Sunday, June 28, 2009

Peak Column #5: Progressivism through the ages

Welcome to week 5 of Rules for Radicals. If you’re just now tuning in, I would suggest you first acquaint yourself with previous installments, starting here. Regular clientele, welcome back for another exciting round of anti-Progressive demagoguery. Today we’ll be looking at Progressivism through the ages. As we’ll see, she was quite attractive in her early years – but the toll of age is steep.

A century ago, the world was full of people who believed in free markets, individual liberty and personal responsibility. We would call them “Libertarians” if they were re-animated today, Jurassic Park-style. We would also keep them in tropical preserves surrounded by electric fences, so out of fashion and practice are their ideals in the 21st century.

Oddly enough, these ancient people called themselves “Liberals.” This raises a few questions, since the 21st century definition of a Liberal is pretty much the polar opposite of what 19th century Liberals such as Adam Smith, David Ricardo and John Stuart Mill meant when they used the label on themselves. Back in their day, Liberals were defined by their support of laissez-faire economics and limited government. Modern Liberals, in contrast, advocate the opposite set of policies: Central planning; state ownership of the means of production; high taxes and lavish social spending. What’s up with that? Have we found a glitch in the English language?

As neat as that would be, no we have not. It may seem unlikely, but the word “Liberal” has been true to itself all this time. There is a clear and direct line of descent between 19th century Liberals like Adam Smith, and 21st century Liberals like, say, Hilary Clinton. This is hard to swallow, since you couldn’t get a 19th-century Liberal to spend 5 minutes discussing policy with Ms. Clinton without them coming to blows, but the common lineage is there, if you know where to look.

Here at Rules for Radicals, we’ve previously defined modern Liberalism (under its synonym, Progressivism) as a preference for centralized government authority over individual liberty. Astute readers may have noticed that this definition is full of holes. In several areas – military power and policing, in particular – Progressives favor a decrease in the power held by centralized governments. Statism is apparently a symptom of Progressivism, and a selective one at that, rather than its defining feature. Clearly we need a new definition of Liberalism, Progressivism, and the Left.

Fortunately, I have just such a definition. I find it simplifies the world, answers questions, and generally matches up quite nicely with reality. Your mileage may vary, of course, but here it is: Liberalism is the political ideology concerned with redistributing power away from those who currently possess it.

Consider the problem of conflicting definitions of the word “Liberal” in the 19th and 21st centuries. 150 years ago the chief proponents of mercantilist (i.e., un-libertarian) economic policies were business and land owners who benefited from tariffs, protectionism and political favoritism. Liberals of the era advocated for free-market reforms at least partially on the grounds that such policies would dilute the power of the wealthy and benefit the working classes. (Google “Corn Laws” for a good example.) Other historical Liberal causes – the abolition of slavery, civil rights, first-wave feminism, replacing monarchal governments with democracies – all can be understood as Liberal attempts to change an existing distribution of power.

I am not a Liberal, according to the word’s modern definition, but I have to admit, their track record is good. Had I been born 50 to 300 years earlier, I would be the era-appropriate equivalent of a Prius-driving, SFPIRG-attending, New York Times-reading, capital-P Progressive. But in the world today, when I look for undeserved power, unearned privilege and unjust authority, I don’t see it in the Corporations, IMF, or whatever other enemy-of-the-week Progressives are decrying with chanting and sign-waving. I see it in the modern Progressive movement.

Certainly, Progressivism has achieved great things in the past. But the men and women who today seek to nationalize our economy, ban dissent through Human Rights Commissions and strangle our public schools with corrupt unions that prevent the firing of incompetent teachers – these are not the same Progressives who created the free, open, and prosperous civilization that we live in, and they don’t deserve the political power they’ve inherited.


