As Greece is suffering worst, it becomes the focal point of the crisis. But the Greek austerity measures are cutting so deep, some people may end up paying to have a job. As the Melbourne Weekly reports:

Amid deep . . . → Read More: Keynes and Austerity]]>

I believe Lorenzo did and excellent job is his essay pointing out the complex fiscal picture in Greece. He does seem to be a bit at odds with Jeff’s comments in his recent post when he writes this:

As Greece is suffering worst, it becomes the focal point of the crisis. But the Greek austerity measures are cutting so deep, some people may end up paying to have a job. As the Melbourne Weekly reports:

Amid deep humiliation and great uncertainty about what it means to be Greek and, more particularly, European, enraged Athenians are lashing out as the weight of five grinding years of recession and the promise of perhaps decades of crippling reform and restructuring crushes the living breath from them.

And the bailout terms are stark:

The conditions insisted upon by Europe and barely delivered on by Athens, include the axing of 150,000 jobs from an 800,000-strong public sector by 2016 and a 22 per cent slice off the minimum wage – in a country in which average wages have dropped 15 per cent since 2009. The retirement age is to be lifted from 58 to 65 and restrictive closed shops that control the professions and services are to be busted.

However, the austere, tight money policy of the European Central Bank (ECB) seems to be the largest factor for the issues in Europe.

I think that the conservative mantra of Keynesian economics is a bit of a red herring. The assumption they impute to Keynes is that he advocated perpetual government spending and debt to stimulate the economy. This is not accurate and a vast oversimplification. I submit these articles as evidence: New York Times, The Concise Encyclopedia of Economics, and AdamSmith.org

I would also like to highlight a quote from this article:

When does the need for deficit spending end?

There’s something else worth pointing out about an analysis that stresses the role of debtors forced into rapid deleveraging. It helps solve a problem Keynes never addressed, namely, when does the need for deficit spending end?

The reason this is relevant is concern about rising public debt. I constantly encounter the argument that our crisis was brought on by too much debt – which is largely my view as well – followed by the insistence that the solution can’t possibly involve even more debt.

Once you think about this argument, however, you realize that it implicitly assumes that debt is debt – that it doesn’t matter who owes the money. Yet that can’t be right; if it were, we wouldn’t have a problem in the first place. After all, the overall level of debt makes no difference to aggregate net worth – one person’s liability is another person’s asset.

It follows that the level of debt matters only if the distribution of net worth matters, if highly indebted players face different constraints from players with low debt. And this means that all debt isn’t created equal – which is why borrowing by some actors now can help cure problems created by excess borrowing by other actors in the past.

Suppose, in particular, that the government can borrow for a while, using the borrowed money to buy useful things like infrastructure. The true social cost of these things will be very low, because the spending will be putting resources that would otherwise be unemployed to work. And government spending will also make it easier for highly indebted players to pay down their debt. If the spending is sufficiently sustained, it can bring the debtors to the point where they’re no longer so severely balance-sheet constrained, and further deficit spending is no longer required to achieve full employment.

Yes, private debt will in part have been replaced by public debt – but the point is that debt will have been shifted away from severely balance-sheet-constrained players, so that the economy’s problems will have been reduced even if the overall level of debt hasn’t fallen.

The bottom line, then, is that the plausible-sounding argument that debt can’t cure debt is just wrong. On the contrary, it can – and the alternative is a prolonged period of economic weakness that actually makes the debt problem harder to resolve.

And it seems to me that thinking explicitly about the role of debt, not just with regard to the usefulness or lack thereof of wage flexibility, but as a key causal factor behind slumps, improves Keynes’s argument. In the long run we are, indeed, all dead, but it’s helpful to have a story about why expansionary fiscal policy need not be maintained forever.

I think it would be more accurate to assert that Keynes was an advocate of stimulus rather than debt, growth rather than austerity. Keynes would prefer the stimulus to come from the private sector but as a witness to the Great Depression he saw that severe austerity leads to severe depression.

From a personal finance point of view austerity makes perfect sense; the less one spends and acquires debt the faster one can quite paying interest and start to save. However, from a macroscopic economic point when the entire economy is austere no one is hiring, the economy is not growing but shutting down. Private debt and public debt increase under severe austerity.

The 5.1 trillion dollars worth of debt attributed directly to Bush as opposed to 983 billion attribute directly to Obama was in large part due to Bush tax cuts and the vast rate of decline of the economy under Bush. When GDP goes down, debt goes up for both the private and the public sector.

One example of this is how the Republican and Democratic decades old food stamp program which was not changed by President Obama went up dramatically due to the Bush recession from the same link just quoted.

Food stamps have been tied to poverty levels for decades. President Obama has nothing to do with the automatic levels that kicked in due to the recession that started in the Bush administration.

Eligibility for food stamps did not change under Obama. More folks qualified for food stamps under the guidelines many Republicans helped to establish. In any case, the food stamp program is clearly an example of how the slowdown in growth of the economy leads to debt.

Republicans have often sided with the idea of government stimulus. Even Bush cut checks during his administration for individuals up to $600 and couples up to $1,200. This is no different of a stimulus that what Obama did with infrastructure. The idea is that the more money that is available and accessible in the economy, the more likely growth will take place. Keynes did not believe in running public debt forever. He thought it was necessary when austerity prevailed on a macroeconomic level since the private sector was incapable of stimulating itself out of its predicament and continued decline would very likely and historically, demonstrably end in severe depression or recession. When the private sector was growing Keynes was conservative and believed in paying down debt contrary to certain popular beliefs about him.

One more point with regard to austerity, the consumer makes up 2/3 of the US economy. Republicans, Bush and chiefly conservative business folks have vigorously advocated consumer spending NOT austerity to stimulate growth. This is clearly evidence that the notion that Keynes had that stimulus, whether public or private, leads to economic growth. When the economy tanks, private debt grows and the economy slows dramatically. Monetary policy has been created to offset and counter the situation and keep it from worsening. You will also find that the idea that inflation increases with public debt is not historically accurate as this article demonstrates:

What anyone who understood Keynes should realize is that as long as output is depressed, there is no reason increased government borrowing need drive rates up; it’s just making use of some of those excess potential savings – and it therefore helps the economy recover. To be sure, sufficiently large government borrowing could use up all the excess savings, and push rates up – but to do that the government borrowing would have to be large enough to restore full employment!

Keynes would be the idiot Republican’s think he is if what they were parroting was accurate of his thought: eternal, increasing debt whether private or public is the death of a vibrant economy but so is eternal austerity. As is almost always the case, the devil is in the details – oversimplification may make for good emotive politics but tends toward perpetuating mistakes of the past and endlessly repeating histories that we once learned from.

What’s wrong with the prescription of spending cuts as the remedy for Europe’s ills? One answer is that the confidence fairy doesn’t exist — that is, claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two . . . → Read More: Austerity measures? Where?]]>

The Keynesian crowd has made much ado lately about how European “austerity measures” have tanked their economies. For example, here’s what Paul Krugman had to say:

What’s wrong with the prescription of spending cuts as the remedy for Europe’s ills? One answer is that the confidence fairy doesn’t exist — that is, claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two years. So spending cuts in a depressed economy just make the depression deeper.

