Saturday, June 11, 2011

Capitalism as art

Government certainly isn't!

One criticism raised against capitalism is that it turns us all into pale imitations of real human beings by taking all the creativity and individuality out of life. This criticism usually focuses on how capitalism creates standardized, “processed,” and inferior products that we gladly consume (think of McDonald’s as the archetype here). The act of production is seen as rote and mechanical, perhaps indirectly due to mainstream economic models that portray the economy as merely an optimization problem lacking any creativity. The result, say the critics, is a bland, gray, highly imitative society.

This perception is misguided. In fact capitalism is fueled by creativity and makes possible a level of individuality never before seen in human history. The anthropologist Grant McCracken recently wrote that “capitalism is art, a transformational exercise that turns meaning into value and value back into meaning.” I think he’s onto something there, and viewing capitalism as creating meaning, like art, is a useful way to respond to the criticism noted above.

Creation of Value

That capitalist production is a “transformational exercise” should be fairly obvious: What entrepreneurs do is to take inputs and attempt to transform them into an output that is valued more highly than the sum of the values of the separate inputs (accounting for the time involved in production as well). A ladder is more valuable than a bunch of wood, some nails or screws, and some tools. Profit is the creation of value.

Note too the idea of “turning meaning into value.” The simplicity of the ladder example might hide it, but the hard part for the entrepreneur is figuring out what people value. One way of expressing this is that producers need to know what has meaning for potential buyers.

The goods and services we purchase are not really the ends we seek in the market — they are means for satisfying our various wants. The challenge for producers is to figure out what those wants are. This requires producers to try to understand the things that have meaning to consumers and then find ways to create them out of available resources. As McCracken says, producers try to transform meaning into value, which requires some elements of art in figuring out what carries meaning and how best to provide people with objects or services that embody it.

On the consumption side, the reverse is true. Capitalism makes it possible for us to better differentiate ourselves from others by providing an enormous variety of goods and services. This variety not only enables us to better fine-tune our purchases to our particular wants — which is itself a way of creating meaning in our lives — but it also lets us create and define who we are by the kinds of products we buy. As entrepreneurs create value by trying to anticipate what we want, we turn that value back into meaning by the patterns of consumption we undertake.

In the West most of us are wealthy enough that our day-to-day needs for food, clothing, and shelter are not pressing concerns. One consequence is that we can afford to make purchases that satisfy not just some particular want, but also the desire to create meaning in our lives. We spend money on our hobbies and interests, no matter how unusual they might be. We buy product lines that say something about who we think we are, or who we want to be, such as Apple products, hybrid cars, all kinds of clothing, and things like tattoos and hairstyles. We are artists creating ourselves through individualized consumption decisions.

Idiosyncratic Tastes

Market economies also produce goods that cater to the most idiosyncratic of tastes. Those with “minority” tastes, such as wearing Hawaiian shirts all the time or ties that look like fish, can find products that satisfy those tastes in the market. Imagine instead that we had to vote on what to produce according to majority rule. Much of what markets now produce to satisfy strange, unusual, or weird wants would never get produced. Markets make possible forms of creative individuality that alternative systems would not, and do not, tolerate.

Consumers take the values that entrepreneurs create and transform those products back into meaning for themselves. In some fundamental sense the creation of value and the creation of meaning are just two ways of looking at the very same process of production and consumption in a market economy. In other words, both entrepreneurship and consumption are acts of creativity, imagination, and art.



Simply Madness

Jonah Goldberg

"Live simply so that others may simply live," Gandhi famously proclaimed. Some vegetarians see their diet as the truest expression of Gandhi's advice. But these days, the slogan has been embraced most passionately by those who wish to say goodbye to economic growth.

That's not an exaggeration. The so-called "steady-state economy" movement holds that "We will have to get beyond growth as a society in order to realize a sustainable future."

That's from the website Its logo features a typical jagged trend line (representing the traditional ups and downs of economic progress) that suddenly flatlines at a high level, sort of like what an EKG would look like if you had a heart attack and died while jogging (death, after all, is the steadiest of states).

