Monday, May 16, 2016

Keynes's beauty contest and the stock market.

Keynes was dismissive of stock markets in the determination of asset prices likening them to a beauty contest. I have some thoughts on this.
In Keynes’s beauty contest the voters form expectations about the judgement of others about the beauty of the contestants. And if everybody behaves like this no one may pay any attention to their opinion about the actual beauty of the contestants. The result is an emergent reflection of the opinion of other people’s opinion. There is no feedback from the ‘fundamental’ beauty of the contestants. There actually is no such thing, since beauty is in the eyes of the beholder anyway. And when the contest is over it is over. Nobody cared about ‘true beauty’.
On the stock market, people form expectations about other people’s expectations of the future price of the stock. And if everyone behaves this way, then the price of the stock depends simply on everyone’s expectations of everyone’s expectations of the future price of the stock. And no one may actually have any expectations about the future price of stock apart from these expectations of expectations (of expectations, …, ?). And the emergent outcome is thus a reflection of these optimistic or pessimistic expectations about expectations. A process without an anchor, says Keynes.
Except that is not the whole story. Unlike the beauty contest, things happen in the world outside of the stock market that affect the price of the stock. Most importantly the company, whose stock is in question, either does or does not have a cash flow from profits. Negative or zero profits means borrowing. This can go on for a while, but “at some point” the absence of profits must impinge upon those expectations because ‘everyone’ knows that the future price of the stock depends ‘fundamentally’ on future net earnings. The palpable uncertainty associated with these asset prices is a result of the ambiguity of the concepts “future”, “at some point”, etc. How long could Amazon actually have gone on without showing any real profits? It went on much longer than many thought possible, and many companies failed for want of earnings, even while Amazon endured. What determines the strength of investor forbearance in some cases and not in others? For that one needs a valid theory of expectation determination, probably an impossibility.
The stock market, for that reason, however, is not a beauty contest. Earnings, in a sense an ‘objective’ measure of performance depend upon revealed consumer preferences – whether *consumers* not *investors* think the product is beautiful. There is an *outside* judge who is not concerned about the asset price or even the future earnings of the company, but, rather, only about the value to him of the product being produced. That lends the crucial anchor to the process that is absent in the beauty contest. (Again we see the importance of capital accounting).

Friday, May 6, 2016


Today I was privileged to sit among the children of Levine Academy in Dallas to listen to Stan Siegal present the story of his parents, Joseph and Anna Siegal who survived the holocaust and came to America to rebuild their lives.
As the number of survivors still alive dwindles, it becomes ever more difficult and ever more important, to try to portray the horror and significance of this episode in history - for us as Jews and for the world at large. But to speak of it in numbers and historical facts fails miserably to convey that horror and that significance. As Adam Smith might have said, it only becomes real when one hears of real people with names, with dreams and hopes for the future whose lives were disrupted and exploded by unimaginable violence. Certainly when speaking to young children, statistics and dates mean nothing until one peoples them with human beings who have faces. Stan told the story of his parents in a way that could reach these young minds and hearts.
Judaism unequivocally exhorts us to "choose life" The story of Stan's parents is about how they chose life after Anna survived years of slave labor in the gulag of Siberia and Joseph survived years in the woods of Poland with other camp escapees. Though all of Anna's family miraculously survived, all of Joseph's family, his siblings, his parents, were murdered. They met in a displaced persons camp after the war and Joseph married Anna there and also married her family, having lost all of his own family. Their first child was born in the camp. They were not alone in marrying and building a family there.
Consider what it means for people who have endured such suffering and loss to pick themselves up and dedicate their energies to the building of a new life, a new family. The Siegals emigrated to the U.S. and today Stanley and his wife Janet live here in Dallas with two of their three children and three of their five grandchildren who attend Levine academy.
There are many stories like this. They occur against the backdrop of the times. I learned from Stan about the displaced persons (DP) camps (1945 - 1959) that contained at least 500,000 Jews (a pitiful remnant of the Jewish communities of Europe) and many others. Many ordinary soldiers and civilians dedicated their lives during that time to caring for and training these survivors. And (whatever his reasons) President Truman responded to the existence of these camps by achieving a dramatic change in U.S. immigration policy to enable many of those survivors to enter the United States. Decades earlier the waves of European immigration had been stopped and many who perished in the Holocaust might have been saved had that not been so. But after the war, at least the survivors were welcomed.
(I can't help thinking of Syrian Christian refugees in the here and now and how we could be instrumental in saving them).
These survivors who came to the U.S. built successful lives and careers and their children and grandchildren are among America's most successful. They enriched not only themselves but untold numbers who benefited from the value they added.
Other DP survivors went to Israel, where a sizable local Jewish population welcomed them, to England, France (and other W. European countries), South America, Australia and South Africa.
As we remember the dead, let us celebrate the living.

Tuesday, May 3, 2016

The Girl From Human Street: An Appreciation and Appraisal

What follows are remarks prepared for an event hosted by the Dallas Jewish Historical Society in honor of the South African Jews of Dallas that took place on Monday, May 2, 2016. Roger Cohen was the guest speaker and he spoke eloquently about his book. These remarks were prepared to be delivered in the event that he was not able to make event and are meant as an appreciation.
I have appended some further remarks by way of critical commentary that might be of some interest.

The Girl From Human Street: An Appreciation

In The Girl from Human Street, Roger Cohen has written a fascinating and unusual book. He is an accomplished and talented writer. His descriptions are vivid and insightful full of original clever little epigrams to encapsulate and summarize his observations.

It is easy to recommend this book to anyone looking for an interesting and informative read, but it will be of particular interest to those who like to read about history, especially modern Jewish history.  And it is above all very appropriate to discuss it here tonight because of its South African connection.

Roger Cohen is a well-known and respected New York Times columnist and one-time foreign correspondent. He now calls New York his home (for more than 25 years), but by origin he is a South African, who grew up in England, and has strong Lithuanian roots. Human Street is in Krugersdorp, outside of Johannesburg, and the girl from Human Street is his mother. It is Cohen’s memory of her that hovers over the entire book as he struggles to come to terms with her suffering and the effect that it has had on him. And that suffering appears to him to have a lot to do with her exile from South Africa. So the South African Jewish element features very prominently in this book and I will pay particular attention to it.

