Power & Market

Last September a very informative paper was published by the neoconservative Atlantic Council. In connection with this institution are such important public figures as Collin Powell, Condoleezza Rice and Henry Kissinger. The paper, written by John T. Watts, summarizes the main conclusions drawn at this year's Sovereign Challenges Conference in Washington, DC. The text allows for a deep look into some of the minds of the American elite and their allies. Its reading is therefore highly recommended. The inclined reader, however, should sometimes overlook empty phrases and distracting rhetoric to get to the heart of the matter.

At its core, it's about maintaining power. According to Watts, the big problem is “disinformation”, which is disseminated through new and alternative media. It destabilizes public institutions and in the worst case undermines the sovereignty of the state. This must be prevented.

Neoconservatives are fully aware that any state system ultimately depends on the trust of its citizens. Trust is the basis for the functioning of state institutions. New communication technologies, however, have increasingly enabled “extremist ideological” currents to spread their toxic messages and deprive people of confidence in existing institutions. It is precisely this loss of trust on the part of citizens that endangers the sovereignty of the state.1

The flood of information in the Internet age plays a decisive role because it makes targeted “disinformation” by small but well-organized groups possible in the first place. It leads to exaggeration, isolation and one-sidedness within one's own “echo chamber”. According to Watts, the sudden availability of large amounts of information can overburden a society. Too much useless and qualitatively inferior information can lead to isolation and polarization. People specifically select their sources of information and limit themselves in the process. They even have to do so in view of the many alternatives available to them. But in doing so, they tend to rely on those sources that confirm and reinforce their own prejudices.

In order to underline the potential seriousness of the situation, Watts refers to Nate Silver's book The Signal and the Noise, in which a parallel is drawn between the invention of the printing press and the advent of the Internet. This analogy was also taken up by the Scottish historian Niall Ferguson in his recent book The Square and the Tower.2 Both authors recall that the invention of printing not only made Luther's Reformation of the Christian Church possible, but also provided a powerful means of communication for many populist and, from today's point of view, deterrent movements. Here, for example, one can refer to the witch hunts of the early modern period. After Luther's Reformation, Europe was also plunged into centuries of religious wars. Is something similar threatening us today in the age of the Internet? It is clear that also today existing hierarchies and power structures are questioned and start to falter. This usually leads to the old elites giving their all in order to maintain their privileged position.

But first it has to be clarified who is really behind the specter of “disinformation”. Watts refers not only to all sorts of “conspiracy theorists” like “truthers,” “chemtrailers” or “anti-vaxxers”, whose political and social impact can really be doubted, but also to Islamic terror groups or the Russian secret service, which is said to have influenced the outcome of the American presidential elections through such powerful social networks as Facebook.

At this point, however, we should pause for a moment. Is interference in the political affairs of other countries an exclusively Russian phenomenon? No. This has always been the case everywhere, especially on the part of the USA in recent history. So, if the Russian secret service is behind targeted disinformation, can the American establishment really free itself from it? Here, too, a clear no. Think, for example, of the deliberate manipulation of public opinion before various military interventions in the Middle East.

For Watts it is simply about which narrative dominates and determines public opinion. Truth is an elastic term, he claims. The question is merely: "Whose truth?” So, it is nothing but a power struggle. From this point of view disinformation is merely a truth deviating from one's own truth and must be fought against. One's own truth becomes the disinformation of the opponent. Therefore, according to Watts, new gatekeepers are needed in the modern flow of information. The prevailing opinion must be brought back on track.

The good thing, however, is that Watts is wrong. Truth is not subjective. It is, if at all, very limited in elasticity. And if it turns out that the hitherto so dominant narrative of the American establishment has overstretched the truth at one point or another, it is a blessing that modern communication technology makes it possible to point this out critically and effectively. We can only hope that technology will always stay one step ahead of regulators and gatekeepers – and that citizens will ultimately trust the narrative that is closest to the truth.

• 1. The loss of trust is reflected, for example, in this year's Edelman Trust Barometer: Global Report. Interestingly, India, for example, has a higher trust index than the USA.
• 2. The interested reader is referred to Dr. David Gordon’s review of Ferguson’s book.

Austrian economists should take an interest in the so-called “replication crisis” in science, which is affecting primarily the field of psychology, but is likely under-recognized in other social sciences—and in economics in particular.

Over the last several, an increasing number of reports have highlighted the fact that scientists are frequently unable to replicate the results of prior experiments in psychology, even when those experimental or correlational studies were conducted and analyzed according to commonly accepted methods. The magnitude of the problem was made concrete in a 2015 Science paper by lead author Brian Nosek. Replication rates, in terms of statistical significance or effect size, were only between 25-50% (depending on the particular field of psychological study).

The doubts raised by Nosek and his collaborators are metastasizing to other human sciences, including medicine. Reports of poor research reproducibility are now appearing routinely in scientific journals. Interestingly , in the context of such a replication study pertaining to the social sciences and published this past August, it was discovered that scientists are able to predict a priori with a high degree of accuracy which particular result will be replicated and which will not!

A perhaps even more startling study was just published last month. Nosek submitted a very rich data set, taken from the 2012-2013 soccer season, to 29 different teams of statisticians for analysis. The question to be answered by the statisticians was whether a darker skin tone increased the likelihood that a player would receive a red card. The variability in the methods chosen and in the results obtained was astounding, especially since, at one point in the process, the teams of analysts were encouraged to compare notes and give each other feedback.

