Where’s the Precaution?

While I am not necessarily a defender of the precautionary principle, I am discouraged at the disregard for its use in green economic schemes. After a quick Google search of the precautionary principle, the most prominent search results pertain to human activity and environmental health (Wingspread statement being the most dominate search result). The Wingspread statement reads:

While we realize that human activities may involve hazards, people must proceed more carefully than has been the case in recent history. Corporations, government entities, organizations, communities, scientists and other individuals must adopt a precautionary approach to all human endeavors. (link)

Where is the precautionary principle in government’s cap-and-trade schemes? We, at the present, have zero conclusive evidence that mankind is causing global warming (see here and here), but we do have conclusive economic evidence that environmentalist’s policies (i.e. cap-and-trade) will do severe harm to our economy while providing only minuscule, if any, benefits for the planet (see here and here). The decoy has been reveled. Anthropogenic global warming is merely a socialist agenda to take over the economy. Capitalism and freedom of choice are the environmentalist's preventive aim and government control is their principal.

The Perfect Liquidation Analogy; Garage Sales

Looking around my community lately you will easily notice one commonality that is on the rise, garage sales. Church yard sales, neighborhood garage sales, garage sale signs on almost every medium at every intersection; there exist almost a race to pool everyone's junk together and sell to the first bidder. This, of course, represents human action as a strategy to rid ourselves of what we perceive as less valuable property in exchange for something perceived as more valuable (money).

My perception, at the moment, is that while the economy is shaky and experiencing a necessary correction of past malinvestments, much of the consumer fear and uncertainty is a result of the mainstream media's scare tactics and upcoming political uncertainty. Of course, much of the media's dwelling on poor consumer outlook is based on the notion of Keynesian economics - consumer spending lift's us out of economic downturns.

The analogy present is that these neighborhood garage sales represent a liquidation process not much different than that which occurs during a correction period in the business and financial sector. Moreover, the present garage sale scenario is empirical evidence of two economic principals; (1) man's propensity and (2) consumerism does not spur long-term real economic growth.

In order for a liquidation process to be successful there must be a buyer present who is willing to exchange his money for what he perceives as a better deal. This is man's propensity. People are inclined to transfer one commodity for another, as long as there is perceived value on both sides of the exchange. Therefore, the garage sale provides an example of a situation where there are those of whom are still looking to exchange their money for a product and those of whom are in need of liquidating non-productive assets. The problem, however, that presents itself is that the liquidator is looking to rid his unnecessary assets for money and the consumer is looking for a deal on something that he could probable otherwise live without. The aggregate economy, as a result of this exchange, has not been made better off.

What is necessary for the aggregate economy to benefit is real capital accumulation - investment and productivity (shown here).

The overall connection here between the garage sales and liquidation processes undertaking by business ventures and or the financial sector is that investment and productivity are what spur long-term economic growth - capital accumulation. As a result of bust cycles, market corrections are necessary to rid malinvestments that occurred during the boom. Consumer spending does not attribute to long-term growth, which is why government's attempt to increase consumer spending (i.e. economic stimulus packages and public work programs) will fail every time.

Change; Yes we can? More like, probably not.

While there exist better ways, one certain (as now empirically evident) way to fool the masses is to speak in non-specific, subjective language. Now that the election is over and the change mantra has lulled many into a false state of security, let us examine, what should be, the self-evident meaning behind “change”.

Everyone wants change of some sort or to change something, in fact through a reflective process this is typically how each one of us goes about progressing our lives. But the problem here is that the word change has zero intrinsic value; change standing by itself, without a quantifier, cannot be broadly measured -- much like marginal utility. Change is not synonymous with good, nor is it necessarily a pejorative. The word change has zero objective meaning. And, being that objectivity is the true nature of reality should lead one to understand that what we will mostly like get is “change” only in the subjective nature of politics. Thus, only time will provide the objective measure as to whether change has occurred and whether or not it was forward-moving.

Although it is still very early to tell, many of the recent implications and nominations by the Obama transition team appears to be altering the “yes we can” into a probably not. For starters, the nominations for staff and cabinet positions seem to be an attempt to replicate the Clinton years (a la Rahm Emanuel and John Podesta); see here. Secondly, much of Obama’s forthcoming agenda is merely more of the same. The same being that much of his ideas are previous failures; New Deal and Great Society. Lastly, and also inclusive with the second, is the idea that The Great Healer can solve our economic situation. Well, again recent evidence should signal to us all that there will be more of the same. See here.

We cannot possibly correct our economy with a simplistic mention of change here, or a suggestion of change there. What we need is exactly the opposite of this “change”. We need to move back toward economic freedom (this requires going all the way back to Silent Cal and before, aside some exceptions). We need to separate politics from our economy. We need to also come to recognize when we are being fooled by sophistry. If the following is not an indicator that many simply swallowed-up the idea of change (in political party) just for the sake of change, then a better example I cannot provide; “Exit polls showed that 62 percent of the electorate said the economy was the most important issue”. More bailouts, more moral hazard, more economic stimulus packages, more socialization, more subsidies; Yes we can!

Again, while it is too early to measure exactly what we get, the implications of more of the same are what’s on the table. "But once the legislator is elected and freed from his campaign promises, oh, then his language changes! The nation returns to passivity, to inertia, to nothingness, and the legislator takes on the character of omnipotence. His the invention, his the direction, his the impulsion, his the organization. Mankind has nothing to do but to let things be done to it; the hour of despotism has arrived." Frederic Bastiat's, The Law