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  • Archive for the 'Capitalism' Category

    Tariffs, Trade, and the British Corn Laws

    Posted by David Foster on 8th October 2018 (All posts by )

    Stuart Schneiderman linked an article by Robert Samuelson on the 1846 British repeal of the tariffs on food imports, which further linked an Economist article arguing that:

    With the repeal of the tariffs, instituted to protect British corn farmers, liberal economic policies ascended. Free trade, free enterprise, free markets and limited government became the rule. And the world has not been the same since.  (Schneiderman’s summary)

    To me, it is highly questionable how much the elimination of tariffs had to do with limited government and internal free enterprise. The view that the British 1846 action was economically a very good thing for almost everybody is, however, generally accepted.  From the Economist article:

    The case for getting rid of British tariffs on imported grain was not a dry argument about economic efficiency. It was a mass movement, one in which well-to-do liberal thinkers and progressive businessmen fought alongside the poor against the landowners who, by supporting tariffs on imports, kept up the price of grain…When liberals set up the Anti-Corn Law League to organise protests, petitions and public lectures they did so in the spirit of the Anti-Slavery League, and in the same noble name: freedom. The barriers the league sought to remove did not merely keep people from their cake—bad though such barriers were, and strongly though they were resented. They were barriers that held them back, and which set people against each other. Tearing them down would not just increase the wealth of all. It would bring to an end, James Wilson believed, the “jealousies, animosities and heartburnings between individuals and classes…and…between this country and all others.”

    Again, this is all mostly generally-accepted thinking.  But Stuart’s post and the links reminded me of something I read–oddly enough, in a 1910 book on railroad history.  The author (Angus Sinclair) describes the transition to steel rails (from cast iron) and the heavier trains they enabled, and then discusses the political-economic impact of this transition:

    The invention of cheap methods of making steel rails has exerted a tremendous effect upon railroad transportation, and has created social revolutions in certain part of the world…It threw many farms in New England and along the Atlantic seaboard out of cultivation; it caused a semi-revolution in farming business in the British Isles, and strongly affected the condition and fortunes of millions of people in other countries.  Irish peasants used to go in thousands to England and Scotland to work in the harvesting of grain crops and thereby earned enough money to pay the rent of their small holdings.  Steel rails and Consolidation locomotives stopped the cultivation of so many wheat fields in the British Isles that the help of the Irish worker was no longer needed…

    The woes of Ireland were merely the preliminary manifestations of hardships inflicted through the grim ordeal of competition worked out by our cheapened  methods of land transportation.  (The heavier locomotive enabled by steel rails) is steadily forcing more grain raising farms of Europe out of cultivation and is raising a demand for protection against cheap land, just as our politicians have so long urged the necessity for protection against the cheap labor of Europe.

    About 60 years ago Great Britain abolished all duties on grain…By curious reasoning the statesmen believed that this policy would not only make the British Isles the manufacturers of the world, but that it would increase the prosperity of the agricultural communities as well.  The first thirty years’ experience of free corn did not seriously  challenge the correctness of the free trade theory, for more of the American wheat lands were yet unbroken prairie or virgin forests, and our steel rail makers and locomotive builders were merely getting ready…In 1858 the rate per bushel of wheat from Chicago to New York was 38.61 cents.  The rate today is 11.4 cents…

    The effect of that cheapening of transportation in the United States has been very disastrous to Great Britain, for during the last thirty years there had been a shrinkage of 3,000,000 acres in wheat and another of 750,000 acres in green crops; an enormous amount of land had reverted to pasturage…and the number of cultivators of the soil  had declined 600,000 in thirty years–1,000,000 in fifty years.

    That is a high price to pay for the devotion to a theory which fails to work out as expected.

    Read the rest of this entry »

    Posted in Britain, Business, Capitalism, Economics & Finance, History, Ireland, Libertarianism, Taxes, Transportation, USA | 36 Comments »

    Draining the Swamp: Progressive Politics – the Road to Crony Capitalist Perdition

    Posted by Kevin Villani on 17th June 2018 (All posts by )

    From A Libertarian Republic to Majoritarian-Totalitarian Democracy: a Summary

    The 2016 American Presidential Election

    Trust in government fell by almost 80% from the end of the Eisenhower Administration to the end of the Obama Administration. Then Americans endured one of the most divisive and longest two year election campaigns leading up to the 2016 election. Former Democrat turned Republican Donald Trump defeated a field of 17 traditional center-right Republicans to run against traditionally center–left Democratic candidate Hillary Clinton who turned left to defeat her socialist competitor Bernie Sanders in the primary. Sanders correctly argued that the U.S. political system is rigged – more than he knew at the time – but responded by promising his generally young supporters socialism without totalitarianism. The public has endured another two years of divisiveness as the losing party tries to undermine and some would impeach the winner.

    Republican nominee and arguably crony capitalist businessman Donald Trump, the son of a crony capitalist housing developer, ran on the paradoxical promise to “drain the swamp.” The faux democratic election of crony capitalist supremo Vladimir Putin in 2011 drew the public reprobation of then U.S. Secretary of State Hillary Clinton, the subsequent Democratic Party nominee. Putin responded with a campaign of not so fake news not to elect Trump – they had the same polls as everybody else – but to expose Clinton as a crony capitalist who also engaged in election-rigging. He hit pay dirt. The faux Russian collusion scandal has since been used to undermine the legitimacy of the Trump Administration.

