Detailed Commentary on Keynes' General Theory by Henry Hazlitt

Back in December 2008, I began a detailed critique of John Maynard Keynes' The General Theory of Employment, Interest and Money (1936). One of the reasons I gave for undertaking this task was because "to the best of my knowledge, there is no such commentary available online."

It turns out I was wrong.

Henry Hazlitt beat me to it with The Failure of the New Economics (1959) by some 50 years! Murray Rothbard contributed an excellent foreword to the book.

Mission accomplished (albeit not by me).

10 Demolition Balls of Economic Destruction

These are some of the 10 most dangerous intellectual demolition balls that have been used to wreak economic destruction:

1. An Essay on the Principle of Population (1826, 6th edition) by Thomas Robert Malthus
2. Das Kapital: Vol. I (1867), Vol. II (1885), Vol. III (1894) by Karl Marx
3. The General Theory Of Employment, Interest And Money (1936) by John Maynard Keynes
   
4. The Affluent Society (1958) by John Kenneth Galbraith
5. Silent Spring (1962) by Rachel Carson
   
6. Economic theory and Underdeveloped Regions (1965) by Gunnar Myrdal
7. Neocolonialism: The Last Stage of Imperialism (1965) by Kwame Nkrumah
8. The Little Red Book (1966) by Mao Zedong
   
9. Animal Liberation (1975) by Peter Singer
   
10. Profit over People: Neolibralism and Global Order (1999) by Noam Chomsky

Dishonourable mention:

• The Communist Manifesto (1848) by Karl Marx and Friedrich Engels

See also: 10 Pillars of Economic Freedom

The Half-life of Ideas

Good--and bad-ideas are extremely long lived. They have a very long half-life. They frequently outlive their creators.

Reading

Currently reading:

• The Mammoth Book of Best New Science Fiction: 21st Annual Collection (2008) edited by Gardner Dozois
  
• The Letter of Marque (1988) (#12 in the Aubrey/Maturin series) by Patrick O'Brian
  
• The Invisible Boy (2002) by Sally Gardner (Bedtime for the boys)
  

Recently finished:

• Curious Minds: How a Child Becomes a Scientist (2004) edited by John Brockman

• Dead Aid: Why Aid is Not Working and How There is Another Way for Africa (2009) by Dambisa Moyo
• Winnie-the-Pooh (1926) by A. A. Milne (Bedtime for the boys)
  

10 Pillars of Economic Freedom

The global financial tsunami continues to pummel the superstructure of economic freedom. But as long as its infrastructure remains firm, economic freedom should be able to weather the storm.

Here are my personal picks for 10 pillars of economic freedom in the realm of ideas:

1. The Wealth of Nations (1776) by Adam Smith
   
   • Full title: An Inquiry into the Nature and Causes of the Wealth of Nations
     
2. The End of Economic Man (1939) by Peter F. Drucker
   
   • Drucker's first book, begun in 1933 a few weeks after Hitler came to power and published in 1939.
     
   • Winston Churchill's review of The End of Economic Man published in The Times Literary Supplement on 27 May 1939
     
3. The Road to Serfdom (1944) by F. A. Hayek
   
   • Condensed Reader’s Digest version
   • The Road to Serfdom in Cartoons
     
4. Economics in One Lesson (1946) by Henry Hazlitt
   
5. Human Action (1949) by Ludwig von Mises
6. Capitalism and Freedom (1962) by Milton Friedman
   
7. Capitalism: The Unknown Ideal (1966) by Ayn Rand and others
   
8. Equality, the Third World, and Economic Delusion (1981) by Peter Bauer
   
9. Basic Economics (2007, 3rd ed.) by Thomas Sowell
10. The Economist (1843-Present)
    

Honourable mention:

• I, Pencil (1958) by Leonard Read
  

See also: 10 Demolition Balls of Economic Destruction

A monstrous success

Parents of young children must regularly make the pilgrimage to the cinema to see the latest and greatest animated movie that's on release.

Mostly, it's dreary fare for the adults. The only compensation being the delight and amusement it seems to give to the children. Occasionally, the movie rises above the dreary. And on even rarer occasions, it soars towards the sublime.

This past weekend, seeing the inauspiciously titled Monsters vs. Aliens by DreamWorks Animation was one of those very rare occasions.

The movie works superbly well for both adults and children. It has a sharp witty script and some wonderful characters. I loved Hugh Laurie's nerdy Dr. Cockroach PhD, Rainn Wilson as the villainous alien Gallaxhar, and Kiefer Sutherland as General W.R. Monger (a play on "warmonger"). Sutherland's voice, incidentally, was unrecogniseable--astonishing given how much of it we've heard in 24, but I guess that's what makes the man a great actor. The movie is full of action and great one-liners, like when the President of the United States (brilliantly played by Stephen Colbert) tells the situation room: "Boys, set the terror level at code brown, 'cause I need to change my pants."

Oh, and it was made in Digital 3D, which makes it an even more fascinating experience. The technology behind 3D movies is pretty fascinating too.

See it.

John Hope Franklin (1915-2009)

Using one's skills to influence public policy seemed to be a satisfactory middle ground between an ivory tower posture of isolation and disengagement and a posture of passionate advocacy that too often deserted the canons of scholarship.

- John Hope Franklin

The historian John Hope Franklin (2 January 1915-25 March 2009) was a towering figure both physically and intellectually.

He was named after the great early 20th century African American educator and political activist John Hope.

John Hope Franklin, the grandson of a slave, went on to achieve numerous distinctions, any one of which would have represented a significant accomplishment for a single lifetime: he revolutionised the study of American history; he became a best-selling author of serious and scholarly books (his 1947 classic From Slavery to Freedom has sold over four million copies and counting, and is in its 8th edition); he made major contributions to the civil rights movement in the United States, such as conducting scholarly research for Thurgood Marshall and the rest of the legal team that successfully argued the landmark case Brown v. Board of Education (1954); he had a long and distinguished academic career in which he earned the respect, admiration and affection of his peers and students; he participated in many major studies and panels, including chairing President Bill Clinton's 1997 One America: The President's Initiative on Race; he won many accolades, including over 130 (!) honorary degrees and multiple awards and prizes; and, most importantly perhaps, he personally embodied the hope of his name for better tomorrows not only for Americans of every complexion, but for everyone around the world. The latter is a remarkable achievement given that historians are by definition concerned with the past.

His life is a testament to the power of moral and intellectual courage. It also exemplifies the power of ideas and intellectual endeavour and discourse as a means for changing the world for the better. Despite the incidence of some pain and one or two controversies, the overwhelming themes of John Hope Franklin's life are about triumph over adversity, the power of hard work and persistence, and, yes, hope. Perhaps nothing symbolises this more powerfully than the state of the United States when John Hope Franklin was born and when he died 94 years later. In 1915, he was born into an America with numerous Jim Crow laws and frequent lynchings of African American men. In 2009, he died having witnessed a man of African descent ascend to the Presidency of the United States earlier that year.

Hope indeed.

See also:

• A poignant personal tribute by one of his colleagues, Stan Katz of Princeton.
  
• The beautifully written obituary in this week's Economist, although I take issue with the characterisation of John Hope Franklin as merely a "historian of America's blacks". He was a historian of America, but I shan't quibble.
• Duke University's online memorial site.

Ayer v. Tyson

Yes, that Ayer and that Tyson.

