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The Vampiric Nature of “Stakeholder” Capitalism

21 Thursday Jul 2022

Posted by Nuetzel in Capitalism, Human Welfare

≈ 1 Comment

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Bank of America, Blackrock, Capital Markets, Consumer Surplus, David Henderson, Don Boudreaux, ESG Scores, Fiduciary Laws, George Will, Mark Joffe, Michael C. Jenner, Producer Surplus, Reservation Wage, Semantic Infiltration, Shareholder Value, Stakeholder Capitalism, Theory of the Firm, Virginia Postrel

When so-called “stakeholders” are in charge of a company, or when non-owner “stakeholders” receive deference to their various goals from management, the actual owners have been displaced and no longer have control. That represents a kind of taking in which managers are complicit, failing to keep proper vigilance in their duty to maximize value for shareholders.

Ceding control to stakeholders represents a severe dislocation in the principle-agent relationship between owners and corporate management. Virginia Postrel is on-point in her discussion of the failures of “stakeholder capitalism”, but she might as well just say that it isn’t capitalism at all! And she’d be right!

Stakeholder capitalism represents a “theory” of the firm that accepts an array of different goals that often stand in conflict. This is the key point raised by Postrel. She cites Michael C. Jenner’s 2010 paper on stakeholder theory in which he notes the impossibility of maximizing any single-valued objective in the presence of a multi-dimensional corporate objective function. Thus, stakeholder objectives nearly always subvert management’s most important responsibility: maximizing value for owners.

And just who are these “stakeholders”? The designation potentially includes just about anyone and everyone: managers, customers and potential customers, suppliers and potential suppliers, employees, the pool of potential job applicants, union organizers, regulators, community members and organizations, local governing bodies, “underserved” populations, anyone with a grievance, environmental activists, and the children of tomorrow. Sure, owners are part of the broad set of stakeholders as well, but as Jenner more or less noted, who’s got time to maximize profits in the face of the myriad “claims” on company resources by the larger, blood-sucking hoard?

George Will aptly refers to stakeholder capitalism as “parasitic progressivism”. In fact, in his opening sentence, he notes that the very term “stakeholder” is a form of semantic infiltration, whereby the innocent (and ignorant) adoption of the term is a gateway to accepting the agenda. Will also notes that management deference to stakeholders violates fiduciary laws intended to protect owners, which include worker pensions and 401(k)s, as well as small investor IRAs, charitable organizations, and insurance companies funding life insurance policies and annuities.

This behavior is not merely parasitic — it is truly vampiric. Once bitten by the woke zombie corpses of stakeholder capitalism, either from within the organization or without, the curse of this deadly economic philosophy spreads. Human resource organizations impose diversity, equity, and inclusion training, rules, and hiring practices on operations. Suppliers might be imposed upon to not only deliver valued inputs, but to do so in a way that pleases multiple stakeholders. Woke fund managers, upon whom the firm might rely for capital, will insist on actions that promote social and environmental “justice”. It can go on and on, and no amount of appeasement is ever sufficient.

Unfortunately, there really are activist investors — actual stockholders — who encourage this misguided philosophy. If the majority of a firm’s owners wish to be accountable to the whims of particular non-owner stakeholders, that’s their right. Other investors would be wise to sell their shares… fast! Wastrels and incompetents have blown many a great and small fortune over the years, but capital markets are well-equipped to punish them, and eventually they will. Get woke, go broke!

The best way for a firm to maximize its contribution to society is to do its job well. That task involves producing a good or service that is valued by customers. By doing it well and efficiently, shareholders, customers, employees and society all win. This is the magic of mutually beneficial trade! Produce something that customers value highly while being mindful of tradeoffs that allow resource costs to be minimized. In general, the customers extract surplus value; shareholders extract surplus value; suppliers extract surplus value; and employees extract a surplus value because they receive wages at least as high as the lowest “reservation” wages they’d find acceptable. Here are some comments from Don Boudreaux on this general point:

“… regardless of how well or poorly managers are at running their companies in ways that maximize share values, there’s every reason to believe that managers will be much less competent at running their companies in ways that adequately satisfy ‘stakeholder’ interests. Not only is the definition of ‘stakeholder’ inherently open-ended and ambiguous, even the most skilled managers have no way to know how to trade-off the well-being of one set of ‘stakeholders’ for that of another set.”

This is very nearly a restatement of Jenner’s conclusion, but Jenner’s applies even when managers know specifics about the tradeoffs. Generally they don’t! Remember too that the firm, its shareholders, suppliers, and its employees are all subject to taxes on their surplus values, so their contribution to society exceeds their own gain. Moreover, many firms are already regulated precisely because lawmakers believe government has an interest in protecting larger classes of “stakeholders”. But beyond meeting regulatory requirements, to further insist that firms devote less than their remaining energies and resources to doing their jobs well, and to ask them to focus instead on the varied interests of external parties, whomever they might be, is ultimately a prescription for social harm.

A monster child of stakeholder theory is so-called ESG scoring. ESG stands for Environmental, Social, and Governance, and the scores are intended as “grades” for how well a firm is addressing these concerns. Proponents claim that high ESG’s are predictive of future returns, but that’s true only if lawmakers and regulators look upon these firms with favor and upon others with disfavor. ESG is basically a political tool. Otherwise, it is an economically illiterate notion foisted upon investors by political activists embedded in “woke” financial institutions like Blackrock and Bank of America. There be some real vampires! As David Henderson and Marc Joffe write, ESG fuels higher prices and obstructs economic growth. That’s because it formalizes the effort to serve “stakeholders”, thus raising the cost of actually producing and delivering the good or service one naturally presumes to be the firm’s primary mission. The shareholders pay the cost, as do customers and employees.

