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AI and the Future of Free Markets: A Nuanced View – Preview of FreedomFest 2017 Panel Comments by G. Stolyarov II

AI and the Future of Free Markets: A Nuanced View – Preview of FreedomFest 2017 Panel Comments by G. Stolyarov II

The New Renaissance Hat

G. Stolyarov II

July 18, 2017


Gennady Stolyarov II, Chairman of the United States Transhumanist Party, offers a preview of his forthcoming remarks at the July 21, 2017, FreedomFest panel in Las Vegas, entitled “Artificial Intelligence & Robots: Economy of the Future or End of Free Markets?”

Find more information regarding the FreedomFest panel here.

Visit the U.S. Transhumanist Party website here.

Become a member of the U.S. Transhumanist Party for free by filling out our concise application form.

He Was a Middle-School Loan Shark – Article by Jeffrey A. Tucker

He Was a Middle-School Loan Shark – Article by Jeffrey A. Tucker

The New Renaissance HatJeffrey A. Tucker
******************************

It came out in passing last night, in discussions with a smart 17-year old, that he got in deep trouble in middle school. He was accused of loan sharking, and forced to do detention.

See if you think there is anything wrong with what he did.

The middle-school cafeteria had candy machines. Every candy cost a dollar. My friend carried extra ones with him. He would buy candy, and immediately people would ask if he could loan them money. He did. More and more people asked. He continued to loan people money, and only some would pay him back. His charity was losing him money.

So he had an idea. He would loan anyone a dollar. However, the next day they had to pay him two dollars. This was great because it weeded out people who were not serious about their candy needs, and got rid of those who had no intention of paying him back. His idea helped to ration his scarce resources. It had the additional advantage of making him some money, which incentivized him to make funds available.

Everyone was happy. He made money. They got their candy. Most everyone paid him back. If he began the week with $5, he ended the week with $10. This was nice. No one was hurt.

If a person was late in paying, he added an additional dollar for each day. Otherwise, why would people pay sooner rather than later? So if you borrowed one dollar on Monday, and didn’t pay until Friday, you would owe $5.

Of course he did have to start keeping books on who borrowed from him. He would sometimes have to hunt them down the next day. Sometimes people need gentle reminders, of course. Mostly people paid.

He was also rather merciful. Once a person got behind by three full weeks. She technically owed $15 on a $1 loan. He came to her and said, “let’s settle this debt today. I’ll take $10 and we can call it even.” She was relieved and happily paid.

My friend was making lots of money. And why? Because many students wanted candy and failed to make the proper financial preparations to purchase it. He was there to facilitate an exchange. They would get candy now, which is what they wanted, and he would be rewarded for anticipating their desires.

So far, I see nothing wrong with this at all.

However, you could express this in more severe terms. People often criticized payday loans for charging an annual percentage rate of 100-700%. Scandalous, right?

Well, think about the rate my friend was charging. It turns out to be 26,000%, based on $1 per weekday.

Keep in mind that we are talking about a 13-year old kid here. This is not exactly a member of the Medici banking family here. He was just trying to help people with a two-party win.

But as his financial holdings grew, and his practices became more formalized, his business became ever more lucrative. That’s when news of his empire began to leak to teachers and parents.

Predictably, there was mass outrage. He was hauled in and accused of “loan sharking.” There was a trial. He was declared guilty. He was put on detention and humiliated publicly.

Once he was out of the picture, kids no longer had any means of getting financing for their candy fixes. They just stood in front of the machines staring blankly. It’s hard to see how the overall middle-school economy was improved by this crackdown.

The response of the parents and teachers was a typical example of mob behavior against intelligent capitalist practices. It’s been going on for hundreds of years, particularly hurting people who make money with their minds through financial savvy.

This was the basis of anti-Semitism from the Middles Ages through the Nazi period, since, as Milton Friedman has explained, Jews have traditionally specialized in the enterprise of money-lending.

And it goes on today, with all the frenzy against usury, payday loans, pawn shops, and so on. Even the Occupy movement sampled some of this populist outrage against money-making.

Damnant quod non intellegunt. They condemn what they do not understand.

Jeffrey Tucker is Director of Content for the Foundation for Economic Education. He is also Chief Liberty Officer and founder of Liberty.me, Distinguished Honorary Member of Mises Brazil, research fellow at the Acton Institute, policy adviser of the Heartland Institute, founder of the CryptoCurrency Conference, member of the editorial board of the Molinari Review, an advisor to the blockchain application builder Factom, and author of five books. He has written 150 introductions to books and many thousands of articles appearing in the scholarly and popular press.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author. Read the original article.

The Evidence Weighs in Favor of Immigration – Article by Luis Pablo de la Horra

The Evidence Weighs in Favor of Immigration – Article by Luis Pablo de la Horra

The New Renaissance HatLuis Pablo de la Horra
******************************

In a previous article, I analyzed the economics of immigration from a theoretical perspective. I concluded that economic theory clearly supports immigration-friendly policies since they benefit all parties involved. In this article, I will examine the empirical evidence on the effects of immigration on host countries and immigrants themselves.

Effects on Employment, Wages, and Public Finances

High immigration rates are often associated with rises in unemployment. The logic behind this (flawed) reasoning is straightforward: if an economy can only absorb a fixed number of jobs and the labor force increases, the unemployment rate will inevitably rise. What’s wrong about this statement? Simple: the economy is not a zero-sum game.

In other words, the number of jobs available increases as the economy grows. After World War II, the US labor force increased dramatically due to immigration and the massive entry of women into the labor market. It moved from 60 million in 1950 to around 150 million workers in 2007. And yet, the unemployment rate in 2007 was as low as 4.6 percent, near full employment.

In a survey paper on the economic effects of immigration, published in 2011, Sari Pekkala Kerr and William R. Kerr concluded that the long-term impact of immigration on employment is negligible. In their own words,

The large majority of studies suggest that immigration does not exert significant effects on native labor market outcomes. Even large, sudden inflows of immigrants were not found to reduce native wages or employment significantly.

