Imagine a town called Learnerville. Within Learnerville there is a building. All the windows are boarded, and all the doors are locked. The building is guarded by armed officers. Inside, there are copies of all the books in the Learnerville world. Inside of those books, just as in our own reality, there is knowledge. No one is allowed to go inside the building, and technically no one in Learnerville is allowed to produce, own, read, or trade books. The situation is not all so bad. Books aren’t that complicated to make, and they are pretty easy to hide and smuggle. So, a lot of Learnervillians still possess and enjoy books nonetheless. Some might even say that certain books are ubiquitous despite their prohibition… certainly not all books. Others are almost impossible to find, and many of those that can be found are only accessible at extreme costs. Hence, the same legal authorities that patrol the building have taken aggressive efforts to forestall the production and distribution of books. Vehicles, guns, a vast variety of equipment and armor are all routinely deployed to seek out, confiscate and eradicate books. Those who produce, possess, read or share books are often tried and punished. Throughout Learnerville live a wide variety of people. Different Learnervillians like books to different degrees, and some residents prefer certain books over others. Some are immensely happy and successful despite their limited access to books. Other Learnervillians seriously struggle and endure lives of significant hardship and suffering. In Learnerville, there is a well-known and well-understood relationship between some of the locked away books and some of the struggles endured. Knowledge works like magic, but perhaps slow and indirectly. Some books can dull pain while others can cure diseases. Some books can inspire motivation and passion in the listless. Some books can even transport the reader to seemingly alternate realities filled with indescribable fantasy. Hence, many of the problems that Learnervillians endure can be fully resolved, and others made at least a little bit better… if only Learners could study and glean the knowledge contained in certain books. The saddest and most horrific feature of this story is that most Learnervillians are complicit to their constriction. I am thankful to live in a relatively free society far afield from Learnerville, wherein the default reaction to the prohibition of books is disgust. From Zamayatin to Orwell to Huxley and many others since and in between, the prohibition and regulation of knowledge, human communication and free expression is viewed as the archetypal feature of dystopia. This consensus about the banning of books, monitored behaviors and policed speech sustains despite a similarly common understanding that not all books are good. Lots of books contain horrible ideas. In the wrong hands many can be dangerous. And yet, most reasonable people today recognize and fully accept the obvious truism that the overall effects of books are positive. We shouldn’t ban books! Not because they are without risks, but because their potential benefits obviously exceed their potential costs.   Daniel J. D’Amico is the Director of the Stephenson Institute for Classical Liberalism and an Affiliated Associate Professor of economics at Wabash College. (0 COMMENTS)

On Saturday evening, a Liberty Fund colloquium on the Austrian and Chicago schools of thought ended. One of the pleasures I got from doing the readings was reading sections of Friedrich Hayek’s The Constitution of Liberty. I had read it over 50 years ago from cover to cover but had read only sections of it since then. So it felt as if I were reading it for the first time. Here are two of my favorite passages: This denial of responsibility is, however, commonly due to a fear of responsibility, a fear that necessarily becomes also a fear of freedom. It is doubtless because the opportunity to build one’s own life also means an unceasing task, a discipline that man must impose upon himself if he is to achieve his aims, that many people are afraid of liberty. [p. 72] I agree with this thought but my pleasure wasn’t from that. It was from seeing Hayek talking about people building their lives. I had posted on this term only a few months ago and had had no idea that Hayek had used it. If we allow men freedom because we presume them to be reasonable beings, we must also make it worth their while to act as reasonable beings by letting them bear the consequences of their decisions. This does not mean that a man [DRH edit: “person”] will always be assumed to be the best judge of his interests; it means merely that we can never be sure who knows them better than he and that we wish to make full use of the capacities o all those who may have something to contribute to the common effort of making our environment serve human purposes. [bold added] It’s the part that’s bold that I like so much. I’ve never been totally convinced that each person is the best judge of his or her own interests; it’s just that how would we know who would be a better judge?       (0 COMMENTS)

When he was a child, poet Dana Gioia’s mother would come home from a long day of work and recite poems while she cleaned. It was a way, he realized later, for her to express the feelings she didn’t want to describe directly, and to vent her sorrows without burdening her son. This, he believes, […] The post Dana Gioia on Poetry, Death and Mortality appeared first on Econlib.

