Judgment refers to decision making that cannot be represented by formal models or decision rules, but is nonetheless different from luck or chance. Unlike other entrepreneurial attributes such as alertness (Kirzner, 1973), judgment is manifest in the ownership of productive assets. It reflects ultimate decision authority—residual rights of control, in Grossman and Hart’s (1986) terminology—about the deployment and use of valuable resources under conditions of uncertainty. Entrepreneurs act to combine and recombine heterogeneous capital resources, whose attributes are subjectively perceived, to pursue financial or other gain. As Lachmann (1956, p. 16) put it: “We are living in a world of unexpected change; hence capital combinations … will be ever changing, will be dissolved and reformed. In this activity, we find the real function of the entrepreneur.”

Are PE firms more entrepreneurial, in this sense, than publicly traded firms? Yes and no. Both theory and the empirical evidence, summarized below, support a balanced view in which PE is best regarded as a governance structure that, like all forms of organization, has benefits and costs that vary according to circumstances. As Jensen (1989) famously argued, PE has substantial potential governance benefits over public equity due to a closer alignment of ownership and control. The high-powered incentives associated with ownership can lead to what Wright, Hoskisson, Busenitz, and Dial (2000) termed a “change in managerial mindset” that prefers long-range, strategic, holistic thinking over a short-term focus on quantitative performance metrics. At the same time, however, privately held firms are often constrained from pursuing potentially attractive profit opportunities by the nature of their debt obligations. Put succinctly, PE favors management by fixed rules while public equity allows a greater degree of managerial discretion, and both rules and discretion have benefits and costs.

Marc Faber of the Gloom Doom Boom Report was interviewed by Bloomberg on Friday, and of course topic number one was the brutal takedown of gold. Reassuringly, he likes the resulting buying opportunity and expects “a major low in gold within the next two weeks.”

More interesting from a theoretical/historical point of view was his segue from gold to the state of the global economy:

“Today we have commodities breaking down including gold and we have bonds rallying very strongly. If you just stand aside and just look at these two events they would suggest that there are strongly deflationary pressures in the system.”

The following chart illustrates Faber’s point. Gold is the downward-trending blue line and long-term Treasury bonds are the upward-trending green line; bonds up, gold down is clearly a deflationary picture:

Gold versus T-Bonds

But how, with the US, Europe and Japan running massive fiscal deficits and buying up every piece of debt in sight, could the global financial system be contracting instead of ratcheting towards an inflationary crack-up boom?

Because even with all the new currency creation, the amount of bad debt that was incurred over the past 30 years is still immense. The eurozone, despite the kind of debt monetization in which the European Central Bank (the Bundesbank’s successor!) was never supposed to engage, is falling apart. Any of five or six zone countries could implode on any given day, potentially unraveling of the whole system. European businesses and consumers are understandably reluctant to borrow and spend. And since Europe is a major market for everyone, a slowdown there equals a slowdown everywhere. (Even mighty Singapore, offshore money haven to the world, is contracting.) The US, last year’s debt monetization champ, is flirting with austerity via sequesters and “grand deficit bargain” negotiations. Unfunded liabilities continue to soar across the developed world. Toss in a quadrillion dollars notional value of derivatives that no one understands or can even locate, and the debit side of the ledger still dwarfs the various QE programs.

In other words, today’s level of debt monetization is apparently not big enough, and now the system is rolling over. The Long Wave is winning after all.

The one data point that doesn’t fit with a replay of the 2008 debt panic is the stock market which (along with an incipient US housing recovery) is the main inflationary indicator still standing. Stocks don’t normally like deflation. As Faber puts it, “I wouldn’t buy stocks because the stock market would be hit by disappointing profits.”

S&P 500


So is it 2008 all over again? A sharp break in stocks coinciding with multiple fiscal crises (Slovenia and Portugal look primed, Italy and Japan could go anytime) would revive talk of a deflationary crash. Bad for precious metals in the short run (2008 was maybe the worst-ever year for mining stocks) but great long-term because the inevitable response of governments around the world will be to emulate Japan: decree 2% inflation and create as much new currency as it takes to get there. If the Fed’s $3 trillion balance sheet didn’t do it, then we’ll try $10 trillion. If buying mortgage backed bonds doesn’t revive those animal spirits, then junk bonds and stocks are next.

If the Long Wave is indeed winning, we’re about to discover the true meaning of an “unlimited” printing press.

