Tag Archives: economics

A Frothy Mug in the Houses of Liberty

Posted on by ewreynolds
Reply

Free speech in the coffee houses of Europe and America birthed the rise of gentility, republican government, and liberty during a time of, as Beatrix Potter said, “swords and periwigs and full-skirted coats with flowered lappets – when gentlemen wore ruffles, and gold-laced waistcoats of paduasoy and taffeta…” Whether philosophical men between sips passionately debated the latest movements of the British Army in America, or some highwaymen sat brooding plots over steaming mugs, coffee was sure to find its way at the heart of most adventures. With the introduction of coffee into Europe in the 17th century and the subsequent rise of the coffee house as a public forum in the 17th and 18th centuries, some of the greatest political, social, and literary achievements of Great Britain and America started with a cup of coffee.

Read more on Landmarks of Liberty…

E. Wesley – Mackinac Center Intern

Milton Friedman and Historical Landmarks

Posted on by ewreynolds
Reply

Time flies, and with it the memory of the late economist Milton Friedman, who would have been 99 years old this year. However, we at the Mackinac Center and the Foundation for Educational Choice hope to revive Friedman’s legacy by hosting some lectures this Friday on his monetary policy. It is also the 15oth anniversary of the American Civil War, an issue encompassing a context for economic analysis.

Friedman’s free-market principles are vital to comprehending monetary supply during the Civil War. An entire generation of brothers hammered their plowshares into swords. As Northern factories shaped rifles and Southern farmers smelt bullets, the strain on local economies was enormous. Like a plague of locusts, the “terrible swift sword” burned through the Virginian Shenandoah Valley and across Georgia, destroying Southern crops and vegetation. Along the Western front, raiders on both sides wreaked havoc on the civilian populace. In the words of a song, “not now for songs of a nation’s wrongs,
not the groans of starving labor; Let the rifle ring and the bullet sing to the clash of the flashing sabre!” The elephant in the room was big government, as usual. Both North and South inflated their money supplies, causing a rise in prices. Southern currency especially suffered a significant decrease in value due to the printing of excess Confederate money. As was apparent to Friedman, inflation is most often the fault of central banks, like those during the Civil War, that print more money than reflects actual market demand.

As a historian, I have always found Friedman’s work to be historically pertinent. His view of the late 19th and early 20th centuries as an era of prosperity deserves more academic acceptance than it gets. I agree with Friedman’s impression that America during the Victorian era was a beacon to all those persecuted peoples throughout the earth who wished simply for the freedom to work hard for their existence. It was not a “gilded age” as historians want to paint it but a golden one. Friedman’s love for America’s heritage and his presumption of good will to all people, even his enemies, are his two qualities I admire most.

This Friday will be a day of both celebration and solemn reflection, as we remember Friedman’s legacy and the many thousands of lives lost during the Civil War. History often repeats itself in various forms. If we do not apply absolute principles to past events, we will be subject to repeating the same mistakes that history contains. We must remember those who are important in the history of our freedom, and reclaim our historical landmarks of liberty.

E. Wesley – Mackinac Center Intern

Image of CivilWarFifeandDrum from Wikipedia

The Good Life, No. 8: Heroes

Posted on by rombachk
Reply

Rose Friedman was once described as “equal parts velvet and steel.” At once her husband’s wife and colleague, Rose was never the great woman behind a great man. She noted in a 1999 interview that “I’ve always felt that I’m responsible for at least half of what he’s gotten.”  From co-authoring three of his most influential works to providing the impetus for such ambitious projects as their television series and nonprofit foundation, Rose Director Friedman can rightfully be called Milton’s partner.

An influential economist in her own right, Rose greatly influenced Milton’s economic thought. “It was an extremely close intellectual fellowship, and she was not someone who got credit for things she didn’t do,” Milton’s student Gary Becker observes. “They discussed ideas constantly.” Another longtime friend of the couple remarks that, for Milton, Rose’s opinion was “the ultimate test.” Friedman eagerly sought his wife’s point of view when developing his own, and openly admitted that she was the only person who had ever won an argument with him. This intellectual equality rendered their professional collaboration a very natural one. Still, she said, “I was smart enough to know that he was smarter than me.” So while Milton focused his efforts on technical economics, Rose set out to bring their theory of freedom to the public.

In the early 1980s, PBS approached the couple about turning their co-written international best-seller Free to Choose into a television series. After convincing Milton to take on the project with her, Rose assumed the role of associate producer and was heavily involved in organizing the series, which achieved global success. Friends and relations also credit her with providing the inspiration for the Friedman Foundation. But while she is universally recognized as an expert economist with intelligence and drive, Rose is also remembered for the grace with which she balanced her roles as colleague and wife.

