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Clarifying Capitalism

From Andy Kessler in The Wall Street Journal, Quit Modifying Capitalism (paywall)

State Sponsored Capitalism (China)

Casino Capitalism (Bernie Sanders)

Sustainable Capitalism (Al Gore)

Patrimonial Capitalism (Piketty)

Surveillance Capitalism ( new one for me-  Ivy League origin)

Popular Capitalism

Conscious Capitalism (John Mackey)

Kessler properly dismisses these qualifiers. They appear to honor capitalism as an indispensable modern economic system, but need to qualify their support by twisting it to fit their superior view.  Qualifiers can reverse a word’s meaning. Think ‘socialism’ and then ‘national socialism.’

Kessler clarifies

My advice? Drop the modifiers. There is only one type of capitalism that works, and it goes like this: Someone postpones consumption, invests his savings to produce a good or service, delights customers, generates profits, and then consumes and invests what’s left in further production. These profits are pure, generated from price signals between buyers and sellers, without favoritism from experts or elites. It isn’t hard to grasp.

Profit is the ultimate measure of value to consumers—and therefore to society. Consumers benefit from buying stuff, or else they would make it all themselves, and producers benefit from selling, or else business wouldn’t be worth the effort. Of similar value, profits go both ways. “Experts” who poke their noses in only mess with this fine balance. And who needs central planning when there’s the stock market, where theories melt and reality bites? Stock exchanges are the true consiglieres of capitalism, providing capital to ideas deemed worthy of it and starving the rest.

The Limits of Rent Seeking

from Garry, Patrick M.. The False Promise of Big Government: How Washington Helps the Rich and Hurts the Poor (Kindle Locations 336-343). Intercollegiate Studies Institute. Kindle Edition.

In 2015 the Capital Research Center reported that GE had spent more than $300 million on lobbying since 1998. Its CEO visited the White House dozens of times. The progressive group Americans for Tax Fairness states that GE paid no federal income taxes from 2008 to 2012 and received $3.1 billion in refunds, despite earning $27.5 billion in profits during the same period. Even if this estimate is exaggerated, GE paid nowhere near the statutory rate of 35 percent in income taxes.

General Electric also reaped benefits from the Obama administration’s “green economy” spending. GE received more than $2 billion in federal loan guarantees for wind and solar projects. Moreover, it invested heavily in a company that made lithium-ion batteries for electric cars; that company received $132 million in federal stimulus funds—and then went bankrupt. All these government benefits occurred because GE has the resources to lobby federal officials and work the corporate tax code to its benefit, while smaller rivals do not.

HKO

GE is the most disappointing stock on the Dow 30. Its price has plummeted 40% while the rest of the market is daily hitting new highs, up over 30% since the Trump inauguration.  It has recently cut its dividend in half.

GE under Jeff Immelt was heralded as one of the most progressive corporations.  Perhaps there is a lesson that rent seeking behavior has limits.  It can never replace the power of serving customers and investors with sound business practices.

The Libertarian Minority

From What Happened to the ‘Libertarian Moment’? by Henry Olsen in National Review

Now it is true that the Republican party is overwhelmingly conservative and that most conservatives oppose high taxes and government direction of society. Polls have shown for decades that Republicans of all stripes believe that the government is doing too much that would be better left to business or voluntary charity. But being opposed to passing something new does not necessarily mean you are also in favor of repealing or modifying something old. And it is when you examine the depth of that sentiment that you find how shallow the commitment to small government is among GOP voters.

In our book The Four Faces of the Republican Party (2016), University of New Hampshire professor Dante Scala and I looked at 20 years of exit-poll data to discern what Republicans believed. We found that at most one in six could be called liberty-minded conservatives, people who wanted both smaller government and lower taxes and made that their principal priority. These voters, whom we called “very conservative seculars,” were the smallest of the GOP’s four factions and had been since at least 1996, when our data series began. Their favorites for the nomination, candidates such as Steve Forbes and Fred Thompson, always lost, and usually quite early, as the favorites of the other GOP factions trounced them in the early states, where momentum is built.

HKO

The political parties are a coalition of ideas priorities designed to win elections. The harsh reality is that liberty minded voters are in a minority in the Republican Party. They remain there only because they are nonexistent in the Democratic Party.

The only chance this minority has is to bond with others to gain power.  Reagan won because the evangelical movement was motivated by Roe v Wade and united with the Laffer supply siders to form a winning coalition, even though they were not mutually supportive.

Libertarian third party efforts fail consistently because they refuse to address this reality.  Without a coalition partner, as odious as they may be, they will remain a minority.

An Epidemic of Bad Ideas

From Glenn Harlan Reynolds in The USA Today, Social media threat: People learned to survive disease, we can handle Twitter:

Likewise, in recent years we’ve gone from an era when ideas spread comparatively slowly, to one in which social media in particular allow them to spread like wildfire. Sometimes that’s good, when they’re good ideas. But most ideas are probably bad; certainly 90% of ideas aren’t in the top 10%. Maybe we don’t know the mental disease vectors that we’re inadvertently unleashing.

Maybe there are some lessons for us here. We don’t know much about the spread of ideas, or what would constitute the equivalent of intellectual indoor plumbing. (Censorship isn’t enough, as it often just promotes the spread of bad ideas that people in power like). Over time we’ll learn more. Maybe we’ll come up with something like the germ theory of disease for ideas.

Where we can do something right away is with the equivalent of nutrition. Traditional training in critical thinking — the sort of thing the humanities used to revolve around, before they became focused on “social justice” — seems like it would be a useful protective. A skepticism regarding groupthink, ad hominem arguments and virtue signaling would likely offer considerable protection against the sort of mass hysteria we seem increasingly vulnerable to. Likewise, a social consensus on important ideas — the kinds of things we used to teach in civics classes — would help.

Better nourished minds are likely more resistant to social-media contagion.

HKO

An excellent and creative piece.  A creative writer can find illumination in seemingly unrelated ideas.  Read the whole piece.

The Trickle Down Mantra

Henry3

by Henry Oliner

‘Trickle down’ is the preferred pejorative of the left towards any tax cut that benefits those who actually pay taxes.  The people who use it sound like idiots to anyone with a basic knowledge of economics.  It is a tool for those who prefer a demon to any understanding.

Money trickles downs, trickles up, and spreads around.  It pays taxes, funds welfare checks, hires employees, buys equipment and funds consumer purchase. It flows where it is least impeded and most welcomed and respected.  Money is an accumulation of a vast network of human action.

When you pay a thousand dollars for a new iPhone are you any poorer? You have willingly decreased your cash and increased your personal equipment. You may be joyful on your purchase or you may be resentful, but if the phone was not worth more than the money you spent you would not have bought it.

Our limited economic measurements may record a transfer of wealth from you to the shareholders of Apple.  But you are no poorer from the transaction.

Would you work an additional 20 hours a week for a substantial pay if the tax rate on your additional earnings was 100%?  Would you be more likely to take the job if the tax rate was cut to 40%?  If your answer is yes to the second question, then congratulations, you understand basic economics and the Laffer Curve.

We can debate the proper rates and the tax system. Claims are made from the right that all tax cuts pay for themselves. This is untrue and is as ignorant as the ‘trickle down’ mantra.

“Trickle down” may or may not be true based on numerous other factors. Regulatory and legal burdens, inconsistency and political uncertainty, debt loads, monetary policy, international competitiveness, unemployment levels, and other factors will impact the effects of tax policy.

But ‘trickle down’ is always an incomplete picture, meant to mislead  by a few, but more often a simple and obvious display of economic ignorance recited as a mindless mantra.