These recent posts are liberally (no pun intended) sprinkled with words like “austerity” and “slashed” to describe how the budgets of European governments have been reigned in just when, according to the Keynesians, stimulus spending was most needed.

The only problem is, it isn’t true.

To the extent any cutting is going on there, it’s hardly undoing the preceding two years of spending increases. It certainly doesn’t qualify as “slashing.”

If you want to see what happens when a European country really implements austerity measures, look no further than Sweden. Three years ago they implemented a permanent tax cut and trimmed welfare to pay for it, and cut property taxes to attract wealthy entrepreneurs. The result: the fastest growing economy in Europe, and a retired deficit.

(UPDATE: As commenter Steve Ruble has pointed out, Sweden’s government spending went from 54.9% of GDP in 2009 to 51.3% of GDP in 2011. This hardly counts as “austerity” and “slashing” as the article I cited claimed. Consequently we still don’t have an example of a European country that has really implemented austerity measures, so we still can’t see what the result of true European austerity would be.)

And if you want to see how countries compare for government spending as a percentage of GDP, here’s the data (albeit from 2009):

2009 Central Govt expenses as % of GDP
Greece 50.7
France 47.6
UK 46.4
Netherlands 45.6
Italy 44.0
Czech Republic 37.3
Estonia 36.8
Norway 35.9
Poland 35.8
Finland 35.0
Germany 31.7
Russia 30.9
Spain 30.7
Turkey 27.3
Australia 26.6
US 26.3
Brazil 25.6
Malaysia 22.7
Chile 22.6
South Korea 21.9
Thailand 19.6
Canada 19.2
India 16.2
Indonesia 15.7
Switzerland 17.0

But we already know there is a strong correlation between the size of government and rate of economic growth of the country, so it should not be a surprise that the countries struggling the most are, generally speaking, the ones with the largest governments.

What is not sensible is ignoring a developed world economy that has conspicuously not suffered any of the economic stagnation problems that have hit the major developed economies. Indeed, has not . . . → Read More: Don’t mention the A-word]]>

The Eurozone, the US, Japan and the UK are all suffering prolonged economic stagnation. [You can see how serious it is in the US here.] It is sensible to suggest that they are doing something (or perhaps many things) wrong and need to change policy.

What is not sensible is ignoring a developed world economy that has conspicuously not suffered any of the economic stagnation problems that have hit the major developed economies. Indeed, has not had a recession (in the sense of two quarters of economic contraction) since 1991. That sailed through the Great Recession and Global Financial Crisis (aka GFC) with barely a ripple. Whose current problems are not of economic stagnation but of maintaining economic balance when one part of the economy is doing much better than another.

That country is Australia. Yes, it is true that the surge in commodity demand (centred on China) has been a boon to the Australian economy (well, to the commodity exporting States; the resultant surge in the value of the $A has been a problem for the tourism-and-goods exporting States—the commodity boom has been a distinctly mixed blessing). But Australia had also managed to avoid recession even when its terms of trade (the ratio of the price of what it sells to the price of what it buys) were in long-term decline and when commodity prices dropped dramatically at the onset of the Great Recession. Indeed, the fall in Australia’s exports as a % of GDP was worse than the US’s.

Yet the Australian success gets mostly ignored. A classic example is Raghuram Rajan’s recent piece in Foreign Affairs. (Non-gated version here [pdf].) Much of what he has to say about the desirability for supply-side reforms is sensible. Indeed, much of what he advocates Australia has already done; which makes the failure to mention what should be the poster-polity for what he is advocating all the more of a glaring failure.

The problem with mentioning Australia is that it does not conform to the stories that Rajan and others want to tell about what went wrong. Rajan essentially ignores monetary policy, both in the commonly offered solutions to economic stagnation (fiscal stimulus and even-lower interest rates: interest rates are a very limited way of looking at monetary policy) and in diagnosing why the economic stagnation descended. So Rajan writes:

today’s economic troubles are not simply the result of inadequate demand but the result, equally, of a distorted supply side.

Australia has done a lot of supply-side reforms, so perhaps it can be ignored.  Except Rajan goes on to say:

For decades before the financial crisis in 2008, advanced economies were losing their ability to grow by making useful things. But they needed to somehow replace the jobs that had been lost to technology and foreign competition and to pay for the pensions and health care of their aging populations. So in an effort to pump up growth, governments spent more than they could afford and promoted easy credit to get households to do the same. The growth that these countries engineered, with its dependence on borrowing, proved unsustainable.

Does anyone really think Australia just magically averted such structural problems, that its economy is somehow profoundly different from other developed countries? Given its per capita GDP growth has been respectable but not outstanding. In particular, while its public finances were much sounder, with public debt reduced to very low levels, enthusiastic embrace of private debt meant that the total level of indebtedness was and is comparable to other developed countries.

The story that Rajan wants to tell is that:

the common thread was that debt-fueled growth was unsustainable.

Except, apparently, in Australia.  Australia ran a mildly higher inflation rate than the US during the “Great Moderation”, so its monetary policy was more “lax” than “easy money-easy credit” US.

Rajan is claiming that low interest rates are an “easy credit” policy: but credit is a supply-and-demand process. Yes, low interest rates make credit cheap to buy but it also reduces the return on providing it. Something is missing in this story; that a lot of capital was looking for safe havens. Many developing economies might be vigorously growing, but they have also been significantly failing to satisfy the demand for safer assets. Said demand therefore flowed into developed countries: including Australia, which continues to run the substantial current account deficits it has for 50 years (i.e. be a net importer of capital). So, the “too much debt/easy credit” story of sin Rajan (and others) want to tell just does not work if you include Australia.

It is true that Australian financial institutions were not much affected by the GFC and that Australian housing prices have not crashed (yet). The former is, in part, because of superior prudential regulation. This includes the Australian banking trade-off where the “four pillars” (NAB, Westpac, ANZ, CBA) have some level of protection in return for strong prudential oversight. Conversely, the American banking sector is far more fragmented, due to regulatory blocks on inter-state branching. Comparison with the performance of both the Canadian and the Australian banking sectors suggests that this regulated fragmentation has not been a social positive. (The much-discussed separation of investment and deposit banking is much less important.) But the GFC does not explain the Great Recession. On the contrary, a failure of monetary policy both aggravated the GFC and created the Great Recession; as was also true for the Great Depression [pdf].

So, despite “lax” monetary policy, fairly standard levels of indebtedness and a considerable export shock, Australian demand (and so income) did not collapse. Which meant debt remained manageable. Why?

