Progress in all Directions

There is a general sense that the history of humanity has been a general march of progress. Progress economically, intellectually, socially. Everybody acknowledges that there have been missteps along the way, but on the whole our species moves ever upward. Assuming that this is the case, (which is not totally evident,) perhaps the most interesting parts of history are those missteps. When humanity turns away from progress and things become appreciably worse. We would be well advised to see the earliest signs of our errors so that they could be corrected before we find that we have strayed too far.

At the beginning of The Economic Consequences of the Peace, John Maynard Keynes describes European society before it was plunged into the Great War. Let’s see how far we have come:

“The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep;”

This is still the case, but the internet has removed the need for any human interaction, even placing the order with a person on the other end of the phone line. Thanks to Amazon Prime, many city dwellers can get most things in under a day. There are also myriad more products available, and the internet allows more and smaller vendors to reach each individual.

“he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend.”

Again, the internet has vastly improved the opportunity for individual investment. Not only can one buy stocks online, one can invest in a friend’s invention, an artist’s project, or a potato salad. And the ability to invest internationally is unprecedented.

“He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could despatch his servant to the neighbouring office of a bank for such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference.”

From personal experience, knowledge of the native language is almost never required (although it can obviously be very helpful.) Being a native English speaker is the next best thing to being multilingual. Otherwise, travel has certainly changed considerably since Keynes’s youth. Commercial airlines have made it possible to travel quickly, safely, and cheaply all over the world. (To say nothing of the availability of highway automobile traffic, which doubtless accounts for the bulk of the increase in personal travel since the beginning of the 20th century.) There certainly are passport requirements for some travel, but a modern Londoner can go nearly anywhere in Europe without a visa.

But the security measures of air travel are substantially more than “the least interference.” Something tells me that Keynes’s pre-war gentlemen would be extremely indignant about being forced to partially disrobe in the airport and subject himself to the invasive measures that every modern traveler has to endure.

Finally, modern states eschew the use of specie, and are engaged in a war against cash. But credit cards can be used in a great many countries, even in the smallest towns. In many respects, this makes travel much safer and easier.

“But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable.”

Like us, the early 20th Century man was confident that society was always improving, becoming ever more convenient and secure. Then the bombs started to drop.

Anchor Steam Beer

 

Beer of the week: Anchor Steam Beer – The progress of beer production in the United States has certainly had some missteps. (One so large that it resulted in two Amendments to the Constitution.) However, this beer represents a return to progress. Anchor Steam claims to be America’s first craft brewery, and this is their signature brew. In the past, I enjoyed this beer on draft, but I don’t much care for it in the bottle. It is an attractive, almost orange-colored beer with lots of foam. The aroma is yeasty. There is a certain bitterness in the finish that I don’t care for. It doesn’t seem like the same as usual bitterness from hops.

Reading of the week: The Economic Consequences of the Peace by John Maynard Keynes – This polemic is probably best known for explaining why the terms of the Treaties of Versailles doomed Europe to future strife. But this section focuses on the state of Europe before the war even began.

Question of the week: Is there any field where humanity is clearly moving in the wrong direction? Or, more importantly, is there such a thing as progress?

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Necessarily Evil?

Government is by its very nature violent. Consider what happens if you do not obey government dictates, even if your disobedience is non-violent itself: a man with a gun will come to your house. Consider the so-called “no knock raid“: if you are suspected of disobeying the government, they may simply break in to your house in the night and kill anybody who, startled and terrified, puts up any resistance to these unidentified, armed intruders.

But the same is true of all government action, not just law enforcement. Does the government run a school? Well you had better pay your school taxes or a man with a gun will come to your door. Your children had better attend or a man with a gun will come to your door.  As Ludwig von Mises observed, “Whatever a government does it is ultimately supported by the actions of armed constables.”

Max Weber wrote that the state is the organization that holds a monopoly on legitimate use of force. But this begs the question. The force is only “legitimate” because it is being exercised by the state. It would be more accurate to say that the state is the organization that has a monopoly on violence.

But for all its violence, it appears that government is necessary. Thomas Paine wrote that “Government, even in its best state, is but a necessary evil; in its worst state, an intolerable one.” Mises went further: “it is not an evil, but a means, the only means available to make peaceful human coexistence possible.” Without government (consolidated force), there can be no freedom because each individual is at the mercy of any stronger individual who comes along. “If we take into account the fact that, as human nature is, there can neither be civilization nor peace without the functioning of the government apparatus of violent action, we may call government the most beneficial human institution. ”

Even so, the government does not deal in freedom; it deals in violence. “It is the opposite of liberty. It is beating, imprisoning, hanging.” Only by strictly limiting and circumscribing the sphere in which the government is allowed to operate can freedom exist. A government that touches every facet of life is one that controls every facet of life. This is because government, regardless of intentions, can only touch violently.

