Immigration to the United States from 1870 to 1920 (2004) – Essay by G. Stolyarov II

July 22, 2014 Gennady Stolyarov II Comments 1 comment

G. Stolyarov II

July 21, 2014

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Note from the Author: This essay was originally written in 2004 and published in six parts on Associated Content (subsequently, Yahoo! Voices) in 2007. The essay earned over 109,000 page views on Associated Content/Yahoo! Voices, and I seek to preserve it as a valuable resource for readers, subsequent to the imminent closure of Yahoo! Voices. Therefore, this essay is being published directly on The Rational Argumentator for the first time. ***

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~ G. Stolyarov II, July 21, 2014

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An Overview of Immigration to the United States from 1870 to 1920

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From 1870 to 1920, immigrants came to America from all over the world and made irreplaceable contributions. Though frequently discriminated against, most immigrants fought through the difficult times and moved forward to build a better life for themselves. It was not an easy task, but immigrants had a drive to start anew and were determined to live the American Dream and complete the work that dream required.

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Emma Lazarus’s poem, “The New Colossus,” describes with remarkable accuracy some of the actual motives that immigrants had during the time that this poem was written to inaugurate the Statue of Liberty. Such a diverse influx of people had never occurred in US history prior to this time period. Immigrants arrived not only from northern and western European nations, such as Germany, France, and Ireland, but also from Italy, Eastern Europe, Canada, and the Far East. Their motives for seeking a new home were as varied as the places from which they had come.

Numerous immigrants were indeed “struggling to breathe free” as they faced religious and political persecution in their homelands. Jews in Russia were, for example, met with severe government-sanctioned anti-Semitism. The czar’s henchmen would often stage pogroms which destroyed what little property and security Russian Jews were allowed to have. In addition, the draft in Russia was merciless and would often take 25 years of a man’s life away to fight in fruitless wars with outdated weapons and brutal discipline. To many Jews and people in similar situations, America symbolized a place where their freedom of religion and occupation could be exercised to a greater extent than anywhere else in the world.

A large portion of immigrants originated from the rural areas of their home countries, and were especially hard-hit by agricultural troubles. Events all over the world much like potato blight in Ireland that triggered an earlier Irish mass migration led people to move away from densely populated and famine-wrecked countries to a more spacious and plentiful America. Many small farmers and craftsmen were unable to find jobs in their homelands, since their original occupations had been rendered obsolete by large-scale mechanized production while the skilled labor market was already too full for them in Europe.

In general, either the difficulties at home or the prospects in the U.S. were so immense as to compel immigrants to leave many belongings behind and expose themselves to an entirely different language and culture in the U.S. A large number did not intend for the change to be permanent; about three-tenths merely came to earn a large enough amount of money to return home in greater financial security. Yet, whatever their intent, the immigrants profoundly shaped America’s history, economy, and culture.

The Journey to America and Immigrant Processing Upon Arrival

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Many immigrants experienced journeys to the United States that were similar in numerous aspects. Conditions during the voyage and upon arrival had improved from prior eras, but were still uncomfortable and lacking in many respects.

The development of passenger vessels made the journey easier, cheaper, and faster for many immigrants. By the 1870s, steam powered ships replaced sailing ships. They were bigger, faster and safer. Immigrants in the early 1800s had to endure voyages averaging 40 days, depending on weather; by the 1900’s, the average voyage was only one week long.

In order to account for and regulate immigration, the US government established immigrant processing centers on both the East and West Coasts. 70% of the European immigrants beginning in 1855 would be dropped off at Castle Garden on Manhattan Island and pass a series of examinations. In 1892, a new immigrant center at Ellis Island was built to replace Castle Garden. On the West Coast, immigrants, mostly Chinese or Japanese, arrived through Seattle or Angel Island in San Francisco.

The increased convenience of immigration did not, however, imply a level of comfort for the immigrants anywhere near modern standards. Poor sanitation and food, as well as diseases such as cholera and typhus, were still common on the trans-Atlantic liners.

Immigrants who could only afford the minimal third-class fees of about $30 were referred to as “steerage passengers.” The name came from the part of the ship, the steerage, where they were kept and which provided the cheapest possible accommodations. It was crowded below deck, and steerage passengers were seldom allowed to go up for fresh air. The trans-Atlantic shipping companies had not yet learned to provide efficient basic services, such as food, and often fed passengers nothing but soup or stew, and sometimes bread, biscuits, or potatoes.

Many immigrants had to wash themselves with salt water while drinking stagnant water that was stored in dirty casks. At the root of these problems was a mindset on the part of many of the companies that considered the immigrants “human cargo.” These same companies would often ship American-made goods to Europe on the return trip, and could not yet see the essential distinction between transporting products and people. They would learn with time.

Even after the tough voyage, immigrants were not guaranteed entry to America. About 250,000 people (2% of all immigrants) were sent back home. 1st and 2nd class passengers were inspected on the ship, but 3rd class passengers had to go to Ellis or Angel Island for screening, waiting about three to five hours in line and undergoing inspections of both a medical and legal nature.

Officials at Ellis Island also did something that is not commonly done today. When they could not pronounce an immigrant’s name, the immigration inspectors thought that this gave them the prerogative to change the name to something less difficult. Names like “Andrjuljawierjus” might be simplified to “Andrews” or something similar.

How Immigrants Lived Upon Arriving in the United States

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From 1870 to 1920, most immigrants arriving in the United States found themselves facing current material poverty, but immense prospects for opportunity and enrichment. But how did they live in the meantime, as they endeavored to achieve the American Dream?

After arrival, immigrants spread themselves throughout the country. Most of them settled in cities, as it was easiest to find jobs there as well as locate persons of similar background or ideology to oneself and cooperate with them economically. Cities that served as the gateways to immigration also came to house many immigrants. In New York City in 1910, for example, three-fourths of the population consisted either of immigrants or children of immigrants.

For lack of abundant funds, many immigrants in large cities settled in mass tenement and apartment complexes that were affordable but often exhibited uncomfortable living conditions. Many rooms did not have windows, and were ten feet wide at most. Filth, dampness, and foul odors were common inconveniences. Yet for many immigrants, this was only a transitional stage in their lives, but still something unpleasant that left a mark on their experiences.

Many immigrants were able to persevere through initial hard times because of support and guidance from relatives. Immigrant families often served as the basic economic unit; they provided assistance to their members and pooled resources together.

The location of immigrants’ relatives would also often affect their destination. If an immigrant had an uncle or cousin in a particular neighborhood, he would be more likely to settle there himself and maintain close ties. Cooperative arrangements, such as boarding with relatives or native middle and working-class families were common transitional stages for many young immigrants.

But these useful ties did not in any way bog immigrants down in one place or one mode of life for a long time. Mobility was high: the families who inhabited a certain neighborhood were unlikely to still be there in 5 or 10 years. Though ethnic districts existed, most white immigrants lived in ethnically mixed neighborhoods, testifying to the fact that families served to spur on economic opportunity and change, rather than counteract it.

Due to productivity and prudence in saving a large portion of the money they earned, many of the new immigrants were able to quickly rise to middle-class status, and some even made vast fortunes during their lifetimes. While they endured initially unpleasant conditions, these immigrants ultimately saw such circumstances as stepping stones toward a better life than they could get anywhere else in the world.

Immigrant Contributions to American Life and Culture

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Immigration from 1870 to 1920 brought to the United States a vast quantity of both ordinary and extraordinary people: individuals who, through their search for greater opportunity and prosperity, dramatically altered and improved American life and culture.

Samuel Gompers, an immigrant from England, was head of the American Federation of Labor beginning in 1886. He advocated moderate labor reforms but was a staunch opponent of socialism and coercive action on the part of unions. His memoirs give an account of his own life and experiences as an immigrant.

Ironically, however, Gompers himself came to oppose the mass wave of immigration, which he perceived to threaten the workers of his union. Many of the nativist arguments that advocated restricting foreign immigration had come from him and his associates, despite the obvious double standard that this implied.

On the opposite side of the immigration debate was an immigrant from Germany, political cartoonist Thomas Nast. His cartoons in the magazine Harper’s Weekly ridiculed nativist sentiments and advocated fair treatment and equal rights for new arrivals to the country.

Some of the most famous and lasting contributions to American culture have been made by brilliant immigrants like the composer Irving Berlin from Russia. Two of his most famous hits were “God Bless America” and “White Christmas.”

