China in Guinea

Guinea is in the news due to a coup, which the US, EU, and AU have condemned. Africa certainly doesn't need any more coups, but it also doesn't need any more direct interference from Chinese mineral concerns. As Africans rightly ask, what's the problem with free trade? The problem is that where free trade with liberal democracies is about benefiting individuals and their voluntary organizations (companies) in those countries, trade with China is about benefiting China - and once the trade link is established, China's doctrine of supposedly not interfering with other countries' internal workings is right out the window. In 2006 China offered to build a soccer stadium for Guinea and in 2008 a hydroelectric dam in exchange for bauxite (aluminum ore) rights.

So far so good. Now look at Zambia. Zambia is an excellent example of the effect of Chinese mineral attention. It's a country whose mineral wealth in the form of copper is being rapidly removed from the country through the backbreaking and poorly compensated labor of Zambians, and to the profit of China. Zambians know this all too well, and in 2006 they came close to electing a candidate (Michael Sata) mostly because his position could be reduced to disliking the Chinese. China stated that should he be elected, they would have broken off all diplomatic ties to Zambia. It's hard to see how that's "non-interference"; I think we English speakers must be mistranslating a word that more accurately means "we should be able to do whatever we want with Tibet and Taiwan".

Unfortunately it seems Zambians recently have only had the choice of either a government that sells them out to Chinese state-run mineral interests, or (in Michael Sata) a student of Bobby Mugabe. Maybe this is why Sata is suddenly more receptive to Chinese investment, as Mugabe has always been.

Should we be surprised by China's neo-colonialism in Africa? Hardly. "In 2001, the Politburo set down its global zou chuqu ("go out") directive, instructing state-owned enterprises to seek long-term access to natural resources." Does this sound familiar? The Chinese government reached the same conclusion that the PNAC did, and they've been acting on it - and more effectively than the US to boot.

There is a way to focus foreign policy and incentivize investment and free trade in commodity-rich (resource-cursed) countries while encouraging the development of infrastructure and liberal democracy in a place where people have struggled with it. It's harder to do it this way, the right way, than to just be overt imperialists, and China is much better at moving in and exploiting moments of vulnerability. What do I mean? We thought "the oil would pay for the war" - and yet China is the first foreign government to sign an oil deal with post-war Iraq. China has the advantage of not having to trouble themselves about the incompetence, barbarism and human rights nightmares of dictators when signing deals with them; and those dictators like not being hounded about reforms, so they're natural allies. Steal elections, arrest and execute your opposition while your people die of cholera and have inflation of literally eleven million percent? No problem! Not for China, not if you have platinum.

A new Great Game has started in Africa; China has had the ball for the whole first quarter of the game, because the West is only now realizing that clock has started. It's difficult not to speak in adversarial terms, and indeed, China and the West still think we're playing two different games. It's critical that China is brought further onto the same playing field in the twenty-first century.


Credit: Economist

Australia is Making a Mistake

Apparently the Australian government now thinks that China is the country to imitate.

Telecommunications Minister Stephen Conroy has called for a Great Australian Firewall that would block websites (sound familiar?). The trial began Christmas Eve, and there's not even any legal mechanism to determine what goes on the blocked-list - just government fiat.

As with most first steps by big government into telling its citizens what they're allowed to see and read, he's acting under the guise of protecting the children. It's an old strategy - you dare speak out against burning witches? Then you must be one too! Speak out against protecting children? You must be an evil pervert! It's deadly for politicians to take a stand for something abstract like freedom of information when they can be cast as taking a stand against something concrete like the safety of children. Australia has been a vibrant democracy and I hope its citizens speak out against this outrage and keep it that way.

First Quake-Related Lawsuit in China

The first Sichuan-quake-related lawsuit is being filed. Briefly there seemed to be a promise of Chinese glasnost after the Sichuan quake, with an unusually open Chinese government; then the openness stopped, and it was back to business as usual. And obviously, no one noticed this more, or suffered more as a result, than the people of Sichuan Province.

