Posts Tagged efficiency
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 »
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.
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 »
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.
However, 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.