Wednesday, July 31, 2013

Upcoming Posts

Renewed Faith in the Public

I was looking at the IMDB comment boards on the film The Fifth Estate, about Wikileaks, and was heartened to see some common sense for a change. Granted, there were some who were strong Wikileaks boosters, the usual "the state and big corporations will enslave us" types, but there were also some, many who were clearly not strongly or even mildly conservative, who seemed to have a quite clear picture of why Wikileaks rubs so many the wrong way.

Here are a few examples:

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It seems everybody wants to be Woodward and Bernstein from Wikileaks to Edward Snowden but they aren't quite hitting the mark. They come off more attention seeking than genuine fighters for transparency. I never felt like the Wikileaks things was that big of a deal but it seems like many people want it to be. 

Did I miss something was it a big deal or wannabes trying to prove something? 

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It was and it wasn't. It was a thing but not as big as many people wanted it to be. The media didn't even cling to it that long and frankly, neither did the public. 

Its not that the public is necessarily apathetic to corruption but are apathetic to "freedom fighters" or "those who know the real truth". They are everywhere and the internet is their mecca. 

We need whistle blowers. We need a outlet for someone who knows something to get the information out to the public safely. I think most would agree on that; the problem is not the message but the messenger. 

The demographic of the people who create these websites have lost the public's trust. They have pressed the panic button so many times people have stopped listening. The public will listen to the "average joe/everyman" whistle blower but any whiff of political posturing, "transparency/keeping the governments/corporations honest", that sort of thing gets you ignored. 

It also doesn't help that these people are going after governments and corporations, which is fine, but it does come off as adolescent rebellion towards authority rather than transparency. What I mean by this is don't just go after governments but also focus on organised crime, terrorist, pedophile rings, human trafficking, identity thieves, and drug lords. You hear about cyber attacks on the government but what about the people in the world that do truly trouble things. Aren't they on the internet in some form or another? 

If you really want to get people to hear you affect their day to day lives and not just "freedom". That's my take on it.

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I'm with you, mickey. You've put it beautifully. 


the problem is not the message but the messenger...The demographic of the people who create these websites have lost the public's trust. They have pressed the panic button so many times people have stopped listening.

That's the problem with Assange. He's now like the Boy Who Cried Wolf, people are sick of it and a lot of us question his current credibility. 


The public will listen to the "average joe/everyman" whistle blower but any whiff of political posturing, "transparency/keeping the governments/corporations honest", that sort of thing gets you ignored...going after governments, which is fine, but it does come off as adolescent rebellion towards authority rather than transparency.

That's the other major problem with Assange. His political posturing now looks so affected and self-important, like he thinks of himself as some kind of Demigod Who Affects the Course of Human History. It's a real turn-off. His ego got in the way a long time ago, and it seems like it's affected his judgment. 


don't just go after governments but also focus on organised crime, terrorist, pedophile rings, human traffics, identity thieves, and drug lords. You hear about cyber attacks on the government but what about the people in the world that do truly trouble things.

That's why someone like Lowell Bergman, of 60 Minutes and Frontline fame, would always have my respect and attention. People like him tend to focus on issues and stories in which the corruption/atrocities/perpetrators that are uncovered really ring a bell with the average 'man-in-the-street.' Bergman (see the film The Insider) knows how to make this connection. 

This rather hazy 'governments-are-smothering-us-and-taking-away-our-freedom' business doesn't always connect, somehow. 

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Snowden himself, doesn't come off well. You fully expect to hear about his book and movie deal any day now. Then he ran to Russia for asylum, a country where if their spies tell their secrets they kill you. LOL. With Snowden and the CIA I think most people felt like there was already programs like that in existence anyway so there was less shock and outrage. When you are talking about invasion of privacy in peoples homes, their property, and on their person expect outrage. But when it comes to the expectation of privacy on the internet, there is a whole rainbow of feelings in that regard so you are going to get a more diverse response. 

As for Wikileaks is wasn't necessarily a big deal but more of a medium size deal. I mean, this is the stuff progressive liberals live for, the media as well. So they are going to make it a bigger deal than the public will. I remember during the Arab Spring, both those groups where on it like honey but where disappointed in the lack of support and/or response for the public and the government. They felt like this was a big deal and expected everyone else to feel the same way. Yet, everyone else was more "wait and see what happens" before they jump on the "history in the making" bandwagon. 

I think the public now is developing a wait and see attitude before the grab their Torches and Pitchforks. Because you know we will.

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Snowden himself, doesn't come off well. You fully expect to hear about his book and movie deal any day now. Then he ran to Russia for asylum, a country where if their spies tell their secrets they kill you. LOL.
I know, seriously. Can you say: cynical and transparent? And Russia for asylum?  


But when it comes to the expectation of privacy on the internet, there is a whole rainbow of feelings in that regard so you are going to get a more diverse response.

Exactly. These 'whistleblowers' are making premature assumptions about what the public will be outraged by. The public isn't always so na├»ve as they seem to expect. You can't just yank a chain and expect it to react a certain way. It's not Pavlov's Dog. 


As for Wikileaks is wasn't necessarily a big deal but more of a medium size deal. I mean, this is the stuff progressive liberals live for, the media as well. So they are going to make it a bigger deal than the public will. I remember during the Arab Spring, both those groups where on it like honey but where disappointed in the lack of support and/or response for the public and the government. They felt like this was a big deal and expected everyone else to feel the same way. Yet, everyone else was more "wait and see what happens" before they jump on the "history in the making" bandwagon.

^^^^ THIS. This. I don't think I've ever heard it described so well. It's as if they're ready to throw a tantrum if the public doesn't react to it with the overwhelming response they practically demand. 


I think the public now is developing a wait and see attitude before the grab their Torches and Pitchforks.

Well, that's the thing that evidently makes Assange and people like him mad. When the public wants to wait before bulldozing onto some pretty thin ice. 

It seems to me his work is all about knee-jerk reactions. Just IMHO. 

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Now, I will grant, a lot of this is just chatter and off the cuff impressions, not deep thought on the matter, but it still does a fair job of explaining why the general public is so opposed to Wikileaks, and also why the internet conspiracy theory, Lew Rockwell, "libertarian left"* , neo-anarchist crowd will never get much traction. So long as they scream excessive claims about the loss of freedom, make claims the public sees as unjustified, they will be written off as spoiled children or fear mongers.

This may also serve as a warning to the right. Though the boosters of Wikileaks are largely left-leaning -- with a few left-libertarian types, and maybe some "fear of business" paleo-con types -- the right has fallen into the same trap from time to time. Yes, we raise valid issues, and often see real problems, but we need to be careful about how we make our case. Screaming out that Obama will destroy all freedom does not win converts, it causes most to stop listening, and, whether we are right or not, it does no good to be in the right if no one listens to you**. I do not suggest denying our beliefs, or staying silent, but instead, perhaps it would be more beneficial to simply point out the immediate and palpable harm of these policies, with a mention of potential longer term problems, rather than scream that the end of freedom is nigh. After all, people will fight against smaller ills as much as greater, and if a problem is immediate and palpable it may even draw more attention than some abstract, remote or potential harm.

In the end, does it matter why an evil is removed? Pushing the public a single step in the right direction is a lot better than shouting and screaming to try to force them to take a hundred steps or more, and not just failing, but so alienating them they will never again listen to what we have to say. One step at a time still reaches the goal***.

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* See  "The State of Nature and Man's Rights", "A Beast's Life", "Civilization and the Fear of Death",  "The Libertarian Left", "Liquid Ice? Female Father? That's Nothing!", "The Failure of Wikipedia", "Copyright as Politics", "Some Libertarian Analogies", "Revelation From Bottom Feeding", "The Tragedy of the Creative Commons" , "Every Kid Likes Hot Dogs", "Guns and Drugs" , "A Little Bit of Irony" and "Speechless".

** See "The "Liberal Bubble" Becomes Universal" and "With Friends Like These".


*** See "All Life in a Day, or, How Our Mistaken View of History Distorts Our Understanding of Events", "Catastrophic Thinking, The Political, Economic and Social Impact of Seeing History in the Superlative", "Harming Society""The Case for Small Government""Tyranny Without Tyrants", "In Praise of Slow Changes", "Conservatism, Incremental Change and Federalism", "Traffic Lights, Predictability and Conservatism", "Why We Need Adults"  and "Why We Need Adults II".

Tuesday, July 30, 2013

Post Hoc, Ergo Propter Hoc

NOTE: I have been quite remiss in transferring my old blog posts to this new blog. I managed to transfer all of my two smaller blogs ("Nation of Whiners" and "Examining the War on Drugs"), but my largest blog, "Random Notes" has only been transferred from my first post "Why the Empty Space?" on 2007/02/26 through "What's Your Point?", originally published 2008/06/08. (Along with a few odds and ends, including my incomplete "Blog Index" and the unfinished series "Liberalism, Its Origins and Consequences".) Thus this post may seem strangely out of place. And it is. However, there is an explanation. This post is, as some may notice, cited quite often in my essays on economics and regulation, however, the original was named incorrectly. For some reason, my Latin failed me for a moment and I entitled the original "Pro Hoc, Ergo Propter Hoc". Since it annoys me every time I have to write that nonsensical title, I have decided to reproduce the post here, so I can link to this copy with a correct title.

Yes, I am entitling a post after a boring logic error, but fear not, that boring logical error has some pretty interesting implications. For example, how often have you heard that we are destroying America by moving from a manufacturing to service economy? Part of this argument comes from theories such as those put forward in "Bad Money" by Kevin Phillips. His thesis, that Spain in the 16th century, or Britain in the 19th, was destroyed by "financializing" of the economy, which is at the heart of this argument, is actually a perfect example of this. And this leads to other foolish arguments, such as theories about cabals of bankers (or maybe Jews) scheming to cause such destruction.