Far from being a cynical celebration that another nation has joined the U.S. in litigiousness, I welcome this as a test to see if China is a modern state, a nation of laws and not of men, with citizens entitled to demand redress from their government for shoddy buildings that took human lives. If it is indeed the People's Republic of China, they should be.

Another Broken Promise

The Olympics are over and now, with less international attention, China re-blocks websites. Surprise, the Great Firewall is back up, strong as ever! Given that I do get hits from China (hello progressives, you're not alone!), it's even possible that you're reading one of them.

Animal Activist Gets Jail Time

Another moron carted off to the clink. Whether or not you agree with his apparent assertion that it's more important to keep an animal alive than to try to cure AIDS or cancer, terrorist acts are never justified - and that's what these kinds of actions are. Same goes for the vandals in Santa Cruz this week).

As repugnant as their behavior is, the trial shows that the justice system works, even without the Patriot Act repealing the basic protections that Americans have fought for. And now that it's Obama's people reviewing the tapes, does the Patriot Act still seem like a good idea to you?

First Memorable Mistake of Obama Administration

This CNN article is clear about why picking Rick Warren was divisive. If Obama wanted a minister at his swearing-in, there are thousands of others he could have chosen from. The Religious Right is not going to start suddenly trusting Obama because he picks Rick Warren, but reasonable Americans of all stripes might start to wonder if "bridge-building" means "favoritism politics".

Subversion of Science and Education for Politics

Here is yet another case of politics intimidating science, and the nation damaging its economy and badly losing. Just because evolution and genetics is threatening to a certain group of people doesn't mean it's not true, and certainly doesn't mean that it should be replaced in universities by dogmatic, unquestionable pseudoscience. Am I belly-aching again about evangelicals trying to force creationism on our kids?

Funny, I guess there is a similarity - but I was talking about Stalin's Biology Director Trofim Lysenko, partly responsible for the famines in 1950s Russia in which millions died. He liked to shout at scientists who dared disagree with his party-line science that they were unpatriotic, or elitists, or out-of-touch. One of his favorite rejoinders was to call dissenting Russian scientists "fly-lovers and people-haters". I know the election is over, but I can't help being reminded of a very similar comment made by someone else.

Need a Laugh? Get One at Hugo Chavez's Expense

Sr. Chavez - ¿Está Fidel llamándote de veras? I ran across this a couple weeks ago. Kudos to Enrique Santos and Joe Ferrero at WXDJ in Miami for actually getting through on the phone to Hugo Chavez pretending to be Fidel Castro. Article here; call here (in Spanish). They tricked Castro too but somehow that's not as funny to me.

Sentencing for Tibetan Resistance

China carefully timed this sentencing to coincide with the global distraction of the U.S. election, so people around the world wouldn't be reminded of what had happened in Tibet in March and April before the Olympics. I wonder if any of the Nepal protesters were "extradited".

Why Should Currency Standards Be *Gold* Standards?

A more updated version of this article can be found at one of my other blogs, The Late Enlightenment.

My question is not whether or not we should be on any kind of standard at all, but rather why it should be gold. So, fiat currency exorcists, please spare me your arguments about the evils thereof. There isn't a single currency based on gold today so in any event your work is cut out for you, and I concede that this is an academic exercise. Still, it's a question that's interested me for a while, and it's curious that there seems to be no solid, rational answer to the question of "why gold?"

The traditional arguments in favor of gold as the most rational exchange medium are invariably a combination of some or all of the following, all of which are undone by modern technology or empirical data:

1) It's easily divisible.

2) It's identifiable (and elemental - it can't be created ab initio).

3) It's durable.

4) It's rare.

5) It's useful.

Gold certainly qualifies for these categories, but today, so do most of the other transition metals. Let's dispense with 1, 2, and 3 immediately since they're no longer unique features of gold. Modern technology lets us work with and machine and divide into coins all metals - and identify them as well (we now have better techniques than color, oxidation and specific gravity). No, this technology wasn't available to past governments, but it's available to us, and we're talking about why would gold still be the standard now, not historically - or at least why it would be the fall-back.

In terms of durability, although gold is more resistant to oxidation than other metals, once mined and refined, metals are stored under contolled conditions (like vaults or pockets) that make the durability question moot. Pure gold nicks and bends easily too; many other metals do not.

