Grégoire Canlorbe

A conversation with Tsutomu Hashimoto, for Revue Arguments

by Grégoire Canlorbe · Oct 19, 2017

Tsutomu Hashimoto is a Professor of Economics at Hokkaido University in Japan, obtained a Ph.D. at Tokyo University, and published various books on liberalism and philosophy of economics in Japanese. He was a visiting researcher at New York University from 2000 to 2002 and at Aix-Marseille University in 2016. Contact: hasimoto@econ.hokudai,ac,jp

Grégoire Canlorbe: Among the major quests of your lifetime, one project that is dear to your heart consists in constructing an original theory of liberalism from the angle of a “philosophical anthropology of the social sciences.” Could you develop the origin of this vocation and the present lines of force of your perspective?

Tsutomu Hashimoto: So far, I have published nine and edited five books in Japanese, all related to the theme of liberalism. You mention “philosophical anthropology of social sciences,” which is actually the title of my second book. In this book, I developed my philosophical foundation of liberalism, focusing on the concept of “person” in the context of philosophical anthropology since Max Scheler (1874–1928).

However, before explaining this, let me discuss my experiences on three epoch-making or breaking crises of our age, since all of these led me to a new consideration on liberalism. The first was the Revolutions of 1989 that lead to the fall of communism in Eastern European countries. The second were the 9/11 terrorist attacks in 2001, which actually happened during my stay in New York. The third was the Fukushima Daiichi nuclear disaster in Japan, in 2011.

First, the Revolutions of 1989 gave me the starting point of my study. At that time, I was 22 years old and was simply shocked by the corruption in Eastern European communist countries. Many Japanese intellectuals who influenced me in the 1980s were sympathetic to Marxist ideologies and they investigated new possibilities or frontiers on Marx’s text in terms of developing contemporary philosophy. In fact, many creative social theories in Japan emerged from this line of investigation. However, in 1989, I realized that these theoretical contributions were entirely useless in terms of normative issues.

At that time, I also had the chance to read F. A. Hayek’s Law, Legislation and Liberty during a seminar at my university in 1989. However, since the professor was a stubborn Hayekian and talked about Hayek authoritatively, I came to read Hayek critically. Meanwhile, I happened to find M. Rizzo and G. O’Driscoll’s stimulating book, Economics of Time and Ignorance, in my college library. When I found this book, I intuitively realized that it would be very important for both my life and research. In fact, after 10 years, I translated it into Japanese and, thanks to Professor Mario Rizzo, I had the chance to be a visiting researcher with New York University from 2000 to 2002.

My first book, The Logic of Liberty: Popper, Mises and Hayek, published in 1994, is about my investigation on liberalism as anti-communism. During the entire 20th century, the most important issue in the field of economic thought was “which regime is better or more desirable between capitalism and socialism?” Since this question cannot easily be settled at a theoretical level, the debate proceeded up to the stage of scientific methodology, and many people examined which side’s methodology or epistemology was scientifically legitimate between capitalism and socialism. This was a unique situation, because methodological statements carried some normative implications of these ideologies.

For example, methodological individualism carried implications on normative individualism. However, in my analysis, this situation gradually collapsed or faded. As such, methodological debates between capitalist and socialist camps have ceased to represent normative conflicts, partly due to their logical endogenous problems and partly due to historically exogenous elements. In other words, methodological investigation became de-ideologized or eliminated its “thought-ladenness.” In order to show what happened with the methodologies of the 20th century, I developed my “functional theory of methodology” and presented a thesis in which I call upon the “thought-ladenness of methodology.” This is, in short, the theoretical core of my first book.

The second book, as I already mentioned, is a philosophical investigation, in which I proposed a new model of what I call “problem-subject.” In this book, I analyzed the achievements of Max Weber and the subsequent Weberians and constructed an original system of philosophical anthropology.

After working on this book, I went to New York for two years as a visiting researcher and experienced the 9/11 terrorists attack in 2001 there. I was frightened not only by this incident, but also by the subsequent situation in New York. For example, I was stuck in an underground car a number of times for reasons unknown to me. Since I was alarmed by this situation in New York, I changed my research interests from Austrian economics to international political economy in general. The achievement of this change was reflected in the publishing of my third book, The Conditions of Empire, in 2007.

In this book, I first developed the ideas of “trans-conservatism” and “spontaneitism” as certain types of liberal enterprise in a global context. From this original perspective, I proposed two policies. One is how to create “world money” through Tobin’s tax and associated avoidance activities. The other is how to promote a liberal society by adjusting tariffs.

After writing this book, I published several other books on liberalism. Finally, in 2011, Japan experienced the Fukushima Daiichi nuclear disaster. This was the third crisis for me and a crisis of the legitimacy of the Japanese government as well. Facing this disaster, I conceived the nature of the problem from an Austrian perspective and pointed out that the constructivist formation of the electricity supply is at issue. From a broad perspective, capitalism in the 21st century would be driven by people’s ecological concerns.

In my book, Lost Modernity, published in 2012, I tried to answer the following question: what type of driving force is possible in our age for capitalism? Theoretically, I divided contemporary history after World War II into three periods: modernity, post-modernity, and lost modernity. Then, I investigated the driving force of capitalism in the age of lost modernity. The answer would be neither “modern diligent work,” nor “post-modern expanded desire.” I will talk about my investigation later during our interview but, in any event, this book was based on my observation on the contemporary Japanese society.