The truth is, such "financializing" has four roots, and two of those roots are the actual causes of societal decay. In other words, it is not the decline of manufacturing which destroys an economy (otherwise Switzerland would have long ago collapsed), rather the same pressures which destroy the economy of a state also tends to cause a decline in manufacturing and a growth of the financial and services sector.

The first two causes of growing services are harmless, though Phillips argues otherwise. First, when an economy grows to become the preeminent economy in a given period, it tends to attract investors from other nations, just as the biggest industries tend to attract investment. At the same time, successful economies also generate surplus wealth at home.With all this excess money looking for an outlet, it is inevitable a vast investment infrastructure would grow up, without such an infrastructure, such money would simply languish, the infrastructure does not detract from manufacturing, it is necessary for the growth of manufacturing, and other segments of the economy1.

A second harmless factor is a change in needs. As the country grows in wealth, the more immediate needs, food, shelter, clothing, tend to be satisfied, and as it grows more, they are pretty well satisfied in trading partners as well. This leaves fewer avenues through which to sell the proceeds of agriculture and manufacture, and so money flows into "services", that is entertainment, medicine, investment, research, and elsewhere. Just as wealth allows economies to abandon agriculture for manufacturing2, more wealth means money can flow from manufacturing to services. That is not a sign of weakness but of strength, of fully satisfied physical needs and the ability to indulge in other pursuits.

Which brings us to the two reasons for an expanding financial/services sector which are signs of decay.

First, we have the rise of an urban proletariat, for lack of a better name. With a huge mass of voters packed into relatively compact urban areas, the power of populist rabble rousers is unprecedented. To some degree it depends on how political systems are organized (eg. the British practice of assigning seats to individual cities amplified this, while the US system of representation by states meant that rural interests could counter-balance this to some degree, until urban population weight eventually moved congressional weight to largely urban states such as New York, Michigan, Maryland, Connecticut, Ohio, and so on.) With the rise of urban rabble rousers there arose movements which, in modern times, would be called "unions". These political movements, by favoring the interests of workers, tended to make manufacturing more costly. As a result, manufacturing would move out of country, to lands where there were nearly as educated workers, nearly as great a reserve of capital, but fewer such laws. (Eventually migrating ever farther afield as "progressive" ideas gain popularity in neighboring nations.) With less manufacturing, money would need a new outlet, and so the financial and service sectors would grow. In addition, with the needs of sending capital overseas, the transportation sector would expand, along with the services related to moving money overseas and importing and exporting goods. Overall, such laws would lead to a shift from manufacturing to transport and services3.

And that brings us to the final change. With the growth of urban labor movements there is often a similar move toward interventionism. This can take many forms. Sometimes the form of social services, either at the request of labor, or by the elite to pacify labor4, sometimes it takes the form of protectionism, usually to pacify agricultural and trading interests, and many times it takes various forms as wealthy interests lobby for government laws to protect their positions, enacting laws they, rightly or wrongly, imagine will advance their interests. The US avoided this for a time, mainly due to the restrictions written into the constitution, but even before those broke down in 18905, the various states had long been taken over by reform movements, labor, and populist politicians. Other nations fared even less well, lacking these protections.

Once the government begins to meddle in industry and commerce it becomes more costly to open new firms, and so money builds up and looks for new outlets. That in itself leads to a growth of the financial sector. But that is not all. The intervention itself leads to increasing inefficiency and regulation, all of which calls for specialists to work around such regulations. In addition, there arise other experts, those who help new firms get through the growing byzantine regulations, those who help existing firms take advantage of the laws, and lobbyists and others who try to bend the laws to suit various needs. And then there is the growing cadre of lawyers who arise whenever the government expands. And so, once again, we see a decline in ventures designed to produce anything, good or service, and a rise of services designed to do nothing but work around the government.

All of which brings me back to my original point. Yes, in the cases he mentions the growth of the financial services sector, and the decline of manufacturing, preceded a collapse, but that does not mean there was a causal relationship. In these cases both the decline in manufacturing and the eventual collapse had a singular cause. In addition, there are, as I showed in the first two examples, reasons that we could have a growing services sector and yet have a perfectly healthy economy and state.

So, the conclusion is obvious. Yes, many times something happens after something else. it may happen more than once, but as I argued in "Correlation versus Causation", "Correlation and Causation Revisted", "Violence and Culture", "Bad Logic" and "Law or Choice?" that in no way proves the two were cause and effect.

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1. This is a good example of the "waste" of capitalism which actually serves an essential purpose. The infrastructure supporting investment looks to some like "dead weight", but without it, how would investment money be sent to the most productive avenues? The infrastructure's cost is less than the gains it bring. That is to be the subject of an upcoming post, so stay tuned.

2. The funny thing is the move to manufacturing was once itself decried. The theory was, by stealing jobs from agriculture it would leave states unable to feed themselves. No one thinks that today, but it was no more absurd than the present argument that service jobs, rather than manufacturing, will destroy our economy.

3. Modern environmental laws have a similar impact, but are due not to urban, industrial labor power bases, but intellectual, left-wing power bases, so I am ignoring them for the moment. In any case, they are not an inevitable outcome of industrial growth, but simply one specific possible outcome of an excessively wealthy, intellectual elite without close connections to or knowledge of manufacturing.

4. History is full of examples of both. For an elite example, there is probably no better than Bismarck's social security measures enacted almost entirely to silence the "progressive" opposition. For examples of the populist version, one need only look at the "war socialism" of England, or the Weimar Republic's many enactments.

5. See "The Best Historical Example".

6. See "The Inevitability of Bureaucratic Management in Government Enterprises".

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POSTSCRIPT
I talked about the absurdity of fears of growing "service" sectors and declining manufacture in  "Jobs, Jobs, Jobs, and More Jobs", "Free Trade, Employment, Outsourcing, and Protectionism", ""Fair Trade"", "Small Business Fetish" and "Wrong on Every Point". 

POSTSCRIPT II
The mention of Jews in the first paragraph in no way implies those fearing bankers are all antisemites. There are many who fear financial interests on completely different grounds. My only point was that this same argument is also used by many who manage to conflate "financiers" and "Jews" to create paranoid antisemitic theories out of these concepts.


Originally posted in Random Notes as "Pro Hoc, Ergo Propter Hoc" on 2009/12/30.

Mergers and Acquisitions

Does anyone recall when when "M&A" was a buzzword in the press? When the Bush White House and the "climate of greed" from "12 years of Bush and Reagan" were to blame for "unjustified mergers" which were destroying the economy?

So, where is the outrage today when USA Today publishes a piece about the revival of merger mania? Why is no one blaming the Obama White House for creating a "climate of greed"? Why is no one making a new version of "Wall Street"? Or ranting about heartless businessmen and their cozy relationships with the government?

Of course, I don't really want them to do so. Nor do I particularly agree with the characterization of M&A activities. I do agree that often a surge in buyouts, especially to simply strip assets and sell off the rest, is often a sign of economic problems, but not always. But even when it is a sign of problems, I do not agree with the "climate of greed" cliche. or the idea that it is somehow the consequence of lax regulation or particularly immoral brokers. As I have explained many times ("Competition", "Big Box Stores and "The Climate of Greed"", "Moral For Me, But Not For Thee", "Symmetry and Greed" , "The Problem of Antitrust", "The Problem With Microeconomics", "A New Look At Intervention", "Saving Us From Lower Prices", "In Praise of Contracts", "Greed Versus Evil", "Fairness and the Free Market", "Fear of Trade", "Exploiting Workers?", "Clarifying a Reality of Capitalism",  "Put Your Money Where Your Mouth Is, Or The Logical Implications of Price Gouging Laws", "Capitalism and Its Consequences", "Greed", "Greed Part 2", "The Triumph of Good"), left unregulated, greed actually drives the market into productive and useful channels. The problems come when the economy is distorted, either through bad regulations of, as I shall discuss shortly, through monetary meddling.

First, let me explain why buy outs, even to simply strip companies of assets, can be beneficial and sign of healthy economic activity. As I explained before ("Bad Economics Part 19" ,   "An Analogy From Past Inflation", "Environmentalism For The Economy?", "Why"Negative" Economic Indicators Are A Good Thing", "Bad Economics Part 11", "Two Perspectives", and "Production and Consumption"), though we tend to think of increasing bankruptcies, failing new businesses and other closures as a sign of economic ill-health, the truth is, they can mean just the opposite. In a vibrant economy, money is available for new start ups, and so there are a plethora of new businesses, but there are also a host of competitors, both competing in the same field, and providing services and goods competing for the same dollars, so only the best survive. Thus, there may be a host of failed businesses, yet it is a sign of health, not a problem.

Let me offer an example. Suppose there is an international racing competition. Nation A has 6 competitors, while Nation B has only 2. In the end, Nation A has the top three slots, and all 6 are in the top 10, while Nation B has none in the top 10. Do we say Nation A did poorly as they had 5 losing racers while Nation B had but 2? However, that is precisely how many supposed economic journalists often report bankruptcy news. Strong competition often means more failures, but it also means those who succeed are even stronger, more productive, more efficient and so on. And the losses mean, not that businesses who should have succeeded were driven from the market, but instead that less efficient, less productive uses were ended in favor of more productive firms. Business competition is not a zero sum game, failures in one area can produce more than compensating successes elsewhere, and so losses in one area can often make for an even more robust market in the end.

And this is where buy outs come in. When a business is less efficient, it makes sense for them to be purchased by a stronger competitor, or maybe by someone from outside the market who has better ideas. Or perhaps for two weak companies to merge so that, operating on a larger scale, they may enjoy improved efficiency. Even a buyout simply to acquire a few choice assets can be economically beneficial, if those assets are then sold to someone who can make better use of them. Of course, for the M&A expert, it is simply a means of making money, but as I said, in the free market, those greedy motivations are still channeled into productive ends. The M&A man may want to get rich, but since the buyer with the most cash is usually the one who has the strongest track record, it often makes economic sense to let him try to make better use of an assets. And thus, whether a merger is a "real" merger, that is one intended to continue as a productive venture, or one of the much maligned efforts to "strip" a business, it can make complete economic sense and benefit the economy, making much of the criticism we heard in the 80's and 90's complete nonsense.

