Power & Market
As the Austrian School has pointed out, the ultimate source of human poverty and failure lies in poor logic.
Here is an example from Forbes Magazine and a leading hedge fund investor who is also a major charitable donor genuinely devoted to helping humanity and the planet.
The editor of Forbes, Randall Lane, quotes Paul Tudor Jones, as follows:
There is no bigger threat to our democracy than wealth disparity. It is a story normally reserved for monarchies, dictatorships and plutocracies….We got into this pickle because over the past 40 years the corporate focus on profits took on manic proportions relative to other stakeholders such as employees, communities and the planet.
There are several things wrong with this logic. In the first place, a focus on profits is not at odds with a focus on employees, customers, communities, or the planet. Profit, properly defined, is the net present value of all future profits, that is, what you should be able to realize by selling that profit stream today. To maximize profit, therefore, one must take a long term view and seek to provide exemplary service over many, many years to employees, customers, communities, and the planet. What Paul Tudor Jones is describing is not profit maximization, but rather short term profit taking, which will actually reduce the net present value of all future profits. As Henry Hazlitt pointed out in Economics in One Lesson, real capitalism focuses on the long run, not just the short run, and considers all consumers, not just some.
The problem of course is that we have never had the benefit of real capitalism. Thanks to the interventions of government into the economy, and especially into the pricing system, we get crony capitalism instead. This is bound to happen in a monarchy or dictatorship. But, contra Mr. Jones, it is no less likely to happen in an American style democracy, as American history has shown. So long as government influences, manipulates, or controls prices, powerful special interests will strive to use the power of government to gain monopolies or other advantages. There are, however, certain periods in which government ( and in particular central bank) policy puts crony capitalism on steroids, with a resultant sharp increase in economic inequality, and that is what we are seeing today.
This clip from MSNBC's Morning Joe went through my Facebook feed earlier, with the show's panel pointing to the willingness of Alabama Republicans to vote for Roy Moore as an example of "extreme" tribalism that has taken over American politics. As Willie Geist put it:
If you're willing to protect the tribe at the cost of a 14-year old girl, you need to re-evaluate yourself.
Now, living in Alabama, I know many Moore defenders will dismiss the legitimacy of the original claims made against him. Putting aside the specific details of the case, it's hard to argue with Mr. Geist's point - if you are truly willing to sacrifice a 14-year old girl simply for the sake of your "tribe", then it may be worth evaluating your actions.Of course, the case of Roy Moore isn't a particularly unique one. Whenever allegations of inappropriate behavior are made against an individual that wields political power, the natural reaction to defend or attack an individual often coincides with how close their political views are to yours.
In fact, one of my favorite articles that has emerged in light of recent allegations came out last week in the Washington Post after allegations emerged about Senator Al Franken. Written by a "feminist" who "studies rape culture", she is refreshingly honest by admitting that she would never want Democrats to take action against Franken simply because he's better than any Republican.
If I believed for one second that Franken is the only Democrat in the Senate who has done something like this, with or without photographic evidence, I would see that as the best and most appropriate option. But in the world we actually live in, I’m betting that there will be more. And more after that. And they won’t all come from states with Democratic governors and a deep bench of progressive replacements. Some will, if ousted, have their successors chosen by Republicans.
In other words, if we set this precedent in the interest of demonstrating our party’s solidarity with harassed and abused women, we’re only going to drain the swamp of people who, however flawed, still regularly vote to protect women’s rights and freedoms.
While it may be fair to argue that this reaction is "tribalistic", it's also quite rational.
After all, politics is simply war by other means - and you tend to prefer an SOB on your side over an enemy choir boy.
The solution, of course, is to change the battlefield. If we take away the power Washington has, and allow politics to be played out at the State and Local level, then America will no longer be a country in which we are required to force our political beliefs on everyone else. Instead, we would all have genuine options about the style of government we live under.
As the scope of government America continues to grow, we will see political tribalism only grow.
Until that trend reverses itself, a politician's political affiliation will always matter more than his morals.
A county sheriff in Texas has run afoul of the social media mob when he publicly announced on Facebook that he was seeking to press charges against a local resident known for using the F-word on a sign on his vehicle.
Social media readers responded with the expected protests over freedom of speech when Sheriff Troy Nehls posted a photo of the offending truck and announced the local district attorney "has informed us she would accept Disorderly Conduct charges regarding it."
Numerous other sites have focused on the First-Amendment implications of the situation. But let's focus here instead on the use of taxpayer-funded resources by a county employee:
In essence, the Sheriff is seeking to make an arrest over what amounts to a rude bumper sticker.
By announcing that he has met with or called the local prosecutor, and may have charges filed, the sheriff is threatening the owner of the truck with state violence that may include arrest, fines, and perhaps even a short period of imprisonment.
