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To: Maurice Winn who wrote (404)5/22/2011 5:15:22 PM
From: TimF
1 Recommendation   of 438

I think your too focused on tradeable citizenship as answer to problems. Even if its a good idea (and I don't see why it would be), I doubt it would answer all sorts of different things. Governments would be pretty much the way they are now, you would still have special interests and malign and/or ignorant political actors.

Voting would be by way of citizens only doing the voting. They would have an incentive to increase the value of their citizenship rather than the current incentive to grab their piece of the action while the getting is good.

If getting your special interest handout decreases the value of your citizenship, but less than the benefit you gain from the handout, then you'd still want the handout. Also a lot of people would not recognize the decrease in value (or if they see it happen, the reason for it), special interests are surprisingly often honest, or if they are lying they are lying to themselves first. People really come to believe the thing that is good for them, or people like them, or people they like, is generally good.

Having a specific citizenship (or legal residence, would that be traded too?) opens up opportunities, but most things of value don't directly come from citizenship. Someone with a business that can't easily be moved would value his citizenship highly, but he's not really valuing the citizenship, he's valuing the ability to continue to benefit from the good setup he has made for himself.

A citizenship market would tend to be illiquid. Most would not want to sell their citizenship. You could open new slots and sell them. That brings in more revenue for the government (a fact that is positive in some ways and negative in others). It would (assuming they are not spending much of their wealth just to get the citizenship and move in) tend to cause new citizens to have enough money to support themselves, but just because they have money, wouldn't not stop them from rent-seeking and act as a special interest as much as anyone else. And it would do nothing about illegal immigration.

The idea of having swarms of Mexicans invading and literally taking possession of the USA would be seen for what it really is - conquest.

That is at the very least overstating the issue. Also tradable citizenship does nothing about it. Many of those Mexicans moving in are illegals.

Because it is not acknowledged that each winning invader grabs $2 million worth of assets

Many of them are net producers of assets, net economic benefits to the country. If your concern is people coming here for welfare, your could change welfare eligibility. If that's not what your talking about then what assets are being taken. People might get a huge economic benefit from being here, but unless they are stealing, or defrauding, or having the government take money for them, that benefit is not grabbing things from others. Opportunity is a positive sum game.

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To: TimF who wrote (405)5/23/2011 5:21:17 AM
From: Maurice Winn
2 Recommendations   of 438
It's not so much Tradable Citizenship as private property in general rather than public serfdom with the collectivist tribal bosses owning everything which is the issue. It's commonly accepted these days that private property is not necessarily a bad thing and many people think it's a good thing.

In strongly communist/hippie/tribal communities, total public ownership is still considered the ideal. But looking around the world at different communities, to the extent that individuals do the owning, people are better off. Tradable citizenship is just another step in that process which is already well established with individuals in many countries even being allowed to own land, if only in fee simple and still subordinate to "eminent domain".

Yes, there would still be some similarities and people would still pursue individual benefits at public cost, but the process would be more visible because there would be an actual measurement running constantly.

<most things of value don't directly come from citizenship. > That depends on which country. The most primal places don't have much public value, but places which have been civil for a century or two have accumulated a great deal of public value per capita. Not just in material assets such as roads,
buildings, airports, sewerage, water and electricity supplies, telcommunications and the whole panopoly of modernity, but also in more abstract value such as stable legal and political systems, clean air, clean water, low murder and violence rates, cultural norms and trust.

If such a place was opened to another umpty million or billion people, the dilution would be enormous and the value destroyed in not just years, but months.

In countries such as New Zealand, Oz and other valuable countries, most value is publicly owned. Private assets such as houses, commercial buildings, companies and whatnot are less valuable per capita, I guess. A NZ citizenship would be worth about US$1 million and maybe $2 million if publicly traded [as things are right now, and would rapidly increase.] That's substantially more than the private assets of the average Kiwi so I'd say the public value is about double the private value [near enough for government work].

<A citizenship market would tend to be illiquid. Most would not want to sell their citizenship. > They would be highly liquid. Tens of thousands of people move around, permanently to other countries. If people don't wish to sell a citizenship and move, then that's fine too, but with 25% of Kiwis living overseas, that's a LOT of people who might be tempted to nab their share and make their move permanent. Or, they might buy one back if they see the decline stopping in a few years.

