Amit Ghate has left a new comment on your post "Protecting Us from Ourselves":

Hi Galileo,

My thoughts on your question run along some of the same lines as your hypotheses; first that education is responsible, though I come at it more from the angle that people in the cities you mention tend to be much more educated than in other places, so they have many more bad ideas than do those with less formal education, not necessarily that some cities have more progressive education than others (though that is probably true too).

Thus, by being productive and successful, the men in the major cities you list could afford to -- and did -- send their kids all the way through graduate school, thinking that this was best for them. But given the ideas they were taught, such an education was actually an attack on all that made it possible, and in this way the producers became promoters of their own undoing.

And not only do their kids have 20+ years of bad ideas thrust on them, in many cases they’ve also been so sheltered that they don’t have any of the real-life experience to untangle the ideas or to see the anti-life consequences of the abominable ideas they’re taught. (This too is similar to a point you make.)

Next, I think that much of regulation is aimed at keeping those in power in power, i.e. of maintaining the status-quo. One of the greatest things about the 19th century is that the expression “shirt-sleeves to shirt-sleeves in 3 generations” was a fact of life. If an heir didn’t measure up, he wasn’t the beneficiary of regulatory power which served to throttle new competitors, while nowadays it’s the reverse (see the Kennedy’s for example). In fact, the original subject of this post illustrates this, i.e. those with sufficient wealth are allowed to invest as they wish (again Ted Kennedy can do what he wants) but those without it are restricted and are thus at a severe disadvantage. This suits the goal of maintaining the status quo and of entrenching social classes -- something which is as anti-American as any policy could be -- yet which is supported by all our intellectuals. A similar case can be made for the income tax; those starting off without any money have to begin by working for income and are heavily taxed, while those that have money and pull can find different ways less subject to taxation and regulation to maintain their wealth. This again has the effect of preserving artificial economic and social strata.

Don’t get me wrong here, I’m obviously not advocating that we tax the rich to remedy this(!), rather that we get rid of all or as many of the taxes and regulations that burden our society as well as the welfare programs they allegedly go to support. The solution isn’t to forcibly create a “level playing field” as the leftists want, but simply to allow everyone the freedom to achieve (and to fail if they make the wrong choices and/or take the wrong actions).

On top of these political issues, there are also more fundamental issues to consider, viz. those which go to the nature of man and his functioning on earth (i.e. of philosophical ideas). For instance, Warren Buffett, who is self-made, extremely knowledgeable about business and as smart as they come, is an advocate of the regulatory state. His position rests on a certain view of man and of reality, so his mind will only be changed by arguing against those more basic premises. (And while I think actual experience in a truly capitalist society would help him accept such arguments by giving him more direct evidence from which he could confirm the principles, it would still be necessary to make the arguments.)

So as much as each political step taken to dismantle the regulatory state is positive and tends to engender further “virtuous circle” effects, there is no way to avoid addressing and refuting the basic philosophical ideas upon which the regulatory and/or mixed economy and/or totalitarian state depends.



Posted by Amit Ghate to Thrutch at 5:45 PM

Galileo Blogs has left a new comment on your post "Froth in the Chinese Stock Market":

The froth is evident. My hypothesis is that both the froth and its very likely correction will be largely the result of monetary actions by the Chinese and U.S. governments.*

Rapid growth rates in the money supplies in both China and to a lesser degree in the U.S. have boosted the froth. Now, we see Chinese bank regulators trying to tamp down bank lending and growth in the money supply. They have raised bank reserve requirements several times and have cracked down on bank financing of stock purchases.

If they do this aggressively enough, it will trigger a bank lending contraction, which will drain money from the stock market. Without bank capital backing up the margin purchases, the stock market will contract. Then, as stock prices contract, margin loans will be called, triggering further stock sales. All of this will spill over into the physical economy, causing a recession or slow-down in economic growth, unless the Chinese central bank then turns around and quickly re-inflates the money supply. Of course, that could just stoke inflation.

The Chinese economy, as fast-growing as it is, is still much smaller than the U.S. economy, so I am not sure what it all means for our economy here. However, the U.S. Fed has also been expanding the money supply at a moderately fast rate, and the U.S. Dollar and Chinese Yuan are linked through a semi-fixed exchange rate.