“She was a great lady, in every sense of the word,” an acquaintance recalls. Outspoken yet polite, patient yet uncompromising, Rose stepped confidently — never aggressively — into her husband’s spotlight and quickly bowed out again when appropriate. She complemented Milton, earning the admiration of her peers and setting a tremendous example of feminine strength, courage and love.

These virtues helped to sustain the Friedmans through an arduous fight for freedom. When they entered academia, the field was virtually void of principled conservatives. Their work reintroduced classical liberalism as a valid and critically important body of thought with the power to revolutionize society as well as the academy. Milton and Rose changed the world together, leaving a legacy that will flourish for generations to come.

An Ode to the Frie Market

Posted on by Elizabeth Tara Ryan
Reply

Milton Friedman won a Nobel Memorial Prize in economics
But that isn’t all about this man; a lesson on him isn’t quick

Born in Brooklyn, New York in July of nineteen hundred twelve,
Milton Friedman was a brilliant economist; in this topic he deeply delved

For thirty years, teaching economic theory was his passion
At the University of Chicago he taught the youth of the nation

As “the most influential economist of the second half of the 20th century,”
His ideas spread like wildfire, to almost everyone, and were not elementary

Big government he said to shun,
Instead, free markets should have all the fun

The virtues of a free market system are so clear
Market intervention a nation should never have to bear

The government’s role in the economy should be greatly restricted.
Interference would only bring about poverty, depressions, and an economy constricted

A natural rate of unemployment he believed existed
No government could change this rate; it was healthy and should not be resisted

Though greatly opposed to the Federal Reserve,
Advice he still gives so the economy will be preserved

The advice: A small steady expansion of the money supply is the only way
If the central bank did otherwise, hyperinflation would never be kept at bay

Services offered by the government can be inefficient,
Should be performed by the private sector: that’s where they ought to be sent

One of these services is the production of money,
The private sector should produce it; and a gold base will lead to the highest stability

“Inflation is always and everywhere a monetary phenomenon,” he claimed
The relation between inflation and the money supply is close, he proclaimed

A monetarist at heart: Control of price inflation should be done with monetary deflation
In addition, price deflation is best controlled by only monetary inflation

An economic adviser to Ronald Reagan,
He predicted the policies of Keynes were bad, close to pagan

Not only would they cause high inflation
But minimal growth; later called stagflation

“Capitalism and Freedom,” a book he co-authored in nineteen sixty two
Speaks for policies like volunteer military and education vouchers, just to name a few

“A Monetary History of the United States,” which he published in nineteen sixty three
Investigates the role of money supply and economics in U.S. history

“Free to Choose,” another book that he and his wife did write,
Is where on monetary policy they shed much light

A staunch supporter of libertarian ideas, he took a chance,
When he fought for legalization of drugs and prostitution, not a popular stance

“Nothing is so permanent as a temporary government program” is his quote,
Noting: Once a program is started, participants will do everything to keep it afloat

He coined the phrase, “There’s no such thing as a free lunch.”
Someone always pays in the end, and will feel the punch

Milton Friedman taught many good economic lessons
Which if heeded, may have kept us out of horrid recessions

With a full life behind him and theories not previously in the mix,
Friedman died on November 16 of two thousand and six

Though he is gone, this week we honor the day Friedman was born
Today his advice to us would be, go free the market rather than mourn