Therefore, I have developed my idea on liberalism by facing the three epoch-making crises: the Revolutions of 1989 in Eastern Europe, the 9/11 terrorist attacks in New York, and the Fukushima Daiichi nuclear disaster in Japan.

I call my original theory of liberalism “growth-oriented liberalism” or “spontaneitism.” More recently, I developed a theory on liberalism by extending the implications of Dogen’s masterpiece, Shouhou Genzou (Treasury of the True Dharma Eye), written in 13th century Japan. I am still trying to broaden my original perspective, especially in the field of economic philosophy.

For example, I am targeting a theory of “capability as potentiality,” as opposed to Amartya Sen’s “capability as ability,” a “vita activa” model of interventionism, as opposed to Cass Sunstein’s libertarian paternalism, and so forth. Hopefully, I would systematize these theoretical studies and present a new image of the liberal ideal. Overall, this will be a work on the art of governance from the perspective of a Hayekian horticultural expert, which I am still working on.

Grégoire Canlorbe: In economics, you esteem the Austrian methodology and Weltanschauung very highly. When it comes to enlightening the specificities of Japanese capitalism, how do you sum up the conceptual advantages of Austrian economics over other approaches such as Weberian sociology or Marxian theory?

Tsutomu Hashimoto: Considering the idea of catching up with western capitalism, I think that there is no great worldview or Weltanschauung that has contributed to explaining it in detail. This is true in the Japanese case as well. Neither Max Weber nor Karl Marx provides us with any significant theory on this topic. Austrian economics, however, might have a normative answer. This school would propose that developing countries be incorporated into the global network of market economy through deregulation of the domestic market and acceptance of capital from advanced countries as much as possible.

This type of normative perspective would explain the successful history of capitalism in small countries such as Singapore, but would not explain other successful economic developments in large countries such as Japan. In fact, the Austrian worldview has begun to influence the Japanese society after Japan has economically caught up with the western countries in the 1980s.

In order to look into the specificities of the success of Japanese capitalism, we need to refer to some innovations in management, such as “just-in-time inventory management” and “quality control circle.” In this respect, Ikujiro Nonaka’s work on shared tacit knowledge in firms is worthwhile mentioning, since this theory explains why Japanese firms have competitive advantage in the global market economy in terms of knowledge. Nonaka’s work is best placed in the context of Austrian economics, as an application of the Hayekian theory of knowledge.

It is also worth mentioning that Katsuichi Yamamoto, the founder of Austrian economics in Japan, became active in the political area as well. While he wrote a comprehensive book on socialist calculation debate in 1939 and several related books on anti-socialism, anti-totalitarianism, and anti-welfare state, he became a member of parliament for five mandates. His political stance was based on moral nationalism and he sought national integrity for the Japanese spirit by means of education. It would be interesting to study his contribution to Austrian economics and his politically conservative message.

What I utilize from the Austrian worldview are some contemporary issues on social policies in Japan. For example, I have presented my reform proposals on national universities. In Japan, national universities have finally transformed into “national university corporations” in 2003. During this transformation, I proposed the following ideas: free mergers and acquisitions among universities, free use of university brand names, acceptance for those who passed a low standard of common entrance examinations in every university and college, additional examination to select students starting the third grade, and so on. It is interesting to see that some of my proposals have been accepted and institutionalized in the reform process of universities.

Other proposals of mine are related to the following issues: privatization of post offices, counter-arguments on the criticism of neoliberalism in Japan, reform proposal on the NHK (National Broadcasting Corporation), reform proposal on the tariff system, proposal to create a world currency, etc. In these proposals, I am, to some degree, inspired by Hayek’s way of thinking rather than by Marxist, Weberian, neoclassical or institutional economics.

A conversation with Deirdre McCloskey, for Man and the Economy

by Grégoire Canlorbe · Juin 28, 2017

Deirdre Nansen McCloskey taught at the University of Illinois at Chicago from 2000 to 2015 in economics, history, English, and communication. A well-known economist and historian and rhetorician, she has written 17 books and around 400 scholarly pieces on topics ranging from technical economics and statistical theory to transgender advocacy and the ethics of the bourgeois virtues. She is known as a “conservative” economist, Chicago-School style (she taught in the Economics Department there from 1968 to 1980, and in History), but protests that “I’m a literary, quantitative, postmodern, free-market, progressive-Episcopalian, Midwestern woman from Boston who was once a man. Not ‘conservative’! I’m a Christian libertarian.”

Her latest book, out in May 2016 from the University of Chicago Press—Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World—argues for an “ideational” explanation for the Great Enrichment 1800 to the present. The accidents of Reformation and Revolt in northwestern Europe 1517–1789 led to a new liberty and dignity for commoners—ideas called “liberalism”—which led in turn to an explosion of trade-tested betterment, “having a go.”

The earlier book in the trilogy, Bourgeois Dignity: Why Economics Can’t Explain the Modern World (2010) had shown that materialist explanations such as saving or exploitation, don’t have sufficient economic oomph or historical relevance. The first book in the Bourgeois Era trilogy, The Bourgeois Virtues: Ethics for an Age of Commerce (2006), had established that, contrary to the clamor of the clerisy left and right since 1848, the bourgeoisie is pretty good, and that trade-tested betterment is not the worst of ethical schools.

