Thursday, April 27, 2006


Are oil companies “gouging” the public? The charge is always a puzzling one, in that economically it must mean that oil companies exploit market power (deriving, as it must, from the limited availability of substitutes for their products) to earn supernormal profits. Immediately, one wonders: if oil companies have this kind of market power, why don’t they exploit it all the time? Why was gas so cheap in 1998? If they can raise prices to $2.80 a gallon because they are a “monopoly,” why not $4.00? Or $10.00?

As is so often true, Thomas Sowell gets to the heart of the matter. In a piece at, he notes the following:

Are the oil companies charging all that the traffic will bear? No doubt. But they were probably charging all that the traffic would bear when the price of gasoline was half of what it is today.

Even businesses that are losing money are charging all that the traffic will bear. Otherwise they could raise their prices and stop losing money.

Most of the people who are making this claim are charging all that the traffic will bear for their own labor or the use of their own products. Dressing up the plain fact that we all usually prefer more to less in political rhetoric about "gouging" explains nothing. Something that is true all the time cannot explain drastic changes.

The “something” is that, at the lower prices that used to prevail, the oil and gasoline desired by consumers exceeded the oil and gasoline offered by producers. Some way had to be found to reconcile that imbalance, and as usual, the price system did that effectively. As one final “As usual,” the whole Sowell piece is as usual worth a read. It prompts one to wonder why, if “windfall profits” taxes are such a good idea when oil prices are very high, why weren’t “windfall losses” subsidies equally compelling when gas was less than $1.00 a gallon eight years back?
It is possible to get a proxy for the extent of “gouging” by dividing the price of a barrel of oil by the price of a gallon of gasoline. Time-series data going back to 1997 are available for both U.S. spot oil price and average U.S. gasoline prices for all grades and areas at the Energy Information Administration.

The chart below shows the result of dividing the price of a barrel of oil by that of a gallon of gasoline. I use current gasoline prices and lag oil prices by four weeks, thus assuming that it takes four weeks for oil-price changes to work through the oil-distribution system; using contemporaneous oil and gasoline prices makes no difference.

In fact, there has been a huge increase in this multiple in the last year and a half. What this means is that oil prices have increase more than gasoline prices in percentage terms. To think about it another way (by inverting numerator and denominator in the chart), in January of 2004 the price of a gallon of gasoline was 5.87 percent of that of a barrel of oil, but in March of 2006 it was only 5.17 percent. In fact, as oil prices have gone up oil companies have been forced by competition to squeeze more efficiency out of the production and distribution system for gasoline, despite Katrina, the increased demand in Asia that has forced Americans to bid harder against them for the scarce resources of oil and gas, and all the other facts which have undeniably caused higher prices. And this of course ignores the broader point that it is only because employees and shareholders of oil companies have risked a lot to begin with that there is any gasoline at all.

As far as I know the English language has no readily available antonym for "gouging." But maybe it should.

Tuesday, April 25, 2006

"The People" and Their Frailties

The King of Nepal, Gyanendra, has advanced the degree to which he is willing to surrender to demonstrators who have been facing down shootings by the security forces in street demonstrations for weeks. He has agreed to reinstate the Nepalese Parliament, after earlier making an offer to name a new prime minister that was summarily rejected. The demonstrators are apparently now demanding that he leave the country. The King appears to be making some of Louis XVI’s mistakes, recognizing too late the depths of the anger at his absolute power and making offers that once would’ve been sufficient but not anymore, with the public having now moved the goalposts in their ire. One hopes that it ends better for His Majesty now than for His Majesty back then.

Nepal has an absolute monarchy because the King seized power in the midst of a ruthless communist rebellion. The BBC story alluded to above has several quotes that are disconcerting for anyone hoping that Nepal will come out the better for having chased him out. An English teacher named Bikash Sharma indicates that ‘[a’ constituent assembly is needed so that we can have the people's mandate. The king must be replaced by the people's man." Another protester, Gyanendra Bhattarai (no relation to the king, presumably) says that "[t]he politicians should not fight among each other as they have in the past and try and pursue personal agendas."