I suppose the outcome of this encounter has to be adjudged a technical knockout for Ayer:

It was at another party, given a later later in the year by the highly fashionable clothes designer, Fernando Sanchez, that he had a widely reported encounter. Ayer had always had an ability to pick up unlikely people and at yet another party had befriended Sanchez. Ayer was now standing near the entrance to the great white living-room of Sanchez’s West 57th Street apartment, chatting to a group of young models and designers, when a woman rushed in saying that a friend was being assaulted in a bedroom. Ayer went to investigate and found Mike Tyson forcing himself on a young south London model called Naomi Campbell, then just beginning her career. Ayer warned Tyson to desist. Tyson: “Do you know who the fuck I am? I’m the heavyweight champion of the world”. Ayer stood his ground. “And I am the former Wykeham Professor of Logic. We are both pre-eminent in our field; I suggest that we talk about this like rational men.” Ayer and Tyson began to talk. Naomi Campbell slipped out.

Excerpt from p. 344 of A.J. Ayer: A Life, By Ben Rogers, Grove Press, 2002.

Unintended Consequences

Decisions involves two things: making choices and dealing with the resulting consequences. Choiceless decisions and consequenceless decisions are no decisions at all. The intentions of the decisions are secondary; the actual consequences are primary.

The circumstances of, and reaction to, the recent resignation letter by a senior executive from AIG, which was published as an op-ed piece in the New York Times, illustrate the dangers of the woolly thinking involved in linking choices only to intentions and not to consequences.

The letter generated a huge response from readers, most of it negative, some of it even to the point of being scurrilous.

The policy of vilifying and demonising everyone that works in the financial services sector is bound to have the severe and unintended consequence of driving away many talented people from the sector. Which will ultimately be harmful to everyone's interests.

Globalisation and its Malcontents

The protests around the ongoing G20 summit have turned violent.

The protesters appear to be from many disparate groups with many disparate (desperate?) aims. Some just seem intent on causing mayhem, destruction, and worse.

What are we to make of it all?

It's unfortunate, but characteristic, that such protests always produce a lot of heat but very little light.

Even more unfortunate is the fact that some of these protest groups, these anti-something groups, never let the facts get in the way of their good stories. No matter how off-base those stories might be.

Take the anti-capitalist strain.

Despite the fact that free market principles have been responsible for the creation of more wealth, and the concomitant alleviation of more poverty, than any other economic system, the anti-capitalists continue to insist that it must be "abolished" or "reformed". The fact that all the substitutes and modifications on offer have been tried before and failed every time appears to be of little concern to the anti-capitalists. The fact that China, communist China itself, has shifted towards free market principles and prospered as a result is little more than an inconvenient fact that is conveniently ignored.

And it's almost always a bad sign when a group is defined more by what it's against than by what it's for.

What are all these anti-something groups actually for?

The true answer is profoundly disturbing.

Look who's back

Tiger Woods won his first tournament after coming back from reconstructive knee surgery and an eight-month absence from the professional golf circuit.

The Curious Case of the Snooping Dragon

Dr. Shishir Nagaraja and Professor Ross Anderson of the Security Group at Cambridge University's Computer Laboratory document a new type of electronic surveillance attack that they call social malware. The attack involves a combination of social phishing and malware (Trojans, to be precise) The target was the the Office of His Holiness the Dalai Lama (OHHDL) in Dharamsala, Northern India. Researchers from Canada followed up by hacking into one of the attackers' servers, something the Cambridge team could not do due to the UK's Computer Misuse Act of 1990. In this report, hot off the virtual press (29 March 2009), the Canadian researchers identify and expose the large-scale cyber espionage network behind the attack. They assign it the name GhostNet.

Notes:

1. This case illustrates, once again, that information and network security is a game of cat and mouse. Or dragon and mouse in this instance.
   
2. Professor Ross Anderson is the author of the technically excellent, yet highly readable text Security Engineering - A Guide to Building Dependable Distributed Systems (2nd edition, 2008).
3. Coincidentally, the Dalai Lama has been in the news in this part of the world, where he was recently denied a visa to visit South Africa. This was as a result of "representations" made to the South African government by the Chinese government-allegedly. So perhaps not so coincidental after all.
   

The problem of knowledge

The leaders of the G20 (actually the G19 plus the EU) are due to meet in London this week. The agenda of the summit centres on the global financial crisis.

A global economy is an enormously complex real-time, self-adaptive communications and control system which works with a variety of signals: data, information, knowledge, wisdom. Or at least, it's supposed to be.

What happens when you try to substitute one type of signal for another in such a system? For example, if you substitute data with knowledge, or the reverse?

Consider, first of all, that the quartet of signal types (data, information, knowledge and wisdom) form a hierarchy: from simplest to most complex; from the most common to the most rare; from the immediate to the ultimate; from the most accessible to the least accessible; from the possessive to the characteristic; from present-focused to future-focused; from the impersonal to the personal; from the material to the spiritual; from input to output; from having to being; from news to views; from the dispersed to the concentrated.

Signal substitution will hinder the operation of the system.

Can the G20 leaders solve the economic crisis?

Based on the stated aims of the summit, the answer must be no because the aims appear to be a classic case of signal substitution.

The reason is what we might call the problem of knowledge. Will the G20 leaders have sufficient and timely knowledge about the financial crisis to solve it? No, on both counts. The knowledge they, or any one person or group of persons, possesses about all the relevant issues is limited. And even the knowledge they have may out of date. The well-known lag effects in economics will only be exacerbated with increased government intervention.

The biggest danger is that the G20 summit will introduce rules and regulations that will harm and hinder the operation of the global economy.

Note: See also Friedrich von Hayek's essay on The Use of Knowledge in Society (1945).

JFK on TJ

On 29 April 1962, President John F. Kennedy hosted a White House dinner honouring Nobel Prize winners. In his remarks, he mentioned that great polymathic genius, Thomas Jefferson:

I think this is the most extraordinary collection of talent, of human knowledge, that has ever been gathered together at the White House, with the possible exception of when Thomas Jefferson dined alone.

"The People"

It's interesting to observe how contemporary political leaders use the phrase "The People".

It is used to justify all sorts of things: "The People" demand this; "The People" want that; "The People" must have this; this must be done in the interests of "The People". And so it goes on. And on. And on. And on.

Who and where are these "People" exactly?

Curiously this is never mentioned.

Perhaps this is because "The People" almost always refers to only some, even just a few, of the people, including the political leader himself.

Surely this phrase should only be used when it genuinely refers to the real common interests of all the people. The phrase has become somewhat debased since it was first used in its proper sense in perhaps the greatest preamble of all great preambles:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

The Bright Interior

Thinking about yesterday's Earth Hour, I remembered this (click here for the full-size version):

It's an animated movie created by some researchers at Google showing how the geographical distribution of requests to google.com changed throughout the day on 14 August 2003. (To what end? Details here if you're interested.)

The activity on the map is highly correlated with economic prosperity, education, enlightenment and energy. The interior of the African continent is one of the darkest regions.

An equivalent map for Earth Hour, with light intensity corresponding to switched off (or non-existent!) lights, would show the interior of the African continent as one of the brightest regions.

Absurd or what?

