I’ve been quite busy for the past weeks, but I had a slow-ish day today, so I clarified my remarks about why Johan Norberg’s book Financial Fiasco is a good read, and much better than Meltdown by Tom Woods.

*”With the YouTubes to prove it!”

Still reads well: “Why Socialism Collapsed in Eastern Europe”

(I gave it as a lecture at a Cato University summer seminar on political economy in California during the summer of 1990, after having spent a good bit of 1989 and 1990 in Central and Eastern Europe.)

David Boaz in today’s Philadelphia Inquirer: “When government slippery slope goes vertical“

Among the many books I read during my recent travels, I strongly recommend Johan Norberg’s truly excellent diagnosis of (and prescriptions for) the financial crisis: Financial Fiasco: How America’s Infatuation with Homeownership and Easy Money Created the Economic Crisis. It’s far better than the other works I’ve read, not only because Norberg is a smart guy, a meticulous researcher, and a good writer, but because it’s an exercise in economic analysis and financial journalism, with no religion thrown in. (As an example of the latter, the book Meltdown by Thomas Woods insists, contrary to the evidence, that the artificially induced boom resulted in a lengthening of the capital structure through overinvestment in too many “long-term projects.” [p. 68] In fact, what we saw was a bubble in housing, which is not a “long-term project” that will “bear fruit only in the distant future,” but a speculative investment in a durable consumer good, with an additional twist: the low refinancing rates and the inducements to refinance led many to treat their homes as ATM machines and withdraw cash to finance, not “long-term projects,” but consumption. But Mises and Hayek explained a previous boom-and-bust cycle in terms of a lengthening of the capital structure, so we must believe — we must, a priori! — that all boom-and-bust cycles must — they must! — follow the same process. That’s religion, not analysis. Woods embeds some information on the deliberately induced housing bubble and the policies of Fannie Mae, Freddie Mac, etc. in a populistic treatment of the crisis; setting aside the religion, it’s ok, but it does not compare well with the much more rigorous and financially sophisticated treatment offered by Norberg.)

Norberg’s book is outstanding. I encourage people to buy it, read it, and recommend it. (I also recommend the writings of John Cochrane of the University of Chicago; this interview of Cochrane by Russell Roberts is a good place to start.)

Lastly….a quick plug for Realizing Freedom: Libertarian Theory, History, and Practice, which contains some essays (e.g., “The Role of Institutions and Law in Economic Development,” “Twenty Myths About Markets,” “Infrastructure: Public or Private”) that may help to make sense of complex economic and political phenomena. At least, John Stossel (then of ABC News) thought so:

“Tom Palmer has the ability to make the complex understandable and to go to the heart of the most difficult problems. He is a valuable resource for journalists and others in search of historical and economic scholarship and philosophical insight, especially about the impact of government intervention and the reasons for respecting the freedom and responsibility of individuals.”

Tom Palmer – “Anarchism, Limited Government & Liberalism: A Modest Case for Sacking the State” from oxford libertarian on Vimeo.

It was a rather informal chat that covered a number of topics in history, sociology, political science, economics, and moral theory. I haven’t had a chance to watch through it, but I had nightmares afterwards that I had misspoken on an important matter, that is, on the absolute incomes of the lowest decile of income in the least economically free and the lowest deciles in the most most economically free. I said, I think, that the latter was something like $17,000, when it should have been more like $7,000 for the most free. That’s a big difference! (Still the lower number is a huge multiple of the incomes of the lowest decile in the least free, which was my point, but misspeaking like that is an embarrassment; I have asked the organizers to check it and post the correction. I will try to check it myself, now that I have some fast internet access.) The stats for the latest report (http://www.freetheworld.com/2009/reports/world/EFW2009_ch1.pdf ) show the percentage of total national income ranges from 2.4 to 2.6 (that is, not much difference) between the least and the most economically free, whereas the average incomes for the lowest decile in the least free countries is $896 and for the most free it’s $9,105.

EurasiaNet.org: GEORGIA: SAAKASHVILI WANTS TBILISI TO BECOME “GOVERNMENT-LITE”

Ilia Chavchavadze

The Georgian leader used a reference to a national cultural icon, the revered 19th century novelist Ilia Chavchavadze, to sway any doubters who believe that liberalism is “a non-Georgian word.” Chavchavadze, a nobleman who led Georgia’s 19th century national movement and was later canonized, was “the first Georgian libertarian,” Saakashvili claimed, the Civil.ge news service reported.
“By choosing liberalism, we are choosing Ilia’s way,” Saakashvili said.

His speech is available in Russian here. (I will search for English.)
More information: “Saakashvili Lays Out ‘Act on Economic Freedom’”

Russell Roberts on NPR: “As Goldman Gloats, What Does It Matter For Us?”

Russell is too much of a gentleman to point out the large number of Goldman cronies who moved into state offices in Washington during the Bush and Obama (or “Bobama”) administrations. Henry Paulson, meet Ferdinand Marcos.

