Sun, 15 Mar 2020 19:24
No, Authoritarian Governments Do Not Outperform "Open Societies" in a CrisisThere are some very disturbing calls for quick-fix "solutions" following the reporting of how countries have and have not handled COVID19. It is not about how contagious or dangerous the virus actually is, which is not my expertise, but the typical and dangerous misunderstanding of the...
There are some very disturbing calls for quick-fix "solutions" following the reporting of how countries have and have not handled COVID19. It is not about how contagious or dangerous the virus actually is, which is not my expertise, but the typical and dangerous misunderstanding of the supposed efficiency of hierarchy and, therefore, the effectiveness of control societies, authoritarian rule, and dictatorial regimes.
To put it simply, the claim is that China "handled it right," was able to do something by acting fast and forcefully, and, by implication, that open societies are impotent to threats and fundamentally fragile. But this is exactly wrong. This misconception arises out of a common but fundamental misunderstanding of social organizing (such as society, markets, etc). And, interestingly, it is put forth by people who should definitely know better, including influential investors and entrepreneurs in Silicon Valley.
There is some limited truth to the argument that a centralized power can act faster and more forcefully (that is, brutally and without respect for individual or groups of people), but it is based on embarrassingly ignorant assumptions. To be true, it requires that the regime, those in power, have the correct information and act in the best interest of society. Those are not simply exaggerated assumptions, but are in fact never true.
I won't speculate about whether this comes from the myth of the King is an enlightened despot, even appointed by a god, that we've been told for centuries by those who benefit from such a lie. What matters is that while hierarchy can indeed act swiftly, it always acts on the wrong information. And, from the point of view of society at large, it acts with the wrong objectives, placing the will of the leadership before that of people in general. In a control hierarchy like that in China, accurate information does not flow freely and certainly not upwards to the decision-makers.
The same thing is true, albeit with lesser such pressures, in any government (and corporate) bureaucracy.
The bits and pieces of local information is also not put together and condensed properly. Nobody in such hierarchies have an incentive to do "the right thing," especially for common people. The incentive is to watch their own backs. As in all bureaucracies, especially political, the number one priority is to avoid getting caught with responsibility for something that turns out bad. Keep your head down and follow the rules; make sure the higher-ups are satisfied, on whatever ground, and keep your subjects in check. If you don't play it safe, you'll be sacrificed at the stake if something goes wrong.
Those calling for swift action, and pointing to China's quarantining multi-million cities as a "success recipe," to stop the contagion must believe either that the hierarchy properly transmits the right information and filters out irrelevant such (which is simply impossible) or that information does not matter (the horrific "we must do something" view, which should be deadlier than the virus).
It is true, as Danielle Pletka argues, that dictatorships only make pandemics worse. Swift, forceful action on the *wrong* information, or without respect for human life and liberties, is and can be nothing but disastrous. History is littered with examples of such regimes, and their track record is without exception abhorrent.
It may seem counterintuitive, but the truth is that decentralized decision-making and market-style systems always beat centralization and power '-- because they aggregate and condense information much more appropriately and because they allow for actions more appropriate to local conditions. I understand that fear, fueled by alarmism, can lead to panic and poor judgment. But the call for authoritarianism as a solution, regardless of the threat, is much worse than poor judgment.
It is not only ignorant of how hierarchies work, but a type of ignorance that historically always ended with mass murder. If it sounds like a quick fix, stay away. It may be quick, but not a fix. It is incumbent upon us to not listen to the false prophets and to resist the temptation to believe impossible promises.
Centralization is one such promise, which has always been offered as a solution but has never delivered. Unless you're the one seeking and are granted the power. Like the kings of old. And their common denominator was not to altruistically serve common folks. As in any time of crisis, the best course of action is to keep a cool head and not panic.
The call for authoritarianism, ignorantly presented as a quick fix, is at best irresponsible. But it could turn out to be much, much worse.
Formatted from Twitter: @PerBylund The Impotence of Monetary Policy Exposed yet AgainAs I write this, the DJIA has just closed down over 2,300 points or 9.99 percent and the S&P 500 is down 9.51 percent. This is the market's largest daily decline since the crash of October 22, 1987. And this is despite the fact that the Fed announced a ''liquidity'' injection of over $1.2...