Ah, but the whole reason we have politics is precisely because “the people” that “the politicians” represent disagree and have different interests, and to satisfy the interests of some of “the people” is to damage the interests of others. Many of history’s greatest tragedies have been brought about once some people started agitating in the name of “the people.” Most of those so eager to build a government to affirmatively serve “the people” are not much aware of the function politics has of reconciling conflicting interests, and are most liable to be taken in by those claiming to speak for “the people” against whatever “special interests” are blocking them. If one supposes that there is a single, obvious “public interest,” and yet public policy does not seem consistent with the needs of “the people,” one is naturally tempted to agree with the Maximum Leader when he says that some sinister group – Masons, Jews, “neoconservatives,” corporations, kulaks, anything will do – is frustrating the public will.

It is a testament to the wisdom of the drafters of the U.S. Constitution that this troublesome phrase “the people” only appears a handful of times. In the text itself (it also appears once in the Preamble) the references are harmless – Article I.2 and Amendment XVII refer to procedures by which “the people” shall elect their representatives, and Amendments I, II, IV, IX and X refer to rights people possess as individuals to be free from government coercion – the right to assemble, to keep and bear arms, to be free from unreasonable search and seizure, and to retain rights not explicitly granted to the federal government. The framers were far more concerned about the power of pressure groups – or “factions,” as Madison called them in the Federalist Papers – to gain control of the government and hence erode liberty. They accepted this fractionalization as an unavoidable fact of life, a constraint that wise people know to be bound by rather than one to be wished away in pursuit of an imaginary, nearly universally accepted “public interest.” The Constitution of The Philippines, just to take an arbitrary example, mentions “the people” about two dozen times in a relatively short document, and they are mentioned as possessing, among other things, the rights to such completely meaningless and unenforceable vagaries as “a balanced and healthful ecology” and “effective and reasonable participation at all levels of social, political and economic decision-making.”

If “the people” of Nepal get their wish and recover democratic governance, they will find that the hardest part is just beginning. Because absent an institutional structure that limits political warfare and encourages people to resolve their conflicting goals in voluntary market cooperation, they will find that democracy is just as toxic as an absolute monarchy. They may find in short order that “the politicians” have failed to deliver to “the people,” and then the cutthroat Maoists will gain even more traction. They have to build a structure that people trust enough not to bring down by yet more marches or rebellions, and they have to do it in the context of their own cultural constraints.

In a very crabby piece, John Derbyshire recently made the following claim:

Only Anglo-Saxon countries can do democracy. The natural state of human society is despotism. If you tally up all the human lives that have ever been lived on this planet under organized systems of government, no more than five per cent were lived under consensual systems. Even to get up to five per cent, you have to include places like ancient Athens and Tudor England, which wouldn't pass muster as "democratic" by modern standards. In the last couple of centuries, practically all consensual systems have been Anglo-Saxon. Other cultures can fake it for a few decades, as France, Germany, and Japan are currently doing, but their hearts aren't really in it and they will swoon gratefully into the arms of a fascist dictator when one comes along.

I am not quite as fatalistic as that, but I am mindful of the empty promise of “democracy” without the cultural and institutional capital that makes people willing to tolerate its frailties and understand how it (and, more importantly, limited government generally) can be destroyed. The more people are convinced that their private interests are really the public interest, and the more they are then exercised about betrayal of “the people,” the more fragile self-government is. To be sure, this is no justification for authoritarianism. The people of The Philippines, for example, are probably much better off now than under the kleptocrat Ferdinand Marcos, overthrown in 1986 by massive street marches and the felicitous intervention of President Reagan. One hears of the occasional virtuous dictator, the fellow who steals minimally, reforms the economy and limits the natural tendency of majority groups to oppress minorities. But these cases are rare; a thief on the cosmic scale like Zaire’s Mobutu or whoever the current septuagenarian head of the House of Saud happens to be is far more likely. And so consensual government is truly the worst form of government, save for all the others. But the notion that when the dictator is gone “the people” get what they want and need is one of the most pernicious of our age. And so the Nepalese ought to give some thought not to how their new government can serve “the people” but how it can referee their disputes as peacefully as possible.