The other factor for the U.S. is the increasingly likely faster revaluation of the Yuan, which is the same thing as a faster devaluation of the dollar (versus the Yuan). Of course, this would be on top of the long ongoing fall in the value of the dollar, which has lost value generally against nearly all world currencies.

All of it is quite interesting. If the U.S. dollar devalues further, it suggests staying long foreign securities versus American securities. Of course, if both the U.S. and Chinese market are likely to pull back, then it is time to get more bearish on equities in general. I invest in U.S.-based utilities primarily, and these stocks had quite a sell-off on Thursday. I'm not sure if the greater risk of a new round of dollar devaluation had anything to do with it.

***

*A qualification on my comment in the first paragraph. Monetary policy undoubtedly has contributed to the froth, but a certain proportion of the Chinese stock market gains has a solid base in genuine, rapid improvement in China's economy. Often, though, this is the pattern of a boom/bust. A legitimate boom caused by a major economic improvement is then artificially stimulated further by overly accommodative monetary policy. Then, central bank officials get nervous about the risk of inflation and artificially curtail the money supply, thereby causing a recession or depression.

Such needlessly exacerbated booms-busts are caused by government manipulation of the money supply, which should be provided only by private banks (and most likely based on gold or some other monetary asset).

I suspect I am preaching to the converted on this issue, though!

Posted by Galileo Blogs to Thrutch at 5:17 AM

Galileo Blogs has left a new comment on your post "Protecting Us from Ourselves":

Thank you for a great article on regulation. I especially liked how you connected all forms of regulation stretching across many areas of life, from investing, to medical practices, etc.

Americans now largely approve of regulation as a general principle. They expect government to regulate in order to "protect" them from risks. An appalling example of it is in New York. New Yorkers have blithely embraced a ban on smoking on private property, such as bars and restaurants, and a ban on the use of trans fats at restaurants.

These outrageous and precedent-setting bans have been rather common in New York's history. For example, the first zoning law to "protect" us from tall buildings was passed here in the early 1900s. I suspect that many other regulations such as building codes, occupational licensing, and multifarious business regulations now common in America began here in New York.

Why is that so? I suspect the answer has something to do with the education of New Yorkers. Many people come here who went to progressive schools where they were indoctrinated with the modern view of the virtue of government regulation of the economy. That is also true of Boston and San Francisco, two other loci of progressive government activity.

My other theory is that because New York is prosperous, the connection between wealth and capitalism has become less obvious to many people. New Yorkers simply see that "the goods are here." Therefore, they do not consider that the goods are here because they were produced using the freedom that still remains in our economy. In New York, the goods have stayed here, despite destructive government policies. Those policies have not yet reached a tipping point where they are obviously destroying the wealth of the city (as they did in the 1970s). Therefore, New Yorkers think that onerous regulation and high taxes can coexist with prosperity. "Somehow" the goods will be here, regardless of what government does to stand in the way of production.

So, oddly enough, New York's very wealth, itself the result of the elements of capitalism that do exist, is a reason why the city's leaders can smugly support the regulations and taxation that will eventually destroy that wealth.

Why do you think the pro-regulation mentality has taken root in America and particularly so in places such as New York, Boston and San Francisco?



Posted by Galileo Blogs to Thrutch at 7:37 PM

Mike N has left a new comment on your post "Crossfit Rest Day Links":

I think the article by Ewe Buse is ok as far as showing the politicization of science where the IPCC is concerned even though I didn't think he went deep enough. I disagree with his description of how meticulous the IPCC is. This may be true of the various ARs but is certainly not true of the SPMs.

And Mr. Buse is wrong when he contends that Richard Lindzen is the only IPCC critic that is that vociferous. There are others equally so. And the idea that Mr. Lindzen's criticisms are just claims is also off the mark. I'v read some of Lindzen's articles and he is not in the habit of making arbitrary claims.

Otherwise, the article does show some politicization of science, more evidence of why science needs to be removed from government.



Posted by Mike N to Thrutch at 12:42 PM