01 December 2005

The French Riots: The Fruits of Nihlism and the Welfare State

Critics of the French Riots and the government response have sought explanations for the events by assuming that there is necessarily a specific motivation for the violence. Some postulated that it was because of the initial deaths by accidental electrocution, others believed it was simply a result of long-brewing discontent with the segregation and lack of economic opportunities.

While these factors may have played some minor role, I believe the fundamental cause is much deeper and pervasive. The primary cause is the amorality of permissive pragmatism which has for generations increasingly permeated our society. This is not to say that the problem lies in a decline in religion, but rather a decline in principles more generally.

Up until the late 19th century, there were generally held beliefs in most western countries that man has certain natural rights, including his right to life, liberty and property. These rights were not rights to the production of others, but rather to retain one's own freedom of action and the right to keep one's own production. People were believed to ultimately be responsible for themselves, and the role of the state was largely to defend those natural rights. While it is true that not all western countries followed this principle equally consistently, each country generally thrived to the degree to which it adhered to this simple principle.

People understood that by working and trading together, everybody's life improved. To abuse a shopkeeper or be generally disrespectful was a recipe to not only social issolation, but self-induced economic autarky from the benefits of exchange. In short, disrespect of others led to misery by the refusal of others to trade un such terms.

As the role of the state grew to include provisions for the material well-being of its people and to arbitrarily legislate arbitrary morality, the concepts of individual responsibility and respect began to fade. The state increasingly started taking wealth from those who had earned it and gave it to those who hadn't. Increasingly arbitrary laws were passed, like rules requiring mandatory schooling, minimum working ages, minimum wages, political correctness, affirmative action and conscription. Social programs like unemployment insurance, the dole and pensions further deteriorated the general principle of self-reliance.

Whereas in earlier times, people learned responsability and respect for others and property by virtue of having to provide for themselves, we now have created a "give me!" culture where people consider the fulfillment of all of their basic needs to be a right.

It should not surprise us when such wards of the welfare state shoot at rescue helicopters during natural disasters like Hurricane Katrina or indescriminately burn vehicles and properites in riots in France. It is not because such people have valid values or even particular grievences and are simply protesting injustice. It is because they have been raised with no concept of values to the point where they are biting, burning and shooting the hand of the state that feeds them. Curiously, the response of the state is not to give such ingrates a chance to achieve a sense of self-worth by withdrawing all social programs, but rather to further accentuate the entitlements and resulting decline into amorality.

The solution to modern amorality is simple. Dismantle every aspect of the welfare state and return our government to its limited role of protecting rather than abusing the life, liberty and property of its citizens.

08 November 2005

Assimilation in France is alive and well: immigrant riots prove it

While many obsrervers have taken pains to describe the alienation and discrimination that has driven the poor French (immigrant) youth to their desperate acts of violence and civil unreset, their behaviour is actually evidence of something else entirely: that these immigrants have been so assimilated that they are adopting the great Gaulic tradition of manning the barricades and achieving goals through intimidation.

The swarming Parisien teen-agers on scooters with molotov cocktails have far more in common with the peasant farmers dumping produce in the streets, or electricity workers cutting power to whole neighbourhoods, than they do with Muslim radicals in the Gaza strip or Iraq.

What could be truer to the barricaded streets and bonfires of the French revolution than torched automobiles and shopping malls?

Instead of wondering at why 3rd generation African immigrants are upset, it would be a far better question to ask what it is about French society that tolerates terrorism and extortion on a grand scale? Why is that every French government (regardless of stripe) always caves in to the demands of protesters, whether it is angry pilots who want a government bail-out, or truckers who are upset about gasoline prices? Already the French politicians are falling over themselves restoring funding for suburbs, putting money into apprenticeship programs, and other largesse for the poor.

The only mystery here is why it took the teaming underclasses of the French Banilieu so long to finally take to the streets and demand their own piece of the French tax-payer.

Now there is someone who really has a reason to go on a riot...