So I ask again: why gold? In terms of usefulness, gold does have industrial and medical applications, but in that regard it's sure no uranium or silicon, and in any event it would be hard to quantify the innate industrial value of an element. That leaves us with only one physical attribute to be the source of gold's central role in human economics.


Rarity

I had always assumed that value correlated with rarity, but realized I'd never seen data on this. Therefore, to determine which metal would be the best value reserve, I looked at the value to rarity ratio by comparing the relative abundance of metallic elements in the Earth's crust and their modern values; most values came from the Los Alamos periodic table pages, or from current commodities markets for those metals that are commonly traded. For practical purposes, we can rule out as a potential value reserve for humans any elemental metals which are unstable or unhealthy to handle at room temperature. For example: radium is radioactive, tellurium stinks, cesium explodes, and francium exists only momentarily and as part of a nuclear decay path (which means it's both radioactive and becomes cesium, which explodes).

Ruling out the intolerables, we find that osmium and iridium are both rarer and more expensive than gold. Before you start celebrating the inherent rationality of the human valuation of metals, a) iridium is rarer yet cheaper, and b) please find me someone advocating an osmium standard for a currency, or a single currency or economy that has ever been based on either osmium or iridium. By the reasons given for gold as the basic commodity metal, currencies should be based on osmium, at least now that we can collect and refine it. Then again, maybe two centuries from now the foolish age of fiat currencies will have passed and the world economy will be on an iridium standard and I will be hailed as a visionary. (Use the right side of my profile on coins, please.) Of course, I'm not making coin-portrait appointments yet, because on further investigation, any semblance of economic logic breaks down:



Platinum has the same value as gold (or historically, often higher) even though it's substantially less rare in the Earth's crust. It bears mentioning that for some reason platinum has never been the basis for any economies either. Palladium is about twice as common than gold. Rhenium is slightly rarer than gold but about a third the value. Rhodium is about 4x rarer than gold but only about 15% more valuable. Ruthenium is about three times rarer than gold but has similar value, even though it's more industrially useful, even if still obscure. Even so, you don't see it being traded in Chicago, and there have never been currencies based on it, or to my knowledge even the suggestion thereof.

One objection to my theory is that a commodity that's too rare is useless as a basis for wealth, and that there is a rarity "sweet spot" for precious metals. While self-evidently true, this really doesn't tell us anything since it's a circular argument. That is to say, by this argument gold has "just the right level of rareness", which we know because it's what people use, so it must be just right. No dice. I might concede that iridium, which is almost 9 times rarer than even gold, wouldn't be a great choice for a standard, but why not palladium or rhenium? They're both of similar abundance to gold, and they're both industrially useful too.

You might object that just because an element is in the Earth's crust, it's not jumping out of the ground, and that production is a measure of said element's availability to human activities. So I ordered elements by global production as well:




There's a slight trend here, but it's still not the ordering you might expect to see. One thing I noticed was that (not surprisingly) gold was produced far out of proportion to its crustal abundance, which suggests that economic value isn't just a function of ease of extraction. So I also ordered the elements in terms of the ratio of production to abundance. Without showing you the scatterplot, the first ten most "overproduced" relative to their natural abundance were, in decreasing order, carbon, nitrogen, gold, lead, antimony, bismuth, tellurium, phosphorus, sulfur, and mercury. Gold is in there with some rather economically indistinguished elements.

Oddly enough, copper is 20,000x more common in the Earth's crust than gold, and yet it has been used as currency, as has silver. What's going on? There are three things going on: oxidation potentials, animal behavior, and habituation.


A Behavioral Explanation

I added this paragraph after the fact, because of the timely eruption of a tailor-made scandal driving home my point: if you don't think irrational grouppthink psychology plays a major role in human economic behavior, how did the Japan Enten scandal happen? I added this later because it was tailor-made for this article. If you're still not convinced, take the time to read MacKay's Extraordinary Popular Delusions and the Madness of Crowds.