As suggested by the research conducted by Giovanni Peri, professor of Economics at UC Davis, immigration has positive effects on productivity since it expands the productive capacity of the economy, which in turn results in higher wages in the long run. Nonetheless, there are certain disagreements on how immigration affects native, low-skilled workers (mainly high school dropouts).

Different studies point at a wage decline between 0 (no effects at all) and 7 percent for this segment of population. Even when assuming the worst-case scenario of a 7 percent decline (which does not consider the investment in capital undertaken by companies to compensate for a decline in the capital-labor ratio), low-skilled immigration has net positive economic effects for host societies, allowing native workers to perform more productive jobs and increasing the specialization of the economy.

One of the most popular arguments against immigration is the issue of welfare benefits. Immigrants are believed to pose a burden on the host economy. Their net fiscal impact (defined as taxes paid by immigrants minus public services and benefits received) is thought to be overwhelmingly negative when compared with the fiscal impact of natives. Yet the evidence does not support this idea. As pointed out by Kerr and Kerr,

It is very clear that the net social impact of an immigrant over his or her lifetime depends substantially and in predictable ways on the immigrants’ age at arrival, education, reason for migration, and similar […] The estimated net fiscal impact of migrants also varies substantially across studies, but the overall magnitudes relative to the GDP remain modest […] The more credible analyses typically find small fiscal effects.

Therefore, there are no good reasons to impose tough restrictions on labor mobility in the name of fiscal sustainability.

The Place Premium: How to Reduce Poverty by Lowering Immigration Barriers

Wage differentials among countries can be explained by drawing on the concept of Place Premium, that is, the increase in earnings that a worker automatically experiences when moving to a high-productivity country. This increase is due to several factors: differences in capital stock, infrastructure, proximity to other high-productivity workers, etc.

The Place Premium of potential immigrants moving to the US has been estimated for a few countries. A Haitian worker that were to relocate to the US would see her PP-adjusted earnings automatically rise by 700% when compared to the same worker in Haiti performing an equivalent job (or a job that requires the same skills and education). Similarly, a worker from Guatemala or Nicaragua would more than triple her earnings, while a Filipino would increase her purchasing power by 3.5 times. In other words, relaxing barriers and letting more immigrants into higher-productivity countries seems to be one of the most effective ways to improve the life of millions of people worldwide.

All in all, the economic benefits of immigration seem obvious for both host countries and immigrants. The data shows that restrictive immigration policies have adverse effects on host economies and prevent would-be immigrants from increasing their income by migrating to higher-productivity countries. Thus, the path to take is clear: we should gradually reduce immigration barriers so that more and more people can take advantage of the benefits of capitalism.

Luis Pablo de la Horra is a Spanish finance graduate from Vlerick Business School.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

My Childhood as a Renegade Entrepreneur – Article by Derek Magill

My Childhood as a Renegade Entrepreneur – Article by Derek Magill

The New Renaissance HatDerek Magill
******************************

For most of my life I wanted to be a businessman.

As early as preschool, I would insist on wearing only business attire to class every day. And by business attire, I mean I’d put on one of my father’s button-down shirts and tuck it in with a ridiculously oversized pair of slacks that my brother had worn.

When I got older this interest began to manifest itself in ways that caused conflict in class.

The Young Entrepreneur
In 4th grade, I made a little business out of reselling Livestrong wristbands after class. I made about $150 with this side business before the school told me I needed to stop. My classmates were disappointed because I was the only reliable source when it came to getting bands. Plus, I had recently started purchasing Freedom Bands, which were available in far more colors than the Livestrong yellow. Needless to say, my customers were always satisfied.

In 6th grade, I loaned a friend money for a cookie but insisted on there being a 25 cent interest fee tacked onto each day he failed to repay. It took him two weeks and he paid the amount he owed, plus interest, without complaint.

The school found out and my parents received a call home.

What I always found interesting was that there was never any sort of explanation offered as to why my behavior was “bad.” It was just simply against the rules.

My classmates loved my attempts at offering services, but there was always the ever-present, and often unseen, force of teachers and school administrators hovering nearby waiting to stop our transactions.

High School Antics
As the associated student body president, I was required to work in the student store. I developed a practice of accepting tips in the form of the spare change students didn’t want to carry around.

I had a jar on the counter, like any food establishment might, and I would casually suggest students leave their change after a purchase. This was an innocent, voluntary donation in which I’d make a little bit of money every day.

But of course, my teacher found out and her response was a swift write-up. Again, I was not told why my actions were wrong.

It’s Only Fair If Everyone Profits
One day, the administration decided to host a club fundraising festival where each club was allowed to sell one item purchased from a grocery store at lunch in order to raise funds for its club—the only time they ever broke the cafeteria monopoly.

I left campus to purchase 150 burgers from Wendy’s for $1 each. I then sold them for $5 per burger on campus, and gave away a free Arizona Iced tea with the burger, which undercut the two other vendors selling Arizona Iced tea.

We eclipsed the rest of the fundraising group that day by over 200 percent and the school accused us of cheating and being greedy.

They confiscated most of the funds and distributed it among the other students to make it more “fair.”

At last the truth had come out in full. It had taken almost eighteen years but I had the answer they had never given me before: my teachers hated the free market.

The administrators regarded commerce as dirty. They didn’t see the value I created for students who wanted something better than cafeteria food for lunch. They saw value that had been acquired at the expense of others.

As I look back now with more knowledge and experience, I’ve come to the conclusion that this experience was both beautiful and saddening.

As children, we are born capitalists. We have no deep philosophies or moralities but we organize ourselves naturally around mutual exchange because we recognize quickly that life gets better if we do.

We trade cards, toys, our lunches, and other things we value for the things our friends value and rarely do we have trouble working out disputes. We don’t do it because we care consciously about free markets — we don’t even know the concept. Nor do we need to. Markets don’t require everyone to know their importance consciously. They just require people to be left alone.

