Skwire versus Ghate on Rand’s fiction

Rounds one and two, I hope, of a good discussion of Rand’s philosophical fiction.atlas-original

Sarah Skwire: “Ayn Rand, John Steinbeck, and Fiction with a ‘Message’: The Problems with Didactic Fiction.”

Onkar Ghate: “Is Ayn Rand a Writer of Didactic Fiction?”

One interesting sub-issue to me arises from the fact that many readers do experience Rand’s fiction as being in the grip of great storytelling, while many other readers do experience it as being lectured at. So I have often wondered how much the responses depend upon what the reader brings to the encounter. Three possibilities are:

1. Some readers have a general discomfort with abstract intellectual content in fiction, in which case they also find lecture-y the long speeches in the epic poems and novels of many authors — Fyodor Dostoevsky, Hermann Hesse, John Milton, Victor Hugo, and so on.

2. Some readers enjoy abstract intellectual content integrated well into fiction, unless they disagree with the value orientation of the content, in which case they disengage with the experience and so find the writing boring.

3. That there is a psychological limit to how much abstract philosophizing one can absorb in the context of reading fiction — and the great writers often violate that limit — but many of us forgive them because their works’ other literary merits more than make up for it.

Other possibilities?

Blamestorming and “Deregulation caused the financial crisis” [The Good Life series]

You’ve heard the claim: “Deregulation caused the crisis.” In the years leading up to 2008, the story goes, bad economists convinced bad politicians to deregulate the money/banking/finance sector of the economy, and bad capitalists then enjoyed an orgy of greed that caused the system to go haywire.

Nobel-Prize-winners Joseph Stiglitz and Paul Krugman have signed on to this story. Krugman, for example, has long championed increased regulation of financial markets, and he recently complained in The New York Times that the politicians have failed to listen to the advice of the right economists. “The world,” he says, “would be in much better shape than it is if real-world policy had reflected the lessons of Econ 101,” and Econ 101, he believes, teaches that more controls (and more government spending) would have prevented the crisis.

So now let us turn to Round Two of blamestorming about the financial crisis. Round One took up the (silly) claim that free-market academics dominate the economics profession and have sway over politicians and regulators. (See “Where are All Those Free-Market Economists Who Caused the Financial Crisis?”) In this next round, let’s look at what politicians did and the trajectory of government regulation in the lead-up to 2008.

How do we tell whether regulation has increased or decreased?

One crude method is to count the number of pages in the U.S. Federal Register, which is the government’s daily publication of new and proposed rules. Some of the rules are trivial and some have large impact; some are proposed and some are final; some are clarifications and some are new. But cumulatively the Register‘s increasing or decreasing bulk tells us something about regulatory trends.

For the last generation, here are the Federal Register‘s total page counts for selected years:
1980s: 52,992 pages per year average.
1990s: 62,237 pages.
2005: 73,870 pages.
2010: 81,405 pages.

More sophisticated data now exist, such as those found at the invaluable RegData site. The RegData social scientists count the number of regulations, break them down by economic sector, and attempt to sort the minor from the major regulatory changes (and they let you make your own cool charts). The data unequivocally show that the overall number of regulations increased in the 1990s and on through in the early 2000s. If we focus only on regulation of the financial sector, the data also show an increase in the amount of regulation.

Yet another measure of regulation is how much the federal government spends to craft and enforce rules in various sectors: consumer safety, environment, energy, homeland security, and so on. The more the government is regulating, the higher its budget should be; and the less government is regulating, the lower its budget. So, courtesy of economists Veronique de Rugy and Melinda Warren, here are the federal government’s budgeted spending numbers for the Finance and Banking sector of the economy (in constant 2000 dollars) from 1960 to 2008:

1960: $190 million
1970: $356 million
1980: $725 million
1990: $1.598 billion
2000: $1.965 billion
2007: $2.065 billion
2008: $2.294 billion

Still another measure is the number of government personnel employed in crafting and enforcing regulations. The numbers for Finance and Banking:

1960: 2,509
1970: 5,618
1980: 9,524
1990: 15,308
2000: 13,310
2007: 11,637
2008: 12,113

So some questions: When did the supposed downturn in the number of regulations occur? When were the layoffs of regulators who, sadly, had to find other employment? And where are the big cuts in the budgets of the regulatory agencies devoted to policing the financial markets?