During the first decade of the twentieth century, Frank Capra came to America from Italy as a little boy. He would grow up to be a six-time Oscar-winning director who would produce some of the best-known films of the 1930s, including “It’s a Wonderful Life” and “Mr. Smith Goes to Washington.”

It is important to keep in mind that, were it not for these individual immigrant innovators, American culture would not have attained some of its distinct elements. Rather than “invading” the American way of life, immigrants, in all spheres of activity, brought about great progress.

Though some immigrants were great creators and innovators, over half identified themselves as unskilled laborers or domestic workers upon arrival. They still had a role to play in the US economy.

Jobs were plentiful, and, especially in a society where living standards rose across the board, there were many jobs for which most natives were overqualified. Those jobs could be taken by immigrant workers, saving businesses money on wages while still giving those workers five or ten times what they would have received in their home countries.

Work in dry-cleaning stores, newsstands, grocery stores, and machine shops, attracted many new arrivals and served as a first step on their upward economic journey. So great was the need for people to operate these jobs, that many of the sparsely populated states actively worked to promote immigration by offering newcomers guaranteed jobs and land grants.

Immigrant Contributions to American Prosperity and Unjust Persecution of Immigrants by Nativists

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Immigrants from 1870 to 1920 made possible America’s economic growth and rise to prominence as a global power. Yet these newcomers also faced unjust persecution from nativists who sought the aid of government to stifle further immigration.

During the past two centuries, small businesses comprised over three-fourths of America’s economy. Small businesses were a sector most crucial and unique to America, as, with scant initial capital, any intelligent man with a profitable idea could quickly rise to financial security.

The small-business field was, without exaggeration, dominated by immigrants. In every U.S. census from 1880 onward, immigrants accounted for a greater percentage of small business owners than natives. These businesses greatly expanded the country’s productivity and job openings, creating jobs for immigrants and natives alike.

Moreover, immigration fueled industrialization. In 1910, foreign-born persons comprised about 53% of the national industrial labor force. So not only did immigrants carry the small business field; they played an indispensable role in large industries as well. One can say with certainty that America would not have reached the status of a global economic power in those days were it not for the contributions of immigrants.

Despite these overt contributions to American prosperity, immigrants encountered a great deal of political regulation and outright opposition from nativist groups allied with the legislature.

Not all legislation discouraged immigration; earlier bills, such as the Homestead Act of 1862 helped attract newcomers by promising anyone who would develop a plot of land in the West for five years ownership of that land. Many Europeans took advantage of this opportunity.

But on the Pacific coast, Chinese immigrants did not fare so well. Bigoted sentiments and laws that began during the Gold Rush era culminated in the Chinese Exclusion Act of 1882, wherein Chinese immigration was forbidden for ten years. This law would be renewed and rendered permanent in the twentieth century and would last until 1943. In 1890, the Federal Government assumed control of immigration, implying that it would be easier to establish nationwide controls for immigration and enforce any initiative that would restrict the inward flow of people.

A slight gain for immigrants, especially those of Asian descent, was the Supreme Court decision of United States v. Wong Kim Ark, in 1898. The Supreme Court ruled that children born in America of Asian parents must be granted citizenship. Denying this citizenship would violate the 14th Amendment clause that classified all persons born on American soil as citizens and would jeopardize the rights of native-born whites with immigrant parents.

The court realized that discriminating against some immigrants could easily be extrapolated to discrimination against large portions of the American population, and that immigrants and America were inseparably linked.

Yet the nativists who controlled the other two branches of the US government continued to push their exclusionist schemes. The Literacy Act of 1917 required arrivals to be literate in some language, therefore cutting off the flow of many of the unskilled and uneducated workers that would have otherwise taken the jobs that no one else wanted.

The death blow to immigration came in 1924, when the National Origins Act set a quota of 150,000 total immigrants per year, disproportionately distributed to England and Northern Europe, with few slots allotted to southern and Eastern Europe and none for Asians. The act ended mass immigration into the U.S. until its repeal in 1965.

Nativist Xenophobia and Persecution of Immigrants

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Immigrants to the United States from 1870 to 1920 were not always welcomed. Many faced unjust and even violent persecution from well-connected nativist groups, who often acted out of nothing more than ignorance and prejudice.

No one expressed and condemned the irrationality of the xenophobia exhibited by the nativist groups against immigrants more vividly than Thomas Nast. His cartoon, ironically titled, “Pacific Chivalry: Encouragement to Chinese Immigration,” portrays Nast’s response to some of the most extreme forms of racism and nativism in the country at the time.

You see a California native whipping and pulling the hair of a defenseless Chinese immigrant. In the inscription in the background, you can barely see written some of the things that aid the abuser in his cruelty. The inscription reads: “Courts of justice closed to Chinese; extra taxes to Yellowjack.”

What does this cartoon suggest about the means that Chinese and many other immigrants had to resist invasions of their rights and dignity? They had just about no means whatsoever. Nast recognized that many of these productive and peace-loving individuals were barred from resisting their inferior condition by small, well-organized activist groups connected with the legislature and prepared to use all means necessary, from the law to vigilante violence, to damage the immigrants. The American people were not opposed to immigration, but many powerful and well-connected elites of the time were.

Indeed, the xenophobia against immigrants sometimes reached horrific extremes. There was substantial discrimination against the Chinese in terms of wages and employment conditions in the West, but this passage by historian John Higham refers to some of the more brutal attacks on their freedoms.

“No variety of anti-European sentiment has ever approached the violent extremes to which anti-Chinese agitation went in the 1870s and 1880s. Lynching, boycotts, and mass expulsions…harassed the Chinese.” (Higham 1963)

Of course, in order to make these actions seem more tolerable in their eyes, nativists tried to justify them by conceiving of Asian immigrants as inferior beings. They could back down somewhat and grant some degree of equality to foreign whites, but this would enable them to play a powerful race card which contained some vicious stereotypes. Anti-immigrant stereotypes were spread by many labor unionists, especially Samuel Gompers, who wrote that “both the intelligence and the prosperity of our working people are endangered by the present immigration. Cheap labor… ignorant labor…takes our jobs and cuts our wages.”

There are numerous fallacies in Gompers’s claims. Immigration creates jobs rather than destroying them. Immigrants did not steal jobs, but rather took work that few natives wanted. Half of immigrants were indeed unskilled, but the other half consisted of people just as, if not more than, educated and innovative than the native population. Indeed, without immigrants, American economic prosperity would have been cut by more than half.

It seems, however, that some debates in American history linger on for centuries. The immigration debate is one of them. Currently, as immigration restrictions in the past thirty years have been laxer than previously, we are experiencing a new massive influx of foreigners into this country. The benefits that these immigrants bring are even more obvious today than ever, but the nativists are still around to attempt to impose stricter quotas and border-control measures. They are often still guided by the same fallacious arguments about immigrants stealing jobs or polluting the country’s culture.

Novelist Stephen Vincent Benet offered a powerful response to nativism, relevant both during his time and today: “Remember that when you say, ‘I will have none of this exile and this stranger for his face is not like my face and his speech is strange,’ you have denied America with that word.”

Sources:

http://web.uccs.edu/~history/fall2000websites/hist153/immigrants.htm
http://www.bedfordstmartins.com/historymodules/modules/mod20/main.htm
http://immigrants.harpweek.com/
http://nimbus.mysticseaport.org/voyages/immigration-0.html
http://www.h-net.org/~shgape/bibs/immig.html
http://memory.loc.gov/learn/educators/workshop/european/wimmlink.html
http://dewey.chs.chico.k12.ca.us/bridging.html
http://www.edc.org/CCT/NDL/1998/institute/stan/immlinks.html
http://www.kn.pacbell.com/wired/fil/pages/listimmigratli.html
http://www.bcps.org/offices/lis/models/immigration/resources.html
http://www.pbs.org/newamericans/6.0/html/amimm_pp403.html
http://www.ailf.org/pubed/pe_celeb_historical.asp
http://www.bergen.org/AAST/Projects/Immigration/
http://memory.loc.gov/ammem/ndlpedu/features/timeline/riseind/immgnts/immgrnts.html
http://www.internationalchannel.com/education/ellis/process.html
http://memory.loc.gov/ammem/ndlpedu/features/immig/native_american3.html
http://mi.essortment.com/postcivilwarr_rrid.htm
http://dig.lib.niu.edu/civilwar/settlement.html
http://www.civilwarhome.com/irish.htm
http://www.marist.edu/summerscholars/97/modimm.htm
http://memory.loc.gov/learn/features/timeline/progress/immigrnt/immigrnt.html
http://memory.loc.gov/learn/features/timeline/riseind/immgnts/immgrnts.html
http://internet.ggu.edu/university_library/histimmi.html
http://www.historychannel.com/ellisisland/index2.html
http://www.archives.gov/publications/prologue/fall_2000_us_canada_immigration_records_1.html

The Single Bullet That Killed 16 Million – Article by Edward Hudgins

June 27, 2014 Edward Hudgins Comments 0 Comment

Edward Hudgins

June 27, 2014

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A century ago, on June 28, 1914, Serbian nationalist Gavrilo Princip shot and killed Archduke Franz Ferdinand, heir to the emperorship of Austria-Hungary, along with his wife, on their visit to Sarajevo.

