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Lessons from the Richest Duck in the World

By Robert Anthony Peters

Scrooge is an unlikely name for a hero. Since Dickens’s A Christmas Carol, it has elicited thoughts of disagreeable skinflints. That all changed with Scrooge McDuck.

At first, Donald Duck’s Uncle Scrooge was quite Dickensian in character, but creator Carl Barks knew that a churlish miser would not sustain an audience’s sympathy. To really give this character legs (or wings), he would have to give him the kind of morals that resonate with readers.

It worked. Disney’s Duck universe has been popular for over 60 years. My generation enjoyed Duck Tales on TV. An older generation avidly read Uncle Scrooge comics, the first issue of which has Scrooge explaining how he earned his fortune: “I made it by being tougher than the toughies, and smarter than the smarties! And I made it square!”

Barks created a wealth of economic lessons through fables that are still enjoyed around the globe today.

A Modern-Day Aesop

Barks was born in rural Oregon to a farming family at the turn of the 20th century. Growing up, he had a hardscrabble existence. Due to several moves, living far from schools, and poor hearing from childhood measles, he had minimal education. He worked as a farmer, cowboy, swamper, railroad worker, printer, and more. His first gig as an illustrator was for a men’s humor magazine. In late 1935, he discovered an ad in the newspaper for Disney. Though the job offered only half his current pay, he decided to join the animation department and eventually the comic book publisher. Barks was a man who was willing to work hard, work well, and take a chance on great possibilities. The storytelling in these comics featured Barks’s strongly individualist outlook, his belief in the entrepreneur, and his optimism in markets resulting in human benefit.

Trade, Trade Again

Before Barks created Uncle Scrooge, he was already exploring the beneficial nature of trade in 1947’s “Maharajah Donald,” an issue of the Donald Duck comic book series, which featured Donald and his nephews Huey, Dewey, and Louie. The story begins with the boys cleaning out the garage at Donald’s behest, with the understanding that they could keep whatever he did not want. Predictably, he wanted all the things and was only willing to part with one stub of a pencil that’s “not worth a thing.” Less than thrilled, the boys keep it to trade for something else. They run into Piggy, who offers them a ball of string. Figuring it is not worse, they trade. As luck would have it, they run into a kid whose kite flying is limited by his length of string. Eager to get it really soaring, he trades them his knife for their string. One of the nephews feels a pang of guilt, but in short order, the other two chime in, “Don’t let it bother you” because “he’s happy!”

Eventually, they trade up to a pearl and decide to cash in. There happens to be a man in the jewelry store who was about to sail to India to obtain a pearl much like what they have in their hands. They exchange it for the steamboat ticket, which Donald promptly steals from them. Donald boards, the nephews stow away, and they arrive in India, only for Donald to run afoul of the local magistrate to the point of being fed to the royal tigers. While wracking their brains to find ways to save him, his nephews run over their list of assets: “We don’t know a soul we could ask for help … and we haven’t a cent for bribing the guards … we just can’t do something that is impossible.” But lo and behold, what do they spy next but an old stub of a pencil! To which the nephews declare, “We’re rich!” They then commence trading goods until they have acquired a creative solution to free their uncle from his predicament.

The storytelling in these comics featured Barks’s strongly individualist outlook, his belief in the entrepreneur, and his optimism in markets resulting in human benefit.

 

The story presents a cornucopia of economics lessons: subjective value, mutual gains from trade, and entrepreneurship. What better display of subjectivity than to have your life saved by the application of market exchange to a good that you considered worthless? Mutual gains are clear by the voluntary nature and perceived benefit of each party to the trade. (Most poignant is the Kirznerian alertness to the pencil and its use in trade.)

A Land without Greed

“Tralla La” is the tale of an exasperated Uncle Scrooge. Tired of being hounded for his wealth and time by charities, businessmen, and tax collectors, he finally snaps, telling Donald, “I want to go someplace where there is no money and wealth means nothing!” From his physician, he hears of the land of Tralla La, a land without gold, jewels, or money, deep in the Himalayas. Scrooge, Donald, and nephews set forth, and as they fly overhead, they see a land of abundance. The leader explains, “We Tralla Lallians have never known greed! Friendship is the thing we value most!”

All is serene until a farmer discovers a bottle cap that Scrooge had carelessly tossed out of the plane window. The honest peasant attempts to return it to Scrooge, who declines it, considering it worthless. Subjective value makes its appearance here, when the farmer and his fellow villagers invest this item with great desirability, leading to a bidding war that goes from 10 sheep to 20 and finally to a year’s yield of rice. When it is discovered that Scrooge has a case of bottles, all with caps, the Tralla Lallians attempt to purchase it, to no avail. Finally, the mob declares him a “meanie” and wants his taxes raised. The only solution to this problem is to call in an air strike — not of bombs, but bottle caps.