When I hear business people talk reverently about serving their “stakeholders” (and when I hear naive investment advisors wax glowingly about ESG scores), it sends up huge red flags. These individuals have lost sight of their valid objectives. They should be trying to run a business, not serving as a grab-bag for other interests. Serve your customers well and efficiently so as to maximize value for shareholders. Do so within the bounds of the law and ethics, but stick to your business mission and the parties to whom you are ultimately accountable!

Feel the Nutzenfreude: Joy In Success of Others

06 Sunday Feb 2022

Posted by Nuetzel in Free markets, Human Welfare

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David Sedaris, Duke University, Economic Efficiency, Exploitation, Free Markets, Freundschaftsbeziehungen, Gleichschaltung, Mark Twain, Marxism, Michael Munger, Nutzenfreude, Nutzenschmerz, Paretian, Pareto Improvements, Pareto Optimality, Privilege, Property Rights, Schadenfreude, Scottish Enlightenment, Social Justice, Tradenfreude, Tradenschmerz

Michael Munger is a professor of economics at Duke University who has coined a term for the distaste we observe, in some quarters, for the success of others. He calls it Nutzenschmerz, a conjunction of the German words “nutzen” (benefit) and “schmerz” (pain).

According to Munger, nutzenschmertz is an impulse of “indignant outrage over someone getting” … “an undeserved benefit”. Of course, “undeserved” is a key word here. I suspect those inflicted with nutzenschmerz apply definitions as flexible and arbitrary as the envy from which they suffer. Nutzenschmerz is a special kind of envy, however, because it doesn’t necessarily imply a personal want of the benefit. It’s simply a condemnation of another’s good fortune. Munger applies an additional twist to the definition, which I discuss below. As a mnemonic device, it might be helpful to think of nutzenschmerz as a hatred for anyone who “gets their nut”!

People of good spirit believe success in others is something to admire, at least if it doesn’t come at someone else’s expense. Perhaps success is more admirable as the fruit of hard work and talent, as opposed to dumb luck. But good luck is nothing to be ashamed of, and it’s often said we make our own luck. Well, maybe only lucky people say that! “Luck” doesn’t necessarily come at the expense of others, however, and no one “loses” things they have no right to expect.

Furthermore, one’s success, lucky or otherwise, often inures to the benefit of others in the form of better products, new jobs, and higher income. For example, if I were to find a deposit of some rare earth mineral on my property while digging a well, I’d consider myself quite lucky. I would then hire people to mine it. The new supplies of the mineral would be used in industry, bringing more plentiful supplies of certain products to consumers. New jobs! Cheaper products!

Economists have a particular framework for discussing “successes” of this kind. If a change occurs from which everyone benefits and no one loses, economists say the change is a Pareto improvement. If only only a few benefit and no one is made worse off, it is a weak Pareto improvement. When all such opportunities have been exhausted, we have reached a state of Pareto optimality. Free markets generally move society toward that state, externalities aside. This is an aspect of what’s meant when we say markets promote economic efficiency. And when technology, tastes, or resource availability change, as they do constantly, new opportunities arise for Pareto improvements.

The Left is selectively intolerant of success and even Pareto improvements from luck or effort. The attitude is usually couched in terms of undeserved “privilege” or some form of “exploitation”. They exempt their own gains, of course, especially when they find themselves in a position to pick winners (and that enterprise almost always involves picking losers as well). In fact, they are probably inclined to celebrate success that owes to subsidies for politically favored activities, which clearly come at the expense of others and are not Paretian in any sense. Social justice warriors demand a free pass on coveting what belongs to others, and they are often just as contemptible of successful effort as they are of dumb luck. Whatever it is you have, or have achieved, don’t expect them to respect it … or your right to have it.

The word Nutzenschmerz amuses me partly because the original German form of my name begins with the letters “Nütz“. Also, like Munger, I’ve always been charmed by the German linguistic practice of stringing words together, like the more familiar Schadenfreude, which means to take pleasure in the misfortunes of others. Or Freundschaftsbeziehungen (friendship demonstrations). Mark Twain said some German words are so long they have perspective! David Sedalis once commented that he heard lots of long words in Germany, but one of the few that stuck was Lebensabschnittspartner:

“This doesn’t translate to ‘lover’ or ‘life partner’ but, rather, to ‘the person I am with today,’ the implication being that things change, and you are keeping yourself open.”

Then, of course, take Gleichschaltung (the standardization of political, economic, and social institutions in authoritarian states). Er … no, please, not that!

In addition to nutzenschmirz, Munger has coined the term Tradenfreude, meaning “joy … at observing the ‘well-contrived machine’ of commercial society, with everyone trading with everyone else for conveniences and necessities.” By extension, he adds Tradenschmerz, meaning the hatred reserved for free markets by many leftists.

Nutzenschmerz is an emotive force that shapes the Marxist psyche. It could be dismissed as incidental to a shallow grasp of the mutually beneficial nature of voluntary trade. However, it also demonstrates a fundamental disrespect for property rights. It’s a rejection of the very things that motivate human action, and which enable cooperation on a scale unprecedented over nearly all of human history preceding the Scottish Enlightenment.