Gavrilo Pirincip fires on the Archduke and Archduchess, June 28, 1914

World War I led to 16 million military and civilian deaths, plus nearly 20 million wounded. And the misery and horror of that war resulted in another casualty: confidence in the Enlightenment enterprise and human progress.

Enlightenment Europe

In the late seventeenth century Isaac Newton’s discovery of the laws of universal gravitation dramatically demonstrated the power of the human mind. Understanding of the world and the universe—what we call modern science—became a central Enlightenment goal.

At the same time, the struggle for Parliamentary supremacy in England led John Locke to pen his powerful treatise on individual liberty. Creating governments limited to protecting life, liberty, and the pursuit of happiness also became a central Enlightenment goal, which culminated in the creation of United States.

Enlightenment values were not limited to Britain or America. They were universal and created a European-wide culture of individualism, freedom, and reason.

Collectivist anti-Enlightenment

But Enlightenment thinkers and activists not only had to fight entrenched oligarchs and rigid religious dogma. Starting with Jean-Jacques Rousseau, a school of thought—if thought it could be called—arose that opposed individualism with the good of “society,” or the group, and rejected reason in favor of emotion and instinct.

The French Revolution starting in 1789 saw Enlightenment ideas losing ground to reactionary and collectivist forces. The result was the Terror and the guillotine, dictatorship and a new monarchy, and the carnage of the Napoleonic wars–the first great modern global conflict, which ended in 1815 at Waterloo.

In the century that followed Europe suffered only short regional conflicts, most relating to the unification of Italy and of Germany. The Industrial Revolution was creating prosperity. Governments were granting citizens rights to political participation and were recognizing their civil liberties. By the early twentieth century, continued progress seemed inevitable.

Pernicious nationalism

But the pernicious collectivist ideology combined with a major European cultural defect: nationalism. This form of collectivism meant more than just an appreciation for the aesthetic achievements—art, music, literature—of the individuals in one’s ethnic group. It meant putting one’s group or one’s country, right or wrong, ahead of universal values and principles. Kill for King or Kaiser!

There’s an irony in the fact that poor Franz Ferdinand wanted to recreate Austria-Hungary as a federation in which the minority groups—that were always either dominated by Viennese elites or at one another’s throats—would have autonomy similar to that enjoyed by the American states. If only Princip had waited a while.

Unfortunately, the volatile combination of nationalism, an interlocking treaty system, and the Britain-Germany imperial rivalry only required a spark like the Sarajevo assassination to set off a global conflagration.

Collectivism vs. collectivism

After World War I, individualism and “selfishness” got much of the blame for the conflict. And science was no longer associated only with progress. It had created machine guns, tanks, and poison gas, and made possible a fearful slaughter.

Idealists created the League of Nations to prevent such wars in the future. But they tried to cure the problem of nationalism with more nationalism, simply accentuating the problem. Indeed, Hitler used the principle of self-determination of peoples as an excuse to unify all Germans into one Reich by force. His form of collectivism also entailed enslaving and wiping out “inferior” races.

The catastrophe of World War II was followed by a Cold War, which saw the Soviet Union asserting another form of collectivism, pitting one economic “class” against another. Western Europe opposed the brutal Soviet kill-the-rich socialism with a kinder, gentler, loot-the-rich democratic socialism. The Soviet Union with its communist empire collapsed in 1991, and Western European democratic socialism is going through a similar disintegration in slow motion.

Still recovering from the Great War

Today, Enlightenment values are making a comeback. The communications and information revolutions, and the application of new technologies in medicine, transportation, and other fields, again demonstrate the power of the human mind and the benefits it confers.

Furthermore, many of the new entrepreneurs understand that it is they as individual visionaries who are transforming the world. And while their achievements benefit everyone, they strive because they love their work and they love to achieve. They pursue happiness. They hold Enlightenment values—though in many cases their politics still need to catch up.

The world is still digging out from the consequences of that single bullet a century ago, which led to the deaths of millions. Putting our country and the world back on the path to liberty and prosperity will require a recommitment to the Enlightenment values that created all the best in the modern world.

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Dr. Edward Hudgins directs advocacy and is a senior scholar for The Atlas Society, the center for Objectivism in Washington, D.C.

Copyright, The Atlas Society. For more information, please visit www.atlassociety.org.

Heterogeneity: A Capital Idea! – Article by Sanford Ikeda

June 26, 2014 Sanford Ikeda Comments 0 Comment

Sanford Ikeda

June 26, 2014

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When Thomas Piketty’s Capital in the 21st Century was released in English earlier this year it sparked vigorous debate on the issue of wealth inequality. Despite the prominence of the word in the title, however, capital has not itself become a hot topic. Apparently none of his defenders have taken the opportunity to explore capital theory, and, with a few exceptions, neither have his critics.

To prepare to read Mr. Piketty’s book I’ve been studying Ludwig Lachmann’s Capital and Its Structure, which, along with Israel M. Kirzner’s Essay on Capital, is among the clearest expositions of Austrian capital theory around. A hundred years ago the “Austrian economists”—i.e. scholars such as Eugen von Böhm-Bawerk who worked in the tradition of Carl Menger—were renowned for their contributions to the theory of capital. Today capital theory is still an essential part of modern Austrian economics, but few others delve into its complexities. Why bother?

Capital is Heterogeneous

Among the Austrians, Böhm-Bawerk viewed capital as “produced means of production” and for Ludwig von Mises “capital goods are intermediary steps on the way toward a definite goal.” (Israel Kirzner uses the metaphor of a “half-baked cake.”) Lachmann then places capital goods in the context of a person’s plan: “production plans are the primary object of the theory of capital.” You can combine capital goods in only a limited number of ways within a particular plan. Capital goods then aren’t perfect substitutes for one another. Capital is heterogeneous.

Now, mainstream economics treats capital as a homogenous glob. For instance, both micro- and macroeconomists typically assume Output (Q) is a mathematical function of several factor inputs, e.g. Labor (L) and Capital (K) or

Q = f(L,K).

In this function, not only is output homogenous (whether we’re talking about ball-bearings produced by one firm or all the goods produced by all firms in an economy) but so are all labor inputs and all capital inputs used to produce them. In particular, any capital good can substitute perfectly for any other capital good in a firm or across all firms. A hammer can perfectly replace, say, a helicopter or even a harbor.

On the other hand, capital heterogeneity implies several things.

First, according to Mises, heterogeneity means that, “All capital goods have a more or less specific character.” A capital good can’t be used for just any purpose: A hammer generally can’t be used as a harbor. Second, to make a capital good productive a person needs to combine it with other capital goods in ways that are complementary within her plan: Hammers and harbors could be used together to help repair a boat. And third, heterogeneity means that capital goods have no common unit of measurement, which poses a problem if you want to add up how much capital you have: One tractor plus two computers plus three nails doesn’t give you “six units” of capital.

Isn’t “money capital” homogeneous? The monetary equivalent of one’s stock of capital, say $50,000, may be useful for accounting purposes, but that sum isn’t itself a combination of capital goods in a production process. If you want to buy $50,000 worth of capital you don’t go to the store and order “Six units of capital please!” Instead, you buy specific units of capital according to your business plan.

At first blush it might seem that labor is also heterogeneous. After all, you can’t substitute a chemical engineer for a pediatrician, can you? But in economics we differentiate between pure “labor” from the specific skills and know-how a person possesses. Take those away—what we call “human capital”—and then indeed one unit of labor could substitute for any other. The same goes for other inputs such as land. What prevents an input from substituting for another, other than distance in time and space, is precisely its capital character.

