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Typo nearly wipes out your retirement savings
Thu, 05/06/2010 - 12:17 — Joel
That 1,000-point drop on Wall Street today? Guess how it happened?
In one of the most dizzying half-hours in stock market history, the Dow plunged nearly 1,000 points before paring those losses in what possibly could have been a trader error. According to multiple sources, a trader entered a “b” for billion instead of an “m” for million in a trade possibly involving Procter & Gamble [PG 60.75 -1.41 (-2.27%) ], a component in the Dow.
That set off a chain-reaction panic on trading floors. As Daniel Foster at National Review noted:
P&G's 37 percent nosedive was only responsible for 172 points of the 992.60 the Dow lost in the slump. The rest was market reaction — and part of that was computerized and automated.
You know, capitalism and free trade generally make a lot of sense. But our current method of allocating capital -- Wall Street being the big mover in that process -- keeps finding new ways to make itself look dangerously insane. Terminator was about how computers and robots set off an apocalyptic attack on humanity; turns out they don't need nuclear weapons to do that, just mindless programming instructions to start selling if somebody else is selling -- even if that sale is the result of a "fat finger" typographical error. Holy crap.
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Comments
1000 point drop on a typo?
I am so using this in my classes. This is the best thing I've heard since those guys burned up a $100 billion* Mars Orbiter in the Martian atmosphere because they forgot to convert from US to metric on the entry maneuvers.
* oops I meant "million"
"There's a reason we don't quote Hitler when we discuss highway spending. It just puts too much noise into your signal." Joel, 2010
This sounded too crazy to be true
And, if this White House source is right, it was a myth all along.
http://whitehouse.blogs.foxnews.com/2010/05/07/senior-administration-off...
Hrmmm.
I don't know about you, but the "official" answer sounds even worse than the "myth."
AI Trading
Obviously what is needed here is more deregulation of the financial markets. Financial institutions need less government oversight of their computer algorithms, so that they can make sure they are able to wring every last profit out of the wild fluctuations they instigate.
Nah
I vote we put Khabalox or a panel of any number of experts he'd like to designate in charge of regulating the financial markets. I'm sure they'd behave more sensibly than millions of unorganized buyers and sellers because, of course, they'd have superior economic knowledge.
Panel of One
I can do it myself. :D
Who else is with me and Deregulator?
Protip: The buyers who matter don't number in the millions, and are not unorganized. But enjoy your view of the sand. :)
More sensibly than millions
surely you meant "billions of unorganized buyers"
Atrios Rule Expansion
I would like to propose an expansion to the Atrios Rule stating that not only is our discourse so stupid, but by extension everyone else's is, also.
Crywalt Corollary to Atrios Rule
This is a wonderful corollary, but may lead to this: where everyone's discourse is stupid, no one's is.
cf. The Incredibles: http://www.youtube.com/watch?v=A8I9pYCl9AQ
Nope
While I appreciate the gambit of quoting The Incredibles (which is itself good enough to use as a foundation for an entire branch of philosophy), I must disagree here. It is possible for everyone to be stupid, and everyone to remain stupid. Stupid is like the speed of light. It's not relative.
Great
that being the case, I move we adopt the Corollary.
"There's a reason we don't quote Hitler when we discuss highway spending. It just puts too much noise into your signal." Joel, 2010
The Business of WS & The Atrios Rule
First, let me plead not-guilty to fulfilling the Atrios Rule by reason of temporary mental defect or disease. I had been browsing /b/ that day, and some of the Anon rubbed off on me.
To more maturely address this topic, let me turn it over to Mark Cuban (yes, that Mark Cuban):
As markets become increasingly complicated and increasingly interconnected, the risks involve escalate dramatically. No longer are the primary agents investing in companies, they are betting on security prices. And when the vanilla securities don't offer enough of an edge, they create more complicated securities where they will have an edge. (Read the paragraph just following that which I quoted to see how Goldman Sachs and others are basically laughing all the way to the bank [my words, not his].)