It takes a lot of schooling to kill these natural inclinations towards freedom. Teachers and administrators stop these interactions on the playground, and in the classroom they teach material that distorts and obfuscates the truth. The process of schooling is the process of taking our innate tendencies towards liberty and destroying them.

As my friend Isaac Morehouse wrote in a comment when I shared this story on Facebook:

Is it any wonder why Ayn Rand is making such a resurgence among high school students?

Derek Magill is a college dropout, marketer, business strategist and career expert. He is currently the Director of Marketing at Praxis and has consulted with companies such as Voice & Exit, the Foundation for Economic Education, Glockstore, Colliers International, Daily Caller, and Undertech.

Derek is the author of How to Get Any Job You Want.

This article was originally published on FEE.org. Read the original article.

Jews As the Enemies of the Enemies of Liberty – Article by Steven Horwitz

Jews As the Enemies of the Enemies of Liberty – Article by Steven Horwitz

The New Renaissance HatSteven Horwitz
******************************

Anti-Semitism, it’s often said, is the oldest prejudice. The hatred of Jews has waxed and waned over the centuries, but appears to be back with something of a vengeance over the last few years, and especially the last few months.

For example, on Monday, February 27, over two dozen Jewish institutions across the country received bomb threats by anonymous phone calls. These included Jewish Community Centers, synagogues, retirement homes, day care centers, and Jewish educational institutions. These threats are part of a pattern of such threats, including multiple cemetery desecrations, that has been ongoing over the last few months. There have been 100 such threats to Jewish institutions just since the beginning of 2017.

Every time such a threat is called in, these institutions have to clear the building to determine if it is just a hoax. This means rounding up children, infants, the elderly, the infirm, and the developmentally disabled, getting them out of the building and, often, out in the cold, for the hour or two it takes to confirm all is clear. Although, thankfully, these have all turned out to be hoaxes, they still are taking a real toll on the Jewish community and the non-Jews who make use of these institutions. They are, I would argue, a form of terrorism.

The Why of Anti-Semitism

There has been much debate over why these threats have increased in recent months, and it seems plausible that the increased brazenness of the “politically incorrect,” including the rise of the alt-right, in the wake of the Trump campaign is probably one key factor. But anti-Semitism is not solely a problem on the Right. The political Left has had its own history of hatred for Jews, manifested in the present by the increased anti-Semitism of the radical Left in the context of criticism of Israel, especially through the Boycott, Divestments, and Sanctions (BDS) movement.

The sources of anti-Semitism on both Right and Left are complicated, but one element on both sides is that Jews have historically been associated with important liberal ideas such as capitalism, entrepreneurship, cosmopolitanism, and free migration. These institutions have enabled massive social, cultural, and economic change, empowering the previously powerless all over the world, and threatening the old order.

The enemies of liberalism have problems with all of these, though the Right and Left differ on which bothers them the most. But for both, Jews can be easily seen as the enemies of those who find deep flaws with the classical liberal social order. When Jews are being threatened, it is usually a good sign that the foundations of liberalism are as well.

Jewish Anti-Capitalism

One point to note up front is that Jews themselves have a history of opposition to classical liberalism. Jewish intellectuals have had a long-standing attraction to socialism, starting of course with Marx himself. In particular, a number of the architects of the Russian Revolution were Jews or of Jewish heritage.

I raise this because I am not arguing that Jews were somehow reliably classically liberal over the last few centuries. And the fact that a good number of Jews were socialist, or that a good number of socialists were Jews, certainly doesn’t justify anti-Semitism by critics of socialism.

I do think that part of the attraction of socialism to Jews was its universalist aspiration in the form of the trans-national cosmopolitan vision of classical socialism along with its desire to “heal the world” and its strong ethic of concern for the least well-off. Those aspirations were shared by 19th-century classical liberals and were also part of Jewish practice. This universalism made Jews the target of the critics of classical liberalism from the Right, as well as the right-wing critics of socialism.

Jewish Pro-Capitalism

The association of Jews with capitalism, trade, and entrepreneurship is well known. The negative stereotypes of acquisitiveness, materialism, and selfishness that have long been part of anti-Semitism grew out of the truth that Jews were more likely to be traders and financiers than were other groups. Part of this was that as a nomadic people, Jews invested in their human capital rather than the physical capital they would have had to schlep around while getting kicked out of country after country.

(This might also explain why Jews have also been disproportionately entertainers and intellectuals. The skills for telling jokes, writing stories, making music, or working in the realm of ideas are ones that don’t require much in the way of physical capital in order to be successful.)

Jews were also often middlemen as a result of their nomadic existence and familiarity with so many parts of the world. Middlemen have always been suspect to the economically ignorant as far back as Aristotle, as they appear to profit by creating nothing tangible. This is particularly true when the middlemen are in financial markets, where they are not even trading something physical.

It’s no surprise, therefore, that hatred of capitalism has been accompanied by hatred of the Jews

Right-wing anti-Semitism, however, often draws upon these capitalist tropes as part of its hatred. But in this context, Jews are not so much seen as representative of capitalist exploitation that can be ended by socialism, but rather as an example of people who place love of money and their universalist aspirations above the love of their country and its citizens.

German anti-Semitism in the 20th century had roots in the argument that Jews had been “war profiteers” in World War I and had benefitted from the economic destruction that characterized the Weimar Republic period leading up to Hitler’s ascension to power. The Nazis, and other fascist movements, saw the Jews as the sort of rootless cosmopolitans who were unable to grasp the importance of blood and soil.

The modern version of this point, and one that is also found on the Left, is the “dual loyalty” charge laid upon pro-Israel Jews: they are beholden to Israel in ways that cause them to work against the interests of the United States.

The Why of Nationalism

One way to see the “national socialism” of various fascist movements is that they objected not to socialism per se, but to socialism’s attempt to put class ahead of race or ethnicity or nationality. To the fascists, German or Italian workers shared much more with German or Italian capitalists than they did with Russian or American workers. Marxian socialism drew the wrong battle lines.