Thursday, April 20, 2006

The Many Lessons of One Red Paper Clip

A man named Kyle McDonald has set up a website called One Red Paper Clip that tells a fascinating story. If you wade through it enough, here is what you will learn:

Mr. McDonald wanted to buy a house but couldn’t afford one.

One day he offered to trade a single red paper clip for anything better.

Two women traded a fish-shaped pen for the paper clip.

Another woman traded a small doorknob for the fish-shaped pen.

A man offered him a camping stove for a small doorknob.

Another man gave him a generator for the camping stove.

Another man gave him an empty keg, a promise to fill it and a neon beer sign for a generator.

Another man gave him a snowmobile in exchange for a beer keg and a neon beer sign.

He was now starting to get publicity. A snowmobile magazine offered a trip to the Canadian Rockies in exchange for the snowmobile. A new trading partner, an inventory manager of a company with a van it was planning to sell, got permission to give the van to Mr. McDonald in exchange for a trip to the Canadian Rockies.

A musician gave him studio time and an offer to pitch the result to recording companies in exchange for a van.

A singer in Phoenix gave him a year in a Phoenix duplex for a recording contract and a promise to hawk the results.

What does he learn from this, according to Fox News? That "[i]f you say you're going to do something and you start to do it, and people enjoy it or respect it or are entertained by it, people will step up and help you."

That is without question a valuable lesson, but it does not begin to exhaust what we could learn from this episode. A series of questions suggest themselves, in light of prevailing ideas. He didn’t make the house, so did he “earn” it? Since all he did was match (after a few steps in between) the paper clip owner to the home owner, did he do anything economically useful? Did he perform any service of value in matching one trader with another until he got what he ultimately wanted? Or is he just a parasitical middleman, who “marks up” prices without performing any services of value, without, after all, actually “making” anything?

Now change the story. Suppose it is not a charming young man hooking up with various other easy-to-like people. Suppose a worker sells his time to the manager at a pharmaceutical-producing factory. The manager takes the output of the worker and, based on the discretion his boss gives him, sells it to a pharmaceutical wholesaler. The wholesaler then sells to another wholesaler, who sells to another one, who sells to a pharmaceutical-chain buyer, who sells the work product to a local pharmacy, who sells it to a customer, in the presence of a Harvard medical professor, who goes on to goes on to slam drug companies who charge high prices without producing anything of value, and the attorney general of New York, who goes on to subpoena three drug wholesalers as he gears up to run for governor. That, one supposes, is somehow or another a much different story.

Wednesday, April 19, 2006

Romano Prodi, Homo Europeus

The new prime minister of Italy will be Romano Prodi. He has held the job once before, and it is striking how vividly European his life has been. He comes from a family of nine children. According to a profile in The International Herald Tribune, he has roughly 30 nephews, of whom two became priests. But he and his wife, closely tracking the country around them, have opted for a dramatically smaller family, electing only have two children. (I have been unable to find references to any grandchildren.)

His career is also rewardingly revealing. He was prime minister once previously, but was ousted after only two years, a normal sort of event for most of Italy’s postwar history. (Ironically, the ousted Mr. Berlusconi was the first postwar Italian government to go the distance without losing a confidence vote or resigning.) His most noteworthy achievements involved preparing Italy for the strict public-debt criteria for entering the euro (a task lauded at the time as bordering heroic, which shows only how starved of heroes Italy is these days). Some of those achievements (along with those of Greece) are now generally acknowledged to have required excruciating torture of the government accounts. But what has really cemented Mr. Prodi as a man of “competence” is his time as chair of the European Commission, the EU civil service. It was largely undistinguished, but it is a sterling credential for an aspirant to Italy’s permanent managerial class, whose job it is (as with his equivalents in Brussels) to micromanage every aspect of his subjects’ lives. Indeed, as I noted two weeks ago, among his primary ambitions is to create a draft for the bureaucracy, with all Italians being conscripted into the civil service for six months.