Slyfox 113 Photo credit dad

Sly Fox Route 113 IPA – The name of this beer has two origins. The first and most obvious is Pennsylvania Route 113 (a highway built and maintained with funds collected from the local population with the threat of force,) which passes by the Sly Fox Brewhouse. But the beer is also named for its level of bitterness, measuring 113 International Bitterness Units. I rather enjoy this local, amber colored beer. There is a hint of caramel in the aroma and the full malt body of the beer is backed nicely by peppery hops.

Reading for the Week: Liberty and Property by Ludwig von Mises – In this section of a lecture delivered at Princeton University, Mises defends free markets as the only source of prosperity and freedom. A government that controls the markets is one that does not allow any freedom and can never advance society. After all, “there is no record of an industrial innovation contrived and put into practice by bureaucrats.”

Question for the week: Mises’ personal motto (seen in part on the above beer glass) was “Tu ne cede malis, sed contra audentior ito”, which means something like “Do not give in to evil, but proceed boldly against it.” In this week’s reading Mises says that government is not an evil at all, but he also says that government is nothing but “beating, imprisoning, hanging.” So if beating, imprisoning, and hanging are not evil, what is?


Of Supply and Demand

When traveling abroad, one often finds that everyday items are really luxuries. The laws of supply and demand are universal, and it is amazing how much money people will spend on something that they would usually take for granted. Among other staggering valuations, I have seen substantial price-tags on peanut butter, asparagus, and cheese. Not even fancy French cheese, stuff that was a few steps above “American Singles“. A very common response to those prices is, “that’s way more than that product is worth!” But does that statement have any meaning?

The problem that people so often have is that they get the idea that the commonly accepted price is the real value of something. “San Miguel can be had for pennies in Manila, so it is not worth $5 here.” That sort of thinking is simply not sound. Items don’t have a set value. The value of anything is determined by supply and demand, and since supply and demand constantly vary, values constantly vary. If San Miguel costs more in one place than in another, it is because the markets support different costs.

An important thing to remember as the consumer is that your willingness to pay (along with the willingness of everybody else) is the demand. If you think something is too expensive, you are right. But if you complain that something is too expensive and you still buy it, it wasn’t really too expensive, was it? On a clear day, I may tell you that Mickey’s Fine Malt Liquor is not worth buying at any price. Yet, in a moment of weakness, I may actually make the same purchase that I’ve regretted again and again. At the time of purchase, though, I clearly think that the beer is worth more than the money I am giving up. Otherwise, the sale would never happen.

To be sure, in retrospect we often feel ripped off. For example, if I knew how awful that Brazilian beer was, I would never have paid so much for it. But what I am talking about here is the asking price for a known good. Now I think that Brazilian beer really is too expensive, but only too expensive for me.  For anybody who happens to actually like it and is willing to buy it at that price, it is worth every penny. All transactions in a market economy happen because both the buyer and the seller think that they are getting the better end of the deal.

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Beer of the Week: Bass Ale – Bass was once a go-to beer for me. It is a pretty amber beer with a good malt body and a very comforting flavor. However, this batch was brewed in New York and it is not what I remember or expect from Bass. Compared to my memory, this American version is sweeter. It also has a hint of sourness from the grains, like sourdough bread. It may still be above average for large-batch American beer, but I am disappointed.

Reading for the Week: Three Men in a Boat (To Say Nothing of the Dog) by Jerome K. Jerome – Simply because Jerome could not get any mustard, he was suddenly willing to trade everything he had and more for a single spoonful. He had witnessed this supply and demand problem before: “I heard a man, going up a mountain in Switzerland, once say he would give worlds for a glass of beer, and, when he came to a little shanty where they kept it, he kicked up a most fearful row because they charged him five francs for a bottle of Bass.”

Question for the Week: In a way, Three Men in a Boat is really about conspicuous consumption:  a group of friends go on a boating holiday with the (unstated and probably subconscious) intention to display their affluence and social standing by engaging in costly leisure. At what point do things become more desirable because of the apparent disconnect between their price and their “real” value? Are larger natural diamonds actually worth more because they have fewer practical applications?