The idea behind the steady-state economy should be familiar to anyone who's heard the lament that capitalism is bad for the environment because it rapaciously consumes resources faster than they can be replaced.

It's an ancient idea, really, a kind of millenarian paranoia that keeps getting gussied up to fit the latest headlines. My favorite example is the 1968 book "The Population Bomb" by Paul R. Ehrlich. "The battle to feed all of humanity is over," prophesized Ehrlich. "In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now."

It was a "certainty" that even in America, famine would claim millions. Ehrlich desperately claims that his predictions were mostly right and that hundreds of millions of people did indeed die of hunger over the ensuing decades. That's not exactly true. Global population has doubled and the amount of food available for humanity has grown as well.

But, yes, people have died of hunger since 1968. Why? It wasn't because markets failed or resources ran out. It was because government planners failed. That's why countries like India and China have introduced markets -- because their central planning was killing their own people.

A few years ago, a special issue of New Scientist magazine was dedicated to the steady-state economy. In it, Herman Daly, a leading guru behind the movement, explained that in his new ideal "sustainable economy," "scientists set the rules."

Translation: If the ecologists don't like an idea, that idea is out. Daly's hardly the only person out there imagining a kind of Plato's "Republic" where the philosopher-kings are replaced with environmental and climate scientists. The 2007 book "The Climate Change Challenge and the Failure of Democracy" makes a similar argument, though its enemy is liberal democracy rather than economic growth.

Either way, the problem becomes clear: When people start talking about capping or halting or managing economic growth, what they really mean is capping, halting and managing freedom. Hence Thomas Friedman, New York Times columnist and avowed envier of China's authoritarian regime, declares that "The Earth is Full" and we must therefore embrace a version of the steady-state economy.

Economic growth is an enemy of all central planners for the simple reason that growth jumps the guardrails of The Plan; it changes the aesthetically appealing flatline of the steady state and makes it jagged. Growth creates new products, destroys old ones and allows people to behave in ways that render PowerPoint projections dismayingly obsolete. Worse, it takes power from the planners.

In order to herd people back onto the official path, planners must tell them that what exists outside the guardrails is too terrifying to contemplate. "Beyond here there be monsters" is the posted sign at every guardrail.

For the record, America has more forests than it did a century ago. Our air, water and food are cleaner than at any time since industrialization. That is not because we lived simply, but because we pursued economic growth and accumulated the wealth and expertise to mend our problems. Over the long run, the same pattern holds true for every country that embraces economic growth.

That's why climate change is such a useful bogeyman -- because it is non-falsifiable, at least in our lifetimes. The "scientists set the rules," and there's no room for appeal. And -- surprise! -- in order to avoid catastrophe, the same old adages apply.

"Live simply so that others may simply live" has never made any sense save in this light. To live simply means to live predictably -- predictably poor (or to not live at all). When India came closest to following Gandhi's mantra, untold millions lived and died -- albeit "simply"! -- in abject poverty.

What America needs desperately today is massive economic growth. That's what will pay off our debt, sustain our entitlements and continue to improve the environment. Almost as important, it will annoy all the right people.



Slash spending and the economy will bloom

by Jeff Jacoby

FOR THREE YEARS, under presidents of both parties, the federal government has pumped trillions of borrowed dollars into stimulus, bailout, and recovery spending. The results have been woeful: Two years after the recession formally ended, the country is mired in a bleak economic lassitude from which it seems unable to rouse itself.

With 14 million Americans still unemployed, President Obama is presiding over the weakest economic recovery in more than 60 years.

Now the wretched news of recent weeks -- feeble GDP growth; painful foreclosure rates; slipping car sales; a drop in factory orders; ever more Americans on food stamps -- has grown even worse.

First, Standard & Poor's reported that home prices have fallen to their lowest level in more than two years, confirming a "double dip" in a housing collapse more severe than the one during the Great Depression. Then came the government's latest employment numbers: only 54,000 jobs added in May, the fewest in eight months, and a rise in the unemployment rate to 9.1 percent. This has been the lousiest recovery in more than 60 years, and by a wide margin.

