Month: August 2016

Khizr Khan’s Muddled Logic

Anyone who follows this blog knows that I’m not a fan of Donald Trump. The only thing worse than a Trump victory in November would be a Clinton victory. But the brouhaha over Trump’s response to Khizr Khan’s speech at the DNC last week overlooks the vital truth that Khan’s speech was a load of propagandistic hogwash.

For the benefit of those of you who’ve been vacationing on Mars, Khizr Khan’s son was a U.S. Army captain who was killed in Iraq in 2004. The point of bringing Khan before the DNC was to point up Trump’s supposed anti-Muslim views. Whether or not Trump is anti-Muslim is beyond my ken, but he is anti-terorist — which is something I find hard to discern in the rhetoric of Democrats, who can’t bring themselves to associate Islam and terrorism.

It is anti-terrorism that animated Trump’s suggestion that there should be no further immigration by Muslims. Such a ban would do no more to prevent terrorist acts, given the numbers of terror-prone Muslims (and others) already in the United States, than a no-gun zone will do to prevent mass shootings by a psychopath. Nevertheless, I understand and appreciate the sentiment behind Trump’s proposal, even though it was a fatuous one that could only draw accusations of xenophobia.

And so it did, both in Hillary Clinton’s recorded introduction to Khan’s brief speech and in Khan’s brief speech itself. Without further ado, here’s the full text:

First, our thoughts and prayers are with our veterans and those who serve today. Tonight, we are honored to stand here as the parents of Capt. Humayun Khan, and as patriotic American Muslims with undivided loyalty to our country.

Like many immigrants, we came to this country empty-handed. We believed in American democracy — that with hard work and the goodness of this country, we could share in and contribute to its blessings.

We were blessed to raise our three sons in a nation where they were free to be themselves and follow their dreams. Our son, Humayun, had dreams of being a military lawyer. But he put those dreams aside the day he sacrificed his life to save his fellow soldiers.

Hillary Clinton was right when she called my son “the best of America.” If it was up to Donald Trump, he never would have been in America. Donald Trump consistently smears the character of Muslims. He disrespects other minorities — women, judges, even his own party leadership. He vows to build walls and ban us from this country.

Donald Trump, you are asking Americans to trust you with our future. Let me ask you: Have you even read the U.S. Constitution? I will gladly lend you my copy. In this document, look for the words “liberty” and “equal protection of law.”

Have you ever been to Arlington Cemetery? Go look at the graves of the brave patriots who died defending America — you will see all faiths, genders, and ethnicities.

You have sacrificed nothing and no one.

We can’t solve our problems by building walls and sowing division. We are stronger together. And we will keep getting stronger when Hillary Clinton becomes our next president.

Khan wraps himself in the flag that draped his son’s coffin. But the tragic death of his son is irrelevant to the issue at hand. It gives Khan no authority to speak about efforts to combat terrorism.

By the same token, also irrelevant are Khan’s various “arguments”:

He is — he says — a loyal and patriotic Muslim-American. So what? There are evidently a lot of Muslims — American and non-American — who are neither loyal nor patriotic, and who would (and have) killed Americans in the name of their religion.

He claims to be an immigrant who came to this country empty-handed, and who shares in and contributes to its “blessings.” So what? A lot of people come to this country, and some of them share in and contribute to its “blessings” but then turn around and kill or try to kill Americans.

His son gave his life in the service of his country. And for that, his son should be honored, and has been honored. But what does that have to do with terrorism?

Ah, here it is. If Trump had his way, Khan’s son (and Khan) wouldn’t have come to America. By the same token, neither would have the perpetrators of the World Trade Center bombing (1993), the Brooklyn Bridge shooting (1994), the killings at the Empire State Building (1997), the New York terror attack (2000), the fire-bombing of a synagogue in Ithaca (2000), the massive attacks of September 11, 2001, the Los Angeles Airport shooting (2002), the Jewish Federation shooting in Seattle (2006), the Arkansas recruiting office shooting (2009), the Fort Hood shooting (2009), the Boston Marathon bombing (2013), the Chattanooga shootings (2015), the San Bernardino attack (2015), or the Orlando nightclub shooting (2016). It’s true that there have been many other acts of violence during the same span of time, but some acts of violence would nevertheless have been prevented had Muslims not been allowed to enter the United States.

Now comes the Constitution, which is like the flag and the Declaration of Independence in its emotional appeal. In fact, the Constitution doesn’t guarantee anyone the right to immigrate. Immigration policy is a matter for Congress to decide. “Equal protection of the law[s]” applies to “[a]ll persons born or naturalized in the United States,” not to persons who wish to enter the United States and perhaps become citizens. “Liberty” is nowhere defined in the Constitution; it’s mentioned in the Preamble (which isn’t part of the Constitution), and twice elsewhere, in connection with due process of law. “Liberty” doesn’t encompass the right of an alien to enter the United States.