Even a humble bottle cap can spark desire because of its scarcity. Its price will be high if it is the only one around and perceived to have value. The results of “Helicopter Ben’s” strategy are on display here as well. Though the Federal Reserve may believe that it can make people wealthier by increasing the money supply, Uncle Scrooge knows that increasing the number of bottle caps will diminish their worth.

From Riches to Rags to Riches

Finally, and probably the most famous Uncle Scrooge story in economics circles, we have “A Financial Fable.” Beginning as a bucolic idyll, the story opens with  the entire Duck clan working the fields and tending the livestock. The nephews sing the praises of hard work while Donald complains, wanting money for nothing.

Scrooge investigates his new bank, a corn crib, hiding his money in plain sight. This may not have been his brightest idea: a cyclone whips through and takes all of his money, scattering it over the countryside. The nephews are distraught, but Scrooge simply replies, “If I stay here and tend to my beans and pumpkins, I’ll get it all back.”

Donald and the rest of the country quit their jobs and set off to “see the world.” Meanwhile, Scrooge and the boys continue to labor on their farm. With no one else working and nothing being produced, Donald and the rest of the world come straggling back. Scrooge is happy to feed them — at new market prices. Eggs are a million dollars apiece, cabbage is two million, and ham is a bargain at a cool trillion. With each purchase, the money from Scrooge’s corn crib trickles back and he becomes, yet again, the richest duck in the world.

With another “helicopter” scenario, we see the inflationary effects of a massive injection of money. We also get a glimpse into many aspects of wealth — how it is created, how it is maintained, and what happens when we redistribute in ways that are not related to market performance. Barks knew he was creating a morality tale of capitalism, admitting, “I’m sure the lesson I preached in this story of easy riches will get me in a cell in a Siberian gulag someday.”

Economic Tales

Economics is all around us — even in our comic books.

Now cable channel Disney XD has announced plans to relaunch Duck Tales in 2017. As long as the show sticks to the characters and stories inspired by the great Carl Barks, it will offer us plenty to enjoy — and economics lessons that are sure to fit the bill.

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Republicans subpoena Obama chief on water rule

Waterways

Members of Congress demand answers on a new EPA water rule.

Republican lawmakers subpoenaed a top-ranking White House administration official over a controversial water rule that gives the Environmental Protection Agency broad regulatory powers, saying at the very least those in Congress have a right to know the logic behind its creation.

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“The proposed regulation is highly controversial and Congress has a right to know how it was developed,” said Rep. Jason Chaffetz, R-Utah, in a subpoena from his House Oversight Committee to the White House Office of Information and Regulatory Affairs, the Hill reported. OIRA reviews major federal regulations before their issuance.

Chaffetz, along with several of his Republican colleagues, say Howard Shelanski. the chief of OIRA, purposely and wrongfully withheld documents on the water rule that Congress has been requesting since March.

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As previously reported by WND, critics say the new regulation will give the EPA power to control any body of water, even puddles, along with adjacent lands.

“The documents and communications that the committee requested will advance our understanding of the review process and the factors that OIRA considered during that process,” Chaffetz said, the Hill reported.

Joining the subpoena efforts was Rep. Mark Meadows, R-N.C., chairman of the panel’s government operations subcommittee. Both Meadows and Chaffetz say they’ve asked Shelanski and his staff for information on the water rule’s review process but have been steadfastly refused.

Republicans in the Senate, meanwhile, sought similarly.

“I have been waiting for over four months for a legal justification of EPA’s redefinition of ‘waters of the United States,;’” said Sen. Dan Sullivan, R-Alaska, who chairs the subpanel with water oversight and who signed onto Inhofe’s letter, the Hill reported. “Having reviewed the final rule, the reason for the delay is apparent — the final rule cannot be justified.”

Both the House and Senate are working to overturn the EPA’s water rule via legislation. Meanwhile, two dozen businesses have already filed suit against the regulation, saying it gives the EPA broad powers to take unconstitutional steps.

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Judge rules again on Dinesh D’Souza’s future

Dinesh-DSouzas-movie-America
Author and filmmaker Dinesh D’Souza, known for his documentaries critical of President Obama, must continue for another four years the community-service portion of his sentence for campaign-finance violations, a federal judge ruled Monday in Manhattan.

As WND reported, D’Souza was released from nightly detention at a work-release center in San Diego May 31 after eight months. During that time, he taught English once a week to Spanish-speaking applicants for American citizenship.

