Megan McArdle:

We’re obviously nowhere near Italian levels of debt.  But the inability to make even quite small changes in our levels of taxes or spending should worry the hell out of everyone.  Yes, yes, I know–the other side is evil and intransigent and you don’t trust them anyway.  The fact remains that we’re married to those jerks in the other party, and there’s no prospect of divorce.  ”Stick to your guns, dammit!” is not a workable policy agenda for either side . . . and no, I don’t really care how much better things could be if we were more like Europe/19th century America.  Given events in Europe, this doesn’t really seem like a good time to be talking up the virtues of larger welfare states or a weak central bank.

Marcelo Somers:

Occupy Wall Street (and all the associated movements) completely defies what is amazing about today. I hate it because it’s sending young people every wrong message. Instead of inspiring the youth of today to create amazing things that add value to the world, it’s inspiring them to complain.

That captures my problem with these protests: there’s nothing productive about them. They’re filled with complaints, but no substantive ideas for how to improve things. It’s long on “There’s no future, there’s no future for you,” and short on making things better.

There’s certainly reason to be frustrated. We’re in the middle of a transition between two very different economic ages, and what worked in the last one—getting a college degree, almost any degree at all—is no longer sufficient for success. And, on top of that, we have an ineffective political system that can’t solve big problems, like our long-term fiscal crisis, let alone more every-day issues; we had a terrible financial crisis that resulted in a steep recession, while companies that should have lost it all were given tens of billions of dollars to weather the crisis; still, three years after that crisis, unemployment is dangerously high and shows little hope of improving; and this recession has laid bare economic inequality that makes the recession’s pain feel even greater, because comparatively, the well-off are doing alright.¹

Yes, there’s good reason to be frustrated. But what Marcelo’s arguing is that, while we are in an absolutely terrible recession that’s been made worse by a confluence of factors, we are also in a time of incredible opportunity. This transition will be difficult, like all transitions, but it will also open up great opportunities—for the people who are willing to see them and to take advantage of them.

The Occupy movement isn’t interested in that, unfortunately—at least in the broad strokes of the movement. What it’s been interested in thus far is vilifying the well-off as the cause of our economic troubles, insinuating that they profited from the financial crisis and the ruin of everyone else, and it’s all of us against them. That’s an easy story to paint, but it’s not accurate, nor is it productive. How can we make good policy aimed at restoring our finances and getting our economy back on track when the movement’s thrust is anger at the well-off? Good policy does not result from misguided anger. It results from a lucid understanding of the situation, what caused it, and what can be done. Making the well-off pay penance for their perceived crimes is not good policy. It’s the satisfaction of anger and frustration, fleeting satisfaction that does nothing to solve the actual problem.

The movement, if it is going to have any positive impact, has to recognize that. It needs to begin contributing well-conceived ideas for how to make things better, rather than anger and divisiveness. They need to move beyond it, and contribute. Because as it is, it’s going no where.

1. The much-derided “one percent” were particularly hard hit by the 2008 crisis and recession, actually, but it is a historically bad recession, and the poor and middle class have been hit the worst—simply because they have less to lose. [↩]

Over the weekend, occupy supporters “protested” a tribute to Ronald Reagan event put on by conservative advocacy group American For Prosperity (of which David Koch is a large donor) in Washington, D.C. When I say protest, I mean intentionally block traffic (and tell drivers “you have no power right now and your son can’t save you” and that they need to find another route), bang on the building’s glass, harass participants, shove them, and, from what it looks like, attempt to enter the building. Here’s video, filmed by the Daily Caller.

At least one protestor was hit by a car while “demonstrating in the street” and taken to the hospital.

Here’s Will Wilkinson on this “protest”:

And here’s the way it looks to the rest of us: A bunch of committed, mostly well-to-do conservatives went to a totally anodyne event organised by a conservative advocacy group in celebration of a popular conservative president, and they got harassed in a pretty frightening way by OWS-affiliated ideologues who seem to think they have the right to intimidate people whose politics they happen to disagree with.

