Monday, October 31, 2016

What has government done to you lately?

...would be a better headline.

What’s Government Done For You Lately?
Here is the core error of the 20th century: the belief that government can accomplish anything with enough intelligence, resources, and power. It afflicted regimes all over the world from Lenin’s 100 years ago to Obama’s today (and this will also be true of any probable successor). This theory built massive bureaucracies, justified vast wars, and drove the creation a legal and regulatory apparatus of unprecedented imperial reach.

The faith survives today, though with ever less conviction. Failure after failure has even sown doubts among ruling-class intellectuals and mainstream politicians. But because so much of the state apparatus – and the strategies that collect money from the public to fund it – are based on this model, a shift away from the paradigm will not come easily.
This, of course, is the central problem with David Rotman's MIT Technology Review article promoting a small tweak to traditional top down economic planning as if it were a wholesale change instead of an exercise in relabeling:
[Dani] Rodrik [an economist at Harvard’s John F. Kennedy School of Government] said in an interview that while “unfortunately” we’re stuck with the label “industrial policy,” today’s versions are very different from ones conceived decades ago. Rather than singling out a specific sector—say, aerospace or steel manufacturing—for support with large investments and tax incentives, new thinking suggests working across sectors to achieve a desired goal such as addressing climate change, using tools such as carbon pricing...

Take, for example, the failure of the solar company Solyndra. It is often held up as the kind of thing that occurs when government picks winners. But, writes Rodrik, Solyndra failed largely because competing technologies got much cheaper. Such outcomes are not necessarily an indictment of industrial policies. The real problem, Rodrik argues: the U.S. Department of Energy loan guarantee program that supported the solar company had a mixed set of goals, from creating jobs to competing with China to helping fund new energy technologies. What’s more, it did not properly define procedures for evaluating the progress of potential loan recipients and, importantly, terminating support to those companies when appropriate. Instead, according to Rodrik, in the absence of such rules, money was lent to Solyndra for political reasons...
The problem with Solyndra, then, was a mixed set of explicitly political goals applied to a specific sector subject to intense competition. The solution to such bad industrial policy is to apply explicitly political impediments to all economic activity. The competition will then be for government favors, like suspending the Obamacare cadillac tax.

No more picking winners and losers, no siree, we’ll just apply general taxes on carbon the government will conjure a 'market' in carbon. Do you believe it will be politically neutral, remain focused on the single problem, and with properly defined procedures for evaluating the continuing necessity for the market? I.e., that the bureaucrats running the scheme will ever even look for reasons to suspend it? If so, you must believe that Obamacare has fulfilled its promises.

It’s so simple, just find a big 'social problem' with dozens, or hundreds, of different causes and impose a single 2,000 page solution. I don’t know why we didn’t think of this approach to solve the obesity epidemic. We’ll just put nutrition labels on candy machines, ban soft drinks over 16 ounces and move toward taxing calories.

That this is still picking winners and losers, such as Warren Buffet’s wind farms versus Peabody Coal’s entire business, seems not to occur to these capos of industry.

Thursday, October 27, 2016

Stick to your knitting

I keep thinking about the MIT Technology Review article mentioned in my previous post.

Editor of Technology Review David Rotman strays into territory far removed from his magazine's titular mission by reviewing Rethinking Capitalism:
A series of essays by authors including Joseph Stiglitz, an economist at Columbia University who won a Nobel Prize in 2001, and Mariana Mazzucato, a professor of the economics of innovation at the University of Sussex… Together, the essays provide a compelling argument that we need more coherent and deliberate strategic planning in tackling our economic problems, especially in finding more effective ways to reduce greenhouse-gas emissions…

[The book attempts] to counter the view that free markets inevitably lead to desirable outcomes and that freer markets are always better: the faith that “the ‘invisible hand’ of the market knows best.” In fact, she argues, we should admit that markets are created and shaped by government policies, including government support of innovation.
What keeps me coming back to it are the straw men, unconscious assumptions and the anti-scientism buried throughout. Economics is neither technology nor science, nor does Mr. Rotman even understand it.

First up, "[T]he essays provide a compelling argument that we need more coherent and deliberate strategic planning in tackling our economic problems, especially in finding more effective ways to reduce greenhouse-gas emissions."

Government intervention never works out to be either coherent or strategic: Obamacare is an example where the government lent its full weight in time, expertise, money, subversion of the political process and publicly repeated big lies. Thank god it was health care and not the "Affordable Energy Act."

