Division of Labour: September 2008 Archives
September 30, 2008
One bailout supporter’s Doomsday scenario

Evan Newmark, writing on one of the Wall St. Journal’s blogs on Friday, three days before Monday's vote on the $700 billlion bailout plan:

The public still doesn’t connect their lives to the crisis. But it should.

Because no bailout bill means that:

By the close of the stock market on Monday, the value of Main Street’s IRAs, 401Ks and pension plans will be worth a lot less than on Friday. How much? Hard to say, but a loss of 20% isn’t crazy.

By week’s end, there is a good chance that a raft of large banks will be taken over by federal regulators.

Within two weeks, as the banks hoard cash, the credit lines on most of Main Street’s credit cards will be reduced, foreclosure proceedings accelerated and car-leasing programs suspended.

Within a month, Main Street won’t be able to buy a home, a car or a tractor unless paid for in cash. As the credit markets shutdown, the mortgage, auto and small-business loan markets will nearly disappear. And the economy will grind to a near halt.

Far fetched? Not at all. It is the absence of credit–not too much of it–that causes great economic depressions.

The Dow-Jones average actually lost just under 7% on Monday, falling to 10365.45. It turns out that expecting a 20% decline was a bit crazy. At this moment on Tuesday it has recovered almost half of that, up 3.3% to 10710.56.

We’ll keep watching to see whether the other dire predictions fare any better.

One can oppose the bailout, by the way, and still favor the Fed using open-market operations to prevent a decline in the money stock and thereby to support the volume of bank credit. It was the steep decline in M2 [in a banking system made artificially fragile by government intervention] in 1929-33 that, as Friedman and Schwartz explained, helped turn the recession of 1929 into the opening phase of the Great Depression. It was not the decline in the number of banks. Socializing and losses and perpetuating bad investments by propping up insolvent institutions – the foolish mission of the Hoover-FDR Reconstruction Finance Corporation – did not help recovery. Almost certainly it hindered it.

By the way, too much credit in the 1920s was a chief cause of the intitial downturn: it sowed the seeds for it by distorting interest rates and thereby fostering the malinvestments that came to grief.

Posted by Lawrence H. White at 03:42 PM in Economics

Afternoon Snark

Probably not entirely fair--so my apologies in advance--but here goes:

Asking Washington pols to solve the financial market crisis is akin to asking an arsonist to put out his fire.

Posted by E. Frank Stephenson at 02:43 PM in Misc.

Markets in everything: Marijuana U.

From an interesting story via KNBC:

Welcome to Oaksterdam University, a new trade school where "higher education" takes on a whole new meaning.

The school prepares people for jobs in California's thriving medical marijuana industry.

For $200 and the cost of two required textbooks, students learn how to cultivate and cook with cannabis, study which strains of pot are best for certain ailments, and are instructed in the legalities of a business that is against the law in the eyes of the federal government.

The only prerequisite for the course is a Politics/Legal Issues 101 class.


Posted by Craig Depken at 01:13 PM in Economics

The anti-bailout coalition

In a microcosm of the national vote, the St. Louis Post-Dispatch reports (and illustrates in a "hell freezes over"-themed cartoon) the fact that those voting "NO" on the bailout included both the left-wing Rep. William Lacy Clay (D-Inner City St. Louis) and the right-wing Rep. Todd Akin (R-Well-to-do Suburbs).

TV's talking heads last night were baffled by the failure of the bailout. They blamed it on a "failure of leadership" to ram the measure through. (Or, if they noticed that the mail to Congress was running 30-1 against the bailout, they blamed a failure of politicians to "educate" the public, who obviously didn't understand the gravity of the situation.)

It's pretty simple, really. Republicans who voted no didn't like the fact that $700 billion would be taken from taxpayers. (A few, encouragingly, talked about defending free-market principles.) Democrats who voted no didn't like the fact that it would be going to Wall Street.

Posted by Lawrence H. White at 12:23 PM in Economics

A Hayekian Economist's Serenity Prayer

During an email exchange with a friend, I suggested that it would be great if Congress were to invoke Psalm 139:6--"Such knowledge is too wonderful for me; it is high, I cannot attain unto it"--when asked how they are going to fix the minute details of the current financial mess, and it would be great if they applied this to policy-making in general. I then sent him a Hayekian adaptation of the serenity prayer:

"God, please grant me the ability to learn the things I don't know, the serenity to accept that there are things I can't know, and the wisdom to know the difference."