Dinesh D'Souza  (Courtesy Dinesh D'Souza)

Dinesh D’Souza (Courtesy Dinesh D’Souza)

His lawyers argued that the community service ended with his release from nightly detention. But U.S. District Judge Richard Berman said Monday the intent of his sentencing was for the weekly Spanish lessons in San Diego to continue for the remainder of his five-year probation.

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As WND reported, after pleading guilty to campaign finance violations, D’Souza was sentenced in September to eight months in a work-release center, five years of probation, a $30,000 fine and community service. He pleaded guilty in May 2014 to arranging “straw donors” to contribute $10,000 to the failed 2012 U.S. Senate campaign of Wendy Long, a college friend.

Berman also said Monday his ordered psychological counseling must continue, because he assessed that D’Souza continued to demonstrate arrogance regarding his case.

D’Souza’s supporters contend the case was politically motivated payback for his two successful documentaries and companion bestselling books critical of Obama and what D’Souza regards as an anti-American ideology.

His lawyers argued the psychologist believes counseling is no longer necessary. But Berman ordered the assignment of a new psychologist and said he would review the matter at the next hearing, Oct. 8.

D’Souza wants to travel to his home country of India to visit his mother, who is ill, but Berman said he won’t be able to leave the U.S. until his first year of community service is completed.

D’Souza’s film “2016: Obama’s America” was released during the 2012 presidential campaign and “America: Imagine the World Without Her” came out in July 2014, ahead of the midterm elections.

In his eight months of nightly confinement, he found time to sign a contract with HarperCollins and begin writing a new book to follow his 2014 New York Times bestseller, “America.” He also started the process of financing his next feature film, scheduled for the 2016 presidential campaign. And he’s designed a sequel to his highly profitable 2014 feature film, “America: Imagine the World Without Her.”

D’Souza believes he even managed to convert the approximately 100 Hispanic immigrant students he taught English as part of his community service from socialist-leaning supporters of the Democratic Party to GOP voters.

Dinesh D'Souza with his English class (Courtesy Dinesh D'Souza)

Dinesh D’Souza with his English class (Courtesy Dinesh D’Souza)

He told WND in an interview last month that he has enjoyed teaching the English teaching.

“I have become very attached to my students,” he said. “There are around 100 of them, in classes ranging from beginner to intermediate to advanced.”

He said many of them have now seen his film, “America,” which he gave to them as a Christmas present.

“They have gotten to know me and my situation,” he said. “And they are now huge fans. If you ran Obama against me with this group, I doubt he would get a single vote.”

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Fired Christian fire chief ‘absolutely’ wants job back

(Daily Signals) After being fired for writing what’s been described as an “anti-gay” book, former Atlanta Fire Chief Kelvin Cochran says he “absolutely” wants his job back.

“In the United States of America, Americans should not have to choose between keeping your job and living out your faith,” Cochran told The Daily Signal in an exclusive interview. “And that’s the position the city of Atlanta actually has taken—that I have to have a choice to live out my faith or to keep my job.”

Cochran was fired in January 2015 for publishing a men’s devotional book for a Baptist church group. In the book, “Who Told You That You Were Naked?” Cochran addressed issues of homosexuality, gay marriage and premarital sex from a biblical perspective.

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Klayman gets chance to grill Hillary Clinton

Hillary and Bill Clinton

Hillary and Bill Clinton

Bill and Hillary Clinton, a former president and a candidate for the Oval Office, on Friday were notified through court filings in federal court in Florida of the dates of their depositions in a case that alleges they violated the Racketeer Influenced and Corrupt Organizations Act.

The filings, submitted by attorney Larry Klayman of Freedom Watch, sets Bill Clinton’s deposition for 9 a.m. July 29 at the offices of a Washington law firm and Hillary Clinton’s deposition a day earlier at the same time and place.

“Such deposition will be upon oral examination conducted before a Notary Public in and for the District of Columbia, or some other officer duly authorized by law to take depositions, and will continue until completed and is being taken for discovery purposes, for use at trial, or any other purpose permitted,” the notices state.

Klayman earlier argued against a motion that the case be dismissed.

The well-known Washington watchdog has sued the Clinton Foundation and Bill and Hillary Clinton under RICO for allegedly running a criminal enterprise.

A federal court in Florida already has scheduled a trial for early next year.

“This is a classic RICO lawsuit,” Klayman argued in a recent filing, “Indeed … few people – if any – can even attempt to refute the hard evidence that Bill and Hillary Clinton and their foundation have over a 10-year history of actually selling government access and influence in exchange for hard cash to fill their coffers and the coffers of their foundation, which not coincidentally, as pled, does not operate as a 501(c)3 nonprofit organization but instead operates as defendants Bill and Hillary Clinton’s own alter-ego in furthering their criminal enterprise.”

