Jan 112011

The January 7, 2011 RealClearMarkets published my OpEd, “A Defense of High-Frequency Trading“.

This piece is not directly about health care, but rather the critical economic infrastructure that makes health care innovation possible — namely, efficient capital markets. I contrast the recent reporting in Wired vs. the New York Times on “flash trading” (high speed computer stock trading), and rebut three fallacious concerns raised by the NYT — its supposed “unfairness”, the loss of human control, and the difficulties it creates for government regulators.

Here is the opening:

Wired magazine and the New York Times both recently published detailed stories on “flash trading” — the increasing use of high speed artificial intelligence algorithms in the financial markets. Both asked the same question: Will flash trading help the markets by improving efficiency — or will it destroy them?

But while both stories covered the same basic facts, they took strikingly different approaches. Wired discussed the technology in a generally balanced fashion, whereas the New York Times adopted a more alarmist attitude, including emphasizing the problems the technology would create for government regulators. However, the concerns raised by the Times against flash trading are variations of fallacies frequently raised against free markets. Hence, identifying and rebutting those fallacies will help one better appreciate and defend flash trading in particular, as well as market capitalism in general…

(Read the full text of “A Defense of High-Frequency Trading“.)

I’d like to thank Wendy Milling for helping me get this published at RCM, and Ari Armstrong, Brian Schwartz, and Jimmy Wales for their helpful feedback on an earlier draft of this piece.

Gus Van Horn PJM OpEd: The Silent Killer

 Posted by on 18 October 2010 at 1:00 pm  Activism, Economics, Government
Oct 182010

The October 15, 2010 editio of PajamasMedia published Gus Van Horn’s latest OpEd, “Government Regulation of the Economy Is the ‘Silent Killer’“. Here’s the opening:

We’ve all heard public service announcements about one disease or another, calling it the “silent killer” and warning of horrible consequences for its unsuspecting victims. A similar silent killer is on the loose now, but there are no such ads. You also won’t hear about it on the news. Nevertheless, millions of Americans are unknowing victims of this silent killer right now.

You are probably one of them…

(Read the full text of “Government Regulation of the Economy Is the ‘Silent Killer’“.)

The “silent killer” analogy is apt in so many ways. We’ll never know what sorts of amazing goods and services ordinary people could have created (to the betterment of themselves and the rest of us), if they had only been left alone to live honestly, produce, and trade with others.

Thank you, Gus, for another fine OpEd!

Jul 212010

The July 19, 2010 episode of “Front Page” on PajamasTV features Don Watkins and Terry Jones discussing “The Ruling Class, the Elites and the Rise and Fall of Obama’s America


(Click on the image to watch the video.)

They discuss the anti-business agenda of the Obama administration and what it would truly mean to be pro-business.

Jul 082010

The July 2, 2010 edition of PajamasMedia has published Amit Ghate’s latest OpEd, “Socialism’s Second Guessers“.

Here’s the opening:

In a recent marketing move, GM donated a car to Detroit pitcher Armando Galarraga after his perfect game was ruined by an umpire’s mistake. In the subhead to a feature article on the subject, the New York Times second-guessed GM, asking: “Was a prize to a pitcher for a near-perfect game, ‘some of the best dollars invested in publicity,’ or a squandering of taxpayers’ equity?”

Note that the car in question was a $53,000 Corvette; GM’s global revenues are on the order of $100 billion. It’s like asking whether a $10 million company should have purchased a $5 box of pens. Pace the NY Times, there’s nothing special about this particular decision; every business or enterprise makes similar ones daily.

And that’s the point. Previously we could take for granted that private individuals or enterprises would be allowed to make such decisions for themselves. But no longer. At the behest of our political and cultural leaders, we’re socializing property at an accelerating rate. The type of meddlesome question the New York Times poses is but one of its consequences…

(Read the full text of “Socialism’s Second Guessers“.)

How to Sell A Dollar For More Than A Dollar

 Posted by on 14 June 2010 at 7:00 am  Economics, Politics
Jun 142010

How to sell a dollar for more than a dollar:

And why this kind of all-pay auction is like political lobbying. (Via bakadesuyo and Marginal Revolution.)

Milling on the Perfection of Capitalism

 Posted by on 11 June 2010 at 7:00 am  Activism, Economics
Jun 112010

The June 9, 2010 edition of RealClearMarkets published a powerful essay by Wendy Milling entitled, “No Thomas Frank, Capitalism Is Perfect“.

Her piece was a rebuttal to the snarky anti-capitalism OpEd by Thomas Frank in the June 2, 2010 Wall Street Journal, “Laissez-Faire Meets the Oil Spill“.

Here is an excerpt from, “No Thomas Frank, Capitalism Is Perfect“:

To be perfect means to meet a given standard flawlessly. The standard of perfection for a politico-economic system is that it be in accordance with the requirements of man’s nature. Man is an integrated being of matter and consciousness who exists by the use of his rational faculty. In order to continue existing, he must implement the products of his reasoning in the material realm, organizing things to achieve a material outcome which contributes to his survival. If force is used against this process at any step, that which is needed for his survival cannot come into being.