Of course, that assumes a free market. And one of the distinguishing traits of the Bush and Obama administrations is the lack of economic freedom. Or, to be a bit more specific, both have a relatively strongly regulated stock market, coupled with a considerable degree of inflation. And that means that in most cases, M&A is not being carried out to eliminate market inefficiencies, but rather is an effort by those who have obtained cheap money in the inflationary market to grab undervalued companies and turn them around for a quick return thanks to inflation and regulation driven instability.

Inflation causes a whole host of ills, far too many to go into here. (See "Inflation and Uncertainty", "Bad Economics Part 7", "Bad Economics Part 8", "What Is Money? ", "What Is A Dollar?", "The Gold Question, Not "Why?" But "When?"", "Monetary Issues Made Simple Part I", "Monetary Issues Made Simple Part II", "Stupid Quote of the Day (January 7, 2012)", "Wolf or Sheep", "The Inflation Engine", "Those Greedy Bankers", "Explaining Past Crashes", "Bad Economics Part 19", "Fiscal Discipline", "Putting the Bull in Bull Market" and "The Rubber Yardstick" .) But three are very relevant here. First, inflation spreads new money around unevenly, allowing some individuals to gain excess cash before prices adjust, while others see the increased cash flow long after the prices have changed to reflect the new money supply. Second, in the early stages of inflation, and sometimes even later, if the market has yet to recognize inflationary increases as a regular phenomenon, the influx of new capital drives down interest rates to absurdly low levels, often enough to overcome subsequent inflation premiums. Finally, inflation causes chaos in business planning and record keeping, often resulting in companies undervaluing some assets, allowing insufficient depreciation allowances, paying out capital as dividends and much worse. When all three of these phenomena are coupled with the heavily regulated stock market which effectively limits the number of people who can legitimately engage in buying out such companies, it is quite tempting for those who do have access, and can see the imbalance between stated and actual values, to take advantage of the cheap money to buy up undervalued companies. As most are in poor health, due to the inflationary ills I just described, this is usually a prelude to selling off the assets, but in a few cases there is enough potential left, or buyers unaware of the problems, allowing for companies to be resold for a larger return.

So, as should be obvious, I do not believe in the whole "culture of greed" myth about the Bush era, when renewed inflation (which also allowed the government to reduce the Reagan era borrowing on the market, freeing even more capital and farther depressing rates) allowed the birth of the modern M&A industry, nor do I think the current environment, driven by a combination of excessive inflation and massive bailouts, fits the bill. The problem is not greedy investors, or anything similar. the problem is a government which spends too much, prints too much currency and regulates too heavily.

But I do find it funny that what was an ill blamed on the president under a Republican administration is somehow completely unrelated to a Democrat president. Not surprised, but amused.

Monday, July 29, 2013

...Before the Truth Has a Chance to Get Its Pants On

It is amazing how long lies will persist, especially if the fit with something we want to believe, or if they serve to reinforce a popular cause. It is because of one such persistent lie that I am bothering to post this essay while still on vacation.

As of this Friday, I have been enjoying the beach, staying in ocean City, Maryland. One thing I noticed, and mentioned to my mother, who happens to be traveling with me, was that there were a considerable number of pelicans, something I didn't recall seeing here when I was a child. (There were also a lot of dolphins and cormorants, but those I do recall from childhood.) This morning, she mentioned that she had read something in the local paper that explained the increase in pelicans. I was worried it would be some sort of global warming nonsense, but fortunately I was spared that. However, the explanation was almost as absurd, as it rested upon the supposed increase in pelican population since the banning of DDT.

Does anyone still believe that DDT thins bird eggs? Every study conducted by reputable scientists has shown nothing of the kind. In fact, the most extreme example, feeding quail doses thousands of times the maximum environmental exposure ever detected showed a small, but statistically insignificant THICKENING of the shells, not thinning. Similarly, surveys of bird populations showed that most bird populations were either fluctuating but stable, or slightly increasing during the period of DDT use. And the birds of prey most often cited as particularly susceptible, showed a decrease at the beginning of DDT use, followed by a general increase, despite continued DDT use.

There was a decline in certain localized populations, but as studies show that egg thinning is most often caused by noise or lights disrupting nighttime activities, as well as temperature changes, it seems likely urban development and unusual weather are far more likely than the mythical DDT.

Though, to be fair, I must confess there was one health effect of DDT, and a quite significant one. Millions of humans died of malaria thanks to the ban on DDT. Despite the rather pathetic pleas for mosquito netting ("Green Kills", "The Ends Justify the Means II", ""Better Safe Than Sorry" Usually Leaves Us Even More Sorry, And Much Less Safe") malaria still continues to infect millions of new cases a year, where once it had been reduced to thousands, even hundreds of new cases at the height of DDT use. In short, instead of being on the verge of eliminating malaria, we have allowed it to rebound to levels almost equal to those before any steps were taken at all. So, I suppose that is the one negative outcome of DDT, though due to the ban, not the use of the chemical.

And yet, somehow, many continue to blame this chemical for harm it never did, while forgetting the harm that the Rachel Carson/EPA-promoted myth did. It is far from the only such myth, but it certainly has one of the higher body counts.

Wednesday, July 24, 2013

Revival of an Old Romantic Folly

I have often claimed1 that the philosophy driving our society is at heart an extension of the "Romantic" movement of centuries past, especially in its elevation of emotion over reason, youth over age and emphasis of novelty as a value judgment. Recently, a trend has appeared in the popular media which convinces me that I am onto something. (As if I needed proof.)

It was a commonplace among certain segments of the romantics that genius, especially artistic genius, was associated with madness. This fit well with their general belief in the futility of reason and primacy of emotions. If emotion is a gauge of one's creative ability, then one who is so emotional as to be mad must be the most creative genius of all.

At a later date, this was taken even farther, and it was a commonplace in the US that "real geniuses" are always alienated, unable to communicate with others and so on, generally that they are socially ostracized madmen as well.

Now, please do not think I am denying that some people of ability have problems. However, in truth, if one is so socially inept he cannot communicate with others, then he might have problems getting his message across and thus it would be hard for him to be recognized as a genius. This is why, for the most part, geniuses have some degree of social ability. They may be odd, may have poor social skills, but they are hardly the near autistic creatures some fiction imagines. And, in truth, many geniuses are actually well adjusted and relatively happy. Some have had rough times, especially if their vision was not recognized at first, but that is true of many non-geniuses as well. But, overall, most geniuses are much like everyone else.

In art the numbers get a bit distorted, but mostly because the belief in madness being a well spring of artistic ability. Thanks to the popularity of that concept, we saw a growth of "outsider art", where the leavings of mental patients, drug addicts and the homeless were exalted regardless of quality, thus giving us a definition of art skewed toward madness. If we claim anything a madman makes is art, then of course we will equate art and madness. However, if we look back through history, yes there were artists who were unbalanced, and some whose fame went to their heads, but there were many who led perfectly normal lives without a hint of madness. And many of those were among the most respected. So, until modern times made madness a prerequisite of art, there was no clear connection between the two.

But no idea is so foolish that it can't be revived, and so recently we have been inundated with shows associating madness, especially autism and Asperger's, with ability, especially ability as a detective. From a plethora of US and British Sherlock Holmes revivals, to The Bridge (the Danish original and the US remake) and -- if I can use as an example a slightly earlier medical, rather than criminal, series and with a protagonist more misanthropic than autistic -- the US series House, all propose that analytic ability is somehow enhanced by a lack of empathy and social skills. It is not precisely the same as the earlier versions of this belief, but it definitely owes quite a bit to earlier veneration of madness. Once again, it is being suggested that somehow the insane see things "better" than the sane.

Obviously, this alone is hardly proof of the impact Romanticism has had on our present culture, but it definitely helps to show that influence, as well as to demonstrate why I find the role of Romanticism in our culture troubling, to say the least.

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1. See "Cranky Old Man?", "Faux "Maturity"", "Pushing the Envelope", "I Blame the Romantics", "The Adoration of Youth", "In Defense of Standards", "Addenda to "In Defense of Standards"", "Deadly Cynicism", "Juvenile Intellectuals", "Congratulations, You're a Victim!", "Trophy Spouses", "O Tempora! O Mores!, or, The High Cost of Supposed Freedom", "Self-Serving Cynicism and Our Cultural Immaturity", "All Life in a Day, or, How Our Mistaken View of History Distorts Our Understanding of Events", "Catastrophic Thinking, The Political, Economic and Social Impact of Seeing History in the Superlative", "Utopianism and Disaster", "The Threat of Perfection""Disturbing Entertainment, Ethnic Quotas and Distorted Views of Pop Culture - A Potpourri of Post Topics", "The Fascination with Change", "Uniqueness", "Self-Interest Versus Narcissism" and "The Virute of Novelty and the Value of Tradition".

Monday, July 22, 2013

You've Come a Long Way, Baby!

This morning I had to buy cigarettes at my local corner store. And yes, I mean "corner store". I live far enough out in the sticks* that I have a privately owned little sandwich, drink, snack and cigarette shop instead of a nice shiny 7-11 or Wa-Wa, High's, Royal Farms or Sheetz. (Those are the local versions, I know other areas have others, such as Little Sue, Rutter's and the like.) Anyway, in going to a small shop I ran into the common problem of cigarette smokers in such stores, the absence of my usual brand. Having to buy Marlboros for the first time in several months, maybe longer, I was struck by the strange writing on the little strip used to remove the cellophane. Instead of just being a normal white or gold strip, this one had writing along it reading "Nothing about this cigarette, packaging, or color should be interpreted to mean safer." over and over again.