As I write this, the DJIA has just closed down over 2,300 points or 9.99 percent and the S&P 500 is down 9.51 percent. This is the market's largest daily decline since the crash of October 22, 1987. And this is despite the fact that the Fed announced a ''liquidity'' injection of over $1.2 trillion into credit markets via term repurchase operations starting immediately. The market briefly pared its losses in the wake of the announcement and then spit and continued on its downward spiral. This should, but probably won't, give pause for reflection to those who extol the creation of money as the panacea for every economic ailment.
In an article published in the Wall Street Journal three days ago, John Greenwood and Steve Hanke properly criticized the Fed for ''fetishizing'' and manipulating interest rates. But then they went on to implore the Fed to supply liquidity ''to deal with the [coronavirus] panic'--whether by quantitative-easing purchases of long bonds, by Treasury bill purchases, by repos or, most important, by increasing the amounts of U.S. dollar swaps available to the central banks of Japan, China, South Korea, Taiwan and Hong Kong.'' And this is despite their recognition that their preferred broad money supply measure, Divisia M4, is growing at an annual rate of 6.9 percent, providing ''ample monetary support for continued [economic] growth.''
Well, the Fed'--at least partly'--followed their advice yesterday to no avail. Trying to direct dollars into foreign supply chains by increasing dollar swaps with foreign banks would not work either. Dollar swaps are an attempt to assist foreign central banks in maintaining an overvalued currency in defiance of economic reality. In fact, the Reserve Bank of India (RBI), the central bank of India, just yesterday announced that it will undertake $2 billion worth of US dollar-rupee sell/buy swaps on March 16 in response to external outflows of dollars from local equity and debt markets.
The bottom line is that any economic contraction caused by the coronavirus pandemic would originate as a ''supply-side shock'' caused by real factors such as factory closings, supply chain interruptions, the impaired efficiency of service sector employees forced to work from home, etc. Printing up paper money and giving it or lending it to domestic businesses or to India will not bring about a miraculous replacement of the lost goods and services or repair broken supply chains. However, the ''pandemic shock'' may, and probably will, have repercussions on the demand side of the economy, likely precipitating a financial crisis. But this is due to the designed fragility of a financial system based on fractional reserve banking and propped up by governmental policies such as deposit insurance and the too-big-to-fail doctrine. And we saw just how well money creation via quantitative easing and financial bailouts worked during the aftermath of the financial crisis of 2008.
Coronacrisis and LeviathanIn his magisterial Crisis and Leviathan, Robert Higgs shows that the growth of government in the twentieth century can largely be explained by patterns of crisis and response. These crises can be real (World Wars I and II, the Great Depression, stagflation) or imagined (inequality, the various...
In his magisterial Crisis and Leviathan, Robert Higgs shows that the growth of government in the twentieth century can largely be explained by patterns of crisis and response. These crises can be real (World Wars I and II, the Great Depression, stagflation) or imagined (inequality, the various isms). In either case new government programs, agencies, and policies are established, purportedly as temporary responses to the perceived emergency. But, as Higgs shows with rich historical detail, most of the temporary measures become permanent'--either explicitly or in a revised form based on the original.
As I summarized Higgs's thesis in an earlier paper:
Higgs (1987) noted that the expanded role taken on by the state during the New Deal period remained largely in place once the crisis passed, leading to a ''ratchet effect'' in which government agencies expand to exploit perceived short-term opportunities, but fail to retreat once circumstances change. Higgs (1987) suggests that government officials (regulators, courts, and elected officials), as well as private agents (such as business executives, farmers, and labor unions) developed capabilities in economic and social planning during crisis periods and that, due to indivisibilities and high transaction costs, tend to possess excess capacity in periods between crises. To leverage this capacity, they looked for ways to keep these ''temporary'' measures in place. Indeed, many New Deal agencies were thinly disguised versions of World War I agencies that had remained dormant throughout the 1920s'--the War Industries Board became the National Recovery Administration, the War Finance Corporation became the Reconstruction Finance Corporation, the War Labor Board became the National Labor Relations Board, and so on. In many cases the charters for the New Deal agencies were mostly copied verbatim from World War I predecessors. Higgs' (1987) ratchet effect illustrates that excess capacity in organizational capabilities isn't necessary leveraged as soon as it is created, leading to smooth, continuous organizational growth, but may remain dormant until the right economic, legal, or political circumstances arise, leading to sudden, discontinuous jumps in organizational size or scope.
How will leviathan expand'--temporarily and then permanently via the ratchet effect'--in response to COVID-19? It's too early to make any definite predictions, but we can make educated guesses based on experience and our knowledge of how governments work.