Posted by Art Carden at 11:40 AM in Economics

Free Markets, Greed, and the Bailout

By now we've probably all seen a lot of punditry laying the blame for the current financial mess on unfettered capitalism and deregulation (Obama returned to this point a few times during the debate on Friday night). Steven Horwitz offers a brilliant "Open Letter to (his) Friends on the Left" making the case that free markets aren't to blame. His letter should be read and distributed widely.

Posted by Art Carden at 11:25 AM in Economics

"We Still Have Heavy Regulations ..."

... says Bill Clinton in an interview with Maria Bartiromo. Self serving? Without a doubt. But mighty interesting, too, because of all the talk that deregulation or lack of regulation is the root cause of the current financial turmoil. Some snips:

MARIA BARTIROMO

Mr. President, in 1999 you signed a bill essentially rolling back Glass-Steagall and deregulating banking. In light of what has gone on, do you regret that decision?

FORMER PRESIDENT BILL CLINTON

No, because it wasn't a complete deregulation at all. We still have heavy regulations and insurance on bank deposits, requirements on banks for capital and for disclosure. I thought at the time that it might lead to more stable investments and a reduced pressure on Wall Street to produce quarterly profits that were always bigger than the previous quarter. But I have really thought about this a lot. I don't see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch (MER) by Bank of America (BAC), which was much smoother than it would have been if I hadn't signed that bill.

[Bartiromo:] Phil Gramm, who was then the head of the Senate Banking Committee and until recently a close economic adviser of Senator McCain, was a fierce proponent of banking deregulation. Did he sell you a bill of goods?

[Clinton:] Not on this bill I don't think he did. You know, Phil Gramm and I disagreed on a lot of things, but he can't possibly be wrong about everything. On the Glass-Steagall thing, like I said, if you could demonstrate to me that it was a mistake, I'd be glad to look at the evidence. But I can't blame [the Republicans]. This wasn't something they forced me into. I really believed that given the level of oversight of banks and their ability to have more patient capital, if you made it possible for [commercial banks] to go into the investment banking business as Continental European investment banks could always do, that it might give us a more stable source of long-term investment.

Posted by E. Frank Stephenson at 11:25 AM in Economics

DDF on the technological end of the human species
"I've got three different technologies that could wipe out the species," said Friedman, a self-professed libertarian who is certain that neither politics nor central planning will avert a possible bad technological outcome.

"I am much more worried about the government making the wrong response and doing damage than I am about the government not protecting me," said Friedman, adding: "It's a mistake to think of the world as if there was somebody in charge. There's never been anybody in charge."

That's David Friedman in a San Francisco Chronicle feature on him and his new book, Future Imperfect.

HT: Jeff Hummell

Posted by Edward J. Lopez at 10:04 AM in Misc.

September 29, 2008
$700 billion for "price discovery"?

I was talking about this puzzle with George Selgin, and he suggested I raise it here. Can anyone explain to us Ben Bernanke's theory according to which taxpayer-financed asset purchases can help a troubled asset market get unstuck, i. e. regain its previously high volume? Is that based on any known theory of markets, or any known historical experience? The purchases are supposed to help the market in "price discovery," via some cleverly designed mechanism (as yet unspecified). Bernanke swears it isn't about overpaying for assets to subsidize the institutions selling the troubled assets, only about finding the market a price. But in that case, why would anything close to $700 billions of purchases be needed?

Comments are open.

Posted by Lawrence H. White at 10:47 PM in Economics  ·  Comments (3)

Another Consequence of Rent Control
Tenants of a Brooklyn building say their landlord came up with a new idea for how to kick them out: Let the smell of the cats out of the bag. Dead cats, that is.

The stench from the carcasses did catch the tenants' attention -- but they stayed and sued.

One tenant, Daisy Terry, told a City Hall news conference on Sunday it was so bad she had to hold her nose coming down the stairs.

Terry says the landlord used the dead cats to try to push out rent-stabilized tenants.

Source. Maybe PETA should come out against rent control. HT: Drudge

Posted by E. Frank Stephenson at 09:19 PM in Economics

Austrian Student Scholars Conference

If you have a student who might be interested in presenting, the deadline for Grove City College's Austrian Student Scholar's Conference is fast approaching (October 1st). DOL friends Ed Stringham and Bob Higgs will be keynote speakers. More information can be found here and the announcement is below the fold.