He said the case is about much more than access to hidden documents, which he is seeking.

“The production of documents at issue is relevant because they evidence a criminal enterprise under the Racketeer Influenced and Corrupt Organizations Act … created and further by each of the defendants, Hillary Clinton, Bill Clinton and the Clinton Foundation, acting in concert as part of a conspiracy, to extort hundreds of millions of dollars in money – that is, bribes – from individuals, entities and persons upon which the defendants have bestowed favors and gratuities, principally in the form of granting waivers to do business with Iran. ”

The allegations, he explained, set “forth all of the operative facts to plead a valid RICO claim.”

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He said the case “must proceed expeditiously” because of a discovery deadline of Sept. 28 and the trial date of Jan. 25, 2016.

“Defendants’ attempts to delay discovery are as transparent as their non-meritorious motions to dismiss. Needless to say, the court should not accept defendants’ lack of reasoned analysis of the factual content of” the complaint,” he wrote.

“It is simply too early to dismiss any portion of plaintiff’s claims where so much information is alleged to provide both notice and a likelihood that more material and predicate acts will be learned through discovery.”

The case brought by Klayman pleads “multiple acts of racketeering activity by travel in interstate or international travel for the purpose of bribery, money laundering and obstruction of justice.”

“These actions were done with the specific purpose of defrauding plaintiff and others out of hundreds of millions of dollars in donations.”

He alleges, for example, that Hillary Clinton as secretary of state “granted a waiver to Victor Pinchuk and his company Interpipe Group as an exemption from U.S. congressional sanctions against doing business with Iran.”

He alleges that was “as a quid pro quo for bribes disguised as donations made to The Clinton Foundation.”

He said the company “then, using the wires and mails and other illegal means fraudulently, donated $2.35 million to The Clinton Foundation.”

WND reported Klayman was urging the court to take physical custody of Hillary Clinton’s infamous private email server because of the evidence it could contain.

In a supplement motion, Klayman said there was new relevant information to bolster his case.

Klayman submitted copies of a Washington Times report that the Clintons’ foundation “set up a fundraising arm in Sweden that collected $26 million in donations at the same time that country was lobbying Hillary Rodham Clinton’s State Department to forgo sanctions that threatened its thriving business with Iran.”

Further, another article submitted by Klayman, from the Miami Herald, reported banks were paying huge fees to Bill Clinton for speeches at a delicate time.

“Many of the speeches and donations were made at times when the host banks were under Justice Department scrutiny. … All told, the same 11 banks have paid more than $81 billion – yes, that’s with a B – over the last six years to resolve federal investigations into alleged corruption,” the report said.

The case charges the Clintons schemed “to reap hundreds of millions of dollars personally and for their foundation by selling government access and influence.”

Klayman, for years a Washington watchdog, engaged Bill Clinton in court battles during his presidency. Klayman also has taken on terror interests and foreign influences in the United States. Recently, he won a federal court judgment against the National Security Agency’s spy-on-Americans program and brought a case against Obama over his amnesty-by-executive-memo strategy.

WND’s attempts to obtain a comment from the New York office for Bill Clinton or the foundation have not been successful.

The order setting the case for trial comes from Judge Donald M. Middlebrooks, U.S. district judge for the Southern District of Florida in West Palm Beach.

When the Clintons left the White House in 2000, they were “broke,” Hillary Clinton has claimed.

But estimates are that since that time, they have been paid well over $100 million, oftentimes in $250,000 and $500,000 increments for speaking. Speaking fees for Bill Clinton have been as high as $750,000.

The Clintons’ foundation also has been embroiled in scandal, with foreign governments making donations when Hillary Clinton was secretary of state and, as WND has reported in a series, a respected Wall Street analyst charging financial irregularities that indicate the Clintons have skimmed millions from the foundation for themselves and their colleagues.

 

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Al-Qaida’s new Yemen chief sets sights on U.S.

Raymi

Qassim al-Raymi

The newest chief of al-Qaida’s branch in Yemen has put America on its hit list, saying there is no other target that takes precedence.

In his first speech since taking over the command post, Qassim al-Raymi – who succeeded Nasser al-Wuhayshi, the military commander of al-Qaida in the Arabian Peninsula who was killed last month by U.S. drone strike – called for immediate attacks on the United States. The U.S.-based SITE watchdog was able to capture his comments on an audio tape, Reuters reported.

In his speech, Raymis vowed allegiance to Ayman al-Zawahri, the commander of al-Qaida, and said America must be hit.