First, we can expect that government controls on travel and assembly will tighten. Whether via legislative approval, unilateral executive action, or judicial decree, the principle that governments must control movement and gatherings of people to prevent the spread of disease has been clearly established (or reestablished). As we know from Higgs's work, the additional capabilities in this area acquired by the Centers for Disease Control and Prevention (CDC) and other agencies will likely be retained and put to use long after the crisis has abated. And further government intervention in the biomedical and healthcare sectors is virtually guaranteed.
The second likely long-term effect is ideological. Already we're seeing the meme that the crisis has been caused (or at least exacerbated) by ''neoliberalism'''--that thanks to pervasive (?) libertarian ideology public health agencies were ''hollowed out'' and thus unable to respond in force:
Libertarians: Government sucks, let's hollow out the civil service*Pandemic comes, hollowed-out civil service is unable to respond effectively*
Libertarians: See, told you government sucks
'-- Avoid groups of people, wash your hands :rabbit2: (@Noahpinion) March 8, 2020Of course, we know that in the US the CDC initially prevented private labs from testing or developing new tests without FDA approval. More generally, public (and private) health in the US, as in most countries, operates within a tangled web of federal, state, and local regulations, subsidies, restrictions, and other controls.
It is impossible to know how a free market medical system would handle something like corona. But we will be told that there are no free market enthusiasts during a pandemic (and that, at best, those of us who favor property rights, markets, and prices should embrace ''state capacity libertarianism''). The case for markets will have to be made, as Mises would say, ever more boldly.
The Fed Can't Save UsBeltway libertarian economists are today hailing the Fed's efforts to cure the economic crisis or are even suggesting they intervene to a greater extent to quell fears in markets. That is like saying we need to spread the coronavirus to more people to stop the pandemic.
The Fed...
Beltway libertarian economists are today hailing the Fed's efforts to cure the economic crisis or are even suggesting they intervene to a greater extent to quell fears in markets. That is like saying we need to spread the coronavirus to more people to stop the pandemic.
The Fed created the economic crisis with its more than a decade''long campaign of ultralow interest rates and quantitative easing policy that injected massive liquidity into financial markets. This unprecedented monetary policy caused companies to become more leveraged and to embark upon capital spending programs on a massive scale.
This made an economic crisis inevitable. The coronavirus is simply the match that lit the fuse. It's just a trigger of the crisis. Just before the event, the stock market was at all-time highs and unemployment was at all-time lows. Things were literally too good to be true!
Then the Fed announced an emergency rate cut on March 3, and it is widely expected to reduce its rate to zero in the near future. Most people, even economists, were left shaking their heads. Why cut rates when the economy is doing so great? How can rate cuts do anything about a medical problem or a supply chain disruption?
The truth is that ''monetary policy,'' that is, inflation, cannot solve such problems. The truth is that the Fed is trying to doctor the stock and bond markets. So far it has not worked and could even be said to be backfiring.
It is the Fed money supply inflation and ultralow interest rates that caused the inevitable crisis in the first place. It also has helped enable trillion-dollar deficits and an exploding national debt. It has encouraged companies to issue more bonds, and a big chunk of marginal investment grade bonds (BBB) will soon be headed for junk bond status. It has also encouraged individual investors not to save or invest in safe assets and to put their money into riskier stocks because they cannot earn interest from banks or dividends from safe companies. Any economist should see all these effects as bad for the economy.
The Fed is the cause of the crisis, not the cure.
As Government Authorities Urge Panic Over Coronavirus One Doctor Breaks RankEverywhere one looks there seems to be panic about the coronavirus. The Centers for Disease Prevention, the World Health Organization, and now the National Institute of Allergy and Infectious Diseases almost seems to be encouraging a frenzied response with their statements on the...
Everywhere one looks there seems to be panic about the coronavirus. The Centers for Disease Prevention, the World Health Organization, and now the National Institute of Allergy and Infectious Diseases almost seems to be encouraging a frenzied response with their statements on the illness. Luckily Dr. Jeremy Samuel Faust, an emergency physician at Brigham and Women's Hospital and an instructor at Harvard Medical School, has recently offered a more measured take on the trajectory of the virus:
There are many compelling reasons to conclude that SARS-CoV-2, the virus that causes COVID-19, is not nearly as deadly as is currently feared. But COVID-19 panic has set in nonetheless. You can't find hand sanitizer in stores, and N95 face masks are being sold online for exorbitant prices, never mind that neither is the best way to protect against the virus (yes, just wash your hands). The public is behaving as if this epidemic is the next Spanish flu, which is frankly understandable given that initial reports have staked COVID-19 mortality at about 2''3 percent, quite similar to the 1918 pandemic that killed tens of millions of people.