Say what you will about the tea-party movement, but I don’t recall tea-party types storming the doors at progressive events and knocking down old ladies. I think it’s safe to say that very few Americans approve of this sort of behaviour. Americans disagree sharply about a whole array of issues, but we expect to work out our disagreements in a civilised fashion, with a minimum of social disturbance. To assemble peaceably is a basic American right and a venerable tradition. To get together and aggressively antagonise other people peaceably assembled because you’ve decided they’re the enemy is not.

I don’t want to wade into the “is the OWS movement better or worse than the Tea Party movement,” because I find both movements rather obnoxious and there’s little value in trying to decide which one is better, but I do find OWS protests descent into more mob-like tactics worrying. What we saw above, and in the Oakland occupy protests decision to blockade the Oakland port, is not a protest. It’s an attempt to use force to disrupt people’s lives because they disagree with them and, let’s be honest, threaten them. Respectable movements do not attempt to force their way into private events and scare people away from attending them.

What happened there could have easily turned into something much worse than the protestor who was hit by a car and the elderly woman who was knocked down a set of stairs in the commotion.

None of this is acceptable, and it isn’t simply a “small minority” in the protest trying to create trouble. That isn’t what happened in Washington, D.C. this weekend and that isn’t what happened at Oakland’s port. This deserves a lot more criticism, and especially from progressives who agree with the general thrust of the movement and do not want to see it devolve into something that will not only harm their cause, but harm others, too.

Cuba provides a nice glimpse into unintended consequences of government regulation:

But the tight grip on imports means cars will remain scarce and command eye-popping prices, whatever their condition, economists and car brokers say.

“A car that in another country you’d pay to destroy, you can sell here for $14,000,” said Paul Gómez Valladares, a mechanic who was fixing the bushings on a 1996 Lada Combi in a workshop shaded by mango trees.

The only Cubans allowed to purchase new cars are ones who earn foreign currency—doctors, artists musicians, and members of airline flight crews.

Harvard students walked out of Greg Mankiw’s introductory economics course in “solidarity” with occupy protests:

Gabriel H. Bayard ’15, another organizer of the walk out, said that he believes the course is emblematic of the economic policies that have led the financial crisis.

“Ec 10 is a symbol of the larger economic ideology that created the 2008 collapse. Professor Mankiw worked in the Bush administration, and he clearly has a conservative ideology,” Bayard said. “His conservative views are the kind that created the collapse of 2008. This easy money focus on enriching the wealthiest Americans—he really operates with that ideology.”

My favorite part of that statement is how Bayard specified what policies Mankiw supported which led to the financial crisis.

Gallup conducted a poll of Americans about what they think are the causes of our poor economy, and the results are quite interesting:

When asked whom they blame more for the poor economy, 64% of Americans name the federal government and 30% say big financial institutions.

A large majority blame the financial sector, but even more people blame the federal government:

78% say Wall Street bears a great deal or a fair amount of blame for the economy; 87% say the same about Washington.

People don’t seem to think the wealthy should pay such high taxes:

Asked what the wealthiest 1% of Americans — the ones excoriated by Occupy Wall Street —should pay in taxes as a percentage of their income, more than a quarter of people — 28% — have no opinion. Another 21% say the richest should pay 10% or less, and only 18% say they should pay more than 30%.

Only one group blames the financial sector more than the federal government:

On whom to blame for the economy, only one educational group — people with some post-graduate schooling — were more likely to blame Wall Street instead of Washington. All others — college grads, people with some college, people who never went to college — pointed more at Washington.

And people seem rather unsure about the protests:

The poll shows that most Americans are paying attention to the protest movement. But most don’t know enough to take a position. Even among those who have followed the protests closely, 43% don’t know enough to say whether they support or oppose the movement’s goals.

About a quarter of poll respondents describe themselves as supporters of the movement; 19% call themselves opponents.

Here’s how the Occupy Wall Street group describe their protest:

We, the people of the United States of America, considering the crisis at hand, now reassert our sovereign control of our land.