They don’t exist. But they are necessary for the Deregulation caused the crisis! claim.

So why the persistence of the claim despite the historical record? Some of it is knee-jerk ideological, of course. A crisis happens, and many immediately point fingers at their political enemies: My theory tells me that they must be responsible for the world’s ills.

But the trajectory of government regulation clearly increased, so more sophisticated advocates of the Deregulation caused it! thesis turn to a more subtle version of the meme. They will grant that regulation as a whole increased but claim that certain specific deregulations also occurred, and those specific deregulations caused the mess.

And here the big culprit is: Glass-Steagall!!!

Glass-Steagall was partly repealed in 1999 by President Bill Clinton. Joseph Stiglitz, for example, blames the repeal and notes it was against his advice. Glass-Steagall was initially put in place in 1933 to segregate commercial and investment banks. Commercial banks were not allowed to invest in securities, and investment banks were not allowed to accept deposits.

But the vast majority of economists and politicians see Glass-Steagall as irrelevant to the crisis. The financial institutions that were in huge trouble — including Fannie Mae, Freddie Mac, Bear Stearns, AIG, and Lehman Brothers — none of them would have been subject to Glass-Steagall’s provisions. Even President Obama has gone on record in Rolling Stone in agreeing that Glass-Steagall is not relevant.

(And notice the implicit model of how economies work, if we are to think that a partial repeal of Glass-Steagall is the culprit: bureaucrats will issue thousands and thousands of regulations — but if they get one rule wrong, the whole thing’s gonna collapse.)

At this point, fans of increased regulation shift ground. Instead of blaming deregulation, they suggest that a lack of new regulation is to blame. Yes, the amount of government regulation increased before the crisis, they will grudgingly admit, but the economy grew at an even faster rate and government regulators couldn’t or didn’t keep up.

This raises an intriguing new set of issues, and perhaps an analogy to soccer or any sport is helpful here. Suppose that soccer becomes increasingly popular and more matches and leagues come into existence. Does it follow that we need to increase the number of soccer rules? Or that we need to hire more soccer referees? Or is a better analogy that people are inventing brand new sports, all of which require new rules and more regulators? But does it even follow that government should make up the rules for the new sports — aren’t players and the leagues and the sports associations themselves capable?

All good questions. But note that we have now moved decisively away from the Deregulation hypothesis, as we should. Deregulation means that existing practices were unleashed. Innovation is when new practices come into existence. So if we are to blame new financial instruments, then we should be criticizing innovation rather than deregulation.

All of this matters to all of us, whether we are average voters or professional policy-makers, because the Deregulation caused the crisis thesis carried the day in frantic policy circles as the crisis became apparent, and since 2008 the amount of regulation has increased on an accelerating trajectory.

But if the data show that regulation was increasing in the lead-up to the crisis, then that policy reaction was the wrong one — and one that has mis-diagnosed the problem, wasted huge amounts of money, stifled recovery activity, and set the stage for worse problems down the road.

And since the data do show increased regulation before the crisis, perhaps we should consider some heretical suggestions: Maybe all of the regulations caused the problem. Maybe centralized control is the fly in the ointment. And maybe — just maybe — asking politicians and their appointees to run something as complex as a modern economy is just asking for trouble.

[This article was originally published in English at and in Portuguese at]

Martín Krause’s index of economic and political institutional quality

Martin_KrauseMartín Krause is Professor of Economics and the University of Buenos Aires and a specialist in law and economics and institutional economics.

With Professor Krause’s permission, here is the 2015 edition of
“INSTITUTIONAL QUALITY 2015” [pdf], which ranks 193 countries in three categories: Krause-imageInstitutional Quality, Political Institutions, Market Institutions.