Fracking for natural gas has done more to reduce carbon emissions than a dozen Solyndras - despite government opposition.

Second, I know of no one who claims “free markets inevitably lead to desirable outcomes." Free markets lead to better outcomes than manipulated markets, and that includes failure when freely invested private money is lost. This Obamaesque straw-man premise additionally implies that if free markets aren’t perfect we must turn to government for such perfection.

Admitting that “markets are created and shaped by government,” begs a question while assuming a conclusion. It’s true that governments choose to create and shape markets. No natural law says they have to, but if Rotman’s admiring analysis is correct, Mazzucato takes this as a given. However, it is something governments choose to do. As Rotman later grudgingly concedes, this choice is rife with drawbacks.

In fact, placing the average bureaucrat as market arbiter is only better than the free market if that bureaucrat’s decisions are consistently better: More informed, more enlightened, more efficient, than free choice market decisions. This never happens. Assuming command-and-control industrial policy as an immutable consequence of having government indicates such endeavors aren’t market-based at all.

Finally, “government support of innovation,” can be accomplished passively. Ask John Cowperthwaite.

Mazzucato and Rotman only see government support as beneficial when it is active market intervention. A fair look at this question would also include examination of the ways in which government stifles innovation with command-and-control industrial policies, not the least of which is the misdirection of resources and prevention of new ways of doing business. Examples are growing corn for ethanol and taxing Uber to protect existing taxi businesses.

To summarize, Mr. Rotman proposes that government should do a better job when it actively creates and shapes markets. No one would disagree government should do better. The question begged is whether government should be actively involved at all. It would "do better" if it weren't.

Free markets are not perfect nor ever claimed to be. They are better than any alternative, and, as repeatedly demonstrated, vastly better than command-and-control industrial policies.

I think I’ll be doing more detailed fisking of other bits of this horrendous MIT article in future posts.

Sunday, October 23, 2016

Corporatism behaving predictably

You would be disappointed if you expected a publication called MIT Technology Review would eschew half baked, agenda driven articles about economics.

The MIT School of Economics needs to give some remedial instruction to David Rotman, Editor of Technology Review. In a recent article, Capitalism Behaving Badly, he reviews Rethinking Capitalism,
A series of essays by authors including Joseph Stiglitz, an economist at Columbia University who won a Nobel Prize in 2001, and Mariana Mazzucato, a professor of the economics of innovation at the University of Sussex… Together, the essays provide a compelling argument that we need more coherent and deliberate strategic planning in tackling our economic problems, especially in finding more effective ways to reduce greenhouse-gas emissions…

[The book attempts] to counter the view that free markets inevitably lead to desirable outcomes and that freer markets are always better: the faith that “the ‘invisible hand’ of the market knows best.” In fact, she argues, we should admit that markets are created and shaped by government policies, including government support of innovation.
Maybe we should admit that markets are distorted by government and result in misallocation of resources. Whatever we admit, we should not pretend that the United States is a capitalist country. It is a corporatist economy where government decides for policy reasons to give money to favored industries. Mr. Rotman apparently favors ‘green’ industry as a major part of a command-and-control industrial policy.

Rotman explains the failures of Solyndra, A123, Fisker, Navistar, Evergreen Solar and others, by arguing the wrong people were in charge, and they spent the money wrongly or stopped supplying it when more was needed, as if the politics were irrelevant and “some people” are not only above such things, but have nearly perfect appreciation of all market forces.

Mr. Rotman specifically addresses Solyndra:
Take, for example, the failure of the solar company Solyndra. It is often held up as the kind of thing that occurs when government picks winners. But, writes Rodrik, Solyndra failed largely because competing technologies got much cheaper. Such outcomes are not necessarily an indictment of industrial policies. The real problem, Rodrik argues: the U.S. Department of Energy loan guarantee program that supported the solar company had a mixed set of goals, from creating jobs to competing with China to helping fund new energy technologies. What’s more, it did not properly define procedures for evaluating the progress of potential loan recipients and, importantly, terminating support to those companies when appropriate. Instead, according to Rodrik, in the absence of such rules, money was lent to Solyndra for political reasons—President Obama and his administration used the company as a high-profile way to highlight its green-energy initiatives. Having singled out the solar company for praise, the administration was then reluctant to end its commitment…

The stimulus bill was well-­intentioned, and the instinct to use government spending for a specific social goal, supporting the development of green energy, was laudable…
1-Competing technologies got cheaper. Failure to recognize that likelihood is not external to government decisions, it is central to why the government shouldn’t be making them, and most certainly counts as a failure of industrial policy.