Monday, June 22, 2009

Peak Column #4: An Unanesthesized Dissection of Progressivism: Part II

Previously on R4R, we began a savage and merciless attack on the political ideology known as “Progressivism.” She was a cagey opponent however, so the smackdown has spilled over into this week’s column. Hopefully, loyal readers of Rules for Radicals are as patient as they are intelligent and open-minded, and can forgive the two-week delay.

The quality of open-mindedness will be particularly important to my Progressive readers this week, since we will be pulling no punches, barring no holds, and landing every cheap shot we can get away with in our cagematch against their flawed and dangerous ideology. It won’t be pretty, my dear Progressive friends, but I promise you: it’s necessary. As for my Conservative readers, prepare for a treat. Grab some popcorn, set the TiVo, and turn your phone off – in a few minutes, Progressivism will be nothing more than a tie-dyed stain on the heel of your host’s boot.

Let’s begin. Recall, in our earlier attack on the Right, we pointed out that Conservatism, by definition, opposes change. But, we said, change is often necessary and desirable. Therefore, Conservatives are idiots. This cuts both ways, however. Change is often good, but it is certainly not always good. Since Progressivism (by its literal definition) always favors change, Progressives must also be idiots.

Of course, I’m just fishing for hate mail right now. Neither Conservatives nor Progressives are, to a man, idiots. But my point, which I’m sure you’ll grant, is that an ideology that is reliably phobic of change is as philosophically bankrupt as an ideology that always and everywhere fetishizes it. Unless you believe that human societies are constantly changing for the better, literal Progressivism is logically untenable.

This is an excellent argument against my own straw-man definition of the Left. Perhaps I’ve convinced you that “Progressivism ” is a slightly inaccurate name for your beliefs, but I’m sure the beliefs themselves remain firmly entrenched; if you supported a comprehensive welfare state coming into this column, nothing I’ve written here should change your mind. But now that we’ve found a fundamental flaw with the ideological core of Progressivism, it’s worth asking some questions.

Such as: If Progressivism isn’t simply an unflinching love of change, what is it exactly? If we look at the policies proposed and implemented by people who call themselves Progressives, what is the common denominator? Consider a list of ideas any sane and reasonable person would have no trouble identifying as progressive: Publicly provided schools and health care; generous welfare programs; state ownership of major industries; increased regulation of business; and the liberal use of fiscal policy during recessions.

Note that each involves a transfer of power from individuals to a centralized governing authority. Is this a coincidence? Did your host cherry-pick to suit his demagogic purposes? Perhaps. But try this thought experiment: put together a list of Progressive policies that do not involve the expansion and centralization of government power. Once you have tried and failed, the conclusion is inescapable: The ideology of Progressivism advocates a gradual and wide-reaching extension of the powers of central governments.

To me, this discovery is reason enough to condemn Progressivism – I see it as self-evident that ever-expanding state authority in every aspect of people’s lives is abhorrent. It strikes me as painfully obvious that, historically, small governments emphasizing the rule of law and free markets have been orders of magnitude more successful at improving the human condition than governments that did not – there is a reason guards on the Berlin wall had their guns pointed inward at their own citizenry, preventing them from escaping. China’s 10% annual growth is not unrelated to her recent pro-market reforms. If your opinion on this matter doesn’t match my own, please spend some quality Wikipedia time with Dubai, Singapore, Hong Kong, South Korea, Chile and Ireland - see if you can manage to come out the other end with your pro-government sympathies intact.

Realistically though, if you don’t share my preference for small government over large, than there is nothing I can say to change your mind in an 800-word column. I can recommend some authors – Milton Friedman to get your toes wet, then some Hayek once you’re warmed up. An occasional episode of South Park doesn’t hurt. But ultimately, the realization that 60’s-style Leftism is untenable is one that recovering Progressives must come to themselves.

Hopefully the conversion process is complete before our next column, though. Next week, we’ll be focusing on a new question: Since the Libertarian ideals of capitalism and free markets have been responsible for what have unarguably been the most prosperous two centuries of human history – why are those ideals being categorically discarded by Western governments over the past century?


