Category Archives: Business

Business, Economics, Political Commentary

The Real History Of America

11 Comments

A very interesting essay by Roderick Long:

There’s a popular historical legend that goes like this: Once upon a time (for this is how stories of this kind should begin), back in the 19th century, the United States economy was almost completely unregulated and laissez-faire. But then there arose a movement to subject business to regulatory restraint in the interests of workers and consumers, a movement that culminated in the presidencies of Wilson and the two Roosevelts.

This story comes in both left-wing and right-wing versions, depending on whether the government is seen as heroically rescuing the poor and weak from the rapacious clutches of unrestrained corporate power, or as unfairly imposing burdensome socialistic fetters on peaceful and productive enterprise. But both versions agree on the central narrative: a century of laissez-faire, followed by a flurry of anti-business legislation.

Every part of this story is false.

Observant libertarians have long noted that in general, captains of industry are not capitalists (or to use Jonah Goldberg’s (via whom I found his link) more accurate phrase, “free-market economists”–“capitalism” is a Marxist term), and never have been.

Business, Economics, Political Commentary

Four Questions

8 Comments

Newt Gingrich says not so fast to Paulson’s bailout plan. I particularly agree with this:

Four reform steps will have capital flowing with no government bureaucracy and no taxpayer burden.

First, suspend the mark-to-market rule which is insanely driving companies to unnecessary bankruptcy. If short selling can be suspended on 799 stocks (an arbitrary number and a warning of the rule by bureaucrats which is coming under the Paulson plan), the mark-to-market rule can be suspended for six months and then replaced with a more accurate three year rolling average mark-to-market.

Second, repeal Sarbanes-Oxley. It failed with Freddy Mac. It failed with Fannie Mae. It failed with Bear Stearns. It failed with Lehman Brothers. It failed with AIG. It is crippling our entrepreneurial economy. I spent three days this week in Silicon Valley. Everyone agreed Sarbanes-Oxley was crippling the economy. One firm told me they would bring more than 20 companies public in the next year if the law was repealed. Its Sarbanes-Oxley’s $3 million per startup annual accounting fee that is keeping these companies private.

Third, match our competitors in China and Singapore by going to a zero capital gains tax. Private capital will flood into Wall Street with zero capital gains and it will come at no cost to the taxpayer. Even if you believe in a static analytical model in which lower capital gains taxes mean lower revenues for the Treasury, a zero capital gains tax costs much less than the Paulson plan. And if you believe in a historic model (as I do), a zero capital gains tax would lead to a dramatic increase in federal revenue through a larger, more competitive and more prosperous economy.

Fourth, immediately pass an “all of the above” energy plan designed to bring home $500 billion of the $700 billion a year we are sending overseas. With that much energy income the American economy would boom and government revenues would grow.

Also, SOX was the disastrous result of the last time Congress decided that it had to “do something.”

Business, Economics, Political Commentary

“Welcome To History”

15 Comments

Jim Manzi has a good, albeit depressing, description of the financial crisis and its likely outcomes.

[Saturday morning update]

One bit in the piece that I found amusing (and a little depressing):

[They] Promulgated a temporary ban on naked shortselling for about 800 financial stocks (in related news, the new recommended medical practice when you discover that you have a fever is to smash the thermometer against the wall, since this makes the problem go away).

Yes, I don’t think this was necessary, and it will probably have bad consequences.

Business, Economics, Media Criticism, Popular Culture

The Pixel Race

24 Comments

I’ve long thought that the resolution of most digital cameras has reached the point at which it’s overkill, and there are a lot of other improvements that the camera needs. Unfortunately, the marketing people at Canon don’t agree:

Canon engineers are being held back from developing new sensor technology by marketing departments in a “race for megapixels”, claims an employee of the Japanese photography company.

The employee told Tech Digest that Canon have the technology to “blow the competition away” in terms of image sensors, but are instead being asked to focus on headline figures like the number of megapixels a camera has. When asked for his opinion on the Canon EOS 5D Mark II, which we covered this morning, the employee said:

“I am hugely disappointed because once again Canon engineers are dictated by their marketing department and had to keep up with the megapixel race. They have the technology to blow the competition away by adapting the new 50D sensor tech in a full frame format and just easing off a little on the megapixels. Although no formal testing has been done on the new model yet, judging by the spec and technology used, it just seems to be as good or as bad as the competition – not beating them by a mile (which we used to).”

I’d rather have more speed and better S/N ratio myself.

There’s an amusing discussion of this, and the perennial war between marketing and engineering, including examples from Dilbert, over at Free Republic.