Obviously, this was an attempt by Phillip Morris to avoid any lawsuit liability based on those silly claims that they had misled people into thinking "light" meant "safer", and thus shake down the big cigarette makers for yet another state and lawyer windfall, likely smaller than the first attempt at multistate extortion ("The Truth"), but still profitable. All of which led me to think about the legal theory behind such suits, and our thoughts on advertising and product liability in general.

The original law was simple, and consistent, though at times people might find the results of its application objectionable. Advertising was unlimited, you could say anything you liked. It was up to the customer to cut through the claims to judge which were likely true and which just hype. Or, if he could not, he had a second recourse, he could ask you to put it in writing. You see, despite the criticism of the principle of "caveat emptor" in sales, it did offer the buyer one protection. He could insist the sales contract embody the claims of the seller. If you said your tonic grew hair, he could ask that the contract guarantee hair growth. if you refused, then he had a pretty good idea how true your claims were.

Of course, the burden was symmetrical, the burden was on the buyer to also make sure the contract contained everything he wanted to buy, as the seller was only obligated to provide what was offered in the contract. ("In Praise of Contracts") If it wasn't in the contract, the assumption was that neither party had agreed to exchange it. It could be harsh at times, if you bought, say, medicine from a manufacturer and failed to notice there was no promise of safety in the contract, and thus suffered ill effects with no recourse, but it was the logical extension of contract law.

Contracts, for lack of a better description, were the means for creating private law. With the law itself covering a relatively small percentage of human interactions, mostly the criminal violation of rights and a handful of unintentional injuries occurring between strangers, the contract filled in to provide rules governing part of the remaining interactions. But, being consensual agreements between individuals the law had little to say about how contracts were written or interpreted. It required that both parties agree ("offer" and "acceptance" in contract terminology), that something of value be involved ("consideration"), at least if it was to be legally enforceable, but beyond that, the law largely left the terms up to the parties. However, one consequence of this was the assumption that the terms reflected the full intention of the parties, that they had discussed the agreement and that everything they wanted was embodied in its terms. And so, if something was omitted, then the assumption was made that neither party had agreed to that item. Presuming guarantees that were not written would have amounted to forcing parties to exchange something more than they had agreed, and that ran contrary to the whole concept, and so the courts decided if one party wanted such a guarantee, it would have been included.

It was a very simple law, and easily understood, and, most important of all, it was consistent. A contract written one hundred years ago could still be enforced today exactly as intended at the time, since the terms were entirely defined by the contract itself. But that was all to change, and consistency was about to fall before compassion. After a number of cases tailor-made to create public sympathy, from cars with collapsing wheels to medicines sold dissolved in a lethally toxic solvent, the principle of "caveat emptor" was strenuously attacked by those who sought to reform the law to make it more compassionate.

The argument offered was that, with the dawn of the modern industrial age, the buyer was not in a position to bargain for himself, he could not insist on contracts guaranteeing his security, and so it was in the interest of society to enact laws to protect him. The first step being the elimination of the old principle of buyer beware, and the substitution of certain legal assumptions, most notably the assumption of a an implied warranty of safety.

At this point, some readers may wonder what my objection is to this change. After all, it is simple a shift in the burden of the contract. Before we assumed there was no promise of safety unless stated, now we assume one unless excluded. How does this endanger the buyers, the sellers or the nation as a whole? After all, there were horrible problems, such as poisonous medicines and defective goods, why not protect against them?

For the moment, I will ignore the later consequences, though as I will show later, they were inherent in the assumption of safety. And for the moment I will also skip the other problems inherent in the principle adopted. Instead, I want to look at one other problem with this argument, the incorrect assumption that the state had no choice but to intervene, that caveat emptor was inherently dangerous and needed reform.

The problem was not so much caveat emptor, nor the size of the companies involved, not even the inherent nature of large scale consumer culture. The real problem was that we were in an age of transition, which also happened to correspond with an age of political activism, and thus problems arose which had never before been encountered, and before the market could adjust,t he government dove in and made changes.

For example, the common complaint of the reformers that buyers could not negotiate for warranties of safety shows nothing so much as an ignorance of the market. The fact was, these issues only truly arose with the much publicized cases in question. Prior to that, the public had not expended much thought on the generic sales contracts of the new age. However, once the problem of defective goods leaving no recourse for the buyer became common knowledge, the public would begin to ask for such changes, and, as the industrial sector grew and new sellers began to compete, these sort of guarantees would become a means of competition. If the public wanted such warranties, there would be a seller willing to provide them, they were only missing at the time as they had not previously been considered important.

Similarly, truth in advertising laws were adopted just slightly later, basically on the same principle, the assumption that the public was unable to demand advertisers reflect the true qualities of their goods. However, in this case, I think the state may have adopted a cause the public at large cared little about. If anything, the advertising of the early industrial age was tame compared to advertisements going back to colonial days. The new ads were much more common, and received more attention, but they were no more dishonest than advertisements had always been. And the public, for the most part, did not seem to care. They hardly avoided those who placed the most absurdly excessive ads, nor did they favor those whose ads were the most restrained. It seems, despite the claims of many reformers that the public was easily misled**, that the public, for the most part, could see through the hyperbole of advertisement, and didn't mind a bit of hucksterism.

However, had the public been unhappy, and wanted the reforms the government enacted, then the solution would have been, not to involve the state, but for the public to frequent those who offered the most honest advertisements, and eschew those who made excessive claims. History, and modern experience, shows the public is completely capable of organizing such boycotts on its own, or even doing so on an informal basis, with individuals deciding to avoid those sellers with whom they have complaints. So there was no need for the state involvement.

However, needless or not, did the changes do any harm? I would argue they did.

First of all, they introduced a certain amount of inconsistency into the law, an arbitrary decision. What is a safe product? What is a dangerous one? What is a defective good? At first this simply meant goods which deviated from the formal design, but that was too narrow for the reformers, and they declared certain designs inherently defective. However, this leaves the manufacturer in a bind. How can he know in advance if his design will be seen as unacceptably dangerous? Under the principle of caveat emptor, he knew what he sold, and knew what he was promising, but under this principle, he could be found liable even though he delivered precisely what he promised.

Which gives us the second problem. The law became a shifting target. A given design could be acceptably safe today, when I sold it, and even safe in a year, but in two years it be found unacceptable. Or perhaps the idea of what was promise din a sale might change and I might be found to have not delivered on some implied warranty. Suddenly, a contract could be acceptable one year and could support a liability suit the next. I could not know in advance if I was subject to a suit. And worse, I might think the courts had cleared me only to find in a future suit it was not true. By changing the law from a contract containing only what I promised to one containing implied promises, a seller could find himself on the hook years after the sale for an implicit promise he never made, and one he could not have waived as the principle upon which it was based was not known at the time of the contract.

And yet the laws became even worse. As I mentioned, truth in advertising was the next step, but that was just the beginning. After a time, implied warranties were not enough. Sellers began to add waivers and thus avoid liability. And thus, because it was assumed buyers could not protect themselves in this unequal bargain, the law began to ignore waivers arguing, on the same principles that justified ending caveat emptor, that buyers were either incapable of understanding the waivers, or else lacked the bargaining power to make a valid agreement. And so, sellers were not only on the hook for explicit promises they made, or for implied warranties, they also could not waive these warranties, even if they and the buyer wished to do so.

And it just gets worse from there. Year after year, based upon the assumption of a powerless, incompetent, easily misled consumer, the law extended ever wider the liability of anyone selling a good or providing a service. Eventually reaching the point where the assumption of incompetence leads to the disclaimer that started this all.

Think about that disclaimer and ask yourself what it means. It means, at its most basic, that Phillip Morris is worried that they will be sued without such a disclaimer. And on what basis? On the basis that the color or name of their product might, in the mind of some attorney, somehow hint that their product is safe, and thus they would be subjected to lawsuits dunning them for millions, even billions of dollars. It is something that no one would have even imagined a century ago, and yet today, it is largely ignored. We are so used to nuisance suits, to the presumption of consumer incompetence and the malevolence of sellers, that we mostly ignore the endless disclaimers, waivers and warning labels around us. It is a troubling fact to realize, how much we accept and how little we think about the true meaning of these things.

Then again, perhaps I am reading too much into a cigarette wrapper. Though I am not so sure. After all, if the lack of such a wrapper could cost a company billions of dollars, it seems that wrapper should deserve at least a little bit of thought on my part.

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* Actually, when I lived in "the big city" (Baltimore), I had a corner store as well. It is funny that the backwoods and big city have that one thing in common, a preponderance of small, privately owned little convenience stores and grocers. To be fair, I am only 10 minute from downtown Annapolis (depending on traffic), but any Marylander (outside of Baltimore, where they seem to forget the rest of the state exists) will tell you, the South River divides Anne Arundel County neatly in half between the relatively developed northern half and my much more rural southern half. So, despite being in what amounts to an Annapolis suburb, it is still the sticks for all intents and purposes.

** As I have written elsewhere (eg "Liberalism, Its Origins and Consequences") the assumption that the majority is incompetent and needs to be told what to do lies at the root of most forms of intervention and modern authoritarian states.

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POSTSCRIPT

My earlier thoughts on liability law can be found at "The Virute of Novelty and the Value of Tradition",  "Still More on Liability Law", "Liability Law and Cost-Benefit Analysis", "Victim as Judge", "The "Right To Sue" As Our Only Right", "Skewed Perspective , or, How Big Government Becomes Inevitable".

ADDENDUM (2013.07.23)

Despite the obvious relevance, somehow I forgot to link my essay "Consumer Protection".

Sunday, July 21, 2013

A Timeline Part Two


Note: This is a somewhat delayed continuation of the essay "A Timeline Part One". If you have not yet read that post, please read it before reading this essay, as I make no effort to explain what came before when beginning the present work.

