We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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“Many Democrats rolled out of the election acknowledging the urgent need for a change in direction—for moderation, an end to cultural radicalism, a reconnect with working-class Americans. They immediately crashed into the left-wing base, threatening political death to heretics. Even if the party had the spine to push back, who exactly on the Democratic bench even remembers how to be a moderate?”
Writes Kimberley Strassel, in the Wall Street Journal ($). She beats up on the Donkey Party, and with good reason:
What looks like a rapid collapse was years in the making. The left’s takeover of the Democratic Party began with the rise of Barack Obama and it steadily eradicated dissenting voices. Nancy Pelosi’s “majority makers”—the Blue Dogs and moderates who won her the speakership in 2006—were made to support unpopular legislation and paid for it in lost elections. Progressives targeted and polarized other holdouts, picked them off in primaries, or drove them to resignation. It was Saul Alinsky’s “Rules for Radicals.”
The Squad’s wild proposals for the Green New Deal, open borders, Medicare for all—a program of socialism that traditional Democrats initially rejected—is now mainstream thinking, the policy litmus test for party entry.
But…
This could be the MAGA future. The GOP is a party of many factions, and their policy disagreements frequently produce stalemates and governing heartache. Influential Trump supporters are honing their own methods for stamping out even mild disagreement with the president’s approach: rally online supporters to pile on, label the target a member of the “uniparty” or the “establishment,” threaten a primary. This exact playbook was exercised numerous times over the past few weeks of nomination votes. “Rules for Radicals.”
It’s a recipe for intellectual stagnation. It’s a departure from the modern conservative movement, which has been defined by its innovative ideas, from school choice to civil-service reform. It sits unnaturally in a movement that has long prized individualism and entrepreneurship and condemned the left’s collectivism. It mistakes the goal of party unity (the act of members compromising on strongly held positions for a legislative victory) with the tyranny of party conformity (think like we do, or get the boot).
And look how it worked out for Democrats.
From the Daily Telegraph (£) today:
A quarter of 13 to 17-year-olds recently admitted to the Pew Research Centre that they use ChatGPT to write their homework, double the proportion found a year earlier. Last year, the Higher Education Policy Institute found that one in eight undergraduates – 13 per cent – were using AI to write assessments, and 3 per cent were handing in the chatbot’s output without checking it.
Oh dear. As the article says, there are AI programmes now that screen writing to see if a generative form of AI has written it. So we have a sort of arms race, as it were, between those using these systems to write essays or whatever, and those using it to spot the cheats.
Using AI is not quite the same, necessarily, as using a search engine to check up on sources, or a calculator to do sums rather than by hand. I do think that something is lost if a person has no idea of how to go about how to find things out: what references to check, how to validate such references and how to understand sources, levels of credibility and corroboration, etc. Being able to think through a topic, to structure an essay, marshal facts and figures, and come to a convincing conclusion, is a skill. It is also an important way that we hone our reasoning. And I don’t think there is anything specifically “Luddite” in pointing out that using AI to “write” your homework assignment will lead cause atrophy of our mental faculties. And in this age of social media, “coddling” of kids and all the problems associated with a “fragile generation” , it is easy to see this trend as being malign.
I am definitely not saying the government ought to step into this. I think that schools and places of higher learning ought, as part of the conditions of entry and admission (preferably with the consent of parents/students) to restrict AI’s use to avoid people not developing their own mental muscle and developing ability to truly grasp a subject, rather than simply “phone it in”. If a place of learning has a mission statement, it surely ought to want to develop the learning ability and skills of its students. If AI detracts from it, then it is out of bounds.
It is best, I think, to leave this up to individual schools. This is also another reason why I am a fanatic about school choice, and fear the dangers of state central control of schools.
Technology has its place, in my view. In my childhood, pocket calculators started to be used, but we were not allowed to use them in class until we’d already mastered maths the old-fashioned way. (I used them in doing my physics O-level, for example, so long as I clearly could show my workings if asked.)
Here is an associated article by Gizmondo. On a more optimistic point, venture capital mover and shaker Marc Andreessen has thoughts on the overall positives from AI.
I also have a more financial concern. If students, such as undergraduates, are using AI to write essays, even whole dissertations, etc, then it makes it even more scandalous that they rack up tens of thousands of dollars, euros or whatever in debt to pay for this. Because if they get a degree thanks to ChatGPT (that rhymes!), then what exactly have they got for their money?