Wednesday, June 17, 2009

The Economics of Friendship

It's blog post titles like this that make people not want to be friends with economists.

(I kid, of course. Everyone wants to be friends with an economist. At least they do today, now that their portfolios have taken a 25% haircut in the past three quarters and their old financial advisor has fled the city to work on an oil rig in Fort McMurray. Now everyone wants some pro bono investment advice from their friendly neighborhood economist. But I digress.)

Today's post will focus on a rigorous, quasi-serious analysis of the economics of friendship.

First, read the inspiration behind this post. Bryan Caplan is one of my favourite economists living today. He is smart, honest, perceptive, and full of integrity. He also strikes me as a fundamentally decent and nice person. Hopefully, in light of all this (very sincere) praise, he will forgive me for pointing out that in his younger years, he was a bit of a nerd. As such, his definition of a successful social strategy sets the bar pretty low.

As I pointed out in the comments to that post, I disagree with his recommendations. To explain why, I'll need to break down a working model of friendship.

Friendships exist because life is full of potential positive-sum interactions between groups of people. Most of these look a lot like unconventional forms of insurance.

- Your friend moves, you help him
- His car breaks down, you drive him around until it's fixed
- He loses his job, you pick up bar tabs until he's back on his feet
- He's single, you introduce him to your girlfriend's hot friends


As I said: Insurance. Except better, because the cost of helping is much less than the benefit received. What does it matter to you if you give up a Saturday to move furniture? You didn't have much to do anyway. But you saved your friend $500 of movers fees. A group of people who are all willing to do altruistic things for one another will always be better off than lone wolves. The closer the friendship, the higher the ratio of (cost to you)/(benefit to them) you are willing to tolerate before the favour becomes "unreasonable." Assuming the number is always less than one, it's pretty easy to see that closer friendships are welfare-enhancing.

So there you have it. The conclusions derived in today's economic analysis: Cherish your friends, offer your help unhesitatingly, and expect them to do the same for you.

The Dismal Science, indeed.


Sunday, June 14, 2009

Textbook Economics

This post is not about Economics textbooks. I've dealt with enough of those in my life that I feel no need to revisit the topic. Instead, I'd like to engage some criticisms Seth Godin has made of the current crop of marketing textbooks. I share his concerns, and I'll add that the textbook situation is only slightly better in other business sub-fields. Luckily, the problem is easy to fix.

But first, let's get the negativity out of the way: The manner in which business departments select, assign and use textbooks is awful. As Seth points out, they are overpriced, impractical, boring, and forgettable. I definitely extracted quite a bit of value from my biz-school undergrad, but at a guess, roughly 80% of my current understanding of marketing has come from writer's like Godin, Cialdini, Tim Ferriss, Ben Casnocha and Tucker Max. Considering I've spent about 10x as many hours with textbooks than I have with all of the above combined, this is a major failure by my undergraduate program to deliver its core product.

The problem with the textbook industry is one of incentives. Professors write them to supplement their income. As writers of both textbooks and syllabi, they are in a conflict of interest - royalties can be increased by releasing unnecessarily frequent new editions, avoiding teaching methods that do not require a text, and so on. The fraction of professors teaching courses using their own textbooks is not large, but there are not many business gurus teaching and writing textbooks at top-tier schools in the world today. A lot of them know each other, and if one can do a favour for the other - well hey, they are business professors after all.

Another problem is the increasingly common practice of textbooks that include supplementary teaching material, such as lecture slides, online quizzes, etc. that make the Professor's job easier. Sometimes this can be perfectly reasonable. Other times - like the 4th year Marketing and OB courses in which the midterm and final exam consisted entirely of pre-written multiple choice questions, all 100% gradeable by Scantron machines - not so much.

Finally there is just the overall low quality of the actual content of the textbooks. One that Godin looked at (Printed in 2009) didn't have an entry in the index for either of Google or Twitter. Yeesh.

So what we have now is suboptimal. How do we fix it?