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“All of you must direct and gather your arrows and swords it,” he said, SITE reported. “God has helped you against this enemy, for not only did you reach its home, but with praise to God and His grace, you have reached the depths of its heart.”

And to Zawahri, he said, Reuters reported: “”I pledge allegiance to you, to listen and obey, in times of difficulty and prosperity, in hardship and in ease, to endure being discriminated against and not to dispute about rule with those in power, and to wage jihad in the cause of God the Almighty, with the Book of Allah and the Sunnah [traditions] of His Messenger, Allah’s peace and blessings be upon him, as much I am able.”

 

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5 Unintended Consequences of Regulation and Government Meddling

By Robert P. Murphy

Voters frequently support measures that sound noble and beneficial but end up causing serious mischief — and often hurt the very groups the measures were intended to help.

A well-known example is price controls, which include minimum wage laws and rent control. These can cause unemployment among low-skill workers and apartment shortages for those without connections.

But that’s not all. Not by a long shot.

Here are five more examples of unintended consequences.

1. “Shoot, Shovel, and Shut Up”

The Endangered Species Act and other laws restrict how landowners can use their property if it is discovered that their actions may adversely affect vulnerable wildlife. Besides the injustice of violating property rights, this regulation produces perverse results.

Imagine a landowner in the Midwest who had plans to sell to an outside developer who wanted to build a shopping mall. One morning, a few days before closing the deal, the man is sipping coffee and looking off his back porch into the woods. He suddenly sees a woodpecker that he recognizes as a protected species. What will the man do, if he follows pecuniary incentives? Is he going to call up federal bureaucrats and tell them the good news?

No. The man will probably go get his gun and shovel and never speak of this incident to anyone.

2. Seat Belt Legislation Kills

In the typical debate over seat belt mandates — in which drivers can be heavily fined if caught driving without buckling up — advocates of liberty tend to stress individuals’ “right to be stupid” while others claim that public safety trumps absolute freedom. Ideology aside, do such laws make us safer?

Economist Sam Peltzman looked at the evidence after some states enacted seat belt legislation, while others did not. He found that drivers did buckle up more frequently because of the government penalties but that traffic fatalities were roughly unchanged.

Because seat belts made people feel safer, they drove just a little more recklessly.

True, the probability of dying in a car crash went down, if you were in a crash, because wearing a seat belt definitely helps you survive a typical accident. However, the states that passed the seat belt legislation saw an increase in rates of traffic accidents. Because people felt safer, they drove just a little more recklessly. No individual driver wakes up and says, “I’m going to get in a fender bender today,” but with millions of people driving hours per day, 365 days per year, we will definitely see more accidents in the aggregate if people are even slightly more aggressive on the margin.

Peltzman found that total fatalities were about the same. The death rate for motorists crept down, but this was offset by a higher death rate among pedestrians and cyclists hit by cars. Some groups obviously did not benefit from the higher prevalence of seat belt usage.

3. Stricter Vehicle Fuel Economy Mandates Do Little for the Environment

The federal government imposes minimum corporate average fuel economy (CAFE) standards on certain vehicles. Some states wanted to “do more” for the environment, so they passed tighter mandates. In other words, states like California imposed higher mile-per-gallon requirements on cars sold in California than the federal government insisted on.

But the way the states structured their rules led to a significant “leakage.” If a car manufacturer increased the average fuel economy for its vehicles sold in California, for example, then those cars counted as part of its “fleet” in calculating the average fuel economy for its cars sold in the nation as a whole. The manufacturer could then get away with selling cars that had lower fuel economy in the states that did not supplement the federal rule, and they were still satisfying both state and national standards. Thus, the California rule as originally designed led to fewer emissions per vehicle-mile in California — but not nearly as much in the nation as a whole. Some economists estimated this “leakage” to be as high as 74 percent. The hodgepodge of standards simply raised the total costs of vehicles while doing little to reduce total US emissions.

4. Jane Jacobs Combats City Planning

Fans of Austrian economics should not be surprised to learn that Jane Jacobs, the champion of the American city, found several flaws with typical bureaucratic city planners. For example, zoning regulations broke up the spontaneous growth of cities into “residential” and “commercial” sections, spawning crime and other social ills.

Originally, apartments were interspersed with shops, so that the owners could always keep an eye on their businesses and on their children. This “natural surveillance” was destroyed with zoning and other regulations, not to mention the interstate highways that would rip neighborhoods apart and the austere “housing projects” that placed most adults far away from the street and thus unable to monitor and shoo away unsavory characters. Zoned neighborhoods became unsafe neighborhoods.

