not help people avoid U.S. taxes, I cannot read this without envisioning a slippery slope argument. If the current climate continues, it won’t be too far-fetched to imagine laws like that of WWII Germany criminalizing and imprisoning people for choosing where to put their own money. And I won’t even mention the new Treasury Secretary. Oops
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