“Earlier this week, the BBC admitted it had broadcast an hour of primetime television narrated by the son of a Hamas terrorist leader. This connection to terrorism was not initially disclosed to audiences.”
– Danny Cohen, Daily Telegraph (£) Here’s a non-paywalled story about this.
In all the calls I come across from the Left, it is not often to find examples of how rich people are attacked because if they are allowed to keep more of their wealth (even if is legitimately acquired and without coercion), the money disappears. Forever, kid. It’s lost.
Yes, you read that right. The money vanishes into a black hole. An argument against “trickle-down” economics (which is a term no serious free marketer I have heard of actually uses) is that nothing “trickles” anywhere. Apparently, there is this place, someone on Earth, where money is just sitting around, gathering dust, all on its unproductive exile, just waiting to be rescued by a benevolent State so it can be put back into work. It sounds like a first draft of the plot from the Count of Monte Cristo and the bit about the secret treasure that Edmond Dantes discovered and used to persecute his foes.
Why do I mention this bizarre idea? Because I read it defended and set out in a book, The Future Of Finance: The Rising Tide of Fintech Lending and the Platform Economy, by Francesco Filia and Daniele Guernini, (Whitefox Publishing, 2024). The book is a mostly informative account of how modern digital technology is changing finance. It talks about the role of blockchain; decentralised finance (DEFI) and other developments. It has lots to commend it if you want to understand these ideas, and the use cases in finance for technologies such as AI. But…some of the economic contentions in the book are bonkers.
For example, the authors claim that “we know” that wage growth and equality drive economic growth. (No clear evidicence is given for this contention.) They argue that wage growth continued for about 100 years until 1970, when it apparently stopped.
However, that begs the question of whether there was a lot of equality in that period. Was there a lot of equality, in relative, equality-of-outcome terms, during the “Gilded Age” of the Rockefellers, Carnegies and the rest? (There was not, but the rising tide of wealth nevertheless was considerable.) Was there much of that during the 1920s? I suspect that equality, brought about by steeply progressive tax rates (and they caused issues) did not really manifest itself greatly until after WW2, and even then, given exemptions and other forces, American society in some ways was less egalitarian than in Western Europe.
The authors argue that a labour shortage drove this wealth growth, but surely, absent the restrictive and destructive impact of labour union restrictive practices, it was superior capital investment, and hence superior productivity, that meant tight labour markets coexisted with rising real wages in certain countries. (West Germany rapidly overtook the UK, and it was a country where income tax rates kicked in at higher levels, unions were less obstructive, and there were fewer price controls under the Adenauer administrations than, say, the UK.) The authors make no reference whatsover in this part of the book to investment in capital. But it is total factor productivity (physical capital, human capital, etc) that makes the difference over time to income growth. The US labour market was, relatively, less unionised in the post-war period than the UK one, for example, but the standard of living in the US rose relatively faster, as Milton Friedman pointed out in his book, Free to Choose.
The idea that real incomes have somehow stagnated because wages have stopped rising ignores what might have caused that stagnation. I argue that they get causation back to front. If it is a shortage of labour that causes wages to rise, then surely, absent state intervention, capital will flow into machinery and the like to make up the shortfall, and such a country will also attract immigration (hopefully, of the sort that adds value via skills). In the US, as recounted by Alan Greenspan and Adrian Wooldridge in their masterful account of American capitalism, that’s exactly what happened. During the 19th century, even before the US Civil War, the US saw tremendous growth of labour-saving devices to handle this labour shortage issue. For instance, the McCormick reaper-binder, Singer sewing machine, and more. Light bulbs, early air conditioning…you name it, have also increased returns on human labour because light bulbs allow 24-hour shift work; AC enables places that are otherwise stinking hot to be more economically viable, and so on. And this capital equipment made US workers more productive and increased their real income, other things being equal.
But it is on page 64 that Filia and Guernini ramp up their error wholesale and put forward what I call the “consumption theory of wealth”, which puts spending, rather than investment, innovation and creativity, as the cause of why we are better off: I am going to quote a passage in full:
“When employees and ordinary people (as opposed to odd people, ed?) have more money in their pocket, they spend it. The go out and spend money in restaurants and bars or entertainment venues, they buy new cars or modernise their homes. As a result, that money goes into the real economy to create demand for goods and services and helps businesses prosper and the economy to grow. But when already wealthy people and business owners keep more money via tax cuts, that money is squirrelled away. It’s dumped in offshore trust funds to minimise tax till further or it’s used in stock buybacks. It never reaches the real economy. All it does is to create even greater inequality.” (My emphasis in bold.)