Italy has double-digit unemployment, had zero economic growth last year, and probably has Europe’s worst case of demographic collapse. It is torn by controversy over immigration. It is angrily divided between a reasonably well-functioning north and an economically decrepit south. In other words, it is a country that could’ve had an election campaign worth remembering. After a campaign that fell somewhat short of that mark, is the bureaucrat par excellence Mr. Prodi the man to fix what ails it? Undoubtedly not, but he is certainly a man of his time.

Thursday, April 13, 2006

Can Ideas Kill Civilizations?

Typically, civilizations collapse by being overrun from the outside – the Roman empire, the Byzantine empire, the sacking of Baghdad by Mongols that ended the Abbasid caliphate. Ideas do not typically loom large in these events – instead they are all-too-normal struggles between populations on the rise and societies in decline, hunkered down behind high walls and faded glories.

But the modern era has been one of at least nominally idea-driven wars, especially grand ideas about historical inevitability and justice. This is especially true in the West. The American and French Revolutions, the colonial eras and the mission civilisatrice, and the Cold War all had grand ideological visions shoring them up. To be sure, there is much evidence that different episodes in these struggles were motivated by lucre rather than ideas, but there is no denying that people rallied to these causes substantially because they were persuaded in the inherent justice of them rather than simply because of some baser desire for treasure. The European upheavals of 1848 and 1968 can also plausibly be cast in this light. Ironically, while most of these ideas both good and bad came out of the West, much of the burden of the latter was borne by those in places very far away, whose societies were torn apart by those such as Mao Zedong and Pol Pot who were entranced by them. (Pol Pot, who presided over the Khmer Rouge regime that exterminated perhaps one-fifth of Cambodia’s population, came to Marxism during his youth, which he spent in France.)

But it is interesting to note that one of the main ideas dominating intellectual discourse in the West now has far more potential to damage the West, perhaps fatally, than other places. That is because the idea (or fusion of ideas) serves primarily to instill unappeasable doubt in the minds of those who live in the West about the merits of their own civilization. Call it what you like – relativism, multiculturalism, post-modernism. But it is a toxic brew that has the peculiar effect of causing Westerners to believe that their civilization is at best an equal among many and at worst a unique plague on the planet.

The fuzzy mix of ideas includes several notions. Relativism holds that no one in one culture can pass judgment on the ethics of practices of other cultures, that no one in one culture (save, perhaps, the highly credentialed intellectuals making the argument) can even understand how other cultures really work. It is often traced to the early-twentieth-century cultural anthropologist Franz Boas, and was made irretrievably political by the literary critic Edward Said in his classic work Orientalism, which held that Western understanding of the Middle East was mainly a justification for imperialism, and certainly had no particular claim to “truth.” And a related notion is the one commonly known as postmodernism, which holds that objective reality is unknowable to the human mind but looks irreconcilably different to each observer. The idea that one could understand Islamism or Chinese philosophy or the “true meaning” of The Scarlet Letter is a fiction, because words have no fixed anchor in reality. (The biologist Edward O. Wilson once sarcastically dismissed postmodernism, with its contempt for the whole notion of scholarly inquiry, as the idea (I paraphrase) that “No words have any objective meaning. Except the ones I just said.”) Ultimately, these ideas have metastasized into an instinctive rejection of any policy that benefits the West, or of defense of Western cultural principles.

This pattern was on display most vividly in the recent episode over the Danish cartoons of Muhammad. Some of the cartoons were offensive to anyone who wishes (as I do) not to mock others’ religious beliefs, but some were innocuous depictions that were offensive only because they violated Muslim religious traditions (in some Islamic traditions he cannot be depicted, although there are many examples from Islamic architecture in earlier centuries in which he is), even though non-Muslims are not bound by these traditions. At a discussion of the controversy I heard a local journalist compare them to child pornography, and indicate that his paper did not need to show the cartoons to discuss the obviously newsworthy global dispute over them. But both the production and display of child pornography are illegal; the depiction of religious imagery is not. Freedom of thought and of the press in particular is a core Western value, and avoiding offense to various sectarian groups is not. And so perhaps the instinct should be to defend freedom of expression first, and worry about the consequences of offense (by firing editors and closing down websites, say, as has happened in France and Sweden) only after that principle is secure. In the days after Sept. 11 the university I work at went through an absurdly angry discussion over the propriety of students and employees placing American flags along the side of the higway abutting campus. Numerous faculty members expressed concern either that foreign students (most of whom came from countries where love of their own society was seen as normal) would be offended or threatened or that to plant them would be an angry display of nationalism. The notion that one might for good reason want to show solidarity for the victims, the military defending our society and thus and the virtues of it was hardly to be seen.