If you watch enough Hollywood films, you eventually learn that it doesn’t pay to accede to the demands of blackmailers. At least in the movies, it always seems to lead to further demands for money.Last year, Russia grabbed a US basketball player and (implicitly) held her for ransom. Eventually, the US government relented and traded a Russian arms dealer in exchange for her release. Some might argue that while it’s unfortunate that we had to deliver a bad guy to the Russians, at least Brittney Griner is now safe and back home.  Unfortunately, that’s not the end of the story. The US government also showed the Russians that it would be willing to give in to blackmail. Thus they have now grabbed another American citizen, and will undoubtedly demand new concessions in exchange for his release.  We gave up a convicted Russian arms dealer and got nothing in the long run. You might argue that we could not have anticipated that the Russians would be so devious.  Not so.  Here’s what I wrote the day after the exchange was announced: It is tempting to view this prisoner swap as a “humanitarian” gesture, but just the opposite is true.  The fact that Russia’s tactics were successful insures that more people will be used this way in the future.  In the long run, there will be more hostages taken as a result of the US government decision to give in to the Russian demands. We are now paying the price for the US government’s shortsighted decision-making process. (0 COMMENTS)

In a previous post, I outlined ten objections to the profit motive, and I tried to counter each in turn. In this post, I offer ten more complaints that allegedly result from the pursuit of profits. See what you think of these, and let me know in the comments!   11- Reduced job satisfaction This was Marx’s complaint – factory workers were alienated because they produced only a single component of the final product and were therefore denied the satisfaction enjoyed by craftsmen who fashioned the whole article. However, factories exist in non-capitalist countries as well, so this problem isn’t confined to companies driven by the profit motive. Moreover, American factories are producing more goods than ever with fewer people. Automation has taken over much boring and repetitive work. Since the late 1950s, the service sector has employed more workers than the manufacturing and agricultural sectors combined. Service work – sales, legal services, healthcare, information technology, management, financial services, architecture, real estate – offer interesting and fulfilling employment for millions of Americans.   12- Depletion of natural resources Back in the 1970s, I took an environmental engineering course. The textbook pinpointed the date on which the U.S. would run out of oil: in mid-1979. The book was wrong for a variety of reasons. First, reserves aren’t static. People with the freedom to explore are continually discovering more. Second, free people find substitutes for existing resources. Natural gas, for example, has replaced coal as the country’s primary fuel for electrical power plants. Third, as natural resources become harder and more expensive to find and produce, rising prices encourage people to reduce consumption. Finally, it’s a mistake to confuse a resource with the service it provides. We don’t care, for example, whether our phone conversations go over hundreds of thousands of tons of copper wire, through fiber optics, or over the airwaves. We just want our calls to go through. As economist Julian Simon observed, the “ultimate resource” is human ingenuity and that is far from depleted. Regulations and laws, however, can and do stifle human creativity.   13- Hindering of technological progress Most technological progress comes from the private sector. Most “hindering” comes from government regulations and dysfunctional intellectual property laws.   14- Decreasing ethical standards That is hardly confined to companies. We’re seeing declining ethical standards throughout society. Much of that stems from government’s adopted role as the ameliorator of all pain. Disconnecting actions from consequences destroys morality and, ultimately, society.   15- Increased risk of financial losses Risk is inherent in any activity. In a free market, risk is diffuse and uncorrelated. In a regulated market, however, risk is often concentrated and coordinated by regulatory “herding” that can quickly become regulatory stampedes. The recent bank failures, for example, were made all but inevitable by regulations that herded banks into “safe” investments such as government bonds. When the Fed started quickly raising interest rates, the value of those bonds plummeted.   16- Monopolization of markets While monopolies do occur, especially when new products or services are first introduced, it’s a mystery to me that so many believe that monopoly by corporations – which must satisfy their customers to survive – is bad, while monopoly by government – which can use deadly force to survive – is good. Moreover, private monopolies rarely last unless government restricts market entry.   