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Capitalism Updated

George Gilder after signing my copy of Wealth and Poverty

George Gilder after signing my copy of Wealth and Poverty

Progressivism can be viewed as socialism lite, paying homage to the great progress of capitalism while acknowledging some of the limitations of a free market. Social and economic theories develop, mature and evolve as they face the hard tests of history and events.  In the competitive continuum between capitalism and socialism or progressivism we tend to compare our preferred idea and the other ideas from different points on the evolutionary scale.

Modern progressives certainly do not advocate the eugenics, prohibition and imperialism characteristic of the early days of the first era of Progressivism under Theodore Roosevelt and Woodrow Wilson, but they do still frame modern capitalism in in the social Darwinism of the Gilded Age.

The philosophy of capitalism has been advanced considerably beyond mere laissez faire and the invisible hand of Adam Smith.  George Gilder wrote in the noted Wealth and Poverty from the 1980’s, updated 20 years later with an additional 40,000 words, that capitalism is the competition of ideas. He expanded on the concept in Knowledge and Power, that capitalism works best when knowledge and power converge.  Government regulatory agencies have considerable power but lack sufficient knowledge to effectively regulate most of the time, and certainly lacks the knowledge to allocate capital as well as a ruthless but accountable market place.

Human foibles and failures which tarnish market choices do not disappear in the government sector and difficult decisions do not disappear when they are abdicated or delegated to the elected serving a limited term or to the bureaucracies which have escaped both control and accountability.

Gilder’s most recent book, The Scandal of Money, focuses on how our management of money is at the root of many of our social ills from inequality to economic stagnation.  He explains how our centralization and instability has led to the financialization and the hypertrophy of finance, pushing far too high a percent of our economic transactions into the financial sphere which is both unproductive and exacerbates inequality.

Deidre McCloskey in Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World caps off a trilogy (Bourgeois Dignity: Why Economics Can’t Explain the Modern WorldThe Bourgeois Virtues: Ethics for an Age of Commerce) bringing a rich and thorough look from history and economics, examining the various developments that explain the rapid growth in human development in the last few hundred years.  Reading McCloskey takes a commitment, this work consumed ten years of her professional life.  It is a worthy, but not a light read.

Both of these gifted authors bring tremendous insight and development into modern economic thinking that goes far beyond the dated concepts of capitalism so commonly used by the left, but both of these authors challenge much of the thinking from the right as well.  Gilder is quite critical of some Milton Friedman’s monetarist thoughts, particularly on monetary velocity, and finds it similar in a few critical ways to Keynesianism.

Matt Ridley adds to this collection with his excellent The Evolution of Everything,  a lively view that spontaneous order applies to many facets of our lives other than evolution.

Perhaps these high minded views of our political economy are mere escapes from a political season mired in deceit and ignorance, but they still provide a much needed view of what actually works and what doesn’t before we continue to double down on failed policies. The challenge to our political class is to translate these ideas into policies that have meaning to modern voters. Toward that end I remain very skeptical but optimistic. History seems to be a march of human improvement, but not without some serious setbacks.

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The Primary Cause of Economic Stagnation

George Gilder

George Gilder

State control of money has become a force for government economic centralization, wreaking havoc on economies around the globe, whether capitalist or socialist. By controlling money supplies, central banks and their political sponsors determine who gets money and thus who commands political and economic power. Unsurprisingly, these establishments back entrenched economic and political interests against their rivals, contributing to new unchallengeable concentrations of wealth. Reinforced with arachnoid webs of government regulation and control, these combinations of economic and political power are the primary cause of economic stagnation in the world.

Since the economic crisis of 2008, Washington has used monetary policy to effectively nationalize the Wall Street banks and subsidize their borrowing. Enormous sums of investment money are diverted from the real work of learning that builds wealth into currency manipulations and “investments” in government debt. The once-great Wall Street banks in turn subsidize the political campaigns of their Washington benefactors. If Friedman had lived to see what monetarism has begotten, he would disown it. Refuting this rare error of Friedman’s is therefore essential to saving the very freedoms that he dauntlessly championed throughout his career.

