selected quotes

The most expensive sex is free sex.

The master calmly said, that if he had to charge them, they would not be able to afford him.

Money as it turns out is very often the most expensive way to motivate people. Social norms are not only cheaper, but often more effective as well.

The more we have, the more we want.

only right right-wing economic argument

In America, we tax work, growth, investment, employment, savings, and productivity. We subsidize nonworking, consumption, welfare, and debt.

need for central bank

In a financial panic, the demand for money soars as people flee bank deposits and weaker securities and move into cash. But without a central bank to supply the sudden demand, a panic tends to feed upon itself as perfectly sound banks are forced to close when they are unable to liquify their assets fast enough to meet the demands for withdrawals.

capitalism

Give a man the secure possession of a secure rock, and he will turn it into a garden; give him nine years lease of a garden, and he will turn it into a desert. The magic of property turns sand into gold.

- Arthur Young

Universal benevolence evaporates on the stove of human nature.

- Robert Wright

take the good, without the bad

Capitalism ceases to amaze me. The affluence it allows and provides.

But for a system that provides for our basic needs so well, it
perpetually creates new desires that are nearly insatiable.   

so instead of being happy, we're depressed.   sad.

Rise of the West

1. Geography theory critique - If Europe enjoyed a natural geographic advantage from ancient times, then why during the thousand years between 500 A.D. and 1500 A.D., the West was a civilizational laggard and showed no signs of becoming the world's dominant civilization?

2. Oppression theory - Using war, imperialism, and slavery, the West colonized the rest of the world and got rich in the process; nothing innately superior of Western culture or civilization that enabled it to dominate the world. Critique - ethnocentrism, war, imperialism, and slavery are not unique to the West 

Resolution - the West became rich because it invented three institutions: science, democracy, and capitalism. These did not exist anywhere else in the world, nor did they exist in the West until the modern era. All three institutions are based on human impulses and aspirations that are universal, but these aspirations were given a unique expression in Western civilization.

Capitalism is based on a universal human impulse—the impulse to barter and trade. All societies have engaged in some form of exchange. Even the use of money is not Western in origin. But capitalism—by which I mean property rights, and contracts, and courts to enforce them, and free trade; in short, the whole ensemble of arrangements that Adam Smith described in The Wealth of Nations—is a Western institution.

Moreover, there is the psychology that is critical to capitalist success. Capitalism is based on the belief that the calling of the merchant or entrepreneur is a worthwhile one. In most societies merchants and entrepreneurs were regarded as lowlife scum and only in the West did their status improve.

Technology then arose out of the marriage between science and capitalism. Science provides the knowledge that leads to invention, and capitalism supplies the mechanism by which the invention is transmitted to the larger society, as well as the economic incentive for inventors to continue to make new things.

Colonialism and imperialism are not the cause of the West's success; they are the result of that success. The wealth and military power of the European powers made them arrogant and stimulated their appetite for global conquest: thus the British, the Dutch, and the French went abroad in search of countries to subdue and rule. These colonial possessions added to the prestige, and to a lesser degree to the wealth, of Europe. But the primary cause of Western affluence and power is internal—the institutions of science, democracy, and capitalism acting in concert. Consequently it is simply wrong to maintain that the rest of the world is poor because the West is rich, or that the West grew rich off "stolen goods" from Asia, Africa, and Latin America, because the West created its own wealth, and still does. The doctrine of oppression ignores this fact, and continues to fuel anti-Western resentment around the world and within the nations of the West.

christianity is VHS

Why do most Americans turn to Christianity when they seek spiritual fulfillment and not others, after their pursuit of money, success, and power fail them?


Christianity in America benefits from what is known as the "network effect." All established/incumbent religions benefit from this network effect. Innovation occurs within these religions but people flocking to a new religion or "framework of meaning" is rare.

A network effect is the effect that one user of a good or service has on the value of that product to other people. When network effect is present, the value of a product or service increases as more people use it.

The classic example is the telephone. The more people own telephones, the more valuable the telephone is to each owner. This creates a positive externality because a user may purchase their phone without intending to create value for other users, but does so in any case. Online social networks work in the same way, with sites like MySpace and Facebook being more useful the more users join.

The expression "network effect" is applied most commonly to positive network externalities as in the case of the telephone. Negative network externalities can also occur, where more users make a product less valuable, but are more commonly referred to as "congestion" (as in traffic congestion or network congestion). Over time, positive network effects can create a bandwagon effect as the network becomes more valuable and more people join, in a positive feedback loop.

inefficient market

The textbook market is like the pharmaceutical market: the people who have the most influence over what is purchased (doctors and professors) don’t have to pay for their choices. Students do.