Allow me to be the bearer of good news. These frightening numbers are unlikely to hold. The true case fatality rate, known as CFR, of this virus is likely to be far lower than current reports suggest. Even some lower estimates, such as the 1 percent death rate recently mentioned by the directors of the National Institutes of Health and the Centers for Disease Control and Prevention, likely substantially overstate the case.
We shouldn't be surprised that the numbers are inflated. In past epidemics, initial CFRs were floridly exaggerated. For example, in the 2009 H1N1 pandemic some early estimates were 10 times greater than the eventual CFR, of 1.28 percent. Epidemiologists think and quibble in terms of numerators and denominators'--which patients were included when fractional estimates were calculated, which weren't, were those decisions valid'--and the results change a lot as a result. We are already seeing this. In the early days of the crisis in Wuhan, China, the CFR was more than 4 percent. As the virus spread to other parts of Hubei, the number fell to 2 percent. As it spread through China, the reported CFR dropped further, to 0.2 to 0.4 percent. As testing begins to include more asymptomatic and mild cases, more realistic numbers are starting to surface.
Another levelheaded take on the illness has been offered by Dr. William Schaffner, Professor of Preventive Medicine in the Department of Health Policy as well as Professor of Medicine in the Division of Infectious Diseases at the Vanderbilt University School of Medicine. Watch his video here.
The disparity between these doctors' response and the hysteria being fueled by governments and health organizations across the globe should make us wonder about the latter's intentions and the truth of their statements.
Adapted from targetliberty.com.
The Fed Announces Another Flood of Easy MoneyThe Federal Reserve announced today that it will aggressively begin injecting liquidity into the market again. From the New York Fed's website:
Beginning Thursday, March 12, 2020 and continuing through Monday, April 13, 2020, the Desk will offer at least $175 billion in daily overnight...
The Federal Reserve announced today that it will aggressively begin injecting liquidity into the market again. From the New York Fed's website:
Beginning Thursday, March 12, 2020 and continuing through Monday, April 13, 2020, the Desk will offer at least $175 billion in daily overnight repo operations and at least $45 billion in two-week term repo operations twice per week over this period. In addition, the Desk will also offer three one-month term repo operations, with the first operation occurring on Thursday, March 12, 2020. The amount offered for each of these three operations will be at least $50 billion.
Consistent with the FOMC directive to the Desk, these operations are intended to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures that could adversely affect policy implementation. They should help support smooth functioning of funding markets as market participants implement business resiliency plans in response to the coronavirus. The Desk will continue to adjust repo operations as needed to foster efficient and effective policy implementation consistent with the FOMC directive.
As Danielle DiMartino Booth put it, this is the money "bazooka reloaded."
This new surge in pumping puts the Fed back on track to reach new highs in its total portfolio.
In other words, the Fed is now back in the business'--although, in truth, it never really stopped'--of buying up assets with newly created money to "stabilize" markets.
Following its days of aggressive QE, Fed assets reached over $4.5 trillion. But then the Fed started scaling back assets ever so slowly, pulling about $740 billion from that $4.5 trillion total. That all stopped late last year, though, as the Fed started injecting money into the repo market. (For more, see here.)
Since then, the Fed has readded $481 billion to its assets. And now the Fed tells us it will add "at least $175 billion in daily overnight repo operations and at least $45 billion in two-week term repo operations twice per week over this period."
So, the Fed will soon be back to peak asset levels.
But what difference does it make? The Fed has been sitting on these assets for years, and so far so good, right?
Well, those with long memories will remember that the Fed said for years that it would "unwind" all its asset purchases and remove all that money it created from the real economy. But now it's pretty clear that's not going to happen for a few reasons:
1. These assets'--such as old mortgage-based assets and other garbage from the last housing bubble'--never recovered enough value to be sold off by the Fed.
2. Because those old assets never recovered, the Fed doesn't want to sell them and thus put pressure on organizations'--like banks'--that still hold similar assets. In other words, if the Fed were to let those assets go, they'd likely pop various bubbles.
3. It's basically policy now that the Fed exists to bailout banks and the financial sector forever, no matter how much it costs other sectors of the economy.
4. This has massively inflated asset prices such as stocks and real estate. That's bad for affordability for regular people. But it's great for billionaires.