For those interested in the performance of North and South American nations, those continents’ nations are also separated for focused analysis and comparison. (See my related article, “Comparing North and Latin American Economic Performance” in English, Spanish, or Portuguese.)

Other important, comparable indices are Index of Economic Freedom, Economic Freedom of the World, and

Entrepreneurship and Values — seven short lectures

CEE’s Entrepreneurship and Values series includes seven 15-20-minute lectures on foundational issues in entrepreneurship.

1. What Is Entrepreneurship?
2. Unleash Your Inner Company
3. Management and Entrepreneurship
4. What Makes Entrepreneurs Tick?
5. Entrepreneurship and Virtue Ethics
6. Entrepreneurship and Liberty
7. Entrepreneurship and Public Policy

The lecturers are all entrepreneurs or university professors — Alexei Marcoux, John Chisholm, Terry Noel, Stephen Hicks, William Kline, and Robert Salvino. The short lectures are meant for use in college courses in entrepreneurship or business ethics.

The lectures were produced by the Center for Ethics and Entrepreneurship.

Does Money Buy Elections? When Billionaires Court Voters [The Good Life]

[This article was originally published in English at and in Portuguese at]

Another election looms, and the question on everyone’s mind is: Will the big donors get their money’s worth?

Cynicism about money in politics is a healthy response to our long history of cronyism. When $700 billion in bailout funds were distributed during the 2008 crisis, politically-connected financial institutions such as Goldman Sachs received the lion’s share. In the 1990s, the now-notorious Enron corporation strategically donated to both Democrats and Republicans to ensure that no matter who was elected it would have a seat at the table. Outside the for-profit sector, unions are also huge donors, as are rich environmental activists and well-funded groups, along with any number of other special interests. He who pays the piper — as the old saying goes — wants to call the tune, choose the instruments, and direct the players.

After indulging some cynicism, however, what should our next steps be?

One regular response is to call for more controls during the election process. We should, some suggest, pass stricter regulations to limit donations to election campaigns and we should empower more government agents to monitor how people spend their money on politics.

But calls for more controls in a free democracy should always be a red flag, and before we heed them we should consider two questions: How much should we worry about election spending? And will trying to control the money get to the source of the corruption of political power?

The questions are fresh, as the Supreme Court recently ruled unconstitutional the limits placed on how much individuals may donate to political committees and candidates. In McCutcheon v. Federal Election Commission, the court held — properly in my view — that the free-speech provisions of the First Amendment were violated by FEC restrictions. To limit the amount of money an individual can spend is to limit how many pamphlets, posters, and other ads he can purchase, and to limit those is to limit speech. In a free society, individuals can put their money where their mouth is to promote any cause they want — commercial, religious, artistic, or political.

Fine. But what of the reasonable concern that big donors will be able to buy up lots of advertising and thereby buy elections?

Not a problem, I think, for several reasons.

One is the principle of political physics: For every Koch there is an equal and opposite Soros. That is, for every billionaire who commits huge money to one side, there’s almost always one on the other side doing the same. No historical evidence exists that the contributions of rich Democrats are consistently higher or lower than those of rich Republicans. And when one party does better in a given election, that always energizes the other side’s fundraisers to improve their results the next time. That is how competition works.

Another reason is that while money is an asset to an election campaign, it is not the only asset or even the most important one. Having large numbers of energetic volunteers is critical. So are the prior reputations of the candidates and their athlete and movie-star champions — and the creativity of wordsmiths and designers who come up with fresh slogans and eye-catching graphics — and the organizational skills of campaign managers — and having friendly media outlets.

So if we are to limit and control donations because they can affect the outcome of elections, then in principle we can limit anything that could affect election results. Should the FEC be able to tell us how much free time we can volunteer? Or how many famous people we can use as spokespersons? Or how many catchy new graphics and slogans we’re allowed to use each campaign?

A third reason is that the data show that the candidates who spend the most do not always win.

