The Bear’s Lair: Cromwell, Keynes and the Industrial Revolution

Maynard Keynes, as a good left-liberal, was a political admirer of an earlier Cambridge alumnus Oliver Cromwell, and certainly regarded himself as part of the “Roundhead” tradition. Yet it is becoming increasingly apparent that, just as Cromwell’s virtues and policies pointed Britain on the road to the Industrial Revolution, so the vices and profligacies inspired by Keynes and his followers are bringing the great human advance brought by that Revolution to an end. Let me explain. Continue reading

The Bear’s Lair: Welch destroyed Sloan’s Century

Jack Welch, former GE Chairman (1981-2000) who died last week, was named “Manager of the Century” by Fortune magazine in 1999. Twenty years later, we can see clearly that the Manager of the 20th century was not Welch but Alfred P. Sloan, CEO and then Chairman of General Motors (1920-1963). Welch’s main achievement was destroying the management model that Sloan had built, causing GE’s subsequent near-collapse. Continue reading

The Bear’s Lair: A world without Mike Milken

President Donald Trump last week pardoned Mike Milken, the effective originator of the junk bond market, who had been sentenced to 10 years in jail in 1990 for mysterious securities infractions. While I have considerable sympathy for Milken himself (not that he needs it, being worth $3.8 billion) I thought it worth performing the thought-experiment: would we indeed be worse off if he had never existed and the junk bond market had never appeared? Continue reading

The Bear’s Lair: Robots don’t threaten weirdos and misfits

The fancy-college-educated left take great satisfaction in proclaiming that robots will soon threaten blue-collar jobs, while skills requiring higher education will be immune from competition driven by artificial intelligence (AI). This is surely incorrect. Robots/AI can in principle reproduce any predictable process, whether mechanical or intellectual. They cannot reproduce unexpected movement, leaps of imagination or eccentricity. Blue-collar workers with good mechanical skills and weirdos who get fired for offensive tweets are tomorrow’s survivors, while the politically correct are robot roadkill. Continue reading

The Bear’s Lair: Half-inflated bubbles are a Buy

If you had bought South Sea Company shares 300 years ago today, on February 17, 1720, you would have paid the inflated price of about £175 per share. If you had sold those shares at any time before the end of September 1720, you would have made a fine profit, more than five times your money if you had sold at the top of £1,000 in July. Today as then, it remains true: half-inflated bubbles are a thoroughly unsound investment, but potentially a very lucrative one. Continue reading

The Bear’s Lair: The Dead Hand of Jacques Delors

On July 6, 1988 European Commission President Jacques Delors propounded the hope that “Ten years hence, 80% of our economic legislation, and perhaps even our fiscal and social legislation as well, will be of Community origin.” The EU has not lost this ambition; this week Michel Barnier, the EU’s chief Brexit negotiator, attempted to prevent Britain from signing a trade deal with the EU unless it conformed to EU regulations. It is therefore worth looking at the damage those regulations have done to what was once an economically thriving collection of countries. Continue reading

The Bear’s Lair: Beyond reason and behaviorism

Classical economics holds that economic decisions are made by rational decision makers, using solid information and reason. Behavioral economics holds that many economic decisions are based on “cognitive biases” such as an aversion to losses that is stronger than the desire for profits. Richard Robb’s new book “Willful” holds that many decisions are made without rational justification or behavioral motivation, but simply “for-themselves” based on whims or deep-seated irrational beliefs. It’s an interesting, plausible thesis that has implications well beyond investing. Continue reading

The Bear’s Lair: Debt Jubilee would set us back to Sumer

With U.S. debt at record levels, enthusiasm is mounting for a debt jubilee, in which part of or all the mountain of debt would be written off, to the great relief of debtors and the despair and probable bankruptcy of creditors. The jubilee’s proponents point out that debt jubilees have Biblical sanction, being a standard feature of the ancient world originating in Sumer. However, while a full jubilee would very likely restore us to the joys of Sumerian living standards, there is another way we could take advantage of current crazed interest rates. Continue reading

The Bear’s Lair: The Coming Fall of the Meritocracy

The last five years have been marked in most Western societies by a populist revolt against the values of a leftist university-educated elite. That elite had appeared invulnerable, and increasingly separated from the rest of us, as Charles Murray described in his 2012 study “Coming Apart.” There are thus two questions to be answered: how did the elite become so cut-off and misguided, and will its rule survive the populist revolt? Continue reading

The Bear’s Lair: Back to the economics of 1792

When William Pitt the younger made his great and optimistic Budget speech of 1792, he attributed Britain’s increased prosperity not to technological improvement but to the wealth-enhancing effect of the compounding increase in the country’s capital stock. Only a generation later, in the administration of Robert, Earl of Liverpool, was technological change given credit for the country’s growth and prosperity. Today, as productivity growth slows or even halts, we may be returning to the economics of 1792, in which only capital increase brings greater wealth. This has uncomfortable implications. Continue reading