The simple answer is: because our central bank is not mad (unlike other central banks). The RBA looks like a standard inflation-targeting central bank. Except it does not have a fixed inflation target, it has an explicit average-over-the-business-cycle target. Which means that, if output falls, the money supply does not have to follow output down. On the contrary, counteracting monetary stimulus “smooths out the bumps”. The effect is not merely to anchor price expectations, but to anchor income expectations as well. We did not end up in the situation where people are nervous about their income expectations but confident in their price expectations (i.e. the future-swap-value-of-money), which then encourages people to hold onto their money, which leads to less transactions and so less income (income being someone else’s spending; i.e. price x transactions), which increases concerns about income, leading to a downward spiral in transactions. Low interest rates are not a sign of “easy” money; they are generally a sign of “tight” money; of money being expected to retain—or even increase—its average swap values. (Inflation expectations in the US are currently very low while cash flow uncertainty can have, unsurprisingly, a significantly negative impact on corporate investment and employment.)

The RBA is also an example of the Australian ability to “do” bureaucracy. It has a clear policy focus, set out in a public letter of agreement between the Governor and the Treasurer, and a strong organisational identity that extends to deliberately investing in developing the skills and experience of its staff.

Rajan wants to tell a structural story for an economic downturn. Certainly, one understands the temptation of a crisis: “oh look, a crisis!, now I can get my favourite reforms through”. But that does not make it sound economics. On the contrary, there simply is no necessary trade-off between dealing with short-run level-of-economic-activity problems and fixing long-term structural problems. (And something that is clear enough to a high school student, however scarily smart, should probably be clear to a full professor.)

If income collapses, debt becomes much harder to manage. If your income does not collapse, you are much less likely to have a debt-management problem. Yes, lots of developed countries are having debt-management problems. But that is not because they were strikingly more indebted than Australia (even if their public debt levels are higher). It is because spending, and so income, did collapse.

Rajan’s penchant for false dichotomies does not just manifest in short-term/long-term trade-off claims, it also extends to excluding policy possibilities:

The way out of the crisis cannot be still more borrowing and spending, especially if the spending does not build lasting assets that will help future generations pay off the debts that they will be saddled with.

Someone’s future liabilities are also someone else’s future income (which is why debt defaults worry folk so; yes, it eliminates someone’s liabilities but it also eliminates someone else’s assets: this also increases your risk premium for any future borrowing). But, leaving that aside, there can be spending without borrowing: that is the joy of monetary stimulus. Yes, the fiscal multiplier is a measure of central bank incompetence. Yes, the monetary authority “moves last”. But, if it is competent, it chooses to move in ways that do not create catastrophic collapses in spending and so income. If people have more confidence in their future income prospects, they will spend. And, if they spend, income goes up and debt becomes much more manageable.

Yes, it would be a good idea if developed countries reformed their public sectors, if they abolished regulations that protect incumbents and retard economic activity, if they got their debt levels under control. All things Australia has done (but, in some areas—notably its land use permit raj’s—not enough). But neither the Great Recession nor the Global Financial Crisis would have been anywhere near as severe if the US, the UK and the Eurozone had had central banks as competent and accountable as the RBA. If they now became as competent and accountable as the RBA, economic recovery would occur much quicker and unemployment would fall much faster. The alleviation of utterly unnecessary human misery would be worth it all on its own. And structural reform could be sold as providing benefits, not simply sharing pain. Pain that, moreover, will not get folk spending again: for that, you have to change their expectations in positive ways. Which central banks can do more thoroughly, and far more cheaply, than anyone else. All it takes is to be as competent, and as accountable, as the RBA.

It is very, very necessary that folk start using the A-word, and considering the example it provides, a lot more.

You have an interesting spin on this study. The truth however is that “anterior cingulate cortex” Is why liberals are much more malleable and easier to manipulate. This is why its nearly impossible to find a self made successful liberal”statist”. Also the anterior cingulate cortex isn’t exactly “Higher intelligence” that would be the frontal lobe which the anterior cingulate cortex is only partially related. You . . . → Read More: Critical Thinking?]]>

Here is an anonymous comment in response to this essay I wrote:

You have an interesting spin on this study. The truth however is that “anterior cingulate cortex” Is why liberals are much more malleable and easier to manipulate. This is why its nearly impossible to find a self made successful liberal”statist”. Also the anterior cingulate cortex isn’t exactly “Higher intelligence” that would be the frontal lobe which the anterior cingulate cortex is only partially related. You also don’t seem to grasp from your article that the amygdala is also involved in connect both the right and left hemispheres of the brain combining emotions with logic. example: my dog is emotional not analytical. This is why liberals accept utopian arguments and seemingly disregard reality.

I find this spin not as much interesting as it is perplexing. I bring this up as an example of what I find typical and empty about internet comments in general. I come from an environment where signing your name and referencing your argument to notable sources is essential. A convincing argument must have a real author and real sources to justify its claims. A real author designates the seriousness of the claim and legitimate sources (not mired in mere apologetics) gives substance to the claims. I am not saying I always do this well but I do understand the need for it and make an attempt to do it. I always appreciate when others make me aware of my failing in this regard. In any case, here is a bit of my specific perplexities with this comment.

A statist is the idea that “a government should control either economic or social policy or both to some degree”. It is espoused by fascists in particular. This commenter appears to be conservative to me. Conservatives have mock posters of President Obama to make him look like Hitler. They are also constantly ragging him about using the government to control their lives. On the other hand, the commenter states that this, “is why its nearly impossible to find a self made successful liberal”statist”". Does the commenter want it both ways? Are we to believe that President Obama is one of those “impossible to find a self made successful liberal”statist”" AND “malleable and easier to manipulate”. This is a logical contradiction which is a hallmark of over-emotionality. Additionally, would the commenter suggest that the folks that voted for President Obama are “malleable and easier to manipulate”? If this is so, why is it that the successful conservative “statist” could not manipulate them into voting Republican? Are they not malleable to conservative devices only to liberal devices? The commenter’s statement does not account for the “statist’s” inability to manipulate liberals as they would like. This also appears logically inconsistent as the liberals ‘malleability’ appears not so malleable when it comes to the successful “statist” or the conservative pundit.

Additionally, the QUOTE “Higher intelligence” cannot be found anywhere in the essay I wrote. A quote is always meant to be verbatim. Perhaps the commenter has a private language that defines the quote differently. In any case, to the contrary, in the original comments I stated:

Oh, also, I did not think of these studies as giving any indication of intelligence. I think that was a leap on your part. I think the whole topic of intelligence is a can of worms (emotional, IQ, analytic, logical, poetic/artistic, folksy wisdom, etc.). I personally do not feel like these studies had anything to say about the intelligence of liberals or conservatives merely how they typically, in our particular present situation, handle making sense of their environment. There certainly is no claim to greater or lesser intelligence in the studies themselves…

The fact that the commenter read this article as a statement of ‘intelligence’ means the commenter really did not ‘grasp’ the article but only used it to give an occasion for some emotional issue the commenter must have with liberals.

I did state:

It [ACC] is responsible for higher cognitive learning – error correction is a big function of the anterior cingulate cortex.

