Author: VD

Mailvox: praxeology and free trade

S asks about reconciling trade barriers with distrust of government:

as always, great work with the blog. I’m a big fan of your writing on economics, especially when applying Austrian theory to show how badly Keynesians misunderstand the subject. As such, I was hoping to ask you for some clarification regarding free trade. I read your book, The Return of the Great Depression, and found your comments on free trade rather interesting. (It’s been 9 months since I read the book so I apologise if I misrepresent any of your arguments.)

If I understand what you write correctly, it seems that the paradigm of comparative advantage espoused by Ricardo and his intellectual descendants doesn’t really make sense because of what you characterise as “the n-body problem”. In other words comparative advantage might work when dealing with two isolated counterparties, but what works for two entities does not necessarily work for three or more because of the exponentially increasing complexities introduced by additional trading entities. On this basis, you argue that a policy of unrestricted free trade doesn’t make any sense from a theoretical or practical perspective.

Here’s my question: given that the conclusions of praxeology generally argue that government intervention is a bad idea, how can this be consistent with a policy of government intervention in trade using tariffs to support specific industries or the general economy?

I’ve been trying to figure this out for a while. The articles at Mises.org generally reference Ricardo’s theory to support their arguments even though Ricardo wasn’t an Austrian theorist. Then there’s this article which makes a lot of interesting points in favour of protectionism, even though it’s written by a guy who is a Keynesian (as far as I can tell). What are your thoughts on the “correct” policy regarding trade?

There are three ways to consider the problem. We can look at it logically, we can look at it empirically, and we can look at it historically. The Ricardian position fails by all three metrics, in part because there is an inherent fallacy in your observed dichotomy. To observe that government is always inefficient and to mistrust its application of power is not synonymous with saying that there is absolutely no role for national governments. Libertarian minarchy is neither anarchy nor the U.S. Constitution, but I think it is worthwhile to note that protecting the borders and funding itself through tariffs are two of the very few genuine powers that the U.S. Constitution grants the federal government.

It is a very odd and perverted form of American conservatism that supports democracy-building on the other side of the globe, but argues against American industry-protecting import duties.

But that’s a tangent. Getting back to the logical angle, the Ricardian notion of comparative advantage completely fails because it is too focused on the TOTAL production rather than the nation-specific production or the effects on a nation of being forced to exchange its manufacturing from one set of goods to another. But the biggest problem is that because it relies on a labor theory of value, it fails to take demand, much less the limits of demand, into account. Furthermore, being a pre-industrial concept, comaprative advantage simply does not envision that a nation could possibly have nothing to physically produce that is considered worthy of trade. Consider the Wikipedia example.

Two men live alone on an isolated island. To survive they must undertake a few basic economic activities like water carrying, fishing, cooking and shelter construction and maintenance. The first man is young, strong, and educated. He is also faster, better, and more productive at everything. He has an absolute advantage in all activities. The second man is old, weak, and uneducated. He has an absolute disadvantage in all economic activities. In some activities the difference between the two is great; in others it is small.

Despite the fact that the younger man has absolute advantage in all activities, it is not in the interest of either of them to work in isolation since they both can benefit from specialization and exchange. If the two men divide the work according to comparative advantage then the young man will specialize in tasks at which he is most productive, while the older man will concentrate on tasks where his productivity is only a little less than that of the young man. Such an arrangement will increase total production for a given amount of labor supplied by both men and it will benefit both of them.

This example assumes that there is something that the old man can do that is of value to the young man. But that’s not necessarily true. What if instead of 2 people, there are 20 and all the old man can usefully do is gather 5 coconuts a day when two young girls with no other useful skills can gather 100, more than the castaway society needs, in the same time? Yes, total production will increase +5, but so what? No one is going to give him anything for his worthless coconuts because there is already a coconut glut thanks to the highly productive young girls. Austrian-savvy individuals should be able to see the seeds of an Austrian critique of Ricardo here.

Anyhow, that’s just a superficial first pass at the intrinsic logical flaw of Ricardian comparative advantage. More on the empirical and historical flaws as well as the government question in future posts.

VPFL Week One

78 RR Redbeards (1-0)
48 Moundsview Meerkats (0-1)

61 Blackmouth Banksters (1-0)
51 MS Swamp Spartans (0-1)

75 Greenfield Grizzlies (1-0)
44 Valders Quixotes (0-1)

72 Winston Reverends (1-0)
47 Meigs Marauders (0-1)

55 Judean Rhyneauxs (1-0)
48 Bane Sidhe (0-1)

This week’s lesson: don’t leave an RB with 29 points on the bench.