Grégoire Canlorbe: Could you start by reminding us of the lines of force of your libertarian case in favor of the principle of unhampered market economy and against the belief that state intervention is virtually omnipotent?

Deirdre McCloskey: One principle and one consequence. The principle is the liberal one that persuasion and trade are better for humans than violence and compulsion. The liberal principle fosters the bourgeois virtues, as against the aristocratic/bureaucratic vices. It has long been praised—by the Blessed Smith, by Mill, by Herbert Spencer, by Mises and Hayek and Friedman. Smith wrote of “the obvious and simple system of natural liberty,” and declared in 1755 that “little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.” He did not realize how very true his deduction from the liberal principle would prove to be, when slowly adopted in the nineteenth century, against the old and new pressures of mercantilism—as old as the Navigation Acts and as new as the Trump administration.

The consequence is that adhering to the liberal principle, as China has in economic policy since 1978, and India in both economy and polity since 1991, yields a Great Enrichment, a rise of real income per head in a couple of generations from horrible poverty to reasonably comfort—on the order not of 100% or even 200%, but 3,000%. The consequence of liberalism after 1800 was that masses of ordinary people were encouraged to have a go. The having-a-go resulted in steam power, plate glass, autos, containerization, and the modern university.

Grégoire Canlorbe: One of your favorite fields of study, in which Vilfredo Pareto may have been a precursor with his theory of “residues” and “derivations,” is the rhetoric of economics. A salient feature of our epoch, in this regard, seems to be the invasion of anticapitalist fallacies. “Every mystery, past, present, or future, wrote Pareto sarcastically in The Mind and Society, yields to the magic password ‘capitalism.’ Capitalism, and capitalism alone, is the cause of poverty, ignorance, immorality, theft, murder, war.” How would you account for the persisting attractiveness of anticapitalist rhetoric? How do you respond, in particular, to Thomas Piketty’s highly popular claims about the worsening of income inequalities?

Deirdre McCloskey: I myself was a long time ago a mild-mannered Marxist. I think the attractions of socialism arise from our experience as children in a loving family, in which income falls myserteriously from Dad, and Mom is the central planner. Unless we are raised on a farm or in a small business, we get no early instruction in the charms, and terrors, of voluntary exchange. We think commands rule the economy, the way commands do rule the family or firm inside—though the child does not realize that prices in markets outside rule all. It is shocking to a child of the bourgeoisie such as Marx and Engels and Lenin, to find that he or she cannot command the rich to relieve poverty. It does not occur to the child that voluntary exchange, and having a go under a liberal ethic, are what has in fact relieved poverty. The relief has not come out of redistribution by state violence from the rich to the poor.

As to Piketty, I wrote a 50-page, respectful review of his book, concluding that it was a brave attempt, but mistaken in ethics and economics and history. I listened in October of 2016 in Shanghai to a paper by Samuel Bowles, an ex-Marxist economist at the Sante Fe Institute, in which he showed that in fact the income distribution is notably similar in all societies, old and modern. That Sam then suddenly concluded that we need to massively redistribute income shows merely the persistence of the leftward lean acquired as a child, against the evidence of its failures accumulated as an adult. A policy of redistribution does not follow naturally from Sam’s amazing historical findings. Rather the contrary.

A conversation with Majid Oukacha, for Gatestone Institute

by Grégoire Canlorbe · Juin 1, 2017

Majid Oukacha is a young French essayist who was born and grew up in a France which he recognizes less every year. « A former Muslim but an eternal patriot, » as he sometimes likes to describe himself, he is the author of Face to Faith With Islam, a systematic critique, without value judgments, of the most inconsistent and imprecise Koranic laws.

Grégoire Canlorbe: Could you start by reminding us of the circumstances and motives of your abandoning Islam — and of your decision to take up your pen to unravel your former religion for the public at large?

Majid Oukacha: Like all Frenchmen who were born and grew up in France in the late twentieth century, I am fortunate to belong to a peaceful nation that allowed me to enjoy rights and freedoms for which I never personally had to fight. My parents, French citizens of Algerian origin and Muslim persuasion, provided me with a religious education, which destined me to remain a devout Muslim. They also gave me a civic, social and ethical education based on respect for France and its values, as embodied in its motto, « liberty, equality, fraternity. »

I started going to the mosque at the age of eight. The first imam who taught me, and who came from a foreign country, had a perfect French accent, a big, cheerful smile, and he was careful never to give orders to his students outside the walls of the mosque. The courses I took quickly led me to see that what I thought was a blessing — to be born into a faith able to save me from Hell, which, according to the Koran, spares only Muslims — would also become a permanent burden.

When one is a Muslim, every trivial action of daily life is codified, from how to drink a glass of water upon waking to how to go to bed. I submitted to Allah to avoid the torments of His wrath in the afterlife; I obeyed codified rituals that sometimes seemed a waste of time or a nonsense. My non-Muslim friends were accustomed to hearing me tell them I had to interrupt a game of football or cards to go to the mosque. There, I essentially learned to do the salat, the Muslim five-times-a-day prayers, as well as the bottomless pit of behavioral codes established as virtues by the romanticized figure of the prophet Muhammad.

