Archive for October, 2012

Are Free Marketers Blind to Tyranny? Part 2

October 19, 2012

In picking up on our discussion of economic tyranny from yesterday, the argument contended that to blindly submit to market forces creates an atmosphere for economic tyranny to arise, every bit as dangerous as political tyranny. This singular belief in markets, to the exclusion of all other considerations, is folly. Both the economic and the political institutions that arise in a society were given space by America’s founders for the betterment of the individual, not the converse.

Economist Wilhelm Röpke noted in The Humane Economy that to focus merely on the economic is to place blinders over our eyes, that

“we have narrowed our angle of vision and do not forget that the market economy is the economic order proper to a definite social structure and to a definite spiritual and moral setting. If we were to neglect the market economy’s characteristic of being merely a part of a spiritual and social total order, we would become guilty of an aberration…” (emphasis added – ed.).

Röpke squarely embeds the economy within the social, within society. (more…)

Are Free Marketers Blind to Tyranny? Part 1

October 18, 2012

All too frequently we hear free marketers in America bemoan regulatory action, suggesting such action actually hampers a sorely needed economic recovery. Free markets, they state, will ultimately sort things out. Yet, do we ever hear these voices caution against economic tyranny? It seems economic tyranny is simply not in their vocabulary. Why?

To blindly submit to market forces creates an atmosphere for economic tyranny to arise, every bit as dangerous as political tyranny. This singular belief in markets, to the exclusion of all other considerations, is folly. Both the economic and the political institutions that arise in a society are there for the betterment of the individual, not the converse. The German American political theorist Hannah Arendt understood this when she observed that

“Free enterprise… is a minor blessing compared with the truly political freedoms, such as freedom of speech and thought, of assembly and association, even under the best of conditions. Economic growth may one day turn out to be a curse rather than a good, and under no conditions can it either lead into freedom or constitute a proof for its existence” (On Revolution, Chp. 6).

Any doubt about these sentiments, written in 1963, can be placed aside when one considers China, a country that has fully embraced capitalism and has taken a commanding lead in global economic growth because of it. Yet, the Chinese enjoy very little in the way of political freedoms. Capitalism does not need political freedom to thrive; in fact, centralized capitalism can create tyrannies of its own.

Economic tyranny arises when the vast majority of citizens are wage laborers. By the very need of an income, wage laborers are at the mercy of centralized economic forces that are seemingly beyond control; one’s fate rests in the hands of others unseen, unknown. Such forces are not part of the “invisible hand” of which Adam Smith spoke. (more…)

The Critical Thinking Ship is Listing Port Side

October 11, 2012

A Bloomberg story this morning reports on the rising number of business degrees being issued during this economic slump:

The number of American college graduates holding business degrees jumped 6.2 percent from the end of the recession in 2009 to last year.

More than 12 million Americans, or one in five college graduates, have a business degree, according to data from the U.S. Census Bureau. Four times as many adults hold business degrees as liberal arts and history majors among the nation’s almost 59 million people who have undergraduate degrees.

“Business is a safe harbor,” Kevin Burns, director of career services at Arizona State University’s W.P. Carey School of Business, said in a telephone interview. “So a lot of people were getting on the biggest boat they could in turbulent times.”

And the payoff for holding a business degree was highlighted:

The Census Bureau also said yesterday the average American with an undergraduate business degree will earn $2.6 million over a lifetime, about $200,000 more than the average for all people with a bachelor’s degree.

Yet, wouldn’t the very fact that with universities generating large numbers of business-degree holders suggest this lifetime advantage will eventually drop? Considering that the Census Bureau’s numbers are based on averages, there is probably a skew already built in to that $200,000 number: A few extremely high wage earners at the top are pulling up the averages. Take out the top 5% of those high-income earners and the advantage may disappear. (more…)

Energy Efficiency Hurts Utilities’ Profits

October 6, 2012

In a story that quietly emerged over the weekend, the headline reported,

Savers Push $374 Billion U.S. Utility Industry to Shift

The gist of the story is this: Households are become smarter about their energy consumption, finding ways of reducing energy usage primarily through new technologies. This, we thought, was a good thing.

Not so: The utility companies are now wringing their hands as they watch their sales and profits drop. Households are saving too much energy.

My natural, sarcastic reaction would be, “Boo hoo.”

But wait. The utilities are planning to take revenge on our energy savings. Buried in the middle of the story was this:

Angie Storozynski, a New York City-based analyst for Macquarie Capital USA Inc., predicted long-term load growth will be even lower, about 0.6 percent, in a Sept. 11 note to clients.

“Slow load growth should hurt near-term earnings,” Storozynski wrote. It may drive utilities to seek rate increases more frequently from regulators or postpone spending on power plants and transmission lines, she said.

So despite the valiant efforts of households to reduce energy consumption, they will get rewarded with monthly bill increases, possible energy shortages, or both.

Doesn’t this fly in the face of that supply-and-demand graph we were taught in introductory economics?

Just for that, I should go out and buy an incandescent bulb.

But I won’t.


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