Given all the effort the Sheriff has gone to, a reasonable person might conclude that there is essentially no crime at all in Fort Bend County.
However, in spite of the fact that the Sheriff acts like he has nothing better to do, it turns out that Fort Bend County has its share of crime.
Indeed, according to the FBI's crime statistics, the Fort Bend County in 2016 reported a total of 758 violent crimes. This included 18 homicides, 83 rapes, 141 robberies, 516 aggravated assaults. Property crimes included 269 auto thefts.
The population of the county is approximately 580,000, which means the homicide rate is around 3.0 per 100,000. That's not an especially high homicide rate by American standards, but it's not an especially low one, either, especially for a high-income suburban area like Fort Bend County.
In other words, the county has its share of crime, but the Sheriff is more concerned with waging petty battles over bumper stickers with local residents, rather than focus on prosecuting violent criminals, or on recovering stolen property.
In the past, here at mises.org, we've noted how with any organization — including law enforcement agencies — time spent on one activity necessarily reduces the resources spent on other activities. The often-used police claim that police "must enforce all the laws" has always been nonsense since there are limited resources available.
Thus, there is a real opportunity cost to tracking down people with naughty words on bumper stickers, while there are also 500-odd aggravated assaults per year.
This should surprise no-one of course, since the Sheriff's department is not subject to any market discipline and is guided more by how well it can lobby the county government for a bigger budget, and how well the Sheriff is at getting votes from the local population. This fracas over a bumper sticker, of course, is likely little more than a political ploy, given that the Sheriff apparently has ambitions for higher office.
It may be that this publicity pays off well for the Sheriff. Local victims of crime, however, may fare less well.
With Trump poised to announce his pick for Fed Chair on Thursday, former Fed boss Paul Volcker quietly announced the forthcoming publication of his memoirs. Hopefully we will be spared a shamelessly self-serving title like Bernanke's The Courage to Act. But in contrast to the fanfare surrounding post-retirement books by Alan Greenspan and Bernanke, Volcker's offering likely won't resonate with the financial press. It's been 30 years since he served as Chair (1979 to 1987), and many of the principals in his story are dead or elderly. It all sounds like ancient history, especially to the under-40 quants populating Wall Street. In fact the 90 year old Volcker is mostly unknown both to the public today, though at 6'7'' he literally and figuratively once cast a long shadow across the central bank.
But faint vestiges of his legacy survive, even in this sordid era of "extraordinary" monetary policy. David Stockman largely praises Volcker in The Great Deformation, reminding us that the former Chair "did not...dream of levitating the economy through the "wealth effect' or by coddling Wall Street speculators." Stockman also praises his willingness to steer short-term interest rates well above long-term bond yields, thus throttling the carry trade that is the target of Stockman's unrelenting ire today. And unlike the madcap QE excesses of Bernanke and Janet Yellen, Volcker was not afraid to attack monetary inflation head-on, through the Fed's balance sheet:
Volcker accomplished this true anti-inflation objective with alacrity. By curtailing the Fed’s balance sheet growth rate to less than 5 percent by 1982, Volcker convinced the markets that the Fed would not continue to passively validate inflation, as Burns and Miller had done, and that speculating on rising prices was no longer a one-way bet. Volcker thus cracked the inflation spiral through a display of central bank resolve, not through a single-variable focus on a rubbery monetary statistic called M1.
Murray Rothbard, needless to say, held all Fed Chairs and Governors in low regard-- bemoaning what he considered their "hagiographic treatment" by the press. Paul Volcker did not escape his withering pen:
When it looked for a while that the great Paul Volcker might not be reappointed as Fed chairman, the financial press went into a paroxysm of agony: no, no, without the mighty Volcker at the helm, the dollar, the economy, nay even the world, would fall apart. And yet, when Volcker finally left the scene years later, the nation, the economy, and the world, somehow did not fall apart; in fact, ever since, none of those who once danced around Volcker for every nugget of wit and wisdom, seem to care any longer that Paul Volcker is still alive.
Yet by current standards there is much to admire in Volcker's tenure at the Fed.
First, he was (and likely will remain) the last Chairman even remotely worthy of the title "Fed hawk." As Stockman makes clear, Volcker understood the argument for monetary tightening-- an argument completely lost to political concerns today. Second, he demonstrated (for awhile) actual political independence during both the Carter and Reagan administrations and was willing to abide a short-term recession. Finally, he understood the critical role interest rates and saving played in the lives of ordinary people depending on thrift rather than investing savvy.
Paul Volcker is no Austrian. But in our neo-Keynesian world of unbridled monetary stimulus, and compared to his successors, Paul Volcker looks pretty good.