< it would do nothing about illegal immigration > Most people don't realize just how much it's costing them to have swarming illegal immigrants. If the value being transferred was recognized, the borders would be locked up tighter than the Great Wall of China.

<Many of them are net producers of assets, net economic benefits to the country. > Yes, and some are fantastically superlative. But being a net producer of assets isn't quite enough unless you include dilution of the public value such as uncongested roads, water supplies, fisheries, unpolluted air and spectrum. How many immigrants would you want living in your house, even if they do net economic benefit such as mowing the lawn in exchange for free rent, free water, free tv watching, free couch sitting....? The measurement of "net economic benefit" looks very narrow to me.

Some of the Mexican flag waving looks similar to a victory parade. When the Europeans took over the Americas, New Zealand, Oz, the locals probably weren't thinking in Tradable Citizenship terms either but could see that their ownership was being badly diluted: <That is at the very least overstating the issue. > In New Zealand, the Europeans are the new Maoris, being superseded by China's thousand million who could do with some more room to spread out. Just as the British did not adopt Maori cultural norms, China's migrants won't adopt New Zealand cultural norms. It's an age old process of one tribe taking over from and subsuming another less effective one. If they can do it without paying for it, they tend to do that. If the locals are happy to simply hand it over, then it's fair enough to accept. We did it in Canada - one of our off-spring owns a Canadian citizenship.

Plenty of the acquisition is by outright fraud, <unless they are stealing, or defrauding, or having the government take money for them, that benefit is not grabbing things from others > with some perpetrators now in gaol but mostly they get away with it. Taito Philip Field is an example of a politician gaoled for such fraud. Grabbing is a reasonable description of the process.


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To: Maurice Winn who wrote (406)5/23/2011 9:37:12 AM
From: TimF
   of 438
<most things of value don't directly come from citizenship. > That depends on which country. The most primal places don't have much public value, but places which have been civil for a century or two have accumulated a great deal of public value per capita. Not just in material assets such as roads,

Its pretty much true for all countries. Note I said they don't directly come from citizenship, not that the citizenship didn't play an important part. Actually its the location that plays an important part in terms of the infrastructure, but of course citizenship or legal residence gives you access to that location (so does illegal immigration, but not in as secure of way).

Beyond infrastructure, good government matters a lot, protection for property rights, a tolerable level of taxation and regulation, a relatively (if rarely absolutely) efficient and honest bureaucracy, etc. That's a bit more directly connected to citizenship, because it deals with the actions of government, but its mostly the government refraining from impairing value for its citizens. Its mostly the government not taking (too much) from you or stopping you from generating wealth in the first place, so its not really wealth from your citizenship or government in that they are not mostly creating it.

If such a place was opened to another umpty million or billion people, the dilution would be enormous and the value destroyed in not just years, but months.

If the US allowed totally unrestricted immigration, it would likely be problematic. It would not OTOH destroy the value of the US in months. An extra couple of million people a year for twenty years (to pick one possible result pretty much out of thin air, its hard to say exactly what the population change would be), might not be a negative sum game at all, and if it is, it would not be as much the mere presence in the country, as it would be the possible political ramifications of the new people's votes (if they vote in worse government, which they might but there is no real way of knowing, then it would be a negative sum game).

BTW - I'm not calling for unrestricted immigration, just pointing out that even that wouldn't result in the quick and massive devastation you seem to think it would cause. That's even further from the case if new immigrants are not eligible for public support for many years (which isn't true now in many cases, but that's a welfare state issue, not an immigration issue)

They would be highly liquid. Tens of thousands of people move around, permanently to other countries.

Many of them do keep their citizenship, I suspect that would still be true if they could sell it, and it would be true to a greater extent if they had to buy the new citizenship. Also in the context of 7 billion people tens of thousands per year is highly illiquid. Or to look at it another way, the housing market, even in good times, is relatively illiquid, a liquid market is more like the market for a major stock, or a widely traded commodity. Oil is liquid (in more ways than one) GE stock is liquid.

Yes, and some are fantastically superlative. But being a net producer of assets isn't quite enough unless you include dilution of the public value such as uncongested roads, water supplies, fisheries, unpolluted air and spectrum.

The US could have a huge amount of immigration, and still be far less dense than say France. I don't think France is suffering from too many people, and in fact if productive net producers moved to France they would make things better (esp. if they voted for less socialist governments).