I had an early morning seminar and book presentation on Realizing Freedom: Libertarian Theory, History, and Practice, at the offices of the Hayek Institut in Vienna, followed by a visit to the Finance Ministry to hear the address of the Finance Minister, Dr. Josef Proll, which, while far from perfect from a libertarian perspective, was far, far, far better than what we have heard from the Obamas and Sarkozys of the world.

(Photos in order)
With Dr. Barbara Kolm at the Hayek Institut

Signing copies of Realizing Freedom at the Hayek Institut’s offices

More of the same

The meeting in the atrium of the Ministry of Finance

I got in last night from Cairo to Vienna, after a successful Egypt Audit program, in cooperation with the Fraser Institute and the IDSC of Egypt. The Egypt Audit applied the methods of the Economic Freedom of the World reports to one country — Egypt — and made recommendations for reforms, which were then discussed by the participants. The papers are being made available to Egyptian cabinet ministers and advisers. There was some very good media coverage and some spirited discussions about how to reduce barriers to trade, reduce the regulatory burdens on entrepreneurs, reform monetary and financial policies, and more.

(Photos in Order)
Being interviewed for Nile TV on the Benefits of Free Markets

With my colleague Dr. Nouh El Harmouzi, Editor of Minbaralhurriyya.org and the primary organizer of the Egypt Audit

Another perspective (taken very artistically by Nouh)

Nouh making the case for radical free-market reforms on Egyptian TV

Two of the Working Groups at the Egypt Audit, preparing their report

Everyone labels their proposals “reform,” which is an empty label. You can’t be “for” or “against” reform until you know what the reform is (unless you’re 100% satisfied with the status quo, which few people are). Here are just three worries that occur to me and that have not been widely discussed in the media.

1. The term “public option” is a very clever neologism for socialism. That’s not a smear, just a simple statement of fact. It is a proposal for a state-owned medical system, a concept that most people find repulsive, until you dress it up in a new label that combines two attractive terms and was the result of extensive focus group research. But it’s a proposal for a state-owned and managed health care system.

2. It is absurd (maybe even “a lie”) to claim that it would be funded entirely from the premiums of those who freely elect to join it. The political dynamic should be clear. It will run a deficit, probably from the first year, and the political system will generate a clamor to ensure that it does not go under (leaving all those people without care!), so that deficit will be made up for with taxes, whether from general revenues or a new tax. Once it’s financed with tax revenues (which is inevitable), it will be hard to insist that only those who also freely elect to pay premiums should have access. Involuntary tax financing (a redundancy) will grow as a percentage of the financing. In a relatively short time, people will find themselves paying twice for health care, and private insurance (set aside that we don’t have a “health insurance market,” but a highly regulated and controlled and restricted market in pre-paid health care plans) will be increasingly crowded out.* It is a path to increasing state control, not “another option” or “competition for the insurance companies.”

3. Rep. Joe Wilson’s outburst during the president’s speech to Congress was a warning of what I fear will be the outcome of the interaction of the American “right” and “left” on this issue. We will get a state health care system that will increasingly crowd out the private sector, and, to placate the nativist right who fear immigrants getting access to that system, we will also get a national identity card system. The state will expand its power dramatically.

*See the history in other countries. A good history is David Green’s Working-Class Patients and the Medical Establishment: Self-Help in Britain from the Mid-Nineteenth Century to 1948.

James Fallows in The Atlantic: “FT, Economist, and me”

I’ll post a response later (gotta rush to a meeting now), but it will be fun to show how he has focused on a non-essential difference.

Hat Tip: Jude Blanchette

Los Angeles Times: “Obama and free trade: What’s the deal?”

Nine months into his administration, Obama’s trade policy is a pastiche of pro-trade rhetoric, violations of international agreements and protectionist bobbing and weaving. That’s why the U.S. can expect rebukes from its economic allies when the Group of 20 meets in Pittsburgh today. Obama’s recent decision to impose stiff tariffs on tires made in China is a clear violation of the vow made by all G-20 members not to raise barriers to trade, goods and investment.

Courtesy of FreedomToTrade.org

on CNN iReporter

It’s easy!

You can join the free trade fan page and join thousands of people, including over 1,000 economists, who’ve stood up for free trade by signing the petition that “Free Trade is the Best Policy.” (It’s available in 32 languages.) And strike a blow for the freedom to trade.

(Don’t forget to visit YouTube.com/freedom2trade for a lot of videos on peace, free trade, and justice in English, French, Spanish, Chinese, Bahasa, Russian, Arabic, Kurdish, Portuguese, and other languages; expect a lot more in the near future!)

Don’t Repeat Smoot-Hawley

The Obama administration has, to its shame, imposed senseless taxes on tires made in China. It is not only an assault on honest Chinese workers, but on honest American customers. Dan Ikenson cuts through nonsense in “Burning Rubber: Proposed Duties on Chinese Tires Whiff of Senseless Protectionism.”

Dan also has an excellent analysis of the nature of international trade at FreedomToTrade.org: “No Longer Us versus Them – Trade Policy for the 21st Century” (That’s thanks to the good offices of the International Policy Network.)

(See “US trade board rules against Chinese tire manufacturers” for the bare facts.)

Mark Calabria actually — gasp! — asks how we could answer that question and looks for the evidence in Cato Policy Report.