Solidarity Forever!

They speak for the 99 percent, after all.

Okay, well, they didn’t do that last part—but they certainly should have. The administration killed the CLASS Act.

The CLASS Act was a part of the President’s Patient Protection and Affordable Care Act passed in 2010, and one of the key components that made the legislation look like it was fiscally responsible. Because the CLASS Act took in premiums without paying benefits for the first ten years, the CBO scored it as reducing the deficit by $72 billion over ten years—a huge chunk of the $120 billion or so the CBO said PPACA as a whole would reduce the deficit.

The problem with this, of course, is that it’s fictitious. Made up. Not real. After those initial ten years, the CLASS Act was a fiscal train wreck that would have made our already disastrous fiscal situation even worse.

And the administration knew this while claiming publicly that PPACA would help solve our fiscal disaster.

It was always obvious that wasn’t true, but now we know the administration intentionally inflated PPACA’s revenue with unworkable programs so they could pass it. In other words, they lied to the public about the program so they could pass it.

Perhaps that’s how politics works, but that’s not how Obama said he would conduct his administration. That’s not change, and it certainly doesn’t inspire hope. Instead, it inspires resigned cynicism.

Yes We Can, Indeed.

Chris Martucci wonders why libertarianism is called “libertarianism” at all if life seems to be prioritized over liberty:

However, upon further consideration, it seems that what’s of prime importance in this scenario is not “liberty,” but “life.” After all, we are essentially saying that one person’s liberty is more important than another’s. This seems rather obvious — of course a person’s liberty to not be sexually mutilated overrides a person’s liberty to sexually mutilate. Still, it would be accurate to say that liberty is not prime, whereas innocent life is.

This depends on a misunderstanding of the classical liberal conception of the individual and individual rights. Chris is assuming that the right to life, liberty and property are wholly separate and distinct rights, ones that can be violated or respected without offending on the others. That is, that we can violate a person’s right to property (take their car, say) without impinging on their right to liberty (to live their life how they choose).

That isn’t the case. For classical liberals, the individual is just that—distinct and separate, not part of some greater mechanism or organism (say, society), but unique.¹ There is no overlap between individuals. You cannot say, “I can’t quite tell where Betty ends and Don begins.”

The individual is herself inviolable, and she has full control over herself. Only she has literal direction over herself—in what actions she chooses, and in what she owns.² Because every individual has that right, by their very nature as an individual, others cannot (morally) choose to violate someone else’s right. Someone cannot choose to, as Chris asked, sexually mutilate someone, because that violate their right to control their life.

What this means is that there are no distinct rights. There is no right to life, or right to liberty, or right to property. Those are approximations used to understand the natural rights of the individual. I only have a right to direct my own life, in all senses. My decisions cannot violate someone else’s same right.

This doesn’t mean we are placing restrictions on someone’s rights by not allowing them to harm others, because they never had that right to begin with. Short hand for this is “my right to swing my fist ends where your nose begins,” and it’s apt.

If you haven’t, I highly suggest reading John Locke’s Two Treatises of Government. Political theory has moved far beyond it, obviously, but it’s incredible just how insightful it is. Some works only become more important as the centuries pass.

1. An individual may choose to be a part of a group, but it only results from their decision, whether affirmative or tacit, and they can remove themselves if they so choose. A “group” is not anything more than a collection of individuals. [↩]
2. It’s worth noting that defining how someone comes to “own” something isn’t easy. Locke first argued that a person comes to own something that originally belonged to nature by exerting labor on it. So, if I cut down a few of trees, cut them into suitably-sized pieces, sand them down, stain them, seal them, and erect them into a house, those trees become mine through my labor. That’s a useful way to explain how we come to own property, but it raises an interesting question, asked by Robert Nozick: if I erect a fence on formerly unowned land to claim it as my own, why should I now own the enclosed land, and not just the land immediately under my fence? [↩]

Financial transaction taxes are no panacea. Kenneth Rogoff:

Such taxes surely reduce liquidity in financial markets. With fewer trades, the information content of prices is arguably reduced. But both theoretical and simulation results suggest no obvious decline in volatility. And, while raising so much revenue with so low a tax rate sounds grand, the declining volume of trades would shrink the tax base precipitously. As a result, the ultimate revenue gains are likely to prove disappointing, as Sweden discovered when it attempted to tax financial transactions two decades ago.