How many immigrants would you want living in your house, even if they do net economic benefit such as mowing the lawn in exchange for free rent, free water, free tv watching, free couch sitting....?

They would not be in my house, they would be in a country that isn't that much smaller than 10 million square km.

Some of the Mexican flag waving looks similar to a victory parade.

Immigration doesn't just mean Mexican immigration, many Mexican's who do become citizens are proud of their citizenship, those wanting to bring territory back to Mexico, or impose a system more like Mexico's here are a small fringe. Also set up your tradable citizenship idea and they will come anyway. Its not self enforcing.

Plenty of the acquisition is by outright fraud

And most of it is not.

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From: TimF6/3/2011 8:18:12 PM
   of 438
Via von Hayek

March 31, 2011 by B.K. Marcus

News from our friends in Italy: "First street ever on earth dedicated to von Hayek in Milan this morning … Marco Bassani was the guest of honor."



Alan April 1, 2011 at 3:49 am

I hope it’s a privately owned toll road.

Tyler April 2, 2011 at 7:12 am

Not the road to serfdom!

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From: TimF6/4/2011 12:44:08 PM
1 Recommendation   of 438
Thoughts on Freedom | Donald J. Boudreaux
Naive Keynesianism: A Failure of Imagination
May 2011 • Volume: 61 • Issue: 4

Each of us has a set of peeves—things that disproportionately irritate us.

By their nature, most peeves are small. For example, I bristle at the failure to use hyphens correctly. As my late, great teacher Fritz Machlup pointed out, a foreign exchange student is typically not a foreign-exchange student. The first is a student studying temporarily in a foreign country, while the second is a student of international currency transactions. (I can’t resist recalling a classified ad whose author offered for sale a “black-man’s bowling ball.” I’m quite sure that this hyphen was misused.)

Some peeves, however, are large. These are ones that spark over-the-top irritation. One of my largest peeves is the frequently heard assertion that because personal consumption expenditures are currently (say) 70 percent of GDP, our standard of living will fall if personal consumption expenditures fall below that level.

This notion is Keynesianism at its most naive—Keynesianism that, though rejected or slathered with conditions by most or all Keynesians in the academy, motivates the (mis)understanding of too many reporters, pundits, and politicians who speak on economic issues.

I avoid here any discussion of the many conceptual problems involved in measuring economic output and in classifying expenditures. (Okay; I’ll mention just one such problem: A large chunk of “personal consumption expenditures” in the United States is on medical care, which is financed massively by government. As Michael Mandel points out, “[I]t’s misleading to say that ‘consumer spending is 70 percent of GDP’, when what we really mean is that ‘consumer spending plus government health care spending is 70 percent of GDP.’”)

The fundamental error woven throughout such naive Keynesian arguments about the importance of a particular level of consumer spending to the economy is that there is no “correct” or “optimal” level of consumer spending apart from whatever is the level that results from individuals freely choosing to spend and to save.
The Precious Aggregate

Suppose Americans for the past several years spent 70 percent of their incomes on consumer electronics, Las Vegas vacations, and massage therapy, while saving the remaining 30 percent for retirement. There is in this pattern of spending and saving nothing inherently natural or precious. It’s simply the measured aggregate result of how hundreds of millions of Americans chose to allocate their resources over the past several years.

What happens if this year Americans’ preference for saving changes so that they now spend only 60 percent of their incomes on consumer electronics, Vegas vacations, and massage therapy, while saving 40 percent for retirement?

One effect is that producers and importers of consumer electronics will earn less money than before, as will masseuses and owners of Vegas hotels and casinos. Another effect is that some workers in these industries will lose their jobs.

Naive Keynesians focus like lasers on this effect. They worry that workers—some of whom are laid off and all of whom now (the naive Keynesians tell us) are more anxious about their economic futures—will reduce their spending even further. And because workers reduce their spending, investors (it is alleged) will reduce their investing.

It’s a spiral downward. The economic rot spreads.

And because before consumers changed their behavior, personal consumption expenditures were 70 percent of GDP, naive Keynesians—after intoning that “consumption is 70 percent” of the economy—will demand government action to restore that level of consumption.

But the fact is that, in this example, personal consumption expenditures are not any longer 70 percent of GDP. They are lower. And there’s nothing wrong or undesirable about this fact.