I propose that we should all practice a philosophy of Nutzenfreude, by which I mean taking pleasure in the Paretian successes of others. It might be vicarious, or it might signal the genesis of new opportunities for the rest of us! The thing is, those successes all represent human progress to one degree or another, from which we all derive incremental benefits. That doesn’t mean we shouldn’t be watchful for harms or externalities, but neither should we regard every success with suspicion, or worse, nutzenschmerz!

Do as Munger says: fight nutzenschmerz! And revel in nutzenfreude!

April 22: Happy Human Achievement Day!

21 Sunday Apr 2019

Posted by Nuetzel in Free markets, Free Trade, Human Welfare, Uncategorized

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Disease, Don Boudreaux, Earth Day, Fossil fuels, Free Markets, Human Ingenuity, Human Progress, Literacy, Marion Tupy, Paul Driessen, Poverty

By way of celebrating human ingenuity, I’ll be driving 600 miles on Monday in a beautiful sedan powered by high-octane fuel. I’ll be clothed in incredibly comfortable fibers and have access to a great variety of listening amusements via satellite. The celebration will continue when I arrive home. I’ll enjoy the comfort of climate-control, electric power, modern plumbing, a refrigerator and pantry full of agricultural bounty, delicious wine, and even more incredible access to entertainment and intellectual pursuits. But it’s not just the goods and technology I’ll celebrate. I’ll also raise a glass to the fabulous, free-market institutions that have made all this possible, effectively allowing us to trade with specialized producers all around the world at low cost, and at prices that signal the true scarcities of resources… ill-considered tariffs aside.

In honor of mankind’s great achievements, I bring you additional testimony from Don Boudreaux, who provides some juicy tidbits to mark our progress. Here is more from Marion Tupy at humanprogess.org. And one more link is from Paul Driessen, who last Thanksgiving wrote of the the many developments since 1800 that have drastically improved human well being, including the ability to exploit fossil fuels that are extremely clean-burning and efficient relative to primitive energy sources.

What riches we enjoy today! Contrary to the claims of doomsayers, busybodies, and self-appointed enforcers of an austere existence, our prospects for continued improvement in human standards of living are excellent. The long arc of technological progress has made the effective abundance of resources greater and more sustainable than ever. As the many charts in Tupy’s article demonstrate, long-term trends in real incomes, poverty, literacy, longevity and the incidence of disease are quite favorable. We owe all that to the spread of human ingenuity, freedom, and voluntary exchange. That’s truly progressive!

Behold Our Riches! Quality, Prices, Income, and the Purchasing Power of Labor

12 Tuesday Sep 2017

Posted by Nuetzel in Human Welfare, Markets

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Affordability, Consumer Surplus, Don Boudreaux, Human Progress, Income Statistics, John D. Rockefeller, Marian Tupy, Martin Feldstein, Measures of Economic Welfare, Middle Class Stagnation, Non-Wage Benefits, Quality Adjustment, Wage Stagnation

coffeemaker

A steady refrain among pundits is that the American middle class can’t get ahead. The standard of living of average Americans has stagnated over the past 30 years, according to this view. It’s bolstered by government measures of average wage growth relative to consumer prices. But Martin Feldstein describes the flaws in constructing these measures; he says they may have led to an understatement of real income growth of more than 2% per year! Here is a link to Feldstein’s piece in the Wall Street Journal: “We’re Richer Than We Realize“. (If the link doesn’t work, an ungated link can be found on the WSJ Facebook page, posted at 10:30 a.m. on Saturday, Sept. 9th.)

Here are some of Feldstein’s observations:

“If there is no increase in the cost of production, the government concludes that there has been no increase in quality. And if the manufacturer reports an increase in the cost of production, the government assumes that the value of the product to consumers has increased in the same proportion.

That’s a very narrow—and incorrect—way to measure quality change. In reality companies improve products in ways that don’t cost more to produce and may even cost less. That’s been true over the years for familiar products like television sets and audio speakers. The government therefore doesn’t really measure the value to consumers of the improved product, only the cost of the increased inputs. The same approach, based on measuring the cost of inputs rather than the value of output, is also used for services.

The official estimates of quality change are therefore mislabeled and misinterpreted. When it comes to quality change, what is called the growth of real output is really the growth of real inputs. The result is a major underestimation of the increase in real output and in the growth of real incomes that occurs through quality improvements.

The other source of underestimation of growth is the failure to capture the benefit of new goods and services. Here’s how the current procedure works: When a new product is developed and sold to the public, its market value enters into nominal gross domestic product. But there is no attempt to take into account the full value to consumers created by the new product per se.“

It goes well beyond that, however, as great swaths of consumer value are completely ignored by government statistics:

“A basic government rule of GDP measurement is to count only goods and services that are sold in the market. Services like Google and Facebook are therefore excluded from GDP even though they are of substantial value to households. The increasing importance of such free services implies a further understatement of real income growth.“

Some of these criticisms are unfair to the extent that income statistics correspond to what consumers can purchase in terms of market value. That is a fundamentally different concept than the total value consumers assign to goods and services (market value plus consumer surplus). Nevertheless, there are efforts to adjust for quality in these statistics, but they fall far short of their objective. Also, GDP and income statistics purport to be measures of economic welfare, though it’s well known that they fall short of that ideal. It might be more fair to say that that official income statistics are reliable in tracking short-term changes in well being, but not so much over long periods of time.