How to Address Conspicuous Consumption

The Problem:

The countercultural "critique" of consumerism insists on analyzing consumer consciousness as a form of manufactured conformity and in the process completely overlooks the role that positional goods and the search for distinction play in driving consumer capitalism. As a result, the proposed solution—individualistic sartorial and stylistic rebellion—simply feeds the flames, by creating a whole new set of positional goods for these new "rebel consumers" to compete for. The struggle for status is replaced by the quest for cool, but the basic structure of the competition remains unchanged.

One Solution:

The most conspicuous flaws in our society today are all unresolved collective action problems. As a result, an "arms control agreement" provides the most useful way of thinking about correcting them. These agreements naturally, require enforcement. Yet too often the left has shied away from such enforcement, on the grounds that it represents a form of repression. Here one can see the baleful influence of countercultural thinking. School uniforms, we have argued, serve as an arms control agreement in teenagers' battle of brands. More generally, economists have suggested that a more progressive income tax may serve as an arms control agreement in the competition for positional goods among adult consumers. We should follow France in adopting a legislated 35-hour workweek. Perhaps we might even consider controls in other areas, such as cosmetic surgery, the size of passenger vehicles or university tuition rates. Each would put the brakes on what are essentially antisocial forms of competition.

All of this will involve further restrictions of individual liberty. Yet so long as individuals are willing to give up their own liberty in return for a guarantee that others will do the same, there is nothing wrong with this. In the end, civilization is built upon our willingness to accept rules and to curtail the pursuit of our individual interest out of deference to the needs and interests of others. It is deeply distressing to find that a misguided commitment to the ideals of the counterculture has led to the political left to abandon its faith in this--the bedrock of civilization--just at a point in history when it has become more important than ever.

- Joseph Heath

one strength of capitalism

One of the central consequences of the fact of pluralism is the inevitability of the market economy. The amount of intellectual energy that has been dedicated to the task of searching for an alternative to the market in the past century is staggering. And yet no matter how you run the numbers, the answer always comes out the same. There are essentially two ways of organizing a modern economy: either a system of centralized, bureaucratic production (such as was found in the former Soviet Union), or else a decentralized system, in which producers coordinate their efforts through market exchange. The former is, unfortunately, incompatible with value pluralism. Central planning works fine for the military, or some other organization where members are willing to accept a standardized allotment of clothing, food rations or housing and to be assigned specific jobs to perform. But in a society where individuals hope to pick and choose from among a range of lifestyle opportunities, there is no getting around the need for a market.

Consider a very simple "who gets what" problem. Suppose that one year, thanks to a fortuitous combination of rain and sun, the rubber farmers get a bumper crop. This means that there is more rubber available than usual. Who should get it? There are literally millions of different ways in which the rubber could be used. Should it be used for bike tires? Lacrosse balls? Waterproof boots? Gaskets? Cables? Shock absorbers? The most persuasive response would be to say that the rubber should go to whichever use is most urgent, or to whoever needs it most. In other words, the rubber should be sent to where it will do the most good. Unfortunately, in a pluralistic society, we lack any common measure of "the good." There is no fixed metric that will allow us to determine whether one person's desire to fix his bike tire is more or less important than some other person's desire to replace the washer in her faucet. The only way to approach the question is to ask how important it is to the person in question. And the only way to find out how important it is to that person is to ask how much he or she would be willing to give up in exchange for the rubber. In other words, we must ask how much that person would be willing to pay for it. (If there is no sacrifice involved, then we can be almost certain that the goods will be wasted, since individuals will ask for all sorts of things that they don't really need. Just look at the difference in the way people behave when they are charging things to an expense account rather than paying for them out of their own pocket.)

Thus the market pricing of goods can be seen as a necessary response to the fact that society is not in a position to judge whose projects are more or less important. (Certainly a process of democratic decision-making is no substitute. In the absence of prices, the problem is simply too complex.) As we have seen, the amount a person should be asked to give up in order to acquire some particular good or service should be a function of how much inconvenience his or her consumption causes to other people. If I insist on being served eggs Benedict for breakfast, rather than cereal, then I should expect to pay more, in recognition of the fact that my consumption imposes greater demands upon not just the cook, but also the chicken farmer. But there is an easy way of ensuring this—simply by arranging it so that the transaction occurs at a price that is agreeable to both buyer and seller. And this is nothing other than the mechanism of market exchange.

Market pricing of goods can be seen as a necessary response to the fact that society is not in a position to judge whose desires are more or less important. Of course, we must recognize that some people are born in more advantageous circumstances than others, and thus have an unfair advantage when it comes to getting what they want. For them, paying more represents less of a sacrifice. Yet it is crucial to realize that criticizing the distribution of wealth or the distribution of other "advantages," such as education, is not the same thing as criticizing capitalism—there is significant latitude for redistribution within the capitalist system. Similarly, one can criticize failures of the market (such as pollution, where some get away without paying the full cost that their activities impose upon society) or the ownership structure of the firm. But we must distinguish between these sorts of criticisms and criticisms of the market itself. Most of what left-wing critics identify as the major flaws of capitalism are actually problems of market failure, not a consequence of the market working as it is supposed to.