03 November 2005

The Virtues of Discrimination

There was once a day, even in my brief life experience, when it was a compliment to call somebody a discriminating person. This was to suggest that they were astute enough to distinguish sound ideas and activities from frivolity. Unfortunately, it is increasingly becoming a criminal indictement to be considered discriminating.

Two recent articles, one on Rosa Parks and another on Greek ostracism help to illustrate that discrimination is one of the cornerstones of a moral, free society. This is as true for god-fearing societies as much as for their atheist counterparts.

In a free society where goods and services are produced privately, voluntary discrimination acts as a regulator of behaviour. It financially punishes businesses who discriminate on arbitrary racist or sexist grounds by reducing their revenues and profits, allowing them to be overtaken by their non-racist, non-sexist competitors. Only by securing government regulations and legal enforcement of irrational discrimination can the impartial hand of markets be stayed from punishing such irrational policies as racism and sexism.

The Rosa Parks article linked above illustrates this poigniantly by reminding us that the private bus owners and drivers protested and resisted the Jim Crow laws that required blacks to give up their seats because of both the injustice and the marginal loss of revenue that such laws entailed. Even if some bus operators were personally racist, their desire for profit led them to oppose racist practices that would reduce their revenues and profits.

In a free market, businesses are successful proportionally to the number of customers that they can please and have every incentive to treat customers with respect, even when a customer is wrong or impolite. Maintaining a positive reputation is paramount to developing a large, loyal customer base, even if that involves some minor losses along the way. The liberal product return policies and satisfaction guarantees offered by most successful American businesses attest to this fact.

Conversely, the right to descriminate allows businesses to refuse service to those who are excessively rude and abusive. This forces such unpleasant people to either be polite and respectful or lead a lonely life of ostracism. The Rosa Parks incident demonstrates that self-interest keeps businesses from discrimating arbitrarily, but does not discourage them from refusing service to abusive customers whose presence is both unpleasant and unprofitable. Businesses will only refuse service when the amount of additional revenue the refused customer might bring them is outweighed by the trouble or cost of dealing with the customer.

Private citizens should and do also discriminate. They should choose wisely which establishments they patronise and whom they associate with. This is - thankfully - still generally legal, though there is strong societal pressure to encourage such discrimination to be applied irrationally. For example, consumers are encouraged to make decisions based on the location of the product producer rather than the quality and price of the products. This is usually packaged as "Buy Scottish" or "Buy American" type campaigns that ignore quality in favour of blind patriotism. There is also often a sense of guilt brought upon the successful to "give back" to the poor, suggesting that they took something from them in the first place or contributed to their miserable condition when neither may be the case.

For discrimination to function properly, two things need to change. Firstly, it has to be perfectly legal for all private businesses and individuals to discriminate on whatever grounds they see fit. Secondly, it is vital to minimize the presence of the state in the economy. The state does not have the same right to discriminate as long as it is funded involuntarily by taxpayers. Because they have paid for the services of the state via their taxes, all tax-payers conceivably have some right to expect access to all state-provided services.

A resounding re-instatement of the right of private individuals and industry to discriminate will cause a renaissance of good-manners and morality, not the opposite. It is no coincidence that the times when it was a complement to be discriminating corresponded to times when people feared less and respected one another more. Let us all be more rationally discriminating.

Microsft: a culture of detail

It's taken me a while (5 years, in fact), but I am finally starting to understand the culture at Microsoft, and how to fit it a little bit. It has been quite an uphill climb for me. I have been used to being the wunderkind at every other place I've worked, but here I was just another face in a crowd of tens of thousands. It has been frustrating, and humbling, to realize that my ability to effect change is so limited, and having to re-discover ways to get my voice heard.

And what have I learned?
  1. Microsoft is a detail oriented place
    There is a high premium placed on micromanagers, and people who know EVERYTHING.

    This has been perhaps the most difficult problem for me to grapple with. By nature I am a broad-brush person who ignores details in favour of the "big picture". At Microsoft, however, this is deadly to your career since no one will trust your recommendations, or judgement, if you can't answer all their questions at the ritual grilling.

    I have a tendency to make decisions based on gut feel, and my over-all impression of customer needs, and market. But this kind of instinctual activity does not go down well at Microsoft.