    On the issue of trade there was no difference between the three main candidates – all opposed the new TTP trade agreement. The U.S. trade deficit has been about $500 billion a year during this century, consumption financed mostly with additional debt. Candidate Clinton, who supported China’s entry into the WTO during the Clinton Administration agreed she would if elected renegotiate NAFTA, the trade bill passed at her husband’s initiative. On the related issue of immigration, candidate Clinton voted for the bipartisan Secure Fence Act of 2006, as did then Senators Obama and Schumer.

    The Obama Administration had doubled the federal debt outstanding to over $20 trillion – and the unfunded liability is approximately ten times that. President Obama’s Chairman of the Joint Chiefs of Staff publically warned as early as 2010 that the debt was a threat to national security. Candidate Clinton promised she wouldn’t add a penny to the national debt, but her platform had an imbedded $10 trillion increase, less than Sanders to be sure. Candidate Trump promised to eliminate the debt in eight years by increasing economic growth. Clinton’s was a political lie, Trump’s an outlandish campaign promise since going unfulfilled: his appropriations bill contained a $200 billion increase in spending, a Democratic victory for domestic spending in return for Republican defense spending.

    Candidate Trump ran against the “deep state” wars and military interventions that candidate Clinton had voted for. But as President, Trump embraced it with overwhelming Democratic support to punish Russia.

    Progressivism’s Administrative State

    The Democrats’ agenda has arguably fared much better under Trump than Republicans did under Obama. Given these similarities in proposed and actual policies, the subsequent animosity might appear puzzling. But the biggest difference among the candidates relates to the relative roles of the public and private sectors. The U.S. is now governed by an unaccountable patria administrative state: judicial and legislative subsumed in the executive branch and sometimes independent even of that – judge, jury and executioner. The new religion is “science” requiring a faux consensus and leadership by the “experts” as proposed by John Kenneth Galbraith in the New Industrial State (1967) over a half century ago.

    Washington, D.C. is a place where self interested deals are made in hotel lobbies and K street offices, but the entire federal bureaucracy sits on a former swamp. Most federal politicians are political swamp people having worked their way up in local and state politics by making political deals for budget and/or tax subsidies and/or regulatory discretion – legal extortion. Candidate Clinton is a self described progressive and candidate Sanders a socialist, the former supports state control of business, the later favors more direct state ownership.

    The Berlin Wall fell in 1989, followed by the Soviet Union two years later. In 1995 U.S. President Bill Clinton declared “The era of big government is over.” Britain’s Prime Minister Tony Blair, publishing in a Fabian pamphlet in 1998 argued: “Liberals (classical, i.e., American conservatives) asserted the primacy of individual liberty in the market economy; social democrats promoted social justice with the state as its main agent. There is no necessary conflict between the two, accepting as we now do that state power is one means to achieve our goals, but not the only one and emphatically not an end in itself.” But “the values which have guided progressive politics for more than a century – democracy, liberty, justice, mutual obligation and internationalism” have lead in practice to “state control, high taxation and producer interests (crony capitalism).” By the end of the century a few years after Blair spoke, the market had reached The Commanding Heights of the economy. But a decade later the Obama Administration had put the state back on top, seeking to control not just health care but finance and energy.

    Progressivism – like fascism and communism – started with the best of intentions, in opposition to crony capitalism. Social welfare programs were implemented to spread the wealth and provide a safety net, but during the progressive Obama Administration economic growth per capita stagnated. Candidate Trump believed that rolling back the administrative state regulations and the tax on savings and investment as suggested by Blair would restore real private economic growth, the key to managing the public deficit. His Democratic opponents both favored a vast expansion of the administrative state and increases in the tax on capital.

    Progressive Internationalism and the New World Order

    Progressives supported freer trade even if not reciprocal in the post WW II era because America could still enjoy a balance of trade surplus that could be used to fund investments abroad and a “new world order” of American dominance in a bi-polar world with the Soviet Union and its satellites. The European Union evolved as a mechanism to end European – especially German – “nationalism” in favor of this plan. Two events undercut this agenda of international control through capital flows: the 1960s wars on poverty and Vietnam turned American surpluses into deficits, and the common European currency created a German economic hegemony over Europe. The U.S. today is to China what Greece, Italy, Spain, Portugal and Ireland are to Germany, and that’s not a compliment. Both China and Germany – whose exports equal China’s with only 6% of the population – are mercantilist countries pursuing low wages and consumption domestically so that future generations can live off the debt that finances their over-consuming customers.

    Germany understands perhaps better than any country the problem of using foreign debt to finance current consumption as it did to feed a starving population during the interwar years. The excessive debt undermined the fledgling Weimar Republic, giving rise to Hitler. Trumps trade policy appears incoherent, as is much of the criticism. Progressives still argue for globalism and internationalism while conservatives and libertarians are hung up on Ricardian theory of comparative advantage in international trade and the accounting identity of the trade and capital balance.

    The problem isn’t global trade per se, but progressive policies that repress national saving and domestic labor and capital productivity while growing the administrative state. National boundaries still matter. In the EU the single currency zone has destabilized previously relatively stable prosperous countries, threatening political and economic collapse. The relationship between the U.S. and China reflects a similar dynamic: the willingness to accept American debt has kept the dollar from falling and trade adjusting. China holds over trillion dollars of debt backed by taxpayers, and was the biggest foreign funder of Fannie Mae and Freddie Mac during the sub-prime lending bubble. Progressives argued that we would grow out of this debt, but simultaneously and inconsistently deny that the failure to grow during the Obama Administration reflected economic repression but “secular stagnation” – that capitalist innovation has run its course. If so, we are doomed when countries attempt to collect.