5. Three Strikes Mean You’re Out

In an understandable reaction to “liberal” judges who would give slaps on the wrist to repeat offenders, the 1990s saw a wave of automatic sentencing legislation to take away judges’ discretion. This included California’s famous 1994 “Three Strikes and You’re Out” rule (Proposition 184), where someone convicted of a third felony would get 25 years to life. Currently, 24 states have some form of “three strikes” legislation.

One problem with these rules is that many acts are felonies that most people would consider petty, such as bringing a smoke bomb to high school. In California, one man with two prior felony convictions was sentenced to 25 years to life for being with a friend who got caught selling $20 of cocaine to an undercover cop.

An unintended consequence of the “three strikes” rules is that someone with two prior felony convictions now has a serious incentive to evade arrest for a third. And in fact, empirical studies of Los Angeles data suggest that more police officers have been killed because of this effect.

The Upshot

Incentives matter. It’s not enough for voters to endorse legislation that has a nice title and promises to do something good. People need to think through the full consequences of a policy, because often it will lead to a cure worse than the disease.

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Should We Fear the Era of Driverless Cars?

By Will Tippens

Driving kills more than 30,000 Americans every year. Wrecks cause billions of dollars in damages. The average commuter spends nearly 40 hours a year stuck in traffic and almost five years just driving in general.

But there is light at the end of the traffic-jammed tunnel: the driverless car. Thanks to millions of dollars in driverless technology investment by tech giants like Google and Tesla, the era of road rage, drunk driving, and wasted hours behind the wheel could be left in a cloud of dust within the next two decades.

Despite the immense potential of self-driving vehicles, commentators are already dourly warning that such automation will produce undesirable effects. As political blogger Scott Santens warns,

Driverless vehicles are coming, and they are coming fast…. As close as 2025 — that is in a mere 10 years — our advancing state of technology will begin disrupting our economy in ways we can’t even yet imagine. Human labor is increasingly unnecessary and even economically unviable compared to machine labor.

The problem, Santens says, is that there are “over 10 million American workers and their families whose incomes depend entirely or at least partially on the incomes of truck drivers.” These professional drivers will face unemployment within the next two decades due to self-driving vehicles.

Does this argument sound familiar?

These same objections have sprung up at every major stage of technological innovation since the Industrial Revolution, from the textile-working Luddites destroying looming machines in the 1810s to taxi drivers in 2015 smashing Uber cars.

Many assume that any initial job loss accompanying new technology harms the economy and further impoverishes the most vulnerable, whether fast food workers or truck drivers. It’s true that losing a job can be an individual hardship, but are these same pundits ready to denounce the creation of the lightbulb as an economic scourge because it put the candlemakers out of business?

Just as blacksmithing dwindled with the decline of the horse-drawn buggy, economic demand for certain jobs waxes and wanes. Jobs arise and continue to exist for the sole reason of satisfying consumer demands, and the consumer’s demands are continuously evolving. Once gas heating devices became available, most people decided that indoor fires were dirtier, costlier, and less effective at heating and cooking, so they switched. While the change temporarily disadvantaged those in the chimney-sweeping business, the added value of the gas stove vastly improved the quality of life for everyone, chimney sweeps included.

Time magazine predicted the computer would wreak economic chaos in the 1960s. 

 

There were no auto mechanics before the automobile and no web designers before the Internet. It is impossible to predict all the new employment opportunities a technology will create beforehand. Countless jobs exist today that were unthinkable in 1995 — and 20 years from now, people will be employed in ways we cannot yet begin to imagine, with the driverless car as a key catalyst.

The historical perspective doesn’t assuage the naysayers. If some jobs can go extinct, couldn’t all jobs go extinct?

Yes, every job we now know could someday disappear — but so what? Specific jobs may come and go, but that doesn’t mean we will ever see a day when labor is no longer demanded.

Economist David Ricardo demonstrated in 1817 that each person has a comparative advantage due to different opportunity costs. Each person is useful, and no matter how unskilled he or she may be, there will always be something that each person has a special advantage in producing. When this diversity of ability and interest is coupled with the infinite creativity of freely acting individuals, new opportunities will always arise, no matter how far technology advances.

Neither jobs nor labor are ends in themselves — they are mere means to the goal of wealth production. This does not mean that every person is concerned only with getting rich, but as Henry Hazlitt wrote in Economics in One Lesson, real wealth

consists in what is produced and consumed: the food we eat, the clothes we wear, the houses we live in. It is railways and roads and motor cars; ships and planes and factories; schools and churches and theaters; pianos, paintings and hooks.

In other words, wealth is the ability to fulfill subjective human desires, whether that means having fresh fruit at your local grocery or being able to easily get from point A to point B. Labor is simply a means to these ends. Technology, in turn, allows labor to become far more efficient, resulting in more wealth diffused throughout society.

