In 1975, engineer Steven Sasson created the first digital camera, a toaster-size prototype capturing black-and-white images at a resolution of 0.1 megapixels.

Class starts in a few hours, otherwise you’d see a long post about this.

The point of my question is not really to wax idyllic about the desirability of a world comprised of large swaths of 100% private organization, not at all. My point is that for all of the tinkering, techno-planning, stimulating, etc. that we do, is it not even the tiniest bit odd or awkward or perhaps cognitively inconsistent to see not so much as one tiny little experiment in America, something resembling complete private order? When people ask me why I think the default view is what it is, this is primarily what I have stuck in my head that has led me to that conclusion. Clearly there are millions of thoughtful people out there, and clearly a good many of them would like to see better outcomes for humanity regardless of how we got there. At least so I think. Then why are the “experiments” we see here in America anything but what I refer to above? I think I can answer that question without having to rely on the default view argument, but that’s for another post.

This musing really struck me hard as I was sitting outside the other night gazing at Orion (don’t ask) and thinking about a discussion I had recently with some Chinese students. I had asked them about how some of their home cities have changed in the last 20 years and I had asked them if they had thoughts on the emerging multi-tiered system of property rights in China. It was exciting to see them talk about how fast China has developed, about some newfound freedoms people were enjoying, etc.

And so I am stuck with this in my head. There are some people in this world, including one of the most influential Progressive intellectuals who gaze fancifully upon China because their still authoritarian government has the ability to mobilize people and resources rapidly and therefore would be a better model to emulate if you wanted to end bipartisan gridlock on climate policy and health care policy, for example. Never mind that China has lots of trains and roads to nowwhere and that their middle class is subsidizing American consumption at their own cost …

I am absolutely baffled by the quite opposite take on China. I, too, can be called a Chinese navel gazer. And I too wish the US could be more like China for a day. But I say that because I look at the trajectory of China and I look at how their economic system has evolved in the last two to three decades and I see a country where private enterprise is becoming more respected and where notions of private property are becoming more, not less, appreciated. Indeed, the authoritarian Chinese that Friedman and his followers so lovingly look upon are authoritarian enough to set up many giant enterprise zones where the scope of economic freedom is far larger than it is elsewhere in the country. In other words, the Chinese communists are far more willing to experiment with competition and respect for property than it seems we American “democrats” are … isn’t that a bit funny?

And no, please don’t try to invoke New York’s special enterprise zones as an example – they are far from resembling what I am talking about. Giving special favors to certain technology firms and sticking it to the rest of the taxpayers is not exactly what I have in mind.

Finally, my scorekeeping above is a bit conservative. Why is that? It’s a static measure. But remember each of the 87,000+ jurisdictions out there has a chance to remake policy every year. Over a two year period, for example, there over 170,000 chances to try contract and property. Over three years, over 261,000 … in other words, if there are N jurisdictions and T time periods, there are N x T total periods when contract and property have had a chance to be tried. And how many of the 87,000 jurisdictions over the past 50 years have actually committed to it?

In a country that is characterized as “wildly capitalistic” that is a pretty low batting average, no? What would you call us if we actually gave it a shot a few times?

When it did the research on this fuel, it was not the result of the diktat of some all-knowing energy czar in Albany or Washington, DC, despite the fact that the prices of whale oil for illumination had been increasing at “alarming” rates for some time. But what is most important is the way that Gesner advertised his wonder product. He ran pieces demonstrating that his kerosene was one-seventh the price of sperm whale oil.

And for all the pomp and circumstance surrounding the new green energy economy, we never hear a single peep about radical changes like this. Stop and think for a minute – how would your life change if the cost of using energy fell by a factor of 7! For example, in the winter our home energy bill runs about $300 per month, and something like $150 the rest of the year. For argument’s sake, call it $250 per month. So we spend $3,000 per year on electricity and gas for our home. And we probably spend about $4,000 per year to fuel up our two cars. And this is leaving out the embedded cost of energy in many of the other things we consume. We spend at least $7,000 each year on energy and related costs. What would a decrease in prices by a factor of 7 mean to us?

Well, it would mean that instead of spending $7,000 per year on energy, we’d only have to spend $1,000 per year. We’d have $6,000 per year, every year, of extra income that we did not have before. We sure as heck know what we would do if we had $6,000 of extra income, and it would be great … if only … if only.

Reflect for a moment on the way that “cost-cutters” are treated in today’s world. It’s 100% contempt 100% of the time. Walmart is the king of recognizing efficiencies in its supply chain and it is the symbol of everything that is wrong with the world. Forget for the time being that its existence reduces the cost of goods by something on the order of $2,000 per year each year for the poorest families in America. Or think of how we caricature Henry Ford’s ruthless cost saving or Andrew Carnegie’s miserly cost consciousness (did’t he famously sweep up iron and steel filings off the factory floor each day and put them back into his production process?) or consider that Rockefeller and his evil oil company figured out that there are over 200 products that can be generated from a barrel of oil. 200! And all of that came about because each and every one of these “evil” people cared very much about lowering costs.