    Thus far the main part of the Trump agenda, the tax reform and regulatory roll back – against universal Democratic opposition and condemnation – appears to be working. Economic growth per capita has picked up, unemployment is the lowest since the turn of the century, and business investment net of depreciation is rising from historic lows. But it is way too early to declare success. China entered the WTO without meeting the minimum requirements for intellectual property protection or reciprocity, a Clinton Administration oversight. Fixing the former should be uncontroversial. Reciprocity insures that the most competitive – not the most subsidized – win. Subsidies may benefit American consumers temporarily, but the dislocations are costly and overconsumption dangerous, the debt leading to contemporary “gunboat diplomacy” to settle debts. A reciprocal tariff is a consumption tax, not irrational to consider under those circumstances.

    Progressive efforts to Impeach President Trump: the Totalitarian Administrative State Strikes Back

    Yet since the election, some progressive Democrats have been pushing for impeachment on grounds of Russian collusion and obstruction of justice, although no evidence has yet been produced of that after two years of investigation.

    One thoughtful progressive commentator dismisses these grounds, arguing that the real grounds for impeachment are the “threats Trumpism poses to democracy and rule of law.” If true, those would indeed be grounds for impeachment but he doesn’t define Trumpism or provide evidence. The many articles in the progressive media can be summarized thus: Trump is tweeting against the administrative state agents that are out to get him.

    Libertarians and Republican conservatives have argued that progressives have been undermining liberty and the rule of law for over a century to create the administrative state, obfuscating their agenda by manipulating words to mean the opposite of their historical meaning. Trump’s Court appointments are intended to reverse that trend. Statism is usually associated with one-party faux democracy to prevent state power from turning against the entrenched interests with a change of government. Trump ran against the progressive new world order, arguing to “put America first.” The Democrats didn’t think Trump had any chance to win. This seems the more compelling reason for their impeachment efforts. The anti-Trump organized hysteria bears a marked resemblance to the largely Soros funded Republican and Democratic efforts to ignite the democratic color revolutions in the former Soviet states described by F.William Engdahl in Full Spectrum Dominance: Totalitarian Democracy in the New World Order (2009).

    This isn’t about Trump tweets. It’s a battle for the commanding heights.
    Read the rest of this entry »

    Posted in Big Government, Capitalism, Civil Liberties, Civil Society, Conservatism, Crony Capitalism, Economics & Finance, History, Leftism, Libertarianism, Political Philosophy, Politics, Public Finance, Taxes, Tradeoffs, USA | 11 Comments »

    More and Better Disclosures!

    Posted by David Foster on 29th March 2018 (All posts by )

    It’s now required for publicly-traded companies to publish the ratio between the CEO’s annual compensation and that of the median employee.  That ratio is, for example,  367:1 at Disney (Robert Iger), 124:1 at Deere & Co (Samuel Allen), and 50:1 for Whirlpool (Jeff Fettig). Link

    These numbers (which, it should be clarified, include seasonal and part-time employees) have caused much alarm in many quarters, and even referred to as heralding a “crisis of capitalism.”

    But why stop at CEOs and other business executives when requiring this kind of analysis?  My idea is that there are many other fields in which high-visibility disclosures could be interestingly required…

    In movies, for example, it should be required that the opening credits include the ratio of the pay of each of the top 5 stars to the median pay of the entire crew that worked on the film–including accounting clerks, boom operators, sweepers, and various ‘assistants to’.

    In professional sports, team uniforms should display prominently the total value of the player’s current contract.  This feature would greatly add to the pleasure of fans, who could instantly and continuously compare the player’s financial value to his demonstrated, moment-by-moment playing-field value.

    At colleges and universities, a sign out front of the president’s mansion should display the ratio of his compensation to that of the median faculty member, which category of course must include the starvation-paid adjunct professors.  (The compensation number for the president should certainly include the imputed value of his university-provided mansion and any other similar benefits, such as cars and drivers.)

    For politicians, the disclosure problem is a little more complicated, since in many cases the main financial payoff for these jobs is in the form of “deferred compensation”, i.e., lobbying positions and consulting contracts offered after the term of office ends, in recognition of services rendered while in office.  About all I can think of for the politician class is that, for all public appearances, they must wear jackets, with the names of their top sponsoring/contributing organizations prominently emblazoned, in a manner similar to the way racecar drivers display the names of their sponsors.

    There are probably a lot of additional possibilities for disclosure and transparency, which the ChicagoBoyz and Chicago Grrrlz and Readerz can surely suggest.

    Concerning those who support the CEO pay-ratio requirement but would object to these further suggestions…I have to wonder if their primary agenda really concerns ‘inequality’ or is really about something else.

    Posted in Academia, Business, Capitalism, Economics & Finance, Leftism, Sports, USA | 10 Comments »

    Po nan Jwèt la: Asymétri Kache nan Lavi Chak Jou

    Posted by Jay Manifold on 16th March 2018 (All posts by )

    Taleb, Nassim N., Skin in the Game: Hidden Asymmetries in Daily Life. New York City: Random House, 2018.

    NB: precisely because I regard Taleb as a national treasure and have considerable respect for his work, I am not going to pull punches here. I get to do this because I have … skin in the game, and not only in Haiti[1] (where I wrote this post over the past ten days, thus the Kreyòl Ayisyen title), but in a couple-three moderately hair-raising situations back in KC, which I will relate when appropriate. Which might be never; see Matthew 6:1-4 (cited by Taleb on page 186).

    Getting this out of the way—buy this book, read it, and recommend it to others. I say this very much irrespective of what might be called the Manifold-Taleb delta, which is not altogether trivial, as I will explain in some detail—again, as a sign of respect—below. Immediately below, in fact.