Worse still, over the long run, the tax burden would shift. Higher transactions taxes increase the cost of capital, ultimately lowering investment. With a lower capital stock, output would trend downward, reducing government revenues and substantially offsetting the direct gain from the tax. In the long run, wages would fall, and ordinary workers would end up bearing a significant share of the cost. More broadly, FTTs violate the general public-finance principle that it is inefficient to tax intermediate factors of production, particularly ones that are highly mobile and fluid in their response.

A large part of the support for these kinds of taxes seems to come out of a desire to punish traders. Any time a policy is supported because it makes certain people suffer, rather than it’s sound policy, it’s probably time to reconsider it.

No, public control and unions don’t reduce innovation:

The University of California last week tentatively agreed to a deal with UC-AFT that included a new provision barring the system and its campuses from creating online courses or programs that would result in “a change to a term or condition of employment” of any lecturer without first dealing with the union.

Bob Samuels, the president of the union, says this effectively gives the union veto power over any online initiative that might endangers the jobs or work lives of its members. “We feel that we could stop almost any online program through this contract,” Samuels told Inside Higher Ed.

(Via Tyler Cowen.)

What a triumph.

Anwar al-Aulaqi, a U.S. citizen who lead Al Qaeda in the Arabian Peninsula, was killed in a U.S. drone strike in Yemen.

He deserves no sympathy. He took up arms against his country and he died in the process.

Nevertheless, though, he was a U.S. citizen, and he was killed in a country where we are not at war. If this becomes a precedent, it would be deeply troubling.

Seth Godin argues we’re at a juncture in economic history, just like the rise of mass production in the twentieth century:

The industrial age, the one that started with the industrial revolution, is fading away. It is no longer the growth engine of the economy and it seems absurd to imagine that great pay for replaceable work is on the horizon.

This represents a significant discontinuity, a life-changing disappointment for hard-working people who are hoping for stability but are unlikely to get it. It’s a recession, the recession of a hundred years of the growth of the industrial complex.

Mass production of standardized goods—underpinned by workers doing very tightly defined jobs that can, with relatively minimal training, be done by anyone—provided incredible value. This was because up until then, goods were largely made individually with poorly defined standards and processes, so they were expensive and time consuming to make. Mass production made goods cheap and plentiful because the processes for making them were standardized so that anyone could do it. The twentieth century was almost entirely about turning people into cogs in a machine in order to squeeze as much efficiency out of each one as possible.

Because there were so many gains to be made by using mass production for goods, it helped create an explosion of economic growth and development and, along with it, jobs. We needed cogs for those production processes. This was very beneficial for workers; because there was so much value created by mass production, companies could afford to pay very respectable wages and salaries and provide long-term benefits, all while the worker was responsible for very little more than following a series of steps.

But those gains have now been used up. There’s no more potential for growth in mass production, except in countries where labor costs are lower than others, and that will be used up in time, too. In manufacturing, it’s a race toward eliminating cost as much as possible, and that inevitably means eliminating people altogether.

What Godin argues is that the idea of long-term, stable jobs where individuals are responsible for very little besides doing their very specific job—an idea we grew up believing to be true because that’s what we saw in the twentieth century—is a myth created by the temporary explosion of economic productivity unleashed by mass production. It isn’t something we can always have or something we will soon get back to after this recession is over. It no longer exists.

This means suffering for many people, as we are seeing. Our society has been built on the assumption that, if only we do well in school, there’ll be a stable and respectable job waiting for us. That is no longer the case, and now people will have to adjust to it. A high school diploma and a college degree is no longer a ticket to a comfortable future. Rather than simply put in the time and work to be comfortable, we must now find insights into the world that will make us all better off. That’s the new frontier.