In the middle of the uniform flock — blindly imitating a distant spectrum imposing its obligations and prohibitions — I was not afraid to ask « hard » questions.

« Why in Koranic law about the need to cut off the hand of thief (Surah 5, verse 38), does Allah not say which hand is to be cut off (the right one or the left one)? Why does He specify no minimum value for the theft from which the hand of a thief can be cut off? Stealing an apple for the first time in one’s life, does it really deserve to have a hand severed? And why does Allah not say the minimum age of a thief who must have a hand cut off? Should a 12-year-old who has never stolen before really be held as responsible as a 40-year-old repeat offender? »

« Why should one walk seven circles around the Black Stone during the Hajj and not six or eight? What will happen if I walk around it eight times? »

« The Prophet Muhammad explains in his Sunnah that a woman, a black dog or a donkey passing in front of a praying Muslim can cancel his prayer; but, as usual in the Sunnah, Muhammad merely advances a judgment without explaining why it should be that way. To someone who does not believe in Islam, such a statement sounds like a superstition. Why not give the intellectual journey linked to it, instead of just a dogmatic sentence? If it is Allah Himself who gave him this knowledge, why didn’t the Hadith that mentions this prophetic story become a verse of the Koran? The Koran is supposed to represent the messages of Allah which the prophet Muhammad passes on to his contemporaries to inform them about what their creator expects of them. If a woman passes one kilometer from someone who is praying, is the prayer canceled then? What is the maximum distance from which a prayer is cancelled altogether? »

The logical « domino effect » of these questions is only a small part of the many thoughts that can, and should, keep one’s mind alert — far from the corset of indoctrination that is closed to doubt. I never heard satisfying answers to the limits of this juridical Islam to which I had always pledged allegiance, so I decided to seek them directly from Allah himself. Just before entering university, I tried to understand Islam with an unbiased look, rather than to learn it as an unquestioning believer.

I had decided to read the entire Koran, from the first to the last sentence, and to register impressions, doubts, and questions in a notebook. Reading the Koran that way not only forced me to have to admit that almost all Islamic laws and dogmas had no scientific or rational basis, but it also highlighted that Islam, under its founder, was a misogynistic religion, preaching slavery, and an enemy of freedom of thought. I had fallen. My trust in what was both obvious and intangible had deceived me all this time. It is the libertarian and egalitarian values of secular and humanist France — which I have learned to love and respect — which gave me the strength to refuse to give in to the fear of blackmail in the form of eternal Hellfire.

Leaving Islam confirmed my longtime fear that one day I would witness the French people lose all these freedoms and this lifestyle that make France a beloved and envied country throughout the world. All revolutions do not necessarily begin or end in a bloodbath. In a democracy, the majority has the power to make or break a revolution, away from anarchy and war. The day an Islamic majority in France will vote for a president and parliamentarians able to define for all of us what separates right from wrong, good from evil and fair from unfair, what choices then will remain for us?

You cannot flee from problems indefinitely. You have to fight them at one time or another. I need to convince the maximum of my contemporaries that Islam is a threat to our individual rights and freedoms, and I choose to fight using words, because communication (through writing, speech) is the weapon that gives me my strength. I am, as far as I know, the only author who has made a comprehensive critical study of the principal legal and doctrinal aspects of Islam, by addressing the technical inaccuracies of the laws but without ever stating any moral or value judgment. I have no taboos so I dealt with explosive topics: slavery, pedophilia, criminalization of freedom of conscience… I think this is the most effective method to demonstrate to the widest possible audience the obscurantism and danger of Islam: a universal legislation that cannot coexist with difference.

Grégoire Canlorbe: This objective look at the technical limitations of Koranic laws seems rare. Is it possible to do the same work with religious books from Christianity or Judaism?

Majid Oukacha: For Muslims, every sentence in the Koran is meant to be a tale whose author is Allah Himself, the creator of the world, and who is an omnipotent, omniscient and perfect God. This God proclaims many draconian universal laws that are not limited by place or time.

This base makes analyzing the Koran far simpler than analyzing some of the sacred texts of Judaism or Christianity. The Talmud cites original narratives and interpretations thought by humans. It is up to today’s Jews to decide whether to adhere to these passages or to question them. We can say the same of the New Testament, which is dear to Christians.

Today, the countries where one lives best, if one is a woman or a free thinker, are precisely the countries with Christian and Jewish roots: France, the United States of America, Israel, Australia, England… These countries defend the individual freedoms of the weakest and the most varied people more than any Muslim country in the world has ever done. If a Muslim wants to criticize a misogynistic passage from the Bible or the Torah for example, good for him!

A conversation with Geerat J. Vermeij, for Man and the Economy

by Grégoire Canlorbe · Mai 31, 2017

Geerat J. Vermeij is a Dutch-born professor of geology at the University of California at Davis. Blind from the age of three, he graduated from Princeton University in 1968 and received his Ph.D. in biology and geology from Yale University in 1971.

An evolutionary biologist and paleontologist, he studies marine mollusks both as fossils and as living creatures. He started writing about his Escalation hypothesis in the 1970s. He received a MacArthur Fellowship in 1992. In 2000 Vermeij was awarded the Daniel Giraud Elliot Medal from the National Academy of Sciences.