    Read the rest of this entry »

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    Posted in Bioethics, Book Notes, Capitalism, Ebola, Education, Entrepreneurship, Environment, History, Human Behavior, Islam, Japan, Libertarianism, Miscellaneous, National Security, Political Philosophy, Russia, Space, Systems Analysis, Terrorism | 17 Comments »

    Technology, Work, and Society – The Age of Transition

    Posted by David Foster on 15th December 2017 (All posts by )

    I recently read an intriguing book concerned with the exponential advances in technology and the impact thereof on human society.  The author believes that the displacement of human labor by technology is in its very early stages, and sees little limit to the process.  He is concerned with how this will affect–indeed, has already affected–the relationship between the sexes and of parents and children, as well as the ability of ordinary people to earn a decent living.  It’s a thoughtful analysis by someone who clearly cares a great deal about the well-being of his fellow citizens.

    Read the rest of this entry »

    Posted in Book Notes, Britain, Business, Capitalism, Civil Society, Deep Thoughts, Economics & Finance, History, Society, Tech | 14 Comments »

    Micro-transactions

    Posted by TM Lutas on 6th October 2017 (All posts by )

    It is now possible to convert electricity to money using an Internet browser (like the one you’re likely using to read this post) in amounts lower than $0.001, which is the smallest unit of account for the US Dollar. Jobs earning that amount are constantly available by doing math on your computer that works on supporting open ledger systems called blockchains.

    The product of the math work turns into cryptocurrency fractional coins which, when accumulated in large enough amounts can be sold for dollars, euros, yen, or any other conventional currency around.

    The transaction costs are orders of magnitude lower than in the conventional banking system, enough that large classes of transactions that were impractical are now merely somewhat expensive. There’s a lot of room for efficiency improvements at present.

    You can see an experiment running the first iteration I’m working with this concept at the project blog for Charleston Dry Feet. It’s currently generating litoshi from anyone who visits. Proceeds go to the worthy project of fixing Charleston, SC’s deficient storm water drainage system. You can turn the widget on or off with a button click.

    Posted in Capitalism, Miscellaneous, Tech | 20 Comments »

    Worthwhile Visiting

    Posted by David Foster on 15th April 2017 (All posts by )

    The National Museum of Industrial History is located on the site of the former Bethlehem Steel complex.  Most of the original buildings are derelict or partly torn-down, but the above array of blast furnaces and supporting equipment has been preserved.

    Suggested musical accompaniment for a visit to the place that was Bethlehem Steel…features a different company and a slightly different geography, but basically the same sad story.

    Posted in Business, Capitalism, History, Management, Tech, Unions, USA | 16 Comments »

    Worthwhile Reading

    Posted by David Foster on 7th April 2017 (All posts by )

    Jamie Dimon of JP Morgan is, IMO, one of the more thoughtful of the financial industry CEO’s.  In his annual letter to shareholders, he devotes considerable space to the current situation of the United States–our assets, our problems, and potential paths for improvement.  The public policy section of the letter starts on page 32.

    My view of several issues is different from Mr Dimon’s, but I think the letter is well worth reading and thinking about.

    (Disclosure:  I’m a JPM investor)

    Posted in Business, Capitalism, Economics & Finance, Education, Entrepreneurship, Immigration, USA | 13 Comments »

    Dodd-Frank, Obamacare grew out of same faulty reasoning

    Posted by Kevin Villani on 6th March 2017 (All posts by )

    The current partisan war over the Dodd-Frank Act is just one dispute in a broader ideological divide about the government’s role in industry. This dispute, which has deep historical roots, includes a similar battle over Obamacare. The common disagreement at issue with both laws — now in the cross hairs of a GOP-controlled Washington — is the extent to which politicians should subsidize their constituents indirectly through regulation of private companies.

    The Affordable Care Act governing health insurers was about 1,000 pages, and Dodd-Frank governing most other financial institutions was more than twice that. Both stopped short of nationalizing their respective industry, instead generating more than 10 pages of regulation for every one page of legislation, although many view nationalization as an eventual but inevitable consequence, particularly for health care.

    The distinction between public control and public ownership is the primary distinction between the competing mid-20th-century ideologies of fascism and communism. In contemporary terminology, this distinction is between crony capitalism and nationalization, neither of which can be reconciled with competition and freedom of choice.
    Read the rest of this entry »

    Posted in Big Government, Business, Capitalism, Crony Capitalism, Economics & Finance, Health Care, Obama, Political Philosophy, Public Finance, Systems Analysis | 10 Comments »

    The Boom/Bust Cycle Isn’t about Emotion

    Posted by Kevin Villani on 27th February 2017 (All posts by )

    My first experience with manias was in the 1950’s. As a pre-schooler, I was dragged along to the Filene’s Basement annual designer dress sale. Thousands of women of all types and sizes pressed against the glass doors opening into the subway station. Within minutes of the doors opening, these “maniacs” cleared all the racks and, holding armfuls of dresses, began stripping to their slips. That’s when I panicked.

    Looking back, those women acted rationally. There was a limited supply of deeply discounted dresses available on a first come basis. They traded among themselves to get the right size and their most desired dress. Buyer’s remorse was cushioned by Filene’s liberal return policy.

    The premise of U.S. financial regulation is that actors within private markets are irrational, but the evidence shows that it’s not maniacal, illogical behavior that sends markets into freefall.