The graphic at the top of this post is taken from Marian L. Tupy’s “Cost of Living and Wage Stagnation in the United States, 1979-2015“, on the CATO Institute‘s web site:

“… many, perhaps most, big-ticket items used by a typical American family on a daily basis have decreased in price. Over at Human Progress, we have been comparing the prices of common household items as advertised in the 1979 Sears catalog and prices of common household items as sold by Walmart in 2015.

We have divided the 1979 nominal prices by 1979 average nominal hourly wages and 2015 nominal prices by 2015 average nominal hourly wages, to calculate the “time cost” of common household items in each year (i.e., the number of hours the average American would have to work to earn enough money to purchase various household items at the nominal prices). Thus, the ‘time cost’ of a 13 Cu. Ft. refrigerator fell by 52 percent in terms of the hours of work required at the average hourly nominal wage, etc.“

Tupy’s post also covers the huge increases in non-wage benefits enjoyed by many workers over the past several decades, which are not captured in average wage statistics.

It’s clear that standard measures of income growth are distorted by the failure to properly account for changes in the quality of goods and services at our disposal. The narrative of middle class stagnation is flawed in that respect. As Don Boudreaux has said, most ordinary Americans are richer today than John D. Rockefeller was a century ago. The availability and quality of goods and many services today, affordable to ordinary Americans, are vastly superior to what Rockefeller had then or could even imagine. And many of those advancements occurred since the 1970s.

Lighten Up For Human Achievement Hour!

25 Saturday Mar 2017

Posted by Nuetzel in Free markets, Human Welfare

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Chelsea Follett, Competitive Enterprise Institute, Earth Hour, Fracking, Free Markets, Human Achievement Hour, Human Ingenuity, HumanProgress.org, Lowering Emissions

idea-light-bulb

Tonight, Saturday March 25th from 8:30 to 9:30, I’ll be doing my part to celebrate humankind’s ascendence over the bare subsistence and misery that was ubiquitous until just the last few centuries. Human Achievement Hour is sponsored by the Competitive Enterprise Institute (CEI) to celebrate the incredible technological miracles  brought forth by human ingenuity and free markets:

“Originally launched as the counter argument to the World Wide Fund for Nature’s Earth Hour, where participants renounce the environmental impacts of modern technology by turning off their lights for an hour, Human Achievement Hour challenges people to look forward rather than back to the dark ages.

Symbolically or not, Earth Hour is a misguided effort that completely ignores how modern technology allows societies to develop new and more sustainable practices, like helping people around the world be more eco-friendly and better conserve our natural resources.

While Earth Hour supporters may suggest rolling brown-outs in India are desirable, we respectfully disagree. Instead of sitting in the dark, Human Achievement Hour promotes new ideas and celebrates the technology and innovation that will help solve the world’s environmental challenges.”

The following are suggestions from CEI as to how you can participate in the celebration. I’ll take them up on the third and sixth items on this list, just as I have for the past several years.

  • Use your phone or computer to connect with friends and family
  • Watch a movie or your favorite television show
  • Drink a beer or cocktail
  • Drive a car or take a ride-sharing service
  • Take a hot shower
  • Or, in true CEI fashion, celebrate reliable electricity that has saved lives, by bringing heat and air conditioning to people around the world, and keep your lights on for an hour

Light up the night! Here are a couple of links with information on the worldwide progress in improving human living conditions:

The Human Progress Blog

Thank Fracking For Reduced Emissions

We are winning the war against starvation, disease and poverty around the globe, though progress can seem frustratingly gradual in real time. Nevertheless, over the sweep of history, we are winning the battle in a dramatic way.

May You Live For a Thousand Years

27 Tuesday Sep 2016

Posted by Nuetzel in Human Welfare, Life Extension, Progressivism

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Alex Tabarrok, Ayn Rand, City Journal, Cyborgization, Glenn Reynolds, Human Ingenuity, Human Progress, Jemima Lewis, Julian Simon, Larry Ellison, Life Extension, Marian Tupy, Mark Zuckerberg, Peter Theil, Priscilla Chan, quality of life, Robert Malthus, The Club of Rome, The Limits to Growth, The Telegraph

didnt-expect-to-live-this-long

What if human life expectancy doubles over the next 50 years? Triples? Mark Zuckerberg and many others with money to spend, such as Peter Theil and Larry Ellison, want to accomplish that and more. For example, Zuckerberg and his wife Priscilla Chan have pledged $3 billion over the next decade to “rid the world of disease”. The implications are fascinating to ponder. In developed countries, most of the life extension would come from reducing mortality in adulthood and late in life, simply because childhood mortality has already reached very low levels. Assuming that the additional years are healthful, the dynamics of population growth and the labor force would change. Family structure could take new directions, especially if extended fertility takes place along with life extension. The coexistence of six, nine, or more generations might make one’s descendants virtual strangers. And it might be possible for an individual to have children who are younger than the great-grandchildren of progeny conceived early in one’s adulthood. For love or money, your great-grandchild might couple with an individual a generation or more ahead of you. Scandalous!

Some pundits foresee dark implications for humanity. Alex Tabarrok comments on some musings in The Telegraph by Jemima Lewis, providing the following Lewis quote:

“We’d better hope they don’t succeed. What would it do to the human race if we were granted eternal health, and therefore life? Without any deaths to offset all the births, we would have to make room on earth for an extra 208,400 people a day, or 76,066,000 a year – and that’s before those babies grow old enough to reproduce themselves.