Read More »
Posted by Joshua Hall at 04:42 PM in Economics

On academic eligibility c. 1908

The Sept. 29, 1908 NYT reports on academic eligibility at Yale:

The chances are slim for Arthur Brides, Yale's all-around football star, wearing a uniform this season. Brides was to-day definitely notified that he cannot join the eleven unless he removes the deficiencies in his studies. There is little chance that Brides can fill the demand, but he will pluckily try to do so before the big games. He will not report with the team for weeks, and the football coaches say that they regard him as out of the competition.
Fairly impressive, although it is Yale after all, that before the NCAA promulgated rules concerning academic eligibility, at least one case of enforcement of standards could be found. Likely this is the problem: the fact that Brides's story was such big news indicates that such academic enforcement wasn't that common and thus, eventually, the NCAA will enact its own rules.

Posted by Craig Depken at 03:24 PM in Sports

September 28, 2008
Greed, Gravity, and the Meltdown

Excellent summary of the problems with the various assertions that free markets and deregulation, coupled with greed, caused the recent financial problems. Good use of a quote from Larry White.

Posted by Wilson Mixon at 09:54 AM in Economics

September 27, 2008
John Stossel on the candidates' financial demagoguery

I especially like this NY Sun piece.

Posted by Lawrence H. White at 11:17 PM in Economics

September 26, 2008
Debate Chat Transcript

Below the fold: the transcript of the live chat that occurred at www.commercialappeal.com earlier this evening (posted for my econ 101 students, who have a homework assignment based on the debate due on Tuesday). UPDATE: Apparently, I was only able to copy and paste the first 40 minutes of the chat. The rest is available here: http://www.commercialappeal.com/debatechat/.

Read More »
Posted by Art Carden at 11:19 PM in Politics

The range of debate on the bailout: wider than reported

Two staff writers in the WaPo today:

The critics [of the Paulson plan] can be roughly divided into two camps. One group thinks money should be directly infused into banks, which should allow it to trickle down through the financial system to borrowers. A second group thinks the government should buy individual mortgages, thus helping ordinary Americans more directly, with the benefits trickling up to the banks.

Actually there's a third camp: those of us who think that the government should not be taking the money from taxpayers in the first place. Instead it should let private market participants recapitalize banks (as Mitsubishi Bank just did for Morgan Stanley) and buy distressed assets, at prices set in actual genuine market transactions, to the extent that those risking their own money think warranted. As we discovered in the savings and loan fiasco of the 1980s, and as Japan discovered in the 1990s, propping up insolvent financial firms so they keep operating only makes survival more difficult for healthy firms.

Posted by Lawrence H. White at 06:57 PM in Economics

You've Got to Love Bureaucracy

You've got to love bureaucracy, if only for the laughs. Libertarians like to mock government bureaucracy, but private bureaucracy can be just as intransigent and mind-numbing. The key thing about bureaucracy is that it always rolls on, a big, inpersonal machine that grinds all before it. And bureaucrats do what they are tasked to do, regardless of the circumstances.

Here, for example, is the last press release from Washington Mutual, issued September 24, as the company teetered on bankruptcy, one day before the buy-out by JP Morgan - Chase:

WaMu Recognized as Top Diverse Employer—Again
Company ranks in top ten of Hispanic Business’ Diversity Elite and earns perfect score on the Human Rights Campaign’s Corporate Equality Index
SEATTLE, WA (September 24, 2008) – Washington Mutual, Inc. (NYSE:WM), one of the nation’s leading banks for consumers and small businesses, has once again been recognized as a top employer by Hispanic Business magazine and the Human Rights Campaign.

Hispanic Business magazine recently ranked WaMu sixth in its annual Diversity Elite list, which names the top 60 companies for Hispanics. The company was honored specifically for its efforts to recruit Hispanic employees, reach out to Hispanic consumers and support Hispanic communities and organizations.

The Human Rights Campaign, the largest national gay, lesbian, bisexual and transgender (GLBT) civil rights organization, also awarded WaMu its second consecutive 100 percent score in the organization’s 2009 Corporate Equality Index (CEI), which measures progress in attaining equal rights for GLBT employees and consumers. WaMu joins the ranks of 259 other major U.S. businesses that also received top marks in the annual survey. The CEI rated a total of 583 businesses on GLBT-related policies and practices, including non-discrimination policies and domestic partner benefits.

In both surveys, WaMu earned points for competitive diversity policies and programs, including the recently established Latino, African American and GLBT employee network groups, all of which have a corporate executive sponsor and champion.