    Great Depression and Recession

    Now in its seventh edition, Manias, Panics and Crashes: A History of Financial Crises, Charles Kindleberger’s seminal work provides the narrative that underlies virtually all public financial protection and regulation: First, the irrational exuberance of individuals transforms into “mob psychology” and fuels an asset bubble. Then, when the exuberance of a few turns to fear, the mob panics and overreacts, causing a crash that brings down both solvent and insolvent financial institutions.

    In his memoir, the former Federal Reserve Bank President and Treasury Secretary Timothy Geithner, who was at the epicenter of the last crisis, concluded, “It began with a mania — the widespread belief that devastating financial crises were a thing of the past, that future recessions would be mild, that gravity-defying home prices would never crash to earth.”  

    Most U.S. federal financial regulation originates from the Great Depression and the subsequent introduction of federal deposit insurance provided by the Federal Deposit Insurance Corporation (FDIC), which was established in 1933 to protect “small” savers. All prior state attempts to provide insurance failed. Because there were no effective, non-politicized regulations that could prevent the moral hazard of insured banks and savings institutions taking on excessive risks, an extensive regulatory infrastructure was put in place.

    Rational Actors

    Now, the U.S. has about 100 financial regulators, including those in the U.S. Treasury and the Securities and Exchange Commission (SEC), the FDIC, and the Fed. With near-universal deposit insurance, bank runs have become a rarity, but systemic crises have occurred more frequently. It is incontestable that big bubbles eventually burst, asset prices crash, and financial crises ensue. What causes the bubbles to inflate to systemic proportions, and to ultimately burst, is more contentious.

    At the time of Kindleberger’s analysis, individuals were assumed to be rational. The latest edition of his book, written after the 2008 financial crisis, postulates numerous theories about mob psychology (mania) that could lead rational individuals to produce irrational markets, but these ideas are all rather lame.

    Read the rest of this entry »

    Posted in Big Government, Business, Capitalism, Economics & Finance, Human Behavior, Markets and Trading, Public Finance, Real Estate, Systems Analysis, Tradeoffs | 9 Comments »

    The End of Accounting Book Review – Part One

    Posted by Carl from Chicago on 8th January 2017 (All posts by )

    Recently I read an excellent book called “The End of Accounting and the Path Forward for Investors and Managers” by Baruch Lev and Feng Gu. I highly recommend this book for investors, analysts, accountants, and those with a general interest in business. The book is very well written and researched in that it:

    1. Describes the current situation in depth
    2. Aligns the situation across an historical context and with relevant research
    3. Makes specific recommendations about how to improve the situation

    If you’d like to read more about this topic on your own (will help to frame out these posts), here is an excellent Wall Street Journal article titled “The End of Accounting” (if the link doesn’t work because you don’t have a subscription you can probably find it elsewhere on the internet). Here is a link from Accounting Today and an interview with the author from CFO magazine.

    The first post in this series is going to be my personal insights and journey in the area of accounting information, financial and investor relations analysts. This context is relevant because I, too, have seen the problems that the authors outline in the series and come up with my own “hacks” to attempt to gain better information and insights.

    I started out my career as an accountant, and I used to help create the footnotes that you see at the end of the financial reports. This wasn’t creative work per se – you would start with last year’s footnote as a template and insert new numbers, unless it was a new requirement, in which case it was a lot of work and we would turn to specialists. At that time (20+ years ago) there were only a few footnotes and the financial statements themselves weren’t that long; you would be able to read from the Chairman and CEO’s letter all the way through to the last footnote in a couple of hours.

    This was also before the internet; we would go into the company library and look at microfiche sometimes to do research or you’d pull up the hard (printed) copy from the files. At that point an annual report was also somewhat of a marketing document; companies put a lot of thought into the cover, for instance.

    At various points in the history of accounting there has been a focus on the balance sheet (assets and liabilities), the income statement (earnings per share and price / earnings ratio) and on cash flows (cash generated from the business). Each of these views are important and have their merits and their drawbacks. The statements were generally the “GAAP” view which focused on financial statement presentation and used taxes at official rates (many companies pay almost nothing in taxes in actuality by deferring them indefinitely) and held assets at historical costs. Both of these assumptions made the financial statements less useful for certain types of companies and industries.

    Read the rest of this entry »

    Posted in Book Notes, Business, Capitalism, Economics & Finance | 3 Comments »

    Trump and Conflicts of Interest.

    Posted by Michael Kennedy on 19th November 2016 (All posts by )

    Trump is organizing his administration but he is facing another crisis.

    The Wall Street Journal is giving him painful and unwelcome but good advice.

    He must liquidate the family business.

    One reason 60 million voters elected Donald Trump is because he promised to change Washington’s culture of self-dealing, and if he wants to succeed he’s going to have to make a sacrifice and lead by example. Mr. Trump has so far indicated that he will keep his business empire but turn over management to his children, and therein lies political danger.

    Mr. Trump has for decades run the Trump Organization and during the campaign said if he won the Presidency he’d turn over the keys to Donald Jr., Eric and Ivanka, all of whom are now serving on the Trump transition. A company spokesperson says the family business is “in the process of vetting various structures” and that the ultimate arrangement “will comply with all applicable rules and regulations.”

    Some of Mr. Trump’s lawyers have called the plan a “blind trust,” which past Presidents have used to protect their assets from the appearance of conflicts-of-interest. But that set-up typically involves liquid assets like bonds and stocks, not buildings or a branding empire. Mr. Trump will know how any given decision will affect, say, the old post office property in Washington, D.C. that he’s leasing from the federal government (another conflict). By law blind trusts are overseen by an independent manager, not family members.

    The Journal is correct. I don’t know how Trump is going to do this but he has to.