First, gold, silver and copper are the only metals likely to be found at the Earth's surface that have negative oxidation potentials for the transition from pure to oxidized metal (meaning they can be found in nature in their unoxidized forms). Okay; so one day a few thousand years ago, someone was wading up a creek, and found gold nuggets glinting under the water. So what? Why was he interested in the physical properties of shiny gold nuggets any more than wood or rock or water?

It bears constant repeating that when we talk about economics, we're talking about the behavior of a specific animal. Economists concede today that Homo sapiens is not the perfectly rationally self-interested and profit-maximizing animal it was sometimes previously thought to be. Having said that, in asking "why gold?", it seems to me the principle factor that's overlooked is entirely irrational and human-dependent, and it best explains why modern humans might be predisposed to maintain gold as a store of value. That factor is that we're monkeys, and we like shiny things.

I mean that to be taken literally and seriously. Though gold does have industrial applications, we still use it primarily for decoration. On the other hand, I've never seen a palladium necklace at Tiffany's. My wife is a monkey who likes shiny things, and I'm a monkey who likes her, so I went to Tiffany's to get her shiny things. So does everyone else. So gold is valuable.

Now add several thousand years on top of our initial monkey-fascination with gold (which keeps it from being like, say, tulips) and you have considerable historical inertia. By this I mean many (but not all) civilizations independently adopted gold as their exchange standard and store of value, and now that billions of us are all trading, it would be even more impossible to change. To do so, you'd somehow have to simultaneously convince all humans who now recognize gold as inherently more valuable than most other metals (the majority of humans, including wives) that another medium was more valuable; this would be true even if there were no other reasons to use gold as a standard. Even the effective removal of monetary gold from circulation in the U.S. in the 1930s had little impact. It would be very difficult to convince people to switch to a different metal, because everyone already is programmed by history to value gold, and would you trust your neighbor to stop considering it valuable at the same moment you do? It's for this same reason that Ithaca hours, among other quirky currencies, have largely died out. When people in your town take Ithaca hours and American dollars, and no one in the town next door takes Ithaca hours, you get pretty nervous about, say, opening your 401K in Ithaca dollars.

One frequent objection is that if the use of gold were really just an economic legacy system or in game theoretic terms a massive and long-running coordination game, then there should have been economies that assigned higher values to shiny metals other than gold. And of course there were. For centuries China valued silver more highly than gold (whether you can say they were on a silver standard is another question). Isaac Newton even wrote on the topic for the British government, and illustrated his concern over the trade imbalances that would result for the two ends of the Old World if economies on opposite sides of Eurasia used different standards. Note that he didn't state that one was better than the other, just that having two value systems operating simultaneously was unhealthy. Today the gold/silver price ratio in China is the same as in the rest of the world. China's system was Betamax to Europe and the Middle East's VHS; I make this analogy to stress that, like Newton, I don't think that gold is necessarily better either, just that more people were using gold, and those people happened to colonize the rest of the world, so it was a matter of time before China's commodity valuations would have to adjust if they were to keep trading with everyone else.

CONCLUSION

I'm no commodities expert which is why I took advantage of a friend's recent visit to pick his brain. He does trade commodities, and works as a geologist for a major U.S. government contractor. When I asked him "why gold", he made the usual jokes about going on a selenium standard, and then said, "I don't know. Historical reasons I guess."

I'm not interested in convincing anybody to stop using gold. If you're going to use a precious metal as a store of value, everybody should use the same one, and gold is the one that humans have settled on at this point in history; it's still a kind of stable value reserve, even if it doesn't anchor currencies anymore. Some economists have predicted that it will eventually lose its value, as matter becomes smarter and labor continues to get more valuable, but we'll see. I asked the question "why gold" purely out of curiosity, but it's interesting to note that no anti-fiat-currency websites have begun calling for a rhodium standard, and that no one has provided an argument that explains the tenacity of gold as well as primate inertia.

World's Smallest Political Quiz

You can find it here. It takes about 45 seconds; see where you end up. I've often said half-jokingly that not only should ballots be secret, they should be blinded - that is, you would only see a list of the candidate's positions but not his or her name. I think Americans might vote a little differently if they could no longer vote straight-ticket Republican or Democratic like their friends and family, or for incumbents, and they actually had to think about how those positions aligned with their principles.