And it’s back to the dead who gave their lives for the United States and now lie in Arlington Cemetery (and other national cemeteries). Yes, there are all (or many) faiths, genders, and ethnicities among those dead. But their dying has nothing to do with whether Muslims should be allowed to enter the United States. In fact, there would be many fewer dead had Muslims not been allowed to enter, had terrorist attacks not ensued from their entry, and had the wars in Iraq and Afghanistan not followed from the terrorist attacks on September 11, 2001.

Whether or not Trump has sacrificed anything is beside the point. Neither has Hillary Clinton, by Khan’s standard. Yet, he ends by endorsing her because Americans will “grow stronger together” when she becomes president. Whatever that means.

And Khan to the contrary notwithstanding, Donald Trump is a piker when it comes to “building walls and sowing division.” Barack Obama has been doing it, metaphorically and actually, by rabble-rousing about “the rich”; destroying America’s health-care system; rewarding indolence with extended welfare payments, food stamps, and health insurance for slackers; stirring racial tension and fostering cop-killings by defending black thugs as “victims” and leveling blanket accusations of racism against cops; jerking the armed forces around with his on-again-off-again policies in Iraq and Afghanistan; caviling before Putin; failing to confront Chinese assertiveness; conspiring in the emasculation of the armed forces despite the obvious ambitions of Russia and China; signing (and ignoring) a treaty that will allow Iran to acquire nuclear weapons; slighting Israel, America’s only true ally in the Middle East; slighting other true allies in Eastern Europe; pushing same-sex “marriage” and gender neutrality as if thousand of years of tradition and biological facts mean nothing; and leveling the power of the central government against religious liberty.

As I said, Trump’s anti-Muslim immigration policy is fatuous. And Trump, as usual, responded to Khan with bluster and name-calling when he should have responded with facts and logic.

But that doesn’t excuse Khan’s own fatuousness or Clinton’s exploitation of his son’s death.

It’s time for principled conservatives — whose number doesn’t seem to include Senator McCain, Governor Pence, and other mealy-mouthed Republicans — to go on the attack and quit retreating in the face of the enemy. That enemy is Hillary Clinton (and other so-called progressives), whose cynical use of Khan is in keeping with her cynical political career — the foundation of which is her partnership with a sexual predator.

*     *     *

Related reading:

Clarice Feldman, “Who Is Khizr Khan, the Father of a Fallen U.S. Soldier?” American Thinker, August 1, 2016

Geoffrey P. Hunt, “Hillary’s Cynical Manipulation of Captain Khan’s Sacrifice,” American Thinker, August 2, 2016

J. Marsolo, “Khizr Khan Has No Shame,” American Thinker, August 2, 2016

William Murchison, “The Khan Con and Other Modern Discontents,” The American Spectator, August 2, 2016

 

Further Pretensions of Knowledge

The Economist‘s second article in its series on “seminal economic ideas” is about Hyman Minsky’s theory that “booms sow the seeds of busts”:

Having grown up during the Depression, Minsky was minded to dwell on disaster. Over the years he came back to the same fundamental problem again and again. He wanted to understand why financial crises occurred. . . .

Minsky . . . developed his “financial-instability hypothesis”. It is an examination of how long stretches of prosperity sow the seeds of the next crisis, an important lens for understanding the tumult of the past decade. . . .

Minsky started with an explanation of investment. It is, in essence, an exchange of money today for money tomorrow. A firm pays now for the construction of a factory; profits from running the facility will, all going well, translate into money for it in coming years. Put crudely, money today can come from one of two sources: the firm’s own cash or that of others (for example, if the firm borrows from a bank). The balance between the two is the key question for the financial system.

Minsky distinguished between three kinds of financing. The first, which he called “hedge financing”, is the safest: firms rely on their future cashflow to repay all their borrowings. For this to work, they need to have very limited borrowings and healthy profits. The second, speculative financing, is a bit riskier: firms rely on their cashflow to repay the interest on their borrowings but must roll over their debt to repay the principal. This should be manageable as long as the economy functions smoothly, but a downturn could cause distress. The third, Ponzi financing, is the most dangerous. Cashflow covers neither principal nor interest; firms are betting only that the underlying asset will appreciate by enough to cover their liabilities. If that fails to happen, they will be left exposed.

Economies dominated by hedge financing—that is, those with strong cashflows and low debt levels—are the most stable. When speculative and, especially, Ponzi financing come to the fore, financial systems are more vulnerable. If asset values start to fall, either because of monetary tightening or some external shock, the most overstretched firms will be forced to sell their positions. This further undermines asset values, causing pain for even more firms. They could avoid this trouble by restricting themselves to hedge financing. But over time, particularly when the economy is in fine fettle, the temptation to take on debt is irresistible. When growth looks assured, why not borrow more? Banks add to the dynamic, lowering their credit standards the longer booms last. If defaults are minimal, why not lend more? Minsky’s conclusion was unsettling. Economic stability breeds instability. Periods of prosperity give way to financial fragility. . . .