And so it is today, as “economic nationalism” is on the rise globally and Jews have again become the most obvious target for an invigorated Right. Jews have always been the symbol of the cosmopolitan, the migrant, and the “rootless” trader. If you reject market-driven globalization, whether because you dislike markets or because you are a nationalist, you are going to have reasons to see Jews as symbols of what you reject. That opposition to immigration and global trade, and the market system that is at the root of both, would go hand-in-hand with anti-Semitism is hardly surprising.

The economic nationalism of Trump and a variety of European leaders is not inherently anti-Semitic, nor does it require that the leaders of such movements be anti-Semites, but the arguments of economic nationalism can easily empower the anti-Semitism of both the Right and Left. The leaders build in plausible deniability, knowing full well the nature of the forces they are unleashing but in ways that avoid direct responsibility.

How could they not know? We have centuries of experience to draw on, back to the ancient world through the Middle Ages all the way to the ghastly slaughter of the 20th century during which anti-Semitism nearly destroyed the whole of Europe itself. The costs have been unspeakable, and hence the vow to never forget. And yet, despite this history, the tendency to forget remains. To remember would require that we think more clearly about ideology and philosophy, human rights and dignity. Many people do not want to do that. It remains easier to scapegoat than to remember.

Admittedly, we liberals have a special grudge against anti-Semitism. It broke up the greatest intellectual society of the 20th century, shattering Viennese intellectual life, flinging even Ludwig von Mises out of his home and into the abyss. His books were banned, and those of many others too. He and so many fled for their lives but bravely rebuilt them in the new world that offered protection.

A Warning Sign

It has been said that Jews are the canaries in the coal mine of a liberal society: when they are under threat, it is a warning sign. The ongoing and increasing threats to Jewish communities here in the US, as well as similar trends across Europe, should have all of us worried. A world where Jews sing out in joy together and are unafraid to fly free is one far more safe from tyranny than one in which we Jews worry about dying in our own cages, as many of us are doing as the threats to our institutions have become more frequent and more brazen in recent months.

Watch how a society treats Jews and you’ll have an indicator of its degree of openness and respect for liberty. When Jews are being threatened, so are the deepest of our liberal values. The poisonous air from coal mining that killed canaries was invisible. The threats to Jews and to liberalism are not. Citizens of liberal societies dismiss or downplay those threats at our own peril.

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions. He is spending the 2016-17 academic year as a Visiting Scholar at the John H. Schnatter Institute for Entrepreneurship and Free Enterprise at Ball State University.

He is a member of the FEE Faculty Network.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author. Read the original article.

A Plan to Make Me Great Again – Article by Jeffrey Tucker

A Plan to Make Me Great Again – Article by Jeffrey Tucker

The New Renaissance HatJeffrey Tucker
******************************

I was out shopping for a sweater this weekend and I ran into Donald Trump, who told me that I should stop outsourcing my job.

“You should be knitting your own sweaters.”

I explained that I’m not very good at knitting. I have other things to do, in any case. This whole idea strikes me as a huge waste of time. I just can’t see myself sitting at home doing knitting. It’s true that this would give me a job, but it is not a job I want, especially since someone else wants to do it for me.

But he strongly disagreed, explaining that the problem with this country is that we keep taking away our own jobs and keep giving them to other people, who then get the money. This is a bad thing. This is why we are all suffering so much.

I persisted with objections, so he proposed a deal. If I continue to outsource my job, I will have to pay him a 35% tax, which means that if I spend $50 on a sweater, I will need to send him $17.50. That’s a bummer, we both agreed.

Instead, he said, if I take up sweater knitting, he will reduce my income tax rate to a flat 15%, plus exempt my sweater-making from all existing regulations. I would be free to make any sweater I want. The catch is that I have to knit sweaters, because doing that will make me great.

“Just think of it,” he said, “Jeffrey Tucker is open for business!”

In some ways, this sounds pretty sweet. A bit goofy but OK. It’s awkward but I’ll take up knitting on nights and weekends, producing at least one sweater per month. I will continue to do this in order to earn the promised benefit.

Also, I’ll stop buying sweaters at the store and thus end my addiction to outsourcing my production. It’s true that I have given up a huge amount of my freedom over how I spend my time and use my resources (I have to buy all those yarns and needles), but, on the plus side, I avoid a punishing penalty, pay lower taxes, and obey fewer regulations.

The deal doesn’t strike me as very efficient, but, as Trump said, this focus on efficiency over greatness is precisely what has gone wrong in this country.

Sometimes I wonder why his version of greatness should prevail over mine, but, hey, he is the President.

One Month Later

I finally finished my first sweater, and I’m a bit behind on other things. I gave up my job driving Uber. I stopped selling stuff on eBay. I was doing volunteer work for a local charity and I had to give that up too. But at least now I have a sweater. Maybe I can make money at this after all.

I tried to sell it but I couldn’t find any buyers. It turns out that everyone else who needed sweaters had made a similar deal. They too had been persuaded to become great by knitting their own sweaters. We had all become sweater-self-sufficient.

I hope they aren’t feeling as poor as I feel now.

I gradually came to realize something. If you cooperate with others, share the work, find out what you do best, trade with others, and make your own decisions about what you want to insource versus outsource, you can eventually find the best strategy for using your time and resources well.

As Adam Smith proved so long ago, a key to prosperity is the expansion of the division of labor, that is, finding ways to benefit from the talents of others wherever they happen to be. I can only do this if I am truly free to buy and sell based on my own evaluation of what benefits me the most. And under this system, what benefits me also happens to benefit everyone.

This system, which we can call free trade, has the added benefit of creating a kind of community feeling. Peace. Prosperity. There is something great about that after all.

Jeffrey Tucker


Jeffrey Tucker

Jeffrey Tucker is Director of Content for the Foundation for Economic Education and CLO of the startup Liberty.me. Author of five books, and many thousands of articles, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. Email.

This article was originally published on FEE.org. Read the original article.