Governed by a ghost

Apropos of yesterday’s discussion of the inimical effects of immigration, Dinesh D’Souza shows that Obama’s driving motivation is neither socialism nor traditional Democratic progressivism, but rather African anti-colonialism:

Clearly the anticolonial ideology of Barack Obama Sr. goes a long way to explain the actions and policies of his son in the Oval Office. And we can be doubly sure about his father’s influence because those who know Obama well testify to it. His “granny” Sarah Obama (not his real grandmother but one of his grandfather’s other wives) told Newsweek, “I look at him and I see all the same things–he has taken everything from his father. The son is realizing everything the father wanted. The dreams of the father are still alive in the son.”

In his own writings Obama stresses the centrality of his father not only to his beliefs and values but to his very identity. He calls his memoir “the record of a personal, interior journey–a boy’s search for his father and through that search a workable meaning for his life as a black American.” And again, “It was into my father’s image, the black man, son of Africa, that I’d packed all the attributes I sought in myself.” Even though his father was absent for virtually all his life, Obama writes, “My father’s voice had nevertheless remained untainted, inspiring, rebuking, granting or withholding approval. You do not work hard enough, Barry. You must help in your people’s struggle. Wake up, black man!”

The climax of Obama’s narrative is when he goes to Kenya and weeps at his father’s grave. It is riveting: “When my tears were finally spent,” he writes, “I felt a calmness wash over me. I felt the circle finally close. I realized that who I was, what I cared about, was no longer just a matter of intellect or obligation, no longer a construct of words. I saw that my life in America–the black life, the white life, the sense of abandonment I’d felt as a boy, the frustration and hope I’d witnessed in Chicago–all of it was connected with this small piece of earth an ocean away, connected by more than the accident of a name or the color of my skin. The pain that I felt was my father’s pain.”

In an eerie conclusion, Obama writes that “I sat at my father’s grave and spoke to him through Africa’s red soil.” In a sense, through the earth itself, he communes with his father and receives his father’s spirit. Obama takes on his father’s struggle, not by recovering his body but by embracing his cause. He decides that where Obama Sr. failed, he will succeed. Obama Sr.’s hatred of the colonial system becomes Obama Jr.’s hatred; his botched attempt to set the world right defines his son’s objective. Through a kind of sacramental rite at the family tomb, the father’s struggle becomes the son’s birthright….

Incredibly, the U.S. is being ruled according to the dreams of a Luo tribesman of the 1950s. This philandering, inebriated African socialist, who raged against the world for denying him the realization of his anticolonial ambitions, is now setting the nation’s agenda through the reincarnation of his dreams in his son. The son makes it happen, but he candidly admits he is only living out his father’s dream. The invisible father provides the inspiration, and the son dutifully gets the job done. America today is governed by a ghost.

The Obama presidency, too, is strongly indicative of where America stands in Glubb’s theory of imperial lifecycles. In much the same way that the later Roman emperors were not Romans in the sense that Publius Cornelius Scipio Africanus, Gaius Marius, or Gaius Octavius Thurinus were, Mr. Soetoro-Soebarkah is not an American in the same sense that past presidents such as Thomas Jefferson, Abraham Lincoln, JFK, and Bill Clinton were. None of Barack Hussein Obama’s predecessors identified with foreign cultures or ambitions, much less were motivated by them and none of them were steeped in expressly anti-American ideologies from their childhood.

Crash and burn coming

If Zynga stock was public, I’d short it:

Since launching its first Internet game in 2007, Zynga has grown rapidly. The company’s true earnings are unknown to outsiders, but industry observers estimate that its annual revenue could now be $500 million or more. In May, social-media analyst Lou Kerner estimated Zynga’s total price tag at $4 billion, based on corporate filings for a stock issuance.

In light of Zynga’s phenomenal rise, one former senior employee recalls arriving at the company eager to discover what new business practices were driving its success in a market where other popular Web 2.0 ventures struggled to make money. What was Zynga’s secret? Not long after starting work, he got an answer. It came directly from Zynga founder and CEO Mark Pincus at a meeting. And it wasn’t what he expected.

“I don’t fucking want innovation,” the ex-employee recalls Pincus saying. “You’re not smarter than your competitor. Just copy what they do and do it until you get their numbers.”

There’s a company like this every generation or two in the game industry. Back in the day, the self-styled “assholes with the money” were GT Interactive. Everyone, especially the people at GT, thought they were going to dominate the industry, but they didn’t even last as long as Origin Systems, much less Electronic Arts. While you can make a lot of money in the short term with a pure copy-and-churn-it-out approach, it never translates into success in the medium term. Once you grow to a certain point, you have to figure out how to make something that people want to play on your own, and that’s not something a group of employees accustomed to operating on an evil and short-sighted ethos are ever able to do.