Zamunda: A cautionary tale

Zamunda is the imaginary African kingdom in the Eddie Murphy classic Coming to America. In February 2003, I wrote a short story about leadership in African countries. Claimer: The events and characters in the story ARE based on actual events and characters from Zambian history. To give some context: About a year earlier, in January 2002, Levy Mwanawasa became President of Zambia after 10 years of increasingly corrupt rule by his predecessor. He had been handpicked by the incumbent. The questions that were in the minds of all Zambians at the time were whether President Mwanawasa would be his own man and just what kind of President he was going to be. As things turned out, he proved to be a pretty good one, a saint of a President indeed by African standards. The title I gave the story back in 2003 was Ali Baba and The Forty Thieves, a title somewhat lacking in subtelty and tact it seems now six years on! The story is allegorical. See if you can spot the good old British Empire; Zambia's first President, the freedom fighter Kenneth Kaunda; Zambia's second President, the wily Fredrick Chiluba; and Zambia's third President, the late, great Mwanawasa. The story seems to suggest that it's all cyclical and that progress is only illusory. Such was my pessimistic, and yes perhaps even cynical, view at the time. I hope I was wrong.

Anyhow, here it is, the complete and unexpurgated original text:

Once upon a time, in the land of Zamunda, there were multitudes of chiefdoms: lots and lots of chiefdoms, some small, some big, some isolated, some integrated, trading, warring, intermingling, living chiefdoms. And so they had gone on, century after century. And so it seemed they would continue into perpetuity.

But one day a group of itinerant bandits, forty in number, happened upon the sleepy land of Zamunda. They were led by Zaafira, a fierce and crafty woman, who had earned the nickname 'Bandit Queen'. Zaafira and her men raided the Zamundans continually and robbed them of untold quantities of golden grudas. They stowed their spoils in an immense secret cavern on the periphery of Zamunda.

On one particular occasion as Khalil, a poor Zamundan (indeed all Zamunda had become impoverished), was foraging for food in remote parts, he saw the bandits approaching on horses laden with sacks of grudas. Having concealed himself, Khalil saw Zaafira stop at a certain spot and say: "Open, Maize-ame!" Immediately the door of the secret cavern flew open and the Bandit Queen and her men hid their treasure inside. Once the bandits emerged from the cavern, Zaafira sealed the entrance of the cavern with the magical words: "Shut, Maize-ame!" And the bandits rode off.

When it was safe, Khalil approached the secret cavern and tried the magic words. Once again the cavern door opened and Khalil was able to carry off many grudas. In keeping with the meaning of his name ('friend'), Khalil shared the wealth he retrieved from the secret cavern with all the people of Zamunda. Khalil shared the secret of the wealth with key Zamundan leaders. Eventually, the Zamundans regained their wealth and their pride and they were able to chase away the bandits.

As the years went by Zamundans forgot their past woes, as it seemed their former idyllic existence had been restored. In the course of time, however, they were to face the usual adversities that visit any society. And by this time, Khalil and almost all Zamundan leaders, had forgotten the magical words to open the secret cavern. They tried "Open, Rice-ame!" and "Open, Wheat-ame!" and all manner of grains, except maize. Meanwhile, the Zamundans grew increasingly restless and, once again, came to know poverty. Almost all Zamundan leaders had forgotten the magic words, save for one, that is: Ali Baba. It was he that came to the rescue of all Zamunda. Or so it seemed at the time.

Ali Baba kept the magic words to open the secret cavern all to himself. Once he had ensconced himself at the helm of Zamunda, he formed a group of what he called the forty operatives to extort what few grudas the Zamundans still had. For the first time in its history, Zamunda became a single chiefdom.

One day Ali Baba yawned and realised he had grown quite bored of ruling Zamunda and decided he wanted to become a professional philosopher. He would have liked to install one of his sons as chief in his place, but, alas, they had inherited all of his brains (which is to say very little) and none of his cunning. And so, Ali Baba appointed the aptly named Mustafa ('chosen') instead, shared with him the magic words, and embarked on his philosophical career.

Mustafa, unfortunately for Ali Baba, turned out to have ideas of his own. He wished, in order to consolidate his own position, to be sole possessor of the knowledge of the magic words, and had Ali Baba discredited and thrown into a lunatic asylum for the rest of his days. Mustafa continued his reign until, in his turn, he played Ali Baba to his own Mustafa.

And that, according to legend, accounts for the cyclical history of Zamunda and the poverty we now find ourselves in. My son, it's late. Go to sleep. Get some rest. Mustafa's workhouse awaits us in the morning...

Is Science simply a matter of opinion?

Humanity is confronted with a number of issues whose solutions rest on the answers to scientific questions.

Take just two topical examples: one from the science of climatology and the other from the science of economics.

First, climatology. The issue here is what has come to be known as climate change. Al Gore and the Intergovernmental Panel on Climate Change (IPCC), a UN panel of scientists and other experts, shared the 2007 Nobel Peace Prize "for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change." In fact, there is currently a global campaign (Earth Hour) to switch off all the lights for one hour this coming Saturday 28 March 2009 at 20:30 local time all over the planet. The purpose is to highlight climate change. There's only one problem: There are other scientists and experts who question the scientific validity of climate change. Who is right? Is it all simply a matter of "everyone is entitled to their own opinion"?

Second example: economics. Noting (and ignoring for now) the view that economics is not a science at all, how is that some economists say "fiscal stimulation" is the only way to solve the global economic crisis whilst other economists say that it will lead to economic disaster. Who is right and who is wrong?

The basic premise of all scientific inquiry is that a natural or artificial phenomenon or system, be it the global climate or the global economy, exhibits order and is capable of being objectively and rationally explained and understood. Understanding forms the basis of prediction, design and control. Science, in its proper sense, cannot simply be a subjective matter. If it is, it ceases to be science.

The first and most important thing to realise on these important scientific issues is that two equal and opposite answers to the same question cannot both be right. Fully accepting this fact naturally leads to the next steps: ascertaining the criteria for assessing truth or falsehood; applying the criteria; embracing the truth and rejecting falsehood.

Truth be told

What is the most incisive and truthful international news programme on TV today?

You have three goes.

OK, first one:

Answer: _________

Nope.

Have another go:

Answer: _________

Sorry, wrong again.

OK, last try:

Answer: _________

Let me put you out of your misery.

It's The Daily Show.

You mean The Daily Show with Jon Stewart, that Daily Show?

Yip, the very same. Besides the US Edition which airs Monday to Thursday on Comedy Central, there is an international Global Edition which airs at weekends on CNN.

But isn't that a comedy show?

Yes, well, actually it's a particular kind of comedy show, it's satirical.

But still, how can that be a news programme, let alone an incisive and truthful one?

Satire has always been more about telling the truth than about making jokes. It has a very long history dating at least as far back as the Ancient Greeks (with Aristophanes being the foremost exponent). Many others have followed in the satirical tradition: Swift, Twain, Mencken, Orwell, Soyinka,...and Stewart.

Any other good examples of such shows?

The BBC's Have I Got News For You is extremely good. It's less scripted and more improvisational though. And it has a two-team quiz format.

Quantitative Euphemising

The English word euphemism is derived from the Greek word euphemismos. The Greek word has three parts: the prefix eu-, which means "well" or "good"; the root pheme, which means "speaking" (or literally "a voice from heaven, a prophetic voice"); and the suffix -ismos, which is used to turn a root verb into a noun and means "the practice, characteristic behaviour or quality, state, or theory of" (and hence vegetarianism, optimism, senilism, and Capitalism respectively). Therefore the word literally means "the practice (or belief) of speaking well or good of". To the Ancient Greeks it meant "speaking words of good omen" or "using auspicious words instead of inauspicious ones".