Why Was Coffee Drinking Once Scandalous? – Article by Jeffrey A. Tucker

Why Was Coffee Drinking Once Scandalous? – Article by Jeffrey A. Tucker

The New Renaissance Hat
Jeffrey Tucker
******************************

In 18th-century Europe, many products and services reached a newly emergent middle class for the first time in human history. The capitalist age was maturing, and that meant that average people had money for the first time and lots of choices on how to spend it. One of the new products they could buy was coffee. With that came a great deal of social suspicion and even dread.

None other than Johann Sebastian Bach satirized the puritanical fear of coffee in his delightful and witty “Coffee Cantata.” It was one of the few times he ever tried his hand at pure pop entertainment. Of course he succeeded brilliantly; he was Bach after all!

The “Coffee Cantata” tells the story of a daughter who scandalized her father due to her devotion to coffee. She couldn’t stop singing about how wonderful it is, while her father corrected her constantly.

“You naughty child, you wild girl, ah!” the father yells at his daughter. “When will I achieve my goal: get rid of the coffee for my sake!”

“Father sir, but do not be so harsh!” she responds. “If I couldn’t, three times a day, be allowed to drink my little cup of coffee, in my anguish I will turn into a shriveled-up roast goat.”

She happily agrees to do everything he says in every area of life except one: she will not give up coffee.

And then follows a beautiful tribute to coffee: “How sweet coffee tastes, more delicious than a thousand kisses, milder than muscatel wine. Coffee, I have to have coffee, and, if someone wants to pamper me, ah, then bring me coffee as a gift!”

The father threatens her: “If you don’t give up coffee for me, you won’t go to any wedding parties, or even go out for walks.”

She still refuses.

Then the daughter plays a little game. She has a husband in mind and extracts from him a promise that if she marries him, he must allow her to drink coffee. He agrees. Then she goes to her father, who opposes the marriage, and makes a deal: if she is permitted to marry him, she will give up coffee. The father is delighted, and agrees.

Thus does the daughter gain a new husband, and, much more importantly, a permanent right to drink coffee whenever she wants!

What was this fear of coffee? Why was this such a big deal? It does have some narcotic properties to it, as we all know so well. It can give you a delightful lift.

But that alone does not account for the early opprobrium with which coffee-drinking, particularly for young girls, was greeted. For a fuller account, we need to understand something larger and more socially transformative: the advent of the coffee house itself.

The coffee house was one of the earliest public institutions, operating on a purely commercial basis, that brought a wide variety of social classes, not to mention a mixture between men and women, in a market-based social setting. In the 18th century, coffee houses spread all over Europe and the UK, attracting young people who would sit and drink together and discuss politics, religion, and business, and exchange any manner of ideas.

What the father in the Cantata is actually objecting to is not coffee as such but unapproved, unchaperoned social wanderings.

The Loss of Control

This was a huge departure from the tradition that entitled parents and other social authorities, including governments, to determine what kind of associations their children would have. Coffee houses introduced a kind of anarchy to the social structure, and introduced new risks of randomized contact with ideas and people that parents could no longer control. Coffee represented freedom itself – the freedom to mix, mingle, and consume what one wanted.

Indeed, coffee houses became a great source of public controversy. In England, in the 17th Century, Charles II tried to ban them all on grounds that they were “places where the disaffected met, and spread scandalous reports concerning the conduct of His Majesty and his Ministers.” Even a century later, women were banned from attending them, and this was true in France as well. Germany had more liberal laws concerning women and coffee but public suspicion was still high, as the “Coffee Cantata” suggests.

houghton_ec65a100674w_-_womens_petition_against_coffee

Women who were banned from coffee houses developed a very clever response. In the famous “Women’s Petition Against Coffee” of 1674, women said that coffee was responsible for the “enfeeblement” of men. Historians say the campaign contributed to the gender integration of coffee houses.

We see, then, that the commercial availability of coffee actually contributed to the advance of women’s rights!

Looking back at the astonishing success of Starbucks in our own time, it doesn’t seem surprising. They too serve as gathering spots, social mixers, places of business, and centers of conversation and ideas. We are more accustomed to it now than centuries ago, and yet even today, how much political controversy is engendered by access to products and services of which social authorities disapprove?

War on pot anyone?

As the “Coffee Cantata” concludes:

Cats do not give up mousing,
girls remain coffee-sisters.
The mother adores her coffee-habit,
and grandma also drank it,
so who can blame the daughters!

 

Jeffrey Tucker


Jeffrey Tucker

Jeffrey Tucker is Director of Content for the Foundation for Economic Education and CLO of the startup Liberty.me. Author of five books, and many thousands of articles, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. Email

This article was originally published on FEE.org. Read the original article.

Markets Are Breaking Down India’s Caste System, Turning Untouchables into Millionaires – Article by Malavika Nair and G. P. Manish

Markets Are Breaking Down India’s Caste System, Turning Untouchables into Millionaires – Article by Malavika Nair and G. P. Manish

The New Renaissance HatMalavika Nair and G. P. Manish
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This year marks the 25th anniversary of liberal reforms in India that led to the dismantling of many socialist economic policies and the end of the draconian License Raj. Liberalization has changed life for many in India over the past couple of decades, although much more remains to be done. Just the middle class alone has exploded from 30 million people in 1991 to 300 million in 2014.

So this is a good occasion to tell the story of perhaps the most unexpected beneficiaries of these reforms: the rising Dalit millionaires. In recent years, many thousands of so-called “untouchables,” or Dalits, members of the lowest group in the Indian caste order, have risen out of poverty to become wealthy business owners, some even millionaires.

By taking advantage of the greater economic opportunity brought about by market reforms, these Dalit entrepreneurs provide us with an important example of the power of markets, not just to bring about economic emancipation, but to fight deeply entrenched social discrimination.

The Plight of the Dalits

The Indian caste system is an ancient and complex social order that divides society into groups based on a somewhat rough division of labor. The Dalits belong to the lowest group, below the four-tiered hierarchy of priests, warriors, merchants and artisans. Traditionally, Dalits were relegated to a life of doing “dirty” jobs such as cleaning floors and toilets or handling garbage: hence gaining the name “untouchable” as others would refuse to come into contact with them.