The First Shall Be Last

I recently read an article about a Quaker church picketing Wendy’s because of the company’s failure to sign an agreement with a farm worker’s union to pay more money for tomatoes. Why, you might ask, should a company voluntarily pay more than market price for produce? The answer is simple, to keep from getting protested. The concept is sold as “stopping the exploitation of migrant workers,” but there can be little doubt that when the pen meets the paper, the agreement is strictly about public relations and extortion. That is, extortion in the form of: “if you don’t pay us, we will picket your restaurant.”

I would like to pause here to address the bile I’ve surely raised in some of my readers. First, I am simultaneously grateful that I have never had to pick tomatoes in the Florida sun and very appreciative of the men and women who do that job every day. Second, I definitely support unions as a free association of people with a common interest. I also support the concept of peacefully protesting. The First Amendment covers both of these and it is good to see people exercise their Constitutional rights while they still exist. (The fact that union king pins often end up exploiting workers just as much as anybody else and the dangers of protests giving way to mob mentality and vandalism are simply unfortunate realities that must be contended with.)

But all that isn’t what I want to write about. What really interests me about the news article is the focus on Quakers. Quakers, as it happens, are among my favorite Christians. They were also a favorite of Leo Tolstoy’s. Quakers are peaceful and educated, and they also founded my home state. However, they seem to have forgotten their parables. The article claims that the Quakers were protesting “unequal pay in the fields.” In the Gospel according to St. Matthew, Jesus tells a story about a man who hired a number of workers to pick fruit in his vineyard. (“Why does that sound familiar?” you wonder.) Well these workers labored for varying amounts of time, but when it came time to pay them, everybody got the same amount. Those who worked all day were understandably miffed. But the landowner laid down some heavy logic on them:  they don’t have a legitimate gripe with the landowner since they had freely agreed to work for that pay. They have no right to be upset at the landowner for not paying them more because they hadn’t been tricked or coerced in any way. They got exactly what they had bargained for.

Beer of the Week: Apostel Bräu – The text of the Gospels doesn’t make it clear that Jesus told his parables to the Apostles over a tall glass of beer, but I think it is heavily implied. Apostel Bräu is clearly not the same as the beer the Apostles would have had since it only dates back to 1713. Like almost all German beers (regardless of the truth of the matter,) the makers of Apostel Bräu claim to brew in accordance with the traditional German Purity Law or Reinheitsgebot. With these appeals to tradition, the beer’s name, and the “stained glass” design, the can evokes thoughts of the old brewery/monasteries. Unfortunately, this beer is no match for a true abbey beer. The beer itself seems quite modern in the sense that it is bland and inoffensive. It is not bad, just absolutely unremarkable.

Reading for the Week: The Parable of the Workers in the Vineyard (Matthew 20:1-15) – Of course the parable isn’t really about economics. The point of the parable is that heaven is not earned through righteousness in this life. The righteous therefore should not begrudge the wicked their salvation; the salvation of the wicked is a greater mercy and more fitting  for a benevolent God. But I prefer the economic lesson: there is nothing unjust about a voluntary transaction between informed, free parties.

Question for the week: I think that the interpretation of the parable in the paragraph above (that heaven is not earned) is thoroughly in keeping with the teachings of Luther. But seems likely to rub some sects the wrong way. What other meaning could that parable have?


But what will become of the glaziers?

Many Americans just recently filed their federal income taxes. Some of them are eagerly awaiting refund checks, or even refund direct deposits since “who writes checks anymore?” There are two things that these people should remember:

1. This money is not a gift from the government. It is your money that you already earned. Think of it more as an interest free loan to the government that you are forced to make and you have to ask nicely before they will pay back.

2. Tax money (money that you worked for and that the government has appropriated) that gets spent on “stimulus” is false economy.* The problem with stimulus spending is that it only accounts for what is seen, not what is unseen.

Every dollar that the government spends is a dollar that some productive person could have spent himself.** We see the government spending the dollar and count it as stimulus. What remains unseen is what the taxpayer would have done with that dollar if he had been allowed to keep it. As it turns out, it is more than likely that he would have spent it. Not only would he have spent it, but he would have spent it on something that he wanted. That is to say, he would have gained something in exchange. Instead, the government gave it to somebody else to spend. The net effect on the economy looks like of $0 (since either way, one dollar gets spent.) However, the tax payer doesn’t get the benefit of his own dollar and the government doesn’t operate for free. So the taxpayer loses a dollar (or, what amounts to the same thing, whatever he would have spent that dollar on) and the economy loses the administrative cost of the government mechanism. So stimulus spending is a net loss.***

Beer of the Week: Bitburger Pilsner – Simple is good. This beer is very simple. It smells of soft malt and a bit of hops. The flavor and texture are both light and refreshing. It is not a great beer, but it is a very nice beer that is made for drinking.

