The feet, they vote too

Intel CEO reminds Washington that capital is mobile. Especially human capital:

Otellini’s remarks during dinner at the Technology Policy Institute’s Aspen Forum here amounted to a warning to the administration officials and assorted Capitol Hill aides in the audience: Unless government policies are altered, he predicted, “the next big thing will not be invented here. Jobs will not be created here.”

The U.S. legal environment has become so hostile to business, Otellini said, that there is likely to be “an inevitable erosion and shift of wealth, much like we’re seeing today in Europe–this is the bitter truth.”

I think he is dead on target here. My father was a pioneer in the computer graphics industry and he’s certainly not creating any new technologies or jobs in prison. I was one of the leaders in bringing graphics hardware to the computer game industry – no one believes this but you can look it up in the Computer Gaming World archives – and have invented a few things from a next-gen sound card to the world’s most advanced mouse and an AI system. I left the country more than a decade ago because I saw signs on the horizon of what Otellini is now pointing out. Furthermore, I run into Americans moving abroad to set up businesses on a regular basis, not every day, but a lot more often than I did 10 years ago. Between the high corporate taxes, the inflexible bureaucracy, the insane amount of regulations and paperwork required, and the global reach of the Internet, it simply doesn’t make much sense to start any business that isn’t a location-tied service one in the USA anymore.

As Schumpeter explained, no entrepeneurs means no economic growth, which means declining societal wealth and eventually grass hut city time. Unfortunately, most people are demanding even more government and they’re getting what they vote for while John Galt votes with his feet.


Except, you know, for those who expected home sales to fall off a cliff as a result of the homebuyer’s credit pulling demand forward, exactly as Austrian theory has been explaining for decades:

New U.S. single-family home sales unexpectedly fell in July to set their slowest pace on record while prices were the lowest in more than 6-1/2 years. The Commerce Department said sales dropped 12.4 percent to a 276,000 unit annual rate, the lowest since the series started in 1963, from a downwardly revised 315,000 units in June. Analysts polled by Reuters had forecast new home sales unchanged at a 330,000 unit pace last month.

Emphasis added, with a good deal of derision. Now note how they’re still talking about the possibility of a “double-dip” recession.

“”The odds of the dreaded double-dip are increasing. I’ve been one of the only people in the double-dip camp explicitly, but more and more of the people who have been playing in the game of what is the probability — 20 percent, 30 percent — are going to start saying maybe it is 50 percent.”

What a load of complete CYA nonsense. There will be no double-dip because there has been absolutely no recovery from which to dip again. The so-called recovery is a simple statistical trick utilizing government spending to paper over the continuing economic contraction. As the second stimulus runs out, the extent of the contraction will become more readily apparent to everyone. Extend, pretend, and hope for change has failed.

Refusing to learn

My contempt for anklebiters notwithstanding, I very much appreciate substantive criticism. This is why. When you refuse to pay attention to your critics, all you manage to do is increase the likelihood that you will look even more ridiculous in the future, as Paul Krugman demonstrates by continuing to cling to his ignorant idea of a nonexistent “hangover theory”:

[A]t least some members of the FOMC have bought into the hangover theory — the modern version of liquidationism in which mass unemployment is somehow necessary in the aftermath of a burst bubble:

Narayana Kocherlakota, president of the Minneapolis Fed, argued that a large part of today’s unemployment problem is caused by issues the Fed can’t solve, such as the mismatch between the skills of jobless workers and the skills that employers wanted.

Here’s what Kocherlakota said in a speech after the meeting:

Whatever the source, though, it is hard to see how the Fed can do much to cure this problem. Monetary stimulus has provided conditions so that manufacturing plants want to hire new workers. But the Fed does not have a means to transform construction workers into manufacturing workers.

I tried, in that old piece on hangover theorists, to explain what’s wrong with this view in general.

Tried and completely failed, Mr. Nobel Prize winner. Krugman clearly has no idea how badly he was bitchslapped on that piece by me and numerous others. He knows nothing of Austrian economics, he has learned nothing in 12 years of its core concepts playing out right in front of his eyes, and he has absolutely no idea what is going on with the economy right now.

What’s worse is that Krugman clearly knows that his critics exist, as evidenced by his comments on his blog and the fact that he reads the comments that are posted there. Krugman isn’t just an ignorant economist, he has willfully and stubbornly chosen to remain that way.