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Good Enough

from Martin Conrad at Barron’s; Finding the Path to Enrichment

Smith argued that man was an economic animal who, by his bargaining and exchanging in the marketplace, could benefit from the diverse talents and genius of all his fellow men. This led to his seminal theory that the most important source of wealth of a nation is not gold, silver, money currency, or even its land or natural resources, but “the skill, dexterity, and judgment” of its labor force.

We see this illustrated today by wealthy nations, such as Switzerland and Singapore, that possess modest amounts of land or natural resources but have grown rich by having educated, trained, productive labor forces.

Smith’s theories and observations also began the destruction of slavery, a universal institution throughout all of history. He destroyed the self-interest that motivated slavery by showing that economies based on it could not profitably compete with those based on a free, motivated, trained labor force.

These principles that enabled much of the world to escape its traditional Malthusian trap still show their power. In 1950 oil-rich Venezuela was more than three times as rich per capita as South Korea. Yet by 2011 this relation was nearly reversed as capitalist South Korea’s per capita GDP was nearly three times that of Hugo Chavez’s Venezuela, despite several years of $100-a-barrel oil.

This most practical, effective utopian philosopher has been so successful because his system works well with people — not as they morally should be, nor as he wanted them to be, but for people just as they are, which was good enough. Adam Smith described the way to harness intellectual capacity and instinctual ambition for the common good. We live and thrive today in mostly his world.

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A Stronger System

From Glenn Harlan Reynolds in USA Today, How to make the U.S. collapse-proof

In Tainter’s characterization, as a society gets older, it accumulates more and more complexity — essentially, onion-like layers of institutions, rules and regulations that offer short term benefits at the expense of increasing the society’s overhead over time, even as they reduce its flexibility. Eventually, there’s no reserve left for dealing with new crises, and the society collapses — often in the face of problems it would have weathered easily in its more youthful days.

You also might want to limit the damage when things go bad by splitting things up.  A huge empire ruled from a single city would seem much more likely to collapse than a collection of smaller states. (As Tainter notes, after Rome fell, Western Europe did not fall again). In the United States, that might mean maintaining the viability of state governments as independent entities. That way, if some go bankrupt (like, say, Illinois might or like Puerto Rico essentially has) the damage will be contained. And if the federal government were to collapse, the states could pick up some of the slack, limiting the damage.

Of course, in describing a limited federal government, ruling over a nation made up of semi-sovereign states, subject to the rule of law and judicial review I’m not describing anything shocking or new: That’s precisely the kind of government we in the United States are supposed to have under our Constitution.

So maybe we should keep it that way. Just in case.

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Losing Your Special Deal

Economist John Cochrane

Economist John Cochrane

from The Wall Street Journal, Ending America’s Slow Growth Tailspin, by John H. Cochrane

Most of all, the country needs a dramatic legal and regulatory simplification, restoring the rule of law. Middle-aged America is living in a hoarder’s house of a legal system. State and local impediments such as occupational licensing and zoning are also part of the problem.

Growth-oriented policies will be resisted. Growth comes from productivity, which comes from new technologies and new companies. These displace the profits of old companies, and the healthy pay and settled lives of their managers and workers. Economic regulation is largely designed to protect profits, jobs and wages tied to old ways of doing things. Everyone likes growth, but only in someone else’s backyard.

There is hope. Washington lawmakers need to bring about a grand bargain, moving the debate from “they’re getting their special deal, I want mine,” to “I’m losing my special deal, so they’d better lose theirs too.” While the current presidential front-runners are not championing economic growth, House Speaker Paul Ryan (R., Wis.) and other House members are. And if economic-policy leadership moves from a chaotic presidency to a well-run Congress, that may be healthy for America’s political system as well as for the economy.

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A Multi Factored World

sowell

Random Thoughts from Thomas Sowell at Town Hall:

Global warming, due to greenhouse gasses, is the latest in a long series of one-factor theories about a multi-factor world. Such theories have often enjoyed great popularity, despite how often they have turned out to be wrong.

One of the most richly rewarded skills in politics is the ability to make self-interest sound like idealism. Nowhere is this tactic more successful than in so-called “campaign finance reform” laws — spending restrictions that prevent challenger candidates from buying enough publicity to offset the free publicity that incumbents get from the media.

If what you want from politicians are quick and easy answers, someone is sure to supply them, regardless of which party you follow. History can tell you where quick and easy answers lead. But, if you don’t want to bother reading history, you can just wait and relive its catastrophes.

 

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The Beast Is Us

kevinwilliamsonhkoA

from National Review, Kevin Williamson, Starving the Beast in Kansas:

Unserious men promise to Starve the Beast and balance budgets by eliminating “waste, fraud, and abuse,” the formulation relied upon by, among others, Donald Trump, 2016’s poster-boy for terminal unseriousness. Delusional politicians insist that significant tax cuts can be offset by simple gains in efficiency — but if it were that simple, then why not implement those cost-saving measures first and the tax cuts afterward?

(Answer: Because it is not simple.)

There are gross spending abuses at every level of government, from Harry Reid’s federally subsidized cowboy-poetry festivals to million-dollar paydays for superintendents of small suburban school districts. These are work for the meat cleaver, not the scalpel. But about 80 percent of what the federal government does is Social Security, Medicare, Medicaid and other health-care spending, national defense, and paying interest on debts incurred by previous Congress’s refusal to implement taxes sufficient to pay for that spending. Most of what state and local governments spend their money on is public schools, state universities, police, roads, and ordinary municipal services. Yes, it’s bonkers that Lubbock, Texas, spends about a quarter-million a year on a city manager, but that’s still chump change compared with what schools and police cost.

We are not going to balance the federal budget without cutting Social Security and other popular entitlements as well as the military, and Kansas is not going to bring its spending down to match a lower revenue line without touching education and the roads. It isn’t going to happen.

Yes, conservatives believe in smaller government, but conservatives also believe in prudence — and that our political calculations must in the end take account of reality. And here’s the reality that every politician eventually discovers: You can promise to Starve the Beast, but in the end, the Beast is Us.