It is backed up by this statement from the study:

The ACC has a variety of functions in the brain, including error detection, conflict monitoring1, and evaluating or weighing different competing choices. It’s also very important for both emotion regulation and cognitive control (often referred to as ‘executive functioning’)—controlling the level of emotional arousal or response to an emotional event (keeping it in check), as to allow your cognitive processes to work most effectively. (the source is in the article)

This Wiki link states:

Reward-based learning theory

A more comprehensive and recent theory describes the ACC as a more active component and poses that it detects and monitors errors, evaluates the degree of the error, and then suggests an appropriate form of action to be implemented by the motor system. Earlier evidence from electrical studies indicate the ACC has an evaluative component, which is indeed confirmed by fMRI studies. The dorsal and rostral areas of the ACC both seem to be affected by rewards and losses associated with errors. During one study, participants received monetary rewards and losses for correct and incorrect responses respectively.

Note: I always check WIKI sources for accuracy before I quote it.

I also made the point that the amygdale plays a vital role in long term memory with these quotes from the original sources (cited in my essay):

Although the amygdala is critical for fear conditioning, it also plays a broader, noncritical role in other types of learning and memory. The amygdala can modulate the function of other memory systems, particularly the hippocampal memory system necessary for declarative or episodic memory.

Investigations into the neural systems of fear conditioning have mapped the pathways for learning from stimulus input to response output. One finding that has emerged from this research is that information about the identity of a stimulus can reach the amygdala by more than one pathway. Romanski and LeDoux (1992) have shown that there are separate cortical and subcortical pathways to convey perceptual information to the amygdala. If one pathway is damaged, the other is sufficient to signal the presence of a conditioned stimulus and elicit a conditioned response. It has been suggested that these dual pathways may be adaptive (LeDoux, 1996). The amygdala responds to stimuli in the environment that represent potential threat. The amygdala then sends signals to other brain regions and the autonomic nervous system, preparing the animal to respond quickly. The subcortical pathway to the amygdala can provide only a crude estimation of the perceptual details of the stimulus, but it is very fast. The cortical pathway allows the stimulus to be fully processed, but it is somewhat slower. This crude, fast subcortical pathway may prepare the animal to respond more quickly if, when the stimulus is fully processed and identified by the cortical pathway, the threat turns out to be real.

More recent research with nonhuman animals has emphasized the amygdala’s role in emotional learning and memory. Work by Davis (1992), Kapp, Pascoe, and Bixler (1984), and LeDoux (1992) has shown that while the amygdala is not critical to express an emotional reaction to stimuli that are inherently aversive, it is critical for learned fear responses.

The amygdala is part of the limbic system, the area of the brain associated with emotions. The amygdala is important for formation of emotional memories and learning, such as fear conditioning, as well as memory consolidation. Emotions significantly impact how we process events; when we encounter something and have a strong emotional reaction—either positive or negative—that memory is strengthened.

The sources further states:

Too much emotion gets in the way of logical thinking, and disrupts cognitive processing. This is why in times of crisis, we learn to set aside our emotions in order to problem-solve our way out of a dangerous situation. Those with the ability to maintain low emotional arousal and have high cognitive control are generally better at handling conflict in the moment, plus tend to be the least permanently affected by trauma in the long term2. They tend to be more adaptable to changing situations (or have a higher tolerance for complexity), and have what we call cognitive flexibility.

The amygdala has many functions, including fear processing [11]. Individuals with a large amygdala are more sensitive to fear [12], which, taken together with our findings, might suggest the testable hypothesis that individuals with larger amygdala are more inclined to integrate conservative views into their belief system. Similarly, it is striking that conservatives are more sensitive to disgust [13, 14], and the insula is involved in the feeling of disgust [15]. On the other hand, our finding of an association between anterior cingulate cortex volume and political attitudes may be linked with tolerance to uncertainty. One of the functions of the anterior cingulate cortex is to monitor uncertainty [16, 17] and conflicts [18]. Thus, it is conceivable that individuals with a larger ACC have a higher capacity to tolerate uncertainty and conflicts, allowing them to accept more liberal views.

The commenter further states:

You also don’t seem to grasp from your article that the amygdala is also involved in connect both the right and left hemispheres of the brain combining emotions with logic.

A further source for the description of the amygdale is given here (many different sources are cited at the bottom of this link). There is nothing here suggesting “the amygdala is also involved in connect both the right and left hemispheres of the brain combining emotions with logic”. Perhaps the commenter is thinking about the corpus callosum in a different more evolved part of the brain that does connect the right and left hemispheres. There is also no mention of “combining emotions with logic” with regard to the amygdale. However, this is a primary function of the corpus callosum. I think the commenter may not have “grasped” this. Additionally, since the amygdale is 500 million years old it should suggest something about the “higher intelligence” and “logic” as the commenter writes in this part of the brain. All the sources I have seen suggest it has much more to do with long term recollection and emotion, especially of fear, which are related.

From these wrong premises the commenter concludes with, “This is why liberals accept utopian arguments and seemingly disregard reality”. I would suggest that wrong premises lead to wrong conclusions but this conclusion seems to stand apart from any previous premise and thereby, gives credence to the fact that if the commenter is conservative as it appears, is using the amygdale portion of the brain more than the ACC.

I must admit that I have seen these types of anonymous, un-sourced comments by both the left and right on the internet. Apparently, folks do not seem to realize that making things up off the top of their head is not the same as making a real and serious argument by a real and serious person. This type of behavior confuses readers. I think it is really primarily emotional. I have gone into this detail to highlight what I think is ‘critical thinking’. ‘Critical thinking’ means you lay down a personal, non-anonymous stake in the game and back it up with something outside of personal emotions. Emotion of this type may have a pretense to knowledge but, in the last analysis, is really only wishful and imaginary self-delusion. Additionally, I think an argument must have logical consistency such that conclusions follow from or are reinforced by premises and contradictory statements are avoided. I will grant that reading syllogisms can be really dull so the argument cannot be too formulaic to make it more palatable. I think it is also important to avoid informal fallacies which may be easier said than done. Informal fallacies may make the argument more fun for sympathetic readers but really take away from the formal credence of the argument.

As one Pakistani political activist writes:

We have observed that most of the suicides bombers are orphans who are less than 17 years old. These vulnerable children are being used as the main tool for terrorism.

Meanwhile, the Iraqi Interior Ministry has announced that:

Al-Qaeda . . . → Read More: Suffer the little children: the burden of God]]>

Just when I thought I had a full grasp of the moral depravity that is suicide bombing, another level of horror is revealed. Al Qaeda’s preferred target group for recruiting suicide bomber is—orphans.

As one Pakistani political activist writes:

We have observed that most of the suicides bombers are orphans who are less than 17 years old. These vulnerable children are being used as the main tool for terrorism.

Meanwhile, the Iraqi Interior Ministry has announced that:

Al-Qaeda has over the past two years used 24 children to carry out suicide bombings in Iraq, the director of military operations for the Interior Ministry, Abdelaziz Mohammed Jasim, told pan-Arab daily al-Sharq al-Awsat.

