Economics

No, Rousseau, Man Is a Social Animal

by Ryan Young on November 27, 2011 · 1 comment

in Zeitgeist

No man is an island. Economics is based on that fact. You can’t make an exchange, and markets cannot emerge, with solitary people leading solitary lives. Evolution bears this out. Our predecessors, from at least Australopithecus on down, lived in bands and tribes. Not alone. They lived, loved, ate, fought, and died together. We are evolved to need each other.

Rousseau, who died over 70 years before Darwin’s Origin of Species, thought differently. His Original Man in the state of nature assumes away our innate social tendencies. From his false premises come many of his false conclusions:

He [Rousseau] begins with a portrait of natural man as a solitary animal devoid of reason and speech, a being whose limited needs can be easily satisfied without depending on anyone, whose soul is restricted to the sole sentiment of his existence without any idea of the future, as near as it may be.

Robert Zaresky and John T. Scott, The Philosophers’ Quarrel: Rousseau, Hume, and the Limits of Human Understanding, location 381 in the Kindle edition.

From that miserable Rousseauian Eden, we are fallen. Thank goodness.

CEI Podcast for June 15, 2011: Do ATMs Kill Jobs?

by Ryan Young on June 15, 2011

in Economy, Employment, Features, Podcast

Post image for CEI Podcast for June 15, 2011: Do ATMs Kill Jobs?

Have a listen here.

In a recent NBC interview, President Obama blamed ATMs for taking away bank tellers’ jobs, and computerized airline check-in kiosks for eliminating aviation jobs. Communications Coordinator Lee Doren points out that innovation doesn’t affect the number of jobs so much as the types of jobs. Accomplishing more while using less labor is actually the key to prosperity. People looking for an explanation for today’s high unemployment need to look elsewhere.

The Environmental-Industrial Complex

by Ryan Young on April 12, 2011

in Economy, Environment, Regulation

Sometimes the green part of green regulations isn’t the environment. It’s money.

Economics says that people act according to their incentives. Public choice theorists say that politicians and regulators also act according to their incentives — just like the rest of us. Those incentives include maximizing agency budgets and winning elections.

This short video from Reason.tv shows public choice theory in action:

Popularizing Hayek

by Ryan Young on March 10, 2011

in Economy, Features

Post image for Popularizing Hayek

Hayek’s The Constitution of Liberty is a work of great depth. It’s one of those books that one doesn’t read, so much as study. But the extra effort brings ample intellectual rewards. Still, it isn’t the most approachable book. For one, its length requires a commitment that many readers aren’t willing to make. For another, Hayek’s verbose prose style does not make for easy reading.

Fortunately, the good folks at IEA have just released Eugene Miller’s summary of all the arguments Hayek makes in The Constitution of Liberty. You can download it for free here. Besides being a good companion to read alongside the original, it looks easier for more casual readers to digest.

IEA has given similar treatments to some of Hayek’s other works. Take a look if you’re new to Hayek, or would like a refresher course on works you’ve already read.

Transparency Bill Proposed Solution to Public Employee Pension Problems

by Kathryn Ciano on February 9, 2011

in Economy, Labor

At a House subcommittee meeting discussing one proposed solution for public employee pensions, a transparency bill designed to trace federal and state funds set aside to cover pension guarantees. Lawmakers and media types weigh in on taxes, Social Security, and how their interest groups are affected by pension cures.

Paul Ryan enters fresh from Bernanke’s hearing, to quote the Federal Reserve chair’s uncertainty as to when and how public employee pensions will be paid. This echoes Grover Norquist’s statement earlier in the same conference that everyone’s answer to the question of the day — Will public employees get the pensions promised them by their states? — is: We’re pretty sure.

Covering public employee pensions has become an enormous problem for states unable to cover even the going expense of running a government. California offered IOU’s to some employees this year, and state employees whose pensions are guaranteed by the state are subsisting on promises and guarantees, but many have not been paid. Arnold Schwarzenegger endorsed this transparency bill as he exited the office of governor, according to a presenting Ways and Means committee member.

Rep. Darrell Issa reminds the room that we will all pay for any failure. If one city or state fails, the entire country will bear the burden. Public employee pensions may not rise to the highest level on some conservative dockets, but as baby boomers retire, public budgets are braced to absorb the shock wave anticipated when the pension crisis hits.

As with every area of the economy, uncertainty quashes growth. As go public employees relying on a lifetime of pension pay-ins, so goes America, relying on receiving checks from social security, not IOU’s.

Live Blogging: “Fixing The World Economy: Stresses And Solutions”

by Lee Doren on December 16, 2010

in Bailout Watch, Economy, Employment, Property Rights

This is a Live Blog of a Thomson Reuters Event on “Fixing the World Economy.” The speakers are Dominique Strauss-Kahn, International Monetary Fund and Chrystia Freeland, from Thomson Reuters.

11:50am: We are about 10 minutes before this event begins. I’m going to be very surprised if I hear any arguments for the Federal government and world organizations doing less, not more.

11:56am: Chrystia Freeland is preparing her questions next to me.

12:03pm: Because of the snow, they said they’ll start the show at 12:10pm.

12:13pm: The event is starting.

12:19pm: Freeland claims that we are talking with one of the most influential men on the economy.

12:21pm: Strauss-Kahn claims that the package that Ireland approved is going to work.

12:24pm: Statements will be made about Greece tomorrow.

12:26pm: It doesn’t appear that Strauss is too sympathetic to taxpayers who don’t want to bailout the banks. He claims there needs to be “a balance.”

12:40pm: Chrystia Freeland is continuing her nonsense in favor of the Estate Tax. Newbusters trashed her today for it.

