Catallaxy Files

polymathic pontification, bleeding heart economic rationalism and liberal secularist contrarianism

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    Saturday, October 12, 2002
    Keysar Trad shows his true colours
    The Muslim community leader who was recently given an arse-licking profile in the Herald doesn't sound too happy with his adopted country - Chris Textor has something to say about this. Here are some charming comments from Trad's essay:

    from the Muslim viewpoint, our ideology is the best salvation for the people of Australia, and the people of the world in general. Yes, we are a threat to the culture of drunkenness, paedophilia, and mostly we are a big threat to the culture of ELITISM ...

    The criminal dregs of white society colonised this country, and now, they only take the select choice of other societies, and the descendants of these criminal dregs tell us that they are better than us. And because we are not elitists, we tolerate them. Yet they want us to assimilate, perhaps they will only become satisfied when we each die our hair red, wear blue/green contact lenses, and operate a fish and chips shop, otherwise, we would not be truly assimilating, would we?

    But don't worry, he's an equal opportunity vilifier:

    India, the Asian country which is dominated by the lowest of the low amongst racists, the class society which divides its own people into four classes and places people of other faiths, and Muslims in particular as the lowest of the low. The policies of these cow worshippers, and their extermination of Muslims in their countries and inside Kashmir (to the silence of Western countries) is one more example of how this feeling of elitism is not restricted to the colour of the elitist, it is a lifestyle of those idiots who have intoxicated themselves with a false feeling of power, and who actively exercise this power against others.

    Perhaps that's why India has a Muslim President.
    It seems he doesn't like fat people either - all you PC crusaders at the Herald, take note of what your arse licked profilee has to say:

    It is astounding how, when Pauline started the assimilation argument that the media found a Muslim woman wearing the Hijab, slightly overweight, doing her shopping, and channel nine would show her in an advertisement for one of their shows, right after the assimilation comment. They do not film a fat Australian woman in tight bicycle shorts, or tight pants, or an Australian drunk, or a nun, or an Australian welfare cheat. NO!!! They show a Muslim woman wearing a Hijab, she is not assimilating, it would be okay if this same woman walked around in bicycle shorts, with her body vulgarly bulging out to the point of regurgitation.

    I am on record as favouring robust free speech and Mr Trad can vilify all he wants. However it's worth pointing out that if someone had written about Islam on the same terms as Mr Trad has compared various countries unfavourably to his Islamic utopia, that person would be before the courts in a tick and his co-religionists would be screaming about outbreaks of 'racism' against Muslims. In this country you should be willing to take as good as you give, 'Brother' Trad. Unfortunately people like you want to have the best of both worlds.
    What happened to Muslimpundit?
    Does anyone in the blogosphere know what happened to Muslimpundit? He returned to blogging in August after a long hiatus but hasn't been heard from since. That guy must have 3 dozen fatwas in his name, I sincerely hope he's still around.
    Hugh Mackay wins economic idiocy of the week competition

    Today’s Hugh Mackay column is all about the virtues of co-operation over competition. He adopts the layman’s definition of competition –as a contest for a given prize, with a winner and losers. Any gains to an individual, therefore, are at someone else’s expense.

    You can argue whether competition in this sense is harmful or not. Mackay should venture inside his precious university sector one day and observe what competitive little beasts most academics are – especially productive researchers.

    My gripe is that he seems to think that his definition of competition is also what economists have in mind when they advocate competition in economic life.

    As a Nobel Prize winning economist (George Stigler) explains:

    “In economic life, competition is not a goal: it is a means of organising economic activity to achieve a goal. The economic role of competition is to discipline the various participants in economic life to provide their goods and services skillfully and cheaply.”

    The opposite of competition as used by economists is monopoly.

    Economic competition signifies a lack of market power – an inability of any producer to influence market prices. It does not require an unpleasant atmosphere between different firms or an endorsement of conflict.. Indeed, the ideal of perfect economic competition is impersonal and the fortunes of one firm are independent of what happens to any other firm – they depend solely on whether it can produce profitably at the going market price.