In Somalia, a 13 year old orphan reports on how he was recruited to be a suicide bomber.

Adoption vacuum
Sharia increases the opportunity for jihadis to recruit orphans because it has usually been interpreted to bar adoptions (though a form of guardianship, or khalat, is permitted). Without adoption as an alternative in most Muslim countries, there is a larger pool of vulnerable recruitment targets in orphanages for al Qaeda and its ilk to recruit as self-activating bombs.

It is not surprising that Sharia should be resistant to adoption. Sharia arose in a society where lineage was crucial: the role of daughters was to breed sons for the lineage (hence the propensity for cousin marriage, so they “breed in”). If there is no living parent, a child’s status as “asset” for the lineage is much weakened. And permitting adoption would open up the risk that they become “assets” to another lineage. (As ever, Philip Carl Salzman’s analysis is a necessary starting point for understanding the social dynamics of Islam’s home region.)

There is a push to re-interpret Sharia to permit adoption, part of the general tension between Islam and modernity which has done so much to shape the contemporary jihadi outlook. (Which is not to say that jihadis are merely some modern phenomenon; it has been a recurring feature of Islam that it produces violent “purification” movements—after all, what was the Prophet himself after he took over Medina if not the leader of a violent religious purification movement?)

Use of orphans as a potential political asset is not unique to al-Qaeda. It was widely rumoured that the Romanian Ceaușescu tyranny sought to recruit orphans as loyal secret police operatives. Though not strictly orphans, the Kim dynasty that owns North Korea uses its illegitimate progeny in a similar fashion.

To use orphans as suicidal military assets is, however, rather more distinctively a jihadi activity. Iran used children en masse during its war with Iraq (which makes the regime’s current public angst about plummeting fertility grimly ironic). Child fighters have been a feature in Africa’s horrors and the Tamil Tigers used both child fighters and suicide bombers. But to specifically target orphans for recruitment—indeed, as your preferred source of suicide-bombers—seems a new, vile twist.

But we come back to the point about lineage. Orphans are cut off from family: this makes them both more vulnerable to recruitment and means they come with fewer entanglements. Being no lineage’s “asset”, their loss has fewer social resonances.

Loving death
Of course, part of the horror of using orphans is precisely their vulnerability. The Somali lad telling of how his jihadi recruiter/mentor offered him purpose and love missing from his life is repellent reading. The horror from so using children comes from the violation of innocence and the sense of life thrown away so early. But that assumes one loves and reveres life. This is not a feature of the jihadis.

That the jihadis are death-obsessed is a recurring observation. But it is one that the jihadis themselves celebrate. In the words of the leader of Hezbollah, the Party of God, that so poisons Lebanese politics:

“The Jews love life, so that is what we shall take away from them. We are going to win because they love life and we love death.”

In a similar vein, a Lebanese Shia reacts to a 2009 speech by Hezbollah’s leader:

He was talking about death. He was asking, ‘Have you ever heard of the last moments before death? You have no idea how terrible these moments are.’ He was describing the very precise nature of this pain. His point was that the only way to die is as a martyr. He said, ‘As you know, everyone dies. So why not choose to die as a martyr, and save yourself the pain of these awful moments between life and death?’
… I am driving my 2009 car, and this guy is telling me how to die better.

The glory of a death in the service of Allah, that brings one to Allah’s paradise, is a commonplace of jihadi rhetoric. Certainly, it offers a transcendent sense of purpose and rejecting refuge from the unsettling confusions of modernity. Or from a solitary and uncertain life cut off from kin-connections in societies so profoundly based on them.

To glory in death is to reject this world. Such discounting of the world is the contemptus mundi tradition that is such a recurring feature of monotheism. Somehow, conceiving of the world as His creation is not enough. True devotion to God is shown by rejecting what He has created in favour of an existence imaged to be closer to Him; indeed, to partake of His direct Presence.

Aspects of this world-rejecting hunger for God keep peaking out from under monotheism. The recurring notion that sex—apart from procreation—separates us from the divine is a particularly powerful, and persistent, manifestation of it.

Wide morality
There is a recurring claim that morality is dependant on religion. This is arrant nonsense, up there with monotheism having created, or being in some special possession of, marriage. Morality is a pervasive feature of human society; indeed, it is clear that human nature has a significant (if varied) predisposition to being moral. Hence the lack of such predisposition is an aberration, a pathology (currently labelled as various forms of anti-social personality disorder). We can see the importance of this predisposition to be moral by looking at the disproportionately destructive impact of those who lack it.

We can also see its importance by comparing homo sapiens to other animals. It is not that what we might call a moral sense is entirely absent from other animals, it is just that it is clearly much less developed than in humans. Chimpanzees, for example, do not seem to develop in nature any sense of property, of rightful control. (Which hugely reduces their social possibilities: the notion of rightful control pervades human society—socialism is as much built on notions of rightful control as capitalism, just different structures and processes of such control. Philosopher John Locke’s notion that we move things into an economy by “mixing our labour with it” is completely wrong-headed, any animal does that; exchange starts with a notion of rightful control, for that is what is being exchanged, rightful control over particular things.)

So, can morality exist without any particular religion? Of course it can. Can it exist without any religion? Yes, though religion can clearly give morality extra emotional power. A more interesting question is how much a civilisation can move away from its origins and maintain its coherence. How much can it shift what moral psychologist Jonathan Haidt would call its moral matrix without a debilitating loss of social capital?

Either way, attempts to rest morality on divine command fail. Commands have to be communicated, so the divine command theory only makes sense within the context of a particular tradition of revelation and human morality obviously operates much widely than any particular such tradition. Moreover, as John Stuart Mill pointed out, no set of revelations is sufficiently complete as to leave moral principles fully defined: indeed, Sharia itself is the fruit of centuries-long attempts to “fill in the gaps”. Morality is broader than revelation, in every sense. As for the notion that God speaks to us through our moral sense, our inner moral voice, that falls into the category “I have no need for that hypothesis”.

Hi-jacking morality
It is true that monotheism, through its notion of a single ultimate authority, who is also the creator of all—so we are all children of God—spreads moral universalism (which is not a universal characteristic of human societies). But it is also true that monotheism, precisely by having God as ultimate authority who trumps anything else, also has a ready-made device for overriding and subverting morality. Deuteronomy 13 provides the ur-text for this, commanding an obedient follower of Yahweh to kill their own sibling if they turn to the worship of another God. God matters so much that the most basic moral precepts are to be overridden.

The attenuation of moral universalism is particularly strong in Islam, with its layered concept of status depending on how complete one’s submission to God is and therefore how close to Allah one is. Male believers outrank female believers; those who engage in the full submission to Allah outrank the People of the Book, those who accept the One God but not His Prophet; they outrank those who do not even accept the One God. Within the People of the Book, those who have accepted Muslim rule outrank those who do not. Islam systematically subordinates morality and moral standing to submission to God.