Gilder, George. The Scandal of Money: Why Wall Street Recovers but the Economy Never Does (Kindle Locations 602-611). Regnery Publishing. Kindle Edition.

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Make Americans Great Again


from Bret Stephens at The Wall Street Journal, The Better Angels of Our Nature

When did the decline of American character begin? Maybe it was between July 1969, when two Americans walked on the moon, and a Saturday that August, when 400,000 Americans rolled in the mud at Woodstock. Maybe it was when that year’s commencement speaker at Wellesley said it was the mission of her generation to search “for more immediate, ecstatic, and penetrating modes of living.” Maybe it happened the night of January 14, 1970, when Leonard and Felicia Bernstein held a soiree for the Black Panthers, inaugurating the era of radical chic.

Or maybe the date came later, when American culture sanctioned the idea that self-actualization should count for more than your children’s emotional health. Or when bragging ceased to be considered uncouth, and ignorance ceased to be embarrassing, and lying ceased to be shameful, and the habits of understatement gave way to ever more conspicuous displays of wealth, desire, feelings, skin.

Whenever. Whatever. Pick your date and trend. Not everything that happened to the American character in the past 50 years is bad—we are more tolerant, more empathetic and more relaxed—but much of it undoubtedly is. If Republicans are going to spend the next few days talking about making America great again, shouldn’t part of that discussion also be about making Americans great again—or, at very least, making us better?

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Is The Debate Really Over?


My biggest disappointment at the Freedom Fest was the great Global Warming Debate moderated by Michael Medved. While they brought up credentialed scientists to debate both sides, the format lacked seriousness and clarity.

How much that AGW is used for gaining political power is irrelevant.  Some skeptics invoke religious themes, though they did not do that in this format where so many libertarians are atheists.

The only germane topic is whether there is or there is not a dangerous level of AGW and if there is, what is the best solution.

Most of us do not understand the science and thus depend on the authority of others and toward that end there is this ‘consensus’ we hear about.  Specifically we hear about a 97% consensus, but now the subject leaves science and goes into the realm of statistics and the nature of knowledge.

The 97% number raises a lot of red flags. For such a field that is fraught with so many variables such a consensus causes skepticism. In the realm of social research it strongly suggests a self-confirming bias.

I have not received satisfactory answers to such questions as:

Who was included in the 97% number? How big a sample is that? What per cent of the scientists is that?

What determines the consensus? What questions were asked?

When these questions get asked this consensus falls apart pretty quickly. Is there any consensus that any of the proposed actions to remediate this problem will work?

When the consensus falls apart, then it becomes clear that the debate is not over.

The right falls apart when they make it all about politics, and the left falls apart when they discredit any serious questions as anti-science as if it is the equivalent of creationism, or when they discredit every voice as a tool of the oil industry.   They do not advance the realm of science by sounding like religious fanatics. The less tolerant of dissent,  the weaker the argument.

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Risk vs Certainty


from The Case for Trump from William McGurn at the Wall Street Journal

At a time when so much of American “law”—from the Health and Human Service’s contraceptive mandate, to the Education Department’s “Dear Colleague” letters on transgender policy, to the National Labor Relations Board’s prosecution of Boeing for opening a new plant in South Carolina instead of in Washington state—is decided by faceless federal bureaucrats, Mrs. Clinton would stuff these federal agencies from top to bottom with Lois Lerners and Elizabeth Warrens.

Welcome to 21st-century American liberalism, which no longer even pretends to produce results. Whatever the shortcomings of Mr. Trump’s people, non-progressives simply do not share the itch to use the government to boss everyone else around. On top of this, an overreaching President Trump would not be excused by the press and would face both Republican and Democratic opposition.

Fair enough to argue that Mr. Trump represents a huge risk. But honesty requires that this risk be weighed against a clear-eyed look at the certainties a Hillary Clinton administration would bring.