Last week, speaking at the Chrysler plant in Toldeo where the Jeep Wrangler is produced, President Obama tried to put a brave face on things. "There are always going to be bumps on the road to recovery," he said. "We're going to pass through some rough terrain that even a Wrangler would have a tough time with." The audience booed. If that's the reaction Obama's keep-your-chin-up rhetoric gets from a friendly union crowd, how will it play with the rest of the country?

In a new strategy memo, Democratic pollster Stan Greenberg warns his party that voters have lost confidence in Democrats when it comes to the economy, and that harping on the past -- insisting that "Democrats did right and brave things" to promote growth -- will not win votes in 2012.

"'The economy' is not the recovery," Greenberg writes, "but a set of powerful on-going realities: a middle class smashed and struggling, American jobs being lost, the country and people in debt. . . . Voters are desperate for leaders who understand the scope of what is happening. . . . They want serious plans, not triumphalism about jobs reports."

To Greenberg and other Democrats, "serious plans" to revive the economy presumably don't include dramatic cutbacks in the government's astronomical spending. But what if that spending -- projected to reach $3.8 trillion this year, $1.6 trillion of it borrowed -- is the very thing inhibiting economic growth? Keynesian economists and pundits have argued that what the economy craves is even more stimulus spending and government debt. But history suggests something altogether different.

Writing last year in the Cato Policy Report, economists Jason Taylor and Richard Vedder showed that the great post-World War II economic boom was ushered in by the swift rollback of what had been the largest economic "stimulus" in US history. At the time, leading Keynesians cautioned that the abrupt withdrawal of federal dollars would plunge the economy into a new depression.

Their warnings were ignored.

"Government canceled war contracts, and its spending fell from $84 billion in 1945 to under $30 billion in 1946," Taylor and Vedder wrote. "By 1947, the government was . . . running a budget surplus of close to 6 percent of GDP. The military released around 10 million Americans back into civilian life. Most economic controls were lifted, and all were gone less than a year after V-J Day. In short, the economy underwent . . . the 'shock of de-stimulus.'"

Fearful predictions of massive unemployment -- 14 percent, Business Week said -- never materialized. Far from collapsing, "labor markets adjusted quickly and efficiently once they were finally unfettered." Even with millions of demobilized soldiers re-entering the workforce, "unemployment rates . . . remained under 4.5 percent in the first three postwar years." Workers who lost government-funded jobs quickly replaced them in the surging private sector. "In fact," Taylor and Vedder add, "civilian employment grew, on net, by over 4 million between 1945 and 1947 when so many pundits were predicting economic Armageddon. Household consumption, business investment, and net exports all boomed as government spending receded."

America's postwar experience indicates that vibrant growth is generated not by massive government interference in the economy, but by the reverse. The way to revive a gasping private sector is for government to get out of its way, not to choke it with trillions of dollars in new spending.

Washington's response to the recession -- unprecedented, intrusive, costly -- has been ruinous. The stimulus hasn't restored the economy to health. The "shock of de-stimulus" just might.




FCC taking “Fairness Doctrine” off the books: "Under GOP pressure, the Federal Communications Commission has agreed to strike from its books an outdated yet still controversial regulation of political speech on the airwaves known as the Fairness Doctrine. FCC Chairman Julius Genachowski said in a letter to a House Republican leader this week that the agency's effort to identify and eliminate 'antiquated and outmoded rules that unnecessarily burden business, stifle investment and innovation, or confuse consumers and licensees' will include a recommendation to delete the Fairness Doctrine."

To fix fiscal mess, follow Texas: "So what example should America follow, that of deficit-slaughtering, budget-cutting, seriously limited government in Texas, which has added 730,000 jobs in the past decade, or that of regulation-happy, spend-mercilessly, owe-everything, flee-this-place-quickly California, which has lost 600,000 jobs during the same period?"

The Trojan Horse of “happiness research”: "A very large literature has built up over the past several decades in the area of so-called 'happiness research.' Such research is based on several very dubious assumptions: namely, that utility is cardinal and measurable after all; that interpersonal utility comparisons can therefore be made; and that the great unicorn of economic theory — the 'social welfare function' — has finally been spotted. Armed with these assertions, socialists around the world believe they have finally discovered their holy grail." [See also here]


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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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