One more thing. We’re talking about the subjective not the objective properties of a capital good. That is, what makes an object a hammer and not something else is the use to which you put it. That means that physical heterogeneity is not the point, but rather heterogeneity in use. As Lachmann puts it, “Even in a building which consisted of stones completely alike these stones would have different functions.” Some stones serve as wall elements, others as foundation, etc. By the same token, physically dissimilar capital goods might be substitutes for each other. A chair might sometimes also make a good stepladder.

But, again, what practical difference does it make whether we treat capital as heterogeneous or homogenous? Here, briefly, are a few consequences.

Investment Capital and Income Flows

When economists talk about “returns to capital” they often do so as if income “flows” automatically from an investment in capital goods. As Lachmann says:

In most of the theories currently in fashion economic progress is apparently regarded as the automatic outcome of capital investment, “autonomous” or otherwise. Perhaps we should not be surprised at this fact: mechanistic theories are bound to produce results that look automatic.

But if capital goods are heterogeneous, then whether or not you earn an income from them depends crucially on what kinds of capital goods you buy and exactly how you combine them, and in turn how that combination has to complement the combinations that others have put together. You build an office-cleaning business in the hopes that someone else has built an office to clean.

There’s nothing automatic about it; error is always a possibility. Which brings up another implication.

Entrepreneurship

Lachmann:

We are living in a world of unexpected change; hence capital combinations, and with them the capital structure, will be ever changing, will be dissolved and re-formed. In this activity we find the real function of the entrepreneur.

We don’t invest blindly. We combine capital goods using, among other things, the prices of inputs and outputs that we note from the past and the prices of those things we expect to see in the future. Again, it’s not automatic. It takes entrepreneurship, including awareness and vision. But in the real world—a world very different from the models of too many economists—unexpected change happens. And when it happens the entrepreneur has to adjust appropriately, otherwise the usefulness of her capital combinations evaporates. But that’s the strength of the market process.

A progressive economy is not an economy in which no capital is ever lost, but an economy which can afford to lose capital because the productive opportunities revealed by the loss are vigorously exploited.

In a dynamic economy, entrepreneurs are able to recombine capital goods to create value faster than it disappears.

Stimulus Spending

As the economist Roger Garrison notes, Keynes’s macroeconomics is based on labor, not capital. And when capital does enter his analysis Keynes regarded it the same way as mainstream economics: as a homogeneous glob.

Thus modern Keynesians, such as Paul Krugman, want to cure recessions by government “stimulus” spending, without much or any regard to what it is spent on, whether hammers or harbors. (Here is just one example.) But the solution to a recession is not to indiscriminately increase overall spending. The solution is to enable people to use their local knowledge to invest in capital goods that complement existing capital combinations, within what Lachmann calls the capital structure, in a way that will satisfy actual demand. (That is why economist Robert Higgs emphasizes “real net private business investment” as an important indicator of economic activity.) The government doesn’t know what those combinations are, only local entrepreneurs know, but its spending patterns certainly can and do prevent the right capital structures from emerging.

Finally, no one can usefully analyze the real world without abstracting from it. It’s a necessary tradeoff. For some purposes smoothing the heterogeneity out of capital may be helpful. Too often though the cost is just too high.

Sanford Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.

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This article was originally published by The Foundation for Economic Education.

“Exploring Capitalist Fiction” – Allen Mendenhall Interviews Edward W. Younkins

February 16, 2014 Allen Mendenhall and Edward W. Younkins Comments 0 Comment

Allen Mendenhall and Edward W. Younkins

February 16, 2014

Recommend this page.

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This interview is reprinted with permission from Allen Mendenhall’s blog.

Read Mr. Stolyarov’s review of Dr. Younkins’s book, Exploring Capitalist Fiction.

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AM: Thank you for taking the time to do this interview. I’d like to start by asking why you chose to write Exploring Capitalist Fiction. Was there a void you were seeking to fill?

EY: The origins of this book go back to the Spring of 1992 when I began teaching a course called Business Through Literature in Wheeling Jesuit University’s MBA program. Exploring Capitalist Fiction is heavily based on my lectures and notes on the novels, plays, and films used in this popular course over the years and on what I have learned from my students in class discussions and in their papers.

The idea to write this book originated a few years ago when one of Wheeling Jesuit University’s MBA graduates, who had taken and enjoyed the Business Through Literature course, proposed that I write a book based on the novels, plays, and films covered in that course. I agreed as I concluded that the subject matter was important and bookworthy and that the book would be fun for me to write and for others to read. I went on to select twenty-five works to include in the book out of the more than eighty different ones that had been used in my course over the years. I have endeavored to select the ones that have been the most influential, are the most relevant, and are the most interesting. In a few instances, I have chosen works that I believe to be undervalued treasures.

I was not intentionally trying to fill a void as there are a number of similar books by fine authors such as Joseph A. Badaracco, Robert A. Brawer, Robert Coles, Emily Stipes Watts, and Oliver F. Williams, among others. Of course, I did see my evenhanded study of business and capitalism in literature as a nice complement and supplement to these works.

AM: I assume that you’ll use this book to teach your own courses, and I suspect other teachers will also use the book in their courses. Anyone who reads the book will quickly understand the reason you believe that imaginative literature and film have pedagogical value in business courses, but would you mind stating some of those reasons for the benefit of those who haven’t read the book yet?

EY: The underpinning premise of this book and of my course is that fiction, including novels, plays, and films, can be a powerful force to educate students and employees in ways that lectures, textbooks, articles, case studies, and other traditional teaching approaches cannot. Works of fiction can address a range of issues and topics, provide detailed real-life descriptions of the organizational contexts in which workers find themselves, and tell interesting, engaging, and memorable stories that are richer and more likely to stay with the reader or viewer longer than lectures and other teaching approaches. Imaginative literature can enrich business teaching materials and provide an excellent supplement to the theories, concepts, and issues that students experience in their business courses. Reading novels and plays and watching films are excellent ways to develop critical thinking, to learn about character, and to instill moral values. It is likely that people who read business novels and plays and watch movies about business will continue to search for more of them as sources of entertainment, inspiration, and education.

AM: Who are the intended audiences for your new book?

EY: My target audiences include college students, business teachers, general readers, and people employed in the business world. My summaries and analyses of twenty-five works are intended to create the feel of what it is like to work in business. The premise of the book is that fiction can provide a powerful teaching tool to sensitize business students without business experiences and to educate and train managers in real businesses. Studying fictions of business can provide insights to often inexperienced business students and new employees with respect to real-life situations.

In each of my 25 chapters I provide a sequential summary of the fictional work, interspersed with some commentary that highlights the managerial, economic, and philosophical implications of the ideas found in the work. My emphasis is on the business applications of the lessons of particular novels, plays, and films. This book highlights the lessons that an individual can take from each work and apply to his or her own life. It is not literary analysis for its own sake.

I do not delve deeply into these novels, plays, and films in order to identify previously-covered and previously-uncovered themes in existing scholarship. My book is essentially a study guide for people interested in becoming familiar with the major relevant themes in significant works of literature and film. The book can also serve as a guide for professors who desire to expand their teaching approaches beyond the traditional ones employed in schools of business.

Of course, literary scholars can use my book as a starting point, catalyst, or reference work for their own in-depth scholarly studies of these and other works. For example, I can envision a number of scholars, from a variety of viewpoints, contributing essays to book collections devoted to different literary works. One possible collection that readily comes to mind would be devoted to David Mamet’s Glengarry Glen Ross. Other candidates for potential collections might include Howell’s The Rise of Silas Lapham, Norris’s The Octopus, Dreiser’s The Financer, Cahan’s The Rise of David Levinsky, Lewis’s Babbitt, Miller’s Death of a Salesman, Hawley’s Executive Suite, Lodge’s Nice Work, Sterner’s Other People’s Money, among others. It would be great if some of the contributing literary scholars to these volumes would come from pro-business, pro-capitalist thinkers such as Paul Cantor, Stephen Cox, Ryan McMaken, Sarah Skwire, Amy Willis, Michelle Vachris, and yourself. As you know most literary critics are from the left. Those mentioned above celebrate individualism and freedom in place of collectivism and determinism.

AM: What can be learned from business fiction?

