Posts Tagged efficiency

Long Live the Artificial: Newt Gingrich’s Anti-Bain Blather

Of all the warts Mitt Romney boasts on his big smelly toe, Newt Gingrich and others have decided to attack the one thing Romney has going for him: his business-leader experience in the private sector. (go here for the full scoop)

This week at Values & Capitalism, I offer my critique of the Gingrich(/Obama) view:

Note to Newt: I know we’d all like a 100% success rate, but high-risk investment doesn’t always pay off, and when it doesn’t, bad things happen. Businesses close, people lose their jobs and human suffering abounds. Oh yeah, and another thing: it’s not great for investment firms either.

When these companies failed under Romney’s watch, I doubt that Jolly Fat-Cat Mitt was grinning in his Doctor Claw Chair while stroking a snickering kitty. Anyone who understands anything about investment firms should understand that bad investments are, well, bad.

There’s plenty of basic economic idiocy here, not to mention nostrils-full of that all-too-familiar “pre-conversion” Gingrich stench (does “moldy baloney” capture it?). But throughout all the confused prattle—e.g. Newt’s forthcoming wanna-be Michael Moore project—I find myself haunted by a single, disturbing reality. Some people actually swallow this stuff.

The deeper issue in Gingrich’s thinking — other than his basic goal of political revenge, of course — is his apparent disdain for creative destruction and his implicit worship of the artificial.

More from my piece:

Most of [this] seems to involve an embrace of the artificial—a belief that prosperity can and should be manufactured from the top down and that successful entrepreneurship, innovation, and jobs(!!!!!!!—those are for you, Joe Biden) demand nothing more than Sugar Daddy U.S.A.’s material blessing.

Implicit in such an orientation is a belief that risk can somehow be avoided or subverted—that turning companies around is always possible, that the solution (if there is one) is always accessible/know-able, and that investments will always produce a profit (when all else fails, there’s subsidies…duh!). All you need is a warm and toasty heart and a propensity to use other people’s stuff to Read the rest of this entry »

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A Real Fair Trade Solution: Kill the Big Ag Behemoth

I have routinely criticized “fair trade” schemes as ineffective, inefficient and counterproductive — a convoluted form of temporary charity that would be better if treated as temporary charity.

The real problems that cause poverty are deep and complicated, and they cannot be fixed by magical price inflation by Westerners (particularly when our own view of value is as distorted as it is).

As I pointed out in my review of Victor Claar’s book on the subject, one of these problems is often the nature of the given market. When it comes to coffee, for example, Claar explains that “coffee growers are poor because there is too much coffee.” The solution is hardly, “more coffee!”

Many of these realities are difficult to change for good reason: accurate, voluntarily determined prices reflect the real preferences of real people who are just trying to create real value. This includes both the consumer and the creator (the coffee grower). Yet other realities are stubborn because they are involuntarily determined.

This is where we should be setting our sights, and this week at AEI’s newly rebranded project, Values and Capitalism (formerly Common Sense Concept), I focus on one of the biggies: agricultural subsidies.

Here’s a taste:

Although the aims of “fair traders” are often noble (e.g. when “equality of outcome” doesn’t masquerade as “fairness”), their efforts would be much better spent tackling the real problems that impact economic development in the long term. If we’re looking for a game of Demolish the Western Privilege Machine, agricultural subsidies are a marvelous piñata.

The price distortion caused by such subsidies is summed up nicely by Daniel Sumner in an AEI paper on the subject:

Farm commodity subsidies—including price and income supports—crop insurance subsidies, and disaster aid encourage US production and disadvantage farmers who attempt to compete with subsidized production from the United States. These programs stimulate more production when Read the rest of this entry »

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Prosperity Explosion: Is Income Disparity Necessary for Growth?

Hans Rosling recently released a marvelous video on the relationship between income and life expectancy over the last 200 years (HT). The visualization is stunning.

See it for yourself:

One item worthy of note is how Rosling describes our “remarkable progress” as occurring despite “enormous disparities.” It is a small but important distinction to dissect.

Is it not true that loosening up trade and expanding freedom requires income disparity, or the mere allowance of it? After all, it is during the de-centralization and the individual freedom of the Industrial Revolution that the bottom-left countries started moving decidedly toward the upper right. In a free society, income disparity is typically a sign of efficiency, i.e., maximizing, channeling, and organizing human potential and innovation effectively (thus a subsequent boost to life expectancy).

This isn’t to say that the current extent of income disparity is inevitable, or that all forms of such disparity are signs of efficiency, but overall, you cannot have steady growth without a steady improvement of allocation, and you cannot maximize allocation improvement without allowing for inequality in economic rewards.

Don’t get me wrong. I share Rosling’s optimistic outlook about the future. I do think we can close the gap between “the West and the rest.” It is indeed possible and desirable that we get most people to the healthy-wealthy corner of Rosling’s chart.

Hans Rosling, data, visualizationHowever, I don’t think we can accomplish this if we see economic inequality as an evil or a hindrance to our productivity. It is in the countries that view it as such that we consistently find resistance to upper-right movement.

It is not, as Rosling says, despite income disparity that prosperity has exploded; it is in part because freedom-loving people stopped fearing it. We began living lives of individual invention and personal risk rather than cowering beneath crippling insulation and slavish submission.

It is only by allowing for life to happen that we can hope for life to improve.

(Photo Credit)

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The New Holy Wars: Economic Religion vs. Environmental Religion

The New Holy Wars by Robert H. NelsonWe have all argued or debated with someone who resists facts and resorts to emotional or idealistic rhetoric. Conversely, we have all found ourselves in positions where we want to ignore the real-world implications of our beliefs for the sake of some perceived justice or goodness.

Whether we’re talking about the foods we eat, the medicines we take, or the public policies we support, we all have a tendency to get religious about the material.

For Robert H. Nelson, author of The New Holy Wars: Economic Religion vs. Environmental Religion in Contemporary America, these examples represent various forms of secular religion. If you look close enough into somebody’s core ideology, Nelson argues, you will surely find parallels to the holy books, priesthoods, and dogmas typically found in “regular” religions.

Nelson acknowledges that there are plenty of competing secular religions in the public sphere; however, he believes that two religions in particular have engaged in what is now the most prominent conflict in American society — namely, economic religion and environmental religion.

But why these religions, and why now?

Nelson argues that both religions emerged during the nineteenth century as a result of the Industrial Revolution. During this time, technological innovation boomed, living standards soared, and access to education expanded.

As Nelson explains:

For the first time ever, one of earth’s creatures — human beings — had literally acquired the capacity to remake ‘the creation’…Astonishingly enough, human beings had now acquired knowledge and powers previously reserved for God.

In other words, the dream of creating heaven on earth was suddenly realistic for those who thought such a feat was actually attainable or desirable. Over time, Nelson argues, the successes of the Industrial Revolution resulted in the emergence of two factions — one that “exalted human control over Read the rest of this entry »

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