“Diversity is an integral part of cultivating a welcoming, innovative and dynamic workplace here at WaMu. We are proud to be recognized for the opportunities and benefits we offer to all of our employees, including the specific efforts we have made to engage Hispanics and the GLBT community,” said Steve Rotella, WaMu president and COO. “We are committed to diversity at WaMu and pledge to listen to our customers and work closely with our employees to continue to make progress.”

You can't make this stuff up.

The full release is here. Hat tip to Mark Krikorian at The Corner .


Posted by Brad Smith at 09:20 AM in Funny Stuff ~ in Politics

September 25, 2008
A healthy bank's CEO rejects the bailout

Namely John A. Allison of BB&T, in an open letter to Congress. Money quotes:

There is no panic on Main Street and in sound financial institutions. The problems are in high-risk financial institutions and on Wall Street. ...

The primary beneficiaries of the proposed rescue are Goldman Sachs and Morgan Stanley. ... Treasury is totally dominated by Wall St. investment bankers. They do not have knowledge of the commercial banking industry. Therefore they cannot be relied on to objectively assess all the implications of government policy on all financial intermediaries. The decision to protect the money funds is a clear example of a material lack of insight into the risk to the entire financial system.

Allison offers his comments in 14 numbered points. 13.5 of them are spot-on. The second half of comment six is only one I'd quarrel with.

Posted by Lawrence H. White at 11:42 PM in Economics

On the Road Again...

...Shannon and I are about to get on the road again. We're headed to Birmingham, where I'll be presenting a paper about Wal-Mart and obesity at UAB on Friday and talking about price-gouging at Birmingham-Southern on Monday. Speaking of which, the Commercial Appeal printed a few letters in response to my article on price gouging and gas prices. In between, we'll be visiting family. On Saturday night, Jacob and I are going to my Dad's house to watch the Bama-Georgia game.

On Friday night, I'll be live-blogging the Presidential debate for the Commercial Appeal from my in-laws' living room. Please feel free to join the discussion.

Next week: Wal-Mart at West Virginia. The following week: corruption and entrepreneurship at Auburn. Then Samford. Then the MVEA meetings in Saint Louis. Then Liberty Fund. Then UA-Little Rock and Central Arkansas. Then Ole Miss. Then...I don't know what. Thanksgiving?

Posted by Art Carden at 06:23 PM in Economics

The case against a federal bailout

Steve Chapman makes the case well. Let's hope it's not too late.

Posted by Lawrence H. White at 04:26 PM in Economics

Today's aphorism

Capitalism in which AIG never closes down is like American Idol in which Sanjaya never goes home.

Posted by Lawrence H. White at 04:16 PM in Economics

Petty tyrants c. 1908

From the Sept. 25, 1908 NYT:

A rich New Yorker may have a swimming pool in his yacht, as one of them has planned; he may have a marble bathtub, though porcelain-laid tubs do very well for ninety-nine out of every hundred; he may bathe in cow's milk, goat's milk, or white asses' milk, as the books say some Romans did, but he may not have two doors to his bath room if it is in an apartment house in New York City...

The Tenement House Department has adopted a rule that no bath room shall have more than one door. And so the plans of the west side man for his bathrooms had to be changed.

"Two doors in a bath room," explained Commissioner Butler yesterday, "makes for the accidental collision of persons in the bathroom. It is so easy to forget about locking the door through which you did not come. There doesn't seem to be any good reason why the rule shouldn't be general. I don't know why anybody should want two doors in a bathroom."

Indeed, I am sure Mr. Butler didn't have a clue as to why someone would want two doors to a bathroom. Thus, as is too often the case with the "benevolent social planner," Commissioner Butler's preferences ruled supreme. Yet, did Mr. Butler's lack of knowledge and/or understanding of other people's preferences improve efficiency and social welfare? Hmmm.....

Posted by Craig Depken at 10:35 AM in Politics

Wall Street & Markets

Quote of the day:
"Wall Street loves money but hates free markets, because free markets distribute economic benefits to those who earn them, rather than to those best able to seize them."

Posted by Wilson Mixon at 09:45 AM in Economics

September 24, 2008
Ron Paul vs. Ben Bernanke

See their exchange on YouTube. Rep. Paul's statement on what landed us in the current turmoil is pretty darn good.

Chairman Bernanke's reply (begins at 4:59 of the clip) is notable in several respects.