When last I wrote, I had taken my examination up to, and partly through, the Civil War, leaving off with changes to the banking system, which I promised to examine in this essay. And, as they represent the first step in a process which greatly changed both economics and government in the United States1, that seems a good place to start.

As I discussed in the previous section, there had been no national bank policy after the end of the Second Bank of the United States. It had been an element of Whig policy, to call for national banking policy and paper money, but they had no success, nor had their successors in the Republican party. However, with the tremendous expenditures entailed in the Civil War, both Union and Confederacy found themselves in need of large sums of cash, far more than tax policy had allowed up to that point. Patriotic sentiment and self-interest allowed for the governments to raise considerable money through the traditional large denomination bond issues, but public sentiment was lukewarm, foreign sources were not all that eager to extend credit, the war cost far more than either side anticipated and ended up dragging on for quite some time.

Faced with these problems, Salmon P. Chase and others discovered two solutions. he first, and the one of interest to us here, was the final introduction of a national banking system. The somewhat misleadingly named "State Banking System" was nominally created to prevent bank runs. Under this system, banks were required to maintain a certain amount of their reserves in gold and silver, part in their vaults, and part in the vaults of specific state banks. These banks, in turn, were required to keep a certain reserve ratio in their vaults, and some in the vaults of central banks, mostly in New York City. It was, from the start, a fairly inflationary scheme. Where, in the past, each bank had to maintain reserves against the notes issued, under this scheme, the same money could be used to support notes issued by the central banks, the central state banks and the local banks, resulting in a tripling of the money piled upon a given reserve in the central banks. However, that was not the primary benefit of such banks to the state2.

No, the real benefit of the State Banking System was the added rule that reserves need not be kept in gold or silver as was previously the policy, instead, a part of the reserves could be made up of treasury notes. In other words, government debt could be used to guarantee bank notes. Not only did this allow for an even greater issue of notes, since there was a considerable amount of government debt available, but it also created a ready market for government debt. Since gold and silver did not pay dividends, many banks found it preferable to keep the maximum amount of reserves in the form of treasury notes3.

In addition to this innovation, there was another innovation dating to the Civil War, and that was the issue of small denomination government notes intended to circulate alongside bank notes as currency. In other words, the first government paper currency issued under the Constitution. These "greenbacks" offered yet another way to effectively monetize debt, since they not only represented government debt, but were also issued as if they were currency, allowing the government to effectively use debt to make purchases. Though they were a relatively short lived innovation, being retired during the Grant administration, these notes were the prototype of both the pre-Nixon Federal Reserve currency and, to a greater degree, today's fiat currency, backed by nothing except debt.

There was one other innovation during the Civil War, this one not in banking, but rather taxation. The Civil War saw the first use of an income tax by the federal government. Though clearly contrary to the constitutional prohibition against direct taxation, this law was allowed to stand throughout the war, giving the central government a means to directly tax the population without the need to request state funding. Given the varying degrees of state support, this proved a valuable tool, though it also created a situation where state control over the federal government was severely weakened4.

Following the Civil War came Reconstruction, another policy which clearly had little basis in the Constitution or any theories of state sovereignty. For a time, the pragmatic willingness to ignore constitutional objections5 continued to allow the central government to go ahead with policies intended to manipulate the state government of ex-Confederate states as it wished. However, without the war to use as an excuse, the central government had less justification for its policies, and objections mounted, until, after a few years, Reconstruction was effectively a dead issue, and the states which had formed the Confederate States were allowed the same degree of self government as the rest of the union.

The years that followed were, for the most part, relatively free, at least in terms of the national government. There were exceptions. The central government still controlled banking. It also funded several intercontinental rail ventures. There were a number of small scale protectionist measures that made it through congress. But, for the most part, the misnamed "Gilded Age" was a time of relatively minimal national government. And, as a consequence, it was also a time of tremendous growth. At least, for the most part.

However, even as the federal government took a mostly hands off approach, there were signs of what was to come in the states. First, there was the growth of machine politics, especially in cities with large immigrant communities. Thanks to (unofficial) Republican opposition to immigrants, Catholics and others, the Democrats often created large blocks of dedicated immigrant and Catholic voters in large cities, allowing those city governments to rule as effectively one party states. And as a consequence, contrary to national Democrat policy, city, and some states, Democrats began to enact much more intrusive laws, intended to benefit themselves and their friends and supporters. One example being the many efforts to extort money from rail, shipping and canal companies by threatening to enact punitive laws unless paid off.

This era also saw these same immigrants and other workers begin to unionize and demand various types of nominally pro-labor legislation. Similarly, near the end of the period, the Democrat farmers of the Ohio Valley and surrounding areas began to ask for an easy money policy, putting them at odds with traditional Democrat policy and setting the stage for the eventual take over of the Democrats by the Progressives, but as that does not come to pass until the end of the 19th century, we will look at it in more detail when we reach that period.

Another element that entered state politics was a much more politically active religious element. As a consequence of ongoing religious revival movements, which encouraged an assertive evangelical approach, state government in various regions, especially in states where there was a strong Republican party6, began to enact various laws intended to enforce public morality, especially abstinence from alcohol. This was not completely novel, the law had always asserted some form of moral control over behavior, and even the most lenient of states had some sort of prohibition against excesses of public drunkenness, but this era saw a much stronger position being taken, laws intended not just to punish the worst behaviors, but to actively force individuals to adhere to certain moral precepts.

There were other issues as well which divided the parties. For example, for the most part, backing for state funded public education was a Republican position. This may seem odd, that public schooling was a partisan issue, but in this case, the Republicans saw public schools as a "remedy" for Catholic schools, and thus many Catholics among the Democrats strongly opposed public school bills, seeing them as efforts to eliminate Catholic education (and to a lesser degree immigrant German Lutheran schools as well)7. And there were similar religious and partisan divides over any number of issues, from "blue laws" closing stores on Sunday to the licensing (and prohibition) of public beer halls.

However, for the most part, these issues remained state questions between, say, 1870 and 1890. A few rose to national attention for a brief time, but were rarely prominent for very long. It was a period in which individual liberty was beginning to conflict with policies intended, on the one hand, to enforce various moral precepts, and on the other to manipulate the market to benefit various groups, be those merchants or manufacturers, labor or political cronies. Yet these issues, for the most part, were not national. However, the seeds had been sown, and it was not long before these activist policies became much more prominent nationally.

There was one other factor which needs to be mentioned, though it is not precisely a political one. Thanks to the national banking scheme, the use of government debt as currency, or at least reserves to back currency, and the willingness of state governments to declare "bank holidays"8 to prevent insolvent banks from going into receivership, this era also saw the birth of the "boom-bust" cycle. Though supposedly a feature of a free market, in truth this phenomenon is an entirely artificial one, caused by the centralizing of note issue, allowing for uniform inflation, as was the case under the State Banking System. Yes, there had been some small recessionary slumps in the preceding eras, notably when the Second Bank of the United States was liquidated, but the actual cycle of inflationary boom followed by a loss of confidence and a recessionary bust did not exist until this time. Of course, as is always the case, this was blamed on the State Banking System being too weakly regulated, and the state pressed for more control, leading eventually to the Federal Reserve System, but that is in the future. For the moment I just want to take note that this era saw the start of the regular cycle of inflation and deflation.

The year 1890, and the decade following saw several major transformations in the US political and economic environment, changes so dramatic that in a number of essays9 I selected the year 1890 as the "turning point" in US politics, the date when our government was set decisively on the path toward unlimited centralized government. As this essay shows, since then I have changed my mind, or at least qualified my decision a bit, and started to look at other eras, be it the Civil War, the teen years of the twentieth century, the FDR administration or the Great Society, but I still argue that the 1890's, and 1890 specifically, are definitely significant years in the course of US politics.

The reason I picked 1890 specifically is because of four events which were, though not well known, watershed changes in how politics and economics worked in the US. Those were the passage of the Sherman Antitrust Act, passage of the Sherman Silver Purchase Act, the decision in Munn v Illinois, the Tariff Act of 1890(the McKinley Tariff), and the creation of the Interstate Commerce Commission. It also makes a convenient starting point for several tendencies that would develop over the following decades, such as the birth of the "Reform Republicans", the takeover of the Democrats by the Populist movement, the first signs of the national labor movement flexing its muscles10, the beginnings of strong anti-immigration feelings11, the first billion dollar budget12, government involvement in the Panama Canal, the first stirrings of what would develop into "gunboat diplomacy" and the establishment of the first US overseas possessions13,14.

It is also personally interesting, as the president in the year 1890, Benjamin Harrison, along with the earlier president William Henry Harrison, were both relatives of mine. My great-grandmother's grandfather was William Henry Harrison's cousin15. Of course, that is nothing more than an interesting bit of trivia, but it does amuse me that the two presidents to whom I happen to be related were both partisans of political movements with which I so strongly disagree16. I am also amused that another relation, former Ohio representative John Scott Harrison (son of William Henry, father of Benjamin and Ohio representative) was snatched from his grave, inspiring quite a bit of agitation to prevent medical schools from engaging in body snatching. But that has nothing to do with our essay, I just found it amusing, and for once it was slightly relevant.

Returning to the fateful year of 1890, let us look first at the five events I listed earlier. We shall start with the McKinley Tariff, then the decision in Munn, followed by the establishment of the ICC and finally the signing of the Sherman Antitrust Act and the Sherman Silver Purchase Act.

Following the Civil War, the large deficit had resulted in the government arguing for maintaining a high tariff to help pay down war debts. Obviously, this was also favored by many as a protectionist measure, but, mostly due to the general prosperity of the ensuing decades, the effect was relatively small, at least as an impediment to foreign trade. On the other hand, it did manage to generate considerable revenue, resulting budget surpluses throughout the 1880's. As a result, the Democrats, especially Grover Cleveland had called for a reduction of the tariff, as it had served its purpose. But, by the late 1880's protectionism, as an element of the emerging populist platform which had increasing influence in both parties, was a popular position, and Cleveland lost his bid for reelection, and, shortly thereafter, the Tariff Act of 1890 was passed, effectively raising most tariffs by 50%.

