Long Way to Zero

Some people like to buy stocks after they've substantially gone down in value. Sometimes the thought is, that after the stock has already depreciated it's less risky. But that's a mistake. No matter where is now or where it came from, it can always depreciate by 10%. And another 10%. And again, and again, and again. As the Wall Street-cliche has it, it's a long way to zero.

I was thinking about this in reading a post by David Henderson at Econlog. It seems like the current Administration and to a substantial extent the voters have given themselves to try just about anything to "fix" the recession on the theory that things can't get any worse. One thing that has me particularly distressed about our current economic misfortunes is that Americans at large still in my opinion have very little perception of the tremendous economic value that we still have, and how close we are to losing it.

Libertarians

I’m trying to show how attractive classical liberalism can be once it is scoured of the conservative barnacles of the now irrelevant Cold War alliance and once it begins to take seriously (rather than just ignore) the powerful arguments of the best contemporary liberal thought. - Will Wilkinson

Will Wilkinson wants to believe that the association with the Right has corrupted American libertarianism. Unfortunately for him, he's exactly backwords on that point. The historical association with the Right is the only thing that keeps libertarianism even remotely legit. Without it, libertarianism in America amounts to, "Pleeeease let me smoke my dope in peace." It may be a decent argument even, but it impresses nobody.

And about engaging the best arguments contemporary liberal thought, that's like talking to the best cello player in Fresno.

American Islam

David Frum has a new post up about Mormonism, which strikes me as being essentially an American form of Islam, some of the strengths and vulnerabilities of the Islamic version of Islam. Theologically, both are founded on kooky precepts which nobody really believes. But both are sustained by as a means to support communities of their believers. Fortunately for Mormons, America has never been the site of Hobbsean war of all against all. Therefore the tribal violence of Mormons and against Mormons has gone away, leaving just good stuff, communitarianism, strong families, etc., to continue in its wake.

Btw, the apparent point of Frum's post is to rehabilitate the hypothetical Presidential candidacies of Mitt Romney and Jon Hunstman. I don't think that'll work. Eventually somebody has to take the theological kookiness of Mormonism seriously, and GOP base voters will if nobody else does.

Snobbery, pt II

What he said.

It may be obvious from the link but it's worth pointing about exactly why the Will Wilkinsons of the world will play second fiddle to the Sarah Palins if freedom in America has any future. Simply speaking there are by orders of magnitude more Palins that Wilkinsons so in any coalition containing them both, the Palins will be the lead dog.

It's a little less obvious (and counterintuitive to many) but the Palins are actually smarter for the same reasons. That is, because Will Wilkinson wants to impose top-down social control over their "reactionary" impulses, he is necessarily going to be on the wrong end of a Hayekian information gap, something that any libertarian ought to know.

The Message, pt II

A day of organizing is worth a week of blathering about "strategy," and an hour of fund-raising is worth far more than a month of navel-gazing op-ed columns pumped out by the punditocracy. - Robert Stacy McCain

I agree with (the other) McCain most of the time, and in fact with most of the post the quote is from. But as much as we might be disappointed with the conservative punditocracy over the last couple of months or years, we can't get by without them. Organizing, candidate recruitment and fundraising are all fairly substantial commitments in the lives of those who participate in them. What is it that we're shooting for that justifies all that energy? I don't think we can be successful in those areas until we get some decent answers.

Winning the Debate

Back in the day, conservatives used to console themselves that they were "winning the debate" over this issue or that. That is, even if we hadn't yet changed the laws to our liking, nobody with an intellectual credibility was willing to defend the liberal status quo with respect to rent control, Communism, or welfare. I remember being occasionally being frustrated upon hearing this, especially in the middle-to-late 90s, where I thought we'd done enough to be winning more than debates.

Now of course, conservative influence is at a low tide, so we should be grateful for small favors. So I guess we ought to be happy that even though in Realpolitik terms we've lost everything that matters, we are in fact winning the debate, for the first time in quite a while I might add.

Most of it has to do with the stimulus package. Recently Matthew Ygesias criticized Harvard economist Greg Mankiw for not being sufficiently condemnatory of Sen Jim DeMint's alternative to the Obama stimulus. From here, he conclude that Mankiw is not merely a reputable economist but also something of a Republican hack. In Jon Chait's mind, this is a "devastating critique."

At one level at least this is plainly ridiculous. Frankly I'd be interested to know what Mankiw thinks about DeMint's plan, but the zeroth order reason why Mankiw hasn't written anything about it is because the DeMint plan had no chance of becoming law and nobody took it that way. And Yglesias surely knows this because a couple of links earlier he criticizes Mankiw's own ideas as being politically implausible.

What's impressed me most about the recent debates is that the Right, largely but not completely represented by libertarian economists, has not only argued their corner well but also demonstrated much more emotional balance about the whole thing. Somehow liberals can't shake off their pissed-off malcontent personas even after they've won.

Cost of Snobbery

"Here I'm starting from the premise that American politics has been fitfully sorting itself into a meritocracy-versus-populism dynamic, with one party (the Democrats) dominated by the mass upper class and the other party (the GOP) representing the middle and working-class voters who resent this newish elite, for good reasons and for bad. The European model Reihan gestures at has succeeded - to date - by largely marginalizing the latter temper, with the result that the continent's right-populist types (your Le Pens and your Haiders) are simultaneously more extreme and more powerless than the equivalent figures in the United States. But conservative populism in the United States is way too potent to be marginalized in that fashion, I think...." - Ross Douthat

Ross writes an interesting post about how libertarians might fit in the big-picture American political dynamic as it evolves over the next decade or so. Leaving aside the libertarians for a moment, I disagree with Ross that right-populism in American cannot be marginalized. I for one think that's America's biggest political risk for the moment.