So, this is just the latest continuation of that policy. It's more bailing out of banks and hedge funds at the expense of those who hold dollars or compete for resources with the bailout firms and industries. By constantly favoring and bailing out bankers and other parts of the financial sector, the Fed has put all other sectors and industries at a disadvantage. As a nonfinancial enterprise, it's hard to compete for investors and capital when the Fed has guaranteed that the financial sector will be bailed out no matter what.
This is monetary policy that was built by bankers and exists for the benefit of bankers. Every solution involves helping bankers. The Fed has no other ideas.
Central Banking Is SocialismLast week, the Federal Reserve responded to Wall Street's coronavirus panic with an ''emergency'' interest rate cut. This emergency cut failed to revive the stock market, leading to predictions that the Fed will again cut rates later this month.
More rate cuts would drive...
Last week, the Federal Reserve responded to Wall Street's coronavirus panic with an ''emergency'' interest rate cut. This emergency cut failed to revive the stock market, leading to predictions that the Fed will again cut rates later this month.
More rate cuts would drive interest rates to near, or even below, zero. Lowering interest rates punishes people for saving, thus encouraging consumers and businesses to spend every penny they make. This may give the economy a short-term boost, but it inhibits long-term economic growth by depleting the savings necessary for investments in businesses and jobs. The result of this policy will be more pressure on the Fed to indefinitely maintain low interest rates and on the Congress and president to create another explosion of government ''stimulus'' spending.
Boston Federal Reserve president Eric Rosengren has suggested that Congress allow the Federal Reserve to add assets of private companies to the Fed's already large balance sheet. Allowing the central bank to buy assets of, and thus assume a partial ownership interest in, private companies would give the Federal Reserve even greater influence over the economy. It could also allow the Fed to advance a political agenda by, for example, favoring investment in ''green energy'' companies over other companies or refusing to purchase assets of retailers who sell firearms or tobacco products.
Mr. Rosengren's proposal to allow the central bank to ''invest,'' in private companies seems like something one would hear from democratic socialists like Senator Bernie Sanders. This is not surprising, since the entire Federal Reserve system is a textbook example of socialism.
The essence of socialist economics is government allocation of resources either by seizing direct control of the ''means of production'' or by setting the prices business can charge. Federal Reserve manipulation of interest rates is an attempt to set the price of money. Federal Reserve attempts to set interest rates distort the signals sent by the rates to investors and business. This results in a Fed-created boom, which is inevitably followed by a Fed-created bust.
Economic elites benefit when the Federal Reserve pumps new money into the economy, because they have access to the money created before there are widespread price increases. Artificially low interest rates also facilitate the growth of the welfare-warfare state.
The Federal Reserve's inflationary policies harm the average American by eroding the dollar's purchasing power. This forces consumers to rely on credit cards and other forms of debt to maintain their standard of living. Many Americans are unable to afford their own homes because they are saddled with student loan debt that can even exceed their income.
Since the bailouts of 2008, there has been a growing understanding that the current system is rigged in favor of the elites and against the average American. Unfortunately, popular confusion of our system of Keynesian neoliberalism with a free market economy, combined with a widespread entitlement mentality, has led many Americans to support increasing government control of our economy.
The key to beating back the rising support for socialism on both the left and right is helping more people understand that big government and central banking are the cause of their problems and that free markets in all areas'--and especially in money'--are the solution. It is important that the liberty movement put pressure on Congress to cut spending and rein in or, better yet, end the Fed.
Reprinted with permission.
John Kenneth Galbraith Was Wrong About AdvertisingMany anticapitalist ideologies have long relied on the idea that capitalist oppressors use advertising to force/compel/trick people into purchasing goods and services "they don't need." Advertising, the theory goes, is a tool employed by the capitalists to exercise power against the workers....
Many anticapitalist ideologies have long relied on the idea that capitalist oppressors use advertising to force/compel/trick people into purchasing goods and services "they don't need." Advertising, the theory goes, is a tool employed by the capitalists to exercise power against the workers. Left to their own devices, workers would save more money and only buy things they truly need. Workers would then use this savings to gain greater financial independence from the capitalists.
The anticapitalists assure us that this doesn't happen however, because advertising exists as a means to control workers and force them to spend virtually all their surplus on useless trinkets and status symbols.
For more, see this analysis of "consumerism."
But, as I've noted both here and here, advertising'--as noted by Ludwig von Mises'--does not actually compel people (synonyms include "force" and "coerce") to buy anything.