My proposed solution has two parts:

1) An Open-Source Glossary

For each field and sub field, and sub-sub-field of business (or anything, really) create an open-source Wiki that can be edited by any peer-approved professor in the field. Wiki-Glossary will function as a collection of impartial definitions of terms, theories, people and ideas in the realm of marketing. Basically, it will be Wikipedia, with editing privileges limited to non-anonymous experts in the field. Truthfully, I think Wikipedia already fills this need. But many people are still not 100% comfortable trusting anyone without official credentials, so an elitist Wiki such as this will be an easier sell.

2) Crowd-sourcing Case studies

The best way to learn business is by reading and analyzing case studies. This is recognized by the top-tier management schools in the world, and it suggests an important role for textbooks to fill: a convenient filter and aggregator of case studies.

The best business courses that I took had "textbooks" that followed exactly this approach. You could certainly do a lot worse, as a professor, than to assign your students a set of case studies that they can purchase bound for $30 and go through each in turn. But you could also do better.

Imagine a database of every case study ever used in marketing and strategic management classes, updated and maintained by business school professors. Each professor can rate the case studies according to his or her tastes. Students as well.

Separately, lesson plans for each case study can be submitted by professors, which would also be rated up or down according to the tastes of their peers (or students). These lesson plans would be submitted anonymously to prevent groupthink and deference to established titans. No professor would be obligated to construct a syllabus consisting of only the "best" lesson plans for the "best" case studies, but it would be immediately easy to separate the obviously at-least-decent from the crap.

So there you have it. Professors would save time, students would get a better education, and I would receive enough blog traffic that I could retire on the proceeds of my "Check your credit rating" pop-up ads. Win-Win-Win.


Monday, June 8, 2009

Outsourcing Lectures

We don't expect individual professors to write their own textbooks for every class they teach. That would obviously be an absurd waste of time - it's far easier to use a textbook already written by someone else.

So why do we expect every professor to plan and present their own lectures? Imagine the quality improvements that would occur if we followed the same distribution model for lectures as we do with textbooks: The best, most well-spoken professors in the world, presenting well-rehearsed and polished explanations of their material in Blu-Ray, delivered or streamed to lecture halls and student's laptops all over the world.

You might object that this robs the student of the ability to ask questions if they don't understand something. But do they really have this ability now? In my experience, students are already hesitant to ask questions when they don't understand something. With a pre-recorded lecture, students could pause, rewind, consult their textbook, ask a friend or look something up on google. On the rare occasion that this kind of self-directed learning fails, a student can make use of optional tutorials or their TA's office hours.

I think we would see an immediate and substantive increase in teaching quality if we adopted this model. More importantly though, outsourcing lectures creates an industry that rewards continuous improvement and encourages innovation. If you think we'll be impressed by the first generation of lectures-on-tape, imagine what we'll be seeing after a decade of testing, focus groups and quantitative analysis of different teaching methods and exam performance. Aside from the inglorious transition from chalk to overhead projector, there hasn't been any sort of innovation in teaching and education in the lives of those now living. Outsourcing lectures will create a strong incentive to improve and refine teaching techniques.

Finally, consider the egalitarian implications in a world where an entire undergraduate degree can be obtained from textbooks and videos. Education would no longer be the sole prerogative of the wealthy and privileged. Anyone with access to an internet connection could receive an education of higher quality than is available to 99.9% of the world today. Universities would continue to exist, focusing on their core competency as research institutions. World peace would reign, the blind would see, and there would be a rainbow every day.

The technology exists. The initial implementation would be tricky, but once this takes off, it really takes off. Economies of scale and all that. I'm a little too preoccupied to start Lectures 'R Us right now, but if any of my loyal readers aren't, please feel free to go ahead and make a billion dollars.