His books include Evolution and Escalation: An Ecological History of Life, A Natural History of Shells, Privileged Hands, Nature: An Economic History, and The Evolutionary World: How Adaptation Explains Everything from Seashells to Civilization.

Grégoire Canlorbe: According to a predominant view in philosophy and in the social sciences, the social hierarchy is an ad hoc cultural construction and not a biological trait. Man is born equal in terms of wealth as well as in terms of social status. Nature spawns neither poor people nor rich people, neither servants nor masters, neither workers nor bosses. Hierarchical relationships are merely cultural, added onto our biological nature (rather than innate). Is this popular view founded, at least in part, in your opinion?

Geerat J. Vermeij: It is true that the human hierarchy is cultural, but there is a substantial cultural inheritance. Although one’s origins can be overcome, the cultural heritability of phenomena such as poverty and status is nonetheless strong, reinforced by epigenetic effects.

Inequality and imperfection, however, appear to be universal and necessary accompaniments to life itself. Whenever organisms interact, one party will almost always gain more or lose less than the other as they compete or cooperate. Very rarely will the outcomes be identical for the participants. Although their fortunes may reverse in the long run, with the underdog persisting longer and ultimately gaining the upper hand, the short-term advantage during interactions tends to belong to the party with the greater power and reach.

This principle applies, for example, to the evolutionary relationship between predator and prey. As a rule, predators exert more intense selection on their prey than prey do on their attackers. Not only do they often kill their victims, but they restrict the times and places in which vulnerable prey can be active. Prey species become important as agents of selection on their attackers only if they are dangerous. Poisonous snakes, stinging wasps, biting crabs, and kicking moose can inflict significant injury on a would-be predator, and could therefore influence the predator’s behavior. Mobbing—large numbers of relatively innocuous prey ganging up on an attacker, as happens when songbirds mount a group defense against a hawk— may also diminish the evolutionary advantage that predators hold over their prey.

Inequalities abound at every scale of biological organization. Ecosystems in which plants and plankton fix carbon by means of photosynthesis subsidize ecosystems that run entirely on food sources derived from photosynthesis. Life on the great abyssal plain of the deep sea depends completely on the steady rain of dead organisms and their excrement falling from the sunlit waters above. It is in the top few hundred meters of the ocean where there is sufficient light for phytoplankton— single-celled life-forms capable of harvesting light and taking up dissolved minerals for photosynthesis— to produce most of the food on which all other living things in the ocean rely. Over the course of evolution, this nutritional subsidy has extended to a subsidy of lineages. The sunlit zone has been the source of most deep-sea groups of organisms, whereas the deep sea has contributed only a handful of cave-dwelling and polar species to the shallow-water ecosystems of the ocean. Land life on the desert shores of Peru, southwestern Africa, and northwestern Mexico is subsidized by marine life in the productive waters just offshore, because seabirds feeding on fish ferry food and feces to shore. Elsewhere, life in the sea benefits from nutrients coming in from rivers that drain rich ecosystems on land. In each of these cases, the more productive system subsidizes, and therefore has a disproportionate influence on, the less productive one.

Even the most egalitarian human societies exhibit inequalities in income and status among individuals, among tribes, among institutions, and among nation-states. Insofar as the price of goods and services is determined by adequate information about supply and demand, producers and merchants possess more information about, and have greater control over, commodities than do individual consumers. Through advertising, they can manipulate demand; and by tracking patterns of what goods and services are sold when, where, and to whom, well-organized companies can predict demand and adjust supply accordingly. Companies simply possess and create a better hypothesis about supply and demand than individuals do, and therefore prices are set largely by them. Their information is, of course, far from complete and may even be inaccurate, but the power it bestows nonetheless remains chiefly in the hands of well-organized enterprises. Only when consumers or labor unions themselves become organized into powerful counterweights to business is this economic inequality lessened or reversed.

The important point is that inequalities arising from differences in access to information or power are not just manifestations of human nature, but pervade the whole of the living world.

Grégoire Canlorbe: In his book Darwin’s Dangerous Idea, Daniel Dennett refers to evolutionary principles as “universal acid” in order to emphasize their all-encompassing explanatory power. According to you, one might equally employ the same metaphor to express the power and reach of the economic perspective, which you see as fundamentally identical to the evolutionary worldview.

Could you explicit and develop this iconoclast point of view? Why do living beings necessarily evolve in an economic world of trade, competition, opportunities and challenges?

Geerat J. Vermeij: Like humans, other living things inevitably compete for (and cooperate to gain access to) locally scarce resources. Competition and resource cooperation are fundamentally economic phenomena. In evolution, survival and reproduction require sufficient resources; therefore, natural selection among phenotypes is fundamentally also an economic phenomenon.

In his book Darwin’s Dangerous Idea, the American philosopher Daniel Dennett indeed characterizes evolution as “universal acid” to emphasize the power of evolutionary thinking to penetrate very nook of human knowledge. But this is a grim image, a metaphor that calls to mind the satanic power feared by doubters and deniers. Evolution is not some corrosive agent, but a universal elixir that enriches those willing to taste it.

Understanding its mechanisms and consequences yields an emotionally satisfying, aesthetically pleasing, and deeply meaningful worldview in which the human condition is bathed in a new light.