The book is what one may describe as a bio-documentary. It is first an historical autobiography stretching from before the beginning of Cohen’s life until some unspecified time before the present. It is a very intimate and detailed autobiography of his past, told through the lives of his family members in various generations. It is probably more detailed and intimate in its revelations than any us could or would like to reveal about ourselves and our families. But in it South African Jews will recognize themselves, as I did, in a strikingly familiar way. It is his story, but it is also the story of most of us expatriate South African Jews of his generation, particularly those of us who have come to America. 

So at the inner most level it is the fascinating story of his family for which he clearly has done an enormous amount of research. His talent for writing is evidently a family trait. He was aided in his research by various memoirs of family members, evidencing considerable literary polish. Through these surviving documents and many other historical sources he is able to trace the various strands of his remarkable family and recount their stories over the generations. Most of us Jewish South Africans of Lithuanian origin have not taken the time or expended the energy to find out much about the lives of our ancestors, either in South Africa, or before that in Lithuania, nor about Lithuania after their emigration to South Africa. What would have happened to them had they not emigrated? Cohen has done this and his account is path-breaking.

At another level this book is an historical documentary of the Jews of Lithuania and of South Africa, with significant views of the Jews of England and Israel as well – and a few glances at Italy. In these forays into the surrounding conditions of the time, Cohen delves also into the lives of others, not family members, and treats their stories just as intimately and compellingly as those of his own family.

So there is a lot of stuff mixed up in the telling. It is not a narrative that proceeds in linear fashion from beginning to end. Rather it is collection of themes, “ghosts of memory” (as the subtitle of the book suggests) seemingly randomly presented, but which, upon further reflection, come together in a poignant mosaic. One may wonder, what is the motivation for this particular mode of expression? Before moving on I want to offer a potential explanation for this.

This is a book about identity. Who are we and what makes us who we are? Clearly, we are more than the sum total of our experiences, but those experiences do play a large part in shaping who we are. This works through memory – through the remembering and imprinting of those experiences. But events remembered do not appear in our memory in historical order. They are more random and mixed. One remembered element connects with another far removed in geography and in historical time. Every chapter in the book contains a kind of network of connected memories separated by place and time. The reader thus becomes privy to the way in which the author encounters his memories, and thereby to the reasons for their significance to him.
Lithuania: Cohen weaves his personal family history into the broader historical picture in different places at different times. These include Lithuania at the time of the emigration to South Africa in the 1880’s, Lithuania at the time of the Nazi occupation and extermination of more than 250 Jewish communities, Lithuania soon after the liberation from the Soviet Union and, finally, Lithuania in 2012, a Lithuania trying tentatively and not completely successfully to face up to the reality of what happened there with the submission of many and the active participation of many others in the genocide of the Jews. One learns also that there were indeed Lithuanians who did not stand by and who distinguished themselves by saving Jews at great risk to themselves.  But they were definitely the rare exceptions. Most Lithuanians, then as now, simply averted their eyes from the horror.

Lithuania is a very small country that has a traumatic history being squeezed between Russia, and later the Soviet Union, on the one side and the Nazis on the other. After the war, when Stalin had already annexed the country, recognition of the genocide was simply ignored and subsumed into the heroic suffering of the Soviet resistance to the Nazis. It is an old story, under Nazism Jews were vilified as communists (Bolsheviks). Under Communism they were vilified as capitalist collaborators. Lithuania achieved independence with the collapse of the Soviet Union in 1990. Only very recently has the Holocaust begun to feature in the Lithuanian collective consciousness and now school children are, at last, being told about it. They are learning about how centuries of Jewish civilization in Lithuania came to an end in a few months during 1941.

We South African Litvaks have all heard vaguely about the pogroms in Lithuania and that the Jews who remained behind were wiped out, but if you are like me, you do not know much more than that. Cohen uncovers painful but vital details about the history of the Jews in Lithuania, the fruits of careful painstaking research including multiple visits to the towns from which his family members came. Of the four pairs of Cohen’s great-grandparents, three were from Lithuania, from towns in close proximity to each other. (Actually in one case it was his grandparents that emigrated, as is the case with many of us). Two of the towns were Šiauliai and Žagarė. Each town has its own particular circumstances and story of how and when the Jews there met their end. Cohen documents the story of these two towns in stark detail. This is the reality of what our ancestors left, this is the fate they avoided, and in doing so they gave birth to us.

What may not be realized about the Jews in Lithuania is that their demise preceded Hitler’s final solution of the gas chambers. Instead, the Lithuanian communities were for the Nazi murderers a first step along the way to the discovery of a more efficient extermination method. The famous Nazi einsatzgrupen (death squads) specialized in mass executions the old fashioned way - with firing squads and naked Jews lined up in front of the graves that they had been made to dig for themselves. In this way they killed thousands upon thousands in a very short period of time. Cohen quotes a recently erected memorial: ”In this place on October 2, 1941, Nazi killers and their local helpers killed about 3,000 Jewish men, women and children from the Šiauliai region.”
South Africa: Roger Cohen is descended from a remarkable set of ancestors. As mentioned, three of the four pairs that emigrated to South Africa at the turn of the 20th century were from Lithuania, the other couple  came from England. Three of the four men, starting with nothing and struggling to overcome hardships and setbacks, eventually  made their fortunes, becoming founders of family dynasties in the new South African Jewish aristocracy of riches. One of his great-grandfathers was a founder of the very well-known South African mid-level department store the OK Bazars. His father’s side was of more modest means, but married into wealth.

So we have graphic and familiar descriptions of the life in South Africa for Jews starting in the hard-scrabble immigrant generation, through the formative period, to the ultimate established generation with their mansions in the Johannesburg suburb of Houghton – glimmering swimming pools, lush gardens tended by ubiquitous but invisible black gardeners, lavish meals cooked by invisible black cooks, and waited on by formally attired black waiters, babies and children cared for by uniformed black nannies, all very tranquil and secure.

The South Africa from which we emigrated was rich in blessings both material and cultural. It was a great place to grow up. Our grand-parents, or their parents, had done the hard work and we were reaping the rewards. The Jews were part of the privileged white minority that ruled the country with a view to hanging on to these hard earned blessings. But, of course, there were formidable, if subliminal, tensions. A slightly older friend of mine from that period, the historian Gideon Shimoni, refers in the title of his Ph.D. dissertation on the Jews of South Africa to the Community of Conscience. Whether we knew it or not, we all struggled with the moral dilemmas of living in the midst of the police-state that enforced the Nazi-style requirements of the policy of Apartheid.