Cuban says he's not passing judgement, just calling it like he sees it. However, he goes on to say that (emphasis Cuban's):
His solution is an interesting blend of the free-market and government intervention. This is a point of view that is often lacking, I think, when the "Left" and "Right" usually talk about how to address problems. My take on Deregulator's position (which may not be perfectly accurate) is that he feels doing away with any and all (or at least the vast majority) of government regulations and "interference" will provide the surest way toward an efficient and safe world/economy/market. On the flip side, he seems to think my position is to impose ironclad rules on Wall Street and have the government in control of nigh everything. I'll admit that I haven't made my thoughts on this very clear at all, but that characterization is certainly incorrect.
Cuban suggests restructuring the tax code to incentivize people to hold onto stocks longer. I'm sure many libertarians would think that any use of law or regulation to affect individual decision making is an anathema, and perhaps Cuban's ideas aren't the best solution, but I think the idea of making a rule such as this and then relying on the "free" market to make it's decisions is much more likely to generate results than simply making a rule such as, "You can not make CDOs." Like Cuban said, any time you make a law or regulation against something people want to do, some really smart person will simply find a way to work around it. This applies to Wall Street, the war on drugs, campaign finance, you name it.
I don't know if Deregulator and other libertarians agree that there is a problem with our financial markets. If not, then perhaps my "view of the sand" comment was justified. But if we do agree that there is a problem, then perhaps we can start talking about the possible ways we can fix it.
Atrios and All
I didn't mean to call Atrios on you, K, so much as on the whole planet. You've got experts who can't figure out what's going on, and you've got free markets involving millions of idiots steering everything into the toilet. It seems to me you can't really trust anyone. It's like getting on the highway and facing the choice of having a buggy Microsoft computer program drive you into an early grave or take your chances driving yourself even though neither you nor anyone else on the road can operate a vehicle reliably.
I do, however, like what you wrote. And what you quoted of Mark Cuban. He must know what he's talking about, he was on the Simpsons! No, sincerely, I think you've got the right philosophy here. Will that be where we go as a society? Probably not. Okay, Mr. Gates, I'm taking my hands off the wheel now....
Thanks for linking and for addressing this point
I think Cuban is onto something, but I can't say I would endorse his solutions.
First of all, any tax policy is at least indirectly a regulatory policy, so unless all investments are freed from taxation, then there always will be government interference in investment markets. (And even an untaxed investment environment would treat people who invest in equity/debt markets more favorably than those who directly purchase commodities or real estate or bury their money in jars.)
So it's impossible to fully divorce regulations from investing.
I also believe that capital gains should not be taxed at all because the money used to invest initially has been taxed at least once -- as income. Sometimes multiple times, depending on how the money was first acquired. Multiple taxation is both unfair and punitive.
That said, so long as capital gains taxes remain on the books, and the rates aren't punitive to begin with, I could see a benefit in offering some favorable treatment to gains from stocks that have been held for some period (five years seems too long -- the business climate moves too quickly; one year sounds better, but I'm not suggesting a "perfect" number).
Where Cuban loses me, though, is that his plan would by definition exclude mutual funds, whose compositions are constantly changing (and frankly, where most savvy small investors who aren't planning to actively trade typically are best served, long-term -- most of us would rather eyeball the performance ratings of fund managers, select a risk profile that makes us comfortable, and let the pros handle the trading).
I also have a philosophical problem with government policies that nudge individuals to alter their investment decisions based on a policymaker's/legislator's idea of what's best.
Still, any taxes or regulations influence behavior. And yes, our policies have penalized capital formation, and we need more investment to fuel job creation and long-term growth (and to provide tax revenues to help pay for our otherwise unsustainable entitlement/welfare state).
The least-bad way out of this would be a shift to a consumption-based tax system. You could use the existing tax code and simply exempt all investment and investment income. (Even better, eliminate most exemptions other than investment [think health care!] and flatten the brackets to one or two at lower rates -- maybe 10 percent and 15 percent.)
The government could raise a ton of money, you'd eliminate the vast majority of dead-weight loss that it costs to comply with the tax code, and you'd stimulate personal savings and investment in a major way.
Of course, we'll probably end up with the same tax code we have now with a VAT piled on top. And we'll not solve any of our long-term fiscal/economic problems.
I'm also open to discussion about why this plan is nuts.
Capital Gains
I'll invoke Atrios on myself here, right at the start, and note that I'm not even remotely an expert on these things. So my opinions are grossly uninformed.