So, if a person saves any money or “squirrels it away”, it is potentially gone. The idea that savings are important, and a source of investment, is totally absent in this account As several on this blog such as Paul Marks regularly point out, a problem in many modern economies is that when investment is financed by central banks’ printing of money, and not real savings made possible by foregoing consumption, it bids up the factors of production, and that without injecting yet more funny money to keep the party going, there’s a crash. The importance of savings cannot be overstated in making sustainable growth possible. The authors claim, with no real evidence, that if money is salted away in a low/no-tax jurisdiction such as the Cayman Islands, Mauritius, Jersey or Dubai, that this money disappears. It’s gone. But that’s plainly rubbish: that money is invested. Why else put it offshore? Even if that money is put into government bonds, that is lent to someone to finance something.
It is true those who use such jurisdictions hope to reduce their overall tax, and in many cases, they defer tax burdens rather that remove them. After all, a person may still want to repatriate their wealth eventually, for whatever reason, and they pay tax on it when that happens. They could, I suppose, give it to charity – but then that money will also go into the “real economy”.
But the idea that money that is not taxed goes out of existence is beyond bizarre. I don’t even know if Thomas Piketty, the French academic who called for progressive taxes and assaults on wealth, went so far into arguing that rich people’s money just vanishes from “real economy”.
Anyway, apart from page 63 and 64, it is a decent book.
“Our problem in the West, I believe, is that we got into a vicious circle of decline. Our victory in the Cold War removed the pressure to remain productive and to constantly demonstrate the superiority of the Western model of free markets and free nations.”
– (Lord) David Frost, Daily Telegraph.
He refers to a new essay he has out to coincide with the Alliance for Responsible Citizenship (ARC) conference that has been going on in London. I think it is a worthwhile read.
“Yes, Mr. Musk and his young team are seeing confidential government data. But he’s also the second most closely observed person on the planet, the exact opposite of the thousands who already have access to government data and stay invisible until they turn out to be Edward Snowden, Bradley Manning, Charles Edward Littlejohn or Jack Teixeira. Mr. Musk is said to be causing chaos but government programs are born in chaos—with congressional horse trading and payoffs to appease interest groups.”
– Holman Jenkins, Jr. Wall Street Journal
“Imagine being Keir Starmer’s voice coach. It’s like being David Lammy’s academic advisor or Bridget Phillipson’s charm consultant.”
– Madeleine Grant.
(For those who don’t – wisely perhaps – follow UK domestic politics, David Lammy is Foreign Secretary, and Phillipson is Education minister. Both are dreadful and therefore classic front-bench ministers in this administration.)
“Mr. Trump sometimes sounds as if the U.S. shouldn’t import anything at all, that America can be a perfectly closed economy making everything at home. This is called autarky, and it isn’t the world we live in, or one that we should want to live in, as Mr. Trump may soon find out.”
– Wall Street Journal (£)
I think this post is going to annoy Trump defenders, and of course he’s done a few things (shutting DEI down in schools and so on) that I applaud. But this is not the time for whataboutery when considering how terrible Biden was and Harris would have been, as they were and would have been. Those talking points have their place, but now Mr Trump is in office. He’s the President for the next four years.
So there’s no way to finesse this. Tariffs are a form of self-harm, and the reasons given in this particular case shows they are seen as clubs to hit countries with in order to make them change this or that policy. It creates uncertainty, hits inward investment and domestic activity. Domestic and global economic growth will be reduced from where it might have been. Tariffs are taxes, however hard one might try and spin that fact away. Since Adam Smith pointed this all out 250-plus years ago, the damaging impact of tariffs have been widely understood.
Tariffs, particularly given how they been justified and enacted, are a grave mistake by Mr Trump. Trying to claim that the US hit economic heights when tariffs existed in the late 19th century is another case of correlation and causation getting all blurred. The US in the post-Civil War era was a low-tax place: no federal income tax, no Fed, hardly much of a Welfare State as we’d call it, immense inflow of immigrants from places such as Russia, Germany, Italy, Sweden, etc. (Because there was little state welfare, such folk had to work their backsides off, and they did.) Here is an essay that in my view debunks the idea that the post-Civil War tariffs were a good idea.