In contemporary English, a euphemism has come to mean an indirect, opaque or convoluted word or phrase that is deliberately used in place of a more direct, clear and simple one. The motives for using euphemisms vary from the benign (the desire to avoid being unnecessarily offensive or harsh) to the malign (the desire to conceal, mislead or deceive). Describing the death of someone's loved one as "passing away" or "passing on" is on the benign side. Describing the relationship between donor nations and recipient nations as an "equal partnership" on the other end of the spectrum.

The global financial crisis has thrown up a first class example of a world class euphemism.

When President Robert Mugabe and the Governor of the Reserve Bank of Zimbabwe print money it is called, well, printing money. When Prime Minister Gordon Brown and the Governor of the Bank of England print money, or President Barack Obama and the Chairman of the Federal Reserve print money, it is called quantitative easing.

In the beginning was the web...

This month is the 20th anniversary of the invention of the World Wide Web by Tim Berners-Lee at CERN. The good folks are CERN have created a (what else?) website to commemorate the event, with some fascinating content including a copy of Berners-Lee's original proposal. Mike Sendall, Berners-Lee's supervisor at the time, wrote on the cover "Vague but exciting" and added at the end "And now?".

"And now?" indeed.

The story of the web is a story of a web, a web of unlikely connections. It's interesting that the web was invented by a British physicist working as a software engineer at a particle physics lab that straddles the border of France (an EU country) and Switzerland (a non-EU country). Of course, it helps to have great tools (thanks Steve Jobs) and great collaborators.

How the Web Was Born: The Story of the World Wide Web (2000, OUP) by James Gillies and Robert Cailliau is probably still the best book ever written on the early history of the web.

Lessons from the end of the earth

The island at the end of the earth.

That is what "Madagascar" means apparently. This stunning photograph shot in 1967 for National Geographic probably shows us why.

Madagascar, a large tropical island off the south-east coast of Africa with over 20 million inhabitants, has been in the news this year for all the wrong reasons. All the wrong, and sadly all too familiar, reasons that keep recurring in both space and time across the continent of Africa.

It has been argued by some that Africa's biggest problem is one of image and that the 24-hour news channels do not reflect the reality on the ground. There's something to be said for that I suppose: I remember asking John, a friend from Belfast, what it was like living in The Troubles (this was before Tony Blair came along with the Good Friday Agreement). "Surprisingly normal," he said, and went on to explain how, most of the time, they just went about their day to day lives without incident.

And yet, and yet. Just how "normal" could life have been in Northern Island with its segregated communities, thousands of British troops on the streets, and hundreds of active paramilitary freedom fighters or terrorists (depending on which side you supported)? The truth is the people of Northern Island had probably grown accustomed to living with the abnormal. So much so that the abnormal had become normal.

And so it probably is in much of Africa today. We have become so accustomed to living with the abnormal that it has become normal. Or rather, the abnormal has remained abnormal and we have become ab-normalised.

Recent events in Madagascar have been tragic and farcical in almost equal measure: a 59-year old duly elected president ousted from power by a 34-year old former DJ who cannot constitutionally become head of state anyway because he's below the stipulated minimum age (40); a supine military aiding and abetting the theft of state power; a pliable judiciary endorsing it; and the restless, mindless, pitiless mood for "change" by the fickle mob. Yes they could, and yes they did: the hapless and helpless incumbent president stepping down after more than 100 civilian deaths and before the many more that were sure to follow if he had dared to resist the inevitable.

Why do such things keep happening in Africa?

Perhaps we're asking the wrong question about the wrong place. Why doesn't this sort of thing happen outside Africa, in Europe say? This casts rather a different light on the matter altogether. For we know that such things were once just as frequent and just as widespread in Europe.

Once.

But not any more.

Why?

Price versus Value

More wisdom from Warren Buffet's latest annual letter to Berkshire Hathaway shareholders:

[T]he market value of the bonds and stocks that we continue to hold suffered a significant decline along with the general market. This does not bother Charlie [Munger] and me. Indeed, we enjoy such price declines if we have funds available to increase our positions. Long ago, Ben Graham taught me that “Price is what you pay; value is what you get.” Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.
[Emphasis added]

Perhaps the U.S. and British governments should take heed as they buy up so-called toxic assets. The cure may literally end up being worse than the disease.

The 10 most dangerous words in the English language

"Hi, I'm from the Government, and I'm here to help."

-According to Ronald Reagan

Five democratic tests

They don't come any redder (in the political sense) than Tony Benn. So we have plenty of ideological differences. But in one of his last speeches in the House of Commons, he said something very wise indeed:

The House will forgive me for quoting myself, but in the course of my life I have developed five little democratic questions. If one meets a powerful person--Adolf Hitler, Joe Stalin or Bill Gates--ask them five questions: "What power have you got? Where did you get it from? In whose interests do you exercise it? To whom are you accountable? And how can we get rid of you?" If you cannot get rid of the people who govern you, you do not live in a democratic system.

That's worth repeating. These are the five tests of democratic leadership:

• What power have you got?
  
• Where did you get it from?
  
• In whose interests do you exercise it?
• To whom are you accountable?
  
• How can we get rid of you?

The Devil Wears Pravda

Read that title again.

Did you read it as "The Devil Wears Prada" (P-r-a-d-a)? Or as "The Devil Wears Pravda" (P-r-a-v-d-a)? If you read it as the first title, you were wrong: you were probably, and quite understandably, thinking of the book or the movie by the same title.

The Prada in "The Devil Wears Prada" refers, of course, to Prada, the Italian designer label. How exactly Prada relates to the Diabolical One is the subject of aforesaid book and movie.

But what about the Pravda in the second title, "The Devil Wears Pravda"?

Pravda, meaning "Truth" in Russian, was the name of a leading newspaper that was run by the Central Committee of the Communist Party in the Soviet Union. This name is exceedingly ironic given what we know about the Soviet era and its widespread misuse of propaganda.

But back to the immediate question at hand: In what sense is it that "The Devil Wears Pravda"?

In his writings, St. Paul speaks of Satan transforming himself into an angel of light and his servants transforming themselves into servants of righteousness (2 Cor. 11: 12-15).

In other words: The Devil Wears Pravda.

The devil (evil) rarely comes dressed in a red suit, with horns and brandishing a three-pronged staff.

On the contrary, evil often comes packaged as "truth" or "freedom" or "justice". The devil is, quite literally, in the details: in the outworking and full ramifications of what is being presented.

Many lies, much bondage and major injustice has been inflicted on mankind in the name of the exact opposite (namely truth, freedom and justice).

Take just one example: Everyone knows that overpopulation is one of the greatest threats to the planet and to mankind, right?

Wrong.

The truth is the exact opposite. Julian Simon amassed copious evidence to debunk this and many other commonly held economic and social "truths". (Vividly illustrating Julian Simon's ideas, UCLA economist Deepak Lal noted the absurdity of the view that if a cow has a child per capita income automatically goes up, while if a human has a child it automatically goes down.)

The lesson is this. Nothing presented or peddled as truth should be automatically accepted as truth at face value. Everything must be thoroughly probed and examined and only what passes the most stringent tests is to be accepted as the truth. Likewise, anything that fails the tests must be rejected as lies.