A concept is therefore needed to denote man’s morally and legally sanctioned freedom of action with regard to his use of materials-the concept of property rights. Since politics concerns the nature of government, and the essence of government is force, the full politico-economic application of property rights is a system in which government protects an individual’s property rights from violation by others, but does not itself violate them. Capitalism is the politico-economic system of private property rights. It connotes a system whereby property rights (and hence, the other rights) are respected objectively and completely.

Capitalism is perfect.

Assaults on capitalism are rooted in a crybaby metaphysics, and they rely on obfuscations, equivocations, and an attitude of militant evasion. One trick is to make inappropriate demands of capitalism, then stomp and pout and denounce capitalism when those demands are not met.

(Read the full text of “No Thomas Frank, Capitalism Is Perfect“.)

Milling spends a significant time demolishing the standard argument that the problem behind the BP oil spill was a problem of capitalism. Instead, she shows how it was an industrial accident significantly worsened by anti-capitalist government policies to become a disaster.

Thank you, Wendy, for speaking out.

Ray Niles Article on Housing Crisis

 Posted by on 4 June 2010 at 7:00 am  Activism, Economics, Government
Jun 042010

Our friend Ray Niles has just published an article on the housing crisis in the George Mason University School of Law’s Journal of Law, Economics, and Policy, Vol. 6, No. 2, Spring 2010. entitled “Eighty Years in the Making: How Housing Subsidies Caused the Financial Meltdown”.

Diana and I have both had the pleasure of reading it, and I found it especially valuable because it presented a thorough historical overview of the many decades of government intervention in various aspects of the market that led to the housing bubble (and subsequent collapse).

I had read several prior articles that discussed one or more of these causes, but Ray’s article did a nice job of presenting all of that information in a nice integrated fashion, accessible to a layperson without specialized economic training.

The article is not available in downloadable form, at least not at present. But Ray has permission from the publisher to send PDF copies. So if you’re interested, send him an e-mail at: “rayniles (at) rcniles (dot) com”.

I highly recommend his article, and I’m glad to see him building on his excellent work from the past few years.

May 312010

The May 31, 2010 PajamasMedia has just published my latest OpEd, “Beware Dr. Galbraith’s Snake Oil“.

My theme is that even in the face of the Greek situation, some economists continue to argue that deficits don’t matter. Here is the introduction:

As the Greek welfare state collapses, citizens there have been rioting over cutbacks in social spending necessitated by mounting government debt. The rioters apparently fail to recognize that whenever a government routinely promises to spend more money than it has, then eventually it will be unable to fulfill those promises. Many Americans worry that we will soon be facing similar troubles at either the state (e.g., California) or national levels.

Yet some renowned economists, such as Professor James Galbraith of the University of Texas, are trying to convince us that the U.S. government should ignore our massive federal budget deficit and instead spend even more. Galbraith argues that calls for fiscal responsibility are “misguided” and that greater deficit spending will create greater prosperity.

Galbraith’s proposals are dangerous because they are based on the notion that you can get something for nothing. Unless we want to see a Greek-style collapse here in America, we must reject those ideas as economic “snake oil” and instead demand an end to our government’s fiscally irresponsible deficit spending.

James Galbraith is no street corner crank. Instead, he has a BA from Harvard and a Ph.D. from Yale, both in economics. He is a professor of economics at the University of Texas, Austin, and son of famous Keynesian economist John Kenneth Galbraith. Because of his impressive academic and intellectual pedigree, many Washington politicians and pundits take his ideas seriously. Hence, so must we…

(Read the full text of “Beware Dr. Galbraith’s Snake Oil“.)

As always, please feel free to leave supportive comments, blog about it, e-mail to friends, promote via Twitter/Facebook, etc.!

May 182010

The May 17, 2010 edition of PajamasMedia has published Amit Ghate’s latest OpEd, “The Nonsensical Notion of ‘Unearned Income‘”.

As Amit notes in his own blog post, “It’s basic theme is to show how the flawed notion of ‘Unearned’ Income is the result of more fundamental Marxist ideas.”

Here is the opening:

Last March, in a midnight deal to save union health care plans from taxation, Nancy Pelosi amended the notorious ObamaCare bill to levy a new 3.8% tax on “unearned” income. In a follow-on PR tour designed to put a positive spin on this disastrous piece of legislation, President Obama lauded the new tax, saying:
Right now, if you’re on salary,… you’re paying your Medicare tax on all of that… it’s part of your FICA. But if you’re Warren Buffett and you get most of your money from dividends and capital gains, you don’t pay Medicare tax on that. You’re eligible for it. You’re going to get the same Medicare benefits as anybody else. But because your source of income is what’s called unearned income — capital gains and dividends — you don’t have to pay this.