17- Reduction in customer service Driven, at least in part, by minimum wage laws, employer mandates (benefits such as insurance, paid leave, parental leave, retirement plans) and payroll taxes for Social Security and Medicare. Increasing the cost of employing workers leads companies to automate and to switch to self-serve formats.   18- Abuse of social responsibility Companies are morally and contractually responsible to their shareholders, customers, and employees. They are not responsible for catering to the Left’s latest “social justice” fads, nor are they competent to deal with social issues.   19- Promotion of unsustainable practices Firms have a vested interest in practices that are sustainable over the long term. Politicians, by contrast, often look no further than the next election. For example, the current political tactic of claiming that an election was lost to fraud – a tactic that is, unfortunately, popular with both political parties – erodes trust in the democratic process and is destructive to the nation. Similarly unsustainable is the common tactic of setting groups against each other to create special-interest voting blocs.   20- Misleading advertising tactics As William Bernbach, the “father of modern advertising” once observed, “A great ad campaign will make a bad product fail faster.” A misleading advertisement might get me to try an inferior product once, but not twice.   Richard Fulmer worked as a mechanical engineer and a systems analyst in industry. He is now retired and does free-lance writing. He has published some fifty articles and book reviews in free market magazines and blogs. With Robert L. Bradley Jr., Richard wrote the book, Energy: The Master Resource. (0 COMMENTS)

Everybody should be impressed when comparing the effects of the 18th-19th-century Industrial Revolution with the previous world depicted by, say, 15th-century poet François Villon. This world was one of dire and hopeless poverty for ordinary people, with few exceptions. Villon imagined that, if he had any money, he would make a bequest to “three naked little children” (trois petits enfants tout nus) who might not otherwise survive the winter, and to remark: II n’est tresor que de vivre à son aise. (The only treasure is to live comfortably.) In the wake of the Enlightenment, the Industrial Revolution produced the Great Enrichment, rapidly realizing the dream of comfort and wealth for ordinary people, as illustrated by my chart below. The great increase in productivity benefited all industries, not only manufacturing. My chart is built on the basis of long-term estimates of economic growth by the Maddison Project, which updates the pioneering work of Angus Maddison (1926-2010). The standard of living over time is measured with gross domestic product (or income) per capita. Many caveats are of course in order regarding historical estimates of the complex concept of gross domestic product developed in the 20th century. But the broad trends drawn by the Maddison estimates are consistent with how other historical sources depict the former epochs of mankind. To keep the chart readable, I start it at the beginning of the 18th century and graph only two countries, the United States and Switzerland, as representative of the effects of the Industrial Revolution. This momentous event actually started in the United Kingdom and the Low Countries, and most Western countries rapidly followed. For many territories corresponding to today’s countries, the Maddison Project (like Maddison’s original estimates) provide some data points back to year 1 CE. Extending my chart backward in time would show that there was generally no economic growth between year 1 and the 17th century, that is, we would see a long visually flat line at roughly the level of the American standard of living in 1650 (i.e. $897). For example, the GDP per capita of the inhabitants of current Switzerland is estimated to have been $956 in year 1. (The Maddison Project does not provide estimates where no recorded history exists at all.) It is generally recognized that the unprecedented growth unleashed by the Industrial Revolution finds its source the in economic, political, and social institutions that protected property rights and allowed or promoted free enterprise and free markets. I have a bit more to say about this in the forthcoming issue of Regulation. Another phenomenon the chart emphasizes is the interrupted industrial revolutions of some countries. For example, consider Argentina, whose economy seemed to be taking off along with other Western countries until the end of the 19th century. But then, with one authoritarian or populist regime after another, economic growth slowed down. As a consequence, real GDP per capita in Argentina is now barely more than one-third of