Why Can't Conservatives Go To Marches

I'll give you a chance to get past all the "because I actually have a job to go to" comments - because so do I, and I go to marches. The reason we're conservatives or libertarians is because we know that the best form of government is a lean, efficient democracy with full individual rights and the freedom to pursue happiness and express yourself as you like. This is why it's literally tragic that individual conservatives think the word "activist" is a slur, and that we aren't more vocal (and participatory) about the human rights atrocities regularly occurring at the hands of the world's dictators. This is moral high ground that left-wingers think they own at the moment - why not pull it out from under them?

If you're doing your charitable giving at the end of the tax year or you just want to commit to making the world a better place, here are three groups worth of the dedication of any real red-blooded American fiscal conservative or libertarian. If these don't make you want to get involved based on your principles, what will?

Human Rights Watch - This outstanding organization works in areas like child trafficking, war crimes, and in general helps to keep dictators accountable. For this they've become the target of a campaign organized by left-wing critics who would rather see HRW remain silent than dare criticize nominal socialist states like China and Venezuela. If for no other reason than that, now is the time to donate or get involved.

The Lights of Liberty - a group dedicated to grassroots and educational efforts right here in the US of A.

Human Rights in China - The name says it all. What's for an American conservative not to like about a group that promotes democracy in our biggest competitor?

How to Make the Healthcare Problem Easier: Raise Sin Taxes

I've said before that you need tax revenue to run a country. We usually only hear about two ways to control this when there are at least three. The first two are

1) What you spend it on

2) How much you tax


And the third is

3) What you tax


I wish #3 would have a greater role in health care policy discussions in the U.S.

The solution is not to nationalize American healthcare, which I've written about before. Our Kafkaesque tax code is in any event already in dire need of a real overhaul to organize it clearly according to modern principles and, by ironing out the labyrinthe, leveling the playing field for the middle class by removing at least some loopholes. I've also said before that it's foolish to tax income, because by doing this, you necessarily disincentivize earning money (or you incentivize earning money and cheating). Earning money is a good thing; so why not tax bad things instead? Pollution, waste - and unhealthy behavior. In whatever cases we can, when the government has to spend money on human-created problems, we should localize the expense to the people creating those problems.

Lee Kwan Yew, while I can't accuse him of being democratic, did something right: his long administration in Singapore turned a postcolonial swamp into the Switzerland of Southeast Asia in mere decades; to put this in perspective, today it's often said that Dubai is the Singapore of the Gulf. Only now is Malaysia catching up, although they've insisted on setting other challenges for themselves that Singapore wisely avoided. How did Singapore do it? One method that I find admirable is focusing revenue collection on fines, rather than on income. Wouldn't you rather your government take money from people who were misbehaving than people behaving successfully (by making money)? It's here that I'll get the first outcries of "social engineering!" from the more fundamentalist of my fellow libertarians - and of course, that's exactly what it is. News flash: the purpose of law is to change behavior. That's why we levy fines or put people in jail for doing bad things.

One of my problems with any kind of nationalized healthcare is that invariably, you end up paying for someone else's bad habits. Why should you be on the hook for my lung cancer treatment when I've chosen to smoke my whole life? Or even stickier, what if I have some inherited disorder - not my fault, but certainly not yours either. That's why you can help support the American healthcare system - and encourage a healthy America - by sin taxes. For example:

- Cigarettes - if it's possible to tax them further.

- Alcohol - I'm probably in the top quarter of American beer and wine drinkers, and I would pay more. Non-drinkers don't owe drinkers treatments related to their beer guts and liver damage.

- Junk food - again, I bet I eat at Taco Bell more than you do, so this definitely hits me. Why allow the government this power, you ask? They have to get money from somewhere - would you rather it be straight from your employer to penalize you for making money as they now do, or on top of your receipt at Jack in the Box, where you can decide to go somewhere else?

- Legalize and tax marijuana - Have you ever seen the estimates for what this would bring in? Extrapolating the numbers in this study, we're talking about $25 billion in combined annual revenues and savings.