12:41pm: Q: If Strauss-Kahn was the dictator, would he support more stimulus? Strauss-Kahn wants as much stimulus as possible.

12:46pm: Strauss-Kahn implies that each country working to fix its own domestic economy isn’t good for the world economy.

12:51pm: Strauss-Kahn argues that It is a dream to think that all the economic problems will be solved simply by dealing with Chinese trade imbalance.

12:53pm: Q: What will be the situation for Spain in 2011? A: Prospects are good, but they face a lack of confidence in banking sector. “I don’t see the risk for Spain will be that big in particular.”

12:59pm: Q: How do you deal with the opaqueness of information with China? A: Strauss-Kahn argues that many countries are analogous. Greece didn’t have accurate or useful information. With regard to China, Strauss-Kahn claims that voluntary actions have been taken to investigate its financial sector. We will have the results in the Spring.

1:03pm: Strauss-Kahn argues that the IMF tries to be evenhanded with all Countries.

1:05pm: Strauss-Kahn doesn’t even have time to think about whether he will be the next President of France.

1:10pm: Pat Garofalo of Center for American Progress will now be discussing the event with Michael Moynihan of Reason.com

1:22pm: The segment is about to start.

1:25pm: Michael Moynihan argues that the discussion was vague. Chrystia Freeland is already starting to interrupt. Moynihan argues that many of the banks in Ireland should be let go.

1:29pm: Chrystia Freeland throws in abject nonsense that Strauss-Kahn argued that top tax breaks don’t stimulate the economy. 1) She was talking about the Estate Tax, not an overall discussion on the tax; 2) He simply brushed it off originally as being part of the package. There was no overall discussion of the top tax breaks.

1:31pm: Moynihan argues that most of the new tax bill is pretty good.

1:37pm: Q: Why continue the Irish bailout if nobody thinks it will work. A: Well, EU has no other plan.

1:41pm: Q: World Economy has gotten worse since IMF. Should we end it? A: Moynihan is not for ending the IMF. He’s not going to comment on the gold standard.

1:43pm: The End.

Milton Friedman on Other People’s Money

by Lee Doren on November 16, 2010

in Economy, Property Rights

Milton Friedman always had a way with words. His brilliance in the following video not only explains the moral problem with using other people’s money, but he also explains why it leads to poor results. In order to use other people’s money, one must first take it from them. Then, once that money is taken, it is rarely spent as carefully as the person who earned it would spend it.

This explains the inherent problem with the government spending for the “public good.”

Individuals can work and spend their money for their own good, which becomes in the “public good” in the aggregate. But, third parties, by definition, cannot spend money for the public good because there is no way that any third party is capable of spending other people’s money to meet all individual interests. The video below explains this well:

The Market Works as Shop Closes

by Lee Doren on November 12, 2010

in Economy

Ed Morrissey over at HotAir.com found an interesting story about a shop going out of business. Apparently, Don Otto’s Market was run the same way politicians treat their citizens. The result was predictable and the business failed in about 6 months.

So what was unique about Don Otto’s?

Well, the owners charged over $8 for eggs, and $28-per-pound of steak. Then when the customers refused to purchase the food at that price, the owners blamed the customers for their lack of loyalty, and understanding about “food quality.” Amazingly, the owners were shocked to think that the price on particular food actually translated into customer purchasing decisions. A quote from a few months ago explains the owner’s naivete:

Eggs, from free-range chickens, are $8.50 a dozen. When asked whether people will balk at the cost, Otto shrugs and explains these chickens’ laying routine. “Their lay cycles rely on the sun, not on artificial lamps that distort production,’’ he says.

So here is a clear example of the free market working. Citizens did not want a particular product at the price that was offered. As long as the shop stayed open, the business was wasting resources. Once the business closed, resources could better serve the public in other sectors of the economy. The sad thing is that had Don Otto’s been a car company, the government probably would have bailed it out already.

Image citation.

How Much Does Government Spending Cost You?

by Lee Doren on November 10, 2010

in Economy

With never-ending increases in government spending, citizens are often curious how much government actually costs them. In response to this question, The Independent Institute has launched MyGovCost.org, that features the personal government cost calculator to render an account of your individual burden.

One of the best aspects of this calculator is that it will also estimate how much you could earn by privately investing your earnings in the stock market.

The website is directed by economist Dr. Emily Skarbeck, who should be commended for educating the American people on this important issue. Too often we hear talking points about government spending. But, when people really see how government impacts them individually, it may begin to persuade citizens on the need for limited government.

NFL Concussion Economics

by Lee Doren on November 8, 2010 · 2 comments

in Economy

There has been an enormous spike of news reports regarding the National Football League and concussions. The NFL has discussed increasing fines after reports of recent helmet-related injuries. Moreover, fans have noticed an increase in penalties during the game as a result of players leading with their heads. But, has all this talk resulted from an increase awareness of brain trauma? While it is true that players and doctors are more aware of the risks involved, I’m slightly skeptical that, that is the only driving force.

The most likely catalyst are the new health insurance negotiations with the players. The players have argued that their insurance coverage is inadequate considering the value they contribute to the sport, and the costs inflicted on their families after they retire. Consequently, many players have demanded health insurance upgrades, which undoubtedly will increase costs of providing such care.  However, like any business, the NFL is always looking to reduce costs.

While I have no doubt that the League cares for its players, certain economic incentives come into play with these negotiations.  If the League foresees the possibility of accepting player demands down the line, it will need to reduce long-term costs.  One way of doing that is reducing player injuries for one of the most violent sports.

If penalizing helmet-to-helmet hits will reduce long-term costs, expect penalties and fines to increase.  One does not need to be an expert in NFL negotiations to understand that basic economics is likely driving changes to the sport.

Photo Credit.

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