The Tariff Act was not the first tariff, not by any measure. Tariffs had been used since the founding of the United States, though the rates had increased considerably since the Civil War. Nor was the Tariff Act the first protectionist inspired tariff. One of the complaints raised by southern Democrats preceding the Civil War was that tariff increases were intended to protect manufacturers of the northeast at the expense of the exporters of raw materials in the south. What made the Tariff Act noteworthy is that it was the first tariff explicitly proposed as a purely protectionist measure. In the past, whatever the true motivation, tariffs has been put forth as sources of revenue. However, in 1890, with the government running a surplus and the existing tariff producing more income than was needed, there was no possible excuse for an even higher tariff. Thus, the act was passed with a far more honest explanation, it was intended to prevent the entry of foreign goods in order to benefit domestic manufacturers.

The McKinley Tariff was also noteworthy in another respect. It was the first truly modern tariff, in the sense that it attempted to manipulate minute aspects of the market, setting rates for individual goods at varying rates in an effort to manipulate the market to farther national manufacturing interests17. Of course there had always been tariffs on specific goods and varying rates, but the tariff of 1890 was unusual in a single bill supporting so many specific elements. It was not unique, but it was unusual in this regard. And its intent, both to manipulate the markets on specific goods, and to use lowered tariffs on a few specific items in a combined effort to bribe and bully foreign nations to manipulate their tariffs18, it was a very modern law.

Unlike modern times, when the failings of a bill generally result in a claim of too little government power and a grant of additional authority19, the Tariff of 1890 was largely seen as a failure by the people of the nation. In the 1890 and 1892 the Democrats took back congress and the White House and many of the tariffs enacted in 1890 were either reduced or repealed. Protectionism was far from a dead issue, and would reappear very soon after, even winning McKinley the 1898 presidential race, but for a brief moment, the actual costs of this specific protectionist measure resulted in a strong political backlash.

The decision in Munn v Illinois was quite a different matter. For many decades, the federal government had used the power to control interstate commerce to enact small controls over trade that flowed between states. As I mentioned earlier, for the most part the federal government was quiet from 1870 to 1890, but it was not completely inactive. The protectionist and proto-populist elements within the Republicans, and the increasing number within the Democrats as well, had enacted a number of laws regulating rates charged for elements of interstate transportation and trade. Many of these related to the railroads, justified in part by the role the government had played in building up the intercontinental rail network, but there were also laws relating to canals and coastal shipping. Most were relatively modest in scope, especially to modern eyes, mostly regulating rates. And they all shared one element, being justified by the commerce clause, they all related to commerce that involved two or more states.

Munn was a case involving laws setting rates for grain silo. The owner of a specific group of silos argued that he was not subject to such laws, as the grain that passed through his silos never left the state of Illinois, and thus was not part of interstate trade. At one time in the past, it probably would have been a winning argument. However, by 1890 times had changed, and legal logic allowed far more leeway than it had in the past (though McCulloch v Maryland had involved some rather creative reasoning as well). And thus,t he courts ruled that, though the grain in question may not have left the state, the prices charged effected the overall price of grain in the state, which effected interstate commerce, and thus the laws still applied.

The rationale offered was, like the ruling in McCulloch, an open invitation to unlimited government involvement. Though it would take decades before anyone dared to take the argument to its logical conclusion, it does not take much imagination to see where this ruling could be taken. Under the definition of what can be seen as "effecting interstate commerce"20, it is hard to imagine anything that would be outside the reach of federal regulation. Taken literally, one would have to produce goods for himself alone to not be subject to federal laws. (And even then, by removing himself from trade, he still might be effecting interstate commerce.) The ruling, over the course of a few decades, removed all restraints on the commerce clause, resulting in a few decades in its use to cover transporting minors across state lines, the advertisement of pornography and the manufacture and sale of narcotics21, among other matters. Yes, eventually the courts did place some small brake on matters, finally arguing that the Violence Against Women Act was unrelated to interstate commerce, but that took nearly a century, and even then it was noteworthy for being one of very few laws found not to fall within the scope of the commerce clause.

It is interesting that in the same year the commerce clause was extended to the point of becoming meaningless, the Interstate Commerce Commission was also established, basically announcing that, rather than the relatively minor intervention previously exercised, there would now be constant and active intervention by the government. The creation of a commission is always a sure sign of more active intervention. How so? Think of it this way. When intervention is carried out by law, passed through congress, generally regulations change once a year at most, and are normally very broad in scope, as more minute legislation is not normally easy to pass. Granted, the McKinley Tariff was an exception, though in the year of 1890 the time seemed right for such minute meddling. On the other hand, until modern times, with massive omnibus bills passed with rubber stamps thanks to log rolling, bills usually had a more general scope, and did not indulge in minute control of the economy. On the other hand, a commission, ruling through administrative law, sometimes even being the initial court interpreting such law22, can not only change laws ad libitum, it can also change how existing laws are interpreted, effectively legislating without the need to even publish a new regulation. And then there is the fact that bureaucratic agencies, though driven by fear of criticism23, also feel a need to justify themselves, and so, especially when new24, establish a strongly activist policy from time to time to show that they "have teeth", and also to show their relative importance in comparison to other agencies, ensuring continued funding. And so, when the locus of power moves from a legislative body to a commission, committee, bureau, agency or any other appointed bureaucratic agency, it is a sure sign of much more intrusive intervention and a much more strongly activist policy. Granted, with time, many industries establish a modus vivendi with their regulators, may even establish a relationship more friendly than they had with the legislature25, but the intent of establishing such bureaus, and normally the first effect of such an establishment, is to create a much more activist regulatory environment.

Finally we come to the two pieces of legislation bearing the name "Sherman". First, let us look at the Antitrust Act.

The Antitrust Act is noteworthy in any number of ways. First, it is a marvel of ambiguity. I challenge anyone to read the law itself and tell me what is made illegal. I am not even including he massive body of contradictory case law that has accumulated around it, I want someone to read the law and tell me what it calls a crime. Basically, it is a translation in legal terminology all those criticisms of "big business" we hear so often, and is just as vague. Essentially, the law makes it a crime to be successful in business. The larger your market share, the lower your prices, the more product you sell, the fewer who can successfully compete with you, the more likely you are violating the law. Of course, the law is not written in those terms, nor are the decisions that arise form it, they discuss "unfair competition" and "restraint of trade" and so on, but then again, those terms are equally nebulous and poorly defined, and so make matters no more clear. And so, in the end, the law is one of those cases where it is defined on a case by case basis26, with businesses uncertain whether or not their in violation until the ruling is handed down. In short, a perfect tool for government bullying, as they can threaten prosecution and be certain of finding some grounds for proceeding. They may not win, but they can certainly cost a company a goodly sum, and maybe create public dislike for a firm27. And in the years since, thanks to such worries, this laws has created situations such as businesses seeking government approval for mergers, baseball needing an exemption to conduct business (thus opening the doors to endless government involvement) and so on. There have been many regulatory means tried to manipulate business, but in the end, antitrust laws have definitely given the state many of its most powerful tools and opened up the most points of entry for the state to intrude into business28.

And finally we have the Sherman Silver Purchase Act, which was the first openly inflationary monetary policy in US history. At least, the first such policy not disguised as borrowing for some necessary cause, stabilizing the banks or some other ostensible purpose. The Silver Purchase Act was fully and openly intended to increase the money supply, to cheapen the dollar, that is, it was intended to create inflation. Yes, in a bit of pre-Keynes Keynesianism it was justified as helping remedy a shortage of money, and arguments were made that it would remedy a host of economic ills29, but in the end, it was clear to all that the intent was nothing short of reducing the value of dollars in order to allow debtors to pay their debts for pennies on the dollar. (And to benefit silver miners who saw prices falling thanks to tremendous recent output.)

Now, some may be curious about my objection to this bill. Have I not always argued that currency should be backed by a commodity? Especially a precious metal? And is not silver a perfectly good store of value? So, why would a bill encouraging the use of commodity currency objectionable? And how could it be inflationary?

The problem is due to a foolish policy the US had pursued since its founding called "bimetallism". A traditional commodity currency is one in which the unit of exchange is defined as a given amount of a single precious metal. Coins and bills are then issued in fractions and multiples of this value. Of course, with most currencies based on either silver or gold, there would be a small problem. If the currency is based on silver, then large denominations, say a $100 coin, would be so large and heavy no one could carry it. Likewise, if we base our money on gold, the dime, nickel and penny, even the dollar, would be absurdly small. Thus, most economies used a de facto bimetallism30, issuing coins in the other precious metal in amounts approximating fractions or multiples of the other metal.  And, so long as the ratio remained close to the established ration, say a silver dollar was worth to something close to $20.67 per ounce of gold31, that was fine. However, from time to time, increased production would cause these ratios to become unbalanced, and a rule called "Gresham's Law" would come into play, that law being "bad money drives out good," or, to put it in a more practical way, the overvalued currency would remain in circulation, while the undervalued would be melted down and sold as bullion. For example, if the silver in a silver dollar were worth only $0.80, those holding silver dollars would exchange them for $10 gold coins, and melt them down to sell as gold. On the other hand, if silver rose, and the silver dollar were worth $1.15 as scrap silver, those would go out of circulation and gold would remain. In fact, it was such forces which drove the US, which had been of an effective silver standard for a long time, to a de facto gold standard, as an earlier shortage of silver relative to gold had driven silver coins out of the market.