Monday, June 1, 2009

Peak Column #3: Progressivism: Not Your Parent’s Radical Ideology

Welcome to another thrilling installment of Rules for Radicals. Last week, I did my best to alienate the Right-leaning half of my readership with a no-holds-barred smackdown of modern Conservatism. It wasn’t pretty. Any Conservatives who have returned – please congratulate yourself. It is a rare person who willingly reads something they disagree with, and your continued patronage of Rules for Radicals speaks highly of your open-mindedness.

As promised, today’s fare is something you’ll feel much more comfortable with - a savage and merciless thrashing of modern Progressivism. In our best impersonations of Ann Coulter, Michele Malkin and Bill O’Reilly, we’re going to hack away at the Progressive movement, until nothing remains but a smoldering pile of patchouli-scented ash and bones. Excited? I certainly am.

Progressivism is ideologically undesirable because it is, quite simply, out of gas. This is not to say it is dead, like Conservatism. Quite the opposite. Progressivism has been the dominant political ideology of the Western world for half a century and counting, and in that time it has achieved near-total control of the levers of power in our world.

Bold claims such as these require some explanation. So says my hate mail, anyways. What’s all this business about the Intergalactic Progressive Empire? Don’t, like, the Corporations and the IMF run the world? Surely Naomi Klein and Michael Moore wouldn’t mislead us on this crucial point. The planet is firmly controlled by a secretive brotherhood of fat, white, Republican men. Barack Obama himself may be one of their cleverly-disguised agents, such is the power of the Vast Right-Wing Conspiracy.

A common narrative, perhaps. But it doesn’t survive close inspection. What is “power” really, in a democratic system such as ours? It seems to rest in the hands of the voters. The people! How noble. But as anyone who has ever met a person knows, they are irrational, whimsical, selfish and unpredictable. Hardly the sort of creatures to be trusted with power. Unfortunately, history has been quite instructive in teaching us that the tyranny of the masses has been considerably less dangerous than the tyranny of the few. Usually, anyways. So we’re stuck with democracy, for lack of a better alternative.

But voters, unlike loyal readers of Rules for Radicals, are not the reasonable, intelligent, open-minded altruists we would like them to be. They are easily led, persuadable, and prone to flights of whimsy. As a consequence, true power is located securely with the people and institutions who can most effectively shape public opinion. Chief among these would be the public schools, Universities, and the media – each of which is a staffed and managed by men and women of an overwhelmingly Progressive disposition. I realize I’m sounding more than a bit like Rush Limbaugh with this, but that doesn’t mean it isn’t true. We can quibble over the extent to which each is dominated by the Left (exceptions abound, particularly in the print media) but it is hard to argue with the conclusion that North Americans receive their information about the world primarily through Progressive-approved channels.

If further proof is necessary, consider the overall trend in public opinion over the past half-century. The increasing power and popularity of Progressivism has been the overwhelming narrative of Western politics since the Second World War. Even if you disagree with my Coulter-like claims of Progressive domination of the information organs of our society, you still can’t escape the fact that something is happening to guide the North American and European citizenry in a Progressive direction. The beliefs of a man who passes for a Conservative today would have been called liberal in 1980, radical in 1950, and treasonous in 1900. Very rarely is a winning team forced to repeatedly lower their standards for what it calls a victory.

So you’ll excuse me for rolling my eyes at the suggestion that the Left is anything but a 100:1 favorite in its perennial showdown with the Right. Of course, demonstrating that a particular ideology has been successful is not sufficient to condemn it. All we have shown today is that modern Progressivism is powerful – hardly a damning claim, though still one that most Progressives would argue against with almost suspicious vehemence. Next week, we’ll continue the case against Conservatism’s longtime rival. As we’ll see, neither belongs anywhere but the ash heap of history.


Dolla Dolla Bills Ya'll

Today's post is about Money. Not about how to make it, how to invest it, or anything like that. Such earthly pleasures are beneath the consideration of your host, whose only goal is to inform and educate. (Pay no heed to the pop-up ads, coming soon) If you've come looking for financial planning advice, I would recommend Macro Man and Snoop Dogg.