    There will be competition over scarce resources in any system. The issue is what are the effects of different ways of determining what wants are going to be satisfied. A competitive market does not create conflict over resource use – it is one way to resolve it. In a competitive market, resources are used for the most valuable purposes as judged by consumers' willingness to pay. There is not one winner and a bunch of losers, but the whole standard of living of the economy can be made higher from the gains from specialisation and trade. Everyone is a consumer, and consumers gain from having producers compete to satisfy them.

    A market system allows for a conflict of ends, but does not require it. There is nothing to stop people co-operating to achieve a common goal. Extensive division of labour, specialisation and co-operation is required to make effective use of available resources and satisfy wants. The market uses self-interest to encourage people to co-operate with and serve others.

    A competitive market is consistent with co-operation within a firm and between employees, customers and employers. Firms can even compete over who offers the most co-operative environment.

    The Peace prize
    Given who past years' winners were, it's certainly an improvement that Jimmy Carter won the Nobel Peace prize this time. However Instapundit argues that these guys deserved a look-in too and I agree. I hope someone at least nominated them.

    Friday, October 11, 2002
    Judicial activism

    Tom Sowell has a great new column on the consequenbces of judicial activism. A sample:

    If Houdinis on the bench can escape the laws that are on the books and substitute their own personal preferences as the basis for their rulings, then democracy becomes an illusion and the reality becomes a judicial ad-hocracy, overruling whatever laws the judges don't like, whether explicitly or by free-ranging "interpretation."

    Laws do not enforce themselves. If courts are too corrupt to enforce them, then our last line of defense is the press, which can alert the public to what is happening and let the voters decide what they are going to do about it. But if both the courts and the press are willing to turn a blind eye to those illegalities which meet their political approval, then the corruption is complete.
    Degrees of separation
    A few weeks ago, John Quiggin mentioned that the firm I work for, NECG, was flying him over to the Sydney office to give us a lecture on the economics of uncertainty. This won't be the first time my boss Henry Ergas has flown a top knotch ANU academic around to lecture in various offices as part of professional development. But I wonder if he has any further plans in store ... NECG recently poached, er I mean, hired, a few high ranking people from Tasman Economics (to put not too fine a point, this has basically made one of their major offices feeling a large gap) and has been known to take on a few academics around the world as 'Network Associates'. Of course the funny thing is Henry and John are basically nemeses on telco reform.
    Left v right

    We know where the left stand, a predominant role for the state in economic matters, although the emphasis has changed from production to consumption. Old fashioned socialists believed in the public ownership of the means of production and central planning, although that is not emphasised so much nowadays (although central planning of the whole economy is rejected – not even the Germans could make it work – it still is adopted in particular markets, such as education and health). Modern socialists emphasise equality of consumption. The so-called third way accepts that market competition is the best way to create prosperity and is happy to use markets and the private sector to produce the wealth used to fund their spending plans and collectivist policies – a sort of a goose that lays golden eggs. Wealth is still to be parceled out by the state in ways unrelated to production – according to social justice. Essentially they believe the power of the state should be used to equalise people and override individual rights.

    The right is pretty much everyone else – the left have a view of the world where they are the centre of the universe and everyone who differs in any direction is labelled right wing. It is a useful tactic to lump liberals (in the classic sense i.e. libertarians), fascists, and conservatives in the same camp so opponents can be misrepresented and dismissed through guilt by association. In fact, fascists have more in common with the left than with liberals as they also believe society is an entity with its own goals which trump individual goals, rather than a handy label to describe its members.

    If we must have a dichotomy, I think Ayn Rand got it right – the conflict in politics is between statism and capitalism. Statism is about concentrating extensive political, economic and related controls in the state at the cost of individual liberty. Socialism and fascism are merely specific variants of statism.

    Also valuable is Sowell’s categorisation of different visions of the world. A vision is a particular set of underlying assumptions about the world works and the nature of man.