    Not that this leads to better decision making. I have seen us make plenty of lousy technical and business decisions, despite (or maybe because of) this detailed fanatacism.

    I have heard many a tale of instances where top executives ripped into someone on minute issues that had come up years before. These stories are told with a sense of awe, and admiration, that our great company leaders have such a grasp of detail. Such stories, however, make me wonder if we aren't somehow too obsessed with minutiae.

  2. It's all in the family
    Relationships mean a great deal at Microsoft, and there is a strong preference for old-timers who have built a history of trust. It is a cadre of old-timers who really make this company tick, which have built a web of relationships, and trust, that the company falls back on again and again. I would even say that there is an inverse relationship to the level at which one is hired into the company and the success of their career. It is far easier to start as a new staffer, out of college, and work your way up rather than come in mid-career with a lot of experience acquired elsewhere.
The good news is that things are finally looking up for me at Microsoft, and this past year has been the first time I've felt like I was really starting to make an impact. The biggest advantage is that I am now starting to gain a wee bit of trust. I may make decisions from the gut, but now a few people are starting to see that these ideas often have some merit to them.

To be sure, I don't regret for a minute my decision to work at Microsoft. It has been tough, but I've learned a lot (about myself and others). Yes there are lots of things to complain about at Microsoft, but there are lots of great things too. I'll have to write about some of these things in future posts.

26 October 2005

A Miracle in Economics Education...

I became a teacher in order to help make the world a more rational place by educating our youth. I choose to teach middle school and high school students so as to have a chance to give them the right tools with which to handle reality early rather than attempting to re-educate them at the university level after their minds have been misguided or neglected from middle school. I also fervently believe that most students are capable of learning most of what is currently reserved for high school while in middle school and what is currently reserved for undergraduate university while in high school. As a teacher, I can only reach 120 or so students per year. At that rate, it will take a long time to educate the world.

Wouldn't it be marvelous if there were an organization to "promote excellence in economic education by helping teachers of economics become more effective educators?" Wouldn't it be even better if such an organization were to train teachers around the country for FREE?

There is such an organization...

I couldn't fully believe it to be true until I actually attended such a course this summer. I took a week-long course entitled Economics for Leaders (http://fte.org/teachers/programs/efl/) and it was absolutely free. It is now my intent to attend every course offered by the Foundation for Teaching Economics (http://fte.org/) at my earliest opportunity. It is an extraordinary organization with a mission that matches my own. They also offer online courses.

Most of their programs are for teachers, but some of them are also for rising high school seniors. I highly recommend FTE programs to any motivated students or teachers who qualify.

15 October 2005

Long Live Globalization!

Our family outing to IKEA today sparked introspection on the numerous benefits of globalization and successful domestic businesses. There can be a good deal of charm in a local mom & pop business that is friendly and well-run, but when a local shop becomes popular and successful enough to grow into a regional, national or international conglomerate, many other people can benefit from that business in addtion to the local neighbourhood of the first store.

It is bewildering to me that there is so much animosity towards successful large coprorations. Organizations like Walmart -- that started as a well-run local Arkensas store -- now bring economies of scale, excellent customer service, low prices and jobs to literally millions of people around the world. We don't have to hope that our local merchant is as efficient as Sam Walton, we can have one of Sam's own stores on our street. Whether local workers labour for Joe's local food store or the local Walmart, they still have a good job. In fact, they can likely get better benefits by working for Walmart because it can negociate better deals with health insurance providers due to its size.

We sometimes forget that these big corporations are really just groups of normal people like ourselves who want to buy a little house, have a family, send their kids to good schools and maybe even go to church on Sundays. The nature of the workers doesn't change with the size of the company for which they work. Each Starbucks, for example, has an ambiance heavily influenced by the workers therein. Further, anybody can be an part-owner of such businesses and share in profits by simply buying shares of their stock. In fact, many of us own shares of Walmart indirectly through the investment holdings of our retirement savings plans.