Within a month of Mr Zuckerberg curing mortality, the first wars over water resources would break out. Within a year, the World Health Organisation would be embarking on an emergency sterilisation programme. Give it a decade and we’d all be dead from starvation, apart from a handful of straggle-bearded tech billionaires, living in well-stocked bunkers under San Francisco.“

Of course, people will still die in accidents and from some illnesses that cannot be anticipated; some people will always engage in self-destructive behavior; and there will always be natural calamities that will take human life, such as earthquakes and hurricanes. Nevertheless, life-extending technologies will increase the human population, all else equal. I say bring it on! But Lewis’ attitude is that increasing life expectancy is a bad thing, contrary to our almost uniformly positive experience with longer lives thus far, including improvements in the quality of life for aging seniors. More fundamentally, her view is that people are a liability, a collection of helpless gobblers, rather than valuable resources with the promise of providing themselves with an increasingly rich existence.

Lewis’ article demonstrates a special brand of ignorance, now common to many on the left, going back at least to the time of Robert Malthus, at about the turn of the 19th century. Malthus’ pessimism about the world’s ability to provide for the needs of an expanding population is well known, and wrong. The Club of Rome‘s report “The Limits To Growth“, published in 1972, pretty much continued in the Malthusian tradition. That report predicted increasing shortages and mass starvation. Of course, the Club erred both empirically and theoretically, as Julian Simon forcefully argued in the 1980s and 1990s. The crux of Simon’s argument was the existence of a renewable resource of vast promise: human ingenuity:

“Because of increases in knowledge, the earth’s ‘carrying capacity’ has been increasing throughout the decades and centuries and millennia to such an extent that the term ‘carrying capacity’ has by now no useful meaning. These trends strongly suggest a progressive improvement and enrichment of the earth’s natural resource base, and of mankind’s lot on earth.“

There are certain conditions that must be in place for the planet to provide for ongoing advances in human well-being. Markets must be operative in order for prices to provide accurate signals about the relative scarcity of different resources. When particular resources become more scarce, their prices provide an incentive to use existing substitutes and innovative alternatives. Competition facilitates and helps perfect this process, as new producers continuously seek to introduce innovations. Needless to say, the more restrictions imposed by government, and the more the state gets involved in picking favorites and protecting incumbents, the less effective this process becomes.

From a global perspective, the human race has done quite well in eliminating poverty during the industrial era. Impressive measures of progress across many dimensions are chronicled at the Human Progress blog, where Marian Tupy writes of “Looking Forward To the Future“. These improvements fly in the face of predictions from the environmental left, and they demonstrate that humanity is likely to find many ways in which extended lifespans can be both enjoyed and contribute to the world’s productive potential.

Extended lifespans will bring changes in the way we think about our working years and retirement. Both parts of our lives are likely to be extended. Job experience utilizing incumbent technologies will become less scarce, and will thus command a lower premium. Continuing education will increase in importance with new waves of technology. There will be changes in the time patterns of saving and investment and the design of retirement benefits offered by employers, but long periods of compounding might reduce the pressure to save aggressively. Bequest motives would almost surely change. Mechanisms like family endowments benefitting members of an extended family via education funding, medical technology and end-of-life care might become common.

There will have to be many changes in our physical makeup to ensure that life extension buys mostly “quality time”. For example, it’s probably not possible for many parts of the human body to function reliably after a century of use. The technologies of skeletal, organ and muscle replacement, or rejuvenation, will have to advance significantly to ensure a reasonable quality of life in an older population. The bodies of older humans will either be cyborgized or freshly regenerated as life extension becomes a reality.

As more radical life extension begins in earnest, it’s likely to begin as the exclusive province  of the rich. However, like everything else, the technologies and benefits will eventually diffuse to the broader population as long as competitive pressures are present in the relevant markets. It will be a matter of choice, and perhaps the most unhappy among us will choose to forego these opportunities. However, such technologies, to the extent that they become a reality, would have the potential to improve the physical well- being of almost anyone.

Dramatically extending the human life span will bring dramatic change and many social challenges, but ending disease is a worthy goal, and one that most certainly will benefit mankind. Tabarrok casts Jenima Lewis as an Ayn Rand villain, though he must realize that she is simply ignorant of the forces that create growth and an improving existence. Unfortunately, she is one of many on the left enamored with a perspective that is “anti-mind, anti-man, anti-life” (to quote Tabarrok quoting Rand).

For additional reading on the left’s anti-human agenda, see this Fred Siegel piece in the City Journal, “Progressives Against Progress” (HT: Glenn Reynolds).

 

Warm, Contented Civilizations

26 Sunday Jun 2016

Posted by Nuetzel in Global Warming, Human Welfare

≈ 1 Comment

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AGW, Andy May, Carbon Concentration, Human Civilization, Ice Core Data, Little Ice Age, Minoan Warm Period, Perihelion, Roman Warm Period, Temperature Proxy, Viking Civilization, Watt's Up With That?

image

Human civilizations have experienced many of their worst trials during periods of cooling and cold temperatures over the past 8,000 – 10,000 years. These were episodes associated with droughts as well. Conversely, civilizations have tended to prosper during warm, wet periods. These associations between human progress and the natural environment are discussed in a pair of articles by Andy May: “Climate and Human Civilization Over the Past 18,000 Years“, and  “Climate and Human Civilization for the Past 4,000 Years“. The articles are part climate science, part history, and part anthropology, with many fascinating details.