1. In a Republican primary race in Virginia, Eric Cantor raised $5.4 million while his challenger David Brat raised $207,000. Cantor’s money paid for 1037 television ads, while Brat’s campaign could afford 65 ads. The result? Brat got 55.6 percent of the vote and clobbered Cantor, who got only 44.4 percent.

2. In Hawaii’s Democratic primary for the governorship, incumbent governor Neil Abercrombie outspent challenger David Ige by a ten-to-one margin. Much of Abercrombie’s funding came from billionaire Lawrence Ellison. Guess who won? As The Washington Post put it, Abercrombie was “overwhelmingly defeated.”

3. In the crucial final month leading up to the 2012 presidential election, pro-Romney spending was significantly higher than pro-Obama spending, but Obama won by a comfortable margin.

So clearly other factors are going on — and maybe we should give voters more credit than to think of them merely as puppets who are manipulated by big money and big media.

Which takes us to a fourth and most important reason.

If we are to be advocates of democracy in a free society, then we have to think of democracy as an evolving experiment in policy and in voter education. Part of democracy is the ongoing project of teaching people how to live in a democracy — including how to think critically about political advertising, however rough-and-tumble it is. And that education process is a long, slow, messy, multi-generational process.

Voters are capable of independent thought. Of course many choose to remain ignorant or become pigheaded or let themselves be dazzled. But democratic policy cannot take as its operative assumption that voters cannot be trusted to vote properly. It cannot coddle them with paternalistic measures designed to massage the number and kind of political messages they hear and see.

There’s a dilemma for too-much-money-in-elections argument: If you think voters really are mostly herd-followers of what the loudest advertising tells them, then you shouldn’t be an advocate of democracy. That is, if you don’t think they can handle such advertising, then you can’t think that they should have a say about important political affairs anyways. But if you do believe that voters can think for themselves, then you shouldn’t worry about their being exposed to political advertising, however one-sided it is.

A free society must treat its members as fully responsible adults — including treating them as fully responsible for their political views and voting behavior. Any healthy democracy must set a high standard for voters to live up to, and democracy’s advocates must teach and otherwise empower voters to achieve it.

This column’s question was: Does money buy elections? That question is not to be confused with the related question: Does money buy politicians? We might be cautiously optimistic about the voters. But the disappointing large number of politicians for sale is a more difficult money-in-politics problem, one that deserves a column of its own.

[This article was originally published in English at and in Portuguese at]

Comparando el desempeño económico de América del Norte y América Latina [Spanish translation]

Por Stephen Hicks

[This is a Spanish translation of “Comparing North and Latin American Economic Performance”, originally published in English at EveryJoe and in Portuguese at Libertarianismo.]

Todos queremos que la gente logre vivir en forma adecuada, especialmente las personas pobres que están luchando por ello. Y si somos ambiciosos, queremos además que la gente pueda vivir una buena vida, que incluya cosas caras como comida de calidad, educación, salud y viajes.

BRAZIL 27 - FAVELLA¿Cuál es la razón de las grandes diferencias en el desempeño económico entre las dos Américas?

Tomemos algunas cifras del PIB del Banco Mundial, una forma de medir el éxito económico. Los datos del PIB son sorprendentes.

Comencemos con un país pobre como Bolivia: el PIB per cápita es de $3.000 (USD). En Paraguay, la gente es más próspera, con $4.500. Y los ecuatorianos y peruanos son el doble de ricos que los bolivianos, con más de $6.000 por año.

Subiendo por la escalera económica: los colombianos, mexicanos, brasileños y argentinos suelen hacer alrededor de $8.000, $10.000, $11.000 y $12.000 por año, respectivamente. Ya la diferencia entre Bolivia y Argentina es de cuatro veces. Impresionante.

A continuación, la nación latinoamericana más exitosa: los chilenos producen más de $14.000 por habitante. También impresionante.

Pero ahora comparemos esto con Canadá, donde el PIB por año es de $50.000. Y tenemos números aún más altos en Estados Unidos: más de $54.000 por año.