The Age of Insight

The nineteenth century was the age of the industrial revolution, the twentieth the age of mass production, and the twenty-first will be a new age, too, of the same scale.

Godin continues:

When everyone has a laptop and connection to the world, then everyone owns a factory. Instead of coming together physically, we have the ability to come together virtually, to earn attention, to connect labor and resources, to deliver value.

Stressful? Of course it is. No one is trained in how to do this, in how to initiate, to visualize, to solve interesting problems and then deliver. Some see the new work as a hodgepodge of little projects, a pale imitation of a ‘real’ job. Others realize that this is a platform for a kind of art, a far more level playing field in which owning a factory isn’t a birthright for a tiny minority but something that hundreds of millions of people have the chance to do.

Whereas the last century was about making goods—food, clothing, cars, toys—cheap and plentiful, the twenty-first century will be about making insights into what will truly make us better off.

It was easy to make huge gains in quality of life in the early twentieth century: providing any kind of affordable clothing, food and car was a giant leap forward. We can’t make those same gains now. That trick only works once.

Now, we have to be smarter. Now, we have to figure out what’s a better use of resources. We have to figure out what kind of car will both be more environmentally efficient and delight its owners. We have to think about completely disparate fields—say, manufacturing, software development, design, and psychology—and combine them to make products that conform themselves to humans, rather than making humans contort themselves to the product in order to use it. We must think about big ideas—ideas that will change society and how people interact—and the little ideas that merely improve people’s lives just a little.

We have to think. This is an age where all of our gains will come from insights into what make products, services, processes, and structures fundamentally better for us. Whereas the twentieth century was about standardization and following a series of steps in a well-defined process, in this new century, there are no defined processes. Everything is to be questioned, re-thought, re-made, or even thrown out altogether.

This century is about having a vision for the way things should be, and the audacity to make it so. Just a decade or two ago, it took immense amounts of capital to launch an idea that could change the world. Now, it takes a few people with an idea, a computer, and the willingness to learn how to build it.

The only thing holding us back now is ourselves.¹ We are all artists, designers, manufacturers, managers, musicians, writers, creators—if we choose to be. And that is the fundamental difficulty of this new age: we all are responsible for our own success.

The twentieth century had a well-trodden path for people to follow: you graduate from high school, go to college, you’ll get a respectable and stable job, and you’ll live in comfort. Our responsibility did not extend beyond following that path.

That will no longer work. We will all have to take responsibility for ourselves, our future, and our ideas. We have to learn to think this way—to think critically of the things we see, of how they could be better and how we could make it so, and thus to see opportunities for ourselves.

We have to change how we think to be successful in this century, and we have to re-design our schools to prepare people for it. I have some ideas for how to do that, but what’s obvious is we aren’t ready for it yet. Not even close. We’re still preparing kids for the last century.

This is a new age, and we better start thinking about it that way.

1. This is not, unfortunately, true for everyone. Poverty and lack of opportunity takes on a new meaning in this century. Rather than hold people back from an education and access to well-paying jobs, it now means holding people back from education that gives them the opportunity to discover a passion from something and discover a way to make something better and, therefore, make a living for themselves, because they are too busy simply trying to survive. This creates two very different classes in society, and is a fundamental threat to it. This, I think, will be one of the great challenges for our century: how do we not only revamp our educational system for a new economic age, but how do we truly make education available to everyone so everyone can participate? [↩]

Megan McArdle on Solyndra:

As far as I can tell, Solyndra was having these troubles with its first fab . . .  so we lent them money to build a second fab.  No one ever said, “hey, this manufacturing process is really fussy and may never work;” the idea was always that if you could just scale up and spend more money, somehow, eventually this product would break even.  Again, if they were going to discover cold fusion, maybe this would have been worth it.  But their only competitive advantage–using no silicon–was dependent on continued high prices of silicon.  No, it’s worse than that; it was dependent on there being a big cost wedge between the price of silicon, and the prices of the commodities that Solyndra did use, like copper, gallium, and iridium. This was a bad bet; Lending them money seems like a very complicated and expensive way to take a large bet in the commodity markets.  And not necessarily a good bet.  Copper, gallium, etc are mined and in limited supply.  The primary ingredients in silicon are wood, charcoal/coal, and silica, aka sand.