There are facts that might be a puzzle, but not when you consider that Mr Trump loves tariffs even because they are a weapon. That’s what gets him out of bed in the morning, sometimes for good causes, often not. But the economic rationale is even worse when you consider that American energy costs, thanks to all that fracking he’s in favour of (a plus for him, in my view) means American manufacturing in some ways has a big competitive advantage on Europe, which self-harms because of Net Zero, red tape and high taxation.
Here is an essay I came across via social media and I think it is worth a read:
“I’m going to get a little wonky and write about Donald Trump and negotiations. For those who don’t know, I’m an adjunct professor at Indiana University – Robert H. McKinney School of Law and I teach negotiations. Okay, here goes.
Trump, as most of us know, is the credited author of “The Art of the Deal,” a book that was actually ghost written by a man named Tony Schwartz, who was given access to Trump and wrote based upon his observations. If you’ve read The Art of the Deal, or if you’ve followed Trump lately, you’ll know, even if you didn’t know the label, that he sees all dealmaking as what we call “distributive bargaining.”
Distributive bargaining always has a winner and a loser. It happens when there is a fixed quantity of something and two sides are fighting over how it gets distributed. Think of it as a pie and you’re fighting over who gets how many pieces. In Trump’s world, the bargaining was for a building, or for construction work, or subcontractors. He perceives a successful bargain as one in which there is a winner and a loser, so if he pays less than the seller wants, he wins. The more he saves the more he wins.
The other type of bargaining is called integrative bargaining. In integrative bargaining the two sides don’t have a complete conflict of interest, and it is possible to reach mutually beneficial agreements. Think of it, not a single pie to be divided by two hungry people, but as a baker and a caterer negotiating over how many pies will be baked at what prices, and the nature of their ongoing relationship after this one gig is over.
The problem with Trump is that he sees only distributive bargaining in an international world that requires integrative bargaining. He can raise tariffs, but so can other countries. He can’t demand they not respond. There is no defined end to the negotiation and there is no simple winner and loser. There are always more pies to be baked. Further, negotiations aren’t binary.
China’s choices aren’t (a) buy soybeans from US farmers, or (b) don’t buy soybeans. They can also (c) buy soybeans from Russia, or Argentina, or Brazil, or Canada, etc. That completely strips the distributive bargainer of his power to win or lose, to control the negotiation.
One of the risks of distributive bargaining is bad will. In a one-time distributive bargain, e.g. negotiating with the cabinet maker in your casino about whether you’re going to pay his whole bill or demand a discount, you don’t have to worry about your ongoing credibility or the next deal. If you do that to the cabinet maker, you can bet he won’t agree to do the cabinets in your next casino, and you’re going to have to find another cabinet maker.
There isn’t another Canada.
So when you approach international negotiation, in a world as complex as ours, with integrated economies and multiple buyers and sellers, you simply must approach them through integrative bargaining. If you attempt distributive bargaining, success is impossible. And we see that already.
Trump has raised tariffs on China. China responded, in addition to raising tariffs on US goods, by dropping all its soybean orders from the US and buying them from Russia. The effect is not only to cause tremendous harm to US farmers, but also to increase Russian revenue, making Russia less susceptible to sanctions and boycotts, increasing its economic and political power in the world, and reducing ours. Trump saw steel and aluminum and thought it would be an easy win, BECAUSE HE SAW ONLY STEEL AND ALUMINUM – HE SEES EVERY NEGOTIATION AS DISTRIBUTIVE. China saw it as integrative, and integrated Russia and its soybean purchase orders into a far more complex negotiation ecosystem.
Trump has the same weakness politically. For every winner there must be a loser. And that’s just not how politics works, not over the long run.
For people who study negotiations, this is incredibly basic stuff, negotiations 101, definitions you learn before you even start talking about styles and tactics. And here’s another huge problem for us.
Trump is utterly convinced that his experience in a closely held real estate company has prepared him to run a nation, and therefore he rejects the advice of people who spent entire careers studying the nuances of international negotiations and diplomacy. But the leaders on the other side of the table have not eschewed expertise, they have embraced it. And that means they look at Trump and, given his very limited tool chest and his blindly distributive understanding of negotiation, they know exactly what he is going to do and exactly how to respond to it.