The analogy with designer labels holds good. Polonius in Hamlet observes: "For the apparel oft proclaims the man." Not quite. More accurately, we should say: the apparel often proclaims the man's intended image and not necessarily who or what the man really is. Designer clothes project a certain image which may be far removed from the actual character of the man wearing them.

The only way to confirm the presence of truth is to test for it. Appearances can be deceiving. You see, the Devil wears Pravda.

Warren Buffet on the global economic crisis

You know there's economic trouble when the richest man in the world tells you that his flagship company lost 9.6% of its market value in the previous year. You know that the trouble's really serious when he says:

This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone "all in." Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation. Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.

Warren Buffet tells the full story, with his usual charm and wit, in his annual letter to Berkshire Hathaway shareholders which was released on 28 February 2009.

The Effective Executive, Chapter 1: Effectiveness Can be Learned

We're back with the long-awaited series on Peter F. Drucker's The Effective Executive (1966).

The following summary of chapter 1 is quite long as chapter 1 is itself a microcosm of the whole book.

The job of the executive is to be effective. Effectiveness is the ability to get the right things done. Effectiveness is NOT intelligence, imagination or knowledge. Effectiveness is what turns intelligence, imagination and knowledge into results.

I. Why we need effective executives

• Effectiveness is the specific tool of the knowledge worker within an organisation.
• Manual work only requires efficiency, i.e. the ability to do things right. The productivity, that is the efficiency and quality, of manual work can be measured in terms of a definable and discrete output. Previously, the bulk of the workers in organisations were manual workers and therefore only a few people were required to be executives, that is concerned with getting the right things done.
• Society is now made up of large, knowledge-based organisations staffed by knowledge workers. The knowledge worker primarily applies his mind to his work, whereas the manual primarily applies his hands to his work. The knowledge worker primarily uses knowledge, theory and concepts; the manual worker primarily uses physical strength and manual skill.
• The viability and prosperity of modern society depends crucially on the productivity of the knowledge worker (or the executive). The productivity of the knowledge worker cannot be measured with the same yardstick as that of the manual worker.
• The nature of knowledge work and the knowledge worker is fundamentally different from that of manual work and the manual worker. Specifically:
  

1. The knowledge worker cannot be supervised closely or in detail. He can only be helped.
2. The knowledge worker must direct himself towards performance, contribution, and effectiveness.
3. The knowledge worker’s primary work is thinking.
4. The motivation of the knowledge worker depends crucially on his being effective and able to achieve. Without effectiveness, the knowledge worker’s commitment to work and contribution will diminish rapidly.
5. The knowledge worker’s output (knowledge, ideas, information) is useless in itself, unlike the manual worker’s output (a physical product like a ditch, a pair of shoes, or a machine part). Unlike the manual worker, the knowledge worker must make a deliberate effort make his output effective.
   
   

II. Who is an executive?

• Every knowledge worker in an organisation is an executive IF, by virtue of his position or knowledge, he is responsible for a contribution that materially affects the capacity of the organisation to perform and to obtain results. Such a person must make decisions; he cannot simply carry out orders. He must take responsibility for his contribution. And he is supposed, by virtue of his knowledge, to be better equipped to make the right decision than anyone else.
• Most managers are executives-though not all.
• Many non-managers are executives in modern society.
• Many managers are not executives –they are superiors and overseers of other people BUT they do not have responsibility for or authority over the direction, content and quality of the work, or the methods of its performance. Their productivity can still be measured with the same methods as those used to measure the productivity of manual workers.
• Whether or not a knowledge worker is an executive does NOT depend on whether or not he manages people. This is because knowledge work is defined by its results NOT by its quantity or by its costs. Consequently, the number of people involved or the size of the managerial task are irrelevant. In fact, a knowledge worker may be so busy “managing” that he has no time for his actual work and to make fundamental decisions. An individual knowledge worker may be as productive or unproductive as a team of 200 knowledge workers. "Throughout every one of our knowledge organisations, we have people who manage no one and yet are executives."
• Executives are those knowledge workers, managers, or individual professionals, who are expected, by virtue of their position or their knowledge, to make decisions in the normal course of their work that have significant impact on the performance and results of the whole organisation.
• The executive plans, organises, integrates, motivates, measures and makes decisions.
  
  

III. Executive realities

The realities of the executive’s situation inside an organisation, at one and the same time, demand effectiveness from him AND make effectiveness exceedingly difficult to achieve. (By contrast, effectiveness for an executive outside an organisation is much easier to achieve.)

There are four major realities about an executive’s situation inside an organisation that push him towards non-results and non-performance:

1. The executive’s time tends to belong to everybody else
   
   • We can define an executive operationally (that is, through his activities) as a captive of the organisation.
   • An executive can also be defined as someone who normally has no time of their own because their time is always pre-empted by matters of importance to somebody else.
2. Executives are forced to keep on "operating" unless they take positive action to change the reality in which they live and work
   
   • Unless the executive changes it by deliberate action, the flow of events will determine what he is concerned with and what he does.
   • If the executive lets the flow of events determine what he does, what he works on and what he takes seriously, he will fritter himself away “operating”.
   • Events rarely tell the executive anything, let alone the real problem. They are often not even symptoms in the sense in which a patient’s narrative is a clue for a physician. What events are relevant and important, and what events are merely distractions, the events themselves do not indicate.
   • What the executive needs are CRITERIA which enable him to work on the truly important, that is on contribution and results, even though the criteria are not found in the flow of events.
3. The executive is within an organisation
   
   • The executive is effective only if and when others in the organisation make use of what he contributes. Organisation is the means of multiplying the strength of an individual.
   • Usually the people most important to the effectiveness of an executive are NOT his subordinates, but his peers or his superiors. Unless the executive can reach these people, and can make his contribution effective for them and in their work, he has no effectiveness at all.
     
4. The executive is within an organisation
   
   • “Even the largest organisation is unreal compared to the reality of the environment in which it exists.”
   • There are no results within the organisation. All the results are on the outside.
   • All that there is within the organisation are efforts and costs.
   • The only reason the organisation exists is for the service it provides to its environment
   • BUT it is the inside of the organisation and all its workings that is most visible to the executive. Unless he makes deliberate efforts to gain direct access to outside reality, he will become increasingly inside-focused.
   • Much of the quantitative information that is presented to executives is inside-focused and misses most of the important and relevant outside events. These events are frequently qualitative, and indeed unquantifiable. They are not yet “facts”, that is “events” that have been conceptualised, defined, classified and endowed with relevance.
   • “The truly important events on the outside are not the trends. They are changes in trends. These determine ultimately success or failure of an organisation and its efforts. Such changes, however, have to be perceived: they cannot be counted, defined or classified.”
   • “Executives may become blind to everything that is perception, i.e. event, rather than fact, i.e. after the event.”
   • “Executives live and work within an organisation. Unless they make conscious effort to perceive the outside, the inside may blind them to the true reality.”

IV. The promise of effectiveness

• Increasing effectiveness may be the only area where we can hope significantly to raise the level of executive performance, achievement, and satisfaction.
• More able and knowledgeable people are welcome of course, but it unrealistic to expect the supply of such people to be significantly increased. At best, we can hope for someone to be good in one specialised knowledge area.
• However, each knowledge worker should try to at least learn what other knowledge areas are about, why they exist and what are their aims.
• Since we can’t increase the supply of better people, we should try and make better use of the people who are available. That is, rather than increasing the supply of a resource, increase its yield. Effectiveness is the one tool to make the resources of ability and knowledge yield more and better results.