And so the practical effect of these ideas is important. An entire generation of those who manufacture opinions (in the universities and in the press) and who work in government ministries has come of age in the era of Western self-doubt. Once upon a time, a correction was probably necessary. If one is to learn about colonialism, it is important to learn about the atrocities, which reached their nadir in places like the Spanish New World and the Belgian Congo. And it is important to know about colonialism as a violation of self-government. But of course a truly educated person knows that invasions of one society by another are the norm in human history, and European colonialism just one species in this vast genus of human activity. And so it would be useful for students to learn the history of Western colonialism in comparison to those of other empires – the Arab empire, the Aztec empire, and so on. While it is true that the British in India distorted the Indian economy and committed atrocities (in the Amritsar Massacre of 1919 Indian soldiers under their command shot somewhere between 379 and 1800 unarmed men, women and children who had done nothing but gather in public), they also campaigned vigorously against female infanticide, as documented extensively in the recent book Bare Branches: The Security Implications of Asia’s Surplus Male Population), and against suttee. They left India the legacy of their common law and democratic conditions, which have served India well subsequently. And Gandhi’s justifiably lauded peaceful campaign against the British worked only because the British were his targets; the victims of the janjaweed in Sudan or those targeted by other colonial empires are not so fortunate. (Similarly, the restraint that Israelis show in their war against Palestinians in comparison to that shown by Palestinians not just against Israelis but against other Palestinians is too little commented upon. Had the Palestinians launched a Gandhi-style campaign of nonviolent resistance years ago they would’ve had their state by now. But they did not, and the opportunity is gone.) And so once upon a time the relativists were right to emphasize the underplayed sins of the West; but we have long since moved past that point, to perhaps move into a future of abandonment of any claim that any of the West’s contributions to humanity – science, democratic liberalism, freedom of commerce – are humanity’s common property only because the West was in a position to bequeath them.

The World Values Survey is an ongoing project that measures attitudes in a variety of countries. Among many other things, they ask people how proud they are to be whatever nationality they are. Here are some percentages from various countries answering “very,” the highest level, ranked from greatest to least:
Saudi Arabia73.4

As in so many things, the U.S. and Canada are outliers among Western nations. (A cynic might argue that Canadians get an artificial patriotism bump through their ability to define themselves as Not America.) The low percentage in China is also interesting, belying the popular conception of that nation as full of budding nationalists looking to throw their weight around as China rises. But what is most striking is how little love of society there is among European nations. There is of course such a thing as too much patriotism, and one could explain the German result by a systematic effort since the end of the war (started by the American authorities) to prevent a re-emergence of Nazism. But how does one explain such low levels in countries like Sweden and Holland compared to, say Morocco and Peru? Can it really be objectively true that European societies have contributed so much less to humanity than these other places? Even in more recent years the Swedes could take pride in the “Swedish model” of the welfare state that scrubs away all life’s insecurities, or the Dutch could revel in their reputation as the world’s most tolerant country. But they don’t. And I suspect that this is because of a long-term intrusion of the idea of Western self-doubt beyond the point of reason, which grew out of a laudable urge to see the world as it is rather than through a fog of distorted patriotism but has become something much worse.

And that change has been unfortunate. One could imagine, for example, that instead of a civilization collapsing from without it could collapse from within. It could refuse to propagate itself because of a loss of confidence in the future. It could admit huge numbers of immigrants from very different civilizations but fail to offer them opportunity in a vibrant, job-creating economy or full participation in society on equal terms with the natives. It could refuse to assimilate them and instead keep them on display for the benefit of the natives through a set of zoo-animal multicultural policies. And then it could wake up and find one day that the civilization and the values it produced are gone, and the newcomers have remade it around them while they slept.

But that would never happen.