From a professional negotiation point of view, Trump isn’t even bringing checkers to a chess match. He’s bringing a quarter that he insists of flipping for heads or tails, while everybody else is studying the chess board to decide whether its better to open with Najdorf or Grünfeld.”
— David Honig
So there you have it. A bad idea having a damaging impact. Is Mr Trump playing 4-D chess with us all, as his defenders and explainers (including those who consider themselves pro-capitalism seem to be doing in some places that I see on social media), or is this in fact a big error that will eventually hurt America and the freer bits of the world? My worry is that history tells us that, with exceptions, tariff clashes tend to go wrong, lead to slower growth, and even nastier conflicts. It may be that Mr Trump is cleverer than we can appreciate, but I am sceptical.
Not a good start to his time in office. May wiser heads prevail, as they say.
Update: Here is a good article today (4 January) from Daniel Freeman at CapX on how, in his view, Mr Trump has misread the causes of America’s ascent as a business powerhouse.
For the past decade or more, “neoliberalism” has been under attack. For example, a few years ago I read a book by the journalist Tom Bergin (Reuters), who argued, with a lot of data and references, that cutting marginal tax rates will not boost an economy. He poured cold water on the ideas of US economist Arthur Laffer, the “father of supply-side economics”, and denied that changes to tax rates make much difference to incentives to work, or so on. (Bergin’s analysis is politely and beautifully skewered, here, by Kristian Niemietz of the IEA. See also this new book by Tim Worstall.)
Of course, it is true that a 1% cut or rise to, say, capital gains tax or other tax will not produce an instant or commensurate change in economic behaviour. The elasticity of supply/demand relationships for labour, capital and land are variable. Labour is not homogenous, as Tyler Cowen notes (this also is a killer for the Marxian labour theory of value); there are frictional costs and sources of inertia that mean an economy cannot be turned on or off like a switch, contrary to the delusions of central planners or, indeed, naive advocates of free markets. But there IS an effect over time.
Changes to incentives compound: if you make it harder to hire and fire, and make it more expensive, irritating and difficult to achieve A or B, then less of what you want will get done. Hiking taxes on employment will reduce labour employed and encourage a substitution of capital for labour, just as taxes on petrol or food will causes changes to consumption, or force those who buy essentials to buy fewer so-called luxuries, or adjust in various other ways, not all of them predictable.
The UK government spending total, as a share of GDP, at the highest level since the late 1940s. And following the 31 Oct. 2024 budget, unemployment is rising. We also have about 1 in 5 working-age adults out of the workforce. Like a rusty naval frigate, large elements of the UK public have been decommissioned, fit only for a salvage yard, so it appears.
Tax incentives aren’t the only thing that count, but they are important. The UK has moved decisively down the wrong side of the Laffer Curve, and the results are clear.
“Now of course it’s true that the nature of home-schooling will vary family by family. That is precisely the point of it.”
– David Frost, Daily Telegraph, warning about the move by the UK government to try and severely curtail home-schooling, which he correctly identifies as a way to enforce ideological conformity on the education of the young – something that the Left (and sometimes also on the Right too) has long sought. Frost writers about the Children’s Wellbeing and Schools Bill.
“The critique of private space companies by many on the left is frequently that those billions could be better spent helping the poor or other philanthropic goals. Of course, the Hayekian answer to that question is we don’t know. Predictions about outcomes based on investments are speculative, but there are two points in favor of the space billionaires overusing public money in the pursuit of opening up space. First, the billionaires have track records building successful institutions and seeing market opportunities. That doesn’t mean private sector investment is always right—take the Segway as a good example of that. But they have done it before…private money is much more agile and responsive than public money. When space exploration is driven by private actors and investors rather than bureaucrats, market signals will be received by people with a vested interest in acting upon them. Bezos, Musk, and Branson have experience with building on successes and ending failures. Bureaucracies rarely die and aren’t nearly as innovative as the private sector.”
– G Patrick Lynch
“Another way to think about Elon Musk’s relentless attacks on Starmer – and apparent desire to see him out of office before the next election – is that he recognises the opportunity Britain presents, if it can only get its house back in order.”
– Marc Sidwell, CapX.
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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