Everyone knows that using a bulldozer to dig a ditch in an hour is preferable to having a whole team of workers spend all day digging it by hand. The “surplus” workers are now available to do something else in which they can produce more highly valued goods and services.  Over time, in an increasingly specialized economy, productivity rises and individuals are able to better serve one another through mutually beneficial exchanges in the market. This ongoing process of capital accumulation is the key to all meaningful prosperity and the reason all of humanity has seen an unprecedented rise in wealth, living standards, leisure, and health in the past two centuries.

Technology is always uncertain going forward. Aldous Huxley warned in 1927 that jukeboxes would put live artists out of business. Time magazine predicted the computer would wreak economic chaos in the 1960s.

Today, on the cusp of one of the biggest innovations since the Internet, there is, predictably, similar opposition. But those who wring their hands at the prospect of the driverless car fail to see that its greatest potential lies not in reducing pollution and road deaths, nor in lowering fuel costs and insurance rates, but rather in its ability to liberate billions of hours of human potential that truckers, taxi drivers, and commuters now devote to focusing on the road.

No one can know exactly what the future will look like, but we know where we have been, and we know the principles of human flourishing that have guided us here.

If society is a car, trade is the engine — and technology is the gas. It drives itself. Enjoy the ride.

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Don’t Let Me Design Your Retaining Wall

By Warren C. Gibson

The State of California says I’m qualified to practice civil engineering. That means you can trust me to design structures that achieve a high degree of safety, economy, reliability, and maintainability. I even have an official rubber stamp that I can apply to drawings or calculations. It is supposed to guarantee that I know what I’m doing and that I follow generally accepted best practices.

But I haven’t practiced engineering in decades. I used my license perhaps half a dozen times in the 1970s. My rubber stamp has sat idle ever since.

Civil engineering, like other professions, requires a high degree of specialization and training. When clients seek both advice and services from the same professional, a conflict of interest can arise. Clients therefore seek the opinions of informed third parties, including certification organizations. These opinions are especially important when hiring civil engineers, because their mistakes can cause injury or death.

Certification organizations can make two kinds of errors: they can approve unqualified applicants and they can disapprove qualified applicants. These are called type I and type II errors in many kinds of estimation activities.

My own case is a prime example of a type I error. I am now utterly unqualified to practice civil engineering. I have forgotten most of what I once knew, and besides, the design and analysis methods for steel and concrete have both changed radically in recent years. It would be a lot worse for me to resume practice under cover of my license than for a contractor who had built many retaining walls to design and build one similar to others he had built — unaided by a licensed engineer. Yet, I would be acting within the law, while the contractor could face penalties for practicing engineering without a license.

I keep my license current as a trophy of sorts, but really, someone should take it away from me.

State licensing boards are not the only sources of information about engineers. Start with college degrees: a BS in civil engineering from an accredited university. Continuing education classes help. And nothing can take the place of experience and a professional reputation.

Reputations have long been cultivated by word of mouth. People ask their friends to recommend a good engineer or dentist or gardener. Today, the app economy makes reputation that much easier to track — and ever more important to protect. Businesses guard their reputations jealously on Amazon, eBay, and Yelp. Online comments have their drawbacks, but here again reputation comes into play. Organizations like Yelp are concerned about the quality of the posts on their sites out of concern for their own reputations.

Nothing can take the place of experience and a professional reputation.

 

This is the essential difference between state and private licensing organizations. It’s not that state board members are bad people, and private individuals can certainly make mistakes. But government and market institutions face fundamentally different incentives. State licensing board members need not worry as much about their reputations. They are seen as dedicated public servants. They are immune from competition. They act under cover of obscurity. And they are safe from prosecution for all but the most egregious malfeasance.

New members of government boards are usually motivated by the best of intentions, but over time, and often subtly, they can become heavily influenced or even outright corrupted by the power at their disposal. They often become unwitting allies of the people or organizations they are regulating. State regulators can protect their capitalist cronies from competition, as the Louisiana State Board of Embalmers and Funeral Directors did when it told the monks at St. Joseph’s Abbey that they couldn’t sell caskets, something monks have been doing for centuries. The licensing board was made up of — surprise, surprise — funeral directors.

If all state licensing boards disbanded tomorrow, the existing private alternatives could not fill the gap, and this is what many people find so scary about the idea of reducing the government’s role in regulating our safety. But new businesses would respond to the demand.

Market regulation would not look like a private version of the state model. The combination of competition and reputation would create services that look more like Yelp and Uber and less like the Louisiana board of embalmers. If you want to know if the monks will build you a sound casket, check how their previous customers have rated them. Then compare their prices to those of the myriad funeral services competing with them.