    Read the rest of this entry »

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    Posted in Big Government, Capitalism, Current Events, Elections, Taxes, Trump | 23 Comments »

    Attack of the Job-Killing Robots, Part 2

    Posted by David Foster on 15th November 2016 (All posts by )

    In my previous post of this series, I remarked that most discussion of the employment effects of robotics/artificial intelligence/etc seems to be lacking in historical perspective…quite a few people seem to believe that the replacement of human labor by machinery is a new thing.

    This post will attempt to provide some historical perspective on today’s automation technologies by sketching out some of the past innovations in the mechanization of work,  focusing on “robots,” broadly-defined…ie, on technologies which to some degree involve the replacement or augmentation of human mind/eye/hand, rather than those that are primarily concerned with the replacement of human and animal muscular energy…and will discuss some of the political debate that took place on mechanization & jobs in the 1920s through 1940s.

    Throughout most of history, the production of yarn for cloth was an extremely labor-intensive process, done with a device called a distaff, almost always employed by women, and requiring many hours per day to generate a little bit of product.  (There even exists a medieval miniature of a woman spinning with the distaff while having sex…whether this is a comment on the burdensomeness of the yarn-making process, or a slam at the love-making skills of medieval men, I’m not sure—-probably both.)  Eventually, probably around 1400-1500 in most places in Europe, the spinning wheel came into use, improving the productivity of yarn-making by a factor estimated from 3:1 to as much as ten or more to one.

    Gutenberg’s printing press was invented somewhere around 1440.  I haven’t seen any estimates of its effect on labor productivity, compared with the then-prevailing method of hand copying of manuscripts, but surely it was at least 1000 to 1 or more.

    The era from 1700-1850 was marked by tremendous increases in the productivity of the textile trades.  The flying shuttle and other advances greatly improved the weaving process; this created a bottleneck in the supply of yarn, which was partly addressed by the invention of the Spinning Jenny–a foot-powered device that could improve the yarn production of one person by 5:1 or better. Power spinning and power looms yielded considerable additional productivity improvements.

    An especially interesting device was the Jacquard Loom (1802), which used punched cards to direct the weaving of patterned fabrics.  In its initial incarnation, the Jacquard was a hand loom: its productivity did not come from the application of mechanical power but rather from the automation of the complex thread-selection operations previously carried out by a “Draw Boy.”

    Turning now to woodworking:  in 1818, Blanchard’s Copying Lathe automated the production of complex shape–a prototype was automatically traced and copied. It was originally intended for making gunstocks, but also served in producing lasts for shoemakers, and I believe also chair and table legs.

    Another major advancement in the clothing field was the sewing machine.  French inventory Barthelemy Thimonnier invented a machine in 1830, but was driven out of the country by enraged tailors and political instability.  The first commercially-successful machines were invented/marketed by Americans Walter Hunt, Elias Howe, and Isaac Singer, and were in common use by the 1850s.

    By the late Victorian period the sewing machine had been hailed as the most useful invention of the century releasing women from the drudgery of endless hours of sewing by hand. Factories sprung up in almost every country in the world to feed the insatiable demand for the sewing machine. Germany had over 300 factories some working 24 hours a day producing countless numbers of sewing machines. 

    The beginnings of data communications could be seen in gold ticker and stock ticker systems created by Edison and others (circa 1870) , which relayed prices almost instantaneously and eliminated the jobs of the messenger boys who had previously been the distribution channel for this information.  Practical calculating machines also appeared in the 1870s.  But the big step forward in mechanized calculation was Hollerith’s punched card system (quite likely inspired in part by the Jacquard), introduced in 1890 and used for the tabulation of that year’s census.  These systems were quickly adopted for accounting and record keeping purposes in a whole range of industries and government functions.

    Professor Amy Sue Bix, in her book Inventing Ourselves out of Jobs?, describes the fear of technological unemployment as silent movies were replaced by the ‘talkies’. “Through the early 1920s…local theaters had employed live musicians to provide accompaniment for silent pictures.  Small houses featured only a pianist or violinist, but glamorous ‘movie places’ engaged full orchestras.”  All these jobs were threatened when Warner Brothers introduced its Vitaphone technology, with prerecorded disks synchronized to projectors.  “Unlike other big studios, Warner did not operate its own theater chains and so had to convince local owners to screen their productions. Theater managers would be eager to show sound movies, Harry Warner hoped, since they could save the expense of hiring musicians.”

    The American Federation of Musicians mounted a major PR campaign in an attempt to convince the public that ‘living music’ was better than ‘canned sound.’  A Music Defense League was established, with membership reaching 3 million…but the ‘talkies’ remained popular, and the AFM had to admit defeat.  A lot of musicians did lose their jobs.

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    Posted in Book Notes, Business, Capitalism, Deep Thoughts, Economics & Finance, History, Tech, USA | 47 Comments »

    What Works and What Doesn’t, Again: A Blush-Pink Frock

    Posted by Ginny on 19th August 2016 (All posts by )

    Ivanka Trump, mother of three and stunning in a sheath, introduced her father at the Republican Convention. Many argue his kids seem great – certainly they appear loyal, attractive, alert, and sensible. But be that as it may. Both Adams and Franklin disowned sons. For most of us, raising children will be our most consequential task and Trump seems to be doing reasonably well. But it’s a thin reed.