That said, my feeling is that capital gains should be taxed as income. The initial investment may have already been taxed as income, but the interest or dividends or whatever coming in from that investment has not been taxed (except as profits for the company invested in). Long-term capital gains taxes, meanwhile, remain significantly lower than income taxes, even though capital gains are every bit as much income in a literal sense. The result is a de facto subsidy of the wealthy, who usually derive a large portion of their annual income from capital gains.
(If we're going to stop multiple taxation, by the way, that pretty much ends all taxation, since my already-taxed income buys goods, the profit from which goes to pay employees who are taxed, and round and round. A percentage skimmed every time money changes hands is pretty much the definition of taxes, so taxing capital gains isn't any more wrong than any other tax.)
I firmly believe that the more profit a person makes, the more their profits depend on the infrastructure of society. No business exists which doesn't use highways, the electrical grid, the sewer system, water, the Internet, the phone network, the protection of the armed forces, the police, the fire department, the legal system, and on and on. All of the human capital in a business thrives due to this infrastructure, too. Think, Mr. Deregulator, of those civic institutions you noted are missing in Iraq and other former and current dictatorships (which point was very, very incisive -- I'd never considered it before and you really taught me something new there. Sincerely). Those civic institutions -- bowling leagues, the Boy Scouts, public schools, social clubs and all -- which also are the hidden foundation of any successful business, all of them rely on the infrastructure of society.
Thus I firmly believe no one makes money in a vacuum -- the richer you are, the more you need underlying those riches. You can't farm in a desert.
Thus I firmly believe that the more money you make, the more you should be taxed. During the most prosperous period in America's history -- in the history of anywhere any time on Earth -- taxes on the wealthy were at some of the highest levels of all time. Was innovation stifled in the 1950s? Did wealthy Americans refuse to run companies, create jobs, innovate and build because tax rates were so high? No they did not. They built so much so well that we're still coasting on their accomplishments 50 years later.
It's only fair that the wealthy should be taxed, and taxed more than the middle class. They've gotten more out of society. They can put some back.
You're discussing the system we have now
While marginal tax rates were higher in the 1950s than they are now, our tax system is stubbornly progressive. You should be singing the praises of the distributional effects of our current tax code. From the Tax Foundation's review of IRS data:
To be sure, those with lower incomes are hit with payroll and sales taxes, but every call I see from the progressive side calling for higher taxes on the wealthy entails higher income tax rates or surcharges on top earners, or something similar when these folks are already paying disproportionately for the cost of government. You can't squeeze enough money out of those top earners to cover the costs of the retirement promises we've already made; paying for ObamaCare will only deepen the debt hole.
I am actually open to finding additional sources of revenue -- but only if paired with real reductions in entitlement spending over time. That would entail raising the retirement age, reducing cost-of-living allowances, and making other cuts that reduce our unfunded liabilities. Otherwise, we face a future a lot like Greece's.
Wrong About Unfunded Liabilities
I think you're dead wrong calling entitlement programs "unfunded liabilities". They're not. America isn't headed for a future like Greece's. We can't end up in that position because we control our own currency. Greece's problem is that they don't control their own currency.
Marshall Auerback explains: "At the most basic level, the combined income of all three sectors of an economy -- the domestic private sector (including households and businesses), the government sector, and the foreign sector -– must equal its expenditures. Sectors in the economy that are net issuing new financial liabilities are matched by sectors willingly owning new financial assets.... Having established this notional balance sheet, there is no reason why any one sector must spend an amount exactly equal to its income. One sector can run a surplus (spend less than its income) so long as another runs a deficit (spends more than its income). Historically, for example, the US private sector has spent less than its income. Another way of expressing this is that the government’s budget deficits have accommodated the private sector’s traditional proclivity to save."
He further notes: "With a few brief exceptions, the US federal government has been in debt every year since 1776.... In fact, talk of 'trillions of dollars of unfunded liabilities' due to retirements of the baby-boomers is meaningless unless it is compared to the cumulative size of GDP over the same length of time...."
He has a number of other articles which do a good job of introducing the complexities of macroeconomics.
Getting back to talk of taxes on the wealthy: I don't really care about what percentage of taxes collected are paid by the rich. I care about what percentage of their wealth is paid. And that percentage has been declining and is now at incredibly low levels. The off-the-shelf argument about raising taxes on the rich -- one used as recently as the past couple of months by New Jersey governor Chris Christie -- is that doing so chases the rich away, makes them move to some place with a lower tax rate, and weakens their incentive for creating wealth and jobs for others. There's a germ of truth to this, but whatever might be lost to those factors is far outweighed by the increased revenue gained.