the US level. Or consider Venezuela, whose industrial revolution started only in the mid-20th century and stopped a few decades later. Helped by higher oil prices, GDP per capita increased a bit under the elected dictatorship of Hugo Chavez (from 1999 to 2013), but plunged dramatically under that of Nicolas Maduro (2013 to now). Venezuela’s GDP per capita is now only 20% of America’s. (For perspective, China’s GDP per capita is one fourth of the American level.) The unresolved question is whether and under which conditions the prosperous civilization built by the Industrial Revolution could crash and bring mankind back to the the Middle Ages or Antiquity, as Jose Ortega y Gasset feared (see my review of his The Revolt of the Masses in the forthcoming issue of Regulation). Nobel prize-winning economic historian Douglass North expressed somewhat similar fears (see his Understanding the Process of Economic Change [Princeton University Press, 2005], pp. 77-78): The long run economic success of western economies has induced a widespread belief that economic growth now is built into the system, in contrast to the experience of the previous ten millenia [sic] when growth was episodic and frequently non-existent. … It is still an open question whether in fact that supposition is correct. It is important to understand that experiencing economic growth for fifteen or twenty years is not a guarantee that it is built into the system. Sources for each country at https://www.rug.nl/ggdc/historicaldevelopment/maddison/data/md2010_vertical.xlsx. (0 COMMENTS)

Will Hodges and Art Carden Santa Claus, the Easter Bunny, and the Tooth Fairy are all notable gift-givers. So who is the best gift-giver? If we define “best” as “most economically efficient” (in a narrow sense), the Tooth Fairy is a runaway winner. Santa Claus and the Easter Bunny offer variety, but they presume to choose for you. Santa brings the toys you put on your list and the socks you didn’t. The Easter Bunny fills your basket with candy…and poorly painted hard-boiled eggs. The Tooth Fairy, to her credit, doesn’t ask you to make a list. She doesn’t presume to pick candy for you. She just brings you cold, hard cash. So, while Santa and the Easter Bunny think they know best, the Tooth Fairy embraces the Economic Essentials.  Specifically, she understands that trade-offs are everywhere. The time people spend in stores and on Amazon could have been used doing something else. The adults (and some of the kids) have jobs. While time is not exactly “money,” we can use data on hourly earnings to estimate just how valuable it is. Average Hourly Earnings of All Private Employees in December 2022 were $32.82 per hour. The time people spent in department stores and shopping online could have been spent working. Then they could have given cash and probably had something left over. That’s one reason many economists think cash is a great holiday gift–and it looks like it’s how the Tooth Fairy operates. Giving a gift is like getting a college degree. College degrees send valuable signals about prospective employees’ skills, work habits, diligence, etc. A gift should send similar signals, but it runs into a knowledge problem. Givers try to align gifts with recipients’ preferences but make mistakes. Hence, people waste valuable time returning gifts they don’t want. Not all signals are informative, which can certainly be true about the signals you’re unwrapping during the holidays. The Tooth Fairy avoids complications and awkwardness by just giving cash. Then, the recipient can use it on whatever they want. If prices are sticky and there are a lot of unemployed factors of production, there might even be a multiplier effect. Because time is valuable and interests are only sometimes understood, cash is the best gift. The recipient can use the cash on anything. The Economic Essentials explain that trade is cooperation, not exploitation. Cash means recipients can cooperate with whomever they please instead of hoping that Santa, the Easter Bunny, or Aunt Sally choose wisely. When someone gets cash, they can create win-win scenarios with people selling what they want. Consumers get the goods and services they want, and merchants get the money they want. All in all, cash is the most economically efficient gift. It offers the most opportunities for gains from trade. By giving cash, the Tooth Fairy shows that she is the most efficient gift-giver. Maybe Santa Claus and the Easter Bunny should take notes.   Will Hodges is a student, and Art Carden is an economics professor at Samford University. They reluctantly acknowledge that Anthony Gill and Michael D. Thomas might be right about the dynamic efficiency of gift-giving. (0 COMMENTS)