    Sowell calls them the unconstrained vision (or the vision of the anointed) and the constrained vision (which underlies classical liberalism). These names do not demonstrate his usual flair for graphic names, perhaps we can call them the wet and dry visions. The two visions have radically different concepts of man’s moral and mental nature, each with its own implications for the concept of knowledge and of institutions relevant for the formation of social and economic policy. The clash between these two visions pervades modern politics. See this speech for a summary of the vision of the anointed and this column for the anointed and their attitude to the war on Islamo-fascism.

    But political views are too complex to be put as a dichotomy. See this site for a four quadrant categorisation of political views.

    You can take the test. My score was
    Economic Left/Right: 6.38
    Authoritarian/Libertarian: -2.05

    Which puts me in the libertarian right quadrant (according to them I am roughly in the same position as Milton Friedman which is correct) – which only a small minority of the population would fall into, which is probably why no major political party in Australia reflects my views.

    It is similar to David Boaz’s 4 quadrant diagram in Libertarianism; A primer, which also inverts the graph to put Libertarian art the pinnacle – and as the opposite of fascism. From memory I was at the top point of that diagram (I can’t find that test on the web but extracts from the book are here).

    My own gripe is how not only has the left in the US stolen the term ‘liberal’, they are now starting to appropriate ‘libertarian’ Even Bill Maher of the misnamed ‘Politically Incorrect Show’ now describes himself as a libertarian. Libertine would be more accurate.

    None of the standard questionnaires ask about attitudes to race. Race issues tap irrationality like nothing else. But those with libertarian views are seldom racist. For example, Ayn Rand described racism as the ultimate form of collectivism – racists claim superiority on the basis of their ancestors genes rather than individual achievement.

    Sully and self-esteem
    Does anyone else see the irony in Andrew Sullivan, of all people, writing an article about why we need less self-esteem? Interesting piece nonetheless.
    My favourite Vernon smith quote:

    Vernon Smith, winner of the 2002 Nobel Prize for Economics in an article in the Journal of Economic Literature:

    That economic agents can achieve efficient outcomes which are not part of their intention was the key principle articulated by Adam Smith, but few outside of the Austrian and Chicago traditions believed it, circa 1956. Certainly I was not primed to believe it, having been raised by a socialist mother, and further handicapped (in this regard) by a Harvard education, but my experimental subjects revealed to me the error of my thinking.

    Thursday, October 10, 2002
    Nazism is not leftism
    James Russell of Hot Buttered Death and John J Ray have gotten into a bit of an argument over the issue of whether Nazism is leftist. Sadly I think they are both talking past each other to some extent so let me step in here and annoy both of them.

    I think James is missing the point when he invokes Godwin's Law. What John is doing with his articles on the anti-capitalist nature of Nazism is to some extent setting the record straight and it is a perfectly legitimate exercise. Being 'anti-capitalist' has tended to be associated with sweetness and light in the progressive mindset and what the work of people like John does is expose the fact that people who hold 'left wing' views can at times be just as if not more reactionary than people who hold 'right wing' views.

    In a sense I suppose this isn't that surprising - for instance some of the most prominent critics of the Industrial Revolution and 'Manchesterism' were backward looking reactionaries and racists like Carlyle, or aristocrats yearning for a bygone feudal age when 'status' mattered more than 'contract' and so forth - see for instance this article which shows that some of the strongest opponents of 'Manchester' liberalism and 'economism' were also fundamentally opposed to the idea of treating races equally and for much the same reasons that they were against 'economism' (it's nice that we economists can claim to have almost always been on the side of the angels on this question). However putting the issue this way also exposes to some extent the problems associated with imputing some inherent tendency towards racism in leftist thought.