Cohen confronts this ambivalence head on. He provides valuable details about the founding immigrant generation – again more than most of us are aware of. His admiration for their achievements is unstinting and well-deserved as is his appreciation of the richness of life in established Jewish South Africa. His South African readers will delight in the vivid familiar scenes – the foods, visits to the Kruger National Park, the rich South African English dialect with its sprinkling of Afrikaans and Yiddish words thrown in. “Howzit, hey?” “Shame, ach sistoch man” “He’s a brainbox” “Let me just go and put on my face” “I stopped at the robot.” [I embroidered here just a bit.]

Whatever the background circumstances there is no denying that it was a period of extraordinary Jewish achievement and creativity. And by contrast to Cohen’s experience in England, South African Jews had no desire to assimilate. South Africa was a society of separate groups living together in an uneasy accommodation. To be Jewish was to be a member of one of those groups. There was nothing to be done about it. They were proud Jews, strong Zionists and they practiced a unique form of Judaism in which the vast majority were affiliated orthodox no matter what their degree of observance – and by the time of our generation most were not observant. We were cultural orthodox Jews who reveled in our various synagogue affiliations boasting of the best cantors or choirs who reproduced the liturgical artistry of the big-city Lithuanian communities that had so recently disappeared. It is natural that in leaving all this behind we felt a considerable loss.

As Cohen points out, these achievement were possible because of the acceptance of Jews into to white mainstream and, notably, because of the absence of institutionalized anti-semitism. It is true that the white Afrikaners, with their seething antipathy toward Britain and to English-speaking South Africans, tended to side with Germany in WWII and identified with the Nazis in their anti-Jewish sentiments. There is a clear incipient anti-semitic movement in Afrikaner history. But after the war, and the gaining of political power, the Afrikaners changed their tune completely, finding it more expedient to coopt the Jews rather than persecute them. They were, after all, white and they were the brethren of those heroic survivors that had founded the state of Israel, in the promised land, out of the ashes of Auschwitz. So began decades of cooperation between the state of Israel and the Apartheid Republic of South Africa.

“Antisemitism was deflected by racism” and Jewish consciences were coopted. But there were notable exceptions, among which were left-wing dissidents, orthodox Jews like the eminent Rabbi Rabinowitz of blessed memory, and the awe-inspiring towering figure of Helen Suzman, the lone Progressive Party member of parliament for decades, a constant thorn in the side of the dictatorial, racist Nationalist Party. But for the majority of South African Jews, as Cohen points out, the name of the game was not to rock the boat. Better not to draw attention to themselves.

This was epitomized in the posture of the organization that styled itself as the official spokesman for South African Jewry, the South African Jewish Board of Deputies. Throughout the Apartheid period the BOD took the position that it would not comment in any way on political matters and thereby it avoided taking a stand for or against Apartheid and its brutal state apparatus. For this the BOD earned the condemnation of many vocal Jews in the midst of the quiet acceptance of the majority. Only very recently in the post-Apartheid period has the BOD acknowledged the unconscionable deception that this entailed. All this and more is recounted by Cohen with sympathetic cogency.
England: Though professing to be an atheist, Cohen feels himself to be a Jew, and a South African Jew at that. His parents were South African Jews even though, following his father’s wishes, they tried to leave their Jewishness behind when they emigrated to England. His mother could never make up for the loss of family and culture and geography that South Africa represented and her mental illness, and the mental illness of other family members, is a recurring theme in the book.

Cohen and his sister spent a lot of time back in South Africa while growing up. Still, England left its impression on him. For him England was in many way the not-South Africa. Though nominally open, polite English society had a way of letting Jews know that they were different and would always be different. He refers to “an ingrained bigotry” and recounts the anti-semitic taunts he endured while in school. Yet, for him, as for all South African Jews, the English experience is pivotal. By an accident of history and geography, we ended up in the English speaking section of the white population of South Africa and we developed a strong, if ambivalent, bond with England and with English culture. For Cohen as for all of us, the English heritage is priceless.
Israel: Israel features throughout the book as it influences the history of the family and of Jewish communities more generally, but it features most  prominently in two chapters towards the end of the book when Cohen recounts his visits with family members living there.  He is a strong and emotional supporter of Israel in its origin as a refuge for Jews and an admirer of the modern state it has become. It is worth quoting a brief passage.

“My family story, like that of millions of other Jews, leads inexorably to Zionism. By the early twentieth century, no alternative offered a plausible chance of Jewish survival and belonging. As Joseph Roth once wrote, “If there is one nation that is justified in seeing the ‘national question’ as essential to survival, then surely it is the Jews who are forced to become a ‘nation’ by the nationalism of others.” Zionism was a necessary break with past, pogrom and persecution.”

But he is worried that Zionism “sought a state on land that was not empty. Zionist resolution on the Jewish question could only give birth to an Arab question.” In the book and in his other writing Cohen expresses a sincere anguish at the fact that by being forced to defend itself, Israel has become an oppressor. Resort to military solutions has had a brutalizing effect on both sides and he worries about this dilemma seeing a two-state separation of irreconcilable peoples as the only solution. He is dismissive of a one-state solution. “One state, however conceived, equals the end of Israel as a Jewish state, the core of the Zionist idea. Jews will not allow this to happen.”

Cohen’s sincere grappling with these issues will resonate with his readers. And like us he is troubled by the rise in anti-semitism among the left intelligentsia and on U.S. campuses and he is likewise troubled by the spurious comparison between Apartheid in South Africa and the separation of populations in Israel. As a South African Jew he knows the difference.
America: Roger Cohen now feels he is at home in New York. He finds in America an openness that was lacking in England. America is a land of immigrants, a land constructively fashioned out of people’s differences. We as Americans are united in our differences. We can be whatever we are, while still being enthusiastic Americans. What better adopted home from which to contemplate and wrestle with the “ghosts of memory” that are the substance of this intriguing book.