A conversation with Steve Kates, for Man and the Economy

by Grégoire Canlorbe · Mai 30, 2017

Steven Kates is Associate Professor of Economics at RMIT. He was chief economist for the Australian Chamber of Commerce for 24 years and a commissioner on the Productivity Commission. If he has a mission in life, it is to see Keynesian economic theory disappear from our textbooks and the return of the classical theory of the cycle as the guide to economic policy.

He has written Free Market Economics: an Introduction for the General Reader (Edward Elgar 2011), which explains what economic theory looks like if the entrepreneur is placed at the centre of microeconomic analysis and in which Say’s Law is brought back as the core of macro.

Grégoire Canlorbe: According to you, Say’s Law was the statement that demand would never fall short of properly proportioned supply. In other words, demand deficiency could never occur—except in the case of miscalculations on the side of supply.

At first sight, this proposition is a tautology. By definition, so long as decisions by producers on what to produce coincide with decisions by buyers on what to buy, there prevails an equilibrium of supply and demand. In my opinion, the law of markets presupposes in fact something crucial, namely that the desire to buy goods is only limited by the nature of goods supplied. Although there may happen a global mismatch between the wishes of buyers and the composition of supply, the willingness to acquire (consumption or equipment) goods is otherwise infinite.

Overproducing means here to produce something in excess with the demand of people or to sell it at a price that does not cover the costs of production. The classical proponents of the law of markets believed overproduction of everything could never occur—unless an outbreak of entrepreneurial mistakes concerning the public’s preferences or purchasing power. In this regard, what they fundamentally did was to castigate any theoretical explanation of crises holding the fluctuations in demand for a phenomenon totally independent of the structure of supply. The classics generally put it in these somewhat sybillin terms: while men err in their production, demand is infinite as such. While recessions happen, they are never caused by demand deficiency.

In his posthumous Notes on Malthus, David Ricardo provided an eloquent summary of this precocious intuition of classical economics.

“If the commodities produced be suited to the wants of the purchasers, they can not exist in such abundance as not to find a market. Mistakes may be made, and commodities not suited to the demand may be produced—of these they may be a glut; they may not sell at their usual price; but then this is owing to the mistake, and not to the want of demand for productions [per se].” [i]

Could you start by reminding us of the lines of force of the reasoning underlying this cumulative proposition on the part of Jean-Baptiste Say, James Mill and Robert Torrens?

Steve Kates: There are a number of false assumptions on the nature and scope of Say’s Law that must be eliminated before we can have this conversation.

The first and most important of these assumptions is that Say’s Law is a conception best understood by looking at economists from the early nineteenth century. And the reason this conception remains embedded in so much of the modern approach is that it is called “Say’s” Law, Jean-Baptiste Say, of course, having written the first edition of his Treatise in 1803. So let me begin by putting this discussion on Say’s Law into its proper context.

The term “Say’s Law” was invented in the twentieth century. It was invented by the economist Fred Taylor, as he describes in his introductory text, Principles of Economics. The text was self-published in 1911 and distributed only to his own students at the University of Michigan, but was then published in 1921 by the Ronald Press in normal textbook form as the eighth edition for use beyond his own classrooms. And how do we know that Taylor invented this term? Because he says so. Chapter XV is titled “Say’s Law” and in it he discusses why he chose this name. Having explained how demand is constituted by supply, he wrote:

“The points just brought out with respect to the relation between demand and the output of goods are so evident that some will consider it scarcely legitimate to give them the dignity derived from formal statement… I shall therefore put the proposition we have discussed in the form of a principle. The principle I have taken the liberty to designate Say’s Law; because though recognized by many earlier writer, it was particularly well brought out in the presentation of Say (1803)”. [ii] (My bolding)

I particularly like the fact that for Taylor and his contemporaries the principles behind Say’s Law seemed so obvious that he hardly thought it even needed to be said. If you don’t believe it, look it up. Taylor had been using the phrase “Say’s Law” since 1909, always mentioning that he had invented the term. It is a phrase never used before it was coined by Taylor and came into common use on the American side of the Atlantic only after his text was formally published in 1921. The very embarrassing question that comes from this is, if this is a twentieth century term invented by Taylor, how did the words “Say’s Law” show up in The General Theory? Because once you realise that Keynes had to have been reading a literature that no one knows he had been reading, the provenance of The General Theory becomes very different from what we have up until now been taught.

Nor does the embarrassment end there. Keynes’s definition of Say’s Law is “supply creates its own demand”, the only phrase within economics other than “the invisible hand” known to every economist. And that, too, comes from a twentieth century American text, Value Theory and Business Cycles, a work published in 1933 by an obscure and unknown American economist, Harlan Linneus McCracken. In a chapter on “Involuntary Failure of Demand” McCracken wrote:

“The Automatic Production-Consumption Economists who insisted that supply created its own demand, that goods exchanged against goods and that a money economy was only refined and convenient indirect barter missed the significance of money economy entirely.” [iii] (My bolding)

You won’t believe that either, since you rightly find it ridiculous that you should be hearing such significant facts about the origins of the most thoroughly investigated economics text in history only now, some eighty years after The General Theory was published and brought to your attention by someone as unknown to you as Harlan McCracken. But there you are, and there is no possibility of anyone refuting either of these two facts since neither the term “Say’s Law” nor its definition “supply creates its own demand” have ever been found anywhere within the economics literature of the nineteenth century. Neither the term “Say’s Law”, nor its definition “supply creates its own demand”, were ever part of the discourse among economists prior to the twentieth century. The question you need to ask is how did they get into The General Theory?