V. But can effectiveness be learned?

• Effectiveness is NOT a gift one is born with, it can be learned.
• What are the elements of effectiveness? What does one have to learn and how does one learn it?
  

1. Is effectiveness a knowledge which one learns in systematic form and through concepts?
2. Is effectiveness a skill which one learns as an apprentice?
3. Is effectiveness a practice which one learns through doing the same elementary things over and over again?
   

• There is no such thing as an “effective personality”. Effective executives differ widely in their personalities, temperaments, abilities, knowledge and interests. All they have in common is the ability to get the right things done.
• All effective executives have the same, common practices that make effective whatever they have and whatever they are.
• Effectiveness is a habit, that is a complex of practices. Practices are very simple. Practices can always be learned. Practices are learned by practising and practising and practising again, until the practice becomes an unthinking, conditioned reflex and a firmly ingrained habit.
• There is no reason why any, normally endowed individual cannot acquired competency in any practice. Mastery may require special endowments, but all that is required for effectiveness is competency.
• There are five essential practices that have to be acquired to be an effective executive.

Effective executives:

1. Know and manage their time (Chapter 2)
   
   • They know where their time goes and they work systematically at managing the little of their time that can be brought under their control.
2. Focus on outward contribution (Chapter 3)
   
   • They gear their efforts to results rather than work. They begin with the question “What results are expected of me” rather than the work to be done, or its techniques and tools.
3. Build on strengths (Chapter 4)
   
   • They build on strengths: their own strengths, the strengths of their superiors, colleagues, and subordinates; and on the strengths in the situation, that is, on what they can do. They do not build on weakness, or start out with what they cannot do.
4. Concentrate on priorities (Chapter 5)
   
   • They concentrate on the few major areas where superior performance will produce outstanding results. They force themselves to set priorities and stick to their priority decisions. They have no choice: they do first things first and second things not at all. The alternative is to get nothing done.
5. Make effective decisions (Chapter 6 and Chapter 7)
   
   • They practise a systematic decision-making process:
     
     • Follow the right steps in the right sequence;
     • Make a judgement based on “dissenting opinions” rather than on “consensus on the facts”;
     • Make few, carefully considered fundamental decisions rather than many, fast (and wrong!) decisions;
     • Strategic, rather than tactical.
       

A dead language?

Latin is a dead language.
As dead as dead can be.
It killed off all the Romans,
And now it's killing me!

This schoolboy ditty could conceivably be titled The Refrain of the Juvenile Classicist.

But is Latin really a dead language?

The (mature) classicist Peter Jones writes the "Ancient and Modern" column in The Spectator. Here's his take on the matter.

Varley funny: An Open Letter to John Cleese

Here they are: Two of the best humourists on the planet going man to man, eyeball to eyeball, pen to pen. They both happen to be called John, Cleese and Varley. Enjoy:

An Open Letter to John Cleese

The very gods themselves

I have had recent occasion to recall a line from Friedrich Schiller's play The Maid of Orleans (1801). One of the characters, Talbot, an English general, makes the following lament (translation by Anna Swanwick):

Folly, thou conquerest, and I must yield!
Against stupidity the very gods.
Themselves contend in vain. Exalted reason,
Resplendent daughter of the head divine,
Wise foundress of the system of the world,
Guide of the stars, who art thou then if thou,
Bound to the tail of folly's uncurbed steed,
Must, vainly shrieking with the drunken crowd,
Eyes open, plunge down headlong in the abyss.
Accursed, who striveth after noble ends,
And with deliberate wisdom forms his plans!
To the fool-king belongs the world.

(emphasis added)

It is not a particularly encouraging thought: "Against stupidity the very gods themselves contend in vain."

[An interesting aside: The Gods Themselves is the title of a highly acclaimed science fiction classic (Nebula award for best novel in 1972 and Hugo award for best novel in 1973) by the late great Isaac Asimov. The novel is made up of three intricately structured and interlocking parts: "Against Stupidity..." (Part I); "...The Gods Themselves..." (Part II); and "...Contend in Vain?" (Part III).]

The same thought can be expressed in economic terms: The supply of stupidity so far outstrips demand, that there is little realistic prospect of the equilibrium price of stupidity ever reversing its downward trend.

She comes to bury Aid, not to praise it

Dambisa Moyo is the author of an important new book entitled "Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa". The book's foreword is by Niall Ferguson. Yes, that Niall Ferguson.

The book is important because it tackles, head on, one of the most enduring myths in economic history: that aid, or more specifically what Dr. Moyo (D. Phil., Economics, University of Oxford) calls "systematic aid", i.e. regular transfers of money from governments in developed countries to governments in developing countries for the purpose of fostering economic development, actually works. She contends that aid is not merely ineffective, but hugely detrimental to development in Africa.

Dr. Moyo proposes that aid be completely discontinued in five years time. The long dead should be finally buried, as it were.

A little-navel gazing

In the very first post on this blog in January 2006, I posed the following question:

[Is] this [blog] really just another instance of self-indulgent online narcissism?

And this is how I answered it:

No, this really isn't just another instance of self-indulgent online narcissism. I hope to cover a great many other topics besides those surrounding the individual yours truly refers to by the vertical pronoun. Naturally, a little navel-gazing will be unavoidable from time to time, but even then I hope it will be free of the odour of self-indulgence. One can but try. We'll see.

Today is one of those unavoidable times for a little navel-gazing, for today is my birthday. And, so, I am here contemplating the meaning of life, the Universe and everything.

Well, almost everything.

I'm currently contemplating the nice little gift Arsenal FC gave me a few minutes ago: a one-nil victory over AS Roma in the Champions League. But such gifts from Arsenal are rarely an unalloyed joy. They missed some golden chances; chances they may rue when they travel to Rome for the return leg.

My final thoughts and prayers are with the only one of my heroes (as far as I'm aware) who shares my birthday: Steve Jobs. I wish him well in his current battle with ill-health.

Odourless navel-gazing I trust.

Moore on Wittgenstein

In the summer of 1929, Ludwig Josef Johann Wittgenstein presented himself for the oral examination for the degree of PhD at the University of Cambridge. His doctoral thesis was the Tractatus Logico-Philosophicus, a work completed some ten years earlier and adjudged by some (even then) to be one of the greatest works of philosophy of the 20th Century. His examiners were Bertrand Russell and G. E. Moore. Laurence Goldstein has published a reconstructed account of the examination. With characteristic understatement, Moore made the following remarks in the actual examiner’s report:

It is my personal opinion that Mr. Wittgenstein’s thesis is a work of genius; but, be that as it may, it is certainly well up to the standard required for the Cambridge degree of Doctor of Philosophy.

Qualified Capitalism?

There have been several recent calls from some unlikely quarters for what might be termed qualified capitalism. It is somewhat unfortunate that the name of capitalism, the system of free market economics first systematised by Adam Smith in The Wealth of Nations (1776), was coined by its arch-enemy, Karl Marx. Indeed, many of the misconceptions that persist to this day about free market economics can be traced directly back to Das Kapital (1867) (or simply Capital in English) and Marx's other works.