We interviewed Nosek on our podcast about his work. It was a fascinating conversation. As an empiricist, he remains hopeful that, perhaps through greater transparency, sharing of data, and collaboration among scientists, the replication crisis will resolve itself. And he expects that the resolution will occur while preserving the standard theoretical assumptions of empiricism.

I’m not so “optimistic,” and I suspect that the crisis will be protracted. But I am hopeful that, over time, social scientists will come to recognize and accept that certain types of knowledge can only be obtained by human judgment, rather than by measurement—provided that the judgment and reasoning proceed logically from a basis of reasonable assumptions. This is a good opportunity for Austrians to showcase their methodological alternative to the scientific world

Listen to Ryan McMaken's commentary on the Radio Rothbard podcast.

In order to whip up opposition to Brexit, pro-EU activists have long relied on generating fear by suggesting that without EU membership, British trade will suffer, and export totals will collapse.

This, however, has always been an unconvincing argument because EU membership tends to restrict participation in global trade more than it enhances it.

Even the EU admits that "growth in global demand is coming from outside Europe, noting that 90% of global economic growth in the next 10–15 years is expected to be generated outside Europe, a third of it in China alone."

Moreover, the importance of the EU as an export market for the EU has been declining in recent decades. 15 years ago, the EU accounted for over 50 percent of all UK exports. By 2015, the number had fallen to 44 percent, reflecting the shift toward markets outside of the EU.

Even the EU's core members like Germany know the real future of global trade lies outside the EU. As Alasdair MacLeod noted last year,

[W]ith respect to trade, Fortress Europe’s trade policies are increasingly disadvantageous to her. Germany now exports more to China than to any individual European country... [Germany] sees on her Eastern flank ...  a pan-Asian phoenix arising in the form of the Shanghai Cooperation Organisation (SCO), led by Russia and China. And it is growing.

...India and Pakistan also became full SCO members, taking the rapidly-industrialising membership to nearly half the world’s population. The Silk Road is sending goods to Europe, and will transport Mercedes, BMWs, and VWs the other way. Asian demand for German engineering and capital equipment is likely to become the largest market by far for the foreseeable future.

Really, by staying in the EU — which is obsessed with tightly regulating and controlling trade with countries outside the bloc — the UK is limiting its own ability to be flexible with the rest of the world.

These facts, however, are not readily apparent to the general public in the UK or elsewhere, and the idea that the UK will be somehow "isolated" without the EU continues to turn heads.

But how to help illustrate that Brexit really means more openness in trade?

There is an easy way to help with this, of course, and it would be the right thing to do with or without Brexit: The US should immediately adopt a position of unilateral free trade with the United Kingdom.

The US, of course, should adopt unilateral free trade with everyone right now, but failing that, the UK is certainly an acceptable place to start.

I suggest the UK as a starting point because open trade with Britain is an easy sell, politically.

After all, opening up unfettered free trade with the UK would be an easy choice strategically. It would make the US an indispensable partner all the more, and solidify the UK as an important part of the North American economy.

Moreover, any claims that unilateral free trade with the UK is "enriching our enemies" would be laughable. The UK and the US have been at peace for more than 200 years. Unilateral free trade doesn't lead to "exploitation" of the US in any case, but even if it did, this would not be an issue of military importance.

From an economic standpoint, of course, unilateral free trade is always to the benefit of the country which adopts it. It would mean lower production costs and less expensive consumer goods for countless Americans and American entrepreneurs. Even if the UK maintained tariffs on American goods, the end result would only mean more inexpensive goods for Americans, and more investment in the US by British companies who reap the rewards of selling more goods to Americans.

Claims that the US would be flooded with "cheap goods made by slave labor" — as some anti-China protectionists like to claim — would be obviously non-sensical. British labor laws are similar to those in North America, and the cost of British labor is similar as well.

Moreover, when it comes to trading with the British, it is harder for protectionists and xenophobes to capitalize on nationalist impulses to push their agendas. Are we really to believe that we ought to fear exploitation by English-speaking high-income foreigners who, by the way, have an extensive history of investment in American industries?

Trump's Mishandling of the Brexit Situation

Unfortunately, for all his big talk about building strategic advantages for the US government, Trump has badly mismanaged the Brexit situation and will probably botch the opportunity to draw the UK further into a greater partnership with the US.

Instead of using Brexit as a means to build a better relationship with the UK, at the expense of the EU's quasi-socialist bureaucrats, Trump has instead attempted to isolate the UK further in order to force UK acquiescence to Trump's economically-illiterate campaign against free trade.

This hurts American consumers and producers while also potentially helping politicians in both China and the EU. As Thomas Wright at Politico notes:

A post-Brexit Britain needs close relations with other major countries, and if the United States is difficult to deal with, [the UK] will find itself increasingly tempted into a closer economic partnership with China, one that will surely have political consequences. Trump’s antagonistic approach also plays into the hands the leftist leader of the opposition, Jeremy Corbyn, a persistent critic of a close U.S.-UK alliance who would likely leap at the chance to weaken the special relationship.

My personal position is that it is not important or in our best interests to engage in foreign policy posturing with China or any other country. Political neutrality and open commerce is always the best position. However, I do know that Trump and his allies think that playing games with China and the EU are important policy goals. But even by their standards, the administration's anti-UK protectionism is counter-productive.

No doubt Trump's supporters will stick to their little narrative in which Trump is playing 4-D chess and has some grand plan that will both stick it to the EU and massively increase American exports to the UK at the same time.

This is a pipe dream, of course, but some people seem to actually believe it.

Were the Trump administration wiser, it would pursue unilateral free trade not just with the UK, but with the entire Anglosphere of Canada, Australia, and New Zealand. Both the economic and strategic benefits would be substantial.