Wednesday, April 12, 2006

The Paradise You Can Never Leave

The Miami Herald has a brief and boilerplate-laden editorial on an incident that happened last week in Cuban territorial waters. A boat with people-smugglers from Florida (with anti-Castro sympathies, presumably) was fired on by Cuban military boats, killing one and leading to the capture of the other two. There is apparently a whole cottage industry of Floridians who go down to Cuba to smuggle people back to the U.S. The whole incident is a less dramatic version of a far more notorious one that happened in 1994, when a Cuban military boat rammed a tugboat, causing 41 to drown, including ten children.

Upon a moment’s reflection, the most striking thing about the incident is that in Cuba it is against the law to leave in the first place. Most people in most societies take it for granted that if they have the money and can get permission from the country they are going to they can leave their country as they please. But Cuba, like other totalitarian states before it, forbids this most basic right. The reason is that ultimately the people are the property of the state in general and of the Maximum Leader in particular. They are not independent agents with their own lives, goals, hopes and dreams. They are instead simply raw material for the latest five-year plan, indistinguishable from fertilizer or steel in that they are told how they will be used, where to work, where they will get medical treatment, where they will live and, critically, that they can never leave. This is the totalitarian mentality in a nutshell – people as nothing more than the property of the Party to be manipulated as the Party sees fit – and emigration controls are its most blatant example. That a society such as Cuba draws admiration from certain segments of the Western Left despite the fact that people are killed for trying to leave it says a lot about the cognitive dissonance that infests so much of progressive thought.

Such controls were the rule in Communist countries throughout the Cold War, but as far as I know they remain now only in Cuba and North Korea. I am unsure about Laos, which is still nominally communist, but have read that at least one non-Communist dictatorship, Portugal before 1974, also imposed such restrictions. But in China and Vietnam people routinely travel abroad for education or business. Sometimes they come back, sometimes they do not, but the governments of these countries have long since decided that the gains to letting their citizens come and go as they please far exceed the costs.

And the fact that China is a country of more or less free emigration is a strong sign that it is in fact irreversibly liberalizing. There has been much talk of whether China will combine greater economic freedom with continued harsh political repression, but when people are free to leave (and the costs of forcing them to stay home are now far too high) the die is cast. There is a flowering of civil society and rapidly increasing resort to (still far from independent) courts to hold government officials accountable, and freedom to leave is both companion and spur to these efforts. China is a rising nation, and rising nations can be aggressive and dangerous ones even without totalitarianism (one need think only of the U.S. from the 1830s through the Spanish-American war), but the trend toward greater personal autonomy and, therefore, more accountable government is probably irreversible.

Tuesday, April 11, 2006

Fame vs. Achievement

When I teach entrepreneurship in my economic principles class I always start by surveying my students and asking them if they have heard of a particular set of people. I usually start with someone on the current list of bestselling CDs on Yahoo or some such place. (I have to look it up because I have usually heard of few if any of them.) For constancy’s sake, I then ask if they have heard of Madonna, with whom I and they are familiar. I then move to the current vice president of the U.S. – this administration aside, typically not someone at the top of the news every day, but whom we would expect all citizens to know. Typically everyone has heard of all of them.

I then ask them if they have heard of Ted Hoff, Fred Smith or Alexander Fleming, and am usually greeted by silence. They were, respectively, vital in the creation of the microprocessor, FedEx and penicillin. Despite that, they are unknown to almost everyone in a world that benefits from their achievements. And in the age of an omnipresent entertainment industry this, alas, is how it is. There is little correlation between fame and achievement.

In one sense this is too bad, because Hoff, Smith and Fleming in their own way did far more to advance the human condition than any singer or movie actor ever will. There is a certain irritation in seeing society held rapt by the Academy Awards or the Super Bowl, knowing that a similar event devoted to great achievements in science and commerce would draw almost no interest. Indeed, to the extent we know businessmen and scientists at all it is often because they have successfully crossed the bridge to celebrity – think of a Lee Iacocca or Donald Trump on the one hand or a Steven Hawking on the other. And as the Trump example illustrates, even here there is no obvious correlation between true achievement and fame.