Here are three examples of calls for qualified capitalism that I have heard recently:

1. Inclusive Capitalism
   (Dr. Mo Ibrahim, Founder of Celtel International and the Mo Ibrahim Foundation)
   Dr. Ibrahim has often discussed the notion of inclusive capitalism e.g. in a May 2005 speech at an IFC (International Finance Corporation) conference. He defined Celtel's "inclusive capitalism" strategy as follows: (a) sharing equity with management and staff; (b) including local equity partners; and (c) developing local entrepreneurs.
   
   
2. Creative Capitalism
   (Bill Gates, Founder of Microsoft and the Bill and Melinda Gates Foundation)
   In his 2007 Harvard commencement address, Bill Gates spoke on the theme of creative capitalism. This is what he said in part:
   

   If you believe that every life has equal value, it’s revolting to learn that some lives are seen as worth saving and others are not. We said to ourselves: “This can’t be true. But if it is true, it deserves to be the priority of our giving.”

   So we began our work in the same way anyone here would begin it. We asked: “How could the world let these children die?”

   The answer is simple, and harsh. The market did not reward saving the lives of these children, and governments did not subsidize it. So the children died because their mothers and their fathers had no power in the market and no voice in the system.

   But you and I have both.

   We can make market forces work better for the poor if we can develop a more creative capitalism – if we can stretch the reach of market forces so that more people can make a profit, or at least make a living, serving people who are suffering from the worst inequities. We also can press governments around the world to spend taxpayer money in ways that better reflect the values of the people who pay the taxes.

   If we can find approaches that meet the needs of the poor in ways that generate profits for business and votes for politicians, we will have found a sustainable way to reduce inequity in the world. This task is open-ended. It can never be finished. But a conscious effort to answer this challenge will change the world.
   [Emphasis added]
   

3. Moral Capitalism
   (David Cameron, Leader of the UK's Conservative Party)
   At the 2009 World Economic Forum (WEF) meeting (28 January-1 February 2009) held in Davos, Switzerland, David Cameron made an impassioned speech calling for moral capitalism, "a new, more popular capitalist system - capitalism with a conscience." He suggested three reasons why capitalism has become so unpopular: (i) Markets without morality. (ii) Globalisation without local competition. (iii) Wealth without fairness. Mr. Cameron then outlined his vision for a new moral capitalism ("A capitalism with a conscience"):

   So I think it's time to update the free market orthodoxy that has dominated the past few decades. It's time to assert a fundamental truth: that markets are a means to an end, not an end in themselves. Markets are there to serve our society, not to suck the joy out of it or trample over its values. So we must shape capitalism to suit the needs of society; not shape society to suit the needs of capitalism.

   That is what I mean by responsible business. Business helping to create a society that is greener, safer, fairer - and where opportunity is more equal. Business helping to create a society that is more family-friendly, where responsibility and power are decentralised, and where we value and build up the institutions of the public realm and civic society.

   So if markets, and capitalism, and the activities of individual businesses conflict with our vision of the good society and a better life if damage is being done to our environment, or if family life is being undermined we must not sit there and take it, going along with the old orthodoxy that nothing should be allowed to impede the pursuit of profit. We must speak out.

   Yes, as I've said many times, we must stand up for business, because it's businesses, not governments or politicians, that create jobs, wealth and opportunity, it's businesses that drive innovation, and choice, and help families achieve a higher standard of living for a lower cost. But we must also stand up to business when the things that people value are at risk. So it's time to place the market within a moral framework - even if that means standing up to companies who make life harder for parents and families.

   It's time to help create vibrant, local economies - even if that means standing in the way of the global corporate juggernauts. And it's time to decentralise economic power, to spread opportunity and wealth and ownership more equally through society and that will mean, as some have put it, recapitalising the poor rather than just the banks.

   The best chapters in our economic history are those that embrace the many, not the few. In America in the 1950s there was a sense that everyone could have a slice of the pie. In the 1980s Margaret Thatcher led an ownership revolution that gave millions a new stake in our economy. That was truly popular capitalism, and we've never needed it more than we do today.

   All of us - politicians, campaigners, economists, business leaders - need to help lead the change. Our financial system boasts people so bright they've created financial instruments beyond even their own understanding. Now they need to use those talents to help the poorest build assets. To go into our most deprived communities, giving them the tools to make the most of the market, to help them with banking and saving and owning.

Comments:

1. Inclusive Capitalism
   Dr. Mo Ibrahim's inclusive capitalism sounds to me like good old-fashioned free market economics and common sense. Consequently, Dr. Ibrahim's qualified capitalism is no different from unqualified capitalism.
   
2. Creative Capitalism
   Mr. Gates proposal, seems to me, to be based on ideas that are fundamentally opposed to the principles of free market economics. It is based on the notion of "market failure". But in order to ascertain whether markets have failed, we need to be clear as to what exactly the purpose of the markets is. If we approach the issue from that angle, we see quite clearly that what Mr. Gates calls failure is actually something that lies outside the scope of markets. Healthcare markets, for example, do exist in both rich and poor countries, as do markets for other goods and services, but their exact characteristics are determined by (0ther) factors outside their direct scope and control. Humanitarian initiatives, such as those spearheaded by the Gates Foundation, can help alleviate human suffering in the short-term, and perhaps even eradicate certain diseases. That is commendable. But the long term solutions lie in poor countries putting their own houses in order. Mr. Gates' qualified capitalism is misguided and would ultimately be ineffective (or perhaps even counterproductive) in achieving its stated aims.
   
3. Moral Capitalism
   Mr. Cameron's proposal is, unfortunately, the most mistaken of all. Initially this seems rather surprising coming from a Conservative Party leader, but on reflection perhaps not such a surprise given the seismic (leftward) shift that Tony Blair's decade in power wrought on British politics. Mr. Cameron's proposal is highly interventionist and, if carried out, would exacerbate the UK's already dire economic situation. The morality Mr. Cameron is saying should be added to capitalism is already there: a free market economy cannot function outside a strong moral framework of trust, respect for the law, respect for contracts, and so forth. Mr. Cameron's qualified capitalism would be an economic disaster.

Conclusion:

Adam Smith still has it broadly right, some 233 years after he figured out how it all works.

Here's what the great man said in The Wealth of Nations (among very many other things, of course):

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.

(Book One: Of the Causes of Improvement in the Productive Powers of Labour, And of the Order according to which its Produce is Naturally Distributed among the Different Ranks of the People, Chapter II: Of the Principle which gives occasion to the Division of Labour)

And:

But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.

(Book Four: Of Systems of Political Economy, Chapter II: Of Restraints upon the Importation from Foreign Countries of such Goods as can be produced at Home)

The Prodigal Son in the Key of F

I love words. Their sound and their texture, their look and their feel.

I love words well selected, well used and well arranged. The following piece is one of the best applications of the literary device of alliteration that I've ever come across.

Years ago, I had the privilege of hearing the late Rev. John Garlock recite the piece live. The piece was originally written by Rev. Garlock and Gwen Jones in the 1940s (see p. 10 of A/G Heritage, Fall 1990). It has been copied and reproduced countless times since without attribution. The theme is one of the most famous Bible stories, the Parable of the Prodigal Son (Luke 15: 11-32). Here it is, the Prodigal Son in the key of F:

Melody in F

Feeling footloose and frisky, a featherbrained fellow forced his fond father to fork over the farthings. He flew far to foreign fields and frittered his fortune, feasting fabulously with faithless friends.