Since one’s caste was determined by birth, and it was impossible to switch castes throughout one’s life, being born an untouchable meant a lifetime of being trapped in a low income “dirty” job with very low social status. Marriages would only take place among caste members, and hence one’s children would be faced with the same hurdles brought by the untouchable identity, leading to systematic discrimination locked into place for generations.

It isn’t surprising that the Dalits consistently rank near the bottom of poverty statistics in an already poverty-ridden country. The term “poorest of the poor” would be an apt description of their socio-economic status in general. For decades, this made them the targets of several affirmative-action programs as well as many a politician looking to champion a cause.

While affirmative action has helped some get ahead, it has by no means been a panacea. For as long as all industry was state-controlled and subject to extensive licensing, the state effectively made all production decisions and awarded licenses to a few chosen oligarchs. This meant that opportunities for entrepreneurship and business were slim to none, and affirmative-action programs only served to redistribute pieces of a fixed pie from one to another.

Slumdog Millionaires

But there is a new heartwarming trend of entrepreneurship and self-help among Dalits since the liberal reforms in India, especially in urban areas. A visit to the Dalit Chamber of Commerce website (see also the Facebook page) reveals slogans such as “Fight Caste with Capital” and “Be Job givers, not Job seekers” as well as a spokesperson who favorably cites the invisible hand, a la Adam Smith! This voluntary Chamber of Commerce, set up in 2003 to bring Dalit entrepreneurs together, currently has 5,000 members whose enterprises jointly boast over half a billion dollars in sales revenue. The actual number of entrepreneurs in the population is much higher.

To what do they owe their success? Fascinating new qualitative research that tracks the life stories of several of these Dalit entrepreneurs reveals a common thread. The opening up of production processes to market forces created new opportunities like never before. Starting small and scraping together resources and capital, many of these Dalits now run business empires that actually provide employment to upper caste members.

There is Thomas Barnabas who was born into a family of bonded laborers, all eight of whom lived in a one-room house. Thomas recalls being thrown out of an upper caste friend’s home as a child after eating and drinking there because he was “untouchable.” They then proceeded to purify and wash the floor where he sat and threw away the dishes from which he ate.

Thomas now owns an industrial waste recycling and disposal business that has an annual sales revenue of $2.3 million and employs 200 people (including many upper caste members) outside the city of Chennai. He strove to fulfill an unmet demand for the processing of industrial waste generated by large corporations like Samsung, Dell, and Mercedes that set up manufacturing facilities in India after liberalization.

Or there is M.M. Rao, who was just one of two children to get an education in a family of bonded laborers with eight children. His family was so poor that they could not afford to buy shoes. His mother and sister were forced to walk barefoot to work in a nearby town.

Rao now owns a group of companies that specialize in construction, especially in the telecom sector, with a sales revenue of $7.4 million in 2010 alone. He was able to use his education as a civil engineer to start a small sub-contracting business laying telephone cables for large companies after the liberalization of the telecom sector. Owing to the quality of his work as well as his business acumen, he was able to grow that small sub-contracting business into what it is today.

Sushil Patil grew up in a 200-square-foot house in a slum, and his father was a laborer in a factory where he was discriminated against for his low caste status. Sushil was able to complete his engineering degree only because his father had to request the college dean to waive the fees that they could not afford to pay. He recalls, “I can never forget my father bowing before the dean, that hit me hard.” He now owns a construction and engineering company with revenues of $45 million a year. His main business is to handle the construction of power plants for major power companies. He has friends who still live in the slum that he grew up in and hopes to construct a charitable hospital that will offer medical services free of charge to the poor.

Markets Break Down Barriers

These stories constitute but a tiny sliver of many thousands, if not more. They lead us to an interesting question: how is it exactly that markets fight social discrimination? Markets work in very different ways than the obvious and visible hand of state-driven policies. While the state seeks to outlaw and abolish caste identity by making discrimination illegal, markets work in quiet and invisible ways by making caste identity irrelevant.

Competition brings about the existence of meaningful and relevant alternatives that raise the opportunity cost of discrimination for everyone participating in the market. It is in an entrepreneur’s economic interest to hire and contract with those who have the highest marginal productivity regardless of their caste identity. For if he does not, his competitor might potentially steal away profits that he could have earned. The more open and competitive a market, the more true this holds.

Once liberal reforms were put in place, they created choice and opportunity for many like never before. Market forces unwittingly brought about economic and thus social progress for society’s poorest and most discriminated against.

But can we go as far as saying the caste system has withered away? Not at all. It is unfortunately alive and well, especially in the rural areas where 68% of the population still lives, despite its being legally “outlawed” for decades.

Can we say that discrimination melts away in a market setting? Not necessarily. Anyone is free to discriminate on the basis of caste identity, even in a market. However, the greater the economic opportunity out there, the greater the chance that the cost of discrimination will be borne by the discriminator himself, not the one being discriminated against.

This is not true under socialism. When the state has a monopoly over all production and its chosen oligarchs (employers) sell to a captive market, discriminating against a certain group of people does not have negative economic consequences for the employer, but only for the ones being discriminated against. Naysayers claim that this rise among Dalits is marginal and not representative of Dalits as a proportion to the total population of the country. Some are getting ahead, but most are still left behind.

While this may be true in terms of numbers, the fact that this has happened at all is nothing short of marvelous. It’s not a coincidence that there were no Dalit millionaires emerging under socialism. It is a direct consequence of the underlying institutional setting. The Dalits exemplify the theory of the so-called poverty trap: being locked into a low-income equilibrium for generations. And yet, given a little opportunity and choice, we see many leaving a life of poverty and social discrimination behind to become well-respected business leaders and philanthropists.

Most encouraging is the recognition among them that it is the invisible hand of the market that has been instrumental for social and economic progress in their community. It is a step in the right direction for the future of classical liberalism and its role in alleviating poverty at a time when many who are more fortunate seem to be forgetting or ignoring its importance.

