Vox Popoli

This reading covered Rothbard’s explication of Austrian business cycle theory. Please take the quiz first, then post any questions or observations you might have in the comments here. And in light of the week’s reading, isn’t it a relief to learn the new president-elect is so well-versed in economic history?

Next week’s reading will be Chapter II, pp 37-55, on the Keynesian critiques. There’s no hurry and I’d like for those who are interested to be able to have this down cold by the time we finish.

First banking, now cars again. One wonders how many industries Obama will have to nationalize before it becomes apparent that if he wasn’t a socialist before, he has become one whether he wanted to or not:

General Motors Corp. said Friday it lost $2.5 billion in the third quarter and warned that it could run out of cash in 2009 if the U.S. economic slump continues and it doesn’t get government aid. The automaker said its cash burn for the quarter accelerated to $6.9 billion, and government aid will be “essential” because of the slow economy and credit crisis.

The move comes hours after Ford Motor Co. said it lost $129 million for its third quarter and will cut about 2,260 more white-collar workers in North America as the industry tries to weather the worst economic downturn in decades. As U.S. and global economies have rapidly deteriorated, auto sales have nearly shut down.

GM said government aid is “essential” to help the U.S. auto industry through the downturn.

This comes as absolutely no surprise to me, as a few months ago, a friend called me up about some automotive paper that he’d been offered which was paying almost 20 percent annually. The only risk was that the automaker wouldn’t go under before the end of 2009. We kicked it around for a while and decided that it was probably too risky.

This was before the Freddie and Fannie fiasco. Now, we figure they’re probably paying 30 percent, but he’s not even interested enough to bother calling and finding out. If you are having trouble understanding the Austrian concept of misallocation aka malinvestment, investing in American automakers making more cars in 2009 is about as perfect an example as one can ever hope to find.

It’s not secret that I find the notion often put forth by evolutionists, particularly those who have actual training in biology, that they are more educated and intellectually sophisticated than all potential detractors, to be ironic in the extreme. However, it occurs to me that they not only don’t understand what I mean by the backtesting problem that reliably leads them into error, more than a few of my critics have appeared to think that this objection is a misguided and whacky concept that I have somehow conceived on my own.

So, it was with some amusement that I re-read the beginning to Chapter 4 and realized that Rothbard had spelled out the essential problem in simpler terms than I ever have:

Most writers on the 1929 depression make the same grave mistake that plagues economic studies in general—the use of historical statistics to “test” the validity of economic theory. We have tried to indicate that this is a radically defective methodology for economic science, and that theory can only be confirmed or refuted on prior grounds.
– Rothbard, p. 85

Needless to say, what is a radically defective methodology for economic science does not magically become any less defective when applied to any other science, including biology. Unfortunately for all of us, we appear to be on the verge of testing both his theories and Ben Bernanke’s regarding the Great Depression in real time now. No one likes to be wrong, but I have to admit, this would be a very opportune moment to discovery that Austrian theory is incorrect.

The incoming data, however, seems to be indicating that it is not: Darling summons bank chiefs over rate cut failure.

As expected, the media version of the election was an inaccurate one, as shown by this study (PDF) from the Center for the Study of the American Electorate:

A downturn in the number and percentage of Republican voters going to the polls seemed to be the primary explanation for the lower than predicted turnout. The percentage of eligible citizens voting Republican declined to 28.7 percent down 1.3 percentage points from 2004. Democratic turnout increased by 2.6 percentage points from 28.7 percent of eligibles to 31.3 percent. It was the seventh straight increase in the Democratic share of the eligible vote since the party’s share dropped to 22.7 percent of eligibles in 1980.

Note that the historical table shows bigger increases in the percentage of voters in 1992, 2000 and 2004 than in 2008. While one might conclude that Americans are simply less interested in liberty than before, given the low 0.032 percent vote for the Libertarian and Constitution parties combined, I think the threefold increase in non-voters seen on this blog shows that the decline is probably more indicative of a loss of faith in the representative vote as an effective method for restoring liberty to a nation. Voting these days primarily concerns how the spoils of government revenue will be divided, an act of little interest to the libertarian.

As Nate has pointed out in the past, it is almost impossible to think of a single historical situation where freedom from government control has come about through the peaceful means of voting. (By all means, do feel free to propose any examples in the comments.) Men have voted away their liberties since Gaius Marius was first elected to an unprecedented third term as consul, but they seldom seem to ever see fit to vote themselves more freedom.