Critical appraisal – three comments

One: As noted, this book is difficult to categorize. It is part autobiography and part historical documentary. At times it may seem like the expression of an unconstrained stream of consciousness. Some people have told me that they found this problematic. I suppose it depends on the reader. I think Cohen took a risk in creating the book in this form, but it did work for me. I was not troubled by the frequent jumps in and out of the personal to the general and back. But, clearly, some readers will be.

Two: There is a potential inconsistency in the personal story, the story of his mother. On the one hand Cohen wants to connect her wrenching displacement from South Africa to her tragic mental illness. On the other hand he wants to highlight the prevalence of mental illness in his family – more family member have black dots in the family tree than do not. Both impulses are understandable. Cohen wants to deal with the loss of leaving South Africa for his mother and more generally, and, also, he wants to deal with his personal discovery of this lurking genetic menace in his family. But it does raise the question: was his mother’s mental illness a result of the trauma of emigration or would she have succumbed under any circumstances simply because of her genetic makeup, like Cohen’s Israeli cousin many years later. A possible reconciliation is to imagine that his mother had the genetic disposition toward debilitating depression that was triggered and exaggerated by her traumatic experiences. This is probably how Cohen wants us to read it.

Three: Finally a word about his position on Israel. On these matters I think Cohen, like most analysts of this subject, may be  considerably off base, and, if I may, I would like to offer a few comments on that. 

To worry about the oppression of Palestinians by Israelis as a betrayal of the core Jewish values, values intrinsic to the founding of Israel, is certainly legitimate. The Israeli military and the Israeli government can be and should be called to account in a way that other governments in the region never are. There is a palpable double-standard, and maybe that is ok insofar as we as Jews set that standard for the only Jewish state. But to think that Israel is the ultimate cause of the poverty of Palestine and for the suffering of the Palestinians is just wrong. Cohen, like so many others, fails to mention that the Palestinians have been kept in refugee-dependency not by Israel but by the UN, by the various Arab states who have used them as pawns for their own nefarious purposes, and, perhaps most importantly, by the mendacious, corrupt, self-serving leaders that constitute the Palestinian Authority. It is the PA that has deprived them of the vote by refusing to hold scheduled elections, not Israel as Cohen suggests.

If Israel is responsible at all it is by handing over governance of the territories to the PA via the Oslo Accords. Palestinians fared much better under Israeli rule than they do now under the joint rule of the PA and the Israeli military. It is hard to see how a two-state solution is possible when one of the states is ruled by a grasping kleptocracy bent on the destruction of the other state. 

In fact, the only solution, if there is one, may indeed be a one-state setup in which Israeli civil law is extended to all the inhabitants of the territories together with the option to apply for Israeli citizenship. The fear that this will mean the demise of the Jewish state, though understandable, is probably unfounded. The population of the territories has been dramatically overstated by the Palestinian demographers and the growth of the Palestinian population is slowing down, even while Israeli populations growth is stable and high. Under civil law the Palestinians will be able to develop their own voices and solutions. And while some may elect to apply for Israeli citizenship, many will probably not. Other types of political arrangements, like some sort of local federalism, may emerge.

Whether and under what circumstances such a move (to extend civil law to all of Israel and the territories) is possible is another matter. How this could be done and what the reaction of various parties might be is the subject of Carolyn Glick’s provocative book, The Israeli Solution. Whatever one’s opinion on this, it seems to me that no peaceful coexistence will ever be possible until a way is found to allow the Palestinian people at large to express their own individual goals and desires and this implies a change in leadership and in political system that no one seems to be talking about. 

Wednesday, April 20, 2016

Remembering to remember - Pesach 2016

Of all the Jewish holidays that have endured through the secular revolution, Pesach may be the most popular. Jews of every shade of religious observance all over the world gather in homes to celebrate it with the traditional Pesach seder meal, during which the story of the exodus from Egypt, and the lessons to be learnt therefrom, is told.

It is curious that this rather peculiar holiday should have survived. One wonders what it is all about? We are commanded to remember. “In every generation every person is obligated to see himself as if he (himself) went out from Egypt.” Why? Because freedom is to be appreciated, savored, and guarded – never to be taken for granted. Freedom is at the core of our being. To appreciate one’s freedom is to appreciate what those who are enslaved must feel. To be a Jew who appreciates freedom is to be a Jew who treats the stranger well because the Jew was once (and again) “a stranger in a strange land.”

And so we gather, eat smooze and remember. But, although we are supposed to imagine ourselves as the liberated slaves of Egypt, in truth that is not all of it or even most of it. In celebrating Pesach we create our own valuable memories. We remember the remembering because we do it together as families and friends. We are supposed to focus on the children. They will remember the food, the songs, the warmth. And, in time, so will their children.

To the narrative of the proverbial exodus we add the family narrative. We plant roots that will sprout strong trees in every generation committed to the defense and maintenance of freedom. 

Tuesday, April 12, 2016

Socialism is a bad idea and it has killed and impoverished millions

This is addressed to my fellow professional economists, but may be of interest to some lay readers as well.

With Socialism once again respectable, Ludwig von Mises’s classic devastating critique reemerges as highly relevant. Rereading Mises’s Human Action version, two interesting points struck me.
As is well known, he isolates the-knowledge problem from the incentive-problem and focuses on the former, the impossibility of acquiring the necessary knowledge for deciding how to allocate resources to produce known ends. Such knowledge can exist only as the result of a market process.
1. The fact that *ends are given and known* is important. Mises explicitly accepts the 'value judgements' of the decison-maker(s), the socialist planning committee for example. His argument is not that they would choose to produce the wrong things, but, rather, that even if we suspend judgment on this, we can show that they would be incapable of effectively producing according to their own values. This makes it a praxeological (logical) rather than a historical (empirical) argument.

2. I did not see Mises explicitly make this argument, but his setup also implies that if we had a completely benevolent dictator, fully and genuinely committed to the 'public good', who also clearly understood the knowledge-problem and the impossibility of capital-accounting under a socialized system, he would attempt to establish a market economy by guaranteeing private property protections and the rule of law. In other words, he would abandon socialism. Benevolence or understanding or both must go if we are to explain the persistence of the socialist dictator or presidential candidate.