Friedman: the Influence of Ideas

Posted on by sjcammenga
Reply

On the bookshelf of an average American patriot, it would be more common to see a collection of Ronald Reagan biographies than books on the life of Milton Friedman. Ask a person on the street who they think holds the most power in America and you have a good chance of hearing “the president.” However, the president is a single man whose power is limited by checks, balances, and, depending on his character, his personal desire for re-election. One free man with an idea can prove influential and limitless without holding public office. Milton Friedman was that man.
Behind every great success lies a great inspiration. For the millions of conservatives who venerate Reagan, they are also (wittingly or unwittingly) admiring the impact Friedman made on the mentality of his times and on Reagan himself. That the political climate even allowed a man with Reagan’s platform to be elected was due in part to Friedman’s work, starting as early as the failed Barry Goldwater presidential campaign, which began calling for a return to laissez-faire economic principles when the position was extreme. This movement gained momentum, culminating in Reagan’s election.
In 1980, Reagan appointed Friedman to the select Economic Policy Coordinating Committee. As a team they applied Adam Smith’s concepts, and the economy became a freer and more prosperous place; regulations were limited, inflation was brought under control, taxes were cut, and government began to find its place – on the sidelines. Reagan’s policies are widely recognized as bringing about the second-longest peacetime economic expansion in the history of the United States. The key to bringing this prosperity was the wisdom of those advisors who, like Friedman, truly understood economic policy. Later, Friedman was given the Presidential Medal of Freedom, the nation’s highest civilian honor.
Friedman didn’t only have an influence at home in America; his ideas brought significant changes around the world. Former prime minister of Estonia, Mart Laar, who is credited with bringing Estonia’s rapid economic development in the 1990s, said that the only book on economics he read before his election was Milton Friedman’s “Free to Choose.” Under Laar, Estonia became the first country to institute a flat tax, which was very successful. While speaking about Friedman’s “Free to Chose” TV series, Reagan mentioned that the principles Friedman expressed had also helped inspire the Polish drive for freedom.
Although politicians come and go and their ideas can change with the political winds, the protection and presentation of sound economic ideas remains a vital tenant of freedom. Politicians are only in power for a few terms at most, but influencing the electorate and swaying public opinion toward freedom is a full time job with no term limit. This position in the cause of freedom is taken today by think tanks like the Mackinac Center. They, like Friedman, publish articles, give lectures and research responsible policy changes, sharing their findings publicly.
As an intern at a think tank, I am inspired by Milton Friedman. Looking at his example, I know that as a responsible citizen, I can live an influential life of loving and sharing liberty without needing to be elected. My job is to provide, present and protect the principles which will bring about the next age of prosperity.

Evolution, Social Cost, and Ideas to Change the World.

Posted on by Dustin Anderson
1

Over at Org Theory, David Stark has an interesting piece on game theory and sociology that is self-recommending.  One of the interesting observations in the post in the first paragraph:

Some years ago, when they were little kids, my children developed a hybrid game.They’d taken their Monopoly board over to a friend’s house.  They’d remembered to bring back the board, but they’d forgotten the houses and hotels.  What to do?  So, they started to use Lego building blocks in place of the houses and hotels.  But, with the Lego pieces offering more affordances, they immediately began to construct ever more elaborate structures.  Even when the Monopoly pieces were returned, the Legos were much preferred and they played it again and again that year while they were first-graders in Budapest. Was it Monopoly? Was it Legos?  It was “Legopoly.”  Over time the rules evolved away from bankrupting one’s opponents and toward attracting customers to the plastic skyscrapers that towered over the Monopoly plain. [emphasis mine]

While this is merely a story to illustrate a point I do think there is significant amount of game theory and experimental economics work with data to back it up (see Wilson, Kimbrough, and Smith’s “Exchange, Theft, and the Social Formation of Property” for experimental).  This story illustrates quite well the possibility of what Hayek called the “spontaneous evolution” of the “rules of the game.”  When there was a change in the way of doing things, that is, when the top-down rules could no longer be followed, the children took matters into their own hands, altering the rules in a way that suited their needs.  Through this evolution came about a less aggressive game.  The game changed from trying to harm your opponent via bankrupting them to a game of cooperation and creating products that attracted others.

However, this is also a quite simplistic view of the world. In his seminal work, “The Problem of Social Cost,” Coase observed that in a world of zero, or near zero, transaction costs, it is easy for people to come to cooperative agreements and that in the real world, a world of transaction costs, it may be more difficult to get people to work together. In the story observed above, there indeed were little barriers to facilitate cooperative, innovative behavior. The only thing that existed was the incentives, that is, the probability of making themselves better off in the game.  With a probability there is also risk that it could fail.

I sometimes feel that there are not enough libertarians who understand this.  They possess utopian, or near utopian, fantasies of the world being perfect and without transaction costs.  Those who believe in liberty tend to talk past people with genuine concerns and who believe there are places in which the state has a legitimate role in providing a social safety net or protecting society from others’ actions.  By no means am I advocating for state intervention, but we must see the big picture if we want to foster the ideas we hope will change the world.

Cross Posted at Rational Conduct.

Conservatives Should Adopt Free-trade Policy

Posted on by clint7981
Reply

The following is a letter submission I made to the Detroit Free Press in regards to the recent debate over immigration.

Since the passage of Arizona’s controversial immigration bill, Americans have split into two distinct groups, namely those who acknowledge the benefits and moral obligations of open immigration and those who clamor over the increased size of the welfare state. Ultimately however, it is an erroneous assumption to conclude that immigration controls improve the economy. In actuality, additional labor increases economic productivity and therefore everyone is made more prosperous.

Also, conservatives should not abandon their belief in Ricardo’s theory of free-trade, especially as it pertains to labor markets. Immigration control is a barrier to entry and acts as a protectionist policy. Furthermore, opponents of free-entry should consider that border controls unfairly punish the geographically disadvantaged. No one should be discriminated against based solely on nationality. Nationalism holds little difference than racial prejudice. True believers in civil liberties and free-markets should endorse open borders, while still rejecting the welfare state.