EY: Fiction can be used to teach, explicate, and illustrate a wide range of business issues and concepts. Many fictional works address human problems in business such as managing interpersonal conflict and office politics; using different styles of management; the potential loss of one’s individuality as a person tends to become an “organization man”; the stultifying effect of routine in business; the difficulty in balancing work life and home life; hiring and keeping virtuous employees; maintaining one’s personal integrity while satisfying the company’s demands for loyalty, conformity and adaptation to the firm’s culture; communication problems a business may experience; fundamental moral dilemmas; depersonalization and mechanization of human relationships; and so on. Fictional works tend to describe human behavior and motivations more eloquently, powerfully, and engagingly than texts, articles, or cases typically do. Literary authors and filmmakers are likely to develop and present ideas through individual characters. They depict human insights and interests from the perspective of individuals within an organizational setting. Reading imaginative literature and watching films are excellent ways to develop critical thinking and to learn about values and character.

Many novels, plays, and films are concerned with the actual operation of the business system. Some deal directly with business problems such as government regulation, cost control, new product development, labor relations, environmental pollution, health and safety, plant openings and closings, tactics used and selection of takeover targets, structuring financial transactions, succession planning, strategic planning, the creation of mission statements, the company’s role in the community, social responsibility, etc. Assessing fictional situations makes a person more thoughtful, better prepared for situations, and better able to predict the consequences of alternative actions. Fiction can address both matters of morality and practical issues. There are many fine selections in literature and film which prompt readers to wrestle with business situations.

Older novels, plays, and films can supply information on the history of a subject or topic. They can act as historical references for actual past instances and can help students to understand the reasons for successes and failures of the past. Older literature can provide a good history lesson and can help people to understand the development of our various businesses and industries. These stories can be inspiring and motivational and can demonstrate how various organizations and managers were able to overcome obstacles, adapt, and survive. Fictional works are cultural artifacts from different time periods that can be valuable when discussing the history of business. Many fictional works present history in a form that is more interesting than when one just reads history books.

Imaginative literature reflects a variety of cultural, social, ethical, political, economic, and philosophical perspectives that have been found in American society. Various images of businessmen have appeared in fictional works. These include the businessman as Scrooge-like miser, confidence man, robber baron, hero, superman, technocrat, organization man, small businessman, buffoon, rugged individualist, corporate capitalist, financial capitalist, man of integrity, etc.

AM: How will your teaching approach change in your Business Through Literature course now that you have published your own book on the subject?

EY: In the past students in this course have read, analyzed, and discussed novels, plays, and films. Each student prepared a minimum of 6 short papers (2000 words each) on the assigned works. Grades were based on these papers and class discussions.

I am experimenting this semester using my book in the class for the first time. I am requiring each student to take notes on each chapter of the book to help them in bringing up topics for class discussion and in participating in class discussions. Each student is also required to prepare and turn in three essay questions on each chapter. These are turned in before each relevant class. Grades for the class are based on class participation and two essay tests.

AM: Isn’t the reverse also true that literature students ought to study economics or at least gain an understanding of business from something besides imaginative literature and film, which tend not to portray capitalists in a favorable light?

EY: It would definitely be beneficial for literature students to study classes in business areas such as management, marketing, accounting, and finance. It would help them somewhat if they took a course or two in economics. Unfortunately, almost all college-level economics courses are based on Keynesian economics. I would encourage anyone who takes such courses to read and study Austrian economics in order to gain a more realistic perspective.

AM: You’ve written a great deal about Ayn Rand, and the chapter on Atlas Shrugged is the longest one in your book. Rand can be a divisive figure, even, perhaps especially, among what you might call “libertarians” or “free marketers” or “capitalists” and the like. But even the people in those categories who reject Objectivism tend to praise Rand’s novels. What do you make of that, and do you think there’s a lesson there about the novel as a medium for transmitting philosophy?

EY: I suspect that there are a lot of people like me who value “novels of ideas.” There have been many good philosophical novels but none have been as brilliantly integrated and unified as Atlas Shrugged. Rand characterizes grand themes and presents an entire and integrated view of how a man should live his life. Rand’s great power comes from her ability to unify everything in the novel to form an integrated whole. The theme and the plot are inextricably integrated. Rand is a superb practitioner of synthesis and unity whose literary style and subject are organically linked and fused to the content of her philosophy. She unifies the many aspects of Atlas Shrugged according to the principles of reality. People from the various schools of “free-market” thought are in accord in promoting an appropriate reality-based social system in which each person is free to strive for his personal flourishing and happiness.

AM: I want to ask about Henry Hazlitt’s Time Will Run Back, the subject of chapter twelve of your book. Why do you think this book has not received much attention? It has been, I’d venture to say, all but forgotten or overlooked by even the most ardent fans of Hazlitt. Is the book lacking something, or are there other factors at play here?

EY: Hazlitt’s novel may not be “literary” enough for many people. However, in my opinion, the author does skillfully use fiction to illustrate his teachings on economics. I think that the book also has a good story line. Economics professors tend to shy away from using it in their classes. Some may be so quantitatively oriented that they cannot envision using a novel to teach economics. Others may perceive the Austrian economics principles found in Time Will Run Back to not fit in with the Keynesian economics principles found in most textbooks (and of course they are right).

AM: Thank you again for doing this interview. All the best in 2014.

Edward W. Younkins. Exploring Capitalist Fiction: Business Through Literature and Film. Lanham, Maryland: Lexington Books, 2014.

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Dr. Edward W. Younkins is Professor of Accountancy at Wheeling Jesuit University. He is the author of Capitalism and Commerce: Conceptual Foundations of Free Enterprise [Lexington Books, 2002], Philosophers of Capitalism: Menger, Mises, Rand, and Beyond [Lexington Books, 2005] (See Mr. Stolyarov’s review of this book.), and Flourishing and Happiness in a Free Society: Toward a Synthesis of Aristotelianism, Austrian Economics, and Ayn Rand’s Objectivism [Rowman & Littlefield Pub Incorporated, 2011] (See Mr. Stolyarov’s review of this book.). Many of Dr. Younkins’s essays can be found online at his web page at www.quebecoislibre.org. You can contact Dr. Younkins at younkins@wju.edu.

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Allen Mendenhall is a writer, attorney, editor, speaker, and literary critic. As of January 2013, he is a staff attorney for Chief Justice Roy S. Moore of the Supreme Court of Alabama. He holds a B.A. in English from Furman University, M.A. in English from West Virginia University, J.D. from West Virginia University College of Law, and LL.M. in transnational law from Temple University Beasley School of Law. He is a Ph.D. candidate at Auburn University, where he received a Graduate Dean Fellowship. He is managing editor of the Southern Literary Review and has been an adjunct legal associate at the Cato Institute as well as a Humane Studies Fellow with the Institute for Humane Studies in Arlington, Virginia. He is a member of The Philadelphia Society and an associate of The Abbeville Institute and soon will serve as an ambassador for the Foundation for Economic Education (FEE).

He has studied at the University of London (Birkbeck College), the Shakespeare Institute of the University of Birmingham, Centro Universitario Vila Velha, Fundacao Getulio Vargas (Direito Rio), and the Tokyo campus of Temple University Beasley School of Law.

He is the author of over 100 publications in such outlets as law reviews, peer-reviewed journals, magazines, newspapers, literary journals and periodicals, and encyclopedias. He lives in Auburn, Alabama, with his wife, Giuliana, and son, Noah, and blogs at The Literary Lawyer, The Literary Table, Austrian Economics and Literature, and TheMendenhall.

Majoritarian Processes versus Open Playing Fields – Video by G. Stolyarov II

February 11, 2014 Gennady Stolyarov II Comments 0 Comment

Putting innovation to a vote is never a good idea. Consider the breakthroughs that have improved our lives the most during the 20th and early 21st centuries. Did anyone vote for or ordain the creation of desktop PCs, the Internet, smartphones, or tablet computers?

All major improvements to our lives come from these open playing fields.

References
– “Putting Innovation to a Vote? Majoritarian Processes versus Open Playing Fields” – Essay by G. Stolyarov II
– “Satoshi Nakamoto” – Wikipedia
– The Seasteading Institute

Machines vs. Jobs: This Time, It’s Personal – Article by Bradley Doucet

February 5, 2014 Bradley Doucet Comments 0 Comment

Bradley Doucet

February 5, 2014

Recommend this page.

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For much of human history, the vast majority of people worked in agriculture. Today, thanks to the Industrial Revolution, that has fallen to about 2% of the population in wealthy countries. But all of us whose ancestors used to produce food have not just been joining the ranks of the unemployed for the past couple hundred years. We’ve been working at other jobs, in many cases doing things our grandparents’ grandparents could not imagine. Luddites were wrong to worry back then, but is it different this time?