Tuesday, February 16, 2016

The closing of the American student's mind

In Texas schools the Holocaust (the one where the Nazis killed six million Jews because they were Jews), is a prominent part of the history curriculum. Field trips by classes from rural school districts to the Dallas Holocaust museum, for a prearranged educational orientation, are routine. I know that school districts in other states have a similar focus.
Meanwhile, at the college level, and in the school districts of the bi-coastal 'liberal' elites the opposite is occurring. Ludicrous efforts are being made to homogenize and destigmatize the Jewish holocaust. In fact, the attempt to remember and underline the distinctive horror of the Holocaust, and its consequences in Jewish history and the history of the world, and, particularly, in Israeli history, is being stigmatized. Antisemites and their useful intellectual left-wing idiots are trying to use the holocaust as a weapon against the legitimacy of Israel. The victims and survivors of the Holocaust cannot be allowed their victimhood if Israel is to be painted as the oppressor. It just won't do.
Don't get me wrong. For a long time I have bemoaned the "commercialization" of the Holocaust. I have criticized the manufacturing of antisemitic events and the exploitation of Holocaust tours and such. I see a danger of reducing the evil to a banality. But, now, this concern pales in comparison to the one described above.
Also, to be sure, the distinctiveness of the Holocaust does not imply its uniqueness. In terms of efficient extermination Stalin and Mao were much more efficient than Hitler, yet Hitler gets star billing. We ought to note more the palpable evils committed by communism. It ought to be given much more prominence in our teaching of history to young people.
What was distinct about the Jewish Holocaust was 1. the extermination of one-third of the entire Jewish people 2. for NO OTHER REASON than the fact that they were Jewish. There was no underlying economic motive to explain it - the rush to speed up the work of the gas chambers in the final days of WWII detracted from the Nazi war effort. It was not a terrible accident of bureaucracy. It was not a political strategy to consolidate power. It was instead the insane pursuit of a satanic obsession.And that, in itself, carries important lessons.
The truth is that neither this nor the genocides of the Soviet Union or China is being properly covered in our teaching of 20th century history. As a result we have the specter of ignorant monsters attending our most prestigious universities.
Comment by Will Ricciardella :

I've seen what you describe first hand in my political science classes. 

Israel is the real evil in Middle East, and the campus as a whole favors Palestinian groups over campus Jewish organizations.

This is little more than leftist postmodern relativism that feeds their twisted narratives of racism, capitalism and the evil of western cultures.

Jew-hatred on campus is part of a general malaise infecting the American academy

Read this article. It will make you feel uncomfortable, but you need to read it.

It is a graphic description of the sort of thing that is going on on campuses across the U.S.
I first noticed this about ten years ago. I experienced events at the University of Binghamton and at SFSU. Northern California schools are particularly bad, but it is everywhere. I don't think people realize how bad it is.
This almost incredible un-self-conscious anti-Jewish bigotry emanates from the very same people who bemoan the persistence of anti-black racism as evidenced, for example, in the police forces around the country, notably including Oakland CA. It begs a host of interesting and uncomfortable questions. The same visceral reactions that these people attack in others reside deeply within their own psyches. Only the targets are different. There are good targets and there are bad targets. It's ok to target Jews because they are beneficiaries of white privilege and use it to oppress Palestinians. It is not ok to attack blacks because they are bona fide victims.
And this closed-minded embrace of stereo-types is protected by the conviction that you should not listen to people with whom you disagree if they make you feel uncomfortable - that very fact suggesting that they are immoral. So any attempt to counter the horribly distorted impression that they have of Israel and of Jewish history is easily deflected and buried.

Seen in this light, campus anti-Semitism is not an isolated aberration. It is the very litmus test of a dangerous and disturbing closing of the American student's mind.

Wednesday, January 27, 2016

Voting is not a privilege; It is a right – And not a very important one.

First, let me dispose of some issues irrelevant to my subject here. This blog is not about the question of whether or not voter IDs are a good thing, or whether or not a reform of the voting system is desirable and fair. I don’t care so much about this, because I don’t think voting is all that important. But, hey, yes, let’s by all means make sure that voting is accessible to all adult citizens on an equal and transparent basis. Let’s get rid of the dirty tricks, etc.

“Liberals” reading my stuff sometimes see their own issues as my targets, without paying attention to what I am really saying. They allow their presumptions about me to dictate what they think I must be saying. I suppose, given the proximity and media-prominence of the impending election this is understandable, if regrettable. And, indeed, this blog was, in part, inspired by the usual sentiments regarding voting.

For example, It is not correct to claim that voting is a privilege. It is not a privilege. It is a right. And so is the right not to vote. There is surely nothing admirable about voting for the sake of voting when none of the alternatives are desirable to you – especially if they are all equally undesirable. And exercising your right not to vote, to sit on your hands, at least makes a statement to this effect.  So we should stop mouthing this judgmental platitude.

We might be less prone to do so if we realized that in actual fact the right to vote is much, much less important than certain other rights, and not realizing this has resulted in a perversion of our values when it comes to judging domestic and foreign policy. What I aim to establish here is that we accord much too much respect and importance to the establishment of political-democracy and much too little to economic-democracy. The context is primarily foreign policy – the values and principles we try to spread around the word.

Nothing I say here is original. In fact, it is somewhat chutzpahdick of me to even trot it out again. It is painfully familiar to many – certainly most economists, political scientists, political philosophers, and similar folks. So I beg their forgiveness. It is not, however, familiar to most people. Somewhere along the way in the last one hundred years or so the idea of political-democracy, the right to vote for those who form the government, at various levels, became identified with the very essence of freedom. This is the conventional wisdom today. And it is to the vast majority for whom this appears to be the case that this blog is directed. It is a challenge to the conventional wisdom, an invitation to engage in, perhaps difficult, reflection to consider my claim that what you believe on this is wrong, dangerously wrong.

It is dangerously wrong because this is only one side of the coin. Along with the veneration of the right to vote has come the denigration of the right to trade, to protection of one’s property, the right to spend one’s money as one sees fit, in short, economic-democracy.

Right about now I am in danger of losing a portion of my audience. Seeing these terms about economic freedom, some will conclude that this is a familiar and irrelevant rant from an economic conservative with ridiculous and insensitive claims about the importance of economic freedom. Sad to say these days it takes only a little discomfort with views expressed to provoke people to turn off. I hope you resist this impulse.