Optimistically, this reform may be the beginning of a simpler consumption-based Federal tax system that encourages savings and growth rather than consumption. (Have you seen American saving rates recently? Courtesy captaincapitalism.) Another tax incentive I'd like to see is a way to translate savings rates into flash and status to get people to do it more. This is a problem that Robert Frank identified.

Remember that Capitalism and Freedom author Milton Friedman is the one who masterminded tax withholding; if that's not (good) social engineering, then what is?

My Dad Was a Steel Company Executive

It's not quite the first line of a Bruce Springsteen song, but thinking about this yesterday it provided some perspecive. The biggest steel company in the world today is Mittal-Arcelor, which may be headquartered in Luxembourg but the majority of whose management board is Indian. My dad is no doubt rolling over in his grave that such a thing could happen. I'm sure he thought it was bad enough when Nippon Steel formed in the early 1980s, but India?

Of course India. We should not only be prepared for the possibility, but expect that the emerging economies will continue to take over the old-economy brick and mortar Frick and Carnegie industries, as happened in the 1980s with Japan Incorporated in many fields, including steel.

Back here in the States, my father's generation over-reacted: they had seen decades of U.S. dominance in every industry, and saw Japan - the first example of Zakaria's "rise of the rest" - as a signal of American decline. The irony is that of course these lieutenants of capitalism did not have the background to appreciate that what to them was just good patriotism was actually in direct conflict with the principles of free trade. If something can be made just as well somewhere else for cheaper, even after transportation costs, then it will be made there. As the rest of the world industrializes, we should expect this cycle to continue, that mature industries - industries which don't depend strongly on continuing innovation for their growth - will continue to be taken over by the developing world. My personal favorite example is the transfer of electronics manufacturing in the last ten years out of Japan and into China. My Japanese father-in-law has been to China twice, both times to inspect new plants for Mitsubishi.

The danger for my generation is that we've grown accustomed to this cycle, and we're under-reacting when there are industries and growth-drivers that we should genuinely be worrying about. Offshoring call centers does hurt American workers in the short-term but is in the long-run not a wealth creator; R&D is. This is why Americans should pay more attention to, among other things, stem cell milestones being met in Korea and the U.K. and Japan, but not here. The ultimate source of economic growth is innovation, and in high-tech, industries where labor produces most of the value, like my own, biotechnology. This innovation tends to occur in geographic clusters of horizontally integrated companies centered around universities. (Visit the Schumpeter Club for more discussion.) This is why, for example, Detroit continues to be a poster-child for urban decay, because it's never gotten over being a one-industry town, but Pittsburgh has been reinventing itself as a biomedical and high tech center - thanks to Pitt and Carnegie Mellon.

You might be asking yourself that if we're under-reacting, how should we react? Can we ask China and India nicely to stop outcompeting mature American industries on the basis of their low production costs? Obviously not - but we can focus on those sectors where we can and do outcompete the rest of the world, and those sectors are the innovation-dependent new ones, and those depend on our best-in-the-world university system. Even leaving aside for the moment the current crisis in Detroit, it is difficult to imagine a future in which the U.S. continues to compete with China and India and the rest in the auto industry, once the semi-skilled workforces there come online and bring their quality standards up to snuff. High tech, pharmaceuticals, medical and financial services will continue to be the source of growth, and that's exactly why we have to protect those industries and improve the educational system that catalyzes them. While the dislocations from the auto industry's decline are no fun for our economy or the workers involved, it's not a battle we can fight forever, nor is it one we should be devoting our resources to. A statistic from Zakaria's Post-American World that I never tire of quoting: in 1907, Britain produced four times as many bicycles as the U.S. The U.S. produced twelve times as many cars. It's even possible that the profit from the auto industry at that point was lower than from bicycles in absolute terms to both economies, but I think the point is clear. We should be America, not Britain.

National Association of Evangelicals Head Resigns

Richard Cizik has been forced out of NAE, the leading lobbying organization for American evangelicals, for saying his position on (at least) gay civil unions is changing. Apparently the good old American right to make up your own mind and conscience doesn't sit will with the organization's senior management.