Mises used the example of how modern advertisers can't convince people to purchase technologically obsolete goods. He noted that all the ads in the world are unlikely to get people to stop buying lightbulbs and light their houses with candles instead.
A notable popularizer of the anticapitalist position on this, however, was John Kenneth Galbraith. Galbraith took the opposite position of the Austrians. While Austrians maintain that producers produce in order to meet consumer demand, Galbraith claimed that producers made things and then relied on advertising to get people to buy new things. In other words, in the Austrian view, producers follow the consumers. In the Galbraithian view, consumers follow the producers.
It's a pretty big difference with major implications that I won't cover here at the moment. But a central mechanism at the core of this idea is the notion that producers basically tell consumers what to to buy. And the producers do this by using advertisements.
But, as Mises suggested with this example of lightbulbs, there are ample examples disproving Galbraith's theory.
Three examples were discussed in my article last week:
1. Mike Bloomberg's failed $500 million ad campaign.
2. The demise of the waterbed industry.
3. The decline of expensive funerals.
But recently one reader, Richard Wilcke, a former business professor, noted a very important example: the Ford Edsel. He writes in an email:
The assumptions of "nudgers" that posters, PSAs, even horrific cancer warnings on cigarette packs as in the UK, have major effects on public opinion is not evident, a topic on which I have lectured often in the past.What I wanted to share is an interesting coincidence. Precisely as Galbraith's book contending that corporations have great power'--expressly through advertising'--to sell anything they choose to American consumers was being published, Ford Motor Company was in the midst of the largest advertising campaign in history to sell the Edsel as "the most exciting and advanced new car ever." Ford's marketing execs loved that many thousands of consumers were lined up at dealers to see the vehicle as it was unveiled. They expanded the budget on the grounds that selling merely 200,000 Edsels would be a grand success.
But in spite of their advertising, they sold barely 70,000 in 18 months and the company pulled the plug. Most glowing reviews of Galbraith's book did not get it; namely, that a real-world experiment'--a test of the idea'--had been going on at that same time. I believe it dramatically disproved Galbraith's thesis.
Ford was highly motivated to get buyers for the Edsel, to say the least. And yet they failed. So, if ad wizards couldn't get people to buy the Edsel, why should we assume Galbraith and his fellow travelers have been right about advertising?
In this vein, we could also note Robert Batemarco's 2014 article, which observes two cases that also suggest advertising is not at all a reliable tool for "making" people do anything.
One is military enlistment. If ads works so well, why not just run a bunch of advertisements about how military service is wonderful? If this actually worked, then there would be no military draft. And even when there is no draft, if ads worked, the US government would never have to increase wages for military personnel. Why raise wages, when they could just run an ad campaign telling workers to be content with one dollar per hour, on-base housing, and some canned slop at the commissary? Yet, as it is, recruiters have to make all sorts of promises to convince people to sign up.
And then there's the problem of people not buying health insurance. As we've often been told in the context of Obamacare, there are too many uninsured Americans, because many simply don't buy health insurance. This is especially true of young and healthy people who need few medical services. The "solution" to this is assumed to be laws that force people to buy health insurance. But why pass laws when the feds could just run a bunch of ads commanding people to buy health insurance? If ads are so powerful in getting consumers to buy things, Obamacare mandates would have never been "necessary."
Michael Bloomberg's Failed Ad Blitz Reminds Us Advertisers Don't Force People to Do Anything Michael Bloomberg dropped out of the Democratic Party's primary this week, but not before he spent more than $500 on political advertisements. According to Bloomberg (the news service, not the man),
Through Friday [Feb 21], he's spent $505.8 million on broadcast, cable, radio...
Michael Bloomberg dropped out of the Democratic Party's primary this week, but not before he spent more than $500 on political advertisements. According to Bloomberg (the news service, not the man),
Through Friday [Feb 21], he's spent $505.8 million on broadcast, cable, radio and digital ads, according to Advertising Analytics. That's an average of $5.5 million a day since he officially became a candidate.
It's also $190 million more than all of his active Democratic rivals combined, including billionaire hedge-fund founder Tom Steyer, have spent on political ads.
This all netted Michael Bloomberg a whopping twenty-seven delegates. That's more than $18 million per delegate. This means Bloomberg didn't even succeed in becoming a spoiler or a kingmaker at the Democratic convention this summer.