• Henderson/Zunes Speaking Event
• Top News
• Opinion and analysis

David Henderson and Stephen Zunes to Speak on US-Iran Relations:

Prof. David R. Henderson, co-chair of Libertarians for Peace, will be one of two speakers discussing the U.S., Iran and the threat to peace. The event is on Thursday, April 18 at 7:30 PM at the Irvine Auditorium, Monterey Institute of International Studies (MIIS) at 499 Pierce Street in Monterey. The program is free and open to the public.

David R. Henderson: "The Perverse Economics of Sanctions" David R. Henderson is a research fellow with the Hoover Institution and a Professor of Economics at the Naval Postgraduate School. Sponsored by the Peace Coalition of Monterey County and Amnesty International.

Stephen Zunes: "Hegemony, Repression and the Nuclear Standoff" Stephen Zunes is a Professor of Politics and International Studies at the University of San Francisco, where he chairs the program in Middle Eastern Studies. He is recognized as one of the country’s leading scholars of U.S. Middle East policy and strategic nonviolent action.

For more information, call 831-899-7322.

This week’s top news:

Americans Obsessed with North Korea, Overstate Threat: Pew Research showed large amounts of the American population are following North Korea "very closely" and take the threat "very seriously."

Syria’s Nusra Rebels Pledge Loyalty to al-Qaeda: This week’s announcement of a merger between Jabhat al-Nusra, one of the key Syrian rebel forces, and al-Qaeda in Iraq (AQI) was discussed today by the Nusra leadership, which insists that they have always pledged allegiance to the al-Qaeda parent group.

Israel to Refuse All Official Gestures to Palestinians: Israeli officials are sending some mixed messages after Secretary of State John Kerry’s visit on whether or not they are going to make any gestures to kickstart peace talks, but it seems safe to say that anything they do will be quiet.

US Troops Attack Afghan Civilian Bus, Killing One: Details are still scarce, but officials are confirming that US troops attacked a civilian bus in the Herat Province, in the Adraskan District. The attack killed one civilian and wounded another.

Obama Approves Yet More Weapons for Somali Military: Citing a recent UN resolution that partially lifted a ban on sending arms to Somalia, the Obama Administration has announced a dramatic new influx of military aid to the self-proclaimed Somali government.

UN: Libya Arms Fueling Mali, Syria Wars: A new UN report addressing the now fairly longstanding problem of arms smuggling out of Libya reveals that despite huge outlays of money from NATO the weapons continue to flow out of Libya at "an alarming rate," fueling wars across the region.

Opinion & Analysis:

• Justin Raimondo wrote about the life of Margaret Thatcher and Hugo Chavez, as well as a fictional piece about a future Rand Paul presidency.
• Ivan Eland argued the best way to handle North Korea’s belligerence is to ignore it.
• Kelley Vlahos lamented the lingering AUMF and the still-expanding war on terror powers utilized by the Executive. She also blogged about how the CIA is wrecking polio eradication in Pakistan.
• Phil Giraldi wrote about Bowe Bergdahl, a US soldier taken hostage by the Taliban.
• John Glaser explained why Obama won’t cut military spending, new evidence that Obama has lied about the drone war, and the cold geo-politics at play in Syria.

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The Neo-Conservative Era Is Dead

Former Congressman Ron Paul will hold a press conference this Wednesday to launch his next big project: the Ron Paul Institute for Peace and Prosperity. After decades in and out of the US House of Representatives leading the call for a non-interventionist foreign policy and the protection of civil liberties, Dr. Paul is launching a revolutionary new vehicle to expand his efforts. The Institute will serve as the focal point of a new coalition that crosses political, ideological, and party lines.

The Ron Paul Institute will focus on the two issues most important to Dr. Paul, education and coming generations. It will fill the growing demand for information on foreign affairs from a non-interventionist perspective through a lively and diverse website, and will provide unique educational opportunities to university students and others.

The neo-conservative era is dead. The ill-advised policies pushed by the neo-cons have everywhere led to chaos and destruction, and to a hatred of the United States and its people. Multi-trillion dollar wars have not made the world a safer place; they have only bankrupted our economic future. The Ron Paul Institute will provide the tools and the education to chart a new course with the understanding that only through a peaceful foreign policy can we hope for a prosperous tomorrow.

Founder, Chairman, and CEO Dr. Paul has invited the Institute’s board of advisors to speak at the conference, including Rep. Walter Jones, Jr. (NC), Rep. John Duncan, Jr. (TN), former Rep. Dennis Kucinich (OH), Judge Andrew Napolitano, Ambassador Faith Whittlesey, and Llewellyn H. Rockwell, Jr.