    At best all John Ray's work does is expose the inadequacy of simple-minded labels like Left and Right upon which John bases his attempt to find family resemblances- arguably a stronger differentiation is that between pre and post Enlightenment thought (here I'm using the word 'pre not to signify that pre-Enlightenment thinkers for instance existed before the Enlightenment but that they identified with modes of thought that existed before the Enlightenment e.g. pining back to some version of lord-serf feudalism, fixed positions in society, traditionalism and so on). The mainstream Left and Right belong to post-Enlightenment thought and this is true even of the genuine revolutionary Left (though not the revolutionary Right who are firmly ensconced in pre-Enlightenment thought and take their bearings from the nostalgists and 'Volkish' critics of the Enlightenment, humanism, cosmopolitanism and their aftermath). For instance Marx admired capitalism as a progressive force which swept away the 'rural idiocy' of feudalism and looked forward to its triumph in feudal states. His gripe with capitalism was that it would eventually go out of fashion and be replaced by something better - something even more progressive.

    By contrast the 'pre enlightenment' critics of capitalism were against it because it was progressive and dynamic and swept away old certainties of status and position. It's not surprising that this view of the world is anti-bourgeois since the bourgeois are seen as Johnny come latelies, the noveau riche, people who earn their living through 'manipulating money' or 'mere' buying and selling, rather than by, say, ploughing the land or hammering out horseshoes. To some extent this is human nature - people always think they're the only ones who do 'real work'. People who have lost their old status in society because of social change elevate this into ideology when they gravitate towards some form of fascism which is mired in this 'pre enlightenment' mode of thought of looking back towards a better world that existed in the past. Hence the cosmetic resemblance between some Fascist and anti-bougeois Marxist rhetoric. However the point is that Fascist movements take their cue from the pre-enlightenment critics of capitalism. Ultimately this characterisation may itself be too simplistic but I think it captures much better the differences between anti-capitalist movements than John Ray's attempt to lump together a fundamentally anti-Enlightenment ideology like Nazism with various varieties of leftism which are fundamentally descendants of the Enlightenment like their feudin' cousin 'Manchester liberalism' (better known by its contemporary name of neo-liberalism, as John Quiggin calls it). At the same time it must be conceded that there are lots of confused people out there so it would not be surprising to find lots of people active in leftist anti-capitalist movements who are fundamentally pre-Enlightenment or anti-Enlightenment thinkers (this seems true for instance of the anti-globo or deep green types, the more extreme members of which as I have pointed out in a previous post seem to have gotten mixed up with unsavoury far-Right 'radical nationalist' types.).

    In short, unlike James Russell I don't think John Ray's thesis is necessarily unreasonable or mere smearing/ adhominem. Nonetheless I don't find the family resemblances he talks about convincing. Furthermore I can understand why leftists might think it unfair and a mere attempt at smearing their intellectual heritage. After all, the German Social Democrats and the Communists were among the most vocal anti-Nazi activists in Germany and Austria and paid with their lives for this activism. In stark contrast, might I add, to the parties of the Conservative Catholic Right who fundamentally shared the Nazis' anti-semitism.

    Let me finish off with some evidence. A few quotes from Volume 1 of the excellent biography of Hitler by Ian Kershaw. At pp. 134-135:

    Much of the potpourri of ideas that went to make up Nazi ideology ... was to be found in different forms and intensities before the first world war ... Integral nationalism, anti Marxist 'national' socialism, social Darwinism, racism, biological antisemitism, eugenics, elitism ...

    Ideas of a 'national' or German socialism in contrast to the international socialism of Marxism were nothing new in Germany ... The liberal pastor Friedrich Naumann had founded a 'National Social Association' in the 1890s with a view to weaning industrial workers from class struggle and integrating them as the pillars of the new nation state. The attempt had failed dismally by 1903 and the notion of a German socialism came to be wholly associated with the extreme anti-liberal politics of the antisemitic and volkisch movement. The appeal here was to the lower middle classes - traders, craftsman, small farmer, lower civil servants- and rooted in a combination of antisemitism, extreme nationalism, and vehement anti-capitalism (usually interpreted as Jewish capitalism).

    While John Ray emphasises the word 'socialism' in National Socialism I think a far more important emphasis is in the word 'National'. The word 'socialism' was a catchall word signifying a rejection of industrial capitalism which as I have argued could be motivated by reactionary or progressive reasons. The word 'National' was added to the word 'socialism' precisely in order to differentiate the Nazis' form of rejection of capitalism from that of the 'international' 'Jewish-Marxist' socialists. To me this is telling evidence of the intended gulf between the two different varieties of anti-capitalism.