But speaking of games, happy 25th birthday, Jumpman!

Immigration and the fate of empires

Sir John Glubb on how immigrants do not strengthen an empire, but rather transform it, weaken it and ultimately help bring about its demise:

The Influx of Foreigners

One of the oft-repeated phenomena of great empires is the influx of foreigners to the capital city. Roman historians often complain of the number of Asians and Africans in Rome. Baghdad, in its prime in the ninth century, was international in its population – Persians, Turks, Arabs, Armenians, Egyptians, Africans, and Greeks mingled in its streets.

In London today, Cypriots, Greeks, Italians, Russians, Africans, Germans, and Indians jostle one another on the buses and in the undergournd, so that it sometimes seems difficult to find any British. The same applies to New York, perhaps even more so. This problem does not consist in any inferiority of one race as compared with another, but simply in the differences between them.

In the age of the first outburst and the subsequent Age of Conquests, the race is normally ethnically more or less homogeneous. This state of affairs facilitates a feeling of solidarity and comradeship. But in the Ages of Commerce and Affluence, every type of foreigner floods into the great city, the streets of which are reputed to be paved with gold. As, in most cases, this great city is also the capital of the empire, the cosmopolitan crowd at the seat of the empire exercises a political influence greatly in excess of its relative numbers.

Second- or third-generation foreign immigrants may appear outwardly to be entirely assimilated, but they often constitute a weakness in two directions. First, their basic human nature often differs from that of the original imperial stock. If the earlier imperial race was stubborn and slow-moving, the immigrants might come from more emotional races, thereby introducing cracks and schisms into the national policies, even if all were equally loyal.

Second, while the nation is still affluent, all the diverse races may appear equally loyal. But in an acute emergency, the immigrants will often be less willing to sacrifice their lives and their property than will be the original descendants of the founder race.

Third, the immigrants are liable to form communities of their own, protecting primarily their own interests, and only in the second degree that of the nation as a whole.

Fourth, many of the foreign immigrants will probably belong to races originally conquered by and absorbed into the empire. While the empire is enjoying its High Noon of prosperity, all these people are proud and glad to be imperial citizens. But when decline sets in, it is extraordinary how the memory of ancient wars, perhaps centuries before, is suddenly revived, and local or provincial movements appear demanding secession or independence. Some day this phenomenon will doubtless appear in the now apparently monolithic and authoritarian Soviet empire. It is amazing for how long such provincial sentiments can survive.

As I noted in a previous post, the influx of Irish, German, and Scandinavian immigrants distinctly transformed the political culture of America in a fundamentally anti-Constitutional manner, not despite but because of their assimilation. In this essay, we can see the way in which the Jewish European immigrants of the post-WWII period have had a predictably inimical effect as well as predict the ultimate outcome of the much larger and more recent wave of Central American immigration. I find this piece to be fascinating because while I hadn’t read Glubb before, I had reached very similar conclusions on the basis of my own historical readings.

The important thing to note is that none of this has anything to do with racial or cultural superiorities, but rather the mere fact of racial and cultural differences between immigrant cultures and host cultures playing out in a repetitive and entirely predictable manner. There’s no point in attempting to assign particular blame to any specific immigrant group, much less to decry awareness of historical patterns as being somehow anti-Irish, anti-semitic, or anti-laraza. If the same pattern has played out everywhere from Asia to Europe and now America over three thousand years, there isn’t any rational grounds to believe that the White Anglo-Saxon Protestant culture upon which the American Empire was originally built was going to be harmed significantly less by the immmigration of smart Russian Jews and hard-working Swedish Lutherans than it is by involuntarily imported African slaves, uneducated Mexican Catholics or half-barbaric Somali Muslims.

The theory points to a very different conclusion than the multiculturalist critic will likely assume. Contra the fevered fears of violent reaction they imagine it will inspire, this theory of imperial decline actually indicates that there is no point even attempting to restrict immigration at this late stage because the imperial culture of America has already been fatally diluted and is now well into the final stage of decadence. The time in which an imperial culture can be preserved is during the Ages of Commerce and Affluence; if the preservationist forces wait until the Ages of Intellect or Decadence to react to immigrant-driven transformations, it is already too late.

What applying Glubb’s theory to the present situation indicates is that those who value the historical imperial culture of America would do much better to focus on building anew on a smaller scale rather than wasting time, money, and opportunity cost on futile attempts to regain what has already been lost. There is a lot to contemplate there, and much of it is not terribly pleasant, but the fact that his historical conclusions happen to point in exactly the same direction as independently developed economic conclusions tends to indicate that they merit more than simply being brushed aside unconsidered.

WND column

America is Done and Dusted: Vox Day interviews Max Keiser

Vox: What is your take on the recent announcement of the 28.7 percent collapse in existing home sales reported by the National Association of Realtors?