Finally facing famine and fleeced by his fellows-in-folly, he found himself a feed flinger in a filthy farmyard. Fairly famishing, he fain would have filled his frame with foraged food from the fodder fragments. "Fooey, my father’s flunkies fare far fancier," the frazzled fugitive fumed feverishly, frankly facing facts.

Frustrated by failure and filled with foreboding, he fled forthwith to his family. Falling at his father’s feet, he floundered forlornly, "Father, I have flunked and fruitlessly forfeited family favor . . ." But the faithful father, forestalling further flinching, frantically flagged the flunkies to fetch forth the finest fatling and fix a feast.

The fugitive’s faultfinding frater frowned on the fickle forgiveness of former folderol. His fury flashed but fussing was futile. The far-sighted father figured, "Such filial fidelity is fine, but what forbids fervent festivity-for the fugitive is found! Unfurl the flags. With fanfares flaring, let fun and frolic freely flow. Former failure is forgotten, folly forsaken. Forgiveness forms the foundation for future fortitude."

Progress depends on retentiveness

"Those who cannot remember the past are condemned to repeat it."

This quotation, and numerous variations of it, has attained extraordinary ubiquity and immortality in the world of quotations.

But who first said it? And where?

The answer to the first question is George Santayana (1863-1952), the eminent Spanish American thinker.

The answer to the second (in context) is as follows.

Excerpt from: Chapter XII ("Flux and Constancy in Human Nature"), Volume One ("Reason in Common Sense") of The Life of Reason; or, The Phases of Human Progress (five volumes), 1905-1906
Author: George Santayana
Source: Project Gutenberg
Stable URL: http://www.gutenberg.org/files/15000/15000-h/vol1.html

Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it. In the first stage of life the mind is frivolous and easily distracted; it misses progress by failing in consecutiveness and persistence. This is the condition of children and barbarians, in whom instinct has learned nothing from experience. In a second stage men are docile to events, plastic to new habits and suggestions, yet able to graft them on original instincts, which they thus bring to fuller satisfaction. This is the plane of manhood and true progress. Last comes a stage when retentiveness is exhausted and all that happens is at once forgotten; a vain, because unpractical, repetition of the past takes the place of plasticity and fertile readaptation. In a moving world readaptation is the price of longevity. The hard shell, far from protecting the vital principle, condemns it to die down slowly and be gradually chilled; immortality in such a case must have been secured earlier, by giving birth to a generation plastic to the contemporary world and able to retain its lessons. Thus old age is as forgetful as youth, and more incorrigible; it displays the same inattentiveness to conditions; its memory becomes self-repeating and degenerates into an instinctive reaction, like a bird's chirp.

Not all readaptation, however, is progress, for ideal identity must not be lost. The Latin language did not progress when it passed into Italian. It died. Its amiable heirs may console us for its departure, but do not remove the fact that their parent is extinct. So every individual, nation, and religion has its limit of adaptation; so long as the increment it receives is digestible, so long as the organisation already attained is extended and elaborated without being surrendered, growth goes on; but when the foundation itself shifts, when what is gained at the periphery is lost at the centre, the flux appears again and progress is not real. Thus a succession of generations or languages or religions constitutes no progress unless some ideal present at the beginning is transmitted to the end and reaches a better expression there; without this stability at the core no common standard exists and all comparison of value with value must be external and arbitrary. Retentiveness, we must repeat, is the condition of progress.

The Power of One

Alex Dalmady is a 48-year-old Venezuelan independent financial analyst based in Florida. By his own account, Mr. Dalmady got a call from his friend Roberto in October 2008 asking for help with his investment portfolio, a substantial part of which consisted of CDs (Certificates of Deposit) at Stanford International Bank (SIB), an offshore bank based in St. John's, Antigua.

Mr. Dalmady visited SIB's website, downloaded the bank's financial statements and analysed them. He then presented his unequivocal conclusion to his friend: "Roberto, take your money out YESTERDAY." And this Roberto proceeded to do, somewhat slowly, but he was out by December 2008.

However, Mr. Dalmady's curiosity had been piqued and he kept on investigating SIB (all from his desk in Florida and using the limitless power of the Internet-Yay!). In January 2009, he sat down and wrote up his findings in an article that was published in the January 2009 issue of the monthly newsletter of VenEconomia (VenEconomy in English), a leading Venezuelan economic and financial publisher.

The article was entitled "Duck Tales". An English version is posted here.

Why "Duck Tales"? Well, here's the synopsis of the article:

One does not have to be a detective, or even a financial expert, to spot financial institutions that may prove insolvent, or worse, with the passage of time. As the saying goes, if it looks like a duck, if it waddles like a duck and if it quacks like a duck, it must be a duck.

Mr. Dalmady tells his tale in a witty and entertaining style. Unfortunately, the moral of the tale is not quite so amusing. SIB appeared to be a "duck", a massive financial fraud.

And so it has proved to be.

Mr. Dalmady's article ignited the blogosphere when it was posted on Miguel Octavio's blog on 9 February 2009. From there, the story was picked up by the mainstream media and the rest is very recent financial history. U. S. federal authorities (and no doubt other authorities elsewhere) are now investigating SIB and its flamboyant owner, R. Allen Stanford, Knight Commander of the Most Distinguished Order of the Nation (Antigua and Barbuda), World Finance's 2008 Man of the Year, and Forbes List billionaire (Forbes also has an in-depth profile of Mr. Stanford and features him in its Secrets Of The Self-Made series).

All this, the result of one single individual, Mr. Dalmady, applying his own mind to the facts that everybody else was seeing, but missing the significance of.

Truly, the Power of One.

U and I

(The title of this post is borrowed from the title of Nicholson Baker's deliciously quirky book on his literary obsession with John Updike.)

John Updike died last week.

He was one of the most skillful craftsmen (or is it craftspersons in these politically correct times?) of the English Language. One of my personal favourites certainly, right up there with Joseph Conrad, V. S. Naipaul, and G. H. Hardy.

He was a remarkably versatile writer: fiction and non-fiction; prose and poetry; art criticism and literary criticism; short stories and novels; plays and plays-on-words; a humourist and a "serious" writer; journalist and essayist; children's books and adults' books; and on and on it goes. He even tried his hand at an African novel (The Coup, 1978) and, post-9/11, a terrorism novel (Terrorist, 2006). Oh, and he was a cartoonist too.

He was also a remarkably prolific writer: literally hundreds of pieces for The New Yorker alone; almost 30 novels; and much, much else besides.

One of the tests of great writing for me is simply this: Does it live on in the mind long after it's been read?

Does Updike's writing pass this simple test?

Let me answer obliquely by reference to a personal reading experience of mine of a few years ago. It was The Oxford Book of Short Stories (1981) edited by V. S. Pritchett, himself one of the finest exponents of the short story form. The book contains masterpieces by a veritable who's who of the greats of literature in English: Hawthorne, Poe, Twain, Conrad, Kipling, Maugham, Joyce, Lawrence, Faulkner, Hemingway, Pritchett (no false modesty here), Narayan, Welty, Lessing, and others. But for me, the story that really stood out then and still stands out now was the very last one in the anthology: Lifeguard by John Updike, which was first published in 1961 in The New Yorker. Out of all those outstanding stories, it is Updike's story, as short and plotless and apparently ephemeral as it is, that has left the deepest impression on my mind. If you're not a subscriber to The New Yorker, there's a bootleg version of Lifeguard here.

A word about the name Updike. It's an Americanised version of the Dutch name Op de Dijk.