But don’t bother looking up my rating in the civil engineering app. Just rest assured that the market is protecting you from my incompetence.

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Free traders: Capitalist champions of unfair competition

nike

Do you like and/or approve of unfair competition? If you’re an advocate for free trade you do, whether you realize it or not. You may call yourself a capitalist, but if you approve of free trade, you approve of unfair competition within the capitalist system you propose to support.

What’s worse than an unfair system is when the system is tilted toward benefiting foreign producers over our own. That is exactly what the American version of free trade has done for the last 40 years: grant economic advantages to foreign producers that our domestic producers don’t enjoy.

Here’s a real world example. American-owned New Balance makes about 25 percent of their shoes in the United States. American-owned Nike doesn’t make any shoes here. Neither does German-owned Adidas or German-owned Reebok.

New Balance is required to observe minimum wage laws, tax laws, labor laws, family leave laws, environmental and pollution controls, paid vacation and sick leave benefits, and pays 7½ percent of the 15 percent tab to Social Security for each American worker (the American workers pays the other 7½ percent).

Get Roger Simmermaker’s advice firsthand, in “How Americans Can Buy American” and “My Company ‘Tis of Thee.”

Any wage that Nike pays in the foreign countries in which they produce is much less than in the United States. There are few if any of the above laws and regulations in China and Indonesia. And Nike doesn’t have to pay an equivalent of 7½ percent of the salaries of foreign workers to America’s Social Security Trust Fund.

I don’t know what it costs for New Balance to make a shoe in the United States, but let’s say it is $15. And I’m not sure what it costs Nike to produce a shoe in Indonesia, but let’s say it is $5. These numbers mean that New Balance has three times the production-cost burden to “compete” for the spending dollars of the American consumer. Is that fair? Of course not.

Economic trade is the only form of competition on the face of the earth where two competitors play by a different set of rules. If your favorite Major League Baseball team played a team from Indonesia, you would find it odd if the Indonesian team had a more favorable set of rules, like batters getting four strikes before they can be called out instead of three, or walks to first base after only three balls instead of four for the American team.

How about if it took four outs to retire the side for the Indonesian team and only three outs for your favorite American team? You would surely cry foul (no pun intended).

Nike probably pays a small import tariff when their shoes enter the United States, but the tariff rate is nowhere near what it would have to be – 300 percent – to make things fair for both competitors.

Why 300 percent, you ask? Simple math. New Balance’s production-cost burden is 300 percent higher than that of Nike. That means to equalize production-cost burdens, we would have to impose what could be called an “equalizing tariff” of 300 percent on Nike shoes to bring their $5 per shoe production-cost burden up to New Balance’s $15 per shoe-production-cost burden.

Now I know that 300 percent sounds high, but we should be more concerned with what it accomplishes. It makes trade fair and it makes sure all players are playing by the same set of rules, just like we would advocate in any other competitive activity.

Actually, my 300 percent tariff scenario is quite conservative if you take one of the studies by the National Association of Manufacturers (NAM) into account. The NAM is a free trade leaning group, by the way.

The NAM study found that it costs 22.4 percent more to make a product in the USA compared to our nine largest trading partners (to pay for things like Social Security taxes, etc. listed above). The capitalist view is that all production-cost burdens must be recovered in the price of the product. If that’s true, then a domestic tax has the same effect as an import tariff, so we can easily call an import tariff a tax. And if tariffs are taxes, the NAM says we are imposing a 22.4 percent tariff on our own production, while imposing a 3 percent tariff on Nike shoes.

At the same time, through trade deals like the Trans Pacific Partnership (TPP), our government is trying to lower import tariffs even more, while continuing to saddle domestic production with ever more regulations and other cost burdens.

Regulations can be a good thing. No one wants a dirty domestic factory to emit cancer-causing chemicals into the atmosphere that can kill the people who breathe it. I get that.

What I don’t get is allowing China to do it (their challenges with polluting their own atmosphere have been well-documented) and allowing them to undercut American production on price because we cannot and should not.

In short, those who abide by and absorb the cost of American laws deserve protection from those who don’t. We have the most lucrative consumer market in the world. Everyone wants to sell to us, so we should be able to dictate the terms surrounding how goods enter into our American market. And if anyone gets an advantage, it ought to be us, but it’s not.

Capitalism? Yes. Common-sense regulation? Yes. But free trade? No. It’s unfair, unjust, and it has put way too many Americans in unemployment lines who didn’t deserve it.

Nike CEO Phil Knight once said the reason his company used low-wage Indonesian labor was because “Americans don’t want to make shoes.” Really? Tell the American workers at New Balance that.