    Still, that dress! It represents what moved country after country out of poverty. Causes of that respect across class lines and the rise of a large middle class and greater health for all are complicated: some see the Bible in the vernacular, some see the marriage of the Great Awakening with the Enlightenment, Dutch and English traditions, sea routes. Surely living longer and with more health meant more productivity. Others rightly prize a concept motivating these views, that each has within the divine. Such a belief emphasizes human rights – the free market of commerce, of ideas, of innovations, of speech, of religion. Honoring the dignity and virtuous habits of the bourgeoisie led to a respect for everyman and everyman’s talents. It was huge, that change from 1700 to 2100. And a signifier is a presidential hopeful in the most powerful nation introduced by his daughter in that blush pink dress.
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    Posted in Business, Capitalism, Elections, Entrepreneurship, Human Behavior, Trump | 9 Comments »

    Quote of the Day

    Posted by Jonathan on 6th July 2016 (All posts by )

    Dale Franks, Vote Properly, You Virulent Racist!:

    But let’s go even further. Even if you could prove that, on balance, free trade is an unquestionable economic benefit, people might still prefer to be measurably poorer if that’s the price that must be paid to maintain their traditional social and political cultures. (This has even more relevance in the case of the EU, because the EU actually has power. Imagine if NAFTA had an unelected Commission in Ottowa or Mexico City that could impose laws on the United States.) Perhaps people don’t regard their economic interests as important as their national or cultural interests. It doesn’t matter what elite opinion thinks the people’s most important interests are. In a democratic society, ultimately, it only matters what the people think they are. People get to determine their own priorities, and not have them dictated by elites. The people get to answer for themselves the question, “In what kind of country do I want to live?”
     
    Of course, I would argue that we don’t have truly free trade or, increasingly, a free economy in the United States. The Progressives always look at the rising income inequality and maintain that it’s the inevitable result of capitalism. That’s hogwash, of course, and Proggies believe it because they’re dolts. But the problem in this country isn’t free trade—we have precious little of it—or unrestricted capitalism, since we have precious little of that as well. The issue behind rising income inequality isn’t capitalism, it’s cronyism. Income isn’t being redirected to the 1% because capitalism has failed, it’s happening because we abandoned capitalism in favor of the regulatory crony state and its de facto collusion between big business/banking interests and a government that directs capital to favored political clients, who become “too big to fail”. It doesn’t matter, for instance, whether the president is a Democrat or Republican, because we know the Treasury Secretary will be a former—and future—Goldman Sachs executive.

    Franks’s post is very well thought through and ties together the main themes that appear to be driving US, British and European politics. It’s worth reading in full if you haven’t yet done so.

    Posted in America 3.0, Capitalism, Civil Society, Conservatism, Crony Capitalism, Culture, Current Events, Economics & Finance, Elections, Human Behavior, Immigration, Leftism, Political Philosophy, Politics, Quotations, Society, Tea Party, Tradeoffs, Trump | 9 Comments »

    Who Built That?

    Posted by Michael Hiteshew on 2nd June 2016 (All posts by )

    Who Built That: Awe-Inspiring Stories of American Tinkerpreneurs ~Michelle Malkin

    Note the ad hominem and generally vile nature of the leftists’ comments. It’s a reflection of who they are.

    Posted in Book Notes, Business, Capitalism, Entrepreneurship, Video | 12 Comments »

    Texas Fracking and the Death of Big Oil

    Posted by Trent Telenko on 15th May 2016 (All posts by )

    It isn’t often you see the death of a major worldwide industry. Last week I saw the death of the “Big Oil” economic model. It just died at the hands of Texas oil frackers who have developed a new “disruptive technology” that has made obsolete all the pillars of technology underpinning large, vertically integrated oil companies. More importantly, the same is true of all the petro-states that nationalized Big Oil’s assets in the 1960s to make all the state oil companies around the world today.

    I found this out doing my day job last week as a Defense Department quality auditor visiting a mid-sized oil service company diversifying into federal contracts. The meeting was about issues with the contract they won and touched on others they have bid on. As a side bar at lunch the following points about their main business came up:

    1. Oil field spending has died. Rig count in the USA is the lowest it has been since 1940.
     
    2. One oil rig controller company these folks worked with saw a year over year drop of 72% in its business.
     
    3. Another company they supplied had their “Cap-X” budget drop from ~$400 million for 2015-2016 to little over $30 million for 2016-2017.
     
    4. One drilling company they supplied went from 120(+) new wells last year to _12_ this year.
     
    5. This supplier sold a lot of copper tubing for “frack-log” drilling. That is the drilling of holes in good oil-bearing rock without fracking rock for oil immediately — and here is the new part — to take advantage of a new long-flow fracking technique.

    While most of the points above are due to the Saudis’ oil price war on Texas frackers. An ex-Big Oil geologist I know put it this way —

    The entire reason for the price drop was because the Saudis wanted to destroy fracking in the United States in order to keep us dependent upon them in order to keep them getting a free defense. The Saudis will have to diversify and start spending money on defense before the price goes back up, or they will be in serious trouble.

    The technique in Point #5 above marks another “fracking revolution” that is of growing importance to the USA. This new fracking energy revolution will upend the world order as we know it. Political winds willing, America may well be a net hydrocarbon exporter in five to eight years.

    Explaining why that is requires some background in Texas oil fracking.

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    Posted in America 3.0, Big Government, Business, Capitalism, Economics & Finance, Energy & Power Generation, Miscellaneous, National Security | 42 Comments »

    Book Review: The Myth of the Robber Barons

    Posted by Michael Hiteshew on 15th May 2016 (All posts by )

    The Myth of the Robber Barons, by Burton Folsom

    —-

    MythOfRobberBaronsCover‘Who controls the past,’ ran the Party slogan, ‘controls the future: who controls the present controls the past.’ ~George Orwell, 1984

    Controlling our view of the past – even our view of the present – is an obsession with the Progressive Left. Our understanding of history deeply influences our thinking and philosophy. Among other things, it shapes our view of both the morality and social-economic effects of free market capitalism versus socialism.