Matt Damon as Sonny Vaccaro in AIR Some movies not only entertain and inspire but convey broader lessons. “Air” is one of them. The film is about Nike’s efforts in 1984 to secure Michael Jordan’s endorsement of its basketball shoes, which soon after became the iconic Air Jordans. But it also tells anyone who will listen that ESG investing—environmental, social and governance—is a trap. When the company begins its quest for Mr. Jordan (played by Damian Young), Nike is an underdog. He and his parents are leaning toward a Converse or Adidas sponsorship, as these companies are more established in basketball. Adidas is a front-runner until Nike alerts Mr. Jordan to a problem with that company. Nike’s determined employee, Sonny Vaccaro (Matt Damon) tells Mr. Jordan’s mother, Deloris (Viola Davis), that because the head of Adidas has just died, there will be turmoil at the top of the company that would hurt her son’s interests by creating uncertainty about his sponsorship. These are the opening paragraphs of Donald J. Boudreaux and David R. Henderson, “Air is a Cautionary Tale About ESG,” Wall Street Journal, April 13, 2023 (April 14 print edition.) I don’t love the title because I think it’s an overstatement. Our point is that if you understand Sonny Vaccaro’s point in the movie that uncertainty about who will run a company hurts stockholders, then a fortiori, you should understand that uncertainty about whether the company is trying to maximize stockholder value or conform to ESG will hurt stockholders. (Or, as the character in the play Other People’s Money put it,“stuckholders.”) I’ll post the whole thing in 30 days. This, by the way, is the first time I’ve co-authored with Don. I hope and think that it is the beginning of a beautiful writing relationship. (0 COMMENTS)

Late in Super Bowl XXXII, the Green Bay Packers allowed Denver to score, rather than have the clock run down close to zero, at which time Denver would almost certainly kick a game winning field goal.  The thought was that allowing Denver to score with 1:45 left would give Brett Favre a chance to lead the Packers on a late drive to tie the game.  (It didn’t work.)  I’m reminded of this game when I look at the standoff between China and Taiwan, which next to Israel might be the most complex foreign policy problem in the world. When the Nationalist army fled to the island of Taiwan in 1949, they continued to insist that they represented the legitimate government of all of China.  This is arguably still the official policy of Taiwan, although in reality the Taiwanese government would prefer to be independent.  Officially, the PRC, the Taiwanese government and the US government still adhere to a “one China policy”.  Neither the Taiwanese government nor the US government has officially recognized Taiwanese independence, due to fear that this might trigger a Chinese invasion.  So the standoff that has been going on for 74 years continues. This odd history has created a rather unusual situation.  For instance, many people equate “Taiwan” with the “Republic of China” (ROC), which is the official name of the “country”.  This is not accurate.  Taiwan is one island, while the Republic of China includes 168 islands.  Obviously Taiwan is far and away the most important part of the ROC, but the other 167 islands have great political significance.  Most importantly, if Taiwan were a truly independent country (not just de facto, but also de jure), then most of those 167 islands would not be a part of Taiwan.  The current structure of the “Republic of China” only makes sense if you view Taiwan as a part of China. For instance, consider the ROC-controlled island of Taiping, which is far and away the largest of the Spratly Islands.  “China” is heavily criticized for occupying the Spratly Islands, which are much closer to the Philippines than to China.  And yet almost none of the criticism is directed against the government in Taiwan.  I actually agree that the criticism should be directed against the PRC and not the ROC, but to understand why we need to take a deeper look at what’s actually going on. Outside of Taiwan, the most important parts of the Republic of China are what might be called “ROC occupied Fujian”.  Both the PRC and the ROC agree that islands such as Kinmen (aka Quemoy) and Matsu are part of Fujian province, an important Chinese coastal province.  Indeed Kinmen is practically a suburb of a large Chinese city (Xiamen.)  Thus Taiwan’s ownership of Kinmen only makes sense if you assume that the ROC is the legitimate government of all of China. You can argue that the Taiwanese are “not Chinese”, but it’s hard to argue that the Kinmenese are not Chinese. In recent decades, the Taiwanese have abandoned any thought of retaking the mainland.  So why not jettison all those outer islands and make Taiwan independent?  And why doesn’t the PRC simply occupy Kinmen?  