And that revenue is needed. You say we shouldn't tax capital gains at all and you say the entitlement state is unsustainable; but your support for this view isn't practical, it's ideological. Clearly if we increased taxes we could sustain the entitlement state, but you think this is immoral. I say you're wrong.
Pot; meet kettle
I'm ideological; I admit it. You're unwilling to concede that Auerbach is too.
He argues that we need significantly more government spending to restore economic growth. 1) Where's the money going to come from except from a printing press? 2) How can a new series of WPA-like programs stimulate private capital formation? How can spending massive new sums of government money employing people generate new tax revenues to retire those unfunded liabilities. (Your Keynsian -- like my first econ professor -- believes the debt's not a problem because we owe it to ourselves.) Dude's stuck in the 1930s -- you know, before, Social Security, Medicare, Medicaid, public pensions, etc., created the entire unfunded liability mess.
Moreover, your goal for tax policy, whether you're willing to admit it or not, is to penalize success. To equalize incomes. My goal is to find the most efficient and equitable way to raise money to operate the government.
Yeah, it's ideological. And it's based on principles and some really scary numbers. Get used to it.
Austerity
This is Europe's future, and as this Financial Times column notes, the continent isn't ready for it.
Margaret Thatcher's famous quote -- "The problem with socialism is that eventually you run out of other people's money" -- is coming home to roost in Greece, Portugal, Spain, Ireland. They've run out of money everyone else's money. We've run out of our own and can't rely forever on the beneficence of China, OPEC, etc.
Keynes
If you think the essence of Keynesian economics is that debt doesn't count because we owe it to ourselves, you misunderstand it at a fundamental level. Paul Krugman has an excellent, simple, yet powerful explanation for Keynesian economics, and how government's control of currency can help smooth out economic boom and bust cycles, in his book The Return of Depression Economics. I had no understanding of macroeconomics -- despite two classes in it -- until I read his explanation.
The trouble is -- and this is a major problem I find when discussing this with libertarians and self-professed conservatives (including writers like P.J. O'Rourke, who I otherwise love) -- the trouble is you imagine a country's government's finances work the same as a household's, only bigger. This is entirely wrong. This is similar to saying you can build a passenger airplane by taking a paper airplane and making it really big. (There's a reason all those Leonardo designs don't fly.) You figure since you can't spend more than you make, unless you get a credit card, which you eventually have to pay back with interest, that the government operates on the same principle. But it doesn't.
It's important to keep in mind that government is a tool. Nothing more. It's a tool for getting things done. And one of the things we can do with that tool is manipulate the money supply to aid in keeping business moving smoothly. In the old days of feudal castles and wooden chests filled with gold, yes, government needed to pay out actual hunks of shiny metal to get things done, and when they ran out of metal, they had serious problems necessitating searching for more metal. But they also had to drag that metal around in wooden carts behind horses, and dig that metal out of the ground with handmade shovels and picks. Today we have cars and assembly lines and jet planes and great big tunnel boring machines, and likewise, the tool that is government is more capable and complex.
I'm not going to try to explain Keynesian economics to you here because I can't do it justice. Krugman's explanation cannot be beat. Go read the book. But the short version is that government finance is not the same as household finance, and government debt is not the same as household debt. And not because we owe it to ourselves, which is simply absurd.
Greece's problems are not a result of its being unable to afford its entitlement programs on a basic level. The problems stem from a refusal of other countries -- such as Germany -- to move some paper around -- because of ideological problems and a total misunderstanding of macroeconomics -- to allow Greece to make it through this recession and out the other side. Greece's underwriters are demanding "austerity measures" which are only going to worsen Greece's economy, which will require more "austerity measures", in a downward spiral which may just take all of Europe with it. And Greece is trapped because it bought into the European Union and therefore no longer controls its own currency. If the Euromasters had better understanding of what they were doing -- and weren't still running on nationalist fumes which were supposed to have evaporated now that there's an EU -- they'd be helping Greece and the rest rather than tossing them to the wolves. Greece's problems are closer to California's. Although one would hope the rest of America wouldn't tell California to go scratch. (Then again we might.)