What the modern environmental movement desperately needs is “Windmart.” We need a renewable energy madman, whose sole goal is to deliver us energy for 10 times lower the cost as we are currently getting it today. We need a madman who refuses to see a single cent of effort or materials wasted in an effort to deliver the next form of energy to us. But we aren’t likely to see this guy anytime soon. He’s Gone Galt. And why has he gone Galt? Because the ruthless cost-cutter is seen as the devil, as everything that is wrong with our semi-capitalist world and few people recognize that the switch to Wind power or flower power or whatever power is coming next just ain’t gonna happen by diktat – it’s gonna happen when we get a breakthrough so incredible that it blows the cost doors off of our current options.

Our modern “E”nvironmental movement should be ashamed. It really should be. We are fed a constant drone of platitudes about shared sacrifice and about how we simply cannot continue living like we are today without wrecking the planet. We are fed time and time again the sorry and tired idea that we need to spend more for energy and less for everything else. That’s the new American way. We’ve descended from a world of Horatio Alger-like ambition to Pittsburgh Pirates’-like resignation. If I were the “mouthpiece” of the new “E”nvironmental movement, I would be spending all of my time ginning up excitement at the prospect of energy that is a factor of 7 cheaper than what we use today. Is it easy? No. Am I predicting that it will happen? Of course not. But no one in the past was able to predict energy transitions and few could have imagined that energy technologies would become so inexpensive as to utterly change the world in ways we could never envision. Cheap and safe electric power was a game changer over using charcoal, coal and wood. I sure hope that someone like Sam Walton is lurking in the green energy sector obsessing about ways to make those turbines last a little bit longer, use a little less material, and so on. You know, the American way – there’s those old ideas popping up again.

p73 in my peak oil notes

One aspect of this learning process does not bring me joy – and that is the annual dance of students trying to figure out what I am. It’s a strange process really, since until recently I never really tried to actively do it when I met others. For example, for all but one or two of my college roommates, I have no idea to this day what their political affiliation is, despite my apparent interest in political economy.

Early on in my principles of economics class, we spend lots of time emphasizing what economics is and is not about. Pretty early on students know full well that it has a lot to do with things other than money. Pretty early on students come to appreciate that economists spend a great deal of time thinking about and debating how messed up the world might be. They tend to get excited about this too. One reason I think they get excited is that hearing a teacher discuss that the world has some issues reinforces this well known “fact” that they have learned from many people over the years. But as the course evolves and we learn about the challenges to social planning, about the limits to our knowledge, about the importance of property, about the way markets work and force reality onto policies like a dousing of cold water, some formerly excited students either become angry, disappointed, or simply puzzled.

“How could something that started out with such promise end up as such a buzzkill?” I find some of them asking. Here is an example after just one lecture. On day one, I run around demonstrating the power of incentives, and that the powerful push and pull of incentives is evident in all aspects of our lives – not just the things we do in market settings. We end up having a discussion about what being a true scholar means and about how economics properly studied is the essence of humanity – it helps us get the most out of life, and not just the most in terms of the “profane and dull pursuit of material gain” (their descriptions not mine!) but also in terms of the “softer” and more “sacred” aspects of life. Some students hate this – they just want to see some graphs and equations and get ready for their next theory class. But some love it (as I do). But among those who love it, I inevitably end up in several conversations that include a observations like, “I am sure glad you talked about sacred values today, I was worried that I was going to get another Republican free-market guy … I think this class might turn out better than I feared!”

I don’t really respond to that aside from learning more about the student and asking them what their big concerns might be. Let’s take this observation out of context. You’ll notice a really disturbing rhetorical trick here (that I hypothesize has been increasing in incidence in my circles). It’s like an argument from intimidation dressed up in a verbal nicety. Surely you are not a Republican! And embedded in this argument is something worse than the logical fallacy that the aforementioned technique implies. Because embedded in these comments is the idea that commitments to justice (properly understood, not the social kind), clean environments, peace and prosperity are only held by a select and enlightened few, and that people who do not “tow the party line” somehow hope for injustice, pollution, war and indigence?  Shouldn’t a human being’s commitment to the good life go without question?

