here, commenting primarily on the erosion of economic liberty:
Over dinner with Milton Friedman several years before he died, I offered the great man a compliment. He refused it.
I had just re-read God and Man at Yale, the 1951 book in which William F. Buckley Jr., denounced the leftist attitudes he had encountered among the Yale faculty and administration as an undergraduate. Buckley singled out the department of economics as the most collectivist department on the campus. "Today," I said, "nobody would call the economics department at a major university 'collectivist.'"
Academia as a whole may have continued its long, sorry wobble to the left, I continued, but the economics profession had proved an exception, moving the other way. Departments of economics across the country now grasped the importance of free markets. "Mises, Hayek, Stigler and you," I told Friedman. "You've transformed the intellectual climate. You've won."
Friedman shook his head. "We may have won the intellectual battle," he replied, "but in practical politics, it's difficult to see that we've had any effect at all."
Government spending had continued to grow, he explained. After a pause during the Reagan years, regulations had once again proliferated. For a moment, Friedman grew silent. Then he looked at me.
"The challenge for my generation," he said, "was to provide an intellectual defense of liberty. The challenge for your generation is to keep it."
As Peter notes, the decline of principled commitment to economic liberty has been a bipartisan affair.
I am also gratified to see that therut doesn't read till the end of the posts. That's a timesaver!
Each generation must meet both challenges, else liberty and self-government become illusions.
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"A Republic ma'am, if you can keep it."
I assume this tells him nothing about his own point of view, only about how the MSM and schools are poisoning our minds.
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Maybe he's right.
Then perhaps they deserve to get a lefty government. The People deserve to get what they want -- and to get it good and hard.
She probably replied, "A Republic? We had 13 Republics? Are you telling me you brought us greater centralization of government power?! This does not bode well at all" [Depending on whom you relate this story to, you can add that the women likely said "F-ck you" at the end.]
The remaining 20% "real Americans" will now vote in Sarah Palin and there will be liberty in every pot!
Not your kind of liberty, hippy! It's liberty in every pot, not vice-versa!
First, is the insistance of the voting public to conceptualize corporations, governments and economic activity in general as if it was just like interacting with your neighbors. People see corporations as selfish or generous independently of what they may think of the people constituting the corporation.
For instance people feel corporations are being irresponsible and greedy if they don't pay their foreign workers at least such and such per hour. Paradoxically, however, they don't seem to feel that the stockholders of that corporation have any obligation to open their wallets and simply give these third world residents money nor do they feel that other corporations who aren't even giving these people any job much less a high paying one are under any obligation.
This is just one example, corporate taxes (as opposed to just taxing the wealth gains by individuals) is another and the pernicious effect of this conception is to inevitably errode economice freedom. The intuitions that work well when dealing with your friends will inevitably recoil at the organizations that free enterprise creates even if they result in good for the individuals involved.
2) The second point cuts the other way. While I think there are problems with our attitudes to economic freedom I would also point out that for most people *economic* freedom is not really an end in and of itself. People want political freedom, freedom to screw who they want and so forth and various social benefits.
So sure losing economic freedom may be a harm (loss of efficency) but if it brings other benefits and our constantly growing economic riches can handle the inefficency what's the big deal?
The Anti-Federalist position has long been undeservedly neglected in both the study of history and the Constitution. Looking back from centuries later, many of their warnings proved to be remarkably prescient, even if they took decades or centuries to play out.
Stocks have reached what looks like a permanently high plateau.
--Irving Fisher, Professor of Economics, Yale University, October 16, 1929.
You're ignoring the fact that we have a government monopoly specifically charged with managing the availability of credit. Artificially low interest rates are why people went into debt- that's exactly what low interest rates signal rational market players to do- not our rejection of the eternal quasi-Luddite complaint that Americans need to be more spartan in their tastes.
You will notice that the government hasn't been able to manage to increase availability of credit in the mortgage market lately. People spend because businesses are very competent in creating demand, as they should be. Credit is fine as long as there are regulatory limits, both to protect the individual from themselves, and to protect the system.
Yes, the government did manage the increase in credit in the mortgage market. It was part of a deliberate, openly stated strategy to increase home ownership. It wasn't just a spontaneous jump in the increase in demand for homes.
How do I remove myself from being part of the "People"? I would like to unsubscribe.
Ha! In America, 'The People' subscribe you!
The government hasn't been able to increase mortgage market credit availability lately, i.e. reduce interest rates in the past six months. Mortgage rates remain high despite fed discount rate cuts and a historically low yield on the ten year Treasury bond. There is no government monopoly on credit.
The housing bubble was caused when the government relaxed lending regulation, which allowed people who did not have access to loans under FNMA regulations to borrow and spend more than they were able to repay. In this case, the demand for housing was already there, but the unqualified buyers were previously kept from borrowing and spending by FNMA lending standards.