What: Press Conference To Inaugurate the Ron Paul Institute for Peace and Prosperity
When: Wednesday, April 17th, 3:00 PM
Where: Capitol Hill Club, 300 1st St., SE, Washington, DC. (California Room)

The Neo-Conservative Era Is Dead

Former Congressman Ron Paul will hold a press conference this Wednesday to launch his next big project: the Ron Paul Institute for Peace and Prosperity. After decades in and out of the US House of Representatives leading the call for a non-interventionist foreign policy and the protection of civil liberties, Dr. Paul is launching a revolutionary new vehicle to expand his efforts. The Institute will serve as the focal point of a new coalition that crosses political, ideological, and party lines.

The Ron Paul Institute will focus on the two issues most important to Dr. Paul, education and coming generations. It will fill the growing demand for information on foreign affairs from a non-interventionist perspective through a lively and diverse website, and will provide unique educational opportunities to university students and others.

The neo-conservative era is dead. The ill-advised policies pushed by the neo-cons have everywhere led to chaos and destruction, and to a hatred of the United States and its people. Multi-trillion dollar wars have not made the world a safer place; they have only bankrupted our economic future. The Ron Paul Institute will provide the tools and the education to chart a new course with the understanding that only through a peaceful foreign policy can we hope for a prosperous tomorrow.

Founder, Chairman, and CEO Dr. Paul has invited the Institute’s board of advisors to speak at the conference, including Rep. Walter Jones, Jr. (NC), Rep. John Duncan, Jr. (TN), former Rep. Dennis Kucinich (OH), Judge Andrew Napolitano, Ambassador Faith Whittlesey, and Llewellyn H. Rockwell, Jr.

What: Press Conference To Inaugurate the Ron Paul Institute for Peace and Prosperity
When: Wednesday, April 17th, 3:00 PM
Where: Capitol Hill Club, 300 1st St., SE, Washington, DC. (California Room)

POPULARITY OF THE INCOME TAX.
The Chamber of Commerce has directed an inquiry into the administrative feature of the income tax after a debate in which it was said that the tax would not affect 99 per cent. of the citizenship. It was suggested that this deprived the bill of general interest, and that it was sure to be unpopular on account of the narrowness of its application.

[...]

The case is worse than this. It will tax the honest and allow the dishonest to escape. The administrative features which the Chamber is to investigate are so complicated that those who understand them will make their taxes light at the cost of those less well informed about the law. The income tax law may be considered good nevertheless by some, but even those who approve the tax despite its faults cannot contend that the same sums could not have been raised more certainly, more equitably, and with less trouble to both payers and collectors by a stamp tax.

The experience with the tariff shows how hard it is to reduce or remove a tax once laid. It always seems better and easier to devise ways to spend the money than to repeal the tax. This fact will be better appreciated as the years pass, and particularly when the time shall come when this extraordinary tax–as it ought to be–shall be needed for an emergency. Then it will appear that this resource has been utilized and that the tax must be doubled instead of imposed initially. The tax was most popular before it was laid. Its unpopularity will grow with its life.

INDIGO ALERT: Urge Cuban Government: Do NOT turn Hakken Family over to U.S. “Authorities”

It is obvious by the spin of the State Media that the parents have already been identified as “anti-government” (read; terrorists).

Cuban Interests Section (an office of the Cuban government)
2630 16th Street NW, Washington, DC 20009

Telephone (202) 797-8518, (202) 797-8518-8520

Fax (202) 797-8521

Consular Section (part of the Cuban Interests Section)

2630 16th Street NW, Washington, DC 20009

Telephone (202) 797-8609, (202) 797-8610, (202) 797-8615

Fax (202) 986-7283

Sanchez goes further. The NAP is a tautology that adds nothing of importance to moral theory. A right is, by definition, a claim that is enforceable. “But all the real action is in the definition of rights; invoking the NAP adds nothing. It is tantamount to saying ‘only enforce rights that are really rights.’ To establish your right over (say) your car just is to establish that I ought not to take or use it without your permission (perhaps barring extraordinary circumstances, the parameters of which will tend to be implicit in the argument establishing the right). It is neither necessary nor illuminating to add the additional premises that taking what you have a right to counts as ‘aggression,’ and that one ought not to aggress.”