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MIT professor Erik Brynjolfsson, co-author of The Second Machine Age, thinks it is different this time, but he is qualifiedly optimistic nonetheless. During an hour-long EconTalk with Russ Roberts, he points out that the first wave of machines replaced human muscle, to which we responded by shifting to more cognitive tasks. The second wave, however, is automating cognitive work, which scares people. If machines have both muscles and brains, how can we compete? Are we staring down mass unemployment in the coming decades?

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For Brynjolfsson, the fear itself is a big part of the problem, pushing us to do counter-productive things like “trying to preserve the past at the expense of the future.” He argues that we can’t stop technology, and actually, we shouldn’t try. “What we need to do is embrace the dynamism that helps us adapt to that. The more we do to try to slow down change, I think the more stagnant we become and the worse off we become.”

So how can we best embrace change? Two things Brynjolfsson mentions are education and entrepreneurship. Regarding the former, he argues not only that we need to become more educated, as the future jobs that have yet to be invented will likely require a more educated workforce, but also that education itself needs to be reimagined to take advantage of new technology instead of carrying on lecturing small groups as we have done for millennia. And how exactly we should do that is, like so much else, up to entrepreneurs. We need to make entrepreneurship easier in a number of ways so that millions of new ideas can be constantly battling it out in the marketplace. “A lot of them are going to be really dumb and they are going to fail,” says Brynjolfsson. But some of them are going to be revolutionary, creating jobs we haven’t even dreamed of yet that allow us to work with the machines instead of trying to compete with them.

And yes, we will probably end up working less, just as we now work fewer hours than we did two hundred years ago. But we will work less to produce more, with many goods and services—think Wikipedia—becoming free or almost free. We already get on the order of $300 billion a year in free stuff from the Internet. As long as we embrace the future and focus on being as adaptable as we can, there’s no reason to fear that the increased wealth of tomorrow cannot be widely shared.

Bradley Doucet is Le Québécois Libre‘s English Editor and the author of the blog Spark This: Musings on Reason, Liberty, and Joy. A writer living in Montreal, he has studied philosophy and economics, and is currently completing a novel on the pursuit of happiness. He also writes for The New Individualist, an Objectivist magazine published by The Atlas Society, and sings.

Putting Innovation to a Vote? Majoritarian Processes versus Open Playing Fields – Article by G. Stolyarov II

February 5, 2014 Gennady Stolyarov II Comments 1 comment

G. Stolyarov II

February 4, 2014

Recommend this page.

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Putting innovation to a vote is never a good idea. Consider the breakthroughs that have improved our lives the most during the 20^th and early 21^st centuries. Did anyone vote for or ordain the creation of desktop PCs, the Internet, smartphones, or tablet computers? No: that plethora of technological treasures was made available by individuals who perceived possibilities unknown to the majority, and who devoted their time, energy, and resources toward making those possibilities real. The electronic technologies which were unavailable to even the richest, most powerful men of the early 20^th century now open up hitherto unimaginable possibilities even to children of poor families in Sub-Saharan Africa.

On the other hand, attempts to innovate through majority decisions, either by lawmakers or by the people directly, have failed to yield fruit. Although virtually everyone would consider education, healthcare, and defense to be important, fundamental objectives, the goals of universal cultivation of learning, universal access to healthcare, and universal security against crime and aggression have not been fulfilled, in spite of massive, protracted, and expensive initiatives throughout the Western world to achieve them. While it is easy even for people of little means to experience any art, music, literature, films, and games they desire, it can be extremely difficult for even a person of ample means to receive the effective medical care, high-quality formal education, and assurance of safety from both criminals and police brutality that virtually anyone would desire.

Why is it the case that, in the essentials, the pace of progress has been far slower than in the areas most people would deem to be luxuries or entertainment goods? Why is it that the greatest progress in the areas treated by most as direct priorities comes as a spillover benefit from the meteoric growth in the original luxury/entertainment areas? (Consider, as an example, the immense benefits that computers have brought to medical research and patient care, or the vast possibilities for using the Internet as an educational tool.) In the areas from which the eye of formal decision-making systems is turned away, experimentation can commence, and courageous thinkers and tinkerers can afford to iterate without asking permission. So teenagers experimenting in their garages can create computer firms that shape the economy of a generation. So a pseudonymous digital activist, Satoshi Nakamoto, can invent a cryptocurrency algorithm that no central bank or legislature would have allowed to emerge at a proposal stage – but which all governments of the world must now accept as a fait accompli that is not going away.

Most people without political connections or strong anti-free-enterprise ideologies welcome these advances, but no such breakthroughs can occur if they need to be cleared through a formal majoritarian system of any stripe. A majoritarian system, vulnerable to domination by special interests who benefit from the economic and societal arrangements of the status quo, does not welcome their disruption. Most individuals have neither the power nor the tenacity to shepherd through the political process an idea that would be merely a nice addition rather than an urgent necessity. On the other hand, the vested and connected interests whose revenue streams, influence, and prestige would be disrupted by the innovation have every incentive to manipulate the political process and thwart the innovations they can anticipate.

It is only when some subset of reality is a fully open playing field, away from the notice of vested interests or their ability to control it, that innovation can emerge in a sufficiently mature and pervasive form that any attempts to suffocate it politically become seen as transparently immoral and protectionist. The open playing field can be any area that is simply of no interest to the established powers – as could be said of personal computers through the 1990s. Eventually, these innovations evolve so dramatically as to upturn the major economic and social structures underpinning the establishment of a given era. The open playing field can be a jurisdiction more welcoming to innovators than its counterparts, and beyond the reach of innovation’s staunchest opponents. Seasteading, for example, would enable more competition among jurisdictions, and is particularly promising as a way of generating more such open playing fields. The open playing field can be an entirely new area of human activity where the power structures are so fluid that staid, entrenched interests have not yet had time to emerge. The early days of the Internet and of cryptocurrencies are examples of these kinds of open playing fields. The open playing field can even occur after a major upheaval has dislodged most existing power structures, as occurred in Japan after World War II, when decades of immense progress in technology and infrastructure followed the toppling of the former militaristic elite by the United States.

The beneficent effect of the open playing field is made possible not merely due to the lack of formal constraints, but also due to the lack of constraints on human thinking within the open playing field. When the world is fresh and new, and anything seems possible, human ingenuity tends to rise to the occasion. If, on the other hand, every aspect of life is hyper-regimented and weighed down by the precedents, edicts, compromises, and traditions of era upon era – even with the best intentions toward optimization, justice, or virtue – the existing strictures constrain most people’s view of what can be achieved, and even the innovators will largely struggle to achieve slight tweaks to the status quo rather than the kind of paradigm-shifting change that propels civilization forward and upward. In struggling to conform to or push against the tens of thousands of prescriptions governing mundane life, people lose sight of astonishing futures that might be.

The open playing fields may not be for everyone, but they should exist for anyone who wishes to test a peaceful vision for the future. Voting works reasonably well in the Western world (most of the time) when it comes to selecting functionaries for political office, or when it is an instrument within a deliberately gridlocked Constitutional system designed to preserve the fundamental rules of the game rather than to prescribe each player’s move. But voting is a terrible mechanism for invention or creativity; it reduces the visions of the best and brightest – the farthest-seeing among us – to the myopia of the median voter. This is why you should be glad that nobody voted on the issue of whether we should have computers, or connect them to one another, or experiment with stores of value in a bit of code. Instead, you should find (or create!) an open playing field and give your own designs free rein.

Liberally Classical – Article by Jeffrey A. Tucker

January 13, 2014 Jeffrey A. Tucker Comments 0 Comment

Jeffrey A. Tucker

January 12, 2014

Recommend this page.

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I was recently in an ornate orchestral hall built in the late Gilded Age, a setting designed to present an opera or symphonic music to a generation before World War I that craved such performance art. The concert I attended was sold out, with tickets running between $40 and $75.

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The place was vibrating with anticipation as the full orchestra with winds, strings, brass, and percussion came on stage, and a 25-voice choir—live acoustic music without conspicuous electronics—filed in behind. The cheers, even before it all began, were glorious.