This attenuation of moral universalism shows up in all sorts of ways beyond the concept of jihad, its most blatant manifestation. Simple misrepresentation, as engaged in by a recent Muslim Brotherhood delegation to Washington, is often a winning strategy to Westerners who want to believe nice things and lack the background information to critically examine congenial claims. If it promotes Islam, promotes extending the ambit of submission to God, deception is fine. The combination of the doctrine of deception, and that one is not supposed to bring Islam into disrepute, make having an honest public debate across the boundaries of Islam difficult.

I can remember asking an expatriate Iranian academic, who had given an excellent presentation on why jihadism was an orders-of-magnitude bigger problem among migrant communities in Europe than in the US, a question about jihad and having him tell me and the audience that, apart from the early years of Islam, jihad had fallen into abeyance until revived in opposition to Western imperialism. A claim that is just flatly false. From Muhammad’s flight to Medina in 622 to the death of Aurangzeb in 1707, it would have been hard to find a single year in which there was not a frontier of Islam where activity sanctified by Sharia as jihad was being carried on. The relentless advance of Ottoman rule into the centre of Europe from c.1350 to 1683 was profoundly and systematically based on it. The often remarkably savage Muslim incursions into Buddhist and Hindu India were constantly justified by it. It was a pervasive feature of North African Islam except for after Western rule was consolidated (and returned after the European rulers departed). Far from provoking an upsurge in jihad activity, the heyday of Western imperialism was the longest period of respite from it.

The aforementioned undermining of public debate is just one example of the profound problem with any principle that seeks to trump, and thus subvert, morality. It poisons and narrows social possibilities when morality—precisely by mutually constraining actions towards each other—greatly extends them. (That the constraints of morality do so broaden social possibilities is presumably why the cognitive foundations for morality were selected for.) The recurring difficulties between Muslim and non-Muslim owe a great deal to the internal logic and dynamics of Islam itself.

But, then, monotheism has a long history of difficulty in playing nicely with others.

Deciding that orphans make good recruitment targets for self-activating bombs is the extreme version of a type of moral depravity that any outlook that decides some principle or principles trump morality engages in. And God is the ultimate trumping principle. Christ’s preaching that one is not to use God to strip people of moral protections retains its moral power.

We can tell, because so few Christians churches actually follow it and so much Christian theology is about subverting the second principle of Christianity, of defining people as not one’s moral neighbours, so folk can use God to strip people of moral protections and moral standing. But the simplest path to priestly or clerical power is to offer and withhold God.

Offering and withholding God being a path to religious power that the Prophet used avidly and systematically. He would, almost certainly, have drawn the line at recruiting orphans to kill indiscriminately: al-Qaeda’s attempt to ground suicide bombing in a solitary parable of a single hadith is tenuous in the extreme. (Enslaving women and children and murdering poets who were rude about him was, however, just fine as far as the Prophet was concerned.) But much of his preaching, once he became ruler of Medina, was all about the primacy of submission to God in setting one’s moral standing. And he established the Islamic concept of martyrdom; that the direct path to God is dying while fighting to extend submission to Allah. Recruiting orphans as self-activating bombs extends the continuum of his preaching, it does not go in a contrary direction.

But no one is compelled to extend that continuum in such a way. Those I linked to denouncing al-Qaeda’s moral depravity in so recruiting and using orphans are Muslims themselves. The cognitive foundations of moral behaviour remain part of human nature; hence the efforts so many put into hijacking and subverting them. So vilely using the vulnerable in a profound assault on moral restraints in the name of God is a horrid example of a much wider phenomenon.

[Cross posted at Skepticlawyer.]

Here are some lowlights from the article in the Wall Street Journal:

The U.S. accused Apple Inc. AAPL +0.41%and five of the nation’s largest publishers Wednesday of conspiring to raise e-book prices, in a case that could radically reorder the fast-growing business.

In a civil antitrust lawsuit, the Justice Department alleged that CEOs . . . → Read More: Apple: Price Fixing and Collusion]]>

In this essay I discussed how price fixing and collusion occurs regularly in the ‘free market’. Here is another recent example of what I discussed.

Here are some lowlights from the article in the Wall Street Journal:

The U.S. accused Apple Inc. AAPL +0.41%and five of the nation’s largest publishers Wednesday of conspiring to raise e-book prices, in a case that could radically reorder the fast-growing business.

In a civil antitrust lawsuit, the Justice Department alleged that CEOs of the publishing companies met regularly in private dining rooms of upscale Manhattan restaurants to discuss how to respond to steep discounting of their e-books by Amazon.com Inc., AMZN +1.40%a practice they disliked. The executives also called and emailed each other to craft a solution to what one of them called “the wretched $9.99 price point,” the suit said.

The five publishers and Apple hatched an arrangement that lifted the price of many best-selling e-books to $12.99 or $14.99, according to the suit. The publishers then banded together to impose that model on Amazon, the government alleged.

As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles,” said Attorney General Eric Holder.

Three of the publishers settled with the Justice Department, agreeing to let Amazon and other retailers resume discounting of e-books. Settlement of a separate suit filed by 16 states and U.S. territories could lead to tens of millions of dollars in restitution to consumers who bought e-books at the higher prices.

A group of 16 states, led by Connecticut and Texas, filed their own suit Wednesday against Apple, Macmillan, Penguin and Simon & Schuster. The states said they have reached tentative settlement agreements with HarperCollins and Hachette. Those two publishers have agreed in principle to provide more than $51 million in restitution to e-book buyers, Connecticut Attorney General George Jepsen said.

My working conclusion is that this happens much more often than many folks think that it does. I base this on my own anecdotal experience of decades in business and management and on cases already mentioned in which I cited specific examples. It may sound trite and clique but I know from personal experience that these guys at the top have huge, inflated egos and they do work out these types of situations in their country clubs and on their golf courses. The Justice Department only pursues a small percentage of these types of activities.

As per Jeff’s recent comment, pure capitalism or socialism does not exist. I have pointed this out in this essay. To think of them as polar opposites in practice is a bit naïve in my opinion. We are individuals and collectivities and as such incorporate both of these components in our politics and economics.

I have no problem per se with selfishness or self-interest. If selfishness or self-interest is given carte blanche in economics the rich and powerful will always make sure that they stay that way at the expense of those that are not. If capitalism is the unregulated or nominally regulated practice of selfishness then what is the practical difference between it and oligarchy, dictatorship, fascism (statist), communism or any system that rules from the top by the powerful?

If practical capitalism is to have a form of democracy (as in the ideal of competition) then the best real hope for impartial rules on how the game is played can only be made by government. To the degree that the rules allow the process to be more competitive is the same degree that capitalism approximates its ideal. As Jeff points out, to the degree that corporatism (crony capitalism) determine the rules is, in my opinion, one factor in turning capitalism into simply another name for the powerful consolidating their hold on power. I have also pointed out that this happens with or without government involvement.