As far as my tax policy: It's not penalizing success. It's recognizing the basic reality that any success rests on the work of others, which also rests on the work of others, going back farther than humans can imagine. When we pull crude oil out of the ground, where did it come from? It represents an enormous investment made millions of years ago (and no, it's not old dinosaurs, either). We bandy about terms like "natural resource" as if such simplicity can wrap up the vast machinery behind it. All natural resources exist as the result of energies and processes of huge scale and complexity. That work has already been done for us.
On top of that is all the work and effort done by humans in the past. All the scientific discoveries, all the resources tapped, all the machines made to make more machines from the first flint knapper on. Every success earned in the present stands on a foundation of human achievement stretching back beyond history.
Taxes don't penalize success, they make it possible by continuing to uphold the foundations.
Last I checked ...
... higher marginal tax rates didn't inspire scientific discoveries or create miraculous machines or pull crude oil out of the ground. Human ingenuity did that. Penalizing that ingenuity (and the ability of creators to enjoy the fruits of their inspiration, intelligence, and efforts) with punitive taxation and crippling debt seems to be a way to not generate more marvels, cures, and breakthroughs.
But that's just my ideology talking, I suppose.
Rand
You sound like Ayn Rand. As if human ingenuity is of any use at all without other humans helping. No one creates anything ex nihilo. Everyone builds on the work of others. Taxes are an admission that, yes, your wealth is built on roads, bridges, phone lines, power generators, bowling leagues, cornfields, and a million million other things developed, built, managed, run by other people, all of whom require a working society and without whom you wouldn't even exist.
There's an easy way to avoid paying taxes: Drop out of all human society. And see how long you survive.
punitive taxation and
Tell that to the Higgs-Boson particle. Or not, if they don't find it. Either way, that will be a watershed moment for physics, paid for in large part by punitive taxation and crippling debt.
Look, obviously if you tax people at 100% of their income, they will have no incentive to produce income. (This doesn't mean that they will not have incentive to produce wealth by the way.) But take a look at this chart showing tax rates by year. From 1951-1963 the top rate was 91%. During this period, GDP grew from $339B to $618B or 82.3%. So, obviously extremely high income tax rates on the wealthy (imposed by a Republican no less) did not dramatically retard innovation, investment, or economic growth in the US. To argue that a progressive income tax structure, especially one where the top rate is <50%, will lead to the economic collapse of our country is ridiculous.
I agree that we need to (eventually) address the deficit and debt issue. But where we disagree is that I favor a combined approach of cutting spending and raising taxes. You are not going to balance the budget simply by getting rid of or scaling back Social Security, Medicare or Defense. You know why? Because voters won't let you. (I can understand why for the first two, but I really don't get why people think we need an empire with 500,000+ troops stationed in allied countries around the globe, not to mention all sorts of expensive gadgets that are all but useless against the likes of AQ and Chinese hackers.)
Oh, and arguing against taxing capital gains "because that money was taxed already" is a fundamentally flawed argument, because it wasn't taxed already.
1950s
You pulled out the numbers for income tax rates in the 1950s, and thank you very much for that. I didn't feel up to getting the actual numbers but I was referring to this.
Capital gains taxes back then were apparently about what they were before W cut them down to 15%, although I'm having trouble finding exact numbers.
I did, however, find a rich guy who says his taxes are too low. "But these tax cuts have taken $45 billion in revenue from the government, and it’s coming from one of the few groups in society that really wouldn’t miss the money." And he's from New Jersey! I love it!
AQ and Chinese Hackers
I just read, by the way, a really interesting but brief article by David Brin about the changing approach of U.S. armed forces. It seems our country is changing the way it trains its warriors -- which sounds like a good idea, except those nations Brin calls our potential peer-level adversaries have noticed. So while I agree that traditional-style defenses may not do much against Al Qaeda or Chinese hackers, there are still some traditional-style threats we need to worry about.
RE AQ and Chinese Hackers
I got on this tangent from listening to Richard Clark who was on Maher recently. He sees the new threats to our national security as being much more "cyber" based and was recommending a shift in how our defense spending is funneled. I don't think he was recommending a complete turning away from conventional defense, but he noted that Obama's much touted Nuke Reduction treaty is great and all, but misses the more real threats.