    What about Hitler himself? It's quite evident that his anti-semitism was ultimately the guiding force behind his beliefs as these quotes make clear and it was even his anti-semitism which underlay both his anti-capitalism and anti-Marxism. This arises because of his identification of the Jews with cosmopolitanism and internationalism:
    At p. 151:

    ''Genuine socialism, declared Hitler, meant to be an anti-semite'.

    p. 245

    '... the initial anti-capitalist colouring of Hitler's antisemitism had given way by the mid-1920s to the connection in his thinking of the Jews with the evils of Soviet Bolshevism. It was not that Hitler substituted ythe image of the Jews behind Marxism for that of the Jews behind capitalism. Both coexisted ... the aim of National Socialism could be simply defined 'Annihilation and extermination of the Marxist Weltanschauung'

    The Nobel and my obligatory Hayek allusion
    The recent Nobel prize in Economics awarded to Kahneman and Smith is well-deserved and bodes well for the future of economics. The rational choice theory which underlies economics has been extremely useful notwithstanding its deviations from reality and will serve as a convenient analytical tool given the lack of anything better for the near future. As long as this is so, we economists will continue searching for our keys under the streetlights. However progress can and should be made to forge better tools in the spirit of cumulative and gradualistic improvements that characterise other science. Recognising the work on heuristics and imperfect decision-making takes us that much further.

    As a side note, the fact that the Nobel has been co-awarded to Vernon Smith also augurs well for neo-Austrian economics as Vernon Smith hails from George Mason University, the intellectual center of neo-Austrian and public choice economics. Of all the different schools of thought neo-Austrian economics goes well with a heuristic-approach to modelling behaviour. As Hayek mailing list participant Roger Koppl put it so eloquently in a posting of a few weeks ago, the new 'research programme' in economics that emerges from all this will be built around five themes: 1) Bounded rationality, 2) Rule following, 3) Institutions (theory of institutions and theory with institutions), 4) Cognition, and 5) Evolution. Koppl in his prescient posting referred to this as "Brice economics." (after the acronym that is formed from these themes) and nominated big-name Brice-ians as including Geoff Hodgson, Douglas North, Vernon Smith, Brian Arthur, James Buchanan, Herbert Simon, and Hayek.

    Reason already has up an interview with one of the Nobellists, Vernon Smith. Apparently there's an Australian connection with regard to Smith's work on experimental economics:

    My colleagues and I have developed techniques to design market mechanisms that are likely to work in the real world. But we don't trust ourselves without doing experiments. The experiments are the means by which we test our knowledge. We use the laboratory to make our mistakes at low cost-and we make plenty of them. We always learn stuff and end up making changes to our model institutions, to our rules, and to our payoffs.

    The next step is to bring in the people who will actually be using the system. They put design elements in, and then we run experiments with them. When they're comfortable with it, we go out in the world with it.

    Here's an example dealing with electric power. Let's say you're creating a market for wholesale electricity. You have buyers and sellers of power at different nodes in an electric power network. People put in location-specific asking prices to sell power; they've got to be location-specific because power grids leak, and depending on where you are on the network, your costs will be different. If you're a wholesale buyer, then you put in a bid schedule at which you're willing to pay for power to be delivered to your node. These are all computer-assisted markets. A computer essentially takes all the asks, all the bids, and all the location costs and it maximizes the gains from trade. It does that by finding prices that clear the markets so there isn't any money left on the table.

    We did experiments for this sort of system in Australia in 1993 and again in '96. We ran experiments and had a seminar a day for two weeks, and the participants got really good at it. Australia ended up deregulating its electric power industry, and I think they did a pretty good job.