Think about it. What really matters most to the majority of the world’s population living in poor or modest economic circumstances under arbitrary and mostly brutal dictatorships? The right to vote for a limited slate of candidates once every now again, or the right to trade, move, spend, read, speak, freely? Of course, you say, the latter, but the former is necessary for the achievement of the latter. No it is not., Not only is it not necessary, it is not sufficient either. The right to vote is not a cause of economic or personal freedom. It is, if related at all, a result, a not-so important result. In other words, if you really care about personal freedom for most people in the world you should be emphasizing the liberalization of the economy – most importantly – the freeing of trade, the opening of closed markets. It is quite simply the attainment of a high degree of economic freedom that is responsible for the achievement of prosperity and the personal freedom that comes with it. Prosperity is impossible without economic freedom. If you don’t believe that find me a counterexample.

A graphic and vital example of this is how the simple process of exchange enriches in so many ways. At its most basic, trade is a positive-sum game in which both parties gain. I give up something I value less for something I values more, so I experience an increase in value. And the person who sells to me gives up something he values less for something he values more (things he can buy with the money I give him). Value goes up for him. By the simple act of exchange for mutual advantage, value is created. Unlike the amount of mass-energy in the world, value can be both increased and decreased. In fact, value can be increased without limit. We call that economic growth. And it begins with simple exchange.

But, exchange, trade, is much more than just that. The process of trade is conducive to many other profound benefits over time. It is provocative of innovation in production, it is provocative of artistic innovation; because of increases in productivity, wealth, value, it is responsible for the spread of literacy (people do not have the time to learn to read or to read when they are devoting all their time to surviving), and of individual reflection that brings one to the realization of what freedom is and how it is to be achieved and maintained. Only then does the right to vote matter much at all. Without a commitment to the fundamental values and institutions that support the achievement of a modicum of prosperity, the  right to vote is not much use at all. To encourage people to think that if they have to right to vote for a government who promises to make them rich they will be free, is the height of irresponsibility when you know that all that said government will do is try to make itself rich at their expense. The responsible thing to do is to help people gain the realization that prosperity comes from the bottom-up in the right circumstances and the best that governments can do is allow it to develop.


It is simpler than it might seem. Everything flows from basic property-rights. In fact, correctly understood, property-rights encompass all individual rights and individual rights are the basis of freedom. It starts with self-ownership (property-rights over oneself) – individual autonomy. No one should be able to own anyone else. Can we agree on that? Then, by extension (says John Locke) we can assert a right of ownership over that which we create or come by voluntarily trough trade or gift. It is property-rights all the way up.

And this works if and only if such property-rights are sufficiently secure. Ambiguity surrounds human affairs and judgement in ownership disputes is called for. Such judgement must be seen to be fair, equal and universal. In other words, we need abstract rules (laws, customs, norms, etc.) that apply to everyone equally – that is, everyone, the president as much as the peasant (at least in sufficient measure). Rules needs to be apart from the rulers who enforce them. Such a society is said to be governed by ‘the rule of law’ and not by the rule of men (humans).  Where do these rules-laws come from? That is another matter of course, about which volumes have been written. Suffice it to say that they are the stuff of long-term social evolution and consitutionalization. If we are to maintain the kind of freedom we are talking about here they cannot be arbitrary and they cannot be ephemeral. They must be durable, respected in the abstract, not subject to opportunistic tinkering.

To summarize, property-rights under the rule of law is the ticket to freedom, real freedom. That is economic freedom, and it extends to all manner of individual rights, including freedom of speech and expression generally. Don’t touch me and don’t touch my stuff without my permission – applicable to everybody equally. If we care about freedom and about world poverty we should be doing what we can to bring about these social institutions. Not easy, maybe not even possible in most places. But starting with freedom to trade is a viable strategy. Help people to help themselves and they will realize the ingredients of freedom in time.

One other thing. Political freedom without economic freedom is useless – actually a dangerous diversion. If there is no private ownership of resources, or if the latter is not secure, then political freedom is an  illusion at best. No one can marshal the necessary resources to be a viable opposition without private property guarantees. Witness Russia - one sad and prominent example of many.

So when president Kennedy said that the Vietnam intervention was “to make the world safe for democracy” he was way off target, unless he meant economic-democracy, aka, economic freedom. The people of Vietnam today have a much greater measure of economic freedom than they did then, but not so much of political-democracy. And they are much better off. A result of opening up of trade and investment and migration, not a result of war.

And when president Bush proclaimed that an aim of the Iraq adventure was to bring democracy to Iraq, he was equally off target. The proclaimed aim of the Iraq intervention was ‘nation building’. You cannot build a nation by securing for people the right to vote. When they have achieved a measure of freedom the right to vote won’t matter that much. Why did president Bush not embrace the aim of economic freedom? Why does no president put this front and center? Because it is not political expedient to do so. Because political-democracy is venerated and economic-democracy is denigrated. Political-democracy is a false god. It is time to depose this false god.


This cannot be done solely with an understanding of the importance economic-democracy. One needs, in addition, a sober understanding of the problems that attach to political-democracy in its various forms.

Quite simply, the political vote is a blunt, inefficient instrument for getting what you want as an individual. It is a 0-1 choice for a proposition given to you. More often than not, that proposition is a candidate, the embodiment of a bundle of promises, some of which matter to you some of which do not, and on some of which your candidate has the right ideas (or so he/she says) while on the others he/she is wrong (on your terms).  There is no sense in which you get anything significant of all of what you want to be happy by exercising your vote. Your vote does not even matter. And even if it did, you exercise it once every long period for the confounded package as a whole, not for any of its constituent parts.

What emerges from the political process that we refer to as representative democracy – the political-democracy of our foreign policy pronouncements – is a dictatorship of minority special interests. Politicians are political entrepreneurs who buy votes by promising special favors to economically powerful people who reward them in various ways, legal and extra-legal.  Those who marshal enough power in this way get to dictate to the rest of us about things over which we have no control. The more things are subject to choice by politics, the less choice there really is.
You do not get the yellow tie you want by voting. You do not get the house you want by voting, or the car, or the food you like to eat, or the books you like to read, or most of what makes your life comfortable and meaningful. The dollar vote is a much more flexible instrument than the political vote. Increasing the ability of people to vote with their dollars will ultimately increase the dollars they have to vote with. That is what we should be doing. That is what we should be emphasizing.