There is often particular antipathy toward foreign companies and products made abroad. That foreigner, however, is a normal human being like the rest of us. If you met him on a train, you might even become close friends, but somehow when a product he made is anonymously labelled as being from a foreign country, it is somehow less desireable than a locally made product. Political borders are arbitrary and often ephemeral. To take a simple example, it might be far more "local" geographically for somebody in Alaska to trade with British Columbia or Yukon Territory, but those are 'foreigners' because arbitrary events in history caused Alaska to become part of the U.S. rather than Canada.

The favoritism for locally produced items is perhaps the most absurd when taken to their logical extreme. Why settle for products from your state or country as being 'sufficiently local' when you could insist on products from your town or street. How many cars or bananas are produced on your street? Personally, I would be sceptical of buying coffee or bananas produced locally here in Glasgow, Scotland.

In short, it is as arbitrary as being racist to choose products based on the proximity of their origin to your place of residence or the nationality of their producer rather than their quality or price. When such preferences for local goods become enforced by government in some form of legal protectionism, it results in inefficiency, encouraging locals to produce inefficiently what could be far mroe efficiently produced elsewhere and exchanged for products in which your region has a competitive advantage. Can you imagine what would happen to the population of Hong Kong, if the government mandated that all food consumed in Hong Kong could not be imported from outside the city?

Globalization translates to better, cheaper products, made easily available to more people. When I walk into IKEA, I can purchase products designed by a skilled foreigner and produced in economies of scale from every corner of the earth (we purchased two bowls today, identical in every way but color; one came from Portugal while the other is from Turkey). Thanks to IKEA having sufficient size, efficiency, and global production facilities, I can buy a host of things to make my life far easier or more comfortable that would simply not be available or would be prohibitively expensive if everything had to be produced in Scotland. I gleefully traded with producers in a dozen different countries during my single visit to IKEA. If those producers could only sell to their local market, we would all be the worse off for it. When two traders of any origin voluntarily come together -- even indirectly through merchants like IKEA or Starbucks -- to trade, both sides benefit, otherwise the trade would not occur.

The next time you hear demonstrations against globalization, ask yourself what those demonstrators would be wearing, driving and drinking for breakfast if they had to produce everything they consume themselves, for that is the ultimate outcome of non-trade. Does it make sense not to trade with somebody simply because he lives somewhere else?

I can hardly wait until more of my favourite shops like Trader Joes and Togos spread to other regions of the country and world.

04 September 2005

Making Poverty History...

Here in Glasgow, especially around the University, there is substantial support for the white "Make Poverty History" wrist band campaign. While the cause of wanting to reduce poverty is indeed noble, and one that I sincerely share, I fear that the efforts to reduce poverty through this program may have exactly the opposite effect.

Through the vast majority of human history, virtually all humans in all regions have lived in a squalid poverty that is hard for most of us to quite fully fathom. Suddenly, some 250 years ago, something happened to cause some countries to climb to unfathomable riches while others remained generally destitute. How did it happen? What enabled the western world to become so wealthy?

They didn't rob the poor, as the poor today are actually generally better off than 250 years ago. They didn't simply have access to resources, as even rocks like Hong Kong and Singapore became wealthy while their surrounding neighbours and soviet russia, teaming with resources, remained in relative poverty.

There is one, singularly important factor that has historically eradicated poverty: capitalism. Free markets, property rights, rule of law, stable currencies, and limited governments have allowed men to come out of the dark ages and rise towards their true potential by creating phenomenal amounts of wealth that simply didn't exist before.

Even today, we witness the wonders of capitalism in both directions. Countries that suppress it, like Zimbabwe, are facing famine. Countries that embrace it, like India and China, are rising in wealth at phenominal rates. Even natural disasters can be better contained in a relatively capitalist country as compared to a less-capitalistic one. Take, for example Hurricane Katrina vs. the Sumatra earthquake. The human casualties of Katrina are orders of magnitude smaller because American's wealth allows it to take action to minimize casualties. I cannot think of a single capitalist country that has had a famine, while non-capitalist countries have them relatively regularly.