(1) He agrees that the price-fixing of the New Deal's NRA and AAA harmed economic recovery, and states that a consensus of economic historians thinks likewise. Good to hear!

(2) He denies that the Paulson plan involves similar price-fixing. He claims that the feds will use "market-based" methods to determine the prices of the distressed assets they buy. But how can this be consistent with his thinking that the market for these assets is currently on the fritz? He mentions auctions as one market-based method, but (again) doesn't explain how he imagines having an auction with only one buyer. Does Bernanke favor a real market approach, or a market-socialist approach a la Oskar Lange? As Felix Salmon rightly asks: instead of pondering auction design, how about considering a real market?

(3) He perpetuates the myths that Hoover's Treasury Secretary Andrew Mellon was a liquidationist, and that the Fed in 1929-32 was following Mellon's supposed advice.

Posted by Lawrence H. White at 07:27 PM in Economics

What would Hayek say (about our financial troubles)?

If you are interested in the finer points of Austrian monetary theory, see the discussion over at Peter Klein's blog.

Posted by Lawrence H. White at 06:34 PM in Economics

The Troubled Orchard Relief Program

Howdy. I grow apples in the Northwest. A few years ago I took advantage of low interest rates and federal farm-loan subsidies to borrow money to clear land and plant apple trees. Trouble is, so did lots of other apple-growers. Now we have so many apple trees out here producing fruit that the price of apples is depressed, and so is the price of my new orchard. I’m not making enough selling my apple crop to cover my loan payments, and I can’t sell my orchard for a high enough price to pay off the loan.

In retrospect, I obviously made a mistake planting those trees. Now what? Until last week I thought my only two options were: I bear the loss and keep up the loan payments somehow, or my lender bears the loss by renegotiating the loan or having it written down for him when I declare bankruptcy. While I’m debating which one of those to choose, and I might go bankrupt, nobody will refinance my other debts at low rates. (Meanwhile my Uncle Freddie, who lent me the money, made a bunch of other bad orchard loans. He made an even bigger mistake than mine. I heard that he's in bankruptcy court now.)

My neighbors Ben and Hank, however, have a third option. They have a different way of looking at the problem. They think the reason that nobody will offer a good enough price for my orchard (and other orchards like it) is that the usual orchard buyers are just temporarily spooked. They think it will pass. They think the three of us should pool our money, set up a new fund, and use it to buy my and other distressed orchards at better than the going price. With the orchard off my own books, they say I can more easily meet the payments on my other loans, and I’ll be able to get new loans. Later our fund will sell the orchards off for what they’re really worth.

Now, I think they’re being foolish. What with all the overplanted trees out there, the apple business and the price of orchards are going to remain depressed for a long while. Barring some unforeseen event that boosts demand for apples, prices will remain depressed until finally enough apple trees have died off to reduce the crop to where it ought to be. I’d be a fool to put any of my own good money into the fund they’re proposing.

But hey, if Ben and Hank can convince some even bigger fool to pay a good price for the orchard I shouldn’t have planted, I’ll cash the check.

Posted by Lawrence H. White at 05:21 PM in Economics

Regulatory Excess

I think Richard Epstein's is the best brief summary of the general perception of the current mess:

[O]ur bipartisan consensus is holding true to form. In a system that is chock-full of heavy regulation, they instantly blame the current collapse on the excesses of the free market, for which a still heavier dose of regulation supplies some supposed cure.

I should have read Mike's piece more carefully before making the statement above. His concluding statement, even shorter, complements Epstein: "Things aren't so bad that a panicked bunch of politicians can't make it much, much worse."

Posted by Wilson Mixon at 01:38 PM in Economics

The Front Fell Off

Unbelievably funny video off of an Aussie senator discussing an oil spill. I'm told this is true [Update: but it's not], but it seems like an Abbott and Costello routine. Thanks to Pete for the pointer.

Posted by E. Frank Stephenson at 09:11 AM in Funny Stuff

September 23, 2008
On banking crises c. 1908

More from the "there are no new problems, only our problems" drawer, the Sept. 23, 1908 NYT reports:

"Europeans believe that the world panic of last Autumn was caused by our banking system; that there is no assurance against a recurrence of the trouble until the banking system is reformed. And I agree with Europeans," remarked Jame B. Forgan, President of the First National Bank, upon his return from a trip abroad today. He continued:

"Over there in Europe, when a monetary scare occurs and spreads, there is at once a unanimity of action among bankers. Money begins to flow to the country's financial centre. The Bank of England, for instance, raises its discount rate; it gets gold from everywhere; the monetary resources of the country are laid under contribution for the benefit of the big bank or banks. The people are then shown the strong position of the large institution or institutions, and are calmed thereby.