On the heels of Bush's "admission" that he believes in evolution at least some of the time, and that the Bible isn't literally true, this hasn't been a good week for evangelical politics in the United States. Hopefully these bad weeks will continue for them, and the GOP will emerge from the 2008 debacle with a new lease on life in 2012.

In any event, it's worrying that so many grown-ups spend more time worrying about gay marriage and yoga than potential nuclear wars between Pakistan and India or the economic competition from our creditor China.

China's Desperate Need to Stifle Dissent Is Holding It Back

Harvard polymath Steven Pinker attacks what he sees as another contemporary myth:

"Everyone says that China will be the next scientific and economic power. Is this compatible with their ongoing rejection of open debate and exploration of ideas? Is a technologically advanced society compatible with anti-intellectualism and suppression of debate? It’s hard to see how China will ever compete with the West as a source of scientific and technological innovation if ideas cannot be discussed and evaluated."

As the blogger discussing the article on futureprogress points out, China has other tricks to try to absorb knowledge without contaminating itself. It's worth pointing out that pre-World War II Japan modernized at an astonishing pace and did not democratize until it was atom-bombed. This is no call for an attack on China (which would be the biggest lose-lose in history) but rather a reminder that we shouldn't be overoptimistic about the automatic liberalization of a state following that state's arrival in the modern economy.

Excellent Point on Fractals of Change

Tom Evslin starts out a post by saying "Antitrust law needs to be updated to include 'too big to fail' as a criterion for dismemberment."

Best Bailout Humor Yet

If you think capitalism works, be sure to read the fine print:

Election Analysis - An Opportunity for Twenty-First Century Conservatives

This is the conclusion section of my full regression analysis of the 2008 election in terms of demographic variables; full text and figures here.

In the US, evangelical and Mormon populations are not growing well in the fast-growing, ethnically mixed, well-educated, and economically strong cities on the coast. The number of atheists in the US is growing (6% of over-30, 12% of under-30 are atheists). Population density, and the resultant admixture of people from different backgrounds, is increasing. The proportion of white voters in the US is dropping. Per capita income will (we hope) continue growing. Hopefully, Americans' average education will continue to increase as the economy increasingly depends on innovation in technical fields. The young voters who helped sweep in Obama will doubtless become more conservative as they age, but whether they will ever become as culturally conservative as their parents is in question. Note that I didn't deliberately set out to pick six demographic variables that are all changing in the Democrats' favor; I picked the six I thought were most clearly relevant to the election. This is not good news for the current incarnation of the GOP, either in California or anywhere else.

At a time when the global credit crisis is causing many inside and outside the US to doubt whether markets are the best mechanism to allocate wealth and promote growth, the GOP cannot afford to allow the Religious Right to continue steering. The market/strong-defense/evangelical alliance is broken, and one of the partners in that alliance has to go.

May I make the unsurprising suggestion to rank-and-file Republicans that you insist on throwing out the partner that, for the last eight years, has revealed itself as a kind of inept religious statist, that can sometimes win elections but has no real governing principles and in the end can't govern its way out of a wet paper bag. Until you do, I'm over here with the Libertarian Party, and a lot of other former Republicans don't know what to do, but they'll be damned if they'll continue voting on the basis of armband religion, as Kathleen Parker put it. The Southern Strategy is dead, it's 2008, and we need new ideas: we need somebody to speak up for the high tech economy that is America's strong suit in this new world, we need somebody to recognize the economic threat-cum-opportunity that is India and China, we need someone to take a principled stand on human rights abuses by our supposed allies and ourselves, and we need someone to show leadership on energy and market reforms and not just let lobbyists write legislation that benefits not just certain industries at the expense of taxpayers and troops, but certain companies. That our government should govern sounds radical, I know; but as an American, I demand the best government in the world. You want to hear it straight from the capitalist horse's mouth? In The Wealth of Nations Adam Smith said "The proposal of any new law or regulation of commerce which comes from [the owners of businesses], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the publick, who have generally an interest to deceive and even to oppress the publick, and who accordingly have, upon many occasions, both deceived and oppressed it." From Book I.