The idea that the government is solely or primarily the culprit may have emotional appeal to some but as far as I can tell is not factual. In a democracy we get the government we deserve. If we prohibit government from intervening in the market with regulation we are effectively handing the market over to the rich and powerful. As Jeff points out they will try to use the government to protect their power but as I have pointed out they will not stop there. They have many tactics for staying in power (as I previously illustrated) and are not above using them.

Those that would have the government stay out of market regulation are effectively playing into the hands of the rich and powerful and doing exactly what they claim the government is doing in crony capitalism – making it easier for the rich and powerful to maintain their hold on power. To ‘hope’ that competition will reign in unregulated or nominally regulated capitalism appears to me to be more like a religious ideal than a realistic practicality. Government should be in the active business of making competition in capitalism real and effective, offering constraints to the monopolizing tendencies of power. Our job as voters is to elect politicians that produce results toward this end and fire those that make big business the real constituents that they serve. If we put the fox in charge of the hen house we should not be surprised when all the hens get eaten.

This is particularly true of a publication that is explicitly ideological in its role. (Using ‘ideological’ in its most general sense of having an explicit normative view of the world.)

The publication in question . . . → Read More: Not a free speech issue]]>

If a private publication sacks a writer because they do not wish to be associated with his declared opinions, this is not a free speech issue. It is a branding issue, it is an employment issue, but it is not a free speech issue.

This is particularly true of a publication that is explicitly ideological in its role. (Using ‘ideological’ in its most general sense of having an explicit normative view of the world.)

The publication in question is the National Review, the premier magazine of American conservatism founded by the doyen of postwar conservative movement writers and activists William F. Buckley Jnr.

The author who was sacked was expatriate British journalist and writer John Derbyshire. He was sacked for this article in Taki’s Magazine.

If Derbyshire were to be prosecuted for publishing the article, that would indeed be a free speech issue. But National Review deciding that it does not wish to be associated with particular opinions, that is a matter of branding, of ideological identity, not free speech (as is, for example, being claimed here).

Colour awkward
The politics of race are endlessly fraught in the US and deciding that American conservatives are ipso facto racist is a common conceit among American liberals (using ‘liberal’ in its peculiar American usage) and folk further left. (That sometimes reaches the level of deciding that conservative support for black figures, such as Condi Rice, Justice Thomas or Herman Cain, is itself a manifestation of racism.) Without getting into the history of American conservatism and race, there are certainly historical reasons why the National Review might have some sensitivity on such matters.

There are also generational shifts. Younger conservative activists are post-civil rights folk. They accept civil rights as a positive feature of American history and a usually very against revisiting opposition to civil rights: young conservtive bloggers actively campaigned against Senate Majority leader Trent Lott after his implicit endorsement of Strom Thurmond’s opposition to civil rights, which led to Sen. Lott’s resignation as Senate Majority Leader.

Either way, the National Review’s decision makes perfect sense. Particularly when leading the ideological assault on a serving black President.

Probability wrong
So, what’s wrong with Derbyshire’s article?

A pretty standard thing: a statistical tendency is not a defining characteristic. It is perfectly true that the homicide rate among black Americans is much higher than it is among other Americans. This is primarily a problem for other black Americans.

It is true that more American whites are murdered by blacks than blacks are murdered by whites. But if a minority group has a much higher homicide rate than a much larger group, it is to be expected that more members of the majority will be murdered by members of the minority than vice versa.

So, Derbyshire has a point then? No, Derbyshire is a statistical illiterate. The chances of any particular black person being a perpetrator of homicide is extremely low. A propensity to violence is not a defining, or even a likely, characteristic of any given black person; particularly a black person who is not young and male. But even a young male black is far more likely to be no risk than high risk. (Their high incarceration rate has everything to do with the insane war on drugs—the systematic, and grievously failed, attempt to deny people dominion over their own bodies—very little to do with any tendency to violence.) Indeed, young black males are far more likely to be the victim of homicide than a perpetrator any white person is.

Even if one accepts a genetic explanation for higher rates of hyper-aggressiveness in African and African-migrant populations, it is still not a likely characteristic of any given African or person of African descent. (Yes, I know we are all ultimately of African descent; I mean descended from folk who were not part of the prehistoric out-of-Africa diasporas.) It is Derbyshire citing averages, when the issue is likelihoods, that demonstrates his statistical malfeasance.

Focusing on someone’s blackness is not focusing on a risky characteristic. It is actually very bad advice to give a young person.

Which is another reason for National Review to sack Derbyshire.

[Cross-posted at Skepticlawyer and at Thinking Out Aloud.]

First, I do think we have some agreement on many of your points. Here are some of the differences that I would highlight.

Regulation is not just something that happens in government. Here are some observations from my own experience. At U.S. Robotics one of the engineering groups I managed was responsible for getting regulatory approval not just for the US but for . . . → Read More: The Free Market Ideal]]>

Thank you Jeff for your thoughtful comments…here are some of my observations.

First, I do think we have some agreement on many of your points. Here are some of the differences that I would highlight.

Regulation is not just something that happens in government. Here are some observations from my own experience. At U.S. Robotics one of the engineering groups I managed was responsible for getting regulatory approval not just for the US but for many countries in the world. We called this homologation. In the US we had to get Underwriters Lab (UL) and FCC approvals to sell in the US. We also sold modems into hundreds of other countries and they all had their own similar approval requirements. These requirements were for consumer safety and radio interference issues.

In the 90s Microsoft decided they would implement a hardware certification process. It was practically impossible to sell modems without the Microsoft certification approval. It was also practically impossible to get all our modems every quarter through the huge bureaucracy of Microsoft. They certainly stifled our competitive efforts based on their regulatory approval.

Microsoft has also required a software vendor like myself to pay private regulatory companies a yearly fee which can be very pricey to “digitally sign” our software. They claim this is to keep hackers from infecting software products. However, there are many very good products available for software vendors like ‘obfuscators’ (which I use) that keep hackers out of code. The actual incidents that Microsoft rationalizes its ‘code signing’ process for is statistically very minimal. However, they do get kick backs from their ‘approved’ code signing companies.

Now, with the release of Windows 7, Microsoft has taken another regulatory step by reporting software that does not have a ‘reputation’. This has nothing to do with the code signing. A company may have their code digitally signed and still run into the ‘reputation virus’. Microsoft reports it as a virus. However, if you read what the ‘reputation virus’ is; it only means that Microsoft has never heard of you. Norton and other virus programs take the Microsoft virus alert and automatically delete the downloaded trial software we produce. They report it as a virus. Microsoft readily admits that 90% of the folks that see the virus alert will not install the product. This means software vendors like myself are not permitted to compete in the ‘free market’ of the software business. I have two products for download on the internet. Both are exactly the same code. The only difference is one byte in a text, configuration file that allows the product to come up as either product. One of my software downloads is allowed by Microsoft and Norton, the other is not. It is reported as a virus and automatically deleted. This affects 90% of my new and upcoming business on the Windows 7 platform. I have talked to literally hundreds of other software vendors on the web who are in total agreement with my contention of Microsoft’s market monopolizing practices.