There are several lessons I hope my students take away from this. The first is the difference between the two things. What is achievement? I define it broadly, as anything that advances the human condition or puts us in a position to improve our lives. And so the greatest achievements in history (as opposed to, say, the most pivotal historical events), usually occur thanks not to diplomats, generals or clerics, but to scientists and entrepreneurs, who ultimately are engaged in the same task – the generation of new knowledge, for the benefit of all future generations, through trial and error. In the case of the scientist this description is obvious. For the entrepreneur perhaps not, but they too are constant experimenters trying out new ideas – here, ideas about how scarce resources should be recombined – in an attempt to learn new economic knowledge – whether their proposed new use of the resources is more socially valuable than the disparate uses to which the resources were previously put. While the well-educated person is generally aware of the greatest scientific achievers, commercial achievers do not always get the credit that they perhaps deserve. In his recent book Human Accomplishment: The Pursuit of Excellence in the Arts and Sciences, 800 B.C. to 1950, Charles Murray (about whom more in a later post) specifically omitted commerce as one of his categories of humanity’s greatest achievements, although because of measurement difficulties rather than ideological ones.

More generally, I think it is a fact that the entrepreneur is not seen as a heroic figure. But thanks to Fred Smith’s demonstration of the feasibility of getting something from here to there overnight, no matter where “there” is, humanity is in considerably better shape. The ability to move perishable substances is much enhanced, business costs are much lower, and so on. And note that by “feasible” I do not mean in an engineering sense: we have had planes capable of traveling great distances in less than a day for some time. The difficulties instead involved figuring out how to link up sender and recipient, how to best organize the flow of parcels, etc. These are informational difficulties, which involve the attempt and abandonment of many different methods before a feasible, i.e. profitable, one is found. And this kind of use of privately held but socially valuable information is what entrepreneurs are always doing. Fleming (and Ernst Chain, and Howard Florey, and the other key participants in the creation of penicillin) behaved heroically in creating the scientific knowledge that enabled its use, but so too did (and do) all those in commerce whose energies made it available to the entire world at such trivial cost. Unlike the creator of a great art work or the winner of a major battle, the fruits of these achievements are spread out in tiny increments among millions of people across many years instead of being consumed all at once.

The contrast between the long-term contributions of people such as this and those who sing or play sports (or do even less) for a living and for public adoration is striking, and perhaps recent. In previous centuries, there were no “celebrities,” people whose lives were scrutinized primarily for their ability to entertain. According to the Oxford English Dictionary the word “fame” has its etymology in the Greek word for “to speak,” and the most recent definition is “The condition of being much talked about. Chiefly in good sense: Reputation derived from great achievements; celebrity, honour, renown.” Newton and Mozart, for example, were “famous.” But nowadays “celebrity” is the outlier word here; no one supposes that Paris Hilton, say, has any honor, great achievements or renown, but she is undeniably famous. It was probably not always thus, in that great renown in centuries past often came from honors by royalty, election to elite organizations such as the Royal Society and the like. But now the divorce between fame and permanent improvement of humanity is complete.

I don’t begrudge the famous any of their money; they are providing services of value, and deserve every penny they get. But I do not confuse their fame with accomplishment, and take some comfort in the knowledge that achievement is permanent, but fame only evanescent. A hundred years from now the only people who will know who Madonna was will be cultural anthropologists who specialize in late 20th-century U.S. pop culture. But the achievement of Ted Hoff and Fred Smith will probably be secure for eternity in the history books of the future, and even if not their legacy of achievement will be obvious every day in the improved lives future generations lead.

Saturday, April 01, 2006

Illegal Immigration


Jonah Goldberg at National Review now has a piece taking up the analogy between black-market labor and black-market drugs.
What should the U.S. do about its illegal-immigrant problem? The U.S. House has proposed making illegal immigrants felons, while a Senate committee has rejected that approach and instead favors an amnesty (whatever the proponents call it) combined with more resources for border enforcement. Americans in overwhelming numbers oppose the wave of illegal immigration of the last thirty years in the abstract, although what they would like to do about it is not clear. On the other hand protesters, many themselves probably either illegal or the children of illegals, have been marching in unexpected numbers in unexpected anger, with some Mexican flags appearing among them. As Victor Davis Hanson notes, there is something comically absurd about protesters waving the flag of the country they or their parents escaped, and those flags are not likely to endear them to the broader population. Upon reflection the problem takes on a different cast from the angry way it is usually discussed.