We don't need any more cheap grand-standing over time-wasting minor social issues - which is about all the GOP seems to know how to do in 2008 - issues that at best are distractions and affronts to privacy and human dignity (like Terri Schiavo) and at worst threaten American business competitiveness (like restricting stem cell research. Notice all those breakthroughs happening in Asia and not here? Surprise!) The strongest Republican governor in the country right now is the governor of California - a centrist who has denounced California's new gay marriage ban as ridiculous. Too bad he wasn't born in the US or I'd already be selling "Presidator 2012" buttons. Religious Right: you broke the GOP and the rationalists want it back - American demographic trends are your worst electoral nightmare, and they're getting worse for you every day. Go off and form the twenty-first century Republican equivalent of the Dixiecrats and win votes in rural Arkansas and Oklahoma if that's your thing. Frankly, after the last election, it seems to be your only thing.

Sun Tzu said the battle is won or lost before it begins; demography is destiny; and David Brooks says the Religious Right will be able to hold onto the GOP's steering wheel at least until 2012. If Brooks is right, fellow moderates and fiscal conservatives, then the battle is lost, and Obama is already a two-term president. For the sake of the country, I hope he's wrong, because I want at least two real American political parties back in action, competing on the merit of their ideas for the next 219 years of the Republic, just as has happened in the previous 219. The party of ideas, the GOP of Reagan and TR and Eisenhower has a golden opportunity here - but if the withered old hands of the Religious Right keep dragging it back, then it's time to consider defection to the Libertarian Party for 2012, or splitting off into the twenty-first century Bull Moose GOP like Teddy Roosevelt did (and kicked Taft's ass, too). And if that's the plan, then we may already have somebody in the wings.

Your Phone Can Read Chinese

Yes, really. Thanks to Linguatec's application using image-recognition software, you take a picture of a sign, and your phone tells you what it says. Pretty cool. One less barrier between China and the rest of the world.

Excellent Christopher Hitchens Article on Mumbai Attacks

Hitchens points out that not only is India our strategic ally, but that it has succeeded as a fellow secular democracy with multiple religions and ethnicities while simultaneously mostly keeping religion out of its government, and has benefited greatly in recent years - a sort of mirror-America in Asia. Fareed Zakaria, whose Post-American World I wrote about recently, is from a Muslim family in Mumbai but describes himself as "not a religious guy" - a description that would have been much more unlikely had he been from Pakistan instead.

The choice for Pakistan should be a clear one. Refute these disgusting and desperate cowards, whether or not they have ties to the Pakistani military, and join the modern world as a growing and open society - or fall behind. Especially India.

Do Not Nationalize Healthcare

Because drugs and medical professionals don't grow on trees, citizens of modern democracies must choose where they want to be between two extremes:

1. Where healthcare is nationalized, but to avoid bankrupting the government, you have to limit what care is available to people.

2. Where healthcare is completely private, and instead people rely on private insurance or savings to pay for treatment.

The irony here is that proponents of #1 argue that healthcare is a basic right. And it's true that in a private healthcare system, some people will not be able to get treatment. But it's very hard to see how a policy denying people available treatments - which a nationalized program invariably does - is an improvement over allowing people who can afford medicine or coverage to purchase it.

Nationalized systems also raise the question of whether I have a right to expect you to pay for my lung cancer treatments after 40 years of smoking, or my physical therapy after a bad rock-climbing fall. By insisting on paying for my healthcare, you're now placing limits on my lifestyle - and I'm for damn sure going to place limits on yours. Some systems (for example Sweden) do try to take some of these into account (for example, smokers pay a higher tax) but you can't take into account every example of willfully unhealthy behavior, and we all get stuck paying for the medically irresponsible. For example, in the Swedish system, to my knowledge alcohol intake, rock-climbing, or even simultaneous participation in both does not figure into the scheme.

At this economic low point in late 2008, the less wealthy countries will be tempted to turn economically to the left, especially on questions like this, and it behooves the world's free marketeers to stand especially firm against the tendency now.