And about that “free-market economist” meme. Nothing drives me crazier, particularly since most people have some version of corporatism in mind when they hear the term, or some other dubious attribute. There is a Hayekian lesson in central planning that can be gleaned from this simple “naming problem.” Ironically, most 6 year olds understand it, as do their teachers, but as we age we forget the lesson. No label effectively captures the myriad thoughts, features, bugs, etc. that make up a person. People are typically repulsed in polite company when certain labels are used. For example, when was the last time you heard someone come up to you at a party and ask you, “So, you must be white?” even if you are light skinned and seemed to have other things that might mark you as being white. You will never hear it. But as for someone’s views on economics or politics, and out come the labels. I have my own ideas as to why, which we will write about later, but let’s stay focused in the point at hand. The Hayekian lesson is that abstracting from the millions of little attributes and nuances of one’s view into some view that is amenable to understanding and reprocessing by people who know you is a really tough task — having it be processed by people who do not know you is completely absurd. It cannot happen. Yet we continue to do it.

I do not think most people have a clue what “free-market economist” means. It really is shorthand for something close to Republican. Well, I am here to announce that I am neither a Republican nor a free-market economist. If I must be tagged, and tagged I will be, then here is how I declare myself in the future. Definitions will come in future posts, as will further thoughts on the linking of terms like free-market and Republican. Please note that when I advocate the views below that I am not claiming that any of them are “right” in some objective sense, I AM claiming that they are “right for me” for whatever that means, and I am also claiming that all of these have their obvious difficulties. No world view is perfect, but some are less imperfect than others. I am a:

• Voluntary-ist
• Anything-that’s-peaceful-ist
• Property-rights-ist
• Competition-ist
• Feedback-loop-ist
• No-special-privilege-ist

Now as you can see there is nothing particularly anti-government about any of that, despite it being easy for people to ridicule free-marketers as such (and therefore the intellectual and moral equivalents of Stone Age Man). Readers might reflect on why and how various anti-government views come out of applying those “-ists” to the world we actually live in and not some nirvana.

And no, I am not in favor of equality. And no, I am not in favor in pure utility maximization – a world with maximized utility, or a need to maximize it, is not a world I would ever want to live in. I would be more than happy to explain each and every one of those and other “-ists” that I might be, and promise to be forthright in doing so – admitting the warts of each position. But consider the folks who might be inclined to ridicule people who share similar thoughts as these. Again, we are treated as little more than Neanderthals. So I can only ask, do my “opponents” really want to go to the mat fighting against peaceful voluntary association? Do they want to go to the mat to promote special privilege? Do they really want to denounce the power of competition? What about feedback processes )(imagine how we’d maim ourselves if suddenly our bodies became insensitive to pain!). Those positions, held purely, are rare.  I suppose some might rescue themselves by saying things like, “voluntary action is good and all that but not all actions are voluntary, and don’t we want to stop some of those actions?” To which I can only remind them, “who is this we” that gets to decide, and do you recognize that by acceding to abandoning one of those positions above, you are necessarily breaking other principles which you would not “normally” want to break?

Now these boats are gorgeous and extremely well crafted. A simple model will run you about $5,000. You can get them rigged up with a mast and sail and some other goodies and probably have it run up to about $10,000.  At the end of a particularly successful year it is revealed that you made $2 million in profits. Doesn’t this mean that if you decided instead to organize your business as a non-profit, or if the authorities did away with the disgusting idea of profits, that these dandy boats would cost consumers $2 million less?

Such is the thinking of many an economic laymen. Look around you at the store. Watch the envy of your neighbors when they discuss the success of certain local businesses. Watch the contempt that profits are discussed by the political class and in the media. And then ask the following question, “how many millions more would these gorgeous boats cost without the prospect of our craftsmen earning profits in the first place?” Would we even have such beautiful boats?

For an insight into the answer, check this out.

Undergraduate education is a highly profitable business for nonprofit colleges and universities.

They do not show profits on their books, but instead take their profits in the form of spending

on some combination of research, graduate education, low-demand majors, low faculty teaching

loads, excess compensation, and featherbedding. The industry’s high profits come at the expense

of students and taxpayer.

To lower the cost of education, federal government policies should encourage competition.

Regulations should not favor nonprofits over for-profits. Further, the accreditation process

should be reformed so that any qualified institution can easily enter the industry. The

financial-aid process should be redesigned to remove the bargaining advantage that colleges

currently hold over prospective students.

The higher-education industry is heavily subsidized by the federal government. These subsidies

play a significant role in the high profitability of the industry and represent a massive

transfer of wealth from the taxpayer to the industry. This should change. All tax credits and

deductions should be eliminated immediately, as should all direct subsidies. The federal loan

program should be restructured to eliminate the government subsidy and ensure that any deserving

student can graduate from college without excessive debt, and eligibility for Pell grants

should be tightened significantly. The net result of these changes would be greater efficiency and

annual savings of $50 to $60 billion. To the extent that the federal government continues to

play any role in higher education, its goal should be to ensure that all deserving students have access

to higher education, not to maintain high industry profits.