They also noted on that show that most recruits are turned down by the military because they are too fat. To which one Air Force general was quoted as saying, "I don't care how fat he is, I just care if he can hack into their computer system."
Since you're recommending books
And pushing straw men (withdraw from society? Ha! You come up with that in junior high?) might I suggest this one, from my boss:
The Heroic Enterprise: Business and the Common Good.
If you paid attention to what I'd written, you'd acknowledge that I conceded new tax revenues are going to be essential. But look, all of the public goods you mention that are the backbone of society, and some more -- roads, bridges, schools, hospitals (cornfields aren't a good example, btw -- farm subsidies are an anachronism and most flow to rich people; and bowling leagues aren't tax-financed, last I checked, and if they are, well, defund 'em!) -- are being starved for funding because such a large proportion of government spending at all levels is used for transfer payments -- 58 percent in 2006, according to this Cato Institute study (PDF). It's either headed to welfare, retirement programs, public employee pay, or -- coming soon -- bailouts for overpromised public pensions. And as a percentage of public budgets, transfer payments are rising and will rise even more as Baby Boomers retire.
Another 15 percent goes in direct aid to states. Some of that is spent on infrastructure, to be sure, but much of it pays employees, too. And that's not including state and local budgets. Your typical school district spends about 80 percent of its budget on compensation. (That's anecdotal from my time as an editorial writer in Denver, where we met regularly with former Superintendent and current U.S. Sen. Michael Bennet.)
Some of those transfer payments are justified. Perhaps much of them. But if your argument for taxation is that it pays for the stuff that makes society work, well, perhaps it did in the glorious 1950s. Not so much any more.
Working
Keeping people working, especially during recessions, is one of the things that makes society work. Keeping people from starving, making sure they're healthy, making sure they're not housebound and eating cat food when they're old, these things all keep society working. Bowling leagues and Boy Scouts may not be directly funded by taxes but, again, keeping people healthy and keeping roads paved for them to get to these things are. It's all connected, and that's the point I'm trying to make.
Corn specifically might be a bad example. For some reason when I think of farms I always think of corn. Probably some subsidy to my corn-based neurons or something.
Listen. In my experience, every Ayn Rand-fueled I-made-my-own-boots-and-then-pulled-myself-up-by-my-bootstraps keep-off-my-hard-earned-money person I've ever met has been full of shit. Every one of them got where they were with massive amounts of aid -- from family members, from business partners, from friends, from the dreaded government -- which they happily pretended never existed. Every supposedly successful businessman or executive I've ever known and spoken to about it climbed up a ladder designed and built by someone else, then kicked the ladder over when they were done with it and pretended there never was a ladder to begin with.
Let them have their delusions of grandeur, let them pretend they're Howard Roark in front of their gilt-edged mirrors all night every night. I don't care. But they should pay their fucking taxes.
Page xii
By the way, I started reading the available pages of that book and already on page xii I'm prepared to argue with your boss and Henry Grady Weaver. Nice to know they're confusing correlation with causation right out of the gate!
Two pages further than I
I only made it to page x. Weaver, and by extension Hood, seem to think that since there are frozen and canned foods available in grocery stores in every city in America then there must not be a hunger problem. It's hard to find numbers on hunger rates in the mid-20th century, but it probably wasn't better than it is now:
Source: USDA
And this doesn't count people who are food secure because of food stamps, charitable donations, family/friends helping, food banks, etc.
Potato Famine
They lost me at the Potato Famine, which is a fine example of deaths due to politics as anything you can find. Sadly, it's cited as an example of the poor state of the world before American freedom and ingenuity made the world into a bottomless cornucopia.