When income earners change the amounts they spend relative to the amounts they save, they of course change the pattern of economic activity. One trouble with naive Keynesians is that they assume the earlier pattern of economic activity—the one that prevailed before the “disruptions” when the level of employment was high—is somehow special. They take that earlier pattern as defining some sort of standard that ought not be disrupted—and if disrupted, ought to be restored.

With people now spending only 60 percent of their incomes on consumption goods and services, while saving 40 percent, naive Keynesians assume that—in the absence of government intervention—the economy will shrink, jobs will disappear, and people will become poorer. The reason is that some chunk of necessary consumer expenditure is now going into savings.

“How can the economy recover,” ask naive Keynesians, “if the 70 percent of it that is personal consumption expenditures is not all used for that purpose?”

Naive Keynesians commit too many errors even to list in the space allotted to me in this column. Perhaps foremost among these errors is their mistaken presumption that the practical imagination and initiative of entrepreneurs is as narrow and as anemic as their own in fact is.

If it were true that entrepreneurs were so dull that none of them could ever figure out how to employ a greater supply of saved resources in ways that improve the operational efficiency of a factory, increase the quality of a consumer good, and enhance worker training so that more will be produced in the future when those higher retirement savings are drawn down, then perhaps increased savings would always spell economic trouble.
Precluding Economic Change

But that would be a world in which any economic change spelled trouble. It would be a world in which, even if people merely changed the kinds of consumer goods they purchased (rather than changed the total amount they purchase), entrepreneurs would be unable to figure out how to adjust to such changes in consumer preferences.

Any change would spell damnation, releasing spooky animal spirits that scare everyone into withdrawing as much as possible from the economy.

Open-eyed observation of the commercial world in which we live should be sufficient to dispel these naive-Keynesian presumptions and fears. Entrepreneurs are forever on the lookout for ways to improve efficiency, to make their products more attractive to consumers, and to introduce totally new products.

Change is a natural and ever-present part of the competitive market process. So just because naive Keynesians can’t imagine how increased savings might be productively employed to make the economy stronger—just because they can’t imagine what capital goods the economy would produce if consumers changed their preferences and started saving more—does not mean that pattern of spending and saving which existed in the recent past is better than any one that will emerge in the future.

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From: TimF6/26/2011 10:28:01 AM
   of 438
Inflation's worst consequence
By Donald J. Boudreaux
Wednesday, February 23, 2011

Inflation & interest rates
By Donald J. Boudreaux
Wednesday, March 9, 2011

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From: TimF8/5/2011 12:56:25 PM
   of 438
Keynes vs Hayek debate

Behind the Scenes at the Hayek v. Keynes Debate
by George Selgin August 3rd, 2011 2:08 pm
BBC Radio 4 is about to air the debate between myself and Jamie Whyte (defending Hayek) and Lord Skidelsky and Duncan Weldon (defending Keynes),so I thought I might supply a little background on it for the sake of anyone who may be interested in how these things shape up...

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From: TimF10/26/2011 10:55:13 AM
2 Recommendations   of 438
The case for recalculation
Written by Sam Bowman Friday, 21 October 2011 17:16

Skeptics of the Austrian narrative of the Great Recession – that inflation caused malinvestment bubbles, particularly in the housing sector, which eventually burst – often point to the lack of empirical evidence for this thesis. David Andolfatto seems to offer some of this vital empirical evidence (hat tip to Arnold Kling):

The collapse of the construction sector accounts for 46.4% of the decline in U.S. GDP and 51.9% of the decline in total employment (roughly 3.4 million jobs).

That's important, because – if it's true – it really would suggest, empirically, that the Austrian story about the crisis is the right one. You probably know the narrative by now – easy money distorted relative prices, making construction appear to be more in demand than it really was, causing a lot of people to invest too much money and time building things that nobody ended up wanting. Once prices started to stabilize and reflect real demand, a lot of the people who'd made bad investments need to cut their losses and get rid of them. The same goes for people who've trained in skills that aren't really needed – they've got to retrain now that reality has bitten.

Andolfatto's analysis is interesting, because it attempts to model the shockwaves that a change in a large single sector can have on the rest of the economy. If you've set up a business selling coffee to workers at a now-defunct construction site, you're out of business. If some of your customers were construction workers, whatever your business, you'll be making less money now, and so will the people who you bought money from. And so on. The interconnectedness of the economy is sometimes difficult to grasp, but it's really important to understanding why one sector going *pop* can affect so many other sectors so badly.