Therefore, if you wish to understand the actual meaning of Say’s Law, it is worse than pointless to return to the economists of the early nineteenth century. It is to Taylor you must go since he specifically tells you what it means.

“Principle – Say’s Law. The Ultimate Identity of Demand and Product

“In the last analysis, the demand for goods produced for the market consists of goods produced for the market, i.e., the same goods are at once the demand for goods and the supply of goods; so that, if we can assume that producers have directed production in true accord with another’s wants, total demand must in the long run coincide with the total product or output of goods produced for the market.” [iv]

But we must go a bit farther to understand why Taylor had gone to the trouble or writing his chapter, identifying this principle and giving it the name Say’s Law. All this is explained at the very start of the chapter.

“General Demand Fallacies. – Among the fallacious notions in popular thinking that have gained very wide currency are to be found a number which grow out of misconceptions as to the real source of the general or total demand for goods, and as to the methods by which that demand is increased or diminished. Several types of these fallacious notions may be cited. Thus, government improvements of all kinds, including even those of questionable value, are often supported by businessmen and others on the ground that such improvements increase the total demand for goods… A true understanding of the nature of the total demand for goods will show that these notions are fundamentally unsound.” [v]

Of course, that entire line of reasoning has utterly disappeared since the Keynesian Revolution. Everyone now believes what economics teaches, that government spending, even expenditure of questionable value, increases the total demand for goods and services, and therefore increases the total demand for labour. And while it may come as a shock to some to find that Keynes deceived his followers by hiding from them the research he had undertaken in writing his book, they will comfort themselves by arguing that at least he was right about these issues. But there is no denying the deception. Keynes lied about what he was reading and it is only these very faint traces that allow us to understand what he was actually doing. Of course, Taylor was also right about the economics and Keynes was wrong, as the consequences of the various stimulus packages should, by now, have made evident.

And as an aside, if you interested in a more extended discussion on all of this, you should look at my article, “Influencing Keynes: The Intellectual Origins of the General Theory” which was published in 2010. It’s all there and in fine detail.

So let me give you the proper definition of the principle that lies behind Taylor’s and this is from John Stuart Mill and from his Principles of Political Economy published in 1848. This is known as Mill’s Fourth Proposition on Capital, and it states:

“Demand for commodities is not demand for labour.” [vi]

The level of employment cannot be increased by increasing the demand for goods and services. It is Mill trying to tell us that a public sector stimulus will never reduce the level of unemployment. And while you might wish to deny that Mill is right about the theory, you cannot deny that, given his words, he would have foretold that the stimulus packages we have seen across the world since 2009 would with certainty fail. Just as each and every stimulus has done in each and every one of the countries in which it has been tried. The meaning of Say’s Law is thus found in the fact that the increased demand for goods and services by governments since the Global Financial Crisis has not led to an increase in employment in any country of the world. Instead, employment growth has been woeful, much worse than in any previous recovery since the Great Depression. It is thus unnecessary to go back to the nineteenth century to understand Say’s Law. All you need to do is look at the abysmal recoveries we have had and recognise that this is exactly what every classical economist would have told you would occur.

And it is not as if the policy direction from Mill had been ignored. This was highlighted by Winston Churchill’s in his 1929 budget speech.

“Churchill pointed to recent government expenditure on public works such as housing, roads, telephones, electricity supply, and agricultural development, and concluded that, although expenditure for these purposes had been justified: ‘for the purposes of curing unemployment the results have certainly been disappointing. They are, in fact, so meagre as to lend considerable colour to the orthodox Treasury doctrine which has been steadfastly held that, whatever might be the political or social advantages, very little additional employment and no permanent additional employment can in fact and as a general rule be created by State borrowing and State expenditure.’” [vii]

These were, moreover, genuine value adding forms of spending and in no sense of the make-work variety. Yet even then, little if any additional employment had been seen to have occurred as a result. The same may be said of the various stimulus packages that have been adopted across the world after the Global Financial Crisis.

Indeed, as a general rule, which has had no peace-time exceptions, increases in public expenditure do not and cannot lead to a permanent increase in employment. If anything, such expenditures will slow the recovery process and will inevitably keep unemployment higher than it would otherwise have been.

This is the conclusion that comes from a proper understanding of Say’s Law. There has, moreover, never been a single exception to this rule during the entire eighty year period since the General Theory was published.

A conversation with Roy Barzilai, for Agefi Magazine

by Grégoire Canlorbe · Mai 30, 2017

Roy Barzilai is an independent scholar, who studied both Ayn Rand’s philosophy of Objectivism and Rivka Schechter’s philosophy of language, rooted in the Hebrew Bible. The synthesis of Rand’s Aristotelian philosophy, and the biblical creed of ethical monotheism provides profound insights into the ideas that shaped the Western mind. By exploring the intellectual history of Western civilization, Roy seeks to reach a greater understanding of the human mind.

As a financial analyst for more than a decade, Roy became aware of the herd mentality in financial markets. He studied the Wave Principle of Human Social Behavior and the new science of socionomics, focusing on how change in social mood affects society, its ideas, philosophy, culture, and economy. This dynamism is the engine of history.