First, the population of illegals is huge. Estimates currently hover around 11 million. The U.S. prison population is roughly two million, and so to turn them into criminals would require such a dramatic expansion of law-enforcement and prison warehousing capacity that this method of enforcement quickly becomes preposterous. It is true that some illegals will be scared of arrest and will return home, but this effect should not be overestimated. People routinely court imprisonment all over the world to engage in many kinds of black-market transactions, and black-market labor is surely no different. Criminalizing illegals is an empty gesture, like passing tough new penalties against “drug kingpins” three months before an election; it is all sound and fury, designed to distract rather than succeed. A fence across the U.S. border would probably be somewhat more effective for awhile, but ultimately would be at least partly defeated; immense expenses would have to occur to achieve only minimal success.

If the labor sellers are not to be deterred, what about the labor buyers, i.e. the employers and wealthy suburbanites who buy the services of the illegals, thus giving them such a compelling incentive to come over in the first place? Politically, this is a much easier task; the sight of a lot of businessmen marching in the street or spending a lot of campaign money to preserve their right to hire illegal labor probably does not inspire much fear on Capitol Hill. But it is here that the illegal problem, and its entanglement with the nature of American society, becomes clear. Put simply, there is no way to enforce meaningful penalties against employers without us becoming a police state. Any criminal or financial penalties significant enough to deter employers would require an immense enforcement apparatus: federal agents sweeping in on workplaces and homes to take advantage of the new access to financial records they would have to have in order to punish the employer and not just the worker. It would be a massive cessation of power to the state from which we would never recover. The inability to solve this problem through punishment is something a lot of smarter public officials know, and that they support this approach anyway is something the great H.L. Mencken would have savored.

Once upon a time there was no such thing as “illegal immigration.” Throughout much of our history the only immigration constraints were on the size of ships bringing them in. In the late 1800s several racist measures were passed against the Japanese and Chinese, but other than that the only way you could be kept out was if you were likely to become “a public charge.” It wasn’t until 1924 that the first meaningful immigration restrictions were imposed, and three years after that the Border Patrol was established. But through all of this time Mexicans came and went freely to work, trade and marry. Only in the 1930s, amidst the Depression and the nascent federal welfare state (Social Security took effect in 1935), did meaningful efforts to keep the brown hordes back commence. (The efforts have failed, like most efforts to stand between willing buyers and sellers, ever since.)

And I think the confluence of anti-Mexican sentiment and the birth of the modern welfare state is no coincidence. Now it is much easier to be a “public charge” than in the 1800s, because we are all entitled to benefit from immense public expenditures on schools, health care, pensions and so on. While the cultural angles – the concern of older or more fearful Americans about being swept away in a tide of Spanish, e.g. – should not be underestimated, the primary impetus for hostility to illegal immigration is the welfare state. In its absence, Mexicans (and others further south) would probably be allowed to come and go as they please, as they once did.

And this suggests the only ultimate solution, at least for Mexicans. (Illegals from other countries who overstay their visas are perhaps a different story, although transportation costs for them to return home are also cheaper than they have ever been.) Let them work legally. They thus are removed from the shadows. Most of them probably don’t wish to live here, only to earn enough money to make their families comfortable. Many, maybe most would work for awhile, go home for awhile, and come back as necessary. That is what they do now, only far less frequently and at far greater personal risk and cost. They would retire at home where they are culturally comfortable, and the sense of assault that Americans in the border states feel would wane accordingly. Allowed to come and go at will, illegals would gain more bargaining power with their employers (thus modestly lessening downward pressure on the wages of the Americans with whom they compete), and their energies could be more easily turned not just to hard labor for someone else but toward their own entrepreneurial creativity.

Black markets are never driven out, only driven underground. The black market for labor is no different. The sooner we learn this the better off we will all be.