Esto indica que si comparamos las naciones de América del Norte con las naciones de América Latina — incluso las naciones latinoamericanas más exitosas –, en promedio los americanos del norte son cerca de cuatro veces más ricos que el más rico de los latinoamericanos.

¿Por qué?

Si uno es un político o intelectual latinoamericano, no hay pregunta más importante de responder bien que ésta. Sobre todo si uno está verdaderamente comprometido — y no solamente profesa estarlo — con el bienestar de su gente.

Así que probemos algunas hipótesis para explicar las increíbles disparidades presentadas:

  • ¿Podría ser una diferencia en los recursos naturales? Tanto América del Norte como América del Sur están enormemente bien dotadas de recursos naturales.
  • ¿Será acaso la historia de su inmigración? Ambas Américas han absorbido una gran cantidad de inmigrantes, personas con diversos talentos y con la energía y ambición para viajar lejos y construir nuevos países.
  • ¿O podría ser la explotación por parte de las naciones ricas hacia los países pobres, como suelen quejarse los comentaristas de la izquierda? Si éste fuera el caso, tendríamos que imaginar que los canadienses se hicieron ricos saqueando a los bolivianos y paraguayos. Si eso suena demasiado absurdo, entonces tal vez deberíamos considerar la hipótesis inversa, como argumenta el profesor Garrett Jones, acerca de que los países ricos no han explotado lo suficiente a los países pobres.
  • ¿Y qué ocurre con el legado del colonialismo? Para bien o para mal –y a veces para bien-, la cultura española y la cultura portuguesa fueron las influencias colonizadoras dominantes en América Latina. Sin embargo, esas culturas colonizadoras no eran especialmente buenas en cuestiones de gobernancia y creación de riqueza. Y para bien o para mal — hay muchas debilidades en la cultura anglo –, América del Norte tuvo la suerte de haber sido colonizada principalmente por los británicos.

En su clásico Imperios del Mundo Atlántico: Gran Bretaña y España en América, 1492-1830 (Yale University Press, 2006), el profesor J.H. Elliott hace el contraste de esta manera: el imperio de España en América fue un “imperio de conquista”, mientras que el de Gran Bretaña fue un “imperio del comercio” (pág. xv).american-neighborhood

Así que la pregunta que sigue es: ¿Qué ideas e instituciones dieron los británicos a los norteamericanos que les permitieron construir economías exitosas?

Sin embargo, no es sólo un problema que se remite al colonialismo de cientos de años atrás. Hace apenas un siglo — para tomar dos ejemplos destacados –, Buenos Aires y Chicago eran más o menos iguales en tamaño y prosperidad. Ambas ciudades fueron igualmente pobladas por inmigrantes de todas partes, y ambas eran importantes centros agrícolas y de transporte. Sin embargo, como analiza el documento de la Oficina Nacional de Investigación Económica, escrito por Filipe Campante y Edward L. Glaeser, las dos ciudades han seguido radicalmente diferentes trayectorias: Chicago hacia una mayor y mayor prosperidad y Buenos Aires hacia un lento declive.

Datos recientes también indican que los políticos e intelectuales pueden trascender las historias de sus culturas y probar nuevos caminos. En The Wall Street Journal, David Luhnow argumenta que tomar a América Latina como un bloque indiferenciado es demasiado crudo. Hay dos Américas Latinas, una orientada hacia el Atlántico y hacia el estatismo, y la otra orientada hacia el Pacífico y mercados más libres. Las recientes tasas de crecimiento de Brasil, Argentina y Venezuela son, tristemente, la mitad de las de Chile, México, Colombia y Perú.

¿Qué ha llevado a esas diferencias?

Me dirijo a los intelectuales y a los políticos latinoamericanos con estas preguntas, porque, en mi experiencia, algunos de ellos son de mente abierta y exploran activamente los datos y la historia. Pero son una minoría. La mayoría parece continuar encerrada en ideologías contraproducentes.

