Tue, 30 Aug 2005

Economics Education

A fellow brought to my attention an article by Joseph E. Stiglitz, Nobel laureate in economics. He was shocked and horrified that Stiglitz would say:

The growth of the 'Open Source' movement on the Internet shows that not just the most basic ideas, but even products of enormous immediate commercial value can be produced without intellectual property protection.

I asked why he was so upset, and he explained that he was afraid that naive people would think that "Open Source = Public Domain". He suggested that this statement is false. He's right, the statement is false (not completely true). It's false in that only a vanishingly small amount of open source is actually in the public domain (without copyright). The statement is mostly true, though: Open Source is a success because it gives up most intellectual property protection. In context, it's true enough and for the audience Stiglitz was writing for, it wasn't worth explaining the difference.

http://russnelson.com/kif_3127.jpg(Brian Ruth carved an eagle's head out of a log)
It's very easy when writing about economics to get so detailed that you completely lose your audience. I present as evidence the fact that so many people have no clue about economics. Bad economics education. Explaining economics is like carving an eagle out of a log with a chainsaw. I saw Brian Ruth do this last week at the New York State Fair. First he roughs out the shape, when he goes back and adds more and more details. You can't present every last detail to people and expect them to comprehend it all. You have to start with the big ideas and help people understand them first.

Posted [20:12] [Filed in: ] [permalink] [Google for the title] [digg this]

Sun, 21 Aug 2005

The Law

Everyone who thinks government is a good thing and more government is a better thing should read The Law, by Frederic Bastiat. Amazon has it. Or listen to the free audio book recording of it. Or read it online.

It's hard to learn what good economics entails -- because you have to give up a comfortable ignorance to do it. Once you learn and understand economics, then you'll become a misfit among your Friends. You'll realize how many of them are pursing actions which are at odds with their goals. They want peace but support a powerful government even though it should be completely obvious that the bulk of society (who are not pacifists) will support the use of that government to wage war.

On the one hand, I don't like being at odds with my Friends. On the other hand, I wouldn't have my ignorance back.

Posted [23:06] [Filed in: ] [permalink] [Google for the title] [digg this]

Fri, 19 Aug 2005

Burning Man

I notice that the Burning Man art festival has an awful lot of rules. Some of these rules are imposed upon it by external authority. Other rules, however, are necessary to keep people from coming to harm. The Burning Man organizers have created their own police, their own hospital, property rights, noise abatement laws, and a planned community.

Some people would say that this is evidence of a need for government. I don't think so. What is happening instead is a very large community is created from nothing in a very short period of time, and then is disbanded. If a community grows slowly on its own, or else is a permanent community, it will create its own spontaneous order. Burning Man has neither of those. The organizers end up being the source and repository of the spontaneous order. They started with no rules, and over time, having made mistakes and learned from them, they have put rules in place.

Posted [04:02] [Filed in: ] [permalink] [Google for the title] [digg this]

Mon, 15 Aug 2005

Trust Free Markets

Dikalosunh writes:

My hunch is that, if low food production is a chronic but cyclical problem, the government should (and should be encourage to) put in place a system for subsidizing grain purchases in lean times - the temporary subsidization would not distort the market too much overall, I suspect.

Alas, it would completely distort the market. You see what happens is that farmers need to sell their grain every year, because they need to get cash out to purchase resources to plant new grain. The price that farmers will get changes from year to year depending on the amount of grain grown and brought to market. And yet customers don't want to have to pay huge amounts of money for grain products one year, and small amounts the next year. You end up with a situation where rich people pay the farmers a smaller total, and charge the customers of grain products a larger total, and smooth out the difference.

I suggest that many people have a problem with this because you have rich people getting richer on the backs of farmers and consumers. The only thing that can make it fair and just is when you have the competition that only free markets can create.

Trying to reproduce this process through government action cannot possibly work, because government players 1) don't have the freedom to risk taxpayer's money (and that is as it should be), 2) don't have the information that the prices produced by free market competition, and 3) government employees have zero incentive to succeed and all the incentive to not fail. "Success" and "not failing" are completely different things.

I want to be clear here: I don't worship free markets, just as I don't worship my automobile engine. I am confident that my automobile engine will get me to the places I need to go. That's not worship, that's just confidence. I feel the same way about free markets, because ultimately, the engine that drives free markets are individual's decisions, backed up by their expectations of success or failure. I don't trust systems, I don't trust magic wands, but I do trust people.

Posted [23:11] [Filed in: ] [permalink] [Google for the title] [digg this]

Wed, 10 Aug 2005

Not really. Employers in the USA have always had considerable

latitude in controlling workers off-the-job behavior. On the other hand, workers in the USA have the ability to tell the employer to sod off. I was surprised to find out that a friend in Germany didn't have the right to quit. Here in the USA, you don't even have to give two weeks notice. There is a fundamental conflict between political and economic protection of workers. The more political protection, the weaker the economic protection. A friend of mine has employees at her plant nursery. She also had to make a wall chart of all the deadlines for this form, and that filing, and the other payment. All of the things that are done in the name of worker protection also have the characteristic of making it harder to employ people. Political protection of jobs reduces the amount of jobs, making political protection more necessary. Another path that the USA could go down is to eliminate worker protections, making it extremely easy to hire someone. This would increase the number of employers looking for employees, which would inevitably allow workers to pick and choose among the best jobs, and prevent employers from abusing their workers. Counter-intuitive? Sure! Economics is a science and any science worthy of the name will create counter-intuitive results. If it didn't, why would anybody bother with it? Who knows what's best for workers? A bureaucrat? Or the worker themselves? Are workers adults, able to look out for themselves? Or do they need protection like babies?
Posted [23:13] [Filed in: ] [permalink] [Google for the title] [digg this]

Sun, 07 Aug 2005

Reducing the influence of big money in the political system.

Some people think that big money has too much influence in the US political system. I disagree. As long as the government does things, and as long as it's democratic, the public will rightly seek to influence what the government does. This public includes non-profit and for-profit corporations.

The problem is that people expect government to do too much for them. People need to understand that they can and should do things for themselves. They do a better job for themselves because they care more about themselves than anyone else can. Providing for themselves is better for their character. Good character leads to good morality.

A strong government has the effect of infantizing adults. This cannot be a good thing.

Posted [20:24] [Filed in: ] [permalink] [Google for the title] [digg this]