    To that end, a group of enormously successful people from the 19th century were demonized by turn of the century Progressives and have continued to be demonized as The Robber Barons by Leftist historians in primary school and college texts ever since. More subtly, through dark Orwellian references in Leftist entertainment programs and media, they have been thoroughly maligned in the popular imagination as well. Yet few people know who these people actually were and what, for better or worse, they actually did in their lives and how their works affected our lives even today. In his book, Robert Folsom sets out to take fresh look at people we would today call entrepreneurs.

     

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    Posted in Academia, Big Government, Book Notes, Business, Capitalism, Education, Entrepreneurship, History, Video | 1 Comment »

    The Mars Chronicles

    Posted by Michael Hiteshew on 30th April 2016 (All posts by )

    Little noticed by many, but SpaceX has moved another step towards a Mars landing (from Nasa Spaceflight).

    SpaceX has entered into an agreement with NASA for a Dragon mission to Mars, set to take place as early as 2018. Known as “Red Dragon”, the variant of the Dragon 2 spacecraft will be launched by the Falcon Heavy rocket, ahead of a soft landing on the surface of Mars. The mission is also part of an agreement with NASA to gain further data on Mars landings.

    Getting mankind to Mars was the original purpose for the creation of SpaceX. Everything they have done, from building the Falcon rocket to creating the commercial launch service, has been to lay the technological and financial foundation for putting people on Mars, permanently. The next developmental step is to build and test the Falcon Heavy, a three booster version of the Falcon rocket.

    FalconHeavy

    Falcon Heavy

    Falcon Heavy will generate over 5 million pounds of thrust from 27 Merlin engines (9 engines x 3 cores) and have a payload of 119,000 lb to LEO and 30,000 lb to Trans-Mars Injection orbit (TMI) and 26,000 lb direct to Mars. Launch cost, minus payload, is expected to be around $90 million. According to Elon Musk, “Falcon Heavy will carry more payload to orbit or escape velocity than any vehicle in history, apart from the Saturn V moon rocket.” Falcon Heavy is expected to debut this year and make its maiden voyage from Vandenberg AFB. According to their agreement with the USAF, certification to carry national security payloads will occur after 3 successful flights and 2 successful consecutive flights.

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    Posted in Capitalism, Space, USA | 7 Comments »

    CRS-8 Dragon: Hosted Webcast

    Posted by Michael Hiteshew on 18th April 2016 (All posts by )

    It’s steps like this that move the space program forward. Notice this wasn’t done by NASA or ULA or the ESA. It was done by a private company that didn’t exist 15 years ago. 37 minutes, including the launch, recovery of the 1st stage, and deployment of the Dragon capsule.

    BTW, very cool to me that Spacex did not require the help of a traditional media company for any of this. And it’s actually much better than anything they typically produce. In addition, the people in this video are in the Hawthorne, California, SpaceX facility where these rockets are designed and produced. They designed and built this rocket. And they’re watching it perform almost real time. How amazing is that?

    One of the early developmental tests:   GRASSHOPPER 325M HOP | SINGLE CAMERA (HEXACOPTER)

    Posted in Capitalism, Entrepreneurship, Space, Tech, Video | 18 Comments »

    Government, the things we do together.

    Posted by Michael Kennedy on 6th April 2016 (All posts by )

    cal

    Barack Obama is fond of describing government this way.

    As President Obama said the other day, those who start businesses succeed because of their individual initiative – their drive, hard work, and creativity. But there are critical actions we must take to support businesses and encourage new ones – that means we need the best infrastructure, a good education system, and affordable, domestic sources of clean energy. Those are investments we make not as individuals, but as Americans, and our nation benefits from them.

    That was a reaction to Romney’s criticism of his silly comment.

    I prefer the quote attributed to Washington.

    “Government is not reason, it is not eloquence,—it is force! Like fire, it is a dangerous servant, and a fearful master; never for a moment should it be left to irresponsible action.”

    Now, we see a new imposition.

    The Department of Labor says its so-called fiduciary rule will make financial advisers act in the best interests of clients. What Labor doesn’t say is that the rule carries such enormous potential legal liability and demands such a high standard of care that many advisers will shun non-affluent accounts. Middle-income investors may be forced to look elsewhere for financial advice even as Team Obama is enabling a raft of new government-run competitors for retirement savings. This is no coincidence.

    Labor’s new rule will start biting in January as the President is leaving office. Under the rule, financial firms advising workers moving money out of company 401(k) plans into Individual Retirement Accounts will have to follow the new higher standards. But Labor has already proposed waivers from the federal Erisa law so new state-run retirement plans don’t have the same regulatory burden as private employers do.

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    Posted in Big Government, Capitalism, Economics & Finance, Public Finance | 7 Comments »

    Culture, Cooperation, and Entrepreneurship

    Posted by David Foster on 6th April 2016 (All posts by )

    Claire Berlinski is very pleased with the response to the GoFundMe page in support of her new book ($9700 as of this writing) as well as the strong interest in the crowdfunding investment possibility.

    A conversation between Claire and her brother Mischa suggests some grounds for cautious optimism about the future of this country:

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    Posted in Business, Capitalism, Civil Society, Tech, USA | 25 Comments »

    The Dangerous Green Agenda

    Posted by Michael Hiteshew on 2nd April 2016 (All posts by )

    Posted in Capitalism, Environment, Leftism, Politics, Society, Video | 7 Comments »