The Silver Purchase Act intended to do something similar, but with even worse results. At the time, silver was being produced in massive quantities, with no sign of stopping, and thus the price of silver was falling. Though this was used as a reason to justify the bill, arguing the law would help stave off financial catastrophe for silver miners, in truth, it was this falling price that made silver attractive. The belief was, if the government moved from its de facto gold standard to a true bimetallism, silver, being overvalued, would drive gold out of the market, leaving silver as the foundation of our currency. And, with silver being produced in such quantities, this would result in an effectively inflationary currency, despite its metallic basis32. It would, for example, allow debtors who had contracted debts in gold backed dollars to repay in much depreciated silver backed money. Similarly, and of much interest to the government, it would allow the government -- and debt ridden companies -- to repay bonds and notes in similarly depreciated currency.And thus it was promoted to both farmers and industrial interests as in the interest of those deeply in debt33.

The Silver Purchase Act was prevented from doing much harm, and was fortunately relegated to being largely a footnote in history books -- or perhaps an annoying test question for high schoolers -- thanks to two events. Following the Panic of 1893, President Cleveland managed to see to the repeal of the Act, and in 1900 the US finally put to rest bimetallism for good and officially adopted the gold standard, though, sadly, 17 years later the creation of the Federal Reserve made that much less significant, and 17 years after that, FDR made the holding of monetary gold illegal, making it something of a moot point.

When I started this chapter, I had intended to go from the Civil War through to the present, but this installment proved longer than expected. Thus, I think I will stop with the fateful year of 1890, and leave it for the next, and hopefully final, installment to carry us through the tremendous change in the parties -- especially the Democrats --  around the turn of the century, followed by World War One, the federal reserve, income tax, the depression, FDR, World War Two, the Great Society, Nixon's closing of the gold window, the Carter administration and more recent events, right up to today.  My apologies for not getting more done in this chapter, but I hope what I did write made it worthwhile.

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1. I know there are many who do not agree with me that commodity currency is the only viable monetary system (see  "Inflation and Uncertainty", "Bad Economics Part 7", "Bad Economics Part 8", "What Is Money? ", "What Is A Dollar?", "The Gold Question, Not "Why?" But "When?"", "Monetary Issues Made Simple Part I", "Monetary Issues Made Simple Part II", "Stupid Quote of the Day (January 7, 2012)", "Wolf or Sheep", "The Inflation Engine", "Those Greedy Bankers", "Explaining Past Crashes",  "Bad Economics Part 19", "Fiscal Discipline", "Putting the Bull in Bull Market" and "The Rubber Yardstick".), but even if you think government managed fiat currency is a viable system, you must admit that the ability to print essentially unlimited amounts of money has played a major part in the growth of government. Were the government forced to borrow money from lenders, rather than monetize debt, it is doubtful they could have run up anything close to the present debt. And that ignores the ability to manipulate interest conferred by both the existence of fiat currency and the degree of centralized control granted by the Federal Reserve, the successor to the State Banking System.

2. Inflation was beneficial to a degree, as the excess of credit made it easier for the government to engage in traditional borrowing. Thus, the system was beneficial in two ways, allowing the sale of debt as reserves and the the creation of a massive inflation making it easier to borrow, as well as pay back earlier debt in cheaper money.

3. It should be obvious how this policy established the basis upon which the Federal Reserve was eventually created. Admittedly, the Federal Reserve eventually eliminated the issue of notes by individual banks, and thus eliminated the need for banks to hold reserves against notes (though they still needed reserves against demand deposits and the like), but much of what now exists grew out of the system established in 1863.

4. As I mentioned in "Minimal Reforms", the 16th and 17th Amendments were very important in stripping the states of power over the central government, removing both state control of finances and any direct representation of the state government in the central government. But that will be covered in more detail when I get to the reform era and the First World War.

5. As described in the preceding installment "A Timeline Part One".

6. The party lines, at least before the Populists became involved, were essentially this: The Republicans were anti-immigrant, anti-Catholic, pro-temperance, anti-gold and generally supported protectionist measures. The Democrats largely supported immigration, religious tolerance, ambivalence toward drink, gold currency and free trade. These lines actually somewhat predate the Civil War, as the last days of the Whigs saw similar divides, but it was definitely more prominent after the war.

7. It is interesting that modern conservatives often see that public schools can be so easily used to indoctrinate, yet loudly oppose any attempts to eliminate public education. As I have argued many times before, there are countless means to educate without involving the state, from charities, to community backed schools independent from the state, not to mention that without regulation and taxes for public schooling, private schools will be both less costly and more easily afforded due to a higher income. Yet, most conservatives seem to believe the liberal party line that without public education most children would not be taught, despite the many historical examples to the contrary. See "Reforming Education", "You Don't Drown in a Glass of Water - Vouchers Revisited", "Why Vouchers are not the Answer", "Never Ascribe To Evil, A Discussion of Education", "Bullies", "Volunteer Fireman, Barn Raisings and Government",  ""...Then Who Would Do it?" ", "Collective Action and Government", "Bar Fights, Riots and Drug Markets - The Limits of Law", "The Written Law","Government Versus Culture - A Forgotten Distinction" and "Why Must The Government Do It? Part I".

8. This is not the place to enter into a full discussion of free banking, but in brief, in a free banking system, banks operate like any business. They issue notes backed by gold (or silver, or both in bimetallic systems like the one we had in this era). They are free to issue notes in excess of their reserves, or to lend out a part of their reserves, but when payment is demanded they must make good, convince the creditor to await payment or else go into bankruptcy. In a free system this serves as a check on excessive inflation. Each bank will inflate a little, but it will not be uniform, and bankruptcies will tend to clear out the bad banks. In addition, even the notes of insolvent banks often continue to be honored, at least for a time, as other banks wish to preserve confidence in the system. (This was historically the case in the few eras when various nations had truly free banks.) When the state calls a "holiday" and denies the right to present notes to banks for redemption to prevent bankruptcy, this eliminates this check and acts as a strong inflationary influence. See "Inflation and Uncertainty", "Bad Economics Part 7", "Bad Economics Part 8", "What Is Money? ", "What Is A Dollar?", "The Gold Question, Not "Why?" But "When?"", "Bad Economics Part 19", "Fiscal Discipline", "Putting the Bull in Bull Market" and "The Rubber Yardstick" .

9. Most notably in  "The Political Spectrum"  and  "A Passing Thought" .

10. Of course labor movements had existed before 1890, even some early national organizations, but it was in this decade that the national labor movements began to come into their own. Granted, it was not until the first decade of the 20th century that they really enjoyed any success, as many state and national governments of the 1890's were still traditional enough to see strikes as civil disorder and continue to use police powers to terminate the aggressive closure of businesses, but that was about to change, and signs of that change were to be found in this decade.

11. There were some earlier stirrings of these sentiments, clearly. Before the Civil War there had been a few anti-immigration movements. And after the war, with the large scale importation of labor from Asia there were strong anti-immigration, and anti-Asian movements, even the passage of a few legal restrictions at the state level, though mostly on the west coast. However, it was only with the tremendous wave of immigrants from southern and eastern Europe in the 1880's and 1890's that opposition to immigration became a significant factor in national politics. Though even then it would take another 15 years or so for the movement to see any success.

12. Though Cleveland, and many Democrats, won office thanks to campaigning against the "billion dollar Congress", the significance of this number is arguable. After all, thanks to regular inflation during the past few decades, and even more thanks to pressure for "free silver" (as I will discuss later), the value of that billion dollars was far lower than it would have been in 1860. Still, it makes a handy benchmark, and does show how much growth had occurred in government since the 1850's.

13. While I am far from an isolationist, and certainly believe the US has every right to engage in aggressive self-defense when needed, the Spanish-American War's outcome was quite uncharacteristic. Certainly, the US had taken territory at the end of the Mexican-American War, but that was land adjacent to the existing United States, and land that had been largely undeveloped by Mexico. In this case, the United States actually took possession of occupied and actively developed colonies, essentially entering the US in a small way into the colonial wars of the European imperial states. It has always struck me as strangely out of character, though perhaps very fitting for the mindset of the times.

14. Of course, this is ignoring Liberia. On the surface, Liberia is not much different from other colonies, however, looking at the history, it seems to me the history of LIberia suggests it is different in some significant ways. When created, it was intended to house free slaves, and I believe, though historians differ, most of those responsible for Liberia intended for it to eventually become fully independent. However, the efforts to settle Liberia never truly panned out, and so the westernized colony many envisioned never formed, leaving the US with a colonial possession it never really intended to own. Of course, I may be too generous in my view of this colony, but whatever the case, Liberia does still seem quite distinct from the possessions obtained through the Spanish-American War.

15. Thanks to inexact family records, I have a little trouble figuring out exactly where the family relations fall, as the Harrison family was prone to reusing the same name for many generations, so whether he was first or second cousin is difficult to determine.

16. Fortunately, through the Harrisons I am also related to the Carters and Randolph and thus the Jeffersons as well, so I do have at least one distant relation who had acceptable political ideas. For that matter, I am also related to Samuel Pepys, and through him to King John's mistress, and from her the Capetian kings of France and the emperor Clovis. But I figure if you go back far enough, most people have similar famous people in their past. On the other hand, the Harrison connection is relatively close. My great-great-grandmother was a Harrison.

17. I am not claiming tariff work to advance the interests of industry. As I have argued many other places, protectionism reduces overall well being, and any apparent gains are more than offset for both industries and individuals by those costs. However, the belief at the time (and by many people in the present) was that protectionism could benefit industries, and thus I describe the bill as intended by the legislators sponsoring it. See  "Protectionism", "Fear of Trade", "Free Trade, Employment, Outsourcing, and Protectionism", "Cheap Lighters, Overseas Dumping and Monopolies", "Jobs, Jobs, Jobs, and More Jobs", "Protectionism Right and Left", "Bad Economics Part 6", "Pro Hoc, Ergo Propter Hoc"[sic], "The Sky's Not Falling Part 2"  and "Bad Economics Part 19".