Here Sanchez has focused on the wrong word. He says, in effect, “Of course you should only enforce an enforceable claim. What else do you propose to enforce — a non-enforceable claim?” He is certainly correct that you shouldn’t enforce a non-enforceable claim, but he has missed something. He has not paid enough attention to “claim.” If you have a moral claim, then something is owed to you. Moral claims are personal. But some moral theories don’t tie the use of force to claims.

As an example, someone might favor transfers of wealth from billionaires to the poor on the ground that this will increase utility. The person might further hold that force can properly be used to do this. In taking this view, the person need not have rights in mind at all. The argument isn’t that the poor have a right to the transfers of wealth, so that if the transfers aren’t made, the poor have been deprived of what is morally owed to them. Rather, the theory holds that transferring wealth in this circumstance is a good thing to do and that’s all you need to justify using force.

In brief, there are non-rights based moral theories. The NAP, by tying the use of force to rights-violations, rules out using force to achieve moral goals not founded on persons’ claims. It is thus not a tautology.

Polio vaccines in Pakistan. Note the guards.

On Wednesday, gunmen in northwestern Pakistan killed one security officer and wounded another as they guarded a team of polio vaccination workers. While no one has yet taken responsibility for the attack,  it was the latest in a string of violent attacks and threats against health workers that began when it was revealed that a Pakistani doctor had helped the CIA gather intelligence on the whereabouts of Osama bin Laden’s family in 2011. He did this by setting up a phony vaccination drive with hopes of collecting DNA samples in Abbottabad, where the bin Laden family compound was located. U.S forces thought the ruse could give them a clue about bin Laden’s exact location. Navy Team Seal 6 eventually got their man, but the Pakistani government did not celebrate whatever role Dr. Shakil Afridi played in bin Laden’s demise — they threw the doctor in jail for a year, then tried him on what appears to be trumped up terrorism charges and sentenced him to jail for another 33 years. Reports say he is in solitary confinement in Central Prison, Peshawar.

A boy with Polio in Islamabad, 2011 Credit: Behrouz Mehri/AFP/Getty Images

But the repercussions of Afridi’s brief CIA experience continue. U.S lawmakers are “outraged” by Afridi’s jailing, even lining him up for a Congressional Medal of Honor and vowing to withhold aid if he is not released, but none have acknowledged that the CIA scheme may have grievously disrupted a global health plan that would see polio eradicated by 2018. They don’t acknowledge, that even before Afridi’s collusion with the CIA, Imams and other Islamist leaders in both Pakistan and Nigeria, had declared the polio vaccine off limits for Muslims, calling it, according to a New York Times story in July, “a Western plot to sterilize girls, that it is unclean under Islamic law, that it contains the AIDS virus.”

Then Afridi came along, apparently thinking he was doing the right thing in helping the U.S roust the terrorists from his neighborhood (reportedly he did not know  the bin Ladens were the target) and gave the Taliban all it needed to exploit that existing fear, paranoia and the ability to control and crack down on any whiff of western influence in northwest Pakistan. The government there acted swiftly, too, disqualifying the health workers who (unwittingly and unknowingly) went along with the fake vaccination drive from further service. Their terminations (over a year ago now) were just overturned by a court in Peshawar, according to The Dawn newspaper.

Some would say the number of actual polio cases — now down double digits — in Pakistan indicate the problem is well in hand anyway. But health officials fear these developments nonetheless, because there are still traces of the virus turning up in sewage samples, and there are a greater number of “carriers” that, without a full vaccination campaign, could spur an outbreak at any time. But as experts have pointed out, the Afridi affair has put ALL public initiatives, not just polio vaccinations, at risk.

According to a recent Associated Press report based on new UNICEF numbers, 240,000 Pakistani children missed out on the UN-backed polio vaccine because of the increased violence, and some 15 health workers have been killed (not counting the one on Wednesday).

Laurie Garrett, prize winning science writer, had this to say last May on the new realities in Pakistan:

“So last July (2011), when it was disclosed that the CIA had used Afridi and a false vaccination campaign to gain access to the Abbottabad complex, I co-authored a warning with Dr. Orin Levine that the CIA had ‘destroyed credibility that wasn’t its to erode.’ We wrote: ‘It was the very trust that communities worldwide have in immunization programs that made vaccinations an appealing ruse. But intelligence officials imprudently burned bridges that took years for health workers to build.’”

They weren’t thinking — or were just thinking of themselves and the prize of bin Laden at the other end of the scheme. A means to the end. Now we can just think about paralyzed children and iron lungs, and our hope that public health officials won’t stop trying to end polio there, even though they risk their lives every day to do it.