May presents large charts that can be downloaded, and they are especially interesting to ponder. He uses historical temperature proxies from Antarctica and Greenland to construct the charts, along with more recent data on measured surface temperatures in Greenland. According to May, the proxies are highly correlated with other proxy data from less extreme latitudes. Several important takeaways are the following:

  1. Warm periods in the historical record are associated with wet conditions, and cold periods are associated with dry conditions. This is intuitive, as warm air holds more moisture than cold air.
  2. There are estimates of temperatures going back more than 800 million years; apparent cyclical regularities in temperatures have lasted as long 150 million years. Cycles within cycles are evident: a 100,000 year cycle is prominent as well as a 25,000 year cycle (see #4 below).
  3. Today’s temperatures are not as high as those prevailing during about 200 years of the so-called Roman Warm Period, or during a span of similar length in the so-called Minoan Warm Period, about 3,300 years ago. Today’s temperatures are much lower than estimates for much of the earth’s pre-human history.
  4. The southern hemisphere has more volatile temperatures than the northern hemisphere due to the tilt of the earth’s axis at perihelion in January, when the earth is closest to the sun. That means the southern hemisphere tends to have warmer summers and colder winters. That will reverse over the next 10,000 years, and then it will reverse again. There is more land mass in the north, however, so it’s not clear that less extreme weather in the north helps explain the hugely lopsided distribution of development and population in that hemisphere.
  5. Recent increases in sea levels have been small relative to the years following the Little Ice Age. Projected increases over the next 50 years are of a magnitude that should be easily manageable for most coastal areas.
  6. Atmospheric carbon concentration seems to lag major increases in temperatures by about 800 years, raising a question of causality. Today’s carbon concentration is low relative to earlier epochs; it has been increasing for thousands of years, clearly independent of human activity, and is now near 400,000 year highs.
  7. Civilizations have blossomed with warm temperatures and they have collapsed or hit extended periods of retarded progress with declines in temperatures. Human agriculture was born as temperatures rose out of the depths of a glacial period about 10,000-12,000 years ago. Rome flourished during a warm cycle and collapsed as it waned. The Vikings settled in Greenland and Newfoundland during the Medieval Warm Period and were eliminated by the Little Ice Age. May cites a number of other examples of temperature cycles bringing on major shifts in the course of human progress. There are many possible explanations for the decline of past civilizations, but extremely low temperatures, droughts, and lengthy periods of weather inhospitable to agriculture have been important.

The fashion today is to insist that only dramatic changes in our use of energy can avert a global warming catastrophe. It is not clear that any effort by humans to manipulate global temperatures can overcome the natural forces that are always driving temperature change. For that matter, it is not clear that carbon dioxide is a bad thing, or that diverting vast quantities of resources to reduce it would be wise. CO2 is certainly not a pollutant in the normal sense of the word. Here is an excerpt from May’s conclusion in his “4,000 years” article, which speaks volumes:

“First, there is no perfect temperature. Man, even in pre-industrial times, adapted to a variety of temperatures and he has always done better in warm times and worse in cold times. Second, why would anyone want to go back to the pre-industrial climate? The Washington Post says the goal of the Paris Climate Conference was get the world to agree to limit global warming to less than two degrees above pre-industrial temperatures. Pre-industrial times? That’s the Little Ice Age, when it snowed in July, a time of endless war, famine and plague. According to the Greenland ice core proxy data, temperatures 180 years ago were nearly the coldest seen since the end of the last glacial period 10,000 years ago! Why measure our success in combating anthropogenic warming, if there is any such thing, from such an unusually cold time?“

Tonight! Let It Shine For Human Achievement Hour

19 Saturday Mar 2016

Posted by Nuetzel in Capitalism, Environment, Human Welfare

≈ Leave a comment

Tags

Earth Hour, Human Achievement Hour, Malthus

image

Tonight, Saturday March 19th, celebrate Human Achievement Hour (HAH). From 8:30 to 9:30 p.m., let all of your lights burn brightly to commemorate the great victory of human ingenuity, liberty and capitalism over darkness, discomfort, poverty, pestilence, disease and early mortality.

Yes, HAH coincides with Earth Hour, when hard-core Malthusians collectively demonstrate their guilt and inner goodness by sitting in darkness in crude emulation of the conditions suffered by their primitive forebears. Needless to say, I haven’t the slightest guilt about thumbing my nose at the bogus spirituality and economic ignorance embodied in Earth Hour. Better to maintain an accurate perspective on the amazing extent of human progress. We should celebrate! And so I say: hooray for HAH!

 

Horizons Lost To Coercive Intervention

27 Wednesday Jan 2016

Posted by Nuetzel in Human Welfare, Price Controls, Regulation

≈ Leave a comment

Tags

Allocation of Resources, Don Boudreaux, Foregone Alternatives, Frederic Bastiat, Luddites, Minimum Wage, Opportunity Costs, Price Ceilings, Price Controls, Price floors, Rent Control, Scientism, Unintended Consequences, What is Not Seen

ceiling prices

Every action has a cost. When you’re on the hook, major decisions are obviously worth pondering. But major societal decisions are often made by agents who are not on the hook, with little if any accountability for long-term consequences. They have every incentive to discount potential downside effects, especially in the distant future. Following Frederic Bastiat, Don Boudreaux writes of three levels of “What Is Not Seen” as a consequence of human decisions, which I summarize here:

  1. Immediate foregone alternatives: Possession, use and enjoyment of X is not seen if you buy Y.
  2. Resources not directed to foregone alternatives: The reduction in X inventory is not seen, compensating production of X is not seen, and extra worker hours, capital use and flow of raw materials needed for X production are not seen.
  3. The future implied by foregone alternatives: Future impacts can take many forms. X might have been a safer or healthier alternative, but those benefits are unseen. X might have been lower quality, so the potential frustration and repairs are unseen. X might have been less expensive, but the future benefits of the money saved are unseen. All of these “unseens” have implications for the future world experienced by the decision-maker and others.