The more I read about Solyndra, the less it sounds like a scandal and the more it sounds like a disastrous example of where government subsidies for private businesses can go wrong. The government tends not to be the best judge of a business’s potential, and when they make a bad choice, not only are taxpayers saddled with the bill, but the government’s intervention shifts the market toward a company that wouldn’t have succeeded in the open market. And the companies that could have succeeded are the ones that are hurt.

Ezra Klein argues government subsidies would be a better way to support start-ups than a low capital gains tax rate:

Eric Jackson, a former employee of PayPal and now the CEO of the online-investing platform CapLinked, worries that implementing the “Buffett rule” would hurt the pool of investment money available to tech start-ups. His logic on this point is unimpeachable: If the Buffett rule means taxing capital gains more like normal income, then it will, on the margin, hurt investment of all kinds, including investment in tech start-ups.

…

But this is a very bad way to defend very broad policies. If Jackson is right, and there is something special about tech investment that we would like to subsidize, then perhaps we should subsidize it directly. That would be far cheaper than taxing all capital gains at a lower rate. Similarly, if we want to do more to help profitable small businesses, we can offer them targeted subsidies, or specific tax breaks. We don’t need to cut taxes on every high-income individual in America in the hopes that a couple of small businesses get caught in the policy’s net.

Or, perhaps, it’s a bad policy if it forces us to begin directly subsidizing small businesses and technology start-ups.

I don’t think Klein would see that as a problem, though. He would probably see it as a feature.

In any case, that’s what happens when government begins playing a larger role in the economy—they inevitably have to begin making decisions about who and who doesn’t get funded. There’s winners and losers, and it’s decided by a political process.

You can see this outside of markets, too. Married couples are provided certain legal benefits, like tax benefits and visitation rights. If (1) taxes weren’t so high that providing tax credits is necessary and (2) government didn’t define what is and isn’t marriage, it wouldn’t be an issue. But it is, and since it’s a political question, we have to define who and who doesn’t receive benefits.

When that’s the case, these kinds of questions are answered by who’s in the majority. And it’s not pretty.

During the GOP debate last night (is this a weekly thing now?), a gay soldier serving in Iraq asked Rick Santorum whether, as president, he would re-implement restrictions on homosexuals in the military. After he finished his question, members of the crowd booed him.

A person in the crowd said after the event that others “shushed and hissed” at the people booing, but nonetheless, it’s incredible to me that the jackasses who did it thought that was acceptable to jeer a soldier, let alone someone serving in Iraq.

What’s worse is Santorum didn’t even mention it in his answer. It’s absolutely unacceptable for people to do that, and they should have been called out for it. That’s shameful.

There is prejudice against homosexuals in the country, and specifically, the social conservative movement, and it was all on display last night.

Rick Santorum’s answer, too, was absolutely ridiculous. He said that we shouldn’t be providing special privilege and recognition to groups in the military, so he would re-implement “Don’t Ask, Don’t Tell.”

Apparently Rick never realized that under DADT, heterosexuals enjoyed a de-facto special privilege. While gays couldn’t discuss their sexuality or even hint at it, heterosexuals could talk about their sexuality without repercussion. There was no problem with talking about how attractive a man (if you’re a female) or woman (if you’re a man) was, because it’s assumed that you are heterosexual. So, heterosexuals were free to (by implication) discuss their sexuality as much as they’d like, while homosexuals had to nod along and watch every word they said for fear it might “sound gay.”

If that isn’t a special privilege, I don’t know what is, and last night was shameful. It’s something that, when you see it, has to be called out for what it is: prejudicial bullshit. If we don’t, it’ll never change.