"Here in the United States we are the victims of a process the direct reverse of that obtaining abroad. when apprehension seizes the Nation our one or two big piles of cash are pounced upon by a myriad of little bankers throughout the country, who make hundreds of piles of them, and who, after getting the money, do nothing but stare at it, having really no use for it.

"In the meanwhile, the cash means of the financial centres are more or less depleted. Their reserves inevitably sink below the 25 per cent limit demanded by the banking law. The newspapers herald this fact, call attention to it, and the panic is emphasized. The people think that the big banks haven't much cash, and wildly conclude that if the important banker is in that condition, what must be the position of the little fellow, not knowing, not understanding, that the crisis has been brought about by the very fact that small bankers want to build little piles of money to look at.

"I haven't the time or the inclination at present to go into the remedial phase of the question - I'm not proposing a central bank, mind you - but I know we cannot go on in the old way with any sort of safety.

"I could not reply to the censure of Europeans simply because I knew that their strictures were fully deserved. i sat there and took it all as a representative of a faulty system must."


Well, it only took 100 years but it would seem that we have come full circle. One wonders whether the reform Mr. Forgan had in mind would have made it harder for his bank to make money. I wager not.

I am not a monetary historian or monetary economist, we have other contributors who fill that role, but from this economist's perspective the crisis of today seems to have been born from the pragmatic politics of the past (whether the pragmatic politics centered on "affordable housing" or blocking "reform" of the quasi-government moral hazard centers).

Posted by Craig Depken at 04:00 PM in Economics

Bail harder, it's raining....

A little squib of an op ed in the Charlotte Observer this a.m., for your reading pleasure.

The text:

From Mike Munger, a Duke University professor of economics and political science, and the Libertarian candidate for governor.

“The state is the great fiction by which each of us seeks to live at the expense of all of us.” The 19th French economist Frederic Bastiat recognized something that seems to be eluding our wise men in Washington, and Wall Street.

If Bastiat were alive, I can guess his reaction to the bailout: First, we don't know what we are doing, and we are as likely to do harm as help. The desperate hurry comes from electoral politics, and not from any real economic necessity.

Second, we aren't creating value. Government can't create value in financial markets. All we are doing is shifting costs from one group (Wall Street bankers, and mortgage sellers who took enormous and unsupportable risks) and transferring them to another group (taxpayers, who don't know any better).

When you hear someone say “The government bailout of Wall Street,” make a mental substitution: “The taxpayer-funded bailout of Wall Street.” And then remember that we have a federal debt bigger than Jupiter.

Deficits are future taxes. The bailout is simply a way of allowing irresponsible lenders to escape unharmed. If you have a mortgage, and can't pay, then you are responsible. If AIG has debts and can't pay, our leaders want to soak taxpayers for the bill.

The point is that you can't take money away from taxpayers who earned it, give it to the financiers who squandered it, and call that a good policy. There is no danger of another Depression, which was caused by a deflationary monetary policy. We are facing a temporary credit crunch, and it will sort itself out if we leave it alone. Things aren't so bad that a panicked bunch of politicians can't make it much, much worse.

Each can't live at the expense of all. Not even if you are a rich banker.

And....it made "THE CORNER"

Posted by Michael Munger at 02:17 PM in Politics

Who said it?

When he sees the luxurious residence or the charming country house of a wealthy person, a poor workingman often asks himself: "Why is there such inequality in the world?"

How many volumes have been written about equality among men! How much blood has been spilled for this idea! And yet, in spite of it all, we still have the rich and the poor...

Let us imagine that one day all the inhabitants of the world would assemble to put into effect this sharing of all goods; and that in fact each person, granted that the world is very big, received an exactly equal portion of the wealth existing on earth.

Then what? That very evening one man might say, "Today I worked hard: now I am going to take rest." Another might state, "I understand this sharing of goods well; so let's drink and celebrate such an extraordinary happening." On the other hand, another might say, "Now I am going to set to work with a will so as to reap the greatest benefit I can from what I have received." And so, starting on the next day, the first man would have only the amount given him; the second would have less, and the third would have increased his.

Then what do we do? Start redistributing the wealth all over again?

Even if everybody began to work right away with all his might and at the same time, the results would not be identical for all. There are, in