The Progress That Wasn't

Discovering the source of human progress

By Isaac M. Morehouse

I heard a story last weekend about a business man who made small metal parts for bagpipes. He stumbled upon an ad in the paper from an airplane manufacturer seeking bids to make small metal parts for planes. After examining in detail, he realized the tools and skills he possessed could easily be transferred from making bagpipe parts to airplane parts, and he could produce them cheaper and better than anyone else. Today, he has a flourishing business producing airplane parts and he still makes bagpipe pieces as a hobby.

No one knew this man was capable of airplane component production. If a group of expert economists and planners were to sit around a table and take inventory of all of the economic resources and skills in the country, this individual would’ve been counted only as a maker of bagpipe parts. What’s more amazing is that he would not have argued against such a classification; even he did not know he could become part of the airplane production process.

The tremendous prosperity that we enjoy as part of the industrialized world is reliant upon such happy accidents. Many great discoveries and advances occur when no one – not even the discoverer – was looking for them. Such advances can only benefit society in an environment of freedom.

Iraq, Afghanistan, and America’s Rubicon

Two events that may cement America’s status as an empire

By: Matt Fay

For those that don’t know, the Rubicon is a small river (approximately 29K long) in northern Italy that, during the days of ancient Rome, served as a boundary between Italy and Gaul (modern France).  The Rubicon is famous more for its symbolism than its physical location.  In ancient Rome, no army was allowed in Italy for fear of military rule displacing that of the Roman Senate.  When Julius Caesar brought his legions across the Rubicon and assumed dictatorial powers – he claimed were for the good of the Republic – the Rome that had been ruled by laws ceased to exist.  And though Rome would not officially become an empire until years later, when Caesar’s nephew Octavian would rename himself Caesar Augustus and seize imperial power, the crossing of the Rubicon is looked at as the moment the Roman Republic died and the Roman Empire was conceived.

(If anyone wants to see an interesting take on these events I would suggest checking out the HBO series Rome.  The show does take some historical license, but is reasonably accurate.  If not for anything else, the show is worth watching for the characters Titus Pullo and Lucius Vorenus – members of Julius Caesar’s 13^th Legion around which many of the events of the show revolve – who may just be two of the baddest dudes in history).

There are two events that may be coming in the near future that represent the American Republic’s crossing of the Rubicon into empire.  Neither is set in stone, but both would represent a symbolic turn that no patriotic American should wish to see.

Who’s On the Hook for the Mortgage Meltdown?

By Isaac M. Morehouse

Listening NPR yesterday there was a clear pattern to the subjects of all the stories: Fannie Mae and Freddie Mack on the brink of insolvency. The dollar’s weak position. The Dow slips below 11,000. The price of popcorn increased 50% in the last year. FDIC takes over IndyMac bank after a run.

I’m the first to acknowledge that major media outlets tend to dramatize events and make everything seem like doomsday (remember “summer of the sharks”?). However, the fact that our economy is slower – especially the stock market and housing market – and oil and other prices are rising faster than has been typical is undeniable. So what were the talking heads and ‘experts’ saying about this?

Not much.

Most described the situation, the direness of it, than say that even though it’s not a really good thing, the Federal reserve and various government agencies must do things. Bailouts, currency manipulation, subsidies, regulations, etc.

What was painfully absent was any analysis whatsoever of what got us here. Do markets simply go through such cycles? Certainly seasonal cycles occur, as well as cycles based on new technological innovations or entrepreneurial efforts. But these tend to be less pervasive; more confined to one sector or another, and relatively smooth over the long run. What would cause so many mortgage brokers and securities traders to get into a situation where they own so many bad loans? Why would lenders make the loans in the first place? Why were housing prices so high that people were leveraging their equity for every manner of expenditure? And seemingly unrelated, what about the price of oil and agricultural products?

Like most economic phenomena, it’s a question of incentives.

The federal government wanted to have as many people as possible owning homes (perhaps it was an administration strategy, since homeowners tend to vote more Republican than do renters?), yet at the same time ensure that every American’s primary investment, their home, was increasing in value. How can you manipulate the economy to ensure that the price of housing stays low so more people can afford them, AND that the price of homes stays high, so people’s investment keeps growing? You can’t. All you can do is create the appearance of such a situation. Fannie Mae and Freddie Mac are given a mission to ensure more and more people can get into homes. All kinds of other Federal guarantees and incentives exist to encourage lenders to give loans to those unlikely to have the ability to repay – the greatest incentive being the Federal guarantee (via FDIC, the Fed, etc.) that the banks risks are ultimately backed by the government (read: taxpayers).

So while lenders were being incentivised to keep lending, thereby making home ownership look cheaper all the time, the Fed was doing its part to ensure home prices kept rising, making home owners feel secure in their investment. Fed inflation is also a major driver in rapidly rising oil and commodity prices, which are starting to seep into all kinds of other goods and services.

The most disturbing thing about the stories I heard on NPR was the confusion about who/what got us here. No one, not even the ‘experts’, seemed to know why this happened. They seemed to think it was just “one of those things”. The danger in not identifying the culprits is that it creates no incentive on elected officials, who have power over Fannie Mae, Freddie Mac, the FDIC and the Fed, to do anything differently now or in the future. In fact, they have every incentive to make things worse.