- Andrew Potter

Pre-Business Major

I think Allan Bloom has a point here about the university turning increasingly into a vocational school. But his opinion that those who major in economics because their sole motivation is money is to say the least absurd. Economics is a powerful tool that enables its practitioner to analyze critically individual and social behavior, markets and industries, and international trade and development.

He needs to make a differentiation between those who major in economics and those who major in business administration. One is an actual science , the other is a vocational degree. Like Bloom however, I personally hold little respect for pre-business majors who take only the bare minimum of liberal arts and social science classes. Accordingly though, they are the ones losing out.

I think one also needs to make the point that what Bloom is/should be referring to here is the MBA undergraduate degree. I believe no one pursuing a MBA graduate degree has the perception that they're getting a liberal arts education or a scholarly one at that. It is and should be a path to getting a more lucrative job.

The establishment of the MBA as the moral equivalent of the MD or the law degree, meaning a way of insuring a lucrative living by the mere fact of a diploma is not a mark of scholarly achievement. It is a general rule that the students who have any chance of getting a liberal education are those who do not have a fixed career goal, or at least those for whom the university is not merely a training ground for a profession. Those who do have such a goal go through the university with blinders on, studying what the chosen discipline imposes on them while occasion­ally diverting themselves with an elective course that attracts them. True liberal education requires that the student's whole life be radically changed by it, that what he learns may affect his action, his tastes, his choices, that no previous attachment be immune to examination and hence re-evaluation. Liberal education puts everything at risk and requires students who are able to risk everything. Otherwise it can only touch what is uncommitted in the already essentially committed.

The effect of the MBA is to corral a horde of students who want to get into business school and to put the blinders on them, to legislate an illiberal, officially approved undergraduate program for them at the outset, like premeds who usually disappear into their required courses and are never heard from again. Both the goal and the way of getting to it are fixed so that nothing can distract them. (Prelaw students are more visible in a variety of liberal courses because law schools are less fixed in their prerequisites; they are only seeking bright students.) Premed, prelaw and prebusiness students are distinctively tourists in the liberal arts. Getting into those elite profes­sional schools is an obsessive concern that tethers their minds.

The specific effect of the MBA has been an explosion of enrollments in economics, the prebusiness major. In serious universities something like 20 percent of the undergraduates are now economics majors. Economics overwhelms the rest of the social sciences and skews the students' percep­tion of them—their purpose and their relative weight with regard to the knowledge of human things. A premed who takes much biology does not, by contrast, lose sight of the status of physics, for the latter's influence on biology is clear, its position agreed upon, and it is respected by the biologists. None of this is so for the prebusiness economics major, who not only does not take an interest in sociology, anthropology or political science but is also persuaded that what he is learning can handle all that belongs to those studies.

Moreover, he is not motivated by love of the science of economics but by love of what it is concerned with—money. Economists' concern with wealth, an undeniably real and solid thing, gives them a certain impressive intellectual solidity not provided by, say, culture. One can be sure that they are not talking about nothing. But wealth, as opposed to the science of wealth, is not the noblest of motiva­tions, and there is nothing else quite like this perfect coincidence between science and cupidity elsewhere in the university. The only parallel would be if there were a science of sexology, with earnest and truly scholarly professors, which would ensure its students lavish sexual satisfactions.

- Allan Bloom

to all those hating haters

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.

- John Maynard Keynes

Health Care Economics

The current health care market does not work at all like other markets. Unlike cars, computers, or retailing, for example, health care services have not become better and cheaper over time. Instead, they have become more costly, and people worry about quality too. Why? Because of gross distortions in supply and demand. Consumers, the demanders, have little of the information that interests them, cannot express their feelings about the price because they rarely see the real cost of their health insurance or health care purchases, and have an artificially constrained range of choices. And when it comes to supply, hospitals suppress competition and innovation, and health care’s key suppliers, the physicians, are increasingly marginalized.

- Regina Herzlinger

The other industry where costs have continued to go up with no noticeable increase in quality is the higher education market. There governments have subsidized the supply of colleges and universities through tax breaks and federal loans. With the potential of the internet to dis-intermediate the value chain in higher education, there is much innovation that can occur.

Deflation - Devaluation

A simple analogy of the choice between deflation and devaluation might be that of the man who has put on weight and is having a hard time fitting into his clothes. He can either choose to lose the weight—that is, deflate—or alternatively accept that his larger waistline is now irreversible and have his clothes altered—that is, devalue. The burden of deflation falls on workers, businesses, and borrowers, and devaluation on savers.

- Liaquat Ahamed