Leave aside the obvious breach of Obama’s campaign promise to not levy new taxes on those earning less than $200,000. Forget too the Democrat’s Orwellian wordplay in transmuting a “Medicare tax” into an “unearned income Medicare contribution.” Instead, consider what is meant here by “unearned,” for it reveals much about the Obama/Pelosi worldview — including insights into how to combat it.

The concept of “unearned” income is the remnant of a long-refuted economic theory known as the “labor theory of value”…

(Read the full text of “The Nonsensical Notion of ‘Unearned Income‘”..)

Congratulations, Amit, on another fine publication!

On Social Unrest

 Posted by on 11 May 2010 at 7:00 am  Economics, Politics
May 112010

I’m delighted to present the following commentary on economic crisis and social unrest by my friend Jason Crawford as a guest post here on NoodleFood.


One argument heard against pure laissez-faire capitalism is that it would lead to an increasing “gap” between rich and poor, and that without some sort of “safety net”, “living wage”, or other income or benefits guaranteed by the government, the poor would become angry, resulting in “social unrest.”

Is this concern supported by current events or the lessons of history? What causes social unrest? If we want to avoid it, what should we be wary of?

Well, we’re seeing it right now in Greece. They are rioting in the streets, and people are getting killed:

Greece’s 24-hour nationwide general strike brought much of the country to a standstill, closing government offices and halting flights, trains and ferries.

At the same time, tens of thousands of protesters marched through Athens in the largest and most violent protests since the country’s budget crisis began last fall. Angry youths rampaged through the center of Athens, torching several businesses and vehicles and smashing shop windows. Protesters and police clashed in front of parliament and fought running street battles around the city.

Witnesses said hooded protesters smashed the front window of Marfin Bank in central Athens and hurled a Molotov cocktail inside. The three victims died from asphyxiation from smoke inhalation, the Athens coroner’s office said. Four others were seriously injured there, fire department officials said.

(“Europe Crisis Deepens as Chaos Grips Greece”, WSJ, May 6.)

It’s not any kind of gap between rich and poor that they’re rioting over. It’s an economy that’s collapsing under crushing government debt. Specifically, people see their wages and benefits cut as the government tries to reform, and they don’t like it:

Artemis Batzak Panayou, a cleaning lady working for a local government, saw her €1,200 monthly salary, on which she supports three children, cut by €250 at the beginning of the year.

A CNN Q&A explains:

So what is Greece doing?

As already mentioned, the government has started slashing away at spending and has implemented austerity measures aimed at reducing the deficit by more than €10 billion ($13.7 billion). It has hiked taxes on fuel, tobacco and alcohol, raised the retirement age by two years, imposed public sector pay cuts and applied tough new tax evasion regulations.

Are people happy with this?

Predictably, quite the opposite and there have been warnings of resistance from various sectors of society. Workers nationwide have staged strikes closing airports, government offices, courts and schools. This industrial action is expected to continue.

What’s frightening is that America is arguably on the same course. In February, the Financial Times ran an editorial titled “A Greek crisis is coming to America”:

Even according to the White House’s new budget projections, the gross federal debt will exceed 100 per cent of GDP in just two years’ time. This year, like last year, the federal deficit will be around 10 per cent of GDP. The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That’s right, never.

Around the same time, Slate had a piece titled “The Future is Greek”:

[A]side from our very large budget deficit—at the moment, 9.9 percent of GDP and climbing—we also have liabilities that are rarely acknowledged. The costs of Medicare and Medicaid are going up, as is the cost of veterans care. Markets assume that the vast debts of Fannie Mae and Freddie Mac are underwritten by the government, and someday the government might be called upon to pay them. No one is lying about these things, but no one is talking about them very much, either.

What’s the root cause?

The Greeks blame corruption. Many commentators blame fiscal irresponsibility. The Slate piece refers to “political deadlock”.

But corruption and fiscal irresponsibility are endemic to socialism, and political deadlock is inevitable when a government promises people benefits without working. Sooner or later the money runs out, but the moral premise that the system is built on prevents true reform. The Slate piece noted:

Try to carry out any social security reform in Greece—raise the pension age, stop early retirements—and watch what happens: Mass rioting followed the passage of a pension reform bill in 2008, and the government became so unpopular it lost the next election.

And Ray Niles, an investor and commentator, said this in an online discussion:

I’m wondering when the Greek disease will spread here, though. My prediction: Unless things are reversed, we will see similar riots here in 20 years, and for a similar reason. The riots will be by the majority entitlement-recipients demanding ever more, in defiance of reality.

That’s why, in terms of keeping peace and civil order, I’m worried, not about any kind of income “gap” or inequality, but about establishing any kind of moral entitlement to unearned benefits. There’s only one place that leads: to an entitlement mentality and eventually a crisis like this one.

Jason Crawford is a tech/business geek in San Francisco. He blogs about startups at http://jasoncrawford.org.

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