In short, the failed Bloomberg ad blitz serves as a helpful reminder that advertising doesn't actually make people do anything. Ads on YouTube and TV'--even when they are released in a veritable torrent as Bloomberg's ads were'--are not enough in themselves to convince people to vote for someone.
We saw a similar issue during the 2016 election, when Hillary Clinton outspent Trump 2 to 1. Indeed, among so-called outside groups (such as super PACs), "Pro-Clinton ads outnumbered pro-Trump ads 3 to 1'--a mind-numbing 383,512 ads for Clinton compared to 125,617 supporting Trump."
This isn't to say that having $500 million lying around for advertising makes no difference. It may be that if Elizabeth Warren had had that sort of advertising budget, she might have been able to compete better with Bernie.
But the fact remains that if an advertisement asks a person to take some sort of action'--whether it's buying Acme zit cream or voting for Michael Bloomberg, that action has to be something that the person targeted by the ad is open to doing. That is, the person being asked to buy or vote must have been already "conditioned"/"brainwashed"/"socialized"/"educated" in such a way that the advertisement's request for action seems like a good thing.
[RELATED: "Advertisers Aren't as Powerful as We Think," by Ryan McMaken]
Often, ads simply stand no chance of succeeding because they're not addressing what the target audience is inclined to desire.
Ludwig von Mises realized this long ago and noted,
It is a widespread fallacy that skillful advertising can talk the consumers into buying everything that the advertiser wants them to buy. The consumer is, according to this legend, simply defenseless against "high-pressure" advertising. If this were true, success or failure in business would depend on the mode of advertising only. However, nobody believes that any kind of advertising would have succeeded in making the candle makers hold the field against the electric bulb, the horse drivers against the motorcars, the goose quill against the steel pen and later against the fountain pen.
Examples of this phenomenon abound. In recent years, for example, we've seen articles on how so-called Millennials are uninterested in buying what the funeral industry is selling. That is, expensive coffins and funerals are highly profitable for funeral homes, but fewer people under fifty are interested in buying. They want less-profitable cremations. So, the funeral industry has had to change the way it does business. But this raises a question: why should the funeral industry change anything? Why not just run a bunch of advertisements telling people to buy $20,000 coffins? Then surely everyone will buy them, right?
But that's obviously not how it works.
And then there's the story of the American waterbed industry. Many people over forty may still remember the time in the 1980s when all the cool kids had waterbeds. But then they fell out of favor and waterbed stores collapsed in a heap of irrelevance during the 1990s. But why did the waterbed merchants allow that to happen? Why didn't they just run a bunch of advertisements telling people to buy waterbeds?
People do what advertisers tell them to do, right?
After all, we're told that "Russian hackers" with some targeted online ads '-- many of which were little more than low-budget unsophisticated memes '-- "swayed" the 2016 election and somehow turned Hillary voters into Trump voters.
The next time a modern-day McCarthyite insists that the 2016 election was stolen by Russian memes, let's keep in mind that with $500 million, Bloomberg couldn't manage to convince more than a few voters to vote for him instead of for Joe Biden, who apparently thinks he's running for the US Senate.
So, let's just chalk up the failed Bloomberg campaign to yet another case of how all the ads in the world won't convince people to buy a product'--or vote for a candidate'--they don't like, don't want, and generally regard as useless.
Happy Birthday, Murray!Today would have been Murray Rothbard's ninety-fourth birthday. He was an unforgettable friend, whose immense knowledge of many different fields was unsurpassed in my experience. In a lecture on the Austrian theory of the business cycle, he mentioned the common objection that the...
Today would have been Murray Rothbard's ninety-fourth birthday. He was an unforgettable friend, whose immense knowledge of many different fields was unsurpassed in my experience. In a lecture on the Austrian theory of the business cycle, he mentioned the common objection that the expansion of bank credit might have no effect if investors anticipated trouble. After the lecture, I asked whether Mises had answered this point. He said, ''See his response to Lachmann in Economica 1943.'' I often went to used bookstores with him, in both Palo Alto and Manhattan, and listened to him as he commented on nearly every book on the shelves. When he was a student at Columbia, he admired the philosopher Ernest Nagel, who he said would always encourage students to do new work. Murray was like this himself. He constantly encouraged students to work on Austrian and libertarian topics. His support for me was never failing, and I owe him everything. If only he were still here now, to guide and instruct us!
Does the Coronavirus Make the Case for World Government?Sometimes terrible things happen without any human malfeasance, and the novel Wuhan coronavirus may in fact be one of those things. It is entirely plausible the virus emerged from "wet markets" in the Hubei Province of China rather than as a fumbled (or worse, intentionally...