Bucky Fuller
The thing is, reading this -- I'm on chapter one now -- I agree with some of it, which is that businessmen should be heroes. To a degree. I feel that this is coming from the same impulse as a lot of the writing of Buckminster Fuller, for example, who also wrote many paeans to technology and freedom. But the two of them end up in different places. Hood reports (and seems to agree) that Weaver sees the freedom of capitalism and America as the main drivers of 20th century progress, but Bucky would argue, I think, that it's not so much freedom and America as it is technology building on itself. Robert Anton Wilson, taking his cues from Fuller and others, writes about what he calls the time-binding faculty of the human nervous system: Symbol manipulation such as speech and later writing and mathematics, which allows the building of knowledge upon knowledge in an exponential growth process until you reach today, where we have more scientists alive and working right now than in the whole of previous human history combined. It's possible to argue that the freedom of Western civilization (which is hardly unique to America) is as much an effect of this Intelligence Squared (as Timothy Leary liked to call it) as it is a cause. Or possibly that capitalism and the United States Constitution are parallel processes along the lines of human intellectual, scientific, and cultural development. (Not that they're necessary states but that they have evolved together.)
Near the end of the introduction Hood invokes Eli Whitney, John Deere, Thomas Edison, Henry Ford, Benjamin Franklin, Thomas Jefferson and Thomas Paine as being inventors and entrepreneurs whose "contributions to American society were greater...than those of many political or military leaders who were better known to the public." I'd agree and I'm absolutely certain Bucky and Wilson would, too. But they wouldn't conflate the contributions of those worthies with capitalism or America. Hood quotes Weaver as suggesting that Deere might not have bothered inventing the plow if he couldn't make a buck off it, which sentiment would probably horrify almost anyone outside of Milton Friedman, Robert Heinlein and Ayn Rand. I'd say the assertion is absurd on its face, because it implies that all the people inventing everywhere and everywhen aside from North America from 1776 on did so accidentally, or for some dopey reason, or less industriously and seriously, than did the noble square-jawed single-minded pioneering profit-seekers of these United States. Certainly selfishness enters into a lot of activities -- and it's not always bad -- but it's hardly the sole driver of human action that crazed Objectivist libertarian free-marketeers make it out to be.
Working?
Paying people to dig holes and then fill them isn't exactly a pathway to economic abundance. Which is what some of the WPA programs were basically about.
You and I have completely different views of the proper role of government. Let's leave it at that.
Leaving It
It's fine to disagree on the proper role of government, but you insist that your view is "based on principles and some really scary numbers". Which it isn't -- it's based on ideology and a poor grasp of economics.
I'm gone. Really.
Hey, I think Keynesianism is based on ideology and a poor grasp of economics. A lot of Nobel-winning and Nobel-caliber Austrians, monetarists, and others would agree.
The Difference
The big difference is Keynesian monetary policy didn't run the planet since 1980 and suddenly and precipitously drive it into the ground several times, most notably in 2008, such that the cradle of Western civilization suddenly can't buy toilet paper. The Chicago and Austrian schools had their turn and they fucked it up, dude.
Baseless
The Chicago and Austrian schools had their turn
When was that, exactly? You state otherwise, but in fact U.S. Monetary Policy (along with that of all of the major industrialized nations) has been fundamentally Keynesian for decades. Or did I miss when George W. Bush and Tony Blair put us all back on the gold standard and dissolved the Fed and WTO?
The Democrats and the Republicans are both dominated by hardcore Keynesians. Oh, the GOP will occasionally pay lip service to Milton Friedman and will pretend they favor free markets, but their hearts are bound to Keynes and his mixed economy. There hasn't been a day in my lifetime or yours that our economy wasn't propped up by massive debt, corporate welfare, fiat currency, a heavily centrally managed money supply, etc.
You can blame the nation's (and the world's, as you do above) economic woes on a lot of things, but suggesting that the Chicago, or particularly the Austrian, schools ever had enough influence to claim they "had their turn" is patently preposterous.
Friedman in Chicago, von Hayek in Austria
Milton Friedman was a professor at Chicago and a monetarist and Alan Greenspan, of course, was a big fan. On Friedman: "[He] was among the generation of economists to accept Keynesian economics and then criticize it on his own terms." The Chicago School is founded on Keynesian economics, so when you say U.S. monetary policy has been fundamentally Keynesian you're right, but you're also wrong, because Friedman and the rest took it in a different direction.
Friedrich von Hayek connects the Chicago School to the Austrian School and was one of Friedman's foundational thinkers.
Friedman's ideas have been ascendant for somewhat longer than I've been alive. By the time I was ten, in 1981, when Reagan came into office, he put Friedman on his Economic Policy Advisory Board. Reagan's basic economic policies have been carried forward pretty much since then. I'd say that means the Chicago School, at the very least, has had its turn.