Personally, I'd rather spend some time looking at this odd phenomenon of "currency" that has been used in every organized civilization that has ever existed.

First, a little background for the non-economists: Wikipedia will tell you everything you need to know about money although there isn't much there that you won't have already picked up in introductory micro, or even just a few minutes of intelligent thought on the subject. Money serves as a medium of exchange, a store of value, etc etc.

Things only start to get interesting when we start talking about monetary policy. Before we go any further, a brief primer on the two major schools (and one bonus non-major school) of thought on the subject. These are the Keynesian, Chicago, and (least fashionable by a country mile) Austrian schools.

The Austrian view on monetary policy is the simplest to explain, so I'll begin with it. Basically, the ideal Austrian policy is: No policy. Step 1) Create a supply of currency. Step 2) Do nothing else for the next 100,000 years. Contemporary Austrians (there are maybe 10 of them) advocate a return to the gold standard, or the creation of a fixed amount of fiat currency, followed by chaining anchors to the currency printing presses and sinking them in the Mariana trench.

The Keynesian view is that markets are beset by irrationality, stupidity and greed, which leads to booms and depressions. To correct these unnecessary and jarring shocks, the central government must enter the fray and rein in the economy during periods of irrational exuberance, and stimulate the economy during slumps. The preferred Keynesian tool for this is deficit spending, which is to say the government borrows money from it's citizenry (or whoever) and spends it on whatever it is governments spend money on. Personally, I am fairly skeptical of any theory that assumes federal government bureaucrats in cheap suits can do a better job than centimillionaire hedge fund managers of determining what is or isn't rational, but that's just me. The Keynesians hold what is certainly the dominant viewpoint within the economics profession today, and they seem to hold sway over policy in the United States.

The Chicago School, or Friedmanite view of money is similar in many ways to that of the Keynesians. The primary difference is that the Chicago School prefers to conduct stabilization actions through the Federal Reserve, rather than the federal government balance sheet. Friedman and Co., being as they are free-market radicals (not at all a pejorative here at R4R) think that individual consumers and investors will do a better job of allocating resources than a centralized governing body. Rather than massive, New-Deal-style stimulus packages, the Friedmanites would prefer the induced spending to come from individuals, rather than central planners.

Now, I've been a committed Friedmanite for some time now. In a showdown with Keynesianism, I'll still take my boy Milt any day. But lately I've been having trouble seeing exactly why it is that respect for the Austrian school perspective on monetary policy is almost non-existent in mainstream economics. I've been doing some reading on the Great Depression, Monetary history, and the current financial crisis. The Austrian story makes sense, fits the facts, and (I think) has a lot to offer in terms of policy to encourage stability and economic growth.

The bottom line is that contemporary economists should be a lot more familiar than they currently are with Austrian Business Cycle Theory. I'm not asking for a wholesale conversion, mainstream economists, but please: at least figure out why it is, exactly, that the Austrian school deserves the ignominy currently heaped upon it by your profession. Here's a reading program for anyone inclined to take up this offer:

1) Wikipedia. Start at the link, and follow the "Related Topics" to your heart's content.

2) Once you've got the basic ideas, start poking around here. If you're a current events junkie, throw together a little case study of your own. Compare the stories being told by the Austrians and the mainstream and see whose strikes you as more plausible. Just sayin'

3) If you're in the market for some light summer reading, pick up a copy of Rothbard's Man, Economy and State. Skip the first volume if you're short on time, the good stuff is mostly in the back.

4) Not for the faint-of-heart, but Monetary History of the United States is a good primer on the history of money, credit and business cycles. The author is a, uh, Friedmanite, but as a historical account, it makes a pretty solid case against what Rothbard would call "The Inflationists".

I'm not convinced the Austrians have it right. In fact, there are a lot of points on which I'm convinced they are dead wrong. In any discussion of business cycles and monetary policy though, the Austrian perspective deserves a fair showing.