– Clint Townsend
Mackinac Research Intern

Minimum Wage Hike

Posted on by razma766
1

Here is a letter Don Boudreaux recently sent to the New York Times:

Don
http://www.cafehayek.com/
…………..

1 June 2010

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

Suppose Uncle Sam orders you to raise the price you charge for subscriptions to your paper by 41 percent.  Would you be surprised to find a subsequent fall in the number of subscribers?  If you assigned a reporter to investigate the reasons for this decline in subscriptions, would you be impressed if that reporter files a story offering several possible reasons for the fall in subscriptions without, however, once mentioning the mandated 41 percent price hike?

Unless you answered “yes” to this last question, I wonder why you published Mickey Meece’s report on today’s record high teenage unemployment rate (“Job Outlook for Teenagers Worsens,” June 1).  Between 2007 and 2009, Uncle Sam ordered teenagers workers (who are mostly unskilled) to raise the price they charge for their labor services by 41 percent.  (That is, the federal minimum-wage rose from $5.15 per hour in 2007 to its current level of $7.25 in 2009 – a 41 percent increase.)

Does it not strike you as more than passing strange for your reporter – assigned to help explain why teenagers today have an increasingly difficult time finding jobs – to ignore the fact that these teenagers are ordered by government to raise significantly the wages that they charge their employers?

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

The House that Uncle Sam Built

Posted on by razma766
1

Steve Horwitz and Peter Boettke have recently completed The Great Recession of 2008, a short and simple study of the most recent recession.  The following is a short analogy that appears at the beginning of the piece:

 The man who parties like there is no tomorrow puts his body through an “up” and a “down” course that looks a lot like the business cycle. At the party, the man freely imbibes. He has a great time before stumbling home at 2:00 a.m., where he crashes on the sofa.  A few hours later, he awakens in the grip of the dreaded hangover. He then has a choice to make: get a short-term lift from another drink or sober up. If he chooses the latter and endures a few hours of discomfort, he can recover. In any event, no one would say the hangover is when the harm is done; the harm was done the night before and the hangover is the evidence.

Intentions do not equal outcomes

Posted on by razma766
Reply

Here is a letter I recently sent to the Midland Daily news:

Colin Mealey, in his recent letter, offers a good analysis of the recent health care situation in America (“Join the Private Sector?,” April 15). The following two recommendations in the concluding paragraph, however, would likely worsen the situation: “…instead of totally revamping the system, why not just put a cap on how much health insurance can cost? Another idea, if the government thinks they can take over something as complex as healthcare, let them set up their own system and join the private sector for a little while.”

The first suggestion, to impose a price cap, would only result in shortages. Shortages always occur when a maximum price, also known as a price ceiling, is placed below the market price. For instance, if health insurance is generally provided for $800 a month and a maximum price of $600 a month is set, fewer suppliers will be willing to supply it and more demanders will be willing to purchase it.

The second suggestion, which would allow the government to “compete” against private companies, would result in lower prices for health insurance and increased taxes (whether it is in the form of a tax, debt, or inflation). Businesses, unlike governments, must serve consumers to exist. If a business does not serve enough customers to profit, it must file for bankruptcy or dissolve. Governments, on the other hand, have the ability to tax, or, put another way, have the ability to earn income regardless of the outcomes generated. This unique capability would conceivably allow the government to set health insurance prices below market prices by subsidizing its losses with taxes until all businesses were out of the market.

Kurt Bouwhuis

The Pretense of Knowledge

Posted on by razma766
Reply

Here is a letter I recently sent to the Midland Daily News:

James Benjamin’s entire letter went as follows: “The solution is simple: Medicare for all; keep your private insurance if you want” (“Simple Solutions,” February 17).

Society is a complex outcome that emerges as a result of individuals interacting with one another. No single individual consciously plans its course. As a result, no one fully understands this complex outcome we call society. Government interventions into the society must, therefore, create unintended consequences that no individual is capable of foreseeing. Simply providing Medicare to all will necessarily generate more outcomes than just free health care for everyone.

Nobel Laureate economist F.A. Hayek, in his Nobel Prize Lecture The Pretense of Knowledge, clearly articulated this point in his concluding paragraph: “The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society – a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.”

Kurt Bouwhuis

A Stimulating Broken Window Fallacy

Posted on by razma766
Reply

Go to 3:25 and listen to President Obama speak about the benefits of  job creation for a window manufacturer in Philadelphia. (watch about 20 seconds… you’ll get the point)

Then watch this clip about the window manufacturer in Pittsburg.

Lastly, read this essay on a window manufacturer from France.  A lot of lessons to be learned…