Donald Canton has this to say: After the PLA liberated Hainan Island in May, 1950, General Peng Dehuai and some generals of the People’s Liberation Army strongly advocated taking down the two islands of Kinmen and Matsu in one go. They asked Mao Zedong for instructions and were denied. Everyone did not understand. Mao Zedong once said privately that the two islands of Kinmen and Matsu were like the two small hands of a child holding his mother’s shirt. If they were taken back, it would be like the hands of the child were cut off. Then, the child (Taiwan) would never come back to the mother (China). In other words, as long as the ROC holds onto parts of Fujian province, then it’s clear that the ROC is part of “China”.  So until the bigger issue of Taiwan can be resolved, it is in China’s interest to allow Taiwan to maintain control of a portion of Fujian province. OK, then why does Taiwan station troops in Kinmen?  Why not let the Chinese walk in and take control?  Isn’t this struggle a zero sum game? I’d say it’s not quite a zero sum game, as both sides would rather avoid war, at least at the moment.  But that might change in the near future. Now perhaps you see the analogy to the odd ending of Super Bowl XXXII.  If it was in the Packers’ interest to allow Denver to score, then wasn’t it in Denver’s interest not to score?  And what happens if a player wants to be tackled, and the other team doesn’t want to tackle them? I suspect that one almost never sees this sort of standoff in football because players are highly competitive and primed to be aggressive, not passive.  The ROC would be sort of embarrassed to surrender Kinmen, even if in some sense it’s in their interest.  Or perhaps they fear that the PRC would interpret surrender as a declaration of independence, and react accordingly. The Cato Institute recently had this to say: So far, most discussions implicitly assume that a PRC military move would take the form of an offensive against Taiwan itself. Only a few experts raise the question of what the United States would do if Beijing launched a more limited action—one against Kinmen (Quemoy) and Matsu (small Taiwanese‐​controlled islands just a few miles off of China’s coast) or against other, more distant islands that Taipei claims. Yet that is a much more likely scenario than a full‐​scale war to subjugate Taiwan. Moreover, it would be a bold, yet relatively low‐​risk way for Beijing to test the extent and reliability of Washington’s resolve to defend Taiwan. The author (Ted Galen Carpenter) suggested that the US would have a difficult time justifying a military response: Xi Jinping and his colleagues would have legitimate reasons to doubt whether the United States would be willing to risk a horribly destructive war with China over small islands that are merely claimed by Taipei. Indeed, the Biden administration would encounter considerable difficulty securing the support of the American people for a war over such meager stakes. Chinese officials very likely understand that point as well. Seizing Pratas/​Dongsha would be a bold move, and certainly is not one without risks, but it also would put the onus of any subsequent, dangerous escalation totally on the United States while sending an emphatic message of China’s determination and fraying patience. Washington needs to pay more attention to this scenario before being blindsided by a major crisis. I think it’s even worse.  Kinmen is not part of “Taiwan”, it’s ROC-occupied Fujian.  If you really believe that Taiwan is an independent country, then it has no business stationing troops in Kinmen.  So why would the US wish to defend that island? If you argue that the Kinmen residents don’t wish to be a part of China, isn’t it equally true that the Chinese soldiers stationed in the Spratly Islands don’t wish to be a part of the Philippines?  And I’m not sure exactly how Kinmen residents feel about the question.  A recent article in The Economist suggests that the residents are rather pro-Chinese: In 2001 a ferry started operating to Xiamen, turning the island into a centre of tourism and business exchange. Many in Kinmen would like to be closer still—some have proposed a bridge and want the electricity grids to be connected. They hope not just to make Kinmen more prosperous, but also that closer integration with the mainland might be the best way to avoid being attacked. “America, China, Taiwan, whatever you do, just leave us out of it,” says Chen Yang-hue, a local councillor. He is one of several local politicians to demand, in February, that Taiwan withdraw its troops and “demilitarise” the island. Taiwan’s central government has not issued a response. . . . Kinmenese want to be part of China’s growth and China wants to invest, says Chen Yu-Jen, who represents Kinmen in the national parliament: “They will treat us well, make us a model, and Kinmen can develop and prosper. But Taiwan won’t accept this.” I’m not certain what Taiwan should do if Kinmen is attacked.  On the one hand, Taiwan might be better off if it jettisoned all its outer islands and tried to form an identify as “Taiwan”, not the “Republic of China”.  