18. The intent of lowering specific tariffs, with clauses allowing for the reinstatement of tariffs, was to induce other nations to reduce tariffs. First, through the incentive of lower US tariffs, and, should that fail, through the threat of not only reinstating, but raising, those same tariffs.

19. See "Government Quackery""Hair of the Dog?", "Solving Problems We Created",  "In The Most Favorable Light", "With Good Intentions", "Grow or Die, The Inevitable Expansion of Everything", "Recipe For Disaster", "The Endless Cycle of Intervention",  "The Cycle of Compassion", "Life Is Not Fair - And Trying To Make It So Makes Things Worse","Bad Economics Part 19",  "Antibiotics, Automobiles and the Free Market" and "Just What We Don't Need" .

20. This dangerously expansive view can be traced all the way back to Chief Justice Marshall's dicta in Gibbons v Ogden. Fortunately, it took almost a century for those bad ideas to make their way into an actual precedent setting ruling. Unfortunately, in 1890 they did so.

21. Traditionally, such laws are almost always justified by both an appeal tot he commerce clause and mention of the general welfare clause as well. However, appeals to the general welfare clause alone have traditionally failed to find much support, even on very liberal courts, so it was this increase in the scope of the commerce clause that allowed the rapid expansion of government powers. (Though I would argue that it also demanded a change in the public perception of the constitution and the role of government. See  "Don't Blame the Politicians", "The Single Greatest Weakness", "Action and Inaction",  "Doing Something", ""Doing Something" Revisited",  "Doing Something Revisited, Again", "How Conservatives Defeat Themselves", "What We Deserve", "Who Is To Blame?", "You Lose When You Think You Win", "Tyranny Without Tyrants", "Volunteer Fireman, Barn Raisings and Government",  ""...Then Who Would Do it?"", "Collective Action and Government" and "Why Must The Government Do It? Part I" .)

22. The IRS, for example, often is the first to hear tax payer appeals. But, even when an agency does not have a formal review process, or an official arbitration or adjudication policy, the agency is still the first to receive complaints and to decide whether or not to act upon them. Thus, in some sense, it has the ability to judge the merits of a claim before it proceeds to formal adjudication. Some may say this is true of everyone, but I would disagree. Many people file suit against others without asking them for redress. Thanks to sovereign immunity, the only relief possible is often to petition the agency in question.And even if law suit is an available remedy (eg. the US Tax Courts), the process normally involves petitioning the agency before moving to a judicial remedy.

23. I have termed the mindset of bureaucrats as being "fear driven", and that seems as good a description as any.  A full description of my thoughts on bureaucracy can be found in the posts listed at the end of this note, but to offer a brief description, bureaucrats gain little from taking risks, but if they draw negative attention it can kill a career. With advancement based more on time served than ability, the natural response is to keep your head down, draw as little attention as possible and do your time. Thus, the greatest fear of any bureaucrat, and the main motivation for their actions, is the dread of negative attention. See  "The Bureaucratic Mind", "Bureaucratic Management", "The Inevitability of Bureaucratic Management in Government Enterprises", "Organizations as Filters", "Bureaucracy and Arbitrary Power", "Somewhat Off-Topic Rants", "Bureaucracy Revisited", "How the Government Corrupts Relationships", "Bureaucratic Management and Self-Policing", "Inflexibility and Bureaucracy", "In The Most Favorable Light", "With Good Intentions", "Grow or Die, The Inevitable Expansion of Everything", "Fear Driven Enterprises", "Adaptability and Government", "The Wrong Solution to Bureaucracy", "Stupid Quote of the Day (January 3, 2012)" and "Best Practices and Resistance to Change, Bureaucracy and the Free Market".

24. For example, former EPA administrators admitted that the science on DDT was inconclusive, at best, but that they proceeded strongly against it in 1970 to show that the newly created agency "had teeth". Nor is this unique. While bureaucrats generally avoid attention at all costs, they do need to maintain some slightly higher profile activities to justify expansion, or just funding. Thus, from time to time, they find a very popular cause and make a show of pursuing it to justify themselves. Newly formed agencies, or those recently criticized tend to be more aggressive in this regard.

25. Despite the talk by many activists of "capture" of regulators by industries, the truth is much less clear cut. Yes, many regulatory agencies hire experts from the very industry they regulate, and to a degree this softens the confrontational nature of interactions. On the other hand, many former employees have axes to grind, or pet peeves, and just having been part of an industry does not mean one opposes regulation. Look at Warren Buffet's economic view, for an example. Or how many in the established auto industry support unions (largely because, despite the costs, they serve to eliminate start ups -- see  "Anti-Business Businesses" ). Just because one worked in an industry does not mean he is favorable towards all the major owners and mangers. In addition, many people, no matter what their former jobs, feel an obligation to be diligent and honest in their chosen profession. I know this goes against modern cynical beliefs (cf "The Presumption of Dishonesty", "Deadly Cynicism" and "Self-Serving Cynicism and Our Cultural Immaturity"), but many of us are less jaded than political pundits and activists believe, and we can set aside past and present friendships and working relationships and act impartially. Thus, much of this talk of "capture" exaggerates the problem greatly.

26. For a discussion of why such "case by case" approaches are so dangerous see "The Problem of Pornography""The Wrong People""The Right People, The Wrong People and "Just Plain Folks"", "The Inherent Disappointment of Authoritarianism", "Elective Monarchy, Absolutism and Big Government", "The Problem With Evolving Standards",  "In Praise of Slow Changes", "Predictability", "Conservatism, Incremental Change and Federalism", "Empathy" Threatens not "Justice" but Predictability", "Sotomayor and Empathy", "Interpretation and Activism", "Why Judicial Activism Hurts" and "Principles Versus Outcomes", "The Problem of the Small Picture", "Keyhole Thinking", "Impractical Pragmatists", "In Defense of Zero Tolerance, or, An Examination of Law, Common Sense and Consistency", "No Dividing Line", "The Consequences of Bad Laws" and "Questions of Law and Questions of Fact .

27. Just think of how Eliot Spitzer made a career from making villains of Wall Street and Marta Stewart. And he is hardly the first or last to build a career for himself by persecuting unpopular individuals. See "Why a Recession?", "Julius Caesar, Elliot Spitzer and Andrew Jackson" and  "Modern Marius and Sulla" .

28. I have criticized the Objectivists many times, but in this case, Rand and her followers are right, the Sherman Antitrust Act is one of the most damaging pieces of legislation in US history, and is every bit as morally repugnant as they make it out to be. For a discussion of the absurdity of antitrust laws in general, as well as related laws on "price gouging" and to preserve "small business" see "The Problem of Antitrust", "The Difference Between Public and Private, Or, The Real Monopolies and Cartels""Competition""Saving Us From Lower Prices", "Put Your Money Where Your Mouth Is, Or The Logical Implications of Price Gouging Laws", "Capitalism and Its Consequences", "People Prove My Point", "How Much Does Government Cost?", "Competition", "Best Practices and Resistance to Change, Bureaucracy and the Free Market", "An Examination of the Economics and Sociology of Government Spending", "A Short Follow Up on Monopolies", "Bad Economics Part 19", "Small Business Fetish", "The Little Guy Can't Compete" and "A Perfect Example" . For a discussion of the use of laws with arbitrary definitions of criminality see "We're All Criminals Now". 

29. The current Wikipedia page (to be taken with a tremendous grain of salt -- see  "If It's New, Can It Be a Cliche?", "Why I Won't Be Contributing to Wikipedia", "The Tragedy of the Creative Commons", "Anecdotal Proof", "Grind Those Axes, WikiEditors!", "Something of a Paradox)" and "Oh So Sensitive" --  speaks of "deflation caused by overproduction" which is nonsense, though fully Keynesian in its ignorance of Say's Law -- see  "Has No One Heard Of Lord Say?", "Bad Economics Part 14" and "Production and Consumption" -- and, more honestly, of farmers' debts and miners upset about falling silver prices.

30. The other alternative to this bimetallism is the use of "token coinage", such as the US penny, which, prior to a massive increase in the price of copper, was worth nowhere close to 1% of a dollar, but was accepted as currency because everyone knew 100 could be converted into a dollar. Such token currency is a safe alternative, as it is of so little worth, Gresham's Law does not come into play. Though, as the penny shows, it is possible that unforeseen changes in value can sometimes accidentally make tokens sufficiently valuable for Gresham's Law to drive them from the market.

31. As established in 1879, following the Coinage Act of 1873, which tried to remove the bimetallic standard, though, as the Sherman Act proved, it did not fully kill it.

32. All metallic currencies can experience fluctuations in value due to production, hoarding, sales of stored quantities, new industrial uses and so on. However, commodities are far less prone to fluctuation than fiat currency.

33. It is a mistake of populists, communists and others to think of "debtors" as synonymous with "the common man" or "the little guy". Many of the largest debtors are actually big companies (and the government), while many creditors are actually "little guys", for example insurance companies and pensions which hold debts on behalf of relatively modest individuals. Thus, populist policies intended to relieve debtors at the expense of creditors may often help the rich at the expense of the middle class and poor, the exact opposite of the intent of most populist policies. Then again, some very clever politicians pushing populist lines are aware of this and quietly use this fact to gain support from more affluent individuals for their nominally populist plans.

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POSTSCRIPT

As with the earlier installment, when I finally complete this series, I will place links to all the chapters here for the convenience of readers.

I would also like to repeat something I said in the earlier post. I am writing this almost entirely from memory, and so I am sure I am missing a few facts, I may be misplacing a few events and so on. I do think, for the most part, my arguments are good, and my conclusions correct. I would be happy, however, to hear from those who can point to contradictory facts. Of course, it is possible -- even probable -- that any dispute will be based more on the conclusions one draws from the facts, rather than the facts themselves. Still, I welcome any reasonable debate or corrections.