These effects take on much more significance in multiples, but (2) and (3) constitute extended unseen implications for society at large. In multiples, the lost (unseen) X production and X labor-hours, capital and raw materials are more obvious to the losers in the X industry than the winners in the Y industry, but they matter. In the future, no vibrant X industry will not be seen; the resources diverted to meet Y demand won’t be seen at new or even old X factories. X might well vanish, leaving only nontransformable detritus as a token of its existence.

Changes in private preferences or in production technologies create waves in the course of the “seen” reality and the “unseen” world foregone. Those differences are caused by voluntary, private choice, so gains are expected to outweigh losses relative to the “road not traveled”. That’s not a given, however, when decisions are imposed by external authorities with incentives unaligned with those in their thrall. For that reason, awareness of the unseen is of great importance in policy analysis, which is really Boudreaux’s point. Here is an extreme example he offers in addressing the far-reaching implications of government intrusions:

“Suppose that Uncle Sam in the early 20th century had, with a hypothetical Ludd Act, effectively prohibited the electrification of American farms, businesses, and homes. That such a policy would have had a large not-seen element is evident even to fans of Bernie Sanders. But the details of this not-seen element would have been impossible today even to guess at with any reliability. Attempting to quantify it econometrically would be an exercise in utter futility. No one in a 2015 America that had never been electrified could guess with any sense what the Ludd Act had cost Americans (and non-Americans as well). The not-seen would, in such a case, loom so large and be so disconnected to any known reality that it would be completely mysterious.“

Price regulation provides more familiar examples. Rent controls intended to “protect” the public from landlords have enormous “unintended” consequences. Like any price regulation, rent controls stifle exchange, reducing the supply and quality of housing. Renters are given an incentive to remain in their units, and property owners have little incentive to maintain or upgrade their properties. Deterioration is inevitable, and ultimately displacement of renters. The unseen, lost world would have included more housing, better housing, more stable neighborhoods and probably less crime.

A price floor covered by Boudreaux is the minimum wage. The fully predictable but unintended consequences include immediate losses in some combination of jobs, hours, benefits, and working conditions by the least-skilled class of workers. Higher paid workers feel the impact too, as they are asked to perform more (and less complex) tasks or are victimized by more widespread substitution of capital for labor. Consumers also feel some of the pain in higher prices. The net effect is a reduction in mutually beneficial trade that continues and may compound with time:

“As the time span over which obstructions to certain economic exchanges lengthens, the exchanges that would have, but didn’t, take place accumulate. The businesses that would have been created absent a minimum wage – but which, because of the minimum wage, are never created – grow in number and variety. The instances of on-the-job worker training that would have occurred – but, because of the minimum wage, didn’t occur – stack up increasingly over time.“

Regulation and taxation of all forms have such destructive consequences, but policy makers seldom place a heavy weight on the unobserved counterfactual. Boudreaux emphasizes the futility of quantifying the “unseen” effects these policies:

“… those who insist that only that which can be measured and quantified with numerical data is real must deny, as a matter of their crabbed and blinding scientism, that such long-term effects … are not only not-seen but also, because they are not-seen, not real.“

The trade and welfare losses of coercive interventions of all types are not hypothetical. They are as real as the losses caused by destruction of property by vandals. Never again can the owners enjoy the property as they once had. Future pleasures are lost and cannot be observed or measured objectively. Even worse, when government disrupts economic activity, the cumulative losses condemn the public to a backward world that they will find difficult to recognize as such.

 

Climate Summit Success? Let’s Talk In Five Years

02 Wednesday Dec 2015

Posted by Nuetzel in Global Warming, Human Welfare

≈ 1 Comment

Tags

AGW, Benny Peisner, Carbon Emissions, Carbon Verification, Climate Alarmism, Climate and Terrorism, Climate Hysteria, Climate Summit, COP 21, global warming, IPCC, Joel Kotkin, Matt Ridley, Regressive Climate Policy

Moudakis Cartoon

Misplaced priorities are on full display in Paris for the next ten days at the climate conference known as COP-21 (“Conference of the Parties”). Joel Kotkin makes note of the hysteria in evidence among climate activists fostered by political opportunists, economic illiteracy and fraudulent climate research. Of course, climate alarmism offers handsome rewards for politician-cronyists and rent-seeking corporatists. With that seemingly in mind, President Barack Obama is playing the role of opportunist-in-chief, claiming that climate change is the biggest threat to U.S. security while blithely asserting that the climate is responsible for the growing danger from terrorism. Here is Kotkin on such tenuous claims:

“… this reflects the growing tendency among climate change activists to promote their cause with sometimes questionable assertions. Generally level-headed accounts, such as in the Economist and in harder-edge publications like the Daily Telegraph, have demonstrated that many claims of climate change activists have already been disproven or are somewhat exaggerated.“