Business, Economics, Philosophy, Political Commentary

No Free Marketeer

12 Comments

That’s what John McCain is. One of the reasons it’s hard to get enthused about him. I suspect that Palin might be a little better.

[Update a while later]

Both presidential candidates are completely economically incoherent.

No surprise, since they’re both economic ignorami. Though in Obama’s case it’s worse, because he thinks that he understands economics, and much of what he knows for damned sure is wrong.

Business, Economics, Education, Political Commentary

Where Is The Pencil Czar?

24 Comments

George Will has more on economic ignorance:

The indignant student, who had first gone to Home Depot for a flashlight, says it “didn’t try to rip us off.” It was, however, out of flashlights. Ruth suggests that the reason Big Box had flashlights was that its prices were high. If prices were left at regular levels, the people who would have got the flashlights would have been those who got to the store first. With the higher prices, “someone who had candles at home decided to do without the flashlight and left it there for you on the shelf.” Neither Home Depot nor the student who was angry at Big Box had benefited from Home Depot’s price restraint.

Capitalism, Ruth reminds him, is a profit and loss system.Corfam–Du Pont’s fake leather that made awful shoes in the 1960s–and the Edsel quickly vanished. But, Ruth notes, “the post office and ethanol subsidies and agricultural price supports and mediocre public schools live forever.” They are insulated from market forces; they are created, in defiance of those forces, by government, which can disregard prices, which means disregarding the rational allocation of resources. To disrupt markets is to tamper with the unseen source of the harmony that is all around us.

The spontaneous emergence of social cooperation–the emergence of a system vastly more complex, responsive and efficient than any government could organize–is not universally acknowledged or appreciated. It discomforts a certain political sensibility, the one that exaggerates the importance of government and the competence of the political class.

Yes, an exaggeration that is reinforced by the propaganda inculcated into people by government schools.

Business, Economics, Education, Political Commentary

Economic Ignorami

32 Comments

George Bush’s announcement this morning that the administration was concerned about “gouging” reminded me of why I wish that we’d had better options in the last two elections (and still do). I expect that kind of nonsense from Democrats, but you’d think that someone who was supposedly a businessman would know better. Or perhaps he does, and is just pandering. I’m not sure which is worse.

Every time we have a natural disaster like this, this idiotic topic comes up, and we once again have to explain Econ 101 to the products of our public school system, probably in futility. This time, it’s Rich Hailey’s turn.

Here’s what I wrote about it a three years ago, in the wake of Katrina.

[Update late morning]

Jeez, I thought that David Asman was smarter than that. Now he’s telling Fox viewers to take pictures of stations with high gas prices so that they can be reported to authorities. It’s hard for me to believe that Neal Cavuto would do that.

[Another update a minute or so later]

You know, I think that this is an explanation for socialism and collectivism’s continuing grip on the public mind, despite its long history of unending failure. There’s just something in human psychology to which it naturally appeals, and rationality just can’t break through. It just “feels” unfair for prices to go up in an emergency, regardless of the demonstrably bad consequences of attempting to legislate them.

[Late afternoon update]

Shannon Love explains how the gas station business works:

I’ll say it one more time for those who can’t be bothered to actually ask someone who owns a gas station. Gas stations set prices for the gas they sell today based on the wholesale price of the gas they will have to buy to replace it. Get it? The price you pay for a gallon today is the cost of the gallon the station will have buy to replace the one you just bought.

Gas stations sell gas at or near cost, so if they did not use replacement pricing any sudden spike in gas prices would shut them down and you couldn’t get any gas. I simply do not know why our public and private talking heads cannot understand and communicate this simple fact.

Because either they don’t know it, or they think that people don’t want to hear it. They operate on razor-thin margins, and can’t afford to hand out subsidized gas as charity, even if that wouldn’t screw up the market. And note, for those who say it’s “big oil” that is “maximizing profits” in the face of a national emergency, even if that were true (it’s not) “big oil” isn’t threatened with jail for “gouging.” It’s the gas station owner, who has no control over his wholesale gas costs. So people who demand that we crack down on gougers are essentially demanding that the station operators either operate at a loss, or pay fines, or go to jail. I don’t know why anyone would want to be in that business in the face of so much public ignorance about it.

Business, Economics, Political Commentary, Popular Culture, Social Commentary

Who Is Overpaid?

11 Comments

Not engineers.

Engineer’s salaries, taking into consideration education and responsibilities, the stress of accelerated delivery schedules and their direct impact on corporate profits and overall success of the company, seem absolutely inadequate.

Well, I’ve known a few who were. But no, not in general.

In many of these overpaid professions, there’s some kind of government-induced market failure going on (e.g., longshoremen), but in a lot of cases, it’s just the occasional irrationality of the market place.