In crisis, people either blame government or run to government for rescue. It depends on who they see as responsible. Since few seem to be making the connections from past government actions to our current economic situation, it is likely that government will be sought as a refuge. The very people, ideas and policies that created the mess will be empowered and emboldened to do more of the same. Imagine being robbed and later asking the robber to help you make some of your money back and protect you from being robbed again in the future. This is what happened during the Great Depression. People wrongly blamed “the market”, and saw government not as an agitator, but a savior. This enabled FDR and his minions to seize historic amounts of power and drag the Depression on far longer than it would have lasted sans state.

History is important, if for no other reason than to can look to the past and discover who’s responsible for the present. As Henry Hazlitt said in the opening chapter of his must-read book, Economics in One Lesson,

“Today is already the tomorrow which the bad economists yesterday urged us to ignore”.

Yes, unstable economic times can be scary. But scarier still are the prospects of a people who respond to such times by giving up more power to government.

If the US Government Were Run By Apple...

By Justin Hartfield

• Federal income tax returns would be exclusively online and consist of three or four extra large text input buttons.

• The United States Postal Service would be ridiculously overpriced but insanely fast.

• There would be a team of perky, pastel-shirted DMV employees waiting to renew your license as soon as you walked in the door.

• The WhiteHouse.gov website would include at least three web 2.0 gradients, a Last.fm widget, and a link to the President's personal muxtape.

• There would be a three hour wait to get the latest $5 bill. It would also feature a web 2.0 gradient.

• The State of the Union would be a Keynote presentation, with the most important policy being revealed at the end, after the President says, "Oh, and one more thing..."

• Incarcerated criminals would be rehabilitated by learning new skills in prison -- however, all their training would take place on an eMachines running a torrented version of Vista beta.

• The eggs at the annual White House Easter Egg Roll would be replaced with iPod minis, making the challenge much more difficult and lucrative in the process.

• For welfare, student loans and other government aid inquiries, you'd visit a 'money genius' to help you with your problems. (Much like Apple's Mac Geniuses, they would take an hour to acknowledge your presence in that smug, Nick Burns condescending sort of way.)

• Instead of a Social Security number, all newborns would receive a free MobileMe account.

• The cabinet would add the Department for Ergonomic Design, including a new position called the Secretary of Feng Shui. The office would debate the merits of using Arial versus Helvetica on street signs. Additionally, the Lincoln Bedroom would be upgraded with a mini rock waterfall and tiny Bonsai trees.

• Steve Jobs' face would inexplicably appear next to Roosevelt's on Mt. Rushmore.

• A Macbook would be standard equipment for every incoming high school freshman.

• Searching for patents, business names and the like would all be controlled via a single Spotlight search box.

• Steve Ballmer would be found murdered in a Trotsky-esque fashion, with a Windows Vista CD found embedded in his skull.

• Every bank account in the US would still be insured up to $100,000. Yet, if you buy the Apple Care Protection Plan, you can extend that limit up to $300,000 for five years.

• 10% student discount on all government services.

• "In God We Trust" would be changed to "Getting Things Done".

• Opponents of Apple policy changes would be publicly ridiculed in "Mac Vs PC" style commercials.

• The President's Cabinet would consist of Tim Ferriss, Merlin Mann, Darren Rowse and the Omni dev team. Steve Wozniak would be conspicuously absent.

• The Statue of Liberty would greet new immigrants with the prospect of freedom, opportunity and free wi-fi.

Oil: We Can’t Drink it…. Can We?

Oil, foreign policy, and America’s energy independence

By: Matt Fay

It has become the most important issue of the summer – in particular, as regards to the upcoming presidential election. It is the “price at the pump” which the mainstream media has decided to focus its demagoguery. It is a burden that many are now being overwhelmed by. But is it necessarily a bad thing that the prices continue to rise?

For many individuals high gas prices are, undoubtedly, a bad thing. For the nation as a whole, rising prices may force the hard choices that could be the key to America's energy independence.

Heaven and Hell All At Once

It’s that time of year…

By Isaac M. Morehouse

Between every other odd-numbered November

You tell us that we’re slaves so you might as well be master

After all you gave your last slaves plenty of bread

Half put out our hands and half just shake our heads

You call it greed when I give five to a man I see is poor

You tell me I don’t care you say it should be more

So you shake me down and take my cash

And give the guy just four

Understanding the Politics of Generation Y

By Rand Getlin

In this election season, the potential impact of first-time voters is a oft-discussed topic, and understandably so.  Barack Obama's primary victory was largely driven by first-time voters, predominantly those under 30.  At current count, there are 79 million eligible unregistered voters in the United States, 20 million of whom are young adults.  If engaged, these voters have the potential to radically alter the expected results of the coming presidential election.

Disengaged citizens are quite an enigma to those in politics, and previously, most pundits and pollsters have simply ignored them.  But now, with Mr. Obama's successful candidacy, they've taken on more relevance.  Young, first-time voters are rapidly considered the dark horse factor in the coming election.

Independence Day

Not just another Will Smith, July 4^th weekend blockbuster

By: Matt Fay

“Remember the reason for the season!”

It is a common admonition around the holiday season – not this coming holiday, of course, but the Christmas season.  It is a saying often seen on church bulletin boards and in Christian literature.  It is a saying meant to remind those who are so busy shopping and preparing for large family gatherings that Christmas is not about rampant consumerism but about the birth of Christ.  While there is nothing wrong with buying gifts for family and friends, or getting together with the same to enjoy each other’s company, the reality is that the reason for that holiday was to provide a day for Christians to celebrate the birth of their savior.  All the rest is simply peripheral fun. 

Remembering why Christmas – and its importance – is celebrated is a decision that should be made by subscribers to that faith.  Remembering why we celebrate Independence Day – and its importance – is a responsibility Americans should embrace.