There are many other cases of ‘private market’ regulation that I could cite but this can probably suffice. The idea is that the corrosive effect of regulation is not just a charge that can be levied against the government. It happens all the time in the ‘free market’ as well. Does this effect competition adversely? Absolutely. Is there perhaps some need for regulation by both the government and big corporations? Probably, but as Jeff suggests it is also used as an excuse to kill competition. However, not as a component of government but of the private market itself. I think most folks agree that there is some need for market regulation by an impartial regulatory agency. However, effective regulatory restrictions by large corporations with vested interests are a market distortion that happens often and distorts the ‘free market’ ideal based on competition. When the government becomes a vehicle for the capitalists that do not want competition as Jeff suggest, it is certainly corporatism which is one of the hallmarks of historical fascism.

It is not a matter of is there corporatism or crony capitalism but to what degree it happens not just by government but by big corporations as well. To the degree that this happens, it is not the ideal of the ‘free market’ but a hybrid practical reality of how it actually works. The Bush administration was a perfect example of what happens when regulatory agencies rubber stamp big business. Oil and gas regulation, toy regulations, financial market regulations and more were thrown out the window and companies were given free reign over regulators. Corporations were even discovered to be wining, dining and giving the regulators luxurious trips. This was not the government interfering with the market but giving it carte blanche to do whatever it wanted. The ideal of small footprint regulation, as Jeff espouses, was realized by the Bush administration and it ultimately resulted in the recession. The housing crisis was not caused by too much regulation but the absolute lack of regulation in the derivatives market. One email at Standard and Poor’s stated, “Rating agencies continue to create and [sic] even bigger monster–the CDO [Collateralized debt obligations ] market. Let’s hope we are all wealthy and retired by the time this house of cards falters.” Moody’s and Standard and Poor’s, both private companies, are considered to have elevated ratings on CDO’s which are mortgage backed securities to minimize the risk and, in so doing, increase the profits for investors. See this, this and this for more data.

Another tactic of the ‘free market’ is price collusion and price fixing. Individual multinational corporations and conglomerations of individual market segment corporations have often been accused of doing this. The diamond market is notorious for this as well as Oil and Gas (remember Standard Oil, Rockefeller) and railroad industries. While this kind of activity in normally associated with monopolies it is still a reality of the practical workings of the free market. It seems to me that thinking of this kind of activity as a rare monopoly situation allows a sort of effective monopolizing in the actual market. Jeff states that, “Thus, monopolies don’t stay monopolies for long unless they are making consumers happy” but how does this measure up? Remember AT&T, officially deemed a monopoly by the courts, -they monopolized the market for decades…is this a short time? In any case, the kind of activity that goes on daily in the market by Microsoft and others has not acquired the label of ‘monopoly’ but shows that monopolizing activity is not a rare court decided phenomenon of the market; it is an analog, practical reality of the market. Microsoft has been brought to court and found guilty at least once that I know of for market monopolizing practices. This kind of activity has to get extremely severe before a public, official pronouncement is made.

Jeff quotes Smith here, “They often propose new laws and regulations, as Smith points out, that are to the benefit of their companies, but not to the benefit of society as a whole (i.e., to consumers).” However, Adam Smith himself, proposed over one hundred pages of financial industry regulations in the “Wealth of Nations” which have largely been neglected by the modern market place. I suppose Adam Smith himself was one the “they”s that Jeff refers to.

My contention is that it is extremely idealistic to think that the ‘free market’ is, in practice, all about competition. Yes, that is a positive aspect of the real market place but it is still an ideal and does not reflect a large part of how the market works. I also agree that government can become the problem when it effectively acts as a monopolist in the market, corporatism. However, as I have shown this is not just an essential evil of the government but occurs in the private market as well. My contention has always been that the free market works best for the public interest when government and big corporations collide. While the David and Goliath story may be cute, two Goliaths tend to do more damage to each other. The government in a democracy is ideally supposed to be the public defender and not the corporate defender although this ideal too has shown itself to be different from the reality. The answer is not to throw in the governmental towel as we did in the Bush administration but to make sure that we elect politicians that will oppose corporatism and government collusion with capitalists.

I find it interesting that Jeff thinks capitalists are capitalism’s biggest detractors. To me, this is like suggesting that churches are Christianities biggest problem. Capitalists vote Republican for the most part. If they wanted more government it seems to me like they would vote Democrat as the Republicans are fond of laying this charge on the Democrats. Republicans publicly state, almost daily, that they are on the side of business and the capitalists. Therefore, they publicly acknowledge that either they welcome the interference with the market that Jeff denounces or they want to return to the lassie faire capitalism of the Bush administration. While the Democrats may be complicitous in Jeff’s charge as well, they are not so bold proclaiming it which might account for something positive (or not). Are we to believe that the best proponents of a philosophy are intent on its destruction? This certainly may add some credence to some of Nietzsche’s discussion and post modernism but it also is a living demonstration of the inability of the system to rationalize itself based on its members. If major and important members are bent on the destruction of the market, are we suggesting that the only way to redeem the ‘free market’ is by the ideal that it proposes? If the reality has anything to do with some of the practicalities that I have suggested and seen, then ‘free market’ capitalism seems like it gets its validation based on an ‘otherworldly’ idealism not unlike Christianity. Are we supposed to believe that the ‘free market’ liberties in the Bush administration were problems of too much government still and therefore salvage the validity of the ‘free market’ ideal? I think this is a bit much to swallow. It is like continually suggesting that historical Christianity is not the ‘true’ Christianity in order to preserve an ideal Christianity that may appear dubious in practice. At some point, even the best metaphysician must live and breathe and have their existence in the world. Dreams are nice but realties are necessary. I do not advocate overthrowing capitalism but simply dealing with the reality of it without using its ideal as a pretense to justify its inadequacies. I think simple answers that make the government the scapegoat for the failures of capitalism are there to reinforce that idealism of a flawed system and enable us to overlook fundamental issues that need to be addressed. I prefer to address the issues directly and smartly while making the market more of a level playing field and less rigged against the interests of the public; a primary concern for Adam Smith and Karl Marx as well.

For me, the problem is better framed not in terms of government versus the private market but big versus small. Is the ideal of the free market demonstrated in TBTF (too big to fail)? What does competition have to do with propping up a business because it is too big? If competition always produces a better value for the consumer how is it that a ‘big’, that is too big to let the competition kill it can come from the ideal Jeff defends (remember Bush and Paulson)? If the ideal of the ‘free market’ is actually realized in practice, is this yet another glitch in the system that we have to rationalize away? How many times can we look the other way and still pronounce the ‘free market’ holy? What interest is served in ‘free market’ apologetics? My point is that ‘big’ is another name for effective monopoly in many cases. I would also apply this to the government with this caveat…the ideal of the government should be efficiency not small. If we make the government a David I would wager that Goliath will win the battle 99 out of 100 times. We need to make the big of the government our friend and defender because if we give that up we will have the mercy of the ‘free market’ and the legacy of George Bush as our BFFs.