“Somewhat exaggerated” is an understatement, given the scandals that have erupted in the climate research community, the miserable predictive record of carbon forcing models, and the questionable practices employed by NASA and NOAA researchers in adjusting surface temperature data (see below for links). When it comes to climate activism, the Orwellian aspect of Groupthink is palpable:

“Rather than address possible shortcomings in their models, climate change activists increasingly tend to discredit critics as dishonest and tools of the oil companies. There is even a move to subject skeptics to criminal prosecution for deceiving the public.“

This is thoroughly contrary to the spirit of scientific inquiry, to say nothing of free speech. As if to parody their questionable approach to an issue of science, climate-change devotees have come out in full force to attack the excellent Matt Ridley, a sure sign that they find his message threatening to the power of their mantra. Ridley and Benny Peiser have an op-ed in the Wall Street Journal this week entitled “Your Complete Guide to the Climate Debate” (should be ungated for now). The authors discuss the weakness of the scientific case for anthropomorphic global warming (AGW); the fact that they use findings of the Intergovernmental Panel on Climate Change (IPCC) to make this critique must be particularly galling to the alarmists. Ridley and Peisner cover the correspondingly flimsy case for draconian environmental policies to deal with the perceived threat of AGW. Also, they emphasize the regressive nature of the demands made by the environmental left, who are either ignorant or unfazed by the following truths:

“… there are a billion people with no grid electricity whose lives could be radically improved—and whose ability to cope with the effects of weather and climate change could be greatly enhanced—with the access to the concentrated power of coal, gas or oil that the rich world enjoys. Aid for such projects has already been constrained by Western institutions in the interest of not putting the climate at risk. So climate policy is hurting the poor.“

Finally, Ridley and Peisner explain the economic incentives that are likely to undermine any meaningful international agreement in Paris. Less developed countries have been asked to reduce their carbon emissions, which they can ill afford, and to agree to a verification framework. Those parties might agree if they view the framework as sufficiently easy to game (and it will be), and if they are compensated handsomely by the developed world. The latter will represent an insurmountable political challenge for the U.S. and other developed countries, who are already attempting to promulgate costly new restrictions on carbon emissions.

“Concerned about the loss of industrial competitiveness, the Obama administration is demanding an international transparency-and-review mechanism that can verify whether voluntary pledges are met by all countries. Developing countries, however, oppose any outside body reviewing their energy and industrial activities and carbon-dioxide emissions on the grounds that such efforts would violate their sovereignty.

… China, India and the ‘Like-Minded Developing Countries’ group are countering Western pressure by demanding a legally binding compensation package of $100 billion a year of dedicated climate funds, as promised by President Obama at the U.N. climate conference in Copenhagen in 2009.

However, developing nations are only too aware that the $100 billion per annum funding pledge is never going to materialize, not least because the U.S. Congress would never agree to such an astronomical wealth transfer. This failure to deliver is inevitable, but it will give developing nations the perfect excuse not to comply with their own national pledges.“

These conflicting positions may mean that the strongest point of accord at the Paris conference will be to meet again down the road.

“Expect an agreement that is sufficiently vague and noncommittal for all countries to sign and claim victory. Such an agreement will also have to camouflage deep and unbridgeable divisions while ensuring that all countries are liberated from legally binding targets a la Kyoto.“

This morning, an apparently sleepy and deluded President Obama spoke at the Paris conference before heading back to the U.S. He insisted again that the agreement he expects to come out of Paris will be a “powerful rebuke” to terrorists. Yeah, that’ll show ’em! Even a feeble agreement will be trumpeted as a great victory by the conference parties; Obama and the Left will attempt to wield it as a political cudgel, a brave accomplishment if it succeeds in any way, and a vehicle for blame if it is blocked by the principled opponents of climate alarmism. The media will play along without considering scientific evidence running contrary to the hysterical global warming narrative. Meanwhile, the frailty of the agreement will represent something of a win for humanity.

Here are some links to previous posts on this topic from Sacred Cow Chips:

Climate Negotiators To Discuss Economic Cannibalism

A Cooked Up Climate Consensus

Fitting Data To Models At NOAA

Carbon Farce Meets Negative Forcings

Subsidized Waste: The Renewable Irony

Manipulating Temperatures, People & Policy

Record Hot Baloney

Alluring Apocalypse Keeps Failing To Materialize

The Stench of Green Desperation

Cut CO2, But What About the Environment?

Live Long and Prosper With Fossil Fuels

Divesting of Human Well-Being

 

 

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Ominous The Spirit

Ominous The Spirit is an artist that makes music, paints, and creates photography. He donates 100% of profits to charity.

Passive Income Kickstart

OnlyFinance.net

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To estimate, compare, distinguish, discuss, and trace to its principal sources everything

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A Commonwealth immigrant's perspective on the UK's public arena.

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Small Steps Toward A Much Better World

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The world's most viewed site on global warming and climate change

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Commentary from a Paleoconservative and Nationalist perspective

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Defending Life, Liberty and the Pursuit of Happiness

The View from Alexandria

In advanced civilizations the period loosely called Alexandrian is usually associated with flexible morals, perfunctory religion, populist standards and cosmopolitan tastes, feminism, exotic cults, and the rapid turnover of high and low fads---in short, a falling away (which is all that decadence means) from the strictness of traditional rules, embodied in character and inforced from within. -- Jacques Barzun

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