Sometimes terrible things happen without any human malfeasance, and the novel Wuhan coronavirus may in fact be one of those things. It is entirely plausible the virus emerged from "wet markets" in the Hubei Province of China rather than as a fumbled (or worse, intentionally released) bioweapon cooked up by the Xi Jinping government.
We may never know, of course. But easy or readily apparent answers to the question of how this could have been avoided should be viewed with the skepticism appropriate to any state propaganda. Crises of all kinds, whether economic, political, military, or health, send ideologues scrambling to explain how such events fit neatly into their worldview. In fact, political partisans often attempt to paint any crisis as having occurred in the first place precisely because their policies and preferences have not been adopted.
The Wuhan coronavirus seems tailor-made for this. Alarmists who argue for (i) much more robust and comprehensive "public health" measures by national governments and (ii) greater supranational coordination inevitably point to infectious diseases as justification for increased state power over personal medical decisions. Scary and fast-spreading viruses are perfect fodder for their busybody argument that people cannot simply be left to their own devices.
Cross-border outbreaks of illnesses are particularly well suited to the preexisting bureaucratic desire for power over populations: they make the public much more willing to accept forced quarantines and arrests for noncompliance; forced immunizations; involuntary commitments to state facilities; curfews; restrictions on business operations and travel; and import controls. They also allow public health officials to commandeer and manage efforts to find "the cure," who then take credit when the virus eventually relents.
These are the sorts of things that authoritarian politicians want all the time. Crises simply provide an opportunity to ratchet up their power and also to accustom the public to being ordered around and taking cues from centralized government sources.
Antistate libertarians are not immune to this phenomenon of attempting to place square events into round holes. We tend to explain crises as the result of state (or central bank) interference, either created or made worse by the lack of market discipline, incentives, and property rights lacking due to state action or state regulation. Libertarians think the Food and Drug Administration, for example, kills more people than it saves by approving bad drugs and delaying regulatory approvals for promising treatments.
Moreover, an individualist libertarian perspective on bodily sovereignty poses an obvious challenge to public health. No individual should be forced to accept quarantine or immunization against his will, and in fact no individual should be forced to consider herd immunity or other collectivist notions when making medical decisions. Just as most libertarians don't think Doritos and Mountain Dew should be banned because their consumption imposes "public" healthcare costs in a statist/fascist system of mandatory insurance and tax-funded Medicaid, most don't think that individual health decisions should be overridden by politicians'--even in an "emergency" outbreak situation.
So how do we reconcile public health with individual rights? Should the latter be sacrificed to protect the former?
Three observations present themselves.
First, even the highly authoritarian Chinese national state has been unable to contain the virus, though it can cordon off whole cities by dictatorial fiat and impose wholesale house arrest over cities in a manner unthinkable in Western countries. Chinese state police literally drag people suspected of carrying the virus out of their cars, forcibly put them handcuffed in hazmat vehicles, and haul them off to what amount to prison hospitals. Chinese citizens who speak out publicly against the Xi government's handling of the crisis are arrested. So, if the Chinese government can't contain it, even with martial law and control over media, how in the world do Western countries expect to do so? Imagine trying to quarantine, say, Dallas and Fort Worth!
Second, poor countries (and China is quite poor per capita compared to the West, ranking around sixty-fifth internationally) almost invariably suffer from worse public health conditions. Sanitation, nutrition, and access to drugs, facilities, and competent doctors matter a great deal when it comes to incubating infectious diseases. Richer countries are healthier countries, and the West benefits when conditions improve and modernize in the Third World.
Third, we already have de facto supranational bodies such as World Health Organization tasked with preventing and lessening the spread of diseases like the coronavirus. The WHO has been around since 1948 and hasn't prevented a host of modern epidemics like SARS and Zika; excatly what new international agency or organization will do better?
If anything, pandemics call for decentralization of treatment. After all, the best approach is to isolate infected people rather than bringing them into large hospital populations in crowded city centers. What doctor or nurse wants to work in a hospital full of coronavirus cases?
We might wish for a utopian libertarian answer to public health crises like the coronovirus, along the lines of a Rothbardian externality argument for airborne pollution. But sometimes bad things simply happen. The best hope is market incentives, the rapid application of individual human ingenuity and self-interest to the situation. Liberty is better, not perfect. And governments, including the Chinese government, are clueless as always.