The policy implications of this perspective are quite signficant. Forget trying to "stimulate" your way out of a recession through spending or printing money – all you'll be doing is creating another type of false, unsustainable demand. You'll do the most damage if the stimulus is aimed at the unemployed, the people who need to retrain to cope with the real economy the most: reskilling takes time, and will be put off if there's some public works project nearby that will hire you instead. Even taking up unemployed people's time has an opportunity cost; justification for "stimulus" programmes ignore this.

Stimulus and government spending aren't just bad because they cost money; they're bad because the people they employ could be doing something else with their time that people actually want. That's the crucial thing that many economists ignore – time. A recession takes time for people to resolve their difficulties. Impatient governments can't do anything to speed that along, except get out of the way.

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From: TimF12/5/2011 1:11:47 PM
   of 438
Soros on Hayek
Arnold Kling
APRIL 29, 2011

Yesterday, I attended an invitation-only event at the Cato Institute, featuring a new edition of the Hayek's The Constitution of Liberty. [UPDATE: now available on youtube]. The panel consisted of Bruce Caldwell, Richard Epstein, and George Soros. In terms of volubility, Caldwell was overshadowed, but he was my favorite among the panelists.

[UPDATE: For more Caldwell on Hayek, see this essay on ten insights that apply today.]

Epstein spoke so rapidly that I cannot be sure that I got what he was saying, but he seemed to suggest that Hayek would have been better off incorporating the concept of a social welfare function. I actually think that is one of the more tenuous concepts in all of economics, and it is hard for me to see how Hayek could have wanted or needed it in his work.

Soros equated Hayek with the Chicago school of economics. In particular, Soros blamed Hayek for promoting rational expectations and the efficient markets hypothesis. I doubt that anyone else on the panel or in the room shared this view of Hayek. However history views Hayek, I do not expect him to get credit for anticipating Fama or Lucas. In fact, as Frydman and Goldberg point out in Imperfect Knowledge Economics, rational expectations runs counter to Hayek's theory of local knowledge, which is one of his most important contributions. I do not see how Hayek could approve of any form of representative-agent modeling.

Soros expressed regret over political polarization. My sense is that this is what the Left complains about when it is not doing well. It would be interesting to correlate stories on polarization with polling data on support for Democrats. My guess is that when the latter is high, the press is less likely to describe the public as polarized.

Soros framed the choice as one of believing that markets always work or believing that markets sometimes fail and therefore we need government. Afterwards, a few people said to me that they wanted to intercede with the line "Markets fail. That's why we need markets."

Suppose we were to hold Soros up to the standard: how well do your arguments impress those who disagree with you?

My sense is that he did poorly by that standard yesterday. However, who among us does well by that standard?

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From: TimF1/5/2012 9:54:26 PM
   of 438
A Consequence of Mr. Keynes
by Don Boudreaux on January 3, 2011
in Complexity and Emergence, Economics, Man of System, Seen and Unseen, State of Macro, Stimulus

Here’s a letter to the Washington Post:

Robert Samuelson criticizes departing White House economist Larry Summers for ignoring the “contradiction between the administration’s ambitious social and regulatory agenda and the business confidence necessary for hiring and investing” (“ Judging Obama’s economics,” Jan. 3).

Mr. Samuelson is correct that this contradiction exists, and that Mr. Summers ignores it. But the problem isn’t with Mr. Summers per se as with the Keynesian mindset that economists of his ilk bring to their role as policy advisors. As my GMU colleagues James Buchanan and Richard Wagner warned years ago, an ill-consequence of Keynesianism is that “allocative efficiency” (the achievement of which is severely hampered by Pres. Obama’s social and regulatory agenda) is “relegated to a second level of importance by comparison with the ‘pure efficiency’ that was promised by an increase in the sheer volume of employment itself.”*

It’s not much of an exaggeration to say that the Keynesian obsession with big aggregates – aggregate demand and its effect on the aggregate level of employment – crowds out concern with understanding the less sexy, but in the end far more important, ‘microeconomic’ details of how the economy works.

Donald J. Boudreaux
Professor of Economics

* James M. Buchanan and Richard E. Wagner, Democracy in Deficit (New York: Academic Press, 1977), p. 26.

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