More than that though, we should wonder why the populism should currently be associated with the Right in America. Fifty years ago, it was associated with the Left (and politically speaking found its home with the Democrats). One one level, it makes more sense that way: modern economies, especially modern capitalist economies, are socially volatile to the point the people with the strong ties to the blood and soil might want help from the political establishment to protect them from being knocked around by incomprehensible forces bigger than they are. Nonetheless, it doesn't work that way, at least now. And the reason why is very illuminating.

Relatively speaking, the conservative base in America has strong families, which, besides being intrinsically valuable, are also protection during bad times. It's a very important but largely ignored reality that intrafamily economics are much more efficient than the general economy. The consequence of this is, with respect to being able to provide for themselves the conservative base has a broader imagination than typical liberals do. We get to slightly comic situation where the supposedly simple-minded Palins shoot their own food, whereas people with master's degrees in comparative literature are agitating for stimulus packages. It seems obvious to me, but the idea that not everybody can get a bailout is actually quite controversial.

Not Good News

We all know that the Obama stimulus package seems likely to pass at this point, and that's not good news. But what's at least as interesting is that how this reflects what the American people want, or will want. Check this out. A man in Elkhart Indiana asking a question to President Obama not only wants a bailout, he doesn't want to suffer the inconvenience of waiting in line to get it. It's quite an honor for the American taxpayer to be able to send his money to some guy he's never met, for nothing in return and at that person's convenience. It's nice work if you can get it.

This is an important transition point toward becoming a Euro-style social democracy. The political class wants to sever the the bounds of accountability imposed by people from flyover country. So it pushes out federal money so as to make everybody dependent on their largesse. From there, he who pays the piper calls the tune. But takes two to do this tango, and the power-happy pol has found his partner.

Life as We Know It

"The whole philosophy of Hell rests on recognition of the axiom that one thing is not another thing, and, specially, that one self is not another self. My good is my good, and your good is yours. What one gains another loses. Even an inanimate object is what it is by excluding all other objects from the space it occupies; if it expands, it does so by thrusting other objects aside or by absorbing them. A self does the same." - Screwtape, The Screwtape Letters

Hellish or not, this was essentially how life was lived for for most of humanity. I took a couple of courses in Roman history in college, and the professor was a big-deal scholar on the subject. On the first day of class he emphasized to us, that at the time of the Republic or the Empire, roughly 80% of the population worked as agricultural field labor, six days a week for at least ten hours a day. Therefore what conventional Roman history is taken to be "about" (Emporers, poets, generals, Senators, philosophers etc.) is our best guess of what we know or believe of the remaining 20%.

Anecdotes like this tend to evoke an aura like hearing about how Abe Lincoln walked x miles from his log cabin to school every morning, but I want to emphasize something else. Not so much how hard life was back in the day, but how it was defined in terms of things that have to be rationed, ie time and space.

What's different for us now is that is that life is much more capricious, and together with that that the "gooey" stuff matters so much more. Bill Gates is worth some number of billions, but his best friend when he was seven makes do with 90K/year. Michael Jordan won six NBA Championships but Karl Malone won none. And on and on. The reasons for this are never completely explicable, but we try. More importantly, we constantly evaluate the difference between success and failure, happiness and regret, in our own lives. But the essential factors, whatever we conclude they are, are not rationed.

If we spend an hour playing Tetris, the hour is gone. We can't use that hour again to write a letter. But a musician can express his passion or curiosity by writing a song. He doesn't have to give those things up once he's finished. In fact it's at least possible that he'll have more of it then. Therefore life itself is a miracle. We are spiritual beings who operate under important mechanical constraints, but those do not define us. For most people these are religious subjects and what we belive about them is defined largely by what religion we belong to. I don't mean to disparage that, or make any particular religious point at least in this post. But to truly express our selves goes way beyond moving rationable things in time and space, and we don't have to rely on any particular religious tradition to know it. Life as we know it is enough.

The Way Out, pt VI

What he said. I like especially how Kling focuses on profits. A lot of the current economic commentary is about credit, and financial institutions. And we do need credit to have profits. But to a large extent we shouldn't be worrying about (or spending money on) financial institutions with the hope that they will provide the credit to the broader economy.

One thing that's largely been missing in most of the recent economic commentary is that we are likely to be in the middle of a substantial sector shift. People have obviously rethought their expenditure patterns with new budgets and ordering of wants. Capital allocation will reflect that, and we know from Hayek that government cannot pull that off. Ie, now more than most times, there is no "aggregate" demand.

If the government can enter the market as a consumer, it can legitimately try to goose growth a little bit by cheating the process toward more expenditure. But the most important thing on the government side is to be relatively conservative of its debt levels.

Whither Stimulus?

In perfect timing with the theme of my last post, Matthew Yglesias argues (at tip to Ross Douthat) that we shouldn't sweat exactly what's in the stimulus because there's a decent chance that it's either stimulus for the economy or good for the country as a whole. I don't think Republicans should hyperventilate over this. The liberals would want these programs whether the economy was in recession or not, and now that they're in power they're going to try to get them. Instead, we should get them off the fence: the amount of money in the bill is so large that its proponents ought to be able to justify why they want it. It's very likely that we should oppose some or most of it anyway, but we won't know why necessarily until the other team has had the chance to make a case in favor of it. In particular, we should see just how much belief the other side has in the neo-Keynsianism they've been arguing for the last few months. It's very possible that it's less than we've been led to believe.