Jeb Hensarling rightly criticizes the FDIC’s unauthorized attempt to suppress fintech companies. A slice:
Regardless of the motivation, the FDIC’s assault on fintechs is part of an alarming trend from the Biden administration. Whether it be the Federal Communication Commission’s imposing net neutrality on broadband providers, the Consumer Financial Protection Bureau’s imposing price caps on bank fees, or the Federal Trade Commission’s banning almost every noncompete agreement in America, government agencies are granting themselves sweeping discretionary powers in constitutionally dubious ways. In so doing, they threaten the rule of law, suppress economic growth and limit consumer choice. That should worry all Americans.
One of my favorite cartoons chronicles a man who lives in an apartment with an aggressive cat and a nice dog. The animals can talk, and argue, but their ability to reason is about what you’d expect: crude inference based on limited observation.
The man is constantly irritated by what the cat and dog call “The Magic Food Cupboard.” In the pet’s minds, the shelf where their kibble is stored is literally “where food comes from.” They attribute the process to magic, of course, because that makes as much sense to them as some elaborate supply chain of purchases and delivery. As Arthur C. Clarke famously put it, “Any sufficiently advanced technology is indistinguishable from magic.”
I have some New York friends whose views of “where food comes from” are not different from “the magic food cupboard” in the comic. Food comes from the grocery store: every time you go there, the shelves are loaded, and the produce racks are bursting with fresh, appetizing fruits and vegetables. Of course, my friends will concede that those things are all put there, and it’s not literally magic.
But it might as well be, since my friends also believe that all of this could be done better, faster, and cheaper, by a different kind of magic. For them, that magic is called “socialism.” Food “should be free,” just as it is for the cat and the dog in the cartoon. If only we abolished capitalism, food would be more plentiful and less expensive.
That’s their theory. Like I said: magic.
Very few people understand the actual technology of commercial systems, the elaborate emergent supply chains that ensure that the grocery stores are full of things that I want when I’m in New York. The system works even though none of the stores have any idea that I’m even visiting, and they don’t know how long I’ll stay. Market systems cause stores to try to anticipate what shoppers will want, and price systems dictate how those products will be obtained and how they can be most cheaply delivered. F.A. Hayek, in his famous 1945 paper on “The Use of Knowledge in Society,” noted the problem that no one understands how markets accomplish this remarkable feat.
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Socialism would only work if each of us specifically intended the good of others, and had the information about what would serve others best. That really would be magic. Commercial capitalism economizes on the need to intend good, and the need to know what is good, relying only on the technology of self-interest, modulated by a system of enforceable property rights and voluntary exchange. Thus, even if people were motivated primarily by self-interest, the system would chug along pretty well.
But commercial capitalism also cultivates what Dierdre McCloskey has called “the bourgeois virtues,” actual habits of right action that really do amount to caring for one another, and for practicing industry and excellence in our daily work lives. Virgil Storr has illustrated the fact commerce creates “moral spaces,” where people serve each other in complex, and often innovative ways, simply because that is the right thing to do.
My GMU Econ colleague Vincent Geloso draws out lessons from the Chinese Exclusion Acts. A slice:
In a recent article with Linan Peng in The European Journal of Law and Economics, I point out how Democrats discovered they could conquer California and peel it off from the Republican hold. They rapidly became competitive in California and nearly won the state on multiple occasions. In fact, had the state flipped in 1876 (when Democrats lost by less than 2,800 votes) they would have gained the White House. More precisely, Peng and I find that counties in California where there were the largest Chinese population relative to the White population (a ratio that proxies racial animus) is where the Democrats became most competitive.
Peng and I point out what is often overlooked: Republicans, initially reluctant to alienate their Reconstruction-era allies among racial minorities, eventually capitulated and adopted similar stances on Chinese immigration. They had to, in order to win. By the 1880 election, both parties had developed platforms that were virtually indistinguishable in their support for Chinese exclusion. This bipartisan consensus was not a middle ground, but rather a race to the bottom driven by the worst impulses of politicians and voters.
David Henderson asks: “Are businesses hard-hearted?”
Robby Soave reports that the U.S. government continues to meddle in social-media content.
When did Britain begin to industrialize? Perhaps earlier than is commonly believed. (HT Arnold Kling) A slice:
According to [Leigh] Shaw-Taylor’s estimates, the share of the British labour force in an occupation involving manufacturing rather than agriculture was three times that of France by 1700.
“We can’t say for certain why this change occurred in Britain rather than elsewhere,” he said. “However, the English economy of the time was more liberal, with fewer tariffs and restrictions, unlike on the continent.”
Moving goods within many European countries was subject to tolls from land barons, so markets were often very local. In England there are few records of such levies after the medieval era.
Shaw-Taylor argues that trade guilds also had more power in other nations. For example, textile production was prohibited in the countryside around the Dutch city of Leiden, and in Sweden no shops were permitted in rural areas until the 19th century.
Yet in the England of 1700, half of all manufacturing employment was in the countryside. “In addition to village artisans, there were networks of weavers in rural areas who would work for merchants that supplied wool and sold the finished articles,” said Shaw-Taylor.
Katherine Mangu-Ward is a fan of Kazuo Ishiguro’s 2021 novel, Klara and the Sun.