This post is intended for those who are participating in the Voxiversity II study of Rothbard’s America’s Great Depression to have the chance to ask any questions that were missed or overlooked in the Saturday comments. So, if there’s something you were missing, feel free to ask away. In the meantime, I noticed that Question 4 was the one with which the most people had trouble. “In 1982, what did Rothbard believe would be the outcome of Reaganomics?”

The most common incorrect answer was that he thought it would be a short-term success but a long-term failure. That’s pretty much how it turned out, in fact, since Volcker’s incredible interest-rate increases did have the effect of shocking the economy and rapidly correcting the malinvestment imbalances, but since Reagan failed to reduce spending, the palliative didn’t quite last a decade. On page xxiii, Rothbard wrote:

“Reaganomics—a blend of monetarism and fiscal Keynesianism swathed in classical liberal and supply-side rhetoric—is in no way going to solve the problem of inflationary depression or of the business cycle. But if Reaganomics is doomed to be a fiasco, what is likely to happen? Will we suffer a replay, as many voices are increasingly predicting, of the Great Depression of the 1930s? Certainly there are many ominous signs and parallels.”

Obviously, Rothbard’s timing was incorrect; 1987 did not mark the collapse of the American economy into another Great Depression. But then, no one expected the Federal Reserve to throw all caution and common sense to the wind and reduce interest rates to all-time historic lows in the process of blowing a series of investment bubbles.

In light of the last two days, Cyn.ical’s comment is rather appropriate: “[M]y thought as I was reading the introductions, was ‘Well! A Sixth Edition ought to be coming out any day now!'”

Joel Belz explains the source of socialism’s revenant appeal in the United States:

While strenuously wrestling over business and banking and health care and energy and a dozen other issues, we cavalierly handed over to the state a perpetual 90 percent share of the nation’s educational interests. America regularly has about 50 million children enrolled in K-12 schools, and about 20 million more in colleges and universities—and while the pattern fluctuates a little, 90 percent of those 70 million young people regularly get a state-flavored view of reality.

Socialized medicine? Most of us recoil at the idea. Socialized airlines? Reminds us of Aeroflot. Socialized banks? When it happened last month, it terrified us.

But socialized schools? Nine out of ten of us patronize them regularly. And we do so with na’ry a thought or concern about how such an arrangement affects next week’s election, or the election after that, or the lifetime of elections to come.

Seizing the intellectual high ground of education has always been a priority for totalitarians. Marx advocated it, Lenin prioritized it, Hitler incorporated it into his 25-point plan. It’s important because it negates the natural advantage of conservatives, which is that they propagate themselves. Socialists, by and large, don’t, which is why they have to propagate by parasitic conversion.

Since it’s now far too late to salvage the USA in its present form, the important thing is to build for the future. If there’s one thing certain about dysfunctional societies, it is that they are doomed to collapse. Therefore it is much more important to focus on building a foundation for future freedom than to chase after yesterday’s vanished liberties. Having children and teaching them well is the single most significant and revolutionary act any individual can reasonably hope to achieve at this time.

The short-term battle is over and the USSA is upon us. But it will be a short-lived entity by virtue of the Invisible Hand’s iron fist; the only real question is if its successor will be the North American Union or a collection of rump-states of widely varying social structures. Five years ago, I would have assumed the former, but now, given the increasing devolution in Europe and chaos in Mexico, the latter is looking rather less improbable than before.

It is a truly noble profession:

CHRIS MATTHEWS: Yeah, well, you know what? I want to do everything I can to make this thing work, this new presidency work, and I think that —

JOE SCARBOROUGH: Is that your job? You just talked about being a journalist!

MATTHEWS: Yeah, it is my job. My job is to help this country.

It’s been a long, long time, but at least they’re finally coming out in the open about their bias. Is there any doubt that Chris Matthews, and Keith Olbermann, and Katie Couric, and nearly every other TV and print journalist won’t do everything they can to make the Obama presidency work?

John Hawkins lists seven reasons why the idea of building the Republican Party around moderates won’t work:

[T]he GOP absolutely cannot build a successful political party around “moderates.”

Why is that the case?

1) What constitutes a “moderate” changes from person to person. That’s how people like Joe Lieberman and Chuck Hagel, neither of whom would agree on just about anything, can both be considered “moderates” in their parties.

Put another way: a socially conservative, anti-abortion voter who believes in big government policies could be fairly called a moderate. On the other hand, a socially liberal, pro-abortion voter who doesn’t want any new government programs could also be fairly called a moderate.

So, since what constitutes being a “moderate” changes from person to person, it’s not possible to build a party around appealing to “moderates.”

2) Because moderates tend to be much less ideological, less knowledgable about politics, and less informed than liberals and conservatives, it’s entirely possible that even if our candidate’s views are closer to their views, they won’t be capable of figuring it out (That’s exactly how it worked with McCain and Obama, for example).