One final word on “inequality”. It’s all the rage right now. Doesn’t the system characterized by economic freedom that I am talking about produce large and unacceptable inequalities between people? The answer to that is not so simple. First, it refers to economic inequality. Equality before the law, equality of individual property-rights, etc. are part of the system. What some refer to as economic inequality are simply the different outcomes of different choices. Presumably there is nothing unfair about that. I will share a secret with you. Academic employment does not pay as much as some other things I might have done. I chose this, was free to choose it, and I earn less as a result. Guess what? I am happier than I would have been earning more in a job I liked less. That is a large part of it.

Yes, but what about really poor people? They don’t have many options at all. True. Their problem is not inequality though. It is poverty. It is not clear that economic freedom does produce more inequality in a meaningful sense. It does produce more diversity of outcomes. Some measures of inequality count this as more inequality. If so, then it is part of the package and not a bad thing. In really poor countries there is inequality of a different kind. There is typically a small proportion of the population, the political elite, that is fabulously wealthy, and the rest of the mass of the population who are all equally, miserably poor. Now that kind of inequality is something to get energized about.

As for us, we can achieve that kind of inequality-equality in the U.S. if we want. We just have to decide whether we prefer to be unequally rich or equally poor.

Equality of outcome is another false god. The ridiculous concentration of the wealth at the very top, notwithstanding the Oxfams of this world’s preoccupation with it, inequality is not the problem; poverty is. And poverty worldwide though still a problem, is at an all-time low.


Our economic policies, our foreign policies, our social policies, all are bankrupt. But we will not be able to change them until we change the terms of discourse at the very top. 

Sunday, January 10, 2016

Our Debt to Spinoza

I have just finished reading Irvin Yalom's The Spinoza Problem.
I am not inclined to review the book, save to say that while I found it very interesting and learnt a lot from it, I also found it contrived, pretentious and anachronistic. The author is a well-known psychiatrist and much of the substance of the book indulges his psychiatric predilections in an ultimately unconvincing way. Still, the interested reader will definitely learn a lot about Spinoza and about the monster Alfred Rosenberg, the ideologue of the Third Reich, who seems to have had an interest in Spinoza. So reading this book provoked thoughts about Spinoza, his ideas and the time and context in which he lived by contrast with our own time and context. And it is this that I want to deal with here. 
Living in Amsterdam in 1656, Baruch (Benedict) Spinoza was brutally excommunicated by a committee of Jewish leaders and forbidden any kind of interaction with members of that community. For him, one of the greatest philosophers of the Western tradition, indeed perhaps the first 'modern' thinker, it was a disaster. He was caught between his love for his community and his inability/refusal to dissemble about his true beliefs. He was cast into a social wilderness, forever sad and lonely – but not completely so, for he lived the rest of his short life in the stimulating company of like-minded thinkers. But his life as a Jew was over.
Today large numbers of Jews (who knows how many?) hold views that in large part agree with those held by Spinoza and they do not lie about them (not to suggest that they comprehend the profundity of his work). They live comfortably within Jewish communities and participate in communal affairs in many ways according to their choice, according, one supposes, to whatever they feel comfortable with and enjoy doing. Secular Jews have come to revere Spinoza, the Jew, - a prominent street in Israel is named after him.
Meantime these secular Jews are the targets of diverse religious Jewish outreach groups who, far from excommunicating them - which would carry no practical consequences for them - seek to attract them to their congregations; never questioning their beliefs or their right to have them and write and speak about them.
The Amsterdam Jewish leaders got their power from tradition, but, moreso, from the government of the Netherlands. The government that welcomed Jewish refugees from the hell of the Spanish and Portuguese Inquisitions into Holland, was a government that was, in part, driven by religious (Calvinist) laws. They placed conditions upon the tolerance of the Jews and gave their leaders the power to enforce those conditions - among which was the punishment of heresy - indeed the leaders had an obligation to punish it. The Dutch would tolerate Jews, within limits, but not atheists or Catholics. So Spinoza had to be banned. The survival of the Jewish community was seen to depend on it.
Today the survival of these religious-orthodox outreach groups depends on their ability to attract adherents, including non-believers, upon whom they must be careful not to make too many demands. The difference? They have no power and obligation to compel. Religion and state are separate and religious beliefs are seen as personal matters.
It is hard to overestimate the importance of this development - the 'secularization' of society - a development recommended by Spinoza whose thinking contributed mightily to it. Without it the transition from a zero-sum to a positive-sum society might have been impossible.
Is it not this that holds back much of the Islamic world today?

Saturday, October 17, 2015

A free people under siege

I returned yesterday from a wonderful week in Israel where I participated in the fourth biannual Friedberg Economics Institute seminar (my second) at Neve Illan, just outside of Jerusalem.
My friend and colleague Richard Ebeling asked me the following questions. My answers appear below.  
Since you've been in Israel during part of this new series of violent acts, I was wondering about any thoughts, observations, interpretations you might have of these events.
·         How are Israelis you talked to or saw reacting to this? What do they think (or fear) this may or may not lead to?
·         Do they consider these types of events a never-ending and recurring nightmare,  or is there any  belief (hope) that there is any "light at the end of the tunnel"?
·         Are there any rational, reasonable Palestinians, or is this near unanimous collective madness?
·         Is this making Israelis "hardened" against any deals and compromises with the Palestinians, is there sentiment that negotiations need to be restarted sooner rather than later?
All good questions. My impressions, purely personal, based on my very limited interaction with a small number of people.

Israel is a country under siege without a siege mentality. Soldiers everywhere, but where the civilian ends and the soldier begins is barely discernable. The equivalent of the Pentagon is in downtown Tel Aviv. There is an ongoing conscious effort to try and 'normalize' the life of a soldier as much as is possible. Some people I know in the military wear their uniforms for work only and are critical of the settlements and wary of the threat of Haredi political domination.

As to the stabbings, Israelis try to live their lives unperturbed, watchful but determined. No, they are not at all hardened to the prospect of peace but do not believe in current circumstances that this is a real prospect. Except for the radicals [some of the Haredi and the settler-types] all Israelis desperately want peace. Yes, they see it as a part of a never-ending series of violent strategies to destabilize and ultimately destroy Israel - not a cycle of violence because they do not see these and similar acts as bona fide responses to provocation as suggested routinely in the world media. They are not responses, they are politically orchestrated acts of violence. It would not make any difference if Israel reformed the severity of the checkpoint procedures tomorrow.