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As I looked around the vast room full of wide smiles, I noted that that average age of the concert goers was late twenty-something. It was a slightly startling sight after having been to so many symphony concerts filled with septuagenarians. Not that there’s anything wrong with old people, but it always seemed to symbolize a dying art to me. Not this time though. This art and this room were alive and youthful and looking to the future.

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What followed was two hours of dramatic, emotionally gripping symphonic music. The audience couldn’t wait to cheer and stand at every opportunity. At the intermission not a soul failed to return to his or her assigned seat.

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I’ve been around the art-music sector of the music industry for many years, and, for me, this experience was all dreamy, even surreal. My whole life, I’ve heard the same old complaints from classical musicians. We are underfunded. Governments are stingy. The people are not coming to our concerts. The young are only interested in junk music. High art is being crowded out by pop: it’s Schubert vs. Spears, Beethoven vs. Bieber, Mahler vs. Madonna. Our concert halls and symphonies are being massacred by market forces. We need subsidies in order to uphold real music against the pathetic tastes of the middle class.

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And so on it goes.

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The conventional tactics for dealing with this obvious and old problem are well known. There are labor strikes—you know, those oppressed oboists and violists who are clamoring for their surplus value to be given back by the unnamed exploiter. Donors are being squeezed to make up for what can’t be gained in ticket sales. There are hectoring public campaigns to “support the arts” or feel really guilty. There are marketing gimmicks. There are foundations that provide temporary relief. All the while, musicians grow ever more bitter, resentful, and despairing.

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So what made this event different? Many things. The bar was open with wine, beer, and spirits, and people were welcome to bring them to their seats, just like in a movie theater when people watch with soda and popcorn. Yes! Why doesn’t the Kennedy Center allow this? I don’t know. It should.

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Also, the fantastic and rightly showy conductor was a young woman—defying the eternal stereotype and addressing another complaint about sexism in the history of orchestral conductors. Another thing: Many members of the audience were dressed in character, sporting funny ears, wigs, and costumes. Character? More on that follows.

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Finally, the main event was something completely unexpected. The music was a performance of the soundtrack to the video game Legend of Zelda. The full name: “The Legend of Zelda: Symphony of the Goddesses.” Yes, a video game, a cult classic, one that began in 1989 and now has a beloved heritage and rich tradition.

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The game itself is accompanied by a full suite of serious music composed over the course of 25 years by a dozen or so specialists (all well-trained musicians) from Japan. That means there is not a single god-like composer—we like to pretend they were all sui generis—but rather a crowdsourced, thematically arranged series of pieces, each of which is connected to some iteration of this long-running game.

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The musicians seemed to love it, and the audience surely did. The exchange relationship between the musical producers and consumers was unlike anything I had experienced. This was not an audience obediently frozen in a stuffy pose waiting for the next assigned time to clap (never, never between movements, dammit!). They were serious, engaged people who were happy to gasp, laugh, cheer, ooh and ahh, and even cry. They did it all, and not on cue.

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Above the orchestra floated a large screen that played scenes that matched the music, from its earliest and crudest computer animations to the latest and most dazzling visual art. We even saw the characters grow up in the course of their adventures, which are wonderful, faux-medieval tales of danger, courage, chivalry, and devotion.

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My goodness, the whole scene just moved me so much. Here were the gamers all gathered, those “nerds” everyone made fun of during high school and college, and their love of their computer world was being validated and affirmed. But I suspect that even they didn’t understand the implications of all of this. I wanted to stand up and explain: Do you see what you have done here? Your consumers’ interests have brought back large-scale, live performance art—full choir and orchestra—through the most circuitous route one can possibly imagine.

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And how different, really, is this from a Rossini opera about a love affair involving barbers, secret letters, singing lessons, stodgy aristocrats made to look silly, and narrow escapes down second-story ladders? Or a Mozart opera involving magic bells and flutes, evil queens, floating boys in an air balloon, and scary dwarfs and dragons? It’s all the same stuff. It’s that beautiful combination of audio and visual art—the sense that something is happening right there in front of you. They didn’t have video games but we do, and good for us!

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All of this music could have easily been played on a loudspeaker, but that would have taken away the whole sense that something was being created on the spot. You want to see the violinists moving their bows, the percussionists crashing cymbals together, the bassoonist playing that most implausible of instruments. Adding to the irony is that the music on the Zelda game itself is mostly electronic, especially the choirs and their ethereal voices. Not here. It was human. It was life. We all experienced it in real time—fantasy became reality before our eyes and ears.

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I thought back to my days hanging around the school of music, all those students and professors with long faces and grim demeanors, people down on markets, down on society, down on consumers. No one would have believed that he or she had a future in live performance music, filling up the old orchestral halls, by way of fun and wonderful video games. No, it took entrepreneurs and commerce to blaze this trail. It took markets to make this surprise happen.

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The world of classical music, in fact, has been pathetically lacking in creative vision for many decades, if not an entire century. In large part, it keeps trying to recreate the past while cursing the present and despairing of the future. Why? Perhaps it is because this sector of life has been ever more removed from the commercial world through centrally planned education, subsidies, union control, copyrighted and monopolized musical scores, a culture of the entitled guild. None of it has worked and, needing to pay the rent, there has been a steady stream of young musicians leaving years of conservatory training to enter some other profession like making lattes.

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But get outside those establishment circles and you see entirely different things happening. It was in Turkey when I first saw a performance of an all-woman string quartet. During the first part of the evening, they presented a solid program of Schubert, Mozart, and Haydn. Then came the change to leather and boots and an all-electronic/pop program followed by the same players. One can sneer at it as tacky (actually, I don’t think so) but people love it and pay the big bucks for it. Since I saw this performance two years ago, the approach has reemerged at several venues in the United States as well.

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My point is not to isolate these two types of art-music presentations and say: This is the future for classically trained musicians. Maybe this is just the beginning. Maybe there are dozens of other approaches yet to be explored. What is needed is some serious entrepreneurship to find the new approaches and test them in the marketplace.

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The main feature in success here is an intimate connection between the players and the audience—the same as you see in the pop music world. It’s not about the style. It’s about the economic and artistic relationship between the producers and consumers. It must be a value enhancing proposition for both sides for a true profit to emerge.

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Meanwhile, I will never be able to read the quarterly harangue in The New York Times about the death of symphonies without thinking of this wonderful evening. Classical music is not dead. It is just now coming back to life.

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Jeffrey Tucker is a distinguished fellow at the Foundation for Economic Education (FEE), CEO of the startup Liberty.me, and publisher at Laissez Faire Books. He will be speaking at the FEE summer seminar “Making Innovation Possible: The Role of Economics in Scientific Progress“.

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This article originally appeared in The Freeman, the magazine of the Foundation for Economic Education.

Meaningful and Vacuous “Privilege” – Article by G. Stolyarov II

December 4, 2013 Gennady Stolyarov II Comments 0 Comment

G. Stolyarov II

December 3, 2013

Recommend this page.

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Sanford Ikeda’s concise and insightful lists of 14 common fallacies about the free market (available in two installments from The Freeman here and here) motivate careful thought about the commonly used and misused term “privilege” and the conflations in which it can result. In discussing the second fallacy regarding the free market, that it is identical to a system where the government grants special privileges to businesses, Dr. Ikeda writes that “People sometimes define ‘privilege’ as any advantage a person or group may have over others. Certainly such advantages exist today and would exist in a free market—you may be born into a wealthy family or have superior drive and resourcefulness—but these advantages are consistent with the absence of privilege in the libertarian sense, as long as you acquired such advantages without fraud or the initiation of physical violence against the person or property of others.”

Indeed, the increasingly common usage of the term “privilege” to mean any advantage whatsoever eviscerates it of any genuine meaning it once had. This problem in today’s discourse spreads far beyond discussions of connections between businesses and governments.

Certainly, the very fact that one individual is different from another – with a different set of experiences, different physique, different knowledge, and even different standing room at any particular time – provides that individual with opportunities that the other lacks, while rendering him or her limited in ways that the other is not. Unfortunately, this trivial fact is increasingly being misconstrued in some circles to suggest vile inequities arising out of innocuous human differences. People who have not aggressed against, or even demeaned or ridiculed, anyone are increasingly being identified as “privileged” simply for belonging to broadly and crudely defined groups – be it all people of European descent, all males, or even all non-overweight people (witness the pseudo-concept of “thin privilege”) or people who are not disabled. (“Ableism” is apparently an emerging sin in the vocabulary of the increasingly militant and vitriolic collectivistic “social justice” movement – which is about neither true individual-oriented justice nor the preservation of a civilized and tolerant society.) Such a vacuously expansive view of privilege is a tremendous insult to the true victims of coercive privilege throughout history – from slaves in all eras, to women who in prior eras were denied suffrage and property rights, to the freethinkers and forbears of liberty and reason, whose voices were too often snuffed out by the arbitrary power of absolute monarchs and theocrats in the pre-Enlightenment world.