2-A mixed set of goals is likewise a failure of government policy. In this case, its execution of the “strategy,” if one should be so generous as to call such a mess strategic. Close enough for government work, I guess.

3-Slack control of money lent is also a clear failure of government execution of its confused and shortsighted planning.

4-Money was lent for political reasons. Duh.

This is not to be laid at the feet of capitalism, since it had no role in the matter.
Creating a rigorous industrial policy to encourage green technologies is no doubt a worthwhile objective. Economists and the lessons from efforts like the stimulus bill can teach us how to design such policies to be robust and effective…
No, they have demonstrated again and again and again that they cannot. We do not learn from experience. We do not learn from Smith, Hayek, Bastiat, Sowell and Ricardo, et. al..

Mr. Rotman's actual agenda is clear. He wants more public/pirate partnerships for his pet cause, only better than the last ones. The pirates aren't capitalists, they are robber barons whose victims are taxpayers.
But won’t wise industrial policies also require wise politicians?
No, there is no such thing as a "wise industrial policy" such a thing requires prescient politicians who have the ability to anticipate market changes, develop focused policies and implement them very efficiently. All while avoiding the opportunities for graft and corruption. Can you name such a politician?

Update Oct 25 11:40
How command-and-control industrial policy actually works:
Hillary Clinton’s campaign chairman met and corresponded on multiple occasions in his capacity as a top White House adviser with a previous employer seeking energy policies that it described as a potential “gold rush,” hacked emails and public records show.

John Podesta was a top White House energy policy official before joining the Clinton campaign last year. He previously served on the board of renewable energy investment firm Equilibrium Capital. He owned stock in the firm and drew $4,000 in annual “board fees.”

White House ethics rules bar employees from working on issues affecting former clients or employers for two years after taking their jobs. However, internal emails show that Podesta was in contact with Equilibrium within months of joining the White House as the company pursued a new energy efficiency financing model that would steer it significant revenue.

Tuesday, October 18, 2016

Autarky is where you find it

Originalists Against Trump
Read the whole thing. It's short.

Trump’s 'pen and phone’ executive order machine would be “bigly, bigly yuge.” Sad.

Sunday, October 09, 2016

Exercises in authoritarianism

Donald Trump's unfortunate, if entirely unsurprising recommendation, "Grab them by the pussy. You can do anything you want," has attracted a by now standard defense from his supporters: "Bill and Hillary are worse."

However, Trump's comment must be generalized beyond simply promoting sexual assault: He thinks of women as property.

In that, he is equal to Bill and Mrs. Bill. The difference is that they comfortably understand their ownership extends to everyone, and they should avoid bragging about it. Because Trump is a slow to learn political novice, he hasn't thought about that yet.

But he will.

Monday, October 03, 2016

Do not a wastrel be

I've made - these - same points, but they bear repeating in another voice. I've excerpted a couple of bits, but you should RTWT.

How Not To Waste Your Vote: A Mathematical Analysis
[T]here are many benefits of voting third party, even for president. It makes a political statement to the majority parties. It helps local politicians of that party in elections. It can help change platforms to include third-party elements. And it provides recognition for the party among voters as a viable alternative...

Your vote is, therefore, an expression of yourself and your beliefs. Your vote has power as a statement. People voting out of fear of the worst candidate is a self-perpetuating cycle. If no one ever has the courage to vote outside of the two main parties, it will never be broken. However, if enough people vote and it shows in the total election count, it will give cause for us to reconsider and embolden even more to vote outside of the two parties...

The value of your vote is what you give it. Should you spend it on a candidate you don’t believe in? Should it be an exercise in fear? It’s up to you. It is my hope that these mathematical calculations will bring you freedom from the idea that only majority party votes matter. A vote is a statement, a vote is personal, a vote is an expression of your citizenship in this country. If enough people vote their conscience and vote for what they believe in, things can change.
The purpose of voting is to express your will. If your will is to validate the lesser of two evils, you're purposely supporting the statist quo. That's a wasted vote.

Further reading:
You Are Not Morally Obligated to Vote for the Lesser of Two Evils

Rethinking ‘wasted votes’ and third-party candidates

Voting Third Party Isn’t Just a Serious Choice, It’s the Serious Choice