References

  1. The unexpected rise of Dalit millionaires: Swaminathan Aiyar
  2. Capitalism is changing caste much faster than any human being: Shekhar Gupta
  3. Defying the odds: The Rise of Dalit Entrepreneurs: Devesh Kapur, D Shyam Babu, Chandra Bhan Prasad
  4. Capitalism’s Assault on the Indian caste system: Swaminathan Aiyar, Cato policy paper
  5. 5. Dalit Chamber of Commerce website: www.dicci.org.

Malavika Nair is an Assistant Professor of Economics in the Johnson Center for Political Economy at Troy University. She is also an associated scholar of the Ludwig von Mises Institute.

G.P. Manish is an Assistant Professor of Economics in the Sorrell College of Business and a member of the Manuel H. Johnson Center of Political Economy at Troy University.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the authors.

How Pokémon GO Brightened a Dark World – Article by Jeffrey A. Tucker

How Pokémon GO Brightened a Dark World – Article by Jeffrey A. Tucker

The New Renaissance HatJeffrey A. Tucker
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All weekend, I’ve fielded texts from people who are despairing about the state of the country. Is some kind of unsolvable civil war developing between police and people, even between races? And how can politics solve this when the candidates seem to have every interest in actually exploiting and even exacerbating the problem? The opinion pages overflowed with expressions of deep sadness and warnings that, once again, the center is no longer holding. The nation is falling apart.

What could possibly be the solution here? These problems seem so deep as to be insoluble.

Oddly, the answer might be in your pocket. Through our smartphones and the app economy, we are being given tools to allow us to reach the world and connect with others in ways that were previously unimaginable. This is not a political solution; in fact, it might be solution precisely because it is not political.

Pokémon Brings Us Together

Poetically, it was exactly this weekend – following so much terrible news and after a season in which two-thirds of Americans report being alarmed by their coming presidential choices – that millions downloaded and played one of the most delightful digital apps to yet appear: Pokémon GO.

It has broken all records on the numbers of downloads in such a short time. In only a matter of a few days, the mobile app had nearly as many real-time users as Twitter. It now lives on more smartphones that even Tinder. As a term, Pokémon is top trending. If you follow your Facebook home feed, you know all about this. If any application could be described as having swept the nation, this was it.

How can a silly game lift up our hearts and give rise to the better angels of our nature?

That something marvelous had happened was obvious to anyone living in dense population areas. Parks filled up with people playing the game. They were hanging out in public areas around malls, at bus stops, in parking lots, and just about everywhere.

People were holding their phones, playing the game, laughing and moving around. Crucially, people were meeting each other with something in common – people of all races, classes, religions; none of it mattered. They found new friends and came together over a common love.

And there was a common feature to all the people doing this. We smiled. We smiled at each other. Even now, even in the midst of a world in which “the center no longer holds,” we actually found that center again: a heart-felt affection for something we love and an awareness that others share that same aspiration.

It was absolutely beautiful to watch. With an element of fantasy and the assistance of marvelous technology, we experienced the common humanity of our neighbors and strangers in our community. This kind of experience is key for building a social consensus in favor of universal human rights.

Why We Love It

The integration between digital and physical in the Pokémon GO game go beyond anything most people have ever experienced. Turn on your camera and you suddenly find opportunities for catching and collecting pocket monsters all around you. Head outdoors and chase them around, going up level after level and eventually find yourself at a gym where you can digitally battle other players in real space.

Dazzling doesn’t quite describe it. It is fun and imaginative, tapping into the inner kid of all of us. All the technological and intellectual discoveries over the last decades are on display. It all feels so real, all this capturing, collecting, and battling.

The industry calls it “augmented reality.” It’s a new level of gamification, not just something that happens on a screen. It reveals a layer of fantasy within the existing structure of reality itself, meaning that it brings to life the most delightful imaginings of our hearts. It helps us see what we would otherwise not see, and allows us to interact directly with the digitally existing thing.

In this way, Pokémon embodies something that we’ve all begun to intuit but haven’t been able to frame up completely. It is this: there is no longer a separation between what we once called real and what we think of as being a pure Internet fiction. The two are blending in ways that are dramatically enhancing our lives. We are to the point where we can no longer even imagine how the world even worked – and how our minds worked – before market forces blessed humanity with digital innovations.

The Great Blurring

Market-driven technology is not some invading imposition that makes people change the way they live without their permission. Instead it seeks to serve us and make our lives better; that’s its whole purpose and ethos. In the whole course of the digital revolution that began some twenty years ago, we’ve seen the gradual blurring between the physical and digital realms. What was created through code started to become just as substantial and meaningful in our lives as anything that took up physical space and we could touch.

We see this not only in games but also in health care, in finding our way around cities, in opening businesses, in driving, in dating, and in millions of life activities. Crucially, such apps are available to everyone regardless of life station. They spread capital and productivity across all classes of people, and more and more of our lives are migrating to this realm to escape the frustrating limits of physical space.

Of course the doubters have kvetched for two decades now. Old timers have screamed about how all this fascination with the Internet was causing a breakdown in human relationships, how the old-fashioned letter was so much better, why ebooks could never replace the glorious romance of physical books, how online music would kill the industry, how dating apps were killing romance, how time-killing blather on Facebook and Twitter were killing productivity, and so on.

Oh, and remember how video games were going to wreck our health by making us all sedentary? Now we have Pokémon GO players romping over hill and dale to “catch ‘em all.” As a wit on Facebook said, “Pokemon GO has done more for childhood obesity in the last 24 hours than Michelle Obama has in the past 8 years.”

Indeed, none of these fears have panned out. In fact, the opposite has proven true. The digital revolution has connected people as never before and given rise to more of what we love in life, whatever that happens to be.

Such doubters were missing something crucial. The key to the digital realm is its unrelenting adaptability to consumer preferences, thanks to the capacity of innovators to learn from the successes and failures of others. Digital innovation allows the crucial element of discovering and innovating to be crowd sourced, creating an environment of exponentially fast progress.