Reading for the Week: The Broken Window by Fredrick Bastiat – In this short and amazingly clear and intelligible economic parable Bastiat explains why a broken window may be good for the window maker, but it is a net loss for the economy on the whole. It is all, as is evident from the title of the essay that contains this parable, all about That Which Is Seen and That Which Is Unseen.

Question for the week: Is there a fundamental difference between stimulus spending and breaking windows? (Hint: In an earlier reading on this site, Bastiat used physical obstructions as an allegory to tariffs.)


Artificial Obstacles

When it comes to shipbuilding, the Republic of Korea has a system. Since they are on the tip of a peninsula and their only land-boarder is a dangerous no-man’s land, it seems only natural that they should turn to the sea for commerce. But they don’t just build ships, they build tons of them. In terms of gross tonnage, Korea produced 137,596,000 GT, some 37.45% of the world’s shipping capacity built in 2011. That is a lot of ship. Some are cruise liners and drill ships, but most are designed for transporting cargo and resources from one port to another. Naturally, most of the ships are sold to other countries, but some are used for transporting goods to and from Korea. It is these ships that form part of the topic here.

Korea builds ships designed specifically to engage in the trade of goods and resources with other countries. These ships are made bigger and faster to make it easier for goods and resources to reach their respective markets. The end result of making transportation easier is to make it cheaper and to reduce the market prices, encouraging commerce, etc.

While the shipbuilders at Ulsan are working diligently to make international trade easier and cheaper by overcoming the natural obstacles that impose themselves on shipping, the politicians in Seoul are working diligently to overcome the artificial obstacles that hinder international commerce and raise prices in the domestic market. Those artificial obstacles are tariffs, and Korea is finally getting rid of some.

Until recently, all imported beer has been subject to an absurd 30% tariff. Not only that, but since Korea does not grow the hops or barley needed to produce beer, the quality of domestic beer has been adversely affected by high tariffs. (That and a collection of regulations that have essentially granted a duopoly on beer production to two giant corporations that have no particular incentive to improve the quality of their products.)

But free trade agreements with the United States and the European Union have been signed and will remove many of the mutual trade barriers that have served primarily to enrich large companies at the expense of the consumers while simultaneously preventing quality beer from making headway in such a large market. Good times lie ahead for Korean (and American and European) consumers. That is to say, the societies as a whole.

But what about other beers from other parts of the world? Why should they still be subject to the tariffs? Some will argue that the FTAs are only good because they are bilateral. The USA takes down its tariffs, Korea takes down its tariffs, everything remains on equal footing. If Korea would remove tariffs on Australian goods without Australia removing its own tariffs on Korean goods, the obstacles of trade would be in only one direction and Korea would be “downstream” of Australia. It would be more expensive to ship goods to Australia than from Australia and that would be… bad? Korea would then be situated relative to Australia in the way that “Havre, Nantes, Bordeaux, Lisbon, London, Hamburg, and New Orleans are with relation to the towns situated at the sources of” the respective rivers on which they lie since it is cheaper for goods to travel down the river than up the river. And are the cities at the mouth of the river not more prosperous than the cities at the source?

Beer of the Week: Hacker-Pschorr Münchner Gold- This is a good example of the Munich Helles Lager. It is a light, clear gold, with a very white head. The aroma is mostly of bready malt. The flavor matches the smell, malty with only a hint of hops at the end. As the beer warms, a touch of alcohol warmth is easily detected in the finish. 5.5% isn’t that high, but it sure makes itself felt.

Reading of the week: Stulta and Puera by Frédéric Bastiat – In this amusing little apologue, Bastiat tells the story of two towns that went to great expense to build a highway to facilitate trade and then went to the further expense of placing obstacles on the road to make trade more difficult and expensive.

Question of the week: Have you ever wondered why high-fructose corn syrup is used instead of sugar (sucrose) in the United States? Did you know that since the early 1980’s, tariffs have made sugar twice as expensive in the United States as it is in the rest of the world?