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October 2015 posts

Using the Market to Confront Gangs in Panama

By Jonathan B. Wight

Here is a remarkable success story in economic development!  A former student, Matt Landau, had wanderlust and ended up working in Costa Rica and Panama.  Eventually he bought and fixed up a gorgeous boutique hotel in Old colonial Panama City, a quaint and charming section of town that caters to foreign tourists seeking ambiance. 

Only problem was the rival gangs that preyed on tourists.

Enter the incentives of the market. Matt and a colleague, thinking outside the box, started the Esperanza Social Venture Club to train gang members to get started in legal businesses. Former gang members now lead walking tours of the neighborhood and run a restaurant that caters to tourists.  Panama2

The money is good and provides an incentive for gang members to thwart acts of crime that would lower their profits!

Congrats to Matt and colleagues for this amazing transformation, as shown here.

The Invisible Hand Man

By Jonathan B. Wight

Cartoonist Dan Perkins, who publishes under the pen name “Tom Tomorrow” has funny and insightful, if woefully one-sided, looks at corporate life.

Since Perkins doesn't know much history of
economic thought, he makes the same mistake that many econ teachers do, assuming that Adam Smith’s invisible hand was at the service—the beck and call—of big corporations.

Hence we see supposedly well-trained economists opining that “greed is good,” and ascribing this to Adam Smith!  Readers of this column know this to be unmitigated, destructive bunk.

Perkins, the cartoonist, is wickedly funny, Invisible hand.2
and has devised a Superman-like invisible hand that comes to the rescue whenever corporate fat-cats need bailing out.

A recent cartoon deals with the fiasco of VW’s jerry-rigged diesel motor computers, designed to lie during environmental inspections. 

To see the whole panel, go here

To see other episodes, go here.

[Thanks to Steve Nash for the link.]

Self-Delusional Positivity

By Jonathan B. Wight

Peter Wehner in the NYTimes quotes Scottish novelist John Buchan.  Buchan (1875-1940) notes that he was:

“brought up in times when one was not ashamed to be happy, and I have never learned the art of discontent….It seems to me that those who loudly proclaim their disenchantment with life have never been really enchanted by it.” 

RainbowThere is wisdom here.

Focusing on the negative will likely lead to a downward spiral of self-fulfilling prophecies, certainly with regard to social interactions. Anyone succumbing to paralyzing fear (“No one likes me. I’m unlikable…”) will inevitably live with the negative consequences of that mindset.

At the same time, being critical of current institutions is a key way we grow through the evolution of norms and self improvement.

The famous Dr. Pangloss of Voltaire’s Candide, who only saw the positive, espoused the Day-Glo rainbow maxim that this was always the “best of all possible worlds.” That mindset has its uses, because self-delusion can come in handy for helping us knock on the next job door or get up the next morning after a setback. 

Such a rainbow person could simply be living in denial (of an abusive spouse or other enabling destructive relationship).

How to reconcile the negative with the positive seems the key to a balanced life. If you have to err, though, add a dollop more of the spiritual and psychological sunshine—even if from a man-made sunlamp. We can celebrate the joy of life amidst the chaos of circumstance.  

Judicial Bias and the Death Penalty

Jonathan B. Wight

Obama justicePresident Obama has an eloquence and slow burning passion that is apparent in this video staged at a prison to talk about institutional injustice.

It provides the clearest statement I’ve heard of how small injustices at the margin—at each level of the justice system—compound to create systematic institutional bias.

This is moving for me to hear, when my state of Virginia executed someone this week for heinous crimes. The anger and vitriol directed against this evil perpetrator is surely justifiable. But the penalty of death is an irreversible punishment, and shown to be meted out disproportionately to some groups compared to others.

Since 1973, there have been 153 cases of death row inmates being exonerated by new information. Even if you believe that the justice system were squeaky clean in terms of doling out similar punishments to all people, the death penalty allows for no errors of fact or theory. And humans are not immune to both blunders.

Absolute punishments seem better fit for Medieval Ages when God’s certainty seemed closer at hand.


Jonathan B. Wight

Mark White calls attention to a Wall Street Journal review of Strangers Drowning: Grappling with Impossible Idealism, Drastic Choices, and the Overpowering Urge to Help (2015) by Larissa MacFarquhar.

What happens when people have an almost pathological urge to help others? The people described in this book undertake “extreme ethical commitments”—such as adopting 20 children, undertaking a dangerous political protest despite having a young son, and refusing to wash dishes because this takes time away from environmental activism.

This last example is  juvenile, and reminds me of the humorous claim made about Gandhi: “You will never know how much it costs us to keep that saint, that wonderful old man, in poverty!”

The implication is clear—the supposed saintly one who extols benevolence toward others often does not fulfill the most basic moral virtue of prudence—taking appropriate regard for one’s own life and responsibilities. One has a duty to oneself as well as to others.

A virtue ethicist would say we need balance. It is fine to be generous and altruistic toward others, but not if that makes you the ward of the state or a burden on others. Some of the people described in this book seem to lack that balance, and that would not be virtuous, regardless of the motive for helping or the focus on others.

Liberals and Growth

By Jonathan B. Wight

Krugman points us to a statement by Jeb Bush that:

“I think the left wants slow growth because that means people are more dependent upon government.” 

As Krugman notes, this is truly amazing… for its complete disregard of what poor people really want—jobs and growth—and what liberals have historically delivered.

The years of rapid growth in the 1990s under Clinton were remarkable for the change in culture in my city of Richmond, which has a large poor underclass. The longest peace-time economic expansion on record resulted in even discouraged workers going back to work. It was clear to me that the poor reveled in economic growth as a chance to make it in the market.

In terms of delivering growth, the quarterly data below come from the St. Louis FRED database.  I started counting in the second quarter of the year a president started his term. 

Since Reagan, Republican presidents presided over an average growth of 2.5%, Democrat presidents presided over average growth of 3.0%.  The supposedly liberal economic policies actually generated faster growth. 

Of course, one should say that presidents don’t control growth, and that fiscal and monetary policies controlled by Congress and the Fed may deserve far more credit for creating conditions favorable for growth. Nevertheless, there is a “first blush” recognition that years of liberal rule in the White House have tended to create growth that is certainly no worse than, and perhaps better than, Republican stewardship.

(And note: if you include the allegedly terrible years of the Carter administration, the Democratic growth rate rises to 3.1%!)

In short, Jeb Bush is blowing smoke.