On the other hand, not defending Kinmen might be viewed as a sign of weakness, and embolden China to make further moves. There are no easy solutions to this problem, but I wonder if both sides of the dispute would benefit from the following proposal: Taiwan agrees to join the PRC in 50 years, and the PRC agrees that Taiwan can maintain its independent military during that interim period.  (The latter condition distinguishes this proposal from the flawed Hong Kong deal.) Both sides would probably reject my plan, but I believe that both sides would benefit.  China could declare that the principle of eventual unification was firmly established, and the Taiwanese could privately decide that if China remained an unpleasant authoritarian place in 2073, then it would renege on the deal.  Doing so would probably trigger war in 2073, but better to kick that can down the road 50 years than face the risk of war in 2030. Of course another solution would be for China to grant independence to Taiwan.  Another solution would be for China to become a model democracy with human rights, making reunification more acceptable to Taiwan.  My plan certainly isn’t the ideal solution, but at the moment it’s the least bad solution that is at least slightly realistic. An article in the NYT recently suggested another solution: Three months after Russia invaded Ukraine, Annette Lu, a former vice president of Taiwan, stood before reporters to promote a wildly unpopular idea. China and Taiwan, she said, should form a commonwealth that would be integrated economically, like the European Union, but remain separate politically. She called it One Zhonghua — a word that means “Chinese” in a cultural, ethnic or literary sense but is distinct from the word that refers to China in a political sense. It was a wink at the Chinese Communist Party’s insistence that there is only one China and that Taiwan is an inextricable part of it. All realistic plans involve goodwill from the PRC, and right now I just don’t see that. PS.  The US officially views Taiwan as being a part of China.  Unofficially, the US views Taiwan as being independent.  But the official view does matter.  The FT reports that Taiwan chip investment in Arizona will be double taxed: Everyone wants a compromise. But solutions risk igniting a difficult diplomatic problem. The US does not see Taiwan as a sovereign nation. Any special tax deal would acknowledge sovereignty. China could regard this as provocation. In contrast, Samsung’s chip plant in America avoids double taxation due to a South Korea tax treaty with the US.  To give such a treaty to Taiwan would require that the rule apply to all of China, or else the US government would have to treat Taiwan as being independent. PPS.  The Economist has an interesting survey article on Taiwan, full of surprising information: But the army is still one of Taiwan’s most conservative, pro-KMT institutions. Many officers are “equally as suspicious of the United States as they are of China,” says an American official once based in Taipei. As late as the mid-2010s, officers told him the Chinese were their cousins and they would “never fight for Taiwan’s independence,” he adds. PPPS.  Believe it or not, the islands of Kinmen and Matsu were a major issue in the 1960 presidential election debate between Nixon and Kennedy. PPPPS.  The Packer’s coach actually misjudged the situation on second down, thinking it was first down.  But the principle involved is what interests me. (0 COMMENTS)

I recently encountered a laundry list of objections to the profit motive. The following is the list with redundancies removed, edits for clarity, and my comments. Many of the complaints are based in ignorance of how markets work, ignorance of the perverse incentives created by government regulation, failure to consider problems with available alternatives, refusal to consider the possibility of government failure, demands that companies solve complex social problems (some of which are created by government), and an insistence on perfection.   1- Lack of accountability Accountability to whom? Companies are certainly accountable to their shareholders, suppliers, and customers. To a large extent, they are also accountable to employees and annuitants. They are required to adhere to contracts their officers have signed and to the laws and regulations of the communities in which they do business. By contrast, to whom are unelected bureaucrats accountable? Bureaucrats who can: write regulations that have the force of law, interpret their own regulations, determine whether a company is in violation of the regulations, and penalize companies that they determine have violated them.   2- Disregard for public welfare Companies that are unconcerned with the welfare of their employees and customers tend not to stay in business long.   3- Increasing inequality Having a job is, by far, the surest way out of poverty. An American who is keeps and holds a job is unlikely to be poor. According to a 2019 U.S. Census Bureau