Posts Tagged ‘free markets’

American success is a result of experiment not design

December 30, 2014

A free society is one that is willing to place millions of small bets on persons unknown and things unseen.

A fascinating end of year reflection on the sometimes forgotten creative power of American individualism and freedom comes from Bret Stephens in the Wall Street Journal. Essentially based on private property rights, Stephens asks what we might consider to the be the most influential innovations in the early 21st century, the equivalents of the Model T Fords, the Wright brothers and Penicillin in the last century?

On the top of his list is fracking. It has made America the world’s leading oil and gas producer, turned the energy markets upside down and paradoxically, reduced the US’s greenhouse gas emmissions to below 1995 levels. And for good measure, it has undermined the success of renewables. .

Fracking happened in the U.S. because Americans, almost uniquely in the world, have property rights to the minerals under their yards. And because the federal government wasn’t really paying attention. And because federalism allows states to do their own thing. And because against-the-grain entrepreneurs like George Mitchell and Harold Hamm couldn’t be made to bow to the consensus of experts. And because our deep capital markets were willing to bet against those experts.

This is a paean to free markets, individualism and anarchic creativity.

Innovation depends less on developing specific ideas than it does on creating broad spaces. Autocracies can always cultivate their chess champions, piano prodigies and nuclear engineers; they can always mobilize their top 1% to accomplish some task. The autocrats’ quandary is what to do with the remaining 99%. They have no real answer, other than to administer, dictate and repress.
A free society that is willing to place millions of small bets on persons unknown and things unseen doesn’t have this problem. Flexibility, not hardness, is its true test of strength. Success is a result of experiment not design. Failure is tolerable to the extent that adaptation is possible.

This is the American secret …We are larger than our leaders. We are better than our politics. We are wiser than our culture. We are smarter than our ideas.

Advertisements

Pope’s misunderstanding of economics

December 27, 2014

“Inequality is the root of social evil”   Pope Francis

Interestingly, The Age, in its summer break, is letting through some interesting think pieces. The latest, by British columnist with London’s The Daily Telegraph, Allister Heath, calls out the Pope, whose hostility to capitalism he feels is tragically misplaced.

He has repeatedly savaged free markets and aligned himself with the views of Thomas Piketty, the far-left intellectual who obsesses about inequality and advocates crippling taxes on income and wealth.

Apparently, the Pope believes that the absolute autonomy of markets is a new form of tyranny.

It was a strangely inaccurate vignette of the modern economic system, which is characterised by not-so-free markets that are routinely bailed out, subsidised, taxed, capped, fettered, regulated and distorted by activist governments and their monetary and fiscal policies. North Korea is a genuine tyranny; free trade and genuine free markets are anything but.

The Pope’s fundamental error, as is that of socialist thinking generally, is that “inequality is the root of social evil”. This logic leads to directly to the idea that it is:

“evil” for the likes of Sir Richard Branson to have been allowed to keep the money he earned by providing the public with goods and services, and that we need immediate equalisation through punitive taxes. Such an extreme approach would have catastrophic consequences, annihilate incentives to work, save and invest, and halt the progress of human civilisation.

Heath points out facts that many seem to ignore; that human prosperity has increased astronomically worldwide and absolute poverty has been halved in a few decades. It reminds me of Matt Ridley’s The Rational Optimist, which outlines just how extraordinary has been human progress in wealth creation, for everyone, everywhere.

Heath concludes,

But unthinkingly to fight capitalism – the greatest alleviator of poverty and liberator of people ever discovered – makes no sense. The sooner the world’s great religions learn to love the wealth-creating properties of the market economy, the sooner they will be able to harness them to make the world a better place.