If we truly want to reduce poverty around the world, there is a clear solution: promote worldwide capitalism and globalization. When we buy products from poor countries, we create jobs so that they can build their economy. Our factories in third world countries provide the valuable first steps for many children and young women to get out of the sex trade and into an honest job from which to support themselves. Too often we try to impose our level of luxury, where we can afford to not have our children working, on countries that are still at an earlier stage of development.

Instead of wearing bracelets, we should:
- encourage capitalistic instutions around the world
- buy products from poor countries at market prices
- build factories in poor countries when it makes economic sense
- encourage globalization

Alas, many of the bracelet-toting activists will do exactly the opposite, the the detriment of the poor. For those that care, the following economic analysis does a brilliant job of explaining the why capitalism is the best solution for the poor:

For those who care to better understand the track record of capitalism, I suggest:

23 August 2005

Fair Trade Coffee: Unstable grounds...

Here in Glasgow's West End around the University of Glasgow, there is a strong "Fair Trade" coffee movement. Not only do many coffee shops prominently advertise their use of Fair Trade coffee, even many of the churches here flagrantly indulge in this movement. It is both sad and disconcerting that an upscale, intellectural neighbourhood surrounding Adam Smith's Alma Matter should so flagrantly ignore basic economic principles.

Prices are normally the primary feedback mechanism to inform producers of the relative changes in supply in demand. High prices suggest that they need to increase production. Low prices induce them to lower production. In the case of commodities like coffee, increases in production involve a delay of several years between the planting of new coffee trees and the first harvest. So, while supply does adjust to price changes, it does cannot do so quickly. Over the past decade, supply has increased substantially in response to high prices in the mid-1990's, and has become more efficient in many ways, lowering costs of production.

Grounds for Complaint:

By paying substantially more than market rates for fair trade coffee, the fair trade producers have incentive to produce MORE coffee, rather than cutting back production, as the world coffee price would suggest. In other words, by buying fair trade coffee, we encourage fair trade producers to increase the supply of coffee and thus depress the market price even further. Given that only about 1% of coffee produced is fair trade, the losers by the lower world market price far outnumber the winners who happily benefit from the fair trade subsidy.

Oxfam's Bitter Coffee:

It is precisely the poorest producers who cannot organize themselves or afford to pay for fair trade certification who suffer the most with the advent of fair trade coffee. By increasing demand for fair trade coffee, those tiny producers outside of fair trade have an even lower demand for their non-fair trade coffee, lowering the price.

If we truly want to help coffee growers, rather than just assuage our guilt, there are things we can do. By freeing up markets in other alternative commodities - like textiles - coffee farmers would have more options if the market price of coffee is too low for them to make a living. We should also stop subsidizing producers through organizations like the World Bank and IMF, which distorts market forces by reducing the relative costs of production of some farmers while others bear their full costs. We can also drink more coffee, hence increasing demand.

In short, the best cure for the poor around the world is not feel good activism like fair trade, but encouraging fewer international trade restrictions, thus allowing poor countries to sell us things they produce in order to improve their quality of life. See subsequent blog entry on Sweatshops. We can do far more for the world by learning and applying basic economic principles than by wearing coloured wrist bands.

10 July 2005

A solution to public education...

Although I ideally believe that the government should not be involved in education in any manner, I wonder if I may have stumbled on a partial solution to public education's ills. If three simple laws were passed, they might allow public schools to eliminate many of the trouble makers, allowing the other students to learn more.

The three step solution:

a. Allow child labour at any age.

b. Allow public schools to expel / suspend any student.

c. Remove legal requirements for students to attend school.

When school is no longer a right, but a privalege, I believe that children and their parents will take it more seriously. By prividing the alternative of on-the-job learning and making it easy to expel misbehaving students from public schools, I wonder if it might improve the motivation and quality of public school students overall. Those that don't want to be in school can go to work instead, and those that do go to school are faced with the reality that if they don't behave properly, they will be involuntarily ejected, keeping them from disturbing the education of the motivated.

I realize, of course, that it is highly improbable that any or all of these three steps will ever be sufficiently socially acceptable, but I believe that they do provide a potential solution short of eliminating public education altogether. They embody some of the key motivating factors that make private schools successful.