report, the poverty rate for individuals who had worked full-time for the entire year was 1.5%. In the U.S., much of the current wealth gap is due to asset inflation caused by the Federal Reserves’ easy money policies, which were, in part, driven by the federal government’s deficit spending. Globally, however, poverty significantly declined prior to the COVID pandemic. For the first time in human history, less than 10% of the world’s population lived in extreme poverty. Prior to the Industrial Revolution and the spread of free markets, the extreme poverty rate was over 90%. Extreme poverty was humanity’s “natural state” for most of its estimated 300,000-year existence. Its drop to 10% from 90% in just two hundred years is nothing short of miraculous.   4- Lowering product quality Companies produce goods of varying quality to match the needs and means of their customers.   5- Price gouging As economist Alex Tabarrok observed, “A price Is a signal wrapped up in an incentive.” High prices reflect demand and provide incentives for producers to meet the demand by increasing production and redirecting goods. Prices also provide incentives for consumers to purchase less and find substitutes. Artificially limiting prices in the face of real shortages does little more than spread and prolong the shortages.   6- Exploitation “Exploit” means to make full use of and derive benefit from a resource. Companies that make full use of natural resources minimize waste and pollution. Companies benefit from employees and employees benefit from their employers – by definition, they exploit each other. As long as employees are free to accept or reject their conditions of employment, there is no exploitation in the pejorative sense. Karl Marx claimed that employers exploit workers because they do not give them the full exchange value of the goods and services they produce. However, Marx’s alternative also exploits workers. The formula “From each according to his ability, to each according to his need,” necessitates Marxian exploitation. A worker whose ability exceeds his need receives less than he produces and is, by Marx’s own definition, exploited.   7- Subversion of government laws and regulations Some companies do ignore laws and regulations and, when caught, pay penalties. Occasionally, company officials go to prison. Perfection is not an option while human beings are imperfect.   8- Prioritization of stockholder interests A company’s responsibility is, first and foremost, to satisfy its owners’ interests. In a free market, they can best do this by providing – within the confines of the law – goods and services for which consumers are willing to exchange the products of their own labor. This activity benefits consumers and society.   9- Neglect of environmental stewardship Much of this neglect stems from a failure by governments to define and protect private property rights. During America’s Industrial Revolution pollution was worse than it needed to have been because the courts refused to enforce property rights. When people sued factories for polluting their air and water, for example, judges decided in favor of the factories on the utilitarian basis of “the greatest good for the greatest number.” Judges reasoned that more people – employees and customers – benefitted from the factories’ activities than were harmed by their pollution. Had property rights been enforced, factory owners would have been required to pay restitution for the harm they were doing, giving them an incentive to find ways to reduce that harm. Settling ponds, for example, could have been used to eliminate the heavy solids released into streams and rivers. Perhaps, companies could have even found uses for those waste products. Standard Oil, for example, found ways to use gasoline, which before, had been considered useless and dumped into the nearest river. Given freedom and the proper incentives, people find ways to turn problems into opportunities.   10- Risky and unsafe working conditions Most of the reduction in workplace deaths and injuries has been the result of technological advances made by the private sector. Throughout human history, knowledge was gained through trial and error – trial and error in a world in which error often resulted in death. The first steam engines were dangerous because they were the first steam engines. We hadn’t yet learned all the ways they could fail and how to prevent those failures. The same is true for the first factories, cars, and airplanes. The steady decline in workplace accidents in the United States began long before OSHA and other regulatory agencies were created.     Richard Fulmer worked as a mechanical engineer and a systems analyst in industry. He is now retired and does free-lance writing. He has published some fifty articles and book reviews in free market magazines and blogs. With Robert L. Bradley Jr., Richard wrote the book, Energy: The Master Resource. (0 COMMENTS)