Max: The economy and the markets are broken. There isn’t going to be any increase in demand without jobs or wages. Furthermore, there is the situation where the commercial banks are holding huge mortgage pools that they claim hold values above zero, which is not the case. These huge write-downs mean huge problems for the Fed.

Will Obama’s financial-reform act that passed Congress earlier this year lead to any improvements in the economy?

No, because it doesn’t solve the structural and systemic problems. The problem is that the banking system is fundamentally broken. It broke in 2008. The big stimulus enacted in 2009 threw new credit into the economy, but it was like giving a blood transfusion to a corpse; we saw some movement, but the corpse still isn’t alive. The system broke in 2008, and no one has done anything about it. It’s a pail with no bottom in the pail.

NFL Week One

It didn’t get started right, but at least it got started.

MIN at NO Vikings Saints
CAR at NYG Giants
ATL at PIT Falcons
CLE at TB Browns
DEN at JAX Jaguars
IND at HOU Colts
MIA at BUF Bills
DET at CHI Lions
OAK at TEN Titans
CIN at NE Bengals
ARI at STL Cardinals
SF at SEA 49ERS
GB at PHI Packers
DAL at WAS Cowboys
BAL at NYJ Ravens
SD at KAN Chargers

Mailvox: the decline of Broadway

CB has a request:

I’ve seen you mention several times before how gays have killed Broadway. I recently mentioned that to someone who jumped down my throat about being ‘ignorant’ and ‘homophobic’ and the other crap liberals throw at people. I was wondering if you knew any articles or statistics to throw back at him to shut him up. I mean I have no raw data to confirm it, it just seems observably true. Like the sky being blue. Got anything more concrete I could hit him with. I’d love to shut him up.

It’s easy enough. According to The Broadway League, there were 39 shows running a combined 1,070 weeks that sold 8.4 million tickets in the 1989-1990 season. That is 7,850 tickets sold per show-week. In the 1999-2000 season, there were 37 shows running a combined 1,460 weeks that sold 11.38 million tickets. That is 7,794 tickets sold per show-week. In the 2009-2010 season, 39 shows ran a combined 1,464 weeks resulting in 8,121 tickets per show-week.

So, despite a 24% increase in the US population over the last 20 years, Broadway attendance has remained relatively flat. Consider the stock market and the housing market by way of comparison; it would be considered an epic disaster if the Dow returned to its January 1990 level of 2,707 (now 10,463) or the Case-Shiller index returned to its January 1990 level of 75.58 (now 138.03). Broadway’s gross revenues have increased 106% in inflation-adjusted dollars over the last two decades, which is why the superficial observer is likely to erroneously conclude that it is in good shape, but it must be kept in mind that this increase is primarily the result of a 45% increase in show-weeks and therefore gross costs as well.

However, the situation is almost certainly somewhat worse than it looks. The reason is that the 2009-2010 statistics are exaggerated due to a recent change from “Net Gross” to “Gross Gross” and “Paid Attendance” to “Total Attendance”. Hence the change from “tickets sold” to “tickets” in the 2009-2010 season. During the 2008-2009 season, for which the previous statistical metric remained relevant, tickets sold per show week were already flat at 7,848. That means Broadway required ten percent more shows and 478 more show-weeks than the 1989-1990 season in order to stay even on average paid attendance.

One can, of course, quite reasonably argue that there are other factors involved in causing this 20-year attendance stasis, but there can be no argument that stasis and relative decline do not exist. And given this, there can be little doubt that the content, particularly the increasingly homo-esoteric nature of it that appears to have begun in earnest in 1991 with the premiere of Tony Kushner’s Angels in America: A Gay Fantasia in National Themes, is one of the significant causal factors.

There is no equality

The easily observable fact is that equality does not exist. It is a myth. It simply does not exist in any material or legal sense.

Judges have been told to treat female criminals more leniently than men when deciding sentences. New guidelines declare that women suffer disadvantages and courts should ‘bear these matters in mind. The rules say women criminals often have poor mental health or are poorly educated, have not committed violence and have children to look after.

I think it’s particularly interesting that these UK rules declare that women criminals have not committed violence, especially if the reason that they are criminals is because they have committed violent crimes. It’s not hard to understand that Londonistan is going to look more and more attractive as it is compared with the lunatic secular alternative on offer.

An unexpected query

Okay, try not to die laughing, everyone. Especially you, Nate. As it happens, it would appear I need to consider buying a riding mower. John Deere X304 or MTD Yard Man 42-inch? Normally, I’d go for the former on the basis of JD quality, but I’ve heard that there have been issues of late and I can probably get better service from the MTD dealer.