They don't see it as a nightmare, horrible as it is, because they have seen worse before and Israel day-to-day is a vibrant incredibly free society. Take your pick of multiple, candid talk shows on any subject, vigorous business activity, construction everywhere, highways, night clubs, shopping malls, technology, art, music, literature, sports, …

Definitely there are many reasonable Palestinians. It is surprising there are not more - there are formidable cultural pressures pushing for uniformity. Polls show that most Palestinians and Israeli Arabs want peace to enable them to get on with their lives and build better futures. And there are forces making for internal tensions. For example, Israeli Arabs who live and work in east Jerusalem get four to five times the pay available on the West Bank, so they are secretly not in favor of unification with the West Bank, and they don't want West Bank Arabs coming into east Jerusalem for obvious reasons. Israeli Arabs are fully integrated into the economy, though sadly not into the broader society. And the Arab members of the Knesset are incredibly hostile to Israel – some moreso than others. None of them condemns the current violence. In this they part company with many of their constituents. It is something of a sad mystery as to why Israeli Arabs continue to elect representatives hostile to coexistence while themselves (many of them) hoping for it.

The on-going, endemic biggest problem is the current Palestinian leadership - status quo bias – directly descendant from Yasser Arafat. Any effective deviation is brutally squashed.

I would describe the current mood as a mixture of realism and hope for the unlikely.

Thursday, October 1, 2015

Once upon a time in the land of Machinea

Once upon a time in the land of Machinea there was a problem The economy was powered by machines produced by different factories and rented by producers. There were those machines that were distinguished by being a bit wider than their substitutes, the W’s. There were those that were distinguished by being a bit bigger than their substitutes, the B’s. And there was a third kind that was atypical, the A’s. Each kind of machine was produced by a number of factories. The largest number were the W’s, then the B’s then the A’s. The machines were difficult to construct and thus there was significant variation in their efficiency – by which is meant their productivity and reliability. Statistically speaking it known that an A was likely to be more efficient than a W or a B, and a W more efficient than a B. As a result, since all they knew about the machines was their type and average efficiency producers were reluctant to hire them at the same rate as the W’s. And since it was frowned upon (and in some place illegal) to pay a lower rent to a B than a W, the likelihood of a B being rented was significantly less than the of a W being rented. The problem that the policy makers wanted to solve was that the rate at which B’s were hired, rented, was too low for their liking. The B factories were struggling to survive.

The proffered solution was to strongly incentivize the machine renters to hire more B’s, that is, to hire more than they would have given their expectations of their efficiency. The reasoning underlying this solution is that the low productivity of the B’s is endogenous, it is a result their low rental earnings feeding back into the budgets of the B factories, which, then, in turn, struggle to produce efficient machines. By intervening in this way, a judicious public policy could break the vicious cycle producing self-sustaining B inferiority. So, they instituted a policy of mandatory affirmative B rental requirements. Each producer had to produce a report showing that his B-rentals were at or above the proportion of B-machines in the market.

Though it seemed like a good idea, albeit at the cost of some inefficiency imposed on the producers and their customers, there were unintended consequences. The managers in the B factories realizing that the likelihood of renting their machines was now higher, regardless of their efficiency, faced a reduced incentive to produced efficient machines, and the quality of the machines actually went down, even as they produced more machines. This raised the hiring mandate under the policy and further reduced the incentive for quality production. So, the policy was actually counter productive and accentuated the negative cycle of B inferiority. The B factories now became wholly dependent on the government to enforce the affirmative rental of their machines.

A minority of policy makers and advisors pondered alternative policies. Perhaps the initial problem lay in a structural defect in many, though not all, of the B factories. These defects were endemic and though not irremediable would require substantial changes in the incentives faced by the B-producers. They suggested policies that would allow B’s to compete by offering lower rental rates, and the scrapping of all policies that deterred the B-producers from making painful but necessary changes.

There were other more wide-ranging policy change suggestions like those that pertain to the inadequate training that B-producers received in their training schools, but these are beyond the scope of this brief. 

Tuesday, September 29, 2015

Happy birthday Ludwig von Mises - Economist Extraordinaire

Ludwig von Mises would be 134 today. The grandson of an East-European (Galicia) cum Austrian rabbi in a rabbinic dynastic family which became prominently involved in finance and was ennobled by Austro-Hungarian emperor. He studied economics at the University of Vienna with teachers from the original Austrian School of Economics founded by Carl Menger. He was always swimming against the stream of political short-sightedness in a turbulent age. He was advisor to the minister of finance in Austria in the inter-war period and helped Austria avoid the ravages of hyperinflation. He was economist to the Chamber of Commerce in Austria and, though always controversial, was quite influential.

With rise of the Nazis, he was personally targeted as they advanced into Austria with the signing of the Anschluss – he was a Jew and a prominent liberal (in the true European sense). He fled literally hours before they arrived for him. After a few years in Switzerland, during which time he wrote his famous Nationale Ekonomie, he was persuaded to leave for the United States (people feared that the Nazis would invade Switzerland). He lived the rest of his life in New York. He remained a visiting professor at NYU for that time. In both New York and Vienna he had weekly seminars. In Vienna these were attended by many of the most prominent scholars of the time. His junior colleague Friedrich Hayek had gone to London in the 1930’s and won the Nobel prize in 1974. Mises died at the age of 93 in 1973. During his years in America he wrote profusely – in English – including the English version of his Nationale Ekonomie, Human Action.

When the Nazis arrived at his apartment in Vienna they packed up his voluminous library, including some of his work and work-in-progress, and put it in storage. Years later my friend and colleague Richard Ebeling, who had married Anna who is Russian, discovered Mises’s library in Moscow – the Russians had shipped it back from Vienna. Richard has now compiled, translated and published three volumes of Mises’s hitherto unknown early papers, which provide a precious account of the economics of the interwar years.

It is hard to overstate the magnitude of Mises’s intellect and his achievements. He was one of the greatest economists ever, and maybe the greatest. For him economic knowledge was indispensable to the understanding of civilization and economic ignorance was more than regrettable, it was positively dangerous, a matter of the life and death of civilization.

"The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race." (Human Action)