Roy holds undergraduate degrees from Tel Aviv University in Law, accounting, and computer science. He is the author of two books: The Objective Bible, published in 2014, and The Testosterone Hypothesis, published in 2015.

A conversation with George Gilder, for Agefi Magazine

by Grégoire Canlorbe · Mai 28, 2017

George Gilder is a venture capitalist and Senior Fellow at the Discovery Institute and American Principles Project, Editor-in-Chief of the Gilder Technology Forum (from Forbes).

Grégoire Canlorbe: It is not uncommon to hear that the global weakness of the contemporary USA lies in the worsening of income inequalities. The best predictor of social and economic class is nowadays the social and economic class of parents. People like the Rockefellers or the family of Mitt Romney are born into the 1% and pass that position along to their children. In other words, the USA have a plutocracy, like it or not; and that plutocracy should at least pay a higher tax rate and a higher death tax—a higher tax for passing along its wealth to its kids. America works best when it can open the path for dirt-poor kids with drive and intelligence to rise—as Abraham Lincoln rose from the poverty and mud of his father’s farm in Illinois.

What is your opinion on this popular view?

George Gilder: The popular view is nonsense. Inequality is irrelevant. Under free markets, capital flows not to those who most quickly spend it but to those who can best expand it. It goes to suppliers rather than demanders. What matters is mobility and creativity. Forbes magazine shows ever more rapid arrivals and departures from their lists of rich people. However, the “hypertrophy of finance” in the world economy that I describe in The Scandal of Money is fostering more inequality based not on merit but on government privileges.

The world’s central banks have become a fourth branch of government that centralizes economic activity and renders the system fragile and unfair. This is a serious threat to the future of capitalism. Futile and meaningless currency trading is now 73 times larger than all world trade in goods and services. Yet it fails to establish money more stable than the economic activity it supposedly measures. The perversion of money under socialism is the leading cause of immutable inequalities based on power and privilege rather than on knowledge and on contributions to the economy.

I believe that new forms of money based on the Bitcoin blockchain and gold will evolve in coming decades and emancipate the world economy from its central bank socializers. I also believe that this popular hostility towards income inequalities as such—and the inability to recognize that only inequalities based on privilege are illegitimate—is the symptom of an even more general misunderstanding of the nature of material progress.

As I have demonstrated in Wealth and Poverty, material progress is ineluctably elitist: it makes the rich richer and increases their numbers, exalting the few extraordinary men who can produce wealth over the democratic masses who consume it. Material progress depends on the expansion of opportunity: geniuses identify themselves chiefly through their works rather than by their inheritance or test scores. Material progress is difficult: it requires from its protagonists long years of diligence and sacrifice, devotions and risk that can be elicited and financed only with high rewards, not the “average return on capital”. Material progress, although democratically demanded, is procedurally undemocratic: it means the expensive support of activities thoroughly beyond the ken of the people, and often even their leaders.

Grégoire Canlorbe: “One of the problems with organized religion,” affirmed Hugh Hefner, “is that it has always kept women in a second-class position. They have been viewed as the daughters of Eve.” How would you assess these statements by the founder and chief creative officer of Playboy Enterprises?

George Gilder: Feminism condemns women to inferiority by subjecting them to the standards of male achievement. Feminists want to present women as victims, which means inferiors. Hefner celebrated the superiority of women’s bodies, which feminists decry. But Hefner, for all his philosophastering, did not have ideas any more interesting than the vanities of feminism. Generally speaking, he did not articulate nor materialize the true spirit of capitalism.

To the extent that both conservatives and socialists believe the engine of economic growth is driven by consumer demand, they agree to see permissiveness as favourable to growth under capitalism. In reality, demand, whether avaricious or just, is impotent to impel growth without disciplined, creative, and essentially moral producers of new value. All effective demand ultimately derives from supply; a society’s income cannot exceed its output. The output of valuable goods depends not on lechery, prurience, lust, and license but on thrift, sacrifice, altruism, creativity, discipline, trust, and faith. To the extent that pornography and promiscuity debauch the moral capital of the society—to the extent that they distract workers and entrepreneurs from the long-term effort to create new value—these sources of “demand” actually undermine economic growth.

By that measure, the sexual revolution embodied by Hugh Hefner and his magazine clearly retards economic progress and prosperity. It distracts, demoralizes, obsesses, and depraves the men and women who must forgo immediate returns, sacrifice immediate pleasures, master difficult disciplines, and respond to the needs and desires of others if they are to create successful businesses. Capitalism has been incomparably the most productive economic system in the history of the world because it best evokes the effort and creativity—the moral quality and productive energy—of workers and businessmen who put the interests of others before their own gratifications.

Grégoire Canlorbe: Your analysis and your appraisal of capitalism are based on a profound theory of information, which was recently synthetized in Knowledge and Power. Could you remind us and develop the main outlines of this highly integrated view of information, technology and entrepreneurship?

George Gilder: Based on the mathematical ideas of Claude Shannon and Alan Turing, information theory is an evolving discipline that depicts human creations and communications as transmissions across a channel, whether a wire or the world, in the face of the power of noise, with the outcome measured by its “news” or surprise, defined as “entropy” and consummated as knowledge.

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