Y esa batalla ideológica es la más importante. El hecho de ser o no ser capaz de reconocer y aprovechar los elementos naturales como recursos; de ver la emigración y la inmigración como algo bueno o malo; o qué tipo de gobierno y sistema económico uno favorece. Todo ello depende de los supuestos filosóficos generales que uno ha adoptado.

Así que otro factor importante en la explicación de las diferencias económicas entre América del Norte y América Latina es que el mundo intelectual — en particular el mundo filosófico — se ha dividido. En los tiempos modernos está dividido entre la filosofía Continental y la filosofía Anglo.

La tradición filosófica Continental se basa principalmente en las tradiciones intelectuales alemana y francesa. Sus principales intelectuales son Kant, Hegel, Marx y Nietzsche, y en las generaciones más recientes, Heidegger, Foucault y Derrida, entre otros. Esta tradición tiene un gran impacto en la vida intelectual de América Latina, pero un menor impacto en la vida intelectual de América del Norte.

En América del Norte, una tradición intelectual diferente es mucho más fuerte. Se trata de una tradición intelectual británica, basada en Francis Bacon, Isaac Newton, John Locke, Adam Smith, David Hume, John Stuart Mill, y otros. Pero en América Latina, los Anglos son mucho menos conocidos.Lima-skyline

Mientras esta última es una filosofía que se centra en individuos racionales que producen y comercian entre sí para mutuo beneficio, la filosofía continental apela a los conflictos de poder entre grupos semi-irracionales que se explotan entre sí. Este choque de tradiciones filosóficas logra explicar el predominio de terribles guerras en el siglo XX, y logra explicar las diferencias en el desempeño económico.

Así que para aquellos intelectuales y políticos, especialmente de América Latina, cuya educación los ha expuesto únicamente a los Continentales del siglo XIX y a los posmodernos del siglo XX, la pregunta es: ¿Están prestando igual atención a la tradición intelectual extremadamente potente que ha tenido gran éxito en América del Norte?

Si una ideología sólo te enseña a ver grupos explotándose donde quiera que mires, entonces verás a la riqueza como un signo de crueldad y a la pobreza como un signo de victimismo. Entonces tendrás dos opciones: convertirte en un explotador despiadado o atacar a los ricos en nombre de los pobres. Ninguna de estas estrategias conduce a la prosperidad económica.

Pero si estamos realmente preocupados por la pobreza y, como toda persona decente, queremos que todo el mundo sea capaz de lograr una buena vida, entonces tenemos que abrir nuestra mente a otras tradiciones intelectuales que pueden tener mejores respuestas que las que, por desgracia, se han impartido principalmente en América Latina.

[Translated by María Marty, 2016.]

Predicting political tipping points is hard


How does one evaluate the significance of a time when (a) millions of voters seem drunkenly elated about a candidate, and (b) all of that society’s wise pundits dismissed the candidate’s possible success?

History helps by sending oracles about eras when those two phenomena were jointly in play.

* On the early 1930s in Germany, intellectual historian Sarah Bakewell comments, “Sometimes the best educated people were those least inclined to take the Nazis seriously, dismissing them as too absurd to last.”

* And philosopher Karl Jaspers compared Germany’s early 1930s to the eve of World War I: “It’s just like 1914, again this deceitful mass intoxication.”

Early 21st-century America is different culturally and institutionally from early 20th-century Germany in many ways, and even in their areas of similarity there are differences of degree. But it is striking that two similar factors are operative: The masses are energized, and the thoughtful are taken by surprise.

nn-hardcover-150x231My view is that philosophy does its work far behind the scenes of political activism, establishing the principled framework within which a thousand points of practical detail are hashed out.

* On the role of two generations of German philosophy in the lead-up to National Socialism: Nietzsche and the Nazis.

* ep-125pxOn the role of two generations of postmodern philosophy in the lead up to contemporary America: Explaining Postmodernism: Skepticism and Socialism from Rousseau to Foucault.