I don’t always see eye to eye with John, but it sounds as if he’s already lining up against the Squish Faction. Which is really no surprise, if you recall that he was disinvited from the Republican Convention for his forthright primary opposition to John McCain.

A post-mortem from the UK:

Republicans are now divided between social conservatives for whom abortion and gay marriage still override all other concerns, and moderates who think the fanaticism of some evangelical voters has driven away independent voters. Many fear the collapse of the Reagan coalition, which united social, fiscal and foreign policy conservatives….

The moderates on Wednesday began to voice the view that Mr Obama’s ability to win states in the previously Republican south and mountain west means that in order to compete, Republicans must also change their battle map and again contest Democratic seats in the north east that they have not won in a generation. David Frum, the former White House speech writer, who has emerged as a standard bearer for what might be deemed the ‘David Cameron’ wing of the Republicans, said that the party must change and start addressing issues that concern floating voters.

“We’re not in good shape. Two big things won this election for Barack Obama: a big increase in turnout by ethnic minorities and a big shift in preference by college educated white people. That is where the Bush collapse really took place. That is where Sarah Palin was such a damaging force in the Republican Party. She symbolised a problem that in the eyes of many college educated white people, who Bush got in 2004 and the Republicans owned in the 1980s, the Republican party has become the party of culture war;”

The view from Arizona, where Republicans were digesting John McCain’s defeat, proved that Mr Frum will have a hard time winning over those doctrinaire conservatives who believe that it is the Republican brand, rather than its principles, that is damaged and that it is the Bush administration’s abandonment of the small government conservatism of the Reagan era that caused John McCain’s defeat.

In my opinion, David Frum’s analysis is factually incorrect and logically incoherent, and an intelligent observer will note that while the Republican pragmatists and moderates were obliterated – again – on Tuesday, it was culture war issues that not only triumphed in Democratic strongholds such as California, but downright dominated in battleground states that went for Obama such as Florida. This isn’t to say a cultural approach is a certain vote-winner in all circumstances; voters tend to be skittish of altering state constitutions and usually prefer to steer clear of the more comprehensive abortion bans, but there’s no question that the anti-homogamy, anti-abortion wing of the Republican Party is far more popular than the banker’s bail-out wing or the Israel First feather.

This should be completely obvious, since one of the main accusations leveled against Sarah Palin by the Frum camp has been that she is a “populist”.

“Cameronian” is an apt description of the squishy Republican moderate faction, since Cameron’s wets had absolutely no hope of defeating a decrepit and scandal-ridden Labour Party until Gordon Brown made the mistake of not calling for an election prior to the UK’s economic meltdown. What the Squish faction is calling for should be familiar to everyone who remembers the pre-Reagan Rockefeller Republicans: a Democrat Lite option designed to appeal primarily to those who generally favor an amount of government intervention but fear the Democrats have gone too far.

This is the political version of Brad Childress’s coaching strategy, with which every despairing Vikings fan is all too familiar. Try to keep it close, don’t take any risks or make any mistakes, just stay in the game and hope that your opponent makes a mistake towards the end that will let you steal a victory. In football, this strategy will win the occasional game, but it never wins the Super Bowl. (Don’t bother bringing up the Baltimore Ravens; if you’ve got a powerful defense capable of overwhelming the other offense at will and forcing it to make mistakes, then the caretaker-QB route is perfectly viable.)

It’s worth noting that the same Republican squishes who are now inaccurately claiming that social conservatism is the problem simultaneously cling to three of the most widely unpopular policies in politics today: the military occupations, the Wall Street bail-outs, and open migration. If the Frum faction remains influential in the Republican Party, they will ensure its return to the tiny minorities of the FRD era. Followership is not a functional strategy in any field of life, least of all national politics.

Evidence that it is pragmatic Republicanism that was rejected yesterday, not the conservatism that Republicans nominally represented:

Proposition 8 ballot to ban gay marriage set to pass in California. With 63 per cent of the state’s voting district results in, the measure was leading by 52.4 to 47.6 per cent…. A ban on gay marriage was approved in Arizona and a similar measure looked set to pass in Florida. Meanwhile in Arkansas, voters approved a measure banning unmarried couples from serving as adoptive or foster parents. Supporters made clear their main target was gays and lesbians.

Perhaps now the homogamy emos will be a bit more open to the idea that the State should not be in the marriage business that they previously dismissed as theoretical. As with everything else, the State with the power to invent a faux marriage ex nihilo, has the power to void it at will too.