I hope nothing I said in my post above suggested I disagree with your observations on the anti-Federalists. I agree completely.
As for Peter Robinson's article, it was well written, but in terms of principle it is much easier to argue against auto industry bailouts if one has not gone on record a month earlier as being comfortable with financial industry bailouts. In each case bankruptcy wouldn't bring societal disaster, merely the transfer of assets into putatively more competent hands.
Interesting post. Let me just point out that free markets don't create corporations -- governments do, through incorporation. One might argue from a free-market perspective that corporations violate the basic principles of property by place the individual at a remove from his or her property and how it is used.
Perhaps all large, jointly owned businesses should be partnerships, like Lloyd's of London.
In a corporate system, shareholders are protected from legal liability, blunting the incentives for corporations to avoid criminal conduct. They are protected from the company's debt, blunting the free-market incentives for caution in business ventures. If the gains are personalized, but the risk is socialized, the incentive to gamble is huge whenever there is access to risks where the potential losses are greater than the original stakes.
If one wants to seek a free-market remedy to spectacular collapses, like Enron and AIG, which leave non-owners holding the bag, perhaps we should do away with corporations, whose legal psuedo-personhood is less than libertarian in principle.
Robert Farrell:
Seems to me that if there's one job for government, it's prosecuting people for criminal conduct. As for running up debt or otherwise poorly managing a company, the problem for shareholders is that their shares fall in value. So no, they're not protected.
I fondly remember Friedman's "Free To Choose" television series, which included a segment by Friedman followed by a group discussion with commenters of varying philosophies. In the original series (later re-done) a very young Thomas Sowell would just politely skewer his collectivist counterparts.
Psst! Say, buddy, wanna buy a bridge? You can finance the whole thing, easy.
But a corporation can commit (and be held responsible for) criminal acts while no real person is held accountable. Problem.
As for running up debt or otherwise poorly managing a company, the problem for shareholders is that their shares fall in value. So no, they're not protected.
You're wrong. Any business venture can incur losses greater than its total value. If the business is a partnership or other non-corporate structure, the creditors then come after the personal assets of the owners, until the losses are repaid. Thus, without a corporate structure, the founders of Enron die penniless in the gutter, which is something any real libertarian should want.
The moral hazard can be understood with a simplified example: suppose a company worth a billion dollars has a chance to buy a mortgage company which has a lot of debts and assets of uncertain value. No one knows how much the assets are worth, but the market thinks that there is a 50% the company is worth $5 billion, and a %50 its value is -$10 billion -- it's debts and obligations exceed its assets by that amount.
Now, rationally this company is worth nothing, and one would have to pay someone a couple billion to take it on. But a coporate shareholder's calculus of risk is different. He sees a 50% chance at a share of $5 billion -- more the adequate compensation for his 50% risk of losing his share of a billion dollars. The stage is set for a market failure caused by government regulation -- in this case, the regulation that protects shareholders from any costs of their decisions over and above the amount of their investment. Any risky behavior -- a risky loan, a risky takeover, a risky strategy of polluting and trying not to get caught or bribing a legislator -- any risky strategy will be favored in the modified cost/benefit analysis of the corporate shareholder.
Ted? Ted Stevens? Is that you?
What costs? They bought a company that went bankrupt and lost their investment. What other costs are you talking about? Actually, if management took that kind of risk with my investment, I'd be pissed. I'm not investing my retirement funds to have somebody play the lottery with them.
As for corporations but not individuals being held responsible for criminal actions, I'm clearly not the legal eagle here but I do seem to recall corporate executives getting charged individually with felonies and going to jail. Anyway, again, as a stockholder I'm not going to be pleased if management gets the company hit with a huge fine or lawsuit for illegal activities.
Where you have large numbers of people investing in diversified portfolios--like for their retirement--if individual investors are to be held accountable for law-breaking by the management then it would simply destroy that avenue of savings and investment. On the other hand, where you have a small number of people incorporating in order to escape the consequences of their own actions, my impression is that courts do stand ready to pierce the corporate veil. At least, that's how it was explained to us at a meeting of my gun club, when we decided to get a very large insurance policy rather than risk our homes.
I'm sorry, can you point us to the quote where MF thought Pinochet was "doing wonderful things"?
Thanks in advance.
And your historical example of economic illiberality bringing constantly growing riches is?
Economic liberty is the precondition for all the others.
Actually, you were, Doc. If you thought not, somebody was lying to you.
"Actually, you were, Doc. If you thought not, somebody was lying to you."
Please. Have you peopleTM who throw the word "lying" around all the time lived such a sheltered life that you've never actually been, you know, lied to?
The word does have a meaning that is useful to signify when appropriate. I don't think anyone would like the consequences of entirely emptying out that meaning.
A faked balance sheet is a lie in my book.