    Libertarians and intellectual property
    Julian Sanchez documents some of the very evident cracks that have been appearing among libertarians over the recent Eldred case (re extension of copyright terms) and open source software. He notes quite amusingly that the Randroids think that Lawrence Lessig is a Marxist because of his well publicised stance over the Eldred case. Well, if Lessig is a Marxist then so are Ronald Coase, James Buchanan, Milton Friedman and many other luminaries of the economics profession who have recently come out against copyright extension. The Randroid position on IP, in addition to lacking sense also lacks consistency - why aren't they in favour of perpetual copyright and patent life if, as they think, it isn't a matter of utilitarian 'public good'?

    Tuesday, October 08, 2002
    John Carroll is a reactionary twat
    Stuff civility. Civility in debating opponents is something I reserve for intelligent lefties. John Carroll is not a leftie. He is obviously highly intelligent but his stances and arguments aren't. When I subscribed to Quadrant under Robert Manne's editorship I read a fairly regular dose of his confused, convoluted rantings against modernity. Tim Blair gives him the fisking he deserves. Now let me predict the reaction and this goes really to the sad state of some of the Left. This reactionary twat, who has devoted his life to writing books like 'Humanism - the wreck of Western culture' will become a left wing hero overnight once his latest book comes out - even though what it says about S11 is no different in substance from what Jerry Falwell said. This would only be symptomatic of the same trend in the Left that saw Michel Foucault give enthusiastic support to the Iranian Revolution.

    Monday, October 07, 2002
    If you, like me, are sick of the inane anti-war arguments that fill the letter pages of the Sydney Yawning Herald, this article by Jonah Goldberg, and the follow-up, provides a nice antidote.

    My favourite part:

    One is tempted to explain the very concept of "sovereign" in "sovereign state," but since those who use this argument are already deeply antagonistic to the idea that America has any right to do anything on its own, let's just skip right past that. Instead, let's go to the moral heart of the matter. People who think we must go through the U.N. seem to believe that the U.N. is an objectively neutral or moral institution. In their eyes, getting approval from the U.N. is like getting approval from a judge or a priest. Or, they think the U.N. is where the nations of the world put aside their petty self-interest and do whatever is in the best interests of humanity.

    There's only one problem with this. None of the nations in the U.N. — especially the permanent members of the Security Council — are acting on such pure motives. France isn't opposed to invading Iraq out of an abiding love of peace. It's opposed to an American invasion largely because France has been trading with Iraq for years, despite the sanctions. France has billions of dollars in oil contracts it doesn't want to lose. Which is why, according to numerous accounts, the French have made it known that if they can keep their existing contracts, they will probably approve a U.S. invasion.

    Or, consider Russia. Russia's foot-dragging is also largely about oil — and securing the $8 billion Iraq already owes them. But Russia also wants the U.S. to turn a blind eye to its military abuses in Chechnya and Georgia. And, by the way, a precondition for China's vote is tacit American approval of a Chinese crackdown on separatist Muslim Uighurs. Now, how is it that an American invasion of Iraq is somehow morally superior with U.N. approval if that approval can only be bought by American support for bloodshed elsewhere? Altruism and charity aren't the coin of the realm on the Security Council; blood and oil are. As the editors of National Review put it in the latest issue: "We will leave it to the shrinks to determine why American liberals consider it a mark of morality in foreign policy when that policy coincides with Russian and French strategies that are themselves arrived at for the crassest of reasons. In general, making 'international opinion' the benchmark for right and wrong is a mistake, since so much of it is driven by fear, self-interest, and greed."

    For more on the motives behind Russia’s UN strategy see this piece.

    I've just noticed the editor of the australian opinion page seems to have the same taste as me.

    Sunday, October 06, 2002
    Quote of the day

    Economic liberalism and other forms of liberalism should be tied together. You get, on the one hand, so-called liberals, who are mostly interested in equality, and who do not see that the liberty to change your money into a foreign currency, to start a business, to go where you like, even to determine how to spend your income, are important liberties. On the other hand, you get so-called economic liberals, who draw up tables of economic freedom, in which South East Asian dictatorships become tolerable. They are both in danger of making themselves absurd; these views are not convincing if held in isolation.

    ~Samuel Brittan




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