[A]s an outsider in the sometimes cloistered world of economics, Minsky’s influence was, until recently, limited. Investors were faster than professors to latch onto his views. More than anyone else it was Paul McCulley of PIMCO, a fund-management group, who popularised his ideas. He coined the term “Minsky moment” to describe a situation when debt levels reach breaking-point and asset prices across the board start plunging. Mr McCulley initially used the term in explaining the Russian financial crisis of 1998. Since the global turmoil of 2008, it has become ubiquitous. For investment analysts and fund managers, a “Minsky moment” is now virtually synonymous with a financial crisis. . . .

. . . In a speech in 2009, before she became head of the Federal Reserve, Janet Yellen said Minsky’s work had “become required reading”. In a 2013 speech, made while he was governor of the Bank of England, Mervyn King agreed with Minsky’s view that stability in credit markets leads to exuberance and eventually to instability. Mark Carney, Lord King’s successor, has referred to Minsky moments on at least two occasions.Will the moment last? Minsky’s own theory suggests it will eventually peter out. Economic growth is still shaky and the scars of the global financial crisis visible. In the Minskyan trajectory, this is when firms and banks are at their most cautious, wary of repeating past mistakes and determined to fortify their balance-sheets. But in time, memories of the 2008 turmoil will dim. Firms will again race to expand, banks to fund them and regulators to loosen constraints. The warnings of Minsky will fade away. The further we move on from the last crisis, the less we want to hear from those who see another one coming.

I am left with this question: Is the Minskyan trajectory a bad thing or a good thing? Is there a better, feasible way to finance economic growth? Or is the alternative some kind of government-enforced algorithm in which one-size-fits-all-regulation fosters hyper-bubbles (as with the directive to lend more to poor, minority mortgagors) or hypo-bubbles (in which rising investment is stifled long before it becomes a bubble).

Government doesn’t have a good track record when it comes to fine-tuning the economy. It’s true that the economy has been somewhat more stable since the creation of the Federal Reserve in 1913. But the price of stability is high; namely, it is inversely related to long-run economic growth. And the two deepest economic downturns in America’s history — the Great Depression and the Great Recession — happened on the Fed’s watch, and can be blamed (in part, at least) on the Fed.

Economics can be a powerfully descriptive discipline. But its power to describe is far from infallible, as Arnold Kling shows in his must-read tome, Specialization and Trade: A Re-introduction to Economics. Among many things, Kling explains why the Keynesian multiplier — the hoariest of fine-tuning ideas — is a terrible idea. (I heartily agree with Kling.)

Even if economics were an infallibly descriptive discipline, it shouldn’t be taken as an infallibly prescriptive one. Friedrich Hayek put it this way in his Nobel Prize Lecture, “The Pretence of Knowledge“:

It is true that . . . systems of equations describing the pattern of a market equilibrium are so framed that if we were able to fill in all the blanks of the abstract formulae, i.e. if we knew all the parameters of these equations, we could calculate the prices and quantities of all commodities and services sold. But, as Vilfredo Pareto, one of the founders of this theory, clearly stated, its purpose cannot be “to arrive at a numerical calculation of prices”, because, as he said, it would be “absurd” to assume that we could ascertain all the data. . . .  I sometimes wish that our mathematical economists would take this to heart. I must confess that I still doubt whether their search for measurable magnitudes has made significant contributions to our theoretical understanding of economic phenomena – as distinct from their value as a description of particular situations. Nor am I prepared to accept the excuse that this branch of research is still very young: Sir William Petty, the founder of econometrics, was after all a somewhat senior colleague of Sir Isaac Newton in the Royal Society!

The chief point we must remember is that the great and rapid advance of the physical sciences took place in fields where it proved that explanation and prediction could be based on laws which accounted for the observed phenomena as functions of comparatively few variables – either particular facts or relative frequencies of events. . . .  A theory of essentially complex phenomena must refer to a large number of particular facts; and to derive a prediction from it, or to test it, we have to ascertain all these particular facts. Once we succeeded in this there should be no particular difficulty about deriving testable predictions – with the help of modern computers it should be easy enough to insert these data into the appropriate blanks of the theoretical formulae and to derive a prediction. The real difficulty, to the solution of which science has little to contribute, and which is sometimes indeed insoluble, consists in the ascertainment of the particular facts. . . .

. . . To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm. In the physical sciences there may be little objection to trying to do the impossible; one might even feel that one ought not to discourage the over-confident because their experiments may after all produce some new insights. But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority. Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims. We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based – a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed.

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants. There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try, “dizzy with success”, to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will. The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society – a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.

(This post offers more on this subject of the limitations of knowledge, and the implications for economic policy.)

The ability to describe a phenomenon in a general way is far from knowing how to improve on it. In fact, the ability to describe a phenomenon in a general way says nothing about whether it can be improved on. Such things as investment bubbles, market failure, and winners and losers from trade are the normative judgments of observers who simply don’t like what they see and believe (mistakenly) that they know how to “make things right.”