Market-driven technology is not some invading imposition that makes people change the way they live without their permission. Instead it seeks to serve us and make our lives better; that’s its whole purpose and ethos. Whatever it is we want to do – read, listen, play, study, create – the technology is there to make it easier and more widespread. It democratizes the tools we need to live better lives.

And what does it make possible? Whatever the human mind is capable of creating. And the element of surprise is always there. Just when we think we’ve reached an insuperable limit to the possible, something appears that surpasses that limit.

The individual human mind is not capable of outsmarting the brilliance of a market process that operates without limits.The challenge became very intense when Bitcoin came about in 2009, and the cryptocurrency gradually took on monetary properties. Economists claimed this could never happen, since money absolutely had to originate in a form of real-world scarcity of something you could hold.

I recall a conversation I was having with one skeptic on Skype who kept saying that Bitcoin can’t be money because it doesn’t exist. Frustrated, I asked him if the conversation we were having right then really existed. He said yes. I reminded him that I was not standing next to him and everything we were looking at and hearing was nothing but code.

Our conversation was purely fictional by his standards, simply because its only existence was in the digital realm. And yet it seemed to me to be actually happening. He was speechless.

The lesson here is that the individual human mind is not capable of outsmarting the brilliance of a market process that operates without limits. And within digital spaces today, we experience the closest thing we have to a free market. It is making things no one thought possible, and doing it daily, and doing it for everyone.

Overcoming Power with Humanity

Mobile apps like Pokémon GO can of course be dismissed as just another game, distractions that do not address serious life problems like race conflict and the tit-for-tat killings between police and citizens. But actually there is more going on here.

A few weeks ago, Facebook rolled out its live video functionality for all users – and keep in mind that this is free for everyone on the planet to use. When a police officer shot Philando Castile with four bullets during a routine traffic stop, his girlfriend Diamond Reynolds took out her phone and live streamed one of the most dramatic and powerful moments yet seen on the subject of police power.

It shocked the consciences of millions. Facebook was her 911. Had private enterprise not been there, the world would not have known. Now that we do, change is made more likely.

That’s the serious side of technology while Pokémon GO represents the delightful side. They work together, each making a valuable contribution to enabling a better life. What they have in common is that both are non-state solutions to crying human needs. No politician in history has ever achieved so much for the cause of human rights and human happiness.

Jeffrey Tucker

Jeffrey A. Tucker

Jeffrey Tucker is Director of Content for the Foundation for Economic Education and CLO of the startup Liberty.me. Author of five books, and many thousands of articles, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. Email

This article was originally published on FEE.org. Read the original article.

Globalization’s So-Called Winners and Losers – Article by Chelsea Follett

Globalization’s So-Called Winners and Losers – Article by Chelsea Follett

The New Renaissance HatChelsea Follett
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A recent Washington Post analysis has argued that political events as diverse as the Brexit and the rise of Donald Trump can be explained by a “revolt” of the world’s economic “losers.”

Before proceeding, it is important to keep in mind that all income groups in the world have seen gains in real income over the last few decades. That said, some have gained more than others. Between 1988 and 2008, for example, the lowest gains were made by people whose incomes fit beteen the world’s 75th to 90th income percentiles. That includes much of the middle and working class in rich countries.

The Washington Post calls the people in this group the bitter “losers” of globalization. But, are they?

follett1There are at least two problems with characterizing such people as “losers.” First, it seems to suggest that income growth rate matters more than absolute income level. Yet a person in the 80th income percentile globally would not want to trade places with or envy someone in the bottom 10th percentile, despite the latter’s much higher income growth rate.

Consider real GDP per person, adjusted for differences in purchasing power, in China and the United States. Between 1988 and 2008, China’s per person GDP grew by over 340 percent. America’s per person GDP, in contrast, grew by “only” 40 percent. China may be making gains more quickly, but it would be wrong to argue that the United States was a “loser,” for American GDP per person in 2008 was $52,704 and China’s $8,104.

chinagrowth

Poor countries are seeing faster income gains partially because their starting point is so much lower—it’s a lot easier to double per person GDP from $1,000 to $2,000 than from $40,000 to $80,000.

The second problem is that the Washington Post piece suggests that the incredible escape from poverty that has occurred in poor countries during my lifetime has come at the expense of the middle classes in the developed world. (This is a fascinating reversal of the more popular, but equally inaccurate, opinion that the Western riches came at the expense of poor countries).

Thus, the Washington Post piece claims, “global capitalism didn’t always work so well for workers in the United States and Europe even as—or, in some cases, because [emphasis mine]—it pulled hundreds of millions of people out of poverty everywhere else.”

Fortunately, prosperity is not a zero sum game.

When trying to understand the “winners” and “losers” of globalization, it is important that we do not compare income growth rates over the last few decades with some imagined ideal. Instead, we should compare income growth to what would have happened in a world without globalized trade. In such a world, hundreds of millions of people would have remained in extreme poverty. And the middle class of the developed world would also have made fewer gains. Just look at the amazing reduction in price of consumer goods that we have collected at HumanProgress.

A few individuals in select industries would benefit from protectionism, like the U.S. sugar industry does now. But on average everyone would be poorer, just as in 2013 Americans collectively paid 1.4 billion dollars more for sugar than they would have without protectionism. (The U.S. manufacturing industry, it may be worth noting, would not be among the “select industries” to benefit—most manufacturing job losses have come from mechanization rather than outsourcing, and have been offset by new jobs in other sectors).

Thanks to trade and exchange, people in all income percentiles have made real gains, and living standards for the middle class in advanced economies have soared in ways not captured by looking at income alone. America’s middle class is getting richer, and the people in the world’s 75th to 90th income percentiles are also winners.

Chelsea Follett is the Managing Editor of HumanProgress.org, a project of the Cato Institute which seeks to educate the public on the global improvements in well-being by providing free empirical data on long-term developments. Her writing has been published in the Wall Street Journal, Newsweek, and Global Policy Journal. She earned a Bachelor of Arts in Government and English from the College of William & Mary, as well as a Master of Arts degree in Foreign Affairs from the University of Virginia, where she focused on international relations and political theory.

This work by Cato Institute is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.