Thomas Jefferson, an opponent of privilege in its meaningful sense, put it best when he expressed in his 1826 letter to Roger C. Weightman “the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride legitimately, by the grace of god.” Jefferson was a staunch opponent of the coercive privilege that enabled some to gain artificial advantages by restricting others from pursuing life-improving courses of action. Accidents of birth, or special lobbying skills, should not, in a just system, enable a person to acquire prerogatives which could not be earned through the free, peaceful exercise of that person’s abilities. Jefferson saw the future and strength of the American republic in the hoped-for emergence of a “natural aristocracy of talent and virtue” – people who, when allowed the liberty to flourish through honest work and competition, would become role models for others solely through their examples. This natural aristocracy would not need force to maintain its prominence, because the traits of the most knowledgeable, most industrious, and most virtuous people will be emulated by any who earnestly seek to improve their own lives and who have the freedom to acquire knowledge and make their own decisions.

Yet Jefferson’s natural aristocracy would be denounced as an example of horrid “privilege” by the “social justice” types – simply due to the necessarily unequal distribution of outcomes on a free market of open and honest production, competition, and cooperation. After all, not everyone can originate the same ideas at the same time. Not everyone can take advantage of the same opportunity for entrepreneurial profit, whose attainment, as economist Israel Kirzner demonstrated in Competition and Entrepreneurship, arises out of alertness to opportunities that others have missed. Kirzner writes that “Because the participants in [a] market are less than omniscient, there are likely to exist, at any given time, a multitude of opportunities that have not yet been taken advantage of. Sellers may have sold for prices lower than the prices which were in fact obtainable… Buyers may have bought for prices higher than the lowest prices needed to secure what they are buying…” (43). Would it be an example of unacceptable “privilege” for an alert entrepreneur to remedy such an arbitrage opportunity and thereby bring otherwise-unrealized value to consumers?

Yes, the free exercise of human abilities will produce outcomes where some people will have some advantages over some others (while, of course, leaving fully open the possibility that those very others will have their own distinct advantages, obtained through hard work, knowledge, or sheer luck). But, as long as coercion is not involved in securing and maintaining those advantages, the people endowed with them are not “booted and spurred” to ride the rest of us. As Dr. Ikeda points out, the differences among people are a source of strength harnessed by the free market: “The free market gives you an incentive to profit from associating with and learning from others who might be very different from you, who operate outside your normal social networks.” By incentivizing and facilitating these interactions, the free market encourages greater tolerance, understanding, and visible societal heterogeneity of the sort that constitutes the best safeguard against truly heinous oppressions based on collectivistic stereotypes. Instead of condemning others as being too “privileged” simply on account of innocuous differences, it is far more productive to think about how those differences can help one achieve one’s own values through honest, peaceful, and productive interaction, cooperation, and exchange.

Dead Models vs. Living Economics – Article by Sanford Ikeda

November 23, 2013 Sanford Ikeda Comments 0 Comment

Sanford Ikeda

November 23, 2013

Recommend this page.

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Since 2008, straw-man versions of free-market economics have popped up whenever someone needs an easy villain. Keynes roared back to prominence, and it looks like this reaction might be gaining steam.

According to an article in The Guardian, students at a few British universities, prompted by “a leading academic,” are demanding that economics professors stop teaching what they refer to as “neoclassical free-market theories.”

Michael Joffe, an economics professor at Imperial College, said, “The aim should be to provide students with analysis based on the way the world works, not the way theories argue it ought to work.”

Joffe is right on that point. But his target is wrong: It’s not free-market economics that’s the problem, it’s the model of perfect competition that often gets conflated with free-market economics. A commenter on my recent columns addressing falsehoods about the free market (here and here) suggested I discuss this conflation.

I was thinking of putting it into a third “falsehoods” column. But the Guardian story makes me think the issue deserves more attention. Here’s the key passage:

The profession has been criticised for its adherence to models of a free market that claim to show demand and supply continually rebalancing over relatively short periods of time—in contrast to the decade-long mismatches that came ahead of the banking crash in key markets such as housing and exotic derivatives, where asset bubbles ballooned [emphasis added].

Why Do You Support the Free Market?

“Free-market economists,” on the other hand, typically have confidence in free markets owing to our understanding of economics, although we often (notoriously) disagree on exactly what the correct economics is. A number of free-market economists base their confidence on what is known as the model of “perfect competition.” Briefly, that model shows how in the long run the price of a good in a competitive market will equal the additional cost of producing a unit of that good (i.e., its marginal cost), and it shows that no one has the power to set prices on her own. How do you get those results? By making something like the following assumptions:

Free entry: While buyers and sellers may incur costs to consume and to produce, there are no additional costs to enter or leave a market.
Product homogeneity: From the point of view of any buyer in the market, the output of one seller is a perfect substitute for the output of any other seller.
Many buyers and sellers: No single buyer or seller is large enough to independently raise or lower the market price.
Perfect knowledge: All buyers and sellers have so much information that they will never regret any action they take.

From these assumptions you can derive not only marginal-cost pricing but also nice efficiency properties as well: There is no waste and costs are minimized. Which is why people like the model.

Moreover, for some important questions the analysis of supply and demand under perfect competition is quite useful. Push the legal minimum wage too high and you’ll generate unemployment; push the maximum rent-control rate too low and you’ll get housing shortages. Also, financial markets sometimes—though as we have seen, not always—conform to the predictions of perfect competition. It’s a robust theory in many ways, but if you base your support for the free market on the model of perfect competition, you’re on shaky ground. The evidence against it is pretty devastating.

Free Entry, Not Perfect Knowledge

In fact, it doesn’t even take the Panic of 2008 to shake up the model; any comparison of the model with everyday reality would do the job. Assumptions two and three about product homogeneity and many buyers and sellers are pretty unrealistic, but it’s the last assumption about perfect knowledge that’s the killer. (I’m aware of Milton Friedman’s “twist” (PDF), which argues that this is irrelevant and only predictions matter, but it’s a methodology I don’t agree with.) Markets are rarely if ever at or near equilibrium, and people with imperfect knowledge make disequilibrating mistakes, even without the kind of government intervention that caused the Panic of 2008.

When the institutions are right, however, people learn from the mistakes that they or others make, and there’s a theory of markets—certainly neither Keynesian nor Marxist—that fits the bill better than perfect competition.

It’s Austrian theory. Its practitioners argue competition is an entrepreneurial-competitive process (PDF). This theory not only says that competition exists in the presence of ignorance, error, and disequilibrium, it explains how profit-seeking entrepreneurs in a free market positively thrive in this environment. The principal assumption that the theory rests on, besides the existence of private property, is No. 1: free entry.

As long as there are no legal barriers to entry, if Jack wants to sell an apple for $1 and Jill is asking $2 for that same quality apple—that is, there is a disequilibrium here in which either Jack or Jill (or both) is making an error—you can profit by buying low from Jack and selling high to Jill’s customer, Lucy. If another entrepreneur, Linus, spots what you’re doing, he can bid up the price you’re giving Jack and bid down the price at which you’re selling to Lucy. Bottom line: A process of entrepreneurial competition tends to remove errors. There is no need to assume perfect knowledge to get a competitive outcome; instead, competition itself improves the level of knowledge.

So Joffe and the critics are wrong about the theory. You don’t knock out the theoretical legs from under the free market by “debunking” the model of perfect competition. He is also wrong about the history. As I’ve referenced many times, economists Steve Horwitz and Pete Boettke have documented how a government-led, interventionist dynamic, and not the free market, led to the Panic of 2008.

Joffe, the Imperial College professor, “called for economics courses to embrace the teachings of Marx and Keynes to undermine the dominance of neoclassical free-market theories.” He also complains that “there is a lot that is taught on [sic] economics courses that bears little relation to the way things work in the real world.” I agree. But that complaint would apply at least as much to the Keynesian and Marxian economics he hypes as to the static, equilibrium-based models of competition he slams.

Sanford Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.

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This article was originally published by The Foundation for Economic Education.

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