The Bear’s Lair: Facilis Descensus Averno

Putin with his 1972 Zaporozhets

Putin with his 1972 Zaporozhets

“The gates of Hell are open night and day
Smooth the descent, and easy is the way:
But to return, and view the cheerful skies
In this the task and mighty labor lies.”

Book VI of Virgil’s Aeneid, translated by John Dryden, published in 1697 when poetry was poetry, is a useful window on China’s descent into renewed Communism – and indeed, the West’s tendencies in that direction. Residents of Eastern Europe and the former Soviet Union know how difficult and arduous it was to convert from Communism to capitalism, or even social democracy, but the road in the other direction is very smooth – at first. Continue reading

The Bear’s Lair: Extraordinary popular delusions and the prizes they bring

Economists David Card, Joshua Angrist and Guido Imbens won the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel” last week for their work on “real-world” experiments that drove a truck through market-driven economic theory. This was not surprising. Conventional wisdom among the “woke” intelligentsia is today a far more important driver of the world’s rewards than any amount of knowledge from our civilization-producing ancestors. Continue reading

The Bear’s Lair: Tech sector can’t do quality control

This column recognizes that new products and services can have technical hiccups. Stephenson’s Rocket ran over a Cabinet Minister at its inaugural ceremony, killing him. The Hindenburg’s new transatlantic airship service burst into flames in Lakehurst, New Jersey. The first jet airliner, the Comet 1, kept blowing out its windows at high altitude. But the Internet is nearly 30 years old and Facebook has been around since 2004, yet they have the quality control of something in its infancy. Possibly this is because the entire industry is run by and for infants. Continue reading

The Bear’s Lair: The palsied hand of capitalism

“Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… 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”

wrote Adam Smith, one of several “Invisible Hand” quotes in The Wealth of Nations. Regrettably, Smith’s model is just a model; it breaks down in extreme situations, and the complexities of modernity, particularly the meddling of governments, have rendered the Invisible Hand more and more palsied. It is worth examining why, and what to do about it. Continue reading

The Bear’s Lair: China should adopt Song Dynasty virtues

China can claim to have invented in its Song Dynasty (AD 960-1279) the policy of easy credit that has led to its recent real estate debacle. Yet the Song’s use of paper money was much more careful than that of today’s China (or of its decadent Western competitors). In other respects: its respect for merit, its generally pacific nature and its technological and cultural innovation, Song China was a model, far ahead of its contemporaries. A return to Song virtues would be a Chinese development we could all welcome. Continue reading

The Bear’s Lair: Losers from higher rates

The August Consumer Price Index’s rise of 5.3% over the preceding year demonstrated that inflation is far from a transitory phenomenon. In these circumstances, it is likely that the Fed will attempt to hold rates close to zero for as long as possible, and then raise them too slowly to prevent inflation from accelerating further. This environment, of rising nominal interest rates and steadily or even increasingly negative real interest rates, is likely to have some anomalous market and economic effects. In this piece, I shall attempt to determine what those effects will be, as a warning to readers. Continue reading

The Bear’s Lair: 2019, 1999, 1928 or 1825?

It is becoming increasingly clear that, at some time before AD 5,000 humanity will enter another Dark Age, in which life will be “nasty, brutish and short,” living standards will be abysmal, and both human potential and human knowledge will be very limited. If we are very lucky, we will eventually emerge from that dark age. Looking back from the new era, using the best archaeological, historical and economic tools available, what year do we think will be seen as the absolute apogee of our current civilization, our “Age of the Antonines”: 2019, 1999, 1928 or 1825? Continue reading

The Bear’s Lair: Social media make crowds madder

Charles Mackay’s 1841 classic “Extraordinary popular delusions and the madness of crowds” established the truth that crowds communicating with one another through the media can make “mad” decisions, in investment and other areas. Modern social media have immeasurably increased the amount and intensity of such communication; there are clear signs that it has also increased the irrationality of investment and other decisions. Continue reading

The Bear’s Lair: The need for space travel is ever-growing

This planet is becoming dangerous and unpleasant. The Covid-19 pandemic appears very likely to have been the result of biological warfare experimentation (albeit possibly released by accident.) Nuclear proliferation is becoming increasingly a threat, as too many nuclear powers come to have lunatic allies. While global warming is only a minor threat at most, the policies to combat it proposed by ever more overweening governments are existentially threatening, as are governments’ intrusions on free speech through the tech giants. Humanity needs a new home where it can hide from this world’s multifarious perils – and fast! Continue reading

The Bear’s Lair: History shows infrastructure has diminishing returns

In my researches into the Industrial Revolution, I have been looking at British canal building. There were three “canal manias” in 1766-75, 1786-93 and 1816-25, but only the first yielded truly attractive investments and economic gains, while the last wave lost money in general. This decline in returns for the later investments has lessons for us today: over-investing in infrastructure density is a huge waste of money, especially if undertaken by the government, and a rocket to Mars is almost certainly a better investment than yet another high-speed train. Continue reading